Novartis AG

Good morning and good afternoon and welcome to the Novartis Q3 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 1 and 1 at any time during the conference. Please limit yourselves to one question and return to the queue for any follow-up. 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 good morning and good afternoon, everybody. Thank you again for taking the time to participate in Novartis' quarter three conference call. Before we start, just a quick reminder for Safe Harbor. 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 6K19. that respectively were filed with and furnished to the U.S. Securities and Exchange Commission. And with that, I'll hand it across to Vas.

Thank you, Samir, and thanks, everyone, for joining today's conference call. Moving to the first slide, we'll take a couple of slides forward. Novartis delivered solid quarter three performance, really across all of our core value drivers. From a growth standpoint, group sales were up 4% in constant currencies. That was driven both by solid performance and IAM at 4%. as well as in Sandoz, U.S. IM sales were up 8% consistent with our strategy to continue to improve our position in the U.S. market. From a productivity standpoint, group core operating income was up 5%, again, driven by IM, which was up 7%. We also had continued our margin progression with a 1% percentage point improvement. Our savings from our SG&A program are on track, and Harry will cover that in a bit more detail. From an innovation standpoint, we had some important events, particularly the approval of Pluvicto with a positive opinion in Europe from the CHMP, and the readout we had and announced earlier this week of Ataclopan in PNH across two superiority endpoints versus anti-C5s, and I'll go through that in a bit more detail. Lastly, on an ESG front, We had an important announcement with respect to our work with the medicines patent pool as well as two additional important milestones for two development programs with hydroxyurea in sickle cell disease as well as in malaria. Moving to the next slide. The performance in the quarter was really driven by Entresto, Kesimpta, Kiskali, and Pluvicto. And you can see the growth here for each of these brands. Intresto continues its strong trajectory, Kesimpta and Kaskali performing well, and Pluvicto in its first full quarter in the launch also performing very well in its early days. We also saw good performance across some of the other brands, and we'll come to that brand by brand in the upcoming section. Moving to slide six. One important element of our story is our ability to make our six key in-market growth drivers into multi-billion dollar medicines. And we stayed on track with respect to that to really continue our confidence in our midterm growth outlook. Those six brands now account for 33% of IM sales, and they were growing 23% in the quarter. And as noted, both Semblex and Pluvicto now are off to a good start and could one day be added to that list of six brands to also be potential multi-billion dollar brands in the future, depending on how readouts go in the earlier lines. Moving to the next slide. Now we'll just take a walk through each of the individual brands, and I'll give you some of the key highlights from the quarter. Cosentix showed steady growth in the quarter. You can see 7% growth in quarter three. We were maintaining our competitive position in our three core geographies. We have over 875,000 patients now treated. In the U.S., we saw solid volume growth, but we also saw the impact of increased revenue deductions, particularly in Medicaid and 340B segments, relative to a previous uplift we saw in revenue deductions in the previous year. That's something we expect to continue in quarter four. Now, with respect to Europe, we maintain our leadership position amongst originator biologics in psoriasis and spondyloarthritis. Future growth drivers for Cothentics to get to that $7 billion peak sales will be driven by our continued expansion in China. Notably in China at the moment, we do face headwinds with the ongoing lockdowns, but we continue to expect China to be an important part of our story. Hydradonitis superativa is now filed, submitted, filed in both FDA and email. I'll tell you a little bit more about why we feel like we have a good opportunity with this indication. We expect to submit our IV regulatory file in quarter four. And we also continue to advance our lifecycle management program across additional indications, including giant cell arteritis, where we saw pretty solid Phase IIb data. Now moving to slide eight, Entrusto continues to strongly across all geographies, 31% growth in the quarter. You can see here the weekly TRXs continue to set record after record, really a strong performance. In the U.S., but also around the world, we now have over 8 million patients on therapy, accelerating momentum in the U.S., strong demand in Europe. When you look at the future growth drivers of the brand, it's worth noting that only a third of eligible half-breast patients are currently on treatment in the G7. And there's a strong profile we continue to build in clinical and real-world settings in heart failure. We have guidelines that continue to support the use of Entresto and Hepref and also support its use in HepPest. And we're also seeing good demand from the hypertension indications we were able to secure in Japan and in China. So moving to slide nine. Zolgensma had a little bit of a challenge quarter. We now are predominantly seeing demand from the incident population. Both US and ex-US are shifted to an incident patient population. Year-to-date, we still have double-digit growth in incident patients treated, and we've exceeded 2,500 patients treated worldwide. Going forward, what will be key for us is to continue to expand into new markets. It's a foundational treatment, as you all know, for type 1 in newborns. We are approved in 45 countries, and we have access negotiations ongoing now in 10-plus markets, including some important markets such as Brazil. We also continue to work to increase newborn