Good afternoon and good morning, everybody, and thank you for participating in the webcast today. Before we start, I just wanted to read you the safe harbor statement. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements. Please refer to the company's Form 20-F on file with the U.S. Securities and Exchange Commission for a description of some of these factors. Just one other additional point for you for today, if I could please request that you limit yourself to two questions at any one time, and if we have additional time at the end of the call, we could provide time for an additional question or two at the end. With that, I'll hand across to Vas.
Thank you, Samir. Thanks, everyone, for joining today's conference call. Here in Basel, I have with me Shannon Klinger, our legal counsel, Susanne Schaffert, the CEO of Novartis Oncology, Paul Hudson, the CEO of Novartis Pharmaceuticals, John Tsai, our Head of Global Drug Development, and Harry Kirsch, our Chief Financial Officer. As you saw with today's announcement, Novartis is off to a strong start in 2019. If we move to slide four. We had strong operational performance with sales growing at 7%, core operating income growing at 18%, and our core margin expanding by 2.6%, allowing us to raise our core operating guidance. Harry will go through that in more detail in his presentation.
We also achieved major innovation milestones in the quarter, including the approval of MAYZENT in secondary progressive MS, as well as the Zolgensma STR1VE interim analysis, both of which I'll go through in a bit more detail. Lastly, and importantly, we continued our transformation to a focus medicines company powered by data science and advanced therapy platform. We've also announced we'll complete our CHF 5 billion share buyback over the course of 2019. Lastly, we confirmed that we'll continue a strong and growing dividend, to be paid in 2019 of CHF 2.85, and that dividend trend will remain unchanged post the Alcon spin. Moving to slide five, we're starting to deliver operating in innovative medicines in line with what we've told you. We committed to generating margins in the mid-30% range by 2022.
In this quarter, we showed that we're on track to get there with a core margin of 33.3%. This margin expansion was driven primarily by in a bit more detail. Also it's worth noting that our launch investments are largely within our existing therapeutic areas, which allows us to leverage our existing infrastructure and scale. Also, I'm quite pleased with the progress we're making on Novartis Technical Operations and Novartis Business Services in terms of the productivity initiatives, which are now really starting to kick in in the P&L. Lastly, we were able to hold our core R&D costs at the level of 20%. As we've stated in the past, our goal is to innovative medicines. That may fluctuate based on pipeline opportunities, but it's, I think, positive trends to show that we are in that range now, and we expect to be there moving ahead.
Now moving to slide six, we saw continued sales momentum in innovative medicines. Cosentyx and Entresto both delivered strong growth in the quarter, and we will talk a little bit more about that. Our oncology growth drivers all performed well also in the quarter, with Lutathera in particular showing a very strong performance consistent with our expectation for this medicine to become a blockbuster. Now moving to slide seven and diving in a bit deeper on Cosentyx. We demonstrated strong growth in the quarter of 41%, and you can look at this from the U.S. perspective and the ex-U.S. perspective. In the U.S. perspective, we had 37% TRX growth versus prior year and 49% sales growth, which really demonstrates we continue our outstanding momentum with Cosentyx in the United States. We also saw strong growth across indications outside the United States.
Importantly, we received approval in psoriasis in March in China, and we expect to launch in the second half in 2019, allowing us to continue that momentum outside the United States. Now going a bit deeper into the United States for Cosentyx on slide eight, we saw continued share momentum both in psoriasis and in spondyloarthritis. If you look at the left-hand side of the chart in dermatology in our key competitive set, we have a market share now in NBRx of 19%, and in terms of NBRx growth, we are outperforming the U.S. market. We continue to lead in TRX among new entrants in the U.S., and we are also on track to read out the ARROW study at the end of this year, providing additional data to support the rapid onset of Cosentyx.
In terms of rheumatology, we surpassed Humira in TRX in ankylosing spondylitis and psoriatic arthritis, demonstrating an NBRx share of 43% versus Humira's 20%. And our non-radiographic axSpA readout is on track for the back half of 2019. So strong performance, strong momentum in Cosentyx, and we are really pleased with where we are with this medicine. Moving to slide nine. When you look at Entresto, we had strong Q1 sales growth with an all-time high of 3,900 scripts from an NBRx endpoint in Q1. This underlying demand was really driven by the additional data that we have generated on quality of life, as well as the impact of Entresto initiation in the hospital, which we showed through the PIONEER-HF study.
That data is now being disseminated across geographies and helps continue to support the broader use of Entresto. We have the readout of the PARAGON-HF study in preserved ejection fraction heart failure on track for the second half. And I wanted to highlight as well our performance in China. Entresto, based on the estimates that we have in-house, is arguably the best launch of a primary care drug in China since 1999, when we actually have data available. This is in a context where we do not have reimbursement yet in China, a national reimbursement yet in China. We expect in China alone, Entresto to be a significant medicine, and we will continue to watch that and provide you updates as our performance in China continues to progress. Now moving to slide 10.
Oncology had a very strong quarter, growing 9% in constant currency. This was driven by our full range of growth drivers. PROMACTA, Revolade, Jakavi, Ontak, Tasigna, and Mekinist all performed well in the quarter, continuing their previous trajectory, given their strong data sets to support their broad use. I wanted to highlight in particular the performance of LUTATHERA. Our total sales in LUTATHERA in the quarter were $106 million. Our AAA sales were $163 million. We've reached over 2,000 new patients since launch in the U.S., and we have positive momentum as well in the European Union, with reimbursement and access in the U.K., Italy, as well as other markets. Taken together, I think this demonstrates our investment in the radioligand therapy platform is truly a platform investment that we can build on.
We look forward to now advancing a broader pipeline, including life cycle management of LUTATHERA and additional indications, as well as moving forward in other solid tumors using radioligand technology. Moving to slide 11. We have 10+ potential blockbusters, which we've been discussing with you, planned until 2021, and over 25 in late-stage development. Really fully stocked pipeline. Some of the important milestones we achieved in the quarter I'll go through now in a bit more detail, starting on slide 12. MAYZENT launched in the U.S. with what we really believe is a unique efficacy data set. I think it's important to keep reminding the group on the phone as well as the broader community that we are the only medicine ever to have successfully been studied in secondary progressive MS.
This is a patient population that is older, that has higher EDSS scores, and to date has not had an approved therapy. We believe the fact that we specifically studied this patient population gives us a unique value proposition and a unique differentiating feature. In our labeling, it was made clear, as you can see in the diagram on the right, that across all of the relevant data subcuts, there was a trend towards favoring MAYZENT in the study. Also importantly, no first dose observation is expected for around 70% of the patient population. It's early days. I think Paul can comment further on how we're progressing on the MAYZENT launch, but we're pleased with where we are. We look forward to giving you further updates over the course of the year.
I'd now like to turn to ZOLGENSMA and go through a couple of slides to really clarify some of the points on ZOLGENSMA's recent data. Moving to slide 13. The STR1VE interim data we recently reported, we believe fully supports ZOLGENSMA as the foundational therapy for SMA Type 1. The efficacy data was consistent with the START trial. Here you see the STR1VE patients overlaid on the START patients. Of course, there are variabilities in terms of starting point, in terms of the CHOP INTEND scores at baseline, so you will see some variability in CHOP INTEND scores. Overall, in our discussions with investigators, we believe this demonstrates the strong performance of the medicine.
We'd expect as we continue to follow these patients, we'll see continued improvements we would expect in their CHOP INTEND scores , demonstrating the early and rapid increase of the medicine and continued motor milestones being reached over the course of the lives of these patients. The safety was comparable to the START study as well. I'll go through the safety data in a bit more detail in an upcoming slide, but there was a single death in the STR1VE study, but this was a respiratory failure completely unrelated to treatment. We had a significant CHOP INTEND increase in this patient of 27, demonstrating the impact of the medicine in the patient despite the very unfortunate circumstances of the patient's death. Moving to slide 14.
