AstraZeneca 2Q16 – Diabetes portfolio up 13% YOY to $645 million; SGLT-2 Farxiga up 64% YOY to $211 million; GLP-1 Bydureon up 11% YOY to $156 million; Saxa/dapa approved in EU under trade name Qtern – July 28, 2016

AstraZeneca (AZ) provided its 2Q16 update this morning in a call led by CEO Mr. Pascal Soriot. Below we include our top ten financial and pipeline highlights from the call, followed by relevant Q&A.

Financial Highlights

1. Sales for AZ’s diabetes portfolio totaled $645 million in 2Q16, up 13% year-over-year (YOY) as reported and operationally and up 12% sequentially. Farxiga drove 84% of the overall growth of AZ’s diabetes portfolio in 2Q16 while GLP-1 agonist Bydureon (exenatide once-weekly) drove 16% of the overall growth.

2. Farxiga/Forxiga (dapagliflozin) sales of $211 million rose 64% YOY as reported (65% in constant currencies) and rose 28% sequentially. Farxiga drove 84% of the overall growth of AZ’s diabetes portfolio in 2Q16On a pooled basis, the SGLT-2 inhibitor class grew 49% YOY and 18% sequentially to ~$715 million in 2Q16; including our estimate of the BI portion of Lilly/BI’s Jardiance, Farxiga holds 29% market share by value. AZ management shared that Farxiga leads the class globally by volume with 42% of the market share as measured by patient days on therapy (POTD).

3. Sales of DPP-4 inhibitor Onglyza (saxagliptin) fell 8% YOY as reported (7% in constant currencies) and 10% sequentially to $191 million. Management attributed the decline in sales to continued competitive pressures in the DPP-4 inhibitor class, but noted that a higher net price, restocking levels, and “good federal-business sales” offset this trend somewhat. We were a bit surprised to hear the net price was higher.

4. Sales of GLP-1 agonist Bydureon (exenatide once-weekly) totaled $156 million in 2Q16, up 11% YOY as reported and in constant currencies and 16% sequentially.

5. Sales of Byetta (exenatide twice-daily) totaled $76 million, down 7% YOY as reported (down 6% in constant currencies) and up 22% sequentially. Teva Pharmaceuticals agreed to settle its patent lawsuit with AZ and will withhold the launch of its exenatide formulation until October 15, 2017.

Pipeline Highlights

6. Very excitingly, AZ shared that its saxagliptin/dapagliflozin fixed-dose combination has been approved in Europe under the trade name Qtern. Management also confirmed that the US resubmission of saxa/dapa has been accepted, with a decision expected in 1Q17. This has been a long and winding road and we assume AZ will be in the market soon with this compound.

7. Disappointingly, AZ has terminated its phase 3 development program for a combination of dapagliflozin and omega-3 carboxylic acids for NASH.

8. Intriguingly, management noted that the THEMIS cardiovascular outcomes trial of antiplatelet agent Brilinta (ticagrelor) in patients with type 2 diabetes has completed enrollment. Wow!

9. There were no updates on the rest of AZ’s diabetes-related pipeline.

10. Notably, AZ briefly addressed the impact of “Brexit” on the drug industry, particularly with regards to mutual recognition procedures for drug approvals.

