Good afternoon. Great to be back in London for our full year briefing. Let me get right into the numbers which we shared with you already. This morning. You have seen group sales are up by 9%, in local currencies 8% at constant rates.
Core EPS growing at a stronger rate at 13%. And on that basis, we propose to increase the dividend to CHF9. On a divisional basis, a very strong result on the pharma side, entirely driven by the newly launched medicines. I will come back to that in a moment. On the Diagnostics side, solid, more moderate growth at 3%.
I'll get back to that in a moment as well. Now if you look here on the quarterly sales development, you see 6% sales growth after a very strong third quarter. And there are really two reasons why sales growth has come down in the Q4. On the one hand, we do feel the impact of the biosimilars now in the U. S.
So finally, they have entered. And on the other hand, we took a decision to take down inventories in China, actually for both divisions for diagnostics and for pharma, even more so diagnostics. And that also explains why you have seen negative growth rates in China in the 4th quarter. And that has also affected, of course, the results of diagnostics. If you look at the underlying development, diagnostics continues to grow in the mid single digit.
And also the demand in China from the end customer remains very strong. Now that's really on a high level the summary and the story about 2019. You see on the one hand, as expected, a significant impact from biosimilars in total SEK1.5 billion, euros The majority in Europe, also Japan. And you see the first impact now in the United States with 300,000,000 and on the other hand, you see the stronger as expected growth and demand for the new medicines with over €5,000,000,000 And it's this balance which has been responsible for the growth last year. And Bill will comment on the various franchises in more detail.
If we look at it from a regional perspective, of course, very strong growth in the U. S. What I'd like to point out here is that we are back to growth in Europe. We have seen negative growth over the last 2 years. Now the new products start to overcompensate for the decline due to the entry of biosimilars.
International also very strong, primarily driven by China. That's also reflected on the operating profit level. You see slightly improving margins and actually a very strong free cash flow this year. If I just turn to the portfolio, one of the leading portfolios in the industry from a quantity point of view. But at the end of the day, it's a lot quality of the portfolio.
And one of the indicators here is the breakthrough therapy designation we get from the FDA where we have a leading position in the industry. And that, of course, speaks for the differentiation, but importantly also about the speed of the approval process reimbursement and how quickly we can bring those new medicines to patients. We've had quite some news flow. Last year, we brought 2 new medicines, Roslitrek and Polyvi to the market. We've seen important readouts, also late stage readouts, and we've brought a number of new tests and platforms to the market on the diagnostic side.
We keep looking for external innovation. We invest a lot in our internal research and development, but a lot of good things are happening out of Roche. You see here a number of transactions in both divisions, just to highlight Spark, which we finally could close towards the end of last year. It took actually longer than we would have thought. But now we are very happy that we could close the transaction, and we have already started with the integration.
So that provides us with a new platform, an important platform initially for rare diseases, longer term, potentially beyond rare diseases. So we're very excited about this. Let me close with the outlook. First of all, really extraordinarily strong clinical news flow in 2020. So this is really a year where we have a lot of readouts.
Now we'll see how many are positive. Not all will be positive, but there's a lot of optionality here. We know for sure that for sure, I mean, given the data, we are extremely confident that we will launch 2 new medicines in neurology with risdiplam and satralizumab. We have some very interesting opportunities in autoimmune diseases, in particular with etolizumab and also in ophthalmology. And there's a number of readouts in oncology.
Just to highlight 1, with Tecentriq in liver cancer, The growth last year was very much driven by the new indications where we have been first to the market, which was small cell and triple negative breast cancer. And with liver cancer, we have yet another opportunity to be the 1st on the market, and many of you have probably seen the results, which we recently presented. I mean, this is really a big step forward for those patients concerned. A very prevalent type of cancer, in particular in emerging countries such as China, and a type of cancer where there is still enormous unmet medical need. Good.
With this, let me close. We expect low to mid single digit sales growth for the current year. We expect again to grow the earnings roughly in line with sales. And on that basis, we should be able to again increase the dividend next year. Thank you very much.
And with this, I think Alan no, Bill. And that makes me realize that this time for the first time we have Thomas Schinnaker with us. I'm already so used to working together with him. He took over in August last year, but I believe it's the first time that you are in front of this audience. So welcome, and for the time being, over to you, Bill.
Thanks, Severin. Welcome, everyone. It's very nice to be here and talk about the results we have. I think we have a duty to disclose our financial results, but the thing that we get really excited about is talking about our pipeline progress. And it continues to really amaze us to see the power of science brought to patients with many really serious diseases.
And I'm very excited to say that just in the month of January, we've approved 8 new pivotal studies for 3 novel molecules. And I mean, this is a pace of progress that every year we think it can't get any faster and there can't be any more breakthroughs at the pace that we have. And every year it seems to get faster. So I think you'll see that the people of Roche are going to be very busy in 2020, but that's going to pay off in rich rewards for patients in the years ahead. So back to the numbers.
So we're very pleased to bring in a full year result above 10% or 11% growth. The U. S, obviously, a really stellar result, again, fueled by the new medicines. Europe, with a return to growth, which is encouraging considering that there was still significant loss for MabThera and then the bulk of the Herceptin losses and biosimilars happened in 2019. And so if you think about we can lose the majority of our Herceptin sales in 1 year and still grow in Europe with all the price pressures and everything else, that's I think quite a remarkable result.
Japan with 9% growth. And again, Japanese pharmaceutical market is shrinking. And so delivering 9% growth is no mean feat. And then overall, international with 15% growth driven by China, so quite an excellent result as well. This is what the P and L looked like.
I think the notable things here, royalties and other operating income, substantially down due to the loss of Cabilly primarily. And so again, that's sort of a shock we weathered and managed to still deliver 11% sales growth and 12% core operating profit growth. So I think we felt quite good about that. Cost of sales up about 7%. Our COGS and period costs in manufacturing were up 3%, while our volume went up 16%.
So I think this is further evidence of the work we've been doing with the transformation and new ways of working in manufacturing that this is really the 3rd year in a row we've had similar types of productivity gains. So really a substantial feat. But you might wonder, with a 16% volume increase and all these productivity enhancements, are we missing anything? And I'm pleased to say we have the highest level of on time and in full deliveries, the highest percentage that we've recorded in a decade in 2019. So I think the transformation is delivering not only productivity, but it's also delivering quality.
And that's part of the mindset is really building that quality in rather than inspecting it at the end. M and D, you see, was up 10%, which was actually more than we originally intended to do. And essentially what happened is as we got further into the year, we realized we had some good opportunities to invest in things that would continue to enhance the growth of some of our new products. And we thought that was an investment in patient access and in our future. So we took that.
R and D, you can see up 6% in G and A, 8%. But the core administrative cost is not such a big increase. This mostly reflects the incorporation of the Flatiron G and A and full FMI G and A on a full year basis. So that was the sort of the overall P and L. This, I think, is a very nice chart because it exemplifies the growth and the strong and broad base of growth we have.
Now with 3 molecules with over CHF1 1,000,000,000 or CHF1 1,000,000,000 growth in a single year as well as PERJETA and Kadcyla with big contributions. And again, as you look down the list, a lot of new products on the list oncology products. I guess, I would just say overall, again, some good features here like, for example, ELISENSA with 38% growth nearing $1,000,000,000 So we should get there this year. TECENTRIQ 143 percent growth and nearing $2,000,000,000 And then I'll comment a little bit more on some of the other franchises as we move forward. HER2 franchise, take a look at Q4.
I think this is particularly interesting because for those of us who've been working on new products in HER2 space for over a decade, I mean, it's really encouraging. So Q4 was the Q1 where our sales of Kadcyla and PERJETA exceeded our sales of Herceptin globally. And I think that's a pretty big milestone. And that's really driven by the uptake of Kadcyla and PERJETA in early breast cancer treatment around the world. So I think a great milestone.
If you look forward and what else is coming in HER2 positive space, we announced the positive study of the Federica study, which is looking at the fixed dose combination of Herceptin plus Perjeta in a subcutaneous form. And we haven't had a tremendous uptake of subcu Herceptin in part because the desired regimen that the preferred regimen for Herceptin now is with PERJETA, whether it's in metastatic disease or in early breast cancer. And so if you have a subcu and an IV, that's not that helpful if you're already going to have to give someone an IV. But with this, you have the opportunity once someone's come patients come through the chemo part of the therapy for the adjuvant continuation, they can come in and instead of having infusions lasting from 2.5 to 7.5 hours, We're talking 20 to 40 minutes. So we think that's a pretty big advantage for patients and it could be an important factor for converting patients to the fixed dose combination.
And so we're excited about it. We expect to launch in the U. S. In 2020. Switching over to the hematology franchise.
I think we as you know, we don't include VENCLEXTA sales. So while this sort of looks like it's going down, if you include our part of the VENCLEXTA sales, it's actually a positive trend. And I think broadening base, you still see a large portion of MabThera, but growing parts for Gazyva, which is doing well in first line CLL for polavi, which launched in the middle of the year in the U. S. And is launching in Europe.
And then I think we're going to continue to see growth on both those products. So pretty good outlook in hematology. Going to switch over talk about immunology for a moment. So we continue to serve a number of different types of diseases in patients ranging from rheumatoid arthritis, IPF to ophthalmology with Xolair. I mean, sorry, Lucentis isn't in here right now, but with Xolair.
I think we've held up well in the face of a lot of competition. And so I think that's really the main message here is that we have some pretty robust brands. If you look at a product like Xolair, has had numerous competitors coming into Xolair's key allergic asthma area. And through areas like urticaria and other indications, Xolair's held in there really quite strong. Neuroscience, it's really about OCREVUS and continued growth.
And again, we've really seen no let up in this. The U. S, the share of new and switching patients has remained around 40%. And that's really held up over, I don't know, 8 or 9 quarters now. I think that's really remarkable if you consider I think there's 16 therapies in MS now and OCREVUS gets 40% and the other 16 split the other 60%.
