Q2 2025 Novartis AG Earnings Call
Good morning and good afternoon and welcome to the Nevada. Q2 2025 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 1 and 1 at any time during the conference, please limit yourself to 1 question and return to the queue for any follow-ups. 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 miss Sloane Simpson head of investor relations. Please go ahead madam
Sloane Simpson: Thank you, Sharon. Good morning, and good afternoon, everyone and Welcome to our Q2 2025 earnings call.
The information presented today contains forward-looking statements that involve known and unknown risks uncertainties and other factors.
Sloane Simpson: These may cause actual results to be materially different from any future results performance or achievements expressed or implied by such statements.
Sloane Simpson: For description of some of these factors. Please refer to the from 20s and its most recent quarterly results on form. 6K that respectively were filed with and furnished to the US Securities and Exchange Commission.
Before we get started, I just want to reiterate what Sharon said. Please, uh, limit yourselves to 1 question at a time and we'll cycle through the queue as many times as we need to. And with that, I'll hand across back.
Speaker Change: Great. Thanks Sloan and thanks everybody for joining today's uh, conference call. If we move to slide 4 uh as you saw earlier today, novardis delivered, another strong quarter, we had double digit, sales growth, core margin expansion and this supported an upgrade to our full year. 2025 bottom line, guidance, sales were up 11% in constant currency core. Operating income was up 21% in constant currency and we also had important innovation highlights in the quarter, many of which I'll cover in the subsequent slides 2. I wanted to highlight here oav 101. It we had submissions in the US and Europe. Uh, and we also had important Milestones reached on Boda plan. Uh, in in Huntington's disease as a few, as well as a few others, which I'll cover our 20. Our core operating income guidance was upgraded and Harry will cover that in a
Sloane Simpson: Bit more detail to move to slide 5.
Sloane Simpson: Our priority Brands continue to drive robust growth demonstrating the replacement power in our portfolio Brands these Brands were up 30% in constant currencies, exclude excluding interest to the portfolio is up 33%. I think some of the highlights for us included Kooskia kasima assemblix lexio. Also with a strong quarter pluvicto as well as sub halt stuff.
Sloane Simpson: So, moving to slide 6.
Sloane Simpson: And going by geography and the us we were up 100% uh in quarter 2, we have metastatic breast cancer leadership in both nbx and TRX now which I think is really encouraging on the early breast cancer side of things, our NVR share now has reached 61% with leadership in both the overlapping as well as the exclusive populations to kusali outside of the United States. We were up 25%. We've achieved metastatic breast cancer leadership in nvx and TRX. The early breast cancer indication is now approved, uh, in Europe, China and 18, other countries. And our first launch markets. I think have shown us some really positive signals. They're following the US trade trajectory our Germany early breast cancer and burex shares at 71% and that also has supported strong performance in our metastatic breast cancer, uh, share as well in Germany. Uh, now as you know, we have strong guidelines support
Sloane Simpson: Category, 1, preferred NCT and guidelines. The only cdk4 6 with the highest smos scores so I think all all together this really puts together a nice story for Cisco to continue to be 1 of the key growth drivers for nardis through the next decade.
Sloane Simpson: Then moving to the next slide.
Sloane Simpson: Consent to grew 33% in the quarter and, and this was fueled by the continued strong demand growth. We see for a self-administered B cell therapy for Ms. In the US we were up 28%. Uh, we had TRX growth of 23%. We're seeing access, uh, improvements translating to fewer bridge and more direct to paid starts, which I think is really encouraging our opportunities. Still Remains the 50% of patients that are still on low efficacy therapies really in the US. Are our goal, is to expand the use of B cell therapies and then within the B cell class, continued to gain, additional mbrx and CRX. Share. Now outside of the US strong growth as well. We're leading in MBR, share and 8 out of 10 of our major markets, many of these markets prefer, self-administered B cell therapies. But here as well, we see a significant opportunity for further growth. Uh, we estimate that 70% of patients in Europe on disease. Modifying treatments are not treated with the
Sloane Simpson: cell therapy. So this clearly shows There's an opportunity to really expand the use of B cell therapies and particularly kitima.
so, moving to slide 8,
Sloane Simpson: And 1 important milestone for us in the quarter was pluvicto returned. Uh, to really, I think robust growth which I think bodes well for pluvicto as well as our more. Broadly, our rlt franchise. It was up, 30% on the quarter driven by the pre-tax indication approval, uh, in the US that launch is off to a strong start. We saw significant quarter-on-quarter growth, 40 40%, uh, in new patient. Starts, uh, sales were up 25%. We had a record high, number of patients starts in June and that typic that that was expected, given that we have about a 4 to 7 week, uh, treatment lifetime from approval, uh, and patients being introduced to the therapy. And then actually coming on to the therapy based on all the testing required. Now, the success factors for us. In the us, both in the near term. And long term are increasingly getting put in place. We're seeing strong uptake in the community setting. A 60% mbrx quarter on quarter growth in the community, uh, 58.
Sloane Simpson: Percent TRX in quarter 2, we estimate that 9 out of 10 patients are now within 30 miles of a treatment site with over 670, sites active. And we see 40. We've seen 40% growth in the number of sites over the over the last year, we believe we have the the right footprint. Now, maybe with some limited editions and really now our focusing on driving additional depth in these sites particularly
Sloane Simpson: Within the Urology setting where we see strong strong uptake, as well as I think targeted expansion in certain regions. We also saw over 50% psa4 patients were with hcps who had previously used Pictou in the vision setting, I think shows as well, that as we gain experience with vision with psa4, that will surely support the psma Edition launch and then future rlts, uh, in in the future years. And then lastly, our xuf growth continues. In the vision setting, our growth is driven by Europe where we're expanding the level of reimbursement in our key markets.
And overall survival and and that will continue to mature over time. And that data will be presented at an upcoming medical Congress. Now, for context, we estimate that. The incidents of hspc is very much comparable to crpc though, there is additional competition and the hspc space.
Sloane Simpson: and as I mentioned on the previous slide, what will be absolutely critical is our breasts now that we've achieved in community oncology and Urology, which will support both psma for and gsma, uh, Edition
Sloane Simpson: So based on the FDA feedback that we've received our submission is planned in the second half, we would plan to provide FDA the final rpfs analysis during the review as well as an updated OS at that time Point. Uh, but I think we feel like we're on a very solid track to get an approval now, in 2026, uh, for pubico in this setting.
Sloane Simpson: Moving to slide 10.
Sloane Simpson: Now, let's see how grew 61%, uh, in the quarter on track now, to exceed, a billion dollars in sales. In the US, our growth was 47% and we outpaced the lipid lowering Market. Our monthly TRX was at 56, uh, percent versus a market of 35%, we're seeing more and more depth. In our key Priority Health Systems these health, systems are Health Systems. We've been working on for many years to really expand the use of lesbia as a way to manage cholesterol, uh, in their patient base and we also are seeing a strong performance in the post-event patient.
Population. Uh, we have new data from the V Inception study, and we've also seen some updated guidelines, which support youth in the, after acute, coronary syndromes. And we see this patient population and this group of Physicians, really interested in optimizing lipid lowering and particularly the use of of litho now, interestingly, you can see here as well, that we've had very strong performance outside of the US, 74% growth in constant currencies, it's driven broadly across the markets where we are approved. But particularly in China, where we see the continued to out of pocket Market expansion. So our goal will be to continue to build that. The evidence base, our pediatric submission is underway our Global V mono trial, uh, is to be presented at e, and we continue to look to expand Lex. View's use in the monotherapy Frontline setting. Um, and then we also will present the V Inception data as well at at what was a recently presented as well at a recent medical Congress.
