Novartis AG

Good morning and good afternoon and welcome to the Novartis Q1 2021 results release conference call and live audio webcast. Please note that during the presentation all participants will be in a listen only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions by pressing the star and 1 at any time during the conference. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. Should anyone need assistance during the conference call, they may signal the operator by pressing star and zero. 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. Thank you for taking the time to join us on the Q1 webinar. Results Conference call. We appreciate that you are taking the time. Before we start, I just want to go through the safe harbor statement. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements. For a description of some of these factors, please refer to the company's Form 20F and its most recent quarterly results of Form 6K that respectively were filed with and furnished to the U.S. Securities and Exchange Commission. And with that, I'll now hand across to Vice.

Thank you, Sameer, and thanks again for everyone for joining today's conference call. With me today, I have Harry Kirsch, our Chief Financial Officer, Mary France Truden, our President of Novartis Pharmaceuticals. Suzanne Schaffert, our President of Novartis Oncology. John Tsai, our Head of Global Drug Development and Chief Medical Officer. Richard Sainar, our Head of Sandoz. Tom Kendris, who is our Chief Legal Officer at Inram and Samir, who you've just heard from. So, moving to the next slide, what I'd like to do is give you an overview of our performance and then dive a little bit deeper into the four key areas as part of the overview section before handing it over to our business leaders. First and foremost, we feel confident in the growth outlook of the company, particularly given the momentum we're seeing in innovative medicines and the expected stabilization we foresee in the Sandoz business. From a productivity standpoint, when you control for forward purchasing, we continued our expansion of our core margin, and I'll say more about that in a moment. We had multiple important milestones from an innovation standpoint, and I'll go into a little more depth as to some of the upcoming milestones and some of the updates we have in our Phase 2 and Phase 3 pipeline, which we view as one of the leading pipelines in the industry. And lastly, in ESG, we continue to our march to being the sector leader within the pharmaceutical and biopharmaceutical sector, as well as being a leader across sectors, ranked number two in the Access to Medicines Index and number one in Sustainalytics, and I'll talk a little bit more about that in a moment. So, going to the next slide, starting with The growth outlook, our key growth drivers really demonstrated that they're returning to momentum over Q1. We had strong performance in brands such as Entresto, Zolgensma, and Cosentix on the pharmaceutical side, as well as a very good performance from brands like Lutathera, Chimriah, and solid performance from Kiskali on the oncology side. In addition, Cosimta is off to a very strong start. Mary France will talk more about the Cosimta launch. Now, when you take it together, our key growth drivers and launches now are growing 20% and amounting to 48% of our total sales. And we expect this number to continue to climb over the coming years, enabling us to deliver the midterm growth we outlined in the meet the market of artist management presentation we had last November. As a proof point, when you exclude forward purchasing, our innovative medicines business grew 3% in the quarter in constant currencies. Now, moving to the next slide, we're also confident that we can continue to deliver the core margin expansion that we've committed to. In the near term, that would be in the mid to high 30s. In the near term, excuse me, and in the midterm, it would be in the high 30s. And when you look at our Q1 underlying performance, when, again, you take into account forward purchasing that we saw, Last year, you had core operating growth of plus 6% and core margin growth of a point, bringing us to 36.3. Well, on our way to getting to that high thirties goal. The drivers of that expansion were sales momentum on our key on our key products as well as the continued productivity program and of artist technical operations where our goal is to deliver 2Billion dollars in savings in the next few years. And we continue to evolve our ways of working, delivering savings from our newly created customer technology solutions organization, which integrates data and digital as well as Novartis business services to even accelerate the overall way of working inside of Novartis. Moving to slide eight, Sandoz did have a difficult quarter, which was impacted by price erosion as forward purchasing and a historically low cough and cold season. The first thing to note is we were cycling an exceptionally strong prior year quarter. And you can see some of the figures here. But, for example, the total sales of Sandoz was up 11% in Q1 2020. And, of course, this quarter we're down 13%. Now, some of the underlying factors that we see impacting this, many of them are sector-wide. It's a price erosion of 10%, which we saw across Europe and U.S. in our key markets. I mentioned the forward purchasing, as well as weak demand in cough and cold retail, as well as some of the impacts of the retention of the oral bindo business and oral solids in the U.S. On a positive note, our biopharma business continues to grow and continues to be a leader in many regions around the world. We expect the business to stabilize in the second half as the pandemic eases. We expect our biosimilars to outperform in the competitive European market. We expect to see our retail European business rebound. And we also have an increasing number