Roche Holding AG

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 9 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 6 to unmute yourself. One last remark, if you'd like to follow the presented slides on your end as well, please feel free to go to www.wolf.com slash investors to download the presentation. At this time, it's my pleasure to introduce you to Thomas Schieneker, CEO of Wolf Group. Mr. Schieneker, the stage is yours.

Thank you very much, and good morning, good afternoon, or good evening, wherever you are. I'm really happy to talk to you about our half-year results, which have been extremely strong. So let me kick it off on this slide. So overall, our group sales increased by 7%. So very strong growth by pharma with 10%. In fact, if you look at the momentum in Q2, pharma even grew by 11%. Diagnostics was flat, so very similar to what we saw in the first quarter, and this is purely due to the China healthcare pricing reforms. Without those pricing reforms, diagnostics grew 6% in the first half of the year, so in line with past expectations. But what's even more exciting is the strong bottom-line performance, with core operating profit growing 11%, and thereby our core operating margin increasing by 1.1 percentage points, and core EPS even growing faster at 12%. Also, we want to update our full-year LOE impact guidance, which we are now lowering to $1 billion instead of the $1.2 billion. In the second quarter, we had a number of key milestones. Among others, the EU approval of ITOFBI and also the US approval of SUSFIMO. We had mixed results with Astragalma, one positive study, one negative study, and Theresa will talk to you more about that. And there have been a number of phase three decisions that have been taken. One is PRAZI in Parkinson's disease. Also here, Theresa will talk to you about that, and she will actually be able to share the Opal label extension data with you on which basis we made the decision to take that into into the phase three, but also sozo as potentially new antibiotic for gram-negative bacteria. This would be the first in 50 years. So for this year, we've taken four medicines into phase three, the number to come. So you can see that we are really refilling the pipeline of new medicines. And it's going to be an exciting year for that with between eight to 11 medicines moving from phase two to phase three, all post-bar and all with the data that supports this move. On the diagnostics regulatory side, we also had two approvals, and Matt will talk to you about that. There's also more significant news flow ahead this year, which we'll keep you updated on. Now, let's look at the overall numbers. Again, 7% is very strong growth for the group, but really driven by pharmaceuticals. I already mentioned diagnostics. And this is in line with the performance that we've shown over the last two and a half years. In fact, if you look at the last two and a half years, starting in 23, when we had to phase out the epidemic sales, which at one point in time were 12% of our sales, we managed to do that by having very strong growth of 8% during that time period. And even since then, if you look at... Basically, the last two years, we've been growing at the average rate of 8%, as you can see here on the right-hand side. Now, the last quarter, there has been an impact in diagnostics, as we mentioned, and this impact should get lighter for us towards the end of the year because some of this impact already happened in Q4 last year. Now, let me talk you through a couple of growth drivers. Let me start with Bobaismo, which continues its very strong momentum. Bobaismo is growing at 18%, so 17% is the overall ophthalmology growth, and we continue to gain market share in the branded market of about 3%-ish points. At the same time, we see a contraction of the overall market because of less cash funding in the United States. Cholera continues to do extremely well with an amazing momentum and now more than 60,000 patients on this medicine in the United States. Also in oncology, we continue to do well with 7% growth. We have the EU label update for administration outside the hospital for Fesco. Alicenza keeps expanding as well. And also on the hematology side, we have now for PolyB and in first-line DLBCL, patient shares now reaching 33%. And we continue also to drive expansion of Columbia and Lanzumio. And I'll get back to Columbia a little bit later. Also, HemLibra continues to do well, and we have the next generation HemLibra in-house, and I know also Theresa will share some data on that. The neurology portfolio, where we are the global leader, continues to do well as well with 10% growth. Ocrevus with a good momentum. We received J codes for the subcut version 1st of April, of course, with only every six months dosing of Ocrevus patients. It's going to take a little bit until we see that in the numbers, but we are confident in our outlook on Ocrevus and the additional revenue that we can achieve by adding the subcut version on top. Also, as I mentioned, we received the EU approval for the tablet formulation. We're very confident in our growth over the next couple of years because we have a very strong momentum in our on-market portfolio. And we also know that we have a number of key readouts coming in the 27 to 29 timeframe, all of which are driven by a strong Phase 2 data and post-bought data. And so we're very confident that we can continue our strong momentum even beyond this decade. And there are a number of pivotal enemy readouts that are still going to happen this