Roche Holding Limited (OTCQX:RHHBY) Q1 2011 Earnings Call April 14, 2011 8:00 AM ET
Welcome to the Roche first quarter 2011 conference call and the live webcast. (Operator Instructions) At this time, I would like to turn the conference over to Dr. Severin Schwan, Chief Executive Officer.
Good afternoon, ladies and gentlemen. Welcome to our conference call. This is Severin Schwan speaking. With me in the room is Pascal Soriot, Head of Pharma; Dan O'Day, Head of Diagnostics; and for the first time Alan Hippe, our new Chief Financial Officer. In the room is also Karl Mahler, Head of Investor Relation with selected members as the finance team. So let's get right into the first quarter sales results.
As you have seen this morning with a 2% growth in local currency, we are fully on track to meet our guidance we gave you at the beginning of the year. We've had a significant currency impact with the strengthening of the Swiss francs virtually against all currencies including the Euro and U.S. dollar and that resulted in a 9 percentage points growth impact on the group level.
We made also again good progress in our pipeline with actually seven out of seven trials hosting positive results just in the first quarter, and let me come back to this in a moment. Operational excellence is on track to deliver the announced savings of CHF1.8 billion for this year and CHF2.4 billion as we go into 2012.
So if we turn to Page 6, Pharmaceuticals Division up by 1% in local currencies excluding Tamiflu, Diagnostics up by 6% ahead of the market, which gives us the 2% for the Roche Group overall. Page 7 underlines our confidence to achieve our full-year guidance both on the Group and on the Pharma level in the low-singe digits.
As you can see on this table across the U.S., Europe and Japan, we had an overall price impact and we expect this growth impact of roughly over 2%. Since some of the measures, especially the austerity measures in the European Union being gradually over the last year, we have a higher base effect in the first-half year, which we expect to level out in the second half of 2011.
Avastin declined as we expected and as we guided you following the ODAC's recommendation on the metastatic breast cancer indication you'll see here an impact on Pharma of 1.3 percentage points. Now, again we should see a leveling out as we get through the fourth quarter 2011, given that Avastin sales in metastatic breast cancer started to decline already in the last quarter, last year after the ODAC's recommendation.
Turning to Page 8, a comment on the Japanese earthquake. We expect that this is only a limited impact on Roche, both in Pharma and in diagnostics, specifically for Chugai, the international supply out of Japan in particular a framework is secured into October as we expect production to fully resume by this time.
Let me turn to Page 9. As you know, we did have pipeline setbacks in the first half of 2010 and it's therefore with an even greater satisfaction to see a series of positive trial results in Japan. In fact, since October 18, out of 18 studies delivered positive results and just in the first quarter as I had mentioned, we had seven trials, six out of them pivotal studies with positive results.
And we look forward, presenting the detailed data at upcoming Medical Congresses. And really these results are a testimony to our focus on innovation and science, and I am convinced even more than ever, with a more challenging environment we will only remain successful, if we are able to provide true innovative medicines and diagnostics with clear medical benefit for patients, prolonging life and leading to a better quality of life.
Turning to Page 10. Really behind that is our capabilities in research and our commitment to science, and that is also reflected in our publications. In 2010 alone, we had 18 scientific publications in Nature, Science and Cell, and we continue this trend into 2011 with the first publications in Cell and in Nature. And as we go forward, we also intend to give you regular updates on Roche contributions on the scientific thought.
To conclude, on Page 11, overall we are confirming our financial outlook for 2011 with the sales growth of low-single digits for the Group & Pharma, diagnostics significantly above the market and high single-digit growth on the Core EPS.
And with this, I hand over to Pascal.
Thank you, Severin. Good afternoon and good morning for those of you who are coming from the United States. So on Page 13, the first quarter for Pharmaceuticals showed a growth rate of 1% excluding Tamiflu at constant rate. We still had in the first quarter, the remaining effect of declining Tamiflu pandemic sales. And this growth rate translates into a plus 2% for the United States, a declining rate of growth in Europe, and 6% in the international region, and 1% in Japan.
If you look at it on a quarterly basis, this 1% is actually explainable for two very simple factors. One is the impact of healthcare reform cost reductions around the world. In the U.S., you are better, so the price reductions in Japan. And the second big factor is the impact of breast cancer sales decline on total Avastin sales. Apart from those two effects, the rest of the business is going at the same rate as in the previous quarter. And in fact, if we were to correct those, for this healthcare reform and Avastin effects, we would have a growth rate that is superior to what we've experienced before.
On Slide 14, you'll see how this growth rate compares region-by-region. The international region may have attracted your attention with a growth rate of "only 6%". I want to make a comment on this, and let you know this, in fact behind this we have a 16% growth rate in Latin America, 23% in Asia-PAC and 6% growth rate is actually influenced by the Africa and Middle East, and Europe region.
And here we see the impact of a strong first quarter in 2010 linked to the timing of tenders in some parts of this region. But also the fact, that Pegasys was negatively impacted in the Middle East, in Egypt in particular and North Africa. So we still have a strong growth rates in the international region, but of course those events impacted us. In Europe essentially the austerity measures, the price reduction and also the effect of Avastin in breast cancer and finally the impact of generics and biosimilars on NeoRecormon and CellCept explains this minus 4% for the quarter.
If you move on to Page 15, and we look at it from a product viewpoint, you'll see here the three products that are driving our growth in the first quarter are Lucentis, with a very healthy growth rate of 35%. You'll see Rituxan and Herceptin still grow by 7% and 8%. And very interestingly you'll see the international region drive the growth for Herceptin in a very substantial manner, but also have an impact from Rituxan, a very substantial impact there.
And this is exactly what we had (disclosed) to you in the past would happen, low-single digit growth rates for this product in Europe and in the U.S., and the growth would be driven by the international region. Actemra is also showing pretty good growth and I would come back to this in a few minutes.
Now, of course the surprising, not so surprising, but disappointing factor is the Avastin self development. It's not surprising, because it's very much in line with what we told you would happen. We are very much on track with our guidance and our expectations here. But suddenly a very disappointing development for our sales in the U.S. and Europe, essentially as I said earlier, influenced by the breast cancer discussions we've had with the FDA, but also in Europe the lots of paclitaxel and the Avastin label.
Moving on to Slide 16, if you look at the oncology portfolio, I said a minute ago, Rituxan and Herceptin are still showing very nice growth rate. MabThera and Rituxan as before, still driven by the uptake in CLL, and the (inaudible) indication and a strong uptick in NHL, in particular in the emerging countries.
