Earnings call: Roche reports growth and optimistic 2024 outlook

Roche Group (ROG.SW) has delivered a solid financial performance in 2023, with a 1% growth in group sales and a 6% growth in core earnings per share (EPS), exceeding their own guidance. The company's CEO, Thomas Schinecker, announced during the earnings call that dividends will increase to CHF 9.60, reflecting confidence in Roche's future. Despite headwinds from COVID-19 and biosimilar competition, the base business excluding COVID-19 related sales has shown robust growth. Roche anticipates a decrease in headwinds and is projecting mid-single digit growth for 2024.

Key Takeaways

• Roche's group sales grew by 1%, and core EPS increased by 6% in 2023.
• Dividends were raised to CHF 9.60, signaling confidence in the company's financial health.
• Excluding COVID-19, pharma sales rose by 9%, and diagnostics sales by 7%.
• The company expects mid-single digit sales growth in 2024, with reduced impact from COVID-19 and biosimilar erosion.
• Significant plans for 2024 include major launches in diagnostics and Phase 3 readouts in pharma.

Company Outlook

• Roche aims for mid-single digit growth in 2024, with a focus on digital health, R&D, and a simplified operating model.
• The company plans to increase dividends in Swiss francs and anticipates a stronger pipeline driving future growth.
• Roche expects to launch two new medicines in 2024 and is confident in their young portfolio.

Bearish Highlights

• The diagnostics division experienced a decline in sales due to a loss of 2.3 billion in COVID-19 testing.
• The effective tax rate is expected to increase in 2024.
• Currency fluctuations, particularly the US dollar, had a negative impact on financials.

Bullish Highlights

• Roche's core net financial results benefited from currency fluctuations and net interest income increase.
• The company defended its margins effectively in constant currencies.
• There were significant drug approvals and positive Phase 3 readouts in Q4.

Misses

• There was a small decline in margins by 0.5 percentage points.
• Net debt increased by 3.1 billion Swiss francs due to M&A activities.
• Cash flow decreased due to lower profits and currency impacts.

Q&A Highlights

• Executives expressed confidence in the success of Salviseron and the incretin portfolio.
• Discussions with regulatory authorities and payers regarding reimbursement for DMD product are ongoing.
• Roche is optimistic about the future of the CDK4/6 inhibitor in combination with other drugs for breast cancer treatment.

Roche Group remains focused on its strategic development and is preparing for significant launches in both Diagnostics and Pharma. The company's underlying business performance has been strong, and with 12 potential Phase 3 candidates this year, Roche is strategically developing its organization for the future.

InvestingPro Insights

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Full transcript - Roche Holding (SIX:ROG) Ltd (OTC:RHHBY) Q4 2023:

Operator: Ladies and gentlemen, welcome to Roche's Full Year Results Webinar 2023. My name is Hendrik, and I'm the technical operator for today's call. Kindly note that the webinar is being recorded. I would like to inform you that all participants are in listen-only mode during the call. After the presentation, there will be a question-and-answer session. [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 Schienecke, CEO of Roche Group. Mr. Schienecke, the stage is yours.

Thomas Schinecker: Thank you very much. Hello, and welcome and I look forward to sharing our full year 2023 results with you. In 2023, we managed to exceed our guidance. As you see on the right-hand side, the group sales growth increased by 1% in constant exchange rates. And this is despite significant headwinds from COVID-19 and also by similar erosion. In total, headwinds of about 6.4 billion or more than 10% of our sales. And we managed to grow through that. As the headwinds will become less for us in 2024, and we have a strong underlying business, this underlying business will shine through in 2024. And you'll see in the guidance, we do expect good growth for 2024. Core EPS, we also exceeded our guidance by reaching 6% growth at constant exchange rates. Now we had a one-time positive effect due to the resolution of a tax dispute. And even without this effect, we grew our core EPS in line with our group sales at 1%, again, exceeding our guidance. And with that, we managed to further increase our dividends to CHF 9.60. So overall, I mentioned a strong growth of 1% that is really supported by a very strong base business growth of 8%. The base business growth is excluding COVID-19. Pharma grew a strong 9% and diagnostic at 7% in the base business. We had the expected COVID-19 sales decline of CHF 4.3 billion and AHR of CHF 1.1 billion. On top of that, we had to compensate for decline in LUCENTIS and Esbriet as well due to biosimilar and genetics erosion, really showing that the strong underlying business made us grow this year despite these headwinds. The core operating margin stable, core EPS plus 6%, operating free cash flow plus 4%, all at constant exchange rates. We've achieved a number of very important key milestones in Q4, the approval of Vabysmo in RVO and Tecentriq as subcuts, the U.S. priority review granted for Xolair in food allergy. We've had a number of positive Phase 3 readouts. One that I would like to highlight is the readout for inavolisib that Teresa will also cover. Really fantastic results and this means we're going to launch this medicine hopefully already this year. We've also had very good results in Xolair in food allergy. We've had a number of launches on the diagnostic side, but also a number of deals for pharma; Telavant, the anti-TL1A, Carmot, the dual GLP-1/GIPs and LumiraDx, really a revolutionary point of care technology. We have significant news flow in 2024. On the diagnostic side, let me say with MassBank with the Accu-Chek SmartGuide, the CGM, c703, updates to cobas 6800/8800, cobas pro serology solution, et cetera, we will have the biggest launch year for diagnostics in the history of this division. On the pharma side, we have a number of Phase 3 readouts. Let me call out specifically Gazyva in lupus nephritis, but also we have a number of Phase 3 enabling readouts. We have in total 12 NMEs that could potentially transition into a Phase 3 during this year. Now, again, let me highlight on this slide the strong achievements of the organization, growing 1% at constant exchange rates. If we exclude COVID-19, you see the strong 8% growth. On this slide, you see the different movements of the sales lines. The dia-based business growing 1 billion. There are actually not that many diagnostics companies that are even the size of 1 billion, and we add that every year. That's the underlying base business growth of 7%. You see the expected COVID-19 impact. As I mentioned before, this impact will be easing. We have a strong growth of our new portfolio in pharma, and we have the expected impact in Ronapreve and AHR. And here, you also see the appreciation of the Swiss francs versus other currencies, specifically in Q4 accelerated. What I also wanted to show is how the quarters have developed over the last couple of years. In Q4 2023, you see 0% growth, but this is due to the COVID effect in Japan of about 1.2 billion. Without this, the group grew 8% also in the fourth quarter. So again, very strong underlying growth of the base business. What I also wanted to show, and you see that in the blue boxes, how the base business, so the business excluding COVID, this is what's going to carry us forward, has developed over the recent years. You see a massive acceleration from 2022 to 2023 in our base business, growing from 3% in '22 to 8% in '23. So strong delivery in our commercial organizations with a good portfolio. Here again, you see the base business development both in pharma and diagnostics. On the diagnostics side, we have again achieved 7% growth in the base business, the same as the previous two years. So we've consistently grown in the high single digits for the diagnostics business. On the pharma side, we've seen really the acceleration from 2% growth in the base business in 2022 to 9% growth in 2023. And what I can say is, also when we look at the guidance, we see a strong continued trend also into '24. The key growth drivers of the portfolio are in diagnostics, we see very strong growth in Core Lab, in Pathology, but also in the Molecular Lab. In ophthalmology, Vabysmo now reached CHF 2.4 billion. Phesgo reached CHF 1.1 billion. Hemlibra has reached 40% patient share in the U.S. and the EU5. And Polivy is becoming the new standard of care in first-line DLBCL. And we've had strong launches with Columvi and Lunsumio in third-line DLBCL and follicular lymphoma. Ocrevus is the number one globally with 24% market share and Evrysdi is the number 1 globally in patient share. So you see a strong portfolio throughout the different disease areas. Now beyond the portfolio, we've made significant progress in terms of strategic and organizational development in 2023. And I will not go through everything, but let me give you some highlights. On a digital health strategy, we have focused our efforts in certain areas. We have decided to go for one technology platform across the group and one center of excellence for digital product development. On the disease area strategies, specifically cardiovascular and neurology, we defined the strategies and we moved forward. On R&D excellence, we've done a productivity analysis and we've seen that there are areas where we are best in the industry, but there are also areas where we can be better. And we set goals to be in the top in all of those measures. We've also set the goal to have 80% of our portfolio either best in disease or first in class. And we are working towards that goal. We're investing in the latest technologies, AI, ML, but also large language models. And we are really accelerating promising projects, going through prioritization of a portfolio, deprioritizing projects that are not as promising and moving those efforts into the most promising projects. And we've seen a couple of effects already. Inavolisib, which was supposed to read out in '24, came in early because of these efforts. Trontinemab was accelerated because of these efforts. So you've seen that we have done a lot to really move our portfolio ahead. We also looked at our operating model to simplify, clarify, and align structures and processes and technologies, to get rid of duplications in our organization, to make fit-for-purpose right processes, slim processes to accelerate everything that we're doing, and to set standards around technology. And some of these things you can see with diagnostics and diabetes care integration or the integration of FMI into diagnostics. On the people and culture side, we've made significant progress as well. Not only do we have a new corporate executive committee, but we also have gender parity now in the corporate executive committee. And we're working on culture. We have a really high engagement from our employees and very good culture scores. We're working on having more debate leading to better and faster decisions by our empowered people and really an excellence to deliver ambitious goals. So we're setting very ambitious goals across the organization to be able to deliver those. It will be very important to build on that with our people. Now, what you can already see, and we already did that in Q3. In Q3, we have already deprioritized three NMEs. In Q4, you see we have deprioritized another eight. And we're shifting the resources to projects that we want to accelerate. You will see a similar number in Q1. So really making sure that we put our efforts behind those projects that are most promising, really working towards achieving a portfolio that not only has the most NMEs in the industry, but 80% of those NMEs, either best in disease or first in class. And one way we built that is also through bringing in external innovation. Telavant, this being one of them, Teresa will comment on it. Alnylam in hypertension, Carmot, again, Teresa will comment on that. We've done deals around ADCs, RNA therapies, molecular glue degraders, and also generative AI together with NVIDIA (NASDAQ:NVDA). We've done a very interesting deal, which is now at the stage of the Definitive Merger Agreement. The closing will be later this year around point of care, where you can do multiple modalities on one single platform, and where we have a very strong and very good cost position. So you see we're building and accelerating our pipeline through our internal efforts and complementing that with our external efforts. Also on the ESG side, we have made significant steps ahead. On the Dow Jones Sustainability Index, we were not only number 3, we were also number 2 with Chugai. So we have two of the top three positions in the Dow Jones Sustainability Index. In reducing the Scope 1 and 2 in the greenhouse gas emissions, we've managed to reduce 79% since 2004. We've also made progress in our portfolio and the contributions that we do there with HPV, molecular testing, and a novel antibiotic class that was developed and discovered by our researchers. Now let me take you through what 2024 will look like. First, we have a young portfolio. We've been launching about two medicines every year for the last 10 years. We're going to launch another two medicines this year, crovalimab, for a certain type of disorder where red blood cells are attacked by the immune system. This medicine has the potential also in other diseases. Inavolisib, where we just got the data end of last year, and it was very promising to a point where we do believe that we can actually bring this to market already this year. And you see that this young portfolio will continue to drive growth in the next years. And on top of that, the headwinds are becoming less. The last time where we really have a major impact from COVID-19 will be in Q1. In 2023, we had an impact of 4.3 billion. This impact is going down to 1.1 billion. In 2023, if you look at biosimilar erosion and you take everything together beyond even the AHR, we had an impact of 2.1. This is coming down to 1.6. So you see the overall headwinds is coming from 6.4 to roughly 2.7 billion. And with the strong momentum in our underlying business, this will shine through and help us grow in the mid-single digit range in 2024. On top of that, we have a number of things in the pipeline that will continue to drive growth in the outer years. And let me start with diagnostics. Mass spec, cobas pro serology solution, blood screening in the U.S., cobas c703 ISE, our Alzheimer panel for Elecsys, the cobas 6800/8800 version 2 molecular diagnostics, next generation sequencing, continuous glucose monitoring. We are on fire when it comes to launches in diagnostics. We have the best launch year in the history of this division. On the pharma side, and I'm just showing you some of the assets that have significant opportunity for growth. And most of those are not even covered in any of the models out there today. And we have significant readouts in 2024. Many readouts, Phase 3 readouts will be in 2025, such as astegolimab, such as fenebrutinib, giredestrant and others. But there are 12 NMEs that could transition this year into Phase 3s. So we have a strong pipeline also on the pharma side that can drive and will drive growth in the outer years. We will not need everything to work, but all of those are significant additional market opportunities. And most of them not included in any of the models. So again, looking at 2024, we see a strong base business growth in '23 8%. We do believe that our base business will continue to do well. The headwinds are becoming less, significantly less. And with that, we believe that group sales will grow in the mid-single digit range. For the '24 guidance, core EPS will then grow broadly in line with sales growth. Now, this is excluding this impact from the resolution of tax disputes in 2023. You've seen that on the '23 slides. I mentioned we grew 1% and core EPS 1%, excluding this effect. So we're excluding the effect in both cases. So you see that we're continuously performing, we're continuously delivering on keeping the margins stable. And this would actually mean that from an operating cost perspective, we'll need to be very disciplined because we'll need to grow operating profit in the high-single digit range to get the core EPS in line with sales growth. But I know Alan will cover more of that. For the dividend, we want to further increase the dividend in Swiss francs. Thank you. And with that, I hand over to Alan.

