Novartis AG

Good morning and good afternoon and welcome to the Novartis Q2 2022 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. After the presentation, there'll be an opportunity to ask questions by pressing star and 1 at any time during the conference. You will then hear an automated message advising your hand is raised. Please limit yourself to one question and return to the queue for any follow-ups. 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 Mr. Samir Shah, Global Head of Investor Relations. Please go ahead, sir.

Thank you very much. And thank you to all of you who joined us today on this beautiful summer's day for Novartis' quarter two results. Before we start, I'll just read you 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 recently 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 Vas. Thank you.

Thank you, Samir, and thanks, everyone, for joining today's conference call. We're pleased to go over the results I have with me today, Harry Kirsch, our CFO, and Karen Hale, our Chief Legal Officer. Moving to slide four, as you saw in the release earlier today, we delivered a solid quarter two across each of our key value drivers. Five percent growth across the entire company, as well as in innovative medicines in Sandoz. Continuing our productivity agenda with solid core operating income growth across the business, as well as continued margin expansion in constant currencies. as well as an upgrade to our expected savings from our transformation program to now 1.5 billion. Some innovation milestones. Notably, we continue to garner approvals for Stemblix, our new medicine for CML, including a positive CHMP opinion. And then lastly, three milestones within our ESG efforts. First, the $250 million R&D commitment as part of the Kigali Declaration for Neglected Tropical Diseases. We've increased our commitment to clinical trial diversity over the next 10 years through our Beacon of Hope project. We also had an upgrade from MSCI to now a AA rating top quartile within the industry. And we continue to work to further improve our overall ESG profile. Moving to the next slide, when you look at innovative medicines sales, we grew consistently across the U.S. and in our ex-U.S. markets, primarily driven by our key growth drivers. We had 6% sales in the U.S., 5% sales ex-U.S., and you now see on the right-hand side of the chart, 59% of our sales come from our key growth drivers, and those key growth drivers are now growing at 21%. And moving to the next slide and zooming in a little closer on the quarter, you saw pretty consistent performance across our key medicines. And we'll go through this in a bit more detail. Two products I wanted to particularly call out. Kesimpta had a very strong quarter, I think, demonstrating its overall profile as a multiple sclerosis therapy of choice. And Kiskali, as well, is now gaining momentum in metastatic breast cancer patients. And we'll talk a little bit more about that throughout the call. Now, moving to the next slide, we've really focused attention as a company on six key growth drivers, we believe, which will enable us to deliver the growth profile we've outlined both in the next five years and also beyond. Notably, Cosentix and Entrusto continue their outstanding performance towards their respective peak sales goal. We'll talk more about Zolgensma, which continues its global expansion. Kiskali and Kasimta I've already mentioned. And Lectio, we're building a strong base with which we believe will enable this medicine to reach a significant sales potential over time. Taken together, these six brands now constitute 32% of innovative medicine sales, and they're growing at 31%. I think given confidence in the growth outlook that we've outlined, Now, moving to slide eight and going through each of these key brands, starting with Cosentix. Cosentix delivered 12% sales growth on the quarter. When you look at the outlook for Cosentix, we continue to guide to a double-digit growth driven by steady volume growth in the key geographies, U.S., Europe, and China. We're very confident in the overall clinical profile now that we've treated over 700,000 patients across five of the indications indicated for Cosentix. And we continue to get important guideline recommendations, including the GRAPA psoriatic arthritis guidelines, which highlight Cosentix's unique benefit versus alternative therapies, including the IL-1223s, and its ability to tackle axial manifestations of this disease. Overall, we're confident in the $7 billion plus peak sales potential. This will be driven by global expansion of the product, as well as lifecycle management, where we had some good progress in the quarter. including approvals in pediatrics in Europe. We've submitted hydroadenitis superativa in the EU, and we expect to submit in the U.S. in the second half. We have positive data on an IV study looking at placentics used in axial spondyloarthritis. And lastly, we do anticipate an IV submission in the U.S. as well in psoriatic arthritis, four proof points of our ongoing efforts on lifecycle management for placentics. Now moving to the next slide, slide nine, when you look at Entresto, Entresto is continuing its really dynamic growth globally and in the U.S. You can see we delivered 33% growth with Entresto. Our weekly NVRX continues its strong progression with continued strong growth. We've now treated over 7 million patients globally and over 1 million patients in the U.S. growing in hospitals, cardiology, and primary care. So really strong growth across geographies. And we're confident in the future growth and delivering the $5 billion plus peak sales potential for this brand. There's only one-third of the addressable population that's been treated. We see a strong profile consistently regardless of the setting the medicine is used in. And lastly, with the approval of Entresto and hypertension in Japan and China, where there's a high unmet need, it gives another opportunity for future growth. Then moving to slide 10 with Zolgensma. Zolgensma is continuing to demonstrate the power of a one-time gene therapy to treat really, in a dramatic