Q1 2021 Novartis AG Earnings Call

[music].

Good afternoon, and welcome to Mr. Phosphorus Q1, 2021 results release conference call.

Operator: Good afternoon and welcome to the Novartis Q1 2021 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 the website shortly after the call ends.

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 one that's at any time during the conference.

Recording of the conference call, including the Q&A session will be available on our website. Shortly after the call ends she does anyone need assistance during the conference call. They may signal the appraised by pressing star and say all right with that I would like to hand over to Mr. Samir Shah Global head of Investor Relations. Please go ahead Sir.

Operator: Should anyone need assistance during the conference call, they may signal the operator by pressing star and zero. With that, I would like to hand over to Mr. Sameer Shah, Global Head of Investor Relations. Please go ahead, sir.

Samir Shah: Thank you very much and good morning and good afternoon, everybody. Thank you for taking the time to join us on the Q1 Results Conference call. We appreciate that you are here.

Thank you very much and good morning, and good afternoon, everybody. Thank you for taking the time to join US from the Q1, we've got this conference call. We appreciate your taking the time.

Samir Shah: I appreciate that you are taking the time. Before we start, I just want to go through the safe harvest.

Before we start I just wanted to go through the Safe Harbor statement.

Samir Shah: The information presented today contains forward-looking statements that,

Information presented today contains forward looking statements that involve known and unknown risks uncertainties and other hard to accuse me of course, I truly loved to be materially different from any future results performance or achievements expressed or implied by such statements for a day.

Samir Shah: It involves known and unknown risks, uncertainties, and other factors. These may cause actual results to be different.

Samir Shah: Is there a difference from any future results?

Samir Shah: performance or achievements expressed or implied by such statements. For a description of some of these factors,

Christian or some of these factors please refer to the company's form 20-F, and its most recent quarterly results from one 6K that respectively.

Samir Shah: 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 Committee. And with that, I'll now hand it over to Vas.

Oh, great and furnished to the U S Securities and Exchange Commission.

And with that I'll now hand across to us.

Thank you Samir and thanks again for everyone for joining today's conference call with me today I have Harry Kirsch, Our Chief Financial Officer, Marie France, <unk>, our president of Novartis Pharmaceuticals, Susanne Schaffert President of Novartis oncology, John Tsai, our head of global drug development and Chief Medical Officer.

Vasant Narasimhan: Thank you, Samir. And thanks again to everyone 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, Suzanne Schaffert, our President of Novartis Oncology, John Tsai, our Head of Global Drug Development and Chief Medical Officer, Richard Saynor, our Head of Sandoz, Tom Kendris, who is our Chief Legal Officer at Interim, and Samir, who you've just heard from So moving to the next slide, what I'd like to do is give you an overview of our performance and then dive a little bit deeper into the four key areas as part of the overview section before handing it over to our business leaders.

Richard <unk>, our head of Sandoz, Tom Kendrick, who is our chief legal officer at interim and Samir, who you've just heard from.

So moving to the next slide.

I'd like to do is give you an overview of our performance and then dive a little bit deeper into the four key areas as part of the overview section before handing it over to our business leaders first and foremost we feel confident in the growth outlook of the company, particularly given the momentum we're seeing in innovative medicines and the expected stabilization we foresee.

Vasant Narasimhan: First and foremost, we feel confident in the growth outlook of the company, particularly given the momentum we're seeing in innovative medicines and the expected stabilization we foresee in the Sandoz business. From a productivity standpoint, when you control for forward purchasing, we continued our expansion of our core margin, and I'll say more about that in a moment. We had multiple important milestones from an innovation standpoint, and I'll go into a little more detail as to some of the upcoming milestones and some of the updates we have in our phase two and phase three pipeline, which we view as one of the leading pipelines in the industry.

And the Sandoz business from a productivity standpoint, when you control for forward purchasing we continued our expansion of our core margin and I'll say more about that in a moment, we had multiple important milestones from an innovation standpoint, and I'll go into a little more depth as to some of the upcoming milestones and some of the updates we have in our <unk>.

Two in phase III pipeline, which we view as one of the leading pipelines in the industry and lastly in ESG, we continue to our March to being a sector leader within the pharmaceutical and biopharmaceutical sector as well as being a leader across sectors ranked number two in the access to medicines index. The number one and sustain Olympics and I'll talk a little.

Vasant Narasimhan: And lastly, in ESG, we continue our march to being a sector leader within the pharmaceutical and biopharmaceutical sector, as well as being a leader across sectors, ranked number two in the Access to Medicines Index and number one in Sustainalytics, and I'll talk a little bit more about that in a moment. So going to the next slide, starting with the growth outlook. Our key growth drivers really demonstrated that they were returning to momentum in Q1.

More about that in a moment.

So going to the next slide starting with the.

The growth outlook, our key growth drivers I really demonstrated that they're returning to momentum over Q1, we had strong performance with brands such as Entresto, So dense and co centric on the pharmaceutical side as well as a very good performance from brands like <unk>, Kim Ryan and solid performance.

Vasant Narasimhan: We had strong performance on brands such as Entresto, Zolgensma, and Cosentix on the pharmaceutical side, as well as very good performance from brands like Lutiferra, Kymriah, and solid performance from Kiscali on the oncology side. In addition, Cosimta is off to a very strong start, and Mary France will talk more about the Cosimta launch.

From kits gallium your oncology side. In addition to simple is off to a very strong started Marie France will talk more about this.

Cause them to launch that when you take it together are key growth drivers and launches now are growing 20% and amounting to 48% of our total sales and we expect this number to continue to climb over the coming years, enabling us to deliver the midterm growth, we outlined and to meet them up to Novartis management presentation, we had lots of Nova.

Vasant Narasimhan: Now, when you take it together, our key growth drivers and launches are now growing 20% and amounting to 48% of our total sales. And we expect this number to continue to climb over the coming years, enabling us to deliver the midterm growth we outlined in the Meet the Martini of Artists Management presentation we had last November. As a proof point, when you exclude forward purchasing, our innovative medicines business grew 3% in the quarter in constant currencies.

Remember.

As a proof point when you exclude forward purchasing our innovative medicines business grew 3% in the quarter in constant currencies now moving to the next slide.

Vasant Narasimhan: Now, moving to the next slide. We're also confident that we can continue to deliver the core margin expansion that we've committed to. In the near term, that would be in the mid to high 30s, excuse me, and in the midterm, it would be in the high 30s.

We're also confident that we can continue to deliver the core margin expansion that we've committed to in the near term that would be in the mid to high <unk> in the near term excuse me and in the midterm it would be in the high <unk>. When you look at our Q1 underlying performance when again you take into account forward purchasing that we saw.

Last year, you had core op, Inc growth of plus 6% and core margin growth of a point, bringing us to $36 three well on our way to getting to that high <unk> score the drivers of that expansion with sales momentum on our key on our key products as well as the continued productivity program.

Vasant Narasimhan: And when you look at our Q1 underlying performance, when, again, you take into account forward purchasing that we saw last year, you had core op-int growth of plus 6% and core margin growth of a point, bringing us to 36.3, well on our way to getting to that high 30s goal. The drivers of that expansion were sales momentum on our key products, as well as the continued productivity program in Novartis technical operations. Our goal is to deliver $2 billion in savings in the next few years.

In Novartis technical operations, where our goal is to deliver $2 billion in savings in the next few years.

Continue to evolve our ways of working delivering savings from our newly created customer technology solutions organization, which integrates data and digital as well as Novartis business services to even accelerate the overall way of working inside of Novartis.

Moving to slide eight.

Sandoz did have a difficult quarter, which was impacted by price erosion as forward purchasing in a historically low cough and cold season. The first thing to note is we were cycling an exceptionally strong prior year quarter and you can see some of the figures here, but for example, the total sales Sandoz was up 11.

Vasant Narasimhan: And we continue to evolve our ways of working, delivering savings from our newly created customer technology solutions organization, which integrates data and digital, as well as Novartis Business Services, to even accelerate the overall way of working inside of Novartis. We're moving to slide eight. Sandoz did have a difficult quarter, which was impacted by price erosion as forward purchasing and a historically low cost in the cold season.

Percent Q1, 2020 and of course this quarter were down 13% because some of the underlying factors that we see impacting this many of them are sector wide. So price erosion of 10%, which we saw across Europe and U S. In our key markets.

The forward purchasing as well as weak demand in cough and cold retail as well as some of the impacts of the retention of the aurobindo business in oral solids in the in the U S. On a positive note. Our biopharma business continues to grow and continues to be a leader in many regions around the world, We expect business the business to stabilize.

Vasant Narasimhan: The first thing to note is we had an exceptionally strong prior year quarter. And you can see some of the figures here. But, for example, the total sales of Sandoz were up 11% in Q1 2020. And, of course, this quarter, we're down 13%.

In the second half as the pandemic eases we accept.

Spectra biosimilars to outperform in the competitive European market, we expect to see our retail European business rebound and we also have an increasing number of launches both across biosimilars in geographies outside of the U S and Europe as well as in small molecules in the second half so that'll be a key area of focus for us as we continue to get Sandoz.

Vasant Narasimhan: Now, some of the underlying factors that we see impacting this, many of them are sector-wide, so price erosion of 10%, which we saw across Europe and the US in our key markets. I mentioned forward purchasing, as well as weak demand in cough and cold retail, as well as some of the impacts of the retention of the Orobindo business and oral solids in the US. On a positive note, our biopharmaceutical business continues to grow and continues to be a leader in many regions around the world. We expect the business to stabilize in the second half as the pandemic eases. We expect our biosimilars to outperform in the competitive European market. Additionally, we expect to see our retail European business rebound.

Back to growth.

So moving to slide nine.

From a pipeline and innovation standpoint, it was a busy quarter youre well aware of the approval of Entresto in patients with a below normal left ventricular ejection fraction updates to concentrix label and approvals and consents.

In terms of Readouts the vision study read out positive on both radar.

Radio.

<unk> PFS as well as on overall survival and we look forward to presenting that impressive data at an upcoming medical Congress.

The positive readout of Concentrix and juvenile idiopathic arthritis, which we now are moving towards filing and will continue to enable us to expand because census indication, where we have a goal of getting to nine indications or formulations to enable <unk> to continue to drive dynamic growth over this decade.

Vasant Narasimhan: And we also have an increasing number of launches, both across biosimilars in geographies outside of the US and Europe, as well as in small molecules in the second half. So that'll be a key area of focus for us as we continue to get Sandoz back to growth. Moving to slide nine.

LNP of Taco Penn had a positive readout in Iga nephropathy, and we'll look forward to preventing that data in upcoming Congress and we have already initiated the phase III program, you'll remember that Iga nephropathy is one of the larger indications we have for this medicine. We also had a positive readout, which we have already stated in pn H in the face.

Vasant Narasimhan: From a pipeline and innovation standpoint, it was a busy quarter. You're well aware of the approval of Entresto in patients with a below normal left ventricular ejection fraction, updates to Cosensics' label, and approvals for Cosimta. In terms of readouts, the vision study read out positive on both PFS and RPFS, as well as on overall survival, and we look forward to presenting that impressive data at an upcoming Medical Congress. We had a positive readout of Cosensics in juvenile idiopathic arthritis, which we are now moving towards filing and will continue to enable us to expand Cosensics' indication, where we have a goal of getting to nine indications or formulations to enable Cosensics to continue to drive dynamic growth over this decade.

We started there and we're expecting additional readouts, which I'll talk about in a moment. We did have the results of Entresto in the post Ami setting where it had a high hurdle trying to demonstrate superiority to ramipril in a very fragile patient population. These are patients who have recently had a myocardial.

<unk> Entresto had a consistent positive trend across all the primary infected at secondary endpoints, but did not meet statistical significance for superiority did demonstrate a very strong safety profile and we'll look forward to discussing the data further but with regulators in the months to come and lastly, youre aware of the Chemokine in second line readout.

So some other designations in submissions from the bottom of the slide but I'd like to move to the next slide and take a little bit of time to go through some of the updates on our expected milestones across our key programs and lifecycle management Pharmaceuticals, and oncology I already mentioned, the Entresto and Concentrix information on consensus.

Vasant Narasimhan: The LNP, Iptaclopan, had a positive readout in IgA nephropathy, and we'll look forward to presenting that data at an upcoming Congress, and we have already initiated the Phase III program. You will recall that IgA nephropathy is one of the larger indications we have for this medicine. We also had the positive readout, which we have already stated in PNH, and Phase III started there, and we're expecting additional readouts, which I'll talk about in a moment.

We are on track for the Hydro Adenitis Super Akiva Phase III Readouts in the second half of 2021.

Golly importantly, we have completed enrollment of the adjuvant study.

Medium and high risk patients since the analyst day, a bit more about what happened to read out in 2022 with respect to Latvia, where we remain on track for our CRO. Our response to be submitted in the Q2 Q3 timeframe. We've also completed a tech transfer into our shops enough facility and are in Austria and are evaluating that.

Vasant Narasimhan: We did have the results of Entresto in the post-AMI setting, where it had a high hurdle trying to demonstrate superiority to Ramipril in a very fragile patient population. These are patients who have recently had a myocardial infarction.

The best way to submit that response now with the FCA.

And I think those are some of the key highlights on lifecycle management and determining to pharmaceuticals.

Portfolio I've already mentioned on LNP zero to three some of the key milestones, but I think the key thing here is that we're continuing to rapidly move across a broad range of indications into phase III. The other highlight I wanted to mention as brand a plan, where we have completed the phase one study and we look forward to providing that information.

Vasant Narasimhan: Entresto had a consistent positive trend across all the primary and secondary endpoints but did not meet statistical significance for superiority. It did, however, demonstrate a very strong safety profile, and we'll look forward to discussing the data further with regulators in the months to come.

In an upcoming medical Congress, we have also completed discussions with the regulators to finalize the phase <unk> study design and plans to start that study in the second half of 2021.

And then moving to oncology I think very important mechanic Kinder Mab studies remain on track in first line and adjuvant, but as important in many ways now the loopy SMA studies in the early lines of therapy.

In hormone sensitive prostate cancer is have begun and we look forward to enrolling the studies rapidly with a planned readout from 2024.

Vasant Narasimhan: So, some other designations and submissions are on the bottom of the slide, but I'd like to move to the next slide and take a little bit of time to go through some of the updates on our expected milestones across our key programs in lifecycle management, pharmaceuticals, and oncology. I have already mentioned the Entresto and Cosentix information. On Cosentix, we are on track for hydroadenitis superattiva Phase III readouts in the second half of 2021.

Moving to the next slide.

You probably will have seen that we've completed our in licensing agreement for <unk> with Beijing, and we didn't have the readout of two important readout of studies that will enable submissions over the course of this year first and second line non small cell lung cancer at ACR you can see the data here on the right with solid.

Overall survival data and then also in esophageal cancer, where the study.

Met its primary endpoint prolonging os's versus chemo and we will.

Provide that data release as well as an upcoming Congress. So these these studies will enable ex China filings, which are on track for 2021, and we have 15 potential registration, enabling studies ongoing as well as a broad range of combination studies in the program.

