Roche Holding AG

Ladies and gentlemen, welcome to Roche's half-year results webinar 2022. My name is Henrik and I'm the technical operator for today's call. Kindly note that the webinar is going to be 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 short 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 end as well, please feel free to go to roche.com slash investors to download the presentation. At this time, it's my pleasure to introduce you to Severin Schwan, CEO of Roche Group. Mr. Schwan, the stage is yours.

Thank you very much and welcome to our half-year briefing. Before I get into the financials, let me just summarize again the leadership announcements we made this morning. As you have seen, Christoph Franz has decided to step down as chairman of the board. and I'm nominated to succeed him as a chairman at the next General Assembly in March 2023. At the same time, Thomas Schinneker will take over as CEO, my current role. And yeah, I'm really pleased how things come together. My colleagues at the corporate executive team and myself, we very much look forward to working with Thomas. We are going to prepare for a smooth transition over the coming months. But for now, let's get back to business. Let's get right into the half-year results. It's been a solid set of results. You have seen a 5% growth on a group level, 3% growth for pharma, which is pretty remarkable. And you will see this in later slides as we still have a significant erosion due to the entry of biosimilars. If you look at the underlying growth, If you correct for Ronabrief and the biosimilars, actually the new portfolio is growing in the double digits. So this is really a very positive and dynamic evolution on the pharma side. Diagnostics continues with a strong growth momentum. We have seen additional momentum in the first quarter for the COVID testing. This has decreased in the second quarter and is supposed to decrease further for the remainder of this year. But what is good to note is a really good, solid growth of the underlying, our routine business, excluding COVID tests. So for the future, I think we are well positioned here. now on the on the product portfolio i'll come back to that in a moment but we see not only a very strong continued growth with the newly launched medicines on top of it we could launch new medicines in the first half of this year. And let me just highlight Babaismo here, where we have seen really an extraordinary launch with very good demand from the community for this novel medicine against eye diseases. Now, if we move forward to the specific numbers, again, pharma up 3%, diagnostics 11%, overall 5%. And if you look now here on the quarterly development you can immediately see the impact of COVID-19. So whilst we are still seeing a strong growth in the first quarter you see here a negative development and as a result on a group level we have It was only a flat growth very much as we would have expected. I think that's a really interesting and pretty exciting slide. If you look at our new pharma products. You can see 1.6 billion growth in just six months. And that is more than compensating for the erosion, which we see with Avastin, Herceptin and Ritaxtin, which is roughly a billion Swiss francs. So that is really good to see as the impact of the biosimilars will further slow down. over the coming years. And you see this also reflected on the right-hand side of this slide, where EHR is now minor part of our overall portfolio and you remember not so many years ago it accounted for almost half of our total sales. So the portfolio has really rejuvenated a lot over a relatively short period of time. If we look a bit what is happening on a quarterly basis and what is happening with the underlying business, both in pharma, I think that is a useful slide. So what we did here is on the left hand side for pharma. We excluded Rona brief that had quite some impact, still a positive impact in Q1 and a negative one in Q2. So if you look here at the underlying business, you see a positive momentum with 4% sales growth in the second quarter. But even more importantly, of course, if you take out the effect for biosimilars, we are actually in the high single digits for pharma. On the diagnostic side, again, here a huge impact with the declining growth due to COVID-19. You see actually a little bit of a dip in the base business in the second quarter. There's some temporary impacts due to China where we had lockdowns. But we expect that to pick up. We have actually had already a strong start into Q3, so we should see a positive trend for the base business for the remainder of this year. On the financials, Alan will lead you through in much more detail. It's a bit of a special year with a number of special items. You see here core EPS up 11%. So that is also a result of the accretion due to the repurchase of the shares from Novartis. And also we had a patent settlement in Japan which was helping on the core earnings per share. But overall a very good development both on profit margins and also on the cash flow. I mentioned vabaismo. That's certainly a highlight in the first half of this year, off to a very good start. Let me, however, not forget about Lunsumio and Polyvi, which has been recently launched. It's now available in Europe for follicular lymphoma as far as Lunsumio is concerned and for first-line aggressive form of lymphoma for PolyV. So that's really good to see and we see a strong initial demand for those medicines as well. Now, for the outlook, I've talked about the recent launches in pharma. There's also a lot happening on the diagnostic side. We had a very successful launch in particular of Covus 5800. our kind of mid-size molecular platform and the Cobas Pure. And those two platforms are now supposed to get FDA approval in the US so that we can also enter this important market. And there's a number of other platforms and diagnostic tests in the making. And I'm sure Thomas will comment on that in more detail. So outlook, this is a slide we showed you at the beginning of this year and it's still very true and as you have seen we have confirmed the outlook for the full year. So good growth both with the new products in pharma and the base business in diagnostics. We do have the drag with biosimilars and we also expect lower sales for COVID-19. Now I should say of course all of that is based on the assumption that we don't see new and importantly more dangerous variants of the COVID-19 so in case we would be confronted with a new development on that front that of course would also have an impact on our sales for the full year. So again to summarize Group sales stable to low single digit growth. As far as EPS is concerned, we expect low to mid single digit growth. And Alan will later lead you through all the specific items which influence that picture. And on that basis, we should be able to further increase our dividend in Swiss francs. So with this, thank you very much. And I hand over to Bill.

