Q4 2022 Novartis AG Earnings Call

Yes.

Yeah.

Good morning, and good afternoon, and welcome to the Novartis Q4, 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'll be an opportunity to ask questions by pressing star one.

I'm on at any time during the conference. Please limit yourself to one question and return to the queue for any follow ups a recording of the conference.

During 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. Samir Shah Global head of Investor Relations. Please go ahead Sir.

And thank you very much Oh, Craig and thank you to everybody for participating on what is a very busy day for reporting in pharma European Sean.

Before we start just reaching for Safe Harbor statement. The information presented today contains forward looking statements that involve known and unknown risks uncertainties and other factors.

These may cause actual results to be materially different from any future results.

For months or achievements expressed or implied by such statements.

For a description of some of these factors please refer to the company's form 20-F and its most.

Recent quarterly results on form 6K that respectively were filed with and furnished to the U S Securities and Exchange Commission.

With that I'll hand across to you bet. Thanks.

Thanks, Sameer and thanks, everyone for joining today's conference call really appreciate your interest in the company and our update for the full year 2022, if we move to slide four.

This year as you saw in our earnings release, our 2022, we delivered what we believe is really robust core operating income growth and margin expansion from a sales standpoint, you saw Q4 sales up 3% with I am delivering Q4 sales of 3% yourselves.

Productivity standpoint, we had a 15% core operating income growth in quarter, four and Harry will go a little bit further through the dynamics that drove that but for the full year that led to 8% core operating income growth ahead of our guidance that leads us to have now a margin for.

Quarter four of 36, 4% and then the full year at 36, 9% and as a reminder, taken together inclusive of corporate costs.

We're well on our way towards our 40% core margin guidance for the medium term.

Terms of innovation some important milestones, we'll go through those in a bit more detail and we continue our journey on ESG sustainability linked bond we continue to progress towards our 2025 target. We had 31 million patients in our Novartis flagship programs and we continue to have solid ratings across the key ESG rating agencies.

Now moving to slide five.

You will remember that in September at our meet the management, we rolled out our new focused strategy and we've been diligently diligently been implementing this across the company five core therapeutic areas two plus three technology platforms for priority geographies, our mindset to really focus on high value medicines to access.

The rate growth delivering the return profile, we believe the company can achieve and you saw that already in quarter four and a continued commitment to culture data science and building Trust with society and.

Now moving to slide to slide six and as a reminder, as you all well know over the last five years and really over since 2014, we've been on a journey to really focus novartis as a pure play innovative medicines company and through a number of actions. We've taken most recently with the announced planned spinoff of Sandoz, we're on our way to becoming a 100.

<unk> innovative medicines.

Company and when you look at the right hand side of the slide we believe that simplified organizational model will allow us to have greater focus leverage our scale and really uniquely position us as a global pure play a large scale innovative pharma company versus our peer set and overtime. Hopefully also re rate the company given the growth profile, we intend to do.

Deliver now moving to slide seven.

We've also guided to improved financials with this new focused company with 4% sales growth a goal of core operating income margin of 40% as I. Previously stated continued improvement on free cash flow and importantly, an improving and attractive return on invested capital profile that will allow us to.

To continue to invest across our capital allocation priorities, which Harry will go through in a bit more detail later on in the presentation.

Now moving to slide eight.

And each of the five therapeutic areas that we've outlined we have core large scale commercial assets.

Multiple pipeline assets that are now progressing and we focused our R&D organization around these five areas. We're streamlining the pipeline I think you'll see over the coming quarters as exiting additional assets as we really try to prune out noncore areas and put all of our scientific firepower and ingenuity tore.

Building out a deep set of pipeline assets in each of these therapeutic areas. We will look forward to showing that progress over the coming coming year now moving to slide nine.

In terms of capital allocation priorities and the strong balance sheet that we have continued to invest in the organic business and pursue value, creating bolt on we look at the <unk>.

Full range of M&A possibilities, but our focus is on sub $5 billion of assets, where we believe we have the opportunity to generate strong returns and find the most value. When we look at M&A opportunities and we also remain committed to our growing our annual dividend and Harry will outline that in a little while but we have paid out $7 five.

In 2022, our proposed dividend is another growth in the three 2% Swiss franc and three 9% U S. Dollar range, even after the proposed sandoz spinoff there'll be no re basing of that dividend will continue to grow off of the current base and we're continuing to implement our $15 billion a share.

Back program, we have $4 9 billion still to be executed and we will continue to look at doing additional share buybacks over the coming years when the opportunities present themselves.

Moving to slide 10.

And I want to turn now to our innovation story, and where we are and continuing to improve our overall R&D productivity I think that's been well recognized we are a leader in terms of generating approval is the leading company over the last 20 plus years in generating drug approvals in the United States and around the World. Our focus now is the.

Prove the value per asset identifying assets earlier that have significant potential investing in those assets more aggressively pursuing more of lifecycle management indications and with that our goal is to increase the success rate and reduce the cycle time and generate larger assets, maybe not winning the game of generating the most assets, but really.

The focus on high value high impact medicines that could impact patients and the company's financial performance.

Moving to slide 11.

I wanted to walk through some of the Readouts that we have coming up in the near term and then in the midterm I think as you all are well aware <unk> Ghali continues on track we'll go through this in a bit more detail in a few slides for a readout in the second half if taco Pan is progressing nicely with multiple readouts over the course of this year our plan.

FDA submission in <unk>, and then Readouts in both <unk> and <unk> and then Victor where we have already read out the top line and the early prostate cancer early metastatic setting with a planned regulatory submission in the second half and I will give you a bit more detail on each of these three in a few slides we're going to the next slide.

When you look at 'twenty four 'twenty five we expect to have an increased pace of readout the potential multibillion dollars medicines medicines, such as pellet Carsten.

Patients with elevated LP little a <unk>, where we've now moved this medicine into multiple Hematological indications first and second line ATP Readouts in 2025, we have additional hematology and immunology indications. We're pursuing now with this medicine, so youll see with Ayatollah Mab, a broad range of phase III.

Programs initiating over the coming period, Remy Bruton <unk>, we have a CSU readout in 2024 ahead of our plan to EMS readouts in the coming coming years, and then we continue to progress with.

<unk> 101, which is our gene therapy for SMA and the interest equal setting as well as the first line semblance program with a readout planned in 2024.

Moving to slide 13 going into bit more detail.

Natalie continues to progress well following the first interim analysis and we continue to guide to a final readout in the <unk>.

Half of 2023 as a reminder, this is a broad population, including both stage two and stage III patients of the broadest population studies to date, we have longer duration that with which we provide therapy. These patients three versus two years, a lower dose to try to improve the overall tolerability profile.

And when you look at where we are in this study final analysis is expected with 500 idea first event at the end of 2023, we've completed the first interim analysis as we noted earlier this month and the study continues unchanged. The second interim analysis would happen after 85% of Iff's beds are complete.

Now moving to slide 14.

And turning to <unk>, where we announced late last year that we demonstrated statistically significant and clinically meaningful radiographic PFS benefit in this patient population now we're continuing to follow these patients with the second towards the secondary OS endpoint analysis in 2025, we plan are on track.

The file in the second half of this year, we have had discussions with the FDA and clarify the OS fraction.

Direction of patients that FDA would like to see has reached a OS endpoint prior to filing we expect to reach that later around the middle of this year, which would then enable the filing in the second half now with that guidance from FDA. We've made the decision to hold the publication or presentation of further data until the second half of this year.

I know some of you have been looking for <unk> and some of the other congresses in the first half we will be presenting this data in the second half. After we've reached that next threshold that FDA has outlined for US. We have alignment then consistent with what FDA is all the other companies in the prostate cancer space to then be able to file in the second half with that dataset.

