Great. Good morning. I'm James Gordon, J.P. Morgan European Healthcare Analyst, and I've got the pleasure of introducing the Sandoz presentation and Q&A today. We've got Sandoz CEO Richard Saynor with us. Thank you very much for joining us, and I look forward to the presentation.
Thank you very much. Good morning. Pleasure to be here. So I'm going to do a couple of things. Talk a little bit about Sandoz. Obviously, this is the second time I've had the pleasure of doing this presentation at an independent Sandoz. So talk about that. Really talk about what we've delivered, particularly post the Capital Markets Day and towards the midterm, and then spend a little bit of time talking about the longer-term opportunities, both from a company point of view, but also how we see the market. First of all, this is Sandoz. Clearly, we're operating, I think, in a really exciting market. It's about a $200 billion market. Gross sales growing at about 7%. Our sales in 2023, roughly about nearly $10 billion. Globally, clearly a top three player. In Europe, we're the leading player by some margin. I'll talk a little bit more about that.
Very strong pipeline coverage. We cover about 80% coverage in terms of small molecules, particularly in Europe. I'll spend more time talking about the biosimilars, but we cover about 60% of the LOE value looking forward in terms of biosimilars. Also, unusually in this industry, we have a strong balance sheet. Less than two times net debt to core EBITDA in terms of our debt, our investment-grade rating. I think as we set up as a company, it's an attractive market. We have scale, we know how to operate, and we have the freedom and the capital resources to do so. 18 months ago, in New York and then in London, we made a number of commitments. I think clearly since then, we've tried to be incredibly boring and do exactly what we said we would do.
Along the way, we've launched Hyrimoz in the U.S. It's a great success. I'm clearly very pleased how that's evolved. Tyruko, which is now Natalizumab in Europe. We've expanded our pipeline around generics and biosimilars. We've got Karen from North America here, but again, very proud that we've stabilized the business in the U.S. and now seeing very strong growth. I'm very excited about how the direction and trajectory there, and then continue to deliver progressive top-line and margin growth and margin expansion, raising our guidance on the top line throughout the year. So very pleased with the momentum. On top of that, we've launched Ustekinumab, Pyzchiva in Europe. Very successful launch. We now have about a 43% market share with about eight competitors in the market, so very much outperforming the market there. Very exciting pipeline in the short term. We've got a significant number of launches.
I'll spend some time talking about that, both in Europe and in the U.S. No doubt we'll have some conversations around GLP-1s. We see GLP-1s coming now quite soon, particularly in Canada and some of the emerging markets and really sort of delivering and building the momentum as we support our medium and long-term growth. Europe, fundamentally, we're a European company, and I think the moat and our scale about Europe don't really come through as often as I'd like, but I'm very proud about what we've achieved. Ultimately, we treat more patients in Europe than any other pharmaceutical company. We have real scale. We operate in over 40 markets, and we're continuing to expand our share of the generics and biosimilars market, pulling away from our competitors. It's an attractive geography.
Frequently at this point, I hear people normally ask me about the Indian generics and the Asian generics players. I've been in this industry 35 years. The Asian players still haven't arrived. They have very small market share. Ultimately, they find it very difficult to build 40 different entities across Europe. Our German business feels very German. Our Spanish business feels very Spanish. And even if you have a German label pack, you can't sell the same pack in Austria as in Germany. So really having that scale is such an advantage, and it really plays through when you see the launches we're willing to execute, particularly things like Ustekinumab. Globally, I think this time last year we became the world's leading biosimilar company, and I think since then we've continued to execute and expand. What's cool about biosimilars is really the continued market expansion.
So you see on the chart on the left is really how the Adalimumab market evolved in Europe. Normally, with a generic, you get a conversion, and generally the patient volume numbers stay relatively static. With biosimilars, that's not the case. As price points come down, patients get treated much earlier in the disease cycle. So you see strong growth post the launch, many years after the launch, which really supports the long-term performance of some of our products. So we've seen strong uptake clearly with Adalimumab in terms of our new launches. Tyruko is performing extremely well in Europe, and we see no competition in the horizon there. And then Ustekinumab, Pyzchiva, again, very, very strong performance, strong leadership position, and outperforming pretty much all of our competitors in all the markets we've chosen to operate. Then think about the commercial excellence in terms of the U.S.