Speaker Change: The moon, this is at 11.
Speaker Change: Now turning to assembly, uh, where we are now in the first phase of our launch. Uh, in the Frontline setting, we saw 79% constant currency growth. Uh, we're on track to see the billion dollars in sales as well, in semblance. Uh, this year we see that really strong momentum in early lines which will go through and continue to have Global Leadership in the third line setting. When you look at the middle panel here, you can see that from an NBR share standpoint uh across all lines of therapy now.
Assemblers is the most widely used tki in CML which I think is really a a testament to the strength of the data and the profile of this medicine. And then on the first line setting at the bottom half of the panel, you can see we've already reached 15% and BRX share and we working hard to drive that up. Now, rapidly over the coming quarters. Overall, we've achieved nbx leadership. As I mentioned, across all lines of therapy outside of the, in the US outside of the US, third line leadership and increasing early line. Uh, approvals, we have 48% total share in our key markets now xus and we see early line indications. Now coming online. We were approved in 20 countries, including China and Japan. We also continue to expand the evidence base. So that hematologists know they have the data to cover all relevant CML patients. A recent data for ask for start and ask to escalate either have been presented or will be presented. And I think build out the overall portfolio,
Of data for this medicine.
Speaker Change: And moving to slide 12.
Speaker Change: Now consensus growth moderated uh to 6% in quarter 2 though. We continue to expect mid single digit growth for for the full year. When you look at it from a US perspective, we saw solid demand for our launches in the us. Both HS and Ivy HFS. Continue to grow uh with 70% of the business from naive patients. And we continue to have leading in BRX share with 52% share in naive.
Speaker Change: Patients and 48%. Uh, overall
Speaker Change: Strong access, uh, and outside of the us, we're the leading originator biologic and both Europe and China. Now that said we are facing some Geographic specific short-term head, headwinds in the US, we did see higher RDS uh in 34. And as part of the Medicare Part, D redesign, in the first half of the year, we do have a new competitor entry in HS, which is impacting us, particularly for switches off of coent, and it is worth noting that we did have strong launch performance in the prior year as well as a positive Rd effect as well. Uh, and all of that is contributing to the Slowdown. We see right now in the US growth outside of the us, we see pricing impacts from the new indication. So as we bring the HS indication online as is normal, we do have a price reset in certain markets and then we grow off of that new price. And then we've also seen a market wide slowdown. Um, in China now, all of that said, we fully expect to be able to maintain mid single digit.
Speaker Change: Plus growth over the coming years and remain fully confident in our 8 billion dollar plus Peak sales guidance uh for cosmetics in 2029.
Speaker Change: The moving to slide 13.
Speaker Change: Now, turning to entrust, though, continue to see solid growth for this medicine, uh, which I think has just been consistent now for for many many, many years did want to provide an update, uh, on on the US situation. We fully met our expectation of a Us Mid 2025 uh aloy from a financial planning. Assumption standpoint, our IP and Regulatory litigation is continuing against a single generic company who we have not settled with yet and who is currently in joined from uh any launch and so that uh it's in place uh, any later launched prior to the final outcome of these. Uh litigations would would be at risk because we continue to prosecute our various, uh, cases that are ongoing. And so we'll continue to monitor uh, the situation. If we have any material updates I will certainly provide them. Uh and we'll certainly see now how the courts uh rule in our various cases over the coming coming weeks and coming months.
Speaker Change: And then outside of the us we have continued strong guidelines position uh and we have balance to Geographic sales. So it's important to note that in this brand, a half of our sales are coming from Europe, China in Japan. And that in Europe, we're protected through November 2026 and continue to look at ways to extend IP beyond that. And in Japan out to 2030 also looking for additional protection there as well. So, and Tressa will continue to be outside of the US important.
Contributed in novardis growth, through the end of the decade.
And moving to slide 14.
Now, turning to our renal portfolio now, where we have 3 medicines, either launched or uh, in in the pipeline, we're excited to see the progress we have on, on our ongoing launches as well as some not new long-term data on ziga khaybar, our Aunty, April antibodies, first up with fehb halsa, we saw steady growth in the US. High persistency and compliance with this oral therapy. We see the a good recognition that this is a medicine that's aligned for patients with persistent Pria and Global inflation inflammation. And then c3g, uh, as well as seeing positive early launch signals reflecting a high unmet need and now we're approved in over 30 countries including in Japan. Now van Raffia our endothelium receptor antagonist. Important to note here, we're seeing very strong hcp feedback positive feedback. Given that we have no Rems and we are seen as a seamless oral add-on to the current support of care, um, to, uh, uh, standard of care.
Speaker Change: We also seeing that we're exceeding. Our early targets for patient enrollment and we've had solid Early Access wins in the first few months now since launching. And then lastly, with zika khaybar, we announced a 100 week data from our ongoing Phase 2 trial with 40 patients, which represents the longest duration of treatment for any
Speaker Change: You are a reduction of 60% sustained, egfr stabilization and no AE is leading to treatment discontinuation. So the Beyond phase 3 study is on track and nearly completed recruitment now. And we, uh, we have a readout expected in the first half of 2026, which would give us our third medicine potentially for patients with Ian and related conditions.
Moon to slide 15.
A week 4. We also saw safety results which were consistent with the overall safety profile of Remy brood nib and just to take a step back. We see food allergy as a significant opportunity and and want to need for for Effective oral option. You know, food allergy represents has a global prevalence of 3 to 8 uh percent. Uh, it is over a 10 billion dollar global market today.
Speaker Change: Allergen avoidance is seen as burdensome and unreliable. Uh, and generally speaking, I would say, current treatment options are limited. So to have Remy bred in a about, potentially the first oral um, allergen agnostic treatment with a rapid onset of action, could be really attractive for for patients and Physicians. So, on the right hand side, you can see uh, the design of the study, I will present the full results. I have an upcoming medical Congress and our phase 3 planning is well underway to advance the therapy as as quickly as possible and build on Remy bruden, in CSU phase 3. Now, in Sindhu ongoing, phase 3 is as, you know, in multiple sclerosis, and myosin gravis and now food allergy, as well. So really, an opportunity here to build out this medicine in a significant way.
The moving to slide 16 in the quarter. We also did present our interim, Phase 1, 2 data on ytb, a rapid card. Uh for immune reset uh in a range of, I mean logical diseases. But here in this study, in severe refractory SLE.
So you can see on the left hand side, the composite, uh, endpoint, um, of the SLE die, 2K total score. You can see that. We had a very uh, strong result that was persistent and consistent out to 1 year um that Improvement in overall disease activity. Uh, I think is very compelling and the safety overall was in line with what we see, overall with our card experience, it's important to know. We're quite rigorous in monitoring these patients and logging how we use IVIG and il6. And I think in our estimation, this is a very consistent with what we see, uh, in our experience with managing, carti patients. And I think very compelling. You can see on the right hand side at screening, these patients had multiple, uh, systemic manifestations, of, of the disease. And you can see when you get out to the, um, 12 month, uh, time Point. Uh, you can see again, that we have, uh, resolved most these patients, see broad resolutions.
Other than in proteinuria, which is likely, due given, how severe these patients are, and how refractory they are to ongoing kidney damage, that can't be recovered. So, remarkable results and because of the strength of this results, we feel confident now in our broad program, which you see on the next slide, slide, 17.
