Novartis AG (NVS) Q4 2014 Earnings Report, Transcript and Summary

Good morning and good afternoon and welcome to the Novartis Q4 Full Year 2014 Results Conference Call and Live Audio Webcast. Please note that during the presentation, all participants will be in a listen-only mode and the conference is being recorded. [Operator Instructions] A recording of the conference call including the Q&A session are available on our website shortly after the call ends. [Operator Instructions] With that, I would like to hand over to Mr. Joe Jimenez, CEO of Novartis. Please go ahead, sir.

Thank you. I’d like to welcome everybody today. Joining me on the Novartis end are Harry Kirsch, our CFO, David Epstein, the Head of Pharma, Jeff George, the Head of Alcon, Richard Francis, Head of Sandoz, Andrin Oswald, Head of Vaccines and Brian McNamara, Head of OTC. So before we start, I’d like Samir to read the Safe Harbor statement.

Thank you, Joe. The information presented in this conference call contains forward-looking statements that involve known and unknown risks, uncertainties and other factors. These may cause actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements. Please refer to the company’s Form 20-F on file with the Securities and Exchange Commission for a description of some of these factors.

Okay, so starting on slide number four, you can see the 2014 was a good year for the company. We delivered sales growth across all our divisions and we more than offset the patent expirations that we saw on the year. We also delivered a core operating income margin improvement of about a 120 basis points in constant currency and we are proposing a 6% dividend increase versus last year in Swiss francs. Now, I think one of the best parts of the year was innovation and I’ll talk more about that in a minute. The portfolio transformation continues to be on track and most of you saw the Animal Health transaction closed on January 4th and the GSK dealers is on track for the first half of the year. So on slide five, you can see an overview of the financials dropping down to – net income was up nicely both in U.S. dollars and constant currency and core EPS was up double-digit in constant currencies. Importantly, we had a good cash flow year, $10.8 billion for the year in U.S. dollars. So let’s look at slide number eight, the way that I think about 2014 is really two different ways. The first is, how did we execute and I call this operational excellence. And the second is, how did we perform around the bigger transformations that are going to set this company up for the future? So starting on slide seven, we had a very strong year for innovation across the company. For example in Pharma not just the launch of Zykadia and non-small cell lung cancer but the importance to new drugs that will be launched in 2015 LCZ696 and Cosentyx. These are moving two very important new drugs close to the market for Novartis in the future. We also received approval to Bexsero, we had an accelerated approval by the FDA and that was just in January. So that was not – that does not fall in the fourth quarter, but it’s just another element of the momentum that we have in our innovation. Also it was important that Sandoz biosimilar filgrastim was also recommended for approval in all requested indications by the FDA ODAC. Alcon also strengthen its pipeline with two extra transactions on slide number eight, so the acquisition of WaveTec, which allows cataract surgeons to measure the eye during surgery but prior to insertion of IOLs. This is going to be added to our surgical suite. And then second agreement with Google to commercialize the accommodating lens, those are two important external deals. Now taking a look at the financials on slide number 9, you can see that we delivered sales and core operating income growth across all divisions in constant currency. Pharma sales grew 1% with Alcon up 6% and Sandoz up 7%. I think two factors drove this growth on slide number 10. The first was our growth products, which are defined us any products launched in the last five years or have exclusivity through ‘18. These now represent 32% of our sales. So a third of this company is from the growth product. It’s a very important factor as we create a platform for future growth. The second is emerging markets. We had a very good year in emerging markets up 11%. Those markets now account for over a quarter of our total sales. So looking at each division briefly, you can see on slide 11 that Pharma grew 1% in constant currency. I can tell by the bars, it’s down in U.S. dollars by about 1% but we absorbed the generic impact of 7 percentage points to be up 1% in constant currencies. That’s an accomplishment that I think that many pharma businesses can talk about. Alcon grew 6%, on slide 12, in constant currency with two very strong consecutive quarters in the second half of the year. Surgical was up nicely, 7% for the year behind the launch of Centurion. Pharmaceuticals in Alcon were up mid single-digit about 5% and Vision Care was up 4%. And then finally, Sandoz grew 7% versus prior year driven by the U.S., Western Europe and some pretty good growth in emerging markets and importantly our biosimilars business grew over 20% and crossed the $500 million mark in 2014. Now, in terms of productivity on slide 14, we delivered $1.6 billion in procurement savings. This is the best year ever that we’ve had in procurement. We also continue to manage our M&S spend down and this is at a time of some pretty intensive launches. So M&S spend as a percent of sales dropped about 80 basis points versus the prior year. We also have now restructured, exited or divested 24 manufacturing site since our footprint program started in 2010. On slide 15, you can see that from a quality stand-point, our continued focus on system upgrades across our network continue to show nice results. We’ve 247 health authority inspections just two were not satisfactory and we have two still pending. We also importantly closed the FDA Warning Letter for the three Sandoz sites in North America, so a great progress on the quality front. We’re also on track in terms of the portfolio transformation on slide number 16. The GSK transaction is on track and for modeling purposes we have assumed in the outlook that Harry will give that the GSK transaction closes at the end of the first quarter. This year, we also created Novartis Business Services on slide 17. This is going to become increasingly important in a currency the kind of environment that we have from a currency standpoint. NVS has made very good progress, so we have a new cross divisional structure in place. This group held their cost flat versus a year ago in 2014 versus the prior year and we got some additional top line synergies through the customer first initiative where we go-to-market as one company and we do things like combined generics with some of our innovative drug offerings. So now I would like to turn it over to Harry to talk about the financials in more detail.

