Novartis AG

Good morning and good afternoon, everyone, and welcome to our Q4 2025 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. Please refer to the company's Form 20F on file with the U.S. Securities and Exchange Commission for a description of some of these factors. The discussion today is not a solicitation of a proxy nor an offer of any kind with respect to the securities of Avidity Biosciences or SpinCo. The parties have filed relevant documents with the U.S. SEC, including a proxy statement for the transactions and a registration statement for the spinoff. We urge you to read these materials that contain important information when they become available. Before we get started, I also want to remind our analysts to please limit yourselves to one question at a time, and we'll cycle through the queue as needed. And with that, I will hand over to Beth.

Terrific. Thank you, Sloan. And great to be with everyone today. With me in the room are Harry Kirsch, our Chief Financial Officer, and Mukul Mehta, our Chief Financial Officer Designate, who will be taking over for Harry in mid-March. So let's dive into the results. And when we start on slide five, Novartis delivered high single-digit growth, as you saw earlier this morning. And importantly, we achieved our 40% core margin goal two years ahead of plan. And I think that demonstrates the strong operational performance of the company. On the full year, our sales were up 8%. Core Op Inc. was up 14%, as I mentioned, the 40.1% core margin. $21.9 billion now on Core Op Inc., I think significant growth over the years. On quarter four, sales did decline, impacted by both gross to net sub which we'll talk about a bit more as well as the uh entrusto loe and core hopping is up one percent we did have some important pipeline highlights which we'll cover over the course of the call but i think a few i wanted to highlight up front first remy brutinib we achieved the submission in the most common type of cindu that was based on positive phase three results as well as interactions with the fda And we'll have the remaining readouts for the two other subtypes of chronic inducible urticaria over the first half of this year. And with Palabrasib, we now have a path forward for both the EU and the US. I'll go through that data and the path forward on a future slide. So overall, we met our upgraded full-year 2025 guidance. We expect to grow in 2026 through the largest patent expiry in Novartis history. which I think demonstrates the strong performance we have on our key growth brands as well on our pipeline replacement power. Then moving to slide six, the growth drivers in the quarter continue their strong trajectory as well as on the full year. Here you see the full year numbers. You can see Cascali was up 57% on the full year. Cosimta was up 36%. Semblix up 85%. Fluvicto on the PSMA4 launch having dynamic growth as well. We'll talk about each of these brands in In turn, overall, 35 percent growth in this portfolio. And this is a portfolio that will carry us through the end of the decade, as well as with many of these brands taking us into the mid 2030s. Now, moving to slide seven. On Kaskali, we grew 57 percent in the quarter to five on the year to four point eight billion, outpacing the market for CDK for six. Now, when you look at the chart on the lower left, our growth was 44% in Q4. When you remove the US RD adjustments, our global sales grew at 54% and our US sales growth was at 62%. So in our view versus the consensus, the entire miss really came from these RD, one-time RD adjustments. We remain fully confident on the $10 billion peak sales outlook for the brand. And what's underpinning that confidence is the very strong volume growth we're seeing across geographies. When you look at the middle panel, U.S. EBC NBRX is now above 60% and holding steady. I think that really demonstrates the strong preference providers have for Kastali, particularly in settings where we are uniquely positioned. And in Germany, we have over 80% NBRX share in the early breast cancer setting, which I think shows, again, this early strong performance for the launch. In Germany, which we hope to carry over now to other ex-US markets. So going to the last panel, I already went through many of the key elements, but I think I wanted to also note that EBC NBRX share is leading in both the overlapping and the exclusive populations. Outside of the U.S., we have important launches in Italy and Spain coming up in 2026. And finally, we continue to bolster the data profile for Qiskali, both with data that we recently presented at San Antonio and ESMO. We'll continue to follow up these patients over the long run, and that should allow us to continue to have mature OS data over time, which we think will continue to bolster the portfolio. So very excited. Qiskali continues to have the outlook to be the largest brand in Novartis' history. Now moving to slide eight, Cosimta grew 36% to 4.4 billion on the year. You can see a continued steady performance of this brand, driven by the continued expansion of the B cell class within MS. In the US, we had 27% growth in quarter four. Importantly, we see increasing adoption in naive patients, which are now 50% of our NBRXs now in first line. Outside of the U.S., we are leading now in NBRX share, a 9 out of a 10 