Good morning, ladies and gentlemen, and welcome to the Sandoz Call today. I will now pass on to Craig Marks, Head of Investor Relations, for his opening remarks.
Thank you. Welcome to the Sandoz Full Year Results Call for 2024. Earlier today, we published our results announcement and an accompanying presentation on our website, which we'll follow on today's call. You can find these documents at sandoz.com/investors. Joining me on today's call are Richard Saynor, Chief Executive Officer, and Remco Steenbergen, Chief Financial Officer. Please turn to slide two. Our results announcement, presentation, and discussion include forward-looking statements. Please see our disclaimer on this slide. As a reminder, before the separation from our former parent in October 2023, third-party sales excluded sales to our former parent, as this was shown in a separate line item. Post-separation, sales to our former parent have been reported as third-party sales. Please turn to slide three. Richard will begin today's presentation with a summary of our highlights in 2024, followed by an update on the business.
Remco will then cover the financial performance, as well as the full-year 2025 guidance and a recap of the midterm outlook. Following a wrap-up of the presentation, we'll be happy to take your questions. With that, I'll now hand over to Richard. Please turn to slide four.
Thank you, Craig, and hello, everybody. It's an absolute pleasure to welcome you all on our call today. Our first full year was exciting and successful, and I'm looking forward to discussing our progress with you. Please turn to slide five. The key message today is that we're fully on track to meet our commitments, with strong sales growth and clear margin progression already in 2024. We continue to drive the top line and surpassed $10 billion in net sales for the first time last year. Growth was driven by strong performance of biosimilars, and I'm very proud that all regions contributed, especially North America. We delivered on our strong margin expansion objective this year, with core EBITDA margin reaching 20.1%. The shift towards value-accretive products is continuing, and top-line momentum is driving operating leverage. We also made further headway with our pipeline, with three regulatory approvals and three launches.
Moreover, we've expanded our biosimilars pipeline by four assets, bringing it to an industry-leading total of 28. Strong growth in core operating income less to 2.5% point increase in Core ROIC to 12.3%. We will propose a one-third increase in dividend to CHF 0.60 per share, representing around 25% of core net income. Please turn to slide six. Our hard work and focus on delivering on our biosimilar portfolio continues to pay off. Quarter four represented our 13th consecutive quarter of growth. And while generics provide a strong foundation for our business, the overall performance reflected the increasing contribution from biosimilars and strong execution across our organization. As a result, biosimilars increased as a proportion of total net sales to 28%.
Our regional sales mix remained unchanged, with over half our business in Europe, where we hold a strong, leading position, and the remainder divided between North America and international. Please turn to slide seven. I was delighted by our sustainability progress last year. Driving patient access and social impact is at the core of what we do, and championing sustainability, empowering our people, and governing with integrity provide an excellent platform to advance our purpose. Highlights from last year include the fact that Sandoz provided more than 900 million patient treatments in more than 100 countries, generating an estimated $19 billion in savings to the U.S. and European healthcare systems alone. We reduced greenhouse gases by 12% while finalizing our decarbonization targets for 2030 and 2035. These will be submitted to the Science Based Targets initiative for validation in due course.
Finally, I'm proud to say that women now represent 40% of the Board of directors and half of the executive committee, while our governance is founded on integrity, while maintaining a 99% success rate in health authority inspections in the past three years. Please turn to slide eight. We've listened to your feedback, and I would highlight two additional disclosures introduced as part of today's results. You'll find the regional sales split by business in the supplementary financial information of our financial report and the appendix of the press release. We will provide this split for the first half and second half and full year going forward. This will allow you to track the progress of both businesses across the region. In addition, we've expanded the pipeline disclosure to provide details of the eight assets in technical development, covering nearly $100 billion of LOE value. Please turn to slide nine.
Now, let's move to more details on the business performance last year, starting with slide 10. Our biosimilars business grew a full 30% in constant currency in 2024, reflecting both the success of our new launches and the strong demand across our base biosimilar business. I will cover Omnitrope, HYRIMOZ, TYRUKO, and PYZCHIVA in the following slides, but let me just say a word on WYOST, Jubbonti and Enzeevu. In July, we launched WYOST Jubbonti, or biosimilar denosumab, in Canada. We settled in the U.S. last year and look forward to launching the product in May at the latest. Enzeevu, our biosimilar aflibercept, was also granted FDA approval at the end of 2024, further enhancing our U.S.-leading ophthalmology portfolio. Launch timing in the U.S. will be dependent on several factors, including the progress and outcome of pending or potential litigation or any potential settlements. Please turn to slide 11.
Now, let me deep dive on some of our biosimilars. I want to start with Omnitrope, the world's first biosimilar, which was launched in 2006. We're continuing to deliver strong double-digit sales growth. This is a great example of the sustainability of biosimilars. Omnitrope is now the global market leader with a 37% market share. The somatropin market is supply-constrained, and we're prioritizing this critical medicine to ensure patients receive the treatment they need. Please turn to slide 12. Turning to HYRIMOZ, it's performed well in Europe over a number of years, while the progress in the US has been strong since its launch in 2023. In addition to our private label arrangement with Cordavis, we are on formulary of all three of the major pharmacy benefit managers with our own branded HYRIMOZ and unbranded adalimumab-adaz.
