Astrazeneca Regulatory News (AZN)

AstraZeneca PLC

26 July 2018 07:00 BST

H1 2018 Results

Strong performances from new medicines and Emerging Markets underpin the return to growth in 2018

Over the first half, the strong sales growth from new medicines (+75%, +69% at CER1) and the continued strength of the Emerging Markets business (+14%, +10% at CER) were offset by the impact from the loss of Crestor exclusivity in Europe and Japan. In line with expectations, an improved performance is anticipated in the second half, notably Product Sales, where guidance is reiterated for a low single-digit percentage increase over the full year at CER. Important news flow from the pipeline is expected to continue beyond the rest of the year.

Financial Highlights

• Product Sales increased by 2% (down by 2% at CER) to $10,015m. New medicines4 generated more than $1bn in additional sales at CER in the half

• The Reported Gross Margin declined by three percentage points to 78.6%, reflecting the favourable impact of manufacturing variances realised in H1 2017 and the agreement on Lynparza with MSD5; the Core Gross Margin fell by three percentage points to 80.0%

• Productivity gains and cost discipline continued with prioritised and targeted investment in new medicines and additional investment in China

o Total Reported Operating Expenses increased by 3% (down by 1% at CER) to $7,814m. Total Core Operating Expenses increased by 6% (2% at CER) to $6,877m.

o Reported R&D costs declined by 6% (9% at CER) to $2,641m; Core R&D costs declined by 2% (5% at CER) to $2,558m, driven by efficiency savings. Reported SG&A costs increased by 8% (3% at CER) to $5,008m; Core SG&A costs increased by 11% (7% at CER) to $4,154m

• Externalisation Revenue declined by 53% (54% at CER) to $318m. Reported Other Operating Income & Expense increased by 29% (28% at CER) to $1,086m; Core Other Operating Income & Expense declined by 27% to $704m, with the difference between the Reported and Core performance reflecting a legal settlement. The Company continues to anticipate a significant level of externalisation activities in H2 2018

• An unchanged first interim dividend of $0.90 per share

• Restructuring costs reduced to $187m (H1 2017: $496m). Capital expenditure reduced to $486m (H1 2017: $549m). The Company continues to anticipate declines in restructuring costs and capital expenditure over the full year

• FY 2018 guidance reiterated and unchanged

Pascal Soriot, Chief Executive Officer, commenting on the results said:

"The performance in the first half demonstrated that we remain firmly on track to return our company to Product Sales growth in 2018. Our new medicines performed strongly and have established themselves as major drivers of Product Sales, including Lynparza, Tagrisso and Imfinzi in Oncology, Brilinta and Farxiga in CVRM and Fasenra in Respiratory. Emerging Markets, led by China, delivered double-digit growth.

The pipeline also continued to deliver: in Oncology, strong results were achieved by Lynparza in first-line ovarian cancer and Imfinzi showed an overall-survival benefit for patients in earlier-stage lung cancer, while a number of approvals were granted, including for Lokelma in hyperkalaemia. AstraZeneca's rich pipeline and sharp commercial focus make us confident that we have in place the right conditions for our return to growth this year."

Commercial Highlights

New medicines generated more than $1bn in additional sales at CER in the half compared to H1 2017. Product Sales highlights were:

• Oncology: sales growth of 42% in the half (37% at CER) to $2,664m, including:

- Lynparza sales of $269m, growth of 132% (124% at CER), driven by expanded use in the treatment of ovarian cancer and a new approval for the use in the treatment of breast cancer. A very strong start in Japan, following the medicine's launch in Q2 2018

- Tagrisso sales of $760m, growth of 89% (82% at CER) reflecting increased use in the treatment of 2nd-line EGFR6 T790M-mutated7 NSCLC8 and the newly-approved use in the 1st-line EGFR-mutated (EGFRm) setting as a new standard of care (SoC)

- Imfinzi sales of $184m (Q2 2018: $122m), reflecting ongoing launches for the treatment of unresectable, Stage III NSCLC, where the number of new-patient starts continued to grow

• New CVRM9: 12% growth (9% at CER) to $1,874m, including:

- Brilinta sales of $609m, growth of 23% (18% at CER) due to continued market penetration in acute coronary syndrome and high-risk periprocedural myocardial infarction (HR PMI)

- Farxiga sales of $639m, growth of 40% (36% at CER) as the medicine consolidated its blockbuster status

- Bydureon sales of $294m, a decline of 2% (3% at CER). An encouraging BCise device launch was reflected in an increase in Q2 2018 sales of 6% (5% at CER) to $155m

• Respiratory: 6% growth (stable at CER) to $2,407m, including:

- A Symbicort sales decline in the half of 6% (10% at CER) to $1,306m, as competitive class pressures in the US continued. Symbicort, however, delivered a significantly-improved sequential US performance in Q2 2018

- Pulmicort sales growth of 12% in the half (6% at CER) to $633m. Q2 2018 growth of 27% (20% at CER) to $287m, reflecting the normalisation of supply in China

- Fasenra sales of $86m (Q2 2018: $65m) further consolidating its leadership position among novel biologic asthma medicines

• Emerging Markets: the largest region by Product Sales, with growth of 14% (10% at CER) to $3,424m, including:

- A China sales increase of 33% (24% at CER) to $1,893m. Underpinned by the launch of Tagrisso, Oncology sales in China grew by 57% (46% at CER) to $403m

- An ex-China sales decline of 3% to $1,531m. A robust result, impacted by divested Product Sales and adverse performances in the Middle East, Africa and Russia

Pipeline Highlights

The table below highlights significant developments in the late-stage pipeline since the prior results announcement:

Guidance

Guidance for FY 2018 is reiterated and unchanged. All measures in this section are at CER. Company guidance is on Product Sales and Core EPS only:

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.

Additional Commentary

Outside of guidance, the Company provides indications for FY 2018 vs. the prior year:

• The sum of Externalisation Revenue and Other Operating Income & Expense is anticipated to decline 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 activities that reflect the ongoing productivity of the pipeline. It is also committed to the continued management of its portfolio through divestments and to increasing the focus, over time, on its three main therapy areas

• Core R&D costs in FY 2018 are anticipated to be in the range of a low single-digit percentage decline to stable. This expectation includes the favourable impact on development costs from the MSD collaboration

• The Company maintains its focus on reducing operational and infrastructure costs. Total Core SG&A costs are expected to increase by a low to mid single-digit percentage in FY 2018, reflecting targeted support for medicine launches, including Imfinzi in Oncology and Fasenra in Respiratory, as well as additional investment in China. The Company also anticipates declines in restructuring costs and capital expenditure in FY 2018 vs. the prior year

• A Core Tax Rate of 16-20% (FY 2017: 14%)

Currency Impact

Based only on average exchange rates in the six months to 30 June 2018 and the Company's published currency sensitivities, the Company anticipates a favourable low single-digit percentage impact from currency movements on Product Sales and Core EPS in FY 2018. Details on currency sensitivities are contained within the Operating and Financial Review.

Sustainability

AstraZeneca is committed to being a valued and trusted partner to its stakeholders over the long term. There is a distinct connection between maintaining a strong business and making a positive impact to a fairer, safer and healthier world. AstraZeneca is dedicated to pushing the boundaries of science to deliver sustainable health that transforms the lives of patients around the world.

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 year-to-date sustainability progress is shown in the Sustainability Update section of this announcement.

Notes

The following notes refer to pages 1-3:

1. Constant exchange rates. These are non-GAAP financial measures because they remove the effects of currency movements from Reported results.

2. Reported financial measures are the financial results presented in accordance with International Financial Reporting Standards.

3. 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.

4. Lynparza, Tagrisso, Imfinzi, Calquence, Brilinta, Farxiga, Lokelma, Bevespi and Fasenra.

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 Brilinta, Diabetes medicines and Lokelma.

10. Cardiovascular outcomes trial.

11. Progression-free survival.

12. Overall survival.

13. Committee for Medicinal Products for Human Use, the European Medicines Agency's (EMA) committee with responsibility for human medicines.