of the major markets that we track. And the core opportunity we see ex-U.S. going forward is to continue to expand B-cell therapies in the 67% of patients who are not on B-cell therapies and receiving disease-modifying therapies in MS. So we continue to generate additional value for Kesimpta. We continue to progress also. Our every two month formulation for Cosimta. So I think we're on a solid track with this brand to fully achieve our peak sales guidance of 6 billion plus. Then moving to the next slide. Plavicto now really showing dynamic performance with the PSMA 4 launch, 42% constant currency growth. We reached $2 billion in sales now overall globally. And that strong performance was driven primarily in the U.S., where we continue to see strong uptake in the pre-taxing setting. Sales grew 75%. We saw a 4x increase in our PSMA share since approval, now reaching 16% in that setting. We also see continued growth across provider settings, including the highest growth in community, where we now have over 790 treatment sites. Outside of the U.S., importantly, we've secured approvals in Japan and China, which also allowed us to continue to drive that ex-U.S. strong growth, and we expect that growth to accelerate now with the Japan and China launches upcoming. Now, the next phase for PluVicto, as we expect to kind of get to the peak of the PSMA4 population over the course of this year, will be the launch in the hormone-sensitive setting, which adds about 75% additional patients to the patients we already have from the vision and PSMA4 population. That SNDA has been submitted to the FDA as well as the NMPA in China and PMDA in Japan. We have the right foundation for that launch to be, we think, a rapid uptake with two-thirds of eligible hormone sensitive patients already with existing treaters or providers. So the capacity is well established. I did want to flag as well that we have new manufacturing sites that are coming online in California, in Florida, as well as in Japan and China. We have over 440 treatment sites now outside of the U.S. as well. So we've really taken this to scale, which positions us well for the Plavicta launches, ongoing Lutathera business, as well as our future RLT portfolio. Now moving to slide 10. Leccio reached blockbuster status in the quarter, an important milestone for this brand as we continue that steady trajectory that we often see for cardiovascular launches. 57% growth on the full year, 46% on the quarter. In the U.S., we continue to outpace the overall advanced lipid lowering market. And our real focus is increasing depth in the health systems we prioritize where they're strong. capabilities within the buy and build setting, strong interest in getting patients to goal, also focusing more on specialty areas as we've guided in the past. We saw 33% growth in the setting versus the prior year. Now, key milestone for us outside of the U.S. will be the NRDL listing, which we achieved in China and is now already now started in the first part of January. As you have heard on previous calls, we have had very strong uptake in China in the private setting. And now with the NRL DL listing, the early signals are very strong for rapid uptake in the China market for Lectio. So we're quite excited about that. And it's a key focus area for us in 2026. We continue to build the evidence base for Lectio, important publications in various journals, mostly focused on adherence rates. as well as our ability to drive LDL-C down to goal, regardless of which background therapy patients are on. Then moving to slide 11, Semblix had another strong quarter. We've reached, again, blockbuster status with this brand, and we have NBRX leadership in the U.S. and Japan, 87% growth in Q4. Now, if I could focus your attention on the middle panel, in the U.S., we've reached 41% NBRX share now across all lines of therapy. And we plan to continue to grow that. But the most important thing for us now is to drive the growth in the first line setting where we're trending ahead of our plan. We're already now in the mid 20% range in the frontline setting. We want to drive that up. And I think as we get, as we've now secured broad access, we have the opportunity now to continue to make Semblitz the medicine of choice on the frontline for patients with CML. And now outside of the U.S., we also continue to have our leadership in the third line setting with 72% share across the major markets that we track. The early line indication is now approved in 60 countries, and we've already just launched in Germany. We expect to get other EU markets online in the front line with launches expected in 2027. I think one ex-U.S. market to note, which I think shows the ability we have to drive assemblies outside of the U.S. is in Japan, where we already have 45% frontline market share, NBRX share, 74% second-line NBRX share. So really strong outlook, confident in the $4 billion-plus outlook for this medicine. Now moving to slide 12, Cosentix grew 8% overall in the year, getting to $6.7 billion on the steady march up to our $8 billion peak sales guidance. You can see the 11% growth on the quarter. In the U.S., we had 9% growth. That was driven by higher demand we saw both in hydroadenitis and in IV. Right now, we're the number one prescribed IL-17 across indications, and that's really because