Sandoz Group Ag S/Adr

Good morning, ladies and gentlemen, and welcome to the Sandoz call today. I will now pass on to Craig Marks, head of investor relations, for his opening remarks.

Thank you. Welcome to the Sandoz Q1 sales update. Earlier today, we published a press release and an accompanying presentation on our website, which will follow on today's call. You can find these documents at sandoz.com strokeinvestors. Joining me on today's call are Richard Saylor, Chief Executive Officer, and Remco Steenbergen, Chief Financial Officer. Please turn to slide two. Our sales announcement, presentation, and discussion include forward-looking statements. Please see our disclaimer here. Please turn to slide three. Richard will begin today's presentation with a summary of the highlights in the quarter, followed by an update on the business. Remco will cover the sales performance as well as full year guidance. Following the wrap-up of the presentation, we'll be happy to take your questions. With that, I will now hand over to Richard. Please turn to slide four.

Thank you, Craig, and hello, everybody. It's a pleasure to welcome you all to today's call, and I'm looking forward to talking you through our continued progress. Please turn to slide five. There are four key messages I'd like you to take away from this morning. Firstly, the quarter one sales performance was in line with our expectations, meaning we've now delivered 14 consecutive courses of top-line growth. This reconfirms our growing track record of execution and performance. Secondly, we again delivered double-digit growth in biosimilars in the quarter, ahead of more launches later this year, putting us in an excellent position to produce good results in 2025. The new confirmed U.S. tariffs have been absorbed within our four-year guidance. And lastly, we're confident in our plan for this year and beyond, and we're extremely well positioned to deliver on our reiterated four-year guidance. Now, let's move to the details of the business performance, starting with slide six. Before we go into the performance of our biosimilars, I wanted to take you through the initial steps of what could be a very significant beneficial movement towards regulatory streamlining, potentially ending the requirement to conduct phase three by a similar trial. In light of the involving global regulatory landscape and growing indications that major regulatory authorities will move to a streamlined by a similar clinical program, we're already minimizing our ongoing Pembrolizumab phase three trial. We believe that this trial will no longer be considered scientifically necessary to confirm that it produces the same clinical outcome as its reference medicine. There is unlikely to be a blanket-wide decision by the regulators on streamlining. It may be a more case-by-case basis, but we're encouraged by these first developments that could lead to significant changes for the industry and for patients. Turning to our approved biosimilars, I'll provide more color on Omnitrope Hymeros, Tyruco, and Pestiva in the following slides. But let me just say a word on YOS-Gibonti and Envizu. Last year, we launched YOS-Gibonti, or biosimilar to Nosemab, in Canada, and we're looking forward to the launch in the U.S. in the coming weeks. We plan to launch YOS-Gibonti and Aflipicept as biosimilar in Europe later this year. The U.S. launch timing of Envisu remains dependent on several factors, including the progress and outcome of potential litigation or potential settlements. Please turn to slide seven. Now, let me deep dive on some of our other biosimilars. After almost 20 years after it was launched, we're again delivering double-digit growth for Omnitrope, which continues to speak to the sustainability of biosimilars. The performance, again, undermined our continued market leadership, driven by a particularly strong result in the international region, which is expected to continue. Please turn to slide eight. Turning to Heimerod's, again, we delivered good growth in Europe. In the U.S., the launch is continuing to go very well. In addition to our private label arrangement with Cordavis, we're on formulary with the major pharmacy benefit managers with our own branded Hymeros and unbranded Adelunumab. This puts us in a leading position in terms of market access and payer coverage amongst Adelunumab via Simulus. In the quarter, we saw significant price erosion in the private label setting, a dynamic you'd expect to see at this stage. Sandoz remains a market leader amongst biosimilars, and we anticipate seeing changes in formularies to benefit biosimilar penetration during 2025. In summary, we're extremely well positioned to capture market share in what is a growing market. Please turn to slide nine. We started rolling Tyruco out across Europe around 18 months ago. Since then, this important medicine has been growing consistently, reaching 21% market share as per the most recent IQVIA data. Both tender authorities and healthcare professionals appreciate a more affordable option in the multiple sclerosis space. In the U.S., we are continuing to work with our partner and the FDA on the potential approval of our JCV assay and remain confident of launching Tyreco before the end of this year. Finally, Ustikinema continues to make strong progress in the quarter following the European launch of Pisceva in 2024. We are amongst the first companies to launch with all key reference strengths by the end of the year, and the medicine has been launched in 22 markets. Uptake continues to be very strong, and we've achieved a leading position in Europe. Position reception is very positive, reinforced by the availability of an initiation dose, which is key to enabling patient switches. Ustekinumab by similar penetration has now reached 30%, a higher level than that of Adalidumab penetration at this stage of a launch. We're also delighted to launch PeaceGiva in February in the U.S. You may have seen that the originator's request for a preliminary injunction on the launch of private label Ustekinumab was denied this week, and we look forward to the launch in due course. With that, I will hand over to Remco.

