Earnings Call Transcript
ROGERS CORP (ROG)
Earnings Call Transcript - ROG Q3 2021
Operator, Operator
I'm the technical operator for today's call. Please note that the webinar is being recorded. It is my pleasure to introduce you to Karl Mahler, Head of Investor Relations and Group Planning. Karl, the stage is yours.
Karl Mahler, Head of Investor Relations and Group Planning
Thank you, Henrik, for your kind introduction. Welcome to our Q3 call for investors. I hope everyone is safe and well. Although we are maintaining social distance, it seems we are beginning to return to a new normal. Henrik has explained how to ask questions. You can also email me at karl.mahler@roche.com, and I will read your questions to the audience. If you could limit your questions to two per person, that would help us stay on schedule. I believe we had a strong quarter with excellent product performance and a robust Diagnostic business. We will be having roadshows tomorrow at various locations, providing another opportunity to discuss the data presented today. Now, I will turn it over to you, Severin.
Severin Schwan, CEO
Karl, thank you very much. And also a warm welcome from my side to our Q3 briefing, and let's dive right into the numbers. As you have seen this morning, group sales are up by 8%. And yes, that was also supported by a strong demand for our COVID-19 portfolio. But what is good to see is a strong recovery of our base business, our underlying business. As you will see in a moment, the newly launched products, both in Pharma and in Diagnostics, are actually developing very well. On top, I should say that Q3 was a particularly strong quarter in terms of pipeline progress. We now have 17 new molecular entities in late-stage development. That's actually a new record for us, with important opportunities coming up, such as faricimab and PDS in ophthalmology or probably be in a form of aggressive blood cancer, DLBCL. Good. If we move on to the next slide. Here we go. Again, a summary of the key numbers. Pharma stable, actually has grown in the third quarter. So it is recovering. Diagnostics, up 39% in local currencies. If you look at the picture or the quarterly numbers, it's a bit pump-y, and that really has to do with the impact of the COVID pandemic, where we had a strong decline in the second quarter last year. That, of course, resulted in a base effect in Q2, combined with the recovery of the business, and now we are at 8%. So if we look a little bit closer, I think that's an important slide. And you can see that Pharma, which is stable overall, has a growth of close to 30% for the newly launched medicine. That includes Ronapreve. If you would take out Ronapreve, still the growth of the newly launched medicines would be 22%. So that's really good news. On the Diagnostics side, we still see a high growth of 18%. It is coming down on a quarterly basis as expected, primarily due to those base effects I just referred to. But again here, very importantly, the sales of the base business. The business without COVID-19 is recovering very well for the first 9 months of this year, up by 19%. If we move on to Slide 10, you can see here the rejuvenation of our Pharma portfolio continues with over 50% now stemming from the newly launched medicines. And you see Ronapreve at the very top of this chart had some impact, but the overall trend is very strong and we are getting less and less dependent on our more mature portfolio. Talking about the more mature portfolio. On the right-hand side, you can see the effects of the biosimilar erosion. As expected, about CHF 4 billion year-to-date. And that, of course, is compensated on the positive side, on the one hand, by the new products in Pharma and by the strong performance in Diagnostics. So if we move forward to the outlook, let me just again highlight the strong portfolio and the progress we made. Good to see that we, just last week, got our 39th breakthrough therapy designation for gantenerumab. So let's keep our fingers crossed that we can get that medicine to patients as soon as possible. It would be the first subcutaneous medicine on the basis of very sound and comprehensive trials. But beyond Alzheimer's, you see a number of new Phase III studies have been initiated. And as I mentioned beforehand, 17 new molecular entities are now in late-stage development. To conclude, based on the strong results, we have raised our outlook from low to mid-single digit to now mid-single-digit growth. We also expect EPS to grow broadly in line with sales, and we should be able to further increase the dividend in Swiss francs on those results. Thank you very much. And with this, I hand over to Bill. Bill, over to you.
