Novartis AG (NVS) Q2 2021 Earnings Report, Transcript and Summary

Good morning and good afternoon, and welcome to the Novartis' Q2 2021 Results Release Conference Call and Live 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 will be available on our Web site shortly after the call ends. [Operator Instructions] With that, I would like to hand over to Mr. Samir Shah, Global Head of Investor Relations. Please go ahead, sir.

Thank you very much, and good morning and good afternoon, everybody. Big thank you to all of you again for participating in this call, and spending the time to listen to our quarterly results. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties and other factors. These may cause the actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. For a description of some of these factors, please refer to the company's Form 20-F and its most recent quarterly results on Form 6-K that respectively were filed with and furnished to the U.S. Securities and Exchange Commission. So, thank you again. And with that, I I'll hand across to Vas Narasimhan.

Thank you, Samir, and thanks everyone for joining today's conference call. Today with me I have members of our executive team, and also we'd like to introduce Karen Hale, our new Chief Legal Officer. Karen joins us from the biopharmaceutical industry with over 20 years experience in a broad range of medical devices and pharmaceuticals. So, welcome Karen. So, if we can move to slide five, I wanted to start by reflecting on the journey we've been on as a company, as we focus the company, rolled out our strategy, and delivered consistent performance over the recent period. Going back to the first-half of 2018, when you look at our financial performance over the first-halves of the -- for the subsequent four years, our sales have grown at 6% CAGR, our core operating income at a 13% CAGR, and we've grown our Innovative Medicines margin from 31.8% to 36.8% in the first-half of 2021, demonstrating that our operational execution has been strong. Now when you look ahead, we remain confident in our growth outlook, as we outlined in Meet the Management last year, where we highlighted a 4% CAGR off of our 2019 actuals to a 2025 sales goal of $60 billion or more, and a consensus IM margin, that is currently at 37.6%, that we remain confident that we can achieve. So, a strong performance track record, and a strong growth outlook remains the story for Novartis. Now, going to slide six, when you look at our strong performance in Q2, it was strong across all of the key elements that we believe will drive long-term value for our patients as well as for shareholders. Our sales growth was strong, and Harry will go through that in a bit more detail. We had strong productivity, with good core operating income growth and good margin expansion. We continued our innovation agenda, which will be critical to driving the growth to 2025 and, importantly, beyond. And we also continued on our journey to be a leader in ESG, with some important milestones. And I'll talk about each of these areas in turn. Moving to the next slide, when you look at our key growth drivers and launches over the period, we demonstrated, I think, strong performance across our key brand. Marie-France will talk a bit more about the strong performance of Entresto, Cosentyx, and Zolgensma, as well as Kesimpta, which is off to a good and strong start. And then Susanne will also cover the various oncology growth drivers. Now taken together, our key growth drivers and launches now account for 51% of our IM sales. And these products are growing at a rate of 29% in quarter two, which I think nicely demonstrates our transition from an older portfolio of medicines to a next wave of portfolios, which we believe will enable us to drive our growth over the next decade. Now, moving to slide eight, I also wanted to say a word on Sandoz. We saw the business stabilize in quarter two. We saw sales at 5% in the quarter, biopharma sales were also up 5%, and core operating income was also up. Now when you look at the story for the rest of the year for Sandoz, we continue to expect disruptions related to COVID. But we do expect also, assuming healthcare systems continue on their current trend, a return hopefully back to a more stable situation. We haven't had a historically weak cough and cold seasons and decreased anti-infectives use, but we will see how this all unfolds. And again, we're hopeful that we can get back to a more stable situation, overall, in the generic sector. Now that said, we are confident in the longer-term outlook in Sandoz. We've made the -- we believe the right investments in biosimilars, we've doubled the size of the biosimilars pipeline, with a focus in key therapeutic areas such as oncology and immunology. And we continue to also invest in our core generics capabilities. We strengthened our antibiotics manufacturing setup, as well as brought in new portfolio of assets, including our recent acquisition of GSK's anti-infectives portfolio. And we continue to make investments in complex generics, including oncology, oncology injectables, and respiratory medicine. So, over time, we remain committed to delivering a Sandoz outlook of mid single-digit sales and mid to high 20 core operating income margin. So, moving to the next slide and turning to innovation, Q2 continued our progress on the innovation front. We had approvals of Cosentyx in the U.S. in pediatric psoriasis, as well as Entresto in essential hypertension, in China, which can be another growth driver for Entresto building on its already strong performance. I'll say a bit more on some of these other milestones in subsequent slides, but I did want to note that Asciminib, our ABL001 has been filed in the U.S. in the third line setting. And we do believe this medicine has blockbuster potential in the third line setting alone, not to mention our efforts to moving into earlier lines, which I'll say more about. And we also had important advances on Kymriah and Alpelisib as well, which I think will enable us to broaden the indications for both of these medicines. So, moving to slide 10, and taking a little bit of a deeper dive on our portfolio. Starting with our lifecycle management, I already mentioned the China approval in essential hypertension. But for Cosentyx, we remain on track for the Hidradenitis Suppurativa readouts in the second-half. There is strong open-label data that supports the use of Cosentyx in this indication. And then we also have a range of other indications we're developing, as we've noted, to enable Cosentyx to continue its strong trajectory. We're on track for Kisqali's MONALEESA-2 OS readout in the second-half, which would be the third OS readout, two have already been favorable for Kisqali, really building on the unique profile we believe Kisqali has. We also are on track for the adjuvant readout, in 2022. We'll speak more about Leqvio in a moment. Now turning to Pharmaceuticals, we'll go through Iptacopan's data in a bit more detail, but I wanted to highlight as well that Ligelizumab's CSU studies are on track for Phase 3 readouts in the second-half. We have also initiated and are progressing chronic inducible urticaria studies as well as food allergy studies. And we have continued to progress Branaplam with an agreement now with the regulators for a start in the second-half of a Phase 2b study in Huntington's disease. Moving to oncology, our Canakinumab readouts are also on track. For Lu-PSMA, we have submissions planned for the second-half, and we've started the Phase 3 studies in the earlier life settings, I'll say a bit more about that. And I also wanted to highlight that with TNO155, our SHP2 inhibitor, we've already now advanced both in combination with other KRAS agents, but are also now moving into the clinic with our SHP2 in combination with our own KRAS agent, JDQ, as well as other SHP2 combinations that we're currently exploring. Lastly, I wanted to note that Asciminib now has entered our wild card box on the bottom here, in the first-line setting, where Asciminib is going against investigator choice of TKI. Our hope is if we're able to deliver this result we would be able to once again transform the care of CML patients, with a multi blockbuster potential indication for Asciminib. It's worth noting that across the wild cards you see in that box, while these programs are still early, each one of them has the potential to be a multi-billion dollar medicine if we're ultimately able to deliver on the clinical value of these assets. Now moving to slide 11, saying a bit more on Inclisiran, you likely saw that our PDUFA action date is now January 1, 2022. We have filed the agreed file from our Schaftenau site which is the manufacturing location where we currently do secondary manufacturing for products such as Cosentyx as well as other biologics. Those sites, it's well-known to the regulators. We also have -- I believe we've addressed the concerns that FDA has raised. And it's notable the FDA has not raised any concerns related to the efficacy or safety of Inclisiran in any of the interactions that we've had. So, this is a Class 2 resubmission, a six-month timeline. We, of course, will continue to work with FDA to see if there's opportunities to move this up earlier in the time period. But hopefully now this will get us to a place where we can bring this very important medicine with a very substantial potential for the company to market in the United States. Now, moving to the next slide, turning to Lu-PSMA, you likely saw in the ASCO plenary session the medicine had really remarkable result of a 38% reduced risk of death, and a 60% improvement in rPFS. Regulatory submissions are on track for the second-half. The movement into earlier-line studies with the PSMA 4 and the PSMA addition studies are already underway. And we're evaluating whether to move the medicine even into earlier-line setting. We're working very hard to also expand the relevant capabilities to administer the medicine, and Susanne will speak more about that in a moment. Moving to the next slide, Iptacopan continues to show its utility across a broad range of indications as you saw in the quarter. With IgAN nephropathy, we presented the primary endpoint at ERA-EDTA, a 23% reduction in proteinuria at three months. And it's important to note that this was a three-month time point. We expect that proteinuria, over time, to continue to improve as we typically see in studies like this. So, we look forward to looking at the six-month and beyond endpoint. Also importantly, there was stabilization of renal function, which will be very important from a regulatory as well as clinical utility standpoint. The APPLAUSE-IgAN, the IgA nephropathy study is now ongoing to support the filings worldwide in this indication. We also continue to progress our C3G indication for this medicine with EU PRIME designation already achieved. We had a 49% reduction in proteinuria with this medicine at three months. Again, we would expect that trend to hopefully continue at subsequent months, a stabilization in renal function also well-tolerated. And this Phase 3 study now is enrolling to support filings worldwide. And moving to the next slide, when you look at Iptacopan in PNH, we also presented data here on the frontline setting to complement the data we already have as an add-on therapy. This new data which we presented at EHA showed clinically important benefits of monotherapy Iptacopan, and this novel agent with its ability to inhibit Factor B with a -- both impact intravascular and extravascular hemolysis, gives us hope that we can be ultimately indicated for frontline usage as well as add-on to Eculizumab. Worth noting it's unique as an oral agent, with a great safety profile. So, we look forward to completing the APPLY-PNH studies with the superiority endpoints, and then again to support filings worldwide. As you likely saw as well in our recent Investor Day on this medicine, we have a broad range of indications also now advancing. We believe this medicine has a substantial potential to treat a range of immunological, renal, and hematological diseases. And moving to the next slide, one piece of data that came out in the quarter that didn't attract as much attention as what one might have expected is our Zolgensma SPRINT data. This was remarkable data showing the impact that gene therapy can have on children with SMA. In this study, a 100% of the patients met the primary endpoint of sitting independently when treated in the pre-symptomatic setting. So, these are patients who are identified through newborn screening and treated with Zolgensma. A 100% of patients met the secondary endpoint. Also, with respect to walking and standing, we saw remarkable gains for these patients, which we hope will continue to improve over time. This data reinforces Zolgensma is a foundational therapy for pre-symptomatic and symptomatic children with SMA. It also continues to give us confidence that over time, as gene therapies as a sector matures, our capabilities in gene therapy having learned so much with the interests of Zolgensma around the world, building outstanding manufacturing and technical capabilities will allow us in the long-term to be a leader in gene therapies for the decade to come. Now, moving to the next slide, I also wanted to say, and as a last note on the pipeline, an update on the Sabatolimab STIMULUS program, which is progressing in MDS and AML. And as a reminder, in Phase 1 studies, we show that Sabatolimab had 50% or 58% ORR in myelodysplastic syndrome. And given this unique mechanism of action, it's the first IOA agent in the hematological setting. It gave us confidence to move forward within MDS and AML with the stimulus programs, which are pivotal studies that tackle both of these indications. Now, the parallel execution of these trials offers us a range of filing options. We did have the CR readout, and the DMC recommended that we continued the study blinded to the PFS readout. And then of course, the OS readout as well will come over time. It's also worth noting in the MDS program, we have a third study in the stimulus array of studies that also looked at -- with a triplet combination, including Venetoclax. So, we believe we have a program that can adequately cover the range of potential options that would be needed for patients to be treated effectively with a medicine such as MBG. So, we remain very excited about the program. We think scientifically, mechanistically, and as a first-in-class asset, it can be an important addition to AML and MDS treatment, an area that we've been a leader in for many years. So, we'll look forward to keeping you updated on this program. Now moving to ESG, we had strong progress on ESG. I think some notable milestones in our effort to be a leader in this space. We reached 1 billion courses of antimalarial treatment delivered since 1999. It's 1 billion patients we've been able to treat with our Coartem, a pioneering agent to treat malaria. Very proud of that achievement. We also recently announced a 10-year commitment to empower 1,200 African-American students working with historically black colleges and universities to really address the inequities in medical education, and broadly, inequities in healthcare in the United States. And you can see other important milestones that we had over the course of the quarter. So, we'll look forward to continuing our progress on this front and being a leader in ESG for the long-term, ultimately embedding this into our business to drive long-term performance. So, with that, I'll hand it over to Marie-France.

