Roche Holding AG

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and listen only mode during the call session. You are invited to send a question to this throughout the entire session using the Q&A functionality of Zoom. In addition to that, you may also raise your virtual hand to address your questions verbally. For participants joining via phone, to raise your hand, use star nine on your phone's dial pad. When you then get selected to ask your questions, please follow the instructions 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 to roche.com slash investors to download the presentation. At this time, it's my pleasure to introduce you to Severin Schwan, CEO Roche Group. Mr. Schwan, the stage is yours.

Thank you very much and a warm welcome from my side. Thank you for joining us for our briefing on the 2022 group results. Let's get right into the numbers. Overall, we delivered a good performance in both divisions, very much driven by the newer medicines on the one hand and the strong base business in diagnostics. This was partly offset by the starting decline of our COVID-19 related sales, amounted to roughly 1 billion Swiss francs last year. Now, as far as the pipeline is concerned, on the one hand, as you know, we did have some setbacks last year, but we also made good progress in our portfolio. We launched, in particular, are off to a very good start. We also launched Lunsumia. We'll talk about those opportunities later and there's a lot more to come for the current year. Now, just to remind us again, we did deliver on the guidance, both in terms of sales and core earnings per share. And on that basis, the board is proposing to the AGM to increase the dividend to nine Swiss francs and 50 Rappen. If we look on the divisional results, You see a 2% growth on the pharma side. So if we would correct here for the COVID cells, actually the underlying growth is 4%. And on the diagnostic side, again, if we would correct for the COVID-19 testing, then the underlying growth of the base business is 7%. So on that slide, actually, you can see the impact of COVID-19 also on a quarterly basis. And it's quite interesting to look at that. And if you focus into the kind of last four quarters on that, slide on the right hand side, you see in the first quarter last year, we still had double digit growth from COVID that came then sharply down to a flat growth in the second quarter. And you saw a declining business as expected, I should say, in the third quarter of 6%. So what you also see is in the fourth quarter, we have again a positive growth. And then it's really driven by one single order we got at the very end of the year from Japan, an order which has been placed already for some time for Ronabrief, and that brought us up to 4%. But if you look at the underlying business, we clearly see that impact of the declining COVID-19 business, and that is going to accelerate for 2023. But we'll come back to the guidance in a moment. So here again, on that slide, on the left-hand side, you see a bit more granularity in terms of what is happening with the underlying business. Dyer-based business up 900 million. So this is the 7% I referred to. And if you then include the half a million COVID-19 testing sales, which eroded last year, then you come to the overall 3%, which I showed on the initial slide. Now, on the pharma side, actually, for the purpose of this slide, we excluded two parts. On the one hand, COVID-19 related sales, which is Rona brief, and that was positive because of this Japan order. If we wouldn't have had that Japan order, actually, it would have been negative as well. And you also see this impact, the negative impact of Actemra, which is also driven by less demand for COVID-19. And then on top of it, we have continued erosion on Avastin Herceptin and Rituxim EHR of 1.9 million. So if you're correct for those two effects, then the underlying growth has been 3.4 billion Swiss francs. So you see the underlying business is growing in the high single digits, very much driven. by the newer medicines. I find the right-hand part of that slide quite interesting as well. If we look back over the last five years in 2017, we still had the full sales for EHR. You can see this was about half of our sales for the pharma division. And you can really see two things here. One is we were not only to compensate for that decline, but actually we grew the business overall from about 50 billion back then to over 60 billion today. But what you also see is how much the portfolio has diversified. We have a less prominent position in oncology, even though this remains our most important segment, but we have entered other areas, in particular neuroscience, of course, with Ocrevus, with Evristi, with EndSpring. We are the leader in Haemophilia A with HemLibra. And you see this kind of small part here, this slice in light blue, which is Vabaismo. And for sure, that part of the pie chart will enlarge over time as we see a very strong growth for Vabaismo and an area where we want to take a leading position. So again here, a slide which shows the rejuvenation of our pharma portfolio. Last year, in addition to the launch of Vabaismo, we also launched Lunsumia, the second new molecular entity, as you know, in blood cancer. And there's more to come in this field also this year. We expect hopefully three NME launches this year. Glovitamab. an aggressive lymphoma. We have the collaboration with Zarepta in Duchenne, and we actually wait for data for Crovalimab, which should come in very soon. Here again, a look at the underlying business excluding COVID related sales. And I guess the message here is we have a good uptake in the fourth quarter, actually both in pharma and in diagnostics with a 5% growth on the pharma side and 8% growth in diagnostics. So a good momentum as we ended the year. Now, stable margins in terms of co-operating results. And I'm sure Alan will later dive a bit more into the overall financial results, including the non-operating items. Good. As we announced this morning, the board is suggesting a dividend increase to 9 Swiss francs 50 Rappen. Let me conclude with the outlook for the current year. We have a number of readouts. Thomas will cover that in more detail. Let me just make a comment on tiragolumab in non-small cell lung cancer. As you know, we didn't reach a positive result for progression-free survival. And as you also know, we are waiting for the overall survival results this year. So just let me again talk about the timelines during this year. First of all, I should say we have no data in-house. We have no additional information. We have no data in-house. And we expect an interim readout still in February. But from all what we know today, the most likely scenario is that the study will continue until the final readout in the second half of this year. So we think this is about six months later. It's an event driven study, but it will only read out in the second half of the year. And again, this is by far the most likely scenario. There is, of course, as always with an interim study, a possibility that we either get a positive or a negative result. If that should be the case, then we would immediately communicate that result to the outside because that would clearly be material. If, however, the study just continues until the final readout, then we are not going to make a specific announcement. In other words, if you don't hear back in February, then you know that the study will continue until the final readout in the second half of this year. Good. Just a word on the sales outlook. We've guided, as you have seen, for low single-digit decline, and it's really entirely driven by the expected decline in our COVID-related sales of roughly 5 billion Swiss francs. That is about 8% of our overall business, and we will largely compensate for that. We've also given you a guidance here of what we expect on the EHR front. We expect a further erosion, but of course, in the meantime, this is on a much lower level at 1.6 billion. But what that means is for the underlying business, as an implied conclusion that there is a strong growth on the pharma side, of course, and a strong momentum from our ongoing launches and existing portfolio. And we also expect that our base business in diagnostics is going to keep a strong momentum. So overall, low single digit decline on the sales side, core EPS to develop in line with sales. And on that basis, we should again be able to further increase the dividend in Swiss francs. Thank you very much. And with this, I hand over to Thomas. I guess the last time that you present a farmer before you take over from me in March. Over to you.

