Thank you everybody. Really appreciate you taking the time to come here to Basel. I know some of you have traveled from across the Atlantic, others from very difficult air routes from just across the channel. Thank you very much for coming. It's our first in-person meeting for I think almost three years now, and all of our management really welcome the fact that we're together, you can ask the questions, and we get your feedback. That's great for us. The way we're gonna do the meeting of Novartis management is as we've always done it, except we also have a webcast as well. We'll start with the agenda, and the first session is going to be with Vas going through our new strategy.
We won't have too much time for Q&A in that first session, simply because the group then meets with everybody in the five subsequent sessions, so you get the opportunity there. Also for the people on the webcast, they'll meet with the group section and with Vas. Before we start, I just wanted to say the safe harbor statement. The information presented today contains forward-looking statements that involve known, unknown risks, uncertainties, and other factors. These may cause the 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 the U.S. Securities and Exchange Commission.
For people on the webcast, please go and look at the slides which Vas will be presenting, and for everybody else here, if you haven't already picked up a booklet, you can do so just outside. With that, I'll hand across to Vas. Thank you.
Great. Thank you, Samir. I also wanna thank everyone for taking the time to join us today. We really appreciate your interest in the company. I think it's a great opportunity for all of you to be able to meet the management of our company at various levels across our divisions, and of course our R&D and commercial organizations. Today also is an important day. 25- years ago, Novartis was launched as a conglomerate, a broad conglomerate, not just in healthcare. Over the years, we were able to focus as a healthcare conglomerate, but today we launch a strategy where we're transitioning to a fully focused innovative medicines company with the announcement to separate and spin Sandoz.
It's an exciting moment and a moment to refresh our strategy and refresh our approach to creating value for our shareholders, creating value for patients and our associates, and creating value for society. When you look at that strategy, and I'll be going through this in some detail, our goal is to deliver high-value medicines that alleviate society's greatest disease burden through technology leadership in R&D and novel access approaches. We'll be going through the focus of the company in five therapeutic areas, five technology platforms, and four priority geographies, and priorities on how we're gonna accelerate our growth, improve our returns over time, and strengthen the foundations that make the company stable, sound, and great in the long run, including around culture, ESG, and of course, digital and data science.
Now just reminding you on the journey that we've been on, and it's been, of course, a long journey. Starting in 2014 with the portfolio transformation, we began this shift to the fully focused medicines company. We first moved out of OTC vaccines and some of our other smaller businesses. Later, we were able to spin Alcon into one of the largest eye care device companies in the world, alongside separating from consumer health. More recently, we of course exited our Roche stake and bought back our own shares. Now with the announcement of Sandoz, we become, in 2023, we expect a 100% innovative medicines company.
Along the way, we have been able to deliver consistent financial performance, 6% growth within innovative medicine sales, 10% core operating income growth, and solid margin progression, as you can see, from 31.6 - 36.2. We'll be talking more today as well about our goal to get to that 40% margin, which I'll speak more about. We've delivered on the transformation to fully focus the company and also delivered on the financial performance consistently over time. What I'd like to do is walk you through each area of focus and talk a little bit about how we're gonna transition and make these changes really embedded into Novartis in the long run.
Starting with our core therapeutic areas, as you can see, we've really taken the effort to move from where we were in the past with 11 therapeutic areas or nine therapeutic areas, depending on which measures you use, over 50 diseases, to really focus down on five where we think we have the scale within our commercial organization, our pipeline, and our research organization to succeed in the long run. Cardiovascular disease, where of course we build on the strengths of Entresto and soon LEQVIO with a deep pipeline. I'll speak more about that. Immunology, we're on the back of Cosentyx, but also on a long history that even goes back to Certican and other medicines. We have the ability, we think, over time to lead in immunology.
In neuroscience, one of the most challenging areas of drug development, but where we have built a solid foundation in multiple sclerosis, we have the opportunity, we think, to over time expand that into other diseases that are important in neurodegeneration. With respect to solid tumors and hematology, a long history on the back of Gleevec, and of course, Zometa and Femara, now Kisqali and Promacta and Jakavi, and a pipeline that's building in those two as well. We'll maintain a presence in an area called TAx, where we'll continue to look at other emerging disease areas where we might want to focus on in the future if we were able to find a significant breakthrough.
The goal is to shift in all elements of the company, research, development, and commercial, to focus in these areas where we believe we can leverage our strength to consistently make medicines that matter for the world. These are also five therapeutic areas with the largest long-term growth potential and where we believe that expertise that we can leverage. When you look at each one of these, oncology, of course, you all know well, but also CNS, immunology, and cardiovascular disease. These are some of the highest growth and largest growth opportunities in the sector, usually in the high single digits to low teens. These are areas as well, as I mentioned, we have the scale and capabilities to win.
Now diving deeper on two, the specific areas which we wanted to highlight, not having time to go through each one of them, but hopefully over the course of the day, particularly with the R&D team and the commercial teams, you have the experts available to you to have the discussions where we can go deeper on our R&D pipeline. In cardiovascular disease, we believe that a combination of our presence in heart failure and dyslipidemia, our novel access approaches in population health, our ability to move into specialty renal indications, and our focus as well on disease-modifying therapies in areas such as obesity. We've built the depth that will enable us to win in the long run.
I think you well know the story on LEQVIO, where we started in secondary prevention, but over time, we'll move into primary prevention and have significant efforts within life cycle management to expand our capabilities to bring multiple siRNAs to patients. Pelacarsen, Lp(a), where we have fully enrolled our phase III studies and have the opportunity to bring the first medicine to really tackle a genetically pre-specified cardiovascular risk factor. Another medicine, XXB, a novel monoclonal antibody targeting the NPR1 target, which will give us the opportunity to further expand within heart failure and hypertension. Iptacopan, a medicine, where we have the opportunity to over time build up a capability across a range of renal diseases as well as rare diseases, and also emerging assets such as TIN, which also would allow us to further expand within the space of kidney disease.
MBL, which is in the world of obesity, I would still characterize a very high-risk proposition, but a novel mechanism of action as we continue to look at how obesity impacts cardiovascular disease and trying to truly help these patients in the full continuum of these conditions. A full pipeline within immunology, where we have great expertise built here in Basel, but it has really built up over time, beginning with Cosentyx, but now expanding with VAY, our anti-BAFF receptor antibody, which is moving forward in a range of indications, both in immunology and hematology. Remibrutinib, where we believe we have one of the best-in-class BTK inhibitors to be proven. Of course, we have to really demonstrate that we have the right safety profile.
The opportunity to expand not only in MS, where there's a lot of focus, but also across a range of rheumatologic illnesses. Then you see some of the other opportunities here on the slide. Some of these are bispecific, such as MIS, MAS, an IL-1 IL-18 monoclonal antibody. Of course, our ongoing efforts within food allergy built off the back of our experience within Xolair. I won't go through each one of the therapeutic areas, but our thinking is to keep building this pipeline depth on the back of outstanding research and development that will help us sustain these franchises or these therapeutic areas in the long run. I also wanted to say a word about next generation technology platforms. We've focused down to really think about this in a manner of two plus three.
Historically, Novartis has been a small molecules company, a real small molecules powerhouse. As you can see, when you look at our sales, 73% in 2020 was primarily from small molecule medicines. Over time, we would like to shift that where we not only have that heavyweight presence in small molecules, but also expand our presence in biologics and have those two technology platforms be the core. Within biotherapeutics, that includes bispecifics, that includes ADCs, that includes multi-format biologics, which might combine biologics with other technologies. We have three emerging platforms where we have to be humble in the sense that these are very difficult to, as we've learned, to build up and expand.
In each one of these areas, we build very leading, I think, very strong and leading positions, which give us the opportunity to leverage these technologies if the right disease, right therapeutics ultimately emerge. Within cell and gene therapy, we build on the back of Zolgensma, where we have, I think, one of the most successful gene therapies in the history of the industry. Our focus now is very much looking at novel cargos that we can deliver through Zolgensma, as well as improved vectors and improved ways that we can actually deliver the target payload to the relevant tissue.
We have 19 projects currently within the gene therapy space in research or in early clinical, and we expect the next filing within in that technology to be the Zolgensma intrathecal, AVXS-101 intrathecal filing, which we hope to achieve in 2025. In cell therapy on the back of Kymriah, we continue to try to innovate to see how can we better scale cell therapy technologies. We have next generation CAR Ts in manufacturing. I think one of the things we have to keep asking ourselves in this space is how can we appropriately and adequately scale for a business that will actually generate adequate returns in the long run? I think one of the challenges has been cost of goods and some of the complexities, but we're working to address these. We have the opportunity to bring forward a next-gen platform called T-Charge.
We're still evaluating if that ultimately will make sense. Then we'll of course look going forward, are there even more breakthrough technologies we could use to radically rethink how ex vivo cell therapy is ultimately delivered? Radioligand therapy is an area I'll go into a bit more detail, but on the back now of Lutathera and Pluvicto, we believe this is a platform that's starting to mature and starting to demonstrate you can build multiple medicines off of this technology. Nine projects right now in R&D. We expect the next filing next year with the next indication for Pluvicto. Within xRNA, siRNAs, but also other RNA-type therapeutics, which could be RNAs linked to monoclonal antibodies, or others, we're building up our in-house capability. It's worth remembering that Novartis had a very deep expertise within RNA therapeutics for many years.
Now we have the opportunity to revive that with the expected success of LEQVIO, to be able to build off of that, and particularly in cardiovascular disease, but also perhaps in other therapeutic areas, to leverage the power of siRNAs and the infrequent dosing and the ability to find a pretty broad therapeutic index. 11 projects currently right now within research. With each one of these technology platforms, the hope is to leverage the scale and expertise we build in the first in-market product, combine that with the commercialization expertise. We think with Zolgensma now reimbursed in over 30 markets around the world, we've demonstrated we know how to get gene therapies into the patient populations.
A global footprint, the development and regulatory experience, and the breadth of projects, which we probably want to focus down at, given the therapeutic area of focus we have, but nonetheless, the opportunity to bring much more value from these platforms. I want to say a word about radioligand therapy as we continue to see the early success of Pluvicto. We've established a leadership position here. We have a very strong supply chain. We're investing in manufacturing capacity with four large-scale facilities. Next year, we hope to bring our Millburn facility, as well as a new facility within Indianapolis online. We have strong commercial expertise, 500 centers across the world, 100 centers right now for Pluvicto. We limit the number of centers just because the demand currently is quite high.
Leading science with multiple projects now advancing within or late research and early development. You can see here a bit more about the pipeline, and we'll look forward to hopefully bringing more advances in this space. It is a unique opportunity because this is a technology with PET scanning. You can see the tumor empirically. You can identify whether you perhaps have a TI because you're not targeting normal tissue. Then you can treat to the scan and ultimately see does your medicine have the desired impact. Often this is 4 or 6 cycles, so far well-tolerated. It has a lot of potential as another approach to tackling cancer.
Now turning to geographic focus, for those of you who have watched us for a long time, over the years, we've built up a presence that has allowed us to be Number 1 in Europe, Number 5 in China with a goal to be Number 3 in 2027, and Number 4 in Japan with a goal to be Number 3 as well. A really strong capability outside the United States. We have to acknowledge the most successful companies in our sector in terms of delivering TSR, delivering returns, creating multibillion-dollar brands have a significant success in the United States. Our ambition now is to move from Number 10 to Number 5 over time in the U.S. We're doing that through very concrete actions that we hope systematically will shift the mindset within the company.
First, we've given this U.S. first mindset to all the relevant units that you'll have the opportunity to speak to today. We have elevated the U.S. to report directly into the executive committee, so the voice is heard in the most critical decisions in the company. We're prioritizing the U.S. in our target product profile. This is a critical element of the story. Historically, we built global target product profiles that often had to balance Europe and other geographies with the U.S. Now we build the U.S. target product profile, and we supplement with other trials as needed for the European geography. Representation in all the key governance bodies. We're big focused now on building U.S. talent and historically, if you watched our company, we often moved talent ex-U.S. To the U.S.
Now the idea is to build homegrown U.S. talent that will allow us to succeed in this geography in the long run. Lastly, given our leadership outside the United States, often our trials have had lower U.S. representation than our peer set. This is something we're trying to systematically address. We know when U.S. centers have experience being party to the clinical trials, have had the opportunity to learn more about the medicine as that medicine progresses in their centers, they're much more likely to use the medicine in the future. Another key focus area for us. Now turning to capital allocation as we close out the focus section. When you look at how we've returned capital and invested in the business, I would say we've been very disciplined to follow the framework that we've always articulated to all of you.
First, we invest in the business. Looking at our investments, CHF 9 billion in R&D annually, CHF 1.4 billion of capital investments in 2021. Our business is well supported in terms of the capital that we allocate. Value creating bolt-ons. We've done about $30 billion of deals between 2017 and 2021. On our measure, that puts us slightly to the higher end of the peer set, but certainly not at the far end in terms of the peer set, in terms of how much M&A is happening. We'll continue to look to do that. We've also returned capital to shareholders in a very consistent way, with CHF 53 billion distributed between 2017 and 2021. We've consistently grown our dividend in Swiss francs over the time period. As you can see, CHF 7.5 billion paid out.
In terms of share buybacks, when we have excess capital that we're not able to deploy to our other priorities, we've been committed as well to doing that as appropriate, with $15 billion of share buyback announced post the sale of the Roche stake, and still more than half of that to be executed at a time period we would believe our relative share price is suppressed. We were able to sell an asset at a high and buy back our asset, our shares at a relative low. As that continues, as the markets are currently in that challenged position, it's a good opportunity for us to, we believe, you know, really return value to our long-run shareholders will then participate when we get to the next phase of growth.
Now also, our capital structure supports flexibility, and we can certainly discuss this more in the group section. When you look at our credit rating positioning, both in Moody's and S&P, not challenged versus the peer set, and also when you look at our relative leverage to our peer set, again, one of the least levered companies in the sector. What this does is it gives us capital flexibility to look at bolt-on M&A, but also to look in the future at returning capital to shareholders as appropriate. We continue to look at this on an ongoing basis to make sure we're doing the right things for the business and for all of you.
Now, turning to our priorities, moving off of the focus, and I hope you get a sense there's a big agenda in the company now as we've now come down to an innovative medicines company to focus. We also want to increase the priority mindset within Novartis. Now first, we articulated to you recently with the announcement of Sandoz, a desire to improve the financial profile of the company. We've committed to 4% sales growth both in the 2020 to 2026 period, but also now 2021 to 2027. In that period, we would expect, we've already seen earlier this week Gilenya to be out of these numbers by 2027. Certainly in our in-house estimate, we assume Entresto with a 2025 exit.
We're planning to grow in spite of some of these patent expiries, and I'll go through why we have that conviction. For core operating income margin, we would aspire now to get to 40%, and that includes corporate costs, which historically we've broken out as a separate number. Versus some of the previous guidance we've given, the recent announcement within Sandoz, that was actually a slight upgrade to get to this 40%+ margin, which will come from both the restructuring activities, the growth we will see in the U.S. market, as well as the opportunity with the Sandoz spin to further simplify the company. Free cash flow generation will follow from that. We hope in a very positive trend that continues to show a strong free cash flow generation in the company.
With that as well, our aspiration is to get from where we've been historically with the acquisition of Alcon in the bottom quartile of return on invested capital to move up the ranks in an appropriate way into the, hopefully, the top quartile of return on invested capital in the sector. Now, we also would have to acknowledge that the Sandoz spin-off will improve some of these numbers both in terms of the margin, free cash flow, and return on investment. That's reflected in the figures that you see here. As I've already stated, we remain committed to the capital allocation priorities previously outlined with the cash that we generate. How are we going to do that? One of the important elements of our story today is eight brands we believe that have multi-billion dollar potential.
Just to say a brief word about each one of those with the opportunity to go deeper over the course of the day. With Cosentyx, we continue to have an outstanding medicine across its core indications. Today at $5.1 billion annualized sales, growing double-digit, solid position in the U.S., where we have solid formulary position that we've built up over time, a growing position within China, solid growth within Europe. Now with additional indications ranging from the recent approval of Hidradenitis Suppurativa, but also the IV formulations, among others, an opportunity to further grow this brand consistently throughout this next decade.
Entresto continues on its march, outstanding performance around the globe, including U.S. and Europe, but also in China, where we have had disruptions because of the rolling lockdowns, where we continue to believe, though, we can make this a very significant medicine as well within the Chinese market. Opportunity to get to over $5 billion peak sales. Of course, if the LOE goes further out, the brand will likely continue to grow on this trajectory. A very attractive asset and continuing to perform very well. Zolgensma is on a steady track as it gets more countries onto the national programs, and more newborn screening continues to grow. The real unlock here will be the approval of the intrathecal indication, which we believe would give this brand another boost to be able to exceed $2 billion.
All the science would suggest this should be a successful trial. It is a very challenging trial to execute. Nonetheless, we're right now on track for a 2024 readout and a 2025 launch of Zolgensma, this medicine in the intrathecal, allowing us access to the two to 18-year-old population. Now Kisqali is on a positive trend coming out of the recent data, very pleased with its performance. It had already been quite strong outside the United States, but in the U.S. , we had struggled to get this brand to really have a trend break. With the third OS data and being one of the only brands with OS data across all of the relevant settings in the metastatic breast cancer patients, we've been able now to finally have that trend break.
We're approaching 30% NBRX in the U.S. market, which really gives us the opportunity to build on that data to have a very strong position in metastatic breast cancer. The bigger opportunity, which we would estimate to be a $6 billion market opportunity, would be in the adjuvant indication. I'll say more about that in a couple of slides. Kesimpta is on a very strong track, building on its capability to be an at-home administered subQ therapy. Right now, we would approach 30% share within the B-cell class in the U.S., with a goal to get to 50% share of the B-cell class over time. Alongside that, we're currently launching Kesimpta in a number of European markets, also in Asia. This brand, we believe, will continue its strong momentum over the coming years.
Lastly, LEQVIO, where we are in early days, and I would say it's still gonna be until the middle of next year at the earliest until we can really see, I think a stronger trend for this brand. We are now already in a place where we have 70%, say, on nearing 70% access to label. We have the permanent J-code in place. We have increasing number of physicians every week. We're seeing growth in the number of prescribers, the depth of prescribing. We're getting better penetration into the major centers, the 200 centers that we're targeting. Really the story now is to do the work to get buy and bill Part B medicine deep into cardiovascular practices around the United States. Alongside that, continue to expand the medicine overseas.
On a positive trajectory, on an Entresto-like trajectory today, our challenge will be how to make this even higher than Entresto to truly reach our aspirations. Now, two additional brands that we launched this year with significant potential are Pluvicto and Scemblix. Pluvicto is beating our internal expectations in the third- and fourth-line post-taxane setting in castration-resistant prostate cancer. We've remediated the manufacturing issues. We've had an outstanding effort from our teams in Italy that are allowing us to continue to service 100 centers consistently. We've got the reimbursement in place with the permanent J-code. More than 50% of insured lives are covered, and we are on track as well to read out the earlier line trial, the PSMAfore study, later this year.
That would expand the patient population for this medicine, we would estimate around threefold, create a multibillion-dollar opportunity to cover nearly all metastatic prostate cancer patients who are positive on a PET scan. An important opportunity, and I think if successful, we are preparing now to scale up our manufacturing next year, as I previously mentioned, to enable Pluvicto to reach its full potential. Scemblix has had a very strong uptake in the third line setting, given its strong safety profile and superior efficacy to the currently approved therapies in third-line CML. The opportunity now is to move into the first line, where our current study, we have a head-to-head trial versus Gleevec or Investigator Choice in first line CML and is enrolling ahead of plan. Most of that is driven by the outstanding safety profile of Scemblix.
CML community, I think, is very tight-knit. Patients understand that this is a very well-tolerated medicine. Now the opportunity is, can we beat these very established medicines in major molecular response. It's a high bar, but certainly if we were able to do that would enable us to create a significant medicine. More to come on these two brands, I think still very early days, but we're on a solid trajectory and hopefully with some positive pipeline out of news flow and data from these brands, we can build much larger brands with the potential to be multibillion-dollar medicines. Now turning to our development and our engine in development.
If you go back over the last 25- years, and you can even take this data back longer, some of you have in your various reports, Novartis leads the industry in the number of drug approvals. Now you can look at that in various ways, but the way we look at that is that shows that we have a powerful drug development engine. We know how to get medicines approved in the U.S. and Europe. We do it consistently over time. So we have the right machine to actually get drugs into patients and ultimately to build the world-leading brands that we hope to build. What we've not done well is really prioritizing high-value assets.
Too many low-value medicines that were developed over this period, not enough focus throughout the R&D continuum on really finding big, important medicines, which is the kind of medicines you need at a company of our scale on a pure play basis, one of the largest, if not the largest medicines company in the world. We're taking action on this. We've already started that even a year ago, prioritizing the core TAs, bringing commercial earlier into the R&D discussion, prioritizing TPPs, as I've already mentioned, simplifying structures to improve the efficiency and increasing the talent level within the organization. We're very focused on this, and when you look at the assets that we'll be bringing forward in the next wave, we're really focused on high-value assets. I already mentioned Pluvicto and Scemblix and Kisqali Adjuvant.
Iptacopan will have its readout, first readout in PNH, the first of a few readouts that it'll have over the coming year. Remibrutinib, as I've also mentioned, both in CSU and MS. These are examples of the kind of assets where we prioritize assets in our key TAs. We go into multiple indications at the same time, and we hope to then focus the organization on the most high-value medicines we can identify. When you look at the catalyst, timelines for us, limited number of catalysts in 2022, 2023, but then a large number of catalysts in 2024 and 2025 across each of our core therapeutic areas. Also looking to as always, to further accelerate the pipeline wherever we can.
I think we're not going to go into detail on these medicines at this point in time, but certainly opportunities to discuss these medicines with our development team. Now just to say a word on the NATALEE readout, which of course offers the opportunity for significant upside to the forecast that we have, and I think many of you have. The opportunity here is a medicine that's been consistent in showing OS benefit across all the various lines of breast cancer in the metastatic setting. The adjuvant study has been designed in such a way where we have three years on drug for these patients, as well as a dose that we think is highly tolerable, which is allowing us to manage dropouts within this patient population over those three years.
The plan is to get to 500 iDFS events. We would expect the various interims to be before the end of this year, first half of next year, and the final study readout before the end of 2023. Trial is on track, and we'll continue to keep, of course, the markets updated as soon as we learn more. Now, I also want to say a word about something that's been important for the company, is continuing to strengthen the integration between R&D. We believe now we have the teams in place, the leaders in place, but this is something that always requires work in a large pharmaceutical company. These are some of the assets, just to give a sense that where we really focus on combining our efforts within R&D to accelerate these medicines, hopefully very quickly.
The one I wanted to highlight was our KRAS inhibitor, where, you know, despite being behind Mirati and Amgen, initially, we have the opportunity with JDQ in combination with our SHP2 inhibitor or our PD-1, to catch up with respect to combinations. This was because we put a massive amount of effort into accelerating this medicine, in non-small cell lung cancer into the later stages of development. Certainly our teams here in oncology did a great job to do that. Now the opportunity exists for us to hopefully win, given the relatively weak data as a monotherapy to win in the combinations. Those are the kinds of stories we need to generate more often, and that's something we're very aware of and we're working hard to improve. I did want to say a word on operational excellence and our organizational changes.
We announced a large scale restructuring in the company where we're integrating the businesses that we've already talked about. New strategy and growth function led by Ronny Gal, who's with us today. Single G&A units to actually drive efficiency and take out costs. This is on track. It is a big effort that involved reorganizing many parts of Novartis, but the hope is it'll not only enable us to take out costs, but make a more simpler, agile organization that will be more effective on delivering the plans that we have to drive growth and returns. We're on track with respect to the operational efficiencies that we outlined over the recent meetings, with a goal to get $1.5 billion of run rate savings in 2024. Those would be ongoing out of the P&L savings that you would see on an ongoing basis.
We're doing this in an appropriate way, compassionate for our people, but trying to also move as fast as we can as we try to march through the various changes we need to deliver on. We've also refreshed the leadership team, and you'll have the opportunity to meet some of the new leaders or leaders who have taken on new and expanded roles. Almost everyone in this diagram is either new to Novartis, or returning to Novartis, or had the opportunity to take on a different approach, different role, including the leaders of our G&A function. Shreeram will be leading the development session. Ronny will be with me in the corporate section. Fiona Marshall, our new head of research, will be joining us on November one, but is certainly now getting up to speed.