William Anderson, CFO
Thank you, Severin, and thank you all for being on the call today. It's been an eventful year, and Q3 continued that trend. On this slide, you can observe the sales development by major geography, and it's significant to note that there's been improved performance compared to Q2 and Q1 across the board. Japan stands out particularly. On the next slide, you will see that this improvement is attributed to Ronapreve and other products, which is encouraging as we see progress in our pipeline and new products making a difference globally. You can also see the changes by product, with Ronapreve showing a strong effect and Hemlibra experiencing 42% growth, maintaining a consistent growth rate even during the pandemic. Additional products like Actemra, OCREVUS, Tecentriq, and Evrysdi are also showing strong growth. The yellow bars represent Japan, highlighting significant growth in that market, driven by Ronapreve and Tecentriq. At the bottom of the slide, the impact of biosimilars in Japan was relatively low this quarter, and we are very pleased with our colleagues' performance at Chugai. Furthermore, the large green bar for Avastin in Europe suggests that its presence has mostly diminished; we will still see some impact in Q4, but it should be largely gone next year. The blue bars indicate that the biosimilar impact in the U.S. has peaked and is now on the decline, leading us to expect much smaller figures next year. This emphasizes the strength of the remaining portfolio to drive growth. Excluding the biosimilars and focusing solely on other products reveals an acceleration in Q2 and Q3 compared to our historical trends, largely driven by COVID products like Ronapreve and Actemra. However, even when these are excluded, we still see a positive growth trend, with a notable increase of 22% in new product sales in Q3 year-to-date. This is a strong performance by any standard. Moving on to oncology, similar trends persist as seen in our half-year report, with Herceptin, Avastin, and Rituxan declining, but substantial growth evident elsewhere. For instance, Perjeta and Phesgo combined have generated around CHF 200 million in sales this year, showcasing remarkable growth for both Perjeta and Phesgo, along with Kadcyla growing at 16%.
Thomas Schinecker, CEO of Diagnostics Division
Thank you very much, Bill. Good morning, and good afternoon, everyone. I'm happy to present the Q3 Diagnostics Division performance. Now with sales of CHF 13.3 billion, we had a very good growth of 39% year-to-date. This growth was driven partly by COVID-19 testing sales of CHF 3.5 billion, and also a strong growth in our base business, which grew at 19% year-to-date, as mentioned by Severin earlier. Now what you see here is that all businesses contributed strongly to the excellent growth results. I would like to just highlight one special effect, and that's under Diabetes Care. I've mentioned that in previous calls as well. We had a one-time effect in Q1 in North America in Diabetes Care, which was a resolution of a dispute over rebate. Without that, Diabetes Care grew 2%. Now looking at the trend over the last quarters. Our base business, as mentioned before, is still growing strongly in Q3 with 11%, and you see the growth in the previous quarters. So really year-to-date, we grew 19%. And this is also but not only due to a base effect, so it's really very strong underlying growth. If you add together the three quarters this year, you see we're CHF 3.5 billion in terms of COVID sales. And we do continue to see testing also in Q4. So we expect that there will be a certain level of COVID testing also in the coming months. Of course, in Q4, we will also compare it at a much higher base than in the previous quarters. So that has to be taken into account. The future demand for COVID testing will obviously also depend very much on the progress still of vaccinations and their efficacy against new variants and maybe also, again, other variants that may emerge in the next months. Now looking at the different regions. We see good growth across all regions, but particularly in EMEA and Latin America. Sales in the core lab is increasing by 26% across our portfolio in that space. This is due to good recovery but also good underlying growth of our business. On the molecular side, we're growing 36%. This is driven by PCR SARS-CoV-2 testing. And you can see here, this goes under virology in that line. And also, point-of-care molecular, which is our EMEA business, is growing at 570%. So very strong growth of point-of-care molecular. Now if I take Q3 alone, our molecular business continued to grow at 21% despite the high base of COVID testing already last year. So we still see continuous growth in that segment. Point of care grew 279%, strongly driven by rapid antigen testing. You see that under this point-of-care immunodiagnostics, which was growing almost 1,500%. I already mentioned Diabetes Care and in pathology growing strong with 14% in advanced staining and also primary staining. I'm very pleased with the financials, but even more pleased with our portfolio progress in the especially in the time of the pandemic.
