Roche's CEO Discusses Q1 2014 Results - Earnings Call Transcript

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Roche Holding Ltd ADR (OTCQX:RHHBY) Q1 2014 Results Earnings Conference Call April 15, 2014 8:00 AM ET


Severin Schwan - Chief Executive Officer

Alan Hippe - Chief Financial Officer

Dan O'Day - Chief Operating Officer, Pharmaceuticals

Roland Diggelmann - Chief Operating Officer, Diagnostics

Karl Mahler - Head, Investor Relations


Tim Race - Deutsche Bank

Richard Vosser - JPMorgan

Alexandra Hauber - UBS

Andrew Baum - Citi

Sachin Jain - Bank of America

Michael Leuchten - Barclays

Luisa Hector - Crédit Suisse

Odile Rundquist - Helvea

Keyur Parekh - Goldman Sachs

Tim Anderson - Sanford Bernstein


Ladies and gentlemen, good morning or good afternoon. Welcome to the Roche First Quarter 2014 Conference Call. I'm Stephanie, the Chorus Call Operator. I would like to remind that all participants will be in listen-only mode and the conference is being recorded. After the presentation there will be a Q&A session. (Operator Instructions)

The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Dr. Severin Schwan, Chief Executive Officer. Please go ahead, sir.

Severin Schwan

Thank you. Good afternoon. Thank you all for joining us at the Q1 sales call. With me here are Alan, our CFO; Dan, Head of Pharma; Roland, Head of Diagnostics; as well as Karl and his team from Investor Relations.

Let me start with the highlights for the first quarter. Overall, we had a very good start in 2014. I am very pleased with our performance both in Pharma and in Diagnostics. We made further progress in our product pipeline, received the subcutaneous formulation from MabThera in Europe, Xolair was approved in chronic idiopathic urticaria, a form of skin hives in the U.S. and also in the U.S. HPV Test and Diagnostics was recommended for primary cervical cancer screening in the first quarter.

On the sales side, I’d like to highlight the two franchise where we see a very good growth, overall 17%, very much due to the recently launched medicines, Perjeta and Kadcyla. Also solid growth in immunology and ophthalmology with Actemra, Xolair and of course, Lucentis.

We also did an acquisitions in Diagnostics with IQuum to strengthen our leading Molecular Diagnostics offering and this acquisition allows us to enter the point-of-care testing in this segment that is rapid and simple testing much closer to the patient.

If we turn to page six, you can see overall growth 5% for the Group, Pharma up 4% and Diagnostics up 7%.

If we move on to page seven, you see that all regions are growing in both divisions Pharma and Diagnostics, let me just highlight a couple of numbers here. To start with international business, as you know from the past, we have high quarterly fluctuations in the emerging markets mainly related to the timing of tenders, the tender business, for example in the Middle East. But the underlying growth -- the underlying dynamics remains very strong in the emerging markets also in Pharma.

In Europe, you would see a very good growth in Pharma, plus 5%, also very much driven by the new product, a bit more moderate growth in the United States as expected. So again we have strong performance here with our new medicines such as Kadcyla in particular, which is as expectedly partly offset by Xeloda, their patent has expired and also Pegasys.

We move on to Page 8. We have now 14 new compounds in late stage development. We have made good progress in our product pipeline. And we look forward to presenting data at ASCO then we’ll cover this in more detail. But we do look forward to presenting the data in particular for anti-PDL1 and also our MEK inhibitor.

Slide 9. 2014 remains busy with many Phase III starts and also we also await important Phase III readouts, in particular, of course for the Kadcyla/Perjeta combination, the MARIANNE trial which could replace Herceptin in the first-line metastatic HER2 breast cancer segment.

To conclude with the outlook on Page 10, based on the good results, we confirm our guidance for the full year that is low to mid-single digit sales growth; core EPS to grow ahead of sales and the further increase in our dividend.

And with this, I’ll hand over to Dan.

Dan O'Day

Thank you very much Severin. Good morning, good afternoon from my side as well. I’ll take you right to Slide 12. I’d like to review the results for the Pharma for the first quarter, so overall, 4% growth. As you can see that growth is driven by strong growth in Japan, the U.S. and Europe. And I want to give you a little more color to these figures.

So first, starting with Japan in quarter one. There is a couple of effects going on there. The first one is that there is a consumer tax increase on April 1. And we also had as we have every two years, the biannual price cuts in Japan. Now, the dynamic that’s going on in our business is because of the innovative nature of our portfolio in fact we’re less affected by price cuts across many of our products, particularly, the new innovative products than perhaps other companies in Japan.

And therefore there is an incentive if you like within the distribution system because of the consumer tax increase in April 1 to build up some inventory there. So I would expect that this will obviously moderate significantly over the course of this year but still good underlying growth in Japan.

U.S. had a really solid quarter. HER2 franchise growing at 27% now in the United States, and I’ll be happy to give that a little color later on. And Europe had a 5% growth driven again by the uptake of the new innovative product Perjeta with the longest lead time there, Kadcyla coming on as well as good uptake of Herceptin subcu. And in addition, we had a significant Tamiflu order in the U.K. in the first quarter of this year which helped to drive the sales. The bottomline is the volume growth significantly offset the pricing pressure in quarter one in Europe, which we estimate to be around 3% to 4% or so.

In the International region, there is a bit of a unique event going on here. Severin already covered this. We’re confident in the underlying growth here. Let me break it down just a bit more for you. So I mean, the first effect is the fact that in Latin America, we actually have very strong growth, particularly in Brazil in the public sector and in Venezuela with our programs with Herceptin and other products in those market places. In Middle East, Europe and Africa, as you’ve begun to be familiar with, we had relatively lumpy sales in the first quarter.

Again this year, we had some rather large tenders in the fourth quarter. This year we expect some more in quarter two of this year. So quarter one was quite down in terms of the tenders there but again, nothing alarming from the underlying growth accordingly.

And the last country, I just want to mention here is China. There are two effects going on in China. Again the underlying growth we’re confident with when we look at our data, the -- we did have a Tamiflu order last year that didn’t repeat itself in Hong Kong and as reported in China. And then we also had some change in distribution from the middle of last year, I would say, there is a lowering of distribution channel inventory and so. When you look quarter-over-quarter ‘14 to ‘13, there is an effect there as well.

But we’re confident the underlying growth in our access programs in Japan -- sorry in China with our innovative products and we expect to continue to have double digit growth in China as we carry on towards the end of this year.

So turning to Slide 13 to the products line, as you can see oncology and Actemra are the main growth drivers. Perjeta and Kadcyla alone in the quarter contributed more than 200 million Swiss francs in one quarter. Avastin continues to remain strong with a 9% growth and that continues to be driven by the launch and adoption in ovarian cancer, predominantly in Europe and then in Europe and elsewhere as well further increasing use with colorectal cancer and treatment beyond multiple lines there as well.

