FORM 6-K
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Report of Foreign Issuer
 
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
 
For the month of February 2019
 
Commission File Number: 001-11960
 
AstraZeneca PLC
 
1 Francis Crick Avenue
Cambridge Biomedical Campus
Cambridge CB2 0AA
United Kingdom
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F X Form 40-F __
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
 
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ______
 
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes __ No X
 
If “Yes” is marked, indicate below the file number assigned to the Registrant in connection with Rule 12g3-2(b): 82-_____________
 
 
 
 
AstraZeneca PLC
 
INDEX TO EXHIBITS
 
 
1.
AstraZeneca Full-Year and Q4 2018 Results
 
 
 
AstraZeneca PLC
14 February 2019 07:00 GMT
 
Full-year and Q4 2018 results
New launches and commercial execution deliver full-year sales growth and a very strong final quarter.
2019 anticipated to be a year of higher year-on-year sales growth combined with operating leverage.
 
The final quarter of the year saw a very strong performance, including Product Sales growth of 5% (8% at CER1) to $5,768m. In the year, Product Sales increased by 4% to $21,049m, reflecting the performance of new medicines2 (+81%) and the sustained strength of Emerging Markets (+12%, +13% at CER); China sales increased by 28% (25% at CER) in the year. Oncology sales increased by 50% (49% at CER) in FY 2018, with Tagrisso and Lynparza each doubling in sales, accompanied by a promising performance from ImfinziFasenra sales reached $297m in its first full year, performing exceptionally well in the countries where it was launched.
 
In addition, Earnings Per Share (EPS) benefited from a low tax rate. The pipeline produced further positive developments and 2019 is expected to be another busy year for news flow.
 
 
 
FY 2018
 
Q4 2018
 
$m
 
% change
 
$m
 
% change
 
 
Actual
 
CER
 
Actual
 
CER
 
Product Sales
21,049
4
4
5,768
5
8
Externalisation Revenue
1,041
(55)
(55)
649
n/m
n/m
Total Revenue
22,090
(2)
(2)
6,417
11
14
 
 
 
 
 
 
 
Reported Operating Profit3
3,387
(8)
(7)
1,077
57
54
Core Operating Profit4
5,672
(17)
(17)
2,192
23
23
 
 
 
 
 
 
 
Reported Earnings Per Share (EPS)
$1.70
(28)
(29)
$0.82
(21)
(22)
Core EPS
$3.46
(19)
(19)
$1.58
22
22
 
Pascal Soriot, Chief Executive Officer, commenting on the results said:
"Closing the year with another strong quarter, our performance confirmed that AstraZeneca has returned to growth. Our new medicines performed particularly well across the therapy areas and the Emerging Markets business went from strength to strength. 2019 will be a year of focus on continued pipeline delivery and flawless commercial execution. The performance of our new medicines demonstrated the ability of our commercial teams to convert the pipeline into successful medicines.
 
As we recently entered a new phase in our strategic development, we have refined our organisation to position ourselves for the next phase of our journey. The changes are designed to further integrate research and development and accelerate decision-making and the launches of new medicines, consolidating what we believe is already one of the most exciting and productive pipelines in the industry. We are also enhancing our commercial units to increase collaboration with our R&D organisation, enabling greater commitment to our main therapy areas; we want AstraZeneca to be more agile, collaborative and focused as we enter a period of sustained growth.
 
Our strategy and plans remain unchanged, with sales growth and a focus on cost management anticipated to drive growing operating profit. I'm pleased that we are fully on track to meet these commitments as we build a sustainable level of growth and a pipeline that is benefitting more and more patients around the world."
 
Financial summary
-
Product Sales increased by 4% in the year to $21,049m; new medicines generated incremental sales of $2.8bn at CER. Total Revenue declined by 2% in the year to $22,090m, driven by a 55% decline in Externalisation Revenue to $1,041m, with the year-on-year performance partly reflecting the impact of $997m of Initial Externalisation Revenue recognised in FY 2017 as part of the Lynparza collaboration with MSD5
 
-
The Reported Gross Margin declined by three percentage points to 77% in the year, partly reflecting restructuring charges associated with biologic-medicine manufacturing facilities, the comparative effect of manufacturing variances in the first half of 2017 and the impact of the Lynparza collaboration with MSD; the Core Gross Margin declined by two percentage points to 80%
 
-
Total Reported Operating Expenses of $16,294m were stable in the year (a decline of 1% at CER). Total Core Operating Expenses increased by 5% (4% at CER) to $14,248m:
 
-
Reported R&D Expenses, which increased by 3% in the year to $5,932m, contained Intangible Asset Impairment charges of $539m (FY 2017: $101m), including a $470m charge in respect of MEDI0680. Core R&D Expenses declined by 3% to $5,266m, driven by efficiency savings and resource optimisation
 
-
Reported SG&A Expenses declined by 2% in the year (3% at CER) to $10,031m; Core SG&A Expenses increased by 10% (9% at CER) to $8,651m, reflecting support for new medicines and growth in China
 
-
Reported Other Operating Income and Expense increased by 38% to $2,527m, reflecting divestment transactions, while Core Other Operating Income and Expense increased by 10% in the year to $2,147m. The difference between the Reported and Core performances was represented by a legal settlement in the first half of the year
 
-
As indicated, restructuring expenses declined to $697m in the year (FY 2017: $807m). Designed to drive further efficiencies in the operations network, the Company recently decided to close two biologic-medicine manufacturing sites in Colorado, US. Associated with the closures, the Company expects to incur $0.4bn of one-time restructuring charges, the majority of which would be non-cash expenses; $0.3bn of these charges were recognised in FY 2018 as a result of impairments of site-related assets and inventory
 
-
As indicated, capital expenditure declined to $1,043m (FY 2017: $1,326m)
 
-
Reported EPS of $1.70 in the year represented a decline of 28% (29% at CER). Both Reported and Core EPS were impacted primarily by a decline in Externalisation Revenue, as well as the Gross Margin
 
-
Core EPS declined by 19% to $3.46, despite a favourable impact resulting from a lower Core Tax Rate of 11% reflecting a $245m favourable adjustment to deferred taxes arising from the recently-announced reduction in the Dutch corporate income-tax rate; enacted in December 2018, it equated to $0.19 per share. Milestone revenue of $70m from MSD that related to the rapid regulatory approval in the US of Lynparza as a 1st-line maintenance treatment for BRCA-mutated (BRCAm) advanced ovarian cancer was received earlier than anticipated
 
-
The Board has reaffirmed its commitment to the progressive dividend policy; a second interim dividend of $1.90 per share has been declared post year end, taking the unchanged full-year dividend per share to $2.80
 
Commercial summary
-
Oncology
Sales growth of 50% in the year (49% at CER) to $6,028m, including:
 
-
Tagrisso sales of $1,860m, representing growth of 95% (93% at CER), with increased use as a 2nd-line treatment for EGFR6 T790M-mutated7 NSCLC8 patients and the 2018 approvals in the 1st-line EGFR-mutated (EGFRm) setting as a new standard of care (SoC). Tagrisso, based on the performance in FY 2018, is anticipated to be AstraZeneca's biggest-selling medicine in 2019
 
-
Imfinzi sales of $633m (FY 2017: $19m), reflecting ongoing launches for the treatment of patients with unresectable, Stage III NSCLC. The majority of sales of Imfinzi were in the US; the favourable impact of additional potential launches in other markets is yet to come
 
-
Lynparza sales of $647m, representing growth of 118% (116% at CER), driven by expanded use in the treatment of ovarian cancer and the medicine's first approvals for use in the treatment of breast cancer. The recent approval ofLynparza as a 1st-line treatment of patients with BRCAm ovarian cancer in the US is expected to support further expanded use
 
-
New CVRM9
Sales growth of 12% in the year to $4,004m, including:
 
-
Farxiga sales of $1,391m, with growth of 30% that included a sales increase of 45% in Emerging Markets (52% at CER) to $336m
 
-
Bydureon sales of $584m, an increase of 2% (1% at CER) that was driven by an encouraging Bydureon BCise launch in the US. Total Q4 2018 sales declined by 6% (5% at CER) to $138m, reflecting ongoing production constraints
 
-
Brilinta sales of $1,321m, representing growth of 22% (21% at CER), due to continued market penetration in the treatment of acute coronary syndrome and high-risk post-myocardial infarction (HRPMI). Total Brilinta sales increased by 26% in Q4 2018 (29% at CER) to $376m
 
-
Respiratory
Sales growth of 4% in the year (3% at CER) to $4,911m, including:
 
-
Symbicort sales decline of 9% (10% at CER) to $2,561m, as competitive price pressures in the US continued, despite a market-share increase for the medicine. China sales of Symbicort increased by 36% (32% at CER) to $240m
 
-
Pulmicort sales growth of 9% (8% at CER) to $1,286m
 
-
Fasenra sales of $297m (Q4 2018: $125m), consolidating its position in the IL-5 class of severe-asthma medicines, performing exceptionally well in the countries where it was launched
 
-
Emerging Markets
The Company's largest region by Product Sales, with growth of 12% in the year (13% at CER) to $6,891m, including:
 
-
A China sales increase of 28% (25% at CER) to $3,795m. Q4 2018 sales in China increased by 17% (22% at CER) to $948m, despite Q4 2017 year-on-year growth of 33% (30% at CER). Oncology sales in China increased by 44% in the year (41% at CER) to $810m, partly underpinned by the launch of Tagrisso in China in 2017. Tagrisso was recently added to the National Reimbursement Drug List (NRDL) for the treatment of 2nd-line EGFR T790M-mutated NSCLC
 
-
An ex-China sales decline of 3% (an increase of 1% at CER) to $3,096m, partly impacted by the loss of Product Sales as a result of divestments. The quarter, however, saw a significantly-improved performance as the impact of divestments diminished, with every Emerging Markets sub-region delivering growth at CER and total ex-China Emerging Markets stable sales of $818m (an increase of 10% at CER). Notable performances in the quarter included sales in Brazil (stable, +23% at CER) and (non-China) Asia-Pacific (+10%, +13% at CER)
 
Organisational changes
As AstraZeneca recently entered a new phase in its strategic development, the Company announced in January 2019 organisational changes to enhance scientific innovation and commercial success.
 
The new structure simplifies R&D functions from discovery to late-stage development into Oncology and BioPharmaceuticals, or BioPharma. The new Oncology R&D function will be led by a world-renowned expert in the field, José Baselga and the BioPharma R&D function will be led by Mene Pangalos, who was previously responsible for the Company's Innovative Medicines and Early Development Biotech Unit. 
 
The same approach has been applied to the majority of the Company's commercial operations. The commercial function for Oncology will continue to be led by Dave Fredrickson and the commercial function for BioPharma will be led by Ruud Dobber, most recently responsible for the Company's commercial operations in North America. The Emerging Markets commercial function remains under the leadership of Leon Wang.
 
The goals of the reorganisation are to:
-
Further increase focus on the Company's main therapy areas
-
Integrate R&D functions for agile decision making and more flexible resource allocation
-
Increase collaboration between the R&D and commercial functions
 
The R&D and commercial functions will each be represented on the Senior Executive Team of AstraZeneca and report to Chief Executive Officer (CEO), Pascal Soriot. The functions will share many common areas including basic biology and science platforms as well as medicine supply, manufacturing and IT infrastructure to improve efficiency. These resources will continue to be allocated on a Company-wide basis, according to the overall therapy-area considerations and strategy.
 
As AstraZeneca entered a period of sustained growth, the reorganisation was designed to enable the Company to be more agile, collaborative and be very focused on the main therapy areas. Further details of the changes can be found in the Corporate & Business Development section.
 
Pipeline highlights
The following table highlights significant developments in the late-stage pipeline since the prior results announcement:
 
 
Regulatory approvals
 
-     Lynparza - ovarian cancer (1st line) (SOLO-1): regulatory approval (US)
-     roxadustat - anaemia in dialysis patients: regulatory approval (CN)
-     Bevespi - COPD10: regulatory approval (EU)
-     Linzess (linaclotide) - inflammatory bowel syndrome w/constipation (IBS-C): regulatory approval (CN)
 
Regulatory submissions and/or acceptances
 
-     Imfinzi - unresectable, Stage III NSCLC: regulatory submission (CN); acceptance (OS11 data) (US)
-     Farxiga - type-1 diabetes: regulatory submission acceptance (US)
-     Fasenra - severe, eosinophilic asthma; self-administration: submission
acceptance (US, EU)
 
Major Phase III data readouts or other significant developments
 
-     Tagrisso - EGFRm NSCLC (1st line): priority review (CN)
-     Imfinzi +/- treme - NSCLC (1st line) (MYSTIC): did not meet OS primary endpoints
-     Imfinzi +/- treme - head & neck cancer (2nd line): did not meet OS primary endpoints
-     Lynparza - ovarian cancer (1st line) (SOLO-1): priority review (CN)
-     Lynparza - ovarian cancer (3rd line+): met response rate primary endpoint
-     Forxiga - type-1 diabetes: CHMP12 positive opinion (EU)
-     roxadustat - anaemia of CKD13: met primary efficacy endpoints
-     Fasenra - eosinophilic granulomatosis with polyangiitis: Orphan Drug Designation (US)
-     Fasenra - hypereosinophilic syndrome: Orphan Drug Designation (US)
-     PT010 - COPD: priority review (CN)
-     MEDI8897- lower respiratory tract infection: Breakthrough Therapy Designation (US), PRIME14designation (EU)
 
 
FY 2019 guidance 
The Company today provides FY 2019 guidance. All measures in this section are at CER. Company guidance is on Product Sales and Core EPS only. All guidance and indications provided assume that the UK's anticipated forthcoming exit from the European Union, even in the event of no deal, proceeds in an orderly manner such that the impact is within the range expected, following the Company's extensive preparations for such eventuality.
 