year. Now let's look at some of the product highlights, and let me start with diagnostics. As we mentioned before, last year was really an historic year in terms of launches for diagnostic, but we have more to come. The sequencing solution will be launching next year. And here we have a solution that can really be disruptive in terms of throughput, in terms of cost position, in terms of speed and accuracy. And I know Matt will talk to you more about some recent data that will support that view. And so we are very excited to get ready for this launch. when we already have first customers which are using this instrument in early access. On the Acrotech SmartGuide, the CGM solution, we launched that last year, and we're continuing to ramp up here in manufacturing, and also mass spectrometry we launched end of last year. So, again, very good momentum, and we're bringing new reagents to the mass spec, so we'll see this momentum increase even. Now all of those three are really first new segments and segments that will enter us into markets that are multibillion. So you could say in terms of pharma kind of language, this is all of these would be kind of blockbusters on the pharma side. And also on the assay side, we continue to make good progress, and I know also Matt will cover this specific assay, which we have in our pathology business. On the pharma news flow, just again to highlight ITOFI with the EU approval, PRAZI, and SOZO with the transition into Phase 3. A couple of updates on the other programs, Tirogolimab, we already stopped all we could in the middle of last year because we knew that these programs are likely not going to be successful. We just let the rest run out, and it's confirmed our decision really to do that last year because we can really see that there is no impact of this antibody. On the Columbia side, let me just say we now have 35 countries in the world that have approved this therapy. The data is very strong in terms of the hazard ratio and the benefits to patients compared to standard of care. and it's also in the U.S. NCCN guidelines. So even though we received a CRL based on the ODOC decision that happened a couple of weeks earlier, we are confident in this medicine, and we are confident also that this will get used also in the United States based on these guidelines. As I already mentioned, and in Levitas, I know also Teresa will go into that. Also here, we are very convinced of the risk-benefit profile of that gene therapy in ambulatory patients. There are 760 patients in the world in this patient group, and this is the only therapy that is available for these patients. These young boys otherwise have no treatment option. And if you talk to KOLs, if you talk to patients who have received this, they are very much convinced of this gene therapy. So we hope that between Sarepta and the FDA, they will find solutions that patients can continue to receive this kind of treatment. Let me just quickly talk about phase three goal decisions. And we always said in the beginning of this year, this is going to be a very important year in terms of refilling our late-stage pipeline. We already have four. There will be probably four coming towards the rest of the year, maybe even more. And this would be a record for us in terms of how many new medicines go into the late stage. NXT-007, this is an antibody that's using the recycling technology of Juga and has a higher level of efficacy. Transcinemab, I think we talked about that many times, about the unique possibility to use brain shuttle technology to get the antibody into the brain with very low levels of side effects. Prazi, I know Theresa will talk about that, and I already mentioned Sozu, which is also very important because we know that there will be a next pandemic, and one of the next pandemics could be a bacterial pandemic. Let me also talk about R&D excellence, and I know that you will get a much deeper and extensive update at Pharma Day. But over the last two and a half years, we have consistently applied the bar across our portfolio. That means we've attrited some of the molecules that were higher risk and lower value, and we've substituted that with more higher value assets, and we generated more data and complemented that also with external innovation. One of the goals that we've had is to increase the share of best indices potential to 80%, and we are in good progress to achieve that. We moved from 58% to 67%. And also, by doing this pipeline prioritization, what also happened is that we increased the average peak sales per pipeline project. So this is not per NME. This is per pipeline project. So per NME, it can be much more substantial than that, which is an increase of 55%. And if we look at the total value of our portfolio, in this time period, it's increased by 26%. And it's our commitment, and we will continue to do that and continue to only move forward projects where we believe these potentials are there. But we, of course, know that in pharma, some of the development times are, you know, for example, late stage, three to four years. So some of the molecules, like, for example, acigolumab, were pre-Barr era. Now, let me also talk about one other aspect that's really important, and it's about resource reallocation. You saw probably in the slide deck that we kept our R&D spending flat, but that doesn't mean that we don't have massive reallocation going on inside. You can see that as a swan kind of on the lake, and we're doing a lot of work, but it may look very calm, but I can tell you there's a lot of