Financial Highlights

1. Sales for AZ’s diabetes portfolio totaled $645 million in 2Q16, up 13% year-over-year (YOY) as reported and operationally and up 12% sequentially. By geography, US sales totaled $368 million and ex-US sales totaled $205 million. Management highlighted the fact that AZ’s diabetes portfolio experienced positive growth in all geographies, rising 9% operationally in the US, 27% operationally in Europe, and 44% operationally in emerging markets. By product, management particularly highlighted SGLT-2 inhibitor Farxiga/Forxiga (dapagliflozin) as a strong driver of growth and noted that it is now AZ’s largest diabetes franchise. Notably, Farxiga drove 84% of the overall growth of AZ’s diabetes portfolio in 2Q16 while GLP-1 agonist Bydureon (exenatide once-weekly) drove 16%. In Europe, growth was driven by Forxiga, Bydureon, and DPP-4 inhibitor Onglyza (saxagliptin). Growth in the US was driven primarily by Farxiga and Bydureon. In emerging markets, growth was driven by Farxiga (up 127%) and Onglyza. In prepared remarks, AZ particularly emphasized the growing enthusiasm for the SGLT-2 inhibitor and GLP-1 agonist classes, predicting that they will become mainstays of diabetes treatment in the future given recent clinical evidence of cardioprotective benefits for some agents (Lilly/BI’s SGLT-2 inhibitor Jardiance [empagliflozin] in EMPA-REG OUTCOME and Novo Nordisk’s GLP-1 agonist Victoza [liraglutide] in LEADER).

Figure 1: Total Sales for AZ’s Diabetes Portfolio (3Q12-2Q16)

2. Farxiga/Forxiga (dapagliflozin) sales rose 64% YOY as reported (65% in constant currencies) and 28% sequentially to $211 million. This percentage YOY growth is somewhat lower than in past quarters, which is to be expected as the Farxiga base grows and it becomes a more established product.  By geography, US sales totaled $115 million, up 47% YOY as reported and in constant currencies. Ex-US sales of $96 million increased 88% YOY, including $48 million from Europe, $32 million from emerging markets, and $16 million from other regions. Forxiga’s performance was particularly strong in emerging markets, where sales grew 127% YOY in constant currencies.

Figure 2: Farxiga/Forxiga Sales (1Q13-2Q16)

• Farxiga was responsible for a whopping 84% of overall growth for AZ’s diabetes portfolio. Farxiga has also now surpassed Onglyza as AZ’s number one diabetes product by revenue. This is a predictable result of the company’s decision in 1Q14 to shift resources away from Onglyza towards Farxiga and Bydureon. It also likely reflects the growing popularity of the overall SGLT-2 inhibitor class due to benefits including insulin-independent A1c reductions, low hypoglycemia risk, weight loss, and potential cardiovascular and renal benefits. We imagine this trend will only be further reinforced by the recent addition of a heart failure warning to Onglyza’s label based on the increased risk of hospitalization for heart failure found in the SAVOR trial. Notably, management shared that one of AZ’s main goals in diabetes is to position Farxiga as the preferred option for patients switching from DPP-4 inhibitors to SGLT-2 inhibitors. This suggests to us that the company is willing to cannibalize some sales from Onglyza in order to expand Farxiga’s base. 
• During Q&A, management suggested that the SGLT-2 inhibitor class should see renewed growth in the coming years. Management acknowledged that class growth decelerated following heightened concerns over DKA in 2015 but argued that the risk is now better understood and that the fundamental benefits of the class remain compelling. Furthermore, AZ characterized the results of the EMPA-REG OUTCOME trial as a positive force for the SGLT-2 inhibitor class overall rather than a disruptive force that will tip sales in favor of Lilly/BI’s Jardiance (empagliflozin) – we agree with this though believe Jardiance will benefit disproportionately after the label change, assuming that happens (at minimum, we’d look for the information to be included on the label). The SGLT-2 inhibitor class is now one of the fastest-growing diabetes drug classes, of course, along with GLP-1 agonists, as management mentioned – no other classes come close! That said, management conceded that the class is unlikely to return to the rapid exponential growth it demonstrated prior to July 2015 – this is unsurprising given that the base is growing meaningfully. Overall, we felt that Lilly management offered a more pessimistic view of the SGLT-2 inhibitor class as a whole in its 2Q16 update, suggesting that, while total prescription volume growth remains strong at 30%, the number of new patients initiating SGLT-2 inhibitor therapy has essentially flat-lined. Lilly also suggested that the recent strengthened warnings for bone factures (for J&J’s Invokana [canagliflozin]) and kidney injury (for Farxiga and Invokana) might negatively impact sales. Lilly management argued that the addition of the EMPA-REG OUTCOME results to the Jardiance label could help Jardiance serve as a catalyst to revitalize the class as a whole – that’s what we expect as well though it’s early to say before the FDA information on the label changes becomes available.
• The SGLT-2 inhibitor class grew to ~$715 million in 2Q16, up 49% YOY and 18% sequentially with Farxiga holding ~29% market share by value based on our estimates. We estimate that total SGLT-2 inhibitor revenue was ~$606 million in 1Q16 and ~$481 million in 2Q15. By value, the Invokana franchise continued to dominate the class with 54% of the total market share in 2Q16 and the Jardiance franchise captured 17% of the market. Importantly, as referenced, these percentages are based on our estimates for total Jardiance revenue – these are estimates, as only Lilly’s share of revenue for Jardiance is publicly reported, and are speculation only. We estimate Lilly’s share of Jardiance revenue at ~33%, based on a comparison between Lilly’s portion of full-year 2015 Jardiance revenue ($60 million) and total global net sales for 2015 from BI’s recent diabetes update (€165 million, or ~$183 million).
  
