Novartis AG

Thank you to everybody for participating on what is a very busy day for reporting in pharma, European pharma. Before we start, just reading 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 on Form 6K 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.

Thanks, Samir, and thanks everyone for joining today's conference call. I really appreciate your interest in the company and our update for the full year 2022. If we move to slide four, This year, as you saw in our earnings release on 2022, we delivered what we believe is really robust core operating income growth and margin expansion. From a sales standpoint, you saw Q4 sales up 3% with IM delivering Q4 sales of 3%. From a productivity standpoint, we had a 15% core operating income growth in quarter four. And Harry will go a little bit further through the dynamics that drove that. But for the full year, that led to 8% core operating income growth ahead of our guidance. That leads us to have now a margin for IM in quarter four of 36.4%, and on the full year, 36.9%. And as a reminder, taken together, inclusive of corporate costs, we are well on our way now towards our 40% core margin guidance for the medium term. Now in terms of innovation, some important milestones. We'll go through those in a bit more detail. And we continue our journey on ESG, sustainability-linked bond. We continue to progress towards our 2025 targets. We have 31 million patients in our Novartis flagship programs. And we continue to have solid ratings across the key ESG rating agencies. Now moving to slide five. You'll remember that in September at our meet the management, we rolled out our new focus strategy and we've been diligently been implementing this across the company. Five core therapeutic areas, two plus three technology platforms, four priority geographies, a mindset to really focus on high value medicines to accelerate growth, delivering the return profile we believe the company can achieve and you saw that already in quarter four. And a continued commitment to culture, data science, and building trust with society. Now moving to slide six, and as a reminder, as you all well know, over the last five years, and really over since 2014, we've been on a journey to really focus Novartis as a pure play innovative medicines company. And through a number of actions we've taken, most recently with the announced planned spinoff of Sandoz, we're on our way to becoming 100% innovative medicines company. And when you look at the right-hand side of the slide, we believe that simplified organizational model will allow us to have greater focus, leverage our scale, and really uniquely position us as a global, pure play, large scale, innovative pharma company versus our peer set. And over time, hopefully also re-rate the company given the growth profile we intend to deliver. Now moving to slide seven, We've also guided to improve financials with this new focus company with 4% sales growth, a goal of core operating income margin of 40%, as I've previously stated, continued improvement on free cash flow, and importantly, an improving and attractive return on invested capital profile. That will allow us to continue to invest across our capital allocation priorities, which Harriet will go through in a bit more detail later on in the presentation. Now moving to slide eight, In each of the five therapeutic areas that we've outlined, we have core large-scale commercial assets and multiple pipeline assets that are now progressing. And we've focused our R&D organization around these five areas. We're streamlining the pipeline. I think you'll see over the coming quarters us exiting additional assets as we really try to prune out non-core areas and put all of our scientific firepower and ingenuity towards building out a deep set of pipeline assets in each of these therapeutic areas. We'll look forward to showing that progress over the coming year. Then moving to slide nine. In terms of capital allocation priorities and the strong balance sheet that we have, continue to invest in the organic business and pursue value-creating bolt-ons. We look at the full range of M&A possibilities, but our focus is on sub-$5 billion assets where we believe we have the opportunity to generate strong returns and find the most value when we look at M&A opportunities. And we also remain committed to our growing our annual dividend, and Harry will outline that in a little while. But we have paid out $7.5 billion in 2022. Our proposed dividend is another growth in the 3.2% Swiss franc and 3.9% U.S. dollar. range and even after the proposed Nando spinoff, there'll be no rebasing of that dividend. We'll continue to grow off of the current base. And we're continuing to implement our $15 billion share buyback program. We have $4.9 billion still to be executed and we'll continue to look at doing additional share buybacks over the coming years when the opportunities present themselves. Now moving to slide 10. And I want to turn now to our innovation story and where we are in continuing to improve our overall R&D productivity. I think it's been well recognized we are a leader in terms of generating approvals, the leading company over the last 20 plus years in generating drug approvals in the United States and around the world. Our focus now is to improve the value per asset, identifying assets earlier that have significant potential, investing in those assets more aggressively, pursuing more life cycle management indications. And with that, a goal to increase the success rate and reduce the cycle times and generate larger assets. Maybe not winning the game of generating the most assets, but really focused on high value, high impact medicines that could impact patients and the company's financial performance. Moving to slide 11, I wanted to walk through some of the readouts that we have coming up in the near term and then in the midterm. Now, I think as you all are well aware, Qiskali continues on track. We'll go through this in a bit more detail in a few slides for a readout in the second half. Iptacopan is progressing nicely with multiple readouts over the course of this year, a planned FDA submission in PNH, and then readouts in both IGAN and C3G. And then Pluvicto, where we've already read out the top line in the early prostate cancer, early metastatic setting with a planned regulatory submission in the second half. And I'll give you a bit more detail on each of these three in a few slides. But going to the next slide, when you look at 24-25, we expect to have an increased pace of readouts of potential multi-million dollar medicines. Medicines such as Palacarcin in patients with elevated LP little a, Ionilumab, where we have now moved this medicine into multiple hematological indications, first and second line ITP readouts in 2025. We have additional hematology and immunology indications we're pursuing now with this medicine. So you'll see with Ionilumab a broad range of Phase III programs initiating over the coming period. Remibrutinib, we have a CSU readout in 2024 ahead of our MS, planned MS readouts in the coming years. And then we continue to progress with FOAV101, which is our gene therapy for SMA in the intrathecal setting, as well as the first-line Semblitz program with a readout planned in 2024. And moving to slide 13, going into a bit more detail, Natalie continues to progress well following the first interim analysis, and we continue to guide to a final readout in the second half of 2023. As a reminder, this is a broad population, including both stage two and stage three patients, so the broadest population studied today. We have a longer duration with which we provide therapy to the patients, three versus two years, a lower dose to try to improve the overall tolerability profile. And when you look at where we are on the study, final analysis is expected with 500 IDFS events at the end of 2023. We've completed the first interim analysis As we noted earlier this month, and the study continues unchanged, the second interim analysis would happen after 85% of IDFS events are complete. Moving to slide 14, in turning to Plavicto, where we announced late last year that we demonstrated statistically significant and clinically meaningful radiographic PFS benefits in this patient population. Now we're continuing to follow these patients towards the secondary OS endpoint analysis in 2025. We plan, are on track to file in the second half of this year. We have had discussions with the FDA and clarified the OS fraction, the fraction of patients that FDA would like to see has reached a OS endpoint prior to filing. We expect to reach that later, around the middle of this year, which would then enable the filing in the second half. Now with that guidance from FDA, we've made the decision to hold the publication or presentation of further data until the second half of this year. I know some of you have been looking for ASCO-GU and some of the other congresses in the first half. We will be presenting this data in the second half after we've reached that next threshold that FDA has outlined for us. We have alignment then consistent with what FDA has told other companies in the prostate cancer space to then be able to file in the second half with that data set. Now, moving to slide 15, and why that's so important is, as I'll talk about when we get to the commercial section of the presentation, Fluvicto is continuing to demonstrate, I think, really impressive uptake in the United States market. And the opportunity is to move first with the PSMA-4 study into the pre-taxing setting, which would expand the patient pool from an estimated 27,000 patients to 42,000 patients. Then with the PSMA addition study, which we expect to read out next year, that would expand us further into the hormone-sensitive setting. And then we continue to evaluate how best to pursue Plavicto further into the biochemical recurrence setting or the localized prostate cancer setting. So stay tuned as we continue to look at the further expansion. But I think this really demonstrates the possibilities with radioligand therapy. And we look forward to continuing to generate a broad set of data to support Plavicto's use and as many prostate cancer patients that could potentially benefit from the medicine. Now moving to slide 16, turning to Eptaclopan, and as I noted in the second half of last year, we first provided an update and provided the full dataset at ASH of the APPLY dataset, which I think showed really outstanding efficacy for both primary and secondary endpoints, superiority to standard of care in patients with residual anemia, In the phase three, a point study where we have demonstrated, again, really strong results, and we'll be presenting that data at a Congress in the first half of this year. And then we continue to progress across a range of indications, IGAN and C3G, which we'll read out in 2023, atypical hemolytic uremic syndrome, where we expect a submission enabling readout in 2025, and then a number of other indications, ICMPGN, lupus nephritis, immune thrombocytopenia, amongst others. Moving to the next slide, and just as a reminder, when you look at that data set that we showed at ASH, I think very impressive data in these patients with residual anemia. Some of the notable data when you look at increase in hemoglobin from baseline, 51 out of 60 patients versus 0 out of 35, so 82.3 versus 2% against the control arm. Hemoglobin greater than 12, similarly impressive result, 42 out of 60 versus 0 out of 35. Again, transfusion avoidance, you can see an impressive 70.3% improvement, and a tenfold lower rate of annualized clinical breakthrough hemolysis. So this is in that refractory setting. We'll present the data in the frontline setting. We've also initiated a study of patients to demonstrate we can switch off of NCC5 directly onto Iptaclopan in patients in that frontline setting. So building out a broad data package within PNH. And moving to slide 18, we wanted to also provide a little more clarity on our approach within IgA nephropathy. And this, sorry, this is still in PNH, excuse me. So, and this is the outline of the data set for a point where we'll present this data, you know, shortly. And you can see, again, you know, the design of the study has the potential to be practice changing in PNH. And as I said, we'll be looking forward to outlining this primary endpoint and secondary endpoint in an upcoming Congress. Moving to slide 19. Returning to the IGAM study, applause for Atacopan. We wanted to clarify that our current filing plan aligned with the FDA's at the nine-month analysis to assess superiority in reduction of proteinuria at nine months. A statistical plan has been agreed. This would support a U.S. subpart H approval for accelerated approval. We would then continue to follow these patients to look for the more definitive endpoint and to look at flowing progression for IGEN, which would take to the end of the study in 2025, enabling the approval to convert to a full approval. So that's the approach we'll take with IGEN, and we'll look forward to sharing that data towards the end of this year. Moving to slide 20. I did want