Thank you, Joe. Good morning and good afternoon everyone. Before we dig into the numbers, I would like to show you how we delivered in our guidance. On slide 19, you can see the 2014 was a good year from an operational perspective, as we met every criterion of our guidance, which refines during the year including group sales and core operating income, as well as sales growth from Pharma, Alcon and Sandoz. If you turn to slide 20, you can see a summary of our performance in the fourth quarter and full year. As a reminder, when comparing our performance with the prior year, we’re comparing to 2013 figures excluding our divestment of blood transfusion diagnostic unit, this is consistent to as how we reported our Q2 and Q3 results. Novartis delivered solid sales growth with strong core leverage in the fourth quarter and the full year. In constant currencies net sales were up 4% in quarter four and core operating income was up 9%, driven by the sales performance and the continued impact of productivity programs. In the full year net sales and core operating income increased by 3% and 8% respectively. Net income also improved substantially by 19% in constant currencies in the full year, benefiting from the exceptional gain from the sale of our 22% Idenix stake to Merck, which I mentioned in last quarter, as well as divestment of our LTS Lohmann shares in the fourth quarter. Free cash flow was much stronger in the full year, reaching $10.8 billion, an increase of 12% or $1.2 billion compared to prior year. I’ll give you more detail on free cash flow later. On Slide 21, we show our usual breakdown of top line performance which demonstrates the strength of the underlying business and the portfolio rejuvenation. If you go step by step, we achieved 7% of underlying growth driven entirely by volume as pricing was flat. This more than offset the generics impact of negative 4% at group level or about $2.4 billion, mainly for the loss of exclusivity of Diovan and Zometa/Aclasta, and the currency impact of negative 2% resulting in the US dollar growth of 1% on sales. You’ll see a similar, but again more pronounced story on core operating income where the higher sales and our productivity initiatives across all divisions drove an underlying growth of 22% more than offsetting the low price effective minus 1%, and the effects from generics of minus 13% on core operating income. The minus 5% on currency impact takes us from a constant currency flow of plus 8% to the US dollar growth of plus 3%. Turning to Slide 22, I’m especially pleased to report that our productivity programs and consequent resource allocation are delivering a margin improvement of 1.2 percentage points in 2014 in constant currency. With core operating leverage in quarter 4, we have delivered core margin expansion each quarter this year. It is also worth noting that all divisions are improving margins, showing the broad base of this improvement. Pharma and Alcon were the key contributors. Pharma grew sales by 1% versus prior year, but it’s was able to grow core operating income by plus 4% with the announced restructuring programs together with other productivity initiatives, generating a 1.1 percentage points improvement in core margin. Alcon grew sales by 6% and core operating income by 8% resulting in 0.6 percentage points margin improvement in constant currency. Sandoz contribution to the improvement in group core margin was small as Sandoz was impacted by high price erosion. The smaller divisions including consumer heads, group core margins strongly from higher sales and good attention to cost, but made the smaller contribution for the group core margin overall. Now on Slide 23, the improvement in group core margin was driven by lower functional costs mainly in R&D and M&As. As a percentage of net sales, core R&D expense decreased by 0.6 percentage points in constant currency and core margin and sales expenses decreased by 0.8 percentage points in constant currency. The decline is based on strict resource allocation to ensure cost discipline, despite continued high investment and promising pipeline projects and key product launches. These improvements reflect our intent focus and emphasis on operational excellence. Group core G&A also decreased by 0.2 percentage points with the setting up of Novartis business services we aim to further decrease G&A as a percentage of sales, but more on the NBS later in my presentation. On Slide 24, you can see what core operating margin is for continuing operations, versus the total group, based on 2014 performance. Despite the fact that continued operations do not yet include sales from the GSK oncology portfolio, our core margin from continuing operations is 250 basis points higher than the current portfolio. Please note that the margin for current portfolio includes 0.2 percentage point benefit from the cessation of depreciation. And as a reminder, Novartis will also benefit from the 36.5% interest in the GSK Novartis Consumer Health joint venture, which will be recognized as income from associated companies i.e. below the operating income line. On Slide 25, we turn to currency. Let me first deal with 2014. As we guided in our quarter three presentation, the impact on the top line for the full year would be negative minus 2%, and on the bottom line would be between minus 4% and minus 5%. Not surprisingly with the actual exchange rates in quarter 4, we are at the upper ends of that guidance for core operating income. This was due to significant strengthening of U.S. dollar in quarter 4, against all key currencies. Nonetheless, the full year 2014 impact remains minus 2% to top line and minus 5% on the bottom line. Now turning to 2015, if mid-January exchange rates prevail for the remainder of 2015, the currency impacts for the full year versus 2014 would be 7 percentage points on net sales and minus 12 percentage points on core operating income from continuing operations. This currency impact results again from the significant strengthening of U.S. dollar against most currencies, especially during the fourth quarter of 2014. Early January the currency impact was minus 11 percentage points of sales and minus 8 percentage points on the core operating income. The mid-January appreciation of the Swiss franc has worsened dollar currency impact and the core operating income by minus 4 percentage points, which is included in the negative 12 points impact since Switzerland represents about 13% of our operating expenses. However the Swiss franc impact on net sales is minor as Novartis only generated about 2% of its net sales in Swiss francs. We expect the negative currency impact to be more prolonged in the first nine months, as the strengthening of the dollar was most notable in quarter four, 2014. Now, let’s move to slide 26, given the currency may have a significant impact on 2015 reported U.S. dollar numbers, I would like to give you some more background and explanations on how Novartis is impacted by currency movements. The table on the left side shows the currency structure on our continuing operation sales and operating expenses for selected major currencies as they are also published in our annual reports and SEC Form 20-F. This can be used as a basis to estimate the currency impact. Let me walk you through the U line, step by step as an example assuming January 16, 2015 exchange rates was applied for the entirety of last year’s currency structure. As of January 16, the euro depreciated by minus 12 percentage points to U.S. dollar versus the average rate in 2014. The 26 percentage points represents a share of sales we generate in Euro and combining those two values leads to an impact on continuing operation sales of minus 3 percentage points from the Euro. Applying the same launching on our share of operating expenses and adjusting for net sales in the Euros alone, the impacts on operating income would also be around minus 3 percentage points. You can also see the respective impact from the depreciation of the Japanese Yen and the Russian Ruble against the Dollar. Interesting is the effect of the Swiss franc, as you can see in the line, which says January 8, which is before the Swiss National Bank announcement to unpack the Swiss Franc from the Euro, our high Swiss Franc cost base was providing kind of a natural hedge for our Euro exposure in operating income. The recent unpacking has removed this effect and as described earlier, increased the currency impact. This slide is illustrative only and details the impact of selective currencies. Of course the other currencies and they may also have an impact on our results, but I hope this helps you to better understand the currency structure that we also displayed in our filings. Let’s turn to free cash flow on slide 27. As expected, our recovery of free cash flow continued in the fourth quarter and we ended the year with $10.8 billion of free cash flow, $1.2 billion above the previous year. The increase was driven by strong operating performance, including exceptional gains from Novartis Venture Fund, despite negative currency effects. The strengthening of the U.S dollar in quarter four generated also significant hedging gains, while investments in intangibles were somewhat higher in 2014. Moving to net debt on slide 28, you can see how net debt decreased from $8.80 billion at the end of 2013 to $6.5 billion at the end of 2014. This was mainly due to our strong free cash flow of $10.8 billion, as well as proceeds from divestments, including divestment of the blood transfusion diagnostic business in January of 2014 and from options exercised related to our employee participation programs, partly offset by our dividend payment of $6.8 billion and the share purchases of $6.9 billion. Now turning to 2015, beginning with the dividend on slide 29, as Joe already mentioned, we are proposing a dividend of CHF 2.60 per share, up 6% in Swiss Francs and up 7% in U.S dollars. This marks our 18th consecutive dividend increase. The compound annual growth rate for the dividend is 10% in Swiss Franc and 13% in U.S dollar. This reaffirms our commitment to a strong and growing Swiss Franc dividend. The payout ratio was 71% of net income, assuming mid-January exchange rates. Starting on slide 13, I want to present some insights on our outlook for the full-year 2015. Let me remind you that this outlook is for continuing operations in 2015 versus continuing operations in 2014 and is in constant currency. As you know, we divested our Animal Health business to Eli Lilly on January 1. We expect to close our transactions with GSK in the first half of 2015. However for modeling purposes only, we assume that a transaction with GSK will close on March, 31, 2015. With that we expect our net sales to grow mid-single digits in constant currency. As in 2014, we are expecting further core margin improvement in 2015 in constant currencies with core operating income expected to grow ahead of sales at high single digit rates. Pharmaceuticals and Sandoz sales are both growing at mid and Alcon growing at mid-to-high single digits. As mentioned this outlook is based on the forecast assumption for modeling purposes of closing the GSK transaction by March 31, but would still hold if the transaction were to close at the end of June. With respect to core margins, I thought I would take this opportunity to explain some of the positive and negative margin drivers for our continuing operations, none of which should come as a surprise. We are now on page 31. The key of positive margin drivers in 2015 at portfolio transformation mainly impacting H2 to pharmaceuticals growth products, the full-year impact of the 2014 restructuring initiatives, ongoing productivity programs and NBS. I expect it to be positive for our core margin. I will come back to NBS in a minute. Against this, the impact of generic competition more in H1, the launch and the pipeline investments for example in Cosentyx that as we said and of course currency expected to be negative drivers. But overall clearly a positive margin story in 2015. A few comments on NBS on slide 32. Novartis Business Services is fully operational in 2015. Through streamlining and consolidating functions, optimizing the geographical footprints, leveraging our scale and cross-divisional coordination, we expect to maintain the addressed cross base flat. With the scope of about $5 billion spend in 2015 and holding to offset, we expect Novartis Business Service to contribute a marginal improvement in 2015 which is included in our core operating income guidance. On slide 33, I want to summarize the core margin movements, as it is somewhat complex given the portfolio transformation and the currency movements. This chart is illustrative to walk you through the building blocks and to not to scale. Overall we expect an improvement in core margins between reported total Group 2014, core margin and 2015 continuing operations core margin despite the currency impact. This is driven first by the portfolio transformation transactions which we focus Novartis now as three leading divisions and second by the expected operational core margin expansion on the continuing business and constant currency due to core operating income growing faster than sales. Assuming in mid-January 2015 exchange rates prevail for all of 2015, currency would reduce the overall reported improvement in margin somewhat and that showed we expect the overall core margin to improve. And with that I will hand over to David.