Alan Hippe: Yeah, thanks, Thomas. Lots of good remarks. I have now to do something first, which I'm not so used to normally. I have to do a little bit of advertising, but it ties very well in what you have said, Thomas, because we would like to deliver even more information to the opportunities that you've talked about in 2024. So we have a neurology update from an investor relations point of view at March 11th, where we have Elevidys, we have trontinemab and we have prasinezumab in Parkinson's disease, we'll have an update there. And we have the Diagnostics Day. Really, how should I say, lots of excitement around that. More talks about the technologies and perhaps one or the other machine might be visible there. And even, how should I say it, touchable, if I might say. And then we have the Pharma Day on September 30th. And on this day, it's not just about the pharma strategy, it's also about the group strategy on top. So I think a very, very important day. Good. With that, let's go into the numbers. First, I give you a quick overview and then I dig into the details. You see on that slide first that I will focus on the right-hand side. So really the numbers and the improvements, if you like, in constant rates. I think that's really justified. We have a very solid natural hedge when it comes to currencies. I come to that and will show you a slide on this. But just to explain to you why I'm so focused on the constant rates development. So you see really sales, and as Thomas said, I think even without COVID, I think we have grown by 8%. I think pharma, up 6%, dia minus 13%. When you then look at it without COVID, pharma up 9% even, and diagnostics up 7%. I think that's really great. And Matt and Teresa will dig into this. And then we have the core operating profit minus 1%. Well, we invested into R&D. So we have an increase there of plus 5%. And we have an increase in SG&A of plus 4%. I come to this. Majorly driven by M&D in Pharma. So we invested into the product. I think in case of the Vabysmo that made a hell of a sense. And we have some increases on the corporate side. When you look at current income plus 3%, I think that's really the tax impact. That's really a tax resolution that we had the pleasure to experience in 2023. It was a major uplift. It is admittedly at that size a one-off. And that's also why we've decided to exclude that from the 2024 guidance. And then really you see from the core net income plus 3% to the core EPS plus 6%. And that's interesting because that's a base effect coming from Chugai last year. You might all remember we had the settlement at the time around a product called Ultomiris. And that settlement gave us a 668 million, if you like, pure profits. And I think that boosted the Chugai result at the time. That's not existent anymore in 2023. So we have a 60% share in Chugai. 40% is really the minority's share. So the deduction, if you like, or the adjustment for profits based on this is much lower compared to last year, which then certainly brings the comparison up and brings the core EPS to plus 6%. IFRS net income plus 7%, better performance, less impairments, a couple of restructuring charges. And then we have the operating free cash flow with 15.8 billion, up 4% in constant rates. I would argue still allowing us to do whatever we want to do and certainly also investing into M&A. And I will come to that later on. The same applies to the free cash flow. Good. With that, let's go rather quickly through the P&L. I think sales, I would argue, is covered and there's more to come. Other revenue, you see a minus 664 million. So reduction compared to last year. That's Ultomiris. Ultomiris, this is 668 million. So I think that number fits perfectly. Then you really see the cost of sales with a plus 1.35 billion. So that's a major improvement. It also brings the cross profit margin up. What certainly I can say here, it's a fantastic achievement because in group, the volumes went up 5%. In pharma, it went up 12% percent. And in pharma, we provide a saving. You will see it later on of roughly 100 million. And then certainly there's diagnostics and they really provide the bulk of the saving, if you like, but certainly also due to the fact that the sales went down significantly. I think when you look really, because I heard a little bit of a question about royalty expenses, I see the royalty expenses itself went up because of Ocrevus and Evrysdi. But we had an offsetting effect, even a little bit of an overcompensating effect coming from collaborating and profit sharing agreements where we had, if you like, a little bit of an ease of the expenses here. And the explanation is simple. It's RONAPREVE. Good. With that, let's go to the next slide, which is R&D asset, up 5%, really driven by pharma with 725 million. And then SG&A was a 590 million increase. M&D from pharma, 346 million. And then we had 100 million really coming from the corporate side, driven by informatics and a little bit by P&C, so people and culture. And then other operating income and expenses, rather stable. It's relatively small number, I would argue. Good. I think when we look at the margins and you know, we said we want to defend the margin. And I would argue in constant currencies, I think we were quite successful. You see the margin decline is small in constant currencies with minus 0.5 percentage points. You see without Ultomiris, it would have even increased. I think you see quite a nice development of pharma division with the minus 0.4 percentage points without Ultomiris plus 1.1 percentage points. And then you see the diagnostics division going down. But I think here a simple explanation. When you lose sales on a magnitude of 2.3 billion, I think it's very hard to keep the margin. Good. With that, let me go to the core net financial results. Here currency helps us, as you can see, because you see a roughly 90 million deterioration in constant currencies, a minus 197 million. And let me lead you through this. I think the equity securities this year we had a gain, last year we had losses. So this is really what comes from the Roche Venture Fund. We're investing into minorities, as you know, in private companies. Evidently, I think we see an uptick here. And then you see the net interest income. I think the team did a great deal here. We've issued bonds in Q4 or in the total of 2023 of 6.5 billion, vast majority in Q4. Certainly, we made use of these funds and that brought the net interest income up. Then you see really the currencies, where we have currency losses, no doubt about that, of minus CHF 243 million, but it was less than last year, and that's the 35 positive that you're seeing here. And then you see the interest expenses, very clear. We had the refinancing. We refinanced at higher rates. We brought more debt in, certainly also at higher rates compared to history. So, okay, a minus CHF 208 here. And then other is hyperinflation, a minus CHF 233 million in total, which came in basically triggered by Turkey and Argentina, so nothing unexpected, so to say. Good. Tax rate. Yeah, let me start on the right hand side, because that's a big pleasure. Effective tax rate for 2023 is 11.9%. We all enjoy the moment. I think really this resolution of a tax dispute was very, very beneficial, accounted for CHF 774 million, so a significant number and certainly also, how should I say? It helps us from a cash-out point of view because that number is so -- this number is not going away in cash. So I think that's quite positive. I think if you add back this impact, you get to an effective tax rate of 16.2%. Now, you might ask yourself, okay, what's going to happen in 2024? Let me be precise here about 2024. What we expect is that the 16.2% goes to 18% and that's the basis for the guidance. And in addition, 1.5 percentage points, so in total, 19.5% tax rate is coming from the Swiss minimum tax, that's coming in here, which is working a little bit against us. So you see there is quite a jump on, one hand on the underlying tax rate, but also, let's say, from the Swiss minimum tax. And I come back to that. Core EPS development, submitted a summary. When you look at profits, let me start with the full year 2022, so the 20.62 and then going over to the full year 2023, excluding the resolution of the tax disputes. And what you see a nice uptick in operations of 2.5 percentage points. ULTOMIRIS worked against us and all other effects netted out, basically. And then you see really from full year 2023, the tax effect was plus 5 percentage points. So quite significant to bring us to the overall plus 6.1% core EPS increase, very important, when we come later to the guidance. Yeah and a couple of non-core items. First, you see core operating profit, as said, minus 1% on the right hand side. You see the IFRS operating profit on the right hand side going up by 3%. And you see really the total non-core operating items plus CHF 670 million. I would outline two effects here. One effect is, we had significantly less impairments compared to last year. I think really, if you let me mention Rozlytrek here, it's just one element which came in in 2023, but significantly loss impairments on intangible assets. And we had a little bit more on global restructuring charges, as you can take from that slide. When you take the IFRS operating profit with plus 3%, you get to the IFRS net income which is plus 7%, which is quite a boost. Well, the point comes from that really impairments are not tax deductible. And also, we have less impairments if you like, which are not tax deductible and that brings, if you like, the tax effect up in a positive way. And therefore, we get to a plus 7% on the IFRS net income. Good. I think really now we get to cash and that's where it all comes together. When you look at the group operating free cash flow, let me start on the left hand side with the CHF 17.6 billion. You see full year 2023 concentrates CHF 18.2 billion. I would argue the CHF18.2 billion is matching pretty well what we have delivered historically in the last couple of years. So that's fine. Let me lead you through this, operating net profit net of cash adjustments of minus 230. Well, I think ULTOMIRIS, once again. Then you see the net trade working capital and networking capital and improvement of CHF 1.2 billion. I think that's great. Nevertheless, accounts receivables went up, inventories went a little bit up. So I think there is still more work to do, which I think gives us a good outlook for 2024 investments in PP&E an increase of CHF 506 million and then you see the investments in intangible assets was an increase of CHF 173 million. I would say with a decrease of CHF 173 million, which then shows as an improvement here on the cash side. So I would argue pretty balanced. I certainly, I think the foreign exchange impact here was a minus CHF 2.5 billion is significant to bring us to the CHF 15.8 billion reported. Good. I think with the margins here, as you can see, I think group looks better in constant rates. Pharma division looks significantly better in constant rates and then diagnostics going down, that's clear. I think when your profits come down, I think it's not surprising that your cash flow comes down as well. Good, Group net development. We are at CHF 18.7 billion net debt. You see on the left hand side, we started the year with minus CHF 15.6 billion. So we had an increase here of CHF 3.1 billion, certainly driven by the M&A activities. But let me lead you through this. I think -- the operating fee cash flow. I've led you through CHF 15.8 billion. We pay taxes 3.6, treasury at CHF 900 million. And then I think you see the CHF 14.4 billion, the dividends CHF 7.9 billion and then M&A with CHF 6.2 billion, which basically is TELAVANT. And you might remember it was $7.1 billion in. It's CHF 6.2 billion in Swiss francs. So I think really that all makes sense, brings us to 18.7 as said, increase of 3.1. Well, a quick look at the balance sheet. You see cash and market level securities go up in concentrates quite significantly, 19%. As said, we have issued bonds of CHF 6.5 billion in the year 2023. Other current assets plus 5%. Debts accounts receivables with CHF 0.8 billion slight reduction in the balance sheet, which is at a different currency rate of inventories and then your non-current assets go up 13% and that's TELAVANT coming in with CHF 6 billion goodwill. Then on the right hand side, you see the capital current liabilities go down minus 2%. That's a lower income tax payable that we're having now after the release of the of the tax provisions. We have the non-current liabilities. This is the gross debt, which has increased to CHF 29.2 billion. And then we have equity, which has increased and we have a solid equity ratio of 37%. Okay, reporting changes. I think that's important to mention. As you might know, I think we will move Foundation Medicine from the Pharma Division to the Diagnostics Division. And we said certainly I think we see some changes here. That does not mean that we change the independence of Foundation Medicine, I think that keeps intact. The whole change is effective at January 1st. And certainly we would like to enable you that you come up with the right estimates for 2024. So we have no restatements made in the 2023 financial statement. This all is going to come during the year 2024 and in 2024, we will restate the 2023 results. And certainly we will apply that structure that you're seeing here in the 2024 financial statements. And these changes will have no impact on sales, operating profit, net income and EPS of the group as a whole. It has an impact on pharma and DIA as you can take easily from that slide, but not for the Group overall. But we said, however, for modeling purposes, I wanted to provide you a heads up here about the changes and how they impact the division of margins. And as you can take easily from that slide, it's an uplift for Pharma and it's more pressure from a margin point of view on Diagnostics. Good. With that, let's go to currency. You hear me always saying, we have a solid natural hatch and that's why I'm not so concerned about the currency impacts. For me, more a reporting topic, to be honest and by the way, I'd say this, I think when you look really at the major countries we do business in, let me start with the US, 46% of our sales are in US dollar, 43% of our of our costs in US dollar. You look at the euro with 16% and 15%, even the Japanese yen, it's 7% and 5%. And then you look really at others, 30% of our sales are in others and with 18% of our costs in other currencies. So I would argue overall, I think very solid. But the only thing and you know that for a long time, the only point we have an imbalance in is in the Swiss franc. Yeah, and it certainly shows when you look at our numbers. Well, currency impact and outlook, I don't want to go on the left hand side. You see really the major deviation compared to the average last year is coming from the US dollar has even increased. Middle of the year, we had a minus 3 percentage points difference then it increased to a minus 5% and then the increase to a minus 6%. You see it on the left hand side in that Swiss franc US dollar slide. But what this all went a cost, if you like it's on the right hand side, full year impact 2023. You see the minus percentage points on sales to minus percentage points on core operating profit, the minus percentage points on core EPS. And all that has been disclosed already at the JP Morgan conference on January 9th to enable everybody to come up with the right predictions here. You know what we're doing at year end? We keep all currency rates stable and then project them until the end of 2024. And then we ask ourselves, what's the impact on sales, core operating profit and core EPS? And you see it in that red box. It's around minus 6 percentage points on sales, minus 8 percentage points on core operating profit and 9 percentage points on core EPS. This is really when you do that modeling, when I say modeling because we all know this is the very, how should I say it? This is a heavy assumption because one thing is for sure, it will be different. And if you were applying today's currency rates and you would keep them stable and project them until yearend, we would be 1 percentage point better. We would be at a minus 5 percentage points on sales, minus 7 percentage points on core operating profit and a minus 8 percentage points on core EPS. Good. With that, another important slide, let me give you the starting point for the forecasting for 2024. And let me lead you through this diligently. I think really core EPS as reported 18.57. The foreign exchange loss, which needs to be extracted or taken away from the core EPS accounts for 0.42. How do we calculate this? It's the FX losses minus CHF 243 million. I've mentioned them even in the presentation. You find them on page 62 in the finance report. And then in addition, the net monetary position in hyper-inflationary economies, I've talked about that as well, the minus 233 accounts for 476. You deduct tax, you deduct the net controlling interest. Here you have to trust me, the CHF 138.32 million. And then you get to a minus CHF 337.68 million Swiss francs. You deduct it through 804 million shares, this is on page 176 of the finance report. And you get to the mentioned 0.42. And that leads you to the 18.99 in the middle of the slide. And then I think to have the right base, you have to deduct the impact from the tax resolution of 2023. And that's a minus 0.97. Leads you to the 18.02, which is the starting point for the predictions for 2024. Good. With that last slide, guidance, Thomas talked about it already, but let me give you a couple of specifics here. Let me say when we talk about mid-single-digit sales growth, we mean mid-single-digit sales growth, which I think is very important to reflect. So mid is mid. As said, we lose CHF 1.6 billion on loss of exclusivity, sales losses that we have. The CHF 1.1 billion that we still lose on the COVID side, so there is some headwind here. When you look at the core EPS growth, and Thomas has mentioned it, I think we have a couple of things going against us. And let me be clear here about these impacts, because it means, we need a very, very significant increase on the core operating profit side. As said, we face a group tax rate increase from 11.9% to 19.5%, based on that guidance from 16.2% to 19.5% and when you calculate that, that's roughly CHF 800 million on the tax side. So that's a significant impact. And furthermore, we face an increase on the interest expenses of roughly CHF 500 million. So that's CHF 1.3 billion in total. And to compensate for that, to get really broadly in line with sales growth, we need a core operating profit increase in the high single digits. So that's a significant commitment from our side and will take a lot of effort to bring us to this. Okay. And I think with that, I'm happy to hand over to Teresa.