Now moving to slide 15.

And why that's so important is as I'll talk about that when we get to the commercial section of the presentation to victoza continuing to demonstrate I think really impressive uptake in the United States market and the opportunity is to move first with the SMA for study into the pre taxing setting which would extend or expand the patient pool.

And estimated 27000 patients to 42000 pesos bandwidth. The PSA May addition study, which we expect to read out next year that would expand us further into the hormone sensitive setting and then we continue to evaluate how best to pursue predictor of further into the biochemical recurrent setting.

Or the localized prostate cancer setting so stay tuned as we continue to look at further expansion, but I think this really demonstrates the possibilities with radio ligand therapy, and we look forward to continuing to generate a broad set of data to support the victors use and as many prostate cancer patients that could potentially benefit from the medicine.

Moving to slide 16.

Turning to have Taco Pan and as I noted in the second half of last year. We first provided an update that and provided the full data set at ash of the apply.

Data set which I think showed really outstanding efficacy for all private for both primary and secondary endpoints superiority to standard of care in patients with residual in EMEA.

Phase III <unk> study, where we demonstrated again really strong results and we'll be presenting that data at a congress in the first half of this year and then we continue to progress across a range of indications I again in <unk>, which will read out in 2023 atypical hemolytic Uremic syndrome, where we expect a submission enabling.

In 2025, and then a number of other indications ICM PGM lupus nephritis immune thrombocytopenia amongst others.

Moving to the next slide.

And just as a reminder, when you look at that data set that we showed at ash I think very impressive data in these patients with residual anemia. Some of the notable data when you look at increase in hemoglobin from baseline 51 out of 60 patients versus zero out of 35% to 82, three versus 2% against the control arm.

Globe and greater than 12. Similarly impressive results 42 out of 60 versus zero out of 35 again transfusion avoidance you can see an impressive 73% improvement and a 10 fold lower rate of annualized clinical breakthrough hemolysis. So this isn't that refractory setting will present the data in the frontline.

Setting we've also initiated a study.

Patients who to demonstrate we can switch off of Mtc five directly onto APAC, Japan and patients in that frontline setting so building out a broad data package within PSNH now moving to slide 18.

We wanted to also provide a little more clarity on our approach within Iga nephropathy.

Sorry. This is still a <unk> excuse me so and this is the outline of the data set for a point where.

Where we will present this data.

Shortly and you can see again the <unk>.

Design of the study has the potential to be practice changing in <unk> and as I said, we'll be looking forward to outlining this primary endpoint and secondary endpoint in an upcoming Congress the.

Moving to slide 19.

Now turning to the <unk> study applause for an attacker Pan wanted to clarify that our current filing plan aligned with the FDA that the nine month analysis to assess superiority and reduction of proteinuria at nine months and the statistical plan has been agreed this would support a U S. Subpart H approval for accelerated approval. We were then.

Continue to follow these patients to look for more definitive endpoint and to look at slowing progression for Oregon, which would take to the end of the study in 2025, enabling that.

Approval to convert to a full approval. So that's the approach, we'll take with with IGN and we'll look forward to sharing that data towards the end of this year.

Now moving to slide 20.

I did want to highlight a couple of earlier stage assets, where we're continuing to progress now really with a focus on large potential assets in the pipeline. These include drugs like X Xb and cardiovascular disease. This is an NPR one agonists given infrequently.

A monoclonal antibody for resistant hypertension heart failure, why TB, our T charge platform, where we presented additional data at Ash, where we are now pursuing this both in the frontline.

Large b cell lymphoma, but importantly also in multiple immunology indications on the back of data, suggesting that we can take refractory patients into remission.

And small scale studies, that's something we're looking at more carefully additional radio ligand therapies, including in breast cancer, and Glioblastoma Pp Y, which is our gene therapy and ophthalmology for geographic atrophy, which we acquired as part of the gyroscope acquisition and lastly deal Axa partnered compounds and alpha oral alpha to nuclear.

<unk> inhibitor for Parkinson's disease, all high risk projects as is always the case in the stage of development, but all with the potential if they were to work to be very transformational medicines and.

Now moving to slide 21.

Now turning to the growth profile of the company and why we believe we can deliver that 4% growth. We have these fixed inline brands. These three major launch assets flu Victoza assembly tackle pad and these additional pipeline assets that I've outlined and that's why we continue to believe that we have the firepower in.

With the assets, we have to be able to generate that 4% growth with that 40% margin and create a very attractive profile in the coming years.

Now moving to slide 22 the.

The drivers of our growth and this year. This past year were primarily Entresto and.

Scalia with major contributions from flu victim as well as to a lesser extent assemblies and life. We expect those assets to continue to have robust growth over the coming years now importantly, we'll discuss a bit more detailed percentage and some of the dynamics there, but the critical element for our authentic story will be lifecycle management in the next way.

There are indications as well as continued growth in Europe , and China, and I will go through that in a moment.

Moving to slide 23.

When you look at Entresto continued strong performance, 44% growth quarter on quarter, you can see the U S. Weekly Trs has continued to climb demonstrating that entrust really now is the treatment of choice for patients with.

Preserved with heart failure meeting.

Guidelines within the label and the relevant cardiovascular guidelines.

<unk> is up 16%.

To see strong growth in Europe , and China, and Japan. We also contribution from Amtrust is used and resistant hypertension.

We remain confident in the ongoing growth growth profile as we continue to penetrate in heart failure continues to generate additional real world data and we see that launch momentum in Asia as well.

Now moving to slide 24, and turning to authentic I think as many of you have already seen <unk> Q4 sales were impacted by a revenue deduction true up related to prior quarters. This was related to a higher level of Medicaid utilization than we had expected and this is a delayed data that we read.

<unk> from the various Medicaid channel sources, and that led to a higher higher revenue deduction for the previous quarters, which we took fully in quarter four when we fully neutralized for that we saw the U S actually declined 6% and when we look at all of the puts and takes we see the U S largely being in line.

Right now with respect to <unk> performance in 2022 versus the prior year, we would expect in the U S for 2023 to continue to see in line.

So.

When we look at all of the dynamics you will see in the first half of the year some declines in cosmetics as we lapped the fact that in the previous year you had these deductions which were not factored in.

But underlying we expect <unk> to be able to hold its current performance in the U S. And then growth that really enables us to get to that mid single digit growth will be driven by Europe , and China, where we continue to see strong growth double digit growth.

China overall and that will enable us to be well set up for what will come next which is primarily the lifecycle management of this brand.

And turning to lifecycle management and when you go to the next slide Slide 2025 really for Concentrix now to continue its trajectory to get to the $7 billion, which we remain confident in it will be around launching these next wave of indications successfully for hidradenitis Suppurativa, we expect the approvals in Europe in the first half of this year and in the U S and.

The second half of this year.

Is a large indication where only one competitor product is approved the TNF.

So we'll be first to market.

A novel agent in this whole setting and so it's an exciting opportunity to bring this new therapy to this patient population, we have the intravenous U S launch where we'd be the first novel post TNF medicine to be available in an intravenous formulation, we expect that launch in the second half of 2023, new auto inject.

And then the continued work we have on giant cell arteritis, and lupus nephritis again indications, where cosmetics has generated compelling data. So taken together when we look at this profile for lifecycle management. The profile, we have ex U S and the stabilization of the U S business, we feel confident we'll get to that $7 billion peak sales potential.

Overtime now moving to slide 26.