Thank you very much, Severin, and good morning and good afternoon to everyone. Now, before I go into the presentation, let me just comment on the changes that were announced this morning. First, Theresa Graham, who has been announced as the CEO of Pharma. And the second change is that in the future, Levi Garraway, our Chief Medical Officer and Head of Product Development, will also have a seat at the Corporate Executive Committee. With that, I'm very happy that we have a complete team in the CEC and also happy with those two people because they are great leaders and they both have an extremely good track record and they're known for the good expertise in this area. So now let me take you through the numbers for pharma. Now with sales of 45.6 billion, we had a strong growth of 2% in constant exchange rates. And you see that what Severin has said is that Actemra and Ronaprev had a certain effect on these sales. So underlying, the pharma business was actually growing with a good 4%. And then looking at the different regions, let me just give you a bit more insight into that. In the United States, as you know, we never had access to RonaPREVE, but here we had the impact of Actemra, which was used to fight COVID-19. Without this effect, underlying the U.S. was growing 2%. In the EU, we had both the RonaPRIF and Nactamera effect. Without this, the EU was growing 7%. Without RonaPRIF orders to the Japanese government in Japan, we were growing 3% and international was 5%. So you see an underlying good growth and dynamic in the pharma division. Now let me take you through the P&L. I mentioned already the sales. The co-op increased by 5%, so ahead of sales. And with that, we increased margins to 42.1%. Taking you to the next line, the royalties and other operating income, which grew slightly faster than sales. Now, here we had two different effects. On the one hand, we had the income from the ultramarital settlement. And on the other hand, last year we had 0.6 billion impact from the run and brief profit share in the US. These two things basically equaled each other out. But these were the underlying effects in that line. Cost of sales decreased 2%, while volumes increased 7%. And here, we also had some special effects underlying, where we had higher costs last year due to costs related to COVID-19. M&D increased in line with sales, and R&D costs increased by plus 1%. Here, again, we had some one-time effects last year related to COVID-19. Without that, we would be growing more in the 4% to 5% range. So overall, a good-looking P&L. From a portfolio diversification perspective, you see the acceleration of the newer products. At the same time, you see impacts of biosimilars in the lower half. Now, if I would add together the top six growth drivers, Okrovos, Hemlibra, Babaismo, Evristi, Tecentric and Fezgo, these all add about 3.6 billion in new sales. We have 16 products now with more than 1 billion in sales, two that are emerging, Babaismo and Fezgo, in the coming year. On the bottom half, again, Avastin, Mapterin, Herceptin, AHNR declined 1.9 billion, so less than what we had expected. And we do expect that in the coming year it will be around 1.6 billion, so the erosion is declining further. We did have impacts on Lucentis and Aspirid. Aspirid here, this being a small molecule, we had generic erosion in the US. And as it is with small molecules, this is a pretty fast event. In Lucentis, we had a minor part of this being switches to a biosimilar, and I'll talk about that later. And also we had some biosimilar effects here. Now, let me take you through more details on the different parts of our portfolio. First, starting with the oncology portfolio, Katsaila growing 7%. And this growth is really driven ex-US in early breast cancer. And this is overcompensating a decline seen in the US. Pageta growing 5%. This is driven on the one hand by international, specifically China, as we got onto the NRDL last year. And also we do see a decline in the EU, but this decline is due to the fact that we actually have a switch to Fasco and you see that Fasco is growing extremely well with 121% now making 740 million and about 33% of all patients on Pachetta were now already switched to Fasco and we see this conversion ongoing. So the outlook is for this coming year that we will continue to see a strong conversion and also a growth for the Pachetta and Vesco combination for the switch from Pachetta to Vesco. And for Cazaila, we see the sales to be stable in the coming years. On the hematology side with Fenglexter, we have two pivotal phase three studies that will be read out in 2023. PolyV, I have a special slide on that, but the growth and uptake is really strong with 85% and this is driven by first-line DLBCL and the uptake in already more than 50 countries where this has been improved as the new standard of care. With regards to Lunsumio, not much on the sales side yet because we've only launched recently and the US got approval just in December. So we do expect this to have an impact in this year. One thing to note is that Lunsumio was now added to the NCCN guidelines in the US as a category 2A treatment, so with a very high level of evidence. And so this is good to see and will certainly help our uptake. Finally, Alicenza, a fantastic medicine coming from our Zhugei partner. Here growth of 15% and the first line market share is more than 70%. And we do expect more data coming this year in the adjuvant setting, which will fuel further growth. I promised a slide on polyB in first-line diffuse large B-cell lymphoma. Now, this is a disease with a very high unmet need. More than 40% of the patients are not cured with RJOB. And for those patients, the prognosis is very poor, with a median overall survival of less than two years. We have presented updated data on phase three results with a median follow up of almost 40 months with a PFS benefit of a hazard ratio of 0.76. And so we have really exciting data here. And this is really recognized and PFS is recognized as a good endpoint for most health authorities. In fact, we have more than 50 countries now that have approved this PolyV plus RCHP combination. And in fact, we have now a funding recommendation from NICE, which is fantastic that we received end of January. And on January 25th, we also received or we were included in the NCCN guidelines as category one, the highest level that you can get in the US. So this is, I think, a very good signal for us. You may have seen that there is an ODAC coming up, so an oncology advisory committee on March 9th, and the PDUFA date is for April 2nd. So we'll see how this goes. And obviously, we'll present our case at the ODAC, and then we'll see how the FDA decides. Given that we have the approval in more than 50 countries, we do hope that the FDA then supports this at the end. Now let me talk a bit about the two CD20-CD3 bispecifics. We have Lunsumio, which comes from the G-RED organization, Glofitimab, which is out of the P-RED organization. So Lunsumio has been launched in third-line follicular lymphoma. And clofidimab is being filed in the US and EU in third line DLBCL. Now, these are two first in class and potentially best in class CD20, CD3 bispecific antibodies, but they also address different patient needs. They are off the shelf, fixed duration treatments with durable response and manageable safety. Now, Lunsumium is good for outpatient and community settings, for indolent follicular lymphoma, and also for elderly or unfit patients. Clofidamab has the best-in-class efficacy potential and can be used in more aggressive disease. On the right-hand side, you see that we have a number of ongoing trials that we'll read out in the next couple of years. As the next slide, let me take you through Ticentric. We have first-in-class indications in first-line hepatocellular carcinoma, first-line small cell lung cancer, and also in adjuvant non-small cell lung cancer. These are the main drivers for this growth. We've had a positive readout for subcutaneous version, and this has been filed in the U.S. with a PDUFA date set for September 15th. Subcutaneous is much more convenient for patients and physicians. And in fact, it will reduce treatment time to seven minutes. And here we have the opportunity to be first in the market for PD-L1, PD-L1 subcutaneous formulation with likely a lead time of over one year. As you have seen, we had a first positive readout phase three, the IAMBRAVE-050 for Dicentric and Avastin adjuvant hepatocellular carcinoma, which met the primary endpoint, which was relapsed free survival. And the OS data, as communicated, is still immature. And we'll share this data with regulators at an upcoming conference. The IAMBRAVE-030 intercentric and neoadjuvant passed the interim analysis and will continue to 2024. Let me say we have not seen any data in-house. It was the recommendation of the IDMC to continue the study. In terms of outlook, we have this year, you know, exciting hopefully data that will come in phase three for adjuvant head and neck cancer and triple negative breast cancer. We will then have what Severin also mentioned, the final data of phase three, the skyscraper one, t-centric enterogolmab in PD-L1 positive, first-line non-small cell lung cancer. As Severin mentioned, we have not seen any additional data. The interim OS analysis has not yet occurred. And as Severin also mentioned, the most likely outcome is that we will continue anyway the study until later this year, because also most of the alpha in the statistical analysis is spent on the final analysis. So this is the most likely outcome. Let me talk about Hemlibra growing extremely well. We have now 3.6 billion in sales. The growth was 24%. Growth was driven both in the US and the EU, beating consensus by 32 million. And we do expect this momentum continue into 2023. This is now the new global standard of care, and we have a patient share of 36% in the EU and the US. In the EU, we have the label extension to include moderate patients. And what's also exciting is that we've now moved our gene therapy into phase three. This is based on five year follow up data with the majority of patients with more than one year follow up showing no decrease in factor VIII activity. So very stable expression of factor VIII. And based on these results, we initiated the phase three in this year. Next, let me come to immunology. Here we have a decline of 17%. This decline was driven by two factors. One is octamera and the less use of octamera in COVID-19 and also the generic erosion of aspirate of minus 48%. Actemra is the leading RA monotherapy, and we are still shifting IV to subcutaneous formulations. Now, subcutaneous formulation accounts for about 60% of our sales. Xolair is doing well with 6% for the full year. Now, here we are the market leader in asthma biologics, and we will also have news this coming year for the Xolair autoinjector and also the phase three in food allergy. Moving to multiple sclerosis, where we're the global market leader. Ocrevus is now more than 6 billion in sales. We have a good momentum in Q4, and we do expect this momentum to continue into 2023. We're the number one MS treatment in the US and EU, and we're the first and only therapy in RMS and PPMS, and it's a six-month IV and with very high retention rates. Now, in the meantime, we have nine-year follow-up data, so the data in the back is very solid from that perspective. And we have exciting news to come in the future. We have phase three ongoing for the six-month subcutaneous home administration. This will come in the middle of the year. And this will open yet another market for us because the IV and the subcu markets are two different markets. And we really have a differentiated product with a six-month subcutaneous home administration. Further, we have completed our recruitment for the high-dose aquifer study, so with even higher efficacy. So again, we are continuing to develop this franchise. Now let me talk about spinal muscular atrophy. Here, this is a small molecule splicing modifier where we have children that have less expression of SMN1. And now with this alternative splicing, we get an increase by using the SMN2 gene. We have sustained efficacy now for up to three years with over 7,000 patients. And this treatment is tolerated well. We have very high retention rates. EvrisD has now achieved 1.1 billion in sales and market leadership in several key markets, such as the US and Japan and many other major markets. The US growth is driven by switching and naive patients, including patients that are less than two months old, following that labor extension. The outlook for 2023 is that we will have growth from treatment-naive patients and switches, as well as babies of less than two months old. At the end of this year, we will have, hopefully, a readout for the pivotal phase three study in Duchenne muscular dystrophy. This is an X chromosome linked genetic disorder. So impacting mostly boys, not only, but mostly boys, where the dystrophin gene is not properly expressed. These children usually are sitting in the wheelchair by the age of 10 or 12, and usually they die in the 20s. So this is 100% fatal disease. There are no treatments available today. So this would be a real relief for these children and these parents. This is a potential first-in-class and best-in-class gene therapy. And we have positive functional and clinically meaningful results at multiple time points for more than 80 patients with a good safety profile. And based on that, we have also the phase three. And we expect this readout in Q4. In the US, Sarepta is in priority review with the FDA with the PDUFA date set for May 29th. We have two additional studies that will run, one for zero to three year olds, and then the other one for the older boys as well, from eight to 18. Coming to ophthalmology, Babaismo had an excellent start in the first 11 months. We've achieved 577 million in sales. If we just take the last quarter, in the last quarter we had 300 million of sales. If we multiply that times four, we would already in the linear run rate be at 1.2 billion. And we definitely had a strong acceleration in the US after we received the J-code on October 1st. And about 70% of the new patients are from switches from a competitor product. 15 to 20% of the switches are from Lucentis, or the 15 to 20% of the patients are from Lucentis. And the rest is from naive patients. We've received rapid uptake after the NICE reimbursement, also in the UK. And on the phase three side, we also had very positive results in the ophthalmology franchise. First, getting a third new indication, RVO, retinal vein occlusion, for the BISMO, but also two positive readouts for SUSVIMO, both in DME and diabetic retinopathy. As you know, we had a voluntary recall for SUSFIMO, the device that is implanted in the eye in the US. We do expect to be on the market in a year or so with this device. Again, we have a very strong momentum with the BIOSMO. We do believe that with BIOS-specific, the two arms, VEGF and ANG2, we are highly differentiated. And the clinicians are giving us the feedback as well that they see strong anatomical improvement. And with that, we're well positioned for further growth. Furthermore, we have also another phase three, which is going to be started, which is anti-IL-6. And this is another pathway that's upregulated and involved in inflammations, also in the eye, but many other inflammations. And we really look forward to this reading out in the future. Now, this is a slide that we have shown in the past in the Q3. We just wanted to show it once again. This is a post hoc analysis of our data applied to the study protocol of another company's study. And let me first say again that we have dual inhibition VEGF and ANG2, so dual mechanisms. We have a clear anatomical benefit of drying of the eye in longer treatment intervals. And our studies actually reflect real world practice. We're not putting patients at risk. That means we start the patients at more frequent dosing and only in patients fulfill all these five criteria and they have to fulfill all the five criteria. Then if they miss one, then we already move them to a more frequent interval. Whereas in the other study, the less stringent criteria was used. And here, all patients irrespective of the C-state were actually put on the extended treatment. And there were only two criteria and the patient had to fail both criterias in order for that criteria to be changed. What we have done is we have actually applied our raw data to this study protocol. And with that, you can see on the bottom right side that 96% of the patients would be Q12 or more, and only 4% of the patients are Q8. I've mentioned the different phase three readouts that you see here. We're very excited to present all of this data at the angiogenesis conference in Miami in just a couple of days. But good to see how our ophthalmology franchise is developing. Now, finally, let me finish with the key late stage news flow slides. On the regulatory side, we've had approvals already for HemLibra in moderate hemophilia A and also Xofluza in young children. On the late stage pipeline, we will have 19 pivotal readouts that are expected. Three of them have been achieved in January. Dicentric in adjuvant HCC, Susfimo in DME, and diabetic retinopathy, as mentioned before. We have three potential new NMEs this year that are reading out. Crovolumab, we mentioned that. We have the gene therapy. So really excited to see that. But we also have a number of very important line extensions that will potentially read out this year. Photocentric, Benclexta, Alisenzo, Pesco, the CD20, CD3 bispecifics, and Ocrevus. Perfect. With that, I hand over to Matt to take us through diagnostics.

