Good morning and good afternoon, and welcome to the Novartis Q3 2026 results release conference call and live webcast. Please note that during the presentation, all participants will be in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions by pressing star one and one at any time during the conference. Please limit yourself to one question and return to the queue for any follow-ups. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Ms. Isabella Zinck, Investor Relations Executive Director. Please go ahead, madam.
Thank you, Sharon. Hi, everyone, and welcome to our Q3 earnings call. Let me briefly read the safe harbor statement before we can begin. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results, performance, or achievement expressed or implied by such statements. For a description of some of these factors, please refer to the company's Form 20-F and its most recent quarterly results on Form 6-K. That respectively were filed with and furnished to the U.S. Securities and Exchange Commission. And with that, I will hand over to Vas.
Thank you, Isabella, and thanks everybody for joining today's call. If we could move to slide four. Hold on one second. We are just getting our slides moving here. In the quarter, Novartis delivered sales growth and core margin expansion. That supported an upgrade to our full-year 2026 bottom-line guidance. You can see sales were up 4% in constant currency. Core operating was up 10%. Mukul will go into the numbers in more detail, but we also had a good margin performance in the quarter.
A number of important pipeline milestones, notably of course, as you all know, the remibrutinib data, but also Rhapsido received FDA approval. Pluvicto also with important approvals in the U.S. and China for HSPC. Pelabresib was also filed in Europe. And del-zota received FDA priority review for DMD 44. Overall, this allowed us to increase our guidance, and we will go through that in a bit more detail on the call. So moving to the next slide. Priority brands continued to perform well in the quarter. They were up 29%.
Very strong performance across Kisqali, Kesimpta, Scemblix, and Leqvio. A solid quarter from Cosentyx. Pluvicto, we are still in the midst of launching in HSPC, so we have not seen that pick up yet, and we will talk more about that in a bit. And Rhapsido also with a very strong performance as well in the quarter. So moving to slide six. Kisqali grew 37%, and it continued to outperform the CDK4/6 market. You can see that our EBC shares, both in the U.S. and Germany are very stable and at a very healthy level. Now turning to the U.S. first, 38% growth in the quarter, $3 billion year- to- date.
We are the leader in EBC, and our NBRx share was up three points versus the prior quarter. 53% of the patients now on Kisqali are from the exclusive population. In metastatic, we are continuing to grow our NBRx share in first line, which is now at 55%. We continue to grow our prescriber base as well. It was up 12% versus the prior year and up 44% in early breast cancer. Outside of the U.S., we had 35% constant currency growth, continued leadership in metastatic breast cancer. Our growth is accelerating now in many of our key markets with the early breast cancer launch now approved in 84 countries and reimbursed in 43 countries.
I think some of the benchmarks that demonstrate the performance, Germany 80% EBC share, U.K. 77%. In China, relatively recently after the launch, already reaching 55%. We also released last weekend the NATALEE six-year data, which showed a clinically meaningful overall survival with a hazard ratio of 0.809. We expect that data to continue to support our growth in the adjuvant setting. I think notably, having that OS data and showing that CDK4/6 combined with endocrine therapy in those node zero and node one patients gives us a strong case to have physicians provide patients with CDK4/6 inhibitors like Kisqali.
Kesimpta grew 22%, fueled by strong demand. U.S. growth was up 21% in the quarter. Our TRx growth is outpacing the market. We were up three points overall in the MS market to 16% share. We were up four and a half points in the B-cell class, getting to 27% share. We see a continued trend to prescribing the medicine earlier in the earlier lines of therapy. 77% of our NBRx is now our first line or first switch. Outside of the U.S., also very solid performance. We have 80% of EU4 patients are from a first line/first switch, and we see strong growth across Europe as well.
We continue to generate evidence to demonstrate Kesimpta's activity in various lines of patients as well in longer-term follow-ups. I think that just allows us to continue to support this medicine and its very strong performance. Moving to slide eight. Pluvicto grew 20% in constant currencies. It was driven more by the ex-U.S. momentum as well as by U.S. pre-taxane growth. The U.S. was up 9% in the quarter. That is primarily driven by the mCRPC pre-taxane setting with use predominantly after the first ARPI.
The first-line NBRx share is at 15% now, and we expect further share gains over time, and that remains our top priority to continue to drive that early utilization in the mCRPC setting. We are in the very early days of the PSMAddition launch, and I will cover that in a little bit further detail on the next slide. Outside of the U.S., we see great performance, 68% growth. We see accelerating adoption in Europe in many of our key markets, Canada and Japan, as well as early momentum in China. Japan became the fastest market to reach 1,000 patients, supported by ongoing site expansion, and also we are building a facility there.
China, we had the approval of the PSMAddition indication in August, and we expect that to support growth as well. Moving to slide nine, turning to the PSMAddition launch. I think first it's important to highlight we have strong foundations in place for the brand. 2/3 of hormone-sensitive prostate cancer patients are managed by physicians who are already using Pluvicto or are connected to established referral pathways. We see broad treatment capacity with nine out of 10 patients within 30 mi of a site.
We are also continuing to address the non-clinical barriers. You can see are the images of both the availability of an infusion and the scaled availability of the pre-filled syringe. It's important to note, we expect about five to 10 weeks of lead time for new patients to be treated, a combination of doing the testing required as well as the scheduling. We do expect the fastest uptake in higher tumor burden patients, as well as the de novo patient segments, where there is unmet need versus the current standard of care.
We also expect continued expansion in the community, particularly in urology. Overall, I'd say we're encouraged by the early uptake indicators. We do think through quarter four, we will see some uptake. Also important to note, we will hit the holidays, Thanksgiving and Christmas. We really think next year is when we'll see further acceleration with the HSPC launch. Leqvio continuing to perform extremely well, up 63% in the quarter.
This is demand around the world. In the U.S., we're up 60%, outgrowing the advanced lipid-lowering market. Our monthly NBRx growth growing well ahead of the market and our main competitor. I think that's in part driven by Leqvio's persistency and the high compliance rates we're seeing. We see very strong performance in Medicare, which is a good indicator of our performance in buy and bill, where we're up to now 22% share.
We also see increasing depth in our key healthcare systems. We really focus on patients post-event, where there's a high propensity to want to get patients to their LDL goal. We also had our U.S. label updated with a cardiovascular outcome statement. We're on track for the ORION-4 and V2P readouts that are expected in quarter four and in 2027 respectively. Outside of the U.S., 65% growth. China growth continues post-NRDL. We've noted previously very strong growth in China, as well as the same growth in Europe.