Herceptin, we got approval for gastric cancer in Japan and the impact of gastric cancer says in Europe is suddenly influencing the self development. On the negative side we had price cuts in April 2010. But we also had some good news on the European front with the CHMP approval of Herceptin in concomitant use with chemotherapy, which will give physicians an additional option to use, Herceptin in combination with paclitaxel.
If you look at Avastin here, you'll see this decline as I said before, influence by the breast cancer indication. Japan is actually growing very strongly. As you can see on Slide17, we experienced 22% growth with Avastin in Japan, so a very healthy growth rate; 16% in the international region and a decline in the U.S. as we expected driven by again by breast cancer.
And in Europe also by breast cancer, and loss of the paclitaxel label has certainly influenced the use of Avastin in breast cancer in Europe, even though we seen now that most of world is using more of Taxol selling in the short-term, which is impacting us negatively.
I guess the picture for Avastin can be summarized in the following few words. In colorectal cancer, in the U.S. and Europe we are stable. We are also stable in lung cancer, in fact we have a slight loss in lung cancer in Europe, but we could we see more or less we are stable. And the decline you see in total sales is purely coming from breast cancer.
In the U.S. we now have a patient share that we estimate around 20% coming down from 35% in the previous quarter, and as you can remember, we were much higher than that in the past months. So certainly, a very erratic evolution, which throughout this year would of course stabilize, and we expect growth to resume with this product as soon as we launch the ovarian indication.
Slide 18, Lucentis is showing a very healthy picture of 35% growth rate for the quarter. Very nice developments on the clinical side with a new positive study in DME that would lead us to five for the DME indication in the United States in the second half of this year. And as you all know, we are still expecting the CATT study to be published pretty shortly from now on.
Moving on to Slide 19. Actemra is still in growth phase. I want to tell you that the development in Japan have been of course very traumatic for Japanese colleagues. They've done a tremendous job, securing supply for Actemra and resuming production, we don't expect any impact of these Japanese development on our supply.
We have enough inventory to cover us until October and beyond that time point we think we have been able to resume manufacturing fully in Japan. In the U.S., we actually achieved reimbursement. We got the J-code in Q1. That had an impact on our sales and we see a nice development of our patient share in second line and third line for Actemra. So still very encouraging results around the world.
If you now look at Pegasys on Slide 20, we are in a transition phase with Pegasys, although the last few months, maybe couple of years you will remember that the market has been steadily declining and we have been gaining market share. And in fact Pegasys was growing, because we are gaining market share, even thought the market was declining. In fact what we see now happening is an acceleration of this market decline.
Our market shares is still very healthy, we now have 80% plus market share in the United States and in excess of 75% in all key European countries, which is a very healthy market share for Pegasys. But suddenly the warehousing of patients, which is linked to the soon to come in production of oral agents is having an impact on sales in the U.S., but also around the world.
So we are preparing for the launch of these oral agents and we expect an acceleration of our sales toward the end of this year, but most importantly into 2012. And we also are preparing for the launch of the Pegasys ProClick, the new administration that will improve the convenience of administration for Pegasys.
On Slide 21, some newsflow here. You can see that we have a very rich clinical newsflow. Certainly the ASCO would be a very rich ASCO for the year, and also a very big year in terms of filings. We're expecting to file Vemurafenib, the BRAF inhibitor, we all call it this year. We are also planning to file the Hedgehog inhibitor in the United States. I said a minute ago, we would be filing Lucentis in the U.S. in the second half of this year.
We filed Tarceva, the EURTAC study, we will also file for ovarian cancer. And finally we have the results of T-DM1 that will be presenting at the ESMO in next year. We should have the results of EMILIA, and MARIANNE will follow in 2014. So as you can see here a very rich year in term of filings and a very busy ASCO for us this year.
On Slide 22, you see here that personalized healthcare is finally becoming a reality and this year we would be presenting the results for three products, the BRAF inhibitor, vemurafenib; and also Tarceva, EURTAC; and MetMAb. On top of those three, we also present the ovarian cancer result for Avastin. I think that you will really be impressed with the results you see for ovarian cancer and Avastin.
And at this ASCO, this year, may well be a turning point in the perception that people have of Avastin. 2011 was suddenly a challenging year for this product and for us all with the breast cancer controversy. But the ovarian cancer results will certainly show you that this is a product that this is bringing tremendous benefit to patients in a number of tumor types.
And finally to close on Slide 23, if you are very rich, let's touch by plants. A lot of studies have already read out positively, as you can see are marked, on this page. And there is a lot more to come throughout year. In particular, we are expecting positive results for Pertuzumab in combination Herceptin. Those results will have a very substantial impact on the future of our HER2 functions and how we manage it moving forward, and as you can see here a lot of results to come for this year.
Thank you. And I will now hand over to Dan for the diagnostics review.
Thanks, Pascal. Good afternoon, good morning everybody. If we turn to Slide 25, this is the overview of the Q1, 2011, Diagnostics division sales and you can see at 6% growth overall, we continue to grow faster than the marketplace as the world market leader and in-vitro diagnostics. We do have the market growth for the full year 2010, which for the top seven competitors was 4%. So we continue to grow with strong growth, faster than the markets across our divisions.
On Slide 26, you can see that we have growth in all of the regions. A significant contribution of absolute growth from EMEA and Asia-Pacific, also good developments in North America, but you can see in the emerging markets we have significant growth as well with our strategy and the E7 countries have a growth overall of 17%.
When we turn to Slide 27, a little bit more around the growth stories in each one of our businesses, I'll cover Professional Diagnostics and Tissue Diagnostics which are the two businesses contributing most to our growth in Q1 in the slides to follow. But to cover the other businesses on this slide, Diabetes Care growth at 1% driven by the growth and the uptake of our new blood glucose monitoring products where we have launched them, and when you break that down and we continue to have good growth ahead of market in Europe at 3%.
In rest of the world, where we have just begun to launch those products, the end of last year, and the beginning of this year, that's Latin American and Asia-Pacific, we have growth of 18%. And clearly in the U.S. markets where we are still under the review process for those products, we had some decline in markets share. But we're looking forward to launching those products later this year also in the U.S. marketplace and continuing our share gain and growth.
In Molecular Diagnostics, we have approved several new tests, new tests in our blood screening area for the duplex test to expand our blood screening franchise. The growth was driven predominantly from the virology portfolio in Molecular Diagnostics. And the review process with HPV continues to go well with the FDA. And we're still on track to launch that product in the second half of this year.