 
Product Sales
 
A high single-digit percentage increase
 
 
In addition to the aforementioned Product Sales growth, the Company anticipates productivity gains and operating leverage in FY 2019. Core Operating Profit is anticipated to grow at a faster rate than Product Sales, despite an expected decline in the sum of Externalisation Revenue and Other Operating Income and Expense vs. the prior year. More details are provided below.
 
 
Core EPS
 
$3.50 to $3.70
 
 
Core EPS is anticipated to be impacted by a higher Core Tax Rate in FY 2019, following a low Core Tax Rate in FY 2018. The rate in FY 2019, indicated below, reflects the anticipated geographical mix of profits, as well as the impact of externalisation and divestment transactions anticipated to complete in FY 2019.
 
Variations in performance between quarters can be expected to continue. The Company is unable to provide guidance and indications on a Reported basis because the Company cannot reliably forecast material elements of the Reported 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.
 
 
FY 2019 indications
Outside of guidance, the Company provides indications at CER for FY 2019 vs. the prior year:
 
-
As part of its long-term growth strategy, the Company remains committed to focusing on appropriate cash-generating and value-accretive externalisation, collaboration and divestment transactions that reflect the ongoing productivity of the pipeline and the Company's increasing focus on its main therapy areas. The sum of Externalisation Revenue and Core Other Operating Income and Expense, however, is anticipated to decline vs. the prior year
 
-
Core Operating Expenses are expected to increase by a low single-digit percentage. Specific support for medicine launches and China sales delivered compelling results in FY 2018 and elements of that support will continue. The Company will retain flexibility in its investment approach
 
-
Core Operating Profit is anticipated to increase, ahead of Product Sales, by a mid-teens percentage vs. FY 2018
 
-
Capital expenditure is expected to be broadly stable and restructuring expenses are targeted to reduce vs. the prior year
 
-
A Core Tax Rate of 18-22% (FY 2018: 11%)
 
Currency impact
The Company's foreign-exchange rate sensitivity analysis is contained within the Operating and Financial Review and, if foreign-exchange rates for February to December 2019 were to remain at the average of rates seen in January 2019, it is anticipated that there would be a low single-digit percentage adverse impact on Product Sales and Core EPS.
 
Sustainability
AstraZeneca's sustainability ambition is founded on making science accessible and operating in a way that recognises the interconnection between business growth, the needs of society and the limitations of the planet. The Company's sustainability ambition is reinforced by its purpose and values, which are intrinsic to its business model and ensures that the delivery of its strategy broadens access to medicines, minimises the environmental footprint of medicines and processes and ensures that all business activities are underpinned by the highest levels of ethics and transparency. A full update on the Company's sustainability progress is shown in the Sustainability section of this announcement.
 
Notes
The following notes refer to pages 1-5:
 
1.   Constant exchange rates. These are financial measures that are not accounted for according to generally-accepted accounting principles (GAAP) because they remove the effects of currency movements from Reported results.
 
2.   TagrissoImfinziLynparzaCalquenceLumoxitiFarxigaBrilintaLokelmaFasenra and Bevespi. These new medicines are pillars in the main therapy areas and are important platforms for future growth.
 
3.   Reported financial measures are the financial results presented in accordance with International Financial Reporting Standards, as reported by the European Union and as issued by the International Accounting Standards Board.
 
4.   Core financial measures. These are non-GAAP financial 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.
 
5.   Merck & Co., Inc., Kenilworth, NJ, US, known as MSD outside the US and Canada.
 
6.   Epidermal growth factor receptor.
 
7.   Substitution of threonine (T) with methionine (M) at position 790 of exon 20 mutation.
 
8.   Non-small cell lung cancer.
 
9.   New Cardiovascular, Renal and Metabolism, incorporating Diabetes medicines, Brilinta and Lokelma.
 
10.  Chronic obstructive pulmonary disease.
 
11.  Overall survival.
 
12.  Committee for Medicinal Products for Human Use (CHMP) of the European Medicines Agency (EMA).
 
13.  Chronic kidney disease.
 
14.  PRIority MEdicines.
 
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.
 
 
H1 2019
 
-      Tagrisso - EGFRm NSCLC (1st line): regulatory decision (CN)
-      Imfinzi +/- treme - head & neck cancer (1st line): data readout, regulatory submission
-      Lynparza - breast cancer: regulatory decision (EU)
-      Lynparza - pancreatic cancer: data readout
 
-      Brilinta - CAD[15] / type-2 diabetes CVOT[16]: data readout
-      Forxiga - type-1 diabetes: regulatory decision (EU, JP)
-      Farxiga - type-2 diabetes CVOT: regulatory submission
-      roxadustat - anaemia: data readout (pooled safety), regulatory submission (US)
 
-      Duaklir - COPD: regulatory decision (US)
 
H2 2019
 
-      Tagrisso - EGFRm NSCLC (1st line): data readout (final OS)
-      Imfinzi - unresectable, Stage III NSCLC: regulatory decision (CN)
-      Imfinzi + treme - NSCLC (1st line) (NEPTUNE): data readout, regulatory submission
-      Imfinzi +/- treme - NSCLC (1st line) (POSEIDON): data readout, regulatory submission
-      Imfinzi +/- treme - small-cell lung cancer: data readout, regulatory submission
-      Imfinzi +/- treme - bladder cancer (1st line): data readout, regulatory submission
-      Lynparza - ovarian cancer (1st line) (SOLO-1): regulatory decision (EU, JP, CN)
-      Lynparza - pancreatic cancer: regulatory submission
-      Lynparza - ovarian cancer (1st line) (PAOLA-1): data readout
-      Lynparza - prostate cancer (2nd line, castration-resistant): data readout
-      Calquence - CLL[17]: data readout, regulatory submission
-      selumetinib - NF1: regulatory submission
 
-      Brilinta - CAD / type-2 diabetes CVOT: regulatory submission
-      Farxiga - type-1 diabetes: regulatory decision (US)
-      Lokelma - hyperkalaemia: regulatory submission (JP)
 
-      Symbicort - mild asthma: regulatory decision (EU), regulatory submission (CN)
-      Bevespi - COPD: regulatory decision (JP, CN)
-      Fasenra - self administration: regulatory decision (US, EU)
-      PT010 - COPD: regulatory decision (JP, CN), regulatory submission (US, EU)
-      PT010 - COPD: data readout (ETHOS)
 
2020
 
-      Imfinzi - neo-adjuvant NSCLC: data readout
-      Lynparza - ovarian cancer (1st line) (PAOLA-1): regulatory submission
-      Lynparza - prostate cancer (2nd line, castration-resistant): regulatory submission
 
-      Brilinta - stroke: data readout, regulatory submission
-      Farxiga - heart failure CVOT: data readout, regulatory submission
-      Farxiga - CKD: data readout
-      Epanova - hypertriglyceridaemia CVOT: data readout
-      Lokelma - hyperkalaemia: regulatory submission (CN)
-      roxadustat - anaemia of myelodysplastic syndrome: data readout
 
-      Fasenra - nasal polyps: data readout, regulatory submission
-      tezepelumab - severe asthma: data readout
 
 
Conference call
A conference call and webcast for investors and analysts will begin at 12pm UK time today. Details can be accessed via astrazeneca.com.
 
Reporting calendar
The Company intends to publish its first-quarter financial results on 26 April 2019.
 
About AstraZeneca
AstraZeneca is a global, science-led biopharmaceutical company that focuses on the discovery, development and commercialisation of prescription medicines, primarily for the treatment of diseases in its main therapy areas - Oncology, CVRM and Respiratory. AstraZeneca operates in over 100 countries and its innovative medicines are used by millions of patients worldwide. For more information, please visit astrazeneca.com and follow us on Twitter @AstraZeneca.
 
 
Investor Relations
 
 
Thomas Kudsk Larsen
 
+44 203 749 5712
Henry Wheeler
Oncology
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Christer Gruvris
BioPharma -
Cardiovascular; Metabolism
+44 203 749 5711
Nick Stone
BioPharma -
Respiratory; Renal
+44 203 749 5716
Josie Afolabi
Other
+44 203 749 5631
Craig Marks
Finance; Fixed Income
+44 7881 615 764
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Retail Investors; Corporate Access
+44 203 749 5824
US toll-free
 
+1 866 381 7277
Media Relations
 
 
Gonzalo Viña
UK/Global
+44 203 749 5916
Rob Skelding
UK/Global
+44 203 749 5821
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Sweden
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US
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Operating and financial review

 
All narrative on growth and results in this section is based on actual exchange rates, unless stated otherwise. Financial figures are in US$ millions ($m). The performance shown in this announcement covers the twelve-month period to 31 December 2018 (the year or FY 2018) and the three-month period to 31 December 2018 (the quarter, the fourth quarter or Q4 2018) compared to the twelve-month period to 31 December 2017 (FY 2017) and the three-month period to 31 December 2017 (Q4 2017) respectively, unless stated otherwise. All commentary in the Operating and Financial Review relates to the year, unless stated otherwise.
 
Core financial measures, EBITDA, Net Debt, Initial Externalisation Revenue and Ongoing Externalisation Revenue are non-GAAP financial measures because they cannot be derived directly from the Group Condensed Consolidated Financial Statements. Management believes that these non-GAAP financial measures, when provided in combination with Reported results, will provide investors and analysts with helpful supplementary information to understand better the financial performance and position of the Company on a comparable basis from period to period. These non-GAAP financial measures are not a substitute for, or superior to, financial measures prepared in accordance with GAAP. Core financial measures are adjusted to exclude certain significant items, such as:
 
-
Amortisation and impairment of intangible assets, including impairment reversals but excluding any charges relating to IT assets
 
-
Charges and provisions related to global restructuring programmes, which includes charges that relate to the impact of global restructuring programmes on capitalised IT assets
 
-
Other specified items, principally comprising acquisition-related costs, which include fair-value adjustments and the imputed finance charge relating to contingent consideration on business combinations, legal settlements and foreign-exchange gains and losses on certain non-structural intra-group loans
 
Details on the nature of Core financial measures are provided on page 68 of the Annual Report and Form 20-F Information 2017. Reference should be made to the reconciliation of Core to Reported financial information and the Reconciliation of Reported to Core Financial Measures tables included in the Financial Performance section of this announcement.
 
EBITDA is defined as Reported Profit Before Tax after adding back Net Finance Expense, results from Joint Ventures and Associates and charges for Depreciation, Amortisation and Impairment. Reference should be made to the Reconciliation of Reported Profit Before Tax to EBITDA included in the Financial Performance section of this announcement.
 
Net Debt is defined as interest-bearing loans and borrowings net of cash and cash equivalents, other investments and net derivative financial instruments. Reference should be made to Note 3 'Net Debt' included in the Notes to the Condensed Financial Information section of this announcement. Ongoing Externalisation Revenue is defined as Externalisation Revenue excluding Initial Externalisation Revenue (which is defined as Externalisation Revenue that is recognised at the date of completion of an agreement or transaction, in respect of upfront consideration). Ongoing Externalisation Revenue comprises, among other items, royalties, milestone revenue and profit-sharing income. Reference should be made to the Breakdown of Externalisation Revenue table in this Operating and Financial Review.
 
The Company strongly encourages investors and analysts not to rely on any single financial measure, but to review AstraZeneca's financial statements, including the notes thereto and other available Company reports, carefully and in their entirety.
 
Due to rounding, the sum of a number of percentages may not agree to totals.
 
