Novartis AG

Good morning and good afternoon and welcome to the Novartis Q2 2024 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 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 Ms. Sloane Simpson, Head of Investor Relations. Please go ahead, madam.

Thank you, operator. Good morning and good afternoon, everyone. Thank you for joining our Q2 2024 earnings call. 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 recently were filed with and furnished to the U.S. Securities and Exchange Commission. I'd also like to remind everyone to please limit yourself to one question, and we'll cycle through the queue as many times as we can. And with that, I will hand across to Beth.

Thank you, Sloan, and thank you, everyone, for joining today's conference call. With me on the call, as always, is our CFO, Harry Kirsch. So starting with slide four, as you saw in quarter two, we continued the strong growth performance at Novartis, which gives us conviction that we are well on track to deliver our 5% plus sales growth out to 2028 and our 40% margin target in 2027. You saw that sales on the quarter were up 11% in constant currency, core operating income up 19%. Our core margin reached 39.6%, reflecting our outstanding productivity programs, but also as a consequence of our strong sales growth. In addition, we had important innovation highlights in the quarter, which we'll review over the course of the call. But some of the really important ones included the Semblitz Firstline CML FDA submission, Updated Kisgali-Natalie data, which we think really support the outstanding profile of Kisgali in the adjuvant setting, in the early breast cancer setting, and we're looking forward to presenting that outstanding data at an upcoming medical congress. And continuing to build out our renal portfolio with the after-sentence submission, as well as our broader portfolio of presentations at the recent ERA meetings. Taken together, this allowed us to upgrade our full-year 2024 core operating income guidance. Harry will go through that in more detail. Now, moving to slide five, our Q2 growth was broad-based, and we had strong contributions from multiple of our outstanding growth drivers. Importantly, Kesimpta was off to a really outstanding start earlier in the year and continued that momentum. Kiskali also continued its strong momentum. Cosentix, with the recent launches, continues to grow in a robust way. We saw steady growth in Fluvicto, strong growth in Lyfeo and Semblix, and taking together a 37% constant currency growth, which we expect to continue. Now, taking each one of these brands in turn, step by step, Entrusto delivered 28% growth in quarter two. And we continue to have high confidence we will exceed our $7 billion peak sales guidance for this medicine. That growth was driven by all our core geographies. You can see here in the middle panel, US weekly TRX reached another record high. That 25% growth was fueled by consistent demand across the various segments that we competed. Outside of the US, growth was 30% with strong contribution from China and Japan. where we continue to see momentum from Entresto in heart failure, but importantly as well in hypertension. So we remain confident in the continued sustained performance of the medicine. For forecasting purposes, we continue to assume an Entresto LOE in mid-2025. However, we continue to enforce our patents and litigate our patents, and we'll ensure that we maximize this brand for as long as possible in the United States, alongside EU RDP in November of 2026. Then moving to slide seven, Cosentix grew at 22% in the quarter. This is fueled by our new launches. And I think importantly, if you take a step back, puts us well on our trajectory to reach $7 billion plus peak sales for Cosentix. When you look at the demand growth by geography, the US grew 34% driven by volume. Ex-U.S., we were up 10%. And this was partially offset by one-time pricing effects due in Germany in particular due to the addition of additional new indications, normal part of the German process. As you get additional indications, you do see price adjustments. We see Cosentix doing very well in its core indications. I think one important dynamic is the strong launch in HS is supporting us. In our core indications of psoriasis, PSA, and AS, we're the number one IL-17 in the U.S. dynamic market, the lead originator biologic in Europe and China. In HS, we're seeing a very strong uptake with market leadership, a share over 60% in the NBRX. In Germany, we're over 50%. And I think importantly, with the launch of Cosentix, we're seeing increased diagnosis and desire to treat amongst physicians and patients, which I think will allow the HS market to grow to larger than it's historically been, and of course, allow Cosentix to help these patients achieve their treatment goals. For Cosentix IV, we saw solid adoption with over 700 accounts now ordering, and we do expect further demand increases in the second half now that we have a permanent J-code in effect as of July 1. So moving to slide A, Cosimta also delivered, as I mentioned, a very strong quarter two, 65% growth. This was broad-based in terms of its geographic growth profile. Over 100,000 patients have now been treated worldwide, naive, or first switched with Cosimta. In the U.S., we saw 49% growth. This demand growth was driven by TRX volume of 43% versus prior year. We gained 4% market share overall in segments. Outside of the U.S., we have NBRX leadership in 7 out of 10 major markets. So looking forward, we feel confident we will exceed our Cosipta $4 billion guidance, peak sales guidance. We see strong trajectory for this brand. Its profile is unique. Self-administered B-cell treatment option, one minute a month dosing, no steroid pretreatment required, an attractive safety profile with respect to injection site reactions, Persistence and adherence we're seeing in the real-world setting is comparable to infused B-cell therapies. We also continue to generate data which support the strong efficacy profile of this medicine. To move to slide nine, Kaskali grew 50% in the metastatic setting with now leading or continued leading NBRX share in the U.S. and ex-U.S. As you know, Kiskali has an outstanding data profile in the metastatic breast cancer setting that's really supporting us consistently now around the world. In the U.S., we saw 67% growth where we gained widespread adoption. We have a leading share now, NBRX share of 47%. 