to highlight a couple of earlier stage assets where we're continuing to progress now, really with a focus on large potential assets in the pipeline. These include drugs like XXB and cardiovascular disease. This is an NPR1 agonist given infrequently, a monoclonal antibody for resistant hypertension and heart failure. YTB, our T-charge platform, where we presented additional data at ASH, where we are now pursuing this both in the front line large B-cell lymphoma, but importantly also in multiple immunology indication on the back of data, suggesting that we can take refractory patients into remissions, at least in small-scale studies, and that's something we're looking at more carefully. Additional radioligand therapies, including in breast cancer and glioblastoma. PPY, which is our gene therapy and ophthalmology for geographic atrophy, which we acquired as part of the gyroscope acquisition. And lastly, DLX, a partnered compound, an oral alpha-synuclease inhibitor for Parkinson's disease. All high-risk projects, as is always the case in this stage of development, but all with the potential, if they were to work, to be very transformational medicines. And moving to slide 21. Now turning to the growth profile of the company and why we believe we can deliver that 4% growth, we have these six in-line brands. three major launch assets, Pluvikos, Semblex, and Atacopan, and these additional pipeline assets that I've outlined. And that's why we continue to believe that we have the firepower in-house with the assets we have to be able to generate that 4% growth with that 40% margin and create a very attractive profile in the coming years. Then moving to slide 22, The drivers of our growth in this year, this past year, were primarily Entresto, Cosimta, and Cascalia with major contributions from Pluvicto, as well as to a lesser extent, Semblix and Lectio. And we expect those assets to continue to have robust growth over the coming years. Now, importantly, we'll discuss a bit more detailed Cosentix and some of the dynamics there, but the critical element for our Cosentix story will be lifecycle management and the next wave of indications, as well as continued growth in Europe and China. and I'll go through that in a moment. Now moving to slide 23, when you look at Entresto continued strong performance, 44% growth quarter on quarter, you can see the US weekly TRXs continue to climb, demonstrating that Entresto really now is the treatment of choice for patients with heart failure, meeting the guidelines within the label and the relevant cardiovascular guidelines. You can see the NBRX is up 16%. We continue to see strong growth in Europe. In China and Japan, we also have contributions from entrusted use in resistant hypertension. And we remain confident in the ongoing growth profile as we continue to penetrate in heart failure, continue to generate additional real-world data, and we see that launch momentum in Asia as well. Now, moving to slide 24 and turning to Cosentix. I think as many of you have already seen, Consentix Q4 sales were impacted by a revenue deduction true-up related to prior quarters. This was related to a higher level of Medicaid utilization than we had expected. This is delayed data that we received from the various Medicaid channel sources. And that led to a higher revenue deduction for the previous quarters, which we took fully in quarter four. When we fully neutralized for that, we saw the US actually declined 6%. And when we look at all of the puts and takes, we see the US largely being in line right now with respect to Cosentix performance in 2022 versus the prior year. We would expect in the US for 2023 to continue to see inline growth. So that's when we look at all of the dynamics, you will see in the first half of the year, Some declines in Cosentix as we lapped the fact that in the previous year you had these deductions which were not factored in. But underlying, we expect Cosentix to be able to hold its current performance in the U.S. And then growth really enables us to get to that mid-single-digit growth, which will be driven by Europe and China, where we continue to see strong growth, double-digit growth in China overall. And that will enable us to be well set up for what will come next, which is primarily the lifecycle management of this brand. And turning to lifecycle management, when you go to the next slide, slide 20-25, really for Cosentix now to continue its trajectory to get to the $7 billion, which we remain confident in, it will be around launching these next wave of indications successfully. For Hydra Adonis Superativa, we expect the approvals in Europe in the first half of this year and in the U.S. in the second half of this year. This is a large indication where only one competitor product is approved, the TNFs. So we'll be first to market as a novel agent in this whole setting. And so it's an exciting opportunity to bring a new therapy to this patient population. We have the intravenous US launch where we'd be the first novel post-TNF medicine to be available in an intravenous formulation. We expect that launch in the second half of 2023. a new autoinjector, and then the continued work we have on giant cell arteritis and lupus nephritis, again, indications where Cosentix has generated, I think, compelling data. So, taken together, when we look at this profile for lifecycle management, the profile we have ex-U.S. and the stabilization of the U.S. business, we feel confident we'll get to that $7 billion peak sales potential over time. Then moving to slide 26. You saw that Kesimpta is continuing a strong growth trajectory with 28% constant currency growth, primarily driven by the U.S., though we now start to see a pickup as well outside the United States. Importantly, the key driver for this is the ongoing utilization of Kesimpta in patients who were previously on braces or were naive to any multiple sclerosis therapy. It's important to note that in the B-cell share of the total market, it's only about 50%. So half the market continues to receive older therapies. Our Cosimta exit share was 30%, and we plan to continue to grow that with a goal to get to 50% share of B-cell patients over time. So really good advocacy profile, strong convenience profile. So we'll continue to look forward to launching Cosimta around the world and driving that dynamic U.S. performance. And moving to slide 27, Kiskali had strong growth across all geographies. And when you look at that 33% growth, that's driven by a recognition that Kiskali really is the agent with the best data sets in the metastatic breast cancer setting today. And that's, I think, been really captured by the NCCN guideline update that happened just a few days ago. where Qiskali was named the only Category 1 treatment for first-line metastatic breast cancer patients with an aromatase inhibitor, which is the majority of patients in the metastatic setting. So with that NCCN guideline update now, and as we continue to communicate that to physicians, this hopefully will give us continued momentum, as you can see with Qiskali now getting to 27% NBRX share, And hopefully we'll see in that metastatic setting that continued climb on the back of the data sets that we presented, NCCN guidelines, broad momentum coming out of the San Antonio Breast Cancer Congress as well. And then that will flow into, of course, the Natalie readout, which we've already discussed, and the ongoing Harmonia head-to-head study we have ongoing versus IBRAN. Notably, as well, we did achieve an approval in China for Qiskali, which will be another growth driver for this brand going forward. Now moving to slide 28. Zolgensma maintained the leading share in patients with SMA less than two years of age, but Q4 growth was muted, and this was really because we've now penetrated most of the bolus, if not the entire bolus, of prevalent patients in most of our key geographies. And growth now is largely dependent on adding additional countries in emerging markets around the world. And so we expect with this brand to stabilize in the $1.5 billion range until we get the readout and hopeful approval in the intrathecal setting. We'll continue to work to increase newborn screening. Importantly, in Europe, that's at 45%, and we have the opportunity, we believe, to drive that up further. could be a source of growth, as well as adding on additional markets in Latin America, the Middle East, and other parts of the world. But the key next inflection point for Zolgensma will certainly be the readout of the STEER study of intrathecal patients and the STRENGTH study in the use of IV Zolgensma in patients in two to five years of age. Those studies are enrolling on track, and then we'll hopefully have datasets to share in the coming years. Moving to slide 29. I wanted to turn to Lectio and give you an update on where we are now as we continue to build a strong foundation for this brand to become a significant cardiovascular medicine for the company. With respect to access, we're now at 76% of patients covered at or near a label. In terms of adherence, we're seeing 75% of patients today coming in for their second dose. We now have 1,700 centers that have ordered Lectio. And we've been able to increase between Q3 and Q4 by 50% the number of HTPs who have prescribed Lectio either through a paid dose or through our free trial offer to now 7,200 physicians. So we continue to build that strong base, continue to generate important data. The Orion 3 data was recently published. Our phase three secondary prevention studies are enrolling well. We've launched now our primary prevention studies, which we'll expect to start in the first half of 2023, and continue to build out a robust data set for this medicine. Now, moving to slide 30, when you look at where Entresto is and compare it to where Entresto was in the U.S., we're largely in line with what we saw in the Entresto launch. A slow ramp as we build up awareness amongst physicians, get all of the various elements in place, and really build momentum in the cardiovascular community for use of a new medicine, or in this case, a new approach to controlling cholesterol. So we're on track versus the Entrusto ramp, and that's the ramp we would expect to see over the course of the coming months with respect to Lectio, with a goal, of course, to accelerate wherever we can. When you look at the US, the key accelerators are going to be new facilities, getting more depth in our existing prescribers, and continuing to educate HCPs on the Part B reimbursement process. We also would expect over the course of this year to get additional conversion from the free trial offer that we rolled out in the second half of last year. Outside the United States, a big focus at the NHS is to get a broader prescriber breadth in the UK. And then we'll have the hopeful approval in the back half of this year in China, which will allow us to have a major geography where we can further accelerate global lectio performance. Moving to slide 31. Plavicto, I think as you've all seen, is off to an outstanding start in the United States. And this is reflective of very strong demand we're seeing for this medicine. $179 million in quarter four, full year sales of $270 million, almost all of that was in the U.S. We are seeing NBRX share at 18% and that continues to climb in the post-vaccine MCRPC setting. 160 unique accounts. We have very good payer coverage. Permanent A code is now in effect. We're approved in Europe. So this is a story now where we continue to see very strong demand in the US and we see strong demand in Europe and we're scaling our manufacturing capacity to meet that demand. And when you look at the next slide, Our Plovicto manufacturing capacity is going to expand over the course of 2023. Our expectations are we'll be able to move across four facilities that we'll have online for this medicine versus the single facility right now that's the primary source of Rhea today. We're working hard to bring Milburn online by the middle of this year, which will allow us for another capacity expansion. Then later this year, an automated brand new facility in Indianapolis with substantial capacity. And then for the rest of the world, Zaragoza facility in Spain, which would then further expand our capacity for Europe. We're also evaluating adding additional manufacturing sites in Asia at this time. With the four facilities you have here, we're targeting capacity of over 250,000 doses annually in 2024 and beyond. And then we'll continue to expand that capacity by adding additional facilities if the demand warrants it. Now moving to slide 33. Semblitz off also to a strong start. You can see the sales share $150 million on the full year, NBRX share at 29%. And probably the most important element here of this story will be the Ask for First study, which we're enrolling ahead of plan. We expect a readout in 2024, which will enable us to potentially move this medicine in the first-line setting and potentially be used as an alternative to imatinib or some of the other first- and second-generation TKIs. And moving to slide 34, I'll hand it over to Harry now for the financial review. Harry?

