Q2 2026 Sandoz Group AG Earnings Call

August 5, 2026

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Craig Marks: You're great.

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Speaker #2: I'm with that. Can I hand over to Richard? Please turn to slide 4.

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Craig Marks: I will now hand over to Richard. Please turn to slide four.

Speaker #3: Thank you, Craig. And hello, everybody. It's a pleasure to welcome you all on the call today. Before we turn to our H1 performance, I'd like to take a moment to reflect on the growth of Sandoz.

Richard Saynor: Thank you, Craig, and hello, everybody. It's a pleasure to welcome you all on the call today. Before we turn to our H1 performance, I'd like to take a moment to reflect on the growth of Sandoz. Over recent months, we've continued to strengthen our position as the global leader in affordable medicines, and as an increasingly important voice in healthcare policy and medicine security. Alongside the three anniversaries shown on the slide, we are also approaching another important milestone. We are delighted that Sandoz will join the Blue Chip Swiss Market Index in September, less than three years after becoming an independent company. This is a strong recognition of our execution, our colleagues, and our growing relevance in capital markets and investor confidence in our long-term growth prospects. Please turn to slide five. Now, let's look at our performance in the H1.

Speaker #3: Over recent months, we've continued to strengthen our position as the global leader in affordable medicines, and as an increasingly important voice in healthcare policy and medicine security.

Speaker #3: Alongside the three-year anniversary shown on the slide, we're also approaching another important milestone. We are delighted that Sandoz will join the blue chip Swiss Market Index in September.

Speaker #3: Less than three years after becoming an independent company, this is a strong recognition of our execution, our colleagues, and our growing relevance in capital markets, as well as investor confidence in our long-term growth prospects.

Speaker #3: Please turn to Slide 5. Now, let's look at our performance in the first half. We delivered a strong set of results, with excellent progress in our pipeline, business, and financials.

Richard Saynor: We delivered a strong set of results with excellent progress in our pipeline, business, and financials. We further strengthened our industry-leading biosimilar pipeline through the addition of four in-house assets, bringing our total biosimilar pipeline to up to 36 assets. We also achieved important regulatory milestones, including EU approval for our insulin biosimilars and US regulatory submission acceptance for our in-house generic tirzepatide. In addition, we received regulatory approval for a new semaglutide treatment option in Brazil, paving the way to expand patient access in this important market. From a business perspective, we continue to leverage our scale and competitive advantages. We moved up to become the number 2 biosimilar and generic company in North America. We opened our new state-of-the-art biosimilar development center in Ljubljana, and our climate targets were validated by the Science-Based Targets initiative.

Speaker #3: We further strengthened our industry-leading biosimilar pipeline through the addition of four in-house assets, bringing our total biosimilar pipeline to up to 36 assets. We also achieved important regulatory milestones, including EU approvals for our insulin biosimilars and US regulatory submission acceptance for our in-house generic to appetite.

Speaker #3: In addition, we received regulatory approval for a new semaglutide treatment option in Brazil, paving the way to expand patient access in this important market.

Speaker #3: From a business perspective, we continue to leverage our scale and competitive advantages. We moved up to become the number two biosimilar and generic company in North America.

Speaker #3: We opened our new, state-of-the-art biosimilar development center in Ljubljana, and our climate targets were validated by the Science Based Targets initiative. These achievements were matched by strong financial performance that was in line with our commitments.

Richard Saynor: These achievements were matched by a strong financial performance that was in line with our commitments. In H1, net sales increased by 5%, including 7% growth in Q2. Biosimilars reached a record 33% of net sales in the H1, while our core EBITDA margin expanded by 90 basis points to 20.9%. Management free cash flow remains strong at around $500 million, despite a significant uplift in CapEx. Based on our performance in H1 and our confidence in the outlook for the remainder of the year, we are confirming our 2026 guidance today. Taken together, this outlook and these achievements reflect the strength of our business model and our ability to translate execution into sustainable growth and value creation. Now, let's look at the sales performance in more detail, starting with slide six.

Speaker #3: In the first half, net sales increased by 5%, including 7% growth in Q2. Biosimilars reached a record 33% of net sales in the half, while our core EBITDA margin expanded by 90 basis points to 20.9%.

Speaker #3: Management free cash flow remained strong, at around $500 million, despite a significant uplift in capex. Based on our performance in the first half, and our confidence in the outlook for the remainder of the year, we are confirming our 2026 guidance today.

Speaker #3: Taken together, this outlook and these achievements reflect the strength of our business model and our ability to translate execution into sustainable growth and value creation.

Speaker #3: Now, let's look at the sales performance in more detail, starting with slide 6. H1 was another period of strong growth for Sandoz, with top-line momentum led by an outstanding biosimilars performance.

Richard Saynor: H1 was another period of strong growth for Sandoz, with top-line momentum led by an outstanding biosimilars performance. Indeed, biosimilars grew by 20% in H1, increasing to 22% in Q2. We continue to benefit from successful launches and excellent commercial execution across every region. Generics also gained momentum from Q1 into Q2. The modest decline in H1 was largely the result of temporary headwinds in Q1, including adverse dynamics in the anti-infectives B2B business. In Q2, low single-digit growth for generics was more in line with the long-term trend. Please turn to slide seven. While biosimilars are the key growth engine for our business, generics are a strong and essential foundation for sustainable growth, providing stability, access, scale, and reliable cash generation to support our long-term strategy.

Speaker #3: Indeed, biosimilars grew by 20% in the first half, increasing to 22% in Q2. We continue to benefit from successful launches and excellent commercial execution across every region.

Speaker #3: Generics are also gaining momentum from Q1 into Q2. The modest decline in the first half was largely a result of temporary headwinds in the first quarter.

Speaker #3: Including adverse dynamics in the anti-infectious B2B business. In Q2, low single-digit growth for generics was more in line with the long-term trend. Please turn to slide 7.

Speaker #3: While biosimilars are the key growth engine for our business, generics are a strong and essential foundation for sustainable growth, providing stability, access, scale, and reliable cash generation to support our long-term strategy.

Speaker #3: For the period 2027 to 2036, we have over 300 assets in the generics pipeline, targeting two-thirds of the loss of exclusivity opportunities by value.

Richard Saynor: For the period 2027 to 2036, we have over 300 assets in the generics pipeline, targeting two-thirds of the loss of exclusivity opportunities by value. Our portfolio strategy remains highly disciplined. We focus on the most attractive LOE opportunities, particularly in oral solids and injectables, where our scale, development capabilities, and commercial footprint provide meaningful competitive advantages. At the same time, we continue to convert our generics pipeline into commercial launches. Recent examples for Europe and the US are shown on this slide. We are also making important progress in GLP-1s. In Brazil, ANVISA recently approved Sandoz's first GLP-1 medicine, with the launch of semaglutide planned for later this year. This represents a historic milestone for us, establishing our presence in the GLP-1 market and providing access to one of the world's largest semaglutide markets.

Speaker #3: Our portfolio strategy remains highly disciplined. We focus on the most attractive LOE opportunities, particularly in oral solids and injectables, where our scale, development capabilities, and commercial footprint provide meaningful competitive advantages.

Speaker #3: At the same time, we continue to convert our generics pipeline into commercial launches. Recent examples for Europe and the US are shown on this slide.

Speaker #3: We are also making important progress in GLP-1s. In Brazil, Anvisa recently approved Sandoz's first GLP-1 medicine, with the launch of semaglutide planned for later this year.

Speaker #3: This represents a historic milestone for us, establishing our presence in the GLP-1 market and providing access to one of the world’s largest semaglutide markets.

Speaker #3: Together with our multi-source strategy, this strengthens our ability to participate in what we believe will be one of the most significant growth opportunities in healthcare over the coming years.

Richard Saynor: Together, with our multi-source strategy, this strengthens our ability to participate in what we believe will be one of the most significant growth opportunities in healthcare over the coming years. Now, let's turn to biosimilars on slide eight. Starting with Hyrimoz, we continue to hold leading positions. Alongside an expansion of biosimilar adoption, we have grown our global market share, and I was pleased to see Hyrimoz delivering double-digit net sales growth in H1. Turning to Pyzchiva, we have quickly established a leadership position in the European ustekinumab market. Today, Pyzchiva is the number one biosimilar across major European markets, with a 35% market share. It also grew double digits in H1. While short-term market dynamics in Germany have created some headwinds for Pyzchiva and biosimilar pricing more broadly, the underlying performance of our biosimilars clearly remains very strong. Please turn to slide nine.

Speaker #3: Now, let's turn to biosimilars on slide 8. Starting with Hyrimops, we continue to hold leading positions. Alongside an expansion of biosimilar adoption, we have grown our global market share, and I was pleased to see Hyrimops delivering double-digit net sales growth in the first half.

Speaker #3: Turning to PeaceJiva, we have quickly established a leadership position in the European biosimilar market. Today, PeaceJiva is the number one biosimilar across major European markets, with a 35% market share.

Speaker #3: It also grew double digits in the first half. While short-term market dynamics in Germany have created some headwinds for PeaceJiva, and biosimilar pricing more broadly, the underlying performance of our biosimilars clearly remains very strong.

Speaker #3: Please turn to slide 9. Let me now turn to Tairuko, an Omnitrope. We continue to make encouraging progress with Tairuko in the European natalizumab market, with market share increasing from 7% at launch to 17% today.

Richard Saynor: Let me now turn to Tyruko and Omnitrope. We continue to make encouraging progress with Tyruko in the European natalizumab market, with market share increasing from 7% at launch to 17% today. Importantly, that share has remained stable over the last few quarters. Looking ahead, we see potential upside from further adoption in Europe, a longer-term ramp-up in the US, and additional launches across Europe and international markets. 2026 marks the 20th anniversary of our first regulatory approval of Omnitrope as the world's first biosimilar. Today, it remains the class leader with a consistently strong market share of more than one-third. Please turn to slide 10. Now, let's move on to our most recent growth drivers, starting with Wyost and Jubbonti, where the launches have exceeded expectations.

Speaker #3: Importantly, that share has remained stable over the last few quarters. Looking ahead, we see potential upside from further adoption in Europe, a longer-term ramp-up in the US, and additional launches across Europe and international markets.

Speaker #3: 2026 marks the 20th anniversary of our first regulatory approval of Omnitrope as the world’s first biosimilar. Today, it remains the class leader, with a consistently strong market share of more than one-third.

Speaker #3: Please turn to slide 10. Now, let's move on to our most recent growth drivers, starting with Wyatt and Jubonte, where the launches have exceeded expectations.

Speaker #3: In the US, both medicines have quickly established leadership positions after the launch in Q2 last year, with Jubonte achieving a 64% biosimilar market share and Wyatt's 54%.

Richard Saynor: In the US, both medicines have quickly established leadership positions after the launch in Q2 last year, with Jubbonti achieving a 64% biosimilar market share and Wyost 54%. These results reflect broad provider access, strong commercial execution, and early wins with key players. The European launch has also been progressing exceptionally well, with rollouts completed across 27 countries on day one, whilst international launches in markets such as Brazil and Australia are also gaining momentum. Turning to Afqlir, our aflibercept biosimilar, we are equally encouraged. Launch execution across Europe has been strong, and the medicine is now available in 19 markets. With limited competition to date, Afqlir is well-positioned to drive broader patient access while supporting more sustainable healthcare systems. Looking ahead, Afqlir represents another meaningful growth opportunity in 2027 and 2028, supported by US launches in the coming months. Please turn to slide 11.

Speaker #3: These results reflect broad provider access, strong commercial execution, and early wins with key players. The European launch has also been progressing exceptionally well, with rollouts completed across 27 countries on day one, while international launches in markets such as Brazil and Australia are also gaining momentum.

Speaker #3: Turning to Asklear, our Blibicep biosimilar, we're equally encouraged. Launch execution across Europe has been strong, and the medicine is now available in 19 markets.

Speaker #3: With limited competition to date, Asklear is well positioned to drive broader patient access while supporting more sustainable healthcare systems. Looking ahead, Asklear represents another meaningful growth opportunity in 2027 and 2028, supported by U.S. launches in the coming months.