Again, Karen will have to answer the questions later on. Of the biologics we've launched, the vast majority of them we've taken a leadership position. Worth noting things like Omnitrope, we launched 18 years ago, and that's a product that's still growing very strongly. Now we're the world's largest supplier of human growth hormone, and we're still seeing originators pulling out of this market. We see strong growth momentum, strong margins, highly attractive, highly profitable products, and we're continuing to serve patients even though originators are deprioritizing that. We're also at an inflection point. We're about to launch a significant number of products. Clearly, we're launching Ustekinumab early quarter one this year. Jubbonti, Denosumab, we have a clear pathway to launch that at the end of May this year. Tyruko, subject to the JCV assay approval. Then a little bit further out, Aflibercept and Erelzi.
So really an exciting range of products and really starting to leverage. And I think we've shown what we're capable of doing in the U.S. market as we move forward. Internally, it's been quite a journey as well. Clearly, as we separated from Novartis, there's been a lot to really focus on. It's been transitioning us from being, I guess, the child of a complex parent pharma company to becoming a much more lean-focused generics business. We'd already started some of that work several years earlier. We've reduced our network, so now we only have about 15 sites within our overall network, which is roughly where we would expect it to be. We're continuing to consolidate our supplier base. We have an awful lot of suppliers. It gives us a great opportunity to get more efficient, reduce our inventory, improve our cost of goods, and make us more flexible.
We've started a significant transformation journey. We've already taken about $50 million of cost as we've simplified the business, think about where we need our headcount, really shaping our business as a generics company. That'll have about a $150 million basis point, $150 million impact this year, and going up to about $200 million of savings in 2026. So a lot of execution in terms of improving the operational efficiency, the speed, but also our cost base in which we operate. That then fits into our guidance. Back in New York and London, we gave guidance that we would deliver roughly mid-single-digit growth up till 2028 and a margin expansion starting from about 18% to mid-20s% by 2028. Now, clearly, the margin expansion journey, it's a journey, not a destination.
And I'm clearly delighted with the sales momentum having raised the guidance twice last year with our final guidance up to high single digits for 2024. So I think building strong momentum, delivering on what we've committed, and moving in the right direction in terms of both margin and in sales. If you think about the long term, I think the future is even more exciting than our past. There's more products coming off patents in the next 10 years than has been in the history of this industry. And I think we're extremely well positioned to capture a significant proportion of that value. Clearly, biologics, you see a significant number of opportunities, both biologics, ADCs, bispecifics. And as I said earlier, clearly we're looking to target 60% plus of the LOE opportunity. When we started this journey five years ago, we had five or six biologics in our pipeline.
Today, we have 28. We add, generally on average, about two new assets every year, and with 11 we've launched, I think we have one of the deepest and broadest pipelines in the industry. Given our scale, both financially and technically, we can access new technologies. Many of the questions I get around things like ADCs, these are areas that we're actively exploring, and then clearly we see new opportunities. We'll talk about geopolitics in a moment, but there's clearly new modalities, new opportunities. I think being a broad-based, strong, with a very strong commercial footprint, with the capabilities and the science and the technology to exercise, we're extremely well positioned to capture a significant proportion of value over the next few years. As I said, really the long-term pipeline, we have now 19 products in early stage development.
Two are dropping into phase three this year, so Nivo and Pembro. And then we say it's very significant market value opportunity. And the vast majority of these products generally fall in oncology and immunology, where certainly in Europe and in the U.S., we're normally a leader. So our ability to extract value without significant commercial investment is very attractive to us. GLP-1s, increasingly every, I think most meeting now, we always get questions about GLP-1s. Really, I see this as a 10-year journey. And normally the questions are around CapEx, our ability to prosecute and bring these products to the market. Really, let's think about it. So 2026, we see the data exclusivity for the diabetes indication for Canada expiring. Bizarrely, no patent was filed in Canada, so clearly there's no block to its launch. And we will aim to launch a market formation for the diabetes indication.
