Roche Holding AG

Ladies and gentlemen, welcome to Vogue's full year results webinar 2023. My name is Henrik and I'm the technical operator for today's call. Kindly note that the webinar is being recorded. I would like to inform you that all participants are in listen-only mode during the call. After the presentation, there will be a question 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 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 desk wall, please feel free to go to roche.com slash investors to download the presentation. At this time, it's our pleasure to introduce you to Thomas Schieneker, CEO of Roche Group. Mr. Schieneker, the stage is yours.

Thank you very much. Hello and welcome. And I look forward to sharing our full year 2023 results with you. In 2023, we managed to exceed our guidance. As you see on the right hand side, the group sales growth increased by 1% in constant exchange rates. And this is despite significant headwinds from COVID-19 and also by a similar erosion. In total, headwinds of about 6.4 billion or more than 10% of our sales. And we managed to grow through that. As the headwinds will become less for us in 2024, and we have a strong underlying business, this underlying business will shine through in 2024. And you will see in the guidance, we do expect good growth for 2024. Core EPS, we also exceeded our guidance by reaching 6% growth at constant exchange rates. Now, we had a one-time positive effect due to the resolution of a tax dispute. And even without this effect, we grew our core EPS in line with our group sales at 1%, again, exceeding our guidance. And with that, we managed to further increase our dividends to 9 Swiss franc 60. So overall, I mentioned a strong growth of 1% that is really supported by a very strong base business growth of 8%. The base business growth is excluding COVID-19. Pharma grew a strong 9% and diagnostic at 7% in the base business. We had the expected COVID-19 sales decline of 4.3 billion Swiss franc and AHRNR of 1.1. On top of that, we had to compensate for decline in Lucentis and Esprit as well due to biosimilar and genetics erosion, really showing that the strong underlying business made us grow this year despite these headwinds. The co-operating margin stable, core EPS plus 6%, operating free cash flow plus 4%, all at constant exchange rates. We've achieved a number of very important key milestones in Q4. The approval of Babaismo in RVO and Thesentric as sub-cuts. The US Priority Review granted for Xolia in food allergy. We've had a number of positive phase three readouts. One that I would like to highlight is the readout for enamelisib that Theresa will also cover. Really fantastic results, and this means we're going to launch this medicine hopefully already this year. We've also had very good results in Xolair in food allergy. We've had a number of launches on the diagnostic side, but also a number of deals for Pharma, Televent, the anti-TL1A, Kamot, the dual GLP-1 GAPs, and Lumira DX, really a revolutionary point-of-care technology. You have significant news flow in 2024. On the diagnostic side, let me say with mass spec, with the AccuCheck SmartGuide, the CGM, C703, updates to COBUS 6800, 8800, COBUS Pro serology solution, et cetera. We will have the biggest launch year for diagnostics in the history of this division. On the pharma side, we have a number of phase three readouts. Let me call out specifically, Gazeiva in nuplus nephritis. But also we have a number of phase three enabling readouts. We have in total 12 NMEs. that could potentially transition into a phase three during this year. Now again, let me highlight on this slide the strong achievements of the organization, growing 1% at constant exchange rates. If we exclude COVID-19, you see the strong 8% growth. On this slide, you see the different movements of the sales lines. The diet-based business is growing 1 billion. There are actually not that many diagnostics companies that are even the size of 1 billion, and we add that every year. And that's the underlying base business growth of 7%. You see the expected COVID-19 impact. And as I mentioned before, this impact will be easing. We have a strong growth of our new portfolio in pharma. and we have the expected impact in RONAPRIV and AHNR. And here you also see the appreciation of the Swiss francs versus other currencies that specifically in Q4 accelerated. What I also wanted to show is how the quarters have developed over the last couple of years. In Q4 2023, you see 0% growth, but this is due to the COVID effect in Japan of about 1.2 billion. Without this, the group grew 8% also in the fourth quarter. So again, very strong underlying growth of the base business. What I also wanted to show, and you see that in the blue boxes, how the base business, so the business excluding COVID, this is what's going to carry us forwards, has developed over the recent years. And you see a massive acceleration from 2022 to 2023 in our base business, growing from 3% in 22 to 8% in 23. So strong delivery in our commercial organizations with a good portfolio. Here again, you see the base business development both in pharma and diagnostics. On the diagnostic side, we have again achieved 7% growth in the base business, the same as the previous two years. So we've consistently grown in the high single digits for the diagnostics business. On the pharma side, we've seen really the acceleration from 2% growth in the base business in 22 to 9% growth in 23. And what I can say is also when we look at the guidance, we see a strong continued trend also into 24. The key growth drivers of the portfolio are in diagnostics. We see very strong growth in core lab, in pathology, but also in the molecular lab. In ophthalmology, Vabaismo now reached 2.4 billion Swiss francs. Fesco reached 1.1 billion Swiss francs. Hemlibra has reached 40% patient share in the US and the EU5. And PolyV is becoming the new standard of care in first-line DLBCL. And we've had strong launches with ColumV and Lunsumio in third-line DLBCL and follicular lymphoma. Ocrevus is the number one globally with 24% market share. And Evristi is the number one globally in patient share. So you see a strong portfolio throughout the different disease areas. Now, beyond the portfolio, we've made significant progress in terms of strategic and organizational development in 2023. And I will not go through everything, but let me give you some highlights. On a digital health strategy, we have focused our efforts in certain areas. We have decided to go for one technology platform across the group and one center of excellence for digital product development. On the disease area strategy, specifically cardiovascular and neurology, we defined the strategies and we moved forward. On R&D excellence, we've done a productivity analysis and we've seen that there are areas where we are best in the industry, but there are also areas where we can be better. And we set goals to be in the top in all of those measures. We've also set the goal to have 80% of our portfolio either best in disease or first in class. And we are working towards that goal. We're investing in the latest technologies, AI, ML, but also large language models. And we are really accelerating promising projects, going through prioritization of a portfolio, Deprioritizing projects that are not as promising and moving those efforts into the most promising projects. And we've seen a couple of effects already. Inevalicip, which was supposed to read out in 2024, came in early because of these efforts. Trontinumab was accelerated because of these efforts. So you've seen that we have done a lot to really move our portfolio ahead. We also looked at our operating model to simplify, clarify, and align structures and processes and technologies to get rid of duplications in our organization, to make fit-for-purpose right processes, slim processes to accelerate everything that we're doing, and also to set standards around technology. And some of these things you can see with diagnostics and diabetes care integration or the integration of FMI into diagnostics. On the people and culture side, we've made significant progress as well. Not only do we have a new corporate executive committee, but we also have gender parity now in the corporate executive committee. And we're working on culture. We have a really high engagement from our employees and very good culture scores. We're working on having more debate leading to better and faster decisions by our empowered people and really an excellence to deliver ambitious goals. So we're setting very ambitious goals across the organization to be able to deliver those. It will be very important to build on that with our people. Now, what you can already see, and we already did that in Q3. In Q3, we have already de-prioritized three enemies. In Q4, you see we have deprioritized another eight. And we're shifting the resources to projects that we want to accelerate. You will see a similar number in Q1. So really making sure that we put our efforts behind those projects that are most promising, really working towards achieving a portfolio that not only has the most enemies in the industry, but 80% of those enemies either best in disease or first in class. And one way we built that is also through bringing in external innovation. Televent, this being one of them, Theresa will comment on it. Alnylam in hypertension, Comets, again, Theresa will comment on that. We've done deals around ADCs, RNA therapies, molecular glue degraders, and also generative AI together with NVIDIA. We've done a very interesting deal which is now at this stage a definitive merger agreement. The closing will be later this year around point of care, where you can do multiple modalities on one single platform and where we have a very strong and very good cost position. So you see we're building and accelerating our pipeline through our internal efforts and complementing that with our external efforts. Also on the ESG side, we have made significant steps ahead. On the Dow Jones Sustainability Index, we were not only number three, we were also number two with Shugai. So we have two of the top three positions in the Dow Jones Sustainability Index. In reducing the scope one and two in the greenhouse gas emissions, we've managed to reduce 79% since 2004. We've also made progress in our portfolio and the contributions that we do there with HPV molecular testing and a novel antibiotic class that was developed and discovered by our researchers. Now, let me take you through what 2024 will look like. First, We have a young portfolio. We've been launching about two medicines every year for the last 10 years. We're going to launch another two medicines this year. Crovalimab for a certain type of disorder where red blood cells are attacked by the immune system. This medicine has potential also in other diseases. It never listed where we just got the data end of last year. And it was very promising to a point where we do believe that we can actually bring this to market already this year. And you see that this young portfolio will continue to drive growth in the next years. And on top of that, the headwinds are becoming less. The last time where we really have a major impact from COVID-19 will be in Q1. In 2023, we had an impact of 4.3 billion. This impact is going down to 1.1 billion. In 2023, if you look at biosimilar erosion and you take everything together beyond even AHNR, we had an impact of 2.1 billion. This is coming down to 1.6. So you see the overall headwinds is coming from 6.4 to roughly 2.7 billion. And with the strong momentum in our underlying business, this will shine through and help us grow in the mid single digit range in 2024. On top of that, we have a number of things in the pipeline that will continue to drive growth in the outer years. And let me start with diagnostics. MassBac, Cobus Pro serology solution, blood screening in the US, Cobus C703 ISE, our Alzheimer panel for Alexis, the Cobus 6800, 8800 version 2 molecular diagnostics, next generation sequencing, Continuous glucose monitoring. We are on fire when it comes to launches in diagnostics. We have the best launch year in the history of this division. On the pharma side, and I'm just showing you some of the assets that have significant opportunity for growth. And most of those are not even covered in any of the models out there today. And we have significant readouts in 2024. Many readouts, phase three readouts will be in 2025, such as Astigolimab, such as Fenabrutinib, Geodestrin and others. But there are 12 enemies that could transition this year into phase threes. So we have a strong pipeline also on the pharma side that can drive and will drive growth in the other years. We will not need everything to work, but all of those are significant additional market opportunities, and most of them not included in any of the models. So again, looking at 2024, we see a strong base business growth in 23.8%. We do believe that our base business will continue to do well. The headwinds are becoming less, significantly less. And with that, we believe that group sales will grow in the mid single digit range. For the 24 guidance, core EPS will then grow broadly in line with sales growth. Now, this is excluding this impact from the resolution of tax disputes in 2023. You've seen that on the 23 slides. I mentioned we grew 1% and core EPS 1% excluding this effect. So, we're excluding the effect in both cases. So, you see that we're continuously... We are continuously delivering on keeping the margins stable. And this will actually mean that from an operating cost perspective, we'll need to be very disciplined because we will need to grow operating profit in a high single digit range to get the core EPS in line with sales growth. But I know Alan will cover more of that. For the dividend, we want to further increase the dividend in Swiss francs. Thank you. And with that, I hand over to Alan. Yeah, thanks, Thomas.