Vasant Narasimhan: In Cascali, importantly, we have completed enrollment in the adjuvant study in medium- and high-risk patients, and Stan will say a bit more about that, but a readout in 2022. With respect to Lectio, we remain on track for a CRL response to be submitted in the Q2-Q3 timeframe. We've also completed a technology transfer into our Schaffner facility in Austria and are evaluating the best way to submit that response now with the FDA. And I think those are some of the key highlights on lifecycle management.

Now moving to the next slide.

I wanted to close just by noting our our commitment across the company in areas of high materiality for Novartis to advance our efforts.

In ESG and returning and building Trust with Society I mentioned, the ranking we have known and sustain a lytic. We're the only company amongst our peer set now ranked with a low risk in the sustain Olympics ranking also an access to medicines index a number two ranking but we were very proud of our number one ranking in product delivery our ability to bring on.

Our innovative medicines to patients most in need and low in low and middle income countries. Other highlights include a agreement with Bill and Melinda Gates Foundation on bringing transformative therapies to patients in sickle cell disease as well as being included in the Bloomberg gender equality index and of course, you're aware of our ongoing efforts in COVID-19 to provider man.

Vasant Narasimhan: Now, turning to pharmaceuticals, the portfolio, I've already mentioned on LNP023 some of the key milestones, but I think the key thing here is that we're continuing to rapidly move across a broad range of indications into Phase III. The other highlight I wanted to mention is Branaplam, where we have completed the Phase I study, and we look forward to providing that information at an upcoming medical congress. We have also completed discussions with regulators to finalize the design of the Phase IIb study and plan to start that study in the second half of 2021.

Are you factoring capacity as well as to collaborate with molecular partners as well as our own in house oral program per Pan COVID-19 oral protease inhibitor to hopefully bring therapeutics overtime to help with the long term control of COVID-19.

So that gives you a little bit of an overview I'd like to hand, it over now to married fronts to dive a little bit deeper into pharmaceuticals or France.

Thank you Matt good morning.

Good afternoon, I'm pleased to update you on our Q1 performance for pharma.

We had revenues of $6 3 billion this quarter and while the overall growth rate was affected versus Q1 2020, our growth drivers and launches are showing excellent momentum with 23% growth versus prior year.

Vasant Narasimhan: And then moving to oncology, I think very important to Ken, echinomab studies remain on track in first line and adjuvant. But, as important in many ways now, the loopy SMA studies in the early lines of therapy and in hormone sensitive prostate cancer have begun, and we look forward to enrolling the studies rapidly with a planned readout in twenty twenty four. Moving to the next slide.

What is noteworthy is that half of our revenues are now coming from our growth drivers and launches.

This is a result of clear portfolio prioritization.

Our relentless focus on commercial execution.

We've also double down on early launch preparation and our investments reflect that.

If we move to slide 15.

Cause context, our largest brand delivered double digit growth.

As we had in Q4, we've seen an access change and one U S accounts, which has impacted volume.

Vasant Narasimhan: You probably will have seen that we've completed our in-licensing agreement for Tissolizumab with Baygene, and we did have the readout of two important studies that will enable submissions over the course of this year. First and second line non-small cell lung cancer at ACR.

Although the shares were affected we will continue to deliver double digit growth from the U S based.

Based on the rebate upside realized and the volume growth over time.

Overall axis remained strong in the U S and continues to be a key pillar of our strategy.

Vasant Narasimhan: You can see the data here on the right with solid overall survival data, and then also in esophageal cancer where the study has met its primary endpoints along the OS versus chemo, and we'll provide that data release as well at the upcoming Congress. So these studies will enable X China filings, which are on track for 2021. And we have 15 potential registration-enabling studies ongoing as well as a broad range of combination studies in the program. Then move to the next slide.

Other constant is that customers continue to experience cost context is a tried and trusted complete treatment.

Now that the shares have adjusted to the new access levels. We are back to our position that we will grow with the market in dermatology and outgrow the market in rheumatology.

Extra what our focus is on accelerating volume growth.

We're off to a great start in China, following our N RDR listing in March in Europe.

<unk> continues to be the leading originator biologic across all three indications.

As we bring the newer indications to market, we expect some pricing concessions in Europe and that will only further enable volume driven growth.

Vasant Narasimhan: I wanted to close just by noting our commitment across the company in areas of high materiality for Novartis to advance our efforts in ESG and building trust with society. I mentioned the ranking we have now in Sustainalytics. We're the only company amongst our peers that now ranks with a low risk in the Sustainalytics ranking and also in the Access to Medicine Index, a number two ranking, but we were very proud of our number one ranking in product delivery, our ability to bring our innovative medicines to patients most in need in low and low and middle income countries.

Full year, we're confident that the concentrix team can deliver double digit growth based on our strategic pillars.

Focus on strong access globally geographic expansion and our leading.

Industry approach to data.

Beyond 2021 are ambitious lifecycle program provides further upside opportunities for the future.

Slide 16.

Entresto is doing extremely well with strong growth across the globe and the U S. We're seeing a convergence of events.

Sessions are adopting the ACC expert consensus recommendations for Entresto in first line, we're seeing recovery from COVID-19 and enthusiasm around the expanded indication.

It's great to see the growing confidence to go direct to the army, which is reflective of the strong evidence behind entresto.

Vasant Narasimhan: Other highlights include an agreement with the Bill and Melinda Gates Foundation on bringing transformative therapies to patients with sickle cell disease, as well as being included in the Bloomberg Gender Equality Index. And of course, you're aware of our ongoing efforts in COVID-19 to provide our manufacturing capacity, as well as to collaborate with molecular partners, as well as our own in-house oral program for pan-COVID oral protease inhibitors to hopefully bring therapeutics over time to help with the long-term control of COVID-19. So that gives you a little bit of an overview. I'd like to hand it over now to Mary Franz to dive a little bit deeper into pharmaceuticals. Mary Franz

We're seeing all time highs in MBR axis the label in the U S. Now covers five out of six patients with chronic heart failure and this makes it easy for physicians to initiate appropriate patients.

We now estimate that about $3 2 million patients are being treated with entresto. Today. This is a big achievement and a testament to the exquisite execution of the teams from the field.

We now have 30% share of the half breath patients from the U S.

So there remains significant room to grow at 70% of vast patients are still on prior standard of care and we've only just started to promote in the past population.

If I move to slide 17, Hello, Jonathan I had a strong quarter, which was driven by reimbursement wins in a number of European markets, while the U S continued its steady trend.

And every new country initially as a bolus of patients and then moving to a steady state you can expect to see some volatility in the quarterly sales pattern.

Mary France: Good morning, good afternoon. I'm pleased to update you on our Q1 performance for pharma. We had revenues of $6.3 billion this quarter, and while the overall growth rate was affected versus Q1 2020, our growth drivers and launches are showing excellent momentum with 23% growth versus the prior year. What is noteworthy is that half of our revenues are now coming from our growth drivers and launches. This is a result of clear portfolio prioritization and a relentless focus on commercial execution. We've also doubled down on early launch preparation, and our investments reflect that. If we move the slide to STEAM,

We have new compelling data uncle John's months efficacy in pre symptomatic patients. We're also initiating a new phase III trial called smart.

Strengthen our confidence for children up to 21 kilograms in knee.

We're on track with our preclinical studies for the IV formulation, which would also allow us to bring his own jasmine to all their children.

Our five year durability data confirms what is this medicine can offer one single treatment and this is what really sets <unk> apart and why we are relentlessly progressing our gene therapy agenda with two more ind's plan this year.

If we move to slide 18.

With cause center, we're bringing a high efficacy b cell therapy to patients early in their disease.

Our new pair of data builds on the strong efficacy profile already shown in our pivotal trials.

Because since I can reduce disease progression that happens independent of relapses by up to 60%. When used early we believe this is incredibly meaningful data for patients because per actually accounts for the majority of progression.

Mary France: Cosuntix, our largest brand, delivered double-digit growth. As we said in Q4, we've seen an access change in one U.S. account which has impacted volumes. Although the shares were affected, we will continue to deliver double-digit growth in the U.S. based on the rebate upside realized and the volume growth over time. Our overall access remains strong in the U.S. and continues to be a key pillar of our strategy. The other constant is that customers continue to experience Cotentix as a tried and trusted complete treatment.

The state is unique in its early patient population.

While the pandemic is still impacting the dynamic market in the prescribing behavior.

All the metrics that are in our control are tracking positively.

Seeing more than 50 per cent use in personal lines per switch, which is exactly aligned to our value proposition.

The team has also done a great job on access in fact that the conversion from free to paid products is ahead of plan.

This is reflected in the Q1 numbers, which also include a 9 million revenue adjustment relating to Q4 and 2020 and why we now expect 65 per cent of sales in the second half of the year.

Mary France: Now that the shares have adjusted to the new access levels, we are back to our position that we will grow with the market in dermatology and outgrow the market in rheumatology. XQS, our focus is on accelerating volume growth. We're off to a great start in China following our NRDL listing in March.

Recent data also shows that the IGD levels of patients on <unk> are maintained over time, which is important to find infections, including COVID-19 and reinforces our safety profile.

Once the market bounces back.

We expect strong uptake for this products based on the compelling product profile and the growing evidence base behind the brand.

Mary France: In Europe, Cosensus continues to be the leading originator biologic across all three indications. As we bring the newer indications to market, we expect some pricing concessions in Europe, and that will only further enable volume-driven growth. For the full year, we're confident that the Cosentix team can deliver double-digit growth based on our strategic pillars, Focus on Strong Access Globally, Geographic Expansion, and our Leading Industry Approach to Data. Beyond 2021, our ambitious lifecycle program provides further upside opportunities for the future. 516

Remember that we just signed this brand specifically from multiple sclerosis. As you can see from the data we are achieving sustained depletion with the monthly dosing and we're not seeing a rebound between doses.

With the high and sustained efficacy and the opportunity for at home treatment cause center has what it takes to fundamentally change how we treat multiple sclerosis.

Slide 19.

Luckily I was launched in Germany, and Austria in February and the limited population of patients.

Very high cardiovascular risk position.

Physician seem happy with the immediate drop they see an LDL C levels and with the ability to have the sustained effect with only two injections per year.

Mary France: Entrusto is doing extremely well with strong growth across the globe. In the U.S., we're seeing a convergence of events. Physicians are adopting the ACC Expert Consensus Recommendations for Entresto and First Line. We're seeing recovery from COVID and enthusiasm around the expanded indication. It's great to see the growing confidence to go direct to Arnie, which is reflective of the strong evidence behind Entresto

In Europe, we need the outcomes data, which we expect in 2026. So in the meantime, we want to advance discussions on population health approaches as our goal is to bring this medicine to a broad population as quickly as possible and this way significantly lower the burden of a S. D V D on patients consistent.

Okay and H S agreement is our first such agreement and is on track for launch in Q3 more to come.

Mary France: We're seeing all-time highs in NBRXs. The label in the U.S. now covers five out of six patients with chronic heart failure, and this makes it easy for physicians to initiate appropriate patients. We now estimate that about 3.2 million patients are being treated with Entresso today. This is a big achievement and is testament to the exquisite execution of the teams in the field.

In the U S. We're on track to resubmit, our file in Q2 Q3.

We're preparing our filing we're also actively engaging with a large number of U S health care system to lay the foundation for broad uptake.

In summary, we continue to focus on executing our strategy maximizing our growth drivers delivering our launches preparing our next day Betsy our growth drivers are doing very well our lunches are gaining momentum now these accounts for half our sales.

Mary France: We now have a 30% share of the HEF REF patients in the U.S., so there remains significant room to grow, as 70% of REF patients are still on the prior standard of care. And we've only just started to promote it in the PEF population. If I move to slide 17, Volgensma had a strong quarter, which was driven by reimbursement wins in a number of European markets, while the U.S. continued its steady trend. As every new country initially adds a bolus of patients and then moves into a steady state, you can expect to see some volatility in the quarterly sales pattern.

As we see them more dynamic market environment will continue to accelerate our portfolio shift and double down on patient HCP and health care system engagement in order to enable access to more patients faster.

I want to thank the teams around the world who work so hard to achieve this every day.

Over to Suzanne.

Thank you Marie France, So, let's move to slide 21.

One college business has delivered solid performance in the first quarter with net sales of $3 8 billion broadly in line with previous year, our key growth drivers continue to perform well, including Kim Ryan Kipp Collie from okta regulate and chalk Avi.

Both our growth brands and recent launches together grew 15% versus previous year and contributed to almost half of the overall oncology sales, allowing us to more than compensate for the continued generic erosion of Afinitor and XJ shade, new in D. S U S and Sandoz that day.

Mary France: We have new compelling data on Zolgensma's efficacy in pre-symptomatic patients. We're also initiating a new phase three trial called SMART to strengthen confidence for children up to 21 kilograms in the EU. We're on track with our preclinical studies for the IT formulation, which would also allow us to bring Zolgensma to older children. Our five-year durability data confirms what this medicine can offer in one single treatment. And this is what really sets Zolgensma apart and why we are relentlessly progressing our gene therapy agenda with two more INDs planned this year.

In the EU.

The first quarter was marked by the continued impact of the pandemic on certain segments of our portfolio. There's a more pronounced effect on hospital initiated therapies, our breast cancer portfolio and recent launches due to the pandemic patients did not see their physicians at the same frequency and die.

Losses, and treatment initiations remains below pre pandemic levels.

Mary France: If we move to slide 18, with Kesimpta, we're bringing a high-efficacy B-cell therapy to patients early in their disease. Our new PIRA data builds on the strong efficacy profile already shown in our pivotal trial. Casimpa can reduce disease progression that happens independent of relapses by up to 60% when used early. We believe this is incredibly meaningful data for patients because PIRA actually accounts for the majority of progression. This data is unique in this early patient population.

I'll ever we remain confident that patient visits to hospitals will resume and treatment patterns will normalize leading to acceleration of growth in these segments moving to slide 22.

Just to remind you that we are the only pharmaceutical company, which is pursuing far different cancer treatment platforms. These include radio ligand therapy cell and gene therapy targeted therapy and immunotherapy, we see an opportunity to combine these platforms for better outcomes.

Mary France: While the pandemic is still impacting the dynamic market and prescribing behavior, all the metrics that are in our control are tracking positively. We're seeing more than 50% use in first line for switch, which is exactly aligned to our value proposition. The team has also done a great job on access. In fact, the conversion from free to paid product is ahead of schedule. This is reflected in the Q1 numbers, which also include a $9 million revenue adjustment relating to Q4 2020 and why we now expect 65% of sales in the second half of the year. Recent data also show that the IgG levels of patients on Casimta are maintained over time, which is important to fight infections including COVID and reinforces our safety profile. Once the market bounces back,

Today, I wanted to especially reflect on our progress this radio ligand therapies since the acquisition of AAA. In 2018, you have established strong closed the expertise in commercializing radio ligand therapies supported by a specialized supply chain manufacturing type.

The abilities across for radio ligand therapy production sites.

No doubt there are our radio ligand therapy for neuroendocrine tumors, you have gained a lot of momentum and in partnership is now 400 centers.

We are able to deliver this life saving treatment to more than 9000 patients since launch.

You have generated a unique skill set and experience in manufacturing supply and commercialization of radio ligand therapy, and we will leverage these to maximize the potential of our future launches in this space.

On the de Mello from event side here advancing four clinical programs and around 11, preclinical and discovery programs to identify the next wave of radio ligand therapies for cancer.

