Roche Holding AG (ROG) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Roche Full Year 2020 Presentation Investor and Analysts Webinar. My name is Marco, and I am the technical operator for today's call. Kindly note that the webinar is being recorded. [Operator Instructions] At this time, it is my pleasure to introduce you to Karl Mahler, Head of Investor Relations and Group Planning. Karl, the stage is yours.

Yes. Thank you, Marco. Welcome to our full year 2020 analyst call. Personally, I hope that you're all well, safe and in a good condition, I trust in that. And we have -- basically, you have 2 hours booked with Roche, 1 hour presentation and 1 hour will be Q&A. Most of you are familiar with the Zoom functionalities. Marco already highlighted that. So you can raise the hand if you have any kind of questions. You can also use the telephone line, we'll organize this one. And you also can send me an e-mail, and then I can read those things to you. In these unstable times, so we wanted to give you some stability. So actually, we have the scheme set up as always, so that is good news. And with this one, I wanted to hand over to Severin. Severin, the floor is yours. Thank you.

Thank you, Karl, and welcome, everybody, to our year-end briefing. Let's go right into the numbers. If I can have the next slide, please. Next slide. Good. So you have seen overall results, 1% growth on the sales side, EPS growing over-proportionally with 4% and a dividend increase in Swiss francs [ trending up ]. If we move on, please. That's, I feel, an interesting slide because even though the sites might look a little bit boring at first sight, there was happening a lot below the surface. On the one hand, what you can see is continued good growth on the Pharma side, which actually would have compensated for the biosimilars impact if we wouldn't have suffered from COVID-19. There, patients delayed appointments and as a result of it, there was less prescriptions for medicines. The impact of biosimilars was significant, somewhat higher than we originally expected. And then, of course, we have seen a very good momentum, in particular in the second half of last year with Diagnostics. Now on the cost side, I think it's really remarkable that we could increase R&D spend for Pharma with over CHF 800 million. That is an 8% increase versus a sales decline of 2%. It's investments into our pipeline. We have really fantastic opportunities we want to fund, and we could do that with all the savings in other areas: manufacturing, M&D, et cetera. So I'd say, yes, pretty good story in terms of protecting our margins, but at the same time, investing into the future. If we move on. That's an overview of all our contributions over the last year in the fight against COVID-19. And all of that happened on top of the ongoing business. Diagnostics, really fantastic to see the buildup of the portfolio, literally out of nothing, 15 new solutions. And you might have seen just this week, we announced a nasal antigen test. So we hope that, that will be yet another opportunity to broaden testing for more people because it's more convenient and you don't need a health care professional to assist for the testing. Likewise, on the Pharma side, important collaborations with Regeneron, with Atea. We'll come back to that in a moment. If we go to the next slide. That's another angle to look at our various efforts in COVID-19. And really, the point I'd like to make here is COVID-19 in some form or another will stay with us. I mean, we all hope that we will overcome the pandemic. But COVID-19 will continue to stay with mankind, like the flu virus. And that's the reason why we are investing, in particular, into the development of the small molecule in this collaboration with Atea. If clinical trial results should read out positively, that would be a very important contribution potentially during the pandemic, but certainly also beyond. If we go to the next slide please. Right. Here, the numbers, again, you have seen that already, minus 2% on the Pharma side and plus 14% on the Diagnostics side. Next slide, the quarterly picture. Next slide. Right. That's an interesting slide because you can see how the business was impacted by the lockdowns first time in the second quarter, with really a significant impact on the Pharma portfolio. And you see here in orange, the newly launched products, where we started off extremely well in the first quarter. And then you see the impact where patients just simply didn't go to their doctor or to the hospital anymore, and growth came down. Now it somehow somewhat recovered in the third quarter. And then again, you see a decline in the fourth quarter. So partly, this is due because a number of countries were going into lockdown mode again. And partly, this is also due to this carryover effect of Ocrevus, which patients are supposed to take every 6 months. And then on the Diagnostics side, you see the contrary effect because here, we have been ramping up our production capacities. And as such, could increasingly meet the demand. If we move on. Right. So that's good to see. On the Pharma side, an increasing portion of our business is now from the newly launched medicines. On the group level, it's over 40%. And as we see continued good growth with the new products, that should really make us confident for the growth over the coming years. Next slide, please. Profitability. We could keep the margin with all the efficiency gains we had throughout the organization. Next slide. That's again an important one. And as we discuss so much about COVID-19 and the pandemic and when it is over and the kind of contributions we make here, we forget that the vast majority of our work is on our other portfolio. And today, still, many more people die from other severe diseases other than COVID-19. So we keep investing in our portfolio. And 2020 was a really good year in terms of portfolio progress. You see that we transferred a number of new molecular entities into the late stage in our pipeline. And as a result of this, we have now a record of 19 new molecular entities in our late stage portfolio, and that is not counting for the indications. So this is just new molecular entities only in late-stage Phase III registrational trials. We've never had a stronger pipeline than today. And we intend to move additional molecules into late-stage in the current year. So that's really -- understandably, everybody focused on COVID-19, but I think that's the real story of 2020 when it comes to our mid- and longer-term prospects. And likewise, on the Diagnostics side, whilst we have been heavily investing into COVID-19, we did not stop working on our new platforms and on our menu of assays. And again, there is a number of very important launches to come, already starting in 2021. And again, that should provide us with growth for the years to come. Next slide, please. Bill will cover this in much more detail. You have probably seen the more recent data on faricimab, also PDS. So ophthalmology is really increasingly a tremendous opportunity for us. If we move on. So in terms of our guidance, in terms of our outlook, good continued momentum with our new medicines in Pharma. We expect very good growth in the first half of the year, in particular. And then it will depend on how the COVID-19 pandemic develops. And that is offset by still a significant impact from the entry of biosimilars. In parallel, we'll work, of course, on our efficiency across the organization. And if we move on to the next slide. That gives us the confidence for an acceleration of growth in 2021. So our guidance is mid-single-digit growth on the sales line, EPS in line with sales, and that should again allow us to increase dividends in Swiss francs for the next year. So who is next? Bill, Thomas? Bill. Bill, over to you. Thanks.