Alan Hippe, COO
Thank you, Thomas, and congratulations on the excellent sales performance. Let's get started with Slide 41. Here, I'm discussing currency effects in our group sales, along with a regional breakdown. My colleagues have not only achieved these sales but have also provided a thorough explanation. Looking at the group level, we see a growth of 8% in constant currency. On the right, you can see the 6% growth in Swiss francs, which highlights a 2 percentage point difference attributed to currency impact. On the next slide, you can see that the U.S. dollar has reduced its negative effect from a 6% decline at the half-year mark to a 5% decline in Q3. Additionally, the impact of the euro exchange rate on the Swiss franc remains positive at 3%. We also need to consider the effects of all other currencies, which brings us to the next table showing a 2 percentage point sales impact year-to-date. An interesting question is what will happen by year-end, assuming exchange rates remain stable until the end of 2021, although that is unlikely. This could result in a 1 percentage point decrease in sales, a 2 percentage point decline in core operating profit, and a 2% drop in core EPS. Overall, we're observing a reduced impact in recent quarters. Bill mentioned the digitalization event scheduled for November 17, which will cover various topics, including research from pRED and gRED, product development from Flatiron, and a focus on personalized healthcare from Diagnostics. It promises to be an engaging event, and we expect a large audience again. Regarding our outlook, as Severin indicated, we are now anticipating mid-single digit growth in group sales, and we have aligned core EPS growth with sales growth. Severin also discussed the dividend outlook. It's important to point out that we expect the biosimilar impact for 2021 to be approximately minus CHF 4.6 billion, which is consistent with our initial guidance. With that, we're ready to take your questions. Thank you.
Karl Mahler, Head of Investor Relations and Group Planning
Thank you all for joining us today. We have about 670 participants on the call, which is great to see. We appreciate your interest in Roche. Let's move into the Q&A session now. We currently don't have any questions in the chat.
Steve Scala, Analyst
I have two questions. In the second quarter, Roche stated that oncology visits were 95% of normal, which was the highest of any company that provided that information at that time. Are visits still around 95% of normal? Or has there been a deterioration? And the second question is that given the strong performance of new products, waning impact of biosimilars and resilient Diagnostics business, is there any reason you know now that 2022 won't bring a sharp acceleration for the top and bottom line for the total company?
Severin Schwan, CEO
Steve, thanks a lot. Let me take the first question before I hand over to Bill for the oncology visits. I'd say the following. As far as Pharma is concerned, you're absolutely right. The biosimilar impact will decline in absolute terms, and that will help together, of course, with the newly launched medicines. We should also expect some growth from the products which are coming next year. So I'd say we are very confident on the Pharma side in terms of the growth dynamics. Now for Diagnostics, we have no reason to believe that the dynamics on the base business are going to change. We have seen a strong recovery this year. We believe we are well positioned to further grow the base business. There are a number of important launches up and coming. Really, the one question where there is most uncertainty is what is about COVID-19 sales. That's very difficult to predict. I remind you just two months ago, in July, when we met for the half-year results, I was rather skeptical that we would have strong COVID-19 sales in the second half. I had predicted actually that in Q3, we should already see quite a decline. Now four weeks later, due to the Delta variant, we suddenly saw a surge in the U.S. and in other countries. The result of it is that COVID-19 sales have been stronger in Q3 than we actually thought they would be. That also is part of the reason why we raised the outlook for the full year. Literally, within four weeks, we had to correct ourselves because we had the wrong prediction in terms of how COVID-19 would develop. There will be at least some remaining business, that's for sure, because this virus will stay with us. Not everybody will be vaccinated and there will be a need for testing. I would assume that there is also some demand for medicines going forward. But it's very difficult for us to predict what exactly it will be. It's not that I don't want to tell you, it's just that our own scenarios have a wide range. This is the unknown. But as far as the Pharma business is concerned and our Diagnostics base business is concerned, we are pretty bullish. Bill?
William Anderson, CFO
Steve, the question about the market and the dynamics in terms of visits and such. In Q3, we were, I think, hoping to see a more continued recovery in terms of patient visits; instead, we got the Delta variant sweeping through the U.S. and Europe. So Q3 might have been impacted a little more than Q2. Now the outlook for Q4 is a little better because it seems like things are waning with the Delta variant. But I think I would say we're almost back to normal, but not quite back to normal. That's kind of how we see it.
