Novartis AG (NVS) Q1 2025 Earnings Report, Transcript and Summary

Good morning and good afternoon, and welcome to the Novartis Q1 2025 Results Release Conference Call and Live Webcast. [Operator Instructions] A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Ms. Sloan Simpson, Head of Investor Relations. Please go ahead, madam.

Thank you, Heidi. Good morning and good afternoon, everyone, and welcome to our Q1 2025 earnings call. The information presented today contains forward-looking statements that have involved 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. 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. Before we get started, I just want to reiterate Heidi's guidance for our analysts. Please limit yourselves to one question at a time, and we'll cycle through the queue as many times as we can. And with that, I will hand over to Vas.

Thank you, Sloan. And thanks everyone for joining today's conference call. If we could move forward to Slide 4, Novartis delivered double digit sales growth in the quarter, really strong start to the year. We had robust margin expansion, and that all supported an upgrade to our full year 2025 guidance, which Harry will go through in more detail. Sales were up 15%, core operating income up 27%. Our core margin reached 42.1% of 400 basis points, and we also had important innovation highlights in the quarter, some of which I'll go through in detail in a moment. Pluvicto, Vanrafia, and Fabhalta, all achieved approvals in their relevant indications. We had a global submission for remibrutinib and CSU and our OAV-101 IT gene therapy for patients with SMA older than 2 years of age. I had a positive readout and we're in the process now of filing that globally. So, taking together a very strong start to the year and going into a little bit more detail starting on Slide 5. We had strong growth momentum from all of our priority brands in the quarter, and I think that really demonstrates the replacement power, which gives us confidence in our midterm guide of 5% plus and also our confidence that we have the levers that we need to continue to grow into the 2030s. You can see strong growth of 32%, constant currency, excluding interest though of the portfolio was up 38%. And I wanted to go through in these -- on each of these key brands, some of the key highlights. So moving to Slide 6. So, Kisqali grew 56% in constant currency, and that reflects our positioning globally, reflects our positioning as the preferred CDK4/6 inhibitor in both metastatic and early breast cancer. You can see that the growth was strong both outside of the United States and in the U.S. I'll go through that in a bit more detail in a moment. In the central panel, you can see that our total brand NBRx now is market leading, trending very strongly, really powered by the early breast cancer launch, which is leading to strong performance both in early breast cancer and metastatic breast cancer. Now turning to each region. In the U.S, we were up 87% in the quarter. We have leading share and metastatic NBRx now at 48%. We're also not tied for TRx leadership really demonstrating now, those NBRXs are impacting our TRx growth. In early breast cancer, our NBRx grew 65% and we reached 60% NBRx share, and what's important to note here is 56% of that volume we estimate is from the population that's exclusive to the Kisqali label. Now outside of the U.S., we're still in the early stages of the early breast cancer launch. We're up 24% in constant currency. We're the metastatic breast cancer leader in 10 of our top countries with 46% share our NBRx share and at 35% TRx share, and our early breast cancer indication is now improved in the EU plus 9 other countries. And I think you all know, we have strong guidelines support with Category 1 and CCN guidelines, and we've also achieved very strong guidelines as well with SSMO. So, overall, really pleased with the performance of Kisqali as it continues to grow towards our peak sales guidance of $8 billion plus. And moving to Slide 7. Kesimpta grew 43% in constant currency, it's outpacing both the B cell and MS market. Our overall sales were robust, both in the U.S. and ex-U.S. markets. In the U.S., 41% TRx growth, we're outpacing the B cell and MS markets, as I mentioned in the U.S. Outside of the U.S., we have leading NBRx share and 8 out of 10 major markets really reflecting the ease of use of the medicine. We continue to generate further long-term data to support the profile of Kesimpta. Seven-year data was presented at AAN, which reinforced the benefit risk profile of medicine. And as a reminder, we continue to believe the profile of Kesimpta was convenient at-home self-administration, makes it the preferred medicine for patients who don't want to have IV administration at a doctor's office. So, I think that really positions us well outside the U.S. and in a large segment inside the U.S., where there continues to be robust growth of B-cell therapies, which we plan to participate in. And moving to Slide 8. Pluvicto grew 21% in quarter one and most importantly for us, we laid the foundation -- continue to lay the foundation for our pre-taxing launch with the PSMAfore population. When you look at some of the dynamics for Pluvicto, first with the post-taxing setting, we have now leading NBRx share in the first line vision population setting, so post-taxing at 40%, and this, I think really demonstrates that we are getting strongly established in this post-taxing population. Now, when you look at some of the momentum we're seeing, we're seeing that we are gaining traction in the community setting with 4000 TRXs, that's 11% of first prior year. We also see overall, I'd say encouraging signs that more and more community practices want to take on radioligand therapy. Outside of the U.S., we see continuous growth driven primarily by European markets, which are increasingly adopting RLT and also with improved pricing that we're seeing in key markets, and now with the expansion over 20 plus countries. The most importantly for this brand, we had the March FDA approval of the PSMAfore population pre-taxing population. As a reminder, Pluvicto doubled the median PFS and had a very favorable safety profile versus a daily oral ARPI. The final OS analysis for the medicine when unadjusted for crossover was 0.91, but importantly crossover adjusted was 0.59, and that's been very well received in the community. And we already have NCCN guidelines support for the use of Pluvicto in this setting. We're also continuing to advance our Pluvicto life cycle management efforts. The PSMA edition readout is on track for the second half of 2025. And as a reminder, the PSMA addition incident is similar to that we see in the pre-taxing setting. Now moving to Slide 9. Just a little bit more on our preparations for the PSMAfore launch in the U.S. We have a strong foundation in place, 620 sites opened, large population now that we've expanded into a pre-fill syringe, that's enabling broad adoption is now nationally launched. 50% of PSMAfore patients are treated by HCPs, who have already prescribed in the vision population. And we're also continuing to increase and have increased our promotional spend. We've doubled our field force and are maintaining a very robust direct to consumer advertising campaign. Now in terms of the launch dynamics, we expect to see, it would take about 4 to 7 weeks of lead time for new patients to be treated for them to get the necessary scans as well as the necessary laboratory tests, to be able to receive the medicine. We expect initial uptake to be driven by depth in our established accounts in the vision setting and also we expect to over time expand our breath in the community and urology settings. So, and as I mentioned, we also have the favorable NCCN guidelines. So, I think set up well, this will really be a second half story and really in the next few months, we want to ensure we start to build the momentum that will allow this brand now to break through, past the $2 billion mark, and then forward to the $4 billion plus guidance that we've given. And moving to Slide 10. Leqvio grew 72% in the quarter on track to achieve blockbuster status. We have the steady march upwards that we're very pleased with. We're seeing solid growth both in the U.S. and XUS. We see a steady climb in monthly TRXs. It's 70% up first prior year, and that's growth across all of the key channels we're targeting. We're also seeing increasing depth in the priority systems that we're trying to establish the medicine that's versus 51% for prior year. We've also evolved our field operating model to better serve physicians and systems that would like to use Leqvio to manage their patients to goal for cholesterol lowering. Outside of the U.S., we're seeing robust growth across our key markets, 74% growth. I