Astrazeneca PLC (AZN) Q1 2018 Earnings Conference Call Transcript

AstraZeneca PLC (AZN -0.25%)
Q1 2018 Earnings Conference Call
May 18, 2018, 7:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good morning and good afternoon. Welcome, ladies and gentlemen, to AstraZeneca's Q1 results analyst conference call. Before I hand over the call to Pascal Soriot, I'd like to read the Safe Harbor statement.

The company intends to utilize the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Participants on this call may make forward-looking statements with respect to the operations and financial performance of AstraZeneca. By their very nature, forward-looking statements involve risk and uncertainty and results may differ materially from those expressed or implied by these forward-looking statements. The company undertakes no obligation to update forward-looking statements.

There will be an opportunity to ask questions after today's presentations. Please press *1 to indicate you wish to ask a question at any time during the call. Now, I'll hand you over to AstraZeneca, the web call is about to start.

Pascal Soriot -- Executive Director and Chief Executive Officer

Hello, everyone. It's Pascal Soriot here, CEO of AstraZeneca. Welcome to our first quarter results conference call and our webcast for investors and analysts. We are here in London on a very beautiful day for the annual general meeting this afternoon. We have people on the phone and on the webcast. The presentation is available to you on AstraZeneca.com, as always, for you to download.

Please turn to Slide 2. This is the safe harbor. Please turn to Slide 3. We plan to spend about 30 minutes around the presentation today and then leave plenty of time for Q&A. Although on the phone you can get in the queue by pressing *1, there is also an option to ask questions online as part of the webcast. As we would like to provide everyone with an opportunity to ask questions, please limit yourself to one question each in the first round. Thank you very much in advance.

So, today, I'm joined, as always, by Dave Frederickson, our Executive Vice President for the Oncology Business Unit; Mark Mallon, our EVP for Global Products and Portfolio Strategy, Medical Affairs, and Corporate Affairs; Marc Dunoyer, our CFO; and Sean Bohen, our EVP for Global Medicines Development and our Chief Medical Officer.

Please turn to Slide 4. This is the agenda, where we will cover all the key aspects of our first quarter announcement today. If you want to turn to Slide 5, please. So, now we are onto the highlights. We'll be making comments on our financial performance using core reporting metrics and a constant exchange rate [inaudible], which are both known GAAP measures. All numbers will refer to million US dollars and growth rates will be at [inaudible] unless we otherwise state.

Our product sales overall declined by 2% as anticipated. The strong performance by the newer medicine up 6% and by China, was off-site but the detail of the loss of exclusivity on Crestor in the EU and Japan that started impacting us last year, and also about 2% negative impact from divestments overall.

In general, there are many moving parts in the sales line as you digest the loss of exclusivity masking underlying performance. As implied by my comments, the second quarter made quite a bit like the first quarter and product sales results will therefore be weighted toward the second half of the year as comparison [inaudible].

Total revenue declined by 9%, reflecting lower Initial Externalization Revenue, while the pipeline opportunities remain intact. The key here is that we are very excited by the new medicines and their launch trajectories. These newer medicines collectively deliver more than $0.4 billion in additional sales versus Q1 '17, and they grew by 66%. Oncology was up by 33%, driven by the Lynparza, Tagrisso, and Imfinzi, that are all performing very well and we'll come back to that later.

New CVRM, cardiovascular, renal and metabolism, was up by 8%. Brilinta is growing by 24%, Farxiga by 39%, so both doing very well. Respiratory was 6% lower, essentially impacted by Symbicort's competitive environment and also by a supply delay in China that impacted Symbicort and was resolved in the meantime. On the other hand, we had a very strong start for Fasenra in respiratory. We launched it in the US in asthma. We also launched in Germany and are rolling out to other markets.

Finally, the emerging markets continued to grow at high single digits, driven by China. That grew by 22%. For the first time, passed the $1 billion mark in the quarter. Fantastic result in China for Q1.

Core EPS was at $0.48, reflecting the Crestor impact in the EU and Japan, but also the investment we had to make in launching all these products -- we have 6 launches under way -- and also, the investment in China, as we continue to fuel our growth there. At the same time, we remain committed to our productivity improvements and our total operating expenses were down by 1%. Our guidance remains unchanged. It's supported by the performance of the newer medicines in the quarter.

Finally, a few days ago, we took further steps in creating a more focused, pharma-sized biopharmaceutical, with the divestment of Seroquel and some international markets. We remain committed to our strategy and the increasing on our focus on our 3 pain [inaudible] areas of oncology, CVRM, and respiratory. However, without being too specific, there are still some medicines left in AstraZeneca that may fit and perform a lot better in another company, and we will keep you abated during the year on new agreements.

With this, let's talk about the pipeline of potential new medicines. If you'll turn to Slide 6. We continue to make progress with our pipeline that is aiding the transformation of AstraZeneca. Lynparza tablets received a broad EU label in ovarian cancer, and the breast cancer submission was accepted also in the EU.

Tagrisso started to receive the first approvals in the first lung setting. We got the approval first in Brazil, which really was a great success by our Brazilian team, followed by the US In the EU, we received a positive opinion and we are waiting approval later this quarter. Given Tagrisso's unprecedented benefit to patients in the first lung setting remains a top priority for all of us.

This priority also goes for Imfinzi, which was approved and launched in the US, also with significant patient benefit in the earlier, unresectable stage of lung cancer. The EU and Japan regulatory decisions are expected in the second half of the year. The combination of Imfinzi and tremelimumab did not show any significant benefit on the primary end points in the third line PDL1-low/neg. lung cancer center in the ARCTIC trial. However, while the Imfinzi on the therapist [inaudible] was not powered for statistical strategic, Imfinzi showed a clinically meaningful reduction in the risk of death compared to chemotherapy in this setting.

Last in Oncology, moxetumomab's first biologics license application was filed, accepted, and received for priority review in the US for third-line hairy cell leukemia, and selumetinib received orphan drug designation.

In CVRM, Farxiga was accepted for review in the EU in Type-1 diabetes as an add-on to insulin and Lokelma received a first regulatory approval.

Finally, in Respiratory, Fasenra did not meet the primary endpoint in the first of two trials in COPD. We are now waiting the second trial for firm conclusion on the utility of Fasenra in that disease.

Please turn to Slide 7. We will now review our important performance as we return [inaudible] to growth in 2018. First of all, on total product sales, the first quarter was down by 2%, as I said before. It was impacted by the tail of the loss of exclusivity for Crestor in the EU and Japan. We lost Crestor in the US last year. As you know, still a lot of impact in the US this year, but mostly Japan and the EU.

We expect this impact to continue in the second quarter, but then it should ease in the second half of the year. So, the comparison then will become easier. It also goes for the impact from divestments and [inaudible] divestment of the local anesthetics [inaudible] last year. As is visible after the first quarter, we have many opportunities to support our return to sales growth in 2018, including the newer medicines that are important to the future of AstraZeneca: Lynparza, Tagrisso, Imfinzi, Brilinta, Farxiga, and Fasenra.