Speaker #3: Please turn to slide 11. This slide highlights the depth, quality, and scale of our industry-leading biosimilar pipeline. I am very proud of the progress that we're making.

Richard Saynor: This slide highlights the depth, quality, and scale of our industry-leading biosimilar pipeline. I am very proud of the progress that we are making. Our biosimilar pipeline now stands at 36 assets. This breadth is unmatched in the industry and provides multiple future growth opportunities across a wide range of therapy areas. Importantly, this is not just about the size of the pipeline. What differentiates Sandoz is our ability to continue to expand our pipeline and convert assets into successful commercial launches. This is creating an increasingly attractive portfolio of market-leading biosimilars. Today, we have five assets, either in regulatory review or are yet to launch, six assets in clinical development, and 10 in technical development, with a further 15 in early development. The shape and expansion of this biosimilar pipeline underpin our increasing confidence in the Sandoz roadmap.

Speaker #3: Our biosimilar pipeline now stands at 36 assets. This breadth is unmatched in the industry and provides multiple future growth opportunities across a wide range of therapy areas.

Speaker #3: Importantly, this is not just about the size of the pipeline. What differentiates Sandoz is our ability to continually expand our pipeline and convert assets into successful commercial launches.

Speaker #3: This is creating an increasingly attractive portfolio of market-leading biosimilars. Today, we have five assets either in regulatory review or yet to launch, six assets in clinical development, and 10 in technical development, with a further 15 in early development.

Speaker #3: The shape and expansion of this biosimilar pipeline underpin our increasing confidence in the Sandoz roadmap. We have multiple assets entering late-stage development, a growing number of regulatory milestones ahead, and a broad set of future launch opportunities that support our ambitions for the Sandoz golden decade.

Richard Saynor: We have multiple assets entering late-stage development, a growing number of regulatory milestones ahead, and a broad set of future launch opportunities to support our ambitions for the Sandoz golden decade. Please turn to slide 12. Beyond the medicines we have in the market today, we are investing to ensure we are the leader of the next wave of biosimilar growth. One of the key milestones in H1 was the opening of our new state-of-the-art biosimilar development center in Ljubljana, Slovenia. More than simply a new facility, it is a strategic investment in scientific and technical capabilities that will support our industry-leading pipeline and long-term growth ambitions. It is a huge step up in our development capabilities, and we look forward to showcasing the center to many of you in November. As our biosimilar pipeline becomes larger and more complex, speed, efficiency, and execution become critical competitive differentiators.

Speaker #3: Please turn to slide 12. Beyond the medicines we have in the market today, we are investing to ensure we are the leader of the next wave of biosimilar growth.

Speaker #3: One of the key milestones in the first half was the opening of our new, state-of-the-art biosimilar development center in Ljubljana, Slovenia. More than simply a new facility, it is a strategic investment in scientific and technical capabilities that will support our industry-leading pipeline and long-term growth ambitions.

Speaker #3: It is a huge step up in our development capabilities, and we look forward to showcasing the center to many of you in November. As our biosimilar pipeline becomes larger and more complex, speed, efficiency, and execution become critical competitive differentiators.

Speaker #3: This center strengthens all three. Alongside our growing commercial scale, the benefits of this investment give us greater confidence in our ability to deliver a leading program of launches and capture significant growth opportunities over the coming years.

Richard Saynor: This center strengthens all three. Alongside our growing commercial scale, the benefits of this investment give us greater confidence in our ability to deliver a leading program of launches and capture significant growth opportunities over the coming years. With that, I will hand over to Remco on slide 13.

Speaker #3: And with that, I will hand over to Remco on slide 13.

Speaker #1: Thank you, Richard. And hello, everyone. Please turn to slide 14. Let me start with our strong first-half performance, which demonstrates the strength of the Sandoz model and our disciplined execution.

Remco Steenbergen: Thank you, Richard, and hello, everyone. Please turn to slide 14. Let me start with our strong H1 performance, which demonstrates the strength of the Sandoz model and our disciplined execution. In the H1, 5% increase in net sales was driven by the very strong performance of biosimilars, where sales grew by 20%. This growth was broad-based. All regions contributed with strong results from legacy biosimilars as well as the recent launches. We continued to make excellent progress on profitable growth. Core EBITDA increased by 15% and the margin expanded by 90 basis points to 20.9%, supported by an increasingly favorable sales mix, continued operational efficiencies, and operating leverage. The combination of higher operating profitability and stronger core net income drove a 17% increase in core diluted EPS to $1.71, demonstrating our ability to convert top-line growth into higher earnings growth.

Speaker #1: In the first half, a 5% increase in net sales was driven by the very strong performance of biosimilars, where sales grew by 20%. This growth was broad-based—all regions contributed, with strong results from legacy biosimilars as well as the recent launches.

Speaker #1: We continued to make excellent progress on profitable growth. Core EBITDA increased by 15%, and the margin expanded by 90 basis points to 20.9%, supported by an increasingly favorable sales mix, continued operational efficiencies, and operating leverage.

Speaker #1: The combination of higher operating profitability and stronger core net income drove a 17% increase in core diluted EPS to $1.71, demonstrating our ability to convert top-line growth into higher earnings growth.

Speaker #1: At the same time, our cash profile remained strong. Management-free cash flow was stable at $503 million, despite additional capital investments to support future growth.

Remco Steenbergen: At the same time, our cash profile remained strong. Management free cash flow was stable at $503 million, despite additional capital investments to support future growth. Please turn to slide 15. Net sales increased by 10% in US dollars or 5% at constant currencies, taking sales from $5.2 billion in H1 last year to $5.8 billion this time. The performance reflected significant volume growth. Biosimilars were the standout contributor. In North America, biosimilar sales grew by 47%, while Europe and international markets also delivered double-digit biosimilar growth. The impact of price erosion was more than offset by strong underlying demand and enhanced market access. The level of erosion primarily reflected short-term market dynamics in Germany and an outstanding biosimilar performance in North America. Currency movements provided a five percentage point tailwind in the H1. I'll touch on our full year expectations in a moment. Please turn to slide 16.

Speaker #1: Please turn to slide 15. Net sales increased by 10% in US dollars, or 5% at constant currencies, taking sales from $5.2 billion in H1 last year to $5.8 billion this time.

Speaker #1: The performance reflected significant volume growth. Biosimilars were the standout contributor. In North America, biosimilar sales grew by 47%, while Europe and international markets also delivered double-digit biosimilar growth.

Speaker #1: The impact of price erosion was more than offset by strong underlying demand and enhanced market access. The level of erosion primarily reflected shorter market dynamics in Germany and an outstanding biosimilar performance in North America.

Speaker #1: Currency movements provided a 5% tailwind in the first half, and I will touch on our full-year FX expectations in a moment. Please turn to slide 16.

Speaker #1: Alongside the rapid growth of biosimilars, generics remain a resilient foundation of the business. H1 generic sales were broadly stable, with the performance improving meaningfully in Q2 after one-time headwinds in the first quarter.

Remco Steenbergen: Alongside the rapid growth of biosimilars, generics remain a resilient foundation of the business. H1 generic sales were broadly stable, with performance improving meaningfully in Q2 after one-time headwinds in the Q1. While residual headwinds remain in generics in the international region, driven by active portfolio rationalization and market dynamics in Brazil and Japan, the Q2 improvement reinforces our confidence in the trajectory of the business and the sustainability of our growth outlook. Please turn to slide 17. Looking at the regions, North America delivered a particularly strong performance, growing by 15% in H1 and even by 18% in Q2. This was mainly driven by the successful launches of Pyzchiva and Jubbonti, which continue to exceed our expectations and illustrates the commercial potential of our biosimilars platform. European biosimilars were also up double-digits, while the generics business returned to growth in the Q2.

Speaker #1: While residual headwinds remain in generics in the International region, driven by active portfolio regionalization and market dynamics in Brazil and Japan, the Q2 improvement reinforces our confidence in the trajectory of the business and the sustainability of our growth outlook.

Speaker #1: Please turn to slide 17. Looking at the regions, North America delivered a particularly strong performance, growing by 15% in H1 and even by 18% in Q2.

Speaker #1: This was mainly driven by the successful launches of YS in Jabonte, which continued to exceed our expectations and illustrates the commercial potential of our biosimilars platform.

Speaker #1: European biosimilars were also up double digits, while the generics business returned to growth in the second quarter. In International, biosimilars continued to gain traction, with growth of 19%, supported by Rexeton and recent launches.

Remco Steenbergen: In international, biosimilars continued to gain traction, with growth of 19% supported by Rixathon and recent launches. Now, let's have a look at the P&L on slide 18. Top-line growth was supported by strong biosimilar momentum and an increasingly favorable sales mix. This helped lift the core gross profit margin to 49.7%, an increase of 50 basis points. At the same time, it generated further operating leverage, supporting a 90 basis point expansion in the core EBITDA margin to 20.9%. Importantly, we achieved these margin expansions while continuing to invest in our pipeline, launches, and future growth opportunities. With core diluted EPS increasing by 17% to $1.71, we delivered a more profitable growth, combining strong commercial execution with disciplined cost management and increasing operating leverage. Please turn to slide 19. As I mentioned, a number of factors helped to grow the core EBITDA margin.

Speaker #1: Now, let's have a look at the P&L on Slide 18. Top-line growth was supported by strong biosimilar momentum and an increasingly favorable sales mix.

Speaker #1: This helped lift the core growth profit margin to 49.7%, an increase of 50 basis points. At the same time, we generated further operating leverage, supporting a 90 basis point expansion in the core EBITDA margin to 20.9%.

Speaker #1: Importantly, we achieved these margin expansions while continuing to invest in our pipeline launches and future growth opportunities. With core diluted EPS increasing by 17% to $1.71, we delivered more profitable growth, combining strong commercial execution with disciplined cost management and increasing operating leverage.

Speaker #1: Please turn to slide 19. As I mentioned, a number of factors helped to grow the core EBITDA margin. The most significant contributor was business mix.

Remco Steenbergen: The most significant contributor was business mix. Strong double-digit biosimilar growth increased the share of accretive medicines in our portfolio, contributing around 2 percentage points to margin expansion. While price erosion is a constant headwind, this was almost offset by continued operating efficiencies, including in manufacturing and supply, as well as support functions. Currency movements continue to have no material impact on our operating margin. Let's now have a look at one-off costs on slide 20. Excluding litigation and some IT expenditures, we had one-off costs of $142 million in H1. I continue to expect these one-off costs to amount to around $0.3 billion over the full year, in line with my previous commentary. Importantly, these costs are trending down significantly from the peak in 2024 as the major separation activities move towards completion.

Speaker #1: Strong double-digit biosimilar growth increased the share of accretive medicines in our portfolio, contributing around 2 percentage points to margin expansion. While price erosion is a constant headwind, this was almost offset by continued operating efficiencies—including in manufacturing and supply, as well as support functions.

Speaker #1: Currency movements continued to have no material impact on our operating margin. Let's now have a look at one-off costs on slide 20. Excluding litigation and some IT expenditures, we had one-off costs of $142 million in the first half.

Speaker #1: I continue to expect these one-off costs to amount to around $0.3 billion US dollars over the full year, in line with my previous commentary.

Speaker #1: Importantly, these costs are trending down significantly from the peak in 2024, as the major separation activities moved towards completion. Outside of underlying one-off costs, we announced this week another important step in addressing legacy US generic drug litigation.

Remco Steenbergen: Outside of underlying one-off costs, we announced this week another important step in addressing legacy US generic drug litigation. We have resolved all pending class actions in US generic antitrust litigation, as well as all claims filed by any US federal or state government against Sandoz. The only remaining antitrust claims against the company in the US generic antitrust litigation are those brought by individual plaintiffs who opted out of class settlement. We reached a settlement agreement with 43 US states and territories covering $400 million, spread cash-wise equally over seven years, starting in 2027, resolving all federal and governmental claims. The resolution of these claims requires an additional payment of approximately $50 million to states that settled earlier. We also entered into a settlement agreement with a putative class of indirect reseller plaintiffs, and will therefore pay $28.5 million in exchange for a full release of all claims.

