Q3 2020 Novartis AG Earnings Call

Good morning, and good afternoon.

Operator: Good morning and good afternoon, and welcome to the Novartis Q3 2020 results release conference call and live audio 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 will be an opportunity to ask questions by pressing the star and 1 at any time during the conference. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. Should anyone need assistance during the conference call, they may signal the operator by pressing the star and zero.

Q3 trends.

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The conference is being recorded.

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The recording of the conference call in Q2 into Q in excess.

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Operator: With that, I would like to hand the call over to Mr. Samir Shah, Global Head of Investor Relations, please go ahead. Thank you very much and thank you to everybody for participating in today's call, and we appreciate it is a very busy day for you all as lots of companies are reporting out. Before we start, I just want to read you the safe harbor statement. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements.

Uh Huh cool.

<unk> third quarter had talked Investor Relations. Please go ahead Sir.

Thank you very much and thank you to everybody for participating in today's call and we appreciate very busy day for you or lots of companies are reporting units.

Before we start I just want to read you the safe Harbor statement things.

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.

Samir Shah: For a description of some of these factors, please refer to the company's Form 20-F and its most recent quarterly results on Form 6-K, which were respectively filed with and furnished to the U.S. Securities and Exchange Commission. And with that, I'll hand over to Vas. Thank you, Samir.

For a description of some of these factors. Please refer to the company's form 20-F. Its most recent quarterly reports on form 6K that prospectively fraud waste and furnished to the U.S. Securities and Exchange Commission.

With that I'll hand to cross too fast.

Thank you Samir and thanks, everyone I from my side as well for joining today's conference call with me today I have Harry Curtis, Our Chief Financial Officer, Mary shoot in our President of Novartis Pharmaceuticals, Susanna Shepherd, our President Novartis oncology, John Dyer head of global drug development, Richard seen our COO Sandoz and Shannon Klinger, our chief.

Vasant Narasimhan: And thanks, everyone, from my side as well, for joining today's conference call. With me today, I have Harry Kirsch, our Chief Financial Officer, Mary France Chudin, our President of Novartis Pharmaceuticals, Susanna Schaffert, our President of Novartis Oncology, John Tsai, our Head of Global Drug Development, Richard Saynor, our CEO of Sandoz, and Shannon Klinger, our Chief Legal Officer. So, if we move to slide five, I'd like to start out by providing some perspectives on the third quarter.

Yes, Sir.

If we move to slide five I'd like to start out by providing some perspectives on the third quarter. As you saw we delivered very solid results and I think it's important to put those results in the context of cope at 19 and the impact it had on health care systems, despite that impact and despite the impact of that those health care system just.

Vasant Narasimhan: As you saw, we delivered very solid results. And I think it's important to put those results in the context of COVID-19 and the impact it has had on healthcare systems. Despite that impact, and despite the impact of those healthcare system disruptions on some of our legacy brands, because of our key growth drivers, because of our execution on launches, we were able to deliver solid sales performance in line with Q3 of last year, 4% sales growth year to date, and strong operating income performance, core operating income performance of 11% in the quarter and 16% year to date. As important was our ability to continue to deliver on our innovation agenda. In the quarter, you saw important approvals, Cosimta in the US, for relapsing forms of multiple sclerosis, multiple approvals for Cosentix, Picray, and then some indication expansions as well for Zolaire.

Options on some of our legacy brands because of our key growth drivers because of our execution on launches we were able to deliver solid sales performance in line with Q3 last year and 4% sales growth year to date and strong operating income performance core operating income performance was 11% in the quarter and 16% year to.

Dave.

I've been important was our ability to continue to deliver on our innovation agenda in the quarter you saw important approvals cuts inside the U.S. for relapsing forms of multiple sclerosis, multiple approvals for Cosentyx pick Ray and then some indication expansions as well for Xolair, we had multiple positive readouts in Bellevue, India me a b cells.

Vasant Narasimhan: We had multiple positive readouts in Bayview and DME, ABL 001 and CML, and importantly, a range of readouts as well for LNP 023 and Taclopan, our factor B inhibitor, which we believe will be one of the next major medicines for Novartis. And we also achieved positive CHMP opinions for Lectio and hyperlipidemia and Adaxio for sickle cell disease. So a solid and strong quarter really for delivering on innovation. There were also multiple important designations we received both for LNP 023 and also for LMI 070, an orphan drug designation for Huntington's disease. And I'll say more about that in a couple of slides.

The reserve one in CML and importantly, a range of Readouts as well for ALN Pcs zero to three at Taco pad are factored be inhibitor, which we believe to be the next one of the next major medicines for Novartis and we also achieved positive fee. It's empty opinion, it for Lexia and Hyperlipidemia dr. for sickle cell disease.

So a solid and strong quarter really for delivering on innovation. There were also multiple important designation we received both for Ellen easier in Q3, and also for our minds or a seven zero <unk> orphan drug designation for Huntingtons disease, and I'll say more about that in a couple of slides moving.

Moving to slide six turning to our growth drivers there were strong performance across our key growth drivers some of the highlights including trust, though growing 45%.

Vasant Narasimhan: Moving to slide six, turning to our growth drivers, there was strong performance across our key growth drivers. Some of the highlights include Entresto growing 45%, Belgensma having a strong quarter with strong uptake in Europe growing 79%, Cosentix growing 7%, ahead of a challenging market right now in dermatology but still demonstrating its overall strength in both dermatology and rheumatology and exceeding a billion dollars for the first time. And solid performance across the full range of our oncology portfolio. You also see Mazen beginning to accelerate and continued solid performance for launches such as PICRE, as well as Luda Thera.

It's about having a strong quarter with strong uptake in Europe growing 79% Cosentyx growing 7% I had a a challenging market right now in dermatology, but still demonstrating its overall strength in both dermatology and rheumatology and exceeding $1 billion for the first time and solid performance across the full range of.

Our oncology portfolio you also see amazing beginning to accelerate and continued solid performance for launches that just pick.

Okay great.

As well as Louis era.

Now when you look overall at our key growth drivers there now accounting for 50% of our sales in the quarter in Q3, and I think that shows the transition from our legacy portfolio to our next wave of innovative medicines as well well entrenched and continuing that pace moving to slide seven just wanted to say a word.

Vasant Narasimhan: Now, when you look overall at our key growth drivers, they're now accounting for 50% of our sales in the quarter in Q3. And I think that shows the transition from our legacy portfolio to our next wave of innovative medicines as well, well entrenched in continuing at pace. Moving to slide seven, just wanted to say a word specifically on Zolgensma. Zolgensma's cumulative sales since launch have now exceeded $1 billion. We can see on the left-hand side of the chart that we achieved sales of $666 million a year to date with strong growth in Europe and also recovery in the US. Just to say a few more detailed words about the geographic highlights.

Specifically on Xeljanz Mogens, most cumulative sale since launch now has exceeded $1 billion you can see on the left hand side of the chart. We achieved sales of $666 million a year to date with strong growth in Europe and also recovery in the U.S. just to say a few more detailed work, but the geographies.

Highlights in the U.S., we saw a rebounding from the pandemic disruptions we saw throughout the summer as well as the spring and that I think is allowing us to get patients tested again and then on treatment, 74% of newborns are now being screened for estimate and we see that rate continue to grow.

Vasant Narasimhan: In the US, we saw a rebound from the pandemic disruptions we saw throughout the summer as well as in the spring, and that I think is allowing us to get patients tested again and then on treatment. 74% of newborns are now being screened for SMA, and we see that rate continue to grow. And, of course, in states with newborn screenings, Zolgensma tends to have very high shares.

Well of course income in states with newborn screenings old Gen, but tends to have very high shares were also seeing an overall shift into the incident population away from switches from new centers and you can see 83% of our sales in Q3 were switches I were new starts for from an incident population versus 34%.

Vasant Narasimhan: We're also seeing an overall shift in the incident population away from switches from Nusinersen. You can see 83% of our sales in Q3 were switches, were new starts from an incident population versus 34% in Q3. In Europe, we're seeing very solid uptake. Nine EU countries have established access pathways that cover 25% of the population.

Three.

In Europe, we're seeing very solid uptake nine new countries have established access pathway, that's already covering 25% of the population. The overall dynamics, we see in the X.U.S. marketplaces as the country comes on board, we see a bolus of patients come onto those and then we move back to the steady state and then we get new countries onboard so.

Vasant Narasimhan: The overall dynamic we see in the ex-US marketplace is as a country comes on board, we see a bolus of patients come on to Zolgensma, then we move back to the steady state, and then we get new countries on board. So in line with that, Germany delivered 50% of our ex-US sales in Q3. We continue to see very strong uptake in Germany, and now we expect to see multiple other countries start to come online in the coming quarters.

In line with that Germany delivered 50% of our ex us sales in quarter. Three we continue to see very strong uptake in Germany, and now well expect to see multiple other countries start to come online in the coming in the coming quarters. The majority of the early patients are coming from prior treatment with new centers and over 30% of.

Vasant Narasimhan: The majority of the early patients are coming from prior treatment with Nusinersen, and then over 30% of patients thus far have been over two years of age, given our broader label in the EU. Now looking ahead in Japan, we see rapid uptake with the immediate following full reimbursement. We've had an approval recently in Brazil, and we're expecting multiple approvals around the world. We continue to believe the ex-US will be a key driver. The US should stabilize now post the COVID situation, and we expect to reach a steady state on our US sales. And we continue to expect Zolgensma to be a strong growth driver for Novartis. Now, moving to slide eight. Sandow's year-to-date sales were in line with the prior year, and there were really two sides to the Sandow story.

Patients.

Thus far I've been over two years of age given our broader label.

You now looking ahead in Japan, we see rapid uptake with the immediate.

Immediately following a full reimbursement weve had an approval recently in Brazil, and we expecting multiple approvals around the world. So we continue to believe ex us will be a key driver. The U.S. should stabilize now closed the coated situation and we'd expect to reach a steady state on our U.S. sales and we continue to expect to be a strong growth driver.

For Novartis now moving to slide eight.

Sandoz year to date sales were in line with prior year and there were really two sides of the Sandoz story. When you look at the bio pharmaceutical sales on the right hand side of this chart you see that we grew 13% in Q3 and nine month year to date, we've grown 20% with biopharma, but primarily our bio similars business.

Vasant Narasimhan: When you look at the biopharmaceutical sales on the right-hand side of this chart, you see that we grew 13% in Q3, and in the nine months year-to-date, we've grown 20% in biopharma, but primarily our biosimilars business. But you do see the drag of our retail sales, with minus 6% in the quarter and minus 4% year-to-date. That's been primarily driven by an oral solids decline in the US as COVID-19 has impacted patient traffic, and also some similar dynamics we see in Europe as well as after the Southern Hemisphere flu season. Now, importantly, we've been able to maintain our profit trajectory with gross margin increases, both from product mix and productivity, and reduced SG&A spend. So overall, we have made some small adjustments to our Sandow's top-line guidance, but overall, I feel good about our margin progression in Sandow's over the course of the year. Now, moving to slide nine.

But you do see the drive of our retail sales was minus 6% in the quarter at minus 4% year to date, that's been primarily driven by an oral solids a decline in the U.S. as Carbonite team has impacted patient traffic and also some similar dynamics, we see in Europe as well as after the southern hemisphere flu season.

Now importantly, we've been able to maintain our profit trajectory with gross margin increases both from product mix and productivity reduced SDMA spend. So overall, we have made some small adjustments to our sandoz topline guidance, but overall feel good about our.

Our margin progression incentives over the course of the year.

Now moving to slide nine.

I want to take a step back again and provide some perspective on the overall trajectory of the company and give you. Some details on some of our pipeline assets. When you look at the outlook for the coming years. We continue to have strong end market growth drivers were in the midst of a range of major launches multiple novel assets in our mid stage pipeline it had been.

We used to see a multiple analyst reports now appreciating the depth and breadth of our mid stage portfolio, which we believe is one of the best if not the best in the industry with 80 submissions planned 50, plus late stage programs and increasingly coming into focus as well will be our lifecycle management program across many of our end market growth drivers as you can see on.

Vasant Narasimhan: I want to take a step back again and provide some perspective on the overall trajectory of the company and give you some details of some of our pipeline assets. When you look at the outlook for the coming years, we continue to have strong in-market growth drivers. We're in the midst of a range of major launches, and we have multiple novel assets in our mid-stage pipeline. And I've been pleased to see multiple analyst reports now appreciating the depth and breadth of our mid-stage portfolio, which we believe is one of the best, if not the best, in the industry, with 80 submissions planned, and 50-plus late-stage programs. And increasingly coming into focus as well will be our lifecycle management program across many of our in-market growth drivers, as you can see on the right-hand side of this chart.

The right hand side of this chart that's there.

Turning to slide 10, I wanted to provide some more detail I go to the side and a little bit of a slower paced by 10 11, just to make sure you have full clarity on where we are in the various pipeline.

It's important to note that we are seeing on select instances delays due to covance and discovered delays typically are in the range of three to five months, we're transparently, reflecting that in our documentation to all of you. So you can see where we are but overall I think relatively speaking our portfolio has remained resilient and lock.

Certainly on track despite the massive disruption of Kobe all around the world that would let vo you've seen are you positive opinion in the U.S.. We've completed the most part element of the review with the FDA, including the full clinical review the only outstanding item now is a single manufacturing inspection, which will work.

Vasant Narasimhan: Now, turning to slide 10, I wanted to provide some more detail. I'll go through the slide in a little bit of a slower pace, slides 10-11, just to make sure you have full clarity on where we are in the various pipeline elements. It's important to note that we are seeing delays due to COVID in select instances, and those COVID delays typically are in the range of three to five months.

Working with the agency on.

So in Italy, we provided extensive documentation and currently work with the agency to try to maintain the action date of December 2020, I know for tumor map you've seen of course, the strong U.S. approval and with very fonts will provide you more contact.

Vasant Narasimhan: We're transparently reflecting that in our documentation to all of you so you can see where we are. But overall, I think, relatively speaking, our portfolio has remained resilient and largely on track despite the massive disruption of COVID all around the world. Now, with Lectvio, you've seen our EU-positive CHP opinion.

Approval as planned in the first half of 2021 now with respect and trust through two critical and important lifecycle management and preserved ejection fraction and in the posted by the FDA has released a notice today that we will have an AD com the preserved ejection fraction filing in December were fully preparing for that advisory.

Committee and look forward to those discussions the FDA action is mainly it's continues to be in the first quarter of next year now with respect to affect this one on one I see on the partial clinical hold we continue to work on our proposed confirmatory clinical trial study and we'll plan to engage with Sta. Our hope is that we can come up.

Vasant Narasimhan: In the U.S., we've completed most of the review with the FDA, including the full clinical review. The only outstanding item now is a single manufacturing inspection, which we're working with the agency on at a facility in Italy. We've provided extensive documentation and currently work with the agency to try to maintain the action date of December 2020. On Ofetimumab, you've seen, of course, the strong U.S. approval, and Mary France will provide you more context. EU approval is planned in the first half of 2021. Now, with respect to Entrust, there are two critical and important lifecycle managements in preserved ejection fraction and in the post-MI.

With a lean program that will enable us to move extremely quickly, but it would be premature to provide any guidance on timelines at this point in time. So we don't have any further guidance on specific timelines on maybe excess one or one I'd see and we'll continue to provide you updates as we continue those discussions with the FDA.