Thank you, Vas. Good morning, good afternoon to all. And pleased to update you on our Q2 pharma performance. If we move to slide 19, we delivered 12% growth versus prior year, and an additional $1 billion in revenues. As you can also see, we also continue to make progress in our portfolio shift. Our growth drivers and launches are showing excellent momentum with 35% growth. And these now contribute to more than 50% of our top line. Thanks to our strong focus on execution. You can expect this shift to continue as we invest behind our growth drivers and launches, and also actively manage the mature portfolio. If we move to slide 20, Cosentyx delivered 21% growth, U.S. volume growth in Q2 is now back in line with the market, and sales were up 11% quarter-over-quarter. Our field force activity is above pre-COVID levels. And as we see the market regaining momentum, we also intend to capture more volume. Ex-U.S., we had really strong growth in Europe. And in China, we quadrupled sales versus Q1, following the NRDL listing in March. So, full-year, we're on track to deliver double-digit growth based on our broad access, our ongoing geographic expansion, and the continued investment. We can now proudly say that 500,000 patients have been treated with Cosentyx. And with our ambition to expand to 10 indications we know that many more can benefit. We will continue to invest with additional approvals in the short-term and with our Hidradenitis Suppurativa readout towards the end of the year. If we move to the next slide, Entresto saw another very strong quarter with 46% growth. In the U.S., you can see from the NBRx growth that we're really capitalizing on the ACC consensus recommendations, and also on the expanded label. In Europe, the ESC guidelines now recommend Entresto as first-line, and that is further reinforcing our position as first choice. China, we tripled sales compared to previous year on the back of strategic account expansion. In fact, China is now Entresto'S second biggest market. So, this team is strongly focused on execution, and educating prescribers on guidelines, activating patients, and ensuring the guidelines become protocol at hospital level. You can expect to see the usual summer slowdown. However, full-year, we will stay strong as we address the remaining 70% of patients who do not yet benefit from Entresto. If I move to slide 22, Zolgensma is continuing its growth trajectory as we open up reimbursement in new markets. As you heard Vas say earlier, we've got compelling data in pre-symptomatic patients. And thus it's really important for us to continue to work to implement newborn screening. As we know the earlier we treat the more transformational the outcomes are for these babies. In the U.S., 80% of newborns are being screened, and this is allowing treatment within a few weeks of birth. Ex-U.S., we expect to see Italy and the U.K. and additional reimbursed markets to drive the growth in the second-half. And even though you can continue to expect some volatility in the quarterly pattern, we're on track to exceed blockbuster status this year. Our preclinical studies for IT are progressing well, and we're actually ready to start our Phase 3 as soon as the FDA gives us the green light. Over time, the ITU formulation could more than double the number of patients who could benefit from Zolgensma. If we move to the next slide, with Kesimpta our focus is on broad adoption in early lines of therapy. We've added 500 new prescribers, and we've doubled the number of patients on Kesimpta versus Q1. We also see that half of the Kesimpta usage is a naive or first switch. And this is exactly where we want to be. The B-cell class is currently leading the recovery of the dynamic market, and Kesimpta has got the second highest NBRx share in the MS space. So, this positions as well as the market opens up further. As we move to the second-half of the year, we know what we need to do to double demand, and we're doing what is needed for a strong Q4. We're maintaining our leading share of voice to really increase the awareness of Kesimpta. We also believe that our PIRA and our IgG data provide important clinical differentiation. So, we're fully focused on what we need to do. We're also fully focused on delivering a positive customer experience. In fact, 80% of patients are receiving their first dose within five days, and our patient support services are enabling fast and easy initiation. If I move on to slide 24, and move on to Leqvio; we all know that ASCVD is the leading cause of death, and unfortunately, mortality is on the rise. There are effective treatments, we know that too, but patients are not at goal due to access, adherence, and affordability challenges. And this is why we're taking a different approach on how we bring Leqvio to market. In the U.S., we've got a new action date for January, and we're preparing for launch. Our access strategy could actually enable two-thirds of patients at launch to access Leqvio with $0 co-pay. So, we're working with healthcare systems on broad adoption. We're using our existing infrastructure to identify patients and also to set up buy-and-bill administration. In the U.K., we're partnering with the NHS to bring Leqvio to more than 300,000 patients at risk of a second CV event over the next three years. And we're on track for that launch in Q3. We understand this approach will take time, and further evidence generation, but this level of ambition is absolutely necessary if we want to drive better outcomes for ASCVD patients. So, in summary, an excellent quarter, we're fully focused on our strategy to maximize our growth drivers, deliver our launches, and also prepare for the next wave of innovative medicines. As we further accelerate our portfolio shifts, we're also transforming our business. We want to be much more customer-centric and also pursue innovative approaches to launch our products in partnership with healthcare systems around the world. So, coming out of Q2, we had good momentum across the globe, which we expect will continue in the second-half. I want to take a moment to recognize the fantastic teams around the work for their hard work and for delivering these results. Over to you, Susanne.

