Novartis AG

Good morning and good afternoon and welcome to the Novartis Q4 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 1 and 1 at any time during the conference. Please limit yourselves to one question and return to the queue for any follow-up. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Mr. Samir Shah, Global Head of Investor Relations. Please go ahead, sir.

Thank you very much, and good morning and good afternoon, everybody. Thank you again for listening to our full year results and Q4 results. The information presented today contains forward-looking statements that involve known and unknown risk uncertainties, and other factors. These may cause the actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements. For a description of some of these factors, please refer to the company's Form 20F and its most recent quarterly results on Form 6K that, respectively, were filed with and furnished to the U.S. Securities and Exchange Commission. And with that, I'll hand it across to Val.

Thank you, Samir, and thanks everyone for joining today's call. I know it's a busy day with many companies reading out, but we hope to provide you some insights into our Q4 2023 results and also some perspectives on the outlook for Novartis in 2024 and beyond. If we move to the first slide, slide four. As you saw in our earnings release this morning, we delivered a strong full-year performance with margin expansion and strong innovation momentum with 10 positive Phase 3 readouts over the course of 2023. As a reminder, our full-year guidance at the start of the year was quite a bit lower than where we ended up, and we had multiple earnings upgrades over the course of the year, demonstrating, I think, the strong business momentum we have as a company. Q4 sales up 10%, core operating income was up 13%. And on the full year, we were up 10% on sales and core operating income up 18% all in constant currencies. And Harry will go through this in more detail in a few moments. We also had the successful spinoff of Sandoz as a really value creating event for Novartis and our shareholders. We provided our updated 2024 guidance where we expect to grow mid single digit and core opting expected to grow high single digit. And we've chosen to be prudent with this guidance at this point in time. And then looking to our midterm guidance, which I'll also go through in more detail, we've extended our midterm guidance of 5% constant currency CAGR growth to 2023 to 2028 and continue to hold to our core operating income margin guidance of 40% plus by 2027. So moving to slide five, this year was a really critical year for the company because we completed the transformation of Novartis. We believe really laying a strong foundation for our future growth. Since 2014, we have spun off both Alcon and Sandoz in shareholder-friendly ways. We have exited our OTC stake, also in a shareholder-friendly approach, and exiting, creating a new OTC company with GSK. And also importantly, exited our Roche stake, completing a $15 billion share buyback, and then continuing $15 billion share buyback, which is ongoing currently, and we expect to complete by mid-2025. That leaves us as a pure play innovative medicines company with a margin of 36% on its way to the 40% plus, strong free cash flow, and a strong innovation engine, which we think positions us well for the long run. So moving to slide six, when you look at Q4, most importantly with the underlying growth of our key growth drivers, which grew 40% overall on the quarter, and that growth rate we expect to continue. That underlying growth is what gives us confidence that we can grow mid-single digit in the coming years and then continue that growth in 2028 and beyond in the mid-single digit plus range. A combination of these growth drivers as well as strong pipeline productivity puts us, I think, in a strong position to be a consistent grower over the next decade. And moving to slide seven. And I want to just walk through each of the brands to give you some perspectives and then look forward to taking your questions. So first, Entresso delivered 31% growth with sales reaching $6 billion and we're well on track to reach our peak sales goal of $7 billion. Plus, this growth was both in the U.S. and ex-U.S. geographies. You can see on our weekly TRX, we continue to reach record highs. We had constant currency growth of 27% and 26% in U.S. and ex-U.S. and China and Japan contributed strongly with strong performance with their ongoing hypertension launches. So looking forward, we expect continued growth for this brand. We maintain our guidance for forecasting purposes that an Entresto LOE would not occur until 2025, and we also maintain our guidance on EU regulatory data protection to November 2026. So moving to slide eight. Now, Cosentix reached $5 billion in 2023, and we expect to see at least mid- to high-single-digit growth in 2024 on our way to our guidance of $7 billion peak sales. Going a little deeper into this performance, we saw 17% growth in the U.S. and 26% outside the U.S. This was in part in the U.S. due to revenue deduction adjustments we had in the prior year leading to a lower base. But we are seeing very good momentum on our IV and hydradenitis launches in the U.S. and in hydradenitis in Europe, which gives us confidence that Cosentix can be a dynamic grower over the coming years. We'll continue to keep you updated on how these launches progress over the coming quarters. And then we also will keep you updated as well on the three ongoing phase three studies we have are progressing in giant cell arteritis, PMR, and rotator cuff tendinopathy. So moving to slide nine, Cosimta sales in the full year doubled to $2.2 billion. We remain on track to reach our $4 billion peak sales guidance. Strong growth in the U.S., but also now increasing growth in Europe and in the ex-U.S. markets. We currently see 85,000 patients treated with Kesimpta to date. Our U.S. growth is 48% in constant currencies, ex-U.S. at 193%. And we have NBRX leadership now in 7 out of 10 major markets