Those are just a few of the examples that we have on this chart. Really excited to have a great group of leaders now to take Novartis on the next step, on its journey. Now lastly, I wanted to just turn to the priority we've placed on ESG, which remains very strong. I think over the last five years, we've been able to shift the narrative on the company, get off the red list, and be much more of an organization that's viewed as one of the leaders in relevant ESG factors within our sector, and that's going to be our focus. We've identified our material ESG factors, as you've seen here, patient health, access, innovation, and ethics.
In each one of those areas, we've created clear goals that we're going to deliver against to really ensure that we're demonstrating we can be a leader in ESG in the long run. Now in conclusion, this will be the new Novartis on this slide, a focused company. We believe in an attractive market, a differentiated portfolio, and a strong global footprint. We are a business that will be operating in a $1 trillion innovative medicines market. We're committed to that 4% sales growth and 40% core margin. At our scale, and given the current P/E and the current growth expectations of Novartis, if we deliver 4% and 40%, opportunity creates significant value for shareholders. We continue to be focused on shareholder-friendly capital allocation.
The differentiated portfolio across five core TAs, the strong pipeline, and the three next-generation technology platforms, and the global footprint, because as we continue to focus in the U.S. , we're one of the companies that's shown demonstrable success in the long run in a broad set of geographies. 280 million patients in 140 countries, 30 manufacturing sites. It's true scale to take a breakthrough medicine and bring it to the world. We're excited about this story. We're excited about this next chapter for Novartis, and we think it's an opportunity to truly create value for the world and value for our shareholders. Now before closing, I did want to also say a word about Sandoz and the decision, as we discussed in our recent conference call, to separate from Sandoz by a 100% spin off.
Focusing more on the Sandoz side of the story, we believe that we have the opportunity to create the number one European generics company in the world and the global leader in biosimilars, and together with that, have the leading generics company on the planet. We think as a standalone entity and the ability to allocate capital to its business appropriately, there'll be an opportunity to invest in external opportunities as well as in the core, create a fit for purpose, low cost generic mindset, and improve access to the 500 million patients that Sandoz serves. Our conclusion is that limited synergies between these businesses and an opportunity to create a leading IM and a leading generics company over time. Just another word about why we believe Sandoz is so uniquely positioned.
When you look at the peer set, you have a number of peers that are pure play generics, but not with strong positions in biosimilars. You have a few peers, which are large cap pharma companies that are in biosimilars, but at a limited scale and a limited long run, at least lack of clarity on their long run interest in biosimilars. With Sandoz, you have a company that has both the ability to have scale in oral solids and injectable small molecule generics, as well as to be a leader in biosimilars. You can see as well the strong position Sandoz has in Europe and the U.S., In closing, transforming to a pure play IM company, a focus strategy, eight in-market multi-billion dollar brands, high value NMEs in each of our core TAs.
We're improving the financial profile of the company consistently over time, shareholder-friendly capital allocation and strong foundations across ESG and culture. With that, we can turn to questions. Thank you all for listening. Thank you. Graham, you were first up.
Thank you. It's Graham Parry from Bank of America. Couple of questions on some of the guidance numbers you put out there. On Entresto, the $5 billion, what does that actually see you through on the patent, and just an update on that. For Kisqali, adjuvant, you said $6 billion. Can you just break that down between high risk, intermediate risk, and your relative confidence across the two? Just the capital allocation question, can you do bolt-on M&A and buybacks side by side? Given I think the market would probably argue you still need to bolster the late-stage pipeline, why not allocate more to bolt-on M&A and R&D investment and less to buybacks where you don't seem to get a lot of benefit in the share price? Thanks.
Yeah. First on, what was the first one? You said Entresto. Sorry, which one?
Entresto and LOE.
Entresto and LOE. Our assumption remains mid-2025. That's the guidance we continue to give. We have, I think as we've described in the past, patents that protect the medicine, 2025, 2027, 2033 and 2036. The trials for this will continue to unfold in the U.S. over the coming year. You know, our goal is to provide certainty as we can and work to settlements with all the generic players, but that's still a work in progress. Clearly, if we had protection beyond 2025, we would expect the medicine to continue to grow at the trajectory it's currently growing. I wouldn't expect us to have any further material updates on that until the second half of next year. The second question?
Kisqali.
Kisqali.
Between intermediate.
The $6 billion opportunity we talked about, roughly speaking, we think it's a three to one ratio between intermediate and high. I would say that's a market opportunity, so we're not necessarily giving guidance on Kisqali itself. Our belief is globally, the opportunity in intermediate and high risk is $6 billion, and the intermediate opportunity is roughly three times as large as the high risk opportunity. In terms of capital allocation, we do have adequate firepower, we think to both, I mean, if needed, share buybacks and M&A. We're actively, of course, screening the M&A landscape, but our focus is on high value creating deals, and not necessarily plugging short-term gaps. We wanna do the right thing for the long term of the company.
We believe we have, with the pipeline and the R&D engine we have, to play the long game. We'll of course, look at assets. If something attractive were to come up, we'd certainly take it on and look at it. At the same time, we also are not gonna lose our discipline in making sure we have a strong case for value creation with whatever we do. Richard and then Florent. Richard. Five minutes?
Yeah.
All right.
Thanks. Just two questions, please. Just outside of radioligands and NATALEE, how do you see your portfolio for oncology? You mentioned ADCs, but you know, how easy is it to catch up with peers there? What do you need to change in research and development for oncology going forward? Just also on the restructuring program, how do you restructure R&D and the general company without hitting productivity on R&D?
Yeah.
Thanks.
On oncology, we didn't obviously go through all of it, but in my mind, in solid tumors, we're building on the back of Pluvicto and Kisqali. Then the next wave of assets are certainly gonna be JDQ443, the KRAS inhibitor in combination. We do have access to an anti-TIGIT, which is an option that we're looking at. We have a number of other agents now moving through translational medicine. I would say, though, our goal now is to hopefully accelerate high-value assets in oncology solid tumors. We have some other high-risk agents, the anti-TGF-beta and a few others, but that's certainly an area where we need to build stronger depth.
Hematology is a place now where we really I think have on the back of asciminib and then VAY736 and a range of hematological indications, a few medicines that we have emerging within AML, a lot of opportunity within hematology. I think we're such a hematology company, our legacy is quite strong. In general, yes, I mean, oncology is a challenging space. Hard to find good medicines, but it remains a focus. The key is continuing to make that strong interface between early preclinical research, translational medicine, and late-stage development. In terms of the organizational changes, the current restructuring program does not impact R&D. We've made a deliberate goal to protect R&D at this point.
Now really what we're focused on is much more the portfolio streamlining within R&D and saying, given the large pipeline that we have, if we were to focus that down into the key TAs and the key technologies, are we more likely to find high-value assets? Our belief is yes. Florent?
Good morning. Florent Cespedes from Société Générale. Two questions. First, you said U.S. first. Given the fact that there are some challenges there with potentially more pressure on the price of some drugs, could you maybe share with us your view and the positioning on Novartis on this geographical area? Second question is on cardiovascular. You presented cardiovascular as a number one slide on your five prioritized areas. Cardiovascular is sometimes seen as a kind of challenging area. Doctors are not necessarily early adopters. Could you share with us why you believe that you have great assets to perform on this segment? Thank you.
Yeah. Thank you, Florent. On the first question, I would say you wanna have a balanced geographic profile. You certainly wouldn't be 70%, 80% U.S. I think the opportunity for us if we were to get to 30%-45%, 50% of our sales base in the U.S., just given the overall attractiveness of the market, it would be, I think, really important for us to do as a company. The specifics of the IRA legislation on the inflation caps, while challenging, we believe it's manageable and no changes to our guidance with respect to managing through the inflation caps in our business.
When you look at the Part D reform and how that is capping out-of-pocket costs, and hopefully over time, you know, providing some uplifts in demand, we think there could be benefits in certain therapeutic categories. It's still early days. We'll have to see. If you think about certain categories like cardiovascular disease, could you see the 3%-10% uplift in demand? So relative positive. I think more could have been done, for sure, on making this a stronger benefit for patients and taking more of the money to actually defray patient costs. Nonetheless, that's a positive. On negotiation right now, given where we are with the Entresto LOE, we would not see any of our medicines really being impacted by this until the end of the decade. And even with Cosentyx, relatively low percentage, 20% of sales is in Medicare.
Next up would be Kisqali. I think that would be again later in the decade. Our aspiration would be to hopefully move legislation to a place where there's more alignment between small and large molecules. Medicines like LEQVIO in 2030 is where it would then become eligible, might have a longer runway because of a shift in legislation, which I think would be sensible. Otherwise, I think the penalty on small molecule innovation for the Medicare population, counterintuitively, this will prevent drugs that are small molecules that could be more affordable for patients and then eventually go generic and then become extremely affordable for patients not to be developed for the elderly. I think that's something that policymakers are gonna wanna fix.
Net-net, our view is we're one of the lowest exposed in the sector, given our relative U.S. sales base and each one of those policy elements being manageable for us. I think Samir is gonna cut me off here.
Yes.
All right. Well, thank you all. We're here all day, so we're looking forward to taking all of your questions. Thank you all very much.
Thanks. Just a few logistics points. I'll begin with the people who are on the webcast. For the webcast, this is the actual agenda. We're actually in a break session now, so there's about a half-hour break before we go through. In the first session, which we'll do here, will be the research and development group. It's obviously Innovative Medicines, which is the international and global product strategy group. We have another break of 15 minutes before Sandoz, and then Innovative Medicines U.S., and finally finishing with the Novartis Group function, at the end of the afternoon. That's what we have for the people on the webcast. When you log in to the webcast, you can also ask questions. It's just below the screen on the left-hand side for asking questions.
We will have people who will address the webcast-related questions as well. That's all I wanted to say for the webcast. Then the logistics for the people who are ac-.
All right. Welcome. Welcome, everyone, to this R&D session, where this team will hope to bring more details on our plans to how we're gonna evolve R&D to deliver on the high-value programs that Vas discussed earlier in the day. My name is Shreeram Aradhye. I'm the President for Global Drug Development and Chief Medical Officer for Novartis. With me are my teammates, Dave Soergel, who heads up cardiovascular, Angelika Jahreis, who heads up immunology development, Alice Shaw, who heads up translational clinical oncology at NIBR, Jeff Legos, who heads up oncology and hematology development, and Norman Putzki, who heads up neuroscience. I think the key theme for this morning for us, as you might have heard from Vas' conversation, is focus. As an organization, we are now focused on three key elements.
One, prioritization, ensuring that we dedicate our resources and enhance the likelihood of success for our high-priority programs. Two, making sure that we focus on the fundamentals and ensure that our target product profiles keep the U.S. as a first priority in mind, making sure that our regulatory strategies are clear, and ensuring that all our plans represent the best thinking that Novartis can bring to improve the probability of success. Finally, making sure that we as an organization are focused on the relentless operational discipline that we discussed earlier in the morning to ensure that we are able to deliver on our plans. Within our teams, what we have said is that the only reason that a program should not work should be because biology ends up behaving in ways that was unanticipated.
All the activities that are within our control in terms of planning and execution are conducted as we would expect them. With that, I'm ready to open the session and let's go to questions. I'm sorry that I can't track everybody's names yet, but
Thank you. It's Michael Leuchten from UBS. Big picture question to start with. Very clear your point on focus, but if we look backwards, the gaps that you have in a portfolio compared to your competition, particularly in oncology, is maybe because you weren't as an organization quite as quick to leap onto external opportunities as quickly as others have. Given your relatively new role, like, why do you think that was that you would be a little bit late to or miss ADCs, that bispecifics came a little bit late into the portfolio on the oncology side? What are you gonna do to do that? Because that's a different aspect to prioritization than what you just outlined.
I think that in the three months that I've been here, what I have observed is the fact that we have a very active set of activities that go on to explore the external environment, to specifically identify the kinds of assets that we want, as Vas pointed out. Not all assets always are at the scale or the value that we think they should have. However, we are committed to it. I'll ask Jeff and Alice to build a little on it. In general, I think the reason may have been that the complexity of an organization and the, if you will, interest in many therapeutic areas perhaps makes some of that decision-making and risk-taking a little bit different.
Oncology is a clear area of focus now, and it is our expectation that we will do what we need to to ensure that we are improving our pipeline. We are of course excited about the programs we have ourselves, but Jeff, why don't you go ahead and add something that you want.
Yeah. Mike, a very good question, and maybe I'll start with your comment with respect to ADCs. Novartis actually was one of the first movers in ADCs with early collaborations, but at the time Novartis entered into the, you know, early scientific research around ADCs, it was a very nascent field, and in fact, all of the molecules were quite toxic. Then they kind of really hit a nadir, and Novartis exited or parked ADCs at that point in time. I think the second area was around kind of the IO molecules, the anti-PD-1s, and I think there in 2010, Novartis didn't pursue anti-PD-1s. Then obviously as the field continued to evolve and demonstrate benefit, we were definitely late there.
I would turn this around and say, I think one of the fields where Novartis has really pioneered is around the RLT, you know, platform. I think there's an example of us having that first-mover advantage of us really establishing, implementing, and now scaling the platform. Maybe with respect to the bispecific, so I'll let Alice comment on where we are with that.
Sure. Yeah. I think as you heard from Vas, I mean, I think we have a nice framework here in terms of where we have focused disease areas as well as focused platforms. We talked a lot about radioligand therapy. Vas also mentioned a real hope that we not only continue to maintain our presence in low molecular weights, but really also enhance our presence in biotherapeutics, and that includes immune cell engagers as well as ADCs. In terms of bispecifics or immune cell engagers specifically, we have been innovating in that space and actually hope to bring sort of next generation immune cell engagers, and in fact, we do have one that is just about to enter the clinic. It's coming soon. It's a novel tri-specific engager in hematologic malignancies. It's actually posted on ClinicalTrials.gov already.
It's PIT565. That's one example of the innovation we hope to bring to that space. Just with regards to ADCs, again, we're hoping to innovate in that space, go beyond the traditional ADCs that we're all very familiar with. We do have some of those even now in the clinic with traditional cytotoxic payloads. We're hoping to have a next generation ADC, where we have what we call targeted ADCs. Again, we've just moved our first one into the clinic recently. It's in, again, posted on ClinicalTrials.gov. It's DYP688, a novel ADC in uveal melanoma.
Mike, the answer, I think, to just close that out, I think that it's that integrated teamwork that's gonna make us nimble and be able to do the decision-making needed for bringing in-house. You heard that we have the necessary firepower in terms of capital, and it's gonna be more nimble decision-making on our part and staying focused on where we are going to make it be more successful at that. Matt.
Great. Thank you. Just got a couple on NATALEE. I think you said the first interim is coming towards the end of this year. The second one first half next year. Just looking at interim analyses on NATALEE, given what we've seen with abemaciclib in the adjuvant setting where they had issues with their overall survival data and then a quite restricted label, how comfortable are you that an interim analysis would show it would be powered enough to show no negative outcome on overall survival? When you're looking at the high risk versus intermediate risk groups, is there a risk you stop early and then only really have meaningful high-risk data in subgroup analysis, which then limits the market opportunity substantially based on what Vas Narasimhan was saying of the split between the high and intermediate risk groups earlier?
I mean, look, at a high level, the trial is designed to read out at the end of the year and powered on the final endpoint that'll happen later next year. But let me have Jeff address more details on that.
No, Graham, thank you for your continued interest in NATALEE. We share the same level of curiosity and enthusiasm there. Maybe first talking about, you know, overall survival. In terms of patient eligibility, this study is designed to enroll patients with stage two and stage three early resectable adjuvant breast cancer. If you think about the natural history of this disease, even before the introduction and the very dramatic benefit in overall survival that Kisqali has provided in the metastatic setting, on average, the five year survival for these patients in stage three would be around 89%, and patients with stage two resectable disease, 78%-80%. Patients, you know, can live, you know, for a meaningful period of time.
When you think about the design of an adjuvant trial, you know, we will probably have somewhere on the order of 2.5 to three years follow-up at the time of these, interim and final analyses for IDFS. You could imagine that the data around overall survival would be quite immature at that point in time. That being said, we will conduct an overall survival analysis at the time of the IDFS. We will continue to follow patients for landmark overall survival, and we will continue to sort of track patients, you know, over the next decade or so, because this will be very important information, you know, for and to inform clinical practice.
I think the second part of your question was around kind of the intermediate, you know, to high-risk patient populations and what we would actually expect. We were very intentional in our enrollment that we made sure that we adequately enrolled, you know, a proportional number of both the intermediate and the high-risk patients. As Shreeram had mentioned, you know, the study is designed as an intent to treat analysis with 500 events so that we have robust information inclusive of both stages of the population that's enrolled. These are patients that really is a continuum, right? These are patients that are both at, you know, intermediate to high risk for relapse, and the question is the timing of the relapse. We've modeled all of this into our design.
We've actually been monitoring, you know, these relapses at an aggregate level, and we believe that we will have a reasonable proportion of patients that represent, you know, both stage subgroups at the time of the interim analysis and at the time of the primary analysis in 2023.
Well.
Thank you very much. Florent Cespedes from Société Générale. Two questions, if I may. First on cardiovascular, could you elaborate a bit on the project in obesity, in terms of what kind of profile you're looking for, efficacy, but also what kind of challenges you see on the tolerance side? Second question, immunology. Could you share with us why you believe that your BTK is more attractive than the others, which are in a more advanced phase? Of course-.
Could you repeat the second part of the immunology question?
Yeah. The BTK.
The BTK. Okay.
Remibrutinib. Excuse me. Remibrutinib. If you could share with us.
Let me start, and then I'll ask Dave to comment more on the obesity product. I think for me, in general, we're looking for a profile of a drug that delivers meaningful weight loss and is well-tolerated. We haven't talked about the mechanism of action for our compound, but I think the goal is to achieve meaningful weight loss in a regimen that is well-tolerated and the patient can stay on. Dave, would you describe it in any other?
I'm not really sure I add much to that. I mean, I think that's pretty much the target we're looking for. I think the exciting thing about obesity right now is that we're seeing medicines that can actually make a substantial difference in terms of weight loss. In the past, as you're probably aware, most of the mechanisms of actions in therapeutics really were sort of modest in their efficacy and had challenges. There are new products now that are kind of opening this space, and it looked like they could be, you know, able to deliver meaningful effects. That kind of opens the whole field, which is why, you know, we're excited about our asset, MBL949.
Excuse me. Just for a question on obesity. Will you have the same kind of GI side effects as observed with the GLP-1s or other drugs?
Well, we'll see. I mean, we haven't talked about the mechanism in detail yet. The drug is in phase II right now, so we'll wait to see those interim data, and we'll update you when we see them.
Thank you.
Good. For all, when it comes to our BTK inhibitor remibrutinib, but let me let Angelika take that one.
Our BTK is certainly differentiated by its selectivity. It's. If you think about hepatotoxicity, and I think that is what you're referring to, that is not an on-target effect. That is an off-target effect. We have by now had many trials that we have completed. We have two ongoing phase III programs. One, Norman, can talk about for MS, as well as a large phase III program for CSU. We monitor the safety through our DMC, but we also have our internal pharmacovigilance, where we look not only at liver toxicity, but in general at the safety profile of our molecules regularly and intensively. Liver function testing is something we do consistently, and we have now seen no indication for a signal for liver safety issues at all. No Hy's Law cases and no clinically meaningful elevations in LFTs. Do you wanna add something, Norm?
Do you wanna add our ambitions in MS?
Yeah. Not much to add. I think when I think about multiple sclerosis and the opportunity with remibrutinib, I think the best BTKI has the potential to be the next generation leading oral medicine in that space for patients who prefer oral treatments. I think that requires a Kisqali-like efficacy bar and a clean safety profile. Looking at the pharmacology and everything we know about remibrutinib, I think it's the only BTK that I'm aware of that hasn't yet shown any dose-limiting toxicity. I think that's the opportunity that we're going after.
Terrific. Maybe I think what we'll do is we'll kind of go in order so it's easier for you, but let's.
Mm-hmm.
I'm noticing all the hands in the back, but I'll get to you as soon as we should have enough time.
Fine.
So...
Thank you. Simon Baker from Redburn. Two questions. One, a big picture question, not on the what, but on the how. That, as we saw from Vas's introduction, there's clearly no issue with discovery within the organization. That the volume of NMEs that Novartis produced in the last 20- years is unmatched. The issue is with value. The question really is how you shift the organization from a numbers game to a value game, both in terms of how the organization is set up, the changes you need to implement, how do you incentivize staff. Because measuring numbers, measuring output is much easier in a short-term timeframe than value. How do you stop development in areas which are scientifically interesting but less commercially relevant?
At what point do you direct or you limit resources in those areas? As a potential exemplar of this, as a nascent area where you do have significant interest and probably as far advanced as anyone else, I'm thinking about targeted protein degradation. Where you are now and how you can change how this new approach will work in accelerating development there. Then a second related question on the changes. The U.S. First model makes perfect sense given the size of the market, despite its challenges that we discussed earlier. Does that come with additional cost? If you're doing more clinical trial work in the States, that is definitionally more expensive or can that be absorbed within the existing budget? Some color on that would be very handy. Thank you.
I think the... I'm gonna start the answer. Alice, think about the targeted protein degradation on how we apply it in oncology. One way to answer your question about how does one do it in the organization, somewhat glib answer is we just do it, and we've started doing it. It is completely recognized that all of our metrics for how we measured ourselves, how we incentivized our teams, were often based on counting numbers of certain things. We've already started now shifting that to progression along the path, especially on programs that we have identified as being high value. I'm certainly thinking about an R&D continuum. I'm looking forward to Fiona's arrival.
The fact that if we start thinking about it in an asset-centric way, and then think of the most efficient plan to generating information that tells us at each point in time whether we're making progress towards a compound becoming a medicine. Incentivizing people on the basis of progression of high-value assets along the continuum perhaps is one way to do it, but this is all work in progress, but there's a lot of commitment to it. What I'm most encouraged by in the last three months that I've been here, which is slightly different than my prior 20- years at Novartis, is that on the very first two days of my coming back, we sat through a portfolio prioritization exercise in the Innovation Management board. What was special this time was the fact that we clearly identified the things that we were going to stop.
In the past, call it cultural, call it the continued interest in working on things that even if low probability of success, you hope if they work are gonna help a few patients. We are recognizing that in order to help the most number of patients, we actually need to work on medicines that generate high value. Most of that high value comes of it by getting to patients in a commercially viable manner. That is a shift in the organization. We are working at it, and you've seen the beginnings of this strategy. I think a focused medicines company with this focus now on five therapeutic areas is fundamentally gonna allow us to start making better decisions. A good example of that is in oncology, where, you know, Alice and Jeff have worked on JDQ443.
You saw Vas call out JDQ443 as an example of where we actually put our minds to making sure that we were moving something along as a priority. We have successfully done that. Jeff started a phase III trial within 18- months of what would have typically taken us twice as long. That work has begun. Maybe let me hand it over to you, Alice, for on making a comment on our TPD plans.
Sure. So TPD, of course, is referring to targeted protein degradation. This has been a large enterprise-level investment that we made about now six years ago. Just as background, of course, TPD, we believe and others believe, is a really powerful technology here because we're inducing proximity of a target protein to the ubiquitin and ligase machinery, and that allows us now to induce ubiquitination and subsequent proteasome degradation of a target protein. This has really been incredible because it now brings into the druggable range what had previously been completely undruggable, in particular transcription factors. You know, we've had such difficulty targeting transcription factors in the past, and now TPD allows us to actually think about how we can go after some of these targets that we've always wanted to.
They're implicated as super promoters and driving metastasis, et cetera, and we hadn't been able to do it, and now we can do it with this TPD platform. As you probably remember at our last R&D day, we did give an update on TPD. We talked about having roughly 10 or so programs in TPD, some of them quite far along. One of them has been in the clinic now for about two years. That's DKY709, and this is our degrader actually targeting IKZF2 or Helios. A zinc finger transcription factor that's highly expressed in T regs, T regs of course being very immunosuppressive. Helios is really important for the function and stability of these immunosuppressive T regs.
Here, our hope is if we can target by this very focused degradation approach, Helios, that we may have a real impact on reactivating antitumor immunity. That's what we've been testing in a first-in-human trial. Some of the discovery and even the very, very early clinical data emerging from this DKY709 trial was presented at AACR this year. What we showed is that we actually have good PK in the first two patients and clear evidence of PD. We are degrading the transcription factor that we set out to degrade. Very exciting. We have another degrader entering the clinic. It's now posted on ClinicalTrials.gov, KFA115. I think there's a lot more to come.