Lots of good remarks. I have now to do something first, which I'm not so used to normally. I have to do a little bit of advertising. But it ties very well in what you have said, Thomas, because we would like to deliver even more information to the opportunities that you've talked about in 2024. So we have a neurology update from an investor relations point of view at March 11th, where we have Levitis, we have Trantinamab, and we have Pratenetumab. So in Parkinson's disease, we'll have an update there. And we have the Diagnostics Day. Really, how should I say, lots of excitement around that. More talks about the technologies and perhaps one or the other machine might be visible there and even, how should I say it, touchable, if I might say. And then we have the Pharma Day on September 30th. And on this day, it's not just about the pharma strategy, it's also about the group strategy on top. So I think a very important day. Good. With that, let's go into the numbers. First, I give you a quick overview and then I dig into the details. You see on that slide first that I will focus on the right-hand side, so really the numbers and the improvements, if you like, in constant rates. I think that's really justified. We have a very solid natural hedge when it comes to currencies. I come to that and I will show you a slide on this, but just to explain to you why I'm so focused on the constant rates development. So you see really sales, and as Thomas said, I think even without COVID, I think we have grown by 8%. I think pharma up 6%, DIA minus 13%. When you then look at it without COVID, pharma up 9% even, diagnostics up 7%. I think that's really great, and Matt and Theresa will dig into this. And then we have the cooperating profit minus 1%. Well, we invested into R&D, so we have an increased sale of plus 5%. And we have an increase in SG&A of plus 4%. I come to this. Majorly driven by M&D and pharma, so we invested into the product. I think in case of a BISMO, they'd made a hell of a sense. And we have some increases on the corporate side. When you look at current income plus 3%, I think that's really the tax impact. That's really a tax resolution that we had the pleasure to experience in 2023. It was a major uplift. It is admittedly at that size a one-off. And that's also why we've decided to exclude that from the 2024 guidance. And then really you see from the cornered income plus 3% to the core EPS plus 6%. And that's interesting because that's a base effect coming from Shugai last year. You might all remember we had the settlement at the time around a product called Altamiris. That saddle mask gave us 668 million, if you like, pure profits. And I think that boosted the Shugai result at the time. That's not existing anymore in 2023. So you know we have a 60% share in Shugai. 40% is really the minority share. So the deduction, if you like, or the adjustment for profits based on this is much lower compared to last year, which then certainly brings the comparison up and brings the core EPS to plus 6%. IFRS net income plus 7%, better performance, less impairments, a couple of restructuring charges. And then we have the operating free cash flow with 15.8 billion, up 4% in constant rates. I would argue it's still allowing us to do whatever we want to do and certainly also investing into M&A. And I will come to that later on. The same applies to the free cash flow. Good. With that, let's go rather quickly through the P&L. I think sales, I would argue, is covered and there's more to come. Other revenue, you see a minus $664 million, so reduction compared to last year. That's Altamiris. Altamiris is $668 million, so I think that number fits perfectly. Then you really see the cost of sales with a plus $1.35 billion, so that's a major improvement. It also brings the cross-profit margin up. What certainly I can say here, it's a fantastic achievement because in group the volumes went up 5%, in pharma it went up 12%, and in pharma we provide a saving, you will see it later on, of roughly 100 million. And then certainly there's diagnostics and they really provide the bulk of the saving, if you like, but certainly also due to the fact that the sales went down significantly. I think when you look really, because I heard a little bit of a question about royalty expenses, I see the royalty expenses itself went up because of Crevice and Evristi, but we had an offsetting effect, even a little bit of an overcompensating effect, coming from collaborating and profit-sharing agreements, where we had, if you like, a little bit of an ease of the expenses here, and the explanation is similar to what Ron approved. Good. With that, let's go to the next line, which is R&D. As I said, up 5%, really driven by pharma with 725 million. And then SG&A with a 590 million increase. M&D from pharma, 346 million. And then we had 100 million really coming from the corporate side, driven by informatics and a little bit by P&C, so people and culture. And then other operating income and expenses, rather stable. It's a relatively small number, I would argue. Good. I think maybe look at the margins. And you know, we said we want to defend the margin. And I would argue in constant currencies, I think we were quite successful. You see the margin decline is small in constant currencies with minus 0.5 percentage points. you see without Altamiris it would have even increased. I think you see quite a nice development of pharma division with the minus 0.4 percentage points without Altamiris plus 1.1 percentage points. And then you see the diagnostic solution going down, but I think here a simple explanation, when you lose sales in a magnitude of 2.3 billion, I think it's very hard to keep the margin. Good. With that, let me go to the core net financial results. Here currency helps us, as you can see, because you see a roughly 90 million deterioration in constant currencies, a minus 197 million. And let me lead you through this. I think the equity securities This year, we had a gain. Last year, we had losses. So this is really what comes from the Roche Venture Fund. We're investing into minorities, as you know, and private companies. Evidently, I think we see an uptick here. And then you see the net interest income. I think the team did a great deal here. You know, we've issued bonds in Q4 or in the total of 2023 of 6.5 billion, vast majority in Q4. Certainly, we made use of these funds, and that brought the net interest income up. Then you see the currencies. Well, we have currency losses, no doubt about that, of minus 243 million, but it was less than last year. And that's the 35 positives that you're seeing here. And then you see the interest expenses. Very clear. We had the refinancing. We refinanced at higher rates. We brought more debt in, certainly also at higher rates. compared to history. So, okay, a minus 208 here. And then other is hyperinflation, a minus 233 million in total, which came in basically triggered by Turkey and Argentina. So nothing unexpected, so to say. Good. Tax rate. Yeah, let me start on the right-hand side because that's a big pleasure. Effective tax rate for 2023 is 11.9%. We all enjoy the moment. I think really this resolution of a tax dispute was very, very beneficial, accounted for 774 million Swiss francs, so a significant number. Certainly also, how should I say, it helps us from a cash-out point of view because this number is not going away in cash. So I think that's quite positive. I think if you add back this impact, you get to an effective tax rate of 16.2%. Now, you might ask yourself, okay, what's going to happen in 2024? Let me be precise here about 2024. What we expect is that the 16.2% goes to 18%, and that's the basis for the guidance. And in addition, 1.5 percentage points, so in total 19.5% tax rate, is coming from the Swiss minimum tax. That's coming in here, which is working a little bit against us. So you see there is quite a jump on one hand on the underlying tax rate, but also, let's say, from the Swiss minimum tax. And I come back to that. Core EPS developments, a bit of a summary when you look at profits. Let me start with the full year 2022, so the 20.62%. and then going over to the full year 2023, excluding the resolution of the tax disputes. And what you see a nice uptick in operations of 2.5 percentage points. Altamiris worked against us and all other effects netted out basically. And then you see really from full year 2023, the tax effect was plus 5 percentage points. So quite significant to bring us to the overall plus 6.1% core EPS increase. Very important when we come later to the guidance. Yeah, a couple of non-core items. First, you see cooperating profit asset minus 1% on the right-hand side. You see the IFRS operating profit on the right-hand side going up by 3%. And you see really the total non-core operating items plus 670 million. I would outline two effects here. One effect is we had significantly less impairments compared to last year. I think really, let me mention Rossley Track here. It's just one element which came in in 2023, but significantly lost impairments on intangible assets. And we had a little bit more on global restructuring charges, as you can take from that slide. When you take the IFRS operating profit with plus 3%, you get to the IFRS net income with plus 7%, which is quite a boost. Well, the point comes from that really impairments are not tax deductible. So we have less impairments, if you like, which are not tax deductible. And that brings, if you like, the tax effect up in a positive way. And therefore, we get to a plus 7% on the IFRS net income. Good. I think really now we get to cash. And that's where it all comes together. When you look at the group operating free cash flow, let me start on the left-hand side with the 17.6 billion. You see full year 2023 in constant rates, 18.2 billion. I would argue the 18.2 billion is matching pretty well what we have delivered historically in the last couple of years. So that's fine. Let me lead you through this operating net profit, net of cash adjustments, a minus 230. Well, I think Altamir is once again. Then you see the net trade working capital and networking capital, an improvement of 1.2 billion. I think that's great. Nevertheless, accounts receivables went up, inventories went a little bit up. So I think there is still more work to do, which I think gives us a good outlook for 2024. Investments and PP&E, an increase of 506 million. And then you see the investments in intangible assets with an increase of 173. Let's say with a decrease of 173, which then shows as an improvement here on the cash side. So I would argue pretty balanced. Certainly, I think the foreign exchange impact here with a minus 2.5 billion is significant to bring us to the 15.8 billion reported. Good. I think with the margins here, as you can see, I think group looks better in constant rates. Pharma division looks significantly better in constant rates. And then diagnostics going down, that's clear. I think when your profits come down, I think it's not surprising that your cash flow comes down as well. Good. Group net debt development. We are at 18.7 billion net debt. You see on the left-hand side, we started the year with minus 15.6 billion. So we had an increase here of 3.1 billion, certainly driven by the M&A activities. But let me lead you through this. I think the operating free cash flow I've led you through, 15.8 billion. We paid taxes 3.6, Treasury 900 million. And then I think you see the 14.4 billion, the dividend, 7.9 billion, and then M&A with 6.2, which basically is Taliban. And you might remember it was 7.1 billion in U.S. dollars. It's 6.2 billion in Swiss francs. So I think really that all makes sense, brings us to 18.7, as said, increase of 3.1. Well, a quick look at the balance sheet. You see cash and marketable securities go up in constant rates quite significantly, 19%. As said, we have issued bonds of 6.5 billion in the year 2023. Other current assets plus 5%, that's accounts receivables with 0.8 billion slight reduction in the balance sheet, which is at a different currency rate of inventories. And then your non-current assets go up 13%, and that's settlement coming in with 6 billion goodwill. Then on the right-hand side, you see the capital current liabilities go down minus 2%. That's the lower income tax payable that we're having now after the release of the tax provisions. We have the non-current liabilities. This is the gross debt, which has increased to 29.2 billion. And then we have equity, which has increased, and we have a solid equity ratio of 37%. Okay, reporting changes. I think that's important to mention. As you might know, I think we will move Foundation Medicine from the Pharma Division to the Diagnostics Division. And with that, certainly, I think we see some changes here. That does not mean that we change the independence of foundation medicine. I think that keeps intact. The whole change is effective at January 1st. Certainly, we would like to enable you that you come up with the right estimates for 2024. So we have no restatements made in the 2023 financial statements. This all is going to come during the year 2024 and in 2024 we will restate the 2023 results and certainly we will apply that structure that you're seeing here in the 2024 financial statements. And these changes will have no impact on sales, operating profit, net income, and EPS of the group as a whole. It has an impact on pharma and dyer, as you can take easily from that slide, but not for the group at all. But we said, however, for modeling purposes, I wanted to provide you a heads up about the changes and how they impact the divisional margins. And as you can take easily from that slide, it's an uplift for pharma, and it's more pressure from a margin point of view on diagnostics. Good. With that, let's go to currency. You hear me always saying we have a solid natural hatch, and that's why I'm not so concerned about the currency impacts. For me, more a reporting topic, to be honest. And why do I say this? I think when you look really at the major countries we do business in, and let me start with the U.S., 46% of our sales in U.S. dollar, 43% of our costs are in U.S. dollar. You look at the euro with 16% and 15%, even the Japanese yen, it's 7% and 5%. And then you look really at others, 30% of our sales are in others, and we have 18% of our costs in other currencies. So I would argue overall, I think very solid. The only thing, and you know that for a long time, the only point we have an imbalance in is in the Swiss franc. And it certainly shows when you look at our numbers. Well, currency impact and outlook, you know, I don't want to go on the left-hand side. You see really the major deviation compared to the average last year as coming from the US dollar has even increased. Middle of the year, we had a minus 3 percentage points difference. Then it increased to a minus 5% and then it increased to a minus 6%. You see it on the left-hand side in that Swiss franc US dollar slide. But what this all went cost, if you like, it's on the right hand side, full year impact 2023. You see the minus 8 percentage points on sales, the minus 12 percentage points on cooperating profit, the minus 15 percentage points on core EPS. And all that has been disclosed already at the JP Morgan conference on January 9th to enable everybody to come up with the right predictions here. You know what we're doing at year end? We keep all currency rates stable and then project them until the end of 2024. And then we ask ourselves what's the impact on sales, cooperating profit and core EPS and you see it in that red box. It's around minus six percentage points on sales, minus eight percentage points on core operating profit and nine percentage points on core EPS. This is really when you do that modeling and I say modeling because we all know this is a very, how should I say it, this is a heavy assumption because one thing is for sure it will be different. And if you were applying today's currency rates, and you would keep them stable and project them until year end, we would be one percentage point better. We would be at a minus five percentage points on sales, minus seven percentage points on cooperating profit, and a minus eight percentage points on core EPS. Good. With that, another important slide. Let me give you the starting point for the forecasting for 2024. And let me lead you through this diligently. I think really core EPS, as reported, 18.57. The foreign exchange loss, which needs to be extracted or taken away from the core EPS, accounts for 0.42. How do we calculate this? It's the FX losses, minus 243 million. I've mentioned them even in the presentation. You find them on page 62 in the finance report. And then in addition, the net monetary position in hyper-inflationary economies, I've talked about that as well, the minus 233 accounts for 476. You deduct tax, you deduct the net controlling interest, here you have to trust me, the 138.32 million, and then you get to a minus 337.68 million Swiss francs. You deduct it through 804 million shares. This is on page 176 of the finance report and you get to the mentioned 0.42. That leads you to the 18.99 in the middle of the slide and then I think to have the right base you have to deduct the impact from the tax resolution of 2023 and that's a minus 0.97 leads you to the 18.02 which is the starting point for the predictions for 2024. Good. With that, last slide, guidance. Thomas talked about it already, but let me give you a couple of specifics here. Let me say when we talk about mid-single-digit sales growth, we mean mid-single-digit sales growth, which I think is very important to reflect. So mid is mid. As said, we lose 1.6 billion on loss of exclusivity, sales losses, and we have the 1.1 billion that we still lose on the COVID side. So there is some headwind here. When you look at the core EPS growth, and Thomas has mentioned it, I think we have a couple of things going against us. And let me be clear here about these impacts, because it means we need a very, very significant increase on the cooperating profits side. As said, we face a group tax rate increase from 11.9% to 19.5%, based on that guidance from 16.2% to 19.5%. And when you calculate that, that's roughly 800 million on the tech side. So that's a significant impact. And furthermore, we face an increase on the interest expenses of roughly 500 million. So that's a 1.3 billion in total. And to compensate for that, to get really to a broadly in line with sales growth, we need a cooperating profit increase in the high single digits. So that's a significant commitment from our side and will take a lot of effort to bring us to this. Okay, and I think with that, I'm happy to hand over to Theresa.