One of the things we've learned through further assessment of the patient who unfortunately died in the STR1VE study is that there was widespread SMN expression comparable to unaffected individuals after Zolgensma therapy. I think it's really important to fully understand this data as it demonstrates mechanistically from a pharmacodynamic standpoint that Zolgensma reaches all of the target tissue, both in the central nervous system as well as the other organs examined, and achieves a situation where their expression of the SMN protein is comparable to unaffected individuals. You can see on the chart here on the left-hand side of the diagram a non-SMA subject, a normal subject. You can see what normal SMN expression looks like.
You can see a non-treated SMA subject with really no expression of SMN, and you can see how Zolgensma, a single infusion IV of Zolgensma, achieves strong SMN expression across all target tissues shown here, as well as other organs in the body. I think this, we believe, really definitively shows that Zolgensma can restore SMN expression to motor neurons that lack a functional SMN1 gene. Moving to slide 15. There's been a lot of, I think, questions raised regarding the safety profile, so I wanted to go through this in a bit more detail.
The overall safety data we see fully supports the strong benefit risk profile of Zolgensma in what is a very fragile patient population. It's worth remembering that from a natural history standpoint, SMA type 1 has only a 50% survival at 10 months of age and about an 8% survival at 20 months of age. These are very ill children. Deaths are commonly reported. If you look at the labeling of the competitor therapy as well as the clinical trials of the other investigational therapies, you will see deaths reported in their clinical trials. This is something that comes with trying to treat patients who are in a very fragile, desperate state. Today, we have 151 Zolgensma patients dosed in our studies, and you can see the breakdown here across the various subtypes and the various settings.
Overall, Zolgensma is generally safe and well-tolerated, and the real key is that appropriate care is provided. I discussed already the first death that had a 27-point improvement in CHOP INTEND was ultimately determined to be unrelated to therapy. In our European STR1VE study, we did have a case of a death that occurred in January 2019. We're really working through the final assessment to determine was there any potential contribution of AVXS-101 to this death. It's important to note, as always, when investigators can't completely exclude the contribution of any study medication, they are required to code the medicine as being potentially contributing to the death. This is normal in all clinical trials. It's just in this instance, we have an open label study, and hence this is more transparent.
We provided regulatory authorities and our data safety monitoring board full information in January as well as in early February, all were aligned that no action was required. The study continued per protocol. We have continued to advise physicians that they need to carefully consider the state of the patient before providing Zolgensma, we of course always want to enable this medicine to be available when there is a hope for a child to potentially achieve a transformational result. This particular patient was dosed at 5 months of age, had swallowing difficulties at baseline, had a potential aspiration pneumonia already at baseline. Already a complicated course. I think heroically, the physician and the parents decided to try to do anything they could for the child and enroll them in the STR1VE study.
Within 14 days, there were secretions that were positive for 5 respiratory infectious agents, including RSV, which many of you will know is a very important cause of respiratory distress in children and respiratory death in children. The patient subsequently died of disseminated sepsis and an autopsy results are pending. Of course, when we have those autopsy results, we can definitively determine was there any contribution of AVXS-101 on top of the already complicated situation, including all the infectious agents and the sepsis in the patient. Moving to slide 16. There are over 150 patients treated now with Zolgensma, as we noted. Importantly, only 5% have been excluded to date due to AAV9 antibody titers. We believe this is an important element for your models to understand that actually the exclusion criteria for the use of AVXS-101 is actually lower than we've previously guided.
We've only had 9 of 177 patients screened to date with exclusionary titers, you can see the MDA Clinical & Scientific Conference 2019 data presentation, elevated AAV9 antibody titers as screening should not affect the ability of the vast majority of infants with SMA to receive treatment. We feel like this is an important element now of the story, that the vast majority of children should be able to receive AVXS-101. Moving to slide 17. We have established readiness ahead of our U.S. approval expected now in May per our PDUFA date. You can see from an institutional standpoint, we have delivery infrastructure set up. We're set up for rapid product delivery. We've already reached the 60 top centers, we're ready to cover 80% of infants with SMA. We're continuing to build supply, with the acquisition of a manufacturing site in Colorado.
We have over 1 million sq ft now of manufacturing space and preparing that space to continue to ramp up production. We've engaged over 70 payers in discussions covering 80% of the SMA infant population and expect to have contracts in place at launch to cover 30% of commercial lives. All I think in line with world-class launch preparation by Paul Hudson and his team. Moving to slide 18. BYL is another important milestone for the company in oncology. I think it's important to note, after HER2-positive status and hormone receptor-positive status, we expect PI3K kinase mutation status to become another linchpin of care for patients with metastatic breast cancer. In this study, we demonstrated for the first time a genetically driven treatment could be used in the breast cancer setting.
We anticipate to be launching later this year, though we are in discussions with the continuous assessment process with FDA in an ongoing basis. We also anticipate to launch with an FDA-approved companion diagnostic for the PI3K kinase test, as well as we've engaged payers to cover over 80% of the target population. Again, we're ready for a strong launch. This launch will be initially a bit slower as we try to achieve strong testing coverage, but then we expect a strong uptake in the future. Moving to slide 19. I wanted to also just briefly highlight some new data with respect to fevipiprant DP2 antagonists, which showed asthma disease-modifying potential in a recent study.
If you look at the left side of this graph, you can see a readout from "Science Translational Medicine" that demonstrated fevipiprant was the first studied medication to impact airway smooth muscle in patients with asthma. This is a disease-modifying effect in patients, the first time it's been, to our understanding, demonstrated by biologics or small molecules, and indicates again why we think this could be a very important medicine pending the phase III readouts. You can see on the right-hand side, we have a full range of trials covering exacerbation, lung function, and safety, and we're looking forward to providing additional data readouts later this year on what we believe will be a very exciting medicine for the company. Lastly, before handing it over to Harry, I wanted to welcome Richard Saynor, our new Sandoz CEO and member of the executive committee.
Richard joins us from GSK, where he's the Senior Vice President of Classic and Established Products, overseeing an approximately CHF 10 billion off-patent medicines business at GSK. Previous to that, he was at Sandoz, where he oversaw Region International in the Latin American region, so understands well Sandoz headquarters, and understands Sandoz legacy and Sandoz footprint. He brings experience of 20+ years in the space, along with a real track record of building successful teams. We're looking forward to having him join in Q3 to enable us to drive the Sandoz transformation. With that, I will hand it over to Harry. Harry?
All right. Thank you, Vas. Good morning and good afternoon, everyone. Please note that my comments refer to the results of continuing operations and growth rates in constant currencies, unless I note otherwise. To assist with your modeling, the 2018 and 2017 results from continuing operations are now available on our website. Slide 22 shows the summary of our strong quarter 1 continuing operations performance, which excludes the Alcon business. Sales grew +7%, mainly driven by the continued excellent momentum from all of our key growth drivers, including Cosentyx, Entresto, and Lutathera, as well as growth from Promacta, KISQALI, KYMRIAH, and Tafinlar/Mekinist. Lucentis, Xolair, and ILARIS grew double digit. Even established medicines like Galvus, Diovan, and Exforge contributed to growth.
Overall, in quarter 1, we saw excellent execution by our pharma and oncology teams, driving significant sales growth of our launch products and the vast majority of our 15 in-market blockbusters. Core operating income grew +18%. This was clearly driven by good sales momentum. In addition, we see our productivity programs kicking in, driving up gross margin and driving down total function cost as a % of sales. As a result, sales growth and productivity programs more than offset increased investments, including pre-launch investments for Zolgensma. Operating income and net income grew 4%, impacted by a net impairment charge and lower divestment gains this year versus prior year. Free cash flow was $1.9 billion, broadly in line with prior year. Please recall that quarter 1 2018 had a one-time sales milestone receipt of $0.4 billion.