Uh where were advancing ytb in a range of Auto? Uh, immune diseases. You can see here 7 plus ongoing uh programs. So you can see both uh a phase 2 and a phase 1 2 and a phase 2 study. And in lupus and lupus nephritis, that's a pivotal study aligned with FDA, systemic sclerosis. Also, pivotal study myositis also pivotal study as well as aav. Also a pivotal study. And then we also have, uh, early stage programs to look at refractory, um, ra and shogun's disease as a basket study, as well as programs in, relapsing, Ms, progressive MS and myosin gravis. So our hope is to use this uh, ytb as our first for a and strong for a into immune reset using a cell therapy. And then behind this, we have a number of programs that look at by specific antibodies and other approaches to achieve immune reset.
Speaker Change: It's very exciting data and we look forward to keeping you updated. So moving to slide 18.
Speaker Change: So overall our key Innovation Milestones are are broadly uh on track, we're on track for the quarter 3 read out of ionil in shogun's disease, that we don't have either studies, uh, data uh, in house as of yet. Uh, and you know, we continue to progress our other programs, uh, on track as well.
Speaker Change: So with that, let me hand it over to Harry.
Yeah, thank you of us. Good morning. Good afternoon, everybody. I now talk you through.
Speaker Change: Our financials for the second quarter and the first half which reflects continued strong performance of our growth drivers and overall portfolio. As always my comments refer to growth rates and constant currencies unless otherwise noted
Speaker Change: So starting on slide, 20.
Speaker Change: Up 37% in US Dollars. And then for the first half,
Um, also reflecting a very strong growth momentum with sales up, plus, 13%, and cooperating income up 24%, core March increased even a bit more given quarter 1, 370 basis points, reaching 42.1% and core EPS. As you can see 4.69 up 27% and 3 cash flow almost 10 billion.
Speaker Change: Speaking of free cash flow I think on the next slide it's a simple slide but would say, not the last quite impressive, right? 46% increase in uh free cash flow on the first half. And as you know, cash will always remains a key priority for us as our ability to convert strong, operating income growth into excellent free. Cash flow provides, of course, plenty of capacity to reinvest pursue bold on Acquisitions and return Capital to our shareholders through growing dividends in Swiss Francs, as well as share BuyBacks.
This brings me to the next slide where I'm pleased to announce that. We are initiating a new up to 10 billion dollar share buyback program, targeted for completion. By the end of 2027 this follows the completion of our previous 15 billion share buyback, programme earlier this month. And as part of our ongoing commitment, uh, to a balanced Capital, allocation importantly, this new buyback does not limit in any way. Our ability to pursue value, creating bold on deals, and remains a key area of focus for us to continue to strengthen our Pipeline and our 4 cor therapeutic. Areas. A good example, from the second quarter is the acquisition of regular Therapeutics, which adds an asset targeting, the most common genetic cause of kidney failure worldwide in our, you know, pipeline.
Speaker Change: Alongside bolt on deals. We of course, continue to invest in our internal R&D engine and Beyond BuyBacks our commitment to a strong and growing dividend, a Swiss Francs remain strong with the payout of 7.8 billion in the first half of our annual dividend to our shareholders.
Speaker Change: Moving now to slide 23.
For the full year guidance, we continue to expect High single digit, sales growth. However, strong business momentum, and good progress on ongoing, productivity programs has led us to raise our bottom line guidance. We now anticipate core operating income to Crown the low teams up from the previous low, double digit Outlook.
Some people asked us, what is low teams? Who is low double digit, uh, low double digit, we see in the range of uh, 10 111 12%, and the low teens in the 1314 percent range,
Speaker Change: Embedded in our Guidance, the assumption that entresto us, generic entry occurs, mid of 2024 to Mid of 2025, however, I want to emphasize this only for financial forecasting purposes. Of course, we will continue to appropriately enforce our valid IP and Regulatory rights that hopefully lengthen that assumption. And as a reminder us and tresto sales were 1.2 billion in quarter to. So each month of sales is worth 400 million for us.
To complete our full year guidance. Please know that we continue to expect core net Financial expenses to be around, 1 billion and our core tax rate to be around 16. To 16.5%
Now let's move to our next slide. Yeah, so I want to talk you through our, the phasing we expect for the remainder of the Year. Usually as you know we don't give such detailed quarterly guidance but in the potential transformation year with promote and Cigna us generics and depending on the interest of Dynamics, I hope this is helpful to describe our Focus scenario could unfold over the next couple of quarters, should and stress to generics in the US enter later in July or August.
Speaker Change: Clearly, if we are successful in the ongoing IP and Regulatory, litigation this forecast scenario looks different without interest or us generics.
Speaker Change: So with this forecast, assumption for the second half, we anticipate mid single digit sales and bottom line growth to arrive. At a guidance. We have given for the full year after a very strong first half, however, the Dynamics and quarter 3, and quarter 4 would be quite different.
Speaker Change: Expect strong growth in quarter 3, based on continued momentum in our priority brands.
Speaker Change: and of course if there would be a generic entry, there would be a initially in quarter 3 a bit less of an impact even though we would expect them multiple entries on interest or
In a quarter 4 Ever, we anticipate a step down in growth on both top and bottom line. And this would reflect the full quarter impact of potential us genetics near interest to us generics, based on our financial forecasting, assumption, as well as a quite large. Prior growth to net adjustment, you may recall when we reported a quarter for last year, we reported 16% but actually underlying excluding um, out of period close to net adjustment was 13%. So quite a big on Top Line. And then of course the bottom line of of that is like 2 and a half times in terms of growth rates, right? And therefore if you would exclude this prior year 1 time and we would have a quarter for the mid single digit sales growth in the Middle, High single digit core operating income growth. I hope that was not too complicated in case it works. We have of course, uh, the call to answer questions or our IR.
Speaker Change: Colleagues will take you through it later in the week. Now, let's move to the final slide.
Speaker Change: Uh, where we outline the expected currency impact for 2025. If mid July rates were to Prevail for the remainder of 2025, we would expect the full year, currency impact to be a positive 1 percentage points on that sales, the negative 1 percentage points on cooperating income. And as a reminder, we always publish this, these uh, estimates on a monthly basis. Uh, assuming the exchange rates is always move would hold for the rest of the year and it's on our website, which I we hope to that. You find that helpful and with that back to us,
Great. Thank you Harry. So if you can move uh, to slide 27. Uh, so in summary, Novar, the silver, the strong quarter 2, Double Digit, sales growth, core margin expansion. Continuing. Now, I think our 10th quarter in a row of of uh, being able to raise our guidance, he launches our accelerating with consistent, strong execution, we saw that particularly with kusali some Pictou, but broadly across the portfolio. We also continue to advance our Pipeline with exciting readouts, including the Pictou hspc, uh, readout as well as now. The Remy food allergy and the ycb readouts, and we've upgraded our full year. 2025, bottom line guidance. But importantly with uh our current Outlook we remain.
Speaker Change: Highly confident in our mid to long-term growth Outlook and this gives us a confidence as well to take on another 10 billion share buyback.
Speaker Change: And moving to slide 28. I did want to say a word about the announcement. We made earlier today earlier today as part of an orderly transition, uh, which we're always committed to uh first I want to thank Harry for his unwavering commitment and over 22 of over with over 22 years at Novartis at the end of this year. Harry will have completed.