We're continuing to expand the Leqvio evidence base. V-CHALLENGE was presented, which showed LDL-C lowering better is superior to bempedoic acid. Moving to slide 11, Scemblix was up 67%, driven by strong U.S. momentum. In the U.S., we continue to see very strong performance in first-line. We have reached 33% share. You can see we're edging towards market leadership. We're really at market leadership now. We're maintaining leadership as well in later lines, where we expect continued shift in the treatment mix from second, third line towards first line.
Very pleased with the U.S. performance. Outside of the U.S. as well, we're building off of very strong third-line leadership, where we have 77% share across key markets. The early-line indication is now approved in 69 countries outside of the U.S. Japan has sustained first-line NBRx leadership at 56% share, and Germany already at 33% share. Very excited about the trajectory of Scemblix as we move forward. Cosentyx had a solid quarter, up 9% in constant currencies.
I think when you net out some of the gross to net, we're in the mid-single digit growth range, so I think that's very solid performance with growth in both HS and the SpA indications. The U.S., you can see our HS share is very stable in the high- 40s. The SpA business is remaining resilient, so you can see as well in the bottom panel here, our share is steady at 14%. Outside of the U.S., continued growth in Europe and most emerging markets, stable in China. We expect continued indication expansion as we move towards the end of the life cycle for Cosentyx. PMR, polymyalgia rheumatica, was approved by the European Commission.
We expect the FDA decision in quarter four, and the HS IV was added to the label as well in October. Rhapsido has had really strong launch momentum. You can see that in quarter three. We also had the additional approval of symptomatic dermographism, which covers about 2/3 of patients with chronic inducible urticaria. Let's start with CSU. We continue to see the launch trajectory in the U.S. on a steady, strong pace. Over 6,000 subscribers split between allergists and dermatologists. Over 15,000 patients treated.
Our NBRx share is about 26%, and that's up about three points versus prior quarter. We've been very disciplined with the contracting, so that performance is in the context of about 50% access to label. We do expect further access expansion over quarter four and into 2027. Of course, as that access expands, we expect continued acceleration on the sales. Outside of the U.S., we're now launched in seven markets, and we're steadily getting reimbursement step by step, market by market. We do see strong early uptake in Germany and China.
When you turn to inducible urticaria, as a reminder, symptomatic dermographism, this is the first-ever approved treatment for this condition. There's about 100,000 U.S. CIndU patients who are uncontrolled on antihistamines out of about 500,000 patients total, and 2/3 of those with SD. We have 100% overlap with the CSU prescribers, so that should enable us to get to a very efficient launch, and we're already rapidly working towards filing the medicine across all three subtypes around the globe. So we're upgrading our peak sales guidance for Rhapsido and CSU and CIndU combined to over $4 billion.
Moving to the next slide. We had some important readouts in the quarter, which you're well aware of. Remibrutinib, hopefully many of you heard the call on Friday, so you know well, so I won't belabor, but we'll go a little bit in further review on the next slide. We were really pleased with the results. We show that we achieved disease control with outstanding consistent safety, and the FDA submission is on track for quarter four with a priority review voucher. Del-desiran, we didn't meet the endpoint in HARBOR, but we did have the evidence of clinical activity in the secondary exploratory analyses.
We'll present that data at an upcoming medical congress. We're doing a lot of work now to prepare the next steps and engage with health authorities to chart out the next right steps for the development of the medicine. We did take a partial impairment charge of $1.9 billion, primarily driven by the timeline shifting out by the additional clinical work that needs to be completed. Lastly, pelacarsen, the phase III ORION-4 study did not meet its primary endpoint.
We will have that full data set presented at AHA and published in a major medical journal, and I think that will provide further insights into that data. Further development of DII235 or once annual siRNA for Lp(a) is still under consideration. All of that taken together, we reaffirmed our 5%-6% constant currency sales guidance for 2025- 2030 and our mid-single-digit constant currency long-term growth outlook. We have done all the modeling. We feel very comfortable with those numbers.
Now turning to REMODEL, remibrutinib, we were really pleased with this data. It delivered comprehensive disease control. You can see here on the left all the data that was reviewed, including the six-month PIRA, so independent of relapse progression impact reduced by 30%. Very favorable safety profile, robust, consistent, no liver signals, no infection imbalances. Nearly 50% fewer discontinuations due to AEs, immunomodulation without B-cell depletion.
As we all know in multiple sclerosis with so many options, it starts with safety. If you cannot demonstrate a clear, clean safety profile, understandably neurologists will look for other options. We think having that safety profile and then showing disease control is why we are so excited about the medicine. The filings are ongoing, as I already mentioned, and if you go to slide 16, as a quick review for anyone who is not on the call, we see an opportunity in the naive population. That is about 30% of that naive population we think would be open to take a medicine like remibrutinib.
In the oral switch population, 40%-100% of patients over time could prefer remibrutinib given its excellent safety profile and comprehensive disease control. We expect over time as patients are fully controlled on their anti-CD20s, patients who might want to be switched to an oral medicine, about 45% of those patients in the U.S. The other segment, which is some of the older injectable medicines, over time, we hope to be able to address 100% of that patient population. Outside of the U.S., we estimate about around 38% is addressable.
All of that taken together gives us confidence in a $4 billion+ medicine with a further upside with the non-relapsing SPMS population. As well, we will read out data in two years on the Ocrevus switch data, which could provide further momentum to these forecasts. Now going to slide 17. I will not go through the slide in detail, but just to highlight, we have multiple readouts coming out in 2026 and a strong catalyst path for 2027. We can cover it on the call with your questions, but all of the milestones that we have for the remainder of this year as well as next year are on track. Moving to slide 18, with that, I will hand it over to Mukul.
Thank you very much, Vas. Good morning, good afternoon, everyone. I will now share more details on the financials for the quarter. As a reminder, my comments, as always, refer to growth rates in constant currencies unless otherwise noted. Moving to slide 19. In the third quarter, net sales grew 4% to $14.5 billion, while core operating income grew 10% to $6 billion, mainly driven by our growth drivers as well as continued productivity in our business. Quarter three core operating income margin was at 41.6% of net sales.
This is an increase of 2 percentage points versus prior year, and this is mainly driven by gross margin improvements as well as continued productivity initiatives, primarily in our SG&A part of our business. Core EPS grew 8% to $2.46. On a reported basis, in quarter three, operating income was negatively impacted by $1.8 billion, which is a decline of 61%, mainly due to higher R&D expenses. The higher R&D spend includes a $1.9 billion partial impairment of del-desiran. This impairment follows the phase III HARBOR readout in DM1, and it reflects our updated assessment of the value of the asset as we evaluate the full data set and engage with the health authorities on the future development path for the product.