The major offset is the tail of the impact from the loss of exclusivity for Crestor, as you know. We therefore can reconfirm our guidance of low single-digit growth in product sales in 2018.

If you'll turn to Slide 8. As we mentioned last quarter, we focused sales reporting on the main CRP areas going forward and this is how they performed during the first quarter. Oncology was above $1 billion per quarter, for the quarter, and it grew by 33%. This is probably the first growing diversified oncology business of any company. We are now making up one-quarter of our total business in oncology.

New CVRM excluding Crestor is made up of [inaudible] diabetes and also soon Lokelma and, in the future, roxadustat. Together, they grew by 8% to almost $1 billion per quarter.

Respiratory was down 6%, reduced by the competitive environment for Symbicort and the timing of US government orders. But we are encouraged by the launch of Fasenra, which has taken significant market share already.

Other medicines were down by 19%, reflecting the loss of exclusivity for Crestor in EU and Japan and the divestment. This line will remain in some decline as we focus all our efforts on the main therapy areas. Emerging markets continued their strong performance with 8% growth. In China, product grew by 22% to a record of more than $1 billion in the quarter.

It's really pleasing to see China performing so well. I would like to offer my sincere thank you to the China team for making this possible, and the benefit they bring to patients in China.

Please turn to Slide 9. As I said before, newer medicines that [inaudible] an extra $0.4 billion in the first quarter, and they grew by 66%. The Tagrisso there was the main contributor, followed by Farxiga, Imfinzi, Lynparza, and Brilinta. We will continue to monitor how our newer medicines are doing, both looking back at sales, but also looking forward at leading indicators.

Please turn to Slide 10. Looking at a few specific examples of launches and we selected those three leading indicators from our US business and how it is returning to growth. In Oncology, the new patient starts for Imfinzi show a very exciting trend in our accelerating after the formal US approval in unresectable Stage III cancer. Physicians are excited to bring the important benefit of Imfinzi to their patients with an earlier non-metastatic stage of lung cancer and are seen there as doing a brilliant job.

In CVRM, Bydureon's new injection device, BCise, has helped. Bydureon, it's new-to-brand prescriptions, actually for the first time in several years. We are pleased to now offer US patients a convenient device to treat Type-2 diabetes. Also, a great job by our diabetes team.

Finally, in Respiratory, another great result, really, by our team there. Fasenra is off to a very encouraging start and already gaining market share of new patients compared to other available medicines, targeting the Aisle 5 [inaudible] asthma. In fact, in new prescriptions, we are the leader in the Aisle 5 class already.

In summary, we are very encouraged by this positive impact made by the newer medicines in the 3 main [inaudible], as they underpin the guidance of returning to growth in product sales in 2018. I will now hand over to Dave and Mark to cover important aspects of product sales. So, if you want to turn to Slide 11, and Dave will now take us for the Oncology TA.

David Fredrickson -- Executive Vice President, Global Head Oncology Business Unit

Thank you so much, Pascal. I'm really pleased to be here today to update all of you on the performance of our new generation of medicines. I'll start first with Oncology and then I'll hand over to Mark Mallon for a summary of CVRM, Respiratory and Emerging Markets. If we could turn, please, to page 12.

We are really pleased to announce that total Oncology grew by 33% quarter-over-quarter and now represents a quarter of total product sales for AstraZeneca. We've now delivered 4 of the 6 new oncology medicines that we set out an ambition to deliver by 2020. We really see that all 4 of these medicines are contributing to the growth of $300 million in additional sales versus the first quarter of 2017.

We see continued growth from Lynparza and Tagrisso, and very importantly, Imfinzi truly has realized an inflection point as we've launched in the United States with the approval of the Stage III unresectable PACIFIC indication. We continue to see encouraging uptake in Calquence as we prepare for the larger CLL indication, with data starting to come next year. It is worth highlighting, though I won't speak about it anymore in the presentation, that other oncology medicines are still growing at 1%, which is mainly driven by the label extensions for Faslodex.

If we could turn, please, to Slide 13. Now turning to Lynparza, we've now seen three quarters of strong growth and for the quarter, we grew by 100% over the same quarter of last year, with total global sales of now $119 million. This is with strong growth across all regions, US, Europe, and emerging markets, as we continue to roll out the broader label in ovarian cancer, tablets, and the breast indication in the US.

US sales were $66 million in the quarter, up 144%, which was driven by increase in demand from the [inaudible] label in the second line ovarian cancer, as well as from the breast cancer indication. As you would expect, we see the majority of use in ovarian cancer, but there is emerging use in breast. Together, they make up about 80 to 85% of the total sales of in Lynparza. Lynparza was the leading medicine in the PARP inhibitor class in the US, as measured by total prescription [inaudible].

European sales were robust at $42 million, up 44% versus the prior year, and this reflects our effort and emphasis on driving testing rates and it's boosted by additional launches across several markets that hadn't yet come online. We are really pleased to have the broader EU ovarian label now included too as of last week in Europe. In markets outside the US and Europe, Lynparza has just this month launched in Japan and so while not in the first quarter numbers, early signs of launch are promising and we'll have more to update on that in our next call.

Finally, the Merck alliance continues to progress nicely, and we look forward to an exciting year of delivery of what we believe is the leading PARP inhibitor.

Please turn to Slide 14. Now, we'll talk about our medicines within the lung cancer portfolio and beginning with Tagrisso. Tagrisso had strong performance again across all markets with 89% growth in the quarter, resulting in $338 million in sales and this has been primarily driven by second line demand and higher testing rates. Tagrisso is now the largest product within our Oncology portfolio. US and EU exhibited strong growth, with sales of $147 million and $69 million, respectively. This is really as a result of being established as the clear standard of care in second line at this point.

Japan did experience a softer quarter, mainly due to the mandatory expiration of a testing program which resulted in testing rates going down, and also in a decline in bolus patients in the late line, but we look for this to turn around with the near-term catalyst of the front line FLAURA approval, which is expected later this year. We are excited that we can announce that front line FLAURA was approved in Brazil and then in the US, which we believe will further drive sales, as we already have seen some contribution of this to sales, not only from our launch, by also following the NCCN Compendia listing from last year.

We continue to build on the [inaudible] of our lung cancer opportunity, where we believe that we are truly leaders in the science and in the space. We've kicked off a trial in locally advanced patients called FLAURA for Tagrisso, which will address unmet need in earlier disease, as we hope to truly bend the survival curve for patients with this terrible disease.

We can turn now to Slide 15. We really have had an encouraging start to Imfinzi. It was approved for the US with the PACIFIC indication for unresectable Stage III non-small cell lung on the 19th of February. This has resulted in a true inflection point for Imfinzi with sales now of $62 million in the first quarter and really the overwhelming majority of these coming from the lung cancer indication. As you saw from a slide that Pascal showed in February, when we launched, we had about 3,500 patient infusions for per month. You can see that we've now doubled in the most recent month to 7,000 patient infusions per month, really showing that the underlying patient demand is the driver of these sales.