14. Chronic obstructive pulmonary disease.

The performance shown in this announcement covers the six-month period to 30 June 2018 (the half or H1 2018) and the three-month period to 30 June 2018 (the second quarter or Q2 2018) compared to the six-month period to 30 June 2017 (H1 2017) and the three-month period to 30 June 2017 (Q2 2017) respectively, unless stated otherwise. All commentary in the Operating and Financial Review relates to the half, unless stated otherwise.

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.

Conference Call

A live presentation, conference call and webcast for investors and analysts, hosted by management, will begin at 12:30pm UK time today. Details can be accessed via astrazeneca.com.

Reporting Calendar

The Company intends to publish its year-to-date and third-quarter financial results on 8 November 2018.

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 three 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.

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 six-month period to 30 June 2018 (the half or H1 2018) and the three-month period to 30 June 2018 (the second quarter or Q2 2018) compared to the six-month period to 30 June 2017 (H1 2017) and the three-month period to 30 June 2017 (Q2 2017) respectively, unless stated otherwise. All commentary in the Operating and Financial Review relates to the half, 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 better understand 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 table 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 the Reconciliation of Interest-Bearing Loans and Borrowings to Net Debt included in the Cash Flow and Balance Sheet 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.

Table 1: Total Revenue

Table 2: Product Sales

Table 3: Breakdown Of Externalisation Revenue

Ongoing Externalisation Revenue of $216m represented 68% of total Externalisation Revenue in the half (H1 2017: $228m, 34%). The Company anticipates that Ongoing Externalisation Revenue will grow as a proportion of Externalisation Revenue over time. A breakdown of Externalisation Revenue is shown below:

Table 4: Initial Externalisation Revenue

A breakdown of Initial Externalisation Revenue in the half is shown below:

Table 5: Ongoing Externalisation Revenue

A breakdown of Ongoing Externalisation Revenue in the half is shown below:

Table 6: Externalised And Divested Medicines

Several AstraZeneca medicines were externalised or divested after H1 2017, thus adversely impacting the Product Sales performance:

Table 7: Ongoing Externalisation Revenue Agreements

Examples of transactions that include Ongoing Externalisation Revenue are shown below:

The performance of new and legacy medicines is shown below, with a geographical split shown in Notes 6 & 7.

Table 8: Therapy Area And Medicine Performance

Specialty-care medicines comprise all Oncology medicines and Fasenra. At 27% of total Product Sales, specialty-care-medicine sales grew by 46% in the half (41% at CER) to $2,750m. In H1 2017, speciality-care medicines comprised 19% of total Product Sales.

ONCOLOGY

Product Sales of $2,664m; an increase of 42% (37% at CER). Oncology Product Sales represented 27% of total Product Sales, up from 19% in H1 2017.

Lynparza

By the end of the half, Lynparza was approved in over 50 countries for the treatment of ovarian cancer. Launches in breast cancer took place in the US and Japan during the period and the indication was under regulatory review in Europe. Product Sales of Lynparza amounted to $269m, an increase of 132% (124% at CER). The strong performance was geographically spread; it was, however, particularly noticeable in the US.

US sales grew by 198% to $149m, with continued sequential quarter on quarter growth of 26% to $83m in Q2 2018; the performance in the half reflected continued growth in both the ovarian and breast indications, as well as the H2 2017 launch of Lynparza tablets and regulatory approval as a 2nd-line treatment for ovarian cancer, regardless of BRCA24 status. In the half, the Company announced the approval of Lynparza in the US as a treatment for patients with germline BRCA-mutated (BRCAm) breast cancer. At the end of the half, Lynparza remained the leading medicine in the poly ADP ribose polymerase (PARP)-inhibitor class in the US, as measured by total prescription volumes.

Sales in Europe increased by 50% (36% at CER) to $87m, this was driven by encouraging levels of reimbursement, a number of successful launches, higher BRCA-testing rates and an increased level of penetration across all countries. On 8 May 2018, the Company announced that the EMA had approved Lynparza tablets (300mg twice daily) as a 2nd-line treatment for patients with ovarian cancer, regardless of BRCA status.

Japan sales of $10m in the half followed the initial launch in April 2018 in ovarian cancer; Lynparza was approved as a treatment for BRCAm, metastatic breast cancer on 2 July 2018, a targeted chemotherapy-sparing option.

In July 2017, AstraZeneca and MSD announced a global strategic oncology collaboration to co-develop Lynparza and the potential medicine selumetinib for multiple cancer types as monotherapies and in combinations. The integration of development and commercial activities is progressing well, with both companies promoting Lynparza.

Lung Cancer

Tagrisso

By the end of the half, Tagrisso was approved in a number of markets, including Brazil, the US, the EU, Russia, Australia, Canada and Egypt, for the treatment of 1st-line EGFRm NSCLC; a number of additional regulatory reviews were also underway. In the 2nd-line setting, Tagrisso has now been approved and launched in more than 75 countries, including in the US, Europe, Japan and China, for patients with EGFR T790M-mutated NSCLC.

Product Sales of $760m represented growth of 89% (82% at CER), partly driven by increased testing rates and the aforementioned US approval in the 1st-line setting. Continued growth was also delivered in the 2nd-line indication in other countries.

Sales in the US grew by 89% to $341m, with sequential growth in the second quarter of 32% to $194m, reflecting a rapid uptake in the 1st-line setting that followed the April 2018 approval of Tagrisso as a 1st-line treatment of patients with metastatic EGFRm NSCLC. Tagrisso achieved market leadership in new patient starts for the 1st-line treatment of patients with EGFRm NSCLC in the US.

Within Emerging Markets, Tagrisso sales grew by 298% (280% at CER) to $159m, with notable growth in China where the medicine was approved in March 2017 as a 2nd-line treatment for patients with EGFR T790M-mutated NSCLC. Asia-Pacific has a relatively high prevalence of patients with an EGFR mutation at 30-40% compared to 10-15% in western markets.

In Europe, sales of $139m represented growth of 83% (63% at CER), driven by positive reimbursement decisions, further growth in testing rates and strong levels of demand. Sequentially, sales were stable as increased volumes were offset by adjustments to access agreements, some with retrospective effect, as the medicine reached more patients in each country. Following EU regulatory approval on 8 June 2018 for the initial treatment of patients with EGFRm NSCLC, Tagrisso launched in select EU countries, including in France and Germany and reimbursement negotiations are underway elsewhere.

Sales of Tagrisso in Japan increased by 15% (11% at CER) to $118m (Q2 2018: $69m), reflecting focused activities to maximise testing and utilisation rates in the 2nd-line indication. A regulatory decision on Tagrisso as a 1st-line treatment for EGFRm NSCLC is expected in Japan in the second half of the year.

Imfinzi

Imfinzi is currently approved for the treatment of patients with unresectable, Stage III NSCLC whose disease has not progressed following concurrent platinum-based chemotherapy and radiation therapy (CRT) and for the 2nd-line treatment of patients with locally-advanced or metastatic urothelial carcinoma (bladder cancer).

In unresectable, Stage III NSCLC, Imfinzi is approved in the US, Japan, Canada, Switzerland, India and Brazil. Other regulatory reviews are ongoing, and an EU regulatory decision is anticipated in the second half of the year.

Global Product Sales amounted to $184m (Q2 2018: $122m) with unresectable, Stage III NSCLC representing the majority of Imfinzi sales. The US represented the vast majority of the global sales; with $5m in sales recorded in other markets following approvals and launches. The number of new and continuing US patient infusions in the unresectable, Stage III NSCLC indication remained strong; additional regulatory approvals are anticipated in H2 2018.

Iressa

Product Sales of $275m; an increase of 5% (down by 1% at CER). Emerging Markets sales increased by 15% (8% at CER) to $148m. China sales increased by 27% (17% at CER) to $95m; Iressa was included on the National Reimbursement Drug List (NRDL) in 2017. Sales in the US declined by 18% to $14m and increased in Europe by 13% (2% at CER) to $61m.

Other Oncology Medicines

Calquence

Product Sales of $20m; Calquence was approved and launched in the US on 31 October 2017. The medicine delivered a promising performance in the half, with demand predominantly based on the use in relapsed/refractory (R/R) mantle cell lymphoma (MCL).

Legacy: Faslodex

Product Sales of $501m; an increase of 8% (5% at CER) that reflected volume growth.

