Q2 2022 Novartis AG Earnings Call

Speaker 2: Good morning and good afternoon and welcome to the Novartis Q2 2022 results release conference call and live webcast. Please note that during the presentation all participants will be in a listen only mode and the conference is being recorded. After the presentation there will be an opportunity to ask questions by pressing star and one at any time during the conference. You will then hear an automated message advising your hand is raised.

Speaker 2: Please them yourself to one question and return to the queue for any follow-up. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Mr Smith-Shar, Global Head of Investor Relations. Please go ahead, sir. Please go ahead, sir. Please go ahead, sir. Please go ahead, sir. Please go ahead, sir.

Speaker 3: Thank you very much. And thank you to all of you who joined us today on this beautiful summer's day for Novartis' quarter to results. Before we start, I'll just really do the safe harbor statement.

Speaker 3: The information presented today contains forward looking statements that involve known and unknown risks, uncertainties and other factors. These may cause actual results to be materially different from any future results, performance or achievement expressed or implied by such statements.

Speaker 3: For a description of some of these factors, please refer to the company's Form 20F, and it's most recently quarterly results on Form 6K. That, respectively, were filed with and furnished to the US Securities and Exchange Commission. And with that, I'll hand across to Vaz. Thank you.

Speaker 4: Thank you, Samir. And thank everyone for joining today's conference call. We're pleased to go over the results I have with me today, Harry Kirsch, our CFO and Karen Hale, our chief legal officer. Moving to slide four, as you saw in the release earlier today, we delivered a solid quarter to across each of our key value drivers, 5% growth across the entire company as well as the innovative medicines in Sando's, continuing our productivity agenda with solid, for operating income.

Speaker 4: $250 million R&D commitment as part of the Kigali declaration for neglected tropical diseases. We've increased our commitment to clinical trial diversity over the next 10 years through our beacon of hope project. We also had an upgrade from MSCI to now a AA rating top core tile within the industry, and we've continued to work to further improve our overall ESG profile. Moving to the next slide when you look at innovative medicine.

Speaker 4: sales. We grew consistently across the US and in our XUS markets, primarily driven by our key growth drivers. We had 6% sales in the US, 5% sales, XUS, and you now see on the right hand side of the chart, 59% of our sales come from our key growth drivers, and those key growth drivers are now growing at 21%.

Speaker 4: They're moving to the next slide and zooming in a little closer on the quarter. You saw pretty consistent performance across our key medicines. We'll go through this in a bit more detail. Two products I wanted to particularly call out, Kassimta had a very strong quarter, I think demonstrating it's overall profile as a multiple sclerosis therapy of choice. And Kiskali as well as now gaining momentum in metastatic breast cancer patients.

Speaker 4: And we'll talk a little bit more about that throughout the call.

Speaker 4: Now moving to the next slide, we've really focused attention as a company on six key growth drivers. We believe which will enable us to deliver the growth profile. We've outlined both in the next five years and also beyond notably Cousinthics and Intrato continue their outstanding performance towards their respective peak sales goal. We'll talk more about Zolgenzma, which continues its global expansion. Couscalian, Cousinthics, I've already mentioned, and let's see where we're building a strong base.

Speaker 4: health growth on the quarter. When you look at the outlook for concentric, we continue to guide to a double-digit growth driven by steady volume growth in the key geographies, US, Europe , and China. We're very confident in the overall clinical profile now that we've tweeted over 700,000 patients across five of the indications indicated for concentric. And we continue to get important guideline recommendations, including the Grapa psoriatic arthritis guidelines, which highlight the

Speaker 4: Cocensics unique benefit versus alternative therapies, including the IL-1223s, and its ability to tackle axial emancipation so that this disease overall were confident in the $7 billion plus peak sales potential. This will be driven by global expansion of the product as well as life cycle management, where we had some good progress in the quarter, including approvals and pediatrics in Europe . We've submitted Hydra Adonitis Superativa and you and me expect to submit in the U.S.

Speaker 4: economic growth globally and in the US, you can see we deliver 33% growth with intrezzo. Our weekly NVRX continues at strong progression with continued strong growth. We've not treated over seven million patients globally and over one million patients in the US, growing in hospitals, cardiology and primary care. It's a really strong growth across geographies. We're confident in the future growth in delivering the $5 billion plot peak tilt.

Speaker 4: Zoldensma is continuing to demonstrate the power of a one-time gene therapy to treat a really dramatic way, treat a terrible disease like SMA, 26% growth driven by global expansion, 2300 patients now treated. We had recent reimbursement decisions, positive reimbursement decisions in Australia, Switzerland, in Greece. And we recently received approval for our North Carolina new manufacturing facility, Auschwitz Research Center in Rochester.

Speaker 4: Further expand the capacity of our gene therapy network and really bring online the state of the art facility continuing our leadership in the gene for AAV gene therapy space. Now future growth drivers for Zolgensvall are gonna be that continued global expansion, 43 countries to date and growing. We also wanna enable stronger newborn screening programs outside of the United States. 97% of newborns are screened in the U.S., but only 30% in Europe and those numbers are similar or lower in many other geographies.

Speaker 4: As we can get more newborn screen, then we believe Zoolgemsma is the treatment of choice for these babies, allows for normalization of their overall development. And we saw that in a nature publication that recently summarized the data from one of our earlier studies with 14 out of 15 patients walking alone and 11 of them in the normal development window when treated early with Zoolgemsma. I also wanna note that both our STEER studies and strength studies are progressing well. And we're gonna be doing this. And we're gonna be doing this.

Speaker 4: traction based on the technical data. I'll talk more about that a little bit later in the presentation. And we saw that I've asked you once again we were able to highlight some of the data sets, particularly around OS in the first line setting, which demonstrates the strong profile of Skiscoly. The Natalie Adjumin Study Primary Analysis is expected in 2023 and continues to progress on track. And I'll talk more about that in the pipeline section.