Karl Mahler, Head of Investor Relations and Group Planning
Thanks for your question, Steve. Wimal, you would be next.
Wimal Kapadia, Analyst
Great. Wimal Kapadia, Bernstein. So can I just first ask on giredestrant in the adjuvant setting. So just how are Roche thinking about the combination with the right CDK4/6 given recently that we had the approval of AVENIO in the earlier setting and that we get Kisqali data next year from the NATALEE study. Have you actually run the right combination trials that would ensure we have the right standard of care? And will running trials with palbo actually cause you a challenge in terms of uptake long-term? And then my second question is just on POLARIX at ASH. I know we need to wait for the data. But I'm just curious what Roche considers as a clinically meaningful difference in complete response. If I look at R-CHOP from GOYA, the complete response was around 56%. So is a 10% difference a fair reflection of what you consider as clinically meaningful? Or what do you think is enough of a difference in CR to drive a new standard of care?
Severin Schwan, CEO
Bill?
William Anderson, CFO
Yes, with regard to giredestrant, you've pointed out correctly that the comparison of CDK4/6 inhibitors and which is the best option remains a topic of discussion. Our aim is to demonstrate a significant advantage with giredestrant, which makes the choice of combination therapy less critical. By that time, we will have generated data on combinations with all relevant therapies for early breast cancer in both first and second lines. This provides us the chance to showcase the strength of giredestrant and address these questions effectively. We have a truly unique molecule when considering its potency, side effect profile, and our early indications of efficacy. We anticipate having more data next year from our second- and third-line pivotal study, offering further insights on giredestrant. As for what constitutes a clinically meaningful difference, it's challenging for me to discuss specifics without disclosing our results. We are in a curative context, typically involving a younger patient population facing a serious diagnosis. I would turn the question back to you: what reduction in relapse rates do you find clinically meaningful? We believe our results exceed what would traditionally be seen as the minimum standard. We look forward to presenting our findings at ASH and engaging in a more extensive conversation on this topic, as we believe it could establish a new standard of care.
Wimal Kapadia, Analyst
Okay. I said 10%. So that's kind of what I have on my mind.
William Anderson, CFO
Yes. But you said 10% in complete response. And of course, the data is progression-free survival. I mean it's adjuvant, and you're looking at does the disease recur. So that's why I didn't answer it in terms of complete response.
Karl Mahler, Head of Investor Relations and Group Planning
Yes. Thank you, Wimal, for your questions and for your guesses. Sachin from Merrill Lynch would be next.
Sachin Jain, Analyst
I just have two, as Karl requested. Firstly, on the COVID and thinking about it going forward. So on my numbers, you're going to end up with COVID solutions across Diagnostics on a proven Actemra of roughly CHF 6 billion. Severin, you've referenced and answered the first question, uncertainty in predicting that line, which is entirely understandable. But at this stage, as we think about your full year '22 guide, would you consider guiding in '22 ex COVID as you did on Tamiflu a number of years back? Or I guess more importantly, given the uncertainty, how much of a line in the sand is showing group growth independent of how that CHF 6 billion progresses? So that's the first question. Second question, just a quick one on OCREVUS. Bill mentioned some issues around administration alongside vaccines. Just wondering whether that's seeing any share shift in the MS market to agents, which you can administer more easily around boosters.
Severin Schwan, CEO
Right. Yes. On the first question, it's a good question, and we have to also internally discuss this in terms of how we make our guidance for next year. But having said that, I think as a minimum, we would provide you with all the necessary context. You have seen already this year that we are carving out the sales of the COVID-related testing on a quarterly basis. So you have a good view on where we stand and how the base business develops. Given the magnitude of the COVID-related sales, I think irrespective of how the guidance will be made, you should have the necessary transparency to see how the underlying business is developing. As far as Pharma is concerned, you anyway have the sales on a product level. It's not a big deal to calculate the sales growth, excluding the respective products. You have seen that for Ronapreve, in particular, where we informed you about the specific sales. For Actemra, it's of course, always a bit more difficult because it's used for different indications. To summarize, I think our goal would be that you have a good understanding of how the underlying business develops.