Thanks, Thomas. Thank you. Good morning. Good afternoon, everyone. It's my pleasure to present the full year 2022 Roche Diagnostics results. So with sales of 17.7 billion Swiss francs, we had good growth of 3% for full year 2022. And this was driven by strong base business growth of plus 7% and offset partly by decline in COVID-19 testing, which contributed 4.2 billion Swiss francs at constant exchange rate and is no longer a driver of growth for the division going forward. So if we go into the different product categories, what you'll see is our immunodiagnostics business core lab growing at plus 6%. However, excluding custom biotech, this was growing at 9%. Our point of care business growing at plus 17%, and this is mainly driven by our COVID-19 rapid antigen sales. However, strong base business growth of plus 13% driven by the strong flu season in the Northern hemisphere. Our molecular lab business, you see minus 15, and this is driven by a decline in COVID-19 PCR testing. However, there was strong underlying base business growth, again, of 8%. Our diabetes care business declined by 2%. However, excluding the settlement in 2021, this business was flat and stable. Our pathology lab, you see strong 11% growth, and this is driven by our advanced staining immunohistochemistry business, as well as our companion diagnostics business. So if you look at the regional drivers of performance, what you see is strong base business growth across all of our regions. Starting with North America, you see plus 13 overall sales driven by COVID-19. However, base business grew at plus 7%. EMEA, you see minus 16%. However, this again, related to COVID-19, the base business growth was 5%. Asia Pacific, plus 23, mainly again driven by the COVID-19 testing sales. However, underlying base growth was 6%. Latin America, minus 1%. However, base business growth, plus 18%. So across all of the regions, we had really good performance on our base business. So if you look at the development of the Roche Diagnostics sales by quarter over the last three years, what I'd like to point out is the strong base business growth of Q4 2022 of plus 8%. And in fact, if you look over the last eight quarters, what you'll see is strong mid to high single digit growth in every quarter for base business, with the exception of Q2 2022, we were heavily impacted by the lockdowns in China. Now, if you look at the blue line, which is our overall sales, you'll see a minus 9% for Q4 2022. And this reflects, again, the decline in COVID-19 testing, where year over year for the fourth quarter, we saw a 58% decline in our COVID-19 testing. Looking forward, we expect to continue to see good performance from our base business and a continual decline of COVID-19 testing as the disease moves to an endemic state. So when we look at the P&L for diagnostics, core operating profit declined at 5%. And this is mostly driven by our COVID-19 portfolio, where we had lower overall sales, with lower PCR and higher rapid antigen. However, overall, we managed to maintain our core operating profit margin above 20%. And our improvement in our base business productivity, where we had a decline in M&S of minus 2%, it enabled us to offset impacts such as inflation and fund additional R&D spending, which will drive the future growth of our business in areas such as mass spec and digital solutions. So now I'd like to talk about some of the innovation that this R&D is fueling and specifically some FDA approvals we received in 2022. So in Q3 of 2022, we received FDA approval for our mid to low throughput system, the CoBOS Pure, which completes our family of serum work area automation for the United States. Additionally, in Q4 of 2022, we received FDA approval for our CoBOS 5800 molecular diagnostics system. Again, this rounds out the full family of molecular diagnostics automation for the US. Why this is important is it allows us to effectively compete in large integrated healthcare network tenders, where you may have a large core laboratory as well as satellite labs, which makes us more competitive in that space. Additionally, these mid to low throughput analyzers are going to enable us to continue to grow our market share in mid to low income countries where this level of automation fits the local market need. So I'd also like to talk about the Roche Diagnostics response to the MPOX outbreak in 2022. So in May, shortly after the WHO flagged the spread of MPOX outside of the countries where it is normally endemic, we very quickly launched a modular virus test on our light cycler instrumentation. In September of 2022, the FDA opened an emergency use pathway for FDA authorization of Mpox tests. Within two months, we had received an emergency use authorization for our fully automated X800 Mpox tests. And why this is important is it shows our commitment to public health globally and the speed with which we're able to get tests to patients in need. So I'd also like to highlight an example of innovation with our existing portfolio. And I'll talk about our StrongHF trial in acute heart failure. So the StrongHF study was a prospective study where we had patients who were discharged with acute heart failure from the hospital. And in the experimental arm, these patients had their dose of standard heart failure medication titrated and also were serially tested with our NT-proBNP diagnostic. The result of this study, 34% decrease in hospitalization and death. And in fact, the study was terminated early due to the superior efficacy of the experimental arm. And this shows the power of diagnostics to change clinical practice. And again, our ability to medically differentiate our existing cardiac portfolio with additional approvals. So now I'd like to turn to the topic of neuroscience. which I know figured as well into the pharmaceutical overview, Roche Diagnostics also has a commitment to deliver innovation along the patient journey for Alzheimer's disease. And what we're very happy about is our approval in Q4 of 2022 for our confirmatory test for cerebral spinal fluid for Alzheimer's disease. I would also point out that in 2022, we received FDA breakthrough designation for our blood-based Alzheimer's triage test, which is currently under development. As you all know, there is a significant global disease burden for Alzheimer's disease, where by the year 2030, we expect over 80 million people worldwide to be suffering from this illness. And it's our commitment to develop diagnostic solutions that help them live a better life. So with that, looking at 2023, we have some exciting launches this year. One of those is gonna be the launch of our point of care instrument, the CoBOS Pulse for hospital blood glucose in the United States. We also expect to launch three tests into our hepatitis portfolio, and as well as expand our offering around digital solutions. For example, adding medical value algorithms in the oncology field to our algorithm suite solution. Thank you very much.