Emerging Markets sales grew by 31% (30% at CER) to $71m. China sales grew by 100% (82% at CER) to $22m. US sales increased by 7% to $259m, mainly reflecting a continued strong uptake of the combination with the CDK4/6 class, a medicine approved for the treatment of hormone-receptor-positive breast cancer.

Europe sales declined by 11% (21% at CER) to $118m, 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 grew by 56% (50% at CER) to $50m, despite the impact of the biennial price cut implemented on 1 April 2018.

Legacy: Zoladex

Product Sales of $376m; an increase of 4% (down by 1% at CER).

Emerging Markets sales increased by 20% (17% at CER) to $202m. Sales in Europe increased by 1% (down by 9% at CER) to $68m. In the Established Rest Of World (ROW) region, sales declined by 10% (13% at CER) to $103m, driven by the effects of increased competition. On 31 March 2017, the Company completed an agreement with TerSera for the sale of the commercial rights to Zoladex in the US and Canada.

CVRM

New CVRM sales grew by 12% (9% at CER) to $1,874m, reflecting strong performances from Brilinta and Farxiga, after each attained blockbuster-sales status in FY 2017. Total CVRM sales, which includes Crestor and other legacy medicines, declined by 8% (11% at CER) to $3,268m, comprising 33% of total Product Sales.

Brilinta

Product Sales of $609m; an increase of 23% (18% at CER).

Emerging Markets sales of Brilinta grew by 22% (17% at CER) to $148m, partly reflecting the benefits of inclusion on the NRDL in China in 2017.

US sales of Brilinta, at $259m, represented an increase of 20%. The performance, reflecting volume growth, was driven primarily by an increase in the number of patients initiated on Brilinta in the hospital and an increase in volume of 90-day prescriptions. Furthermore, Brilinta continued to deliver increasing levels of market share in the half. US sales growth in Q2 2018 slowed to 13%, with sales of $144m reflecting the impact of affordability programmes.

Sales of Brilique in Europe increased by 27% (14% at CER) to $172m, reflecting indication leadership across a number of markets; sales were also bolstered by the inclusion within HR PMI guidelines by the European Society of Cardiology in 2017. Improvements were delivered across the major markets; Brilique gained further reimbursement in key countries in its HR PMI indication with the 60mg dose.

Farxiga

Product Sales of $639m; an increase of 40% (36% at CER). Farxiga consolidated its global leadership position within the sodium-glucose co-transporter 2 (SGLT2) inhibitor class.

Emerging Markets sales increased by 57% (59% at CER) to $157m, reflecting ongoing launches and improved levels of patient access. In March 2017, Forxiga became the first SGLT2-inhibitor medicine to be approved in China, with encouraging levels of access and performance.

US sales increased by 29% to $266m. The performance in H1 2017 was adversely impacted by the Company's level of participation in affordability programmes; subsequent changes to the Company's approach to these programmes, however, helped to deliver a much-improved performance in H1 2018. Despite slowing growth in the US, the SGLT2 class continued to be scientifically underpinned by growing evidence around cardiovascular benefits, including data from the CVD-REAL series of studies (first published in May 2017), showing a statistically significant reduced rate of hospitalisation for heart failure and death from any cause compared to other type-2 diabetes medicines.

Sales in Europe increased by 45% (28% at CER) to $152m. In Japan, sales grew by 40% (35% to CER) to $28m. Ono Pharmaceutical Co., Ltd is a partner and records in-market sales.

Onglyza 

Product Sales of $255m, a decline of 16% (19% at CER). 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 documented CV benefits. Given the significant future potential of Farxiga, the Company continues to prioritise commercial support for Farxiga.

Sales in Emerging Markets increased by 29% (24% at CER) to $81m. After the addition onto the NRDL in China in 2017, sales grew there by 136% (121% at CER) to $33m, driving the Emerging Market sales growth. Sales in Europe declined by 10% (17% at CER) to $47m, reflecting the broader trend of a shift away from the DPP-4 class.

Bydureon

Product Sales of $294m; a decline of 2% (3% at CER). An encouraging BCise device launch in the US was reflected in an increase in Q2 2018 sales of 6% (5% at CER) to $155m.

Sales in the US declined by 4% to $234m, reflecting pricing headwinds that offset an encouraging performance from the aforementioned BCise launch. Favourable sales volumes were driven by continued growth in the glucagon-like peptide-1 class, at the expense of insulin, for more-advanced forms of type-2 diabetes. Bydureon sales in Europe increased by 2% (down by 10% at CER) to $43m; a regulatory decision on the device in the EU, however, is anticipated in the second half of the year.

Legacy: Crestor

Product Sales of $727m; a decline of 39% (42% at CER).

Sales in China grew by 33% (23% at CER) to $238m, 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 favourably impact sales.

US sales declined by 41% to $90m, reflecting the ongoing impact of multiple Crestor generic medicines. In Europe, sales declined by 69% (72% at CER) to $111m, reflecting the impact of the entry of generic Crestor medicines in various countries in 2017. AstraZeneca expects these impacts to begin to recede in the second half of 2018.

In Japan, where Shionogi Co. Ltd is a partner, sales declined by 71% (72% at CER) to $76m, reflecting the impact of the entry of multiple Crestor competitors in the market in the second half of 2017. AstraZeneca expects this impact to recede in the second half of 2018. 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 $2,407m; increased by 6% (stable at CER) in the half, following a challenging performance in the first quarter. Respiratory Product Sales represented 24% of total Product Sales, a one percentage point increase vs. H1 2017.

Symbicort

Product Sales of $1,306m; a decline of 6% (10% at CER). Symbicort continued to lead the global market by volume within the inhaled corticosteroid (ICS)/Long-Acting Beta Agonist (LABA) class.

Emerging Markets sales grew by 13% (10% at CER) to $241m, partly reflecting growth in China of 34% (24% at CER) to $119m. In contrast, US sales declined by 21% to $439m, reflecting continued pricing pressure and the timing of government buying, partly mitigated by market-share gains. The performance was in line with expectations, with challenging pricing pressure expected to continue.

In Europe, sales increased by 3% (down by 8% at CER) to $411m; the performance reflected the level of competition from other branded and Symbicort-analogue medicines. Symbicort, however, continued to retain its class-leadership position and stabilise its volume market share in the class, with some markets achieving volume growth. In Japan, where Astellas Pharma Co. Ltd assists as a promotional partner, sales were stable (down by 3% at CER) to $100m, despite the impact of the biennial price cut implemented on 1 April 2018.

Pulmicort 

Product Sales of $633m; an increase of 12% (6% at CER).

Emerging Markets represented 76% of global sales and increased by 22% (15% at CER) to $482m. In China, sales grew by 25% (16% at CER) to $401m, despite a temporary supply constraint in the first quarter. The growth in the half reflected higher demand, strong underlying volume growth and AstraZeneca's delivery of over 15,000 nebulisation centres in China.

Sales in the US and Europe declined by 24% to $59m and increased by 4% (down by 6% at CER) to $50m, respectively, a consequence of the medicine's legacy status there.

Fasenra

Product Sales of $86m (Q2 2018: $65m).

In November 2017, the Company was granted approval for Fasenra in the US as a treatment for patients with severe, eosinophilic asthma; the approval was followed immediately by the launch of the medicine. US sales amounted to $67m. New-to-brand prescription data showed that Fasenra, a novel biologic medicine, tracked ahead of prior biologic-medicine launches in its class in asthma, despite being third to market. Initial feedback from physicians and patients has been particularly encouraging, citing a rapid onset of action and convenience of dosing.

In Europe and Japan, AstraZeneca was granted regulatory approval in January 2018 on a similar basis to that in the US. In Europe, a number of launches were executed in the half, including in Germany, Denmark and Sweden.

Sales in Japan amounted to $11m in the half, following its launch in the second quarter.

Daliresp/Daxas

Product Sales of $83m; a decline of 10% (12% at CER). US sales, representing 81% of global sales, declined by 15% to $67m, driven by a reduced level of adoption of the medicine. It is the only oral, selective, long-acting inhibitor of phosphodiesterase-4, an inflammatory enzyme associated with COPD. Sales in Europe increased by 56% (44% at CER) to $14m.