William Anderson, CFO
I would like to add one more point regarding the Pharma side of the business. The sales of our COVID-related products will largely depend on the COVID situation. If there is a significant amount of COVID and many hospitalizations, I believe the sales of Actemra and Ronapreve could match or exceed this year's figures. Conversely, if COVID is minimal, which is what we all hope for, then the sales of these products will likely decrease. However, there's a sort of built-in protection as we believe a reduction in COVID would positively impact the rest of our products, which have generally been negatively influenced by COVID. When we look at our total Pharma sales of over CHF 40 billion, COVID has dampened that overall figure, while a small portion of sales has benefited from COVID. I think we feel optimistic about the outlook. Regarding concerns about vaccines and the timing of infusions affecting our market share in MS, I don't believe that's the case. If you examine the share of OCREVUS or the market competition it faces, you’ll see it remains substantial and stable. The issue seems less about switching and starting new patients, as OCREVUS still holds 35% of new and switching patients, which indicates a strong trust in the medication. The more significant factor is the delay in treatment for existing patients by a month or two, which has a greater impact on sales than minor fluctuations in new patient market share.
Karl Mahler, Head of Investor Relations and Group Planning
Yes. Thank you, Sachin. I hope we could address your questions. The next one will be Peter Welford.
Peter Welford, Analyst
On top, I've got two. Firstly, just on COVID-19 testing, over to Thomas. I wonder if you could perhaps provide us with a rough split of that CHF 1 billion that we saw in the third quarter. I guess what I'm really asking for is how much of that is PCR testing. And it'd be helpful if you could talk a little bit about what sort of dynamics you're seeing for PCR testing, particularly any granularity you can give us by geography would be very helpful as far as Roche's business. And then second question is just, I appreciate this is a sales call, but just with regards to the margin. We obviously heard I think at the Pharma Day, Bill talked a lot about Roche's enthusiasm for investing in R&D. Given obviously the very strong sales that we've seen, can you just talk a little bit about the sort of opportunities that you're looking at to invest that additional sales, if you like, in R&D during the remainder of this year and why we shouldn't anticipate some sort of margin expansion this year given obviously the impressive sales performance we've seen so far during the first 9 months?
Severin Schwan, CEO
Okay. Perhaps just a word on the margins. I mean what you say in principle is correct. When you have additional sales, if the top line is developing nicely, then there's also operational leverage. That's obviously very true in our industry. It's always been like that. And that effect is, of course, there. But what you should also look at is the product mix because if you look at it from a core point of view, then of course, the growth has been primarily on the Diagnostics side and it has been literally flat for the first 9 months on the Pharma side. So you have a portfolio mix effect coming in from a group perspective. Whilst you would expect that there is some operational leverage due to COVID testing in Diagnostics, you have an adverse effect because you have a product or shall I say, portfolio or a divisional negative mix effect on a group level. I should say, however, to finance that, we are also very diligent to get the money from somewhere. You've seen that at the half-year results that all the other expense lines, marketing and distribution, general and administration have been managed very tightly to fund the investments into R&D. So overall, yes, we are always working on our productivity but I want to temper your expectations a bit given the product mix effect on a group level. And Thomas, if you could cover the testing question.
Thomas Schinecker, CEO of Diagnostics Division
Sure. I'm happy to share that PCR is a fairly stable business without significant fluctuations. This stability mainly comes from our traditional clients like hospitals and labs. In contrast, antigen testing can experience volatility due to government orders that occasionally lead to large one-time purchases. In Q3, PCR accounted for the majority of our testing. Geographically, testing in Asia has steadily increased since the pandemic began, although some countries like Singapore, which had previously managed COVID well, are now seeing considerable surges. Europe has also maintained consistent testing levels. In the U.S., we noted a significant decrease in testing from Q1 to Q2, which rebounded in Q3 due to the Delta wave. PCR testing tends to be more predictable, involving smaller continuous orders compared to the larger government orders for antigen testing. We're positioned strongly in the PCR market, benefiting from extensive automation that enhances our quality. Our pricing strategy during the pandemic, where we kept prices at pre-pandemic levels without hiking them, has set us apart as demand currently surpasses supply. Customers have appreciated our reliability during the pandemic and our decision not to exploit the situation for profit. This goodwill has supported us, and we experienced a 23% growth in our molecular business in Q3, despite last year's high benchmarks. Overall, business is progressing well.
