Roche Holding AG

I'd 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're 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, you'll 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 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 www.woosh.com slash investors to download the presentation. At this time, it's my pleasure to introduce you to Thomas Schinecker, CEO of Woosh Group. Mr. Schinecker, the stage is yours.

Thank you very much and good morning and good afternoon everyone. I'm very much excited to share our half year 2026 results with you. We again had a strong performance and we truly made significant portfolio progress in the second quarter. Now, let me take you through this slide. I think the headline says everything. Co-operating profit growth at plus 10% ahead of sales growth at plus 6%. Again, increasing our margin, similar to what we have done over the last couple of years. Performance driven really by both divisions, both pharma and diagnostics. Diagnostics without the China impact is growing 6%. And let me just also reframe the impact of the flu season. The flu season had about a 1% or more than 200 million impact on the group results. So without that also, we will be growing at 7%. I already mentioned the strong bottom line performance with cooperating profit plus 10%, cooperating margin plus 1.7 points. Core EPS plus 9%, very strong performance. We had significant milestones that we have achieved in Q2. We have five US FDA priority reviews in, for example, for Ticentric, but also in Gaciva. We have made a number of progress in terms of filing, for example, in end-spring thyroid IDCs. So overall, extremely good regulatory progress. On the pharma readouts, we had two positive phase three results as well. Overall, the phase three success rate in this year is 80%, and with that significantly above the average of the industry. So I think here also we're making very good progress. On the business development side, I would highlight two that I'm going to also mention later. One is PathAI, the other one is New York Therapeutics. On the diagnostics launches, we've had also significant amount of launches that I'm also going to go through and I know Matt's going to go through as well. We have significant news flow ahead, including phase three readouts for ITOFBI and Lunsumio and potentially a new enemy, Sifoxersen. So in the pipeline right now, we have three new enemies that we're going to launch, but with Sifoxersen could be a fourth one. And then some phase two readouts. So overall, quite a lot of news flow in the second half of 26. But even more... If you then look at 27, 28, 29, we have really huge amounts of new flow coming with really a lot of potentially very big medicines and also a lot of de-risked assets. So we're really excited as we look into the next years when it comes to our pipeline. Again, let me just highlight the numbers, 6% pharma, 3% diagnostics. I already mentioned the impact of the flu season and also the healthcare pricing reforms. So overall, very good track. Here you can see the sales growth over the last quarters and we'll continue to see good uptake also in the rest of the year. And as we move into the end of the decade and into the next decade, as I've shown to you in previous presentations, We believe that we will continue to have a good momentum and we feel comfortable with where we are at the moment. Really good growth across the different parts of our portfolio. We have a very diversified portfolio. We have in total 16 blockbusters. We're globally number one in diagnostics. We also have a very strong market position in many of the areas like haemophilia, ophthalmology, neurology, oncology, et cetera. And here you see just some of the news. We continue to see good global growth at 6% in market share gains. There is, of course, the US market, which is only growing low single digit, but where we keep gaining market share. Also in the immunology portfolio with Xolia and Gaciva, we have really good progress. And just to point that out, with TIL1A, of course, next year, it's new medicine coming into this portfolio. On oncology as well, Fesco, Coversion, Ongoing, the HER2 breast cancer franchise, will peak in 2026 with a strong tail. Decentric, we see accelerated growth driven by new indications. And Alicenza, we expect flat growth for the full year. Continuing with PolyV, continued strong first-line DLBCL uptake. Columbia driven by second-line plus DLBCL and also by third-line follicular lymphoma. and Libra very strong growth in the first half year double digit and also in the neurology franchise we're growing quite well. So let me talk a little bit about portfolio progress and portfolio progress is a combination of our own R&D and also bringing in external assets like we've done in the second quarter Thank you very much. You can see a couple of acquisitions