Initial feedback from the launch has been very positive from physicians and from patients alike, though lots of educational effort remains, as we need to ensure that we continue to drive treatment rates post-CRT and bring awareness into this setting where previously there hadn't been any alternatives available.

Please turn to Slide 16. Lastly, I'd like to talk about our Hematology franchise and I'd like to highlight the good start that we've made with the launch of Calquence. We hope that this is the first of a much broader platform that we look to build upon in years to come, including our potential fifth new oncology medicine: moxetumomab, which Pascal mentioned briefly and Sean will talk about a bit more. Calquence continues to perform well with sales of $8 million in the first quarter, in the fast-to-market, second line, relapsed occurring, mantle cell lymphoma indication. We now see about one quarter of new patients starting on Calquence within this setting, and we look forward to the chronic lymphocytic leukemia data readouts, which we expect to start from 2019.

As mentioned, moxetumomab is our first potential antibody drug conjugate and we look forward to the regulatory decision in the third quarter for this niche, but high-end met need disease of hairy cell leukemia. With this, I turn it over to Mark.

Mark Mallon -- Executive Vice President, Global Products and Portfolio Strategy, Medical Affairs & Corporate Affairs

Thanks, Dave. Now moving to new CRVM, which as Pascal mentioned is defined as our medicines in Cardiovascular, Renal, and Metabolic diseases. Sales were up by 8%, despite the intense competition, with first quarter sales at $900 million. Farxiga and Brilinta continue to remain strong with double-digit growth across all regions. Brilinta sales of $293 million, with 24% growth driven by the US at 32% and emerging markets at 20%. Farxiga delivered sales of $299 million in the quarter, with 39% growth. Farxiga maintained volume market share leadership globally with a 41% share. Farxiga growth of 32% in the US exceeded SGLT 2 class growth; however, we are seeing some slowdown in the SGLT 2 class growth, and we're looking forward to declare results in the second half of this year.

Ex-US, where we have 58% of our global sales for Farxiga, we've been seeing encouraging performances. For example, in Brazil, Farxiga is the No. 1 innovation oral diabetes medicine. Turning back to the US and the fast growing GLP-1 market, our auto-injector, Bydureon BCise, continues to perform well as Pascal mentioned. Importantly, roughly half the patients are new GLP-1 patients going on to Bydureon BCise. A third have been switched from the Bydureon pen.

Please turn to Slide 18. Turning to Respiratory, as Pascal mentioned, sales continue to see challenges in the quarter with an overall sales decline of 6%. For Symbicort, product sales were down by 12%, with the US particularly adversely affected, in part, due to phasing of government purchases. We anticipate the US price compression to remain with moderate easing throughout the year. Globally, Symbicort volume is holding steady, with some growth in the US end demand.

Overall, sales growth in emerging markets was held back by a delay in releasing Pulmicort supply in China, which we have addressed, and Symbicort delivered growth of 10% in the quarter.

Please turn to Slide 19. Fasenra, as you saw, is off to a strong start and we're very happy with the initial launch, which has been consistent with our expectations, given its highly competitive clinical profile. The success has also been supported by our strong pre-launch preparation, which was enabled by a dedicated team staffed with highly experienced respiratory and biologic sales colleagues that were able to hit the ground running. We also put in place an industry leading support program to help patients and physicians gain reimbursement for Fasenra as quickly as possible for the patients that needed it.

Fasenra reported sales of $21 million in the quarter, resulting mainly from the US launch at the end of last year. We look forward to Japan and the other markets that are launching as we speak coming on board the next quarter.

Please turn to Slide 20. Emerging markets continued to track in line with our long-term performance target, with 8% sales growth in the quarter. China delivered strong performance with 22% growth, and a record of over $1 billion of sales in the quarter for the first time. China benefited from the addition of more medicines to the National Reimbursement Drug List last year, and the launch of Tagrisso.

Outside China, we saw the impact from divestments and general economic conditions, specifically in Russia, where the business was impacted by lower healthcare spend.

Finally, there was strong performance across our core therapeutic areas in emerging markets, with Oncology up 36%, Respiratory up 5%, and new CVRM up 30%. Although we missed the China National Reimbursement Drug List timing update for Farxiga, we've added already a number of provincial reimbursement lists and are very pleased with the launch so far in China for Farxiga. With this, I'll hand it over to Mark.

Marc Dunoyer -- Executive Director and CFO

Thank you, Mark. Hello, everyone. I'm going to spend the next few minutes taking you through our financial performance in the first quarter of the year, as well as our end change guidance. Please turn to Slide 22.

As usual, I will begin with the reported P&L before turning to the core numbers. As Pascal mentioned earlier, product sales declined by 2%, impacted by the reduces of Crestor in Europe and Japan. The effect of the divestment of medicine in prior periods, such as anesthetics, also reduced our product sales by about 2%. But as you heard earlier, we delivered especially promising performances in China and right across Oncology medicine.

As implied by my comments on why we do not guide on a quarterly basis, the second quarter may look a bit like the first quarter and product sales growth therefore will be weighted toward the second half of the year as comparisons ease. The lower level of Initial Externalization Revenue this year meant that total Externalization Revenue declined by 67% in the quarter, despite the inclusion of a $70 million milestone receipt from Merck for the approval in breast cancer for Lynparza.

The performance of our top line was in line with our expectation, and so I am keeping my guidance for product sales unchanged.

Please turn to Slide 23. Turning now to the core P&L, our gross margin ratio for the year fell, as expected, by 4 percentage points to 78.8%, driven primarily by the positive impact of manufacturing variances in Quarter 1 2017, and the inclusion of the profit share with Merck. The decline in the sales of Crestor also had an impact.

Total core operating expenses declined by 1%, the result of a continued focus on core discipline. Core R&D costs were reduced by 12%. We did, however, see an uplift in core SG&A cost in the quarter, driven by some specific factors, which I will talk about in a moment. Core other operating income declined by 64%, a result of the timing of our divestments this year. The core tax was 18%, in line with indication, our full-year core tax range of 16% to 20%.

Please turn to Slide 24. Looking at Externalization Revenue in more detail, there was a reduced level of Initial Externalized Revenue, which led to the overall decline year-on-year. By next year, they will never be a smooth, even pattern of agreements and receipts, but I want to be clear that we expect the significant level of Externalized Revenue this year including from Merck. We remain committed to focusing on appropriate cash generation and [inaudible] agreements given the productivity of our pipeline. We also committed to the continued management of our portfolio divestment and to increasing the focus on our 3 main therapy areas of [inaudible].