Teresa Graham: Great. Fantastic. Thank you, Alan. So let's just jump right into Pharma sales. So with sales of CHF 44.6 billion Swiss francs, Pharma grew at a very strong 6% at constant exchange rates. And if you take out the effect of RONAPREVE, we grew at 9%. You can see that with the exception of Japan, all portions of the world grew quite strongly. Japan was, of course -- change of plan was of course impacted by a very strong RONAPREVE effect. If you exclude that, they also grew at a very respectable 6%. Overall, Pharma volumes were up by 12%. The price impact mix was about 6%. And you can see the currency headwinds intensified through the entire year, as Alan mentioned. They were at 8% for Pharma in Q4 and that's up from 7% in Q3. Core operating profit increased by 5% versus a 6% sales increase. Alan has walked through the COP dynamics, so I will go ahead and skip that. Again, you see here other revenue decreasing. As Alan mentioned, this is completely the ULTOMIRIS's impact. Cost of sales decreased by 1%. Alan mentioned the 12% volume increase, a very respectable result. This cost of sales decrease is mainly driven by favorable product mix and lower distribution costs. The R&D increase was largely around trial acceleration, which is something that certainly is a core component of the work that we're doing around R&D excellence. And as Alan mentioned, the increases in SG&A were largely very strategic and focused on places where we intend to see impact not only in 2023, but in future years as well. You've heard us often talk about our young portfolio, and I think when you look at this growth graph, you can see why we are so excited about it. So just to comment on the graph, all values are absolute and year-over-year growth rates are presented in CHF at constant exchange rates. You can see the VABYSMO continues to exceed expectations with 324% growth, easily crossing $2 billion last year. OCREVUS, HEMLIBRA, POLIVY, PHESGO, EVRYSDI all continue to grow very respectably. We'll talk about all of those in due course. RONAPREVE approved sales did continue to decline. This is driven primarily by the base effect of CHF 1.2 billion in Q4'23. In Japan, the last of our RONAPREVE sales will wash out in Q1 of this year and then we will officially have that behind us. AHR erosion was ultimately in line with what we communicated in Q3 at CHF 1.1 billion. This is the last time that we will talk to you specifically about AHR as their own subset. In the future, we will really talk about biosimilar and generic erosion as a whole. So now jumping into the actual product performance. So we are updating the way we present our Pharma and therapeutic area slides. You can find the details on the new definitions of those therapeutic areas and a crosswalk in the appendix on slide 172. For each of our therapeutic areas, we will present a slide like the one you have here, which shows you the full year sales in the donut chart on the left, as well as key Q4 updates in the outlook for full year 2024 on the right. So let's start here with solid tumors and oncology. In 2023, solid tumors increased year to date at 2% at constant exchange rates to CHF 16.1 billion. Looking at the HER2 franchise to start, PHESGO continued its exceptional growth at a 64% growth rate, that's a 39% conversion rate for PERJETA/PHESGO, achieved in our 46 pre-launch countries. Again, we have consistently said that we are aiming for a 50% conversion rate and we are well on our way in our key markets. We would expect that that ongoing strong conversion continues. And as we have previously said, as PHESGO continues to get acceptance and that conversion continues to happen, what we do ultimately see is that PERJETA/PHESGO penetration then continues to increase. So, very much looking forward to continuing to see that dynamic. KADCYLA grew by a respectable 4% last year, primarily driven by ex-US with early breast cancer more than offsetting the declines that we're seeing in the EU and the US due to metastatic competition. We recently presented very strong KADCYLA data at the San Antonio Breast Conference and we'll cover that in more detail on another slide. PERJETA grew at 1%, largely driven by international, offsetting the EU decline, which again is driven primarily by conversion to PHESGO. Many of you will have noticed the Q4 sales dynamics were negatively impacted by an adjustment in reserves related to US government programs. This was a one-time effect. We do not see anything in the underlying growth of anywhere in the HER2 franchise that leads us to believe that the guidance should be anything different than what we have given you in the past. To be more specific, for HER2 next year we would expect single digit growth and just with a slightly different product mix. And if you exclude the Q4 adjustment that was made here, PERJETA, again that growth was around 1% in Q4. TECENTRIQ is at 9% growth driven primarily by HCC in the EU5 and ex-US, as well as adjuvant non-small cell ex-US. I think in the US and adjuvant we are holding our own in an increasingly competitive market. We are happy that we have achieved EU approval for the subcu formulation and we're looking forward to FDA approval in September of this year. As a reminder, subcu TECENTRIQ allows us to go from a 30 to 60 minute infusion to a 7 minute injection which for capacity constrained healthcare systems is certainly a benefit. You may recall that we received approval in the UK last year and we have already seen about 18% conversion to TECENTRIQ sub-Q and just similar to PHESGO, a lot of really positive feedback from accounts who have made that switch. ALECENSA grew at a very respectable 8%. We're maintaining our market leadership in the ALK+ metastatic setting and the positive Phase 3 ALINA data have been filed. We expect US and EU approval later this year in adjuvant and we again would expect that growth to continue. Alan mentioned at JPM that we will expect to see the results for SKYSCRAPER 01 now in the second half of 2024. I think everyone has seen the data that was externally released last year that 0.8 hazard ratio. Again, event driven trial events have just simply slowed and we would look forward to getting that data at the end of this year. Thomas mentioned INAVOLISIB. We will go into more detail on the very strong results that we saw, but that is clearly a very exciting advance and so let's actually go straight to that now. So INAVOLISIB, holds a special place in my heart because it is a homegrown molecule. This was invented and developed by our gRED scientists in Genentech in South San Francisco and as Thomas mentioned we saw a very impressive result for this highly selective PI3 kinase inhibitor in first line mutated hormone receptor positive breast cancer. We saw the combination in this trial reducing the risk of disease progression by 57% with a very strong hazard ratio of 0.43. OS was immature, but certainly trending in the right direction. As I think all of you know about 80% of breast cancer patients are hormone receptor positive and about 40% of those patients carry this mutation. So we have – and patients with this mutation do tend to have a worse outcome. So these are data that were very well received. It was probably the latest late breaker in the history of San Antonio breast. It was presented at the end of last year to a lot of excitement and we're very much looking forward to continuing our conversations with health authorities and looking forward to approval for this drug hopefully this year. Of course in addition to the program that we currently have going on with INAVOLISIB we also continue to have a significant investment in hormone receptor positive breast cancer with a number of Giredestrant trials which will begin to read out in 2025. Again Giredestrant has the potential to really reset and be a new foundational backbone standard of care for patients with hormone receptor positive breast cancer. So this is certainly very much a place to watch. San Antonio was a big conference for us last year as we were also able to present the KADCYLA, the long-term KADCYLA data. KADCYLA is the standard of care in early HER2 positive breast cancer with residual invasive disease. This is seven-year data and you can see that it is the -- it is actually quite stunning what we have shown here at seven years. The long-term data continued to show IDFS benefit with an absolute benefit of 13.7% at seven years versus Herceptin. Again this data was extremely well received. It continues to entrench KADCYLA as the standard of care in this setting and we look forward to continue to bring this this wonderful option to patients around the world. Moving on to hematology which includes both malignant and non-malignant heme. So of course we will start here with HEMLIBRA. So HEMLIBRA finished with over $4 billion in sales this year. Very strong continued growth, 16%. We now have about 24,000 patients who have been treated globally. The basic profile of HEMLIBRA continues to be very attractive to patients who are looking for prophylactic treatment. About 60% of our patients are already on every two or four week dosing. They have zero risk of developing inhibitors and importantly for this patient population we have a wealth of long-term data across a number -- across patients of all ages and so I think you know they're despite the fact that we see increasing competition in the hemophilia space, there's nothing that tells us that HEMLIBRA can't continue to be the standard of care and can't continue to grow. Moving on to malignant heme, POLIVY had a very strong launch in first line DLBCL. We do expect it to cross into blockbuster status this year. Patient shares in first line DLBCL and that IPI zero to five status have climbed to 14% in the U.S., just under 30% in Germany, about a third of patients in Japan. We are anticipating an update to the NCCN guidelines to bring POLIVY or the POLARIX regimen to category one and a recommendation of the use of POLIVY in all stages of DLBCL which should further drive that momentum. Again if you are looking at Q4 sales and you saw a softening that was largely related to the fact that we had a software update in one of our distribution facilities at the end of last year and that unfortunately impacted POLIVY specifically and just drove a different buying pattern in Q4. So there's nothing that we see in the underlying growth of POLIVY that would lead us to believe that there should be any difference in what we would see going forward and we would continue to see strong growth and to see it establish itself as the new standard of care. GAZYVA grew at 19%, continued very strong growth driven by that first line uptake in combinations in first line CLL including combinations with VENCLEXTA. The launches of both LUNSUMIO and COLUMVI and third line plus follicular lymphoma and DLBCL respectively continue to go well. I think we have always said that, the real opportunity for these drugs is moving into earlier lines of treatment. We would expect a couple of hundred million of additional sales here in the third line plus indications but we do get that second line DLBCL data for both of these products this year and that is really where the additional growth will come from. So before I move on to neurology I will also sort of give another little shout out for crovalimab in PNH which Thomas mentioned earlier which gets its US and EU approval this year and is currently also in studies for additional diseases such as sickle cell. Moving on to neurology, Ocrevus remains the market share leader in both the US and the EU with 24% market share. We have over 300,000 patients being treated globally. This this growth that we see with Ocrevus is not only because of new patient share but is because we do see higher retention rates than is typical with other MS medicines. We expect this momentum to continue for Ocrevus. Again I think many of you know that we are expecting our Ocrevus subcut approval in the US and the EU this year. This is an every six month subcutaneous injection that will not only provide additional convenience for patients but will open up an entirely new segment of MS patients to Ocrevus. We would expect this to be a blockbuster opportunity in its own right and we're very, very excited to be able to bring this new option to patients. Evrysdi had another strong year with 39% growth. It is now the global market leader in patient share as Thomas mentioned a little bit earlier. We expect this growth to remain strong into 2024 particularly as we continue to expand into the adult segment. 