Roche Holding AG

SIX:ROG

Earnings Call Transcript 2023-Q1

[Bruno Eschli, Head, IR]

[abrupt start]

you may also raise your virtual hand to address your questions verbally. [Operator Instructions] 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/investors to download the presentation.

At this time, it's my pleasure to introduce you to Thomas Schinecker, CEO Roche Group; Mr. Schinecker, the stage is yours.

[Thomas Schinecker, CEO, Roche Group]

Good morning and good afternoon everyone. Together with my team, I'm looking forward to presenting the Q1 2023 results. So, let's get right into it. Group sales declined by 3% and this was driven by the expected decline in COVID-19 testing. The underlying base business in both divisions reported strong growth results, which meant for the group plus 8% for the base business.

Pharma had a very strong performance in Q1 with plus 9% and this was driven by the ongoing portfolio rejuvenation. We had also a good diagnostics-based business growth of plus 4%. The COVID-19 sales decline is in line with our full year 2023 expectations and our full year guidance of roughly minus CHF5 billion.

The growth in Pharma was strongly supported by the key products and new medicines, Vabysmo, Ocrevus, Hemlibra, Tecentriq, Perjeta, Phesgo, and Polivy. And we've had a number of key approvals already in the first quarter.

Let me highlight Polivy in first-line diffuse large B-cell lymphoma in the US; Hemlibra in moderate hemophilia A in the EU; and Columvi or Glofitamab in third-line DLBCL in Canada, and we are now rolling it out also into other countries.

In Diagnostics, we launched several new oncology tests and navify digital solutions. And let me also give you an update on the pipeline in the first quarter. With a positive Phase III study, IMbrave050 of Tecentriq and Avastin in adjuvant hepatocellular carcinoma, where we hit on the RFS primary end points and overall survival is still immature.

We've had also a positive Phase III study in Crovalimab, with Crovalimab in PNH. For the remainder of the year, we expect at least another 14 late-stage readouts and among those are a number of line extensions and pivotal readouts for another two NMEs. And we also have a strong pipeline of upcoming launches in Diagnostics.

On this slide, you see the Q1 sales development for the group and for the divisions. Group sales reached CHF15.3 billion, down 3% in constant exchange rates, and excluding the impact of COVID-19 sales you see we grew by 8%, which is a fantastic growth.

COVID-19 sales erosion in Q1 was only in the Diagnostics division, which you can clearly see on this slide, Diagnostics declined by 28%, and excluding COVID testing sales, Diagnostics grew by plus 4%. And Matt will give you more details here. Pharma grew strongly with 9%, driven by ongoing portfolio rejuvenation, and you see that COVID-19 didn't have any material impact on the sales growth rates.

This slide summarizes the key and most important movements in Q1. The Diagnostics base business grew with CHF146 million. And here, you also see a strong decline in Diagnostics COVID-19 sales by minus CHF1.6 billion, so we had roughly CHF300 million testing sales in Q1.

The Pharma underlying business continues to do extremely well based on the new medicines, growing by CHF1.3 billion. And I would say Vabysmo really stood out, again, with sales of CHF432 million, so really being now the biggest growth driver in our portfolio.

AH&R is completely in line with our expectations. And on the right-hand side, you see how our portfolio diversification is ongoing. In the light orange, you can see AH&R back in 2018 made about 40% of our total sales, and oncology was about 50% of our total sales.

Now, moving forward in 2023, while growing you see that AH&R is now a significantly smaller part of our business. And also, we have diversified into other disease areas such as neuroscience playing a much bigger part, Hemophilia A; but also ophthalmology, where you see that the Vabysmo is taking a bigger share of the cake. And this will continue to go into this direction.

This slide shows the underlying performance by quarter. Pharma growing 9% and having no impact from Ronapreve. Diagnostics-based business growing with 4%. Again, Matt will take you through those numbers in more detail.

Since 2015, we've launched 19 new medicines, and these new medicines are expected to deliver growth in the next years. We've had the latest launch of Columvi or Glofitamab, a bispecific CD20, CD3 antibody. The first launch was in Canada, but we are in the process of rolling this out throughout the world. The PDUFA date is set for July 1st.

We have the possibility for two further NMEs this year: Crovalimab in PNH, where we already had a positive Phase III readout; and SRP-9001, which is a gene therapy for Duchenne muscular dystrophy.

Now, there is the expectation that the Phase III will read out at the end of the year, but depending on an FDA approval, we have the opportunity to launch in a number of countries ahead of this Phase III readout.

On the right-hand side, you can see that the new launches now account for more than 50% of the Pharma sales, which is eight percentage points more than in Q1 2022. And you can also see the increasing contribution from Vabysmo, which has achieved blockbuster status after only four quarters and is one of the best launches in the history of Roche. And it is already approaching annualized sales of about CHF2 billion if you extrapolate the March sales numbers.

Now, let me provide you with a quick update on our pipeline, and I'm sure Teresa will take you through those in more detail. I've already mentioned the positive Phase III Tecentriq and Avastin study in adjuvant HCC. The data was presented at AACR.

We've had a negative trial outcome for Tecentriq and chemo in adjuvant triple-negative breast cancer. I've already mentioned the positive Phase III data for Crovalimab in PNH, and we have already shared the positive news on Susvimo in DME and DR in the full year 2022 presentation.

Now, let me also share quickly an update to my team. Since April, we now have the team complete. And I'm very proud of this team because I believe we have a very strong team that will take this organization forward. We have two new CEOs for both divisions; Teresa Graham, as the Pharma CEO; Matt Sause as the Diagnostics CEO.

In addition, we have new people -- with two rows that were not present on the CC in the past, now part of the CC. First, Levi Garraway, our Head of Pharma Development and our Chief Medical Officer, who is now part of the Corporate Executive Committee.

Now, with this move, the entire pharma research and development now have a seat at the Corporate Executive Committee, including people like Hans Clevers and Aviv Regev, who are leading the early research and development organizations and who were already part of the CC in the past. Together with James Sabry, our Head of Partnering, they will work closely together to make sure that we have a clear focus on our pipeline going forward.

[indiscernible] has also joined the Corporate Executive Committee, it's again a new role as Head of Strategy and Sustainability. And she will help lead our future ESG activities and also our strategic initiatives.

This slide should be very familiar to you as we presented it at the full year 2022 presentation. Let me reiterate, the guidance remains unchanged and we see that the sales drivers continue to perform as we had expected in the beginning of the year. In Pharma, we have our key products, new medicines, new launches with strong growth and momentum, as you've already seen in Q1.

In Diagnostics, we expect a good base business growth. We do also expect a significant decline in COVID-19 sales of roughly CHF5 billion across the two divisions with a decline of CHF1.6 billion already in the first quarter, and this is in line with our expectations.

AH&R sales are expected to erode by roughly CHF1.6 billion. In the first quarter, we had an erosion of CHF330 million. This is also in line with our expectations. We confirm the full year 2023 guidance, group sales to decline in the low single-digit range; core EPS is broadly in line with the sales decline; and dividend to further increase in Swiss francs.

And with that, I hand over to our new CEO for Pharma, Teresa Graham.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Great. Thank you, Thomas. So, as Thomas mentioned, Pharma had a very strong start to the year. We had sales of CHF11.7 billion at constant exchange rates with a growth of 9%, approximately about CHF977 million in additional sales. All regions delivered strong growth and new products more than offset the generic erosion.

Sales in Japan grew by a healthy 18%. That was due to about CHF600 million in Ronapreve sales, which represents the final tranche of prior government contract. If you exclude those sales, Japan still grew by quite a healthy 10%. Overall, Pharma volumes were up by 13%. Prices were down by approximately 14%, and we faced increasing currency headwinds of about 4%.

So, where is that growth coming from? As Thomas mentioned, we are very pleased that we have one of the youngest portfolios in the industry. And our sales are largely driven by products that will continue to be able to provide value for us well into the decade or throughout the decade, especially Vabysmo, Ocrevus, Hemlibra, Evrysdi, Tecentriq, Perjeta, Phesgo, and Polivy.

Vabysmo is clearly leading the growth, our strongest growth contributor, after only five quarters already annualizing out at about $2 billion, as Thomas mentioned, one of the strongest launches that we've had at Roche. We're going to go into all of these in more detail in later slides. So, I will just take a moment to talk about a couple of things that we actually won't discuss in other parts of the presentation.

