Craig Marks: Richard will begin with the highlights of our sales performance and an update on the business, including the continued expansion of our pipeline and further enhancements of our biosimilar capability.
Richard Saynor: Together, these excellent developments will further strengthen our in-house capabilities and support our long-term growth ambitions. Looking at our top-line performance, net sales grew by 5% in the quarter, but at an underlying level by 7% when excluding the anti-infectives B2B business. It is worth noting that we do not expect to see a material B2B headwind in Q4 or for next year.
Richard Saynor: Biosimilars continue to be our growth engine, delivering another double-digit performance in the period, whilst representing 34% of net sales. We are delighted with the underlying performance of the business. Demand is strong, our launches are performing well, and we recently strengthened our balance sheet, and we are delivering in line with our Bio100. Today, we have narrowed our 2026 net sales guidance to 5% to 6% and upgraded our core EBITDA margin guidance for the year to 23% to 23.5%.
Richard Saynor: Importantly, today's update to guidance does not change our previously communicated outlook to 2028 or our recently announced outlook to 2030. Remco will take you through the full-year guidance later. We will enter 2027 with strong momentum as we capture more market share, launch more medicines for more patients around the world, and expand our pipeline further and deliver more growth. Now, let's look at the sales performance in more detail, starting with slide 6.
Richard Saynor: Q3 was another period of strong underlying growth for Sandoz, with net sales of $2.9 billion. Once again, biosimilars were the standout performer, growing by 17%. This reflects continued momentum from the established portfolio, as well as the excellent contributions from our recent launches. Excluding the B2B impact, generic sales grew by 2%, in line with our long-term trend. From the regions, North America was the standout in the quarter, with growth of 20%.
Richard Saynor: Please turn to slide 7. I am so pleased to see the progress that we are making in generics. We now have the leading global market share in generics, accompanying our number 1 position in biosimilars. This is a true milestone for our business. We continue to see strong execution across our portfolio. In GLP-1s, we made our first shipments to our partner in Brazil, while we achieved regulatory approval for Sandoz semaglutide in Canada, our generic version of Ozempic.
Richard Saynor: Our pipeline contains more than 300 generics, and our disciplined portfolio strategy is focused on the most attractive LOEs, particularly in oral solids and injectables. We are targeting around 70% of generic LOE opportunities by value, and we continue to convert our huge pipeline into new medicines. We have launched around 270 medicines alone so far this year. Overall, this demonstrates the continued strength of our generics engine, combining excellent market share progress, disciplined portfolio management, and a deep pipeline and consistent launch execution. Challenging conditions in the B2B market for penicillin API sales still remain.
Richard Saynor: We continue to urge the European Commission to investigate alleged dumping and consider anti-dumping duties or tariffs to safeguard European antibiotic supply. We also continue to advocate structural reforms that ensure a level playing field for European producers. Now, let's turn to biosimilars on slide 8. Our industry-leading biosimilar pipeline continues to expand. It includes six assets in regulatory review or yet to launch, seven in clinical development, 14 in technical development, and nine in early development. We also reached another milestone with the recent EU regulatory submission of our pertuzumab biosimilar. As I said at the CMD, building the next generation of biosimilars requires both strong in-house capabilities and selective partnerships.
Richard Saynor: The continued expansion of this pipeline demonstrates how we are combining these two approaches. Another important point is that we are building a broad and diversified pipeline of future opportunities across multiple therapeutic areas. Now, let's look at how some of the biosimilars in our portfolio are performing. Starting with Hyrimoz, we continue to see strong performance. Our global biosimilar market share has increased now to 23%, supported by broad preferred payer access in the US and continued volume momentum in Europe.
Richard Saynor: Turning to Pyzchiva, we continue to hold the number 1 position across the European markets. Our biosimilar market share now stands at 25%, while overall biosimilar penetration of the ustekinumab market has increased significantly beyond 50%. Together, these performances demonstrate both the strengths of our established biosimilar portfolio and our ability to grow alongside increasing biosimilar adoption. Please turn to slide 10.
Richard Saynor: Moving to Tyruko, our European market share remains stable at 17%. We continue to see opportunities for further geographic expansion, including our recent launch in Saudi Arabia. Omnitrope continues to demonstrate the durability of our established biosimilar portfolio, maintaining a strong global market position with a 36% market share. Its established daily treatment profile remains resilient, and a more sustainable US distribution model provides a stronger foundation for future growth opportunities.
Richard Saynor: Now, please turn to slide 11. Let's now look at some of our more recent launches. Starting with WYOST and Jubbonti, we continue to see very strong commercial momentum in the US. Jubbonti has already achieved a 56% biosimilar share, and WYOST a 49%. The European launch continues to advance, whilst the international rollout is also progressing well, including in Brazil and Australia.
Richard Saynor: Turning to Afqlir, the European launch is progressing very well, supported by strong execution and favorable competitive dynamics. Afqlir is now available in 22 European markets with a 73% biosimilar market share, and has become an important contributor to our European biosimilar growth. The launch of Enzeevu in the US is exactly in line with our expectations, providing an additional opportunity to build on our strong European start. These launches illustrate what we discussed at the CMD, the ability to move successfully from pipeline development into launch execution and global commercial scale. Please turn to slide 12.