Thanks, Severin. Thanks, everyone, for joining us. And [ no doubt ], obviously, a very eventful year. I'd like to just underscore a couple of comments that Severin made about the nature of what was 2020. While there was a tremendous flurry of activity regarding COVID, and that hasn't stopped, and we're very involved in a lot of aspects of fighting COVID. However, if you go back 3 years ago, we were talking about our industry-leading pipeline with 10 exciting molecules in Phase III or registration. And now we have 19 molecules in Phase III or registration. In fact, we added 6 in the course of 2020. One of those was related to COVID, but 5 are in other areas. And for example, we doubled our late-stage oncology portfolio in 1 year, in 2020. And I think between the massive shift of resources from operations, from SG&A over into R&D, between that and the progress on actual molecules, I think the real story of 2020 for at least the pharmaceutical division was one of progress in the pipeline, despite all the obstacles posed by COVID. So I'm really proud of the work that everyone has done. We've spoken in the past about our bold ambition to deliver 3 to 5x as much patient benefit as we have in the past, but at half the cost to society. And I think we've laid a very strong foundation for that over these last 2 years, and in particular, in 2020, big advances, both with the science, the molecules and the investment profile. So we're looking forward to more of that in 2021 and some really exciting results ahead. Let's put up the first slide, thanks. Yes, so again, here you can see the geographic breakdown. Minus 2% overall. And obviously, the biggest hits were in the U.S. and Japan, where we had the most biosimilar impact with A, H and R all exposed in those markets. Next slide, please. So the P&L is actually, I would say, a pretty interesting story to follow because despite that 2% loss on the top line, we were able to offset that, deliver basically a stable operating profit, but also to invest CHF 800 million incremental in pharmaceutical R&D in the year. And I am really proud of the efforts that we've made over multiple years now, but a lot of those really paid off in a big way. We did have lower write-offs in the operations area, in manufacturing, than we had in 2019, but also strong gains on efficiencies and big gains in terms of our effectiveness and our focus in SG&A as well. So good progress. Next slide. And this is what it adds up to. And again, you can see our ambition at the top, and we're talking about doubling of medical advances. I'll explain it. What we want to do is have twice as many NMEs, twice as many new products and we want each of those products to have a bigger impact. So that's where we get from doubling medical advances to 3 to 5x the patient benefit. And we're going to do that at half the cost to society. Again, those costs can be in the price of medicines, but they also can be in terms of like early cures, things that avoid future health care costs or avoid current health care costs. And I think we've made some good gains and some good examples of that already. But if you look, this requires a lot of internal innovation, and we're investing there, but also a lot of collaboration. We had 92 new agreements in the pharmaceutical realm, 5 new agreements in late-stage alone. And you can see the modalities, and we really have the waterfront covered. You see on the left is small molecules, and we have 12 of those in clinical development across the enterprise. And when I say the enterprise, I'm talking about gRED, pRED, Chugai, Spark and the late-stage organization. And so 12 small molecules, all the way over to personalized MNRA (sic) [ mRNA ] vaccines, 2; and a personalized T cell therapy, 1. The grand total of molecules in clinical development is just over 90. And I'm super excited about that. I am, by background, a science nerd. So the opportunity to work with over 90 new molecules is a dream come true, and we're going to take it up from there. Next slide, please. So this is really the revenue picture. And obviously, the big blue bars at the bottom is the U.S. impact of biosimilars. I think we've seen the worst that it can get, the impact was bigger than certainly than our base case, with a total impact in the U.S., Europe and Japan of about CHF 5.1 billion declines on those 3 products. The worldwide impact was about CHF 5.7 billion for the year. And we -- again, I think that's -- we forecast that, that's probably the worst that it will get. We think this year, in 2021, the number will probably be closer -- roughly CHF 4.6 billion, so about CHF 1 billion less impact from biosimilars, but we do expect to have continued strong growth from products at the top, including Tecentriq, which has continued progress in penetrating a number of indications, especially in the international realm, in Europe, in Japan, outside the U.S, the reason being is because we're already highly penetrated in the U.S. with Tecentriq. Hemlibra, which continues to rapidly penetrate markets around the world, but a lot of growth left there. Ocrevus, we'll come back to. But again, good progress there. And so I think in this year ahead, yes, we feel really good about the lineup we have and more to come. Next slide. So this is the Q4 numbers on the left. And you can see we're now up to 47%. It's interesting if you look at the percentages versus the heights of the bar, the bars get squashed a little bit on the right side because of the appreciation in Swiss francs. So the bars are actually in actual rates. And so we see a bit of an impact towards the end. But it's really an impressive performance of these new products, and we added 4 more new products to the portfolio this year, and we'll either be filing or getting approval for 4 more in '21. So again, I think the pipeline investments over many years is continuing to realize benefits for patients and for Roche. Next slide. So in oncology, overall, minus 10%, really combined impact of biosimilars and COVID, mostly, in this case, mostly biosimilars as an impact. But I think what I'd point out here is if you look now at Herceptin and Perjeta, Perjeta has surpassed Herceptin. In fact, Perjeta is now our #3 medicine; Ocrevus is now #1; and A, H and R are #2, #4 and #7 in the lineup. So it's quite a big change in a year. Next slide. In hematology, I think this is one to watch. I would just point out here that what's not in shown is Venclexta. And as you know, Venclexta is now a blockbuster. We book approximately half of the profits for Venclexta, but not the revenues. And so you don't really see that on the bar chart. But we've had good progress with our portfolio in hematology, including a couple of things I'll come back to. So next slide. Yes, so this is some of the latest data from mosun and from glofit, and these are our 2 anti-CD20/CD3 antibodies. These bispecific antibodies recruit CD3-positive T cells and take them to the tumor. And we've been really encouraged by both the tolerability and the progress on that, of these regimens as well as the clinical benefit. And you can see mosun in highly refractory patients with follicular lymphoma. This is a breakthrough designation from the FDA. And again, if you look at -- different patient groups, but you can see between 65% and 76% overall response, which is a really great result and a great option for these patients with more indolent disease. In DLBCL on the right, this is glofit, and I think what was really impressive about this is the dosing is providing for response rates up in the 60s, which you might expect from a CAR-T therapy, but this is an off-the-shelf therapy. And so again, we're quite optimistic about our prospects for approval of both of these medicines in the next 12 to 18 months. And we're also -- by the way, we're examining a subcu dosing for mosun that could even further improve the dosing profile. So good progress here. Next slide. So here's Tecentriq. And again, I would remind you that the bar chart is affected by currency because the bars are in CHF. And over the last 12 months, there's been about a 6% to 10% increase of the Swiss franc against the major currencies that we're realizing our sales in. But you can see in Q4, we had 35% year-over-year growth. And looking forward, again, I think a lot of the growth we will see is outside the U.S. because we have a relatively high level of penetration already in the U.S. I think the other thing I would mention here is just the high potential for the TIGIT combination because there really hasn't been a big step forward in cancer immunotherapy in terms of the MOA since the advent of the checkpoint inhibitors. And we have a number of Phase III studies that could show that type of step forward. That will have, obviously, an effect on tiragolumab, our TIGIT targeting molecule. But because these studies are being run in combination with Tecentriq, then there's the potential for quite a big effect of pulling Tecentriq up with that. On the outlook for Tecentriq, I would highlight a couple of things. The adjuvant studies in non-small cell lung cancer and in squamous cell head and neck cancer. Those studies have been long anticipated. We believe they'll both read out in 2021. I want to mention that earlier, we had talked about the neoadjuvant study for lung cancer also reading out in 2021. We now think that's more likely to be 2022. And the reason being is that study will look at the pathologic response but also event-free survival. And in our ongoing discussions with the regulators, we believe that event-free survival is probably going to be seen as more the gold standard. And so the event-free survival endpoint was always going to be after the pathologic response endpoint, and that result we anticipate in 2022. But we do anticipate the adjuvant studies in lung and head and neck cancers to read out in 2021. Next slide, please. So just a brief note. You can see Alecensa continuing good progress. It's a very much the standard of care now in ALK-positive lung cancer, and we're really pleased with the continued growth of Alecensa. And you can see in Q4, we were up over CHF 300 million, so well into the blockbuster category. And again, really pleased