Speaker #1: We have resolved all pending class actions in the U.S. generic antitrust litigation, as well as all claims filed by any U.S. federal or state government against the company.

Speaker #1: The only remaining antitrust claims against the company in the U.S. generic antitrust litigation are those brought by individual plaintiffs who opted out of the class settlement.

Speaker #1: We reached a settlement agreement with 43 US states and territories, covering $400 million, spread equally in cash over seven years, starting in 2027.

Speaker #1: Resolving all federal and governmental claims. The resolution of these claims requires an additional payment of approximately $50 million to states that settled earlier. We also entered into a settlement agreement with a putative class of indirect reseller plaintiffs, and will therefore pay $28.5 million in exchange for a full release of all claims.

Speaker #1: These settlements reflect our commitment to operating with integrity, maintaining strong governance, and responsibly resolving legacy matters, as we continue to work to expand access to affordable medicines.

Remco Steenbergen: These settlements reflect our commitment to operating with integrity, maintaining strong governance, and responsibly resolving legacy matters as we continue to work to expand access to affordable medicines. These settlements do not affect our full year 2026 guidance or midterm outlook. Please turn to slide 21. Turning to cash, the strong operating performance translated into management free cash flow of around $500 million. This was achieved despite a meaningful step-up in CapEx to around $500 million, as well as higher interest and tax payments, demonstrating the underlying working capital resilience of the business. Be aware that higher interest expense in H1 mainly reflects the coupon payments in March 2026 on recently issued bonds. We continue to expect CapEx to peak during the current investment cycle this year at around $1.1 billion.

Speaker #1: These settlements do not affect our full-year 2026 guidance or midterm outlook. Please turn to slide 21. Turning to cash, the strong operating performance translated into management free cash flow of around $500 million.

Speaker #1: This was achieved despite a meaningful step-up in CapEx to around $500 million, as well as higher interest and tax payments, demonstrating the underlying working capital resilience of the business.

Speaker #1: Be aware that higher interest expense in the first half mainly reflects the coupon payments in March 2026 on recently issued bonds. We continue to expect CapEx to peak during the current investment cycle this year, at around $1.1 billion.

Speaker #1: These are deliberate investments to support our future growth, and the performance of management-free cash flow underlines the resilience and cash-generative nature of our business model.

Remco Steenbergen: These are deliberate investments to support our future growth, the performance of management-free cash flow underlines the resilience and cash generative nature of our business model. Please turn to slide 22. Our balance sheet remains strong and provides significant financial flexibilities to support both growth investments and disciplined capital allocation. During H1, we further strengthened our liquidity position to $2.3 billion, supported by successful Swiss bond issuance in April earlier this year. Gross debt increased to $5.9 billion. Strong cash generation, however, largely offset this impact, leaving net debt broadly unchanged at $3.5 billion. This meant a net debt to core EBITDA ratio of 1.4 times at the end of the period, down from 1.5 times at the end of last year. Our strengthened balance sheet, improving liquidity, and investment-grade rating puts us in an excellent financial position to support our ambitions.

Speaker #1: Please turn to slide 22. Our balance sheet remains strong, and provides significant financial flexibility to support both growth investments and disciplined capital allocation. During the first half, we have strengthened our liquidity position to $2.3 billion US dollars, supported by successful Swiss bond issuance in April earlier this year.

Speaker #1: Gross debt increased to $5.9 billion. Strong cash generation, however, largely offset this impact, leaving net debt broadly unchanged at $3.5 billion.

Speaker #1: This meant a net debt to core EBITDA ratio of 1.4 times at the end of the period, down from 1.5 times at the end of last year.

Speaker #1: Our strengthened balance sheet, improved liquidity, and investment-grade rating put us in an excellent financial position to support our ambitions. Please turn to slide 23.

Remco Steenbergen: Please turn to slide 23. We continue to maintain investment-grade ratings for S&P and Moody's, with both having positive outlook on Sandoz. Our debt maturity profile is well-diversified, with an average maturity of around five years, while our average borrowing costs remain below 4%. At the same time, we remain disciplined on leverage, targeting net debt to core EBITDA below two times in the medium term. This combination of financial strength, flexibility, and disciplined capital allocation ensures we can continue investing for growth while maintaining an attractive risk profile and delivering value to our shareholders. Please turn to slide 24. Now finally, let's recap on the guidance for the full year. We continue to expect net sales to grow by a mid to high single-digit percentage constant currencies, supported by the positive impact of recent launches.

Speaker #1: We continue to maintain investment-grade ratings from S&P and Moody's, with both agencies having positive outlooks on Sandoz. Our debt maturity profile is well diversified, with an average maturity of around five years, while our average borrowing costs remain below 4%.

Speaker #1: At the same time, we remain disciplined on leverage, targeting net debt to core EBITDA below 2 times in the medium term. This combination of financial strength, flexibility, and disciplined capital allocation ensures we can continue investing for growth while maintaining an attractive risk profile and delivering value to our shareholders.

Speaker #1: Please turn to slide 24. Now, finally, let's recap on the guidance for the full year. We continue to expect net sales to grow by a mid- to high-single-digit percentage once adjusted for currencies.

Speaker #1: Supported by the positive impact of recent launches, the core EBITDA margin is targeted to increase by around 100 basis points. We now expect overall pricing to decline by a mid single-digit percentage in 2026, compared with our previous expectation of a low to mid single-digit percentage decline.

Remco Steenbergen: The core EBITDA margin is targeted to increase by around 100 basis points. We now expect overall pricing to decline by a mid single-digit percentage in 2026, compared with our previous expectation of a low to mid single-digit percentage decline. This reflects the near-term dynamics in Germany and North America I mentioned earlier. Outside of guidance, we now anticipate a 2 percentage point tailwind to net sales from currency movement this year, based on recent spot rates and average rates in the period. Our prior assumption was a 4 percentage point tailwind. We still do not expect a material impact from currency movements on the core EBITDA margin this year. Looking beyond this year, we remain highly confident in the outlook for Sandoz in both 2027 and 2028.

Speaker #1: This reflects the near-term dynamics in Germany and North America I mentioned earlier. Outside of guidance, we announced a dissipated two-percentage-point tailwind to net sales from currency movement this year.

Speaker #1: Based on recent spot rates and average rates in the period, our prior assumption was a four-percentage-point tailwind. We still do not expect a material impact from currency movements on the core EBITDA margin this year.

Speaker #1: Looking beyond this year, we remain highly confident in the outlook for Sandoz, both in 2027 and 2028. Recent launches will continue to contribute more meaningfully.

Remco Steenbergen: Recent launches will continue to contribute more meaningfully, we have a strong pipeline of biosimilar and generic launches ahead, including the rollout of GLP-1 in early markets. Importantly, our multi-source GLP-1 strategy positions us well to capture the significant market opportunities. With strong business fundamentals and clear visibility on our growth drivers, we are very confident in what Sandoz can achieve. With that, I'll hand back to Richard. Please turn to slide 25.

Speaker #1: And we have a strong pipeline of biosimilar and generic launches ahead, including the rollout of GLP-1 in early markets. Importantly, our multi-source GLP-1 strategy positions us well to capture the significant market opportunity.

Speaker #1: With strong business fundamentals and clear visibility on our growth drivers, we are very confident in what Sandoz can achieve. And with that, I hand back to Richard.

Speaker #1: Please turn to slide 25.

Speaker #2: Thank you so much, Remco. I'd now like to wrap up the presentation before we go to questions. Please turn to slide 26. To conclude, our business continues to perform strongly across pipeline execution, market position, capability building, and financial performance.

Richard Saynor: Thank you so much, Remco. I'd now like to wrap up the presentation before we go to questions. Please turn to slide 26. To conclude, our business continues to perform strongly across pipeline execution, market position, capability building, and financial performance. We further strengthened our biosimilar pipeline, which now comprises 36 assets, whilst also achieving important regulatory milestones. We received our first GLP-1 approval, a historic milestone for Sandoz. We moved up to become the number two provider of affordable medicines in North America. I am delighted that we have now opened our state-of-the-art biosimilar development center in Ljubljana, further strengthening our long-term development capabilities. Financially, we delivered strong growth, core EBITDA margin expansion, and robust cash generation. Based on our performance in H1, our confidence in the remainder of the year, we are confirming our full year 2026 guidance today.

Speaker #2: We further strengthened our biosimilar pipeline, which now comprises 36 assets, while also achieving important regulatory milestones. And we received our first GLP-1 approval—a historic milestone for Sandoz.

Speaker #2: We moved up to become the number two provider of affordable medicines in North America, and I am delighted that we have now opened our state-of-the-art biosimilar development center in Ljubljana.

Speaker #2: Further strengthening our long-term development capabilities. Financially, we delivered strong growth, core EBITDA margin expansion, and robust cash generation. And based on our performance in the first half and our confidence in the remainder of the year, we are confirming our full-year 2026 guidance today.

Speaker #2: Taken together, these achievements demonstrate the strength of our business, the momentum across our platforms, and our ability to create sustainable value, while continuing to pioneer access for patients worldwide.

Richard Saynor: Taken together, these achievements demonstrate the strength of our business, the momentum across our platforms, and our ability to create sustainable value whilst continuing to pioneer access for patients worldwide. Please turn to page 27. As we look forward, we are focused on delivering sustainable growth and creating value for patients. We are excited by the opportunity to share more about this and our golden decade for biosimilars with you at our Capital Markets Day on 8 September in London. Thank you again for listening. Please turn to slide 28. I will ask the operator to open the lines for Q&A.

Speaker #2: Please turn to page 27. As we look forward, we are focused on delivering sustainable growth and creating value for patients. We're excited by the opportunity to share more about this and our goals in the decade for biosimilars with you at our Capital Markets Day on the 8th of September in London.

Speaker #2: Thank you again for listening. Please turn to slide 28. I will now ask the operator to open the lines for Q&A.

Speaker #3: Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the "raise hand" function at the bottom of your Zoom screen, or if you have dialed in, please press star nine to enter the queue.

Operator 3: Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. If you have dialed in, please press star nine to enter the queue. Once your name has been announced, you can ask a question. If you want to withdraw your question, please lower your hand using the raise hand function in the Zoom app or, via telephone, press star nine. Thank you. A moment for the first question, please. Our first question comes from Sophia Graeff Buhl-Nielsen at J.P. Morgan. Please unmute your line.

Operator: Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. If you have dialed in, please press star nine to enter the queue. Once your name has been announced, you can ask a question. If you want to withdraw your question, please lower your hand using the raise hand function in the Zoom app or, via telephone, press star nine. Thank you. A moment for the first question, please. Our first question comes from Sophia Graeff Buhl-Nielsen at JPMorgan. Please unmute your line.

Speaker #3: Once your name has been announced, you can ask a question. If you want to withdraw your question, please lower your hand using the raised hand function in the Zoom app or via telephone, press star nine.

Speaker #3: Thank you. And a moment for the first question, please. Our first question comes from Sophia Gray Bull Nilsson at J.P. Morgan. Please unmute your line.

Speaker #4: Good morning. Thanks for taking my questions. I just want to ask Claire, in Europe, where are you seeing most of the volume come from? Is it mostly from the originator or competitor brands?

Sophia Graeff Buhl-Nielsen: Good morning. Thanks for taking my questions. Just want to ask Asclera in Europe, where are you seeing most of the volume coming from? Is it mostly from the originator or competitor brands, or are you seeing significant uptake in naive patients? Just what is your expectation for how that volume opportunity might develop or be limited as the originator converts patients to their high dose formulation? I think they were saying yesterday they expect 70% of volume to be on the high dose by the end of the year. Just on Wyost and Jubbonti in Europe as well, how are you seeing biosimilar market share penetration progress in Europe relative to what we saw in the US with Sandoz?