Thank you, Marie-France. And moving to slide 26, I'm very pleased to give an update on the oncology business. So, the oncology business showed very solid performance in the second quarter, delivering 7% of growth with sales reaching $3.9 billion. Our growth drivers and recent launches are showing good momentum with 19% growth versus prior year driven by Kisqali, Jakavi, Promacta/Revolade and Kymriah. And together, these products now contribute to half of the overall oncology sales, allowing us to more than offset losses from continued generic erosion of Glivec, Afinitor, and Exjade/Jadenu in the U.S. In Q2, the oncology market continued to be affected by COVID-19. Oncologists are reporting that there's caseload depending on geography is still 25% to 50% below pre-COVID level. And most affected areas are our breast cancer portfolio, recent launches, and hospital initiated therapies like Kymriah and Lutathera. Looking at Kymriah, this grew globally 19%, and it was driven by strong ex-U.S. growth and geographic expansion. In the U.S., we remain very competitive. However, overall demand in the class has slowed down. And Lutathera sales were growing 10% in Q2, the ex-U.S. growth was double-digit, and we also saw positive signals in the U.S. as it is emerging from COVID and referrals started to increase. So, overall, we remain confident that patient visits to hospitals will increase, and treatment patterns will further improve in the second-half of the year, leading to acceleration of growth in these segments. Moving to slide 27, I wanted to share a bit on our performance in the U.S. U.S. remains our biggest market globally, and is contributing to over 40% of our overall oncology sales. Our growth brands and launches contribute to 49% of sales. The U.S. market is slowly recovering from the pandemic with oncologist caseload now reaching 75% of pre-COVID level. However, testing rates for the most common tumor types remain suppressed in Q1, delaying diagnosis and new prescriptions. In Q2, we have seen partial recovery of our growth drivers and recent launches, together growing 10% versus previous year, and also accelerating versus previous quarter. So, this was mainly driven by Promacta, Kisqali, and Taf/Mek. Overall, with continued recovery of the market, we expect acceleration of sales in the U.S. in the second-half of the year. Moving to Kisqali on slide 28, Kisqali delivered strong performance in second quarter, growing 36% with sales of $225 million. The uptake was mainly driven by continued momentum in patient share gains, ex-U.S. and particularly in Europe. Kisqali is the market leader in premenopausal setting in France, Italy, and Spain. And in the U.S., we have also seen Kisqali sales getting traction, delivering 17% versus previous quarter, driven by increased demand in new patient starts. We see increased field force reach in those accounts where access restrictions were lifted, and we also continue to leverage digital engagement based on dynamic targeting. At ASCO, we presented updated OS data from our MONALEESA-3 trial that showed consistent OS benefit with a median OS of 4.5 years. And with this data, Kisqali demonstrated the longest OS in postmenopausal patients, and it's the only CDK 4/6 inhibitor with data in first-line responsive trend. We believe that these excellent results may be attributed to the unique profile of Kisqali versus other CDK 4/6 inhibitors with a preferential inhibition through CDK 4 over CDK 6, and a high concentration to inhibit the target. In addition, we are going into the adjuvant setting with our NATALEE study, exploring Kisqali in both intermediate and high-risk population. And just to remind you, this population represents around 70% of the adjuvant early breast cancer population, and there's a clear unmet medical need. I'm very pleased to report that the enrollment of the NATALEE study is completed, and we are on track for readout in 2022. Moving to slide 29, as you heard from Vas, we are very excited about data from the VISION trial that positions lutetium-PSMA well to potentially address the unmet needs of more than 80% of men with late-stage advanced prostate cancer, who express PSMA receptors. And just to remind you that prostate cancer is the second most diagnosed cancer globally. And in the majority of cases, patients unfortunately develop metastasis by the time of castration-resistant prostate cancer diagnosis. Earlier in June, we got a breakthrough therapy granted by the FDA. And filing to FDA is on track for the second-half of 2021. We are fully in launch preparation with focus on the top 200 treatment centers, and are also working on raising awareness on a clinical relevance of PSMA; very pleased to see growth in the PSMA, awareness has doubled among the target physicians over the last month. And just to reassure you that we have adequate capacity to meet the demand for the current launch. So, our focus will be on driving referrals from community centers, where 70% of prostate cancer patients are treated. When you model the lutetium-PSMA launch, keep in mind that hospitals need to set up processes and licenses, and patients need to be selected through PSMA PET scannings. And these factors are likely to drive a more gradual uptake at launch, versus what you saw with the bolus effect on Lutathera. Moving to the next slide, slide 30, I would like to talk about a launch preparation for Asciminib, the first STAMP inhibitor that has the potential to transform CML treatments standards again. In the Phase 3 ASCEMBL study, Asciminib nearly doubled the major molecular response at 24 weeks compared to Bosutinib. We have completed filings for FDA and EMA earlier in June, and FDA has granted two breakthrough therapy designations and fast track designations for Asciminib, and is reviewing the file under real-time oncology review. As we are preparing for the launch, our focus is on raising awareness on the importance of STAMP inhibition to overcome resistance and minimizing off target events typical for TKIs. Aided awareness has already reached 75%, and just to remind you, the third-line indication for Asciminib has already blockbuster potential. But we are also very excited by the potential benefit that Asciminib may provide to CML patients in first-line setting. Despite the advancements in treatment of CML, over the last 20 years, there are still around 50% of patients who relapse or are intolerant to Imatinib in first-line. And more than 30% of patients suffer from TKI-related non-hematological AIs. We believe that in earlier lines of CML treatment, I'm assuming it may prevent resistance to currently available TKIs, and therefore, we are initiating a Phase 3 study of Asciminib versus investigator-selected TKIs with enrollment plans to start in the second-half of '21. So, moving to slide 31, we have made great progress on our innovation agenda, and '21 is a very important year in terms of readouts and submission. In addition to the Vision data, we had multiple readouts, like positive data from Iptacopan in PNH, Alpelisib in Pros, Kymriah follicular lymphoma, and OS data for Lutathera. Canakinumab readout in second-line non-small cell lung cancer did unfortunately not show positive data, but it is very important to mention that we have two more studies ongoing in first-line, and adjuvant non-small cell lung cancer with the first-line trial on track to readout in second-half of '21. Later in the year, we're also expecting KYMRIAH to readout in second-line non-Hodgkins lymphoma, and Kisqali OS data from MONALEESA-2. In terms of submission, we have completed submissions for GvHD for Jakavi in Europe and Japan, Tabrecta in Europe, and Asciminib in third-line U.S. and Europe, and for H2, we're on track for filing of lutetium PSMA, Kymriah in follicular lymphoma, and second-line non-Hodgkin's lymphoma, and Tislelizumab in non-small cell lung cancer and second-line esophageal cancer. So, exciting times ahead for oncology; big thank you to all the teams. And with that, I hand over to Harry.