And I'll pass it down. Matt, thank you. Thanks a lot. Yeah, I have a little bit of a package today that I have to bring together and I come to that. But let me first welcome you from my side as well. I hope everybody is safe and healthy and happy to show you a couple of solid financials for 2022. Yeah, that's why I'm saying I think it's not just about the results, cash flow and outlook. We will come up for next year with a new income statement representation. And I would like to guide you through what we're going to change and how that looks like. Good. With that, I think the highlights, I will touch on all of them. So I skip that one for the sake of time and we'll go to the group performance right away. And I think my colleagues have done a fantastic job on explaining the sales. So plus 2% in constant rates, as you can see. And then you see the core operating profit plus 3%. I think really good cost containment. I will explain that later on. So pretty good here. Then you see the move from cooperating profit with plus 3% to the core net income with minus 1%. So the question is, what's going on here? And there are two explanations for it. One is the taxes. You might have seen that the effective tax rate went from 14.5% in 21 to 16.4% in 22. That's one element. And the other element is higher interest expenses and a worsened financial result, which I will come to, but I think well explainable and shouldn't be a surprise. Then the coordinate income from a minus 1% to a core EPS growth of plus 5%. This is the accretion effect from buying back our shares, if you like, from Novartis and terminating them. We terminated 53.3 million shares. And as you can imagine, I think now the share base is lower and we have a higher profit distribute to this. So that gives you a higher momentum with plus 5%. Good core EPS and plus 5% to an IFRS net income of a minus 6. And what we've done here, we've looked at our balance sheet, you know, we have intangible assets on the balance sheet. uh we looked really at the the outlook for these assets and then came up with corrections and impairments so i think we had higher impairments compared to last year uh that brought the ifrs net income down with a minus six percent and then you see the operating free cash flow with a minus eight percent we'll talk about this but nothing concerning here um we had sales with shugai it was rona pre for 1.2 billion we booked them at the 27th of december and i think it is absolutely understandable you know that this was not converted into cash right away that's something which will convert into cash really at the beginning of this year so we'll have a jump start but certainly we're missing this 1.2 billion if you like in the operating free cash flow And then the free cash flow down by minus 16%. Well, as said and which came through, I think we had pretty good sales and profit impact coming from Japan where we have a higher tax rate. So we paid higher taxes for Japan and partially for the US as well. So let's get let's get now to the details. I think Severin has made and did a great job on that slide. Let me make the comment about the COVID sales. You see that on the left-hand side. I think in 2021, we had roughly 7.4 billion COVID sales. In 2022, that dropped to 6.4 billion. That's the billion. And now I think, as said, for 2023, we expect that this will come down by roughly 5 billion. So I think there will be a little bit of a tail end then of the COVID sales in 2023. That's what I wanted to add to that slide. So let me get to the P&L and give a little bit on light here and also here. My colleagues have made comments already. Don't want to repeat the 2% on the sales side. So we see royalties and other operating income. I have a slide on that one. I have a slide on the cost of sales. So that's going to come. So let me make a comment on M&D. M&D, I think a modest increase of 2% on the diagnostic side, really investments in digital and higher distribution costs. When you look at pharma, certainly we had the launches, predominantly with BISMO, which trigger a little bit of an increase here. Then you look at R&D, and that's a pretty modest increase with plus 3%. And when you look at pharma, it's even plus 1%. But here are a couple of base effects. On one hand, we had higher R&D expenses in 2021 due to Ronaprev and Atea. And then in 2022, we had even a release of a couple of provisions. When you add that together, it's a 420 million, which worked for us, if you like, coming from the base effect as well as from the release of the accruals in 2022. If you were adjusting for that, I think at least pharma would have grown by 4% to 5%. What I want to make is the statement we're definitely investing into R&D and we're committed to innovation. I think really then when you look at G&A, I think really good cost containment, good management here, which then brings us to the cooperating profit growth of plus 3%. with that let's get to the royalties and other operating income and thomas made a comment here we had a couple of of impacts uh so you see really here the increase of three percent which i had outlined before in constant rates the royalty income came down by 122 million that is predominantly due to lucentis we had lower lucentis sales as you know And then we have the outlicensing income increased by 713 million, and that's the settlement of Shugai due to Altamiris. So patent settlement that we have had, it was a one-time payment, which came in positively. And at the same time, certainly, and that's something which goes back to 2021, uh we missed really the rona brief profit share these were the sales here in the us where we just got a professor we didn't show the sales we just had if you like a part of the profits and that declined by 611 million so that you see that matches pretty well and then we had a little bit of a higher income from product disposals over 116 million Good. With that, let's get to the group core cost of sales. And also here, I think the explanations are pretty straightforward. As you've seen, I think we had a relatively modest growth with an underlying volume growth of 6%. So you ask yourself, okay, how is that going? And what you see here is when you start really with the 18.1 billion, that we had incremental production costs for Ronaprev and Etea in 2021 of 613 million. So kind of a base effect. And then I think really you get to the normalized number for 2021. And then when you put a 5% increase on top, you get to the 2022 number and the 5% matches very well the 6% volume increase. So I would argue nothing unusual here. When you look at the margins, let me say here, I think in the morning I received a couple of messages about how about profitability. And honestly, I think what you see is we defended the margin quite well in 2022. Pharma even brought the margin up as promised and as hoped for and as expected to 42%. And diagnostics, I think, gave the explanations basically on R&D, why they have seen a decline here. When we go to the core net financial result, which worsened by 475 million in constant rates, then let me go through the explanations. Equity securities at the Roche Venture Fund, I think the market is declining. We all know that. And I think for that, I think we've done pretty okay-ish. Net interest income, I think interest rates have risen, so 37 million plus here. A currency is predominantly hedging, and that comes predominantly from Russia. And then you have the interest expenses, which is a major increase of 269 million. Well, that's pretty clear. That's the additional debt from the share buyback related to Novartis. We bought the shares back for roughly 19 million Swiss francs. I think we have seen that debt then on the balance sheet at the end of 21. But we just had it in the end of 21 in 2021. And then certainly we had it for the full year of 2022. And that triggered the increase here. Then other is really hyperinflation expenses and some losses from associated companies. Good. With that, let's go to the tax rate. And let me say here, I think we ended up with an effective tax rate, group core tax rate, I should say, of 16.4%, which I think is not a bad achievement. We guided for 18%, around 18%, as you know, so underlying 17.9%. We had a couple of releases of tax provisions in 2022 as well, but to a lower extent compared to 2021. So I think really pretty okay with what we've achieved here on the tech side. So let me summarize that when we go to the core EPS development. And when you look at it, the plus 4.8, which is C%, which you see on the bracket above, that's the rounded 5% core EPS increase. You see operations up by 3.1 percentage points. You see then the Altamiris paddle settlement really then was basically offset and more than offset. uh by uh the loss of the rona pre profit share which didn't reoccur in 2022 was a minus 1.5 you might ask yourself okay when we look at the cooperating profit then the the the rona pre profit share is a lower number compared to the altimiri settlement so why is it now overcompensating this in the core EPS and the explanation is relatively simple. Altamiris comes from Japan and Japan means a high tax rate and it means we have a minority in play for Shugai. So that reduces that impact and makes, I think, that movement explainable. Then we have the net accretion of the Novartis share buyback with the plus 4.8 percentage points and other is taxes. Good. With that, let's go to the non-core section and the IFRS income. You see the cooperating profit plus 3%, as mentioned before, in constant rates. And then you see the IFRS net income with a minus 6%. And then you see what happened here in between. I think really you see the global restructuring