screening rates to above 35% in Europe and hopefully get over time to the rates that we see in the U.S., where we're close to 98% of newborns screened. Taken together, we expect Zolgensma to – we continue to expect Zolgensma to reach the $1.5 to $2 billion sales level in the IV indication alone. But getting beyond that sales level will require expansion into the intrathecal indication in the 2- to 18-year-old patient segment, where this SEER study is continuing to enroll, and we also have the STRENGTH study looking at the IV utilization in that indication starting in Q4 2022. Now, moving to slide 10, Kiskali had a really strong quarter across all regions with 49% growth on the quarter. You can see, importantly, in the middle panel of the slide, the trend break we've had with respect to NBRX share in the U.S. in the metastatic population, where we've been able to climb over the course of this year from 12% to 13% to now 26% exiting in August. That's really on the back of the strong data that we have with respect to OS across all of the metastatic lines. It's the only CDK4-6 with overall survival benefit across three Phase III studies. We also have strong data with respect to quality of life. We've launched a head-to-head study, the Harmonia study, versus iBrands to further solidify that profile. And the Natalie study continues. We have not had any feedback yet from the steering committee with respect to the first interim analysis, and when that feedback becomes available, if it indicates any action on our part will, of course, inform the markets. Moving to slide 11. Now, Consumptia had strong sales growth as well in the quarter, driven by its U.S. launch momentum, 172%. You can see here on its launch trajectory, really all of the key metrics are trending in a favorable direction. TRX, 131%. NVRX, 47%. Versus a market, notably, that's declining 20%. We are up to 30% NBRX share in B-cell, amongst B-cell therapies in MS in the U.S. with a goal to reach 50% share. We're adding 100 new riders per month. Our initiation programs with our patient hub are performing extremely well. And we also released new four-year data in recently diagnosed and treatment-naive Kysimpta patients that support its use in earlier stages in RMS disease. So really good trajectory here and an opportunity for us now to also accelerate our efforts outside of the United States to bring this medicine to more multiple sclerosis patients around the world. Now moving to the next slide. Now with Lectio, as we've noted, this is a steady build over the course of 2023 and the first half of 2024. Last quarter, we highlighted that we have good data or good positioning right now with respect to market access. with 70% of lives covered at or near the full label. The vast majority of patients are able to access the medicine with a low copay. And now what we're doing is step-by-step expanding HCP adoption, with now 4,800 or so physicians that have been able to initiate a patient on left PO. What is critical now for us is to guide these physicians through the process, so that they're able to get their patients on board, they're able to see how Biome Bill works, and importantly, they're also able to see the impact of the medicine on lowering LDL for their patients. What we find is in physicians that have gone through that process and have ultimately seen the impact on their patients, over 80% of physicians are pleased by the process and are pleased by the clinical and safety profile of the medicine. We just need to get more physicians through that process So you can see some of the other data on the right-hand side. We have a free trial offer as well that's launched that seems strong uptake. So we'll continue to work through the hurdle step-by-step. I think the right things are happening, but again, this is going to take time, and we really think it's mid-year next year before you would expect to see any further acceleration beyond the linear path that we're on at the moment. Then moving to the next slide. So, Victor, as I noted in my opening comments, is off to a strong start in the U.S. We're seeing very rapid launch uptake for this brand in the third, fourth line, castrate-resistant prostate cancer, metastatic prostate cancer segment. $80 million in share. We're already up to 14% NBRX share in the post-taxing setting. We have 120 centers actively ordering, and we're really focused on servicing those centers in an outstanding way. Seventy-five percent of insured lives are covered, and we have a permanent A-code now in effect as of October. Now, looking ahead, as we prepare for additional data and potential expansion of the indications for this medicine, we're expanding the number of treatment centers. We expect to, over time, get to 350 to 400 centers. We're significantly increasing our manufacturing capacity. We have our Italian site, Avria, online, and Milburn and Indianapolis are planned for 2023. I mentioned already the positive CHMP opinion, and we're on track for the readout of PSMA4 before the end of this year and PSMA addition. And I've known PSMA4, our current assessment, is this would cover all pre-taxane metastatic patients, eliminating the need for one of the additional studies we had previously expected to be running in that setting. And in PSMA addition, in the hormone-sensitive setting, we would expect a readout in 2024. So more to come, but overall solid launch so far with PluVicto. Then moving to the next slide and looking at Semblix. Semblix also continuing a solid launch momentum through quarter three. You can see $41 million in sales, 13% total overall patient share in the third line setting, and 39% third line new patient share. That new patient share growth has slowed a bit as we would have expected, as we need patients to switch off of therapies that they're currently on to be typically moved to Semblitz. Looking ahead, we've had the accelerated approval converted to a regular approval based on 96-week data. The global rollout is ongoing. And importantly, our Phase III study is enrolling ahead of plan. Right now, we forecast the readout expected on this first