with the long -- the durable benefit of Alecensa for these patients. Next slide. So Hemlibra, I think this is a really good illustration of the effect of the pandemic. So you saw very strong growth across -- really across countries up through Q1 of 2020. And then in Q2, basically, almost no new patients going on and some existing patients having disruptions. Then Q3, actually a very strong rebound, and Q4, again, healthy growth. And so we have every expectation that Hemlibra will continue to have strong growth as it penetrates in the inhibitor markets, in the international area, but increasingly in Europe and the U.S. penetrating outside inhibitor. So look for continued growth here. Next slide. All right. Immunolog,y, what was a little surprising on immunology in 2020 is that we didn't -- we weren't surprised by the reduction in Rituxan sales due to biosimilars, but obviously, Actemra, upside there based on the use of Actemra in many countries for treating critical patients with COVID and those studies continue to read out, I'll say a little more about that in a bit, but you can see the overall immunology franchise at plus 2% in constant exchange rates. Next slide, please. So Ocrevus. So basically, here's what's going on in the MS market from what we can see, is that people with MS, especially relapsing MS, are dealing with the disease for 30, 40 years. And there was a high level of switching to Ocrevus up through Q1 of 2020. We were up in the high 30s to 40s in terms of our percent of new and switch patients, and there were a lot of those patients switching. Beginning with late March of last year, the switching slowed dramatically. And in addition to that, there were a lot of existing Ocrevus patients who were nervous about whether or not to get a dose who delayed their doses, because of either concerns about safety or concerns about the therapy itself or concerns about going into a hospital or infusion center. So in Q3 of 2020, we saw those returning patients who delayed their doses in Q2, they all came back in Q3. So we got a bounce in Q3, and you can see that reflected here. In Q4, essentially what happened was that the patients whose doses got delayed out of Q2, that meant they were also delayed out of Q4, right? So if you were supposed to get dosed in May and you didn't get dosed in May, but instead in July, then you also didn't get dosed again in 2020 at all. Your next dose shows up in January of 2021. In addition, the rate of switching is still lower than pre-pandemic, for sure. It's hard to estimate exactly how low. But when we've done our market share survey, and it's a monthly market share survey, we have the data through October, and we follow a 3-month moving average, and that number was about 40% for October. So we don't see any reduction in -- or significant impact on people's interest in Ocrevus or their choosing of Ocrevus versus the other 17 alternatives in the market. It still remains very high, but the rate of switching is still lower, I think as people are kind of riding out the pandemic and waiting to see what to do next. But overall, we have strong confidence in the future of Ocrevus, and we expect that we'll have good growth in 2021 and that we'll continue to see this cycle because that actually could last for years where we'll have every other quarter up and down. Next slide, please. All right. So Evrysdi. So this has been very well received. There's no other way to put it. We have more than 350 doctors in the U.S. that are prescribing Evrysdi, which is quite remarkable because there's not so many doctors who treat SMA. Virtually, all the specialty centers are now using Evrysdi broadly. We've got about 1,000 patients treated and that was after less than 5 months in the market, and this is a launch in the middle of a pandemic, which I probably don't have to tell you is a bit more of a challenging exercise. So frankly, the reception has been overwhelming. We're getting quite a few naive patients, about 1/3 of the patients are new to therapy. Those tend to be older patients, children or adults. About 2/3, though, of the patients are previously treated with one of the existing therapies. And again, it's a broad range of ages from 2 months old up to 70-plus years, and about half of the patients are adults. So again, we think this is going to be a very important therapy for a long time in the future. It's very well tolerated. It's a convenient once-a-day dosage, oral dosage. And it doesn't require contact with a health care provider. And again, it's been a really good start. And we'll have more data coming this year in the previously treated patients. We'll have the 2-year data from the pivotal studies, and we have ongoing study in newborns. So really excited what we see. Next slide. Oh, and I should mention Evrysdi, we are still looking forward to approval in EMA in the first half of this year and in many other countries around the world. Let me make a few comments about ophthalmology. So you've noticed since our last quarterly call that we've actually had 4 Phase III studies with faricimab, have read out. So 2 in DME and 2 in AMD. And we were, again, very pleased with what we're seeing. About 50% of the patients in -- with DME were able to achieve 16-week dosing, about 45% of patients with AMD (sic) [ nAMD ] achieving 16-week dosing. This has really never been seen before in trials of molecules targeting angiogenesis in retina. It's a $12 billion global market, and we think that faricimab is going to be a really important new choice for physicians and patients. Some people might ask, well, how does that relate to the port delivery system? Again, in May, we showed data that we had about 98% of patients getting 6-month dosing intervals with the port delivery system. And how do these things all fit? And I think one way to think about it would be, faricimab is a very well-understood route of administration, right? So it can be given the same way that Lucentis and other therapies are given, in a simple dose, but with a 16-week interval. The port delivery system -- sorry, and let me say, and that will be really great for the half of patients that are able to get a 16-week dosing interval. But other patients may need a 12-week, 8-week, even 4-week dosing interval on faricimab. Those patients would be great candidates for the port delivery system. They have the implant done, and then they can have basically twice a year dosing. We've also announced a study of the port delivery system on a 36-week dosing, which would extend the time out to 9 months for the PDS. So we just think that more choices are going to be really important. This is a really large therapy area. And there's a high unmet need for continued efficacy over time. Next slide. All right. Let me just touch on the infectious disease area. And obviously, this is something that's on everybody's mind these days. I'll start with Actemra maybe because that was the first thing that we studied. And as you know, we've run a number of randomized controlled studies. We've had mixed results. And I would say, we think a good part of that has been due to different endpoints and different patient populations. And we think we're sort of zooming in on both the most relevant endpoints and relevant patient population. It seems like the ideal candidates are patients who are really in that acute phase of inflammatory attack. They're characterized by needing high-flow oxygen or some ventilation support, but not yet requiring organ support. And then not too early. And so the REMAP-CAP study read out in January, that was announced in England. We don't have the full data on that. That's actually a study being run by the NHS, but based on that study and what they reported was a 10-day lower time of hospitalization, also lower need for mechanical ventilation and other important endpoints. So based on that, they've authorized Actemra on the NHS, which I'd say is a fairly high bar. And we have 2 more Phase III studies reading out for Actemra and COVID over the next 6 weeks or so. And so those should really confirm what we have. Also the Regeneron cocktail with casi and imdev. And you may have seen the news, but there was some studies published in the last week that looked at the ability of these molecules to overcome the resistant variants. And so far, at least the cocktail is holding up. And so I think that validates their decision and ours in working with them to really focus on having 2 or more molecules to target COVID so that we can overcome resistant variants in the future. Next slide. So in terms of the final say on 2020, we were able to add a couple more green checks. We were pleased on the key outputs, including those 2 Phase III studies for faricimab. But it was -- yes, it was a year where we had some big wins and then some challenges and some setbacks. But we know that if we're not taking big risks, then we're not going to drive medicine forward, and that's really what it's all about for Roche. I think you know that we have a real passion for innovation in medicine. And in some years, we're going to have some more red Xs. But we have a lot of -- yes, a lot of excitement about what's in the pipeline and our prospects. And I'd say we ended the year in a reasonable place. If you go to the next slide, this is some of what's coming up. And I think, again, the additional studies that are going to read out on outpatient and prophylaxis of the cocktail, that's significant. I mentioned already the adjuvant studies of Tecentriq. I didn't talk about POLARIX, which is Polivy plus R-CHP in DLBCL. This is a big deal. It's been 20 years since Rituxan was established as the standard of care in diffuse -- frontline diffuse large B-cell lymphoma. And now, we have an opportunity to best Rituxan. And so that's what we want to do with Polivy. Looking forward to that readout mid-year. Also mosun and glofit, some important data readouts there that will enable filings and then continued, as I mentioned, the switching data on Evrysdi. So I think quite a good year for news flow, and we think it's going to leave us in an even stronger position at the end of the year than we're starting. With that, I think I want to turn it over to Thomas.