2024 will be an exciting year for neurology in terms of news flow and key readouts. We have a pivotal Phase 3 study for luminescence in end spring and generalized Myasthenia gravis. We hope this data will be presented this year. We hope it will be at the IR event that Alan mentioned a little bit earlier. We expect this to be about an $800 million opportunity which is quite significant so stay tuned for that data. We're anxiously awaiting it. We also have a number of very interesting Phase 3 enabling readouts. There's the MANATEE study with Evrysdi in combination with GYM329. This is our anti-myostatin which comes from Chugai utilizing their recycling technology. When you think about the opportunity to keep muscle or grow muscle in these patients with SMA, is very potentially clinically meaningful for these patients. We will get an interim readout of that trial this year which could potentially green light a Phase 3 trial. We get the Phase 2B results from PADOVA which is a Posay in Parkinson's disease. Again, hopeful for this based on the digital biomarker signals that we saw out of prior Posay trials. And then of course, we have the Phase 1b/2a Trontinemab updated data and we'll talk more about Tronti on a subsequent slide. I think there would be no conversation in neurology these days that would be complete without a conversation around EMBARK and Elevidys in DMD. While it did not reach its primary endpoint, I think when you actually see the data from EMBARK, you can see that there really is a benefit to these boys. As many of you know, Elevidys is the first and only gene therapy approved for the treatment of ambulatory DMD patients in that four to five year age range. That's based on the accelerated FDA approval that Sarepta received last year. And while we didn't meet that primary endpoint of NSAA compared to placebo, you do see for all key pre-specified secondary functional endpoints, that time to rise, that 10 meter walk run endpoint. You see very clinically meaningful results in favor of Elevidys across age groups. And I think this is where we really hold a lot of hope that this is going to be a very meaningful medicine for these boys. There have been no new safety signals observed and we are very eager to bring this data to EMA and other global regulators to be engaged. We have a significant development program that is still currently underway, both in older ambulatory patients, which is ongoing, and then in Q4, we kicked off the zero to three year old ambulatory patient study, the involved study. This is definitely a place to watch. Again, we will be presenting the full EMBARK data at the MDA conference and this will also be included in our IR neurology update on March 11th. Another extremely exciting molecule in our portfolio these days is Trontinemab in AD. This is another largely homegrown molecule from our pRED organization this time using our proprietary brain shuttle technology. You can see that it does exactly what we know we need to do with neurological treatments going forward, and that is get across that blood-brain barrier to deliver more antibody where antibody is needed. And if you look at the images in the center of the screen, you can see exactly that. You can see that using the brain shuttle technology, you can actually flood the antibody into the brain all at the same time, getting the medicine exactly where it's needed. If you look at the clinical results that we've seen in our Phase 1b/2a study, you can see that it just drops plaque like a stone. It drops it rapidly and it gets to almost complete resolution extremely quickly. We do know now that the removal of plaque does correlate with increased clinical benefit for these patients, and so we truly believe that there is a very unique opportunity for Trontinemab. We will be presenting updated fourth dosing arm later this year, but this is, as Thomas mentioned, one of those programs that we are prioritizing through R&D Excellence and are really eager to begin to think about how we can rapidly accelerate getting to patients. Moving on to immunology. Overall, the sales performance of negative 7% is of course impacted by continued Esbria and Mabthera/Rituxan, decline due to generic and biosimilar competition. However, both Actemra and Xolair continue very respectable growth with 5% at constant exchange rates. Actemra has solid performance and its chronic indications largely driven by the U.S., and we're now at about 60% subcuts, which again is a nice natural hedge against the biosimilars, which will primarily launch with IV. Xolair growth continues to be driven by strong CSU performance, and I'm also very excited to share with you, as we did at the end of last year, that the FDA has granted priority review for Xolair in food allergy, and we expect that approval to be happening in this quarter. More on this on the next slide, but we really do think that this has the opportunity to benefit many, many patients who suffer from food allergy. There are more exciting developments in immunology to look forward this year. Gazyva is certainly one you've heard me talk about many times over the last number of years. Gazyva and lupus nephritis, that trial does read out this year. It is one of several trials that we have running in nephrotic indications for Gazyva. Gazyva in immunology has the potential to actually be very impactful. Lupus nephritis is a terrible disease. Right now, there really is no good standard of care. If the Phase 2 results replicate in Phase 3, we would expect this to be a very compelling indication. Lupus nephritis, SLE, membranous nephropathy, we've won pediatric indication also under study here. So Gazyva in immunology, I think, is definitely a place to watch, and we will also have a look at the trials that we will be running in TL1A and IBD on a subsequent slide, but first let's take a quick look at Xolair. So I'm sure all of you have someone you know, a family member, a friend, a colleague who suffers from food allergy, and so you know the impact that it has on their daily life and the fear that people can live in that they may be exposed to an allergen, particularly if you have small children that you're sending to school. In the U.S. alone, there are 17 million people who have confirmed food allergy, and a really staggering more than 40% of children with food allergies will experience a severe reaction at least once, and that doesn't just mean a trip to the hospital, that can actually mean a trip to the ICU, which is really very, very scary and very, very dangerous. To give you a feeling for the level of excitement, not only at Roche, but from the KOL community that we're hearing about Xolair and food allergy, there was a recent KOL interview and this KOL said, my level of excitement for Xolair and food allergy is a 12 out of 10. The FDA granted priority review, we expect a decision again in the first quarter of this year, and this is really thanks to a first-of-its-kind Phase 3 study, the outmatch study, where the interim results show that Xolair significantly increased the amount of peanut, milk, egg, and cashew that it took to cause an allergic reaction. The study was run together in combination with partners at the National Institute of Allergy and Infectious Disease, which is part of the NIH, and our partners at Novartis (SIX:NOVN). Detailed results have been submitted to a peer-reviewed journal. We expect publication soon, but again, I think this really is going to be an indication to watch. Another molecule I'm very excited to share with you is our TL1A. This is the recent acquisition that we made from Telavant. We believe that this has the potential for first-in-class, best-in-disease in its first indication in IBD. The bar graphs show that this molecule in its Phase 2B study, Tuscany, showed very significant results, both in all patients and in biomarker-positive patients, on both endoscopic and clinical remission. What's most impressive here is that when you look at the results that we saw here, sort of a 36% to 43% or 50% to 64% in endoscopic improvement, this compares to a 30% to 40% percent for the current standard of care, which is the TNF. So you can clearly see here that we have the opportunity to really reset the standard of care for these patients who live with a very debilitating and devastating disease. Safety profile and tolerability profile were both very good. The Phase 3 trials are going to be initiated in 2024. And if you know the pathway of TL1A, you know that it is actually quite well understood, quite well validated. It is very relevant in downstream inflammation and in fibrotic processes. And so we believe that there are many other indications for which TL1A will be relevant. And we are clearly looking forward to thinking about additional lifecycle programs for this molecule. So please do stay tuned to see where this one is headed, because it has a big future in front of it. Moving on to our most rapidly growing therapeutic area, ophthalmology. Vabysmo continues to deliver strong growth with an impressive 324% growth at constant exchange rates for 2023, easily surpassing sales of $2 billion. U.S. market shares in AMD (NASDAQ:AMD) and DME are continuously expanding. We have 22% and 15% currently based on November claims data. That compares to 19% and 12% just back in August. You now see that nearly half of all patients starting Vabysmo are treatment naive. That's up from the teens in the beginning of the year. So you can really see that we are starting to establish Vabysmo as the new standard of care. And as more physicians get, as retinal specialists get experience with it, as patients have great results, you're just seeing that momentum build on each other. Similarly, our launches outside the U.S. are steadily gaining market share with our early launch countries continuing to expand those double digit market shares. We have now achieved reimbursement in all EU5 countries, which improves access greatly. And we are continuing to expand our access in all countries around the world and are really looking for how we will be able to bring Vabysmo to as many patients as possible. Our third indication in RVO has been approved late last year, and we expect the U.S. approval to follow this year. Maybe to give you just a little bit of extra color on sort of what the launch of Vabysmo has meant in the U.S., we currently have 928 retinal specialists who have not prescribed a Genentech product in ophthalmology, for many, many years who are now prescribers and in many cases, very loyal users of Vabysmo. So you are really seeing the new market opportunity being opened and expanded here. Let me also quickly mention the latest developments for Susvimo. We are expecting to restart clinical trials this year. The U.S. commercial re-launch is also expected this year, and we will be looking to re-launch commercially in 2025 in other parts of the world. In terms of clinical news flow, for 2024, we initiated two Phase 2s for End Spring and Thyroid Eye Disease. Again, another multi-billion dollar market, so it will be very interesting to see how that IL-6 treatment does there. And we have two additional potentially Phase 3-enabling readouts expected this year for vamikibart, our anti-IL-6 in DME, and for the ASO factor B in GA. And last but not least, let's have a closer look at our Incretin portfolio, which we added to our pipeline via the Carmot acquisition, which just closed last week. The lead asset, CT388, is a GLP-1/GIP [ph] dual receptor antagonist with best-in-class potential in obesity, which is a rapidly growing market. We know that about 50% of the world's population is expected to be obese by the end of the decade. This is anywhere between a $50 and $100 billion market. CT388 really does have the opportunity to potentially be best-in-class. In its very earliest data, we saw impressive weight loss reduction at eight weeks, and we believe that this molecule has the pharmacology that may actually be able to enable more patients to get to 15% to 20% weight loss with a very good tolerability as we think about optimized dosing. This would be impressive enough if you were just looking at the monotherapy opportunity for CT388, but we are, of course, also looking at it in combination with other drugs in our portfolio, including GYM329, which is that anti-myostatin that we talked about a little bit earlier, but also other drugs in our portfolio that may have applicability to some of the comorbidities that we know patients with obesity face. Also, we know that Incretins may have applicability into other disease areas, and so again, we would be looking at the assets that we acquired as part of the Carmot deal's really as a backbone for future plays across cardio metabolism, but also potentially other disease areas as well. In addition to CT388, we have 868 and 996, both of which will have Phase 2 interim data in type-1 and type-2 diabetes, respectively, this year. So please keep your eyes on this. Lots more to be coming out of the Carmot acquisition. In terms of closing out our Q4 regulatory and clinical updates, let me mention a couple of things that I don't think that I've touched on during this presentation in other places. So we did, unfortunately, have a negative readout for Tecentriq in the Phase 3 IMvoke010 study in adjuvant head and neck. Unfortunate result, but I think we always knew that this was likely to be a difficult one. Unfortunately, head and neck has a long history of drugs not working there. And then we also saw the positive data from Skyscraper-08 and First-line esophageal. This was the China-only study that was recently presented with Tirigolumab plus Tecentriq and that trial we are awaiting subsequent data on as well with the Skyscraper-07 data, which will give us a little bit of an opportunity to more tease out what the effect of Tirigolumab is versus Tecentriq. Looking ahead to 2024, we have already touched on much of the key regulatory news flow. We already have our first achievement with the Tecentriq subcut approval in the EU, but we've talked about Alecensa approval, OCREVUS subcut, Cravalumab approval, and inavolisib filing. In addition to the key clinical trial results that we've talked about, again, we don't have as many Phase 3s reading out in 2024, but what we do have is a tremendous amount of Phase 3 enabling trials that we'll be reading out this year. And some of those we've actually talked about, most of these Trontinemab, vamikibart, zilebesiran in hypertension, the KARDIA 2 trial will also be reading out this year, and again, the additional trials from Carmot with new data this year as well. So before I hand it over to Matt, I just want to take one minute to sort of step back and really take a look at where we are expecting growth from the pharma portfolio over time. Like you, we are very interested in growing our business and growing our ability to help and impact patients around the world, and this is how we intend to do it. Of course, we have our launched portfolio, all the wonderful best in class, best in disease drugs that we've just been talking about, Vabysmo, Ocrevus, Evrysdi, Phesgo, Hemlibra, Polivy, these are all drugs that are going to continue to drive growth going forward and drive significant growth in patient benefit in the coming years. In the midterm, and we're defining midterm here as drugs that will receive data in sort of the 24 time period, 24 to 26, Gazyva Lupus, Nephritis, we've talked about, Thomas mentioned Astegolimab in COPD, Elevidys, certainly the potential to get approval in this time period, Phenobrutinib, our oral BTK for MS, Inavolisib, Giredestrant, Tiragolumab, these are all very significant drugs that have very large patient populations where we could be able to change the standard of care, and we will be getting that data, much of it starting in late 2024 and early 2025, driving a tremendous amount of growth in the mid and long term. And then, of course, looking at those long term opportunities defined as things that will be filing after 2026, you can see this is where a lot of the benefit from our partnering activities will be happening over time, that Telavant acquisition, the Alnylam partnership, the Carmot acquisition, these again are very important, and these are very important molecules, very large commercial opportunities that will really fuel our long term growth in addition to things like Trontinemab and then all of the emerging assets from the early pipeline in BD. So in summary, we are very convinced that we have a very strong pharma portfolio and one that will continue to provide growth into the short, mid, and long term, and we're looking forward to sharing updates on all of these building blocks with you in the future. So now, thank you very much, and let me hand it over to Matt.