Karl Mahler, Head of Investor Relations and Group Planning
Thanks a lot for your questions, Peter Welford from Jefferies. The next one would be Tim Anderson, Wolfe Research.
Timothy Anderson, Analyst
All right. On TIGIT, my question is you guys call out four pivotal readouts in 2022 and the slide deck today reiterates the same. But on Slide 49, when you talk about regulatory filings, you only show one for 2022, which is small cell lung; the two others being in 2023; then the fourth of the 2022 readouts not being until the year after that. So I'm wondering why there seems to be a lag in filing timelines relative to when the pivotal readouts occur in 2022? And then second question on gantenerumab. You recently got awarded a breakthrough therapy designation. I was surprised to see that because you're the only company of the leading ones that hasn't really shown any cognitive or functional data yet. Does getting breakthrough therapy designation change how you're thinking about possibly using the accelerated approval pathway? I thought it's unlikely you would pursue that, but maybe the breakthrough therapy designation changes your mind.
Severin Schwan, CEO
Thanks for your question. Bill?
William Anderson, CFO
Sure. Regarding TIGIT, there isn't anything particularly unique here. The main issue is the ongoing uncertainty surrounding the specific timelines for the results. We may have been conservative concerning the filing timelines. The small cell readout appears clearer since it's the first to occur, meaning less variability in the timeline, and we're nearing the conclusion in terms of events. However, for non-small cell and others, these depend on predictions about the event rate related to standard care, which can fluctuate. We might have been slightly conservative regarding the filing timelines. As for gantenerumab, we're very happy to have received the breakthrough designation, which we believe is fitting. The FDA recognizes the urgency for new Alzheimer's therapies, a sentiment we agree with. We're looking forward to the full 27-month endpoint readouts in the second half of next year. The breakthrough designation will facilitate improved communication with regulators, allowing for a more continuous dialogue to expedite the filing of the best possible submission. Our base case indicates that the slowest scenario would see the full data in the second half of next year, followed by a filing. We are currently in talks with various regulators about potential ways to speed this process up, with the primary aim of making this medication available to those with Alzheimer's as soon as possible. Essentially, we're looking to backtrack the timeline from the second half of next year's readout. If we can establish a faster approach, we'll share that information when the time is right.
Karl Mahler, Head of Investor Relations and Group Planning
Yes. Thank you for your question, Tim. Richard Vosser from JPMorgan would be next.
Richard Vosser, Analyst
Thanks, Karl. So a couple of questions, please. One, just thinking about the biosimilar erosion to round out the picture on '22. Should we anticipate any additional biosimilars like Lucentis adding on to Avastin, Herceptin, Rituxan? Could you maybe give us a flavor on those of should we be expecting an extra CHF 2 billion erosion or what we should anticipate there? Then, the second question, just on Herceptin. It seemed to do very well in the international region this quarter. Are there any tenders in there? Is there anything that we should anticipate doing better than expected and how that region might develop going forward?
Severin Schwan, CEO
Bill?
William Anderson, CFO
Yes. Thanks, Richard. In terms of Lucentis biosimilar, I think maybe we wouldn't break that out in the same way we have with AH&R just because the magnitude is totally different. Lucentis sales are a bit over CHF 1 billion. AH&R were 20x that before the biosimilar erosion hit. So in addition to that, I think the ophthalmology market is quite complex. The availability for more than a decade of Avastin has been used by many as a replacement for other VEGF therapies. This probably affects the biosimilar equation for Lucentis, and people who are looking for a low-cost alternative often turn to that. The market dynamic is really shifting. I think Lucentis will be cannibalized. But I think the other products also will be by the availability of faricimab and the Port Delivery System with ranibizumab, which we believe are superior products in multiple ways in terms of convenience, dosing, and the ability to provide really a sustained benefit over time. I don't think Lucentis biosimilar is going to be a dynamic that we'll be talking about a lot. In terms of Herceptin biosimilar and performance, I think Herceptin was down 32% in Q3 year-to-date, which is a little less than Avastin and MabThera, but the basic pattern is the same. I'm not aware of any specific onetime events or things in that Herceptin figure. I think in some international markets, maybe there was just some physicians and patients opting for the branded products just to ensure they got the real thing.