You saw the Kissimmee is continuing its strong growth trajectory with 28% constant currency growth, primarily driven by the U S that we now start to see a pickup as well outside the United States Importantly, the key driver for this is the ongoing utilization of <unk>.

In patients who were previously on braces or were naive to any.

Multiple sclerosis therapy. It is important to note that in the diesel share of the total market is only about 50%. So half the market continues to receive older therapies are consumed to exit share was 30% and we plan to continue to grow that with the goal to get to 50% share of B cell patients over time, so really good.

Great.

Because he profile strong convenience profile. So we'll continue to look forward to launching to center around the world and driving that dynamic U S performance now.

Now moving to slide 27.

Because clearly you had strong growth across all geographies and when you look at that 33% growth that's driven by a recognition that <unk> ghali really is.

The agent with the best data sets in the metastatic breast cancer setting today and Thats I think been really captured by the end CCN guideline update that happened just a few days ago, where <unk> was named the only category one treatment first line metastatic breast cancer patients with an aromatase inhibitor.

<unk>, which is the majority of patients in the metastatic setting so with that Mtc and guideline update now and as we continue to communicate that the physician. This hopefully will give us continued momentum as you can see with <unk> now getting to 27% and <unk> share and will hopefully will see in that metastatic setting that continued.

Climb on the back of the dataset that we presented and CCN guideline broad momentum coming out of the San Antonio San Antonio breast comps breast cancer Congress as well and then that will flow into of course, the <unk> readout, which we've already discussed and the ongoing harmonia head to head study, we have ongoing versus eyebrows.

Notably as well we did achieve.

Achieving approval in China for <unk>, which will be another growth driver for this brand going forward.

Now moving to slide 28.

So we'll just maintain the leading share in patients with SMA in less than two years of age, but Q4 growth was muted and this was really because we've now penetrated a lot of most of the bolus if not the entire bolus of prevalent patients and most of our key geographies and growth now is largely dependent on <unk>.

Adding additional countries and emerging markets around the world and so we expect with this brand to stabilize in the $1 $5 billion range until we get the.

Readout and hopeful approval in the interest equal setting will continue to work the increased newborn screening importantly in Europe , that's at 45% and we have the opportunity we believe to drive that up further it would be a source of growth as well as adding on additional markets in Latin America, the middle East and other parts of the world, but the key next inflection.

Point for Xeljanz, but we will certainly be the readout of the sphere study of interest equal patients and the strength study and the use of IV <unk> in patients in two to five years of age those studies are enrolling.

On track and then we will have hopefully up datasets to share in the coming years.

Moving to slide 29.

I wanted to turn to let Theo.

And give you an update on where we are now as we continue to build a strong foundation for this brand to become a significant cardiovascular medicine for the company with respect to access we're now at 76% of patients covered at or near label in terms of adherence, we're seeing 75% of patients today coming into the second dose.

We've now have 1700 centers that have ordered <unk> and we've been able to increase between Q3 and Q4 by 50%. The number of Hcp's, who are prescribed less either through a paid dose or through our free trial offer.

7200 physicians.

So we continue to build a strong base continue to generate important data. The Orion three data was recently published our phase III secondary prevention studies are enrolling well we've launched now our primary prevention studies, which we'll expect to start in the first half of 2023 and continue to build out a robust data set for this medicine.

Now moving to slide 30.

When you look at where Entresto is.

And compare it to where I started by leg view is and compare it to where entresto was in the U S were largely in line with what we saw in the Entresto launch a slow ramp as we build up awareness amongst physicians get all of the various elements in place and really build momentum in the cardiovascular community for use of a new medicine or in this case.

Our new approach to controlling cholesterol. So we're on track versus the truck the ramp and Thats. The ramp we would expect to see over the course of the coming months with respect to <unk> with the goal of course to accelerate.

We can when you look at the U S. The key accelerators are going to be new facilities getting more depth in our existing prescribers and continuing to educate HCP on the part B reimbursement process. We also would expect over the course of this year to get additional conversion from the free trial offer that we rolled out in the second half of last year.

Year outside the United States, a big focus at the NHS is to get a broader prescriber breadth in the UK and then we will have.

Hopeful approval in the back half of this year in China, which will allow us to have a major geography, where we can further accelerate global life field performance.

Moving to slide 31.

So Victor I think as you've all seen is off to an outstanding start in the United States and this is reflective of very strong demand. We're seeing for this medicine $179 million in quarter four full year sales of 270 million almost entirely all of that was in the U S. We are.

We're seeing <unk> at 18% and that continues to climb in the post taxane.

<unk> setting 160 unique accounts, we have very good payer coverage permanent a code is now.

We're approved in Europe . So this is a story now where we can.

Continue to see very strong demand in the U S and we see strong demand in Europe , and we're scaling our manufacturing capacity to meet that demand and when you look at the next slide our <unk> manufacturing capacity is going to expand over the course of 2023, our expectations are we will be able to move across four facilities that will have.

Online for this medicine versus a single facility right now that's the primary source of Ria today, we're working hard to bring millburn online by the middle of this year, which will allow us for another capacity expansion and later this year and automated do no brand new facility in Indianapolis with substantial capacity.

And then for the rest of the World Zaragoza facility in Spain, which was then further expand our capacity for Europe . We're also evaluating adding additional manufacturing sites in Asia at this time with the four facilities you have here, we're targeting capacity of over 250000 doses annually in 2024 and beyond.

And then we'll continue to expand that capacity by adding additional facilities if the demand warrants it.

Now moving to slide 33.

Somewhat also to a strong start you can see the sales here of $150 million on a full year MBR share at 29% and probably the most important element here of this story will be the AST <unk> study, which we are enrolling ahead of plan, we expect to read out in 2024, which will enable us to potentially move this Matt.

<unk> in the first line setting and potentially be used as an alternative to imatinib or some of the other first and second generation Teekay us.

Now moving to slide 34, I will hand, it over to Harry now for the financial review. Thank you Bob Good morning, Good afternoon, everyone.

I'm now going to talk you through some of the financials for 2022 as well as provide you with our 2023 guidance.

As always my comments refer to growth rates in constant currencies unless otherwise noted.

Next slide please.

I would like to begin by comparing our performance with the latest guidance. We provided in October last year as you can see we generally met our guidance across the divisions in the group level.

With a notable beat for group core operating income, which was largely driven by innovative medicines performance.

As you can see Sandoz topline also returned to growth with core operating income impacted by higher than expected inflationary pressures on input costs.

Next slide please.

Taking a step back for a moment you will see that our 2022 performance was a continuation of our strong track record for innovative medicines over the last three years, we have delivered a 5% CAGR growth in sales and double of that at 10 <unk>.

Ascent CAGR on core operating income.

Obviously this performance has resulted in margins improving from approximately 33% at the beginning of this time period to now 37% an increase of 480 basis points in constant currencies over three years.

In short we are delivering consistent performance against our financial targets.

And intend to continue to deliver improved financials of course.

Turning to slide 37.

I will focus on the full year numbers on the right hand side for the full year as Bob laid out sales grew 4% and cooperating.

8% operating income was down 13%, mainly due to the higher restructuring cost related to the implementation of a streamlined organization model net income was <unk> 7 billion with the comparison versus 21 impacted by the Roche stake divestment income.

Recall, we had a onetime gain of 14 billion when we sold the Roche stake.

And.

421 billion.

Core EPS was $6 12 growing 14%, excluding the prior year Roche impact free.

Free cash flow was 12 billion for the full year of course also impacted by the currency movements, but overall solid free cash flow performance.

Speaking of free cash flow, let's talk about our next slide.

Of course, one of my favorite yearend slides.