Again, super excited because as an oncologist, there have been so many targets that we've been eyeing for so many decades, and only now with the TPD platform can we start to think about how we approach them clinically.
Yeah. I think I'll build on Jeff, I'm gonna ask you to build on what will be different this time is that as these data are emerging, we will already be starting our plans for what will be the seamless development plan and where will we take these exciting molecules in a way that keeps an eye on the final path to an actual product. Jeff, why don't you comment on that?
Yeah. No, thanks, Shreeram. You know, Simon, maybe some more specifics to your question around ways of working. You know, both Shreeram and Vas highlighted the JDQ443 example. I think there is a great example of working across the R&D in the commercial continuum. For example, at the earliest phase of chemistry, which we would call development candidate selection, right? There we had sort of this sort of end-to-end continuum coming together to really sit down and collectively define the target product profile, ultimately in terms of what indications we wanted to pursue, in what sequence, and then ultimately with additional combinations.
It was through those early insights from our commercial organization that we worked all the way back into the discovery organization to really define the path to first-in-human, then ultimately the path to registration, so that it could be as fast and seamless as possible, and then ultimately as broad as possible. Some of the great outcomes of that is we went from this development candidate selection to the start of phase III in 2.5 calendar years. Truly unprecedented by all industry standards. The way we did that is we had very smart strategic investments early on in manufacturing. We made the final phase III formulation before we even went into our GLP toxicology studies. We established and verified the companion diagnostic before we dosed the first patient in human.
In addition to now starting the phase III trial, we also have an ongoing phase I trials in combination with TNO155 or SHP2 inhibitor in combination with anti-PD-1, and then a much broader platform trial ongoing, looking at other combination-based therapies. That helps with time and value. The other difference is instead of diluting our investments across multiple assets and multiple diseases, by really focusing them on the areas where we want to win, I think that's another way of kind of creating these multi-billion dollar products by having much earlier life cycle management. I think Pluvicto is a good example of that. Before we even had the phase III data readout of VISION, we started two additional pivotal phase III studies.
We were working on the third pivotal phase III trial in non-metastatic prostate cancer, and we've made a significant CapEx investment in a major manufacturing plant in Indianapolis before we even have phase III data. We now have the opportunity to have these serial data readouts coming on an annual basis and moving the molecule from a later line of therapy into earlier lines of therapy in earlier stages of disease. Again, another way of creating real value through very focused, concentrated investment.
I'll just close out the answer by saying that it's through that focus that allows us to actually then create a footprint that we choose with a different proportion of input coming from the U.S. sites, compared to what we may have done in the past, where the focus might have been primarily on cost and efficiencies. There? I don't know. Should we...
Hi. It's Keyur Parekh from Goldman Sachs. Two big picture questions for you, Shreeram. The first one is, what has been whatever metrics you use, IRR, return on investments, whatever you use, what has been the historical background to that from a Novartis R&D investment perspective? You're spending $9 billion on R&D. What is the return you've achieved over the last 10- years? As you talk about maximizing value, what is the target return profile you are aiming to achieve over the next three to five years? That's question number one. Then question number two is, you're talking a lot about focus, about adding value, about prioritizing assets. Those are all buzzwords we've heard over the last 10- years from various kind of management teams at Novartis.
What is going to be fundamentally different this time in your decision-making that is going to actually deliver those things?
I'll start with the second first, and for the first, I'm going to refer you to Vas and Nikos here with Ronny on what the, what the returns on investment are, because I've been here for about three months, and I haven't spent as much time on analyzing the past ten years, and I'm quite focused on how to get things done in the moment. Let me get to your second question. I think what's different is, first, the fact that this now becomes a focused medicines company, one. Two, and we have the unique clarity and possibility of having a construct where we have with my ECN colleagues, between Marie-France, Victor, me, Fiona, when she arrives, as the continuum from commercial through research, and Ronny bringing in an external perspective of being the sort of internal challenger for that decision-making.
I think it's the focus, the fact that the volume of things that people are going to keep an eye on is now reduced instead of being a conglomerate to a single company. I'm very confident that that difference, and I've already seen it in three months in terms of the conversations that are happening, where the speed of decision-making, the clarity of how a particular project applies against the standards that we are setting. The ability to do all of that, I think, is far more efficient. I'm drawing upon, frankly, a little bit of what I've learned in three years being in biotech now, where what it means like to be value-focused in the harsh realities of a biotech that looks for funding brings a different mindset.
I'm committed to bringing it every day to how we're going to make decisions. That's what's going to be different. Of course, I recognize that the world is saying, "Show us," and we are committed to do it. I think we have time for maybe one more question because it's 9:41 A.M. In the back. I know that we didn't get to anybody in the back.
Sure, Ronny, we can go until 10.
Until 10, we have time.
Oh, we have until 10:00 A.M. Sorry. Okay. It's not 9:45 A.M. Good. We have more time. All right.
Thanks. Seamus Fernandez from Guggenheim. Just a few quick questions. Alice, any new pathways that you're particularly excited about, that you know are going to be entering the clinic at this point? You know, I think we talked a little bit about the Hippo pathway yesterday, and that's I think a unique target of interest. You know, second, as we just think about the broader portfolio, and how Novartis has historically approached R&D, which is pathway-driven, small, unique proof of concept trials in small patient populations. How do you I mean, is that part of the structure that has been problematic, or do you still see that as the solution?
It just seems like, you know, when you go after these small populations, yes, it's nice to have proof of concept, but it doesn't seem to have really spiraled into or expanded into the very large potential categories that we've seen the rest of the industry grow into.
I'll take the second first, and then I'll let you answer, Alice. I think that that's exactly what we will change, Seamus. We will establish proofs of concept or proofs of mechanism in areas where we have a permanent interest, which is driven by the final line of sight on whether this is going to be a valuable product. The proof of mechanism or proof of concept are going to be milestones on a continuum, but not necessarily the goal in itself. So I do think that that's something that'll change. Then, Alice, let me have you answer the question around.
Sure. Thank you.
Around pathways.
Yeah. We have a number of of novel entities entering the clinic or recently entered the clinic. You and I spoke yesterday about one of these, called IAG933. This is a clinical trial, first in human, phase I trial. It's posted on ClinicalTrials.gov. It is a YAP-TEAD inhibitor. And just to remind everybody, YAP-TEAD is a transcriptional complex, a downstream transcriptional complex in the Hippo signaling pathway. This pathway can be perturbed in a number of different cancers, and also has been implicated in driving resistance across a number of different oncogene-addicted cancers. We very strongly believe in this, in YAP-TEAD as a target. There are other players in this space as well. That's definitely one that I would keep an eye on.
I think it will be an important single agent potentially, but even more important potentially as a combination partner. Another asset I would flag that is just about to enter the clinic, this one also is posted on ClinicalTrials.gov, is MGY825. This is a small molecule, novel MOA, which we haven't disclosed yet, but we're targeting here, Nrf2/KEAP1 mutant non-small cell lung cancer. Some of you may know that Nrf2/KEAP1 mutations are found in about 20% of non-small cell lung cancers of large molecularly defined subsets of a, of a very common cancer. Actually, even in squamous cell lung cancer, up to about 30% of patients have Nrf2/KEAP1 alterations.
Just as a reminder, these mutations can lead to aberrant activation of this Nrf2 pathway, which has been shown to drive tumorigenesis and metastasis and metabolic reprogramming. I mean, this is a bad actor. We're excited about that program just about to enter the clinic. Maybe the last program I'll highlight, which I already referred to, was DKY709, which is our degrader. You know, I think with the degraders, I already mentioned why we believe in this, why we can now target so many of these undruggable transcription factors. Here, DKY709, because it can reactivate tumor immunity, this is gonna be potentially relevant across a huge range of different cancers.
Our focus, of course, will be one of the main focus areas, non-small cell lung cancer, where, of course, we believe that there's real value here in targeting, trying to reactivate the immune system, especially in patients who either didn't respond to PD-1 blockade or have relapsed on PD-1 blockade.
Okay. Seamus.
Yes. Richard Parkes from BNP Paribas Exane. I've got one big picture question, one product-specific question. Obviously, there's been a lot of changes in R&D management, so I'm interested in your sort of fresh perspective. When I look at where Novartis is invested in its technology platforms, at least three of those four technology platforms have significant challenges that maybe make achieving that focus on more bigger commercial opportunities difficult. I'm thinking radioligand therapy, cell therapy, gene therapy in particular. I'm just interested in your perspective on those platforms. Do you think that was the right areas to focus on? Are you confident you can address those challenges, maybe with the T-Charge platform? How much of your R&D budget going forward do you think you would ideally like to be focused on those technology platforms?
That's the big picture question. The second was specific on it. Iptacopan ahead of the PNH data that we'll see in the fourth quarter. We've just seen AstraZeneca announce data for their factor D inhibitor, danicopan. Obviously, it's a three times daily product, but their strategy is to offer it as an add-on for patients, which might be a little bit easier of a sell for a patient rather than necessarily coming off a drug that might have been saving your life, not kind of solving all of your symptoms. But I suppose my question is, do you think you're gonna have enough data to convince physicians around long-term outcomes as well as just improving symptoms with iptacopan when you launch?
Yeah. David, I'll get you to the iptacopan question. I think Richard, on your long-term platform question, I think as you saw in Vas's slides, the expectation that a contribution to our sales in the 2030 timeframe coming from a larger proportion of products along the advanced platforms is the ambition. I think the learning, even as I stepped away from Novartis and have come back, is that when you are the pioneer in the space, there are some things that are more difficult and complicated to figure out than one might have initially imagined. Having said that, I think on gene therapy, I believe that there have been a lot of learnings.
I believe I have personal experience already in the last three months on the interactions I've had with health authorities where it is clear that we are the ones that have built an enormous amount of knowledge and capability. Now it's a matter of we're getting Zolgensma IT done, hard program to do, but we are on track at this time and looking forward to it. There's a whole host of other ideas coming behind that will target areas in neuroscience. For radioligand therapeutics, I'm going to ask Jeff to comment, but I think that this idea that we now have the ability to treat what you see with this platform and even the excitement that we're seeing with Pluvicto as we're getting it going makes us very confident that these are the kinds of investments that are important.
Of course, it will be critical to make sure that the focus that we are bringing is still maintained on making sure that we are now leveraging those platforms in the indications that have the most, you know, the highest drivers of value. Jeff, do you want to add on the RLTs?
Yeah. Maybe first just a broad comment on.
The sales on RLT.
The platform as well, right? When you think about the concept of a platform, it requires deep expertise with significant infrastructure across the entire continuum. When we talk about sort of RLT, you know, through the initial sort of acquisition of Triple A and then ultimately the launch of Lutathera, we have already established a supply of all of the radioisotopes. We have established centers, you know, more than 500 centers now, where we've treated about 16,000 patients or so with these radioligand therapies. We've worked very closely with these sites in order to make sure that they have the right infrastructure in place to be able to deliver these therapies to their patients. Now we could build upon that infrastructure and leverage this concept, as Shreeram said, treat what you see or the simple physics of radiation.
If you could deliver a molecule to a cell and keep it there long enough with the radioactive lutetium, it should work, right? Now we've done this not once, but twice, and we have about nine other projects already in the clinic, and we have a discovery portfolio between eight and twelve additional projects where we could sort of target novel cell surface antigens and deliver this radioactive payload directly and precisely to cancer cells based on a radioligand imaging. Since you mentioned cell therapy, I think being a first mover in this space, Novartis has a decade worth of expertise. We realized that one of the challenges was around the manufacturing turnaround time. One of the first principles we were trying to solve for with the T-Charge platform was simply, can we improve, can we optimize the turnaround time?
Specifically, T-Charge in and of itself has a very short manufacturing timeline. It's less than two days. The overall, what we would call vein-to-vein, so the time from apheresis to delivery of the cells back to the site, on average, will be at least half of the first-generation CAR T. A significant improvement in the overall kind of turnaround time for patients. The second reason why we're interested is we believe that this can be a definitive therapy, and we truly are approaching patients with curative intent following a single infusion of their cells. The last point I will make is not only have we, you know, really optimized the manufacturing piece, but this platform actually truly generates differentiated T cells. They have a much greater stemness, so their ability to self-renew and to proliferate.
Most of the expansion is actually occurring in the body, you know, rather than ex vivo. The data that we shared at EHA this year was actually quite intriguing. Of the 26 patients that had passed their 6-month follow-up for safety, there's about two-thirds of those patients that were still in CR. We believe we could actually provide a much more durable response with a much more rapid turnaround in terms of manufacturing. Now it's leveraging this T-Charge platform as our foundation to bring more cell therapies to patients.
Good. Do you want to go to the back?
Did you want me to answer the?
Dave, yeah, Dave will answer the top-.
The other question, yeah. I was thinking about how to sort of continue the theme of a platform. Obviously, iptacopan is a small molecule oral Factor B inhibitor, so it's not really a platform, but it is a pipeline in a pill. It's a scientific built on a scientific platform of complement inhibition, which gives us a huge range of opportunities within a variety of disease states. When you think about a product for patients with PNH, look, I mean, C5 inhibitors were, you know, a great innovation for patients with PNH and fundamentally, you know, changed their lives.
It's time to move on to the next generation of therapies, where we have the opportunity to free patients from having to get parenteral therapy and instead replace it with an oral twice a day, which is far more patient-centric and convenient. The way we've chosen to design our iptacopan program is to demonstrate that scientific rigor by going head to head against C5s in our phase III program in the APPLY-PNH study. Individuals, about 40% of individuals on C5s remain anemic. About 20% of those patients who are on the best standard of care today, C5s, remain transfusion dependent. We're enrolling patients who are on C5s but haven't adequately achieved their treatment goals, and then randomizing them to continue C5 therapy and comparing that directly head to head against iptacopan.
We think that those type of data will show that iptacopan can replace this more burdensome approach to treating patients with C5s. Even if you add on top an additional therapeutic that addresses the extravascular hemolysis, the real advantage would be to get rid of the parenteral therapy altogether. The other question is really about the volume of data and the type of data we'll have. We have two trials going on. The trial I just described is APPLY-PNH. The second trial we have going on right now is a naive study called APPOINT-PNH. There will be two data sets coming out that will support the value proposition that we've been describing for iptacopan.
Like we said, we're excited about it because we think this could represent the next generation for PNH patients.
Okay, in the back. I think that.
Yeah. I'm Patrick from Canadian National Railways Pension Trust Fund in Canada. I'm wondering, Vas Narasimhan was talking about redirecting research. From what level, from what stage will this research be redirected? From the, you know, basic research or phase I, phase II , phase III , something like that? Second question I'd have is, it seems like I heard you mention that you're building your CapEx maybe a little bit earlier than before. You know, even at phase II, you started to build CapEx or like a production plant for like, you know, one drug that you were talking about. This to me, I guess, means a little bit higher risk, but maybe more reward also. Is that like a change in mentality as well, with what was done before?
Maybe I'll ask Jeff to clarify. I think what Jeff was referring to was the fact that when we identify a certain program that is a priority or a focus area where we think the rewards are high enough, then traditionally we may make investments in producing, let's say, a final marketed image or investments in TRD at an earlier stage than we might have previously done. It may not always involve a large CapEx expense. Jeff, I mean.
Yeah. You know, as Vas shared earlier, we already have significant manufacturing capacity and capability around the world, right, with 30, you know, 30 or so production facilities. I think what was unique here was a production facility specifically designed ground up for radioligand therapy. The location was intentional, right? It is Indianapolis. It's pretty much right next door to FedEx. For products that have, you know, sort of radioactive half-lives, and for Pluvicto, it's five days, where time matters, this gives the ability to sort of pack, label, ship, and send to the site in a very expeditious timeline. That's why that was a very specific, you know, capital investment for this platform as a whole.
It serves more than just the investigational products in many cases.
Yes.
It's part of our commercial footprint. Where's the mic? Shall we go in the back there? I know that this lady's been patiently putting her hands up.
Thank you.
That may be the last question because I think we're at 9:56 A.M. We have four more minutes, so.
Thank you. I'm Marietta. I'm with Prime Avenue. I have one specific question and one general question. The specific question is, you just talked about the T-Charge platform, and Vas was saying earlier this morning that the jury is still out. I'm just trying to understand what exactly are the gating factors and the timelines for that to either take it forward or can it. And if you can it, then what are you, are you basically closing down the whole cell therapy thing and focusing on ADCs and bispecifics in the high potency space, or what would that imply. And the second question is just quickly on the U.S. specific TPPs.
I mean, is that just about generating more robust data sets for the U.S., or would you actually consider making structurally different molecules for different markets or just for the U.S.? And what indications do you think this is most relevant for? Because presumably in oncology, it's all about, you know, if you have, you know, massive overall survival advantages, that works for all markets around the world. Which are the indications where you really have a very different profile that's needed in the U.S. versus Europe? Thank you.
I think the, I think I mean, on the U.S. TPP, I don't think it's as complex as it sounds. I think that what we basically learned from our recent experiences, whether there were times when we perhaps complicated a trial far too much in trying to achieve the evidence that the U.S. might need, in addition to what Amgen might need in Germany, and starting to create trials that got a little too complicated. Sometimes the burden of evidence that was required in the U.S. might have been far simpler to achieve than the traditional HDA markets. Instead of complicating large phase III studies, getting U.S. studies that are focused and getting them done and finding alternate ways of generating data for the other markets is what that prioritization refers to. It's a lot more complicated than that.
Jeff, do you want to close out on T-Charge?
Absolutely. Maybe I'll try to integrate both topics, right? With respect to your question on T-Charge and what's coming next. We acknowledge that some of the competitor products had recent approvals earlier this year in the second line DLBCL. It's actually changed the definition of how patients are treated, whether they are transplant eligible or transplant ineligible. Thinking about the U.S. TPPs versus the global TPP. These products have not yet been pre-approved outside the U.S. In theory, there is a window of opportunity, and we could easily run a study outside the U.S. in second line DLBCL. In the U.S., the default position will be, should we consider a head-to-head, which has its own logistical complications.
We are currently working through our development plans, you know, in collaboration with our medical experts and in discussion with the FDA in terms of where we can actually, you know, run pivotal studies that are fit for purpose for the U.S. in light of the evolving treatment landscape.
That's the clarification that we're waiting on and what Vas Narasimhan was referring to, which is waiting for that regulatory input and the finalization of our development plans for YTB323.
Yeah. Exactly.
I think with that, we are at time. Thank you for your attention. I wish you a great rest of the day in this wonderful auditorium, and thank you, and look forward to seeing you. All right. Thank you.
Good morning, everyone. It's actually really nice to actually be in a room with people. Thanks for being here in person. Of course, welcome to all of you who are joining us on the webcast. This is part of my team, which I'm gonna introduce in a second. You heard this morning from Vas, and I think from the conversations that we had last night that it's a time of change for Novartis. You know, we're very focused on making sure that you've heard the word focus and prioritization of our pipeline, of our portfolio. It's also a big attempt to simplify our processes internally and make sure that we're way more agile from a market and a customer perspective. That's one of the main focuses.
Secondly is really around focusing earlier in our pipeline, and Rod will definitely talk about that in some detail, and then really transform our commercial model. The people that are in the room today are leading this change, are managing this change. I'm gonna start by introducing you, Rod. Rod is our head of global product strategy, so he's basically let's say the lead in terms of our pipeline, our early pipeline, the focus. We've redirected our focus to be much more, let's say, focused on early market shaping. He's working obviously across the globe with a big focus on the U.S. and, as I said before, focused on the early pipeline. Then, Ingrid Zhang, which is, it's a real privilege to have Ingrid in person.
Thank you.
She's here from Shanghai. I personally haven't seen her in a year, so it's a real treat. Thanks for being here.
Sure.
Of course, Ingrid can take a lot of your questions on China. It's certainly been an interesting year for us in China, and she'll tell you all about our great growth stories there as well. Then to my left, Haseeb Ahmad, who is heading Europe. He's recently been appointed in May. Haseeb comes with a ton of general management experience, has been leading value and access for us, and is someone who's also very versed in our NHS agreement with LEQVIO. I'm sure there'll be questions coming his way in that. Europe's our biggest business for the company, and certainly it's got challenges, but also a lot of opportunities.
Last but not least, Mukul Mehta, who is the Chief Financial Officer for Innovative Medicines International and really driving some of that refocus, that reallocation, and the drive for efficiencies across the unit. I'll stop there and invite your questions.
Wow.
Good morning. Florent Cespedes from Société Générale. Two questions. First on cardiovascular, could you elaborate a bit on the main drivers and notably on LEQVIO, in the U.S. , in Europe, usually, doctors, cardiologists like outcome trial results. Is the situation different in the U.S.? You seem to be quite confident on the acceleration of this product there. So more color would be great. My second question is on China. Could you give us some color about the growth driver, on this area? Thank you.
Thank you. Rod, do you wanna take the cardiovascular question?
I'll cover the U.S. piece, and then maybe if you want to, Haseeb.
Sure.
Comment on region Europe. This has been a space for me of 15+ years having launched Crestor at another company, and it's a passion. I think what we see in the U.S. in ASCVD and LEQVIO is the body of evidence over time is overwhelming. Physicians and healthcare systems and the payers, they're not waiting for outcomes data to make decisions in this space. They believe in the number of trials that have shown that as you not only lower LDL to significant levels, but you can sustain it over time. There's great acceptance. Now what plays out in the U.S. more is the access to the medicine, the affordability for patients.
Then the big driver in why LEQVIO is also the adherence component. What we're seeing, and Vas mentioned to date is we're on an Entresto-like curve, but what we really are focused on for the long term is in order to really get to the true potential of a product like LEQVIO is how do you do this at scale? We're working more with healthcare systems and community-based practices, not only on buy and bill, but on setting up an alternative injection center so that they can get access in a more seamless approach to the medication, and then get the full value of a twice-yearly medication to do it. The outcomes aren't the challenge in the U.S., Building the right foundation to treat this at scale and really give the true potential to this category is where the focus.
We're seeing, as Vas said, now we're starting to see some of the early uptake in the building of the foundation and expect more growth in the second half of next year. Haseeb?
Maybe just to add that from a European perspective, obviously, Europe's a rich tapestry. Just like Rod, spent the first sort of 10- years of my career, both with statins and ezetimibe, so know the market quite well. We have a mix of markets. You have markets like the U.K., some of the Northern European markets, where from a payer perspective, the correlation between LDL-C reduction and reduction in events and outcomes is very well established. In those markets, you get broad reimbursement. We have some other markets where, such as Germany, where we have currently reimbursement in a smaller population. There is, in those markets, still an opportunity to still engage with payers.
It could be sick funds in Germany, regional payers in Italy or Spain, to sell them with a value proposition and a commercial agreement that potentially could broaden reimbursement. There are still opportunities within these markets. Over the long term, super excited about the opportunity. But to maximize the full value and potential of the asset, clearly outcome data will be helpful across all those markets.
Perhaps, Ingrid, before you get into the sort of general answer on China, maybe you wanna talk about LEQVIO in China.
Absolutely. I'm really excited about this product. You know, China has 67 million ASCVD patients. Only 30% of them have gotten to their LDL-C goal. This incredible efficacy and safety profile, combined with twice-a-year dosing, because adherence is a big problem for Chinese patients. I think it's incredibly compelling value proposition. We have it available today in a special economic zone in Boao, which is a southern island, and there are already over 1,000 patients on it in a self-pay. We're really looking forward to launching this medicine in the next year or so. Then maybe just generally speaking on China. I'm very excited to be here, first time traveling internationally, in the last year.
I've been in and out of China for the last 15 years and really see this country with 1.4 billion population, significant needs, whether it's cardiovascular, leading cause of deaths, as with cancer. You know, really a lot of opportunity for us to help. China is a growth story for Novartis. I think if I look at this, you know, Vas made a commitment to double our business by 2024, and we are well on the trajectory with double-digit growth. Three-part strategy. One is the focus on medicines, you know, these large disease areas. Entresto, Cosentyx are the growth drivers of today, and we look forward to launch LEQVIO and Kisqali in a year's time.
Secondarily, we're building a strong team with very strong commercial capabilities, taking the global strategy Rod's developed, do market shaping, early prep, but also think about how we're gonna maximize access for patients in the shortest amount possible. I think lastly, I would also speak to our broad footprints, which allows us to not only tap into patients in urban areas, but also 60% of the population in country. To sum it up, really excited about this. Really, you know, not just cardiovascular, but same with Cosentyx, being able to drive the biologic penetration from the very low single digit before the launch of Cosentyx in 2019 to 20% today, and we hope to double that and bring it to the U.S. standards. Yes, it's a growth story.