Matt Sause: Thanks very much, Teresa. So with that, good afternoon, good morning, everyone. It's my pleasure to present the full year Roche Diagnostics 2023 full year results. And so with sales of CHF14.1 billion, the diagnostics division declined by 13% or minus CHF2.3 billion at constant exchange rate versus full year 2022. And as you heard earlier, this decline is driven by the expected decline of COVID-19 testing sales of CHF3.3 billion at constant exchange and offset by strong base business growth of plus 7%. And so let's on this slide, let's look at the performance of diagnostics over the last eight quarters. And I'd like to start by focusing on the orange dotted line, which represents our base business performance. And in Q4 2023, our base business grew at plus 8% with strong sales momentum in all of our regions. And now I'd like to turn your attention to the blue line, which reflects total diagnostics division sales, including COVID-19. In Q4, diagnostics delivered growth of plus 4%. And I would note that we had a CHF300 million government order of rapid antigen tests, which was reflected in this overall performance. But you see with the return to growth, the lessened effect of COVID-19 testing and the very strong performance of our base business. Now, looking forward, we're not expecting additional government orders or significant sales of rapid antigen COVID-19 tests, but we expect the vast majority of COVID-19 testing to be PCR based. And I would add that we expect the majority of this testing to be performed in a multiplex format as part of a standard diagnosis of respiratory disease. Consequently, we expect to see COVID sales in 2024 to be significantly lower than 2023, in line with the guidance you heard earlier. We're also expecting some potential headwinds in China due to ongoing government procurement initiatives. However, I'd like to restate that given the strength of our base business, we are still expecting mid to high single digit growth for diagnostics in 2024. And so now I'd like to take you through the sales by product category. And what you see first, our core lab business, which is our largest business unit here, excluding the COVID-19 effect. We grew at plus 11% with really strong performance in some key categories, such as cardiac, where we grew at very strong double-digit numbers. Our molecular lab here, excluding the COVID-19 effect, we grew at plus 7%. And if you look on the right side of the slide, you see some of the very impressive performance of the different product categories, cervical cancer growing at 23%, blood screening growing at 13%, and also very robust performance of our core virology business at plus 6%. Pathology lab, growing at plus 14%, which is very strong. Point of care, excluding the COVID-19 effect, grew at plus 4%, which was really driven by the strong respiratory season in the Northern Hemisphere. And diabetes care receded at minus four percent. And this is really driven by the market evolution from traditional blood glucose monitoring to continuous glucose monitoring. But I would also point out, as you heard earlier, we're getting very close to launching our own continuous glucose monitoring solution. And so we look to see this change, this trajectory in the future. Now I would like to go through the performance by the different geographies. So when you exclude -- so if you look across all our geographies, first you'll see the impact of lower COVID-19 testing sales across all regions. But then excluding the COVID-19 effect, you see strong base business growth across all regions. In North America, excluding the COVID effect, plus 5% growth, EMEA, excluding the COVID effect, plus 5%. In APAC, excluding the COVID effect, plus 10%. And in Latin America, excluding the COVID effect, sales grew at plus 26%. So very strong performance. So now I'd like to walk you through the diagnostics P&L. So core operating profit on sales of CHF14.1 billion declined 24% at constant exchange rate, driven by the strong decline of COVID-19 testing sales, again, as expected. The cost of sales declined at 15%, as you heard earlier. But this is faster than sales decline. And this was, again, driven by lower sales of COVID-19 rapid antigen tests. R&D costs remain stable. And our investment in R&D was really driven and focused in areas of future innovation and revenue growth, such as mass spec, continuous glucose monitoring, sequencing, as well as our digital solutions. Our SG&A remains stable at constant exchange rate due to a good organizational discipline. So when taken all together, we delivered a core operating profit of CHF2.67 billion, with a margin of 18.9% in reported currency. But as you heard from Thomas and Alan, the margin was affected by currency headwinds. And I would call it that our margin at constant exchange rate was 21.5%. So now I'd like to shift gears and talk a little bit about some of the innovation that we delivered in 2023, which impacts patients but will also drive our growth into the future. And I'd like to start with a recent and quite exciting milestone in relation to our portfolio expansion in neurology. Roche's Elecsys Neurofilament Light Chain test, with indication for multiple sclerosis, received FDA breakthrough designation in November of 2023. And I would note that we've received multiple FDA breakthrough device designations for our Alzheimer's portfolio. Around three million people are estimated to live with multiple sclerosis. After diagnosis, many face challenges with managing their disease due to timely identification of disease progression, which is critical for optimization of treatment. And the access and availability of testing that's capable of identifying these disease progression has the potential to improve treatment optimization for these patients. And this may result and hopefully will result in better clinical outcomes. So we're very excited the impact the Elecsys Neurofilament light chain test will have for MS patients by offering a biomarker obtained by a minimally invasive blood draw that can deliver rapid results to patients and to caregivers. And I would also point out, we heard quite a bit about Ocrevus, the synergistic and synchronized approach between Roche Pharma and diagnostics that allows us to continue to deliver better access for patients who need who need medication and better and better care. And I would also call out, you see there the floodlight MS. This is a digital solution that measures motor and cognition skills of MS patients. And we're also exploring potential applications for this in disease monitoring. So now I'd like to turn to a product category very near and dear to my heart, which is infectious disease testing. And start by a pair of new launches that we had in Roche Diagnostics in 2023, are anti-HEV IgM and anti-HEV IgG tests. It is estimated that one third of the global population could be at risk for infection with hepatitis C virus, but the true burden is unknown as it is underdiagnosed. Consequently, the WHO has updated its essential diagnostics list, which includes in vitro diagnostics that should be available in all countries. And last year for the first time, tests for HEV are included to aid in both diagnosis and surveillance. In November 2023, we launched our tests for IgM and IgG. And why that is important is this allows us to diagnose both acute and chronic infections for hepatitis C. That allows patients to diagnose, to monitor, and to appropriately treat patients infected with hepatitis C. And I would call out that this is also important for competitive reasons. You saw the strong growth of our core lab franchise earlier in my presentation. Having a differential panel for hepatitis is one of the critical competitive aspects of immunoassay and infectious disease and the addition of these two tests really completes our differential panel for hepatitis. So we're very excited also about the ability for us to compete even more strongly in immunoassay. So now I'd like to transition to our growing digital portfolio by providing an update on our Navify algorithm suite. The algorithm suite is a one-stop shop for digital algorithms used to aid and improve clinical decision making. This platform integrates into a hospital's laboratory information system and soon will be seamlessly integrated into a hospital's EMR system. It takes data off of Roche analyzers but also clinical data that is provided by a patient when they present in a health care setting. The algo suite provides hospital providers with a growing library of verified Roche algorithms as well as algorithms from partner companies to use in their everyday practice and improve insights needed for clinical decision making. And I would like to point out that we have 15 certified algorithms available and expect to have more than 20 additional algorithms by the end of 2025. So currently the majority of our offerings are in the oncology and cardiac therapeutic areas. These are two areas with high inmate need and an opportunity to improve clinical decision making. However, looking into the future we also expect to have additional algorithms in neurology, infectious disease as well as sepsis. And so now I'd like to turn to some of the additional platforms that we're launching in diagnostics with the next generation of the -- one of our long-standing platforms the LightCycler Pro. So we launched this new real-time PCR instrument in November of 2023 opening use in IVD use in CMARC and FDA. And the unique benefit of the LightCycler Pro it is the first real-time PCR instrument to be simultaneously labeled for research as well as IVD use, opening the opportunity to use lab-developed tests as well as registered IVD tests. So this instrument launched with a broad menu of 60 molecular diagnostic CE IVD tests and 200 research assays through TiB Molbiol. And it will include or it does include, excuse me, key features such as higher multiplexing capabilities. It actually has seven optical channels that allows you to discriminate different targets in an individual well in an individual run. And it has improved precision scalability and data analytics. We feel this will be a very highly competitive entry in the real-time PCR marketplace which I would call out from a reagent perspective is about CHF 0.5 billion and as an instrument market is about CHF 0.2 billion every year. So now looking at our launches in 2023 I'm very proud of the performance of the organization. We achieved 15 of our key launches and as you heard earlier 2024 is shaping up to be the biggest launch year ever for Roche Diagnostics and not just the number of launches but some of the most impactful launches for the future of the division. So first I would like to call out the Core Lab launch of the game-changing i601 mass spec system which is really going to revolutionize mass spec testing by offering a fully automated standardized reproducible mass spec instrument that will integrate with our existing serum work area instrumentation and make us even more competitive in that Core Lab space, as well as our first offering in the continuous glucose monitoring space the Accu-Chek SmartGuide CGM. Additionally we're planning the launch of new automated solutions for the Core Lab including our cobas c703 for clinical chemistry which will by far have the highest throughput of anything we've ever launched or of our competition and the ISE neo which will allow us to stay ahead of competition and keep our strong momentum in the Core Lab. We also expect the U.S. launch of our 4-Plex Liat Multiplex molecular point-of-care test for respiratory virus testing. This will look at Flu A, Flu B, COVID as well as RSV. So we feel this is going to be a very competitive launch. Additionally we will be launching the highly multiplex respiratory flex panel on our existing 58, 68, and 8800 systems. This is going to be a broad panel of respiratory pathogens and be the first launch we have with our revolutionary new TAGS assay chemistry. On top of this we plan to launch the version 2 of our already industry-leading cobas 6800 and 8800s and this will add additional functionality and competitive features. We will also make significant progress in the critical area of blood donor screening as you heard earlier with the launch of our cobas serology solution in the U.S. and a global launch of our molecular test for malaria. We also look forward to the important U.S. authorization of the primary diagnosis claim for our DP600 digital pathology slide scanner and this will make us even more competitive as we continue to expand in the growing area of digital pathology. We're also expanding our digital solutions offering with the introduction of the Navify analytics family for all of our customer areas and this will deliver improved operation efficiency to clinical labs around the world. So I kind of spoiled it a little bit by jumping ahead to this slide but I'll say it. You heard it from Alan. We're very much looking forward to our diagnostics investor day on May 22nd. So this will be a hybrid event taking place in London but also held virtually. With our leadership team we put together a very exciting portfolio for you and I'm very much looking forward to May 22nd. So please save the date. As you heard we're going to profile some of our new technologies such as mass spec, continuous glucose monitoring. We'll talk a little bit about next generation sequencing as well as other exciting launches. So look forward to seeing you there and with that I'll hand it over to Bruno for questions.