We have a number of partners. We've disclosed one of those, but we have others as well, and also bear in mind we're investing in our own injectable capacity as we become a stronger and stronger biologics player, so I think we're well positioned to capture the diabetes indication as that market starts to form and in other markets, whether it's Brazil, other international markets over the 2020s. Europe doesn't really start falling till sort of early 2030s, by which point then we can make a decision if we need to expand our capacity, continue to work with our partners, and think about how we want to leverage that, and then really, the appetite in the U.S. doesn't really start opening up until 2035, so this is quite a long-term journey. Very much focused on bringing products to Canada. We filed.
Fascinating opportunity, but again, we want to be very thoughtful about how and when we bring this to the market over the next few years. And then really, to close, I think ultimately we have a very compelling story. We're a leader in our field globally. We're the world's leading biosimilar generics company. We have an incredibly strong presence in Europe, a strong and dynamic presence in the U.S. We're capable of really extracting value both from our own biosimilar launches, but also with partners. And we've rapidly really become the partner of choice because we can offer a scale and a capability that quite frankly nobody else can offer. We have numerous levers for margin expansion and growth. As I said, an unrivaled opportunity coming before us with $400 billion of product coming off patent.
Ultimately, I think we have a very strong, credible presence, all with a strong balance sheet, discipline, and execution to continue to leverage and grow. With that, I will happily hand over to James and take your questions. Thank you so much. Thanks for the full presentation.
Can we swap seats?
Yeah, please.
I've not got visibility on the app, but given how many people are in here, if people want to just raise their hand if they've got any questions, that might be easiest. Does anyone have any questions they'd like to start with? We'll just get a microphone to you, thanks.
Yeah, I was just wondering how you all think about, with so much interest in the GLP-1 space and trying and the time it takes to build a biosimilar associated with that, the dilutional effect of so many players, of so many life cycle management folks coming in on the oral side, on top of the injectable side, and how do you all plan for that from a forecasting and growth perspective in the future?
It's an excellent post. Honestly, there is no simple answer. But first, let's break it down. I'm very thoughtful. That's why I'm careful how I phrase. We're focusing on the, so obviously the data exclusivity in Canada, it's for diabetes. That's what we're focusing on. I'm not going to promote off-label.
Go where you know you can go first.
Go where you know you can go first.
And then, yeah, okay, but the reality is I've never known a product in 35 years where the originator can't actually meet the demand. And so, yeah, you're right. But honestly, if we could sell this at, and this is hypothetical, so don't take it as a guide, but if we sell this at $50, what's the size of the market? I've got no idea. I mean, I think Novo should treat 14 million patients. So the unconstrained demand, if you really get the pricing right, and yeah, there's going to be new therapies, new modalities. But also the data package around Semaglutide is so good and so compelling that I think at the right price point.
That's not necessarily a race to the bottom because I still think this is still going to be a relatively constrained market in terms of the available capacity, particularly around fill-finish. I don't really see it like a biologic in terms of API. I mean, there are plenty of API suppliers. Most of these are synthesized, and the filing is more like a small molecule than a biologic. So I think from a technical point of view, I don't see it as a particularly challenging issue. Certainly the partners that we've worked with, we filed in Canada, as I said.
You mentioned the strength of the channel in Europe that you have.
Yeah, so.
That's interesting.
And it's going to, but that's why I sort of said that we don't need to. I don't need to answer some of all those questions. I think Canada, honestly. I'm not giving Karen a target for North America yet. We'll see how it goes. And I think almost it's not in our guidance. So sitting here, it's all an upside for us. I'd rather be pragmatic and say, "Look, I don't know," and be honest and say, "We'll figure it.
A follow-up. And so suddenly this 2026 is technically when you could launch in Brazil, Canada, and Mexico. So we heard something about Canada, but could Brazil and Mexico be a bit further out, or could we think next year you've actually got products on the market in Brazil and Mexico?
I'd like to hope we have. But we'll see with the regulators and the files.
Yeah, but you filed in Canada, but you've not filed in those two?
We're in the process of pulling files together for those markets.
I'm not that familiar with how things work in Brazil and Mexico. Are they challenging markets to launch generics in normally?
They're different. I mean, Brazil, we're already the largest biologics player anyway, so we have a big infrastructure or good infrastructure in Brazil. Bizarrely, the biggest prescribers for GLP-1s in Brazil are dentists. So because you get your teeth done and the Botox and then the bikini body. So the market behaves very differently in different markets. But we have scale there. And similarly, in Mexico, we have a good scale, so.