7,000 HCPs now prescribing, and that provides us a very strong base of physicians which we can leverage as we move to the early breast cancer launch. Similarly, outside of the US, 35% growth at the preferred CDK4-6 inhibitor. We have a leading share of 38%. We're the fastest growing CDK4-6 inhibitor in Europe. And when you look at the early breast cancer setting, we're on track now for a launch in half two. We've completed the manufacturing adjustments in close collaboration with FDA, which we outlined earlier in the year. We're now anticipating a US approval by the end of quarter three. We remain confident in a broad label based on the consistency of results that we've seen across the Natalie population. And as we announced this morning, we have now updated Natalie data with a median follow-up of four years. All patients have now completed their three-year course of the medicine. And we see continued clinically meaningful benefit, consistent safety profile. We believe very compelling results that will really support the launch of this medicine. And so we're really excited to present that data at an upcoming medical meeting and continue to support that Cascaglia will hopefully be the preferred medicine for patients with early breast cancer. Then moving to slide 10. So Pluvicto demonstrated very steady growth versus prior year. Now, when you take a step back on Pluvicto, we're now in a transition point where our early rapid uptake is now transitioning to a place where we need to generate demand in the next wave of centers and then eventually out in community oncology, both for the success of Fluvicto, but also for the long-term success of RLT. That said, we remain highly confident in the long-term prospects of Fluvicto to be a multibillion-dollar medicine across the various segments that it will compete in. We do believe that once we're through this period, we will get back to robust growth, particularly driven by the PSMA-4 indication and later the HSPC and oligometastatic indications. We had growth, as I mentioned, of 44% on the quarter. Now, when you look specifically at the vision population, We estimate our market share is in the mid-30% with 50% share in established RLT treatment sites. We see a dynamic where the sites where we're well-established, we could have market shares above 90%. We have another group of sites where we're working to go from 50% to 90%. And then we have about a third of sites of the 475 treatment sites that we're operating in where we need to now get from 10% of share of the vision population, hopefully up over time now to 50, 90%. That will drive the steady growth that we expect over the course of the coming quarters. Now, when you look specifically at what we're doing to supercharge PluVicto and also enable us to build a broad capacity for the system to take on RLT, We're increasing our U.S. promotional efforts, including a field force expansion, which is now completed. We'll be launching a DTC campaign in quarter three. We'll also have the phased launch of the patient-ready dose, which is a very important, I think, step, in that it reduces the time from providing Plavicto from around an hour to less than 10 minutes. And this will allow sites to hopefully take on more patients, especially sites that have significant capacity to take on more vision patients. And then lastly, we have German pricing approved, which is why you've seen the uplift in the XUS market, XUS sales profile. So looking ahead, FDA submission for PSMA4 on track in half two. We already have profiled the positive trend in OS and PSMA4. China submission is planned in the second half, and we did do a groundbreaking now for a RLT manufacturing site in China, alongside plans for also manufacturing sites And in PSMA addition and PSMA, ADC continued to progress as per plan. So moving to slide 11, Lectio had strong growth as well, 134% growth. I think we're seeing step-by-step more and more acceptance of the option to take twice-a-year medicine to achieve 50% to 60% cholesterol lowering, and that's a trend we're seeing broad-based around the world. We have now 4,200 facilities ordering Lectio in the US. We continue to steadily expand our breadth and depth, continue to generate additional data to support the profile of Lectio as we move also towards our outcomes trials, two outcomes trials for Lectio, as well as continue to progress efforts to move Lectio into the frontline setting for cholesterol management. Outside of the U.S., our rollout continues with over 35 countries with reimbursement, strong market growth, 24% first prior year. And so we feel confident that step-by-step, LifeValue also is progressing towards its multi-billion dollar goal. And moving to slide 12, Semblance momentum continued in quarter two. And I think as you're all aware, we have US market leadership in the third line setting. And most importantly at ASCO, we presented our outstanding first line data, which I'll go in a little bit further detail about on the next slide. Now, when you look at the third line setting, we're the market leader in NBRX and TRX share in the US. Outstanding performance as well, we're seeing outside of the United States. TRX and monthly prescribers continue to grow across all geographies. One important note for modeling purposes is that shortly we'll be launching 100 milligram SKU for the T315I patients, a patient group that requires 400 milligrams of Semblix, which is about 10 pills per day. They will now be able to take four pills per day. But what that will lead to is about a $15 million sales that will not repeat in quarter two and quarter three. So for all your modeling, just to take into account that because of that price adjustment, the 100 milligram dose being launched, and