Thank you, Bill. Hello, also from my side, and I hope that you had a good start to the year despite this terrible pandemic and all the personal consequences that everyone has to deal with due to this pandemic. Now if we go to the next slides, I'm happy to present the full year Diagnostics Division performance, with sales of CHF 13.8 billion. We had more than 14% growth for the year, and this growth was driven predominantly by Molecular Diagnostics with 90% growth, and Point-of-Care, which is part of the Centralized and Point-of-Care business area, which grew 212%. This was driven by antigen testing. And really, we only had the antigen test available the last 2 months of last year. So on that regard, then having 212% growth for the year is really significant. Now Severin already showed the growth by quarters. Q4, we had more than 28% growth, and we do expect further acceleration of this growth, particularly in Q1 and Q2 of this year. Now Centralized and Point-of-Care declined by 1%, and this was due to a decline in the routine testing due to the pandemic and the lockdowns. And if we go back during the quarters, in Q2, we had minus 17% in this business, minus 17%. And this was really the hard lockdowns all over the world, with 30%, 40% volume drop in the months of April and May. June was much better. So you can see how well this business recovered, but obviously also the antigen testing did play a role. And by the way, we already saw a Q1 impact at the time because in China, we had the first impact. And here, we had, specifically in March, a significant impact in volumes in this business. Sales in Tissue Diagnostics grew 5%. Also here, we had fantastic Q1, Q3 and Q4. Q2 was really impacted by the lockdowns. Otherwise, in the other quarters, much higher growth even, so this business is doing extremely well. Diabetes Care sales declined partly due to COVID, but also because of continued adoption of competing technologies to BGM. So overall, we do expect the COVID-19 portfolio to grow significantly also in 2021, and particularly in the first half year. But we also expect that the non-COVID business, the kind of core business will grow very well in 2021 because we did have certain impacts this year, and we will get a certain tailwind out of that. Now going to the next slide. Here, this is the regional split. Sales growth was driven strongly by North America, EMEA and Latin America. In these regions, we did have a lot of COVID testing sales business. At the same time, we did have an impact in our routine business. But net, it was definitely positive. And we did see a recovery of the routine business, particularly in Q3 and Q4 over the time. Asia Pacific is the only region that actually had a decline, again due to these preventative measures, particularly in China, which was minus 11% for the year. And China was the first impacted and really didn't have much of the upside in terms of COVID testing sales beyond the MagNA Pure and LightCyclers. And if I take China out, actually, APAC also grew double digits. And one other specific information on China is that we actually did also take the opportunity to further lower inventories from 80 days inventories to 45 days inventories, which is approximately CHF 200 million, and most of that was happening in Q4. And with 45 days, we're at the lower end of what we need in terms of inventories in China. Going to the next slide here, just focusing 2 areas, Centralized and Point-of-Care, which decreased by 1%, mainly due to immunodiagnostics and clinical chemistry. Again, largely impacted by China and also by this inventory reduction. And then if you look at Point-of-Care immunodiagnostics, 2 months of sales in antigen and for the entire year, with that, we grew 667%. So a really strong impact here. Molecular grew 90%, mainly due to the PCR testing. Within the virology line, we report the tests for the high throughput, 6800, 8800, which in Q4 grew 250% in the LightMix Systems. This is where we report on the MagNA Pure and LightCycler, and this grew by almost 200% in Q4. Going to the next slide on core operating profit. Here, we had substantial growth in core operating profit by 50%. And thereby, we grew the operating profit faster than sales. And this was, one hand, a favorable product mix. But also, as you can see, we had very good and tight cost management across the organization. Cost of sales, you see with a 10%. This, on the one hand, is, of course, higher volumes, but also we sold more instruments than we would normally do and the margins on instruments are lower. And the third piece is really higher costs in terms of global supply chain, to really bring this product faster to different places, also flights and containers were more expensive than they normally are, and we really needed to bring the products where they were needed as quickly as possible. M&D is flat. But here, again, if you look at marketing and sales was actually down. Here, also the local distribution costs was rising significantly. So again, superb cost control. R&D, this is what we want to do. We want to invest in new products. And this was really driven, on the one hand, by all the COVID products that we launched, but also -- I mean, we didn't neglect the rest of our portfolio. So we really pushed forward on that. And you'll see 2021 will be a fantastic launch year. And so this is really paying off. G&A is slightly above 0, and this is due to legal expenses in the U.S. So also here, really going in the right direction. So overall, very happy with this development. Now going to the next slide. Here, you can see our overall portfolio on what we have launched. And the virus was not even sequenced and the sequence was not known in the beginning of the year. So it was only in the very couple of first weeks of January when the sequence was published. And to develop this many products in such a short period of time and at that quality was really a huge effort by our organization, working day and night. Also the ramp-up in production, I have to say the team really did everything they could to help the world fighting this pandemic. Now we have developed those solutions on the Molecular side, so PCR; and on the immunology side, which is antibody testing and antigen testing, antigen to detect the disease, antibody to detect previous infections, but also in clinical labs and point-of-care. So really a comprehensive solution for everyone and they can pick the options that they need in order to fight the pandemic the best way in their country. Now let me highlight just 3 things on the slide, 2 of them, I'll get back to it on a later slide. One is the Anti-SARS-CoV-2 S antibody test, which got emergency use approval in the U.S. This is very much needed, specifically in conjunction with vaccines that also target the spike protein. And then the second piece is the authorization for the Elecsys antigen test. So being able to detect the antigen on these lab machines that are basically present in every hospital around the world very quickly, very precise. Again, another weapon to diagnose people quickly, specifically health care workers, et cetera, a very important one. And just beginning of the week, we also announced that we received CE Mark for our rapid nasal antigen test. Again, a very important weapon specifically because it allows for a much easier collection of the sample. And obviously, with that, it's more convenient, and people will be more willing to do it on a more regular basis. And then this is a great opportunity to then open up more of society and more of the industry as well, because you can control infections much better. Going to the next slide. And this is something that we didn't talk about that much last year. We always said that we were working on a ramp-up. But we wanted to take this opportunity now because now it's happening, because normally it takes 18 months to really do this. We took a risk back in March, April, invested more than CHF 600 million, hired more than 1,200 people and really focused on, first of all, buying 90 manufacturing lines from our suppliers, then building buildings and validating those lines. And the first of those lines now came in end of last year and the beginning of this year. I mean what we could do in the beginning of this pandemic is really maximize the usage of our existing lines, which means people worked day and night, not only in our organization, but also with our partners. People were not taking vacation. They were working weekends, they were working during holidays. Between the Christmas and New Year there was only 1 day where people didn't work. So really, they are giving everything to make sure that we can do the best for the world. And they're doing it with pride, and they're doing it out of free will because they know it's important right now. Now this was really a huge effort. And when you talk about the test, often people think "Oh, it's only 1 test that you have to ramp up." That is not correct. We actually need 17 different products that we need to ramp up. There are multiple different consumables, pipette tips, different plates, et cetera. There are raw materials that you have to ramp up. And so there is a lot that you have to do. And in a typical test on its own, only the test itself, there are 600 components. So this is really complicated. And to do this in such a quick time was extremely important. And again, these are very specialized, clean room, automated manufacturing processes. And this would only take much longer. Now what would that mean now? Well, our ramp up will actually result in a doubling of our PCR capacity by end of Q1 and then again, a doubling approximately by half year. And I just want to say that we didn't -- we obviously did the mathematical, theoretical calculation what that would mean in sales, and these are obviously mind-boggling numbers. But there are other factors that make it a bit unclear on how things are going to develop. So we did not include all of the sales in our outlook, because we know that testing sales can be impacted by the rollout of vaccines, can be also impacted by the different variants and mutations that are coming and can be impacted by pricing. Now there are things where I think we are well positioned. One of them around pricing. I mean, we are charging less than the average other company out there. So we have a certain buffer in there that our prices -- I mean, others will have to go down significantly to match the price. That's one end. But also a lot of the testing that's being done as well is very manual, and with that also very cost-intensive. And the quality, if it's so manual, it's then also not at the same level when you have such high level of automation that we have with our systems. I mean, with our systems, you can take the sample, put it on the machine, you can go home, you don't have to do any other manual intervention. So I believe as potentially volumes will go down, people will switch mostly to our systems because it's just a lot, lot easier, yes? So there are certain things where I see as a potential. But from our outlook, we really mostly included sales of COVID testing in the first half year. And then Q3 and Q4 would then be a potential upside. Now going into the next slide, some of the portfolio that I wanted to highlight around COVID. One is the Elecsys SARS-CoV-2 antigen test. And here, this is a new solution. It's an immunoassay for the qualitative detection of the nucleocapsid antigen of SARS-CoV-2. And as you can see, the performance is truly excellent with almost 3,000 patients in our clinical trials. And what I think is also special about it is the virus inactivation time. Right now, there are not many players that have such a solution on the market. And most have a virus inactivation time that's more than an hour. We have a virus inactivation time of 2 minutes. And this solution can work in all the hospitals. They can screen health care workers on a regular basis, if they see the virus. And the results are available in 18 minutes, and you can do up to 300 tests an hour. So that is really significant, another important contribution to fight this pandemic. Next slide, please. Here, we launched in December, our Elecsys SARS-CoV-2 Anti-S (sic) [ Anti-SARS-CoV-2 S ] antibody test, which received emergency use authorization. Now this antibody compared to the nucleocapsid one that we launched in May targets the receptor binding domain of the spike protein. So it's anti-S. And it's -- our nucleocapsid assay was already used, for example, in Moderna trials to baseline the start of the trial, so they use that. But now they're also using this assay to monitor the level of antibodies and also the duration on how long this vaccine is going to work. So we're working very much with these vaccine companies on this. And you can also see the results on the performance, which is confirmed also by these companies is really excellent. Now we developed this assay before there was an international WHO standard in terms of quantification, because this is a fully quantitative assay. The good thing is WHO came out with a standard in last month, and it's a perfect correlation to our assay. So this is really good news because everyone that will develop something like this will have to standardize against this international standard. Now moving outside of COVID into oncology. We recently also launched a PIK3CA mutation test to enable fast decision-making for targeted treatment decisions in advanced or metastatic breast cancer. PIK3CA mutations are often associated with tumor growth and resistance to endocrine treatments. This test detects 17 different mutations in the PIK3CA gene and can also help identify then patients who can benefit from a PI3 kinase inhibitor target therapy. As you may know, PIK3CA is one of the most commonly mutated genes in advanced or metastatic breast cancer. Up to 40% of the patients do have mutations in this gene. And our studies have shown high analytical sensitivity and clinical reproducibility. Going to next slide. With nearly 2.1 million cases of breast cancer that are diagnosed every year, and 15% to 20% of those being HER2-positive, it's obviously important that people get a very good and fast diagnosis. And if you look at those slides, there may be some very good pathologists that can read that very accurately. But clearly, with the rising amount of cases, it's important that we digitalize this and standardize this. And with these algorithms that use the latest advances in artificial intelligence, we can do that. And we have launched 3 this year, we're going to launch more next year. And this can be used in conjunction with our scanner, the DP 200. But also it's run on the uPath software and can then be -- the information can be transmitted into the NAVIFY Tumor Board. Going to the next slide and giving you a bit more of an outlook. I believe 2021 will be an amazing year in terms of launches for us. Here, you have 3 system launches. In addition, we'll also launch another system called COBAS PULSE. But beyond even the system launches, we have really a fantastic pipeline of medical value assays and solutions that we are going to launch. Now we did this exercise looking at how much we launched, not in 2020 but -- because we launched more in 2020 -- but the years before. We launched on average 5 of these medical value assays. 2021, it's going to be 17. So this is really fantastic to see this progress. Now what I also think is labs need great systems that are easy to use to be able to run those. And on the Serum Work Area side, we had the cobas pro, which was the next-generation system. But now we are launching a system for the high throughput with the cobas pro ultra-high throughput and the cobas pure for the lower end. And this is unique because many of our peers, they play maybe in one of the segments mostly, but to really have family approach across all is really what our customers need because they think in networks. And the same we did on the Molecular side. We had the 6800 and the 8800, which have been proven to be perfect for a situation of a pandemic. And I would say there's no peer out there that has systems in that throughput range. And most were playing more in the area where we're going to play on the 5800. So we had, I would say, somewhat of a gap here because we had -- with the cobas 4800, not such an automated system. So now launch this, we'll have, again, a full family approach and really something that is extremely competitive in this space. And again, all of these systems have identical user experience, identical reagent concept, same performance, same quality, allowing standardization across. So really excited about this. Next slide, please. And here, I would really like to invite you to our Diagnostics Investors Day, which is going to be on the 23rd of March and will be taking place virtually in our new Customer Experience building in Mannheim. So you'll get the feeling that you're actually in that building. In 2020, we did launch our new diagnostic strategy. And with my leadership team, I would like to give you the opportunity to see that, but also give you a look into really our exciting pipeline. And yes, I can just invite you to that. Next slide, please. Now the team did a tremendous effort to not only deliver the 15 COVID solutions. We also were very productive in the rest of our pipeline. So -- and this will definitely ensure a continued success of our business. Last slide, please. And I'm also very excited on how 2021 is going to look like. I mean you can see that the font is getting smaller, and that's because we have a lot of launches. And I believe 2021 will be huge. And also, this will drive our growth in the following years. So really looking forward to your questions later, and I hand over to Alan.