would want to highlight the solid pricing and access we've secured in Japan as well as the continued out of pocket expansion we're seeing in China, which I think bodes well for the future of this medicine in Asia. We know there's a significant runway ahead of us, only about 2% of secondary prevention patients receive any advanced lipid lowering therapy, and there's increasing guideline recommendations that recommend these patients receive advanced lipid lowering therapy. So, a big market opportunity and step by step we're on track to fully realize the potential of this medicine. And moving to Slide 11. Now Scemblix, as you know, established itself as a leader in the third line plus setting. And now our focus has switched to really establishing the medicine in earlier lines given our recent approvals. Now, in the third line setting, we're up at 54% NBRx share, we're 3 times higher than the next competitor, reflecting the excellent profile of Scemblix; outside of the U.S., in key markets, 68% in Japan and 47% in Germany for NBRx share and an overall share of 47%. So, I think really well positioned now in the third line setting. So, our focus has shifted to driving our performance in our [indiscernible]. We see continued momentum in the U.S. We have a very strong start building off the NCCN guidelines for a category one preferred recommendation. We have 54% of commercial lives covered now to label. We're seeing expanding prescriber drafts 16% versus prior quarter, and a strong uptake in second line where we've already achieved 40% share and steady progress as well in first line where we have 10% NBRx share. And as a reminder, we are of course working against generic imatinib and the generic second generation TKIs, but we feel confident that step by step we'll continue to be able to take a significant share from those medicines. Our early line approvals are on track globally. We have already approval in 10 countries and our submission is not completed in Europe. So, moving to Slide 12 and turning to Cosentyx. Cosentyx grew 18% on the quarter. It was driven by both our launches in HS and IV, but also importantly very good performance in our core indication. In the U.S., we saw strong demand growth 29%, more than offsetting the expected impact of the Part D redesign. Our NBRx volume is outperforming the market in our core indications, 15% versus the market in psoriasis, 12%, in spondyloarthropathy, and we also have continued NBRx leadership in HS at 53%, even in the face of a new competitor entry. Now, when you look at the IV formulation, we have 1900 accounts using the medicine, that's a 13% growth. I think it's still early stages for the IV launch, but we're confident that step by step now that we have the relevant reimbursement and support in place that the IV launch can also accelerate over the years to come. Outside the U.S., we delivered 15% volume growth mainly in the core indications. We're the leading originator of biologic now in Europe and China, and we've also achieved now HS reimbursement across our key markets. So taken together, we're confident, in continued growth. We are on track to get the phase 3 readouts in both GCA and PMR, and we’re also well prepared to launch in those indications when it is approved. Now moving to Slide 13. And now turning to Entresto, which continues to have strong performance at 22% growth. You can see here on the quarter reaching over $2.2 billion in global sales. We expect continued growth in the U.S. up until LOE. We continue to guide to a mid 2025 LOE, but we can get into that in more detail on the call. But in terms of outside the U.S., we have a very strong guideline position. We have balanced geographic sales at 50% of our sales outside of the U.S. We expect RDP protection in Europe to November 2026 and also of course we'll continue to pursue other avenues to fully protect the medicine in Europe. June 2030 in Japan with possible additional protections as well, and I would say that the hypertension indication is performing extremely well in China and Japan, and the possibility for that to drive our growth towards -- through the end of the decade is something we continue to remain focused on. Now moving to Slide 14. I did want to say a word about our renal portfolio. As you know, we've been building out a strong renal portfolio around the globe. We have the ongoing launch now of Fabhalta and the recent approval of Vanrafia. When you look at Fabhalta or IgAN, we've already seen 100% volume growth and 60% increase in riders versus the prior quarter. I think that reflects the excitement around the impact the medicine could have for these patients. We have over 90% of patients remaining on treatment out at 5 months. We have 68% commercial coverage to label, and in C3G while we're only improved in March, we already see positive signs over 2000 physicians are REM certified, and that's applicable across both indications. Now, Vanrafia was approved by FDA in April, once a day non-steroidal oral treatment. What's exciting about this medicine from an efficacy standpoint can be seamlessly added on to existing RAF inhibitors that a patient may be on without any discontinuation needed. But also importantly, there was no REMs for the label for hepatotoxicity or pregnancy. So, a nice clean label as well, which was the business case for this medicine. So, we really have now a safe, effective oral medicine to be given for the management of the endothelium in the kidney with this medicine. So overall, we're driving strong synergies across this portfolio and our aspiration will be to continue to build out the strength of our renal pipeline to really ensure we can establish ourselves as a long-term real leader. And moving to Slide 15. I did want to say a word about the OAV-101 IT gene therapy readout that we had in the quarter. So, looking at the left hand part of the slide, you can see the primary endpoint was achieved in patients 2 to 18 years of age, but I wanted to focus in on the patient's 5 to 18 years of age, particularly given that Zolgensma has been in the market for some period of time. The treatment effect versus placebo of 2.45 is really very strong and I think differentiating versus competition and positions as well, we believe to get both hopefully the approval and ultimately payer support for the use of this one-time therapy in patients 5 to 18 years of age. And so we're excited about the [indiscernible] studies, the overall favorable safety profile we've been able to deliver with the medicine, and as I mentioned, we're on track for global regulatory submissions over the course of the first half of 2025. So moving to the next slide, also from a clinical data standpoint, we did have long-term data on remibrutinib in CSU, which we think further supports the differentiative profile of the medicine. Strong efficacy was maintained up to 52 weeks even as the placebo group crossed over onto active 25 mg b.i.d. You can see that we have meaningful improvements in symptom control across all measures, but I think really importantly that symptom control starts as early as week one in a highly symptomatic disease where itch can lead to disruption in quality of life and quality of sleep. Patients want something that will hopefully impact their disease very soon after initiating therapy. We also had a very favorable safety profile in the data set, including balance LFTs. I can say that in our mid-cycle review, we did not receive any questions from FDA with respect to liver, the liver profile of the medicine. So, I think in CSU, that bodes well for the profile of remibrutinib. We continue to achieve our key milestones. We had the New England Journal of Medicine publication. We've completed submissions now in the U.S., EU, and China. We've initiated a head to head study versus dupilumab with the readout expected in 2027, where we'll focus very much on the speed of onset of action of remibrutinib, and we can continue to advance a full range of indications. Our Phase III in chronic inducible urticaria is ongoing and targeted for 2026 submission. We've initiated our HS Phase III study. We also have Phase IIA-B studies ongoing for food allergy with a readout expected in the second half of this year. And as you all know, at a higher dose, we also are looking at in neuroscience at relapsing MS as well as myasthenia gravis. So, the next milestone for us will be an FDA decision on CSU in the second half of the year. So moving to Slide 17. Taken all together, on track for our innovation milestones for the year. I will continue to keep you updated as we continue to get readouts, but importantly as well, the progress on our early and mid-stage pipeline, which we believe will generate the replacement power to enable us to grow strongly into the next decade. So with that, I'll hand it over to Harry.