The results have been published now in the American Journal of Clinical Pathology and they really are truly groundbreaking results for the field of cervical cancer and HPV monitoring. So we're looking forward to bring in that product to the marketplace in the largest HPV market around the world, a little bit later this year.
On the Applied Science side, we had an effect over H1N1 sales in the first quarter of 2010, with sales of instruments and reagents that's effective our overall growth rate there. Excluding that, we do have strong growth of the custom in biotech sales business, and other aspects of our business in Applied Science.
If we turn our attention into the two major contributors to growth in 2011, so far in the first quarter on Slide 28, we are on track with the product launches that we expected for this year. First, as you know, the strength of our businesses are large installed base in all of our businesses, in Professional Diagnostics, where we enjoy the largest installed base out there in the serum work area.
We launched yet another module for our cobas 8000. This is our ultra high throughput analyzer for central labs. The cobas c 702, which had been requested by our customers for ease of use in those ultra high throughput labs. We launched that in Europe in the first quarter and are on track to launch that in the second quarter of this year.
We also expanded on Slide 29, our total offering to those mid-to-large throughput customers in the central lab, by announcing the acquisition of PVT. This is a company that we have been collaborating with for the past 10 years. Through the acquisition it will allow us to strengthen our offering in the pre-analytic area and the post-analytic area. And enable us to further grow and connect with our lab customers in that segment. We're looking forward to closing that transaction shortly and then continuing the offerings in that area, which allow us to retain our large installed base out there.
On Slide 30, then turning the attention to the medical value side of our business and to the products, that the reagents that drive our revenue base as well. We launched two new key products in Professional Diagnostics in the first quarter, HE4 for ovarian cancer. And very importantly another example of personalized healthcare within the Roche Group by the launch of our Elecsys HBsAg quantitative assay, again on a very large installed base of our cobas instrumentation out there.
This is a very important product, relative to PHC, because it allows for therapy monitoring at the 12-week mark of Pegasys therapy to determine those patients that are likely to respond in continuation of treatment. And as you know, HPV is a very key disease in the developing world and in particular in Asia-Pacific region and we have our joint organizations in Pharma and Diagnostics rolling this out to emphasize both the medical value to patients and the cost savings to healthcare systems in this important area of infectious disease.
Turning our attention then to the, Tissue Diagnostics growing at 18% significantly above the markets around the world driven predominantly by our advanced staining systems within Tissue Diagnostics. And I am pleased to report the first of the products from our acquisition in the second half of last year BioImagene are rolling out, which allow us to continue to gain market share in our key pathology account.
This software allows pathologist to both capturing and share images as well as has algorithms to take what is today a manual process brought with potential inaccuracies and turn it into a process that increases accuracy and reproducibility of diagnosis, which is critical to the evolution of cancer care throughout the world. We expect to launch these products outside of the United States after Q1, so again continued strong growth in Tissue Diagnostics.
Closing on 32 then, we have fulfilled certainly our expectations and commitments for Q1 from market growth, from key products launches, from personalized healthcare and also the continued strong growth and uptake of our products in the emerging share markets. And we reiterate our guidance for yearend, which is to grow sales significantly above the market and diagnostics.
So with that, thank you for your attention. I turn it over to Alan, to cover the financial section.
Thank you, Dan, for the handover. Thank you, Severin, for the introduction. Well, two weeks now with Roche now. So don't expect there is a larger face on me tonight. But well, for us the first point, what is so intriguing about Roche for me. The first point is certainly, this is a world-class CFO job, which very intriguing. So that was really a no-brainer for me.
And the second point is, it's a very exciting industry, very exciting innovation-driven industry, I am a part of. And better, it was a world-class management team as I find here in Roche. I think that's really an honor to be part of. So what I can say after the first two weeks, the fundamentals that I've seen here so far are pretty good and fantastic, and as expected. So I think there will be a lot of exciting stuff to do.
While we move on 34, as we've already done, then you see while there are two points. First is the initial period and I think in initial period I will keep my understanding for Roche and the healthcare industry. So as said, don't expect anything specific or material from my side today.
And the other point is April/May roadshows. We will come to Zurich, to London and to Boston. And to shape your expectations, I think it's all about gaining an understanding, what you expect from us, from me, and what you expect really from the company, and how we can improve. So the intension is really to build a relationship and to get out better understanding as from your expectation.
With that, let's go to the next Page 35. And you'll see here once again, the impact that we have had from the currency rates and you'll see basically all currencies have weakened against the Swiss franc, and the highest impact from the regions with highest exposures are U.S. and Europe. And when you look at the high growth areas like Asia and Latin America, we had here comparably the lowest currency impact, absolute as well as relative.
On the next page 36, you see the Group sale up 2% in Local currency and I think that's why they told about at the end and also for the guidance. And both divisions as well as the Group have grown in the local currencies. You know, I have said, I think that gives us a good feeling and then we can achieve our targets and it also assures that we have had a pretty robust development in Q1, 2011.
On the next Page 36, you'll see the group sales up 2% in local currency and I think that's what is all about at the end, also for the guidance. And both divisions as well as the group have grown in the local currencies, as said, I think that's gives us a good feeling. And that we can achieve our targets and it also shows that we have had a pretty robust development in Q1 2011.
On the next Page 37, you'll see the currency sensitivities that we have. And very clear, I think with the strength of the Swiss francs is, is quite a significant impact for us, as you have seen. So here you get rid of the currency sensitivity. It's based on 2010 group sales. You might know that we have kind of a model on our website where you can do all kinds of sensitivity checks when it comes to currency impact on sales.
And I think that's very important for you, because it really avoids misunderstandings from your side. So whenever you do your own volume, which is fine, please check with our vol. just to make sure that your results are really the right ones. And last but not least, I think not worth to mention anymore, but I think the outlook here is what it is, and we stick to the outlook and we're happy to achieve our results in 2011.
With that, thanks a lot. And we are happy to receive your questions.
(Operator Instructions) The first question is from Mr. Michael Leacock from RBS.
Michael Leacock - RBS
I have two, if I may. Firstly, from my transcript, I know you may have been in place two weeks, but in terms of the debts as you're confirming about for 2011, what is it for some time now; whether the aim is to return to a net cash position by 2015? I just wondered what your views would be on that type of target, and whether that's an admirable target to have.