There were a few notes. This morning also noting the legalism add timeline, we do expect the trials to readout on track fully enrolled and to read out in the second half of next year. However, given the kovar disruption. We are now forecasting the submission will be pushed into the first part of 2022 now moving down the line. The next item I wanted to.

Vasant Narasimhan: The FDA has released a notice today that we will have an ADCOM for the preserved ejection fraction filing in December. We're fully preparing for that advisory committee and look forward to those discussions. The FDA action continues to be in the first quarter of next year. Now, with respect to Avexis 101 IT on the partial clinical hold, we continue to work on our proposed confirmatory clinical trial study and will plan to engage with FDA. Our hope is that we can come up with a lean program that will enable us to move extremely quickly, but it would be premature to provide any guidance on timelines at this point in time. So, we don't have any further guidance on specific timelines for Avexis 101 IT, and we'll continue to provide you updates as we continue those discussions with the FDA. There were a few notes this morning also noting the Legalizimab timeline.

A highlight with kind of kitimat cannot be one as you know enrollment is complete the DMC did recommended continuation after without change after the interim analysis. So we remain fully blinded to that study. The full readout is expected in the second half of 2021, and similarly cannot be too is fully enrolled and we expect to read out in the first half.

2021 for that program and lastly, I wanted to note on kit Golly that we did expand our agile and Natalie study by 1000 patients learning from the recent readouts from some of our competitors to ensure we maximize the success of this medicine in the additive in setting across both intermediate and high risk patients.

As you know there is a unique profile here with tiscali. The most potent CDK four inhibitor, which we believe is most important in this setting and also three years of treatment in this patient population with a 400 milligram dose lower than what we have in the metastatic setting to really ensure patients can stay on therapy. We're optimistic about this program and look for.

Vasant Narasimhan: We do expect the trial to read out on track, fully enrolled, and to read out in the second half of next year. However, given the COVID disruption, we are now forecasting that the submission would be pushed into the first part of 2022. Now moving down the line, the next item I wanted to highlight was Canakinimab, or Canopy 1. As you know, enrollment is complete.

Forward to continuing to provide you updates as it progresses now.

Now moving to slide 11.

On the emerging pipeline assets and many of these will provide more details on our upcoming meet the management I mean, I had mentioned at Taco Pat I'll go through some more details in the next few slides, but a range of positive feedback, including positive phase two results and CNH and C. D. We're on track now to have a singer.

Vasant Narasimhan: The DMC did recommend a continuation without change after the interim analysis, and we remain fully blinded to that study. The full readout is expected in the second half of 2021. And similarly, Canopy 2 is fully enrolled, and we expect a readout for that program in the first half of 2021. And lastly, on Kifgali, we did expand our adjuvant Natalie study by 1,000 patients, learning from the recent readouts from some of our competitors to ensure we maximize the success of this medicine in the adjuvant setting across both intermediate and high-risk patients. As you know, there's a unique profile here with Kifgali, the most potent CDK4 inhibitor, which we believe is most important in this setting, and also three years of treatment in this patient population with a 400 milligram dose lower than what we have in the metastatic setting to really ensure patients can stay on therapy.

In its pivotal trial for the frontline and combination setting to start in 2020 as well as pivotal studies in both seat Briegel, Maryland, the profit profit the United into profit to start in the first half of next year.

Moving down the line the other.

Asset at one it's a little bit of time on is Brenda plan RMR in a slice inhibitor, which we announced had received orphan drug designation for Huntingtons disease. This is based on it.

Extensive preclinical data, which we expect to be published.

In the coming months as well as clinical data from our estimate trial in which we were able to look at Huntington are an expression. We believe brand of planned R&D splicing mechanism has a unique profile to be able to tackle huntingtons disease as a potentially once weekly will have to see the final dosing.

Oral therapy, and we'll plan to start that Huntington's disease phase to be in the first part of 2021.

Now in terms of oncology, probably the one asset I wanted to spend a moment to highlight was our shipped two inhibitor that is in a broad range of combination studies multiple combination studies with BARDA lives America Scalia has written that as well as Mercedes G.

Vasant Narasimhan: We're optimistic about this program and look forward to continuing to provide you updates as it progresses. Now moving to slide 11. On the emerging pipeline assets, many of these will provide more details on our upcoming needs in management. As I had mentioned at Taclopan, I'll go through some more details in the next two slides, but a range of positive feedback, including positive phase two results in PNH and C3G.

Well see and we're working very hard to finalize some of those early results would you hope can inform pivotal studies in the combination path path going forward across a range of solid tumors.

So moving to slide 12.

Just briefly on and Taco Pan and CNH. This was data. We recently presented it demonstrates that we were able to significantly reduce rigid residual hollysys and eculizumab treated patients and returned their hemoglobin to normal it's important to note there is a significant proportion.

Vasant Narasimhan: We're on track now to have a single PNH pivotal trial for the frontline and combination setting to start in 2020, as well as pivotal studies in both C3 glomeruline nephropathy and IgA nephropathy to start in the first half of next year. Moving down the line, the other asset I wanted to spend a little bit of time on is Branaplam, our mRNA splicing inhibitor, which we announced had received orphan drug designation for Huntington's disease. This was based on extensive preclinical data, which we expect to be published in the coming months, as well as clinical data from our SMA trials, in which we were able to look at Huntington RNA expression. We believe Branaplam's RNA splicing mechanism has a unique profile to be able to tackle Huntington's disease as a potentially once weekly treatment, we'll have to see the final dosing, oral therapy, and we'll plan to start that Huntington's disease phase two B in the first part of 2021.

Eculizumab treated patients that don't reach goal and we believe as an add on therapy. This is important medicine, but even more importantly, you can see in the black squares patients that were able to move off of their eculizumab treatment and maintain their overall hemoglobin levels, which is the basis of us going forward as a monotherapy as well.

Indications.

Moving to the next slide similar.

Similarly in C. G. We see a very strong results that data was presented over the weekend.

Recently, it demonstrates a significant reduction in proteinuria, you can see a very impressive you value as well as importantly, a stabilization of renal function as measured by far again, a very clean safe tolerable profile.

This medicine with this data was able to receive you Prime designation I think that you had highest designation with respect to these sorts of medicines, so very exciting data for our user in Q3.

Vasant Narasimhan: Now, in terms of oncology, probably the one asset I wanted to spend a moment to highlight was our SHP2 inhibitor that is in a broad range of combination studies, multiple combination studies with Bartolizumab, Cascale, Mazaritinib, as well as Maradi's G12c. And we're working very hard to finalize some of those early results, which we hope can inform pivotal studies in the combination path going forward across a range of solid tumors. So moving to slide 12. Just briefly on Iptaclopan and PNH; this was data we recently presented. This demonstrates that we were able to significantly reduce residual hemolysis in ecolizumab-treated patients and return their hemoglobin to normal.

Lastly, moving to slide 14 over the course of the quarter you saw us making important strides in history across all our operations. It is our absolute goal to be a leader in urology across large companies and in the healthcare industry. We adopted ambitious target in terms of access innovation, our global health programs committing to full carbon neutrality.

That's on top of can already committing to full neutrality in our own operations by 2025, we track we measure we transparently publish our target annually, which I really think is unique amongst the companies in our sector. We launched the first sustainability like bond and links to social targets, particularly access to medicine.

Bond was oversubscribed and we also received upgrade CSD scores from a range of third party rating agencies now ranks number one by multiple agencies across the healthcare sector. So we have a lot of work to do we're nowhere near where we want to be but we continue to make important progress on this front.

Vasant Narasimhan: It's important to note there is a significant proportion of ecolizumab-treated patients that don't reach goal, and we believe as an add-on therapy, this is an important medicine. But even more importantly, you can see in the black squares patients that were able to move off of their ecolizumab treatment and maintain their overall hemoglobin levels, which is the basis of us going forward as monotherapy as well in this indication Moving to the next slide.

So with that I'll hand, it over to our Chief Financial Officer Harry occurs.

Hey, Thank you guys good.

Good morning, and good afternoon, everybody sorry.

So I'm now going to walk you through some of the financials for the third quarter and denied lumpy.

As well as provide you with an update full year guidance.

All the way my comments refer to your size of continuing operations and growth rates in constant currencies.

Vasant Narasimhan: Similarly, in C3G, we see a very strong result that data was presented over the weekend, just recently. It demonstrates a significant reduction in protein urea; you can see a very impressive T value, as well as, importantly, a stabilization of renal function as measured by EGFR. Again, a very clean face, a tolerable profile.

Otherwise noted.

Slide 16 shows the summary of our performance for quarter, three and the past nine months.

I would like to focus on the year to date resides on the right hand side.

Nine months.

Performed while strong with states cooling, 4% driving core operating income and core EPS growth of 16%.

That's in all segments were mainly driven by its customers our gen.

Sandeep subdivide bonds.

Vasant Narasimhan: This medicine, with this data, was able to receive EU prime designation, I think the EU's highest designation with respect to these sorts of medicines. So, very exciting data for LNP0238. Now, moving to slide 14, over the course of the quarter, you saw us making important strides in ESG across all our operations. It is our absolute goal to be a leader in ESG across large companies and in the healthcare industry. We adopted ambitious targets in terms of access to innovation, our global health programs, and committing to full carbon neutrality, that's on top of already committing to full neutrality in our own operations by 2025. We track, we measure, and we transparently publish our targets. Annually, which I really think is unique amongst companies in our sector.

Right after the rest of our growth portfolio and core operating income growth at this to connect the current level was driven by the higher sales.

Improved gross margin.

Various productivity.

So you're going there.

Of course coal, which we laid with lower marketing and sales spending also contributed to core operating income growth.

Free cash flow was $8.3 billion, that's down 22 said the new installs.

Really driven by legal settlement cash.

Lower divestment proceeds compared to prior year.

With respect to quarter three lets say its were in line with the prior year or two to the increased generic competition optics.

We have put into our exchange as soon as the effective told my team mainly on our long term allergy portfolio, which we will discuss in more detail later. Despite this we were able to deliver another quarter of double digit increase our core operating income, which grew 11% driven by lower.

Vasant Narasimhan: We launched the first sustainability-linked bond, and linked to social targets, particularly access to medicine, the bond was oversubscribed. And we also received upgrades to ESG scores from a range of third-party rating agencies, now ranked number one by multiple agencies across the healthcare sector. So we have a lot of work to do. We're nowhere near where we want to be, but we continue to make important progress on this. With that, I'll hand it over to our Chief Financial Officer, Harry Kirsch. Thank you all. Good morning and good afternoon, everybody.

Spending and improved gross margin overall strong performance, especially given the challenging business environment.

All in.

Next lets focus on our core margin on slide 17, broken down bulk again by quarter year to date 40 year to date on the large side continue.

Continuing operations core margin was 43.2% growing 360 basis points with strong improvements.

Both divisions innovative medicines margin moved up to 46.3% up 270 basis points.

Harry Kirsch: So I'm now going to walk you through some of the financials for the third quarter and the ninth month, as well as provide you with an update on our full year guidelines. As always, my comments refer to the results of continuing operations and growth rates and consequences, unless otherwise noted. Slide 16 shows the summary of our performance for Q3 and the past nine months. First, I would like to focus on the year-to-date results on the right-hand side. Perform was strong, with sales growing 4%, driving core operating income and core EPS growth of 16%. As you know, sales were mainly driven by interest or gentner and percentage for the 9 months, as well as the rest of our growth portfolio. And co-operating income growth at this significant level was driven by higher sales, and improved growth margins from various productivity and cost-sharing initiatives. Of course, COVID-related lower marketing and sales spending also contributed to core operating income growth. However, pre-cash flow was $8.3 billion, but down 12% in U.S. dollars, mainly driven by legal settlement cash outs and lower divestment proceeds compared to the prior year.

Gross margin to 420 basis points to 24.4%.

And then as medicines margins, it's likely to be a while before we factor central well, yes, we.

Reaching our mid teens margin targets a couple of years all in yield on loans of course, we have a contribution from coal would you then would you spending thats a significant part of these margin gains were also resolve of productivity and cost.

That being implemented.

For the quarter, reflecting similar pattern with continuing operations margin.

3.2% trailing 320 basis points and innovative medicines margins at 35.8% clearly.

Clearly we are also whether on track to deliver on our innovative medicines margin target of the mid to high Thirtys margin in the mid term.

Let's now turn to slide number 18.

We have updated.

I'll, let you showed last quarter on the impact to pull that all have different categories.

As a reminder.

That shows you innovative medicines weekly sales.

Dilution based on a rolling four week average index to qualify for last year.

We have used the same classification categories as before too long to compare.

Our recent launches and.

Harry Kirsch: With respect to quarter three, net sales were in line with prior year due to increased generic competition, particularly on affiliature and exchange, as well as the impact of COVID-19, mainly on our ophthalmology portfolio, which we will discuss in more detail later. Despite this, we were able to deliver another quarter of double-digit increase in our core operating income, which grew 11% driven by lower spending and improved gross margin. Overall, a strong year-to-date performance, especially given the challenging business environment that we are all in. Now, next, let's focus on our core margins. On slide 17, it is broken down again by quarter and year to date.

The detail on what we call Jimmy we won't as you can see at the bottom of the slide mall continued to grow quite strongly.

Thanks, Robin slide appears to be flat during the quarter.

However, our strong strongest performed more flattened Correctional Center is also reflects some to metal too.

Turning to Concentrix dermatology and to some extent rheumatology markets continue to see lower patient starts as you.

COVID-19.

And then they also won't affect the price trend growth rates declining during July and August.

There are clear signs of recovery with 10 more.

Demolishing in order to understand all the dynamics it is important to split the market for the Bakken.

Harry Kirsch: For the year to date, on the right side, continuing operations core margin was 33.2%, growing 360 basis points with strong improvements in both divisions. Innovative Medicine's margin moved up to 36.3%, up 270 basis points, and Sundar's margin grew 420 basis points to 25.3%. Innovative Medicine's margin is likely to be around 35% for the full year, reaching our mid-30s margin target a couple of years earlier than planned. Of course, we had a contribution from COVID-related reduced spending, but a significant part of these margin gains also resided in productivity and cost saving initiatives that we have implemented.

Shrunk.

Thank you, we'll see I clinic, maybe lets recall that we're gonna to conceal treatment, our key often larger product backlog.

New finding sentence on shown in the Gray line.

Can see signs of recovery.

Good morning.

The recovery is lumpy.

Ophthalmology Q2, roughly equal impact from coal mountain disruptions and we expect no impact on us from only normal chairman.

Similarly, our foremost retail business continues to be impacted by cold weather wont mention.

We try to be as oral solids, which we have decided to retain earlier this year.

Harry Kirsch: The quorum reflects a similar pattern with continuing operations margin at 33.2% following 320 basis points and innovative medicines margins at 35.8%. Clearly, we are also well on track to deliver on our innovative medicines margin target of the mid to high 30s in the mid term. Let's now turn to slide 18.

Overall corporate margin continue to negatively impacted margin in quarter, three pulp to me and dermatology ophthalmology. However, we are pleased to see that.

Our recent launches and woke levels continue to do well.

Now turning to our full year guidance on slide 19.

We continue to expect all continue operations to grow mid single digits. We are now upgrading core operating income guidance to grow low double digit.