Thank you, Harry. Our pharmaceuticals business delivered constant currency sales growth and as you see core operating income grew well above the top line, in a large part from restructuring a continued focus on procurement as well as reallocating resources and getting our manufacturing base in a better place. So now I think it’s worth taking a deeper look at sales to see exactly the components of our underlying revenue. In particular, on Page 36, you see now that our growth products represent 43% of division sales. This gives us one of the youngest and healthiest on market portfolios among the big pharma companies. On Page 37, we put the dynamics of our product launches offset by generic erosion into perspective over a four year period. And what you see is that, during the course of 2014, we’ve dropped the biggest generic impact in our history. Importantly, we were able to launch enough new products and do it – do so well that we're able to continue to report constant currency sales growth. Part of the growth story is also on Page 38 where you see we made a decision a few years ago to further invest in emerging growth markets. Though the emerging growth markets now represent 26% of our business and have grown from a 6% growth rate in 2012 to 11% growth rate in 2014. Looking forward into 2015, we would say that growth is likely to be a bit lower, particularly given geopolitical risk and the impact of oil on some of these economies. Turning now to the next page, we see a familiar slide which is our unparalled growth platform with exclusivity until 2018 and beyond. Gilenya is now the biggest product in this growth category with 30% full-year growth. I’d also like to move you down to the bottom of the chart where you see our respiratory franchise initially anchored by Xolair which also grew 30% for full-year 2014. But just as importantly, the launch of our three inhaled products Onbrez, Seebri, Ultibro while being very recent launches now reaching almost $0.5 billion in revenue for our company up 93% versus the previous year. Now let’s spend a few minutes on a few of these brands as well as a few of the near-term pipeline assets starting with Gilenya on Page 4. What you see is the 30% growth for the year, as well as a 32% growth during Q4. Now with over 114,000 patients treated to-date with Gilenya worldwide. In a number of the markets ex-US we have number one in value share in this market segment. On Page 41, we take a look at Lucentis, where we now see that a new indications have become a blockbuster in their own right. Growth for full-year was up 5%, while only 1% in Q4 as we saw one of the competitors into the DME market, and we saw continued pressure from the use of off-label Avastin. On Page 42, we see that Tasigna is now accounting for one third of our CML franchise. It was up 24% for the year, and 30% in Q4. In the U.S. growth is mostly driven by increased usage of Tasigna in first line CML patients which is very good news. We also continue to report data, which shows that patients do not progress as quickly as they do with Glivec. On page 43, you get some insights as to why our respiratory franchise is growing so well. In particular, Ultibro, which is the combination of LABA/LAMA product, which was launched in ex-U.S. markets, is off to a very strong start. With market shares between 4% and as much as 7% in some of these markets, franchise growth for the full year as well as for the quarter was roughly 94%. We also during late December completed our submissions to the U.S. FDA for both Seebri and Ultibro and with an expected approval in the very end of 2015. So Jakavi on page 44, you see really excellent growth of 72% for the full-year and 94% from the fourth quarter, importantly we received now a positive CHMP decision and polycythemia vera, which should result in a launch in a new indication in the second quarter in the EU, which should drive additional growth. We believe the target patient populations in myelofibrosis, as well as PV are roughly the same size. On page 45, I will share with you also a new approval for a medicine called Signifor, the long-acting release form for the treatment of acromegaly. We currently sell our product called Sandostatin LAR, which is $1.6 billion in full year 2014 sales. A large number of these patients do not get full control with the use of Sandostatin, one of the competing therapies. Signifor would give these patients a new opportunity to get their disease under control and should add a few hundred millions of dollars to our overall somatostatin analog franchise. Now for some of the really exciting products starting at page 46 with Cosentyx, things are going very well with Cosentyx. As you can see, we were able to receive a Japanese approval, a European approval and a U.S approval roughly all back-to-back, which means we get to launch in all those three key markets at the same time unlike most drug launches, both in our company, as well as for the competition. In psoriasis, Cosentyx is highly differentiated in the marketplace with superior efficacy now shown versus Enbrel, as well as Stelara, sustained response, a favorable safety profile and a monthly maintenance regimen. With that anticipated I should better say appreciated by most is the size of the market opportunity. Psoriasis is a disease that if still not well treated, dermatologists historically having settled for a 75% improvement in the quality of skin for these patients. Now with the anti-IL17 and Cosentyx in particular, the vast majority of the patients can get clear to almost clear skin, which means they can go back to work and that has to deal with some of the pain and disfiguration associated with their disease, the market effect just for the use of biologicals in psoriasis is almost $6 billion based on October moving total estimate and that market is growing at 22% per year. So you can imagine why we’re so excited about the opportunity. And if that was the entire opportunity, one might be satisfied but the reality is, this is just the beginning of where the anti-IL 17 may take us. We’re currently striving to be the first company aiming to have three indications on our label. And as you could see from the data on page 47 looking may be upper left hand corner of the chart, you see the very, very nice responses in psoriatic arthritis which will form the basis of a filing early this year as well as the truly excellent responses in ankylosing spondylitis where there are not many options for these patients. When one adds these three categories together, these three diseases together, the market today is already well over $10 billion and also growing at roughly 22%. As the result, Cosentyx has the opportunity to become a multi blockbuster therapy. Now on page 48, I’d like to take a moment to just update you on LCZ696, our product that will be initially labeled through reduced ejection heart failure. What I can say here is the discussions with the regulators are going very well. The European Union as well as Swissmedic have granted an accelerated review. In the case of the EMA, this is the first time an accelerated review has been granted for cardiovascular therapy. We submitted in mid-December in the U.S. and within 60 days of that submission, we should hear from the U.S. FDA whether or not an accelerated review is possible. Should they grant an accelerated review, one would expect a labeling decision or an approval in August of this year. Importantly, we continue to generate additional data and publications. And then more we look at the data, the more excited we get about the opportunity to reverse of the negative impact of chronic heart failure. Take a look at the left hand side of the chart there and what you’ll see is, there was a 20% reduction in sudden death. Even more importantly, if you look at the number of patients who actually have come from their heart stopping is market. The challenge we will face and I think the opportunity if we are changing the treatment paradigm of this disease is to help physicians understand that when a patient comes back to their office just because they may look well and may not have any complaints, they are all finely progressing. And their first symptom they may have may be that their heart stops to work and that LCZ substantially reduces the likelihood of that occurring. I’d like to now wrap up on Page 49 with our expected news flow for the year. Once again it’s a very exciting outlook as our R&D engine continues to develop. In particular, we already had good news in three areas this year with Cosentyx’s approval on Europe and in the U.S, as well as the positive opinion on Jakavi in polycythemia vera. In addition, we are looking forward in the first half to hearing about the new formulation of Exjade in the U.S. which will replace a very difficult to take dosage form. In addition, we’ll be filing Cosentyx for the new indication and we expect to hear from the CHMP for Zykadia and ALK positive non-small cell lung cancer. In the second half, we’ll be in a position to both share data as well as to submit our first PI3 Kinase inhibitor for the treatment of breast cancer. The new products for the achievement of Basal cell carcinoma, as well as we hear from the FDA and from the European Union on LCZ. And last but not least, by the very end of the year, we would anticipate hearing back from the FDA on QVA and NVA. So a busy but exciting year as we continue to innovate. And now back over to Joe.