  • AZ management shared that Farxiga leads the SGLT-2 inhibitor class globally by volume with 42% market share as measured by patient days on therapy (POTD). Based on AZ’s presentation slides, it appears that Invokana holds 29% market share in terms of POTD and Jardiance holds 19%, with 10% share going to “other SGLT-2s” (presumably including products such as Astellas’ Suglat [ipragliflozin], available only in Japan and South Korea). In the US in particular, management highlighted Farxiga’s >90% covered status for commercial plans – this is a big deal. In its 1Q16 update, AZ attributed US gains in market share to the achievement of preferred status with a major health plan. This could refer to CVS Caremark’s formulary, which granted preferred status to Farxiga and Jardiance over Invokana for 2016. That said, management acknowledged the “competitive landscape” and the fact that Farxiga’s Medicare Part D formulary access could be stronger. We expect that much of the formulary challenges stem from Farxiga’s second-to-market status in the US – it was approved in the US in 1Q14, almost a full year after Invokana’s approval in March 2013. Outside the US, Forxiga holds 60% market share in terms of POTD.

Figure 3: SGLT-2 Inhibitor Sales (1Q13-2Q16)

• Management shared that the DECLARE CVOT is fully enrolled and confirmed that the trial is expected to complete in 2019, with an interim analysis expected in 2017. Currently, a whopping 17,276 participants from 33 countries are enrolled. AZ’s press release suggested that regulatory submission of the DECLARE results in the US and EU is expected in 2020, further underscoring management’s continued optimism that Farxiga will show a cardioprotective benefit. An FDA decision on an expanded indication for Jardiance and Synjardy (empagliflozin/metformin) based on the EMPA-REG OUTCOME data is expected by the end of the year – the recent FDA Advisory Committee narrowly voted in favor (12-11) of an expanded indication to reflect reduced incidence of CV mortality. Earlier this week, Lilly management forecasted in the company’s 2Q16 update that an expanded indication would increase Jardiance’s share of the SGLT-2 inhibitor market. The CANVAS and CANVAS-R CVOTs for J&J’s Invokana are scheduled to complete in 2017. Notably, DECLARE has enrolled a higher proportion of patients who are at lower risk for CV morbidity and mortality compared to the patient populations in CANVAS and EMPA-REG OUTCOME. If positive, DECLARE would lend support for the hypothesis of a cardioprotective class effect for SGLT-2 inhibitors and support generalizability to a larger proportion of type 2 diabetes patients. We expect that a cardioprotective finding in DECLARE could lead diabetes treatment guidelines committees to privilege SGLT-2 inhibitors as a preferred second-line agent (at least).

