Head of Investor Relations of Sandoz, which trades on the OTCQX Best Market under the symbol SDZNY, and on the Swiss exchange under the symbol SDZ. Welcome, Craig.
Thanks, Craig, and hello everyone. Thanks very much for sparing the time to show real interest in Sandoz. We think it's a great company, a very good investment case, and we're glad to present to you today. I'm going to spend the next few minutes or so sharing some slides, and that will hopefully take you through the opportunities for growth at Sandoz. We believe there's vastly more opportunities than we can handle, so it's a great position to have. It's a great problem to have, and we're in such a position to develop the company and deliver excellent growth for shareholders over the course of time. Starting off, really, you can see from the title of the presentation, Sandoz is really about pioneering access for patients.
This is about driving access as much as we can so that patients, more and more patients around the world, can get more affordable medicines more quickly, and that's really what Sandoz is all about. We're a generics and biosimilars company. We believe we have very little in the term in relation to peers right now. As an end-to-end generics and biosimilars company, we are not an innovator. We're not an originator. We're a pure-play generics and biosimilars, and I'll show you some of the key statistics in a moment as to how we are grounded. We are rooted as a European champion with excellent positions elsewhere in the world. That's our disclaimer. I'll kind of safe harbor, I guess. I'll really kind of kick off with showing you what a leading position we have in a very attractive market around the world.
You can see some of the statistics there. For example, the market size at over $200 billion. We believe there's strong growth, especially in the biosimilars market going forward. As I was saying earlier on, we're broadly around 70% generics, 30% biosimilars right now, but proportionally, more and more of our sales are actually coming from biosimilars. Biosimilars tend to be more attractive in terms of margin and perhaps in terms of sustainability, but also perhaps in terms of level of competition as well. We are very well placed within the biosimilars market. Generics tends to be more of a flat to low growth market. We believe there is growth there, but probably not at the rate as the biosimilars opportunity. Last year, we delivered over $10 billion of U.S. sales, sorry, of sales in U.S. dollars.
That was a real milestone for us, but actually within that, you saw double-digit growth in biosimilars, and it was really good to see that all regions were contributing to strong growth. This was our first full year as an independent company. You probably know that just over 18 months ago, we spun out of Novartis and became an independent company, and that means we've been able to really focus not just on generics, but really build our biosimilars business that I'll take you through. We are a top three player, so if you take our position in European markets, I'll go through exactly how we see Europe as a particular moat for us. It can pick a particular competitive advantage we got versus other companies. We do cover probably around 80% of the pipeline in generics, probably more like 60-65% in biosimilars.
There are many, many biologics in the market right now that do not have a biosimilar. Now, we would like to address that, and we think that's one of the opportunities we may have going forward. We are number one in biosimilars worldwide, and we do have the world's strongest biosimilars pipeline. We have currently 28 assets in the pipeline, and we've been launching at a rate of not even, for example, Hyrimoz and Envisa in the U.S. recently, as well as Tyruko in multiple sclerosis in Europe. We have more launches to go this year, and you'll see over time the number of launches we have, for example, across oncology and other areas, for example, in immunology.
On the financials, we're running at less than two times debt- to- EBITDA, so we do have a strong balance sheet, and I'll take you through the refinancing of the balance sheet a couple of months ago in a moment. I'll just recap. It seems a little while ago now, but we printed our 2024 results back in March, and there were kind of four big buckets of messages that we wanted to get across really in relation to the strategic progress that we're making. First of all, we are advancing on the pipeline. We had a number of regulatory approvals last year and a number of launches. We do see numerous opportunities to actually increase the coverage that I mentioned a moment ago, and we're expanding our pipeline at a rate of not.
We did see 30% growth of biosimilar sales last year at constant currency, leading to that $10 billion level of sales for the first time. On the margin, we are delivering an expanding and strong margin, so we've guided this year to a 21% core EBITDA margin, and last year we hit 20.1%. We do think over the midterm we can get to between 24–26% core EBITDA margin, and we're making really good progress on that, partly through mix as biosimilars do have a more attractive gross margin, and also in terms of operating leverage as well. There's more we can go for in terms of driving sales growth ahead of our OPEX cost growth. Finally, on creating value, our ROIC is actually up, so it increased to around 12.5% last year.