Yeah, thank you, Bas. Good morning, good afternoon, everyone. I'm now going to talk you through some of the financials for 2022, as well as provide you with our 2023 guidance. As always, my comments refer to growth rates and constant currencies, unless otherwise noted. So next slide, please. I would like to begin by comparing our performance with the latest guidance we provided in October last year. As you can see, we generally met our guides across the divisions and at group level with a notable beat for group core operating income, which was largely driven by Innovative Medicine's performance. As you can see, Sandoz top line also returned to growth with core operating income impacted by higher than expected inflationary pressures on input cost. Next slide, please. Taking a step back for a moment, you see that our 2022 performance was a continuation of our strong track record for innovative medicines. Over the last three years, we have delivered a 5% CAGR growth in sales and double of that at 10% CAGR on core operating income. Obviously, this performance has resulted in margin improving from approximately 33% at the beginning of this time period to now 37%, an increase of 480 basis points in constant currencies over three years. In short, we are delivering consistent performance against our financial targets and intend to continue to deliver improved financials, of course. Turning to slide 37, I will focus on the full year numbers on the right-hand side. For the full year, as Marcel already laid out, sales grew 4% and cooperating income 8%. Operating income was down 13%, mainly due to the higher restructuring cost related to the implementation of our streamlined organizational model. Net income was $7 billion, with the comparison versus 2021 impacted by the raw stake divestment income. Recall, we had a one-time gain of $14 billion when we sold the Roche stake for $21 billion. Core EPS was $6.12, growing 14%, excluding the prior year Roche impact. Free cash flow was $12 billion for the full year, of course also impacted by the currency movements, but overall a solid free cash flow performance. Speaking of free cash flow, let's talk about the next slide. Of course, one of my favorite year-end slides. Given our solid 22 free cash flow, we are pleased to propose the 26th consecutive dividend increase to three francs 20 per share. This is up 3.2% versus the three francs 10 last year, the dividend yield of 3.8%. Of course, this increase is fully in line with our policy of increasing our dividend per share every year in Swiss francs. Now to slide 39, please. Thank you. Now let's get into some further details about our 2022 margin performance by division. Overall for the full year core margin for the group increased 130 basis points to 33% of sales driven by IM margin which also increased by 130 basis points to 36.9 percent. I will talk about Sandoz in detail on the next slide. So here's the summary of the Sandoz 2022 performance. It was a good year for the division returning to top line with sales up four percent driven by the biopharma growth of nine percent and retail growing four percent. Co-operating income was essentially flat for the full year disproportionately affected by inflationary pressures on input cost. As we look in the future, we expect continued share gains across geographies and true potential by similar U.S. approvals in the second half of 2023. With respect to the planned spinoff, we remain on track to complete this in the second half of the year, pending the required approvals. Next page, please. As we anticipate a spin-off of Zandos in the second half of the year, we thought it would be useful to give guidance for innovative medicines, Novartis excluding Zandos, and Novartis including Zandos, to allow for the respective modeling that no doubt you will do. So for innovative medicines, we expect sales to grow low to mid-single digits, and cooperating income to grow mid to high single digits. Novartis, excluding Zandos, has, of course, exactly the same growth guidance as Innovative Medicines because the only difference between the two are corporate costs. Now, Novartis, including Zandos, which is essentially today's group, the group guidance is assuming here that Zandos would remain with the group for the entire year. We would expect sales to grow low to mid-single digit and co-opting to grow mid-single digit. On the next slide, I detail a bit more the Sandoz guidance. So for 2023, we expect the top line for Sandoz to grow low to mid single digit and the core operating income to decline low double digit. Now this core profit decline reflects the required stand up investments and transition cost to separate Sandoz and some continued inflationary pressures. Clearly with this setting, 2023 would be the trough year for Zando's core margin, given the expected added cost to stand up a public company. Looking ahead, with respect to Zando's mid-term potential, sales are expected to grow low to mid-single-digit CAGR, and the core margin is expected to expand to the mid-20s, driven by continued sales growth and operational efficiencies, especially as a standalone lean generic company. On slide 43, I would like to add some perspective on the other key financial elements of our expected core net income performance. In short, we expect both core net financial result and core tax rate to be broadly in line with 2022. On the next slide, I would like to go into a little more detail about the tailwinds and headwinds facing core operating income growth in 2023. So the expected drivers of future co-operating income growth include, of course, continued performance of our in-market growth drivers and the acceleration of recent launches, such as Plovicto and Legvio. We also expect China growth to accelerate, benefiting from a return to normal in the second half of the year. Additionally, our simplified organizational structure is expected to continue delivering SG&A savings And of course, we will continue our ongoing productivity programs. Growth will be partly offset by inflationary headwinds, which are expected to continue in 2023. On inflation, some further details as we saw it finalizing in 2022. In 2022, the inflation impact we saw was a bit higher than expected in quarter four. So for the total company, we estimate that the 2022 inflationary impact was approximately $350 million. However, this was, of course, more than offset by cost control and productivity savings. In 2023, we expect the inflation impact to be slightly higher, also including some above-normal merit increases at approximately half a billion. This has been fully considered in our 2023 bottom-line guidance. The other headwinds are generic erosion of Chilean and U.S. and potentially dissenters in the EU and the stand-up investments as discussed related to the likely Sandoz spin-off. Despite the headwinds, we continue to anticipate further margin expansion in 2033 and beyond due to the expected sales growth and productivity progress. Finally, on slide 45... We thought it would be helpful to go into some detail regarding the currency impacts expected, especially given the significant fluctuations of the last months. As you saw in quarter four, currency had a negative 7% point impact on net sales and a negative 9% impact on Corp Inc. If late January rates prevail for the remainder of 2023, we expect the full year impact in 2023 of currencies to be much lower. On the top line, it would be 0 to positive 1%, and on the bottom line, slightly negative with minus 1%. As a reminder, we update this given the volatility monthly on our website. And with that, I hand back to Bas.