And secondly, in Diabetes Care, if I might ask a little more background perhaps in the U.S. marketplace, is the shortfall merely due to a delay in your launching newer products? So is there fundamental problems or perturbations in the demand to Diabetes Care products in a co-base and things like that?
Dan, if you want to take the first question on diabetes care, than Alan can comment on the cash position.
So on Diabetes Care, to your points on the fundamentals in the marketplace, there does continue to be a weakness in the Diabetes Care U.S. market from the overall market standpoint. We would expect the market to be slightly declining in the United States as a whole. And clearly, that comes predominantly from price pressures in the United States as well.
Our decline in the United States is certainly affected by that, but also affected our product gaps in the United States with the Maltose Independent Chemistry that we still have under review with the FDA, and we expect to launch a little bit later this year. So I would expect that when we launch the new products, that we will see the type of share gains, again that we're seeing with the very same products and the very same competitors that we have in Europe and Asia-Pacific. We're seeing, when we launch these products, we get good share gain again.
And those are some of the dynamics that I see in the North American market.
That cash (off), being a net-cash positive in 2015, what I can say here is the targets are the targets. And I think for the time being and for now I think it's a good target to go for because it tells you when it generates quite some cash. I think that's good. And so, we go into that direction. And we will see what's going to happen on that road, but we're committed to that target.
The next question is from Sachin Jain from Merrill Lynch.
Sachin Jain - Merrill Lynch
First, a quick question for Pascal on that Pegasys outlook for 2012, where you said acceleration (inaudible). I wonder if you could provide a little bit more color on that and the extent of volume uplift you expect from warehouse patients coming back on to therapy and how many patients you think are sitting on the sidelines waiting for orals and how much of this you think might be offset by shorter treatment duration?
And then two questions for Alan, again accepting in a couple of weeks in, but just any early thoughts on two issues; firstly, potential to raise the dividend payout, given you can't do a share buyback. And then secondly, you've kind of referenced during your talk, talking about attractive healthcare industry. Just early perspectives on R&D productivity, how Roche backs up within that and any new financial rigor do you think you can bring to the process?
Alan, you want to take the second one?
Well, first of all certainly after two weeks; I think I cannot say anything about the dividend policy and share buybacks and whatsoever. I think really I have to develop a proper look and the position which I don't have yet. And I think that's absolutely explainable.
I think in case of the healthcare industry, I think, well I came intentionally to Roche. That tells you something. Now, what I think about the healthcare industry; I think it's a great industry to be in. Certainly, the industry has challenges, but it was a very, very conscious decision from my side to be part of that industry. So I think that tells you something.
And the value that I can bring, well, I think everything about the role that goes back to Severin in my opinion here. He should describe that. But very clear, there are elements that I would like to contribute. Nevertheless, I have to develop them and that will take time.
So Alan, since you handed over the ball to me, first on your role. I mean, I am very pleased to have Alan on board. First of all, of course, if you like as a basis that his financial track record in an international environment. I do believe what is very important is that Alan is going to be deeply involved with the business. That's also where he spends time now to really understand what's going on, so that he is a real partner on the Corporate Executive Committee for the respective businesses.
And lastly, from my perspective, of course with Alan coming in from other lower margin industries, he might have a different look on our processes, on our way of doing things, and I think such a fresh look is always very useful.
May I just make a comment on the dividend? You know our guidance, but what I'd like to confirm again in very general terms is that we are, and we have stated that over and over again, committed to an attractive dividend policy as we go forward. And with this, perhaps Pascal, if you could take over for the Pegasys questions.
Yes, it's a great question Sachin. And the answer is, first of all dependent on, to start with, those products have to get approval. But next is, they need to get reimbursement. And in Europe, of course, it would be a more challenging process than it is in the U.S. as it always is. But if we assume everything goes well, in particular in the U.S., we expect to see a substantial ramp-up in prescription next year as I said.
We have seen actually the number the percentage of (inaudible), meaning the number of patients who go see a physician and are not treated because the physician "warehouse" the patient in anticipation of being able to treat them with oral agents that referral rate has gone up from 36% in the last quarter of 2010 to 47% today. So we see the number of patients visiting physicians remains the same but the number of referrals is rapidly increasing.
So that will of course change dramatically and rapidly as soon as all agents are launched.
I will not specifically comment on what our focus is for 2012 for Pegasys, but I can only tell you that even considering a short duration of treatment with the substantial upside in our sales forecast for 2012, at least in the U.S., again because in the U.S. we believe reimbursement of all agents would be easier and faster than in Europe. So in Europe that would influence the up-tick for Pegasys of course.
Sachin Jain - Merrill Lynch
Just a quick follow on. Do you expect penetration in Q4 on a certain percentage of patients or not?
I cannot be specific in terms of the assumptions we are using in our forecast here, because I don't have them with me; I don't remember them precisely. But we do expect the treatment duration to short-term. But we also expect a substantial ramp-up in the number of patients that will be treated with a combination of Telaprevir or Boceprevir, together with Pegasys Ribavirin.
The next question is from Mrs. Alexandra Hauber from JPMorgan.
Alexandra Hauber - JPMorgan
Any chance you can give us a rough idea what the (RVO) contribution to sales is? I do understand that you probably don't have the exact market research data, but is that in the 5% to 10% ballpark or in the 30%?
And then also on Avastin, if I look at your European decline of 8%, is this almost exclusively just a change in the label, or is there also a significant impact from the austerity as you know with some sort of price cut or element in there?
Just coming back to the diabetes question again in the U.S. market, you said you're going to launch later this year. I mean these launch plans have slipped, but I am just wondering whether you have any visibility on that and whether you can be any more precise on this? Also, it looks from IMF data there is quite a large number of new entrants in this space. So the question is whether it takes a longer time; whether you will find a market that has substantially changed?
Then I have a final question. I'm not sure whether anyone's on the call who can answer that. But I noticed in your pipeline that the anti-oxLDL has finally moved into Phase II. And when that was still a Genentech product, it was supposed to have made that step in the second quarter of 2009. So I'm just wondering what took so long, what element needed to fall into place for that Phase II decision?
If we can start with Diabetes Care, Dan, on the U.S?
Sure; so I think Alexandra, your questions were related to FDA process and new entrants in markets. I mean, on the FDA process, yes, as you know it's a very difficult thing to predict at this stage. I can say that clearly the hurdles are been raised throughout diagnostics for approval of products I think at the end of the day overall, and the diagnostics division just works to our favor in terms of the strength of the investment we make in clinical trials.