This puts us in a leading position in terms of the market access and payer coverage amongst adalimumab biosimilars. While this allowed us to take close to an 80% share of the biosimilar adalimumab market in the U.S. in 2024, the originator has still retained about 80% of the overall market at the end of the year. We expect to see changes in formulary to benefit biosimilar penetration in 2025 and are extremely well positioned to capture increasing share. The most recent IQVIA data shows that we're right on track, and as I mentioned last year, IQVIA excludes the Cordavis-related script since January 1st, 2025. Looking at the market excluding Cordavis, biosimilars have captured 19% of the U.S. market, increasing from 10% in early January. Sandoz remains market leader amongst biosimilars. Please turn to slide 13.
Moving to TYRUKO, we started rolling it out across Europe at the end of 2023. Since then, we've been gradually growing market share. Both tender authorities and healthcare professionals appreciate a more affordable option in the multiple sclerosis space. To date, we've received positive feedback on the product from both physicians and payers. In the U.S., we're working with our partner and the FDA on the potential approval of our JCV assay, and I'm confident of launching TYRUKO before the end of the year. Please turn to slide 14. Finally, PYZCHIVA has made strong progress since its European launch in July last year. We were amongst the first companies to launch the product with all key reference strength, and by the end of the year, the product had been launched in 20 markets. The uptake so far has been strong, and we've achieved a leading position across Europe.
Physician reception is positive, reinforced by the availability of an initiation dose, which is key to enabling patient switch. In the U.S., we were able to recently launch and extend our immunology portfolio even further. I would now like to turn to slide 15. Our generic pipeline has around 450 products covering approximately $200 billion of originator sales. Our large scale and robust infrastructure allow us to continually bring new generic products to the market. Today, we have an industry-leading biosimilar pipeline of 28 assets covering around $200 billion of originator sales. Through a combination of in-house development and partnerships, we've been able to triple the size of our pipeline over the last five years.
Our ongoing goal is to increase biosimilar net sales as a percentage of the total to at least 30% by 2028 through targeted launches, and we're well on our way to achieve this sooner than expected. To conclude, update on slide 16, we see many opportunities to simplify our supply chain and optimize our capacity and adapt our processes. Let me highlight some of our early progress. We've reduced our internal network to 15 sites, a full year ahead of schedule, while increasing capacity at our remaining sites through extension projects and efficiency. We're also consolidating our network of external suppliers, looking at finished dose form, well on track to reduce the current 400 suppliers by nearly 50%, and we're already in the process of exiting 100 suppliers with the balance fully identified.
Finally, beyond manufacturing, we initiated a transformation program last year to make our organization more agile, simpler, and more efficient. We're well on track, and I've already recorded the first savings. With that, I hand over to Remco.
Thank you, Richard, and hello, everyone. Please turn to slide 18. As Richard mentioned, we reported a very strong performance in our biosimilar business in both Q4 and the full year, and we continued to enjoy a good amount in our generics business. We delivered sales growth of 9% in both periods, with pricing more favorable than historical levels. There was an adverse 2 percentage points impact on currency movements in both the quarter and the full year. This was mainly the consequence of U.S. dollar strength versus several currencies in our international region throughout the year, as well as versus the Euro and the Swiss franc, mainly in the fourth quarter. Let's now move to sales by business on slide 19. Generic sales increased by 4% in the fourth quarter and 2% for the full year.
The acceleration in the quarter was driven by recent launches across various markets in Europe. Momentum continued in international, aided by favorable pricing dynamics and launches. This was partly offset by the divestment of our Chinese business in May. North America generic sales declined as expected in 2024 due to price erosion. This was partly offset by the launch of paclitaxel in October, which turned the North American generics business back to growth in the fourth quarter. Biosimilars delivered very strong growth of 25% in the fourth quarter and a whole 30% for the full year. We are very pleased with this performance and with strong progress that we're making with our biosimilars overall.
The growth was driven by continued strong demand for our first-ever biosimilar Omnitrope, the ongoing strong demand of HYRIMOZ in the United States, and the acquisition of CIMERLI, and the contribution from the launch of TYRUKO and PYZCHIVA in Europe. Now, let's have a look at the performance of our three regions, which delivered strong performance in both the fourth quarter and the year. Please turn to slide 20. Europe sales grew by 8% in the quarter and by 6% in the year. Strong growth in biosimilars continued, led by demand for Omnitrope and the contribution from the launch of TYRUKO and PYZCHIVA. Generics momentum accelerated in the second half of the year, driven by recent launches. North America sales grew by 14% in the quarter and by 15% in the year, and benefited from the strong biosimilar performance, reflecting the ongoing uptake of HYRIMOZ.
2024 acquisition of CIMERLI, further share gains by Omnitrope in the United States, and the launch of WYOST Jubbonti in Canada. The strong growth was partially offset by a full-year decline in US generics business that reflected pricing pressure. International sales grew by 6% in the quarter and by 8% for the full year due to strong volume growth across biosimilars and generics, contributions from Mycamine, favorable pricing, and recent launches. This was partly offset by the divestment of the Chinese business. Now, let's turn to increases in our profitability last year. Please turn to slide 21. We leveraged the 9% growth in net sales last year to deliver very strong growth in core EBITDA at constant currencies of 24%. Core adjustments for EBITDA in 2024 amounted to $1.3 billion.