Please turn to Slide 25. We made further progress on our core discipline in the quarter. As I mentioned earlier, total cooperating expenses fell by 1%, despite the investment in the launches. Core R&D costs fell by 12%. Despite maintaining high level activity level, we saw the benefit of productivity initiative and efficiencies, and there was also support from the Merck collaboration Cost Sharing Agreement. Investment in our business remains one of our capital allocation priorities, and we are enjoying the benefit of more targeted investment in our pipeline. I continue to anticipate a stable to low single-digit decline in core R&D this year.

Core SG&A cost increased by 6%, reflecting investment in the launches and in China. It is worth noting that Quarter 1 2017 was one of the lowest level of core SG&A spend in many years, and core SG&A declined sequentially from Quarter 4 2017 into Quarter 1 2018. I currently anticipate a further significant year-on-year uplift in core SG&A cost in the second quarter, but I want to reiterate our expectation of a low to mid-single-digit percentage increase in core SG&A cost over the full year.

Please turn to Slide 26. I'd like to conclude with a reiteration of our 2018 guidance, which is on product sales and core EPS. We anticipate low single-digit percentage growth in product sales for 2018, at constant [inaudible] rates. This growth is significantly weighted toward the second half and we expect the pressures on product sales seen in Quarter 1 to continue in Quarter 2. This pattern reflects the first half impact of January competition to Crestor in Europe and Japan. I continue to anticipate the sum of external revenue and other operating income to be less than that in 2017. We also anticipate a core EPS of $3.30 to $3.50 at constant [inaudible] rate.

With the financial performance in line with our expectation as well as success of our pipeline in newer medicine, I'm confident in our ability to deliver against what are unchanged and consistent capital allocation priorities. With that, I will hand over to Sean.

Sean Bohen -- Executive Vice President, Global Medicines Development & Chief Medical Officer

Thank you, Marc. I would now like to run through the late-stage pipeline events since the last results announcement and the highlights of recent data presentations at medical meetings. As usual, I will finish with a look at our upcoming news flow.

Please turn to Slide 28. We delivered more good progress in the quarter in Oncology. Lynparza received EU approval for a broad second line ovarian cancer indication with a tablet formulation, while we also received submission acceptance for breast cancer. Tagrisso received the important US approval for first line EGFR mutated non-small cell lung cancer, and also received submission acceptance in the EU. In hematology, moxetumomab's submission was accepted by the FDA and granted priority review, for an intended indication in third line hairy cell leukemia.

On the data front, we announced that the ARCTIC trial of Imfinzi plus tremelimumab in third line non-small cell lung cancer did not meet the primary endpoints of PFS and OS in patients with PDL1-low/neg. tumors but, as discussed in the announcement, the Imfinzi monotherapy substudy A, while it was not powered for statistical strategic, showed a clinical meaningful reduction in the risk of death compared to chemotherapy.

Continuing on data, we presented the ovarian cancer cohort from the MEDIOLA trial, and Lynparza plus Imfinzi was demonstrated to be well tolerated. Response rate was greater than 70% within the entire cohort, and for patients with one prior line of therapy, the response rate was 77%. Following the data presentation, we announced plans for a Phase III trial of Lynparza plus Imfinzi in ovarian cancer. There are more details for you in today's results announcement.

At AACR and ELCC in April, we also shared overall survival data for Lynparza in breast cancer and data from both our ATR and ATM inhibitors in Phase II. In IO combo, the second line cohort of Study 006 in non-small cell lung cancer was presented with Study 10 in bladder cancer. We also presented data for Tagrisso from the FLAURA Phase III trial, looking at patients after progression, which continued to emphasize Tagrisso's impressive efficacy and safety.

Please turn to Slide 29. Staying in Oncology and continuing our momentum, at ASCO this year, we will be sharing key data across our Oncology portfolio. We are pleased to have more than 90 abstracts, 14 oral presentations, and 7 best of ASCO designations. From our DNA damage response portfolio, we will share Phase II results from our Study 8 trial in prostate cancer, where we combine Lynparza and abiratertone. Further, on Lynparza combinations, we will share results of Lynparza combined with vistusertib in ovarian cancer and triple negative breast cancer.

In addition, we will also present data for other potential new medicines focused on DNA damage response, including data from a Phase II trial of our highly selective oral AKT inhibitor, capivasertib, in metastatic, triple negative breast cancer.

In Immuno-Oncology, we will have additional Imfinzi monotherapy data, including safety data, from the PACIFIC trial in unresectable Stage III non-small cell lung cancer and updated Phase II results in third line, non-small cell lung cancer from the ATLANTIC trial. Further, we will show Imfinzi monotherapy data from Study 1108, this time in gastrointestinal cancers, and small cell lung cancer. As for Imfinzi combination with tremelimumab, we will have Phase I data in non-small cell lung cancer from Study 006, and Cohort C, which are IO-pretreated patients and other data in gastrointestinal cancers and small cell lung cancer from their dedicated combo trials, and then in mesothelioma, which is in combination with chemotherapy.

In hematology, Calquence results from Phase I/II trial and Waldenstrom Macroglobulinemia will be presented, as will data from moxetumomab pasudotox in relapsed or refractory hairy cell leukemia. There are other data points as well, including selumetinib and neurofibromatosis Type-1, an orphan disease. We hope many of you can join us at our ASCO investor event on Monday, June 4th in Chicago.

Please turn to Slide 30. In CVRM, we received EU approval for Lokelma, a combination of Bydureon plus insulin in Type-2 diabetes, also received USFDA approval. For Farxiga, the EU accepted our regulatory submission from the treatment in Type-1 diabetes, a potential new use of the medicine. Staying on Farxiga, CVD-REAL 2 was presented and was consistent with CVD-REAL 1, which was presented last year. In CVD-REAL 2, more than 400,000 patients across 5 countries were treated with SGLT2 inhibitors. The data was analyzed with 75% of these patients receiving Farxiga.

The analysis demonstrated that the treatment with an SGLT2 inhibitor was associated with a lower risk of all-cause death, lower risk of hospitalization for heart failure, lower risk of myocardial infarction and lower risk of stroke. As a reminder, the DECLARE Phase III cardiovascular outcomes trial is on track for top line data in the second half and the primary end points include hospitalization for heart failure.

Please turn to Slide 31. I want to conclude by highlighting some of the upcoming news flow. For Lynparza, we soon anticipate first line data in ovarian cancer with potential regulatory submission in the second half. Following the US approval in breast cancer, we expect a regulatory decision in Japan during the second half, and a regulatory decision in the EU next year.

For Tagrisso, in the first line setting, we anticipate regulatory decisions in the EU this quarter and Japan in the second half.

Moving to Immuno-Oncology, we anticipate EU and Japan regulatory decisions for the PACIFIC trial in unresectable Stage III non-small cell lung cancer in the second half. Further, in lung cancer, we expect data readout for MYSTIC in the second half, with NEPTUNE now coming in 2019. In head and neck cancer, we expect data from the KESTREL first line and EAGLE second line trial in the second half. Our first line bladder cancer trial, DANUBE, will have a data readout in 2019.