Speaker 4: They're moving to Kisimta on the next slide, slide 12. The launch is continuing to, and really continuing on a strong trajectory. It would be an acceleration of the brand in the US, and we continue to work towards providing the medicine globally in our key markets. We have US demand of 18% growth quarter of a quarter. We have 3,200 adopters, position adopters since launch. You can see the NBRX up now 42%. It really dynamic growth for this medicine.

Speaker 4: And we're working to continue to strengthen the profile and differentiation. We have new extension data, which demonstrated I ate out of 10 patients treated continuously with, because I've said no evidence of disease activity from a operational standpoint. We continue to work to drive back to the initiation. Patients are now getting on therapy within six days, and 80% of patients achieving that goal. And we have a 30% of patients achieving that goal.

Speaker 4: And 77% of patients remain on therapy at 12 months, so it's again, demonstrates the medicine's impact as well as its use of use for patients. Very excited about the alipair, because it's a...

Speaker 4: Now moving to the next slide, on slide 13, with LECT-VO, we're laying the foundation, as we've outlined, in 2022 for the ramp we expect over the coming years. And we continue to expect in the remainder of 2022 for a steady ramp up of LECT-VO. But I think there's important proof points that we're beginning to lay that groundwork successfully. First, with respect to access, and as a reminder, LECT-VO is under the medical benefit. This is going to end this presentation separately.

Speaker 4: We have 65% of patients now covered with Alliance War label or near our label. And that's within six months of launch. This is higher than relevant competitor brands both from PTSD, monoponal antibodies and or other recently launched anti-cluster ulcera, putics and those brands have been on the market for many years. I think it demonstrates we've been able to drive fast access.

Speaker 4: And the J-code now is in place as of July 1. So I think from an access perspective, we're progressing well, progressing on or ahead of our plan. And I think that sets up well for the future. Secondly, on affordability, we can now confront a two-thirds of patients of zero copay for LACBO, including Medicare Part B patients with supplemental insurance. This again, we believe will enable a strong uptake and strong adherence to this medicine. So patients can get the benefits that they need from lower cholesterol.

Speaker 4: 3,900 patients in the service center. So all of this taken together, I think, points to a strong future for the brand. And we'll continue to work through this second half of this year to build out this base to enable long-term growth.

Speaker 4: Then moving to the next slide, slide 14, with Plovikto and moving to our two recently launched medicines in oncology, Plovikto and Semblix. The Plovikto launch is really progressing in a strong manner, and it's either at or above our own expectations. We've seen our manufacturing issues remediated and we've cleared our backlog. Commercial and clinical supply resumed in June . We have a permanent A code that was granted in July and that will be effective in October .

Speaker 4: setting with a readout for the pre-taxane study still inflated before the end of this year. The manufacturing scale-up is ongoing. We have a new facility in Indianapolis that we plan to bring online in the second half of the next year. I mean, it's capacity, interventions ongoing in our Italy and New Jersey sites. And we're making significant investments to ensure logistics can support access as the patient populations that can be reached if our radio-like and therapies continue to expand across to victim-

Speaker 4: recently we launched the medicine and 16% NBRX share regardless of CML line of treatment. In terms of future growth for some, it's going to be driven by the first line study which is enrolling ahead of plan that says a reminder is versus investigator choice of TKI and the THMP positive opinion and the XUS markets where we continue to work to get a global roll out of the medicine.

Speaker 4: So moving to the next slide, and turning to San DOS. As you saw, San DOS had a really solid quarter in quarter two, and we raised the full year of guidance for San DOS, and Harry will talk a little bit more about that. When you look at the drivers for San DOS sales performance, it's primarily in Europe where we are a leader with a leading engineering company with 4% growth driven by both launches, as well as recovery of the healthcare systems. We have double digit growth in the rest of world markets.

Speaker 4: Japan and other emerging markets. And we've seen a stabilization in the US business, setting us up with future biosimilaires launches and small molecules launches to drive growth in the US over the years to come. You can see our retail sales growth in the quarter with 4% biofarmal with up 11%.

Speaker 4: So we've raised the guidance as mentioned, and when you look longer term, we believe this creates a solid base of growth, for growth 2023 and beyond. And a lot of that will be driven by the Biosimilars portfolio. The portfolio of Biosimilars in San Jose targets $80 billion of originator sales, over 15 assets in the portfolio, and some recent progress including the acceptance of the Adalimumab high concentration formulation as well as Natalismab in the EU.

Speaker 4: We're also continuing to pursue small molecule opportunities to bolster the small molecule portfolio. Overall the strategic review, of a percent is continuing to progress on track and we expect an update at the latest by the end of this year.

Speaker 4: Moving to the next slide on slide 17. Our broad pipeline of novel medicines progressed in quarter two, but we've also worked to focus our efforts, as you saw in both our earnings release, as well as with some of our pipeline decisions. Five core therapeutic areas while being opportunistic and other therapeutic areas. And we're trying to make consequential decisions to really ensure we're focused in getting scale in those five core therapeutic areas. On this slide, a few things to highlight we had important designations in myelts zones.

Speaker 4: Cocentics was a file, had a filing for Hydro Adonite as super-Tiva in Europe , and we continue to work towards the US filing. And then lastly, we continue to streamline the portfolio. We have a number of projects that we made the decision to either partner or stop, and notably, we're exiting our efforts, development efforts, and COPD, and general asthma with the decisions of partner to assets in that portfolio. We'll continue to look to streamline the medicine, and our portfolio of interpipelines so that we can focus on the medicine.

Speaker 4: and importantly, median OS that's been achieved consistently across these three studies, the longest median OS ever published. And we've seen that same OS benefit regardless of situation. We also maintain that benefit even after prior CDK46 use. So we think this data set is part of the reason we're seeing the real growth acceleration behind Kiskali. Now, in the middle frame, you see that the reason for this clinically we believe that Kiskali is unique.

Speaker 4: the first utility analysis, the primary analysis is planned at 500 IDFS events, and we expect that by the end of 2023. The two interim analyses are to be conducted at 350 and 425 events. We have not yet reached the first of those interim analyses. We expect that in the coming quarters. We do guide for this study to really complete at the end of the next year when we reach them.

Speaker 4: A full number of events that will of course keep the markets updated as we progress through these interim analyses.