Given our solid 'twenty two free cash flow. We are pleased to propose to 26th consecutive dividend increase to <unk> 20 per share. This is up three.

Three 2% versus <unk> 10 last year, the dividend yield of three 8% of the.

Of course this increase was fully in line with our policy of increasing our dividend per share every year in Swiss francs.

Now to slide 39, please thank you.

Get into some further details about our 2022 margin performance by Division.

For the full year core margin for the group increased 130 basis points to 33% of sales driven by.

Margin, which also increased by 130 basis points to 36, 9% I will talk about some of those are detailed on the next slide.

So you'll see a summary of the Sandoz 2022 performance.

Was a good year for the division returning to top line with sales up 4% driven by the Biopharma accruals of 9% and retail growing 4% core operating income was essentially flat for the full year disproportionately affected by inflationary pressures on input cost.

If you look in the future.

Expect continued share gains across geographies.

True Biosimilar U S approvals in the second half of 2023 with respect to the planned spinoff.

Remain on track to complete this in the second half of the year pending the required approvals.

Next page please.

As we anticipate a spinoff of sandoz in the second half of the year, we thought it would be useful to give guidance for innovative medicines, Nevada, excluding sandoz and novartis, including Sandoz to allow for the respective modeling that no doubt you will do.

Innovative medicines, we expect sales to grow low to mid single digits.

Core operating income to grow mid to high single digits.

Excluding Santos has of course exactly the same growth guidance is innovative medicines, because the only difference between the two.

Corporate costs.

Novartis, including Sandoz, which is essentially today's group to group guidance is assuming here that sandoz would remain with the crew for the entire year, we would expect sales to grow low to mid single digit and cooperating to grow mid single digits.

On the next slide details a bit more to sandoz guidance so for 2020.

We expect the top line for Sandoz to grow low to mid single digit and core operating income to decline low double digit now. This core profit decline reflects the required standup investments and transition cost to separate sandoz and some continued inflationary pressures clearly with this.

Setting 2023 would be the trough year for Sandoz core margin given the expected add cost to stand up a public company.

Looking ahead.

With respect to Sandoz midterm potential sales are expected to grow low to mid single digit CAGR and the core margin is expected to expand to the mid twenties, driven by continued sales growth and operational efficiencies, especially as a standalone lien generic company.

On slide 43.

I would like to add some perspective on the other key financial elements of our expected core net income performance in short we expect both core net financial result, and core tax rate to be broadly in line with 2022.

On the next slide I would like to go into a little more detail about the tailwind and headwinds facing core operating income growth in 2023.

So we expect the drivers of future core operating income growth include of course, the continued performance of our in market growth drivers and the acceleration of recent launches such as <unk> two electrical.

We also expect China growth to accelerated benefiting from a return to normal in the second half of the year.

<unk> is simply our simplified organizational structure is expected to continue delivering SG&A savings and of course, we will continue our ongoing productivity programs.

Growth will be partly offset.

By inflationary headwinds, which are expected to continue in 2023.

Inflation some further detail as we saw it in 'twenty finalizing in 2022 in 2020 and truly inflation impacts you saw was a bit higher than expected in quarter. Four so for the total company. We estimate that the 2022 inflationary impact was approximately 350 million.

However, this was of course more than offset by cost control and productivity savings.

In 2023, we expect the inflation impact to be slightly higher also including some above normal merit increases and approximately half a billion.

This has been fully considered in our 2023 bottom line guidance.

The other headwinds are generic erosion of Chilean U S potentially two centers in the U S.

Sendup investments as discussed related to the.

Likely sandoz spinoff.

The headwinds we continue to anticipate further margin expansion in 2023 and beyond should as expected sales growth productivity progress.

Finally on slide 45.

We thought it would be helpful to go into some detail regarding the currency impact is expected, especially given the significant fluctuations of the last months.

As you saw in quarter four currency had a negative seven percentage point impact on net sales and the negative 9% impact on core Op, Inc.

Late January rates prevail for the remainder of 2023, we expect the full year impact in 2023 of currencies to be much lower on the top line it would be zero to positive 1%.

And on the bottom line slightly negative with minus 1% as a reminder, we update this given the volatility monthly on our web site.

And with that I'll hand back to us.

Great. Thanks, Terry moving to slide 47, just wanted to make a note that we continue to focus on our goal to be one of the leaders in impact and sustainability in our approach to ESG as well as just delivering on our core purpose 290 million patients reached with our innovative medicines in our global health portfolio 400.

<unk> 53 million patients reached with Sandoz, a broad pipeline across various technology areas numerous new drug approvals and.

In multiple recent innovation highlights just to highlight that we think the greatest contribution we make to the world is based on our ability to discover develop and ultimately scale and launch new medicines to people across the planet.

Moving to slide 48.

In closing eight priorities that will really determine our path going forward, we're transforming the company to a pure play <unk> company five core Ta five core technology platforms, and our core geographic focus with a focus on the U S. Nine multibillion dollar potential brands.

Real emphasis on improving our R&D productivity towards high impact assets in high value assets of.

Focus on key <unk> and building depth in those days, improving our financials as <unk> seen with the margin delivery in the ongoing efforts we have to continue to improve the overall financial picture shareholder focused capital allocation as we've shown with our dividend increase share buybacks.

And continued approach to how we dispose or move forward with assets such as standard.

To our shareholders and continuing to strengthen our foundations with ESG and human capital. So with that we can open the line for questions.

Colleagues on the line could limit themselves to one question I will try to make it through the list a couple of times.

Thank you to ask a question you will need to press star.

One on one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one on one again, please limit yourselves to one question Keith.

Keith will follow.

We will now go to Bob first question.

And the last question comes from the line of Matthew Weston from Credit Suisse. Please go ahead. Your line is open.

Thank you very much I'm going to go with a big picture question to start with because Im sure. This will dig into the detail on drug pricing.

The incoming chair for pharma in 2023, I'd Love your perspective on whether the industry sees any success and normalizing the nine versus <unk>.

Exclusivity for small molecules versus biologics and also your thoughts on EU pricing pressures that seem to be a lot of impressions building and a number of your core markets in Germany.

<unk> and others and also some worrying legislation in front of the European Commission.

I would very much love your thoughts given the Boston exposure to that.

Yeah. Thanks, Matthew So first of all our guidance already factors in the various headwinds we see in pricing around the world. So that 4%, 40% and then also the guidance in 2023 already factored that in so that's an important I think caveat. So to your first question on in the U S. There's three core priorities that we have as in.

Industry to take forward now one is to correct. The distortion of the nine versus <unk> small molecule NDA versus BLA second is a focus on PBS reform and the third is continuing to improve the $3 40 B program. So that it can.

Can actually deliver on its intended purpose for patients.

Lower income settings, and who benefit from various programs from federally qualified health care clinics.

Now on your specific question on the nine nine versus 13, I think we have very good arguments as to why this creates an unintended long term innovation distortion, which disadvantages small molecule and related medicines.

For the Medicare population indication expansions in cancer medicines that take longer to ramp and cardiovascular disease are in respiratory diseases. So all things that need to be considered I think the key thing will be when in the coming years Theres, a legislative vehicle for us to be able to pursue that but at the top.

40 of the industry and I think at least my belief is our industry. When we come together to really focus on a topic and have a very clear compelling policy case in a relatively small pay for from a congressional standpoint that we can make it happen and thats going to be our total focus as the sector in the U S. Now on the EU.

Pricing pressures is a little bit of a mixed bag certainly we are concern by some of the actions in the UK actions proposed actions in France.

