Roche Holding AG

Ladies and gentlemen, welcome to Roche's full year results 2021 webinar. My name is Marco and I am the technical operator for today's call. Kindly note that the webinar is being recorded. I would like to inform you that all participants are in listen-only mode during the call. After the presentations, there will be a questions and answer session. You are invited to send in questions for this throughout the entire session using the Q&A functionality of Zoom. In addition to that, you may also raise your virtual hands to address your questions verbally. For participants joining via phone, to raise your hand, use star nine on your phone's style pad. When you then get selected to ask your questions, please follow the instructions from the phone and press star six to unmute yourself. One last remark. If you would like to follow the presented slides on your end as well, please feel free to go rush.com slash investors to download the presentation. At this time, it is my pleasure to introduce you to Bruno Ashley, head of investor relations. Bruno, the stage is yours.

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

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