Harry Kirsch: We have updated the chart that we showed last quarter on the impact of COVID on our different categories. As a reminder, the graph shows you Innovative Medicine's weekly sales evolution based on a rolling four-week average, indexed to quarter four of last year. We have used the same classification categories as before to allow you to compare. Our recent launches, and the detail of what we count in recent knowledge, as you can see at the bottom of the slide footnotes, continue to grow quite strongly. The cross riders' line appears to be flat during the quarter.

Within the divisions, we expect innovative medicines sold to grow mid single digits, and we help lower the sandals topline zones to be productive lives.

Moving to the decline of fuel on solids, which we have two small joint pain as mentioned earlier.

Yes, and the impact of colder than normal routine boom.

Assumption for milestones is that we see a continuation of two children.

All are prescribing dynamics in the fourth quarter.

September and early October patients will be paid off.

And we won't pointed walton election.

Now I want to go into some of the renminbi Callaway golf behind our guidance and the volume push some close on slide 20.

Harry Kirsch: However, all the prose writers performed well. The flatness of the curve from the letter center is also a reflection of some humanitarianism. Turning to cosmetics, the dermatology and, to some extent, rheumatology markets continue to see lower inpatient stats as a result of COVID-19. Pathetics also were impacted by this trend, with growth rates declining during July and August, although there are clear signs of recovery in September. For ophthalmology, in order to understand the market dynamics, it is important to split the market for the back of the eye and the front of the eye. Back of the eye clinic visits recovered much quicker due to the urgency of treatment.

Im showing the actual and expected quarterly development and expectations for the full year.

Okay.

In the fourth quarter, we anticipate sales, which you see on the salt low to mid single digit growth.

Core operating income.

Right.

To high single digit growth.

Core operating income growth is expected to be somewhat lower than year to date.

We will see some hiring more.

Even though it's going to be considered come next year.

Arms and launching more.

Still after delivering 16% cooperating income year to date this results.

Premium volumes.

Low double digit to mid teens for core operating income.

Harry Kirsch: Our key ophthalmology products for the back of the eye, dominated by Lucentis, and shown in the gray line, began to see signs of recovery towards the end of that quarter. However, the recovery has not been seen in other ophthalmology due to roughly an equal impact from COVID-19 disruptions and the expected generic impact on the U.S., primarily for Gramaton and Ciproda. Similarly, our Sandoz retail business continues to be impacted by COVID, as Lars mentioned, as well as the flood of US oil solids, which we decided to retain earlier this year. Overall, COVID-19 continued to negatively impact demand in quarter three, particularly in dermatology and ophthalmology.

Of course, if there would be a resurgence of the cold with no impact on the head kill systems prescribing behavior in our major markets.

Bobby off lower sales growth in quarter four was what we assume.

We should also when we would use oral fluid. So it's too early to the 3% to 4% range.

The Liberty pool performed stage drove the pools long months.

Incorporating in club.

We would expect this quarter to four point, you'll love it even potentially cold, which we know that.

Lower khotsong quarter for US we are kind of naturally hedged on the bottom line.

Don't happen again.

So do you expect this lower spend levels in such a scenario.

Finally on slide 21.

Tom teams are constantly changing I won't get into intentions, we estimate the palms your phone.

Harry Kirsch: However, we are pleased to see that our recent launches and growth drivers continue to do well. Now, turning to our full-year guidance on slide 19. We continue to expect continuing operations to grow mid-single digits. We are now upgrading co-operating income lines to grow low-double-digit to mid-single-digit. Within the divisions, we expect innovative medicine sales to grow mid-single digits, and we have lowered the Sanders top-line guidance to be broadly in line with prior years. This is due to the decline of US oil solids, which we have decided to retain, as mentioned earlier this year, and the impact of COVID on our retail business.

While results using the exchange rate.

Total roads to normal for the remainder of 222 point.

Say again.

It would be and maybe just 1% point and core operating income would be negative two percentage points.

It's the same rates prevailed folks want to 21.

Full year schedule Kone season flavors for 2021 would be probably just one to two percentage points.

Core operating income between your two plants, one come standpoint, and as a reminder, we do update loose and focusing on our website.

Yes.

Do it all behind old intermodal calls for an update on the pharma business.

Thank you Harry Good morning, good afternoon to all of you So let's turn to the overall performance for pharmaceutical.

Harry Kirsch: The key assumption from this guidance is that we see a continuation of the return to normal prescribing dynamics in the fourth quarter. September and early October patient visit data, in the U.S. part of that directorate. Now I want to go into some of the reasoning behind our guidance and the various pushes and calls. On slide 20.

The first nine months of sales growth, 6% with continued momentum from our two key growth drivers.

Q3 saw sales growth at 2%. Despite the continued COVID-19 impact.

Our focus continues to be on driving Cosentyx and Entresto also leveraging the launch and new indications and geographical expansion and of course executing on the launch of BELBUCA sometime in Lexia.

Harry Kirsch: We show the actual and expected quarterly development and expectations for the full year. During the fourth quarter, we anticipate for sales, which you see on the left side, low- to mid-single-digit growth, and then for co-operating income, let's go to the right side, mid- to high-single-digit. The co-operating income growth is expected to be somewhat lower than year-to-date, as we will see some higher investments, including those for the Casilica and Lexio launches Offload double-digit materials for cooperating. Of course, if there were a resurgence of the COVID-19 impact on the healthcare system, there is a scenario of lower sales growth in Q4 versus what we assume here, which could also then reduce our full-year sales growth to the 3-4% range, as we have delivered 4% sales growth in the past 9 months on cooperating income.

If we turn to slide 23 24.

Sarkozy Scientx Q3 brought us our first billion dollar quarter and 7% year over year gross.

Despite COVID-19 impact intensifying competition.

Sellers and pricing pressure.

This is a great Testament to the complete profile of Cosentyx.

The market growth has slowed versus previous year due to COVID-19.

Today, we still see only an estimated 70% to 90% of patients returning versus the pre covenant levels. We continue to see delays in diagnosis and smell slower new starts across the U.S. and the EU, particularly in dermatology.

Despite increasing competition.

Index maintains a strong position underarm and is outperforming the market in ground. If we look at the U.S., we saw double digit trx growth year over year strong momentum in the second half of this quarter.

Our focus is on maintaining value underarm, while driving the growth and win.

If we look a little bit more closely at dermatology, we maintained our market share.

Harry Kirsch: We would expect this quarter four to be at the four-year level, even with potentially COVID-related lower sales growth in quarter four, as we are kind of naturally hedged on the bottom line, should lockdowns happen again due to the expected lower spend levels and such. Finally, on slide 21, as currencies are constantly changing, I want to bring to your attention the estimated currency effects of our results using the current exchange rate. So it's late October, and if rates prevail for the remainder of 2020, the full year impact of currencies on sales would be a negative 1% point, and a co-operating income would be a negative 4%. If the same rate prevailed for 2021, the Fourier effect of currencies on trades for 2021 would be a positive 1-2% pop, and a co-operating income between zero to plus one.

Our I O 17 leadership.

Rheumatology, we're growing three times the market year over year, and leading in the Rx share around 30%.

If we turn to you cosentyx a stabilized market share in derm and maintains rheumatology, despite increasing mandatory use of biosimilars in our key markets.

There is significant opportunity for short and long term growth.

So increasing biologic penetration something this year has suffered given covert and expanding our geographic footprint as well as our future indications.

We aspire to maintain a strong position in the dermatology space and we're set to accelerate and rheumatology.

In Q4, we expect to return to double digit growth and we see a continued strong growth trajectory for Cosentyx, and 2021 and beyond with a potential of $5 billion and beyond for the brand.

Harry Kirsch: And as a reminder, we do update these effects on our website on a monthly basis. And with that, I hand over to Maurice Frantz for an update on the pharma business. Thank you, Harry. Good morning. Good afternoon to all of you.

If I turn to slide 25.

And UN trap. So Q3 saw another excellent performance quarter, driven by underlying strong demand across geographies.

And trust US great momentum is reinforced by how significant the unmet need is and how entresto is increasingly used as an essential first choice treatment. Thank.

Harry Kirsch: So let's turn to the overall performance for pharmaceuticals. The first nine months saw sales grow 6%, with continued momentum from our two key growth drivers. Q3 saw sales growth of 2% despite the continued COVID-19 impact. Our focus continues to be on driving Cosentix on Entresto, also leveraging the launch of new indications and geographical expansion, and, of course, executing on the launches of BioView, Quesimta, and Lectio. If we turn to slides 23, 24.

The U.S. weekly NBR axes returns have above 4000 by the end of Q3, despite the seasonality of the summer and we continue to see strong trx growth versus previous year.

China continues strong growth as well as increasing penetration and account expansion.

I think we can say that interest, though is recognize the standard of care for treatment of half RAF and delivers on its value proposition of keeping patients out of hospital.

Marie-France Tschudin: For Kucentics, Q3 brought us our first $1 billion quarter and 7% year-over-year growth despite COVID-19 impact, intensifying competition, biosimilars, and pricing pressure. This is a great testament to the complete profile of the Center.

It is of course, especially important right now.

We're confident in the future growth of interest. So please remember that about three out of four eligible half breath patients are still not entresto, where we're seeing expansion in China, and Japan and potential new indications in the near future.

If I turn to slide 26.

Deal you.

Marie-France Tschudin: The market growth has slowed versus the previous year due to COVID-19, and today, we still see only an estimated 70 to 90 percent of patients returning versus the pre-COVID levels. We continue to see delays in diagnosis and slower new starts across the US and the EU, particularly in dermatology. However, despite increasing competition, Cosentix maintains a strong position in Durham and is outperforming the market in Broome. If we look at the U.S., we saw double-digit TRX growth year over year and strong momentum in the second half of this quarter. Our focus is on maintaining value in Durham while driving growth in the room. If we look a little bit more closely at dermatology, we maintained our market share and our IL-17 leadership. And in rheumatology, we're growing three times the market year over year and leading in NBRX share around 30%. If we turn to the EU, Cosentyx has stabilized market share in DERM and maintained rheumatology despite the increasing mandatory use of biosimilars in our key markets.

So what's new.

If we look at screen post hoc analyses that have recently demonstrated the correlation between the role of fluid and what Andy envision outcomes.

These recent analyses are showing that more than 50% of the eyes treated with a current anti VGF therapies had.

Visual retinal fluid after two years of treatment.

What we also see is that about 30% of patients at your want to follow up our dose more frequently than every eight weeks.

There's a clear unmet need for medicines that provide greater fluid resolution, which is what we have you offers.

We have a full development program, that's continuing and we've recently released the results of tight our pivotal DMD study, which met its endpoint and confirmed the importance of fluid reduction on vision outcomes.

We now have approval in more than 50 countries with an updated label.

You asked me see steady uptake in Germany and Japan.

We've seen U.S. demand to recover and stabilize around 1200 miles vials per week.

We believe that the rare events can be managed and we continue to educate HCP is about how to reduce risk as clinical practice impacts the effects of this medicine.

Marie-France Tschudin: There is significant opportunity for short and long-term growth through increasing biologic penetration, something this year has suffered given COVID, and expanding our geographic footprint as well as our future indications. We aspire to maintain a strong position in the dermatology space, and we're set to accelerate in rheumatology. In Q4, we expect to return to double-digit growth, and we see a continued strong growth trajectory for Cosentyx in 2021 and beyond, with a potential of $5 billion and beyond for the brand. Now, I turn to slide 25.

With be of use favorable benefit risk profile. We believe we can achieve blockbuster status for this product.

On slide 27, if I turn to sometime.

So sometimes the potential that become our first choice high efficacy DMT for patients physicians and payers, we're launching with an agile approach and focusing our efforts on HCP adoption patient initiation and access.

For us it's key to have broad HCP engagement and have this translate into adoption. Our field force has reached above 90% of our targets either through face to face or through adaptive digital initiatives.

Marie-France Tschudin: And to Entresto, Q3 saw another excellent performance quarter driven by underlying strong demand across geography. Entresto's great momentum is reinforced by how significant the unmet need is and how Entresto is increasingly used as an essential first choice treatment. The U.S. weekly NBRX returned to above 4000 by the end of Q3, despite the seasonality of the summer, and we continue to see strong TRX growth versus the previous year. China continues to see strong growth as well, increasing penetration and account expansion.

And we are now covering over 90% of our Salesforce territories as our as our field force has returned to the field.

We delivered our first access wins in record time, and we're on track to obtain broad rapid access.

Patients are experiencing sales process in the patients and treatment initiation. This is seen as simple easy and fast fiber both patients and physicians.

We're fully focused on execution 2020 is about driving demands to benefit of money unless patients as possible and we believe this will translate into solid sales growth and 2021.

If I turn to like Neil.

Marie-France Tschudin: I think we can say that Interesto is recognized as the standard of care for treatment of HF-REF and delivers on its value proposition of keeping patients out of hospital. This is, of course, especially important right now. We're confident in the future growth of Entresto, but please remember that about three out of four eligible half-breast patients are still not on Entresto. We're seeing expansion in China and Japan and potential new indications in the near future. If I turn to slide 26, BLU

On slide 28.

It's a unique product and it addresses both clinical and non clinical barriers.

With like they always do we will be providing effective and sustained LDL C reduction up to 52% with two doses a year.

Our worldwide launches are progressing rapidly and underway and we've just received CE HMP opinion ahead of schedule for the treatment of primary hypercholesterolemia and mixed dyslipidemia.

You approval is expected in the January December January timeframe for all 27 member states and the UK.

Marie-France Tschudin: So what's new? If we look at three post hoc analyses that have recently demonstrated the correlation between the role of fluid in wet AMD and vision outcomes, these recent analyses show that more than 50% of the eyes treated with the current anti-VGF therapies had residual retinal fluid after two years of treatment.

Yes, the action date as Bob mentioned is expected in December 2020.

I wanted to spend just a moment and talk a little bit about the unmet need in.

In this space it is extremely high for patients and health care system.

We see above 135 million as CBD patients.

In the key markets 18 million deaths a year.

Marie-France Tschudin: What we also see is that about 30% of patients at year one of follow-up are dosed more frequently than every eight weeks. There is a clear unmet need for medicines that provide greater fluid resolution, which is what VOVU offers. We have a full development program that's continuing, and we recently released the results of KITE, our pivotal DME study, which met its endpoints and confirmed the importance of fluid reduction on vision outcomes. We now have approval in more than 50 countries with an updated label. Ex-U.S., we see steady uptake in Germany and Japan. We've seen U.S. demand recover and stabilize around 1,200 miles per week.

80% of patients treated on satellites are not at goal and more than 50% of patients are not adhering to treatment.

Hey, FCB Casa health care systems over a trillion dollars a year and health care spend this is not because they're not good treatment, but because the nonclinical barriers are high either access affordability or adherence.

Which we know will take time and a different approach to resolve but this product has a long patent life and we're committed to differentiated approaches to make an impact on AMC meeting.

With this unique profile and our innovative commercial model, we think we have a real chance of tackling it CVD at a completely different scale.

So in conclusion, we expect to deliver further growth in Q4, despite the continuing COVID-19 impacts.

Marie-France Tschudin: We believe that the rare events can be managed, and we continue to educate HCPs about how to reduce risk as clinical practice impacts the effects of this medicine. With BOVU's favorable benefit-risk profile, we believe we can achieve blockbuster status with this product. On slide 27, if I turn to Kasimka.