of the strong access that we have, frontline access. In HS now, we're the NBRX leader in naive patients with 51% share and 47% overall. And, you know, the naive market is two and a half times the switch market. Certainly we've seen our competitor get traction in the switch market, but we're very much focused in that naive market where we have a really strong position. And the IV is also steadily advancing 8%, steady growth, 200 new accounts. We expect that to continue over the coming years. Outside of the US, no major changes, continued very strong growth, leading originator biologic in the EU and China. And overall, we would forecast Cosentix to have, on average, mid-single-digit growth over the coming years as we get to that $8 billion peak sales potential. I did want to also flag that we have completed the submission with the US FDA for polymyalgia rheumatica. And so we're excited about that as an additional launch now for Cosentix. And we're also on track to file in the EU in Japan in the first half. So moving to slide 13. Our renal portfolio has continued its rollout, I think, with steady progress. And separate from that, we also have amended our Zika Kybar Phase 3 protocol, which I wanted to talk about in a bit more detail. Starting with our renal portfolio, our IGAM portfolio contributed 50% of the NBRX market growth versus prior year, driven equally by Venrafia and PubHalta. So I think we see steady uptake across these two brands. Also in C3G, Pubhalta continued steady adoption across the top accounts, and we hope to see that accelerate now over the course of 2026. And outside of the US, Pubhalta is now approved in C3G in 45 countries. Van Raffia had its EU submission. So I think across these three brands, we have the opportunity to continue to build out a strong position. We do expect to be able to provide the full data set on the Fabhalta EGFR readout in IGAN soon, and also move forward with the filing for full approval in IGAN for Fabhalta. And we also expect, I should also note, the VADRAFIA full EGFR data set in the first half. On Zika Kibar, we have made the decision, in order to optimize the overall label positioning and the competitive positioning, to align our UPCR readout with the interim EGFR readout, which we expect in the first half of 2027. And we expect that to support our BLA for a full approval. This was a decision based on our analysis of the phase one and two data. We think we have the opportunity to be second to market with both proteinuria and the EGFR benefit. And so that, I think, is going to hopefully position us well to have a fourth renal agent in our portfolio. also have combination trials underway because we certainly see the opportunity in having a hemodynamic agent having a fabhalta and having a zika kybart the opportunity to use combinations to optimize care for these patients now moving to slide 14. rhapsody is a u.s launch which is obviously something we're very closely tracking is delivering encouraging results we are optimistic with already what we're seeing in the early days for this launch. We see strong demand with an encouraging mix of patients, both patients who are post-antihistamines as well as post-biologic failure. We have a strong and positive response from allergists and dermatologists. The sampling and bridge program has over 2,000 HCP starts. And I think that when we benchmark that versus other highly successful dermatology launches, It's right in line with some of the most successful dermatology launches. We're also seeing early access wins. I think access will be now the gating factor. Every few months, we expect to bring on additional access on board. That will allow a steady pickup in sales over the course of the year with more of a steady pickup in the second half of the year. I think it's really that second half I would encourage everyone to watch as we get that access together. And as a reminder, I think you all know well, clean safety, no box warnings, no contraindication, no required routine lab monitoring, no liver safety issues in the label, fast relief across a broad population as fast as two weeks. Anecdotally, we hear reports as fast as a day or two days, patients are starting to see benefits. And it's the only oral therapy approved by FDA who remains symptomatic despite antihistamine therapy. Now moving to slide 15. Now Rapsodo is one of these brands that we hope over time could become one of the largest brands in Novartis' history. This is an opportunity over multiple indications. I mentioned CSU launched, Sindhu now positive data that we have in hand for one type, two more types coming. An HS readout in 2028. We have positive food allergy data, which we'll be presenting in Q1 of this year. That's leading us to now initiate a broad phase three program in food allergy. We are on track for the RMS readouts second half of this year, but really mid of this year is the opportunity that we had to read out the RMS, two RMS studies, SPMS and myasthenia gravis ongoing. So when you take that together, you really clearly have an opportunity with a medicine with a clean safety profile and strong efficacy as an oral option to have a significant long-term sales potential. Now, moving to slide 16. Now, in Visma, which we haven't had as much attention, but it's something we continue to believe has a significant overall sales potential, total potential for this brand across the IV and IT of $3 billion plus. This is a U.S. approval that brings the one-time gene therapy to children two years and older. It's a broad label across patients who are non-sitters, sitters, and walkers. No AAV9 antibody titer limit for this treatment. There's a strong value proposition, single administration, durable efficacy, solid safety profile. So we see a multi-blockbuster opportunity for this brand. 