we've done. You see a number of those have already moved into phase three. The latest one is the BTK degrader in hematology, but potentially also in immunology and urology. Phenobrutinib. is a PTK inhibitor with a degrader. We see even more reduction of the protein and we believe that this could be a next generation molecule here with a proven mechanism of action. So we feel this was a very good move for us, especially also because of our strength in hematological cancers and also in immunology and neurology. And here, usually, you know, when I talk through the slide, you have some red boxes. We had no red box in the second quarter, which really also shows that we've had really good pipeline progress. And just to take you through here, gerodestrin, we have filing acceptance by the FDA. We have FDA priority review. We expect the launch towards the end of the year. NXT 007 moved into phase three. This is the next generation of Ham Libra. Feedback has been very positive so far. It's about 30 times more potent, but also very safe. I already talked about the BTK degrader. Diveracep, I know Theresa will cover that, very good data. Also Sevastimab has continued to progress well as well as the HER2 tyrosine kinase. This is a brain penetrant molecule for HER2 positive breast cancer, really also addressing one of the biggest unmet needs there is to tackle the brain metastases that are developed in HER2 positive breast cancer. So also very exciting. And on the obesity side, we've also had interesting data on petrolintide, specifically when it comes to tolerability, placebo-like tolerability. And we know that on current medicines, most of the patients never go to the highest dose. They actually end their dose in the mid-range, where you would get to the same kind of weight loss as petrolintide. But we also know that creatinine has a higher level of side effects. And this is really a medicine that's extremely tolerable. Now, let me go to the diagnostic side and just show you some of the external activities that we've done over the last couple of years. And I would like to pick one from the last years. That one is STRATOS, sequencing by expansion technology, which we have acquired in 2020, which is really the basis for the Xelios sequencing. and I've always promised that we will deliver and we did deliver on the sequencing with really a differentiated product and now Matt will go through that. In addition we've done two additional acquisitions in more of the oncology space. One is Saga Diagnostics for ultra sensitive minimal residual disease testing. You know the market cap of some of the companies out there that are working in the space The really interesting thing about this is not only the really ultra high sensitivities, but you actually sequence the cancer and we have Xelios. And then you monitor by specific primers and you do it on digital PCR, which is highly cost effective. And we have a digital PCR system. So we are extremely well positioned here to really scale this on a global level, much better than some of the other players. On PATH-AI, this is really AI-driven diagnostics, AI-powered diagnostics, specifically in a pathology lab, reading the slides and really improving the diagnostics. And with that, also improving the treatment. And I know Matt will talk about that as well. So really excited about the progress. and this is just a beautiful slide, three major launches. Each of them, even for pharma terms, would be a blockbuster. Really differentiated when it comes to mass spec for sure and sequencing. And if you look at the industry, you know, at times maybe you have a company having one of such launches, but we have had three in such a close period of time. It just shows you how productive our R&D is, as well as adding new assays. And I just picked two out of here. One is the Alexis P-Tau 217. For Alzheimer's disease, where we have a significant head start versus our other major competitors out there. So really excited that especially in combination with Trantinumab and you have seen some data just lately that we presented in London on Trantinumab, which continues to impress. and then Alexis Interfering Gamma Release Assay for tuberculosis. This is detecting latent tuberculosis. About 25% of the patients or of people in the world actually have latent tuberculosis. These are both really great opportunities in the scale of what you have in diagnostics when it comes to potential sales volume for a test. Now, let me finish with the outlook. Mid-single-digit sales growth currently growing 6%, core APS growth, high single-digit core APS growth growing 9% currently, and we further will increase dividends in Swiss francs. So I think we're very well on track. And with that, I hand over to my team, and I want to thank them for all the great work. Ellen, Theresa, and Matt, thank you very much. So over to you, Ellen.