So it's really proving through the twice a year infusion, through the strong dosing profile with the unsurpassed efficacy on disability progression, whether you're in primary progressive disease or relapsing, It's just it's a really good choice for patients. And we're seeing, again, increasing share in early patients but really use across the whole spectrum. Again, more to come on that and we like what we see. I think we're excited to have 2 new molecules coming now, medicines in SMA and satralizumab. We announced just in January the positive results of FIREFISH Part II, which is the second part of the Type I study.
And so we're glad to see the first part results sort of reaffirmed. I think particularly because again the FIREFISH patients tend to be significantly older than the patients on the other therapy studies. And so we're really encouraged by the efficacy we see given the older setting. We filed now based on FIREFISH and SUNFISH, and we're expecting approval in the first half of the year in the U. S.
We'll be filing later in Europe because the EMA wanted us to file with both FIREFISH and SUNFISH, so Type 1 and Type 2 and 3. They wanted us to wait until we had all the data available before we filed. But I think we have a strong package here and a compelling I think both a compelling product profile, but a lot of patients who are not currently served, whether they're older and they have weight kind of limitations or whether they have limitations due to the need for intrathecal injections. So I think risdiplam is going to be a great addition to the arsenal against SMA. And then satralizumab in NMO, which we filed and we're looking forward to launching later this year.
All right.
Let me come back to TECENTRIQ. So again, excellent growth curve here. You can see we're well over the $2,000,000,000 run rate. And this has really been driven, again, through 2019, primarily by the small cell lung cancer indication, continued use in non small cell in first line growth there as well as the triple negative breast cancer. And we were very pleased to add the results from TECENTRIQ plus Avastin in liver cancer.
Some of you may have seen these curves. This is what we presented at the ESMO Asia Conference in Q4. And I think for those of you who are used to looking at oncology overall survival and PFS curves, you'd agree this is really a beautiful sight in what it represents for progress for patients. And I think particularly what you see on the progressive free survival curves often you see the curves coming together at the end. And here you see quite a large number of patients that seem to be getting a prolonged benefit.
And then you see that also playing out in the overall survival curve where the standard of care Sorafenib was about 13 months overall survival median and you see how we seem to be getting the tail. Now what the final analysis will look like exactly, I couldn't say. But I think what's clear is you get an early and prolonged benefit. And this is in a chemo free regimen, this is going to bring new hope to a lot, a lot of patients, including about 900 a day who are diagnosed with metastatic liver cancer in China alone. So it's a tremendous unmet need.
The regulatory authorities, when we provided this data, I mean, they literally are ringing our phones, saying, Hey, how can we make this available to liver cancer patients in our areas? So, FDA put this in the real time filing protocol, which allows us to continually submit data. And we look forward to very speedy approval in the U. S, but we're also working very closely with EMA and China on rapid approvals. And we hope to launch in the first half in the U.
S, but hopefully in the second half, we have a chance to launch both in Europe and China. So we'll be following that really closely. So this is a slide that just kind of demonstrates the breadth and the depth of our oncology pipeline, 45 studies ongoing. We've had a number of positive readouts. But there's a few things that are I think are pretty interesting to highlight.
So these ones that are highlighted in this sort of yellow color are all adjuvant or neoadjuvant studies. And obviously, if we can make an impact in the curative setting, it's a tremendous benefit for patients, but it's also something that's very popular with payers and gives us a chance at a better reimbursement outlook. And so I think what's interesting, you can see lung adjuvant, head and neck, renal and so a number of important areas in addition to breast cancer where I think we're typically have been focused in the past. Another way to look at this is through new molecular entities. So these are studies that with novel agents and these are all late stage studies.
So for example, in lung cancer, small cell lung cancer, there's a study with Tecentriq plus an anti TIGIT molecule, we call Terga and plus chemo. And that study will be starting very soon, a Phase III study. If you look over under breast cancer, there are novel studies with a number of agents, including a SERD, a PI3 kinase inhibitor and let's see what else is in there. Oh and apadasertib, which is a Phase III molecule with 3 studies reading out, 3 pivotal studies reading out this year. So that's one that we hope to be launching next year and so on.
So I think it's exciting to see the number of new targets that we're pursuing and what that can mean for patients as well. Now I'm just going to finish out a few comments on the hemophilia franchise. So this is basically HEMLIBRA. We're excited now. We have Spark.
We have an opportunity to bring gene therapy. But today, patients are increasingly benefiting from HEMLIBRA. And essentially, you see more and more patients making that choice. And we had tremendous growth throughout the course of 2019. We really don't see any sign of this slowing down in 2020.
If anything, we see sort of a momentum effect where once patients have been on a while and they start to tell their friends in the hemophilia community, there's a growing confidence in what this medicine can mean to patients and their families. Okay. So in terms of the things to look forward to this year, and this is a sampling because there were really too many to list. But I wanted to highlight a couple that are in ophthalmology because this is an area where we pioneered with anti VEGF therapy with Lucentis back in 2006. And now we're really looking forward to 2 opportunities to go worldwide.
The first is the port delivery system with Lucentis. And just as a reminder, we have several Phase III studies going on. We're in wet AMD. We hope to have readouts there around the middle of the year. We also are in diabetic macular edema, which is a large unmet need and especially because you have younger patients.
And so this idea of getting frequent injections in the eye for 10, 20 years, they really need a better solution. And so the opportunity to have a high sustained efficacy with twice a year refills of the device, we think is really compelling. And we think this is a bit of a sleeper because it's not a new molecule. It's a device. And so it's something that maybe people have been sitting on the sidelines a little, but we're really looking forward to having the Phase III data and going to regulators and bringing this to physicians around the world.
And then finally, ferricimab, which is ANG2 and VEGF, so two targets. And the goal here really is to get higher efficacy levels than we've seen within anti VEGF alone. We'll have we had promising Phase II data that we shared. We'll have the 1st Phase III is reading out in Q4 in DME and in Q1 of next year in AMD. And so we're going to have really concrete answers on this.
And I think you'll agree that if we're able to show a substantial benefit over an anti VEGF, this could be a really important medicine for the future. So in summary, you can see a really excellent progress of the medicines that we've delivered in the past decade. I think we're really impressed to see 35% of sales in Q4 coming from the new medicines. That number will be over 40% by mid year of this year. And 3 new molecules or 3 new launches with satralizumab, risdiplam and the fixed dose combination of PERJETA and Herceptin on track for this year.
This was the news flow in 2019. I think many of you have been following it as it came, but I think it's worth just looking back and seeing the progress we made, how many new approvals and frankly a lot of really important advances in pivotal studies. So a great chart. How's this year's look? It's a long list.
And I guess that's one of the disadvantages of following Roche is you have to put up with long pipeline presentations. But we'll keep that problem hopefully for a long time. And so we've got a number of really important approvals that we're looking forward to. I think probably the one that's maybe the most symbolically important is the Tecentriq plus Avastin just in terms of its impact and the thousands and thousands of patients who are dying every year and the opportunity to have really a prolonged sustained effect there is super exciting. But then in terms of Phase III readouts, you'll notice this list is even longer than last year's.
And there's some really important things in here. 3, apadocertib pivotal readouts. Most of you may not be tracking apadocertib. And so you might want to take a deeper look into what we're doing there. I think the etralizumab product, which is the second one from the bottom, we've had in Phase III for a number of years.
These are massive studies. We have Phase III head to head studies with Humira, with REMICADE. We have in Crohn's disease and ulcerative colitis. And those studies are all going to be reading out over about a 12 month period beginning in the middle of the year. This could be a major important advance in IBD and we think also another molecule in the line of OCREVUS, HEMLIBRA, Tecentriq that could be a really large medicine for Roche.
So anyway, a lot of exciting things. We're looking forward to it. But there's no treatment without a diagnosis, right, Thomas? And so I'm pleased to invite my friend and colleague, Thomas Schinaker, up to cover diagnostics.
Thank you very much, Bill. Yes. Thank you very much, Bill. Very excited to be here today. As Severin mentioned, I'm fairly new in the role, but not new to the company.
I've been with the company for the last 17 years in different roles and different parts of the regions, both in commercial roles and also product development organizations. So really excited because I see the great potential that diagnostics has. As Bill mentioned, diagnostics plays an important role and they create opportunities to continue to develop our pipeline. Now if you look at the sales in 2019, we had 3% growth, as Severin mentioned, and this was impacted, of course, by the inventory reduction that we did also at the end of last year. Now if I look at the different business areas, and I'll get into more detail on a later slide, growth has been strongly driven by the centralized endpoint of care business area and the molecular diagnostic business area.
Now if I look at the different regions, strongly the growth is coming from the emerging markets, so Latin America and also Asia Pacific. Now, you may have seen that growth last year in China was only about 5%. So the growth is lower in Asia Pacific because of the China situation. In all other markets, I have to say, the growth was fantastic also in 2019. Now if we look at in market growth, in market growth is still strong.
So we see a much higher growth in market when it comes to the sales growth in China. EMEA LatAm, so EMEA with 2%. Specifically on the Diagnostics side, we had very strong growth with 4% in very mature market where the market growth is actually very low. North America was 0%, and I'll get to it. The growth has been impacted by lower growth in tissue diagnostics and the coagulation monitoring business.
Now as promised, I'm going to go a level deeper looking into different business areas. The centralized and point of care business area, which is our biggest one, growth again driven by the immunodiagnostics business. But this is exactly the area where we reduced inventories. So without that, growth is still in a very good double digit range. We have a decline in coagulation monitoring.
This is predominantly driven by the new drugs that are available where there's no more testing needed. So this will continue to decline. In molecular diagnostics, we have good growth with 6%, strongly driven by the Blood Screening business and Molecular Point of Care business. Here, we also report the sequencing business, which had a double digit growth last year. Diabetes Care in a more difficult market environment has kept the sales stable with 1% growth.