Yes, thank you, Susanne. Good morning, and good afternoon, everybody. So, I'm now going to walk you through some of the financials for the second quarter and the first-half of the year. And as always, my comments refer to growth rates in constant currencies unless otherwise noted. So, in slide 33, you'll see the summary of our operational performance for the second quarter and the first-half. We had a strong quarter two, resulting in a solid first-half performance, despite the impact of COVID during the period. Quarter two net sales grew 9% to $13 billion, driven by our key growth drivers. And core operating income grew 13% to $4.3 billion, mainly driven by the higher sales and favorable gross margin, partly offset by higher investments. Core EPS growth was also up 16% to $1.66, and free cash flow grew 17% in U.S. dollars to $4.2 billion. Of course, we appreciate the benefit on comparison from the low base in quarter two 2020 due to the COVID de-stocking in the prior year. However, even when excluded, we still return to healthy growth with sales up 5%, and core operating income growing 4%, quarter two 2021 underlying. Our half one performance was solid, with 3% growth on the top line and 2% on the bottom line. Core EPS grew 5% to $3.17 and free cash flow was $6 billion. Of course for half one, the quarter two, quarter one de-stocking stocking from the prior-year has washed out. So, these values represent underlying growth of half one 2021. Next slide, please. So, on slide 34, I want to dive into our performance during the quarter by division. Innovative Medicines delivered a strong quarter with plus 10% top line and plus 14% bottom line growth, and a margin of 37%. Even if we adjust for last year's lower base, we still saw strong growth with Innovative Medicines sales increasing 7%, and core operating income up 6%. The Innovative Medicines performance was driven by continued strong double-digit growth of our key growth drivers, including Cosentyx, Entresto, Zolgensma, and the oncology launch brands. And as Vas mentioned earlier in the presentation, our growth drivers and launches are thriving portfolio rejuvenation, and now account for over half of our Innovative Medicines sales. Of course, the pandemic still impacts our business, particularly Sandoz retail and anti-infective segment. However, the Sandoz business is now beginning to stabilize with sales up plus 5% in quarter two, and bottom line growing 3%, although growth did also benefit from prior-year de-stocking. Now, turning to our full-year guidance on slide 35, we confirm full-year guidance for both the group sales and core operating income. For sales, we continue to expect low to mid single-digit growth in 2021. And for the bottom line, we expect mid single-digit growth ahead of sales. For Innovative Medicines and Sandoz, we're also not making any changes. We continue to expect Innovative Medicines division sales to grow mid single-digits, and core operating income to grow mid to high single-digit ahead of sales. And for Sandoz, we continue to expect sales to decline in the low to mid single- digit range, and core operating income to climb low to mid-teens. The key assumption for the guidance is that we see a continuation of the return to normal global healthcare systems, and prescribing dynamics in the second-half of this year. And in addition, we continue to assume that no Gilenya, no Sandostatin LAR generics would enter in 2021 in the U.S. On next slide, we provide some detail on our expectations for the second-half of the year. We expect top line growth to accelerate from 3% in half one to mid single-digits, bringing us to the low to mid single-digit range for the full-year. Our assumption is that this will be driven by growth acceleration as we continue to return to normal prescribing behaviors, as well as further Sandoz stabilization. We expect core operating income growth will be high single-digit in half two, reaching our mid single-digit expectation for the full-year. Core operating income growth will be driven by higher sales, and ongoing productivity programs partly offset by increased investments in our growth drivers and pipeline. It is possible that we could reach the higher end of the ranges we have provided, but as you know, the COVID situation still remains fluid. Finally, on slide 37, as currencies are constantly changing, I want to bring to your attention the estimated currency impact on our results using the current exchange rates. So, if mid-July rates prevail for the remainder of 2021, the full-year impact of currencies on sales would be positive 2%, and on core operating income positive 2% to 3% points. For quarter three, it will be positive 1% on sales and positive one to two points on core operating income. And as a reminder, we always update this estimated currency impact on our Web site on a monthly basis. And with that, I'll hand back to Vas.

Thank you, Harry. So, moving to the next slide, when you look at 2021, we have a broad range of catalysts still to go. We've also had good pipeline delivery over the course of the year. So, we look forward to keeping you updated as we continue to advance these assets and programs. I'd also note, our mid-stage pipeline continues to generate, I think, exciting new innovations, which we hope will emerge and be able to add to our pipeline over the course of the second-half. Now, moving to the last slide, just to close, as I noted at the beginning, our consistent long-term performance over the recent years is driving our confidence for the future and the continued growth outlook for the company. We've had strong performance in Q2 driven by key growth drivers as you've seen throughout the presentation. And we've also continued to advance our pipeline of novel medicines. You've seen the positive readouts across Iptacopan, Lu-PSMA and others. And we're reconfirming our full-year 2021 guidance, our commitment to drive long-term accretive growth, and again, thank you for your commitment to the company. And so, with that, I'll ask the Operator to open the line for questions.

Thank you. [Operator Instructions]

Operator, if I could say one thing. If questioners could limit themselves to two questions, we would appreciate it. Thank you.

Thank you. Your first question today comes from the line of Wimal Kapadia from Bernstein. Please go ahead. Your line is open.

Oh, great, thanks very much for taking my questions. I'm Wimal Kapadia from Bernstein. First, I'm just curious how Novartis are thinking about the potential impact of SGLT2s for Entresto following some of the recent positive data in the preserved ejection fraction population. You know, clearly these drugs have quite a robust profile [indiscernible] reasonably well-priced, and have demonstrated efficacy on top, and in Entresto-naïve patient. So, do you expect to see any impacts? I'm just curious in your level of confidence that these drugs will not be used ahead of Entresto? My second question is just on Iptacopan. Clearly lots of interesting data recently for the drug across multiple indications, but I'm just curious how Novartis is thinking about it from a commercial perspective? I appreciate this will come down to timelines, and which indications demonstrate efficacy in Phase 3, but they're quite a different size of markets and competitive dynamics are quite different. So, ultimately, how Novartis is going to prioritize, should we see success across multiple indications, particularly given the acceptable price points by indications could be quite different, and competition from the likes of Apellis could limit the potential? Thank you.

Yes, thanks, Wimal. So, first on the SGLT2, Marie-France?

So, thanks for the question. As you rightly said, the SGLT2s are add-ons. And so, we expect them to continue to be used predominantly in diabetes patients. Even if we think about the new readout of PEF, we've really only seen the press release, and we'd have to look at the full data, because the trials were really quite different. The bottom line is actually Entresto has a unique position. And it's got a broad label in the U.S. that's covering five out of six patients with chronic heart failure, we're very strong with the cardiologists, and we're going to focus on making sure that 70% of the HFrEF breast patients who are in previous standard of care switch to Entresto. So, I think between the compelling data, the strong guideline support that we have, the commercial infrastructure, the excellent team that we have in place, we have what it takes to continue the momentum with Entresto, and if patients need an add-on, then SGLT2 is the right thing to do.

Thanks, Marie-France. And with respect to Iptacopan, I think our overall strategy, as you can see, is to fully leverage the unique mechanism and profile of this medicine across the range of indications we've outlined. Now, of course it will be data-driven, and the sequencing will be determined by size of data, but our goal is on the one hand, to disrupt existing markets with the fact that we have a safe oral, that can be given broadly to patients, who at the moment are taking at least -- at the moment taking IVs on an ongoing basis. And so, we think there's a very attractive profile there. And then, to enter into completely new market segments in renal disease, haematological illnesses that currently don't have a very strong standard of care, and so, that's how you're going to see us approach the launch, fully maximize the asset across the full range of numerous indications we're pursuing. Thanks, Wimal. Next question?

Thank you.

Thank you. Your next question comes from the line of Graham Parry, Bank of America. Please go ahead. Your line is open.

Great, thanks for taking my questions. So, first one is on Kesimpta. Just wondering what percentage of drug dispensers free drug in first-half and how you expect that to be in second-half, because you said you expect demand to double, 2H. And I think if you take first-half sales and add-on twice that, you get to around consensus of $350 million. But if you're getting less free drug, could you actually beat the consensus number? And then secondly, on the NATALEE trial, now that recruitment is complete, can you narrow the window down to when in 2022 you might see the data? Even just as that, do you think it's the first-half or a second-half event? Thank you.

Thanks, Graham. On Kesimpta, Marie-France?

Yes. So, on Kesimpta, our key focus is really on broad adoption in early lines of therapy. And I say that, because I think it's really important for our strategy that everyone understand that we want to ensure the value of high-efficacy B-cell therapy early. As I said in my opening comments, we have about 500 new prescribers, and we've also got about twice as many patients on Kesimpta's Q1. All patients are starting on free drug. And even though our free-to-paid conversion is happening really quickly, there's always a bit of a lag. So, in the second-half of the year, we know we have the fundamentals in place. We know we still have some scaling to do around familiarity of the brand, given that Kesimpta is new in market. And we're going to continue our focus on leading share of voice on the differentiation, and really on consistently enabling fast and easy initiation. So, for the full-year, we're comfortable with external expectations. We know what we need to do to double demand in Q2 and really deliver a strong Q4. Medium term, we expect Kesimpta to be a major growth driver for the company.

Thanks, Marie-France. And then on NATALEE timing, John?

Yes, thanks for the question, Graham. On NATALEE, which is our adjuvant study for Kisqali, as we disclosed earlier last year that we've increased the recruitment from 4,000 to 5,000 patients, and this includes both the intermediate and high-risk patients who have had advanced breast cancer. Our final result that we expect to readout is going to be at the end of next year, and that's how it's currently powered. As we said previously, we're not disclosing interims. So, we're currently powered for the end of the year next year for our final readout.

Thanks, John. So, thanks a lot for the questions, Graham. Next question, Operator?

Thank you. Your next question comes from Jo Walton from Credit Suisse. Please go ahead. Your line is open.

Thank you. My first question is about marketing spend. So, we saw in the second quarter of last year clearly very little on the sales side and a dramatic constriction of everybody's marketing spend, and then could you give us some idea of how you've opened that up, what sort of level of your marketing capacity you're at now in the second quarter as you enter the third quarter? And how you think marketing spend might be able to be sustained at perhaps a lower level going forwards? I don't know, more use of digital or whatever, but if we can get a sense of whether you feel -- or how confident you are in a reduction in your long-term marketing spend, because of all the things that you've learned with COVID. And my second question would be to ask for a bit more detail on China. You've talked about drugs, where you've tripled sales, quadrupled sales. Can you just give us a little bit of an idea of your level of investment and your level of ambition in China, please?