Great. Thanks, Eric. Moving to slide 47. Just wanted to make a note that we continue to focus on our goal to be one of the leaders in impact and sustainability in our approach to ESG, as well as just delivering on our core purpose. 290 million patients reached with our innovative medicines and our global health portfolio. 453 million patients reached with Sandoz. A broad pipeline across various technology areas, numerous new drug approvals. and multiple recent innovation highlights. Just to highlight that we think the greatest contribution we make to the world is based on our ability to discover, develop, and ultimately scale and launch new medicines to people across the planet. Then moving to slide 48, in closing, eight priorities that will really determine our path going forward. We're transforming the company to a pure play IM company, five core TAs, five core technology platforms, and our core geographic focus is a focus on the U.S., nine multibillion-dollar potential brands, a real emphasis on improving our R&D productivity towards high-impact assets and high-value assets, a focus on key DAs and building depth in those DAs, Improving our financials, as you've seen with the margin delivery and the ongoing efforts, we have to continue to improve the overall financial picture. Shareholder-focused capital allocation, as we've shown with our dividend-increased share buybacks, and continued approach to how we dispose or move forward with assets such as STANDOs to our shareholders, and continuing to strengthen our foundations with ESG and human capital. So with that, we can open the line for questions. If the Colleagues on the line could limit themselves to one question. We'll try to make it through the list a couple of times.

Thank you. To ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Please limit yourself to one question and return to the queue for follow-up. We will now go to our first question. And the first question comes from the line of Matthew Weston from Credit Suisse. Please go ahead. Your line is open.

Thank you very much. I'm going to go with a big picture question to start with because I'm sure others will dig into the detail. It's on drug pricing. You're the incoming chair for pharma in 2023. I'd love your perspectives on whether the industry sees any success in normalizing the 9 versus 13 exclusivity for small molecules versus biologics. And also your thoughts on EU pricing pressures. There seem to be a lot of pressures building in a number of your core markets in Germany and France and others, and also some worrying legislation in front of the European Commission. I very much love your thoughts, given the vast exposure there.

Thanks, Matthew. So first, our guidance already factors in the various headwinds we see in pricing around the world. So that 4%, 40%, and then also the guidance in 2023 already factors this in. So that's an important, I think, caveat. So to your first question in the U.S., there's three core priorities that we have as an industry to take forward now. One is to correct the distortion of the 9 versus 13 small molecule, or NDA versus BLA. Second is a focus on PBM reform, and the third is continuing to improve the 340B program so that it can actually deliver on its intended purpose for patients in low-income settings and who benefit from various programs from federally qualified healthcare clinics. Now, on your specific question on the 9 verse 13, I think we have very good arguments as to why this creates an unintended long-term innovation distortion, which disadvantages small molecule and related medicines for the Medicare population, indication expansions in cancer, medicines that take longer to ramp in cardiovascular disease or in respiratory disease, so all things the need to be considered. I think the key thing will be when in the coming years there's a legislative vehicle for us to be able to pursue that. But it's a top priority of the industry. And I think at least my belief is our industry, when we come together to really focus on a topic and have a very clear, compelling policy case and a relatively small pay for from a congressional standpoint, that we can make it happen. And that's going to be our total focus as a sector in the U.S., Now, on the EU pricing pressures, it's a little bit of a mixed bag. Certainly, we are concerned by some of the actions in the UK, proposed actions in France. Germany has had some headwinds, but overall, the German environment, we'd say, is relatively positive and workable. But I'd say, broadly speaking, I think we as a sector need to do a better job clarifying the policymakers that in order to invest in innovation in Europe, We need a pricing environment that rewards innovation, particularly when it improves outcomes for patients. And this can't be seen as a place to constantly cut costs, especially relative to the rest of the world. So that's going to be our focus to try to educate. But for us, I think Germany remains the most attractive market. And therefore, I think from a financial outlook standpoint, we feel comfortable with the guidance that we've given. Thank you, Matthew. Next question, Operator?

