Roche Holding AG

Ladies and gentlemen, welcome to Roche's full year results 2021 webinar. My name is Marco and I am 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 presentations, there will be a questions and answer session. You are 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 hands to address your questions verbally. For participants joining via phone, to raise your hand, use star nine on your phone's style pad. When you then get selected to ask your questions, please follow the instructions from the phone and press star six to unmute yourself. One last remark. If you would like to follow the presented slides on your end as well, please feel free to go rush.com slash investors to download the presentation. At this time, it is my pleasure to introduce you to Bruno Ashley, head of investor relations. Bruno, the stage is yours.

Thanks, Marco, and welcome. My name is Bruno Ashley. I'm the new head of Investorations, and I wanted to use this occasion also for a special thanks to my predecessor, Karl Mahler. Karl has been dedicated every single day, and I think probably also a few nights over the last 20 years, in telling Roche's innovation and investment story to the world. He managed communication on many pipeline ups and downs. And I think everybody who knows him knows that he kept an eagle eye on one particular number. This number actually is our share price. So when Card joined back in 2002, Ross shares traded at around 120 francs. And since then the share price and the market cap also has nearly tripled. So today's market cap being just above 300 billion. And basically, we believe that we will continue to have exciting times just in front of us with a record number of phase three studies to read out in 2022. And with that, actually, I would like to hand over to Severin Chuan, CEO of Voigt.

Yeah, welcome everybody to our year-end briefing. Thanks for joining. And let me also take this opportunity to thank you for your many contributions over the last 20 years. You have been a fantastic ambassador of Horsch for our financial community. Thank you very much for that. So let's get into 2021. Here's the summary. You've seen the numbers. Sales up by 9%. Very much driven, of course, by COVID-19 sales, but also a very strong development of the base business in diagnostics and pharma growing in spite of the very significant impact of biosimilars last year. Profit and cash up, free cash flow up actually in the high double digits, which is helpful given that we just did the repurchase of the Nomadis holding in Rorschach. But what I'd really like to focus in my opening is the pipeline. I mean, it's really been developing well in the last year. And we have a series of readouts in the current year. So, 16 phase entities in late stage. And also on the diagnostic side, we saw a number of significant launches, such as 5,800 in the molecular diagnostic segments and many more. What I'm really, really excited about is the strong news flow in 2022. I cannot personally remember that we had so many very material and significant readouts in a single year. That's pretty amazing to speak about that later on, decentric in the actual end settings. This is an extraordinary year in terms of phase three readouts on top of the ongoing launches of important medicines. And likewise, also on the diagnostic side, we have some important innovations to come to the market soon. If we can have the next slide, please. Yeah, here again, a high-level summary. I've seen the numbers. basically hitting our original expectations set ourselves at the beginning of last year. Next slide, please. A bit more of granularity, both on the sales and on the operating profit side. So I will start with sales on the left-hand side of this slide. And what is really good to see is that in a year where the buyer is similar erosion peaked with 4.5 billion, we were able to not only compensate, but actually outgrow this erosion with new medicines. So that's really exciting to see. And having in mind that as of now, the biosimilar exposure is of course decreasing sharply, we expect actually 2.5 billion for the current year. you can immediately see the momentum we get here from the newly launched medicines. Diagnostics up by 4 billion. Now, part of that is COVID, but don't forget, we also had significant COVID sales back in 2020. So a big part of that increase versus the previous year is also because of the recovery of the base business and good growth in the underlying business. So very strong on the diagnostics side. If we move on to the Let's just go quickly to cooperating profit. Here basically what you can see is the significant investments into research and development. In total 1.7 billion, 1.5 billion in pharma and another 200 million in diagnostics. Of course very much a reflection of the rich pipeline we want to further push forward. And I think that is good investments for the mid and long term. of the company. You do see that at the same time, we are working on our efficiency across the board. You see on the pharma side, a big part of that additional spend has been financed by efficiency gains across the P&L, if you like. And of course, we also benefit from the fantastic growth in diagnostics, which also falls through to the bottom line. If we move on, so again here, 3% pharma, 29% growth in diagnostics, overall 9%. Next slide, please. That's a look back over the last seven years. And really the message here is now that we have peaked on the biosimilar EMAC and as that starts to significantly decline. I guess it's worthwhile to look back over the last years and I'm pretty proud of the team of how we managed through that period of biosimilar erosion. If you think of how dependent we were only a couple of years ago on the three big cancer medicines, Avastin, Maptera and Herceptin and how different the portfolio looks today, that's really good to see. And we also managed through this COVID-19 pandemic quite well. If we can go to the next slide, please. Yeah, I think that's an interesting slide, actually, because it shows you two things. On the one hand, and I start with pharma here, you can see the impact of biosimilars versus the overall portfolio, and you can also see it on a quarterly basis. And what you see is the very strong, continued strong growth of the new medicines, which is 35%. And even if you strip out Ronabrief, which had a significant impact last year, we are still at a level of 23%. So that's really good to see. And then you see that on a quarterly basis, pharma is returning to growth. So that's a reflection of the declining effect of the biosimilar. And that gives you a bit of a flavor of how we see things to develop into 22 and the years to come. On the diagnostic side, Interesting, of course, also to see this enormous impact due to COVID-19. You see the blue line, which is all inclusive. But then if you strip that out, you can also see a solid growth on the base business. Now, part of it in 21 was a bounce back, right? So you see a recovery of the business because we were hit in particular in the second quarter 2020. So you see a recovery on the one hand. But now as we get back to a more stable rhythm, we see a good growth of the underlying business and that should continue into next year. Next slide, please. Right, profitability, there is more details we'll present during that session. Alan will go into more details. So in absolute terms, profit is up by 4%, margins have declined. That's partly driven by COVID-19 business, partly driven by the investments in research and development. We'll talk more about that in a moment. Otherwise, good development on the earnings side and also the free cash flow actually developed very nicely. Next slide, please. Yeah, if we turn to the outlook, a lot, of course, depends on COVID-19. And, you know, I don't tell you that I would know what is going to happen in 2022 and beyond. And frankly, I was pretty wrong last year. We started out the year and I thought that this pandemic would soon be over. Remember, we guided for low single digit and we ended up with 9% sales growth. And a lot of that, of course, was due to COVID-19. So again, we predict a very moderate growth and we'll see where we end up. But basically there are two potential scenarios. One is the blue one and that's the base assumption for our guidance that with Omicron we will now move into a more endemic situation and the pandemic actually will slow down as of the second quarter. There is, of course, another scenario, a more steady state scenario where we have another outbreak or perhaps another wave, in particular in the winter season, end of the year. That, of course, would reside in a very different situation also as far as our business and our sales are concerned. But that's not what we assume. So we are more optimistic, if you like, in terms of leaving this pandemic behind us. and we base our guidance on a scenario where it slows down in the second quarter. And I should say, at the very moment, as we speak, the demand for diagnostics is incredibly high. So, you know, we have the numbers, of course, for January only in-house, and we expect a strong first quarter on the COVID-19 testing. But again, our assumption is that that little market will slow down in the second quarter. So if we go on, next slide, please. Yeah, I mean, that's my absolute favorite slide and I could spend hours here. I'll keep it very short. I mean, basically every month we have an important readout here. on top of important launches in ophthalmology with Susvima and Vapaismo. And also we are going to launch Polyvina in the first-line setting of DLBCL. So a lot to come this year, a very, very important year, in particular on the pharma side. But you can see that on top of the launches we had last year in diagnostics, there's also more to come. on the diagnostic side. Next slide, please. Right. So let's just spend a minute on the outlook. And I start with sales. And there are really two numbers that we thought we give you, you know, a more precise information of what our underlying assumptions are so that you can better model what the underlying business is doing. And first, that concerns the biosimilar entry for Avastin, Aceptin and Rituxan. And we estimate that to be 2.5 billion sales. And yeah, we'd be comfortable about that estimate. I mean, if you look at what we estimated for last year, we had 4.6 billion, we ended up with 4.5 billion. So this was pretty much a spot landing, right? So I think there is quite some certainty around the 2.5 billion. We'll see how it evolves, but that should be pretty predictable because we now better understand the erosion curves of the respective medicines. Now on the COVID side, of course, that depends on how the virus evolves and who really knows, but our assumption is 5 billion of sales. So that's a decline versus privacy of 2 billion. So if you add that up, sorry, the 2.5 billion and the 2 billion in total 4.5 billion, and if you strip that out, And you see the real underlying growth of the respective businesses, and that's in the high single digits. And that's exactly what you expect if you look at the development over the second half last year. So if we move on to profitability, again, stable to low single-digit sales growth, including those two effects, and on the core EPS side, We expect a higher growth above sales. And that is really a technical effect with the equation of the share repurchase. I mean, Alan will spend much more time on that and go through the details. But I think roughly what you can say is that overall, the profitability is growing in line with sales. And I should say already now, in spite of the fact that we assume a higher tax rate in 2022. You know that we had special tax releases in 2021. And as those are not expected to return, and we will get back to a more normalized tax rate, there is, of course, the need to do better on the operations to keep overall earnings in line with sales, if you exclude the accretion effect. Okay, and on that basis, we should also be able to, again, increase our dividend for the current year. That's what it was from my side, and with this, I hand over to Bill. Bill, over to you.