Okay, fantastic. Thank you, Alan. So let's just jump right into pharma sales. So with sales of 44.6 billion Swiss francs, pharma grew at a very strong 6% at constant exchange rates. And if you take out the effect of Ronaprev, we grew at 9%. You can see that with the exception of Japan, all portions of the world grew quite strongly. Japan was, of course, in effect, Japan was, of course, impacted by a very strong run-approved effect. If you exclude that, they also grew at a very respectable 6%. Overall, pharma volumes were up by 12%. The price-impact mix was about 6%, and you can see the currency headwinds intensified through the entire year, as Alan mentioned. They were at 8% for pharma in Q4, and that's up from 7% in Q3. Core operating profit increased by 5% versus a 6% sales increase. Alan has walked through the COP dynamics, so I will go ahead and skip that. Again, you see here other revenue decreasing. As Alan mentioned, this is completely the Altamaris impact. Cost of sales decreased by 1%. Alan mentioned the 12% volume increase, a very respectable result. This cost of sales decrease is mainly driven by favorable product mix and lower distribution costs. The R&D increase was largely around trial acceleration, which is something that certainly is a core component of the work that we're doing around R&D excellence. And as Alan mentioned, the increases in SG&A were largely very strategic and focused on places where we intend to see impact not only in 2023, but in future years as well. You've heard us often talk about our young portfolio, and I think when you look at this growth graph, you can see why we are so excited about it. So just to comment on the graph, all values are absolute, and year-over-year growth rates are presented in CHF at constant exchange rates. You can see the BISMO continues to exceed expectations with 324% growth. easily crossing $2 billion last year. Okraves, Hemlibra, Polivi, Fezgo, Evrizdi all continue to grow very respectably. We'll talk about all of those. In due course, Ron approved sales did continue to decline. This is driven primarily by the base effect of 1.2 billion Swiss francs in Q4 23 in Japan. The last of our Ron approved sales will wash out in Q1 of this year, and then we will officially have that behind us. H&R erosion was ultimately in line with what we communicated previously. in q3 at 1.1 billion this is the last time that we will talk to you specifically about ah and r as as their own subset in the future we will really talk about biosimilar and generic erosion as a whole so now jumping into the actual product performance so we are updating the way we present our pharma therapeutic area slides you can find the details on the new definitions of those therapeutic areas and a crosswalk In the appendix on slide 172, for each of our therapeutic areas, we will present a slide like the one you have here, which shows you the full year sales in the donut chart on the left, as well as key Q4 updates in the outlook for full year 2024 on the right. So let's start here with solid tumors in oncology. In 2023, solid tumors increased year-to-date at 2% at constant exchange rates to $16.1 billion. Looking at the HER2 franchise to start, Fezgo continued its exceptional growth, a 64% growth rate. That's a 39% conversion rate for Progetta Fezgo achieved in our 46 pre-launch countries. Again, we have consistently said that we are aiming for a 50% conversion rate, and we are well on our way in our key markets. We would expect that that ongoing strong conversion continues. And as we have previously said, as Fesco continues to get acceptance and that conversion continues to happen, what we do ultimately see is that Progetto-Fesco penetration then continues to increase. So very, very much looking forward to continuing to see that dynamic. Ketxila grew by a respectable 4% last year, primarily driven by ex-US with early breast cancer more than offsetting the declines that we're seeing in the EU and the US due to metastatic competition. We recently presented very strong Ketxila data at the San Antonio Breast Conference, and we'll cover that in more detail on another slide. Progetta grew at 1%, largely driven by international, offsetting the EU decline, which again is driven primarily by conversion to Fesco. Many of you will have noticed the Q4 sales dynamics were negatively impacted by an adjustment in reserves related to U.S. government programs. This was a one-time effect. We do not see anything in the underlying growth of anywhere in the HER2 franchise that leads us to believe that the guidance should be anything different than what we have given you in the past. To be more specific, for HER2 next year, we would expect single-digit growth and just with a slightly different product mix. And if you exclude the Q4 adjustment that was made here, Progetta, again, that growth was around 1% in Q4. Ticentric is at 9% growth driven primarily by HCC in the EU5 and XUS as well as adjuvant non-small cell XUS. I think in the US in adjuvant, we are holding our own in an increasingly competitive market. We are happy that we have achieved EU approval for the sub-Q formulation, and we're looking forward to FDA approval in September of this year. As a reminder, sub-Q to Centric allows us to go from a 30 to 60-minute infusion to a 7-minute injection, which for capacity-constrained healthcare systems is certainly a benefit. You may recall that we received approval in the UK last year, and we have already seen about 18% conversion to centric subcut. And just similar to Fesgo, a lot of really positive feedback from accounts who have made that switch. Alicenza grew at a very respectable 8%. We're maintaining our market leadership in the ALK positive metastatic setting. The positive phase three Alina data have been filed. We expect US and EU approval later this year in adjuvant. And we, again, would expect that growth to continue. Alan mentioned at JPM that we will expect to see the results for Skyscraper 1 now in the second half of 2024. I think everyone has seen the data that was accidentally released last year, that 0.8 hazard ratio. Again, event-driven trial. Events have just simply slowed, and we would look forward to getting that data at the end of this year. Thomas mentioned Inovalisib. We will go into more detail on the very strong results that we saw, but that is clearly a very exciting advance, and so let's actually go straight to that now. So Inovalisib holds a special place in my heart because it is a homegrown molecule. This was invented and developed by our G-RED scientists in Genentech in South San Francisco. And as Thomas mentioned, we saw a very impressive result for this highly selective PI3 kinase inhibitor in first-line mutated hormone receptor positive breast cancer. We saw the combination in this trial reducing the risk of disease progression by 57% with a very strong hazard ratio of 0.43. OS was immature, but certainly trending in the right direction. As I think all of you know, about 80% of breast cancer patients are hormone receptor positive, and about 40% of those patients carry this mutation. And patients with this mutation do tend to have a worse outcome, so these are data that were very well received. It was probably the latest late breaker in the history of San Antonio breast. It was presented at the end of last year to a lot of excitement, and we're very much looking forward to continuing our conversations with health authorities and looking forward to approval for this drug, hopefully this year. Of course, in addition to the program that we currently have going on with Novelisib, we also continue to have a significant investment in hormone receptor-positive breast cancer with a number of gerodestrin trials, which we'll begin to read out in 2025. Again, gerodestrin has the potential to really reset and be a new foundational backbone standard of care for patients with hormone receptor-positive breast cancer. So this is certainly very much a place to watch. San Antonio was a big conference for us last year as we were also able to present the long-term CAD-SILA data. CAD-SILA is the standard of care in early HER2-positive breast cancer with residual invasive disease. This is seven-year data. And you can see that it is actually quite stunning what we have shown here at seven years. The long-term data continued to show IDFS benefit with an absolute benefit of 13.7% at seven years versus Herceptin. Again, this data was extremely well-received. It continues to entrench Quetzala as the standard of care in this setting. And we look forward to continue to bring this wonderful option to patients around the world. Moving on to hematology, which includes both malignant and non-malignant hemes. So, of course, we will start here with Hemlibra. So Hemlibra finished with over $4 billion in sales this year, very strong continued growth, 16%. We now have about 24,000 patients who have been treated globally. The basic profile of HemLibra continues to be very attractive to patients who are looking for prophylactic treatment. About 60% of our patients are already on every two- or four-week dosing. They have zero risk of developing inhibitors. And importantly for this patient population, we have a wealth of long-term data across patients of all ages. And so I think, you know, despite the fact that we see increasing competition in the hemophilia space, there's nothing that tells us that hemolibra can't continue to be the standard of care and can't continue to grow. Moving on to malignant heme, Polivi had a very strong launch in first-line DLBCL. We do expect it to cross into blockbuster status this year. Patient shares in first-line DLBCL in that IPI 0 to 5 status have climbed to 14% in the U.S., just under 30% in Germany, about a third of patients in Japan. We are anticipating an update to the NCCN guidelines to bring Polivi or the Polarix regimen to Category 1 under recommendation of the use of Polivi in all stages of DLBCL, which should further drive that momentum. Again, if you are looking at Q4 sales and you saw a softening, that was largely related to the fact that we had a software update in one of our distribution facilities at the end of last year, and that unfortunately impacted Polivi specifically and just drove a different buying pattern in Q4. So there's nothing that we see in the underlying growth of Polivi. that would lead us to believe that there should be any difference in what we would see going forward, and we would continue to see strong growth and to see it establish itself as the new standard of care. Gaziva grew at 19%, continued very strong growth, driven by that first-line uptake in combinations in first-line CLL, including combinations with Benclexta. The launches of both Lunsumio and Columbia and third-line plus follicular lymphoma and DLBCL, respectively, continued to go well. I think we have always said that the real opportunity for these drugs is moving into earlier lines of treatment. We would expect a couple of hundred million of additional sales here in the third line plus indications, but we do get that second line DLBCL data for both of these products this year, and that is really where the additional growth will come from. So before I move on to neurology, I will also sort of give another little shout out for Krivalumab and PNH, which Thomas mentioned earlier, which gets its U.S. and EU approval this year and is currently also in studies for additional diseases such as sickle cell. Moving on to neurology, Ocrevus remains the market share leader in both the US and the EU with 24% market share. We have over 300,000 patients being treated globally. This growth that we see with Ocrevus is not only because of new patient share, but is because we do see higher retention rates than is typical with other MS medicines. We expect this momentum to continue for Ocrevus. Again, I think many of you know that we are expecting our Ocrevus subcut approval in the US and the EU this year. This is an every-six-month subcutaneous injection that will not only provide additional convenience for patients, but will open up an entirely new segment of MS patients to Ocrevus. We would expect this to be a blockbuster opportunity in its own right, and we're very, very excited. to be able to bring this new option to patients. If RISD had another strong year with 39% growth, it is now the global market leader in patient share, as Thomas mentioned a little bit earlier. We expect this growth to remain strong into 2024, particularly as we continue to expand into the adult segment. 