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

Great. Thanks for taking my question. So it's on Plavicto. So it's now annualising over $700 million, which I think was pretty close to your peak guide for the vision labelled indication. So is that a steady state number? Or can you see growth expanding from this quarter on quarter? So have you hit your supply capacity constraints now until you get more supply coming online? And could you have just underestimated the vision population here, given it's penetrated so quickly? And then on your capacity into next year, you said the number of doses around 250,000, correct me if I'm wrong, but that would equate to around 50,000 patients, which is over $8 billion today. of revenue potential at U.S. prices. So perhaps just give us a feel for what you think the top peak numbers for this drug could be in the context of the $2 billion that you've been putting into the slides for PSMA 4 and PSMA Edition. Thank you.

Yeah, thanks, Graeme. So first, I think from a demand standpoint, I would say our initial estimates of the vision population have underestimated the potential of this population, and the demand would suggest to us that There are a greater number of patients and providers interested in this medicine. So we certainly have not fully penetrated the vision population in the United States. And really, it's a question of us continuing to expand our capacity to meet what is a much larger interested population than we initially expected. And so we're working towards that, as I mentioned. We're working with multiple sites to have online over the course of this year. Ideally, and if all went according to plan by the middle of this year, but that's dependent on regulatory action, and then additional sites towards the end of this year as well. So we would expect, if we can meet the demand, that there would be continued growth from the vision population in and of itself. Now, I think beyond that, with the PSMA-4, PSMA addition, We certainly see this medicine becoming a very significant medicine for the company, assuming the data reads out positively over the coming readouts. That will take, of course, the readouts have to come through, but we're preparing from a capacity standpoint to have this be a very large medicine for Novartis. And you see that. I also mentioned we're preparing as well to add additional facilities in Asia. We have advanced already planning on those two additional facilities. So we'll be ready to make this medicine around the world available to as many prostate cancer patients as we can.

And so just to be clear, have you reached capacity already or is there further capacity that you can still fill with increased demand?

We have further capacity versus Q4, but we certainly need to continue to work to further expand the capacity given the size of the opportunity, size of the demand that we're seeing. We have some limited additional capacity versus Q4, but we need to expand further to fully meet the demand for sure. So I think from how you model this, I think in the first half of this year, it should be modest growth as we work to expand the facilities, and then assuming we get the facilities online, We would hope a ramp up then in the second half as that additional capacity comes online. And then moving into next year, of course, we have the additional capacity, additional geographies, and then hopefully as well the PSMA addition population as well. Very clear. Thank you. Next question, operator.

Thank you. Your next question. comes from the line of Steven Scala from Cowan. Please go ahead. Your line is open.

Oh, thank you very much. We noted that the Phase II data for your obesity agent, MBL949, is due in May. I don't believe Novartis has stated the mechanism other than it's not an incretin. Can you confirm that it targets anti-ACT-R3? And is it the same as or similar to the molecule you previously outlicensed? And I'm also curious on the same topic, why you didn't highlight it on slide 20, are you not excited about this target or are you not excited about obesity? Thank you.

Yes, thank you. So it's, I can say definitively it's not related to BYM, the molecule that we are licensed. We're not disclosing the mechanism of action. You are correct that we do expect the readout in quarter two. And a simple reason we didn't highlight on the slide is we view it as a high-risk, high-reward program. Now, they're all high-risk, high-reward, but I think particularly for agents of obesity, the key is can we find a dose and schedule that leads to both profound weight loss and a tolerability profile? And I've not seen the data, so I don't know, but, I mean, that's the key question, and that's why we chose not to put it on the slide until we have further information.

data which we'll have in the second quarter and then of course we'll provide an appropriate update at that time thank you next question operator thank you your next question comes from the line of tim anderson wolf research please go ahead your line is open uh thank you on cosentix what's driving the higher medicaid channel next

And could that somehow increase further or might it actually reverse out as Medicaid enrollment numbers potentially shrink with the US declaring that the pandemic is over? And then an update on formulary positioning in 23 in terms of lives covered in a preferred spot. And also if you can comment on whether there's any new access restrictions and what the rebating was like in 23 relative to prior periods.

Yeah, thanks, Tim. All great questions. So first, on the Medicaid increase, first it's important to note, you know, with a brand like this, $3 billion of net sales, significantly more gross sales. The actual percentage variation here is not huge. Nonetheless, we don't have a great handle on why exactly the Medicaid came up a bit more. But one of the drivers was certainly we had certain – special uh higher discount agreements with certain Medicaid plans those are have now expired and so those would no longer be in play for the coming years um and so I think overall we expect to see this you know the mix goes up and down year to year but overall we expect to see the mix stabilize back to what we've historically seen prior to this uh this situation we had in 2022. In terms of formulary, it's largely in line with what we had in 2022. We've seen no significant shifts or changes in terms of formulary position, access. Overall, given the overall scheme of things, when we look at growth to net, they're in line with 2022. So that's why we feel good in the U.S. that on an annual basis, we will be able to deliver sales that are in line with what we saw in 2023 with what we saw in 2022. And then the growth would come from the new indications. Again, I just want to highlight that for the first half of this year, because of the fact we took all of that Medicaid charge in Q4, and when you lap the prior years, the base is not fully adjusted, so you are going to see a lower relative authentic sales in Q1 and Q2 because of the base effects of taking all of that Medicaid rebate into quarter four. But I think that the bigger picture on this brand is our ability to deliver new indications, new formulations. That's really where we have to focus. And then the continued expansion in Asia and China, as well as in Europe. Thank you, Tim. Next question, operator.

Thank you. Your next question comes from the line of Florence Cespedes from Societe Generale. Please go ahead. Your line is open.

Good afternoon. Thank you very much for taking my question. On slide 30, on Lake Viau, there is a chart showing the sales versus and the Entresto sales as well, the monthly sales. Do we have to understand that the Lake Viau should continue to trend with the same pace as Entresto or, as you suggested last year, we should see an inflection later this year, even if we expand the number of sites that would prescribe the product? So some color on that would be very helpful. Thank you.

Yeah, thanks, Laura. I think we just want to overall indicate that the launch is in line with other major cardiovascular launches where we've been able to generate very large medicines, and you've seen how Entrusto continues to perform. We continue to hope for the inflection point, certainly in the second half of the year. It's hard to predict exactly when it would happen. There are a few things that give us confidence. We should see some acceleration in the back half of this year. One is the pretrial offer program that we had rolled out will expire, and we hope that those patients will convert into paying patients in the second half second. With that 7,000 plus physicians that I mentioned, we expect to get greater depth in those physicians over time, which should also drive greater growth as well. We also see an increasing comfort with buy and bill versus the alternative injection centers. And as that happens as well, we generally see physician sites prescribing more of Letheo because they can do it in-house without having to refer a patient out. So all of those would be the positive tailwinds we would see towards the second half of the year. I think broadly speaking, we feel comfortable with where consensus is on Letheo for the full year 2023. And then our goal remains to make this into a very significant multibillion-dollar medicine over the coming five to ten years. Next question, operator.

Thank you. Your next question comes from the line of Peter Welford from Jefferies. Please go ahead. Your line is open.

Oh, hi, thanks. I have a question on oncology. Just obviously, there was a lot of emphasis on radioligand therapies, and that was highlighted from the new and upcoming ones you have as well that are coming through phase one and two. There are relatively few other sort of priorities in oncology highlighted within the pipeline. And so I wonder if you could still say, first of all, if you're still enthusiastic on your KRAS and the opportunities there, given also what we've seen develop in that market. But also ociperlimab, is that now discontinued or is it just delayed as you continue to evaluate TIGIT? And sort of more broadly, is this still an area which you could see further business development, or do you think this is an area perhaps obviously less focused from Novartis? Thank you.