reorganization and reshuffling going on. In total, we've been able to save about $1 billion. The goal by 2030 is around $3 billion in savings that we can reallocate into our business. We do that, for example, by we reduced the number of CROs we're working with. We used to work with 12. We're now working with three. We renegotiated those contracts. We renegotiate contracts in research. We take out manual work in different parts of the organization by implementing AI. We reduce the system landscape and simplify the organization. So we do a lot of things to really cut out cost so that we can fund the external innovation, which you see here, so that we can fast track certain programs, but also that we can implement new systems which make the work that our people do much more effective and cost efficient. and this reinvestment with that we managed to fast track a number of key assets like a 50 bar which we accelerated significantly ct388 which we also accelerated crunching them up when we look at the cycle times that we now have we managed to get now a cycle time acceleration of a total of about 11 months through rnd excellence the goal is of course much higher by 2030 But this is in a time period where, if you look at the average industry cycle times, they have actually increased. And it's very important to also reinvest some of the money into key productivity initiatives, creating new systems, automation, and AI, so we can take out costs out of the system. Now let me talk about the guidance I already mentioned, the LOE impact, which we assume is going to be less. The group sales growth, mid-single digit, core EPS, high single digit. Of course, the first question is, well, if you're growing 7% already in sales, your core EPS is growing by 12%. Aren't you being conservative? I would say our reputation is to be conservative, and we also know that we have a lot of geopolitical turbulences these times. And so what we said is we're going to observe the situation. Obviously, we're tracking very well, if you compare it to the guidance, and we have the opportunity to revisit that decision in the next couple of months. Let me say also, that, Rosh, in our history, we've never missed the guidance. And if you look at the last three years, we've exceeded our guidance in every year, including we also raised the guidance last year. So, of course, we want to continue to deliver, and I can promise you we will continue to deliver. And so whatever happens in terms of the U.S., we will continue to deliver. With that, thank you very much, and I hand over to Alan. Yeah, thanks, Thomas.

Yeah, hi to everybody. Thanks for coming in. Hope everybody's fine. Very pleased with the results that I have the pleasure and the honor to provide here, and especially with the operational performance that we can show. Well, I want to talk about the results. So the P&L, I think a couple of points on the cash and on the balance sheet. And certainly, I think, well, these days, it's important to talk about currencies. This is the overview. When you really look at the 7%, I'm sure that Teresa and Matt will give a lot of details about the sales development. When you look really at the cooperating profit with more momentum than the sales growth, I think that underlines good cost management. Coordinate income even with a higher momentum, plus 13%. Here the financial result helped with a couple of currency impacts. I will come to that in a positive way. And then you see really coordinate income and core EPS pretty much in line. IFRS net income up plus 23%. Explanation is simple, lower impairments compared to last year, around about $800 million. And then when you look really operating free cash flow, it looks a bit poor at first sight. But, well, first, Sealand, $1.2 billion, which has been in licensing deals or goes to the intangible assets and therefore is part of the operating free cash flow, where M&A is not. I come to this. So I think that's a difference to last year. And then we have a higher level of networking capital, especially on the pharma side, on the accounts receivable, which is not a worry that we'll balance out until the end. On the free cash flow side, what fuels, if you like, the distance even a little bit more is higher tax payments, but also this will balance out until year-end. Good. When we look really at the group sales growth and the bridge here, you see left-hand side half-year 2024, right-hand side half-year 2025. You see the 7% increase in CEI. You see the currency impact. Let me start with diagnostics. You see the minus 326 in constant rates. This is the China healthcare pricing reform impact on the diagnostic side. If you move one bar further, you see the plus 348. And this is really the plus 6% on the diagnostic side if you exclude the China effect. Pharma, I think, with strong momentum, as said already. Theresa will shed more light on this. And here you see on the next bar the impact, the negative impact, from loss of exclusivity products with a minus 347. You know we have that 1.2 billion out as additional information to the guidance. Thomas made a remark on this already. We bring that down to a billion due to the half-year impact that you're seeing here. And then you see the currency impact, which I would argue speaks for itself. Like I said, let's go to the co-operating profit and the P&L, at least the first part of the P&L. Sales is clear. Other revenue pretty stable here. When you look at the cost of sales, plus 8%, pretty much in line, I would argue, with the sales growth. But what is important, the