Speaker 4: Moving to the next slide on slide 19.

Speaker 4: You know, we're on track largely against our key 2022 events. Just three things to note. Three submission enabling readouts coming up in the second half of this year. Canopy A, at TacoPan and TNH. And as I already mentioned, Ploveco in the pre-taxane setting. So we'll look forward to the study readouts updating all of you as we get that data in house. And updating all of you as we get that data in house.

Speaker 4: With that, I will hand it over to Harry.

Speaker 5: Thank you very much, Lars.

Speaker 5: Good morning and good afternoon everybody. I'm now going to walk you through some of the financials for the second quarter and the first half. And as always, my comments refer to growth rates in content guarantees unless otherwise noted.

Speaker 5: So in the next slide, yes, we show our quarter two and half one actual result summary. So in the next slide, we show our quarter two and half one summary.

Speaker 5: As you can see, quarter to sales and cooperating income, both through 5% in constant currencies, with sales benefiting from the continued strong performance of our key growth brands, and cooperating income growth, and mainly by the higher sales.

Speaker 5: However, operating income and net income declined significantly in the quarter. This was mainly due to prior year divestment gains from tail end products.

Speaker 5: and higher impairments and higher restructuring costs this quarter, mainly for the Transformation for Growth program.

Speaker 5: KERIPS KU1%

Speaker 5: However, if you exclude the impact of the prior year-roach income, Core EPS would have grown 10 percent.

Speaker 5: Overall, the delivered solid sales and cooperating income close for the quarter, reciting also in a strong operation half one performance, with sales clothing, five percent, and cooperating income seven percent.

Speaker 5: Core EPS and half one crew 11% excluding the road stake impact.

Speaker 5: On the next slide, I would like to clear down a bit into the performance by the vision. So for quarter two, you can see that innovative medicine stop line crew 5%, and the bottom line 6%. Residying and an improvement in the core margin of 15 basis points to 37.2%. Some of the net sales also crew 5%, although cooperating income decreased 4%.

Speaker 5: magnitude to increased M&S investments and higher other expenses.

Speaker 5: This was reflected in the core margin which decreased to 20.4%.

Speaker 5: Overall, for the first half...

Speaker 5: We saw strong performance for innovative medicines and sandals.

Speaker 5: Innovators made a success growing 5% and cooperated income 6.5% and cooperated income

Speaker 5: Sandals prove 6% on the top line and 10% on the bottom line and half one driven by a very strong quarter one. And as a reminder, as we discussed in April , Sandals benefited from a return towards normal business dynamics compared to a NOAA price.

Speaker 5: Our half-one core margin improved by 30 basis points for innovative medicines, 70 basis points for sandals, and 60 basis points for the total group. And 60 basis points for the total group.

Speaker 5: Turning now to our guides on slide 23.

Speaker 5: So within the divisions, we expect innovative medicine sales crawling mid-single digit and core operating income crawling mid to high single digit ahead of sales.

Speaker 5: The expected I am core margin increase will be driven by expected continued good top line momentum and continuation of our productivity programs. The expected I am core margin increase will be driven by expected continued good top line momentum and continuation of our productivity programs. The expected I am core margin increase

Speaker 5: Of course, including the new organizational structure, giving us some benefits in the second half already. Giving us some benefits in the second half already.

Speaker 5: For Sandoz, the performance year-to-date allows us to upgrade sales guidance.

Speaker 5: to crawl low single digit, which is a one notch upgrade. And core operating income guidance is upgraded by two notches to now be talking stories or?'s because there is a wide game about the mid-endecks to our idol manipulation and taxation fight activities are complicated. I'd like to announce it. PLEASE LOOKING? worked at IT, to now be plot nearbyiamo or?? interest. So now I will be plot around kept to tonight with that you

Speaker 5: For the Group, we confirm our overall full year guidance. We continue to expect both top and bottom line to grow mid-single digit in 2022.

Speaker 5: The key assumption for this guidance is that we see continuing return to normal global health assistance.

Speaker 5: including prescription dynamics and that no gelemia and no sandals, dirt and meliage, and aerics would enter in the US in 2022. Thanks for watching!

Speaker 5: As many of you know, in June of this year, the US appeals court held the Jylenya US Dosing Regiment patent invalid. We plan to petition the appeals court for further review to uphold validity of this patent.

Speaker 5: And as a reminder, there's no generic competition in the US at this point in time for Jelenya, and in Quarter 2 US sales were 332 million for Jelenya. It is worth noting that US Jelenya sales have been steadily declining due to competitive pressures and of course our key focus in Milcita Speroza being on Casinta.

Speaker 5: Next slide please.

Speaker 5: I would like to provide some further details on the expectations for the second half dynamics on top and bottom line. We expect sales to continue to grow with single digit, bringing us to our guidance for the future. Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 5: For half-two core operating income, we expect to grow slightly slower compared to half-one, at low to mid-single digit.

Speaker 5: This is mainly due to the higher priori base for thundles and half-treat.

Speaker 5: As you know, half-1 cooperating income growth benefited partly from a very low prior year base at Sandals.

Speaker 5: We will of course continue to monitor the impacts of inflation and utility costs, particularly on the sandals product portfolio. As well as the situation around COVID-related lockdowns in China, given that we are seeing improving science as a June , which we will continue to monitor in half-tool.

Speaker 5: On the next slide.

Speaker 5: I would like to provide an update on our new simplified organization model and the financial impacts of the restructuring.

Speaker 5: As last discussed earlier, we have increased our estimates of SGA savings to approximately 1.5 billion. We anticipate the savings to be fully embedded by 2024. We anticipate the savings to be fully embedded by 2024.

Speaker 5: This year we also expect some savings.

Speaker 5: But the overall impact will be minimal as we will be offsetting higher energy costs and inflationary pressures.

Speaker 5: Part of the 1.5 billion savings we expect to be reinvested into our pipeline, and a significant part that contributes to achieve our mid- to long-term, low-40s innovative medicine's core margin guidance.