Speaker #4: Or are you seeing significant uptake in naïve patients? And then, what is your expectation for how that volume opportunity might develop, or be limited, as the originator converts patients to the high-dose formulation?

Speaker #4: I think they're saying yesterday they expect 70% of volume to be on the high dose by the end of the year. And then just on Western Jabonti in Europe as well.

Speaker #4: How are you seeing biosimilar market share penetration progress in Europe, relative to what we saw in the US for Sandoz? And have you been able to establish a clear lead as you did in the US?

Sophia Graeff Buhl-Nielsen: Have you been able to establish an aflibercept lead as you did in the US, or is the volume competition a lot closer amongst biosimilar peers in Europe? Thank you.

Speaker #4: Or is the volume competition a lot closer amongst biosimilar peers in Europe? Thank you.

Speaker #2: Thank you, and good morning. Thank you so much for your question, Sophia. As Claire– I mean, look, we're seeing very strong uptake. I think what you've seen, clearly, we took a very strong position in terms of our patent strategy.

Richard Saynor: Thank you. Good morning. Thank you so much for your questions, Sophia. As aflibercept, look, we're seeing very strong uptake. I think what you've seen, clearly we took a very strong position in terms of our patent strategy, and I think we've been rewarded from that. Really it's a bit early today. We need to see the IQVIA data, but certainly we're seeing strong uptake broadly in all of the markets that we've launched. I don't really see a massive. Clearly some patients will migrate to high dose, but also this is an opportunity to offer far more patients this medication. This wasn't a very expensive medication. What we're seeing is payers in Europe using this as an opportunity to drive access. It actually goes back to our very core purpose as a company.

Speaker #2: And I think we've been rewarded for that. I really don't, you know—and really, it's a bit early today. We need to see the IQVIA data, but certainly we're seeing strong uptake broadly in all of the markets that we've launched.

Speaker #2: And I don't really see a massive—I mean, clearly, some patients will migrate to high dose, but also this is an opportunity to offer far more patients this medication.

Speaker #2: So this was in a very expensive medication. So what we're seeing is payers in Europe using this as an opportunity to drive access. So it actually goes back to our very core purpose as a company.

Speaker #2: And similarly, with wife and Jabonti, yes, we've taken a very strong lead. I think we are by far the largest player in Europe. Again, we have yet to see the most recent IQVIA data, but we are very pleased with the performance and uptake of the product.

Richard Saynor: Similarly, Wyost and Jubbonti, yes, we've taken a very strong lead. I think we're by far the largest payer in Europe. Again, we're yet to see the most recent IQVIA data, but very pleased with the performance and uptake of the product.

Speaker #3: Our next question comes from Victor Flock at BNP Paribas. Please unmute your line.

Operator 3: Our next question comes from Victor Floc'h at BNP Paribas. Please unmute your line.

Operator: Our next question comes from Victor Floc'h at BNP Paribas. Please unmute your line.

Speaker #5: Hi, thanks so much for taking my question. Maybe one for Richard on potential US tariffs. I believe you’ve flagged this morning constructive dialogue with the US administration.

Victor Floc'h: Hi. Thank you so much for taking my question. Maybe one for Richard on potential US tariffs. I believe you've flagged this morning constructive dialogue with the US administration and openness to expand your manufacturing capabilities beyond Slovenia, I guess. Should we read that as a commitment to US CapEx? Should we assume that you need both generics and biosimilars capabilities on the ground locally to comply with US demands? Thank you very much.

Speaker #5: And openness to expand your manufacturing capabilities beyond Slovenia, I guess. So, should we read that as a commitment to U.S. capex? And should we assume that you need both generics and biosimilars capabilities on the ground locally to comply with U.S. demands?

Speaker #5: Thank you very much.

Speaker #2: Good morning. Thank you, Victor. Yeah, look, I mean, I think as I said this morning, we have a very open dialogue with the administration.

Richard Saynor: Good morning. Thank you, Victor. Look, I think as I said this morning, we have a very open dialogue with the administration. I was in Washington actually 2 weeks ago. I met with quite a number of senior members of the cabinet. I do see opportunities. I think it's too early to say what that would look like. We've always said, look, I think we're broadly aligned to the US administration. We want to find ways to bring affordable medicines to US patients. I think that's the dialogue that we need to have now. I think certainly we're talking, I think we want the same thing, and I'm optimistic. It's way too early to say what that would look like. So I couldn't comment on what the specifics would look like. Certainly based on the conversations, I'm very optimistic.

Speaker #2: I was in Washington, actually, two weeks ago, and met with quite a number of senior members of the Cabinet. I do see opportunities. I think it's too early to say what that would look like.

Speaker #2: We've always said, look, I think we're broadly aligned with the US administration. We want to find ways to bring affordable medicine to US patients. Yeah, and I think that's the dialogue that we need to have now.

Speaker #2: And I think, certainly, we're talking—I think we want the same thing. And I'm optimistic. It's way too early to say what that would look like.

Speaker #2: And so I wouldn't—I couldn't comment on what the specifics would look like. But certainly, based on the conversations, I'm very optimistic.

Speaker #3: Our next question comes from Charlie Hayward at Bank of America. Please unmute your line.

Operator 3: Our next question comes from Charlie Hayward at Bank of America. Please unmute your line.

Operator: Our next question comes from Shirley Hayward at Bank of America. Please unmute your line.

Speaker #5: Hi, Charlie Hayward, Bank of America. Thanks for taking the questions. I have one on CEMRA and one on ILEA, please. So first on CEMRA, I know you didn't want to commit too much before approval, and it's not part of your '26 guide, but I think there was some more positive commentary from yourselves today.

Charlie Hayward: Hi. Charlie Hayward, Bank of America. Thanks for taking the questions. I have one on semaglutide and one on Eylea, please. First on semaglutide, I know you didn't want to commit too much before approval, and it's not part of your 2026 guide, but I think some more positive commentary out of yourselves today. Now that you have one approval and potentially decent visibility on the Canada approval, how are you thinking about that potential contribution 2027, 2028? Then on Eylea US launch in Q4, you've got a competitor annualizing $1 billion sales. I think you're likely 3rd to market with four or five more coming by end of Q1 2027. You're clearly excited here as well. What could you point to to help us understand central differentiation there?

Shirley Hayward: Hi. Shirley Hayward, Bank of America. Thanks for taking the questions. I have one on semaglutide and one on Eylea, please. First on semaglutide, I know you didn't want to commit too much before approval, and it's not part of your 2026 guide, but I think some more positive commentary out of yourselves today. Now that you have one approval and potentially decent visibility on the Canada approval, how are you thinking about that potential contribution 2027, 2028? Then on Eylea US launch in Q4, you've got a competitor annualizing $1 billion sales. I think you're likely 3rd to market with four or five more coming by end of Q1 2027. You're clearly excited here as well. What could you point to to help us understand central differentiation there?

Speaker #5: So now that you have one approval and potentially decent visibility on the Canada approval, how are you thinking about that potential contribution for '27, '28?

Speaker #5: And then on ILEA US launch in fourth quarter, you've got a competitor annualizing at $1 billion in sales. I think you'll likely see the market with four or five more coming by the end of Q1 '27.

Speaker #5: And you're clearly excited as well. So, what could you point to, to help us understand potential differentiation there? Is this dosing device, access, contracts?

Charlie Hayward: Is this dosing device access contracts and any market proxies that you would flag where you've been a long way behind an original player that's formed the biosimilars market and you've quickly gained market share? Thank you.

Shirley Hayward: Is this dosing device access contracts and any market proxies that you would flag where you've been a long way behind an original player that's formed the biosimilars market and you've quickly gained market share? Thank you.

Speaker #5: Are there any market proxies that you would flag where you've been a long way behind the original player that's formed the biosimilars market, and you've quickly gained market share?

Speaker #5: Thank you.

Speaker #2: Thank you. Thank you, Charlie. Yeah, look, clearly we're pleased with the approval in Brazil. I think certainly for 2026, we never said it would be particularly material, but I think it's a step in the right direction.

Richard Saynor: Thank you. Thank you, Charlie. Look, clearly we're pleased with the approval in Brazil. I think certainly for 2026, we never said it would be particularly material, but I think it's a step in the right direction. We still have the ambition that we would launch in Canada this year as well. It becomes more interesting as you get into 2027, and I guess it sort of underpins our confidence in terms of the momentum we would expect to see. Clearly, we would launch in Brazil. We expect a number of the other international markets like Turkey, et cetera, and clearly Canada flowing through into 2027. It becomes more material and meaningful as we go into 2027 and 2028. As we've talked many times, it's actually a very difficult product to characterize in terms of how that market will expand.

Richard Saynor: Thank you. Thank you, Shirley. Look, clearly we're pleased with the approval in Brazil. I think certainly for 2026, we never said it would be particularly material, but I think it's a step in the right direction. We still have the ambition that we would launch in Canada this year as well. It becomes more interesting as you get into 2027, and I guess it sort of underpins our confidence in terms of the momentum we would expect to see. Clearly, we would launch in Brazil. We expect a number of the other international markets like Turkey, et cetera, and clearly Canada flowing through into 2027. It becomes more material and meaningful as we go into 2027 and 2028. As we've talked many times, it's actually a very difficult product to characterize in terms of how that market will expand.

Speaker #2: And we still have the ambition that we would launch in Canada this year as well. It becomes more interesting as you get into 2027.

Speaker #2: And I guess it sort of underpins our confidence in terms of the momentum we would expect to see. Clearly, we would launch in Brazil.

Speaker #2: We expect a number of the other international markets—markets like Turkey, etc.—and clearly Canada flowing through into '27. So it becomes more material and meaningful as we go into '27 and '28.

Speaker #2: As we've talked many times, it's actually a very difficult product to characterize in terms of how that market will expand. But certainly, we're pleased to be participating and excited to be moving forward.

Richard Saynor: Certainly we're pleased to be participating and excited to be moving forward. In terms of Eylea, I think the key here is we have a phenomenal ratio. Remember, we bought an ophthalmology capability a couple of years ago, really with this product very much in mind. We have the relationship with the payers, and we're well established. I can give you numerous examples where we weren't necessarily first to market, but over a period of time we've ended up taking a very strong position. I think the commercial capabilities and our strength in the market sets us up well. Clearly we're excited about the launch later in the year. Again, I think it's a great opportunity as we go into 2027. Again, another one of the reasons sort of underpins our confidence, how we see the outlook going.

Speaker #2: In terms of ILEA, I think the key here is we have a phenomenal ratio. Remember, we bought an ophthalmic, ophthalmology capability a couple of years ago.

Speaker #2: Really, with this product very much in mind. So, we have the relationship with the payers, and we're well established. And I can give you numerous examples where we weren't necessarily first to market, but over a period of time, we've ended up taking a very strong position.

Speaker #2: And I think the commercial capabilities and our strength in the market set us up well. So, clearly, we're excited about the launch later in the year.

Speaker #2: And again, I think it's a great opportunity as we go into 2027. And again, another one of the reasons that sort of underpins our confidence in how we see the outlook.

Speaker #2: It's very hard to give you a proxy, unfortunately. Much as I'd like to try and think about how to help you in terms of modeling.

Richard Saynor: It's very hard to give you a proxy, unfortunately. As much as I'd like to try and think about how to help you in terms of modeling, there really isn't sort of an obvious one. Certainly, I think it's an attractive opportunity, and I think we're very well-placed to position the product.

Speaker #2: There really is sort of an obvious one, but certainly I think it's an attractive opportunity. And I think we're very well placed to position the product.

Speaker #3: Our next question comes from Sian Cotidia at Goldman Sachs. Please unmute your line.

Operator 3: Our next question comes from Shyam Kotadia at Goldman Sachs. Please unmute your line.

Operator: Our next question comes from Shyam Kotadia at Goldman Sachs. Please unmute your line.

Speaker #4: Hi there. Thank you for taking my questions. And just circling back on the GOP1 opportunity in Brazil—you've got the approval. I wanted to check if you could provide a little bit more color on the commercial dynamics, given that there are around five to six players, including Novo’s rebranded version that is now approved.