Net income for the period was at $1.2 billion, which was a decline of 71%, mainly due to lower operating income and higher interest income. Free cash flow for the period was at $5.1 billion, which is below prior year, primarily due to lower net cash flow coming out of our operating activities. For the first nine months of the year, net sales were flat and core operating income declined 2%. Core operating income for the nine month period was a decline of 0.8 percentage points. Free cash flow for the same period was at $14 billion.
Moving to slide 20, please. We remain committed to our shareholder-friendly capital allocation strategy, balancing disciplined growth investments in the business with meaningful capital distribution back to our shareholders. In quarter three, we completed the acquisitions of Myricx Bio, adding to our early-stage oncology pipeline. We also exercised our option to acquire Sironax's blood-brain barrier delivery platform, and at the same time, we continued to invest in our internal R&D programs.
On capital distribution front, in the first nine months of the year, we have now repurchased $2.8 billion worth of our shares under the current up to $10 billion share buyback program. Please note we still have $4.9 billion of the program still to be executed. Slide 21. Moving to guidance. Given our very strong bottom-line performance in the quarter, we are raising our full-year 2026 guidance for core operating income. We now expect for the full year 2026 core operating income to be in line to growing low double digits.
For reference, this is an upgrade from the previous guidance of core operating income of low single-digit decline for the full year. At the same time, we are maintaining our full-year guidance on net sales, expecting to grow net sales at low single digits for the year. For 2026, we also continue to expect core net financial results to be an expense of $1.7 billion and the core tax rate to be around 16.5%. This is in line with our previous guidances for them.
Moving to slide 22. Yeah. So beginning of the year, we talked about 2026 as a year of two halves, and with this quarter reading out, we're pretty much sticking to that outlook. As a reminder, in H1, net sales declined 2%, core operating income declined 7%. Both were impacted by the U.S. Entresto generic erosion. With a strong Q3 delivery, we now expect a stronger H2 performance. For H2, we expect net sales growing mid to high single digit and core operating income growing high single to low double digit.
After stepping up in Q3, quarterly sales growth is expected to accelerate further in Q4 as we move beyond the impact of the U.S. Entresto generic erosion. On the core margin, we do expect a decline in Q4 versus Q3. This reflects the typical year-end phasing of our spend. Also, higher royalties as growth drivers scale up would play a part. Finally, we will also see the impact of lower other income as a result of the Xolair biosimilars in the U.S. As a reminder, for 2027, we will provide our full-year guidance with the Q4 results in February next year.
Moving to slide 23. Yeah. If exchange rates remain at late October levels, we expect +1 percentage point impact on the full-year net sales and +1 percentage point impact on our full-year core operating income. If these rates also prevail in 2027, we would expect -1 percentage point impact on top line and no impact on core operating income. As a reminder, we publish updated FX estimates monthly on our website. That concludes my remarks, and I will hand it back to Vas.
Great. Thank you, Mukul. Thank you, Mukul. So turning to slide 25. We delivered strong growth in the quarter driven by our priority brands and launches, which really shows the replacement power of the business. We've been able to successfully navigate the Entresto, Tasigna, Promacta expiry in the U.S., demonstrating we will grow through the year, which I think really shows the power of the company. We advanced the pipeline with positive readouts for our RMS and for Rhapsido, as well as the Pluvicto label expansions.
We're upgrading our full-year guidance for core operating income, and we remain on track to deliver our midterm guidance of 5%-6% sales in 2025-2030 and our long-term growth outlook. If you go to slide 26, we're excited to also host, hopefully many of you at Meet Novartis Management. We will provide an update on our midterm guidance from 2026- 2031, as well as our long-term growth outlook.
We will update our peak sales potential for key growth drivers. We will also focus on our mid- and late-stage pipeline assets, which we believe will support our long-term growth. We will have, as usual, breakout sessions by therapeutic area, and we will also have a panel session on AI in R&D. We will look forward to seeing you there. With that, we can open the line for questions.
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. Please limit yourself to one question and return to the queue for any follow-ups. To withdraw your question, please press star one and one again. We will now take the first question. The first question today comes from the line of Sachin Jain from Bank of America. Please go ahead.
Hi. Thanks for taking my question. Maybe I will just kick off. At this time of year, it is usually helpful to hear pushes and pulls for 2027 growth. So number of launches next year, perhaps some color on what you are most excited about. Limited LOE it seems into next year. To wrap the question, is the implied full Q sales growth rate the best proxy if you had to think about 2027? Thank you.
Yeah, thanks, Sachin. I think overall, when you look at next year, as you say, we have less generic headwinds. We will be navigating the Entresto Europe headwinds, which we will just navigate country by country, and so I think that is important to factor in there. But we do expect continued dynamic growth from our key growth drivers, brands like Kisqali, Kesimpta, Leqvio, Pluvicto, HSPC, of course, remibrutinib and CSU and CIndU showing acceleration.
We will also have Scemblix, and then, of course, we will also expect the adalimumab launch as well. So a number of things that will provide us the opportunity to have a strong 2027. I think it is important to note in quarter four, we are lapping a number of gross to net dynamics in the previous year. So I think it would be best for us to provide more detailed guidance as always in January. But I would say overall, we do expect to get back to where we were, dynamic growth, in 2027. Next question, operator.
Thank you. Your next question comes from the line of James Gordon from Barclays. Please go ahead.
Hello, James Gordon from Barclays. Thanks for taking the question. I noted the comment on the Ocrevus to Remi switching study and the focus on switching on Friday's call. Can you just talk, assuming the approval, what do you think the initial rationale for switching would be, and then what do you hope the trial will show? Because with the caveats of cross-trial comparison, I know the percentage of naive patients might make a difference. Ocrevus does look a bit more effective in terms of relapses and disability, but is that just due to different patients? So what is a good outcome on the trial, and what would that show?
Yeah, absolutely. I think it is important to note, obviously, we have to complete the study. But our expectation is that once an anti-CD20 manages the inflammation, particularly in controlling from an MRI standpoint, the overall inflammatory burden on the patient, that remibrutinib's ability to achieve disease control, particularly when you look at the disability progression and the PIRA without complete depletion of B-cell antibodies, which has advantages for patients or if patients no longer want injectable therapies.
So the idea would be to show patients once they are under control with the anti-CD20, that we can maintain control with MRI as well as other measures. And I think that would give you the opportunity to kind of treat and then maintain with Remi. We are certainly also evaluating to do additional studies, again, with all of the anti-CD20s, just to demonstrate that Remi can control regardless of the anti-CD20.