Germany has had some headwinds, but overall the German environment, we'd say, it's relatively positive and workable, but I'd say broadly speaking I think we as a sector need to do a better job clarifying the policymakers in order to invest in innovation in Europe , we need a pricing environment that rewards innovation.

Particularly when it improves outcomes for patients and this can be seen as a place to constantly cut costs, especially relative to the rest of the world. So that's going to be our focus to try to educate but for US I think Germany remain the most attractive market and therefore, I think from a financial outlet standpoint, we feel comfortable with the guide.

That we've given.

Thank you Mathieu next question operator.

Thank you.

Your next question comes from the line of Graham Parry Bank of America. Please go ahead your line is.

Great. Thanks for taking my questions it's unpredictable.

So it's now annualizing over $700 million, which I think thats pretty close to your peak tied for the vision labeled indication.

It's a steady state number or can you see grace and.

Expanding from this quarter on quarter. So if you hit your supply capacity constraints now until you get more supply coming online.

And could you just underestimated division population had given it's penetrated say quickly.

And then on your capacity into next year.

He said.

The number of days around Tianjin 50, Townsend correct me, if I'm wrong that would equate to around 50000 patients, which is over $8 billion of revenue potential that U S prices say, perhaps just give us there.

For what you think the.

Peak numbers to this trial could be in the context of the 2 billion that you've been putting into the slides the pace to make whole on pace to My addition, thank you.

Yeah. Thanks, Greg So first I think from a demand standpoint, I would say our initial estimate of the division population have underestimated the potential of this population and the demand would suggest us that.

There are a greater number of patients and providers interested in this and this medicine.

We certainly have not fully.

Penetrated the vision population in the United States and really it's a question of us continuing to expand our capacity to meet what is a much larger interested population than we initially expected.

So we're working towards that as I mentioned, we're working with multiple sites to have online over the course of this year.

And if all went according to plan by the middle of this year, but that is dependent on regulatory action.

And then additional sites towards the end of this year as well so.

So we would expect if we could if we can meet the demand that there will be continued growth from the vision population in and of itself.

I think beyond that with the PSM may for PSA made this and we certainly see this medicine, becoming a very significant medicine for the company.

The data reads out positively over the coming Readouts.

That will take of course, the readouts have to come through but we're preparing from a capacity standpoint to have this be a very large medicine for novartis and you'll see that I also mentioned, we're preparing as well as to add additional facilities.

Asia.

Advanced already planning on those two additional facilities. So we will be ready to make this medicine around the world available.

Prostate cancer patients as we can.

Thanks, Greg.

We reached capacity already or as I said the capacity that you can still felt.

Increased demand.

We have further capacity versus Q4, but we certainly need to continue to work to further expand the capacity given the size of the opportunity size of the demand that we're seeing.

We have some limited additional capacity versus Q4, but we need to expand further to fully meet the demand for sure. So I think from a.

How you model. This I think in the first half of this year it should be modest growth as we work to expand the facilities and then assuming we get the <unk> online we would hope our ramp up then in the second half as those that additional capacity comes online and then moving into next year of course, we have the.

Capacity additional geographies and then hopefully as well the PSM May addition, population as well.

Okay. Thank you.

Next question operator, thank you.

Your next question comes from the line of Stephen Scouten from Cowen. Please go ahead. Your line is open all right. Thank you very much we noted that the phase two data for your obesity agent NPL 94 nine.

Is due in May I don't believe Novartis has stated the mechanism other than it's not 10.

Can you confirm that it targets anti act are three and is it the same as or similar to the molecule you previously out licensed and I'm also curious on the same topic why you Didnt highlighted on slide 20.

You're not excited about target or you are not excited about obesity. Thank you.

Yes, I think so.

Can say definitively is not related to <unk> the molecule that we.

Our license.

Not disclosing the mechanism of.

Action you are correct that we do expect to read out in quarter, two and the simple reason, we didnt highlight on this slide as we view it as a high risk high reward program now, they're all high risk high reward, but I think particularly.

For agents of obesity. The key is can we find.

A dose and schedule that leads to both profound weight loss and the Tolerability profile and I don't know I have not seen the data. So I don't know, but I mean, that's the key question in and Thats why we didnt chose not to put it on the slide until we have further data, which we'll have in the second quarter and then of course, we will provide an appropriate update at that.

Time.

Thank you.

Next question operator.

Thank you.

Your next question comes from the line of Tim Anderson Wolfe Research. Please go ahead. Your line is open.

Thank you on Centex, what's driving the higher Medicaid channel mix.

Could that somehow increased further reminded actually reverse out as Medicaid enrollment numbers potentially shrink.

The us declaring that the pandemic is over and then an update on formulary positioning in 'twenty three in terms of lives covered in preferred spot.

And also if you can comment on whether there was any new access restrictions and what the Rebating was like in 'twenty three relative to prior periods.

Yes. Thanks, Great question. So first on the on the Medicaid increased first it's important to note with a brand like this $3 billion of net sales significantly more gross sales the <unk>.

We will percentage variation here its not not huge nonetheless, we don't have a great handle on why exactly the Medicaid came up a bit more but one of the drivers what certainly we had certain special.

Special higher discount agreements with certain Medicaid plan those are have now expired and.

And so those would no longer be in play for the coming years, and so I think overall, we expect to see the mix goes up and down year to year, but overall, we expect to see the mix stabilize back to what we've historically seen prior to this.

Situation, we had in 2022 in terms of formulary, it's largely in line with what we had in 2022, we see no significant shifts or changes in terms of formulary position access overall, given the overall scheme of things when we look at growth in that they are in line with 2022. So that's why we feel we will.

Good in the U S that on an annual basis, we will.

Be able to deliver sales that are in line with what we saw in 2023 with what we saw in 2022 and then the growth would come from the new indications again I just want to highlight that for the first half of this year because of the fact, we took all of that Medicaid charge in Q4, and when you lap.

The prior year as the base is not fully adjusted so you are going to see.

Lower relative cosmetic sales in Q1, and Q2 because of the base effects of taking all of that Medicaid rebate into quarter, four but I think the bigger picture on this brand is our ability to deliver new indications new formulations, that's really where we have to focus and then the continued expansion in Asia and China as well as in Europe .

Thank you Tim next question operator.

Thank you.

Your next question comes from the line of Shlomo This is Pat.

Some society Generale. Please go ahead your line is open.

Good afternoon. Thank you very much for taking my question.

Slide 30.

<unk> there is a.

Chart, showing the sales Miss in place.

Nice to see us as well, but most of the sales.

Do we have to understand that the view.

You should continue to trend.

Same base as interest to or as you suggested last year, we should see an inflation later this year.

And the number of sites.

Prescribed the product for some color on that would be awesome.

Thank you.

Yes, Thanks, Laura I think we just wanted to overall indicate that the launch is in line with other major cardiovascular launches, where we've been able to generate very large medicines and you've seen how entresto continues to perform.

I don't exactly we continue to hope for the inflection point certainly in the second half of the year, it's hard to predict exactly when it would happen. There are few things that give us confidence we should see some acceleration in the back half of this year. One is the free trial offer program that we had rolled out will expire and we hope that those.

Patients will convert into paying patients in the second half second with that 7000, plus physicians that I mentioned, we expect to get greater depth in those.

Physicians over time, which should also drive greater growth as well, we also see an increasing comfort with buy and bill versus the alternative injection centers and as that happens as well, we generally see physician sites prescribing more of IPO because they can do it in house without having to refer a patient out so all.

Those would be the positive tailwind, we would see towards the second half of the year I think broadly speaking, we feel comfortable with where consensus is unlike view for the full year 2023, and then our goal remains to make this into a very significant multibillion dollar medicine over the coming five to 10 years.