In Diabetes Care in particular, it has taken a bit longer than we expected. But I can inform you that the approval process continues to move forward for Diabetes Care, Maltose Independent Chemistry, and we are working actively with the agency to respond to their questions as they come up.
I'm sorry, I can't really give you a better timeframe than that other than that we are expecting the launch of those products in the second half of the year at this stage. And again, these are the same products that we are rolling out and have been rolling out around the world for greater than a year now, and are gaining share.
Alexandra Hauber - JPMorgan
Is the FDA hurdle on that Maltose interference chemistry, is it different? Do they ask you different data or is it working slower than the regulatory agencies everywhere else?
Yes; I mean they are asking different questions for different data in the United States in all of our products than they are in rest of world. Clearly, in diagnostics, there is a significant difference between the hurdle rates to get a product approved in the United States and outside the world for all of our products.
So the scrutiny on the clinical data, the scrutiny on the questions asked is always higher in the U.S. - and it is again, in this case. That's what we are facing. But we are working through the issues. Where we need to we are supplementing some of our clinical data during the process. But I would say, it won't be too long and we are still optimistic for approval in the second half of the year.
Alexandra Hauber - JPMorgan
And on the competition front?
On the competition front there are some new entrants into the U.S. marketplace. I mean, it's predominantly the same entrants as we have in the rest of the world. The market share is split predominantly between the three major players, as it is ex-U.S. But there are some new players coming into the U.S. marketplace that are particularly playing in the Medicaid tender business segment. I would say they are small entrants, but they are also having an impact I believe on the price levels in the United States.
And as we have new products approved in the United States in blood glucose, I believe we will be able to again compete well with those new entrants. And of course the other strategy within Diabetics Care in the United States is to link in beyond blood glucose to our devices, our patch pump device which we are expecting to launch in the early part of 2012 to have a greater and a more total offering and present greater percentage of barriers to entry than just blood glucose alone.
As to your question regarding anti-oxLDL, we cross-checked in the home, and we have to come back to you offline regarding the timelines.
Unidentified Company Representative
Alexandra, it's (Carl). We'll get back to you.
You asked two questions; one was related to Lucentis and RVO. I can give you a couple of numbers. First of all, the share of sales coming from RVO as a total, I think was your question, is a little bit below 20%. I think it is 17% to 18% of total sales.
The other piece of statistics that might be useful to you is that our share of patients treated with Lucentis who have RVO as an indication is increasing. It was below 20% in the last quarter of 2010. I think it is 22% or 23% now. So it's increasing.
As usual, our biggest competitor is Avastin. That will not surprise you, but certainly we are making good progress, even though they ask us no data, but that's life. But certainly, Lucentis is making good progress in the RVO indication. And RVO is contributing to the growth that you saw in the first quarter.
Then you had a question about Avastin. The biggest contributor to the decline in Europe is breast cancer for sure, in particular the (inaudible) test, the fact we lost (inaudible) from the label, but beyond that the kind of general is the effect on breast cancer as a result of the limit of the use in breast cancer. The second factor is price reductions in some countries, in particular in Germany and Spain and some other countries and the general austerity environment of course that is limiting the use of products. But I would say the biggest factor really is breast cancer.
Alexandra Hauber - JPMorgan
What I was really after is more like a sort of volume loss. Is that more in a 5% area?
For breast cancer, we have our estimates and I wouldn't want to quote those estimates because for the first quarter, we have a bigger time lag in Europe to get this kind of granular data. So everything we do is based on estimates.
The next question is from Keyur Parekh from Goldman Sachs.
Keyur Parekh - Goldman Sachs
I have two questions, if I may. First, Severin has also recently spoken about moving to a more flexible pricing policy for the emerging markets. Can you share with us some of your examples of what you have been able to achieve with that so far?
And secondly, from a broader portfolio perspective, when should we start seeing this being reflected in the reported sales? And then I have a separate question for Alan, but I'll just wait for you to answer that.
Pascal, if you can take the first question please.
So the answer to the first question is, we have actually started doing it quite recently. So of course it's going to take a little while to have an impact. But we certainly have very positive results in a number of countries. For instance, we have been able to sign agreements that we'd expand access in Brazil. We have also done it in some countries in Eastern Europe. We are negotiating in China with good hope.
So there are a number of countries where we have made progress. But essentially we see those offers, those programs being put in place, you see them every week. So we are putting them in place right now. So you are going to have to wait another few months before you see a substantial impact.
Having said that, I am sure you noticed that the international region in the first quarter, the sales for Herceptin and MabThera as well as Avastin are growing very nicely. So you will see a further impact of those price flexible arrangements on our sales in the course of the next few months.
Keyur Parekh - Goldman Sachs
Then to Alan, a couple of things; first, as you said about your agenda and priorities for the next year or so, can you tell us a bit about what your priorities are for the first three, six, and 12 months? And secondly, given some of the challenges that Roche has faced over the last 18 months can you just share with us some of your preliminary thoughts on improving shareholder returns?
Yes, well, first of all I think for the three, six and 12 months, first of all first three months and the first 100 days will be less a kind of a due diligence type of style. Yes, understanding the business, getting more in size, and then creating a plan. And everything else comes next.
Well, when I look at the last 18 months, I think I was an outsider at that time and I cannot really judge what has happened. But as you can see, and I can just reemphasize this once again, I made a very conscious decision to come to Roche. And for me as an outsider, it looked like a very attractive place to be.
And as I said, in the first two weeks, the fundamentals looked really like I expected, so that was not kind of a negative surprise to me; nothing.
The next question is from Mr. Mark Dainty from Citi.
Mark Dainty - Citi
Just a few quick questions; firstly, can you tell us 2010 sales of Pegasys, how much was in MENA and specifically in Egypt? And can you also give us the number for the first quarter? And in your press release, you talk about biosimilar pricing and the EPO market having a greater effect. Could you just give us some figures and some explanation as to why that's having an incremental effect this quarter?
And then, finally on Lucentis, do you have any thoughts that you can share with us about Medicare claims database analysis that's an abstract of the ASCO Conference?
Let me start with the last question because it's an easy one. You'd have to wait for the results to be presented. Where our warehouse and analysis that has been formed, we cannot comment and do not wish to comment on those results until they would be published.
I guess the only point to you and everybody else would be that when you consider accounts you are going to have to consider accounts in a context of general body of data, considering both safety and efficacy. But again, I don't want to comment specifically on that study I referred to.