Tamiflu and Xofluza both experienced growth, largely due to a strong flu season particularly in Asia. And then we're also seeing the Avastin, Herceptin and MabThera decline of hitting about CHF3.5 billion, which is very much in line with the approximately CHF1.6 billion decline that we expect for the full year.

I also did want to touch quickly on Ronapreve. We mentioned that there was a remaining a residual purchase that went to the Japanese -- to Japan, the residual part of a Japanese contract that was fulfilled primarily last year in Q4 for approximately CHF1.2 billion. That added a very incremental amount of Ronapreve sales to Q1, so I think it was less than CHF50 million. So, really had no effect on our overall Q1 sales, but this really is the last -- these are the last sales of Ronapreve that we expect to see.

So, now let's move on to looking at the portfolio in more depth. So, we'll start with oncology. Oncology sales grew at approximately 4% year-to-date at constant exchange rates, that's almost an additional CHF4.9 billion compared to fiscal year 2022.

In particular, we see the HER2 franchise growing strongly. Kadcyla had 5% growth, primarily driven ex-US in adjuvant breast. This compensates for some of the competitive decline that we're seeing in the metastatic setting. We also saw the Chinese NRDL listing granted for Kadcyla.

Perjeta continues to grow strongly, 11% in Q1, driven by US and international sales and is expected to grow going forward. We are also seeing strong conversion to Phesgo in most countries around the world, particularly in our launch countries, but we'll talk about that momentarily.

We will also spend considerably more time on Tecentriq, but we are seeing strong solid growth in Tecentriq at 15%, again driven primarily by our first mover markets in adjuvant non-small cell lung cancer and first-line HCC.

And then the hepatology franchise continues to expand, strong sales for Venclexta with expanding patient share in first-line AML and first-line CLL. We see two additional pivotal trials reading out for Venclexta this year, which we've actually been long awaiting the multiple myeloma study as well as the MDS study.

Strong growth in Gazyva, driven primarily by first-line follicular and first-line CLL, in many cases, in combination with Venclexta. We'll talk about Polivy in more detail, but clearly strong growth owing to the first-line DLBCL uptake.

And as Thomas mentioned, Lunsumio received its first global approval in Canada and third-line follicular. That launch is -- I'm sorry, Lunsumio has received its global third line plus follicular lymphoma approval in many parts of the world. That launch is ongoing, and we are part of the NCCN guidelines. Glofit or Columvi just received its first approval.

Alecensa continues to show remarkable growth. This is just a wonderful product, first-line ALK-positive non-small cell leadership continues in our major markets, and we are anxiously awaiting the ALLENA data in adjuvant ALK-positive non-small lung cancer, which we expect in 2023 and we anticipate will drive significant new growth for Alecensa.

So, Polivy approval was granted just last week, which is extremely exciting. I think everyone knows that for patients with first-line DLBCL, about 40% of them do not receive -- do not -- are not cured by R-CHP. So, the approval of Polivy in this setting is really important for patients.

The approval follows an 112 ODAC that voted in favor of the approval of Polivy given the clinical benefit that we saw in first-line DLBCL. That US label does include patients with IPI scores of 2% to 5%. This is a high degree of overlap with the clinical trial population for Polivy and represents about 50% of the line DLBCL market, which is a very significant portion. It has been included in the NCCN guidelines as Category 1 since January, which is fantastic. And we are beginning to see reimbursement around the world for Polivy.

We have a very strong NHL development program that is currently progressing. We've talked quite a bit about the SUNMO and STARGLO programs in second-line DLBCL for Lunsumio and Columvi, respectively. We will see the results of that data here very shortly in second half of 2023 and second half of -- first half of 2024, respectively.

And we're also pleased to announce that the enrollment will begin for our first-line DLBCL study with Columvi plus Polivy plus R-CHP. So, lots more coming in NHL, and this is just a really important space to watch as we begin to really see Polivy bring benefit to patients around the world.

Phesgo continues to drive a high conversion rate. Our conversion rate in our early launch countries has reached 35%. If you look ex-US, that rate rises to, I believe, it's 43% or 46%, which is incredibly impressive. Phesgo reduces administration and time and cost to the health care system dramatically. We go from anywhere between two and a half to seven and a half hours depending for administration with the IV formulation to just 20 to 30 minutes for the subcu. So, this is really just a huge benefit to patients and a huge benefit to systems.

85% of patients prefer Phesgo and subcutaneous administration over intravenous formulations, Unsurprisingly, again we're seeing strong conversion rates in our early launch countries, including strong uptick markets where we might not traditionally think that we would see conversion to a subcu formulation. In particular, the US and Germany have conversion rates that are approaching 20%, which is impressive, and we would expect to continue to see those grow.

We also have a pivotal Phase I result expected in second half of this year for Phesgo OB, this is an on-body injector, actually quite a cool device, which is expected to enable patient self-administration. So, certainly, we have not seen the full story yet written on Phesgo and would expect to see considerable growth in this product going forward.

Very excitingly, we now see Divarasib in CRC. Our positive early combination data presented at AACR just last week. This is our KRAS G12C molecule. You've heard us talk quite a bit about this in the past. We believe that this molecule is more potent and selective in-vitro than its competitors. It has been granted FDA Breakthrough Designation for second-line non-small cell lung cancer.

And as we all know, KRAS is the most frequently mutated oncogene and is present in many cancers. This initial Phase Ib result in metastatic colorectal cancer was extremely well-received, very promising results with an unconfirmed ORR of 66% and 62% with a very manageable safety profile.

This supplements the strong responses and several other indications that we've seen, including second line plus non-small cell. And so we are very pleased with the results that we're seeing with the KRAS, and we expect to be able to bring you some additional data on this drug going forward.

Tecentriq, as I mentioned, has solid growth across all regions. Very excitingly, we are the first PD-L1 with pivotal subcu results which have been filed. And the PDUFA, as Thomas mentioned earlier, is set for September 15th. Again, this represents a significant advance for patients and health care systems and for payers as well, particularly where resources are constrained.

When we think about Tecentriq overall, in addition to the strong growth that we saw in Q1, we did also release our IMbrave050 results in adjuvant HCC, this is Tecentriq plus Avastin in adjuvant HCC. This is the first trial to demonstrate RFS benefit in this patient population.

The OS was extremely immature at this first read, only about 7%. But I think again the results were extremely well-received, and we're very eager to see this trial mature over time and really see the benefit that we can provide to patients.

As Thomas mentioned, the IMpassion030 Phase III trial in adjuvant TNBC has been discontinued at interim analysis due to futility. It's important to note that this does not impact any other adjuvant TNBC trial that is currently ongoing nor does it impact any of our other adjuvant trials in Tecentriq. And we saw nothing in this trial that leads us to have any questions about the efficacy or Tecentriq of -- or the efficacy or safety of Tecentriq in any additional indication.

We continue to see strong adjuvant growth in our EU launches. And again, the US continues to grow in its early lead indications. The HCC franchise is continuing to grow as we continue to penetrate in newer launch markets and also in our core markets of the EU, US, and Japan.

And then finally, the Phase III IMvoke010 studies in adjuvant head and neck are expected in H2. This is a very significant patient population in a place where we have the opportunity to have a first mover advantage.

And then as you all know, the Phase III SKYSCRAPER-1 data, Tecentriq in combination with tiragolumab in first-line non-small cell, has passed its interim. It's continuing to final analysis, and we are expecting that trial to read out in Q3, but again it is event-driven.

Switching now into benign, Hemlibra remains the global standard-of-care. We've reached 37% of patient share in our largest markets. We now have 20,000 patients treated globally and we continue to penetrate across all approved patient segments.

The -- we're recently approved a label expansion to moderate patients, which is fantastic for those patients to have another option. We expect further patient share gains in the non-inhibitor population and we also have the SPARK gene therapy pivotal Phase III to be initiated this year.

Moving on Crovalimab. So, Thomas had mentioned this as well. We have now seen 3 positive Phase III trial results in PNH, and we'll be expanding into additional diseases. The COMMODORE 1/2 studies in both switch patients and naive patients will be presented at EHA here shortly. There will -- that will be accompanied by a live -- or I'm sorry, by a virtual IR event.

We also see the Phase III China COMMODORE 3 studies, which we had already reported showed a positive result. That has been filed in China with breakthrough designation and priority review. We expect that to be Roche's first China-first approval, and that is expected later this year and global filing plans -- global filing is planned for half one of this year.

As you can see, we have quite an extensive development program for Crovalimab in a number of complement-mediated diseases, including aHUS, sickle-cell, and lupus nephritis, which will be initiated shortly.