Table 1: Total Revenue
 
 
 
FY 2018
 
Q4 2018
 
$m
 
% change
$m
% change
Actual
 
CER
 
Actual
 
CER
 
Product Sales
21,049
4
4
5,768
5
8
Externalisation Revenue
1,041
(55)
(55)
649
n/m
n/m
 
 
 
 
 
 
 
Total Revenue
22,090
(2)
(2)
6,417
11
14
 
Table 2: Product Sales
 
 
 
FY 2018
 
Q4 2018
 
$m
 
% of total
 
% change
$m
 
% of total
 
% change
Actual
 
CER
 
Actual
 
CER
 
Oncology
6,028
29
50
49
1,767
31
58
61
New CVRM
4,004
19
12
12
1,103
19
8
11
Respiratory
4,911
23
4
3
1,362
24
2
5
Other
6,106
29
(22)
(23)
1,536
27
(24)
(21)
 
 
 
 
 
 
 
 
 
Total
21,049
100
4
4
5,768
100
5
8
 
Table 3: Top-ten medicines
The top-ten medicines in the year by Product Sales are shown in the table below:
 
 
Medicine
 
Therapy Area
 
$m
 
% of Total Product Sales
 
Symbicort
Respiratory
2,561
12
Tagrisso
Oncology
1,860
9
Nexium
Other
1,702
8
Crestor
CVRM
1,433
7
Farxiga
CVRM
1,391
7
Brilinta
CVRM
1,321
6
Pulmicort
Respiratory
1,286
6
Faslodex
Oncology
1,028
5
Zoladex
Oncology
752
4
Seloken/Toprol-XL
CVRM
712
3
 
 
 
 
Total
 
14,046
67
 
Table 4: Breakdown of Externalisation Revenue
Ongoing Externalisation Revenue of $929m represented 89% of total Externalisation Revenue in the year (FY 2017: $821m, 35%). A breakdown of Externalisation Revenue is shown below:
 
 
 
FY 2018
 
Q4 2018
 
$m
 
% of total
 
% change
$m
 
% of total
 
% change
Actual
 
CER
 
Actual
 
CER
 
Initial Externalisation Revenue
112
11
(93)
(93)
-
-
n/m
n/m
 
 
 
 
 
 
 
 
 
Royalties
49
5
(54)
(54)
11
2
45
41
Milestones/Other[18]
880
84
24
23
638
98
n/m
n/m
Ongoing Externalisation Revenue
929
89
14
13
649
100
n/m
n/m
 
 
 
 
 
 
 
 
 
Total Externalisation Revenue
1,041
100
(55)
(55)
649
100
n/m
n/m
 
Table 5: Initial Externalisation Revenue
A breakdown of Initial Externalisation Revenue in the year is shown below:
 
 
Medicine
 
Party
 
Region
 
$m
 
Crestor
Almirall, S.A.
Spain
61
Other
 
 
51
 
 
 
 
Total
 
 
112
 
Table 6: Ongoing Externalisation Revenue
A breakdown of Ongoing Externalisation Revenue in the year is shown below:
 
 
Medicine
 
Party
 
Region
 
$m
 
Lynparza
MSD - milestone revenue
(regulatory)
Global
140
Lynparza
MSD - milestone revenue
(sales-related)
Global
250
Lynparza
MSD - milestone revenue
(option payment)
Global
400
Other
 
 
139
 
 
 
 
Total
 
 
929
 
Table 7: Externalised and divested medicines
Several AstraZeneca medicines were externalised or divested in FY 2018, thus adversely impacting the Product Sales performance:
 
 
Completion
 
Medicine
 
Region
 
FY 2018[19]
FY 2017
Adverse Impact on
FY 2018
Product Sales
$m
 
$m
 
$m
 
%
January 2018
Crestor
Spain
7
74
(67)
 
June 2018
Seroquel XRand
Seroquel IR
UK, China and other countries
109
148
(39)
 
September 2018
Atacand
Europe
70
86
(16)
 
November 2018
Nexium andVimovo
Europe, Global
235
248
(13)
 
 
 
 
 
 
 
 
 
Total
 
421
556
(135)
2%
 
 
Product Sales

The performance of new and legacy medicines is shown below, with a geographical split shown in Notes 7 & 8.
 
Table 8: FY 2018 therapy area and medicine performance
 
 
Therapy Area
 
Medicine
 
FY 2018
 
$m
 
% of total
 
% change
 
Actual
 
CER
 
Oncology
 
Tagrisso
 
1,860
 
9
 
95
 
93
 
Lynparza
 
647
 
3
 
n/m
 
n/m
 
Imfinzi
 
633
 
3
 
n/m
 
n/m
 
Iressa
 
518
 
2
 
(2)
 
(4)
 
Calquence
 
62
 
-
 
n/m
 
n/m
 
LEGACY:
 
 
 
 
 
Faslodex
 
1,028
 
5
 
9
 
9
 
Zoladex
 
752
 
4
 
2
 
2
 
Arimidex
 
212
 
1
 
(2)
 
(3)
 
Casodex
 
201
 
1
 
(7)
 
(8)
 
Others
 
115
 
1
 
1
 
(1)
 
Total Oncology
 
6,028
 
29
 
50
 
49
 
CVRM
 
Farxiga
 
1,391
 
7
 
30
 
30
 
Brilinta
 
1,321
 
6
 
22
 
21
 
Bydureon
 
584
 
3
 
2
 
1
 
Onglyza
 
543
 
3
 
(11)
 
(11)
 
Byetta
 
126
 
1
 
(28)
 
(28)
 
Symlin
 
34
 
-
 
(29)
 
(29)
 
LEGACY:
 
 
 
 
 
Crestor
 
1,433
 
7
 
(39)
 
(40)
 
Seloken/Toprol-XL
 
712
 
3
 
2
 
4
 
Atacand
 
260
 
1
 
(13)
 
(12)
 
Others
 
306
 
1
 
(11)
 
(12)
 
Total CVRM
 
6,710
 
32
 
(8)
 
(8)
 
Respiratory
 
Symbicort
 
2,561
 
12
 
(9)
 
(10)
 
Pulmicort
 
1,286
 
6
 
9
 
8
 
Fasenra
 
297
 
1
 
n/m
 
n/m
 
Daliresp/Daxas
 
189
 
1
 
(5)
 
(5)
 
Tudorza/Eklira
 
110
 
1
 
(27)
 
(29)
 
Duaklir
 
95
 
-
 
20
 
14
 
Bevespi
 
33
 
-
 
n/m
 
n/m
 
Others
 
340
 
2
 
20
 
18
 
Total Respiratory
 
4,911
 
23
 
4
 
3
 
Other
 
Nexium
 
1,702
 
8
 
(13)
 
(14)
 
Synagis
 
665
 
3
 
(3)
 
(3)
 
Seroquel XR/IR
 
361
 
2
 
(29)
 
(31)
 
Losec/Prilosec
 
272
 
1
 
-
 
(2)
 
FluMist/Fluenz
 
110
 
1
 
41
 
44
 
Movantik/Moventig
 
109
 
1
 
(11)
 
(11)
 
Others
 
181
 
1
 
(66)
 
(67)
 
Total Other
 
3,400
 
16
 
(18)
 
(19)
 
 
Total Product Sales
 
21,049
 
100
 
4
 
4
 
 
Specialty-care medicines comprise all Oncology medicines and Fasenra. At 30% of Product Sales, specialty-care medicine sales increased by 57% in the year (56% at CER) to $6,325m (FY 2017: $4,025m).
 
Table 9: Q4 2018 therapy area and medicine performance
 
 
Therapy Area
 
Medicine
 
Q4 2018
 
$m
 
% of total
 
% change
 
Actual
 
CER
 
Oncology
 
Tagrisso
 
594
 
10
 
95
 
98
 
Lynparza
 
209
 
4
 
n/m
 
n/m
 
Imfinzi
 
262
 
5
 
n/m
 
n/m
 
Iressa
 
112
 
2
 
(14)
 
(11)
 
Calquence
 
24
 
-
 
n/m
 
n/m
 
LEGACY:
 
 
 
 
 
Faslodex
 
269
 
5
 
13
 
16
 
Zoladex
 
182
 
3
 
(3)
 
3
 
Arimidex
 
46
 
1
 
(19)
 
(16)
 
Casodex
 
46
 
1
 
(15)
 
(13)
 
Others
 
23
 
-
 
(21)
 
(17)
 
Total Oncology
 
1,767
 
31
 
58
 
61
 
CVRM
 
Farxiga
 
397
 
7
 
20
 
24
 
Brilinta
 
376
 
7
 
26
 
29
 
Bydureon
 
138
 
2
 
(6)
 
(5)
 
Onglyza
 
148
 
3
 
(18)
 
(15)
 
Byetta
 
32
 
1
 
(33)
 
(31)
 
Symlin
 
10
 
-
 
(23)
 
(23)
 
LEGACY:
 
 
 
 
 
Crestor
 
353
 
6
 
(41)
 
(38)
 
Seloken/Toprol-XL
 
160
 
3
 
(5)
 
4
 
Atacand
 
58
 
1
 
(21)
 
(14)
 
Others
 
75
 
1
 
(12)
 
(8)
 
Total CVRM
 
1,747
 
30
 
(10)
 
(6)
 
Respiratory
 
Symbicort
 
636
 
11
 
(15)
 
(13)
 
Pulmicort
 
389
 
7
 
5
 
9
 
Fasenra
 
125
 
2
 
n/m
 
n/m
 
Daliresp/Daxas
 
54
 
1
 
2
 
4
 
Tudorza/Eklira
 
19
 
-
 
(55)
 
(55)
 
Duaklir
 
22
 
-
 
(4)
 
-
 
Bevespi
 
10
 
-
 
25
 
25
 
Others
 
107
 
2
 
26
 
32
 
Total Respiratory
 
1,362
 
24
 
2
 
5
 
Other
 
Nexium
 
390
 
7
 
(9)
 
(6)
 
Synagis
 
251
 
4
 
7
 
7
 
FluMist/Fluenz
 
75
 
1
 
29
 
33
 
Losec/Prilosec
 
60
 
1
 
(13)
 
(9)
 
Seroquel XR/IR
 
56
 
1
 
(65)
 
(64)
 
Movantik/Moventig
 
25
 
-
 
(17)
 
(17)
 
Others
 
35
 
1
 
(70)
 
(68)
 
Total Other
 
892
 
15
 
(18)
 
(17)
 
Total Product Sales
 
5,768
 
100
 
5
 
8
 
 
 
Product Sales summary

Oncology
Product Sales of $6,028m in the year; an increase of 50% (49% at CER). Oncology Product Sales represented 29% of total Product Sales, up from 20% in FY 2017.
 
Lung cancer
 
Tagrisso
In the 2nd-line setting, Tagrisso has been approved and launched in over 80 countries, including the US, in Europe, Japan and China for patients with EGFR T790M-mutated NSCLC. By the end of the period, Tagrisso had been approved in more than c.60 countries including the US, in Europe and Japan for the 1st-line treatment of patients with EGFRm NSCLC; a number of additional regulatory reviews are also underway.
 
Product Sales of $1,860m in the year represented growth of 95% (93% at CER), partly driven by increased testing rates and the aforementioned approvals in the 1st-line setting. Continued growth was also delivered in the 2nd-line indication in other countries, including in Europe and Emerging Markets. Tagrisso became AstraZeneca's second-largest selling medicine and largest-selling Oncology medicine in the year.
 
Sales in the US increased by 115% to $869m, with sequential growth in the quarter of 21% to $289m; Tagrisso was established as the SoC in the 1st-line setting. A high level of penetration was achieved following the April 2018 approval in that setting.
 
Within Emerging Markets, Tagrisso sales increased by 157% in the year (159% at CER) to $347m, with notable growth in China, where the medicine was approved in March 2017 in the 2nd-line setting. Q4 2018 sales of Tagrisso in Emerging Markets declined sequentially from $107m to $81m, reflecting the addition of Tagrisso to the NRDL with effect from January 2019. The Asia-Pacific region has a relatively high prevalence of lung-cancer patients with an EGFR mutation, namely c.30-40% of lung-cancer patients, contrasting with c.10-15% in the Western hemisphere.
 
In Europe, sales of $314m in the year represented growth of 68% (61% at CER), driven by further growth in testing rates, positive reimbursement decisions and strong levels of demand in the 2nd-line setting. Sales in Europe increased sequentially by 11% (12% at CER) to $92m in Q4 2018 as the medicine reached more patients, with the benefit felt from the EU regulatory approval in June 2018 for the 1st-line treatment of patients with EGFRm NSCLC. Tagrisso was subsequently launched in a number of countries in this setting, including in France and Germany, where Tagrisso is listed as the preferred 1st-line tyrosine kinase inhibitor in local guidelines; reimbursement negotiations are underway elsewhere, with reimbursement decisions expected later in 2019.
 
Sales of Tagrisso in Japan increased by 45% in the year (43% at CER) to $317m, reflecting increasing use as a 1st-line treatment, following approval in this setting in the third quarter. Focused activities to maximise testing and utilisation rates in the 2nd-line setting also supported the growth in Product Sales.
 
Imfinzi
Imfinzi is approved in more than c.40 countries, including the US, in Europe and Japan, for the treatment of patients with unresectable, Stage III NSCLC whose disease has not progressed following platinum-based chemotherapy and radiation therapy (CRT). It is also approved for the 2nd-line treatment of patients with locally-advanced or metastatic urothelial carcinoma (bladder cancer) in a number of countries, including the US.
 
Global Product Sales of Imfinzi amounted to $633m in the year (Q4 2018: $262m), of which $564m of sales emanated from the US, mostly for the treatment of unresectable, Stage III NSCLC. $35m of sales in Japan and $27m of sales in Europe in FY 2018 followed recent approvals and launches; time was taken to achieve reimbursement decisions in many markets. Additional regulatory approvals are expected in due course and subsequent launches will follow anticipated reimbursement decisions.
 
Iressa
Product Sales of $518m in the year; a decline of 2% (4% at CER).
 
Emerging Markets sales increased by 14% (12% at CER) to $286m; Iressa entered the NRDL in China in 2017 and was included in the China 4+7 pilot tender scheme during the year. Given the growing use of Tagrisso, sales of Iressa declined by 33% to $26m in the US and declined by 3% (8% at CER) to $109m in Europe.
 
Lynparza 
 
By the end of the period, Lynparza was approved in over 60 countries for the treatment of ovarian cancer. Launches in the treatment of breast cancer took place in the US and Japan in 2018 and the indication is under regulatory review in Europe.
 
Product Sales of Lynparza amounted to $647m, an increase of 118% (116% at CER). The strong performance was geographically spread, with ongoing launches in the Established Rest of World (ROW) and Emerging Markets. Ongoing MSD co-promotion efforts also contributed to sales.
 