Thanks David. So just to summarize, I think 2014 can be characterized as a good year for Novartis. Good financial results, one of the best innovation years that we’ve had in Ohio, but even more importantly focusing on their portfolio transformation, 2015 is going to be all about execution. So first and foremost, it's delivering the numbers and not letting some of the other things get in our way. Strengthening the innovation pipeline, so you’ll see us add to that pipeline, as well as completing the portfolio transactions including the integration and separation of those businesses. We’re going after more cross-divisional synergies particularly with some of the foreign exchange headwinds, and also building a high performing organization in the area of quality and incompliance. So that’s sums up the year, and I’d be happy to take questions.

[Operator Instruction] We’ll now take our first question from Richard Vosser from JP Morgan. Please go ahead.

Hi, thanks very much for taking my questions. First question on marketing and selling margin improvement, you’ve also shown an 80 BPs as you’ve highlighted in 2014. Just wondering how much more you can do on this going forward, and I am thinking beyond '15 and really at what point do you think you’re going to start affecting your competitiveness? It would also be useful if you can discuss whether you see the potential improvement of going forward coming from Pharma or whether Sandoz and Alcon can contribute over the next couple of years? Second question just on the BKM120, just as you look out to the data in the second quarter, where do you think this is going to fit in the treatment paradigm of breast cancer given the potential also by the CDK4/6 and LEE011 you’re your pipeline. And finally a question on generic Rituxan, looking a clinical trials if the ORR endpoint is at 24 weeks. So could we potentially see date on this that as in 2015 or should we think of waiting till 2016 as just before a potential launch? Thanks very much.

Okay, Richard. Starting with M&S, I do believe that the progress that we showed this year was very important, because as you know we had critical launches in Pharma, but we were launching in Alcon, the Centurion as well as a number of other important launches. I do believe that beyond 2015, it’s probably going to be a lumpy, it’s going to be a straight line, but there is more room here for margin enhancement particularly as David and his group shift more towards specialty medicine, specialties down closer to the low 20s. And also as Alcon continues to grow the topline, Jeff and his group are looking at maintaining or slightly growing M&S, but growing a little slower rate than sale. So, I think trend line you could see that M&S is going to be a source of margin, but it’s not going to be every year, we got some big launches coming up in 2015. Regarding BKM, David?

It’s a BKM just to pancreatic neuroendocrine tumors every time that we’re investigating it’s in breast cancer in a Phase III trial of HR+, HER2- in advanced breast cancer. We also have a second trial that drug is being studied and they were all a mix of failure so, from a heart failure and then last, but not least there is the opportunity we have in the Phase I going down in combination with the CDK4/6 inhibitors. So, lots of things upon the overall efficacy level exactly where it’s going to play. And well, I am blind in the second quarter and as I said certainly by early in second half you’ll hear about it.

And Richard on generic Rituxan, you could imagine that the whole biosimilar space is amazingly competitive right now in terms of legal strategy, so we’re not going to comment other than to say that we are in a Phase III.

Sure. Thank you.

We will now take our next question from Matt Weston from Credit Suisse. Please go ahead.