2024 will be an exciting year for neurology in terms of news flow and key readouts. We have a pivotal phase three study for luminescence in N spring in generalized myasthenia gravis. We hope that this data will be presented this year. We hope it will be at the IR event. that Alan mentioned a little bit earlier. We would expect this to be about an $800 million opportunity, which is quite significant. So stay tuned for that data. We're anxiously awaiting it. We also have a number of very, very interesting phase three enabling readouts. There's the manatee study with Evrizdi in combination with GIM 329. This is our anti-myostatin, which comes from Chugai, utilizing their recycling technology. When you think about the opportunity to keep muscle or grow muscle in these patients with SMAs is very, very potentially clinically meaningful for these patients. We will get an interim readout of that trial this year, which could potentially greenlight a phase three trial. We get the phase two B results from Padova, which is prosy in Parkinson's disease. Again, hopeful for this based on the digital biomarker signals that we saw out of prior prosy trials. And then, of course, we have the phase one B2A Trontiumat updated data, and we'll talk more about Trontiumat on a subsequent slide. But I think there would be no conversation in neurology these days that would be complete without a conversation around Embark and LVDs and DMD. While it did not reach its primary endpoint, I think when you actually see the data From Embark, you can see that there really is a benefit to these boys. As many of you know, Elevides is the first and only gene therapy approved for the treatment of ambulatory DMD patients in that four- to five-year age range. That's based on the accelerated FDA approval that Serapta received last year. And while we didn't meet that primary endpoint of NSAA compared to placebo, you do see for all key pre-specified secondary functional endpoints, that time to rise, that 10-meter walk-run, endpoint, you see very clinically meaningful results in favor of LOVDs across age groups. And I think this is where we really hold a lot of hope that this is going to be a very meaningful medicine for these boys. There have been no new safety signals observed, and we are very eager to bring this data to EMA and other global regulators to be engaged. We have a significant development program that is still currently underway, both in older ambulatory patients, which is ongoing. And then in Q4, we kicked off the zero to three-year-old ambulatory patient study, the involved study. So this is definitely a place to watch. And again, we will be presenting the full Embark data at the upcoming MDA conference. And this will also be included in our IR neurology update on March 11th. Another extremely exciting molecule in our portfolio these days is Trontiumab in AD. This is another largely homegrown molecule from our P-RED organization this time using our proprietary brain shuttle technology. You can see that it does exactly what we know we need to do with neurological treatments going forward, and that is get across that blood-brain barrier. to deliver more antibody where antibody is needed. And if you look at the images in the center of the screen, you can see exactly that. You can see that using the brain shuttle technology, you can actually flood the antibody into the brain all at the same time, getting the medicine exactly where it's needed. And if you look at the clinical results that we've seen in our phase 1b2a study, you can see that it just drops plaque like a stone. It drops it rapidly, and it gets to almost complete resolution extremely, extremely quickly. We do know now that the removal of plaque does correlate with increased clinical benefit for these patients, and so we truly believe that there is a very unique opportunity for titinumab. We will be presenting updated fourth dosing arm later this year, but this is, as Thomas mentioned, one of those programs that we are prioritizing through R&D Excellence and are really eager to begin to think about how we can rapidly accelerate getting to patients. Moving on to immunology. Overall, this TA's performance of negative 7% is, of course, impacted by continued Esbria and Mephtheria rituxan decline due to generic and biosimilar competition. However, both Actemra and Zoller continue very respectable growth with 5% at constant exchange rates. Actemra has solid performance in its chronic indications, largely driven by the US, and we're now at about 60% subcut, which again is a nice natural hedge against the biosimilars, which will primarily launch with IV. Xolair growth continues to be driven by strong CSU performance, and I'm also very excited to share with you, as we did at the end of last year, that the FDA has granted priority review for Xolair in food allergy, and we expect that approval to be happening in this quarter. More on this on the next slide, but we really do think that this has the opportunity to benefit many, many patients who suffer from a food allergy. There are more exciting developments in immunology to look forward this year. Gaziva is certainly one you've heard me talk about many times over the last number of years. Gaziva and lupus nephritis, that trial does read out this year. It is one of several trials that we have running in nephrotic indications. For gaziva, gaziva in immunology has the potential to actually be very impactful. Lupus nephritis is a terrible disease. Right now there really is no good standard of care. If the phase two results replicate in phase three, we would expect this to be a very compelling indication. Lupus nephritis, SLE, membranous nephropathy, we've won pediatric indication also under study here. So gaziva in immunology I think is definitely a place to watch. And we will also have a look at the trials that we will be running in TL1A and IBD on a subsequent slide. But first, let's take a quick look at Zolaire. So I'm sure all of you have someone you know, a family member, a friend, a colleague who suffers from food allergy. And so you know the impact that it has on their daily life and the fear that people can live in that they may be exposed to an allergen, particularly if you have small children that you're sending to school. In the U.S. alone, there are 17 million people who have confirmed food allergy. And a really staggering, more than 40% of children with food allergies will experience a severe reaction at least once. And that doesn't just mean a trip to the hospital. That can actually mean a trip to the ICU, which is really very, very scary and very, very dangerous. To give you a feeling for the level of excitement, not only at Roche, but from the KOL community that we're hearing about Zoller and food allergy. There was a recent KOL interview and this KOL said, my level of excitement for Zoller and food allergy is a 12 out of 10. The FDA granted priority review. We expect a decision again in the first quarter of this year. And this is really thanks to a first-of-its-kind Phase III study, the OutMatch study, where the interim results show that Zoller significantly increased the amount of peanut, milk, egg, and cashew that it took to cause an allergic reaction. The study was run together in combination with partners at the National Institute of Allergy and Infectious Disease, which is part of the NIH, and our partners at Novartis. Detailed results have been submitted to a peer-reviewed journal. We expect publication soon, but again, I think this really is going to be an indication to watch. Another molecule I'm very excited to share with you is our TL1A. This is the recent acquisition that we made from Televant. We believe that this has the potential for first-in-class best-in-disease in its first indication in IBD. The bar graphs show that this molecule in its Phase IIb study, Tuscany, showed very significant results, both in all patients and in biomarker-positive patients on both endoscopic and clinical remission. What's most impressive here is that when you look at the results that we saw here, sort of a 36% to 43% or a 50% to 64% in endoscopic improvement, This compares to a 30% to 40% for the current standard of care, which is the TNF. So you can clearly see here that we have the opportunity to really reset the standard of care for these patients who live with a very debilitating and devastating disease. Safety profile and tolerability profile were both very good. The phase three trials are going to be initiated in 2024. And if you know the pathway of TLNA, you know that it is actually quite well understood, quite well validated. It is very relevant in downstream inflammation in fibrotic processes. And so we believe that there are many other indications for which TLNA will be relevant. And we are clearly looking forward to thinking about additional life cycle programs for this molecule. So please do stay tuned to see where this one is headed because it has a big future in front of it. Moving on to our most rapidly growing therapeutic area, ophthalmology. Vibizimo continues to deliver strong growth with an impressive 324% growth at constant exchange rates for 2023, easily surpassing sales of $2 billion. U.S. market shares in AMD and DME are continuously expanding. We have 22 and 15% currently based on November claims data that compares to 19% and 12% just back in August. You now see that nearly half of all patients starting Vibismo are treatment naive. That's up from the teens in the beginning of the year. So you can really see that we are starting to establish Vibismo as the new standard of care, and as more physicians get, as retinal specialists get experience with it, as patients have great results, you're just seeing that momentum build on each other. Similarly, our launches outside the U.S. are steadily gaining market share with our early launch countries, continuing to expand that double-digit those double-digit market shares. We have now achieved reimbursement in all EU5 countries, which improves access greatly, and we are continuing to expand our access in all countries around the world and are really looking for how we will be able to bring Vibizimo to as many patients as possible. Our third indication in RVO has been approved late last year, and we expect the U.S. approval to follow this year. Maybe give you just a little bit of extra color on sort of what the launch of Abizmo has meant in the U.S. We currently have 928 retinal specialists. who have not prescribed a Genentech product in ophthalmology for many, many years, who are now prescribers and, in many cases, very loyal users of Abysmo. So you are really seeing the new market opportunity being opened and expanded here. Let me also quickly mention the latest developments for SysVimo. We are expecting to restart clinical trials this year. The U.S. commercial relaunch is also expected this year, and we will be looking to relaunch commercially in 2025 in other parts of the world. In terms of clinical news flow, for 2024, we initiated two phase twos for end-spring and thyroid eye disease. Again, another multibillion-dollar market, so it would be very interesting to see how that IL-6 treatment does there. And we have two additional potentially phase three enabling readouts expected this year for Mickey Bart, our anti-IL-6 in DME, and for the ASO factor B in GA. Okay. And last but not least, let's have a closer look at our Incretin portfolio, which we added to our pipeline via the Carmont acquisition, which just closed last week. The lead asset, CT388, is a glyph-gippen dual receptor antagonist with best-in-class potential. In obesity, which is a rapidly growing market, we know that about 50% of the world's population is expected to be obese by the end of the decade. This is anywhere between a $50 and $100 billion market. CT388 really does have the opportunity to potentially be best in class. In its very earliest data, we saw impressive weight loss reduction at eight weeks, and we believe that this molecule has the pharmacology that may actually be able to enable more patients to get to 15% to 20% weight loss with a very good tolerability as we think about optimized dosing. This would be impressive enough if you were just looking at the monotherapy opportunity for C388, but we are, of course, also looking at it in combination with other drugs in our portfolio, including GIM329, which is that anti-myostatin that we talked about a little bit earlier, but also other drugs in our portfolio that may have applicability to some of the comorbidities that we know patients with obesity face. Also, we know that incretins may have applicability into other disease areas. And so, again, we would be looking at the assets that we acquired as part of the Carmont deals really as a backbone for future plays across cardio metabolism, but also potentially other disease areas as well. In addition to CT388, we have 868 and 996, both of which will have phase 2 interim data in type 1 and type 2 diabetes, respectively, this year. So please keep your eyes on this. Lots more to be coming out of the CARMOT acquisition. In terms of closing out our Q4 regulatory and clinical updates, let me mention a couple of things that I don't think that I've touched on during this presentation in other places. So we did, unfortunately, have a negative readout for Ticentric in the Phase 3 Invoke 10 study in adjuvant head and neck. Unfortunate result, but I think we always knew that this was likely to be a difficult one. Unfortunately, head and neck has a long history of drugs not working there. And then we also saw the positive data from Skyscraper 8 and first-line esophageal. This is the China-only study that was recently presented with tiragolumab plus Dicentric. And that trial we are awaiting subsequent data on as well with the Skyscraper 7 data, which will give us a little bit of an opportunity to more tease out what the effect of tiragolumab is versus Dicentric. Looking ahead to 2024, we have already touched on much of the key regulatory news flow. We already have our first achievement with the Dicentric subcut approval in the EU, but we've talked about Allicenza approval, Okravis subcut, Krivalumab approval, and Invalisib filing. In addition to the key clinical trial results, that we've talked about. Again, we don't have as many phase threes reading out in 2024, but what we do have is a tremendous amount of phase three enabling trials that we'll be reading out this year. And some of those, we've actually talked about most of these, Trontinumab, the Mickey Bart, Zalbistron and Hypertension, the CARDIA-2 trial we'll also be reading out this year. And again, the additional trials from CARMA with new data this year as well. So before I hand it over to Matt, I just want to take one minute to sort of step back and really take a look at where we are expecting growth from the pharma portfolio over time. Like you, we are very interested in growing our business and growing our ability to help and impact patients around the world, and this is how we intend to do it. Of course, we have our launch portfolio, all the wonderful best-in-class, best-in-disease drugs that we've just been talking about, the baisamo, okra, vis-a-vis, Fezgo, Hemlibra, Polivi, these are all drugs that are going to continue to drive growth going forward. and drive significant growth in patient benefit in the coming years. In the midterm, and we're defining midterm here as drugs that will receive data in sort of the 24 time period, 24 to 26, gazivin, lupus nephritis, we've talked about, Thomas mentioned astagolibab in COPD, LVD certainly, the potential to get approval in this time period, phenobrutinib or oral BTK for MS. Inovalisib, giridestrin, tiragolumab, these are all very significant drugs that have very large patient populations where we could be able to change the standard of care, and we will be getting that data, much of it starting in late 2024 and early 2025, driving a tremendous amount of growth in the mid and long term. And then, of course, looking at those long-term opportunities defined as things that we'll be filing after 2026, you can see this is where a lot of the benefit from our our partnering activities will be happening over time. The Televan acquisition, the Adyla partner, the Cameron acquisition, these again are very important and these are very important molecules, very large commercial opportunities that will really fuel our long-term growth in addition to things like trontinumab and then all of the emerging assets from the early pipeline in BD. So in summary, we are very convinced that we have a very strong pharma portfolio and one that will continue to provide growth into the short, mid, and long term. And we're looking forward to sharing updates on all of these building blocks with you in the future. So now thank you very much, and let me hand it over to Matt.