I think when you have patients that have been on anti-CD20 for five to eight years, there is a desire for many patients, and we put our estimates in our forecast to get control through a safe oral medicine. We are also equally excited by new starts in patients who do not want to start on an anti-CD20, switching oral patients who are not feeling like they are or physicians are not comfortable with the level of control or also switching older injectable patients onto Remi. So we think we have many opportunities to grow the brand.
Thank you.
Next question.
Thank you. Your next question comes from the line of Simon Baker from Rothschild & Co Redburn. Please go ahead.
Hello, it's Michael on for Simon. Thank you very much for the commentary on the SG&A line in 3Q. I appreciate the seasonality in 4Q, but I'm just wondering what the durability is of that cost reduction and how we should think about that line going forwards.
Mukul?
Yeah. Thanks for the question. Productivity remains a very strong key pillar of how we run the company. If you look at SG&A for the quarter, we've actually seen SG&A 7% lower in Q3 versus previous year, while the company, from a top-line perspective, has shown a growth of 4%. This will, as we have previously said, this focus on driving the company forward while looking at productivity, SG&A productivity in particular, as means for us to get to those profit margins of 40%+ by 2029 latest, would remain a focal point for the company. Historically, we've said we are spending upwards of $11 billion every year on third-party spend.
This is a year, the last couple of years, I think the extreme focus on those cost categories, which includes things like agency cost, travel cost, consulting or professional services cost, and trying to get some of these categories we know have been significantly impacted by use of technology, use of AI, and to get both from a demand as well as cost perspective, our fair share of the benefits that these categories are deriving is leading us this productivity advantage, which is very durable as we look forward from an outlook perspective for the company.
Perfect. Thanks, Mukul. Next question.
Thank you. Your next question comes from the line of Florent Cespedes from ODDO BHF. Please go ahead.
Good afternoon. Thank you very much for taking my question. Florent Cespedes from ODDO BHF. A question related to Leqvio. The ORION-4 results are expected by the end of this year. Could you come back on why it is earlier, it is event-driven? Could you remind us what kind of profile for this product, and if the results are positive, is it fair to assume an acceleration of the sales next year for this product? Thank you.
Thanks, Florent. We have two studies. We have the ORION-4, and then we have the VICTORION-2 PREVENT. Both are looking at outcomes. ORION-4 focused primarily in the U.K. The VICTORION-2 PREVENT is a global study. We expect VICTORION-2 PREVENT to read out next year. I think both studies were designed in such a way to really look at if you look at the fixed time, so following up over a fixed time point, but holding for much longer than the competitor PCSK9s, could you demonstrate a greater CVRR than the high teens that the other PCSK9s demonstrated?
We will see how that works. It is important to know ORION-4 was partially conducted during the pandemic, so I think that is something we are going to have to see how that data plays out. Nonetheless, we would expect both of these studies, given the cholesterol lowering for Leqvio, so LDL lowering is so clear to ultimately read out positive. I think it would support the continued growth of Leqvio. We have guided it to be a $4 billion+ medicine, very strong and dynamic growth around the globe. You are seeing that in the U.S., you are seeing that in China.
We are certainly looking at the peak sales potential of the medicine longer term. I think certainly the outcome studies would support that. We also have V1P, which is a primary prevention outcomes trial, which we would expect to read out in 2029. A number of things I think that can support, a number of readouts that can support the longer-term growth of Leqvio. Next question. Thanks, Florent.
Thank you. Your next question comes from the line of Graham Parry from Citigroup. Please go ahead.
Great. Thanks. A few questions. You now have two quarters in a row with margins above 40%, and I think the guide has been a suggestion to return to above 40% by 2029. Can you maybe just talk to how we could see that progressing into next year? Could you see 40% earlier than 2029 and maybe even into next year? Then if I could just throw in a quick follow-up on the Pluvicto. Are you seeing any potential impacts of the draft proposed new DG-8070 guidelines for patient release after radioligand therapy, and any impacts on the ability of sites to administer radioligand therapies in general? Thank you.
Thanks, Graham. On the margin, Mukul?
Yeah. Thanks for the question, Graham. We remain confident on our commitment to get to 40% margin by 2029. The main drivers for us to get back to that would be continued momentum on the top line, as well as continued productivity movements, and as I've previously answered, I think most of it would come from SG&A as a percentage of sales. Now, what we have to understand, as Vas mentioned previously, I think during this time, we'd also have to deal with Entresto ex-U.S. genericization, as well as the U.S. Xolair biosimilar competition coming and hence impacting other revenue, which is essentially pretty much $1 on other revenue all comes down to the bottom line.
So I think give or take, we're talking of between 2%- 2.5% percentage of erosion to deal with from this other revenue perspective. I think, yes, we've had a fantastic performance year- to- date at, I think, yeah, year- to- date numbers of 40.1% from a margin perspective. But we do expect Q4 to be lower as it has always been, with the spend going up in Q4. From there on, I think we would see continued investment in R&D, continued productivity measures, especially on the SG&A line, erosion on the margin as a result of other revenue wiping off or other revenue because of Xolair biosimilar wiping out, and then we getting back to 40% latest by 2029.
Graham, on the Pluvicto, we don't see an impact from this regulation. I mean, we did provide input. We don't see any changes in site behavior from what we can tell. Certainly, we're working with the authorities to continue to educate them on the appropriate standards for radiation exposure, and manage that appropriately. But we don't see that. If anything, we're having ongoing programs to look at Pluvicto re-administration in multiple settings.
So could it be given an HSPC and an mCRPC to give physicians more confidence that they could use Pluvicto and not have to reserve it for patients who are further progressing? So I will keep you, of course, posted if we see anything different. But at the moment, no impact from those regulations. Next question.
Thank you. Your next question comes from the line of Kerry Holford from Berenberg. Please go ahead.
Thank you for taking my question. Just around, I wonder, Vas, if you could give us a little bit more insight into the plans post-HARBOR. Will you run another phase III? Are you considering different endpoints? Update us on the timeline there. Also on the impairment, noting it was only around 1/4 of the total carrying value, perhaps the price up was not larger. You did mention the delay to launch. Was that the key reason for the write-down, and should we assume there's been minimal change to your probability assumptions, your peak assumptions for that product? Thank you.