way, treat a terrible disease like SMA. 26% growth driven by global expansion, 2300 patients now treated. We had recent reimbursement decisions, positive reimbursement decisions in Australia, Switzerland, and Greece. And we recently received approval for our North Carolina new manufacturing facility, which further expands the capacity of our gene therapy network and really brings online a state-of-the-art facility, continuing our leadership in the AAV gene therapy space. Now, future growth drivers for Zolgensla are going to be that continued global expansion, 43 countries to date and growing. We also want to enable stronger newborn screening programs outside of the United States. Ninety-seven percent of newborns are screened in the U.S., but only 30 percent in Europe, and those numbers are similar or lower in many other geographies. As we can get more newborns screened, then we believe Zolgensma is the treatment of choice for these babies, allows for normalization of their overall development. And we saw that in a Nature publication that recently summarized the data from one of our earlier studies with 14 out of 15 patients walking alone and 11 of them in the normal development window when treated early with Zolgensma. I also want to note that both our STEER studies and STRENGTH studies are progressing well, and we continue to outlook a submission in intrathecal for Zolgensma for 2- to 18-year-olds in 2025. Then moving to the next slide, with Qiskali, we continue to deliver double-digit growth. You see 43% growth. We see this as a brand that, given its recent data releases, is really coming into a strong profile and strong growth profile. We're seeing increased traction based on the clinical data, and I'll talk more about that a little bit later in the presentation. And we saw that at ASCO, once again, we were able to highlight some of the data sets, particularly around OS and the first-line setting, which demonstrates the strong profile of Kaskali. The Natalie Adjaman study primary analysis is expected in 2023 and continues to progress on track. And I'll talk more about that in the pipeline section. Now, moving to Casimta on the next slide, slide 12, the launch is continuing and really continuing on a strong trajectory. We see an acceleration of the brand in the U.S., and we continue to work towards providing the medicine globally in our key markets. We have U.S. demand of 18% growth quarter over quarter. We have 3,200 physician adopters since launch. You can see the NBRX up now 42%. It's a really dynamic growth for this medicine. And we're working to continue to strengthen the profile and differentiation. We have new extension data, which demonstrated 8 out of 10 patients treated continuously with Cosimpta had no evidence of disease activity. From a operational standpoint, we continue to work to drive fast initiation. Patients are now getting on therapy within six days, 80% of patients achieving that goal. And 77% of patients remain on therapy at 12 months, which I think, again, demonstrates the medicine's impact as well as its ease of use for patients. So very excited about the outlook for Cosimta. Then moving to the next slide, slide 13, with Lectio, we're laying the foundation, as we've outlined, in 2022 for the ramp we expect over the coming years. And we continue to expect in the remainder of 2022 for a steady ramp up of Lectio. But I think there's important proof points that we're beginning to lay that groundwork successfully. First, with respect to access, and as a reminder, Lectio is under the medical benefit. We have 65% of patients now covered with, aligned to our label, or near our label. And that's within six months of launch. This is higher than relevant competitor brands, both from PTSD monoclonal antibodies and or other recently launched anti-cholesterol therapeutics. And those brands have been on the market for many years. I think it demonstrates we've been able to drive fast access And the J code now is in place as of July 1. So I think from an access perspective, we're progressing well, progressing on or ahead of our plan, and I think that sets us up well for the future. Secondly, on affordability, we can now confirm that two-thirds of patients have zero copay for Lectio, including Medicare Part B patients with supplemental insurance. This, again, we believe will enable a strong uptake and strong adherence to this medicine so patients can get the benefit that they need from lower cholesterol. And lastly, we're making progress working through logistics and administration for this medicine in cardiologist offices as well as in relevant hospitals and medical centers. We've increased the number of unique locations, ordering Lethio to over 700. We're expanding the depth now with 55% of our customers already having placed repeat orders. And we're seeing growing usage now with 2,100 HCPs and now 3,900 patients in the service center. So all of this taken together, I think, points to a strong future for the brand, and we'll continue to work through the second half of this year to build out this base to enable long-term growth. Then moving to the next slide, slide 14, with Pluvicto. And moving to our two recently launched medicines in oncology, Pluvecto and Semblant. The Pluvecto launch is really progressing in a strong manner, and it's either at or above our own expectations. We've seen our manufacturing issues remediated, and we've cleared our backlog. Commercial and clinical supply resumed in June. We have a permanent ACO that was granted in July, and that'll be effective in October. Over 50% of insured lives now are We have over 100 RLT sites now operational, 40 sites have completed orders. So, a strong trajectory from the start, and we're hoping to maintain that over the coming months. We're preparing for further expansion with this medicine, given the clinical profile we've seen to date. Both the Phase III studies are on track, both in the pre-taxane setting and the hormone-sensitive setting. with a readout for the pre-caxane study still slated before the end of this year. The manufacturing scale-up is ongoing. We have a new facility in Indianapolis that we plan to bring online in the second half of next year, and we have capacity and our expansion is ongoing in our Italy and New Jersey sites. And we're making significant investments to ensure logistics can support access as the patient population that can be reached by radioligand therapies continue to expand across Pluvicto, Lutathera, and our pipeline. So moving to the next slide, slide 15, Semblix as well is off to a very strong U.S. launch, and then we achieved the, as I noted earlier, important regulatory milestones in the EU. $31 million of sales, primarily driven in that third line setting. 