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Roche Hldg Ltd Spons (OTCQX:RHHBY)

April 12, 2012 10:00 am ET

Executives

Severin Schwan - Chief Executive officer

Pascal Soriot - Head of Pharma Medicines and Chief Operating Officer of Pharmaceuticals

Daniel O'Day - Chief Executive Officer of Roche Molecular Diagnostics and President of Roche Molecular Diagnostics

Alan Hippe - Chief Financial and IT Officer

Analysts

Alexandra Hauber - JP Morgan Chase & Co, Research Division

Tim Anderson - Sanford C. Bernstein & Co., LLC., Research Division

Luisa Hector - Crédit Suisse AG, Research Division

Andrew S. Baum - Citigroup Inc, Research Division

Steve Scala - Cowen and Company, LLC, Research Division

Michael Leuchten - Barclays Capital, Research Division

Marcel Brand - CA Cheuvreux, Research Division

Keyur Parekh - Goldman Sachs Group Inc., Research Division

Philippe Lanone - Natixis S.A., Research Division

Jeffrey Holford - Jefferies & Company, Inc., Research Division

Operator

Ladies and gentlemen, good morning or good afternoon. Welcome to the Roche's Fourth Quarter 2012 Conference Call. I am Myra, the conference call operator. [Operator Instructions] At this time, it's my pleasure to hand over to Dr. Severin Schwan, the Chief Executive Officer. Please go ahead, sir.

Severin Schwan

Thank you. Good afternoon, everybody. Thank you, all, for joining us on our call on the Q1 sales results. I am pleased to report that we are on track to achieve our full year targets. As you can see on Slide 6, Pharma up 2%; diagnostics up 4%. If you would exclude Tamiflu, actually Pharma and the Group sales had increased by 3 percentage points.

Turning to page 7, Q1 was in particularly strong in terms of regulatory milestones and the progress we made in our late-stage pipeline. In fact, 5 out of 5 late-stage clinical trials delivered positive results. You can see on Page 8 that we have now launches and filings for 4 new molecular entities this year. As you know, we have launched Zelboraf in Europe, Erivedge now in the U.S. We got priority review status by the FDA for pertuzumab, and we are very excited about T-DM1 to redefine the standard to breast cancer treatment, and we are all looking forward to present you the full data at the upcoming ASCO event. We also had a variety of important line expansions in terms of subcu formulations for MabThera and Herceptin. As you know, this is important in our defense as biosimilars will come to the market. Avastin expect to grow fast -- very much also driven also in the future by new indications, such as ovarian in Europe or TML. And let me also highlight the Lucentis PRN filing, which is important given the competitive landscape in this space.

Turning to Slide 9, let me just briefly comment on the status of the Illumina transactions. Based on the public information available to us, we believe that our offer price of USD $51 per share is a full and fair offer and extremely attractive to Illumina's shareholders. As we have said earlier, our preference remains a negotiated transaction, and we would, in fact, consider any additional information, which shows value we can't see at this point. Unfortunately, however, Illumina has not engaged in any discussions with us, and we firmly believe that our present offer is more than adequate to serve as a basis to begin a negotiation with Illumina. Again, let me be very clear here. There is no reason for us whatsoever to increase our offer unless we get into negotiations. And so far, this is not the case.

To conclude on Slide 10, as I said earlier, we are on track for our full year targets, Group and Pharma with their low- to mid-single digit growth, Diagnostics above the market and a high-single digit growth on our core earnings per share for the full year. Thank you very much. And with this, I'll turn over to Pascal for the Pharmaceuticals Division.

Pascal Soriot

Thank you, Severin. Good morning, good afternoon, everybody. I will start on Slide 12. And as you can see here, and Severin told us a minute ago, this Pharmaceutical Division grew by 2% on a constant currency basis for the first quarter. Importantly, if you exclude Tamiflu, we grew by 3%, so very much on track with our guidance for the year.

If you move on to Slide 13, which gives you a view of our growth drivers by product, as you can see here, Pegasys in the first quarter experienced tremendous growth in particular in the United States. And this is, of course, due to the launch of the couple of PIs by Merck and Vertex in the combination therapy that has been taking place in the United States. I want to right now warn you that certainly, this is a growth that will not keep going up and up in the quarters that follow. We don't expect further increase beyond what we’ve seen now of this combination regimens. But you also see our dollar products like MabThera, Herceptin experience very nice growth, as well as Actemra. And as expected, our sales were negatively impacted by generics of CellCept, Boniva and the decline of Tamiflu.

On Page 14, you'll see the growth rate for the quarter by region. Essentially, you can see a very strong growth in the United States. International region, while impacted by the timing of tenders in the CEMAI region, in particular in Russia, those tenders are delayed to quarter 2 and quarter 3, but also impacted by one-off effect in China in the first quarter. In the first quarter of 2011, we had a large Herceptin order that we imported into China to supply our distributor there. And of course, that created a very strong base in Q1 2011 and China in just the first quarter for the growth rate of 15% due to this base effect.

On Page 15, gives you a view of the United States and the main products that drove our growth rate there, as I said, Pegasys, but also note, very good growth of Rituxan, Herceptin, Xeloda and the continuous success of the Zelboraf launch. I will come back to this in a few minutes. Overall, a 6% growth rate in the United States for the first quarter, so very pleasing results. I'd just like also to attract your attention to the Actemra growth rate, certainly very pleasing results for Actemra in Q1 in the U.S.

Page 16 gives you a sense for the moving parts in the Western European region. As I said a minute ago, we are, of course, negatively impacted by the generic -- the patent expiry of Bonviva, CellCept and the EPO market. There's also an impact of the austerity measures that started last year, and we see the tail end of this in the first quarter of this year. We expect that from now on, this should stabilize a bit more and, of course, the decline of volatile products. On the other hand, we have good growth for our new products, our strategic products, Actemra, Herceptin, MabThera, and we launched Zelboraf in the first quarter with so far pretty good results. Actemra in Europe grew by 41% in the first quarter, so a very strong result there.

In terms of the international region on Page 17, you can see here that despite the strong base in Q1 2011, we experienced overall in the E7 markets, those are the key emerging markets that we focus on, we experienced a growth rate of about 5%. I'd like to attract your attention to a couple of points here. One is, as you can see here on this graph, Q2 2011 was much lower than Q1. So that really shows you right there that we had a strong base in Q1. In particular, in China you can see, Q2 in China was certainly much lower than Q1. Now the second thing I'd like to attract your attention to is China, where we experienced a reported growth rate of 15% for the first quarter, but in-market sales are much higher than this, and I will come to this in a second. And finally, very good result in Brazil, where we grew for 19% -- by 19% for the first quarter.