Yes, thanks, Jo. So, first on marketing spend trends, I'll hand it to Harry. Harry?

Yes. Hi, Jo. So, on the marketing spend, it's actually playing out as we guided to early in the year, which is, as you pointed out, quarter two spend is quite higher than last year quarter two, where basically, all major markets were locked down, maybe other than China, but also in the U.S. So, that's why we guided also that, in the first-half, we wouldn't see margin improvement. And I think with the sales of 3% and core operating income of 2%, we saw that also playing out. So, I would expect continued, especially quarter three, where also last year's spend levels were low, that marketing and sales growth is at a certain healthy level, given the investment needs. But of course, within our guidance, be it on our productivity programs, on manufacturing, and overall, the expected sales growth that, then in the second-half, also as we had more normal, I would say, spend levels in quarter four last year, that this plays out. And I laid out that in half two, we will have some very nice margin improvement that leads to the full-year guidance of margin improvement. Now in the mid-term, I do expect that SG&A will be, together with manufacturing productivity on cost of goods, be the major driver of our margin increases, especially Innovate Medicines, to the high 30s. And certainly, a change in mix, somewhat a bit more to virtual, digital, but still face to face in most markets being important, especially for launch initiation, but I would expect that SG&A is one of the major drivers to continue to improve in the midterm our margin.

Thanks, Harry. And on China, Jo, first to take a step back, a few years ago, we began an investment effort in China, really putting in the necessary infrastructure both in pharma and oncology, building out sales forces to really enable us to drive longer term growth. And then second, we adopted a development strategy to bring our full portfolio of medicines to China, as well as including China in our Phase 3 programs at the start, so that given the changes in the regulatory framework there that would enable us an earlier launch. Now, fast forward today, we are growing in the high-teens percentages in China overall. From a business -- we're on track on our stated goal to double the size of our China business from the 2020 baseline. We expect to be, if current trends prevail, one of the top three players among multinationals, if not more, in China by 2024-2025. That's driven primarily by new medicines. So, overcoming any of the medicines that ultimately get tendered, driving -- our newer portfolio driving the growth. We have 50 potential approvals in that time frame, continued strong success on the NRDL listings, as you saw with Consentyx. So, we expect China to become the second largest market for Novartis in the world. We see profitable, accretive growth being driven from there, and we'll continue to look to invest prudently in China over the years to come. So, thanks Jo for the question. Next question, Operator?

Thank you. Your next question comes from a line of Andrew Baum from Citi. Please go ahead. Your line is open.

Thank you. I have a couple of questions, please. First on Kisqali and the NATALEE trial, given the outcome of the PENELOPE-B trial with Ibrance, how comfortable are you that your disease-free survival data that you'll have at the end of next year have sufficient duration on it to satisfy the FDA without wanting to see further follow-up? And then second question on business development, we've seen a rash of your competitors doing neurodegenerative deals. You've obviously had the surprising approval of Aducanumab. How is that influencing your interest in the neurodegenerative space? And then, if you could also comment on your Chairman's recent comments of Novartis' interest in mRNA as a platform? Many thanks.

Yes, thanks, Andrew. On the Kisqali situation, John, you want to take that?

Sure. Thanks for the question, Andrew. And as we've taken a look, as I said earlier, we've increased the number of patients in our NATALEE trial from 4,000 to 5,000, including both intermediate and high-risk patients. As we look at this patient population, there's a couple of things that we focus on; one is, we have a longer treatment duration, looking at a duration of three years for the overall treatment, so that should give us confidence in the approach. We've also looked at the adherence of patients, particularly in the first year. As we look at these patients, as you know, in the early treatment of these patients, micrometastatic disease is important. And what we've seen, at least across both arms, is that the patients are adhering and staying on drug at the 400 milligram dose. So, with those two specific components, we feel comfortable with the readout at the end of next year.

Thanks, John. And so, on business development, we of course are watching the changes in the approach to the use of the accelerated approval pathway. As we've already noted, in neurodegenerative diseases, we have the ongoing program in Huntington's disease entering Phase 2b, and we'll certainly consider how best to potentially bring that forward if there's a way to accelerate regulatory submission, assuming positive clinical trials. And then also internally, we've had neurodegeneration efforts within the country for many decades, as you know. And we continue to have programs targeting Alzheimer's disease, Huntington's, as well as other neurodegenerative diseases, both using biologics, RNA interference, siRNAs and ASOs, as well as gene therapies. So that will continue. No specific comments on BD&L in the neurodegenerative space. Of course, we are looking, as always, for attractive assets to bring in given our broad-based efforts in neuroscience. On mRNA, again, not much more to add; I think we've watched how mRNA continues to have value in the COVID space, and are curious to see, could mRNA have applicability more broadly within the vaccine space? We have our own ongoing efforts internally, obviously, with Inclisiran in manufacturing, for siRNAs with Pelacarsen, with antisense oligonucleotides, we're a substantial manufacturer of those technologies. And also have internal efforts on RNA interference. So that work will continue. And we'll continue to evaluate if there is any sensible approaches in mRNA more broadly, but nothing imminent at the moment. So, thanks Andrew for the questions. Next question, Operator?

Thank you. Your next question comes from the line of Mario Purcell from Morgan Stanley. Please go ahead. Your line is open.

Yes. Thank you very much. Firstly, on Kesimpta, I wondered if you could give us the NBRx share in the U.S. currently. And then in terms of thinking about those 13 launches anticipated by the end of 2021, how we should think about the advantages and disadvantages of a sub-cut formulation for a B-cell therapy in those launch markets outside the U.S.? And then, secondly on Inclisiran, two parts; first part, what are your latest thoughts around FDA site inspection, and how should we think about the future supply split between yourselves and a third-party? And then you sort of mentioned these new initiatives, V-Initiate and V-Inception, which are kicking off now ahead of outcomes data in 2026, could you elaborate a little bit more on those initiatives and others you are looking to increase the evidence base behind Inclisiran before we wait for those outcomes data? Thank you.

Thanks, Mark. So, first on Kesimpta, subcutaneous outside the U.S., Marie-France?

Yes. So, Kesimpta is an important launch for us outside of the U.S. And if I look at Europe alone, we've got 420,000 patients living with MS and many of these patients are on low-efficacy therapies. Actually, many more patients are in low-efficacy therapies versus the U.S. So, what we also know, we're currently working through reimbursement and to accelerate access. But what we also know is that a lot of these patients don't have access to infusion centers. So our research tells us that physicians and patients will appreciate a self-administered, high-efficacy therapy that can be used in the comfort of a patient's home. So right now, we're working with each country through their own reimbursement system, and we know what we need to do to bring Kesimpta as quickly as possible to patients around the globe. On your NBRx question, currently, our NBRx share in the U.S. is 11%.

And I would also note on Kesimpta, if you look at one case study in the U.K., our ability to get rapid access there, I think, demonstrates the value in ex-U.S. markets of the subcutaneous formulation, where the overall cost effectiveness of a therapy is high on the system's mind. On Inclisiran, just on the manufacturing side of things, in the U.S., our intention at the moment is to focus production out of our Novartis-owned Schaftenau facility. We can't predict on whether or not the FDA will inspect. It's notable that this site is regularly inspected, has been recently -- this very line has been recently inspected by FDA using a remote inspection and approved for use in a given indication. And so, we'll have to see what the FDA ultimately determines. But I think it's notable that this is a line that's regularly used and inspected by the FDA. And then in terms of the data initiatives, maybe Marie-France, on the efforts to build out data on Inclisiran?

Yes. So, I mean you saw some of that on the slide, and obviously, learning from Entresto, we know that we need to build evidence generation. You know about our efforts on the outcomes data, so Orion-4. We're also looking at primary prevention studies. But we're also looking to complement with the V-Initiate trial, for example, on the different ways of accessing Inclisiran when it comes to acute coronary syndrome or use or no use of Ezetimibe. So, that's the level of evidence and generation that we want to build around the product so that we can ensure fast uptake.

Thank you.

Yes. And I just want to add that we continue to work with various important parties. So, we hope to have updates over the second-half of the year on our partnership with the NHS on Inclisiran. That's something we've highlighted in the past. That will be a very important proof point that Inclisiran can be used at a large scale in healthcare systems. We're also partnering with major organizations in the United States, such as the American Heart Association, and we hope to announce others, which I think will also demonstrate that we can generate evidence, but also generate large scale utilization volume demand for the medicine. So, we'll keep you updated as those happen. Next question, Operator?

Thank you. Your next question comes from the line of Emmanuel Papadakis from Deutsche Bank. Please go ahead. Your line is open.