As you know, here we have continuous glucose monitoring taking over the strip area. So here, we managed to actually compete very well in a highly competitive market. But of course, if you look at the overall diabetes care market, it's growing higher because of continuous glucose monitoring. The tissue diagnostics business you see was 0%. But looking at the reagents, we have a solid growth.
And here, we expect much higher growth going into 2020 with more system placements and system sales going forward. Now looking at the P and L, we were talking about the top line with 3% and the bottom line with 1%. Here, again, looking at the situation that we had with the inventory reduction, our growth on top line would be in the middle single digit range and the same in the operating profit line. And how did we do this? Well, if you look at M and D, R and D and G and A, we had very good cost control.
So a lot of productivity measures were happening in last year. We did have a higher increase in cost of sales. And this was driven predominantly by 2 things. First of all, the high instrument placements that we had last year. And this is great news because this will drive future growth.
And I'll have a slide on that very soon as well on the next slide, I believe. Now the second part was the IVD regulation, and you may have heard about that. So with the IVD regulation that has or is going to take effect in Europe, we have to re register all of our products into that market. So that, of course, drives some of the regulatory costs, which we book into cost of sales. Let me also point out the R and D line because we're spending SEK 1,500,000,000 in R and D.
We're a company that strongly believes in innovation and the innovation potential in the diagnostic space. So looking at that and looking at all of our competitors, we are significantly are spanning that area, which is an investment into the future. So where we investing in? We're investing in developing new systems. And here you can see a typical large lab with pre analytics in the bottom left side.
You see on the right side here, you see the molecular diagnostics area, here clinical chemistry, immunochemistry, hematology and here are the fridges. So sample after it's been worked on in the different systems can then go back to the fridge, wait if there's another request can go back out. So there's no human intervention. This increases quality and this also makes this more scalable because as the volumes go up significantly, the hospitals cannot afford to hire more and more people to do manual labor. The people can actually focus on what's needed and it's the patients.
They can focus on the patients. And you can see the instrument placements. We are significantly increasing the instrument placements and this is driving the cost of sales, but this is an investment into the future. We have more than 100,000 of the large instruments placed in the world. We have more than 1,500,000 point of care instruments placed in the world.
So this is very important for us because this where our innovative reagents run on. This is the infrastructure. And we have new systems in the pipeline, both on the pre analytical side, which is the Cobos Prime, which can handle all kinds of sample types, also for cervical cancer screening, but also in mass spectrometry, molecular diagnostics and the immunochemistry area, we have new products in the pipeline. Now what is running on those different systems? So today, we already have the broadest menu in the industry.
We have more than 500 assays available across the different platforms. And we have them available across many different disease areas, from infectious disease, oncology, women's health, cardiology, critical care and so on. And the key is to have the broadest menu available on single platforms because the labs don't have space for multiple machines. They need to consolidate everything on as few machines as possible. And this is exactly our strength.
And this is the strength that we're building on also in the future because we're investing a lot of money into developing new assays that can really differentiate us going forward even more than today. And you can see some of the areas where we're doing research in. One example is in oncology. We have a marker in the pipeline for early detection of hepatocellular carcinoma. So that's something that Bill was mentioning earlier.
But also in other areas like in critical care, new markers to detect sepsis earlier. 50,000,000 people die every year of sepsis. That means every 2.8 seconds, someone dies of sepsis. In sepsis disease, it's not a disease per se, but it's a situation that a patient is in that can be detected much, much earlier and so that the doctor can react. So we have a number of different assets in the pipeline that can really change the standard of care and differentiate our menu.
Same in the neurology area. We got breakthrough designation for Alzheimer's assays. We have assays in the pipeline for Parkinson's, but also for skeletal muscle disease. So very key to drive that expansion. And let me give you a couple of examples of recent launches.
One is the Alexis HIV dual launch in China. So this is a combination of antigen and antibody. And with that, you can close the window significantly from the time that someone is infectious until the time that it's actually you can detect in blood. So that's the medical value behind it. And none of the large players, except us, actually has this essay.
And specifically, we're launching this in China. China is, in the future, still going to contribute 40% of our absolute growth. So this is important for the Chinese market and there are no local players also that can offer that test. Furthermore, we expand a lot in the blood screening area, in other area of infectious diseases. So you can see that we have launched in 2019 Zika, we've launched Babesia, we have launched Cobas Pro.
So all systems and assays in that market that help differentiate us. We have won a number of tenders across different countries around the world. At the moment, we have about 80,000,000 blood donations worldwide that get tested by our systems. With these wins, we have additionally 11,000,000 donations that will be tested in 2020. And why are we winning these standards?
We're the only player that can combine serology and nucleic acid testing from 1 company. And we can combine it with preanalytics because no other company can connect a molecular system to a preanalytics system. So really excited about this because with that, we keep blood safe in the world. And how else do we keep blood safe? Zika, I mentioned that.
And you may have remembered a couple of years ago, this was a real crisis with babies having really a difficult situation because their mothers were infected with this virus. And this infection came via mosquito, but also it could come via blood transfusion. And so we have launched it in the U. S. So in the U.
S, in blood screening centers, they are screening for Zika, but also now we have launched it in Europe. So we reacted very, very quickly. And we reacted quickly not only with Zika, we reacted quickly with MERS. We reacted quickly with Ebola and also SARS. And that's I think that's something that we're known for to react quickly.
And this is also what we have done in this situation with the coronavirus. And this is, of course, all over the news at the moment. But it's key that you can identify the patients quickly, that you can isolate the patients so that they can be kept away from the healthy patients so they don't infect more people. And we have a combination of assays that help do this. Also in China, we're of course working very closely with everyone to support those efforts to make sure that everyone gets the support that's needed.
Finally, we have also launched a digital solution in the diabetes care space. We have these different glucose meters, and these glucose meters can then be used in combination with strips. But with these apps, with these apps that you can do have nowadays on your iPhone and with a camera, you can actually read the strips without using a meter. And this is specifically important for more emerging markets where the penetration of iPhones or smartphones is actually very high, but maybe not so much the rest of the infrastructure. So very excited that we have launched this at the end of the last year as well.
So in 2019, we had a number of very key launches. So very excited about that. Even more excited, of course, also about the launches that we have in 2020. Let me just give you one example in infectious disease with EBV. So we have received breakthrough designation for EBV and BKV and this is for transplantation patients.
And why? Because many of us carry these viruses in us. However, these viruses are harmless as long as we're not immunocompromised. So it's very important that in such situations like with transplantation patients, you actually measure those viruses if they are in the body. So you can avoid complications.
But we have many other systems and assays that we're going to launch next year. That's just an excerpt. So I'm really excited about the possibility that we have both on our portfolio and pipeline in the systems, but also in our biomarkers because we really can change the standard of care with diagnostics. With that, I hand over to Alan. Thank you.
Thanks, Thomas. Thank you. Welcome. Great to see you. It's really been a solid year here for Roche.
Let me lead you through a couple of figures now. Let me start with the overview. And when you look at it, sales growth 9%, and as said, we had an impact of €1,500,000,000 negatively from biosimilar competition. SEK 1,300,000,000 in Japan and Europe and then roughly SEK 300,000,000 sorry, SEK 1,200,000,000 in Europe and Japan and SEK 300,000,000 in the U. S.
And you know we have given guidance basically on the impact in Europe and Japan, and we came out really, really on spot. So very happy with that. The core operating profit up with 11%. You know really there was a major headwind on the royalty side from the loss of the Gabelli patent. 708,000,000 dollars 705,000,000 constant rates.
So I think we mastered that and overcompensate. I will come back to that. The core EPS growth at +13%. What really gave us is additional dynamic in the core EPS compared to the core operating profit taxes. We had 2 tax cases that we resolved, very old ones, 15 years old, and they gave us a little bit of a boost here.
Dividend in Swiss francs, I think Sarah mentioned that. The cash flow, very happy with the cash flow, CHF 20,900,000,000 I will show the development later on. Brought net debt to minus CHF 2,500,000,000 so CHF 3,100,000,000 reduction in spite of doing the Spark transaction. And then which I think is pretty outstanding compared to the previous years is that we brought gross debt down. Now from €18,800,000,000 to €14,400,000,000 you might remember in the last years, we were always hovering around CHF 20,000,000,000 and then CHF 18,000,000,000, but there was never a major step.
I think this year, we made a major step. And I will come back to a point called the bond redemption. The net financial result, we'll explain that. Two elements, on one hand, lower income from equity securities, and we'll tell you a story about it, and then the early bond redemption, euros 202,000,000 that we brought into the core results. And the net income up 32%.
Major impact is certainly the operations and how much we have improved there. The other piece is lower impairments compared to last year. Here's the overview. I think 9% I've mentioned. My colleagues did a great deal, Thomas and Bill, to explain that.
Then the 11% core operating profit, I will go through the P and L. You see core net income has a higher dynamic. That's basically taxes. Then you see the core EPS losing a little bit dynamic, just growing with 13%, that's Sugar. Sugar had a tremendous year and that even more dynamic in their profits compared to the dynamics that we have.
And we have to take the 40% out. We own 60% on Sugar. We take that out. And that brings the dynamic in the core EPS a little bit down. Good.
IFRS net income, I made a comment on that one. I will come to the question later on, look at the $20,900,000,000 I'm pretty proud about that number and the free cash flow at CHF 16,700,000,000 Here's the bridge, and I think the bridge is quite important because it tells a little bit the story of the year, and I will even give you the impacts first half and second half. So we went from CHF 18,300,000,000 CHF 18.3 billion to CHF 20 point six four at the end of 2019. The first point to make is the gains on the product disposals. And you might remember in the first half, we had a little bit of an uplift coming from that.