Yeah, thank you, Vas. Good morning. Good afternoon, everybody. I will now talk you through our financials for the first quarter, which reflect a very strong start to the year. As always, my comments refer to growth rates and constant currencies, unless otherwise noted. So, starting on page number 19, net sales grew 15% in quarter 1 was per year and co-operating income grew 27%. Our core margin was 42%, reflecting a 400 basis points improvement driven by the excellent sales growth and good cost management. Core earnings per share was $2.28 up 31%, and free cash flow was $3.4 billion. Now, just to note, close to net favorability, mainly in the U.S. added about 2% points to growth in quarter 1 from growth to net to ups based on invoices related to prior quarters in 2024. So, the underlying growth in quarter 1 was still a very strong 13%. On the next slide, just a focus -- short focus on free cash flow, which was up 66% in U.S. dollars, and this is of course a continued area of focus for us. Our very strong ability to turn excellent cooperating income, growth into great free cash flow provides, of course, ample capacity to reinvest in the business, pursue bolt on deals, and return capital to shareholders while growing dividends and share buybacks. Speaking of capital allocation. Next slide, please. Yeah, we remain committed to our shareholder friendly capital allocation strategy, which optimizes both, investing in the business and returning capital to shareholders. So, we continue to invest R&D and CapEx and pursue, of course, also value creating bolt on M&A and [BD and LDs] [ph]. For example, we recently announced a 5-year 23 billion investment into our U.S. based manufacturing in R&D footprint, and we also closed the acquisition of Anthos Therapeutics in April. In terms of returning capital to shareholders, we paid 7.8 billion in dividends in March and April of this year and continued our up to 15 billion share buyback in quarter 1, which has approximately 2.7 billion left to be executed over the next months. Moving to Slide 22. So, our continued strong business momentum combined with the gross to net favorability mainly in the U.S., allowed us to raise our full-year guidance to the upper end of the prior provided range for both top and bottom line. So, we now expect sales to grow high single digit, up from mid to high single digit, and we expect cooperating income to grow low double digit, up from high single to low double digit. Embedded in our guidance is the continued financial planning assumption that the Tasigna, Promacta and Entresto would have U.S. generic entries occurring mid of this year. And to complete our full year guidance, please note that we continue to expect core net financial expenses to be around 1 billion and our core tax rate to be in the range of 16% to 16.5%, so no change versus what we said end of January. Now to my final slide already, where we have outlined details regarding the expected currency impact. If late, April rates would prevail for the remainder of 2025. We would expect a full year currency impact to be neutral on net sales and negative 2% points on core operating income. As a reminder, we provide an estimated impact on exchange -- of exchange rates on our results on a monthly basis on our website, which I hope is useful to you, especially in times of a bit more volatility lately. So, with that back to Vas.

Thank you, Harry. So, in conclusion on Slide 25, strong start to the year, with double-digit sales growth, robust core margin expansion, strong core operating income growth, strong free cash flow generation. Given that strong start, we've upgraded our guidance for the full year. I think importantly significant pipeline progress in quarter 1, we had 3 new approvals in the span of 3 weeks, that we believe can generate important growth for the company, and we remain confident even with the uncertainties of the geopolitical environment and achieving our mid to long-term, growth outlook as we've outlined previously. So with that I think we can open the line for questions.

[Operator Instructions] We will take our first question, and your first question comes from the line of Simon Baker from Redburn Atlantic. Please go ahead, your line is open.