plans, which are, let's say, a little bit lower than last year. You see the amortization of intangible assets. Well, that's as we add, which I see is amortized now. So we don't have that anymore impacting this number. We have the impairment of intangible assets, which has increased compared to last year. Nothing extraordinary here. We just went through our assets and then there was not a lot of activity on the M&A side. And the same basic lies to legal and environmental here. So I think when you then take the financial result, the taxes on top of this, you get to the IFRS net income development of minus 6%. Good. Let's talk about cash a little bit. And cash came down, as I've said, but very explainable. And I would even say, well, I think a good Good indications for 2023. You see really basically every number is pretty balanced. What sticks out is the networking capital movement. And let me say net trade working capital here even. Well, the accounts receivables went up. Sugar is once again the explanation here with the Rona pre-sales that I've explained before. So 1.2 billion brought the accounts receivable up will convert into cash soon, I'm sure. And then we have the inventories, which went up by roughly a billion in both divisions by roughly 500 million. So that's also something we can work against and which will materialize when it comes to cash in 2023. Good. I think really don't want to go through the margins here. Let's go straight to the group net debt development. When you look at this, I think we ended up 2021 with net debt of minus 18.2. End of 2022, a minus 15.6, so an improvement or reduction, if you like, of 2.6 billion. Well, let me explain that quickly. I think you see the operating free cash flow, which I've given a couple of explanations about, of 17.7. We paid the taxes with a higher number compared to the previous years and the Treasury. And then certainly the dividend payment of 7.8 billion, the dividend we paid in 2022 for 2021 is another factor here. Certainly, I think this reduction could have been larger with the 1.2 billion from Shugai and Ronapriv, which will come in 2023. quick comment on the balance sheet just for the sake of completeness cash and marketable securities went down a little bit this is because we repaid debt if you like so we used our liquidity to do this the other current assets is the accounts receivables is the inventories as mentioned the non-current assets is really the impairments reduce that by a a certain number then we have the current liabilities and they have decreased significantly and that's short-term debt We have converted short-term debt into long-term debt, and the team did really great, because basically when you look at the average interest rates that we're paying, I think this is pretty balanced what we had last year. So I think really great timing here. The non-current liabilities, very clearly that's the long-term debt now kicking in, and that leaves us with an equity ratio of 36%, which I perceive a pretty solid balance sheet. good with that uh let's go to the outlook and start let me start with the currencies here um and i don't want to go back and say well what happened in 2022 you know the major effect was that the us dollar basically got stronger the euro got weaker against the swiss franc and i think that balanced out quite quite a little bit so i think we were okay in 2022 despite quite some volatility And what is striking, you know, our model, I think we're always assuming that the year end rates from 22 remain stable over the course of the year. And if you do that this year, well, let's say at the end of 2022 and projected on 2023, you get to heavy impacts as outlined on the slide on the right hand side. So impacts of around minus four percentage points to minus six percentage points on sales, cooperating profit and core EPS. Honestly, you know, this is a pretty wild assumption that this is going to happen, that everything stays constant. This is surely not the case for the course of 2023. So stay tuned and we will update you on a quarterly basis and you will see what's going to happen. And my basic argumentation certainly would be we have a natural hedge in all the countries and all the regions. We have also major sales. So I'm not really concerned here. Let me set the stage as well for your projections on 2023. And you'll notice the core EPS. I think this is now the core EPS 2022 as reported. You'll find it on page three in the finance report. you know you have to correct that number for the foreign exchange losses, could have it every year. And that number is an 0.32 Swiss franc, so it's 32 Rappen. How do you get to that number? Well, you go to page 59 in the finance report, you find a foreign exchange loss of 278 million. You take that 278 million, you put a tax rate on it, so that reduces the impact. And then you divide that by roughly 808 million shares and Genusschein, if you like. You find that number on page 116 of the finance report. And that brings you then to the basis for 2023, which is 20.62. Good. With that, on the outlook, I think, well, I think pretty reasonable outlook that we bring in here for 2023. Don't forget, I think really we expect to lose roughly 5 billion in COVID sales, which is a very significant number, represents roughly 8% of our sales. And you see really we work against that. Don't forget on top we lose on the pharma side roughly 1.6 billion. due to AHNR biosimilar competition. So I think really we close the gap quite well. We want to maintain the margin and defend the margin with the core EPS growth broadly in line with the sales decline. And we stay on track with the dividend. Good. That leads me to my last section. And this is really about the income statement presentation. And we would like to change that for a couple of reasons. And there will be a couple of changes. But let me lead you through this really step by step. The first one is really that we would like to apply more to what our peers do, and we would like to go to SG&A to selling general administration. And that's a relatively simple step because we just have to add marketing and distribution and G&A, and that's what we're going to do in the future. We will introduce a line of other revenues. That's another point here. So really, we had before revenue, but now we use other revenues instead of royalties and other operating income. And I think that is very important because there is a little bit, let's say, when you look at IFRS, a discussion about what is revenue and we want to project that well. And you will see there will be now a line, other operating income and expense in the P&L. And that will be very much characterized by the disposal of products that will come in there where you can debate, is it revenue or not? And I think we project here evidently that this needs to be in another line. The other piece is really about removing allocations. That is certainly something we do on, if you like, because we want to do it, we want to simplify and standardize what we're doing internally. We had quite a hefty allocation system in Roche and we want to get rid of that. And certainly I think what that means is that we really reduce costs that we allocate to the divisions and that will have an impact certainly on their margins. What's not going to change is certainly the key metric sales, group operating profit and EPS. All of that remains unchanged. Good. So let me now lead you through this. I think the first step is certainly and you see a small number one on that slide here right in the middle. And this is just adding up MND and GNA and that all this and summarized on the right hand side into SGNA. So we have now an SGNA line in Roche and you see on the right hand side how that would look for 2022. So that's the first step. And then you have the second arrow and the second, the number two. So we move 612 million income from disposal of products and 184 million other income from within G&A to the new line, other operating income and expense. So you see that. And as a third step, we rename the line royalties and other operating income into other revenue. So I think that's more the IFRS move that I've mentioned before. Good. And then the last step is really about the allocations. So we are removing allocations from various reporting lines. And that leads to a 660 million lower cost of sales and a 788 million lower R&D costs. A major driver here is informatics costs, by the way. So it's, I think, other group functions as well, but the major drivers informatics. The sum of the two, which accounts for, it's mentioned on the slide, 1.458 billion is moved to SG&A, as you can see. So you see it on the far right, how the resated P&L looks like, and of course, still with the same cooperating profit of 22.173 billion Swiss francs. Good. I think that's what we wanted to bring to your attention. I think let me close that section by saying, well, very clearly, I think when you look really at cooperating profit in absolute terms, I think nothing is going to change. What will change, though, is how the results look like in the divisions and for corporate. And when you look at the margins and that's really on the right hand side, on the lower part of the slide, you see for the Roche group, the cooperating profit margin remains the same with 35%. But it's going to change for pharma, which then really goes up from 42.1% to 46.4%. And then for diagnostics from 20.1% to 24.7%. But this is just due to the fact that we're allocating less from corporate as we did in the past. Good. With that, I think I want to close my section as well. And I think we're happy to receive your questions. And Kay, you're sorry that it took quite a while.