Speaker 5: With regards to the one-time restructuring costs, we could narrow this range of it and we estimate it beats now to be one-time to 1.2 times of the annual structural savings of 1.5 billion.

Speaker 5: On slide 26.

Speaker 5: I want to provide an update on expected currency impact.

Speaker 5: If can't you stay at the current levels?

Speaker 5: Obviously currency impacts are significant this year, given the strengthening US dollar against many countries.eler particles have more money than any other entity in China but to capture foreign cultures before the sales price. The majority of the users do not have any studies here or deposits here. So there is no Hearse-?? informants of which universityrea'er seeks to remove Thank you very much.

Speaker 5: So if countries stay as they are now for the full year, the estimated impact on top line to be negative six to seven percent points, and on the bottom line, make it just seven to eight percent points. And on the bottom line, make it just seven to eight percent points.

Speaker 5: And given its volatile, we wanted to give you also a bit of an outlook for 2023. So for the full year 2023, we would expect sales to be impacted by negative 2% and cooperating income negative 2% to 3% in 2023 versus 2022. And as a reminder, the update is currently in fact on our website monthly.

Speaker 5: and the things especially in these times, quite important to watch that. Finally, on page number 27.

Speaker 5: you. Finally, a reminder about our capital allocation priorities, where we remain disciplined and shareholder focused, of course. We aim to balance investing in the business with returning capital to shareholders via our dividend and share buybacks.

Speaker 5: In the first half, our investment in the organic business was $4.5 billion in R&D and half a billion in COPEX.

Speaker 5: We also had Bolt-on M&A, which was around 0.9 billion, mainly for the gyroscope acquisition.

Speaker 5: Alongside this, as you can see in terms of returning capital to shareholders, we paid our annual dividend of 7.5 billion earlier this year and have 9.4 billion still to be executed of our ongoing 15 billion share buyback program of which we have completed 5.6 billion by the end of June . And with that, I hand it back to Lars.

Speaker 4: Thank you, Harry. So if we move to the last slide, slide 29, we continue to progress against our top 222 priorities as we've outlined successful launches, particularly ensuring the foundation is laid for Lecvio by driving the dynamic performance of Casimta, Suvesto, Semblix, which as you've seen are continuing to pace. Mechanics of the growth momentum across our six key inline growth drivers, progressing the pipeline where we have 20 plus assets or we expect significant sales.

Speaker 4: We deliver our returns and you've seen that with our productivity initiatives are increased to 1.5 billion of SDN 8 savings with our new organizational model. We continue to reinforce the foundations. We believe that in the long run we'll drive new artists' performance around culture, data science and as I noted earlier, ESG.

Speaker 4: So with that we look forward to taking your questions. If the questioners could please limit themselves to one question, we will be able to get through hopefully the list and a lot of people that's multiple rounds over the course of the call. So operator, we can open the line for questions. Thank you. As a reminder to ask a question, you will need to slowly press star and one on your telephone keypad and wait for your name to be announced. Once again, star and one if you would like to ask a question. So, if you would like to ask a question, you will need to ask a question.

Speaker 2: We will now take our first question from Matthew Weston from Credit Sweets. Matthew, your head is open.

Speaker 6: Thank you very much. A question on Kiskali please, Vas, and you have very clearly set out the interim analysis timelines and the final analysis timeline. One question that we've received a lot in recent weeks is how you would communicate when you go past an interim. Would you consider that a material event which you have to press release to the market? Obviously, if it's positive, it would be positive and we'd see a release, but if you simply pass an interim and move forward.

Speaker 6: Would you see that as requiring a press release or would we simply learn that at the next quarter where you would update the timeline? Many thanks indeed.

Speaker 4: Thanks, Matthew. So I think as you outline it, clearly if at any time in a study that we either get a definitive positive result as determined by the DSMB or a negative result, we would update the markets. Otherwise, our plan would be as a quarterly call to provide updates on where we stand on the study. We don't believe passing an interim analysis warrants any sort of further update.

Speaker 4: Thank you very much, Matthew. Next question operator. Thanks, sir.

Speaker 2: Thank you.

Speaker 2: Your next question comes to the line of Tim Anderson from Wolf Research. Please go ahead your line as Apern.

Speaker 4: Hi, just a high level question on healthcare reform and just talk of reconciliation pushing ahead. Seems like it's finally gonna happen to us at least. Your thoughts on the likelihood of this happening and what it could mean to industry financials and to Nevada specifically over time and if you have certain products that you think would be impacted the most.

Speaker 4: and then moving into next year, more significant sales contributions from our ex-US markets. Of course, the big markets in Europe , but I was also recently in Canada, where there's a lot of excitement as well about the medicine. And then to a lesser extent in Asia, Japan, et cetera, where MS rates are lower, but the market sizes are significant. I mean, I think it's important to note in those markets, a monthly sub-Q patient administered drug is very attractive because of those markets, they're not the same.

Speaker 4: incentive structures around infused medicines, as well as the ability to de-load the hospital system by having at-home administration. So we feel optimistic about the opportunity now for Cassandra as its next wave of growth to really be about a global expansion of the medicine.

Speaker 4: structures around infused medicine as well as the ability to de-load the hospital system by having at home administration. So we feel optimistic about the opportunity now for Kisinta. I did the next wave of growth to really be about a global global expansion of the medicine. Thank you very much.

Speaker 2: Next question operator. Thank you. Your next question comes from the line of Emily Field from Barclays. Please go ahead. Your line is open. Your line is open.

Speaker 4: Hi, thanks for taking my question. I just have to ask a question on the development plans for legalismab. I believe kind of the slides just mentioned food allergy, but on clinicaltrial.gov, the ProPROVOC study and CINDU still looks to be recruiting. So just any update on the other indications. Thank you. Yeah, but with legalismab, as you know, we made the decision not to take it forward in CSU, will we continue the development program in food allergy? We'll complete the program as well. In CINDU, we can...

Speaker 4: as we note in our documentation.

Speaker 4: in our documentation. Next question I'll bring. Thank you. Thank you. Thank you. Thank you. Thank you. Thank you.