Thanks, Severin. Great to have an opportunity to cover our results with all of you and look forward to your Q&A as well. Let's see. So starting out with the division sales by geography, you'll note that we were growing in every region except for the U.S. for the year. And actually in the U.S., we returned to single digit growth in Q4. So after a number of quarters of really strong biosimilar impact, I think it was six quarters in a row of U.S. where we were negative, but we're back in the positive. And I think that portends well for the outlook as well. Next slide. So in terms of the P&L, I know Alan's going to go into more detail on the P&L, but I'll hit a few highlights. So on the royalties and cost of sales lines, those were significantly modified in terms of the out of the norm by the COVID business, in particular, RonaPrieve, because royalties and other operating income includes profit share income from sales of RonaPrieve in the U.S. as part of a U.S. government contract that was was handled by Regeneron. And then the cost of sales includes both our profit share payments to our partner, Regeneron, as well as some special incremental costs that had to do with both production of RonaPrev and production of Atea 527 as a development program. So that's the main thing that's kind of moved those lines around. M&D, we kept flat. We were tracking a little lower than that through most of the year, but we had some opportunities in Q4 to make some incremental investments that we thought would benefit 2022 sales. And so we did that. And then I think the G&A is sort of self-explanatory. We've been committed over multiple years to hold SG&A down. We've been very lean on M&D and G&A, and we plan to continue that. R&D is the other one worth commenting on. So 14% increase year over year. This is part of sort of a three-year effort to make sure that we have a strong investment behind both the late-stage opportunities, of which we have many, and we'll talk about those, but also really driving the investment in early-stage technologies and the science and in early partnerships. And so we've managed to increase our R&D as a percent of sales, as a percent of total OPEX, In fact, we're homing in on, in 2022, being 10 points higher in R&D than SG&A, which will really put us at one of the top positions in the whole biotech space. So that's a little bit on the P&L structure. Next slide, please. So this is the sort of ups and downs by product. And I think what's probably worth highlighting here, the big blue bars on the bottom are the U.S. biosimilar impacts. And those bars, frankly, will be a lot smaller in 2022. and hopefully smaller yet in years after that. But you can see quite a diverse set of products driving growth and geographies as well. And then RonaPrieve was a significant contributor in 2021. We think we'll have additional sales of RonaPrieve in 2022. And longer term, it's a little hard to call because it depends a lot on the trajectory of the pandemic. Next slide. So in oncology, pretty dynamic picture. A lot of studies that read out, we launched a T-centric and adjuvant. We've got a lot more coming, but I think what I would highlight here is Progetta and T-centric are now our biggest two oncology programs, having supplanted AHNR. for that title. And it's great to see continued strong growth. If you look at Fezgo and Progetta together, you're in the high single digits growth, which is great to see and the continued important uptake of that adjuvant cancer regimen for women around the world. I'm going to go to the next slide. And here on T-centric, so you can see a bit soft in Q4, and this is primarily related to the withdrawal of the two accelerated approvals in bladder and TNBC. You can see that's mostly a U.S. phenomenon. We actually think that's going to be very short-lived, and we should return to growth now as we're launching in adjuvant lung. We have good signs on that, for example, that over 70% of patients, in the adjuvant setting are having their tumors tested for PD-L1. So it should be easy to identify the patients that are most likely to benefit, and they'll be ready to get T-centric. So a little bit, that's part of the outlook for T-centric. I think part of the outlook for T-centric has to do with the adjuvant studies, which I'll talk about shortly. Next slide. Next slide. So, tiragolamab, I think most of you have probably seen this result on the left that we shared at ESMO IO in December. We're really pleased to see a strong impact in survival that's continuing out past two years, and I think pretty remarkable results. And now we don't have much more suspense as we'll start to see the readouts in the 2022, and hopefully, you know, literally in months in both non-small cell lung cancer and small cell lung cancer with readouts in esophageal cancer and cervical cancer later in the year. Next slide, please. Hematology, also, I think, an area of increasing strength for us. The Polarix results, I think, were very well received by physicians at ASH in December. And I think, you know, this result, it's not as eye-popping as the results from the tiragolamab study that I just showed on the previous slide. But it's important to remember that this is the curative setting, the frontline setting. And you're looking at, you know, if you look at, say, the 18-month time point, you're talking about a difference of eight or nine out of 100 patients that have the possibility for a cure and no recurrence. That's a big difference if you're one of those eight or nine patients. The regimen was seen to be well-tolerated and easily administered. especially when you consider some of the other things that are being mooted for hematology, things like CAR T. This is a regime that's easily given in general oncology and in countries around the world. So we look forward to launches of PolarX, starting with the EU and Japan, and the U.S. filing will happen tomorrow. probably around mid-year. The FDA, basically, they're looking at the same data as everyone else. They just wanted to see more maturity because the first data set was an early interim where we hit. And so we'll provide that and be filing in the middle of the year. And then Mosin, which there's a number of other things I can highlight, but I think the data speaks for itself in heavily pretreated group of follicular lymphoma patients to see this level of complete responses and responses is really quite remarkable. And again, we've filed in the EU, we started the rolling filing in US and we look forward to bringing this to patients around the world. Next slide. So, continuing with hematology, I won't talk about all these regimens. I think we've got DLBCL and follicular lymphoma covered very thoroughly, but I did want to highlight a few of the more exciting things on the medical science side. So, we've started now a number of really interesting studies. So, for example, BLOFIT, which is the two-to-one ratio bispecific CD20, CD3 antibody. It's a combination with Gemox in second-line DLBCL, so that's begun We've also got a study with poliviplasmosin, which is really interesting since it's a chemo-free combination in the second line of DLBCL. Again, you know, this is, we think, a big difference from something like CAR-T because we would like to see, you know, things like complete response rates that might be higher than the percent of patients that would be eligible to treat with CAR-T. And so, again, we think we're really well positioned in multiple lines in DLBCL. And then finally, we're hoping this year to start a combination study of PoliB plus one of the anti-CD20, CD3 antibodies, either Mosin or Glofit, in the first line setting this year. So that would be our first chance to improve on the Polarix result that I just shared on the previous slide. Next slide, please. Okay, so hemophilia, Hemlibra is continuing its very strong appeal to patients and physicians around the world. As you see, there's not really any sign of slowing down here. And I think, again, it's just the efficacy and the dosing profile and convenience sort of speak for themselves. And we expect to see continued progress with Hemlibra. At the same time, just a couple things to mention. So we now have the interim results in mild and moderate patients. Those patients have been excluded in the EU, and we've now filed for an indication that would cover those patients in the EU. So that's happened in terms of the filing. And then finally, just a quick update. Our colleagues at SPARC have made some good progress with dosing regimens. in hemophilia A with gene therapy and are looking to start the phase three this year. So we're excited about that as well. Next slide. So in immunology, there's, you know, Continued strong performance from medicines like Xolair. Really pleased to see that. Actemra had a large increase, mostly driven by the use in COVID. We estimate more than a half a million patients in 2021, probably over a million patients since the beginning of the pandemic. Hospitalized patients have been treated with Actemra. and it's really now an integral part of the standard of care in most countries. One other thing I would point out is we've now started a systemic lupus study with gaziva. This is the, I think, third immunology study for our phase three study we've commenced with gaziva, and we're looking forward to bringing gaziva hopefully to patients with autoimmune diseases as well as hematology. Next slide. All right, turning to Okravos and the outlook there. Again, I think this chart really tells the story. Okravos was growing very strongly. The pandemic came along and created a lot of questions and challenges. And now that's largely been resolved in terms of things getting back to a slightly more normal place. Probably the only thing that is not normalized yet is just the rate of switching in general in the MS field is still, I think, at about 85% of what it was before the pandemic. But we are hopeful that as pandemic conditions ease, that we'll see more of a return to the normal switching. And we benefit the most from that because we have the highest share, which is held up at about 35% of new and switching patients. And I think I'll keep going. Next slide. Spinal muscular atrophy and avaricity, good progress here as well. You can see the lumpiness that we saw last year has kind of smoothed out a bit, and we see good growth in all the international regions. In the U.S., we think there's a little bit of a phenomenon of when we launched, there was sort of a big bolus, including some older patients who maybe aren't able to benefit from therapy. And so some of them have been dropping off. Meanwhile, we're continuing to get new patients in. So our outlook is that we'll have continued growth in the U.S., as well as continued penetration in countries around the world. So we think adversity's got a long way to go. And looking forward to being able to help many more patients. Also, we filed for our label extension for babies less than two months old based on the Rainbow Fish data, which was really, really excellent and encouraging. Next slide. So turning to ophthalmology, I know you all are familiar with the data, so I'm not going to get into that. But I do want to say we're looking forward to presenting two-year follow-up data on SysVimo at the angiogenesis meeting. And also on Vibismo, I just want to make a few mentions because this was approved just last Friday. And I want to say I think we're very pleased with the label in the sense that it gives physicians and patients flexibility on dosing, which I think is most important. So they approved. You'll have to read the label if you want the details. But essentially, there's flexibility around dosing from monthly up to every four months. And I think this is really a new high watermark. for treatment of these retinal diseases. And we're looking forward to bringing Bobizmo to patients in the U.S. now and to many other countries over the course of 2022. Next slide, please. All right, so in summing up, I think we've really accomplished an amazing feat of replenishing the portfolio, strengthening the portfolio. If you look at the pie charts on the right, I think it's pretty impressive to note that very recently, as recently as five years ago, AHNR were 40% of the group business. That's now below 10% and declining. Meanwhile, we've basically grown in every other area, including diagnostics. This is growing from 50 billion group sales to about 63 billion in group sales. And remember, that's not monopoly money. That's Swiss francs. So if you translate that into other currencies, you can add on another 10 percent growth, which I think is really impressive. that we've been able to do this at the same time that we've lost our biggest products. And so as someone, and I know everyone on this call has been part of Roche for some time, we've worked really hard and we're really pleased to have this outcome. Next slide. And we're not satisfied with that, and we have more to go. So if you look at the launches, a list of some really important launches this year, including bringing Evrizdi. Oh, sorry, this is 2021. Okay, you guys have seen this. We're going to move to 2022. So, looking forward to a bunch of really important launches, including the launches of our two ophthalmology products, Moson, T-Centric adjuvant around the world, Hemlibrin and mild to moderate, and the Polarix regimen, which will be, again, approving around the world. And then, in terms of readouts, it's an epic year, 14 pivotal readouts in 12 months, and which, you know, I think when I was pondering entering the field of biotechnology, I dreamed of something like a year like this with this many great readouts in really impressive areas, adjuvant cancer with Dicentric and Alicenza. Tyrogolamab with four pivotal studies reading out and hopefully really setting a new standard in cancer immunotherapy. G-redestrin, which we hope can be a best-in-class molecule as a CERD in hormone receptor-positive breast cancer. And then at the end of the year, the biggest one of all, Narimab in two large phase three studies. So we're super excited about this and look forward to bringing the results for everyone to see. And with that, I'll turn it over to my friend and colleague, Thomas Schoenecker.

