Novartis AG

Thank you very much, everybody, and good morning and good afternoon to all participants. Thank you for joining us today for Novartis' quarter one 2022 results. Before we start, just wanted to go through the safe harbour statements. 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 20F and its most recent quarterly results on Form 6K that respectively were filed with and furnished to the U.S. Securities and Exchange Commission. And with that, I'll hand across to Val.

Thank you, Samir, and thanks, everyone, for joining our conference call today. If we could move forward a few slides. So with me today, I have Harry Kirsch, our Chief Financial Officer, and Karen Hale, our Chief Legal Officer. If we go to slide four, overall, the quarter came out with a solid start for Novartis across all of our four key pillars. From a growth standpoint, good sales, growth, both at the IM and Sandoz and, of course, the overall group level. Good productivity, group core operating income up 9% on constant currency basis, as well as a solid result in both IM and Sandoz. Some important innovation milestones. I'll go through those in a bit more detail. And we also continue to advance our ESG agenda in AMR, as well as access to medicines agreements in Africa. So I think a solid quarter that we can build on over the course of this year. Moving to the next slide. Our innovative medicine sales group across both our U.S. and ex-U.S. geographies, 3% in the U.S., 5% ex-U.S. in constant currencies, with growth drivers now accounting for 56% of our IM sales growth, of those growth drivers up 21% quarter over quarter. So a nice demonstration that we continue to replace our sales base with newer and newer products. Now moving to slide six. We saw strong performance on our key growth drivers, the six brands we've been consistently highlighting, and I'll talk about them in a bit more detail. But you can see really across these key brands, growth that ranged from the high single digit to the double digit range. So again, pleased with the broad-based performance. Of course, there were pockets of weakness, and we can talk more about that. But overall, we're pleased that we're off to this solid start on the key brands. But let's go a bit deeper on the six key brands. So moving to the next slide on slide seven, you see that on Cosentix, Entrusto, Zulgensma, Cascale, Cosimta, and Lefio, we had good growth on the major brands that we really believe will drive our midterm sales performance. And of course, continue to maintain our peak sales guidance on these brands. Importantly as well, Cosimta has now demonstrated in Q1 the potential we expect of this brand. to really reach that multibillion-dollar potential with very strong growth in the quarter. We'll talk more about that. And with Lectio, continue to build a solid foundation base for what will be a multi-year journey to get to the multibillion-dollar sales potential. But I think the initial foundational elements are starting to come into play. So, again, it will be a longer-term journey for this brand. Moving to slide eight. And going to each one of these brands, brand by brand, first with respect to Cosentix, double-digit sales growth, 12% on the quarter, really driven by our ex-US performance. When you look at the specifics on the growth momentum, we saw steady volume growth in the US and EU. We have 700,000 patients now across our five indications treated worldwide since launch. Very good performance in rheumatology across geographies. We expect double-digit growth in driven by our China market expansion. Year-to-date, our China performance has been good. We also will, in the medium term, be driven by our ability to get new indications online. We're on track for our Hydradenitis Superativa submission this year, and we do expect CHMP decision on a couple of additional indications later in quarter two. So we confirm our $7 billion-plus peak sales expectations for Cosentix. Moving to the next slide, Entrusto had an outstanding first quarter, growing 42% on the quarter, driven by both U.S. and ex-U.S. performance. You can see here the U.S. weekly NBRX showing a nice steep ramp as we come out, particularly as we come out of the pandemic period. This growth has been driven across hospitals, cardiology, and primary care, so really broad-based in the U.S., primarily driven by reduced ejection fraction, especially with the new guidelines that are now in place, but also supported by the preserved ejection fraction indication. We have strong demand growth in Europe for the brand, and in China, as well as Japan, the launch of our hypertension indications and the NRDL listing in China have helped drive this growth. So longer term, we expect the continued development of evidence-based, the continued drive of the guidelines that place ARNI as a first choice for physicians treating reduced ejection fraction heart failure, as well as for further penetration in China and Japan to drive the momentum for Entrusto. Moving to the next slide, Zolgensma grew 18% on the quarter with increasing access outside of the United States. The Q1 highlights were really the ex-U.S., where we had sales growth 32% in constant currency, while the U.S. remained steady as we continue to drive up the newborn screening rates. So right now we have over 2,000 patients treated worldwide, which I think demonstrates the profile of this gene therapy and the confidence providers are having in using this medicine. In the future, our growth will be driven by continuing to penetrate in the U.S. in the under two, really getting to a high market share. We expect to have