In CVRM, the Phase III DECLARE trial will be available later this year. We anticipate a regulatory submission for Bydureon's auto-injector in the EU in the second half. As communicated by our partner, FibroGen, we now anticipate data for roxadustat in the second half and regulatory submission to follow in 2019.

In Respiratory, our regulatory submission for PT010 in COPD is expected in the second half. Staying in COPD, we announced that Fasenra did not meet the primary endpoint in the first COPD trial, GALATHEA, but we expect the second trial, TERRANOVA, to report this quarter, which will further inform our plans.

Finally, we expect data from anifrolumab in lupus in the second half of the year. With this, thank you to everyone for your continued support, and thanks to all the hardworking colleagues in AstraZeneca who come to work every day to make this happen. Please turn to Slide 32. I will now hand back to Pascal for closing comments.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thank you, Sean. Please turn to Slide 33. Let me summarize before we end. We are really pleased with the ongoing launches and the performance of our newer medicines during the first quarter, as they underpin the guidance of growth in product sales in 2018. Our final [inaudible] is on track with our performance being weighted toward the second half of the year, and with product sales leading the way. Total revenue reflected lower Initial Externalization Revenue, which was unchanged by plan opportunities. We remained focused on productivity, as shown by the 1% decline in total core operating expenses, while we also continued to invest for growth in our new products and in China.

The commercial execution is very strong with $400 million of additional sales, versus the first quarter of 2017, 66% growth from the newer medicines that are key to the future of AstraZeneca, and our Oncology platform in particular starting to take really good shape. The pipeline continued to deliver important news flow. Based on the first quarter performance and the encouraging trend on product sales, we reconfirm our 2018 guidance today.

Questions and Answers:

Pascal Soriot -- Executive Director and Chief Executive Officer

We'll now go to the Q&A. For those on the phone, please remember to press *1 to ask a question. We'll also take written questions from the webcast. Can I please remind everybody to limit questions to one, to be fair to all of our callers. Thanks in advance for your help with us. Perhaps I'll take the first question from the conference call.

We have a question here from Simon Baker at [Inaudible]. Simon, go ahead.

Simon Baker -- Analyst

One for Sean, please, if I may. We can see from the press release this morning the expanding and evolving PARP IO combination trials that you're conducting. But I was just wondering how much further there is to expand that? I'm thinking areas like colorectal, where there's been some interesting work published this year on the potential applicability of PARP in that indication, and also therefore potentially to add IO in there. I was also wondering about the scope for IO PARP combinations where the IO is Keytruda instead of Imfinzi through the joint venture. Thanks so much.

Sean Bohen -- Executive Vice President, Global Medicines Development & Chief Medical Officer

Sort of two questions there. One is the expansion of, I'm going to call it Lynparza IO, so Lynparza, Imfinzi, or Imfinzi plus treme. So, when we shared our ovarian cancer data, we also shared that we are initiating a trial called Duo-O, which is looking at that combination specifically in ovarian cancer and then we are looking at other datasets to see where we might expand beyond that. With regard to data and other indications, the MEDIOLA trial does have multiple expansion cohorts. We haven't shared them all yet, but we will use data from those expansion cohorts to help inform what additional confirmatory trials we might do in other expanding indication.

With regard to the scope of the Keytruda-Lynparza combination, we actually don't share information between Merck and AstraZeneca on what we're doing with Lynparza in the contest of IO combinations, so that's not really an AstraZeneca question, it's a question that should be addressed to Merck about their activities.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thank you, Sean. There's a question on the webcast that we'll allow from Vincent Meunier at Morgan Stanley. So, he's trying to understand the potential of Tagrisso [inaudible]. The question is, "Are there countries where the prevalence of the [inaudible] is higher than other countries? What about Japan? And also in China, what is the breakdown of volume sales that's in China between the private channel and, I guess, all the channels?"

David Fredrickson -- Executive Vice President, Global Head Oncology Business Unit

Thank you for the question. Yes, there are countries where the prevalence is higher. In Asian countries, it tends to be the highest around the globe. Prevalence rates in the US and in European countries for EGFR mutation is around 15%, and in Asian countries, we see it around 30%, even as much as 35%. Japan, China, Korea, this would all be the case for those countries, as you look through that.

On the second question in terms of the breakdown of volume in sales in China, the majority of the sales in China that we're seeing right now are coming from the private channels. There are a few examples of provinces that have included reimbursement, but really, again, the demand that we're seeing in China and the growth is coming from the private sector.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thank you, Dave. Then there's a question from Tim Anderson at Bernstein. Tim, go ahead.

Tim Anderson -- Bernstein -- Analyst

Thank you. Emerging markets in China are a big part of your business. In China, your proportion of total sales coming from that region is much higher than it appears. I usually thought of emerging markets exposure is a good thing, but you could argue it the other way around because profit levels are less. In markets like China, you may get volatility tied to price costs. So, would AstraZeneca investors generally look for margin expansion over time, I'm wondering if your growing emerging market presence could actually end up holding you back in this regard? Can you talk about this and quite simply, can you just disclose to us what the operating margin is in emerging markets? I'm going to slip a second question in -- a very short one. Can you say whether AstraZeneca was approached by Trump's attorney, Michael Cohen, at any point and if you were, can you confirm that you did not do business with him?

Pascal Soriot -- Executive Director and Chief Executive Officer

Let me just cover the second question, Tim. And then Mark Mallon, you might want to cover the China question. The second is very [inaudible], Tim. We were not approached and didn't talk to Michael Cohen, so we're totally out of that discussion. China, Mark?

Mark Mallon -- Executive Vice President, Global Products and Portfolio Strategy, Medical Affairs & Corporate Affairs

We definitely see China as a positive, and to have such a strong position in there. We see continued growth and future potential. Of course, every country around the globe is wrestling with healthcare costs. As we've seen in the last week in the US, there is risks around pricing actions. I don't think China represents a particularly more or less risk than any other country. In fact, you might argue that China is showing signals to be even more committed to innovation medicines in the way they've been supporting changes in the China FDA adopting global standards and recently adding a number of products to the NRDL. We're really confident in the future prospect in China.

Of course, in overall emerging markets, you will have disruptions because the economies are not as mature and so you'll have ups and downs. But it's a really strong portfolio for us. In terms of operating margin, we've talked about this before. The business in emerging markets is a profitable business. Particularly in China, it is very much profitable growth. The margin I think we've talked about as being a bit below what we see in Europe, but absolutely an attractive business for us.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thanks, Mark. I think with China, Tim, we have to sort of combine three things. First of all, the population is, of course, as we know, very large, but the economy is maturing to focused on innovation and has very strong momentum, so that will bring additional purchasing power at the private level, the private insurance level. The government is starting to fund pharmaceuticals in a broader way. We got an investment last year for an additional five medicines, including some that are newer medicines.