Karl Mahler, Head of Investor Relations and Group Planning
Yes. Thanks a lot for your question, Richard. And the next one would be Keyur from Goldman Sachs.
Keyur Parekh, Analyst
Two questions, please. One for Thomas on Diagnostics and then one kind of big picture for Severin and Alan. On Diagnostics, Thomas, you've spoken recently about your efforts in next-generation sequencing. Just wondering if you can share with us the progress you've made on that over the last couple of years, how confident you are of being close to market? Where do you think Roche will be able to have a competitive product? What do you think the differentiation for your offerings might be? So just your thoughts on next-generation sequencing efforts at Roche more broadly. And then secondly, Severin, Alan, can we hear your thoughts on capital allocation? It's a topic that obviously is close to lots of people's heart. You should be, everything being equal, net cash positive very soon. Severin, remind us what your priorities are relative to M&A versus increasing dividend for shareholders.
Severin Schwan, CEO
Right. Our M&A strategy has always been, how shall I say, opportunistic. It's of course focused on our franchises in Diagnostics and Pharma, but it's opportunistic in the sense of looking at the specific opportunity. We would also go into areas where we haven't been before. It's not only true on the M&A side, it's also true on the portfolio side. That's how we ended up in MS in the first place. We never had a strategic plan or any strategic intent to build out MS and OCREVUS was an opportunity to enter this field. Or if you think of hemophilia, for example, Chugai stumbled into this area given that the technology of the bispecifics they could apply in that field. As a result, we are in hemophilia. I think that's important. Internally, we typically say we follow the science, and that's true for our internal portfolio, and it's also true for how we look at M&A. Sometimes, if you have a franchise that can help you with the business case. If you have a franchise, you can leverage certain resources or your footprint, for example, around the world, that can help to make a business case work. I can confirm that we don't have a strategy where we say now we want to find an asset in MS or in immunology or somewhere else. It's rather the opportunities which come up, primarily driven by the scientific progress and sometimes by opportunities which are presented to us. Gantenerumab, the accelerated approval?
William Anderson, CFO
Yes. It's a good question. The simple answer is that we're going to have the full readouts on the 27-month clinical data in about a year's time. There's really not a scenario where we could be launching, even on an accelerated approval timeline, where we would be launching without people knowing what size, what type of clinical impact we have. That’s part of the reason we're having discussions with the regulators about what is the best approach, innovative approaches to make gantenerumab as available as soon as possible to people with Alzheimer's. We look forward to completing those studies.
Karl Mahler, Head of Investor Relations and Group Planning
Yes. Thank you for your question, Tim. Richard Parkes from Morgan Stanley would be next.
Richard Parkes, Analyst
Two questions. The first question is should we expect Actemra biosimilars before the end of 2022? There have been filings in the summer but there's also been IPRs filed in the summer as well. If you can't comment today, when should we gain more visibility on that product, given it's an increasingly large base? And then secondly, Phesgo appears to be gaining momentum, providing additional HER2 franchise revenue protection. There’s a big Herceptin subcut revenue base still to convert in Europe as well. Could you remind us how Phesgo is positioned in price versus the three combinations of Perjeta and Herceptin? With oncology pricing becoming more of a discussion point today, how should we think about co-formulations in oncology going forward? An obvious example coming up could be the Tecentriq-tiragolumab combination where if it's fixed as opposed to a free combination, it could further energize the Tecentriq franchise.