With our relentless focus on our priorities and with our innovative approaches to deliver customer value. We are setting up ourselves for short and long term success.

We're driving growth with Cosentyx and Entresto.

Leveraging new indications and geographical expansion, we're executing on the launch of B of UK sometime Mexico, and we're preparing the market for a future blockbuster launches.

Marie-France Tschudin: Kesimpta has the potential to become our first choice high efficacy DMP for patients, physicians, and payers. We're launching with an agile approach and focusing our efforts on HCP adoption, patient initiation, and access. For us, it's key to have broad HCP engagement and have this translate into adoption. Our field forces reached above 90% of our targets, either through face-to-face or through adaptive digital initiatives. And we are now covering over 90% of our field force territories as our field force has returned to the field. We've delivered our first access wins in record time, and we're on track to obtain broad, rapid access. Patients are experiencing seamless processes in patient and treatment initiation. This is seen as simple, easy, and fast by both patients and physicians.

I want to thank the teams for their hard work in these trying times and hand it over to Suzanne.

[music].

Thank you very much my France, and let's turn to slide 30.

On color T. business remains resilient delivering 4% of gross for the nine months with sales, reaching 10.9 billion in the quarter you have seen a very strong uptake of our recent launches Kiss Collie, Kim Ryan pick right, a duck meal and the recently launched today correct.

And also our gross drivers Promacta Revolade koffler mechanism and Chuck heavy continued very strong double digit growth.

This strong momentum across these brands must offset this quarter by increasing generic erosion of Afinitor akshay, new in the U.S. and send the stepped in and they are in Europe as well as continued its cold weather impact in some areas of the oncology business.

Marie-France Tschudin: We're fully focused on execution. 2020 is about driving demand to benefit as many MS patients as possible, and we believe this will translate into solid sales growth in 2021. Now, if I turn to Lectio, on slide 28.

Marie-France Tschudin: It's a unique product, and it addresses both clinical and non-clinical barriers. With Lexviol, we will be providing effective and sustained LDL-C reduction of up to 52% with two doses a year. Our worldwide launches are progressing rapidly and underway, and we just received a CHMP opinion ahead of schedule for the treatment of primary hypercholesterolemia and mixed dyslipidemia. EU approval is expected in the December-January time frame for all 27 member states and the UK, and the FDA action date, as Vas mentioned, is expected in December 2020. I wanted to spend just a moment and talk a little bit about the unmet need in this space. It is extremely high for patients and health care systems.

Due to the pandemic our radio like in therapy, Littlefair continued to experience increased number of cancellations and delays in new patient starts still achieving sales of 109 million.

But overall oncology business remains very resilient and we are confident about the dynamic into the fourth quarter maintained by the strong performance of in market brands and recent launches moving to slide 31 Kings College continued its very strong gross to check.

Three this Q3 sales of 183 million and 50% gross from previous year benefiting from the ongoing impact of positive overall survival data from two pivotal phase three trials.

Marie-France Tschudin: We see over 135 million ASCVD patients in the key markets, and 18 million deaths a year. 80% of patients treated on statins are not at goal, and more than 50% of patients are not adhering to treatment. ASCVD costs the health care system over a trillion dollars a year in health care costs.

We have seen very strong uptake in market share again, ex U.S., especially in European markets, where both post and pre you may know positive indications that are approved for reimbursement in Germany, Italy, France, and Spain and also in the U.S. Fiscale continued to grow and gain.

Marie-France Tschudin: This is not because they're not good treatments, but because the nonclinical barriers are high, either access, affordability, or adherence, which we know will take time and a different approach to resolve, but this product has a long patent life, and we're committed to differentiated approaches to make an impact on ASCVD. With this unique profile and our innovative commercial model, we think we have a real chance of tackling ASCVD at a completely different scale. So, in conclusion, we expect to deliver further growth in Q4, despite the continuing COVID-19 impact. With our relentless focus on our priorities and with our innovative approaches to deliver customer value, we are setting up ourselves for short and long-term success.

Market share in Q3, and this despite patient screening being suppressed and approximately 20% decline in NBR rigs of CDK for six and at the moment kids content is the fastest growing CDK four sticks in the U.S.

We are also pleased to see that differentiation between the CDK for fixed gas is increasingly recognized and just to remind you that kids Carly has a unique profile versus other CDK for six inhibitors. This preferentially any ambition to CDK for oversea, Dkksix and Uh huh.

[noise] concentration to inhibit the targets.

Marie-France Tschudin: We're driving growth with Cosentix and Intresto, leveraging new indications and geographical expansion. We're executing on the launch of BioView, Quesimta, and Lexio, and we're preparing the market for a future Blockbuster launch. I want to thank the teams for their hard work in these trying times and hand it over to Suzanne. Thank you very much, Marie-France. And let's turn to slide 30.

We are very proud to share with you that kids Carly has received the highest rating as the only CDK four six on the S. small magnitude of clinical benefits case, confirming once again the substantial benefit for patients based on significant overall survival benefit.

On the development side, we are expecting a read out with overall survival response from our Mona Lisa to study in age 21.

Susanna Schaffert: The oncology business remains resilient, delivering 4% growth for the nine months with sales reaching $10.9 billion. In the quarter, we have seen a very strong uptake of our recent launches, Kiskali, Chimraya, Picre, Adaglio, and the recently launched Tabregta. And also, our growth drivers, Promagta Revolade, Tafelar Mechanis, and Chakaweed, showed very strong double-digit growth.

Our natale trial as Ross mentioned in high and yes, I do have unprecedented is enrolling well you have to extended the enrollment in the trial in order to enrich the data that's generated increased sample size and allow more robust assessment of the treatment effect, they're not going to try.

Susanna Schaffert: The strong momentum across these brands was offset this quarter by increasing generic erosion of Affinitor, XJ Jade New in the US, and Xandostatin LAR in Europe, as well as continued COVID impact in some areas of the oncology business. Due to the pandemic, our radioligand therapy Lutathera continued to experience an increased number of cancellations and delays in new patient starts, still achieving sales of 109 But overall, the oncology business remains very resilient, and we are confident about the dynamic into the fourth quarter, maintained by the strong performance of in-market brands and recent launches. Moving to slide 31, Kiskali continued its very strong growth trajectory with Q3 sales of 183 million and 50% growth from the previous year, benefiting from the ongoing impact of positive overall survival data from two pivotal phase three trials.

It is on track for a final read out and Twentytwenty. So overall, we're very pleased with the performance of King's College, and this bad I hand back to boss.

Thank you Susanna so just in conclusion as you can see we had a very solid quarter with double digit core operating income growth. Despite the impact of co bid on health care systems, our growth drivers our launch brands. The key drivers for our mid to long term growth are well intact and performing well we raised our full.

Core operating income guidance is Harry outlined or mid and late stage pipeline is advancing and I hope all of you will continue to appreciate the depth and breadth of our mid stage pipeline in the coming months and years and lastly, we continue to progress on our journey to becoming he asked you leader with concrete advances over the quarter, we look forward to taking your.

Questions. So operator, we can open the line.

Thank you as a reminder, thanks gentlemen, if you wish to ask a question press the star.

Don one on your telephone keypad.

Your first question today comes from the line of Mark Purcell from Morgan Stanley.

Susanna Schaffert: We have seen very strong uptake in market share gain ex-US, especially in European markets, where both post and premenopausal indications were approved for reimbursement in Germany, Italy, France, and Spain, and also in the US, where Piscali continued to grow and gain market share in Q3, and this despite patient screening being suppressed and approximately 20% decline in NBRX of CDK-46. At the moment, Piscali is the fastest We are also pleased to see that differentiation within the CDK-4-6 class is increasingly recognized. And just to remind you that KIS-Cali has a unique profile versus other CDK-4-6 inhibitors with preferential inhibition to CDK-4 over CDK-6 and a high concentration to inhibit the target.

Yes. Thank you very much for taking my question more for some of these tiny or.

Just a couple from me in terms of Sunday I noted on the Mi the management of vendors theres going to be a focus on this business. So perhaps could you sort of talk to us about some of the pipeline opportunities you you see here and I guess how are in sensors and.

And it is a significant opportunity set of global manufacturing footprint within this business, what sort of a pricing margin targets cheaply you could get added to the pipeline I mean things like Annaly and Biocon and so nice map, which you have to spend much time talking about yet.

And then a second one for Harry on the on the Great March and a 360 basis points improvement could you help us understand the underlying improvement on the sort of private related improvement on how sticky that type related part might be going forward and then last question is on Scott Im I've said it'll be like LMT itself, I guess a pipeline of products here.

Could you help us understand if that's going to be any more sort of interim analysis from the proof of concept data.

As that matures and the transplantation, setting and sort of frame the opportunity and and shoulder syndrome. I think it's the second most prevalent also I mean does it say how significant could that opportunity. They had a pretty clear proof of concept data in the second office here. Thank you.

Susanna Schaffert: We are very proud to share with you that Kiskali has received the highest rating as the only CDK46 on the ESMO Magnitude of Clinical Benefit Scale, confirming once again the substantial benefit for patients based on significant overall survival benefits. On the development side, we are expecting a readout with overall survival results from our Mona Lisa 2 study at age 21. Our NATALY trial, as Voss mentioned, in high and intermediate adjuvant breast cancer is enrolling well.

Thank you Barack so first Richard on Sandoz pipeline and global manufacturing Yeah. Thank you Mark.

Let's start with the pipeline, we don't generally disclose specific elements of a pipeline that we have a very strong pipeline across small molecules, but increasingly biologics on more complex products to bring to market for the gold I did it being at first entry of market that Alwy formation occurring.

Susanna Schaffert: We have extended the enrollment in the trial in order to enrich the data set generated with the increased sample size and allow a more robust assessment of the treatment effect. The NATALY trial is on track for final readout in 2020. So overall, we are very pleased with the performance of Kiskali. And with that, I hand over to Voss.

Pretty much all our territories.

I mean, you're right to point about supply actually physical supply. This year has been remarkably strong given the challenges that we've had and also we've gone ahead and foam sandoz textbooks over this year that means that we have far more controlled oversight utilization investment and strategy that is helping to bring better Cogs reduction.

On a greater degree of alignment between the retail and commercial businesses and the supply chain, which as you know in generics as a key success factor.

Vasant Narasimhan: Thank you, Susanna. So just in conclusion, as you can see, we had a very solid quarter with double-digit core operating income growth despite the impact of COVID on healthcare systems. Our growth drivers, our launch brands, the key drivers for our mid- to long-term growth are well in tact and performing well. We raised our full-year operating income guidance, as Harry outlined.

So I think it.

Maybe just to add one point, we have signed a range of deals over the recent years to continue to bolster the sandoz portfolio, including the Aspen problems Euticals business in Japan, which helps us to build.

Build out our injectables portfolio and pipeline and depend again and Lee as you mentioned in diabetes. The Biocon collaboration so our aspiration is both through the internal portfolio and bio Similars, but offers the rage partnerships not only tackle the largest opportunities and bio similars, but also the mid the so called mid.

Vasant Narasimhan: Our mid- and late-stage pipeline is advancing, and I hope all of you will continue to appreciate the depth and breadth of our mid-stage pipeline in the coming months and years. And lastly, we continue to progress on our journey to become an ESG leader with concrete advances this quarter. We look forward to taking your questions. So, operator, we can open the line. As a reminder, ladies and gentlemen, if you wish to ask a question, press the star and 1 on your telephone keypad. Our first question today comes from the line of Mark Purcell from Morgan Stanley. Yes, thank you very much for taking my question, Mark Purcell, Morgan Stanley. Just a couple if you may.

Your opportunities and bio Similars and building a broad and deep portfolio I think Mark you also asked around margins and we have an aspiration to get to the mid to high Twentys margins and Sandoz overtime. This won't be necessarily overnight, but we believe that we have the potential to be in line with the top tier peers into.

Eric sector, that's absolutely our goal.

Harry on group margins.

Yeah, I think it's going on.

Sandals.

The mid Twentys communities to higher rent is what we see as achievable on tomorrow actually collect cost and manufacturing.

Initiatives transformation initiatives are onto the significant ways. According to Sandoz margin in addition to.

Mark Purcell: In terms of Sandos, I noted at the Meet the Management event that there's going to be a focus on this business. So perhaps could you sort of talk to us about some of the pipeline opportunities you see here? And over to Harry in terms of, you know, there's a significant opportunity for the global manufacturing footprint within this business. What sort of operating margin targets do you believe you could achieve? And for the pipeline, I mean things like Ganalee and Biocon and Tenosimab, which you haven't spent much time talking about yet. And then a second one for Harry on the group margin, a 360 basis points improvement.

Those will be the biologic success simply been struck screw biologics.

Synerons home home in a margin structure.

Other possible so really good potential here for the EMS business, but of course overall truly innovative medicines.

Also very positive if you look at the first nine months no 360 basis point profit improvement and I think you can almost putting CAD 2.14 trillion by the gross margin also youre close to manufacturing footprint.

A mix effect.

Paul just going back to Boeing so they'll twosixty person 360 basis points.

And the.

Yeah again local clubs I would say well be covance related.

Lower spend level to remember so true activity and say is four.

4% or so it's cool.

Mark Purcell: Could you help us understand the underlying improvement and the sort of COVID-related improvement and how sticky that COVID-related part might be going forward? And the last question is about Escalomab. So, a little bit like LNP, it's, I guess, a pipeline and a product here. Could you help us understand if there's going to be any more sort of interim analysis from the proof of concept data as that matures in the transplantation setting and sort of frame the opportunity in Sjodren's syndrome? I think it's the second most prevalent autoimmune disease.

[laughter] pick up.

And now we do expect that some of the pulled what's the latest on the spread would come back and buy.

Anyway alter the current situation, we do invest.

Invest into our products, where it's possible of course, we don't waste money.

Some activities on can do not possible or possibly what we're going to be lower.

Lever.

But we do also believe for most of the productivity that before this new situation will also stick for the future.

Of course, and key elements, we will ultimately saves fuel next year industry consolidation plan.

So we expect that with them.

You do.

He is our core margin on innovative medicines business and the company.

Yes and that.

Very well on track to get to the mid to high Seventys with this much improvements year by year as.

Mark Purcell: So how significant could that opportunity be ahead of proof of concept data in the second half of this year? Thank you. Thank you, Mark. So first, Richard, on the Sandoz Pipeline and global manufacturing. Yeah, thank you, Mark. Let's start with the pipeline. We don't generally disclose specific elements of our pipeline, but we have a very strong pipeline across small molecules but increasingly biologics and more complex products to bring to market, with a goal, ideally, of being at first entry into the market at LOE formation across pretty much all our territories. You raise a point about supply.

We continue on our productivity programs and also trigger all told me that most of the coal which related.

The initiatives on system.

So overall, a very good trajectory there.

Thanks area, and then John on scaling up.

Yes, as you know mark our discount and that is our anti CD 40 that we're advancing in multiple indications are primary indication that we're pursuing is in renal transplant. We've shared some of the data previously and we're moving forward with an innovative approach to every call I box, which is a risk prediction, scoring combines measurements of.

Kidney function, we look forward to bringing that to the market working with health authorities in the early 23 timeframe matched for renal transplant, you were referring to the Sjogren syndrome, which which is an additional indication that we're exploring and that is moving forward currently in a phase two eight study there is an interim readout.