of launches both across biosimilars in geographies outside of the US and Europe, as well as in small molecules in the second half. So that'll be a key area of focus for us as we continue to get Sandoz back to growth. So moving to slide nine, From a pipeline and innovation standpoint, it was a busy quarter. You're well aware of the approval of Entresto in patients with a below normal left ventricular ejection fraction, updates to Casentix label and approvals in Casimta. In terms of readouts, the vision study read out positive on both PFS, RPFS, as well as on overall survival. And we look forward to presenting that impressive data in an upcoming medical congress. We had the positive readout of in juvenile idiopathic arthritis, which we now are moving towards filing and we'll continue to enable us to expand indication where we have a goal of getting to 9 indications or formulations to enable to continue to drive dynamic growth over this decade. LNP of taclopan had a positive readout in IgA nephropathy, and we'll look forward to presenting that data in an upcoming Congress. And we have already initiated the phase three program. You'll remember that IgA nephropathy is one of the larger indications we have for this medicine. We also had the positive readout, which we have already stated in PNH and the phase three started there. And we're expecting additional readouts, which I'll talk about in a moment. We did have the results of Entresto in the post-AMI setting where it had a high hurdle trying to demonstrate superiority to Ramipril in a very fragile patient population. These are patients who had recently had a myocardial infarction. Entresto had a consistent positive trend across all the primary and secondary endpoints, but did not meet statistical significance for superiority. Did demonstrate a very strong safety profile. And we'll look forward to discussing the data further with regulators in the months to come. And lastly, you're aware of the canakinumab second line readout. So, some other designations and submissions on the bottom of the slide, but I'd like to move to the next slide and take a little bit of time to go through some of the updates on our expected milestones across our key programs in life cycle management, pharmaceuticals, and oncology. I already mentioned the Entresto and Cosentix information. On Cosentix, we are on track for the hydroadenitis superativa phase three readouts in the second half of 2021. In Cascali, importantly, we have completed enrollment of the adjuvant study in medium and high-risk patients, and Susanna will say a bit more about that, but a readout in 2022. With respect to Lectio, we remain on track for a CRL response to be submitted in the Q2, Q3 timeframe. We've also completed a tech transfer into our Schaffner facility in Austria and are evaluating the best way to submit that response now with the FDA. And I think those are some of the key highlights on lifecycle management. Now, turning to pharmaceuticals, the portfolio, I've already mentioned on LNP023 some of the key milestones, but I think the key thing here is that we're continuing to rapidly move across a broad range of indications into Phase III. The other highlight I wanted to mention is Braniplam, where we have completed the Phase 1 study, and we look forward to providing that information in an upcoming medical congress. We have also completed discussions with regulators to finalize the Phase 2B study design and plan to start that study in the second half of 2021. And then moving to oncology, I think very important that canakinumab studies remain on track in first line and adjuvant. But as important in many ways now, the Lew PSMA studies in the early lines of therapy in hormone-sensitive prostate cancer have begun, and we look forward to enrolling the studies rapidly with a planned readout in 2024. Now, moving to the next slide, you probably will have seen that we've completed our in-licensing agreement for Tisalizumab with Beijing. And we did have the readout of two important studies that will enable submissions over the course of this year, first and second line non-small cell lung cancer at AACR. You can see the data here on the right with solid overall survival data. And then also in esophageal cancer, where the studies have met its primary endpoint, prolonging OS versus chemo, and we'll provide that data release as well in an upcoming Congress. So these studies will enable ex-China filings which are on track for 2021 and we have 15 potential registration enabling studies ongoing as well as a broad range of combination studies in the program. Then moving to the next slide. I wanted to close just by noting our commitment across the company in areas of high materiality for Novartis to advance our efforts in ESG and building trust with society. I mentioned the ranking we have now in Sustainalytics. We're the only company amongst our peer set now ranked with a low risk in the Sustainalytics ranking. Also an access to medicines index, a number two ranking, but we were very proud of our number one ranking in product delivery, our ability to bring our innovative medicines to patients most in need in low and low and middle income countries. Other highlights include an agreement with Bill and Melinda Gates Foundation on bringing transformative therapies to patients in sickle cell disease, as well as being included in the Bloomberg Gender Equality Index. And, of course, you're aware of our ongoing efforts in COVID-19 to provide our manufacturing capacity, as well as to collaborate with molecular partners, as well as our own in-house oral program for a pan-COVID oral protease inhibitor to hopefully bring therapeutics over time to help with the long-term control of COVID-19. So that gives you a little bit of an overview. I'd like to hand it over now to Mary France to dive a little bit deeper into pharmaceuticals. Mary France?