For immunology, we saw about a 15% decline in quarter 1. This is largely driven by COVID-19 sales and the loss of Esbriet exclusivity. Excitingly here, we see the auto-injector approval and a Phase III food allergy readout expected in 2003. This is a wonderful continuation of the Xolair story.

Xolair is a little bit the Energizer Bunny in some ways, it's a molecule that just keeps going on. We do actually now believe that we will not see biosimilar competition for Xolair until 2025 and it continues to be a market leader in asthma and show very strong growth in CSU.

In other news, in immunology, we have the Phase III Regency Gazyva trial in lupus nephritis fully recruited with the readout expected next year. Many of you will know that I'm actually personally very excited about the lupus nephritis trials based on the strength of the NOBILITY trial, the Phase II that read out some years ago.

This is an area of extremely high unmet need, where there's a strong scientific rationale for B-cell therapy and could represent a very significant market opportunity for Gazyva. And also for Gazyva, we have initiated a Phase III in pediatric nephrotic syndrome.

Switching over to multiple sclerosis. Ocrevus remains the standard of care, reaching 22% market share. We have reached a milestone of 300,000 patients treated globally. We have the number one treatment in both total share and new to brand share in both the US and the EU5. We have a much higher retention rate than we're seeing with other medicines.

We will see the Phase III results for this every six-month at-home subcutaneous Ocrevus device expected this year, and we are also getting very close to completing enrollment for the high dose study for Ocrevus.

We continue to expect further market share gains and additional growth with Ocrevus. That subcu data will allow us to tap into an entirely new part of the market for multiple sclerosis, and we could drive considerable growth for Ocrevus going forward.

We also have the first Phase II data for fenebrutinib reading out in RMS. This is the FENopta biomarker data actually that will be coming out this year. This is the first data set for fenebrutinib in MS, but it is sort of important to note that I think this is actually a molecule that we haven't necessarily talked a lot about but that is actually pretty exciting. This is a highly selective non-covalent BTK molecule.

We have two Phase III trials -- or three Phase III trials ongoing in MS. We would expect the PPMS trial to read out this year. And we are very much looking forward to seeing the results here. This is a drug that has been studied in a number of different indications.

We have about -- we have safety data in 2,000 patients across multiple indications. 1,000 of those patients are in MS, and we have not seen any cases of confirmed hides law in fenebrutinib to-date. So, still much more to see here, and this is going to be one to watch.

Moving on to spinal muscular atrophy, another pillar of our industry-leading neuroscience set of products. Evrysdi is the market leader today in the U.S. and Japan. We are increasingly penetrating in the treatment-naive patient segment. We have reached 8,500 patients treated worldwide with a retention rate of about 90% of patients globally in the first 12 months of treatment, which is very significant.

In the US, we see that growth driven by both switch and naive patient starts, including patients under two months of age. And in the ex-US, we're seeing continued strong growth in share gains in all major markets.

I think the other thing that's actually interesting to note here is that we've talked previously about the need to penetrate in the adult segment for Evrysdi. And we are now seeing significant penetration happening in the adult segment, which is -- globally, which is actually a really great advance for these patients.

We'll talk a little bit more about the SUNFISH data on the next slide, but that is data we recently presented at MDA. And the outlook for 2023, we continue to see continued growth in market share gains for SMA, and in the EU, we are awaiting label expansion from the RAINBOWFISH data for the under two-month old babies.

The Evrysdi four-year data, again, these were presented at MDA 2023. These are very solid data. And you can see here that the increase in motor function scores achieved in that first year are sustained after four years compared to natural history, where you would normally expect to see a decline in motor function for these patients.

I think what's particularly impressive about the SUNFISH data is that this was a very diverse population. These patients were between two and 25 years old. They had considerably more advanced disease. The fact that more than 65% of them had scoliosis, I think, gives you a sense of the severity of the patients enrolled in this trial and, frankly, just reflects a much more real-world population than we typically see in clinical trials.

So, this is a great indication of what your average treater is going to see in their own patient population. You can see very good functional score maintenance. But also very encouragingly, our AE rates decreased over this 48-month period with both AEs and SAEs reflective of the underlying disease.

Treatment adherence was at 99%, and there was no AE that led to withdrawal or discontinuation during this trial. So, again, I think another data set that really just continues to underscore that Evrysdi will continue to have a very important leadership place in SMA for many years to come.

And finally, ophthalmology. So, this very strong Vabysmo launch continues. We have hit double-digit market share in AMD and mid-single digit in DME. So, based on our February CLAIMS data, we see 12% market share for AMD and 5% in DME, and we see corresponding decreases in the competitive set.

We have strong uptake with switches primarily coming from EYLEA with use in naive patients further accelerating. We have over 860,000 vials shipped globally in the first 24 months of launch. This is up from, I think, 430 but, which is three months ago. So, you can really see the acceleration in adoption happening here. This is all demand-driven. And so I think you can really see the dual action, the drying and the durability story is really resonating with patients and physicians, and we're just seeing incredibly positive uptake and feedback from the entire community around Vabysmo.

We're going to talk in a minute about the positive Phase III results for Vabysmo in RVO, which we'll see at ANGIOGENESIS 2023. And then we have the Phase III post-hoc analysis in both AMD and DME, which indicates grade retinal drying for Vabysmo versus EYLEA, which was presented at ARVO.

So, again, I think just really underscoring this idea of drying in that dual action is really important and a very key thing that retinal specialists look for when they treat their patients.

For Vabysmo, we would expect see continued growth and market share gains in both AMD and DME while we pursue filing in RVO. And I think we have every reason to believe that Vabysmo will become a standard-of-care for patients who require IVT therapy.

It's also worth noting that we have seen positive Phase III data result -- we have seen positive Phase III results for Susvimo in both DME and diabetic retinopathy. Both of those data sets were presented and we continue to work very diligently to make the improvements which will allow us to bring Susvimo back to patients in the US and restart our clinical trials and resume our filing activities.

In Vabysmo, we have positive results in RVO. And in particular, the improvement in macular leakage compared to EYLEA is impressive. Vabysmo achieved robust BCVA gains and reduction in CST across both studies.

At week 24, you can see that more patients achieve that absence of macular leakage, which is a very important clinical data point for treating physicians and these results are to be filed globally with regulatory authorities.

But I think the body of evidence around Vabysmo just continues to grow. It continues to improve. And it's worth noting that the RVO patient population represents about 15% of the $15 billion retinal market, so not an insignificantly sized opportunity that we will be pursuing.

And finally, the 2023 key late-stage news flow. So, Thomas covered much of this, and we talked about many of these things throughout the course of my presentation. So, I won't duplicate. Just a couple of things to maybe call out that we haven't spoken to precisely.

Thomas mentioned the DMD, the Phase III EMBARK study. This is this Rapta-9001 trial in combination or in partnership with Sarepta. We believe this to be approximately a $2 billion market and has the potential, I think, to be one of the most successful -- or the most successful gene therapy launch ex-US. These boys really have no other option. The data so far has been very compelling, and I think we're very much looking forward to being able to launch this drug.

And then also the TNK's TIMELESS study will read out later this year, and this allows us to actually potentially expand the window for stroke patients up to 24 hours, which again just dramatically increases the number of patients that you might be able -- you might be able to successfully treat for stroke and would potentially mean that there's a lot less disability for these patients over time.

So, many more line extensions to read out, some exciting new NMEs to read out, and overall another very busy year for Roche in Pharma.

And so with that, Matt, I will pass it over to you to -- for an overview of the Diagnostics division.

[Matthew Sause, CEO, Roche Diagnostics]

Thanks very much, Teresa. So, good morning, good afternoon, everyone. It's my pleasure to present the Q1 2023 Diagnostics division sales results. So, with sales of CHF3.6 billion, the Diagnostics division declined by 28% compared to Q1 2022. And this decline is entirely driven by the expected decrease of COVID-19 testing sales by minus CHF1.6 billion. When excluding COVID-19 testing sales, our base business growth is plus four percentage points.

So, if you look at the sales both of our COVID-19 business as well as our base business from Q1 of 2021 through Q1 of 2023, what you see is in Q1 of 2023, COVID-19 testing sales were at CHF300 million.

Now, this is down 85% versus Q1 of 2022 when COVID-19 test sales and COVID-19-related business peaked as a result of the Omicron wave. As I said, in Q1 base business growth was plus 4%, excluding COVID-19 testing sales.

Now, when taking into consideration all sales impacted by COVID-19 testing, which we call COVID-19-related business, the growth in Q1 2023 would have been actually three percentage points higher.