These were driven by anticipated run-rate cost related to the separation from our former parent, transformation program launched last year, and the rationalization of internal manufacturing. In addition, adjustments for legal costs mainly reflect the settlement of the legacy U.S. generic antitrust class action litigation. This underscores our commitment towards integrity and sound governance and it's an encouraging step towards resolving allegations of legacy conduct. Now, let's look in more detail at the drivers of last year's Core EBITDA margin improvement. Please turn to slide 22. In order to compare the year-on-year Core EBITDA margin, we first need to normalize it for our treatment of third-party sales and standalone costs. Our Core EBITDA margin in 2023 was based on third-party sales excluding sales to the former parent, which were classified as internal sales. Post-separation, sales to the former parent were classified as third-party sales.
In addition, 2023 only included part of our cost as a standalone company, whereas 2024 has the full cost included. Adjusting for these items, our Core EBITDA margin in 2023 was 17.0%. Favorable product mix from strong double-digit biosimilar growth, leveraging expenses from a growing top line, initial savings from our transformation program, and operational improvements were only partly offset by price erosion and inflation on postage and logistics. Inflation of 10% in late 2022 started to impact the P&L in the second half of 2023 and carried over into the first half of 2024. The impact of postage and logistics inflation on our gross margin was immaterial in the second half of 2024. As a result, our Core EBITDA margin grew 3.1 percentage points on a comparable basis to 20.1%. From the P&L, now let's move to cash. Please turn to slide 23.
To provide insight into the underlying free cash flow from our core business, meaning excluding the one-off items, I want to cover management free cash flow. In 2024, we managed to improve working capital through favorable movements in receivables and a lower rate of increases in inventories following the spin-off from our former parent. In line with our growth plans, CapEx included investments in our new biosimilar facility in Slovenia and the expansion of our antibiotic facility in Kundl, Austria. Together with strong core EBITDA growth, this led to the generation of $1.1 billion in management free cash flow, a significant improvement compared to 2023, where we generated around $100 million. Reported free cash flow of $98 million can be compared favorably to an outflow of $234 million in the prior year. One-off items in 2024 were mainly related to separation, transformation, and litigation costs.
Please turn to slide 24. Looking at our balance sheet, total financial debt increased by $276 million, reflecting the issuance of a senior fixed-rate note in September 2024 in the amount of EUR 600 million, partly offset by repayments of local debt facilities and favorable currency translation rate. Liquidity increased by $62 million, mainly driven by net proceeds from the issuance of the senior fixed-rate note and net cash flows from operating activity, partly offset by the first dividend payment and the CIMERLI acquisition. As a result, net debt increased by just over $200 million- $3.3 billion. The net debt to core EBITDA ratio decreased to 1.6 times, reflecting the strong growth in core EBITDA. We enjoy solid investment-grade ratings, placing our company in a strong financial position to support our ambitions.
Finally, our growth in core operating income led to a 2.5 percentage points increase in core ROIC to 12.3% in 2024. We will increase our focus on this metric as it tracks our ability to generate returns on our investments and aligns with our long-term value creation objectives. Moving now to our 2025 outlook and midterm outlook. Please turn to slide 26. I am pleased to say that we expect net sales to grow by a mid-single-digit % in constant currencies this year, while the core EBITDA margin is expected to increase further to around 21%. We do expect a return to a more normalized level of price erosion of a low to mid-single-digit %. It's worth noting that, similar to last year, we expect a lower core EBITDA margin in the first half than in the second.
In 2025, this will reflect increased investments to support the pipeline and numerous launches and the improvement in the second half driven by favorable product mix as the launches begin to contribute materially. Outside of guidance, we anticipate an adverse 4 percentage points impact on net sales from currency movement based on rates in January. Given the geography of our cost base, however, we do not expect these movements to have a material impact on the core EBITDA margin. Finally, our 2025 guidance excludes any impact of unforeseen events or unconfirmed developments. This includes potential trade tariffs emanating from the U.S. government. Please turn to slide 27. Beyond our full-year guidance, our midterm outlook to 2028 remains unchanged. We expect annual mid-single-digit net sales growth at constant currencies and core EBITDA margin expansion to 24%-26% by 2028, with this based performance of 2024.
Volume, mix, and price is expected to contribute around 100 basis points of the improvement. We continue to expect volume growth across our regions and an increased shift towards higher-value products. By 2028, we expect at least 30% of our sales coming from biosimilars. On pricing, we expect to return to historical levels of erosion. Operational improvements still represent the greatest favorable impact on the margin at 300 basis points. This includes changing the way we procure and produce, as well as reorganizing our internal and external network to maximize efficiency in our supply chain. Organizational efficiency accounts for the remaining 100 basis points and is all about transforming into a more streamlined and agile organization. This is anticipated to deliver increased run-rate savings from our transformation program in 2025. Please turn to slide 28.