Bruno Eschli: Yeah thanks a lot, Matt. With that we'll open the Q&A session. We have 40 minutes. We have 10 analysts in the queue so I would ask everyone to just stick to two questions please so that we get everyone, give everyone the opportunity to have questions and then also to be disciplined when providing the answers. The first two questions would go to Charlie Mabbutt from Morgan Stanley (NYSE:MS). Charlie please.

Charlie Mabbutt: Hi thanks Bruno. It's Charlie Mabbutt from Morgan Stanley. Thanks for taking my questions. I guess firstly with the newly enlicensed CL1A obesity assets and the hypertension drug you're entering several new therapeutic areas which will come with significant R&D and commercial investments. So I guess how do you think about your ability to compete across so many therapeutic areas at the same time whilst many companies are becoming more focused on their areas of leadership and what does this mean for the margin profile over the coming years? And then secondly could you just briefly comment on how you think about the potential impacts of Vabysmo, or EYLEA high dose getting a J-code? And do you think this is to slow the launch momentum later in the year? Thank you very much.

Teresa Graham: Excellent. So when it comes to the R&D expenses related to the new access acquisitions that we've made that's really about prioritization within our R&D portfolio and it's a lot of really good and important conversations that are happening across all of the R&D organizations to create the oxygen in the system that's going to be necessary in order to give the investment to the programs that we've in-licensed or acquired to ensure that they get what they need. So we're being very disciplined about making sure that we're giving those programs everything that they're going to require in order to be maximally successful when it comes to the commercial aspect, I think there are sort of 2 things at play here. The first is that the fundamental changes that we made to our commercial model a number of years ago were really designed to create a flexible commercial model that does allow us to pivot and expand much more easily than sort of the fixed models of the past. And so, certainly, I think that gives us a lot of comfort that as these drugs come to market, we'll be able to accommodate. The other thing that I think we should keep in mind is that I think we think of some of these drugs as "primary care drugs". What primary care marketing looks like today is likely not what primary care marketing is going to look like in the next 10 years. And so, I think the application of technology, the application of AI, really thinking differently about how you deploy field resources and digital resources, we intend to take a very creative and sort of forward-looking view to how we commercialize these assets in ways that both maximize their ability to impact patients, but also do so in a really cost-efficient manner. So, more to come on that over time. In terms of VABYSMO and the high-dose launch, I think there's a couple of factors at play here. So first of all, we're expecting the high-dose launch, we're expecting the J-code like all of that is sort of part of our plan. But when you think about how we actually price VABYSMO, we priced it sort of at parity to the current standards of care. High-dose came in at a 20% premium. It does not have all of the features of the label that I think retinal specialists are looking at. I think you have to look at the core benefits of VABYSMO, those 3 Ds, drying, durability, the dual mechanism of action. I think we will be able to compete effectively, both from the clinical attributes of VABYSMO and the clinical experience that we've been generating over time, but also the broad coverage that we've been able to secure from payers, given our responsible pricing approach. And then, as we have always said, in an environment, particularly in the U.S. where contracting is important, we will, of course, contract competitively.

Thomas Schinecker: Yes. Let me just add from my side. As Allen mentioned, our goal is to grow operating profit in the high-single digit range this year. That means that we will need to keep operating costs stable. And what that means is that the trade-off decisions that you've seen in Q4 are trade-off decisions we are also going to make in Q1 to make sure that we put the money behind the right assets and really accelerate those assets. So you can see that, that will happen. So also, in the long run, just to assure you, we want to keep the margins stable and make sure that we do our contribution here as in the past.

Bruno Eschli: Thanks, very good. So the next 2 questions would come from Richard Parkes from BNP Paribas (OTC:BNPQY).

Richard Parkes: Thank you, Bruno. Yes, a couple of pipeline ones. So firstly, on the GLP/GIP biased agonist CT-388. Obviously, still several years away from the market, and I think there's some skepticism about this opportunity as a stand-alone, given we've got Novo coming with CagriSema. So just wondering how you see the opportunity for CT-388 on a stand-alone basis? Would you be willing to do head-to-head trials versus Mounjaro or Wegovy? And when do you think you're going to be in a position to accelerate it into Phase 3 development? Just wondering what else you need there. And then secondly, I just wondered if you could discuss your confidence that the neutralizing antibodies you've seen with trontinemab won't be an issue for that program. And again, if you could just discuss what you need to see from the ongoing Phase 1 trial before you can make a go decision on Phase 3 and maybe what opportunities there might be to accelerate that program.

Teresa Graham: Yeah, absolutely.

Thomas Schinecker: Do you want to take it or should I?

Teresa Graham: Either way.