Actemra, very steady, remained strong in all regions and very good uptake of the subcutaneous formulation in Japan followed by now, the subcutaneous formulation being approved in the United States at the end of last year and soon in Europe. So this will continue to be an important growth driver for us moving forward and the subcutaneous allows us to participate in a major part of the market to be competitive in this field.

On the negative side, of course as we expected and as we communicated to you, we started to see the impacts of Xeloda, of course already at the end of last year in Europe and now as of March in the United States. So we would expect to continue to see an acceleration of Xeloda decline as we go throughout the year. And the other issue is Pegasys. Of course, we continue to see a decline year-on-year.

Interestingly, when you look at the U.S. figures, you see an increase versus quarter four, again due to the second-generation oral therapies taking hold there. However, as usual, we expect that to change in the second half of the year with the non-interferon remedies coming in the second half of this year, also in the U.S. So that’s -- clearly, our growth drivers are more than offsetting for this decline in Pegasys and Xeloda.

So we turn to Slide 14 to give some more color to oncology. HER2 franchise growing strongly, we continue to see Perjeta and Kadcyla patient shares increasing. Rituxan/MabThera continued to grow on a global level and in particular, we see strong growth of MabThera and Rituxan in the areas of the world where it’s not fully penetrated like the international region in the emerging markets.

And of course in Europe and Europe as you know, we have a very high penetration level of MabThera in the major indications. So the slight weakness that you see in the U.S. is mostly reflection of that high patient share, the strategy at work related to Kadcyla replacing in the first line, the offsetting and then also somewhat lower use in the non-Hodgkin’s lymphoma phase and study as well.

Tarceva, currently a competitive environment, some newly class products have been launched in the U.S. that are impacting on the first lines. EGFR past the mutated shares and in Europe, we see growth in the first line setting that is not fully compensating for the loss of the shares sort of the second line as well.

I have already mentioned Xeloda and the trends there. I’ll just mention one more thing about Zelboraf. We do see, of course in the United States in class competition. I would remind you that our own Phase III data for the combination of Zelboraf and MEK inhibitor will come throughout the course of this year and depending on the strength of that data, we could in the future see a change in that dynamic.

So, let’s move to Slide 15, drill down little bit more on the HER2 franchise. First with Kadcyla, we see increasing used in the labeled indication. In fact, in the second line setting, we see the share increasing up to around 43%, good successful launch in Europe so far. Many countries still waiting for reimbursement approval, but in Germany and the U.K., where we’ve launched we see good uptake. We expect the launch in Japan in the second quarter of this year and then I just remind you, the MARIANNE results are still expected in the second half of this year.

Perjeta, you’ve seen the very strong growth here, really driven by the U.S. strong adoption in neo-adjuvant. In fact, we’ve seen our share in neo-adjuvant from -- since I last spoke you to move from around 15% up to 65% in the neo-adjuvant setting. I should give you some indication of the uptake and the strength of that, of the data there and we’ve also seen some good additional increase in share in the first line setting up to almost 65% there, so very strong performance on Perjeta. Obviously, we are just beginning to roll this out now in Europe. In more detail, we could update there as well. And the final CLEOPATRA. Overall, survival data is planned to be presented at ESMO.

Just a bit of color on that. I mean, we’re just a little bit too late for the late-breakers at ASCO is the reason as well. Otherwise, you would have seen this data at ASCO, but you will see it now at ESMO.

And finally, a good update on Herceptin subcu. We launched in now 18 countries. We have some countries with shares up to around 30% to 40% already. I think it speaks to the value that this brings to healthcare systems and again part of our overall strategy to grow the HER2 franchise over time. Because if you remember Herceptin subcu would also have some additional patent life to extend it, and this really provides significant advances to the clinics and hospitals in terms of their workflow and patient advantages, as we’ve seen from the studies we’ve done there that we think are quite sustainable.

So moving on from the oncology franchise to immunology. As we said at the end of last year, I mean this is a franchise that did more than $6 billion in sales last year, has been growing double digit for many years now, and you can see in the first quarter that continues with 11% growth. We’re very excited about this franchise and we’re also very excited about the new potential medicines like etrolizumab and lebrikizumab which will begin to answer this franchise presuming Phase III success in the next couple of years.

I would just say this is fresh out of AAAAI in San Diego. A few weeks ago we presented the additional results on the Phase II, which showed up 60% overall reduction in exacerbation rates in severe asthma. And again, the benefit of having a companion diagnostics targeted program in the field of asthma, this would be really the first companion diagnostic targeted therapy for that field of therapy. So the Phase III trial is ongoing now. We are going ahead with two doses and recruiting now and we expect to file presuming success in Phase III in 2016.

Lucentis also had a good quarter, up 8%. We continue to see the whole AMD market growing in the United States. We see our share stable in AMD and RVO and continuing to increase our patient share in DME. I will remind you in the second half of this year, we expect additional competition in the DME setting, but we also continue to expect that the overall market for Lucentis grow throughout the course of this year.

So moving to some forward-looking items. I would just say that we have quite a bit of news flow between now and our half years results. I just wanted to point you to a few of those. One is ASCO and I will come that a bit on the next page. But in addition to ASCO, we will be presenting information on oral octreotide and acromegaly in Chicago in June and we will presenting -- and those are Phase III results and then we will be presenting the crenezumab Phase II in Alzheimer’s at the AAIC in Copenhagen in July as well.

So turning to slide 19, it will be another busy ASCO for us. Again this year, we’re very excited about being able to share some additional data with you there. We will have in immuno-oncology space a full update on our program, additional longitudinal data, as well as some additional new data. One of which is the Phase I data on anti-PDL1 in bladder cancer. You’ve seen now as of yesterday, I think it’s on that we will be beginning our Phase II program in bladder cancer and we’re excited to present the Phase I data too at ASCO this year. So more on that soon.

In addition, we will have the much awaited CALGB study for Avastin. In Hematology, we will be able to give you an update on the Bcl2 inhibitor in Phase I in CLL and DBCL. And as we indicated, we brought anti-79b into our late-stage portfolio last year, so we will be able to present to you the Phase II results on the anti-CD79b in hematology.

And then also very importantly, the Zelboraf MEK combination for the Phase Ib, so the BRIM7 data will be presented at ASCO and as you know, we’re awaiting this year the Phase III results for Zelboraf with our MEK inhibitor. I just make sure you all have on your agenda the Analyst Meeting on Sunday, June 1st. As usual, we’ll have quite a bit of data share with you there and a variety of experts to communicate that information.

So finally, just in terms of the late stage news flow on slide 20. We have already discussed bitopertin, just a brief update there. Since our last discussion, we have looked at the futility on the positive symptom trial, and we’ve essentially stopped all but one positive symptom trial that will continue till the end. But again, in the field of schizophrenia, that program no longer has a regulatory milestone.