The transformation program, together with the separation from our former parent, means one-off costs reflected in the reported P&L. 2024 was the peak year, with around $700 million of one-off costs or $1.3 billion when including the litigation-related expenses. One-off costs are anticipated to decrease this year to around $500 million, with limited costs thereafter. As mentioned at our strategic review in September last year, this is $200 million higher this year compared to our original estimate of pre-separation spend due to a more complex and intertwined infrastructure of systems and business processes with our former parent than anticipated. Please turn to slide 29. We are planning to increase our CapEx investments to exploit further growth opportunities and efficiencies. In total, we expect to invest nearly $3.5 billion between 2025 and 2028, a billion dollars more than initially anticipated.
Two-thirds of the CapEx, or closer to $2.2 billion, is mostly related to replacement and expansion CapEx for manufacturing. Additional investments include extensions of internal biosimilars manufacturing capacity and internalization of fill-and-finish capacity. The remaining $1.2 billion are reflected in intangible investments, mainly related to business development and licensing IT. The increased CapEx investment is driven by IT upgrades to leverage efficiency. Please turn to slide 30. Finally, expanding our margin in the midterm will have a direct and positive impact on the generation of free cash flow, especially after this year, once the separation and transformation activities are behind us.
Cash flow generation will underpin investments in growth opportunities such as GLP-1s and provide platforms to leverage efficiencies, for example, through digitalization. Even considering these additional value-creating investments, we plan to increase cash flow generation by two to two-and-a-half times until 2028 compared to the level of 2022. With that, I hand back to Richard.
Thank you, Remco. As we look to 2025, we expect the positive momentum in our business to continue. We anticipate good contribution from several exciting biosimilar launches, such as PYZCHIVA and TYRUKO in the U.S. and WYOST and Jubbonti in both U.S. and Europe. These will add to an already growing in-market portfolio and contribute to margin expansion. In addition, we'll continue to build on our industry-leading pipeline across generics and biosimilars. And of course, we have many generic launches across many markets that will continue driving the growth of this large business in 2025. Now, please turn to slide 33. In summary, we are strongly positioned to pioneer access for patients as the leader in a growing and dynamically attractive market, driving long-term value for all our stakeholders.
Our home base is Europe, but we're very well positioned in the U.S. and internationally. We anticipate significant biosimilar launches in the coming years, delivering an improving mix and attractive growth. We have the internal resources to execute on our pipeline and have the scale to develop and attract strong partners to capture high-value, long-term opportunities. Our strong balance sheet gives us real optionality. And finally, we are on track to deliver on our midterm ambitions, both in terms of portfolio and pipeline, with margin expansion supported by the opportunities to simplify our business through our transformation plan. Thank you very much. And with this, I will ask the operator to open the lines for Q&A.
Ladies and gentlemen, we will now begin our Q&A session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Or if you've dialed in, please press star nine to enter the queue. Once your name has been announced, you can ask a question. If you want to withdraw your question, please lower your hand using the raise hand function in the Zoom app or via telephone, press star nine. Thank you. And a moment for the first question, please. Our first question comes from James Gordon with JP Morgan. Please unmute your line.
Hello, James Gordon, JP Morgan. Thanks for taking the questions. One on what's assumed for biosimilars in the guide and then one on tariffs, please. So on biosimilars, for the U.S. CIMERLI, I saw on the 17th, Coherus announcing a withdrawal of the product in the U.S. So what is the guide assuming there in terms of any headwind?
And is the guidance assuming that you might relaunch the product later this year, potentially at a higher price? Or is the guidance assuming that there is no more biosimilar center sales? And similarly for Stelara, so that for the private label, I know J&J has filed for a preliminary injunction stopping you launching it. Does the guide assume that you're not going to launch a private label now and it'll be upside if you do? Or is that something for that in the guide already? And then the other question was just tariffs. So I think the guide is ex-U.S. tariffs. But if there was a 25% U.S. tariff on goods manufactured in Europe, which I think is where you do your manufacturing, what impact would that have? And would there be any potential offsets?
Okay, well, first of all, good morning, James. Impressive. You got the call on the record early this morning, so thank you. So biosimilars, CIMERLI. So yes, you saw the CIMERLI announcement. You're correct. I mean, this was due to the rebate structure that the original owner of this asset put in place, which really made this unsustainable if you look at the difference between the WAC and the ASP and the proportion of institutional business. We're not withdrawing this product. We're pausing this product, and that's an important differentiation. We think that'll take about a year to allow us to reset the ASP, and then we would fully commercialize the product again. We have experience of doing this in the past with pegfilgrastim. It's not material to us, but certainly I know it is to CIMERLI. But clearly, we've got plans to bring that back to the market.
Your comments about the injunction, I can't really talk about the legal framework. Clearly, we would still expect to see a launch. But even if we don't, clearly, we have a strong relationship with the PBMs and would expect our own label product to do well anyway. And again, I would just say this is again an action by the originator trying to prevent access of products to patients, and it really frustrates me in terms of that behavior. And clearly, we'll work with Samsung and see what happens. Tariffs, I'll let Remco talk about the specifics. Again, on tariffs, I mean, look, every morning we get up and something seems to change, so it's very hard to predict. I think just a couple of points.