3. Sales of DPP-4 inhibitor Onglyza (saxagliptin) fell 8% YOY as reported (7% in constant currencies) and 10% sequentially to $191 million. US sales for 2Q16 totaled $88 million, marking a 22% YOY decline as reported and in constant currencies. This represents a 29% sequential decrease against a tough comparison, given the 27% sequential increase for US Onglyza sales in 1Q16. Management attributed the decline in sales to continued competitive pressures in the DPP-4 inhibitor class, but noted that a higher net price, restocking levels, and “good federal-business sales” offset this trend somewhat. Ex-US sales totaled $103 million, including $40 million from Europe, $44 million from emerging markets, and $19 million from other regions. This represents 8% YOY growth and 18% sequential growth for Onglyza outside the US. However, like other DPP-4 inhibitors, Onglyza has been facing challenges due to pricing pressure and competition from SGLT-2 inhibitors and GLP-1 agonists. The Onglyza franchise experienced a rare YOY increase in 1Q16 but has otherwise continuously declined since 4Q14. The company attributed the comparatively stronger performance in 1Q16 to increased access and a higher net price, but acknowledged that the product had lost market share within the class. For comparison, Novartis reported $306 million in 2Q16 revenue for Galvus (vildagliptin), while we estimate total 2Q16 revenue for Lilly/BI’s Tradjenta (linagliptin) at $336 million, based on the assumption that Lilly’s publicly-reported revenue accounts for ~36% of the total global revenue for the product. Merck’s Januvia/Janumet (sitagliptin) and Takeda’s Nesina (alogliptin) have yet to report 2Q16 earnings; the franchises were worth $1.4 billion and $93 million, respectively, in 1Q16. We’ll be back with a class-wide look at DPP-4 inhibitors very soon, after Merck and Takeda report their 2Q16 earnings Friday.

Figure 4: Onglyza Franchise Sales (4Q12-2Q16)

There was no mention of the recent FDA addition of a heart failure warning to Onglyza’s label (along with the label for Takeda’s Nesina). We expect this may be posing an additional challenge for Onglyza, on top of the pricing pressure and competition from SGLT-2 inhibitors and GLP-1 agonists that are affecting all DPP-4 inhibitors.

4. Sales of GLP-1 agonist Bydureon (exenatide once-weekly) totaled $156 million in 2Q16, up 11% YOY as reported and in constant currencies and 16% sequentially. The sequential growth occurred against a fairly easy comparison given 1Q16’s 13% sequential decline. Nevertheless, Bydureon’s successful quarter is consistent with the overall success of the GLP-1 agonist class, which AZ remarked is currently the fastest-growing diabetes drug class, with growth rates around 30%. Management shared that Bydureon’s growth outpaced that of the GLP-1 agonist class in Europe (up 42% YOY operationally to $50 million) and Japan (total revenue for ex-US established markets up 50% YOY operationally to $3 million). US growth for Bydureon was comparatively sluggish at 9% YOY as reported and operationally, reaching $243 million in revenue for 2Q16. AZ attributed this to competitive pressures from the “wealth of options” for GLP-1 agonists in the US. We look forward to gaining a better understanding of the GLP-1 agonist market after Novo Nordisk reports its 2Q16 earnings next Friday, August 5.

• The EXSCEL CVOT for Bydureon is ongoing. The trial has enrolled approximately 15,000 subjects, with a primary endpoint of three-point MACE (cardiovascular death, non-fatal MI, non-fatal stroke). The trial is expected to complete in 2018.