Richard Saynor: As we build towards Bio100, partnerships will be an important complement to our in-house development and manufacturing capabilities. Our collaboration with Henlius includes four initial programs covering numerous assets. Henlius will lead development and manufacturing, whilst we will leverage our global commercial reach. Our partnership with mAbxience adds our first hemophilia biosimilar.
Richard Saynor: Again, mAbxience brings development and manufacturing capabilities, while Sandoz holds exclusive global commercialization rights. These partnerships increase the breadth and opportunity of our pipeline whilst allowing us to concentrate our own resources where we believe they can create the greatest value. Please turn to slide 13. Alongside the expansion of our pipeline, we are building the manufacturing capabilities needed to support the next phase of biosimilar growth. In Lendava, we've opened our advanced biosimilar drug substance manufacturing center, adding 120,000 liters of large-scale fed-batch capacity.
Richard Saynor: In Ljubljana, we're investing in new drug substance facility, focused on disposable fed-batch technology. This will add 8,000 liters of biologic drug substance capacity by 2029 and give us an additional in-house capability for low to medium volume production, complementing our continuous and high-volume technologies. Together, these investments provide greater flexibility and control of our capacity and further strengthen our vertically integrated biosimilar network. This is an important practical element of Bio100. As the portfolio grows, we'll have plenty of capacity to support it. With that, I will hand over to Remco on slide 14.
Remco Steenbergen: Thank you, Richard, and hello, everyone. Let me start with our 9-month net sales performance on slide 15. Net sales increased by 8% in US dollars and with 5% in constant currencies. Excluding the B2B impact Richard mentioned before, underlying net sales growth was 6% at constant currencies. The major driver was volume demand, while price erosion reflected portfolio mix and market dynamics. Most importantly, biosimilars continue to drive growth, supported by both successful recent launches and strong demand across the whole established portfolio. Please turn to slide 16.
Remco Steenbergen: Now, let's have a look at the performance by business. Our underlying momentum continues to be strong, but we did face some temporary headwinds in the quarter. German market dynamics were a bit more challenging than we originally expected, while the additional biosimilar volume amount that we had anticipated could not be fully matched by supply. In the quarter, the 5% growth included biosimilars with up to 20% growth. They now represent 34% of total net. Underlying net sales growth in the quarter was +7% when excluding the AI B2B impact. Underlying generic sales in the quarter were up by 2%.
Remco Steenbergen: While we ended up facing the same B2B impacts we saw in Q1, we do not expect further impacts from Q4 onwards. Please turn to slide 17. Let's turn to the regions. North America was again the strongest contributor to growth in Q3, driven by an excellent biosimilars performance. Europe continued to deliver increased market share, including significant gains within biosimilars. As already mentioned, performance in Germany in the quarter was more challenging than we expected. Stronger volume demand in the third quarter also resulted in short-term biosimilar supply constraints.
Remco Steenbergen: In international, underlying growth is 5%, despite impacts from active portfolio rationalization, divestment activity, and the supply constraints. Now, let's have a look at the debt maturity profile on slide 18. Our balance sheet remains strong and continues to provide financial flexibility. We recently issued a 500 million euro bond with a 12-year maturity, extending the average maturity of our debt profile.
Remco Steenbergen: Importantly, we continue to maintain attractive funding costs, with the expected average interest rate on long-term debt remaining below 4%. We continue to enjoy investment-grade ratings with positive outlooks from both Moody's and Standard & Poor's. This framework gives us a strong foundation as we continue to invest in our pipeline, manufacturing network, and future growth opportunities. Please turn to slide 19. Finally, let me turn to our guidance for 2026.
Remco Steenbergen: We have narrowed our expectations for net sales growth to 5% to 6% at constant currencies, compared with our previous guidance of mid to high single-digit growth. This primarily reflects the constraints in biosimilar supply and strong volume demand, as I mentioned earlier, as well as the stronger-than-expected adverse market dynamics in Germany. As Richard mentioned before, our confidence in 2027 is very strong.
Remco Steenbergen: Importantly, the net picture for 2026 is also positive, as we have upgraded today our expectations for the core EBITDA margin for 2026, which we now anticipate being in the range of 23.0% to 23.5%. This compares with our previous expectation of around 100 basis points year-on-year expansion. If you remember, our margin last year was 21.7%. This new guidance has increased our expectations for core earnings per share this year. Our assumption for pricing remains the mid-single-digit slide.
Remco Steenbergen: Based on recent spot rates and assuming these prevail for the remainder of the year, we continue to anticipate an approximate 2 percentage point FX tailwind to net sales, with no material impact on the core EBITDA margin. With that, I hand back to Richard. Please turn to slide 20.
Richard Saynor: Thank you so much, Remco. Now, please turn to slide 21. Let me conclude with the bigger picture. Last month, we set out our ambition for the next decade and introduced Bio100. By 2035, our goal is to more than double our net sales compared with 2025 before any additional upside from GLP-1s, whilst delivering a core EBITDA margin of more than 30%. Today, you can already see the progress that we are making here. Through Bio100, our ambition is to build a portfolio of more than 100 biosimilars by 2040.
Richard Saynor: Our biosimilar pipeline continues to expand, and we are investing in the manufacturing capabilities required for the next wave of growth. Recent launches are building strong positions in their respective markets, and we continue to broaden our opportunities through both in-house development and partnerships. At the same time, our generics business provides a strong foundation while we continue to advance new-term growth opportunities, including GLP-1s. Together, this reinforces our confidence in our long-term growth prospects and our ability to continue delivering on our purpose on pioneering access for patients. Please turn to slide 22.
Richard Saynor: Before I move to questions, we look forward to welcoming many of you to our Slovenia sites next month for a firsthand look at our new biosimilar capabilities. We will visit our recently opened development center in Ljubljana and our drug substance manufacturing facility in Lendava. The visit will demonstrate how our investments are bringing Bio100 to life through an integrated network spanning development and manufacturing. We look forward to seeing you there. Thank you for listening. Please turn to slide 23, and I will ask the operator to open the lines for questions.
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, or if you have dialed in, please press star 9 to enter the queue. Once your name has been announced, please unmute and ask your 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 9. Thank you, and a moment for the first question, please. Our first question comes from Sophia Graeff Buhl Nielsen from J.P. Morgan. Please unmute your line and ask your question.
Sophia Graeff Buhl-Nielsen: Good morning. Thanks for taking my questions. One on the guidance. Given you do not anticipate any further headwinds from the B2B API business in Q4, and you should also see the benefit of the launch of Enzeevu in the US and GLP-1s, how should we think about the lower end of your top line guidance? Why would that be in the range of the 5% performance that we have seen year to date?
Sophia Graeff Buhl-Nielsen: And just in terms of the recent supply constraints that we have seen, will this have any implications for the upcoming Enzeevu launch in the US? And how can you ensure that this will not become a recurrent issue for Sandoz ahead of the ramp-up of the Slovenia facilities? Could these provide you any flexibility in terms of supply before the end of the decade? Thank you.
Richard Saynor: Thank you so much for your questions. If I comment on the second two parts, the second two questions, and then I will let Remco comment on the guidance comment. First of all, we see no issues or constraints with the Enzeevu launch, but really, that will be pretty soft this side of the year, but we see quite a very attractive opportunity as we go into 2027.
Richard Saynor: So again, our confidence around that, and we are quite excited about that opportunity in the US, but really, that impact flows through mainly into 2027. And the same with the GLP. We always said in 2026, it was never really significant to the overall performance of the business. The license that we have now launched in Brazil, and again, we would look to launch in Canada later this year, but do not see a significant impact. And I think you make a really good point.
Richard Saynor: I mean, in a sense, part of our core Bio100 strategy was building our own internal capacity in the medium and long term so we got greater control. The issue around supply is more a demand question than a supply question. What we saw was, and you see that partly why it flows through to the bottom line, is an acceleration in demand, particularly in markets like Germany, where the pricing frameworks have changed.
Richard Saynor: And we are now working to catch up that volume. We do not see an impact flowing into 2027. We are working with our partners to increase capacity. But in a sense, some of that demand was perhaps a little ahead of where we thought it was, but some of that was in lower pricing, which I guess in terms of market share is actually a positive.
Richard Saynor: But in the short term, could cause some frustration in terms of the overall supply capacity available to meet that demand. Remco, do you want to talk about guidance?
Remco Steenbergen: Yeah, thank you. Thank you, Sophia. Yeah, indeed, excluding B2B, we had a 7% growth in Q3. Underlying the direction you should assume going forward in Q4, and also for next year, we are looking very positive at the growth outlook. Yeah, always when you give out guidance, correct, you have to give some kind of range, so that is why we ended up with the 5% to 6%.
Remco Steenbergen: A 7% growth in Q4, would that be applicable? It ends on an average of slightly above the 5.5%, so that would be more around the 6%. It is so precise, so we give around that range of 5% to 6% to give you the best indication we have at this point in time. We have still 2 months to go. Overall, we expect to step up in Q4 versus Q3. That is very clear, and we look very positively, as well as the overall mix of the portfolio, and also the upgrades we did on the—
Richard Saynor: EBITDA margin.
Operator: Thank you. Our next question comes from James Gordon with Barclays. Please unmute your line and ask your question.
James Gordon: Morning. James Gordon from Barclays. Thanks for taking the questions. Two questions, please. The first one was extrapolating the top line growth. I think I heard that effectively implied in the guidance, it would be that you would grow something like 7% for Q4, and that we could extrapolate that for 2027.
James Gordon: For that bit, what does that assume in terms of biosimilar Eylea in the US and generic semaglutide? I think the generic semaglutide, it is technically not in the full-year guide for this year, but is that 7% assuming you do get a bit of a boost from generic semaglutide in Q4 this year and into next year that is material? What are you seeing so far on biosimilar Eylea?
James Gordon: The second question was on the EBITDA margin and the upgrade there. You have taken the margin up by 30 to 80 bps for the full year, twice that in the H2, more than a percentage point. How sticky will that benefit be, and where does the benefit come from? Is it more some cost avoidance in the H2 of this year, which then comes back, or even is even more of it into 2027? Or are some of these things that are going to mean the margin is materially higher in the H2 this year going to apply to 2027 and beyond, please?
Richard Saynor: Thank you. Good morning, James. I am going to pass, and both of those questions are great for Remco, so I am going to let him open this morning.
Remco Steenbergen: Thank you, James, for allowing me to have breakfast this morning. Yeah, clearly, as I said before, with the prior question from Sophia, we expect a step-up in Q4 versus Q3, and indeed, the underlying Q3 was around 7%, so that is not a strange number from our perspective. The consensus for next year currently stands at around 5.5% growth, currency comparable, and that is something we fully support.
Remco Steenbergen: At this point in time, it is too early to give a guidance for next year. We will cover that next year. But we would encourage anyone to change their position with regards to their outlook for 2027. As Richard said before, we are looking very positive to this. For this year, with regards to the margin upgrade, as the biosimilar growth is going very well, we benefit really from the mix improvement.
Remco Steenbergen: In terms of cost on the SG&A, as we said before, we try to keep that as flat as possible. We are doing that. With regard to R&D, we are actually investing more than we originally planned, also in line with what we said in the CMD. There is nothing we are holding back on the investment of growth. On the contrary, we have only accelerated this. The underlying improvement purely comes from the mix and all the cost constraints with regard to SG&A, fully in line with our plans. Very positive and nothing special to be mentioned.
Richard Saynor: Again, just to reiterate, I think, for Sophia's question, in Q4, really, the Eylea launch and the GLP-1 really don't make any material difference to the outlook of the business, but set us up extremely well for 2027, and we're very optimistic around that, but don't see that as really a significant driver for this quarter.
Richard Saynor: Thank you, James.
James Gordon: Thank you.
Operator: Thank you. Our next question comes from Shyam Kotadia with Goldman Sachs. Please unmute your line and ask your question.
Shyam Kotadia: Hi. Thank you for taking my questions. First one is on Germany. You flagged stronger-than-expected headwind in the quarter for both generics and biosimilars. How much of a drag was this to the group? Could you remind us what your expectations are for this impact, as I believe you flagged this is only being a 2026 impact? Is this still the case, or could we see this going into 2027 also?
Shyam Kotadia: My second question is on the anti-infectives impact. You mentioned the impact will be immaterial in Q4 2026 and next year, but just wanted to get a sense check on the visibility regarding that, because I recall prior commentary that Q1 2026 was going to be the largest impact, and it was going to probably taper from there, as it was in the base for H2 2026.
Shyam Kotadia: Just wanted to get a sense check there on the visibility going forwards, given the release also mentions there is no imminent return to pre-dumping conditions being expected. Thank you.
Richard Saynor: Thank you, Shyam. I will start with anti-infectives. I think, look, clearly, we have taken quite a big hit this year. It has been a bit lumpy, Q1, Q3. But really now, as we get into Q4, we do not see. In a sense, we have already taken that hit, and it is pretty much washed out. So, our visibility to that is pretty good, so we do not see any impact really as we go into 2027. So, that headwind will wash out.
Richard Saynor: Again, I am trying to use this call, both with the commentators, but also the media, to put pressure on European governments. Super frustrated that we spent so much time to try and protect a European asset, and yet we are still facing quite heavy dumping from Chinese suppliers.
Richard Saynor: Germany, yeah, I think, look, it has been an interesting story. Germany, we talked about at the beginning of the year that the government changed the sick fund contract to essentially to open house contracts. We started that. That triggered sort of an expansion of the market, which I think in the medium and long term is very good for us, but also some price declines, particularly in biologics.
Richard Saynor: The government then changed its mind and changed the rules, but then clearly the sick funds still were behaving in that way. So, you had this very unsettled dynamic in the German market. When we look at our internal data, we are encouraged because we see we are winning share. I think it is also worth noting that we became the world's largest generics company this quarter, so again, building on that momentum. I think the bulk of that impact will wash through into 2027.
Richard Saynor: Again, I think there are some structural opportunities to better position our business as we go through in 2027. Again, it supported the margin expansion, but in a sense, this was probably the main driver in terms of the acceleration of the volume, which then put tension in terms of the overall supply network. So, these things always become a little bit interlinked. But Germany has been not a straightforward journey, but I think clearly in the medium and long term, it is an attractive place because given our scale and given the Bio100 positioning, I think the adoption of biologics will accelerate. If Remco wants to add.
Remco Steenbergen: No, I think when you say, hey, where is the difference coming from Germany out of the total? The consensus for the full year was around 6.5%. Now, we guided now between 5% and 6%. So, let us say we talk about EUR 100 million. That will be a combination of supply in Germany, 50/50 roughly of impact to that EUR 100 million.
Remco Steenbergen: Thank you, Shyam.
Shyam Kotadia: Thank you.
Operator: Thank you. Our next question comes from Harry Sephton with RBC. Please unmute your line and ask your question.
Harry Sephton: Brilliant. Thank you very much for taking my questions. First one on the US Enzeevu launch. Just want to get your thoughts on how you see this market evolving given the very strong biosimilar incumbents, and then also the buy-and-bill model, which creates certain pricing incentives, which you'll have familiarity with, similarly on the markets where you have to withdraw it.
Harry Sephton: Then my second question, there are a number of clinical-stage biosimilars that are going off patents in 2027. Can you give us some indication as to what timeframe we should expect some of these to come to market? Thank you.
Richard Saynor: Well, thank you, Harry. I guess, anything specific, because again, it's quite a long list. I mean, clearly we've disclosed, or we've tried to be incredibly transparent in terms of our pipeline and where we'd anticipate our first launches. I guess if there's anything new, we would update you. So, nothing's really changed. Obviously, in a sense, Novartis Biologics, we were always going to necessarily be there given the nature of the separation. So, I think we've been quite consistent with that. On the US Enzeevu, I think having Cimerli, it certainly informed us on our position.
Richard Saynor: I think you're going to have to forgive me here because I don't particularly want to disclose our strategy and our positioning to the market, other than I think this is a really exciting opportunity, and I think we're extremely well-positioned, and I think something we can comment on a little bit later. But I don't particularly want to disclose much more at this point, given that we're really just in the very launch phase of this product, and I don't want to signal to our competitors what we intend to do.
Operator: Thank you. Our next question comes from Charlie Haywood with Bank of America. Please unmute your line and ask your question.
Charlie Haywood: Morning, Charlie Haywood, Bank of America. Thanks for taking the question. Just wanted to dig into the supply chain issues, which sounded like they came as somewhat of a surprise, and I think a bit more color on that would be appreciated by us and the market. First part is, could you just help us understand specifically what happened? Is it a manufacturing, is it a delivery issue, a timing issue, et cetera?
Charlie Haywood: Part two, just sort of more hypothetically on volumes. I imagine the volume demand change on a group level from something like this must have been a low single-digit change at most. So, I am surprised your ability to supply is operating at that narrow of a bandwidth. Then into sort of next year and the following year, biosimilar volumes would likely be growing at greater than 20% per year.
Charlie Haywood: So, what is the confidence on delivering that? Even if there is some sort of surge in demand on another price cut, how confident are you to supply that going forward? Thank you.
Richard Saynor: No, thank you. I think this is a demand question, not a supply question in its root. Clearly, if you look at our business, today, 34% of our business is now biosimilars. That is like 4 points ahead in value. In volume terms, that is significantly where we thought we would be even a few years ago. You have got to appreciate, with a biologic, you need to forecast normally a year, 18 months in advance to build capacity. It is not a small molecule generic.
Richard Saynor: I think part of the challenge fundamentally is we never have 100% of any market. So, if a competitor has challenges or whatever, how that flows through, it is naturally a constrained market. Demand has accelerated, particularly in markets like Germany, so pricing has come down, but then we have seen a corresponding increase in volume.
Richard Saynor: As we see that then blowing through, we are working very closely with our partners. We are adding capacity. I do not really see that, or I do not see that as an impact going into 2027, and we are working extremely closely. But the nature of this business is that clearly it is demand-sensitive. But really, the root of this is we have seen an acceleration of our volume demand rather than necessarily a constraint of our supply, and it is now matching those two things.
Charlie Haywood: Thank you so much.
Operator: Our next question comes from Urban Fritsche with ZKB. Please unmute your line and ask your question.
Urban Fritsche: Yes, thank you very much. Good morning, everybody. Just coming back to the supply constraint discussion, and to understand a bit the market dynamics in general. What did happen when you were short in supply? Were there some other competitors which were stepping in immediately so that in the end you would lose some market share? Or is it product-specific and that it is really demand for your specific products? And then maybe a second—
Richard Saynor: No, I mean, the—
Urban Fritsche: question.
Richard Saynor: Yeah, sorry.
Urban Fritsche: Okay. Then maybe a second question.
Richard Saynor: No, no, sorry.
Urban Fritsche: Yeah, sorry for that. The second question on the B2B penicillin impact. In general, is there a risk for spillover effects on other generics as these players know how they have to play the game?
Richard Saynor: Supply constraints, if anything, it is the opposite. If you look at our market share data, we are winning share. Our evolution index is accelerating ahead of all our major competitors. So, I do not see that we have necessarily lost anything here. As I said, this has always been a dynamic market. There are very few products where we have sole supply or only one other competitor.
Richard Saynor: So, I think it always ebbs and flows between markets. But when you look at it as a whole, and also in Germany, from our internal data, we are winning share, we are not losing share. So, this is, as I say, very much a demand question rather than really a supply question. The B2B, and I think there are two different things here. Do not confuse B2B supply with generic supply.
Richard Saynor: What has happened is Chinese API sources have been supplying directly, but predominantly through Indian manufacturers who then have been blockaded. Prime Minister Modi has effectively put a tariff on B2B imports into India, but allowing exports. Then Indian manufacturers have particularly had a very low-cost API and then dumped it. Both the Chinese there is an indirect link through India. So it has not changed the generics dynamic.
Richard Saynor: I do not think there is a winning formula here, and certainly not a winning formula when a government is heavily subsidizing its key strategic asset. So I think this is a very different dynamic, but certainly something that I find incredibly important and incredibly frustrating that we call this out and challenge European governments to make sure that this critical business, whilst it still exists, is protected. But thank you for raising the point, Evan.
Urban Fritsche: Thanks a lot.
Operator: Thank you. Our next question comes from Simon Baker with Rothschild & Co Redburn. Please unmute your line and ask your question.
Simon Baker: Thank you for taking my questions. Some quick ones, please. Just on the anti-dumping issue, if the European Commission does act to sort this out, is there a potential upside going forward if this problem is resolved? Or is it can't get any worse, but it can't get any better? A quick question also following on from Germany.
Simon Baker: Can you just give us any points you'd flag on any other markets in Europe where there is potential structural changes that we should be aware of, be they positive or negative? Then just a very quick one on Sema in Canada and Brazil. We're getting a huge amount of interest, obviously, in this as to when this will become impactful. It's early days in both markets. Any idea you could give us on when we should start to see the trajectory emerging in these two markets would be really helpful. Thanks so much.
Richard Saynor: Yeah, look, I guess on your first, I'll put all the points on. I guess, look, I can always dream. I think, and you're absolutely right, it's one of those things now pretty much, and this is why unfortunately I have confidence that it can't be much more of a drag because I don't think it can get much worse. Clearly, there is an opportunity if we can convince Europe to maintain, keep this product on the critical medicines list, to modest impact.
Richard Saynor: But I think the ability to add probably EUR 1 a pack to maintain these products across Europe makes this a basically a difference between a particularly unattractive portfolio to being a critical but sustainable franchise. It's not just in Europe. We are having similar conversations with the US administration about how we supply anti-infectives to the US government, given that at the moment, they are predominantly buying from Asia as well. I think, clearly, I do not think it is a downside, and I think the way you articulate it quite well, it could be an upside.
Richard Saynor: Germany, I think we have talked about. I guess France, I think potentially moving, but again, I think there is an opportunity to expand our market share and penetration rates. Other markets, again, the conversation we are now having with governments is that we are part of the solution and we are not part of the problem. We did a back-of-the-envelope calculation to the North American markets. We could save about $1 trillion a year in healthcare costs over the next 10 years if we accelerate and adopt the Bio100 we proposed.
Richard Saynor: So really, those are the conversations about how do we get better market reform, how do we then drive better access and penetration of biosimilars. I think, again, positioning Sandoz in a very nice place over the next few years. GLP-1, very fair question. I think, look, the time to have this conversation is probably when we close the year, in Q1, when we do the full-year earnings. I mean, clearly, I think it is going to be an attractive contributor to 2027.
Richard Saynor: Clearly, we will have launched in Brazil, Canada, Saudi, Turkey, and a number of other markets, and we will have a much better sense of how that is going to evolve. But certainly, it will have an impact next year, and certainly it is not going to be negative. So, how bigger positive, I think that is the time to have that conversation. Thank you for the question.
Remco Steenbergen: If I may add on it, just a technicality which is probably not always well understood. Biosimilars is more profitable than generics on average, even when the price erosion is a little bit higher, which you see in Germany. So with volume going up and a little bit more price erosion, that you see also coming back in our updated guidance and upgraded guidance. It is not negative, correct? When we gain market share in biosimilars much faster, it is net positive for us.
Simon Baker: Yeah, that is very clear. Thanks so much.
Richard Saynor: Thanks, Simon.
Operator: Thank you. Our next question comes from Thibault Boutherin with Morgan Stanley. Please unmute your line and ask your question.
Thibault Boutherin: Yeah, thank you very much. Just a quick follow-up on a previous question. Can you tell us if there are specific products that are being impacted by a supply constraint? Is it more Humira, Stelara? Is that across the portfolio? Just second question on the margins. So you're already guiding for 23% to 23.5% on EBITDA this year. The midterm guidance was what, 24% to 26% in 2028.
Thibault Boutherin: So just if you could help us how we should think about the margin progression over the next couple of years. Could it be a bit back-end loaded, or do you expect margin improvement next year, basically, without giving a guidance, just the shape? Last quick one, GLP-1 Brazil. If I understand correctly, you have a commercial partner there. I think you previously said that you were sourcing API and finish elsewhere. So, just if you could explain what role you're playing in Brazil GLP-1, and what are your margins on that country? Thank you. [crosstalk].
Richard Saynor: Okay.
Thibault Boutherin: [crosstalk].
Richard Saynor: Thank you, Thibault. No problem at all. Thank you, Thibault, and good to hear a few questions. Thank you so much. Look, you got to forgive me. I am not going to disclose individual products, partly for competitive reasons. But again, there is not any specific one. I think it is more about the general sentiment. But again, we have talked enough, I think, about this morning about the supply and the demand side, but I am not going to disclose individual products. I will let Remco talk about margin in a moment. On GLP-1, we have a strategy. We have a two-product launch strategy. The first way through a partner will access certain channels of the market, and then early in Q1 next year, we will launch a Sandoz semaglutide in addition.
Richard Saynor: In a sense, it is a two-product strategy that we intend to adopt, which we think is the right way for us to penetrate and access the market and play both to our strengths and our relative partner's strengths in various sectors of the market. We do not disclose the margin mix of individual products. But again, it is an interesting market, an out-of-pocket market, and I think we will have better insights, really to Simon's question earlier on, as we get into the earnings call early next year. Remco, do you want to talk about margins?
Remco Steenbergen: Yeah. Thibault, thank you for the question. Yeah, indeed, in 2028, we have given an outlook for in between 24% and 26% EBITDA margin, and then in 2030, 25% to 27%. If you would indeed enter between the 23% and 23.5% for this year, yeah, with the outlook that always we try around 100 basis points improvement year on year, we are ahead of the outlook at this point in time. It would mean that in 2027, we would already be in the range for 2028.
Remco Steenbergen: In that sense, we are looking very positive at the numbers we currently see. It is too early to give a guidance for 2027. But on balance, clearly, we are ahead of our plans.
Operator: Thank you. Our next question comes from James Vane-Tempest with Jefferies. Please press star six to unmute and ask your question. James Vane-Tempest, please unmute your line and ask your question by pressing star six.
James Vane-Tempest: Hi, thanks for taking my questions. James Vane-Tempest from Jefferies. I have two if I can. If I can just come back to the biosimilar temporary supply again. I understand your point, Richard, it's a demand question, which you mentioned. But if supply can't keep pace with demand, I'm trying to understand why this isn't a supply question. B
James Vane-Tempest: ecause if there's 12 to 18 months timeline to build capacity, I guess looking today through the end of 2027, how should we think about the timing of the ramp in Slovenia to help mitigate any future supply issues if there is excess demand above your contracted supply agreements? Or do you have enough potential excess capacity secured for next year? My second question is just on margin guidance and I guess the cadence longer term.
James Vane-Tempest: Is any of this, just to clarify, temporary due to mix, or with a regular cadence, do you simply have increasing confidence of the midterm margin range, or are some of the benefits more one-off in nature this year? Thank you.
Richard Saynor: Thank you, James. I'll let Remco take the margin question. Look, Slovenia, we don't see the Slovenia impact in terms of supply really coming till late 2029, early 2030. But as we go into 2027, we will be working with our partners to free up more capacity. As I said, we're putting more packing capacity, more fill-finish capacity.
Richard Saynor: So, we have, certainly as far as we see it, more than enough capacity to meet the demands that we see for 2027. We're confident in terms of how we will build that momentum. Again, I think it highlights the importance of our mid to long-term strategy to bring more and more of our capacity in-house to give us the flexibility and also the cost leadership that we want in this business. Remco?
Remco Steenbergen: Yeah. James, thank you. Again, also there was a previous question in this regard on the cost. There are no one-offs we currently see in 2026 bringing this margin increase. There's also no additional cost savings or something we pull back on investments. There's nothing in this. This purely comes from a better mix and the operational performance going in line. If you then think for the years after, correct, the baseline reset.
Remco Steenbergen: If the mix of bio and generics is better this year than we originally estimated, from there, you just move into next year. There's not a headwind coming negatively, suddenly that's reversing. Actually, we don't see that. It's just a baseline which resets, and from there, we move onwards. Nothing special to be said here.
Operator: Thank you.
Remco Steenbergen: Thank you, James.
Operator: Our next question comes from Victor Floc'h with BNP Paribas. Please unmute your line and ask your question.
Victor Floc'h: Hi, thanks so much for taking my question. Maybe just two on my end. Maybe just looking a bit further out, you seem very confident in delivering mid-single digits growth next year. But beyond LOE in the US, can you walk us through the key launch drivers for 2027 and 2028? We have relatively few major biosimilar launches on our radar for this year, so I was wondering whether there are any opportunities that we might be overlooking.
Victor Floc'h: The second one is just on CapEx, and then coming back a little bit to the CMD. With CapEx now expected to remain around EUR 1.1 billion annually over the medium term, how should we think about the trajectory of free cash flow over the next couple of years? Thank you very much.
Richard Saynor: Thank you, Victor. I think the second question is a great question for Remco, so I will let him deal with it.
Remco Steenbergen: I get more breakfast.
Richard Saynor: Okay, you get more breakfast and coffee. I think you, again, there is momentum in a lot of products, and I know we talked about this at the Capital Markets Day. You get into late 2028, 2029, you have the etanercept launch in the US, 13 years after our first launch. We have a number of, yes, we have insulins launching in Europe. We have aflibercept launching in the US. Deno is doing great. Afqlir is great in Europe.
Richard Saynor: We have also launched 270 generics so far this year. No one talks about that. Sales drivers deliver growth. We have some interesting generic launches potentially coming up in the US in the full molecule case, and again, we do not break those out. I think if you go into 2027, everything is in place for the 2027 growth. We are not waiting for any approvals.
Richard Saynor: Now, it is about execution and continuing to build on the strength that we have. As we flow into 2028, let us get into 2028 when we get closer. I think let us focus on closing 2026 and talking about 2027. I think we have disclosed a lot of our pipeline, particularly in biologics. I would look at some of the legacy assets, particularly there are some very attractive growth opportunities.