So as far as China, if you look at Slide 18, you can see here on this graph the accelerated growth rate we've been experiencing the last few quarters in relation to the market. In quarter 4 of last year, we grew by almost twice the market growth rate, which we -- the market is estimated to grow by 16%, 17%. You can see, we are at about 30%. We don't have, of course, IMS data for the first quarter, but we track what we call our in-market sales, our in-field sales which are x-distributor sales, and our estimate is that we will still be close to about 30% growth rate in the first quarter of 2012, which is twice the recorded growth rate of 15%, which as I told you a minute ago, was impacted by this one-off order to -- by our distributor last year. So certainly, very strong results, a very strong development in China, which are the -- which is a further proof that our innovation-based strategy actually can work even in the emerging market and our differentiated products are able to penetrate the market very successfully there.

On Slide 19, the traditional view of the oncology franchise. You see here a continued good growth rate across the various regions, 7% for MabThera/Rituxan, 7% for Herceptin. Herceptin is still driven by the emerging market and the gastric cancer indication and MabThera by NHL and the continued uptake in CLL. You see here a 1% growth rate in Avastin impacted by Japan, but I have to say, we are stabilizing in the other regions in Europe and in the United States. In fact, in Europe, we have volume growth in the first quarter, but still impacted by the tail end of a price reduction that was part of the austerity measures of last year. But we have volume growth of about 4% in the first quarter in Europe. And in the U.S., we have now stabilized, and we certainly expect the Avastin grow in the next few quarters. You see here Zelboraf is still quite small but very good results so far in the United States and qualitatively, very good also feedback in Europe.

Slide 20 shows you that Lucentis was flat in the first quarter relative to quarter 1 2011. Of course, Lucentis is impacted by the launch of Eylea, but we believe we've maintained a good position for Lucentis. We still have 36% in new patients versus 12% for Eylea. Now, of course, we expect Eylea to make further inroads in our patient share in AMD but certainly so far, they only have 12%. We have a stable share in RVO, and of course, we are preparing to launch the DME indication. Very importantly, I'd like to attract your attention to a very important filing for Lucentis, the so-called PRN filing, which will enable us, if accepted by the FDA, will enable us to promote the PRN use of Lucentis, which is certainly a very critical plank of our differentiation versus Eylea.

Slide 21 reports back on Actemra. You can see here 46% growth rate in the first quarter. We have a 19% share in the bio IR segment in Europe. And that is continuously growing. And we're making very good progress in the monotherapy segment. We started promoting Actemra in monotherapy late last year, in the second half of last year, and we've made very nice progress in that segment. And of course, this will be further supported by the ADACTA data that will be presented at EULAR in June. And as you know, those -- this ADACTA study was very positive. Also, I'd like to attract your attention to our filing in the United States in December for DMARD IR, which is also an important development. And we expect to submit the subcu formulation by the end of this year.

On Slide 22, you can see here, as I said a bit earlier, that Zelboraf is doing very well. We now have in the United States about 80% of patients are tested for BRAF status. And of those that are BRAF mutated, we have 79% of them treated with Zelboraf in first line and about 70% in second line. So certainly a very strong result in the U.S. And again, as I said earlier, qualitatively, good feedback in Europe. It's a bit early to comment on specific numbers in Europe. We also got approval in a variety of countries: in Switzerland, Brazil, New Zealand, Canada, as you can see here. So very nice development for Zelboraf across the various regions. We also launched Erivedge, and first quarter sales were 5 million. We are, of course, in the early phase of launch. The initial uptake is very encouraging, and we have very good coverage. And as I said -- as you can see here, about 175 patients estimated treated. Importantly, I'd like to mention that we have an early access program outside the United States, and that has met with very high demand, which shows that Erivedge will actually address an unmet need around the world. And so this is very encouraging for us as we wait for news from the other regions outside the U.S. from their regulatory authorities.

Page 24 shows you that our strategy to defend our HER2 franchise and more than defend it, to actually grow it over the next few years because we do believe we can grow the HER2 franchise. Our strategy of innovation actually is really working, and we have very good news for pertuzumab, as you know, of course, and we filed in United States. But importantly, the EMILIA study for T-DM1 was very encouraging for the use of T-DM1 in first line, but also the further development of T-DM1 over the next few years. So as you can see here, of course, initially, T-DM1 will be positioned in the second line, but over time, we believe that the treatment -- the standard regimen will become in the first line, T-DM1 plus pertuzumab.

In the adjuvant setting, we expect in the midterm to see Herceptin subcu and pertuzumab to become the standard treatment reference. And of course in the longer term, certainly, T-DM1 in combination with pertuzumab, should play a big role in the adjuvant breast cancer setting, but we're talking really more long-term here.

Slide 25 gives you a sense of the critical data that -- clinical data that we will be presenting over the next few quarters. First of all, EASL, which is happening right now, and is an important congress for hepatitis C and our franchise, of course. At the ASCO, we will be presenting the T-DM1 results, but also the TML study in colorectal cancer for multiple-line for Avastin which we believe is a very pivotal study for the future of Avastin. And finally, as I said a minute ago, the ADACTA study at the EULAR in June.

And finally, and to close on page 26, you see here that we have a very rich news flow in 2012. Importantly, very positively here, you see we have already achieved a large number of our milestones for 2012, so a very strong start of the year. And we have again lots and lots of clinical news that we will be communicating throughout this year. And finally, we've noted here for 2013 the dalcetrapib data. We expect at this point that certainly, we will have -- the study will run its course until the end of the study, and we will be communicating with you the final results in 2013.

On that, I will hand over to Dan. Thank you.

Daniel O'Day

So good morning, good afternoon, everybody, from my side. I'd like to start up on Slide 28, if I can. First quarter for Diagnostics Division at Roche showed strong growth, particularly strong growth in Professional Diagnostics, Molecular Diagnostics and Tissue Diagnostics, and somewhat offset by a challenged market environment in Diabetes Care, but we expect to improve as the year progresses, which I'll get into a bit more.

If you turn to Slide 29, you can see the regional growth and very strong growth in all the regions. We think leading growth, with the exception of EMEA, which was also overly affected by the Diabetes Care performance in the first quarter. If you were to exclude Diabetes Care from EMEA, we grew at 4% and, in fact, in North America at 10%, so some strong growth from the underlying business overall in China and Asia Pacific, strong growth with Asia Pacific growing at 13%, China overall at a 27% growth in the first quarter for Diagnostics.

If you turn to Slide 30, we can look a little bit more at each one of the businesses. Taking first our largest business, Professional Diagnostics with a 9% growth. The immunoassay business there at a 14% growth reflects, I think, the strength of our position there. Also, we are really back to a full supply now situation with our Hitachi instruments, which we're able to meet the demand after the earthquake in Japan last year.