Next question operator.

Thank you.

Your next question comes from the line of Peter Welford from Jefferies. Please go ahead. Your line is open.

Hi, Thanks question oncology, just obviously there was a lot of emphasis on maybe like an entire page highlights some of the new and upcoming once you have as well that are coming through Facebook.

There are relatively few of that sort of priority. If you don't apology highlighted within the pipeline. So I wonder if you could still say first of all if you said it did yesterday.

Hey, Ralph will be opportunity there given also what we see developing in that market, but also occupy the Bob.

Is that now just continued or is it just delays as you continue to evaluate hey, Jay.

More broadly it's still an area, which you can see the business development. What do you think the scenario, perhaps obviously less focus from the Basel.

Yes.

Yeah. Thanks, Peter So I think on oncology remains a huge focus for the company, 40% of our R&D budget is focused on developing the next wave of oncology medicines.

Within solid tumors. In addition to the radio ligand therapies, where we have now a growing portfolio across.

Aro endocrine prostate we have a range of other indications where taken <unk> into.

We have the MTN ticked integra and.

The bond basin, we recently or hopefully, bringing in a full eight as well.

Our broad portfolio within royalty, where we see a significant opportunity. We continue to also pursued the tissue through the deal we have with Beijing, and we have that as an option deal. We also are.

Last thing what other.

Lines of therapy to take that pivot into given the competitive landscape. That's something we're actively evaluating and then in terms of other <unk>.

<unk> programs that are in phase III certainly the <unk> are continuing our overall perspective is the critical thing now is to demonstrate efficacy in a combination setting. We think we've seen now from the sales performance of the mono <unk> inhibitor as well.

Gordon for a certain group of patients that have the mutation much more important is can you ultimately demonstrate tolerability and efficacy of the <unk> with a PD one with a ship to with.

Other agents and that's something now we're working through to see and that would really I think give us more confidence that this could be.

Significant medicine now earlier stage within the <unk> portfolio, we have a range of different assets that we're pursuing.

We have a few targeted protein degradation agents that are advancing now into phase one two couple of novel targets in non small cell lung cancer as well as other solid tumors that whole space continues to progress as you know oncology has a high level of failure rate. So I don't want to oversell, it but I think we're.

Really working to continue to find the next wave of solid tumors and then we active are active in the BD Enel space and I think if we can find attractive assets within our core cancers lung cancer prostate cancer.

The gastro Gi cancers et cetera. Those are certainly things we would actively look at I would say in hematology now between <unk>.

<unk>, if taco Pan <unk>, we have some pretty building on the legacy of course of Gleevec into stigma and Promacta Rev. Late we have a pretty good portfolio in hematology and then of course with now why TV moving into the first line setting.

And a large b cell lymphoma is a nice portfolio to continue to keep maintain our strength in hematology overtime.

Thanks, Peter next question.

Thank you.

Your next question comes from the line of Seamus Fernandez from Guggenheim.

Please go ahead your line is open.

Oh, great. Thanks for the question so.

Sure.

Can you maybe just give us a sense of what the team is doing too.

And the IL 17 franchise beyond <unk> exclusivity in 2029.

There's obviously a number of high value immuno.

Immunology assets out there in development, we're just interested to know what novartis is doing beyond that and maybe if you could.

Would you mind, commenting on how you see the landscape evolving.

Going forward given some of the data that we've seen for <unk> map, and then potential competitor moonlike as well. Thanks, so much.

Yeah. Thanks, James So.

First one on.

IL 17, and cosmetics portfolio overall of course, something we're actively working on and looking at the <unk> 2029, we've additional patents that go into the 2000, <unk>, which will of course actively actively prosecute as well we have a range of oral anti.

Logical agents were pursuing in house so.

Oral IL 17, a and as well as other oral agents and of course are actively looking at external opportunities as well in that space. If we see compelling compelling data so I think.

I think that's going to be really critical for us to look at but of course, we have time and that's something we'll work through over the coming years I also would say that in immunology between <unk>.

<unk> prudent as well as other programs, we have now advancing through the pipeline. We're also prepared to pivot not to be not just focused on psoriasis PSA, but also try to move into really be a leader in areas like show Grand SLE.

<unk> and other Hematological illnesses as you mentioned like Hs Hs our view is that our 52 week data is very compelling. We think this will really be a space where long term data is what really matters and we think our 52 week data relative to the TNF are very good we're aware of other IL 17 days coming up.

What's important to note is this is a very very undertreated patient population these patients.

Generally have given up and generally are not coming in for therapy. So that the real opportunity here is to get these patients to know that they are better therapies available and that will create I think a large market opportunity where multiple players can it can be successful given that these agents are looking like they have better efficacy and safety than the TTM.

Have anything to say about other mechanisms at the moment and house are pursuing other mechanisms as well against Hs to try to make sure that we cover our bases, we have evaluation of our anti CD 40 ligand.

Evaluating Remy Bruton of RPC K inhibitor. So we have a range of efforts looking at HSN and of course, we'll see which ones pan out in house.

Next question, operator, I've been advised that really remind everyone. Please limit yourself to one question.

The next question operator.

Thank you. Your next question comes from the line of Andrew Baum from Citi. Please go ahead. Your line is open.

Thank you Christian.

Excellent.

Looking at your patient access map.

Kidney materially.

<unk> currently for the product in the U S. Could you just outline your confidence of FDA approval for the maiden and yet for the new facilities just given the recent track record.

Plus you have a new facility what is the risk of that dragging on and connected to that how should we think about the future competition from point Lance yes.

We could see a nicer typed in prostate.

Yes, I think with respect to the <unk>.

We are ready to file the size since were in discussions with FDA to file the millburn site and so at the time.

Get the okay to file as the four month review clock for that additional facility, our Indianapolis facility with multiple large scale automated lines, we plan to file in quarter, three as well to the to.

The NDA and again it would be in addition, or additional sites. So we would expect a four month approval time.

And so we're doing everything we can to make that a reality and we plan right now for those sites. Our base plan is for those sites to come online. This summer and then later on this year and then wed have adequate supply to fully meet the demand of the vision population as well as the Pea SMA.

It appears to me for population now I think in terms of the competition. It's important to know that this is extremely difficult manufacturing. This is just in time manufacturing.

That requires really logistics expertise, we currently source the entire U S market out of an Italian site and do it successfully.

And we believe we've built up substantial know how and expertise with the relevant sites to give us a strong competitive position now other players of course are going to come in and try to lots of question will be do they have the same scale and expertise that novartis does to be able to navigate that complexity and really ensure that they can meet that.

<unk> demand.

So that's kind of our outlook right now we feel good about it by the middle of this year will be in a very strong position to meet the supply I would also note for <unk>.

As I noted your comment on that product I mean, we have a large scale I know thats up and running in Switzerland, which makes us the largest producer of <unk> in the world. So I think we're good on gene therapy, <unk>, MSR and a manufacturer and we feel very good with the approach we've taken and I think we're in a very good place on all three.

We have them next.

Next question operator.

Thank you.

Your next question comes from the line of <unk> Parekh from Goldman Sachs. Please go ahead. Your line is open.

Thank you for taking.

One big picture one for you boss.

With the proposed separation of Sandoz Novartis will become a focus innovative medicines company.

Once the transaction is done.

You've done kind of the.

In the process of changing the shape and structure of Milwaukee.

Milwaukee.

Do you think that is more kind of you want to.

To do relative to the size and the chute.

Medicines company that will be met.

At the end of the Sandoz transaction.

With that I know Rodney steam has been hiring kind of kind of some people might not be young et cetera, but just more broadly.

Along the process.