In terms of MetMAb, we are evaluating the data beyond the lung cancer data that we discuss with you so in gastric and the final data in GBM. And I’ll be able to update you a bit more in the half year. But as you know, that was not successful in Phase III in lung cancer and you also know some of the other results in Phase II as well.

Finally, I just want to communicate too that we do have data in-house that’s being assessed, that’s being looked at, that’s being reviewed, and that’s the oral octreotide, which I discussed we’ll be presenting this June. As to crenezumab, which will be presented this July, and we continue to have lots of data on anti-PDL1 that we’re reviewing in-house as well in the forms our decision making.

And now on slide 21, as you know, we’ve got the approval in the first quarter for MabThera subcutaneous and we’ll begin rolling that out in European countries over the next several months. We got the indication for Xolair for CIU in the U.S., skin disorder and that’s rolling out now. And the rest of the approvals are coming, the Actemra subcutaneous is fairly eminent and making good progress on the Gazyva filing in Europe.

So with that, thank you very much. I’ll turn it over to Roland to cover Diagnostics.

Roland Diggelmann

Thank you very much, Dan. Allow me to take you through the first quarter results for Diagnostics. Overall, a good quarter with a 7% growth for the division, excluding the Diabetes Care, so the clinical lab business at 8% growth in the quarter. Driven by our largest franchise, Professional Diagnostics was a 9% increase year-over-year. Diabetes Care was at 5% growth. Here a couple of comments. One thing that we had a low base, if you remember the first quarter 2013 was a minus 5%, so on that base, on that relatively low base, although an encouraging growth of 5%.

Also a change in the timing of the rebates, largely in the United States from late last year to early this year, which resulted in the change of ordering pattern of some of the wholesaler so that also had an impact. On the other hand, good uptake of Accu-Chek Aviva and Accu-Chek Performa, the new non-code systems and good for the penetration of our Accu-Chek Mobile, especially in Europe.

Molecular Diagnostics, up 4%, excluding the Sequencing sales of 7%, so good sales there. Tissue Diagnostics, double-digit growth outside of the United States. United States affected by some reimbursement changes at 1st of January this year and overall continued penetration of the Tissue Diagnostics sales and customers.

Moving on to page 24, the geographic distribution. You can see growth across all geographies. I will start with Japan, a similar but less pronounced pattern that Dan mentioned for Pharma, not material in terms of significance but still anticipated sales in view of the increase of the VAT. Other than that, very good sales, continued sales in emerging markets, Asia-Pacific, Latin America up 13%. Good growth also in the Middle-East and that takes average 7 countries growth to 16% for the quarter. Good growth as well in EMEA, which still accounts for almost half of our sales, was here at plus 4% for the quarter. And then in North America, a very good first quarter, primarily driven from Professional Diagnostics and also some Molecular Diagnostics and also some orders -- early orders in Custom Biotech that also contributed favorably, but with 9% a very good performance in North America.

Moving on to page 25 and some sales and portfolio highlights in the quarter, you can see Professional continues to be driven largely by the growth in immunoassays, the expansion in the infectious diseases menu, so very good growth there, continued double-digit growth.

In Diabetes Care, I mentioned the impact in the United States is improving. European markets, I would like to mention the launch of the Accu-Chek Insight pump, which is the next-generation insulin delivery systems, integrating blood glucose monitoring, the Accu-Chek bolus advisor insight pump.

Moving to Molecular, HPV sales continued strong momentum, 56% increase quarter-over-quarter. So very good growth there and good momentum, and I’ll talk little bit more about the FDA panel recommendation on the next slide.

Tissue Diagnostics, I mentioned, the double-digit growth in EMEA, Latin and Asia-Pacific, United States affected because of reimbursement changes and also some late impact from the negative controls as customers try to reduce their cost base.

Moving on to Professional Diagnostics, a key addition to our menu and closing an important gap is the introduction of the Syphilis test, which is can be run on the entire Elecsys platform, so across the largest installed base in the industry, a new addition complementing the already leading immunoassay platform in the industry.

A very good test high sensitivity, specificity, low blood sample volume required and short-time to result as always on the Elecsys platforms. So, really key addition to our portfolio.

And with that moving to the next page which is Molecular Diagnostics and positive recommendation on the FDA panel hearing unanimous recommendation to approve our HPV Test for primary screening, which would make the first FDA approved primary screening HPV Test, which has run on our cobas 4800 platforms, which is already well-penetrated in the market and you can see here three test results in one test, identifying the highest risk Genotypes HPV 16 and 18 and then 12 high risk Genotypes in one pool. We do expect a decision of the FDA likely quarter two or quarter three and we are looking forward to the feedback from the FDA.

We continue to have ongoing pilot studies across Europe as well. Some markets mentioned here, Sweden, the Netherlands, U.K. and Italy and some other regions as well where we continue to drive for primary screening for HPV Testing.

That takes me to the next slide 28 and the importance or significance of the HPV Test as part of our cervical cancer portfolio. You can see here how the three tests actually are being brought together from screening to managing to diagnosis of HPV or cervical cancer. So with the cobas HPV Test you can screen, know high risk genotypes as mentioned and you can identify those women who can forgo actually further triage.

The CINtec PLUS assay which is a cytology-based test, you can identify the underlying disease, determine those, you should proceed to colposcopy. And with the CINtec p16 histology test then technology can confirm the presence of the p16 protein in biopsies obtained during those colposcopy. So, the important to continue to build this franchise and having the most comprehensive cervical cancer portfolio and the offering.

And then also in Molecular Diagnostics on page 29, very exciting the acquisition of IQuum, which allows us to enter the point-of-care in Molecular Diagnostics. It also will complement our leading Molecular Diagnostics portfolio. As you know the leading franchise with mid-high throughput systems, so we see, will be at a low throughput and -- in the low throughput segment, in the segment which is growing fast at about 20% rate a year and with a truly innovative approach in the so called laboratory-in-a-tube technology which allows fast and simple automated processes. It literally brings laboratory PCR to the point of care with a short turnaround time.

The current portfolio, the proved test are Influenza A/B plus of course the Analyzer itself and the in-development will be Strep A and RSV and in the future, we look to enhance on the microbiology platform -- on microbiology segment, I should say, with MRSA and C-diff. Very exciting acquisitions here which will allow us to literally go into the point-of-care physician offices, emergency rooms, hospital wards, potentially even pharmacies.

And that brings me to the last slide, which is just the overview of our portfolio, the key launches for 2014. As I mentioned, the good start, five new systems and assays launched in the first quarter, the insights on Accu-Chek diabetes care platform and then the HSV, Syphilis, the blood screening approach and in microbiology as mentioned MRSA, C-diff on the existing platform again which helps us to penetrate further and leverage our existing leading platforms as in the market.

And with that, I’d like to conclude and hand over to Alan for the financials. Thank you.