Diabetes Care clearly had a challenging market environment in the first quarter. The negative sale development really were 2 major reasons. One is that the -- there were some changes in reimbursement in the blood glucose area for several key European markets and in particular, there was a 2-month reimbursement exclusion, not just for our blood glucose monitoring products but for the major glucose -- blood glucose manufacturers in Poland, which has now come back into reimbursement now for the second quarter. The second major reason is the postponed product launches, as I've been speaking about in the United States. We did receive the approval for Accu-Chek Nano in the first quarter, and we will begin rolling that out now in the second quarter.

So as we look forward with Diabetes Care, we expect the new product launches in the United States, as well as continued rollout of our next-generation Accu-Chek Mobile product in several European countries to improve the picture in Diabetes Care as we continue through the second half of this year.

In Molecular Diagnostics, very strong growth at 8%, driven by blood screening and the rollout of some of our new products in that area as well. Applied Science continues to be challenged with the overall pressure on the research funding environment globally, and that's reflected also in our figures as well. And then Tissue Diagnostics with an 18% growth, the advanced staining portion growing at 20%, continued strong movement in our tissue diagnostics business globally.

Turning to Slide 31. Just to give you a couple of highlights from the quarter, we received approval in the United States for our CT/NG test. This is on our cobas 4800 system, which is the same system that runs our HPV assay and also our oncology portfolio. So it's another example of menu expansion. And particularly for the labs that are small and medium-sized labs that don't have fully dedicated instruments to a particular screening assay, this is a significant step forward that we're rolling out now in the United States and should help us in our competitiveness also for our HPV product in the United States.

In Slide 32, I just wanted to emphasize a couple of points, and that is in the diagnostics market, the importance of strong clinical data and what that does to drive a market over time. And what we saw is 3 key influential guideline organizations in the United States recommending HPV testing alongside cytology at this stage and in particular, an emphasis on the importance of genotypes 16 and 18. And again, these guidelines were highly influenced by our ATHENA trial, which again is the largest clinical trial ever done in diagnostics to date.

But it does demonstrate a couple of things: number one, that you have to have strong clinical medical data to influence market environments out there in diagnostics; and number two, that it takes time to change medical practice. So we'll continue to see, I think, improved uptake of HPV, not just in the United States, but around the world as healthcare systems evaluate the significance of this data.

On Slide 33, I'm picking up on a disease area approach to differentiating our business. I spoke in the last quarter about the complementary nature of products from many of our businesses in the area of oncology. I just wanted to point out the area of hepatitis here. Obviously, HCV is an area with renewed focus also in the pharma sector in terms of patient treatments. And Roche is a very strong player on the diagnostics side in HCV. We have more than 11 tests. Three new tests were launched in the first quarter, one on our immunology platform, an Elecsys Anti-HCV assay and then 2 new improved tests in Molecular Diagnostics. And I think what this shows is the strength of having a full menu and also the benefit of Roche's ability to have multiple technologies to approach a particular disease area for our customer base.

On Slide 34, just wanted to emphasize our progress on companion diagnostics, both internally and externally at Roche. We continue to drive our companion diagnostics PHC strategy at Roche with 2011 having more than 200 collaborations now just within the Roche group that drive our late-stage portfolio in pharma, as you've heard from Pascal already. And those same advantages that we enjoy internally are also recognized by external companies. We don't have all the same benefits that we do internally in terms of being able to -- freedom to operate and work, but you can see now that we have more than 30 companies that we work with externally, 4 new partnerships were assigned alone in the first quarter of this year. And this strengthens our overall offering to our customer base by having unique, high medical-value menu on our large installed base out there in the environment.

So on 35, just to wrap up, we're on target with our key launches for the year, and we reiterate our guidance of achieving sales growth above the market growth rate for the year.

With that, I'll turn it over to Alan to cover the financials. Thank you.

Alan Hippe

Yes, thanks, Dan. Yes, well a couple of comments here on the financials and when you go to 37, to Slide 37, you'll see the highlights here. I think on the sales side, just to mention it, the negative currency impact of minus 3 percentage points. I'll come back to that later on and what the outlook could be for the year at least when the currency rates remain stable. And the other point is the debt repayments that we have done. We have repaid to date CHF 2.2 billion notes at maturity, and we have done a tender offer and a cancellation of EUR 782 million notes due March 2013. And while the charge we have taken for that was 45 million but the interest savings, overall, it was 41 million in 2012 and 9 million in 2013 justify this transaction, which certainly was also driven by our maturity structure, which I will emphasize on the next page.

When you look at the debt refinancing, you'll see we have been out in the Swiss franc market and we placed 3 tranches. And this was majorly driven certainly by the dividend because we have to pay the dividend in Swiss franc, as you all know, and you benefited from that. And therefore, we saw that tapping the market makes a lot of sense. And you also see the terms and conditions that we have achieved, which are completely outstanding and even for Roche standard and never seen so far.

The additional interest we are having for the Swiss franc tranche of 1.5 billion is 30 million in 2012, which I think speaks for itself here for a tranche of 1.5 billion. We also tapped the euro market, and as said, I think we'll -- I will come to the maturity structure on the next slide. We had good reason to go into the market. We got EUR 1 billion with a 2% coupon and 18 basis points of margin also outstanding. And that was pretty much an opportunistic move because, as I've said, the maturity structure was encouraging us to be proactive. The additional interest in 2012 for this tranche is CHF 19 million. So overall, CHF 32 million additional interest carry in 2012 coming from these actions. And as I've said, interest savings of CHF 41 million coming from the tender offer.

On the next page on 38, you'll see what I'm talking about because you see a relatively high buy in 2013 coming from the euro financing. And what we have done is, in fact, we mitigated the effect that we are going to face in 2013. The market offered us very favorable terms and conditions, and we have been proactive. But still, as you can see, there is a lot to do. I think it is important to mention that, in fact, we have repaid pretty much half of the debt which has been caused by the Genentech transaction already.

When you go to the next page, 39, you'll see really the favorable loan conditions that we are facing. And I think just to focus just a little bit, this chart shows, in fact, what we have achieved with our multi-currency facility. We renewed that facility in November 2011. The amount is EUR 3.9 billion. The old facility would have expired in 2012, so we had good reason, yes, to go into the market. The duration is 5 years plus 2 one-year extensions options that we're having. The margin is 22.5 basis points, which is outstanding as you can take from the chart. It's, in fact, a peer comparison, and commitment fee is 30% of the margin, and we don't have a financial covenant in that facility, which speaks for itself.