Thank you so much, Bill. And good morning, good afternoon, everyone else from my side. And I'm very happy to present the full year diagnostics division results. And with sales of 17.8 billion, we really had an excellent growth of 29%. And as Sarah mentioned, the growth was driven by both the COVID-19 testing, but also strong base business growth really across all of the customer areas that you see on the slides. Actually, if you look at it, the about 4 billion Swiss francs in absolute growth last year, it was actually 1.85 billion that came from the base business. And that's really amazing. It's almost half. In a typical year, we would have added 600, 700 million, but really to add 1.5 billion on a base business, that's really significant. Now, let me point out one more thing that I think is important also for your planning for this year. In our diabetes care business, we had a resolution of a dispute of a rebate in North America in Q1. And without this impact, our sales would have grown by 1%, not by 3%. And obviously, that will impact also Q1 2022. Now, let's go to the next slide. And let me give you a bit more detail. So our base business is growing very strongly at 16% for the full year also, but not only due to the base effect. COVID testing sales were 4.7 billion. in 2021, and we really expect this to continue strongly in Q1. In fact, we had an extremely strong start, both in the base, but also in the COVID-19 related testing sales. Now, since the beginning of the pandemic, we actually delivered more than 1.2 billion tests, so since 2020. Now, the question that you will all ask me is how will this continue? And I mean, there's future demands and there are multiple scenarios. And Severin mentioned the two main scenarios. This demand will really depend on now the length of the Omicron variant wave, the emergence of new variants or previous variants like Delta. And also how effective are these vaccines going to be against those variants? Will we see waning of this immunity, et cetera? So really this will impact very much than the second half of the year. So as Severin mentioned, we risk adjusted the second half of the year and we have the majority of our COVID-19 test immunity sales expectations really in the beginning of the year. Now going to the next slide, looking at the regions, you can see the growth is really driven by all regions. And I'm very happy that with the FDA emergency use authorization of the rapid antigen test, this will open a great opportunity for us in the U.S. in 2022. Please go into the next slides. Now taking you through the businesses a bit more in detail, sales in the core lab increased by 21%, which is very strong. This is due to a strong base business growth in all regions. Molecular also had a good year on the basis of a very, very strong year in 2020 with a full year growth of 29%, again, driven a lot by SARS-CoV-2 testing, but not only. And actually, Q4 alone, our molecular business continued to grow at 15% despite some price erosion and a high base in 2020. And point-of-care molecular actually grew much faster with 271%. Point of care overall with 138%, and this was driven by rapid antigen test sales, and pathology grew 12%. Now taking a look at the P&L on the next slide. Co-operating profit grew faster than sales, almost twice as fast, and increased to 54%, thereby increasing our margins. Royalties and other operating income increased by 30%, and this was a one-time income from an out-licensing agreement of $18 million in diabetes care. You see the cost of sales is growing faster than sales. This is due to higher COVID-19 related sales. On the one hand, certain distribution costs are booked here, but also just increased volumes of SARS-CoV-2 rapid antigen tests where we have lower margins. M&D, you see the increase of 8%. This was really due to higher spending on local distribution costs, also very much linked to higher volumes of SARS-CoV-2 rapid antigen tests. R&D growing double-digit in line with our strategy, and this is really to advance our strong innovation of pipeline of new technologies, medical value, and digital solutions. With 7%, again, this is really driven through the acquisition of Genmark and other one-time costs. So this should normalize out and we should see some reverse effect going into 2022. So overall, I'm very pleased with the financials, but even more with our portfolio progress in a time of epidemic. And so let me share some of the highlights. On the next slide, you see that we received emergency use authorization of our COVID-19 at home test in the USA on December 24th. So there was no impact yet on sales in 21. You will see that in Q1 22. And there was an independent clinical trial done by NIH of our test and another test from another company. And this really showed excellent results of our test with a sensitivity of 95.3 and a specificity of 100%. There was another company that got the approval a couple of days after us. They had 10% less sensitivity than ours. So this really shows the quality of this test. Now, on the next slide, you see that we also received a CE mark for the combination rapid antigen test between SARS-CoV-2 and influenza A and influenza B. This test, just as the test I showed you in a previous slide, works together with our digital solution, NavifyPath. And with this, you can immediately store, display, and share your COVID-19 results. We are also here working with the FDA to get this test approved for the U.S. market, specifically as we may have a flu season end of this year. It would be very important to have this available also for U.S. citizens. Many of the COVID tests run on molecular systems, and one of the systems on the next slide that we just launched at the very end of last year is the COVAS 5800. And Cobus 5800 is, again, a fully automated PCR-based system for more of the lower volume segment. And it offers the broadest menu of assets in the industry. And when I call it lower volume, it's in light of the 6800, 8800, because actually most of the other molecular players, they actually have a system more like the 5800, maybe not as automated as ours, but in terms of throughput. And 6800, 8800 just deliver much more. And it was so essential now with Omicron. And we see that in January, because first of all, we could do more and more with less people. because the limits that many labs had were not the PCR tests, at least not from our side, but the limit what they had was really the labor, the personnel to do these tests. And because we have such a high level of automation, they could scale up much easier. And just to highlight that, if they put the samples onto the machine, it can go home, sleep, the next morning they're done, actually in three and a half hours. But most people sleep longer than three and a half hours. But the point is you don't need people for it. And in a phase where actually the people are the bottleneck because you don't have enough trained staff, this is really our competitive edge here. And as I mentioned, 5800 is really part of a family of systems with 6800 and 8800, and they share the same menu, the same radiation cassettes, the same user interface. On the top right, you see that we also launched in 2020 the Cobos Prime, and it's unique because no one else offers that. It's a molecular pre-analytic system. So basically, when the samples come in, you can put them all onto this machine, and it sorts, it allocates, it decaps, it does everything that otherwise people would have to do, which is really tedious manual labor, where you can also make errors. And this does it automatically. It's then connected with a line to the 60, 100, 80, 100. Everything is automatic. And since no one else has it, it really further extends our market leadership position in terms of automation in molecular law. And with the acquisition of Genmark in April in 2021, we also entered the syndromic panel market. And this market is the fastest growing molecular segment. So really excited about that. And we also see very high demand for these solutions. And here you can multiply more than 30 pathogens so that you can treat for the right pathogen very quickly. On December 1st, we closed the acquisition of TIPmobile. You see that in the lower row in the middle. And through this partnership, we have access to more than 45 IBD essays and 100 research essays available on our LightCycler platform. And in 2022, we'll also be launching our digital LightCycler. So, I mean, if you look at this portfolio, this is world-class. And I'm really excited to see how this is developing. Now, let me show you on the next slide something else that I'm really excited about because it shows the direction that we're taking in terms of clinical decision support and really digitalization of healthcare. And this is Cobus Pulse, and it's the first professional blood glucose system that combines best-in-class performance and expanded digital capabilities that are very similar to that of an iPhone. It actually runs an Android system on this platform, And together with Cobus Infinity Edge, which is an open ecosystem, we can provide our own clinical decision support apps, but also third-party apps via the Roche Digital Marketplace. It's kind of an app store. You can download it. At launch, we already have six clinical decision support apps available on this platform. One, for example, where you take the Cobus Pulse, you put it on the chest of the patient, and you can detect atrial fibrillation. Another one where you can take the glucose results and make an incident dosage requirement, which is obviously a regulated product on a regulated device. And a third example would be in wound management where you can take pictures of the wound and it calculates the wound healing and if you have to take measures. And all of that is directly connected to the EMR. So I would call it like the window from the clinician and the patient into the EMR where you can keep the quality standards high and make decisions right at the patient that are then also recorded in the system. So this is really an important milestone for point of care, and I'm super excited about it. Now, going into oncology, on the next slide, we've also launched the Avenia Tumor Tissue Comprehensive Genomic Profiling Kit. And this is the first jointly developed product between Roche and Foundation Medicine. And the development of this decentralized version of the FMI assay is really a step towards giving customers broad access to testing. And this test detects four classes of genomic alterations and three classes of genomic signatures. With the FMI analytics platform that it leverages, you can have insights to more than 500,000 clinical samples to support clinical decision-making. So another great progress in terms of clinical decision support. Staying with that and with digitalization of healthcare, let's talk about oncology, and in this case, Navify Oncology Hub. Now, this system enables much more efficient and effective clinical decisions. Currently in hospitals, and I've seen their infrastructure, sometimes you believe some of the hospital IT infrastructure dates back 20 or 30 years. Actually, it's dispersed all over the place, fragmented in multiple systems, not very easily accessible and not very shareable. Now with the Oncology Hub, we integrate and aggregate all of the patient data across the many different systems in one central workspace. And along the patient journey, from the very beginning, when the patient is first diagnosed until hopefully there's a positive outcome for the patient. And thereby, by having all the data ready to be able to make the right decisions, you can improve outcomes for these patients. Now, on the next slide, you see that we have had really an excellent year in terms of new launches, and this is just a selection. And I'm really proud of the progress the team made in this time of a pandemic. And in 2022, which is on the next slide, we'll again have a number of very, very important launches. On the instrument side, Benchmark Ultra Plus and Ventana DP600, which is a slide scanner for pathologists, again, to provide more clinical decision support. And in the molecular space, I talked about digital light cyclone. Among the test launchers, we'll have the PITSAO Beta-42 ratio Gen 2 in the US, where we've received breakthrough device designation by the FDA. And this is to help the diagnosis of Alzheimer's disease. And as you know, Alzheimer's is a big topic in 2022. So we really hope that we can support it with a much better and earlier diagnosis because using PET scans that are very expensive, it takes you months to actually get on the list. To do that much earlier would be very essential so that people can get the best possible treatment. With that, I'm really excited again about 2022. And with that, hand over to Alan to take you through the financials. Thank you.

