Roche Holding AG

Ladies and gentlemen, welcome to Roche's first quarter sales 2021 webinar. My name is Henrik and I'm the technical operator for today's call. Kindly note that the webinar is being recorded. I would like to inform you that all participants are in listen-only mode during the call. After the presentation, there is a question and answer session planned. You're invited to send in questions for this throughout the entire session using the Q&A functionality of Zoom. In addition to that, you may also raise your virtual hand to address your questions verbally. For participants joining via phone, to raise your hand, use star nine on your phone's dial pad. When you then get selected to ask your questions, please follow the instructions on the phone and press star six to unmute yourself. At this time, it's my pleasure to introduce you to Karl Mahler, Head of Investor Relations and Group Planning. Karl, the stage is yours.

Thanks a lot, Henrik. Welcome to our Q1 conference call. Hope you're all safe and well on your side. We have about one and a half hours reserved for you. presentation, however, that is Q&As, and you should have plenty of time, sufficient time for the questions and answers. As Henry explained, it's a Zoom call, so you can raise your hand, you can go in the chat, unmute yourself with star six, and of course, you also can directly send me an email in case you want to. Personally, I believe that we had a really good start into the year with very strong new product sales for Pharma, excellent diagnostic business. So I would say Roche is offering some stability, good stability in these very unstable times. And with this one, over to you, Sarah.

Thank you, Karl. And actually, you summarized it well. We had a good start. into 2021. So if we can go to the first slide again. No, I think we jumped too far now. If we can go back. Okay, now I can start with this one as well. Good. So then just a word in terms of our fight against COVID-19 has been quite a lot of media coverage on our rapid test, this home test, a nasal test. And you see this also reflected in the numbers. We see continued strong demand for that test. Let me just emphasize again that Our test is very sensitive if the virus load is high. And we know that, of course, those people who have a higher virus load are the most infectious people. That is primarily people with symptoms, but that can also be people without symptoms where you have a high virus load and as such very infectious patients. So we really do believe that as long as populations are not yet sufficiently vaccinated, these home tests can really be a very important weapon to interrupt infection chains. Now on the antibody cocktail, again, I just want to remind you about the stunning data we have seen from our phase three results. We have seen a 70% reduction in hospitalization and death rate. I mean, this is really, really significant. And I think nobody doubts the medical value of those antibody cocktails. Logistics is an issue because the medication needs to be infused. Typically this happens in the hospital setting. So we have to make sure that patients really get to the point of care, but healthcare systems are adapting. And again, we believe this is a major contribution in the fight against COVID-19. If we now can go to the numbers. Next slide, please. Right. Bill and Thomas will cover this in much more detail, but let me just summarize. on a high level what we see in the first quarter and how this all comes together. Pharma down by 9% and there's a number of factors playing into that development. It's very much in line with what we have expected and as Karl already pointed out, we see continued good growth with the newly launched medicines of plus 20%. Then, of course, we saw a major impact of the biosimilars. As Bill will show later, the impact in the first quarter was particularly high. So we expect that to ease out for the full year. And we still expect to remain in line with our original guidance of 4.6 billion. And then very important as well is we have a negative base effect in the first quarter because of the impact of the pandemic. As you remember, last year, Q1 was a very strong quarter where we had very good growth. And then the pandemic started us to hit severely in the second quarter. So we have a negative base effect this year in the first quarter, but you will see this exactly being reversed in the second quarter as we build on a much a smaller base. And as we hope that more patients will resume their doctor visits and as such, we will see some normalization of treatment patterns. Now diagnostics, very much the contrary to pharmaceuticals. So here we benefit from the pandemic, unlike in pharma with the additional demand for COVID-19 testing. But what I highlight actually in the first quarter is the fact that the routine business, the underlying business, so this is the non-COVID-19 business, has started to recover. So what we see here, and I think this is noteworthy, is that on the diagnostic side, we already see a recovery. And I think that is a good sign because for healthcare systems normalizing overall, because the first thing which you see is that people get again to the doctor, they get their diagnosis, and then later on, we would hope that that also leads to a better coverage in terms of treatments, et cetera. So that's really what I wanted to share on that slide. If we move on. Putting all of that together, you can see a 3% growth in the first quarter. So we continue to grow in spite of all these negative effects from the pandemic and the biosimilars. If we look for the outlook for the full year based on the results, if we turn to the next slide, we are very confident to achieve our goals. What you see here actually is again a split of the sales development, a really strong impact of biosimilars, which should ease now over the rest of the year. We hope for a recovery from the pandemic. And perhaps really also interesting to see here that the new products now already account for 50% of pharma sales. Next slide, please. Okay. Here again, the dynamic for the two divisions, diagnostics, very much shown by COVID-19, very much driven by COVID-19 testing, and also supported by the recovery of the routine business. On the pharma side, a continued impact of the pandemic on our regular business. So we hope that this will recover. And then of course, we had a very severe impact in particular in the first quarter from biosimilars. Next slide, please. Okay. Good. A lot has happened on the pipeline side. We've had important readouts. Just highlight here the entries into phase two. We had a number of entries into phase three. So that's obviously extremely important for the long-term growth of our franchises. And I should say also on the diagnostics, I would argue that we have already a leading franchise and cutting edge systems out there. We are now coming again with a new generation of systems, new launches, which should further solidify our market leading position. Next slide, please. So you've seen, we confirmed the outlook. And with this, I hand over, I think it's you first, Bill.

