Roche Holding AG

SIX:ROG

Earnings Call Transcript 2021-Q3

[Operator]

[Audio Gap] I'm the technical operator for today's call. Kindly note that the webinar is being recorded. [Operator Instructions] At this time, it's my pleasure to introduce you to Karl Mahler, Head of Investor Relations and Group Planning. Karl, the stage is yours.

[Karl Mahler, Head of Investor Relations]

Yes. Thanks a lot, Henrik. Thanks for your kind introduction. Welcome to our Q3 call for investors. I hope that you're all safe and well in one room here. So lots of distance between us, social distancing, but at least it looks like it's getting back to normal, kind of a new normal. Henrik explained to you how you can ask questions. [Operator Instructions] But of course, you can also send me an e-mail under [e-mail], and I will read your questions here to the audience. If you could maybe limit your questions to maybe 2 per person, that would really help us to stay in time, I have to say. And I think we had a really good quarter, strong product performance, excellent Diagnostic business. And we will have some roadshows tomorrow at various locations. We have another opportunity to discuss the data, which we present to you today. And with this one, over to you, Severin.

[Severin Schwan, CEO & Executive Director]

Karl, thank you very much. And also a warm welcome from my side to our Q3 briefing, and let's dive right into the numbers. As you have seen this morning, group sales up by 8%. And yes, that was also supported by a strong demand for our COVID-19 portfolio. But what is good to see is a strong recovery of our base business, our underlying business. As you will see in a moment, the newly launched products, both in Pharma and in Diagnostics, are actually developing very well. On top, I should say that Q3 was a particularly strong quarter in terms of pipeline progress. We have now 17 new molecular entities in late-stage development. That's actually a new record for us, with important opportunities coming up, such as faricimab and PDS in ophthalmology or probably be in a form of aggressive blood cancer, DLBCL. Good. If we move on to the next slide. Here we go. Again, a summary of the key numbers. Pharma stable, actually has grown in the third quarter. So it is recovering. Diagnostics, up 39% in local currencies. If you look at the picture or the quarterly numbers, it's a bit pump-y, and that really has to do with the impact of the COVID pandemic, where we had a strong decline in the second quarter last year. That, of course, resulted in a base effect in Q2, combined with the recovery of the business and now at 8%. So if we look a little bit closer, I think that's an important slide. And you can see that Pharma, which is stable overall, has a growth of close to 30% for the newly launched medicine. That includes Ronapreve. If you would take out Ronapreve, still the growth of the newly launched medicines would be 22%. So that's really good news. On the Diagnostics side, we still see a high growth of 18%. It is coming down on a quarterly basis as expected, primarily due to those base effects I just referred to. But again here, very importantly, the sales of the base business. The business without COVID-19 is recovering very well for the first 9 months this year, up by 19%. If we move on to Slide 10, you can see here the rejuvenation of our Pharma portfolio continues with over 50% now stemming from the newly launched medicines. And you see Ronapreve on the very top of this chart had some impact, but the overall trend is very strong and we get less and less dependent on our more mature portfolio. Talking about the more mature portfolio. On the right-hand side, you can see the effects of the biosimilar erosion. As expected, about CHF 4 billion year-to-date. And that, of course, is compensated on the positive side, on the one hand, by the new products in Pharma and by the strong performance in Diagnostics. So if we move forward to the outlook, let me just again highlight the strong portfolio and the progress we made. Good to see that we, just last week, got our 39th breakthrough therapy designation for gantenerumab. So let's keep fingers crossed that we can get that medicine to patients as soon as possible. It would be the first subcutaneous medicine on the basis of very sound and comprehensive trials. But beyond Alzheimer's, you see a number of new Phase III studies have been initiated. And as I mentioned beforehand, 17 new molecular entities now in late-stage development.To conclude, based on the strong results, we have raised our outlook from low to mid-single digit to now mid-single-digit growth. We expect also EPS to grow broadly in line with sales, and we should be able to further increase the dividend in Swiss francs on those results. Thank you very much. And with this, I hand over to Bill. Bill, over to you.