Thomas, thanks and congratulations for a fantastic year. Same goes certainly to Bill. Really great. So hello, everybody. Thanks for joining. I hope everybody is safe and healthy. I think we had a really good year. which lots of justified investment. But before I start, let me thank Carl. Carl, really a big, big, big thank you from my side as well. I think you have given investor relations, what should I say, a new benchmark, a new standard, if you like, for 20 years, which is amazing. So you joined in 2002. The share price was at 120, as was mentioned already. And you were completely focused on that, which I always admired. And certainly that helped me quite a bit. So thanks for that. But mostly I would like to thank you for your great humor. It was always great to be with you on the road and quite some fun. And it's really sad to see you leave. But OK, life goes on. Good. I have a lot of details, and that's why I think we should jump into it. The highlights, I think that the basic highlights you heard, and I will anyway refer to them in a second. So let's go through to slide 52, the next one. And there you see really what Severin has mentioned already, the sales volatility, if you like, that we went through with the biosimilar hit, but both divisions contributed fantastically, really. So we were able to come up with significant growth despite the fact that we lost really significant sales due to biosimilar impact. It was a bit less compared to 2020, but now really you see the number coming down. And I come to that when I speak about the guidance. Then really the point about the cooperating profit, which moved up by 4%, and there you see really our commitment to innovation, but also our commitment to the pipeline, where we invested 1.7 billion in addition in R&D, and I will come back to that as well. So let's get to the overview on the next slide. And the overview when it comes to the group performance. So let me lead you through this and we will get to more details. I think sales plus 9%, I think well described by Bill and Thomas. Cooperating profit up 4%. I will talk about the P&L in a second. Two points to mention here. Cost of sales went up significantly. I will talk about that. R&D went up as mentioned as well. Then the coordinate income went up with 6%, and you know I talk about the blue bar and the numbers in the blue bar, so really the gross rates and constant rates, you see now plus 6%. So you ask yourself, okay, cooperating profit up 4%, coordinate income up 6%, what happened? Taxes. We really benefited from the resolution of tax disputes even more than we benefited in 2020. I will explain that as well. You see then from the core net income to the core EPS plus 6%. There's a small accretion effect in it in 2021 already from the repurchase of the Novartis stake of 0.4 percentage points. So even when you exclude it, round it, we stick to the 6%. But I want to bring that in. I will talk about it. Later on, and then the IFRS net income, which has grown by 2%, we brought more charges in, and you will see that on a specific slide later on, you see IFRS net income even declined in Swiss francs. Operating free cash flow up 34%, fantastic and timely as we have loaded the balance sheet with debt from the repurchase of the stake, of the Novartis stake. 19.4 billion is an impressive number. And you see even the free cash flow went up with 46%. So really timely and helps us out quite a bit. Good. Let's go to the core EPS development. And why do I put that forward? Because I think really it describes the performance of the company quite well. And let me show you the bridge and the ingredients which drove the year the core EPS growth in 2021. You see on the left-hand side the core EPS in 2020. UC operations helped us quite a bit with an increase of 4.4 percentage points. You see really what worked against us were losses on equity securities. And, you know, we have a participation company called Alakos. Share price really went down significantly before year end because they announced the outcome of two studies, the Enigma phase three trial and the Cryptos phase two phase three trial. And both studies did not achieve statistical significance on the patient-reported symptomatic co-primary endpoints. The data was not completely conclusive, but it tended to be on the negative side, and that certainly gave us a hit. Let me mention here that, in fact, I think we have sold quite a stake on other costs already, and we have a significant cash return with that participation. So, so far, so good. We will see how it further develops, but it worked against us. And then you see really the effective tax rate change. In fact, it was not really a tax rate change. It was really impacts from the resolution of tax disputes. But that gave us a boost of plus 3.3 percentage point, which certainly won't return in 2022, at least is not expected to return in 2022. So these were the major drivers. And we will come back to them again and again. Let's go to the P&L. And the P&L is on 55. Bill and Thomas gave you quite some ingredients already. Don't have to talk about the sales. Royalties and other operating income up a billion, 75 million. I think Bill brought it in well. And I will have a specific slide on that, very much driven by Rona Preview S and higher divestment gains. We have the cost of sales up 3.7 billion. I have a slide on that. MND, a bit driven by diagnostics with the increase in distribution costs that Thomas mentioned. Pharma basically flat, but very much driven by, let's say, the newer members of pharma like Spark, Flatiron, and so on. Then you have R&D, 1.7 billion, as mentioned. And here, 1.5 billion going to pharma, for oncology, CNS, PHC, COVID-19. And as mentioned, we have started 16 phase 3 trials in addition in 2021. So evidently, I think that triggers quite some investment. On the diagnostic side, I think Thomas mentioned it, CoLab, Molecula. digital COVID-19 played into this. And GNA, you see, we even came up with the savings. So really all what we have said that we want to really find funds and put them into other cost times, especially into R&D. I think that comes across here. Good. With that, let's go into more of the details of the P&L and sales. I don't want to spend a lot of time here. You see a farmer has grown by 3%. Bill explained what happened in the U.S. where we still have a significant, had a significant biosimilar impact in 2021. I think all the other markets have grown well. And then diagnostics with 29% growth leads us to 9%. And the currency impact of minus one percentage point, which leaves us with an 8% growth in Swiss francs. I see more interesting is royalties and other operating income. And I know everybody is behind that point. What is what is Ronabrief really doing in our numbers and how does it show? So let me lead you through this. And you see here on that slide, Casivirimab plus Imdevimab and that's Ronabrief. 2020, you see, we had roughly 2 billion, 20 million in royalties and other operating income, and that increased to 3 billion, 49 million in the year 2021. Let's go through the bridge. First one is the royalty income driven by Van Clexta. I think Van Clexta does really, really well. We have an additional readout in 2022. You know, we don't report the sales, but we report here the royalties that we get, and we enjoy this, as you can see. Outlicensing income, that's a base effect from last year from Shugai, that's why you see here a drop. And then we get to the very interesting point, other operating income, including the profit share from Roanokeef. And you see a number of 754 million. So let me explain that. $654 million of the $754 million are coming from Roan Apprieve US. This is basically, you know, we don't report the sales for Roan Apprieve in the US. All we get is, if you like, a profit share for sales in the US, and this is mirrored here. Certainly, I think we don't expect to have significant sales in Ronaprip in the U.S. in 2022 at this stage. We will see what happens. But I would argue it's pretty likely that we don't see that $654 million again in 2022. What remains is other operating income from other products, like when Klexta U.S., where we have also a profit share, or XSOLA XUS. I think that will come through. certainly in the royalties and other operating income. Then we have the income from the disposal of products. You know, when we have tail end products, we sell them and it's pretty steady. We had here a slide up compared to previous years of plus 257 million. Good. With that, let's go to the cost of sales. And the cost of sales have certainly the largest deviation of all the cost lines or expense lines in the P&L. It's also the largest deviation to consensus when I remember it well. And what you see it really, you see the cost of sales full year 2020 and then the bridge to the cost of sales full year 2021. Let me lead you through the differences. And the first bar, red bar, is really the volume increase, which is pretty intuitive. 15% volume increase. That is pharma with 11% and diagnostics with 30%. So that accounts for the 15%. So 2.2 billion coming from that. Then we have incremental production costs for COVID. And this is Ronapriv and Atea. And let me clarify that. I'm aware of the fact that we have in the finance report on page 22 said for incremental production costs, it's 575 million. What brings, let's say, this number to 615 that we have on the slide is impairments for ITF for PP&E. They are included here. And that really in total gives you the 615. Then we have the RonaPRIF profit share expense. Well, you've seen the sales of RonaPRIF in our numbers, roughly 1.6 billion for 2021. You see now the related profit share expense to these sales. And as you might have heard that Sugar has announced already that they expect to have sales of RonaPRIF of around 1.6 billion in 2022. So this is a number which is pretty likely to reoccur in 2022. You see really then, let's say, the year-on-year change in Ractaximab's error profit share expenses, which went down as the sales went down. And then a very important point is certainly the pharma diagnostic sales mix, which has changed. And whenever you project for 2022, that's definitely something you have to take into account. Good. With that, let's go to the margins. That's 59. And you see a margin decline in 2021 on the group side. I would argue nothing dramatic here. Nevertheless, I think if you understand the guidance for 2022 well, and I will come back to that, I think it's pretty clear that we further will work on the margin. and on productivity and efficiencies, and it's justified that we will see quite a good momentum in 2022. On that front, you see also where it came from. I think there is a decline in the pharma margin. Well, I think on one hand, we invested into R&D. On the other hand, we had COVID-related impacts, like in the cost of sales that I've explained before. And then you see on the right-hand side, diagnostics. And let me say that I think a fantastic margin was 22.1%. But we don't know what's going to happen with the COVID sales for diagnostics. If they were declining on the diagnostic side, there would be certainly a little bit of a weakening here because, well, very clearly, I think COVID sales certainly contribute to the gross profit margin. And that certainly helps to cover the fixed costs. Good. With that, let's go to the core net financial result. And you see, really, there was a negative impact, which increased in 2020, a minus $564 million. In 2021, on the right-hand side, in blue, a minus $751 million. And equity securities, I've explained already, with the impact from Alakos and the minus 257 million. You see interest expenses, we were able to decrease them again by 95 million, so quite a significant saving for us. So it helped us to mitigate the negative effects that I've described before. But I have to say in 2022, certainly we expect additional financing costs for Alakos. the repurchase of the Novartis dike of roughly 330 million. I come back to that, but very, very clearly, it is clearly to expect that this green bar that you see in here will turn into a red bar in the course of 2021. Good. With that, let's go on to the tax rate. And that's, I think, another story to mention. Well, in the middle of this slide, you see the blue bars. And the blue bars are the adjusted, if you like, the underlying group core tax rates for 2020 and 2021. And I would argue they are both very compatible. So 18.6% compared to 17.8% in 2021. But what we're also seeing is in 2020 and in 2021, we experienced positive and even enjoyed positive impacts from the resolution of tax disputes. which certainly led to the release of provisions. And the extent in 2020 was 317 million positive, if you like, which helped us on the profit side. And in 2021, that was even higher, 697 million. And as you can imagine, as these tax disputes are all related to authorities, Well, you know, it's not like that we expect something like this to happen in 2022, which means that I expect that the group core tax rate will go to around 18% in 2022. So another effect, which will certainly mitigate the growth of core EPS. With that, let's go to the non-core items and the IFRS income. I want to cut that short. Corporating profit growth of 4% you have seen. I'm talking about constant rates here. Let's say the global restructuring plans, we've booked additional charges, which certainly lead to additional savings moving forward. Amortization of intangible assets, you see here a saving of 200 million, 194 million to be precise, compared to last year. I can say that the aspirate amortization came to an end at the end of September, so there will be a positive impact in 2022 from that. Then you see really a minor impact on the impairment of intangible assets and on M&A and alliance transactions. And you see a larger impact in legal and environmental. You know it was positive in 2020, that was the release of the Accutane provisions with roughly 300 million positive. And then you see in 2021, these are additional environmental provisions that we have taken for certain sites. You see the IFRS operating profit basically flat with that. Then you bring the financial effects and the tax effects based on what you've seen before in. And you end up with an IFRS net income with an increase of 2% in constant rates and minus 1% in Swiss fraps. Good. With that, I think really to slide 63, which is just summarizing what I've explained. And I would like to go straight to the cash flow on 65. First of all, I think it was a strong idea. You can see all divisions ramped up their cash generation quite significantly, which is certainly very pleasing. As I said, it comes at the right time. So I think a good thing here. Let's go a little bit to the ingredients on the next slide. Here you see really where it came from. You see the first green bar, the operating profit, net of cash adjustments. And you would argue, well, it's on one hand really operations, so the operational profit, and on top of that, provisions that we have taken. Then you see really the networking capital movement, and that is very much driven by the accounts receivable, as the accounts payable, sorry. And then you see the investments in PP&E, and here Shugai and Diagnostics have driven that number up. And then you see really the investments in intangible assets, which came down compared to last year. which could trigger the question, well, did you invest enough into innovation? Well, you've seen the ramp up in R&D, but if you just look at the balance sheet and M&A and equity investments and all of that, the difference to last year is not very big. Good, with this, let's go to the net debt development. Yeah, and we started into the year, you see on the left-hand side, with net debt of 1.9 billion. And the question was very justified, would you get net cash positive? And we didn't. And the sole reason why that is, is that we did the share repurchase. But let me lead you through the bridge. 1.9 billion net debt at the beginning of the year. Then the operating free cash flow was 19.4 billion. You see really the net operating free cash flow with taxes and treasuries that we have paid. And then you see that large red bar, the minus 32 billion. And this is driven by the dividends paid. really for the year 2020. And then you see the share repurchase of 19 billion, which comes in here, which leaves us with a net debt position of 18.2 billion. Below you see really the comparison, the investments in innovation with intangible assets, equity, M&A and total, and you see the difference is 1.2 billion. With that, let's go to the balance sheet. And I don't want to go through every detail here. You see on the left-hand side, really the assets, cash and marketable security is pretty stable. And that's a good cash generation, I can say. Then the other current assets, inventories went up by 521 million, accounts receivables up by 652 million, other current assets up by 648 million. You see the non-currency assets, that's basically PP&E, so investment in plant property and equipment of a billion, ramp up. And then the goodwill, which increased by 1.56 billion, certainly driven by the acquisitions of Genmark and Tidmobile. And then I think which is much more interesting is the right-hand side, the liabilities and the equity. And the short-term, the current liabilities really went up by short-term debt, 11.1 billion, which is the bridge for doing Novartis stake repurchase. And then the long-term debt went up by roughly 6 billion, 5.8 in Swiss francs. This were 6 billion US dollars bonds that we've issued and that we brought in already, I think a very attractive range, which is good. You see the equity has reduced to 31%. That's the equity ratio now. We feel comfortable with that, but it's the consequence of terminating the shares of the repurchase, which has happened, I think, a couple of days ago now also legally. We had to account for it already last year, but legally it was not done yet. So that's done now. And now we have a much lower share base, if you like, at least from a number point of view than before. And I come to this. Good. Let's get to the outlook. Outlook first on currencies, and I want to cut that short. You see really what the currency impact has been for the full year, minus one percentage point on sales, minus two percentage points on the cooperating profit, minus three percentage points on core EPS. And you see what it was driven by on the left-hand side. I think the negative impact of the US dollar got smaller in the course of 2021, and the positive impact of the Euro got smaller as well, if you like. So I think really these two mitigating things really came together. I think really you see our projection here on the right-hand side of the slide. If we expected all the currency rates that we have had at the end of the year 2021 to remain stable in the course of 2022, which is certainly completely unlikely, But if that were the case, I think the currency impacts would be between minus two percentage points to minus four percentage points on sales, core operating profit and core EPS. Good. And when I say core EPS, it's a perfect segue into the slide 71. And that's now really for everybody who wants to come up with proper projections for 2022. And I want to set the stage well that you can do that. You know the core EPS projections are really operating with a constant rate, in a constant rate environment, and I want to deliver you now really that one. Really, you see really the starting points on the left-hand side. It's the core EPS 2021 as reported, excluding the accretion effect from the repurchase. The share repurchase impact is 0.07 Swiss francs and leads you to the core EPS of 2021 as reported of 19.81. Now, when you go on page 60 of the financial report, you will see a currency loss of 232 million incorporated into that number. When you deduct the taxes, you get to exactly 200 million Swiss francs. And this is what you add to the net income for ROE shareholders of 17 billion, 40 million Swiss francs. Furthermore, you have deducted 1 million for the interest of non-controlling interest shares of the group net income. And that leaves you a net income for ROE shareholders used to calculate in a constant rate environment for 2022 of 17 billion, 239 million Swiss francs. You deduct this through 860 million shares, to be very precise, 859,867,000 shares. And that leaves you then with the 20.05, which is outlined here of that slide. Good. Now let me clarify on the next slide the accretion effect and how we got to the accretion effect. for 2022. You see on the left-hand side of the slide what I've explained already, the accretion effect for 2021 with plus 0.4 percentage points that you see in that pink arrow. Now let's get to the left-hand side, the right-hand side with the 4.4 percentage points. First of all, I think there's the number of shares which go down, and they go down to 810 million shares. Don't forget, there's also an LTI impact incorporated into this, and you'll find that on the pages 167 of our finance report where it is outlined. So you get to 810 million. When you do just use the $810 million and you take the profits that you project and you just put it really on this $810 million, you have automatically an accretion impact of 6% roughly. What comes certainly in addition is a cost of financing assumption. And the cost of financing assumption I've mentioned already, we expect... to have 330 million more financing costs in the course of 2022. This number can vary. We're happy to update you during the year where we are. When you take that into account and the number of shares that I've mentioned, you get to a counter effect, a mitigating effect of 0.34, which then leads you to a core EPS 2021 after the repurchase impact in 2022 of 20.69%. Certainly, I think if you want to adjust value, you have to bring the currency impact in as well. That leads me now to the outlook. And the outlook, Severin, went through this. But let me make a couple of points just to get it completely straight. This outlook contains the assumptions that our COVID sales from 2021 of roughly 7 billion declined to 5 billion in 2022. So we lose roughly 2 billion COVID sales baked in into that guidance. We will lose furthermore around 2.5 billion in sales due to the biosimilar competition in 2022. So really on the sales side, we expect to lose roughly 4.5 billion, and this is incorporated into that guidance. On the core EPS growth side, well, what we have included, and that's on that slide here, the accretion effect of 4.4 percentage points. But in addition, we assume that the group core tax rate goes to around 18%, which is a significant step upwards. And in addition, we also expect that the financing costs go up by 330 million. Therefore, and don't have to say anything about the dividend outlook. Good, I think that leads me to the end of my part and we are happy to take your questions.