Thank you, Richard, and hello, everyone. Please turn to slide 12. As Richard mentioned, we started the year as expected, with net sales growing by 3% in constant currencies, or by 5% when adjusting for the acquisition of similarly last year, as well as the 2024 divestments of our China business. Volumes contributed 6 percentage points to the growth, while price erosion returned to a more familiar 3 percentage point. Finally, there was an adverse 3 percentage point impact from currency movements in the quarter. Let's now focus on the breakdown of our sales performance on slide 13. While generics continue to provide a strong foundation for our business, the overall performance With another double-digit performance, buyers similarly increased as a proportion of total net sales to 27% compared to 25% in Q1 last year. I'm particularly proud that the 10 largest selling medicines, representing a third of net sales, grew by a combined 4% in a quarter. Our regional sales mix remained unchanged. with our very strong European business now delivering 55% of our sales. Let's now move to sales by business and by region on slide 14. Biosimilars produced strong growth of 11% in the quarter, driven by continued strong demand for Omnitro, especially in our international region, Hong Kong's strong demand for Hyramon, and the contribution from the launch of Peace Chiva in Europe, Europe's sales grew by 7% in the quarter. Strong growth and biosimilars continued, led by demand for recent launches, including East Chiba. International sales grew by 2% when excluding the impact of the divestments of the China business. North America's sales grew by 1% and before the impact of the withdrawal similarly by 3%. Akitaxa also continued to perform well in North America following its launch last year. After reviewing our sales performance, now I'd like to turn to another positive development we executed last month. Please turn to slide 15. It successfully strengthened our balance sheet by issuing new bonds to repay the spin-off term loan. Moreover, we signed a new $2 billion revolving credit facility. These transactions were very well received with a six-time oversubstitution of the final order book on the Euro tranche. This was the largest oversubscription rate achieved by Sandoz for a single tranche. Each successful transactions give a significant financial leeway going forward. Since independence, we have built a robust debt mature profile, has substantially reduced our financing costs. With these latest transactions, annual interest rate of gross debt is expected to be reduced to below 4%. After repayment of the existing term loans and the new bonds in place, the maturity profile has been extended to 2035 with an average maturity of around five and a half years. Please turn to slide 16. Moving now to U.S. tariffs. The key message is that SOMBOS is significantly insulated from both current and potential tariffs given our business model and footprint. We advocate against the introduction of tariffs for pharmaceuticals, especially generics and biosimilars. These tariffs are expected to increase prices over time, disrupt supply and access. We believe that this isn't beneficial to the U.S. healthcare system, and most importantly, to patients. For Sandoz, it's worth noting that the U.S. continues to represent less than a fifth of our sales, while manufacturing footprint is predominantly based in Europe. We do not export from the U.S., where we have one side. With the tariffs that are already in place focused on China, we anticipate only a limited indirect impact from CMOs, and so we can absorb the impact of the confirmed tariffs within our full year guidance. While we're closely monitoring ongoing developments, we remain confident in our ability to navigate further tariff actions. Before we wrap up the presentation, I want to cover our 2025 guidance on slide 17. I'm pleased to say that we continue to expect net sales to grow by a mid-single digit percentage in constant currencies this year, and to core EBITDA margin to increase to around 21%. We also continue to expect a return to more normalized levels of price erosion of a low to mid single-digit percentage. It's worth noting that, similar to last year, we expect a lower core EBITDA margin in the first half versus the second half of 2025. This will reflect increased investments to support the pipeline and numerous launches with the improvement in the second half driven by a more favorable sales mix as the launches begin to contribute materially. Outside of guidance, we anticipate an adverse 3 percentage points impact on net sales from currency movements based on the average rates in January through March. Given the geography of our cost base, however, we expect these movements to have an immaterial impact on the core EBITDA margins. If the latest spot rates were to prevail for the rest of the year, however, we would see a one percentage point tailwind to net sales over the full year. The core avatar margin would face a limited adverse impact of less than half a percentage point, which would be in line with what we had in 2024. With this, I will hand back to Richard. Please turn to slide 18.