Mary France: We expect strong uptake for this product based on the compelling product profile and the growing evidence base behind the brand. However, remember that we designed this product specifically for multiple sclerosis. As you can see from the data, we are achieving sustained depletion with a monthly dose, and we're not seeing a rebound between doses. With high and sustained efficacy and the opportunity for at-home treatment, Cosimtha has what it takes to fundamentally change how we treat multiple sclerosis. Slide 19.

Continue to invest in our radio ligand pipeline should be in licensees of our library of fibroblast activating protein or Fox targeting H and the investment into active oncology for development of other southeast radio ligand therapies and our most recent collaborations as arduous.

Pharma to discover and identify novel combinations of DNA damage response inhibitors. This orange juice.

Mary France: Lexio was launched in Germany and Austria in February in the limited population of patients at very high cardiovascular risk. Physicians seem happy with the immediate drop they see in LDL-C levels and with the ability to have the sustained effect with only two injections per year. In Europe, we need outcomes data, which we expect in 2026. So in the meantime, we want to advance discussions on population health approaches, as our goal is to bring this medicine to a broad population as quickly as possible and this way significantly lower the burden of ASCVD on patients and systems. The UK NHS Agreement is our first such agreement and is on track for launch in Q3. More to come.

Moving to slide 'twenty suite.

Early in March we were excited to share with you with data from the vision study. This lutetium P SMA and met desktop castration resistant prostate cancer and other trial met both primary endpoints of improved overall survival and radiographic progression free survival versus standard.

Per just to remind you of prostate cancer is the second most diagnosed cancer globally and then the majority of cases patients. Unfortunately developed metastases by the time of castration resistant prostate cancer diagnosis.

Significant unmet medical need in this population is a five year survival rate of approximately 15% and they have very limited treatment options.

Mary France: In the U.S., we're on track to resubmit our dossier in Q2-Q3. Meanwhile, while we're preparing our dossier, we're also actively engaging with a large number of U.S. healthcare systems to lay the foundation for broad uptake. In summary, we continue to focus on executing our strategy, maximizing our growth drivers, delivering our launches, and preparing our next big bet. Our growth drivers are doing very well, our launches are gaining momentum, and now they account for half our sales.

The vision study.

Findings confirm that lutetium P. S. M. A has the potential to become the targeted treatment for more than 80 per cent of men with late stage advanced prostate cancer. They intend to initiate discussions with regulatory authorities and prepare a submission to the FDA and EMA by the end of this year.

Here on the commercial side, you're effectively preparing for the upcoming launch is a focus on hospital and community centers more than 70 per cent of prostate cancer patients are treated here.

Mary France: As we see a more dynamic market environment, we'll continue to accelerate our portfolio shift and double down on patient, HCP, and healthcare system engagement in order to enable access to more patients faster. I want to thank the teams around the world who work so hard to achieve this every day.

Given the prevalence of the disease, we are working with treatment centers to better understand their operational needs for capacity expansion in order to ask the minister targeted radio ligand therapies. Additionally, we are raising awareness on the clinical relevance of P. SMA and the potential value of targeted R. A T.

Unknown Executive: Thank you, Marie-France. So let's move to slide 21. Our oncology business delivered solid performance in the first quarter with net sales of $3.8 billion, broadly in line with the previous year. Our key growth drivers continue to perform well, including Kymriah, Kizkali, Promagta Revolade, and Chakavi. Both our gross brands and recent launches together grew 15% versus the previous year and contributed to almost half of the overall oncology sales, allowing us to more than compensate for the continued generic erosion of Afinitor and XJ Chadenew in the US and Xandostatin LAR in the EU.

<unk> as a new mechanism of action and advanced prostate cancer on.

On the development side. The vision trial findings are supporting our confidence in moving into earlier lines of advanced prostate cancer. They are planning a phase III study with lutetium pitched in MA in the pre tax in metastatic castration resistant prostate cancer, setting and indeed metastatic hormone.

It is setting do you anticipate that both of these studies will start in the first half of 2021 moving.

Unknown Executive: The first quarter was marked by the continued impact of the pandemic on certain segments of our portfolio with a more pronounced effect on hospital- initiated therapies, our breast cancer portfolio, and recent launches. Due to the pandemic, patients did not see their physicians at the same frequency, and diagnosis and treatment initiations remained below pre-pandemic levels.

Moving to slide 24.

Just call it delivered solid performance in the first quarter with sales up 19%, reaching 195 million driven by unprecedented overall survival benefit from two pivotal phase III trials.

I'm very pleased to see kits Callie continued to grow strongly and gaining market share ex U S, especially on European markets in the U S. Cali maintained share. Despite the overall slowdown of the CDK four six market driven by just suppressed diagnostics right and overall degrees in new patient start.

Unknown Executive: However, we remain confident that patient visits to hospitals will resume, and treatment patterns will normalize, leading to acceleration of growth in these segments. Moving to slide 22, just to remind you that we are the only pharmaceutical company pursuing four different cancer treatment platforms. These include radioligand therapy, cell and gene therapy, targeted therapy, and immunotherapy, with an opportunity to combine these platforms for better outcomes. Today, I wanted to especially reflect on our progress with radioligand therapy.

<unk>.

We believe keeps Kylie has a unique profile supported by the longest reported median OS among all phase III trials in advanced breast cancer, reaching around five years in premenopausal patients. Therefore, we remain confident in the longer term potential of Tiscali.

On the development side naturally ought to lung study in intermediate and high risk population has completed enrollment ahead of plan and we are on track for a final readout in 'twenty 'twenty two so overall confidence viscous highly resilient performance in what continues to be challenging.

Unknown Executive: Since the acquisition of AAA in 2018, we have established strong global expertise in commercializing radioligand therapies supported by specialized supply chain manufacturing capabilities across four radioligand therapy production sites. With LutaFera, our radioligand therapy for neuroendocrine tumors, we have gained a lot of momentum, and in partnership with now 400 centers, we are able to deliver this lifesaving treatment to more than 9000 patients since launch. We have generated a unique skill set and experience in manufacturing, supply, and commercialization of radioligand therapies, and we will leverage these to maximize the potential of our future launches in this space.

Market environment, and with that let me hand over to Harry.

Yes. Thank you Susanne good morning, and good afternoon, everyone.

I'm going to walk you through some of the financials for the first quarter as well as provide you with an updates on our 'twenty one guidance as always my comments refer to growth rates.

Currencies unless otherwise noted.

So slide 26 shows the summary of our operational performance for the first quarter as we indicated at the start of the year quarter. One growth was negatively impacted by prior year quarter, one forward purchasing which amounted to around minus 3% per.

Unknown Executive: On the development side, we are advancing four clinical programs and around 11 preclinical and discovery programs to identify the next wave of radioligand therapies for cancer. We continue to invest in our radioligand pipeline through the licensing of a library of fibroblasts activating protein or fat targeting agents, the investment into active oncology for the development of alpha-based radioligand therapies, and our most recent collaboration with Arteos Pharma to discover and identify novel combinations of DNA damage response inhibitors with RNTs. Moving to slide 23.

And sales and minus seven points on core operating income.

This quarter also still have continued demand impact from COVID-19.

Particularly a dermatology ophthalmology, our breast cancer portfolio and for the Sandoz retail.

In fact <unk> businesses.

Free cash flow was impacted this quarter by the 650 million upfront payment for total is about in licensing from Beijing.

For more details about free cash flow later in the presentation.

With this caveat you can see the changes in net sales and core operating income.

Minus two points and minus eight points, respectively, which flow down to EPS and free cash flow.

Unknown Executive: Earlier in March, we were excited to share with you data from the VISION study with lutetium PSMA and metastatic castration-resistant prostate cancer. And the trial met both primary endpoints of improved overall survival and radiographic progression-free survival versus standard of care. Just to remind you, prostate cancer is the second most diagnosed cancer globally, and in the majority of cases, patients unfortunately develop metastasis by the time of castration-resistant prostate cancer diagnosis.

Turning to slide 27.

We have shown the change versus prior year for sales core operating income and core margins for the first quarter as reported on the left hand side of this table.

The right hand side.

The other similar chart last year quarter. One we have illustrated what is underlying operational performance. It looks like if the crude at the prior year forward purchasing.

Innovative medicines.

Solid underlying performance sales grew plus 3% core operating income plus 6% and core margin was up plus 1% point.

Unknown Executive: There is significant unmet medical need in this population with a five-year survival rate of approximately 15%, and there are very limited treatment options. The vision study findings confirm that Lutein PSMA has the potential to become the targeted treatment for more than 80% of men with late stage advanced prostate cancer. We intend to initiate discussions with regulatory authorities and prepare submissions to the FDA and EMA by the end of this year.

Innovative medicines performance was driven by continued strong with double digit growth of all our key growth drivers like it's tough to judge from our Concentrix and our oncology growth drivers partly.

Offsets by mature products declines of generic erosion.

For Sandoz, we would still have seen a charge in quarter. Excluding prior year forward purchasing sandoz sales were still down minus 9% and core operating income was minus <unk>, 9%.

Boss explained earlier some of the key charges for Sandoz, where the pricing impact historically, low cough and cold season, and softer retail demand as a result of COVID-19.

Unknown Executive: On the commercial side, we are effectively preparing for the upcoming launch, with a focus on hospitals and community centers. More than 70% of prostate cancer patients are treated here. Given the prevalence of the disease, we are working with treatment centers to better understand their operational needs for capacity expansion in order to administer targeted radioligand therapy. Additionally, we are raising awareness about the clinical relevance of PSMA and the potential value of targeted RRTs as a new mechanism of action in advanced prostate cancer.

The group level underlying performance is up to plus 1% of sales and cooperative in public cloud minus 1%.

Let's now go to slide 28.

One way of better understand the underlying performance given the distortions caused by COVID-19 over the last year is to compare to what you could call. It normal first quarter and 22 with quarter one 2021.

On this slide we have showed whats happened to crude and innovative medicines over the last three quarter was for both top and bottom line.

We showed a CAGR for both and you can see that for keeps its CAGR was a solid plus 5% and core operating income CAGR was plus 11%.

Unknown Executive: On the development side, the vision trial findings are supporting our confidence in moving into earlier lines of advanced prostate cancer. We are planning a phase three study with lutetium PSMA in the pre-taxane metastatic castration resistant prostate cancer setting and in the metastatic hormone sensitive setting.

This is clearly driven by innovative medicines with the top line growing at a 7% CAGR at the bottom line, even at 13% CAGR.

Which shows the strong operational performance of our innovative medicines division.

And the way the medicines core margin increased by 300 basis points over the two years, we used to as a result of a good top line growth combined with very good progress on productivity programs.

Unknown Executive: We anticipate that both of these studies will start in the first half of 2021. Moving to slide 24, Kiskali delivered solid performance in the first quarter, with sales up 19%, reaching $195 million, driven by unprecedented overall survival benefits from two pivotal phase three trials. We are very pleased to see Kiskali continue to grow strongly and gain market share ex-U.S., especially in European markets. In the U.S., Kiskali maintains market share despite the overall slowdown of the CDK4-6 market, driven by the suppressed diagnostic rate and overall decrease in new patient starts.

On slide 29.

You can see that free cash flow for the quarter was $1 6 billion. The most significant reason as mentioned for this decrease once the U S dollar $650 million upfront payment to in license physical visit about from Beijing.

Lower operating income adjusted for noncash items, partly offset by favorable changes in working capital.

Now turning to our full year 2021 guidance on slide 13.

We confirmed full year guidance both for Q.

Innovative medicines for sales are cooperating income.

For innovative medicines, we continue to expect mid single digit sales growth in 2020, one for sandoz, reflecting the start of the year you know expect sales to decline low to mid single digit revised downwards from the prior broadly in line guidance for something.

Unknown Executive: We believe KISCALI has a unique profile, supported by the longest reported median OS among all phase 3 trials in advanced breast cancer, reaching around 5 years in premenopausal patients. Therefore, we remain confident in the longer-term potential of KISCALI. On the development side, Nathalie Adjouman's study in intermediate and high-risk populations has completed enrollment ahead of plan, and we are on track for final readout in 2022. So overall, we are confident with Kiskali's resilient performance in what continues to be a challenging market environment. And with that, I will hand over to Hari.

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Now as an exception to our regular guidance format due to the impact COVID-19 Ted on Sandoz quarter. One results. We are also going to provide for this year.

Great out of core operating income guidance by Division.

We expect innovative medicines core operating income to grow mid to high single digits. The head of sales and for Sandoz, We expect core operating income to decline low to mid teens. The key assumptions for this guidance remains that we see a return to normal global healthcare system.

<unk> and prescribing dynamics by mid of 2021.

In addition, we continue to assume that no gilenya.

No Sandoz definitely all generics 2021 can do us.

Turning now to my last slide.

Harry Kirsch: Thank you, Susanna. Good morning and good afternoon, everyone. I'm now going to walk you through some of the financials for the first quarter, as well as provide you with an update on our 2021 guidance. As always, my comments refer to growth rates. Constant Currencies Unless Otherwise Noted, Slide 26 shows the summary of our operational performance for the first quarter. As we indicated at the start of the year, quarter one growth was negatively impacted by prior year quarter one forward purchasing, which amounted to around minus three percent points on sales and minus seven points on co-operating income.

Several of you asked for more detail on quarterly phasing on slide 31, I've tried to explain the dynamics that we expect to see in quarter, two and for the full year given the impact on COVID-19 of COVID-19, both in 2020 and 21.

As you recall at the start of the year, we guided to expect quarter, one sales to decline low to mid single digits and underlying sales excluding prior year forward purchasing to be broadly in line with prior year. This was the case and as already explained.

Sales, excluding prior year forward purchasing crude plus 1% in quarter one.

For quarter, two we expect sales to grow mid single digits benefiting from approximately plus 3% points of prior year forward purchasing reversal.

We're cooperating income.

First half of 2021 we expect it to decline low single digits due to prior year lower cost base.

Yes.

Quarter, two of 2021 to support the second half growth.

Harry Kirsch: This quarter also still had continued demand impact from COVID-19, particularly in dermatology, ophthalmology, our breast cancer portfolio, and for the Sandoz retail and anti-infectives business. Free cash flow was impacted this quarter by the $650 million up from payment for Digitalism App in licensing from Beijing.

In summary quarter, one showed a solid underlying performance for innovative medicines.

LNG for Sandoz, but allowed us to reconfirm, our full year guidance in quarter, two we expect to benefit from the reversal of forward purchasing and some improved momentum in the U S. Given the speed of explanations in that key market, our current and expected performance.

Also allows us to reiterate our confidence that we will grow top and bottom line every year through 2025 meet external expectations and with that I'll hand, it back to book.

Harry Kirsch: I will give more details about free cash flow later in the presentation. With these caveats, you can see the changes in net sales and co-operating income, minus two points and minus eight points, respectively, which flow down into EPS and free cash flow. Turning to slide 27.

Perfect. Thank you Harry I wanted to highlight before closing we do have a catalyst rich period coming up for the remainder of this year a number of submissions as you see here on the chart a number of important readouts that would enable submissions either this year or next year. So we'll look forward to keeping you up to.