We recently increased our dividend by a third, so we took it to 0.6% per share, and we're investing in growth opportunities, particularly in biosimilars, where we think that's where the real value is centered over the mid to long term. As I was saying, we've got more opportunities than we can handle. We've got a great problem to have. If you take the loss of exclusivity opportunities over the next few years, you could almost break it down between biosimilars, GLP-1s like semaglutide, and also generics. You can see some of the numbers on the page, but there's real value expansion in the long term, and that's really driven by not just traditional biologics, but also new technologies such as antibody drug conjugates. For example, we have Enhertu within our pipeline that comes up in the not too distant future.
We think there's a big opportunity for biosimilars and generics. GLP-1s is more of a longer-term opportunity. We think in weight loss, we want to be there at market formation. We haven't disclosed to the market exactly what our GLP-1 plans are, but we do know that it's going to be a very significant opportunity for us some years away, but clearly we want to be on that, and the company, the size and scale and capacity of Sandoz, we will absolutely be there at market formation. You can see what we got in the pipeline on generics versus biosimilars. People ask us sometimes about individual generics. An individual generic product will not make a difference. We do have tens of thousands of SKUs, so it's very difficult, even though we launch multiple generics per year, it's really difficult to pin down exactly what's driving the performance.
On biosimilars, we do have right now 28 products, but we think we can actually drive that potentially further. On the business mix, as I was saying, we've moved from 23% of our sales in biosimilars to 28%, and that's really been driving the strong growth of the company, and that is set to continue. On the regional mix, we're very much a European company. When I'm in the U.S. and I was in New York at an investor conference last week for a couple of days, quite logically and reasonably, 95% of the questions we get are around our U.S. business. However, the U.S. is less than 20% of our sales. North America is about 23%, but quite clearly includes Canada, which is a good size market for us.
Although we are exposed to things like tariffs, the PBMs and so on, obviously it's of limited impact for us given the scale, not just of our international business, but also the fact that we do have such a strong position in Europe, which is a real champion for us. As I was saying earlier on, it's a real competitive advantage that we have in Europe. We do have, in a very, very big market, commercial operations right through Europe. We have in over 40 markets, offices in each country. We'll have, for example, a German salesforce, but also an Austrian salesforce. We'll have different go-to-market strategies, different packaging, different relationships with the authorities and with payers and so on.
That's a function really of the vast amounts of investment that Novartis has put in over the years, and that's why you see other competitors really struggling to get anywhere near us in Europe. We have a vast portfolio of products that we can talk to doctors, to hospitals, to pharmacy chains about that you wouldn't see maybe from some of our competitors. For example, some of the Indian companies out there, while they are great at developing and very good at producing, they may not always have that scale of network of commercial capability that we have. It's a real moat for us. This is a slide that we put up at Q1. We printed back at the end of April our Q1 performance.
Again, even for biosimilars, there's no one biosimilar that really kind of moves the needle because we're now building up such a strong portfolio of biosimilars. I'll just give you an example. Maybe I'll just pick on one or two. So Omnitrope, which is our growth hormone medicine, very strong for us, probably one of our biggest, if not biggest seller. It's been around for 19 years. It's one of the first biosimilars, and it's been around for such a long time, but posted double-digit growth last year. That's the difference really that I found after working for 10 years for originators, coming into a generics and biosimilars company. I couldn't really get my head around the fact that there isn't a loss of exclusivity once you go generic. Once you lose that patent, you don't lose it again.
The fact that we're 19 years into Omnitrope being on the market and delivering double-digit growth took me a little while to actually really get to grips with. We've been launching, as I say, at a rate of not. We know, for example, Tyruko, we hope to launch by the end of the year, and it's going particularly well in Europe. We've just launched, to the bottom left of the screen, Doneotumab. Actually, we launched it just a few days ago, and in Q4, we'll launch in Europe as well. We're particularly pleased to have launched that vital medicine. For Adalimumab, our Humira biosimilar, Hyrimoz, is making good progress in Europe and continues to be that leading biosimilar in the Adalimumab space in the US.
Pisteva, again, we've launched fairly recently in Europe, and we launched only very recently in Q1 in the US. Actually, only a short time ago, we launched in private label with a PBM in the U.S. as well. Hopefully, we can update the market later this year on the progress of those launches in the US. Finally, Aflibercept, which is our Eylea biosimilar. We do not quite know when we are going to be launching in the US, maybe over the next year or two, but we are not quite sure yet. We are set for the European launch in Q4 later this year. I would mention the fact that the tagline at the bottom about regulatory streamlining, this is a particular factor for us, and it could open up the biosimilars market an opportunity for us maybe even further.