Thanks, Alan. And we will open now the line. And actually, the first question comes from Emanuel Papadakis, Deutsche Bank. Emanuel, please.

Thank you for taking the question. Perhaps I could kick off with a question around the breast franchise outlook. uh, cat Silas or declining key for, for the first time, is that now likely to continue? And we're anticipating some head to head new adjuvant data from the same competitive product. There's pressure on you and metastatic. So what's your confidence around the sustainability of the franchise in the midterm as well. And then on Pagetta and Fez go, um, Fez go seems to have slightly, uh, plateaued in the last couple of quarters. So, uh, Just give us a sense of what percentage of the franchise you believe you can convert by the time Pagetta faces biosimilars. And perhaps you could also remind us when you expect that actually to be. And then perhaps, since I'm amongst the first, it may be premature, but a question on broader strategy. It may be a little early to comment, but is there an intent to use the forthcoming management change as an opportunity to review current group strategy, for example, as it pertains to the group perimeter strategy? M&A intent or indeed the R&D structure of the company, or should we really be looking for continuity of approach? Thank you.

Okay, thank you very much for your question. Thomas, just go on.

Good. As I mentioned in the presentation, we do believe that for the next couple of years, Cazale can remain stable. And this is due to the fact that already, I think more than 60% of our sales with Cazale are in the adjuvant setting. As you mentioned, there is a certain competitive pressure, especially in the metastatic setting. And these trials will probably read out in a couple of years. And so we'll see how these trials are then going to read out. And depending on that, we will potentially see an impact. At the same time, we know that that's about the same time when we also have our patent life ending on Katsaila. Now, you asked the question on Fasco and the conversion. We don't really see a slowing down of the conversion. And for Fasco, we have a patent life, which is much longer. And this is a triple combination and very difficult to manufacture. So we do believe that Fasco has a longer life. Then the question was around reviewing of a group strategy. I do believe that as biology will be more and more better understood, that diagnosis will become more accurate. It will become earlier. And this combination of diagnosis and medicines is going to be really essential. At the same time, we know that, you know, data and artificial intelligence, digitalization in healthcare is still a huge opportunity. It's something in healthcare that's lagging behind, but here we can also have an impact. And I think this combination of these three fields is absolutely critical. So with that, I do believe that we have the right strategic direction from my perspective. Thank you.

Can we have the next question, please?

Next question would come from John Priestner, JP Morgan.

Hi, thank you for taking my questions. So I have two. The first being, how big of a benefit really do you see from the inBRAVE adjuvant liver cancer indication for Dicentric, both in China and ex-China? And how do you view the reimbursement in China versus the local players? And then my second question is around defending the margins in 2023. So really kind of what sort of level of product disposal income have you assumed in your guidance given we saw about 600 million in 2022? Should we assume a kind of a continued streamlining of the portfolio? So just trying to get a feel of how much cost savings will be needed to defend the margin and kind of where they'll be coming from?

Right. Elin, you want to take the margin question and the guidance first?

I think the guidance implies that I think we are very prepared to defend the margin. I think that's the signal we want to send here. And honestly, I think all the ingredients that you then have in the P&L have to play out. So I think we will see what that means to practice polls in 2023. Certainly we have a certain number in mind. I think not worth to mention it now because we have to see how all the other things come together. But very clearly, I think we want to defend the margin in a period where basically we say we have declining sales, which I think is quite a commitment.

Comment on I'm Brave 050. So we've only communicated top line results. These results are now going to be shared with regulators and they're going to be presented at the next conference. Obviously, HCC is a big disease burden in China, but I would say it's still too early to comment on China. But, you know, it is an opportunity both outside of China and in China, in my perspective.

Next question, please.

Next question would come from Matthew Weston, Credit Suisse.

Thank you very much. A number of questions, please. I'm going to start with a big picture one. I don't know whether it's for Thomas as incoming CEO or whether it's for Severin as incoming chair. But you've lost a number of late stage products over the course of the last few months. Ganta, Zinpentraxin has gone out of phase three and Tidget is uncertain. You still have a very strong balance sheet. M&A has not really been a feature of Roche previously, but is now the time for you to act to bolster the late stage pipeline. But also, I'm aware that the family ownership is now much less of an issue such that a share buyback is much more possible. So is there any way that we can see improved capital allocation or changed capital allocation, perhaps I should say, at Roche? And then just a couple of quick product questions. For BISMO, the strong demand, can you confirm that you have no concerns about manufacturing capacity and ability to supply? And then the second issue is around to centric adjuvant lung has been a key driver. You have a competitor with now a broader label. Is there a risk to growth?

Okay, so let me have a first go on the overall big picture question in terms of our strategy and capital allocation. Now, first of all, the overall capital structure with the ownership of the founding families, I mean, this has absolutely changed. no influence on how we run our operations and there's also no impact or change in our strategy following the share buy of Novartis. Now, as far as M&A is concerned, yes, it's always interesting to bring in opportunities from the outside and we keep looking for opportunities which potentially arise, but there's also a price to be paid. And what we have seen in the past is, in particular for late-stage opportunities, it was difficult to justify it from a business case point of view. So we'll see in the future, but Thomas, I guess... you would agree that we keep looking for opportunities as we did in the past, but I don't see any fundamental change in our overall strategy.

Yeah, I can confirm that. I mean, we always do our due diligence. So whenever anything is on the market, we are usually aware of that. And so we look at it and we make decisions based on the science and based on the financials. And we'll continue to do that as we go forward, as we have done in the past. Then you had a question around the bias mode, if we have any concerns, if we can manufacture enough. We don't see that that will be an issue. And we are excited about the strong uptake and the clinical benefit that patients are seeing with the dual action of the two arms of the bispecific antibody. Then you were mentioning a study that was just reading out or got approval lately in adjuvant non-small cell lung cancer, the Keynote 091 study. I would say, I mean, we have looked at data. Some of the data is a bit counterintuitive. So I think it will be a bit of a discussion also among oncologists because actually the hazard ratio was better in PD-L1 negative than in PD-L1 positive population. But it's a broader label, as you mentioned. But yeah, I think that will be a bit of a discussion. That's the first point. The second point is that We have the label in PD-L1 positive. We have first mover advantage and we have a significant better hazard ratio. In fact, our hazard ratio in the PD-L1 positive population is 0.43 versus 0.82 in this Keynote 091 study, which is a significant benefit to patients.

if you did we answer all your questions or you have any additional questions that's perfect thank you bruno okay then we move on um next questions would come from emily fields from barclays emily please

Hi, thank you for taking my questions. Two, please. The first one, just on the competitive landscape for Ocrevus, a lot of attention being paid to the recent launch of Briumv, Lutuximab at a lower price point. Could you just give some thoughts on how you expect to continue to take share with Ocrevus, given that development? And then also, just a clarification on tiragolamab on Skyscraper 1. You know, I appreciate the commentary that you haven't seen any of the data, but I was just, you know, going through some of the comments the company made at the ASH conference recently that talked about the interim OS data being expected in the first quarter of 23, and then the final analysis, you know, being in the earlier part of the second half of the year. I just wanted a confirmation that, you know, nothing from a timing perspective has changed since ASH. Thank you.