Speaker 7: Thank you. Your next question comes from a line of Simon Baker from Redburn. Please go ahead. Your line is open. Thank you for taking my question. A quick two-part product question if I may please. Firstly, on the old Zoltz old Jensmer, as you talked about the strong XUS growth, but actually the growth in the US was pretty impressive this quarter. I just wonder if there's any anything to add behind that. And secondly, on Lecvia, I wonder if you could update us on the XUS performance, particularly the...

Speaker 4: And so I think that will continue as we move up the newborn screening. But then of course we would expect to be back to a steady state. As with all gene therapies, eventually you get to the steady state of the ability to identify the diseases that are birthed in an so-called incident population. The first thing we would expect is to identify the diseases that are birthed in an so-called and to identify the diseases that are birthed in an so-called incident population. And so I think that will continue as we move up the newborn screening.

Speaker 4: screening and then of course we would expect to be back to a steady state as with all gene therapy is eventually you get to the steady state of the ability to identify the diseases at birth in an so called incident incident population.

Speaker 4: When you look at the specifics on Lefvio XUS, I'd say in the UK as well, we've been systematically building up towards what we hope will be a trend break. I think the UK, NHS had to, of course, deal with COVID for much of the first part of this year. In the last few months, we've now successfully upgraded and enabled NHS EHRs to identify patients who would be able to use Lefvio. We have now, I think, over 70% of primary healthcare units with Lefvio available on theirbright corneal area.

Speaker 4: We've launched a large scale education campaign in the UK. So I would expect to see as well, hopefully a trend break in letBO in the UK in the first part of next year as we continue to build that foundation in the second half and at the NHS works through the backlog it has from other, from from other diseases because of the COVID pandemic. Beyond that, we see very strong uptake in Germany with letBO on a per population basis that uptake is very good.

Speaker 8: I mean, absolutely our goal is to ramp this medicine faster than we were able to in in Trusto and obviously with a runway that goes to the late 2030s. At the very least, the significant opportunity to make this a really, really significant medicine.

Speaker 8: Thanks so much. Next question operator.

Speaker 9: Thanks so much. Next question, operator. Thank you.

Speaker 2: Your next question comes from a line of Kerry Hallford from Baronberg. He's going to head your line of Z-Pern.

Speaker 10: Thank you to take my question. Thanks, think on radio lag and therapy is in the recent manufacturing delays. Can you now confirm that you do our full supply of running an inventory building to both the Tefera and Tevik? So I will give you a little bit of elaborate on your plans for expansion of our LT manufacturing supply going forwards and how you work around what you've learned through those recent delays. And it's so many ways to reach the manufacturing gap.

Speaker 8: The result of the delay to the ongoing phase three PSMA force study, which I think is due by your end. Thank you. Yes, thanks, Harry. So a couple of points on radio ligand therapy manufacturing, which is a challenge, but also I think points to why if we can get it right, create a long term competitive advantage. This is a medicine where you cannot build inventory. We make the medicine and depending on whether it's ludifera or plevica we have.

Speaker 8: between three and five days to get it to its relevant site. And so because of that, you have to be world-class with respect to the supply chain. And it's not something easy, I think, for anyone to build from scratch. What we've learned is to increase capacity with redundant lines in different manufacturing sites to enable us to ensure we have a steady supply if we were to have a disruption at any one of our sites. And within those sites, to segregate the lines so that the one line having an issue doesn't affect any of the other lines. And we've been able to do that.

Speaker 8: additional patients with confidence. And then to further expand the supply, we'll be bringing on a third large-scale manufacturing facility in Indianapolis. That'll actually have automated lines moving away from more manual lines, which is further increased capacity. So we would expect by mid to second half of next year to have three separate US manufacturing facilities to support the US for both Lutathera and Flubicto, giving us the redundancy, large-scale capacity.

Speaker 8: And of course, the ability then to fulfill what we hope if the data supports that a potential multi-billion dollar opportunity for Puevecto across lines of prostate cancer. And I'd also take the opportunity to say that the feedback both from the nuclear radiology community as well as the urology community, which is an important customer base for this medicine has been very positive today. With respect to the Phase III studies, we've been able to fully reopen enrollment, and we currently...

Speaker 4: Your next question comes from the line of shameless Fernandez from Google Home Securities. Please go ahead, your line is open. Great. Just one quick question on Ftacapan. But just wanted to get your thoughts on relative positioning in PNH and in A-HUS versus the well-established C5 inhibitors. Just wanted to get your sense of the ability to compete.

Speaker 8: in the treatment naive setting, as well as the sort of patients that are struggling as we look at this first data set. And then I think the treatment naive data set will come in the first half of next year. Thanks. Yeah, thanks, Amit. Then a lot of work with the US team here and really to understand the position expectations and the dynamics. And overall, we believe that human toleratives would be

Speaker 8: to avoid having to come in and out of the hospital. Also very safe drug that can be used across lines of therapy would be highly attractive for physicians. So you're correct that the first data set will be focused both on add-on therapy as well as switch. And then we'll have a second data set, the PNH applied study, which would then be in the frontline setting. And those two data sets together will support the overall filing. We remain optimistic on that PNH, and that of course would translate as well into a typical.

Speaker 8: across a range of other factor B driven diseases. And the unique profile here is a twice a day oral with a very, very safe safety profile, which I think for these rare diseases will hopefully make a lot of sense.

Speaker 9: Thanks, Jamis. Next question, operator. Thank you. Okay, thank you. Thank you. Okay, thank you.

Speaker 2: Your next question comes from the line of Andrew Baum from City. Please go ahead your line is open.

Speaker 4: Thank you. Question on your Beijing collaboration, a couple of parts. So first, I'm curious whether you could provide some color on the FDA's guidance to not to file in monotherapy. I assume that they had Western data. I think they do. So I'm just curious as to why, to be because they feel the market's well served, slight inspection of all some other. And then second, you have an option on the Beijing PIGGET. It sounds like Rochus now not gonna be representing the interim data or Esmo. When do you have to exercise that option? And can you give us any guidance on what you will do if you need a medical data?