On Page 40, you will see the currency impact that I've mentioned already. And when you look really at the currency impact, there is still an impact to expect at half year. Yet, if all currency rates remain stable from now on or from end of March on, and you see at half year still an impact on sales of minus 2%, minus 3% on the core operating profit and minus 4% on core EPS. But what you also see is the full year that, in fact, these effects pretty much go away and therefore, we really find some good reason to look into the actuals.

On Page 41, I don't want to emphasize once again the outlook. I think we're well on track and can deliver what we have committed to the market. And so far, so good. Thanks a lot for your attention.

Severin Schwan

Thank you, Alan. With this, I suggest that we go right into your questions. Can we have the first question, please?

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from Ms. Alexandra Hauber from JPMorgan.

Alexandra Hauber - JP Morgan Chase & Co, Research Division

First, a couple of question on Diagnostics. Diabetes Care was weak across the board and sort of the explanations get changed every -- change every quarter. Firstly, can you give us a rough idea how big Poland is within your EMEA sales contribution? And secondly, if I look at the U.S., quarterly progression, the fourth quarter was very good because you had some product launches in September, but now it's been very weak again. So it almost looks like you had pipeline filling in the fourth quarter that's now destocking. So is there any reason we should be concerned that these new products that were launched in September in the U.S. are not living up to expectations? Also, on Applied Science, the key source of weakness was actually EMEA, and I thought that the issue with constraints in the research funding was mostly an issue in the U.S. So is that mostly a competitive situation here? Then moving on to Pharma, actually, to HCV, your slides have been showing and still show for some time 2014 filings for both mericitabine and danoprevir, but you still haven't given us any idea about what exactly you're going to do in Phase III. So what is the crucial piece of missing information that you're waiting for to make your decision? Is it the Matterhorn [ph] data? Is it competitor data? And how does setrobuvir fit into the whole picture? And also on Pegasys, if we assume for a second that 7977 didn't exist, do you think that the Abbott data we have seen from the EASL abstract alone may trigger any warehousing, is there any risk of that just from that Abbott data?

Daniel O'Day

Alexandra, just starting on Diabetes Care. Again, I think they're -- relative to the reimbursement changes in Europe, there is really 2 factors we're seeing at play here. One is in a couple of key markets, there was as of really the third quarter, fourth quarter last year, a change in several key European markets, France and Germany on type 2 diabetes reimbursement. And I think that came to a more full effect in the first quarter, even though the change occurred, it came to a more full effect in terms of inventories in the first quarter. And I think that's why we're seeing a bigger impact now in the first quarter. Poland is tens of millions of Swiss francs impact. So it is material, and it was not just for us, it was for the -- all the major players. They literally stopped reimbursement of all products January 1 and have just now instituted, albeit at lower prices, reimbursement in late March. So that's, I think, affecting predominantly our European sales where, by the way, Roche is overweight in comparison to our competitors because of our overall presence and strength in Europe. In the United States, we have a situation where we got the Accu-Chek Nano approval in January, but because of the time it takes to get a product into the channel and into the trade and into the pharmacy, we really won't see an impact of that until this second quarter. So what you saw, I think, between the fourth quarter last year and the first quarter this year is just continued competitiveness erosion without having being able to really launch the new products fully into the marketplace. So that's on the Diabetes Care side. Happy to go back and answer anything else. On Applied Science, as well, clearly, we're affected both by research funding and I would say competitiveness in the environment, particularly in our genomics microarray business, where the long-read technology is clearly not the highest growth area of sequencing today. So we're seeing both an offset from research funding and also overall competitiveness of the long-read technology in the environment.

Pascal Soriot

Alexandra, thank you for those 2 questions. The first one, with regards to the hep C franchise, essentially, we're still waiting for -- to understand how the overall competitive landscape will evolve. And I think, really, we'll have to be a little bit patient here and wait until the AASLD because there's more data coming out of the AASLD later this year. And also looking at some of our internal work, and we'll have a better view of what we do by the end of this year. But you'll have to bear with us. I know you'd like to get a better view of our plans as of today, but we need to be patient and wait until we can see more data and the dust settles, if I may say so, because this is a fast-changing environment, and the winners of today may not be the winners of tomorrow. So we really need to get more data. The second question is, we haven't seen any warehousing as of today. Now the Abbott study looks promising, but first of all, it's a Phase II study and secondly, I'd like to see the full abstract -- the full presentation at EASL. We haven't seen, for instance, much data on the safety profile of that combination. But so far, no warehousing. Of course, if there are more and more old regimens that demonstrate very good efficacy and good tolerability because we focus on efficacy, we shall not lose track of the tolerability of this regimens and the side effects profile. But if there's more of this coming including at AASLD and at some point, we may see some warehousing develop, but no sign of this at this point.

Alexandra Hauber - JP Morgan Chase & Co, Research Division

Just a follow-up to that, the uncertainty in terms of what prevents you from moving ahead already, that's more like what's happening on the competitive front than your own data, is that correct?

Pascal Soriot

Yes. We need to understand on the competitive front, what really -- what are the regimens that are emerging. We also need to understand, get to a clear view internally as to what potentially could be the winning combination. We have several assets to look at, of course, danoprevir, mericitabine, setrobuvir. So we need more time to work through all of this. And there are 2 parts. One is Pegasys-based regimens, of course. That is a little bit clearer and then the non-interferon-based regimens. For that strategy, we need more time.

Operator

The next question is from Mr. Tim Anderson from Sanford Bernstein.

Tim Anderson - Sanford C. Bernstein & Co., LLC., Research Division

On Zelboraf, if I look at the U.S. numbers and compare those with ipilimumab, the ramp is quite a bit slower. And I know your product is only effective in half of the patient population, but still, that ramp-up seems light given the user dosing and better safety. And I'm wondering what you think happens from here. And even with ipilimumab, I'm surprised that the uptake in the U.S. has flattened out. And it makes me wonder really what the treatment population will be in melanoma. So if you could address that, that would be helpful. On emerging markets, can you bracket the sales growth you expect to achieve over the next few years on both the pharma side and the diagnostic side? Do you think that would be single-digit sales growth or double digit? It seems that a lot of companies describe one-offs that, in fact, recur quite a bit. And if those continue to recur, they might weigh on the overall growth of this bucket of sales.