Tudorza/Eklira

Product Sales of $73m; an increase of 3% (down by 3% at CER).

Sales in the US were stable at $29m. On 17 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. Circassia began its promotion of Tudorza in the US in May 2017, where AstraZeneca books Product Sales.

Sales in Europe were stable (down by 11% at CER) to $38m, impacted by the decline of the overall long-acting muscarinic antagonist (LAMA) monotherapy class.

Duaklir

Product Sales of $50m; an increase of 43% (29% 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. The global LAMA/LABA class continued to grow, albeit below expectations.

Bevespi 

Product Sales of $13m; launched in the US in Q1 2017. Prescriptions in the period tracked in line with other LAMA/LABA launches. The overall class in the US, however, continued to grow more slowly than previously anticipated. Bevespi was the first medicine launched using the Company's proprietary co-suspension technology.

OTHER

Product Sales of $1,676m; a decline of 19% (22% at CER). Other Product Sales represented 17% of total Product Sales, down from 21% in H1 2017.

Nexium 

Product Sales of $890m; a decline of 16% (19% at CER). Emerging Markets sales were stable (down by 3% at CER) to $343m. Sales in the US declined by 45% to $187m in the half. Sales in Europe increased by 2% (down by 9% at CER) at $122m. In Japan, where Daiichi Sankyo Company, Limited is a partner, sales declined by 2% (6% at CER) to $205m, reflecting the biennial price cut implemented on 1 April 2018.

Synagis 

Product Sales of $250m; a decline of 17%. US sales declined by 25% to $125m 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, declined by 6% to $125m.

Seroquel XR

Product Sales of $129m; a decline of 20% (23% at CER). Sales of Seroquel XR in the US, where several competitors launched generic Seroquel XR medicines from November 2016, declined by 36% to $49m. Sales of Seroquel XR in Europe declined by 23% (30% at CER) to $33m, also reflecting the impact of generic-medicine competition. On 8 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 and Seroquel XR in the UK, China and other markets.

Table 9: Regional Product Sales

Emerging Markets

Product Sales of $3,424m; an increase of 14% (10% at CER). Q2 2018 sales of $1,659m represented an increase of 15% (12% at CER).

China sales grew by 33% (24% at CER) to $1,893m in the half, comprising 55% of total Emerging Markets sales. In Q2 2018, China sales increased by 37% (26% at CER) to $868m. Onglyza and Iressa were included on the NRDL in China in 2017, as were Brilinta, Faslodex and Seroquel XR; the benefits of these inclusions were felt in the half. The performance of new medicines was also encouraging, with Tagrisso as the main contributor.

Emerging Markets sales excluding China, however, declined by 3% to $1,531m, partly driven by the aforementioned impact from externalisation activities, as well as the decline in Middle East & Africa sales of 14% to $499m. Russia sales declined by 42% (41% at CER) to $67m.

US

Product Sales of $3,102m; an increase of 3%. Q2 2018 sales increased by 6% to $1,615m.

The performance reflected the success of new medicines, including Lynparza, Tagrisso, Imfinzi and Fasenra. Oncology sales in the US grew by 91% to $964m and sales of Fasenra in the US amounted to $67m in the half (Q2 2018: $48m). Strong sales of Farxiga and Brilinta contrasted with the impact of continued competitive intensity on sales of Symbicort, which declined by 21% to $439m. Symbicort delivered an improved performance in the second quarter, with sales in the US down by 14% to $256m.

Europe

Product Sales of $2,154m; a decline of 5% (14% at CER), reflecting the impacts of the entry of generic Crestor medicines in various markets in 2017. AstraZeneca expects these impacts to begin to recede in the second half of 2018.

The new medicines delivered an encouraging performance in the half. Oncology sales in Europe grew by 21% (9% at CER) to $505m, partly driven by Tagrisso sales growth of 83% (63% at CER) to $139m; Tagrisso was approved for the treatment of patients in the 1st-line EGFRm setting on 8 June 2018. Lynparza sales of $87m represented growth of 50% (36% at CER), partly benefitting from the approval on 8 May 2018 for use as a tablet-based treatment for platinum-sensitive ovarian cancer, regardless of BRCA status. Brilique sales growth of 27% (14% at CER) to $172m was accompanied by Forxiga sales growth of 45% (28% at CER) to $152m. Fasenra was successfully launched in several European countries, with a strong initial uptake.

Established ROW

Product Sales of $1,335m; a decline of 11% (14% at CER).

Japan sales declined by 14% (17% at CER) to $917m, reflecting the impact of the entry of generic Crestor medicines in 2017. AstraZeneca expects these impacts to recede in the second half of 2018. Crestor sales in Japan declined by 71% (72% at CER) to $76m. Excluding sales of Crestor, Japan sales increased by 4% (stable at CER) to $841m. The performance was also impacted by the aforementioned biennial price cut.

As seen in other regions, new medicines delivered an encouraging performance in Japan. Tagrisso is currently approved as a treatment in EGFR T790M-mutated NSCLC and sales increased by 15% (11% at CER) to $118m, reflecting focused activities to maximise testing and utilisation rates in the 2nd-line indication. On 19 January 2018, the Company announced that Lynparza tablets, approved as maintenance treatment for women with platinum-sensitive relapsed ovarian cancer regardless of BRCAm status, were approved in Japan and the medicine was launched in April 2018. On 2 July 2018, the Company announced that Lynparza was approved for use in patients with unresectable or recurrent BRCAm, human epidermal growth factor receptor 2 (HER2) negative breast cancer who have received prior chemotherapy.

Financial Performance

________________________________________________________________________________________

Table 10: H1 2018 Reported Profit And Loss

Table 11: Q2 2018 Reported Profit And Loss

Table 12: Reconciliation Of Reported Profit Before Tax To EBITDA29

Table 13: H1 2018 Reconciliation Of Reported To Core Financial Measures

Table 14: Q2 2018 Reconciliation Of Reported To Core Financial Measures

Profit And Loss Commentary

Gross Profit

Reported Gross Profit declined by 5% (8% at CER) to $8,187m; Core Gross Profit declined by 5% (8% at CER) to $8,334m. The declines partly reflected the favourable impact of manufacturing variances realised in H1 2017, as well as the lower level of Externalisation Revenue.

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 to 78.6%; the Core Gross Margin declined by three percentage points to 80.0%. The movements were a result of the aforementioned favourable impact of manufacturing variances realised in H1 2017 and 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 impact of Oncology sales.

Operating Expenses

Reported R&D costs declined by 6% (9% at CER) to $2,641m, with the Company continuing to focus on resource prioritisation and productivity.

Core R&D costs declined by 2% (5% at CER) to $2,558m, reflecting productivity improvements across every therapy area and the favourable impact on development costs from the MSD collaboration. Targeted investment in the Company's R&D programme is a consistent priority; the level of activity was unchanged in the half and Core R&D costs represented 25% of Total Revenue.

Reported SG&A costs increased by 8% (3% at CER) to $5,008m. Investment focused on commercial and medical-affairs support for launches and extensions of the new medicines. These include Lynparza, Tagrisso, Imfinzi, Calquence and Fasenra; additional investment was also added to support sales growth in China. Intangible Asset Amortisation and Impairment charges of $346m, recorded within Reported SG&A Costs, partly reflected the impact of recent regulatory approvals granted for acquired medicines.

Core SG&A costs increased by 11% (7% at CER) to $4,154m, reflecting the aforementioned investments. H1 2017 was also a period when the Company delivered its lowest level of Core SG&A investment for a number of years; comparisons will be more favourable in the second half of this year.

Other Operating Income & 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 & Expense in the Company's financial statements. Reported Other Operating Income & Expense increased by 29% (28% at CER) to $1,086m and included:

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

· $346m, resulting from a legal settlement

· $63m, representing a gain on the spin-out of six potential new medicines from MedImmune's early-stage inflammation and autoimmunity programme into an independent biotech company, as announced on 28 February 2018

Core Other Operating Income & Expense declined by 27% to $704m, with the difference to Reported Other Operating Income & Expense reflecting the aforementioned legal settlement.