Thanks, Severin, and thanks to all of you for joining us today. Yeah, a lot of progress to report on. I'm very pleased with the performance over across the division and the amazing work that our people have done to ensure that patients, our ongoing patients with cancer and MS and many other diseases, have been able to receive their medicines in an uninterrupted way. But at the same time, we've made significant strides in the fight against COVID. We can get into it now. Let's get to the first slide. This is just slightly more detailed than you saw from Severin. I guess the main point here is the US had the biggest hit and that was largely due to the biosimilar impact with AHNR all having maximum impact beginning in 2019 and with Avastin coming, biosimilars to Avastin coming at the beginning of last year. And so that was the bigger impact with Europe. It was mostly Herceptin, I'm sorry, mostly Avastin. And then Japan had a sort of a mix. If you go to the next slide, I can shed a little more light on it. So here you can see a number of products that continue to grow very well. Products like Ocrevus growing 16% despite all the challenges with COVID in terms of patients not going in to see their doctors, in terms of questions about vaccines and therapies. And so we're pleased to see continued strong growth And again, I'll talk more about each of these molecules as we go. But you can see at the bottom, the biosimilar impact. As I mentioned, Avastin had a very large impact in Europe. And most of the Avastin business in Europe is now gone. So again, this is largely in line of what we expected. But it also means that the biosimilar issue is kind of moving behind us. If we go to the next slide, I thought this chart was very helpful. This is on a constant currency basis, just looking at the sales of all the products in pharma, excluding AHNR. And as you can see, we've had very strong growth over the last four years. You can see a couple things here I think that are important. First, you can see a little bit of that base effect that Severin described in Q1 of 2020, where we actually had on a number of products, we had some extra buying that happened because of the pandemic. So this happened with Lytics, with Esbriet. Those were two medicines that were being considered as potential treatments for COVID-19, COVID-19 pneumonia. And so there was some stocking that happened. Also, even products like Hemlibra, where individual patients were sort of ordering extra to make sure they were covered. So you can see that you have a nice steady growth up to Q1 of 2020, a little bit of acceleration in Q1 of 2020. And then the impact in Q2 of the pandemic. and sort of a recovery since that time. It's not been as strong as a recovery as we would have had if we hadn't had second and third waves. But nonetheless, I think you can see it. It's sort of across the portfolio and over time that we are gaining momentum on the new products. And that's what we want to see. Next slide, please. So, as Severin mentioned, the milestone of 50%. So, 50% of our sales in pharma now are from the new products. I think this is really a best-case scenario. If you go back four or five years in terms of how this could have worked out, we're really pleased that our portfolio has delivered in such a strong way. And you can see the 17 products delivered. Well, the 17 products we've launched, plus two that are with partners, and that's FinClex and Gavretto, but those 17 products are now accounting for over $5 billion of sales in the quarter and really fueling our future trajectory. In terms of filings and progress, so if you look at that 2021 box on the lower right, so we've now filed for the approval in Europe and a number of other jurisdictions for the antibody cocktail, that's Kaseer and IMDEV. and then also for the port delivery system. So those filings have been submitted. In addition, we'll be filing shortly for furosemab and monotuzumab, so medicines for retinal diseases as well as for lymphoma. Next slide. So to focus in a little on oncology, you can sort of see the dynamics. So for example, in the HER2 franchise, an overall shrinkage of 11%. That's based on losses of Herceptin, significant loss of Herceptin, 2% growth of Progetta, and then Quetzila at 17%. And then also some growth in Fezgo, which is the combination of Herceptin and Progetta in a single vial. And the... The way to think about this is with Progetta, there's a large degree of sort of penetration for Progetta in the US and Europe. We continue to penetrate and have strong growth in international markets for Progetta. And then in the U.S. and Europe, what's happening now is sort of a conversion of Progetta patients to Kedsila patients as the early breast cancer treatment data on Kedsila is sort of, yeah, driving that change. So you have to kind of look at them as a whole. Otherwise... highlights here. I think, you know, again, continued strength in the hematology franchise apart from Rituxan by a similar impact. And then I'll speak in detail on some more of these. Next slide, please. So T-Centric, really a very important quarter for T-Centric. As you can see, nice growth. Again, this is in the context of a pandemic situation where There was a very severe wave three in Q4 and Q1, which we understand did affect somewhat new patients seeking therapy in oncology. But despite that, we had 26% growth on T-Centric. And we continue to penetrate in various indications in countries around the world, but also very significantly, we announced the positive phase three results for T-centric in adjuvant lung cancer. This is the first time a checkpoint inhibitor has been shown to have a positive benefit on disease-free survival. These are patients that are eligible for resection, so early lung cancer patients, and we look forward to sharing the full data at ASCO in a little over a month. Next slide, please. So in hemophilia, again, you can see the pattern, very strong growth up through Q1 of last year, and then an impact from the pandemic. But since that time, a return to very strong growth. And we have over 11,000 patients treated globally globally. We're now the number one prescribed therapy for prophylaxis in the U.S., and this is true for the total market as well as with and without inhibitors. Almost a third of patients are now on Hemlibra in the U.S., which I think is really an amazing milestone. If you consider how long factor VIII was the standard and that we've been able to penetrate that market and provide so much value to those patients in such a short time is really excellent. So continued growth ahead for Hemlibra. We don't see any letting up on this, and we're really pleased to see it. Next slide, please. So immunology, there's definitely a number of COVID impacts here, both negative and positive. And in the case of medicines like Esbriet, we saw a base effect because people were, again, patients that have IPF were nervous about COVID pneumonia. They bought extra. There was some purchase patterns that now in hindsight, we see, hmm. It looks like that was sort of COVID-induced. So the loss in volume in Q1, we think, is really mostly related to that. And we should see that kind of lining out and being relatively flat on the year ahead. Actemra, sales increase driven by COVID use. And then Zolair, again, just impacted a bit by doctor visits and such. I'm really pleased to say in terms of the pipeline, a couple updates, the Pentraxin study, Starscape, we now have our first patient in, in IPF. So that's That's really great news. And then gaziva in membranous nephritis. So it's a type of lupus. And we have first patient in that we expect any day now. So good progress there. Next slide, please. MS. So, Ocrevus, again, you can see the pattern. This one is a little more complicated because there have been these questions on Ocrevus about use with vaccines. Most of you may know that with the B-cell depleting therapies, there can be an interference with vaccine activity, at least the acquired immune system portion. So, To the extent the vaccines are driving antibody uptake or creation of antibodies that can be affected by use of a B-cell depleting agent. Last weekend at the American Academy of Neurology, there was some data presented on this in terms of what's been the experience of patients who got COVID in terms of their generating both B-cell responses, antibody responses, T-cell responses. And we were very much encouraged by that data. What it showed was that the patients that were treated with Ocrevus, over 60% of them had antibodies after having had COVID, whereas the number for patients who were not on therapy or on other therapies decreased. was a little over 80%. So there was a slight diminution of presence of antibodies. But then when they looked at the T-cell response, so T-cell specific response to COVID, what they found was that response rate on the Okravis patients looked very similar to patients on no therapy or on other non-B cell related therapies. So I think the overall data that as it continues to emerge, we're not seeing anything troubling here and we're able to provide at least more medical information and updates to physicians to allow them to make good choices for their patients and use of Ocrevus. A few other things, the EU label has been updated to include this endpoint of delay in time of wheelchair for PPMS, which is very significant, especially for primary progressive disease. The higher dose studies of Ocrevus in relapsing and PPMS are recruiting very strongly. I think data continues to come in that suggests that the dose really does matter significantly. We see this with the outstanding Ocrevus data on disability. Other sort of recent studies they've read out in MS that didn't show an impact on disability that have sort of different dose levels. So we, you know, we think we have a really a world leading medicine in Ocrevus. And we look forward to continuing its life cycle with additional data and hopefully even bigger benefits for patients. We also have the first patient in our phenobrutinib phase three program in relapsing disease. So excellent progress there. And we look forward to continuing to serve this patient community. Next slide, please. So in SMA, great progress here as well, both from a launch standpoint as well as a development standpoint. I'll just highlight we now have over 1,600 US patients that are treated, a bit over 15% of total share after only being launched in August, and that was a virtual launch. because we weren't able to go into doctors' offices until rather recently. So we're really pleased at the progress of this. We have now over 450 treating physicians have prescribed Avrisdi, which is a very high proportion of the total physicians who see these patients. We also have really strong payer coverage, so over 75% of lives covered. And now we have EU approval. So that's really exciting to be able to bring Evrizdi to the EU and many other countries that have been approved. Let me mention the clinical updates on the next slide. So these were a couple of the endpoints that were shared at the AAN in the last week. And so very significantly, this is two year efficacy results in type one SMA. So if you recall last year, we were able to show that about 29% of infants were able to sit unassisted for up to five seconds. And now if we look at 12 more months of therapy, that number has actually increased to 61%, which is very encouraging, both because this is a degenerative disease. So to see patients actually improving rather than degenerating is always great. But these were babies that were commenced on therapy rather late. So I think the median time was more than five months. And so to see such a high proportion of them achieving these milestones is of sitting for five seconds, sitting unassisted for 30 seconds. And then also you can see the CHOP in 10 scores. And again, continued improvement, which is really positive development. So again, I think Evrizdy is still early in its launch, but beginning to contribute in a meaningful way to our portfolio. And we look forward to much continued growth for Evrizdy in the months ahead. Next slide. Ophthalmology has also been a very busy area for us with both the port delivery system and furosemab. Furosemab is our bispecific antibody that targets both VEGF and ANG2. We announced late last year and early this year results from four phase three studies in DME and AMD. These are the results in DME. And what you can see on the left side is It's basically the upper graph is comparing Q8 weeks with Aflib Recept, and then the lower one is comparing the sort of variable dosing plan with Q8 week Aflib Recept. And you can see both strong comparability on the clinical data points, but then if you look at the anatomic outcomes, So this is the thickness of the retina layer. And this is what you're looking at to see is, are we succeeding in sort of drying up the wet AMD and preventing further damage? And what you can see is that both the eight-week dosing, as well as the longer dosing intervals, showed meaningful differences in anatomic outcomes versus a flibrocept. And on the right, you can see the proportion of patients. But basically, we had about 75% of patients are able to get dosed either every 12 weeks or every 16 weeks, which is a totally new milestone in treatment of COVID. retina disorders, and we're really pleased to be filing this soon. The reception from the thought leaders has been very strong, and we really can't wait to bring this to patients around the world. Next slide. I also mentioned the port delivery system, and this is data that we presented as well in a recent retina meeting. We brought the 72-week results. So before, I think we had shown 48-week results. And so what you can see is basically a continued pattern of high durability. You can see the graph here that shows basically people on the PDS had an average of 3.9 treatments. versus about 20 treatments on Lucentis. And that's quite remarkable if you think about the difference in terms of injections in the eye and a very strong patient preference as well. So we've got more studies coming. We have phase three studies in DME and diabetic retinopathy are both enrolling rapidly. And the filing is under the way in the US and EU. And we believe that we'll have a first approval in the US later this year. So probably right at the end of the year. But really exciting news on that. Next slide, please. So just to round it out in terms of our efforts on fighting COVID. So Severin mentioned some of the progress with the neutralizing antibodies. So I won't repeat that. But what you can see on Actemra, we've listed the largest randomized controlled studies of Actemra and just to try to frame it up because we have seen mixed results, different levels of benefit, some positive studies, some negative studies. If you look across the five studies, we think there is a good level of evidence suggesting a benefit for certain patients with COVID pneumonia. In particular, if you look at this chart, you can see that we provide the sample size and the recovery study has about 4,100 patients in it, which is more than the other studies combined. And that study, I think, you know, lent a lot of credibility to the hypothesis of treating these patients differently. you know, sort of at the right time when they require assistance with breathing or they require supplemental oxygen, but before they're so far deteriorated that they require mechanical ventilation. And so we had a very strong result there. We are filing for EUAs in a number of countries for Actemra, but the use is ongoing. And then I'll just say, lastly, on the AT527, this is our small molecule effort. And we have a phase two study that was ongoing. We have a new phase two that we're looking at different doses. That new phase two has been somewhat delayed because of lower COVID patients in the UK where that study was taking place. So we're pursuing that study in additional countries. But the phase three, we believe, will commence. in the coming weeks. And we're doing that in parallel to make sure that we get the fastest possible answer for the world on a potential pill for COVID. And then last slide. So this just gives you a sense of some of the key news flow for this year. Pleased to already have some good news flow on the post-exposure prophylaxis for Zofluza, for EU approval for Evrizdi, In terms of the readouts, you can see furosemab, the antibody drug cocktail, and adjuvant lung cancer, but a number of really important studies to come. One in particular that I would highlight is the Polovi data in Polarix that we expect. uh, late this summer. And, uh, and that one's a pretty big one to watch. I think the last positive study in DLBCL was in 2005 with Rituxan. So we're, we're taking on the, uh, the standard of care, uh, that's, that's, uh, that's been really hard to beat, but we think Polovi's got a good shot at it and we're looking forward to that one in particular. And, uh, with that, let me, uh, hand it over to Thomas Schoenecker.