Speaker Change: 13 years CFO. And I think truly 1 of the, the great leaders in the history of our company, being able to reshape novardis into the Pure Play medicine company. Uh, we are today, so, very grateful and very indebted to Harry for all of his amazing contributions. Uh, he will retire and step down from the ecn effective, March 15th, 2026, and a warm. Welcome to mukul ma, uh, who will join us as our new CFO. I enjoyed the ecn effective March 16th, 2026. Mukul joined Novartis in 2020, 2003. He has done all of the keys, uh, Financial roles across the company, uh, and after a rigorous election process was clearly, uh, the best leader. Uh, we believed to lead Novartis into this next chapter. So, a big warm welcome as well to mukul.
Speaker Change: So with that, uh, I think we can open the line to questions.
Thank you to ask a question. You will need to press star 1 and 1 on your telephone and wait for your name to be announced. Please leave it at yourself to 1 question and return to the queue for any follow-ups to withdraw your question. Please press star 1 and 1 again.
You will now take the first question.
Speaker Change: And your first question comes from the line of satin Jane from Bank of America. Please go ahead.
Speaker Change: Hi there. Thank you. My question is, first 1. Just on show is actually. If I met van, thanks for confirming no data in house, or you can just update on your level of confidence into a face. You dated to 3 q and can you just clarify whether you need both studies to be positive for a filing? Um, uh process. Thank you.
Speaker Change: On shogun's. Look, I think it, you know, this is an incredibly exciting opportunity, but I think we should acknowledge that there's been no drug that's ever been demonstrating a benefit on a statistically significant benefit on the SI. So I think we go in with a very strong Phase 2 Data, We Believe very much in the mechanism but also acknowledging, this is a tough indication. Uh, and so it definitely has risk going into the phase 3. And now in terms of whether or not, um, you both studies, I think that really depends on the data. We've had very robust discussions with FDA, both on the primary endpoint and secondary end points where we have full full agreement. So I think based on the data on the 2 studies we'll and of course given that 1 Study has a third dose level uh, that are dosing that's every 3 months versus every month. I think we'll have the opportunity to look at different statistical approaches and then find the best path uh, forward. So we're looking forward uh, to getting to the database locks uh, and then ultimately the readout.
And then given that, these studies are are very close together. We would plan on informing uh, the markets based on the results of both studies at the same time.
Speaker Change: Thank you. Next question, operator.
Thank you. Your next question comes from the line of Shirley 10 from Barclays. Please go ahead.
Speaker Change: Hi. Thank you for taking my question. So, 1 on of Cosmetics. So you called out a Slowdown in cosmetics up the uptake in China, you know, due to broader space Healthcare spending tightening. So can you please share more about how significant this impact is, you know, relative to your assumptions and whether you know it is affecting broader portfolio and how are you adapting your China strategies to maintain growth in the face of increasingly constrained, government pricing. And also something interesting that you mentioned uh on um like the lack of growth from out of pocket in China. Do you think it would be the case for your other products? Um, for the commercialization in China, I thank you so much.
Speaker Change: Yeah, thank you Shirley. Um, so for for China, broadly, we we have seen over the first 6 months of this year a notable slow down. Our China business last year was growing over uh 20% and we saw a very robust overall market growth as well. This year we have seen a broad at least on to the data. We're seeing sector wide slow down uh in pharmaceutical spending uh and we see our our growth coming down as well. Now we continue to expect to see China grow for Novartis uh, in the high single digit to low, teens range. So still very
Very robust uh growth. Uh but we do see this though as a, I think a reset in the market because a number of the policies that have been put in place to limit for prescription spending. I think will you know continue on for the years to come so we continue to see China as a double digit growth market for Novartis, but maybe not at the 20% plus range where we've been uh, historically. Uh, so this is impacting, the portfolio. Broadly primarily medicines that are part of the nrd listing. Uh, as you noted, not medicines that are private markets, um, and particularly medicines that are higher volume medicines. We saw the impact primarily consent 6, and Trust. So drugs, like lucentis, uh, these were the medicines where we saw the largest impact through the first 6 months of the year. We expect this to stabilize and the second half, and then now off of this base, we'll continue to as I noted to see our business grow, uh, in that high single digit to low teens plus, uh, plus range. Now, in terms of, and this is fully factored into our midterm guidance long,
Speaker Change: Long, long term guidance. So no shifts in in guidance because of this with respect to China now uh in terms of lexio out of pocket, it has been, I think a pleasant surprise to see uh how strong that uptake uh has been. And I think it does give us confidence that in the future. When we launched a medicines of a similar profile, we can go out of pocket and then make a decision, whether it makes sense to move into the nrd listing at a lower price versus continuing in the out of pocket. I think that's an ongoing debate for us right now. As to what
Speaker Change: When we'll move lexio into the NRL listing, but I think seeing that out of pocket Market uh materialized in China, I think is also positive overall overall for the sector.
Speaker Change: Next question, operator.
Speaker Change: Thank you. Your next question comes from the line of Peter Fidel from BNP pariba, please go ahead.
Speaker Change: Ms. HHS your people in the, on the hill about, you know, what the administration is thinking about? In terms of framework implementation, or when we might hear, what they plan to do, going forward on drug pricing in the US, thanks.
Speaker Change: Yeah, thanks Peter and not at all. Happy to have these uh, have that discussion because it keeps evolving on an ongoing basis. I would say, broadly speaking uh, that the the conversations with the administration from the novardis standpoint have been productive, very open dialogue, trying to find Solutions. Uh, and the goal is very much to to see how can we have the markets outside of the US in the oecd, uh, pay more for Innovative medicines, which we fully support to really reward Innovation and pay help support. Uh, the R&D, uh, efforts of the industry. Um, as well as get patients in the US options for, uh, lower priced medicines in our view, primarily through going more direct and cutting out. Uh, many much of the 50% to 60% that goes, to pbms 340b. All of the other elements, uh, in the system. Uh, and so, that's where we're trying to find the solution space.
Speaker Change: We're moving forward with proposals. HHS is also evaluating our proposals and we're looking at the different options. So I think it'll still be sometime before we get to uh, you know, full resolution. But I I'd say there's a strong desire within the administration to maintain us leadership in biofarma suitical, Innovation. And not see that leadership to China or any other markets. I think that's very much high in their minds to ensure they get the balance. Right. And I think that's what we're um continuing um, continuing to work towards. I think we also have to do a better job. Educating more broadly about the fact that in the US, while there is a disparity in Innovative medicine. Spend overall, given the 94% of volume in the US is estimated to be generic medicines in the US, has the lowest generic prices among the major oecd countries in the world that actually the US total drug bill or when it's uh appropriately volume adjusted.
Uh, is actually lower than many of these countries overseas. Most of the countries in the oecd. So we just have to keep educating about these these dynamics that the US system. Works extremely well. It rewards Innovation during the patent period, but then it's extremely effective at generic medicines as well. And I think that's something we need to do a better job of and educating policy makers.
Speaker Change: So, uh, yeah. Thank you very much for the question. Next question, operator. Thank you.
Speaker Change: Thank you. Your next question comes from the line of Simon Baker from Rothschild and Company Redbarn. Please go ahead.
Thank you for taking my question, 1 on, uh, cosentyx. Uh, please just wondering if you could flesh out a few, uh, elements. Uh, from the the slide firstly. Can you give us any more color on the price volume Dynamic, uh, so far this year and and also why, um, if you could elaborate a bit more on the, your comments on the competitive environment and why you see that as a temporary Factor rather than an ongoing, uh headwind. Thanks so much.