You do need to conduct phase III trials in biosimilars, even for a biosimilars company, even after the reference medicine has been on market and has been approved some years ago. We do conduct phase III trials. Other companies conduct phase III trials before a biosimilar is approved. There are early initial signs that the regulators may be potentially moving towards dropping that requirement for phase III trials. Now, it's very early stages. There's no blanket decision being made. We're waiting for any kind of updates from the regulators, but we've already stopped recruitment into one trial for Pembrolizumab recently, and that's after conversations with regulators. We've seen it elsewhere. We know the U.K. regulatory authority has dropped the requirement for phase III trials. What that means is we could take a significant chunk of cost out of the cost of development.
Now, if you're talking, for example, $100 million, $120 million out of the cost of developing a biosimilar, you could apply that, reallocate that to widening your pipeline even further. We would love to cover every biologic coming up for patent expiry around the world. We just can't do everything. Our view is we can do anything we want. We just can't do everything. If you took out that phase III development cost, we could apply that to expanding our pipeline even further. That could be a real groundbreaking opportunity for us. Moving to manufacturing. We are really advancing on our simplification initiatives, particularly after spinning out from Novartis around 18 months ago. We are now at 15 sites around the world. That's 11 in Europe.
We do have one site in the U.S., and we have one or two other sites around the world, for example, in Brazil. Our number of finished dosage form suppliers, you can see that we're nearly halving. We're making good progress already, and we think by 2028, we'll actually reach around 250 of those suppliers or so. We're making good progress there. On transforming the business, making our company right size, making sure we've got the right teams in place, the right capabilities after pulling away from Novartis, we're making good progress on our run rate savings, and that will help to expand that core EBITDA margin that I mentioned. I alluded earlier on to the strength of our balance sheet as well. The fact that we're now down to around something like 1.6 times EBITDA at the end of last year.
We recently refinanced, and you can see our updated maturity profile there. We do have excellent credit ratings from S&P and Moody's. We do have a new revolver, and we came to market both in Swiss francs and euros early this year to repay term loans. We brought down interest costs of debt maturities and now extended out to 2035, and our balance sheet, we think, is in very, very good shape. Our priorities this year really are around delivering operationally and financially. First of all, we want to keep delivering for patients on launches and on our pipeline. We really do want to get more affordable medicines to more patients more quickly, and that is why we come into work every morning. We want to maintain the unrelenting focus on commercial execution. Commercially, we are a very, very good company.
We want to maintain and expand that advantage around the world. Excuse me. Finally, we want to drive further growth in sales, margin, and free cash flow. Those are the three elements we keep pushing to our teams around the business. We do not say, excuse me, the one is ahead of the other. We have to be top-line-led. We have to expand the margin, and we think we are in good shape to do that. Excuse me. I just wanted to finish off by talking about the midterm. Beyond this year, I mentioned some of this earlier on. Excuse me, I have got a frog in my throat. Last year, we delivered 9% growth. We think we can extend out to 2028 by growing constant currencies on net sales by mid-single digit.
That is also our growth for this year that we have guided to. In terms of our margin, you can see the elements that will drive our margin, and you can really bracket this in terms of operating leverage and mix. Mix will have an impact as we sell proportionally more and more biosimilars, and that will drive our growth in EBITDA margin. We are taking out more costs and driving organizational efficiency, but there is more that we can do around manufacturing, around supply chain, and around procurement. I know that consensus right now for margin in 2028 is around 24.7%. Certainly, the market is in line with how we are thinking about the outlook.
On dividend, as I say, we are now at around 24% payout to core net income based off last year's number, and we think we can get to 30–40% in the midterm. More free cash flow, more dividend, a stronger balance sheet, and a top-line-led business that will see leverage down the P&L. Overall, that was hopefully a reasonable presentation for you to understand the opportunities at Sandoz. Buy-side interest right now is off the charts. I've never been so busy with requests for meetings, which is a great thing. It keeps me talking to investors, which is the best part of the job. Certainly, there's a lot of interest in Sandoz right now, both at a retail level and at an institutional level, and that's set to continue. I'll just turn to any questions that have come in.