Yeah. In fact, I think Cosentyx is the biggest ultimate growth.
Absolutely.
Product in China this year.
It's clearly a biological leader.
Yeah. Please. Vincent.
Yes. Richard Parkes from BNP Paribas Exane. A couple questions, firstly on LEQVIO. We've heard a lot about the challenges to driving uptake in the U.S. in terms of access and injection facilities. It sounds as if it's been a little bit slower than maybe you'd hoped for. I don't know if that's correct or not. Maybe you could also talk about how things have progressed in the U.K. with the NHS agreement and what you're doing to address those. That's the first question. Then the second question is just on Cosentyx, obviously still one of your big growth drivers. We've just seen an oral TYK2 inhibitor approved in the U.S. with a pretty clean label. I'm just wondering how you think about new oral competition to that franchise in the longer term. Thank you.
Okay. I'll definitely direct part of the LEQVIO question to you, but I think I'll start just by regrounding us on what we're trying to do. We know that what's happening in the ASCVD field is not working. When you have 18 million deaths a year, it's the biggest cause of mortality. It's the biggest cost driver for the healthcare system worldwide, estimated $1-1.5 trillion in expense. If we go with the same approach, we're not gonna be successful. This is exactly why we're changing the paradigm. Going to your question, are things going as quickly as we would like? The answer is no. What we're trying to do is fundamentally change the way that LDL-C is treated. It's gonna take some time.
What I can say is that this team is incredibly confident that we're picking the right strategy, and we have the indices from the marketplace to lead us to believe that. So it's not just coming out of our own sort of drink the Kool-Aid. Maybe you wanna talk a little bit more about what we're seeing in the U.S.
Yeah. The U.S. team will be up this afternoon. To your specific question, Richard, on the access piece, just having been in this space for a long time, the access that Vas mentioned this morning, having 70% access to the on-label, it took five years for the PCSK9s to have that type of access. That's a substantial building of the foundation that we needed early on. The not only the access piece of that, but because it's a Part D medication, you also have more than half of those patients who have a $0 copay. You're addressing the affordability piece of that as well. The piece that takes some time is helping cardiologists build up an opportunity to do buy and bill.
We knew it would take a little bit of time to do that, but we're starting to see some traction. That's why we also wanted to build the infrastructure so that we would have a direct connection with alternate injection sites. As cardiologists and high-prescribing primary care physicians wanted to take advantage of the opportunity, they had one of either way to be able to ultimately do it. Again, Reponsd, we knew that this would take some time to build that foundation. Now we're starting to see with over 7,000 patients in the U.S., more than 5,000 prescribers, we're starting to see some of that take hold. Of course, to your point, we would like it to go fast.
Yeah. I think one of the things that is very important is the feedback we're getting, and I'm sure you're having your own conversations with cardiologists. The feedback on the clinical efficacy is really incredible. It just gives us a lot of confidence that we're on the right track, and we just need to connect the dots through the system to make this a systems approach and not just a classical launch, but more about that in the NHS, obviously.
Yeah. Just to touch on the NHS, I mean, clearly what we're doing is very bold, hugely ambitious, and both the NHS and Novartis, we are absolutely committed to getting up to 300,000 patients on this treatment. Just to ground you in kind of where we are today, at this point of launch, just under 95% of formularies in the U.K. have access to LEQVIO. 95% of the population. Broad access, so uncontrolled patients on a statin can prescribe LEQVIO. That's in primary care. It's eligible for use in primary care. To date, 14% of GP practices, primary care practices in the U.K. have used and ordered LEQVIO. Starting at good breadth. It's around about just over 1,000 practices in the U.K., getting another 50 or so every week.
Broad usage. I mean, Richard, you live in the U.K., so I think one of the things you will recognize living in the U.K. is the NHS practically was shut down until April of this year. The experience that we've had with the NHS is that really this has probably shifted the launch curve by 12-18 months. But we're now starting to get good breadth of usage, good depth, by partnering in the way that we're launching with the NHS. We have the level of access, the breadth of access you wouldn't traditionally get. We're working with the NHS now. They have a digital tool set on every EMR system, where at the push of a button, they can re-stratify the patient population of patients in their practice and bring them in to be reviewed.
If you like, the infrastructure is there, now it's about getting water through the pipes, but we're absolutely committed to launching in this way.
I think there was a question on Cosentyx, right? On you know where we see the growth in the future and of course the recent TYK2 oral.
Yeah.
Yeah.
Cosentyx, we continue to see our short-term growth intact. We continue to see double-digit growth, and that's across the globe. I'm sure as Ingrid already mentioned, clearly China's a clear growth driver. Really, the strategy is around we know how competitive it is in the dermatology space and to maintain our position there. Where we're seeing strong growth is in rheumatology. I was sharing with one of you earlier that with the new international treatment guidelines, the GRAPPA guidelines, which are internationally recognized, it really uniquely positions the importance of frontline treatment with an IL-17 like Cosentyx, 'cause you're getting efficacy across all the six domains that matter, ultimately not only to the physician, but to the patient and the efficacy.
Cosentyx has a unique position there, and we'll continue to drive that growth as we're seeing in China. We know this space is going to be crowded, but safety plays a large role as well in this area, and we'll have to watch that closely. We know we have the confidence of both dermatologists and rheumatologists as a really effective and safe therapy. The next wave of growth for us really comes in the life cycle management. The two nearest on the horizon, of course, are Hidradenitis Suppurativa that we'll file later that has a growth opportunity in 2024 and beyond. Specifically in the U.S., the IV formulation opens up a new population that we know is underserved in terms of their access to an effective biologic.
Already 20% of PSA or psoriatic arthritis and axSpA patients are treated with some form of IV, but we need to broaden that population, and Cosentyx and IV formulation in the U.S. can also be an opportunity. There are other life cycle management that I'll let some of my GDD colleagues go further in this later this afternoon.
Hi. Thank you. It's Sarita from Morgan Stanley.
Yeah, it's okay.
Okay. Thank you.
Next question.
Just first one on Zolgensma. Have you seen any impact on sales following the label update for acute liver failure? Scemblix, on Scemblix, how should we think about the launch in the third line setting? Are there any resistant mechanisms forming? I think Vas mentioned that the first line trial was recruiting ahead of expectations.
Mm-hmm.
Is there any potential for an earlier launch than previously guided for?
Maybe I'll take the Zolgensma question.
Yes.
pass the Semglee question over to you. So we haven't seen any direct consequence of the two fatalities that were described. Again, to just ground people in the fact that these toxicities are well described in our label, we've gone back. We've spoken to authorities about making sure that language is even more clear. Of course, we've worked with our teams internally because it is really important that the aftercare is taken seriously and that the tapering off of steroids happens in a you know very comprehensive way. So that is where the team is focused on. But we haven't seen any change in prescribing habits.
Actually, most of the KOLs that we speak to or the treating physicians that we obviously have a very close relationship with, you know, it just reinforces the fact that the aftercare is incredibly important. But it's still a one-time therapy. It's still basically the treatment of choice for patients with this indication. Then on Scemblix .
On Scemblix, we're really pleased with the initial launch in the third line setting in CML patients. We know that about 15%, up to 15% of patients will progress to that third line and have tried two or more TKIs. Commonly you're going to see some resistance or potential just tolerability issues over time. We've seen and are really pleased with uptake. I've just recently come back from ESMO, and there is a lot of enthusiasm about using Scemblix in earlier lines of therapy. Yes, the trial is recruiting ahead in first line.
Of course, part of the new role and while the focus is really about from my team is how do we prepare the market and the right product strategy so that we could accelerate that launch and our uptake in the first line setting as much as possible. We have European launches coming on soon. I think the opportunity in Europe will be different from a third line versus a first line setting, where we see in the first line, most of that opportunity is really gonna come from the U.S. I don't know, Haseeb, if you wanna make any of your comments on Europe, but that's what we're looking at.
All right. Thank you.
Keyur Parekh from Goldman Sachs. Two questions, please. The first one, Marie-France, kind of the last time we had financial stress across Europe, we saw the governments react quite significantly in sense of kind of pricing pressure, et cetera. As we get into 2023, and as you start talking to various reimbursement systems, are you sensing any of that kind of coming through? And if so, kind of which countries are more exposed to that? How should we be thinking about it? Secondly, we had the R&D guys before you-
Mm-hmm.
They were talking about how commercial is now kind of involved at a much earlier stage kind of through the process. Just if you can give us some more color around that. When is it that kind of you guys get involved? What is that decision-making path? That would be very helpful. Thank you.
Great questions. Thank you. I'm actually gonna give this one over to you, Mukul.
Well, thank you.
The first one.
Well, thanks, Marie-France, and Keyur, good to see you again, and thanks for the question. You're absolutely right. I think the economic circumstances that we're seeing ourselves, the industry will see more pressures across the globe, and Europe's no different from other parts of the world. We have to understand that looking back, our industry from a healthcare cost containment pressures has seen this pressure before. Our success in this would be to be able. Are we in a position to get new innovative medicines into the market? Can we take them successfully into the market, change the standard of care, and make it meaningful for the healthcare systems to win? I think we spent a better part of the last 15- minutes talking about LEQVIO. LEQVIO is a great example of it.
What we're trying to do with LEQVIO is to create a paradigm where everybody wins, where Novartis wins, the healthcare systems win, and the patients win, no matter what the economic circumstances are. I mean, the answer to your question is yes, we're seeing the pressure, but we believe we have to make the most of the assets that we have. If we do it well, we'll get to a growth, profitable growth, which is what we're looking for.
Yeah. Then maybe on the second question, around the focus or let's say the newfound relationship and bonds between GDD, NIBR, and our commercial units. I mean, that's been a huge part of what we're trying to do differently, because there was quite a bit of silo in the organization. It's a big company. So that's a big shift, but I think it's gonna fundamentally change the way that we bring our products to market and how good we are in bringing these products to market. Rod, I mean, this is the man spearheading all of this from a commercial perspective. He's done an amazing job over, you know, this has been over, what? A year of work now. He's setting up his team, but I'm sure very modest, but I won't let you be modest.
Hopefully what you heard from our GDB colleagues and the research colleagues is that part of the shift that we're making is how do we number one, how do we get the right senior level of talent with a strong commercial experience and background in both market access and their scientific knowledge and their, the knowledge of healthcare ecosystems around the globe? Not just put them 36- months, you know, out from launch, but how do you have that thinking embedded as early as possible with our research team in both Basel and in Cambridge, as well as in East Hanover? That was the second big piece was part of U.S. first is, now I have 60% of my strategy team sitting working in the U.S.
That's a big shift from the team predominantly being Basel-based and having that U.S. experience, so when we see things like the Inflation Reduction Act, there's not a time to get up to speed and understand. How do we provide that strong commercial research and development in line together? That's a big shift for us to be co-located more in the U.S. , having more senior level experienced people sitting with our drug development and research colleagues and really forming the more focused strategy.
I would say the third piece of this is with Ronny joining the organizational strategy and growth, the other value in the change is not just providing the commercial voice, providing it in a way that from an enterprise and portfolio level, what are the biggest disease areas and assets that we're gonna disproportionately invest in, particularly in our five therapeutic areas. That's really where the opportunity and the big change has been for us as we've built out this global team.
Can I just follow up on that last comment? So I remember correctly, historically what we've seen is low single digit price pressure in Europe every year through kind of 2010, 2011, it kind of nearly doubled. We're talking about 5%-6%. Is that what we should be expecting into 2023, 2024, or do you think that level is not right?
Well, I think we would not probably guide to exact number, but I would say the pressure is gonna remain. I think on an individual country by country basis, we have a whole public affairs team. It's not a Novartis issue, it's an industry issue. I think the industry is gonna account for it. I'd probably say, healthcare is more of a defensive sector, so to say, and I think people take medicines because they need it, not a luxury. I'd probably say the past, at least in the short term, would pretty much be a guide for the next couple of years, is how I'd model it.
Go ahead.
Thanks. It's Graham Parry from Bank of America. Just get back to LEQVIO in the U.K., obviously, you know, the NHS has been relatively shut. But if you look now about GP practices, what proportion of GP practices do you think are now actually out there actively LDL testing their post MI, post-stroke patient populations, to actually start recruiting patients in? How long post an event do you think that they should be doing that? And what is Novartis doing to help them do that, given that GPs in the U.K. don't do anything unless they're getting paid for it? Second thing is top three opportunities that you would flag in China. And then thirdly, if the NATALEE trial is positive, CDK4/6 is moving into adjuvant breast cancer are substantially more expensive than anything else there.
What’s your assumptions around pricing and access for CDK4/6 and adjuvant in European markets? Thanks.
Yeah. Lecvia U.K., To add to some of the comments I made to Rich's comments earlier. We did see clearly during COVID a significant reduction over 90% reduction in the number of LDL-C tests that were being done. That's now back up quite significantly, not quite up to pre-COVID levels. We are working with the U.K. NHS, so on their stream, one of the things that they're considering through consultation right now is putting in a QOF incentive for next year for GPs to actually review hyperlipidemia patients. That will certainly help. We're also driving volume by putting our own resources. We have field teams as well, going into GP practices and kind of educating them about LEQVIO and the value proposition we have.
on China?
Yes. Thank you. When I look at the three greatest opportunities in China, right? I would actually start by saying it's driving innovation in the focused TAs. I talk about Entresto, Cosentyx already, and I'm looking forward to launch LEQVIO and Kisqali. Right? Very large unmet needs, you know, 67 million ASCVD. Breast cancer alone has 400,000 newly diagnosed cases every year. Right. These are women. That's the first thing. The second thing I would probably say, it has to do with how we are doing market shaping. As you can see Entresto, Cosentyx we're clearly the market leader, so is LEQVIO. But even with Kisqali, while they are already CDK4/6 on the market, but that class share is only 5% last year, whereas I think that figure is about 60% in the U.S.
Think about, you know, significant opportunities and for a company like Novartis, like partnering with Rod, and I think that's great opportunity. I think maybe the third thing which is quite unique for China is patient activation. They say that, you know, China has a very unique digital ecosystem. Everybody's on WeChat. What we're doing is actually we're partnering with Tencent, and where we have an AI suite of offering. We've started with heart failure, and we're moving to dermatology. Essentially by using tags, we can identify patients, whether they've identified psoriasis or other plaque conditions, we identify them, and we work them as a community where we do actually weekly HCP and patient education, as well as community bonding.
We do online, offline events to make sure they know biologics are there that can help their lives. I'll tell you an example. You know, recently my team shared with me that there's an 80-year-old patient asked for biologics, and we were all in shock, right? 'Cause typically we think about younger patients, you know, want a better, you know, care for themselves. But the 80-year-old patient told me, he said, "You know, I wanna die with dignity. I don't want my body to be covered with plaques. You know, I want, you know, die normally." Think about the power of that. I think, you know, the patient activation story not only plays out for psoriasis, but also for ASCVD, as well as, you know, for breast cancer patients.
With that, you know, I think we're really confident and looking forward to driving the next growth in five years.
Yeah. I think in China, if we create the right ecosystem, and the right approach to the market, there is just tremendous opportunity. We could go on. You know, we could talk about supporting co-pay and.
Mm-hmm.
All of these other activities.
Credit, yeah.
Right, that are also looking at duration of treatment and other aspects that have traditionally been true challenges in China, but where we have an opportunity to really think differently about the market. Yeah, we continue to be very bullish on China. It's a great team as well, so.
Absolutely, yeah. Thank you.
All right. I think there was another question, right?
There's a NATALEE reimbursement.
In Europe.
Yeah. Do you wanna comment on?
Kystele or something.
Yeah. Obviously we price to value. Do you wanna just repeat your question so I'm-.
On the pricing of it.
If the NATALEE trial.
Mm-hmm.
Mm.
If the NATALEE trial is positive.
Mm-hmm.
You're looking to launch Kisqali into the early breast cancer adjuvant setting, it's obviously a lot more expensive.
Yeah.
than hormonal therapies, which are, most are generic, et cetera. What are your thoughts on pricing and access in the European markets for that? Is this just gonna be a U.S. opportunity?
No. Yeah. We do see opportunity within Europe. Clearly, depending on the readout and the size effect, that's clearly gonna have a big impact in terms of what the reimbursement will look like. Within Europe, obviously, we price to value because the systems obviously are driven off value. Really depends on the cost per quality that will be delivered, as a result of the NATALEE trial. We do have opportunities now to look at healthcare systems like both the U.K. and in Germany.
While they don't have indication pricing, one of the things they can do is they look at the population and make assumptions on what proportion of patients would be an adjuvant versus metastatic, and we have blended pricing, so it wouldn't be a direct jump down to a lower, possibly blended price effectively. Really the impact depends on the size effect.
Um.
Would you?
Thank you. Simon Baker from Redburn. Two related big-picture questions then one on Lenvima. A helpful way for us to think about the changes in your global product strategy would be to see how you would do things differently if you had your time again. Whether we're talking about Entresto, Cosentyx, Kesimpta, any one you'd like to. Can you tell us what you would do differently now were you launching today? Related to the change point, in most markets, with the exception of China, we are getting back to a degree of normality post-pandemic. I'd just be interested to see what practices that evolved to deal with the pandemic are sticking in your new business model.
On Lenvima, the deal you've done with the NHS in the U.K. seems a very attractive deal for similar single-payer healthcare systems around the world. I just wonder when we should be expecting other similar deals to be announced.
Mm-hmm.
Thank you.
All right. You wanna start? That's 'cause that's probably one of your favorite topics.
Yeah. Simon, on your first question, you know, what's different? I think, one, I would start with just acknowledging all of our launches haven't gone the way we wanted. You know, the Mayzent and the Piqray. You take those on and learn what would you do differently. That's part of now what we are doing differently is some of these launches, like whether we're focusing on now on iptacopan or on pelacarsen or remibrutinib, is we have to much earlier in our product strategy and market shaping understand what's the right integrated evidence packages, both not just the registration studies, but the real-world evidence, the clinical trial sites that we choose. How do we build that advocacy earlier on? Or if there are companion diagnostics, biomarkers, other things, those aren't things that you can start to develop too late.
The third piece of it is not only just the clinical piece of the data, because we've seen successes with launches now. Just having great clinical data doesn't mean you're also addressing non-clinical barriers or the friction in the system based on how you develop and design medicine. We're looking even much earlier at life cycle management of what makes the difference between whether it's convenience, whether it's seamless approach to how offices are able to onboard patients. Those are decisions that need to be made in your clinical trial designs, your real-world evidence packages, how you'll shape a market and working with the right patient advocacy groups or other healthcare systems like we're doing in the NHS, and how we might approach more population health bases.
Those can't happen within 36 months. As we look ahead and plan for the iptacopan, the pelacarsen, as an example, we know that the success in an Lp(a) testing is about how much awareness you can raise and drive testing with. It's got to come through with systems, and it's got to come from the right patient activation and pull. These are decisions now we're making earlier and putting the right resources in place to be able to do them so that the uptake curve, we have the potential to change that much earlier on in the process.
I had the opportunity to speak to some of you last night, and I think this is a real important change in the model. In my 30- years of working in this industry, the challenge in global teams has been always this incredible breadth from end to end. What's important is you have an end-to-end continuum, but not necessarily the same team working on all of that. Because the default is, I mean, it's just human nature. You work on what you need to do tomorrow versus what you need to do five years from now. What Rod is doing, and I think it's that much more relevant now that we see the IRA in the U.S. , is you have to start early. You have to bring it all.
This, you know, iptacopan is a great example. We're going in with multiple phase III clinical trials at the same time, so that we cover that breadth, not necessarily how we thought about things in the past. You know, you bring your first indication, and then you follow on through with that. So it's a much more. It has to be fluid, but it's a much more focused approach on what needs to happen to ensure success in the future. Some risk to that, obviously, because we won't have all the data, but you make your choices and you take those risks. Then I think there was a question on,
Just so maybe to provide a bit more color. What we're seeing in this whole kind of ecosystem of healthcare is that prevention and secondary prevention, in this case of cardiovascular diseases, is becoming more important. Healthcare systems recognize that if you look at, you know, the largest cause of death is cardiovascular disease. More people die in one year from heart attack and strokes than we saw in the last two and a half years from COVID. There's lots of engagement with healthcare systems in prevention of cardiovascular disease and secondary prevention in particular, because lipid management is one of the most addressable and modifiable factors in terms of reducing cardiovascular risk. We are seeing good engagement now with many payer and provider organizations across Europe, I can speak for.
The deal that we had with the U.K. NHS was kicked off by the medicines company. You know, these deals take a number of months, indeed, even years, to actually go from idea generation to a commercial agreement. We have long patent life, obviously, with LEQVIO going way into the 2030s, but you should certainly see in the next coming years, probably a flow of more countries. Not just national payer systems. We're engaging with sick funds in Germany, in Italy and Spain, with regional health, autonomous health authorities that are budget holders. It's not just on that kind of national system level.
I think the third question was. I can't remember.
was about post-COVID adult practice.
Post COVID.
Oh, that's right. Do you want to take that, Mukul?
Yeah, I can take a shot at it. Clearly, I think, Simon, as you rightly noted, COVID was a game changer in a lot of ways in how we interact within the company and outside the company. We pivoted as a company to saying, "How do we operate in this new world that we're living in?" As we come back to some form of normalcy, we clearly see that some of the old behaviors are coming back. I think this would be an example of it, where there is credit given to face-to-face meetings. What we're trying to pivot towards is how do we ensure that some of the learnings that were forced upon us as an industry, us as a company, stick together.
How do we get to a more hybrid model when it comes to interactions internally as well as externally? How do we make sure that when a field force or a field-facing individual within the company interacts with a CP community or external community, what are those kind of interactions that we have which have to be face to face, and where can we go digital? We were in our digital journey within the company already, and I think it's probably, if anything, this has been a catalyst of that change going forward, and we feel that some of those changes are here to stay for the long term.
Yes.
Hi, Dominic Sheridan from Credit Suisse. On LEQVIO, you talked about quite high doctor acceptance for some of the outcomes data before actually having data. I'm just thinking, you know, when you think about your peak sales potential for LEQVIO, what proportion do you actually ascribe to, you know, the CV outcomes in 2026 and unlocking that value, as opposed to actually just kind of waiting till that time?
Yeah, maybe I can take that question. The big opportunity until we have the outcomes data is definitely a U.S. opportunity. Rod, I think, talked about that before in some detail around the fact that we don't need to wait for the outcomes in the U.S. We're getting enough traction in there. This is not something that comes into the dialogue. Because of the reimbursement systems in the rest of the world, the CVOT data is not something. We have to do the trials, so we're doing the trials. However, we are seeing, as Haseeb also mentioned, we are obviously actively engaging in dialogue. There are
You know, we definitely are thinking about this from a bottom-up approach, which is very important because we have to continue to create the advocacy level around the clinical efficacy. There is interest top-down to really look at this. When you start to put the numbers, the actual individual numbers in front of people, not necessarily always the health ministry, but finance ministries or regional governments, the purse holders, they are very interested in thinking about cardiovascular health in a different way. It's finding those people who are actively seeking prevention versus intervention and starting to bring that together. That's why it takes some time, but we do think that we will have, you know, bigger and smaller stakeholders that come together with a plan before we have the CVA data outside the U.S.
What I can say in the U.S. too is that because there's such acceptance of LDL control and outcomes, the other thing that Vas shared this morning and why we're initiating a primary prevention trial, that's beyond what Marie-France said. We expect to see the growth in the U.S., The next opportunity beyond that, in particular, when you think of a profile like LEQVIO, where in a primary prevention, so a perception of maybe lower risk than a secondary prevention population. The idea that you have a medication that, you know, after the initial doses, you've got a twice-a-year opportunity for these patients almost with adherence, you know, guaranteed, that's the type of population that you want. When it comes to a next U.S. growth driver, the outcomes data will help.
They will absolutely help, but it's not the big change. The next would be then a primary prevention indication in the U.S.
Thanks. Seamus Fernandez from Guggenheim. One question that I guess I've started to struggle with to some degree is, you know, as IRA kinda comes into the mix, what are the secondary effects of being U.S. first in your thinking on the international business? Because there are also, you know, pricing dynamics that could come into play as next iteration effects. Should we start thinking about global pricing as a driving force? You know, what are the factors that we need to start thinking about in that context? The second question, just in terms of, you know, the top three products that you could launch by 2025, what are the top three that you really are uniquely excited about? I think we spend honestly a lot of times too much time talking about LEQVIO.
Can we learn a little bit more about the products that you're uniquely excited about in the next three years to really, you know, get your hands on and really drive forward? Thanks.