On slide 23, you see the resulting core margin expansion in quarter 1 of 260 basis points for both innovative medicines and continuing operations. Let me briefly comment on two of our major productivity programs. Novartis Technical Operations transformation and resulting manufacturing efficiencies, as well as favorable mix, drove gross margin improvements. Novartis Business Services also contributed to core margin expansion with continued efforts on standardization and footprint optimization as we leverage even more our global shared service centers. Innovative medicines core margin expanded to 33.3%. This puts us very nicely on track for the mid-30s margin goal by 2022. Sandoz margin also grew as gross margin improvements more than offset the U.S. pricing pressures. Before we come to our updated full-year guidance, please keep in mind that we expect to see higher generic headwinds in the upcoming quarters.
This is mainly expected in our oncology business on Xgeva and Afinitor. In addition, we continue to monitor Sandostatin LAR. Some of the quarter 1 growth in Diovan and Exforge was mainly due to competitive supply issues and may not continue. On slide 24, you see our updated 2019 full-year guidance for the new focused medicines company. This excludes Alcon and Sandoz U.S. dermatology and oral solids portfolio for the full year in both 2018 and 2019. In short, we are confirming our sales guidance at mid-single digit. As Vas mentioned earlier, we are raising our core operating income guidance to grow high single digits following the strong quarter 1 performance. Some of you asked this morning what to base the guidance for the new focused medicines company of in 2018. Let me give you some hopefully helpful details. Alcon is excluded from continuing operations, that's straightforward.
The to-be-divested U.S. generic business generated, we said, prior CHF 1.2 billion. Some of you asked for very detailed on that. It's CHF 1,174,000,000 of sales in 2018, and the core operating income, where we said CHF 0.3 billion, is CHF 294 million of core operating income in 2018. I hope that's helpful as you model the new focused medicines company. With continued good momentum, we could finish 2019 at the upper end of our sales and core operating income ranges. We need to consider the upcoming results from our catalyst-rich pipeline in 2019. This will allow us a bit later in the year to continue to fine-tune our full-year guidance. On slide 25, you see how currencies would impact our results if mid-April rates prevail for the remainder of 2019.
The full-year impact on sales would be minus 3%, and on core operating income, we would have a minus 3% to minus 4% impact. As you can see on the slide, the negative currency impact is more pronounced in the first half of the year as the U.S. dollar strengthened mainly during quarter three of last year. As a reminder, the expected currency impact is updated on our website monthly. With that, I hand it back to Vas.
Thank you, Harry. I appreciate the great interest in the company. We've had an outstanding, I think, start to the year, and we look forward to answering your questions. Operator, we can open the line for questions.
Absolutely. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. You can cancel your request at any time by pressing the hash key. Your first question comes from the line of Graham Parry of Bank of America. Please go ahead.
Great. Thanks for taking my question. I've got one on Gilenya and then one on Zolgensma. Firstly on Gilenya, could you just remind us where you are in your arbitration negotiations with Mitsubishi in terms of Gilenya royalties? I see they stopped booking the royalties overnight pending the outcome of arbitration. Can you confirm, are you continuing to book royalties in your numbers and what the assumption on royalty post the August composition of matter patent expiry is baked into your guidance currently? Secondly, on Zolgensma, could you give us an update on the label expectations beyond the START and STR1VE populations that you were alluding to on the fourth quarter call? On the second death, your slide doesn't mention the neurological complications that were referred to in the media statements.
Could you elaborate on these, why you think the investigator determined that respiratory infection could possibly be treatment related, and the expected timing of autopsy results and DSMB final determination on whether this was a drug-related death or not? Thank you.
Great. I'll actually start on the Zolgensma topic on the safety, and then I'll hand it to the colleagues to say Gilenya and then also the Zolgensma labeling. This is a situation where we had a disseminated sepsis, and in sepsis you typically have neurological complications, and the neurological complications, to our estimation, were related to the sepsis. I think the only question here is does the administration of an AAV therapy in the context of an infection lead to an exacerbation of the infection? In this case, I think we've advised all physicians going forward to ensure that there's appropriate steroid administration and ensure that all the supportive care is given. But I think, one, the read across to the platform technology is not in our view appropriate.
This is really about when you provide a therapy in the context of a very complex sepsis situation, you can exacerbate the overall care. That's why the regulators were unconcerned. That's why the DSMB was unconcerned. We'll complete the autopsy results shortly and, of course, finalize the assessment. I think the key thing to note is regulators, DSMB, clinical trials, all on track, no change, and no change for our expectations on timing of approval. With respect to Gilenya, Mitsubishi, I'll give it to Paul. Paul?
Yeah. Thank you, Graham, for the question. Just to remind everybody that our full-year core operating income guidance reflects the current contractual terms with Mitsubishi. No additional change there.
John or Paul, in terms of the Zolgensma labeling?
Yeah. In terms of Zolgensma labeling, Graham, as you know, we are studying this in a variety of SMA types, including Type 1, 2, and 3, and we have four studies ongoing. What I would say is that the discussions with the FDA and other regulatory agencies are going well, and we're continuing to advance as we have these conversations.
We can provide, of course, further updates once we see the final labeling from the FDA. Thanks, Graham. Next question, please.
Thanks.
Oh, go ahead. Oh, go ahead. Next question.
Thank you. Your next question comes from the line of Andrew I beg your pardon. Andrew Baum of Citi. Please go ahead.
Thank you. Couple of questions. First for Vas. If I remember correctly, you gave an upper end of a value-based reimbursement for Zolgensma at $5 million per patient. Does the data from the further follow-up of STR1VE still support that analysis? The second question, again to Vas. Perhaps you could talk us through how you see Novartis' role as a cell therapy player. Arguably, the outlook is getting better from a U.S. perspective, given the national coverage determination, greater tech-related add-on payments. Your pipeline seems to still focus only and very much on CD19. Should we expect additional business development for novel antibody constructs expanding into TCR as some of your competitors have done? Are you following a different strategy for cell therapy here? Thank you.
Thank you, Andrew. First on Zolgensma, I think has been well published through the various reports from ICER. At a $500,000 per QALY cutoff, the medicine is cost-effective in the range of $4 million-$5 million. At $150,000 QALY cutoff, it's cost-effective at a range of $1.5 million. That's the range that we're looking at. We don't believe any of the clinical data that we saw in the STR1VE study changes our assessment. It's completely consistent with the overall performance we've seen. I think as ICER noted in their report, they recommend we should price lower than $4 million-$5 million based on their final report. We take that as useful information, and of course, we'll announce our final price in due course. That hopefully gives you some of the boundaries. Now, in terms of cell therapies.
We believe fundamentally, along with AAV9 gene therapy and radioligand therapy, having the capability to do ex vivo cell therapy is going to be critical for our long-term ability to generate new medicines and continue to be a leader as a focused medicines company. That's why we started with CD19 CAR T. Our initial focus in cancer will continue to be on B-cell therapies. You saw we did an investment in a company called Poseida Therapeutics for an additional BCMA option. We're continuing to build out our own portfolio internally of next generation as well as buy specific programs within the space of targeting B-cell cancers. That's one thrust. Alongside that, we continue to look at using ex vivo cell therapies in a range of other conditions. Whether it's in next-generation technologies for hematology, looking at other therapeutic areas.
That's part of the reason we've built out the global manufacturing base that we have with a manufacturing center now in the U.S., three manufacturing centers in Europe, a manufacturing center in China, and a manufacturing center in Japan, as well as lentiviral production capability both in-house and external that we're building. We believe then we would be the logical company to be able to scale ex vivo cell therapies across a range of indications. We'll continue to look externally, but we also, through both our internal pipeline, our alliance with Xencor, our alliance with CRISPR companies, we are also working on our internal portfolio as well. Thank you, Andrew. Next question.