Thank you so much, Franco. Now, let's take a look for the outlook for the rest of this year. Please turn to slide 19. I'm looking forward to additional growth in the second half of the year and further progress as we launch more biosimilar medicines. We anticipate good contribution from several exciting biosimilar launches, such as Denosinab in both Europe and the U.S., Aflibicept in Europe, and Nataluzumab in the U.S., the latter being subject to FDA approval of the JCV assay. These new medicines will add to an already growing in-market portfolio and contribute to margin expansion. In addition, we will continue to build our industry-leading pipeline across both generics and biosimilars. And, of course, we have many other generic launchers across a number of markets that will continue driving the growth of this large business during 2025, now being turned to Site 20. As I mentioned, The quarter one sales performance was in line with our expectations and represented another period of double digit growth in biosimilars. Our performance to date, as well as the launches later this year, mean that we're extremely well positioned to deliver on our full year guidance. As we look ahead, our focus is clear. We are committed to delivering both operationally and financially with a sharp eye on execution and long term value creation for society, shareholders and other stakeholders. First and foremost, we will continue to deliver for patients, especially through our upcoming launches and the pipeline. We will also maintain our unrelenting focus on commercial execution. That means making sure every medicine, every market and every team is aligned to deliver on performance. At the same time, we are committed to driving further growth across sales, margin expansion and cash generation. This is essential to support reinvestment in our business, expand patient access, and create more value for shareholders. 2025 is a pivotal year for our strategic roadmap, and I'm delighted by the progress we've made so far. With this, I will ask the operator to open the line for Q&A. Please turn to slide 21.

Our first question comes from Victor Flock at BNP Paribas. Please unmute your line and ask your question.

Hey, thanks a lot and good morning. Thank you for taking my questions. A couple of questions on my side. So, first of all, could you work it through the rationale behind the deal announced yesterday night and potentially comment on whether we should expect further deals of that kind moving forward? And then my second question is on Stellara. So, we heard that J&J has been denied preliminary injections. just clearing the way for Psycheva private label launch. Any chance you could update us on your expectation for Psycheva for the remainder of the year? Is iRemo still a good proxy, or would that be fair to assume a quicker ramp-up? Thanks so much.

Good morning, Victor. Thank you. I think your first question was Ippoluma, the enrichment announcement. So, again, this is a partner we've worked with in the past. We believe this is an opportunity to bring an interesting product that complements our oncology portfolio at the point of market formation, both in the US and in Europe, which is sort of going to be towards, I guess, the latter part of this decade. But, yeah, I think we're pretty clear beyond that. The J&J question, yes, clearly we're delighted that the court saw the same thing we did. Yes, we will now go ahead and look to launch with our partner, structured this deal slightly differently than our own. So here we would only book the income. We would not book sales. So you won't see this in the sales line. So the take up, I guess we will see. We would look to see how that evolves. Again, I would caution when we launched Adelunumab, it took nearly nine months before we started to see an inflection point. I think this will be a little bit quicker, but I don't think it'll be sort of straight out of the gates over the next couple of weeks. I think it's going with who ends up on formulary. We're confident that we would have a wide coverage, but again, it's too early to really give specific indications on that. But I would describe it as a quietly optimistic.

Okay. Our next question comes from Harry Sefton at UBS. Please unmute your line and ask your question.

Brilliant. Thank you very much for taking my questions. So the first one is just on the biosimilar performance in the first quarter. So you'd quite well flagged that we were going to see some headwind from the similarly withdrawal. But if you look at the performance, there's about 100 million sequential decline on the fourth quarter of last year. So can you just give us some help on what were the contributing factors to such a weak quarter? on the biosimilar cells. And then maybe on the, you called out the Adalimab pricing as a headwind in the US. We haven't really seen buy similar pricing being a material issue to date. So it'd be helpful if you could clarify what was driving that? Was that competition with other manufacturers looking to compete on your contract with CVS and you were defending against that? Or were there any other factors? Thank you.