Thanks, Severin. Hi, everybody. Great to have a chance to share our results. We're really excited about what's going on in the pharma division this year, and so fasten your seatbelts. Here we go. Three percent overall growth, which I think we're encouraged. It's solid growth, showing that we're really starting to emerge from the biosimilar period. As I'll discuss in a moment, the COVID impact, the pluses and minuses roughly cancel out. So I think you can think about this as a 3%, including the effect of biosimilars. And yeah, I think that's back squarely in the black, and we intend to stay there. I'm going to – I'll talk about it. You can see Europe's down a bit, Japan's way up. That's mostly related to sales of Ronaprev where we were down in Europe. I think without Ronaprev, we would have been plus four in Europe. And in Japan, we would have been at eight instead of 34. So that – but they roughly wash out, and the 3% is pretty close to the – to the actual without pandemic. From a P&L standpoint, so the royalties and other operating income was affected by the large settlement that Chugai had on Ultimeras. And so that was a driver in there. In terms of cost of sales, COGS and period costs were up about 9%. Volume was up 8%. So it was up a little more because we were slightly lower capacity utilization. We were basically at 100% for the last two years, and so we came down a little bit, which, frankly, I'm glad to see because I don't like running at 100% capacity. M&D just reflects a little bit of extra spending on launches. And the R&D is down a bit because of really high spending, extra high spending in R&D in the first half of last year, including a couple hundred million extra revenue. for Rona Preve and AT527 last year that didn't recur this year. And then the GNA reflects some tax effects and our continued emphasis on savings there. So core operating profit up 8%. And yeah, we're glad to be bringing in that result. From a product standpoint, I like the shape of this. You can see if you look at the top eight lines, number eight is actually Vivizmo, so the newest entrance on the list, but it's really excellent to see that the top eight lines are basically products we'll have for a while. and really part of our core portfolio. You can see Hemlibra and Okravis each contributing more than $800 million on an annual basis of incremental sales, and then accompanied by strong results from Evrizdi, Fezgo, and we'll talk more about some of the others. And then down at the bottom end, What I would point out is you have AHNR and Actemra. So Actemra was down a couple hundred million, which basically reflects that in Q2, there was very little sales of Actemra for COVID. Hopefully, it'll stay that way, meaning that the hospitalization rates are down and stay down. But that remains to be seen. And then I think you can see, for example, with Herceptin and Mabthera, we're starting to find the bottom. You know, you've got minus 16, minus 21 percent. And so I think we're looking forward to being in the sort of post-AHNR biosimilar era and getting there pretty quickly. In oncology, encouraged to see our two biggest franchises with growth. The HER2 franchise now where Progetta, Fezgo, and Kedsila are all kind of outgrowing the losses in Herceptin. And so, you know, really an excellent result, about a little over $9 billion annualized. So strong performance in HER2. Ticentric with good performance. We'll come back to that. And, yeah, you can see we continue to make gains in the part of hematology that's not Rituxan. Coming back to the HER2 franchise, so Fesco, this is really proving, this is our subcutaneous version of H plus P. And it's proving very attractive when we have countries that are up at like 90% adoption, particularly healthcare systems where infusion capacity is limited. And we think this will be helpful. I mean, obviously it offers patients and healthcare systems a benefit today, but it'll also provide, you know, a more difficult to challenge system. product from a biosimilar standpoint when we get to that point with Progetta. I also just wanted to share a study that we started. This is on the right side of the slide. I think this is a really neat example of what we can do as a real leader in cancer. So this is one where we're – so it's like the Fesgo use in first-line metastatic HER2-positive breast cancer, but this is for patients who are HER2-positive as well as ER-positive, and this time what we're doing is we're running a phase three study to examine the addition of G-redestrin to the standard regimen, and G-redestrin is our new CERD, and so we've already got metastatic first-line and adjuvant studies ongoing for G-redestrin, but now this is a third study And I think signals our confidence in the data we've seen to date. But what's, I think, especially important about this is, so in the maintenance setting, this would give patients basically a lower intervention because G-Ridestrin is a pill and Fezgo is a sub-Q. And so we hope for a more potent but also