Thanks very much, Teresa. So with that, good afternoon, good morning, everyone. It's my pleasure to present the full year Roche Diagnostics 2023 full year results. And so with sales of 14.1 billion Swiss francs, the diagnostics division declined by 13% or minus 2.3 billion Swiss francs at constant exchange rate versus full year 2022. And as you heard earlier, this decline is driven by the expected decline of COVID-19 testing sales of 3.3 billion Swiss francs at constant exchange and offset by strong base business growth of plus 7%. And so on this slide, let's look at the performance of diagnostics over the last eight quarters. And I'd like to start by focusing on the orange dotted line, which represents our base business performance. And in Q4 2023, our base business grew at plus 8% with strong sales momentum in all of our regions. And now I'd like to turn your attention to the blue line, which reflects total diagnostics division sales, including COVID-19. In Q4, diagnostics delivered growth of plus 4%. And I would note that we had a 300 million government order of rapid antigen tests, which was reflected in this overall performance. But you see, with the return to growth, the lessened effect of COVID-19 testing and the very strong performance of our base business. Now, looking forward, we're not expecting additional government orders or significant sales of rapid antigen COVID-19 tests. but we expect the vast majority of COVID-19 testing to be PCR paced. And I would add that we expect the majority of this testing to be performed in a multiplex format as part of a standard diagnosis of respiratory disease. Consequently, we expect to see COVID sales in 2024 to be significantly lower than 2023 in line with the guidance you heard earlier. We're also expecting some potential headwinds in China due to ongoing government procurement initiatives. However, I'd like to restate that given the strength of our base business, we are still expecting mid to high single digit growth for diagnostics in 2024. And so now I'd like to take you through. the sales by product category. And what you see first, our core lab business, which is our largest business unit. Here, excluding the COVID-19 effect, we grew at plus 11%, with really strong performance in some key categories, such as cardiac, where we grew at very strong double digit numbers. Our molecular lab, Here, excluding the COVID-19 effect, we grew at plus 7%. And if you look on the right side of the slide, you see some of the very impressive performance of the different product categories. Cervical cancer growing at 23%. Blood screening growing at 13%. And also very robust performance of our core virology business at plus 6%. Pathology lab growing at plus 14%, which is very strong. Point of care, excluding the COVID-19 effect, grew at plus 4%. which is really driven by the strong respiratory season in the Northern Hemisphere. And diabetes care receded at minus 4%. And this is really driven by the market evolution from traditional blood glucose monitoring to continuous glucose monitoring. But I would also point out, as you heard earlier, we're getting very close to launching our own continuous glucose monitoring solution. And so we look to see this change this trajectory in the future. Now I'd like to go through the performance by the different geographies. So when you exclude, so if you look across all our geographies, first you'll see the impact of lower COVID-19 testing sales across all regions. But then excluding the COVID-19 effect, you see strong base business growth across all regions. In North America, excluding the COVID effect, plus 5% growth. EMEA, excluding the COVID effect, plus 5%. In APAC, excluding the COVID effect, plus 10%. And in Latin America, excluding the COVID effect, sales grew at plus 26%. So very strong performance. So now I'd like to walk you through the diagnostics P&L. So core operating profit on sales of 14.1 billion Swiss francs declined 24% at constant exchange rate, driven by the strong decline of COVID-19 testing sales, again, as expected. The cost of sales declined at 15%, as you heard earlier, but this is faster than sales decline, and this was again driven by lower sales of COVID-19 rapid antigen tests. R&D costs remain stable, and our investment in R&D was really driven and focused in areas of future innovation and revenue growth, such as mass spec, continuous glucose monitoring, sequencing, as well as our digital solutions. Our SG&A remained stable at constant exchange rate due to a good organizational discipline. So when taken all together, we delivered a core operating profit of 2.67 billion Swiss francs with a margin of 18.9% in reported currency. But as you heard from Thomas and Alan, the margin was affected by currency headwinds, and I would call it that our margin at constant exchange rate was 21.5%. So now I'd like to shift gears and talk a little bit about some of the innovation that we delivered in 2023, which impacts patients, but will also drive our growth into the future. And I'd like to start with a recent and quite exciting milestone in relation to our portfolio expansion in neurology. Roche's Alexis neurofilament light chain test with indication for multiple sclerosis received FDA breakthrough designation in November of 2023. And I would note that we've received multiple FDA breakthrough device designations for our Alzheimer's portfolio. Around 3 million people are estimated to live with multiple sclerosis. After diagnosis, many face challenges with managing their disease due to timely identification of disease progression, which is critical for optimization of treatment. And the access and availability of testing that's capable of identifying disease progression has the potential to improve treatment optimization for these patients. And this may result, and hopefully will result, in better clinical outcomes. So we're very excited the impact the Alexis Neurofilm and Light Chain test will have for MS patients by offering a biomarker obtained by a minimally invasive blood draw that can deliver rapid results to patients and to caregivers. And I would also point out, we heard quite a bit about Ocrevus, the synergistic and synchronized approach between Roche Pharma and diagnostics that allows us to continue to deliver better access for patients who need medication and better care. And I would also call out, you see there, the Floodlight MS. This is a digital solution that measures motor and cognition skills of MS patients. And we're also exploring potential applications for this in disease monitoring. So now I'd like to turn to a product category very near and dear to my heart, which is infectious disease testing, and start by a pair of new launches that we had in Roche Diagnostics in 2023, our anti-HEV IgM and anti-HEV IgG tests. It is estimated that one third of the global population could be at risk for infection with hepatitis C virus, but the true burden is unknown as it is underdiagnosed. Consequently, the WHO has updated its essential diagnostics list, which includes in vitro diagnostics that should be available in all countries. And last year for the first time, tests for HEV are included to aid in both diagnosis and surveillance. In November 2023, we launched our tests for IgM and IgG. And why that is important is this allows us to diagnose both acute and chronic infections for hepatitis E. That allows patients to diagnose, to monitor, and to appropriately treat patients infected with hepatitis E. And I would call out that this is also important for competitive reasons. You saw the strong growth. of our core lab franchise earlier in my presentation. Having a differential panel for hepatitis is one of the critical competitive aspects of immunoassay and infectious disease. And the addition of these two tests really completes our differential panel for hepatitis. So we're very excited also about the ability for us to compete even more strongly in immunoassay. So now I'd like to transition to our growing digital portfolio by providing an update on our Navify algorithm suite. The algorithm suite is a one-stop shop for digital algorithms used to aid and improve clinical decision-making. This platform integrates into a hospital's laboratory information system and soon will be seamlessly integrated into a hospital's EMR system. It takes data off of Roche analyzers, but also clinical data that is provided by a patient when they present in a healthcare setting. The AlgoSuite provides hospital providers with a growing library of verified Roche algorithms, as well as algorithms from partner companies to use in their everyday practice and improve insights needed for clinical decision making. And I would like to point out that we have 15 certified algorithms available and expect to have more than 20 additional algorithms by the end of 2025. So currently, the majority of our offerings are in the oncology and cardiac therapeutic areas. These are two areas with high inmate need and an opportunity to improve clinical decision making. However, looking into the future, we also expect to have additional algorithms in neurology, infectious disease, as well as sepsis. And so now I'd like to turn to some of the additional platforms that we're launching in diagnostics with the next generation of one of our longstanding platforms, the LightCycle Pro. So we launched this new real-time PCR instrument in November of 2023, opening use in IVD use in CMARC and FDA. And the unique benefit of the LightCycler Pro, it is the first real-time PCR instrument to be simultaneously labeled for research as well as IVD use, opening the opportunity to use lab-developed tests as well as registered IVD tests. So this instrument launched with a broad menu of 60 molecular diagnostic CE-IVD tests and 200 research assays through Tim MulBio. And it will include, or it does include, excuse me, key features such as higher multiplexing capabilities. It actually has seven optical channels that allows you to discriminate different targets in an individual well in an individual run. And it has improved precision, scalability, and data analytics. We feel this will be a very highly competitive entry in the real-time PCR marketplace, which I will call out from a reagent perspective is about half a billion Swiss francs, and as an instrument market is about 0.2 billion Swiss francs every year. So now looking at our launches in 2023, I'm very proud of the performance of the organization. We achieved 15 of our key launches. And as you heard earlier, 2024 is shaping up to be the biggest launch year ever for Roche Diagnostics. And not just the number of launches, but some of the most impactful launches for the future of the division. So first, I would like to call out the core lab launch of the game-changing i601 mass spec system. which is really going to revolutionize mass spec testing by offering a fully automated, standardized, reproducible mass spec instrument that will integrate with our existing serum work area instrumentation and make us even more competitive in that core lab space, as well as our first offering in the continuous glucose monitoring space, the AccuCheck SmartGuide CGM. Additionally, we're planning the launch of new automated solutions for the core lab, including our COBA C703 for clinical chemistry, which will by far have the highest throughput of anything we've ever launched or of our competition, and the ISE NEO, which will allow us to stay ahead of competition and keep our strong momentum in the core lab. We also expect the U.S. launch of our four-plex LIAT multiplex molecular point-of-care test for respiratory virus testing, We will also, this will look at flu A, flu B, COVID, as well as RSV. So this is, we feel this is going to be a very competitive launch. Additionally, we will be launching the highly multiplex respiratory flex panel on our existing 58, 68, and 8800 systems. This is going to be a broad panel of respiratory pathogens and be the first launch we have with our revolutionary new TAGS assay chemistry. On top of this, we plan to launch the version 2 of already industry-leading COBOS 68 and 8800s, and this will add additional functionality and competitive features. We will also make significant progress in the critical area of blood donor screening, as you heard earlier, with the launch of our COBOS serology solution in the U.S. and a global launch of our molecular test for malaria. We also look forward... Oh, pardon me. All right, thank you. We also look forward to the important U.S. authorization of the primary diagnosis claim for our DP600 digital pathology slide scanner, and this will make us even more competitive as we continue to expand in the growing area of digital pathology. We're also expanding our digital solutions offering with the introduction of the Navify Analytics family for all of our customer areas, and this will deliver improved operation efficiency to clinical labs around the world. So I kind of spoiled it a little bit by jumping ahead to the slide, but I'll say it. You heard it from Alan. We're very much looking forward to our Diagnostics Investor Day on May 22nd. So this will be a hybrid event taking place in London, but also held virtually. With our leadership team, we put together a very exciting portfolio for you, and I'm very much looking forward to May 22nd, so please save the date. As you heard, we're going to profile some of our new technologies, such as MassSpec, continuous glucose monitoring. We'll talk a little bit about next-generation sequencing, as well as other exciting launches, so look forward to seeing you there. And with that, I'll hand it over to Bruno for questions.