Thank you, Harry. I guess it's almost both the questions are linked. I mean, I wouldn't describe the performance as a weak quarter. I think you're looking at a really couple of factors. I think your second point partly answers your own question. Obviously, we have to renegotiate. We have a strong relationship with CDS, but it's a competitive market. We've always said that we would maintain the volume, but the pricing would have to be renegotiated. And now this contract is moving into a more mature phase. That's a normal part of that life cycle. And then I think you have a couple of factors. Clearly, we had a very strong final quarter last year and really combination of pricing that we talked about in terms of Adalunumab and the phasing of orders, particularly in the US. So, you know, really, you have one or two big customers that take orders. And really, you've got to look at sort of the timing of that. So I don't really see this as a trend. It's just more, you know, when you have a particularly big order, clearly who wants to close last year is strong. This quarter then will blow through in some of the pricing impact. And then on top of that, as you mentioned, the similar impact has effectively caused this product in the marketplace. So there's really no sales at all in Q1 versus a strong sales performance in Q1 last year. So I think a combination of those things.

Thank you. Our next question comes from Thibault Boutheran from Morgan Stanley. Please unmute your line and ask your question.

So my first question is just on the seller market and the biosecurity penetration here. When we look at IQVIA data, we see so far very, very limited penetration, including for Amgen, which has a private label deal as well. So first of all, do the data reflect what you're seeing on the market? And second, sort of if you could help us understand how you think this data will evolve for the rest of the year. And second question, just on the Kate Kruger trial and sort of minimizing this trial based on the feedback you're getting from agencies and other elements. Just if you could give us, in the long term, sort of put and take you're expecting for the industry, because on one side, this is helpful for lowering and decode for uh the stock month but at the same time it's it's actually lowering the bias to entry and very similar so if you could um sort of give us what you think the net net is for for um funders and for the um players thank you no thank you thank you um i guess i think partly goes back to the question harry asked i mean a bear in mind sorry the only question from victor the the point is that our partnership with um stelara

Borista Kinnaman is a third party. We don't book the sale, so you won't necessarily see this in the Acuvia data. So again, I always take the Acuvia data with a bit of a pinch of salt. And it's still too early days. Again, I would caution when we looked at Adelunaman, it was up from six to nine months before we saw any inflection. I do think this will take a while before contracts renegotiated and stuff moving over. I think we'll see. We sort of forecasted internally a modest buildup during the year and no big bang. So we just looked at a step performance. Clearly, you know, we're a leader in the Amazon space. We have a relationship with the position. We have a great product. I would sort of take you back in Europe with a 30% share. We've done extremely well. I think we're outselling our competition almost two to one. So we know how to market the product. We know how to position it. And the partnership with Amazon is working extremely well. I think the question you have raised on Patreon is a fascinating one. Yes. Yeah. And I think this is going to be case by case on the dependency on the quality of the data submission. So we're encouraged that both both the EMA and the FDA now are becoming more aligned in terms of a rational approach to the data submission. Now, I don't have a blanket, I think, but it's a step in the right direction, which I'm really encouraged by. Then the question I normally get, well, does this mean that the biologic market will commoditize? Let's be real here. I mean, I think we're dropping from a cost of about $150 to $180 million down to maybe $100 million. That is still a significant barrier to entry, plus all the capex and the requirements to manufacture that. But then I'd also then caution, you know, I always sort of look at Europe in many ways. I've been in generics 30-plus years, and the Indian generics companies have been coming all that time, and yet they've somehow not arrived in Europe because there's a significant barrier to entry. And in this space, there's two barriers to entry in Europe. Going from technical to commercial, that's actually very technically difficult. It's something you need real skill and capability, and a lot of our partners, why they come to us, really struggle. And then the piece that we always forget is commercial. And you saw that execution in the U.S. without a learning map, and you see our phenomenal performance in Europe due to that execution. It also means that potentially we can bring more assets. Obviously, with the deal that we've just announced, On IPI, that takes us now to 29 assets in our pipeline. Five years ago, we had five assets. I would clearly love to continue to reinvest in our business. I'll be happy when we have 40 plus assets. So, you know, I think it's a rational move as a leader in this space. It allows us to really cement that position and accelerate. So I think this is probably the most exciting thing I've seen in this sector for a very long time.

Thank you. Our next question comes from Florence Suspérez from Bernstein. Please unmute your line and ask your question.