Yeah, thanks, Kerry. With del-desiran, it's early days. I think it's hard for us to give you too much color. What we're doing is a deep analysis of the trial data and really trying to learn as much as we can. We have an ongoing open label extension, which is also providing us further insights and using that to further understand the profile of the medicine. I think that will inform our approach for the next steps in development. I think once we have clarity and really alignment with regulators, we'll provide updates on what that next study will look like. We still assume we'll need to do another phase III study to ultimately bring the medicine to patients.
In terms of the math for the write-off, when you have to do an additional study, of course, a phase III program, the timelines are the timelines. We assume a similar probability of success. We, of course, make various assumptions, the scenario assumptions with respect to competition, and that's how we arrive at the number. I would note that we also, when we have accelerations, it may not always be the case, we mark up assets as well. I wouldn't read too much into these numbers. I think it's more important that we just keep working as fast as we can to get the medicine forward to patients, and that's what we're focused on. Next question.
Thank you. Your next question comes from the line of Steve Scala from TD Cowen. Please go ahead.
Oh, thank you so much. On the second quarter call, Novartis said that ianalumab was on track for a Q3 approval. We are now 1/3 of the way through Q4 and no news. On the second quarter call, the company also referred to data FDA was requesting, so real-time requests at least as of that point. Curious on the reason for the delay and what is the outlook. Thank you.
Yeah, thanks, Steve. We are in ongoing label discussions with FDA and providing them the analyses that they are requesting to finalize their review, as well as to support them on their approach to labeling. We do expect an action by the end of the year. I would say everything is on track, and we are providing that information on a real-time basis. We will look forward to giving you an update, but we do expect the action before the end of the year. Next question.
Thank you. Your next question comes from the line of James Quigley from Goldman Sachs. Please go ahead.
Great. Thank you for taking my questions. On Pluvicto, you flagged the speed of uptake for PSMAddition, which is helpful. But for the past four quarters or so in the U.S., sales have been flat. Is the PSMAfore indication sort of fully penetrated from a revenue perspective in the U.S.? How should we think about the impact here with respect to PSMAddition? Should we expect a similar pattern with a step up in Q4 or the first half and then to plateau relatively quickly, and then ex-U.S. will drive most of the growth?
Interested on how you think that is going to play out, particularly with respect to Europe following the withdrawal of the application for PSMAddition. Also a very, very quick follow-up on Steve's question on ianalumab. How do you expect the market to develop given the positive data from a competitor? I know we haven't seen their SPI benefit, but how are you thinking about the potential scenarios around that? Thank you.
Yeah, thanks, James. So on Pluvicto, I think there's a couple of dynamics. We see most of the demand, as I noted, in the mCRPC setting, and we continue to work to get physicians not to cycle ARPIs, and then ultimately to ARPIs, excuse me, and to use Pluvicto after the first ARPI where it is indicated. So that's something we're working through, and I think we do very well after multiple rounds of cycling, and we're trying to get earlier and earlier in the treatment paradigm. We do think there's a lot more opportunity in the mCRPC, but it does take time to change those physician behaviors, particularly in the community.
So we do want to see continued growth in mCRPC, and then on top of that, HSPC as well. We do expect there to be steady uptake. I do think that it's important to note that this is going to take time to develop. There's certain patient groups that the physicians are particularly interested in. So I mentioned high burden patients or patients who are de novo. I think over time, as physicians get more comfortable in the community urology setting, we'll hopefully see broader use for Pluvicto in that setting, and that could then also take us up to further sales momentum.
As you also note, I would say particularly we're excited about the growth we see in Japan and China, where we see a lot of dynamic growth on the outlook for the brand and could be quite substantial. We also do see very solid performance in certain European markets like France, and to some extent, some of our other European markets. The reason, of course, we always think through our indications in Europe is just because of some of the pricing considerations. Sometimes it's not, unfortunately, the best move to add additional indications, depending on what the various reimbursement agencies' perspectives are on the trial. So we have to make those decisions in real time.
But all of that taken together, no change in our peak sales outlook for Pluvicto. We think this is just the nature of you see a ramp initially, and then you have a slower climb as you try to change behavior in the physician offices. With respect to Sjögren’s, very hard to comment. Of course, we don't know the competitor's data in detail. Of course, they ran a different program. So I think we need to also understand their data as well in the high symptom burden patients.
We are running a separate study in the high symptom burden patients, but we ran duplicate studies in the systemic patients, replicate study. I think the profiles of the studies are a little bit different. I think we will have to see. Also, the mechanisms are very different. Tissue B cell depletion with ianalumab and CD40 ligand is targeting a different pathway. I think there also could be nuances as to which patients respond. All to be determined, but hard to know until we see the full data set.
Great. Thank you.
Next question.
Thank you. Your next question comes from the line of Trung Huynh from RBC. Please go ahead.
Hi, guys. Thanks for taking my question. On your slide on the Meet Novartis Management, you have noted this focus on mid-stage and late-stage pipeline assets to support growth. I do not want you to give too much away here, but can you frame which three or four phase II assets do you believe to be the next assets for the next decade? At the event, will you help with guidelines for peak sales, timelines, anything to really help us start thinking about these for our forecasts? Thank you.
Yeah, I think I do not want to get into it, because I want you guys to actually come, so I will not get into all the details. But I think we have a number of programs first advancing in phase III or expanding programs that we have not talked a lot about. I think certainly abelacimab is high on our mind in trying to describe not only the pivotal study but also the full spectrum of indications that we will have for pursuing for abelacimab. It is a drug we are very excited about. Programs like actinium, PSMA, palovarotene we have not spoken a lot about, but we are advancing palovarotene.
Of course, we can provide further updates on some of the programs we acquired from Avidity. Then there is going to be additional mid-stage programs that we have not previously gone into. I do not want to get into it here on the call, but I think our goal would be in each one of the therapeutic areas to identify, let us call it one to three assets that we would want to get you guys to start thinking about. We will provide you at least some perspectives on how we think about it. Peak sales we tend to reserve to indicate drugs where we actually have an approval in at least one indication. But we will provide updates on peak sales for our growth drivers as well as recent launches. Next question.
Thank you. Your next question comes from the line of Thibault Boutherin from Morgan Stanley. Please go ahead.
Yes, thank you very much. Just on the cardiovascular pipeline, the Lp(a) siRNA follow-on drug DII235 you mentioned is under assessment. What clinical data are we waiting for to make a decision? Are you waiting for competitor data on Lp(a) following the lack of signal that we've seen with pelacarsen? Similar for pacibekitug IL-6 in ASCVD, we obviously have disappointing data from ziltivekimab in ASCVD and CKD. What could be the path forward here for the IL-6?