For our upcoming quarters in 2023, we are expecting a mid- to high single-digit growth of our base business, while our COVID-19 testing sales will continue to decline significantly along with the incidence of COVID-19.

So, if we take a step back and look at this by product category, sales in our core lab business increased by 7%. The base business, excluding custom biotech, which is related to COVID, grew at plus 10% with very strong momentum driven by our immunodiagnostics and clinical chemistry.

Our molecular lab had a decline of 48%, and this is due to lower COVID-19 PCR-based testing sales. However, excluding the COVID-19-related business, molecular lab is growing at plus 7%. And this is due to strong growth in virology-based business at plus 12%, our blood screening franchise at plus 15%, and our cervical cancer testing business at plus 22%.

Now, looking at point-of-care, you see a decline of 72%, and this is driven entirely by lower COVID-19 rapid antigen and COVID-19 molecular point-of-care testing sales. The base business grew at plus 13%, and this is due to a high incidence of seasonal respiratory virus testing driving LEAD sales, particularly in the US.

Our Diabetes Care business had a 5% decline, and this is driven really by the continuous market shift from traditional blood glucose monitoring to continuous blood glucose monitoring, or CGM. Sales in our pathology lab grew strongly at plus 7%, and this is mainly driven by advanced staining immunohistochemistry reagent growth and companion diagnostics.

So, if we look across our different geographic regions, what you see is the impact of lower COVID-19 testing sales across all of our regions. However, excluding the COVID-19-related business, we see strong base business growth across all of our regions.

In North America, the divisional base business excluding COVID-19-related business grew at plus 6% and this is driven by all of our customer areas. In EMEA, the base business excluding COVID-19-related business grew at plus 3%, and this is really driven very much by our core lab business.

In Asia-Pacific, sales grew at 11% when excluding the COVID-19-related business, again due to strong growth in the core lab. And in Latin America, sales grew by plus 21%, again excluding all COVID related business and again driven by the core lab business.

So, when you really take a step back and look at what's driving the growth of the Diagnostics business, a big part of it is the expansion of our installed base. And so what you see here is the growth of some of our different product lines in 2022. And I'll take you through a few highlights.

So, our newer core lab systems, the cobas Pro, which is higher volume, and we launched this in 2018 -- December 2018; and the cobas Pure, which is mid to low volume, which we launched in April of 2021, these are growing at 122%. You see this heavily reflected in the growth of our core lab business.

In the molecular lab, our cobas 5800, 6800, and 8800, which are fully automated systems for low to high throughput testing in molecular diagnostics grew, by 33% in 2022. And this will be an engine for future growth and menu expansion. I call out that this was 30% growth in the third year of the pandemic, which shows really resilient demand for these products.

I would also like to point out the great growth of cobas Liat. This is our molecular point-of-care system, which grew at 24% in 2022.

So, moving to the pathology lab. You see our digital pathology systems, the DP200 and DP600 slide scanners grew at 29%. And our workhorse instruments, the HE600 for primary staining as well as our Benchmark ULTRA and ULTRAPLUS for immunohistochemistry analysis grew at a healthy plus 12% and plus 10%, respectively. So, this expansion in our installed base is really going to ensure future growth for reagents in the years to come.

So, while it's important to grow your installed base, it's also important that you continue to have a healthy and innovative reagent portfolio. And so I'm going to focus here a little bit on our core lab menu. And with over 240 assays, we have the broadest clinical chemistry immunoassay menu, what we call serum work area, in the industry.

And every year, we are launching additional indications and tests for our already industry-leading menu in core lab. For example, as an average over the last three years, we achieved on average six FDA approvals and 11 CE Marks per year.

And you saw it in the slide from Thomas, and you can -- you also see it here across the three different years that we call out, a growth in our hepatitis portfolio. And having a full comprehensive hepatitis portfolio is really critical because customers in the infectious disease segment of immunoassay really want to see that full menu, and that makes us even more competitive in this growing market segment.

But we're also investing in line extensions for some of our existing products such as NT-proBNP, where we recently added a claim extension for heart failure based on our STRONG HF trial.

And you also can see in the left side middle column at the bottom our Alzheimer's cerebral spinal fluid biomarker, which received FDA approval last year in 2022. This biomarker had actually previously received FDA breakthrough designation. And in the coming years, we're going to continue to grow the neuroscience portfolio because we see this as an important area to innovate for patients, but also an important market section going forward.

So, now I'd like to turn to our digital solutions. And we're really committed to building digital solutions for our laboratory customers that enable more efficient laboratory management but also clinical decision support for physicians.

And if you look on the far left, you see an example of a laboratory, all of our laboratory customers are potential customers for our digital solutions. And this is where we can add additional value to customers and also deepen our relationships.

In addition to revenue that these digital solutions will deliver, they will also make us stickier and have higher customer retention in the labs and hospitals that adopt our solutions.

Like I said, every one of our customers is a potential customer for our digital solutions, and they can access our digital applications for improved laboratory efficiency as well as clinical insights through our navify portal, if they're an existing customer; or if they're not an existing customer through our navify Marketplace.

And you can see on the far right, some of those solutions that will add additional operational efficiencies, such as navify Inventory or navify Analytics. This helps our customers run their lab in a more efficient manner to achieve better economies of scale, better control of their inventory.

But I'd also like to call out the launch of our new navify Algorithm Suite. This will help physicians by delivering clinical decision support. We will continue to populate this with clinically validated algorithms to aid and improve clinical decision-making in the future.

And so we really talked a little bit about some of the high medical value, like, for example, with Alzheimer's, and I want to call out that it's important to have, yes, the broadest menu in the industry, but it's really important that we deliver innovative medical testing solutions that change the standard-of-care.

And so here, I'd like to focus a little bit on our Ventana FOLR1 RxDx assay, which is the first FDA-approved companion diagnostic test for ovarian cancer. Ovarian cancer is a terrible disease affecting about 322,000 women each year. And I'm sure most of us all know someone who has been diagnosed with ovarian cancer. It's got a high disease burden, and the severity really drives the need for new therapeutic options.

Our FOLR1 immunohistochemistry test has been codeveloped with a new drug for second-line treatment in ovarian cancer. It recently received FDA approval as the first companion diagnostic test, enabling pathologists to identify patients who may be eligible for the new therapy, and this really highlights Roche's commitment to have the broadest menu, but again, importantly, high medical value test that deliver critical answers for patients.

So, you'll see here the list of launches that we have in 2023 across instruments and automation, new tests, as well as new digital solutions. We're off to a good start, and I look forward to updating you on our progress in future calls.

And so with that, I'll hand it over to Alan.

[Alan Hippe, Chief Financial and Information Officer]

Thanks Matt. Yes, I think Teresa, Thomas, and Matt explained the sales development already. So, I don't want to be redundant either. Let's jump really directly to slide 45 because I want to certainly talk about the currency impact as it's a sales call.

So, what you see on slide 45 is, on one hand, the sales development over the region on the Pharma side. And I think really Pharma really developed very, very well. as explained. And then you see the decline in the Dia division. I think Matt pointed out, I think underlying the business has grown 4%, but even a little bit more, if you look at the COVID-related sales. So, really underlying really great momentum, which leads us to the minus 3% sales decline for group in concentrates.

If you then move over on the right-hand side to the Swiss franc, then you see really a minus 7%. So, evidently, we lose an additional minus four percentage points due to currency impact. And I would like to explain now this minus four percentage points on Slide 46 or 1 more. And what you see here is really basically every currency has weakened against the Swiss franc in that period.

And you see really, on one hand, the euro weakened, you see really APAC here, the renminbi plays a major role, and then I think you see the Japanese yen, which has also contributed to the development quite significantly.

So, now the question is a little bit, okay, what's going to happen further? And you know these tables. So, let me start on the left-hand side. And there, you see the dark blue bars and they once again highlight what has happened with the US dollar and the euro against the Swiss franc in the first quarter. And what you see is, as mentioned, I think really roughly a minus 4% triggered by the euro. You see a pretty stable situation Swiss franc-US dollar.

And then I think when you move over to the right-hand side, you see our projection for half year and for full year. And how that projection is done. It's basically assuming that all currency rates at the end of March 2023 remains stable until the end of the year, which is a pretty unlikely scenario, but I think directionally perhaps at least a certain level of orientation.

And you see for half year, what we expect if we do this and if you model it, like I explained, you see sales a minus five percentage points, the core operating profit of minus five percentage points and on core EPS, a minus six percentage points.

