Novartis AG

good morning and good afternoon and welcome to the novartis q2 2023 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 one and one at any time during the conference please limit yourself to one question and return to the queue for any follow-ups A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Mr. Samir Shah, Global Head of Investor Relations. Please go ahead, sir.

Thank you very much, Sharon. Good morning and good afternoon, everybody. I want to begin by thanking you for participating in our webcast and investor call again. Before we actually start, I'm going to read the safe harbour 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 that respectively were filed with and furnished to the US Securities and Exchange Commission. Just a couple of housekeeping points. As per usual, we'll have one question per analyst when we go to the Q&A session, and you'll have time to go back again and ask a second question. And the other point is that we aim to finish today at quarter past the hour. So it's 9.15 East Coast time and 15.15 European time. And with that, I'll hand it across to Rod.

Great. Thank you, Samir. And thanks, everyone, for joining today's call. With me today, I also have Harry Kirsch, our CFO. So let's move straight to slide four. And as you saw in our release earlier today, Novartis delivered strong sales growth, excellent margin expansion, and we were able to raise our full-year guidance. Getting to the numbers, our group sales grew at 9% and core op-inc at 17%. IM sales were up 9% and core op-inc up 20%, allowing us to drive our IM margin to 39%. And Sandoz sales were up 8% and core op-inc up 6%. Harry will go through the guidance in more detail, but as you saw, we raised our full-year guidance for both sales and core operating income. We had a number of innovation milestones as well as other strategic milestones over the course of the quarter. And we'll go through those over the course of my slides. In addition, you saw that there was a ruling from the district court regarding one of our patents for Entrusto, our combination patent. We're in the process of appealing that patent and feel our arguments are strong to ultimately prevail on appeal, though that process will take 12 to 18 months. We would note there are currently no generics that are currently approved for Entresto. And also of note, in our assessment of recent history, there hasn't been an at-risk launch on a product of Entresto size in at least 15 years. So we'll continue to fully defend our IP, citizens' petitions, and other elements of our strategy to enable Entresto to have as long an exclusivity period as we believe it deserves. Now moving to the next slide, our Q2 growth was driven by strong performance across our key growth drivers. You can see that each of our key brands, Entresto, Casimta, Pluvicto, Casgalli, Semblix, Lectio, all delivered excellent performance in the quarter. And I think this reflects a combination of our new strategy or refreshed strategy, a focus in five key therapeutic areas, as well as our streamlined organization from our transformation last year. That's delivering outstanding growth in market from a top line standpoint, but also delivering strong performance on the bottom line as well. We're going to take each one of those brands in turn in the subsequent slides. Now, moving to slide six, Entrusto delivered strong double-digit growth in all geographies. The brand grew 37% on the quarter, and you can see robust growth both ex-U.S. and U.S. On the U.S. side, our weekly TRX prescriptions continue to grow robustly, 38% sales growth, 17% NBRX growth, so really outstanding performance on the U.S. side. Ex-U.S., we had 36% constant currency growth, and that's driven by HFRAP, but as well our performance on hypertension in China and Japan. We remain confident in the outlook for Entrusta's continued growth, both driven by guidelines, its HFRAP indication, but as well as continued use in the HFPEF indication. And importantly, our pediatric approval in the EU confirms that we have regulatory data protection through November of 2026. Now, moving to slide seven, in Cosentix, our sales stabilized in Cosentix in the second quarter with sales up 1%. When you dive in a little bit deeper into our Cosentix performance, you saw US sales down 12% in constant currency. And this was a situation where volume growth was offset by revenue deductions as we outlook in Q1. There's also the matter of the base impact we had in the previous year from the revenue deduction true ups we took in the second half of the year, which weren't accounted in the first half of 2022, leading to a higher base last year. Ex-US sales were up 18% with growth across all of our core indications. And importantly, in China, we're seeing outperformance versus the market with double-digit growth as the China healthcare systems continue to stabilize. Now, when you outlook to the second half, we expect important pipeline milestones with hydradenitis already approved in the EU. In the U.S., we expect to get approvals of both HS and our IV formulation, which would allow us to penetrate the Part B segment