US sales increased by 145% in the year to $345m, driven by increased demand that reflected continued growth in the treatment with Lynparza of patients suffering from ovarian or breast cancer. In December 2018, Lynparza was approved by the US FDA as a 1st-line maintenance treatment of patients with BRCAm ovarian cancer and remained the leading US medicine in the poly ADP ribose polymerase (PARP)-inhibitor class in the year, as measured by total prescription volumes and in both ovarian and breast cancer.
 
Sales in Europe increased by 46% in the year (41% at CER) to $190m, driven by increasing levels of reimbursement and BRCAtesting rates. The Company also rolled out a number of launches in a broad, 2nd-line, maintenance ovarian-cancer indication, regardless of BRCA status. In the first half of the year, the Company announced that the EMA had approved the use ofLynparza tablets (300mg twice daily) as a treatment for the same patient population.
 
Following the initial launch in April 2018, Japan sales of Lynparza in the year as a treatment for 2nd-line maintenance ovarian cancer amounted to $48m. In July 2018, an additional approval was granted as a targeted chemotherapy-sparing treatment forBRCAm, metastatic breast cancer; a respective launch followed thereafter.
 
Emerging Markets sales of $51m in the year reflected the approval of Lynparza as a 2nd-line maintenance treatment of patients with ovarian cancer by the China National Medical Products Administration (NMPA), resulting in the subsequent launch ofLynparza in China, the first PARP inhibitor to be approved in the country.
 
Haematology and other Oncology medicines
 
Calquence
Product Sales of $62m in the year; Calquence was approved and launched in the US in October 2017. The medicine delivered a promising performance in the year, with more than one third of new patients now treated in the 2nd line with Calquence in the approved indication of mantle cell lymphoma (MCL). At the end of 2018, the first regulatory approvals outside the US for the treatment of patients with MCL were granted in Brazil and the United Arab Emirates, with launches expected to benefit patients in 2019.
 
Legacy: Faslodex
Product Sales of $1,028m in the year; an increase of 9%, reflecting volume growth. Faslodex achieved blockbuster status in the year, namely sales of more than $1bn.
 
Emerging Markets sales of Faslodex increased by 34% in the year (41% at CER) to $154m. US sales increased by 9% to $537m, highlighting a continued strong uptake of the combination with the CDK4/6 class, medicines approved for the treatment of hormone-receptor-positive breast cancer.
 
Europe sales declined by 14% in the year (19% at CER) to $221m, reflecting the impact of generic entrants in certain countries. In June 2017, a label extension, based upon the FALCON trial in the 1st-line setting, was approved in Japan, where sales increased by 51% in the year (49% at CER) to $109m, despite the impact of the biennial price cut, implemented in April 2018.
 
Legacy: Zoladex
Product Sales of $752m in the year; an increase of 2%.
 
Emerging Markets sales of Zoladex increased by 16% in the year (18% at CER) to $409m. Sales in Europe declined by 6% (10% at CER) to $133m. In the Established ROW region, sales declined by 11% (12% at CER) to $202m, driven by the effects of increased competition. In March 2017, the Company completed an agreement with TerSera Therapeutics LLC for the sale of the commercial rights to Zoladex in the US and Canada.
 
CVRM
Total CVRM sales, which included Crestor and other legacy medicines, declined by 8% to $6,710m. Total CVRM sales comprised 32% of total Product Sales in the year, down from 36% in FY 2017. New CVRM sales increased by 12% in the year to $4,004m, reflecting the strong performances of Farxiga and Brilinta.
 
Diabetes
 
Farxiga
Product Sales of $1,391m in the year; an increase of 30%.
 
Emerging Markets sales of Forxiga increased by 45% in the year (52% at CER) to $336m, reflecting ongoing launches, improved levels of patient access and strong performances in key markets such as Brazil. In 2017, Forxiga became the first SGLT2-inhibitor medicine to be approved in China; since the subsequent launch, the medicine has seen growing levels of access.
 
US sales increased by 21% in the year to $591m. The performance in the first half of 2018 was favourably impacted by the Company's changes to affordability programmes at the end of H1 2017. Despite slowing growth in the US, the SGLT2 class continued to be underpinned by growing evidence around cardiovascular (CV) benefits.
 
Sales in Europe increased by 30% in the year (24% at CER) to $315m. In Japan, sales increased by 42% (40% to CER) to $75m. Ono Pharmaceutical Co., Ltd, collaborating with AstraZeneca, records in-market sales in Japan.
 
Bydureon
Product Sales of $584m in the year; an increase of 2% (1% at CER).
 
Sales in the US increased by 4% in the year to $475m. This illustrated a continued encouraging performance from the launch ofBydureon BCise. Favourable sales volumes were driven by continued growth in the glucagon-like peptide-1 class, at the expense of insulin, for more-advanced type-2 diabetes patients. Bydureon sales in Europe declined by 8% (13% at CER) to $81m. In August 2018, the Company announced that Bydureon BCise had been approved by the EMA.
 
Q4 2018 global sales of Bydureon declined by 6% (5% at CER) to $138m, reflecting ongoing production constraints.
 
Onglyza 
Product Sales of $543m in the year, a decline of 11%.
 
The performance reflected adverse pressures on the dipeptidyl peptidase-4 (DPP-4) class and an acceleration of ongoing diabetes-market dynamics, where patients are moving to medicines and classes of medicines with proven CV benefits. Given the significant future potential of Farxiga, the Company continues to prioritise commercial support over Onglyza.
 
Sales in Emerging Markets increased by 32% in the year (34% at CER) to $172m; this partly reflected the full-year effect of entry onto the NRDL in China in 2017. Sales in Europe declined by 14% (18% at CER) to $89m, highlighting the broader trend of a shift away from the DPP-4 class.
 
Other CVRM medicines
 
Brilinta
Product Sales of $1,321m in the year; an increase of 22% (21% at CER). Total Brilinta sales increased by 26% in Q4 2018 (29% at CER) to $376m.
 
Emerging Markets sales of Brilinta increased by 46% in the year (48% at CER) to $326m, bolstered by the entry onto the NRDL in China in 2017. US sales of Brilinta, at $588m, represented an increase of 16%. The performance, underlined by volume growth, was driven primarily by an increase in the number of patients initiated on Brilinta in hospitals and a lengthening in the average-weighted duration of treatment, reflecting the impact of growing 90-day prescriptions. Furthermore, Brilinta continued to deliver increasing levels of market share during the period. US sales increased by 15% in the quarter to $177m.
 
Sales of Brilique in Europe increased by 18% in the year (13% at CER) to $348m, highlighting increased HRPMI-penetration levels across a number of markets.
 
Lokelma
Lokelma's launch programme recently began in Scandinavia. It was approved in the EU in 2018 for the treatment of hyperkalaemia, a serious condition characterised by elevated potassium levels in the blood associated with CV, renal and metabolic diseases; launches will commence in major European markets in due course.
 
In the US, where Lokelma was approved in 2018, the Company has market-preparation processes underway in order to secure coverage across commercial and Medicare Part D plans. AstraZeneca has also actioned procedures to ensure inclusion on hospital formularies so that patients have adequate access to Lokelma when it is anticipated to become broadly available in the second half of 2019.
 
Legacy: Crestor
Product Sales of $1,433m in the year; a decline of 39% (40% at CER).
 
Sales in China increased by 22% in the year (19% at CER) to $456m, a result of underlying demand. Market growth in statin usage, AstraZeneca's commercial strength in China and the Company's successful strategy of broader coverage in China also continued to impact sales favourably.
 
During the period, however, the results of the first round of negotiation from the aforementioned 4+7 scheme were announced, with Crestor being unsuccessful; the decision is anticipated to have an adverse impact on sales of Crestor in China.
 
US sales declined by 54% in the year to $170m, underlining the ongoing impact of the entry of multiple Crestor generic medicines in 2016. In Europe, sales declined by 70% (71% at CER) to $203m, reflecting a similar impact that began in 2017.
 
In Japan, where AstraZeneca collaborates with Shionogi Co. Ltd, sales declined by 66% in the year (67% at CER) to $166m, reflecting the impact of the entry of multiple Crestor competitors in the market in the final quarter of 2017; AstraZeneca expects this impact to recede significantly in 2019. The decline also reflected actions by the Japanese government to focus further on incentives to increase the adoption of generic medicines.
 
Respiratory
 
Product Sales of $4,911m in the year; an increase of 4% (3% at CER). Respiratory Product Sales represented 23% of total Product Sales, unchanged vs. FY 2017.
 
Symbicort
Product Sales of $2,561m in the year; a decline of 9% (10% at CER).
 
Symbicort continued to lead the global market by volume within the inhaled corticosteroid / long-acting beta agonist (LABA) class.
 
Emerging Markets sales of Symbicort increased by 13% in the year (14% at CER) to $495m. In contrast, US sales declined by 22% to $862m, reflecting continued pricing pressure, the timing of government buying and the impact of managed-market rebates. The performance was in line with expectations, with challenging pricing pressure expected to continue.
 
In Europe, sales declined by 6% in the year (10% at CER) to $773m; the performance partly reflected the level of price competition from other branded and Symbicort-analogue medicines, plus government pricing interventions. Symbicort, however, continued to retain its class-leadership position and stabilise its volume market share in the class, with volume growth achieved in a number of markets.
 
In Japan, sales increased by 1% in the year (stable at CER) to $207m, despite the impact of the aforementioned biennial price cut. In January 2019, AstraZeneca and Astellas Pharma Co. Ltd (Astellas) announced that the sale and distribution of Symbicort, conducted by Astellas in Japan, was to be transferred to AstraZeneca and that the co-promotion conducted by Astellas and AstraZeneca will be terminated on 30 July 2019. The Company will solely distribute and promote the medicine in Japan from 31 July 2019.
 
Pulmicort 
Product Sales of $1,286m in the year; an increase of 9% (8% at CER).
 
Emerging Markets, where sales increased by 18% in the year (17% at CER) to $995m, represented 77% of global sales of Pulmicort. China, making up the overwhelming majority of Pulmicort sales in Emerging Markets, delivered a particularly strong performance, supported by higher demand and strong underlying volume growth, underpinned by the impact of AstraZeneca's contribution to increasing numbers of nebulisation centres.
 
Sales in the US and Europe declined by 26% to $116m and by 2% (8% at CER) to $90m in the year, respectively, a consequence of the medicine's legacy status.
 
Fasenra
Product Sales of $297m in the year (Q4 2018: $125m).
 
In November 2017, the Company was granted approval for Fasenra in the US as a treatment of patients with severe, eosinophilic asthma; the approval was followed immediately by the launch of the medicine and US sales amounted to $218m in the year. New-to-brand prescription data showed that Fasenra was the preferred IL-5 biologic medicine for the treatment of severe asthma at the end of the period, despite being third to market.
 
In Europe and Japan, AstraZeneca was granted regulatory approval in January 2018 on a similar basis to that in the US. In Europe, sales totalled $32m in the year, predominately reflecting strong sales in Germany. Sales in Japan amounted to $45m in the year, following its launch in the second quarter; Fasenra is already leading the class by value share in Japan.
 
Daliresp/Daxas
Product Sales of $189m in the year; a decline of 5%.
 
US sales, representing 82% of the global total, declined by 7% to $155m, driven by the impact of low market growth and payer pressures. It is the only oral, selective, long-acting inhibitor of phosphodiesterase-4, an inflammatory enzyme associated with COPD. Sales in Europe increased by 8% (4% at CER) to $28m.
 
Tudorza/Eklira
Product Sales of $110m in the year; a decline of 27% (29% at CER).
 
Sales in the US declined by 62% to $25m, reflecting the impact of federal purchases. In March 2017, AstraZeneca announced that it had entered a strategic collaboration with Circassia Pharmaceuticals plc (Circassia) for the development and commercialisation of Tudorza in the US, where AstraZeneca records Product Sales. As part of the collaboration agreement, Circassia had the opportunity to exercise an option to sub-licence the commercial rights to Tudorza in the US by paying $25m. The option was exercised in Q4 2018 and completed in Q1 2019.
 
Sales in Europe increased by 1% in the year (a decline of 3% at CER) to $74m, impacted by the deterioration of the long-acting muscarinic antagonist (LAMA) monotherapy class.
 
Duaklir
Product Sales of $95m in the year; an increase of 20% (14% at CER).
 
Duaklir, the Company's first inhaled dual bronchodilator medicine, is now available for patients in over 25 countries, with almost all sales emanating from Europe. Germany and the UK accounted for over half of all European sales in the year. The global LAMA/LABA class continued to grow in the period, albeit below expectations.
 
Bevespi 
Product Sales increased by 106% in the year to $33m.
 
Launched in the US in Q1 2017, Bevespi saw prescriptions in the period track in line with other LAMA/LABA launches; the class in the US, however, continued to grow more slowly than anticipated previously. Bevespi was the first medicine launched using the Company's proprietary Aerosphere Delivery Technology.
 
Other (medicines outside the main therapy areas)
 
Product Sales of $3,400m; a decline of 18% (19% at CER). Other Product Sales represented 16% of total Product Sales, down from 21% in 2017.
 
Nexium 
Product Sales of $1,702m in the year; a decline of 13% (14% at CER).
 
Emerging Markets sales increased by 1% in the year to $690m, while sales in the US declined by 39% to $306m. In Europe, sales declined by 5% (10% at CER) at $235m. In October 2018, AstraZeneca announced that it had agreed to divest the prescription medicine rights to Nexium in Europe to Grünenthal. In Japan, where AstraZeneca collaborates with Daiichi Sankyo Company, Ltd, sales declined by 8% (9% at CER) to $405m.
 