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Thanks, Severin. And thanks all of you for joining our call today. It's been a -- yes, quite a dynamic year, and Q3 was no exception on that. So on this slide, you can see the evolution of sales by major geography. And I think noteworthy here is that you see improved performance relative to what we saw in Q2 and Q1 pretty much across the board. I think the standout here is Japan. And you'll see on the next slide, the source of that is Ronapreve but other products. But good to see progress in the pipeline and new products, having its impact across the geographies. Here, you can see the changes by product. And I guess at the top, you can see Ronapreve, very strong effect; but also Hemlibra with 42% growth. And again, no real diminution. The absolute growth rate of Hemlibra has been very steady even during the pandemic. You also see Actemra, OCREVUS, Tecentriq, Evrysdi at the strong growth end. If you see the yellow bars, those are Japan. And so you can see really outsized growth in Japan, driven by a combination of Ronapreve and Tecentriq. And then also at the bottom of the slide, on biosimilars, you can see relatively low impact of biosimilars in Japan in the quarter. And so we're -- yes, we're very pleased with how our colleagues at Chugai have done with the portfolio and continue to do. The other thing I would highlight, if you look at the biosimilar bars at the bottom, the large green bar on Avastin for Europe basically means that Avastin is mostly gone now at this point. So you'll see in Q4 still an impact in Europe. But then starting next year, the green pretty much goes away. Also, the blue bars are quite large. The biosimilar impact in the U.S. has peaked and is now declining. And so again, the 3 bars at the bottom, we expect to see a lot smaller next year. And I think that underscores the power of the rest of the portfolio to drive growth. This is what you get if you take out the biosimilars and just look at the -- all the other products combined. And you can see a bit of an acceleration in Q2 and Q3 relative to our historical trend. This is largely driven by the COVID products, by Ronapreve and Actemra. But for example, if you take them out, you still have a nice positive growth trend. In fact, our growth in just the new product sales without Ronapreve and without Actemra was 22% in Q3 -- well, year-to-date. And so I think it's quite a strong performance by any measure. Now turning to oncology. The trends are similar from what we showed at the half year, the Herceptin, Avastin, Rituxan all declining, but pretty strong growth across the board beyond that. And so for example, Perjeta, if you look at the combination of Perjeta and Phesgo, which was about CHF 200 million in sales so far this year, very strong growth for Perjeta, Phesgo as well as Kadcyla at 16%. Going to drill into some of the franchises now. So in hematology, we really have a lot going on. We were very pleased in August to announce the top line results from POLARIX. This is the first-line DLBCL study of Polivy, and it's shown on the chart here. We are really excited to debut those results in their entirety at the ASH conference coming up in December. But we're in discussions with regulatory agencies and all the major markets now about the filing approach and time line and look forward to further updates for all of you in -- at ASH. On the right side, you can see a number of the other things that we have going on in hematology, including the first filing for mosun in third line this quarter and then the first filing for glofit in DLBCL in the first quarter of 2022. Also, a number of new studies we're initiating. So more good news in the hematology front. In breast cancer, we have 1 molecule in particular that we think has the potential to make a huge impact in the largest segment of breast cancer in hormone receptor-positive disease. And so basically, giredestrant, we showed these results at ESMO. This is our first really attempt to displace the aromatase inhibitors that are typically used in first line and frankly, in multiple lines in the HR-positive breast cancer setting. And I would just highlight the table in the middle, we showed a fivefold increase in the complete sales cycle arrest measure. So from 5% with anastrozole, which is a leading aromatase inhibitor, up to 25% with giredestrant. We were able to give full dosing. We've not seen any need to reduce doses as has been seen with other SERDs, especially in combination. This really looks like medicine that's going to be useful in multiple lines of therapy. And because of that, we've got the adjuvant setting trial started in Q3 of this year. That's a long study, but it's a really meaningful result that we'll read out in a few years. And then we will have the first results in second- and third-line breast cancer next year. So look forward to that. Tecentriq, strong gain in momentum and growth here driven by continued penetration in lung cancer around the world, but also by the use in liver cell carcinoma. And you see that, yes, showing up in particular in Q2 and Q3 this year. We've also just received approval for the first adjuvant approval in lung cancer for a checkpoint inhibitor for Tecentriq in the U.S. just last week. And so we've got a lot to continue to drive the momentum for Tecentriq. Hemophilia, as I mentioned, Hemlibra, I think the graph basically tells it all. You can see very -- again, very strong growth continuing, and this is true in the U.S. It's true in the international markets. And we've got -- you see Europe, it kind of tapered off because in Europe, we've been limited to more severe patients, but we've now have the results filed for HAVEN 6, and this is the study that EMA asked us to do in mild to moderate patients with Hemlibra. So that should help us get the Europe growth back on track as well. Immunology. So we have an impact here on a number of programs, but Actemra obviously had the biggest difference because of the use of Actemra for treating COVID-19. We have -- as I've mentioned, Xolair. Strong growth here, 8%, and this is based on the availability now of a self-injectable formulation, and that's proving to be really useful for expanding the use of Xolair into the home. So we're really pleased to see renewed growth on a medicine that's been very meaningful for patients for well over a decade. In multiple sclerosis, again, a lot going on here. If you look at the sales trends, you can see that we've more or less gotten out of the pattern that had been taking place, that started with the pandemic in Q2 last year because people delayed their doses because of concerns. And so we had a cyclical pattern that had been established. Now what's happened is patients are delaying doses of OCREVUS because they want to get their booster shots. This is in our largest market in the U.S., where it's particularly true. And so we actually see the parameters, the leading indicators for OCREVUS use, like new patient share, it remains very strong at 35% in the U.S. We have 35% of all switching patients. About 40% of OCREVUS patients that are starting OCREVUS are patients who've never been treated before. So we've got very high first-line share as well. And I think the outlook is good, but the actual volume usage has been affected because patients, instead of getting their doses every 6 months, they've been getting them more like every 8 months because of the vaccine dynamic. But we think this will be returned to a normal use pattern in the months ahead. Evrysdi and the SMA franchise, nice gain here in terms of patient numbers. And you see on the graph that sort of large light blue bar in Q2. So that was actually a number of units that were sold as part of tenders, so where the countries take the Evrysdi and put it in stock and then dispense it to the patients. And so what we have here is basically a onetime effect. There's, I think, a return to a more normal use pattern in Q3 and Q4. And so we continue to be very encouraged about the uptake of Evrysdi. We have 20% total share in the U.S. after only 14 months on the market, and we're now the #1 prescribed therapy, new and switching patients in the U.S. and strong growth outside of the U.S. as well. I want to share one other update in SMA, which is we've initiated a study. We think we'll have a first patient in Q1 of a combination of a new molecule, it's an anti-latent myostatin recycling antibody. And the idea here is, especially for type 2 and type 3 patients who've been living with SMA for some years, we want to find a way to help them regain function and we have to do more than what's done with the existing therapies. And so this is a novel approach to do that, really to build muscle strength and grow muscles. And so we've got really encouraging preclinical data, and we look forward to a result in patients in the future. This is really -- the graph is just a reminder of what we set out to do to kind of beat the biosimilar dynamic with new therapies. I think we've really demonstrated we can do that, and we've got a lot of strong news flow ahead. You see 13 readouts in 2022. So basically, every 4 weeks, we're going to have sort of a major medical practice-changing readout, and it's going to be a really exciting time. Finally, this is just the standard chart we show to see how we're doing with our studies in a given year. And actually, so far, we have all green checks, which is really unusual. These are -- yes, basically, our pivotal study readouts, and we look forward to a bit more news yet this year. And we've got a couple of opportunities I just want to highlight for all of you. There's a digitalization event on November 17, that you're invited to hear about what we're doing across the enterprise on digital and then ASH. We have a special investor event on December 15 to highlight the advances on Polivy and the bispecifics and some of the other 90 abstracts that we'll be bringing to ASH. So with that, I look forward to hearing from Thomas about diagnostics.

[Thomas Schinecker, Chief Executive Officer of Roche Diagnostics]