volume has risen by 12%. And this is 15% on the pharma side and 1% on the diagnostic side. I think having that in mind, I think that's a pretty reasonable number. increase that we're seeing here. And you ask yourself, okay, when you look really into the divisions, you will see that we had a plus 8% in diagnostics as well. This is the China healthcare pricing reform, manufacturing rank up, especially for CGM, and certainly the increased installed instrument space. R&D, pretty flattish. Thomas explained that. I think we have great savings on the R&D side, coming from R&D excellence. I think that is contributing to that stable development. Then you have SG&A, and SG&A, well, two major drivers. One driver is on the pharma side, where we have put more money behind marketing and distribution, really just to fuel the momentum of our products, especially with Bison or Exolia. And then we have on the diagnostic side, really, really good cost management. So the last point to mention here is really informatics, where we have invested more in AI and more into cloud. Good. Other operating income and expenses, well, we have done less divestments, and we have less gains from divestments of products compared to last year. That explains the minus 168. Good. With that, I think you see a cooperating profit of roughly $12 billion, nice margin increase, plus 11% overall. Good. When you look at the margins, you see the margins went up quite well overall, plus 1.1 percentage points for the group in constant currencies. The pharma division is plus 1.7 percentage points of constant currencies. You see the drop in diagnostics, which is not surprising, given the impact from China. Therefore, I would argue overall pretty good development. Core net financial results, and as I've said at the beginning, it's interesting because the net financial result has improved with plus 84 million in constant currencies. And when you look at the large green bar on the right-hand side under other, then it's very clear we had here the net foreign exchange results which played a role and the net monetary positions in hyperinflationary economies that was a plus 89 here which played a role, and that gave us quite a boost here. When you look really at the interest expenses, it's also a positive. That's pretty clear because most of our debt is in U.S. dollar. And as the U.S. dollar has weakened, we receive a positive impact here. And then you look really at the investments that we have in the Roche Venture Fund. And when you look really, the portfolio was negatively impacted here by the U.S. dollar as well. Good. With that, let's go to the core tax rate, and that's an easy one this time because the tax rate is basically stable. We had a couple of positive, couple of negative effects here. For the full year, certainly you know that I've said for the full year that we expect a group tax rate of 19.5%. I think given really the relatively good result at half year, I would go now to 19% for the full year. Good core EPS, and that's one of the slides which demonstrates the best, how well we have performed on the operational side. You see really a comparison half year to half year. We are up in constant rates by 12%. as mentioned by Thomas already, but you see really major trigger here is operations. So what went against us is less product disposals. That's one element here. All the rest really washes out. But as I said, I think the thing we're really proud of is the operational impact here. Good. Non-core and IFRS income. You see the cooperating profit growing by 11%, as mentioned already. You see really when you go down on the right-hand side, the IFRS net income is up by 23%, as mentioned at the beginning. And then you look at the impairment of intangible assets, which has improved significantly. You know that we have revisited the pharma portfolio. I think we cleaned the portfolio, and therefore we also cleaned quite some stuff in the balance sheet. So that's a result of it. And therefore I think really the IFRS net income has a nice momentum. Good cash. Here you see really how the cash has developed. Half year 2024 constant rates to half year 2025 in constant rates. And then you see the currency impact, which gives us the reported number. When you look at it, I think really the green bar, operational performance, really great. Networking capital, I've mentioned that. I think really here on the pharma side, increased accounts receivables due to the sales of Acreba, Sixolia, and Vibesmo. I think something which will balance out until the end. So I think that that should be fine. And then you see the investments in intangible assets, the impact of Sealand, the Sealand pharma deal of $1.2 billion, which I would argue explains the majority of the difference here. And then you see really when you move over the relatively small currency impact that we had on the cash side. Good. When you look at operating free cash flow and free cash flow margins, so to say, well, certainly it's not a surprise that this went down, given that we had the Zealand deal. I think that's really reflected in the Roche Group. It's also reflected in the pharma division. The diagnostics division very clearly impacted by China. When you look really at the cash generation of the business, then it decreased by 13%, which is in line with the 14% decrease in the cooperating profits. So I think Val explained it. Group net debt development, you see net debt went up from $17.3 billion end of the year 2024 to $21 billion at the end of June 2025. You see the ingredients. I think