7,500 children, teens, and adults have not been treated yet with Zolgensma IV. We also have an extensive experience in the U.S. and ex-U.S. with this medicine. Outside of the U.S., we've already been approved in the UAE one day after the FDA approval, and Europe and Japan submissions are completed. And as a reminder, for Zolgensma, actually our sales are larger outside of the U.S. than in the U.S., so there's certainly a significant opportunity ex-U.S. for Abysma. Now moving to slide 17, as I mentioned on the first slide, We read out in the quarter four the 96-week data from the Phase III manifest program, which both on safety and efficacy has now given us a path forward to, we believe, get this medicine registered, assuming successful regulatory and clinical trial Phase III trials. In that study, we showed deep and durable responses and a comparable safety profile to ruxolitinib and myelofibrosis. You can see the data here on the left in terms of the spleen response. When you look at the data that we presented, we had a deep and durable spleen volume reduction for the spleen volume 35% reduction landmark, 91.5% versus 57.6%. We also saw sustained improvements in symptom scores and anemia. We had two times as many patients reaching goal with the spleen volume reduction and the TSS50. So we believe this medicine has disease-modifying potential. We saw improvements in bone marrow pathology on the anemia. was importantly now from a more a mortality standpoint fewer deaths and progressions observed with collaborative and ruxolitinib versus ruxolitinib alone and the overall safety now is proven comparable with ruxolitinib including comparable leukemic transformation rates which was one of the topics that was holding this program back so with this data set we have now agreement with the eu to file in 2026 based on this data And in the US, China, and Japan, we'll be starting a new phase three study focused on patients who have high TSS50 at baseline, where we believe we have the data set now to show we can achieve the regulatory milestone to ultimately get approval. Now moving to slide 18. I did want to also take a moment to mention our impact on global health. As I think many of you know, Novartis has been in global health for nearly 100 years, working on malaria and other neglected tropical diseases. With our CoRTEM medicine 25 years ago, we started a real sea change in the treatment of malaria, reaching now well over a billion patients with CoRTEM. And now with the recent data we presented in November, we have the opportunity to bring the first new malaria medicine, novel medicine, so it's CoRTEM in 25 years. This is KLU156, it's Ganaposide plus Lumafantrine. It disrupts the parasite's internal protein system Very positive data here. You see on the adjusted basis, 99.2% cure rates versus 96.4% versus a five-day course, a three-day course, opportunity to block transmission, very solid safety profile. So we're quite excited to bring this forward as part of our mission in global health. So moving to slide 19. Now taken together, very good year for us from a pipeline standpoint in 2025. You can see we met the vast majority of our milestones and trial starts and i think that really shows the strong execution machinery we have now in r d at the company very aligned across research and development and strong execution across our global development organization and turning to slide 20 for 2026 we're on track for seven pivotal readouts with the potential to strengthen the midterm outlook that we're guiding to including the mid-single-digit sales growth we expect in the 2030s. A few particular readouts which I haven't mentioned, which I'll call out. On the left side, you can see Pella Carson for CVRR. We do expect a readout middle of this year. It will be second half, but it will be middle of this year, which, if positive, would allow us for a U.S. submission this year. We also are on track for our submissions for Yinalimab and Sjogren's disease. and as well as the delzota dmd u.s submission which assuming the closure of the avidity deal would also happen in the first half of this year number of pivotal readouts i mentioned paul carson there will be the yinalimab readouts in hematology which could have significant potential to drive that brand to very large long-term potential of course remy brutinib as well as the del disran dm1 phase 3 readout again assuming the closure of the ability we also have the additional readout of the ducks for interim data readout as well which could support accelerated launch in fshd however that we would characterize as an upside case and then a number of key study initiations you can see on the right hand side of the chart so another exciting pipeline year to continue to bolster our long-term growth profile now moving to slide 21 I will hand it over now to Harry.