Good morning, everyone. Thank you very much for taking my questions. Two or maybe three quick ones. First, on Tyrico, could we have a quick update on your discussion regarding your GCV assay, as you said? So my second question is on a GLP-1 strategy. Could you remind us if you would be interested to launch products in diabetes and obesity as early as next year in countries such as Canada and Brazil or if it's not necessarily an attractive market for you. And last question, big picture questions on tariffs. do you believe that the biosimilars may be excluded from Paris? Because given the profile of the products, at the end of the day, this would favor the branded products. So I'd like to have your thoughts on this really important question for patients and for the industry. Thank you.

Thank you. JCB, yes, we're working with the regulators. We're still anticipating a launch in Q4 this year. And clearly, if we get any more material, we'll update you. But we're confident in terms of how that's progressing. And then we'll look to launch that in the latter part of the year. GLP-1s, I guess I've been talking about that now for a couple of years. Yes, we have at least two partners for the Canadian market, potentially others. So we are looking to launch in market formation in Canada. Similarly for Brazil and a number of emerging markets I would caution we deliberately didn't put this into our guidance because this is an evolving space. And I've never seen a product in my career that in a sense the originators couldn't meet the demand. And I think it's a huge opportunity. Bear in mind that Canada is the second largest semi-glutide market in the world. So I think it presents a significant opportunity and we are the second largest player and one of the strongest players in the Canadian market. So I think we'll be extremely well positioned capitalize on that. And similarly, markets like Brazil, I think, present a fascinating opportunity during the next few years. And then more in sort of the medium term, Europe doesn't really come off that until the early 2030s, and then the US a little bit later, and then to zap a tide more into sort of the mid-2030s. So this is really sort of a 10-year journey, and clearly it's going to have many twists and turns. Our focus at the moment, as you rightly say, is looking to bring a product to patients as early as possible in Canada next year. And lastly, tariffs. Look, it's a fascinating subject. And again, I take a step back. I'm so encouraged by the conversations that Karen, our US president, has been having with the White House. I think there's a degree of common sense in terms of doing a full strategic review. I do sense that the administration recognize the important role that generics and biosimilars play. Let's remind ourselves that the United So quite frankly, without our industry, there is no healthcare in the US. To tariff that in a meaningful way over a long period of time, I don't think would do a lot of benefit for patients. I think the conversation we should be having and we are having is about how do we create more carrots rather than focus on the sticks. I think clearly looking at PBM reform, looking at channel reform, looking at creating incentives, I think those are the things that ultimately will benefit by similar market the approval, the faster approval of biosimilars, about opening up channels to make this a more attractive market that then may warrant greater investments and opportunities. But I think in tariffs in themselves, I think ultimately it would be unfortunate for patients to carry a multiple preference. But I think at the moment, I'm optimistic that we won't see any significant tariffs in this space.

Good. Thank you very much for your care.

Our next question comes from Simon Baker at Redburn Atlantic. Please unmute your line and ask your question. Thank you.

Thank you for taking my questions. Two if I may and just a clarification. Just going back to Thibaut's question on pembrolizumab development. As you said, that's in progress. You've got a 720 patient phase three study ongoing. Presumably you'll stop enrolment. I just wondered if you could give us some idea of how enrolled that study is. And then moving on to hybromods. There have been a lot of moving parts there. You talked about pricing. If we look at the scripts, it looks like there was an acceleration in sequential growth in March. On Friday, AbbVie cut their US Humira guidance for the year by $500 million. So taking all that together, how is Hiram Oz tracking in 2025 in the US versus your original expectations? And then a question for Remco. You alluded to the success of the recent bond auction. You've got by far the strongest balance sheet in the sector. So I just wonder if you could update us on your appetite and opportunities for M&A. Thanks so much.

Thanks, Simon. Good to hear from you. Pembroke, yeah, we're trying to manage it. Obviously, we have a review of care to the patients already on a study, so we wouldn't just abruptly stop a study. It's really looking at how we are now, I guess, not enrolling further patients and minimizing that. So we would continue with the patients that are on that. I think it's a moral obligation to do so, but really trimming any expansions or reducing the power of that study. So it's getting some savings there that we would look to reinvest in the business. Pembroke, yes, you're right. I think In terms of volume, it's in line with our expectations. They always sort of struggle a little bit with the IQ via data. And I always said last year that this is probably one of the biggest opportunities that we still have in the US. I know we sort of talk about some of the other launches, which is really exciting, but this is still the largest Delaware in the history of the industry. And we're the only company on formula with all three BBMs. And we have the largest share of the market. So, you know, we see nice substantial gains and pretty much in line with our own internal targets. Beyond that, we tend not to break out individual products. I don't think it really helps explain the story anymore than it does. Thank you. And then I'll hand over to my colleague, Renko.