Harry Kirsch: We have shown the change versus the prior year for sales, co-operating income, and core margins in the first quarter, as reported on the left-hand side of this table. On the right-hand side, as we did a similar chart last year in quarter one, we have illustrated what the underlying operational performance looks like if we excluded the prior year forward purchasing. Innovative medicines had a solid underlying performance: saved crew plus 3%, co-operating income plus 6%, and core margin was up plus 1% point.

Date on these readouts as they happen over the course of share and also present the data at major Congresses.

So moving to the next slide and in closing I think you've heard now from all of US do we have confidence in our growth drivers and launches to continue their strong momentum you've seen that underlying performance is starting to come through and momentum is picking up solid I am top and bottom line performance and even when you take into account the prior year purchasing you really see.

And underlying performance come through our broad pipeline of novel medicines in phase two and phase III continue to progress well and we're confident in delivering our 2021 and more importantly, our longer term top and bottom line growth outlook.

Harry Kirsch: Innovative medicine's performance was driven by continued strong double-digit growth of our key growth drivers like Imprestos, Zolgens, Microcentix, and our oncology growth drivers, partly offset by mature product declines and generic erosion. For sundals, we would still have seen a challenging quarter.

With that operator, we can open the line for questions I would ask our questioners to limit yourself to two questions is we have a lot of people in the queue operator.

Okay.

Yeah.

As a reminder, if you wish to ask a question press the star and fun.

Her name is benign first question today comes from the line of Mark Purcell from Morgan Stanley.

Yeah. Thank you very much for taking my questions. So one on cardiovascular outcome studies, one of them cause him to PS.

In terms of the the rainforest study I just wondered if there's anything more you can say about it today from December 24 to 2026 and whether given the also recruiting patients. This study I think it's from by Oxford University. What is the options add more patients to try and expedite the read out the reason why I ask is there's been a recent uptick.

Harry Kirsch: Excluding prior year forward purchasing, Sandoz sales were still down minus 9%, and co-operating income was down minus 29%. As Voss explained earlier, some of the key challenges for Sandoz were the pricing impact, a historically low cuff and coat season, and softer retail demand as a result of COVID. At the group level, underlying performance added up to plus 1% on sales, and co-operating income declined minorly. Let's now go to slide 28.

So for two quiche 230 on the Horizon study is still on track to complete in March 2024, So I'm not sure what's unusual or otherwise about around food and then secondly on cause symptom Mary phones, one for you.

Could you help us understand the latest MD Rx share trends are in the United States.

And that's the sort of patient so it comes back in your promotion responds in kind, a where you feel the MBR, Russia should evolve during the course of this year. Thank you.

Harry Kirsch: One way of better understanding underlying performance given the distortions caused by COVID over the last year is to compare to what you could call a normal first quarter in 2019 with the quarter one in 2021. On this slide, we have shown what happened to generics and innovative medicines over the last three quarter ones for both top and bottom line. We showed a CAGR for both.

Great. Thanks, Mark So John you want to take the TV outcome study.

Sure, we'll do it thanks, Mark Thanks for the question on right now.

As we noted in our maintenance of artist management last year at the end of the year are that our expectations for like they are at that time was conclusion in 2025, we've seen a pretty significant impact as you know we're doing the study with the Oxford group, where the majority of our patients are recruited from the U K and as we've seen.

Harry Kirsch: And you can see that for group states, CAGR was a solid plus 5%, and for co-operating income, CAGR was plus 11%. This is clearly driven by innovative medicine, with the top line growing at a 7% CAGR and the bottom line even at 13% CAGR, which shows the strong operational performance of our Innovative Medicines Division. Innovative Medicines' core margin increased by 300 basis points over the two years, which is the result of our good top-line growth combined with very good progress on productivity. On slide 29, you can see that free cash flow for the quarter was $1.6 billion.

<unk>, both with COVID-19 and then the additional variance with the impact of COVID-19 in the U K recruitment has been challenging initially in December as we saw there was an uptick in COVID-19 cases in the U K and then subsequently throughout the first quarter of the year in the U K there was significant impact of COVID-19. So based on the recruitment timely.

Lines reaction, where you have deferred the study results through 2026, because during that time I think the health care systems were overwhelmed with taking care of COVID-19 patients. So it was very difficult to recruit these patients.

As we've had discussions with the Oxford group I think recruitment is starting to pick back on track and we're working very closely in terms of Ah report report out of the results from 2026.

Harry Kirsch: The most significant reason, as mentioned, for this decrease was the U.S. dollar $650 million upfront payment to in-license Kissler Bismarck from Beijing and Lower Operating Income Adjusted for Non-Cash Items, Partly Offset by Favorable Changes in Working Capital. Now turning to our full year 2021 guides on slide 13. We confirmed four-year guidance both for and Innovative Medicines for Safe and Co-operating Americans. For Innovative Medicines, we continue to expect mid-single-digit sales growth in 2021. For Sundance, reflecting the start of the year, we now expect sales to decline low to mid-single-digit, revised downwards from the prior broadly in line guidance.

Thanks, John and then just one additional note across other studies like keep your day, where we had a global footprint, we've been able to flex our recruitment around the world to maintain timelines in this particular study given the high proportion of patients from the U K NHS. There just was a bigger impact we of course look at all ways to expedite the study in the meantime.

Cause symptoms Marie France.

Yeah. So thanks for the question. The first thing to note is that our U S launch is progressing really well and as I said in my opening remarks.

Areas that are under our control are progressing really well if we talk about positioning we talked about the first line first switch at 50% even of initiation, which was very important for us and access where we already have 75 per cent of commercial lives covered.

Harry Kirsch: Now, as an exception to our regular guidance format and due to the impact COVID had on Sandoz's quarter one results, we are also going to provide for this year the breakdown of cooperating income guidance by division. We expect Innovative Medicine's cooperating income to grow mid to high single digits ahead of sales, and for Sundance, we expect cooperating income to decline low to mid-teens. The key assumption for this guidance remains that we see a return to normal global health care systems and prescribing dynamics by mid-2021. And in addition, we continue to assume that no gyrelinia and no Thunderstaten enter the R-generics market in 2021 in the US. I'm turning now to my last slide.

So based on that we saw that paid products is growing faster than expected and we're also looking at 65% of sales in the second half of year. Previously we had said 75 per cent.

If I pivot to the MD Rx, we're currently at 10%, but as you know the dynamic market still suppressed and we see hesitation to switch patients or to initiate patients on b cell therapy prior to vaccinations.

As the market bounces back and as we see vaccination campaigns progressed.

I believe that we'll see a.

Significant uplift in the MBR access for a call center.

Also bring in additional markets.

Or cause symptoms to additional markets and can also expect strong uptake based on the efficacy.

Harry Kirsch: Several of you asked for a bit more detail on quarterly phasing. On slide 31, I have tried to explain the dynamics that we expect to see in quarter 2 and for the full year, given the impact of COVID, both in 2020 and 21. As you recall, at the start of the year, we guided to expect quarter 1 sales to decline low to mid-single digits and underlying sales excluding prior year forward purchasing to be broadly in line with prior year.

As we said you know we talk about one relapsed every nine to 10 patient years and now we've got additional evidence that shows that cause center reduces risk of progression independent of relapses by up to 60 per cent.

These patients so all of this points to a tremendous opportunity for for patients and for those products.

Also very I'm confident that we'll see a big expansion in the B cell market. So currently we see around 30% in the U S and we expect that number to get to 50% over the next couple of years.

Harry Kirsch: This was the case, and as already explained, sales excluding prior year forward purchasing grew plus one percent in the quarter. For quarter two, we expect sales to grow mid-single digits, benefiting from approximately plus 3% points of prior year forward purchasing reversal. For cooperating income in the first half of 2021, we expect it to decline by a low single digit due to the prior year's lower cost base and investments in quarter two of 2021 to support the second half growth.

Thanks, Nick next question operator.

Thank you. Your next question comes from the line of Graham Parry from Bank of America.

Great. Thanks for taking my question say another one on because I'm touching in the free versus paid for it. So I think you'd previously said it was around 50% paid for in your day and he's getting up to 70% by the end of the year. So if you could just give us an update from where you are now and where you expect that to be at the end of the year and that drives the 65% number.

And then secondly on Sandoz, just you talked about stabilization in the second half of the year, but if margins are down largely because of price is there a risk. They just doesn't reverse their off to say, perhaps help us understand what happens in 2022, and we're all you intend.

Harry Kirsch: In summary, quarter one showed a solid underlying performance for innovative medicine, challenging for sandals, but allowed us to reconfirm our four-year guide. In quarter two, we expect to benefit from the reversal of order purchasing and some improved momentum in the U.S. given the speed of vaccinations in that key market. Our current and expected performance also allows us to reiterate our confidence that we will grow top and bottom lines every year to 2025 and meet external expectations. And with that, I hand it back to Voss. Perfect.

With the separation of Sandoz into fully autonomous unit inside Novartis I think you'd said it was probably around the middle of this year that would be complete and is that the point to it. She then decided by the Novartis remains the best day anywhere Sandoz. Thank you.

Thanks Ram on the first one because center back to Ya man from.

Yeah. So currently we have about a 2.4 thousand patients treated on Cassandra and as you pointed out we have a 12 month bridging program when.

When we when we discussed this at the end of Q4, we were actually looking at 30 per cent pay.

Vasant Narasimhan: Terrific. Thank you, Harry.

Vasant Narasimhan: I wanted to highlight before closing that we do have a catalyst-rich period coming up for the remainder of this year, a number of submissions, as you see here on the chart, a number of important readouts that would enable submissions either this year or next year. So we'll look forward to keeping you up to date on these readouts as they happen over the course of this year and also present the data at major congresses. So moving to the next slide.

Paid with 70 per cent Frank that that has radically changed so it looks like we flip those numbers and we're currently at 70% paid products, we expect that to get up to 80 per cent for the rest of the year and that's why we've changed our percentage sales for the second half of the year from 75% from 65 per cent.

Great and then on Sandoz a stabilization in dynamics Richard.

Vasant Narasimhan: And in closing, I think you've heard now from all of us that we have confidence in our growth drivers and launches to continue their strong momentum. You've seen that underlying performance is starting to come through, and momentum is picking up. Solid IM top and bottom line performance. And even when you take into account the prior year purchasing, you really see the underlying performance come through. Our broad pipeline of novel medicines in phase two and phase three continues to progress well.

Thank you Brian.

With 40 per assumed the level of price erosion going through the rest of the year you got to remember a lot of that's being driven because of volume declines we saw in Q1 and with volume declines you saw a stabilization in the market service levels go up and you better be that means that the competition for price goes up as well.

<unk> seen that will start to walk through and wash out as we go through the second half. We also assume that will be a normalization in demand patient start returning back to hospital elective surgery, and we also anticipate a slightly stronger cough and cold season, given it really had very little this season with social distancing. So there's a number of drivers and we've already assumed some level of price erosion going on through there.

Vasant Narasimhan: And we're confident in delivering our 2021 and, more importantly, our longer-term top and bottom line growth output. So with that operator, we can open the line for questions. I would ask a questioner to limit themselves to two questions as we have a lot of people in the queue. Operator.

Rest of the year.

I'll, let <unk> comment on the Sandoz.

And autonomy.

Yeah. Thanks, Richard So thanks Graham on Sandoz, we've now successfully separated the manufacturing unit with links to our global manufacturing and I think that most of the relevant area. Sandoz has now enabled to compete at the relevant cost structure and flexibility to be successful as a leading generics player our focus now.

Operator: Thank you. As a reminder, if you wish to ask a question, press the star and 1, and wait for a name to be announced. Your first question today comes from the line of Mark Purcell from Morgan's Family.

<unk> is to get Sandoz as we've stated consistently to consistent mid single digit sales growth and core operating margins that are in line with the top end of the peer set which would be at the high Twenty's and that's where our energy and focus is a lot of that is getting to world class launches in biosimilars getting our oral solids business in.

Mark Purcell: Yeah, thank you very much for taking my questions. So one on cardiovascular outcome studies, and one on cosymptoms. In terms of the Orion 4 study, I just wondered if there's anything more you can say about the delay from December 24 to 2026 and whether, given you're still recruiting patients, this study, I think, is run by Oxford University, where there's the option to add more patients to try and expedite the readout. The reason why I ask is that there's been a recent update for TQJ230, and the Horizon study is still on track to complete in March 2024. So I'm not sure what's unusual or otherwise about Orion 4.

Launches back on track in the U S as well as being at market formation for key launches in Europe, and that's what we're really focused on at the moment.

Thanks, Rod next question operator.

Yeah.

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

Thank you a couple of questions. Please.

With <unk>.

Attained a preapproval agreement with the U K I'm wondering whether you have or will be entering into similar agreements with European territories. So your PD one license from Beijing.

That's the first question.

My question is could you talk to which.

Some populations VA intimates and how.

Within the U S where you.

You may be able to get entre with COVID-19 as a map and then finally, if you have.

Is that can you comment on how you book the competitive outlook from defensive give.

Mark Purcell: And then secondly, on cosymptomy, I have one for you. Could you help us understand the latest MBRX share trends in the United States? And as the sort of patient flow comes back, and your promotion responds in kind, where do you feel the MBRX share should evolve during the course of this year? Thank you.

Given what's been surprised by ophthalmologists feedback on for it from that ahead of anticipated approval. Thank you.

Great. Thanks, Andrew So both the PD one questions in Europe and U S. Susanna.

Yeah sure. Thank you Andrew So you know our ambition is to provide flow with access to visit with them up in the broad array of indications as you know Biogen is running a very broad development program and that is really our first ambition b, we really want to establish sales that leaves him up and he.

John Tsai: Great, thanks Mark. So John, do you want to take the CV outcome study?

Indications, where PD ones are cardio market and also pursuing other combinations with our portfolio. So really short term day focuses on on getting first indications are five we plan to file in non small cell lung cancer and so forth.

John Tsai: Sure, I will do it. Thanks, Mark. Thanks for the question on LECVEO. As we noted in Meet Novartis Management last year, at the end of the year, that our expectations for LECVEO at that time were for completion in 2025. We've seen a pretty significant impact. As you know, we're doing this study with the Oxford Group, where the majority of our patients are recruited from the UK. Because during that time, I think the healthcare systems were overwhelmed with taking care of COVID patients.

Cancer and we expect these two to be submitted in the second half of 2021 you know.

On the specific agreements I don't want to comment you have seen the data. If you have very solid day O S data presented at ACR and we believe that there's elysium up is it's a valid differentiated PD one.

John Tsai: So it was very difficult to recruit these patients. As we've had discussions with the Oxford Group, I think recruitment is starting to kick back on track. And we're working very closely in terms of reporting out the results.

So in terms of subpopulations, we of course want to make sure that we focus on the areas where it is at Lytham App is differentiated and I think the two data Readouts show that I think there is still space for a strong PD bought in so that's.

John Tsai: Thanks, John. Just one additional note. Across other studies like DQJ, where we had a global footprint, we've been able to flex our recruitment around the world to maintain timelines. In this particular study, we gave a high proportion of patients from the UK NHS. There just was a bigger impact. We, of course, will try to expedite the study, and I'm Cosimto. I'm very proud.

That's for now and then be worked through reimbursement agreements Miami and prepare for a launch.

Thank you Susanna and then on Lucentis coming from.