Thanks, Ellen. And may I ask all the participants in the Q&A to just limit themselves to two questions. I would open now the line for Wimal Kapadia from Bernstein. Wimal, please.

for first-line DLBCL. Filing is now expected in the middle of the year. So it seems that the U.S. is the regulator which requires an additional six months of data. So can I just ask, what was the regulator's hesitation? And does that really change your view of the potential label and uptake in the U.S.? And just tied to that, could we see good momentum in the OUS markets without OS data? And then my second question, please, is just to come back to prior comments on TIGIT in small cell lung cancer. So we are yet to see any clinical data in the setting for the combination. But given we're approaching the pivotal readout, I just wanted to get a sense from you today, you know, your level of confidence there. into this first tiragolamab readout. You know, given that PDX alone in this indication only drives a modest benefit, you know, what exactly have you seen from the internal data? And just how important is the chemotherapy component to demonstrating success here? Thank you.

Great. I guess I'll take those. Yeah. So in terms of Polarix, I think, you know, you all are followers of what's going on in terms of, you know, various regulators and things. And I think the FDA is setting a very high bar these days in terms of approvals and things. And they wanted to see some more data in terms of the duration of data. But the primary endpoint in discussion with the FDA and all the other regulators has been the PFS, which is the standard approval for a first-line therapy and DLBCL, because the point is you're trying to, basically, you're trying to limit the percent of patients who recur to This isn't like metastatic cancer where, you know, at least historically in metastatic cancer, 100% of patients recur, and it's just a question of timing, and so then the focus becomes OS. In DLBCL, you know, patients who don't recur within a few years often are cured for life, or typically are cured for life, and so the primary endpoint of the study, which was You know, the primary endpoint for previous studies, including the RCHOP regimen, was PFS, and that remains the approval standard in the U.S. and rest of the world. And I think that probably partly answers your question about whether we need OS, ex-U.S., Again, I think we have good confidence that we will see OS, but it may take a while because, again, it does typically follow later. But the point is, if you recur in the first-line setting, your options today are things like CAR-T therapy. And so people understand that, you know, having an agent that substantially decreases the proportion of people who recur, that is the goal. And that's why we're very confident in Polarix becoming the standard of care and in getting approval in all the major geographies. And then in terms of, you know, what's our confidence level in tiragolamab in small cell lung cancer? I would say it's, you know, it's measured by the fact that we don't have randomized controlled data in small cell lung cancer with teragolamab. So, you know, we took a calculated risk based on the strong data we saw in non-small cell lung cancer that maybe it would behave typically or behave in a way that's similar to what we've seen with the checkpoint inhibitors. But we don't know that. And we'll find out when the data comes in. But I think We definitely see small cell lung cancer historically has been a hard one to hit with many different agents. And I think if that result comes in first and it was negative, I don't think it undermines our confidence in the total program, but obviously we'd love to have a positive result. Great. Thank you.

Thank you. Thanks. So the next one in the row would be Simon Baker from Redburn. Simon.

Thank you for taking my questions too, if I may, please. And I think they're probably both for Bill. Just on Gantanarumab, you said that that's the biggest readout at the end of the year. The previous two quarters, you said second half. I just wanted to check whether that was semantics or whether that is a slight delay from effectively second half to fourth quarter. And also on Gantanarumab, We had the Adjahelm Q4 sales out this morning, which were almost negligible. I just wonder how this has influenced your thoughts on what you need to demonstrate in that study. Clearly, Biogen has not succeeded in persuading. What do you need to do with the profile of gantanerumab? And also, what lessons can be learned commercially, assuming you do from what Biogen have done? And then secondly, on glifitamab, Bill, you mentioned the combination with Gemox. I just wonder if you could give us a bit more color on the combo potential of glifitamab in light of the phase one study that you posted yesterday. What else do you think is the potential combination partners for glifitamab? Thanks so much.

Thanks for the question, Simon. So first off, in terms of Gant and Aramav, there's definitely no delay. It's just in out years, we typically talk about first half, second half, and now that we're in the year, and we can zoom in a little more on it. And so we're projecting Q4. But, you know, that's our best guess, but we're quite confident that we'll have it in Q4. Let's see, you asked about the Alzheimer's space and how we're, you know, looking at competitor molecules and things. I think the fundamental issue here is belief in efficacy and safety of a medicine. right? And people are getting, analyzing with a fine tooth comb, the CMS draft payment guidance, this sort of thing. I think what it comes down to is that physicians, patients, payers, they want compelling evidence. And in this particular case, for various reasons, they seem to be voting with their feet that they don't have that yet. I mean, we're And we've been compelled since we started the graduate program with Gant and Aramab that we need to deliver two large, robust studies run to the end. I remember when we were having the discussion about the trial design and potential for futility analysis. This is back before any results from out of helm, you know, and we said, look, the last thing we want to do is stop early because, you know, We know that we have a titration period, and then we're going to have a sort of a treatment period with patients on the high dose. And so we want to have basically the longest reasonable study we can run with 100% of patients at the maximum dose. And that's what we're going to be delivering in Q4 this year. And I think that that's the best anyone can do, and we're quite hopeful. that that's going to deliver a very clear, you know, unequivocal result on safety and efficacy that will encourage, you know, people to use it and adopt it. And so I hope that makes sense. And then you asked about potential combo partners for Glofi. You know, it's interesting because of the two-to-one format, we can combine it with anti-CD20 molecules like rituxan, which is unique. And the safety profile, you know, the main thing that we have to deal with is the cytokine release syndrome, which means that some of the toxicities of other typical agents in hematology aren't really overlapping with it. So, you know, we think it's got a bright future in combinations. It's so efficacious, we're not sure how much combinations are going to be important. So, you know, let's see what we decide in terms of, for example, the frontline study in DLVCL. If we do a combination with Polovi, You know, that could be, you know, obviously a very interesting setup in terms of efficacy, side effect profile, and obviously we would hope to deliver something big for patients. But more science to come on that. Thanks, Simon. Thanks so much. Thanks.

The next one would be Richard Fosser from J.P. Morgan. Richard.

Thanks very much, Pranik. A couple of diagnostics questions, please. So just thinking about the demand that you highlighted in the first quarter and early parts of the year, maybe an idea of where your capacity is now for antigen testing? how you see the PCR demand holding up, obviously very high in Q1. But some idea of that would be would be very helpful. And then maybe you alluded to having limited or risk adjusted sales in the second half. is what you're seeing something like Denmark where testing is just abandoned because no one isolates anymore? Just some thoughts there. And then allied to that, the second question, the margins in diagnostics, clearly Alan hinted to being somewhat down if you have down sales, but just some colour about how to think about that on the gross margin side to get us to a level of what's in the guidance would help. Thanks very much.