Alan Hippe

Yeah, Roland, thanks a lot and thanks for the handover. I would like to lead you immediately to Slide 32 and talk briefly about the finance highlights. And the first one is the evident one, the major currency impact that we have had, coming predominantly from the U.S. dollar to Japanese Yen and the Latin American currencies. And I will highlight this a little bit later on the slide.

This resulted in negative fixed percentage point impact on the Q1 2014 sales growth. When you look at the major Q1 cash outflows, one is also evident that the dividend 6.7 billion in comparison to the 6.3 billion a year before and then we had the debt repayment of 1.6 billion and let me split that up. And so then our two effects were roughly 900 million Swiss Francs were paid out for a call of the U.S. dollar on call last year paid out this year and roughly 700 million Swiss Francs were paid out for British Pound bond call late this year and this bond is due in March 2015.

So I know I think about that it is that we have on one end a negative P&L impact from the loss of the redemption but on the other hand the interest savings we’re having already in 2014 compensate this pretty much. So it’s pretty much a zero game in 2014.

I think IQuum and Roland has talked about it and described the acquisition already. I think what we’re delivering here is a little bit of financials, $275 million upfront and up to $175 million in contingent product related milestones.

With that, I would like to go to the next page and next slide 33. There you see where we have grown. I think that was described very well by Dan as well as by Roland. And what I would like to emphasize is the 5% growth in constant currencies for the Group equaling a total of 574 million Swiss Francs and then you look at the currency impact over compensating this with a negative impact of 667 million Swiss Franc.

And please keep that number in mind, because on next page, next slide, I would like to break that down a little bit and as you can see on the left hand side on the slide, the plus 5% growth and then you see really the impact, negative impact coming from the weakening of the U.S. dollars, the Japanese Yen and the Latin American currencies and when you add that up, I think this accounts roughly 500 million, 485 million to be precise, equaling and negative impact of minus 4.3%.

With that, let’s go to the next page, because the question is a little bit, how is that going to look like here and the rest of the year. And I think so far, I think yeah, there will be further impact in the year 2014. And when you look at this page, and you know, how we do it. In fact, what we are assuming is that March 31, 2014 exchange rates remain stable until the end of 2014. When you do that, the impact is expected to be and I will just highlight the half year, it’s a minus 6% on sales, it’s a minus 8% on the core operating profit and a minor 7% on core EPS.

When you go to the full year, it’s a minus 5% on sales and minus 8% on the core operating profit and minus 6% on the core EPS. When you go to the left-hand side of the slide, you see that the easing of the impact is coming a little bit from the U.S. dollar. The U.S. dollar weakened quite significantly at the end of last year already, obviously this washout the affect at the end of 2014 to a certain extent.

And I think from a cash point of view, I’m not concerned because as you know, we have a relatively challenged natural hedge with their operations and a relatively high cost base in the U.S., as well as in Europe and also in Japan, we have improve our new change. So, I think that gives us a pretty good edge in such a situation.

And with that, I would like to go to Page 36, which is outlining our debt maturity profile, 71% of the Genentech related debt is repaid. What you can see on this page is in the first bar 2015, this is U.S. dollar bond we recall last year’s and it’s outlined already and where we have repaid $1 billion roughly in the first quarter. And then in 2009, in the portion of the British pound bond that we have repaid in Q1 2014 already.

And last year at this stage, we had repaid 31.2 billion Swiss francs. We are now at 34 billion Swiss francs that we have repaid and that equaled at that time to 66% of the Genentech related deb. Now, we are at 71%, so the deleveraging is going into the right direction. And on the next slide, once again, the outlook here which was confirmed already by Severin, so we are quite confident that we can reach the guidance in the year 2014.

And with that, we are happy to take your questions. Thanks a lot.

Question-and-Answer Session


(Operator Instructions) Your first question is from Mr. Tim Race from Deutsche Bank. Please go ahead.

Tim Race - Deutsche Bank

Hi, there. This is Tim Race from Deutsche Bank. Thank you for taking my questions. Just a few if I may. First of all, on the CALGB study of Avastin versus Erbitux. It’s a long time since we have had this battle. We’ve been waiting for this study for a while. Could you just highlight what we should expect to see from this data in terms of clinical backbones and how the FIRE-3 study we saw last year is a good comparison for what we expect or not, that will be useful?

Next, a comment maybe on crenezumab, given that you’ve got the data in-house and we are seeing the data in the AAIC, I’m assuming the data is positive. Can you just remind me, what we need to see from the BLAZE and ABBY studies in terms of what you need to transition this into Phase III and what’s holding you back from announcing that, and really what sort of the decisions you have to make versus gantenerumab? And then lastly, could you just remind me on the PDL1 program, you got the FIR study and the BIRCH study that you started, could you just talk through why you are doing the BIRCH study, what’s the difference to the FIR study is other than size of patients, et cetera and what that gives you versus just a standalone small FIR study? I would leave it there and get back in the queue for other questions. Thanks.

Dan O'Day

Okay. Thanks, Tim. So, just taking your questions in the order on the CALGB side, as you know, obviously it’s not our trial, it’s a cooperative trial, so it would be remiss for us to comment on it in detail. I would just say, just to take you back to the ASCO last year when the FIRE-3 was presented, I think the general sentiment at least that we interpreted from the medium is that the results were clearly negative on the first point and inconclusive and everybody I think is waiting for the CALGB as a bit more of a definitive study in terms of it’s design that will allow I think to answer the question between Erbitux and Avastin. So, I would leave it at that.

On crenezumab, yeah, what do we need to see? Well, obviously, we have the data in-house. We are evaluating it. We are looking at it. The reason we don’t announce it now is because we -- obviously, it’s important to present these at meetings and publication strategies. So obviously, you’ll be seeing the data first and soon. Let me take it back to the gantenerumab point that you made as well. I think the two programs have to be looked at also separately and just to give you the update on the gantenerumab. As you know, the last patient in SCarlet RoAD was recruited at the end of last year. We’ve now, actually just had the first patient into our mild trial, Marguerite RoAD and again that decision was based upon the interim analysis look that we had in SCarlet RoAD and to make sure that there were no concerning safety profile and that allow us -- give us confidence to move ahead with the mild study.

So crenezumab, as you know, is studied in the mild to moderate population. So, it’s a different population. And of course, I think, it’s important for us to make decisions on that program relative to the data on that program. So given the fact that the crenezumab data will be presented before the half year, Tim, I would probably say that I will be able to give you a much better update at the half year relative to, how we’ve interpreted the data internally, how we see the data in comparison to gantenerumab, and I think at least the timeline for decision making on crenezumab for the rest of the year. But we would certainly expect to be taking the decision on crenezumab before the end of the year relative to moving the decision to -- whether or not to move that into Phase III.

Then, finally on the -- yes, just to point out, sorry, one other thing on crenezumab before I move on. I mean, what you will see at AAIC is both the Phase II ABBY cognition study as well as the BLAZE biomarker study. So, both of those will inform us on how to proceed with crenezumab.