Thanks, Thomas. Great to see the excitement and great to see how diagnostics is flourishing and what you've really done in case of contributions really to testing, and to society, I would even argue. So really great. So welcome from my side. I hope everybody is safe and healthy. I think we -- you can imagine, I'm excited about the contributions that Roche made in 2020. And certainly about all the contributions to come really to create more safety and health in our society. With that, let's go to Slide 55. Yes. So you've seen the agenda very quickly, nothing unusual. And the highlights, I will tap on all of them. So let's move on to the next slide. And here, you see really what Severin has alluded to already. I think the major shuffle -- reshuffle, if you like, of resources in our company. I think on the sales side, as you mentioned, a minus CHF 1.2 billion sales reduction on the Pharma side. Nevertheless, I think, extreme growth from the new products, you've seen that. And then certainly, the Diagnostics division was CHF 1.8 billion up, CHF 2.6 billion of COVID-related sales, which I think also shows that there was really an impact on the underlying business on the routine tests. On the right-hand side, you see the profits. And really, I think what is amazing is, on one hand, I think the momentum that you're seeing in the profit growth. But the other piece is really here that Pharma lost the sales that I've mentioned already, invested CHF 803 million more into R&D and then really balance that out with Pharma efficiencies and other gains in that area to stay basically flat on the core operating profit. And then you see the Diagnostics coming in with a significant growth in core operating profit of CHF 981 million, which then really resulted in the 4% growth, as mentioned. Good. With that, let's go to the next slide. And this is the comprehensive view. Let me very quickly lead you through this. I think sales in constant rate, up 1%. I think my colleagues did a great deal in explaining that already. Then the core operating profit up by 4 percentage points. Good cost management. I will explain that a little more into detail. Then the core net income by even a higher dynamic with plus 5%. And here, the financial result plays a role. We'll dig into that as well. And then you see where the core EPS loses a little bit of dynamic in constant rate by up plus 4%. And here, the point is that certainly, you take the minority out for Chugai, and I think we all know that Chugai had a great year in 2020. The IFRS net income, up 17% in constant rates. And this is certainly due to a base effect coming from 2019, where we wrote off the goodwill for the Diabetes Care business, and you will see that later on. Operating free cash flow, down by 21% in constant rates. I will dig into that. In my opinion, not a major worry, because very well explainable. And you will see an increase on the net working capital side, which I think really we can benefit from in the outer years when that really turns into cash. So with that, yes, let's go to the sales bridge here. Nothing, I think, unusual. You see really Pharma now in a little bit more detail from a regional point of view. And you see the impact in the United States, certainly driven by the biosimilar impact. You see Europe, which could overcompensate the biosimilar impact. International with solid growth, I would argue, especially in China. Chugai also impacted by biosimilar competition and then the Diagnostics growth that I've mentioned. You see really the group growth of CHF 620 million and then you see the significant currency impact of CHF 3.8 billion, which I will allude to later on as well, which gives us a minus 5% in Swiss francs. Good. With that, let's go to the core EPS development, the bridge over here. And let me start really with the point that, I think, overall, core EPS has grown by 4.2% from CHF 20.35 to CHF 21.20. And you know that when you look at half year, I think we had a momentum of 1.9%. So we even increased the momentum in the second half. And let me lead you through this. I think the first part is about income from disposal of products, and we had less disposals compared to last year by roughly CHF 250 million. At half year, we had a larger negative impact here of roughly CHF 300 million. So we did some smaller things in the second half, but still, let's say, a gap of CHF 250 million to last year. You see other royalties and operating income, that's basically flat. Same applies to the gains in equity securities, completely different composition, but basically flat. And then the bond redemption that we did in December of 2019 had an impact of minus CHF 202 million and you see really that gave us a base effect in the second half when it comes to core EPS. Resolution of tax disputes, I have a slide on that. I think we had positive impacts from resolution of tax disputes in 2020 as well, like in 2019, but a little bit lower, a little bit lower, admittedly. And that took a little bit of momentum away, but look at really what we contributed on the operations side to bring the core EPS up, an increase of plus 4.9 percentage points. Good. With that, let's go to the P&L. Let's jump right away to the royalties and other operating income. I gave the explanation already, really lower income from the disposal of older products. The CHF 250 million, I think that explains that line. You see the cost of sales, and on the cost of sales, really, I think you see a reduction here of CHF 1 billion, so a saving of CHF 1 billion, and there is an impact from the Pharma side of roughly CHF 1.6 billion. And on the Dia side, an increase of CHF 600 million. And that -- really, that nets to a saving of CHF 1 billion. I will explain that because that deserves a little bit of explanation on one of the next slides. M&D in Pharma down by CHF 600 million, flat when it comes to Diagnostics. R&D, an increase of roughly CHF 1 billion -- CHF 953 million; CHF 803 million on the Pharma side. And the rest on Diagnostics, which I think is amazing because you really see how we reinvested the money, I think, in a time where we faced a lot of challenges. And then you see G&A, and that is, how should I say, that could be worrying. It isn't, because the CHF 157 million is driven by Spark. We consolidated Spark relatively late in the year 2019 in the second half of December. So basically no effect here. But then in 2020, we had the full base effect of Spark, which really explains CHF 100 million of that increase of CHF 157 million, and the rest is really in FMI and Flatiron as they build their organizations. And the core operating profit, I've mentioned a couple of times already, up by CHF 981 million, which represents an increase of 4%. So let's dig a little bit into things. I think on royalties and other operating income, I can be quick. You see royalty income, out-licensing income and other operating income is balancing out, as you can see. The other operating income is driven by Venclexta. I think Bill made a comment about that product. I think that product is becoming really meaningful when it comes to profits and has contributed significantly on the profit line for Roche and for Pharma. And then you see really the income from the disposal of products, which I've mentioned already, which was by CHF 250 million -- roughly CHF 250 million lower compared to last year. With that, let's go to the cost of sales. As said, I think that deserves a little bit of explanation because you see overall, and I've mentioned that in the last line here, in bold Group, you see the saving of CHF 1,015 million. When you go to the Pharma division, you see a saving, in constant rates even, of CHF 1.6 billion, CHF 1.7 billion if you round precisely. And certainly you [ actually ] say, "Wow, that's a big figure." So let me explain that a bit. I think really, first of all, you see the manufacturing costs went down by CHF 800 million roughly, that's the plus CHF 787 million. I think we had a couple of base effect here. We had great efficiencies. So I think really -- this is really what matters here. The rest, so over CHF 800 million, basically half, of the overall effect is really driven by the fact that we paid lower collaboration and profit sharing. I think that was one element, which [ when it ] came down, that is around CHF 400 million. And the other point is lower royalty expenses. While Cabilly came down, Ocrevus came up a little bit with the royalty expenses, which is understandable. But I think, overall, that gave us a saving of around CHF 200 million here. So I think just to put that into perspective. But as Bill said, I think a major improvement in efficiencies. And in Dia, it's a pretty straight increase of CHF 637 million, which is also represented in the manufacturing costs. With that, let's go to