Shyam Kotadia: Hi there. Thank you for taking my questions. Just circling back onto the GLP-1 opportunity in Brazil. You got the approval. I wanted to check if you could provide a little bit more color on the commercial dynamics, given that there's around 5 to 6 players, including Novo's rebranded version that's now approved. It seems like price erosion is more steep than initial expectations. Can volumes offset that? Any color there would be great, as well as commercials with Adalvo in terms of a profit share royalties. Any color there would be great. My second question is on the other revenues line item. This came in below expectations, and looking at the H1 report, it seems as though this was due to hardly any profit-sharing income. I believe this might relate to Pyzchiva in the US through your collab with Samsung.

Speaker #4: It seems like price erosion is more steep than initial expectations. So, can volumes offset that? Any color there would be great, as well as on the commercials with Adalvo in terms of profit share, royalties—any color there would be great.

Speaker #4: And then my second question is on the other revenues line item. This came in below expectations, and looking at the half-year report, it seems as though this was due to hardly any profit-sharing income.

Speaker #4: I believe this might relate to Pesquibra in the US through your collaboration with Samsung. So, can you talk through what's happening here? Is there some sort of phasing that would unwind in the second half?

Shyam Kotadia: Can you talk through what's happening here? Is there some sort of phasing that would unwind in the H2? Thank you.

Speaker #4: Thank you.

Speaker #2: Okay. Thank you, Sian. GLP-1s—it's too early to say. I think, look, it's going to be a dynamic market. I think we've always said, in a sense, this is an underserved opportunity.

Richard Saynor: Okay. Thank you, Shyam. GLP-1, it's too early to say. I think, look, it's going to be a dynamic market. I think we've always said, in a sense, this is an underserved opportunity. Clearly, we have a strategy as we enter that. I think let's get into the market. It'd be something we'll talk about many quarters ahead. I don't really want to disclose our strategy or how I see that market will evolve and make our competition any harder. Let's see. Clearly pleased that we're there, and I think we're now pretty much the only international generic company coming into that market at this point. We have a strong brand and a strong relationship, let's see. I think other revenue, I was just looking at Remco. I'm not sure if you want to comment Remco, but you might like.

Speaker #2: Clearly, we have a strategy. As we enter that, I think let's get into the market. It'll be something we'll talk about many quarters ahead.

Speaker #2: I don't really want to disclose our strategy or how I see that market will evolve and make our competition any harder. So, let's see, but clearly pleased that we're there.

Speaker #2: And I think we're now pretty much the only international generic company coming into that market at this point. So we have a strong brand and a strong relationship.

Speaker #2: And so, let's see. I think, other revenue—I was just looking at Remco. I'm not sure if you want to comment, Remco, but we might wait.

Remco Steenbergen: I think with regard to your question with the profit sharing, et cetera, there's nothing particular which has happened in H1. I don't have so quickly the answer on the other revenue movement. There's nothing special to be considered in H1 versus what there was before. There are no major changes.

Speaker #5: I think, with regard to your question on the profit sharing, etc., there's nothing particular that has happened in H1. I don't have the answer so quickly on the other revenue movement.

Speaker #5: But there's nothing special to be considered in H1 versus what there was before. There are no major changes.

Speaker #2: Thank you.

Shyam Kotadia: Thank you.

Speaker #3: Our next question comes from Simon Baker at Rothschild & Co. Redburn. Please unmute your line.

Operator 3: Our next question comes from Simon Baker at Rothschild & Co Redburn. Please unmute your line.

Operator: Our next question comes from Simon Baker at Rothschild & Co Redburn. Please unmute your line.

Speaker #4: Thank you for taking my questions. Two from me—another one just continuing on the CEMRA in Brazil theme. About half that market is, we understand, compounded product.

Simon Baker: Thank you for taking my questions. Two for me. Another one just continuing on the semaglutide Brazil theme. About half that market is, we understand, compounded product. I just wondering, can you give me thoughts on how that affects the dynamic. Does that affect price or will quality be a selling point there? More broadly on semaglutide, indeed, tirzepatide. Lilly and Waters were recently commenting that establishing purity of these chemically synthesized peptides is far from trivial. I don't see that as an issue for Sandoz, but it could be an issue for some of your competitors. I just wondered if you could update us on the quality, quantity, and sourcing of your peptides in this space. Then secondly, a slightly bigger picture question.

Speaker #4: I just wanted to get your thoughts on how that affects the dynamic. Does that affect price, or will quality be a selling point there?

Speaker #4: And more broadly on CEMRA, and indeed on Tezepatide, Lillian Waters was recently commenting that establishing the purity of these chemically synthesized peptides is far from trivial.

Speaker #4: I don't see that as an issue for Sandoz, but it could be an issue for some of your competitors. So I just wondered if you could update us on the quality, quantity, and sourcing of your peptides in this space.

Speaker #4: And then secondly, a slightly bigger-picture question. As we see repeatedly in this presentation and previous ones, it looks like the market tends to underestimate the longevity of opportunity for an individual, by assuming that your share stays stable as penetration increases.

Simon Baker: As we see repeatedly in this presentation and previous ones, it looks like the market tends to underestimate the longevity of opportunity for an individual biosimilar, that your share stays stable, penetration increases. I am just trying to get an idea, and I am sure this is something you will discuss more at the CMD, about how long we should think about the duration. Time to peak may not be quite the right phrase, but it feels like it is a multi-year opportunity and some color on what multi-year looks like, if indeed one can generalize, would be really helpful. Thanks so much.

Speaker #4: So I'm just trying to get an idea—and I'm sure this is something you'll discuss more at the CMD—about how long we should think about the duration.

Speaker #4: "Time to peak" may not be quite the right phrase, but it feels like this is a multi-year opportunity. And could you provide some color on what "multi-year" looks like?

Speaker #4: If indeed there is one, a generalization would be really helpful. Thanks so much.

Speaker #2: Thanks, Sian. Thank you so much for your questions, Simon. And I think I couldn't have put it better myself. So, I'll come back in a moment.

Richard Saynor: Thanks, Shyam. Thank you so much for your questions, Simon. I think I could not have put it better myself, I will come back in a moment. Look, semaglutide, I think the compounding, in a sense, why is compounding there? It is a reflection that the patients want this product at a lower price point. I think in many ways, with the entry of generics or copies of this product, I think a lot of the compounding will disappear because quite frankly, the economics do not make sense. You want to have the security of a fully manufactured product and the appropriate supply chain. I think actually, I see that as an indication of the opportunity, and I expect it to erode pretty quickly as generics enter the market and convert it. Tirzepatide, your comments made me smile. I have been in this industry a very long time.

Richard Saynor: Thanks, Simon. Thank you so much for your questions, Simon. I think I could not have put it better myself, I will come back in a moment. Look, semaglutide, I think the compounding, in a sense, why is compounding there? It is a reflection that the patients want this product at a lower price point. I think in many ways, with the entry of generics or copies of this product, I think a lot of the compounding will disappear because quite frankly, the economics do not make sense. You want to have the security of a fully manufactured product and the appropriate supply chain. I think actually, I see that as an indication of the opportunity, and I expect it to erode pretty quickly as generics enter the market and convert it. Tirzepatide, your comments made me smile. I have been in this industry a very long time.

Speaker #2: Look, semaglutide—I think the compounding, in a sense, why is compounding there? It's a reflection that patients want this product at a lower price point.

Speaker #2: I think, in many ways, with the entry of generics or copies of this product, a lot of the compounding will disappear because, quite frankly, the economics don't make sense.

Speaker #2: You want to learn how the security of a fully manufactured product and the appropriate supply chain. So, I think actually I see that as an indication of the opportunity.

Speaker #2: And I expect it to erode pretty quickly as generics enter the market and convert it. I mean, your comments made me smile. I've been in this industry a very long time.

Speaker #2: Every originator, right from the first original generics, has been going around saying generics are poor quality. And then we had the same with biosimilars—how can a biosimilar be the same?

Richard Saynor: Every originator, right from the first original generics has been going around saying generics are poor quality. We have that same with biosimilars, that how can a biosimilar be the same? I am sorry, it is the same old shtick that originators always try and disparage this industry. I am comfortable with the product. I stand behind the products without apology, and I think it is just a normal response from originators who are desperately trying to hang on to legacy products and legacy shares. It is not something that unduly concerns me. I love your question around longevity. This year, Sandoz launched its first ever biosimilar. We created this market, as it were. We launched Omnitrope 20 years ago. Today, Omnitrope is still one of our largest products. We are still the leader in that share.

Speaker #2: I'm sorry, it's the same old shtick that originators always try and disparage this industry. I'm comfortable with the product. I stand behind the products on quality, and I think it's just a normal response from originators who are desperately trying to hang on to legacy products and legacy share.

Speaker #2: So it's not something that I'm unduly concerned about. And I love your question around longevity. This year, Sandoz launched its first ever biosimilar. We created this market, as it were.

Speaker #2: We launched Omnitrope 20 years ago. Today, Omnitrope is still one of our largest products. We are still the leader in that share.

Speaker #2: And these markets don't go away. And I think it's very hard to say what is that longevity. But I can, with a high degree of confidence, say, well, no one's ever likely to launch another biosimilar to human growth hormone.

Richard Saynor: These markets do not go away, and I think it is very hard to say what is that longevity. I can, with a high degree of confidence say, well, no one is ever likely to launch another biosimilar to human growth hormone. Patients will need those products. Similarly, with a lot of the portfolio we have, unlike small molecule commodity generics, absolutely, there is a very long life cycle. I think that goes back to the fundamentals of the investment case around Sandoz. As we bring more biosimilars to the marketplace, they are accretive, and they continue to deliver year after year, and we are all broadening that portfolio. Again, I think you are right. We will touch on that at the CMD, but I think we are extremely well-positioned. That is exactly why I keep saying this is Sandoz's golden decade as we look forward over the next 10 years.

Speaker #2: So patients will need those products. And similarly, with a lot of the portfolio we have, unlike small commodities, small molecule commodity generics, absolutely, there's a very long life cycle.

Speaker #2: And I think that goes back to the fundamentals of the investment case around Sandoz. As we bring more biosimilars to the marketplace, they're accretive.

Speaker #2: And they continue to deliver, year after year. And we're all broadening that portfolio. So again, I think you're right. We will touch on that at the CMD.

Richard Saynor: We will touch on that at the CMD, but I think we are extremely well-positioned. That is exactly why I keep saying this is Sandoz's golden decade as we look forward over the next 10 years.

Speaker #2: But I think we're extremely well positioned, and that's exactly why I keep saying this is Sandoz's golden decade as we look forward over the next 10 years.

Speaker #5: Yeah, Richard, if I may add to it, we are often being looked at as an individual biosimilar, biosimilar case. For example, we're not an originator with a few biosimilars.

Craig Marks: Yeah, Richard, if I may add to it, we are often being looked at as an individual biosimilar case, right? We're not an originator with a few biosimilars. It becomes a whole portfolio together. There's also no end date. With an originator, there's an end date. For us, there's no end date, which is also forgotten in the equation, if I can add those two things, Rich.

Remco Steenbergen: Yeah, Richard, if I may add to it, we are often being looked at as an individual biosimilar case, right? We're not an originator with a few biosimilars. It becomes a whole portfolio together. There's also no end date. With an originator, there's an end date. For us, there's no end date, which is also forgotten in the equation, if I can add those two things Rich.

Speaker #5: It becomes a whole portfolio together. And there's also no end date. With an originator, there's an end date. For us, there's no end date, which is also often forgotten in the equation.

Speaker #5: If I can add those two things, Richard.

Speaker #4: Thanks so much. Very helpful.

Simon Baker: Thanks very much. Very helpful.

Speaker #3: Our next question comes from Harry Sefton at RBC. Please unmute your line.

Operator 3: Our next question comes from Harry Sephton at RBC. Please unmute your line.

Operator: Our next question comes from Harry Sephton at RBC. Please unmute your line.