Thanks a lot, Matt. With that, we'll open the Q&A session. We have 40 minutes. We have 10 analysts in the queue, so I would ask everyone to just stick to two questions, please, so that we give everyone the opportunity to have questions and then also to be disciplined when providing the answers. The first two questions would go to Charlie Mebbitt from Morgan Stanley. Charlie, please.

Hi, thanks, Bruno. It's Charlie Morgan Stanley. Thanks for taking my questions. I guess, firstly, with the newly-enlicensed TL1A obesity assets and the hypertension drug, you're entering several new therapeutic areas which will come with significant R&D and commercial investments. So I guess, how do you think about your ability to compete across so many therapeutic areas at the same time, whilst many companies are becoming more focused on their areas of leadership? And what does this mean for the margin profile over the coming years? And then secondly, could you just briefly comment on how you think about the potential impact of Abysmo, of ILEA high-dose getting a J code? And do you think this is likely to slow the launch momentum later in the year? Thank you very much.

Excellent. So when it comes to the R&D expenses related to the new acquisitions that we've made, that's really about prioritization within our R&D portfolio. And it's a lot of really good and important conversations that are happening across all of the R&D organizations to prioritize. create the oxygen in the system that's going to be necessary in order to give the investment to the programs that we've inlicensed or acquired to ensure that they get what they need. So we're being very disciplined about making sure that we're giving those programs everything that they're going to require in order to be maximally successful. When it comes to the commercial aspect, I think there are sort of two things at play here. The first is that the fundamental changes that we made to our commercial model a number of years ago were really designed to create a flexible commercial model that does allow us to pivot and expand much more easily than sort of the fixed models of the past. And so certainly I think that gives us a lot of that gives us a lot of comfort that as these drugs come to market, we'll be able to accommodate. The other thing that I think we should keep in mind is that, you know, I think we think of some of these drugs as quote-unquote primary care drugs. What primary care marketing looks like today is likely not what primary care marketing is going to look like in the next 10 years. And so, I think, you know, the application of technology, the application of AI, really thinking differently about how you deploy field resources and digital resources. We intend to take a very creative and sort of forward-looking view to how we commercialize these assets in ways that both maximize their ability to impact patients, but also do so in a really cost-efficient manner. So more to come on that over time. In terms of the BISMO and the high-dose launch, I think there's a couple of factors at play here. So first of all, we're expecting the high-dose launch. We're expecting the J-code. Like, all of that is sort of part of our plans. But when you think about how we actually priced the BISMO, we priced it sort of at parity to the current standards of care. High-dose came in at a 20% premium. It does not have all of the features of the label that I think retinal specialists are looking at. I think you have to look at the core benefits of a BISMO, those three Ds, you know, drawing, durability, the dual mechanism of action. I think we will be able to compete effectively both from the clinical attributes of a BISMO and the clinical experience that we've been generating over time, but also the broad coverage that we've been able to secure from payers given our responsible pricing approach. And then, as we have always said in an environment, particularly in the U.S., where contracting is important, we will, of course, contract competitively.

Let me just add from my side, as Alan mentioned, our goal is to grow operating profit in a high single digit range this year. That means that we will need to keep operating costs stable. And what that means is that the trade-off decisions that you've seen in Q4 are trade-off decisions we're also going to make in Q1 to make sure that we put the money behind the right assets and really accelerate those assets. So you can see that that will happen. So also in the long run, just to assure you, we want to keep the margins stable and make sure that we do our contribution here as in the past.

Thanks. Very good. So the next two questions will come from Richard Parks from BNP Paribas.

Thank you, Bruno. Yeah, a couple of pipeline ones. So firstly, on the blip, get biased agonist CT388. Obviously, still several years away from the market. And I think there's some sort of skepticism about this opportunity as a standalone, given we've got Novo coming with Kagrisema. So just wondering. How you see the opportunity for CT388 on a standalone basis? Would you be willing to do head-to-head trials versus Monjaro or Wegovi? And when do you think you're going to be in a position to accelerate it into phase three development? Just wondering what else you need there. And then secondly, I just wondered if you could discuss your confidence that the neutralizing antibodies you'd seen with Trontinimab won't be an issue for that program. And again, if you could just discuss what you need to see from the ongoing phase one trial before you can make a go decision on phase three and maybe what opportunities there might be to accelerate that program. Thank you.