Simon, good morning to you. Good morning to all of you. Yeah, I'm very happy with the balance sheet. You can imagine where we're currently standing. I think it's also very helpful in the current turbulent times we're all in. We'll have an ethical balance sheet and I think also from a currency perspective, we are well-positioned overall. With regard to M&A, we have said that a small couple hundred million M&A we would consider for the moment every year, depending on what the opportunities are, but that's for the moment it. We have a lot of work to be doing still to get disentangled from Novartis, which requires some efforts we want to get behind, and in a few years we can look again if some things make sense. Still to remember that most of it, we believe internally, we have a lot of opportunities for investments in our DNR portfolio as well on BDNL. And of course, those have more likely a larger return. But there are certain things we always look at. But no big M&A on the horizontal plan.

Thanks so much.

Our next question comes from James Gordon at JP Morgan. Please unmute your line.

Hello, James Gordon, Jake Morgan. Thanks for taking the questions. Firstly, just an update on tariffs, please. So if it was the case that tariffs came in such that it was on all your products or your API from outside the US, just what would that now do? And maybe how would it change over time? So where are we in terms of bringing lots of inventory into the US, which presumably you've been doing? And maybe would you even move some sourcing or manufacturing? How might you mitigate that? Also, any thoughts on how quickly you might be able to move prices up if there were new tariffs announced? I know some companies have suggested that their existing contracts are hard to move prices up, but they could opt out of existing contracts and then try and renegotiate. So if you could talk about that, please. And the second one was just on Kumira. The comments were helpful for the US. But overall, do you think Kumira is still going to be a significant growth driver for you for this year in the US with the worst pricing, but with volume still sounding good?

Yeah, good morning, James. Humira, I'll take Humira and then I'll let Renzo comment on tariffs. Yeah, again, we took up, I think we talked about 20% of the market is converted. We've got a significant 80% of that 20% by the time I look. So clearly there's the blind share to go for. And I think the earlier comment about the originators comment about reducing intake expectations for this product. So I think, yes, in dollar terms, it's probably still the single biggest growth driver in the U.S., And don't forget, we're still seeing this product growing strongly in other geographies, whether it's international and or in Europe. So this still has momentum years after Halloween. So, yes, I think it will. Yes, there was always going to be a bit of a washout as you renegotiate volume contracts with CBS. The volume actually broadly will stay the same.

Remco, do you want to talk about tariffs? Yeah, thank you, James. Of course, it's also on our minds, Greg. Let's say overall, in terms of sourcing and manufacturing a strategy over the longer term, we might move a little things, but for the moment, particularly on the biosimilars, this all comes from Europe. There's nothing to be changed. We also don't see any need in any logic to change anything here. Secondly, if we look at which tariffs are currently applicable, it's Chinese for 20%. Also, we have some products coming through Canada, which have Chinese content, which then also are subject to the 20%. That's not a big amount, 10 to 15 million, and we can easily handle within our guidance. Now, should the unfortunate case, which we don't think will happen and won't make sense, as Richard said before, on the biosimilars from Europe become subject to tariffs, At this point in time, if it would be a percentage of 20%, a responsible tariff, which has been mentioned in the past, but we don't know and we hope it's not the case. But let's say that's the case. We still believe we can handle that within the guidance with all the additional actions we take. Plus, because these products come directly from the factory going out, also from a technical perspective, the first sale will be applicable, which also significantly reduces the tariff burden for us. All in all, we believe that if it will become applicable for a small percentage, again, we hope not, that with all the actions and the way we are positioned, that we can handle that even within the guidance position.

I think then your comment on pricing, I think it's fair. It really depends on product by product. Maybe that you can't pass price on day one, one day to the next. But as contracts get renegotiated over a period of time, clearly there will be upward pressure on pricing. If there wasn't, then you'd see suppliers exiting the market, which will put upward pressure on pricing. So, yeah, I think you may have a relatively short to modest impact, but I think over time. And again, let's just also remind ourselves, Sandoz, less than 20% of our revenues come from the US. We're predominantly a European company. You saw the very strong growth in Europe and a stronger bio growth. So, yeah, I think we're extraordinarily to weather this, to absorb it, and to deliver on our performance. So I'm not so concerned. I know we have a lot of conversations about it, but I do think it gets a little bit over in there.