Thank you very much, Bill. Good morning. Good afternoon, everybody. I'm happy to present the Q1 Diagnostics Division performance on the next slide, please. So with sales of roughly 4.3 billion, we had a growth of 55%. And this is an acceleration as Severin has shown on one of the slides versus the previous quarter growth. growth was driven by both the COVID-19 testing and also strong growth of routine non-COVID testing. And the non-COVID testing was growing at 18%. Now, if we look back into Q1 last year, we did already see some effects of COVID on our normal sales. specifically in China, but this effect was rather small still. It was about 2%. So really growing at 80%, I would say this is really a stellar underlying performance of the business, which is great for the years to come. The core lab sales increased by 31%, and this is exactly one of these areas where this is mainly driven due to the strong growth of routine non-COVID testing. Molecular increased by 86%, and this was driven mostly due to COVID-19 PCR testing sales. And here, I want to remind you that we already had launched a solution in January last year on our MagnaPure light cycle systems for testing for COVID. And already in March, we had a solution on the market on a COVID-6800, 8800 highly automated solutions being first to market in both. Point of care had a strong growth of 281%, and this is driven by rapid antigen test sales. In diabetes care in Q1, this growth is driven by the resolution of a dispute over rebates applied by a distributor in the US. And excluding this one-time event, diabetes care growth is 5%. Sales and pathology is growing 9%, driven by advanced staining. Now let's take a look at our regional sales. on the next slide. Here, growth is driven by all regions and all businesses in all regions. Latin America, 71%, EMEA, Asia Pacific, both growing at 62%, and North America, 34%. In Asia Pacific, we saw strong growth in China, which is the country that was really impacted already in Q1 last year with COVID-19 restrictions. But overall, as I mentioned before, The impact over the overall business was limited, but the biggest impact then came in Q2, where we would then expect strong acceleration of the routine non-COVID business as well. On the next slide, you see a bit more details per sales area. In core lab, we increased 31%, as mentioned, driven by immunodiagnostics and clinical chemistry. We had some effects here from certain COVID-19 related products such as procalcitonin and interleukin-6, but also antibody testing. Molecular, here the growth was driven by the SARS-CoV-2 portfolio, as mentioned. Virology, where the high throughput systems, Sales are recorded for SARS-CoV-2 was growing 200%. Point of care with the LIAT was 130%. And LightMix Systems, this is what we've launched already in Q1. Sorry, not in Q1, in January last year into the markets with the SARS-CoV-2 test was growing 55%. Again, we were the first to launch solutions here already in Q1 last year. Point of care, the considerable growth was driven by the rapid antigen, specifically point of care immunodiagnostics. So let's look on the next slide the different solutions that we've provided to the market. Overall, 18 solutions to fight this pandemic, including molecular solutions, immunodiagnostic solutions, but also digital solutions for both clinical laboratories and point of care. And I will give some examples. This test portfolio has become a significant factor in supporting patients and healthcare systems during this pandemic. We've launched recently, as Severin also mentioned, the SARS-CoV-2 rapid nasal antigen test, which allows healthcare professionals to easily collect samples from the tip of the nose. But we've also launched a self-test version. which has now been approved in several countries, just to name a few, Germany, Denmark, Netherlands, Switzerland, and Belgium. Now let's take a deeper dive here on the next slide. Our SARS-CoV-2 rapid antigen nasal test that you see on the left allows for convenient and fast testing for patients. and it can reliably detect infectious patients within 15 minutes. This test has been independently validated by the University of Heidelberg and Charity Berlin, but also it's very important that in a meta-analysis that was published of 20 rapid antigen tests across 74 independent studies with more than 30,000 patient samples, this test has performed the best in overall sensitivity of all tests studied. And as mentioned, this test can be used in a professional setting and there is a version that is also being able to be used in a self-test version. With that, we also launched a digital solution. And NavifyPath can provide test results directly to individuals. So patients can receive the results in the app while providers can easily record and provide the results to these patients. What this also has is it has a COVID passport functionality. So it can verify the testing and the vaccine status of an individual. And with that, it can be used for events or other similar things in order to grant admittance to those events. Now, on the next slide, you see the variant tests that we have launched. on a Cobra 6800 and 8800. And this really helps to support the understanding of the prevalence of these variants. And there are a number of mutations in this version that we have focused on. And it's the mutations that have shown to increase infectiousness of the virus, but also lethality of the virus. And these are E484K, N4501Y and a deletion of HV6970. And these are well-known mutations now that are present in a number of different variants like South African, UK, Brazil, but also a number of variants circling in the US right now. Now, what's great is also on the next slide that, you know, We've been active on the external front as well. And I would like to add some words on that. On 15th of March, we signed the definitive merger agreement with Genmark so that we're able to access this technology for a broad range of different pathogens. So you can really look at dozens of pathogens in just one patient sample in just 90 minutes. And this really complements our portfolio. You see on the right-hand side that we have solutions for the high throughputs. and the medium throughput with 5,800, which we're going to launch later this year. We have point of care solutions, but a multiplexing stat analyzer, like what Genmark has, we didn't have in our portfolio and it's participating in a market that we didn't participate in. So it's essential for us to get access to this. And as many of you know, infectious diseases are a leading cause of death globally. And of course, earlier detection of the cause of an infection has been shown to improve outcomes. But what's also important that with such a solution, we can support things such as antibiotic stewardship, making sure that antibiotics are given in a targeted way. Because we're just past one, not yet, but hopefully at one point in time we'll be past this pandemic. But one of the future pandemics that will come is when we have antibiotic resistance and we have no longer antibiotics with which we can treat. And, you know, it's gonna come. The question is just when. And we need to do everything to, you know, avoid that. On the next slide, you can see that we recently launched Corpus Pure and Corpus Pro and Severin already showed that on his slides. But these solutions really complete our new stream work area offering. And as Severin mentioned, we are leading in this area. And now, while we already have great products on the market, we're taking it yet another level. And what's great also is that we have a family concept from really low throughput, middle throughput to high throughput. And this range of throughput means that these solutions are perfect for laboratories that work in networks. And more and more laboratories will work in networks. And I think we are very well positioned here and very uniquely positioned here because not many companies have that. Now let's have a look at CoboSphere first. This system can run 870 tests per hour, and we can provide the full CME test menu on this with more than 230 tests. Again, this is market leading. We have the broadest menu on such a platform from any company, and it can do this in just two square meters. With Cobus Pro and the high throughput configurations, which we launched on 23rd of March, now this is really a superb solution for the high throughput labs. So really having the flexibility for labs for all sizes now. One of the tests that's running on those systems is shown on the next slide. And in Q1, we did receive FDA breakthrough designation for a Lexus GDF-15 test. And we got this designation as a companion diagnostics assay with a Pfizer investigational drug to identify patients that are suitable for a treatment addressing unintentional weight loss in cancer patients. This unintentional weight loss is also called carcaxia. And it is a highly prevalent complication in cancer, and it can affect more than half of all cancer patients worldwide. And this actually leads to significant functional impairment and increased risk of death. So with a successful treatment, we can hear, and with this test, then we can contribute to improve the cancer care worldwide. Another area where we received breakthrough designation is on the next slide. And here with the EBV and BKV on the 6800, 8800, we did receive breakthrough designation, which we already communicated end of last year. But now we've also launched a panel of three specific EBV immunodiagnostics tests. And this panel accurately identifies EBV infection stage from a single blood sample. That means faster diagnostics for patients and less confirmation testing. As you can see, we're building an end-to-end solution to a test portfolio to improve care for transplant patients. And before the transplantation, people are then being tested on our serology tests to characterize both the donor and also the recipients of the transplant. And this then assesses the risks for the recipient to develop an infection after transplantation because when people get this drug, they take, sorry, when people get the transplant, they take an immunosuppressive drug And with that, viruses that are present in the body, but normally don't have any impacts like Epstein-Barr virus can be present, but not have any clinical impact. But that would then start to have a clinical impact because your immune system is suppressed. So these tests are then used to provide on the post-transplantation side, consistent monitoring of these patients. because these patients can develop certain life-threatening diseases like post-transplant lymphoproliferative disease or cancer. As we know, EBV can also cause cancer. So finally, on my last slide, I'm very excited really about the amazing progress that we've made already in the first quarter with a number of key launches and what else is coming throughout the year 2021. I think our teams, despite the pandemic, going to manufacturing, going to R&D, working tirelessly, I think they did a tremendous job to deliver on both the on-market products, but really also to deliver a number of innovative solutions already in the first quarter. With that, I thank you, and I hand over to Alan, and I look forward to your questions.