Speaker #2: Brilliant. Thank you very much for taking the questions. The first one is on pricing. You called out in your guidance that you're seeing price erosion step up to the mid-single-digit level, rather than low to mid.

Harry Sephton: Brilliant. Thank you very much for taking the questions. The first one is on pricing, you called out in your guidance that you're seeing price erosion step up to the mid-single digits level rather than low to mid. Can you maybe just expand on that and where you're seeing that pricing and your ability to offset that with volume gains? My second question on denosumab US. It appears that that continues to be a very strong tailwind for you in the US. What is your expectation for the continued market share gains in the H2, what are you seeing on pricing? It looks like the originator has been a bit more aggressive on rebating there. Any help on the pricing side would be helpful. Thank you.

Speaker #2: Can you maybe just expand on that and where you're seeing that pricing and your ability to offset that with volume gains? And then my second question on denosumab US.

Speaker #2: It appears that that continues to be a very strong tailwind for you in the US. What is your expectation for continued market share gains in the second half?

Speaker #2: And what are you seeing on pricing? It looks like the originator has been a bit more aggressive on rebating there. So any help on the pricing side would be helpful.

Speaker #2: Thank you.

Speaker #1: Remco, do you want to pick that pricing up?

Craig Marks: Remco, do you want to pick the pricing up?

Richard Saynor: Remco, do you want to pick the pricing up?

Speaker #5: Yes, I picked it up. So, the pricing—there are two elements which play a role. One, the success in North America. That, of course, sounds strange—to higher price erosion.

Remco Steenbergen: Yes. The pricing, there are two elements which play a role. One, the success in North America. That, of course, sounds strange to high price erosion, but the bio grows really, really fast in the US, and particularly the early launches attract a relatively higher price erosion percentage. Still doesn't mean that the product isn't profitable, because pricing relatively starts high, and then you have a steeper price erosion. Now, with that high growth, you've seen a 47%. Proportionally, it attracts a bit more and more price erosion. Indeed, the growth which is behind it is more than offsetting it. Second was Germany. Germany, at the beginning of the year, there were some new pharma substitution rules introduced for the biosimilars, which some tenders came in. They're stopping now through 2028, and they're relooking at it.

Speaker #5: But the bio is growing really, really fast in the US, and particularly the early launch has attracted a relatively higher percentage of price erosion. It still doesn't mean that the product isn't profitable, because pricing relatively starts high.

Speaker #5: And then you'll have a steeper price erosion. Now, with that high growth, you've seen a 47% proportionally, it attracts a bit more and more price erosion.

Speaker #5: But indeed, the growth which is behind it is more than offsetting it. Second was Germany. Germany, at the beginning of the year, there were some new pharma substitution rules introduced for the biosimilars, which on tenders came in.

Speaker #5: They're stopping now through '28, and they're re-looking at it. On the other hand, in Germany, we had fabulous growth as well on the volume side.

Remco Steenbergen: On the other hand, in Germany, we have had fabulous growth as well on the volume side, it's more than offsetting it. We are not worried. We see this tendency in different markets around Europe and around the world, it's a normal part of our business. We don't see any impact on nor the profitability nor the top line, as well as our guidance has completely been changed. For us, nothing special, although I understand it attracts a little bit your attention.

Speaker #5: So it's more than offsetting it. We are not worried. We see this tendency in different markets around Europe and around the world, so it's a normal part of our business.

Speaker #5: So we don't see any impact on either the profitability or the top line. That's why our guidance is completely unchanged. So for us, nothing special.

Speaker #5: Although I understand it attracts your attention a little bit.

Speaker #2: And then, on denosumab, I mean, clearly we're going to lap ourselves, so the growth rate naturally will slow down. But we still see good share gains.

Richard Saynor: On denosumab, I think clearly we're going to lap ourselves, the growth rate naturally will slow down. We still see good share gains. I still see it as a growth driver in the H2. I'm sorry, again, my comment earlier, I've been in generics a long time. Originators always fight to try and keep share. It always ends up being a zero-sum game for them because their business models are very, very different. You could argue that every single biologic that we've launched in the US, the originators claim that they can defend, and they take aggressive pricing. In the end, the industry normally wins out as a generic and biosimilar. I don't see anything unusual in terms of what they are doing. I'm clearly delighted to have taken such a strong leadership position in the US with quite strong competition.

Speaker #2: So, I still see it as a growth driver in the second half. And I'm sorry—again, as I mentioned earlier, I've been in generics a long time.

Speaker #2: Originators always fight to try and keep share. It's always ends up being a zero-sum game for them because their business models are very, very different.

Speaker #2: You could argue that every single biologic that we've launched in the US, the originators claim that they can defend and they take aggressive pricing.

Speaker #2: In the end, the industry normally wins out as a generic and biosimilar, so I don't see anything unusual in terms of what they are doing.

Speaker #2: And I'm clearly delighted that we've taken such a strong leadership position in the US, despite quite strong competition. So I still see some growth potential in the second half.

Richard Saynor: I still see some growth potential in the H2.

Speaker #3: Our next question comes from James Gordon at Barclays. Please unmute your line.

Operator 3: Our next question comes from James Gordon at Barclays. Please unmute your line.

Operator: Our next question comes from James Gordon at Barclays. Please unmute your line.

James Gordon: Hello. James Gordon from Barclays. Thanks for taking the questions. A couple of questions, please. One was on Germany. There have been these headlines about healthcare spending cuts, which you mentioned, and short-term market dynamics. Is your understanding it's just a 1-off hit on biosimilars and then pricing goes back to normal? How will pricing work beyond this? Could there be a longer-term headwind for what you charge for biosimilars in Germany? Do you think there might be any offset in terms of Germany's trying to save money? Could there be more spending on generics and biosimilars, so some volume benefit, or is Germany just going to be a tougher market? Second one was just a clarification on semaglutide in Canada, where I think you said you hope to be approved by the end of the year.

Speaker #6: Hello, James Gordon from Barclays. Thanks for taking the questions. A couple of questions, please. One was on Germany: these headlines about healthcare spending cuts that you mentioned and short-term market dynamics.

Speaker #6: But so is your understanding it's just a one-off hit on biosimilars and then pricing goes back to normal? How will pricing work beyond this?

Speaker #6: Could there be a longer-term headwind for what you charge for biosimilars in Germany? And do you think there might be any offset in terms of if Germany is trying to save money?

Speaker #6: Could there be more spending on generics and biosimilars? There's some volume benefit, or is Germany just going to be a tougher market? The second one was just a clarification on Senna and Canada, where I think you said you hope to be approved by the end of the year.

Speaker #6: Do you think you're just going to be the one big dose, or the two big dose? Because I think that the approvals so far haven't been the full dose range.

James Gordon: Do you think you're just going to be the 1 mg dose or the 2 mg dose? Because I think that the approvals so far haven't been the full dose range. If it's not the full dose range, does that materially reduce the opportunity because patients want the full dose range with the innovator? Just quickly, finally, would be gross margin. You're up 50 basis points year-on-year, which look good. Do you think you are going to get much more margin expansion from EBITDA margin expansion from gross margin?

Speaker #6: And if it's not the full dose range, does that materially reduce the opportunity? Because patients want to have the full dose range with the innovator.

Speaker #6: And then just quickly, finally, would be gross margin. So, you're up 50 basis points year-on-year, which looks good. But do you think you are going to get much more margin expansion from gross or EBITDA margin expansion from gross margin?

Speaker #6: When we're hearing about pricing pressure in Europe and tariffs, and in-license products with pay-aways, is the margin expansion going to be much more about SG&A leverage, and gross margin more modest?

James Gordon: When we're hearing about pricing pressure in Europe and tariffs and in-license price repair waves, is the margin expansion going to be much more about SG&A leverage and gross margin more modest, or do you think you're going to start to see a step up in gross margin expansion even ahead of Syvener coming in?

Speaker #6: Or do you think you're going to start to see a step-up in gross margin expansion even ahead of Slovenia coming in?

Speaker #2: So perhaps Remco, do you want to take the first and third question? Sorry, thank you, James. Thank you for your question. And then I'll take the Senna.

Craig Marks: Perhaps, Remco, do you want to take the first and third question? Sorry. Thank you, James. Thank you for your question. Then I'll take the Semina.

Richard Saynor: Perhaps, Remco, do you want to take the first and third question? Sorry. Thank you, James. Thank you for your question. Then I'll take the Semina.

Speaker #5: Yeah. James good to hear your voice again. Good morning to you. Indeed, for Germany, we see this for the moment only as an implication for '26.

Remco Steenbergen: James, good to hear your voice again. Good morning to you. Indeed, for Germany, we see this for the moment only as an implication for 2026. These tenders have continued for 2027, 2028. Germany is relooking at the process here. Clearly, to save money in the healthcare systems, you need more generics and biosimilars, right? As that participation of us in the market grows faster, it clearly has a benefit. Germany has different channels. Tenders is one of them. The tenders have also big opportunities with regards to volume. We become a larger player. We can provide also the volume. These dynamics are something which we see in every market in Europe, and we will deal with it. For the moment, we don't see the price erosion we have seen now in Germany in 2026 to continue in 2027. We don't see that.

Speaker #5: These tenders have continued for '27 and '28. Germany is re-looking at the process here. Clearly, to save money in the healthcare system, you need more generics and biosimilars, right?

Speaker #5: And as our participation in the market grows faster, it clearly has a benefit. Germany has different channels—tenders is one of them.

Speaker #5: The tenders also have big opportunities with regard to volume. They become a larger player. We can also provide the volume. So these dynamics are something which we see in every market in Europe.

Speaker #5: And we will deal with it. But for the moment, we don't see the price erosion. We have seen now in Germany in '26 and expect it to continue in '27.

Speaker #5: We don't see that. On the last question—yeah, we see the EBITDA margin improvement continuing year on year through different dynamics. One is the biosimilar.

Remco Steenbergen: On the last question, we see the EBITDA margin improvement to continue year-on-year through different dynamics. One is the biosimilar part of the portfolio to keep on growing, and biosimilars have on average, a higher margin. That trend will not change. Secondly, the recovery on our fixed cost structure will still help us in the leverage of the cost. The mix between gross margin and TFC, that will vary depending year-on-year, quarter-on-quarter of the different dynamics. Both of them will play a role also in the coming years ahead. That's part of our medium guidance. I have to say very boringly, it's the same story and nothing has changed here. Richard, over to you for the second.

Speaker #5: Part of the portfolio will continue to grow. And biosimilars have, on average, a higher margin. That trend will not change. Secondly, the recovery of our fixed cost structure will still help us leverage costs.

Speaker #5: The mix between gross margin and TFC will vary depending on the year or quarter, due to different dynamics. But both of them will continue to play a role in the coming years ahead.

Speaker #5: That's part of our midterm guidance. I have to say, very boringly, it's the same story and nothing has changed here. Richard, over to you for the second.

Speaker #2: Yeah, thank you so much. On Senna, we have not disclosed what presentations. Again, we still have the ambition that we will get an approval and launch in Canada this year.

Richard Saynor: Yeah, thank you so much. On semaglutide, we've not disclosed what presentations. We still have the ambition that we will get an approval and launch in Canada this year. It's also worth pointing out we're not dependent on one partner. We have a numerous partner strategy, it gives us more capacity, it gives us more flexibility, and it gives us better confidence in terms of our ability to supply this market. Bear in mind, in Canada, we're in a very strong position. We have an extremely strong relationship, I think we're the number two company in Canada. It becomes a very interesting opportunity, but clearly, no doubt we will have many conversations about this once we're in the market over the next few quarters. Thank you.

Speaker #2: It's also worth pointing out we're not dependent on one partner. We have a numerous-partner strategy, so it gives us more capacity, and it gives us more flexibility.

Speaker #2: And it gives us better confidence in terms of our ability to supply this market. Also, bear in mind, in Canada we're in a very strong position.

Speaker #2: We have an extremely strong relationship, I think, with the number two company in Canada there. So it becomes a very interesting opportunity.