Synagis 
Product Sales of $665m in the year; a decline of 3%.
 
US sales declined by 9% to $287m and continued to be impacted by the prevailing guidelines from the American Academy of Pediatrics Committee on Infectious Diseases. Product Sales to AbbVie Inc., responsible for the commercialisation of Synagis in over 80 countries outside the US, increased by 2% to $377m.
 
In January 2019, the Company completed an agreement with Swedish Orphan Biovitrum AB (Sobi) for the sale and licence of the rights to Synagis in the US.
 
Seroquel XR and Seroquel IR
Product Sales of $361m in the year; a decline of 29% (31% at CER).
 
Sales of Seroquel XR in the US declined by 58% to $73m, reflecting the ongoing impact of generic-medicine competition. Sales of Seroquel XR in Europe declined by 21% (24% at CER) to $62m, highlighting a similar impact. In May 2018, the Company announced that it had entered into an agreement with Luye Pharma Group, Ltd. (Luye Pharma) for the sale and licence of the rights to Seroquel XR and Seroquel IR in the UK, China and other markets. Sales of Seroquel IR declined by 7% in the year (8% at CER) to $167m.
 
FluMist/Fluenz
Product Sales of $110m in the year; an increase of 41% (44% at CER). FluMist returned to the US market in Q3 2018 in time for the 2018-2019 influenza season, where sales amounted to $15m in the year. Sales of Fluenz in Europe increased by 20% (22% at CER) in the year to $91m.
 
Regional Product Sales

Table 10: Regional Product Sales
 
 
 
FY 2018
 
Q4 2018
 
$m
 
% of total
 
% change
$m
 
% of total
 
% change
Actual
 
CER
 
Actual
 
CER
 
Emerging Markets[20]
6,891
33
12
13
1,766
31
8
16
China
3,795
18
28
25
948
16
17
22
Ex-China
3,096
15
(3)
1
818
14
-
10
 
 
 
 
 
 
 
 
 
US
6,876
33
11
11
2,037
35
15
15
 
 
 
 
 
 
 
 
 
Europe
4,459
21
(6)
(10)
1,173
20
(9)
(7)
 
 
 
 
 
 
 
 
 
Established ROW
2,823
13
(8)
(9)
792
14
-
1
  Japan
2,004
10
(9)
(11)
588
10
4
5
  Canada
489
2
1
-
131
2
-
4
  Other Established ROW
330
2
(15)
(14)
73
1
(27)
(22)
 
 
 
 
 
 
 
 
 
Total
21,049
100
4
4
5,768
100
5
8
 
 
Table 11: Regional Product Sales, Emerging Markets
Product Sales of $6,891m in the year, an increase of 12% (13% at CER). Q4 2018 sales of $1,766m represented an increase of 8% (16% at CER) and continued the strong double-digit growth seen in prior periods. The new medicines represented 15% of Emerging Markets' sales in the year, up from 10% in FY 2017.
 
 
 
FY 2018
  Q4 2018  
$m
 
% of total
 
% change
$m
 
% of total
 
% change
Actual
 
CER
 
Actual
 
CER
 
Oncology
1,528
22
36
37
355
20
19
30
CVRM
2,695
39
14
15
691
39
12
21
Respiratory
1,644
24
18
18
497
28
17
25
Other
1,024
15
(19)
(19)
223
13
(23)
(21)
 
 
 
 
 
 
 
 
 
Total
6,891
100
12
13
1,766
100
8
16
 
China sales, comprising 55% of total Emerging Markets sales, increased by 28% in the year (25% at CER) to $3,795m and by 17% (22% at CER) in the quarter to $948m. New medicines delivered particularly encouraging sales growth, supported by strong performances from PulmicortSelokenCrestorNexium and Symbicort. New medicines represented 11% of China sales in the year, up from 7% in 2017.
 
Table 12: Regional Product Sales, US
Product Sales of $6,876m; an increase of 11%. Q4 2018 sales increased by 15% to $2,037m. New medicines represented 48% of US Product Sales in the year, up from 26% in FY 2017. The performance during the period reflected, in particular, the success of the new Oncology medicines, including TagrissoImfinzi and Lynparza, plus the strong performance of Fasenra in Respiratory.
 
 
 
FY 2018
Q4 2018
$m
% of total
% change
$m
% of total
% change
Oncology
2,412
35
n/m
792
39
134
CVRM
2,206
32
(7)
604
30
(14)
Respiratory
1,416
21
(6)
386
19
(6)
Other
842
12
(28)
255
12
(20)
 
 
 
 
 
 
 
Total
6,876
100
11
2,037
100
15
 
 
Table 13: Regional Product Sales, Europe
Product Sales of $4,459m in the year; a decline of 6% (10% at CER), reflecting the impact of the entry of generic Crestormedicines in various European markets in 2017 and continued competitive and price pressures. Excluding sales of Crestor, Europe sales increased by 4% (stable at CER) to $4,256m. Crestor sales in Europe declined by 70% in the year (71% at CER) to $203m and represented 5% of Europe sales. New medicines delivered an encouraging performance in the year, representing 28% of Europe Product Sales, up from 18% in FY 2017.
 
 
 
 
FY 2018
 
Q4 2018
 
$m
 
% of total
 
% change
$m
 
% of total
 
% change
 
 
Actual
 
CER
 
 
Actual
 
CER
 
Oncology
1,053
24
19
14
287
25
19
21
CVRM
1,230
27
(26)
(29)
295
25
(28)
(26)
Respiratory
1,229
28
1
(4)
307
26
(9)
(7)
Other
947
21
(5)
(8)
284
24
(6)
(3)
 
 
 
 
 
 
 
 
 
Total
4,459
100
(6)
(10)
1,173
100
(9)
(7)
 
 
Table 14: Regional Product Sales, Established ROW
Product Sales of $2,823m; a decline of 8% (9% at CER). New medicines represented 24% of Established ROW sales in the year, up from 13% in 2017. The performance during the period reflected, in particular, the success of Tagrisso and Forxiga.
 
 
 
FY 2018 Q4 2018

 

 
$m
 
% of total
 
% change
$m
 
% of total
 
% change
Actual
 
CER
 
Actual
 
CER
 
Oncology
1,035
37
16
14
333
42
38
38
CVRM
579
21
(33)
(34)
157
20
(24)
(22)
Respiratory
622
22
5
4
172
22
6
8
Other
587
21
(19)
(20)
130
16
(29)
(27)
 
 
 
 
 
 
 
 
 
Total
2,823
100
(8)
(9)
792
100
-
1
 
Japan, comprising 71% of total Established ROW sales, declined by 9% (11% at CER) to $2,004m (Q4 2018 sales increased by 4% (5% at CER) to $588m). The impact of the entry of generic Crestor medicines was felt faster than expected; the biennial price reduction also adversely affected sales in the year. Excluding sales of Crestor, Japan sales increased by 7% (5% at CER) to $1,838m. Crestor sales in Japan declined by 66% (67% at CER) to $166m and represented 8% of Japan sales in the year. Sales of Tagrisso in Japan increased by 45% in the year (43% at CER) to $317m, reflecting increasing use as a 1st-line treatment, following approval in this setting in the third quarter. Focused activities to maximise testing and utilisation rates in the 2nd-line indication also supported the growth in Product Sales.
 
 
Financial performance

Table 15: FY 2018 Reported Profit and Loss
 
 
 
Reported
 
FY 2018
 
FY 2017
 
% change
 
$m
 
$m
 
Actual
 
CER
 
Product Sales
21,049
20,152
4
4
Externalisation Revenue
1,041
2,313
(55)
(55)
Total Revenue
22,090
22,465
(2)
(2)
 
 
 
 
 
Cost of Sales
(4,936)
(4,318)
14
13
 
 
 
 
 
Gross Profit
17,154
18,147
(5)
(6)
Gross Margin[21]
76.6%
79.6%
-3
-3
 
 
 
 
 
Distribution Expense
(331)
(310)
7
6
% Total Revenue
1.5%
1.4%
-
-
R&D Expense
(5,932)
(5,757)
3
3
% Total Revenue
26.9%
25.6%
-1
-1
SG&A Expense
(10,031)
(10,233)
(2)
(3)
% Total Revenue
45.4%
45.5%
-
-
Other Operating Income and Expense
2,527
1,830
38
38
% Total Revenue
11.4%
8.1%
+3
+3
 
 
 
 
 
Operating Profit
3,387
3,677
(8)
(7)
% Total Revenue
15.3%
16.4%
-1
-1
Net Finance Expense
(1,281)
(1,395)
(8)
2
Joint Ventures and Associates
(113)
(55)
n/m
n/m
Profit Before Tax
1,993
2,227
(10)
(14)
Taxation
57
641
 
 
Tax Rate
(3)%
(29)%
 
 
Profit After Tax
2,050
2,868
(29)
(30)
 
 
 
 
 
Earnings Per Share
$1.70
$2.37
(28)
(29)
 
Table 16: Q4 2018 Reported Profit and Loss
 
 
           
Reported
 
Q4 2018
 
Q4 2017
 
% change

$m
 
$m
 
                             Actual                                                                         CER  
Product Sales
5,768
5,487
5
8
Externalisation Revenue
649
290
n/m
n/m
Total Revenue
6,417
5,777
11
14
 
 
 
 
 
Cost of Sales
(1,637)
(1,225)
34
37
 
 
 
 
 
Gross Profit
4,780
4,552
5
8
Gross Margin[22]
71.6%
77.6%
-6
-6
 
 
 
 
 
Distribution Expense
(93)
(85)
10
16
% Total Revenue
1.5%
1.5%
-
-
R&D Expense
(2,012)
(1,551)
30
33
% Total Revenue
31.4%
26.8%
-4
-4
SG&A Expense
(2,600)
(3,078)
(16)
(12)
% Total Revenue
40.5%
53.3%
+13
+12
Other Operating Income & Expense
1,002
848
18
19
% Total Revenue
15.6%
14.7%
+1
+1
 
 
 
 
 
Operating Profit
1,077
686
57
54
% Total Revenue
16.8%
11.9%
+5
+4
Net Finance Expense
(311)
(267)
17
24
Joint Ventures and Associates
(36)
(12)
n/m
n/m
Profit Before Tax
730
407
79
69
Taxation
279
854
 
 
Tax Rate
(38)%
(210)%
 
 
Profit After Tax
1,009
1,261
(20)
(22)
 
 
 
 
 
Earnings Per Share
$0.82
$1.03
(21)
(22)
 
 
 
 
 
 
 
Table 17: Reconciliation of Reported Profit Before Tax to EBITDA[23]
 
 
 
FY 2018 $m
 
FY 2017 $m
% change
Actual
 
CER
 
Reported Profit Before Tax
1,993
2,227
(10)
(14)
Net Finance Expense
1,281
1,395
(8)
2
Joint Ventures and Associates
113
55
n/m
n/m
Depreciation, Amortisation and Impairment
3,753
3,036
24
24
 
 
 
 
 
EBITDA
7,140
6,713
6
7
 
Table 18: FY 2018 Reconciliation of Reported to Core financial measures
 
 
 
Reported
 
Restructuring
 
Intangible Asset
Amortisation & Impairments
 
Diabetes Alliance
 
Other[24]
 
Core[25]
 
Core
% change
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Actual
 
CER
 
Gross Profit
17,154
432
187
-
-
17,773
(4)
(4)
Gross Margin[26]
76.6%
-
-
-
-
79.5%
-2
-2
 
 
 
 
 
 
 
 
 
Distribution Expense
(331)
-
-
-
-
(331)
7
6
R&D Expense
(5,932)
94
572
-
-
(5,266)
(3)
(3)
SG&A Expense
(10,031)
181
1,582
(60)
(323)
(8,651)
10
9
Other Operating Income & Expense
2,527
(10)
4
-
(374)
2,147
10
10
 
 
 
 
 
 
 
 
 
Operating Profit
3,387
697
2,345
(60)
(697)
5,672
(17)
(17)
% Total Revenue
15.3%
-
-
-
-
25.7%
-5
-5
 
 
 
 
 
 
 
 
 
Net Finance Expense
(1,281)
-
-
337
208
(736)
13
11
Taxation
57
(146)
(487)
(73)
109
(540)
(37)
(36)
 
 
 
 
 
 
 
 
 
Earnings Per Share
$1.70
$0.43
$1.47
$0.16
$(0.30)
$3.46
(19)
(19)
 
Table 19: Q4 2018 Reconciliation of Reported to Core financial measures
 
 
 
Reported
 
Restructuring
 
Intangible Asset
Amortisation & Impairments
Diabetes Alliance
 
Other[27]
 
Core[28]
 
Core
% change
 
$m
 
$m
 
$m
 
$m
 
$m
 
$m
 
Actual
 
CER
 
Gross Profit
4,780
355
48
-
-
5,183
11
14
Gross Margin[29]
71.6%
-
-
-
-
78.6%
(1)
(1)
 
 
 
 
 
 
 
 
 
Distribution Expense
(93)
-
-
-
-
(93)
10
16
R&D Expense
(2,012)
(1)
547
-
-
(1,466)
1
3
SG&A Expense
(2,600)
71
515
(380)
(42)
(2,436)
12
15
Other Operating Income & Expense
1,002
1
1
-
-
1,004
18
18
 
 
 
 
 
 
 
 
 
Operating Profit
1,077
426
1,111
(380)
(42)
2,192
23
23
% Total Revenue
16.8%
-
-
-
-
34.2%
3
3
 
 
 
 
 
 
 
 
 
Net Finance Expense
(311)
-
-
84
52
(175)
43
41
Taxation
279
(89)
(238)
47
5
4
n/m
n/m
 
 
 
 
 
 
 
 
 
Earnings Per Share
$0.82
$0.26
$0.69
$(0.20)
$0.01
$1.58
22
22
 
Profit and Loss Commentary
 
Gross Profit
Reported Gross Profit declined by 5% in the year (6% at CER) to $17,154m; Core Gross Profit declined by 4% to $17,773m. The declines primarily reflected the lower level of Externalisation Revenue; there was also an adverse impact from an increase in the Cost of Sales.
 