All right. Maybe I'll take the first question, Rod. I'll hand over the second one to you, but then maybe ask one of the two markets to comment because I think, you know, it is kind of different geographically depending on where we are. The first answer to your question is gonna be really short because I think, to be totally honest, we don't know yet, right? I think we have to look at our pipeline. We've got to look at what products are we trying to launch? What is the sequence? We've got to understand what are the pricing dynamics. We have, you know, products that we're positioning in rare disease like iptacopan. And then you have, you know, we just talked about primary prevention.
I believe that it's going to evolve and that's obviously not a Novartis question. It's a broader question. The one thing I can tell you for sure is the IRA has implications, right? The first one is, does it stay the way it is? I think that's a question mark. You know, we don't know yet, and of course, we've got our own opinion about that. Does it change the way we're thinking about our launches, our product, our pipeline, our pricing? For sure. It will. How? Honestly, too early to tell. Then what are we excited about?
Yeah. I'm gonna pick up iptacopan.
Mm-hmm.
The reason I pick iptacopan is that we're talking about the potential to have a multi-billion-dollar asset in ultra rare diseases in both oncology or hematology and then also in renal disease. I'm sure the GDD colleagues talked about it a bit, but what we see as this unique opportunity is that with factor B inhibitors, you get a more complete response when we're talking about patients living with PNH, because you're addressing both sides of extravascular and intravascular hemolysis. We think we can have more complete response in both the frontline setting or in addition to anti-C5 therapy.
I think that's an exciting proposition that when we engage with nephrology centers and really the community that's suffering from these renal disease, they're excited about this opportunity because you're talking about a younger patient population, whether it's in PNH, in hematology or the renal indications, our first of which would be C3 glomerulopathy. You're talking about a real opportunity to make a difference in these patients. It's an attractive opportunity, and it only starts there because those are our first indications, and we're pursuing multiple other trials. I think this is a real chance for us, as Marie-France said, to invest early in the broadest possible program that we can have, but really get started with some indications that can make a very big difference early for these patients and then continue on.
For me, it's Iptacopan, and I'm looking forward to that launch.
You, Ingrid?
I'm gonna pick Kikojie, LP little A. Very large ASCVD patients, and we have some real world evidence to show those hospitalized. You know, it's actually, you know, they're really a disproportionate high number that has very, very high Lp(a) and no known treatments and genetic predisposition, right? I have physicians and patients come and ask me, "When can we make this available?" You know, I'm really excited about, you know, leveraging our strong CV heritage and be able to offer this medicine to help others. Also in China, lipid panel testing is more prevalent. Annual physical, a lot of people do that, and there's just too many people being hospitalized for acute events, so they have their Lp(a) checked as well. I'm excited. Haseeb?
I'm gonna go for Pluvicto. Both in the U.S. but also in France, where we have an ATU, an early access program, from clinicians and from patients. I mean, this is addressing a truly unmet need. We're seeing much higher demand than we initially anticipated. Pluvicto is number one. I'm gonna add two more as well, because you did ask for three. I'm gonna add in Cosentyx HS. We see strong double-digit growth on Cosentyx in Europe. We've got a good base. The HS is a product in its own right. I'm super excited about that. Kisqali is very much just in launch phase right now. They're my three.
Yeah, I think our life cycle management right now on Cosentyx, on Kisqali, on Pluvicto. I think we don't talk enough about Pluvicto. You said we talk too much about LEQVIO. We don't talk enough about Pluvicto. We haven't even mentioned that in China, and I think, you know, that's real grassroots. I mean, the number of metastatic prostate cancer patients in China is just huge. There is an opportunity there, and we'll have to, you know, work that out. Then I guess, you know, iptacopan, remibrutinib, pelacarsen. Those are the big focus areas for us right now. Can we just take one question in the back? I know we're over time. Because you've been raising your hand so patiently. I'm so sorry. Like the tendency is to look in the middle of the room. It's not.
Thank you. I was just wondering, in terms of the margin target that we heard this morning, is that set in stone or would you actually have an opportunity to go back to Vas and the CFO and make a case if you can actually see that you could generate very high ROI at a lower margin? I'm just asking because it sounds to me like you might have a lot of opportunity to generate, sort of like lots of volume at much lower prices, you know, with, you know, inflation coming and with potentially population health agreements. In, I don't know, two, three years' time, maybe that margin target is no longer so relevant. I'm sorry, I'm Marietta Miemietz from-
No, no. Look, I think this team, we're totally focused on growth, right? I don't know, Mukul, if you wanna make another comment. I mean, this is gonna come from the CFO, why am I? But this team, that's our focus, is how do we grow this business? How do we focus on delivering that 4% CAGR and beyond if we can, right?
Yeah. Maybe the only add that I would make is I think everything that we do within the company is a discussed number. I think what you guys get at the end is the overall direction that this organization's going. The transformation that we are on gives us a unique opportunity to position this company to focus, to simplify, and to go for growth and put our resources where they will give us the biggest margin. Margin improvement is as much about making the most with the dollars that we are actually spending. It is all about that. I think now we say low 40s% or 40%+ in terms of margin improvement, and that is definitely in the range for a focused pharma company that we are today.
As Marie-France said, we will not let go of a growth opportunity for the want of money within the organization. We have enough money. It's just that we have to make sure that we put them in the right resources. Getting this focused into five TAs, eight big brands would give us that.
If we bring the growth, we'll bring the margin.
Yeah.
All right, we gotta stop. Thank you so much for your time.
Thank you.
Thank you.
Okay. Hello, everybody. First of all, I'd like to introduce myself. I'm Richard Saynor. I'm the CEO of Sandoz. I'd like to obviously, we've got our management team here, or some of them are left to right. Colin Bond is our CFO. He joined us about three or four months ago. Deep experience in the Swiss capital markets, and really helping now driving our separation as we stand up Sandoz as a standalone company. Keren Haruvi is ex Teva, was previously Corporate Head of M&A in Novartis, and now President of the U.S. business, and doing a fantastic job stabilizing and bringing the U.S. back to growth. Claire, to my right, was again ex Teva, and now is our Chief Science Officer and heads up the development organization, both on small and large molecules.
Pierre Bourdage is Chief Operating Officer. Prior to his current role, he was responsible for the biologics business, and under his leadership, we've more than doubled the pipeline that we have in partnership and development. He's now responsible really from the end-to-end portfolio selection and execution for both large and small molecules. Last but not least, Rebecca, who heads up our region Europe, our largest and our strategic platform in terms of our business. Sandoz is a unique company. We're the world's largest generics and biosimilar company. We're one of the largest pharma companies in Europe, treating, you know, nearly 500 million patients a year. We're a world leader or number two in biosimilars. We're one of the broadest and deepest portfolios and pipelines. We have a strong presence pretty much globally.
A really exciting opportunity to take this company forward and take it to an independent future. I look forward to your questions both from the internet and from the room. Thank you.
Thanks. It's Graham Parry from Bank of America. Just wonder if you could talk through the separation how manufacturing works. Initially, you're gonna have the manufacturing done by Novartis, but they also wanna keep hold of their nice, clean, innovative plant. How much do you think you'd be likely to move to a third-party provider type model? How much are you gonna have to build yourself? How's that gonna impact on CapEx margins, et cetera, over maybe the first few years of the life of Novartis as an independent company?
Okay. Thank you. Perhaps if I answer the perimeter question, and then Colin, look at the CapEx question. We're just finalizing the perimeter. I think the broad principle is the bulk of the small molecule manufacturing will stay within the Sandoz network, so a lot of the sites there. Places like Turkey, Poland, Germany, India, et cetera, are already predominantly Sandoz sites, so they'll stay as part of our network. The biologics manufacturing will continue to stay within Novartis, and Vas has already talked to that. We'll we've already put in place a long-term service agreement in terms of the pipelines we're both developing and also the existing portfolio that we take out of the network.
In the medium term, we're looking at then building our own capacity to tech transfer a significant number of those assets to our own network, in the medium and longer term, and also then looking at building our own pilot and scale up plants to allow us to bring future assets to the marketplace. Colin, do you wanna perhaps talk about CapEx?
Yeah. As Richard said, you know, we're nine months before potential separation. We're in the process of determining the exact scope of the perimeter that will drive the CapEx requirements. We're, of course, not in a position to give short-term guidance at the moment. We'll do that as part of the year-end in the normal process as part of Novartis. But you know, medium term, we expect high 20s% EBITDA, core EBITDA as a percentage of sales. That's what we're targeting.
Thank you.
I think probably one last thing to add is, you know, clearly this is super exciting in terms of the capital structure. The separation is anticipated that we'll be set up with investment grade and the requirements for the CapEx. Once we've finally determined, it will be put into that capital structure and funding.
Okay. Thank you. Go ahead.
Thank you. Simon Baker from Redburn. Just continuing on from Graham's question. When you talk about long term and medium term, can you give some sort of idea how long these service agreements could run for? The reason I ask is a sort of second follow-up question, do you perceive any risk from this? Because you will initially become a biosimilars manufacturer with outsourced manufacturing, and then you're gonna bring it in-house. Establishing and commissioning and validating biologic manufacturing is not trivial. So do you I mean, should we consider that there to be any risk there, and do the service agreements effectively hedge that risk by allowing you to sort of overlap the two processes?
As just a second question, on a slightly more positive note, we had some encouraging noise from EMA this week about interchangeability within Europe. How important is that? I mean, clearly interchangeability is very important, but are they effectively codifying what's already happening in Europe? Or is the genuine upside from the announcement that they made? Thank you.
I'll let Rebecca pick up the interchangeability in a moment. Yeah. Clearly, look, I take your point. At the moment, we're just agreeing the TSAs between ourselves and Novartis. The assumption is we'd look at probably a 5 + 2 + 2 to give us the security of supply over that period of time. Realistically, it's what? A three to five year journey to build the capacity. Again, part of that co-agreement would be us leveraging the technical capabilities within Novartis to allow us to stand up those capacities and facilities, and then how we then support the tech transfer. I'm confident that we have the capability, the technology, and the resourcing to do that. Also, if you look at our past history, we've had a very strong and positive supply base.
Really, that's been one of the key drivers of our business, so I'd expect that to continue, as we continue to leverage Novartis as a third-party supplier, and it's clearly in their interest to leverage and support that as well. Rebecca, do you wanna talk about interchangeability?
Yes. First of all, I think for us, the interchangeability brings clarity, right? The EMA statement, because it clearly states now that the products are really equal to reference products. In EMA, this was always the case that you would say this is not a regulatory designation which you need. It is just to confirm that once you have approval from EMA, it is proven that you have quality, efficacy, and safety of the products. If you look at Europe, I would say fundamentally, it has been a very positive market for biosimilars. If you look at Sandoz specifically, we are the leader in this market with 37% of share. What this helps is clarity in the markets, right? Fundamentally confirms what we already have started. We are driving a lot of the access initiatives across the market.
If you think about Germany, where we're making sure that more patients are getting access earlier on, so with FARO study, where we proved one year earlier access for rheumatology patients. Of course, this gives another confirmation that we have basically interchangeability proven by EMA. I would say, yes, it is gonna help us to further drive access and also biosimilar penetration in Europe.
Thank you.
Good morning. Florent Cespedes from Société Générale. Two quick questions. First, a follow-up question on your biosimilar own manufacturing capability. How in a short, medium term, the fact that you have the agreement with Novartis, and the fact you have to invest into your own plans, this will impact your short-term margin or the CapEx should be, let's say pretty high in the short term. Could you share with us on the financial aspects, how you see the years to come? My second question, a big-picture question, how you will differentiate from some of your competitors given your portfolio biosimilars, U.S. Presence, and rest of the world? If you could give some color on that front, it would be great.
Perhaps if I take the second question first and then Colin, the first question second. I mean, I think Sandoz has already differentiated. I mean, we're unique in the sense that about 30% of our revenues at the moment come from biologics. You know, really the peer, the competitor set, they're either very heavily focused on small molecules or predominantly focused on biologics. Actually, having the combination of the two is a really powerful lever. If you look at our business in Europe, you'd think, okay, normally when we talk about generics, normally first to market, cost of goods are the key drivers. If that was the case, then some of the South Asia, Asian players would dominate in Europe, but they're not. Something else is going on.
What really is going on is, I sort of think about it as market intimacy. If you look at our German business, it feels very German. If you go to Italy, it feels very Italian. Having that combination of a very strong local market capability and this balanced portfolio between small molecules which are cash generative and biologics which are margin expansive gives us a really, really nice position. I was in Spain last week, and what's interesting in Spain, if you launch a biologic, you can then move and expand the market because frequently these drugs are so expensive as an originator, they're third or fourth line in terms of treatment. As the biosimilar comes, you get this market expansion effect that you just don't see in small molecules.
It gives us a really great strength in terms of how we manage the play. Clearly over the medium and long term, we want to more than double the proportion of biologics in our business. You know, keeping the focus on small molecules, but expanding and strengthening our biologics pipeline. Colin, do you wanna comment on the margin?
Yeah. As I said before, we're in the process of determining our CapEx requirements. Those CapEx requirements will be funded, you know, with the balance sheet that we get at the separation, working back from the assumption that we'll be properly set up to have investment-grade rating. In the medium term, you know, clearly we have to invest in the development and launch of the biosimilars pipeline. That's priority number one. We have some stand-alone set up costs, but we think that over the medium term, those will be more than offset by the capacity that we have and the freedom to really then operate as a generics company in a much leaner and more efficient way, and we'll get those benefits. As I said, from the medium-term perspective, we see mid-20s% core EBITDA as a percentage of sales.
Bear in mind, think about the margin expansion will come from really two areas. Clearly, as we launch more biologics, you know, starting really Q3, Q4 2023 and beyond, those are quite accretive already. Also, as Colin says, as we stop being a large pharma company or being part of a large pharma company and we become a generics company, there's opportunities to simplify our operating model, you know, look at the whole cost structures across the whole business. You know, that gives us two really good areas that we can then focus to look at delivering margin expansion over the mid-term.
Okay. Thank you.
Yeah.
Hi, Keyur Parekh from Goldman Sachs. Two questions for you, please. The first one is, what do you think not being part of Novartis allows you to do better as a stand-alone company? What are some of the strategic aspirations that currently may be curtailed, but as we think over the next 3-5 years, geographically, technologically, what are some of the capabilities that you would like to have? Then secondly, kind of linked to that, what do you see as the shape of the broader generics industry over the next 5 years? Do you see further consolidation across the players? And what if yes or if not, why not? And what role do you think Sandoz will play in that?
Okay. Again, perhaps Claire will comment on the technology platforms, but perhaps if I take the industry. I mean, consolidation is an interesting idea. I guess it's from our own experience in the U.S., divesting and acquiring generic companies is hard, and clearly competition authorities. I don't think you're gonna see significantly more consolidation. I think the biologics business is already pretty consolidated. I think, correct me if I'm wrong, Pierre, I mean, the five major players account for nearly 80% of the market today, and I think that trend will continue, not necessarily consolidation, just through the scale that they have. I think then really the industry will continue. I think Europe will continue down the path it is. I mean, clearly there's a significant number of LOEs.
It's something like, I mean, globally, $400 billion of LOE, roughly 60-40 split between small molecules and large coming off patents in the next 10 years. Big market opportunity. Growing proportion in biologics and more complex biologics. Clearly, you know, from a Sandoz point of view, our focus will be to continue to expand and grow in those technology areas, and then continue to invest in other areas that allows us, like complex injectables, respiratory, going forward. Claire?
Yeah, I think just to add to what Richard is saying, the base of the business really is the small molecule portfolio and the biosimilar portfolio. You know, we have quite a lot of advantage of being part of Novartis, but as we move forward and become a stand-alone company, we will continue to focus on the key areas we have in our small molecule portfolio, the solid orals, the injectables, the respiratory portfolio. We also have been working in the anti-infectives, and then similarly, we have the biosimilars. I think the difference that not being part of Novartis brings is that generic mindset and that generic focus. You know, to succeed as a generic, there's a strong focus in the U.S. on first to file to allow us to be first to market.
It's also a requirement in Europe. In order to do that, I think the IP strategy and the speed of development and the agility of development is something that we would be able to own a lot more strongly to be able to progress as a standalone company. I think with the track record of success we've already had as part of Novartis, you know, I'm certainly confident that we'll be able to accelerate our journey with that pure generic mindset. Built on the enabling technologies. You know, we're looking at more digital technologies and capabilities to allow us to automate a lot of our areas, and also to manage our data more clearly. I think those are some of the advantages that I think we'll be able to progress more rapidly as a standalone company.
Thank you. There's a question at the back.
Samuel Group. I have a question. You can read on an anecdotal basis at the moment about supply issues for several compounds, both in Europe and in the U.S. I wanted to ask how much you see this also with compounds from Sandoz, and perhaps what is your thinking how this plays out in the midterm?
It's a good question, actually. Well, I'll let Rebecca comment.
Yeah. Like, I think the entire supply situation, first of all, let me say that we see huge volatility, right? We're coming out of COVID, and we saw a huge demand. Actually, I'm pretty proud on how the industry has reacted to this huge demand and how we kept on going and operating and delivering. I think it was only possible because we had a really strong collaboration across industry and very strong business continuity plans. This was also seen by authorities, right? We are. If you think it through, where 70% of all prescriptions in Europe are done with generics. We are fundamentally super important to drive access to essential medicines. This said, of course, with a portfolio, we have in our portfolio over 20,000 SKUs, if you imagine, right?
It's a huge portfolio we are offering, and of course, you're always gonna have a couple of molecules which are sold out, right? It's impossible that you have 100% reliability. That said, I think it's super important that this is also for Sandoz an advantage, that of course, our strong European manufacturing footprint becomes really an advantage because you are closer to the market, and you can deliver this supply reliability, which becomes also more important as we move. I would say you see ups and downs, but importantly for us is, if we wanna keep the strong manufacturing footprint in Europe, we need to make sure that we have an equal system which allows us to sell what we produce in Europe, also to sell in Europe.
We need to find a balance between supply reliability, quality and all the measures in place for the cost containments.
Okay. Question.
Ben Shapiro from Valley Ashley Asset Management. I'm curious if you could speak to how you're thinking about portfolio development beyond biosimilars and capital deployment subsequent to the spin. You'll obviously have an IG rating, so plenty of debt capacity and firepower.
Okay. Do you wanna talk about that?
The portfolio, as I said earlier, we have the small molecules and the large and the biosimilar portfolio. From a portfolio point of view, we have focused on building on the loss of exclusivity opportunities, both in the biosimilar space and in the small molecule space. The key technologies that we've really been focusing on is the solid orals, where we have a focus mainly on oncology. We've also focused on injectables. Interestingly, the injectables share a very common platform with the biosimilars, so it's really an area of strong development for us. We're looking at the complex injectables, particularly because that's an area where you will have less depreciation over time. Similarly, we're also looking at respiratory.
As part of our respiratory portfolio, you know, we have vertically integrated capabilities with manufacturing and development co-located, and we've recently acquired a device development organization as well. It's really looking at the expansion of the portfolio based on the technologies that are coming through from the brand companies and ensuring that we are continuing to build our capabilities to anticipate that new technologies evolution and ensure that we're able to continue to have a sustainable delivery of portfolio products moving forward. In the biosimilar space, it's a very similar rationale. You know, we have in excess of 15 molecules in our biosimilar portfolio. Again, we are continuing to develop our biosimilar capability, really focusing on ensuring that we can deliver the portfolio.
We should have enough capital to invest. I mean, I guess for me, the interesting question is sort of what happens beyond sort of 2032, 'cause really our strategy is to cover broadly focus on LOE. I'm relatively agnostic around therapy areas. I'm just more interested in how the technology platforms, I mean, Vas was talking about, you know, conjugates and antibody conjugates with biologics. Those are the spaces that ultimately we need to think about what we need to invest, so whether we acquire platforms, set of partnerships, JVs. Our capital structure, as you said, gives us the freedom to do that and start making the long-term bets. It'll be, I guess, the next wave of biosimilars as we go sort of beyond 2032 and beyond.
Hi, Richard Parkes from BNP Paribas Exane. I just got a question. I think you've outlined, like, four big sort of biosimilar opportunities beginning from late 2023. It's easy for us to look at the originator sales, but a bit more difficult obviously to sort of quantify what likely pricing pressure will be and number of competitors. I just wondered if you could sort of help us in ranking those, like, four opportunities where you. How you see the kind of relative market opportunity for Sandoz and why you think Sandoz is kind of uniquely positioned to capitalize on that.
I'll let Pierre comment on the pricing. Again, part of it again is, and I guess I have sympathy trying to model this because these don't behave like small molecule. You know, I'll use the Spanish example where you see actually significant market expansion. In Europe, we've not launched a biosimilar for the last three years, and yet we still grew last quarter 7%. That doesn't happen in small molecules. It's a very different dynamic in terms of patient reach, patient access, and how the uptake can expand. But perhaps, Pierre, do you wanna talk about the pricing or how we see really the next four big launches?
Sure, yes. The four big launches over the next five years cover about $30 billion in LOE. The way I characterize the four is that one of them is very unique, our proposed biosimilar to natalizumab in partnership with Polpharma. We expect very little competition, if any, from other biosimilars. I think that'll be a very unique entry into a specialty market. Adalimumab high concentration in the U.S. will be at the other end of the spectrum in terms of competitive intensity with more than 10 entrants into the U.S. market projected. So I think those are the two near term. Longer term, but filgrastim and denosumab, 2025 forward, those are clearly really interesting opportunities.
We'll know more about the competitive intensity likely in the next year or two as clinical trials and other competitors disclose their assets. What I would say in terms of thinking about how will Sandoz succeed and what's the opportunity, I would say two things. One, if you look at Europe, we have eight biosimilars, and we're in a number one position overall and number one on five out of eight. Anywhere we've launched, we've done well. Similarly, in the U.S., we have a more concentrated portfolio, but we've done very well and are in a number one position on our two anchor biosimilars in oncology. I think we look at the four opportunities being different, but our aim is to be highly competitive and succeed in a top position in each one of them.
Okay. Thank you. Graham?
Thanks. Just trying to think through commercialization strategies and how you think that's going to develop over time. It used to be one of the touted benefits of being part of Sandoz that you could utilize the knowledge on marketing, going to physicians, patient services, all of those sort of extra bits that you get with a, an innovator company. Is it the case now that that's just not how this market works and you don't think it will work that way, and it's really just about getting payers and their organizations to switch at a higher level?
I guess I'll let Rebecca comment on that one.
Yeah. I mean, if you look at the biosimilar market, and I think your question is specific for biosimilars, where the market currently, you have roughly 50% is tender, which means you have framework tenders or you have one single slot tenders depending on the market. It's hugely fragmented. Then roughly 50% is share of voice, where you would need a sales force and you need to drive prescriptions to get biosimilar penetration into the market. I think what we have done, don't forget we have 15- years in the market. We launched in 2006 the first biosimilars, and since then we launched eight products, mostly in immunology and in oncology.
I think during this time, we have really built a very strong commercial capability in the market and expertise how to drive those markets, because we're in 17 out of 21 markets, number one. Which means whether it is share of voice or tender excellence, we pretty much have the capabilities and expertise across the markets in Europe. Of course, this gives confidence that also in the future, even being independent, we feel confident that we can execute on the pipeline to come and continue to grab share, which we have done over the past couple of years.
Maybe let me add here from a U.S. perspective, again, very similar trends, but you know, for us in the medical benefit, we're kind of, as Pierre mentioned, that we're leading and have a leading position. We're already contracting with payers and with the IDNs. Same on the pharmacy benefit. We have a lot of kind of experience coming. Our operations now are completely separate from Novartis. We have our own hub, you know, for Glatopa. We have all those services. Honestly, there are not synergies now and going forward. We are very confident that we continue to execute the way we executed so far.
One of the areas we're sitting since I've been here, completely standalone from Novartis is commercial. Any questions from the web if we have any questions in the room? No? There's another. Oh, okay.
Thank you, Marietta Miemietz. Marietta Miemietz with Primavenue. Sort of a big picture question for the really long term. I mean, you talked about sort of LOEs ultimately shifting to basically from molecules to technology. You have these ADCs, for example, where the molecules have been off patent for a long time, but it's really the technology that's sort of making the difference in the clinic. Do you think that there's realistically going to be an opportunity commercially to copy those, because I'm just wondering, you know, if we're just going to have a lot of technological obsolescence, and you're just going to have a lot of other players making tweaks to ADC technologies, bispecifics, whatever. Basically just, you know, coming up with something better based on the molecules we have.