Pascal Soriot

Yes, so let me address the Zelboraf question first of all. I'd like to sort of disagree with you in terms of the ramp-up because we have 80% share of patients who are BRAF-mutated after 4, 5 months of launch. It's really -- I see this as an extremely rapid market penetration. Importantly, and really thanks to a great collaborative effort in the U.S. with the diagnostics colleagues, we've also been able to ensure that 80% of patients are actually tested for BRAF mutation. And then of those, as I said earlier, 80% are treated with Zelboraf. So from a patient share viewpoint, we see this as a very rapid penetration. Now as far as the dollar, it might be more your comment. As far as the dollars, of course, in relation to ipilimumab, you have to consider first of all that we treat the BRAF-mutated patients, which is 50% of the melanoma patients, but also importantly, you've got to think of the sort of compounding effect, if you will, of -- if you treat a patient with ipilimumab, you give them the sort of annual cost of the treatment if you want in the first 4 injections they get. Whereas with Zelboraf, you have to treat them month after month after month, so you have this continuous accumulation if you want of sales month after month as you treat new patients and the older patients -- the earlier -- the patients treated earlier keep accumulating in term of generating more sales. So that explains the difference you see on the dollar side. But from a patient viewpoint -- patient share viewpoint, we've seen very rapid penetration.

Severin Schwan

Pascal, do you also want to comment on emerging market outlook [indiscernible]?

Pascal Soriot

Yes, so in term of the emerging markets from a pharmaceutical viewpoint, this first quarter -- let me just back up a little bit and expand from the emerging markets to the whole world. This first quarter is actually not really reflecting what you're going to see throughout the year. We have a very strong growth in the United States. We expect our business to keep doing well in the U.S., but we don't expect to see this kind of growth rate throughout the whole year because we certainly have issues to deal with, in particular, the launch of Eylea, which certainly impact Lucentis, and we have the patent expiry of Bonviva, et cetera. So very strong growth rate in the U.S. We’ll keep growing, of course, but probably not by the same kind of rate. On the other hand, the emerging markets, the growth rate may actually be lower than you expected. But you have to consider these delayed tenders. You have to consider the one-off effect of Herceptin in China in particular, and there's a couple of other sort of one-off effects as well. We see certainly our in-market sales, the consumption in the market to be as strong as we've seen in the last quarter. And we certainly will see higher growth rates in the international region in Q2, Q3, Q4. So you're going to see the opposite effect of what I told you for the U.S. You’ll see stronger growth rates in the emerging markets in the next few quarters.

Severin Schwan

May I add on the longer-term growth for pharma, I think -- I mean, of course, it's always difficult to predict in the long term how the growth rates will be in the respective regions. But in very general terms, from a more strategic point of view, perhaps let me add 2 factors here, which are directly linked to our innovation-based strategy. I mean, we do see also price pressure of course in emerging markets, also in view of the fact that reimbursement gets more important in those respective markets, but what we do see is that the pricing pressure is much, much more stronger for less differentiated medicines like branded generic, for example. So generics, in general, whereas we are much more protected with our highly differentiated medicines, that's point one. And then the other point is, if we look at the penetration rates for our highly specialized products at this stage, they are really very low still compared to the developed countries, which should also give us momentum for the longer term. So I do believe due to the specific structure of our portfolio, we do have a competitive advantage in the long term to benefit from the growth opportunities in those markets. You also alluded to diagnostics. Perhaps, Dan, you could cover that.

Daniel O'Day

Sure. I mean at Diagnostics, I think we continue to see robust growth in the emerging markets. As I mentioned, 32% in Asia Pacific, 27% growth in China, and I think there's still significant opportunity in these markets. We're moving now from just penetrating hospitals in China for instance in some of the major cities, to now moving to, well, okay, smaller cities, but more than a billion population per city and also even medium-sized hospitals in the large city. So I believe that there's sufficient continued growth in these markets and by the way, the growth is being driven by really the basic infrastructure being set up in diagnostics today. So it's really our clinical chemistry immuno assay business, predominately prescribing -- driving growth in these markets. And as these markets evolve, to Severin's point, I think we'll see our other businesses starting to contribute more in those areas, molecular diagnostics, tissue diagnostics, with the advent of things like screening programs, which hardly exist today in these markets in these programs. So overall, I think we see plenty of opportunity on diagnostics in the emerging markets.

Tim Anderson - Sanford C. Bernstein & Co., LLC., Research Division

I'm sorry, on the pharma side, can you just say whether you think that all rolls up to single-digit sales growth over the next few years or double digits?

Pascal Soriot

I would say over the next few years here, we -- you would think high-single digit to low-double digit growth rate in the emerging markets, that kind of range.

Operator

The next question is from Ms. Luisa Hector from Crédit Suisse.

Luisa Hector - Crédit Suisse AG, Research Division

So I have a couple of questions for Pascal and maybe one for Dan. So on Pharma, can we go back to those regional growth rates and obviously, the strong performance in the U.S. and in particular, Rituxan and Herceptin do seem to stand out. Can you give us any more color as to why this should be sustainable? I mean is this the gastric element, which I thought should be small in the U.S.? Is it the oncology side for Rituxan that's driving the growth there? And then on the flip side, when you look at Western Europe, the growth rates for those 2 drugs do drop down significantly. So again, is that the austerity measures? If so, how are they manifesting themselves and is that the more sort of sustainable outlook for Western Europe for those key products going through 2012. So that's the pharma questions. And then maybe for Dan, just to go back on the Diabetes Care. If we've got the European reimbursement effect, presumably that will last for the whole year, maybe not for Poland but that's -- let's say that's small, so are we looking at negative growth for 2012 in Diabetes Care? Or can we rely on the Accu-Chek launches to get us to positive territory?

Pascal Soriot

So the first question relates to the United States. The growth of Herceptin, MabThera is actually driven by -- for MabThera is the [indiscernible] indication. There is some limited but some price effect there and in terms of Herceptin also some limited price effect but the growth is driven by longer treatment duration as you can expect in a little bit of the gastric indication, and also some increase in testing and better testing, increased productivity to a limited extent. Now I don't think you should assume that this kind of growth rate you will see in the next few quarters for Herceptin, MabThera in the United States. This certainly -- our products will keep growing but Q1 was certainly strong. On the other hand, in Europe, we expect to see an acceleration of growth rates. We see how good volume growth we've been impacted by austerity measures and in Europe, I think you will still see the continuous effect of CLL, the first line indication -- [indiscernible] syndication has really done very well for MabThera. Herceptin also same factors as in the U.S. in terms of testing rights in term of treatment duration and also in term of the gastric indication. So we will see better growth rate in Europe for Herceptin, MabThera in the next few quarters.

Luisa Hector - Crédit Suisse AG, Research Division

And is it utilization control that's the negative drag still?

Pascal Soriot

Yes. I think utilization control in Europe. They are an issue but they're more an issue for Avastin than for Herceptin, MabThera. We haven't seen much at all, if any, impact of utilization control with those products in Europe. Of course, off-label use has been very much targeted in terms of utilization control, but we haven't seen much impact of austerity measures and utilization control in '12 for Herceptin, MabThera. It's really an Avastin issue.