I'll just have a look on screen to see what's come through. First of all, okay, the first question, how should we think about the impact on COGS from U.S. tariffs in 2025 and beyond? Can you please quantify? Do you still believe you'll be able to absorb the impact? The answer is yes. We'll be able to absorb the impact. We think this year there's actually a limited impact from tariffs on our business, partly because the U.S. is actually a reasonably small part of Sandoz sales. If the EU, so what's in place right now that's impacting us is the original 10% plus the 10% from this year put on China. We do have that impact.
If the EU were to face, let's say, a 20% tariff on an annualized basis, the total tariff cost for us at a COGS level will be up to $65 million. That's how we see it. We could absorb the current impact, but also that potential EU tariff, we could absorb that within guidance. Second question coming in, are you considering ramping up manufacturing in the U.S. as are some originators? The answer is no. We are not looking to invest CapEx in the U.S. right now. The U.S. is a major growth driver for us. It's still a reasonably small part of our business, but we do see excellent potential growth there. I think what we'd like to see is reform of the PBMs and the route to markets in the U.S.
We'd like to see work done on rebates, and sometimes the addiction to rebates in the U.S. system. Also, pricing for originators in the U.S. is good. Pricing for generics and biosimilars, not so good. It's one of the more challenging markets when it comes to generic pricing, and we'd like to see more attractive pricing in the U.S. Sometimes you'd be paying far more for a packet of chewing gum than you would be for your antibiotic. We're not a charity. We want to obviously make money and reinvest in bringing more medicines to more patients. The U.S., as I say, is attractive for us, but right now, it doesn't really make sense given the challenges in the incentives in the U.S. system, pricing in the U.S. system, and so on. The third question, can you outline the key drivers differentiating H1 and H2 this year? Yeah.
You probably see a little bit of a difference both in terms of sales and margin. There is an element of seasonality in there, but also our launches this year, particularly in biologics, are weighted towards the second half of the year. We have a number of launches, for example, in Europe in Q4. We have recently launched with Denosumab in the U.S., I think, last week. However, you are not going to see the material levels of sales actually coming through until the second half, and clearly, we are in June right now. At a sales level, you probably see a slightly stronger performance in the second half, and also the same in terms of margin. That is partly around the mix impact from those biosimilar launches, but also in terms of product costs and some phasing as well.
What is the impact on your biosimilar pipeline from regulatory streamlining? I think we touched on that. How does the uncertainty in staffing at the FDA impact Sandoz? We haven't seen any impact yet. What we're launching over the next 12 months or so has already been approved by the U.S. FDA. We're just waiting for things like patent expiries. We are waiting for a test to be approved for what's called John Cunningham virus for when we launch Tyruko in the U.S. This has already been approved in Europe, but we're looking to agree with the authorities in the U.S. on this test. We think we hopefully will have that approved by the end of the year. That's not actually with the FDA. That's with New York State. We're not impacted by any staffing impacts of the U.S. FDA right now.
That may well be different in the future, but right now, we're not seeing any impact. Could the impact on Sandoz following the U.S. executive order on most favored nation pricing? What could be the impact? Okay. The impact, we have actually reasonably limited sales to government, so Medicare, Medicaid programs in the U.S. Actually, most of our U.S. business is commercial. Government, yeah, that doesn't take up much of an impact for us. That may well change as we launch, for example, Denosumab and one or two other medicines in the U.S. If the U.S. called it 20% of our sales and government business maybe called it, let's say, 10% of our sales in the U.S., you're talking exposure to MFN on Sandoz overall at around 2% of our sales. We're not seeing any impact there.
The final question, can you please give an update on your recent launches in the U.S.? They are very recent. We produce our Q2 sales and our H1 results on the 7th of August. We will make it July next year. I am not sure why it is August this year, but we will look to update the market on how those launches are going on the 7th of August. We are looking forward to that. How much data we have at that stage, given the very recent launches, I am not sure, but we will do our best to update the markets, and we will do that through the year. A lot is going on at Sandoz. We are very pleased with the progress we are making. We are actually performing in line with our strategic roadmap, in line with our midterm outlook. We have got a huge amount of opportunity to go for.
We're making good progress, not only in terms of our pipeline, our commercial execution, but also financially. That's being reflected clearly in the investor engagement that we're having. With that, I'd like to thank you for your time. It's been a real pleasure to speak to you today. If you want to get hold of me and arrange some additional time, I'm very happy to chat. You can find me at Craig.Marks@Sandoz.com, or you can go on the website, and you'll be able to find our details there. That's Craig.Marks@Sandoz.com. Thanks for your time. Bye-bye.