Thank you for taking my questions. Two, if I may, please. Firstly, on the issue of tariffs, as most of your peers have led their quarterly presentations this time with tariffs and the impact and the correlation between where drugs are made, where they're sold, you chose not to, so I just wondered if you could give us some thoughts on the tariff exposure as you see it now and related to that, given it's a few weeks since it was published, I wonder if you could give us, some, feedback on your letter with Paul Hudson to the FT. And then, secondly, for Harry on the gross to net, positive impact of 2% points, could you give us any more color on precisely where that was disproportionately landing? I'm assuming it wasn't equally distributed across the portfolio, so a little bit of color at the drug level would be very helpful there. Thanks so much.

Thank you, Simon. So, first on tariffs, I think as Harry noted and we noted earlier today as well, our guidance fully accounts for any potential tariffs that we've modeled or scenarios that we expect in this year and in the medium term guidance and we've taken, I think appropriate actions with inventory levels and in terms of managing our supply chain to enable us to feel comfortable we can manage it this year and in the medium term as you also saw with our $23 billion investment, our goal in the coming years is to have 100% of our key U.S. products fully produced end-to-end in the U.S. and we're on track to do that. So, we think it's manageable and not something that we need to highlight with respect to our financial outlook. Hence, we don't place a lot of emphasis on it. This is something we've been working on since January and we feel good about where we are. And with respect to the latter on EU properly rewarding innovation, we believe there is an opportunity right now given the deliberations of the European Commission on how to maintain a competitive environment for the biopharmaceutical industry to hopefully, you know, make the commission consider doing something more proactive to ensure that we have a better environment in Europe. Clearly prices in Europe have continued to decline, no longer reflecting the innovation that we deliver. The combination of capping market growth, analyzing new indications, low prices at launch has really led to 30% of medicines not being launched in Europe or being delayed in Europe. That number will only grow over time. So, as an industry I think this is something we're taking up. We put forward 3 ideas on how we could potentially address the situation, maybe other ideas as well, and we're hopeful that the European Commission will take it up and we'll stay determined to educate policymakers at the country level and at the commission level to really address the situation. Now with respect to gross to net, Harry.

Yeah, thank you. Thanks, Simon, for the question. Obviously, we continue to monitor, as you know, this is due to invoice we get 6 to 9 months late sometimes. If we try to always be in the midpoint, based on the latest information we get, and again we got a bit lower Medicaid utilization and more favorable channel mix, which gives prior period adjustment. I mentioned two points of impact, but of course also informs us about future. So, also when we come to the upgrade, it's not only the prior period of gross to net, it's also a better revenue deduction outlook for a year to go if you will for the future as well as continued very good, brand performance, and I think Kisqali and -- fantastic performance there. Now in terms of, it's really across many brands, so I don't want to call out one brand. It's not distorting growth rates very much, it's in this range of 1% to 4% or something like that. So, it's not worth mentioning a single product, it's quite broad-based.

Thank you Simon. And just as a reminder, if the colleagues on the call could limit yourself to one question, thank you very much. Next question, operator.

We will take the next question. Your next question comes from the line of Graham Parry from Bank of America. Please go ahead, your line is open.

Great, thanks for taking my question. So it's just following up on tariffs [indiscernible]. So, your guidance -- so your midterm guidance focuses on revenue and margin. Obviously Novartis is one of the companies that has a lower global tax rate, because of the booking profits in Switzerland, it looks like from the report and accounts are just 16.5%, that's obviously quite a long way below US corporate rates; so, when you're talking about factoring this into your guidance, is that also factoring in the potential for any actions on transfer pricing or IP patent boxes, etc., which would impact on tax rates as well.

Harry?

Okay, Graham. So, we feel very confident in our tax rates, in our tax planning, in our transfer pricing, all of that is very robust, from that standpoint, we at the moment in the 16% or 16.5%. This already includes a Pillar II, 15% minimum, for example Switzerland. So, all of that we feel is very robust. And of course, you know, I don't want to talk about others, but overall, all of this is also OECD conformed. So from that standpoint, I believe that our tax rate will be in that range of 16% to 17% as a core tax rate.

And I think, Graham, of course, we don't know. We're monitoring the situation, if the government were to -- the U.S. government would have taken more extreme actions, we of course have to reevaluate; but, based on everything we're hearing, we believe we can manage the policies that have been put forward thus far, and so feel confident in the position we have. Next question operator.

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

Thank you very much for taking my question. Maybe a question on Pluvicto. Just firstly, a clarification. I think you mentioned as earlier, $4 billion ultimate peak sales ambition. But if I recall correctly, last year, you provided us with the $5 billion numbers. I just wanted to confirm if that changed or that was just a typo. And then just talk to us a little bit about the confidence on H2 PSMAfore inflection. Is that really based on confidence that you're going to transcend this community referrals bottleneck? Is it actually expanding the number of sites will be capable of administering therapy? If you could provide a little bit more color that, that would be extremely helpful.

Yes. Thank you, Emmanuel. My apologies. It is still $5 billion plus. I misspoke. So, with respect to Pluvicto and the dynamics that we're seeing, I think within the academic centers and large integrated health centers that already are well set up, we expect to see rapid uptake. I mean, these accounts, these are accounts that are familiar with the medicine. They have capacity. They do need to staff up, but we believe that's within their reach, and those are the accounts where we expect to see initial rapid uptake of the medicine, and that will drive, I think, the second half performance. I think to reach the full potential within the PSMAfore population and the PSMA addition population, we're going to have to continue to expand not only the number of centers, but getting many of those centers to increase the volume of patients that they're seeing. So, we would estimate of the centers that we've gotten set up, about half of those centers are using Pluvicto at a target rate in terms of the number of patients that are actually able -- they're actually processing through their clinic. And the remaining 300, we need to get up. We need to get up to a higher level of utilization, and then we also need to expand the number of sites. That's going to be some combination of getting comfort with use of the medicine. Hence, we roll out prefilled syringe, use with the referral networks and adequate capacity as well for the imaging, which we're working through as well. We've reorganized our field force to enable easier referrals, but also to hopefully better align with where imaging capacity is. And I think that will be really important as well. And then, of course, continuing to promote the medicine to patients and physicians, so they understand the strong data set that we have. I mentioned the unadjusted OS and the adjusted OS, both of which I think have given confidence to experts that the medicine has the opportunity to have a significant impact on these patients. So, each one of those activities is ongoing. I think this is important for us, not only obviously because of Pluvicto, but also given the broader radioligand therapy portfolio that we're developing. We're now entering the clinic with multiple RLPs in rapid succession targets such as FAP, fibroblast activation protein, targets like HER2, B7-H3, DLL3, all of these targets now entering the clinic. And for that -- those medicines to be successful, we know we need to build out this community capacity and hence a big focus for the company to figure this out.