Thanks for taking the question; Emmanuel from Deutsche Bank. Maybe a question on Sabatolimab, the MDS1 effective deferral for PFS readout, I think the original fairly long-term guidance has been for a filing on the CR readout in the second-half of this year. So, what can we interpret on efficacy from that data monitoring decision or recommendation to continue until the PFS readout. Unless I'm mistaken, that's a couple of years away. So, does that impact your guidance around that being potential blockbuster $1 billion-plus indication? And then a question on Zolgensma, you've given helpful guidance of around 20% newborn screening rates in Europe. Does that inflect next year, or is it going to be a relatively slow incremental build? How are you progressing in terms of national level discussions about -- particularly in light of, as you said, presymptomatic data? And then if I may, just a quick one on the Intrathecal. It sounds like not much has changed since Q1. I think you said then you had agreement on the trial design, you were waiting for the clinical hold to be lifted. So, are those discussions ongoing, or has there anything new actually happened in the last few months? Thank you.

Yes, thanks, Emmanuel. So, first on the Sabatolimab CR readout, John?

Yes. For the Sabatolimab, as you know, this is our Tin-3 compound, our first-in-class IO therapy for myelodysplastic syndrome and AML. As we designed the study, we always had two primary endpoints, the first primary endpoint being complete remission and the second endpoint being progression-free survival. And as we read out the complete remission, we reached the number of endpoints in the earlier part of this year. At that point, the DMC, Data Monitoring Committee came back and told us to continue the study as originally planned. So, you've seen the slide that was shared earlier by Vas in terms of the number of readouts. As you've seen, we actually look at not only MDS but also AML. So, as we look at this, we do think that this is a differentiated asset for -- not only for us to think about high-risk MDS, but also AML based on the fact that it has a good safety profile and potentially pending results, the efficacy in terms of durability of response. So, we await the results in 2022 and '23.

And I think, Emmanuel, as we highlighted, there's multiple different filing options depending on how the results play out. And it doesn't change our belief that the medicine given it's a first-in-class asset that has a different mechanism than any existing therapy or late-stage therapy that can be a significant $1 billion-plus medicine. On Zolgensma, on the incremental NBS and how we're doing on newborn screening, Marie-France, do you want to say a word about that?

Yes, I would just say that -- so you know that in the U.S., the newborn screening is high. Outside the U.S., I mean, it really is a market-by-market. So, it's gradual. I mean, I can give you some information. Germany will be implemented from October. We'll see parts of Belgium screening. From the beginning of this year, we know that Poland is implementing gradually. We've got other countries across Europe that are doing this. So, it's a mixed picture. We're very committed to it. We know that it's really important to start Zolgensma early. We saw that from the SPRINT data and how amazing the results are when babies are treated early. So, it is a priority for us. And then of course, medium- term, our goal is to bring Zolgensma to older children once we get the IT formulation.

Yes. And just another word on that -- thanks, Marie-France, on the Intrathecal, there's no update, Emmanuel, we continue to work through resolving the FDA's concerns, but we do have the protocol, finalize agreement with the FDA on the Phase 3, design or preparing operationally for the study's execution with the belief that, that indication can continue to be a multibillion-dollar indication for the company. And as soon as we have any updates on the preclinical topic and resolution with the FDA, we'll of course provide it. Thank you. Next question, Operator?

Thank you. Your next question comes from the line of Richard Parkes from Exane BNP. Please go ahead. Your line is open.

Hi. Thanks very much for taking my questions. Just two questions, firstly, on sales and margins, both your expectations for 2Q that you set out at the 1Q results, I just wondered if you could discuss what surprised you positively and confident that those trends will continue, given that you haven't updated guidance? And I just wondered if you could add your thoughts on impact of the delta variant and maybe whether you've adjusted your planning or solutions for healthcare systems, opening up on the basis of that? And then secondly, just a question on some of your legacy oncology assets in the U.S., specifically Promacta, Tasigna and Tafinlar, if I look at sales per script over the last few quarters, at least in the first-half, it looks like sales per script has been growing in double digits, which seems to imply quite significant price increases. I just wondered whether you could discuss that trend and whether there are any other factors such as channel mix that might be impacting that. Thank you.

Thanks, Richard. So, first on sales and margins outlook, Harry?

Yes, the line was a bit hard to understand. Richard, could you briefly repeat?

Harry, I think the question was, were there anything that surprised us versus the guidance we gave after Q1 on how Q2 would play out? And how do we potentially see the delta variant impacting our guidance for the rest of the year?

Yes. So yes, okay, thank you. So Richard, obviously, we delivered a bit more than what we thought, right? So, we saw in the U.S. a bit faster reopening, I would say, in most of our brands. Sandoz is pretty much in line with expectation, but our innovative medicines, some better momentum overall. And then also very good work from our manufacturing colleagues on productivity, in addition to always perfect levels. But overall, I would say, slightly ahead of our internal expectations in quarter two.

Yes. Thanks, Richard. I think on the delta variant, we continue to monitor the situation. What we are expecting is that given that healthcare systems have seen the impact when they have shut down to patients with non-communicable diseases and the substantial impact that has, we remain optimistic that healthcare systems will ensure that patients get the care they need while dealing with any surges that may or may not happen with respect to COVID-19. Now, on Promacta, Taf/Mek, U.S. performance, Susanne?

Yes, thanks a lot. And Richard, on Promacta, actually, we are very, very pleased with the performance. As you rightly note, 18% growth, and it's really across all geographies, and it is volume-driven. And it's really still our main indications, ITP and SAA. To give you a little bit more granularity on the U.S., we had 11% growth. And maybe just to remind you, there was a label update earlier this year that makes Promacta even more competitive. We are seeing share gains increasing NBRx. And of course, it is the efficacy driving that. It's also the oral convenience and is the non-immunosuppressive benefit over competitors, and therefore, a very strong performance. Ex-U.S., we saw 26% growth versus previous year. It's very strong underlying performance in major markets like the EU. And also just to mention very strong performance in China, where we got NDRL listing end of last year, so very pleased with Promacta. Similar on Tabrecta, we could -- sorry on Mekinist + Tafinlar, we could really stabilize market share and are very competitive versus new entries, very pleased with the growth also across geographies. And also to mention for China, we are very pleased. We got a tough Mek included into the NRDL list, so really strong growth on volume base across geographies.

Thanks. Thanks, Susanne. Thanks, Richard. Next question, Operator?

Thank you. Your next question comes from the line of Seamus Fernandez from Guggenheim. Please go ahead your line.

Great. Thanks for the question. So just a two quick ones, as we think about the opportunity in MDS and for the TIM-3 assets, I was just hoping you could give us a little bit more color on the evolution. I just wanted to follow up on the previous question. And specifically as it relates to the CR response there is that -- your conclusion there that the proceeding to the PFS benefit is a clear positive moving into the subsequent events or is this just a continuation of the trial, which could be viewed as somewhat disappointing on that side of it for the high risk MDS patient population? The second question obviously you guys are talking quite strongly about the opportunity for Asciminib just in the third-line setting blockbuster potential. Can you just talk about that relative? Is that predominantly relative to Bosutinib as sort of the primary opportunity and kind of replacing that asset, you're replacing that product sales? Or is it really speaking to a broader opportunity in the third line setting because of potential for duration of use expanding upon how that products used so far? Thanks.

Yes, Seamus. Just in the interest of time on the MDS, I think with the CRV -- I would say, neutrals to positive, I mean, neutral is saying, because we're blinded, so we don't know what the DMC saw, but I think the fact that the study will continue now to the next endpoints and the positive mechanisms that we see in the previous data that we've seen on the product. We remain optimistic that both in MDS and AML we can get some positive results and bring meaningful innovation to patients. As John noted, the studies have a range of different designs including a third study that also takes into account Venetoclax, so a doublet and a triplet design. So I think we have the bases covered, and we look forward to getting the additional readouts over the coming year-and-a-half. On the sale potential of a Asciminib, Susanne, do you want to say a word about this?

Yes, I'm happy to take that. Vas, and maybe just on the opportunity on Sabatolimab just why we are very excited is, because it's a completely novel mechanism. It's a TIM-3. So it has the potential to be the first immune-oncology therapy in hematology, in MDS and AML. And why we believe that is important is because obviously, there is now has been made progress on having more efficacious treatments, but what we all know durability and also safety profile is still remaining challenging. And therefore, we are very excited that Sabatolimab would have this attribute to add really huge value to this medical need. And on Asciminib to maybe lead you a little bit through just to remind you a little bit on the dynamics in CML. So there is still 10% to 15% of patients that progress to third line. But what you also have to know there is a significant number of patients that remain in second line, just because of lack of options for these patients. ,:

Great, thanks, Susanne. Thanks. Next question, Operator?