Operating Profit

Reported Operating Profit declined by 21% (20% at CER) to $1,459m, driven by the aforementioned declines in Total Revenue and the Reported Gross Margin, as well as the increase in Reported SG&A costs. The Reported Operating Profit margin declined by three percentage points to 14% of Total Revenue. Core Operating Profit declined by 33% (34% at CER) to $2,161m, driven by the aforementioned factors, as well as the timing of divestments in FY 2018. The Core Operating Profit margin declined by 10 percentage points to 21% of Total Revenue.

Net Finance Expense

Reported Net Finance Expense declined by 14% (7% at CER) to $640m, reflecting an adverse foreign exchange impact in the comparative period and reduced levels of discount unwind on Acerta Pharma B.V. (Acerta Pharma) liabilities. Excluding the discount-unwind on acquisition-related liabilities and the adverse foreign exchange impact in the comparative period, Core Net Finance Expense increased by 3% (down by 1% at CER) to $369m.

Profit Before Tax

Reported Profit Before Tax declined by 27% (29% at CER) to $786m, reflecting the lower level of Externalisation Revenue, the lower Reported Gross Margin and the increase in Reported SG&A costs.

Taxation

The Reported and Core Tax rates for the half were 19%. The net cash tax paid for the half was $288m, representing 37% of Reported Profit Before Tax. The Reported and Core Tax rates for the comparative period were 11% and 19% respectively. The net cash tax paid for the comparative period was $336m, which was 31% of Reported Profit Before Tax.

Earnings Per Share (EPS)

Reported EPS of $0.54 represented a decline of 32% (34% at CER). The performance reflected a decline in Total Revenue, the Reported Gross Margin and increased Reported SG&A costs. Core EPS declined by 37% (39% at CER) to $1.17, impacted by the aforementioned factors as well as the decline in Core Other Operating Income & Expense.

Dividends

The Board has recommended an unchanged first interim dividend of $0.90 (68.4 pence, 7.92 SEK) per Ordinary Share.

Table 15: Cash Flow

The Company saw a net cash outflow from operating activities of $75m in the half, compared with an inflow of $338m in H1 2017, due primarily to the reduction in Reported Operating Profit. The increase in the movement of working-capital and short-term provisions partly reflected the release of provisions related to legal settlements as well as launch support for new medicines.

Net cash inflows from investing activities were $177m, compared with outflows of $351m in H1 2017. The difference partly reflected movements in short-term investments and fixed deposits, as well as a reduction in capital expenditure. The cash payment of contingent consideration in respect of the BMS share of the global Diabetes alliance amounted to $151m.

Net cash outflows from financing activities were $481m in the half, compared to inflows of $146m in H1 2017; the difference reflected new long-term loans in the earlier period.

Capital Expenditure

Capital expenditure amounted to $486m in the half, compared to $549m in H1 2017, which included the investment in the new global headquarters in Cambridge, UK, as well as strategic biotech manufacturing capacity in Sweden. AstraZeneca anticipates a reduction in capital expenditure over the full year vs. FY 2017.

Table 16: Debt And Capital Structure

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 17: Currency Sensitivities

The Company provides the following currency-sensitivity information:

Related-Party Transactions

There have been no significant related-party transactions in the period.

Principal Risks and Uncertainties

It is not anticipated that the nature of the principal risks and uncertainties that affect the business, and which are set out on pages 63 to 65 of the Annual Report and Form 20-F Information 2017, will change in respect of the second six months of the financial year. Further information on our key risk management and assurance processes are set out on pages 210 to 220 of the Annual Report and Form 20-F Information 2017. The potential impact of Brexit continues to be treated as an integral part of the Principal Risks rather than as a stand-alone risk as summarised on page 63 of the Annual Report and 20-F Information 2017. Further information on our key risk management and assurance processes are set out on pages 210 to 220 of the Annual Report and 20-F Information 2017.

In summary, the principal risks and uncertainties listed in the Annual Report and 20-F Information 2017 are:

a) Product pipeline and intellectual property risks

Failure or delay in delivery of pipeline and new products; failure to meet quality, regulatory and ethical drug approval and disclosure requirements; failure to secure and protect product intellectual property.

b) Commercialisation risks

Competitive pressures including externally driven demand, pricing and access; failures or delays in quality execution of commercial strategies.

c) Supply chain and business execution risks

Failure to maintain supply of compliant, quality product; failure of information technology and data security and privacy; failure to deliver gains from productivity initiatives; failure to attract, develop, engage and retain talented and capable employees at all levels.

d) Legal, regulatory and compliance risks

Safety and efficacy of marketed products is questioned; adverse outcome of defence of product, pricing and practices litigation; failure to meet regulatory and ethical expectations on commercial practices, including bribery and corruption, and scientific exchanges.

e) Economic and financial risks

Failure to achieve strategic plans and meet targets and expectations.

a) Divestment Of Seroquel And Seroquel XR

On 8 May 2018, AstraZeneca announced that it had entered into an agreement with Luye Pharma for the sale and licence of the rights to Seroquel and Seroquel XR in the UK, China and other international markets. Seroquel, used primarily to treat schizophrenia and bipolar disorder, has lost its compound patent protection globally; the Seroquel XR formulation patents have also expired in the vast majority of its markets. The transaction completed in Q2 2018.

Luye Pharma will pay $538m in consideration, including $260m that was received upon completion. The total consideration, adjusted for time value, was recorded in Q2 2018 in Other Operating Income & Expense within the Company's financial statements. AstraZeneca will continue to manufacture and supply Seroquel and Seroquel XR to Luye Pharma during a transition period.

Seroquel generated sales of $85m in FY 2017 in the markets covered by this agreement, while Seroquel XR generated $63m.

b) Divestment Of Atacand In Europe

On 24 July 2018, AstraZeneca announced that it had agreed to sell the commercial rights to Atacand (candesartan cilexetil) and Atacand Plus (fixed-dose combination of candesartan cilexetil and hydrochlorothiazide) in Europe to Cheplapharm Arzneimittel GmbH (Cheplapharm). Atacand is a prescription medicine for the treatment of heart failure and hypertension. The agreement is expected to complete in the third quarter of 2018. AstraZeneca will continue to manufacture and supply Atacand and Atacand Plus under a supply agreement and will continue to commercialise the medicines in all markets where it still holds the rights.

Cheplapharm will pay AstraZeneca $200m on completion of the agreement, plus a time-bound payment of $10m and sales-contingent milestones. The present value of the upfront and time-bound payment is expected to be reported as Other Operating Income in the Company's financial statements. In FY 2017, global Product Sales for Atacand and Atacand Plus were $300m, including $86m in Europe.

AstraZeneca's sustainability ambition has three priority areas39, 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

During the period, the Company signed a Memorandum of Understanding (MoU) with the Saudi Ministry of Health (the MoH) to launch the Healthy Lung programme in The Kingdom of Saudi Arabia (KSA). Healthy Lung in Saudi Arabia aims to enhance the management and increase public awareness of asthma and chronic obstructive pulmonary disease (COPD), ultimately to reduce the number of cases and related deaths. Under the MoU, the Company will work together with the MoH to drive a series of activities to raise awareness of the prevalence of respiratory diseases in KSA.

During the period, to mark World Hypertension Day on 17 May 2018, the Healthy Heart Africa (HHA) programme partnered with the ministries of health in both Kenya and Ethiopia to raise awareness of the dangers of high blood pressure (hypertension) and the need to adopt healthier lifestyles. Activities took place in both countries under the global theme of 'Check Your Pressure', which was celebrated through a series of events, including free blood-pressure screenings and speeches by cardiologists, government officials, HHA partners as well as the HHA team.

At the core of the work in the Young Health Programme (YHP) is a commitment to ensure young people have a voice in identifying health threats and needs, as well as planning and delivering solutions. During the period, the Company commenced a campaign entitled 'Step Into My World'. This series of films featured interviews with young people involved in the YHP programme in India, Spain and Kenya describing the challenges they face and why involvement in the YHP can help.