And then finally, the FIR and BIRCH trial, again let me just put the BIRCH into perspective again, right. So this is not new of course since our last call with you. The trial was actually initiated in December of 2013, the BIRCH trial I am talking about. And just to remind you about the PDL1 program, it’s a program that’s moved very, very quickly. We moved very quickly into the FIR, which was a relatively small Phase II designed trial, which predominantly would help us also with the biomarker and understanding how to dimensionalize that biomarker.

And we wanted to move very quickly into the OAK trial, which, as you know, we are now running and hence recruited the first patients for Phase III trial. But in moving quickly into the OAK trial, there is a number of questions that we still need to answer to make sure we take advantage of the OAK study to its fullest potential.

And so the BIRCH study is actually a larger Phase II trial. As you know it’s 300 patients, we’re going to run that in parallel to the OAK trial. And the way the trial is designed, the OAK study, it will allow us to use both FIR and the BIRCH study to inform us before we finalize the analysis on OAK.

So as you know, I mean, we can still make statistical adjustments during the OAK trial before we unblind the results. So the BIRCH trial is really now a much more comprehensive trial. It will allow us to get even more clearer on the size of the OAK trial and also further information on the diagnostic hypothesis. So it’s all part of an aggressive large program to answer the question about the PDL1 in non-small cell lung cancer which again from the initial data we presented at ASCO last year we think we have a very favorable profile also when it comes to the diagnostic subsets.

Tim Race - Deutsche Bank

Okay. Thanks, Dan.

Dan O'Day



The next question is from Mr. Richard Vosser from JPMorgan. Please go ahead.

Richard Vosser - JPMorgan

Hi, Richard Vosser from JPMorgan. Thanks for taking my question. Three please, on Gazyva, could you explain what you’re seeing in terms of the initial uptake in the U.S.? It seems a little bit slower than potentially we had thought. So, has there been any pushback from physicians on the product or anything you can help us with there?

On Perjeta, what sort of duration are you seeing for Perjeta in first-line? Is there a lengthening of use, and is that a contributory factor to the growth? And what level of neo-adjuvant penetration do you think you can get to?

And then finally on PDL1, how should we think about the combination with Avastin and PDL1 in terms of your priority within the wider combination strategy for the product? When can we hear more about this and other combinations? And a sub-question, just on other companies, they’re looking at the combination with Avastin and other products, for first-line lung for example. Do you expect they will have to go head-to-head with Avastin [for their path to market][ph] in that area? Thanks very much.

Dan O'Day

Great. Thanks, Richard. So Gazyva, I think we’re very pleased with the uptake in the U.S. so far. I mean, it is, in its labeled indication, so I remind you that particularly in the United States, the chemotherapy backbone is in chlorambucil and we have the GREEN study that is going on right now, that is looking at additional chemotherapy background which we’ll have more data on and start beginning in 2015.

I'd also remind you that the labeling for Gazyva in U.S. as you know, because of the very accelerated approval there, we filed the head-to-head additional package insert change with the FDA and we expect that in the third quarter of this year. But overall, I think in its prescribed indication and the incredible data on PSF that we've seen, very pleased with the uptake there. I’d remind you that the European decision is pending right now and that chlorambucil is a very common backbone in Europe.

On Perjeta, lengthening use, first-line, Yes, I mean, bottom line is we are seeing obviously commensurate with the survival data of lengthening of use in the first line. It's a bit hard to quantify that right now just because frankly the duration of survival is a bit longer than we’ve had in [other market] [ph] in many patients. So we're still in the process of evaluating that, but clearly that does contribute to the growth that you are seeing there. Both we saw the increase in the first-line metastatic setting with the really outstanding results in neoadjuvant. So, I would say that there is a further encouragement on use in the first-line and then in the lengthening as well.

In terms of the level of neoadjuvant, yeah, hard to say, I mean we’re up to 65% right now. I wouldn’t want to guesstimate exactly where we can go from here but the results - the synergistic results are pretty strong and I think we could expect to continue to gain share. Good, I think that was Perjeta.

Avastin in PDL1, yeah, as you know, we've got a combination moving on in the preclinical setting, we saw synergistic effects with Avastin, PDL1 and we'll just have to see how that plays out in the Phase I clinic. Now as we've communicated on the combinations study that we have going on right now, we would expect that you would see results before the end of this year.

And then you asked about Avastin being used in other -- with other agents and whether they need to have a head-to-head with Avastin. Yeah, I mean hard for us to determine. I think they would need to have a head-to-head with whatever the standard of care is in the particular disease state, in the particular order and once they're going after it and in many cases as you've seen with competitors that have tried to come in and compete with Avastin, we've seen them at times trying not take them on the head-to-head and work around the edges or work in indications where Avastin is non-approved. So, I think the past behavior may indicate the future behavior there as well.

Richard Vosser - JPMorgan



Your next question is from Mrs. Alexandra Hauber, UBS.

Alexandra Hauber - UBS

Thanks for taking my questions. Three questions, please. Firstly, I would be curious to know whether that experience has triggered a wider review of your various biomarker approaches as those probably can only be successful if you measure the correct biology. So wondering whether you considering any extra steps or processes to make sure that the biomarker is indeed reflecting the biology? And I know it is early days but I am wondering whether you have already identified any lessons learned, conclusions, processes given that's so central to many other things that you are doing where you are measuring biomarkers, whether biology is still evolving, whether that is -- whether you are looking at PDL-1 or PIK3A mutations?

Secondly, just a quick follow-up on crenezumab, gantenerumab, if I understood correctly you just said that the gating event from the grid was the safety update from SCarlet RoAD. So can I just confirm that ABBY results were not the gating event from the grid?

And also I appreciate that you only wanted a third about crenezumab in the second half but given that Phase III study for Alzheimer's, that’s probably going to be quite extensive. Under what conditions, would you be prepared to take two different agents move within the Phase III.

And final question, as I just heard that you made a survey, comment about lower maintenance fees in interns for Rituxan on this quarter. I’m just wondering, is that, sort of, any new agents or is it more like a reimbursement situation right now, which could be a problem in the U.S. Thank you?

Dan O'Day

Okay. Thanks Alexandra. Yeah, let’s first talk on the MetMAb program. As you can imagine, I mean, I think it’s a bit premature to glean all the lessons learnt from MetMAb. I think, we continue to believe in the activity of the pathway. No question about that. But at the same time, I think what this demonstrate is that when you -- I mean, there’s always risk involved with going after new pathways. And I think we’re certainly going to understand the biology better. And I think, probably we have the best set of data now to understand this MetMAb pathway and some of the other potential complementary pathways that could go along with this, including potential geo-point, potential biomarker approaches to this.

I would want to comment further right now because the theme is heavy into the data. I mean, obviously we have clinical trial programs that’s have been put on hold in gastric and other areas that we need to really actively look at and manage and make sure we’re assessing right now. But I’ll be more than happy to give you learnings on that, when we have digested the data and how we progress ahead. I would caution though to make a broad statement about, if you like our biomarker programs. And clearly we can learn from this. But I think, we continue to, I think, have some of the strongest expertise and my confidence is not shattered after this program.