As far as the EPO, there is an impact that is substantially coming from the fine on that franchise actually, which is not so much in the end impact price related but also impact seasonal factor quarter-to-quarter. In terms of the price, we had an 18% price reduction just for (memory). But we also have, as you know in Japan, we always have a lower first quarter compared to the previous quarter.
So you have the similar impact of sales in Japan and the effect of the price reduction. I would say this is the biggest effect that we see on the EPO franchise.
In terms of Pegasys, I'm actually not sure I got your question. If you don't mind repeating it. I think you were talking about Egypt. The point was, Pegasys in the Middle East and Northern Africa was certainly substantially impacted. So we have sales that are delayed. We are hoping of course to be able to recover this in the months to come, but certainly from a timing viewpoint that had an impact. And then the other big impact on Pegasys was the U.S., where we see, as I explained earlier an accelerating effect of warehousing.
But maybe this was not your question, so if was not, could you rephrase it?
Mark Dainty - Citi
I was just actually trying to understand what proportion of Pegasys sales are in the MINA region in 2010 and then trying to just kind of elucidate what the impact was for the first quarter?
The only thing we have actually communicated out is sales by region, which you I think have in the attachments to the press release, where you can see the Pegasys sales in international regions declining by 16% for the reasons I have described to you. And you see also the decline in the United States. And then you the split by region. We haven't communicated more than that.
But maybe Mark, in absolute terms, as you can see from the sales figures it's not too much a decline. So it was 180 and 170 over the last quarters. So actually in terms of real sales, not too much difference.
The next question is from Mr. Amit Roy from Nomura.
Amit Roy - Nomura
Couple of questions on Avastin in terms of market share. You have written that the European lung cancer market share is stable. And if I am correct, the last quarter it was 15%. So am I to read that's essentially stopped growing now in Europe, lung cancer of 15%, the first question.
Secondly, colon cancer has been stable now in Europe for the first few quarters, around 45%. That leads me to the part of your guidance where you are looking forward for about CHF500 million of Avastin growth outside of Europe and U.S., and in particular International.
If I take the amount of growth you had in Japan and International, annualized over the year, I get to about half of the CHF500. Could you maybe help see how you get to your CHF500 number, considering that the sequential sales is up in International and Avastin the last three quarters have been about 230'ish, they have been flat essentially. How do you get to the CHF500?
You need to still consider the rest of the year of course, and we also hope dividend in improve in ovarian cancer. So what we did for the full year is, if you take the growth and the downsize, and as you can see, the chart and what is in the presentation of Pascal, you have basically CHF150 million which we lose and we have basically CHF60 million which we gain, it's about CHF90 million. And if you look at the CHF90 million times you have accepted the difference, which we lost in the full year which is the difference to the CHF300 million. So we are really on course to deliver on the guidance overall for the year.
As for the rest of the year, you need to see that the year is still to continue on the one side, and ovarian is still an opportunity to come. So basically that is a mix of various factors.
You should consider that when the ovarian data presented at the ASCO that should have an impact in particular on the United States on the use of Avastin in ovarian cancer, even though the indication will not be there and even though we will not promote it of course, we know very well that strong data, the ASCO influence prescribing in the following months.
Amit Roy - Nomura
And that will be the second line ovarian data if I'm right.
We hope to send that at ASCO, both an update on first line and of course second line data the (Avastin) data, it's basically both.
Amit Roy - Nomura
And on my first question, could you confirm that the European lung cancer is now stable at 15%?
Yes, the market share in Europe was around 15% in lung cancer.
Amit Roy - Nomura
So it's stopped growing.
Unidentified Company Representative
As I said, and I'm totally able to (inaudible) is a slight increase. But as Pascal also has (inaudible). In Europe of course it is more difficult to get those data in. So what we can share with you at this point in time is to be just conservative so that we flag it at stable. Anecdotally, what Pascal has said before, it's slightly increasing, but this is just to put that into context.
Thanks, (Carl) for this. The 15% I was pointing is really Q4, and we have communicated in the presentation that lung cancer is stable. Based on the estimates we do, our estimate is that we actually go over in the first quarter slightly in lung cancer. But this would have to be confirmed by the panel when we run into (inaudible).
The next question is from Alex Evans from Deutsche Bank.
Alex Evans - Deutsche Bank
I don't know if I missed this at the beginning of the call, which I missed the first few minutes. But I was just wondering, could you give us just a little bit more color on pricing across your pharmaceuticals business through Q1, what the impact was, whether that's deteriorating or getting better?
I was just also curious about the (inaudible) on the EPO market in Europe. Could you give us a little bit more color on the dynamics there? How much have prices come down since biosimilars entered the market and what sort of market share do they have?
Perhaps on the first question regarding the pricing, what we have seen is an impact from the U.S. healthcare reform of 0.7% for the first quarter and for Europe of 1% on a group level. So overall, 1.7% from those two regions, and then also the effect of the price impact in Japan.
Now, going forward, we should see a leveling out on the growth impact due to the fact that some of these measures in Europe were all introduced gradually during 2010.
So I certainly would not expect a sort of a slowdown in the growth, but on the contrary, a leveling out in the second half of the year.
So on the (inaudible) the product decrease has varied quite substantially from one country to another in Europe and around the world. The highest decrease we saw was in Germany, up to 50% decrease of price by biosimilar.
We decreased our price by 30% or so. The important point with this business is to look at each quarter to quarter now, because of course if you compare it to the previous quarter in 2010, you see a substantial decrease, but you should compare it quarter to quarter. We are actually relatively stable. And so we are not losing market share.
From a volume viewpoint we have done actually relatively well. The (inaudible) has been a substantial price decrease, which doesn't seem to be accelerating actually.
The next question is from Marcel Brand from Cheuvreux.
Marcel Brand - Cheuvreux
On T-DM1, you recently reported that there is a statistically significant progression-free survival advantage. It's a small (city) but it's a very different tone from what you have been talking about at ESMO only a couple of months ago. So can you maybe explain how that turnaround was possible, and to expect crossing progression-free survival of course, can you maybe also give us an idea about mortality trends you may have seen? And also with respect to T-DM1, to your plan to develop this drug also in the adjuvant setting.
And then a very quick question on Pegasys; you said you expect a reacceleration in 2012, but if I am informed correctly, Telaprevir should probably be in the market in 2011 already. And the experience with Ribavirin has actually shown that the warehousing effect starts to act very quickly on the sales of the interferons.