the core operating profit and the margins. And you see really the margins went up in all divisions and not just in concentrates, also in Swiss francs. And let me add a point here on the Pharma side. I think that's amazing because, as said, with lower sales and a higher investment into R&D of CHF 803 million and still defending the margin, I think is quite an achievement and look at Diagnostics and look at the group overall. With that, let's go to the core net financial results and the core net financial result has improved quite significantly, as you can see, by CHF 339 million. And let me lead you through the bridge. You see the net interest income has deteriorated. While we had lower cash on hand in 2020, and interest rates went lower, equity securities basically flat; currency, no impact. And then you see where the debt redemption, as mentioned already, which we didn't do again in 2020, but did it in 2019. So a base effect in '20. And then you see where the interest expenses, which is certainly to a major portion also the result of the debt redemption that we have done. So an improvement of CHF 182 million, and then you see the position of Other, which is a nice mixture of a lot of things. So then with that, let's go to the group tax rate. And the group tax rate in the middle, you see that when you look really at the underlying group core tax rate, not a lot of move from 18.4% to 18.6%. But what you also see in green is that in both years, we had quite some help from positive impacts from the resolution of tax disputes. You see really in 2019, we came out with 16.3%. The resolution of tax disputes meant a reduction of the tax rate of plus 2.1 percentage points, representing an absolute amount of CHF 454 million. And you also see in 2020 where the reported rate is 17.1%, that we had some help here from the resolution of tax disputes. They're coming in here by a reduction of minus 1.5 percentage points, representing a positive impact of CHF 317 million. When I look at 2021, let me say here, I expect the group core tax rate of about 19%, see a little bit of an increase in Japan, in Chugai that plays into this, but roughly 19% should be in the cards. With that, let's go to 67, Slide 67, and this is about the noncore items. And you see the core operating profit increase, which I've mentioned, plus 4% in constant rates. And then you see the global restructuring plan, basically comparable to what we have seen in the past years. Amortization of intangible assets, a little bit up, driven by Rozlytrek, which came new into the portfolio, if you like here, and then the impairment of intangible assets, which went down significantly by over CHF 1 billion. And here, the major driver is that we have written down the diabetes care goodwill in 2019. M&A and alliance transactions flat basically. And then legal and environmental, with quite some swing of CHF 800 million. And you see really the negative impact in 2019 of minus CHF 480 million, very much driven by one legal case we reserved for, for Meso on the Dia side. And then I think, really in 2020, we released the Accutane provision of roughly CHF 300 million. So CHF 347 million here positive. I think that all adds up to quite a positive year of roughly CHF 2 billion from the non-core item, which brings the IFRS core operating -- the IFRS operating profit up by roughly CHF 1 billion. So plus 16% in constant rates, which is then reflected in the IFRS net income, which goes up by 17% in constant rates. Good. With that, let's go to cash on Slide 69. And as said, I think a significant impact from CHF 20.9 billion in 2019. The operating free cash flow went to CHF 14.8 billion in 2020 in Swiss francs. And you see the first point to make is foreign exchange of CHF 1.7 billion, and that leaves us with 2 major impacts. One is investments into intangible assets, and I think that's a good thing because this is what supports our pipeline, especially on the Pharma side. So when you think about Sarepta, Blueprint, Bio, Atea, I think this is all investments, which are reflected here. And then if you see really the increase in net working capital, the major driver here is inventory is up by CHF 1.4 billion in both divisions, in Pharma and basically equally in Diagnostics. And on the Pharma side, it is really about the new launches. And on the Diagnostics side is that we have good inventories for all the COVID tests and what we're seeing over there, what we're doing over there, and I think that's justified. So no doubt that this will turn into cash over time. Another piece here I should mention, is that we have taken lower provisions in 2020. And with that, let's go to the group net debt level. I think, well, we are not net cash positive. We still have net debt on hand with a minus CHF 1.9 billion, start of the year with a minus CHF 2.5 billion. And you see the bridge here, and I'm not going through all of that because I think that's pretty obvious. Let me make a point about the bar on the lower part of the slide. And because what we have seen in 2020 is that we had quite a trade-off between intangible assets, investments into intangible assets and M&A. And perhaps that was a reflection of all the high valuation in the market, that we did more in-licensing deals, and agreed on more milestones and more sharing of opportunities and risks moving forward. But you see, really, when you look in total at our investments into innovation, there is not a huge difference to what we have invested, at least from a balance sheet point of view, in 2019 compared to 2020. Good. And with that, quick look at the balance sheet. Balance sheet, nothing really extraordinary. Cash and marketable securities pretty flat. Other current assets, up by CHF 1 billion roughly, and that is basically inventories. The noncurrent assets, this is the increase in intangible assets of more than CHF 1 billion. And then you look at the liabilities, the current liabilities went up by short-term debt of plus CHF 2.3 billion. The noncurrent liabilities went down by long-term debt by minus CHF 2.4 billion. And then you see really the equity, equity portion now at 46% and roughly CHF 40 billion now when you look at the absolute number, which I think is a nice improvement compared to how equity looked like when I joined the company 10 years ago. Net debt to total assets at 2%. Good, with that, quickly to currency on 73. And when you look at currency, well, we've taken quite a hit in 2020, but let me emphasize once again that we have a pretty good natural hedge, which means we have our major sales in currencies where we also have our major costs. When you look at the U.S., we have a full supply chain, a full value chain in the U.S. We have a full value chain in China. We have a full value chain when it comes to Europe. So I think that is, for me at least, a little bit more of a reporting point. But when you look really at the impact in 2020, and you see that on the right-hand side, with a minus 6% -- 6 percentage points on sales, with a minus 8 percentage points on core operating profit and a minus 9% on core EPS. And if we assume that all currency rates stay flat from year-end 2020, we would expect impacts between 3 percentage points to 5 percentage points on sales, core operating profit and core EPS in 2021. Good. Core EPS, Slide 74. Let me set the stage for your assumptions and for the analysts' assumptions for core EPS in 2021. And to do that, I think we have to get the basis right for 2020. So core EPS 2020, as reported, is CHF 19.16. You see now that you need to take an adjustment for the foreign exchange losses as we apply, and all apply, to a constant exchange concept, exchange rate concept to be precise. And to get to this CHF 0.19 to eliminate it, you take the currency losses of minus CHF 206 million, you find them on Page 65 of the finance report, and you take the taxes away from them, that's roughly CHF 38.31 million. And you get to that by -- when you multiply the CHF 206 million, the minus CHF 206 million to be precise, with the underlying tax rate of 18.6%. So when you do so, you get to a CHF 167.68 million, and you divide that by 865 million shares, that means voting and nonvoting shares. And you will find that number on Page 171 in the finance report. So once you do that, you get to CHF 0.194, and that is exactly the number that we have highlighted here in the slide, and you have to add that up to get to the 19.35%, which then represents the basis for the projections for 2021. Good. And with that, I think the last slide is the outlook. I think Severin has alluded to that, looks a bit boring, but I think given all the uncertainties and the momentum and every -- all the challenges we have seen in 2021, very happy to provide that guidance. And I think we all look forward to your questions now. Thanks.