more patient-friendly solution for these patients. As I mentioned, T-centric strong performance. In Q2, we were at 13%, and the first half was at 11%. And this just reflects getting the washout from the removed indications in TMVC and bladder cancer. That's kind of getting behind us. Really strong uptake in lung cancer. in the adjuvant setting in the U.S. We're now up to 80% testing in the adjuvant setting for PD-L1, and then we're at 60% market share in the PD-L1 positive patients or in the high PD-L1 patients. So I think a very strong launch there. We've just been approved in Europe. We're going to get approval in Japan probably in the fall. And, by the way, if you look at the growth chart here, what you can see is quite strong growth in the U.S., in Europe, in international, and actually Japan shrunk, and they had a mandatory price cut at the beginning of the year. So I think the 13% growth isn't all we're capable of, and we're looking forward to continued strong growth as well as some good readouts coming up. Hematology, another area where we've been really busy. We now have, as Severin mentioned, the Polarix regimen has been approved in Europe. It's been filed in the U.S. and will be approved later this year. It's going to be approved in August in Japan, and we're getting approvals around the world right now. We think this is a potential for, you know, more than a billion of additional revenues. And we think adoption will be quite rapid because if you're, you know, one of the seven or eight out of 100 patients that gets a cure from this therapy, yeah, this means all the world. And so we look forward to bringing that to patients in every country. Severin also mentioned this is the result, and this is why we think this will rapidly become standard of care in third-line and later follicular lymphoma. As you can see from the waterfall chart, I mean, 60% of patients with a complete response, 80% of patients with a response. It doesn't require hospitalization as some of the other later-line therapies do, and look for more there. And then I also wanted to mention glofidamab, which is our other T cell bispecific, and this one in DLBCL, and we presented this data at ASCO. And I think what's particularly compelling is we had a 39% complete response rate, which is quite a high rate of complete response rate. but also these were really durable, and this is a fixed-duration therapy. So you have a fixed duration of treatment, and then many patients are going for, you know, months, years without relapsing, and we think this is a superior alternative to CAR-T. And so we're filing this, looking forward to launching GloFit. I also want to point out that these initial approvals of Linsumio and Glofitimab are really just the beginning for these two molecules. These are both monotherapy approvals, but we think that the real key here is going to be combinations. And because we're already the leader in hematology, especially in NHL, follicular lymphoma, CLL, we've got a lot of studies teed up. And you can see the list, including three phase three studies, Glofit with chemo, in relapsed refractory DLBCL, polivine linsumio in relapsed refractory DLBCL, and then linsumio plus lenalidomide in second-line follicular. So I think we've got a lot of the bases covered here, and we're looking forward to some really great results in the future. Hemlibra is an excellent growth story. You know, it's just the combination of convenient dosing and high efficacy that's really unsurpassed in hemophilia is just leading to continued adoption in every country. And again, you can see from the bars, you know, very strong growth in the U.S. and Europe and international, as well as still some growth in Japan. So you We continue to see more growth ahead for Hemlibra. We always get the question, you know, sort of where's the top? And we're not sure where it is, but we sure haven't found it. And, you know, again, more approvals coming in. We have the label expansion to include mild to moderate patients soon in Europe. And we've got the infants results in Haven 7 coming soon. Immunology, this is mostly affected by Actemra declines, as I mentioned, due to COVID reductions. Zoller's holding up strong at 13%. With all the talk about new asthma agents, people sometimes forget that Zoller is still the market leader in asthma, but also is growing strongly in urticaria. And then Esriat, finally, we did lose the patents. There are multiple generics in the market in the U.S. now, and those sales, we anticipate, will go away rather quickly. Coming to Okravis, again, really nice growth here. You can see we have more than 250,000 patients. It's the number one market share in new and total in the U.S. and number one in new market share in Europe. We have very high level of persistence, which means that With a given level of, so for example, with 35% new market share in the U.S., we can actually get higher than that in total market share because the other therapies lose patients faster and we get a longer persistence. So