Yep. Yeah, thanks a lot for the question. I think on Lp(a), we don't need to wait for necessarily competitor readouts. I think we have a lot of insights based on the study, and you all will see that from Dr. Nissen at AHA. I think we have a good understanding, and I think we're just trying to evaluate is there a patient segment where we think that the medicine could make sense, and how best to then ultimately run that study?
I think that assessment is just ongoing. I don't want to supersede his presentation and the publication of the data, but I think we still have things to think through as we learn from that very large, robust data set from the Horizon trial. I think your point on pacibekitug is well taken. We are carefully assessing, given the readouts that we've seen from our competitor, what is a reasonable development path that we're still working through that and trying to identify is there a patient group? We focus on the ACS patients, so patients who are post an acute coronary event. Is there a trial design?
Is there something where we believe we have conviction to think that there's a reasonable probability of success? I think given what we've seen, anything we do would have to be considered a high risk, high reward approach. We're willing, of course, to take those bets in cardiovascular as appropriate. That's still something we're working through. We can discuss that further in meet the management, but we still have to, I think, do some more analysis and thinking to finalize that phase III program. Next question.
Thank you. Your next question comes from the line of Matthew Weston from UBS. Please go ahead.
Thanks very much. Vas, you raised the Remi peak for CSU and CIndU to $4 billion+ , but you said wait for the CMD for other peak increases. I am just curious as to why the two-tier timing. Is it because you wanted to reinforce the overall potential of Remi, given maybe the market expected more for MS? I am just interested.
Yeah, Matthew. I think our thinking is not too sophisticated here. $4 billion for CSU and CIndU, $4 billion for the current MS readout, so not including non-relapsing SPMS. That indeed equals $8 billion+ . I think once we see the HS readouts, that would help us then, I think, inform the overall number that we want to head to. We acknowledge we have food allergy as well. We have chronic pruritus of unknown origin.
We have rosacea. As you know, our standard is usually not to include peak sales for drugs that have not actually read out positive in the phase III study. So any Remi peak sales we give has to be based on indications that have read out positive. So HS would then inform, I think, our thinking on the overall Remi peak sales. If we ultimately were to be successful in food allergy, we would revisit the peak sales and then CPUO and rosacea. Does that make sense?
Yeah, it does. Thank you.
Thank you. Next question.
Thank you. Your next question comes from the line of Peter Verdult from BNP Paribas. Please go ahead.
Yeah. Hi, Peter Verdult, BNP Paribas. Apologies for any background noise, traveling back from ESMO. Just the one for you, Vas. When we think about the key debate in the market, the mid-aspiration of growth beyond 2030, and what could help drive that from the pipeline, one asset we haven't talked about is rap-cel. So just wanted to check in, is there any increment to say on those autoimmune studies that were paused over the summer? Getting restarted. I know when we saw you in September, you were talking about patients and docs clamoring to get these trials restarted, but are regulators moving at the same speed? Is there anything you can say there? Thank you.
Yeah. Thanks, Peter. I think we're still working through that safety assessment. We have to, obviously now, because we're on hold, prepare a full package and ultimately engage with regulators. I don't have a specific timeline. All I can say is we're very committed. We've seen the efficacy, and it is impressive in almost every indication that we've taken the medicine into. I think now we just need to figure out exactly what is the right approach to mitigate this particular safety issue that we've identified, the IEC-HS. I think that will take us a few more months, is probably the best guess I have at this point, and then we hope to get those studies started up again next year.
I think on the market debate, I think for your earlier part of the question, our plan certainly at Meet Novartis Management is at least to outline for you how we see, at least from where we sit today in 2026, how that first part of the 2030s will unfold, where you've got the LOEs, but then what we see from our in-line brands that have protection into the 2030s, what we have from the new launches that we have coming online, what we see from the pipeline, and help you guys bridge to why we're where we're at in the mid-2030s, 2035, 2036, versus the few calls there are right now for the consensus.
Thank you.
Next question.
Thank you. Your next question comes from the line of Michael Leuchten from Jefferies. Please go ahead.
Thank you. Vas, if I could please go back to ianalumab in Sjögren’s. Just wonder if I could push that a little bit further on the inconsistency that we had in the data around regulatory ESSDAI and clinical ESSDAI, and there were subgroups of the endpoints that worked better than others. When you talk to label discussions with the FDA, is it about the definition of the endpoint and where the benefit is, or is it about defining patient populations that should be the target population?
Yeah. I think it is not about the endpoint. The endpoint results are robust. This is about how best to describe the benefits. Which patients derive the greatest benefit, I think, is the best way to put it, and we are providing them the necessary data to do that in the way they see best within the label. That is probably as much as we know as well, but we are providing all that information as we continue to try to finalize the label with the agency.
Thank you.
Thank you. Your next question comes from the line of Richard Vosser from JP Morgan.
Hi. Thanks for taking my question. Quick question on going back to Remi in HS. We have obviously seen in the last week or so the lutikizumab data, which came in a little bit on the underwhelming side. Just Vas, latest thinking on Remi in HS. What types of patients have you got in the trial? I think there were differences between the two doses in phase II. Just latest thoughts there. Thanks very much.
Yeah. Thanks, Richard. I think we obviously saw that data, and as you know, in immunology studies, particularly in a situation like this where the placebo group can move around quite a bit, we will have to see. I think our hope is that if we can show efficacy in the HiSCR75, also HiSCR 50, but really the HiSCR 75, in the range of biologics as a highly safe oral drug, especially if we can show that that persists over time, this can be a very attractive medicine. Then, of course, the upside would be we can demonstrate what we showed in the phase II data where we had at least cross-trial comparison superiority to the biologics.
There's a lot of this will come down to how the placebo group behaves, and we think we've done all of the right things to manage that, but that is the kind of wild card in this whole situation. We'll have to see, but we have the two readouts sequentially, and then we'll provide that update. Hopefully, I think we should hopefully get this done before Meet Novartis Management. Next question.
Thank you. Your next question comes from the line of Rajesh Kumar from HSBC. Please go ahead.
Hi, thanks for taking my question. Just thinking through 2027, I know you're going to provide guidance in January, but if we think of the mechanics of it, gross margin-wise, should we sort of assume that to be the trough, yeah? We had a very strong performance of SG&A. Seasonally, that should reverse in fourth quarter a bit. But on a run rate basis, does $14 billion order of magnitude for 2027 looks like a sensible ballpark number which consensus currently is modeling?
Yeah, go ahead, Mukul.