Yes, thanks, Thomas. Congrats on a fantastic quarter. But also congrats to Bill for robustness and resilience and the great pipeline. And from my side, hello to everybody. Hope everybody is safe and healthy. And I just have very brief comments. on some of the financial. Let us go to the highlights on slide 43. Sales, I think, were well covered by Severin, Bill and Thomas. On the M&A side, I think Thomas made a remark on Genmark already. Let me go here a little bit to the formal points. You know that our tender offer was launched on March 25th. The end of the tender period is at April 21st, so today at midnight. So if you want a tender now, it's the time. The closing of the transaction is subject to a tender of more than 50% of the common shares outstanding. And as said, a transfer in action, if we achieve that, we'll close tomorrow. And we will finance the transaction with a combination of general corporate funds and the commercial paper program. Cash out gross, roughly 1.9 billion US dollars. What you see below is, well, the currency I've talked about, but I would like to refer to the bond repayments and the issuance in 2021 because that fits nicely to the M&A opportunity that I've outlined. On one hand, we had one bond due in the first quarter, 1.1 billion euros, 12 years. The coupon was 6.5%, which was converted in US dollar. And we replaced it with a new bond, which has been issued on March 1st. 1.4 billion Swiss francs. And you see really the trenches that we have brought to the market. And certainly what you see is it's a nice trade-off, Mitch, with much lower rates moving forward. With that, let's go to slide 44. And slide 44, once again, on the group sales. And I'm not going to explain, again, the left-hand side for the pharma division and the diet division. So let's go straight to the group performance of plus 3% in constant range, which has been outlined by Saren already. So basically, the blue bar of the plus 428. And on the right-hand side, you see really the growth rate in Swiss ranks of minus 1%, minus 213, and that's the dark blue bar. And then in the middle, you see the currency impact of 641, which is representing an impact of minus 4 percentage points. Well, not great, but let me say here that we had for the full year 2020 an impact of minus 6 percentage points. So we're seeing, I think there are a couple of mitigating factors coming up. So let me go to a couple of ingredients here, and that's on 45 where we break it further down. You see on the left-hand side, once again, the sales growth in constant rates plus 2.9%, so rounded 3%. And on the right-hand side, you see it in Swiss ranks with a minus 1.4%, rounded 1%. So and in the middle, you see really the impacts of the different currencies. And to be outlined on one hand is here the euro. And on the other hand, with a negative impact, the US dollar, as well as currencies from Latin, predominantly from Brazil and Argentina. OK, I think that's that's the setup a little bit. So now the question is, what does that all mean? And is, let's say, this reduction of currency impact on sales. Well, what does it take to keep that lasting and perhaps to even improve it further? And you find that on 46%. And then 46, let me start on the right hand side, because here you see our table where we take the 31st of March rates and remains unstable until the end of 2021. And then look really at the impacts on sales, cooperating profit and core EPS. And the CQ1, as described, was a minus four percentage points. And then you see when you go to half year, September year to date, and also to full year, that indeed, if you keep the rate stable, which is predominantly driven by a strengthening US dollar, that we have quite of a lower currency effect. compared to 2020. And why is that? Let's go to the left-hand side. You see really the Swiss franc and the US dollar. And when you look really here and at the upper box on the left-hand side, you see really the minus 7%. And that is really how the US dollar has developed against the Swiss franc. And then you see really that the impact is getting smaller until year-end when you compare the average rates. When you go to the euro and that's the lower box, Swiss francs to euro, you see that's pretty stable and the impact remains stable. So you see really the mitigating effect triggering a lower currency impact is definitely coming from the US dollar if the currency rates were remaining stable until the end, which is certainly pretty unlikely. Good. With that, let's go to slide 47. Outlook confirmed once again. As Saren said it already, very happy with that. But let me also emphasize here that this includes an expected negative sales impact related to the biosimilar competition of roughly 4.6 billion euros. Swiss francs. So we have not changed that figure. That's still the same figure that we have used once we've published the year-end results 2020. So overall, our guidance remains stable. Okay, and with that, I think we're happy to answer your questions. Thanks for your attention.

Thanks a lot. Again, maybe Henrik, you would like to help us with a bit more administrative help on how the people can ask questions?

Exactly. So we are now coming to the Q&A session. And yeah, to participate in the session, you can send in questions throughout the Q&A functionality of Zoom. Or if you would like to ask your question verbally, you can also just raise your hand. And for participants joining via phone, you can just click on star nine on your phone's dial pad, and then you also have your raised hand up.