that's an extra great feature. We have now commenced the phase three study. for subcutaneous Ocrevus, and we'll have results in 2023, so not far away from an Ocrevus sub-Q for patients. And then we also have the extensive Phase III program with high-dose Ocrevus and phenobrutinib, our BTK inhibitor. Moving on to SMA, Evrizdi, another really strong picture here. And again, if you look at the bars, you can see there's growth in every country or in every region. And this is really because of the convenient dosing, strong efficacy, and excellent tolerability of Evrizdi. You know, we're seeing a high level of switching from Spinraza, Also, there have been rumors about, oh, do patients stay on Evrizdi? Actually, 90% of our patients are staying on Evrizdi, which is pretty remarkable given that there are some very advanced patients, say with type 2 or type 3, that maybe don't get many benefit from any of the therapies. And so, you know, 90% retention is quite strong here. and we continue to expand both our label and geographically, and so we look forward to continued growth here. This is, I think, the first slide I've shown at least in some time with DMD results, and we're excited with our partner, Sarepta, to have been sharing these things. So the Phase 1B study called endeavor also called study 103 so this was a cohort of 20 patients and you can see that in these 20 patients the the general trend was they had an increase in their functional score which um you know is is atypical you know in baseline in in you know non-treated patients you would typically either see in this time period of a year either stable or down and our external control was roughly stable versus the increase for the boys who received the treatment. And then we now have four-year data from the initial cohort of the phase one study. This is obviously a very small data set, but it is good to see that these boys are maintaining their functional gains over time, and these will be meaningful contributors to the overall data package. The outlook remains here that we we will finish our phase three accrual this year. We'll have results next year and we'll be filing short shortly thereafter. But we are still exploring possibilities for accelerated approval. But our base case remains phase three. And now I'm to Vibismo. So we're super excited by the momentum here on this launch. We have – it says 70,000 vials. That was at the end of June. Now it's 80,000 vials. And this is important because – so we can assume that most of those vials have been administered, and we haven't seen any – unusual safety signals. This is something that doctors are very closely watching because they want to make sure that when the real-world experience comes in that there's no surprises. And so far, there's no surprises, you know, 80,000 vials in. It's also noteworthy that in June in the U.S., we actually hit a 500 million annual run rate. So what I mean by that is basically take June sales and multiply by 12. We were slightly over 500. And then Japan has come online in May with reimbursement. They've had a really positive uptake, and they're really excited about what that means for the future of Vibismo. We now have simultaneous approval and reimbursement by NICE in the UK, which is very unusual. And so we're launching there, and we'll be launching in many other countries. So look for more on Vibismo. This is the latest data, which shows that in AMD – that now we have more than 60% of patients. So 59 in one study and 67 in the other study were able to extend dosing to four months. And this is really unprecedented in this space. And this is why I think Vibismo is being so well received. We have 60% to 70% of our patients are switching from ILEA. A smaller number are switching from Lucentis. And then the least number is patients that are naive. But now reimbursement is well established. 80% of U.S. payers are reimbursing or covering and have policies for Vivizimo. We'll have a permanent J code on October 1st. And as I said, I think all indications are this is going to be a very important medicine in the retina space and a very important medicine for Roche. My last slide, just an update on a few things. And so one thing I wanted to mention is that we did have a negative study with concentric adjuvant RCC. You know, this was an area where I think our expectations were modest, given sort of mixed results from other checkpoint inhibitors in the adjuvant RCC setting. But nevertheless, we were disappointed to see that we didn't have a statistically significant benefit on disease-free survival. So that one's coming out. Meanwhile, we're continuing to final analysis on the... the adjuvant head and neck study for T-Centric, and that'll happen in 2023. And otherwise, I think we mentioned that Alicenza, the adjuvant study, is likely now to read out in early 2023. So a lot of good progress for the pipeline and for the launches, and really excited to answer your questions later. And I'll turn it over to my fantastic colleague, Thomas.