Yeah, so I'll give the price volume Dynamics to Harry Harry.
Harry: Yeah. Overall um of course in cosentyx uh we do have you know an impact as we out laid out uh due to the Medicare Part D redesign. So rebates go up as we contribute and the catastrophic phase where the sobriety design where we didn't do that, you know the the 2 Brands where you see is Major mainly in our portfolios, Co Centex and costly cuz Carly the large completely um kind of over uh, over waste that. But because endings that it has some impact also um,
Harry: Of course, there's also then the effect that last year. The HS launch really, uh, got momentum as of quarter 2. So the comparable base is quite High
Speaker Change: Thanks area. And then, in terms of the competitive entry, I think Simon the way we see it as often, and we've experienced this many times, over the last decade with Kent, is that when a new competitor enters, there is an initial impact. And then the market settles down into the new, a new Dynamic. I mean,
Speaker Change: when you look at a consent is very strong Frontline access across all of the relevant and indications including HS, the opportunity we see is
Speaker Change: Increased in effect increased dosing of cosines to achieve Disease Control. I think, as we do that, we'll be able to moderate some of the switches off of cosmetics. And then second, we continue to see the opportunity where we have very strong performance in that first switch off of the anti-tnf and there as well. I think we're going to continue to work to do better and that will become. I think a solid source of growth for Centric in HS taken together. We continue to see HS as a 3 billion plus market and Co Centex as a brand that can deliver a billion dollars of sales in HS, which gives us confidence overall uh in our 8 billion dollar guidance.
Speaker Change: Details guidance.
Speaker Change: Great. Thanks so much.
Next question.
Richard Foster: Thank you. Your next question comes from the line of Richard Foster from JP Morgan. Please go ahead.
Speaker Change: Hi. Thanks for taking my question, just 1 more on coent just as we look out with that. I think mid single digit growth that you implied to 29. How should we think about? Um, uh, direct negotiation towards the end of that period is, do you think cosentyx will will get, uh, uh, hit by that in terms of, um, the IRA or, or should we, uh, not be expecting that. Thanks very much.
Yeah. Thanks, Richard. We we, factored Ira into all of our our, our guidance. So that'd be the first point. I think to Centex overall, we estimate to be about 30% of our sales are exposed, uh, to to Medicare pricing. So certainly there will be, uh, an impact. But overall we think, you know, can be managed managed appropriately and that that is factored in as well, you know, into the guidance, uh, we have, I think overall, so with Ira, I think it was a net positive. That the, uh, orphan cures Act was was enacted as part of the recent reconciliation package, which enables medicines to have multiple rare diseases, uh, as part of, uh, without having to, to give up its the, the medicine's exclusion from the IRA negotiation, uh, price setting. So I think that's, that's a positive overall as well for the sector, but all all factored in. And at 30% we think manageable
Excellent. Thanks.
Speaker Change: Next question. Thank you. Your next question comes from the line of Michael Lyon from Jeffrey's please go ahead.
Michael Lyon: Oh, thank you very much. Um,
about that please. Um, it looks like the apologies Michael. We cannot really hear you. Your audio is really bad.
Okay, I shall try again, thank you. Um, question. Um, it looks like the Ian as well to see 3G performance is quite well, you've got Ziggy Bart coming, but the way you frame the product and the opportunity still seems a little bit conservative or was just wondering, uh, what are you looking for to maybe become a bit more optimistic about the performance of the overall franchise?
Michael Lyon: Back up to be, uh, you know, a billion billion and and get us over to, you know, our Peak sales guidance for this for this medicine overall. So, I think there's uh, clearly the opportunity in ien where we've positioned the medicine with the higher pricing, that we've set just to get Physicians, more and more comfortable, um, with using it in that later line, setting c3g, I think as well, good opportunity pnh, we're seeing continued to update, um, as well. So, I think we're very optimistic overall in the brand, so the intention was not to to show a lot of optimism, the more, I think that this will be a steady climb, I don't think we're going to see a rapid inflection. It's going to take time as we build out. I again, as we build out c3g in P&H, as we work through the various vaccination requirements. I mean, every 1 of these things will have to be worked through and then step by step, as we add more and more indications, uh, we think we'll get to that, um, significant Peak sales that we've guided to,
Thank you.
Thank you.
Speaker Change: Your next question comes from the line of Emmanuel. Papadakis from Deutsche Bank, please go ahead.
Speaker Change: Thank you for taking the question. Um,
perhaps, I'll take a question from remma bnib if I may uh intriguing to hear about the positive Phase 2 and food energy box, you could just give us an indication of how that compares to
Speaker Change: the zolad agent setting and perhaps your willingness to go ahead and phase 3 to round out the profile.
And then maybe just a reminder on your expectations, the speed of commercial CSU launch assuming approval later this year, we'll also be helpful. Thank you.
Speaker Change: Festival in food allergy, but I think having an oral therapy, very strong safety clean, safety profile. Uh, and when we looked at the, you know, comparable, Cross travel comparisons we saw. I think pretty compelling overall profile. So we feel we feel pretty good about that. Um, I think the opportunity will will clearly depend on how broad an indication. Um, you know, we can ultimately get and then over time as well, moving into the Adolescent more pediatric range with with Remy bruden. Um, but yeah, I think, I think overall favorably positioned in terms of head-to-head studies Brazil, all under under evaluation. I mean, we got these results just a few weeks ago. So, I think we're currently evaluating, what is the optimal? Um, third phase 3, but also phase 3 B. Any additional studies will need to do to ensure Remi group Rudin is appropriately positioned versus, um, versus biologics. Now, in terms of CSU, you know, we're quite excited. Um, we think there's a significant opportunity here, you know, when you look at
Speaker Change: Ruden's profile having a drug that, you know, is able to uh, work after 2 weeks and then have this consistent, uh, ability over 52 weeks to manage the, the symptoms of rhotic carry a, a CSU. Uh, I think is very compelling and so we expect both in the US and X us, that they're to be, uh, strong patient and physician, uh, demand. Uh, so we'll see how the first months go, but I think it could be, hopefully, an attractive uptake in the early months.
Speaker Change: Uh, I'd also not. I mean, we're we're doing a head-to-head versus dupilumab to really show that, you know, in the ear that early period, where patient patients want resolution that we can demonstrate uh, a stronger profile than a biologic. Uh, that will also I think it'd be important data that we'll get out there as well. So we're investing heavily to make Remy brood as significant as possible. CSU xindu food allergy, we have the HS study ongoing. We have the 2 Ms, studies ongoing. So we'll try to maximize this medicine over the coming years.
Speaker Change: Thank you. Next question.
Thank you. Come on. Next question. Comes from the line of Harry. Cept from UBS. Please go ahead.
Speaker Change: Thank you very much. Uh, just wanted to follow up on mfn. So how does the industry go about? Getting X us countries to pay significantly more. And presumably this wouldn't be on current products but only uh, new product launches. So, in this case, would the consequences of of this be fewer. New product, launches in markets that don't accept your price. Thank you.
Yeah, I think it's uh all good questions and I don't think there's a single easy answer. What I would say is in the medium to long term. There's a few things that the industry strongly advocating for particularly, with respect to trade negotiations, I think with the trade negotiations we feel strongly that, um, that when you look at the, the percent of, uh, in spend on Innovative medicines relative, uh, to to GDP. You see that, you know, the US is significantly higher than most of these oecd markets. So 1 can we get a commitment from these key markets to increase their funding for Innovative medicines as part of their overall government budget? And if we could get that into trade negotiations, that would at least set the bench that the actual, uh, pool of money available up. Then, I think separate from that, there's a few specific policy changes that we continue to advocate.