Speaker 8: Yeah, thanks Andrew. On the first question on Monotherapy, I think the FDA's assessment of our overall data set was that it didn't adequately reflect the US population in terms of the number of patients and the standard of care that was used in that Beijing-Derman first-line study. So our focus right now is to finish the filing in the second line, small cell lung cancer. Sorry, it's off of the yield cancer.

Speaker 8: And then we had very good data in the first line setting as well. As we announced that's been pushed back as we await the ability for FDA to inspect the facilities in China. And then hopefully we'd be able to have both first and second line in a soft material. We'd have then hopefully second line in non-spel cell. Long cancer and we would expand from there. I do think that the FDA is making it very clear now that they expect any studies to be filed that they're global in nature.

Speaker 8: they have an appropriate amount of U.S. patients and that the standard of care used reflects the standard of care in the U.S. With respect to the anti-tidgits, we haven't changed, no change from our option agreement. The option agreement is driven off of the data from Osiprolumab, the Beijing anti-tidgits molecule, and so that option would be based on when their data set becomes available.

Speaker 8: we'll continue to wait for their data to mature, which we would expect, I think, if I'm not mistaken, but we can verify in the second half of – in the second half of – first or second half of next year. Now in terms of the ROSE dataset, I mean, it doesn't change anything for us. We will continue to wait and watch as the field evolves and then make an appropriate decision. I think it's important that we – everyone would like to understand where is the appropriate use of this medicine and in which –

Speaker 8: PD1 subgroup, all comers, and if there is a place, which place would it actually be? But for us, there's no change plan at this point in time. Thank you, Andrew. Next question operator.

Speaker 2: Thank you. Your next question comes from the line of Laura Sutcliffe from UBS. Please go ahead your line is open. Hello thank you. Could you help us understand who the typical US prescriber of LeClo is who's already prescribing to multiple patients or who is already a repeat prescriber? Thanks. Yeah thanks Laura. That's a great question. I spent three days now in the in the field here.

Speaker 8: mid to large size group cardiology practices have been really I think a key area so far for the medicine. Combined with, I would say large volume cardiologists and smaller practices who are leveraging alternative injection centers where we continue to see solid uptake. And that's a solid base for us to grow from. Now, the goal is to move into larger centers where you of course have to work through the pharmacy and the very.

Speaker 8: is a lot of enthusiasm for a twice a year physician administered medicine that can modify the single most important risk factor in cardiologists mind for preventing repeat cardiology events, cardiovascular events. And I think seeing that and hearing that again and again, gives us confidence, gives me confidence that we will work through the logistical hurdles, which seems to be the primary topic. And then get this medicine into wide scale use.

Speaker 8: I think we often hear it back from practices, especially when they put the patient on the medicine. And then at the next visit, they see a significant drop in the LDL levels. That's a very winning proposition after a single dose. And then I think those practices get really excited about getting more patients on therapy. So again, laying all the foundations, but I think all the right steps are being taken to get us to where we need to be. Next question operator.

Speaker 11: Thank you. Your next question comes from the line of KR Parake from GSPs. Go ahead, your line is open. Oh, hi, thank you. Last big picture kind of capital allocation question for you. If you look at slide 27 kind of first half, obviously, it's only first half, which shows that you kind of returned somewhere about $13 billion kind of to share holders.

Speaker 11: And then just kind of more specifically, you are telling us that you will provide us an update on Sandoz by the end of the year. What is that update expected to be? Are we going to get a decision on what you would do? Is it going to be if you plan to separate it, will we get details on structuring or separation, etc.? So just any color you might be able to provide on what that detail or what that update might involve. Thank you. Yeah, thanks, Gail. So I will let Hari start and then I can add on. Hari?

Speaker 5: Yeah, thank you, hi, Karir. So on the capital location, of course, all things a bit huge by our dividend being annual dividends, right, is that a month billion. So if you want to do it mathematically, you almost have to half that and put it on two sides. But it's annual dividend. Over all, of course, all of these elements, R&D, we expect to continue to grow in line with sales, at least, and so there will be continued growth on R&D lessons.

Speaker 5: very attractive net debt position and strong cash flows and balance sheet. Of course, we have quite significant bolt-on M&A firepower, if you will. And if you don't find the right opportunities, of course, share buybacks will always continue to be part of the mix. In terms of funders, I think you said it all, we make very good progress in line with our plans on the cardboard financials, I'm looking at all different options.

Speaker 5: would be of course happy to give a preliminary decision by end of year. But you know this is of course subject to board approval and from that end the progress overall on our whole planning. But end of year should be quite giving you some good hints to in what direction it goes given that we take appropriate time for all the homework we are doing on the cardboard financial separation costs, tax situations and all of that. So it would be think that end of year the latest we should be in a good position to inform you.

Speaker 9: about the next steps here. Mars? No, it's perfect. I think Harry's that it all. Thank you, Harry. I think Harry. Next question, operator. Thank you. Your next question comes from the line of Nara. Chao Han from Inton Health. Please go ahead. Your line is open.

Speaker 9: Hi, thanks for taking my question. Some of the work we've done suggests that people cost around 40 to 50% of the total cost of the industry. So my question is how we should think about the timing of the inflationary impact on salaries. Is it fair to assume that on the whole 2022 salaries and therefore your guidance has factored in only the last years of inflation and that really we have to wait until next year's end.

Speaker 9: before we start to see this year's inflation baked into your cost base on the salary side. Thank you. Thanks, Deresh. Harry, you want to take that?

Speaker 5: Yes, you are absolutely right. I mean, the current inflationary effects mainly on energy, utilities, freight costs, and so on, on those cost categories as we speak. On wages and salaries, not much yet, yet, if anything. So that needs to be closely monitored, and I would expect this to come more in annual cycles.

Speaker 5: If there is something short term, it's probably depending on the countries. Of course, we always monitor the markets to be very competitive. And we have of course quite a bit, if you will, workforce in Switzerland, where inflation and wage increases are below, I would say, developed a market average. So from that standpoint, our home base gives us all to here.

Speaker 8: Thank you. Thanks. Thanks, Mary. Next question, operator.