Right. I just would like to clarify on the timing because we gave a more narrow window here. So the interim readout will actually be in February. not only in the first quarter. And the final readout will be six months after the interim readout, but it's event-driven. So therefore, you can't be so precise when exactly it will happen. But we have confirmed that. So that timing is confirmed. Perhaps, Thomas, if you can add also on the octopus.

Sure. And thank you, Emily, for the question. So there are... As you mentioned, there are three in-class competitors, Ocrevus and Cosimta and Obliviximab. Now we have the longest data with more than nine years of data. We're the only company that's approved in PPMS and RMS. What we also see is that the market is kind of, there are two different markets. One is the IV market and one is the sub-Q market. And You know, we have the six months, you know, dosing subcutaneous IV on the one hand, but we will be also hopefully on the market with subcu version where the trial will read out in the middle of the year. So then we can play in both markets right now. I would say these are more two separate markets. With regards to Oblutiximab, I think from a data perspective, from where we approve PPMS versus RMS, and also in terms of the dosing frequency, et cetera, we see ourselves as significantly differentiated, plus also from a commercial presence. I mean, we are much more present in the different markets than the company that's selling Oblutiximab. And I believe Severin answered the question on Tidget for Skyscraper 1. We don't have more information on any data, so nothing has changed. And so it's still consistent to what we said in the past. And we're hopeful that this will be positive in the final readout for sure.

Emily, did we answer all your questions or you have any additional questions?

That was great. Thank you.

Okay. So the next question would come from Lisa Hector from Bloomberg. Lisa, please.

Thank you, Bruno. Thanks for the call. So just excluding COVID, as we think about 2023 and sales, are there any particular moving parts that would lead to a range within your numbers? So, I mean, we've touched a little bit on her too, Katsaila. anything unusual for the centres, actemra, potential biosimilar at the end of the year, or you feel that everything's on a fairly stable trajectory. And maybe to follow up on those impairments, Alan mentioned, but just some explanation about what went wrong. I noticed the haemophilia A, the spark, there was the impairment, yet you are still planning to start the phase three this year. So perhaps a bit of an update there and the plans for the phase three as well. Thanks.

Right. So perhaps just a word on the impairments. So for Spark, it's primarily a matter of delays. Timelines have moved out actually for the whole field, but we are impacted as well. So Spark is part of that. And we also took an impairment on Gavretto. You have seen that sales have have been very slow and we have adjusted our projections and as a result of it, we took the respective impairment. Gavretto alone, just to put it into perspective, was about 700 million. Yep, there was some more granularity asked on the guidance on a product level.

Sure. As you have said, I think it's seen both in Severin's presentation and Alan's presentation is that the biggest impact for us in this coming year is the decrease in COVID-19 related sales of 5 billion. And when you calculate that on our total sales, that's about 8%. So that's definitely the most significant effect. We also had on one slide, the effect of H and R. which is roughly 1.6 billion. With regards to other moving parts, we do believe that the aspirate erosion will continue as well as on the Lucentis side. We don't see any impact of Actembra in 2023 because Biosimilar will not be on the market yet, more towards the end of the year.

Thank you. Can we have the next question, please?

Lisa, did we answer all your questions or you have a follow-on question?

That's fine. Thanks very much.

Okay. Then we move on. Next one would be Andrew Baum from Citi.

Hi, many thanks. A couple of questions. So firstly, on Sky One, just going back to the alpha spending in relation to the interim analysis and apologies for the somewhat nerdy question. But my understanding is you're using O'Brien Fleming, which I'm sure that your team would know is a sort of exponential fund spending approach. which means that there will be an exponential increase in the alpha spent, meaning the probability of hitting at the interim, if it is positive, is materially greater than at the initial analysis. It wouldn't actually improve that much by the time you get to the final. So I'm just somewhat confused. Why are you downplaying the relative importance of the interim, assuming you are using alpha? Oberon Fleming. So that's the first question. The second question is more big picture. The organizational changes, which you and Thomas announced this morning, bring Thomas into greater proximity with development decisions through the direct line report, leaving Teresa focusing on the commercial. Could you talk to what you hope to achieve beyond the obvious with this? This is about prioritization of portfolio and Is it decision-making and clinical trial design? How should I think about the key function underpinning, the key drive underpinning this decision? Thank you.

Thank you for the questions, Andrew. Well, on the first one, I'm not the expert here, but talking to the scientists, what they tell us is that by far the most likely scenario is that it only reads out for the final analysis. Perhaps we can make some follow-up on your specific question. I can just reflect what I hear. from our scientists. And again, that's what they have been saying throughout that process because we don't have any new data, right? So I just wanted to put that into perspective. There is no change in our assumptions. We just wanted to make clear what our internal expectations are. But perhaps... Thomas, you can give even more color to that and then also talk to the organizational changes.

So we've never disclosed a statistical plan regarding the mode of analysis. We've used O'Brien-Fleming, as you've mentioned, but it does increase over time, the alpha. And so the highest likelihood is at the end. So we just ask you to be patient on that one. Again, we have zero view on the data. There's no change in what we are communicating. And I think that's important for you to know. Then regarding the organizational change, yeah, whenever you have a management change, this is an opportunity when you also look at how you organize the team. And as you know, in the Corporate Executive Committee, we have already P-RED and G-RED with Aviv Regev and Hans Clevers representing those two organizations. And we felt it was a good moment in time to then also add late stage into the CEC. Now, there have been committees like the Late Stage Portfolio Committee or other committees where they have been talking about the R&D portfolio as a whole. But nevertheless, given that there was now this kind of opportunity, we thought it would make a lot of sense to have the holistic end-to-end R&D discussion also in the Corporate Executive Committee.

Yeah. Any additional questions, Andrew, from your side?

No, perfect. Many thanks. Appreciate it.

OK, then we move on. The next question would come from Sarita Kapila. Sarita, please.

Hello, thanks for taking my question. Sarita from Morgan Stanley. Just the first one on vibizino, please. So some physician feedback has suggested that switching ilea refractory patients has led to mixed outcomes, with some patients doing worse in terms of drying when switching to vibizino. So is there a risk that the launch of ilea high dose will lead to physicians first exhausting the dosing window with ilea before switching the remaining refractory patients to vibizino? And then secondly, just to follow up on ticentric nevastin in liver cancer, Can you update on the approval timelines and will the immature OS data lead to any delays in approval? Thank you.

So let me just answer the second one first with the centric of us in HCC. So we just recently released the data. We will then show the data in the next conference. We're in discussions with authorities. So at this stage, we can't comment on exactly when we will get the approval. But we are in discussion. Regarding the bias more, I mean, I have to say I've had a lot of interactions lately with our people. who get a lot of positive feedback from clinicians. In fact, especially on this anatomical improvement of drying of the eye, where the dual mechanism plays a very big role. So increasing the dose of VEGF doesn't impact that from that stage. Also, when you compare the two trials and you do a fair comparison, you see a significant benefit using Babaismo versus VEGF. the product that you just mentioned. Yeah, so I would say I've not heard that. And in fact, we see a very high switching rate from this other product to our product. And we are confident that the growth of Baizno will continue beyond the middle of this year into the future.

Sarita, did we answer your question or you have any additional questions?

No, that was it. Thank you.

Then let me maybe pick a question here from the chat. It comes from Simon Baker and it goes to you, Matt, so that Daya also gets a question finally. Can you give us a bit more colour on the solid growth ex-COVID? And the question is also referring to here, what evidence and trends are you seeing for the non-COVID use of the machines which were installed during the pandemic? And maybe you can provide an update here.