Yeah. Rajesh, when you were talking about your estimates for next year, I think this is as we've previously said, I think we would wait for Q4 to give our estimates. But from a midterm perspective, I think we stand 25%, 35%, 36%. We've historically said that this will not be a linear growth path. There will be years like 2026, which will be more impacted because of genericization, and then there will be years like 2027 where we will have less generic impact, but we would wait for end of the year to provide the necessary guidance for next year.
No, I appreciate that. The implicit question was that the SG&A we have seen, the reduction we have seen in third quarter.
Yeah.
Were there any structural elements there that we need to factor in when we are thinking about the future, like AI-driven productivity or certain cost reductions, which means for future you won't have those costs? Or all of it is, at the moment, cost containment as you go through the LOE phase?
Yeah. I think, Rajesh. Okay. Sorry, I got it now. On SG&A, as a percentage of sales, I think we've historically said that that's the place where our margin improvement over the next four years is going to come. As we spoke about getting to 40% by 2029, we've actually said that that margin improvement will come from SG&A. If I look at Q3, I think taking one quarter and saying that's the estimate now for the next three years, I think annualizing it for the full year is not the right thing. But if we needed a data point to say how we get to that 40% margin by 2029 through SG&A, then I think here is a good data point that we have that we are absolutely on the right path, as I said.
Very clear, sir. Thank you very much.
Thank you.
Next question.
Thank you. Your next question comes from the line of Urban Fritsche from ZKB. Please go ahead.
Yes. Hi, everybody. Thanks for taking my question. Just a question on capital allocation. You have been stepping up share buybacks quite a bit after the pelacarsen failure. What is your thinking going forward with those share buybacks? Will they stay on that level? Also taking into account that your shares have nicely rebounded. How do you think about having those gaps open now from the recent failures, and filling those versus share buybacks? That is my question. Thanks.
Maybe on the first part of the question on the pace of the buybacks, Mukul.
Yeah. As you know, I think share buyback is a clear pillar of our overall capital allocation priority, and this will not change going forward. You also know that we do the share buybacks on the secondary line here in Switzerland, which are clearly we have certain constraints in terms of the amount of volumes that can go.
We do the share buyback through an independent partner and independent bank who does it, and we modulate how much we buy depending on market conditions. This is what we have done in the past, and we would continue to do so. Absolutely right, that as the share price took an inordinate significant reduction, we actually increased the pace. But we have to. I think going forward, we would continue to modulate it up or down, and we remain committed to getting to that $10 billion share buyback program by end of 2027.
And then I think on the broader capital allocation point versus M&A, there's no change in our thinking. We grow the dividend in Swiss francs every year as we have now done for almost 30 years. We are approaching 30 years. We are committed to investing in the core business. We do primarily bolt-on M&A under $2 billion, very selectively doing larger deals when we see something that's very compelling. Then with excess capital, we're committed to also returning capital to shareholders via the share buyback program. So all four pillars are things that are priorities for us. We do them in balance, and no change based on any of the recent events. Next question.
Thank you. Your next question comes from the line of Seamus Fernandez from Guggenheim. Please go ahead.
Oh, thanks so much for the question. So my question is actually on your approach in kidney disease. Vas, I was just hoping, you have a number of assets in the space across IgAN and other immunologic disorders on the kidney disease side of things, but just wanted to get a better sense of how you see Novartis presence in kidney disease evolving from here, just given the intensifying competitive landscape, in particular. Thanks.
Yeah. Thanks, Seamus. So I think clearly the anti-APRILs have changed the landscape. I think the data has been clear and compelling and really demonstrated that they are the standard of care. So I think now we continue to believe Vanrafia will be a blockbuster medicine. We also continue to believe Fabhalta across all of its various indications will get to the $3 billion sales we've outlined for that medicine. But I do think we've had to think carefully now on how to position these medicines in the context of the anti-APRILs.
So I think zigakibart, of course, will have the readout next year. That will be an important milestone for us. Then to determine how best to position these medicines in the context of potentially having four different anti-APRILs in the market. So that's how we're looking at IgAN. I would say outside of the U.S., the story is very different. In places like Japan and China where we have very strong positions, we are seeing significant opportunities for our IgAN portfolio, also in certain other markets around the globe.
This will a little bit be geographically tailored for IgAN. We remain committed to adult polycystic kidney disease. We have farabursen. We are continuing to advance that in the clinic. We also have ongoing efforts for other rare renal diseases. Those generally are early stage, and that continues to be a focus area as well. That is kind of how we are thinking about it, but we are in a state of flux at the moment as we think through how best to position Vanrafia and Fabhalta in the context of the anti-APRILs. Next question.
Thank you. We will now start round two for the Q&A. Please limit yourself to one question and return to the queue for any follow-ups. The next question comes from the line of Steve Scala from TD Cowen. Please go ahead.
Thank you so much. Regarding Kisqali, what portion of growth is attributed to the adjuvant setting, and what is the risk that Roche's giredestrant captures a majority of that growth? Is Novartis' defense solely based on having achieved OS and the duration of experience with Kisqali? That is a good argument, but it did not work for Lilly with Verzenio when you were launching Kisqali. Thank you.
Yeah. I think, Steve, we have very solid growth across all lines. We can get you the exact number, but I think metastatic continues to be an area where we are strong with our NBRx share, as I mentioned in the first line setting. As I mentioned, over half of the patients are coming from the node zero, node one, where we are alone, and then the other half for in the early breast cancer setting from the overlapping population with our competitor. The way we think about it is we have a couple of things going for us.
One, as you know, we have a very long history here in the market, and we do believe that physicians trust endocrine therapy that they have had established for many years, maybe more than is currently being assumed in the market. I think that is not an insignificant task. We've learned that in many parts of different therapeutic areas to displace established therapies that are safe and effective is not always a straightforward task.
Second, with Kisqali plus endocrine therapy, you do have a long history and you have OS data now, which we think is something that we can use to significant effect, especially when you look at the overall benefits here for patients. This is something that's proven. You have the OS as well. Lastly, we continue to work to generate data with Kisqali and the appropriate oral SERD to show that you could also use these in combination as well. We're, of course, thinking about that for our CDK2 and CDK4 portfolio as well to make sure we have those combination data.
We think when you look from here, 2027, 2028, 2029, 2030, we'll be able to manage this and achieve our $10 billion peak sales. You yourselves can see where Kisqali already is. I would say outside of the U.S. should not be forgotten. We do extremely well. You saw our very high shares outside of the U.S., given our strength ex-U.S. We're not MFN constrained. We're not constrained by any of these other dynamics. China and our DL is obviously helping us quite a bit as well. Taken together, we feel very comfortable with the peak sales guidance on Kisqali.