Thank you, Henrik. I mean, thanks for your interest in the call. I mean, you can see that we have 800 participants. 800. This is really... an overwhelming large number of participants. So thanks for your interest. We have about 15 people which raised their hand for questions. So that means that maybe we can hopefully have your questions down to two. And we will try to keep our answers as short as possible. And with this one, I wanted to open the Q&A. And Vimal, you were the first. And I will take it according to your order, how you dive in. I will change the order here. Bimal, you will be the first one. I open your line now.

Great. Thank you very much for taking my questions. I'm from Bernstein. So could I just firstly ask if you could give us an update on the PCR capacity rollout? You know, for your results, you suggested a capacity of 40 million tests by the end of 1Q and 70 million tests by the end of 2Q. And given that the COVID contribution for the division was similar in 1Q21, as for Q20, you know, around the 1.1 to 1.2 billion Swiss franc level. Just curious where we stand on the capacity rollout and how that's, you know, reflected in guidance for 2021, given results suggest this is a change. And then my second question is just for Bill on the Polaric study. Curious how you think about the speed of transition as a new standard of care for first-line DLBCL. You know, what... What will be clinically meaningful benefit to ensure rapid transition given RCHOP, like you said, has been used for quite some time? And just tied to that, how would a positive outcome here be reflected in the CD3, CD20 development program for DLBCL? Thank you. Thomas, maybe you're first.

Yeah, thank you very much for the question. As mentioned in the earlier call, we said by end of Q1, so we did not commit yet to increase sales in Q1. That's the first thing that I would like to say. The second is there are certain markets, I would say specifically in the US, and I think that data is available to everyone, where you see a strong decrease in testing. It's not what we experience in our portfolio yet. And what's actually happening is exactly what we predicted would happen is that people are moving away more from the research platforms and going to the highly automated platforms as there's more testing available and there's less demand in certain markets. And so we see this demand continuing and we see that we will be able to meet the demands within the second quarter. And probably there will be more shifts from research platforms to automated platforms. And we are, I think, best positioned here because we have the most automated high school platform on the market.

Great. Then regarding your questions on Polarix and Polovi, so first question was the speed of transition. If we have a positive study, I think the transition would occur very fast, starting with the U.S. and then working its way around the world. I say that because yeah, this is the curative setting. These are relatively young patients and you're trying to, yeah, have more patients who are never going to have lymphoma again. And by the way, the The difference is you're either cured or if you have a recurrence of DLBCL, that's not good. That's not a good prognosis. So I think a meaningful benefit could be as low as a few percentage points. Of course, we want much bigger than that. But if you're talking about, say, three or four patients out of 100 being cured, again, relatively young patients, And if this is a well-tolerated regimen, which we hope it will be, I mean, the earlier phase one data on the combination was very well-tolerated. So I think it would be very popular. So let's hope it does work. And then in terms of the impact on the CD20, CD3s, Really, it would just be a new standard of care. So it would mean that, you know, for running phase three studies for first line, that we would need to run those now against Polarix if it's positive. But again, that is kind of our goal is we always want to improve and there is room for improvement in the LBCL first line. And so let's hope we can do it. Great. Thank you very much.

Thanks a lot for your question, Lima. Next one would be Tim Anderson from World Research. I'll open your line now, Tim.

Great. Thank you. A couple of questions, please. Biosimilars in China, Avastin, Rituxan, Herceptin all have them now. I wonder what the experience has been relative to markets like the US and Europe. Is the erosion of brands faster or just as fast and fierce or what exactly? And how does that impact in our deal for brands once biosimilars launch? And then a second question just on China overall. No mention of performance in the quarter, even in aggregate this time around. You did disclose that last quarter. And I know Q4, it was a weaker number. So can you give us any data here for Q1? Thank you.

Yep. Thanks, Tim. So biosimilars in China, yeah, it's – I wish I could give you a simple answer. It's not like the behavior of biosimilars in other markets. So we have biosimilars to Avastin, Mapthera, and Herceptin in China. In the current quarter, we had overall, across the three molecules, we grew But we actually had a very large growth in Herceptin and a small decline in the other two. China overall, our overall sales in China was up 11% in Q1 versus the prior year period in constant exchange rates. So I guess the bottom line is that there are biosimilars in China, but we are competing with them and we're competing reasonably effectively. And so I think they will eventually, I think they will penetrate the market more and cause more damage to our business. But for the moment, we're still growing. H&R in China.

Thank you.

Thank you.

Did we address all your questions, Tim?

No, that's it. Good. Thank you.

Thank you. Next one would be Richard Fosser. Richard, I'll open the line.

Thanks, Carl. Thanks, everyone. So just a question on Ocrevus and how you see the potential impact from Oblituximab from TG and maybe give us an update on how Cosimta is doing. It doesn't seem to be having much impact at the moment, but just... Thoughts on that future competition with the lower infusion time there and Cosimta? And then second question, just there's a there's an FDA panel looking at TNBC. and bladder cancer for Ticentric. Clearly strong data for the Abraxane combination, but maybe the follow-up trial didn't work. So what can you present to the FDA to placate them with that review? Thanks very much.

Yeah, thanks for the questions, Richard. So first, regarding Ocrevus and competition, you know, I don't... I don't try to make a practice of talking about other people's products or other people's data. I would just say, you know, in the case of the first one you mentioned, my understanding is they did not show an impact on disability progression. I don't view that as a full-fledged competitor to Okravis. I mean, people that are going on Okravis are not going on Okravis simply to have relief from relapses. They want to make sure that in five years or 10 years time that they're They're doing the best thing today to ensure the maximum of freedom and to pursue the life they want to pursue. And I think, you know, Okravis, we continue to deliver data on, you know, at AAN, we deliver data on what is the long-term consequence for the patients who started on Ocrevus versus the patients who started on placebo in the phase three trials. We're seeing long-term significance of that two years earlier of Ocrevus in both primary progressive disease and relapsing MS. And I think what's interesting with this new agent is it showed once again that you can't just throw an anti-CD20 at people with MS. You have to have the right dose and you have to have the right approach to administration. And when you do that, you can get a very strong impact on disability progression. And if you don't, you might not. And Yeah, I think the mystery is beginning, I guess I would say, is more and more being solved on this. And that's why we're running the high-dose studies, because of the pattern we saw based on exposure in the original studies. We think we have the best MS medicine available. I think doctors are voting with their feet on that as well, and patients are. And we think we're gonna strengthen our case with additional data over time on the original phase three studies and with the high dose studies. And again, with respect to other competitors, you see the same market share data I do. We feel really good about where Ocrevus is and we think it'll do even better with the resumption of sort of more normal approach to therapy. as vaccines are rolled out and the healthcare system kind of comes back to normal. Just a brief comment on the FDA panels on TNBC and bladder cancer for T-centric. We have, I'd say, very thorough and sort of broad encompassing plans and life cycle plans in both breast cancer and in bladder cancer for T-centric. And we'll do our best to make our case of why those are important indications and why patients need to have that choice of T-centric. These are not the major uses. Our use now, if I look forward through the rest of this year, probably about two-thirds of the use of T-centric will be in lung cancer and another closing in on 20% will be in hepatocellular carcinoma. And so, you know, these aren't the most significant indications, but we think there's a good case for why those indications should remain. Brilliant.

Thank you very much.

Thank you, Richard. Next one would be Richard Parks from Exxon. Richard, open your line.

Thanks, Carl. Thanks for taking my questions. A couple for Bill, I think. Firstly, on Ticentric, in uh adjuvant lung i just wondered if you could help us uh understanding your thoughts on the market opportunity and what you're assuming there in terms of penetration rates for adjuvant treatment etc and maybe how important your neoadjuvant study um is to the ultimate opportunity in your positioning there and then secondly um on breast cancer diagnosis trends i think um New patient diagnoses are down quite substantially. I'm just wondering if you can quantify what impact that has had on pharma sales trajectory and how you expect that to play out going forward, whether there's potential for, unfortunately, a bolus in sales at some point. Thank you.