Thank you very much. Three questions if I can, the first on Novartis Business Services. I note from the slides you highlighted a cost base for NBS in 2015 of $5 billion. Joe, I think I recall you referred to $6 billion as the combined cost base. When you launched NBS in mid-2014, can you confirm that’s the case and if that’s an indication that effectively you’re looking to save a $1 billion in the first year? And if that, well, and then a subsequent question, how much in total of that cost base do you think can be saved overtime? Secondly, around cash returned to investors, Harry reiterated the commitments of a strong and growing Swiss Franc to dividend? How should we think about the share buy back in the light of currency moves and the share price increase? And then finally, a pipeline question, RTH258 the aflibercept compound, I see it moves to Phase III. The text in the release mentions positive Phase II data versus both Lucentis and Eylea, can you just give us some more information on that? Did it showed superiority to Eylea in the Phase II study and when do we expected to see that data? Thank you.

Okay, thanks Matt. Regarding NBS, yes the slide shows that the cost base is $5 billion and I have said $6 billion. The cost base on NBS is going to continue to increase over the next few years as we fold more and more responsibility into that unit. So we started with a manageable amount of functions, financial reporting and accounting, procurement, a number of other groups. And as NBS has their organization structure laid out, we’re going to continue to add. So don’t misread the $6 billion versus the $5 billion as a billion in savings. Think about it as $5 billion, it’s going to go to $6 billion, it’s going to go to $7 billion under the purview of NBS. The way to think about NBS savings in terms of the long-term potential, as we grow the company over the next five years, if NBS could just hold our cost base flat by taking cost down in some areas as we reinvest in other areas, that’s going to be highly margin accretive to Novartis. And so we’re thinking about NBS as a facilitator for margin growth in the company but we’re also not talking about slashing and burning because we’ve got some very important launches. The long-term success of this company is still going to depend on innovation and growth, and so we’re going to fully fund those growth areas and we’re going to do it by taking cost out of NBS. So if you think about flat cost and the margin accretion that that could create as the company grows, I think that’s probably the best way to think about it. Harry on to share buyback.

Yes, the overall in terms of the return of cash to investors, you have seen two elements of that in my slides on page 28, we bought shares back for $6.9 billion, which is about $2.4 billion from our overall full year $5 billion share buyback program, but there was also a big option exercise and we have bought back all these shares and in our commitment to always mitigate impact from employee participation programs. So from the total $5 billion we continue. So my expectation is that also in 2015, we will buy about, $2.4 billion is the remaining of the $5 billion program and we also have an intention, but we don’t give exact timing on mitigating employee participation programs as well. So you have seen also on page 28, that we announced and is our proposal through the AGM another strong Swiss franc and USD dividend increase. Our dividend policy continues to be a strong and growing dividend Swiss francs and that will continue to be our focus.

So Jeff, RTH?

Yes. On RTH258, which is the product formerly – compound formerly known as ESBA 1008 is the novel single chain antibody fragment that we’re really excited about in the treatment of wet AMD is a follow on next generation product and the space. So in December, we did initiate Phase III clinical trials to evaluate the safety and efficacy of RTH versus Eylea. There are two studies in our Phase III clinical program, we had our first patient first dose in mid-December and we enroll about 1700 patients. We are going to be presenting the second Phase II, we have two pivotal Phase II studies one versus Lucentis, one versus Eylea, the date that we haven’t released yet will be presented at the 38th Annual Macula Society Meeting next month where we’ll be able to share a bit more regarding the profiles of the product and its dosing, frequency advantage and the longer duration of action that we’re seeing with that product and why we’re excited about it.

Great.

Next question please.

We will now take our next question from Michael Lewiston from Barclays, please go ahead.

Thank you, it’s Michael Lewiston from Barclays. Three question please. One again going back to the foreign exchange, from your perspective, given the moves and conscious you have seen, is there any need for structural changes in your cost base outside to scope that you were looking at previously and in particular looking at the implementation of NBS, does the currency move require some change in the set-up structure there? And secondly a clarification question for Harry. In terms of your Slide 30, the guidance from a growth rate perspective. When you say pro forma is that adjusted so like-for-like including the Glaxo Oncology revenues in 2014 from which pro forma base you then guide for growth? Or is it excluding those revenues and then including those for 2015. And then the third question for David. On LCZ, last time you spoke on that asset, you were talking about potential trials focusing on the weaning of patients off the ace inhibitor Enalapril onto LCZ to make the physician's life easier and make them help to understand how to take patients often onto LCZ. Can you provide any update on those studies, please?

Okay, Michael regarding the FX and the moves, yes since FX has worsened we’re looking at ways that we can structurally accelerate some of the plans for Novartis Business Services. And part of that is that obviously we took a big whack when the Swiss National Bank unpegged the Swiss Franc from the Euro. And so we’re taking a hard look at our Swiss cost base, but obviously we have to look globally, it was – thank goodness we had set up Novartis business services last year in 2014. Now we have a good organization in place, so what we are doing is we are going to work now looking at ways to accelerate structurally that organization towards the outcome that we had thought we would do maybe on a longer-term basis. And maybe incurring a bit more risk in terms of moving two hubs quicker than we thought we were going to – so there are many things that we are considering right now, but the answer to your question directly, yes, we are taking hard and decisive action around mitigating the FX, because it’s an issue for us. What I don’t want to do is I don’t want to sub-optimize the launches. So we’ve got to launch LCZ in Cosentyx and all the other launches with full spending, so that we get peak sales in future years for the company. And then NBS's role is going to be to help us offset the FX issue. Harry?

Yeah. So just to clarify, on continuing operations, we assumed the GSK Oncology business to barely start to be part of continuing operations as of April 1, 2015. And there is a modeling assumption, some people speculated now they say they will close there. We continue to expect to close in first half, but like with Diovan mono, we just put in a modeling stake in the ground, so that is better alignment also on the analyst models. And also to take this opportunity to clarify that if you go to Page 13 of our press release that shows you exactly what continuing operations is, I know, you know, but some others had questions what are the greedy include. It is pharmaceuticals, Alcon, Sandoz and then the continuing part of corporate. So that is exactly what will be the 2014 rates from which we have guided, we have call it for Pharma because of the 2014 we have a different reported base and of course also 2015 from this modeling assumptions there will be a quarter of OTC, a quarter of vaccines and 12 months of flu which adds too in the reported way to the continuing operations. One thing to add also is as you look into a core EPS modeling of – as I said earlier, we continue to share buyback, it’s roughly 1% of our share base, the 2.4 billion as well what is not in our core operating income guidance is of course our 36.5% share of the OTC joint venture which come into our P&L below operating income as income from associated companies.

And David

In terms of LCZ, so there’s really three components of our program. The first is what you mentioned which is, we are looking to see if there is any other regimen that would make it easy for patients to start on LCZ. Remember during the Phase III trial actually most patients experienced no problem, but we can now look at whether or not dose escalating for example a little bit more slowly makes the difference. And you will see the data before we launch. In addition we have a Phase III program underway and preserve ejection fraction which were very excited about. And then we’re starting discussions with the number of investigators who are very, very interested in the positive renal and liver effects that this drug is generating and we’re beginning to think about where else we could take this medicine in the future.