Yeah, absolutely.

Do you want to take it or should I?

Either way.

Let me take a first stab at it. So on the GLP-1 GIP, I mean, the data that we've seen so far is extremely promising, also compared to the molecules that you've mentioned. But really looking into the future, I think the topic is more around combinations. GLP-1, GLP will be the backbone for a number of different combinations of molecules that we also have in-house. One of those is GYM329, which Teresa also mentioned is currently in a trial in combination with Evristi. And CHM329 is an anti-latent myostatin. It has this recycling technology from Chugai, so really highly active antibody. And because one of the issues with GLP-1s, GIPs, is that not only do you lose fat, you also lose muscle mass. And if you actually follow those patients, after they get off the medicine, they actually return back the weight pretty quickly. And the reason is that the metabolism is going down as there's less muscles to burn the calories. And in fact, as a teenager, one could eat whatever they wanted because you had a higher muscle mass. Now, being in my late 40s, unfortunately, that's no longer the case. And the reason is that also, you know, the muscles have gone in a different direction. So with gym 329 in combination with GLP-1 GIP, this is the kind of thinking that we have. and how we're going to differentiate. And that goes beyond obesity and cardiovascular, also into other disease areas where we want to combine this as a backbone. So that's just a bit of an explanation where we see the differentiation when it comes to this important new molecule. Regarding neutralizing antibodies, we don't see that at all on Trantillimab, so this doesn't seem to be a concern. What's interesting is that it must be with the entry on how this but it gets into the brain, we actually also see a much lower area rate because I think that's also something that is a concern with the medicines that are currently in the approval process or approved. We hope that we can go into phase three this year. Right now, the data that you've seen is from 50 patients, so quite significant. And we hope that we can go into phase three this year and we can make a decision there. Anything you would like to add?

So the only thing that I would add is the obesity space is incredibly large. I mean, again, 50% of the world's population is likely to be obese in the next decade. This is somewhere between a $50 and $100 billion market by analyst projections. There's going to be room for multiple players to do very well. And I think given at least the early hints that we have the clinical profile for CT388, it could well hold its own in this space.

Richard, could we answer your questions?

Perfect. Thank you very much.

Okay. Then let's move on. Next one in the row would be Simon Baker from Redburn. Simon, two questions, please.

Thank you, Bruno, and thank you, everyone else, for the presentation. As luck would have it, I also have a question on CT388. So firstly, let's go there. On the data you've seen so far, you talked about the weight loss of up to 8%. I know it's only six patients in that cohort, but We've seen particularly with Tazepatide, there's a huge range of responses. I just wonder around that 8% average, what the response was after four weeks, notwithstanding the fact that 8% is pretty good to start with. And then secondly, on Xolair, you talked about some interesting lifecycle management features. programs for Zola, which you've been engaged in before. At some point, there will be biosimilars. So I'm just wondering, what's your latest expectation on when that will hit? And is there anything beyond Zola in your portfolio? I can't really see anything, but looking further down the track would be very helpful. Thank you.

Great. So in terms of 388 and the Individual data, I'm not sure that that's been publicly released.

Yeah, I think the data you're referring to, Simon, were the data which were, I think, presented by Carmod before, which showed a minus 8.5% weight reduction at week four. And we will have additional data here, follow-up data, to come 12 weeks, 24 weeks. And this is data which we will get in 24, and then you will get an update. And there is more to come. But we are pretty confident that we have a compound here, which really, if you benchmark it with all the other compounds out there in development, could make a best-in-class profile in terms of efficacy.

And in terms of Zoller biosimilars, those will occur next year, 2025, likely second half of the year. And in terms of other things in our portfolio for respiratory, I think the closest asset we have is astragolamab and COPD.

Thank you. Okay, then let's move on. The next one would be next two questions from Matthew Weston. Matthew.

Thank you, Bruno. It's Matthew Weston from UBS. Two, please. Thomas, one for you. You highlighted the strategic update we should expect at the end of September. Last year, you already gave us a couple of first steps. You brought R&D into the decision-making process. You said staff needed to be accountable for delivery across the organization. We then saw you acquire assets and now you've accelerated some in-house assets. I guess the question is what's left in terms of a strategic update that we should expect ahead of that event? And then secondly, a number of times both Teresa and Thomas have mentioned the phase two trial readouts in the next 12 months. If we look across those phase two assets, there seem to be a lot of what we would historically consider high risk categories. So neuro, autism, Parkinson's, but also geographic atrophy and even latent myostatin and muscle building has been a graveyard for a number of people in the industry before. Would you consider your phase two portfolio higher risk than normal? Or would you say that they are normal phase two probability assets?

Yeah, so first, let me say, as I started the role in March, the areas I focused on first are the areas where I felt I had the most urgent need to look into. And that was R&D excellence and at the end, R&D productivity. So how we can accelerate that. As we went through that and rolled that out in September, I could then focus on more strategic topics as well, broader on a group and on the division. Theresa is looking at the pharma strategy. We'll clearly talk about the disease area focus. We'll talk about what's is the combination between diagnostics and pharma and where do we want to play. But give us time. We will finalize the strategy probably in Q2. And with that, we will then roll it out in the organization and then we can share it also externally. I hope you understand that we first have to communicate internally before we communicate externally. Regarding the assets in our pipeline that are reading out this year and next year, You know, there are a number of assets, like I think Troncinemab, where the mechanism of action is now pretty well established. The data seems very compelling. I think also when you look at TL1A, we believe that the probability of success is very high. So we've tried to complement our portfolio also with assets with a high probability of technical success. On top of that, I think there are And I think a number of very interesting readouts, like Gasaiva and Lupus of Riders, which we also believe has a very high probability of technical success. So you see, we have a number of very good shots to go that I believe will also drive growth in the 25 years.

uh to 2030 time frame yeah teresa and i guess maybe just to add on to that because i completely agree with what you said i would say within the phase two readouts that we have that would be phase three enabling i would say there are things that mechanistically we have a really good belief they're going to work so bistron would be another one all of the in cretan portfolio i would say just based on the well-known and well-characterized mechanism we would expect those to to have a high probability of success and then there are riskier things which is sort of what you need to do when you're driving for breakthrough innovation. And so I think we actually have quite an appropriate mix in our phase two to phase three conversion pipeline.

Matthew, did this answer your question?

Thank you, Bruno.

Yes. Okay. Then we go on with the next one in the row being Sachin Jain from Bank of America. Sachin.

Hi there. Thanks for taking my questions. Two, if I may. I wonder if you could just touch on DMD and your filing and reimbursement path. I'm particularly interested in reimbursement, given that you've missed your primary endpoints, or even if you get approved on some of the secondaries. Do you have feedback that payers are willing to pay on these secondary endpoints, particularly ex-US where you have territories? And then secondly, Thomas, you called out gaziva lupus a couple of times as an exciting opportunity. Are you still seeing that as a billion opportunity or is it now in your mind larger than that? Is your excitement related to it as being the first of multiple immunoindications or just its higher probability of success? Just a bit of color there, given you pulled it out a few times. Thank you.

So in terms of DMD, I would say what gives me more hope is that this is a life-threatening disease for which there are absolutely no other treatment alternatives. And when you look at the totality of evidence that we have as part of the Phase 3 trial, I think it is compelling. And so clearly, we still need to have conversations with the regulatory authorities. And, you know, obviously, the conversations and research with payers are underway. But given the opportunity to treat these boys who otherwise will get no treatment and who will have no chance for long-term survival, I just think it's a different situation. and some of the other gene therapies that we've seen over time where they're competing against other standards of care that exist. I just think it's a slightly different situation here. But certainly this is a path that has not yet been traveled, and so we're actively in conversations. But, again, when you look at the totality of the data, it's compelling, and I think it's compelling for these boys, and I think it will ultimately be compelling for payers.

Yeah, let me just comment also on DMD. We had a meeting with key opinion leaders here in Switzerland at the end of last year from all over the world, and there was actually quite a lot of excitement. So that's, I think, also another data point that's very promising. The other one is Peter Marks from the FDA has said that he actually wants to expand the label. We have a number of countries ex-US where they follow the FDA approval and we already have tourism going on where people are going into other countries to get their children treated and I think that we will probably see more of that happening because for these children you know this is the option to survive and So I think it's an important opportunity to help these children.

And actually just to add on to that, because I don't think I mentioned it, we do expect to treat our first patient this quarter.

Yeah. Good on the cyber in lupus nephritis. I am excited, one, because of the strong phase two data, very strong phase two data. And yeah, alone in lupus nephritis, we believe it's a one million plus opportunity. I hope that answers your question.

Yeah, perfect. Thank you.

Maybe, Teresa, just one additional question regarding DMD, which was submitted about additional data for Elevides coming in over time and how this would support our filing and then later on our reimbursement negotiations in the U.S.

Yeah, absolutely. I mean, additional data is clearly going to be necessary for no other reason than to expand to additional ages. So I think all of the additional data that will come in over time, and it will take some time to materialize, but all of that data will continue to strengthen our ability to bring this drug to market.

Thank you. Next two questions would go to Emanuel Papadakis from Deutsche Bank. Emanuel?

Thank you for taking the questions, Amanda from Deutsche Bank. Maybe I'll start with a big picture question on guidance. You're helpful enough to remind us on biosimilar timelines for Zola. Perhaps you could do the same for Progetta and Actemra. I believe they're expected on a similar timeframe around 2025, but perhaps you could remind us if that is still your expectation. And if that is the case, your degree of confidence on Progetta Preserving a similar magnitude of farmer revenue growth going forward in single digit and indeed protecting the margins over that midterm period. Second question, maybe a follow up on Embark. It seems quite a different tone of communication today relative to your prior comments around respecting the outcome of primary endpoints. And before we even get to reimbursement discussions, just interested to know whether you've actually held any preliminary discussions with European regulators. What's their degree of receptivity to that?