First and foremost, more than 80% of our revenues have got nothing to do with the U.S., so I think we're very well hedged anyway. And the harsh reality is this is an industry-wide effect. Virtually nothing is manufactured in the U.S. anyway. And even those products manufactured in the U.S. are accessing API coming from Asia. So pretty much everybody's going to face a tariff impact, which ultimately means one of two things: either further disruption to patients on already slim margin simple generics, and/or over time, those prices will just get passed on to payers and ultimately to patients. So I don't see in the medium and long term, other than disruption, a major impact to the core business. But I'll let Remco talk about more on the specifics.
Yeah, James, good morning. Perhaps also a little bit on the sales growth, Great, we have guided for mid-single digits. We have to keep in mind that this includes still the divestments of China last year, which will fall through into the numbers this year. Also, we have said that we have a little bit of higher price erosion assumption at this point in time. Just to give you also those two data points for the rest, there are always pluses and minuses that we are looking forward to seeing again in a successful year or both top and bottom line. With regard to the tariffs, just to give you some numbers in answering your question, I think first of all, there has been now announced in the last 24 hours for Canada and China, correct, to the 25%, the China go from 10%- 20%.
Depending on the way this all has to be calculated, so there's not everything clear out. And before any compensating actions on our end, the analyzed impact of that would be between CHF 35 million and CHF 50 million. For 2025 itself, we expect it between CHF 25 million and CHF 35 million. This we expect that we can handle that within the 21%. So just to clarify this for everyone on the call, because others must have had a similar question. Now, of course, then the question, hey, about the EU, we don't know. Of course, it goes up and down. There are two also there, two or three scenarios. Nothing will happen. Of course, it's good. The reciprocity way of handling with regard to duties could be a way forward. If that happens, we calculate an impact on the full year between 15 and 35, which would be between CHF 10 million and CHF 25 million impact.
If it would be 25% across the board, it's a wider range. It would be between 35% and 85% for the full year and for 25, between 25% and 60%. So you see a very wide range because there are a lot of technicalities underlying which can make the difference. And of course, what Richard already described, Great, we will look at all ways of compensating ways to handle this. With regard to the EU, yeah, I will not do further comments on how that fits the guidance because at this point in time, we don't know. It goes every day left and right. It's a big soap we are currently in. So there are no comments from my side. But for Canada and China, we can confirm that the 21% target includes this, and we believe we can handle it. Thank you. I hope that answers your question, James.
Yes, it did. Thank you.
Our next question comes from Victor Floc'h from BNP Paribas Exane. Please unmute your line and go ahead.
Yeah, thanks for taking my question, Victor Floc'h from BNP Paribas Exane. Yeah, maybe just like a follow-up on the biosimilars. First of all, any chance you could update us on TYRUKO and the path to the U.S. market? Any comment from like no new feedback from the FDA you could share with us? And my second question relates to PYZCHIVA and the, well, the changing litigation. I was wondering, do you see that as a company-specific issue, or would that be fair that we could expect a shift in the market with originators, including this kind of like provisions against private label in the settlements moving forward? Thanks so much.
Okay, thank you so much, Victor. So too, I mean, TYRUKO, again, we're working closely with the FDA, really trying to find the right pathway through to manage the JCV assay. We have a number of other plan A, plan B, so again, we still commit or made the comment that we would anticipate to launch that product later this year. I can't really say much more than that. Again, the comment you make about Enzeevu, clearly, I'm disappointed that we're seeing originators again trying to block access on this product. We've already launched anyway, so I think, yeah, we'll see what happens with the injunction, but I think probably unlikely, but again, I think that's for the courts to decide, and I don't think this is a seismic shift.
I think this is just an originator trying everything in its power to dominate a market and block access to patients, which we will vigorously defend and challenge. I don't think it's right for anybody. But again, it's the desperate actions of an originator trying to, I guess, protect its market for as long as practically possible.
Our next question comes from Thibault Boutherin from Morgan Stanley. Please unmute your line.
Yes, thank you very much. First question is just on the pricing of U.S. biosimilars. I mean, we saw some comments around the pricing for Stelara in particular being quite challenging. And I think that's been confirmed by a couple of companies watching this market. So just if you could kind of give us your assessment here as you're on the market. And is this specific to Stelara, or is it reflective of the general U.S. biosimilar environment?
And second question is just on Omnitrope, obviously, big growth driver still. If you could tell us kind of how much more room for growth do you see here? You talked about capacity constraint. What's the outlook for supply? And yeah, generally speaking, the outlook for this product?
Okay, fantastic. Thank you so much for your question. I think you're going to take a step back. The sticker price for the originator product of this per patient per year is $150,000 a year. The pricing you're talking about, that rebating was already in place. I think the question then is really just shows the level of really distorting rebate that originators put in place with PBMs, in this case, about 80%. So really, the start price is about 80% of that list price. And that's really where you would look at discounting. So I think that's normal.
Certainly, what we saw with adalimumab, I don't see a different change. I think this is, again, this distortion effect that PBMs and originators are addicted to high list prices and massive rebates, and then they're all making percentages of that. That's a flaw in the system, but we already assumed at least an 80% rebate before we even start in terms of pricing and further discounting. So not a surprise, pretty much in line with our models and what we assumed and certainly our experience of other markets. Omnitrope, I guess theoretically, we have a 27% market share, so that's 73% to go, but plenty of room to grow. We have more capacity internally, and certainly, the feedback we have is certainly one of the other major suppliers in this market is deprioritizing and potentially exiting it.