Thank you. Next question please

We will now take our next question from Jeff Alfred from Jeffries. Please go ahead?

Hi, thanks for taking my questions. Just first off on Alcon we are seeing a great recovery in the growth there. I just wondering if you can talk to how sustainable you think that is, and just what a long run rate of growth within the business into the mid-term might look like. It is similar to what you see in 2015. Then just secondly just helps us a little bit on the core EPS side any factors you want to flag between core operating income and EPS such as other income or the tax rate that we might need to consider in our modeling. And then just lastly, I'm wondering if you can just comment strategically on what the business development approaches are within Pharma. Thank you very much.

Jeff.

Yes. It’s Jeff. We are taking at quarter-by-quarter at this point. We are pleased with the last couple quarters of performance getting double digit bottom-line growth and mid-to-high single digit growth at 7.5% in Q4. I think in terms of the drivers on that, I’m pleased with the continued acceleration of our surgical business, which grew 7% as Joe mentioned in ’14, and it’s really on the back of a very strong centurion launch as part of our Cataract Refractive Suite and that’s having a nice pull through effect, not only on IOLs where we’ve been struggling I think, few quarters before and we’re seeing good volume growth bounce back with that, but also really on consumables, equipment packs the whole suite of products that we surround our surgeons with. We also on the pharma front are seeing improving performance, which helps with margins from an ex-perspective pharma was up 10% in Q4 and we’re seeing accelerating performance in our glaucoma business, keep in mind we’re number one in that business globally with about a $1.5 billion in sales, I’ve been pleased with that, coupled with the opportunity in dry eye where we continue to see sustained grown at about 25%. So, while we do face headwinds in 2015 in the form of about 1.5 points of loss of exclusivity due to generics that hits our growth, I feel good about the momentum that we’re seeing in surgical pharma is improving. What to do on Vision Care frankly, to improve our contact lens care business, because our contact lens business is doing very well, but the solutions business has dragged that business down to 4% growth. So, I think all in all a good momentum, but early days.

Okay, Harry core EPS any factors to flag?

Yes, thank you Jeff. As I mentioned Jeff beforehand the OTC JV income 36.5% continued share buyback reducing the share count on the one hand and then our – as you have seen our core tax rate has been slightly above 13 not much as 14.0, I see that a sustainable couple of basis points up or down fine, but all was sustainable and from that standpoint we had some hedging gains on the operating income side in the range $50 millions, $60 million that may not be repeated well, but in the overall contacts not many moving pieces.

And David, business development.

So that’s three components to the approach, one is to build more depth in the key franchises just as we did with the GSK deal. Second is to go after other game changing therapies as you saw when we signed the University of Pennsylvania deal around cell and gene therapy. And last but not least, we’re starting some efforts near of digital medicine and you saw that we signed and created a new joint venture company with Qualcomm last week which will bring to us the digital technologies we believe we need to surround our medicines with in order to improve patient outcomes.

Thanks very much.

Next question?

We will now take our next question from Tim Anderson from Bernstein. Please go ahead.

Thank you. So as you kind of headed into 2015, I am wondering if you saw in the U.S. any price compression across to any categories. And on that same line of questioning in multiple sclerosis some people think that the category where you will additionally see price compression unlike we’ve seen in respiratory and diabetes. I am wondering, if I could get your perspective on those two questions and then on Biosimilars and the recent good news at FDA on. I am hoping you can provide an update for how things evolve from here in terms of what’s really next payer discussions have you initiated those? What would be the marketing plans? What divisions within the company you’re going to market the Biosimilar and any other details that you can share?

Okay, starting with U.S. price compression. David why don’t you start off?

Yes, I think the general environment around the world including the U.S. is a continued march towards getting more value out of the healthcare spend and medicines in particular and that would continue pressure on prices, particularly when there is a therapeutic equivalent and now you’re seeing that in the Hepatitis C market in particular. We have not noticed in our portfolio any kind of step change across any of the categories in which we participate in, but just that slow steady increase in pricing pressure.

Okay, on Biosimilars I’ll start and Rich you can jump in, but across the divisions obviously, we have a lot of capabilities that will be used to launch not just the first Biosimilar in the U.S. but what comes next. So think about this is a close collaboration between the divisions, but with the primary responsibility resting in Sandoz and Rich you can talk more about or if you want to talk more about progressive and what the plans are?

Thank you Joe, I’ll dig into the question of Tim, obviously we are very excited with the potential progress, I mean we’re very pleased that the FDA advice report unanimously voted 14 to zero in favor, we’ve been prepared a long time for this launch and over a number of months return or years and obviously we’re looking at all the key components of any launch as of Biosimilar is a new area that we’ve moved into the U.S. in this side. We are very complement where we are right now, just to go into a detail about how we are going to do that regard to payers and our marketing and our sales force, I think would open us up to competition, so I won’t go into detail on that.

In Europe, you are aware of the litigation that’s going on, BPCIA really is a pathway that is being blazed, I think right now in terms of clarification and filgrastim will do that and I think that will benefit us down the road as we launch additional new biosimilars into the U.S.

Thank you.

Next question please.

We will now take our next question from Graham Parry from Bank of America. Please go ahead.

Thanks for taking my questions. Firstly, for Harry, what productivity improvements are being assumed in 2015 guidance; I think you said 5% of sales being delivered in 2014 and any dollar savings maybe you can give us from cost of witness at NBS being assumed in the guidance. And secondly, given reported guidance including January FX rates, it seemed sales roughly down 2% to 3% and operating income 3% to 4% down. On a reported basis, is it fair to assume reported continuing core operating margins were being flat to down, so essentially currency wide out to your margin benefit. And then thirdly, a question on the basis of reporting, I’m still to close, the main core measure, you focused on prior to deal closes included consumer and vaccines. The guidance is now on a core continuing basis. So should we expect that to be focus for core reporting post deal close? And then, one just general question for Joe, express scripts has been going after oncology pricing. Any general thoughts of that in a world of generically wet from 2016 and is there any risk to signet pricing or the product being pushed into second line step therapy? Thanks.

Okay, Harry?

Yes, on productivity overall, you have seen the different pieces. We have delivered regulatory procurement. Since this year Joe alluded to that we have set up NBS, which is now productive. So, I expect that also with our strong will to offset FX effects as much as we can without compromising on our business and launches that actually productivity will go up from here. And then on the currency margin, overall of course currencies are fluctuating every day as we know and the guidance that we are setting this up is from continuing operations as I mentioned earlier. And if you think about it also from the contribution of the discontinuing operations which you can see on page 14 of our press release our core operating income has been roughly $140 million in 2014 which is basically the cessation of depreciation effect. So, even if you now put in a quarter of OTC and vaccines kind of offsetting is more or less on vaccines in quarter one, there is some gain of OTC in quarter one, then we on through for full year that’s roughly $100 million, $150 million of loss on that range. You can model out to full report on to core operating income relatively easily assuming this March 31 modeling assumption for the GSK deals. So I think overall by focusing on continuing operations, it’s easier for everybody to model and I think it’s the appropriate way to guide you on.