The calculation of Reported and Core Gross Margin excludes the impact of Externalisation Revenue, thereby reflecting the underlying performance of Product Sales. The Reported Gross Margin declined by three percentage points in the year to 76.6%; the Core Gross Margin declined by two percentage points to 79.5%. The movements were a result of the favourable impact of manufacturing variances realised in 2017, the inclusion of the profit share on the collaboration with MSD, as well as the effect of losses of exclusivity on Crestor sales in Europe and Japan, partly offset by the growing favourable impact of Oncology sales.
 
Designed to drive further efficiencies in the operations network, the Company recently decided to close two biologic-medicine manufacturing sites in Colorado, US. Associated with the closures, the Company expects to incur $0.4bn of one-time restructuring charges, the majority of which would be non-cash expenses; $0.3bn of these charges were recognised in FY 2018 as a result of impairments of site-related assets and inventory, impacting the Reported Gross Margin.
 
Operating Expenses: R&D
Reported R&D Expenses increased by 3% in the year to $5,932m. Targeted investment in the Company's pipeline of medicines is a consistent priority; AstraZeneca, however, is continuing to focus on resource prioritisation, productivity improvements across every therapy area, simplification and improved development processes, all helping to deliver cost reductions. Importantly, high levels of activity remained unchanged in the year.
 
Highlights of the progress made include:
-     Moving late-stage-execution roles to lower-cost locations
-     Reducing supply waste
-     Optimising protocols, including a review of the number of procedures, countries involved and in-sourcing a larger proportion of clinical trials
 
Reported R&D Expenses contained Intangible Asset Impairment charges of $532m (FY 2017: $101m), including a $470m charge in respect of MEDI0680, a programmed cell death-1 protein monoclonal antibody, or anti PD-1; the charge reflected the assessed future potential of the antibody.
 
Core R&D Expenses declined by 3% in the year to $5,266m, reflecting the aforementioned productivity improvements. Core R&D Expenses represented 24% of Total Revenue.
 
Operating Expenses: SG&A
Reported SG&A Expenses declined by 2% in the year (3% at CER) to $10,031m, primarily due to the movement in the valuation of contingent-consideration liabilities arising on business combinations. Investment focused on commercial and medical-affairs support for launches and extensions of the new medicines. These included LynparzaTagrissoImfinziCalquence and Fasenra; additional investment was also added to support sales growth in China. Intangible Asset Amortisation and Impairment charges of $1,582m (FY 2017: $1,469m), recorded within Reported SG&A Expenses, partly reflected the impact of recent regulatory approvals granted for acquired medicines.
 
Core SG&A Expenses increased by 10% in the year (9% at CER) to $8,651m, reflecting the aforementioned investments. Core SG&A Expenses represented 39% of Total Revenue.
 
Other Operating Income and Expense
Where AstraZeneca does not retain a significant ongoing interest in medicines or potential new medicines, income from divestments is reported within Other Operating Income and Expense in the Company's financial statements. Reported Other Operating Income and Expense increased by 38% in the year to $2,527m and included:
 
-
$695m, reflecting an agreement with Grünenthal for the prescription medicine rights to Nexium in Europe. Within the same agreement, an additional $33m reflected the sale of the global rights (excluding the US and Japan) to Vimovo. The agreement completed in Q4 2018

 
-
$527m, reflecting an agreement with Luye Pharma for the rights to Seroquel XR and Seroquel IR in the UK, China and other international markets

 
-
$346m, resulting from a legal settlement

 
-
$210m, reflecting an agreement with Cheplapharm Arzneimittel GmbH for the commercial rights to Atacand and Atacand Plus in Europez

 
-
$172m, reflecting a milestone payment under an agreement with Aspen Global Incorporated, part of the Aspen Group, for the commercialisation rights to anaesthetic medicines in markets outside the US

 
-
$139m, reflecting an agreement with Covis Pharma B.V. (Covis Pharma) for the rights to AlvescoOmnaris and Zetonna. The agreement completed in Q4 2018

 
-
$63m, representing a gain on the spin-out of six potential new medicines from the Company's early-stage inflammation and autoimmunity programme into an independent biotech company, as announced in February 2018
 
Core Other Operating Income and Expense increased by 10% in the year to $2,147m, with the difference to Reported Other Operating Income and Expense reflecting the aforementioned legal settlement.
 
Operating Profit
Reported Operating Profit declined by 8% in the year (7% at CER) to $3,387m, partly driven by the declines in Total Revenue and the Reported Gross Margin. Restructuring costs declined to $697m in the year (FY 2017: $807m). The Reported Operating Profit margin declined by one percentage point in the year to 15% of Total Revenue. Core Operating Profit declined by 17% in the year to $5,672m; the Core Operating Profit margin declined by five percentage points to 26% of Total Revenue.
 
Net Finance Expense
Reported Net Finance Expense declined by 8% in the year (an increase of 2% at CER) to $1,281m. The effect of higher Net Debt and an adverse movement in the fair value of bonds and derivative instruments was offset by lower levels of discount unwind on Acerta Pharma B.V. (Acerta Pharma) liabilities and an adverse foreign-exchange impact in the comparative period. Excluding the discount-unwind on acquisition-related liabilities and the adverse foreign exchange impact in the comparative period, Core Net Finance Expense increased by 13% in the year (11% at CER) to $736m.
 
Profit Before Tax
Reported Profit Before Tax declined by 10% in the year (14% at CER) to $1,993m, reflecting the lower level of Externalisation Revenue, the lower Reported Gross Margin and the increase in Reported R&D Expenses.
 
Taxation
The Reported Tax Rate of (3)% and the Core Tax Rate in the year of 11% was impacted by a favourable adjustment of $245m to deferred taxes, reflecting the recently-announced reduction in the Dutch corporate income-tax rate, without which the Core Tax Rate would have been 16%. There was also a reduction of $188m in tax provisions and a $52m deferred tax benefit from the Swedish corporate income-tax rate reduction. Excluding these impacts, both the Reported and Core Tax Rates would have been 21%. The net cash tax paid for the year was $537m, representing 27% of Reported Profit Before Tax.
 
The Reported and Core Tax Rates for the comparative period were (29)% and 4% respectively. The Reported Tax Rate included $617m of adjustments to deferred taxes, in line with the reduced US federal income-tax rate from 35% to 21%. This was excluded from the Core Tax Rate. The Reported and Core Tax Rates reflected a $321m benefit driven by reductions in tax provisions, return to provision adjustments, recognition of previously-unrecognised tax losses and UK Patent-Box profits. The Reported Tax Rate also included a benefit from non-taxable remeasurements of acquisition-related liabilities. Excluding these benefits, the Reported and Core Tax Rates for the comparative period would have been 22%. The cash tax paid for the comparative period was $454m, which was 20% of Reported Profit Before Tax.
 
Earnings Per Share (EPS)
Reported EPS of $1.70 in the year represented a decline of 28% (29% at CER). The performance reflected a decline in Total Revenue and the Reported Gross Margin. Core EPS declined by 19% to $3.46, reflecting declines in Total Revenue and the Core Gross Margin, as well as an increase in Core SG&A Expenses.
 
Dividend Per Share
The Board reaffirms its commitment to the progressive dividend policy; a second interim dividend of $1.90 per share (146.8 pence, 17.46 SEK) has been declared, taking the unchanged full-year dividend per share to $2.80 (215.2 pence, 25.38 SEK). Dividend payments are normally paid as follows:
 
-      First interim dividend - announced with half-year and second-quarter results and paid in September
-      Second interim dividend - announced with full-year and fourth-quarter results and paid in March
 
The record date for the second interim dividend for 2018, payable on 27 March 2019, will be 1 March 2019. The ex-dividend date will be 28 February 2019. The record date for the first interim dividend for 2019, payable on 9 September 2019, will be 9 August 2019. The ex-dividend date will be 8 August 2019.
 
Table 20: Cash Flow
 
 
 
FY 2018
 
FY 2017
 
Change
 
$m
 
$m
 
$m
 
Reported Operating Profit
3,387
3,677
(290)
Depreciation, Amortisation and Impairment
3,753
3,036
717
 
 
 
 
Increase in Working Capital and Short-Term Provisions
(639)
(50)
(589)
Gains on Disposal of Intangible Assets
(1,885)
(1,518)
(367)
Non-Cash and Other Movements
(785)
(415)
(370)
Interest Paid
(676)
(698)
22
Tax Paid
(537)
(454)
(83)
 
 
 
 
Net Cash Inflow from Operating Activities
2,618
3,578
(960)
 
 
 
 
Net Cash Inflow/(Outflow) from Investing Activities
963
(2,328)
3,291
 
 
 
 
Net Cash Outflows from Financing Activities
(2,044)
(2,936)
892
 
The Company delivered a net cash inflow from operating activities of $2,618m in the year, compared with an inflow of $3,578m in FY 2017, partly reflecting the increase in the movement of working-capital and short-term provisions impacted by the reduction of provisions related to legal settlements, as well as launch support for new medicines.
 
Net cash inflows from investing activities were $963m, compared with outflows of $2,328m in FY 2017. The difference partly reflected the payment of deferred consideration in relation to Acerta Pharma in FY 2017 of $1,450m, as well as the movement in short-term investments and fixed deposits. Disposals of intangible assets amounted to $2,338m in the year vs. $1,376m in FY 2017. The cash payment of contingent consideration, in respect of the Bristol-Myers Squibb share of the global Diabetes alliance, amounted to $349m in the year.
 
Net cash outflows from financing activities were $2,044m in the year, compared to outflows of $2,936m vs. FY 2017; the difference reflected new long-term loans and the repayment of loans in the earlier period.
 
Capital Expenditure
Capital expenditure amounted to $1,043m in the year, compared to $1,326m in FY 2017. This included the investment in the new global headquarters in Cambridge, UK, as well as strategic biotech manufacturing capacity in Sweden.
 
Table 21: Debt and capital structure
 
 
 
At 31 Dec 2018
 
At 31 Dec 2017
 
$m
 
$m
 
Cash and Cash Equivalents
4,831
3,324
Other Investments
895
1,300
 
 
 
Cash and Investments
5,726
4,624
 
 
 
Overdrafts and Short-Term Borrowings
(755)
(845)
Finance Leases
-
(5)
Current Instalments of Loans
(999)
(1,397)
Loans Due After One Year
(17,359)
(15,560)
 
 
 
Interest-Bearing Loans and Borrowings
(Gross Debt)
(19,113)
(17,807)
 
 
 
Net Derivatives
384
504
Net Debt
(13,003)
(12,679)
 
Capital allocation
The Board's aim is to continue to strike a balance between the interests of the business, financial creditors and the Company's shareholders. After providing for investment in the business, supporting the progressive dividend policy and maintaining a strong, investment-grade credit rating, the Board will keep under review potential investment in immediately earnings-accretive, value-enhancing opportunities.
 
Foreign exchange
The Group's transactional currency exposures on working-capital balances, which typically extend for up to three months, are hedged where practicable using forward foreign-exchange contracts against the individual Group Companies' reporting currency. In addition, the Group's external dividend payments, paid principally in pounds sterling and Swedish krona, are fully hedged from announcement to payment date. Foreign-exchange gains and losses on forward contracts for transactional hedging are taken to profit.
 
 
Table 22: Currency sensitivities
 
 
The Company provides the following currency-sensitivity information:
 
 
 
Average ExchangeRates vs. USD
 
 
Annual Impact Of 5% Strengthening in Exchange Rate vs. USD ($m)[30]
 
Currency
 
Primary Relevance
 
FY 2018[31]
 
YTD 2019[32]
 
% change
 
Product Sales
 
Core Operating Profit
 
CNY
Product Sales
6.62
6.80
-3
+221
+126
EUR
Product Sales
0.85
0.88
-3
+145
+66
JPY
Product Sales
110.45
108.87
+1
+114
+74
Other[33]
 
 
 
 
+216
+105
 
 
 
 
 
 
 
GBP
Operating Expenses
0.75
0.78
-4
+26
-72
SEK
Operating Expenses
8.69
8.98
-3
+4
-73
 
 
Corporate and business development

a) Nexium divestment in the EU and Vimovo divestment in ex.US/Japan markets
In November 2018, AstraZeneca completed an agreement to divest the prescription medicine rights to Nexium in Europe, as well as the global rights (excluding the US and Japan) to Vimovo, to Grünenthal. Under the terms of the agreement, AstraZeneca received payments of $700m for Nexium and $115m for Vimovo. The upfront payments, net of an appropriate derecognition of an intangible asset related to Vimovo, were reported within Other Operating Income and Expense in the Company's financial statements in Q4 2018 as $728m.
 