we are operating free cash flow. I think ceiling is part of it. And then the non-operating free cash flow is taxes and treasury. And then you see an interesting point in dividends, M&A, and alliance transactions. And that is a positive impact from currency translations. That's the U.S. dollar once again. Roughly 70% of our debt is in U.S. dollar, nominate in U.S. dollar. So we had a positive effect here, which certainly helped a little bit on the net debt development. I think what went a little bit against us, you will see in the balance sheet, is that our cash position is reduced, but still at a very comfortable level. And here we are. When you look at the balance sheet, I think first you can see that the decrease in assets at half-year has been driven by the reduction of cash and marketable securities, but still 12 billion on hand. And the decrease was partially offset by higher trade receivables, especially in pharma. When you, by the way, look at the liabilities, the reduction of the non-current liabilities is really a reduction of long-term debt and quite significant, roughly $4 billion reduction there. When you look really at the equity ratio, I think that looks fine. You see really we're at 35% now, so a little bit down compared to year-end, but you know that the dividend we pay, the $8 billion, is equity deductible. So the equity gets reduced by the $8 billion dividend, and we're basically close to where we have been at year-end. So I think that speaks for the profits we're making, that we're building up the equity, and we should have a quite nice equity ratio at the end of the year. Good. Let's look at currency. Well, that's the picture for quite a while, to be honest. And you see that the Swiss franc has strengthened basically against all the major currencies. And you see really that the US dollar is the driver here. But certainly also the Chinese renminbi and APEC plays a role here. but also other currencies here. So that is, how should I say, that it doesn't give us a great platform for the end of the year. When you look really at the currencies itself, you see on the left side that the 2025 average currency rates remain below 2024 for both the U.S. dollar as well as the euro. So let's move to the right-hand side. You see at half here the minus 3 percentage point, the minus 5 percentage points on cooperating profit. and the minus 4 percentage point on core EPS. And, yeah, I think for the full year, you see the minus 5 percentage points, minus 6 percentage points, and minus 6 percentage points on core EPS, which would result from the assumption that we keep all the currencies at the end of June constant until year end, which is pretty unlikely that this will happen. I think just for the sake of information, I think we run the whole model yesterday with the currency rates of yesterday. And I can argue that the result is not very different to what you see here. It's slightly different, but not very different. So it looks like that this is a little bit the direction we're going. Thomas said everything about the guidance. Well, tariffs is the major point here, which holds us back to make a step here, and it looks a bit inconsistent. I agree. Nevertheless, the risk is there. The uncertainty is there. You've seen the adjustment here on the loss of exclusivity impact to a billion. So I think a pretty reasonable picture, and we will assess the situation further in the next couple of months. Now I come to a pretty formal point that I want to raise here. And the Roche Board of Directors proposed an exchange of Genussscheine to participation certificates, Partizipationsscheine. A pretty formal move, as shared in our press release, I think yesterday, the Board of Directors proposes this switch. The exchange of Genus China, really an outdated equity instrument, a really outdated old instrument. It's not even a good translation for Genus China, to be honest. So I think really good to go for the participation certificate. And this follows the Roche articles on incorporation. It's an adjustment driven by the revised Swiss corporate law. It's really now a more modern instrument that we now bring in. Let me emphasize that the participation certificates are economically equivalent to China. So economically, there is no change. Following these changes, the participation certificates replacing the Notion will be listed on the SIG Swiss exchange and have the same dividend entitlement as well as the same entitlement to any liquidation proceeds as the bearer shares. So I think very clearly, no change, just a formal change. Welcome to the digital world because so far we still work with paper here at Roche and we have to get rid of this. And I think now it's the time because really the time is running out until we can use this physical coupons of the Gnus China as well as the Inhaber. So we are really forced to do that move. There will be detailed explanations of the proposals of the Board of Directors, and they will be made available before the Shareholder Assembly in 2026, where the final approval will be made. It's very important. So there is a timeline until March 2026, where you can revise it, look at it, and get comfortable with the move. And as I said, this is more of a formal change than really a change in substance. and then certainly subject to the shareholder approval in the 2026 AGM. The exchange is expected to be implemented shortly after the 2026 AGM. Good. Thanks for your attention here, and I'm happy to hand over to Theresa. And all that comes to my mind, Theresa, is double-digit.