And that kind of growth and strategy functions.

The army is kind of not wanted to do when do you think that might be done.

Thank you.

Yes, Thanks Ger.

Speaking our strategy was to get to become a pure play innovative medicines company design the company in the right way, we started that journey.

Vincible way five years ago, there was a pandemic for two and a half years in the middle of that.

It got a little more complex, but I think we have the right setup post <unk> spin with a geographic focus on the U S and ex U S and from a commercial standpoint really committed and renewed leadership in R&D and then the strategy and growth function to really identify external and internal opportunities that can drive the growth.

So I think post that time period and posts seeing through the transformation program, we announced last year and the relevant restructuring I think we'd be then in a position to really just focus on execution and we need to execute on our launches execute on our pipeline execute on our productivity continue to generate that mid single digit sales grew.

And that attractive core margin over time, and then that becomes the core of what we do day in and day out continuing to look at attractive external assets to add on.

Overtime Ronnie's team is getting built out I think off to a strong start a much more integrated the most integrated approach now that we've had that I'm aware of at least 20 years to R&D portfolio management. It all falls under one roof now in terms of how we look at the R&D portfolio and integrated approach to taking commercial.

Input into the earliest stages of research much more focus on key tas and being much more disciplined and saying no to projects that are off strategy. So I think all of that is coming together its been four or five months for Ronny. It's been two months for Fiona Marshall, but I feel really good that this is a great team that can deliver that innovation horsepower, we're going to need is a pure.

Play company.

Thanks, Eric next question.

Thank you.

Your next question comes from the line of Emily Field from Barclays. Please go ahead. Your line is open.

Hi, Thanks for taking my question I guess.

Wanted to ask a question about attack a pan.

U S filing in the first half of this year include both P&A trials.

And then.

You mentioned that Youre running a switch study for the frontline patients as well just trying to get a sense of commercialization strategy across the PNA spectrum and then just I know you with BTG for this.

Just how long of a regulatory.

Thank you.

So.

With a tackle then yes, we will be filing both studies both the.

Refractory and frontline study as part of the package and Thats aligned with FDA.

We do we do have used a priority review voucher as well for this asset to really ensure that.

<unk> in a rapid timeframe.

Even though we had breakthrough therapy designation, we don't want to take any risks with respect to this particular filing to make sure that it happens as fast as possible.

With respect to our overall strategy with attack a pan I mean, when you look at this market, we believe that it's <unk>.

60% to 70% of patients who on current NCC five based therapies are not adequately controlled and those patients could be switched to attack a plan based on the data we presented at ash and assuming the final label supports it and so that's a substantial opportunity for the medicine, we know that that potentially up to 60 to 70.

Percent of diagnosed <unk> patients are not on therapy to date and they come on I think a few different categories. Some are subclinical or are not quite clinically severe enough and the question is with a twice a year safe oral is there an opportunity to get more of those patients on therapy, because maybe physicians or pay.

We're holding off wanting to be on us regular infusions, so could an oral therapy open up that market. I think there is a set of patients also who have gone back to taking transfusions, having now failed prior therapies. That's another opportunity and then theres, probably a set of patients as well. They are just in the watch and wait.

Mode, So that will be an opportunity for the medicine as well. So we think there is multiple places it will take us time to drive. This launch. So this will not be fast given the strength of the incumbent position and then also that this significant group of patients not on therapy has to get mobilized we believe over time with the compelling data that we have.

And the recognition that a twice a day oral could be a really compelling option. We can build a very significant medicine on <unk>, then expand into C. III eigen hoo.

<unk> and then subsequent indications thereafter.

Next question operator.

Thank you.

Your next question comes from the line of Richard <unk> from Jpmorgan. Please go ahead. Your line is open.

Hi, Thanks for taking my question just going back to the center.

And obviously very strong we're going to see another launch for another CD 20. This this year and coming around now from TG Therapeutics, obviously, niv, but price.

How do you see that impacting.

This year may be I'll say, we're going to see subcutaneous <unk> data, how do you see that as well in the future.

Around the launch thanks very much.

Yes, Thanks Richard.

So the way we look at the EMS market. So one as I mentioned, 50% of patients that are not on b cell therapies, and 50% on b cell therapies. So there is a substantial market opportunity just to get more patients in the first line first switch setting on to high efficacy B cell therapy. So there is plenty of room for growth.

For FEMSA in getting to more of those patients.

Thing based on our understanding of the market is that there are.

Facilities and.

Health systems that prefer infused medicines and there are those that prefer providing patient sub Q medicine, and we see those as very stable. So really this market has a split market you have a market of physicians, who want to give infused medicines there is.

A large proportion of the market, but wanted to give patients the opportunity to have at home sub Q administration within that sub Q, we don't see any at home administration relevant competition for the coming years, and that's very much our focus area within the IV segment. There is no competition and I think that comp is.

<unk> dynamic will be an important one for us to observe and I think to your point Richard will the opportunity of having sub Q physician administered medicines expand the number of centers that might be interested in a physician administered approach. We don't know nonetheless, the market opportunity ahead of us with the 50% of patients not on <unk>.

Cell therapies, and the substantial number of physicians, who prefer providing an at home administration that the opportunity for this medicine and that gives us plenty of room to grow over the coming period.

Thank you Richard next question operator.

Thank you.

Your next question comes from the line of Simon Baker from Redburn. Please go ahead. Your line is open.

Thank you for taking my question just going back to <unk>.

You briefly touched on on volumes just wondering if you could give us a little bit more detail on the progress you're making that I asked because.

On one hand, there was a fairly negative article earlier in the month.

Okay.

Like vantage point, though on the other hand, we see in September December last year quite a significant.

Okay.

This website. So I just wonder if you could give us the latest picture that thanks, so much.

Yes. Thanks, Simon look there's no question that buy and Bill is a new approach that cardiologists need to understand and get implemented into their office that said. We know there are many specialties are successfully done that ophthalmology oncology rheumatology neurology. So this is something that.

Can be done.

Is it does it take time, yes, do you have to work through many hurdles, yes do.

So you get has to get office staff to understand the new approach, yes, absolutely, but it can all be done and as I noted now that we have over 7000 physicians that have taken action on <unk> <unk> thousand 800 facilities ordering less.

Steady increase in conversion from facilities that were previously using alternative injection centers to now implementing buy and bill in their facility for IPO I think we're getting to a place now where physicians are getting more and more comfortable with the concept and what we generally see is once a physician has one patient go through the process and they understand.

That it is something Thats manageable then it becomes something relatively straightforward further office and then they take it on relatively quickly. So we have to get up that curve, but we're seeing I think positive trends.

We'll just keep working through it keep also hopefully having clinics be able to educate one another about the experience of how buy and bill ultimately works and get that further implemented.

I wouldn't read too much and you can always find probably a physician to tell you any any processes onerous and terrible.

But I think broadly when we look at a large scale data set we see steady progress on this front.

Next question operator.

Thank you.

Your next question comes from the line of Michael Eisen from UBS. Please go ahead. Your line is open.

Thank you question for Harry Please just coming back to the Sandoz operating expenses into 2023.

The biggest talent that's a consensus mainly looking at the composition of numbers for this year.

Harry.

Much of these expenses are standup costs and how much is sort of prepping for manufacturing shift as well as just seems a meaningful amount that is coming into the P&L is that purely just separation cost centers that already including sort of longer term expenses already in 2020. Thank you.

Thank you Michelle.

So overall I would say, though if you take out these.

<unk>.

Standup and transition to re cost.