Thomas Schinecker: Let me take a first stab at it. So, on the GLP-1/GIP, the data that we've seen so far is extremely promising also compared to the molecules that you've mentioned. But really looking into the future, I think the topic is more around combinations. GLP-1/GIP will be the backbone for a number of different combinations of molecules that we also have in-house. One of those is GYM329, which, Teresa also mentioned, is currently in a trial in combination with Evrysdi. And GYM329 is an anti-latent myostatin. It has this recycling technology from Chugai, so really highly active antibody. And because one of the issues with GLP-1/GIP is that not only do you lose fat, you also lose muscle mass. And if you actually follow those patients after they get off the medicine, they actually return back the weight pretty quickly. And the reason is that the metabolism is going down as there's less muscles to burn the calories. And in fact, as a teenager, one could eat whatever they wanted because you had a higher muscle mass. Now, being in my late 40s, unfortunately, that's no longer the case. And the reason is that also the muscles have gone in a different direction. So with GYM329 in combination with GLP-1/GIP, this is the kind of thinking that we have in how we're going to differentiate. And that goes beyond obesity and cardiovascular, also into other disease areas where we want to combine this as a backbone. So that's just a bit of an explanation where we see the differentiation when it comes to this important new molecule. Regarding neutralizing antibodies, we don't see that at all on trontinemab. So this doesn't seem to be a concern. What's interesting is that it must be with the entry on how this brain shuttle, antibody gets into the brain, we actually also see a much lower area rate because I think that's also something that is a concern with the medicines that are currently in the approval process or approved. We hope that we can go into Phase 3 this year. Right now, the data that you've seen is from 50 patients, so quite significant. And we hope that we can go into Phase 3 this year and we can make a decision there. Anything you want to add?

Teresa Graham: So, the only thing that I would add is the obesity space is incredibly large. Again, 50% of the world's population is likely to be obese in the next decade. This is somewhere between a $50 billion and $100 billion market by analyst projections. There's going to be room for multiple players to do very well. And I think, given at least the early hints that we have of the clinical profile for CT-388, it could well hold its own in this space

Bruno Eschli: Richard, did we answer your questions?

Richard Parkes: Perfect. Thank you very much.

Bruno Eschli: Okay, then let's move on. Next one in the row would be Simon Baker from Redburn. Simon, two questions, please.

Simon Baker: I also have a question on CT-388. So firstly, let's go there. On the data you've seen so far, you talked about the weight loss of up to 8%. I know there's only 6 patients in that cohort. But we've seen, particularly with tirzepatide, there's a huge range of responses. I just wonder around that 8% average, what the response was after 4 weeks, notwithstanding the fact that 8% is pretty good to start with. And then secondly, on XOLAIR, you talked about some interesting life cycle management programs for XOLAIR, which you've been engaged in before. At some point, there will be biosimilars. So I'm just wondering what's your latest expectation on when that will hit? And is there anything beyond XOLAIR in your portfolio? I can't really see anything, but looking further down the track would be very helpful. Thank you. Great.

Teresa Graham: So in terms of 388 and the individual data, I'm not sure that that's been publicly released.

Bruno Eschli: Yes. I think the data you're referring to, Simon, were the data which were, I think, presented by Carmot before, which showed a minus 8.5% weight reduction at week 4. And we will have additional data here, follow-up data to come 12 weeks, 24 weeks, and this is data which we will get in '24, and then you will get an update. And there is more to come. So -- but we are pretty confident that we have a compound here which, really if you benchmark it with all the other compounds out there in development, could make a best-in-class profile in terms of efficacy.

Teresa Graham: And in terms of XOLAIR biosimilars, those will occur next year, 2025, likely second half of the year. And in terms of other things in our portfolio for respiratory, I think the closest asset we have is astegolimab in COPD.

Simon Baker: Thank you.

Bruno Eschli: Okay. Then let's move on. The next one would be, next two questions from Matthew Weston. Matthew?

Matthew Weston: Thank you, Bruno. It's Matthew Weston from UBS. Two, please. Thomas, one for you. You've highlighted the strategic update we should expect at the end of September. Last year, you already gave us a couple of first steps. You brought R&D into decision-making. You said staff needed to be accountable for delivery across the organisation. We then saw you acquire assets, and now you've accelerated some in-house assets. I guess the question is, what's left in terms of a strategic update that we should expect ahead of that event? And then secondly, a number of times, both Theresa and Thomas have mentioned the Phase 2 trial readouts in the next 12 months. If we look across those Phase 2 assets, there seem to be a lot of what we would historically consider high-risk categories, so neuro, autism, Parkinson's, but also geographic atrophy, and even latent myostatin and muscle building has been a graveyard for a number of people in the industry before. Would you consider your Phase 2 portfolio higher risk than normal, or would you say that they are normal Phase 2 probability assets?

Thomas Schinecker: Yeah, so first, let me say, as I started the role in March, the areas I focused on first are the areas where I felt I had the most urgent need to look into, and that was R&D excellence, and at the end, R&D productivity, so how we can accelerate that. As we went through that and rolled that out in September, I could then focus on more strategic topics as well, broader, on the group and on the division. Theresa is looking at the pharma strategy. We'll clearly talk about the disease area focus. We'll talk about what is the combination between diagnostics and pharma, and where do we want to play, but give us time. We will finalize the strategy probably in Q2, and with that, we will then roll it out in the organization, and then we can share it also externally. I hope you understand that we first have to communicate internally before we communicate externally. Regarding the assets in our pipeline that are reading out this year and next year, there are a number of assets, like I think TRONTINEMAB, where the mechanism of action is now pretty well established. The data seems very compelling. I think also when you look at TL1A, we believe that the probability of success is very high, so we've tried to complement our portfolio also with assets with a high probability of technical success. On top of that, I think a number of very interesting readouts, like GAZYVA in lupus nephritis, which we also believe has a very high probability of technical success. You see, we have a number of very good charts to go that I believe will also drive growth in the 25 to 2030 timeframe. Teresa?

Teresa Graham: I guess maybe just to add on to that, because I completely agree with what you said, I would say within the Phase 2 readouts that we have that would be Phase 3 enabling, I would say there are things that mechanistically we have a really good belief they're going to work. So Salviseron [ph] would be another one. All of the incretin portfolio, I would say, just based on the well-known and well-characterized mechanism, we would expect those to have a high probability of success. Then there are riskier things, which is what you need to do when you're driving for breakthrough innovation. I think we actually have quite an appropriate mix in our Phase 2 to Phase 3 conversion pipeline.

Bruno Eschli: Matthew, did this answer your question?

Matthew Weston: Thank you, Bruno. Yes.

Bruno Eschli: Okay. Then we'll go on with the next one, the row being Sachin Jain from Bank of America (NYSE:BAC). Sachin?

Sachin Jain: Hi there. Thanks for taking my questions. I too, if I may, I wanted to just touch on DMD and your filing and reimbursement path. I'm particularly interested in reimbursement, given that you've missed your primary endpoints, or even if you get approved on some of the secondaries, do you have feedback that payers are willing to pay on these secondary endpoints, particularly ex-US where you have territories? Then secondly, Thomas, you called out I believe, a couple of times as an exciting opportunity. Are you still seeing that as a billion opportunity, or is it now in your mind larger than that? Is your excitement related to it as being the first of multiple immuno indications, or just its higher probability of success? Just a bit of colour there, given you called it out a few times. Thank you.

Teresa Graham: In terms of DMD, I would say what gives me more hope is that this is a life-threatening disease for which there are absolutely no other treatment alternatives. When you look at the totality of evidence that we have as part of the Phase 3 trial, I think it is compelling. Clearly, we still need to have conversations with the regulatory authorities, and obviously the conversations and research with payers are underway. But given the opportunity to treat these boys who otherwise will get no treatment, and who will have no chance for long-term survival, I just think it's a different situation than some of the other gene therapies that we've seen over time, where they're competing against other standards of care that exist. I just think it's a slightly different situation here. But certainly, this is a path that has not yet been travelled, and so we're actively in conversations. But again, when you look at the totality of the data, it's compelling. I think it's compelling for these boys, and I think it will ultimately be compelling for payers.

Thomas Schinecker: Yeah, let me just comment also on DMD. We had a meeting with key opinion leaders here in Switzerland at the end of last year from all over the world, and there was actually quite a lot of excitement. So that's, I think, also another data point that's very promising. The other one is Peter Marks from the FDA has said that he actually wants to expand the label. We have a number of countries ex U.S. where they follow the FDA approval. We already have tourism going on, where people are going into other countries to get their children treated. And I think that we will probably see more of that happening, because for these children, this is the option to survive. And so I think it's an important opportunity to help these children.

Teresa Graham: And actually, just to add on to that, because I don't think I mentioned it, we do expect to treat our first patient this quarter.

Thomas Schinecker: Yeah, good. On GAZYVA in lupus nephritis. I am excited, one, because of the strong Phase 2 data, very strong Phase 2 data. And yeah, alone in lupus nephritis, we believe it's 1 million [ph] plus opportunity. Maybe I can, I hope that answers your question.

Sachin Jain: Yeah, perfect. Thank you.

Bruno Eschli: Maybe Teresa just one additional question regarding DMD, which was submitted about additional data for Elevidys coming in over time and how this would support our filing and then later on our reimbursement negotiations in the US.

Teresa Graham: Yeah, absolutely. I mean, additional data is clearly going to be necessary for no other reason than to expand to additional ages. So I think all of the additional data that will come in over time, and it will take some time to materialize. But all of that data will continue to strengthen our ability to bring this drug to market.

Bruno Eschli: Thank you. Next two questions would go to Emmanuel Papadakis from Deutsche Bank (ETR:DBKGn). Emmanuel?

Emmanuel Papadakis: Thank you for taking the questions, Emmanuel from Deutsche Bank. Maybe I'll start with a big picture question on guidance. You're helpful enough to remind us on biosimilar timelines for XOLAIR. Perhaps you could do the same for PERJETA and ACTEMRA. I believe they're expected on a similar timeframe around 2025. But perhaps you could remind us if that is still your expectation, and if that is the case, your degree of confidence on preserving a similar magnitude of Pharma revenue growth going forward with single digit and indeed protecting the margins over that midterm period. Second question, maybe a follow up on EMBARK. It seems quite a different tone of communication today relative to your prior comments around respecting the outcome of primary endpoints. And before we even get to reimbursement discussions, just interesting to know whether you've actually held any preliminary discussions with European regulators. What's their degree of receptivity to that?

Teresa Graham: Yeah.

Emmanuel Papadakis: Yeah.

Teresa Graham: Sorry, I got excited to answer your question. So we don't typically comment on ongoing regulatory activities, but I can tell you that we are in the process of having those conversations, but we obviously couldn't comment on exactly the content of those at this time. In terms of loss of exclusivity, the first ACTEMRA biosimilar in the EU has been approved. We're expecting it in the US next year. We're expecting something like a 15% impact in 2024. As a reminder, most of the ACTEMRA biosimilars will launch with IV and then subsequently go to subcut. Subcut currently represents about 60% of the ACTEMRA global market. So we are expecting that we'll see a little bit more of a gradual decline over time given that subcut will have to roll in before many patients would consider switching. The PERJETA, I think what we've said is sort of middle of this decade. So we've got a little bit of time left on PERJETA, particularly in the US. So I think we are continuing to stand by our prior statements around what we believe is going to happen with the HER2 portfolio, which is that we are expecting that it will largely remain stable and sort of gradually decline towards the back half of the decade. We won't see the kind of relatively sharp patent cliff that we've seen with some other drugs just based on a, the conversion to PHESGO, but also the difficulty in manufacturing something like KADCYLA. So I think we've just got different dynamics at play in the HER2 portfolio than we did with AHR.