Thank you. Your next question comes from the line of Tim Anderson of Wolfe Research. Please go ahead.
Thank you. Kind of a question across the pipeline, which is slide 11. You describe major launches planned through 2021, and you show 13 different medicines. If we ignore the three already approved products, Cosentyx, Entresto, and MAYZENT, can you pick out the top three that you think have the biggest sales potential, assuming that data comes out favorably? You've got products like Zolgensma, RTH, fevipiprant, SEG101 , and others. You have a very full pipeline, but it would help narrow down the focus for investors of what could matter most. Then RTH258, a quick question. Relative to last quarter's update, it looks like the timeline for filing DME and RVO each got pushed out by one year, and I'm wondering what drove that.
Thanks, Tim, for the questions. In terms of the three top, we're excited, of course, by the whole range of products that we have. I'd say, of course, Zolgensma is absolutely critical and one we believe has significant potential across the range of SMA indications as a truly foundational therapy for SMA. Clearly, RTH258 is something where we believe we can build our next-generation technology beyond Lucentis, also with the U.S. possibility to really drive significant potential in this space. I think the big upside wildcard we have is QAW039, where we could be the first oral medicine in a range, a large patient population positioned before biologics in patients with severe asthma, who, if you look at the numbers, patients who have already on triple inhaled therapy, but still not adequately controlled, who are still not on a biologic.
This is a very large patient population that we believe could be a major medicine if ultimately successful. Those are three, but again, I think all of them are quite exciting. I would note as well, we'll continue to provide more transparency at meet the management and other settings on the next wave of innovation we have with over 25 potential blockbusters in late-stage development. Now in terms of RTH258 delays, John?
Yeah. For brolucizumab, Tim, the way that we capture these on timelines often is year by year. What you see perhaps is a shift from 2019 to 2020 per se, but it's actually not a whole year in terms of delay. Often these are quarters. In terms of the DME study, there was just some discussions with the regulatory agency for us to be able to begin recruitment of that trial. That was a slight delay of about one quarter. Also for the RVO study, it was a similar situation for us. Really these are not slippage in terms of one year, but just a quarter in terms of logistics.
Thanks, John. Thanks. The next question?
Thank you. Your next question comes from the line of Matthew Weston of Credit Suisse. Please go ahead.
Thank you very much. Two SMA questions if I can, please. We've already had a question about price, I fully understand that you're not going to comment, but one other thing that's very important for our models is when the income is actually going to come in for each patient. I note with interest the comment that you had a high interest in innovative contracting methods on your slide 17. Vas, I'd be very interested if you could just set out, in broad brush strokes what those innovative contracts could look like in terms of revenue recognition as a proportion of the total cost per patient in year one versus later subsequent payments. Secondly, I also note in clinical timelines in the press release, your oral splice inhibitor, LMI, moved forward a couple of years in terms of filing to 2022.
Could you let us know what in terms of data has led you to bring that forward, and such that you're now seeing it in a much more reasonable time frame? Thank you.
Great. Thanks, Matthew. Paul, why don't you start?
Look, we've done a lot of research about pricing. We've really been listening very actively. The vast majority, just to be clear, would prefer to pay upfront. It's very much a budget allocation process and a phasing process. We'll be prepared for that, but there are a group of payers that prefer to pay over time and spread the cost and we'll allow that, I think, up to five years in terms of return. As for revenue recognition, Harry?
Yes, Matthew, what we basically talk here a bit is what is the pattern of the cash coming in case we would be collecting and it would be over a payment of the three, four, five years. The cash may be delayed. We could still choose about if they're a financing company in between. We will see whatever is the NPV optimal way of doing that. In terms of sales recognition, I would expect, as IFRS asks for sales revenue recognition when virtually certain, we would probably book the majority of the sales once basically the respective conditions are fulfilled. In case there's a performance condition with it, based on the clinical trials and the real-world evidence, we may have a small rebate that we book as we recognize the sales. Sales I would expect to come quite quickly with the patients.
On the cash side, depends a bit what revenue model we implement here.
John, in terms of branaplam?
In terms of branaplam, as you know, Matthew, we believe that Zolgensma is the foundational therapy for patients with SMA. At the same time, given the severity of the disease, we also want to explore all opportunities for these babies to continue and improve. We currently have a dose-ranging study that's ongoing for branaplam, and that's continuing to move forward. Based on those results, I think we'll advance in terms of how we would register this product moving forward, and we'll have further understanding as we get these results.
Okay, thanks, John. Thanks for the questions, Matthew. Next question?
Thank you. Your next question comes from the line of Richard Parkes of Deutsche Bank. Please go ahead.
Hi. Thank you very much for taking my questions. I've got a couple of product questions as well. Firstly, again, just on SMA, we're obviously looking forward to the data at AAN on SMA Type 2 patients. Obviously, there's a large prevalent patient pool there. I'm just wondering how you think about penetrating that. I realize that AAV9 antibody exclusion is minimal for the infant population, but could you help us understand what proportion of Type 2, Type 3 patients might be eligible based on this and any other eligibility criteria, and how much manufacturing capacity might be limiting to your ability to address that need? That's the first question. The second question was on siponimod.
Given the subsequent approval of Mavenclad with a label encompassing active SPMS, I'm wondering how you feel this impacts the drug's differentiation, and is there any risk that other highly active MS drugs could get label updates that specifically call out activity in that patient population? Thanks very much.
I think Paul, both for you.
Yeah. Thanks, Richard, for the question. We're looking forward to AAN. Just to remind everybody, there's a lot of data that will be shared at AAN. There's more than the additional 12 months follow-up on START. There'll be additional 3 months data on STR1VE. We'll have first presentation of some of the data on SPR1NT. Of course, an early look at the STRONG data, the first presentation of that. I think that's where you're heading with the intrathecal formulation and the potential to go after, if you like, older patients. There's just a couple of important things to realize, and I think Vas made it upfront in his presentation about the neutralizing antibodies and the effect whether a patient could be treated at all. We see the large majority of patients suitable for treatment.
Some of it will be weight-based, and some of it will be approached either IV or IT. We feel very confident that there is a large patient population that we will be eligible for. A lot will depend on the label and where we net out, but feeling very good about that. We'll have an investor call on May the 8th. I think that was mentioned. As for siponimod, again, Vas mentioned up front, we're the only successfully studied medicine in secondary progressive MS. That's quite a big deal, and whilst others may claim an overall ability to be indicated for active SPMS, it really is about being studied for it. I had the opportunity to meet a couple of opinion leaders last week, very fresh after launch, who threw that point back at me.
They're most interested in the drug with evidence in this patient population, not just getting the additional indication, but being proven in that patient population. I'd rather not comment on Mavenclad, but I think the label sort of will help you understand why we think siponimod is really the right option for the broader patient population.
Thanks, Paul. I think the other element to keep in mind is even with the presence of AAV antibodies, they have to be neutralizing against the AAV9 subtype to really preclude our ability to use the therapies. That's the other thing to keep in mind as you watch this space. Thanks, Richard. Next question?
Thank you. Your next question comes from the line of Keyur Parekh of Goldman Sachs. Please go ahead.
Good afternoon. two questions, please. one on SMA and the second on margins. First on SMA. Vas, I know there have been a couple of questions asked about the breadth of the label.
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Hello?
Go ahead, Keyur. Why don't you start again? I think you had a question on SMA.
The second one on margins. On SMA, I know there have been a couple of questions asked about kind of the breadth of the label, but can you share with us what ongoing data sets the agency has had a preview to look at beyond type 1, and how comfortable do you still feel about a broad label beyond type 1? Secondly, on margins, very impressive kind of pharma margins this quarter. Can you tell us what you're doing differently and why this may not be sustainable as we think kind of beyond 2019?