Daniel O'Day

And Luisa, on Diabetes Care, I think it is a bit hard to predict the market environment moving forward. I mentioned some negative effects in countries like Germany and France and segments of reimbursement and obviously, Poland. There's also positive effects in countries like Finland, and also, for instance, New Zealand had announced a desire to significantly change the reimbursements. And because of the challenges associated with switching patients in Diabetes Care, that's currently under review right now. So I have to say, it really is a changing marketplace. We expect the launch of the new products, particularly Accu-Chek Mobile, to be able to offset some of the reimbursement changes going on in the marketplace, changes I mentioned, and also some uptake in growth in the United States. And I think it's a little difficult to give you an absolute prediction for the year end other than that we would be firm in the fact that we believe that the overall diluted share growth will improve between now and the end of the year, and that it won't significantly affect our ability to meet our overall commitment on the diagnostics side to grow faster than the market.

Operator

The next question is from Mr. Andrew Baum from Citi.

Andrew S. Baum - Citigroup Inc, Research Division

Three questions. Firstly, the comment that Pascal made about the confidence or the likelihood that the dalcetrapib dal-OUTCOMES trial goes all the way to 100% of events, should I just take that as a reflection of it's unlikely that the magnitude of any treatment effect is going to result in the premature termination of the trial in the interim analysis? And then second, should I assume that if dal-OUTCOMES fails to meet its end point, then trial recruitment into dal 2 will be suspended, i.e., is there any way that you would continue prosecuting dal 2 if OUTCOMES 1 was effectively a failed trial? And then finally, MetMAb, you've clearly extended your clinical trial program beyond lung into breast and colorectal. Potentially, this involves significant capital outlay. If you proceed down the Phase II route, can you just share with us some of your confidence about the additive role of Met inhibition on the top of Avastin in the additional indication?

Pascal Soriot

So the first question regarding dal, Andrew. I mean, of course, if dal-OUTCOMES 1 didn't work, we certainly would knock out [indiscernible] OUTCOMES 2, but let me just say that we see the probability of stopping the dal-OUTCOMES 1 study because of negative results of the interim analysis, that probability exists but it's extremely low.

Andrew S. Baum - Citigroup Inc, Research Division

I meant more on the positive side actually but…

Pascal Soriot

Yes, so on the positive side, with interim analysis, you need to keep in mind that it is not only an efficacy-driven decision. The decision to stop the study, the interim analysis time point will be made by the DSMB on the basis of efficacy and testing. So it's a judgment-driven decision. It is not a cutoff of efficacy level. So it's an important point because even if you have good efficacy, now if you have extremely strong risk reduction, strong efficacy, of course, it will be tempting to say, we should stop the study. But if you have good efficacy, it is possible, likely the DSMB would want to continue their study until its end to accumulate additional safety information. We have to remember this is a class that suddenly, I mean the perception of this class is important. We believe the agency is safe but it's a new class and certainly the dalcetrapib history is still in people's minds. So it is quite likely the DSMB would want to accumulate additional safety data. And at the end of the day, they make the decision based on their judgment of the overall efficacy and safety profile of the agent. So for these reasons, we believe that it is likely the study will keep going until the end. But we don't have any new news or new information to think one way or another. There's still a chance the study stops for efficacy at the interim analysis, too, but it's a very moderate probability. And on the basis I told you a minute ago that we believe we will continue until the end of the study. As far as MetMAb, basically, we think this agent can have efficacy in a variety of tumor types, and we have a large Phase II program of about 10 or 12 studies exploring various indications beyond lung cancer. I can't tell you much more at this point. We have to accumulate more data but we certainly believe this could be an agent with efficacy across a wide range of tumor types and we see the potential for MetMAb as being very large suddenly beyond lung cancer.

Operator

The next question is from Mr. Steve Scala from Cowen and Co.

Steve Scala - Cowen and Company, LLC, Research Division

I have a few questions. First, has the overall AMD market grown year-to-date? And what has been the trend in the absolute number of new and existing patients on Lucentis? I assume it's down but can you tell us down by how much? Secondly, I'm just curious on the dalcetrapib, dal-OUTCOMES trial. Why is there a futility look at the 70% of events time point but there was not at the 50% time point? Does this suggest that events accelerate as time goes on? And then thirdly, regarding the second line metastatic colorectal cancer opportunity, how do you see this playing out between Avastin and Zaltrap once both products are approved for that indication?

Pascal Soriot

So the first question is the AMD market in terms of volume, we see that market more or less stable. And so we look at it more from a share viewpoint. In the -- in that segment, in the first quarter, we've seen a slight reduction of the Lucentis share to about 36% from 41%. You have to keep in mind that it was about 36% last year until Q2, Q3. We increased our share of the AMD market in Q4 from 36% to 41%, after Avastin experienced the eye infections that you probably remember that took place in September last year and suddenly, Lucentis fixed it right after this. We are now back down to 36%, which is the share we had in Q2, Q3 last year. And of course, we believe that we'll see a further decline as Eylea launches and gain full reimbursement and a reimbursement code. But we also believe that with the PRN data, we should be able to certainly support Lucentis very effectively. As far as the second-line CRC indication, we see there that with the TML data, we should be able to increase our shareholders second-line CRC metastatic segment. We should see a slight increase in treatment duration but importantly, we should see a share increase in the second line. And we don't see much of a need, quite frankly, for [indiscernible] in the second-line setting with the TML data that we have actually presented. I'm sorry, the dal question, there was a futility analysis at the 50% patient mark. And there's a new one at the 70% mark to be done now.

Operator

The next question is from Mr. Michael Leuchten from Barclays.

Michael Leuchten - Barclays Capital, Research Division

A couple, it's Michael from Barclays. First, Pascal, on HannaH, if I look at the trial results for C12 and also the response rate, there is a degree of difference there, which I presume the European authorities are okay with, but where are you with taking this data to the FDA, have you done that? Are you going to do that? Or is that data pretty clear that these products are not substantially similar in the eyes of the FDA? Secondly, on your comment on the Russian tenders for Rituxan, how confident are you actually going to be able to compete there appropriately, given that there is additional competition, particularly in Russia on Rituxan? And then just going back to Lucentis. I thought or my information tells me that the majority of Lucentis in the U.S. is currently being used on PRN. So how are you really going to be able to use this data to defend the franchise? And then if I could tempt you, if I look at what Regeneron is saying on Eylea, there seems to be a disconnect between their volume comments and yours. And I'm kind of trying to figure out where the difference is. Would be interested in your thoughts. And then lastly, for Dan, on the ATHENA trial, why does it take to 2013 to file that? What's keeping that for that long?

Severin Schwan

Pascal, you take the first one.