We had €437,000,000 in gains in. In the second half, we had €62,000,000 So in total, roughly 490,000,000 dollars which is a little bit of a boost compared to last year. And you see really the impact here of plus 1.3 percentage points. Royalty and other operating income, that's certainly excluding the gains of the product disposals, this has been Cabilly. Cabilly is the major point here.
And Cabilly is a bit of a reversal. We had an impact of minus $271,000,000 in the first half and then lost more, roughly $430,000,000 in the second half. So I think really, you see we had an acceleration of that, and that has caused us minus 2.8 percentage points dynamic. Then the gains of the equity securities, it's a bit of a funny story. We have a minority in a company called Allakos.
And Allakos from end of 2018 to end of 2019 has basically doubled the share price. But it was a bit of a volatile, right? I think it came down in the first half and then came up again in the second half. There's a real difference maker here is the minus 0.6 percentage points is of AXIS. The company we held a minority in, and then Novartis came and bought it, and we had a nice gain in our numbers unfortunately in 2018 and not in 2019.
So we're missing €100,000,000 here, which explains the minus 0.6 percentage points. The bond redemption happened in the second half, €202,000,000 dollars gave us a minus 1.1 percentage point impact. And then the resolution on the tax disputes, you know we had an impact in the first half. In the first half, that was the very old case, 15 years old, impact plus $242,000,000 And in the second half, we had another impact from another tax case, plus a 213. So these 2 together, minus plus 454, they gave us a positive impact of plus 2.9 percentage points.
And the rest is operations. Good. Quickly through the P and L. 9% is explained. Royalties, other operating income was a minus 3.75%.
That's Cabilly. That's Cabilly. Now you might ask yourself, okay, where's the positive impact coming from? This is on one hand the product disposal I've explained already, yes, and this was larger than last year, €170,000,000 more. And the other piece is really about VENCLEXTA.
VENCLEXTA really gave us quite something, and some of you even had in the papers. I think we had a $176,000,000 increase, dollars 18,000,000 to $19,000,000 from VENCLEXTA alone in that line positively. Cost of sales, dollars 1,000,000,000 up, dollars 1,050,000,000 to be precise. It's tremendous how the volume has increased. Pharma had a volume increase of 16%, Diagnostics had an increase of 4%.
I think really having a cost increase of 7%, I think really shows how well we have dealt with the costs in that line. M and D, I think Bill made the point. You have seen basically no increase in Thomas numbers. So that's driven by pharma, where we really use the opportunity to invest into the pipeline in launching the new products. R and D up 633,000,000 dollars basically same here, driven by pharma.
And then G and A, an increase of $151,000,000 a little bit with some service costs from last year. We had a positive impact in 'eighteen, which we didn't have in 2019. But the vast majority is really coming from administration. It's really coming from the acquisitions, flat iron, FMI, etcetera, that we have done. Good.
Leads me to the royalties. And really, that explains Gabelli. I've mentioned that already. You see royalty income and others outlasting income pretty stable. Then other operating income, yes, that is really the profit share with VENCLEXTA which is driving that for the U.
S. And then we have the gains and losses of the product disposal, dollars 170,000,000 that I've explained already. Good. Margins look pretty good. I think we had a slight increase in the group.
We have a slight increase on the pharma division. I think if we didn't have done the reduction of inventories in China, I think Thomas would have had the same margin, yes, than the year before. So I think we look pretty good here. When you then look really at the core net financial result, a $300,000,000 deterioration, if you like, Well, the bond redemption, that's certainly something which will help us in the future, and I'll come to that on my next slide. Equity securities, nothing else than AveXis that I've explained before.
Net interest income is a nice anecdote because as we've waited for the closure of the Spark transaction, certainly we held all these 1,000,000,000 of U. S. Dollars available and reinvested it in short term assets, so assets here with short term returns. And that gave us a +68,000,000 I admit it's not our core business, but we take it. So that's a positive here.
A small impact from currency and some other points. So you see really the deterioration here a little bit by design. Good. The bond redemption itself, don't want to dig too much into it. We bought back $2,900,000,000 which is a very significant number, helped us to bring the gross debt down.
I think it's fair to assume steady state certainly that we will have a reduction for interest expenses in 2020. So that will be another help in the year in this year. Good group tax rate went from 19.7% to 16.3 percent, so really a significant reduction. And certainly, the 2 old tax cases that we have resolved, 1 15 years old, we can argue, yes, whether this will come back again or not. I think I don't expect that to happen in 2020.
So I think really the 18.4%, this is really what we should have on our mind. And I think really a tax rate around 18%, this is what I would guide for the future. Non core and IFRS income. So let me lead you through that. The core operating profit, up £2,000,000,000 as you can see, to £22,500,000,000.
I think quite an impressive EBIT. When you look really at the global restructuring plans, they came up with roughly 300,000,000 dollars And these are really projects that are going really across the company with a lot of transformation efforts. So we are constantly working on our financial flexibility, and that allows us to make all the investments that we're doing. So but you see really, I indicated to you, I think whatever the charge is around €1,000,000,000 I feel pretty good with that. So I think we achieved this.
Amortization of intangible assets went up $238,000,000 I think the major point here is really the revaluation of Esbriet. We brought Esbriet in the valuation a little bit up here as we brought the goodwill down last year of Intimmune. So I think that's a point here. Then impairment of intangible assets, a reduction of 1,600,000,000 euros So in fact, a positive impact in the comparison, that's really, well, Intermute, which accounted for 1,800,000,000 last year. M and A and alliance transactions are positive for these 3.
You might be surprised why is that a positive. Well, this is the release of contingent considerations or provisions for contingent considerations for companies and goodwills that we've impaired. So that comes in up positively. And then we have leave and environmental with a minus €480,000,000 increase of €300,000,000 I would call out one case here, that's the MISO case. I think it's page, I think, 89 in the finance report.
Old case about an ECL technology. We went for that case for quite a long time. We lost the court case. We will appeal, but we made a provision of roughly 200,000,000 euros So all in, you can see an improvement at €800,000,000 compared to last year, and that brings the IFRS operating profit up by roughly €2,800,000,000 Then you see the total financial result and taxes with an improvement of €464,000,000 a year. We have even 3 tax topics in.
The 2 that I've mentioned before with the plus 445,000,000 Then we have an additional one, which we had at HAVI already as a change of the Swiss tax reform, where we reevaluated our deferred tax assets related to this. And it doesn't mean that we pay less taxes in Switzerland. It just means we had to look once again at our tax assets, the deferred tax assets, and that gave us a positive here of €232,000,000 And then certainly, the bond redemption went against that. So you end up then with the €464,000,000 and that means the IFRS net income goes up €3,200,000,000 which is 32% at constant rates. Good cash.
As I said, I think a great year here. Look at the 20,900,000,000 look at the €20,500,000,000 coming from the pharma side. And then you really see the Diagnostics division. It looks like a little bit weaker with the $963,000,000 but they did 2 deals. The first one, the in licensing deal will definitely help Thomas in the future.
That's a good thing and we see that positively in the P and L. And then the Santa Clara, we bought a site in the U. S. I think if we didn't have done these 2, I think, well, we would be on the level of last year. So well explained.
Good. I think when you look at the cash flow overall, I think what is exciting to me is how well we did on the net working capital side. Because what you could have expected with all the growth that we have had is that we have very high inventories, accounts of serials go through the roof. I think that was not the case. I think on group level, the inventories went even down.
So I think really we did good, and we're pretty good structurally on inventory. So I think the supply chain did a great deal here. Accounts receivables went up, as you would expect with the high sales growth. But at the same time, accounts payable went up and compensated for that. So very happy with that.
We had a little bit less investment in PPME. Then you know that's IFRS 15 that we now have to show the lease liabilities pay that was formally in the core operating profit. And then we have more investments in intangible assets. Yes, you might have seen that. We have roughly invested into intangible assets €1,500,000,000 €1,600,000,000 I think when you really look at the balance sheet.
In the cash, it's €1,500,000,000 So the difference is what we have not paid yet. So and that's the right spot here to put our money. No doubt about this. But still, I think we end up with €20,900,000,000 in operating free cash flow. That's the track record, which I really appreciate, and that's determining our strategic flexibility moving forward.
So I would say the stage is set. What happened to net debt? As mentioned at the beginning, we went from minus $5,700,000,000 to minus 2,500,000,000 dollars So we are still yes, we still have net debt. We're not net cash positive. Operating free cash flow explained, we paid taxes, dollars 3,500,000,000 a little bit of outflow certainly for interest expenses on the treasury side.
And then the dividend, certainly the dividend for 2018 paid in 2019 and then certainly Spark is in that number. Good balance sheet very quickly. On one hand, you see cash and marketable securities goes down from €13,100,000,000 to €11,900,000,000 and certainly that's the money that we have put into that bond transaction buying back bonds. And you see on the other side, when you look at the non current liabilities, they go down. And this is really why we have reduced our long term debt.
The non current assets, that's a bit special because we closed Spark at December 17, right in the range that we gave in our guidance. But what we did is it was not enough time to really come up with a great purchase allocation. So basically, what we have done, we put that whole thing into the non current assets. And now we have to look at it, what are the intangible assets, whatever. And we expect to finalize the purchase accounting until half year twenty twenty.
Formally, we have to finalize it at the end of 2020. I think we can't do it until half year. So the numbers will shift a little bit here. Equity went significantly up, and the equity ratio is now at 43%. As I've said, the stage is set.
Outlook, currency. You know, we came from half year and it's quite interesting when you look at it. Here is the Swiss francs to U. S. Dollar ratio.
Here is the Swiss francs to euro ratio. And when you look at half year, so June, yes, plus 3%, minus 3%, impacts 0. And then what happened is, yes, the U. S. Dollar remains strong, but just the plus 2%.
And then you see the minus 4% here. And then you see the negative impact, yes, which came. So I think the U. S. Dollar is still going strong, but the euro went even weaker.