Yeah. Oh, sorry. I got excited to answer your question. So we don't typically comment on ongoing regulatory activities, but I can tell you that we are in the process of having those conversations, but we obviously couldn't comment on exactly the content of those at this time. In terms of loss of exclusivity, The first octamer biosimilar in the EU has been approved. We're expecting it in the U.S. next year. We're expecting something like a 15% impact in 2024. As a reminder, most of the octamer biosimilars will launch with IV and then subsequently go to subcut. Subcut currently represents about 60% of the octamer global market. So, you know, we are expecting that we'll see, you know, sort of a – we'll see a little bit more of a gradual decline over time, given that the subcut will have to roll in before many patients would consider switching. The Progetta, I think what we've said is sort of middle of this decade. So we've got a little bit of time left on Progetta, particularly in the U.S. So we're I think we are continuing to stand by our prior statements around what we believe is going to happen with the HER2 portfolio, which is that we are expecting that it will largely remain stable and sort of gradually decline towards the back half of the decade. We won't see the kind of relatively sharp patent cliff that we've seen with some other drugs just backsliding. based on A, the conversion to Fesgo, but also the difficulty in manufacturing something like Quetzala. So I think we've just got different dynamics to play in the HER2 portfolio than we did with AH&R.

Let me just add that when we spoke about the LOE impact in this year, we actually included Actemera in that. So the roughly 1.6 billion is across all of the medicines that have an LOE impact.

And let me also here add for Progetta, I think the latest communication has been that the first biosimilar we expect for 26, not before. Yeah, Mama, did this answer your questions?

It certainly did. Thank you, Bruno.

Yeah. Then we move on. And next one would be Tim Anderson from Wolfen.

Tim, please. Hello, can you hear me now? Yes, we can hear you. Thank you. It's Richard Wagner on for 10. Yes, please. There's some feedback. It's not too many.

No, it's Richard. It's Wolfer Research. It's just the wrong name here in the system. But please, Richard, go ahead and ask your questions. Okay, maybe we quickly then just do it in the opposite way and first take the questions, two questions from John Priestler.

Hi, John Priest and JP Morgan. Thanks for taking my question. So just two for me, please. So for duradestrin, we noticed that you kicked off another phase three study, the Pioneer, focusing on the ESR1 mutant patients. So how should we really think about this study relative to the already ongoing Persevera study in all comers, which I think reads out earlier in 2025? Are there any other key differences we should really be thinking about? And what's your level of confidence in success in the all comers? And then maybe the second one on Ticentric. So following the invoke disappointment in head and neck cancer, what are the next growth drivers really for Ticentric? And how should we really think about the trajectory in 2024 in particular? Thank you.

Great. So let's start with Dicentric. So Dicentric will continue to grow outside the U.S., primarily in HCC and adjuvant non-small cell lung cancer. And it's sort of continuing to hold its own in the U.S. at the moment, particularly in adjuvant. Certainly in small cell and in HCC, we would expect it to maintain its leadership position, but particularly in large markets like the U.S., those are probably largely at peak. We would expect some impact from adjuvant in the U.S. with competition over time. We have subcut rolling in, which again, as we have previously stated, we expect that to be largely protective, but it may add a couple hundred million on top. with expanded use, but the next real big value driver for Ticentric will be in combination with Tura Volumap. And so we will need to wait to see the outcome of the skyscraper studies to really get a sense of where we expect Ticentric will top out at peak. In terms of giridescent, I think that this is a drug that when you look at the biologic rationale for it, it really ought to work. And so I think we do have some confidence certainly in the – in those patients where the endocrine receptor is still quite active. And I think it is very reasonable to assume that in an all comers population, it may have benefit as well. So this really is a highly selective, highly potent drug, and one that we think really may have the opportunity to very much redefine the backbone of care for patients with hormone receptor positive breast cancer. Seeing that first data set in 2025, I think will be extremely informative, but this is a molecule I'm really watching quite closely because I think it could be transformative, not only in the biomarker selected population, but in all comers as well.

John, do you want to answer your questions?

Perfectly, thank you.

Yeah, then we might give it a try again with Richard from Wolf Research. Richard, please.

Yes, is this better?

Yeah, now it sounds good. Yeah, there's no echo.

Two questions then. On KJIT, the latest level of Russia's confidence relative to a year ago, I would think that it would be less, given all that we've known across the field. Also, on the China government procurement, Could you provide at least some details on what are the products or areas that would be affected? And is there a risk that, as with pharma, that the government procurement programs would spread beyond the initial limits?

Okay, so I think two questions. One is a broad question about our confidence level in Titchit.

So, I mean, I think, Thomas, you... Yeah, I mean, first of all, let me say that we haven't seen any additional data to the data that you are well aware of internally. And, you know, we've seen a number of readouts in phase two readouts that clearly show that this is an active molecule. So overall, our confidence level is such that we are starting more phase three trials. So obviously, we believe that this could be a medicine. Regarding, yeah, the situation, you know, on the market with other TIGIT molecules, I would say it supports it as well. I mean, Teresa, what would you add to that?

Yeah, I mean, I think that's absolutely right. I think this is a new pathway on top of a highly efficacious standard of care. I think the data that we saw at the second interim result of skyscraper one tells us that the drug is doing something. I mean, a 0.8 hazard ratio increase Again, when you're talking about something that's on top of a very effective standard of care, I think we invested heavily in the TIGIT pathway for a very good reason, and I think that's because we believe that it very well has the opportunity to be biologically active and to help patients. So at this point, we're in the uncomfortable position of waiting. See you at the trials readout.

And the China question probably goes to diagnostics first place.

This has been a publicly announced government procurement initiative in Anhui province around core lab reagents. And we don't comment about our commercial participation there, and I can't speculate as to the future move by the Chinese government. But we feel, again, I'll reiterate, we feel mid-to-high single-digit growth in diagnostics based on the strength of our core business. Okay.

And I think a very limited impact for pharma in China.

I'm sorry, I didn't hear you.

Yeah, I think for China on the pharma side, there is hardly an impact.

No.

Okay. Tim, did this answer your questions? Richard. Richard, sorry. I still have Tim here on my screen. Richard, you're still in line? Okay. If not, then we maybe have here a final question, then going again to Richard Parks from BNP Paribas. You get rewarded for being here so patient.

Hi, Bruno. Yeah, thanks for my follow-ups. It was just a couple of products. Hemlibra and Ocrevus slowed a bit in the fourth quarter, having been sort of delivering consistent double-digit growth. Just wondered if you could walk through the dynamics there. I think maybe Hemlibra more specifically, given potential impact from competition, what are you seeing there? Thank you.

Yeah, so thanks for this question, because I think really we are not seeing anything that we believe impacts the fundamental underlying demand for either Hemlibra or Ocrevus. It is, I think, very much a currency effect that we're seeing with both of these drugs. For Hemlibra, we are at 40% market share, 40% patient share, which is certainly very good, but that leaves you a tremendous amount of room to grow. As we see Altuvio coming into the market, I think largely what we see is patients using Altuvio in combination with Hemlibra. So either having it on board as their backup factor, which is something that is, you know, for the hemophilia population is something that is recommended by guidance or using it in combination with. versus people switching from Hemlibra to Altuvio. I think we see particularly with Hemlibra, the people who switch to Hemlibra tend to be quite young. So we get people in when they're very early in their disease management and they stick with us over time. So again, we're just not seeing anything out of Q4 that leads us to believe that the trajectory for either Hemlibra or Okravis is really any different. and a very good start in January for both of these products, which would sort of underscore that.

Thank you. Could I have one other follow-up, Bruno, just on the Tidget program? Just wondered if you could update us on that. the broader timelines for the other phase three trials in lung cancer i just noticed that you have the stage three and respectable potential filing in 2025 so i wondered if that could slip into the phase three readout could slip into this year and how your confidence on that trial design in particular has evolved over time given what we've learned about the class

Bruno is really excited to answer this one, so we're going to give him a shot.

Maybe not about the confidence level, but just to confirm again, you know, that we have not been more outspoken here about precise timelines for the other studies, but you are right. There are a couple of them, the chemo combination, SkySkills 6, for example, which gets some attention. And we will, yeah, once the data is in-house and we feel ready, then we will update you. yeah um richard um all good from your side yeah great thank you yeah would maybe have um two questions here um which were sent to us um from louisa hector from birnberg um here she had to jump out um there was one question here about um The target, which was mentioned by Thomas, about 80% of the pipeline being first or best in class. Where do we stand on this journey?

Yeah, right now, I would say we're around 40 to 50% in that range. And so we're working very hard to increase that to 80%. That's a target across all of the R&D organizations.

And then I think also here a question I got several times today already about our R&D spend going forward into 2024. What would we guide here?

Yeah, I already mentioned, and I think Alan mentioned that as well. So in the current guidance, basically it means that we have to grow our operating profits in the high second digit range. That means we will have to have a lot of cost discipline across all cost lines, including R&D.

And then maybe the final question, and this is, I think, we have the question here from Luisa, but also from Andrew Baum from Citi. This is about the landscape in hormone receptor-positive breast cancer and how this might now change in light of the InnoVelicit data, which we just had last December. So first of all, are our assumptions changing here? Our future development plans, having now a best-in-class PR3 kinase inhibitor at hand, also seeing the oral certs coming to the next generation of the oral certs coming to the market, and then the CDK4-6s making inroads. So for the development plans here for our molecules, the first question, the second question about the initial usage requirements considering the label we might get now based on the data in AVA-120, would we expect quite a broad uptake initially, even with only having pyrocyclic combination data in the label? This is the question.

And a small question to finish with. So in terms of, maybe we'll take the CD4K6 question first, which is that, you know, while we ran the study on, while we ran the initial enobelisib study with palbo, we are currently exploring other CDK4-6 combinations. And so we will have additional data so that, you know, those data are coming. We don't expect the fact that it was on a palbo backbone to be a limitation necessarily. for utilization after approval. It would be premature to speculate on what the actual label would look like or what actual usage would look like. I think those are all things that we'll have to explore after we have our conversations with health authorities. But obviously, seeing the transformative data that came out of that study, I think it really gives us a lot of confidence that this is a molecule that we should be looking at in a more broad capacity, and certainly those conversations are underway. As we are thinking about the evolution of the HR-positive breast cancer space, I think we are continually looking at how to make sure that we're optimizing either our existing trials or future trials to ensure that we are staying ahead of standard of care. And, you know, those are all activities that are currently ongoing, and certainly we can share with you more as changes are made.

Perfect. So thank you very much, everyone. And yeah, as you've seen, the underlying business, so the business excluding COVID-19, is performing very well in 2023 with 8% growth. And as we head into 2024, we will have less headwinds. and with that specifically after q1 you'll see more of that growth really shining through i think we've made good progress also on on the pipeline and you've seen the ambitions that we have there we have on a diagnostic side i think one of the biggest launchers ever On the pharma side, we have 12 enemies that potentially could move into phase three this year. And you've also seen how we are developing and making sure that our organization is well set up for the future, both from an organizational perspective and from a strategic perspective. With that, thank you very much for joining us today. And I look forward to a call in a couple of months from now for Q1. Thank you very much.