5. Sales of Byetta (exenatide taken twice daily) totaled $76 million, down 7% YOY as reported (down 6% in constant currencies) and up 22% sequentially. Management attributed this decline in Byetta sales to the company’s greater focus on Bydureon, AZ’s more convenient once-weekly exenatide formulation – a decision that is reflected in Byetta’s decreasing sales trajectory since 1Q14. Bydureon revenues comprised 67% of the 2Q16 sales from AZ’s $232 million GLP-1 franchise. Byetta is the subject of two patent infringement lawsuits. AZ filed lawsuits against Teva Pharmaceuticals and Amneal Pharmaceuticals, both of which have proposed launching exenatide products of their own. AZ shared that Teva agreed to settle in June and will withhold the launch of its proposed exenatide product until October 15, 2017. The trial with Amneal Pharmaceuticals is set to begin in December 2017.

Pipeline Highlights

6. Very excitingly, AZ shared that its saxagliptin/dapagliflozin fixed-dose combination has been approved in Europe under the trade name Qtern. The combination – previously referred to as “saxa/dapa” – is the first DPP-4 inhibitor/SGLT-2 inhibitor combination to be approved in Europe and is approved in all 28 EU member countries as well as Iceland, Liechtenstein, and Norway. The product is indicated for adults with type 2 diabetes on metformin and/or sulfonylureas whose diabetes is inadequately managed with either component alone or for adults with type 2 diabetes who are already taking both components separately. It does not appear that the combination is indicated for patients who are naïve to both DPP-4 inhibitors and SGLT-2 inhibitors – that’s too bad in our view, but we hope this will change over time. Qtern is available as a single tablet containing 5 mg of saxagliptin and 10 mg of dapagliflozin. Like Forxiga, Qtern is not recommended for use in patients with moderate to severe renal impairment (estimated glomerular filtration rate [eGFR] <60 ml/min/1.73m² or creatinine clearance [CrCl] <60 ml/min). Qtern’s European label also includes several warnings from the Onglyza (heart failure and acute pancreatitis) and Forxiga (DKA, urinary tract infections, and volume depletion) labels. AZ previously received a positive CHMP decision for the combination from the EMA in May.

• Management also confirmed that the US resubmission of saxa/dapa has been accepted, with a decision expected in 1Q17. The FDA issued a Complete Response Letter (CRL) for saxa/dapa in October 2015 that, in part, requested more clinical data “to support various dosing regimens” according to management – this was very disappointing and we hope the approval this time around is swift. AZ previously emphasized that the CRL was not due to concerns about heart failure or DKA. In its 4Q15 update, AZ shared that the resubmission would include data from a new trial and that the company has been in close contact with the FDA, expressing strong confidence that the resubmitted application would be approved. It’s unclear exactly what data the FDA is looking for, though ClinicalTrials.gov lists several new phase 3 trials for the combination of saxagliptin and dapagliflozin. These include (i) a 24-week trial (n=900) of 5 mg saxagliptin co-administered with 5 mg dapagliflozin compared to monotherapy as an adjunct to metformin, with an expected completion date of July 2017; (ii) a 24-week, open-label, head-to-head trial (n=598) with a 28-week extension period investigating the co-administration of 5 mg saxagliptin and 10 mg dapagliflozin compared to insulin glargine therapy as an adjunct to metformin and/or sulfonylureas, with an expected completion date of November 2017; (iii) a 24-week head-to-head trial (n=420) of co-administration of 5 mg saxagliptin and 10 mg dapagliflozin compared to Merck’s Januvia (sitagliptin), expected to complete in October 2016; and (iv) a 52-week head-to-head trial (n=440) with a 104-week extension period investigating the co-administration of saxagliptin and dapagliflozin compared to treatment with sulfonylurea glimepiride as an adjunct to metformin, with an expected completion date of August 2017. In addition, an exploratory phase 2/3 trial investigating the effect of dapagliflozin alone and in combination with saxagliptin on A1c and albuminuria in patients with type 2 diabetes and micro- and macroalbuminuria is expected to complete in May 2018.  
• If approved, saxa/dapa will be the second DPP-4 inhibitor/SGLT-2 inhibitor combination to reach the US market. Lilly/BI’s Glyxambi (empagliflozin/linagliptin) has been available in the US since March 2015, though the product seems to have underperformed expectations thus far. Lilly has offered little commentary on the combination since its launch and it does not appear to have had a major impact on sales considering the modest growth for the overall Jardiance (empagliflozin) franchise since its launch. That said, Lilly has been stepping up the visibility and marketing for the combination in its recent exhibit hall booths – the company even offered a photobooth section at ADA 2016 in which attendees could take pictures with life-size cartoon characters representing the empagliflozin and linagliptin components of Glyxambi as partners. We suspect reimbursement and the product’s high list price ($581 for 30 days) are substantial barriers to uptake and we hope having multiple options available on the market can help alleviate some of these challenges. Glyxambi is not yet available in the EU, making Qtern the first-to-market combination outside of the US – and a decision on the European submission is expected by the end of 2016. Merck/Pfizer are also developing a DPP-4 inhibitor/SGLT-2 inhibitor combination of sitagliptin (Januvia) and ertugliflozin (the Pfizer/Merck SGLT-2 in phase 3). An FDA submission for the combination is expected by the end of the year, along with submissions for a standalone ertugliflozin formulation and an ertugliflozin/metformin combination.