In pursuing new biomarkers, being able to measure those biomarker, which is not always easy. And I think as we continue to provide you data as you mentioned on things like the PDL1 program and others, it’s one of the reasons. By the way, its my response about FIR and BIRCH that we’re really doing a lot of -- I think sophisticated scientific work to verify our biomarkers throughout the course of our clinical trial program. And as certainly we don’t necessarily read on MetMAb over to the other programs from that perspective.

On Onartuzumab, I think the question was about whether it was safety or whether it was also -- sorry -- sorry, your question was about the interim analysis on gantenerumab, correct?

Alexandra Hauber - UBS

No, the question was whether in addition to the interim analysis of SCarlet RoAD, and whether the ABBY were also gate keeping event for initiating the gantenerumab. I know it’s a different molecule but for the similar indication study?

Dan O'Day

Well, I’m not catching the word that you’re saying, whether the what results?

Alexandra Hauber - UBS

Whether the one, whether the ABBY study, the crenezumab…

Dan O'Day

Well, the ABBY study, all right. No, I don’t think there was a sufficient play over to those two, no I can be clear on that. The gantenerumab program and the timing of the decision on the miles was really driven by -- I’m sorry, the SCarlet RoAD and gantenerumab. ABBY and BLAZE, now I understand what you’re saying, ABBY and BLAZE will inform us obviously on the Crenezumab approach. And then you ask me under what conditions could we see moving too ahead.

Well, I think again, that’s really a topic I’d like to discuss with you more at mid-year, when the results are public because then we can discuss what is our -- first of all patient populations, prodromal, mild, moderate. There’s any number of scenarios, first in class, best in class. So there’s a variety of different scenarios that we’re evaluating right now. And we’ll certainly come back to you and obviously will be a part of our decision making first and foremost and then part of our explanation depending on how we decide to move ahead.

And then finally -- Rituxan and maintenance, yeah, I think it’s a bit too early to tell that that’s a trend. We just noted one quarter data we have to careful under any call. So I wouldn’t overly state that. We do see a little bit of softness in that area but we don’t see that as competition, I would just say.

Alexandra Hauber - UBS

Okay. Thank you.

Dan O'Day



Our next question is from Mr. Andrew Baum from Citi. Please go ahead.

Andrew Baum - Citi

Good afternoon. Three questions please. Firstly, you call out Avastin, growing fast in colorectal cancer. Perhaps you can remind us of the market share progression within the segment between yourselves and Erbitux. In particular whether the [eCorp] (ph) data has strengthened your position in that segment?

And second, regarding your previous comments on what you say with an undisclosed indication, but now absolutely that again has speculated? You used to describe a unique profile versus the other agents. I think, there is the word, Dan that he used? I am struggling to understand what that based on, is it unique and the fact that you have the data and they don’t, would you think that something unique about your molecular seems just like?

And then the second question is, your development strategy assuming that you have nice positive Phase I data that you would be sharing with us at ASCO seems pretty slow, particularly in the refractory, the advanced indication? Could you just take us through why not initiate the registration trial from the get-go or am I missing something and perhaps the Phase II could be used for filing at least for that advanced cohort?

And then the final question is, I think, Richard had previously documented that you plan to take two molecules in novel immunotherapy molecules that connect every year for the next 10 years? When we expect news flow on this year’s tranche of molecules? Thank you.

Severin Schwan

Great. I’ve try to look up Avastin share, okay. So, Andrew, thanks for the questions. I think, we can clarify this maybe offline too. The Avastin shares could be stable in second line at this stage. But let just get back to that because, I guess, I don’t have that on my finger tips.

Right, so, the PDL1 and again, I think, the highly competitive area, so I am going to try to do my best. But I think, as you know before we have -- we had a scientific hypothesis but by targeting PDL1 and instead of PD1 that may have -- that they may have particular benefits both in terms of potential longer term safety profile and also in terms of utility across tumor types.

I think the most important thing is to show clinical data that verifies the hypothesis or not and certainly, the bio-cancer is one piece of clinical data to add to that our limitation perspective. I think you need to see it at ASCO and public we have a more complete discussion. But there clearly are other cancer types beyond the three and now beyond the four with bladder cancer that we continue to explore PDL1 with and as we have recommendation and data we will certainly do that as well.

Just a little bit of teaser then for ASCO and if you like the earlier stage compounds that we can expect to see there. We have in the immune checkpoint side we have an anti-CSF one-arm mab. It is in Phase I in solid tumors that really targeting maybe something I talked about at the year end the Immunosuppressive Tumor Microenvironment. You are going to see data on that from ASCO. You will see another assay the antibody-cytokine fusion protein CEA IL2 variance and this is a program that moved into Phase I in December.

And then I talked about this at year end too, you will see a little more on the anti-CD40 antibody which -- what’s interesting particularly in terms of its combined ability with other checkpoint protein such as the anti-CSF-1R, some targeted IL2s potentially PDL1 and also the therapeutic cancer vaccine. So in addition to updates on PDL1, bladder, further rationale and how we feel we are progressing in other tumor types, you can expect you have more in the early stage programs and we will also be covering those at the Analyst event on this topic. Does that help?

Andrew Baum - Citi

I mean, the only thing is on the bladder cancer strategy, I mean, some of your competitors are initiating what potentially a faster registration trails and by that -- are this somewhat surprise that didn’t apply half?

Severin Schwan

I missed that one, so again I think we can update you as we move. We have decided to answer into a fairly large Phase II trial with the intension, of course, still discussions ongoing with regulatory authorities to potentially have that be supportive of filing and that’s the two cohort trial one with treatments as you’ve seen in the platinum, with treatment in the events of platinum-analyzable patients and then the other cohort with patients with disease progression following or during the platinum-containing treatment. So at a recoupment of 330, we feel that the trial will give us sufficient insight in to how we could proceed here from a regulatory perspective.

Of course, we’re exploring other ways to support this bladder programs and as we make decisions on that, we’ll let you know. But clearly, we want to pursue this with a lot of aggressiveness.

Andrew Baum - Citi

Okay. Thank you.


The next question is from Sachin Jain from Bank of America. Please go ahead sir.

Sachin Jain - Bank of America

Hi. Sachin Jain from Bank of America. I have three-part questions as well placed on. And especially on lampalizumab factor D, I think we still are awaiting the Phase III start and despite the date, I think almost seven or eight months ago. So I just wonder if you can give us any color on regulatory discussions there when that Phase III might start?

And then the second question was to clarify the comments on crenezumab. I think you said you’d progress it if you felt it was best in class. So I just wanted some color on that. Obviously ABBY is the first cognition Phase II study and then you have similar cognition dates for gantenerumab. So how would you think about comparing this across the molecules or should we be more focused on the plaque study which is more traditional amyloid reduction data.