Thank you so much for your question. So first, yeah, let me talk about antigen tests here. We have capacities of more than 100 million per month. And I would say that, yeah, I would say the beginning of the year is strong. And I would very much expect that specifically on antigen tests, probably as we go into the summer, they're going to drop sharply. I think that there will be more demand on PCR testing because really antigen tests, most of the orders come from governments. And they're big orders. And, you know, when the things are not dramatic anymore, they usually don't buy. And then suddenly they buy again. And so it fluctuates a lot more. And it's always like big orders every time. So I think in some it will be a drastic drop. When it comes to PCR, we have really significantly increased our production capacities by at least, I would say, 10x from the beginning of the pandemic. So, you know, we are like 50-60 million tests a month right now in terms of capacities, and we actually have some safety stocks as well because As we went into the winter, we kept producing. In the summer, it was a bit lower, but we didn't stop. And this is really helping that right now, because right now the demand is much higher than we've ever seen it in the entire pandemic. I can say that. And so it's really good that we never stopped. And our high level of automation also improved. Right now, with no staff available, people dropping out because of Omicron in the labs, they really see this as the preferred choice. Then you were asking, you know, how is this going to continue? I think it's very hard to say. But as Severin showed, the two scenarios, there is one scenario that as we enter into the summer, things are going to drop. I think PCR is going to be more stable than antigen, but it will drop. And then the key question is, how will the next winter look like? And I think that we will enter new respiratory seasons. The question is, will there be COVID? And I would say the likelihood is not small. And then it's a question, is it going to be dependent? Is it going to be like Omicron or, you know, a descendant of Omicron? Or is it going to be a re-emergence of, for example, Delta virus? You know, things are going to look very different if it's going to be a re-emergence of Delta. And some biologists are speculating that that could be a possibility or a descendant of Delta, right? So, you know, it's very hard to predict how things are going to play out. But I would say what governments can't afford is that they get caught off guard in the third winter in a row. I mean, that would not show very good planning on their end. And so, you know, financials is one thing, but we are going to be ready for both scenarios. I want our organization to be ready for both scenarios because I don't want it to be because Roche cannot deliver. I mean, that would not be good. Now, with regards to the margins, I think Ellen showed one slide where you see the development of the margins over the last three years, which is more than seven percentage points up. What you don't see, it's like all the work that we've done actually to improve operating expenses underneath, right? So as we move out of the pandemic, we do expect to be a couple of percentage points better than where we were prior to the pandemic. But there still will be a drop because all of the gross profit that we generated is dropping through all the way through or most of it all the way through right now. So there will be a drop. But it's not going to be a small drop either. I just want to say it's going to be better than pre-pandemic. a couple of points, but not that much more, not yet. So give us time to continue to work on our operating expenses. And I'm very committed to do that.

Thanks very much.

So the next two questions would come from Sachin Jain from Bank of America.

Hi there, Sachin, Jane here. Just a couple of topics for me, please. Just start off with the margin. I just don't make it bigger picture. So is it fair to assume that group margins are stable in 22 within the guide? And is that pharma margin offset by the diagnostic down? If that's correct, I wonder if you could just detail what's the main drive of the pharma margin in 22. And on your diagnostics comment, Thomas, I wonder if I could just push you further. I think on prior calls, you've talked about defending 20% EBIT margin in a post-pandemic period. Is that possible in 22? So that's margin question. Second question on ticentric adjuvant lung adoption. Bill, you made some very brief comments on some early indicators. I wonder if you could provide a bit more color on any markers beyond that. 70% testing that you've seen. And I think you've talked about this as a 2 billion opportunity before. Does that still stand? And then my final question, I just wonder if you would give some details on this. The 5 billion COVID, just very simply, any color on a 1H versus 2H split and a pharma versus diagnostic split. Thank you.

Perhaps I can take the margin question and let me start on a group level, Sachin. I think that's the most important thing because what you see is that, of course, we have the accretion effect, but take the accretion effect out, then you see that earnings are growing in line with sales. Now, what you also see is the tax rate is expected to be around 18%. So marketly up versus what it has been last year with the specific releases we had to, as we had some settlements, right? So by definition, you know, you can do the maths as there are no other major additional effects, as a result, operating margins have to go up. Otherwise, it is not possible that you keep earnings up, excluding the accretion effect, right? So I just kind of let's get back to the group level because that is the starting point. And that is actually a very specific guidance we are giving you here. And now I wouldn't go so far to give specific margins for the divisions, but directionally, you're absolutely right. Because as we expect less COVID sales on the diagnostic side, that leads... to a loss in gross profit where you have, you know, only limited operating expenses associated with. So that will be a burden on the margin in diagnostics. And consequently, of course, there must be even more upside on the pharma side. And I guess a very important point, Part of the explanation is in the reconciliation slide, which you have seen by Alan, right, where he explains the cost profit. So here you see the major items and you can see that some of those items are very much related to our COVID sales honor brief in particular. So I think the short answer is really on a group level, you need operating margin improvement to achieve that guidance. And more specifically, I would refer you to the details of Alan's slides, because that is very telling in terms of where the margin improvement comes from. Now on the 5 billion COVID sales, The majority is expected in the first half versus the second half. That is particularly true for diagnostics, where we expect in our scenario, in our base assumption, the majority to occur in the first half. Now, there is a scenario, as Thomas has alluded to, where we see another wave in the winter season, That, of course, would change the picture, but that's something we have not incorporated in our guidance. In pharma, it's a bit more spread over the year, but overall, the majority is in the first half. There was a specific pharma question. Sorry, Thomas, you wanted to add in.

Yeah, I just wanted to quickly add on the diagnostic side, because I get this question every now and then on this 20%. I always say it's definitely a long-term goal. We have certain major investments right now in R&D ongoing that we want to see through. because, you know, these are very important projects for us. And it's clear that if, you know, sales are going to go down, as mentioned, with maybe a less operating profit, sorry, a gross profit than the rest of the portfolio, but it drops through all the way, it will impact also the operating profit. And so my guidance is we will be a couple of percent better after the pandemic than prior to the pandemic, but don't expect 20%. Now, all can change if there is more COVID sales, right? I mean, you know, there's this uncertainty of these two scenarios, but I would say that's like kind of giving you some frame.

And it puts even more pressure on pharma, I guess. Over to you, Bill.

Yeah, yeah. Sorry, Sachin, you asked about the... T-centric adjuvant launch. And honestly, I don't have much to tell you because the tracking data is all on delay and we just got approval in October. And then we went right into a kind of craziness of Omicron in December, January. So I think the signs are positive. The things we're hearing from doctors are positive, but we just don't have data at this point.

Okay, thanks. Then I would open the line for Richard Parks from Exxon. Two questions, please.

Hi, hopefully you can hear me okay. First question is just to push a little bit more on the margin expectation. If I pass out the tax rate normalisation and the increased finance costs, I do see that guidance implies a margin improvement, but it still seems to leave you sort of 100 basis points or so below where you were last year. So I wondered if you could comment about longer-term margins. Should we expect... a further improvement when we look into 2023, when maybe some of the run-approved sort of margin dilution effects washes out. And I say that because consensus has obviously got margins moving towards the sort of high 30s in the longer term. So I wonder if that's still achievable. The second question is on Vibismo. As you mentioned, you had a very strong label. I just wondered if you could share some of the prescriber feedback and your thoughts on the initial trajectory. Obviously, it's been a very dynamic market in the past, but wondering to what degree physician experience with the safety concerns with Bayerview might temper that initial launch trajectory. Thank you.

Yeah, Richard, on the longer term outlook for margins, I think really this depends on the development of the pipeline. That's really the answer. I mean, especially this year, right? I mean, there's so much coming through. And if... A good number of those are positive. Not all will be positive. I think that's not realistic. But if a good number of those are positive, don't worry about margins. We are on a really good journey. If everything goes down the drain, start worrying about the margins. So, in the longer term, it all depends on our ability to rejuvenate the portfolio with truly differentiated medicines because that's basically the essence of the pricing power we have in the market. So, in this respect, really, If you look at the sensitivities, it's all about the pipeline. And this year is a particularly critical year in this respect, as we have such a quantity of important readouts. So that's really the answer to that question. Bill, there was a question on Babaismo as well.

Yep, yep. And let me take this opportunity, since it's a new medicine, to try to get us all saying the name the same way. So it's Vibismo. And the reason, the easy way to remember that is it's bispecific. So there we go. The label, I mentioned, you asked what the feedback was. So I was actually just digging through my text messages. So this is a text from a a physician involved in treating a lot of patients. They said, wow, two exclamation points, amazing label, exclamation point. You work day and night to get this. Monthly dosing okay for both. No CST in the label. Huge win. So, you want to know what they said. This is what we're hearing. It's a big deal that they have flexibility because, as you know, and as we've learned from the studies, what's important is that you get the right dose frequency for each patient and the goal being to really maximize the efficacy, get the maximum gain in visual acuity, and then to maintain it. And unfortunately, this too often isn't happening in the real world. And so the fact that we have the flexibility, while we think that the vast majority of patients are going to end up getting either one dose every three months or one dose every four months, but that there's no wrinkles with the payers in between, for example, with the baseline dosing. And so, yeah. Yeah. I think we're very encouraged and we think we've got every prospect to have a very strong launch for the BISMA. Did I answer your question?

Yeah, just in addition to that, obviously, physicians have had the experience with Bayerview catching them out in terms of safety concerns. Just wonder to what degree that might temper kind of initial uptake until you generate more world-world experience.

Yeah, I think that's fair that, you know, that there could be some of that effect, but we're certainly not hearing any specific concerns about Vibismo. The advisory boards and the conversations we've had and then the initial discussions we've had, people feel like we ran, you know, we have four phase three studies, you know, two in AMD and two in DME. That data has been very thoroughly reviewed now for, gosh, from whenever we first presented, it's probably been eight months. And physicians have had a good chance to examine it. And I think we should have a good launch.

Perfect.

Thank you.

Thanks. So the next one on the row would be Emmanuel. Emmanuel, these two questions. Deutsche Bank.

Thank you, Bruno, Manny Papadakis. Sorry to labour the point on farmer margins. Just to follow up, particularly on the gross margin, I think you said you expect run-of-pre-sales again in the region of one and a half billion. Perhaps you could just confirm that. And then implications of gross margins, I mean, assuming... U.S. sales are going to be minimal this year due to the ineffectiveness relative to Omicron. So therefore, you won't be getting a royalty stream from the U.S. You will have a pay away ex-U.S. It seems hard. Therefore, you're going to have much improvement on the gross margin within pharma. So is the improvement really coming from SG&A side of things? And a bit more color there would be extremely helpful. And then on the bispecifics, Mosunituzumab. I have to confess I was a little surprised to recall Biogen had an opt-in there to share profit for the princely sum of $30 million. So does that affect how you think about prioritizing development plans between the two assets? For example, which one you do take forward in frontline DLBCL? You mentioned Clifitimab earlier. as a potential partner for Pallavi. And on the latter, I know that came by period, therefore doesn't fall under the same agreement. But can you just remind us to what extent Biogen has any potential claim on the economics of that molecule as well? Thank you.