And that gave us then the negative impact on sales, core operating profit and core EPS. And you know our modeling, if we remain all currency stable at year end 2020, how would 2020 look like? It would be a minus 3 percentage points FX impact on sales, core operating profit and core EPS, a very unlikely case, as we all know. Good. Let me set the stage for 2020 and for your predictions by giving you the adjusted number for the core EPS 2019.
So the core EPS, as reported, is CHF 20.16. And you know what we have taken out is the FX losses. You find the FX losses in the finance report on Page 59. On Page 59, you find the 205,000,000. We have an 864,000,000 shares, so you divide that now.
Before you do that, you first take the taxes away. That's a good thing. 18.4%, I think we agreed on that. When you take the 18.4% away, it's a $37,700,000 charge and you end up with $167,000,000 This is the number. You divide through the 864,000,000 shares and then you end up really with the adjustment of plus CHF 0.19 and that leads you to CHF 20.35 and that's the basis for your projections.
Good. Here's the guidance. Let me make one point about the guidance right away. I think this guidance looks even more ambitious when you take into account that we expect a biosimilar impact in 2020 of roughly CHF 4,000,000,000 negatively. So that's really the number that we have on mind.
And I think really when you take that into account, I think that's really a that's a great guidance to have and quite an opportunity for our company. But as said, the stage is set. And now we are, I think, expecting the questions, correct? Very good. Thanks for your attention.
Shall we directly continue? Or do we want to make a break? Is it fine to continue? Okay. Good.
Excellent. So can I ask my colleagues up to the table? And can we take the first question here? Do we have a mic?
Thanks very much. Richard Vosser from JPMorgan. Two questions, please. First question, thanks for the biosimilar impact. But thinking about some of the international operations on some of the products, obviously, weakness in China because of the destocking.
So how should we think about the outlook of PERJETA, Herceptin, Avastin, Rituxan in the international operations specifically? PERJETA on the NDRL, should we think of the bolus growth like Herceptin did? And then how should we think of the others, Herceptin, Avastin, Rituxan? 2nd question, just going back to the or going to the net debt to total assets, it's now considerably below, I think, the original target range, whether that was 10% or 15%. So how should we think about you putting to work the capital to restore the balance?
Thanks very much.
Yes, sure. International operations and the you said Perjeta, Avastin, Herceptin, MabThera. Okay. And I'm going to add ALECENSA because ALECENSA and PERJETA were both added to the NRDL in Q4. And although the prevalence of ALK positivity is not necessarily higher in China, there's just there's a tremendous amount of lung cancer in China.
And so the number of patients that can benefit is really quite large. So we think we'll still have we think we'll have some underlying growth, although most of the growth in MabThera and Avastin and Herceptin in China has probably already happened. But Perjeta and Elisensa should be good growth drivers since they just received the listing and that does dramatically expand the number of patients who are eligible and can receive it. And then otherwise, in the rest of international, there's some gains and losses. There's some biosimilars or non comparable biologics in some markets.
And so we have some negative markets and then we have other markets where it's really more the effect of PERJETA and KADZYLA getting into the adjuvant therapy. Also products like ELISENSHA and other products that we've launched in the last decade that are really just starting to penetrate some of those international markets. So we think it should be a reasonably good year in international. 15% is hard to replicate, but
we feel good about it overall.
Net debt to dollar lessons? We're now at 3%. So a justified point. Well, I think we have set discussions since I joined the company 9 years ago. And every year, I think there was this concern, we would become net cash positive.
I think so far, we've put our money to work and really found solid acquisitions, good acquisition, I would even say, even in some cases, which gave us good returns. And I think really in a period where we have a good growth, I think, well, we will find opportunities to move forward here.
It's a good problem to have. Correct. And really cross the bridge when we have to bridge it, right? Good. Please.
Sachin Jain,
Bank of America. A couple of questions, please. Firstly, on the CHF 4,000,000,000 just another part of it. What portion of that is the U. S?
And what's your level of visibility on the erosion rate you've assumed there and level of confidence around that given there's not a lot of precedent as it sits? And second question, you've referenced a couple of launches through this year, risdiplam, satralizumab, tacentric and liver across all regions. To what extent are those launches reflected in guidance versus offering upside? Background to the question obviously is your prior launches, Ocova, Tecentriq, HEMLIBRA drove upgrades through the last couple of years. And then the final question is on gene therapy.
No mention of Sarepta. So I wonder if you could talk about that licensing deal towards the end of the year, your level of excitement and broader gene therapy intentions beyond that deal. Thanks.
Okay. I think you can make the point. It's important to us that you say roughly $4,000,000,000 Yes, that's what we're guiding for.
Yes. I mean, we did we really nailed it. Well, I think the point is we really nailed it in 2019. We said the impact would be about $1,300,000,000 and it was $1,300,000,000 We're not always that good. And so we Roughly.
So yes, we think it's roughly $4,000,000,000 we think of which, I think as Alan said, we think the impact ex U. S. Will probably be similar this year as last year, which was about 1.2. So the rest is roughly the rest is the U. S.
In terms of the visibility on that and how confident are we, I mean, I think there's a fairly decent range on it because it's still early days. So keep in mind that there were 2 products launched, one biosimilar to Herceptin and one to Avastin in late July. They didn't really get momentum with contracts and all that sort of thing really until the Q4. And then there have been several other launches since that time, just in like November, December. There's additional launches happening kind of in Q1.
So it's still pretty early. I think what we would say is it's consistent with what we've said all along. We expect the impact in the U. S. To be similar to Europe, maybe a little better, maybe a little slower.
I think it's really very that's still our outlook. And yes, so far that's been it. You asked about whether the launches are in the guidance. Is there potential upside? We always like to think there's upside.
I think if you consider the launches we're talking about, risdiplam is likely late first half. I think we've said May PDUFA date. So if we launch in May, its ability to drive a massive upside in the year given that it's not given upfront. OCREVUS, one of the effects we had there is that as soon as a patient's dosed, they just got 6 months of therapy. Risdiplam is dosed daily.
So I think with risdiplam, with satralizumab coming later in the year, with the HCC is a big indication, but the biggest demand for that will likely be outside of the U. S. Because liver cancer is relatively less common in the U. S. And the first approval is likely to be in the U.
S. So all that to say is, while there is a range around those launches, I don't think they're going to be a big variance driver in 2020. I think it's really more the underlying strength of the ongoing launches like TECENTRIQ, OCREVUS, HEMLIBRA continuing. So does that answer? Sarepta, we're super excited about.
I think the timing, that's going to depend a little bit on what the further development program looks like. There's been very promising data, I mean, remarkable results in just a few patients, the kind of results that you just wouldn't expect to see in Duchenne's muscular dystrophy. That's what made us so excited about it. We're we remain incredibly excited about bringing that to patients around the world. But it's not a we don't think that's a 2020 phenomenon.
And then finally, our intentions in gene therapy are we have big intentions. In fact, I've spent a significant amount of time, several of us have with leadership at Spark already this year, sort of helping plan how do we use the resources, the worldwide resources of Roche to help accelerate the programs they have ongoing, additional investment for Spark in Philadelphia to extend into new disease areas. And I think we expect big things about from Spark in the future. But again, these are more the majority of those things are new concepts that we're investing in and so they won't have impacts in 2020.
Let me just bring it over here.
It's Mike Leuchten from UBS. One question on the inventory reductions in China, timing and rationale both for diagnostics and pharma. And then Bill, in your commentary around hematology, you didn't mention POLYV, the POLAREX trial for 2020. Is that still a data point for this year or not?
You want to
talk about inventory?
Yes, sure. So we decided in Q4 also to reduce inventories in China. We see a lot of pressures in China in terms of the 2 invoice policy. You may have heard about that. So basically, most of our business in China goes through distributors.
And the Chinese government has implemented this to an invoice policy, which means that between us and the end customer, there can only be 1 distributor. And this used to be very different in the past. So what we did, we did the prudent step and we said, okay, let's reduce inventories rather than get into negotiations with our distributors. I think that's the best thing for the future.
Yes. And in the pharma area, we went from 26 days to 16 days. And largely what created that was, our volumes increased substantially. I mean, we had a 38% sales growth. Our volumes were even significantly more than that.
And we reevaluated how much safety stock we needed in the channel because when you have higher volumes, you don't need as many days. So we basically we thought about it, and we said we might as well take that as we come to the end of the year and go ahead and line it up in a place where we'd like to be. The polavi study you mentioned, so this is the study of polavi with our CHIP, which instead of our CHOP, which is the standard of care in diffuse large B cell lymphoma. It's in the curative setting. It's a big deal if we can replace the vincristine with polavi and drive what we hope will be better tolerability and higher cure rate.
And so this is really the big study for polavi. And the reason I didn't mention it is because we'll only get the results at, I think, it's like end of the year, maybe Q1 of 2021. So it's possible it will happen in 2020, but maybe more likely we'll be talking about it around this time next year or shortly after. Thanks for the
question. Good. I suggest we go over to this side, yes? Very good, please. Thank you.
Mark Purcell from Morgan Stanley. A couple of questions. Just in terms of firstly, risdiplam, the opportunity and what we should think about from an uptake perspective. We understand that about 40% of patients diagnosed with SMA in the adult setting don't like to take the drug because of the intrathecal delivery. I think, Bill, you mentioned that.
So is there a sort of big sort of unmet demand here? And how do you see diagnostics playing a role in growing that market? The second thing is on OCREVUS. Obviously, there's incoming competition, but you have plans to reduce the infusion times. You also have your own subcut program as well.
So could you help us understand the plans and timing behind defending and building the Acribus franchise? The third one is on the bispecific, the CD20, CD3. You said in the press release there's a decision to be made soon. The 2 to 1 may be a better refractory option, faster to market. The 1 to 1 may be safer, better for earlier stage patients.