Yeah, thanks, Peter. So I think on oncology, it remains a huge focus for the company. Forty percent of our R&D budget is focused on developing the next wave of oncology medicines. Within solid tumors, in addition to the radioligand therapies where we have now a growing portfolio across neuroendocrine, prostate, we have a range of other indications. We're taking Lutathera into, we have the anti-integra, the Bombasin. We recently are hopefully bringing in a folate as well. So we have a broad portfolio within RLT where we see a significant opportunity for We continue to also pursue the TIDGET through the deal we have with Beijing, and we have that as an option deal. We also are assessing what other lines of therapy to take that TIDGET into given the competitive landscape. That's something we're actively evaluating. And then in terms of other active programs that are in Phase III, certainly the KRAS and the KRAS G12C are continuing. Our overall perspective is the critical thing now is to demonstrate efficacy in a combination setting. We think we've seen now from the sales performance of the mono G12C inhibitor as well, important for a certain group of patients that have the mutation, much more important is can you ultimately demonstrate tolerability and efficacy of the G12C with a PD-1, with a SHIP-2, with other agents. And that's something now we're working through to see. And that would really, I think, give us more confidence that this could be a very significant medicine. Now, earlier stage within the NIBR portfolio, we have a range of different assets that we're pursuing. We have a few targeted protein degradation agents that are advancing now into phase 1, 2, a couple of novel targets in non-small cell lung cancer, as well as other solid tumors. So that whole space continues to progress. As you know, oncology has a high level of failure rate, so I don't want to oversell it, but I think we're certainly working to continue to find the next wave of solid tumors. And then we are active in the BDNL space, and I think if we could find attractive assets within our core cancers, lung cancer, prostate cancer, the gastric GI cancers, et cetera, those are certainly things we would actively look at. I would say in hematology, now between Semblix, Iptaclopan, Ionilumab. We have some pretty, building on the legacy, of course, of Gleevec and Tasigna and Promacta, Revelate, we have a pretty good portfolio in hematology. And then, of course, with now YTB moving into the first-line setting and large B-cell lymphomas, a nice portfolio to continue to keep, maintain our strength in hematology over time. Thanks, Peter. Next question.

Thank you. Your next question comes from the line of Seamus Fernandez from Google Home Securities. Please go ahead. Your line is open.

Oh, great. Thanks for the question. So, you know, can you maybe just give us a sense of what the team is doing to extend the IL-17 franchise beyond Cosentix exclusivity in 2029? There's obviously a number of, you know, high-value immunology assets out there. in development. We're just interested to know what Novartis is doing beyond that. And maybe, if you could, would you mind commenting on, you know, how you see the HES landscape evolving going forward, given some of the data that we've seen for bimucizumab and then potential competitor Moonlake as well? Thanks so much.

Thanks, Seamus. First on IL-17A and the Cosentix portfolio overall, of course, something we're actively working on and looking at. Cosentix LOE 2029, we have additional patents that go into the 2030s, which we'll, of course, actively prosecute as well. We have a range of oral anti-immunological agents we're pursuing in-house, so oral IL-17A as well as other oral agents. And of course, actively looking at external opportunities as well in that space if we see compelling data. So I think that's going to be really critical for us to look at. But of course, we have time, and that's something we'll work through over the coming years. I also would say that in immunology, between Ionilamab, remibrutinib, as well as other programs we have now advancing through the pipeline, We're also prepared to pivot not to be not just focused on psoriasis, PSA, and AS, but also try to move into really be a leader in areas like Sjogren's, SLE, and other immunological illnesses, as you mentioned, like HS. Now, HS, our view is that our 52-week data is very compelling. We think this will really be a space where long-term data is what really matters. We think our 52-week data relative to the TNFs are very good. We're aware of other IL-17As coming. I think what's important to note is this is a very, very undertreated patient population. These patients generally have given up and generally are not coming in for therapy. So the real opportunity here is to get these patients to know that there are better therapies available, and that will create, I think, a large market opportunity where multiple players can be successful, given that these agents are looking like they have better efficacy and safety than the anti-TNF. I don't have anything to say about other mechanisms at the moment. In-house are pursuing other mechanisms as well against HS to try to make sure that we cover our bases. We have evaluation of our anti-CD40 ligand. We're evaluating remibrutinib, our BTK inhibitor. So we have a range of efforts looking at HS, and of course we'll see which ones pan out in-house. Next question, operator, and I've been advised to really remind everyone, please limit yourself to one question. Appreciate it. Next question, operator.

Thank you. Your next question comes from the line of Andrew Brown from Citi. Please go ahead. Your line is open.

Thank you. Questions on Clavicta. Looking at your patient access map, demand clearly materially exceeds supply currently for the product in the U.S. Could you just outline your confidence of FDA approval for the mid and end year for the new facilities? Just given the recent record of Lequio, plus you have a new facility, what is the risk of that dragging on? And connected to that, how should we think about the future competition from Point and Lantheus with their reticulum, isotope, and prostate? Thank you.

Yeah, I think with respect to the files, we're ready to file the site since we're in discussions with FDA to file the Milburn site. And from the time we get the okay to file, it's a four-month review clock for that additional facility. Our Indianapolis facility with multiple large-scale automated lines, we plan to file in quarter three as well to the NDA. And again, it would be an addition of additional sites, so we'd expect a four-month approval time and so we're doing everything we can to make that a reality and we plan right now for those sites our base plan is for those sites to come online this summer and then later on this year and then we'd have adequate supply to fully meet the demand of the vision population as well as the PSMA the PSMA 4 population now I think in terms of the competition it's important to note this is extremely difficult manufacturing this is just-in-time manufacturing that requires really logistics expertise. We currently source the entire U.S. market out of an Italian site and do it successfully. And we believe we've built up substantial know-how and expertise with the relevant sites to give us a strong competitive position. Now, other players, of course, are going to come in and try to launch. The question will be, do they have the same scale and expertise that Novartis does to be able to navigate that complexity and really ensure that they can meet the demand? So that's kind of our outlook right now. We feel good about it. By the middle of this year, we'll be in a very strong position to meet the supply. I would also note for Lectio, because I noted your comment on that product, I mean, we have a large-scale line now that's up and running in Switzerland, which makes us the largest producer of siRNAs in the world. So I think we're good on gene therapy, RLT, and siRNA manufacturing. We feel very good with the approach we've taken and I think we're in a very good place on all three of them. Next question, operator.

Thank you. Your next question comes from the line of Kayur Parekh from Goldman Sachs. Please go ahead. Your line is open.

Hi. Thank you for taking. One big question, one for you. With the proposed separation of Sandos, Novartis will become a focused innovative medicines company. Once that transaction is done, Are you done with kind of the process of changing the shape and structure of Novartis? Or do you think there is more kind of you want to do relative to the size and the shape of the innovative medicines company that will be left at the end of the Sandoz transaction? And just kind of linked with that, I know kind of Ronnie's team has been hiring, kind of they've hired kind of some people like Dr. Yang, et cetera, but just more broadly, How far along the process of building that kind of growth and strategy function section under Ronnie is kind of Novartis today? When do you think that might be done? Thank you.