Thanks, Richard. Let's see, in terms of the centric adjuvant opportunity, I think we understand that the size of the potential market for resectable lung cancer is probably between two and three billion dollars. And I think, you know, the questions that remain will remain for us is, you do we end up with an indication for all patients or is it limited to patients that are PD-L1 positive? The study was stopped based on the result in PD-L1 positive and negative patients. But as the data continues to emerge, for example, right now we have the disease-free survival data, but we'll get OS data. And also the DFS data will mature. So that'll answer an important question, whether this is an essential therapy for only PD-L1 positive or is it sort of for all comers. And then, of course, there's competition. So we'll see how their studies read out and when their studies read out. But we're very pleased to have a first shot at serving these patients. And we think we have a good chance at being market leader there. You asked about the importance of neoadjuvant. And neoadjuvant therapy is not yet established as important in lung cancer. It's not so common anymore. We have a study in neoadjuvant. Competitors have studies in neoadjuvant. Let's see how that plays out, whether this ends up being a distinct setting, whether it becomes sort of a continuation, or whether we stick with adjuvant. So let's see.

Thanks at all. There is one question maybe for you, Sibling, or Evan from Peter McDougall. He's asking about the profitability impact of all these moving parts, biosimilars going out, new drugs are coming in, diagnoses are going out. And so, I mean, we have given guidance for the year for profitability. And this is not a profit call, but maybe just to address it at this point in time, because it may be on the minds of Do you want to give us some profitability from here?

Yeah, I think we can keep that very short. We are very confident to meet the guidance that is to grow earnings in line with sales. And I think at least on a high level, what is important to note is that the profitability of our new medicines is very comparable to the profitability of the established products where we now face competition. So the structural change in our portfolio is not leading or is not a concern in terms of our profit margins. And in parallel, of course, we continue to work hard on our cost structure and drive productivity across all cost items. So yes, we are very confident to confirm our guidance for the full year.

Thank you, Simon. Next one will be Sachin. Sachin Jain from Merrill Lynch, King of America. I open your line now, Sachin.

Thank you very much. Sachin Jain here, Bank of America. A couple of questions, both high level, if I may. Firstly, on diagnostics for Thomas, I just wanted to get an update on how you see the shape of growth across 21 and 22. So a few parts of that. If you could comment to the sustainability of the roughly mid-teens underlying base business growth you saw in 1Q. Secondly, an update on where you see COVID diagnostic revenues. I think you've previously indicated roughly 4 billion. So where are you at? Regarding that, given that one key was 1.1 and then any visibility as to how to think about the 22 downdraft. Again, I think you've alluded to sort of a two billion headwind getting closer to a flu type market. So that's question one. Question two, I guess, for Severin, is you still comfortable committing to group sales growth in 2022? if diagnostics declines, depending on how Thomas answers a prior question. And essentially, that would require pharma to return to mid-single digit growth into next year. So your level of comfort in that. Thank you.

Yeah, thank you for those questions. And as I had communicated in the full year call three months ago, it was already that I expect very strong Q1 growth faster than last Q4. And this is exactly what had happened. Now, what do I see in Q2? In Q2, I see that because we already had molecular PCR cells fully for the full quarter, we will see growth in molecular, but not the same levels that we had seen in the past. But we will see rapid antigen testing and other COVID testing cells that we didn't have at that time. Fundamentally, what will also happen is we will see a very strong growth of our routine non-COVID business. In fact, this is already what we see in the first weeks of Q2. We see a very strong start to Q2 and specifically also in the routine business. I do believe that the strength that we see in the routine business in Q2 will not be as high in Q3 and Q4, but Because in Q3 and Q4, we did also have some headwinds. We should see some good underlying growth in the routine business. With regards to COVID, I've always said, look, I don't guide on COVID. There are many scenarios that we have internally. And the number that you had mentioned at that time was one of the scenarios, but it was one of the higher scenarios. But you don't know how things are going to develop. how the rollout of the vaccines is going to work, how the variants are going to work. If they're not as effective in some of the variants, you still may have to do testing, even though people don't go to the hospital, for sure travel. I think people will be testing for quite some time because a lot of the different markets in the different parts of the world will not have achieved herd immunity in terms of vaccination. School children will not be vaccinated, most likely all of them, when school starts again in the fall. So there are a lot of variables, right? So what I can say is that we are pretty much on where we would have thought in Q1 with COVID sales, and it's 1.2 billion, by the way, not 1.1. And we're much stronger even than we had hoped for in the non-COVID period. And I do believe Q2 will be strong. I think now Q3, we have a higher base effect versus last year as well as Q4. But I do believe that testing will reach more into Q3. And I had mentioned in the beginning of the year that we basically risk adjusted the second half of the year, not knowing how the pandemic would develop. So we put the majority of the sales for COVID into the first half year. And then we said, we'll update you. Clearly, I think there are some opportunities here that go into Q3 for sure. And then on the long term, what, you know, I got this question many times, I said, you know, flu market is an interesting market to compare it with because it's also an endemic virus. It's also something that mutates that, you know, you constantly have to monitor. But interestingly, if you look at the flu market in the past, the two billion, This was predominantly U.S. in the past because most of the other markets didn't really test for flu, although a lot of people died due to flu. And I believe it's going to be higher than that because you will see other parts of the world also testing. Now, the question is, when do we get to that kind of more balanced stage? And that really depends on vaccine rollout. Look at India right now, what's happening there. I mean, We just got a huge order of PCR tests from India because it's completely out of control. So, you know, we will have to see how things develop. Right. And I can only say, I promise you to keep you updated on how things develop. But I think we are really well positioned because, you know, specifically when more volumes are available, we have the most automated systems. I mean, you can put it on, you can go home. You don't have to do anything with the system. Whereas some of the other ones, you just pipette, pipette, pipette, and people are burned out. They don't want to do it anymore. So I think, you know, our business will be more sustainable than anyone else's business. That's for sure.

If I can just add on your question, depending on sales development or outlook for 22 on a group level. Now, obviously it's a bit early to guide for 2022, but As you know, we have always stated that we are confident to grow through this biosimilars period. Now, of course, COVID came in between, but I remain optimistic for 2022. And without formal guidance at that stage, it would certainly be our goal to continue to grow. Now, where does the optimism come from? There's no doubt that at some point, COVID testing and demand for COVID tests will come back. I mean, this is clear. And we will see a decline of COVID testing in diagnostics and we'll have some headwinds. But then again, it is open how much business will actually remain and can we increase our market share in this field. And Thomas has given you reasons why we think we are well positioned. But beyond COVID-19, I'm confident about the continued growth in our routine business and our core business. I think we are well positioned to also grow market share you've seen the new platforms which we launch now this year. I'd argue we had cutting edge, if not the best platforms in the first place, and now we put something on top of it. So that should help us to grow our business as we go forward. Now on the pharma side, I'd like to point out the following. First of all, I would hope for a recovery after the pandemic accelerated growth for the newly launched medicines. But also there is obviously a positive base effect on the biosimilars. I mean, you've seen the huge impact now in the first quarter. I mean, you don't need to be a mathematician to figure out that quarter one next year will benefit from this base effect. And that will also be the case for the full year. And lastly, of course, it's a lot about the product pipeline. We have important trials to read out and we'll see how it plays out. But put all these factors together, I'm pretty confident about our ability to grow through this continued by a similar erosion time in spite of COVID.

Thank you. Hopefully that will answer your questions, Sachin. We have Peter Walford, next one. Peter, I open your line up.