Thank you. Your next question comes from the line of Kerry Holford from Berenberg. Please go ahead. Your line is open.

Thank you. Yes, a couple for me, please. Harry, just on the second-half outlook, you've obviously raised pro forma operating profit growth in the slide today, I think you've not updated the growth drivers for the group. And although you've not changed the outlook for Sandoz in the second-half, what is it within this division that continued caution for that second-half outlook just by those improvements you've seen in Q2? And then on Inclisiran, just I think a question was asked on this earlier, but just to clarify, what are your plans on the manufacturing of that drug in the future? Can you remind us where the ex-U.S. supply is manufactured? Should we understand that the global manufacturing sites is now the Austrian site? Or should we anticipate further significant investment at some point perhaps in the U.S.? Thank you.

Yes. Thanks, Kerry. So first on the Sandoz outlook on the second-half, Harry?

Yes. Thank you, Kerry. So, we have to remember how quarter one and quarter two have developed here. So clearly, you saw a very steep decline of quarter one. And then, you saw that 5% growth of Sandoz in the second quarter, but underlying, if you take the prior year is talking about minus 1%. So, we saw as expected a stabilization, but we have a first-half with a 5% decline. So, in order to be at the low to mid single-digit decline in the full-year, we continue to expect stabilization around broadly in line for the second-half for Sandoz. And I think that is, at this moment, a very reasonable assumption. Of course, we can all make scenarios around cough and cold and flu season in quarter four and the market dynamics for that. We have taken the midpoint scenario on this. So, overall, I would say of course volatility given the COVID situation and how the cough and cold season would be. But overall, I would say our guidance is quite, starting from a minus 5% decline in half one, quite reasonable that Sandoz would stabilize. They have a few first five launches in the second-half. So, that helps. We have to see also how the pricing in the U.S. continues to develop. So, I would say not all were overly cautious but realistic.

Thanks, Harry. And then, Kerry, on manufacturing, it's important to note when you take a step back, our overall goal is to have Novartis be the primary manufacturing of both the upstream and downstream parts of this siRNA for Inclisiran. And we've made the necessary investments to do that. We have substantial manufacturing capacity to synthesize the siRNA. And then, as we've noted, in the U.S., we'll move to using our Schaftenau facility. And over time, globally, the primary manufacturing will be done out of Novartis facilities, being supplemented by CMOs as needed. The primary reason to do this is, one, we believe the medicine will be, as we've noted, one of our most significant medicines. And then second, from a COGS standpoint, our goal is to drive significantly down the cost of goods to enable large scale use of the medicine in the secondary prevention study, and eventually perhaps in the primary prevention study. Right now, ex-U.S., we do use third-parties for both the primary and the secondary, but again, over time, the evolution will be the Novartis-owned facilities. And those investments have already been either started or completed. Thanks, Kerry. Next question, Operator?

Thank you. Your next question comes from Peter Welford from Jefferies. Please go ahead. Your line is open.

Hi, thanks for taking my question. Just two, please; firstly, on oncology, just looking at some of the hospital-administered drugs, in particular, and also some of those that require either biomarker companion diagnostics to use, it actually looks as though the second quarter for some of those drugs is sort of relatively weak compared to the first quarter. There certainly wasn't sort of an uptick. I'm thinking the likes of Kymriah and Lutathera, for instance. Also as well, I think things [indiscernible] other drugs. I wonder if you could just comment on what you're seeing there with regards to why I guess we're not seeing Q-on-Q improvements in oncology, and how we should think about that perhaps in the second-half of the year and the gating factors? And then secondly, I just want to come back to Harry's comments that we could reach the higher-end of the outlook ranges that COVID situation remains fluid. Should we take that to mean that if COVID situation pans out as we currently see, the higher-end of the range is where we should be thinking, or should we take that as thinking that you just don't know, and you still see uncertainty? I guess curious sort of where you're thinking with regards to the current COVID situation and whether the situation has to deteriorate significantly for that to be not valid? Thank you.

Thanks, Peter. So just briefly, Susanne, on the hospital administered oncology?

Yes, thank you, Vas, and thank you, Peter for the question. So, as I mentioned in my presentation, these areas that you mentioned hospital-initiated areas, but also of course where you have new launches, this is still impacted by COVID, especially when you look at the U.S. that only 75% of patients are back versus pre-COVID levels. So, we still -- like a fourth or a quarter of patient's volume that we usually saw, and that is impacting, for example, diagnostics, it's impacting screening, and that's of course Tabrecta would be such a brand, where you see lower biopsies, you see lower testing REIT rates overall. I have to say when you look within the ones that are tested, Tabrecta and testing for cMET is increasing, but it's just suppressed patient volumes. And this is same, what we see for hospital-initiated product. Just to give you some figures on Kymriah, as I said, 19% versus previous year, but we saw that especially in the U.S., the whole class saw a reduced demand. And while we stay very competitive with Kymriah, and that is really linked to recent -- also manufacturing success rate that customers are very pleased about, it's really the demand that we saw in the whole class going down. And on Lutathera, there is some early positive signs in the U.S. We have seen growth versus previous year as some now referrals are started, but it's still very, very suppressed. And we remain confident that with now the market opening up centers, taking more patients in, this should improve and accelerate.

Yes. Thanks, Susanne. And then Peter, on the outlook, as Harry noted, it's multiple dynamics of course we're monitoring, but if the business dynamics continue as we currently see them, if oncology can continue its recovery, if Sandoz remains in a stable situation, given the strong growth we're seeing in our growth drivers, there's certainly the potential for us to be at the higher-end of the guidance. And we'll of course keep you updated in quarter three. Next question, Operator?

Thank you. Your next question comes from the line of Laura Sutcliffe from UBS. Please go ahead. Your line is open.

Hello, thanks. First question is on Leqvio, please; have you dosed any patients in the U.K. under your program there yet? I think you said the program was starting this quarter. And what setting will those early doses be given, and are these patients being seen in the hospital or have you managed to get it into primary care from the word go? And then second question is just on Entresto. Could you maybe talk a little bit about the uptake in the past population? Thanks.

Yes. Thanks, Laura. So, first on Leqvio, the agreement, we're still working through the final stages with the NHS, so we have not yet dosed patients in the U.K. The agreement, though has the aspiration that this would be rolled out in primary care from day one at scale, trying to address the ASCVD population and get the U.K. toward its long-term goal in cardiovascular health. So, hopefully we'll have updates in the coming months on that pioneering initiative, which we hope will catalyze Leqvio's global impact over the coming years. On Entresto, half of that -- and I'll just start taking the questions given the time Entresto half of that. We do see, I think, the uptake already, and you can see that in the NBRx, but it's still early days, and I think as we continue the rollout in the education as well as the awareness on the guidelines, we would expect to see continued growth for Entresto. We see a strong outlook for the brand. We're confident we'll be in that $4 billion to $5 billion range. And as we continue to see the trajectory, we'll provide further updates on the long-term outlook for Entresto in the coming months. Thanks, Laura. Next question, Operator?

Thank you. Your next question comes from Tim Anderson from Wolfe Research. Please go ahead. Your line is open.

Thank you. On Consentyx, thinking about Bimekizumab, they've gotten some good exposure recently with publication of their data in the New England Journal; beats your product on efficacy, has a one side effect of oral candidiasis. How much do you think this product will impact Consentyx? And do you think that one side effect is a material impairment to their product in your view? And then, on Tislelizumab, your partnered PD-1, how realistically will we compete in a setting like lung in Western markets? Can you and your partner assure us you won't be disruptive on price? I ask because U.S. markdowns for price erosion over time in the category, I'm wondering who is going to be driving that.

Yes, thanks. So, first on Cosentyx, when you look at the dynamics, we've been able to take on competition consistently over the recent years, continue to grow the brand double-digit, as Marie-France said, to 20% plus. That's driven both in dermatology and in rheumatology. We know the additional competitors coming in. I can't comment specifically on Bimekizumab, but we do think that Consentyx has very clean safety profile, the fact that it's used in such a broad range of dermatology offices and consistently across patient types, its ability to address scalp, palmoplantar psoriasis, as well as the joint manifestations, and the fact that we have additional indications, we're not concerned by additional IL-17 entrants. And really our focus now given that we've been able to effectively hold price in the U.S. market despite some disruptive attempts. We are confident now that our focus has to be on the next wave of indications to drive this brand well beyond the $5 billion benchmark we've already put out there. On Tislelizumab, you've seen the esophageal cancer filing. We're moving toward first and second-line non-small cell lung cancer. We do believe that the -- we are able to market this medicine from a competitive standpoint, given our long presence, particularly outside the U.S., but also in the U.S. We'll be prudent in how we think about the pricing, but we do think we can make a compelling value proposition. Longer term, the real opportunity for us is in combination. We'll be taking forward Tislelizumab in combination with our SHP2 inhibitor in combination with some of our RLT agents, among other opportunities. And so, we're going to work to both maximize on the combination side as well as take as much as we can of a very large PD-1 market, given the broad range of indications we expect the agents to have. Thanks, Tim. Next question, Operator?