As Mark said, the government is now looking at regulations to open the way to fast track approvals, etc. The final thing, include, which is really something we cannot say enough is we have a tremendous team. I think we have an incredibly talented team of individuals in China and we have the scale. When you get the right people, the right team, and you have the scale, then you create a momentum that is really quite formidable, and that's exactly where we are today.

Now, as Mark said, of course China will be exposed to price pressures as the market grows, but nothing different from what you experienced in Europe or in the US.

So, we'll move to Matt Weston at Credit Suisse. Matt, go ahead.

Matt Weston -- Credit Suisse -- Analyst

Thank you, Pascal. My question is on the cost base, really. Higher SG&A has been one of the key discussion points this morning with investors. Mark mentioned the low basis effect, but also the guidance range of low to mid-single digit growth is a large window. Can you just give us some of the drivers of that range? Is it competitors potentially reacting in Respiratory that you may need to react to? It doesn't look like it could be upcoming launches because Lokelma in the US is the only one that's controversial. Is it the outcome of DECLARE or roxa? Some help there would be very useful.

Pascal Soriot -- Executive Director and Chief Executive Officer

Let me try and Mark Mallon could also help me. In terms of the new launches, we've talked about quite a number of new launches, Tagrisso, etc. for sure. Now, in the second half, I think you've got to this of roxa and Lokelma, but they are like more in the pre-launch mode, if you will, including in the US. Lokelma, after we get approval, we're going to spend a fair amount of time seeking access. You cannot launch these days in the US without an appropriate access, otherwise you struggle. So we're going to take some time to focus on access. So, those two medicines will be in the pre-launch mode. I think DECLARE is the other one. But much less requirements than the first half, of course. Mark, do you want to add to the?

Mark Mallon -- Executive Vice President, Global Products and Portfolio Strategy, Medical Affairs & Corporate Affairs

No, I think we are -- just one word, we are obviously launching eight, in total eight new medicine line extensions or new formulations. Obviously, this is very important timing for their final trajectory. So, we are closely monitoring the performance of these brands as they are being launched. This is why we try to allocate as much resources as we can dedicate to ensure the final success on those brands.

Pascal Soriot -- Executive Director and Chief Executive Officer

Maybe one last point that I should've added, actually, because the comments were made well -- and I guess not your point related to the US, but we also have to think that as we progress, we start launching in Europe as well. So, Europe is a little bit behind, as always, because you need to get approval, but also reimbursement. So, the launch of Imfinzi will come later in Europe. Then you have sort of a ramp-up.

[Crosstalk]

Unidentified Speaker

-- is China. And China, to your point, we have great scope and scale. We still have so much more to penetrate and so we are continuously expanding into new hospitals and customers, and even cities. And also, we're doing multiple new launches in China, so it's not just the established portfolio. We've got many launches occurring at the same time, so that's also part of the picture.

Pascal Soriot -- Executive Director and Chief Executive Officer

So as you can hear [crosstalk], yeah, go ahead, Matt.

Matt Weston -- Credit Suisse -- Analyst

If I could just ask one quick follow-up. I have no question regard the increased spending in SG&A, because clearly you're in full launch mode. I understand that. Everything that everybody seems to have referred to in your answer is events that are known to you or very highly likely to happen, with the exception of really DECLARE and roxa. My question was really about what about the 5 percentage point range embraced in the guidance? How should we think about the need for you to flex the investments? What are the triggers for you to go to the high end of the range or the low end of the range, but that it seems that you should already know and have fully planned for what you need to do.

Pascal Soriot -- Executive Director and Chief Executive Officer

Matt, first of all, we provide guidance on the product sales and EPS. So, these are the two variables we obviously closely look at. There obviously are several lines in the P&L between product sales and EPS, but, you know, you need to remember we have provided guidance on these two and we will be doing our best to meet or exceed this guidance for the year.

So, we're committed to the guidance and, in fact, the valuation, Matt, is really based on what opportunities we see. If we see a new opportunity somewhere that could drive additional sales and profit, we flex at that point. But essentially, as Mark said, we'll stick to the guidance.

Maybe the last point I as going to make earlier is that you can see we are in, and as you mentioned yourself, we all right the maximum pressure point this year terms of the launches and moving forward, clearly, we expect that to improve substantially. So Mark Doucette at Redburn has a webcast written question. I will read it for everybody. So about the gross margin and the question is, "You have a reduction in the core growth margin to 78.8%. Can you help us understand what proportion of this reduction can," and that will be for you, Mark, again, from "first, positive manufacturing guidances in Q1 '17; (2) the MSD collaboration; (3) patent expiries; and (4) buildout of biologic manufacturing capacity which has yet to be utilized. Can you help us understand where you are with the biologic manufacturing capacity buildout? How much capacity will you have when this is completed and when utilization will kick in and help expand the gross margin again?"

Marc Dunoyer -- Executive Director and CFO

The flashpoint reduction is obviously a reduction from Quarter 1 2017, Quarter 1 2018, and roughly the 4 factors that have been proposed are more or less equivalent to explain the difference. So, the buildout of the biologic manufacturing, the lower absorption because we are early in the launch. This is about a quarter of it. A mixed effect on products such as Crestor. This is another quarter of this variance. The impact of the profit sharing with MSD, again, another quarter. And the better situation that we had in 2017 Quarter 1 because we had positive variances, procurement, credit, and such things. This is another quarter.

So these are the 4 factors that explain the difference between the first half of the first quarter 2017 and 2018. If you now compare the second half of 2017 and the first quarter of 2018, you will see that the gross margin ratio are very similar. I indicated several times in the course of '17 that the first half was not going to be a good prediction for the second half of '17, but I also said that the second half would be quite helpful to guide for 2018.

So, my recommendation is for you to look at the second half of '17, and also to look at the first quarter of '18. These numbers should help you anticipate the gross margin for the full-year 2018.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thank you, Marc. As far as the capacity build, we are kind of almost done with this. We are completing our filling plant in Sweden, but in terms of manufacturing product substance, we are done. We will start using that capacity over time.

We now have a question from Andrew [inaudible] at Citi. Andrew, go ahead.

Andrew Baum -- Citigroup -- Analyst

Thank you. I suspect AstraZeneca has received the request for information from the HHS following these new drug pricing announcement. Could you just give us a sense of how much follow-through should we expect in relation to those announcements? Particularly the conversations about removing the protective class. I'm thinking of categories such as PARP. Maybe just a quick one for Sean. Could you just outline your plans for your AKT inhibitor 5363? Is there any possibility of filing for an accelerated approval despite the caveat in the data given there is an OS signal [inaudible] or should we assume that Phase III is going to be the development part of the product?

Pascal Soriot -- Executive Director and Chief Executive Officer

Andrew, great questions. The line was breaking up. The second question is clear, for sure. The first one, hopefully Marc you got that one, OK?