Now in the Sjogren syndrome population that will not come out until the first half of 2022. So those are the general timelines, but we are looking at multiple indications for a scout map, we're hoping for a potential more for approaches to treating patients.

Richard Saynor: Actually, first of all, supply this year has been remarkably strong, given the challenges that we've had. And also, we've gone ahead and formed Sandoz Tech Ops this year. That means that we have far more control over site utilization, investment, and strategy that is helping to bring better COG reduction and a greater degree of alignment between the retail and commercial businesses and the supply chain, which, as you know, in generics is a key success factor. So, thank you. Maybe just to add, you know, one point: we have signed a range of deals over recent years to continue to bolster the Sandoz portfolio, including the Aspen pharmaceuticals business in Japan, which helps us build out our injectables portfolio and pipeline in Japan.

You bet.

All right next question operator.

Thank you.

Next question comes from the line of Graham Parry.

From Bank of America.

Hi, Thanks for taking my question and say that especially on the margin guidance to how you is just touching on that so year to date, you'll that all makes sense is that it.

Until mid to high 30 cents margin target, which I think you'd previously pitches being my Twentytwenty. Two so can you just help us understand when does margin wed as margin gray stop so, whereas it caps at and above that level secondly on 'cause into it that any channel sales in the quarter was all free drug and how long do you expect the team.

Free drug program to continue its not.

Richard Saynor: Again, and Lee, as you mentioned, in diabetes, the Biocon collaboration. So our aspiration is not only to tackle the kind of largest opportunities in biosimilars but also the so-called mid-tier opportunities in biosimilars and build a broad and deep portfolio. I think Mark, you also asked about margins, and we have an aspiration to get to the mid to high 20s margins in Sandoz over time.

For all this Keyuan office also 2021 for example, and then secondly on the changes on the knot fleet trial. So you highlighted you increased to 5000 patients, but have you changed your treatment criteria, David tool to enrich the population the higher risk patients or amended the statistical analysis plan to allow primary.

Endpoint readout only in high risk patients for example, or do you think that the differences were seeing between the brands and the Xenia and I, even Charles were actually probably rather than trial population related. Thank you.

Vasant Narasimhan: This won't necessarily be overnight, but we believe that we have the potential to be in line with the top peers in the generic sector. And that's absolutely our goal. Harry on group margin.

Thanks, Graham on the mid to longer term margin hair.

Harry Kirsch: Yeah, first, also on Sandoz, we are in the mid-20s, clearly the mid to high 20s, you know, we see as achievable, and Marshall corrects, of course, the manufacturing initiatives, the Transformation Initiatives, are also a significant way of supporting the Sundance Margin. In addition, of course, will be the biologic success, given that, structurally, biologics and the biofinance have a higher margin structure than the So very good potential here for growth, but, of course, overall, for the group at Innovative Medicines, also very positive. If you look at the first nine months, you know, 360 basis points of improvement. And I think we can almost put it third, third, third.

Thank you Kevin.

Of course, we have to first revenue to first nine months.

Imagine oil business is usually a bit above sea food here this quarter for margins tend to be for Susan I would use is more so we are the first nine months to 36 I indicated for the full year, we see roughly 45.

So we have some room to go you know for the mid to high.

Yeah.

And then we don't put a cap on it but first you want to get into that range mid to high Fortys I think most of our large.

A comparable market cap companies R&D is mid to high Thirtys, but it depends also of course on the mix of businesses and the launch cycle. So I don't want to put it almost at the moment for sports you want to get to the mid to high Thirtys and we always always want to ensure that we have to rise.

Last month, we say total to twox productivity and results on location.

Thanks, Harry on 'cause Center merchants.

Yeah. So our focus on 2020 is really just about driving appropriate demands and initiation of patients in other words for us the broad HCP adoption and east ease of access initiation is key.

Harry Kirsch: One third is driven by the close margin. Also, here, of course, the manufacturing footprint and some mixed effects have a positive impact, about a third of that 360, 100%, 360 basis points, and the other third, I would say what we call it related lower spent levels and another third productivity and sales, you know, four percent sales growth maybe fixed cost pickup. And now we do expect that some of the COVID-related underspend will come back. And by the way, also in the current situation, we do invest in our products where it's possible. Of course, we don't waste money, and some activities are simply not possible or are only possible at a lower level.

As you know we have this free drug program and this will be a significant bridge for a number of patients until we get to paid script. So so far our key metrics is going to be NBR acts.

We're not underestimating the extra lift it takes to launch a product during this pandemic and that's why we're really focused on driving demand and initiation. We've already seen some early access wins and we're focusing on broad availability for for patients we've seen that with Cvs not now we've had our first Medicare when we want to ensure that.

Patients have preferred single step access.

Harry Kirsch: But we do also believe that most of the productivity that we find in this new situation will also stick for the future. And that's, of course, a key element as we work ourselves through next year and the three to five-year plan. So we expect that with this, we do increase our core margin, you know, on the innovative medicines business and the company each of the next years, and that we are very well on track to get to the mid to high 30s with these marginal improvements year by year as we continue with our productivity programs and also figure out how to make most of the COVID-related productivity initiatives also stay. So overall, I'm on a very good trajectory there. Thanks, Harry. And then, John, on Escalomab.

We believe that sometimes has the potential of being the first choice DMT for patients physicians and payers because it's highly efficacious and safe then it can be administered at home.

So that's what.

We're doing right now in 2000, Twentys really focusing on on a demand and initiation of patients.

Thanks, Jonathan Jonathan Natalie.

Yeah. Thanks, Graham Thanks for the question Natalie.

As you know we increase the sample size from 4005 5000 patients to allow for more about assessment of the overall treatment effect.

But I will say is for competitive reasons, we don't want to disclose too much details, but we do believe in the unique skylink profile and the overall trial design remain the same so what we can disclose is that enrollments continuing and growing very well. We also are using a 400.

John Tsai: Yeah, as you know, Mark, Escalomab is our anti-CD40 antibody that we're advancing in multiple indications. Our primary indication that we're pursuing is in renal transplant, and we've shared some of the data previously. And we're moving forward with an innovative approach that we call IBOX, which is a risk prediction scoring that combines measurements of kidney function. And we look forward to bringing that to the market, working with the health authorities in the early 23 That's for a renal transplant.

Graham dose here and what we've seen so far is that this has been well tolerated which is different from the 600 milligram dose in the advanced breast cancer patients. So overall, its going well and recruitment is going very well. So thanks fast track you.

And maybe just to build on John's point I mean, we really believe that gets done is unique in its focus on that as I mentioned my early comments on CDK. Four we also believe with a robust trial in which we limit patient Discontinuations discontinuations in the study, which we think tempered some of the other studies we have they are.

John Tsai: You were referring to Sjogren's syndrome, which is an additional indication that we're exploring. And that is moving forward. Currently, in a phase 2a study, there is an interim reading out in the Sjogren's syndrome population that will not come out until the first half of 2022.

For two unity to have the broadest indication in the entire time.

Our competitive set which would be of course, a unique selling proposition for kids scalia around the world. So we're quite excited about taking this forward.

John Tsai: So those are the general timelines. But we are looking at multiple indications for Escalomab, and we're hoping for potential multiple approaches to treating patients. Thank you. All right, next question, operator.

Thanks, Ryan next question operator.

Thank you. Your next question comes from the line of Andrew Baum from Citi.

Thank you three questions first married shrunk piece on increase around firstly in terms of the launch in marketing should I assume that the interest that field force is going to do the bulk of the heavy lifting.

John Tsai: Thank you. Your next question comes from the line of Graham Parry and Bank of America. Hi, thanks for taking my question. Firstly, on the margin guidance that Harry was just touching on there, so year-to-date, you're almost into your mid to high 30s margin target, which I think you'd previously pitched as being by 2022. So can you just help us understand when margin, where does margin growth stop? And so where is it capped at above that level? Secondly, on Kazimta, were there any actual sales in the quarter? Was it all free?

Second when would you expect a J code to be issued I understand though she quarterly now so I'm, assuming either first or second quarter and then finally, just thinking about the degree of cost advantages you have in terms of pricing to pass versus the piece, yes kind antibody could you just compare and contrast the call.

Thanks.

On increased ceramic versus a monoclonal.

Thank you.

Thanks, Mary fronts, if you want to take the first I can tackle the Cogs so on the field.

Field force in the J code recur.

Graham Parry: And how long do you expect the two-month free drug program to continue? Is that scheduled for all of Q1 or the first half of 2021, for example? And then thirdly, on the changes in the NATALI trial, you've highlighted that you've increased to 5000 patients, but have you changed recruitment criteria there at all to enrich the population for higher risk patients, or amended the statistical analysis plan to allow a primary endpoint readout only in higher risk patients, for example? Or do you think that the differences we've seen between the IBRANS and VIZINIO adjuvant trials were actually product rather Thank you. Thanks, Graham. On the mid-to-longer-term margin, Harry?

Yeah. So I mean, clearly they are there a lot of synergies between the field force that we felt with interest, though and what we would like to do with with and close their eyes. I think the approach that were taking within cause ran well require us to also build our capabilities in.

Managing different stakeholders, such as government and and insurance companies and payers and working with us and so we will have to build additional capabilities, but overall I think it's clear that when you look at interest. So when you look at inquisitor on and when you.

Harry Kirsch: Thank you, Graham. Of course, we have to first recognize the first nine months. A margin in our business is usually a bit above the full year, as quarter 4 margins tend to be, for seasonality reasons, lower.

Looking to the future of RCM.

ER CDM portfolio that there there are a lot of synergies that we can leverage across the board.

When it comes to the J code, yes, you're right. They are giving out J code quarterly I'd, just remind you that sell the lot of cardiologists in this space are not necessarily set up front for the buying process.

Harry Kirsch: So we are in the first nine months at 36. As I indicated, for the full year, we see roughly 35 for innovative medicines. So we have some room to go, you know, for the mid to high 30s. And then we don't put a cap on it, but first, you want to get into the range of the mid to high 30s. I think most of our large comparable market cap companies are in these mid to high 30s, but it depends, of course, on the mix of businesses and the launch cycles.

In terms of care are and many of these cardiologists are affiliated with systems of care. So we believe that through the system, we will be able to overcome this initial hurdle and that being said, we will be building the capabilities for buying those possibilities for her cardiologists and beyond.

Harry Kirsch: So I don't want to put a cap on it at the moment, but first, you want to get to the mid to high 30s. And we always, always want to ensure that we have the right investment levels at the same time as we try for productivity and resources. Thanks, Harry. On Kissimta, Marichon.

Thanks, very front and then on on our longer term strategy and how it links to the cost of goods. We of course have the aspiration to take the product brought into the CBB secondary prevention market. We have the ongoing secondary outcome study and then we also have the aspiration to test the medicine and primary prevention.

Marie-France Tschudin: Yeah, so our focus in 2020 is really just about driving appropriate demand and initiation of patients. In other words, for us, broad HCP adoption and ease of access and initiation are key. As you know, we have this free drug program, and this will be a significant bridge for a number of patients until we get to paid scripts. So, so far, our key metrics are going to be NBRX. We're not underestimating the extra lift it takes to launch a product during this pandemic. And that's why we're really focused on driving demand and initiating it. We've already seen some early access wins, and we're focusing on broad availability for patients. We've seen that with CVS and Aetna. We had our first Medicare win. We want to ensure that patients have preferred single-step access. We believe that contempt has the potential to be the first choice DMT for patients, physicians, and payers because it's highly efficacious, it's safe, and it can be administered at home.

In an agreement with the NHS to take that forward and potentially additional supportive study just to get us to a primary prevention, which would open up the patient population quite dramatically in order to enable that we of course would then have to over time be able to provide this larger volumes and a competitive cost we believe that as an R&D based therapy with small.

Molecule small molecule production profile, we have the opportunity to drive these cogs quite low at tool not as low profit of the traditional small molecule, but in that range. The way we're going to do that is we are overtime planning to build up our own internal capabilities to produce this produced this medicine we are.

Working with collaborative group also in the UK and to look at next Gen technologies, but the aspiration would be certainly to have the cost via a fraction of the cost of a typical monoclonal antibody that would enable I think that large volume possibility.

Marie-France Tschudin: So that's what we're doing right now in 2020, really focusing on on demand and initiation of patients. Thanks, Frank. And John, and Natalie.

Thanks, Andrew next question operator.

Thank you. Your next question comes from the line of Nora Sutcliffe from GBM.

John Tsai: Yeah, thanks, Graham. Thanks for the question. I'm Natalie.

Hello. Thank you closely on so you think about your plans to drive demand in the short term, but could you outline for us what you think the ramp towards profitability look quite put aside.

John Tsai: As you know, we increased the sample size from 4,000 to 5,000 patients to allow for a more robust assessment of the overall treatment effect. What I will say is, for competitive reasons, we don't want to disclose too many details, but we do believe in the unique Cascale profile, and the overall trial design remains the same. So what we can disclose is that the enrollment's continuing and going very, very well. We also are using a 400 milligram dose here, and what we've seen so far is that this has been well-tolerated, which is different from the 600 milligram dose used in advanced breast cancer patients.

Is it quicker than usual because you've made obviously went up historically, albeit in a different formulation.

Then secondly for John on the B and C G.

Using the regulator on what the appropriate endpoint as for a phase three trial, it's breaking urea enough or will you need it you far and then maybe finally on Xeljanz mischelle outside the U.S. I think you said Japanese playing a very substantial pot, but could you tell us what other countries are contributing meaningfully to revenue. It looks like is it just upon.

Thank you.

Thank you Laura so let's start with the custom to run it from.

Vasant Narasimhan: So overall, it's going well, and recruitment is going very well. So thanks, Bob. Back to you. And maybe just to build on John's point, I mean, we believe that Kiskalya is unique, and it's focused on that, as I mentioned, my early comments on CDK4. We also believe with a robust trial in which we limit patient discontinuation, discontinuations in the study, which we think hampered some of the other studies, we have the opportunity to have the broadest indication in the entire competitive set, which would be, of course, a unique selling proposition for Kiskalya around the world. So we're quite excited about taking this forward. Thanks for having the next question, operator. Thank you. Your next question comes from the line of Andrew Baum. Thank you. Three questions for Mary France, please, on Inquisiran.

Yes, I think I think we have to think about what what cosenza is right. So because sometimes the high efficacy therapy, it's well tolerated it can be administered at home.

And for this reason, we firmly believe that our position goes beyond the current be selling market.

If you think about the fact that 70% of patients are currently on either Subcu, our oral the MTV.

And 63% of patients are remain on low epic contained therapies when.

You look at what's happening in the marketplace today, it's very encouraging to see the shift to higher efficacy therapies.

We know that there are a number of submissions that are not necessarily don't necessarily have access to infusion capabilities or you know patients certainly in this current period, we're going to be looking for options that don't require them to spend time in an Ivy infusion center. So we believe.

Is that the way we should be positioning for Samsa is in a first line or a per switch and that's why the focus for 2020 is really on the appropriate demand. The initiation of patients you look at some of the estimates on what the BSL market could look like over.

Andrew Baum: Firstly, in terms of the launch and marketing, should I assume that the Interesto field force is going to do the bulk of the heavy lifting? Second, when would you expect a J-code to be issued? I understand they're issued quarterly now, so I'm assuming either the first or second quarter.