with respect to Cosentix with rheumatologists who continue to use IV formulations of these medicines. And the 300-milligram autoinjector we also received approval for. From an LCM standpoint, three important programs continue to progress on track, giant cell arteritis, PMR, and rotator cuff tendinopathy. We did terminate our lupus nephritis program based on a lack of compelling efficacy. Now, moving to the next slide, Kaskali continued a strong momentum globally, and I think this is a testament to its excellent differentiated profile. You had 66% growth across the globe, driven both by the U.S. and ex-U.S. markets, Our NBRX share now in the U.S. has climbed to 34% on the three-month rolling, and we continue to see strong month-to-month growth on our NBRX share. And this is, of course, driven by data you all know well, the consistent efficacy we showed in the metastatic setting across Mona Lisa 2, 7, and 3, which showed that the medicine has consistent benefit regardless of patient status or combination therapy. The medicine is included in the NCCN guidelines as the only Category 1 treatment for first-line metastatic breast cancer with neuromatase inhibitor. Now, moving to the next slide, our Natalie results, which we unveiled at ASCO earlier this summer, build on that differentiated profile, allowing us to demonstrate the potential benefits of Cascali in a broad population of Stage 2 and Stage 3 early breast cancer patients. As a reminder, we had very consistent results across IDFS, RFS, distant disease-free survival, and OS. Those consistent results is what give us confidence that we'll be able to achieve a broad label in the early breast cancer setting. Importantly as well, we saw a positive OS trend already at this early interim analysis. Now in terms of safety, there were no new safety signals. The 400 milligram dose was well tolerated with limited need for dose reductions. AE related discontinuations were mostly protocol mandated due to lab findings. The most frequent AEs were neutropenia and were liver related. And we had low rates of a grade three symptomatic AEs, particularly with respect to GI related symptoms. Then moving to slide 10, The next steps for Cascali will be continued momentum in the metastatic breast cancer setting, where you see strong performance across our key geographies. And we want to continue to drive that momentum as we believe Cascali is becoming the standard of care in the metastatic space. Natalie, updated analysis for IDFS and OS is expected in the second half of 2023. We expect filings in the EU in Q3 and U.S. in Q4 at the FDA. We'd like a greater information fraction on the OS analysis to allow us to get to the filing in Q4 of this year. And we're pursuing a broad label reflecting the intention to treat populations studied in Natalie. So collectively, we believe that Natalie has enabled Cascali to have the potential to more than double the number of patients who could benefit from a treatment with a CDK4-6 in the early breast cancer setting. Now, moving to slide 11, Casimta also had an outstanding quarter and continues its strong trajectory, doubling sales versus prior year. Sales were up 105% U.S. NBRX, you can see here, trending very well on the rolling four-week. The TRX in the U.S. was up 80%, and NBRX was up 43%. Our B-cell NBRX share is currently 54% of the market, and that, I think, will be a key driver going forward as the B-cell therapies continue to gain a larger and larger share of the MS market. In Europe as well now, we're seeing strong launch momentum with 24,000 patients treated And we're confident in the continued growth of this brand, as I mentioned, both with the expansion of B-cell therapies, but also with the compelling profile versus older therapies, as well as in competing overall in the B-cell class. Now, moving to slide 12, Pluvicto continued its strong performance. And importantly, we are at a situation where our supply is no longer constraining our ability to grow this brand. In quarter two, we saw Q2 sales of 240 million. Milburn was approved for the US and Zaragoza was approved for the EU as sites for commercial supply of Pluvicto. And we are ramping up now additional lines in Milburn rapidly. This has allowed us to start adding new patients as well as adding new centers where we have goal to add over 100 new centers over the coming months to enable continued treatment for patients with prostate cancer with Pluvicto. And we have progressed as well our XUS reimbursement discussions. Upcoming milestones for PluVicto will include the PSMA 4 pre-taxing data presentation, and we expect filing in the second half. In addition, the PSMA addition study is progressing on track as well. And we also expect submission and approval of our new Indianapolis site to further increase supply of PluVicto. So we would expect continued strong performance in this brand, and we continue to outlook Fluvicto to exceed a billion dollars in sales this year. And moving to Lectio, the launch continues to progress steadily as we've outlook, and we continue to gain broader and broader utilization and depth amongst cardiovascular providers in the United States. 