Thomas Schinecker, Wafaa Mamilli, Bruno Eschli, Claudia Bockstineger, Maria Cristina Wilbur, Nicolas Dunant, Boris Zaitra 3% in Daya, as Thomas has said, 6% excluding China, Pharma with 6%, so really doing well. And look at the Swiss francs, the minus 2%, just for the sake of completeness. In US dollars, we would have grown 8%. Cooperating profit up 10%, as Thomas has outlined as well, very good cost containment, I will explain that. Cooperating profit to the core net income, we keep the momentum. That means the financial result as well as taxes were not in the way. Nevertheless, I can say stabilizing the tax rate in the first half is a little bit of an outlier and I will come to that. And then Cornet Income to Core EPS, well, the momentum slows a little bit with the plus 9%, but these are just the outstanding results from Shugai. As you know, we own 60%, so we have to take 40% from the performance away. So I think that brings the Core EPS to the plus 9%. IFRS net income, I will explain, plus 6%. Still here, a couple of impairments in there. And then the operating free cash flow, plus 21%, plus 2% in Swiss francs. Let me outline this. So happy with that number. And then the free cash flow is plus 58% and plus 26% in Swiss francs. This is a timing effect as well. Here we had some tax payments or we didn't have the tax payments in the first half that we will have in the second half. Good, with that, let's go through the sales growth. And you see really on one hand, the 6% in CER. You see that the currency effect, which is a minus 8 percentage points, which brings us to the minus 2% in Swiss francs. Let me talk about the plus 6% at CER. On one hand, you see pharma. Excluding LOE, you see the LOE with a minus 244 came in a little bit better than we all expected. It's also a reason why we updated our outlook for the full year or our additional information for the year and said we expect to lose roughly 600 million due to loss of exclusivities, so a lower number than we had at the beginning of the year. When you put the two together, you get to plus 6% in CR. Diagnostics, plus 6%, excluding China, minus 15% in China as well. And then you really put it together and you get to the plus 3% that were mentioned before. When we go through the P&L, sales is clear, other revenue. Other revenue is increasing by 258 million. There are a couple of elements in it. When I start with pharma, I think on one hand, there's a settlement on a royalty claim, which is in here, roughly 70 million. We have in here an expected milestone income from Shugai for Fondayo. That's one element here. And then we have a cross-licensing settlement in Pharma of 126 million. When you put everything together, you get roughly pretty well to the 258. When you look at the cost of sales and the cost of sales, both divisions have grown their costs by 5%, which is quite an achievement because overall volume has grown by 8%, pharma by 9% volume growth and diagnosis by 5% volume growth. And when you look really at the two divisions, the cost of sales and pharma were driven by higher profit share expenses based on higher sales of XOLA and royalty expenses from the increased sales of Okravis and Evristi. and the cost of sales in diagnostics were driven by the increase in stalled instruments, the manufacturing rent up of the new launches and then certainly the US tariffs of roughly 43 million. When we look at R&D, R&D plus 1%, I think really here a lot of cost discipline in the game here, but certainly I think also, let's say quite some investment in key therapeutic areas like oncology, CVM and neurology. SG&A has increased by 3% and let me on one hand say really in pharma we had an increase in M&D so we really put money behind our products in marketing and distribution. Admin was really really fledged as even a small saving here so I think very disciplined approach here as well. And then other operating income and expenses here really lower income from product disposals compared to last year. Let me make an additional comment about other revenue. I think really when you look really a little bit at our history and where we stand at the moment, other revenue normally represents roughly 3% of our sales. I think certainly now with the Foundeo element coming in for the next couple of years, we expect that ratio to grow to 5% until the end of that decade. Good, I think I hope well explained how we get from 6% sales growth to 10% corporate profit growth. So when you look at the margins itself, I think that looks fine. I think even in Swiss francs, I think we are able to increase the margin. So as you can see, margin has increased by 1.7 percentage points in constant currencies. And that was driven by strong performance in both divisions. Pharma increasing by 2 percentage points. and Daya by 0.6 percentage points. Let me outline here that both divisions benefited from the further centralization of SG&A, especially on the legal side under corporate. That represented a benefit for pharma of 105 million in the first half benefit and diagnostics for 24 million in CR, less costs compared to half year 2025. What does that mean? I'm certainly well over the way of the fact that we have said basically it's 300 million for the full year that we're going to shift. I'm not going away from that number. It could be a little bit lower, but we will see a little bit of a ramp up of that effect in the second half. Cornet