So it's obviously a competitive environment. You're currently ahead. You may not stay ahead. So just what's going on there? And how should we think about that opportunity?
And the last one is just a quick one. Liver cancer, Tecentic in combination with Cabometyx, the data come out in Q3, the COSMIC-three twelve trial. So how do you think about having Avastin and Cabometyx as partners on top of Tecentic in this setting? Will there be patients or countries or opportunities where one might be an advantage versus the other?
Great. That's quite a list. So let's start with risdiplam. Yes, I mean, it's fascinating, a field like spinal muscular atrophy, where essentially there were no products, what, 4 years ago? There was no medicines.
And now we're actually in the wonderful position that there's actually 3 choices or soon will be 3 choices. And they couldn't have more different modalities with an intrathecal administration several times a year versus a gene therapy, which is one time but has certain limitations in terms of age, in terms of viral antibody positive, etcetera, and then an oral daily. It seems like each of the medicines is very efficacious, so they have that in common, but that there's very different patient populations. So Type 2 patients, often they don't present with symptoms until they're toddlers or older. Type 3 patients sometimes don't present until later yet.
And then there's also this complication around what benefit can you provide. In other words, if neurological damage has happened, can you repair that? Or are you really just preventing further damage? And so and we and the other companies have been trying to figure out as much of this stuff as fast as possible in types 1, 2 and 3 all at the same time. So I would say that I think there's it's going to take another decade or 2 before all of this is worked out and like which types of patients should get which medicines in which setting.
But I think there's a large opportunity for risdiplam today because there are many patients who aren't going to be eligible for one of the other therapies. There's the fact that with an oral therapy, you have an opportunity from a payer standpoint. You've got an immediate ability to have therapy. You don't have a big price tag upfront. There's the fact that we will have data.
We'll have more Type 2 and Type 3 data than the other therapies. We've got patients out in even including patients in their 20s in the SUNFISH studies. So I think overall, we're going to have a really good regulatory package and a great medicine to bring. And I mean, I haven't been very good at predicting the uptake of I didn't know I knew OCREVUS was going to be really big because I but I'd say HEMLIBRA has surpassed all the market research we did. Normally, you do market research and then you adjust it down because market research is sort of a bias.
You're asking about this thing and then they sort of but with HEMLIBRA, the actual uptake has far surpassed the market research. On risdiplam, I think it's a difficult one to call, and I'm glad we have a lot of really excellent analysts here who will help us with that. But I think it's going to be very meaningful. OCREVUS, we have completed a faster infusion study. We know it can be dosed about twice as fast with an IV infusion.
Right now, it's usually 3.5 to 4 hours. It can be more for first infusion, and we think we'll be able to deliver that dose in 2 hours. So if you think about it, a 2 hour infusion twice a year, which is about as often as an MS patient sees their physician, it's a pretty good way to deliver a very efficacious and tolerated therapy. We're just going to be going we're not going to be competing per se. We're going to be going out and talking to people about the benefits of OCREVUS and what it's doing for primary progressive patients, relapsing patients, the impact it has on the long term with disability progression, with the well characterized dosing.
And we think that OCREVUS is going to continue to grow for a long time. CD20, CD3, I'm not going to say very much about it because it's still very much in the works. It's a very exciting field. We have 2 looks like 2 really excellent molecules and they have different sorts of attributes so far, what we're seeing. But we haven't I don't think we've maxed out yet on the efficacy of MOSUN.
And we haven't hit we are continuing to work with the dosing profile of the 2:one and continuing to get gains on tolerability. So it's hard to call and say, oh, MOSUN is going to be the frontline and the 2:one is going to be refractory because those are plausible that's a plausible hypothesis, but I think it would be prejudging. We'll follow the science, and we expect to maintain our lead though. And then liver cancer, you asked about TECENTRIQ plus cabo. It's all going to be about the data.
Let's see it. We welcome it. Tecentriq is an excellent cancer immunotherapy. CABO is a really compelling medicine with several applications and we can't wait to see the combo.
If we just continue in this row, perhaps.
Yes. Richard Parks from Deutsche Bank. Thanks for taking my questions. Firstly, obviously, thanks again for quantifying the biosimilar impact this year. I wonder if you could commit to whether you think this is definitively going to be the year of maximum pressure from biosimilars?
I know you obviously got European Avastin biosimilars launched this year. I just wonder how you think about that erosion. And maybe you can give us a number of what that number would be in 2021, or maybe that's too cheeky. The second question is just on TECENTRIQ in adjuvant lung cancer. I think at the Pharma Day in September, you had those two trials potentially reading out this year, but they haven't been mentioned in the presentation.
So could you just talk about where we are in terms of interim analysis there and where you think you are versus the competition in adjuvant lung? And then final question on HEMLIBRA. You highlighted the strong initial uptake in the initial European markets and the non inhibitors setting, but the sales at the moment look quite modest. So could you talk about the reception and compare and contrast the uptake in the reception from physicians to the U. S.
Experience?
Yes. So the first question on biosimilar impact, I mean, I think it's been evident in our modeling for some time that the year of maximum impact would likely be 2020 or 2021. Now I haven't answered anything because you sort of had that in your honestly, I mean, I'm going to give you an answer that might seem sort of obvious, but it sort of depends on what the ultimate impact is in 2020, whether 2020 is the maximum. If it's bigger in 2020, then it's going to be less than 2021. And so and the roughly, I would hardly agree with.
So let's wait and see. Maybe by mid year, we'll have a better idea of whether it's but in either case, I think what's most exciting is with the trajectories from the products we've already launched and the additional ones we're adding, I think we get increased optimism that we can continue to grow through it. TECENTRIQ and adjuvant lung, yes, the trials are all on track. There's a potential, depending on the level of efficacy, that we could hit an early readout in 2020. We've been anchoring on the base case with your final analysis in 2021, but it's possible.
And we think we're at least equal or ahead of competition. So we look forward to the results there. These things are somewhat unpredictable, but we hope we'll have a good benefit there. HEMLIBRA EU uptake, yes, in non inhibitors, because the unmet need is not as high, obviously, as the inhibitor patients, I think the Europe the system the health care system in Europe has been a little slower to respond to it. We see all the same dynamic in Europe as the U.
S. In terms of the attractiveness for patients. We don't see any fundamental reason why it won't do as well in Europe as the U. S. Ultimately.
But there's been just maybe a little slower start in some major markets. Germany is 1. We think there's some ways about how the factor is reimbursed that gives pretty big economic incentives to the hemophilia centers. But we think that the compelling profile of HEMLIBRA will ultimately prevail in that.
Sam Fazeli from Bloomberg Intelligence. Just three questions. One following on from Richardson, Tecentriq in adjuvant. Obviously, we have the failure of the monotherapy in bladder cancer. Is there anything you want to comment on in terms of what that might mean for obviously, we all hope that the lung and renal monotherapies will read out positive.
But obviously, it raised the question about whether the right test is being conducted there. And on the biosimilars, just
for some of us who cover some
of the other companies that do are launching the competitors. Could you give us a feel for what your expectations are between volume and price impact? And no specifics, but if there is a split fifty-fifty, what are you thinking in terms of the reduction? And then lastly, I saw a headline pass with RISDIPLAN pricing. I'm not sure I'm not going to attribute the word aggressive to anyone because I didn't actually hear it.
What does that mean? Right. But what does that mean? How does that we know what the prices of the current drugs are roughly per annum under lifetime, etcetera. What is give us some color, if you might, please?
Yes. And just to clarify, so when I was asked about that, I talked about what we've done in other medicine launches. And somehow, it ended up that we're going to be aggressive there. So we're really we don't typically comment on the pricing of a medicine before we launch it. I think the only thing I would say is that we will stay true to our values, which is we want to make sure that it's perceived as a good value, not just by us.
It's always easy for yes, that's easier for us to perhaps perceive it. It's really important for us to talk with the patient families, the insurance companies and see what they believe is of value and we'll make a good decision on that. Biosimilar, the impact will be primarily on a volume impact, not price because we don't have major changes on our prices. And so the main impact is that we lose the business.
Antacentric attributes. Yes, sorry.
You started with that, didn't you? Yes.
So you're talking U. S, I assume. Yes.
So there are some countries where statutorily they force a price cut when a biosimilar launches or when the patent expires. And so some of that has already happened. But then once the biosimilars enter, then it tends to be more of they come in with big discounts and yes, we lose the volume. Okay. And then you asked about the so the metastatic sorry, the muscle invasive adjuvant study for bladder cancer with TECENTRIQ.
We recently announced that we didn't hit the primary endpoint. And so, of course, we have that same question. What does this mean about is this a good prognostic, an accurate prognostic for the opportunity to do good in other adjuvant forms. And we also asked that question beforehand because it's always important to get the answer before the results in. And basically, what we were told is, hey, I wouldn't put too much weight on the bladder cancer study because bladder cancer, even in the metastatic setting, there's a lot of patients who don't benefit.
And so I think that lung and melanoma, those may be more of, I guess, the bellwethers for the impact of cancer immunotherapy in adjuvant, and that's why we're very anxious to get the lung result.
Okay. So perhaps we can take a question from the phone in between. Can you connect us?
The first question from the phone comes from Tim Anderson from Wolfe Research. Please go ahead. Hi. A couple of questions. Just on Alzheimer's, you have gantenerumab in the DIAN2 trial, and I'm wondering if you can give us your perspective on that as something that should be reading out very near term.
Do you view that as a trial that's extraordinarily high risk or medium level of risk or what exactly? And then another question on etrelizumab. Bill, I think I heard you draw parallels between that and some big recent launches like HEMLIBRA and OCREVUS. Does that signify that you're highly confident in the outcome of those results? Or is that simply just a reflection of what the theoretical market opportunity is for a product like that without necessarily meaning that you're highly confident in the outcome of the Phase III trials?