Over the next 10 years.

There are some estimates that point us to 35% to 40% of the market, we certainly want to be participating in that very strongly so.

Andrew Baum: And then finally, just thinking about the degree of cost advantages you have in terms of pricing to payers versus the PCS kind of antibody, could you just compare and contrast the COGs on Inquisiran versus a monoclonal antibody? Thank you. Marie-France. If you want to take the first, I can tackle the COGS.

What the focus is now is broad adoption ease of access initiation, we've learned a lot from our previous launches in this space and we know that it's absolutely crucial for us to have strong access and for patients to be able to initiate this drug very easily we've got as we said the free drug program and our our key metrics.

Vasant Narasimhan: So I'm the field force in the JCOGS, Marie-France. Yeah, so clearly, there are a lot of synergies between the field force that we've built with Intresto and what we would like to do with Inquisirin. I think the approach that we're taking with Inquisirin will require us to also build our capabilities in managing different stakeholders, such as government and insurance companies and payers, and working with systems. So we will have to build additional capabilities. But overall, I think it's clear that when you look at Intresto, when you look at Inquisirin, and when you look into the future of our CVM portfolio, that there are a lot of synergies that we can leverage across the board. When it comes to the J-Code, yes, you're right; they are giving out J-Codes quarterly.

Over the next couple of months is going to be and the Rx.

Thanks, very front and then John on the Island C O M P and phase three endpoints, yeah for LMP, Laura I guess, we'll call it took a pan.

You guys now the new name for it in fact, as we look at a C. G. As you know that there's no therapeutic agent designed to really target the underlying disease, which is a complement dysfunction here. So we're really encouraged and you saw the results that by shared in a presentation slide so we're really incur.

Courage by those results now as you pointed out in terms of proteinuria reduction. This is not a validated validated surrogate marker with the FDA. So we're currently working with the FDA looking at both the your protein creating ratio as well as I'm looking at each.

Marie-France Tschudin: I think, you know, just to remind you that a lot of cardiologists in this space are not necessarily set up for the buy-and-build process. The systems of care are, and many of these cardiologists are affiliated with systems of care, so we believe that through the systems, we will be able to overcome this initial hurdle. That being said, we will be building the capabilities for buy-and-build possibilities for cardiologists and beyond. Thanks very much.

Estimated glomerular filtration rate jafar.

And what we did see in the phase two studies was that there was benefit in both so as we move forward, we're capturing both in our studies and looking for the best path forward with the regulatory authorities.

And then lastly on those ends my ex U.S., there's I would say maybe four groups of countries that are relevant to the U.S. a of course, Japan as we continue to launch.

In Europe, you have some early adopter countries, so primarily primarily Germany and a few other smaller countries. But then we're now working very hard on expanding access in the UK, France, Spain.

John Tsai: And then on our longer term strategy and how it links to the cost of goods, we, of course, have the aspiration to take the product broad into the ASCVD secondary prevention market. We have the ongoing secondary outcome study. And then we also have the aspiration to test the medicine in primary prevention and agreement with the NHS to take that forward and potentially additional supportive studies to get us to primary prevention, which would open up the patient population quite dramatically. In order to enable that, we will, of course, have to be able to provide this in larger volumes and at competitive costs. We believe that as an RNA-based therapy with a small molecule production profile, we have the opportunity to drive these COGs quite low, not as low, perhaps as a traditional small molecule, but in that, the way we're going to do that is we are, over time, planning to build up our own internal capabilities to produce this, and produce this medicine. We're working with a collaborative group also in the UK to look at next-gen technologies, but the aspiration would certainly be to have the cost be a fraction of the cost of a typical monoclonal antibody, and that would enable, I think, that large volume possibility. Thank you, Andrew. Next question, operator.

In Italy, and then the fourth group will be the emerging market countries, which are substantial markets countries like Turkey, Saudi Arabia, and the Gulf Coast countries.

Brazil, Australia, not emerging markets, but it's still a Australia and Canada.

So as the next 12 months unfold various markets will come online at different points in time, depending on how fast the body the various axis bodies move and providing reimbursement. We do continue to see a that's a that's a reasonable number of patients in a self pay situation as.

As well and also compassionate use of course, where compassionate use program.

I'd say overall the demand is very robust across these markets. Both below two years of age, but as I noted also a significant number of patients proportion of patients about two years age as well.

Thank you Laura next question.

Thank you. The next question comes from the line of Kerry Holford from back then.

Thank you Kevin how fresh.

Three questions. Please see most perspiration, let me now turn Lenny I'm not sure they share declining to three.

[noise] Swaption see increased competition, you mentioned that.

[laughter], which can pedigree anything shack kit.

I Wonder if this is also reflection of you.

Vasant Narasimhan: Thank you. Your next question comes from the line of Laura Stratcliffe from UBS. Hello, thank you.

Making maison.

I'm going to ask Lenny.

Ah pitching that continued control.

Laura Sutcliffe: Firstly, on Kysimpsa, you've been clear about your plans to drive some demand in the short term, but could you outline for us what you think the ramp towards profitability looks like for this drug? Is it quicker than usual because you've made opitumumab historically, albeit in a different formulation? Then, secondly, on John on Factor B in C3G. Thank you. Thank you, Laura.

80 is that true.

I ask you said another interim analysis showed children to kind of be one study that showed the final read out.

So when that might be.

Sarah I guess I'd like to understand what the risk is either.

I actually think current nature to the generic.

Sure.

Sexual interest.

Marie-France Tschudin: Yes, I think we have to think about what KSIMSA is, right? KSIMSA is a high efficacy therapy, it's well tolerated, and it can be administered at home. And for this reason, we firmly believe that our position goes beyond the current B-cell market. If you think about the fact that 70% of patients are currently on either sub-q or oral DMTs, and 63% of patients remain on low-efficacy therapies. When you look at what's happening in the marketplace today, it's very encouraging to see the shift to higher-efficacy therapies. We know that there are a number of physicians that don't necessarily have access to infusion capabilities or, you know, patients, certainly in this COVID period, who are going to be looking for options that don't require them to spend time in an IV infusion center.

Patients and patients how can you pay that interest in that relationship. Thanks.

Thank you Kerry so first on the millennial, Mike Fransen animals yeah.

Yeah. So our Q3, Johnny as decline is is as expected and then it's been driven by some engine inventory decreases but should bounce back we have seen as you know a significant slowdown in the N.B. Rx, especially in the S. One p. class and engineered due to its a pretty tough.

And first dose observation has has seen a slowdown in the MBR Rx market. We've also seen a slower recovery in the S. One p. market versus the others. During this covert pandemic.

We have had a lot lower demand due to increased competition, there are new or all the MTS.

And also we have seen some some switches are happening with other competitors higher R&D and the fact that the full organizational focus is on driving new patient starts for K sometime nascent. So you know Jelena continues to be a third most prescribed DMT worldwide. We know, it's a high efficacy or all the only.

John Tsai: So we believe that the way we should be positioning Kesimpta is in a first line or a first switch. And that's why the focus for 2020 is really on appropriate demand and initiating patients. If you look at some of the estimates on what the B cell market could look like over the next 10 years, there are some estimates that point us to 35 to 40 percent of the market. We certainly want to be participating in that very strongly.

DMT prescribed in pediatric patients 10 years or older in the U.S. will continue to promote it in this population or patients who prefer all but our focus is clearly shifted.

Thanks, very fronts on or can it can amount John.

Yeah for kind of Kenyan matter in first line non small cell lung cancer study Kerry I, what I didn't mention earlier in the presentations that the DMC did meet earlier this month and recommended that we continue to study without modifications and this was an interim as noted previously.

Susanna Schaffert: What the focus is now is broad adoption and ease of access initiation. We've learned a lot from our previous launches in this space, and we know that it's absolutely crucial for us to have strong access and for patients to be able to initiate this drug very easily. We've got, as we said, the free drug program, and our key metrics over the next couple of months are going to be NDRS. Thanks, Marie-France. And then John on the C3G, LNP, MP3, MP4.

We continue to have high thresholds for the interim analyses for both canopy, one and cannot be to the Oh.

Yeah and analysis that are planned for a canopy. One is in the second half of next year and for cannot be to the N. analysis is planned for the first half of next year. So those are the or profit timelines moving forward.

And we do have a carry additional interim analyses that were not in a position right now to predict exactly when those are going to happen based on the on the statistics will of course keep everyone up today would have a better better visibility.

Vasant Narasimhan: Yeah, for LMP, Laura, I guess we'll call it Iptokapan if you guys know the new name for it. In fact, as we look at C3G, as you know, there's no therapeutic agent designed to really target the underlying disease, which is complement dysfunction here. So we're really encouraged, and you saw the results that Voss shared on the presentation slide. So we're really encouraged by those results. Now, as you pointed out, in terms of proteinuria, or reduction, this is not a validated surrogate marker with the FDA.

On Luna Cerus is done.

Yeah. Thank you Carrie question so.

Sorry, I was more or less in line with previous year, reaching 190 million and it is as you rightly say impacted by Kobe. It's when you look at the different dynamics for the U.S. He had a slight decline of 4%, but on the other side in Europe, where the situation opened up again these.

Talk rossa or 10% versus previous year, we remain very confident in lupus there given the very strong profile of the product as you remember the dust has demonstrated overall survival benefit over so much is that the treatment and B C.

Vasant Narasimhan: So we're currently working with the FDA and looking at both the urine protein creatinine ratio and the estimated glomerular filtration rate, EGFR. And what we did see in the phase two studies was that there was benefit in both. So as we move forward, we're capturing both in our studies and looking for the best path forward with the regulatory authority. And then lastly, on Zolgensma ex-US, there are, I would say, maybe four groups of countries that are relevant, the US, of course, and Japan, as we continue to launch. In Europe, you have some early adopter countries, primarily Germany and a few other smaller countries.

Still very high interest for the product.

Saw some postponements and cancellation of new patient starts.

But to be still activating our plan to further growth, we are reaching out to the community level over 65% of the patients are treated and yet very encouraging discussions there. So overall, we remain very confident and the current softness is mostly impact.

Vasant Narasimhan: But then we're now working very hard on expanding access in the UK, France, Spain, and Italy. And then the fourth group will be the emerging market countries, which are substantial markets, countries like Turkey, Saudi Arabia, and the Gulf Coast countries, Brazil, Australia, not emerging markets, but Australia and Canada. So as the next 12 months unfold, various markets will come online at different points in time, depending on how fast the body, the various access bodies move and provide reimbursement. We do continue to see a reasonable number of patients in self-pay situations, as well, and also compassionate use, of course, through our compassionate use program. I'd say overall, the demand is very robust across these markets, both below two years of age, but, as I noted, also a significant proportion of patients above two years of age as well. Thank you, Laura. Next question up. Thank you. The next question comes from the line of Kerry Holford from Boneburn. Thank you, Kerry Holford. Three questions, please. Firstly, in multiple sclerosis, looking at Lenia, how much of the sales decline in Q3 is due to the pandemic disruption versus the increased competition you mentioned there? Which competitor are you losing share to?

Ted by coal bed and as soon as the situation is released we expect to have new patients taking up again.

Very good we have a number of questions on the line until after the next set of questions to please limit yourselves to one question with until more than two sub parts. So.

The next question operator.

Thank you. Your next question comes from the line of Peter Welford from Jefferies.

Hi, Thanks for taking my question and good afternoon.

Giuliani I just go back to that whether you can provide us any visibility now on the timing of potential U.S. generics I think we'll wait to see the legal cases have now been finalized I'm sorry can I just go back to Jon just for clarification on kind of kinda, Bob and he said the word of the interim analyses I think you said that you see is the second half 21 headline day.

To that you're talking about is not your best estimate for the final readout of cannot be won or is that your assessment of when we could next here, which actually could be one of the next interim analyses. Thank you.

Yes, I think I can take both of these on until any Oh. We of course are very pleased with the response of the district court's uphold our pod and Oh, we do understand the filer has filed an appeal. So over the next 12 to 18 months now that appeal Ono unfold, we continue to stand by.

Our patents, including some of the more recent past the patents that have been been issued.

Yeah, we would expect again, a court case, though subsets they happen over the next 12 to 18 months and in the meantime, we continue to operate as us as planned and continue to aggressively defend or.

Kerry Holford: I wonder if this is also a reflection of you promoting Mazant and Kazimter over Jelenia, and I presume that will continue going forward. Can I ask, is there another interim analysis scheduled for the Canopy One study before the final readout? and if so, when that might be?

Our IP with respect to kind of get them out the final analysis for the second line study is in the first half of next year and the final analysis for the first line study is in the second half of.

Kerry Holford: And then on Lucasfera, I guess I'd like to understand what the risk is here that the disruption we're seeing currently due to the pandemic results in a permanent loss of access or interest from physicians and new patients. How can you attain that interest in that relationship?

Next year, there is an interim another an interim analysis for both studies, both the second line and the first line a lot.

Learning from some of the disruptions that have happened with Covidien, we would feel more comfortable not providing specific timings until we have a better sense of when exactly those those interims what occurred is that clear Peter that's great. Thank you.

Kerry Holford: Thank you. Thank you, Kerry. So first on Jelenia, Marnie Cross, and then, Yeah, so our Q3 Jelenia decline is as expected, and it's been driven by some inventory decreases, which should bounce back. We have seen, as you know, a significant slowdown in the NBRX, especially in the S1P class. And Jelenia, due to its pre-testing and first dose observation, has seen a slowdown in the NBRX market.

All right perfect. Thank you next question operator.

Your next question comes from the line of Pat.

Hi, Good afternoon, hopefully you can hear me, Okay. Ross would you mind, just setting a setting the tone for the upcoming advisory company before and Christo and have said based on your conversations with.

Marie-France Tschudin: We've also seen a slower recovery in the S1P market versus others during this COVID pandemic. We have had a lot lower demand due to increased competition. There are new oral DMTs, and we have seen some switches happening with other competitors, higher RDs, and the fact that the full organizational focus is on driving new patient starts for Kesenta and Mason. So, you know, Jelenia continues to be the third most prescribed DMT worldwide. We know it's a high-efficacy oral. It's the only DMT prescribed to pediatric patients 10 years or older.

The agencies, what should we expect to be the focus of the Advisory Committee. That's one and then very quickly secondly for highly how do you kind of can you just remind us for your priorities for capital allocation as we get into kind of next year and especially how are you thinking about kind of stock buybacks was.

But that said luffman. Thank you.

Yeah, Karen Thank you for the questions on the on the Advisory Committee will see a ultimately with the FDA folks.

Focus is on I think our expectation is two major areas of focus one on the primary endpoint as you know the.

John Tsai: In the U.S., we'll continue to promote it in this population or patients who prefer orals, but our focus has clearly shifted. Thanks, Marie-France. About Canna Kinnaman, John?

Centrally adjudicated result, with narrowly missed the investigator a dedicated result.

Was in fact, a positive it met statistical significance a re analysis by an independent group also indicated a positive positive results of parsing those various results I think will be one major topic and then looking at the various subgroup analyses.