AstraZeneca will continue to commercialise Nexium in all markets outside Europe, where the Company retains the rights. The transaction did not include the transfer of any AstraZeneca employees or facilities. AstraZeneca did not retain any ownership rights to Vimovo globally.
 
b) Divestment of global rights to AlvescoOmnaris and Zetonna
In December 2018, AstraZeneca completed an agreement with Covis Pharma to sell its rights to the medicines Alvesco, used for the treatment of persistent asthma, and Omnaris and Zetonna, used for the treatment of nasal symptoms associated with rhinitis. The rights covered markets outside the US and the US royalties for the medicines. The transaction did not include the transfer of any AstraZeneca employees or facilities.
 
Under the terms of the agreement, AstraZeneca received a payment of $350m from Covis Pharma. As AstraZeneca will not maintain a significant ongoing interest in the medicines, the upfront payment, net of an appropriate derecognition of an intangible asset, was reported as Other Operating Income and Expense in the Company's financial statements in Q4 2018 as $139m.
 
c) Synagis divestment in the US
In November 2018, AstraZeneca agreed to sell US rights to Synagis, used for the prevention of serious lower respiratory tract infection caused by respiratory syncytial virus, to Sobi, which will commercialise Synagis in the US; around 130 AstraZeneca employees transferred to Sobi as part of the transaction.
 
Sobi will also have the right to participate in AstraZeneca's share of US profits and losses related to potential new medicine MEDI8897, intended to treat patients with lower respiratory tract infection. The Company will continue to develop MEDI8897 in collaboration with Sanofi Pasteur, the vaccines division of Sanofi S.A.
 
Upon completion of the agreement in January 2019, AstraZeneca received upfront consideration including cash of $966m and ordinary shares of Sobi with an initial fair market value of c.$600m. This equated to an ownership interest of 8%, based on the relevant Sobi share price. AstraZeneca has undertaken not to sell the shares received as consideration for a period of 12 months following the closing date of the transaction.
 
AstraZeneca will also receive up to $470m in sales-related payments for Synagis, a $175m milestone following the submission of the Biologics License Application (BLA) for MEDI8897; potential net payments of approximately $110m on achievement of other MEDI8897 profit and development-related milestones; and a total of $60m in non-contingent payments for MEDI8897 during 2019-2021. Under the agreement, Sobi will have the right to participate in payments that may be received by AstraZeneca from the US profits or losses for MEDI8897.
 
d) AstraZeneca strengthened Oncology development and commercialisation collaboration with Innate Pharma
In October 2018, the Company announced a new multi-term agreement with Innate Pharma, building on an existing collaboration. The extension enriched AstraZeneca's immuno-oncology (IO) portfolio with pre-clinical and clinical potential new medicines. AstraZeneca obtained full oncology rights to the first-in-class humanised anti-NKG2A antibody, monalizumab. AstraZeneca also gained option rights to IPH5201, an antibody targeting CD39, as well as four preclinical molecules from Innate Pharma's pipeline. Innate Pharma licenced the US and EU commercial rights to recently US FDA-approved Lumoxiti for hairy cell leukaemia; Lumoxiti was launched in the US in Q4 2018.
 
AstraZeneca recorded $50m upfront for Lumoxiti in Q4 2018 and derecognised the related intangible asset, resulting in net income of $6m that was recorded as Other Operating Income and Expense. The Company anticipates receipt of up to $25m for future commercial and regulatory milestones, in consideration for its intellectual property and clinical and manufacturing development of the medicine. AstraZeneca will pay Innate Pharma $100m in the first quarter of 2019 for the expansion of the monalizumab collaboration, reflected by a recognition of an intangible asset in Q4 2018. Further, AstraZeneca paid Innate Pharma $50m upfront for the development collaboration and option for further co-development and co-commercialisation of IPH5201, with recognition of a related intangible asset in Q4 2018.
 
AstraZeneca also paid Innate Pharma $20m upfront for an exclusive licence to option the aforementioned four molecules, treated as prepaid R&D Expenses. These options can be exercised before the molecules reach clinical development, triggering an option exercise fee in addition to milestones and royalties. Innate Pharma will have the potential for co-promotion and profit sharing in the EU, dependent on future progress. AstraZeneca also acquired a 9.8% equity stake in Innate Pharma, in line with the agreement, through the issuance of 6,260,500 new shares to AstraZeneca at €10/share (€62.6m). A non-current asset investment was recognised in relation to Innate Pharma in Q4 2018, reflecting the transaction. The premium paid on purchase of the shares over the quoted price was capitalised in Q4 2018 as part of the cost of the acquisition of IPH5201.
 
e) Organisational changes
As AstraZeneca recently entered a new phase in its strategic development, the Company announced in January 2019organisational changes to enhance scientific innovation and commercial success.
 
The new structure takes R&D functions from discovery to late-stage development down to two, Oncology and BioPharma. The new Oncology R&D function will be led by a world-renowned expert in the field, José Baselga and the BioPharma R&D function will be led by Mene Pangalos, who was previously responsible for the Company's Innovative Medicines and Early Development Biotech Unit. 
 
The same approach has been applied to the majority of the Company's commercial operations. The commercial function for Oncology will continue to be led by Dave Fredrickson and the commercial function for BioPharma will be led by Ruud Dobber, most recently responsible for the Company's commercial operations in North America. The Emerging Markets commercial function remains under the leadership of Leon Wang.
 
The goals of the reorganisation are to:
-     Further increase focus on the Company's main therapy areas
-     Integrate R&D functions for agile decision making and more flexible resource allocation
-     Increase collaboration between the R&D and commercial function
  
 
The R&D and commercial functions will each be represented on the Senior Executive Team of AstraZeneca and report to Chief Executive Officer (CEO), Pascal Soriot. The functions will also share common basic biology and science platforms as well as medicine supply, manufacturing and IT infrastructure to improve efficiency. These resources will continue to be allocated on a Company-wide basis, according to the overall therapy-area considerations and strategy.
 
Prior to the changes, Bahija Jallal, Executive Vice President, MedImmune and Mark Mallon, Executive Vice President, Global Products and Portfolio Strategy, Global Medical Affairs & Corporate Affairs left AstraZeneca in January 2019. Sean Bohen,Executive Vice President, Global Medicines Development & Chief Medical Officer will provide interim leadership for Global Medicines Development and remain at AstraZeneca as Chief Medical Officer during the transitional period to support implementation of the new structure. A new Chief Medical Officer is expected to be appointed in due course.
 
 
Sustainability

AstraZeneca's sustainability ambition has three priority areas[34], aligned with the Company's purpose and business strategy:
 
-     Access to healthcare
-     Environmental protection
-     Ethics and transparency
 
Recent developments and progress against the priorities are reported below:
 
a) Access to Healthcare
The Company was recognised in the 2018 Access to Medicine Index, which analysed 20 of the world's largest research-based pharmaceutical companies as to how they make medicines, vaccines and diagnostics more accessible in low and middle-income countries. It described AstraZeneca as maintaining a strong performance in the year. Retaining a top-10 position, the report praised the Company's innovation and the progress made against pricing commitments since the 2016 report. In particular, it noted the positive application of advanced methods for determining prices for different population subsets. It also highlighted the innovative practices used in the Dunga Beach pilot project in Kenya, that aims to reduce air pollution and improve respiratory health.
 
During the quarter, the Company saw two key areas of progress in its focus on supporting access to healthcare in Africa. Firstly, the pilot Dunga Beach programme, launched in partnership with the Cambridge Institute for Sustainability Leadership, became fully operational in the Dunga Beach region of Kisumu county in Kenya, supporting efforts to improve respiratory health by enabling the local community to process waste into clean energy. Secondly, the Company launched a new voluntary employee-giving initiative, AZHealthConnect, which enables an initial employee population of AstraZeneca's three strategic science centres - Cambridge, UK Gaithersburg, US and Gothenburg, Sweden - to support families in Kenya with health insurance. Contributions by employees are matched by AstraZeneca and are transferred anonymously to a mobile health wallet to cover annual health insurance for an African family. Developed in response to employee crowd-sourcing, the initiative aims to engage further AstraZeneca employees around the access to healthcare priority of the sustainability strategy, while empowering Africa's poorest people to take good care of their health and build a decent future for themselves and their families. The Company aims to expand the programme to more locations during 2019.
 
At the close of Q3 2018, AstraZeneca had reached more than 10 million people through its portfolio of Access to Healthcare programmes (Healthy Heart Africa, Phakamisa and Healthy Lung). The Company also expanded the Healthy Lung programme to the United Arab Emirates, Saudi Arabia, Oman and Mexico.
 
b) Environmental protection
During the period, AstraZeneca was highlighted as a global leader in sustainable water management and for its actions and strategies to manage carbon and climate change across its supply chain by environmental impact not-for-profit organisation CDP. The Company achieved a place on the CDP Water Security A List and was ranked within the top 3% on the supplier engagement leader board. The Company was also recognised for its operational action on climate. Currently awarded a B-listing, AstraZeneca is under re-evaluation upon further review from CDP for a potential upgrade to A- for climate. CDP independently assesses companies against its scoring methodology based on data disclosed about their environmental impacts, risks and opportunities. CDP publishes A-D scores across climate, water and forests for over 3,000 major companies, with the leaders celebrated on the A List.
 
As part of the Company's commitment to addressing anti-microbial resistance, a paper authored by AstraZeneca with le Page et al was cited by the European Federation of Pharmaceutical Industries and Associations and was included in AstraZeneca's response to the EMA environmental-risk assessment concept paper to remove fish and invertebrate testing for antibiotics. The EMA released a revised guideline taking this research into account, determining that fish trials are no longer required for the development of antibiotics.
 
Table 23: Environmental protection targets[35]
 
 
Target
 
Plan year
 
Performance in the period
 
Reach 25m patients through AstraZeneca's portfolio of access programmes
2025
 
On plan: AstraZeneca has reached more than 10 million patients through its portfolio of Access to Healthcare programmes (hHF, Phakamisa and Healthy Lung Asia). The Company recently expanded the Healthy Lung programme as mentioned above
 
Lead the industry to manage pharmaceuticals in the environment
2025
 
On plan: ecopharmacovigilance (EPV) spatial environmental risk-map updates have been commissioned and product-specific concentration (measured vs. predicted safe) distributions
are being developed. These will form the basis
for a first published EPV report
 
AstraZeneca's Pharmaceuticals in the Environmentstatement was published during the period
 
Ensure 90% of active pharmaceutical ingredient syntheses meet resource-efficiency targets at launch
2025
 
Lagging: overall reduction in H1 2018, with a 2% decline across the Company's portfolio
 
Develop resource-efficiency targets for biological medicines
2025
 
Lagging: positive developments on benchmarking biologics process resource efficiency data through the American Chemical Society Green Chemistry Institute Pharmaceutical Roundtable. Behind plan on development of target creation
 
Develop a medicine-sustainability index and pilot approach
2019
 
On plan: project launched to develop a medicine environmental-sustainability rating system, to be piloted internally prior to external publication in 2019
 
Achieve Science Based Targets for greenhouse gas emissions
2025
 
On plan: AstraZeneca's Operational Green House Gas footprint declined by 4% vs. year-to-date 2015
Scope 1 -6%
Scope 2 -48%
Scope 3 emissions +11%[36]
 
100% renewable-power consumption globally by 2025; interim ambition of 100% in the US and Europe by 2020
2025
 
On plan: 60% of sites already powered
by renewable energy
 
Reduce energy consumption by 10% against a 2015 baseline
2025
 
On plan: energy consumption increased by
2% compared with 2015
 
Expand the number of 'green-fleet' vehicles
2025
 
On plan: a number of European locations are implementing green-fleet vehicles through their 'Green Mobility' programmes. AstraZeneca US launched the 'GoGreen' initiative and it is expected that by 2022, the Companies entire US fleet will be made up of hybrid vehicles
 
Maintain water usage as the business grows against a 2015 baseline
2025
 
Lagging: water use declined by 5% vs. 2015.
Water audits and energy efficiency projects have driven large reductions and cost savings. A warm summer for many of AstraZeneca's key sites, however, contributed to higher than expected usage during the period
 
Reduce waste 10% below the 2015 baseline
2025
 
On plan: waste generated: -3% vs. 2015
Hazardous waste: -3%
Non-hazardous waste: -7%
An increase in hazardous waste generation offset by reductions in non-hazardous volumes. Target currently on track despite quarterly fluctuations
 
 
c) Ethics and transparency
During the period, the Company was recognised in the 2019 Bloomberg Gender-Equality Index, which distinguished companies committed to transparency in gender reporting and advancing women's equality. As the only major pharmaceuticals company represented in the index, the Company achieved a number of top scores and best-in-class ratings across the index categories, including for Board and CEO representation, Pipeline from Workforce to Management, as well as Education Programmes. AstraZeneca employs c.64,000 people in more than 100 countries; in 2018, women made up half of the workforce, comprising 41% the Board and five out of 14 Senior Executive Team members.
 
During the period, Chairman Leif Johansson signed a pledge with the European Round Table of Industrialists (ERT) calling for action to deliver inclusion and diversity best practices and outcomes across 51 companies and numerous industries. The ERT is an organisation that advocates at both the national and European level to strengthen competitiveness across the EU.
 