Alzheimer's, so the DIANNE study is a it's an independent third party group that's running a study in familial Alzheimer's. It's a rare inherited form. And it includes a medicine from Eli Lilly as well as gantenerumab. And I think there's, I want to say, 87 gantenerumab patients in the study. So I mean, by definition, it's an exploratory study.
In fact, most of these patients, they started on the low dose, which is about, I think, onefour of the current dose. And so I think based on a number of those factors, we think it's quite a high risk that it would read out with a positive result. It might yield something interesting, but to hit statistical significance with a small n would be, I think, unusual. And as such, we haven't really factored it into our main plans. But we hope it will offer some clues and some useful information.
In terms of etralizumab, I think I'm we think it's very likely that the mechanism works because there's another program, I think it's ENTYVIO, that has an anti integrin in IBD. That molecule, I think, is closing in on $4,000,000,000 in annual sales. And so I think ENTYVIO addresses alpha-four beta-seven and eptralizumab hits alpha-four beta-seven and another integrin called alpha-four beta-e. So we don't know yet what the significance of that dual mechanism is. In fact, the Phase 3s will kind of answer that question.
We had good Phase II data, and that makes it something that we think is very promising. We're pretty confident it's going to work. The question in ulcerative colitis and Crohn's disease is how well does it work. And these diseases have been really tough over the years. There have been a lot of good molecules that have gone in, had Phase II data and then missed on Phase III or disappointed on Phase III.
So I think we think it's going to be I mean, we hope that the clinical trials will be positive and strongly positive. We've done everything possible to make this a really important medicine in terms of the formulation. We'll have a once a month subcu with an auto injector. It's we're setting it up for success, and now we've got to wait for the Phase III results. Thanks, Tim.
Can we have a mic? Yes. Yes.
There was one question via the web on Ocrevus from Manasi Akhaval, and he was asking about the future of Ocrevus. He said you reached 3,700,000,000 sales in 2019. Do you think this has reached now the peak sales? And how do you see the ongoing competition from Maven Clark, Mason's and any other kind of competitors going forward?
Sure. No, I mean, we don't think it's reached peak sales. We think, yes, I mean, in fact, outside the U. S, OCREVUS is really just getting started in a number of places. I think there's still something close to a dozen countries in Europe that don't have full reimbursement for relapsing and primary progressive.
So we think ex U. S, there's a lot of growth continuing. Inside the U. S, we have 40% of new and switching patients, we only have 20% total market share. So as we continue to get a large number of switchers and new patients, the market share will continue to grow.
We really don't see any impact on OCREVUS from any of the recent launches. The 40% number has I think we vary between sort of 37% 41% for 7 or 8 quarters. Obviously, there's now will be competition probably sometime in 2020 from another B cell directed therapy. We think it's good for patients to have more choices, and we think B cell therapy that we pioneered is clearly a leading approach in MS. And so but we don't think that's going to stop the growth of OCREVUS.
Okay. If we move on with the mic in the same row Over there, right?
It's Keyur Parekh from Goldman. Three questions, please. 2 for you, Severin, one for you, Bill. Severin for you, you've spoken for multiple years about the direction of travel, which is growing through biosimilars. Can you talk a bit about the momentum of travel?
So on an underlying basis, what you're guiding to today, assuming around €4,000,000,000 in biosimilar hit is underlying growth of 8% to 9% in 2020. You've just done 9% in 2019. You're sitting on acralizumab, Resdiplam, Tecentriq and adjuvant. So as we think beyond 2020, can you talk a bit about the momentum of that growth exiting 2020? That's first.
Secondly, on this mythical bridge that you will get to at the end of this year on kind of 0% to 15% net debt to assets, of course, but just philosophically, can you help us think about your preferences between returning money to your shareholders versus paying it to somebody else's shareholders? I'm not asking for modalities in which way you do it, but just help us think about one versus the other. And then Bill, lastly for you, Herceptin, Perjeta fixed dose combination, help us think about the ambition there. Is it to protect what you've got there? Is it to recapture some of the volume share you've lost to the biosimilars?
And in that context, how should we think about kind of broad picture pricing for that combination? Thank you.
So let's start with your question on the longer term growth perspective. And as Bill has alluded to, we have another 2 years, 'twenty 'twenty one, where we have significant impact now from the United States, right? We still have Avastin in Europe, but we have Herceptin and MabThera basically behind us. And our experience has shown with Vabtera and Herceptin, it takes about 2 years to wash it through, right? So that's our best estimate at this point.
Considering a significant impact from the U. S. In the short term. So on a very high level, I'd say 'twenty and 'twenty one is the peak for the biosimilars, and then you'll have a tail, of course. The other side of the equation, of course, is the new products.
Bill, you have alluded to the continued growth of the medicines we have already launched. And then the big question, of course, is how many of the other medicines will actually make it to the market. And I would say that's the most uncertain component. We have really I think that's really special now also in 2020. We have a very, very rich news flow.
And you can play through all the scenarios. You mentioned etrolizumab, Alzheimer was discussed, PDS, Farazimab. I mean, you go on and on and on. And now all of those actually have a huge potential. So these are not small franchises if it works.
But the question is, does it work? And you can play through the scenarios. If I look at the success rate of our Phase III trials over the more recent past, it's about 66%, 67%. Now that would suggest that some of those will work out and some will fail. But you can have a scenario where everything fails.
I've gone through that as well. I remember very well back in 2010. I will not forget this year. We had lots of stuff coming through. Those of you who were around in metabolism, in diabetes, and I mean, one after another kind of failed.
And all our growth expectations turned into actually a decline of sales. So you can have a scenario like that. And then you can have times when kind of everything works. I've seen these phases as well. So that's the biggest piece of uncertainty.
Now of course, what you always hope is that one of those big one makes it. Etrollizumab would be a blockbuster. I mean, without any doubt, imagine you have something in UC and Crohn's. If you have something really differentiated in this field, your question gets obsolete, right? If indeed Alzheimer works, that's a shift which kind of puts the growth on a completely pattern.
But if I I would put it like this. There's a lot of headwind still in 2020 2021, which is compensated for now with what we have already on the market. Now beyond that, I would hope for an acceleration of growth because the headwind goes away. And then there is this kind of nagging thought in the back of my mind where I say perhaps 1 or the other hits, and that could put us on an even different growth pattern. But I just don't know.
And you know better than me how binary it is. Look at the growth which we had in 2019. I mean, at the end of the day, it's basically three medicines which have made the difference, right? So just imagine all 3 of them would have failed. We would be in a very different space.
And we can't get rid of this binary kind of situation in our industry. It remains high risk and high opportunity, of course. I hope for the latter.
I guess that's One perspective, though.
I mean, if there's hope Well,
no, here's the thing. The worst year, the year you referred to, I mean, again, in hindsight, we had we sort of had a lot riding on 3 things. 1 was Avastin Adjuvant. The second was some cardiovascular metabolism mechanisms that I don't think we or anybody really understood very well. Now we understand that, but and the third was we had a whole bunch of antibody drug conjugates.
And so we had a relatively narrow base of things. So it turns out Avastin Adjuvant, that didn't work. A lot of those antibody drug conjugates had toxicities and the cardiovascular mechanism we were targeting all had, right? If I look at things like etralizumab, Lucentis PDS, polatuzumab, I think these are areas we understand pretty well. And the question may be how powerful are those results.
So I don't think we have the potential for an all red Xs slide. I think some of these are going to hit and some of them are going to be big and it's just a question of how many.
Thanks for the encouragement. I feel much better now. On the capital allocation question, right, yes, just go back a bit in time. Remember, when we gave this guidance of 0% to 15% net debt relative to assets, that was actually at the time after the Genentech acquisition. And we gave this guidance for very different reasons.
At that time, the bondholders were concerned that we were over leveraged, right? And they were interested that we reduce our debt, and we gave a guidance where we want to land. And that was the 0.0% to 15% relative to assets. Now of course, the situation has turned the other way around. And now the people are worried that we have not enough leverage over time, just to put that into perspective.
I should also say that there is no rock. I mean, there's no science around that. I mean, what we did at that time is we looked at the industry and as we said, what is reasonable and provides us with the necessary strategic flexibility. So it's also not like if you get over this line, then suddenly the world looks very different. This is kind of a high level range, which we gave at the time, but it's still valid, and we have to see how things develop.
Now what are the various components? I mean as far as dividends are concerned, we have committed ourselves to an attractive dividend policy. We'll certainly keep that going after now, what is it, 30 3 years of consecutive increases. So we want to I don't want to end up as the CEO who first kind of even reduce the dividend or okay. And what that tells you is we look at it very long term, right?
So we want to increase the dividend, but we want to do it in a very sustainable way. So that will not change in essence. And then the other question is around M and A, right? That's what you, Alan, alluded to. And that's, of course, very opportunity driven.
And I don't see a fundamental shift here at this very stage. We do see that late stage assets remain very pricy. There's scarcity around those. And in most of those transactions, we actually step out for economic reasons. The focus continues to be on earlier stage deals.
That's typically where we can bring in other capabilities are an interesting partner for those companies because it's not only about price, it's a lot about bringing it to the next inflection point and generating value for the partner this way rather than just the plain exit. Then again, if there are opportunities, right, we would seize them. And we would be very willing to take external innovation into the company. So that's opportunistic, and we'll see how it develops. And I don't see, however, a major change in the dynamics here.
So really, what I'm going to tell you here is really we take it step by step. We don't have kind of scenarios what we do depending on those opportunities. Really, it's what I said beforehand. We cross the bridge when we have to cross it, and then we will cross it. Is that in fixed dose?
Yes.
So the fixed dose combination, and you asked about the pricing. And I think, for starters, we've been actually pursuing combination based pricing in a number of countries around the world for some time. In other words, we don't necessarily think if we have 2 molecules that the price should be 1 +1 equals 2. We'd like to bring better value than that. And so I think it's almost certain that we'll do that in the case of the fixed dose combination, but it will differ by country.