Speaker 8: Thanks, Barry. Thanks, Nira. Next question, operator. Thank you.

Speaker 2: Your next question comes from the line of to Rita Capilla from Morgan Stanley . Please go ahead, your line is open.

Speaker 12: Thank you for taking my question. Please could you discuss where you stand on the development of the diabetes and obesity franchise? So you have the MBL 949 in phase two. I don't believe the mechanism has been disclosed but it appears to be dosed every two weeks and you also have an existing cardiovascular and metabolic commercial platform and there are a number of assets focused on diabetes in phase one, two which remain unpartnered. So it looks like from today's update respiratory is less of a focus but it's not necessarily clear where you stand on diabetes and adding assets around and trust OLEXIO.

Speaker 8: we were awaiting our face to data on weight loss with NBL. And if that's positive, that would be an exciting opportunity to hopefully address with a unique mechanism of action obesity on a large scale. And I think based on that readout, we would determine if we advance other earlier stage opportunities and combination partners we would have for NBL as well as potential external opportunities. So I think more to come, certainly observing the need for better obesity drugs and hopefully alternative mechanisms to those already out there at something we're looking at and we'll keep the markets up today as we learn more. And we'll keep the markets up today as we learn more.

Speaker 4: Great, thank you. Next question operator. Thank you. Your next question comes from Peter Walford from Jeffries. Please go ahead. Your line is open. Hi, thanks for taking my question. A question on consent, please. You've talked to a little bit about the aim for this year. We'll leave you to just talk a little bit about next year. And in particular, you've also talked a lot about Humira by as similar as in your plan there in the US. We just talked a little bit about the aim. We just talked about it. We just talked about it. just told us.

Speaker 8: introduction of Adelaum and Matt Biosimilers, that it's a manageable situation and we already have significant growth to nets on co-centrex. In some accounts and other accounts we have very strong overall positioning and as a first line therapy. And of course we'll have to see as the upcoming year unfold and also how some of the upcoming legislation that potentially might be passed by Congress will impact the growth in that environment given that there would be if the law has passed that's currently designed less ability.

Speaker 8: We would hope to get Hydro Adonitis approved over the course of next year, which then means in 2024, it would be an additional labeled indication for us in a unique labeled indication for a consenting, but also to expand into with IV into other payment settings. And to have IV approved, hopefully across both Act Deal Spa as well as Story Adonck or Thritis, would enable providers to also provide consenting in those reimbursement settings. And hopefully that also helps us manage the overall pay or environment.

Speaker 8: Probably the best answer I can give at this point in time, but I think as we learn more in the second half of the year, as we enter towards the January negotiations in Q4, we'll keep you posted.

Speaker 6: Next question, please. Thank you. Your next question was from the line of Matthew Weston from Credit Suisse. Please go ahead. Your line is open. Thank you very much. Just a couple of follow-on housekeeping items, please. Harry, the quarter we saw significantly lower finance charges and also significantly lower corporate costs.

Speaker 6: than consensus was anticipating. I know there was a hyperinflationary right back in the finance charge. Can you give us any help with what we should anticipate for both those lines for the full year? And then if I can cheat and ask another question, Vass, you obviously the emphasized COPD within development. Does that mean that we can anticipate that you may consider divesting your legacy respiratory assets or that something where you're gonna maintain an existing commercial franchise? Thank you.

Speaker 6: participating. I know there was a hyperinflationary right back in the finance charge. Can you give us any help with what we should anticipate for both those lines for the full year? And then if I can cheat and ask another question, Vass, you obviously the emphasized COPD within development. I think that we can anticipate that you may consider divesting your legacy, respiratory assets, or that something where you're going to maintain an existing commercial franchise. Thank you.

Speaker 5: Yeah, hi, Matthew, welcome to the second round. And so on the corporate cost, we guided so far to 600 or 650 million this year. Our new guidance now would be not down 550 to 600 million. Now, the biggest piece of that is actually currency because as you can imagine, given our headquarters in Switzerland, most of our corporate cost are Swiss francs. And the Swiss francs also, the Swiss franc also we can do it with dollar.

Speaker 5: So the corporate dollars, if you will, will be a little bit less and we will be a bit lower. If you take in-concline currencies, it's probably hard for you to model on corporate cost. This year's quarter, two cost, we're only five million lower than last year's quarter, two cost. And of course, we do also work on corporate cost efficiencies. So I think that's just a corporate part. In terms of the core cost on net financial results.

Speaker 5: We of course do have some income, right? We have some hedging gains, which is the other side ask the currency impacts. So that should also be a little bit lower. But of course, both of these list the corporate cost apart of our co-operating income guidance and currency currencies. And then a bit of gains on the net financial results also those per idea, but not so to connect with them.

Speaker 8: Thanks, Harry. And then Matthew, on the respiratory side of things, I think as you rightfully point out, we do have a business in Inhaled Respiratory, La Valle Lama, ICS, outside of the US, primarily in Europe and to some extent in emerging markets. And as well, we have the Zolaire business outside the US in severe asthma, as well as the Co-Promote in the US. All those businesses remain intact, and of course we'll continue to drive them.

Speaker 8: We always do evaluate what is the right mix in the market. And I think with our recent announcement, with the transformation announcement, where we move to a single innovative medicines unit in every country that we operate in, we are going through an exercise to ask, what is the right portfolio, not necessarily specific to respiratory, but what is the right portfolio of medicines for us to really focus our resources on, and where can we optimize or deprioritize so that we drive the most growth out of the business and really have the most impact that we can from the portfolio. So as we get to better clarity on the decisions, and if anything changes, of course, like...

Speaker 8: best in business. Thank you.

Speaker 13: Thanks and sorry.

Speaker 2: Thanks, Matthew. Next question, operator. Thank you. Your next question comes from the line of Vimal Kapadia from Bernstein. Please go ahead, your line is open.