John Tsai: Yeah, for canakinumab and the first-line non-small-cell lung cancer study, Kerry, what Voss did mention earlier in the presentation is that the DMC did meet earlier this month and recommended that we continue the study without modifications, and this was an interim, as noted previously. We continue to have high thresholds for the interim analyses for both Canopy 1 and Canopy 2. The end analysis plan for Canopy 1 is in the second half of next year, and for Canopy 2, the end analysis is planned for the first half of next year, so those are the overall timelines. And we do have, Kerry, additional interim analyses, but we're not in a position right now to predict exactly when those are going to happen based on the statistics.

There was a clear trends for benefit in patients with it yeah up to a certain cut off roughly 57.

Present, as well as in women and how the ft. It might navigate navigate all of the above from a a labeling perspective, we expect those to be the major topics. So from a safety perspective don't expect major discussions Harry on the capital allocation.

Hi, Carol.

A year or so thank you.

Well sure probably a margin there was no change lower cap limitation or strategy first priority always hurts your investment.

Most susceptible to being disruptive growing dividends, and Switzerland, which we again.

John Tsai: We will, of course, keep everyone up to date when we have better visibility on Ludothera, Susanna. Yeah, thank you, Kerry, for the question. So Luthafera was more or less in line with the previous year, reaching 119 million. And it is, as you rightly say, impacted by COVID. But when you look at the different dynamics, for the US, we had a slight decline of 4%.

Expect to pay out then well.

Well, usually March next year or should.

As always some too.

So our htwo two of those in creating bolt on.

Core share buybacks. So it depends very much on what opportunities do you folks. We all know that's news on usually on M&A bolt on quite healthy premiums hopes to be page Adobe Super selective on low so let's see if we find them.

Up to 5% of all markets.

Susanna Schaffert: But on the other hand, in Europe, where the situation opened up again, we saw growth of 10% versus the previous year. We remain very confident in Luthafera, given the very strong profile of the product. As you remember, Luthafera has demonstrated an overall survival benefit over somatostatin treatment, and we still see very high interest for the product. However, we saw some postponement and cancellation of new patient starts. But we're still activating our plan for further growth. We are reaching out to the community level, where over 65% of the patients are treated, and we have very encouraging discussions there. So overall, we remain very confident, and the current softness is mostly impacted by COVID. And as soon as the situation is released, we expect to have new patients starting again. Very good

And should be notifying them of course share by bugs.

But always to be part of our total indication but to Forcepoint you.

Having said that we always do some share.

Share buybacks to avoid any dilution from our glu constipation programs. So that we don't do malls the ongoing commitment.

Commitment to not to lose all their shareholders.

Thanks, Terry. Thank you Karen next question. Please operator. Thank you next question comes from the line of Simon Baker listen.

Thanks, very much first a question on on Santos I Wonder if could you give us an idea of how important label carve outs of genetics Oh you in license. The recent polling to potentially go into some illegal in the class I took the case earlier this month.

And then secondly, I noticed on the slides dimension of luck sterner in a few notes no.

Vasant Narasimhan: We have a number of questions on the line. To ask the next set of questions, please limit yourself to one question, with no more than two subparts, so we can have the next question operator. Your next question comes from the line of Peter Welford. Hi, thanks for taking my question. Could I ask on Gilenya, just going back to that, whether you can provide us any visibility now on the timing of potential US generics after I think all the legal cases have now been finalized. And sorry, can I just go back to John just for clarification on Canna Kinemab.

No other common shopping if you could just give us an update on where you stand with luxton. Thanks, so much.

Thank you Simon on the Sandoz label carve outs for sure Yeah, no. It's a it's a really important interesting topic, I mean, clearly, but watching the progression now with Teva I think going to appeal.

On this on the on the T.S.K. Couric case.

Katy the Isa skinny labels as being a a routine routes to market, particularly in the U.S.

It really goes against ready the provision that they put in place and clearly as an industry, it's something we need to explore and consider how we challenge.

On a look sirna Muslims.

Yeah. So as you know we have a we have on the the rights for like Star not X X U.S. and we have certainly made a lot of progress in in making sure that we prepare centers from a training perspective too.

Peter Welford: I know you said that there were other interim analyses, I think you said, but is the second half 21 headline data that you're talking about, is that your best estimate for the final readout of Canopy 1, or is that your assessment of when we could next hear, which actually could be one of the next interim analyses? Thank you. Yes, I'll take, I can take both of these.

To manage the product I will say that during this call that period, we did see a complete stop to those surgeries as they were considered non urgent what we what we are seeing is we are seeing pickup happen now. So the hope has to be that such that we can continue this.

Vasant Narasimhan: On Jelenia, we are, of course, very pleased with the response of the district court to uphold our patent. We do understand the filer has filed an appeal. So over the next 12 to 18 months, that appeal will now unfold. Meanwhile, we continue to stand by our patents, including some of the more recent patents that have been issued. So, you know, we would expect, again, a court case that would potentially happen over the next 12 to 18 months. And in the meantime, we continue to operate as planned and continue to aggressively defend our IP. With respect to Canna Kinnamab, the final analysis for the second line study is expected in the first half of next year.

He missed children getting getting getting use of <unk>, let's turn on what we've seen an increase in approvals overall, we're working on reimbursement.

And making sure that centers are are basically apt and trains to administer the product.

Right. So it's definitely a slowdown, but but hopefully for the rest of the year and we'll get some will get as many children treated as possible.

Thanks, very front next question operator.

Thank you. Your next question comes from the line of Florence has today from Society Generale.

Good afternoon, everyone. Thanks for taking my question just two quick ones first full money home.

Amazing how could you please elaborate on what.

Vasant Narasimhan: And the final analysis for the first line study is in the second half of next year. There will be another interim analysis for both studies, both the second line and the first line. Learning from some of the disruptions that have happened with COVID, we would feel more comfortable not providing specific timings until we have a better sense of when exactly those interims will occur. Is that clear, Peter?

What is behind the acceleration of the product and if it is sustainable and my second question you finish them up for children.

Could you share with us how you believe it will differentiate this product that's his show kidney before which is in phase two thank you very much.

Thanks, Laura Amazement America.

Yeah. So I mean, we have we have seen an acceleration amaze and we're very happy to to show 41% quarter over quarter growth.

Peter Welford: That's great. Thank you. All right, perfect.

You know this is a unique set of patients and they then have unique data in this population showing 'em really great results in a in the CMS population, we've seen growth. Despite covered and this is just such a tribute to the fact that.

Vasant Narasimhan: Thank you. Next question, operator. Hi, good afternoon. Hopefully, you can hear me okay.

Vasant Narasimhan: Vas, would you mind just setting the tone for the upcoming advisory committee for Encresto and HESPES based on your conversations with regulatory agencies? What should we expect to be the focus of the advisory committee? That's one. And then, very quickly, secondly, for Harry, can you just remind us of your priorities for capital allocation as we get into kind of next year? And especially how are you thinking about the kind of stock buybacks versus business development?

ER physicians are identifying these patients and are bringing these patients to two treatment you know weve got blacks and in our Rx patient Onboarding is happening and it's easier. So we've improved when it comes to that and also we have a clear a clear positioning.

We've also launched in additional markets. So we've we've seen that Germany has about 1000 patients. We've also recently seen a nice nod from the UK and we're preparing to launch in China and Japan. So I think you can continue to see this growth saw quarter over quarter and year over year with.

Harry Kirsch: Thank you. Thank you for the questions. On the advisory committee, we'll see ultimately what the FDA focuses on. I think our expectation is two major areas of focus. One, on the primary endpoint, as you know, the centrally adjudicated result was narrowly missed, but the investigator-adjudicated result was, in fact, positive and met statistical significance.

Hi, Jason.

Thank you and John on Legalism it.

Thanks, Brian Thanks for the question on liberalism, Matt as you know legalism averages our anti GE that forms free complexes in buying Jessica.

Gee, we did have a publication earlier in the year and New England Journal, which compares liberalism Avon's CS you, where we showed significant benefits at 42% versus 26%.

Vasant Narasimhan: Thank you. As you probably imagine, there is no change in our capital allocation strategy. The first priority always remains the investment in your bank business.

In Xolair. So based on that we are moving forward, obviously and our fully recruited in our trial for winter wasn't that we expect to read out to be in the second half of next year, you asked about differentiation versus revenue Britain have BTK inhibitor. Currently we're still looking at we're awaiting the full results for.

Harry Kirsch: The second priority being an attractive, growing annual dividend in the Swiss franc, which we then expect to pay out in usually March of next year, should the AGM, as always, approve. The third priority is value creation both through M&A and for share buybacks. So it depends very much on what opportunities we find. We all know that these are, usually on MLA Bolton, quite heavy premiums have to be paid. And so we are super selective about them.

Remy Britain had been CS you. So obviously for any Britain and the vision oral versus localism mapping subcu formulation. So as we get more information on Remy Britain have I think we'll be able to clarify what the differentiation is between the two agents.

Harry Kirsch: And so let's see if we can find them up to 5% of our market cap. And should we not find them, of course, share buybacks will always be part of our capital allocation but the fourth priority. Having said that, we always do some share buybacks to avoid any dilution from our employee participation programs so that we don't announce the ongoing commitment to not dilute our shareholders. Thank you, Kerry. Thank you, Kerry.

Thank you very much thanks.

Next question operator.

And the next question comes from the line of Richard Vosser from JP Morgan.

Hi, Thanks for taking my question one please.

Fascinated me remarks about a continued improvement.

In the U.S. prescriptions, we've seen in terms of caveats are coming back with a vengeance maybe in Europe. So just your thoughts on on how new patient starts and a and your therapy is occurring in Europe and outside the U.S. to just give us a flavor going into Q.

Simon Baker: Next question, please, operator. Thank you, the next question comes from the line of Simon Baker from Redcliffe. Thanks very much. First, a question on SAMDOS.

Thanks very much.

Yeah. Thanks, Richard I think it's very variable situation, what I do believe is that it's variable by country and jurisdiction what at what I think is clearly the case those health care systems of one gotten better at managing Corvidae severe cold cases understanding when hospitalized went to bring patients into the IC you and therefore better managed.

Richard Saynor: I wonder, Richard, could you give us an idea of how important label carve-outs of genomics are for you in light of the recent ruling that potentially renders them illegal? And then, secondly, I noticed on the slides the mention of Lutz Stirner in a few of the footnotes but no other comment if you could just give us an update on where you stand. Thank you, Simon. On Sandoz label carvouts, Richard? Yeah, no, it's a really important and interesting topic. I mean, clearly, we're watching the progression now with Teva, I think, going to appeal the GSK Correg case. Clearly, the use of skinny labels has been a routine route to market, particularly in the US. It really goes against the provision that was originally put in place.

Hello, and I think second there is a broad recognition broadly also published in the academic literature that there is a substantial impact of this pandemic on non communicable diseases writ large the there's a I think a broadening desire and the public health community not to see that expands to trying to maintain patients ER visits schedules from.

In oncology in all of the various Noncommunicable. These can do these categories rheumatology cardiology, pulmonology dermatology ophthalmology et cetera.

Marie-France Tschudin: And clearly, as an industry, it's something we need to explore and consider how we challenge Lepsterne, Marie-France. Yeah, so as you know, we have the rights for Luxterna in the US and we have certainly made a lot of progress in making sure that we prepare centers from a training perspective to manage the product. We've seen an increase in approvals overall. We're working on reimbursement and making sure that centers are basically apt and trained to administer the product. So, definitely, a slowdown, but hopefully, for the rest of the year, we'll get as many children treated as possible. Thanks, Mary France. Next question, operator?

And then third from a different economic financial sustainability healthcare systems are quite motivated based on my conversations to all.

Also maintain their normal a bit their normal activities to to the extent possible I think for all those reasons. We certainly are seeing an impact of the second next wave in Europe, but there hasn't been thus far as severe as what we saw in April and May.

As Harry noted, we're hopeful that that will remain the case now we do see significant disruptions of course, we will have to adjust.

Accordingly, and I actually think that the similar situation in the U.S. or the U.S. appears right now to be a bit more resilient and making sure.

The health care systems operate also I think because of the financial strain those systems have been under.

Thank you Richard.

Next question operator.

Thank you. The next question comes from the line of Tim Anderson from both percentage.

Operator: Good afternoon everyone. Thank you very much for taking my questions. Two quick ones. First, for Marie-France on MaizeN.

Hi, Thank you for taking my question. This is Richard Wagner also from all different like plus a one for all regarding lag five to five year lag three inhibitor.

Marie-France Tschudin: Could you please elaborate on what is behind the acceleration of the product and if it is sustainable? My second question on Ligée Lisumab for John. Could you share with us how you believe you will differentiate this product versus your own? Thanks Laurent Mazin, Marie-Claude. Yeah, so I mean, we have seen an acceleration of MAZEN. We're very happy to show 41% quarter over quarter growth. You know, this is a unique set of patients. And MAZEN has unique data in this population showing really great results in the SPMS population. We've seen growth despite COVID. And this is just a tribute to the fact that physicians are identifying these patients and are bringing these patients to treatment. You know, we've got breadth in our Rx. Patient onboarding is happening, and it's easier. So we've improved when it comes to that. And also, we have a clear, clear positioning.

In Q2 as shown at the 2023 submission.

Dropped off of the submission slide wondering if you had some underwhelming data with this novel anyway, It's changed its prioritization I know, it's a high priority programs, but its relative to one either Io competitors, Bristol Myers Squibb, who have more than a luxury program. Thank you very much.

Thanks, Richard John I don't know if you have the latest on hung on luxury I certainly don't maybe yeah. So yeah.

Yes based on portfolio prioritization Tam, we made some decisions and the area that we were looking at was a lag in triple negative breast cancer, and we decided not to move forward in that indication so thats why chopped off.

Thanks, John next question Operator next question operator, they believe it's maybe a last question.

<unk> question comes from the line of travel from Credit Suisse.

Thank you two quick ones do you have any visibility on some of the stuff in Israel.

Eric and he I believe it was mentioned that Sandostatin generics in Europe, where effect to other oh, they're more countries, it's not becoming more serious issue and the second one on Cosentyx. Please.

Marie-France Tschudin: We've also launched in additional markets. So we've seen that Germany has above 1,000 patients. We've also recently seen a nice nod from the UK, and we're preparing to launch in China and Japan. So I think you can continue to see this growth quarter over quarter and year over year with Mason. Thank you. And John and Ligalism Ed.

I know that you say that there has been a drop in ER visits to dumb, but we are seeing in the first three.

Cautious of this year substantially higher prescription and sales growth. So there's obviously some increased competition here and I Wonder if you could address the competition angle as much as the lack of a patient.

John Tsai: Yeah, thanks, Lauren. Thanks for the question on Ligalizumab. As you know, Ligalizumab is our anti-IgE antibody that forms free complexes and binds up free IgE.

Patients I'm in the U.S. and I believe in Europe. He said, there's no mandatory use of Biosimilars I Wonder if you could expand on that comment too.

John Tsai: We did have a publication earlier in the year in the New England Journal, which compared Ligalizumab and CSU, where we showed significant benefits at 42% versus 26% in Zolair. So based on that, we are moving forward, obviously, and are fully recruiting in our trial for Ligalizumab. We expect a readout to be in the second half of next year. You asked about differentiation versus remibrutinib, a BTK inhibitor. Currently, we're still looking at...we're awaiting the full results for remibrutinib and CSU. So obviously, for remibrutinib, this is an oral versus Ligalizumab being a sub-Q formulation.