7. Disappointingly, AZ has terminated its phase 3 development program for a combination of dapagliflozin and omega-3 carboxylic acids for NASH. The phase 2 EFFECTII trial investigating the effect of the combination on liver fat completed in December 2015 and we had not heard any updates on the results or the development program since then. Management did not provide any commentary on the decision to terminate the program in either the 2Q16 update call or in the accompanying press release. NASH is an area of particularly high unmet need and we’re disappointed that this combination didn’t meet the bar for advancement. That said, we’re glad to see that AZ remains committed to NAFLD/NASH with its phase 1 anti-microRNA candidate (AZD4076, partnered with Regulus Therapeutics). A phase 1 trial of the candidate (n=48 healthy males) is still recruiting participants and is expected to complete in February 2017. Significant interest and investment in NAFLD/NASH of late has fostered a fairly robust pipeline of products for this indication – see our competitive landscape for an overview.

• AZ has a number of other ongoing life-cycle extension projects for dapagliflozin. The phase 3 DEPICT 1 and DEPICT 2 trials of dapagliflozin in type 1 diabetes are both still recruiting participants and are expected to complete in August 2017 and January 2018, respectively. A phase 3 study of dapagliflozin and exenatide in combination is ongoing with completion expected in December 2017 (primary completion in April 2016, a slightly accelerated timeline from the previous expectation of May 2016). We see this as another extremely promising combination that could potentially boast two components with demonstrated cardioprotective effects.

8. Intriguingly, management noted that the THEMIS cardiovascular outcomes trial of antiplatelet agent Brilinta (ticagrelor) in patients with type 2 diabetes has completed enrollment. The THEMIS trial enrolled 19,000 patients aged 50 or older with type 2 diabetes and coronary artery disease, but no history of MI or stroke. Participants in the trial were randomized to treatment with 60 mg Brilinta twice-daily or placebo; the trial has a primary endpoint of three-point MACE (cardiovascular death, non-fatal MI, and non-fatal stroke). The trial is expected to complete in January 2018 according to ClinicalTrials.gov, and AZ expects to release topline results in 1Q18. Patients with type 2 diabetes experience great residual risk for macrovascular events even when treated to standard of care and we glad to see AZ investigating whether Brilinta can narrow this gap. We’re intrigued by the eventual possibility of an explicit indication for patients with type 2 diabetes and coronary artery disease in the Brilinta label and see AZ’s investment in this trial as a further sign of the company’s commitment to patients with diabetes.