Right. Yeah, let's see. So everything you, your, your assumptions about Rona pre were generally correct. Um, the sales could be, uh, you know, in the neighborhood of a similar level to, to this year, we think it's less likely that we would have us sales, not because there wouldn't be any sales in the U S but probably because Regeneron would be able to, to cover that, um, in most scenarios, uh, just cause they've had, you know, had longer to produce. Um, And obviously, you know, some of this is subject to what happens with the, well, a lot of it is subject to what happens with the coronavirus. Although we think some governments will want to have, you know, some amount of Ronaprev available because of the, you know, unknown nature of where the pandemic's going next. You asked about, oh, and effect on the gross margins. I mean, there's a number of other things at play, but in terms of product costs of sales, Yeah, we think there'll be a general improving and with the various ins and outs. And we also had some exceptional costs, as Alan and I mentioned, that were specific to 2021. Like, for example, the AT-527 program and the costs associated with that in cost of goods and some exceptional costs related to Rona Pre getting it going. So we're confident of improving margins. And you asked about Mosen and prioritizing. So maybe just explain to folks, you know, we have this longstanding collaboration. Originally, the collaboration was between Genentech and IDAC and then It was inherited by Biogen IDEC and Genentech and then Biogen and Roche eventually. So the way it works is for things that are developed in G-RED, they fall under basically the original collaboration agreement, which was modified in, what year was that, 2009 or 2010, based on the development of Okravis. There were some changes. Okravis fell outside of the original agreement and got a royalty. But basically, Mosen stays with Rituxan. The profit share is in the 30s, and it drops when revenues get to certain milestones over time. And then with Lofit, they have an opportunity to participate on a more limited basis. The terms of that are to be determined. But we will definitely not be prioritizing based on the structure of the agreement that that's, that's not in our DNA. We'll follow the science and whatever medicine looks like it's going to have the best shot at winning against cancer that that's where the priorities will go. Thank you.

Maybe just as a little follow on Ellen do you want to provide the numbers for the incremental production costs, which are non reoccurring.

Yeah, well, that's the 575 million that I've even mentioned. That's pretty clear. Also the entire impairment of PPNU of 38. So the 615 million that I've mentioned in my cost of sales slide, I think that's pretty clear that this won't reoccur. I think that's just one element. And certainly I think really we had also development costs for Rona Brief as well as for Atea. I think all of these things are elements which won't reoccur in 2022.

Thanks. Then we move on to the next participant. It would be Louisa Hector from Birkenberg. Louisa?

Hello, and thank you for the call, and thank you for all the explanation around the margins. It's really helpful. Maybe just another follow-up on the farmer margin, though, and connecting to the Biogen payment, because I know it's more than the 30 million. There's an R&D reimbursement. Is that something which will be taken into core earnings? Is it a significant amount that is included within your guidance for the core earnings? And then maybe to follow up again on Polivi, so you did mention, Bill, the potential for a phase three start in the first line setting with a bispecific. I just wondered whether that is dependent on how things progress with the FDA or whether you would start that trial regardless. Thank you.

Alan, I'm looking at you in terms of that question about CORE. I know the numbers aren't big.

You know, that's the point I would argue that's incorporated into what we have really as guidance. The numbers are not as big as that. But the question, I was not really, Luisa, I was not completely clear about the question itself, to be honest.

I think the question was whether any participation in R&D by Biogen would be part of the core earnings? And the answer is, of course, yes, but it's not material.

The answer is yes. But the question would be, is that number of any significance, which we might doubt, Bill, correct?

Yeah, sorry. And I thought the question was specific to the, there's an opt-in payment and then there's some payment for past R&D. But I think that's, I think it's, I'm pretty sure it's core and it's small. So it's not going to change anything significantly. And then the question about Polovi phase three or combo with a bispecific and Polovi, would that be dependent on something from the FDA? And no. Yeah, we know there's no OS requirement, so we don't need to wait for that in terms of Polarix requirements. Although, again, we're confident that we will see an OS benefit over time, but that's not the requirement from the regulators and it's not something we're waiting for. So really what's going to determine the start is just the generation of the evidence of combining, you know, basically what happens when you combine those two and what's the evolving dosing and safety profile of Glophe in particular, because that one is less developed than Mosin. So thanks for the questions, Louisa.

If we answer all your questions, Louisa?

Yeah, that's great. Thank you.

Okay, thanks. Then we move on. The next one would be Tim Anderson from Wolfer Research. Tim, two questions, please.

You're on mute, Tim.

Yeah, okay. Can you hear me now, hopefully?

Yep.

Okay, a couple of questions, higher level. China, what's the long-term growth outlook for Roche in China, let's say, over the next five years versus what it's been over the last few years? It seems like there's lots of different reasons why the market's slowing down in China. Yeah. And can you just talk about what sales growth was for Roche in China, either Q4 or 2021? And then second question, I think for Severin, the sales base at Roche is very large. One could argue almost too large, nearly 70 billion in sales this year, probably pushes 100 billion towards the end of the decade. So even though you're launching, you know, lots of important drugs, it seems like it could be a challenge to ever have high above average growth. So I'm wondering if Roche ever thinks about trying to shrink that base that could either occur by jettisoning businesses or splitting up somehow, splitting out diagnostics. I know on Severin in the past when I've asked you about that, you've said that would happen over my dead body, quote unquote. So just how do you think about the size of this organization and what needs to be done to achieve competitive or above average growth?

Right. Yeah. So let me get right to that question. And it's true. If the animal grows, it needs more food. And part of the answer is that we really want to continue to invest into science, into innovation. and we want to leverage also new technologies and we keep looking for innovation which happens outside of Roche to bring this kind of innovation into the company. And then, you know, I do think it is super to make step changes. You know how it is. Two or three medicines can make a huge difference. And if you look at what has been driving our growth over the last 10, 20 years, really it has been... you know, at the end of the day, a limited number of medicines. We just need enough of those. So I don't think that size per se is a problem. What is important is that we keep an agile organization. Size can get into a problem if we get bureaucratic, right? Then it can slow down things. but as long as we are able to keep it a vibrant place and as long as we keep the units within the universe in a reasonable shape, I think size can be an advantage because we can leverage the synergies across the group. And to your question regarding diagnostics, I do believe that this combination of pharma diagnostics and in future increasingly what we refer to as insights, so this is data-driven businesses, That provides us with a very specific strategic positioning, which is very difficult to copy for other companies because you cannot simply build that up overnight. So we have, I believe, a competitive advantage by being able to combine those specific businesses. And yeah, let's. Let's see how it works out. And this year actually will be an important year on this journey, given the many redarts we have. On China, I just keep it short. You asked for the five years outlook. I'm very bullish on China in the long term. There's just no doubt that China has so much room to catch up economically. And eventually that also means that more money is being spent in health care. At the same time, China is investing a lot into innovation, into the biotech sector. We want to be part of that. So long term, I'm bullish about China, but it can be bumpy along the road. And if you look now very specifically with the pandemic, for example, I'm in China. you know, suddenly shuts down cities which have the size of countries in other parts of the world, which means that you can have 20, 30, 40 million people having very limited access to health care because there was a couple of corona cases. So it will be bumpy and there will be volatility. But long term, I'm very bullish on China and we want to be part of that.

Yeah, quick comment on Q4. We don't, you know, we don't give precise numbers on that, but I can say pharma pretty flattish in China and diagnostics with solid growth, very solid growth. Thank you.

Next question would come from Kapila Sarita from JP Morgan.

Hi, this is Sarita from Morgan Stanley. Two questions, please. The first on TIGIT. So you're starting head-to-head trials for tirugolamab in stage 3 and first-line non-small-cell lung cancer. How have you designed these trials? So are you aiming for non-inferiority, or are you looking for superiority on efficacy supported by some improvements in tolerability? And then just a second question on biosimilars. So our data suggests that the biosimilar pressure is stabilizing in Europe and lessening in the U.S. And in Q4, rituxan and heseptin perform better than expectations. So if the biosimilar pressure is easing, are you being conservative in your guidance for 2.5 billion of erosion in 2022? Thank you.

Thanks, Kapila. Let me answer your second question first in terms of biosimilars. So what we're accounting for is the fact that while we've had major impact from biosimilars in Europe and the U.S., and now we have more stabilization in those areas, although continued significant impact in the U.S., but obviously there's just less to decline. But what we haven't had so much of yet is some of the international countries and Japan. So that we expect to see a little more biosimilar pressure there, and that's why we have the estimate of $2.5 billion. In terms of your question about the – the, the, the TIGIT question. I think we might need to give you more details and follow up with IR because I don't, I don't have the details, but I, but I believe it is a superiority design. That's our goal is not, is not non-inferiority, but with a better safety profile. And we'd like to have superiority and a better safety profile, but I think, I think it's going to be more of an add on and head to head for superiority.

Thank you. Next question will come from Kayo from Goldman Sachs. Kayo, two questions, please.

Hi, thanks, Bruno. Two comments and two questions. The first one is on behalf of all of us, Carl, thank you very much for all your hard work. Obviously, your colleagues have already said that, but I'm sure as a community, we're all very thankful to you. So thank you very much. Secondly, I should say kind of the profile pictures of all of you gents look very sleek on the new presentation. Does that also mean kind of as we go forward, kind of we're going to get a much sleeker kind of presentation pack? Well, I think, Alan, your slides are incredibly helpful for this quarter, but it is becoming kind of unmanageable for all of us, kind of. So just any help you guys can give us in making this sleeker would be great. Two questions, please. The first one, Severin, you very kindly provided for us that if you're to X out the COVID impact next year and we are to X out biosimilars, then on an underlying basis, your revenue growth would be high single digit. Any sense for what kind of the bottom line growth would be kind of on a similar basis? Because there's so many moving parts kind of across the COGS line, across kind of R&D reimbursement, et cetera. So just on an underlying basis, how do you see the operating margin kind of outlook going forward? That's question number one. And then question number two, Bill, as we kind of look at the glyphosate data set that seems to be in-house, kind of how should we think about your confidence in being able to file on the basis of what you already have in-house versus kind of needing incremental data sets on that end? Thank you.

All right. So at least I can give you some general flavor on the profitability of COVID versus non-COVID. And it's, I'd say on a divisional level, there's a divisional level answer to that, and there is a group level answer to that. So I start with divisional level answer. In the diagnostics business, the COVID business actually is beneficial in the margins. And the reason is that even though cost profit is in line with the rest of the business, there's less operating expenses associated with the COVID business because typically you have large orders from governments where you don't have a high cost base. So in other words, If there is less COVID business, then that is a burden for the margin. In the pharma business, as you have seen in 2021, actually, there was a lot of cost associated to the COVID business, both on the manufacturing side, but also on the R&D side. So in this In this case, on the farmer side, actually it's dilutive to the margins, and that means less of the business actually helps the margins going forward, which is in particular relevant as we get out of the pandemic. So that's the answer on a divisional level. But what you also have to consider is the product mix on a group level, because overall, diagnostics is less profitable than pharma, right? It's also less risky, but it's also less profitable. So if you have an over-proportional growth in diagnostics, as we had last year, then of course you have a divisional product mix with more diagnostics versus pharma business, and that again is diluted. So if you assume that we will have less of COVID sales going forward into 2022, which is our assumption, as we have explained, right, because we expect that COVID sales come down as of the second quarter in diagnostics, then actually, out of that effect, you have an additional positive product mix effect on a group level. I hope that gives you a bit more color without us having to now really go down product line by product line in terms of our margin development for the current year. And I think there was another question for you, Bill.