because we have consistent pricing across SKUs, that adjustment just needs to be factored into your models for Semblix. But more importantly, we're very confident in the first-line opportunity. We have FDA submission under real-time oncology review. We received breakthrough therapy designation. I think all of you saw the truly outstanding data at ASCO that positions semblance of the medicine of choice for patients in the frontline setting. And we're looking forward to also completing our ex-UF submissions in 2024 and 2025. Now, moving to the Semblitz ASCO data, as a reminder, this was data that demonstrated superior efficacy and a favorable safety and tolerability profile against standard of care TKIs in first-line CML. Efficacy-wise, superior MMR rates and also deep molecular response, importantly, as well, against all TKIs and against imatinib with very impressive differences. We had earlier achievement of MMR, greater depth of responses, also important improvements versus second-gen TKIs in MMR speed and depth. And then very importantly as well for these patients, and I think from a physician's standpoint as well, outstanding safety and tolerability, fewer grade 3 AEs, fewer dose adjustments or interruptions, really making Semblitz, I think from a safety profile, the medicine of choice for these patients. So we're very excited about bringing this medicine forward. We guide it to $3 billion plus peak sales for Sumblix. As a reminder, Sumblix has protection into the mid-2030s. Also, as a rare disease medicine, will not be expected to be part of the IRA. So a really great profile, great medicine, very excited about its future. Now turning to Fabhalta, we had the US P&H launch, which is off to a very encouraging start. We saw really strong growth in quarter two versus quarter one. Ex-US approvals have also been received now in multiple markets. And when you look at the profile of Fabhalta, we're making steady progress. We have REM-certified HCPs ahead of competitive benchmarks. We see continued uptake across Naive and Switch patients. Patients are getting treated across all hemoglobin levels, but also including those patients at 10 to 12 who are just slightly below normal, I think, in showing the interest there is in a twice-a-day oral option. We also see increasing commercial coverage from our bridge programs. So all on track with respect to Fab-Halta. We would expect in the second half to now see steady growth, but also to take into account that the bolus of patients that we saw in the first half, especially the conversion from Bridge, likely won't repeat in the second half. So our growth rate will be steady, and I think it's exciting, but also certainly not at the rates that we saw in the early part of the year. Now, moving to slide 15. Turning to our renal portfolio, as you all know, we've been working to build an attractive portfolio to manage IgAIN, C3G, and related renal diseases. And as part of that effort, we acquired Atrocentin. And in the Phase III aligned IgAIN study, we announced at ERA in May a 36% pronurial reduction relative to placebo. We're very excited about this medicine as we think it can be a foundational medicine to provide hemodynamic and nephroprotective potential for patients and physicians. It's a clinically meaningful proteinuria reduction. We see a very favorable safety profile. We think up to 50% of patients with persistent proteinuria progress to kidney failure, so important that these patients get better options. We submitted to FDA and of course the study continues in a blinded fashion to 2026 when we would read out the EEGFR. So looking forward to launching this medicine in 2025. Alongside that, with Aptacopan, we also announced at ERA the full result phase three appearance C3G study, which demonstrated 35% proteinuria reduction relative to placebo. You can see the design on the left-hand side of the slide. On the right-hand side, you see that impressive minus 30% versus an increase of 7.6% in the placebo arm. We saw numerical improvements in EGFR, favorable safety profile overall. This would be the first treatment, potential treatment, targeting the complement pathway in C3G. And again, in these patients, 50% of patients develop kidney failure requiring dialysis. Now, importantly today, we're also announcing that we have end of study results for this medicine at the 12-month time point. That data is consistent with the six-month data, which now allows us to move forward with the filing in the second half of 2024 with an expected launch next year. We'll present that end-of-study data at an upcoming medical meeting, but I think this is an important update for this medicine, allowing us to now have sub-ALSA, hopefully next year, in three separate indications. I'd also note We're also working to develop Fabhalta and atypical hemolytic uremic syndrome. We announced the start of a phase three program in myasthenia gravis. And so we're very excited. Another medicine that has LOE protection well into the 2030s. And then as well, primarily treating younger patients, not a medicine that's exposed to the Medicare Part D IRA. So another medicine that we have, we think that can really drive our growth well into the 2030s. across a broad range of rare diseases. Then moving to the next slide. So in closing, before handing it over to Harry, we expect to continue our innovation momentum and have to. We had 10 positive phase three readouts in, as you all know, in 2023. Really this year is about filing and really making sure that we get these medicines ready to launch. But we are excited as well about a next wave of medicine. One thing we did want to note is we have shifted our remibrutinib CSU filing slightly as we do need to make a few CMC adjustments. But as a reminder, remibrutinib showed biologic-like efficacy in the control of CSU, a very good safety profile. So we're excited to get that medicine submitted in 2025 and then out to launch. We do, of course, also expect a steady stream of readouts as well in 2025-2026, which we'll profile in upcoming meetings. So with that, let me hand it over to Harry.