Thanks so much for taking my questions. So first of all, sorry to get back to PPR testing, but if we could just talk about it again for a second. Just curious, Eric, you can just comment on during the first quarter, has demand consistently outstripped your supply? And if we look into 2Q, you know, given you're saying up to 70 million, do you think that will still be the case? Can you just talk a little bit about, I understand in the US we've got good data and we can see obviously the testing decreasing. Can you talk a little bit about what you're seeing in Europe, where obviously rapid antigen tests are there, but also we've got a sort of third wave in many countries. Are you seeing rapid antigen being used instead at all, or is this now increasing demand again for PCR testing? And then just quickly, I can add to the bill on Progetta, or actually Herceptin in China. I'm curious that obviously Herceptin was strong in China, as you said in the quarter, and obviously Progetta was on the NRDL. Is this a sort of use of Progetta with Herceptin feeding through to China? And are you seeing Progetta use feeding combination with the brands? Or is some of the Progetta use being used by a similar Herceptin? How do you think about that trend? Thank you.

Thank you for those questions. Okay, let me go through it. So the statement around 40 million, 70 million was always by end of the quarter, right? So effectively volumes available by Q2 or the 70 million by Q3. Now, what we see is in the US, we see a significant drop in volumes. We are not as exposed to the US as maybe some of the other players, the first part, The second part is we actually didn't have a drop in the US, right? In fact, I think we're even increasing volumes in the US. And the reason is that what I mentioned is that, you know, and what I mentioned throughout the last year as, you know, more supply is available as, you know, potentially also when testing goes down, people will try to consolidate on the most automated high throughput platforms. And here no company is as well positioned as Roche because we have the highest throughput, the most automated solutions. So we have had zero impact there. Now, overall, what I can say, you know, going down a bit deeper, I mean, you know, we have MagnaPure and LightCycler systems on the market as well. Um, and these are more manual systems. Um, and you have the 6,800, 8,800 in the 6,800, 8,800 is where we had the significant, uh, or we are, we are having the increase in, in, um, in production volumes. We didn't do it because we knew that eventually people will move away from that, the automated solutions, but people are using these research systems like some other systems out there, um, because there was just not enough, um, Uh, capacity and what we've actually seen is that, you know, specifically on the demand is not as high as it used to be, but we're overcompensating that by our more volumes on a 6,800, 8,800 people really want to move onto those systems, uh, throughout the world in Europe. I mean, there's still the situation where, you know, demand is extremely high, uh, but even. at the time when potentially the demand will come down. I mean, I think we have a number of good situations. One is that we have the most automated system and we see that in the markets when it's declining, we're actually not declining. But the second piece is also from the get-go, we never abused the pandemic to increase prices versus our normal portfolio. In fact, you know, we wanted to make sure that we are not under scrutiny and we applied average prices. So, you know, other players that maybe have asked for two, three times, or some of them five times the price, I mean, they have a long way to come down before they reach our price.

Yeah, thanks a lot. Thanks a lot for you, Bill. Question was on Pochetta China.

So thanks, Peter. We don't have data at that level of precision in terms of whether our Progetta is being used with our Herceptin or whether it could be used with the biosimilar Herceptin. I would guess that most of it is probably being used with branded Herceptin. Progetta is now our second largest product in China. And and that's not because of big declines on on Mabthera and Avastin, because actually I think sales of Mabthera and Avastin were both down in single digits percentages in Q1. But Progetta is growing rapidly. Herceptin, as I said, is also has quite healthy growth. So Allisense is also growing nicely. So that's how we we come to be growing at 11 percent in China.

Thanks a lot. That'd be just all your questions. And the next one would be Emmanuel Papadakis. Emmanuel, I open your mind to Deutsche Bank.

Thank you for taking the question, Emmanuel Papadakis from Deutsche Bank. Perhaps I could take one on the outlet for capital deployment this year. I mean, even with GenMark, it seems, and I'm not sure this is perhaps a question for Severin, as you see fit. Even with Genmark, it seems you'll be in a relatively healthy balance sheet position by the end of this year. So just help us think or refresh our minds in terms of your priorities for capital allocation, your perspectives on the environment for business development, particularly in the US. There is a lot of innovation happening. Things aren't cheap. What are you thinking in regards to that and how you utilize that balance sheet? And then perhaps a question on Evrizdi. Got the European Commissioner rubber stamp at the end of the quarter. What's the position as regards of reimbursement? One of the notable aspects of a recent competitor launch was fairly healthy initial uptake in some markets. Should we expect to see something similar for Everisd or are we expecting a lag in terms of gaining reimbursement in key continental European markets? And perhaps you could just tag onto that. Where are we in the US in terms of what we see as revenues being a reflection of true underlying demand and the shares you've talked about, to what extent are you still subsidizing uptake in the US? Thank you.

So if I could comment on capital employment, Emmanuel, I don't see any change in our M&A strategy. I mean, clearly, we keep looking for bolt-on acquisitions, be it technologies or be it products. But having said that, even though there are potential opportunities, typically we can't make the economics. So I would see the type of Genmark acquisitions still more the exception than the rule. And we will continue to focus on earlier stage deals, licensing deals, et cetera. Here we're actually quite active, but less so for bigger transactions. And there's a scarcity to start off, but very often we just can't make the economics work for us. So not much change here. Yeah, otherwise, you know, we keep investing in our business, of course, but You know, we make sure that we can pay an attractive dividend in the long term. And if indeed we end up with a situation where we feel we have too much cash on the balance sheet, we'll find ways to return it to shareholders. The question is not imminent at that point. But I can certainly guarantee you that we are not getting money for too expensive M&A transactions.

In terms of Evrizdi reimbursement in the EU, we don't see any particular barriers there. That being said, there is a lag, you know, depending on the country. And so, but I think the pattern should be sort of typical of what we've seen with other significant breakthrough products, which is to say, you know, we're going to penetrate across Europe in the coming months year or two, but it's not going to be, you know, three or five years, and I think the medicine will be well received. We actually ran most of the studies, almost all the sites were in Europe. In fact, we had very few participants from the U.S. in our phase three studies, so it's one of the reasons we're so pleased with the with the reception. And you have to remember from a reimbursement standpoint, we're competing with a therapy that is administered via, via intrathecal and injection on the one hand, or a gene therapy for which most patients living with SMA are not eligible. So yeah, I, I think we anticipate a very good reception in the EU. You asked about revenue versus demand in the U S and yeah, while we do have programs to get patients started and things that we mean the vast majority, I think about 80% of the patients are already on, you know, commercial medicine and pain. So that's, that's not a, I don't think that's a significant issue for us. Thank you.

Thank you. Thanks a lot. Keo, you would be next. Keo, the Goldman Sachs, open your hand, Keo. Keo.

Okay, are you there? Carl, can you guys hear me okay? Yeah, no, we can hear you, yeah. Okay, thank you. Shabrin, how would you characterize your confidence or lack thereof on the industry achieving some form of an agreement with the White House or the government as it relates to kind of drug pricing reform in the U.S. kind of later this year? That's kind of question number one. And then separately for you, Bill, you kind of mentioned the rolling filing for PDS. As you think about the opportunity for Farisimab and PDS put together, can you give us some sense of how big you think those opportunities might be? Do you think one of them is bigger than the other on a combined basis? How should we think about that ophthalmic portfolio, second generation that you're developing today? Thank you.

Right, yeah. On the US environment, difficult to judge at this stage, I guess. And Bill, please chime in. My impression is that currently the government is very focused on the pandemic on the one hand, very focused on infrastructure investments. So obviously, pharma remains on the agenda, but I, you know, I don't get see enough evidence to tell you where all of that is going to but Bill perhaps you can can put a bit more light on on the situation.