So I'm delighted that this is a product that we launched in 2006. It's 19 years old, and it's still growing strongly. It's highly accretive, and we have more capacity. And ultimately, delighted that we can continue to serve patients this critical medicine.
Perfect. Thank you.
Our next question comes from Harry Sephton from UBS. Please unmute your line and ask a question.
Brilliant. Thank you for taking the questions. So the first one is just on, you mentioned that you were well placed to benefit from the changes to formulary coverage in the U.S. for Humira. Just wanted to get any specifics there, whether you've seen any preferential formulary changes at the start of the year that might benefit yourselves versus competitors. And then the second question, more high level on the sales guidance.
So I think what you've referenced so far on the call is some very positive dynamics continuing for biosimilars. You've obviously got a number of important launches this year. In the context of you growing biosimilars 30% last year, that's approaching 30% of your overall sales. Why so conservative on the mid-single digit guide where I guess we see expectations for maybe more towards the high single digit or the range? Is it just conservatism at the start of the year or any other factors that may be playing in the generic segment that you might want to highlight? Thank you.
Thank you, Harry. I'll let Remco comment on the sales guidance and the books and takes there. On Humira, yeah, you're right. Again, I think as we exited last year, about 20% of the market was available for biosimilars, of which we'd achieved about an 80% share.
Again, step back. We are on formulary with all three of the PBMs. So I think we're in a very strong position, and I was encouraged when you look at the January data. I think we gained another nine points of share on our own branded product, not on the Cordavis. So I think we're well positioned, and clearly, this is the single largest LOE in the history of the industry. There's still 80% to go at. So there's more to go than has already gone, and I think we're in a leadership position to take more share during 2025. Remco, do you want to pick up on the sales guidance?
Yeah, Harry, good morning to you. Again, what I said before, I think overall we have to keep a couple of things in mind in the context of the guidance. One, we are impacted in 2025 because of the divestments of China last year, so that those sales are not showing up, so if you would exclude that, of course, there is a different impact, but the way we report, it's in constant currency, so that's one element. Secondly, the volume growth, of course, is higher than the mid-single-digit, right? Because we anticipate a low- to mid-single-digit price erosion.
Now, we have to see how that will work out over the year, but we find at this point in time what we also see in the market, that a prudent approach, so those are the dynamics which are currently at play. We will see how that will work over the year. I don't think it's necessarily conservative guidance at this point in time. I think it's more realistic in where we currently stand. Of course, we hope it's all better, but let's see in the rest of the year.
Brilliant. Thank you.
Our next question comes from Simon Baker with Redburn Atlantic. Please unmute your line.
Thank you for taking my questions, and thank you for the additional disclosure on the revenues. A few if I may, please. Just going back to the question of tariffs, you do have U.S. manufacturing. So I just wondered if you could tell us approximately how much of the U.S. revenues emanate from U.S. facilities. And from what you're saying more broadly, one of the concerns that people have had is the substitutability of generics on the basis of the impact of tariffs. It sounds like you don't think that's a likely scenario given that everybody's dependent on foreign-sourced API, essentially. So some thoughts on that would be helpful.
And then on HYRIMOZ, AbbVie have guided to a 44% decline in U.S. Humira sales in 2025, which is a slight acceleration on 2024. Qualitatively, how does that map over in terms of the growth opportunity for HYRIMOZ in 2025 versus 2024? And then just one final question on margins. You're guiding to some more margin expansion in 2025. Firstly, I wonder if you could just give us some sort of indication of whether that's essentially driven mainly by mix or by cost savings or indeed a mix of the three. And then speaking of the midterm guidance, I just wonder if you could sort of give us a midterm update on how much of the three buckets of volume and price, operational improvements, and organizational efficiency you've achieved in terms of moving towards that 2024 to 2026 target. Thank you.
Thank you, Simon. I'll ask Remco to pick up the margin expansion and the midterm guidance. Tariffs, actually, we have a very small component that's manufactured in the U.S. As you said, we've rationalized a lot of the network over the last few years, including a number of sites in the U.S. So I don't see that as a significant component or a part of our supply to the U.S. market is coming from our U.S. facilities. My comments around the U.S., I mean, ultimately, clearly the point of tariffs is to drive capital investment in the U.S. But until the PBMs and the GPOs and the whole market fundamentally changes, I see no rationale to make that because the amount of government and institutional business is so small, it just doesn't make it sensible.
I mean, Keren Haruvi, our President, is a member of or Chairwoman of the AAM, which is the Association of Affordable Medicines in the U.S. She was in the White House on Friday and made it very clear that really, unless there is a fundamental shift in the reimbursement and payer framework, really, the U.S. market is just not sustainable. So this is a failure of the market. And certainly, in the short to medium term, I think tariffs will only drive up more and more instability in terms of security of supply. And ultimately, it will drive up pricing because those prices will get passed on to insurers, i.e., then to payers, and then to patients. So I think it's short-sighted, but clearly, we want to try and find a solution there. On HYRIMOZ, you're right.