9. There were no updates on the rest of AZ’s diabetes-related pipeline. The company’s GLP-1/glucagon dual agonist MEDI0382 for diabetes and obesity remains in phase 1. The first phase 1 trial of MEDI0382 in healthy volunteers completed in August 2015 and a multiple-ascending-dose study (n=75) in patients with type 2 diabetes and a BMI >27 kg/m² is currently recruiting participants and expected to complete in April 2017. Several other companies also have GLP-1/glucagon dual agonists in their early stage pipelines – see our competitive landscape for more. AZ’s phase 2 pipeline includes the PCSK9 inhibitor/GLP-1 agonist combination MEDI4166, with an ongoing two-part phase 1/2 trial expected to complete in November 2016. A weekly suspension formulation for Bydureon is expected to be submitted in the US and EU in 2017. The company also has phase 3 2-OG inhibitor roxadustat for anemia in chronic kidney disease and end-stage renal disease that it expects to submit in China in the second half of 2016 and in the US in 2018. See our diabetic nephropathy competitive landscape for an overview of other companies that are investing in this area of high unmet need.

10. Notably, AZ briefly addressed the impact of “Brexit” on the drug industry, particularly with regards to mutual recognition procedures for drug approvals. While emphasizing that the discussions between the UK and the EU on the UK’s exit from the EU are at a very early stage, management underscored that AZ is most concerned about maintaining mutual recognition for drug approvals so that duplicate efforts for approval in the UK and the EU will not be necessary. Management expressed hope for a “practical” solution and pointed out that an end to mutual recognition would translate into additional costs and delays for drug approvals that would hurt multiple stakeholders (patients, payers, and industry). Much of the specifics of Brexit are uncertain at this point, but it’s clear that a British exit from the union will have far-ranging economic consequences that may extend into the pharmaceutical industry.

Questions and Answers

Q: Even though the EMPA-REG results are value-enhancing for the whole SGLT-2 class of drugs, might it might actually lead to more price competition in this category if companies other than Lilly compete for formulary share by lowering their price?

A: I think in the end EMPA-REG is a very positive force. We've closely watched SGLT-2 class growth; in 1Q16 it was around 2% whereas in 2Q16 it went up to 7%, which is very encouraging. Our focus is capturing as much of that as possible. Our focus is on converting patients who may be placed on a DPP-4 onto a SGLT-2 instead – when that decision is made, we want to make sure that patient is a Farxiga patient.

Q: Could you make some high-level comments on Brexit and the potential impact to the drug industry in the intermediate term?

A: We are at the very beginning of the discussions between the UK and the EU and we'll have to see how the process evolves over time. Certainly one of the most important aspects for us is the regulatory process. We hope that we can retain the very effective process of mutual recognition so we don't have to duplicate efforts to get approval in the UK in addition to the EU, since that adds costs and delays and doesn’t help anybody – the patients, the payers, or the industry. We hope that everybody is going to be practical about those things, but it’s really too early to judge.

Q: Can you talk about likely formulary positioning for Farxiga in 2017?

A: I think it's best to summarize the diabetes contracting environment in the US as dynamic and relatively unpredictable – that’s how it's been for some time. We've got a strong commercial position with around 90% of the lives covered. Where we need to do some more work is Part D and we're very focused on that.

Q: Your competitors are highlighting slowing NRx (new prescriptions) in the SGLT-2 class in the US. What is your expectation for Farxiga and what you might be able to do to help to return the class to growth?

A: The class was on a very steep growth curve until around July of 2015 when the DKA letter came. I think the issue around DKA at the time was that there were other elements besides the classic symptoms of DKA, which made it difficult to understand and then characterize that patient. We’ve gotten past that, and now what we're seeing in the last quarter is the beginning of the class growth again. It's not where it was before, but if you look at the fundamental benefits, this class is very effective. A product like Farxiga is very effective at addressing A1c and you have the added benefit of weight loss, of course. We have the DECLARE study in place and hopefully that should help ensure that this class returns to its historical growth.

-- by Abigail Dove, Helen Gao, Payal Marathe, Emily Regier, and Kelly Close