Yeah, thanks, K.R. You know, broadly speaking, our strategy was to get to become a pure play innovative medicines company, design the company in the right way. We started that journey in a principled way five years ago. Of course, there was a pandemic for two and a half years in the middle of that, so it got a little more complex. But I think we have the right setup post the Sandoz spin with a geographic focus on the U.S. and ex-U.S. and from a commercial standpoint, really committed and renewed leadership in R&D and then the strategy and growth function to really identify external and internal opportunities that can drive the growth. So I think post that time period and post seeing through the transformation program we announced last year and the relevant restructuring, I think we'd be then in a position to really just focus on execution. We need to execute on our launches, execute on our pipeline, execute on our productivity, continue to generate that mid-single digit sales growth. and that attractive core margin over time, and then that becomes the core of what we do day in and day out, continuing to look at attractive external assets to add on over time. Ronnie's team is getting built out, I think, off to a strong start, a much more integrated, the most integrated approach now that we've had, that I'm aware of, at least in 20 years, to R&D portfolio management. It all falls under one roof now in terms of how we look at the R&D portfolio. an integrated approach to taking commercial input into the earliest stages of research, much more focused on key TAs and being much more disciplined in saying no to projects that are off strategy. So I think all of that's coming together. It's been four or five months for Ronnie. It's been two months for Fiona Marshall. But I feel really good that this is a great team that can deliver that innovation horsepower we're going to need as a pure play company. Thanks, Sarah. Next question.

Thank you. Your next question comes from the line of Emily Field from Barclays. Please go ahead. Your line is open.

Hi. Thanks for taking my question. I just wanted to ask a question about Atacapan. Will this US filing in the first half of this year include both PNH trials? And then, because I know you mentioned that you're running the switch study for the frontline patients as well. Just trying to get a sense of commercialization strategy across the P&H spectrum. And then, I know you have BTD for this asset, just how long of a regulatory review you might be expecting. Thank you.

So, with Eptaclopin, yes, we'll be filing both studies, both the refractory and frontline study as part of the package, and that's aligned with FDA. We do have used a priority review voucher as well for this asset to really ensure that it's approved in a rapid timeframe. Even though we had breakthrough therapy designation, we don't want to take any risks with respect to this particular filing to make sure that it happens as fast as possible. With respect to our overall strategy with Aptacapan, I mean, when you look at this market, we believe that it's 60% to 70% of patients who, on current anti-C5-based therapies, are not adequately controlled. And those patients could be switched to Iptaclopan based on the data we presented at ASH and assuming the final label supports it. And so that's a substantial opportunity for the medicine. We know that potentially up to 60% to 70% of diagnosed PNH patients are not on a therapy to date. And they come on... I think a few different categories. Some are subclinical or not quite clinically severe enough, and the question is with a twice-a-year safe oral, is there an opportunity to get more of those patients on therapy because maybe physicians or patients were holding off wanting to be on regular infusions, so could an oral therapy open up that market? I think there's a set of patients also who have gone back to taking transfusions, having now failed prior therapies. That's another opportunity. And then there's probably a set of patients as well that are just in the watch and wait mode. So that will be an opportunity for the medicine as well. So we think there's multiple places. It will take us time to drive this launch. So this will not be fast given the strength of the incumbent physicians and then also that this significant group of patients not on therapy has to get mobilized. We believe over time with the compelling data that we have and the recognition that a twice-a-day oral could be a really compelling option, we can build a very significant medicine on PNH, then expand into C3, IGAN, AHOOS, ICMPGN, and then subsequent indications thereafter. Next question, operator.

Thank you. Your next question comes from the line of Richard Foster from JP Morgan. Please go ahead. Your line is open.

Hi, thanks for taking my question. Just going back to Cosimta and obviously very strong. We're going to see another launch for another CD20 this year and coming around now from TG Therapeutics. Obviously an IV but lower price. How do you see that impacting Cosimta this year and maybe also We're going to see subcutaneous ocrevis data. How do you see that as well in the future around the launch? Thanks very much.

Yeah, thanks, Richard. So the way we look at the MS market, the one, as I mentioned, you have 50% of patients that are not on B-cell therapies and 50% on B-cell therapies. So there's a substantial market opportunity just to get more patients in the first line, first switch setting onto high-efficacy B-cell therapies. So there's plenty of room for growth. just for Cosimta and getting to more of those patients. The second thing, based on our understanding of the market, is that there are sets of facilities and health systems that prefer infused medicines, and there are those that prefer providing patients sub-Q medicines, and we see those as very stable. So really this market is a split market. You have a market of physicians who want to give infused medicines, and there's a large proportion of the market We want to give patients the opportunity to have at-home sub-Q administration. Within that sub-Q, we don't see any at-home administration relevant competition for the coming years, and that's very much our focus area. Within the IV segment, there is now competition, and I think that competitive dynamic will be an important one for us to observe. And I think to your point, Richard, will the opportunity of having sub-Q physician-administered medicines expand the number of centers that might be interested in a physician-administered approach? We don't know. Nonetheless, the market opportunity ahead of us with the 50% of patients not on B-cell therapies and the substantial number of physicians who prefer providing an at-home administration, that's the opportunity for this medicine that gives us plenty of room to grow over the coming period. Thank you, Richard. Next question, operator.

Thank you. Your next question comes from the line of Simon Baker from Redburn. Please go ahead. Your line is open.

Thank you for taking my question. Just going back to LECVO, Vaz, you briefly touched on buy and bill. I just wondered if you could give us a little bit more detail on the progress you're making there. I ask because on one hand, there was a fairly negative article earlier in the month on LECVIO's buy-in bill. Yet on the other hand, we see in September and December last year quite a significant uptick in traffic to the LECVIO access website. So I just wanted you to give us the latest picture there. Thanks so much.

Yeah, thanks, Simon. Look, there's no question that buy-in bill is a new approach that cardiologists need to understand and get implemented to their office. That said, we know there are many specialties that have successfully done that, ophthalmology, oncology, rheumatology, neurology. So this is something that can be done. Does it take time? Yes. Do you have to work through many hurdles? Yes. Do you have to get off the staff to understand a new approach? Yes, absolutely. But it can all be done. And as I noted, now that we have over 7,000 physicians that have taken action on LifeBO, 1,800 facilities ordering LifeBO, a steady increase in conversion from facilities that were previously using alternative injection centers to now implementing buy and build in their facility for LifeBO. I think we're getting to a place now where physicians are getting more and more comfortable with the concept. And what we generally see is once a physician has one patient go through the process and they understand that it is something that's manageable, then it becomes something relatively straightforward for their office, and then they take it on relatively quickly. So we have to get up that curve, but we're seeing, I think, positive trends, and we'll just keep working through it, keep also hopefully having clinics be able to educate one another about the experience of how buy-in bill ultimately works and get that further implemented. So I wouldn't read too much, and you can always find probably a physician to tell you any process is onerous and terrible. But I think broadly, when we look at a large-scale data set, we see steady progress on this front. Next question, operator.

Thank you. Your next question comes from the line of Michael Leuchten from UBS. Please go ahead. Your line is open.

Thank you. Question for Harry, please. Just going back to the Sandoz operating expenses into 2023, I think that's the biggest delta to consensus really looking at the composition of numbers for this year. Harry, how much of these expenses are stand-up costs and how much is sort of prepping for manufacturing shift as well? This just seems a meaningful amount that is coming into the P&L. Is that purely just separation costs or is that already including sort of longer-term expenses that already hit 2023? Thank you.