Yeah. So other countries did really well in Q1 growing 4% due to the steady performance in Europe. So there is some rebound we can expect to see that to continue and also the strong NRDC all driven momentum in China.

Mary France: Yeah, so thanks for the question. The first thing to note is that our U.S. launch is progressing really well, and as I said in my opening remarks, the areas that are under our control are progressing really well. We talked about positioning, we talked about the first line, first switch at 50 percent, ease of initiation, which was very important for us, and access where we already have 75 percent of commercial lives covered.

Which is it's definitely where we're looking to see a good chunk of revenue growth. This year. So for the remainder of the year, we expect to see low census growth low single digits.

And again with China being a major driver.

In terms of the competition just remind you that lucentis has really established in the market and we believe we'll continue to do well one of one of the key drivers is just a very complete indication portfolio that lucentis has and that newer products will not bring to market immediately.

Thanks, Okay. Thank.

Thank you Andrew next question operator.

Thank you. Your next question come from the line.

Mary France: So based on that, we saw that the paid product is going faster than expected. And we're also looking at 65 percent of sales in the second half of the year. Previously, we had said 75 percent. If I pivot to NDRX, we're currently at 10 percent. But as you know, the dynamic market is still suppressed.

I'm sorry. Your next question comes from the line of Cai that back from Goldman Sachs.

Hi, good afternoon, Thanks for taking my questions two please.

I know you've kind of suggested that the sandoz separation is kind of other independent.

Independent company is kind of on group, but could you just remind us conceptually the positives and negatives from a novartis perspective of keeping sandoz in house.

It's been a drag on your growth for as long as one can remember.

Mary France: And we see hesitation to switch patients or initiate patients on B-cell therapies prior to vaccination. As the market bounces back and as we see vaccination campaigns progress, I believe that we'll see a significant uplift on the NBR axis for Casimta. We're also bringing in additional markets, or Casimta to additional markets, and we can also expect strong uptake based on efficacy. As we said, you know, we talk about one relapse every nine to 10 patient years.

So just conceptually why does it belong with I'm going to walk this equity story would be great and then separately from Marie France on so again small as we think about kind of the next few quarters can you just remind us of the incremental increase you are going to be launching the products in and the size of.

The bullets opportunity in those countries. Thank you.

Yeah. Thanks, Gary So probably on Sandoz is a I think a few considerations one.

Historically, and we continue to believe in certain markets. There is a commercial synergies of having a broad portfolio across the generics and and innovative medicines. We of course continue to challenge ourselves and <unk>.

Mary France: And now we've got additional evidence that shows that Casimta reduces the risk of progression independent of relapses by up to 60% in naive patients. So all of this points to a tremendous opportunity for patients and for this product. We're also very confident that we'll see a big expansion in the B-cell market. Currently, we see around 30% in the US, and we expect that number to get to 50% over the next couple of years.

Valuate that but we do have those agreements in certain markets is that dependent.

Depending on how health care systems evolve in the future it could be an advantage to have one of the largest if not the.

The largest by volume generics company in the World. The other part of the story of course is Biosimilars, where our manufacturing scale and Knowhow enables us as well as our development expertise enables us to enable sandoz to build a leading biosimilars portfolio and then of course, the company will benefit over time and we're hopeful that.

Mary France: Thanks very much. Next question, operator.

Sandoz Biosimilars portfolio can help us get sandoz to that mid single digit growth up on the margin spectrum and then contribute to the growth of the overall overall company.

Operator: Thank you. Your next question comes from the line of Graham Parry from Bank of America.

Graham Parry: Great, thanks for taking my questions. So another one on Kazim Turchin and free versus paid forex. I think you'd previously said it was

I think are the two key considerations. There is of course, the the broader software consideration that sandoz serves hundreds of millions of patients and provide billions of doses to humanity, which is consistent with the overall purpose of the company to re imagine medicine.

Graham Parry: Around 30% is paid for, and you're aiming to get that to 70% by the end of the year, so if you could just...

Graham Parry: an update on where you are now and where you expect that to be at the end of the year that drives the 65% number and then secondly on Sandoz just you talked about stabilization in the second half of the year but if margins are down largely because of price is there a risk that this just doesn't reverse thereafter so perhaps help us to understand what happens into 2022 and and where are you in terms of the separation of Sandoz into a fully autonomous unit inside Novartis I think you said it was probably around middle of this year that would be complete and is that the point to which you then decide whether Novartis remains the best owner of Sandoz thank you Thanks, Graham. On first on Cosimta, back to you, Mur. Yeah, so

So on Xeljanz from marathons.

Yeah. So in the U S. Our business is driven by the incident patients. So the growth ex U S is coming from from these recent reimbursement wins in Europe for the rest of 2021, we expect the U S business to remain stable and to be continue to be driven by the incident patients in Europe, we're working on securing.

Reimbursement in additional countries right now we've seen a good uptake in Germany, and recent reimbursement and acceleration in smaller markets, such as Czech Republic or UAE.

If we look at the nature of the European markets. We also expect to see reimbursement on a rolling basis. What you can expect going forward is the U K and Italy, where we've now secured reimbursement and that'll bring sometimes went to two additional patients.

As we said before the initial source of business and all other launches comes from previously treated patients and over time that patient mix shifts to the incident population.

Mary France: Yeah, currently, we have about 2.4 thousand patients treated on Kesimpta, and as you pointed out, we have a 12 month bridging program. When we discussed this at the end of Q4, we were actually looking at 30 percent, paid with 70% free. That has radically changed. So it looks like we flipped those numbers, and we're currently at 70% paid product. We expect that to get up to 80% for the rest of the year. And that's why we've changed our percentage sales for the second half of the year from 75% to 65%.

Overall for 2021, we expect blockbuster status with Xeljanz man.

Thanks, Mary Thanks, Kerry next question operator.

Your next question comes from the line of Emmanuel Public actress from Deutsche Bank.

Oh, thanks for taking the questions of medical products from Deutsche Bank, maybe a couple of products specific ones.

Just from the pockets on the phase two we are going to see D.

Jay and day to relatively seamlessly, perhaps you could give us any commentary around the conference and just I mean in terms of the base yourself up as the primary protocol game points Z P. C L.

Should we expect to see a consistent benefit on the key secondaries like.

Uh huh.

Would you regard as a clinically meaningful improvement on the primary and any key secondaries.

Mary France: Great. And then on Sandoz stabilization and dynamics,

And then maybe a question on the ship to tune it wasn't quite five.

Richard Saynor: Thank you, Graham. We've already assumed the level of price erosion will continue through the rest of the year. You've got to remember, a lot of that was driven because of the volume declines we saw in Q1. And with volume declines, you saw a stabilization in the market, service levels went up, and invariably, that means that the competition for price goes up as well. We assume that it will start to wash through and wash out as we go to the second half.

Two takes on any ramifications from some compression day to be sort of ICR.

If you could just remind us of confidence on that program's potential and when we should be look we see the first high rise combination data.

No I don't believe that is the most promising combination.

We should be particularly anticipating in terms of the various combination studies yet from guys that market. Thank you.

Thanks, Danielle So John you want to start on the Iga nephropathy.

Thanks for the question Emmanuel as you know for Pakistan, we're looking across a number of indications, including Iga Nephropathy also see three go married nephropathy as Rhonda Pn age.

Richard Saynor: We also assume that there will be a normalization in demand, patients start returning to the hospital for elective surgery, and we also anticipate a slightly stronger cough and cold season, given it really had very little this season with social distancing. So there are a number of drivers, and we've already assumed a level of price erosion going on through the rest of the year. And I'll let Vaz comment on the sandals in autonomy.

Specifically in Iga nephropathy, we do have the phase II dose range, finding study, which is ongoing we've had an interim readout and based on that interim readout we've already.

Besides advance into phase III studies, those results will be coming out before the half of the year the specific conference.

Richard Saynor: Yeah, thanks, Richard. So, thanks, Graham.

We the posters and abstracts have not been released so we refrain from telling you exactly but we're confident that those results will be presented before the first half of the year and as I said you know the phase III is has advanced as we move forward in Iga nephropathy and the expected filing is.

Vasant Narasimhan: On Sandoz, we've now successfully separated the manufacturing unit with links to our global manufacturing, and I think in most of the relevant areas, Sandoz is now enabled to compete at the relevant cost structure and flexibility to be successful as a leading generics player. Our focus now is to get Sandoz, as we've stated, consistently to a consistent mid single-digit sales growth and core operating margins that are in line with the top end of the peer set, which would be in the high 20s.

Based on conditional approval for proteinuria reduction at nine months. So these are the same results.

In our phase two which we have in the phase III study and as you asked about the secondary endpoint.

These are the same secondary endpoints that we have in our phase III study. The final approval, which is expected to be in 2025 is based on the Egfr slope and this was the phase II study that we had in place and also is the endpoint also for a full approval.

Vasant Narasimhan: And that's where our energy and focus are. A lot of that is getting to world-class launches and biosimilars, getting our oral solids business and launches back on track in the US, as well as being in market formation for key launches in Europe. And that's what we're really focused on, I think.

Our expectation in 2025 based on results.

Vasant Narasimhan: Thanks, Graham. Next question, operator?

So I think the second question that you had was around the ship to our ship two inhibitor and how should we be thinking about the ship two inhibitor as we move forward as you know ship to as a fast tyrosine phosphatase and exited really important note as we look at the rack glass map kinase pathway.

Operator: Thank you. The next question comes from the line of Andrew Baum.

Andrew Baum: Thank you. I have a couple of questions.

Andrew Baum: [inaudible]

Andrew Baum: Attained a pre-approval agreement with the UK. I'm wondering whether you have or will be entering into similar agreements with European territories for your PD-1 license from Beijing.

And and pretty preclinical studies, what we saw was not only single agent activity, but also in combination.

Andrew Baum: That's the first question. The second question is, could you talk to which sub-populations, VA, Intermed, and Health, within the US where you may be able to get on trade with Truismab? And then, finally, if you have a second to comment on how you look at the competitive outlook for the census, given we've been surprised by ophthalmologists' feedback on Truismab ahead of anticipated approval. Thank you. Great, thanks, Andrew. So both PD-1 questions in Europe and the US: who's that?

With other agents our strategy for our ship two inhibitor is that we expect to go broadly in terms of a number of combinations and as we look at the approach that we're taking there for potential areas that we're currently looking at first as in combination with our own Egfr agent this would be.

<unk>, our third generation E. R. F P J E G.

Our agent and this would be our first consideration for a combination with our ship two inhibitor. Secondly is looking at the role of ship to an immune cells and so that consideration would be with PD, one and we have a study ongoing with <unk> mab thirdly, we'd be looking at them.

Unknown Executive: Yeah, sure. Thank you, Andrew.

Unknown Executive: So, you know, our ambition is to provide global access to Digitalism Up! within a broad array of indications. As you know, Viachin is running a very broad development program, and that is really our first ambition. We really want to establish Digitalism Up!

<unk> kinase Ras pathway as we look at the combination with potentially K Ras <unk> C. And also we have a study in place with cash.

Scully and then fourth would be we currently have an early study in combination with the graph and a tremendous asset.

Unknown Executive: in key indications where PD1s are currently marketed and also pursue novel combinations with our portfolio. So, really short term, the focus is on getting the first indications filed. We plan to file in non-small cell lung cancer and esophageal cancer, and we expect these to be submitted in the second half of 2021. You know, on specific agreements, I don't want to comment.

As we look at the treatment for BRAF V 600 mutant CRC patients. So we have high expectations in combination with our shipped two inhibitor looking broadly in addition to the K Ras <unk> pathway.

Thanks, John and maybe just to highlight again, we're not focus here on single agent I couldn't hear your question, but we really think the opportunity for ships. It will be in combination and hopefully in combination with a range of agents and that data should come out over the coming.

Unknown Executive: You have seen the data. We have very solid OS data presented at AACR, and we believe that Digitalism Up! is a well-differentiated PD1. So, in terms of subpopulations, we, of course, want to make sure that we focus on the areas where Digitalism Up! is differentiated, and I think the two data readouts show that I think there is still space for a strong PD1. So, that's for now, and then we will work through reimbursement agreements while we then prepare for launch.

18 months.

Next question operator.

Thank you. Your next question comes from the line of Matthew Weston from Credit Suisse.

Many thanks two questions. Please.

The first on U S tax reform.

Novartis like many in the pharma industry is a major beneficiary of transfer pricing.

I'd be very interested in how his view of the long term tax rate.

Given the discussions that are being had or proposed by president Biden are about changing the way multinational tax is calculated with minimum revenue based metrics on a national approach.

Unknown Executive: Thanks, Susanna. And then on Lucentus, Mary Franz?

Mary France: Yeah, Lucentis did really well in Q1, scoring 4% due to its steady performance in Europe. So there is some rebound, and we can expect to see that to continue.

And I also in the shorter term if you could just give us some update as to.

Mary France: And also the strong NRDL-driven momentum in China, which is definitely where we're looking to see a good chunk of our growth this year. So for the remainder of the year, we expect to see Lucentis grow at low single digits, again with China being a major driver. In terms of the competition, just remind you that Lucentis is really established in the market and we believe it will continue to do well. One of the key drivers is just a very complete indication portfolio that Lucentis has, and that newer products will not bring to market immediately.

The likely near term impact of other thing we've learned from the near term U S. Domestic fiber tax changes that would be extremely interesting.

Then secondly, our products.

Specific question regarding the drop in collaboration in COVID-19 can you just give us an update on the project both in terms of.

The early clinical data that we've seen on the first stop and how the tech transfer is progressing for Sandoz.

Your thinking as to when we might have something to file from that program.

Yeah. Thanks, Matthew So first on tax reform Harry.

Hi, Matthew.

So as you know this year, we guide to about 16% core tax rate.

Mary France: Thanks very much. Thank you, Andrew. Next question, operator.

Last year at $15 four.

Operator: Thank you. Your next question comes from the line, and so your next question comes from Kea Barak from Goldman Sachs.

So we saw a few nimitz.

The 16% to 17%.

Given the current.

Kea Barak: Hi, good afternoon. Thanks for taking my questions, too, please. Vass, I know you kind of suggested that the Sandoz separation is kind of, or the independent company is kind of on the route, but can you just remind us conceptually the positives and negatives from a Novartis perspective of keeping Sandoz in-house? Kind of, it's been a drag on your growth for as long as one can remember.

Tax loss.

Of course, the Bible border the U S part.

Would not be a positive for anybody if you will right from a tax rate standpoint, but our exposure to the U S. If you will as a book.

Relatively low given that the majority of our IP.

From this in Switzerland and.

The other issue with all of this is of course that not too. Many details are available and therefore I don't want to go into any speculations.

Kea Barak: So just conceptually, why does it belong within the Novartis equity story? Would be great. And then separately, for Marie-France on Zolgensma, as we think about the next few quarters, can you just remind us of the incremental countries you're going to be launching the product in and the size of the bolus opportunity in those countries? Thank you.

Because we don't know what will be the end.

Implemented we don't see anything changing for this year.

Anytime soon at the moment, we <unk> of course, we would come up with the respective somehow of yours.

Okay. Thanks, and then on the molecular partners collaboration just to remind the group. The idea here was to pursue the DARPA and technology, which is a naturally occurring tech knowledge naturally occurring protein based molecules that act.