Since committing to provide greater transparency around payments to healthcare professionals (HCPs) and healthcare organisations (HCOs) at the 2018 Annual General Meeting, the Company successfully expanded disclosure activities across an additional five countries by year-end. The Company currently discloses payments to HCPs, HCOs and patient groups across 43 countries, including in Europe, the US, Japan, Australia, the Middle East, Asia Pacific and Latin America with ongoing plans to expand its payment disclosure to a further six countries over the next two years. AstraZeneca's current disclosures comprised over 95% of all such disclosures possible worldwide in Q4 2018, an increase from 93% in Q3 2018.
 
The completion rate for the Code of Ethics awareness, an annual training module educating and empowering all employees to make good decisions in the long-term interest of the Company, reached the target of 100% of the workforce.
 
Other developments
During the period, AstraZeneca was recognised by Corporate Knights as one of the world's 100 most sustainable companies. The Company was ranked 50th overall and 5th highest-ranked pharmaceutical company. Inclusion in the Global 100 placed AstraZeneca in the top 1.3% companies in the world for sustainability performance. Although performance was consistent across the assessment, the strongest areas included top-quartile performance on board and executive-gender diversity and above-average percentage of medicines (20%), with equitable pricing strategies targeting priority countries.
 
During the period, the Company also conducted a sustainability materiality refresh with the aim of refining the sustainability priority areas and developing a future-ready strategy. AstraZeneca worked with an independent consultancy to examine significant trends and engage internal and external stakeholders to define the environmental, social and governance issues that matter most and where most impact can be gained. The materiality assessment identified 16 priority-material issues leading to a sharpened focus - narrowing the field of issues prioritised by c.50%. This has served as a framework for the Company to develop the sustainability strategy up to 2025 and future reporting for 2019 onwards will align to these new 16 material areas under the pillars of Access to Health, Environment and Ethics.
 
 
Research and development

A comprehensive data pack comprising AstraZeneca's pipeline of medicines in human trials can be found in the clinical-trials appendix, available on astrazeneca.com. Highlights of developments in the Company's late-stage pipeline since the prior results announcement are shown below:
 
Table 24: Update from the late-stage pipeline
 
 
Regulatory approvals
 
4
 
-     Lynparza - ovarian cancer (1st line) (SOLO-1): regulatory approval (US)
-     roxadustat - anaemia in dialysis patients: regulatory approval (CN)
-     Bevespi - COPD: regulatory approval (EU)
-     Linzess (linaclotide) (IBS-C): regulatory approval (CN)
Regulatory submissions and/or acceptances
 
5
 
-     Imfinzi - unresectable, Stage III NSCLC: regulatory submission (CN); acceptance (OS data) (US)
-     Farxiga - type-1 diabetes: regulatory submission acceptance (US)
-     Fasenra - severe, eosinophilic asthma; self-administration: submission
-     acceptance (US, EU)
Major Phase III data readouts or other major developments
 
11
 
-     Tagrisso - EGFRm NSCLC (1st line): priority review (CN)
-     Imfinzi +/- treme - NSCLC (1st line) (MYSTIC): did not meet OS primary endpoints
-     Imfinzi +/- treme - head & neck cancer (2nd line): did not meet OS primary endpoints
-     Lynparza - ovarian cancer (1st line) (SOLO-1): priority review (CN)
-     Lynparza - ovarian cancer (3rd line+): met response rate primaryendpoint
-     Forxiga - type-1 diabetes: CHMP positive opinion (EU)
-     roxadustat - anaemia of CKD: met primary efficacy endpoints
-     Fasenra - eosinophilic granulomatosis with polyangiitis: Orphan Drug Designation (US)
-     Fasenra - hypereosinophilic syndrome: Orphan Drug Designation (US)
-     PT010 - COPD: priority review (CN)
-     MEDI8897 - lower respiratory tract infection: Breakthrough Therapy Designation (US), PRIME designation (EU)
 
New molecular entities and major lifecycle medicines in Phase III trials or under regulatory review
 
11
 
Oncology
-     Tagrisso - NSCLC[37]
-     Imfinzi - multiple cancers37
-     Lynparza - multiple cancers37
-     Calquence - blood cancers36
-     tremelimumab - multiple cancers
-     selumetinib - NF1[38]
-     savolitinib - multiple cancers
CVRM
-     roxadustat - anaemia36
Respiratory
-     PT010 - COPD36
-     tezepelumab - severe asthma
Other (outside main therapy areas)
-     anifrolumab - lupus
Total projects in clinical pipeline
131
 
 
 
Oncology
AstraZeneca has a deep-rooted heritage in Oncology and offers a new generation of medicines that have the potential to transform patients' lives and the Company's future. At least six Oncology medicines are expected to be launched between 2014 and 2020, of which TagrissoImfinziLynparzaCalquence and Lumoxiti are already benefitting patients. An extensive pipeline of small-molecule and biologic medicines is in development and the Company is committed to advancing Oncology medicines, primarily focused on the treatment of patients with lung, ovarian, breast and blood cancers.
 
In December 2018, the Company presented further evidence of its progress at the 60th American Society of Hematology (ASH) Annual Meeting and Exposition in San Diego. At the meeting the Company presented new long-term follow-up results forCalquence in patients with relapsed or refractory MCL and updated results of an ongoing clinical trial, assessing Calquencemonotherapy in treatment-naïve patients with CLL. Data from recently-approved Lumoxiti and early pipeline data, including the preclinical activity of the novel MCL1 inhibitor AZD5991, was also presented.
 
At the European Society for Medical Oncology Immuno-Oncology Congress in Geneva, the Company presented the Stage IV, 1st-line NSCLC Phase III MYSTIC trial results of Imfinzi or Imfinzi + tremelimumab or SoC chemotherapy.
 
Lung cancer
a) Tagrisso
Tagrisso 40mg and 80mg once-daily oral tablets have now received approval in more than 40 countries, including the US, Japan and in Europe, for the 1st-line treatment of patients with Stage IV EGFRm NSCLC. Multiple other reviews are underway, including in China, where a decision is now expected in H1 2019 based on a priority review granted in December 2018. Approvals have been achieved in more than 80 countries, including the US, Japan, China and in Europe, for the 2nd-line treatment of patients with EGFR T790M-mutated NSCLC. Tagrisso is also being developed in the adjuvant setting (ADAURA trial), in the locally-advanced, unresectable setting (LAURA trial) and in combination with other treatments, including the Company's MET-inhibitor, savolitinib. During the period, the ADAURA trial achieved its last patient commenced dosing (LPCD).
 
b) Imfinzi
During the period, the Company received an acceptance from the US FDA for a supplemental BLA (sBLA) based on PACIFIC OS trial data for Imfinzi as a treatment of patients with unresectable, Stage III NSCLC, reflected in a Prescription Drug User Fee Act (PDUFA) date anticipated to be in Q3 2019. The Company also submitted an application to the China NMPA for the initial indication of unresectable, Stage III NSCLC. PACIFIC was the first immunotherapy trial to demonstrate a significant OS benefit in unresectable, Stage III NSCLC, reducing the risk of death by 32% (hazard ratio (HR) 0.68, 99.73% confidence interval (CI) 0.47-0.997; p=0.0025).
 
The Phase III MYSTIC trial was a randomised, open-label, multi-centre, global trial of Imfinzi monotherapy and the combination of Imfinzi and tremelimumab, an anti-CTLA4 antibody, versus SoC platinum-based chemotherapy in previously-untreated patients with metastatic Stage IV NSCLC. In the primary-analysis population of patients, whose tumours expressed PD-L1 on 25% or more of their cancer cells as determined by the VENTANA PD-L1 (SP263) assay, Imfinzi monotherapy and the combination of Imfinzi plus tremelimumab did not meet the primary endpoints of improving OS, compared to SoC chemotherapy.
 
The full MYSTIC results showed that Imfinzi monotherapy did demonstrate clinical activity, with an OS HR of 0.76 (97.54% CI 0.564-1.019; nominal p=0.036) in the primary-analysis population of patients whose tumours expressed PD-L1 on 25% or more of their cancer cells, but this result did not meet statistical significance. After two years of follow-up, the OS rate for treatment with Imfinzi monotherapy was 38.3%, vs. 22.7% with SoC. This difference was observed despite a group of patients in the SoC arm (39.5%) receiving subsequent immunotherapy, following chemotherapy treatment. The combination of Imfinzi plus tremelimumab did not meet the progression-free survival (PFS) primary endpoint, as announced in July 2017, or the OS primary endpoint. A summary of these data is included below.
 
Table 25: Summary of MYSTIC trial results 
 
 
 
Imfinzi
(n=163)
 
Chemotherapy
(n=162)
OS (primary endpoint) in PD-L1 ≥25%a
 
 
Number of deaths (%)
 
108 (66.3%)
128 (79.0%)
HR (97.54% CI)b,c
0.76 (0.564, 1.019)
p-valueb,d
 
0.036
Median in months (95% CI)
16.3 (12.2, 20.8)
12.9 (10.5, 15.0)
24-month OS rate
 
38.3%
22.7%
 
 
 
 
Imfinzi + tremelimumab
(n=163)
 
Chemotherapy
(n=162)
OS (primary endpoint) in PD-L1 ≥25%a
 
 
Number (%) of patients with event
 
113 (69.3%)
128 (79.0%)
HR (98.77% CI)b,c
0.85 (0.611, 1.173)
p-valueb,d
 
0.202
Median in months (95% CI)
11.9 (9.0, 17.7)
12.9 (10.5, 15.0)
24-month OS rate
 
35.4%
22.7%
PFS (primary endpoint) in PD-L1 ≥25%i
 
 
Number (%) of patients with event
 
118 (72.4%)
112 (69.1%)
HR (99.5% CI)b,c
1.05 (0.722, 1.534)
p-value
 
0.705
Median in months (95% CI)
3.9 (2.8, 5.0)
5.4 (4.6, 5.8)
12-month PFS rate
 
25.8%
14.3%
The data cut-off date was 4 October 2018 (OS and safety) and 1 June 2017 (PFS).
Stratified by histology.
Confidence interval adjusted for interim analysis.
Criteria for statistical significance at the final analysis of OS was a p-value ≤ 0.0246 for Imfinzi vs SoC and p-value ≤ 0.0123 for Imfinzi + tremelimumab vs. SoC (using Lan DeMets spending function approximating O'Brien-Fleming boundary).
 
A prespecified exploratory analysis of blood-tumour mutational burden (bTMB) showed that high bTMB, defined as ≥16 mutations per megabase, was associated with better OS rates in patients treated with Imfinzi monotherapy and the Imfinzi-plus-tremelimumab combination. In high-bTMB patients, combination therapy reduced the risk of death by 38%, compared to SoC (HR 0.62, CI 0.451-0.855) and the monotherapy arm had an OS HR of 0.80, compared to SoC (CI 0.588-1.077). These preliminary data included 809 samples, representing 72.4% of patients. The analysis used a plasma-based TMB score, generated from a minimally-invasive diagnostic test from Guardant Health that was recently granted Breakthrough Device Designation by the US FDA for patients with NSCLC. Additional bTMB analyses will be presented at a forthcoming medical meeting.
 
Based on the results from the MYSTIC trial, the Company is assessing the need to refine ongoing trials of Imfinzi and tremelimumab in NSCLC, including the NEPTUNE and POSEIDON Phase III trials.
 
Table 26: Key Imfinzi trials in lung cancer
 
 
Name
 
Phase
 
Population
 
Design
 
Timelines
 
Status
 
AEGEAN
III
Neo-adjuvant (before surgery) NSCLC
SoC chemotherapy +/- Imfinzi followed by surgery followed by placebo orImfinzi
 
FPCD[39] Q1 2019
 
First data anticipated 2020
Recruitment ongoing
ADJUVANT BR.31[40]
III
Stage Ib-IIIa NSCLC
placebo or Imfinzi
FPCD Q1 2015
First data anticipated 2020+
 
Recruitment ongoing
PACIFIC
III
Unresectable, Stage III NSCLC
concurrent CRT[41] followed by placebo or Imfinzi
 
FPCD Q2 2014
 
LPCD Q2 2016
PFS and OS primary endpoints both met
PACIFIC-2
III
Unresectable, Stage III NSCLC
concurrent CRT concurrent with placebo or Imfinzi followed by placebo or Imfinzi
 
FPCD Q2 2018
 
First data anticipated 2020+
Recruitment ongoing
PACIFIC-4
III
Unresectable, Stage I-II NSCLC
stereotactic body radiation therapy followed by placebo or Imfinzi
 
FPCD Q1 2019
 
First data anticipated 2020+
Recruitment initiating
PACIFIC-5
III
Unresectable, Stage III NSCLC
(Asia predominant)
sequential or concurrent CRT followed by placebo or Imfinzi
 
FPCD Q1 2019
 
First data anticipated 2020+
Recruitment ongoing
ADRIATIC
III
Limited-disease stage small cell lung cancer (SCLC)
concurrent CRT followed by placebo or Imfinzi or Imfinzi + treme
 
FPCD Q4
2018
 
First data anticipated 2020+
Recruitment ongoing
PEARL
III
Stage IV, 1st-line NSCLC (Asia)
SoC chemotherapy or Imfinzi
FPCD Q1
2017
 
First data anticipated 2020
 
Recruitment ongoing
MYSTIC
III
Stage IV, 1st-line NSCLC
SoC chemotherapy or Imfinzi or I