On 25 May 2018, AstraZeneca submitted data on its access to healthcare activities to the Access to Medicines Index (ATMI), following the last submission in 2016 when the Company climbed eight positions and entered into the top 10. The ATMI analyses 20 of the world's largest research-based pharmaceutical companies and how they make medicines, vaccines and diagnostics more accessible in low and middle-income countries.

b) Environmental Protection

On 18 April 2018, AstraZeneca published a paper in a peer-reviewed journal, Science of the Total Environment, focusing on developing sustainable solutions to inadequate sanitation and the resulting spread of infectious diseases and antimicrobial resistance (AMR) via contaminated water. Unfortunately, wastewater connection and treatment are not universal in many developing and emerging countries, especially in rural and peri-urban locations that are remote from central sewers. The paper describes the process optimisation of low-cost, scalable solutions to maximise the removal of total nitrogen and antibiotic resistance genes from domestic wastewater to protect environmental and human health. The results obtained from these laboratory-based studies are now being validated in Malaysia with the construction of a pilot plant to treat peri-urban wastewaters. This paper, 'Co-optimization of sponge-core bioreactors for removing total nitrogen and antibiotic resistance genes from domestic wastewater', is one of 13 published in peer-reviewed scientific journals relating to environmental protection in the first half of 2018, with the aim of furthering scientific development to address the challenges of pharmaceuticals in the environment.

During the period, the Company was recognised by the Science Based Targets (SBT) initiative as one of over 100 global companies, and one of the first companies in the FTSE 350, to have environmental targets approved by SBT. The initiative is a partnership between the Carbon Disclosure Project, World Resources Institute, the World Wide Fund for Nature and the UN Global Compact. Only targets that meet strict criteria are approved. Importantly, companies setting science-based targets must seek to not only reduce emissions in their own operations, but also within their value chains, which can move entire industries toward more efficient and greener supply chains. The Company further showcased its environmental protection commitments to support World Earth Day on 22 April 2018.

Table 18: Environmental Protection Targets40

c) Ethics And Transparency

The Company commenced a project to replace the use of Horseshoe Crab blood in medicines development. Over 600,000 horseshoe crabs are captured each year to donate around 30% of their blood, which is used in required regulatory testing. Although there are welfare procedures in harvesting the blood, between 10-30% of donor crabs die in the process. AstraZeneca is exploring viable alternatives to support the longevity of this vulnerable species.

AstraZeneca, together with GlaxoSmithKline, Teva Pharmaceutical Industries Ltd. and Takeda launched the Responsible Health Initiative (RHI) in response to the need to improve the social, ethical, and environmental impact within supply chains. Powered by sustainability-specialist software platform EcoVadis, the RHI aims to create synergies between companies active in the healthcare and pharmaceutical sector to raise standards and improve sustainability performance across the industry.

During the period, the Company was featured in an article in the Wall Street Journal, 'Companies Find Value in Combining Compliance, Sustainability'. The article featured AstraZeneca's work to leverage synergies and better manage risk from combining the compliance and sustainability functions in the organisational structure. 

Other Developments

During the period, the Company entered into a new partnership with the University of Cambridge to fund new research on global sustainability challenges. One of nine founding organisations, The Prince of Wales Global Sustainability Fellowship Programme with the Cambridge Institute for Sustainability Leadership (CISL) aims to attract academics from around the world to identify breakthrough solutions to meet the UN Sustainable Development Goals (SDGs). AstraZeneca's research scope will focus on SDG3: Good health and wellbeing. The research will explore how world health systems, seeing increasing strain on resources due to an overall rise in non-communicable diseases (NCDs), can deliver higher standards of care to a growing and ageing population.

On 21 May 2018, at the 71st World Health Assembly (WHA), AstraZeneca announced a new sustainability project in partnership with the Cambridge Institute for Sustainability Leadership. The pilot will see the introduction of portable bio digesters to Dunga Beach on Lake Victoria in Kenya, which will allow the local community to process organic waste into valuable clean energy. It will study the impact on the environment and local economy and provide potential insight into the effect of clean cooking on respiratory health.

In addition, AstraZeneca hosted two side-meetings at the WHA ahead of the UN High Level Meeting on non-communicable diseases (NCDs) in September 2018. On 21 May 2018, the Company hosted a panel focused on Driving Novel Partnerships Throughout the NCD Life-Cycle. For AstraZeneca, the event was hosted by Executive Vice President for Sustainability, Katarina Ageborg, engaging over 90 representatives from industry, civil society, academia, multilaterals and governments. On 22 May 2018, the Company welcomed policy makers, civil society, research experts and journalists to a second YHP event - Turning The Tide On NCDs: Why We Need To Focus On Youth. The discussion focused on two important pieces of research commissioned by the YHP, which highlighted how critical it is for the world health community to focus on adolescence, if the rising global death toll from NCDs is to be stemmed.

In July, the Company commenced a sustainability materiality assessment working with specialist advisory BSR. AstraZeneca last conducted a materiality assessment in 2015; the 2018 refresh will guide future strategy and capability build. Initial input was sought from the Sustainability Advisory Board and from employees through virtual focus groups with a cross-section of business units and geographies. These insights will additionally support a robust employee engagement programme around sustainability.

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 19: Update From The Late-Stage Pipeline

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 Lynparza, Tagrisso, Imfinzi and Calquence 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 June 2018, the Company presented further evidence of its progress at the American Society of Clinical Oncology (ASCO) annual meeting in Chicago, US. This was illustrated by seven 'Best of ASCO' presentations and 14 oral presentations from a total of 91 accepted abstracts. These presentations highlighted AstraZeneca's four scientific platforms: Immuno-Oncology (IO), DNA Damage Response, Anti-Drug Conjugates, and Tumour Drivers and Resistance.

a) Lynparza (multiple cancers)

On 27 June 2018, AstraZeneca announced positive results from the randomised, double-blinded, placebo-controlled, Phase III SOLO-1 trial of Lynparza tablets. Patients with BRCAm, advanced ovarian cancer, treated with 1st-line Lynparza maintenance therapy, had a statistically-significant and clinically-meaningful improvement in PFS compared to placebo. The safety and tolerability profile of Lynparza was consistent with previous trials. Based upon these data, AstraZeneca and MSD have initiated discussions with health authorities regarding regulatory submissions.

During the period, the Company announced that Japan's Pharmaceuticals and Medical Devices Agency (PMDA) had approved the chemo-sparing regimen of Lynparza tablets as a monotherapy for patients with unresectable or recurrent BRCAm, HER2 negative breast cancer who have received prior chemotherapy. The ability to offer an alternative to chemotherapy treatment for patients with metastatic breast cancer is an important factor as patients are expected to receive multiple lines of chemotherapy during the course of their disease.

At the aforementioned ASCO meeting, data from an 'all-comers' trial assessing Lynparza in combination with abiraterone as a treatment for patients with metastatic castration-resistant prostate cancer (mCRPC) was selected as one of the 'Best of ASCO' presentations. The trial showed an improvement in median radiological progression-free survival (rPFS), compared to abiraterone monotherapy, an SoC in mCRPC.

Study 08 was a randomised, double-blinded, multi-centre Phase II trial, comparing Lynparza in combination with abiraterone (n=71) to abiraterone monotherapy (n=71) in patients with previously-treated mCRPC, regardless of homologous recombination repair (HRR) mutation status. Median rPFS was 13.8 months with Lynparza and abiraterone, compared to 8.2 months with abiraterone alone (hazard ratio (HR) 0.65; 95% CI 0.44-0.97; p=0.034). Pre-specified exploratory subgroup analyses demonstrated an rPFS improvement in patients, regardless of HRR status (see Table 17). Study 08 was not powered for subgroup analyses and secondary endpoints.

Table 20: Lynparza Study 08 in prostate cancer; rPFS by HRR status

The safety profile of Lynparza and abiraterone was generally manageable, with no detrimental impact on quality of life, compared to abiraterone alone.

Table 21: Key Lynparza Combination Trials

b) Tagrisso (lung cancer)

On 8 June 2018, AstraZeneca announced that the EMA had granted marketing authorisation for Tagrisso as a monotherapy for the 1st-line treatment of adult patients with locally-advanced or metastatic EGFRm NSCLC; the approval followed the positive opinion, published in April 2018, from the CHMP. The approval was based on results from the 1st-line NSCLC Phase III FLAURA trial, which showed that the length of patients' PFS nearly doubled when treated with Tagrisso, compared to patients treated with current SoC, namely earlier-generation EGFR tyrosine kinase inhibitors.