Speaker #2: But clearly, no doubt, we will have many conversations about this once we're in the market over the next few quarters.

Speaker #6: Thank you.

Speaker #3: Our next question comes from James Vane-Tempest at Jefferies. Please unmute your line by pressing star six and ask your question.

Operator 3: Our next question comes from James Vane-Tempest at Jefferies. Please unmute your line by pressing star six and ask your question.

Operator: Our next question comes from James Vane-Tempest at Jefferies. Please unmute your line by pressing star six and ask your question.

Speaker #4: Yeah, hi. Thanks for taking my questions. Two if I can, please. It's James at Jefferies. I'll start with the first one and then come with a follow-up.

James Vane-Tempest: Yeah. Hi, thanks for taking my questions. Two if I can please, it's James from Jefferies. I'll lead with the first one, come with a follow-up. You talked more about there's some negative pricing of mid-single digit from low to mid. There's been questions already on Germany, I was sort of wondering, thinking about biosimilars, are there any particular you're having to discount more to win share versus what you previously thought? Just to kind of raise the pricing pressure this first part of the year.

Speaker #4: You talked more about there’s some negative pricing of mid-single digit, from low to mid. I mean, there’s been questions already on Germany, but I was sort of wondering—thinking about biosimilars—are there any in particular where you’re having to discount more to win share versus what you previously thought? Just to kind of raise the pricing pressure at this first part of the year?

Speaker #6: Remco, do you want to?

Remco Steenbergen: Remco, Yeah, take it. There's nothing more particularly to mention than other than North America, which always has a higher price erosion when we launch, just the sheer volume of it makes the mix having a bigger impact. Germany, I just explained as well. There's nothing else which is there. You still have to keep in mind, there's such a focus on this relatively price erosion, which is a bit weird on balance because we look, of course, at the mix and the profitability on a product-by-product level, biosimilars are very profitable, or let's say more profitable than the generics. This is part of the portfolio. We look more at the mix of the products we sell and the profitability of that mix. Clearly that's improving.

Richard Saynor: [Remco to]

Remco Steenbergen: Yeah, take it. There's nothing more particularly to mention than other than North America, which always has a higher price erosion when we launch, just the sheer volume of it makes the mix having a bigger impact. Germany, I just explained as well. There's nothing else which is there. You still have to keep in mind, there's such a focus on this relatively price erosion, which is a bit weird on balance because we look, of course, at the mix and the profitability on a product-by-product level, biosimilars are very profitable, or let's say more profitable than the generics. This is part of the portfolio. We look more at the mix of the products we sell and the profitability of that mix. Clearly that's improving.

Speaker #5: Yeah, I take note of it. Nothing more particularly to mention, other than North America, which always has a higher price erosion when we launch, and just the sheer volume of it makes it, in the mix, have a bigger impact.

Speaker #5: Germany, as I just explained as well, there’s nothing else there. You still have to keep in mind that there's such a focus on this relative price erosion, which is a bit weird on balance, because we look, of course, at the mix and the profitability on a product-by-product level.

Speaker #5: And biosimilars are very profitable, or let's say, more profitable than generics. This is part of the portfolio. So we look more at the mix of the products we sell and the profitability of that mix.

Speaker #5: And clearly, that's improving. You see that also in our gross margin, where we have the 200 basis points improvement year-on-year in our profitability.

Remco Steenbergen: You see that also in our gross margin where we have the 200 basis points improvement year on year in our profitability. That's something we expect to continue also in the coming years. Also with what Richard said, that before the outlook for 2027 and 2028, we see a good volume growth. We see this mix to continue in the P&L, therefore, we have also a very positive outlook on the profitability, and that we expect the margin to continue.

Speaker #5: And that's something we expect to continue also in the coming years. So, also with what Richard said, for the outlook for '27 and '28, we see good volume growth.

Speaker #5: We see this mix continuing in the P&L. Therefore, we also have a very positive outlook on profitability, and we expect the margin to continue.

Speaker #2: I need to perhaps capture a couple of comments on Germany. I mean, first, obviously, this is running related to the SIG funds. And actually, the law that was driving substitution has been reversed.

Richard Saynor: I need to perhaps add just a couple of comments on Germany. First, obviously, this is only related to the SIG funds, actually, that the law that was driving substitution has been reversed. I think eventually substitution will arrive in Germany, actually, I'm net positive. If you look at our pipeline, the depth and breadth of our pipeline means that as we bring more modest-sized biologics to the market, we see much more rapid uptake and penetration. Actually, I could argue it's net benefit to the company overall, and clearly, I think given the overall strength in the German market. As Remco said, I tend to not over-index relative price erosion. I know we get a lot of questions, and I understand why.

Speaker #2: I think eventually, substitution will arrive in Germany. But actually, I'm net positive. You look at our pipeline—the depth and breadth of our pipeline means that as we bring more modest-sized biologics to the market, we see much more rapid uptake and penetration.

Speaker #2: So actually, I could argue it's a net benefit to the company overall. And clearly, I think, given the overall strength in the German market, and as Remco says, I tend to not over-index relative price erosion.

Speaker #2: I know we get a lot of questions. I understand why. But it's not something I look at so much, because as we launch more biologics, you're naturally starting from a much higher starting point.

Richard Saynor: It's not something I look at it so much because as we launch more biologics, you're naturally starting from a much higher starting point, and you're always going to discount percentage-wise, much more. It doesn't materialize when it flows through to the P&L. I know you all look at it and model it, but I look at it slightly differently.

Speaker #2: And you're always going to discount, percentage-wise, much more. It doesn't materialize when it flows through to the P&L. But I know you all look at it and model it.

Speaker #2: But I look at it slightly differently.

Speaker #4: Thank you. And then just to follow up on your guidance construct, and particularly thinking about phasing for this year—the business clearly accelerating into Q2 to 7%.

James Vane-Tempest: Thank you. Just to follow up on your guidance construct, and particularly thinking about phasing for this year. Business clearly accelerating into Q2 to 7%, if we think about then momentum as we move through Q3 and Q4, is an exit rate of 10% reasonable this year, just given the acceleration and the new launches ramping up? Related to margins, around 100 basis points, and you've done 90 in H1, with this sort of momentum you've got in H2. What would you needed to have seen to perhaps change this from around 100 basis points to greater than 100 basis points, just to sort of help us understand what held you back there? Is that how we should really be thinking about it this year? Thank you.

Speaker #4: But if we think about momentum as we move through Q3 and Q4, is an exit rate of 10% reasonable this year, just given the acceleration and the new launches ramping up?

Speaker #4: And then, related to margins—around 100 basis points—and you've done 90 in the first half, with this sort of momentum you've got in the second half, what would you need to have seen to perhaps change this from 'around 100 basis points' to 'greater than 100 basis points,' just to sort of help us understand what held you back there?

Speaker #4: Or is that how we should really be thinking about it this year? Thank you.

Speaker #2: Thank you so much, James. I'll let Remco answer that one.

Richard Saynor: Thank you so much, James. I'll let Remco answer that one.

Speaker #5: James, very fair question. What we have said before, and also at the beginning of the year, is correct. We believe, first of all, that H2 will have higher growth than H1, which, of course, is not a surprise.

Remco Steenbergen: James, very fair question. What we have said before and also at the beginning of the year, correct? We believe, first of all, that H2 will have a higher growth than H1, which of course is not a surprise. We go to end on mid to high, that is higher than the 5%, without quantifying that exactly. We need to come with higher points in H2, which we clearly have on the radar screen. Still have to be seen, if you think about the phasing in H2, that we expect Q4 to be higher than Q3, something similar as we have seen in H1 between Q1 and Q2. We also there have to keep in mind that in Q3, we still expect some headwinds from the anti-infectives. You see that we had some anti-infectives headwinds in Q1.

Speaker #5: Because to end on May 2 high, that is higher than the 5% without quantifying that exactly. So we need to come up with higher points in H2, which we clearly have on the rate of, of screen.

Speaker #5: But still, it has to be seen if you think about the phasing in H2—that we expect Q4 to be higher than Q3—something similar to what we have seen in H1 between Q1 and Q2.

Speaker #5: We also, there, have to keep in mind that in Q3, we still expect some headwind from the anti-infectious issues—that we had some anti-infectious headwind in Q1.

Speaker #5: In Q2, we didn't have much, but there is still some impact from that in Q3, which also makes the Q3 top-line growth a little bit lower, although, underlying, the quality of the sales is there.

Remco Steenbergen: In Q2, we didn't have much, but there is still some impact of that in Q3, which also makes the Q3 top line growth a little bit lower, although underlying and the quality of the sales is there. Then at Q4, we expect a further step up, we come to the mid to high. I can't comment on an exact percentage, Craig. That's not how we give the guidance. Sorry about that. With regard to the profitability, indeed, if you want to come $100 for the full year, it's $90 in H1, the average would be then $110 in H2. We clearly stand behind that and be very confident on the current trend, the way the business is going, the mix is going. That we can make again that step up as in line with our commitment.

Speaker #5: And then at Q4, we expect a further step up, so we come to the mid to high. I can't comment on an exact percentage, correct?

Speaker #5: That is not how we give the guidance. So sorry about that. With regard to the profitability, indeed, if you want to come to 100 for the full year, it's 90 in H1.

Speaker #5: The average would then be 110 in H2. We clearly stand behind that. I'd be very confident, given the current trend, the way the business is going, and the way the mix is going.

Speaker #5: That we can make, again, that step up in line with our commitment. And, by the way, that's not something we only expect in 2027.

Remco Steenbergen: By the way, that's not something we only expect in 2027. Our midterm guidance for 2028 stands very in full to the 24% to 26% then. Also that trend we expect to continue in each of the coming years. It's not only a 2026, it's also the 2027, also the 2028.

Speaker #5: Our midterm guidance for '28 stands there in full. So the '24 to '26 stands. So also, that trend, we expect to continue in each of the coming years.

Speaker #5: So, it’s not only for ’26; it’s also for ’27 and for ’28.

Speaker #4: Thank you.

Richard Saynor: Thank you.

Speaker #1: Our next question comes from Nicholas Pollard at Kepler Cheuvreux. Please unmute your line.

Operator 3: Our next question comes from Nicolas Pauillac at Kepler Cheuvreux. Please unmute your line.

Operator: Our next question comes from Nicolas Pauillac at Kepler Cheuvreux. Please unmute your line.

Speaker #4: Hi, guys. Thanks for taking my question. Maybe just a quick follow-up on what was asked before about the, let's say, long-term profitability of biosimilars.

Nicolas Pauillac: Hi, guys. Thanks for taking my question. Maybe just a quick follow-up on what was asked before on the, let's say, long-term profitability of biosimilar. Would be interesting to have your view on what's this time instead of the, let's say, revenue generation, but rather the profitability of this biosimilar as time passed on, because I would assume that the competition reduced. Do you get some leverage maybe on SG&A or things like that on this product?

Speaker #4: I would be interested to have your view on this time, instead of, let's say, revenue generation, but rather the profitability of this biosimilar as time passes on.

Speaker #4: Because I would assume that the competition reduced, and so do you get some leverage maybe on HDNA or things like that on this product?

Speaker #4: And then also, when you say that you are looking at the, let's say, golden decade and so adding new layer of growth on this biosimilar division, is there a point in which you see that there might be some let's say, manufacturing competition between all of the biosimilar franchise or the new investment plan that you have done has been done thinking that, for instance, you would keep growth on the mid top for the next 10 years this year?

Nicolas Pauillac: Also, when you say that you are looking at the, let's say, golden decade, adding new layer of growth on this biosimilar division, is there a point in which you see that there might be some, let's say, manufacturing competition between all of the biosimilar franchise or the new investment plan that you have done has been done thinking that, for instance, you will keep growth on the mid top for the next 10 years? Yeah.