78 million globally. We now have 2,600 facilities that have ordered Lectio, which is a solid increase versus quarter one. We are expanding buy-in bill as the primary mode of acquisition of Lectio consistently now over time. And one of our key areas of focus is to drive greater depth amongst early adopters of Lectio. In general, we find that once physicians reach a certain comfort level with the medicine along with their office staff, then we can reach a significant number or proportion of patients in a given office or clinic ultimately receiving Lectio to lower elevated cholesterol. We've demonstrated already, as you are aware, a consistent safety profile for this medicine. But importantly, in the last few weeks, we've also achieved a label expansion in the U.S., which expands Lectio to patients with primary hyperlipidemia, and that, in effect, allows us to move into the primary prevention setting. Less restrictive language for use for statin therapy, meaning that patients do not have to be on a maximally tolerated statin to initiate Lectio, as well as the removal of several adverse reactions from the safety section. So this will give us an additional catalyst to help us continue to drive broader Lectio adoption in the U.S. and around the world. Now looking at Semblix sales, Semblix sales were strong in the quarter. This brand continues to outperform our internal expectations. Sales reached 106 million in the quarter. This is driven by our new patient share in the third line setting, where we've reached now 35%, and we've had a 16% increase of monthly prescribers on the brand, as well as a global rollout of the medicine in Germany and Japan. I think one of the compelling things of this therapy are excellent efficacy, but also an outstanding safety profile, which clinicians and patients appreciate. And we continue to work to advance Semblik's data set to enable it to be used in earlier lines. The Ask for First first-line registration study has completed enrollment, and we expect readout and filing in the early part of next year. And we also continue to do additional studies to further profile semlets in the second-line setting as well as in combinations with second-generation TKIs. Moving to slide 15 and turning to our pipeline, a couple of notes here. Our key 2023 readouts are on track. That includes the Cascali data, which I've already mentioned, the PluVicto updated analyses, which I've also mentioned, As well as the TACAPAN, where you're aware we filed in both P&H, both in the US and the EU. We used a priority review voucher as well in the US. We also are on track to read out the APLAS IGAN phase three study in the quarter four, as well as the APIRS C3G data readout as well in Q4 of 2023. Turning to the next slide, when you look ahead now to the potential readouts that we have, or expected readouts we have in the 2024-2025 timeframe, these also are on track. Rimi Brudnib will have its primary analysis in CSU, chronic spontaneous urticaria, in the second half of this year, with the final 52-week readout required for regulatory submission in the U.S. in 2024. I've already covered Semblix and Pluvicto. Our OAV101 gene therapy for SMA in older patients with an intrathecal administration is on track now for a readout in 2024. And pellicarsin, ionilumab, and additional indications for octaclopan also all are on track, which really gives us a broad array of new medicines to enable us to drive growth in the second half of this decade and into the 2030s. Moving to the next slide, and just to provide an update on some of our external BDNL-related efforts, we've done a number of recent deals to bolster our pipeline as well as strengthen our technology platform. We have a proposed acquisition of Chinook Therapeutics, which is currently awaiting regulatory approvals. This would bring into the portfolio two late-stage assets for the treatment of renal diseases, Atrasentin and Zygotecabart, which is an anti-apryl antibody, both have shown strong proteinuria reduction in Phase 2 and could provide near-term launches in our portfolio. We also announced earlier this week the acquisition of DTX, which is an siRNA company that has an asset that we expect to soon enter human clinical trials for Charcot-Marie-Tooth syndrome. but also as a platform, importantly, which enables the siRNAs to be directed using a lipid technology to the central nervous system, which hopefully could open up new opportunities to treat a range of diseases with siRNAs. We also made important acquisitions of the gene therapy from AvroBio for cystinosis, a really debilitating disease without great therapies currently, as well as a mid-stage radioligand therapy targeting FAPI, from Clovis Oncology. We also continue to focus our portfolio consistent with our overall company strategy. We announced the proposed divestment of our front-of-the-eye assets to Bausch & Lomb for an upfront of $1.75 billion, as well as a total consideration, depending on sales milestones, of $2.5 billion. And we also recently terminated our option agreement for Ociperlumab with Beijing. So with that, let me hand it over to Harry. Harry?