Thank you very much, Bill. Good morning, and good afternoon, everyone. I'm happy to present the Q3 Diagnostics Division performance. Now with sales of CHF 13.3 billion, we had a very good growth of 39% year-to-date. This growth was driven partly by COVID-19 testing sales of CHF 3.5 billion, and also a strong growth in our base business, which grew at 19% year-to-date, as mentioned by Severin earlier. Now what you see here is that all businesses contributed strongly to the excellent growth results. I would like to just highlight one special effect, and that's under Diabetes Care. I've mentioned that in previous calls as well. We had a onetime effect in Q1 in North America in Diabetes Care, which was a resolution of a dispute over rebate. Without that, Diabetes Care grew 2%. Now looking at the trend over the last quarters. Our base business, as mentioned before, is growing strongly still in Q3 with 11%, and you see the growth in the previous quarters. So really year-to-date, we grew 19%. And this is also but not only due to a base effect, so it's really very strong underlying growth. If you add together the 3 quarters this year, you see we're CHF 3.5 billion in terms of COVID sales. And we do continue to see testing also in Q4. So we expect that there will be a certain level of COVID testing also in the coming months. Of course, in Q4, we will also compare at a much higher base than in the previous quarters. So that has to be taken into account. And the future demand of COVID testing will obviously also depend very much on the progress still of vaccinations and their efficacy against new variants and maybe also, again, other variants that may emerge in the next months. Now looking at the different regions. We see good growth across all regions, but particularly in EMEA and Latin America. Sales in the core lab is increasing by 26% across our portfolio in that space. This is due to a good recovery but also good underlying growth of our business. On the molecular side, we're growing 36%. This is driven by PCR SARS-CoV-2 testing. And you can see here, this goes under virology in that line. And also point-of-care molecular, which is our [ EMEA ] business, is growing at 570%. So very strong growth of point-of-care molecular. Now if I take Q3 alone, our molecular business continued to grow at 21% despite the high base of COVID testing already last year. So we really see still continuous growth in that segment. Point of care grew 279%, strongly driven by rapid antigen testing. And you see that under this point-of-care immunodiagnostics, which was growing almost 1,500%. I already mentioned Diabetes Care and in pathology growing strong with 14% in advanced staining and also primary staining. I'm very pleased with the financials, but even more pleased with our portfolio progress in the -- especially in the time of pandemic. And now let me share some highlights with you. So first here, let me frame this. Hepatocellular carcinoma is causing about 830,000 deaths every year. And if you detect it early, 5-year survival can actually improve by about 80%. Now this is actually the first regulatory-approved IVD algorithm for detection -- early detection of hepatocellular carcinoma. And this algorithm actually combines gender, age and 2 of our markers, AFP and PIVKA-II. We'll be launching next year, another marker, which is AFP-L3 which will further increase the sensitivity of this algorithm. With that, we launched the Elecsys GALAD score, which is the enhanced score the next year. And this is the score for which we received breakthrough device designation actually from the FDA. Now on this slide, I'm going to talk about the claim extension of our Procalcitonin assay. And this assay helps -- will help enable to monitor patients that are on antibiotic therapies for early detection of resistance and a more targeted use of antibiotics. Now already on market is what you see on the left-hand side, the diagnosis of severe bacterial infection. So the target here or the amount of patients that benefit from this is about 50 million patients. And with the new claim, we actually add about 420 million patients that can benefit from this testing. Acute respiratory infections are also one of the leading causes of death globally. And we are launching -- or we have launched 3 more respiratory panels, and this is just in time for the respiratory season as we go into that time, specifically the Northern Hemisphere. And you're able to combine these flexible panels together depending on what your need is and you can target specifically that to the patient's needs. As you see on the right-hand side, in 2023, we're actually going to launch a 12-plex as well, which will then encompass all of these different parameters as well. Now what's also important is that you can combine these 3 panels together with our SARS-CoV-2 panel. So specifically, as we go into this next couple of months into the respiratory season, if someone comes in with a runny nose or these symptoms that very much overlap between all of these respiratory diseases, you can then kind of differentiate what the person has. So we believe that -- now that also the amount of protection in terms of mask-wearing, et cetera, is not as strong anymore as we had last winter. We may get a much stronger respiratory season also this year, and this would obviously impact that. We're also very excited to have entered the definitive share purchase agreement of TIB Molbiol. TIB Molbiol has a very broad menu of 45 CE IVD assays and more than 100 research use-only assays. TIB Molbiol has been a partner for us for more than 20 years. In many countries, we've already been the company responsible for selling all of these products, but there are a couple of countries in the world where we have not done that in the past. So when this closes end of November, our opportunity is then also to use our global footprint to make sure the patients get opportunity to be diagnosed with all these different assays as well. Now TIB Molbiol has a very strong history of reacting very quickly to the pandemic, I mean in the beginning of 2020, only days after the sequence of the virus was actually known. So this partnership we already enabled SARS-CoV-2 testing around the world already in January 2020. But it's beyond that, right? So if we go back with anthrax, the first SARS-CoV-1, bird flu, swine flu, EHEC, MERS, Ebola, Zika, et cetera, we were always through this partnership, very quickly to the market. And you can see that we have a very strong and broad installed base with MagNA Pure and LightCycler: more than 2,000 MagNA Pure, more than 14,500 LightCycler systems in the market, and these assays run on those systems already. We've also made good progress in the area of digital pathology, where we're the first provider of a powerful new open AI environment to pathologists. Now what does that mean? It means that it enables third parties to be able to develop algorithms on our platform that then can be integrated into the NAVIFY Digital Pathology software. This can happen both in the cloud and can also happen on on-premise. Now our customers can do that, but we have also engaged in a number of partnerships already. Let me just mention one. That's the one with PathAI, and PathAI is the global leader in artificial intelligence-powered technology. And under this development and distribution agreement, we will jointly develop an embedded image analysis workflow for pathologists through which PathAI imaging technology can be accessed through our NAVIFY Digital Pathology. The final point here is that we've launched 3 more breast cancer algorithms. And with that, we've actually completed our breast cancer algorithm, and this allows a faster and more accurate diagnosis. Now with a number of launches we have achieved in Q3, we are on track to achieve our key launches in 2021. Q4 will be really a superb quarter when it comes to launches. We have a number of very important launches to come. cobas pulse, which is a system that helps measure blood glucose at patients in the hospital setting, but it also includes an app environment where a couple of clinic decision support, digital solutions can actually be enabled at the physician, at the patients. We have cobas 5800, a molecular solution coming. We have the decentralized kit version of the FoundationOne test that's coming and much more. So I'm really excited about all the amazing launches that will come now in Q4. Now with this outlook, I will hand over to Alan.

[Alan Hippe, Chief Financial & Information Officer]

Yes. Thanks, Thomas. Congratulations for great sales. Let's jump right into it, and that's Slide 41. Perfect. And you see basically I'm talking about currency, so let's move into it. You see here the overview on the group sales a little bit with the regional split. And my colleagues, I think they have not just realized the sales, I think they also explained them masterfully. So I will go right to the group level. You see really in constant rate, a growth of plus 8%. You see that on the right-hand side, the growth in Swiss francs of 6%, and the difference is 2 percentage points, and that's the currency impact. So let me explain this on the next slide. You see it on the left-hand side, what happened. You see on one hand, the U.S. dollar, which has reduced its negative impact from minus 6% at half year to minus 5% in Q3. And you see really below, when you look here at Swiss franc-euro, you see that the euro impact or the euro exchange rate impact of the Swiss franc basically contributed the same with plus 3%. Now you might add that up, but certainly, we have to bring all the other currencies in, which leads us directly to the right-hand slide or the right-hand table because you see really September year-to-date a minus 2% percentage points sales impact, as mentioned on the previous slide. I think what is really interesting is the question what's going to happen until year-end. And you know the model and the assumptions that we bring in, assuming that the exchange rates at the end of September remain stable until end of 2021, which is certainly very unlikely, but let's assume that. You see how the impact would look like with a minus 1 percentage point on sales, minus 2 percentage points on the core operating profit and a minus 2% on the core EPS. So I think overall, we are seeing a nice reduction of impact in the last quarters. Bill mentioned it already. I think we have a digitalization event coming on November 17, will be along the value chain. So really a couple of things. pRED and gRED certainly will talk about research. We have then Flatiron in here, talking about product development a little bit, then we have Pharma Informatics with commercial piece. And then we have Diagnostics coming in, bridging a little bit, the whole topic to personalized health care. So it will be a fun event. I remember last time, I think we had quite a large audience, and we are all looking forward to it. Outlook raised. Severin framed that already. I think the group sales growth is now mid-single digit. We skipped the low. We kept the core EPS growth broadly in line with sales growth. Dividend outlook mentioned by Severin as well. Let me emphasize here, once again, that we think the biosimilar impact for 2022 -- '21 should be roughly minus CHF 4.6 billion. So really the number we started with, and that's certainly implied in that guidance. So with that, well, I think we are all happy to receive your questions. Thanks.

[Karl Mahler, Head of Investor Relations]

Yes. Thanks a lot to all of you. Just a kind of a short recap, we have about 670 people on the call, which is a lot. So thanks for your interest in Roche. We would like to open the Q&A now. We have no questions in the chat. [Operator Instructions]

[Karl Mahler, Head of Investor Relations]

And with this, let me start with the first one. The first one would be Stephen Scala from Cowen.

[Stephen Michael Scala, MD & Senior Research Analyst]

I have 2 questions. In the second quarter, Roche stated that oncology visits were 95% of normal, which was the highest of any company that provided that information at that time. Are visits still around 95% of normal? Or has there been a deterioration?And the second question is that given the strong performance of new products, waning impact of biosimilars and resilient Diagnostics business, is there any reason you know now that 2022 won't bring a sharp acceleration for the top and bottom line for the total company?