And David on oncology pricing in the U.S?

Yes, so I think there will be increased pressure on oncology pricing particularly as you see new immuno oncology is coming into the market at a fairly high price and the fact that we are going to increasingly see combinations two or even three products being used together in oncology patients and they needs to - there should be a limit to pricing. So I fully expect whenever, a payer has good therapeutic equivalents they will put pressure on. In the case of your question specifically about Gleevec, I’ve actually said before, I’d not at all be surprised if payers around the world ask new patients to initially go on Gleevec because what this generic is going to be extremely cheap. But those who do not get a good response or have side effects will then rapidly be switch to a second generation agent. And we are trying to make sure that second generation agent is Tasigna. And in addition, in our pipeline we have another drug called ABL-001, which is meant to further add benefit for CML patients and further extend that franchise.

Thank you.

Next question please.

We will now take our next question from Florent Cespedes from Societe Generale. Please go ahead.

Good afternoon gentlemen. Thank you very much for taking my question. It’s Florent Cespedes from Societe Generale. Three quick questions, first on the respiratory, could we have an update on your plans for the U.S markets given the pricing environment and the mix ramp up of the products from your competitors? Second question on the new products, the products that you will be launching this year the psoriasis and LCZ. How should we think about their ramp up profile even the fact that they address to very different population? And the last question on multiple sclerosis, following the Tasigna results in primary progressive MS. What is the probability to CDS312 succeeding in secondary progressive and marginal question on MS what is your strategy beyond Tasigna? Thank you.

It’s David. Okay, so first in terms of our respiratory updates. So, just to clear sort of two words, ex-U.S we are starving with Neohaler, Seebri and Ultibro to be one of the market leaders in respiratory medicine. And that’s working as you saw from our 2014 sales levels. And it’s speaks through the quality of these medicines and the differentiation. In the U.S, the first chance for approval will be the back-half of 2015. And as we’ve said before we are talking to other companies about potentially whether we make sense to do a launch of Seebri and Ultibro together, but we haven’t yet made a final decision about how we go to market, but clearly in the U.S. we do not have the same strength and market presence as we have in Europe. So, we want to be cautious about not overspending in a category that is promotionally intense. In terms of Cosentyx and LCZ uptick, the launches in the U.S. are such that they are impacted ultimately by how payers put products on formulary. In the case of LCZ, this is a heavy Medicare population so the patients are elderly and what that means is we will not see a lot of formulary decisions during the first six months because Medicare won’t be making a decision during the first six months. So, we would expect a relatively modest uptick with LCZ and then going into the following year, once we get the Medicare reimbursement then the other carriers will start coming on you should then see acceleration. Cosentyx is less because the patient population is younger and less impacted by the Medicare decision making and as a result I would hope that uptick will be a little bit quicker. On the other hand, with Cosentyx there is a lot of competition and our strategy there, because I’ve been asked a lot about how we are going to price? It’s despite the best-in-class properties of the product. We are going to price largely on par with Stelara and that is meant to accelerate that market access of that brand. And then lastly in MS you asked me whether or not what our thoughts were on the second generation or the next product following up after Gilenya and how that would do in secondary progressive MS. Given that Gilenya did not serve a statistical difference in primary progressive. And what I heard in your question is you’re basically making the hypothesis that the lack of response to primary progressive means less likelihood of having a responsive secondary progress. And that’s indeed what key investigators tell us in their categories. So, I’m not making a big bet on the follow up to Gilenya. On the other hand, we have good data, increasingly good data that the anti-IL17’s are acted in multiple sclerosis and in particular we have a highly potent next generation ageing called CJM, which we are taking into multiple sclerosis and other indications.

Thank you very much.

Next question please.

We will now take our next question from Kerry Holford from Exane. Please go ahead.

Hi, thank you, a couple of questions, please. Firstly, I’d like to go back to NBS, so I can understand the medium offset. You talk about the core space being about $5 billion, today they are growing over time as that team manages more spend. So if you reasonable for us expect that cost base showed any decline on 2016 onwards are you may increase the budget that they manage or what reduce the underlying NBS spend back to something in the order of $5 billion over time. Secondly, on Cosentyx, David you mentioned the difference – three different markets for Cosentyx, do you think these rule distinct from one and another or is there some overlap to be aware of. And then lastly I noted that the RA Phase III study came in as a mix data, have you decided to not to prevent further where there because it’s less competitive in a very crowded market? What do you think else in that Phase III study when you feel arrows. Thank you.

Okay, starting with the NBS question. The $5 billion – the way should think about the $5 billion cost base in the increasing amount that they are accountable for its coming out of the divisions. So, if there is an additional billion that they pickup let’s say in 2016, it would be already in the cost base just managed by the three different divisions. So it really is a cost shifting and it will occur as the NBS unit gets up and capabilities running. I want to them to focus most on where the big money is right now, which is in the big spends of the procurement organization, the financial reporting and accounting and human resource transactions, IT there is a few very big chunks that they are going to go after in 2015 and again the way to think about it is, they are going to be reducing cost in some areas as we invest in others around the launches and capability built in the launch. So you will see – I think in hold our cost flat, obviously that would enable us with the growth on the top line to contribute quite substantially to margin growth. Cosentyx?

So a couple of Cosentyx pieces, first of all yes, there are three markets and there is overlap between the psoriatic arthritis market and psoriasis. About 30% of psoriasis patients end up eventually going on to develop systemic disease of psoriatic arthritis. However, the financial figures I share with you are not overlapping so we tried disaggregate them, so you can essentially add them together to understand the market opportunity. In terms of RA, we did do a clinical trial in rheumatoid arthritis. Cosentyx is active but there is as you point out there is a lot of competition in rheumatoid arthritis and the profile was not compelling enough for us to invest further. Having said that there are other potential indications for Cosentyx or more importantly for CJM which is our – a new even more higher potency anti-IL17 and multiple sclerosis so we wanted those indications, but I suspect we’ll have yet additional indications to talk about in the near future.

Next question please.

We will now take our next question from Alexandra Hauber from UBS, please go ahead.