When you then go for the full year projection, which is very hypothetical admittedly, but nevertheless, you see really in sales of minus four percentage points, incorporating profit at minus four percentage points and in core EPS, minus five percentage points.

Good, with that, I think as Thomas said, we confirm the guidance for the full year 2023. And that certainly includes the roughly CHF5 billion loss in COVID sales and it also includes the roughly €1.6 billion loss in AH&R due to biosimilar competition.

In addition, today, I would like to promote an event from Investor Relations about ESG. And this time, we will dig deeper into environmental sustainability, certainly the major lever for Roche when it comes to sustainability, its access to medicines and to tests.

Nevertheless, I think, certainly, we take care of the environment as well, and we would like to demonstrate to you what we do in these areas because we have quite something to provide.

Good. With that, I think we're all happy to receive your questions. Thanks.

[Bruno Eschli, Head, IR]

Thanks, Allan. And with that, we will open here the Q&A session. We have 10 people in the row and 40 minutes left. So, I would recommend that each stick to 2 questions, and I would also recommend that we try to get the answers within four minutes then done.

So, first two questions would come from Matthew Weston from Credit Suisse. Matthew, please.

[Matthew Weston, Credit Suisse]

Thank you very much. Hopefully, you can hear me. Two questions please. The first one, a simple one. Obviously, the ramp-up of the Vabysmo has been a very positive surprise to many was it a positive surprise to you? Can you make enough? Is there a risk that supply shortages become a challenge later in the year?

And then Thomas, a much bigger strategic question for you in your role as CEO. You flagged the changes to the exec. You also, as Roche, spend a great deal on internal R&D. You've basically added more cheerleaders for innovation to your management committee. How can you be sure that you're getting value for money for that R&D? Do you think M&A has a more significant role at Roche in the coming years? And if so, what therapeutic areas are interesting?

[Thomas Schinecker, CEO, Roche Group]

You want to take the quick one?

[Teresa Graham, CEO, Roche Pharmaceuticals]

No, we do not expect any problems with supply.

[Matthew Weston, Credit Suisse]

Lots of time for the long one.

[Thomas Schinecker, CEO, Roche Group]

Yes, lots of time for the long one. So, let me start with M&A. We are always open to M&A and we always check all the opportunities that are on the market. Now, they have to make sense from a scientific perspective. They have to make sense from a financial perspective. And so we have to have the discipline to make sure that we only buy things that make sense. And with that, I don't think our strategy towards M&A has fundamentally changed. As in the past, we are always looking at all of the opportunities.

Now, the early stage opportunities, there may be more opportunities now simply because of the funding issues in the biotech sector. I think in the late-stage opportunities, there are not that many and it's much more competitive. So, I would say we don't see the same kind of dynamic as we see in the early stage phases.

Now, regarding R&D. I really -- and I showed it in one of the slides, if you look at end of 2015 or even 2016, until now we've launched 19 new medicines, and these medicines will carry us for the next few years. It's clear that as an innovative company, you have to keep innovating.

And we did have with Levi Garraway already ahead of Pharma Development and Chief Medical Officer. The only difference now is that they all sit on a Corporate Executive Committee. And I think it's actually a strength because we have three very good leaders, very strong scientific medical minds that can also challenge each other and make sure that we make sure that as an organization, we continue to stay at the forefront of innovation.

And that's also my goal that we look into our pipeline, we look at all the opportunities we have and to make sure that we accelerate our pipeline, what we have internally. And that's what we're going to focus on.

[Bruno Eschli, Head, IR]

Thanks Thomas. The next two questions would come from Luisa Hector from Berenberg. Luisa please.

[Luisa Hector, Berenberg]

Thank you, Bruno. I have a question -- a sort of more general question on the subcutaneous formulations, maybe we have a few questions within. But I'm trying to just understand the IP around those. So, maybe if we take the legacy subcutaneous offerings that you have, I know that there's some potential for IP to end soon.

So, how do you expect potential biosimilar competition on those? How do you think subcutaneous formulations will be treated under IRA? And specifically on Tecentriq, what kind of opportunity do you see for the subcutaneous?

And then if I may able to have another one, just maybe a quick comment on the COPD trial because you have the Phase III that started. Just anything on profile and how you have learned from competitor studies in the past? Thank you.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Okay. So, let's start with the potential for subcu with Tecentriq. So, we actually think that the subcu for Tecentriq has the opportunity to be quite protective for Tecentriq, right? It will be the first PD-L1 that has a subcu formulation. I think in those places where Tecentriq is currently being used, it's a great convenience for patients that will allow -- it will allow providers and health care systems to actually treat more patients than they have been able to. So, I think Tecentriq, the potential will somewhat, what's the word I'm looking for, protective may also have the opportunity to help us grow slightly with Tecentriq.

In terms of the IP implications of our subcu formulations, I think that isn't something that we would typically comment on publicly other than to say that we will always continue to look for ways to protect the IP of our programs. And it is possible that the subcu formulations may help extend that IP.

When it comes to biosimilar competition with some of the more, I would say, innovative -- with some of the more innovative devices that we are looking at, I think it clearly would provide some protection against biosimilar competition.

I think that's particularly evident in things like Perjeta where -- or Phesgo, where we think des and the strong conversion that we're seeing to Phesgo will actually help mitigate some of the biosimilar impact for Perjeta.

In terms of IRA, I think there's a lot that we still don't yet know about how the IRA will be implemented. And so it's probably too soon to really comment on that. In terms of the astegolimab profile in COPD, so I think everybody knows that this is an anti-SD2 ligand for IL-33. This is increased in COPD.

Unlike our other IL-33 competitors in COPD, we actually work against the receptor. And so there's a possibility that we would actually have a different mechanistic advantage. Again, that will just have to play out in the trials.

We have -- we do have a Phase III that has been started. I think the big differentiation piece for us with astegolimab is really that our trial, we believe, has the potential to help patients who are both eosinophilic high as well as eosinophilic low. The data that we've seen readout so far has really only been in the ESO high patient populations. But the ESO low patients actually represent the vast majority of COPD patients. with about 80% of COPD patients being ESO low.

Our trial also looks at smokers and as well -- current smokers as well as former smokers which, again, is a little bit of a subtlety in the patient population that we're looking at in these trials. And it's probably worth saying that this -- the move to the Phase III is for [Indiscernible] and COPD, these are gated trials, so they will be gated on an analysis to make sure that we're seeing the benefit that we want to see before we proceed.

[Bruno Eschli, Head, IR]

Very good. So, I think we are still on time. So, next one in a row is Sachin Jain from Bank of America. Sachin please.

[Sachin Jain, Bank of America]

Can you hear me?

[Bruno Eschli, Head, IR]

Yes.

[Sachin Jain, Bank of America]

Thanks. A couple of questions. So firstly, on TIGIT, I wonder what visibility you have on the second interim. Does that give you -- or retain your confidence in the final OS or should we be more muted in our expectations here?

Just note some discussion seems to be on further Phase III starts for the molecule, so just wondering what's giving you confidence there? Is it the interim? Is it SKY-8 or something else?

And then second, just a broad question for you, Thomas. You've done a lot of road shows in your transition period and there's a lot of investor debate on midterm growth outlook.

So, I wonder if you can give us any color you're seeing you -- I guess, been through business planning process on sustainability of the underlying mid-single-digit growth you're seeing this year through to 2027 and thoughts post given the young portfolio you referenced. Just sort of interested how you're seeing growth outlook versus what the consensus currently models. Thanks.

[Thomas Schinecker, CEO, Roche Group]

Sure. Can you take TIGIT first and then I take the growth outlook.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Okay, great. So, I think we continue to be really interested in the TIGIT pathway. We continue to think that this has a lot of mechanistic in biologic rationale and could still potentially be something that helps redefine what cancer immunotherapy treatment looks like going forward.

So, I think in addition to the trials that we're currently running, we do continue to signal seek in different combinations and in different tumor types. You will likely see us announce additional trials and additional Phase III starts given the evolving data that we're seeing.

In terms of Sky 1, I can just reiterate that we passed the second interim. We are continuing to find an analysis. We expect that final analysis to be in Q3, but it is an event-driven trial. And there are several other data sets that we'll read out later this year as well.

So, I think the story on TIGIT is far from fully written. I think there's a lot we still don't know, and we will need to wait for the clinical trial data to read out. But again, I don't think that there's anything that we've seen thus far that would lead us to believe that this doesn't potentially have a meaningful role to play in the treatment of cancer going forward.