Very helpful, thank you.

Next question operator.

Thank you. Your next question comes from the line of Florent Cespedes from Bernstein. Please go ahead, your line is open.

Good afternoon. Thank you very much for taking my question. Just a quick follow-up on Pluvicto. In the U.S., when you said that 50% of the sellers are not using Pluvicto at a target rate, is it -- what's the main pushback from the sellers? Is just they need more convenience, so prefilled syringe would help? Or other -- any color on this front would be helpful. Thank you.

Yes. I think it's a combination of things, Florent. I think one is of course, once you have a patient treated to ensure you have adequate reimbursement and then see the process ultimately work. I think second, continuing to educate on the staffing needs and to be ahead of the curve in order to get patients treated. And then I think the referral networks and making sure the referral networks are operative, so that patients are referred to locations where Pluvicto is available. I think these are all surmountable challenges. I think we've already made tremendous progress each 6-month period in terms of expanding the reach of the medicine. I remember a few quarters ago, we were at 100 or 150 centers now providing the medicine, and now we're at multiples higher than that. So I think we're getting there step by step; but of course, for each account, it is a puzzle that we need to solve. We've mapped that out geographically. We were reordering our field force to match to that mapping, and then we just have to, I think, stay consistent. And when I look at corollary, you think about how long it' took chemotherapy and long ago to ultimately roll out. We know these things take time. But once you establish them into the standard of care, they stick. And that's the mindset we're taking, consistent investment over time to make it stick given the portfolio that we have that we're bringing forward.

Thank you very much, very clear.

Next question operator.

Thank you. Your next question comes from the line of Peter Verdult from BNP Paribas Exane. Please go ahead, your line is open.

Yes, thanks. Just one question for you guys on ianalumab in Sjogren's. I mean, the feedback from the docs is positive, but we know that there are no systemic treatment options to offer patients. It just seems from the people -- getting that replicating that Phase II data you presented earlier, it will be enough to get the community excited. So I just wanted to check in on your latest thoughts ahead of that readout and how you're seeing the commercial opportunity if we were to compare it to something like Cosentyx in HS. Do you see Sjogren's and ianalumab being that sort of similar size or even bigger?

Yes, I think we see ianalumab being a very significant medicine if successful, I think clearly with Sjogren's having no approved systemic therapies and given the size of the patient population, there's an opportunity here to create a significant medicine. We haven't guided to specific numbers yet, but I think certainly, multibillion-dollar potential medicine is what we would expect in just the Sjogren's indication. Now I think -- but that, I think, goes without saying that this will be a challenge with respect to, one, when you look at this disease, it's a heterogeneous disease, Hence, the endpoint here, the SI endpoint is a challenging endpoint. We've done everything we can in the design of the study to ensure that we control for placebo effect, that we power appropriately, we have the appropriate statistical analysis, hierarchy, that we've included FDA requested patient-reported outcomes, which I think will also be important for physicians. We've done all of the steps needed to really give ourselves the best chance. And I think also it's going to be important to have impact not only on composite endpoints like [indiscernible], but also very specific areas that patients care about, saliva production, fatigue, et cetera. So, I think each one of these elements of the story have to ultimately tie together. And then I think the opportunity then is significant given that we're targeting patients here with systemic manifestations of the disease, so patients that clearly are having this impact their daily lives. And if we can demonstrate that we move the needle for patient -- patient quality of life, we would expect a very significant medicine. So, we're excited about the readout; hopefully, we can replicate what we saw in Phase II-B, but we're fully also acknowledged that this is a high-risk study that we have to deliver on. Next question operator.

Your next question comes from the line of Richard Vosser from JPMorgan. Please go ahead, your line is open.

Hi, thanks for taking my question. A question on Scemblix, please. The growth on prescriptions is very stunning, but revenue growth is a bit below that. So, just wondering whether you're having to rebate more heavily to generate first-line volume or we could see an uptick later on this year in terms of Scemblix more towards the prescriptions. Thanks very much.

Yes. We've looked into this a bit. And I think one of the things we're seeing is when we look at the IQVIA data set versus what our internal data sets would show, our internal data sets, which are 73% TRx growth of Scemblix versus prior year, and that ties to the 75% net sales growth, so very much in line. We know IQVIA is showing a higher number. We think this might have to do with the nature of a rare disease product that's not flowing fully through only the pharmacy, but also through a specialty distribution change. So, I think that's the key difference. It has more to do with channels than anything underlying the performance. I think most important for us is that we're seeing strong growth in the second-line and first-line indications. We have the reimbursement in place. We have the NCCN guidelines. And now we think the growth should accelerate in the first and second line. And we think this medicine, as you know, has a very significant potential that we plan to fully realize. Thank you Richard. Next question operator.

Your next question comes from the line of James Quigley from Goldman Sachs. Please go ahead, your line is open.

Great, thanks for taking my question. I have a question on Pelacarsen's competitiveness. So last month, really put out Phase II data demonstrating 94% reduction in the Lp(a) at the highest dose with a 180-day administration interval. The Phase II will clearly come after Horizon, and we need to see that to really sort of see where the competitive landscape will move; but with data emerging for competitors with longer dosing intervals, how does this impact your view on the competitiveness and/or your launch strategy for Pelacarsen, assuming positive horizon data? And does this also increase the need to accelerate development of your own 6-monthly or longer acting Lp(a) option?