Thank you. There's a hand raised over there, please, for a microphone.
Hello, thank you. Could I just ask for an update on litigation? I know there's been a couple of payments that have been announced. Anything else that's outstanding on that front?
I guess I don't know what I don't know, but certainly all our litigation wasn't disclosed, or ongoing litigation was disclosed in our prospectus. Now, clearly, we were keen to put as many of the legacy issues behind. I think clearly with the second payment to the injured parties following the price fixing, it gave us a position and enough clarity to build a provision really with the intent of sort of giving clarity to the street about, "Okay, this is where we think the line is," and I think generally it's been well received. Similarly, we did the same with opioids. It was also part of the philosophy of why we got out of markets like China. I think it's really making sure that we've cleaned up as many of the legacy issues or markets where we think there's greater risk.
Question here?
Yeah, you said you're at 11 biosims now, adding, say, two a year or so. Omnitrope is still growing 20 years on the market, and scripts go up for biologics when they lose exclusivity. So if we fast forward a few years, it sounds like you need 20 separate product lines of biologic manufacturing. How do you sort of justify that on a CapEx basis and an overall maintenance basis? It's a pretty big biologic manufacturing overhead.
But generally, it's not bespoke lines for individual products. So partly it's threefold. I mean, not all our eggs in one basket. So if you look at our supply network today, we use Novartis for a lot of our capacity. That's at a cost-plus basis. So it's not a CDMO relationship. We're investing heavily in Slovenia. So that site should be completed 2026, and then assuming in 18 months, two years tech transfer, that'll start coming on stream. We use a number of partners, so clearly Polpharma, Samsung, and others. We have a deep partnership with Just Evotec, so we'll then have the optionality to put a JPOD in our own facility and/or use their own network as well. So ultimately, it's going to be a mixture of all of those things.
But certainly, I think we've invested quite heavily, particularly in Slovenia, to meet what we see as a future demand, but then make sure it's a spread because I don't want all of my eggs in one basket.
I see a question over there.
Thank you. Richard Saynor is the only manufacturer of penicillin API in the Western world, which is a product category you didn't allude to, but it may very well become strategic to the U.S. and to Europe. Do you want to allude a little bit on that?
Yeah, no, it's something I'm very proud of. Sandoz has been in antibiotics since 1945. So it's part of our history, part of our DNA. And you're right, we're the only supplier left in the Western world in terms of beta-lactams. That gives us a unique leverage, I think. It's certainly given me phenomenal access. Most governments, including the U.S. government, want to talk to us. I think now we need to find ways to think about a more sustainable business model to make sure that these are strategic assets. In the U.S., you have a stark choice. You either buy beta-lactams from India and China, or you buy them from Austria. That's your choice. And without them, there's no operations, there's no dental care. And yet somehow in the U.S., we sell antibiotics for less than a packet of M&Ms. And I find that offensive.
So yeah, as a patient, you're paying $30-$40 bucks. So someone in the middle is making out. To find we can get into the disconnects in the U.S. healthcare system. So I think there's a number of opportunities. Certainly in Europe, we're having conversations with the E.U. regulators to look at how tenders can be shaped better to make sure they have a bigger component of local manufacturing. Certainly governments are looking at more sustainable reimbursement models. And normally the parallel question that I get is pricing. Pricing is hard to regulate, not least of which price fixing, as you can see, is illegal and has consequences. Whereas looking at the middle part of the P&L in terms of credits for investment, infrastructure, shaping tenders, and so forth. So that's really where we're putting a lot more energy.
So I think certainly we have a lot of opportunities over the next few years to leverage it. And that's something I'm very proud of.
I'm Mr. Sandoz. Otherwise, I'm going to ask the question. Question here?
Yeah, so just.
You can switch to the microphone, please.
Yeah, just thinking about the GLP-1 opportunity you mentioned, probably Canada and emerging markets are going to be the ones which will probably add to our growth, and the regulated markets come later. How should we think about this opportunity in terms of it contributing to your growth? Do you think it could be material, or it's just going to help us?
That's why we've deliberately not guided it. I think going back to the question right at the beginning, it's very hard for us to predict. I think that's why Canada is 2026, okay, how material that will be. I mean, certainly, I think by the time you get to 2030, I would think it's going to be significant. But it would be foolish of me to put any kind of number to it at the moment.