over 90% of children who are diagnosed in newborn screening receiving Zolgensma. That's our goal. And continuing to drive up that newborn screening in the EU above 25%. Our next phase of data studies or data generation is on track to steer study with intrathecal in older children. is currently enrolling the strength study to further profile in the IV setting. It's starting in the second half. We also rolled out some additional data at MDA, which supports the overall profile of Zolgensma IV. So this will be a steady ramp towards our goal to be a $2 billion product over time, but overall the signs and signals are good. Moving to the next slide. Kaskali delivered 28% growth on the quarter, primarily driven, again, by XUS performance. The market trends show a recovery to pre-COVID levels for CDK4-6-TRX, but we continue to see suppression in the NVRX part of the market. And so we'll have to continue to watch to see that recovery, which will be critical for us because a lot of our growth is dependent on new-to-brand patients. Kaskali's growth in the U.S. is in line with market, but in Europe we continue to grow ahead of market. And I'll speak more about the Natalie adjuvant study update that we've provided today in an upcoming slide. Moving to slide 12. Now turning to Kesimpta. Kesimpta really, I think, had a strong quarter. We have 20,000 patients treated. Over 60% are naive or first switch. In the U.S., we see really strong growth dynamics despite a suppressed market. You can see in the upper left-hand side of the slide, the U.S. MS market growth remains below its pre-COVID levels. Nonetheless, we see Cosimta continuing to gain momentum. And now outside of the United States, we're approved in 68 countries. So over the course of this year and really starting in 2023, we would expect the ex-U.S. contributions to the brand to start to increase significantly. We again rolled out additional data in the quarter, now at four years out, showing the ability to reduce disability worsening with stable IgG levels, as well as data that supports the use of Kesimpta in patients who need to be treated with COVID-19 vaccination. So overall, I think a strong start to the quarter, a lot of good momentum with Kesimpta, and we'll look forward to delivering that momentum or accelerating that momentum over the course of the year. And moving to the next slide, slide 13, Turning to Lectio, again, early days, particularly in the U.S., but I think the leading indicators point to the foundations being put in place to have this brand become a very significant brand for the company. We've reached over 90% of HCPs. We have good unaided brand awareness. Our DTC is now initiated. We've also established access in over, it's actually over 50 now, of the 200 prioritized systems, so it's 35 on the slide, but we're up to 50, have ordered Lectio. Our focus very much is in driving more depth in those accounts. We have 55% of our alternative injection sites accounts now have purchased Lectio, 30% repeat orders. And importantly, our permanent J code has been granted and will go into effect on July 1. So all of this to say that the foundations are in place in the second half of this year to begin to see some more acceleration and growth for Lectio going into what we expect to see further acceleration in the coming years. Now moving to the next slide. Just wanted to say a word on our two recent launches in the U.S. Semblix, our BCR able inhibitor, stamp inhibitor, showed nice performance in the quarter in the third line setting. Here you can see our NVRx share has reached 20% through February. Still small numbers, but I think it points to the potential of this medicine, given its strong efficacy and safety profile. We're up to 49% third-line patient share, and our first-line Phase III study is now enrolling ahead of plan. So we remain optimistic that we can deliver an over $500 million brand in the third-line setting, but our focus in the longer term is to hopefully, with positive data, move into the front-line setting. Moving to the next slide was Plavicto. So we, towards the end of the quarter, received approval for Plavicto. And I think on the U.S. launch, we're off to a good start in getting, again, the key elements in place to really drive this launch. As a reminder, the population is metastatic CRPC patients who are post-relevant chemotherapies. Patient selection is driven by a gallium PSMA 11 agent to identify patients who would benefit from Fluvecto. There was a 38% reduction in the risk of death in these patients, so a lot of physician and KOL interest in the medicine in the prostate cancer space. Six infusions, over six weeks, which really gives us an opportunity for a one-time therapy over that period of time, and then patients derive the benefit. We're building on our Lutathera experience with this medicine. Our commercial field teams are in place. We see a high awareness already in the 240 treatment centers that we're targeting initially. Forty RLC centers are already onboarded into the ordering system, and many of these centers have experience with us. And we've submitted the application for the permanent A code for this medicine. Now, in Europe, we expect approval in the second half of 22, and we also are progressing on track with our Phase III studies in the pre-taxane and hormone-sensitive setting, and we're also – which would expand the patient population 3 to 4x and allow us to target a patient population to enable this to be a multibillion-dollar brand over time. And we're evaluating additional Phase III studies in the earlier-line setting.

And moving to the next slide.