William Anderson, CFO
In terms of Actemra biosimilars and timelines, I don't really have much to say about that. It could certainly be that it doesn't happen at all in 2022 and that, that happens later in 2023. But that's about all I would say. In terms of the pricing for Phesgo, which is the combination of Perjeta and Herceptin, it's competitive. It really depends by country. Some countries, it looks something like the Herceptin biosimilar price plus Perjeta. It's a competitive situation. We want to make sure that Phesgo is at a price point that allows it to be adopted in the healthcare system. We adapt to the local circumstances. So it's been very popular. We think this approach could be useful for other oncology therapies. In terms of how broad that's going to go like, for example, you mentioned tiragolumab and Tecentriq. First off, I would say if we have studies that show a strong benefit for tiragolumab when added to Tecentriq, our expectation would be that's how it will be used in practice. They are not going to combine tiragolumab with another checkpoint inhibitor because just like they don’t, the checkpoint inhibitors are not used interchangeably today. You basically see them being used in combinations in which they were studied, and we think that will be also true for tiragolumab and Tecentriq.
Karl Mahler, Head of Investor Relations and Group Planning
Thank you. We have three more questions remaining in the queue. If my calculations are correct, we have nine minutes left, and we need to manage our time. We can allocate three minutes for questions and answers, so I will turn it over to Richard Parkes.
Richard Parkes, Analyst
I think it was next.
Eric Le Berrigaud, Analyst
The two questions actually refer to two legacy franchises. So starting with HER2, I'm curious to hear your thoughts about the pattern going forward. Most of Herceptin has gone now, but Perjeta and Kadcyla are getting mature. Phesgo is showing nice growth. Beyond that, the debate around de-escalation is still around. Last but not least, new ADCs are showing great promise. All in all, how would you see things developing? It's kind of flat sales overall over HER2, is still the best guess on your side? Or would you guide differently now one way or the other? The second question is in ophthalmology, pretty much the same question. Lucentis biosimilar coming, but PDS, faricimab, on the other hand. Is it fair to assume sales balancing out in the U.S. and growth coming from ex-U.S. territories? And as far as growth, would you guide towards gradual growth with new patients first or pretty fast adoption, including aggressive switches?
William Anderson, CFO
Great. Yes, let's see. In HER2, I think certainly, one thing we're really excited about is the potential for cancer immunotherapies to play a role. We’ve initiated studies, for example, with Kadcyla and Tecentriq in early breast cancer. I think that's certainly an area for growth. Remember that HER2 is approximately 20% of total breast cancers. With giredestrant and our PI3 kinase inhibitor, we're targeting the HR-positive population, which is a little more than 60% of breast cancer. Overall in breast cancer, we think we've got an opportunity to grow significantly over time and impact many more patients with therapies ranging from cancer immunotherapy to protein-targeted therapies, small molecules in HR-positive. In ophthalmology, likewise, I think we're quite confident in growing. We have a relatively small part of the U.S. market with Lucentis at this point. Outside the U.S., we only have a royalty share. We're taking both the Port Delivery System with ranibizumab as well as faricimab into the U.S. and launching all around the world with full revenue. In the case of faricimab, doctors are super excited, and I think we'll have a relatively rapid uptake of faricimab. With the Port Delivery System, because it requires a surgical procedure for each patient and each physician needs to be trained on this novel surgical procedure, they'll actually be trained by Roche or Genentech and then they'll perform a number of those procedures in a supervised way before they ramp up. So I think with ranibizumab with Port Delivery System, that's going to be a slower ramp. But I think ultimately, it could be a very large product because of the convenience advantage. So overall, strong growth ahead, we believe, in both breast cancer and ophthalmology.
Karl Mahler, Head of Investor Relations and Group Planning
This one, I wanted to thank all of you for your interest in Roche. I wanted to thank the presenters helping us today to make the call an exciting one. I wanted to thank Bruno, Birgit, Gerard, Loren. With this one, maybe over to you, Severin.
Severin Schwan, CEO
Yes, Karl. To conclude, thank you very much for your interest also from my side. We touched on biosimilars today. We had a lot of talk about COVID-19, of course, rightly so. But I'm really pleased that we talked a lot about the newly launched medicines and our pipeline; that's the future. It was nice to hear Bill close on faricimab. That's what really counts in the long term, and we have a lot to offer here. Thanks again for your interest, and have a good day. Thank you.