Great. Thanks, Keyur. I think on SMA, as we noted earlier, we're in discussions with the agency regarding the final labeling and prefer not to comment on the breadth of the label as we're in the midst of those discussions. I think, as you know, in the START study, we had remarkable results and I think in the STR1VE study as well, again, very strong results. I think all of that is forming the basis of how the FDA is ultimately looking at the therapy. In terms of the margins, I'm very pleased with our performance, and I think there's, again, two key drivers for this. One is the strong sales performance of our growth drivers. Cosentyx and Entresto now are fully invested in, the sales growth is falling to the bottom line.
There's strong cost discipline in innovative medicines that the gross margin is falling through to the bottom. We see that also in Oncology, where we see the upside performance in some of our key growth drivers. Again, gross margin falling through. I think also what you're seeing now is our renewed commitment and very clear commitment to productivity. We've stated multiple times we are serious now as a company about productivity, both in Novartis Technical Operations and Novartis Business Services. We had very strong COGS performance in Novartis Technical Operations, and we've really taken on an ambitious productivity program in that organization. Similarly, in Novartis Business Services, again, we've brought on, I think an outstanding leadership team with executives from outside the pharmaceuticals industry who really now try to build a world-class business service organization that would be competitive with business service organizations in any industry.
That's the benchmark. We're starting to see that productivity now start to also flow through the P&L. Of course, we aspire to continue the momentum, but as Harry said, we need to of course, be judicious when we think about some of the potential patent expiries and competition we face, particularly in Oncology with respect to Afinitor and Xgeva. I think we'll see how it goes. Of course, we want to outperform if we can, but we'll continue the momentum from here. Any other comments here? No. Okay, good. We'll move to the next question. Thank you, Keyur.
Thank you. Your next question comes from the line of Richard Vosser of JPMorgan. Please go ahead.
Hi. Thank you for taking my questions. First question, just you mentioned on the established medicines business, Diovan, Exforge, potentially having extra competitors. Perhaps you could talk more broadly about the sustainability and price pressure potential that you might see in China. Volume potential going really well, but just thoughts on that sustainability. A little bit more detail there would be great. Second question, just on the oral solids business within Sandoz, just to pin down, give us a little bit of help with the continued business. When exactly we should think about closing and when we should have that coming out of sales and profit for this year. Thanks very much.
Great. On China, Paul, or on established medicines, Diovan and then China.
Yeah. On established medicines, we're really pleased with how it's come together, to be honest, and we've been much more efficient about how we supported the medicines, digital, other things. Been a little bit leaner to reinvest in growth drivers, and that's been very sensible. Price pressures have been not unexpected and again, well managed and predicted, so reasonable there. The real excitement actually is coming out of China and what we're doing and how we're putting the business together. Vas mentioned the potential for Entresto to be a significant medicine. Already the best primary care launch of an oral medicine in the last 2 decades. We've got Lucentis growing at a significant rate. We've got Cosentyx approval. We'll get reimbursed next year, Entresto reimburse later this year.
The investment over the last two or three years are really starting to pay back and we shared in Meet the Management, I think, last year, the real one to watch for us in terms of a growing geography is going to be China, and we're really very well set. Even if there is some price pressure, our focus has been around volume and growing it even in innovative medicines, and we think we're set up very well to do that.
Maybe just to build on Paul's comments. In China broadly, we see three key trends. A first key trend is there is the effort to tender the established medicines, which, in the case of Diovan and Gleevec, of course, will lead to additional pressures. That's going to free up CHF 30 billion, we estimate, of money that can be reinvested in innovation. Combine that in a moment in time when the China FDA is becoming really world-leading in terms of its policies of allowing international studies to be done in China directly, more rapidly approving medicines, and then a more regular reimbursement environment, predictable reimbursement environment. Our strategy in China is to pivot to new launches. Paul and Susanna's organizations are very much focused on driving new launches to enable us to double our China business, we hope, over the coming five years.
That's something we'll want to keep you updated on over the coming years. Great. Thanks, Richard. We had oral solids, sorry. Harry.
On oral solids. The to-be-divested product portfolio to Aurobindo. Richard, we continue to expect that divestment will be completed during 2019. Now it's of course pending closing conditions, including some regulatory approvals. We are not in control of that because Aurobindo is leading this. From a forecast assumption, it would continue to take quarter 3. Of course, we cannot be certain about that. I think that's a good forecast assumption. What we also will do once the divestment is completed, we would provide them pro forma financials for the continuing operations, which would exclude that to-be-divested business from 2018 and 2019, so it's easier for everybody to model.
Great. Thanks, Richard. Next question, operator.
Thank you. Your next question comes from the line of Florent Cespedes of Société Générale. Please go ahead.
Good afternoon, gentlemen. Thank you very much for taking my questions. Two non-SMA related questions. First, for Susanne on Kisqali. The performance this quarter seems to be a bit better. Could you please elaborate on that if you see a kind of a trend or any reasons to explain this? My second question for Paul on Tasigna. The sales performance on this product this quarter is a bit softer. It's a mature product, could you elaborate a bit or give any reasons for that? Do you see a trend behind that? Thank you very much.
Thanks, Florent. Both Kisqali and Tasigna. Susanne?
Thank you. Thank you, Florent, for the question. Kisqali, we had a very good quarter, very pleased with that. We could reach CHF 91 million, and we really see gaining momentum. That is driven mostly by the expansion of indications into premenopausal setting and into the combination with fulvestrant. That makes us the CDK4/6 with the broadest data set in first line. Outside U.S., we see very strong growth driven by further penetration. Also in the U.S., we see very good momentum the last weeks. As we always said, Kisqali remains a very important growth driver for Novartis Oncology, and we are confident that this product has the potential to reach blockbuster status. Regarding Tasigna. Tasigna had a few soft months.
I think as we also said last quarter, we have a very focused action plan to differentiate Tasigna in terms of efficacy and broader and deeper response. We are confident that we can return to modest growth by the second half of the year.
Great. Thank you, Susanne. Thank you, Florent, for the questions. Next question, operator.
Thank you. Your next question comes from the line of Peter Welford of Jefferies. Please go ahead.
Hi, it's Peter Welford at Jefferies. Two questions, please. Firstly, on the Sandoz business. I noticed that the biopharmaceutical sales seemed perhaps a little weak this quarter. Any sort of insight on the growth trajectory for those and whether or not we should anticipate an uptick during the course of the year? Perhaps a comment there on what you're seeing in the underlying markets there. Secondly, on Lutathera. Possible to give us the U.S. sales perhaps this quarter or the ex-U.S., U.S. split? Also any commentary on the types of patients you're typically treating. Is it GEP-NET patients or are you seeing uptake in a broader range of NET patients? Thank you.
Thanks for the question. On Sandoz Biopharmaceuticals, globally, we saw very strong growth really driven by Europe. Europe is performing well with the recent launches of our Rixathon, our rituximab biosimilar, and Erelzi, our etanercept biosimilar. We're also now preparing for what we hope is an approval of our pegfilgrastim biosimilar relatively soon to build on what I think is arguably the broadest portfolio of biosimilars in the market. Any softness we've seen is in the U.S. where we've had additional competition both on Glatopa, our Copaxone generic, as well as on filgrastim, where we have additional entrants coming into that product line. Key for us in the United States will be continued launches. We are on track now with pegfilgrastim. I think that will enable us hopefully to have a potential approval depending on how FDA finds the resubmitted data.
That's a six-month clock from our resubmission as it was a CRL. We have the outstanding situation with Erelzi in the U.S., as well as upcoming future filings and launches. I think now the key for us in the U.S. will be to replenish the biosimilars portfolio. With respect to Lutathera, Susanne?