financial results. Quantate Financial Results, improvement of 42 million, and surprisingly in Swiss francs as well as in CER, so the numbers are equal. And you look at the equity securities, I think that's a nice improvement here for the Roche Venture Fund. Net interest income, we had lower cash, so a little bit less compared to last year. Interest expenses, certainly US dollar helps here with plus 43%. and then in other we have the increase in losses from currency results and other effects. Cortex rate. Well, first of all, I think really it's great that it came in at 17.5%. You see just a very slight increase compared to half year 2025. Let me say here, it's a timing effect. The timing effect that we benefited from came up late. So very clearly there will be an increased tax rate in the second half. And just to give you additional information here, I'm pretty convinced we will get to around 20%, perhaps a little bit lower for the full year nevertheless. Core EPS. When you look at the core EPS and at the bridge, and you see here the 9.3%, which represents the rounded 9% for the core EPS growth we've talked about already, you see operations is the major driver here. Then the product disposal and disposal of subsidiaries, as mentioned before, a decrease of 104 million. The financial income and expense here really positive with 42 million. Then the tax rate, which was pretty much stable. And then all other effects, once again, Shugai, with an effect of minus 1.6 percentage points. So really the overperformance, if you like, from Shugai, when you take it out, and that's what we do in the Core EPS, where we take the 40% out that we don't own, then you get to this effect. Non-core and the IFRS income. You see really co-operating profit up 10%, minus 1% in Swiss francs, and then the IFRS net income up by plus 6%, minus 6% in Swiss francs. And what are the drivers? A little bit less restructuring charges compared to half year 2025. The major difference are the impairments here. Let me outline that we have an explanation for the in-payments in Note 9 intangible assets in the Interim Consolidated Financial Statements on page 65, where we really go through it. Good. When you look at operating cash flow, I think really a great result here with plus 21%, plus 2% in Swiss francs when you really take the whole range of the bars that you have here on the slide. You see really operating profit net of cash adjustment, significant increase. Networking capital is basically effect from payables. On the pharma side, I think that will wash out, so I think that looks promising. Investments in PP&E flat, investments in intangible assets a little bit less compared to last year. You remember last year we had Sealand with 1.2 billion cash out and that leads us to the plus 21% and then you see the currency effect clicking in bringing us to the plus 2% in Swiss francs. Good. When we look here at the margins, I think overall a great development. Both divisions contributed to what you see really on the left-hand side of that slide and the increase of 21%. So what does that mean for the group net debt development? First of all, you see really that net debt has increased here from end of the year 2025 until end of June 2026. And the increase here is 5.9 billion. Having said this, when you look at gross debt, gross debt is stable. Just to mention this, gross debt is stable. Year end, it was 31.6 billion. This was not on the slide, that number. And at half year, it was 31.8 billion. So really stable gross debt, which means we have reduced our cash position. I will come to that on the next slide. When you look really what drove it, I think the operating free cash flow is clear. Then we have really taxes and the treasury is minus 2.1 billion. And then certainly the dividend kicks in, as always. I think that's the driver normally for the net debt increase in the first half that we will work against in the second half. Good balance sheet. I will keep that short. Two things to mention. As said, cash and marketable securities, I said less cash available. We've paid the dividend. And then the other piece is really the equity. The equity goes down, which is a normal phenomenon for Roche because we deduct the dividend payment from the equity. And then as the profits come in the second half, we hopefully, we will not just hope, we will wash that out and equity will increase. Good, currency. Yeah, interesting. When you really look at half-year itself, I've mentioned the currency effects, I think, quite a bit. When you look at year-to-date September, keeping all the currency rates stable at the end of June, we get to minus 5 percentage points. And when you look at full-year for sales, cooperating, profit and core EPS, we get to minus 4 percentage points, minus 6 percentage points and minus 6 percentage points, which is exactly the same prediction that we had in Q1. So the situation is stabilizing a little bit. Let's see what happens. But the volatility is still huge when it comes to currencies. Good. With that, let's go to my last slide, which is the guidance slide. As said before here, Thomas has made the confirmation already. But let me mention here the LOE impact of roughly 600 million now expected for 2026, which is a reduction to what we had at the beginning of the year 2026. Everything else is confirmed as we had it at the beginning of the year. And with that, happy to hand over to Theresa.