[Severin Schwan, CEO & Executive Director]

Steve, thanks a lot. Let me take the first question before I hand over to Bill for the oncology visits. I'd say the following. As far as Pharma is concerned, you're absolutely right. The biosimilar impact will decline in absolute terms and that will help together, of course, with the newly launched medicines. And we should also expect some growth from the products which are coming next year. So I'd say we are very confident on the Pharma side in terms of the growth dynamics. Now for Diagnostics, we have no reason to believe that the dynamics on the base business are going to change. We have seen a strong recovery this year. We believe we are well positioned to further grow the base business. There's a number of important launches up and coming. So really, the one question where there is most uncertainty is what is about COVID-19 sales. That's very difficult to predict. I remind you just 2 months ago, in July, when we met for the half year results, I was rather skeptical that we would have strong COVID-19 sales in the second half. And I predicted actually that in Q3, we should already see quite a decline. Now 4 weeks later, due to the Delta variant, we suddenly saw a surge in the U.S. and in other countries. And the result of it, COVID-19 sales have been stronger in Q3 than we actually thought they would be. And that also is part of the reason why we raised the outlook for the full year. So literally, within 4 weeks, we had to correct ourselves because we had the wrong prediction in terms of how COVID-19 would develop. So that's really the big unknown. I guess there will be at least some remaining business, that's for sure, because this virus will stay with us. Not everybody will be vaccinated and there will be a need for testing. I would assume that there is also some demand for medicines going forward. But it's very difficult for us to predict what exactly it will be. So it's not that I don't want to tell you, it's just that our own scenarios have a wide range. So this is the unknown. But as far as the Pharma business is concerned and as far as the Diagnostics base business is concerned, we are pretty bullish. Bill?

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Yes. And Steve, the question about the market and the dynamics in terms of visits and such. So Q3, we were, I think, hoping to see a more continued recovery in terms of patient visits, but instead, we got the Delta variant sweeping through the U.S. and Europe. And so Q3 might have been impacted a little more than Q2. Now the outlook for Q4 is a little better because it seems like things are waning with the Delta variant. But I think I would say we're almost back to normal, but not quite back to normal. That's kind of how we see it.

[Karl Mahler, Head of Investor Relations]

Thanks for your question, Steve. Wimal, you would be next.

[Wimal Kapadia, Research Analyst]

Great. Wimal Kapadia, Bernstein. So can I just first ask on giredestrant in the adjuvant setting. So just how are Roche thinking about the combination with the right CDK4/6 just given recently that we had the approval of AVENIO in the earlier setting and that we get Kisqali data next year from the NATALEE study. Have you actually run the right combination trials that would ensure we have the right standard of care? And will running trials with palbo actually cause you a challenge in terms of uptake long term? And then my second question is just on POLARIX at ASH. I know we need to wait for the data. But I'm just curious what Roche consider as clinically meaningful difference in complete response. And if I look at R-CHOP from GOYA, the complete response was around 56%. So is a 10% difference a fair reflection of what you consider as clinically meaningful? Or what do you think is enough of a difference in CR to drive a new standard of care?

[Severin Schwan, CEO & Executive Director]

Bill?

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Yes, sure. So with respect to giredestrant, I think you're correctly highlighting that the question of CDK4/6 inhibitors and which one is best or is there a difference is an open topic. I think our goal is that we're showing a big enough difference with giredestrant by -- with the add-on that the question of which one we combine with is less important. And I think that's also true if you consider that by that point in time, we will certainly have generated data in combination with any of the therapies that are relevant in early breast cancer and in first- and second-line breast cancer. So I think we've got an opportunity to demonstrate just how strong a molecule giredestrant is and sort of answer those kind of questions that way. I think we have a truly differentiated molecule if you look at the level of potency, if you look at the side effect profile, if you look at our early hints on efficacy. And again, we'll have more data next year with the readout of the second- and third-line pivotal study. So lots more data to look forward to on giredestrant. In terms of the -- what difference is clinically meaningful, I'm trying to think how do I answer that without somehow talking about what our result is. But this -- we're talking about a curative setting. We're talking about generally a younger population who is diagnosed with a potentially fatal disease. And I guess I'd almost turn it around back to you. What level of reduction in relapse do you think would be clinically meaningful? I think we believe that we've got a result that is well beyond what would be seen as a minimum result. So again, I think we look forward to showing the results at ASH and having a broader dialogue about that. But we think it's going to be a new standard of care.

[Wimal Kapadia, Research Analyst]

Okay. I said 10%. So that's kind of what I have on my mind.

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Yes. But you said 10% in complete response. And of course, the data is progression-free survival. I mean it's adjuvant, and you're looking at does the disease recur. So that's why I didn't answer it in terms of complete response.

[Karl Mahler, Head of Investor Relations]

Yes. Thank you, Wimal, for your questions and for your guesses. Sachin from Merrill Lynch would be next.

[Sachin Jain, Managing Director]

I just have two, as Karl requested. So firstly, on the COVID and thinking about it going forward. So on my numbers, you're going to end up with COVID solutions across Diagnostics on a proven Actemra of roughly CHF 6 billion. Severin, you've referenced and answered the first question, uncertainty in predicting that line, which is entirely understandable. But at this stage, as we think about your full year '22 guide, would you consider guiding in '22 ex COVID as you did on Tamiflu a number of years back? Or I guess more importantly, given the uncertainty, how much of a line in the sand is showing group growth independent of how that CHF 6 billion progresses? So that's the first question. Second question, just a quick one on OCREVUS. Bill mentioned some issues around administration alongside vaccines. Just wondering whether that's seeing any share shift in the MS market to agents, which you can administer more easily around boosters.

[Severin Schwan, CEO & Executive Director]

Right. Yes. On the first question, it's a good question, and we have to also internally discuss this in terms of how we make our guidance for next year. But having said that, I think as a minimum, we would provide you with all the necessary context. And as you have seen already this year, we are carving out the sales of the COVID-related testing on a quarterly basis. So you have a good kind of view on where we stand and how the base business develops. And given the magnitude of the COVID-related sales, I think irrespective of how the guidance will be made, you should have the necessary transparency to see how the underlying business is developing. And as far as Pharma is concerned, you anyway have the sales on a product level. So it's not a big deal to calculate the sales growth, excluding the respective products. You have seen that for Ronapreve, in particular, where we informed you about the specific sales. For Actemra, it's of course, always a bit more difficult because it's used for different indications. But to summarize, I think our goal would be that you have a good understanding of how the underlying business develops.

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Great. And I would just make one additional comment on that, which is on the Pharma side of the business, I think the pharma products for COVID, the sales will depend a lot on what happens with COVID. If there's a lot of COVID and a lot of hospitalization, I think the sales of Actemra and Ronapreve could be equal or greater next year than this year. If there's very little COVID, which I think we all hope, then the sales of those products will be lower. But there's sort of a built-in hedge because we think that would be really good for the rest of the products, which have been adversely affected in general by COVID. So when you consider the total Pharma sales of over CHF 40 billion, and that whole CHF 40 billion gets dragged down by COVID. And then we have some number that's a tiny fraction of that, that's positively impacted by COVID, I think we feel really good about it. In terms of whether concerns about vaccines and timing of infusions and treatment are causing share shift in MS, I don't think so. I mean if you look at the -- whether you look at the share of OCREVUS or the OCREVUS plus anti-CD20 competition to OCREVUS, it's quite large and stable. So I think this is really less of a dynamic about switching and new patient starts because, for example, OCREVUS still has 35% of new and switching patients, which is, I would say, quite a vote of confidence in the medicine. It's really more about timing of existing patients being just delayed a month or 2 months, and that has a much bigger impact on the sales than does plus or minus a few percent share on new patients. So I think that's really what's happening.

[Karl Mahler, Head of Investor Relations]

Yes. Thanks a lot, Sachin, that we could address your -- hope that we could address your questions. The next one would be Peter Welford.