[Thomas Schinecker, CEO, Roche Group]

Yes. And yes, let me answer that question in two parts. First, the next couple of years, and I've mentioned that we have launched 19 new medicines since the end of 2015. And these medicines will carry us for the next couple of years. And most of those medicines, I think there are only two that have patent expiry only at the very end of this decade.

At the same time, we know we need to deliver more medicines. So, already this year, we are going to most likely launch three new medicines: one with Columvi, so Glofitamab, the CD20, CD3 bispecific antibody; then Crovalimab in PNH, which we're taking into also other indications; and then the gene therapy for the gene muscular dystrophy.

But beyond that, I think we do have exciting things in the pipeline. If you look at [Indiscernible], right, as we're taking it into the earlier lines. And looking at that data, we are hopeful that this pathway is relevant in populations that have not been so heavily treated.

Tiragolumab as mentioned by Teresa, everyone's focusing on one trial. We're starting multiple additional trials in Phase III. So, we have many additional opportunities with Tiragolumab.

Teresa mentioned Gazyva in lupus nephritis, again, a great opportunity. And I could continue -- again, I think the one that was mentioned was fenebrutinib BTK inhibitor, which is very differentiated because it doesn't bind covalently and it's very selective and doesn't have the side effects that some of the other pharma companies have been reporting. PD-1 [indiscernible] than the key KRAS.

So, I think we have many shots at goal. And at the same time, M&A was mentioned. So, we're always open to outside opportunities as well. I mean, that's just part of how we need to do our business.

So, we know every single medicine that's going to deliver the growth in the second -- or let's say, in the last couple of years of this decade, but we have many opportunities. And just looking at the track record of Roche delivering two to three medicines every year, I think you can believe and trust in Roche that we will continue to innovate to stay in the forefront of innovation. And I can also say, it's my biggest focus in this company, and that's where I've spent all my time in the last couple of months.

[Sachin Jain, Bank of America]

Thank you.

[Bruno Eschli, Head, IR]

Sachin, did we answer all your questions, I think you also had a question on SKY-8? SKY-8, we will provide an update towards the end of the year.

[Sachin Jain, Bank of America]

Thank you.

[Bruno Eschli, Head, IR]

Yes. Okay. Then we move on. And next one would be Michael Leuchten from UBS. Michael, two questions please.

[Michael Leuchten, UBS]

Thank you, Bruno. Just one really for Thomas. So, in your fact finding in the last few months, just wondering how you ran the filter over the pipeline. Is it just number of products with a probability assessment? Is it modalities? Is it -- like what's the framework you applied to it?

And the reason I'm asking, you have R&D now reporting straight into you, so I'm assuming that this sort of your initiative on how you would assess the pipeline in that function that is not reporting to you?

[Thomas Schinecker, CEO, Roche Group]

Yes. So, I spent a lot of time in research and development both in the reds, but also in late stage. Obviously, we have 83 NMEs with, I think, 150 different projects. So, quantity is not everything. It's also about quality, making sure that we have the right quality of our pipeline. PTS is obviously something that's important, being first-in-class, best-in-class, also where we bring in opportunities from the outside, making sure that those have first-in-class and best-in-class opportunities.

Now, when it comes to modalities, as a company, we've always been open to look into other types of technologies but also in terms of other disease areas. If you look back in the past, we were very oncology-heavy. But again, if you look at the pie, you see that we've gone into new areas such as neuroscience, Hemophilia A, ophthalmology where we were not present in many parts of the world.

So, in the past, we've said we follow the science, we make sure we have best-in-class molecules, and that's what we will continue to do. And that's going to be my focus and the focus of the team, to constantly up the game when it comes to our pipeline and keep raising the bar. And with that, I think the quality of the pipeline and quantity both make a difference.

[Bruno Eschli, Head, IR]

Okay. Next question would come from Richard Parkes, Exane. Richard please.

[Richard Parkes, Exane]

Hi, thanks for taking my questions. Firstly, I just wondered if you could just discuss your confidence that the Phase I data for Phesgo on-body injectors sufficient for approval. It looks like that would position you to launch obviously well ahead of expected biosimilars, and it sounds like it could give good protection to the franchise.

So, could you just discuss your optimism on that and how much of the franchise you think could be protected once biosimilars do become available for Phesgo and the on-body?

Then second question was just on backfilling of the late-stage pipeline. You've confirmed, I think, three programs to move to Phase III in terms of NMEs, the factor B, the Hemophilia, and the ST2 in COPD. I just wondered if you could talk about what other NMEs you could see move to Phase III over the next 12 months or so?

I've got the sense the multi myeloma bispecific might be ready to accelerate going forward. So, I just wondered if you will be willing to put any kind of numbers around that in terms of NMEs moving to Phase III? Thanks.

[Teresa Graham, CEO, Roche Pharmaceuticals]

So, maybe I'll take the first one and you can take this one? Okay. So, confidence in the Phase I being sufficient, I think we are intent is to file the trial that we have currently ongoing. That data is expected midyear.

Again, I think it's important to note that, that would enable treatment at home. It's significant advance for patients so I think we would be excited to bring that to the market. And I do believe it would provide additional franchise protection from biosimilar entry.

[Thomas Schinecker, CEO, Roche Group]

Yes. So, from my side, I've mentioned a number of different NMEs that we have a lot of hope in. I think tiragolumab, even also beyond the SKYSCRAPER-1 study, but also Gazyva in lupus nephritis, [indiscernible] in PD-1 LAG-3, so the bispecific PD-1 LAG-3 antibody. So, we have a number of new potential medicines where we will continue to start Phase III studies to make sure that we have new medicines also coming to the market.

[Teresa Graham, CEO, Roche Pharmaceuticals]

And just think about things that we're accelerating quickly out of the reds, I think the ISO Factor B in IGA and --

[Thomas Schinecker, CEO, Roche Group]

That was mentioned.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Another one that was rapidly accelerated, the IL-6 in UME was another one that was rapidly accelerated. So, I think we're always looking for opportunities to bring things forward as quickly as possible.

[Bruno Eschli, Head, IR]

Thank you. Our next question would come from Richard Vosser. Richard, please?

[Richard Vosser, JPMorgan]

Thanks Bruno. Thanks guys. So, first question on Tecentriq. Could you maybe talk about the competitive environment and how you see that developing, particularly in adjuvant lung cancer and how you see the growth outlook for the product there?

And then maybe a similar question on Diagnostics. You sort of highlighted the 4% growth, but confidence to getting to the mid to high single-digit in the second half. Maybe you could talk about what was dragging on the demand in the first quarter or leading to lower growth.

And maybe talk about what you're seeing in the market, whether you think growth will normalize after this year back to historical levels? Or you still see a boost on growth there? And maybe linked, what sort of benefit from Alzheimer's testing do you think you could have in Diagnostics in 2023 and beyond? Thanks.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Okay. So, starting with Tecentriq. So, I think that the adjuvant lung space is actually really interesting right now. So, I think what's interesting with being sort of a first mover in the adjuvant lung space, again we've seen diagnostic testing rates now approaching 90%. We see many patients actually being put into the treatment funnel, which is fantastic.

This is a place we're having first-mover advantage, I think it has been really useful and helpful to Tecentriq. We have a very intuitive label based on what our clinical data is and I think we have some really good installed experience within the adjuvant lung space.

What's been an interesting development over the past couple of weeks is sort of the perioperative space. So, I think at AACR last week, we had two of the competitor drugs actually share their data in the perioperative space. And I think what was interesting is that right now, with the data cuts that we're seeing, we're actually not really seeing appreciable difference in treatment outcomes for perioperative treatment relative to just treatment in the adjuvant setting.

And so what this will actually mean for the treatment of patients, does perioperative become a standard of care or not? Or does the fact that we have we have lung -- we have that first-mover advantage in adjuvant lung. I think that actually sets Tecentriq up quite well. While our own perioperative study, it was pushed out into 2024.

I think the thing that might work in our favor actually is you may just need to see more time on therapy in order to see the difference between perioperative treatment and adjuvant treatment. And so it might actually help us when we read out our trial because we'll have patients who have been on treatment much, much longer.

But we do expect Tecentriq to grow double-digits in 2023, and a good chunk of that growth will be driven by adjuvant lung. It's important to remember that adjuvant lung is just in the process of launching in many parts of the world and gaining reimbursement.