It sounds like a quite significant deviation from what the generics or biosimilars industry used to be in terms of, you know, a molecule that works, losing exclusivity, and then you copy it. I'm just curious on your thoughts on that. I mean, do you think I'm sort of too pessimistic as I think that maybe, you know, there's just going to be very rapid technological obsolescence? Or do you really think that basically, I mean, it's gonna be quite difficult to beat some of these ADCs that are out there right now, and they will still be the gold standard, in their particular indication when they come off patent? Just any thoughts there. Thank you.
Thank you. I'll pass for comment first and then Pierre. I mean, I guess we'd. If we'd roll back the clock 20- years ago, and you'd asked me the same about biologics, when we effectively would have asked pretty much exactly the same question 20- years ago about where we are today around biosimilars. Biosimilars didn't exist until we launched our first biologic. There weren't regulatory pathways. There wasn't clarity. In a sense, we took a long-term bet. The markets evolved, and now it's becoming highly attractive. I guess it's now exactly the same again as we look at, you know, ADCs or other platform technologies. We need to choose and think about what that investment looks like, to continue to allow us to enter those markets and shape them.
I think we have the scale, the capability and the relationships with payers and the frameworks to do that. Yeah.
Yeah, if you look at the next 10 - 12 years, we see a lot of opportunity within the existing frameworks. You have approximately $500 billion of LOE, roughly split 55%-60% small molecule, 40%-45% biologic. We've got a runway of opportunity in front of us. Having said that, there is disruption. When we select a product to develop, particularly a complex product or a high-cost project, we look very carefully at disruption, whether it be gene therapy, whether it be life cycle management and formulation innovation or other. Having said that, our pipeline build has been very robust. We continue to see opportunity.
The trick will be post-2032, 2033, what are the technologies in that space, whether it be antibody or ADCs or other novel technologies like gene therapies, can we shift from a technology perspective into those sectors? I would say that's longer term. In the next 10-12 years, significant opportunity, both in our pipeline and beyond.
Thank you.
Seamus Fernandez from Guggenheim. You know, two questions. A little bit following up on that point. Given the IRA could actually put a lot of the potential products that you guys would be adding value on, and that value is just going to be extracted by the U.S. government, potentially over time, particularly as it relates to ADCs, how do you make the kind of investment that's necessary to actually plan for that potential eventuality? The second question is, you know, you guys are expert at producing product at scale to an extraordinary degree. There are other markets, you know, particularly auto-injectors, other companies that have developed very, very successfully large, you know, market caps associated with that through big partnerships. Why haven't you gone there?
Why not be a contract manufacturer at a level where you're producing auto-injectors to an extraordinary degree and participate in that opportunity? What prevents Sandoz from going into that kind of an opportunity?
Pierre, do you wanna go first?
Yeah. Well, look, if I think about the DNA of what has made Sandoz successful, it's building a business off patented medicines and that technology area. I think that that's our strength, that's where we can grow, and that's where we've been able to compete across geography. I personally, at a corporate strategy level, I think that won't change. Now, if we look at the second part of the question on the U.S. legislative changes, I'll make one comment, then I'll pass to my colleague, Karen, to speak specifically on it. We have to remember that when we build a biosimilar pipeline, we build it with global scale. The 15 or more assets that we have, your clinical trials study and your program design is built globally, both for Europe, Canada, Australia, Latin America, and the U.S.
Even if there is a risk in the U.S., most biologic assets have 45%-55% of their total global value in ex-U.S. That's a consideration as well, because we have scale. I'll pass to Karen to talk specifically about the legislation and some of the risks involved.
Yeah, thanks. I think that, as you said on the IRA, the negotiation piece and really reducing the price just before competition enters, that's one of the unintended consequences that we are concerned about. We are definitely having those discussions with policymakers to make sure that you do not end up, you know, not investing today on having this competition. I think we got a very good signal from them with the two-year waiver for biologics. If you have biosimilar program two years before the product needs to be negotiated, it would not be considered as a sole source. It shows you that they wanna have this as part of their kind of future. But definitely implementation, it's early days. We need to see how CMS will come out, and definitely as we learn more, we'll update.
Thank you.
Thank you. It's Mike Leuchten from Given the input and asset intensity of recombinant manufacturing, I would think that whoever makes adalimumab work best will possibly have a competitive advantage going forward. If that's true, how much of a loss leader can these massive biosimilar, early biosimilar opportunities be to build future success going forward? Is that something we need to take into consideration as we think about CapEx plans, as we think about launch plans, as we think of our pricing, as we think about margin?
Yeah, great question. Speaking specifically on adalimumab, certainly we're in a position of strength, and I'll answer the question from that optic. We are number one in Europe. We're in a leadership position in the Canadian, Australian and Brazilian markets. As a biosimilar leader in a highly competitive field, we've been able to build up global scale, which we benefit clearly on the manufacturing end as we enter the U.S., Our ability to have broad supply, competitive cost of goods, we believe is a strength heading into the U.S. Market. Moving forward on assets where the U.S. will be the first market to form, clearly if you have a large volume base in the U.S, you can scale your manufacturing accordingly, both in drug substance but also in drug product and fill finish operations. It's very important.
As we think about my prior answer about scaling our biosimilar operation globally and our pipeline, very critical. You can't ignore the U.S. market. It'll be 30%-40% of all global volume on biologics in the decade ahead.
Um.
Love your thoughts on the broader, your strategic interest in the diabetes space. You've kind of partnered with Gan & Lee kind of on the insulin side, but will you have in-house capabilities to do GLP-1s? If so, kind of how do you think about manufacturing complexity of that, devices, et cetera, or is that not an area of interest in the near term for you?
Yeah. Funny enough, we had this topic discussed yesterday, so maybe Claire, you wanna take this one.
Can you repeat the question? Sorry, it was difficult.
GLP-1s and whether we have the internal scientific capability and what it means for being able to deliver as well in manufacturing.
Okay. Yes. I mean, we definitely do have the internal capability to do the GLP-1s. Yeah. As Pierre said, quite rightly, we did have that conversation yesterday. I think when you look at the development of the GLP-1s, it covers several elements. There's API element, there's obviously the product development element, and there's the device. With respect to the device, as I said earlier, we've actually acquired a drug device combination organization based in the U.K., which gives us a platform not just for our respiratory products, but also for our injectable products. They do have experience in both technologies. In terms of our internal manufacturing capability, we do have a very extensive and well experienced sterile manufacturing platform that allows us to do not just manufacture the fill finish, but also the assembly of the devices.
With respect to API, we will partner on API because the API is actually really the key ingredient in the GLP-1 portfolio of products. Definitely it's a technology capability that we do have in-house. The other element is really having extensive regulatory understanding and the analytical capability. Those are areas as well that we have developed quite extensively, and we will continue to have dialogue with the regulatory agencies to ensure that we can succeed in getting these products to market.
Maybe zooming out of that specific example, we're the number three generic player in the global injectable space with more than $1 billion annual business, broadly geographically diversified.
Can I just follow up on the GLP-1? Will liraglutide be what we should be looking at, or would you skip that first generation and go straight to 2031 with semaglutide?
One of the things that we don't disclose because of the degree of competition we face in the generic industry, you know, we don't discuss the individual molecules. Suffice it to say that it is a portfolio space that we're very interested in. We will look at the right assets to bring to market.
Okay.
Okay.
Simon.
Thank you. Simon Baker from Redburn. Is a standalone Sandoz more or less committed to the U.S. generics business than Novartis historically has? Can you talk us through the various options for that business, your preference for carry on as before, bulk up or divest? Thank you.
Thank you. Karen?
Yeah. Yes, we are committed to the space of the business. Definitely we had challenges, given this attempt to divest. We had a lot of partner terminations that we disclosed, and we are past this period. We also had gap in our portfolio, and that's what you saw in the last kind of few years. We definitely committed to this space. We have more portfolio kicking in 2024 onwards. Definitely if you look at the kind of coming LOE, a lot of them are in the oral solid space.
Look, I see it as a platform. You know, we've done a lot of work. Karen and the team have done a phenomenal job simplifying, cleaning it up. Now it's stabilized as a business, and we'd be very selective in terms of the assets that we bring. But having that scale and intimacy in the market means that we have a relationship with payers, a relationship with, you know, with all the key opinion leaders. There's actually evidence to prove that. I mean, as Pierre said, you know, something like pegfilgrastim, we were fourth to market. We're number one in the market now. You know, that combination of scale.
The right portfolio and then commercial capability. When we do bring our assets in the future, we don't need to have a significantly larger commercial organization to bring those assets. The opportunity for that then to be accretive both on our top line, but even more importantly on the bottom line, is what makes the U.S. attractive for me.
Maybe I can add one point, Richard. From a development point of view, you know, lots of exclusivity opportunities in the solid orals tend to be U.S. First. What our current practice is to leverage that development from the U.S. into other markets. Again, it brings scale and optimum efficiency and utilization of our development resources to ensure that we can meet the requirement to build a solid oral pipeline in the U.S.
Thank you.
Could you speak to the ease or challenges of commercializing biosimilar Tysabri, and how that population might differ from other biosimilar launches that have preceded it?
Yeah. I mean, in many ways, it's almost like launching an innovative product in the generics industry. It's, I mean, a really exciting opportunity. I don't know, Pierre or Rebecca, do you wanna...
I think you can start.
Yeah. We've done a lot of preparation heading into what I think will be a very unique launch. First and foremost, it's very rare to enter as the sole and only potential entrant for the next several years. Second of all, it'll be the first biosimilar in MS, but one that enters in a realm where you have a REMS program, a JC virus assay, and a very careful management of the patient pathway and population. There's a lot of intimacy involved with healthcare practitioners and patients in this space. What I would say is that in all our regions, U.S. and Europe in particular, there's been very thorough preparation, understanding of the market mapping. We don't take for granted when we enter into a new therapy area.
A little bit taking the best practice of an innovator pharma company. You map the market, you map the insights, you map the patient journey and the healthcare practitioner journey, and then you scale accordingly, but in an efficient way. I won't say more than that simply because we'll be in a competitive space, but maybe I'll pass to my colleagues in this one.
Yeah, I mean, I look at it like in terms of 'cause like look at Omnitrope. Omnitrope was our first biosimilar 15- years ago, and it's still, you know, again, you know, we almost patient by patient, we've had to build that brand, and now we're the leader in human growth hormone globally, but particularly in Europe. I think you've got that dimension. It's also interesting, I won't disclose the markets, but, you know, we're talking to payers, and there's a lot of interest at country and regional level with drugs like this, because clearly there's an opportunity to expand the patient base of what is an excellent therapy to patients earlier in the treatment cycle at a significant saving to healthcare system. To me, this almost defines the purpose of Sandoz.
You know, we can treat more patients, we can save healthcare systems significant amounts of money, and at the same time create a very sustainable business for ourselves. It's a very nice sweet spot, you know, and that's why I'm super excited about it.
Just to add and round it up, we're gonna be one of the only ones. We're gonna also have a broader portfolio because we just launched DMF in Germany, for example, which is the first entry into MS. Once we go to natalizumab , we're not gonna be totally naive in this field, right? We have now already the time to create relationship and also understanding of the market insight. I think that's one thing we should not forget. I would say the other one, you asked me before on interchangeability. Of course, that's also gonna help us in this field because this is also preparing the ground for physicians that it brings clarity across the markets.
I've got time for one last question. Okay. Well, no last questions. Look, first of all, thank you all for your questions today. Some broad topics. Clearly, I'm super excited about the next year as we stand up Sandoz. Even more excited about what happens when we take this company to independence. I think, you know, clearly we're a global leader. We've got a lot of strength. A very, you know, a strong pipeline. As Colin says, you know, we have ability to invest and fund our growth going forward, in what is an incredibly exciting space with a lot of opportunities. Thank you to my colleagues, and thank you for your questions and time today.
Okay. Good afternoon for all of you joining us here in Basel. Good morning, good evening for those joining on the webcast. Thank you very much for joining this Innovative Medicines U.S. breakout session today. My name is Victor Bultó. I lead the newly created Innovative Medicines team in the U.S., Today, I have the pleasure to be here with some key members of the team that I wanted to briefly introduce you to give you a little bit more context and background. I'll get started with Reshema Kemps-Polanco. Reshema leads our oncology team in the U.S., She has experience across oncology, across cardiovascular, both at Novartis and also through a stint at J&J.
Very pleased to have her on board, and she's been leading with her team the launch of Pluvicto, the launch of Scemblix, and the current turnaround in performance with Kisqali. She'll be very pleased to take any questions in those areas. To my left, I have Eden Wells. Eden is our head of Patient Specialty Services team. It's a function that is not necessarily that well known, but that is absolutely critical in the U.S. market, where friction for patients to access to their medicines, for physicians to be able to onboard patients is quite substantial. Over the years, this function has become more and more relevant. Eden, just for reference, leads, for example, the field reimbursement team for LEQVIO.
She leads the teams that lead co-pay assistance for our patients, free drug programs, and so on. She'll be glad to take your questions on those areas. Also, here to my left, we have Mark Vinas. Mark leads our managed markets organization or market access organization. He's responsible for negotiations with payers, PBMs, channel strategy, and also within the context of LEQVIO, responsible for the systems of care team that is implementing our strategy with that key stakeholder and the alternative injection centers as well for LEQVIO. Mark has depth of experience coming from Cardinal Health, where he was the GM for specialty pharmacy. He was at Genentech as well, leading oncology and pharma access as well for a number of years. We're very pleased to have him on board on the team as well.
Last but not least, we have Mike Exton, who's technically not part of the U.S. team as of recently. He's now the global head of cardiovascular, but has been leading the cardiovascular team in the U.S. for the last years. I credit him for all the success we have been seeing in a sustained way with Entresto, and also for building up the commercial strategy for LEQVIO in the U.S. Very pleased to have Mike joining us as well. With that, happy to take your questions. Graham, please.
Thanks. It's Graham Parry from Bank of America. I've got three questions. One is on Pluvicto. The uptake seems to be faster than anticipated so far. Perhaps you can just compare and contrast the difference in experience there with Lutathera in your neuroendocrine tumor. What is it that's meaning that physicians are more excited about the uptake there? And when you get into the frontline setting, how broad opportunity is that by comparison? If you can just run us through that. Secondly, on Kisqali, are you seeing entire treatment centers now shift across to frontline Kisqali in metastatic breast cancer instead of Ibrance post the PALOMA-2 study? Then thirdly, on Iptacopan, what sort of label do you think you would be competing with versus C5?
Apellis obviously ran a similar trial program, got a C5 failure indication, but they haven't had a lot of frontline use. Do you think you're gonna have to run some commercial head-to-head studies further down the line, for example, to be able to commercialize that?
Excellent. Well, thank you, Graham. Reshema, going to come your way. On Pluvicto, current experience-.
Yes. Yes.
Pre-taxaine.
Yes. We're extremely pleased with the performance we're seeing on Pluvicto. Currently, you're right, it is exceeding our internal expectations. I have depth in prostate cancer. I actually worked on launches of Zytiga, Erleada, so worked in this space for a really long time. When we think about the pre-taxane setting, it is at least two to three times larger, depending on what line you're thinking about, first line or second line pre-taxane. We're very hopeful to see positive results by year-end and the potential to file next year. To your question on what's different when you think about Lutathera, first of all, NET tumors are quite rare. It's quite a tight group of treaters.
The other thing, the urgency to treat is not the same as what you see in prostate cancer, particularly metastatic prostate cancer, in the salvage therapy line, where patients really have exhausted most of the therapies. NET tumors tend to be slow-growing, and they cycle through a number of therapies there. Our focus as a growth driver is really on Pluvicto. If we're successful in that pre-taxane setting, I think we really are looking at a multi-billion-dollar opportunity. That's one. Kisqali, my other personal favorite where I spend most of my time, we're seeing, you know, an accelerated uptake, as I'm sure you're all seeing, in the NBRX share now approaching nearly 30%.
If you were to look at it before ASCO of last year, it was hovering around 10%-12%. Out of the last four quarters, we've seen a real acceleration in the last three quarters. Certainly one where we had saw definitive data on Ibrance, where for the third time, they were not able to demonstrate overall survival. Certainly, we've been able to do that with Kisqali, three for three times versus zero for three times. When we think about the size of the population, here's another one where we believe when we go into the adjuvant space, that is at least double the opportunity of addressable population. Similar to Pluvicto, we're looking to see those results in the next 12- months.
In terms of centers, I would love for my colleague, Mark, to talk a little bit about what we're seeing. There are a number of things that give us confidence that we'll be able to sustain this at scale. One is a change in pathways and protocols. Coming out of ASCO, there was a segment of physicians who were really waiting to see, almost hopeful to see, you know, if palbociclib would have posted overall survival. But once that didn't happen, for the third time, we started to see immediate shifts in calls out to our people to bring in the data package so that they could review it to establish pathways and protocols. That's one.
We've also seen where the NCCN has noted that in the first line metastatic setting, only Kisqali is the CDK4/6 that has demonstrated overall survival. I think the key message is we're pretty clear now that all CDK4/6s, they are not the same. At one time, physicians thought they were, and it's very clear that they're not, and we believe that Kisqali should be the CDK4/6 of choice in the metastatic setting. I would love for Mark to talk about what we're seeing on the payer front in terms of scale and ability to pull those prescriptions through.
Thanks, Reshema.
Since ASCO, there's been a real shift in tone and shift in sentiment in regards to Kisqali access. When we launched Kisqali, the main competitor in the class was able to put price concessions in and, in some cases, restrict patient access to Kisqali. What we're finding is that now that, as Reshema said, we've had three successful trials measuring overall survival, and Ibrance has failed three consecutive trials measuring OS. There's almost a sense of a moral hazard that it's no longer clinically appropriate to disadvantage Kisqali versus Ibrance. Since ASCO, three regional payers have improved Kisqali access without any restrictions relative to the class. That was, you know, that was a bit spontaneous. Those are downstream clients to Optum and ESI.
I think the nationals are getting pressure. The change in tone and sentiment is real and is consistent. I'm absolutely optimistic that our access situation is gonna be quite positive moving forward.
Yes. There was a follow-on question.
Tacopan.
Tacopan.
Yeah.
In PNH, we are certainly preparing for that launch. In terms of profile, I think you're probably aware that iptacopan is an oral, right? It will be the first oral and really focused on intravascular and extravascular hemolysis. Why do I say that? This is a much younger population. If you talk to a patient that has this, you know, rare disease, and it is ultra-rare, but it is quite debilitating. These are patients who say they literally cannot get out of bed. They're so fatigued. This is while they're on an anti-C5 therapy. We know that these patients are infusion and transfusion dependent, many of them despite the therapy.
From an unmet need standpoint, we believe that we'll have a very competitive profile. There's one last point, 'cause I know there's another question behind you. Our hematology sales force has great legacy in this space. In fact, we are not strangers to benign hematology. Right now, we have Promacta and ITP, where we are the market share leaders. This is the same team that is preparing for launch for PNH, and they've been quite successful in selling an oral therapy in the benign hematology space with these same customers despite an injectable or IV market.
Can I just get a follow-up on that first line perhaps of Plerixa? Excuse me. Sorry.
Yeah.
Just follow up on Pluvicto, going back to that first line, or pre-taxane setting.
Mm-hmm.
You said could be up to three times, depending on prior therapy. Presume there you're talking about where they've had androgen receptor therapy or not prior to, so that the clinical study requires them to have had that. Do you think you'll be able to get just true frontline patients, or do you think patients have just all had androgen receptor in the hormone sensitive setting, so you'll just be able to pick up the front line anyway?
Depends on what timing you're speaking of. When we have the readout of the PSMAfore, that I believe those patients will likely have had an anti-androgen before, right? Before, Pluvicto will come in and push back the taxane. However, the following year, 2024, we should have the readout and filing of PSMAddition, and that is looking at the metastatic hormone-sensitive patient. Now you can combine those two populations together. Yes. I think if they're hormone-sensitive or hormone-castrate resistant, you'll see that population likely move into Pluvicto, provided that there's a meaningful benefit which we are hopeful for.
Yeah. Yeah, there's a lot.
Thank you. It's Mike Leuchten from UBS. Two questions, please. One, just LEQVIO. Early in the year, you made it very clear this year would be first half slow, second half quicker, or different dynamics. Are you seeing that? Is that working out according to plan?
Mm-hmm.
Question on first-line CML with your new agent. In the past, obviously, you've tried that or the organization's tried it before with Tasigna, and it didn't quite work out. Just wondering what you've learned from that to make Scemblix work.
Excellent. Thank you very much. Mike, do you wanna start with LEQVIO on the commercial front? I'm sure, you know, Mark and Eden can provide color as well since their teams are actively engaged.
Yeah. Absolutely. Yes, that is the case. We're a couple of months post permanent J-code, and we're seeing steady growth in that time. I expect that will continue throughout the rest of this year and into next year. I think to give you some background as to what we expect of this growth over into 2023, you know, we set up this model as sort of specific U.S. strategy with LEQVIO to really address a lot of the non-clinical barriers that have limited the potential of the mAbs. So they were mentioned at the kickoff meeting, the launch meeting, which is access, affordability, and adherence. Clearly, the two injections a year inherently is addressing the adherence piece of that equation.
You know, what we're seeing, and I'll ask Mark in a little minute to talk about access and affordability, but we're seeing vindication of that strategy, which really puts us in a good position to pull it through without the.
The friction that we've seen with the mAbs. You know, we've taken an approach in the U.S. , which is a buy and bill approach, Medicare Part B, via a sort of dual mechanism, if you like. One, establishing this in the top 200 systems of care. Now, that really is working with big complex systems that takes time and bureaucracy, and they even can talk you through that. That will build over time as we go into next year. A lot of the use that we're seeing now, more than half of the use we're seeing, is through these alternative injection centers where it's already set up. They have the capabilities to do all of the PAs, the buying, the billing, et cetera.
That sort of ease of use is sort of getting the clinical experience and building into, as we bring these systems on board one by one, it's not going to be an all or nothing because they're all very different. We will see that sort of steady growth happen in the second half of 2022 and into 2023. Mark, maybe talk a little bit about the access and affordability piece right now.
Absolutely. Thanks, Mike. I'll talk about this from two ends. One is the overall access situation, then sort of some numbers on how we're doing within the target 200 systems. I'm really pleased with how our access situation is going. We look at it from two metrics. The one is coverage to label. As of Q1, coverage to label or near label will be at 73% on average across both Medicare and commercial, which is ahead of where we thought we would be and certainly ahead of our forecast. Really pleased there. The other metric we think about is patient out-of-pocket responsibility. Over 60% of LEQVIO patients will have no or low financial responsibility.
If you take very high access and significant portion of the population with no out-of-pocket responsibility, that overall experience contributes to the launch. The other piece I'll talk about a little bit is as we've told you, we targeted 200 systems. To date, 165 systems have used or are using LEQVIO. 140 of those systems are actually buying it and building the capability to conduct buy and bill. 25 of those systems are leveraging third-party injection companies, alternative injection sites, either because that's their choice or they're building the capability.
Of the 140 systems that have actually purchased from a distributor, 111 of them are repeating orders highly every week, every other week. We're seeing nice traction. We expect this, we expect to get most of these systems up and running before the end of the year. Every week, we have a few more systems come on and buy or use an AIC. Now, I do wanna put a level of humility in all of this and perspective.
Within each of these systems that are up and running and building the infrastructure that Eden will talk about in a moment, it's typically one, two, or three KOLs or early adopters that are passionate about the product and are leading and driving that capability building within the system or the large practice. Yes, we have good practice. It's a lot of work to work with these systems. We're making traction, and we have a beachhead, and now it's our job to pull this through more broadly within the system from those early adopters that we're working with today. This is where Eden's organization comes into play. Eden?
Yeah. I'll add a little bit of extra color to what I'm seeing as progress. For context, I've worked in buy-and-bill pretty extensively. I launched Ocrevus. I've got deep experience in the retinal market and the oncology and uvea space. What I see are a lot of analogs between what progression looks like in those markets and what we see here. With a caveat, every market has its nuances, and there's differences between these. Just to explain what I see in the work that we're doing. These 200 centers, there's gonna be a natural progression curve as the acumen improves, the experience improves, the confidence improves, and they've actually got the workings of the processes in place.
The centers that are gonna be on the far edge of that curve that are already adopting and trialing, these are likely gonna be centers that have already done buy and bill, potentially in a different disease area, and they have some type of centralized processes already in place. They have the sophistication and the people that can actually walk through the steps more quickly, P&T committees, loading LEQVIO into the EMR and billing systems, and most importantly, what Victor Bultó's called previously, rewiring the processes to do buy and bill. Let me describe an account that's probably more in the middle of the curve right now. This is a site that maybe has gone through P&T.