Vas, as you highlighted, we were very pleased with the performance, Lutathera reaching more than CHF 100 million. To your question on where the sales come from, it's the vast majority coming from the U.S., where we really see great momentum. We have now more than 125 centers using the treatment, treating more than 2,000 patients. We also see now first sales coming from Europe, vast majority coming from the U.S. and some sales coming from Europe. When you ask about patients, it's neuroendocrine tumors, and it's mostly second-line patients that see some progress. As you remember, the results from NETTER study really showed tremendous impact on progression-free survival and overall survival in this setting. This is where the majority of the patients come from.
Thank you, Susanne. Thanks, Paul, for the questions. Next question, operator.
Thank you. Your next question comes from the line of Seamus Fernandez of Guggenheim. Please go ahead.
Thanks for the question. I was hoping that we could talk a little bit about incremental margins and a couple of opportunities. First off, the incremental margins that we can sort of think about reading into the underlying core P&L for Zolgensma, despite, obviously cash flows dynamics from some of the payer agreements notwithstanding. Just hoping to better understand the kind of incremental margins, and the contribution that this can make to the margins going forward. As well with Zolgensma, can you just help us understand the challenges that the company might face for patients who are already on drugs like Spinraza? How you will deal with that within the context of the payer environment. The second question's on RTH. Again, incremental margins there.
I think I recall, Vas, you talked about some challenges with manufacturing with RTH and getting that to consistent pharmaceutical margins for an antibody product. Can you just update us on that? It seems like there's also a heavy royalty burden that we should be thinking about with Lucentis relative to that, certainly RTH could be a positive contributor there. Thanks so much.
First on margins with respect to Zolgensma. Thanks, Seamus, for the questions. Harry?
I would say, actually, I can almost take them a bit together because these are, in the end, different price levels. Yes, different price populations, in terms of cost of goods and royalty burden and so on, quite high margin products. There's some royalties on Zolgensma, very focused, as you can imagine, marketing and sales effort. Very high margins expected on Zolgensma. Same is true for RTH with a slightly different mix. Of course, there's a bit more marketing and sales, even when you look at Lucentis footprint, it's quite focused and the specialty and focused center market. Both of these products, I would expect to significantly contribute after launch period to our margin. Not only the sales, but margin profits and cash flows.
Paul, on Zolgensma switching.
We are aware that it's going to be one of those things that is being discussed and it'll be very much for the payers to decide how they handle that. But from our perspective, we've worked through the MAP program to try and make sure that it is an option for patients. It'll be very much case by case, but I think we're very open to allowing it happen.
Vas, on RTH manufacturing. One of the things I'd want to clarify is our filing now involves the updated manufacturing process. You'll recall that we had a delay in RTH because we needed to update the manufacturing process. We completed that. We completed the bridging study. The cost of goods with respect to RTH now are competitive with what we would expect for any of our biologic products. Thanks, Seamus. Next question, operator.
Thank you. Your next question comes from the line of Mark Purcell of Morgan Stanley. Please go ahead.
It's Mark Purcell from Morgan Stanley. Thank you so much for taking my questions. A couple of follow-ups on ZOLGENSMA, then just firstly on Sandostatin LAR. You said you're keeping an eye on the generic situation there. Could you help us understand the developments you're watching and what we should expect in terms of competitive dynamics going forward?
Then going back to ZOLGENSMA, some really encouraging pre-launch prep that you've described very clearly on slide 17. With relation to previous studies, in terms of combination use, are you going to do any combination trials yourselves in patients that are also going to be treated with SPINRAZA? In terms of patients who already received ZOLGENSMA and then have followed up with SPINRAZA therapy on top, can you help us understand the reasons why these children are using both drugs together as opposed to ZOLGENSMA as a single therapy? Then there was an earlier question on manufacturing.
Could you help us understand the current manufacturing footprint, the capacity you have in terms of treatment, patient numbers, in terms of the IV, and as you move into intrathecal, how that sort of addressable patient population is going to change, and if we should expect any potential changes in terms of safety and efficacy, given you're moving from a systemic IV product to something that may have less systemic exposure?
Thank you, Mark, for the questions. First on Sandostatin LAR, Susanne.
On Sandostatin LAR, the situation has not changed, as Harry mentioned, we are monitoring closely. The situation is that we are aware of one company that has initiated regulatory procedures in Europe, and we assume the same to be the case in the U.S. No change at the moment, but we are monitoring closely.
With respect to Zolgensma combination trials, manufacturing capacity, et cetera, Paul.
On the combination trials, I think we've mentioned this before, it's probably worth repeating. Where there was evidence of patients getting both, it's where patients had gone into the study, desperately ill children into a study with Zolgensma, and of course, the parents wanted to give whatever they could on top. I think that's understandable because it was still an investigational compound at that point. I think now the question and the whole conversation has moved very separately to how do we move patients from SPINRAZA to Zolgensma, and we're collecting the data to do that and sharing it where we can. We feel confident that we'll be able to help physicians and payers understand that as we go. There is also, by the way, an appetite from payers to make that switch. We'll see where we get to.
In terms of manufacturing, a general manufacturing update, Vas mentioned the million sq ft. We were already set up before we took on the Colorado facility to match what we think will be the demand over the next year or so. We took the opportunity to take on a high-tech facility, a biologics GMP-approved facility to make sure that as we go further into the prevalent populations, if there's an unprecedented level in the 2s and 3s, we can cover that, too. We have more than enough capacity to deal with what we think could be an unprecedented demand.
Thank you, Paul. Thanks, Mark, for the question. I'd also want to highlight that again, we'll present additional long-term follow-up data from the START study, but we are seeing continued sustained efficacy in the patients that we've described to you in the past. Any patient who chooses to add on a therapy, as Paul said, is purely out of a patient's decision or parent's decision, not because of anything with respect to Zolgensma, in our view. Next question, operator.
Thank you. Your next question comes from the line of Steve Scala of Cowen. Please go ahead.
Thank you. First, on the psoriasis market, is there anything you would like to highlight in the risankizumab label or price that represents a competitive advantage for Cosentyx? Vas, when you were speaking about the ARROW trial, you mentioned rapid onset. Is that likely to be the sole point of differentiation versus the IL-23s in psoriasis? Secondly, on the Gilenya royalty question, to clarify, what is now assumed in the revised operating income guidance? Is a lower royalty to Mitsubishi assumed, so operating income guidance might have to come down if the lower royalty doesn't happen? Is the current royalty assumed, so operating income guidance might have to move higher if a lower royalty is realized? Thank you.
Thanks, Steve, for the questions on psoriasis, risankizumab, and the ARROW study. Paul?
Another IL-23 enters the market. We feel that the market is well-served with the medicines it has already. We think that a skin-only approach is part of it. You've seen from the data Vas showed on NBRx, although NBRx is volatile, it does show you what a position we've taken as one of the leading, if not the leading new medicine in the psoriasis space. Our growth in psoriasis is above market continuously. We don't think there's anything clinically to be gained from risankizumab entering the market at all. We do respect AbbVie and their heritage and their presence in the market and what that could mean. We think that more than skin is needed to be treated, and we've seen from Tremfya that we know how to handle an IL-23 in general terms. In terms of Gilenya, did you want me to-
It was the ARROW study.
Oh, I'm sorry, the ARROW study. We said when we took this study on, we wanted to advance the mechanistic understanding for the community. We think there is a lot more to psoriasis, and we think that's why the IL-17 mechanism is going to be absolutely critical. I think we get the readout towards the end of the year from recollection, and we're looking forward to adding that and helping with the debate. You've seen from our performance and our growth in quarter one versus quarter one last year, we're in a very good place. We've taken some very sensible decisions, and we feel that our NBRx growth is showing that we've made some good choices.