outside of the United States. I think everyone knows well the compelling profile we have in terms of efficacy and convenience, as well as the easy-to-use sensor-ready pen that patients can benefit from with Casimta. We have five years of efficacy, safety, and tolerability, and we'll look forward to continuing to expand this brand, both in terms of the growth of the B-cell class in MS, but also increasing our NBRX share within the B-cell class as a key growth driver. Moving to slide 10. cascali reached 2.1 billion in the metastatic breast cancer setting we maintain our 4 billion dollar peak sales guidance in the metastatic breast cancer setting alone you can see this growth again was driven by both the us and our international business our rolling nbrx share and the metastatic setting is now up to 46 and we see continued strong growth in the metastatic setting This is driven by the statistically significant OS we have now across three pivotal studies, the NCCN Category 1 designation, and the median OS of five years we've demonstrated across those three pivotal trials. We can confirm that we have filed in the EU, US, and China the adjuvant indication across intermediate and high-risk breast cancer, and we'll look forward to keeping you up to speed as we progress towards hopefully those approvals and launches over the course of this year. moving to slide 11. fluvicto a full year sales closed out a near blockbuster status at 980 million importantly now we see unconstrained supply for this brand we maintain our multi-million dollar peak sales guidance for the current indication and i can say we see very strong demand signals and growth dynamics in january consistent with our expectations But as we cleared the supply constraints and some of the challenges we saw in quarter four, we would get back to strong, robust growth in quarter one 2024. And what we would expect is robust quarter on quarter growth over the course of this year. Some more details in terms of treatment sites. We have over 300 US sites now that are active and regularly ordering fully unconstrained supply. We're 99.9% now doses injected on the planned day. with a capacity of 250,000 radioligo therapy doses expected in 2024, with the approval now of our Indianapolis site. We have a network expansion ongoing to prepare for launches in Asia with announced investments in both China and Japan. And as I already noted, we expect robust quarter-on-quarter growth over the course of 2024. Our PSMA-4 expected US submission is second half 2024, and we'll keep you updated as We progress towards that and we also remain on track on our both our PSMA addition and PSMA localized oligometastatic disease trials to move Flavico into earlier lines of therapy. Now moving to slide 12. Semblix had a strong year and strong quarter moving up now to 125 million in quarter four 2023. This is in the third-line setting where we have leading third-line market share, NBRX share of 43%, TRX share of 22%. I think, as you all well know, there's high unmet need in the third-line setting, and over 50% of hematologists really want improvements in quality of life and better management of side effects. Insemblix really delivers that. Now we have four years of follow-up that really demonstrate its differentiated profile in terms of efficacy as well as a very clear and strong safety profile. So the global rollout in the third line setting is ongoing. We have approval in over 60 markets. We have access granted now in over 25 markets and very positive feedback from payers on the clinical benefit. Now moving to slide 13. We read out earlier this month the Ask for First trial, which met both its primary endpoints with clinically meaningful and statistically significant results in the frontline setting for Semblix. As a reminder, this study had Semblix compared to investigator-choice TKI. We estimate 50% of the patients were on imatinib and 50% of the patients were on second-gen TKIs, nilatinib or disatinib or busutinib. Both primary endpoints were met. We showed superior major molecular response rates at week 48 for standard of care, and we also had a very favorable safety and tolerability profile with fewer AEs, treatment discontinuations, and no new safety signals observed. So we're very excited about this data. Importantly, MMR is a good predictor, a reasonable predictor of important endpoints such as PFS, OS, and EFS. So this data will be presented at an upcoming medical congress. We're moving rapidly towards a submission in the first half of 2024, and we'll look forward to sharing this full data set and really providing our conviction that Semblix can be a multibillion-dollar medicine for Novartis. Now moving to slide 14. Now, Lectio continued its steady expansion in the US as well as across regions. You can see here we delivered $123 million on the quarter. growth in both our international and our US business. On the US side, we have 3,500 facilities now ordering Lectio, which is a 13% growth versus Q3. 55% of that business now is coming from in-office buy and build. And we expect to continue to drive growth on this brand by driving depth in our key accounts, as well as expanding the buy and build acquisition channel. Ex-U.S., our rollout also continues well with 29 countries with public reimbursement, 39 countries with private coverage. And we see very positive, solid early signals in China in the self-pay market, which we expect to continue over the course of 2024 ahead of a proposed NRDL listing in 2025. In terms of the outcome trials, we remain on track for our secondary prevention outcome studies in 2026. And we also continue to enroll our primary prevention studies as well. And moving to slide 15, Fabhalta now is launched in the United States. And we see, I think, very positive early launch signals. But we do expect a modest ramp for this brand, given the dynamics within the PNH market. As a reminder, we have very compelling data for this medicine, including improvements in hemoglobin transfusion avoidance. IVH, intravascular and extravascular hemolysis control, and