They maybe have started to load LEQVIO through their EMR system, started to pull it through to the rest of the billing systems, the downstream systems. This is where our field reimbursement team comes into play. We spend a lot of time. We've hired the largest field reimbursement team that we know of in the industry to teach and coach and help these practices learn the right processes, do it with confidence, so that they can submit clean claims with high confidence that they will actually get reimbursed. We help them think about and learn best practices for inventory management. That's where a practice in the middle of the road right now is gonna be in terms of progression.
What we find is once we have a couple of champions on board that can help push through the bureaucracy that's inevitable in every organization, it usually takes two to four sessions with our field reimbursement team, and then these practices will feel confident and will start to trial with patients. You know, the permanent J-code was approved in July, so we're about three months past that. ASP will be effective in October. What I see when I look at our trends is the more that we see claims coming through, and I think we're nearing up on 1,000 paid claims at this point, that builds confidence in these accounts. We're at a really nice place in our curve, and I expect the progression to continue until this time next year.
Excellent. Thank you. Reshema, there was a second part to the question on Scemblix's first-line. Can we address that, and then we'll move?
Yes, I'll try to do that quickly as I know we have other questions. The first thing to understand is Scemblix is a very different product than the ATP competitive TKIs, right? Where those TKIs, including Tasigna, are non-selective, this one is very specific, right. Very specific in terms of being a STAMP inhibitor. What that means ultimately for patients is that you have very minimal off-target effects. We know that with TKIs we've made great advances, and I just want to say that with Gleevec and then follow on with Tasigna and other TKIs, but we still see patients, particularly in the first line, 60%-70% of them are having adverse events or side effects. Forty percent of patients are still started on imatinib today.
Part of that is just due to payer management. In the front line, if we are successful in the trial, in showing that not only is this a very tolerable, has an outstanding tolerability profile, but that it is efficacious when compared to imatinib and also second-generation TKIs, because the way the trial is designed, it is physician's choice, I believe we will have a very successful product that will be beneficial for patients because it is differentiated, and that patients can start with and stay with. We know the typical duration of therapy in frontline CML is about two years, and that's pretty long in an oncology setting. We have that opportunity for growth there.
The last thing I will say is we are seeing accelerated enrollment of that trial. Where that gives me confidence is that physicians' zeal to put patients in the trial tells me there is still an unmet need, that is CML is not solved. Otherwise, we would struggle and see slow enrollment. This is not one of those trials. It is on its way. It's ahead of schedule. We're looking forward to seeing the readout of that and filing in the, I believe we said the 2025 timeframe.
Thank you.
Okay.
Thank you, Reshema. Yes.
Good afternoon. Florent Cespedes from Société Générale. Two quick questions. First, a big picture question. U.S. first. Again, could you give us some examples or what you're doing now that you were not doing in the past? Second question, it's maybe early days, but on the Lp(a), pelacarsen, given the experience you have with like Diovan and Crestor launch, what could be the opportunities and the risks for this product, even though it's still early days again, when it will be available on the market? Thank you.
Excellent. I'll take on the first question, and I'll let Mike answer the lip-.
Sure.
U.S. Lipoprotein(a). On this focus on the U.S. , Vas has clearly outlined in the plenary session the reason why this is important for us. The mechanisms are pretty straightforward. The first one is a clear mandate for the functions being development, being research, being international to prioritize, you know, and not make a compromise, you know, when it comes to decisions that come to the U.S., That is particularly noticeable when it comes to drug development. The underlying dynamics of the market, right, in Europe, for example, where we've traditionally always had a very strong position and in the U.S. may vary. Right? The profile, the delivery method that you use, the comparator that you may use may differ, if you develop specifically for the U.S. or for Europe.
For example, for cancer drugs, Europe much prefers an oral drug. It matches much better, you know, the dynamics of the market. While in the U.S. , you know, IV drugs are preferred for a number of reasons that are well known to all of us. What we do right now is we do the target product profiles based on the U.S. first. We design with research and development what is the profile that will be successful to mitigate as much as possible friction in the system, right? And bring the right level of evidence in the U.S., Then we sit down with our colleagues, with Marie-France and others to look, okay, what else needs to be done to complement that evidence for Germany, for example, for Japan, for China.
We used to have more of an approach of bringing something that would work for everyone else with a bias for ex- U.S. , and that's one of the tangible changes we're making. We take that with profound sense of accountability and responsibility in the U.S. because that means our input into that process needs to be exceptionally robust. That means we've also made great progress from a talent perspective, bringing solid talent. You have great examples here on the stage with my colleagues to really bring that depth of U.S. expertise, not only to commercialize our roadmap, but to provide input early on into the development programs. That also applies to IT systems. That applies to a number of processes, not only drug development.
We're very, very engaged with the process, as you can imagine. Mike, on
Yeah.
Lipoprotein(a) and pelacarsen.
Look, we're extremely excited on the HORIZON trial, as you know, fully enrolled, albeit with somewhat of a delay, although currently in our estimation, two years or so ahead of the Amgen asset. We believe that being first to market here is extremely important, because both because of the work that my team is doing, and I've had a team working on this in the U.S. for the last three years, to raise awareness of Lp(a) and the importance of that as a risk modifier in ASCVD. But perhaps more importantly, the rates of testing. As you know, testing is pretty low, or screening, we should say, because it's a one-off screen.
We're working to ensure that those levels increase, you know, between now and when HORIZON reads out and we eventually reach the market. I think it's quite noticeable over the last six to 12 months, the increase in both awareness and the number of people talking about Lp(a), you know. I was just at ESC. I'm sure some of you were as well, and I heard Lp(a) being spoken about in heart failure presentations. It's starting to pervade. We've seen this before with amyloidosis, where treatments for a condition where there were no previous treatments start to come to market, then the awareness and potential diagnosis increases significantly. We expect that will continue just by natural causes.
Clearly, my team in the U.S.. And internationally are really driving that awareness and need for screening across the board as well.
Thank you, Mike. Now Seamus.
Thanks. Seamus Fernandez at Guggenheim. So a couple of questions. On pelacarsen, where are screening rates at this point? What's sort of the testing rate, and what do you have to get to in order for that business to really start scaling relative to your promotional opportunity? And then, you know, I said I wasn't gonna ask a question on LEQVIO, but I lied. As we think about LEQVIO and the ability to scale what you're building in the organization from a buy-and-build perspective in cardiology, where else does that scale in the business? What learnings are you getting from LEQVIO-.
Mm-hmm
all of the expense and the work that you're really putting in now that can then scale into other products or other areas of the business?
Excellent. Well, thank you very much. I think, Mike, you can take both questions.
Yeah. Yeah. I'd love to. Look, it's very low. The screening rates at the moment is about 1% of potential patients. We're focused on getting it into double digits at the time of launch. It's going to take a lot of work from us and the medical community to get it there. But we've got analogs, like I said, with amyloidosis that have proven that is very achievable, albeit with a lot of work. It's not going to come without the effort. We expect that at the time of launch, that will continue to increase over time as people become familiar with the treatment and the greater recognition, and we have a strong evidence plan to ensure continued information around the product over time.
As it relates to LEQVIO, clearly, there's a lot of applicability within cardiovascular, within my therapeutic area. As you know, in this model now in my new role, as a global leader, I work very closely with development and NIBR. Vas mentioned this morning we are doubling down on the in-house siRNA capabilities. In fact, Sean Coughlin, my NIBR counterpart, is building a pretty strong portfolio within the cardiovascular space, and we will look to potentially bring that to other areas of the business. The initial sort of proof of concept is certainly going to be in cardiovascular, but not limited to that, as we've seen with other companies who have assets in development across other therapeutic areas.
I think it's important to really recognize that we're building a very unique capability for cardiovascular medicine in the industry, and we expect to take advantage of that over the coming decade.
Yeah. Thank you. Can we get a microphone here?
Thank you. Simon Baker from Redburn. Three quick questions. Just going back to LEQVIO. Understandably, we're all focused on how quickly you can administer that first dose. I was just wondering what systems you have in place to ensure capture for the second, the third.
Yeah.
fourth. Then moving on to Cosentyx. Historically, Novartis has always argued that one of the sort of cornerstones of Cosentyx is the breadth of indications, and that's certainly been vindicated because as new entrants have come in, you've continued to grow the product. Is that still the case given yet more new entrants in the space? Then finally, an opportunity for a bit of speculation. We're barely weeks after the signing into law of IRA, and already the Republicans are trying to add amendments to Cures 2.0 in order to neuter the negotiation part of the bill. When it comes to 2026, 2027, what probability would you put on the negotiation still being in law? Thank you.
Great. Let me ask Eden to address the question on LEQVIO adherence. Her team is responsible for optimizing adherence to treatment and helping patients with that across our portfolio, and she has a very particular program for LEQVIO.
Absolutely. It's actually a great follow-on to the previous question about scaled capabilities. Just for those of you in the room less familiar, what's very typical, unfortunately, in the U.S. is a doctor will write a prescription, 30% of those patients, 30%-40%, will never start the first dose. One year in, of those patients, 70% will fall off of therapy. To your question. We've actually been building capabilities targeted exactly at this, what I would call funnel leakage, exactly at this problem, and we've been applying it across the portfolio. We've applied it very successfully at Kesimpta to date, but and that's been a key part of the launch success to date.
Specific to LEQVIO, what we're pulling forward is similar capabilities, but tailoring them the right way for this particular community that might not be familiar with it. I'll give you a tangible example. Especially as coverage is being established for LEQVIO, what we make sure our teams are aware of as a patient comes into first dose, has the coverage been established? Has it changed? We do proactive communication with both the patient and the practice in time for their next treatment, such that the risk goes way down that they actually will miss that next treatment.
Maybe if you allow me to add on there, Eden.
Yeah.
Just one nuance about the U.S. system compared to Europe. Systems within a city compete for patients. Typical that you'll have two or more systems that were really, you know, in competition with each other, and they're very well-versed at retaining patients for the obvious reasons that means. They have fantastic systems beyond what we provide that really ensures patients come back for not just repeat injections, but their repeat follow-up visits, et cetera, whether it's by text message, email, et cetera. It's a really well-run system. We have to work on that in other places in the world, but in the U.S., there's a sort of natural way for that to happen.
Mike, you know, another point, these are patients with ASCVD, so they have vessel disease, many of them have already had an event. As part of the regular schedule of seeing their cardiologist, they typically go every six months, and that lines up perfectly with the injection cycle for LEQVIO. There is some consistency, and it's congruent with standard practice today.
Thank you very much. Addressing your question on Cosentyx, I think if we take a step back, there's one thing about the autoimmune market that is really interesting, which is that if you look back, you know, and take COVID years aside, we've seen consistent double-digit growth in this market since I launched Cosentyx a number of years ago, right? The reason being that even with the number of available options and all the efforts, we're only treating on average 20% of the eligible population with a biologic in the U.S., and that spans across PSO, PSA, AS. I would very highly likely see that growth continue to compound year after year in the coming years.
Right now with our position, we've clearly established Cosentyx with seven years of experience, very well-recognized safety profile. And a carve-out position where physicians, e.g., dermatologists, rheumatologists, recognize the value of Cosentyx addressing not only the skin disease, the manifestations, but also all the underlying other manifestations of the psoriatic disease, being nail psoriasis, scalp psoriasis, joints, spine, quite distinctly from the IL-4 and the 13s in that particular area. In these indications, we're seeing the ability to continue to grow with the market, despite these high levels of competition. To your question on lifecycle management and new indications, you know, we're planning to submit hidradenitis suppurativa later this year in the U.S. and an IV formulation for PsA.
The opportunity we see in hidradenitis suppurativa, the only approved therapy today for the 200,000 patients who suffer from it is Humira, and it's only a 5% penetration. We think that with our experience of Cosentyx, with the data that actually shows sustainability of response up to 52 weeks, that we can really bring a great alternative for these patients and for the providers. From an IV perspective, you know, we know 20% of the patients in rheumatology offices, for PsA and AS actually are treated with an IV. That allows a mg per kg adjustment of those, most importantly as well, allows for Medicare patients to get a much more beneficial reimbursement profile. We're really excited about bringing potentially these two additional indications.
On your question on IRA, I would take a step back and say we're pretty clear about what are the short-term implications, right? We share them in terms of inflation penalties, in terms of the benefit and the tailwinds of the $2,000 cap in out-of-pocket. What is less clear to all of us, right, and even I think to legislators, is exactly how the mechanisms, particularly around price negotiation or price setting, depending on how you want to see it, will actually evolve. There'll be lots of work on the regulations, right?
Of course, there'll be lots of work from the industry as well, to eliminate that difference between the nine years and the 13- years between small molecule and large molecule, which we believe doesn't have too much ground. You'll see lots of efforts to shape all of that, and we will learn as we go. As you can imagine, we have a number of teams working in the organization like Mark, working on all the first, second, and third order implications of these legislations, to make sure we anticipate all these moves. Also working with our research and development organization to optimize all that decision-making I was referring to when we said, you know, building specific drugs for the U.S., baking in potential scenarios for the IRA negotiations.
On that negotiation anyway, our exposure could be potentially towards the end of the decade on Entresto, dependent on LOE. On Cosentyx, but there we have less than 20% exposure to Medicare. Potentially on Kisqali, if we read out positively on the metastatic. Lots of work ongoing across the industry within Novartis to really understand the legislation and understand the threat to innovation down the road and be able to mitigate it. Yes, please.
I think she had.
Oh, sorry. I'm really sorry.
No, it's okay. Hi, Sarita from Morgan Stanley. Just a quick follow-up on Cosentyx. How should we think about the pricing dynamics in 2023 and 2024, given the launch of biosimilar Humira? I think you previously mentioned it was more of a 2024 impact, so wondered if you could elaborate on why. Then secondly, around tislelizumab. Following the FDA feedback and the decision not to file in non-small cell lung cancer, will that impact any of the other tislelizumab filings? And the route to market for the TIGIT, where I believe there's phase III combination trials ongoing in non-small cell lung cancer. Thank you.
Excellent. Well, thank you, Sarita, and sorry about that again. Mark, you're the resident expert on negotiation. Can you tell us your perspectives on 2023, but also 2024?
I'll start with our thoughts on a biosimilar version of adalimumab. I think it's gonna be a little bit quiet for biosimilar volume of adalimumab in 2023. The first interchangeable agent comes out from BI midyear, and from, you know, everything I can see, most likely PBMs will accept deeper rebates on existing stable patients on Humira, and look for conversions and more assertive tactics later on in the medium term, 2024 or 2025. I think, you know, we'll see most patients on branded Humira probably persist into at least midyear and probably for most of the year. With that said, new patients will be up for grabs, so there might be some opportunity lurking in this event.
From a Cosentyx perspective, I'll start with, in the near term, for 2023, expect stability and continuity. No real changes in our access for 2023. As we look in the medium term, we have, you know, a few reasons to be confident. I have a few reasons to be confident. One, Cosentyx is in a really strong net price position versus, you know, within the immunology class overall and particularly versus IL-23s. Second, as biosimilars take root in the medium term, 2023, 2024, 2025, AbbVie's ability to contractually restrict the number of preferred agents is gonna come under pressure. Their ability to keep doing that will be challenged, and again, there could be opportunity, as the market evolves in that manner.
Third, something we've already discussed, as we launch our indications in HS and in IV formulation, it's gonna bring added volume, and that is only gonna strengthen our value proposition. Cosentyx is in a strong place today. We're in a continuously strong position for 2023, and we have reason to believe for the outer years as well.
Thank you, Mark. We have a couple of minutes to address the tislelizumab question. Reshema, would you like to take that one on?
Yes. As you say, we're, you know, well aware of the feedback from the FDA. Having said that, we do know that this is a very active PD-1, and really looking across, you know, four to five studies where we see significant activity. One of the first areas we're focused on is esophageal second line and first line where that data has reported out, and we're in discussion with the healthcare authorities about that. I think to put it into context, what really matters with tislelizumab is combinations, and that's where we see the benefit of having our own in-house PD-1.
Combinations that we're looking forward to, JDQ443, our KRAS inhibitor, if we're able to combine those two together in non-small cell lung cancer, and then also even with RLT, the potential for combination. That's where we're really thinking the value creation could be, provided the science pans out. It's still very early. On the option with the TIGIT, you know, we do have optionality there. I think we have to wait and see, as we're all waiting to see really the meaningfulness of this, of this, the TIGIT, knowing that what we know about PFS, but it doesn't always correlate to OS, right, in this space, in immuno-oncology. I think we have to wait and see.
Having said all of that's more of, I would say, midterm. Those are more midterm opportunities. Right now, what we're really focused on are the three growth drivers I talked about, which are Entresto, Kisqali, and Cosentyx, which are fairly, because of the indications that we have today and the growth that we're seeing, de-risked assets, right? Looking at those near-term data readouts for those larger addressable populations, we believe that that is more than enough to get us up that growth curve, and we'll wait and see. Our hope is to have a very meaningful asset in the lung cancer space, but really we're looking at combinations as the way, as the path there.
Excellent. Thank you, Sarita. Thank you very much, everyone, for joining the session, for your questions. We hope to see you very soon. Thank you very much, and thanks everyone on the webcast as well.
All right. Welcome to our final session of the day. This is the group session. With me today, we have Ronny Gal, our Chief Strategy and Growth Officer, Harry Kirsch, our Chief Financial Officer, Karen Hale, our Chief Legal Officer, and Steffen Lang, our President of Novartis Operations. We look forward to taking your questions both here in the room and also on the webcast. We'll start here in the room. Who wants to start? Graham Parry?
Thanks. It's Graham Parry from Bank of America. You've laid out a strategy post-Sandoz spin effectively today, bumped out the guidance an extra year. I think what most people are looking at for Novartis at the moment is what are you actually doing with the cash that's being generated and the capital allocation? I can see we've got Ronny here as well, a few weeks into the job, but maybe some insights on that as well. In particular, what sort of size scale of M&A opportunity do you think is right? I think a lot of investors would look at a buyback as maybe showing a lack of imagination or lack of pipeline.
How much do you think they have a place in the future capital allocation? That's the first question. The second question is on the changes in R&D leadership. You've had new or you have an incoming new head of NIBR and also you now have a new head of development as well. Again, that's perhaps an area where things have been maybe, to be fair, a little inefficient going in the past. What changes do you think those changes in leadership will bring to Novartis?
Yeah. Thanks, Graham. First on capital allocation, as we outlined this morning, we're fully confident we can achieve the growth aspirations we've set out with our eight multi-billion dollar potential multi-billion dollar peak sales blockbusters, as well as the readouts we have both in the next two years and then an increasing number of readouts in 2024, 2025, 2026. We're willing to be patient on our own pipeline as well as on the potential we have on our main assets. I think that's our focus right now, delivering on the main business. With respect to M&A, we of course evaluate the full range of potential opportunities, primarily looking at TA fit and can it actually help those five core TAs or could they help bolster one of our key technology areas.
It's not a top priority. Our priority now is to drive the core business. When we do look at M&A, I think right now we've focused our energy more in the sub-$4 billion space, of course, also while evaluating the ongoing opportunities in larger deals. And so what we plan on doing is completing the current share buyback, which completes in the middle of next year. And continue to evaluate M&A, and if at that point in time we have excess capital, continue to return it to shareholders, in an appropriate way. Harry, anything else you want to add on that one? Okay. That's very good. On R&D, I'll hand it to Ronny to talk a little bit about some of the architecture we're putting in place on TA strategy.
As we outlined today, we think we have an outstanding development engine, but we have to get better at identifying early the in-house assets that we think are most valuable, that we need to accelerate, even in research, and then accelerate through translational medicine and into late-stage development. We're gonna do that both from a governance standpoint. We're gonna do that by obviously pruning down the portfolio and focusing in the vast number of opportunities we have within NIBR to a more limited set of assets, more limited set of technologies. Also to manage the TA strategy and the decision-making throughout. Maybe Ronny, you wanna say a few words about that?
We've got 87 molecules in the clinic pre-launched. Those have to be looked at to identify the ones with the highest probability of success, with significant revenue potential. Those will get disproportionate share of the resources to advance those programs forward. In terms of how this will be done, the logic is that there will be a core team within strategy and growth that will look at each one of those TAs. We are looking for candidates for those positions. If any of you or people you know might be interested, please, make sure they come our way. Those strategy team's job will be to pull together the talent in NIBR, GDD, and commercial to a single unit process.
This group of people will evaluate and make decisions around those assets. The idea is to push a target profile and understanding of what this particular molecule will do earlier in development. Once we've selected those molecules, to continuously evaluate the external markets in terms of competitive situation, in terms of ongoing opportunities and update at least on an ongoing basis and disseminate that information about what's happening externally into the organization so a broader group of stakeholders can actually understand where each market stands and continue to update their thinking about where we should go with our molecules. That's roughly the broad strokes around this.
Thanks, Ronny. Florent, and then I'll go to Michael.
Good afternoon. Good afternoon, Florent Cespedes, Société Générale again. One quick question, after this long day of very interesting meetings. What is your view on what investors are missing, where you see maybe more opportunities? We understand that, let's say Pluvicto seems to be well on track and ahead of your expectations, maybe LEQVIO as well in the U.S., looks that you have there is nice opportunities. Apart from these two examples, do you have other element that you have to share with us where we should see maybe more potential that we currently see on the market? Thank you.
Yeah. When you look at our expectations from an in-line brand standpoint, there are a few places where we have larger aspiration naturally than I think what the markets currently view. Clearly, with Kisqali, we have the opportunity to currently drive a global multiple sclerosis launch. On Kisqali, the opportunity in metastatic breast cancer is already present with our strong NBRx share gains, which you probably heard from our U.S. organization, but also globally, where we continue to perform well, and then an opportunity to extend that lead with that opportunity with the adjuvant indication, where we see a significant market opportunity if we're successful. With LEQVIO, early days, a lot of work to do, but we continue to see this as an opportunity to drive a very large medicine for the company over time.
We'll have to deliver proof points, obviously, over the next year, but we see positive trends in the U.S. that give us confidence that over the next year, you know, we can clearly see an uplift. Now on Pluvicto and Scemblix, which are both molecules that have new indications that have potential to read out in the coming few years, we don't include that in our 4%. We probabilize that down in the same way many of you would. But there's a significant opportunity that if Pluvicto can move from the third, fourth line into across the metastatic patient population that's PET positive for metastases, a big opportunity, and then later into the hormone-sensitive population or perhaps even earlier.
Similarly with Scemblix, in head-to-head studies versus Gleevec, the opportunity to move into frontline CML, which would offer further upside on the overall story. The last thing I would say is, in general, our pipeline is underappreciated. We need to do our work to prove it. I think with a couple of positive readouts, hopefully there's more conviction that those readouts that are coming in 2024, 2025 and 2026 can drive the longer term growth of the company. Michael?
Thank you. Thank you to Mike Leuchten from UBS. You've been very clear on what you mean by focus, but does focus mean boldness as well? Because looking at your decisions in the past, I think only canakinumab is an example where you really have gone all in without having all the information. In other scenarios, you've sort of taken a softly approach, really starting trying to understand the molecules and go slowly to really make sure the decision you take are done on the best information that you possibly could get. How do you get to that balance where maybe you make bigger decisions earlier and are willing to take more risks?
I think there's a few examples already where we show that we go broad early now on our key molecules. If you look at iptacopan already you'll see studies reading out in the next 18 months in PNH, C3G and IgAN. We did all of them at the same time, rather than waiting for a de-risking event before we go broad. Subsequent to that, we would expect to have readouts in IMN, in atypical hemolytic uremic syndrome, and then other indications. That's one example where, as our strategy now is just to find a molecule we think has significant potential and go broad early with the risk that, of course, the molecule may not work. Similarly, if you look at ianalumab BAFF, we've already advanced it in SLE, in lupus, in lupus nephritis.
Alongside that, we're also advancing it in two separate phase III hematological studies. We haven't disclosed those indications, but we have the go-ahead to go forward in those studies. That would be five indications with ianalumab, our anti-BAFF receptor, with significant sales potential. Third example I would give is remibrutinib, where we think we have one of the best profiles for a BTK inhibitor with limited side effect profile. We've gone simultaneously into CSU. We're going into MS. We're going into Sjögren's. Again, showing that we're willing to go broad early. That's a shift in our mindset. In every one of those cases, we're doing it within our core therapeutic areas and say, "Look, let's go broad early in the core." Keyur? I'll come back to you.