Thank you. Thank you. The next question comes from Siddhartha Modi from Barclays. Please unmute your line and ask your question.

Hi there, Siddharth Modi on behalf of Embly Field from Barclays. Just one question on the deal yesterday. I just wanted to ask you, when is the earliest that you can launch this product? And if this has baked in into your midterm guidance, we should expect an increase in the midterm guidance based on this. Thank you so much.

Thank you so much. It's not in our guidance. I mean, we only announced the deal yesterday and obviously we gave our guidance two years ago. So it's not. We wouldn't be any more specific than I think the earlier comment that I made. Certainly, I guess this is looking at towards the late 20s, early 30s. Obviously, LOE is always partly subject to the patent dance in the US, but we are confident that we will be there in market formation with this product. And again, to remind ourselves, in Europe, we're the largest oncology company. both through in-house deals, in-house development, and through third-party PD and partnerships. So, again, I'm pleased it's a step in the right direction, but it's not in our guidance yet.

Thank you so much.

Our next question comes from Yoris Zimmerman at Octavian. Please unmute your line and ask your question.

Yeah, hi, Joris Zimmermann from Octavian on the line. Two quick ones, if you allow. The first one is on Chimerly and you mentioned the impact of the acquisition in Q1 and the temporary halt. Can you help us understand how we should have this moving forward? So what does it mean in terms of timelines and potential impact that we still see in Q2? And the second question is on the regulatory changes that you highlighted. You've already taken action with the phase three trials. Does that already impact also the costs in development and regulatory this year? Thank you so much.

Thank you. Thank you. So similarly, really, as I said, we don't anticipate any similar sales during 2025. I think we paused. as early as we can, but probably realistically in early 26. And then we would expect to see a relatively modest buildup of sales from there. So really this year, it's going to wash out and then start growing again as we get into 2026. The regulatory change, I mean, this is a directional change, not an announced change across all products. So clearly we've not reinvest that money in our pipeline. Now, clearly, as we review this situation, at the moment, we spend a significant amount of money on DNR. We would look to expand, use that to expand our pipeline. I think as I commented earlier on, you know, I'll be happy when we have 40, 50, 60 plus assets in our pipeline. Now we have a record 29.

Thank you. Thank you. Our next question comes from Alistair Campbell at RBC. Please unmute your line and ask your question.

Hi, just checking in here, please. Yes. Yeah, that's brilliant. Thanks for taking the question. It's a Morning, yeah, it's a top level one. Just thinking about the big three PBMs and seeing how they're adjusting their formularies, evolving formularies for Adalimab coming into 2025, it sort of feels like they are increasingly prioritising private label options and sort of feels like in the future you're going to have to align with at least one of these big three to have a good chance of commercial success in pharmacy benefit. Do you think that's true and do you think that's ultimately good or bad for Sandals? Thank you.

Yeah, well, there's a few things there. I mean, A, even the pharmacy, even the pharmacy, their own label products don't service all patients. So obviously, in the case of CVS, it's their own commercialized coverage. They made a choice to switch. But there's still a significant patients with that PBM that are still not on. And there's an opportunity to convert to a classic formulary. Also, not all PBMs are the same. I mean, I think you rightly said all three of the PBMs have signed or labeled deals. Only really one of them has made any kind of material change. And for a mixture of reasons, different PBMs have different capabilities in terms of their degree and execution of switch or their desire to switch. I do think we'll see some of that evolution. Also bear in mind, though, this is really only products that are predominant in the pharmacy benefits space. And really, there's only ever been two biosimilars that have launched in this space. One, Adalimob, and the other one, Ustakinomab. Beyond that, most of the others are all in medical benefit space where really I don't see this as a business model that is sustainable. So yes, it's a case of, we've done extremely well. Yes, booster, we have at least one PBM signed. So again, we've leveraged that model, but I don't see that happening in an awesome app. I don't see it happening on a Flipper set. I don't see it happening on Tyroco. So it's very specific to this asset class. Hopefully that helps.

Thanks, Richard. Thank you.

Our next question comes from Graham Parry at Bank of America. Please unmute your line and ask your question.