Speaker Change: As far as part of the trade negotiation, but also independent of the trade negotiations, 1 is to end the practice of clawbacks for above sector growth or or above Benchmark. Growth many European countries. When the sector grows faster than a, a artificially sets growth cap. Uh the growth has to get reimbursed back the practice that when you have new indications which you've invested for, um, that uh benefit more patients that you face a price.
Speaker Change: Are created and set.
Speaker Change: Um, next question.
Thank you.
Speaker Change: Your next question comes from the line of James quickly. From Goldman Sachs. Please go ahead.
James Quickly: Great, thank you very much questions. Uh, firstly, congrats, how are you on the retirement and all the best for the future? Um, I've got a question on Pictou. So obviously you've you've highlighted some encouraging metrics following the the Pearson psma, 4, uh launched. But how are you thinking about using earlier lines? Know, you have um, psma Edition. Um patients tend to be typically a bit younger here and a few carols. We've spoken to have suggested that they may think twice about radio Ligon therapy, due to potential impacts on continents and sexual function. Um, is this consistent with what you may be hearing or could this be more of a, a minority View and are there any differences in sort of geographic launch You're Expecting in the earlier lines? So maybe you know, less worries in the US versus X us and then related to that. How does the uh how how could the actinium psma fit into? Which we should just move into phase 3, how can that fit into them the markets um as you position towards earlier lines as well? Thank you.
James Quickly: Yeah, thanks James. When when we so we haven't heard that that feedback is included. The safety profile is quite compelling, I think with respect to the sexual function and and chemical castration. I mean that really is a consequence of some of the other hormonal therapies that these patients are on. So, I think the question could become, could we get to a point where we get early enough, where you don't have, um, that in
Speaker Change: Act on on patients. But Pictou, itself. Primary topics are are generally speaking salivary glands, uh, and and bone marrow, uh, and so some of the hematologic side effects. Um, and so I think we feel pretty confident overall. In fact, what we usually hear is that people are struck by how well tolerated pluvicto is, uh, in in various patient populations and I do think, as we move earlier, our lines there is more more competition. So there will be, I think different ways. That flew victim might end up being used, but we expected with the compelling rpfs data and as the OS data, hopefully matures in the right direction. We'd have a very compelling case for a significant use, um, in HSBC where it's used on top of standard of care. Uh, and then, of course, in the pre, uh, pre pre chemo and post chemo settings in a crpc. Um, so I think, uh, overall, I think we feel pretty confident, that fichte will continue on the peak sales, guidance, that, that we
Speaker Change: We've laid out. I uh now xus. I think it's the the topic in in xus is a little bit different. You you asked xus xus, really comes down to the comparator choice. We've designed these studies very much with the us in mind, depending on the geography or country in question. Um, there there is sometimes a request for different comparators and then we have to decide. Is it worth doing those additional studies or not? Certainly in the vision population. We've already launched. Um,
Speaker Change: In multiple European markets and preparing to launch in Asia. We think with the psma edition trial design, we have a very compelling case to have that launched probably the 1 where there's a little bit more. Geographic. Variability is is a psma Force study. Uh, now in terms of the actinium, the current plan is to move that in the post pluvicto setting. So for patients, who are progressing on, uh, pluvicto, uh, then switch from a beta emitter to an alpha emitter actinium to see if we can, uh, obtain control or or achieve control, uh, of the cancer. And then there is the question as well. If safety profile is compelling. Could we go even earlier with an actinium based psma? I mean, I think that is still an open question as to would Lut given the long history we have now both with Ludo, the and fluido that we have a very compelling safety, profile, and safety understanding. I think with actinium still a lot to learn figuring out, you know, what is the
Speaker Change: Dose interval, what is the appropriate dose in different patient, populations? Uh, it is as an alpha emitter can be stronger um on on certain tissues. So those are all things. We're we're working through but we have multiple psma actinium in house and we're working through. What's the right? Uh, right approach. But the phase 3 you see right now is in post poo, victo patients. Uh in the the crpc I could see if we move it earlier uh in in subsequent trials.
Speaker Change: Next question, operator.
Thank you. Your next question comes from the line of Carrie. Horford from Baron. Please go ahead.
Speaker Change: Understand why you're more conservative here going forward. Does this signal or growing appetite? Perhaps, for more business development?
Speaker Change: Over that time frame or any other expected demands.
Speaker Change: That will change on your future cash flow. Thank you.
Speaker Change: Thanks Gary. Harry. Yes. Thank you Carrie. So so first of all, we are absolutely uh, convinced of our 5-year plan 5% uh, sales kegger, right. And with that continued core operating income and free cash flow growth.
So uh clearly strong cash flow last year, 16 billion this year already 10 billion, the first half to continued, very good. Cash flow growth. Now 10 billion smaller than 15 billion. We call the last 2 15 billion programs. We basically also started after we sold our roast steak at a very high price and got like 21, 22 billion for it with a 14 billion profit at the time. And then, of course, was then also the element of that. So I would say we almost kind of returning back to the prior 10 billion share buyback Rhythm we had. And also we want to have a balance here, right? We we continue to look, um, of course, after bolt ons, uh,
Speaker Change: It's not for lack of trying or any risk aversion is we would like to find more bold on m&a opportunities, to continue to further, strengthen our pipelines. But we strongly feel that a 10 billion over 2 and a half years is a nice balance versus also BD and L and m&a. And from that standpoint, the field is a good element of continued balance Capital location.
Speaker Change: Thanks Terry. Next question.
Terry: Thank you.
Speaker Change: Your next question comes from the line of TBA. Bothering from Morgan Stanley. Please go ahead.
Speaker Change: Thank you. Um, just a a question on why TB? And the immune reset opportunity. So clearly strong, um, early, uh, early results. I noted that you are calling the phase 2 reading out from 27 as pivotal. So if you could, um, replicate similar results in that study, are you confident you can file from 27?
And then if you could just sort of frame a bit, the opportunity, should we think about this as uh for highly referred to patients so more like a niche market and would you have to wait for next uh Next Generation uh your like you mentioned by specific or could we already see a big opportunity with with the first generation Cassie?
Speaker Change: Yeah, great question. So, um, right now, our assumption is in the 4 P studies. That with, uh, highly positive data in 2027, we, we could file. Yes, we could file based on that data. We would still have to do randomized phase 3 studies, uh, likely, as well, uh, as follow-ups. But, uh, our expectation is that we could replicate this level of results, we would be able to file off of off of that data. Um, so does create the potential, the data depend data dependent and data driven for launches, uh, in in the 2028, uh, time period, uh, in terms of the market size, we're continuing to starting now, to really do more detailed work to figure out what proportion of of patients would be willing to undergo the procedures needed for card primarily. Uh, the, the bone marrow ablation to create space, uh, for the engraftment of the, of the car car sells. Um, and so I think it's it's early days.
Speaker Change: You know, our hope is that this though very much is a multi-billion dollar opportunity that across these indications, we create a multi-billion dollar brand and that clearly if we're able to manage the side effect profile and make it more accessible to a broader group of those refractory patients could be even larger than that. Uh that's certainly the aspiration and why we go. So broadly I mean I think it's important to know these are a group of patients that are no longer able to have any additional options.