Yes. Could we get again the administrative illustration here on how we can ask questions and participate in the call. Operator, please?

[Operator Instructions] And with that, back to you, Karl.

Yes. Thanks a lot, Marco. So just for the record, we had at peak about 870 people joining. So it's still well above 800, 830. So that is really an excellent participation. So I just wanted to really thank you for your interest in Roche. Maybe for -- let me get through the questions. [Operator Instructions] We will try to keep our answers short so that we make best use of the remaining time and get through all your questions. And the first one, I got via the web here. And also, we have the chat from Michael Leuchten from UBS, and Sam Fazeli. They had basically the same question, so I just tried to summarize it, and it's going to you, Bill. They were wondering about the impact for -- on Avastin, Herceptin and Rituxan during the year, but in particular, in Q4. So if you could maybe illustrate a bit what happened in Q4. Also, maybe if you could give it a try. What happened to COVID, what happened to foreign exchange, what happened really to the biosimilar? I know that it is a bit of a difficult, but -- so that is basically the line of questions, which we got from these 2 gentlemen.

Sure. Thanks, Karl. And I'm not sure I can -- there's too much color I can add to it. I mean, essentially, the impact that we saw in the U.S., which was obviously the biggest country impacted last year, was, I would say, rather linear over time. I mean as the year evolved, we weren't sure. We thought, "Oh, maybe it's leveling off a little" and then it would accelerate again and then it would level off a little and then it would accelerate again. But if you step back and look at the whole year, it was pretty linear. And the reason Q4 was such a large impact is just the impact in 2019 was rather small. And the monthly impact was just growing over the course of the year following down that curve. So Q4 just had a big number. But I don't know that there was anything really special there to point out. I saw another question that was sort of related, and maybe I'll answer, which is just why was the number bigger than we had projected. I think we started the year saying that we thought the number for U.S., Japan and Europe would be about CHF 4 billion, and it ended up being about CHF 5 billion for those territories. And honestly, I think the reason that it was bigger than we expected was that we thought that maybe the U.S. -- and I think this was very consistent with what we said. We always said the U.S. would be like Europe, but maybe a little less steep. And in fact, it ended up being pretty much like Europe. So we gave the erosion a little bit of a haircut and thinking that maybe in the U.S., it would be a little slower. And largely just because of systemic factors in the U.S. health care system and some of the incentives and things. As you're aware, there were a lot of other biosimilars that had very poor uptake in the U.S. We always said that you shouldn't expect that with A, H and R because some of the reasons those other biosimilars weren't used as -- were kind of historic reasons. In the end, yes, the uptake was quite large, consistent with what we saw in Europe. And I think it's a new chapter, but fortunate for us, we've got a strong pipeline and able to continue growing those new products right through.

Yes. I wanted to take a call here via the telephone line, Matthew Weston. So Matthew, I open your line now.

Can you hear me, Karl?

Yes, we can hear you, yes.

Perfect. I've got 2 questions, please. One for Bill and one for Thomas. So Bill, on Ocrevus, 2 comments, please, your suggestions around the 6 monthly cycle, and the weakness in Q2 therefore having an impact on 4Q, would suggest that the very strong bolus we saw in 3Q '20 should lead to a very strong recovery of Ocrevus in 1Q '21. So can you give us some indication as to whether what you've seen in January to date supports that? But also, I'd be very interested in your thoughts. You've said previously you're following data around COVID survival rates on patients who had B-cell depletion, and I'd love to understand, now that we've had significantly longer and a deeper pandemic, whether you remain confident that doctors are committed to B-cell therapies during the pandemic. And then secondly, a question, an easier question for Thomas. You've set out the uncertainties, but also the opportunities of diagnostics in 2021. I'd be very interested if you could get your crystal ball out and let us know what proportion of profit you think will be booked in the first half versus the second half of the year.

Yes. Bill, before you answer, we had a similar question from Naresh from Intrinsic Health, only that we get everybody aligned here. So over to you, Bill.

Okay. Yes. Thanks for the questions, Matthew and Naresh. So let's see, in terms of the 6-month cycle and seeing that play out, I would just say, from what we've seen so far this year, we don't see any reason to change our view on that. And if we did, I would have said something different. But yes, we -- there's really been -- since April, May, there's really been no change in the dynamic on returning patients. We have a high level of returning patients and they come in about every 6 months. So we haven't seen any reason to change our view on that. In terms of confidence in B-cell-related therapies, let's see, our latest data point was October, where we had approximately 40% of new and switching. So that was pretty well into the pandemic. And again, so I don't really have any reason to doubt that doctors are going to have confidence in this MOA that the safety profile has been unchanged since launch, which frankly, in itself is a bit unusual because I think every other MS therapy that I followed the launches, usually over time, some additional things got added to the safety profile, and Ocrevus has held up really well. So again, we're very confident in the future. There was also this question about whether there's pent-up demand and that will we have a glut of new patients later this year. I don't know. We'll see. And Naresh, I think you also asked if there was a bolus, but now we're almost 4 years on the market. So I don't think you could really characterize the continued strong growth as a bolus. I think it's really just patients -- the existing MS therapies have a lot to be desired in terms of preventing disease progression. And when patients' MS worsens, they look for an alternative, and Ocrevus is the number one choice.

Yes. I guess the other question was for me. Yes, having a crystal ball will definitely help in these very uncertain times. And there are a number of factors that really can impact the sales positively or negatively throughout 2021. But what is clear is that the growth we had in Q4 with 28%. And I mentioned that we had some then opportunity to outgrow that, in Q1 specifically, but also Q2, so that we will have very strong growth in the first half year, and that will translate also in strong profitability growth. Now what's going to happen in the second half year is a question mark. One is, how quickly is the rollout of vaccines. Now is this going to take longer? Then the question is really on the different variants. What kind of level of vaccine rate do you need to have to get really to herd immunity, et cetera? And as this may take longer, then there is an opportunity to have a stronger second half of the year, but always against a much higher base, because if you look at this year, we did have a very high base in Q3 and Q4. So for me, I think the first half year is very clear. This is where we have most of our sales in terms of COVID sales for 2021. And then second half year, we'll see how certain things develop. And as the year progresses, we can inform you and update you on that.

Yes. There is a question from the chat from Emily [ Hutchinson ]. She's asking for Andrew Baum. Bill, one for you. Your confidence in gantenerumab going forward? I guess this is on the mind of many investors only.