Thank you.
Next question.
Thank you. Your next question comes from the line of Graham Parry from Citigroup. Please go ahead.
Hi, Vas. Thanks for taking my follow-up. Just rolling Entresto European generics. I think the regulatory data protection expires next month. I think there were some SPC rulings on your SPCs to 2028 that might provide some protection in additional countries. Maybe you could just help us understand timing, the expected launches across different European territories and if they differ at all. Thank you.
Yeah. So right now, you are all correct, Graham. SPC expires next month. We do not currently expect any impacts in quarter four. I think we are continuing to now work through the various cases in individual countries. I think each country has a different dynamic. I think it is really a country-by-country situation where we do have to make the filing for an injunction and then, of course, then go through the various legal. We are absolutely committed to defending our patents in every one of these markets, and we believe we have a case to be made.
So we are absolutely doing our best to extend based on those valid patents and trust those protection across Europe. For a variety of reasons, I do not want to get into individual countries at this point in time. Then, of course, when we have clarity, we will of course fold that into any updates that we give in the various quarters. Next question?
Great. Thank you.
Thank you. Your next question comes from the line of Thibault Boutherin from Morgan Stanley. Please go ahead.
Thank you very much. Just a quick question on Kesimpta and the multiple sclerosis landscape in the U.S. Your main competitor has been noting increasing competition from BRIUMVI in the U.S. market. I know it's not exactly the same channel, but can you comment if you notice any shift in competitive intensity in the U.S.? Any color here because you seem to paint a different picture for Kesimpta in the U.S.
Yeah. Thanks for the question. For Kesimpta, what we do see is the market has split into physicians who are more oriented towards buy and bill, and there is a competitive dynamic there. As you're aware, in the self-administration market, we've been able to go on our own, which is why our market share high 20s for the B-cell class and then continues to grow overall. We are working very hard to get the readout for the Q2 month Kesimpta next year, and we're on track for that, and then continue to look at other life cycle management options. Of course, we have remibrutinib as well, now coming as well in MS.
But we don't see impacts from the injectable competitor or the various at-home infusions and pumps, et cetera, for Kesimpta right now. We are watching closely the potential launch of a subcu from one of the competitors. I think also there it will be very important to look at safety profile. Can you get around the ejection site reactions and any sort of pre-medication? Kesimpta is a very, very comfortable for neurologists to use. We are not expecting that to disrupt the Kesimpta peak sales outlook. I think overall, we are very pleased. Then again, outside of the U.S., Kesimpta performs extremely well. In many markets, we have 80%+ share for Kesimpta. I think that just demonstrates that the brand is performing extremely well. Next question.
Thank you. Your next question comes from the line of Sachin Jain from Bank of America. Please go ahead.
Hi. Thanks. Just a follow-on. Just after an update on votoplam and FSHD, timing of the FDA meetings and how those interactions are going. Thank you.
Yeah, thanks, Sachin. We do expect the votoplam engagement in the coming months. I think that then appropriate updates will happen based on the two-year follow-up data. I think particularly focused on the intermediate advanced patients, so the intermediate disease patients. With FSHD, we are expecting the FDA meeting again before the end of the year. I think we are doing our best to make the case for an accelerated approval filing based on the data package we have, which we think is compelling. Of course, this is first-in-class medicine, a disease that has never had a therapy before. We are, of course, going to have to have that discussion with FDA.
I will also add in that before the end of the year, we also expect palovarotene potential accelerated approval discussion based on MANIFEST-2. We are running MANIFEST-3 right now. That would give us confirmation that if the FDA agrees, which we still have to see, we will be able to file this medicine as well. So pelabresib would be a nice uplift as well and something we are quite excited about. Then lastly, since it has not been asked, we did pass the abelacimab interim result. It was a very high bar.
Ultimately the study will continue, but without any changes. So we feel really good about that and excited now to get that study to completion. As I mentioned, we already have a program. I think I have mentioned in other settings that we are planning a study to start next year in secondary stroke prevention and also evaluating additional clinical trials for abelacimab, which we can discuss further at Meet the Management. Next question.
Thank you. Your next question comes from the line of Richard Culpeper from JP Morgan.
Hi. Thanks for taking my call. Just wanted to go back to the Xolair erosion. I think your partner was suggesting that Xolair might not go down next year. So just wanted some clarification or clarity on the profit share agreement and how you are thinking about that going into 2027. Thanks very much.
Yeah. Thanks, Richard. Richard, I think we can work with the assumptions that we have right now in the market. We know that there is a biosimilar right now in the market. There is potential for further biosimilars to come. I think as we go into the next couple of years, as there will be more biosimilar activity, Xolair sales will go down, and hence the profit contribution that we have that comes to us in terms of other revenue will go down, which essentially that other revenue comes into our core operating income that puts this pressure that we will have.
Now, you are absolutely right that if the amount of biosimilar impact next year is limited, then we would also have that impact that we would have on the margin would also be limited for us. But I think we would have to see how this pans out in terms of biosimilar activity. But what is very clear is that we would see pressure on the margin in the next couple of years as a result of Xolair biosimilars in the U.S. Does that answer the question, Richard?
Yeah, it does. Super helpful. Thank you very much. Sorry for that background noise.
Thank you.
Well, thank you. Next question.
Thank you. We will now take our last question for today, and the question comes from the line of Rajesh Kumar from HSBC. Please go ahead. Rajesh, your line is unmuted.
Hi. Just in terms of your comment about share buyback, I know it is a core pillar of how you add value. What would you need to see in an acquisition opportunity for you to rethink that capital allocation decision to buy or do business development would be worth more than share buyback? I mean, what would change your mind?
Yeah, I think for us, given the free cash flow that we generate and our core operating income outlook five-year plan, we do not see this as a trade-off at all. I mean, we can do the M&A deals that we find attractive and maintain share buybacks. Since we are not contemplating deals that are so large that we would have to compromise our share buybacks, we do not see this as a trade-off. Actually, we think it is something that can all work, and then we, of course, have to pay things based on a number of factors, financing costs, debt load, et c.
But I think overall, this is not a trade-off. This is a balanced approach that we plan to maintain over time. Very good. So thank you everybody for joining. We always appreciate it. Always excellent questions, and we hope we got to almost all of your questions. We'll look forward to seeing everybody at Meet Novartis Management, where you'll get to interact as always with our R&D teams, our commercial teams. We think it's a great event. We always look forward to it and always appreciate all of your participation. Thank you very much, and we'll see you in a few weeks.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.