Vasant Narasimhan: Yeah, thanks, Kerr. So on Sandoz, there are, I think, a few considerations. One, historically, and we continue to believe in certain markets, there are commercial synergies and having a broad portfolio across generics and innovative medicines. We, of course, continue to challenge ourselves and evaluate that, but we do have those agreements in certain markets. And that, depending on how healthcare systems evolve in the future, it could be an advantage to have one of the largest, if not the largest, by volume generics companies in the world.

In a completely different way to monoclonal antibodies book with a similar a similar effect.

The first DARPA and a set of darkens for COVID-19 showed very strong preclinical.

Africa see in preclinical models also against the variance the unlike the other partners Novartis collaboration we've completed the phase one study, which will enable a phase three start shortly we target a read out in the Q3 timeframe, which we expect to enable an emergency use authorization.

If positive the provide the benefits of this approach would be one the potential for a sub Q injection versus IV into because this technology can be produced in bacterial fermentation or use fermentation I should say.

Vasant Narasimhan: The other part of the story, of course, is biosimilars, where our manufacturing scale and know-how, as well as our development expertise, enable us to enable Sandoz to build a leading biosimilars portfolio. And then, of course, the company will benefit over time. And we're hopeful that, you know, the Sandoz biosimilars portfolio can help us get Sandoz to that mid-single-digit growth on the margin spectrum and then contribute to the growth of the overall company.

Much lower Cogs for for the Medicine, which was enabled hopefully broad scale US also much higher volumes could be produced versus mammalian cell monoclonal antibody.

So a lot to still work through and figure out, but we're working through it now and hopefully the split the study start and then the ultimate readout over the course of the summer.

Vasant Narasimhan: Those, I think, are the two key considerations. There is, of course, the broader, softer consideration that Sandoz serves hundreds of millions of patients and provides billions of doses to humanity, which is consistent with the overall purpose of the company to reimagine medicine. So, on Zolgen.

Thank you Mathieu next question operator.

Next question comes from the line of Richard.

Yeah.

Yeah.

Hi, Thanks for taking my questions, especially on Xeljanz.

Just in the U S. I just wondered if you could talk a little bit more about where you are in terms of penetration as the incident SMA patient population. It looks like it's just in the <unk>.

Mary France: Yeah, so in the U.S., our business is driven by the incident patient. So the growth outside of the U.S. is coming from these recent reimbursement wins in Europe. For the rest of 2021, we expect the U.S. business to remain stable and to continue to be driven by the incident patient.

60%.

I wondered what renewals for that to move higher based on the screen.

Screening improvements and maybe you could discuss that and where you are in terms of share amongst the various treatment options in that population, but they are often impacted by this.

Mary France: In Europe, we're working on securing reimbursement in additional countries. Right now, we've seen good uptake in Germany and recent reimbursement acceleration in smaller markets such as the Czech Republic or UAE. If we look at the nature of the European markets, we also expect to see reimbursement on a rolling basis. What you can expect going forward is the UK and Italy, where we've now secured reimbursement, and that'll bring a little adjustment to additional patients.

This day launch Osama.

Oh, sorry, I remember you talking about same conditions delaying stopped due to COVID-19.

I'm just wondering whether that's no longer the case.

Then second question is we've heard from some other management teams seem to be expressing some optimism.

Compromised solution on us good pricing could be achievable given the current volume.

So power in the Senate and I, just wondered what Novartis is perspective from that was in New York So from what.

My husband medium term, thanks very much.

Mary France: As we said before, the initial source of business for all of the launches comes from previously treated patients. And over time, that patient makes shifts to the incident population. Overall, for 2021, we expect blockbuster status with Zolgensma.

Yeah. Thanks, Richard So I'll just quickly take the Bill Jones from the U S question. It would go down for dividends from our right now the principal driver of business is the newborn screening programs around the country, which are in those screening programs very high nearly all patients tend to get xeljanz.

Mary France: Thanks, Mary Fran. Thanks, Karen. Next question, operator.

Now newborn screening is covering about 70% of newborn lives, we hope to get that number up to 82% before the end of the year that would be the.

Operator: Thank you. Your next question comes from the line of Emmanuel Papadakis from Deutsche Bank.

Steady state driver for them and then we continue to see some utilization in switch patients who are.

Emmanuel Papadakis: Thanks for taking the questions, Emmanuel Papadakis from Deutsche Bank, maybe a couple of product-specific ones. Just on the attack of phase two, we're going to see the IGAM data relatively soon, I believe, perhaps you could give us any commentary on the conference. And just, I mean, in terms of the data itself, I presume you hit the primary, if I recall, the endpoint was UPCR.

Or in the so called prevalent pool are on an alternative therapy, and then switch to xeljanz.

We do believe we're at a steady state in the U S with some potential growth as newborn screening continues to expand over the.

The coming years, but that's kind of how we think about the U S childrens of opportunity.

Emmanuel Papadakis: Should we expect to see a consistent benefit on the key secondaries like EGFR? And what would you regard as a clinically meaningful improvement on the primary and any key secondaries? And then maybe a question on ship two, TNO 155. Just your take on any ramifications from some compassion data we saw at AACR? If you could just remind us of your confidence in that program's potential and when we should be looking to see the first KRAS combination data, or if you no longer believe that is the most promising combination, what we should be particularly anticipating in terms of the various combination studies you have ongoing for that molecule. Thank you.

As we stated in the presentation, we continue to work through the nonhuman Primate studies to enable AVX 101 interest equal to be lifted off of clinical hold and then b would rapidly want to advance that program through phase III studies, we have agreement with FDA on the design of that phase III clinical trial now in terms of U S drug pricing.

We're absolutely supportive of finding a path forward to enable broader and more affordable patient access at the pharmacy counter.

Which would likely include reforms to the benefit design and part D as well as elements of the design and part D.

We saw the outlines of that.

John Tsai: Thanks, so, John, do you want to start on IJNepropathy?

Potential agreement and the Grassley Wyden Bill last year, but we are cautiously optimistic that we might be able to come to a thoughtful agreement that preserves the industry's ability to investing in innovation and then also enables broader patient access but as you know there are multiple moving parts the situation is quite fluid.

John Tsai: Sure. Thanks for the question, Emmanuel. As you know, at PACAPAN, we're looking across a number of indications, including IgA nephropathy, also C3 glomerulonephropathy, as well as PNH. Specifically, for IgA nephropathy, we do have the phase two dose range finding study, which is ongoing. We've had an interim readout, and based on that interim readout, we've already decided to advance into phase three studies. Those results will be coming out before the half of the year, at the specific conference.

I think that the big shift is that the industry is working to be part of the solution here working actively with the relevant stakeholders to try to find a sensible set of legislation.

Thank you Richard next question operator.

Thank you. Your next question comes from the line of Laura Sutcliffe from UBS.

John Tsai: The posters and abstracts have not been released, so we refrain from telling you exactly, but we are confident that those results will be presented before the first half of the year. As I said, phase three has advanced as we move forward in IgA nephropathy, and the expected filing is based on conditional approval for proteinuria reduction at nine months. These are the same results in phase two which we have in the phase three study.

Hello, Thank you.

Firstly, excluding the impacts of forward purchasing you had space operating income growth and margin expansion this quarter and I realize this could be difficult to pick a part, but how much will you still benefiting from cost savings that you might not ultimately got to keep in the first quarter.

Secondly for the two ex China filings Youre expecting to make particularly this amount this year could you confirm whether or not you'd like to include the U S. Thanks.

John Tsai: And as you asked about the secondary endpoints, these are the same secondary endpoints that we have in our phase three study. The final approval, which is expected to be in 2025, is based on the EGFR slope, and this was the phase two study that we had in place and also is the endpoint for full approval in 2025 based on results.

Yes.

So I think quickly on the on the second point, yes. They would include the U S.

Then on the question on cost savings and they will give it to Harry Harry.

Thank you Laura.

Of course, we had some lower activity in quarter, one, but when you look at the cost levels.

Pretty much in line, even though.

Prior year quarter, one where the shutdown can mainly only in second half of March. So and then secondly, we of course also driving new ways of working.

John Tsai: So I think the second question that you had was about SHP2 or the SHP2 inhibitor and how should we be thinking about the SHP2 inhibitor as we move forward. As you know, SHP2 is a tyrosine phosphatase and acts at a really important note as we look at the RAS-MAP kinase pathway. And in preclinical studies, what we saw was not only single agent activity but also activity in combination with other agents. Our strategy for our SHP2 inhibitor is that we expect to go broadly in terms of a number of combinations. And as we look at the approach that we're taking, there are four potential areas that we're currently looking at. First, it is in combination with our own EGFR agent. This would be our third generation EGFR agent.

Key but the good things if you will off the situation to run the company more effectively and of course also our customer facing colleagues, who don't have a mix of tools.

With where face to face is most effective at wanted of course that happens.

But also the virtue and other interactions. So I would say most of the cops cost savings, we can keep our day.

Other had some increased investments will happen in quarter two.

All of that is part of our full year guidance.

Thanks, Terry Thanks, Laura next question operator.

Thank you. Your next question comes from the line of Simon Baker from Redburn.

Okay. Thank you for taking my questions. Two please if I may I'm, especially on Xeljanz from not getting back to the European situation.

John Tsai: And this would be our first consideration for combination with our SHP2 inhibitor. Secondly, we are looking at the role of SHP2 in immune cells. And so that consideration would be with PD-1, and we have a study ongoing with spartalizumab. Thirdly, we would be looking at the MAP kinase RAS pathway as we look at the combination with potentially KRAS-G12c. And also, we have a study in place with cascali. And then fourth, we currently have an early study in combination with braffenib and trimetinib as we look at the treatment for BRAB V600 mutant CRC patients. So we have high expectations in combination with our SHP2 inhibitor looking broadly in addition to the KRAS-G12c pathway.

Could you give us a little bit more color on where the growth was coming from in the quarter, which from what you've said it sounds like it's still the prevalent population in Germany, given the timing of.

You you kind of Italian.

Reimbursed, but any any color on that would be useful and onto cash centex.

Perhaps you could give us your thoughts on the competitive landscape within psoriasis concentrix in licensee in the kitchen mouth data a few days ago.

Secondly on Concentrix, you'll see your thoughts on the Sigma debit card initiatives to try and move people off because it takes I don't see alternative products. Thanks, so much.

John Tsai: Thanks, John. And maybe just to highlight again, you know, we're not focused here on a single agent. I couldn't hear a question, Mandel.

Thank you Simon so first on the Xeljanz my growth Marie France.

Yeah. So when we look at the European business, the incremental uptake has been mainly in Germany, and as I mentioned before we've seen acceleration in some other smaller markets, so chocolate public UAE and Qatar.

Vasant Narasimhan: We really think the opportunity for shift two will be in common, and hopefully in combination with a range of agents, and that that data should come out over the coming 18 months. Next question, operator.

We have not yet seen the uptake in the U K and Italy, and that's what you can expect to see towards the end of the year. So as we said before we will be moving from incidents segments to two additional countries, where you'll see this initial bolus of patients and then they'll transition.

Operator: Thank you. Your next question comes from Matthew Weston from Credit Suisse.

Matthew Weston: The first on U.S.

Matthew Weston: So Novartis, like many in the farmer industry, is a major beneficiary of transfer pricing. I'd be very interested in Harry's view of the long-term tax rate, given the discussions that are being had or proposed by President Biden.

And to an incident population is what you see in the U S. So you can you can expect some volatility in the quarterly sales pattern because of course, it's a one time treatment.

Every quarter, we start again from from from scratch, but that's what you can expect to see we're bringing in new countries. We have a number of countries that have day, one access agreement.

Matthew Weston: about changing the way multinational tax is calculated with minimum revenue-based metrics on a national approach, and I also think in the shorter term if you could just give us some update as to the likely nearer term impact of anything we've learned from the near

We hope to bring about 15 countries with full reimbursement by the end of 2022.

And then I'm going to say Yep Yep.

Yeah, so on costs on to your two questions.

So I'm I'm a competitive overview that the first thing that I'd say is that we have to remember in in this marketplace. So you you you referred to psoriasis. The biologic penetration remains really low in fact, when we look at psoriasis, we're talking about about 15% of biologic penetration.

Matthew Weston: And from the near-term U.S. domestic Biden tax changes, that would be extremely interesting.

Matthew Weston: And then, secondly, a product-specific question regarding the DARPIN collaboration in COVID.

Matthew Weston: Can you just give us an update on the project, both in terms of...

And if we think about cost context, we know that there are a lot of competitors out there, but we've shown efficacy across four indications.

Matthew Weston: The early clinical data that we've seen on the first DARPIN, and how the tech transfer is progressing to Sambos.

Psoriasis, our data shows that we clear a scan in eight out of 10 patients and that we have strong efficacy across the axial spa spectrum remember that two thirds of patients are going to have some of these manifestations.

Matthew Weston: and you're thinking as to when we might have something to file on that. Thanks, Matthew. So first on tax reform, Harry.

Harry Kirsch: Hi Matthew. So, as you know, this year, we got to about 16% of the core tax rate. Last year, we were at 15.4%. You know, we saw you in the midst of the 16 to 17% given to current students. Now, of course, the Biden proposal, the U.S. part would not be positive for anybody, if you will, right, from a tax rate standpoint. But our exposure to the U.S., if you will, is relatively low, given that a majority of our IP and a lot of substance is in Switzerland, and the other issue with all of this is, of course, that not many details are available, and therefore I don't At the moment we have details, of course, we would come up with the respective sentence.

One other point I wanted to make is that we have five year plus safety data and the bar is.

Very high right now on safety, especially now.

<unk>.

What cause some flex offers is a tried and trusted complete treatment.

In addition to that we have strong access not only in the U S, but across the globe and so you know I keep talking about our three pillars in our strategy and it's exactly that has strong access early line access that's going to allow us to grow volume and revenue in the U S and in the EU we've got the.

Expansion in China with the NRG all that just came in March so you'll see more of that in the rest of the year.

Then we've got our complete profile and we continue to have strong resonance in the marketplace with the data that we have and of course in the future. Our lifecycle management program. So we've shown that we can do well despite multiple competitive entry in the psoriasis space and beyond this rise.

The space and we're confident we can deliver double digit growth in the year.

Thanks.

On second half so the next day.

Yeah, Yeah. So I think that's a question for Cigna.

Harry Kirsch: Great, thanks, Thierry. And then on the Molecular Partners Collaboration, just to remind the group, the idea here was to pursue the DARPIN technology, which is a naturally occurring protein-based molecule that acts in a completely different way to monoclonal antibodies, but with a similar effect. The first DARPIN, a set of DARPINs for COVID, showed very strong preclinical efficacy in preclinical models, also against the variant. The Molecular Partners Novartis Collaboration, we've completed the phase one study, which will enable a phase two, and three start shortly.

But what I'll say is that we're not going to change our commitment to physicians and patients.

We believe that access should enable a clinical decision between a physician and the patient and that's why broad access is going to stay a core pillar of our strategy.

But we'll always balance that with the long term value of the brands, we have six potential upcoming indication. So it's our obligation to think about what drives value today, but also what drives value in your future.

Alright, thanks very much.

Next question operator.