I mean, as I said earlier, the most recent IQVIA data showed we gained about another nine points of share in January. So really delighted with the momentum. It's hard to sort of reconcile in sort of numbers what this conversion from the 44% of the originator in terms of what that will mean for us. Again, we're focused on maintaining the relationship with the PBMs. I think we have a good product, well-supported, and clearly has taken a leadership position in all the biosimilars. So we'll continue to leverage that going forward. And I think it could be a nice contributor to growth during 2025. Remco, margin?
Thank you. Yeah. Margin, of course, it's a mix of everything. First of all, of course, the top line grows. And with regard to our cost base, of course, we want to keep that relatively flat.
Also, all the transformation efforts play a part in there. So if you think about SG&A, it's a kind of flattish number we're targeting for 2024 to 2025. The R&D expenses in amount, we expect to go up, but net net, we still expect a little bit of leverage with the top line growth. I think that's one element which drives the margin. Yeah, we said, hey, we expect for the moment low to mid-single digit price erosion. Of course, that's a negative on the margin. On the other hand, we expect some benefits coming in on all the work we're doing on our cost of goods sold, correct? So then we regain a little bit again. And then, of course, the whole launches, which will come in the course of this year, by the way, that will be more heavily weighted towards the second half of this year.
But that certainly helps. And a continuous mix change with biosimilars growing more than generics. And in general, we are looking at the mix of the company. So it's a whole mix of different areas, which also really makes us hopeful because there's just not one thing we have to do. There are multiple things, and they can work together to come to this result. Hey, for the midterm update, what we had done in the presentation here is to use 2024 as the baseline, as before you saw the prior year as the baseline. But actually, the step to come from the original number of 18% to 2024 to 2026 is now to 20% to 2024. So everything we already realized is in. What is in this overview, which has a very high level of certainty, of course, is the transformation because that has been already put in place.
It's in the execution mode. So the 100 basis points you see in there, I would say, are ticking the box. Of course, the volume price mix you saw in the first column, as well as all the cost price savings, it's something which we have to do in 2025, 2026, 2027 for the years to come to 2028, as explained before. So that would be it overall. Perhaps a little additional comment to what Richard said on the U.S. manufacturing. What we still have to keep in mind is that what at least we know, most generics players, if not all, and even the forward integrated CDMOs are not producing. They have no footprint in the U.S. The originators do. But in that sense, we're all in the same boat of not having manufacturing in the U.S. Great. Thanks so much.
Our next question comes from Florent Cespedes from Bernstein. Please unmute your line.
Good morning, everyone. Thank you, Raj, for taking my questions. Two quick ones, please. First, on the U.S. generics business, now I will have you disclose the details. Is it a fair assumption to believe that the sales will continue to decline going forward? That's my first question. And my second question is about pipeline and just like to know if there is anything new on your plans behind GLP-1s, notably in the short term where, let's say, in some countries, there should be the loss of exclusivity in Canada, Brazil. Any update on this one would be helpful. Thank you.
No, thank you for your questions. Yes, I mean, you saw in the disclosure, I think what you'll see also that quarter four, the U.S. generics business came back into growth.
So it started to flatten really. The driver in growth in U.S. generics is launches. If we launch more, then we come back to growth. I think the aspiration was always to really see this about how we keep this plus or minus relatively stable. We saw the paclitaxel launch last year. That's done extremely well. And that's continuing to run well. And then clearly, we have other launches this year, and we'll see. But directionally, we would always aspire to try and keep that broadly flat. And then really, the growth and the accretive growth comes from the biologics. And again, we've got a record number of biologics launching this year in the U.S., with obviously PYZCHIVA now approved and launched, denosumab coming, and then potentially TYRUKO later in the year.
So I think we've never actually been in a position to launch four biosimilars and continued growth, particularly from adalimumab, as we discussed on a couple of the earlier questions. On GLP-1s, thank you. First question of the day. Yes, clearly, we're still planning to launch a multi-formulation in Canada. I've always said, look, there's so many uncertainties around this product. I think it's a fascinating opportunity. It's not built into our guidance at the moment. We've not disclosed that. And clearly, we're focusing on launching into the diabetes indication as the data exclusivity expires in Q1 next year in Canada, and then clearly bring that to the emerging markets, as you said. But no more updates than what I've currently given on previous calls and meetings.
Okay. Thank you very much.
Thank you.
Our next question comes from Emily Field with Barclays. Please unmute your line.
Hi, great. Thanks for taking my questions. One, just I know that there have been some media reports in the U.K. about adverse events for some of the TYRUKO switch patients. I was just wondering if that's if you've seen anything in your internal monitoring data or if that is in any way something that could influence the U.S. FDA review. And then secondarily, just a question on the incremental CapEx investments that you've announced today. Should we expect those with any particular cadence between I know your guidance between 25 and 28, front-end loaded, back-end loaded? Just any incremental color you could give there would be super helpful. Thank you.
Great. Thank you so much for your questions, Emily. And again, I'll let Remco get the complicated financial ones. So the adverse event, thank you for the question. First of all, our number one priority is patient safety.