Yeah, thank you, Vaz. Good morning, good afternoon, everybody. I now walk you through our financial results for the fourth quarter and the full year of 2025, which, as Vaz mentioned, was very strong despite mid-year significant US generic entries. And as always, my comments refer to growth rates and currencies, unless otherwise noted. So on slide 22, 2025 marked another year of excellent execution. So over the last five years, as you can see here, we delivered an 8% sales average growth rate and a 15% core operating income average growth rate driven by strong commercial execution, a great late stage readout and disciplined productivity programs. This translated on the right side into more than a thousand basis points of core margin expansion in constant currencies. And as you can see in reported currencies, you know, allowed us to reach our midterm core margin target of 40% two years earlier than planned. As you may recall, we initially planned for 2027. Now we have achieved in 2025. With this results, I hope you agree, but I believe we have really elevated the company to a new level of sales performance, margin profile, and as I'll discuss later, free cash flow generation. On slide 23, just a quick summary. You see that we have delivered our full year guidance in 2025 after upgrading twice throughout the year, and we guided to high single-digit sales growth and we delivered 8% for cooperating income we guide it to low teens and achieve 14%. And this is a strong result in the year, as I mentioned, where US generic entries for Entresto, Promacta, and Tersigna happened. And it speaks really for the momentum of our priority brands, as Marcel really laid out, as well as disciplined cost management. Turning to slide 24. So here are a few more details. For the full year, we delivered the described solid top and bottom line growth record a core margin and record free cash flow almost 18 billion. The core margin in the year improved by 210 basis points to 40.1% and core EPS rose 17% to $8.98. Free cash flow grew 8% to 17.6 billion. Now for the quarter, On the right side here, as expected, the US generics had an impact, which we see in Q4, and then Mukul will lay it out first half of next year, of 2026. But then again, back to growth. Anyway, sales declined 1%, whilst cooperating income increased by 1%. And the results were a little bit noisy due to some US RD adjustments. a positive impact in quarter four of 2024, so last year financially, and a negative impact this year in quarter four 2025, mostly on generic brands. So excluding this adjustment, underlying quarter four sales growth would have been positive 3%. As said, the vast majority of the growth from net adjustments were Entresto and other generic brands like Promagda and US. Core APS in the quarter, $2.03, up 2%. Now on slide 25, you can see our continued progress on free cash flow generation, which reached 17.6 billion all-time high for the company in 2025. I think it shows you also beside the financial, the power of being a pure play pharma company, as you know, Many years back with even six businesses or even before the Alcon and Sandoz spin, these numbers were usually 10 to 12 billion range. And now this is the earnings power of a focused and very successful pharma business. We remain, of course, focused on ensuring that the growth and co-operating income translates into high quality earnings and strong cash flow generation. This robust cash flow allows us to reinvest in the business pursue bolt-on acquisitions and continue to return attractive capital to the shareholder through growing dividend and share buybacks. On page 26, a quick reminder on our unchanged capital allocation strategy. As you see, we continue to execute our balanced shareholder-friendly capital allocation in 2025. We invested more than 10 billion in R&D an 8% increase versus prior year, announced four acquisitions, 10 licensing deals, strengthening our key platforms and pipeline across all of our four therapeutic areas. On returning capital to our shareholders, we completed our 15 billion share buyback program in early July, and we launched a new up to 10 billion program targeted to be completed by the end of 2027. Approximately 7.7 billion of that remains to be executed. In addition, we distributed 7.8 billion in dividends during the first half of 2025. Now, speaking of dividends, turning to slide 27, we are proposing a dividend of 3.70 francs per share, a 6% increase in Swiss francs and even double digits in dollars. And it's our 29th consecutive dividend increase in Swiss francs since company creation 96. And including years following the Sandus and Alcon spins when we did not rebase the dividend at all. This reflects our long-term and long-standing commitment to a growing dividend in Swiss francs per share. That concludes my remarks. Before handing over, I'd like to briefly acknowledge that this will be my final earnings call as CFO of Novartis. It has been a privilege to serve this role the last 13 years and to work alongside Vaas and so many other great colleagues to help guide the company through a period of significant transformation and performance improvement. I'm very pleased to hand over to Mukul, a longtime colleague. In fact, we both started maybe at different stages of our career in 2003 at Novartis and very intensively worked together, especially the last 10 years. So with that, I turn over to Mukul to take you through 2026 guidance.