a very clean safety profile. Our populations in our label are adults with PNH, both naive and switch patients, which was our target label for this medicine. And as an oral therapy, we think we really provide a unique offering for patients with PNH. There is a REMS requirement, but this is similar to other complement inhibitors. Right now, as we look at our launch, our focus very much is coming out of ASH, getting patients up on our patient support program, getting our REMS up and running. Our first patients have already been initiated. And what we're hearing is positive HCP sentiment, interest from patients and pair groups. And our goal will be initially to focus on newly diagnosed patients as well as patients who are not currently under full control for their hemolysis with their existing therapies. Over time, we would want to certainly expand this market. We estimate half of patients with PNH are currently not on therapy. And with an oral agent, we have the possibility, we hope, over time to get more patients on therapy to avoid any of the subsequent sequelae associated with PNH. And moving to slide 16. You know, as noted, in 2023, we had 10 positive Phase III readouts with significant sales potential. You see them listed here. A lot of this data will be presented over the course of 2024, so you'll have a better understanding of the potential of these medicines, whether it's medicines like Remibrutinib. We've already seen the Lutathera Netter2 data, which I think is really outstanding, and hopefully some of you saw that potential now for Lutathera on the frontline setting. Of course, the data for Atrasentin and Aptacopan and the SumList data, which I've already mentioned. So moving to slide 17, I just want to say a word of some of the top line readouts we had in quarter four. Eptaclopan had another, it's a third phase three readout with a positive, positive phase three readout with clinically meaningful and statistically significant pronuria reduction in patients with C3G, lemurial nephropathy. You see here on the left, the phase two data, which we've previously disclosed. In phase three, we had a study design versus placebo looking at month six before patients crossed over to Iptaclopan on both arms. We saw this really important proteinuria reduction and safety profile consistent with what we've seen in previous data, and we're currently engaged with regulatory agencies with a goal for submissions in 2024. And moving to slide 18, over the course of the year, we had positive readouts both on imtaclopan and our newly acquired atrasentan in IgA nephropathy, clinically meaningful results here as well. Both of these programs have been reviewed with the FDA and we're on track for submissions of these medicines that would really allow us to have, I think, a robust portfolio of medicines to bring to nephrologists in IgA nephropathy and then in the future, D3G as we continue to try to build out a nephrology presence around the world. Zygacibart, our anti-april antibody also acquired in the Chinook acquisition, is also on track in its phase three study. So moving to slide 19. Now we expect our innovation momentum to continue in 2024. This will be a year of data readouts, full data readouts and submissions primarily for the company. We expect a few phase restarts, but importantly, as I mentioned, key data readouts and submissions will keep you posted on as we progress. And when you look at slide 20, this is why we have confidence as well that we'll have a steady stream of innovation to drive the company's growth beyond 2028 with the number of exciting, I think, assets we have, 24, 25, as well as the 26, 28 timeframe. This will create a steady flow of replacement power and innovation, enabling us to drive that mid single digit growth rate beyond. Now moving to slide 21. Over the course of the year, we also signed 15 strategic deals, exits, as well as acquisitions totaling over $6 billion. I do want to emphasize our core approach in M&A remains as bolt-on acquisitions in the sub $5 billion space. Deals such as Chinook but also many smaller deals you can see across the full landscape you're very much focused on technologies like XRNA gene therapy and RLT as well as our key therapeutic areas like such as Chinook Amongst others. We also continue to invest in artificial intelligence on top of our collaborations with Microsoft and Palantir we've also signed agreement now with an agreement now with isomorphic labs of Google's DeepMind and which really allows us, I think, to be partnered with some of the most preeminent AI researchers in the world to speed up our drug discovery and drug development. And moving to slide 22, we did also today extend and update our midterm guidance. You'll remember at R&D day, we had noted 22 to 27, 5% CAGR. And today, given the momentum we're seeing on our growth drivers and the strong pipeline, performance we're seeing, we're extending that 5% growth guidance to 23 to 28. Now, of course, up until 28, we do have some GX impact, which I'm sure we can discuss further in the Q&A. But the momentum we're seeing in our in-market growth drivers across our base business, across each of the brands, which I've already discussed, as well as the positive data we've seen in PopHalta, Semblix, Remy Brutonib, and Atrasentin, gives us confidence now that we can continue that 5% growth up to 28, and we've already guided mid-single digits beyond that. So moving to slide 23, I want to close with just a word on ESG, which remains very much a part of the Novartis strategy and Novartis approach. We focus on innovation and access to medicine, human capital in terms of our work on DEI culture, as well as ensuring that we're amongst the leaders in environmental sustainability and ethical standards. When you look at our performance now, we're number one in sustainability in the leaders group in MSDI and also amongst the leaders in important other benchmarks such as access to medicine and GDP. We plan to continue that, of course, in 2024. And so with that, on slide 24, I'll hand it over to Harry.