And our goal really is to offer both convenience, and I think the difference between hours and 20 to 40 minutes is going to be significant, but also to bring value to the health care systems. So we'll yes, we'll be taking those matters very seriously.
So let's move on a little bit to the back. If we can go to the next row, and then we'll come forward again. We still have 15 minutes? 10 minutes. Okay.
It's Simon Rae from Redburn. Three questions, if I can. Firstly, Bill, you mentioned that you've signed off 8 new pivotals in January. I'm assuming that's not the run rate for the year, but perhaps you could give us some of the pushes and pulls on the R and D line for 2020? And then moving on to gene therapy, could you I know it's early stages post the spark closure, but could you us any thoughts on the requirements for manufacturing capacity investment within gene therapy?
I'm guessing that at the moment, Spark's relatively limited capacity is fine for an ophthalmic indication, but if you move to more systemic administration, you're going to need more capacity there. And then finally, for Thomas, given you're relatively new in the job of diabetes, the 2 classical questions. Firstly, is diabetes care core to the Roche Diagnostics? And also, could you give us your rationale for why Roche Diagnostics is part of the Roche Group? Thank you.
Yes. So the 8 pivotal studies, I hope it is indicative of the pace for the year because that would mean we have a lot of really important studies to run. And but I don't know if I would take 3 weeks and multiply by what would that be 17 times 8, probably not. But that would be a great problem to have. But I do expect the R and D line to grow grow is we just believe that more and more in the future, society is going to be demanding and needing breakthrough medicines, but also that we can deliver those at affordable cost.
And so our vision for the future is very much that we're really maximizing our investment in R and D, improving R and D productivity also, but both the investment and the productivity, but then really emphasizing new ways of working to drive productivity across the organization. And I think it's really encouraging to see the gains we've made already and the fact that that's not been a result of cost cutting. We haven't put out any guidance to people and say, Hey, you got to go cut your costs. I think I've shared with most of you, we eliminated budgets in our commercial organization about 2 years ago in the U. S.
And last year in international. We've seen tremendous gains in productivity in marketing and sales. Similarly, in manufacturing, I think over the 3 year period, we're up about 45% on volume and our headcount's down about 18% over the same period. And that's not based on cost cutting. It's really been based on, hey, how do we make everyone's job count for more and make sure that people have great jobs and that they're able to make a maximum impact.
And so, yes, and we're going to take the gains from that and largely put them into R and D. So I think that's really where we need to be as a company. And frankly, I think that's where the life science industry needs to be for the future.
Can I
answer that, Phil?
Please. And
that certainly doesn't mean we're not changing the guidance. The guidance is the guidance. What's really happening is there's a reallocation that we really increase R and D on one hand and then take it from other cost lines. I think that's the idea here, just to put that very straight. This is not a contradiction to the guidance.
It's partly also driven by the acquisitions. So we continue to invest into the digital space, for example, with FMI and the Flatiron acquisition, and then we also have Spark now. So Spark is really an investment case at that time. So there is a need to find the money somewhere. And it's a matter of reallocating resources accordingly.
But I think those are good investments for the future.
And of course, when we're growing the top line as well, that's a big part of it. Gene therapy requirements, capital requirements for manufacturing, it depends a lot on the dose. And in gene therapy, the doses you start talking about in logs. So the dose ranging can go from like 1 to 1,000. And then the manufacturing requirement has a lot to do with whether you end up at the high end or the low end.
But I think on average, the manufacturing costs are going to be relatively low in gene therapy because you're still you're providing generally one dose. And so even if you end up at a higher viral load, it's going to be tend to be rather low. But exactly so I think it's basically on a P and L the size of ours, the gene therapy manufacturing capital is not going to be a point of discussion.
Yes. No, please go ahead.
I think we have CapEx in 2019 of $3,500,000,000 I think came down $500,000,000 as I've presented before from roughly 4 percent. Honestly, I don't expect that number majorly to change. And as Bill said, I think really this gene therapy piece is not really moving the needle so much.
Thomas, you have the big question.
Yes. So let me start with diabetes care. So we're very committed to that business. I mean, that area is extremely important because, a, this is one of the areas with or diseases with the highest disease burden worldwide. And also, if you look at the diabetic, usually they don't have just one disease.
So they have usually also cardiovascular diseases, neurological diseases, etcetera. So we can combine our strength between diagnostics and diabetes care to really help the patients. So from that angle, I'm very much convinced. Also, given that we've just launched the patch pump, the SOLO Micro Pump, we have new products there in the pipeline. We just saw another app.
So especially also there, we have a lot of digital capabilities also in the diabetes care area that we can leverage not only for diagnostics, but actually across the whole group. I mean, we have so many software installations out there that are regulated. And we think about some tools that we're looking at on the pharma side, specifically for neurological diseases, on how you can monitor progress. I mean, we can do that in a regulated fashion that pharma doesn't have the history. And so that helps definitely.
But let me give you other examples that are key from my perspective. One is, I mean, we have a ton of joint development programs ongoing. In fact, we have a meeting set up in very near future where we're going to go through all of these. I mean, I had this meeting also with our Head of Pharma Research and Early Development. We were both surprised by how many programs we actually have ongoing between the two groups.
And let's not forget, when pharma launches a medicine, they would want that companion diagnostic to be available as broadly as possible across the world. And that's why it's powerful to work with the number 1 in the diagnostic industry because we have the largest installed base of platforms around. So you want to make sure that the hospitals don't have to start installing different systems. They don't have space. They need to work with that organization.
So from that perspective as well. Another key reason for me and when I was leading the research and development on the centralized area, it really became evident for me. I mean, we're not only one of the largest, if not the largest antibody manufacturer in the world on the pharma side, we're also the same on the dia side. So on the research and production side, we leverage a lot of technologies across the two divisions to be more effective, make better antibodies that are more specific. So we can really leverage that.
So I mean, I'm very excited. And I think I want to even collaborate even more, yes?
I'm excited too. And I think what you didn't even share, and we talk about this a lot, more and more health care systems when we come when we show up Roche Pharma or Roche Diagnostics, they want to talk about the whole picture. I mean, how are you guys going to come together to help us manage oncology care in our country? And we actually have solutions we can bring and especially with the Insights businesses like FMI and Flatiron and DIA and pharma, I mean, we can come in and talk about how do we actually get patients having truly personalized care. And we have these shining tower examples we're running now in a number of countries.
We've already announced several of them including Croatia and South Korea, where every patient diagnosed with metastatic cancer will get a full workup including things like foundation medicine testing, the tissue testing from Roche Diagnostics and every patient will get a targeted therapy. It might be one of our targeted therapies or someone else's and that's fine because that's what leaders do in a field. We have a commanding lead in diagnostics in oncology and in therapeutics in oncology, and we can bring that together. So and I think really the costs of us being together, I'm not sure what those are. In other words, when you ask the question like, well, why diagnostics and pharma together, it's not obvious to me why not because we do, I think, gain a lot of knowledge from each other about the other part of the patient journey.
And it works great, I think.
I mean, neuroscience, for example, we have about 15 markers that we have established with pharma. So they can do research in that area. So it's very key also in early research to be able to work with someone who can then develop these assays so this research can be done on the pharma side.
We have to move on, yes. Right. Andrew, at the back.
Not sure it's on, maybe it is. It's Andrew Baum at Citi. A couple of questions. Number 1, in reference to the administration's IPI proposal, I know Roche Genentech has historically great links with Washington, but this administration seems to have a way of forging its own path. So I'd be interested in your anticipation of timing, impact and the enactment and how of any IPI proposal as we indeed hear is happening.
And then second, in reference to your adjuvant bladder trial, which failed to meet its primary endpoint, I'm less interested in bladder, but I am interested in the messages that we can take from that to other indications despite the obvious differences in biology. So could you share with us, particularly when you're looking at the subgroups, any information on baseline PD L1 status, baseline antidrug antibodies to Tecentriq? Were there any positive subgroups there, which may have significance to how we think about future adjuvant trials, were the current trials not to be positive?
Yes. Carl is reminding me that I mean, honestly, some of the analysis you asked about, we haven't even done yet. And we won't be disclosing it until we bring it to a major medical meeting because I think it is important for the world to understand what we learned from that. But honestly, I don't even know the answer to the questions you're posing. I think they're very good questions.
Regarding IPI and timing and all of that, look, we are I think what we have in common with the policymakers and really everyone else involved in the U. S. Health care system is we think that patients deserve better. We think that patient out of pocket costs are too high. We think that there are reforms needed in the way that medicines are priced and sold.
We've been driving for on the pharmacy benefits side, rebate reform, lower out of pocket costs should be capped for patients. It doesn't make sense that patients with serious diseases are paying a price for medicines that the insurance companies aren't paying, that these discounts happen or rebates happen without the patient benefiting. And so driving for that On the hospital acquired medicines in Part B, we've been in discussions with key policymakers on both sides of the aisle about market based pricing reforms. We think that's really the way forward. And I think something like IPI, I think, would be difficult to implement because it requires new channel partners that don't exist at this point.
It would be very disruptive for the health care system. And we think that reference pricing is something that, frankly, it's a bad idea because the market based pricing approach has led to this revolution in biotechnology that is bringing all these new medicines. And you've probably seen that the White House Council of Economic Advisors, so their internal group has said that foreign reference pricing in the form of HR3 would result in 100 new innovative medicines not being launched in the next decade. Something like IPI would have likely a similar effect. So yes, I mean, we just we're working on better solutions, and we remain optimistic that in the end, better solutions will be found.
Okay. We have to come to an end. Thank you very much for your interest. And for those of you who are still around, we have the usual aperol. However, I think you have to go to the U.
S, you have to also go back to Switzerland. I will be around, and most importantly, Karl will be around. So see you in a moment. Thank you very much. Thank you.