Yes. Thanks, James. Certainly, we're watching the competitive landscape; but, our core focus right now is to deliver on the Phase III trial and then accelerate towards the launch and hopefully establish ourselves as a first-in-class therapy and building the -- on our global cardiovascular presence with the monthly dosing, really get a broad base of patients on therapy. I mean, we acknowledge the fact there could be competitors coming down the line with quarterly dosing and we'll see what the clinical data ultimately shows for that medicine, and then 6 monthly dosing, as you mentioned later in the decade. But we feel confident that Pelacarsen can have a very significant outlook with its current profile. I would note as well when we look at the recently published study that we -- that the investigators published on the baseline characteristics of the Horizon study, you see a situation where the median level of Lp(a) was around 108. We had 80% of patients above 90%. So, I think that shows that we've enrolled a high-risk patient population in the study, which hopefully gives confidence that if the modeled performance of the drug ultimately -- and the modeled impact of Lp(a) reductions ultimately bears out, that we have a good chance to win on the study when it fully reads out. I would say as well we do have multiple efforts ongoing to get to less frequently dosed siRNAs or ASOs. Those could be as far out as -- out to 1 year is certainly the goal. We're trying to get to annual dosing. So, we have the opportunity to establish ourselves within the market with a monthly dose therapy and then life cycle managed into a much less frequently dosed medicine that we'll be looking to hopefully bring to market at the end of the decade or the early part of the 2030s.

Thank you.

Next question operator.

Your next question comes from the line of Thibault Boutherin from Morgan Stanley. Please go ahead, your line is open.

Thank you very much. I just have a question on the new Phase III study you started with Kesimpta in you're dosing regimen. Is it extending injection interval? Is it exploring higher dose for more efficacy? Because it's quite late in the life cycle of the drug, so, I'm just trying to understand the goal here and could it be something potentially helping with IP duration, for example.

Yes. Thanks, Thibault. We -- this is an effort for us to increasing the dosing interval of Kesimpta before the end of the life cycle of the medicine. I think when we look now at the competitiveness of Kesimpta, given the situation with competitors not fully achieving their goals, I think we have an opportunity to continue to extend this franchise longer. So, we're looking at infrequent dosing. We also have other internal efforts ongoing. We believe that Kesimpta can be a mainstay of B-cell therapy for an extended period of time, given that it's convenient at-home dosing which is, I think, convenient for patients around the globe. We continue to pursue a BTK inhibitor, remibrutinib as well in MS, but we of course are cognizant of the fact that we do have 4 studies that have not shown an impact on RMS today from competitor products. So, we would characterize that as still a high-risk opportunity. But given the overall competitive landscape, we want to ensure now that we fully life cycle Kesimpta. We currently don't believe we would face biosimilars in the United States until the early part of the 2030s. So, we believe there's time to develop these alternative formulations. Next question operator.

Your next question comes from the line of Matthew Weston from UBS. Please go ahead, your line is open.

Thank you. It's a question for Harry, please. Harry, in the 4Q slide deck earlier this year, there was a very prominent slide on the first half, second half dynamics in the year especially around profitability. It's absent in today's slides. Is that because you're expecting less of a sharp contrast in first half, second half, now you've seen the launch of Kisqali and continued growth of Kesimpta? Or is it just that you decided not to include it today?

We just wanted to see if you noticed. No, kidding. But no, thank you, Matthew. So obviously, the onetime effect of the gross to net for prior period, that is reflected in the current quarter. And then there are a couple of other effects that give us further confidence and contribute to the overall full year upgrade, right? And one is that with this, there should be also better gross to net going forward. We adjusted our assumptions. We always learn every quarter. Of course, we are fully modeled in and accrued for the Medicare Part D redesign, which you already see part of Q1. And the second -- the other contributor is of course, very good growth performance overall. So clearly -- and therefore, I see both half 1 being better than what the outlook; but also half 2, half 2, I mentioned low to mid-single digit. We now would see the half 2 to be in the mid-single-digit range given these 2 improvements of more favorable gross to net ongoing as well as better-than-expected performance on some brands. So, hope that answers your question, but we can happily add that slide back if it's very helpful. And then we continue to see here if our mid-year assumption for [32b] [ph] genericized brands in the U.S. as a financial planning assumption plays out or if we would have updates for you. But of course, at the moment if we would know, we will inform you. Therefore, for the time being, we recommend that continues to be the financial planning assumption for everybody.

Thanks Harry. Thanks Matthew. Next question operator

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

Thank you for taking my question. On votoplam, please. Are you still on track to release that Phase II data in the first half of this year? And do you see the potential to file and securing approval in Huntington’s [indiscernible]? Or should we assume Phase II study is likely to be required?

Yes. Thanks, Kerry. As you know, votaplam is currently being -- the Phase II study is being conducted by a PTC. So, we do expect the readout in the first half of this year. And I think when we see the data, we'll have a better sense of -- if on top of mutant Huntington protein reduction, we also see improvements in clinical endpoints, which would be, I think, needed for us to be able to file with FDA. So I think based on the data, we'll work with our partners at PTC to determine what's the right approach, whether to file off of that Phase II-B or to move forward to conduct a pivotal Phase III study. So stay tuned. I think we'll obviously know more once we have a look at the data. And of course, we're staying abreast of the evolving kind of mindset within FDA and certainly what other competitors are doing as well. So, we'll see how the data unfolds. Next question operator.

Your next question comes from the line of Seamus Christopher Fernandez from Guggenheim. Please go ahead, your line is open.