During the period the Company commenced the Phase III LAURA trial assessing the effects of Tagrisso following chemoradiation in patients with unresectable, Stage III EGFRm NSCLC.

c) Imfinzi (lung and other cancers)

During the period, the US FDA accepted a supplemental Biologics License Application to update the dosing regimen for all indications of Imfinzi to a more convenient infusion schedule of 1,500mg, fixed-dose, once every four weeks, or, for patients weighing less than 30kg, a 20mg/kg dose every four weeks. Imfinzi is currently approved in the US at 10mg/kg administered as 60-minute intravenous infusion every two weeks for the treatment of certain patients with locally-advanced or metastatic urothelial carcinoma or unresectable, Stage III NSCLC. The submitted data suggested that there are no clinically-significant differences anticipated in efficacy or safety between every two weeks and every four weeks or the flat dosing, compared to the weight-based dosing. A regulatory decision is anticipated in the final quarter of the year.

The Company continues to advance multiple monotherapy trials of Imfinzi and combination trials of Imfinzi with tremelimumab and other potential new medicines:

Lung Cancer

During the period, the Company was granted approvals for Imfinzi in Japan, Switzerland, India and Brazil for the treatment with Imfinzi of patients with unresectable, Stage III NSCLC, whose disease had not progressed following concurrent platinum-based chemoradiotherapy (CRT). CRT, followed by monitoring for disease progression, has been the SoC in this setting for over two decades and multiple trials have failed to improve upon this. The approvals of Imfinzi were based on positive PFS data from the Phase III PACIFIC trial, in which Imfinzi demonstrated an improvement in median PFS of 11.2 months compared to placebo, representing a 48% reduction in relative risk of progression or death in all patients, regardless of PD-L1 status. A regulatory submission, based on the PACIFIC trial data, is currently under review in the EU, where the Company anticipates a regulatory decision in the second half of the year.

During the period, the Company announced that Imfinzi had met the second and final primary endpoint from the Phase III PACIFIC trial in patients with unresectable, Stage III NSCLC, demonstrating an OS benefit which was both statistically significant and clinically meaningful. These positive OS data provided compelling evidence of the durable responses that Imfinzi can offer in this earlier stage of lung cancer, where patients are treated with curative intent. Five-year OS rates are currently 15-20% in Stage III NSCLC; Imfinzi has the potential to substantially improve these numbers.

Table 22: Ongoing Key IO Lung Cancer Late-Stage Trials

Other Cancers

Table 23: Key IO Non-Lung Cancer Late-Stage Trials

d) Calquence

At the aforementioned ASCO meeting, the Company presented new data for Calquence from the Phase II clinical trial (WM-001) of patients with treatment-naïve (TN) and R/R Waldenström macroglobulinemia (WM). Calquence demonstrated an objective response rate of 93% in both TN and R/R patients and the median duration of response, PFS and OS were not reached after a median follow up of over two years. The two-year PFS rate was 90% in TN patients and 82% in R/R patients. A tolerable safety profile was demonstrated with Calquence therapy in patients with WM.

In R/R MCL, a regulatory submission was made for Calquence in Canada with other countries underway aimed in extending the regulatory approval in the US granted on 31 October 2017.

e) Selumetinib

During the period, AstraZeneca and MSD reported that the selumetinib ASTRA trial in differentiated thyroid cancer (DTC) did not meet its primary endpoint. The ASTRA trial is a randomised, double-blinded, Phase III trial in high-risk DTC. Trial results demonstrated that treatment with a short course of selumetinib and single dose adjuvant radioactive iodine therapy did not meet its primary endpoint of improvement in complete remission rate compared to placebo. The full data will be presented at a forthcoming medical meeting.

At the aforementioned ASCO meeting, the Company, along with the US National Cancer Institute, presented initial Phase II data from the ongoing SPRINT trial, evaluating selumetinib as monotherapy in paediatric patients with NF-1 and plexiform neurofibromas. The data demonstrated a sustained reduction in tumour burden for patients treated with selumetinib and an encouraging improvement in patient-reported outcomes, such as pain and motor function. Partial responses (tumour-volume declines from baseline of ≥20%) were observed in 36 of the 50 children (72%).

CVRM

Cardiovascular (CV), renal and metabolic diseases are key areas of focus as the Company sets the challenge to better understand how its portfolio of medicines might be used to help address multiple risk factors or co-morbidities. Today, AstraZeneca is delivering life-changing results in the main CV-disease areas and their complications. The Company is investing in science to demonstrate CV and mortality benefits, by slowing the underlying progression of CV-related diseases and protecting the organs of the CV system. Ultimately, AstraZeneca is looking to do more than just slow CV-related disease, by modifying or even halting the natural course of the disease itself and regenerate organs. The net result is a strong, continued commitment to new CVRM-treatment options that have the potential to deliver improved outcomes to hundreds of millions of patients.

At the American Diabetes Association congress in June 2018, the Company presented 45 abstracts, including seven late-breaking data disclosures, such as first pre-clinical and clinical data for MEDI0382 (a novel oxyntomodulin-like peptide) for patients with type-2 diabetes. In a double-blinded Phase IIa trial, 51 patients with type-2 diabetes were randomised (1:1) to receive 200 µg of MEDI0382 subcutaneously, or placebo, daily. Results after six weeks of treatment demonstrated that MEDI0382 significantly improved glycaemic control and reduced body weight, compared to placebo. A separate exploratory analysis of the Phase IIa trial evaluated the effects of MEDI0382 on hepatic fat content in overweight patients with type-2 diabetes. Results of the analysis demonstrated that patients treated with MEDI0382 showed a significant relative reduction from baseline in hepatic fat content vs. placebo (-39.1% vs. -19.5%; p=0.0172). MEDI0382 is currently in Phase IIb testing; expected results in the second half of the year will inform a potential Phase III initiation decision.

a) Brilinta (CV disease)

During the period, results from a new real-world analysis of more than 45,000 heart-attack survivors was published in Heart, suggesting that treatment with Brilinta plus low-dose aspirin, compared to clopidogrel plus low-dose aspirin, was associated with an 18% reduction of risk (adjusted hazard ratio (HR 0.82 (0.70 to 0.97)) over one year for the composite endpoint of death, heart attack or stroke, in patients with moderate kidney disease (as defined by estimated glomerular filtration rate of 30-60ml/min). The results from PRACTICAL, an analysis of data from the ongoing SWEDEHEART registry, provided real-world evidence that patients who survived a heart attack (also known as myocardial infarction (MI)) and have moderate kidney disease, had a lower risk of experiencing future CV events when treated with Brilinta rather than clopidogrel, an older and generic medicine.

b) Farxiga (diabetes)

In May 2018, AstraZeneca announced that it had submitted a supplemental new drug application (sNDA) to Japan's PMDA for the use of Forxiga as an oral adjunct treatment to insulin in adults with type-1 diabetes. The sNDA was based on Phase III data from the DEPICT (Dapagliflozin Evaluation in Patients with Inadequately Controlled Type 1 Diabetes) clinical programme for Forxiga in type-1 diabetes and a dedicated trial in Japanese patients. Results showed that Forxiga, when given as an oral adjunct treatment to insulin in patients with inadequately-controlled type-1 diabetes, demonstrated significant and clinically-meaningful reductions from baseline in HbA1c53, weight and total daily insulin dose at 24 and 52 weeks, compared to placebo, at both 5mg and 10mg doses.