Thank you, Michelle. So overall, I would say if you take out these stand-up and transitionary costs, the Corp Inc. Sandoz in 2023 would be flat. So if this low double-digit decline comes from that, if you think about it, Sandoz delivered 1.9 billion, Corp Inc. in 2022. So we talk about roughly plus minus 200 million of a cost block. Out of that 200 million, about 70 to 90 million will be real stand-up cost, corporate cost, and so on that Zandoz needs to operate as a separate public company. And the other half, if you will, will go away over time as fully transitioned to a public company. That would naturally go away as these transition costs are not anymore needed after a couple of years. Of course, also the corporate cost, there will be corporate costs, but clearly, Sandoz has plans to reach in the mid-term, the mid-20s margin, by then streamlining the overall operations SG&A structures as they are a standalone company. So I hope that gives you a bit more flavor on that guidance for this year, which really should be a trough year, and then after the separation, relatively quickly, come off that, including, of course, taking over transitional service costs like for IT over time quite quickly, usually maximum two years on such services.

Thanks, Harry. Thanks, Michael. Next question, operator.

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

Thank you for taking the question. Perhaps I'll take one on Kiskella. You've reiterated the over 3 billion pleat sales potential for the edge of an indication. So perhaps you could just help us understand how important you think a clinically meaningful benefit in both of the QT subpopulations in the trial is by intermediate risk and higher risk in terms of realizing that potential that is positive and how would you define clinically meaningful in terms of either absolute or relative IDFS benefit in that population? And indeed, is that something you would actually disclose with a headline or would have to wait until details are presented? Thank you.

Yeah, thanks, Emmanuel. So the trial right now is overall designed for an endpoint across both patient populations. So in order to hit the primary endpoint, we need to hit across all populations. Now, the question would be, would FDA parse the data and say that it was driven by the high-risk population and then potentially take a different approach? We can't judge. But the way we've designed and powered the study is across the entire group. And so from a pre-specified analysis on the primary endpoint, it would be for both the intermediate and the high-risk. of course, with the relevant secondary endpoints. I'd also note that we've aligned with FDA that key for us is to show no detriment in OS, so as long as we can demonstrate no detriment in OS at the time of that readout, that would be the case. I think you would expect a headline on whenever it comes on the IDFS, and then if relevant, the OS, if not relevant, the OS, we would not say anything on the OS, and then we'd have to have the discussion with the agency to determine how they would like us to cut the data. You know, from our competitor data, there was a threshold that was applied for a certain subpopulation, KI-67, and then later adjusted. So these are all things we would have to determine as part of the review process. Next question, operator. Thanks, Emil.

Thank you. Your next question comes from the line of Mark Poussel from Morgan Stanley. Please go ahead. Your line is open.

Yeah, thank you. Thanks for taking my question. Could you help us understand when you said the nine-month analysis could potentially support U.S. subpart H filing, how should we think about the probability of moving forward at that point versus obviously out to 2025 or so and slowing progression of IGAM before you can approach the FDA with your package? And then sort of related to that, obviously a much bigger population and In IGAN versus PNH and C3G, A-Health, et cetera, should we think about a sort of subpopulation of the 185,000 patients you estimate with IGAN, which would be a target hill, or would you sort of launch this as a completely separate brand? I'm trying to think about what Novartis' broader ambitions might be to build out a portfolio of primary care and rare renal assets, given your commercial capabilities across the platform.

Yeah, thanks, Mark. So first on the endpoint for IGAN, we saw in the Phase II data, Phase IIb data, you know, I think a reduction in proteinuria across, you know, the very statistical analysis that we've done. And that's the basis for us designing the Phase III study. So we feel good that if we hit the required slope of reduction that we target, that that would – allow us to file with the FDA, though I imagine it will also come down to the totality of the data. But certainly our base case is that if we hit the primary endpoint on proteinuria, that should give us the basis to file. And then, of course, we would look at EGFR and other endpoints in 2025 that would be more meaningful after further follow-up. Broadly speaking, for our Factor B So, a focus on PNH, B3G, AHU's ICMPGN, cold agglutin disease, and the related spectrum of illnesses. When we're in a more common illness like IgA nephropathy, our focus is on more severe patients to be able to maintain the ultra-rare pricing. We do have follow on factor B inhibitors that we plan to take forward in broader indications. You'll note that we do have a program for a to evaluate it in geographic atrophy and related retinal diseases. And if successful, we would actually use the backup compounds for those broad indications. And that's how we're thinking about splitting out across the whole factor B enterprise. Thank you next question operator.

Thank you. Your next question comes from the line of Richard Parks, BNP Paribas. Please go ahead. Your line is open.

Hi. Thank you very much for taking my question. It's just another one on Plavicto. You've outlined, obviously, you'll have manufacturing capacity to allow you to address the majority of the PSMA4 population by 2024. Could you talk about the other hurdles and limitations on your ability to penetrate that population, including referral patterns, proportion of patients cared in the community, and access to nuclear medicine facilities, just so that you can help us scope out the opportunity? Thank you.

Yeah, you know, Richard, what we've seen thus far is there's about – 500 facilities we believe we would need to be able to provide Plovicto, at least in the U.S. market, to reach the demand, the potential patient population across the three indications that we have. We're currently servicing a little over 200 of them, and we expect that to expand over time. I think what's going to be the next challenge, because the demand is, as we've noted throughout the call, much higher than we expected, than I think folks on the call expected, frankly, is actually having the centers have enough infusion chairs to be able to provide the therapy to enough patients. So that's the next constraint beyond once we relieve our supply constraint later in the middle of this year to then work with the centers to have a better estimate of what the number of patients they think they will need to provide radioligand therapy to a day. and ensure they have adequate chair or bed capacity to be able to do that. Because I think that will be, as we get into broader and broader patient populations, that will be the next constraint we'll have to then work through. There seems to be a lot of enthusiasm in the urology and nuclear medicine community to do that, so I expect it will happen, but that's something we're going to have to work through over the coming quarters. Next question. And this is the last question. I think it's Steve. Steve?

Thank you. Just opening Steve's line. Steven, your line is open. Hi.

I assume you're calling on Steve Scala. So I'm just wondering what is your specific assumption for the profile of Merck's oral PCSK9 for which data is coming very near term in terms of both its LDL lowering and its safety I assume your view is very cautious, which supports your high enthusiasm for Lectio. But what sort of role do you think an oral PCSK9 ultimately could have in this marketplace? Thank you.

Yeah, thanks, Stephen. I'm glad you asked that question. You know, our view, and we had an oral PCSK9 program, which we've deprioritized. We are pivoting cardiovascular research in Novartis into infrequently administered SIRNAs, ASOs, et cetera, to get to first, you know, as you know, we have PCSK9. We have combination programs. Of course, we have LP little a, follow-on programs with various combinations. And the goal would be to say, can you get to, Combinations at 6 months or long acting at 1 year with the belief that over the last 25 years, we've learned that compliance to orals in this market is low statins are 30% other therapeutics are in a similar range. And if we really want to tackle cardiovascular disease at scale, we need to get to infrequent administration. So, we have as a starting point, we're going to work very hard to extend past not get the 9 to 13, but anyway, going to have life cycle management, working on long acting, like, working on combinations with in our goal will be very much to have a combination that can cover the relevant mechanisms of action. for cholesterol lowering so that patients won't need oral drugs anymore because we think that's where medicine is heading, and we think that's what siRNAs, long-acting ASOs, and similar technologies can deliver. So, hence, we deprioritize orals systematically or cardiovascular adenovartis and focus on this next wave of technologies and therapies.

Very interesting. Thank you.

Thanks, Steve. All right, very good. Thank you all for joining, and we'll look forward to updating you further at quarter one. Take care.

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