Telaprevir, I said we expect an acceleration in the remaining part of the year. So throughout the end of the year, we will see an acceleration. But we have to be careful because we think these products will get approval and be launched in the August to September timeframe in the United States. And then they have to get reimbursement, and of course those are attractive products, they should get reimbursement relatively quickly. But still, you're left with kind of three months in 2011
We will see an acceleration in 2011 for sure. But what I meant was that the impact would be substantial in 2012 for Pegasys. Now, if I go back to your T-DM1 question, it's a great question because when you see the results of the study you're referring to, the (55-40) study, T-DM1 study, you will see those are very nice results with very good (NYSE:PFS) benefits. Of course, the Phase 2 study was not meant to be used for filing and registration.
You know, I cannot comment until they are presented at a Congress later this year of course, but they give us a lot of heart and a lot of excitement in terms of potential for T-DM1.
And that brings me to this question about the place for T-DM1 in the adjuvant setting. Certainly, we were looking to see what the efficacy of T-DM1 and the safety profile looked like before making the decision of the future of T-DM1 in the adjuvant setting. And this is something we're going to be looking at in the next few weeks.
Also, we have to consider the place of Pertuzumab in that setting. But certainly, a very exciting time for us in the HER2 franchise with Pertuzumab and T-DM1.
Next question is from Gavin Macgregor from Credit Suisse.
Gavin Macgregor - Credit Suisse
I have just a few quick questions on products. Firstly, could you just expand why (inaudible) in particular in the U.S. and tell me why that might be? Secondly, you talk in the press release of price pressure. I wonder if you can expand on that, tell us which markets you are seeing that and what's driving it.
And then lastly, if you are able to give us a split of the Rituxan revenues by oncology and RA.
Xeloda, the price pressure we are referring to essentially are the price reductions we have seen in Europe, which were over North and hopefully we don't have to experience the same kind of evolution in the future. But if you look at the sales, despite this price reductions, this says our activity is stable quarter to quarter. So the trend is actually not bad.
And we are also hoping for some good news with Xeloda and Avastin in breast cancer in the weeks to come. So that could also help us there. So I would say despite these price cuts, we believe they are still doing well and have some goals ahead of itself there.
Bonviva, there is essentially competitive pressure; it's essentially pressure on reimbursement in the United States because generally by first finance in the marketplace and that is impacting us. But again, if you look at quarter to quarter, the decline is not enormous. Having said that, we have to accept, Bonviva is in the last leg of its last cycle. We will lose the patent protection early next year. So really, we are at the end of life, a tough situation for this product.
And finally, your last question was Rituxan RA versus oncology. I think RA is about 1 billion in total sales in (inaudible) oncology.
Gavin Macgregor - Credit Suisse
CHF1 billion in oncology, did you say?
Yes, CHF1 billion is remitted under (Early) Phase Oncology.
Gavin Macgregor - Credit Suisse
So just going back to Rituxan and Xeloda, I thought that the patent was in 2014?
I was talking here about the patent of Bonviva.
Gavin Macgregor - Credit Suisse
Commenting on Bonviva, I just said was weak in the United States. We're saying the weakness is well achieved, because again the sales line is not dramatically done. But certainly the impact here is managed care and the generic market in which we operate. And I was also saying, Bonviva anyway is at the end of its last cycle. We will lose patent protection next year.
The next question is from the Steve Scala from Cowen and Company.
Steve Scala - Cowen and Company
I have two questions; first on dalcetrapib's dal-PLAQUE and dal-VESSEL studies, what can you share with us regarding the efficacy seen in these trails? And if you cannot share any details on efficacy, can you tell us whether you are very pleased with the efficacy results?
And secondly, regarding the Avastin hearings in late June and the new analysis to be presented by Roche, would you say that it will be a substantially more convincing argument than you've presented to the FDA previously, or would you say they are more smaller incremental insights?
Okay, that's a toughie, but I just want to remind you, those studies of course will include efficacy data, but they were powered for safety. So there were interim studies, if you will, that were designed at a time when everybody was worried about dalcetrapib and the whole class - you have to remember this. And we established those studies essentially to give us some comfort at some point in time that as we were running the dotcoms to give us some comfort that the agent was safe.
And from that viewpoint, the data we are re-insuring, and we are very confident that we have a product that will make a difference for patients. But of course, we have to wait till their results come out.
From an efficacy viewpoint, you'll have to wait for the results and look at them yourself. I would say they are interesting, but again the studies were not powered for efficacy. So you just have to keep this in mind.
As far Avastin and the appeal, essentially we appeal because we believe we have a strong argument. The European authorities have reconfirmed as you know Avastin in breast cancer - almost every authority around the world. And I want to quote the (authorities) here, which is one of the most demanding regulator in the world, has also reconfirmed the value of Avastin in breast cancer in combination with paclitaxel. Every country almost, Canada hasn't, but every country I know of has actually reconfirmed Avastin's breast cancer.
So we see this as a drama almost, I would argue, for breast cancer women in the United States if they can no longer access the use of Avastin as an option.
So for this reason and the fact that we believe we have a reasonable argument, we have decided to appeal. Now whether we conform with the FDA or not remains to be seen of course.
The next question is from (inaudible).
It's actually (Richard Parks from Deutsche Bank). Just got three quick questions; firstly, you mentioned competitive pressures on Tarceva from generics. Wondered if you could elaborate on that comment.
And then secondly, and you might have covered this earlier on, but I wondered if you'd had any discussions with CMS on the likely impact of the CAT study on reimbursement for Avastin and Lucentis and what changes could happen there and what the scenarios might be.
And then finally, on your HCV development portfolio, it looks like you're developing the polymerase inhibitor and the protease inhibitor in various combinations. And I just wonder why that strategy? It looks like you are going with Ritonavir.
So the first question, Tarciva and paclitaxel generic, now I would say we haven't seen an impact of paclitaxel generic on the use of Tarciva necessarily. And in fact we are hoping that the (inaudible) would certainly drive Tarciva sales.
As far as (inaudible) and CMS, it is very clear from our research that physician's behavior is unlikely to change on the basis of the CAT results unless those were positive or negative. But if they are what everybody expects them to be, because if you remember, the study is a small study and is not powered to show a difference. It's very likely to show non-inferiority. This study shows these physicians are unlikely to change their behavior, and the sales will actually be influenced by the payers.
So clearly, the behavior of payers and (inaudible) of CMS and the various (inaudible) would have a strong influence. I cannot comment on what we see that behavior will be or the decisions would be at this point because quite frankly, we have to see the totality of the data. We have to see the CAT results to start with, and then we have to see the totality of the data from an efficacy and safety viewpoint comparing Lucentis and Avastin. When we have the totality, then we can get a better sense for what CMS and the regional carriers will decide. So it's really hard to comment at this point in time.