Mark Mallon -- Executive Vice President, Global Products and Portfolio Strategy, Medical Affairs & Corporate Affairs

Andrew, if I'm off track, please correct me. You asked about did we get a request to provide input or information as part of the drug pricing plans that the administration is working on and how much do we expect that to come through the system? I think, as you know and we all know, there were a lot of, over 50 potential actions highlighted in the administration's plan. Some requiring correctional action, some they can move on. It's hard for us to predict how much of this is going to impact ideas like moving classes of reimbursement around between Part B, Part D, other approaches they might take. It's just too early for us to make a prediction on that.

What I can say is that we're happy to be talking with the administration around innovation contracting and thinking about outcome-based contracts. We've had quite a bit of success in that in the commercial area. We've got over 30 contracts now across the whole portfolio, our outcome-based contracts. So, we're looking forward to actually engaging in the very near future to see what we might be able to do within the government sector.

Pascal Soriot -- Executive Director and Chief Executive Officer

We've been very successful with some of the outcome-based pricing contracts we've implemented. If we could expand on those as part of a broader policy the administration would want to put in place, I think it would really be very welcome by us and I'm sure by many other companies. Sean, do you want to cover the AKT question?

Sean Bohen -- Executive Vice President, Global Medicines Development & Chief Medical Officer

Sure. Thank you for the question, Andrew. So, the question relates to the Phase II data that you will have seen the abstract for. We'll present it in more detail at the ASCO meeting. Capivasertib, our AKT inhibitor in triple negative metastatic breast cancer. We think that it is encouraging. We think it's a pretty strong indication of activity of the AKT pathway in triple negative breast cancer, which is a significant unmet need. It's a very poor prognosis subset of breast cancer.

With regard to accelerated approval, it would really be speculative at this point to get into whether that might be an acceptable pathway. So, what we do is we take the data, we make in any case a decision as to do we want to or need to confirm it with a Phase III trial? Then I think with regard to whether there's a more accelerated path, it's really a discussion with regulatory agencies as to whether they see the data as supporting that. The one thing you mentioned was survival, and we are encouraged by the consistency across endpoints.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thank you, Sean. As you can see, more to come on this one, but certainly very exciting early data with this new agent coming out of Cambridge research team, so really good new development. We'll extend the TC by about 10 minutes so that we give everybody a chance to ask a question. The next one on the list here is [Inaudible] at Bank of America.

Analyst -- Bank of America

Thanks for taking my questions. On Lynparza, similar to the prior question, [inaudible] with a PFS benefit, so any thoughts of filing after the [inaudible]. J&J have talked about filing [inaudible] with a strategy on response rate data. If that study isn't fillable, just what are your plans for the combination given the profound Phase III study, is currently monotherapy study? Thank you.

Sean Bohen -- Executive Vice President, Global Medicines Development & Chief Medical Officer

I think, Sachen, let me clarify your, in this case you're referring specifically to Study 8 data and prostate cancer --

Analyst -- Bank of America

Correct.

Sean Bohen -- Executive Vice President, Global Medicines Development & Chief Medical Officer

Okay, great. Well, I think the answer is not dissimilar to the answer I gave for Andrew's question with regard to capivasertib. Again, we find the data encouraging from Study 8. Again, the question is really whether there's a regulatory pathway to bring that forward and that's a discussion with regulators in order to decide whether or not we are going to do that. Then, obviously, is the discussion as well with regard to Lynparza + abiratertone in a Phase III setting to confirm. We do have ongoing, but recall Profounca, it's a different setting in terms of later stage disease, also single agent in that particular case. Then, as well, very heavily dependent on biomarker hypothesis looking at genes in the DNA damage response portfolio and mutation in those genes as inclusion criteria.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thanks, Sean. So there's a question on the webcast by Sam Fazeli at Bloomberg. The question is, "Can you explain the reasoning behind starting PACIFIC II?" So sort of the PACIFIC program. Sean, do you want to cover that?

Sean Bohen -- Executive Vice President, Global Medicines Development & Chief Medical Officer

Yeah, sure. The rationale behind PACIFIC II really has to do with the fact that while concurrent administration of chemotherapy and radiation therapy are the well established standard of care in the United States and Europe, there are many parts of the world where concurrent isn't the standard of a care and a lot of that has to do with the challenges of coordinating that radiation therapy and chemotherapy. So PACIFIC II allows the testing of the maintenance hypothesis that occurred in -- I'm sorry, that's China PACIFIC, I'm talking about. That's the maintenance hypothesis following sequential.

PACIFIC II asks a different question, which is that in PACIFIC, we did a sequential administration of Imfinzi after the completion of chemoradiotherapy. PACIFIC II asks the question, what happens if you start everything at the same time? So, that would be a current chemo radiation therapy IO therapy going forward.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thank you, Sean. I think we have may, we'll take another two. So, we have one question here. Alex Arfaei at BMO. Alex, do you want to go ahead?

Alex Arfaei -- BMO Capital Markets -- Analyst

Thank you very much. Looking at your operating margin here, I fully appreciate the headwinds you're facing with the patent expirations and the investments, the maximum pressure points on launches, etc. But as you step back and look at your business, how realistic is it for investors to expect that once things normalize, you should have an operating margin that's more in line with your European and US peers and when should we expect that?

And a follow-up, if I may, on Imfinzi. Are you seeing adoption in resectable Stage III patients as well, and when do you expect PD1 competition in Stage III? Thank you very much.

Pascal Soriot -- Executive Director and Chief Executive Officer

Okay, so the second question, Dave you could take. Then the first question is about margins. When you look at our peers, you really have to be careful who you look at because some companies have such a very focused business in the wrong space -- specialty care and sometimes it's even beyond that, specialty care US, with a little bit of Europe [inaudible]. So, the margins, of course, reflect a little bit of a business shift. So, you've got to take comparisons to some of our European peers or even US peers that have the same kind of mixture of specialty care and primary care.

Having said this as a context, it is clear that we intend to see our margins improve. We are the maximum pressure point this year. We've got so many launches, as you can see, at a time when we have a business that, to some extent, is small relative to the size of our pipeline and the number of launches. So, typically you have a legacy business that is helping you and is large, or at least relative to the pipeline is large. It's not our case. So, we are really going through maximum pressure points, but from 2019 onward, suddenly our goal and our expectation is to see the operating margin improve as the business ramps up.

So, yes, we had another question. PD1. Sorry, Dave.

David Fredrickson -- Executive Vice President, Global Head Oncology Business Unit

On the first question of the uptake that we've been seeing with Imfinzi in the Stage III on resectable, as I mentioned earlier, the lion's share, in fact, the overwhelming majority of our sales in the first quarter came from that population. As you saw earlier in one of the slides from Pascal, you can see the demand increasing with Imfinzi within this population. We had an estimated 3,500 monthly infusions in February. You can see that it's more than doubled or almost doubled, excuse me, into what Pascal showed was an April number of 7,000 two months later. So, we really are encouraged by very good growth in the underlying demand. The growth is demand-based, as opposed to inventory or stocking base that we've seen.