Yes. Well, believe me, it's on the top of our minds. We have lots of reasons to believe, and we have reasons to be concerned. And until there is a definitive, unassailable, pivotal result or pair of pivotal results, I think we have to handicap all these studies. And that's just how it is when you're pioneering in a new area. So I mean, I can give you the 5 reasons we're excited and then I would still say, it's -- I don't know, is it 50-50? It's something like that. It's -- I don't think we need to get precise, but, yes, this is a difficult, difficult disease. We don't understand the pathophysiology of Alzheimer's Disease. And we're targeting something that is in a huge evidence that it's linked to Alzheimer's, but the causative role that it plays, we don't know. And the data that came out from another company in the last quarter, people got really excited about. And I want to be excited, too. But again, that's a little bit of a slight tweak on the MOA. It's a novel endpoint. It's a small dataset, and we haven't seen the data yet. So I'm not going to take that and run off to the -- run off to celebrate. I think the good news is that we're coming up on a readout, it's in our sights. And this day has been awaited for a long time, and we've got a subcu formulation, which is very exciting because if you can imagine hundreds of thousands or millions of elderly people, going to get their monthly IV infusion, I struggle with that one. And so I'm pleased that we were able to get to a subcu formulation, and we'll look forward to that readout.

Next one would be Sachin Jain. I allow you to talk.

It's Sachin Jain here. A few, please. First, I want to just kick off with guidance. In '21, I mean, just comment on the balance of growth between Pharma and Diagnostics within group guide. So does Pharma grow CER in '21 and is the majority of group growth coming from Diagnostics, just to get the shape of the divisional growth correct? Second question is on faricimab. The profile you've delivered, Bill, you weren't particularly excited by it when you were on the 3Q call. So I wonder if you could just clarify the change in your thought process there. And how you frame the dosing frequency advantage? Is this in your mind transformational to current practice or incremental and becoming a marketing battle? And then I just have one on Tecentriq adjuvant lung. You've given in your introductory comments timing for Polivy at midyear. It doesn't seem like you're giving timing for adjuvant lung anymore. But I wonder if you could just comment, do you still expect to be first and by a margin that's important enough commercially as you'd commented before, or not?

Sachin, perhaps, I can just comment on the first question around the guidance and where the growth is coming from before I hand over to Bill. Of course, with the pandemic there are different scenarios and there is a certain uncertainty. But I think it's safe to say that we should see a very good growth for diagnostics in the first half of this year. And there are really 2 factors underlying that. One is that the pandemic, of course, still leads to a big demand. But also, we have a base effect. I mean, if you look at the sales development last year, Diagnostic sales were really kicking in only in the second half of the year. So there's no doubt that in the first half of this year, we will have a very strong growth in diagnostics. Then we will have a base effect kicking in, in Q3 and in Q4 and the uncertainty is around how big is demand and how does the pandemic develop. But I think it's fair to assume that the sales growth in the second half will be lower than the sales growth in the first half. Now for Pharma, it might just be the other way around, right? Because if we do see the pandemic getting under better control, I mean patients will take up their medical appointments. And then, of course, we also have more -- I mean, an increasing benefit of the growth of the new products, on the one hand, and a decreasing effect of the biosimilars on the other hand versus the previous year. So I hope that gives you a bit of color how we see it evolving. But at the end of the day, there's a lot of uncertainty as well. Overall, we are confident to grow low- to mid-single-digits with this kind of reverse effect in the first and the second half. But let's see where we'll get. Bill, over to you.

Yes. The question about faricimab. I think I've probably said most of what I can say without divulging data. And so we look forward to that opportunity to present the data at the upcoming Retina Meeting. And then I think then we'll let the doctors decide what it means, but I would say that we have a high degree of confidence in what we're seeing, that this does represent a meaningful step forward for patients and physicians. And it's certainly made a difference in the past, the dosing interval. And now we're talking about, for example, doubling or tripling the dosing interval for many patients between faricimab and PDS. So in chronic therapy, those kinds of things can make a big difference. And I think there's a long history of that in some important medicines, including one that's been the largest therapy in the world, was all about a dosing interval. So yes, I look forward to your view when you see the data. I think you had another one about...

Adjuvant, if it will be [ first ]...

Yes. Adjuvant lung. Yes, I think -- let's see, yes, there's no change on that, and we're confident in the timing. I think -- what have we been saying, first half, Karl?

No, no. We have said that we have a chance to be first ahead of the competitors, but we didn't precise when it -- exactly it is, first half or second half. But we can confirm the readout in 2021 adjuvant, that we can confirm. We know that, yes.

Yes.

Okay. Can I just go back to Severin on then. So very kindly provided the phasing of growth, but 1H -- sorry, on [ RNH research ], but the question was more around the divisional, so does Pharma grow in '21?

Severin, you're on mute.

Sorry for that. No, that's certainly our ambition that we grow for Pharma next year.

Next one would be Tim Anderson. Tim, I open your line now. Tim, you're on mute.

Can you hear me?

Yes. Now we can hear you, yes.

Two questions, please. Evrysdi for SMA, you mentioned sources of switching business, both SPINRAZA and Zolgensma. And I'm just trying to understand Zolgensma and how that would be a switch exactly? Are you saying patients forwent Zolgensma in favor of your product, or there are patients who received Zolgensma and then went on to receive your product? And then a second question on the pipeline -- on a pipeline product, tominersen for Huntington's. Are we going to see any data related to this program in 2021? And what's your level of enthusiasm for this program relative to your level of enthusiasm for gantenerumab? Which excites you more?

Crystal balls today, no?

Great. Yes. Let's see, just to clarify, and I think this is just -- maybe it's just a convention. But usually switching just means that there's naive patients who haven't had a therapy and then there's patients who have had a therapy. And we don't differentiate between someone that had, let's say, SPINRAZA last week and somebody who had SPINRAZA last year, and likewise, if someone's been treated with gene therapy, and then they go on Evrysdi, then they would be counted as a switch, although I certainly see your point. But to be clear, we're not talking about people who forwent gene therapy. We're talking about people who receive gene therapy and subsequently, at some point after that, were put on Evrysdi. And that's -- but the bulk of patients, as you might imagine, because many, many more patients have been treated with SPINRAZA than have been treated with Zolgensma. So the bulk of the switchers are patients coming from SPINRAZA. But we've had a not insignificant number of patients that were treated with gene therapy coming onto Evrysdi. And on tominersen, again, I'd sort of repeat what I said about Alzheimer's. And unfortunately, Huntington's, there's never been a therapy. It's a promising target we're pursuing. But we -- and we know we have a biological effect. So we have a pharmacodynamic effect on the mutant Huntington's protein. We also have an effect on the wild-type Huntington's protein. So we -- yes, I mean, to translate that into clinical impact, it's going to require the Phase III data. And we thought we might have some sort of an early look. This was, I don't know, 16 months ago or so, we thought, "Oh, maybe there'll be an opportunity to see something early." But we now think we're just going to have to wait for the Phase III. And so I don't believe there's going to be any sort of game-changing data in 2021. I think the final outcome is going to be the one that matters in 2022.

Yes. Thank you, Bill. Thank you, Tim, for your questions. Richard Parkes would be the next one. I open your line, Richard.

Hopefully, you can hear me.

Yes, just perfect. Thank you.

A couple of questions. Firstly, on the biosimilar. Looking back now, it's obviously -- the impact has been a bit more than you expected. I wonder, looking back, is there anything that you would do differently in terms of pricing or contracting strategy, if you could look back? I'm just kind of thinking about when we model biosimilar impact for Actemra and Perjeta over the next few years, is this a good example of what to expect? Or are there other things that maybe you could do differently to mitigate some of that impact? So that's the first question. The second question, and I understand you're probably frustrated because you've given the 2021 outlook and start to ask about 2022. But if you could help us to understand some of the trajectory of the headwinds as you go into 2022? Obviously, you've got the -- I think the Esbriet patent expiry and Lucentis biosimilars, maybe a continued tail of erosion of that legacy 3? And I know some investors are concerned that Diagnostics could then become a kind of headwind versus the tailwind currently. So could you just talk about the trajectory of those headwinds into 2022 and maybe your ability to maintain or improve the current momentum in terms of earnings growth?