And on the HCV front, it is still a little bit unclear as to what regimen in the long run we'd actually win. Some patients would probably need (quad) CRP. So, Pegasys, in combination with Ribavirin and probably a couple of other oral agents; we think all agents with that interferon also will have a place. Actually I think now it is clearly demonstrated that Pegasys-free regimens will have a place. And so we are, like everybody else in the industry, experimenting different combinations, different regimens to see which ones will suit which patient groups.
So that's why seeing different strategies being pursued by us, but also by others in terms of various combinations. Having said that, the important point is, we believe that polymerase inhibitors would have an important role to play. We think (inaudible) would possibly be a cornerstone of combination with all the oral agents because of its effect on limiting the development or resistance that you see with potent inhibitors.
(Operator Instructions) The next question is from Gbola Amusa from UBS.
Gbola Amusa - UBS
Question for Daniel, perhaps. We heard that you're on track for your guidance for diagnostics growth overall. Would you be able to comment qualitatively on the five segments and how they are doing in particular, how applied science is doing ex-H1N1?
And then a second question is just a question on global pricing in the Pharma division. I have heard that in 2009 the market that can afford your drugs in China grew 30% to 40%. Given disproportionate wealth creation at the top of the income pyramid in a lot of the international markets, the decision to lower prices, if it does happen, either I'd imagine comes because of elasticity of demand curve suggesting me to make more money or because there is increased competition coming.
Would you be able to talk to which of those two factors matters more, again, given that there is a lot of wealth creation at the top?
If Pascal can take the first question on the pricing in China, and then Dan on the growth prospects for the business areas in diagnostics.
Two comments here. I mean, our strategy to come up with flexible pricing arrangements around the world is not influenced by competitive prices; it is influenced by the opportunity we see to increase access substantially in countries where economies are now developing rapidly and enabling either patients or payers to insurers and public payers to pay for outright.
For a long time we were catering only for the top of the pyramid in those countries because nobody else could pay anything almost. But now you see the emergence of a middle class that can pay maybe not the prices that we can sustain in Europe and in the U.S, but certainly more reasonable prices. So that's why we actually are introducing those flexible arrangements.
And every country has a different scenario; it's a different environment. In some countries we are negotiating with public payers, flexible arrangements against increased volume, increased taxes for patients. In other countries where patients pay out of their own pocket, we are relying on elasticity curves, and we are hopeful of volume increase as a result of the price reduction.
So every country has a separate set of circumstances. So that is really the strategy we are pursuing. Now, we also have experienced in China in particular, price reductions that the industry as a whole is experiencing. Many products have had price reductions of 20% plus in China this year. In our case, the products that have been impacted are products that are not differentiated. So, products like (inaudible) have had substantial price reductions, which we expected. In fact, they are substantial, and many of the so-called branded generics have experienced price reductions in China, which we believe confirms the fact that our strategy of focusing on innovation and differences of products is the only sustainable strategy in the long run.
Gbola Amusa - UBS
And just to follow up, because one example is that (inaudible) sales into India was Ticurb. And they'd reduced their price and saw sales increase dramatically. Is that market still a market that's, I shouldn't say it, but that may not be a significant one for you in the future? Or do you see an opportunity there as well?
I don't like so much to comment on our competitors to be honest. But the Ticurb sales response, I'm not sure that I have seen it, at least not in very substantial terms. So I am aware of price reductions that have been put in place. But as far as Ticurb, I'm not sure it has led to substantial price increases, but it doesn't necessarily reflect on the ability to drive volumes for price adjustments, it may simply reflect on Ticurb itself as a product and the medical value that it brings patients.
But certainly, we are pursuing this. We are, in a large of countries, pursuing as I said, flexible pricing arrangements which we are starting to put in place now. So you will see the impact hopefully over the next few months.
I'd just like to remind everybody, again. The first quarter, the Herceptin (inaudible) grew by 18%, for 125% for the other one. Herceptin grew 25% in the first quarter in the international region. So an enormous rise or increase. So there is already an impact there, but I'm hoping that certainly we'll see a continuous impact of this price-flexible arrangement.
Thank you, Pascal. Before we close the session, Dan, could you just comment on diagnostics again?
So to talk through just briefly the key businesses, Professional Diagnostics growing at 10% and the immunoassay portion of that growing at 15%, that's significantly above the market growth rate in that area. I think it speaks to the roll-out of our strategy of testing, efficiency and medical value. And again, we have many offerings that we will continue to launch this year.
So we feel confident that we can continue to gain share in that business. And the United States portion of that business, where we continue to want to improve our share position grew close to that same figure, 9% to 10%. So I believe that we have good, robust growth in that segment.
Tissue Diagnostics, as I said before, growing two times the global market growth rate at 18%. Diabetes Care, broadly in line with the market on a global basis at 1%. We expect the market figures to come in about 1% to 2% in that area. And as I've stated before, where we've launched the new products, we have seen acceleration of growth and share gains. So we are trying to make that happen also in the United States market later this year.
Molecular Diagnostics, we are a clear market leader there at 30%. The market is growing higher single digits, and that's predominantly due to HPV, which we will be launching a differentiated product in the marketplace in the second half of this year with a product that provides significantly clinically differentiated results with HPV-16 and HPV-18. So we expect to begin playing in that CHF300 million market in the United States with the launch of that product and expect to accelerate our growth of molecular diagnostics towards the end of this year and into next year.
And finally on Applied Science, again removing the H1N1 effect, we do have growth in the underlying business, not just driven by the biotech sales but also, we launched a new product into the sequencing business in the first quarter of this year, the HLA Primer Sets and we continue to have uptake of our GS Junior product for the long read for customers out there in the sequencing environment.
And likewise in our array business, we launched a new CHG array which allows us to continue to play in that marketplace.
So I think as we head into the half year and into the second half of this year, we'll see this H1N1 effect going out and the underlying growth of Applied Science continues to come through.
Gbola Amusa - UBS
Are you able to say what the number is ex-H1N1?
We haven't disclosed that figure right now, but I believe at the half year you'll see that impact coming out. But we haven't disclosed the details of that.
With this, I would like to conclude our conference call. Thank you very much for your interest in us. Thank you.
Ladies and gentlemen the conference is now over. Thank you for choosing the conference call facility, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
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