Remco Steenbergen: Let me take you a little bit to a higher level, if I may, Craig. We have a generics and a biosimilar business, and they're very synergetic, Craig. The advantage we have with a very high generics business, that we have an infrastructure commercially, but also for our overhead, our G&A, which we can fully leverage. It's not that the biosimilar attracts a different kind of commercial cost on top of or extra general administrative cost. This is a bit of the really good position we have versus any other company which is out there. If you start only with biosimilars, you don't have that big infrastructure which you can leverage, which we can. The margin improvement you have to see over the coming years comes again from biosimilars being a large part of the portfolio and having on average a higher margin.

Speaker #5: Let me take you a little bit to a higher level, if I may, correct? So, we have a generic and biosimilar business, and they're very synergetic, correct?

Speaker #5: So, the advantage we have with a very high generics business is that we have an infrastructure commercially, but also for our overhead, our G&A, which we can fully leverage.

Speaker #5: So, it's not that the biosimilar attracts a different kind of commercial cost on top of, or extra general and administrative cost. And this is a bit of the really good position we have versus any other company which is out there.

Speaker #5: Because if you start only with biosimilars, you don't have that big infrastructure which you can leverage, which we can. So, the margin improvement you have to see over the coming years comes, again, from biosimilars being a larger part of the portfolio and having, on average, a higher margin.

Speaker #5: And the whole infrastructure, which we can further leverage, and also we are driving productivity in different angles. Now, what later, of course, comes with the infrastructure we have, with what we all built in Slovenia—you get also that benefit of the full vertical integration over the coming years.

Remco Steenbergen: The whole infrastructure, which we can further leverage. Also, we are driving productivity in different angles. Now, what later of course comes with the infrastructure we have, with what we all built in Slovenia, you get also that benefit of the full vertical integration over the coming years. Then we get new bio in the portfolio, where probably we will have less competition. All that equation makes this very positive over the years to come. With now quite a nice portfolio of products with 36 in, 13 launched in the market, there is so much opportunity, Craig. We know that with the $650 billion of LOE over the coming 10 years, that can only grow further. We have a great infrastructure to leverage. Percentage-wise, we also shouldn't forget the faster biosimilar growth, the larger part it becomes of the portfolio.

Speaker #5: And then we get new bios in the portfolio, where probably we have a lot less competition. So all that equation makes this very positive over the years to come.

Speaker #5: And with now quite a nice portfolio of products, with 36 in, 13 launched in the market. And there's so much opportunity with the $650 billion of LOE over the coming 10 years.

Speaker #5: That can only grow further. And we have a great infrastructure to leverage, and percentage-wise, we also shouldn't forget the faster biosimilar growth; the larger part it becomes of the portfolio.

Speaker #5: So the average growth for the group will also go up, correct? In total. So it's all reinforcing together. Sorry to make it a bit higher.

Remco Steenbergen: The average growth will also for the group go up, Craig, in the total. It's all reinforcing it together. Sorry if I could go a bit higher.

Richard Saynor: Yeah. If you then think about the golden decade, I think it's always a little bit counterintuitive, but actually the competitive intensity is going down, not going up. You've got something like 100 biologics coming off patent in the next 10 years. The average number of competitors per biologic is maybe one or two. Yes, everyone is focused on the denosumabs and the pembrolizumab, we've seen 10 players in denosumab, I think we've demonstrated our capability to win in those sorts of markets. Also now you see some of the more modest size LOEs, maybe $2 billion and $3 billion, we just don't see any competitors and all very few competitors. I think leveraging our scale, leveraging that, I think the other part of your question is then the infrastructure and Remco touched on it.

Speaker #4: Yeah, and if you then think about the

Speaker #2: Golden decade—I think it's always a little bit counterintuitive. But actually, the competitive intensity is going down, not going up. So you've got something like 100 biologics coming off patent in the next 10 years.

Speaker #2: So, the average number of competitors per biologic is maybe one or two. And so yes, everyone is focused on the denosumabs and the Pembros.

Speaker #2: And we've seen 10 players in denosumab, and I think we've demonstrated our capability to win in those sorts of markets. But also now you see some of the more modest size LOEs—maybe $2 or $3 billion—but we just don't see any competitors.

Speaker #2: And all very, very few competitors. So I think leveraging our scale, leveraging that. And I think the other part of your question is then the infrastructure—and Remco touched on it—but broadly, we're investing now in the capacity in terms of manufacturing, both set-batches, large and small, and the continuous manufacturing platforms that we have in France.

Richard Saynor: Broadly, we're investing now in new capacity in terms of manufacturing, both fed-batch, large and small, and the continuous manufacturing platforms that we have in France gives us really the optionality to supply that network. I think we're in such a nice position with this combination of mature assets and then the strengthening opportunity as we look into our golden decade, which is why we describe this as Sandoz's golden decade, not the industry's golden decade.

Speaker #2: It really gives us the optionality to supply that network. So I think we're in such a nice position with this combination of mature assets and the strengthening opportunity as we look into our golden decade, which we describe as Sandoz's golden decade—not the industry's golden decade.

Speaker #1: Our last question comes from Florence Cespedes at Otto EHF. Please unmute your line.

Operator 3: Our last question comes from Florent Cespedes at Oddo BHF. Please unmute your line.

Operator: Our last question comes from Florent Cespedes at Oddo BHF. Please unmute your line.

Florent Cespedes: Good morning. Florent Cespedes from Oddo BHF. Can you hear me?

Speaker #6: Good morning. Florence Cespedes from Otto EHF. Can you hear me?

Speaker #2: Just about. You're very faint, but thank you, Florence.

Richard Saynor: Just about. You're very faint, but thank you, Florent.

Speaker #5: If you could speak up a little bit, please.

Remco Steenbergen: If you could speak up a little bit.

Speaker #6: Okay, so thank you very much for taking my questions. Two quick ones, if I may. First, for Remco, regarding slide 20 and the one-off—could we have a little bit more color on how we should think about the rest of the year for the legal costs and the software costs as well?

Florent Cespedes: Okay. Thank you very much for taking my questions. Two quick ones, if I may. First from Remco, regarding the Slide 20 in the one-off, just could we have a little bit more color how we should think about the rest of the year for eventually the legal costs and the software costs as well? Regarding the underlying one-off costs, we understand that it's Asclera that you have reiterated that you will record $8.3 billion costs this year. How should we think about this underlying one-off costs going forward? Is it fair to assume that the transformation will be stable or separation will go down? Any color on this one would be great. My second question, it's a big picture question for Richard. When we look at the pipeline, the assets on the pipeline, most of the long-term projects are in-house.

Speaker #6: And regarding the underlying one-off costs, we understand that it's clear that you have reiterated that you will record $0.3 billion in costs this year.

Speaker #6: But how should we think about these underlying one-off costs going forward? Is it fair to assume that the transformation will be stable, or that separation costs will go down?

Speaker #6: So any color on this front would be great. And my second, let's say, big-picture question for Richard: when we look at the pipeline, the assets in the pipeline—most of the long-term projects are in-house.

Speaker #6: So, is it fair to assume that, going forward, this will have a positive impact on the product mix and on the margin? Because in the short term, we see more projects in the pipeline which are partners.

Florent Cespedes: Is it fair to assume that going forward, this will have a positive impact on the product mix and on the margin? Because in the short term, we see more projects in the pipeline with short partners. Any color on this one would be great. Thank you.

Speaker #6: So any color on this front would be great. Thank you.

Speaker #2: Thank you very much, Florence. Remco, I'll let you go first and then I'll close.

Richard Saynor: Thank you very much, Francois. Remco, I'll let you go first, and then I'll close.

Richard Saynor: Thank you very much, Florent. Remco, I'll let you go first, and then I'll close.

Remco Steenbergen: Good. Thank you, Florent, for this question. First on the underlying one-offs, about $150 million in H1. We guided for the full year around $300 million. We still stand behind that, so nothing changed. We expect as well in 2027 that to go further down, right in line with the guidance we have given. There we deliver exactly what we said. Software has to do with a bit of the strange accounting rules around SAP in the cloud, where somehow that cannot be capitalized and aligned with other companies. The fact that we can't capitalize, we show it separately. It's a similar number for the full year as it been last year with our SAP introduction. That will also remain for the coming years whilst we complete that software upgrade with our SAP systems. The legal element, you have to remind that it's a legacy.

Speaker #5: Good. Thank you, Florence, for this question. First, on the underlying one-offs, about $150 million in H1; we guided for the full year around $300 million.

Speaker #5: We still stand behind that, so nothing has changed. And we expect as well, in 2027, for that to go further down, correct? In line with the guidance we have given.

Speaker #5: So there we deliver exactly what we said. Software has to do with a bit of the strange accounting rules around the SAP in the cloud, where somehow that cannot be capitalized in alignment with other companies.

Speaker #5: The fact that we can't capitalize, we show it separately. It's a similar number for the full year as it has been last year, with our SAP introduction.

Speaker #5: And that will also remain for the coming years while we complete that software upgrade with our SAP systems. The legal element, we have to remind, is a legacy.

Speaker #5: It's something which comes from more than 50 years ago. That was also from our predecessors when we were cleaning up that mess. H1 is the big impact.

Remco Steenbergen: It's something which comes from more than 50 years ago that was also from our predecessors, and we're cleaning up that mess. H1 is the big impact, we don't expect at this point in time any material impact in H2.

Speaker #5: And we don't expect, at this point in time, any material impact in H2.

Speaker #2: And thank you, Florence, for your final question. I think you're absolutely right. Clearly, a larger proportion of our pipeline will come from our own in-house network.

Richard Saynor: Thank you, Florent, for your final question. I think you're absolutely right. Clearly, a larger proportion of our pipeline will come from our own in-house network. I wouldn't say it's an and rather than an or. Clearly, we are really the partner of choice in this industry because we can give share, we have this capability. Also, I think it will increasingly become a mode. It's interesting, a lot of companies claim to be biosimilar companies. Quite frankly, just in licensing a few products doesn't make you a biosimilar company. In fact, we have a broad capability in terms of technical development, manufacturing, legal, commercial, really means we are in such a unique position to leverage these huge opportunities we set up as we look forward. Very pleased to see our pipeline expanding.

Speaker #2: I wouldn't say it's an "and" rather than an "all." So clearly, we are really the partner of choice in this industry because we can give share.

Speaker #2: We have this capability. And also, I think it will increasingly become a mode. It's interesting—a lot of companies claim to be biosimilar companies, but quite frankly, just in-licensing a few products doesn't make you a biosimilar company.

Speaker #2: In fact, we have a broad capability in terms of technical development, manufacturing, legal, and commercial. This really means we are in such a unique position to leverage these huge opportunities we look forward to.

Speaker #2: So, very pleased to see our pipeline expanding. I would still look to continue to work with partners, and that means we can then service more and more portions.

Richard Saynor: I would still look to continue to work with partners, and that means then we can service more and more portions. You're absolutely right. Clearly, it will gain. It's another positive impact on margin growth in the midterm, because clearly we're not having to share revenues with third parties as we develop products in-house. I think with that's our final question. Look, thank you so much. Been a pleasure to give you our performance for H1. I look forward to seeing many of you in London at the Capital Markets Day. Look forward then to giving you more clarity about how we see the business coming. Hopefully, you got a sense in terms of our confidence in the business in the second half of this year and also particularly our confidence as we go into 2027 and 2028.

Speaker #2: But absolutely, you're absolutely right. Clearly, it's another positive impact on margin growth in the midterm because we're not having to share revenues with third parties.

Speaker #2: As we develop products in-house. So I think with that, that's our final question. So, look, thank you so much. It's been a pleasure to give you our performance for H1.

Speaker #2: I look forward to seeing many of you in London at the Capital Markets Day. I look forward then to giving you more clarity about how we see the business coming.

Speaker #2: Hopefully, you got a sense of our confidence in the business in the second half of this year, and also particularly our confidence as we go into 2027 and 2028.

Speaker #2: Thank you so much for giving us your time today, and have a good day.

Richard Saynor: Thank you so much for giving us our time today. Good day.

Operator 3: This concludes today's call. Thank you everyone for joining. You may now disconnect. Goodbye.

Operator: This concludes today's call. Thank you everyone for joining. You may now disconnect. Goodbye.

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