During the period, the Company received US FDA and EMA regulatory submission acceptances for Farxiga, based on the DERIVE trial. DERIVE is a Phase III trial, designed to evaluate the clinical efficacy and safety of Farxiga in patients with type-2 diabetes and moderate renal impairment (chronic kidney disease (CKD) Stage 3A). On 19 July 2018, the Company received EU acceptance of the regulatory submission for the triple combination therapy (Farxiga + Onglyza + metformin) for the potential treatment of type-2 diabetes.

c) Bydureon (type-2 diabetes)

During the period, the Company received US FDA regulatory submission acceptance for Bydureon, based on the CV outcomes trial, EXSCEL. This Phase IIIb/IV trial (EXenatide Study of Cardiovascular Event Lowering) compared the effect of once-weekly Bydureon (exenatide extended-release) vs. placebo, when added to usual type-2 diabetes treatments, on the risk of a major adverse cardiac event (MACE), a composite endpoint of time to first occurrence of CV death, non-fatal myocardial infarction (MI) or nonfatal stroke, in adults with type-2 diabetes at a wide range of CV risk. The trial met its primary safety objective of non-inferiority for MACE. Fewer CV events were observed in the Bydureon arm of the trial; the efficacy objective of a superior reduction in MACE, however, did not reach statistical significance.

In June 2018, AstraZeneca announced that the CHMP had adopted a positive opinion, recommending inclusion of Bydureon BCise device (2mg prolonged-release suspension for injection) as a new formulation within the marketing authorisation for Bydureon for the treatment of type-2 diabetes. The CHMP recommendation was based on the clinical trials DURATION-NEO-1 and NEO-2. DURATION-NEO-1 was a 28-week, randomised, open-label, comparator-controlled trial (n=375), which showed that once-weekly Bydureon demonstrated an HbA1c reduction of 1.4% vs. 1.0% for twice-daily Byetta (exenatide) injection at 28 weeks (baseline HbA1c 8.5% and 8.4%, respectively). Additionally, Bydureon administered once weekly via the BCise device demonstrated a mean weight reduction of 1.5kg as monotherapy, vs. a reduction of 1.9kg (baseline was 97kg), when combined with certain oral, antidiabetic medicines.

Table 24: Major Ongoing Cardiovascular Outcomes Trials

Major ongoing CVRM outcomes trials are highlighted in the following table:

d) Lokelma (hyperkalaemia)

In May 2018, the US FDA approved Lokelma (sodium zirconium cyclosilicate), formerly ZS-9, for the treatment of adult patients with hyperkalaemia, a serious condition characterised by elevated potassium levels in the blood associated with CV, renal and metabolic diseases.

The risk of hyperkalaemia increases significantly for patients with CKD and for those who take common medications for HF, such as renin-angiotensin-aldosterone system (RAAS) inhibitors, which can increase levels of potassium in the blood. To help prevent the recurrence of hyperkalaemia, RAAS-inhibitor therapy is often modified or discontinued, which can compromise cardio-renal outcomes and increase the risk of death.

The Company expects a broad commercial launch of Lokelma to begin in early 2019, once appropriate levels of inventory are available. Lokelma is manufactured through a proprietary, complicated manufacturing process at a dedicated production facility.

e) Roxadustat (anaemia)

During the period, the ALPINE Phase III clinical-trial programme for roxadustat completed patient enrolment. The programme, sponsored by FibroGen, Inc. (FibroGen) and its partners Astellas, Inc. (Astellas) and AstraZeneca, has now enrolled approximately 9,000 patients across seven clinical trials. ALPINE was designed to support the US regulatory submission for roxadustat as a treatment for anaemia associated with CKD in both dialysis-dependent (DD) and non-dialysis-dependent (NDD) CKD patients. AstraZeneca is conducting two large trials, ROCKIES and OLYMPUS, to support efficacy and CV safety in DD and NDD CKD patients, respectively. Top-line data from these trials is anticipated in H2 2018 with a pooled safety analysis anticipated to be available in H1 2019.

On 31 May 2018, Astellas and FibroGen announced that the fourth Japanese Phase III trial for roxadustat had met its primary endpoint. This trial evaluated the efficacy and safety of roxadustat compared to erythropoietin (darbepoetin alfa) in haemodialysis-dependent CKD patients with anaemia and previously treated with erythropoietin. Average haemoglobin (Hb) levels were effectively maintained at 10.99 g/dL at weeks 18 to 24 in roxadustat-treated haemodialysis patients previously treated with erythropoietin. The primary efficacy endpoint of change in average Hb levels from baseline to weeks 18 to 24 was -0.04 g/dL and -0.03 g/dL in the roxadustat-treated group and in the darbepoetin-treated group, respectively. Roxadustat was well tolerated and the safety profile was consistent with that observed in previous trials both in DD and NDD.

During the period, the first patient was randomised into a Phase II/III trial in China to evaluate roxadustat for the treatment of anaemia in patients with non-transfusion-dependent, myelodysplastic syndrome (MDS). A Phase III US/EU trial in transfusion-dependent MDS patients is also currently recruiting.

RESPIRATORY

AstraZeneca's Respiratory focus is aimed at transforming the treatment of asthma and COPD through combined inhaled therapies, biologics for the unmet medical needs of specific patient populations and an early pipeline focused on disease modification.

The growing range of medicines includes up to four anticipated launches between 2017 and 2020; of these, Bevespi and Fasenra are already benefitting patients. The capability in inhalation technology spans both pressurised, metered-dose inhalers and dry-powder inhalers to serve patient needs, as well as the innovative Aerosphere Delivery Technology, a focus of AstraZeneca's future-platform development for respiratory-disease combination therapies.

During the period, AstraZeneca attended the American Thoracic Society (ATS) 2018 International Congress, in San Diego, US. The Company presented 60 accepted abstracts, including five oral presentations that focused on key areas of unmet need in asthma and COPD. Highlights included the results from two Phase III trials, SYGMA 1 and SYGMA 2, of Symbicort Turbuhaler (budesonide/formoterol) in mild asthma, which were presented as late-breaking abstracts. Additionally, eight abstracts were also presented, including one late-breaking abstract that underscored the growing body of evidence on Fasenra and the role of this new medicine for patients with severe, eosinophilic asthma.

a) Tudorza (COPD)

In June 2018, the Company and its partner, Circassia, submitted an sNDA for Tudorza to the US FDA. The submission was based on the results from the ASCENT trial, which fulfilled a post-approval commitment to conduct a randomised, controlled trial to evaluate the risk of MACE with Tudorza as a treatment for patients with COPD.

The trial achieved its co-primary endpoints for safety (MACE) and efficacy (exacerbation reduction). It is anticipated that the US label will be updated accordingly.

b) Duaklir (COPD)

In May 2018, AstraZeneca and Circassia submitted a New Drug Application (NDA) to the US FDA for Duaklir for the maintenance treatment of patients with COPD and reduction of exacerbations. The NDA included data from three Phase III trials, including the AMPLIFY trial, which demonstrated statistically-significant and clinically-meaningful improvements in lung function for the combination of aclidinium bromide/formoterol twice-daily, compared with the combination's individual components of either aclidinium bromide or formoterol.

c) Fasenra (COPD)

On 30 May 2018, the Company announced top-line results from the Phase III TERRANOVA trial, the second of two pivotal Phase III trials for Fasenra in patients with moderate to very severe COPD. The trial did not meet the primary endpoint of a statistically-significant reduction of exacerbations. This followed the prior announcement that the first pivotal Phase III trial, GALATHEA, did not meet its primary endpoint.

The safety and tolerability findings in GALATHEA and TERRANOVA were consistent with those observed in previous trials with Fasenra. A full evaluation of the data is ongoing, and the Company anticipates submission of the results for presentation at a forthcoming medical meeting. The Company does not currently intend to make a regulatory submission.

OTHER

a) Lanabecestat (Alzheimer's disease)

During the period, the Company and Eli Lilly and Company (Lilly) announced the discontinuation of the global Phase III clinical trials of lanabecestat, an oral beta secretase cleaving enzyme (BACE) inhibitor, for the treatment of Alzheimer's disease. The decision was based on recommendations by an independent data monitoring committee (IDMC), which concluded that both the AMARANTH trial, in early Alzheimer's disease and the DAYBREAK-ALZ trial, in dementia of mild Alzheimer's disease, were unlikely to meet their primary endpoints upon completion and therefore should be stopped for futility. As a result of this decision, the related AMARANTH extension trial was also discontinued. The IDMC recommendation to stop the trials was not based on safety concerns. The Company and Lilly BACE alliance for lanabecestat remains in place and the companies are working with the clinical-trial sites involved to implement the discontinuations.

Condensed Consolidated Statement Of Comprehensive Income