Thanks, Evan. Yeah, K or I think. I think there's a reasonable chance to have a deal that is good for everybody this year because I think the administration would like some progress to say that they've accomplished something positive. I think there are members in both parties in Congress who would have some motivation, again, to make progress. They are in the business or to be in the business of doing things that are good for the country. So we'll see if they can put aside their differences long enough to do something. And I think the industry is motivated. We've been saying for several years now, we are keen on significant reforms that will improve access to medicines for patients, reduce patient out-of-pocket costs. and protect innovation and that we're willing to pay a lot to get that. And we haven't really had takers recently in terms of that kind of an arrangement. But the thing I mentioned is not impossible and we've We've detailed specific plans to achieve that, like rebate reform in Part D, like introducing more competition, market-based competition in Part B. And so I think there's an opportunity there. I think it would be a bad move for the Democrats in light of the major contribution that pharma is making to ending the scourge of this pandemic to then go full square and try to tackle pharma and do things that would hurt innovation. Because I think we have a very credible message that, you know, well, yeah, I think people can look and see, you know, what is the contribution of pharma companies been? And I don't have to list them, but, you know, starting with the things like the testing, what is... you know, the therapeutics and of course the vaccines. So I guess I have some optimism, but I've been optimistic for some years that we would get there and it hasn't happened yet, but let's see. In terms of PDS versus furosemab and, you know, the size of the market opportunity, I mean, Macular degeneration, DME, I mean, this is over 10 billion worldwide market. I think the size of the opportunity is very large. I think, you know, it's really challenging to sort of guess which one's going to be bigger. I mean, I think it's higher probability that fericimab would be bigger. because furosemab doesn't require a change in practice. It's sort of an improvement over the currently available therapies, but it's delivered in the same way and doesn't require a surgery. It's not disruptive to the business model. Essentially, because patients currently don't receive all the injections they should receive, what furosemab could do is basically giving people – a similar level of injections to what they're getting that offer the prospect of a more complete control of the disease. So, I mean, I think furosemab is pretty clearly gonna be attractive. I think with PDS, you know, experience is going to tell. I mean, the good thing about PDS is that, you know, you're really talking about two visits to the doctor a year and, and knowing that a hundred percent of patients could receive full benefit with two visits a year. And so that's pretty compelling, but I think again, the experience of physicians with the surgery and, and the patient's experience over time will, will dictate how big it'll be.

Thank you. Yeah. Thanks a lot. Okay. Next one would be Joe Walton. Joe, I'll open your line now. Joe, are you there?

Yes, I am. I'm sorry. Thank you. The first one is on Mosen. So you seem to be very confident that you can file this year. As I seem to remember it, I think your last patient started last year. So just a question of how confident you are you can complete all of that. and file it this year and when would be an appropriate point for us to see this could there be anything as early as asco or would it be later in the year and my second question is going back to biosimilars i'm afraid uh looking back at uh the european experience where we started to see some biosimilars in 2018. We've had 1920 and we've still got a significant rate of decline still in 2021. So it's a long-term gradual erosion. We obviously haven't had it for as long in the U.S. And I'm just wondering how long you think we should still see erosion in the U.S., whether it's just happening much faster. So it will be something you can get over with much quicker or whether we're going to have a continued sort of, you know, drag from biosimilars. And I'd just like to ask as well if you could confirm your latest thoughts on the timing for biosimilar Actemra. which I think is end 22, early 23, and potentially also the same for Lucentis. Thank you.

In terms of questions, I mean, we are more or less approaching the end of the call. So if it's okay for you, we give you 10 more minutes because of the overwhelming interest which we have, if that is fine for all of you. So which would mean five more minutes maybe. And we have still some questions in the line. So we will get back to the people later on. We have taken note. We're still in line and get back to later on. But maybe over to you, Bill, for the questions. Sure.

With respect to Mosin, we think the readout would likely be in the second half of the year with data potentially at ASH. And the reason we have some degree of confidence on timing is because this is sort of like the part B of a study that had a part A. And we know how that worked. So we can reasonably extrapolate. Let's see, biosimilar is how long? Ah, okay, well, an important element of why the biosimilar impact period has been so long in Europe is because it began with... with Herceptin and Mabthera only. And then we only lost exclusivity on Avastin in Europe in, I think it was June of last year, or the first biosimilars were in, I think, June of 2020. So in effect, we had a biosimilar impact in Europe. And then we had kind of a year where we didn't have it. And then we had it again. And now it's mostly over. Whereas in the US, we had basically all three almost simultaneously. So I think there will be I have no doubt that those sales will be decreasing on H&R for some time. It's just the magnitude of the impact that's so significant right now. And in future years, it'll be much less. And so I think it'll just be less significant. And in terms of timelines on Actemra and Lucentis, I'd say they're... It's a little bit in the, it depends category. So I'm not sure I'm going to provide a date right now.

Yeah, we haven't also not given it. And so we actually legally speaking, we are not asked to comment on those timelines. And to send this is anyway different than because we have so many products. If I see my PDFs coming on the market, it will be replaced anyway. And we have already kind of a bias still on the market, as you know, for many years. in that sense. Joe, anything else from you as well?

Noah, it was just the rate of decline for even products that you've had biosimilars for in Europe. You know, you're still three years down, still looking at 30% plus erosion. So that's what I was wondering about. It's not 60, but it hasn't gone away. Is it every year you get another generic and another 10% price cut and you're just never getting to the trough?

Yes, that's the bad news. The good news is the numbers just aren't very meaningful. The percentage might be 30, but the value is very small because there's just not much left.

Okay, thank you.

So one last question, one last answer. We have two minutes left here now. Andrew Baum, I open your line. You have the privilege of the last question for the call.

Thank you. What a privilege. So I'd be interested in the collective views on FTC in terms of antitrust in relation to M&A and the extent to which it's going to change the outlook for you and the industry, given how reliant the industry is on it? Is it going to force you more into early stage deals, into licensing? Do we have any visibility on exactly how they're going to define novel ways of anti-competitive behavior through M&A? And the second question is on Polarix. In order to maximize probability, you have enriched for choosing poor prognostic patients using IPI scores. I understand it's further enriched beyond that, which is understandable. My question is, what assurances do you have from the FDA that they will give you a broad label rather than restricting you to the very poor prognosis patients, which are overrepresented within the trial? Many thanks.

Right, perhaps I can shortly comment on antitrust legislation. Clearly, what we have seen now for some time is a much more increased discussion level coming from the tech industry. So starting in the US and now also very much in Europe, there is a debate of whether the digital industry, the tech companies need some kind of different framework when it comes to antitrust. Now this has to a certain degree spilled over into the biotech and pharma industry. And actually Roche was directly concerned by that. I remind you when we did the Spark transaction, the closing was delayed because the FTC did a more detailed investigation. It was cleared eventually. but we already saw the impact. Now, I think as far as our industry is concerned, it's too early to make any conclusions whether there will be fundamental changes here of how the authorities look at it from an antitrust point of view. It's simply too early. There is more scrutiny. It has led to a delay of the Spark transaction without any doubt, and we have been very public about it. And you see this now also in the medtech industry. But the jury is still out of whether we see fundamental change in legislation. So, yeah, everybody's watching, as you do, as we do, but it's not yet clear where this is going.

Yeah, and on Polarix, great question. You know, we try to run the phase three studies in order to get the best shot at a clear outcome and also a clear outcome in a reasonable timeframe. And so that's... You know, there's almost no clinical trial or no phase three trial that isn't enriched in some way or another. And I think the answer to your question about whether the label will be broad would really, you know, it's going to depend on the on the result. I mean, if it's a if it's a if it's a clear result and it looks like it's you know, that result's been seen in the sort of enriched population, but also in the smaller proportion of patients that are sort of less enriched, then I think we would get a broad label. And if it's something other than that, then there'd be a discussion. But yeah, I think it's nevertheless, I think it's a very meaningful part of the total population and we're looking forward to the output. Many thanks.

Yeah, thanks a lot. So apologies for the online which couldn't place their questions but there is really no way administratively and time-wise that we can get we took note of it we wrote it back to you directly um and uh i wanted to thank uh david uno sabine and jared john for all that help i wanted to thank you and speakers for um for this participation in that call also for the administrative support from beatrice melanie and others and with this one i wish you a nice day Keep safe and thanks for your interest in Roche. Bye bye. All the best to you.

Thanks a lot. Bye bye. Thank you. Bye bye. Bye bye.