Sure. So I can maybe start with the second part first. And so we expanded our install base of our automated molecular diagnostics instruments significantly during the course of the COVID pandemic. And you see that as well in the 8% growth in our base business in molecular diagnostics. And so what we see is those instruments which are placed in a lot of hospitals and laboratories across the world are contributing to future growth. of our non-COVID diagnostics base. And so that's the second part of the question. The first part, if you look at the general growth of the diagnostics market, it's mid single digits and we expect to outcompete that. And so our expectation is that our performance should be somewhere in the mid to high single digit range as we head into 2023.

Thanks for the answer, Matt. We'll take the next question here from theCUBE. It's from Peter Welford. Peter, please. Peter, the line is open. Okay, maybe we move on and can try again later. Then we would go to Matthew Weston. Matthew, please.

Thank you, the fastest follow-up ever. It's a finance question. Alan, tax. There were a number of moving parts. You set out a whole series of moving parts, 21 versus 22. There's also a lot of debate globally about what will happen to tax rates in terms of OECD, minima and everything else. Can you give us some help in pointing where your best guess is for the tax rate for 2023?

Yeah, as I said, I think I'm pretty clear here. I think about 18% is what we're heading to. I think I expect really the minimum tax being applied. I think where the early is 24, I think perhaps 25 is a more realistic date if we can really agree and if countries can agree on the right basis to put the 15% on. So we will see. Let me also say, I think even if I think that scenario comes into play, I think that appears to us rather manageable. Certainly it wouldn't be a positive, but I think, rather manageable. So I think from today's point of view, I feel pretty okay about that. But to answer your question right away, once again, I think 2023 should be around 18%.

Thanks, Alan. So then we have another follow-on question, this time from, by the way, Matthew, any other questions?

I'm good, thank you.

Okay, then we have another follow-on question coming from Emmanuel Papadakis. We'll open the line. And maybe, Emmanuel, also one comment from my side, because I think you mentioned, you asked before about FESCO and the conversion and how this will proceed. I think we are very bullish on FESCO, so a significant conversion here to take place in the next two to three years. The more difficult countries, for example, the US or Germany, we are approaching the 20% conversion rate already. So we clearly, Thomas mentioned it, I think, as well, that we will have blockbuster status reached as of 23. And there is, I think, even more to come afterwards. So it's a decent opportunity.

Thank you very much, Bruno. That was very helpful. A few minor follow-ups, if I may. One more on financials. Perhaps, Alan, if you could give us a little assistance with the outlook for financial expenses, given the step up in 22 in terms of 23 and beyond, that would be very helpful. An R&D question. You've initiated the second line lung phase three trial with your KRAS G12C. If you could just help us, as in monotherapy, if you could just help us think about what's the clinical strategy here? How are you hoping to differentiate versus competitors that are already well ahead in that setting. And then perhaps I could take a follow-up to Centric on your subcutaneous comment. Could you just give us your perspective on the IP timelines that implies and indeed whether that will have any impact on its potential inclusion in due course in price negotiation? Thank you.

thank you ellen you start on the finance yeah well on the on the financial result i think first of all i think on the interest expenses what i can say is i i rather expect the absence of major m a um if we do rather smaller stuff which we which we have done also in the course of 2022 i think i can can even see that it's a certain reduction nothing of major significance but i think that's a it's a certain reduction compared to um 2022 because i expect expect certainly i think that we So if we pay back that, especially in the current environment, I think that's quite an incentive to it. When you look really at the financial result in total, I think we have a couple of moving parts, certainly. I think really the income from equity securities, I've mentioned that with the venture fund. I don't know where you think the biotech market is, but I think if the biotech market were taking off, I think there might be even an opportunity in that field. But I'm a little bit skeptical here, given the environment and what I see currently. So let's see what that means. I think we don't expect a major uplift in the net foreign exchange losses. I think that's really something we have to deal with. And I've said a couple of these things come from very volatile currencies. So I think the spending is really justified here. so i think really okay i think um if interest rates really were further going up i think there might be a little bit of a higher uh interest rate or interest income and but i think really the major point is certainly the financing costs and the interest expenses and i think here um it's not like that i have the feel yeah that we put uh at the moment more debt on the balance sheet in the absence of major m a transactions yeah so uh let me first uh comment on the kras uh

small molecule. So we have initial clinical data in second line, non-small cell lung cancer and colorectal cancer. We've received breakthrough device or therapy designations in this case for non-small cell lung cancer. And in terms of differentiation, it's about the best in class potential with respect to potency. And there is also an opportunity to do combinations going forward. Now, regarding your question around T-centric sub-Q, so we did have the positive readouts. We do hope that we have regulatory approval soon. With that, we have at least one year head start. And as we know from immunotherapies, head start and being the first is a big thing. And we will be able to reduce infusion time to less than seven minutes. So we see a big differentiation here for sure. Regarding the patent situation linked to this, so I would say there are two elements. that we are probably in a range beyond 2030. But also, it's around the manufacturing piece. Manufacturing becomes a lot more complicated. And so we do have an opportunity there. And for sure, in some markets, SubQ will help even faster uptake of Dicentric.

Thank you. Emanuel, did we answer your questions or anything else?

Just a follow-up about whether it impacts potential inclusion in price negotiation was the only additional. I don't know if you can comment on that.

I think we would not really portray it that way that we would believe this is necessarily the case. I think we'll have to wait and see how this develops, but yeah, would not be our best case.

Very helpful. Thank you.

Okay. Then we have another follow-up, this time from Emily from Barclays. Emily, please.

Hi, thanks. A couple of pipeline questions. One on the ASO factor B starting phase three and IGAN. Just wondering if you would give any sense of differentiation versus the other factor, oral factor B, that's already in phase three there. Obviously, you'd be coming later to market. And then on cobalamab. across Factor B and Factor D, in addition to C5s, it feels like there's a lot of assets going after the PNH space. So just any thoughts on how you feel Crovalimab will be differentiated? Thanks.

Yeah, so let me start with Crovalimab. It's a C5 inhibitor. It's an antibody that's using the recycling technology of Chugai, so it's a proprietary technology. And with that, we have a much higher level of activity because the antibodies can be in the body reused multiple times. And that's why we believe in terms of efficacy, we have differentiation. That's one element. The second element is that it's subcutaneous. once a month. Now, yeah, there are, as you said, you know, others that have oral administration or longer administration. Now, regarding oral administration, the problem is that this is a fatal disease. So if you kind of miss it, so in terms of compliance, it's almost becoming a little bit more difficult. So we do see this as being sub-Q home, you know, as being actually an advantage in this case. as well as the very high efficacy because of this recycling technology. As regards to the antisense oligo factor B, Maybe, Bruno, you want to answer that one?

Yeah, I think we just provided an update here, Emily, last time. And it's globally, IGAN is still the most common primary glomerulonephritis that will progress to renal failure in the end. So I think there is still a high unmet need. We have the phase two data. And based on what we've seen, we have initiated here the phase three. And I think we, yes, all these areas which we are referring to where complement plays a role, these are diseases, a lot of diseases spanning immunology, but also neurology, for example. I think it's here to some extent also about establishing a molecule and then seeking opportunities. And then also I think the next step is looking for combination development So I think this is the progress in general. And yes, I think we see, clearly we see there is a high level of competition in the space and different MOAs currently in late-stage development.

I mean, that's a good point. I mean, also for Crovalimab, we go in PNH first. But, you know, as Bruno mentioned, the complement pathway is involved in many other diseases. So you have an opportunity to expand also into other areas, sickle cell being one of them. Okay.

I think with that, actually, we are at the end of our call. And if there are any remaining questions, then please reach out to the other team. And then I think I hand back to Severin for our final word.

Yeah. Thank you very much. I realize this is my final investor call in the CEO Hall. Thank you for all your support over the years. Thank you for the good interaction. and have a good day. Bye-bye. Thank you. Great day.