Pascal Soriot

Yes. Well, the first study -- the first question regarding HannaH, the subcu formulation for Herceptin was never a U.S. project. It always was a non-U.S. project. And the reason for this is that suddenly, the FDA requirements from our perspective were suddenly higher than what we expect, what we experienced elsewhere in the world and the development program we put in place was not going to be sufficient to meet the FDA requirements, in particular, PCA is not yet recognized as an endpoint. To some extent, it actually tells you that the barrier for biosimilars in the United States, by the way, is going to be pretty high because we are on a very similar situation here with subcu. So it was never a U.S. consideration, always non-U.S. And in any case, the importance of this formulation for us from a competitive standpoint is really outside the U.S. where we are patent protected until the end of the decade. In terms of the comparative profile of Herceptin that you described, so far, the feedback we've got from European authorities is pretty positive. They consider the 2 Herceptin and the subcu formulation as comparable. Of course, we'll have to wait until the regulatory process review plays out, but the feedback we get so far is encouraging. As far as Rituxan, I'm not aware of specific Russian competition. I'm not sure what exactly you are referring to. I can tell you that we are very confident from the information we have that we will get those tenders. The thing with Russia is that -- and some other markets by the way that are very much tender driven is that they are relatively volatile, if I may say so, and then the timing of the tenders is not always something we can control. I mean, the budget and the timing of those orders vary dramatically. And Russia is such a big country that the volumes they order, of course, have a huge impact on our sales. But we are very confident that 2012 will be a very good year for us in Russia. And Lucentis volume, I'm not sure what you refer to by volume. Maybe you referred to what -- you referred to share and what they have -- what has been commented on by Regeneron is patient share. Now I wouldn't want to comment on share or volume of products, competitive products. You'd have to ask them what they refer to. What I've given you is new patient share for first quarter. Sometimes, people look at intent to treat, share half, intent to treat by physicians, so if we look at this ourselves, if we go to physicians and do surveys and ask them their intent, their intent to use Eylea is higher than the share you see in the first quarter. Now, our job is to try and influence that and demonstrate to them, they don't need to change their behavior and that's what we intend to do and that's why the PRN data will certainly be helpful because our sales force will be able to actively promote the use of PRN and demonstrate the fact that Lucentis can, they use PRN on a PRN basis, basically it leads to 6 injections a year on average. So it's sort of equivalent to the Eylea regimen. And finally, we also have the DME indication that I mentioned earlier in the presentation, which should have an impact in the second half of this year as we launch it.

Daniel O'Day

Michael, thanks for the question on ATHENA. I meant to comment that on the slide, so just to clarify, ATHENA has 2 different components to it this trial. One was a 1-year portion of the trial, which really gave us the indication in the United States for ASC-US, triage and co-testing, which are the guidelines we’re driven by and what's in the market today. The second aspect of the ATHENA trial is a 3-year follow-up on these patients and it will actually be -- it's the only trial we know of that is fully prospective that is looking at a 3-year follow-up on patients on HPV testing. This data will read out in 2013 and then we intend to file that in the U.S. for an approval. This represents really a very significant new market opportunity globally. In fact, the only really country that's began to work with primary screen is a couple of countries in Europe, but Sweden in particular, which has a pilot going on. But to date, molecular co-testing or a triage version, moving it to primary screening would be a significant mid- to longer-term opportunity for HPV.

Operator

The next question is from Mr. Marcel Brand from Cheuvreux.

Marcel Brand - CA Cheuvreux, Research Division

Just 2 quick questions on ADACTA. Now that you have these much better-than-expected data, do you plan to start also a first line RA study on top of MTX? And if you had known this outcome, might you have started this study maybe earlier? Then also, in general, in the RA market, I see quite hefty price increases across the board. Can you confirm that and can you let us know what your recent price hikes have been with Actemra? That's it.

Pascal Soriot

Yes. Marcel, thanks very much for this question. I mean it's a good question. If we had known these results, will we have done this study earlier? With hindsight, we are all very much wiser, of course. Starting this monotherapy study, believe me, was not necessarily obvious because a number of people would have thought that Actemra would be equivalent to Humira. Now we believed in the efficacy of Actemra, in particular, in monotherapy and so after certainly a substantial amount of internal discussion, we launched that study. The results are very good. I have to say they're even better than we had expected, which is certainly very supportive of Actemra. We certainly will consider additional studies. First line data, I mean first line data we already have. The question for us is to get the indication in the United States. We have filed for it, but we have the data. So we'll do additional studies, comparative study in all likelihood but we don't have a specific need for first line retail. Let me just say that in monotherapy, so we're making very nice progress. I told you, 19% share in the BIO IR segment in Europe. In the monotherapy segment across the entire market, including first line, we have 14% in Q4 last year and it's increasing and that's basically 14% on the basis of -- basically a simple promotion. We didn't have the ADACTA study. So with the ADACTA study, we think that, that share would increase. We've seen an increase in the monotherapy segment across the entire market, not only BIO IR but the entire market. So both in the U.S. and in Europe. In the U.S., we have about 9%, I think, and improving. So certainly, monotherapy, which represent about 30% to 40% of patients is a segment that can grow in that -- and in that segment, we think we can grow our share. So hopeful for Actemra there. And in terms of the U.S. and the price increase, we’ve had about 4% price increase in the first quarter with Actemra in the United States. And that's what we expect for the year. We don't expect much more than that.

Marcel Brand - CA Cheuvreux, Research Division

So if you answer yes or no, you are going to start the first line study on top of MTX?

Pascal Soriot

We have this kind of data already. We don't have to do a specific study in that setting.

Marcel Brand - CA Cheuvreux, Research Division

But comparative to -- I think in comparison to Humira.

Pascal Soriot

Comparative to Humira, we have no specific plan to do this at this point.

Operator

The next question is from Keyur Parekh from Goldman Sachs.

Keyur Parekh - Goldman Sachs Group Inc., Research Division

The first one for Mr. Hippe. In the context of the language on the press release regarding Illumina today and your willingness to increase your offer if Illumina was to indeed be willing to negotiate. Can you help us think about how we should think about the potential for increase in absolute dividends over the next few years at Roche? I believe consensus is looking for about a 20% increase in absolute dividend over the next 2 years. Is that kind of a fair way of thinking about it? And then secondly for Pascal, one of your peers has spoken about their plans to file their BRAF inhibitor along with the MEK inhibitor later this year. Can you help us think about how you see the potential competitive landscape for the melanoma market in 2013?

Alan Hippe

Yes. Let me first touch on that point in case of Illumina. It's Alan speaking and thanks for the question. I think we have always said we stick to our attractive dividend policy, and that's what we're following. I think when you remember the presentation I have given as to full year results, I have emphasized the large financial flexibility of our company. And the cash generation that we're having and I can say that this goes on. So I think very clear we stick to the attractive dividend policy. I think everything else in case of Illumina, let me stipulate once again. Our offer is fair and full, $51. That's what we have on the table. Without additional information coming from negotiation situation, there's no way that we increase that.