And then thirdly just on Bcl-2, one of you just update on TLS whether you closed the resolution with the regulators on the path forward there. Thank you.

Dan O'Day

Thanks Sachin. Okay. Terrific. Lampalizumab. Okay, terrific. Yeah. So what I can say on lampalizumab is that we’ve got -- as you know, this is also a competitive area. So -- but we had very productive meetings with regulatory authorities in the U.S. and in Europe. The Phase III design, as we said, we’re going to have first patient in on that trial by the end of the year, which means obviously the Phase III designs will be public, most likely in quarter three.

So I don’t want to give too much weigh on it because there is a lot of competitive information here. But I would just say that we have consulted with the regulatory authorities, with clinical experts and we have incorporated the feedback into the Phase III design. We have consulted with payers and the sample size is that adjust the base of our med.

Now clearly as I said before, we’re confident that geographic atrophy will be an important endpoint and a primary endpoint. We’re continuing to explore alternative secondary visual function endpoints and we’re very much on track with the trial. But I would resist from talking about duration in those types of things until we publish the Phase III program, if that’s okay.

On crenezumab, yeah, I think again, I don’t know that I can say a whole lot more unless and until we see the data. I mean, it’s clearly, you’re right. I mean, you’re going to have different levels of data in Phase II than you have with potentially other programs in Phase III. But obviously there is different ways of interpreting where you think you have a best-in-class asset or not. And I would again refer you to the data that will be presented at AAIC in Copenhagen in July than we can have even more complete discussion at ASCO.

On TLS, we -- I would just say we’re just coming off of the meeting on Bcl-2. Literally, we don’t have the minutes and everything we had at that meeting. But I would just say that it was a very positive and instructive meeting. So I think we’re moving in a very good direction with Bcl-2.

Sachin Jain - Bank of America

Thank you very much.


Next question from Michael Leuchten from Barclays. Please go ahead sir.

Michael Leuchten - Barclays

Thank you. One question on Perjeta please and one on Lucentis. On Perjeta in Europe, the products are in the market for I think about five quarters. Just wondered whether you could offer any insights into penetration rates in markets where it’s been on the market a little bit longer and at the same time, talk little bit about the pricing in those markets in terms of how you are able to capture the deal pricing. And then on Lucentis and DME, fairly generic comment in the presentation on increasing market share in DME. Just wondering whether you could be a bit more precise about what you’re seeing in this market relative to off-label -- other off-label opportunities and also later? Thank you.

Severin Schwan

Sure. So, Perjeta in Europe, I mean, it’s off to a very good start. We see market share gains basically every month. As you know, it’s not easy to capture market shares across the European countries as we do in the United States. Obviously, there is a lag affect on reimbursement and we continue to get new markets reimbursed on a monthly basis. So, we are really encouraged of the uptake there in Europe.

On the pricing side of it, I would say that, again, I think the reimbursement discussions we are having based upon the test of the clinical data have been very productive and very propulsive. We are seeing the pricing that I articulated between the U.S. and Europe to be representative in our reimbursement discussions. It’s approximately similar between 15% to 20% lower than the U.S. average price but that is the price point and once we are reimbursing.

And then, we also of course have a Perjeta receptive combination in some countries that allow us to price the combination and again, that combination is also holding up well in our discussions with pricing authorities. So on the Lucentis DMEs, we’ve got, in DME in particular, we were at a share of around 20% and about a year ago, I think we were at 14%. So we continue to see very good uptake in that market, predominantly there is some offset from Avastin and also growth in that market as well. But good solid uptake in DMEs and continues.


Next question from Odile Rundquist from Helvea. Please go ahead, madam.

Odile Rundquist - Helvea

Yes. Good afternoon. Thank you for taking my question. As you reported Madopar and protein sales last year, would you just give us the sales numbers for these two products? Another one on Herceptin, I mean, you recorded 3% growth, 0% in international markets. I’m just surprised to see that we don’t see any -- see any affect from the longer duration of Herceptin use in combination with Perjeta while we see very strong uptake of Perjeta. If you can maybe just give us more color on the respective countries for Herceptin? And last question also on Diabetes Care, if you just give us an update on the outlook for the year? Was the new launch maybe offsetting the pricing cuts we continued to see in the year? Thank you.

Severin Schwan

Okay. Excellent. Okay. Thank you, Odile. Let me start with the Diabetes Care question. So what we’ve seen is obviously, the CMS decision last year with the massive reimbursement cut was in fact in the first of July last year. We are going to see annualization, but I would be cautious because many of these cuts have been anticipated. So we will continue to see a volatile market, volatile environment. We don’t expect any major reimbursement cuts. But as in the past, some countries moved into reimbursements cuts with relatively short notice. And again, we have seen a very soft first quarter last year.

So this is why we have seen a bit of an uptake here in the first quarter as well as this changing pattern. The whole thing is responding on some timing of rebates from the last quarter 2013 to first quarter ’14, so all of these contributed favorably to the first quarter. I would expect a slowing of the growth of course, but some of the uptaking in the new products are encouraging. Some of the pipeline products, non-protein products that I mentioned and ongoing penetration of existing products like the Mobile Accu-Chek roll out in Europe.

Okay. So quickly on Madopar, I mean, just to be -- so the reason we haven’t shown that is that it fell out of the top 20 products, the very mature products that we obviously do continue to promote in some of our emerging markets around the world. The bottom line is the core one ’14 sales for that were 59 million Swiss francs.

On Herceptin, sure, I will be happy to give you a little more color. I mean, we’ve got the 3% growth overall in Herceptin, that’s 4% in U.S., 2% in Europe, 23% in Japan. And then international, I would just point out again, Herceptin is a major driver in international regions and all the discussions that I mentioned around EMEA and the tenders and China growth significantly affect these figures. So I think we need to take a look at this again the half year.

Having said that, I mean, just looking in the market that don’t have those effects to your point on Perjeta. I think overtime we will see of course some duration and therapy effects, but we haven’t really have those PFS that go to a point where we see the effect on ourselves and that has to be also taken into consideration with the fact that in second line and beyond overtime too we are going to see Herceptin cannibalize by Kadcyla.

So there is a bit of an offsetting factor there. But again 3% growth overall for Herceptin given that and again more and more we are going to be looking as we go out time the HER2 franchise because that’s really I think the important figure as we move ahead and of course the 17% growth we are very encouraged by.

Odile Rundquist - Helvea

And do you also have Nutropin sales I know it’s not part of the 20 biggest products?

Severin Schwan

Yeah. Maybe we can take that offline entirely.

Odile Rundquist - Helvea


Severin Schwan

Do you have that?

Dan O'Day


Odile Rundquist - Helvea

Thank you


Next question is from Luisa Hector, Crédit Suisse. Please go ahead, ma’am.