So, there's still a lot of new patients who could benefit from adjuvant lung. We also have obviously just read out the IMbrave050 data in adjuvant HCC. We have the adjuvant head and neck trial in IMvoke010 coming. So, there's a lot of additional adjuvant data coming for Tecentriq and potentially some very large indications and, again, in at least two where we know we'll have first mover adjuvant HCC and adjuvant head and neck.

[Matthew Sause, CEO, Roche Diagnostics]

Thanks Teresa. So, good question on the diagnostics growth. So, like I mentioned, we saw plus 4% growth of our base business. And you mentioned a drag. As I mentioned, that is what we call COVID-related business. And the example I gave which I'll just reiterate, is our custom biotech business, where we manufacture many of the components for COVID testing for other companies.

Now, as that testing goes down, so does that business. And so we estimated in the first quarter that constituted approximately three percentage points of growth. So, to answer your question, that's how we see the drag on Q1.

We know that COVID testing more or less peaked in the early part of last year, so we expect this to decline over the course of the year. And as far as what we see going forward, I would just reiterate what we've guided for, which is mid to high single-digit growth of the Diagnostics business.

Your second part of your question around Alzheimer's, this is really going to depend on a couple of things. which is some of the adoption of the disease-modifying therapies, which you've seen some promising results from a variety of companies.

And their adoption and reimbursement is really going to lead to some of the increased need for these diagnostic modalities. So, while we're optimistic about the potential for this to change medicine, I don't think we have a specific guidance on it at the moment. Does that answer your question?

[Bruno Eschli, Head, IR]

I hope so. Then we move on. Next question will come from Tim Anderson from Wolfe Research. Tim, please.

[Tim Anderson, Wolfe Research]

Thank you. On Vabysmo, you say switches are coming primarily from EYLEA. But wouldn't that be fully expected given that that's the product with dominant market share? Or is there some nuance I'm missing to that comment. And can you say what the market share is in naive patients?

And then on TIGIT, if I could to just go back to SKYSCRAPER-08, clintrials.gov recently amended to say the primary completion date was more than two months ago. That suggests some milestone has been crossed. You're saying we're going to get data later this year. To me, it raises the possibility that PFS didn't can hit and it's still ongoing for OS mirroring what you saw with SKY-01. Is that the right way to look at it?

[Teresa Graham, CEO, Roche Pharmaceuticals]

Yes. So, maybe start with SKY-08, I would say that, that isn't the assumption that I would draw and the -- as Bruno stated, the data will be shared later in the year. In terms of the switches from EYLEA, clearly EYLEA has a dominant market share and so clearly we would expect from a numbers perspective to just see more patients coming over from EYLEA.

But again, I think it speaks very highly for the clinical acceptance of EYLEA that we are seeing a move much more into naive market share. And I am actually trying to remember actually what the naive share is. Have we disclosed that yet?

[Bruno Eschli, Head, IR]

We've not really disclosed that. We've been communicating 70% to 80% of switches from EYLEA depending on the indication and then 50% to 20% for Lucentis depending on indications. The remainder is basically naive patients, and they have been keeping -- increasing over the last few quarters.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Exactly. So, I think this is 1 of those things that we'll continue to see evolve over time. But it is when patients -- or it is when physicians start seeing the benefit in their switch patients and they start moving in mass to naive patients that we will really start to see the acceleration take off. And I think that's the inflection point that we're quickly getting to.

[Thomas Schinecker, CEO, Roche Group]

Yes. And let me just add one thing on SKYSCRAPER-08. So, this is a China-only study comparing to chemotherapy, which now is no longer the standard-of-care. And so I think it's going to be important to wait for the also SKYSCRAPER-07 readout, which is going to compare to immunotherapy.

[Tim Anderson, Wolfe Research]

Thank you.

[Bruno Eschli, Head, IR]

And we go on. The next two questions would go to Mark Purcell from Morgan Stanley.

[Mark Purcell, Morgan Stanley]

Yes, thanks very much Bruno. I hope to be can hear me.

[Bruno Eschli, Head, IR]

Yes.

[Mark Purcell, Morgan Stanley]

Two clarifications, but then just one initial question. On Gazyva, I think you've said this could be bigger in immunology compared to oncology. In oncology at the moment, it's annualizing sales of over CHF100 million. So, I wonder if you could sort of help us understand that ambition and so potentially in lupus-based on the Phase IIb data that you described.

And then two clarifications on TIGIT, I guess some of the data you've seen that we haven't seen a combined TIGIT with chemotherapy whether that's SKY-06 or SKY-08 in combination with Alecensa so triple combination triplet therapy. So, is there something mechanistically you can help us understand that chemotherapy actually adds the durability you can achieve with TIGIT in terms of resistance pathways.

And then secondly, just going back to Richard's question on Tecentriq in IO and Tecentriq in the adjuvant non-small cell lung cancer setting. Could you help us understand the share that IO drugs have in adjuvant non-small cell lung cancer and specifically what Tecentriq's share is of new patient starts in adjuvant non-small cell lung cancer, just so we can understand the dynamics going on there. Thank you.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Yes. Great. So, Gazyva, I think, could be easily $1 billion-plus in immunology if we get lupus nephritis, if we get SLE, if we get pediatric nephrotic syndrome. These are potentially very large indications and ones where today, often they're undertreated because they're just -- other than steroids and other things, there's just -- there's not a significant amount of treatment options available to these patients.

So, once you actually get something that's available that we know is efficacious and safe and available to patients, I think you can oftentimes see these immunological markets actually become bigger than we had originally thought. So, I easily think that if Gazyva hits in these indications, this could be over $1 billion just in immunology.

In terms of TIGIT with the chemo combos, triplets, does this add to durability? I don't think that we believe that it's a durability play. I think this is all about trying to get to the right level of efficaciousness given the particular treatment setting. And I think that does become important for example, in China, that was the treatment setting.

IOs were not really widely available. So we chose to -- at that time, so we chose to combine with chemo. And in terms of Tecentriq, market shares in adjuvant, I don't believe that we've disclosed those previously.

[Mark Purcell, Morgan Stanley]

Okay. Thank you.

[Bruno Eschli, Head, IR]

Okay. The next two questions would come from Emily Field from Barclays.

[Emily Field, Barclays]

Hi, thanks for taking my questions. One on Hemophilia. Your competitor launching the novel long-acting Factor VIII product has talked about potentially taking share from Hemlibra and prophylaxis down the road. Is that something that you're concerned about as that product is launching? And then has the next-generation bispecific enter the clinic yet? If so, when could we potentially see some updates there?

And then just going back to fenebrutinib, there's been a lot of focus on the toxicity profile of these assets. I think you mentioned -- when we could see the PPMS update, I believe that's head-to-head versus Ocrevus. But just the tox data emerge kind of late in pivotal trials for the competitors. So is it something about your molecule design that's giving you the confidence there or just the number of patients test that you mentioned? Thank you.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Yes. Great. So, for Hemlibra, I don't actually really see the long-acting factor being a significant threat to Hemlibra patients that are currently on treatment. We believe that this is primarily going to impact the factor class. But for patients who are on prophylactic treatment or for whom prophylactic treatment is appropriate and what they desire in their therapy choice, Hemlibra is the standard-of-care.

And so I would be very hard-pressed to see patients who are currently well maintained on Hemlibra actually switching to a long-acting factor. The majority of our patients are on at least every other week dosing already. So, it's not any more convenient.

And again, I just think the standard that Hemlibra has set for the annual bleed rate for the convenience, for the safety, it's just hard for me to imagine that people would switch off to the back to Factor VIII, I just really don't see that happening.

The next-generation bispecific is currently in Phase I. That's Phase I that's being run by Chugai. And we're obviously working closely with them on next steps.

And then there was one additional question -- fenebrutinib. I think there's a number of things that give us confidence about this molecule. One, I think mechanistically, it is different. It is more specific. It is on covalent so it has a different binding.

And then we also just do have a lot of patient experience across a number of different indications with fenebrutinib. So, we obviously we're monitoring the safety of this program very, very carefully. There's an IDMC that is very involved and really looking to make sure that these -- that we're taking safety extremely seriously in these trials, as we do with all of our trials,

But at this juncture, we have over 2,000 patients who have been treated with no cases of confirmed [Indiscernible] and 1,000 of those patients have been in MS. So, I think it's just the body of evidence that we have in fenebrutinib, along with the fact that it is just a fundamentally different molecule than our competitors have.

[Bruno Eschli, Head, IR]

And maybe to add one argument on the question whether people -- patients would switch over from Hemlibra to [indiscernible]. I think there's also, I think, unknown still in terms of the safety and whether such patients then would have a higher risk, for example, for developing -- so I think still some lags on the data.