Speaker 14: Great, thank you very much for taking my question. So just firstly with Casscarli, you previously suggested that Adjivan is a six billion opportunity, but I'm just curious how we should think about it, because when you look at the epidemiology, it would suggest a much larger opportunity into intermediate patient pool. So I'm just curious, what assumptions you're making in terms of which actually receive a drug in this population? Because really, if we see a decent penetration, the market potential should be significantly larger. And then just to be cheeky, because we've done one round. Just on chavitola, ma'am.

Speaker 14: Given the delay in filing due to needing Phase 3 OS data and the high hopes that physicians seem to have of NCLEXA and MDS from the Verona trial, I'm just curious how you're thinking about the potential for the product in MDS at this point. Does it now become somewhat of a lower priority, or do you still believe that greater than one billion opportunity you discussed previously in MDS is still feasible? Thank you.

Speaker 8: Yeah, thanks, Momal. On Kiscali and the adjuvant setting, we do believe that with the possibility of adding intermediate risk and top of high risk, that is a significant expansion in the patient population, probably three to four acts, what we see in the high risk patient population. We previously guided to, I think, six billion based on what we saw and kind of consensus outlooks in various market projections. But I mean, I would agree that if we are successful in demonstrating a meaningful benefit.

Speaker 8: across that entire intermediate risk range, there could be a larger opportunity for the medicine. And we're certainly doing that work now as we move towards the final readout of the study. So I agree, it is a significant opportunity and could be a fundamental inflection point for the company if Cascale is successful. And most importantly, for all of those women with breast cancer who need better therapeutics so that their cancers don't recur. But I think it's a good push and we'll try to come back with better numbers. On sabotolumab, I think the data that we have suggests that we need to wait for the OS data and phase.

Speaker 8: prudent to put too much more onto it until we see that data readout.

Speaker 8: but too much more on surveillance so we see that data readout. Thanks for it.

Speaker 4: Next question operator, and we'll try to do as many as we can in the last five minutes. Thank you. Your next question comes from the line of Richard Parks from BNP Paribas. Please go ahead. Your line is open. Hi. Thanks very much for taking my question. It's a follow-up on Lecvio in the US. What we've received recently from US physicians is that they're still seeing difficulties accessing injection centres and that reimbursement is still challenging. I just wanted to…

Speaker 9: whether that's just an issue of experience and lack of infrastructure or whether there are other barriers that payers are putting into place in order to manage utilization such as requirements for specific injection centers or anything you haven't expected. And then can I just ask a clarification because I think I heard you say that the final Natalie readout was the end of next year but I might have misheard that so could I just clarify that time Lawrence, thank you. Yeah absolutely so first on Natalie it would be in the second half of the next year which I think is what we guided to previously.

Speaker 8: or the sort of patients that do have a step at it. And I think physicians are just getting experienced seeing how different patients actually have to move through the system. I think as they get smarter about that and understand those dynamics, that offices get better and as we get better at supporting offices, we should be able to overcome those. And as I noted, we have a very high percentage of patients covered now to the full, full-life BO label. With my knowledge, there's no restrictions on which alternative injection centers or other administration centers that can be used that would really be impacting that perception. I think it's...

Speaker 2: Your next question comes from the line of Richard Potter from JP Morgan. Please go ahead, your line is open.

Speaker 4: Thanks for the follow up. Just one on the LOEs that we should expect in 23. I think Promactor is slated but there are some formulation and use patterns that might actually push that out and maybe similarly just anything else like Lissentis that we should be thinking about. Thanks very much.

Speaker 8: Yeah, thanks, Richard. Yeah, and Pramakta, we're continuing to work to really support all of the full range of patents we have on the medicine. And I think in an appropriate time, we're successful, we'll provide an update on Pramakta, but it is something we're very focused on. And then on Lucentus, we do expect the biosimilar, a few biosimilar entries in Europe . I think it's important to note that with the broad scale availability of Avastin we're now many, many years that we believe the biosimilar's market.

Speaker 8: has in effect already happened in Europe . So we would expect a moderate decline on the launch of the biosignal notice, but maybe not what you would see with other biologics when biosignal entry occurs. So that's how we're forecasting the incentives now of the companies.

Speaker 2: And one last question, operator. Thank you. Your final question comes from the line of Graham, Perry from Bank of America. Please go ahead. Your line is open. Thank you. Your final question comes from the line of Graham, Perry from Bank of America. Please go ahead. Your final question comes from the line of Graham, Perry from Bank of America. Your final question comes from the line of Graham, Perry from Bank of America. Your final question comes from the line of Graham, Perry from Bank of America.

Speaker 7: Great, thanks for taking my follow-up. So just, oh, it's one on Jelenya. So obviously you've had the overturning of the decision from the appeal court and you said you're going to petition. So just help us understand timeframe for the petition. Does that prevent a launch happening in the intervening timeframe? So your level of confidence that we won't see a launch this year, or is the guidance just a guidance assumption, but that could change depending on what happens with the court.

Speaker 4: And then just one last one, Kiskale growth was just well above prescription growth, although obviously we are seeing resurgence there. Is that reflective of real volume growth, or could it be just a sort of prescription retail versus other channels that we're seeing, and actually the reported growth is much more in line with the real volume growth? Thank you. Yeah, on Jelani, right now no generics can enter the market. We are petitioning the court, and we would expect to get a response from the court in the coming months. If granted, then it would be another set of months before the hearing, and then the hearing would take another set of months.

long-stop date was anyway in 24. So from a midterm growth standpoint, this is not having a significant bearing. Also in Europe where we were granted the patent, granted the patent by the European Patent Office, we expect that patent to be issued later this year and will continue to defend Gelenia across Europe . So a lot of things puts and takes, I think, on Gelenia at the moment. And I think on your question on Kiscali, I don't know the answer. We'll just have to follow up with you, but we'll get back to you on that to make sure you're clear on the volume price dynamics. But I would say that what we see in our numbers is a strong growth and underlying demand for everything.

just kif galley that we'd like to sustain. So thanks everyone for joining the call. Apologies we didn't get to every single question, but I really appreciate everyone taking the time and we'll look forward to catching up soon. Bye bye.

Thank you, this concludes today's conference call. Thanks for participating. You may now disconnect.

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