Hi, thanks for taking the question. So, really just wanted to ask about value-creating bolt-ons and areas of focus for BD, in particular, if you see opportunities for life cycle management via BD around your hypertension and heart failure portfolio particularly given the upcoming loss of Entresto in the U.S., but the robust opportunity for Entresto in overseas markets. Thanks so much.

Yes. Thanks, Seamus. So, nothing specific to say. I mean, we feel very good about our cardiovascular pipeline overall. We have, of course, Entresto, Leqvio, Pelacarsen. We have our entire renal portfolio. We recently did the Anthos acquisition to get --, the monoclonal antibody for anti-coagulation into the portfolio. We have a broad range of siRNAs targeting cholesterol lowering, targeting Lp(a) lowering, targeting hypertension lowering in-house as well. So, all those programs are proceeding -- and also an antiarrhythmic portfolio. So, I think we of course are looking across the opportunities out from a bolt-on standpoint, but no particular focus on cardiovascular medicines at this time. Next question operator.

Your next question comes from the line of Steve Scala from TD Securities. Please go ahead, your line is open.

Thank you so much. Novartis has among the fewest manufacturing plants in the U.S. in the industry, but did announce the 23 billion program to expand the U.S. footprint. The question is how much of that 23 billion build-out to the footprint will be complete in -- by 2028? It seems that such a profound pivot could be a less than ideal decision if the views in the U.S. were different in 4 years. If instead, it was an inevitable pivot regardless of the U.S. President, then why didn't it start sooner? And related to this, you said Novartis can manage plans put forward in the U.S. so far. Does that include most favored nation legislation?

Thanks, Steve. So on point one, I think we would acknowledge, I think, we could have done this earlier. I mean, this is a strategic decision to say that U.S. is our most important single market from a growth and revenue standpoint. And we want to be in a position to be able to produce all of our key medicines end to end in the U.S. And so I think we -- you're right, we should have recognized it sooner. But now we have recognized and I think independent of who's president, it's prudent for us to be able to have our supply chain stable inside the United States. We do have a number of medicines already fully produced in the U.S. cell and gene, our Leqvio, Kesimpta, our gene therapy, Pluvicto. And then the other relevant therapies, we believe within this period of time, we can get the necessary manufacturing plants up and running given our footprint that we already have in certain locations to manage this. But it is a strategic decision independent of the President to make sure that we have that capacity inside the United States. Now in terms of most favored nation, of course, I think if this policy, which I think would be devastating to the industry was ultimately put forward in any kind of meaningful way. It would cause, I think, all companies to have to relook at their long-term -- medium- to long-term outlook. It goes without saying. But I think it's really important that we keep advocating that the United States should not import European price controls in the European anti-innovation or challenging innovation environment into the United States. I don't think that will serve patients well, serve health care systems will and the biotechnology ecosystem well. And that's certainly what we're advocating for. Rather, the focus should be to correct the imbalances that have occurred in Europe over the last decades and hopefully get a better environment in Europe that's more competitive with the United States. Next question operator.

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

Hi, thanks for taking my follow-up. So, first one is just on Pluvicto and PSMA addition. Just wondered, when you get the PFS primary endpoint read, roughly what proportion of overall survival events you think you'd have and whether that will be sufficient for finding just given you needed more OS data on PSMAfore? And then actually, I just wanted to follow up on Harry's comment on Entresto. I think -- because Vas, as I think you quoted on the wires this morning saying expecting generic Entresto in July. Harry still refers to that as a modeling assumption. So, could we still see some flex in that? Is there a potential for a 918-patent ruling or a settlement there that could see this bumped into 2026 in the scenarios that you see?

Yes. Thanks, Graham. So first on Pluvicto PSMA addition, so at the time of the RPFS output, difficult to say exactly, but we would expect OS in the range -- the OS events in the range of 40% to 60%, something in that range overall. And I think our view is that we would maintain the study blind, and then with a small group review the data set with FDA to ensure that the FDA felt like the OS is sufficient at that point in time, assuming the study is positive for us to take it forward. And if they tell -- inform us it's not the case, then we'll maintain the study blind, so as not to inadvertently change the rate of crossover in the study. So, that's the approach we're currently taking on PSMA addition. Now with respect to Entresto, there are multiple cases ongoing. So, we have 2 generic filers that we've not settled with. We do have the ongoing patent litigation on the amorphous complex patent, which is pending. We have the ongoing [traderess] [ph] litigation as well with MSN. We have the ongoing litigation with the FDA on whether the approvals are valid. So, all of these litigations are ongoing, and at any point in time, any of those litigations could shift our perspective on the mid-2025 LOE. But, I think until we hear from any of those cases, the most prudent course for us is to maintain a mid-25LOE. And if it changes, of course, we'll immediately update the markets and then update our outlook accordingly.

Okay. So just to replay, that's based on litigation outcome as a place to settlement that you're referring to potential for it to move.

It could be litigation outcome or settlement. All of the above are things we're working on.

Thank you.

Next question operator.

Your next question comes from the line of James Quigley from Goldman Sachs. Please go ahead, your line is open.

Just a quick follow-up for me. Given the European prices has been mentioned a couple of times. So how -- what is the politicians' view on this at the moment? Is it seen as a problem? Or do you have some support from some European politicians about addressing the innovation imbalance that you see between Europe and the U.S.? And have any negotiations or discussions started? Or are we still in a standing start and, hence, the reason for your letter?

Yes. Thanks, James. There is a letter from FT to the European Commission, which I think has been published publicly, which I think outlined some of the topics, but not the specific recommendations that Paul and I put forward in the FT. But I think that was a response to a request from the European Commission to understand how the innovation environment in Europe can ensure that they retain their leading biotechnology sector, biotechnology manufacturing, biopharmaceutical R&D. I think a lot of the focus right now is in streamlining regulations, which are welcome; streamlining and improving regulatory data protection, also welcome; strengthening overall support for the biotech ecosystem, metro capital, et cetera, all welcome as well. But I think, we as an industry and at least some of other CEOs strongly believe that this also should be an opportunity to rethink the overall approach to valuing innovation in the European community. And I think that's what we're trying to focus on. I can't really comment on whether or not those -- that is being viewed as something that will be taken out by the commission. That's not something they've communicated back to us. But it's certainly something we're advocating for both at the commission level and with individual countries around Europe as well.