Before I move to Gilenya, maybe just a few other quick points on Cosentyx. I think the key thing to keep reminding colleagues on the phone is that IL-17A, we've demonstrated through the data we have on all of the additional manifestations of psoriasis, whether it's palm or plantar, whether it's nail, whether it's scalp, that IL-17A seems to be really a preferred therapy from the data we've generated to date in treating these hard-to-treat psoriasis patients. In addition, we know that the IL-12/-23s have not been successful to date in ankylosing spondylitis, particularly with respect to some of the elements in the joint. Again, IL-17A proves itself to be really a differentiating medicine in ankylosing spondylitis. Then we also believe in psoriatic arthritis, particularly with respect to enthesitis, which is the inflammation at some of the insertion points in the joint.
There are multiple points of differentiation that go beyond speed of onset, which we also think we've demonstrated as well. Now, with respect to the Gilenya royalty, Harry?
We cannot really add much to what Paul has said here. We reflect the current contractual terms, and I would not expect the guides to change one or the other direction anyway. That's what we can say, and unfortunately, not more.
Okay, thanks, Steve. Next question.
Thank you. Your next question comes from the line of Simon Baker of Redburn. Please go ahead.
Thank you for taking my questions. Two, please. Firstly, I wonder if you could give us an update on the expected timing and potential remedies in your litigation with Amgen with respect to the Aimovig co-promotion. Secondly, now that you've completed the dividend in kind distribution of Alcon to Novartis shareholders, I was wondering if, in principle, the same could be done with the Roche shareholding that you have. Thanks so much.
Yeah. First on the Amgen case, I'll hand it over to Paul. Paul?
Just one sentence or two before we get to the case itself. We're delighted with the progress we're making with Aimovig, we're thrilled with what we're doing for patients. It's a huge unmet need, we don't blink. That is business as usual for us, we go on to get reimbursement and approvals across Europe and the rest of the world. As for the legal dispute, well, we're very confident in the strength of our legal position. One thing you may be interested to hear is that we, in fact, the U.S. agreement does not even contain the clause on which Amgen relies as a basis for its termination. We feel very good about where we're positioned. Above all, and this happens between big companies occasionally, above all, it's business as usual with migraine and migraine patients and Aimovig.
With respect to the Roche stake, there's no change in our position. It continues to be a financial stake with a strategic component. On the next question, operator.
Thank you. Your next question comes from the line of Laura Sutcliffe of UBS. Please go ahead.
Hello. Thank you. Two questions, please. One on Zolgensma, then a follow-up on margins. On Zolgensma, if I read the slides from your conference presentation last week correctly, there were noticeably more adverse events in STR1VE than there were in your earlier study. As far as I understand it, the product that was used in STR1VE was commercially produced, whereas the one for the earlier study was not. Is that a potential source of the difference? If not, where do you think it could come from? Secondly, on margins, could you just outline some of the pushes and pulls that you expect on your gross margin in innovative medicines, specifically throughout the rest of 2019? Thank you.
Yes. On the first question on Zolgensma, I'll hand it to Paul. Paul?
Yeah, an interesting question. We don't see any difference, in fact, and we performed extensive analytical and clinical comparability studies. We think any difference at all is in the baseline characteristics of the patients. Let's also be clear, the improvement made by the children is significant on CHOP INTEND, et cetera. We feel very good about the results and look forward to sharing more and across more studies at AAN.
Yeah. I think we don't see the safety difference that I assume our competitors are feeding. On the margins, Harry?
Yeah, the gross margins, pushes and pulls. Of course, we have, on the one hand, always mix. It's very important. As you know, most of our products are quite high-margin products, so high gross margins. A few are lower. On the other hand, we see that the key growth drivers have quite high margins. Afinitor, Exjade, and the tail end of Gleevec, of course, are also very high margins. I would say from that standpoint, the mix probably neutralizes as we expect a bit more generic impact in the future quarters. We have the whole technical operations transformation plan that already has contributed, but we expect that to continue. A bit hard to completely predict, but I would say that we have made good gross margin improvements, and if you take everything together, you probably expect roughly the same gross margin year-over-year.
Great. Thanks, Harry, thanks for the questions. Next question, operator.
Thank you. Your next question comes from the line of Kerry Holford of Exane. Please go ahead.
Thank you. Yes, two questions please for me. Firstly, on Entresto, I wonder if you can just comment on the U.S. growth in the quarter, which was very strong. How sustainable is that going forward? Can you talk about the underlying volume demand versus price contribution in the quarter? Was there some stocking in Q1? Also, I wonder, has this drug also been a beneficiary of the generic valsartan supply shortage in the U.S.? Secondly, on MS, can you quantify, I believe there was some de-stocking for Gilenya in Q1. Can you quantify that and also talk about the underlying demand for that product? Talk about the relative positioning of MAYZENT versus Gilenya. Are you yet at the position where you're talking about negotiations for access, needing to offer high rebates on Gilenya, perhaps in exchange for access at MAYZENT? Thank you.
Paul, both for you, Entresto and Gilenya and MAYZENT.
It sounded a bit more like more than two questions, happy to give some fast answers. Entresto performance has been fantastic. We're now really started seeing the fruits for all the effort put in. We saw the PIONEER-HF data kick on, we're seeing the hospital initiation data set complete, feeling good about that. Will it continue? We believe it does continue, we believe that PARAGON-HF readout is going to be the next sort of accelerator if the results are good. We know confidence is high, we know that Entresto becoming standard of care in many settings is a really important position for us. For Gilenya, the comments around, there is definitely some de-stocking.
There was, of course, as I mentioned in Q1 last year, there was some stocking, the like-for-like comparison, we'd have been very close to consensus, I think, without the inventory moves. Underlying demand is solid, frankly, no issue there. As for MAYZENT, 50%-80% of patients progress. I referred to some opinion leaders I spoke to last week. They know that, they've not had an opportunity to have a specifically proven medicine in that group. They look at MAYZENT's position as taking all comers who are progressing, not specifically Gilenya. We'll continue as we do, as we go on to identify this patient population, feel confident as we begin to educate and communicate that we'll be in a very good place with MAYZENT right across all medicines from a switch potential.
Good. Thanks, Paul. Thanks, Kerry, for the questions. Next question, operator.
Thank you. Your next question comes from the line of Emmanuel Papadakis of Barclays. Please go ahead.
Thanks for taking the question. Maybe one for Harry on buybacks. You've reiterated several times you're going to complete the CHF 5 billion by the end of this calendar year. You're very light in Q1. Is there any particular reason why you've left that phasing heavily skewed to the remainder of the year? Is there any particular things we should think about from a modeling perspective in terms of the phasing, the distribution over the remainder of this year? Second one was a couple of quick follow-ups. KYMRIAH, you've referenced in the report discussions with the FDA aiming to change the specifications in the U.S. If you could just elaborate on that. I think it's fair to say you're continuing to lag your key competitor in that space. Any color in terms of how that may change and when would be helpful.
Just a quick follow-up on BYL . You alluded to 80% payer coverage. I assume that was for the drug itself. Just a bit more color in terms of the diagnostic payment, test cost coverage, et cetera, would also be very helpful. Thank you.
First, Harry on buybacks.
Yeah, thank you. On the share buyback, as you can imagine, level of share price is one key input into that activity. We also were quite optimistic that the Alcon spin would happen in April. I think the timing of the majority of the share buyback after the Alcon spin is probably a good one. That's why as of tomorrow, we will basically restart the share buyback program, and we are quite optimistic that we will finish it by the end of the year.
Yeah, we want to maximize the number of shares we can, of course, take out of circulation for the benefit of Novartis shareholders. Susanne, both on KYMRIAH and BYL .
Yeah. Thank you for the question. On KYMRIAH, I think when you look over the last six months, we made quite good progress in terms of building our manufacturing footprint. We recently got FDA approval to increase manufacturing capacity. We got, in addition, approval from health authorities outside the U.S., namely EU, Switzerland, Australia, Japan, and Canada, to widen the commercial specification in line with the clinical product. FDA has not yet approved our prior approval supplement application, citing insufficient information to widen KYMRIAH's commercial specification. We are obviously disappointed by this decision, and we are working closely with FDA to find a way forward. We also plan to collect additional data, and we update you as soon as we have more clarity.