Thank you and next question comes from the line of.

<unk> from.

From Bernstein.

Oh, great. Thank you very much for taking my questions, we'll make a party from Bernstein Chipotle.

Harry Kirsch: We target a readout in the Q3 timeframe, which we expect to enable an emergency use authorization. The benefits of this approach would be, one, the potential for a sub-q injection versus IV, and two, because this technology can be produced in bacterial fermentation or yeast fermentation, which would have a much lower cost per unit for the medicine, which would enable, hopefully, broad-scale use. Also, much higher volumes could be produced compared to mammalian cell monoclonal antibodies.

About the piece from a $6 seven individually isn't study alone as opposed to headlines in March just given the continued changing in the standard of care in prostate cancer I just wanted to get your thoughts on the trial design and the implications for commercial potential should the real comparator our provision have been purposeful.

In order to be a real clinical importance rather than the best standard of care. Given you know the license that you can extend that no longer recommended.

That setting so I appreciate there's quite a fluid situation when it makes the when it comes to trial design, but just your thoughts on commercial impact would be great. And then my second question is just on Legalisms mountain in the upcoming phase III readout in CSU just curious on your thoughts.

Harry Kirsch: So a lot to still work through and figure out, but we're working through it now, and hopefully, this is what the studies start and then the ultimate readout over the course of. Thank you, Matthew. Next question operator.

On your level of confidence for that readout later this year, how quickly could we actually see switching from Xolair should we see positive data and can you just provide some context on what proportion of dollar sales come from CSE today. Thank you.

Yeah. Thanks for a month and thanks also for your initiation of coverage and Theyre very comprehensive report a few weeks back. So first on on P. S. M 80 617.

Vasant Narasimhan: The next question comes from the line of Richard Parkes, and it's saying BNP.

Operator: Hi, thanks for taking my questions. Firstly, on Zolgensma, just in the US. I just wondered if you could talk a little bit more about where you...

This is suzanne on the commercial potential and the trial design.

Yeah. Thanks, a lot so maybe let me start with the trial design. So you know.

Richard Parkes: of penetration of the incident SMA patient population. It looks like it's just under 60%, but I wondered what room there was for that to move higher based on screening in pre-reaching.

Just to remind you what discussing also other vision trial, so at Boston and Progressive metastatic castration resistant prostate cancer missed at least one line of prior androgen therapy and at least one but not more than two lines of Taxane based chemotherapy.

Richard Parkes: and Maybe you could discuss that and where you are in terms of

Richard Parkes: Thank you all for joining us today. I'm delighted to be here. I'm delighted to be able to share amongst the various treatment options in that population whether that's been impacted by the EverVisity launch. Also, I remember you talking about seeing physicians delaying starts due to COVID. I'm just wondering whether that's no longer the case.

And we felt like in this setting a standard of care.

The best comparator.

It's really a setting where there is limited options in this setting of very high unmet medical need. So we believe it is very strong data and I think the fact that EBITDA will be showing a positive data on boes a day.

Richard Parkes: [inaudible]

Richard Parkes: I heard from some of the management.

Richard Parkes: [inaudible]

Richard Parkes: be achievable given the current balance of power in the Senate, and I just wondered what Novartis' perspective on

Radiographic PFS S O S. I think is demonstrating that.

Richard Parkes: on that was and your thoughts on what might happen in the medium term. Thanks very much.

And as I say per commercial potential in this area is significant.

Vasant Narasimhan: Thanks, Richard. So I'll just quickly take the Zolgensma US question. For Zolgensma right now, the principal driver of business is newborn screening programs around the country, which are very high; nearly all patients tend to get Zolgensma. Right now, newborn screening is covering about 70% of newborn lives. We hope to get that number up to 82% before the end of the year.

Plus day at cancer is the second largest cancer indication.

Then of course is in late lines of business there.

We need to have very high medical need and peace in PSM are they will offer a very very attractive.

You know treatment option and then you just look into the setting think again that the majority of these patients will be met us that big hit by very low survival of five year survival rate. So therefore, it is a significant pool of patients.

Maybe I'll just add as we noted in the presentation, we've already initiated or will soon initiate a range of earlier stage.

Vasant Narasimhan: That would be the steady-state driver for Zolgensma, and then we continue to see some utilization in switch patients who are in the so-called prevalent pool or are on an alternative therapy and then switch to Zolgensma. So we do believe we're at a steady state in the US with some potential growth as newborn screening continues to expand over the coming years. And that's kind of how we think about the US Zolgensma opportunity.

Prostate cancer studies, which will enable us if successful to rapidly brought in the indication base for PSM basics, one seven and so.

So on legalism of on the clinical program and.

Confidence, maybe John and then maybe my response on the.

Tribune of CSU in the ability to switch from Xolair.

Sure Yep.

Thanks for the question.

We moved into a phase III program based on the phase two head to head study that we had against Xolair, which was published in the New England Journal based on that Phase two study what we saw was 42% symptom free with legalism Mab versus 26% normal is a map, which was a significant difference.

Vasant Narasimhan: As we stated in the presentation, we continue to work through the non-human primate studies to enable AVXS101 intrathecal to be lifted off of clinical holds, and then we would want to rapidly advance that program through phase three studies. We have agreed with FDA on the design of that phase three clinical trial. Now, in terms of US drug pricing, we're absolutely supportive of finding a path forward to enable broader and more affordable patient access at the pharmacy counter, which would likely include reforms to the benefit design in part D, as well as elements of the design in part B. I think we saw the outlines of that potential agreement in the Grassley-Wyden bill last year, but But as you know, there are multiple moving parts, and the situation is quite fluid. I think that the big shift is that the industry is working to be part of the solution here.

<unk> and scientifically as we think about that legalism mab recognizes a different epitope on the <unk> molecule for Xolair and that's the confidence that we have and then more specifically binds on Etsy Epsilon are I effector cells and based on the stack we've moved into that.

Two Pearl two studies per one in Perl to.

We expect to get those readouts by the end of the year in the early part of next year as we continue to recruit a crew hum.

The endpoints.

On the population and the operator.

Trying to go to.

Ameriprise from you folks.

Yeah. So the first thing I'd point out is that the biologic penetration in this market space is also really low we currently estimate that less than 30 per cent of patients are on xolair and that's probably optimistic.

And what we know is that we've got about a 1.3 million CSU patients in the top 11 countries that are still not adequately controlled. So this is a big opportunity. This product is showing to differentiate itself significantly and an opportunity for us to bring this product to them much.

Vasant Narasimhan: Thank you, Richard. Next question, operator. Thank you. Your next question comes from the line of Laura Sutcliffe from UB. Hello, thank you. First of all, excluding the impact of forward purchasing, you had both operating income growth and...

Broader population, which right now is really underserved with antihistamine.

Perfect. Thanks, very fast so for the remaining questions somebody good basket. Thank you.

If we could limit yourself to 111 question that would be great. As we have a number of people in the queue. So next question operator.

Operator: Thank you. Your next question comes from the line of Laura Sutcliffe from UBS.

Thank you. Your next question comes from the line of Florent Cespedes from Societe Generale.

Good afternoon, everyone and thank you so much for taking my question.

Susanne on Ts Kelly.

Laura Sutcliffe: So I think, quickly, on the second point, yes, they would include the U.S., and then on the question on cost savings, maybe I'll give it to Harry. Harry?

How do you explain the difference on the dynamic of the U.

U S versus Europe markets and.

Why Europe is much more dynamic than the U S and how do you see the U S market breast cancer market dynamic going forward. Thank you.

Harry Kirsch: Yeah, thank you, Laura. So, of course, we still had some lower activity in quarter one. But when you look at the cost levels, they're pretty much in line, even with prior year quarter one when the shutdown came mainly in the second half of March. So, and then, we are, of course, also driving new ways of working to keep the good things, if you will, of the situation to run the company more effectively.

Suzanne.

Yeah. Thank you flora so yeah.

As I said, a good colleague globally was growing 19% and as you rightly point out there was very strong growth ex U S, especially in the EU vial sales are more or less flattish or slightly declining in the U S and I think the reason is really very different.

Market dynamics that are in the U S. The market certainly is already quite penetrated the CDK four six inhibitors.

Harry Kirsch: And of course, also our customer-facing colleagues, you know, have a mix of tools where face to face is most effective and wanted, of course, that happens. But also virtual and other interactions. So I would say most of the cost savings we can keep. On the other hand, some increased investments will happen in quarter two. And, of course, all of that is part of our full-year guidance.

And when you look at the impact of COVID-19, you saw that a N b Eric swipe sample in February was down 16% and this is continued now since the pandemic started and this is now already impacting P. Eric's going down minus 4% so of course our growth.

Harry Kirsch: Thanks, Terry. Thanks, Laura. Next question, operator.

Would come from new patients and that's hard to get if its less new patients coming in while in Europe overall penetration of CDK four six is much slower so of dynamics. There are are more.

Operator: Great, thank you for taking my questions, two please, if I may. Firstly, on Solzhenitsyn, and we're going back to the European situation, could you give us a little bit more color on where the growth was coming from in the quarter? From what you've said, it sounds like it's still the prevalent population in Germany, given the timing of the UK and Italian reimbursements, but any more color on that would be useful. And on to Cosentyx, perhaps you could give us your...

More active and therefore, we could capture more patients there. So overall as I said kits Carly. This the strong always data we feel is very well differentiated we keep on focusing executing our growth brands and you remain confident also for the U S debt of in patients with cash.

Unknown Caller: [inaudible]

Unknown Caller: on the Sigma Debit Card Initiative.

Unknown Caller: Thank you very much.

Unknown Caller: Thank you, so first on Zolgna growth, Mary Franz. Yeah.

Come back in and things will open up more that we capture again strong growth.

Mary France: Yeah, so when we look at the European business, the incremental uptake has been mainly in Germany. And as I mentioned before, we've seen acceleration in some of the smaller markets. So the Czech Republic, the UAE, and Qatar.

Thank you.

Next question operator.

Thank you. Your next question comes from the line of Richard Vasa from.

J P Morgan.

Hi, Thanks for taking my question just a question on the oxo brand erosion and just when we should think about that bottoming out and and the growth of the ophthalmology franchise skateboard. Thanks very much.

Mary France: We have not yet seen the uptake in the UK and Italy, but that's what you can expect to see towards the end of the year. So, as we said before, we will be moving from incident segments to additional countries where you'll see this initial bolus of patients, and then they'll transition to an incident population, which is what you see in the US. So you can expect some volatility in the quarterly sales pattern because, of course, it's a one-time treatment. So every quarter, we start again from scratch, but that's what you can expect to see. And we hope to bring about 15 countries with full reimbursement by the end of 2022.

Thank you Richard so on Ophthalmology dynamics Marie France, I guess also referring to front of the eye as well.

I draw a strong <unk> performance as well really on the quarter.

Right that was what I was going to mention that so we do we do see obviously, we've seen a huge impact in in a in this space.

Because of COVID-19. So there's a combination of factors. So we have seen some loss of exclusivity, which is obviously something that we anticipated over our strat plan period, and then of course, there was a COVID-19 impact, which really hit the entire Austin portfolio as you know starting with the anti VEGF.

Mary France: And then I'm going to think. Yeah. Yeah.

Mary France: Yeah, so on Cosensics, your two questions. So on the competitive overview, the first thing that I'd say is that in this marketplace, as you referred to psoriasis, the biologic penetration remains really low. In fact, when we look at psoriasis, we're talking about about 15% of biologic penetration. And if we think about Cosensics, we know that there are a lot of competitors out there, but we've shown efficacy across four indications.

What should nicely recuperated.

During the year and you see them off too to a solid performance across the board in in 2020, one we still see him a a a suppression in the marketplace. Although that's starting to pick up and what I will point out is our our front of the eye portfolio, namely enzyme draw.

We do see very encouraging data and then we had to re launch that brand as you know, but we also know it's a big market like 32 million people with dry eye disease, and and only $1 6 million of them are on a prescription drugs. So we had.

Mary France: In psoriasis, our data shows that we clear the skin in 8 out of 10 patients and that we have strong efficacy across the axial spas spectrum. Remember that two-thirds of patients are going to have some of these manifestations. One other point I wanted to make is that we have five years plus safety data, and the bar is very high right now on safety, especially now. What Cosentex offers is a tried and trusted complete treatment.

We had a good quarter was I try 28% of N V Rx share and it just shows that if you. If you have the share of voice if he has the right campaign.

And it's worth investing in this space.

Terrific. Thank you Marie France, and Richard next question operator.

Thank you. The next question comes from the line of Tim Anderson from Wolfe Research.

Yes, Hello. Thank you for taking the question. This is Richard Wagner on behalf of Jim at Wolfe Research.

Question on the Kids Kelly could.

Could you speak about what you're seeing in the U S in terms of Rebating.

Mary France: In addition to that, we have strong access, not only in the U.S. but across the globe. And so, you know, I keep talking about our three pillars in our strategy, and it's exactly that. It's strong access, and early line access. That's going to allow us to grow volume and revenue in the U.S. and in the EU. We've got the geographic expansion in China with the NRDL that just came out in March, so you'll see more of that in the rest of the year. Then we've got our complete list.

This oral oncologic category, our understanding is that from ebay.

Stepping up presumably that is driven by Pfizer trying to hang on to market share what's the outlook for the net price trends in this category.

And where how would those trends in particular impact to Sally.

Which does not have the volume of by brand and does not yet have the adjuvant data.

Thank you very much.

Thanks Richard.

On kits golly, our CDK four six rebating trends.

Yeah sure. So you know I wouldn't want to comment on that and maybe let me just reemphasize what is our strategy certainly we see that his colleague has the best OS data and also has demonstrated now longest O S.

Mary France: profile, and we continue to have strong resonance in the marketplace with the data that we have. And, of course, in the future, our life cycle management program. So we've shown that we can do well despite multiple competitive entries in the thoracic space and beyond the sororias of space, and we're confident we can deliver double-digit growth in the year. If I take your question on Cigna, yeah, so the next question was on Cigna, yeah.

Combining all of the phase III trials in bed.

It keeps us confident that.

Focus continued on execution.

We'll also see continued momentum be we get very positive feedback from Hcp's N V. C that are they are changing now that treatment Petra said more and more are willing to risk. His colleagues. So I believe our focus needs to be and differentiation on continued execution of our group.

Mary France: Yeah, so I think that's a question for Cigna, but what I'll say is that we're not going to change our commitment to physicians and patients. We believe that access should enable a clinical decision between a physician and a patient, and that's why broad access is going to stay a core pillar of our strategy, but we'll always balance that with the long-term value of the brand. We have six potential upcoming indications, so it's our obligation to think about what drives value today but also what drives value in our future.

Most brands are and therefore I still believe it's tally is a important growth driver for us and I remain very confident in the brand.

Thank you Susanna next question operator, I think we just have a few more left.

Thank you. Your next question comes from the line of Mike No COVID-19 co fritzsche from Cowen.

Mary France: Okay, thanks so much.

Hi, Thanks for taking my question I'm curious on Entresto it looks like the data in the post <unk> setting trended toward improvement despite missing the primary end point, but the readout is listed as neutral on the slide. So I'm just wondering should we take that to mean that filing in that indication might still be on the table right.