You're still on mute. Sorry about that. So, Keora, I appreciate the compliment, I think. You know, I don't think I've been described as sleek before, so my 20-something children will get a kick out of that when I tell them. And we'll see what we can do with our slides to make them sleek also. Let's see, you asked about the Glowfit data. So yes, we have. So basically Glowfit is like very much real time. as we've been modifying the dose and running a number of different studies and combinations. But this is the relapsed refractory DLBCL study. So we've shared one set of data. We have another cut that's in-house that we haven't presented yet. We'll be presenting it at an upcoming conference. We're planning to wait for an additional cut of data to get a bigger N. But we'll be sharing the cuts as we go with regulatory authorities, but we are confident and we plan to file both in the EU and the US in 2022. Thanks.

Caillou, were we able to answer your questions?

Yes, Bruno, thank you.

Yeah. Next one would be Matthew Weston. I open the line. Matthew? Thank you.

It's coming now, I think. Many thanks, Bruno. Alan, you've been a great help on guidance, but I do just want to dig back into it, particularly on the COVID impact, if I can, just to clarify. So you said in 2021 there is a total of 7 billion COVID impact cases. But I think we know that's 4.8 diagnostics. We know Ronoprev is 1.6. That only leaves 0.6 or 600 million for Actemra, which seems small. So I'd just love you to clarify what I'm doing there that's wrong. The second issue is around the 2 billion top line impact that you've highlighted clearly in guidance. You also flagged the $650 million of other operating income for U.S. Ronaprev, which you suggested we should model going to zero. Can I just check, is that included in the $2 billion or that's in addition to the $2 billion when we're looking for the EPS impact? And finally, if I can just cheat a third one on the same theme. Obviously, you've suggested you assume a significant amount of Ronaprev ex-U.S. revenue in 2022. But we've also seen the U.S. essentially withdraw approval because of its efficacy on Omicron. What gives you the confidence that you'll continue to see regulatory authorities in EU and Japan recommend the product?

Yeah, happy to take that. I think on your first statement, really related to ectamera, I think you're basically okay, I would argue, because point is with ectamera, I think it's used in multiple indications, and it's a little bit hard for us to find exactly out what goes to COVID, what goes not to COVID. But I think I would argue that your basic numbers that you've mentioned at the beginning, that this is going in the right direction. The $2 billion top line reduction, certainly I think the $600 million, the $654 million, that will disappear. That's pretty clear. And that's in addition. Let me say that. And the other piece is about RonaPrieve XUS. I think that goes a little bit more to Bill. But you know that Sugar has given a guidance and they were outspoken about the sales they expect for RonaPrieve. And that's what we build our guidance on here.

Yeah, and I would just add that, for example, one of the other accommodations and actually one of the other single antibodies that was approved in the U.S. originally then got knocked out by the beta variant. and was taken off the market in the U.S., and then it basically came back for Delta. So it's basically the same rationale that, you know, the next wave of coronavirus might be a descendant of Omicron, but it could also be a descendant of one of the previous variants, and we really don't know, and nor do governments. And so some of those governments are interested in procuring some Ronaprev to make sure that they've got what they need if there is a major outbreak.

Perhaps I can also add on Actemra, of course, the numbers we give are rough numbers. And then in this case, you know, the rounding actually already makes a bit of a difference. I think diagnostics to be exact was 4.7 billion, if I'm not mistaken. The 7 billion overall are roughly 7 billion. I think the exact numbers is 7.1 or something. And of course, the 5 billion next year are also rough numbers. So, you know, that already, you know, makes the residual number for October go up a bit. But as Alan said, directionally, you're absolutely right.

Perfect. Many thanks indeed.

Next two questions come from Michael Leuchten, UBS.

Michael. Thank you, Bruno. Carl, thank you so much for all the effort and help over time. So two questions for Bill, please. Bill, just going back to your centric adjuvant question, the 70% of patients being tested in that setting, is that different from what you assumed in the past? So I think if I seem to remember right, you were talking about a market opportunity here of 2 to 3 billion.

michael we lost you michael you're still in line will we take the next question in the meantime and then come back to michael yeah we can do that one um then let's quickly go to eric leberigo eric uh two questions please from steve yes hello uh thank you and first of all also from my side one thank you to car

Before asking the two questions, so first of all, coming back to the 5 billion Swiss francs from COVID that remain in 2022, how should we think about this going over the next few years? And if COVID comes from pandemic into endemic, should we think about at least part of it staying for the long term or should we think about a 5 billion going and being at risk 2023 onwards? And the second question is about the biosimilar risk, the 2.5 billion for 2022. Does that relate only to AHR or do you include also Lucentis in particular into it? And in the guidance for 23, do you have also kind of half a year of Lucentis biosimilar impact or do you do differently with this drug. Thank you.

All right. Yeah, perhaps Bill and Thomas, you want to comment on potential residual COVID sales and on the biosimilars, just to be clear, this is only AHR. So, you know, there was a very specific situation why we, because it was such a large part of our business why we got more into the specifics, but over time, of course, we hope that we get into a more normal stage where we will continue to have patent devotions, but that is not part of that biosimilar guidance. Bill and Thomas, any comments on the residual COVID business?

Sure, I can start. That gives you a bit more time to think, Bill. But yeah, so I get the question a lot. So, I mean, it's clear that this virus is going to stay for the next decades. And it's clear also that the awareness in the public related to respiratory viruses has gone up significantly. So I think there probably will not be a COVID-only market. It will be more like a respiratory market. And so what does that mean? I think it's going to eventually move into – like a low to maximum mid single digit billion market size. And, but it's going to entail probably, you know, influenza, SARS-CoV-2 and potentially other respiratory viruses. So I think there will be much more testing in the past and there will be some residual revenues that are not unsubstantial, but not at the level that we see right now, obviously.

Yeah, really nothing to add. We'll know what the residual is when we know where the pandemic's going. But I think Severin's slide that sort of showed the figurative view, those are the two scenarios that we're trying to make sure we cover the range.

Just follow up on the sentence. It's not in the 2.5, but it's in the general guidance, right? You assume an entry by mid-year. Yes. Okay. Okay. Thank you.

Maybe we try again, Michael.

I'm hoping you can hear me now.

Yeah.

Sorry about that. So, Bill, just one question to you on the centric adjuvant. In the past, you sort of have spoken to the market potential here being limited due to the lack of treatment pathway and patient workup. The 70% you spoke to earlier of patients being tested, Is that a better market backdrop now such that the market opportunity can actually be bigger than the two to three billion that you talked to in the past? Or is it in line with what you would expect it to be?

Yeah, great question. First off, I think we were pleased to see that the testing rate was as high as in the 70s. We thought it might have started lower than that. And then we would, you know, have to have to get the word out of the importance. So I think that's that's a good signal that people are, you know, Yeah, they're intent on treating because you don't, you don't do a test if you're not planning to do something with the result. So I think that's good. In terms of the peak I think the peak would would still be the same and I think we've talked about one to 2 billion. I could check me on that but I don't, I don't think we've said three. Although I'm, I'm all for it if you've got some Intel we don't have. Thanks, Michael.

Okay, then we will take two final questions from Peter Welford from Jefferies. Peter.

Hi, thanks very much for squeezing my ear. Just two quick questions. Firstly, just for DUN Diagnostics with regards to Genmark. I'm curious, that platform really hasn't had a lot of airtime today. I guess you've had sort of one of the most perhaps remarkable environments ever to launch a multiplex panel system for respiratory tests. I wonder if you can give us your initial thoughts. Is this not yet sort of fully integrated into the Roche's marketing machine? You know, have you been able to, I hate to use the word, but sort of capitalize, if you like, on the pandemic? And can you just talk a little bit about your future thoughts on the panels that you can put on the Genmark system? And then secondly, a broader question on business development. Obviously, we've seen a lot of pressure in the biotech market. Curiously, if Roche can only comment on what they're seeing with regards to sort of appetite at the moment and valuations, and in particular gene therapy, where clearly it's been a pretty bad year in 2021. How do you now think about that space? And I guess, you know, are you encouraged to proceed more in there after Spark, or would you prefer to be a bit more cautious and see how Spark, with the phase three starting, pans out before perhaps making further investments in that area? Thank you.

So Peter, thank you for the question. So I would say we bought both Genmark and Zip at the right time. So we're definitely profiting from that in Q4 and I would say especially also in January. And I would say that definitely continues for the next couple of weeks and months. So I haven't gone into the detail except that I mentioned when we acquired them, etc., But what I can say is that actually the way the trajectory is, it's ahead of our business case. That was the basis of our acquisition. We have started the integration. And in Genmark, that means that we have integrated the sales team into the U.S. organization. Rest of Worlds actually was done by distributors. So over the last months, we've negotiated with distributors to take over that business. And so we are now sequentially launching in these markets outside of the U.S., But really, if you look at Genmark, it was more or less just a U.S.-based company with a U.S. focus. And this is really giving us the opportunity to roll it out more broadly outside of the U.S., where also I have to say these ceramic panels are not yet as widely being used as it was in the U.S. So I think things are progressing well. We also have integrated in the supply chain, supporting them in raw materials, et cetera, because we are one of the biggest producers for raw materials in the diagnostics industry. We do that for us ourselves, but we also do that for a lot of other players. So I would say, you know, things are progressing very well, more than in line with our expectations.

Thank you, Thomas. Sorry, Bill.

I was just going to say, on gene therapy, I think we're really pleased with the developments at Spark, and we think this is a field where it really pays to go deep. I think there's something like 200 companies doing gene therapy, and from my vantage point, I'm not sure that's a great thing, because there's a lot of things you have to get right in gene therapy, including you know, understanding the disease, the delivery, the target organ. Often for many target organs, you need a device. Then you've got the conditioning, the things to prevent initial rejection, the antigenicity risk down the road. And I think so all that to say is I think we'll probably stay pretty focused with a limited number of partnerships beyond SPARC and a big emphasis on SPARC.

And to your wider question in terms of valuations in the biotech sector, I mean, valuations went through the roof and I was not shy to also say this publicly. So even though valuations did indeed come down, they are still at a very high level. So we will remain very disciplined and cautious looking at external opportunities. So, yeah, thank you very much for your great interest in Roche. Thank you for joining that session. And from my side, again, a big thank you to Carl. All the best for your future.