Luisa Hector - Crédit Suisse

Thank you. Good afternoon. So question on Avastin because you talked very positively about the growth in -- from ovarian and the multiple lines, colorectal, but when you look at the growth over the quarter’s it seems have dropped down from double-digit to single-digit in Europe and international, so just to check whether is anything negative going on that, perhaps international it was the totally timing you mentioned?

And then another question on MabThera and any comment on the potential with U.S. launch? Thank you.

Severin Schwan

Thanks, Luisa. So in Avastin, no, there is nothing fundamental going on with demand there, if anything you could see we use to do well there. I think, in Europe, we continue to see really stronger uptake in both ovarian and colorectal and U.S strong growth with 6%. I would say that those very same reasons we just talked about with Hercentin are also true in the international region with Avastin, Avastin is growing nicely in China and probably not fully reflected in the figures that you see here. So, again, I would ask just take a look at that at half-year. But good strong growth in Avastin, I would say overall. On MabThera, no, we haven’t taken any final decision on that and as soon as we do we will certainly let you know.

Luisa Hector - Crédit Suisse

Okay. And so, Avastin Europe has 17% goes down to about 8%, despite the uptake in ovarian there is nothing?

Severin Schwan

No. I would be careful to look quarter-to-quarter. I think, I mean, the fourth quarter was strong. We had a high base last year in quarter one, so I would, there is nothing fundamental going on, let’s have another chat at half year but this year will have a difference.

Luisa Hector - Crédit Suisse

All right. Thank you.

Severin Schwan



Next question from Keyur Parekh from Goldman Sachs. Please go ahead, sir

Keyur Parekh - Goldman Sachs

Good afternoon and thank you for taking my questions. I have three, first, Dan, I think you mentioned at the start of the call that the pricing pressure in Europe was about 300 to 400 basis point this quarter, that is certainly ahead of Wall Street just stated in the past which to my memory is about 200 basis point, are these specific countries that you are seeing the incremental pricing pressure is or is this simply a function of newer product that might have gone generic?

Secondly and as it relates to the broader outlook kind of for this year, the market kind of given the incremental data that we have seen from some of your competitor would love to hear your take on how you see this market developing over the next 12, 24 months?

And then lastly for Severin, you kind of spoken about over the last 12 to 18 months about kind of the difficulty in executing on in-licensing and business development given biotech valuations, given what you’ve seen over the last kind of 12 weeks has your view on that change or do you still think those fields are very difficult to get done from an [NPV, IRR] (ph) perspective? Thank you

Severin Schwan

Hey. This is Severin speaking. I’ll start with your last question on in-licensing opportunities. I just like to be confirm our overall strategy in terms of in-licensing and M&A activities. We continue to screen the market for bolt-on opportunities to complement our two businesses in pharma and diagnostics, both in terms of potential products or technologies and IQuum which we just last -- announced last week. I think it’s a very typical example of what we do in the field.

Now you’re right, the biotech sector has come a bit down over the last couple of months. But when we spoke the last time and I was worried about the high valuation since then, I think net, net it has even gone up. So it remains difficult to seize opportunities in this space, in particular when it comes to later stage. And if it is more earlier stage opportunities, typically those companies are very interested to leverage our know-how and to bring the respective assets to the next deflection point. When it is a later stage asset, it tends to be a bidding process and it’s about price only. And as you have seen from our activities in the past, basically there has been none. We are very reluctant to participate in this segment at the moment. So, nothing has changed from that perspective. Dan, can I hand over to you?

Dan O'Day

Yes, please. So thanks, Keyur. I wouldn’t agree too much into a change in the pricing pressure in Europe. I think in the first quarter this year, we had some significant effects in France, that again will moderate out over the course of the year, but we are not seeing necessarily a fundamental change in terms of the pricing pressures on our portfolio. We continue to see our portfolio doing better than other products in the mix in Europe.

And then to your question on the CLL market, the answer, one line answer is no. We don’t see any fundamental shift in the CLL market, actually as we report. I would say that when we look specifically at MabThera and Gazyva in the first-line CLL, their share growing. You look at that in combine, which is similar to what we see in, for example in the HER2 space when we add the effective agent on top list. And in terms of some of the competition and we see them competing in their labels indication, it’s really where we see it versus you know is in refractory, relapsed refractory CLL and mental cell. So, that’s really where we see the entrants of the new competitor.


Your last question for today is from Mr. Tim Anderson from Sanford Bernstein. Please go ahead, sir.

Tim Anderson - Sanford Bernstein

Thank you. I would like to go back to a couple of earlier lines of questioning. On Avastin combination studies with PD-1 or PDL1, can you just articulate, are we likely to see any combination data with Avastin and a PD-1 at ASCO? And then more generally in 2014, you said we would see data, can you just articulate in what term or types we would see that data? I thought we would see it in colorectal and lung perhaps.

And then going back to the FIR and BIRCH discussion, it’s still not clear to me why you are starting a second Phase II trial, are there some differences in BIRCH for example, are you looking at PDL1 expression levels using different cutoff values? The reason I asked that is, if I look at the FIR trial, it looks like you are still enrolling. So if those trials are identical, why don’t you just keep on enrolling or expand enrollment into FIR? And then, can you confirm that it’s possible that the FIR trial could be used as a registration study, that’s what I thought it might be in the past?

Severin Schwan

Yes, okay, Tim, thanks. Right, the bottom line in Avastin combo at PDL1 is that we won’t see the data at ASCO, but we do expect, as we said, to see that in second half of this year, hopefully before the end of the year. We also expected, as we indicated to you, to see some FIR data hopefully at the end of this year, possibly early next year, but hopefully at the end of this year at this stage.

Again, once again in this field, there is a number of programs we have that we haven’t yet made public. We have additional combinations as you know and, I mean, you double it, it will be starting throughout the course of this year and we will do our best to update you just as soon as we feel it’s competitively appropriate or that we have data to share. So I’m sorry to be a little faint on that but given the competitive nature of this I think we have to be.

Let me try one more time on the FIR and BIRCH, I mean, FIR is an exploratory study that used to define and further refine the diagnostics. The test result will used to determine the difference between archival and fresh tissues, and we really wanted to explore the first-line activity and test -- the utility of test and refine the overall diagnostic workflow and operation.

So there are very specific objectives for each one of the trials. They build upon each other and they inform us on the Oak trial. So I just wanted to articulate that the three of these combined will help us, of course, to make sure that the Oak trial meets this need.

And at the same time, of course, depending on the outcome and the results, we will have a discussion with regulatory authorities as we would, so there is a variety of different options here where as you know our stance is to be a bit more cautious about interpreting whether the trial results would be attractive or not to regulatory authorities, let’s see the results and then we will have those discussions as well.

Tim Anderson - Sanford Bernstein

Thank you.

Severin Schwan

Thank you very much. This closes our Q1 sales. Thank you for your interest and look forward to meeting you later at ASCO. Thank you very much.


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