The co Op, Inc. Sandoz in 'twenty three would be flat. So this is low double digit decline comes from that if you think about what sandoz delivered $1 9 billion Corp. In 'twenty. Two so we talk about roughly plus or minus $200 million cost block out of the $200 million.

About 70% to $90 million will be real standup costs corporate costs, and so on that sandoz needs to operate as a separate public company.

And the other half.

If you will will go away over time.

Fully transitioned to a public company that would necessarily go away as these transition costs are not any more needed.

After a couple of years of course also the corporate costs, there will be corporate cost but.

Clearly sandoz has plans to reach the mid term the mid twenty's margin by streamlining the overall operations SG&A structures as they are as Standalone company. So I hope that gives you a bit more flavor.

That guidance for this year, which really should be a trough year and then after the separation relatively quickly come off that including of course, taking over transition service costs like for ITE over.

The time quite quickly usually maximum two years.

<unk>.

Thanks, Harry I think Michael next question operator.

Thank you.

Your next question.

Comes from the line of Emmanuel Papadakis from Deutsche Bank. Please go ahead. Your line is open.

Thank you for taking my question perhaps.

Perhaps I'll take one.

You've reiterated the over 3 billion peak sales potential for the adjuvant indication. So perhaps you could just help us understand how important do you see a clinically meaningful benefit in both the.

J T cell populations in the Toronto medium risk and high risk.

In terms of realizing that potential.

And how would you define clinically meaningful and Davita Rx.

Thanks Ben.

Sure.

And indeed is that something you would actually disclosed what that line will have to wait until detailed percentage. Thank you.

Yeah. Thanks, Emmanuel So the trial right now is overall design for an endpoint across both patient populations and so.

In order to hit the primary endpoint, we need to hit across all populations.

The question would be would SDA parse the data and say that it was driven by the high risk population and then potentially take a different approach we can't judge but the way we've designed and powered this study is across the entire entire group and so from a pre specified analysis on the primary endpoint it would be.

Both the intermediate and high risk of course with the relevant secondary endpoints I'd also note that we've aligned with FDA that key for US is to show no detriment and OS as long as we can demonstrate no detriment in OS at the time of that readout.

That would be.

So I think you could expect a headline on whenever it comes on the idea of FES, and then if relevant or not relevant.

Anything on the OS and then we'd have to have the discussion with the agency to determine how they would like us to cut the data you know from our competitor data.

Was.

A threshold that was applied for a certain subpopulation CAD 67, and then later adjusted so these are all things we will have to determine as part of the review process.

Next question operator.

Thank you.

Your next question comes from the line of Mark <unk> from Morgan Stanley . Please go ahead. Your line is open.

Yes, Thank you Mark Purcell from Morgan Stanley . Thanks for taking my question.

<unk> could you help us understand.

You said nine months analysis could potentially support U S Subpart H filing.

How should we think about the sort of probability of moving forward at that point.

First is obviously out to $2025 seven and slowing progression of icon before you can approach the FDA with your.

Package.

I mean, that's sort of related to that obviously, a much bigger population.

And icon versus <unk>.

Should we think about a sort of sub population of 195000 patients you estimate with what should be our target Hill or would you sort of launch. This is a completely separate Brian I'm trying to think about what Novartis board ambitions might be to fill it out.

Primary care in rare renal assets, given your commercial capabilities across the platform.

Yeah. Thanks, Mark So first on the endpoint for again, if we saw in the phase II data basically be data I think.

Reduction in proteinuria across.

The very statistical analysis that we've done we've done and that's the basis for designing the phase III studies, though we.

We feel good that if we hit the required slope of reduction that we target that that would allow.

Allow us to file with the FDA, though I imagine it will also come down to the totality.

The data, but certainly our base case is that if we hit the primary endpoint.

On proteinuria that should give us the basis to file and then of course, we would look at Egfr and other endpoints in 2025 that would be more meaningful after further follow up broadly speaking for our factor B.

And so I'll focus on DNA <unk>.

<unk> and cold agglutinin disease, and the related spectrum of illnesses. When we're in a more common elements like Iga nephropathy. Our focus is on more severe patients to be able to maintain the ultra rare pricing. We do have follow on factor B inhibitors that we plan to take forward in broader indication.

You will note that we do have a program for <unk> evaluated in geographic atrophy.

And related retinal diseases.

If successful we would actually use the backup compounds or those broad indications and thats, how were thinking about splitting out across the whole factor B enterprise.

Thank you next question operator.

Thank you.

Your next question comes from the line of Richard Parkes BMD POI Rob. Please go ahead. Your line is open.

Alright, Thank you very much for taking my question.

Just another one on perfect.

You've outlined a seal have manufacturing capacity to allow you to address the majority of the SMA population.

For 2020, so could you talk about any other hurdles.

The limitations on your ability to penetrate that population.

The referral patterns proportionate patients kind of in the community and access to nuclear medicine.

Facility, just so that you can.

Scott.

Opportunities. Thank you.

Yes, Richard what we've seen thus far is there is about.

500 facilities, we believe we would need to be able to provide so victor or at least in the U S market to reach the demand the potential patient population across the three indications that we have.

We're able to currently servicing a little over 200 of them and.

And we expect that to expand over time.

What's going to be the next challenge because the demand is as we've noted throughout the call much higher than we expected I think folks on the call expected frankly.

Is actually having the centers have enough infusion shares to be able to provide the therapy to enough patients. So that's the next constrained.

Beyond once we leave our supply constrained later in the middle of this year to then work with the centers to have a better estimate of what the number of patients. They think they will need to provide radio ligand therapy to a day and ensure they have adequate chair or bed capacity to be able to do that because I think that will.

B as we get into a broader and broader patient population that will be the next constraint. We will have to then work through there seems to be a lot of enthusiasm in the urology and nuclear medicine community to do that so I expect it will happen, but that's something we're going to have to work through over the coming quarters.

Next question.

And the last question I think it's Steve Steve.

Thank you.

Just David and Steve line.

Steven Your line is open.

Alright, alright.

And you're calling on Steve Scala so.

Im just wondering what is your specific assumption for the profile of Merck's oral PCF canine for which data is coming very near term in terms of both LDL lowering and safety I assume your view is very cautious which supports your.

Enthusiasm for <unk>.

But what sort of role do you think an oral pts canine ultimately could have in this marketplace. Thank you.

Okay.

Yes, Thanks, Steve I'm glad you asked that question, our view and we had an oral <unk> program with <unk>.

<unk> prioritized weird.

Pivoting cardiovascular research into NOLA and Novartis into infrequently administered.

<unk> <unk> et cetera to get to first as we are Tcf benign. We a combination program. Once we have LP little a follow on programs with various combinations and the goal would be to say can you get to combination that six months or long acting at one year with the belief that over the last 25.

Years, we've learned in compliance to oral and this market is low statin, 30%. Other therapeutics are in the similar range and if we really wanted to tackle cardiovascular diseases scale, we need to get the infrequent administration. So we have <unk> as a starting point, we're going to work very hard to extend past not get benign.

<unk>, but anyway, you're going to have lifecycle management working on long acting like Dio worthy on combinations with <unk> and our goal will be very much to have a combination <unk> that can cover the relevant mechanism of action for cholesterol lowering so that patients won't need oral drugs anymore, because we think thats where.

Madison is heading and we think Thats, what SA RNA is long acting <unk> and similar technologies can deliver.

Hence we de prioritize oral systematically cardiovascular at Novartis and focus on the next wave of technologies and therapies.

Very interesting thank you.

Okay.

Alright, very good. Thank you all for joining and we'll look forward to updating you further at quarter one take care.

Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.

Okay.

The conference will begin shortly to raise and lower Johan during Q&A you can dial one one.

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