Operator: Thank you. Your next question comes from the line "Kawumal Kabaddiah" from Bernstein.

Kawumal Kabaddiah: Well, great, thank you very much for taking my questions. Can I just first ask about PSMA-617 and the VISION study following the positive headlines in March? Just given the continued change in the standard of care in prostate cancer, I just wanted to get your thoughts on the trial design and the implications for commercial potential. Should the real comparator for VISION have been cabotaxil in order to be of real clinical importance rather than the best standard of care, given the likes of Zytiga and Xtandi are no longer recommended in that setting?

Yeah, I'll just quickly take that you know we need to discuss with the regulatory authorities and we'll present the full data at ACC, where you can see both the primary.

And secondary endpoints, but the other question on the table of course, as we demonstrated a positive trend versus an established standard of care in ramipril, but it wasn't a superiority study. So I think moving to work through with the regulators what's possible in terms of any sort of indication in the label.

Or any data in the label.

We will take those steps and we'll present the data at ACC.

Kawumal Kabaddiah: I appreciate it's quite a fluid situation when it comes to trial design, but just your thoughts on commercial impact would be great. And then my second question is just about Legolizumab and the upcoming phase 3 readout in CSU. Just curious about your level of confidence for that readout later this year. How quickly could we actually see switching from Zolair should we see positive data? And can you just provide some context on what proportion of Zolair cells come from CSU today? Thank you.

Next question operator.

Okay and final question comes from the line of Peter Welford from Jefferies.

Hi, Thanks for squeezing me in a quick question on Sandoz again, I'll look it is possible to quantify the impact of the termination of the oral solids partnerships, which have somewhat of a one off and just thinking about then the sandoz business and getting it back to growth and margins how should we think about potential for disposing of parts of that.

I think Nashville splitting the portfolio down I know you've tried this before the purely to return to growth and margins go the other way so slimming down the sales line is that even viable with the business portfolio that you have thank you.

Thanks, Peter and good to hear from you and Richard sooner on the Sandoz U S business and the legacy Oh.

Kawumal Kabaddiah: Yeah, thanks, Amal. And thanks also for your initiation of coverage and your very comprehensive report a few weeks ago. So first on PSMA 617, I'll move to Susanna on the commercial potential of the trial design.

The oral solid and dermatology business yeah. Thank you. Thank you Peter so yeah, you're right I mean, clearly we've terminated all ended a number of the partnership relationships and that's really washing through from the end of last year really pretty much to the end of this year. So a lot of the decline that you see in the oral solids business is really related to that.

Susanna Schaffert: Yeah, thanks a lot. So maybe I should start with the trial design. So, you know, just to remind you what the setting was for the vision trial. It was in progressive metastatic castration-resistant prostate cancer, with at least one line of prior androgen therapy and at least one but not more than two lines of taxane-based chemotherapy. And we felt that in this setting, standard of care is the best comparator. It's really a setting where there are limited options in a setting of very high unmet medical need.

But I said I hope to that will wash out by the end of this year and then really I see the U S business is sort of three distinct chunks you have the core business. The injectables the biologics in the auto business, which really has a strong momentum and potential for growth as we launch new products going into the end of 'twenty, two and 'twenty three.

We're currently looking at how we strengthen and stabilize the oral solids business once that washout phase has played with both in house development and rebuilding that capability and then looking at also a BD and M&A to strengthen it and then the derma piece already we've taken up a lot of the derma business, we divested some of those elements over the last month.

And the remaining is relatively stable and accretive to the overall business. So a lot of moving pieces, but we've got a clear plan going forward.

Susanna Schaffert: So we believe it is very strong data, and I think the fact that we were really showing positive data on both radiographic PFS, and SOS is, I think, demonstrating that. And as I said, the commercial potential in this area is still significant as prostate cancer is the second largest cancer indication. This setting, of course, is in late stages, but we still believe there's a very high medical need. And the PFS and PSML will offer a very, very attractive treatment option. And when you just look at the setting, think again that the majority of these patients will be metastatic, and have a very low survival, five-year survival rate. So, therefore, it is a significant pool of patients.

Terrific. Thanks, Thanks, Richard and thanks to everyone for your questions today, maybe just to take a step back I think its worth.

Worth noting.

When you look at the longer term growth profile of the company. Our key again drivers cause centex Entresto xeljanz months cause symptoms are all demonstrating they have the outlook or the potential to really enable us to grow consistently through 2025 as Harry outline on top of that we continue to expect to be able to bring.

And closer into broad groups of patients in the U K and the U S. Well ahead of the outcome study, giving them closer and significant potential even ahead of that outcomes data, which we now expect in 2006 with Scalia adjuvant and our continued efforts in bed with you you have a broad range of products enhance that drive that growth for the next few years.

Susanna Schaffert: Maybe I'll just add, as we noted in the presentation, we've already initiated or will soon initiate a range of earlier stage prostate cancer studies, which will enable us to successfully broaden the indication base for PSMA 617. So on Legalizumab, on the clinical program and our confidence, John and then Mary Franz on the contribution of CSU and the ability to switch from Solar.

Then on top of that you have a deep mid stage pipeline, where we continue to show progress multiple assets.

Could be multibillion dollar potential assets to drive our longer term growth you see already the first possibilities with loopy SMA and we hope to demonstrate with further readouts over the course of this year the potential of that pipeline continued margin progression and aspiration and demonstration of leadership in ESG. So I think the store.

John Tsai: Sure. Yep. Thanks.

John Tsai: Thanks for the question. As you know, we moved into the Phase 3 program based on the Phase 2 head-to-head study that we had against Zolaire, which was published in the New England Journal. Based on that Phase 2 study, what we saw was 42% symptom-free with ligalizumab versus 26% nomalizumab, which was a significant difference. And scientifically, as we think about that, ligalizumab recognizes a different epitope on the IgE molecule for Zolaire, and that's the confidence that we have.

He is taking shape and we look forward to continuing to attract long term investors to our company to our stock and our overall vision to re imagine medicine. So thank you all very much for joining the call and we'll look forward to speaking again soon.

Yeah.

Thank you that does conclude your corner webcast book, Okay. Thank you all for participating and you may now disconnect.

[music].

John Tsai: And more specifically, binds to the FC epsilon Ri effector cells. And based on this fact, we've moved into the two studies, PERL-1 and PERL-2, on the population and opportunity we can go to, yeah, we can go to Mary France, Mary France.

John Tsai: Yeah, so the first thing to point out is that the biologic penetration in this market space is also really low. We currently estimate that less than 30% of patients are on Solair, and that's probably optimistic. And what we know is that we've got about 1.3 million CSU patients in the top 11 countries that are still not adequately controlled. So this is a big opportunity. This product is showing to differentiate itself significantly and is an opportunity for us to bring this product to a much broader population, which right now is really underserved with antihistamines.

Mary France: Terrific. Thanks, Mary France. So for the remaining questions, I could ask them. Thank you. If we could limit ourselves to one, one, one question, that would be great as we have a number of people in the queue. So next question, operator.

Operator: Thank you. Your next question comes from the line of Florent Cespedes from Society General.

Florent Cespedes: Good afternoon everyone. Thank you very much for taking my question. For Suzanne, on Keith Kelly, Suzanne, how do you explain the difference in the dynamics of the US versus European markets and why Europe is much more dynamic than the US?

Florent Cespedes: much more dynamic than the U.S., and how do you see the U.S. breast cancer market dynamic going forward?

Susanna Schaffert: Yeah, thank you, Florent. So, you know, as I said, Kizkali globally was growing 19%, and as you rightly point out, there was very strong growth ex-US, especially in the EU, while sales were more or less sluggish or slightly declining in the US. And I think the reason is really very different market dynamics.

Susanna Schaffert: In the US, the market is certainly already quite penetrated with CDK46 inhibitors. And when you look at the impact of COVID, you see that NBRX, for example, in February was down 16%. And this has continued now since the pandemic started, and this is now already impacting TRX, going down minus 4%.

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Susanna Schaffert: So, of course, our growth would come from new patients, and that's hard to get if fewer new patients are coming in. While in Europe, overall penetration of CDK46 is much slower, so dynamics there are more active, and therefore, we could capture more patients there. So overall, as I said, Kizkali, with its strong OS data, we feel is very well differentiated. We keep on focusing on and executing our growth plans. And we remain confident also for the US that when patients come back, and things will open up more, that we will capture again strong growth.

Susanna Schaffert: Thank you.

Operator: Next question, operator.

Richard Vosser: Thank you. Your next question comes from Richard Vosser from J.P. Morgan.

Richard Vosser: Hi, thanks for taking my question. Just a question on the opt for brand erosion and just when we should think about that bottoming out and the growth of the ophthalmology franchise going forward. Thanks very much.

Mary France: Thank you, Richard. So on ophthalmology dynamics, Mary France, I guess also referring to the front of the eye as well. I would note ZYDRA, a strong ZYDRA performance as well, really, in the quarter.

Mary France: Right, I was going to mention that. So we do see that, obviously, we've seen a huge impact in this space because of COVID. So there's a combination of factors. We have seen some loss of exclusivity, which is obviously something that we anticipated over a strike plan period. And then, of course, there was a COVID impact, which really hit the entire OFDA portfolio, as you know, starting with the anti-VGFs, which nicely recuperated during the year, and you see them off to solid performance across the board in 2021.

Mary France: We still see suppression in the marketplace, although that's starting to pick up. And what I will point out is that in our front of the eye portfolio, or namely in Zydra, we do see very encouraging data. And we had to relaunch that brand, as you know. But we also know it's a big market, right? 32 million people have dry eye disease, and only 1.6 million of them are on a prescription drug. So we had a good quarter with Zydra, 28% of NBRX's share. And it just shows that if you have the share of voice, if you have the right campaign, then it's worth investing in.

Mary France: Perfect. Thank you, Mary Constance and Richard. Next question, operator.

Operator: Thank you. The next question comes from the line of Tim Anderson from Wolf Research.

Timothy Anderson: Yes, hello, thank you for taking the question. This is Richard Wagner on behalf of Tim at Wolf Research. There's a question on this, Kis Callie.

Richard Wagner: Could you speak about what you're seeing in the U.S. in terms of rebates in this oral oncologic category? Our understanding is that the rebates are stepping up, presumably driven by Pfizer trying to hang on to market share. What's the outlook for the net price trend in this category? And where would those trends, in particular, impact Kiskali, which does not have the volume of Ibrands and does not yet have the adjutant data?

Richard Wagner: Thanks, Richard. So Susanna on the CDK 4.6 rebating trend.

Susanna Schaffert: Yeah, sure. But, you know, I wouldn't want to comment on that.

Susanna Schaffert: Maybe let me just reemphasize what our strategy is. Certainly, we see that Kizkali has the best OS data and also has demonstrated the longest OS, combining all the phase three trials. And that keeps us confident that if we continue to focus on execution, we will also see continued momentum. We get very positive feedback from HCPs, and we see that they are changing their treatment patterns now, and more and more are willing to list Kizkali.

Susanna Schaffert: So I believe our focus needs to be on differentiation, on continued execution of our growth brands. And therefore, I still believe Kizkali is an important growth driver for us, and I remain very confident in the brand.

Susanna Schaffert: Thank you, Susanna. Next question, operator? I think we just have a few more left.

Operator: Thank you. Your next question comes from the line of Mike Nedelcovych from Cowan.

Michael Thomas Nedelcovych: Hi, thanks for taking the question. I'm curious about Entresto; it looks like the data in the post MI setting trended toward improvement, despite missing the primary endpoint, but the readout is listed as neutral on the slide. So I'm just wondering, should we take that to mean that filing for that indication might still be on the table?

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Vasant Narasimhan: I'll just quickly take that. You know, we need to discuss it with the regulatory authorities, and we'll present the full data in ACC, where you can see both the primary and secondary endpoints. I think the question on the table, of course, is whether we demonstrated a positive trend versus an established standard of care in Ramapril, but it was a superiority study. So I think we'll need to work through with the regulators what's possible in terms of any sort of indication in the label or any data in the label. But we'll take those steps, and we'll present the data at ACC. Next question, operator.

Vasant Narasimhan: Thank you. And the final question comes from the line of Peter Welford from Jeffreys.

Operator: Hi, thanks for screening me in. A quick question on Spandau.

Peter Welford: again. I wonder if it's possible for you...

Peter Welford: to quantify the impact of the termination of the oil solids partnerships, which I guess is somewhat of a one-off.

Peter Welford: The Sandoz business is back to growth and margins. How should we think about the potential for disposing of parts of that business or slimming the portfolio down? I know you've tried this before, but clearly, to return to growth and margins, the other way is to slim down the sales life. Is that even viable with the business portfolio that you have?

Peter Welford: Thank you.

Vasant Narasimhan: Thanks, Peter. Good to hear from you. And Richard Sainer on Sandoz's US business and the legacy of, oh, well, the oral solids and dermatology business.

Richard Saynor: Yeah, thank you. Thank you, Peter.

Richard Saynor: So yeah, you're right. I mean, clearly, we've terminated or ended a number of partnership relationships, and that's really washing through from the end of last year, really, pretty much to the end of this year. So a lot of the decline that you see in the oral solids business is really related to that. But hopefully, that will wash out by the end of this year.

Richard Saynor: And then really, I see the US business in sort of three distinct chunks. You have the core business, the injectables, the biologics, and the OPSA business, which really has strong momentum and potential for growth as we launch new products going into the end of 22 and 23. We're currently looking at how we strengthen and stabilize the oral solids business once that washout phase has cleared, with both in-house developments and rebuilding that capability, and then looking at both BD and M&A to strengthen it.

Richard Saynor: And then the derma piece, we've already cleaned up a lot of the derma business. We divested some of those elements over the last month, and the remaining is relatively stable and accretive to the overall business. So a lot of moving pieces, but we've got a clear plan going forward.

Vasant Narasimhan: Terrific. Thanks. Thanks, Richard. And thanks, everyone, for your questions today. Maybe just to take a step back, I think it's worth noting.

Vasant Narasimhan: When you look at the longer-term growth profile of the company, our key drivers, again, Cosentix, Entresto, Zolgensma, Cosimta, are all demonstrating they have the outlook and the potential to really enable us to grow consistently through 2025, as Harry outlined. On top of that, we continue to expect to be able to bring Inclustrin to broad groups of patients in the U.K. and the U.S., well ahead of the outcome study, giving Inclustrin significant potential, even ahead of that outcome data, which we now expect in 26.

Vasant Narasimhan: With the Cascale adjuvant and our continued efforts in Bayview, you have a broad range of products in hand to drive that growth for the next few years. Then, on top of that, you have a deep mid-stage pipeline, where we continue to show progress, multiple assets that could be multibillion-dollar potential assets to drive our longer-term growth. You are already seeing the first possibilities with Loop PSMA, and we hope to demonstrate the potential of that pipeline with further readouts over the course of this year.

Vasant Narasimhan: Continued margin progression and an aspiration and demonstration of leadership in ESG. So I think the story is taking shape, and we look forward to continuing to attract long-term investors to our company, to our stock, and to our overall vision to reimagine Medicaid. So thank you all very much for joining the call, and we'll look forward to speaking again.

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Operator: Thank you. That does conclude our call and webcast for today. Thank you all for participating, and you may now disconnect.

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