Speaker Change: Or few additional options, they're generally have relatively severe outcomes and and you're seeing, you know, almost the disease, if not completely reset turned back decades by this kind of therapy. So, it's really a remarkable result. So, we'll, we'll get a get a better understanding of the demand. But I would say it's a multi-billion dollar opportunity with the potential to be more based on how we how we see the phase 3 results or Phase 2 results play out.
Speaker Change: Next question, thank you.
Speaker Change: From TD Cowen, please go ahead.
Speaker Change: Hi, thanks for taking my question. I have a question on the cardiovascular pipeline, at the meat management event late, last year, Novartis expressed the ambition to have multiple arrhythmia Assets in the clinic by 2025, and I'm just curious. If you could give us an update on that effort, thanks.
Speaker Change: Yeah, great question. So we are progressing now. Um, we are, hopefully, we'll soon have the okay on an IND to move now into the clinic on a novel agent, uh, for, uh, control of of aib with a. So that would then enable us hopefully. For a first patient first, visit this year. Uh, and then we would hopefully have 1 or 2, additional agents. May not make it this year, maybe early next year. But the goal very much is to have a portfolio of Agents targeting uh aib. And then potentially as well ventricular. Uh arrhythmias. We've also signed a, a few licensing agreements for pre-clinical stage assets which are also now, uh, advancing their there was an HVAC. Um, and so we're, we're looking at that to accelerate those as well. So we see this as an area where we have unique expertise, uh, probably 1 of the few companies still going after uh can uh addressing cardiac arrhythmias. And obviously if successful Market size is
Is here are quite large. Uh, and the opportunity to use a medicine versus uh using uh, the device-based cardio version is quite quite uh compelling for patients.
Speaker Change: Thank you. Next question, operator. Thank you. Your next question comes from the line of Florence as Peres from Bernstein. Please go ahead.
Speaker Change: Good afternoon. Thank you very much for taking my question. A quick 1 on Andres to please. Um, could you maybe remind us? What is the next step for the us? If the generics, um, generic reached the market, when do you expect the appeal called the decision and could you remind us, when is the next, uh, patent expiry and also your view on on Ira. Thank you.
Speaker Change: Yeah. All right. So there's many, there's 3 cases, uh, ongoing. Um, so we have, uh, the, uh, current uh, amorphous complex case where we have a temporary preliminary injunction. Uh we're fully briefing. The court. Uh and uh we very much are over the view that that should be. That primarily injunction should be upheld. And then we would have an appeals case where we would continue to defend the amorphous complex pattern, we have ongoing litigation on, um, the fda's, uh, label carveout. And whether that label carveout, uh, is appropriate. Uh, and so that appeal uh, is ongoing as well.
Speaker Change: Well uh we have the trade dress uh, topic as well. Uh where we continue to look at our options, uh, on on the trade dress. Uh, and this is all with respect to 1. Uh, generic file filer, given that all of the other generic followers have settled with us. And so, that's where we stand. Very difficult for me to comment on timelines. I think at this point, we'll, we will see. And if there's a material update, uh, we will update you, uh, accordingly, uh, I think um, on the IRA topic we continue to expect and Trust oh to to face uh the as plan Ira in 2026. Um, we can say that the IRA pricing is in line with our current net pricing overall. So from a pricing standpoint, if if we were able to maintain entrust into 2026 um given all the legal proceedings, our net pricing would continue to be in the range of where we are.
This year. So that the upside that Harry outline would continue for every month that entrust those on the market, independent of um the the IRA broadly speaking, uh, with some nuances of course.
Harry anything you'd want to add?
Speaker Change: No, I was uh perfectly correct. Thank you very much.
Speaker Change: Perfect. Thank you. Thank you very much.
Speaker Change: Thank you.
Speaker Change: Your next question comes from the line of Sheamus. Fernandez from Guggenheim, please go ahead.
so,
Targeted Therapies in HS specifically. Thanks so much.
Speaker Change: Yeah, thanks Jamie. So you know while we we continue to pursue Remy bruden uh NHS and I know we didn't see the compelling results. We had expected. The reason we had thought that there could be an opportunities. We do see a bath uh upregulation in HS patients uh in HS lesions so we thought there could be an opportunity there but it's important to know that um we did not have Phase 2 Data or or proof of concept data per se that really supported that it was more a hypothesis. And so it doesn't really shift our our conviction on shogun's disease on lupus nephritis on sle or on the multiple ITP indications uh and autoimmune hemolytic, anemia indications that we have ongoing. So we continue to see those as uh, all B cell driven diseases, uh, and where we think that tissue resident B cells, which is particularly where inlab targeting uh anti an anti bath um, monicon lab antibody would be
Speaker Change: Um, effective. Now to your question more, broadly, certainly we're we're learning a lot between Remy, bruten as an oral BTK antibiotic with Anila mad, our program on immune reset with ycb are emerging programs on by specifics, uh, on truly trying to get to the next generation of B, cell management, and B cell control, clearly anti-cd20 is a
Speaker Change: Have set the foundation here. But the operation opportunity here is, as we get smarter about all of the D cell. Lineages and understanding which lineages? We want to affect in different diseases. We have the opportunity obviously to have better and better um Disease Control. So we definitely do uh learn a lot. We run many of these programs as basket studies to try to get as much information and data as possible. And as I said I think we'll learn a lot uh in the coming years between inlab, the Remy brute program and the ytb program and that hopefully will then inform and the next generation of medicines. Once we get those medicines through pivotal studies,
Jamis: Thanks Jamis. Next question.
Thank you. Your next question comes from the line of rajas, Kumar from HSBC, please go ahead.
Rajas Kumar: Hi there. Thanks for taking my question. Um,
Rajas Kumar: Just in terms of capital allocation uh uh appreciate that uh you know you're doing a, you know, share bye back at the moment. Um, how how much during the same period would you allocate for m&a?
Rajas Kumar: and uh, just thinking through the current
Rajas Kumar: You know, valuations.
Rajas Kumar: Clearly there, there would be assets which are complimentary to your portfolio.
Rajas Kumar: Which might be available at more attractive valuation right now.
Rajas Kumar: So, can you run us through the rationale of prioritizing? A share buyback increase over Capital allocation towards m&a at this Junction?
Rajas Kumar: Thanks for the question. Regards Harry.
Rajas Kumar: Yeah, thank you gajesh. Um, we are not prioritizing share BuyBacks over over a bold and m&a. It's a, we are constantly and our build. Our team is uh, we have an excellent BDL 11, a team that has done over 30 deals over the last 30, uh, 2 years. Uh, we also happy to look at the big bigger bold ones, if they're available have great assets. So look, we have 16 plus billion, free, cash flow growing clearly as we go forward. And, um, with the dividend level we have we we have only 1 time, um, net debt. Over a, they are our balance sheet has significant flexibility and if you call it so Firepower,
So, if we find attractive asset as an attractive price, that is creating a likely, very good return for a shareholders. We will try to get that asset. So it's not for lack of trying. So we are not prioritizing share BuyBacks over bold on m&a at all, it is about
Rajas Kumar: How much can we find in terms of excellent assets that would support our 4 toss?
Terry: Thanks Terry. Understood.
Speaker Change: Thank you as a reminder, if you would like to ask a question, please press star 1 and 1 on your telephone and wait for your name to be announced. Please limit yourselves to 1, question and return to the queue for any follow-ups.
Terry: We will now take the next question.
Simon Baker: And the question comes from Simon Baker Roth Sheldon Company. Please go ahead.