And how will the market behave as and when we see more players entering here? You mentioned there are a lot of filers. There are a lot of companies in India, China, who file for these products. So does the market behave like a complex generic market where with incremental competition, you see pricing coming down? And how should we think about profitability?
I don't know. I mean, I think it goes back to my point earlier. In a sense, every other product ever coming off patent, generally every patient who wants a product can have it by and large. Here, as I said, if it amounts to, what was the U.S. price? It's about $1,000 a month. If this was $50 a month, how many patients would take? But even at that price, it's still a very accretive and highly profitable product. So the dynamics are so fundamentally different. I was with the U.K. government bizarrely a few weeks ago, and they had this whole Jabs for Jobs program that if you were unemployed and slightly overweight, could you put you on Semaglutide? But that's a huge cohort of patients. And I said at the moment, Novo is treating 14 million patients. That could be 14 million patients in the U.K.
I've got no idea. The opportunity and how it will stratify in terms of the auto injector, the device, and how it will evolve. We'll see. I think we've got plenty of time, and I think we will be as transparent as we can.
You plan to have manufacturing capabilities across all of these devices as well?
Yes. I mean, already we're strong in injectors, any auto injectors and devices, but as I said, I think Canada is an experiment. Let's see how it evolves, and then what resonates in the market, and we'll build that. I think it's a pragmatic approach and a disciplined approach with our cash, but certainly, look, it's a super exciting opportunity, but I don't want to get too excited yet.
Thank you.
Question here?
Hi, thank you. You're about to launch three biosimilars in the U.S. this year, while, let's say, holding out a few others in Europe. Any reason why we should, let's say, believe that you could not be able to grow at least on par as 2024 should be? What could be the other headwinds into 2025?
That's fair. I mean, look, I think we'll give the guidance when we have our earnings update in March. I mean, there's always headwinds and tailwinds. I mean, clearly you're right. There's a number of tailwinds with our launches and the momentum with things like ustekinumab and adalimumab in Europe growing. Headwinds invariably pricing or level of competition. But I think clearly, I think really with now pretty much everything we intend to launch, we have clarity. I think the only product we're waiting for clarity is Natalizumab, waiting for the JCV assay in the U.S. But other than that, we've got clarity into the launches. But I think let's get to March, and then we'll have that conversation.
We've got a question there. I'll just ask one follow-up, if you don't mind, Richard. So on Tysabri, or the biosimilar of Tysabri for the U.S., so the rate-limiting factor is to get the assay approved. What is the issue with the assay? Why is that proving difficult?
I'll let Karen do that one.
Yes. So we got a product approved, the BLA approved, and the REMS program as part of it. And the JCV assay, we're still working with Polpharma, our partner, and the FDA to get it approved. We have it approved in Europe. And the challenge in the U.S., to some extent, there is no risk to patients. It's just the test that we work together is more sensitive, actually, than the test is currently in the market. So the challenge, are we limiting patients that could have used it, and they will not use it? So it's again, it's a false positive challenge. We are working with the FDA on different solutions. We're doing everything we can to make sure we launch in 2025, and we'll keep updating you as we learn more.
Thank you. If we could take the question from there.
Hi, thank you. Can you give us an update on the latest on the U.S. generics pricing environment? I mean, we have had a good few years. What's kind of the latest you are seeing, and potentially what's the driver? Thank you.
Yes. So generally speaking, I would say after COVID, we saw pricing getting better to some extent. If you think in COVID to some extent, service levels were very high. The FDA didn't inspect any site. Service levels were very high. Prices were very low to some extent. Since the FDA came back and doing their job, we see pricing is more stable. I would say, generally speaking, the U.S. generic prices are too low, as the FDA commissioner used to say. The problem that we have in the U.S. is twofold. Innovator kind of pricing is too high, and generics are too low. So definitely the drug shortages that we see in the market and a lot of other dynamics is given the prices, as Richard said, we're looking at other solutions on how we're going to solve it.
We are very active as an industry. I'm the Chair of the Association for Accessible Medicines. And we're looking forward to work with the new administration to make sure we continue working on the bills that already started. There are a few exciting bills, I would say, with the Senate Finance Committee.