From a competition perspective, we are the first and we believe, based upon our scanning, that we have an 18-to-24 month lead on other Phase IIIs. Again, those are all event driven and have to do with the recruiting paces, etc. So, it's difficult to predict, but those are our estimates for how much ahead.

Pascal Soriot -- Executive Director and Chief Executive Officer'

Did you want to go on?

Sean Bohen -- Executive Vice President, Global Medicines Development & Chief Medical Officer

I believe if I heard you right, Alex, there was a question as well around resectable disease. Obviously, that's not the indication. That's not something we track. I just want to point out that we do have an adjuvant study ongoing, which studies that question very specifically, Stage IB through IIA, non-small cell lung cancer post-surgical therapy. They do better than non-resectable patients, but they don't do very well. So, the first data for that is anticipated in 2020. Again, as Dave said, we believe we're quite a bit ahead in that setting as well.

David Fredrickson -- Executive Vice President, Global Head Oncology Business Unit

[Inaudible] 100% of our use is in the un-resectable population post-CRT. And in the US, that represents about 80% of Stage III in terms of the un-resectable population.

Pascal Soriot -- Executive Director and Chief Executive Officer

So, we'll take the [inaudible] question on the webcast [inaudible]. She's asking a question about Farxiga in China and saying, "I didn't realize you could get provincial reimbursement without being on the NRDL, and also is there a chance to get on the NRDL for negotiations that are outside the official window for reviews in addition?" Mark, do you want to cover this.

Mark Mallon -- Executive Vice President, Global Products and Portfolio Strategy, Medical Affairs & Corporate Affairs

Thanks, [inaudible], that's a great question. Yes, you can. We've done this in the past with other products. In fact, I should say getting on the NRDL doesn't guaranty you that you get listed on the province level. This is one of the reasons Pascal keeps highlighting the importance of the quality of our people and the scale of our business because we have dedicated market access teams in all of the major provinces and that's what's leading to the success in Farxiga and the speed of which we can take advantage of NRDL listings.

This isn't going to replace the NRDL. The NRDL is critical because we won't get all province through this process. The question about would we negotiate in advance of the NRDL, if there was an opportunity to make a difference for patients and we thought we could agree with the government on what's the right value proposition, then certainly we'd look at this.

I think China is committed to accelerating the regularity of updating the NRDL list, so hopefully that won't be something that we need to do, but actually is an example. [Inaudible] was a case where we did this and it's been a very good thing for patients and a very good thing for our business. So, I think this is just highlighting another part of the strength of our team in China and they should be congratulated for the great work they're doing.

Pascal Soriot -- Executive Director and Chief Executive Officer

Not only can you get provincial reimbursement, you can sometimes get the City reimbursement. So there are many different sources of access in China. The last question, Richard Parks at Deutsche Bank. We'll finish with Richard's question. Go ahead, Richard.

Richard Parks -- Deutsche Bank -- Analyst

Thanks very much for taking my question. Again, it's on Imfinzi and the Stage III un-resectable lung cancer setting. If you look at the IMS weekly sales, it looks like you're annualizing now well north of $400 million. I'm just wondering if you could give us any kind of sense of where you are in terms of penetration of that un-resectable setting in the US and maybe whether that strong launch would make you reevaluate your floor in terms of north of $1 billion.

In addition to that, you talk about in the slides the need for physician education to continue to drive that growth. I just wondered if you could elaborate on where you think you need to improve understanding of the drug's potential utility. Thanks.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thanks, very much, Richard. I appreciate the question. That will help us in our discussions with Dave, actually, and the forecast. You're absolutely right. The last weekly data points are pretty good. Dave, do you want to cover that one?

David Fredrickson -- Executive Vice President, Global Head Oncology Business Unit

Yeah, absolutely. So, I think the first place just to comment on in terms of where we see the penetration. I want to ground it just in the CRT behavior. Again, about 80% of Stage III patients are un-resectable. Of those, half get CRT. That is not something that has really changed too dramatically in terms of the number of CRT patients post that are unable to get unresected. So, one of our big educational opportunities that we do see, of course, is to grow the number of Stage III patients that are getting CRT and to have discussions about that.

Now, among those who get CRT and who are able to not progress, which is the majority of them, we have seen that about half of those now are getting treatment with Imfinzi in the post-CRT setting. And so that's really the area that we've been focused in on. We think that's growing quite nicely, but the educational opportunities are around really educating on an option that exists post-CRT that really creates a chance to, in a curative setting, keep patients in Stage III. This is one of the major areas that we are focused in on because, as I had mentioned before, physicians have truly not had any other options available to them up until this point. So, we're really trying to build the Stage III market and show that there's now an opportunity to raise the bar with respect to curative intent within this setting.

Pascal Soriot -- Executive Director and Chief Executive Officer

Thanks, Dave. As you can imagine, of course, we are also launching in Japan and the rest of the world, Europe, etc. later this year and into early next year. So, there's a lot more to come as it relates to Imfinzi. That gives me a chance before I conclude to thank Dave and the Oncology team particularly in the US with the fantastic Imfinzi launch and also the Tagrisso team and the Lynparza and everybody on the Oncology team in the US and around the world doing a tremendous job.

The Fasenra team, you say, Mark Mellon showed you the market share, an absolutely incredible ramp-up in terms of new prescription share, so we are really on a good track with this one too. The Cardiovascular diabetes team is certainly driving growth across the CVRM portfolio that is certainly very exciting too. Let me quickly conclude.

First of all, thank you for all your support and interest. Just conclude by saying, as I said, we are really very happy and pleased with the results of our launches so far and the performance of our newer medicines during Q1. Our financials are on track. Clearly we are at the maximum pressure point in terms of the cost of launching those products, but we are on track with what we expected. We certainly reconfirm our guidance for the year, both in terms of our cost, but also our EPS.

At the end of the day, the very exciting part and very important part to keep in mind is the growth within China, the fact that the commercial execution around the world is very strong, with about $400 million of additional sales in Q1, 66% growth from these newer medicines that are key to our future, and based on all this strong performance, as well as the continued delivery of important news flow, we reconfirm our product sales for the year and our guidance. Again, thank you for your interest and a good weekend to everybody.

Duration: 76 minutes

Call participants:

Pascal Soriot -- Executive Director and Chief Executive Officer

David Fredrickson -- Executive Vice President, Global Head Oncology Business Unit

Mark Mallon -- Executive Vice President, Global Products and Portfolio Strategy, Medical Affairs & Corporate Affairs

Marc Dunoyer -- Executive Director and CFO

Simon Baker -- Analyst

Tim Anderson -- Bernstein -- Analyst

Matt Weston -- Credit Suisse -- Analyst

Andrew Baum -- Citigroup -- Analyst

Alex Arfaei -- BMO Capital Markets -- Analyst

Richard Parks -- Deutsche Bank -- Analyst

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