[Peter James Welford]

On top, I've got two. Firstly, just on COVID-19 testing, over to Thomas. I wonder if you could perhaps provide us with a rough split of that CHF 1 billion that we saw in the third quarter. I guess what I'm really asking for is how much of that is PCR testing. And it'd be helpful if you could talk a little bit about what sort of dynamics you're seeing for PCR testing, particularly any granularity you can give us by geography would be very helpful as far as Roche's business. And then second question is just, I appreciate this is a sales call, but just with regards to the margin. We obviously heard I think at the Pharma Day, Bill talked a lot about Roche's enthusiasm for investing in R&D. And obviously, given the pipeline, we can understand that. But given obviously the very strong sales that we've seen, can you just talk a little bit about the sort of opportunities that you're looking at to invest that additional sales, if you like, in I guess, R&D during the remainder of this year and why we shouldn't anticipate some sort of margin expansion this year given obviously the impressive sales performance we've seen so far during the first 9 months?

[Severin Schwan, CEO & Executive Director]

Okay. Perhaps just a word on the margins. I mean what you say in principle is correct. When you have additional sales, if the top line is developing nicely, then there's also operational leverage. That's obviously very true in our industry. It's always been like that. And that effect is, of course, there. But what you should also look at is the product mix, because if you look at it from a core point of view, then of course, the growth has been primarily on the Diagnostics side, and it has been literally flat for the first 9 months on the Pharma side. So you have a portfolio mix effect coming in from a group perspective. So whilst you would expect that there is some operational leverage due to COVID testing in Diagnostics, you have an adverse effect because you have a product or shall I say, portfolio or a divisional negative mix effect on a group level. And as you rightly point out, we also continue to invest into R&D. We have highlighted the progress we made in our pipeline, the many new entries into Phase III, and we think it's very much also in the shareholders' interest to make something out of these opportunities and to invest into R&D. I should say, however, to finance that, we are also very diligent to get the money from somewhere. And you've seen that at the half year results that all the other expense lines, marketing and distribution, general and administration have been managed very tightly to fund the investments into R&D. So overall, yes, we are always working on our productivity, but I want to temper your expectations a bit given the product mix effect on a group level. And Thomas, if you could cover the testing question.

[Thomas Schinecker, Chief Executive Officer of Roche Diagnostics]

Sure. Happy to do so. So first, let me talk about PCR. I would say PCR is a rather stable kind of business. You don't see that many spikes. And there are a couple of reasons for that. One is surely that our traditional customers are buying this, right? So it's hospitals, it's labs, et cetera. Whereas with the antigen, you see sometimes spikes because it's usually government orders, right? So it's suddenly a government deciding to buy something, so you get certainly a onetime -- a big order. So that's why you see in PCR, it's rather stable; whereas in antigen testing, you can have some spikes up and down. Now when it comes to split between PCR and antigen, I can say in Q3, the majority was PCR. And when you look at the split between the geographies, basically, in Asia, the testing has increased since the beginning of the pandemic continuously. Well, a lot of countries in Asia were pretty good with dealing with COVID last year. This year, it's a bit of a different story, and you see that in, for example, countries like Singapore that suddenly have a huge numbers of COVID. Well, they had it very much under control for quite some time. In Europe, you also have more continuous testing. In the U.S., I would say you had -- specifically Q1 versus Q2, you have seen that there was a significant reduction of testing in the U.S. which then picked up again in Q3 as the Delta wave really hit the U.S. So you have a bit of different behavior in a different part of the world. But generally, PCR testing is a lot more predictable, I would say, than what you have with antigen testing because it's continuously kind of smaller orders versus one big order from a government. Also, I believe we are extremely well positioned on the PCR side and very well protected because we have the most automation from any company. When it comes to PCR testing, we have a very high quality as can be seen. And lastly, it's also our pricing decisions that we made early in the pandemic, where we basically priced the line pre-pandemic times and didn't increase prices in a pandemic whereas now the demand is basically smaller than the supply. Obviously, these discussions are happening, and we don't have to give in the price because given that we haven't priced so high and given that we actually have a better position in cost of -- total cost of ownership because of the automation, we're extremely well positioned there. And I also have to say, we also got a lot of goodwill from our customers who said, "Well, you, we could rely on you in the pandemic and you didn't use the situation to increase prices." So that's helping us to -- and you see it. I mean we have more, I think I said 23% growth in Q3 in our molecular business despite the high base last year. So it's going quite well.

[Karl Mahler, Head of Investor Relations]

Thanks a lot for your questions, Peter Welford from Jefferies. Next one would be Tim Anderson, Wolfe Research.

[Timothy Minton Anderson, Managing Director of Equity Research]

All right. On TIGIT, my question is you guys call out 4 pivotal readouts in 2022 and the slide deck today reiterates the same. But on Slide 49, when you talk about regulatory filings, you only show one for 2022, which is small cell lung; the two others being in 2023; then the fourth of the 2022 readouts not being until the year after that. So I'm wondering why there seems to be a lag in filing time lines relative to when the pivotal readouts occur in 2022? And then second question on gantenerumab. You recently got awarded a breakthrough therapy designation. I was surprised to see that because you're the only company of the leading ones that hasn't really shown any cognitive or functional data yet. Does getting breakthrough therapy designation change how you're thinking about possibly using the accelerated approval pathway? I thought it's unlikely you would pursue that, but maybe the breakthrough therapy designation changes your mind.

[Severin Schwan, CEO & Executive Director]

Thanks for your question. Bill?

[Karl Mahler, Head of Investor Relations]

Yes. Before you go into the [indiscernible] going to the same direction, maybe you can take it a bit broader because obviously, one competitor was reporting on their sales for Alzheimer's. And so the question here is, could you please confirm that the time lines are still on, what you expected and how you think about the potential of the Alzheimer market in general. So maybe you could kind of take it a bit more broader, the answer.

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Sure. So first, Tim, thanks for the questions. So on TIGIT, yes, there's really nothing special here. I think it's really just a matter of there's still some uncertainty around the exact time lines for the readouts. So I think we probably were conservative about the filing time lines. These are -- the small cell readout, I think, is clearer because that's the first one up, and so there's less variability in the time line because yes, we're just closer to the end in terms of the events. But in things like non-small cell and the other ones, these all have to do with predictions about what the event rate will be on the standard of care. So those can shift a bit. And I think we were probably just maybe being a little conservative on the filing time lines. And let's see, with respect to gantenerumab -- let's see how to -- where to start. So in terms of the breakthrough designation, we're very pleased to have that. We think it's very appropriate. The FDA has shown a -- yes, a conviction about the need for new therapies for Alzheimer's disease. That's a conviction we share. And we're very pleased to have the full 27-month end point readouts in the second half of next year. And the breakthrough designation really is a tool to allow for enhanced interactions with the regulators and to have more of an ongoing dialogue so that we can expedite the filing of the best possible package. So our base case is still that we would get the -- or sort of the slowest scenario would be we'd get the full data in second half of next year and then file. But we are in discussions with various regulators on potential options to accelerate that, and the whole goal being to bring this medicine to people with Alzheimer's as soon as possible. So I think the time line -- the base case is basically back up the time line from second half next year readout. And then if we can come to an agreement on a faster approach, then we'll communicate that in due course. In terms of the approach to the -- well, the Alzheimer's market and the potential, we believe, I don't think we should project what the Alzheimer's market is based on the launch of 1 competitor product. That has taken place under a fair amount of controversy. I think what we have going for us versus other alternatives is pretty clear. I mean we'll have a 27-month data readout. People with Alzheimer's, they're not diagnosed for a short period. It's a lifelong diagnosis, and we think having a longer readout and the ability to show an effect over time is really important. We also think having a convenient formulation is really important because to imagine elderly people having to go into an infusion suite on a monthly basis, even I think one of the competitors has every 2-week IV, and that's that -- we don't think that's that desirable as well. And so having a subcu formulation, having a really complete and noncontroversial data set will be very meaningful. And I think we have every conviction that the market is large because the need is large. So I hope that answers both of your questions.