Sandoz, I'm missing this wave. Otherwise, yeah.
Yeah, I think people are extremely excited about GLP markets is because historically, when there's a first-for-market generic, now it becomes first-best-for-market. A lot of people are competing with one molecule. So the GLP-1 is a large market. Maybe that satisfies more competitors. But going forward, do you foresee any potential opportunity that could become back to one or two competitors as a beginning? Is there any that can a single product can drive the revenue growth significantly?
For GLP-1s or?
Not other than GLP-1s.
Single big product, I think.
There's something with high barriers that the first-for-market can maintain more than six months exclusivity or some longer time, like some of the inhaler products. Other than that, any?
I don't think so. I mean, I guess the days are old. The Hatch-Waxman, the 180 days exclusivity. We don't really, I mean, very rarely we talk about it. So I don't think of the business in that way. I mean, I think what's nice about us is we've got, in a sense, so many shots on goal, so many levers to create value in 28 large molecules in our pipeline and then only 450 small molecules. I think our ability to gain that, and I think the bit that people always forget when you comment to GLP-1s is you still need the commercial scale to leverage and create value from these things. And I think you've seen that with the U.S. with Adalimumab and the work that Karen and her team did with CVS. And you're seeing it now with the European business with Ustekinumab and adalimumab.
I think our ability to leverage our scale, our relationship, and we'll continue to do the same in the U.S. with Hyrimoz, so I think there's a lot of opportunity, but I don't really think about it so much in terms of the classic generic model from, say, 15, 20 years ago.
Hatch-Waxman is celebrating this year 40 years. It's the time to Hatch-Waxman 2.0.
We're going to Hatch-Waxman 2.0.
Yeah.
So we've got Remco with us here as well. I'll be taking any questions your way.
Particularly difficult financial ones.
Hopefully not a difficult one, but how much reinvestment is there going to be? It sounds like there's quite a lot of pipeline reinvestment, particularly in maybe US generics. So is what you did in 2024 a good guide to how much spend you're going to do in 2025 on DNR or R&D, or is it ramp up in spend time?
Yeah, so we had in our spin, we had a certain level of guidance of investments, particularly to build up our own infrastructure in Slovenia, where Richard was referring to. That costs a certain amount of money. In the coming years, we might ramp that up a little bit more in anticipation also with GLP-1, but it will be always a mix with external and internal. But we see so much opportunities there. But you have to think in numbers, maximum $100-200 million a year more as we see it now than we had originally planned, which within the cash flow is not a problem.
Just to clarify, the 100-200 is what the extra CapEx could be. That's not the R&D investment, which would go through the P&L?
Yeah, so we have also the DNR investments, correct, of course, with the growth and keeping the percentage slides. There will be every year a little bit more. For 2025, which we have also publicly said, we probably do a little bit more, so we increase also the percentage of sales a little bit to fuel the DNR portfolio because we see so many opportunities, and we keep on looking for those opportunities, and we have to nicely balance, of course, because we have our mid-term target. We want our profitability up, which we need for the cash flow. On the other hand, we want for the mid to longer term to do all the right investments, and I think we have found the right balance, but certainly, when we have the opportunity to invest more, because there's so many good opportunities out there, we will do so.
Any other audience questions? Maybe a final one for me, Richard Saynor. So Humira did very well in the U.S. in 2024, better than the market was expecting at least. For Stelara, could you do something similar in terms of a partnership, and when can we find out some more about that?
We have. So we have a partnership with one of the PBMs. I can't disclose what or who, and I can't disclose the nature of the agreement, but we have entered into certainly one PBM in the U.S. I think then the question is, how do I see us evolving? I think clearly, look, we guided when we launched Adalimumab that this was going to take a little while. And a lot of it's going to be down to the decision, certainly the beginning of when the PBMs choose to switch over because it's their decision, not ours. But again, just as I think we've taken, I mean, on Ada, we have 80% share of the available market with 10 or 11 competitors. I would expect Karen to perform extremely well with Ustekinumab and Adalimumab. So I'm excited about that as a launch this year.
Great.
I think we're well positioned, so thank you for the question.
Thank you very much. I think we'll wrap up there. Thank you.
Thank you.