Thanks, Joe So first on sentences on them.

Yeah. Thank you Chuck So as you saw us understand insights were declining and this was mostly driven by generic of ocean in Europe.

I'd say there is two one generic that has received marketing authorization in Europe and has started commercial activities in limited countries, namely, Germany, France, UK and a few other smaller countries on the U.S. side, we know that that's one generic application going.

Lego Sone process.

John Tsai: Thank you very much. Thanks, John. Next question, operator. The next question comes from the line of Richard Vosser from JPL. Hi, thanks for taking my question. One, please.

But at the moment he has no further update.

And then on Cosentyx, the competitive dynamics very far.

Yes, I'll just start off by saying that it's a very competitive class.

And it's getting more competitive by the quarter on laws and but despite that.

Richard Parkes: You talked about in the opening remarks about continued improvement in US prescriptions we've seen in terms of COVID coming back with a vengeance maybe in Europe. So just your thoughts on how new patients start and your therapies are going in Europe and outside the U.S. to just give us a flavor going into Q4. Yeah, thanks, Richard. You know, I think it's a very fluid situation. What I do believe is that it's variable by country and jurisdiction.

Cosentyx continues to deliver very strong growth and if I can just take you through it.

We have first of all we had our first billion dollar quarter, which I think is definitely something to celebrate and we have seen a slowdown in the market. So if we look at and say the expansion of the market. This year versus last year I mean, there's clearly been a slowdown there has been more competition will get to the Biosimilars question second.

What we have seen as we've seen a faster recovery and the rheumatology space versus the dermatology space.

Vasant Narasimhan: What I think is clearly the case, though, is healthcare systems have, one, gotten better at managing COVID, severe COVID cases, understanding when to hospitalize, when to bring patients into the ICU, and therefore better managing the load. I think, second, there's a broad recognition, widely published in the academic literature, that there is a substantial impact of this pandemic on non-communicable diseases writ large. There's, I think, a broadening desire in the public health community not to see that expand, so trying to maintain patients' visit schedules in oncology in all of the various non-communicable disease categories, rheumatology, cardiology, pulmonology, dermatology, ophthalmology, et cetera. And then third, from just an economic and financial sustainability perspective, healthcare systems are quite motivated, I think for all those reasons, we certainly are seeing an impact of the second next wave in Europe, but it hasn't been, thus far, as severe as what we saw in April and May.

If we look a little bit more carefully at the U.S., we're maintaining trx share and MDR Sharron derm.

Even though you see the slower recovery and the increased competition of aisle 20 threes in the room space were actually growing three times trx versus the market year over year.

So what what our aspiration is to maintain our our share in Darren and accelerate in the rheumatology space.

If I look at you wear bio similars are are have entered and where there's mandatory use so its exclusively in some other markets in the EU, and namely, Germany, Spain and the UK.

What we've done is we've actually maintain their share in dermatology. After the initial entry of bio similars and and and the same with the rheumatology space, where we've seen the bio similars being being more use.

So what this means actually is that we're just seeing a delay in use for cosentyx in Europe, we still maintain a number one or number two position in most major markets.

And then with China, we're outperforming income and biologics and we expect NRT outlets thing in the first half of this year. So this all leads us to believe that that you know through the complete treatment approach of Cosentyx. We see you know very broad indications from the P. S O space to the Axiall five effect around the.

Vasant Narasimhan: And as Harry noted, we're hopeful that that will remain the case. Now, if we do see significant disruptions, of course, we'll have to adjust accordingly. And I actually think it's a similar situation in the U.S., that the U.S. appears right now to be a bit more resilient in making sure the healthcare systems operate, also because of the financial strain those systems have been under. Thank you, Richard. Next question, operator.

The fact that we believe that we and others will continue to grow this market. If you can consider the market penetration rates are the biologic penetration rates in both room and arm, they're still relatively low.

And the fact that Cosentyx, we were investing in future indications you can anticipate three additional indications in the room space three additional indications in the derm space. This will address approximately an additional 3.5 million patients. So for these reasons, we believe that Cosentyx you know despite the.

Richard Vosser: The next question comes from the line of Tim Anderson. Hi, thank you for taking my question. This is Richard Wagner for Tim Anderson.

Marie-France Tschudin: My question once again is regarding LAG-525, your LAG-3 inhibitor. In Q2, it was shown as a 2023 submission; it's dropped off of the submission slide. I was wondering if you had some underwhelming data with this novel in the way it changed its prioritization. Thanks Richard. John, I don't know if you have the latest on LAG-3. I certainly don't.

Oh down of coal that despite the competition. Despite the biosimilars, we have the potential to go beyond 5 billion in sales.

Thanks, very fine. So I think we have two more perhaps questions on the line operator, please take the muscle. Thank you. The next question comes from the line.

She wants something somehow.

Hi, there. Thanks for taking my question, just one picture one on MSG and somebody being a big topic, when discussing novartis with investors and you're sitting at a concerted efforts, including the racing to what extent have those assets acquired.

John Tsai: Yeah, based on portfolio prioritization, Tim, we made some decisions, and the area that we were looking at was lag and triple negative breast cancer, and we decided not to move forward in that indication. So that's why it's dropped off.

Actually led to better financial or operational outcomes and is that they're seeing the earliest CSS come at the expense of the bottom line to submit a color on what you're seeing there.

John Tsai: Thanks, John. Next question. I believe it may be our last question. Themes from the line of Joe Watt: Thank you. Two quick ones.

Joe Watt: Do you have any visibility on sandstatin LAR generics? I believe it was mentioned that sandstatin generics in Europe were a factor. Are there more countries?

Thanks, Ross I think I think the U.S.D. efforts have had multiple benefits for us has been a big focus for US were really pleased not only to have gotten into.

Important rating number one ratings across many of the agency is.

Joe Watt: Is that becoming a more serious issue? So there's obviously some increased competition here, and I wonder if you could address the competition angle as much as the lack of DERM patients in the U.S. And I believe in Europe you said there's now mandatory use of biosimilars. I wonder if you could expand on that comment, too. Thanks, Joe. So first on SAMHSA, this is Emma.

Also in various specialty rate agencies and climate and diversity also moved off of the Red list for M. A C. I was I think a lot of investors had on their minds. All of that is cleared off the table, but I see a few fundamental benefits for for U.S. Yoo first with our own associates, it's a huge motivator to be a leader in that space I think for our people.

Richard Saynor: Yeah, thank you, Joe. So, as you saw, standard statins were declining, and this was mostly driven by generic erosion. In Europe, at date, there is one generic that has received marketing authorization in Europe and has started commercial activities in limited countries, namely Germany, France, the UK, and a few other small countries.

If if more than 50% millennial. This is a huge topic. So we see it as an element of our own story internally I think second with a broader stakeholder group the issuance as the case that the issuance of our bond led to me they get very positive feedback from range of stakeholders ranging from ministers of health.

You know very senior people in government the Gates Foundation, and so I think it creates the ability to have a broader conversation about your company and the impact on the impact you're trying to have and then lastly, we do believe that getting a much more efficient on how we use energy much more diverse and how we.

Marie-France Tschudin: On the US side, we know that there's one generic application going through Legos' early process, but at the moment, we have no further updates. And then there are Cosentyx competitive dynamics. Yes, I'll just start off by saying that it's a very competitive class, and it's getting more competitive by the quarter almost, but despite this, Cosentix continues to deliver very strong growth, and if I could just take you through it. We had, first of all, our first billion-dollar quarter, which I think is, you know, definitely something to celebrate. And we have seen a slowdown in the market. So if we look at the expansion of the market this year versus last year, I mean, there's clearly been a slowdown.

Source and bringing people into the company I get it to be a leader in building markets in emerging markets and low income and loan middle income countries through our work in Africa.

All of these things will benefit novartis strategically for us for the long term from a talent markets and all of the fundamentals of the business. So I actually think it's totally sensible we talked about it as a leadership team and a committee that I share. We systematically have the targets, which we published transparently I think we have a leadership team is very passionate.

Marie-France Tschudin: There's been more competition; we'll get to the biosimilars question in a second. And what we have seen is we've seen a faster recovery in the rheumatology space versus the dermatology space. If we look a little bit more carefully at the U.S., we're maintaining TRX share and NBRX share in Durham. Even though you see this slower recovery and the increased competition of IL-23s, in the room space, we're actually growing three times TRX versus the market year over year. So what our aspiration is is to maintain our share in Durham and accelerate in rheumatology. If I look at the EU, where biosimilars have entered and where there's mandatory use, so it's exclusively in some of the markets in the EU, and namely Germany, Spain, and the UK, what we've done is we've actually maintained the share in dermatology after the initial entry of biosimilars. And the same with the rheumatology space, where we've seen biosimilars being used more. So what this means, actually, is that we're just seeing a delay in the use of cosensics in Europe. However, we still maintain a number one or number two position in most major EU markets.

Got it and again in the long run it will go on shop in the quarters, but it will show up in the long run trajectory of the company better so.

Thanks for the question or US next to last question I believe.

Thank you and the final question comes from the line of Richard Parkes from Exane BNP.

Hi, Thank you very much for taking my question just one on it's kind of it looks like you're also initiating a phase three and RJ.

Okay. So.

<unk> not want to talk about this phase two that come to this purpose, but maybe you could compare your experience with the phase two trials and things take longer oxy and dodging the perfectly to the previously quoted on INTECH experienced with the closing up and [noise].

Also how you're thinking about the safety of the drug drug in terms of infection risk and how that's developing of conflicting opinions from experts, but there's obviously, a greater or lesser risk of serious infection. We try to be inhibition. So I'd be interested in your perspective. Thank you.

Marie-France Tschudin: And then with China, we're outperforming incumbent biologics, and we expect NRDL to list in the first half of this year. So this all leads us to believe that, you know, through the complete treatment approach of cosensics, we see, you know, very broad indications from the PSO space to the axial spas spectrum. The fact that we believe that we and others will continue to grow this market, if you can consider the market penetration rates or the biologic penetration rates in both room and derm, they're still relatively low. And the fact that Cosensics, we are investing in future indications. You can anticipate three additional indications in the room space and three additional indications in the derm space.

Thanks for the question Richard John.

Yes. So thanks for the question Richard across the Board as you know for Tucker band, we're looking at multiple indications.

CNH as well as a C G III Jay as far as idiopathic membranous nephropathy for as we're looking across the board for C. G. What we see is obviously the data that we shared recently for Hi, Jay where the full data set is going to be out there or early part of next year.

Marie-France Tschudin: This will address approximately an additional three point five million patients. So for these reasons, we believe that cosensics, you know, despite the slowdown of COVID, despite the competition, despite the biosimilars, we have the potential to go beyond five billion. Thanks, Marie-France. I think we have two more, perhaps, questions on the line. Operator, please take the next question. The next question comes from the line of Na

As we look at the opportunity. It is a there's no disease modifying treatments out there currently and so the profile that we're seeking is one where we do believe there's benefit you asked specifically about infection risk so far based on our phase two studies.

We see that it's well tolerated.

We haven't seen significant increases infections across the board and Thats across both high J C G as well as in the P. and age so I make with all of that information, we will have a large pool of safety information and move forward and all of these indications so I'll leave it there hopefully that answers your question.

Unknown Executive: Hi there, thanks for taking my question. Just one big picture one on ESG. It's obviously been a big topic when discussing Novartis with investors, and you clearly made a concerted effort to improve the rating. To what extent have those efforts surprised you in that they actually led to better financial or operational outcomes? And is it unfair to assume that all ESG efforts come at the expense of the bottom line? Just a bit of color around what you've seen.

Thank you.

Perfect. Thanks, everyone for joining the call hope everyone sees the safe and healthy never done difficult time, so well continue to drive the growth of Novartis were confident in the long term outlook of the company I hope increasingly all of you will be as well and we'll look forward to keeping you up to date. Thank you.

Vasant Narasimhan: Thanks. Thanks, Naresh. I think the ESG efforts have had multiple benefits for us. It's been a big focus for us. We're really pleased not only to have gotten important ratings, number one ratings across many of the agencies, also in various specialty agencies in climate and diversity, but also to have moved off of the red list for MSCI, which I think a lot of investors had on their minds. All of that is cleared off the table.

Thank you ladies and gentlemen.

For today. Thank you all for participating and you may now disconnect.

[music].

Vasant Narasimhan: But I see a few fundamental benefits for ESG. First, with our own associates, it's a huge motivator to be a leader in this space. I think for our people, more than 50% of whom are millennials, this is a huge topic. So we see it as an element of our own story internally.

Vasant Narasimhan: I think second, with a broader stakeholder group, the issuance, as in a case study, of our bond led to me getting very positive feedback from a range of stakeholders, ranging from ministers of health, you know, very senior people in government, the Gates Foundation. And so I think it creates the ability to have a broader conversation about your company and the impact you're trying to have. And then lastly, we do believe that getting much more efficient in how we use energy, much more diverse in how we source and bring in people into the company, and getting to be a leader in building markets in emerging markets and low and middle income countries through our work in Africa. All of these things will benefit Novartis strategically for the long term, from a talent market and all of the fundamentals of the business. So I actually think it's totally sensible.

Vasant Narasimhan: We talked about it as a leadership team in a committee that I chair; we systematically have the targets, which we've published transparently. I think we have a leadership team that's very passionate about it. And again, in the long run, it won't show up in the quarterly results, but it will show up in the long-term trajectory of the company.

Unknown Executive: Thanks for the question, Naras. Next, last question, I believe. Thank you. And the final question comes from the line of Richard Parkes: Hi, thank you very much for taking my question. Just one on iptocopam.

Richard Parkes: It looks like you're also initiating phase three of IgA nephropathy. So I know you might not want to talk about the phase two data until it's published, but maybe you could compare your experience with the phase two trials in C3 glomerulopathy and IgA nephropathy to the previously reported anecdotal experience with Clusimab and also how you think about the safety of the drug in terms of infection risk and how that's developing. I've heard conflicting opinions from experts about whether there's likely to be a greater or lesser risk of serious infection with factor B inhibition, so I'd be interested in your perspective.

John Tsai: Thank you. Thanks for the question, Richard. John?

John Tsai: Yeah, so thanks for the question, Richard. Across the board, as you know, for iptocopam, we're looking at multiple indications, PNH, as well as C3G, IgA, as well as idiopathic membranous nephropathy. As we're looking across the board for C3G, what we see is obviously the data that we shared recently. For IgA, the full data set is going to be available in the early part of next year. As we look at the opportunity, there are no disease-modifying treatments out there currently.

John Tsai: And so the profile that we're seeking is one where we do believe there's benefit. You asked specifically about infection risk. So far, based on our Phase II studies, we see that it's well-tolerated. We haven't seen significant increases in infections across the board, and that's across both IgA and C3G, as well as in the PNH. So I think with all of that information, we will have a large pool of safety information as we move forward with all of these indications. So I'll leave it there. Hopefully, that answers your question.

[music].

Vasant Narasimhan: Thank you. Perfect. Thanks, everyone, for joining the call. I hope everyone stays safe and healthy and energised in these difficult times. We'll continue to drive the growth of Novartis. We're confident in the long-term outlook of the company.

I hope increasingly all of you will be as well and we'll look forward to keeping you up to date. Thank you. Thank you. That does conclude your call for today. Thank you all for participating. May 9, [inaudible] ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? ???