Pascal Soriot

Yes, so the -- Keyur, the combination data we’ll, first of all, in terms of the competitive data, we'll have to wait until we see the data at the ASCO that would give us a better sense. We actually believe in the value of combining BRAF with the MEK inhibitor, and we have our own program there. So certainly, we'll have our own program and our own data and, of course, we are working as fast and as expeditiously as possible on that program. Just one thing to remember is that Zelboraf has now proven overall survival advantage. And all the products will have to demonstrate that too. So we have -- if you want first mover advantage and over time, we will ourselves launch our own combination with MEK inhibitor.

Operator

The next question is from Mr. Philippe Lanone from Natixis.

Philippe Lanone - Natixis S.A., Research Division

A few quick questions. Number one, I would like to come back on Zelboraf, because I heard your comment that the pattern of injection is different from Yervoy but still, if you have 80% market share today, we can't expect a huge increase in sales and 30 million is about the same level as the fourth quarter. And as you know, the consensus is about 1 billion, so we certainly are far from it, so can you just comment on what we should expect for the next few quarters if we should really have a stronger increase in sales? Second question on prices, I have seen in the press reports that there has been minus 1.5% price decline in Europe. Can you confirm that? Maybe give us figures you have won for the pharma business worldwide. And last on dollar outcome, the 70% interim analysis, how will it be communicated if you just continue the study? Will it be mentioned or will it be just at the half year results?

Pascal Soriot

So the -- thank you, Philippe, for those questions. The Zelboraf question first of all. When you talk about 1 billion for the consensus, I'm actually unsure what you're referring to.

Philippe Lanone - Natixis S.A., Research Division

That's the evaluate consensus.

Pascal Soriot

We've communicated ourselves, peak size between 0.5 billion to 1 billion. When you look at the 1 billion, you always have to think, do you include adjuvant or not in that forecast? And certainly, if you look at metastatic only, our view is that you'll be more at the lower end of the range. We gave the upper end of the range so it depends what indications you include. Thirdly, and also do you include on the melanoma, or do you want also include thyroid cancer as an additional indication. Now when you look at the first quarter sales, remember that we essentially in the first quarter, only have U.S. sales, almost because we launched in Germany and Switzerland. We are in the early phase of launch, which is why I said it was too early to quantitatively comment on the European launch, qualitatively good feedback but that's all we can say. So you have to look at it as a quarter sales that you see in the first quarter. And keep in mind that you have to consider the accumulation of sales coming from new patients starting on top of patients treated earlier and the earlier treated patients get longer treatment duration. Unfortunately, of course, in that indication, people don't get cured after a period of time, they tend to progress unfortunately and often die but you still have the accumulated effect of new patients treated longer with Zelboraf. So I really think we are very much on track with the forecast of the guidance we gave for Zelboraf of 0.5 billion to 1 billion depending on what indications you include. In Europe, 1.5% price effect, negative price effect for the quarter is indeed correct. Now on the global basis, we have -- we estimate that the price effect is about 1% and we estimate that this is also should be true for the whole year, so the 1% you see globally for first quarter is also something you could keep in mind for the whole quarter. Let me just say that again, that reflects, as Severin said earlier, reflects positively on the type of products we are marketed -- marketing. Those are differentiated products, and of course, we are not immune to price reductions and austerity measures but in terms of price reductions, we've been much less impacted than some of our competitors that have less differentiated products. And finally, your question about dal-OUTCOME. Our intent is to communicate the half-year results and will basically in all likelihood again tell you that the study will continue until the end, until 2013 as previously communicated. There is an off-chance, of course, that we would make a much more positive early communication but again, it's unlikely at this point.

Operator

The next question is from Mr. Jeff Holford from Jefferies.

Jeffrey Holford - Jefferies & Company, Inc., Research Division

Just quickly, can you give any update on when you think top line data are going to be available from HER2 because obviously it looks like you don't think it's going to be in time for ASCO. And then secondly, have you looked at the risk from Zaltrap launching in the U.S. and potentially being used off label after compounding? Have you done any assessments? Lastly, are you still thinking of moving to a quarterly reporting schedule for earnings? Is there any update around that?

Severin Schwan

Alan, do you want to start, if you want...

Alan Hippe

Yes. I can do that with the quarterly reporting. Look, I think what we're doing is we're complying with all the requirements we're facing here, especially from the Swiss stock exchange and so far, we are fine. I think, to be very honest here, we don't see really a major benefit here going to a quarterly reporting. I think what we indicated to the market evidently is good enough to support our development. So, so far, we have no plans at all to do this.

Pascal Soriot

In terms of HER2 we will -- we expect to get the results in the second half of this year. [Indiscernible] events driven but we think that the second half of this year is basically when we will get the results. I think importantly, the one thing I'd like to say is that we will get those results before the results for the faster they are communicated and I'm saying this because I know at some point, there was some confusion and some rumors out there that [French] or fair, sorry. It’s [French] in French and fair in English, but there was some idea that these study results could come out earlier. In fact, they'll come out after the HER2 and we will communicate those HER2 results in the second half of this year. As far as Zaltrap, I can't see, to be honest, much off label use outside the second line. The overall efficacy safety is not overwhelming, and I see more as a product to be used in second line. And as I said earlier, if you consider the TML data, there's not a great justification for the use of Valtropin [ph] second line because really, I think the concept and that's an important point, the concept that is emerging with Avastin today is that when you start treating patients with Avastin, you should never stop. So it's a continuous treatment concept that we believe will emerge over the next few months and years. And so if you start...

Jeffrey Holford - Jefferies & Company, Inc., Research Division

Sorry, Pascal, I was actually referring to maybe thalamic indications instead of Lucentis or Eylea?

Pascal Soriot

You were talking about in our view. Sorry, I'm so sorry about this, I thought you were talking about using earlier lines of colorectal treatment. No, I mean I don't see much -- I can't see. I mean everything is possible, of course, but in our view, I really don't see much use there. I mean that would be really small, I guess.

Severin Schwan

Okay. Thanks a lot. With this, I'd like to conclude our Q1 call on behalf of the Roche team. Thank you very much for your interest in Roche and have a good day. Thanks.

Operator

Ladies and gentlemen, the conference is now over. Thank you for choosing the Chorus Call facility and thank you for participating in the conference. You may now disconnect your lines. Goodbye.

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Source: Roche Holding AG, Q1 2012 Sales/ Trading Statement Call, Apr 12, 2012
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