Thomas Schinecker: Let me just add that when we spoke about the LOE impact in this year, we actually included ACTEMRA in that. So the roughly 1.6 billion is across all of the medicines that have an LOE impact.

Bruno Eschli: And let me also here add for PERJETA, I think the latest communication has been that the first biosimilar we expect for 26, not before. Okay, Emmanuel, did this answer your questions?

Emmanuel Papadakis: It certainly did. Thank you, Bruno. Yep.

Bruno Eschli: Then we'll move on and the next one would be Tim Anderson from Wolfe Research. Tim, please.

Tim Anderson: Hello, can you hear me now?

Bruno Eschli: Yes, we can hear you.

Unidentified Analyst: Thank you. It's Richard Vosser [ph] on for Tim, Wolfe Research.

Bruno Eschli: Yes, please.

Unidentified Analyst: There's some feedback. I apologize. It's not too many.

Bruno Eschli: No, it's Richard. It's Wolfe Research. It's just the wrong name here in the system. But please, Richard, go ahead and ask your questions. Okay, maybe we quickly then just do it in the opposite way and first take the questions, two questions from John Priestner.

John Priestner: Hi, John Priestner, JP Morgan. Thanks for taking my question. So just two for me, please. So for giredestrant, we noticed that you kicked off another Phase 3 study, the pionERA, focusing on the ESR1 mutant patients. So how should we really think about this study relative to the already ongoing perservERA study in all comers, which I think reads out earlier in 2025? Are there any other key differences we should really be thinking about? And what's your level of confidence in success in the all comers? And then maybe the second one on TECENTRIQ. So following the invoked disappointment in head and neck cancer, what are the next growth drivers really for TECENTRIQ? And how should we really think about the trajectory in 2024 in particular? Thank you.

Teresa Graham: Great. So let's start with TECENTRIQ. So TECENTRIQ will continue to grow outside the US, primarily in HCC and adjuvant non-small cell lung cancer. And it's sort of continuing to hold its own in the US at the moment in particularly in adjuvant, certainly in small cell and in HCC, we would expect it to maintain its leadership position, but particularly in large markets like the US, those are those are probably largely at peak, we would expect some impact from adjuvant in the US with competition over time, we have subcut rolling in which again, as we have, as we have previously stated, we expect that to be largely protective, but it may add a couple 100 million on top with expanded use. But the next real big value driver for TECENTRIQ will be in combination with tiragolumab. And so we will we'll need to wait to see the outcome of the skyscraper studies to really get a sense of where we expect to TECENTRIQ we'll talk about at peak. In terms of giredestrant, I think that you know, this is a drug that when you look at the biologic rationale for it, it really ought to work. And so I think we do have, we do have some competence, confidence, certainly in the HR in those patients where the endocrine receptor is still quite active. And I think it is very reasonable to assume that in an all comers population, it may have benefit as well. So this, this really is a highly selective, highly potent drug, and one that we think really may have the opportunity to very much redefine the backbone of care for patients with hormone receptor positive breast cancer. Seeing that first data set in 2025, I think will be extremely informative, but it's, this is a molecule I'm really watching quite closely, because I think it could be transformative, not only in the biomarker selected population, but in all comers as well.

Bruno Eschli: Answer your questions.

John Priestner: Perfectly, thank you.

Bruno Eschli: Yeah, then we might give it a try again, with Richard from Wolfe Research. Richard, please.

Unidentified Analyst: Yes, hello. Is this better?

Bruno Eschli: Yeah, now it sounds good. Yeah, there's no echo.

Unidentified Analyst: Two questions then on TIGIT, the latest level of Roche's confidence relative to a year ago, I would think that it would be less, given all that we've known across the field. Also, on the China government procurement, could you provide at least some details on what are the products or areas that would be affected? And is there a risk that, as was formal, that the government procurement programs would spread beyond the initial run?

Bruno Eschli: Okay, so I think two questions. One is a broad question about our confidence level in TIGIT.

Teresa Graham: So I mean, I think, Thomas, do you?

Thomas Schinecker: Yeah, I mean, first of all, let me say that we haven't seen any additional data to the data that you're aware of internally. And, you know, we've seen a number of, readouts in phase two readouts that clearly show that this is an active molecule. So overall, our confidence level is such that we are starting more Phase 3 trials. So obviously, we believe that this could be a medicine. Regarding the situation, on the market with other TIGIT molecules, I would say it supports it as well. I mean, Theresa, what would you add to that?

Teresa Graham: Yeah, I mean, I think that's absolutely right. And this is a new pathway on top of a highly efficacious standard of care. I think the data that we saw at the second interim result of SKYSCRAPER-01 tells us that the drug is doing something. I mean, a 0.8 hazard ratio is, again, when you're talking about something that's on top of a very effective standard of care, I think, we invested heavily in the TIGIT pathway for a very good reason. And I think that's because we believe that it might be, it very well has the opportunity to be biologically active and to help patients. So at this point, we're in the uncomfortable position of waiting. So yeah, the trials read out.

Bruno Eschli: And the China question probably goes to diagnostics first place.

Matt Sause: This has been a publicly announced government procurement initiative in Anhui province around Core Lab reagents. And we don't comment about our commercial participation there, and I can't speculate as to the future move by the Chinese government. But we feel again, I'll reiterate, we feel mid-tie single digit growth in diagnostics based on the strength of our core business.

Bruno Eschli: Okay. And I think a very limited impact for pharma in China.

Teresa Graham: I'm sorry, I didn't hear you.

Bruno Eschli: Yeah, I think for China on the pharma side, there is hardly an impact.

Teresa Graham: No.

Bruno Eschli: Okay. Tim, did this answer your questions?

Unidentified Analyst: Richard.

Bruno Eschli: Richard, sorry. I still have Tim here on my screen. Richard, you're still in line? Okay. If not, then we maybe have here a final question then going again to Richard Parkes from BNP Paribas. You get rewarded for being here. So patient.

Richard Parkes: Hi, Bruno. Yeah, thanks for my follow ups. It was just a couple of products, Hemlibra and Ocrevus slowed a bit in the fourth quarter, having been sort of delivering consistent double-digit growth. Just wondered if you could walk through the dynamics there, I think, for the Hemlibra more specifically, given potential impact from competition, what are you seeing there? Thank you.

Teresa Graham: Yeah, so thanks for this question, because I think really, we are not seeing anything that we believe impacts the fundamental underlying demand for either Hemlibra or Ocrevus. It is very much, I think, very much a currency effect that we're seeing with both of these drugs. For Hemlibra, we are at 40% market share, 40% patient share, which is certainly very good, but that leaves you a tremendous amount of room to grow. As we see Altuviiio coming into the market, I think largely what we see is patients using Altuviiio in combination with Hemlibra. So either having it on board as their backup factor, which is something that is, you know, for the hemophilia population is something that is recommended by guidance, or using it in combination with, versus people switching from Hemlibra to Altuviiio. I think we see particularly with Hemlibra, the people who switch to Hemlibra tend to be quite young. So we get people in, you know, when they're very early in their disease management, and they stick with us over time. So again, we're just not seeing anything out of Q4 that leads us to believe that the trajectory for either Hemlibra or Ocrevus is really any different, and a very good start in January for both of these products, which would, you know, sort of underscore that.

Richard Parkes: Thank you. Could I have one other follow-up, Bruno, just on the ticket program? Just wondered if you could update us on the broader timelines for the other phase three trials in lung cancer. I've just noticed that you have the stage three unrespectable potential filing in 2025. So I wondered if that could slip into the phase three readout, could slip into this year, and how your confidence on that trial design in particular has evolved over time, given what we've learned about the class?

Teresa Graham: Bruno is really excited to answer this one, so we're going to give him a shot.

Bruno Eschli: Maybe not about the confidence level, but just to confirm again, you know, that we have not been more outspoken here about precise timelines for the other studies, but you are right, there are a couple of them. The chemo combination, SKYSCRAPER 06, for example, which gets some attention, and we will, yeah, once the data is in-house and we feel ready, then we will update you. Richard, all good from your side?

Richard Parkes: Yeah, great, thank you.

Bruno Eschli: Yeah, we maybe have two questions here, which were sent to us from Luisa Hector from Berenberg. She had to jump out. There was one question here about the target, which was mentioned by Thomas about 80% of the pipeline being first or best in class. Where do we stand on this journey?

Thomas Schinecker: Yeah, right now I would say we're around 40% to 50% in that range, and so we're working very hard to increase that to 80%. That's a target across all of the R&D organizations.

Bruno Eschli: And then I think also here a question I got several times today already about our R&D spend going forward into 24. What would we guide here?

Thomas Schinecker: Yeah, I already mentioned, and I think Ellen mentioned it as well. So in the current guidance, basically it means that we have to grow our operating profits in the high-single digit range. That means we will have to have a lot of cost discipline across all cost lines, including R&D.

Bruno Eschli: And then maybe the final question, and this is, I think, we have the question here from Luisa, but also from Andrew Baum from Citi. This is about a bit the landscape in hormone receptor positive breast cancer and how this might now change in light of the innovative data, which we just had last December. So first of all, are our assumptions changing here? Are future development plans having now a best-in-class, PI3 kinase inhibitor at hand? Also seeing the [indiscernible] oral coming to the market and then the CDK4/6s making inroads. So for the development plans here for our molecules, as the first question, the second question about the initial usage, considering the label we might get now based on the data, in INAVO120, would we expect quite a broad uptake initially, even with only having pilocyclic combination data in the label? This is the question.

Teresa Graham: And then a small question to finish with. So in terms of -- maybe we'll take the CDK4/6 question first, which is that while we ran the study on -- while we ran the initial inavolisib of study with palbo, we are currently exploring other CDK4/6 combinations, and so we will have additional data that -- those data are coming. We don't expect the fact that it was on the palbo backbone to be a limitation for utilization after approval. It would be premature to speculate on what the actual label would look like or what actual usage would look like. I think those are all things that we will have to explore after we have our conversations with health authorities. But obviously, seeing the transformative data that came out of that study, I think it really gives us a lot of confidence that this is a molecule that we should be looking at in a more broad capacity and certainly those conversations are underway. As we are thinking about the evolution of the HER2 -- HR positive breast cancer space, I think we are continually looking at how to make sure that we're optimizing either our existing trials or future trials to ensure that we are staying within -- ahead of standard of care. And those are all activities that are currently ongoing. And certainly we can share with you more as changes are made.

Thomas Schinecker: Perfect. So thank you very much, everyone. And yes, as you've seen, the underlying business, so the business excluding COVID-19 is performing very well in '23 with 8% growth. And as we head into '24, we will have less headwinds. And with that, specifically after Q1, you will see more of that growth really shining through. I think we've made good progress also on the pipeline, and you've seen the ambitions that we have there. We have, on the Diagnostics side, I think one of the biggest launch years ever. On the Pharma side, we have 12 NMEs to potentially move into Phase 3 this year. And you've also seen how we are developing and making sure that our organization is well set up for the future, both from an organizational perspective and from a strategic perspective. With that, thank you very much for joining us today. And I look forward to the call in a couple of months from now for Q1. Thank you very much.

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