Thank you. I'm Keyur Parekh from Goldman Sachs. Vas, two for you, and Ronny, one for you. Vas, as we think about Novartis without Sandoz, what are some of the key benefits that a slimmer version of Novartis will bring to the company from a decision-making perspective and agility perspective, and how should we kind of measure that externally over the course of the next kind of 2, 3 years? That's first. The second one is the last time we were all here, we heard a lot about kind of digitalization and big data and AI, and we haven't heard any of that today. Just kind of if you can bring us up to speed on how much progress you made on that and what your ambitions there are.
Lastly, Ronny, presumably when you went through this process of being hired, you identified some things where you thought Novartis may be able to do things better. What were the top three on your list, and what were your suggestions to solve that?
Thanks, Keyur. Harry's been leading a lot of the work on the Sandoz separation, so I'll hand that first question to Harry.
Thank you, Keyur. We've seen really big opportunities for both the new Novartis as well as Sandoz. I think, you know, as you know, as we discussed over the years, I'm a big believer in focused business models. While there were some synergies, you know, bit of manufacturing, for example, or shared services, I believe that being standalone and focused will allow both businesses to optimize for their business models. All right? That's why we also actually opted for upgrading our mid- to long-term margin guidance, where we say 40% plus, including the corporate or group cost, if you will, for the new Novartis, which is a little over a point. All right? That sounds maybe small, but it's real money.
We believe simply that out of the streamlining of the processes, we will get there. We become overall more agile, more nimble and faster. Because you can imagine at the moment, you know, for example, our shared services units and manufacturing have to deal with a huge complexity, right? As you know, the generic business number of SKUs, you know, over 20,000 and completely different. Right? The same will be for Sandoz, where they will be on their own and owned by our investors or the future investors. I think that will be super beneficial as both companies will be able to optimize for their respective business model.
I think, Harry, to build on Harry's comments, you should see it in the financial results. We think we can deliver higher profitability, more consistent growth because you don't have the ups and downs of the generic business, more return, higher return on invested capital. Also you can be sure then that the capital allocation that we make to external opportunities is 100% focused on innovative medicines. Whereas in the past, we would have to allocate capital to lower returns to support businesses in the past like Alcon and currently like Sandoz. On data and digital, I'll say a few words and hand it to Steffen on our approach, you know, today. Over the last years, there have been a few areas where I think we've emerged as a potential leader.
I think within R&D, we have a lot of work ongoing within NIBR to really, what we think of as close the loop in terms of once we have a target to optimize, the candidate molecule using AI. We do this now at scale. That I think really is hopefully enabling us to identify drug candidates much quicker, with optimal profiles that hopefully will be able to advance through preclinical tox and into the clinic. Similarly, in clinical, we have a large scale platform called data42. It's, I think, viewed by many of our peers who also have requested access to it or requested the opportunity to work with us on it. It's viewed as one of the industry-leading platforms. It was built over many years but with one of the leading AI companies in the world.
Took four or five years to build, and it houses all of our clinical data, all of our research data and allows clinicians, data scientists in the company, but also any scientist in the company to mine data sets at scale. It's all there, along with real-world evidence, built on the Foundry platform that's used by many large institutions. I think that's a pretty unique capability. We'll have to see how that ultimately allows us to win in terms of finding new drugs. Of course, in all of the other areas, we continue our work, manufacturing, commercial, et cetera. Steffen, you wanna make any other comments?
Yeah. I think we spent the last few years to really get the right skills, the right capacities, but also the right tool landscape in place. What we're doing now is we're basically scaling out and operationalizing this across the entire enterprise. Most of the applications are in the discovery NIBR as well as in GDD. I think we want to set also for clinical trial site selection and performance. Also a lot of applications in the area of commercial. We are building typically now use cases. We have the agile methodology, and then we deploy those use cases against the case and the expectations we have. It's really part of the way of working now and we see a lot of value coming through that.
I think Steffen points out an important one. We've now really moved from a place where data science digital was housed in a separate unit, it's now embedded in every one of our operating organizations, and they need to own it, so research, development, manufacturing and commercial. Simon? Oh, the Ronny. Sorry, I forgot the Ronny question. Your top items, Ronny.
I don't think I could come to a new corporation like this and come up with new ideas that they haven't thought about for that before. Novartis is very self-critical internally in terms of the people's view of what needs to get done, what could be better. I think everything was kinda known. The two problems I would probably focus on early that we could potentially help, one of them is the ability to look externally and integrate external information internally very, very quickly.
The solution that we're gonna try is a little bit of the pod structure that we see around Wall Street, with a team of people who would look at every TA, cradle to grave and be able to look across the commercial development and the research area and come up with insights for the company about where to focus. A second one is this issue of kinda like broad decision-making that involves a lot of stakeholders. The solution we're suggesting essentially is co-location of folks that manage the portfolio, manage the strategy, and manage the BD M&A in the same place so they can make a decision very quickly by walking across the floor and making decisions together. Hopefully this will serve to make things a little bit faster and more effective.
Thanks, Ronny. Simon?
Thank you. Simon Baker from Redburn. Three quick ones, if I may. You've outlined in considerable detail the new strategy, and clearly in three to five years' time, we'll know how well it's worked. How can we measure success before then? What things should we be looking for to show that actually there's some tangible benefits sooner than that? That would be very helpful. Really continuing on Kev's question, I'm not looking for a precise number here 'cause I doubt one exists, but where do you see the ideal balance between internally and externally sourced R&D? It clearly shouldn't be all of one or all of the other. You need a mix. What's a reasonable figure and where is Novartis currently against that ideal?
A question probably for Karen. Typically these days we see the disclosure of generic settlement dates in patent litigation. You haven't done that with Gilenya. I just wonder if you could give us the reason why that hasn't been disclosed. Thank you.
I'm sorry. Could you repeat?
The reason why it wasn't disclosed, the Gilenya patent settlements.
Settlement dates. Yes. Yeah.
First on, you know, measuring the change. I mean, when you look at each of the parameters, I mean, obviously there's gonna be a lot of input measures that you can look at how are we in the U.S. focusing our clinical trials and our target product profiles? How are we allocating our resources towards the key TAs and really shutting down programs which we've already done and already disclosed in Q2, in our individual therapeutic areas. How are we making pipeline decisions? I mean, I think all of those are input measures, but in the end, in the near term, it's gonna be a combination of can we drive faster sales growth on some of our key brands, which we've already baked in.
If you look at it, I would say the changes we've recently done have helped Kisqali grow faster and probably have helped the Pluvicto launch execute better. I would hope that that would be shown with the next set of launches and ongoing commercial execution the structural changes we've made, focusing our resources on top 8 brands rather than 20 brands, these changes should lead to faster sales growth. They should lead over time to better profitability, which we always sign up for as well with the 40% margin target. We should see a more streamlined pipeline. I mean, we're no longer putting on our slides we have the most NMEs or the most clinical trials. Ideally, we want to have the most valuable NMEs and the most valuable clinical trials.
Hopefully you'll see that start to flow through as well. In the long run, I hope our replacement power and our pipeline improves because in the end, our ability to generate high levels of replacement power is the ultimate long-term measure of is our pipeline actually executing. I think anyone add anything like that? Otherwise on internal, external, Ronny?
I think the industry in general are on a range of 40%-60% innovation coming from internal and external. I think currently we are skewing a little bit low in this. I suspect that if we got a lot of success out of a pipeline, we would like to continue to skew low on this, but I suspect we'll be in that range somewhere.
Lastly, Karen.
Yes. With respect to disclosing settlement dates, historically you were used to seeing litigation with maybe one or two ANDA filers. It's much easier then to get everyone under the tent and to have one disclosure. When you're dealing with 10-15, sometimes as many as 20 companies, it really goes to strategy. Do you disclose the first one or two settlements, which then gives ammunition to the other filers as far as continually pushing on what is the entry date. From our perspective, it's really about preserving the strategy and also protecting our innovation and the exclusivity of the patents for as long as we can.
Thanks, Karen. Seamus?
Vas, you're talking about going to therapeutic categories that are, you know, presumably gonna scale bigger. You guys are already in oncology, you're already in immunology, you're already in cardiometabolic. The question is, what do you feel that you've missed if you're not already in that? Or is it all you're already within those categories and can easily pursue outside of that. Again, we just had Pfizer predict yesterday that, you know, just to one up the analysts even further, that obesity is gonna be a $90 billion market. As we just kinda think about the new opportunities and additional market opportunities, what are the areas that you're uniquely interested in and focused on, you know, as kind of new opportunities?
The second question is just again, Harry, you know, as you look at the opportunity to continue to improve margins, can you just help us understand as we sort of work our way towards 2027, that sort of what are the key assets post 2027 that you see, you know, driving margins, you know, either higher or keeping them sustained?
Yeah. Thanks, Seamus. First on, I think by new opportunities you mean adjacent TAs or what are we looking at beyond the those five, you know, I've outlined. I think one thing is we wanna create a really high bar. I mean, I think historically we've had far too low a bar to get into areas like in one case study in my mind is NASH, where of course we spend a lot of energy. Do we really have the understanding and know-how to do it, and do we have the assets to be able to do it? We wanna keep the bar high. I think a few areas come to mind. I mean, one, clearly in renal diseases with iptacopan, and then subsequently a few pipeline assets that we have.
We see in general renal is we have a lot of nephrologists within our cardiovascular. Actually, Shreeram is also a nephrologist. You know, we have a lot of nephrologists. We have expertise in this over the years, also because of transplant, where we were the largest transplant company in the world. We have transplant nephrologists all over Novartis. That gives us an ability, we think, to look at assets that could address kidney diseases rare and common, which is an area that's, you know, largely underserved. I mean, a lot of unmet need, a lot of patient morbidity in renal disease. That's probably an opportunity we'll continue to look at and focus on. The other one I'd, you know, I would point out is within the space of rare diseases.
You know, we've built up know-how through the combination of AveXis and Zolgensma on how to treat ultra-rare diseases. We have teams, very lean teams, that are able to mobilize on ultra-rare diseases. We wanna again have a high bar because we cannot chase all, you know, small assets. You know, I think some, like we're very proud of the patient benefit Luxturna delivers, but it's a very subscale asset for us to be bringing to market. If you look at the recent acquisition of the Gyroscope CFI gene therapy, if we do work as a single-dose therapy for geographic atrophy, that would be a massive opportunity. Not $90 billion, I don't know, but it certainly will help a lot of patients who are losing their vision with a single dose.
That would be something, again, we could commercialize. Hopefully, we would then relook at our ophthalmology footprint and certainly ask ourselves the question, you know, could we do something more? Or market it through our gene therapy footprint if it ended up only working in certain genetically, you know, predisposed predefined populations. Any others that come to your mind now, Ronny Gal?
In terms of what?
Adjacent TAs.
No, obesity and cardiovascular is an obvious-
Yes. Yeah, go ahead. Yeah.
Yeah, obesity is, you know, begin to talk to our cardiovascular guys about obesity, and they go, "Well, it's a cardiovascular disease," and we look at it. That's an obvious extension, and we have the capability to run those trials quite well. That you could think about those if we can get a differentiated asset to be an area we would like to participate in. As you mentioned, some people have very high numbers for this. I think that's probably the better example here.
Margins, right?
Yeah. Seamus, beyond 2027, right? Beyond 2027, I think first let's ground ourselves into reality, right? Over the last years, we have driven the innovative medicines margin from the low 30%- 36%, right, last year. That was good progress. Now we have announced our transformation for growth program, where the key is really to make us slimmer, faster, more agile, but by taking out basically unnecessary or, you know, the two complicated middle and upper management structures from pharma and onco, consolidating that. That will give us CHF 1.5 billion structurally by 2024. A nice contribution to the getting to the 40%+ of the new Novartis.
The other contribution of that, I expect, again, in the mainly SG&A area, by driving the expected sales growth, basically with existing resources that are better allocated, more productive, the launches are within existing therapeutic areas, so the incremental launch costs are quite marginal, if you will. Then beyond 27 and beyond 40%, right? That for me comes really down to a bit product mix, a little bit of also geographic mix, right? Certainly having large products in the U.S. is helpful, right? By then, we should have that. But I think the plus of the 40% + we would discuss when we get closer to that. Let's get first to the 40%, right?
Beyond that, also, I think first of all, we will not suboptimize assets or investment opportunities just to hit a 40% or beyond that, right? But we clearly see the path by optimally investing into growth opportunities in R&D and marketing and sales to the 40%. Beyond that, I do really believe it depends on the product mix and a bit of geographic mix.
I think Richard was next.
Yeah. Richard Parkes from BNP Paribas Exane. So a couple of questions. Firstly, one for Harry. A little bit nearer term on margin progression. Just wondered, I don't want you to give guidance for 2023, but if you could just talk about the pushes and pulls next year on margin. Obviously, you could be losing some Gilenya revenues, which is a bit of pressure. But if half of that $1.5 billion in SG&A cost savings is embedded, could we see SG&A costs actually decline on an absolute basis next year? How do you see that trajectory to the 40%? That's the first question. Second question is on Inflation Reduction Act impact and what you've factored into the targets longer term.
Because obviously one of the consequences is of Medicare Part D restructuring is payers are gonna be on the hook for more of those costs, particularly in high-priced oral drugs through Medicare Part D. Just wondering behaviorally, what's their response to that? Do they look to squeeze pricing in those high-priced oral drugs which maybe impacts you less? Or do they just look to make even more savings in competitive categories that might be impacting Cosentyx? Just wondering how you think that will play out and what's factored into your targets.
All right.
Go ahead, Harry. Yeah.
Of course, as always, standard answer, right? Guidance for 2023 will be given with the full-year results end of January. I think in terms of pushes and pulls, yes, Gilenya, assuming now generics launching next week, right? Let's see. Assuming that as a planning assumption, and of course, you know, roughly $1 billion of sales will be missed next year, and of course, at a quite high gross margin. On the other hand, you know, you can imagine we have done our scenario planning before that because this event was not an unlikely event, given the decisions that these courts made in June. We are bullet-proofing our 2023 plans, our 2024 plans, certainly.
Of course, the restructuring element of transforming for growth comes in handy, right, to offset this effect, for example, and to continue to drive margin in constant currencies. I just mentioned the constant currencies because, of course, at the moment, the currency is not very helpful, right, with a strengthening U.S. dollar and a strengthening Swiss franc. But we are working through that. The other thing we have to work through is, besides the sales growth dynamics, which we believe will be solid, of course, also, what is the inflation doing and how are the salaries developing. So we work through all of that. We are confident in our midterm and long-term margin improvement and see how the short-term dynamics help next year.
The details we will then again give you end of January, early February.
In terms of the Inflation Reduction Act, in terms of our, the guidance we gave today, the 4% and the 40% margin, that is including the assumed effects of IRA. We would expect those numbers, assuming that IRA gets implemented in the timelines that have been outlined with the inflation adjustments happening in the fourth quarter this year, then following to that, the co-pay caps, and subsequent to that, the negotiation starting in 2026, where we wouldn't expect to be on the list. We think depending on where Entresto lands with an LOE, that could be a swing factor. Other than that, we would expect only to be on list, as I mentioned earlier today, at the end of the decade.
That too, with the medicine Cosentyx, it's relatively low exposed to the Medicare population. In terms of recouping costs, I mean, I think first the spirit of the bill was that each of the players in the system should contribute to improving patient affordability at the pharmacy counter. I don't think the spirit of the bill was for, as we already have to contribute as an industry, for the portion that we need to pay to ensure that there is that benefit at the pharmacy counter. Now, if payers decide, which already make a lot of money from rebates, that they need to increase rebates further from us in order to pay for that their portion, I would expect there to be stiff resistance from the industry. Of course, we'll have to see how that plays out.
I think, you know, we're gonna have to see in 2024 how things go. I certainly think we would want to hold the line, and say that this is not the spirit of the bill, and also look for other ways to make sure that we're not asking for mitigation actions. Ronny, do you see any other aspects?
I think you basically said the point. Okay, it's not like the big three buyers within Medicare Part D have been cuddly and warm so far. Sure, I mean, there are incentives to continue to push, and we'll see how much impact they're able to have.
Yes, from the web.
Thank you, Vas. So, a question from Steve Scala, from Cowen, following up on the margins. Steve is asking, versus current expectations, what cost lines leave the most new opportunity relative to achieving the 40% margin target?
Yeah, thank you, Steve. Thank you for reading it. On the cost lines, I would expect mainly SG&A to contribute from here, right? The restructuring element of transformation for growth is mainly in G&A as well as in marketing and sales above customer facing. In local, regional, global headquarters, that's there. In terms of the R&D line, again, you know, we will not follow a formula like we also don't do on B, D, and L or M&A. The investments are according to the opportunities to maximize the opportunities. I would expect roughly from a planning standpoint, R&D keeps growing in line with sales. On the COGS line, similarly, where Steffen and team do wonderful work on the productivity. The production COGS continue to come a bit down, right?
Always with fantastic customer service levels, quality, but of course, a strong productivity focus. At the same time, we have a bit higher royalty, given that several of our growth products are externally sourced. Mainly from SG&A.
Thanks, Harry. Go back to Graham.
Thanks. I was just gonna follow partially on the Gilenya timing and impact, I guess. First question on timing, if you were to petition this or as you're petitioning the Supreme Court, if they were to take that up, do you have any sense of, you know, what the right timing to think about for a Supreme Court decision would be? And would you have any expectation that generics would stay off the market while that was happening? And then secondly, in terms of the margin impact, you have had a fairly hefty but declining royalty payaway to, I think it's Mitsubishi, on Gilenya.
You said before, it was a fairly high margin, but actually is because of the royalty, is this actually a large gross margin positive event, or is this still gross margin dilutive of Gilenya going away? Thanks.
On the first one, Karen.
Yes. With respect to Gilenya, by the end of this week, we will file not only to seek certiorari from the Supreme Court, but we're also filing a stay, a motion for a stay of the mandate that actually closes out the appellate litigation. We should have a decision on the motion to stay sometime next week. If that motion is denied, then we would expect for any FDA-approved ANDA filer of Gilenya to enter the market at that time. With respect to timing for a decision for the Supreme Court, full briefing would take place between now and the end of the year, and then we probably would expect a decision sometime within first quarter into first quarter next year as to whether cert would be granted.
Harry on the gross margins.
Expect it to be still slightly dilutive because the production COGS or the small molecule is quite low.
Mm-hmm. Keyur?
Vas, just a big picture question for you on industry R&D returns. I mean, all of us have seen multiple charts kind of talking about how industry IRR is coming down. Can you help us put in perspective where you think Novartis today sits on kind of R&D returns? As you look forward and having some of those changes that you highlighted today come through, what would be your ambition for R&D returns to go to?
Yeah. I think industry R&D, Harry and I were discussing this earlier, is an interesting game to play. I mean, with us, if you include 2015 with Cosentyx and Entresto, we look wonderful. You take the analysis forward one year, now we don't look great. If we get a couple of big hits this year, we will look great. I mean, it is because this is a sector where industry R&D returns are looking for a stable output from an investment that you give. Almost all of these models are saying, "I invested this much this year, therefore I get this much out this year." The reality of this sector is, you know, we're looking for unicorns. That's what we do, right? I mean, we are looking for extraordinary medicine. To get a multi-billion dollar medicine is an extraordinarily hard thing to do.
In my mind, the real measure is how often and how consistently can we find really big medicines. You could win the return game, and if you don't find a couple of really big ones, I'm not sure it matters. Our focus is how do we more consistently find very significant medicines that would really move the needle for Novartis, but also move the needle for society in the work that we do. Of course, I mean, it goes without saying, if we do that, well, I would expect us to return above our cost of capital and hopefully be, you know, in the mid-teens or higher. I mean, that would certainly be where we'd wanna be. I think that's the mindset that one has to have.
I look at all of these analyses and charts, and people keep sending me reports and, you know, in the end, I'm thrilled if we can find. If Kisqali Adjuvant hits, if Iptacopan hits, if Lu-PSMA works in two earlier lines, we have three really big medicines that maybe the world was not expecting that could impact a lot of people and move the needle for the company. Yeah, it's okay. Whatever the return chart says, it doesn't matter. Did I get that wrong or are you okay? You may have made those charts in the past, so no offense.
Mine always show Novartis positive. Just so you know. I'm not a, you know, I'm like you, Vas, on this one. I'm not a big fan of this analysis and have generally stayed away from it. You know, in the end of the day, companies are valued on the late stage pipeline, the commercial launch assets. You know, backward-looking view, by the time you get it, you know, there's so many other factors that play into this acquisition and so forth. It's really hard to make a ton of sense for this one.
I do hope, maybe to carry to your second part of your question, the changes that we make in terms of TA focus, in terms of thinking about asset potential, even in discovery, focusing in on technologies we really think we have leadership position, will increase the likelihood we find these really big, big, big medicines. There's this chart I love to kind of remind myself of. If you look at the Novartis history, for those of you who followed us around town, if you look at the year a medicine launched and the size of the peak sales, you have a chart that looks at Diovan, that looks at Gleevec, then looks at Gilenya and Xolair and Lucentis, and then looks at Jakavi. Oh, Jakavi came a little bit later. Then you have Cosentyx and Entresto, and then you have Kesimpta.
We need those peaks to come more frequently, and we need those peaks to be high enough. That's the chart that matters in, I think, in the long run, and that should lead to the replacement power that you need. Seamus?
Vas, as it comes to the dynamics around how you structure R&D, what are the aspects that were, you know, kind of problematic? My recollection is the post-Gleevec days, it became no opportunity is too small for Novartis to pursue because it could turn into Gleevec. Do you feel like that's what really needs to change now? That is what you are changing, that mindset has to shift?
Yeah, I think.
Am I wrong about that mindset? Like
No, I don't think. Look, there's always pluses and minuses to all these mindsets. I think between the formation of NIBR and the changes we're making, the new strategy we're making now, we built one of the premier high science institutes in the world. I think when I look at most measures, there's no question we have absolutely world-class scientists. We have the largest number of NMEs in R&D in the sector, so we find molecules that prosecute against drug targets. We also had the mindset that we will develop anything that can impact human health, even if it was small. We had this mindset that maybe small things could become really large things with the kind of pathways thinking.
We had the mindset that if something was really innovative and cutting edge, independent of the value creation that might happen, let's do that because, you know, we are a highly innovative company. I mean, there's nothing wrong with any of those things, but it's not the right thing for us given our scale and what we bring to the world, which is the ability to take discoveries, make medicines, and commercialize them globally and in the U.S. at big scale. That's what we're designed to do. To have that lens in all of those assets, I have the belief we will find those big drugs and then differentially invest in them.
Because the consequence of that mindset is you don't have the investment per asset that we have in R&D is just lower than the peer set because we have more assets that we look at. I think the likelihood you accelerate something, you do the things Michael talked about, you do many indications at the same time, goes up if you just bring it down an increment. I'm not saying it's gonna become. You know, we're not gonna be at the leading side of this, of some of these measures, but I think that will increase the likelihood we invest differentially to win the race and then ultimately get the full potential of the medicines. That's a shift, for sure, from the historical mindset we had in R&D. Simon?
Just following up on that point, does this present potential retention issues within R&D? Because it's quite a mindset shift that's being proposed, it's going from a sort of almost quasi-academic approach to a bit more commercial focus. At what point do you tell scientists, "Well, actually, there's nothing wrong with the science, but there's just no money in it"? Now some scientists will be much more focused on the ends versus the means, the commercial potential rather than the pure interest of the science. Do you think that there's something to be managed there in shifting between the two? Could retention be an issue in that situation?
Certainly our hope is we can manage this in such a way that we can retain all of our best talent. The conversations I've had thus far is people appreciate the at least clarity on what we want to them to be working on and what will ultimately. Most scientists want their medicine ultimately to get to development and get to patients. They're not interested in working on things that we ultimately say we're not interested later on. I think if we can tell the story in the right way, it can be really compelling. I think there will be people who selected us as a place because they thought they had tremendous freedom to work on anything, and we're saying that's not the case anymore. I mean, we need things that will ultimately lead to value creation.
I'd also say here on this Basel site, I mean, you have a 100-year history of a research unit that is among the leaders in the history of the industry in the number of drugs ever licensed. You have people who pride themselves on wanting to get drugs to market. I think it's giving those people as well a stronger voice in the equation. I think we have 7 seconds left, and we will not get another question in given how long I take to answer questions. Very good. Thank you all very much, and I look forward to your continued interest in Novartis. We'll keep you updated as things progress. Thank you all here in the room as well for all of your great interest over the course of the day.