[Karl Mahler, Head of Investor Relations]

Yes. Thank you for your question, Tim. Richard Vosser from JPMorgan would be next.

[Richard Vosser, Senior Analyst]

Thanks, Karl. So a couple of questions, please. One, just thinking about the biosimilar erosion to round out the picture on '22. Should we anticipate any additional biosimilars like Lucentis adding on to Avastin, Herceptin, Rituxan? And could you maybe give us a flavor on those of should we be expecting an extra CHF 2 billion erosion or what we should anticipate there? And then second question, just on Herceptin actually, it seemed to do very well in the international region this quarter. Are there any tenders in there? Is it -- is there anything that we should anticipate doing better than expected and how that region might develop going forward?

[Severin Schwan, CEO & Executive Director]

Bill?

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Yes. Thanks, Richard. So in terms of Lucentis biosimilar, I think maybe we wouldn't break that out in the same way we have with AH&R just because the magnitude is totally different. Lucentis sales are a bit over CHF 1 billion. AH&R were 20x that before the biosimilar erosion hit. So in addition to that, I think the ophthalmology market is quite complex with the availability for more than a decade of Avastin being used by many as a replacement for other VEGF therapies. I think that probably affects the biosimilar equation for Lucentis, and people who are looking for a low-cost alternative often turning to that. Also, I think the market dynamic is really shifting. I think Lucentis will be cannibalized. But I think the other products also will be, by the availability of faricimab and the Port Delivery System with ranibizumab, which I think we believe are superior products in multiple ways in terms of convenience, dosing and the ability to provide really a sustained benefit over time. So I don't think Lucentis biosimilar is going to be a dynamic that we'll be talking about a lot. And then in terms of Herceptin biosimilar and performance, I think Herceptin was down 32% in Q3 year-to-date, which is a little less than Avastin and MabThera, but it's -- the basic pattern is the same. And I don't -- I'm not aware of any specific like onetime events or things in that Herceptin figure. So I really think that in some international markets, I think because of the nature of Herceptin being used in early breast cancer, these are younger women that -- and we're in a curative setting, maybe there was just some physicians and patients opting for the branded products just to make sure that they got the real thing.

[Karl Mahler, Head of Investor Relations]

Yes. Thanks a lot for your question, Richard. And the next one would be Keyur from Goldman Sachs.

[Keyur Parekh, Equity Analyst]

Two questions, please. One for Thomas on Diagnostics and then one kind of big picture for Severin and Alan. On Diagnostics, Thomas, kind of you've spoken recently about your efforts in next-generation sequencing. Just wondering kind of if you can share with us the progress you've made on that kind of over the last couple of years, how confident are you of being close to market? Where do you think kind of Roche will be able to have a competitive product? And what do you think the differentiation for your offerings might be? So just kind of your thoughts on next-generation sequencing efforts at Roche more broadly. And then secondly, kind of Severin, Alan, can we hear your thoughts on kind of capital allocation? It's a topic that obviously is close to lots of people's heart. You should be, everything being equal, net cash positive kind of very soon. Severin, remind us kind of what your priorities are relative to M&A versus increasing dividend for shareholders.

[Severin Schwan, CEO & Executive Director]

Right. So perhaps, I'll start with the second question. And Alan, feel free to chime in. I'd certainly not link our balance sheet to M&A decisions. An M&A decision has to make sense in its own right. Just because you have money, that's not a reason to waste it, right? So we look at each opportunity of whether it makes sense from a strategic point of view, from a financial point of view. And then we go for it if the economics are reasonable. So those two topics, I think it's very important to be disciplined and not connect them. And as far as the balance sheet is concerned, yes, I keep saying it's a good problem to have and will, for sure, find ways to return any excess cash to shareholders when we cross the bridge. Alan, anything to add here?

[Alan Hippe, Chief Financial & Information Officer]

No. I think you've said it well. I think we have always said net cash positive, nothing we are worth driving it. I think we have a strong balance sheet. On the other hand, I think our disciplined activities in M&A allowed us to avoid a net cash positive position for many years. So we balance it out well, and we go from there.

[Severin Schwan, CEO & Executive Director]

Diagnostics, next-gen sequencing.

[Thomas Schinecker, Chief Executive Officer of Roche Diagnostics]

Yes. So first of all, let me say that we don't usually comment on product launches that are more than 1 year out. So with that, you can already see that we're not announcing at the end of this year that we're going to launch it next year. That being said, as people are aware that we have also acquired the Stratos chemistry last year. And in combination with the [indiscernible] chemistry , both can run on the same system. We believe we're making very good progress. And yes, let's see how the things go. But yes, confidence in our internal program.

[Severin Schwan, CEO & Executive Director]

It's still early.

[Karl Mahler, Head of Investor Relations]

Yes. Thanks a lot. Thanks for your question, Keyur. Matthew from Credit Suisse, Matthew Weston.

[Matthew Weston, Managing Director and Co]

Two questions, please. The first for Bill on Tecentriq in adjuvant lung. You recently got a very broad label, but you have the most striking data in the PD-L1 high population and also PD-L1 testing is not really yet established in the adjuvant setting. I'd be interested how you would characterize launch expectations into 2022? Should we expect slow and steady? Or should we think fast and furious?And then a second one for Thomas on Diagnostics. It's really picking your brain here. There's a lot of focus in the U.K. on the AY.4.2 lineage or Delta Plus variant. I was wondering if you're seeing similar interest globally from health authorities or whether the idea of Delta Plus being more infectious isn't something that's yet really emerging in global discussions?

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Well, since we're going with the titles of stories, I think we'd probably go with baby bear's porridge because yes, I think it will be somewhere in between. I think the data is compelling and the opportunity to prevent recurrence in early lung cancer is very attractive. At the same time, as you said, the testing isn't established yet. It's not mysterious how to do the testing, and the testing is already established in metastatic lung cancer. Also, I think it may be faster to penetrate in the highest category of PD-L1 positivity versus patients with lower levels of PD-L1 showings that may go a little slower. So I think it will be a good uptake, but probably it won't all happen on one day.

[Thomas Schinecker, Chief Executive Officer of Roche Diagnostics]

Good. And regarding the Delta Plus variant, I mean this combines mutations that already are known, right? So -- and this is obviously not only an issue in the U.K., it's an issue all over the world. The question is always which strain will be the dominant strain, right? And most likely, this will not be the last variant that we'll see. And the question is, will there be more infectious variants that are coming? Will there be more deadly variants that are coming? And so I would say the virus has thrown us a couple of curveballs. And it's probably not the last curveball that we'll see. What we'll definitely see though, and I think that's something that I think has the biggest impact for our business, for the Diagnostics business, is that people that are vaccinated can still carry the virus and still infect other people, right? There's not this notion of sterile immunity. And I think that has -- beyond other variants appearing, the fact that the vaccination itself doesn't give you the sterile immunity is, I think, an issue for the world. For testing, it's something that supports testing.

[Severin Schwan, CEO & Executive Director]

Yes. We had some questions also in the chat on basically maybe you both guess, what we will see in terms of waves, let's say, going forward term. Is that now dying out? Or what is your expectation? Are there series of weights still coming next year, year after next year? I know it's a difficult question and guesswork on the answer. But I mean, I guess that you have done some simulations and maybe you can help the audience here.

[Thomas Schinecker, Chief Executive Officer of Roche Diagnostics]

As Severin mentioned, we have done all of the different scenarios, and they are quite broad still, the situation. I would say by end of the year, we'll know a lot more. We're now heading into the respiratory season, and we'll see what kind of new variants will appear, but also how much the cases will pick up now that people go back into rooms, right? And maybe certain precautionary measures are not taken any more, et cetera. So we'll -- I will say the scenarios will come a lot closer in the next 3 months. But I think this winter will still be a situation where we'll see a lot of cases.

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

And I would just say, when we were -- when we started modeling this last year or early days of the pandemic, some of the factors that we plugged into the model, one of the key ones was is there a vaccine, right? And now we know, hey, we have some really good vaccines. But as Thomas said, the fact that you don't have sterile immunity, that's also a pretty big factor for continued propagation of the virus. Vaccine duration was an unknown. Now we know a little more about that. And what we know is that, yes, the effects of the vaccine were off. So if everybody gets vaccinated promptly every 6 months forever, then there will be relatively little disease. But I don't think, based on the dynamic we've seen that, that's likely to happen. So we think there's going to be some amount of COVID, including unfortunately, severe cases for some years.

[Thomas Schinecker, Chief Executive Officer of Roche Diagnostics]

And I think what's also interesting to see is if you look at the subpopulations of people that are vaccinated, they have a very different level of antibody response, right? And so that's why certain subpopulations are now being vaccinated again with a third booster shot, et cetera. I mean age is definitely one of the factors. And so I mean, I can say that testing people on the amount of antibody that they have is important to know how safe you are.

[Karl Mahler, Head of Investor Relations]

Yes. Okay. Yes, thanks a lot. I think that is the maximum we can say at this point in time. So Michael Leuchten would be next from UBS.

[Michael Leuchten, Co]

Two questions, please. Just going back to your confidence that OCREVUS or OCREVUS is being slowed by patients in the U.S. waiting for the booster vaccines. Just wondering how you go out and make sure that is the right assumption. And I'm thinking the average MS patients is relatively young. We know this product has been prescribed across range of disease. So how do you substantiate that, that's really the roadblock, the break that is going to come off once we go into next year? And then a question on Evrysdi, please. You were kind enough to offer patient numbers for the second quarter in the U.S. I think you said more than 1,800 patients. That was not a data point on the slides this time around. Would you be able to provide that number for the U.S. so we can look at the patient flow in that region?

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Sure, Michael. Thanks. So in terms of our confidence on the OCREVUS that our hypothesis around delayed dosing is correct, I think really, there's 2 elements to that. I mean it's surely happening because we hear this in every MS office. It's not -- we don't really talk to folks who are saying, "Oh, hey, it doesn't matter at all. You can mix the vaccine and the infusion anytime. It doesn't matter." I mean there's a broad understanding and belief that the timing does matter. And now with the combination of the Delta variant and the motivation to get booster shots, this is real. And then the point about the patients being young, it's true that many people are diagnosed with MS at a young age and many of them are starting OCREVUS. But it's also true that, for example, the primary progressive population is older. We have a high share of primary progressive because we're the only therapy demonstrated to treat primary progressive. We also have a lot of patients who've had relapse in MS for a number of years who are older. And then basically, people with autoimmune diseases are considered in the categories of folks that are at risk for worse outcomes from COVID and are being recommended to get boosters. So I think the facts, they add up. I mean we don't have precise data, but I think we have enough sort of anecdotal evidence and other facts that support it, that we're quite confident in it. And in terms of Evrysdi, my understanding is the U.S. patient number at the end of Q3 was up to 2,100. So hopefully, that helps, Michael.

[Karl Mahler, Head of Investor Relations]

So again, a considerable increase. And I think you can cross-reference that also with some sales figures and numbers from peers. If you put the mosaic together, then you know somehow what the basic drivers are at the moment in that market, in the SMA market. Next one would be Mark Purcell from Morgan Stanley.

[Mark Douglas Purcell, Equity Analyst]

Two questions. The first question is should we expect Actemra biosimilars before the end of 2022? So obviously, there have been filings in the summer, but there's also been IPRs filed in the summer as well. And if you can't comment today, when should we gain more visibility on that product, given it's an increasingly large base? And then secondly, Phesgo appears to be gaining momentum, providing additional HER2 franchise revenue protection. And there's a big Herceptin subcut revenue base still to convert in Europe as well. So could you remind us how Phesgo is positioned in price versus the 3 combinations of Perjeta and Herceptin? And with oncology pricing becoming more of a discussion point today, how should we think about co-formulations in oncology going forward more generally? So an obvious example coming up could be the Tecentriq-tiragolumab combination where if it's fixed as opposed to a free combination, it could further energize the Tecentriq franchise.

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Thanks, Mark. In terms of Actemra biosimilars and time lines, I don't really have much to say about that. It could certainly be that it doesn't happen in -- at all in 2022 and that, that happens later in 2023. But that's about all I would say. In terms of the pricing for Phesgo, which is the combination of Perjeta and Herceptin, the -- it's -- it really depends by country. I mean in some countries, it looks something like the Herceptin biosimilar price plus Perjeta. Yes, I mean it's a competitive situation. We want to make sure that Phesgo is at a price point that allows it to be adopted in the health care system. And so we basically adapt that to the local circumstances. But it's a huge economic benefit to the system because you basically replace up to a 2-hour infusion with like a 5-minute procedure. And yes, in terms of use of facilities and time of nurses and things, it's a big benefit. So it's been very popular. And we think that this approach could be useful for other oncology therapies. In terms of how broad that's going to go like, for example, you mentioned tiragolumab and Tecentriq. I mean first off, I would say, if we have studies that show a strong benefit for tiragolumab when added to Tecentriq, our expectation would be that, that's how it will be used in practice. They're not going to combine tiragolumab with another checkpoint inhibitor because just like they don't -- the checkpoint inhibitors are not used interchangeably today even though they have similar properties and similar molecular characteristics. You basically see them being used in the combinations in which they were studied, and so we think that will be also true for tiragolumab and Tecentriq.So I think all I have to say is I think tiragolumab can be a big growth driver for Tecentriq, but I don't believe a co-formulation is required for that. And at this time, we don't have plans for a co-formulation.

[Mark Douglas Purcell, Equity Analyst]

And so that will be kind of 1 plus 1 pricing presumably on that basis? I guess there could be potential for tiragolumab to be used quite widely even without Tecentriq, it could be other IO combinations in the future?

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Yes. That's possible if other companies -- once it's available, we want to do studies in combination with tiragolumab, we would welcome that. But I think -- and then as to whether it's 1 plus 1, there are -- we have innovative pricing mechanisms that we use in terms of indication-based pricing that allow us to adjust prices depending on how therapy is used. We have that ongoing in, I don't know, 20 to 30 countries around the world. So I mean, I think we have a lot of opportunities to make sure that we're priced in a way that allows broad access and allows us just to realize the benefit of our investment.

[Karl Mahler, Head of Investor Relations]

Thanks a lot. So we have 3 more questions left in the queue. We have 9 more minutes if my math is correct, we need to -- yes, keep the time. We have 3 minutes for question and answer, so Richard Parkes.

[Richard J. Parkes, Head of Pharmaceutical and Biotechnology Team]

So firstly, I've heard some discussion about potential inclusion of monoclonals in future VBP rounds in China, with AHR obvious candidates. So I just wondered if you could discuss what you'd heard on that and what your expectation is and what you'd factored into your planning assumptions? Then secondly, your report data from adjuvant trials of Tecentriq in renal, HCC and head and neck cancer in 2022. You gave us some kind of ballpark range for the adjuvant opportunity in lung cancer. I wondered if you could do the same for those opportunities in aggregate and your likely competitive positioning.

[Severin Schwan, CEO & Executive Director]

Richard, could you just repeat the first question? What was the question again?

[Richard J. Parkes, Head of Pharmaceutical and Biotechnology Team]

I've heard some discussion about possible inclusion of monoclonal antibodies in future VBP rounds in China, with AHR obvious candidate. So I just wondered whether you'd heard anything about that likelihood and what your expectations were.

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Okay. I think if I understand what you're asking is, is there -- are you talking about like threat from biosimilars? Or I guess I'm trying to understand what your -- do you see a little more...

[Richard J. Parkes, Head of Pharmaceutical and Biotechnology Team]

The VBP rounds could be expanded to include monoclonal antibodies. So obviously, if they're biosimilars, then there could be value-based procurement impacting AHR.

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Yes. I mean we -- there's already impact on Avastin and Rituxan biosimilars in China. And -- well, and there's competition in Herceptin, we're still growing Herceptin. I don't -- I mean, I guess I would say over time that we will have biosimilar erosion in China on AH&R in the same way we've had in other countries. I think in the meantime, we're continuing to expand rapidly on a number of other products. There's still a lot of demand that's unfilled for AH&R, notwithstanding the availability of biosimilars. So I think we feel good about our future in China with or without that kind of competition. And then in terms of the market potential.

[Severin Schwan, CEO & Executive Director]

Adjuvant Tecentriq.

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Yes. I think if you look at the appendix from the Pharma Day, I don't have it on me, but I think in the Pharma Day packet that we gave out, there was epidemiology from our IR team that was in there for a number of those indications. I think you'll find what you're looking for there.

[Karl Mahler, Head of Investor Relations]

Yes. Thanks a lot. Next one would be from Andrew Baum from Citi.

[Andrew Simon Baum]

A couple of questions. Firstly, on gantenerumab. The blowback that existed after gantenerumab -- sorry, after aducanumab's approval on the back of A-beta lowering has subsided. One of your competitors has thrown its hat into the ring and saying they going to take advantage of the pathway. Could you just confirm that if the FDA greenlighted you for using the accelerated approval on the back of nongraduate data that you would seize that advantage and go forward with it? That's the first question. Second question on M&A. Roche has an extensive breadth of assets across therapeutic areas. But with the exception of MS, immunology perhaps is not as strong as it could be. There are several big categories where Roche doesn't have a meaningful presence: psoriasis, RA, respiratory pemphigus and so on and so forth. How keen are you to build out that immunology franchise with business development, thinking about, obviously, you have unlimited capacity given your financial strength?

[Severin Schwan, CEO & Executive Director]

Right. Our M&A strategy has always been, how shall I say, opportunistic. It's of course focused on our franchises in Diagnostics and in Pharma, but it's opportunistic in the sense of looking at the specific opportunity. In other words, we would also go into areas where we haven't been before, right? And it's not only true on the M&A side, it's also true on the portfolio side. That's how we ended up in MS in the first place, right? We never had a strategic plan or any strategic intent to build out MS and OCREVUS was an opportunity to enter this field. Or if you think of hemophilia, for example, Chugai stumbled into this area given that the technology of the bispecifics they could apply in that field. And as a result of it, we are in hemophilia. And I think that's important. Internally, we typically say we follow the science, and that's true for our internal portfolio, and it's also true for how we look at M&A. Now sometimes, if you have a franchise that can help you with the business case. Because if you have a franchise, you can leverage certain resources or your footprint, for example, around the world, and that can then help to make a business case work. But I can just confirm that we don't have a strategy where we say now we want to find an asset in MS or in immunology or somewhere else. It's rather the opportunities which come up, primarily driven by the scientific progress and sometimes by opportunities which are presented to us. Gantenerumab, the accelerated approval?

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Yes. It's a good question. I think the simple answer is that we're going to have the full readouts on the 27-month clinical data in about a year's time. And so there's really not a scenario where we could be launching, even on an accelerated approval time line, where we would be launching without people knowing what size, what type of clinical impact that we have. So that's part of the reason we're having discussions with the regulators about what is the best approach, innovative approaches to make gantenerumab as available as soon as possible to people with Alzheimer's. And again, we're looking forward to completing those studies.

[Karl Mahler, Head of Investor Relations]

Thanks. And with this, we get to the last question.

[Operator]

Last questions from Eric Le Berrigaud from Stifel now.

[Eric Le Berrigaud]

The two questions actually refer to 2 legacy franchises. So starting with HER2, I'm curious to hear your thoughts about the pattern going forward. Most of Herceptin has gone now, but Perjeta and Kadcyla are getting mature. Phesgo is showing nice growth. But beyond that debate around de-escalation is still around. And last but not least, new ADCs are showing great promise. So all in all, how would you see things developing? It's kind of flat sales overall over HER2, still the best guess on your side? Or would you guide differently now one way or the other?And the second question is in ophthalmology, pretty much same question. Lucentis biosimilar coming, but PDS, faricimab, on the other hand. Is it fair to assume sales balancing out in the U.S. and growth coming from ex-U.S. territories? And as far as growth, would you guide towards gradual growth with new patients first or pretty fast adoption, including aggressive switches?

[William N. Anderson, Chief Executive Officer of Roche Pharmaceuticals]

Great. Yes, let's see. In HER2, I think certainly, one thing we're really excited about is the potential for cancer immunotherapies to play a role. And so we've initiated studies, for example, with Kadcyla and Tecentriq and in early breast cancer. So I think that's certainly an area for growth. And then, of course, remembering that HER2 is 20% approximately of total breast cancers. And with giredestrant and our PI3 kinase inhibitor, we're targeting the HR-positive population, which is a little more than 60% of breast cancer. So I think overall in breast cancer, we think we've got an opportunity to grow significantly over time and to impact many more patients with therapies ranging from cancer immunotherapy to these protein-targeted therapies, small molecules in HR-positive. And then in ophthalmology, likewise, I think we're quite confident in growing. We have a relatively small part of the U.S. market with Lucentis at this point in time. And outside the U.S., we only have a royalty share, whereas now we're taking both the Port Delivery System with ranibizumab as well as faricimab into the U.S. and launching all around the world with full revenue. And in the case of faricimab, we have -- doctors are super excited, and I think we'll have a relatively rapid uptake of faricimab. With the Port Delivery System because it requires a surgical procedure for each patient and each physician needs to be trained on this novel surgical procedure. They'll actually be trained by Roche or Genentech and then they'll perform a number of those procedures in sort of a supervised way before they ramp up. So I think with ranibizumab with Port Delivery System, that's going to be a slower ramp, we think ultimately could be a very large product because of the convenience advantage. So overall, strong growth ahead, we believe, in both breast cancer and ophthalmology. So thanks for the question, Eric.

[Karl Mahler, Head of Investor Relations]

This one, I wanted to thank all of you for your interest in Roche. I wanted to thank the presenters helping us today to make the call an exciting one. I wanted to thank Bruno, Birgit, Gerard, Loren. And with this one, maybe over to you, Severin.

[Severin Schwan, CEO & Executive Director]

Yes, Karl. To conclude, thank you very much for your interest also from my side. We touched on biosimilars today. We had a lot of talk about COVID-19, of course, rightly so. But I'm really pleased that we talked a lot about the newly launched medicines and our pipeline, that's the future. And it was nice to hear Bill close on faricimab. That's what really counts in the long term, and we have a lot to offer here. So thanks again for your interest, and have a good day. Thank you.