Simon Baker: Thank you for taking my second question. Um, vas. I just wanted to return to a comment you made about um uh pricing uh, outside the US and moves to uh, stop claw back. Um, there seems to be quite a lot of activity from your peers with respect to that in the UK at the moment, either directly or indirectly, uh, to reform vag. I just wonder if you could give us an update on, uh, on what what you've been, uh, participating in and learning about potential changes in the UK. Thanks so much.
Simon Baker: Yeah, I think so and there's been I think active engagement, uh, and we've, I think appreciate the, the UK government. Now actively looking at, um, vag, which is the, the system they have in their, in the UK, to cap the pharmaceutical market growth. And then basically, uh, ask the industry to rebate back or refund back. Uh, certain levels of growth, I'll be on certain levels of growth. Um, and I think they've been productive engagements and discussions. I think we're still trying to work through an agreement that we think actually achieves. The the UK's goal of building a vibrant. Bio pharmaceutical sector uh which is a stated goal of the government at the moment. As you know, uh, it's a very challenging environment with, uh, with nice, uh, and the overall reimbursement environment in the UK, where I actually the reimbursement levels are, you know, almost at the level of middle income countries and uptake is quite slow. So our goal very much as an industry is to get to a
A much better place. I think that's also the government's goal. And the question is, can we find Common Ground? Uh, and, and in these discussions and so that's, that's an ongoing process that, yes, I think many of us are involved in or, or trying to shape
Simon Baker: great. Thank you.
Simon Baker: Thank you.
Your next question comes from Harry sephton from UBS. Please go ahead.
Harry Sephton: Brilliant. Thank you very much for taking my second question. Just 1 moment please. So we saw an acceleration in growth in the second quarter over the first quarter. But presumably, psma, 4 didn't really pick up meaningfully until the end of the quarter. So just want to get your, your thoughts on the expectation for further acceleration in the third quarter and then maybe just also on the, the average doses for Pictou, I think to date we've seen that being about 4. Uh, do you expect any difference in the earlier setting? Thank you.
Yeah, absolutely. So hairy, I think you're right. That we saw the primary impact of psma 4. I think in the last 4 to 6 weeks of quarter 2, when patients post the approval, I had gone through the necessary, pre-treatment procedures to be able to ultimately get the treatment. Uh, so I I think we'll hopefully see a continued acceleration now, over the second half of the year. Um, so, you know, we, you know, I think we would see steady, steady growth, steady acceleration. I don't expect to see necessarily a quote unquote hockey.
Harry Sephton: Thick but I think it'll be steady acceleration over the second half um a second half of the Year particularly as we get deeper into the community and get more and more of those community centers to move from a few patients than to uh, hopefully, you know, multiple patients and then hopefully, teens of patients on on therapy in their clinics. Uh, in terms of the average dosing level, you're correct that in the vision setting, we were historically in the kind of 3.7 to 3.9 range somewhere at something like that. Versus a 6 doses that are estimated its very early days but we do see a positive trend up on the number of doses per patient, but I think we're going to have to have a couple more quarters. But we would expect that in earlier settings where patients tend to live longer. They tend to be healthier and may not progress as quickly that we hopefully will get closer and closer to the, the, the, um,
Stated labeled dosing of 6 Doses. And that's certainly the, the aspiration. And then hopefully in hspc, we can certainly get there, uh, given, uh, the health of those patients, I think 1 of the other notable things as well, is that, uh, in terms of the efficacy that we're seeing clearly going earlier, uh, you also see a, a more robust effect likely because you see a better more consistent psma expression and perhaps, uh, fewer cells that have mutated away from psma expression. And so, you see that
Harry Sephton: I think the the robust advocacy we're seeing in PSN before, and then that Topline data on psma, psma Edition,
Speaker Change: Brilliant, thank you.
Harry Sephton: Thank you.
Speaker Change: Your next question comes from the line of Carrie Holford from Barber. Please go ahead.
Speaker Change: In the context of us, politics.
Speaker Change: You mentioned a desire to look at more options.
To go direct to patients and I wonder if you can just be more explicit on what you're referring to here. Could this be something similar to that sort of DTC strategy that we see in place it's Nova and Lily in the Obesity Market?
Speaker Change: And if that's what you're thinking, which of your drugs, would you see as best suited to that channel?
Speaker Change: Thank you.
Speaker Change: Yes, thanks Carrie. I I think the yes, that's correct. I think the idea would be, are there ways we could give patients access to our medicines at uh, the what is an effect, the net price. Uh, in a way that does not disrupt the overall complexities of the US pricing system. So it's, it's definitely something you have to be thoughtful about. Uh, but certainly depending on our products, you know, depending on the product line, you know, you have gross to Nets anywhere from 50 to 70%. And so giving those discounts direct to the patient as opposed to through the various intermediaries would be a very, you know, attractive option. But you know we're we're in the early days of evaluating. As you note, it's very product specific. Uh, and we also have to evaluate the knock-on effects on best price and some of the the impacts on on other parts of the system, so we're evaluating it. Uh, and clearly, I think uh, I think overall in the sector there's certainly I think an evaluation as well.
Speaker Change: To see if there's any approaches that we could work with HHS uh, to to come up with. But that's certainly the idea we're moving towards, that's correct.
Next question. Last question. Last question, thank you.
Your final question for today comes from the line of Saturn Jane from Bank of America. Please go ahead.
Saturn Jane: All right, thanks man. My phone was another 1 on a US policy from a VAV.
So within the, the answer to the priority questions, nothing that you described as the vast solution, involves a price cut as I understand it with the US portfolio. So just confirming that's correct because HHS cultural that the reason is the question obviously, is the public comment which is Administration has been very vote around the industry coming to the table with the price solution. So I just wanted to confirm that was correct and then the second 1 was um, you said it could take time, obviously. It's an unknown and what's your best. Guess as to when this could get resolved, is it in 25 or could this bleed into 26? Thank you.
Yeah so I I think on on the solutions I mean I think again and because of the the Nuance here between list price and and net price, you know I think our goal get to our option for patients which would perhaps be a a quote unquote cut to what the patient is paying but we're very focused on out of pocket costs and improving the the realized price for for patients and figuring out how to how to reduce that because as you know, moving list prices around.
In the US system may not mean anything for a likely, won't mean anything for for patients. So, um, I, I think that and that's, I think a lot of the discussions we're having in a very productive way with HHS is, how can we reduce the burden, um, for patients out of pocket? Uh, and and that's that's where all of our activity has been overall. Now, I think in terms of resolution, it's very difficult.
Saturn Jane: Very difficult to say, um, I I, I really have no, no idea. I mean, I think there's multiple efforts ongoing, uh, using different approaches that I think HHS is thinking through, and we're trying to support as as best we can, but impossible to say when exactly. Because clearly doing any of these things requires significant shifts, in rulemaking, in in, in some of the knock-on effects across the system, not, not at all straightforward to do, you know, overnight. So, would require policy changes at HHS, would likely have to make as well? And until the, the plan is clarified, I think even that process can't get started. So I think, um, I think it's going to take time. We might, we might have the beginnings of what we would want to do in the coming quarters, but then actually implementing it and then rolling it out. We'll take certainly, I believe we'll take time.
Thank you.
Very good. Well, thanks everybody for joining today's call. I look forward to updating you then uh in quarter 3 or when we run into each other at various other conferences meetings Etc. Thank you again.
Saturn Jane: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect