Novartis Q3 2024 Earnings Report

Novartis EPS Results

• Actual EPS: $2.06
• Consensus EPS: $1.94
• Beat/Miss: Beat by +$0.12
• One Year Ago EPS: $1.74

Novartis Revenue Results

• Actual Revenue: $12.82 billion
• Expected Revenue: $12.62 billion
• Beat/Miss: Beat by +$205.14 million
• YoY Revenue Growth: N/A

Novartis Announcement Details

• Quarter: Q3 2024
• Date: 10/29/2024
• Time: Before Market Opens
• Conference Call Date: Monday, October 28, 2024
• Conference Call Time: 9:00AM ET

Novartis (NYSE:NVS) is a Swiss multinational pharmaceutical company headquartered in Basel that researches, develops, manufactures and commercializes prescription medicines and related health-care products. Formed through the 1996 merger of Ciba-Geigy and Sandoz, Novartis operates globally and focuses on bringing therapeutics from discovery through clinical development to commercial markets worldwide.

The company’s activities center on innovative pharmaceuticals across several therapeutic areas, including oncology, immunology, cardiovascular and metabolic diseases, neuroscience and ophthalmology, alongside capabilities in advanced therapies such as biologics, cell and gene therapies. Novartis has historically included generics and biosimilars through the Sandoz business and previously separated its eye-care business, Alcon, as an independent company; its portfolio and organizational structure have evolved through acquisitions, divestitures and strategic partnerships.

Research and development is a core part of Novartis’s operating model, with sustained investment in early-stage discovery, clinical trials and regulatory submissions. The company leverages a mix of small-molecule drugs, monoclonal antibodies, novel platforms and digital-health initiatives to advance its pipeline and to support commercialization in markets across the Americas, Europe, Asia-Pacific and other regions.

Novartis is publicly traded and reports under the ticker NVS on the New York Stock Exchange as well as on the SIX Swiss Exchange. The company is led by Chief Executive Officer Vas Narasimhan and maintains a global leadership and research footprint intended to accelerate development of new therapies and expand patient access to approved medicines.

Novartis Q3 2024 Earnings Call Transcript

Key Takeaways

• Q3 operational performance: Net sales grew 10% and core operating income rose 20%, driving a third guidance raise for 2024 and lifting the core margin to 40.1%.
• Product growth momentum: Flagship brands delivered double-digit gains with Cosentyx up 28%, Entresto up 26% and Kisqali up 43%, supported by new indications and strong uptake in key markets.
• Pipeline and approvals: Achieved FDA approval for Kisqali in early breast cancer, accelerated approval for Fabholta in IgA nephropathy, FDA priority review for Semblix first-line CML and PSMA-4 filing accepted for Pluvicto.
• Financial outlook bolstered: Raised full-year guidance to low-double-digit sales growth and high-teens core operating income growth, assuming no mid-year generics for Tasigna, Promacta or Entresto.
• Program termination: Discontinued the XXB hypertension candidate after safety signals and inadequate blood-pressure reduction on top of standard of care.

Presentation

[Operator]

Good morning and good afternoon, and welcome to the Novartis Q3 2024 Results Release Conference Call and Live Webcast. Please note that during the presentation, all participants will be in a listen-only mode, and the conference is being recorded. After the presentation, there'll be an opportunity to ask questions by pressing Star 1 and 1 at any time during the conference. Please limit yourself to one question and return to the queue for any follow-ups. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Ms. Sloan Simpson, Head of Investor Relations. Please go ahead, Madam.

[Sloan Simpson, Head of Investor Relations at Novartis]

Thank you so much. Good morning and good afternoon, everyone. Thank you for joining our Q3 2024 earnings call. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements. For a description of some of these factors, please refer to the company's Form 20-F and its most recent quarterly results on Form 6-K that respectively were filed with and furnished to the U.S. Securities and Exchange Commission. With that, I will hand across to Vas.

[Vasant Narasimhan, CEO at Novartis]

Thank you, Sloan, and thanks, everyone, for joining today's webcast. So we'll dive right in. I have Harry Kirsch on the line with me as well as always. So moving to slide four, you saw this morning that Novartis delivered strong operational performance in Quarter Three, really continuing now what's been two years of very strong operating performance for the company. Sales grew 10%, core operating income was up 20% in constant currencies. In the quarter, our core margin went all the way up now to 40.1%. And we also had important innovation highlights, which we'll talk about a bit more over the course of the call. Kisqali's FDA approval and CHMP positive opinion in hormone receptor positive, HER2 negative, stage two and three early breast cancer. Our Fabhalta accelerated approval in IgA nephropathy. Pluvicto had its filing accepted for the PSMAfore population and metastatic castrate-resistant prostate cancer.

[Vasant Narasimhan, CEO at Novartis]

And then we expect the Scemblix approval in the coming weeks. We received FDA priority review for first-line CML. And lastly, and importantly, we had our third guidance raise for the year, raising both our top and bottom-line guidance. And Harry will go through that in more detail. So moving to slide five, Quarter Three growth again reflected strong performance across our key growth drivers. You see 34% constant currency growth, which we expect to continue and help drive our 5% guide out to 2028 and also enable us to continue that strong margin expansion that you've seen. And let's go through each one of these brands in more detail. So moving to slide six, Entresto's sales continued to climb as they have now for multiple years, increasing 26% in Quarter Three.

[Vasant Narasimhan, CEO at Novartis]

It's the 10th year now of continued momentum on this brand, which I think really shows our ability to create large and lasting cardiovascular medicines: 25% TRX growth, 20% NBRX growth, 500,000 TRXs per month. XUS, we're growing 26%. So we're confident in the growth up to the LOE. We have strong guideline positions in the U.S. and EU. We continue to see very strong performance in hypertension in China, in Japan. We don't expect an LOE in Japan until 2031 at the earliest. And we continue to see protection for our business in China. For forecasting purposes, we maintain our guidance of the LOE for Entresto in the United States for mid-2025. And in the EU, regulatory data protection would expire in November of 2026.

[Vasant Narasimhan, CEO at Novartis]

Moving to slide seven, Cosentyx grew 28%, and this was primarily driven by the strong performance we've had in our new launches in HS and in the IV formulation. You can see 28% growth overall, but driven by very strong performance in the United States of 38%, outside the U.S., 16% in constant currencies. We remain the number one IL-17 in the U.S. dynamic market, and we're the leading originator biologic now in the EU and in China. In HS, we've achieved dynamic market leadership with over 60% NBRX share. In Germany, we're at over 50%, and we increasingly secure reimbursement in our key markets. We see the opportunity to continue to grow dynamically in HS. We think we have an outstanding data profile, even versus the incoming competitors.

[Vasant Narasimhan, CEO at Novartis]

We also see an opportunity for a market that's going to continue to expand, a market that's probably 3 billion plus today, but has the potential to be a 5 billion plus market over time or even larger, depending on how patients continue to see their physicians. In the IV, we had accelerated adoption in the U.S. with over 1,250 accounts now ordering. That's a 52% growth. I think we'll continue to see more sales delivery in IV now that we have the permanent J code, but that, of course, will take time, and we look forward to delivering that. We have two important LCM opportunities that will be out in 2025 in polymyalgia rheumatica, as well as in giant cell arteritis, both sizable indications that could give us even further opportunity to well exceed Cosentyx's $7 billion peak sales forecast.

[Vasant Narasimhan, CEO at Novartis]

Now, moving to slide eight, Kesimpta continued to see strong momentum globally, and it's a unique profile that this medicine provides for patients and physicians. 28% growth, but when you strip out the one-time RD adjustment that we had from a European market last year, our sales growth was 56% in constant currencies. We now have over 100,000 patients treated worldwide, either naive or first switch. The U.S. growth, TRX volume growth was 38% versus prior year, gaining 3.7% share. XUS, we had strong underlying growth, excluding the one-time RD adjustment from last year. We also presented some important new data at ECTRIMS in the ALITHIOS trial. 90% of first-line Cosentyx patients had no disability progression, independent of relapse activity up to six years. We had an additional study that demonstrated no new active lesions 12 months after switching from an anti-CD20 IV therapy.

[Vasant Narasimhan, CEO at Novartis]

We remain confident in the continued momentum on this brand. We're annualizing now well above $3 billion and have the opportunity, I think, to well exceed our $4 billion peak sales guidance to date. To our knowledge, there are no Cosentyx biosimilars currently in clinical development, which should give us a long runway looking forward for this medicine. Now, moving to slide nine, Kisqali continued to cement its leadership in metastatic breast cancer and launched, importantly, in early breast cancer, as I mentioned. But perhaps most importantly, we achieved a category one NCCN guideline recommendation for the full Kisqali population. Overall growth in the quarter was 43%. U.S. is up 50%. It's really gaining widespread adoption. Our NBRX share is at 48%. We're now second in TRX share overall. We have over 7,000 physicians now actively prescribing Kisqali and, I think, reflecting our strong guideline position.

[Vasant Narasimhan, CEO at Novartis]

Outside of the U.S., 36% constant currency growth as the preferred CDK4/6 inhibitor in the class. We have a leading share of 43% in those international markets, and we're the fastest growing CDK4/6 in Europe. Now, as I mentioned, the FDA approved Kisqali with a broad label, fully in line with the NATALEE population. CHMP has issued a positive opinion, and we're looking forward to a European Commission approval to allow us to launch in Europe. The Kisqali, if you go back to slide to slide nine, the category one guideline recommendation for the full study population, I believe, gives us the opportunity now to really fully realize the potential of this medicine, including a node-negative patient. In the early feedback we're getting from the market is very strong.

[Vasant Narasimhan, CEO at Novartis]

The early scripts we're seeing show a very strong trend, and we look forward to now building upon that as we get broad access for this medicine. We would expect access in the early breast cancer setting in the range of 90%, which is what we have for Kisqali in the metastatic setting. Now, moving to slide 10, as a reminder, Kisqali showed really strong deepening benefit in the uptake that we showed at ESMO. When you look at the graph on the left, across the intent-to-treat population, as well as stage two and stage three patients, as well as node-negative disease, and a really strong four-year IDFS absolute benefit that's consistent across secondary endpoints. We have a trend of improved OS, which we expect to continue to deepen over time. No new safety signals were identified.

[Vasant Narasimhan, CEO at Novartis]

So overall, we think we now have really the perfect positioning that we would want for Kisqali to succeed in the long run. As a reminder, the early breast cancer indication doubles the number of patients that are eligible for Kisqali versus the metastatic indication. And we estimate it is a three times larger population than is currently labeled for the competitor product in the class in early breast cancer. Now, moving to slide 11, Pluvicto continued what we would characterize as steady performance in the post-taxane setting. Our focus at the moment is really laying the foundation for the PSMA4 launch in 2025, which would triple the number of patients eligible for Pluvicto. We saw 50% growth in the quarter. When you adjust for the one-time price adjustment in Europe, our sales growth grew 36%.

[Vasant Narasimhan, CEO at Novartis]

Just to provide more context, that was true volume growth that we had in earlier quarters. As is always the case in certain European markets, our prices get adjusted over time. So that was the reason for the uplift we saw in Europe. Overall, we would expect Quarter Four to be broadly in line with Quarter Three, excluding the RD adjustment. And I think for us now, it's really about preparing the market for Pluvicto as a PSMA4 opportunity. Our U.S. field force has now expanded. We've launched a DTC to drive HCP and patient awareness. We now have 530 treatment sites in the U.S., which we feel like covers the key geographic areas. We will continue to expand that over time quite significantly.

[Vasant Narasimhan, CEO at Novartis]

But we feel comfortable that we have capacity now to fully support the Pluvicto PSMA4 launch, and we'll expand deeper into the community setting step by step. Our ex-U.S. launch is progressing well with good pricing and reimbursement discussions. And so we feel very good about where we are to prepare for that launch next year. Now, in terms of new indications and geographies, the PSMA4 filing was accepted by FDA. We're preparing for a launch in the first half of 2025. In China, both the post-taxane and in Japan, the pre- and post-taxane submissions have happened. We're in the midst of building up manufacturing facilities in both of those markets, as we expect them to be sizable opportunities. The PSMAddition and Uncertain studies are progressing according to plan. And we have also begun construction of two additional facilities in the U.S.

[Vasant Narasimhan, CEO at Novartis]

to support our expanding RLT portfolio, which now includes multiple additional programs that have entered the clinic, including assets such as a B7H3 actinium RLT, as well as a HER2 RLT and a folate RLT, all of which now either have first patient first visit or will soon have first patient first visit, giving us a broad portfolio that we need to now prepare for. Moving to slide 12, now Leqvio continued its strong growth trend with accelerating adoption outside of the U.S., and we're very pleased by both the solid U.S. performance, but that acceleration we're seeing in our international markets. We have continued growth that's outpacing the overall advanced lipid lowering market. 4,600 facilities have ordered Leqvio, which is a substantial increase versus prior year. We see demand increasing across all channels, and I'd say our targeting strategy in the U.S.

[Vasant Narasimhan, CEO at Novartis]

to really focus on patients and physicians that are treated in the post-event setting, where there's a high propensity to add an additional lipid lowering therapy, has worked really well. Now, outside of the U.S., we're reimbursed in 39 countries, commercially available in 73. And as I said, we're seeing steady and strong uptake, particularly in markets such as Japan, where we recently launched and our launch is well exceeding our expectations. Now, adding to the overall Leqvio body of evidence, we did read out the V-MONO trial, which demonstrated superiority as Leqvio monotherapy in both placebo and ezetimibe versus placebo and ezetimibe in LDL-C reduction. And we are looking over time to think about how we can further expand Leqvio into the monotherapy or frontline indication, depending on the geography. So moving to slide 13, Scemblix grew 72% in Quarter Three.

[Vasant Narasimhan, CEO at Novartis]

As you know, it has really become the preferred option for third-line CML. It's the market leader in NBRX and TRX across geographies with 26% TRX share growth. It's driven by 18% quarter-over-quarter demand. Outside of the U.S., we see a very strong sales trajectory for the product with total market share, with a growing total market share and growing prescriber base. And that's critical for us to continue to build that strong base in third line, because as we approach the first-line launch, those physicians get more and more comfortable with the overall profile of Scemblix. So, as I mentioned, we have FDA priority review. We do expect the approval in the coming weeks. We're fully prepared for launch. We're also fully prepared to obtain rapid market access to really ensure a rapid launch in the U.S. and eventually around the world.

[Vasant Narasimhan, CEO at Novartis]

Outside of the U.S., China and Japan submissions have now been completed, and we're also on track for a European submission in 2025. Now, moving to slide 14, Fabhalta, it's early days, but we were pleased by the performance in PNH, ultra rare disease, not a lot of cycling of these patients. So it will take time to build this brand, but as the only monotherapy, oral monotherapy to provide extravascular and intravascular hemolysis control, we're seeing strong launch performance overall. We see a high compliance and continuation rate on the medicine. We have over 70% coverage to label. We have NBRX share now of over 30%. And outside of the U.S. as well, we're seeing solid early signs of success with good patient activation, with over 1,000 HCPs now reached in the first three months post-launch. We're seeing utilization across naive and switch patients.

[Vasant Narasimhan, CEO at Novartis]

We also have recent launches in Japan, U.K., and we were granted early access as well in France. Taken together, early days, but step by step, this is an important building block as we build Fabhalta across multiple indications to be over a $3 billion plus medicine over time. Moving to slide 15, in addition, Fabhalta received the accelerated approval in the U.S. as the first and only complement inhibitor in IgA nephropathy. That was based on the positive interim results of the APPLAUSE phase three study. The study is continuing to the confirmatory endpoint of eGFR at 24 months. We expect a completion date in 2025. We see very positive HCP feedback on the efficacy and safety and an understanding of the role of the complement pathway in this disease. We also see important early signs from a utilization standpoint.

[Vasant Narasimhan, CEO at Novartis]

Over 1,000 HCPs are now REMS certified, and we're leveraging our portfolio to ensure that we have broad and quick access for this medicine. Perhaps most importantly, we're seeing patients with a positioning of this medicine as for patients with persistent proteinuria and glomerular inflammation as really getting traction in the marketplace, and that's enabling us to maintain the price of Fabhalta consistent with the PNH indication, which will also be important for the subsequent indications that we have for Fabhalta, including C3G, and if we go to the next slide, slide 16, we released results over the weekend of the 12-month APPEAR-C3G data at ASN. On the left-hand side, you see the sustained proteinuria reduction over 12 months and that that was replicated in the placebo arm after switch to Iptacopan, so that was very positive and something the regulators had asked us for.

[Vasant Narasimhan, CEO at Novartis]

But importantly as well, we're seeing stabilization of the eGFR slope versus the historic slope decline, and that's been maintained now for 12 months. So we're seeing on the important outcome measure as well, very positive data. So we have ongoing health authority reviews in the EU and other countries, and we expect to make this submission now in the U.S. before the end of the year. So moving to slide 17, overall, we had good progress on our innovation milestones. We did suffer a few setbacks with XXB. We will terminate this program. We saw a safety signal in heart failure, and overall, the hypertension blood pressure reduction we saw on top of standard of care was not sufficient to meet the TPP we think we need to achieve for this medicine.

[Vasant Narasimhan, CEO at Novartis]

So we'll be stepping back and focusing on our siRNAs for hypertension, as well as other assets we have in our cardiovascular portfolio. So with that, let me hand it over to Harry.

[Harry Kirsch, CFO at Novartis]

Yeah, thank you, Vas. Good morning and good afternoon, everyone. I will now talk you through our financials for the third quarter and the first nine months, which were very strong. As always, my comments refer to continuing operations and growth rates in constant currencies, unless otherwise noted. On slide 19, it's a pleasure to present results like those that we have on slide 19. I think you hopefully agree with that. Quarter three, net sales grew 10%. Core operating income was up 20%. Our core margin, as Vas already mentioned, 40.1%, which reflects a 340 basis points improvement versus prior year.

[Harry Kirsch, CFO at Novartis]

Core EPS was $2.06, also up 20%, and free cash flow was basically $6 billion, the highest we have ever achieved in any one quarter. For nine months, net sales grew 11%, and operating income was also up 20% with the core margin increasing, so 39.4% for the first nine months, demonstrating continued good or very good progress towards achieving our midterm margin guidance of 40% plus by 2027. Core EPS was $5.83, up 21%, and the free cash flow in the first nine months grew 15% to $12.6 billion. Now on to the next slide, please. Our continued strong business momentum, together with operating efficiencies, despite the many launches we are fully funding and, of course, the R&D pipeline, allowed us to once again raise our full-year guidance on both top and bottom line, which you will see on slide 20.

[Harry Kirsch, CFO at Novartis]

We now expect sales to grow low double digit from high single to low double digit previously, and we expect core operating income to grow in the high teens from mid to high teens previously. Embedded in our guidance is the key assumption that there will be no Tasigna, Promacta, or Entresto U.S. generic entries in 2024, and we also expanded a bit so that you can start with the modeling for next year, and we are making an assumption that these generic entries in the U.S. will happen in the middle of 2025 for forecasting purposes, and to complete our full-year guidance, as always, the other two components from core op. inc. down to basic core EPS. Please note that we expect core net financial expenses to be around $0.7 billion for the full year, and our core tax rate continues to be around 16.2%.

[Harry Kirsch, CFO at Novartis]

Moving to slide 21, we remain committed to our shareholder-friendly capital allocation strategy to invest in the business while it's also returning attractive shareholder returns. In the first nine months, we executed multiple bolt-on M&A and BD and LDs, particularly to strengthen our R&T platform, our renal pipeline, and AI capabilities, in addition to having invested, of course, in our internal R&D engine. In terms of returning capital to shareholders, we paid our growing annual dividend of CHF 7 per share, this time $7.6 billion in March of this year, and we also continued our $15 billion share buyback, which has approximately $8 billion left to be executed by the end of 2025. Now on to my final slide already, where we have outlined details regarding the expected currency impacts.

[Harry Kirsch, CFO at Novartis]

In quarter three, FX had a mild negative 1% point impact on net sales and negative 3% points on core operating income, of course, driven by U.S. dollar strengthening, but also, of course, on the bottom line due to our Swiss franc cost base. If late October rates were to prevail for the remainder of 2024, we would expect the full-year currency impact to be again around 1% negative on net sales and negative 3 to 4 percentage points on core operating income. As we already start to look forward into 2025, again, to inform your modeling assumptions, we expect a negative 1% point impact on net sales and negative 2 percentage points on core operating income, again, if currencies stay for next year where they are right now.

[Harry Kirsch, CFO at Novartis]

Of course, as we all know, currencies move every minute, and so we will, given the difficulty to predict this from outside of the company, each month in the middle of the month, we will give you an update, which is posted on the website, so you always have that element of the forecast as well. So thank you for your interest, of course, and back to you, Vas.

[Vasant Narasimhan, CEO at Novartis]

Great. Thank you, Harry. So moving to slide 24, in summary, we see continued strong business momentum in the quarter, and I think the numbers speak for themselves, the 10% and 20% growth. We raised our full-year 2024 guidance for the third time, just showing the underlying momentum we're seeing across our growth drivers and new launches.

[Vasant Narasimhan, CEO at Novartis]

We continue to deliver on our pipeline, building off of 10 phase 3 readouts and positive phase 3 readouts with indication expansions of Kisqali, Fabhalta, and the submission of Pluvicto-PSMA4, and we're well on track to achieve our midterm guidance of 5% sales growth, 2023 to 2028, and 40% plus core operating income margin by 2027. Going to my last slide, we also wanted to just flag for all of you, we will have Meet Novartis Management on November 20th and 21st in London. It'll be a great opportunity for our investors to meet our leadership teams across the company with a focus on our TA leaders in R&D. We'll also be able to provide an update on our 2023 to 2028 midterm guidance, as well as a 2024 to 2029 sales guidance as well.

[Vasant Narasimhan, CEO at Novartis]

And then lastly, we'll also provide an update on the peak sales outlooks for many of our brands, which continue to have really strong momentum. So with that, Operator, we can open the line for questions.

[Operator]

Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now go to your first question. And your first question comes from the line of Richard Vosser from JP Morgan. Please go ahead.

[Richard Vosser, Senior Managing Director and Research Analyst at J.P. Morgan Chase]

Hi, thanks for taking my question. It's a question on the impact of coverage gap reform on the business in 2025, and particularly thinking about the impact on Cosentyx and Entresto. If you could give us any color on how that's panning out, that would be great. Thanks very much.

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks, Richard. And I also want to add, we should have one question. Thank you for adhering to that already, Richard, but one question per person, and then we'll cycle through the list as many times as we can. So in terms of the coverage gap reform, there's going to be pushes and pulls, which we'll have to understand better over the course of 2025. On the positive side, we'll see how demand generation increased with the 20% out of pocket cap, especially depending on how many patients sign up for the smoothing. You could see those impacts happening relatively early in the year, but that's something we'll have to see how it ultimately plays out on the positive side. In terms of headwinds, certainly our cost sharing within the system will go up, and that's something we'll have to manage.

[Vasant Narasimhan, CEO at Novartis]

But on the flip side, our patient support programs also should be adjusted down, given the number of patients who would qualify, would no longer qualify given adjustments, given the IRA being in place. So net net, we see this as neutral to slightly negative, but that's already factored into the guidance that we've given for the long run. So that's already in the 5% out to 2028. So no material impact on how we look at the business. And I think we're going to learn more over the course of the year. Thanks, Richard. Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Emily Field from Barclays. Please go ahead.

[Emily Field, Director and Head of European Pharmaceutical Equity Research at Barclays PLC]

Hi, thanks for taking my question. I'll ask one on Pluvicto. I was just wondering when you'd expect some of these new promotional efforts to have an impact on Pluvicto patient growth in the U.S. And the Pluvicto population, or should we more expect sales to really start to grow again once PSMA4 is launched? I believe earlier in the year you said that that launch would be an inflection in sales, so any color you can provide would be helpful. Thank you.

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks, Emily. So in terms of the timelines for those investments, we started the DTC in September. We got the full field force out really in the August, September timeframe. So it usually takes six months before you see any impact for those expansions and investments. So I think for us right now, we want to maintain the Pluvicto population. We always guided to Pluvicto to be about a $2 billion peak sales globally. So in the U.S., we're already annualizing in that kind of $1.2-$1.4 range.

[Vasant Narasimhan, CEO at Novartis]

We expect as we bring China, Japan, and other markets on board, we can reach that $2 billion over time. But the real inflection for this medicine is the tripling of the patient population with PSMA4, and then a further large addition of additional patients with the HSPC PSMA addition studies. So we've got to make sure that we have adequate capacity, which we feel pretty good about in terms of bed capacity. A lot of our work now is getting the referral systems in place to ensure that community oncology understands how they can refer and when to refer to be able to get Pluvicto and get those patients also then back to community oncology. Also making sure that large academic centers are prepared for what we expect will be a surge of patients on the approval of PSMA4.

[Vasant Narasimhan, CEO at Novartis]

So all of that work is very much in focus, but I wouldn't expect a significant inflection point before we get PSMA4 fully launched. Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Florent Cespedes from Bernstein. Please go ahead.

[Florent Cespedes, Senior Analyst at Société Générale]

Good afternoon. Thank you very much for taking my question. Quick one on 2025. I know it's early days and you won't provide any guidance, but could you remind us which are the main tailwinds and headwinds for next year and how you see this challenging year given the generics expected to be launched mid-2025? Thank you.

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks. Thanks, Florent. Obviously, we don't provide guidance till January, but I can say we're confident we'll grow top and bottom line, and we'll provide more color on that, obviously, in January. When you think about the tailwinds that we have, it's clearly the new indications and launches.

[Vasant Narasimhan, CEO at Novartis]

I mean, you've already seen Cosentyx is continuing to have strong performance in HS and AS. We, of course, have now the Kisqali early breast cancer with a broad label and a broad NCCN guideline. We're in the early days of the Fabhalta launch, but the Fabhalta launch both in PNH and IgAN. We expect to accelerate over the course of next year. Importantly, the Scemblix first line launch in CML will continue to allow us to expand that drug, hopefully substantially. And then, of course, Kesimpta, you've seen is already on just a steady, strong pace, and Kisqali and metastatic breast cancer also in a really strong pace. And then Entresto outside of the U.S., also with continued strong performance.

[Vasant Narasimhan, CEO at Novartis]

I mean, I think the biggest headwinds we're going to have, as we noted, is the LOEs that we currently forecast for forecasting purposes for mid of next year on Tasigna, Promacta, and Entresto. Of course, it depends on how those ultimately all the various litigations go and whether products are approved, et cetera, but that's our current forecasting guidance on those medicines. But beyond that, we see continued opportunities for strong margin performance, strong free cash flow performance. We feel very good with where the business is. So I think we can navigate that. And as we said all along, we factor those patents or those LOEs into that 5% plus guidance out to 2028. So it's well captured in our long-term guidance, and we'll navigate it and continue to grow the company strongly. Next question, Operator.

[Florent Cespedes, Senior Analyst at Société Générale]

Thank you very much.

[Vasant Narasimhan, CEO at Novartis]

Thank you, Florent.

[Operator]

Thank you. Your next question comes from the line of Simon Baker from Redburn Atlantic. Please go ahead.

[Simon Baker, Partner and Head of Global Biopharma Research at Redburn Atlantic]

Thank you for taking my question. One on Cosentyx and HS, if I may. You've seen a very, very fast adoption in HS, which is testament to the superiority of Cosentyx over previous treatment options, but there were quite a few behind Cosentyx coming into HS. So I just wondered if you could update us on your thoughts on the competitive dynamics there. How long do you expect that preeminence of Cosentyx to persist, bearing in mind what is coming behind over the next 12 to 18 months? Thanks so much.

[Vasant Narasimhan, CEO at Novartis]

Yeah, I mean, look, Simon, thanks for the question. We continue to expect Cosentyx to be over $1 billion in HS. And the reasons we have that conviction, as you noted as well, there's a tremendous support for Cosentyx among dermatologists.

[Vasant Narasimhan, CEO at Novartis]

We're very comfortable using this medicine given the long period of time that it's been on the market and successfully used. But the other thing is I think there's confusion in the market in terms of the comparison of Cosentyx to the IL-17A/Fs and psoriasis versus what at least we see in HS. Importantly, in HS, when you look at the HiSCR50, you have pretty comparable results. Cross-trial comparisons are always, of course, challenging different patient populations, so you have to be taken with appropriate caution, but very similar. And then when you look at flares, in our study, we had 60% of patients free of flares. And in pain, we showed a meaningful reduction of 50% for these patients in pain. I would encourage the investor base to look at that data versus the competitor entry.

[Vasant Narasimhan, CEO at Novartis]

I think that would enable us to have really a strong clinical positioning on top of the strong account positioning and long history that we have. Then really the focus is in a growing market with additional patients who hopefully will come in. Can we continue to maintain a strong share position given that data, given our access position, which is why we think HS will be a really substantial opportunity for the medicine. I think that distinction between psoriasis and HS data is absolutely crucial for everyone to understand. Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Graham Parry, Bank of America. Please go ahead.

[Graham Parry, Managing Director and Head of Healthcare Equity Research at Bank of America Securities]

Great, thanks. Question on Pluvicto. The flat fourth quarter guide implies no growth ex U.S. as well as in the U.S. I understand U.S. Centers are pretty fully penetrated in the vision population, but why no growth ex U.S.? And on PSMA4, just wondered why you didn't use a priority voucher or attempt to accelerate the review there in any way. Thank you.

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks, Graham. So on Pluvicto, I think ex U.S. right now, we do continue to see growth generation, but of course, with the pricing dynamics, as we continue to work to secure the final pricing, we don't expect that to translate yet into revenues. And then I think China and Japan will be absolutely critical to really get the ex U.S. going. In Europe, we're primarily focused in Germany and France, and we have ongoing negotiations in those markets regarding the pricing situation. So I think that's why we want to be realistic and say, in addition to that dynamic, we also have the holiday period in the U.S.

[Vasant Narasimhan, CEO at Novartis]

We know from prior years that for Pluvicto, Thanksgiving and the Christmas holidays is not a time that patients want to initiate therapy because post-dose, they can't be around family, be around children. At least that's the current guideline. Whether biologically sensible or not is irrelevant. That's the current guidance, so that leads to a few weeks that we lose in quarter four always. So taking all of that together, we think it's reasonable and prudent to provide a guidance that will be in line net of the adjustment. Now, in terms of Pluvicto PSMA4, we chose not to use a priority review voucher purely because we had discussions with the FDA. And the FDA's view was given that we'll provide 100% OS during the review period. They wanted flexibility for the timing to review that data.

[Vasant Narasimhan, CEO at Novartis]

Now, hopefully, given that data continues to trend positive, assuming that holds and that we have a very compelling package, we hope that we can get an approval on a faster timeline than the typical PDUFA timelines. But in consultation with the FDA, that was their request, hence we didn't use the voucher. Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Matthew Weston, UBS. Please go ahead.

[Matthew Weston, Equity Research Analyst at UBS Group AG]

Thank you very much. My question's about payer dynamics in 2025 as well. Vas, I'm just aware that you have a very strong position in immunology and commercial PBMs have lost a significant amount of rebates from Humira over the course of this year. I wonder whether we should expect a particularly strong and dynamic rebate environment at the beginning of 2025, and we should be prepared for that as we look at the forecast into next year. If I can cheekily sneak a second, it's just, can you remind us factually, when do you anticipate Kisqali ex U.S. patent expiry?

[Vasant Narasimhan, CEO at Novartis]

Thank you, Matthew. So first on Cosentyx and the overall immunology dynamic, we've completed largely our payer negotiations, and we're really pleased with the broad access we've been able to maintain for Cosentyx. And I would say while we do see increased rebates, it's modest and not substantial. So we've been able to keep that as a single-digit increase overall across the portfolio. So we shouldn't expect, well, of course, that is a headwind. We do expect overall the opportunities in HS and IV alongside the opportunities that we have with additional launches, as well as the overall momentum we have globally. Globally, Cosentyx should continue to grow in the double-digit range. And so that's our current expectations for Cosentyx.

[Vasant Narasimhan, CEO at Novartis]

Now, in terms of Kisqali LOE, it is August 2032 is our current estimate in Europe.

[Matthew Weston, Equity Research Analyst at UBS Group AG]

Thank you very much.

[Vasant Narasimhan, CEO at Novartis]

Next question, Operator.

[Vasant Narasimhan, CEO at Novartis]

Thank you. Your next question comes from the line of James Quigley from Goldman Sachs. Please go ahead.

[James Quigley, Executive Director and Senior Equity Research Analyst at Goldman Sachs International]

Great. Thank you for taking my question. I've got a quick one on Xolair. So Roche is seeing some strong uptake in the U.S. for the food allergy indication. Does Novartis plan to use the data from the Outmatch trial to potentially file for the indication in the Novartis territories? And what would you think about the potential opportunity here? Obviously, there's a big discontinuation in Ligelizumab in this indication as well. So does that leave a potential clear run for you and Xolair in ex-U.S. markets? Thank you.

[Vasant Narasimhan, CEO at Novartis]

Yeah, so James, I'd have to come back to you.

[Vasant Narasimhan, CEO at Novartis]

I don't actually know off the top of my head on what our plans are on Xolair for ex-U.S. food allergy. Obviously, in the U.S., we have our existing contractual obligations with Roche Genentech. In general, my first instinct to say is food allergy ex-U.S. is challenging given the overall payer dynamics, particularly in Europe. But let us come back to you because I don't want to make that a definitive statement without knowing for sure. We do continue to develop Remibrutinib as an oral option in food allergy, and we're going to see how that data pans out because we think the option of giving patients the twice-a-day oral therapy for food allergy could be quite attractive. So that development program is continuing on track. Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Peter Welford from Jefferies. Please go ahead.

[Peter Welford, Senior Research Analyst at Jefferies Financial Group]

Oh, hello. My question is on the broader cardiovascular portfolio now at Novartis, particularly focusing on the pipeline. I mean, obviously, we're aware of Pelacarsen, which I wonder if you can confirm we're still expecting the phase three readout there next year. But obviously, following the news on XXB, when you now look at the late-stage cardiovascular portfolio outside of nephrology, I guess, how do you now think about the need perhaps in Novartis to bolster that? Or are you comfortable given the long life that we see still with Leqvio ahead despite the loss of Entresto in the U.S.? So you will basically just build the cardiovascular pipeline largely internally and through the early-stage phase one preclinical programs that you have. Thank you.

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks, Peter.

[Vasant Narasimhan, CEO at Novartis]

Obviously disappointing with XXB, but overall, we feel confident given where we see Leqvio's continued expansion and the adjustments we've anyway made to the field for us. We think we're right-sized for Leqvio. Pelacarsen on track. It's event-driven, so we'll have to continue to track the events, but we currently guide to a 2025 readout. Then behind that right now, we're really focused on accelerating our siRNA portfolio. Those siRNAs could either be as mono indications or in combination with Leqvio, so we're exploring a range. And we have now a couple in phase two or one. It's even a bit later than that. We'll be providing updates on those over time. Certainly, siRNAs in hypertension, siRNAs against HMG-CoA, which could be then used in combination or independent of Leqvio, as well as other earlier phase one siRNAs are all advancing.

[Vasant Narasimhan, CEO at Novartis]

We continue to want to build out a broad siRNA portfolio and then also look as appropriate for combinations with Leqvio. The other element, two elements of our story, I think on cardiovascular, one is a portfolio of agents in arrhythmia, high risk, very high risk, but we're relatively on our own in arrhythmia. And so we have a few agents now in phase one or proof of concept studies. We'll certainly see how those ultimately play out. And then we have, obviously, as all companies do, a broad preclinical portfolio, but including preclinical efforts on novel targets in obesity as well as in other areas of cardiovascular risk reduction, particularly around nephrology. We'll see how those advance as well. Obviously, we'll always look externally, but there's no urgency to plug any gaps at this point. Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Etzer Darout from BMO Capital Markets. Please go ahead.

[Etzer Darout, Managing Director and Senior Equity Research Analyst at BMO Capital Markets]

Great. Thanks for taking a question. I had a question on Pelacarsen readout next year for Lp(a) and apologies if you've commented on this in the past. Just curious, there's literature on the impact of Lp(a) on GLP-1 levels, but curious as to the reverse. And I guess given the increasing use of GLP-1s broadly, just curious if GLP-1 use matters in this study and if so, how you're accounting for its use in the trial. Thank you.

[Vasant Narasimhan, CEO at Novartis]

Yeah, absolutely. So I think GLP-1s are noted to have, I think, modest reductions of Lp(a).

[Vasant Narasimhan, CEO at Novartis]

I mean, the focus of this study is on patients that are much higher on the range of Lp(a), so the top quartile and the top decile, which we believe you need to have pretty substantial knockdown, 70%-90% of the Lp(a) levels, 90% plus, ideally, that would then enable you to have the hoped for, at least the genetically validated efficacy benefit. So we don't believe GLP-1s alone or PCSK9s alone. PCSK9s, also knock down Lp(a), are going to be sufficient for this patient population that is at a very high risk of cardiovascular events due to their Lp(a) levels. In terms of background therapy, I don't know offhand how many patients were on a GLP-1 at baseline, but with all of these trials, we always have, of course, patients who are on standard of care for their various comorbidities.

[Vasant Narasimhan, CEO at Novartis]

And then, of course, we would do subgroup analyses based on the various patient populations. Those would not be powered, of course, and would be post-hoc. But as always, we generate those forest plots to demonstrate how different patient groups responded to the medicine. So that's what I would expect would happen in this case.

[Etzer Darout, Managing Director and Senior Equity Research Analyst at BMO Capital Markets]

Great. Thank you.

[Vasant Narasimhan, CEO at Novartis]

Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Kerry Holford from Berenberg. Please go ahead.

[Kerry Holford, Managing Director and Senior Equity Research Analyst at Berenberg]

Thank you for taking my question. Just going back to the theme of M&A, given your strong balance sheet and a growing patent expiry burden, just interested to hear you talk about your appetite for more M&A in future here. I wonder if you can comment specifically on your degree of interest in obesity. You referenced it.

[Kerry Holford, Managing Director and Senior Equity Research Analyst at Berenberg]

Just to note that with regard to your early-stage internal pipeline, and interest in potentially bolstering that externally. Tied to this, I think it is somewhat disappointing that we should see an impairment so soon after the MorphoSys deal closure. My question then is, how can investors gain confidence in your future M&A choices? Any commentary you would have there? Thank you.

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks, Kerry. Overall, we have, of course, adequate firepower. As Harry mentioned, we have a balanced approach to capital allocation, invest in the business, growing dividend in Swiss francs, ongoing share buyback with adequate capacity to continue share buybacks as deemed appropriate. Then we've been very active in the deal front, really in the sub-$1 billion asset space.

[Vasant Narasimhan, CEO at Novartis]

I mean, most of these don't hit the radar, but we've built out, I think, a pretty—and we'll outline this in a bit more detail and meet the management—but a really broad range of assets across our key therapeutic areas as well as key technology areas to fill either mechanism of action gaps or technology gaps, which we think are critical for us to succeed in those four quadrants or in our three key technology platforms. A great example being the various deals we've done in RLT, including Mariana Oncology, to build out a strong actinium profile, or even the deal we announced, I think, yesterday with Monte Rosa Therapeutics, which gives us a strong opportunity within the world of molecular glues for immunology. I think, regarding your specific comment question on obesity, no change.

[Vasant Narasimhan, CEO at Novartis]

We think GLP-1, GIP, etc., are well served by the current incumbents, and we expect a flood of companies from China and elsewhere to attempt to enter these spaces, and so we don't see an opportunity to really build a differentiated profile, especially given what will likely be a very intense payer rebate environment in the U.S., as well as genericization of first-line GLP or older GLP-1 agents over the coming years, so we don't think that's a game to play in as a fast follower, late follower, rather focus on novel assets, and I think overall, when we look at our—I mean, our M&A track record, we've done it very carefully, and we systematically look at it. We see our overall success rate in line with the overall sector. There are companies that are worse than us. There are a few that are a little bit better than us.

[Vasant Narasimhan, CEO at Novartis]

But of course, if you look at the GSK oncology acquisitions, if you look at Kesimpta, if you look at building out a strong RLT portfolio, I expect that with AveXis ultimately showing the positive impact of our intrathecal readout later this year or early next year in the 2- to 18-year-old patients, well, that will also be a strong payback. So obviously, whenever you do clinical stage deals like we did with Pelacarsen, you will have updated clinical data. I think that's normal in this business. I would expect sophisticated investors not to read too much into one-offs, but rather look at the overall portfolio of how a company does and executes M&A. Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.

[Seamus Fernandez, Senior Managing Director and Senior Equity Research Analyst at Guggenheim Securities]

Oh, thanks so much for the question.

[Seamus Fernandez, Senior Managing Director and Senior Equity Research Analyst at Guggenheim Securities]

So really just one question to follow up on business development in areas of interest. The dynamics in immunology are obviously heating up, accelerating across bispecifics, long-acting assets, and overall asset development. Wanted to just ask, I guess, a bit of a blended question, not two, but what the effort with Generate is really seeking to execute and if there's an awareness or when we might have the targets potentially disclosed in that collaboration and how you're thinking about immunology writ large from a BD perspective, simply because we know that Generate is also doing quite a bit there along those lines. Thanks.

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks, Seamus. So I'll divide my commentary into first AI and then separately into specific immunology.

[Vasant Narasimhan, CEO at Novartis]

So with Novartis, our primary collaboration is with Isomorphic Labs, where we partner with the Nobel Prize-winning team there to really work on novel targets to generate hits and leads that we can take then further into development. So that's a collaboration that's ongoing for small molecules and potentially could expand over time into other areas of drug development. And then with Generate, we focus on biologics. We have not disclosed the targets that we're working on, but generally speaking, it would be difficult to drug targets or we want novel biologics with novel formats, as you mentioned, bispecifics, trispecifics, etc. So that's the focus of the Generate-Bio collaboration. And then we're going to learn and see how it goes as we continue to use AI to hopefully speed up our research and early development process. We could expand into additional targets with both of those collaborations over time.

[Vasant Narasimhan, CEO at Novartis]

But I think it's early days, and I think we need to see the results of those efforts, the first efforts, and then, of course, progress step by step. I think more broadly in immunology in-house on top of remibrutinib and VAY, both of which will have readouts over the course of 2025, 2026, which would allow us to, I think, build two more very substantial medicines to continue to build off of the success of Cosentyx. We have a number of bispecifics and trispecific programs that are in phase one, phase two. And then, of course, we have YTB now in either phase one or phase two development for immune reset. That's our rapid CAR-T therapy, I think now enrolling in six or seven indications, continuing to look to expand across immunology as well as in neuroscience indications.

[Vasant Narasimhan, CEO at Novartis]

And so I think our BD and M&A efforts are either to bolster the areas I just mentioned, bispecifics or cell therapies, or to look at novel targets like Monte Rosa that we recently have done. Those are the things I think we're broadly looking at, but I would say we do believe you need to move now into more specialty immunology, more targeted immunology, going into the mass market with a number of biosimilars coming out at the end of the decade and high rebate pressure. You need to really find places where you can have a differentiated offering in the United States, particularly given that payer dynamic. Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Rajesh Kumar from HSBC. Please go ahead.

[Rajesh Kumar, Head of Life Sciences and Healthcare Equity Research at HSBC]

Hi. Good afternoon. Thanks for taking my question. On capital allocation, can you help us understand how you think between your choice of doing deals versus buying back shares? And then at what share price or multiples would doing a deal become the only good use of capital? I think your share price has been quite strong, if we leave today aside, but if we look at the earnings momentum, etc., at what point would you stop share buybacks and deploy more capital towards dealmaking?

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks, Rajesh. I'll give that to Harry. Harry?

[Harry Kirsch, CFO at Novartis]

Yeah, thank you, Vas. Thank you, Rajesh. I mean, it's, of course, a question that does never have an absolute answer, right? Obviously, we believe that our share price has much more potential. If I just look at our five-year growth rate outlook, right, even consensus is not there yet at the 5%, slowly creeping up every few months now.

[Harry Kirsch, CFO at Novartis]

I think consensus just makes it to 4%. Of course, we keep that dynamically. In terms of balance sheet and cash flow, we call it firepower so nicely, right? But anyway, we have such a nice capacity that we have the situation we can do all M&A bolt-on deals that we come up with. And by the way, it's not so easy to come up with good ones, right? Given the premiums one has to pay and the high conviction we have to have to have a great deal for our shareholders, also in terms of returns. But we can do both. We can do bolt-on M&A, right? Our net debt is even below one times EBITDA at the moment with CHF 16 billion, right?

[Harry Kirsch, CFO at Novartis]

EBITDA is higher, CHF 18-19 billion, and growing. And so we have that luxury situation. On the one hand, we keep doing, I would say, continuous good share buyback at an attractive level. As you may know, Switzerland has an interesting situation. I think it's unique in the world that we can only do over time, right? Roughly CHF 10 billion a year max. And on the other hand, do all the bolt-on M&A to continue to further strengthen our 48 pipelines. And again, obviously, we believe that our share price has significant upside potential, and that's why we continue to do both for the foreseeable future. Thank you.

[Operator]

Thank you. Thank you. Your next question comes from the line of Steve Scala from TD Cowen. Please go ahead.

[Steven Scala, Managing Director and Senior Research Analyst at TD Cowen]

Oh, thank you very much. No generics of Entresto and Promacta were already assumed in the 2024 guidance, so Tasigna is the only update. What amount of the guidance raise is attributable to no generics of Tasigna? And it sounds like the extension to 2025 for all three is due to litigation for Tasigna and Promacta in addition to Entresto and not slower generic progress and/or settlement. Is that correct? Thank you.

[Vasant Narasimhan, CEO at Novartis]

Yeah, Steve, I can take the second part, and I'll give it to Harry on the contribution of Tasigna to the overperformance. Overall, I mean, we're not going to comment on specific legal cases, but I think it's a combination of our litigation, our settlements, and our kind of competitive intelligence as to where various players are and their approvals that gives us our current forecasting estimate of middle of next year. But that's not a definitive date.

[Vasant Narasimhan, CEO at Novartis]

It's really going to depend on a number of factors. As you know, we have three litigations ongoing with respect to Entresto, with respect to the approval with FDA, the combination patent where we're appealing the decision, and the first instance hearings on the Co-Crystal patents. So that's all unfolding, and then Promacta and Tasigna, it's not something we've disclosed, but we continue to estimate mid 2025, and we'll see how the actual market develops. Harry, in terms of the Tasigna contribution?

[Harry Kirsch, CFO at Novartis]

Yeah, thank you. Yes, you still have some contribution. I mean, also on the Q2 call, I mentioned that if there's no generic entry, likely we will be at the higher end of our guidance, and that's what has happened now, right? So we don't expect any generic or if there's still, we have a bit of Sandostatin LAR.

[Harry Kirsch, CFO at Novartis]

There's a small entry in the U.S., but it's only in one account, 10% of business. So that's very little in terms of impact model this year for Sandoz and LAR. But so there's a contribution of Tasigna to it. We also had some gross-to-net favorability in quarter three. Prior, I guided to high single digit. Now we came in at 10%. So there was a contribution that was basically offsetting prior year favorability at one-timers. But overall, if you look at our business, our model at the moment is like we have a 14% volume growth, then we have two points of generic impact and one point of negative pricing adding up to the 11% year-to-date sales growth, right? And that's the model we go into operationally into Q4 as well into next year.

[Harry Kirsch, CFO at Novartis]

And then what is expected to happen with the generic component goes a bit up and then a bit of pricing, not too much, but also partly or fully offset by some volume impacts in the U.S. So overall, some slight contribution to getting to the higher end. But overall, what we just see at the moment is a fantastic continued very good business momentum. And the only dynamic next year is really when are these generic impacts happening. But the underlying growth of the portfolio is really excellent. And that's why we are also very confident in our 5% plus CAGR for 2023 to 2028.

[Steven Scala, Managing Director and Senior Research Analyst at TD Cowen]

Great. Thank you, Harry.

[Vasant Narasimhan, CEO at Novartis]

I think we have a few more questions. So Operator will continue down the line.

[Operator]

Thank you. Your next question comes from the line of Emmanuel Papadakis from Deutsche Bank. Please go ahead.

[Emmanuel Papadakis, Managing Director and Senior Equity Research Analyst at Deutsche Bank]

I'm trying my luck and squeezing one and a half. The half is a follow-on on Pluvicto just to understand what has changed versus, as Harry noted, your high conviction at the time of completing that transaction. And the one is on Kisqali, if I may. Next year, it looks like it's going to be a particularly important offset, some of the potential headwinds you may face. Could you just talk about the realism of consensus or conservatism of consensus expectations for $4 billion? Is it realistic to expect you to add another billion dollars of sales? And are you expecting a gradual increase in pace of prescription adoption or some inflection post-NCCN, etc.? Thank you.

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks, Emmanuel. Pluvicto, it's nothing new. I think the data was presented in ESMO and other settings.

[Vasant Narasimhan, CEO at Novartis]

This is a medicine that had a safety imbalance that we think has to get fully resolved prior to being able to use the data for any kind of filing. We need to follow these patients longer to see how the two arms perform. There is an indication that OS is going in a positive direction. However, we need to, I think, see this unfold, I think, for a longer period of time and also determine what additional trials will be required given that safety signal to have a positive benefit risk. So that's what we're monitoring, and we'll continue to monitor. These things, I think, happen in clinical development that safety signals emerge, and then you have to deal with them. So that's, I think, normal course of business in our industry.

[Vasant Narasimhan, CEO at Novartis]

With respect to Kisqali, I don't think we're prepared here to give additional peak sales guidance, but we will update our peak sales guidance for Kisqali given and at Meet Novartis Management. I think it's pretty clear you can all annualize right now the metastatic indication and where that's heading. So that already, I think, is really strong momentum in that area. And then now that we have the broad label, including node-negative patients, as well as the NCCN guidelines and node-negative patients, as well as the positive overall label at CHMP, I think we clearly are very optimistic for the overall size of this medicine and will provide that update at Meet Novartis Management. I think one more, two, three more. Next question, Operator.

[Operator]

Thank you. Your next question comes from Richard Foster from JP Morgan. Please go ahead.

[Richard Vosser, Senior Managing Director and Research Analyst at J.P. Morgan Chase]

Hi, thanks for taking my follow-up. Just one on Kesimpta. Just a competitor is rolling out their subcutaneous formulation. Just thoughts on how that's impacting? Are you seeing any impact at the moment? Thanks very much.

[Vasant Narasimhan, CEO at Novartis]

Yeah, thanks, Richard. So we haven't seen, in our experience, impacts to date. We see steady overall share, slightly increased NBRX share. Our focus right now is to capture more of the growth of the B-cell class as it's been our real focus. As the B-cell class continues to grow 60% plus to hopefully greater and greater proportions of first line, first switch for MS patients. Most of the impact that we hear about is primarily to the competitor product within the IV class of these medicines.

[Vasant Narasimhan, CEO at Novartis]

I think given the fact that there is required for a healthcare professional that you need the various pretreatments and post-dose monitoring, and then you have a pump involved with the subQ administration, it's not viewed as comparable to the experience of having Kesimpta, which takes seconds or minutes to inject and is relatively straightforward at-home administration for patients. So we haven't seen that impact today. That said, we have to be really diligent, and our teams are fully prepared to continue to argue for the value proposition. I think outside of the U.S., we really don't see the impact. I think there we feel very confident that given the structure of those ex-U.S. markets, there is a preference for when you can get patients out of the medical home using Kesimpta.

[Vasant Narasimhan, CEO at Novartis]

So I think that's continued to allow us to continue to have strong momentum outside of the United States as well. Next question, Operator.

[Operator]

Thank you. Your next question comes from the line of Graham Parry, Bank of America. Please go ahead.

[Graham Parry, Managing Director and Head of Healthcare Equity Research at Bank of America Securities]

Great. Thanks, David. Follow-up. It's just on the Kisqali patent challenge from MSN, just thoughts on timelines of ruling from the Delaware Court on that. And if MSN was actually successful in invalidating the patents, just your expected timelines for resolution of an appeal. And just correct me if I'm wrong, but are you sort of past the stage of settlement here, or is that would still be could that still be an option? Thanks.

[Vasant Narasimhan, CEO at Novartis]

Yes, so no updates. Ruling could come at any point, so we'll continue to monitor that.

[Vasant Narasimhan, CEO at Novartis]

We are prepared to immediately file the necessary injunctions and appeals, and that process can take, as you know, some period of time. In addition, I think, of course, the approval has to also happen. So there's a number of things here as well. And we think we have some important elements as well to highlight with respect to that. And so I think we're in a good place, but we'll have to see how the ruling happens. Difficult to say. I mean, I think without knowing exactly how the courts would time the various appeal hearings, we would say 26 and beyond. But I think we'd have to see with the timing of the ruling and the appeals and the hearings to provide more granularity on that. Next question, Operator.

[Operator]

Thank you. We will now take our final question for today. The final question comes from the line of Matthew Weston from UBS. Please go ahead.

[Matthew Weston, Equity Research Analyst at UBS Group AG]

Thank you, Vas. It's a question about politics and siRNA. So clearly, siRNA as a mode of action is very important to Novartis. I believe you're very active in the legislation to try and get an amendment to IRA to extend the life from nine years to 13 years in terms of government pricing action. Can you give us any update as to where that legislation is, please?

[Vasant Narasimhan, CEO at Novartis]

Yeah, absolutely, Matthew. So I'll take the opportunity, given that nice broad question, and thank you, Matthew, for your third question today, to provide, I think, a broader perspective as well.

[Vasant Narasimhan, CEO at Novartis]

So first, on the IRA, which, of course, is a top priority for the industry, there's the broader desire to, and I think important for public health and, of course, pipelines in oncology, neuroscience, cardiovascular disease, indication expansion, to get the nine to 13 small molecule versus large molecule aberration corrected. And there is legislation tabled currently in Congress to try to get that broad correction to happen. I believe now there's bipartisan support in the House for that broad correction. Alongside that, there's a number of limited fixes that are being proposed by various actors. And one of those is the MINI Act, which targets correcting for genetically targeted therapies such as siRNAs, ASOs, etc., and trying to get their definition more in line with what was done in 21st Century Cures. That also has bipartisan support in the Senate and the House and a relatively low pay for.

[Vasant Narasimhan, CEO at Novartis]

So that's also out there as well. Actually, minimal payoff, I should say. So I think now it's much more moving through the election period, moving through, obviously, the establishment of a new session, and then trying to get those bills, whichever combination of the various bills that are out there. There's also efforts to correct the rare disease, multiple indication versus single indication situation, similar definition, etc., and finding a right context to get those bills put in place, as well as trying to get the broad fix overall for IRA. So I think all of those efforts are ongoing. And a completely separate track are the various litigations that are ongoing to repeal the IRA. We have one. Other companies have them. The industry overall has one. So we'll see how that also plays out.

[Vasant Narasimhan, CEO at Novartis]

I think it will be in the two- to three-year period, we get more understanding of all of those various pieces. We continue to, of course, push for PBM reform in as broad a way as we can, and then also to get, hopefully, a more sensible 340B environment, which is, I think, a significant issue for the overall industry, starting with transparency of who are the patients and what are the centers getting this money and how is it used for. Those are, I think, the three big priorities for us as a company and overall for the industry from a legislative standpoint as we move to a new Congress and a new president. So thank you all very, very much. I really appreciate all the great questions and interest. I hope we'll see all of you at Meet the Management in London.

[Vasant Narasimhan, CEO at Novartis]

In the meantime, wishing you all a very nice autumn. Take care.

[Operator]

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

Participants

Executives

• Sloan Simpson, Head of Investor Relations
• Vasant Narasimhan, CEO
• Harry Kirsch, CFO

Analysts

• Matthew Weston, Equity Research Analyst at UBS Group AG
• Steven Scala, Managing Director and Senior Research Analyst at TD Cowen
• Emmanuel Papadakis, Managing Director and Senior Equity Research Analyst at Deutsche Bank
• Etzer Darout, Managing Director and Senior Equity Research Analyst at BMO Capital Markets
• Seamus Fernandez, Senior Managing Director and Senior Equity Research Analyst at Guggenheim Securities
• Emily Field, Director and Head of European Pharmaceutical Equity Research at Barclays PLC
• Simon Baker, Partner and Head of Global Biopharma Research at Redburn Atlantic
• Peter Welford, Senior Research Analyst at Jefferies Financial Group
• Florent Cespedes, Senior Analyst at Société Générale
• Rajesh Kumar, Head of Life Sciences and Healthcare Equity Research at HSBC
• James Quigley, Executive Director and Senior Equity Research Analyst at Goldman Sachs International
• Graham Parry, Managing Director and Head of Healthcare Equity Research at Bank of America Securities
• Kerry Holford, Managing Director and Senior Equity Research Analyst at Berenberg
• Richard Vosser, Senior Managing Director and Research Analyst at J.P. Morgan Chase