Okay. Then we go on. Next one on the list would be Steve Scala from Cowen. Steve?

[Steve Scala, Cowen]

Thank you. Can you hear me?

[Bruno Eschli, Head, IR]

Yes.

[Steve Scala, Cowen]

So, I apologize, but I'm confused on the messaging around TIGIT. So, on SKY-08, you said that we would -- we should not assume PFS was missed. So, is there any other alternative then PFS was hit? Is there some other alternative that we should think about?

On -- similarly, the teragolumab plus Tecentriq plus chemo study, that completed in March. So, what should we think about that? Should we assume PFS hit there as well? And if Roche doesn't wish to answer, I'm just wondering what is the benefit to Roche to not being clear on this point? So, that's the first question.

Secondly, on Tecentriq and adjuvant, triple-negative breast cancer, why does Roche think this failed when Merck was successful? What was different about the study design, the patients enrolled or some other factor? Thank you.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Yes. So, in terms of the TIGIT question, I think the TIGIT space is intensely competitive. And so I think, first and foremost, we have a great excitement around TIGIT. We have a very robust clinical trial program that we're currently running. And we are also aware that it is an extremely competitive space. So, I think as we receive data that is meaningful and material, we will share it. When we have the SKY-01 result, we will share that, and you will be getting the results of the other trials later in the year.

In terms of the TNBC adjuvant failure, I think we're currently -- that decision to discontinue that trial was recently made, and we are actively looking at the results of that trial once it becomes in-house and is unblinded to us to determine why we believe that it may have failed and to see what we can learn from that trial that would help us continue to refine additional programs going forward. .

[Bruno Eschli, Head, IR]

We move on. Next one would be Andrew Baum from Citi. Andrew?

[Andrew Baum, Citi]

Yes, thank you. Just following on from the earlier question. And I know Roche historically hasn't done this, but other companies have. Given your greater confidence in the post 2026 outlook, would you ever consider giving a 0.28 or 0.29 revenue and earnings number to underpin that confidence to the Street?

And then second for Thomas. I'm sure part of your under the hood in pharma whilst you've been interim CEO has been getting some candid feedback from senior internal employees. We've seen the new leadership structure.

Whilst I'll acknowledge the internal discovery across areas outside oncology, as you highlighted, Roche failed to future proof its HER2 franchise, CLL missed out on BTK. ADCs, despite initial efforts haven't come through. So, could you share anything in terms of learnings different from the new management team that you intend to pursue narrowing therapeutic areas or what I'd be interested.

And then finally, if I could borrow from Michael Leuchten and his unused question, I owe Mike and I owe you. Could you just tell me what percentage of target events triggered the SKY-01 interim? That would be helpful. Thank you.

[Thomas Schinecker, CEO, Roche Group]

Yes, good. So, let me take the first two questions. As in the past, we've never really guided beyond the current year. What we already said is that the current portfolio of medicines will continue to carry our growth for the next few years.

Beyond that, I don't think we should guide. We don't -- we have not done that in the past, and I don't think we should do that in the future.

Now, you said that I looked under the hood, and that's correct. And it's definitely being the interim CEO for a couple of months was definitely helpful. And as with any company, there are always areas for improvements. And you've mentioned areas where we've missed. There are other areas where we've been quite successful.

If you look at Vabysmo, if you look at our CD20 CD3 bispecifics in blood cancers. If you look at Hemlibra, Evrysdi, et cetera. But you're right, there are also areas where we can improve and it's an area and a focus of mine that we continue to improve as an organization. And we continue to up our game when it comes to our pipeline even more in the future and to look at both quality and quantity, to look at speeds in the organization, making sure that we deliver ahead of the competition.

And that's something that is definitely ongoing and is not done in one or two months or 40 days being in the role. But it's definitely something where we can always improve and that's kind of also the mentality I want in the organization, constantly raising the bar. And if you jumped over the bar that you've laid, you need to raise the bar again. And again, and I think that's the mentality that I would like to have in the organization.

[Teresa Graham, CEO, Roche Pharmaceuticals]

And to answer the question on the SKY-01 target number of events for the -- no, we don't comment on trial details.

[Bruno Eschli, Head, IR]

Okay. Then we go on. The next one would be Simon Baker from Redburn.

[Simon Baker, Redburn]

Thank you, Bruno. Two questions, if I may. Firstly, returning to fenebrutinib. Teresa, you said there were no adjudicated cases of highs-low that you've observed so far. I wonder if you could comment on any observations related to elevated liver enzymes?

And then secondly, on DMD gene therapy. Could you give us an idea about potential manufacturing capacity for that product? What we've done in the past suggests that the volumes required would be fairly significant. I just wonder, is that $2 billion peak indication dictated by capacity or by opportunity? Thanks very much.

[Teresa Graham, CEO, Roche Pharmaceuticals]

Yes. Great. So, probably the easiest one to answer for DMD, the gene manufacturing question. So that is being largely handled by Sarepta, so it would be inappropriate for me to comment other than to say that in our conversations with them, we have confidence that we will receive the -- we have confidence that we will receive the supply that we need in order to launch. In terms of fenebrutinib, we had seen elevated liver enzymes, but those elevations were transient and resolved.

[Simon Baker, Redburn]

Thank you.

[Bruno Eschli, Head, IR]

Okay. And then I think we come to the final questions from Peter Welford.

[Peter Welford, Jefferies]

Hi, thanks very much for fitting me in. Just two questions. Firstly, just coming back to R&D and the sort of broader question. It seems perhaps a bit unfair, but maybe a disproportionate number of assets that originated recently from Chugai, particularly, I think given sort of their budget, if you like, relative to yours.

I guess, there's sort of two parts to this, which is, one, do you think this is just phasing, if you like, where the different three -- of the three organizations within R&D go through ups and downs? Or do you think -- are they doing something different? And I guess more importantly, have you looked at what you guys are doing?

And equally, could you potentially consider more broadly looking at some of the Chugai assets in the future, given I think you've passed on some opportunities that perhaps were outside your area and now look like it could actually have been pretty meaningful. .

And then just secondly, on Diagnostics. It might be a little bit in the weeds but just trying to understand the opportunities with multi-pricing, what you've done so far with the GenMark acquisition, if you can comment any further on that.

We haven't heard a lot about it. Obviously, it happened during COVID. Was that a benefit to you or not? And how are you should be getting on rolling out that to see that sitting within molecular?

[Thomas Schinecker, CEO, Roche Group]

Yes. So, let me first answer the question on R&D. And you're right, Chugai has been very productive in developing new medicines. And I've also spent time at Chugai. And I have to say that there are also interesting things in the pipeline that will also help filling more our pipeline as well going forward.

Yes. Then you look at pRED, you look at gRED, just looking at pRED, you look at the productivity there, Evrysdi came from pRED, Vabysmo came from pRED, giredestrant and tiragolumab came from pRED.

So, you see that all of the different early research and development organizations keep delivering across the different parts of our R&D organization. And I think that's actually a strength, that we have the diversity of approaches in three different organizations that keep delivering new medicines that can then go from Phase II into Phase III.

And if you look 10 years ago, you probably would have said, well, Chugai, what's in the pipeline of Chugai? It comes in waves. And so I'm confident that pRED, gRED, and Chugai will continue to deliver new NMEs that will then go into Phase III, and with that we'll have new medicines to launch in the future.

[Matthew Sause, CEO, Roche Diagnostics]

Thanks. And I'll take the second part on GenMark. So, I think we remain convinced that syndromic panel testing is going to be an important part of Diagnostics going forward, and we're happy with the performance of our respiratory panel, our blood culture identification panel.

And we're continuing to invest in R&D there and looking at future opportunities for things like a GI panel, but we feel it fits very well with our molecular portfolio, where we go from point-of-care molecular testing, high throughput testing in the lab. And then syndromic panel, I think it gives us a very competitive portfolio. So we're happy with how this is developing so far. .

[Bruno Eschli, Head, IR]

So I think with that, we are at the end of our Q&A session. If there is -- if there are any questions, then please feel free and reach out to the IR team any time. And then I will hand back to Thomas for a final word.

[Thomas Schinecker, CEO, Roche Group]

Yes. Thank you very much, Bruno, and thank you very much for all of you -- to all of you for attending today. I look forward to seeing some of you in the next couple of days. And for those others, I'll see you in the next couple of months. So, thank you again.