44% share in the third line, which I think is a good marker given how recently we launched the medicine. And 16% NBRX share regardless of CML line of treatment. In terms of future growth for Semblitz, it's going to be driven by the first line study, which is enrolling ahead of plan. This is a reminder versus investigator choice of TKI. And the CHMP positive opinion in the ex-U.S. markets where we continue to work to get a global rollout of the medicine. So moving to the next slide and turning to Sandoz, as you saw, Sandoz had a really solid quarter in quarter two, and we raised the full year guidance for Sandoz, and Harry will talk a little bit more about that. When you look at the drivers for Sandoz sales performance, it's primarily in Europe where we are a leader with a leading generics company with 4% growth driven by both launches as well as recovery of the healthcare systems. We have double digit growth in the rest of world markets, Japan and other emerging markets. And we've seen a stabilization in the US business setting us up with future biosimilars launches and small molecules launches to drive growth in the US over the years to come. You can see our retail sales growth in the quarter was 4%, biopharma was up 11%. So we've raised the guidance as mentioned. And when you look longer term, we believe this creates a solid base of growth for growth 2023 and beyond. A lot of that will be driven by the biosimilars portfolio. The portfolio of biosimilars in Sandoz targets $80 billion of originator sales, over 15 assets in the portfolio, and some recent progress, including the acceptance of the adalimumab high concentration formulation, as well as natalizumab in the EU. We also continue to pursue small molecule opportunities to bolster the small molecule portfolio. Overall, the strategic review for Sandoz is continuing to progress on track, and we expect an update at the latest by the end of this year. Moving to the next slide, on slide 17. Our broad pipeline of novel medicines progressed in quarter two, but we've also worked to focus our efforts, as you saw in both our earnings release as well as with some of our pipeline decisions. five core therapeutic areas while being opportunistic in other therapeutic areas. And we're trying to make consequential decisions to really ensure we're focused and getting scale in those five core therapeutic areas. On this slide, a few things to highlight. We had important designations in milestones, assemblies I've mentioned. Pella-Parson completed enrollment for the Phase III Horizon Study, so on track. on its journey to become the first medicine to treat LP little a driven cardiovascular outcomes. JDQ443, our G12C inhibitor for solid tumors. The phase three study in second, third line non-small cell lung cancer was initiated, and we continue to also progress combination studies for that medicine. Cosentix had a filing for hydradenitis superativa in Europe, and we continue to work towards the U.S. filings. And then lastly, we continue to streamline the portfolio. We have a number of projects that we made the decision to either partner or stop, and notably we're exiting our efforts, development efforts, and COPD and general asthma with the decision to partner two assets in that portfolio. And we'll continue to look to streamline the medicine portfolio in our pipeline so that we can focus on the medicines that matter most in our core therapeutic areas. So moving to slide 18, I did want to say another word on Qiskali. Given the OS benefit now we've seen across all three of the phase three trials in the metastatic setting we've conducted to date. On the left-hand side, you can see the results that we've generated in the first line of metastatic setting. You can see an impressive risk reduction, and importantly, median OS that's been achieved consistently across these three studies. The longest median OS ever published, and we've seen that same OS benefit regardless of situation. We also maintain that benefit even after prior CDK4-6 use. So we think this data set is part of the reason we're seeing the real growth acceleration behind Qiskali. Now, in the middle frame, you see that the reason for this clinically, we believe, is that Kiskali is unique in its ability to hit the CDK4 target. And we hit it eight times harder than we hit CDK6. And that's relevant because we believe CDK4 is the key driver of the benefits you're seeing for this medicine. And you can see our relative performance in preclinical studies versus our competition Now, when you look at the adjuvant study, it's fully enrolled, as we've already noted. We've already cleared the first utility analysis. The primary analysis is planned at 500 IDFS events, and we expect that by the end of 2023. The two interim analyses are to be conducted at 350 and 425 events. We have not yet reached the first of those interim analyses. We expect that in the coming quarters. We do guide for this study to really complete at the end of next year when we reach a full number of events, but we'll, of course, keep the markets updated as we progress through these interim analyses. Moving to the next slide, on slide 19, we're on track largely against our key 2022 events. Just three things to note, three submission-enabling readouts coming up in the second half of this year, Canopy A, Etaclopan in PNH, and as already mentioned, Fluvecto in the pre-taxane setting. So we'll look forward to those study readouts and updating all of you as we get that data in-house. So with that, I will hand it over to Harry.