Thank you for taking my questions. A couple on the guidance housekeeping questions and then some on Cosentyx and one on RTH, so that $2.5 billion generics that those you gave for 2015 that are quite bit bigger than I thought, could you just quantify please for me what the contribution from erosion of international dive and [indiscernible] are in this number and also whether that includes the Alcon exposure on [Indiscernible]. Secondly on Sandoz, the 2014 base has a 2% to 3% base effect from the generic Diovan contribution. Is that going to be similar in 2015 or is that the headwind against that do you need to work on to get your mid single-digit growth? Then moving onto Cosentyx, you’ve indicated pricing in line with Stelara, now there is difference, for Stelara the high dose is the exception for new dose, for Cosentyx that high dose is going to be the rule. So when you talk about in line, is it high dose versus high dose and low dose versus the low dose or average prices. I guess, I think that would be quite a big difference and also in the past you’ve given us some market data on the psoriasis market indicating about 10% uptake of biologics among the target population more that to be a psoriasis. Do you have any – do you happen to have any market intelligence which describes not how much the chronic usage is 10%, but what is actually the initial trial number. And then finally in RTH, the Phase III, can you please tell us what’s the dosing it evolve, will be after initial two loading doses and conceptually whether you intend. Mostly on larger – longer dose, less frequent administration or actually better efficacy?

Okay, so Alexandra, on your first question around the guidance, the $2.5 billion is a total group number, so that would include the Alcon, [Indiscernible] and the way to think about the big chunks I mean I will give you three of the big chunks Diovan obviously because it had a holdover into 2014, that’s about $1 billion half of the Pharma business, we’ve got exports that has gone in the U.S. that’s about another $300 and Gleevec’s about $300 in other parts of the world. So that’s a big chuck of that $2.6 and then you’ve got a laundry list of smaller numbers, Richard on Sandoz?

So, yes, if I answer the question correctly, it was how much time that would be in 2015 driving that mid single-digit growth. The answer is very, very little really insignificant. So we’ll be driving that business with the assumption that we won’t have any Diovan in there. We will be driving that based on the growth that we’ve been seeing through our major markets and some of our major growth markets as well as the strong performance we’ve seen in our biosimilars this year and we have to continue and build on next year.

David, pricing?

And so on Cosentyx, so Alexander you’re right, there is a low dose of Stelara and a high dose. So we did a blended average and just see if you can model. We assume that 55% of Stelara is used was the 45 milligram dose and 45% was the 90 milligram dose. Your question for more detail on the market, I don’t have that data in front of me. If you want to send me the questions, what we can try to do is see if there is any market research that might answer those questions for you.

And Jeff on RTH.

Yeah, Alexandra, so you just may be present a Phase II and then I go to Phase III. So the Phase II study met its primarily end point versus Lucentis which was data we shared in Q3, so it showed non-impurity with respect to macular thickness and then advantages with respect to dosage and duration of effect. And we will be presenting the second Phase II pivotal data to macular society as I mentioned next month. In terms of the Phase III design, we are looking for dosage superiority and better duration of effect. So we will be testing that basically in a Q12 with the Q8 step down regimen.

Okay. I think we have time for two more questions.

We will now take our next question from Andrew Baum from Citi. Please go ahead.

Hi, two question please. Firstly, realizing [indiscernible] synergies cross division, from the competitions I’ve had with industry executives including Novartis is not always as easy as it may appear given complete incentives for the two divisions. Obviously you’ve got a couple of initiatives ongoing that you’ve spoken about, but there is going to be much more in the future. What’s your internal level of confidence that you can manage those commercial incentives that have every one pulling in the same direction rather than lines that have individual product responsibilities? And then second with regard to Gilenya, you’ve had a capital additional patent business, could you just remind us or is that changed your outlook in terms of timing of generic entries for Gilenya inside the U.S. market? Thank you.

Okay. Andrew, on your first question about cross divisional synergies, they are difficult to generate, but we’ve had a number of years of experience doing it and now with the start up of NBS, one of the reasons why I asked Andre Wyss to run Novartis Business Services which includes the cost side, but also the revenue generating side cross divisional is because he was an operating guy who knew what happened on the ground with between these divisions and with the divisions, because he ran the U.S for us for a long time. We are changing the incentives for some of our key people to benefit from combining efforts to go after cross divisional synergies on the revenue side. And it’s becoming increasingly important with some of our biggest customers, not just in the U.S but also in Europe. And so, by changing the incentives, by creating monetary incentives for what you deliver cross divisionally and also with Andy’s experience in doing this and Andy driving it across the company. I am very confident that we’ll be able to significantly increase that number and we’ll provide some visibility to it as we did it up and running Gilenya.

Okay. So you asked about Gilenya loss of exclusivity just to ground this in a date it’s 2019 in the U.S. however, in Europe, in Japan it’s 2021. There are opportunities to extend the dating for pediatric exclusivity as well as additional in the U.S as well as additional regulatory data protection in Europe. And I would urge you to focus on those as opposed to additional patents.

Got it, many thanks.

Okay, last question please.

We will now take our last question from Odile Rundquis from Helvea Please go ahead.

Hi, good morning, just a few quick questions. Just on the Alcon, I think I just alluded it through the long-term driver of Alcon. I was just wondering that Jetrea in there, would it be any big or even medium contributor that you can even breakdown the project was in Alcon. And then just looking at your news flow table, two news flow for me that looks quite important just want to have some color on, is the FDA action dates LDH multiple myeloma I know that there was this extension, anything there a color on that and also the other survival data from the fraction from Glaxo also any timeline there would be helpful? Thank you.

Okay, Jeff the Alcon question.

Yeah, with respect to Jetrea deal look it’s been – I think it’s just fair to say it’s been below expectations of what we would have liked to have seen out of the gates for this product and BMA and BMT, I think part of that’s driven by the Phase III clinicals, the patient selection didn’t screen out, patients with vitreoretinal membranes and macular hole, so the efficacy was on the order of 25% to 30%. I think we are seeing good uptick of this product, when it’s used screening of those patients, so we are seeing efficacy rates that are more in the range of 50% all the way up to 90% with vitreoretinal surgeons who have a lot of experience using this. But I think time is going to tell us to how much we'll be able to really continue to drive this. We have been getting more approvals and more reimbursements, so I am optimistic that this will be a good product for us, but I don’t think it’s a product on the order of maybe what was expected a couple of years ago.

Yeah, David on LBH?

Okay. So, you are correct. The FDA late last you had extended the review clock by three months which would bring the new action date to February 24 for LBH in multiple myeloma. They are considering an approval based upon a subpart H request that we have made and we should hear something definitely in that timeframe. The second question was about GSK’s combination program in melanoma, where they are studying Tafinlar and Mekinist together and looking at overall survival. My understanding is those are driven trials, the mostly likely scenario is there will be something in Q1 of this year.

Okay, I’d like to thank everybody for attending, and we look forward to giving you an update at our first quarter in 2015.