Great, thanks for taking my question. Just want to follow up on the comments around the sort of broader tariffs if they were introduced. So if you did have a sort of blanket 25% tariff for all products being imported into the US, Remco, you're indicating that you felt that you could manage that within the guide this year. But how much of that is because of, you know, shipping of inventory ahead of implementation of a tariff like that and the likelihood that it would be introduced later? later in the year, given it would be subject to the 232 investigation. Perhaps you could help us by giving us what sort of impact you might expect to see on an annualized basis, as you did at the beginning of the year, if you saw that sort of tariff implemented. And then secondly, just I'd be interested in your thoughts on or updated thoughts on capacity expansion plans and what's needed for any GLP-1 launches for Canada and Mexico next year. Thank you.

Okay. Good morning, Graeme. So if I do a blitz and then I'll pass the round and go to Terence. As I said, I mean, the capacity that we're leveraging for Sydney Canada and the emerging markets we're using with third parties, we have more than sufficient capacity to cover the forecast needs that we've put. Then we'd look, as we said as we go along, in many ways, I didn't put any guidance. I'm seeing this as a bit of a giant experiment in a way. I have no idea how this market's going to evolve once price points move. We may have massively over-forecast, massively under-forecast. It's difficult to say. But certainly we have more than in the short to mid-term. Mid to long-term, we're already investing heavily in Slovenia for fill-finish capacity, which is part of our plans anyway, because we're basically a biologic company and we need that fill-finish capacity. And then we've got some flexibility there as the markets fall. So we're trying to sort of take a pragmatic and cautious approach.

Frank, do you want to talk about tariffs? Yeah, of course. Graham, it's quite the world's discussion because it really depends what the tariffs will be, how they will be implemented, etc. The number I can give you also in the comparison before when we had full year results discussion is also a technical discussion. Is the transfer price applicable, the first sale applicable, which makes quite a difference. You can confirm that the first sale isn't applicable, which reduces the amount significantly. If you will talk on an analyzed basis, but then I talk the current 20% which is mostly in place, it will talk with an analyzed number of around 60 to 65 million before any corrective actions, right? So that's before any pricing actions or any other actions, right? Of course, that will be a bit lower for this year. If it will be later in this year, it's a part of it and the rest will come next year. If you do that number, if you consider that number and it's before corrective action, you can imagine that if it would be a 20% that we feel at this point in time, we can handle that within our guidance for this year, but also for the midterm, that we will not have any problem handling that. But of course, again, it depends, correct? If it's 50%, it's a different ballgame. But with the current discussions, we're very happy, actually, that we are in that position and we can handle it.

And so just to be clear, the 60% So just to be clear, the 60 to 65 is the total impact, including the China, or is that incremental on top of China that's already baked in?

It's including. It's the all-in number.

Including. Yeah, got it. And that was based on first sale as opposed to transfer price. Sorry, I just wanted to make sure I understood it properly.

It's based on first sale, and then it's based on 20%.

Great. Okay. Thank you.

we would think will be highly unlikely.

Thank you.

Thank you. Our final question comes from Victoria Lambert at Berenberg. Please unmute your line and ask your question.

Thanks for taking my question. It's just on the Nosumab. We've had quite a few approvals from some competitors recently. So just would like to get a sense of how you think this market's going to develop because it's through the hospital channel. It seems that's a bit easier to take share. and it happens pretty quickly compared to the PBM channel. So just wanting to get a sense of how you see the phasing of market share and how competitive you think this market's going to be. Thank you.

Yeah, no, thank you. Good morning anyway, Victoria. Yes, you're right. Also, the other part is you need a QCOE. So when you launch into this space in the US, you have to have a code. Because we had an settlement, we are the only company with a Q code at launch, and we'll probably have that for about five months versus our competition. So that gives us a really good opportunity to secure contracts and partner with customers. Because without a Q code, quite frankly, it's a nightmare to get reimbursed at a patient level. So clearly we intend to capitalize on that opportunity when we launch the product later this month. So I'm excited about it. It's an exciting launch. It's done extremely well in Canada. We've got about 30% share of the market now. And we're also looking to launch it in Europe. So, you know, it's a really nice, nice product. We have all the presentations. I think we're well positioned in the US, given that we're the only company with a few code app launch. So we want to capitalize on that when we bring this product to the market. So thank you so much for your question. That's the last question. That's the last question, operator. I think we'll close the line. And thank you all for your questions today. And have a good rest of your day and a good bank holiday weekend.