On the BYL diagnostic.
Yes. In terms of BYL , as Vas mentioned, we are quite excited about the launch. We plan to launch together with a companion diagnostic provided by QIAGEN. We work very closely with QIAGEN to allow broad coverage and also reimbursement for the tests.
Great. Thank you, Emmanuel. Next question, operator.
Thank you. Your next question comes from the line of Marietta Miemietz of Primavenue. Please go ahead.
Yes, thanks for taking my questions. A couple of financial questions, please, for Harry first. You hinted at a guidance upgrade if the pipeline delivers according to plan. Could you just share with us some of the major news flow items that have been excluded from the current guidance? Also, could you please quantify any dyssynergies from the Alcon spinoff that could weigh on margins from Q2 onwards, and for how long they are expected to persist? Then a couple product questions, please. Coming back to Kymriah in the U.S., just trying to get a little bit more detail there.
Is the situation that the FDA has simply not yet made up its mind whether the specs can be changed at all, or have they sort of indicated that they're willing to meet you halfway, but you're still working to show that you can get the number of viable cells up to the proposed new threshold? Can you maybe just also elaborate a little bit on the current impact on your U.S. business in terms of sales, in terms of taking on new commercial patients, what your capacity is, and if clinical trials are continuing as planned? Then finally, sorry to come back to the Zolgensma safety issue, but I was quite surprised, actually, by the panic that was sparked by that second death, because I would assume that all sorts of respiratory issues can actually arise as a complication of the disease itself.
It would just be really helpful if you could help us understand, in very general terms, any potential mechanism by which Zolgensma could theoretically even contribute to respiratory infections and how that can be ruled out in an autopsy. Is this really all about that tiny risk of the vector recombining with other viruses? Do you actually have any data in patients or in vitro, whatever, to see whether and how that actually happens? Any color there would be very helpful. Thank you very much.
Yeah. Thanks, Mariette. I'll take the third question first. With respect to Zolgensma, no, there's no mechanistic reason, this is primarily a situation where when you give an AAV therapy, you do trigger an enhanced stimulation of the immune system. If you did that in the context of sepsis, you can, of course, exacerbate potentially the sepsis. There is no preclusion criteria for an infection because we want to maximize the number of children treated. This is a situation where we administer the therapy. I think the key is you need to give steroids at an appropriate time with respect to when AAV is administered. That's the absolute key in terms of managing a situation like this, where a patient has multiple potential infectious agents already affecting them, and we want to minimize the impact the AAV might have on the clinical course of the patient.
I would say this is not a platform question. This is more about when you give a therapy like this in the context of a very potent immune response to an existing infection, you can, of course, have consequences to that, which would be the case for any medicine that you give in this setting.
Just a follow-on from that.
No.
How can you actually then rule out on the autopsy that the medicine contributed anything? Because you can never know whether it was a too strong immune response that killed the patient and whether the drug contributed at all. I'm just a little bit confused.
The good news is we have regulators who make these decisions, and fortunately, we have independent DSMBs and regulators who have all already said there's no necessary changes to the trial protocol, no changes to the clinical program, and no changes to the overall approval timeline. I think I leave it in the hands of the very capable, independent organizations that make these assessments. We'll, of course, provide the data with respect to the autopsy to the relevant agencies, and we look forward to completing the regulatory timelines towards an approval. Now, with respect to the guidance upgrade, Harry?
As you have seen, we had a very strong quarter one, 7% sales growth, innovative medicines 10% sales growth, core operating income growth for the company 18%. With that, of course, you have to see, okay, how is the rest of the year going? With such a strong start, some people even mentioned maybe there should be more upgrades. I think strong start. On the other hand, we should never get ahead of ourselves. On the bottom line, we see the potential for the upgrade that we have given. In terms of some of the pushes and pulls, clearly, we have to see what are the labels we get on some of the very important medicines that where we expect approvals over the next quarters. It's on the one hand.
On the other hand, we have to see also how fast is there a generic erosion on Afinitor and Xgeva, for example, or Exforge in Europe, a smaller product. Is there anything on Sandostatin LAR? Those are some of the pushes and pulls. We discussed them already. I think we have given a good, prudent guidance. On the other hand, this is also the quarter where we expect to have the least generic exposure. I think we are well set with this, and then we see how quarter two evolves and quarter three, and then I think we're in a very good situation to give an updated guidance if necessary.
On the interest of time, I think we're going to have to go to the last two questions on the line. We'll get back to you, Marietta, on your other questions. On the next question, operator.
Thank you. Your next question comes from the line of Vincent Chen of Bernstein. Please go ahead.
Great. Thank you very much for taking the question. I was wondering if you could just help us quickly dimensionalize what types of data we should expect to see at AAN for the ZOLGENSMA intrathecal STRONG study specifically. Should we expect to see data on achievement of motor milestones, or is it more reasonable to expect that the focus will be on initial data on patient trajectory on motor function scales and safety, given the relatively early stage of the study?
Paul, on the AAN data readouts.
You said upfront what you expect to see. I told you a little bit earlier, I think, START study, another year. STR1VE, an additional three months' worth of data. SPR1NT, first presentation of the data in the pre-symptomatic population. For STRONG, which you mentioned, again, you'll see some reflection on dosing because we'll have some feedback on those enrolled in the low to mid dose. I think we'll see some feedback on standing and support for greater than three seconds as one of the endpoints. You'll start to see the benefit and see some of the evidence on that in type 2s.
Great. Next question. Do we have time for one more, Samir? Okay, one more question, operator.
Yes, there is. Your next question comes from the lines of Andrew Baum of Citi. Please go ahead.
Hi. Just a follow-up in relation to RTH, please. The conversations we have with ophthalmologists is concern about taking up fridge storage space, given the limitation of only having an initial approval for AMD. Conversely, continuing with Cosentyx, EYLEA has obviously multiple approvals. To what extent do you think that's going to limit the adoption until you actually have that DME in hand? Very quickly, if I could, on rebate reform, do you anticipate it will be in force for January the 1st of next year? Do you want to comment on the impact you think that'll have on realized pricing for those products affected within your portfolio?
Great. Thanks, Andrew. On RTH, Paul?
Of course, yes, fridge storage space is something to consider. You may be interested to know as part of world-class preparation, we spent a lot of time looking specifically at this and observing workflow to try and make sure we know. We think having a q12w without any sacrifice in visual acuity, that's what we hope for in our label, and that is, we think, worthy of fridge space and so much more. Yes, the other indications require the medicines. Most retina specialists have one plus, we believe that we will have earned our right for the right amount of shelf space, if you like. For everybody that we've spoken to, they feel strongly that our interval and our fluid resolution is compelling enough to demand capacity in their own office environment.
Thanks, Paul. With respect to rebate reform, it's difficult to judge the exact timing of the administration's proposal to be implemented. We support, along with many of our industry peers, the removal of rebates in Medicare Part D. We believe this will achieve the goal of reducing patient out-of-pocket at the pharmacy counter. It's difficult for us to judge the exact impact until we know the details of how this will all transpire. We certainly would expect, given our overall portfolio's relatively low exposure to the U.S. government payer environment, not significant effects on our overall portfolio. I think we have one more question from Tim Anderson. Tim, please go ahead.
One moment, please. Tim, your line is open. Please go ahead.
Nope. Okay. We may have lost Tim. Okay. Thank you very much. With that, thanks again for your interest in the company. A strong Q1. We're looking forward to continuing to deliver momentum over the course of the year, and we'll continue to keep you updated as we progress. Thanks for joining the call.