I can't stress that enough, and we will always act with that in mind. When you dig into this, now, clearly, we're working closely with the regulators. Now, we've launched, I think, in a significant number of markets across Europe and in the U.K. We have something like 5,000 patient years of data. This product has been extremely well accepted by both patients and physicians. When you drill down into this data in the U.K., this is only coming from one center in the U.K. And clearly, we're trying to work with the regulators to understand why that's the case. At the moment, then your question related to the U.S., our product is approved, so clearly, the only issue we're waiting in the U.S. is the approval of the JCV assay, which is a different department of the FDA.
But in terms of patient safety, absolutely, it's our number one priority. And if we felt there were any issues, clearly, we would act differently. But certainly, at the moment, all we see is this coming out of one single center in the U.K. And we're trying to understand why and work with the regulators to get to the bottom of it.
Emily, great to hear your voice. Good morning to you. Remco here. With regard to the additional CapEx, yeah, we said already, I think last year, August as well, when we had the strategy update session that we would evaluate the CapEx planning and particularly our biosimilar capacity levels because the biosimilar uptake is at such a good level. We also want, relative to what we originally assumed at Spin, to up our original capacity assumption that relates to API and that relates to fill and finish.
So most of these investments are all going to buy additional biosimilar investments, and most of that is all in Slovenia. We are well on track with already our first increase, but over the coming years, that will just continue. It will always be a split between outsourced and internal, but relatively, we believe we can do a little bit internal and also have a very good cost price base, which will also help us go forward. So this all ROI related, and I'm looking very much forward because you can see as well that biosimilars we saw well ahead of track that there's a lot of opportunity. The other part of the CapEx is IT related. There's a lot of work to get out of the Novartis IT framework, which we hope to be closing for the majority end of this year and the remaining part in 2026.
But equally, we know as well that it's still an outdated IT system. So also the coming five years, we want to bring our IT systems to the next level. Yeah. And of course, there we also have to invest. But of course, that will bring as well further cost savings in our infrastructure and allow us also to leverage our cost base when we go for further growth. So they're really, again, ROI based. With regards to the free cash flow, correct, because that, of course, has to stay healthy. We have given you some information. We still expect that with all we are doing, still a healthy free cash flow also over the coming years, be able to well afford these investments. I hope that answers your question, Emily.
No, that's great. Thank you so much.
Okay. Have a nice day.
Our last question. Our last question comes from Graham Parry from Bank of America. Please go ahead. Great.
Thanks for taking my question. Just a couple of follow-ups, actually. So just going back to the significant amount of private label, is there anything actually assumed in guidance for that? So if there's an injunction that prevents that launch going ahead, is there a risk to guidance at all from that? Second, just a point of clarification on guidance. You say there's no impact on core EBITDA margins. So just reconfirming that the 4% negative sales headwind would be 4% negative absolute impact on EBITDA. So it's the margin you're saying there's no impact as opposed to the absolute level.
And then lastly, on CapEx and shifting into your own manufacturing, should we think about that as something which can drive incremental top-line growth, but also improve margins? And over what sort of timeframe do you think we should start to see the benefits of that? Thank you.
Thank you so much, Graham. So I'll take the first, and then I'll ask Remco and take the last two, and then we'll close off. So FDA, I think irrespective of what happens, it doesn't change our guidance. Clearly, I think it puts intent. In the unlikely event that our label doesn't materialize, then clearly, we would work to drive our own label product with our partners. And I think we're well positioned to do that. So as I said, I'm just more frustrated about the actions of the originator in this.
But as I say, we've launched, we have a product on the market, and we have all the presentations, and we have all the patient support network and everything else in a space that we know extremely well, as you've seen with our performance on adalimumab. So anticipating a solid performance there. Also, I would caution. I think this time in 2023, when we launched adalimumab, we said this would be a build, not a bang. I would say exactly the same with this. It took about eight to nine months before we started to see some inflection points. I think this might come a little bit sooner, but don't expect a big bang early on. I think it will again switch as patients rotate and as the PBMs rotate contracts. So I think just a note of caution in terms of when you're modeling. Remco?
Yeah. With regard to the FH, you noted in 2024, in the EBITDA margin, we had a 40-50 basis points impact on the margin because of FH, correct? We expect that every year, a little bit coming through. So 2025, it's a similar amount of that. That's what we wanted to bring across. We don't expect any materially different number than we have had historically. With regard to the CapEx and when it comes into play, you know when you build a factory, it takes two years to build it.
And to get it approved, it's another two years. We're talking four years out. So we don't expect a material impact within the midterm guidance 2028 framework, similar for IT by the time we're starting really with something. We're in 2026. So we hope at the time that's finished, it will be also outside the 2028 horizon. Of course, we want to have it faster and better, but this is a bit of a time frame. So we have to work with a lot of longer frame. I hope that answers your question.
This concludes the question and answer session. I will now hand back to management for closing remarks.
So thank you so much for your questions. Again, I clearly want to recognize the hard work of all our associates and Sandoz employees, I think delivering on our purpose to be the world's leading and most valued generics and biosimilars company. I'm delighted to be able to reconfirm our guidance for 2025. And I think we're well positioned with the number of launches that we've got, the momentum we have in the business, and leadership position as being the world's largest biosimilar company. So again, thank you so much for your questions.
And look forward to continuing to engage with you during the course of the year.