Richard Saynor: Another example, I think we see some nice growth coming out of things like estrogen patches. I was with a lot of the US government last week. We are going to serve another 300,000 American women next year. That is all a growth opportunity, and I think there is still a significant untapped potential in that space as well. Again, this is not just a bio story. It is also the scale of our generics business as well.
Remco Steenbergen: Let me take the one on the CapEx, Victor. We had to settle some Capital Markets Day, correct? The CapEx slightly above EUR 1 billion, and that amount will stay about the same for the coming five years through 2030, and then as a percentage of sales, it will grow, further grow. That is what we have said. Over the coming years, with the top line growing, the EBITDA margin growing, of course, the EBITDA amount will go up, and therefore the free cash flow would also correspondingly go up.
Remco Steenbergen: With regard to the working capital, we try to keep it as flat as possible. There might be a very modest increase, but we have to think about the end of the decade is when also the site in Slovenia up and running, there would be some more inventory. Of course, in the working capital, with being vertically integrated, which now sits with our partners, but that is also manageable. We would expect a further increase in the free cash flow. Also on Capital Markets Day, we have given some indication of what free cash flow would be by 2030. I hope that answers your question.
Operator: Thank you. Our next question comes from Florent Cespedes with ODDO BHF. Please unmute your line and ask your question.
Florent Cespedes: Good morning, Florent Cespedes from ODDO BHF. Thank you very much for taking my question. A quick one on the hemophilia portfolio strategy. Do you intend to launch different products on this field, or the focus will be on emicizumab? Could we have a little bit more color about the timelines, if you have an idea of when you could launch this product on the market? Thank you.
Richard Saynor: Okay. Good morning, Florent. Other than what we have disclosed and the partnership with mAbxience, I cannot really say very much more. I think that is a very detailed question. Thank you for the question. I need to reflect on that, but I will let Craig pick that up with you separately. But, other than what we publicly disclosed, I am not going to disclose anything else.
Florent Cespedes: Okay. Thank you.
Richard Saynor: Thank you.
Operator: Thank you. Our next question comes from Erwin Fritz from ZKB. Please unmute your line and ask your question.
Urban Fritsche: Yes. Thank you very much for this follow-up. Two more on product. For the Sema launch in Canada, what is holding you back from launching in Canada? Is this Canada-specific, or are there some learnings we should apply for other Sema launches in other markets as well? Then maybe a second question on building up on the WYOST Jubbonti success. In terms of other biosimilars, what could be a next WYOST Jubbonti-like opportunity? Which of all the biosimilars in the pipeline are you most excited about? Thanks.
Richard Saynor: Thank you so much, Erwin. I mean, asking which of my most biosimilars, like saying which of my children do I love the most. It is very difficult. I think, look, I am not going to. Again, some of it falls into competitive intelligence. I would look backwards rather than forwards.
Richard Saynor: I think, again, we have a track record, whether it is aflibercept in Europe, adalimumab when we did the first own label in the US, the excellent work the team have done now with WYOST and Jubbonti in the US, and how we have managed that strategy. I think what it shows is consistently our commercial capability as the leading player in this industry to be the partner of choice, not just in terms of inflow of product, but in terms of commercial execution. So, I think there are a number of products.
Richard Saynor: Clearly, I am excited about the potential for the upcoming aflibercept launch in the US. I think that is a very interesting opportunity. Then we will just look at it asset by asset. But I think, again, it plays to our strength. You make a good point on semaglutide. I think, A, semaglutide is not a straightforward product. If you look at the Canadian market, the two companies that have already technically launched, both of them have had challenges.
Richard Saynor: One in terms of their API, and now working with the regulators. I am telling you, one of those partners we will work with in the short term, but then we have an additional partner that we will launch later, earlier into Q1 next year. The other company that has launched, they had problems with its device and is working with the regulators. So, this is not a straightforward product.
Richard Saynor: It is technically not a straightforward product. It is cold chain. It is not necessarily easy. I think it plays to Sandoz's strength, our ability to manage partners, to manage cold chain. We are a strong biologics player in Canada. I think it is the number one player in Canada. So, I think we are well-positioned. We have always said this was a very small launch, a not material launch in Canada this year.
Richard Saynor: We would still anticipate to launch this year. This is now a question of supply being available and bringing it to the market. Then we would launch with additional partners as we go into 2027. I think that puts us in an extremely strong position to take a nice position in Canada during the year. But we have always kept this away from guidance.
Richard Saynor: We have always said this is where we are going to learn and experience, and I would still stand by that. But it is an interesting opportunity, and it also partly goes back to, I think, one of the earlier questions about an additional growth driver next year. Clearly, I think, has the potential to certainly be attractive and accretive to our growth next year as well. So, nice position to be in.
Richard Saynor: I think that is probably pretty much where we are at. I think that is all of the questions. I look forward to seeing, hopefully, many of you in Ljubljana in a few weeks' time. I would bring a rain jacket because it is obviously November in Ljubljana, but I look forward to seeing you then. Thank you so much for your questions, and thank you so much for your support. Have a great rest of your day.
Operator: This concludes today's call. Thank you, everyone, for joining. You may now disconnect.
Operator: Goodbye.