Thank you. Your next question comes from the line of Simon Baker from Redburn. Please go ahead. Your line is open.

Thanks for taking my question. Two, please, if I may. Just going back to Leqvio, I wonder if you could give us some idea of the ramp to 300,000 patients given the unusual situation you have there, having not only agreed reimbursement but also utilization. And then secondly, moving on to Sandoz, Harry, you gave the principal drivers for expansion of the IM margin over time. I wonder if you could do the same for the Sandoz margin. Thanks so much.

Yes. Thanks, Simon. So, for Leqvio in the U.K., it's going to be driven by our ability to work with the U.K. to get primary care physicians to diagnose these patients out of the MS data systems and then rapidly get them on to Leqvio. I think it will be a slow initial ramp, and then we hope to see a rapid ramp-up. In the U.S., we've done a very good job of targeting the relevant integrated health systems to hopefully be prepared to have a reasonable uptake initially, but again, it will take time to get those centers on board. In parallel, we'll also have a traditional launch with our traditional sales and marketing approach, leveraging the Entresto field force and reach. So, on approval in the U.S., we'll go very -- obviously, out very strongly. It will take time to get the brand up. And then once we think we get momentum, we expect the brand as we've guided to, to be a very significant multibillion-dollar medicine for the company. Mid-term Sandoz margins will be driven by a portfolio shift with the biosimilars portfolio, large number of biosimilars in the mid-20s. We expect to get forward, get into the market and some of the first-in-class first hopefully, to markets such as Natalizumab, among others. And then on top of that, the ability to launch additional injectables and oral solids, while continuing to drive down cost of goods. So, you'll have a mix shift to higher-margin products as well as the continued efficiency gains and cost of goods. And then lastly, Richard and team are working hard to optimize the manufacturing and sales set of leveraging digital technologies. And I think that will be the other element that will help us get to those mid to high 20s margins in Sandoz. Thanks Simon. Next question, Operator?

Thank you. Your next question comes from Steve Scala from Cowen. Please go ahead. Your line is open.

Thank you. I have two questions. First, on AVXS-101, can any findings from the preclinical intrathecal safety studies be shared with us today? So, that's the first question. And then, on the second question relates to the Kisqali adjuvant interim look in NATALEE. I'm curious if this look has already occurred? If it has, then it would seem to be a material update and you would have announced it. So, I assume that it has not yet occurred, but please confirm. Thank you? Thank you.

Yes. Thanks, Steve. On AVXS-101 IT, the preclinical data we've seen to date do not indicate any concerns. However, we need to complete the relevant assessments. And of course, ultimately agree with FDA and the listing of clinical hold. And so, we'll keep you updated as that progress. The NATALEE interim has not occurred, but as we've guided to, we're no longer guiding to interim analysis timings, and we're focusing on the final outcomes. John, as you mentioned earlier in the call, we expect that to be in the back-half of next year. And of course, as we learn more in that study, we'll keep you updated. Thanks, Steve. Next question, Operator?

Thank you. Your next question comes from the line of Naresh Chouhan from Intron Health. Please go ahead. Your line is open.

Hi, there. Thanks for taking my question. Just two, please, in the U.K., we recently seen increased structure hospitals partly due to COVID and partly because of the record patient. We've seen electives and oncology appointments being delayed as a result. Are you seeing early signs or anything similar in the U.S. as you go into a few states where hospitalizations are rising pretty quickly? I'm just wondering whether or not that have you seen early signs of that in the U.S. And secondly, on Asciminib, do you expect food interaction to be flat on the label given to the earlier studies? And how do you expect that to be up, especially with the generic price probably in the market launch? Thank you.

Yes. Thanks, Naresh. On the U.S., we currently don't see any shifts in utilization or better notable, other than what we already stated in the call, oncology is below pre-COVID levels, cardiovascular is also below pre-COVID levels. So, Entresto continues to have very strong performance, and patients with heart failure seem to be getting the medicine as expected. So, nothing that we can flag at this point and also the clinical trials are enrolling on time. So, we have learned a lot about managing -- I think the healthcare systems have learned a lot about managing COVID. We've learned a lot of them managing our trials and the uptake of our medicines during COVID. So, hopefully, we can navigate this next period successfully, but certainly something we're watching very, very closely. I think it's too soon to comment on specifics on Asciminib's label. I would note that the safety profile was remarkably clean. When you look at the -- it was a head-to-head study versus Bosutinib across all relevant safety markers. It was a very clean profile patient stayed on drug. So, we're optimistic that overall, the Asciminib profile will be attractive, which is a part of the reason as well as Susanne mentioned, we're quite confident that if it ultimately proves superior can be a very effective first-line therapy. Next question, Operator? Thanks, Naresh.

Thank you. Your next question comes from Martial Descoutures from ODDO BHF. Please go ahead. Your line is open.

Good afternoon. Thank you for taking my question. I would like to come back on the Sandoz business, and thank you for your previous answer on the H2. We understand the next step with the top line improvement driven by the pipeline with biosimilars and the section of complete generics. But could you share with us your vision on the improvement of the ratability in midterm? Do you see any concrete operation or leverage on the cost or due to the improvement of the top line expected and the affiliated cost plus the price erosion? Should we consider stabilization of this activity for the next year, if you could give us more color maybe to help us to manage the core EBIT margin in the next quarters and years? Thank you very much.

Yes. Martial, I don't think I fully picked up the question, but I'll give my best answer. So, when you look at Sandoz evolution over time from a margin standpoint, first, right now, our goal is to invest and create a very strong pipeline performance in this period of time, both biosimilars and oral solids. So, in the coming years, you're not going to see big shifts in the margin or the operating leverage, but our belief is, given, Richard is driving very strong efficiency gains across all the relevant P&L items, and we continue to expect important pipeline delivery in biosimilars in respiratory and oral solids. When that pipeline delivery happens, then we expect the margin in the mid-term to be accretive and move up into that mid to high 20s. So, the shape is going to be stable for the period, next few years, and then we expect acceleration in margin improvement for Sandoz as that portfolio ultimately comes through. So, I think that's the best way to think about it. And I think that was the -- we have one more question, Operator. So, Operator, could we go to the last question? Thank you.

Thank you. Your last question today comes from Keyur Parekh from Goldman Sachs. Please go ahead. Your line is open.

Thank you. And thank you for taking my questions. Vas, if I may, your introductory comments on Sandoz, talking about the strategic vision in the long term, almost like setting the narrative for a 2022 decision on the longer-term outlook for Sandoz. Am I overinterpreting your comments or is that the time frame in which we should expect a broad decision on whether Sandoz is a part of Novartis and not longer term? That's question number one. And then question number two, we are getting very close to on an annualized basis, kind of the peak sales numbers you provided for Cosentyx and kind of Entresto. So, I'm wondering kind of why we haven't seen updated kind of peak sales estimates for those two products. Is there anything from a competitive or market perspective that worries you or was this just not the right opportunity for you to address the longer term peak opportunity for those products? Thank you.

Thanks, Keyur. Good to hear from you. On Sandoz, there's no updates or changes. I mean, our goal right now is to put Sandoz in a strong position to invest in the business, so that it can be on a track to be the leading generics company in the world, which we think it can be from a financial as well as impact standpoint. If and when we take any decisions or start a process, we'll of course let you know, but right now, our focus is on the operational performance of Sandoz and supporting Richard and his team to driving that mid single-digit growth and margin expansion that we've outlined. I think on your second question, I think we are very pleased with the trajectory of Entresto and Cosentyx. You are correct, if we're approaching the sales outlook of $4 billion to $5 billion we guided to in Entresto, and $5 billion plus in Cosentyx, our current plan is that meet the management will provide an updated outlook on both of those brands, especially as we understand better the dynamics, but certainly, would want to highlight we are confident in both of those brands to be very strong pillars of Novartis in the years to come. So, thanks, everyone, for joining today's conference call. Apologies we ran a bit over. We'll keep you updated. Thank you for the interest in the company. And please stay safe and healthy, and we look forward to speaking soon. Thank you.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.