Thank you.

Next question.

Your next question comes from the line of Thibault Boutherin from Morgan Stanley. Please go ahead, your line is open.

Your press release mentioned a litigation with drug manufacturer for a generic of Lutathera. Just if you could help us understand what generic would look like with radioligand in terms of type of price discounts. Any challenges a potential generic maker could face in terms of penetration, [super challenges] [ph] kind of things?

Yes. So first, I think on generics and RLT, this is not something where there is, we believe, an adequate or clear regulatory standard. So, while one topic is does any proposed generic infringe on our IP, which is what the litigation is referring to, separate from that we have filed citizens petitions and continue to advocate with the regulators around the world to clarify what is expected of a radioligand therapy, and it should absolutely be held to the standard of ensuring patients and the tumor is receiving equivalent dose of radiation to ensure efficacy and appropriate safety. So that's all, I think, also ongoing. And then the third question is the supply chain and can a potential generic manufacturer produce the medicine in a way that doesn't also infringe on our patents in terms of production and know-how in terms of production, but also in a way that reliably provides these medicines to patients given that you have a 4-day -- 3- to 5-day window, depending on the medicine, to actually get it to physicians. And as we've learned, it's absolutely critical to be on time in full. And Novartis right now is 99.9% on time in full for our radioligand therapy business. And that's the standard I think physicians expect and that any generic company would also have to meet. So, I think those are the three levels of the ongoing discussion. I think it will take years to resolve. But it will be important because these standards will ultimately be what defines the sector in the longer run. Next question operator.

Your next question comes from the line of Matthew Weston from UBS. Please go ahead, your line is open.

I'd love to go back to Graham's question on tax, Harry. On the Astra call, Pascal was prepared to say that he believes Astra pays a fair amount of tax in the U.S. relative to the sales booked in the U.S. and the total tax paid by the company. There's been a lot of discussion in the past as to how Novartis pays tax in the U.S., some of it before your time. So I'd just be interested if you're comfortable saying the same thing from a Novartis perspective.

Thank you, Matthew. Harry?

Of course, we pay in every jurisdiction we do business our fair and proper amount of taxes. And by the way, we don't have any offshore balance sheet structure. So from that standpoint, we are very confident in our tax planning and very robust.

Perfect, many thanks indeed.

Thanks Matthew. Next question operator.

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

Yes, thanks. Last one, I promise. So, I just wanted to follow up, actually, guys, on the -- to qualify the comment you said about MFN being devastating for the industry, I think the word you used, if it was implemented. But when you say devastating, are you talking about MFN being imposed across both government and commercial setting? Or do you see that just in position across Medicare, Medicaid would actually have that level of impact. I think it's an important clarification.

Yes, absolutely. Look, of course, the [indiscernible] in the details with these things. I think MFN, as previously conceived, is limited to Part B drugs. For Novartis, highly manageable. If it's MFN in Medicare Part B and Part D, but we no longer have to pay rebates and a number of other discounts disappear, manageable. If it's Medicare Part B, Part D with the spillover into Medicaid, the spillover into 340B pricing and all of the other problems, definitely painful. If it spills over into the private market, devastating. So I mean, I think all of this, of course, is something to look at. And here, I speak about the industry, I think, broadly as well. I mean, of course, for Novartis, given our relative exposure to the U.S. and relative exposure to Medicare, if this policy ultimately were to come into place, we're well positioned relatively speaking. But that still doesn't mean that we would, in any way, want this to happen given -- obviously, given the damage it would do to our ability to invest in R&D, invest in manufacturing, invest in future pipeline of medicines for patients around the globe, it would definitely have a significant impact. But certainly, it depends on the details of what ultimately is conceived.

Thank you.

Next question operator.

Your next question comes from the line of Florent Cespedes from Bernstein. Please go ahead, your line is open.

Good afternoon, thank you very much for taking my follow-up question. First, a big picture question on IRA. Could we have your thoughts about the difference in exclusivity between small molecule and large molecules in 9 years versus 13 years? Do you see any, let's say, possible happy endings or more favorable trend on this front? Any color will be great.

I think it was very promising and I think a good sign that in the President's executive order that there was support for moving as a small molecule 9 years to 13 years and something the industry has made our top priority from a legislative standpoint. We have the pay force to enable this to happen. So, it's our absolute focus that any reconciliation bill is taken forward, that the correction of 9 and 13 is part of that reconciliation bill. And I think we have a good bipartisan support both in the House and Senate to make that happen. And I think we know that with respect to these kinds of bills, it really comes down to the very final language on the last day. So we can never be sure. But I think all signs are positive that we have an opportunity to get this fixed, which would really, I think, enable us to sustain small molecule drug innovation into the future. So, I'm hopeful at this point that we could make something happen. I think while on that, I think we continue to also advocate, of course, on PBM reform. I think there was a good bill that nearly passed in December, and we continue to hope that can happen. And then we continue to advocate for the fixing the 340B system as well. That may not happen legislatively, but we continue to pursue all avenues to ensure that there's no abuse of the 340B system. There was an important report put out by the Senate Health Committee, I think, that highlights the problems in the current system. So hopefully, step by step, we get to a place where that program is also put into its proper context of actually helping patients and clinics in low-income communities and disadvantaged rural communities get the support they need without the abuse that we're seeing around the country. So those would be the 3, I think, big legislative priorities for the industry and for Novartis.

Right, thank you very much.

I think we have one more question maybe?

[Operator Instructions]

No.

All right. Very good. Thank you all very much. Thank you for joining today's call. We look forward to keeping you up to speed on all happenings at Novartis, and we wish you a great day.

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