Earnings call transcript: Novartis Q3 2025 sees robust growth in sales and innovation

Novartis reported a strong third quarter in 2025, with net sales increasing by 7% to $20 billion and core operating income also up by 7% to $7.86 billion. The company’s core EPS rose by 10% to $2.25. According to InvestingPro data, Novartis maintains impressive profitability with a 76.28% gross margin and has achieved 12.95% revenue growth over the last twelve months. Despite facing challenges such as generic erosion, Novartis remains optimistic about its growth trajectory, supported by innovative product launches and strategic acquisitions.

Key Takeaways

• Novartis’ Q3 net sales grew 7% to $20 billion.
• Core EPS increased by 10%, reaching $2.25.
• Kisqali and Scemblix showed significant growth, with 68% and 95% increases, respectively.
• The company expects high single-digit sales growth for the full year 2025.
• Proposed acquisition of Avidity Biosciences to boost long-term growth.

Company Performance

Novartis demonstrated robust performance in Q3 2025, driven by strong sales of key products like Kisqali, Pluvicto, and Scemblix. The company has maintained its market leadership in several therapeutic areas, including metastatic breast cancer and prostate cancer radioligand therapy. With an impressive EBITDA of $23.55 billion and a return on equity of 33%, the company’s financial health is rated as "GREAT" by InvestingPro analysts. This performance is noteworthy given the challenges posed by generic competition for some of its established drugs. For deeper insights into Novartis’s financial health and growth potential, check out the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $20 billion, up 7% year-over-year
• Core operating income: $7.86 billion, up 7%
• Core EPS: $2.25, up 10%
• Free cash flow: $6.2 billion

Outlook & Guidance

Novartis anticipates a "year of two halves" in 2026, with the first half impacted by generic entries but stronger performance expected in the second half. With a conservative beta of 0.57 and an attractive dividend yield of 3.36%, the stock offers stability alongside growth potential. The company projects high single-digit sales growth and low teens core operating income growth for the full year 2025. The proposed acquisition of Avidity Biosciences is expected to raise sales growth from 5% to 6% between 2024 and 2029. Based on InvestingPro’s Fair Value analysis, Novartis currently appears undervalued, suggesting potential upside for investors.

Executive Commentary

"We’re on a solid track to drive growth through the coming years," said Vas, an executive at Novartis, highlighting the company’s strategic focus. CFO Harry added, "We expect to emerge much stronger in the second half," indicating confidence in overcoming near-term challenges.

Risks and Challenges

• Generic erosion for key drugs like Entresto, Tasigna, and Promacta could impact revenue.
• Supply chain disruptions may affect manufacturing and distribution.
• Macroeconomic pressures, including potential policy changes, could influence market dynamics.
• Competition in the pharmaceutical sector remains intense, requiring continuous innovation.

Q&A

During the earnings call, analysts inquired about potential policy negotiations with the White House and the impact of generic entries on margins. Novartis executives also provided insights into pipeline assets, such as the anti-APRIL antibody, and discussed rebate adjustments affecting financial performance.

Full transcript - Novartis AG (NOVN) Q3 2025:

Sharon, Conference Call Operator: Good morning and good afternoon, and welcome to the Novartis Q3 2025 Results Release Conference Call and Live Webcast. Please note that during the presentation, all participants will be in a listen-only mode, and the conference is being recorded. After the presentation, there’ll be an opportunity to ask questions by pressing star one and one at any time during the conference. Please limit yourself to one question and return to the queue for any follow-ups. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Ms. Sloan Simpson, Head of Investor Relations. Please go ahead, Madam.

Sloan Simpson, Head of Investor Relations, Novartis: Thank you, Sharon. Good morning and good afternoon, everyone, and welcome to our Q3 2025 earnings call. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements. Please refer to the company’s Form 20-F on file with the U.S. Securities and Exchange Commission for a description of some of these factors. The discussion today is not the solicitation of a proxy, nor an offer of any kind with respect to the securities of Avidity Biosciences or SpinCo. The parties intend to file relevant documents with the U.S. SEC, including a proxy statement for the transactions and a registration statement for the spin-off. We urge you to read these materials that contain important information when they become available.

Before we get started, I want to reiterate to our analysts, please limit yourselves to one question at a time, and we’ll cycle through the queue as needed. With that, I will hand over to Vas.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Great. Thank you, Sloan, and thanks everybody for joining today’s conference call. If you turn to slide five, Novartis delivered solid sales and core operating income growth. I think importantly for us, important pipeline milestones through quarter three. Sales were up 7%. Core operating income was up 7% with our core margin at 39.3%. In the quarter, we were able to deliver some important approvals, including remibrutinib, our FDA approval in CSU for our BTK inhibitor, as well as important phase 3 results, which we’ll go through in a bit more detail: ianalumab, Pluvicto, Kisqali’s five-year data, as well as positive opinions for Scemblix, and then also positive data that came out relatively recently on Cosentyx in polymyalgia rheumatica and Fabhalta in IgAN. Now moving to slide six, our priority brands drove robust growth in the quarter.

I think really, while we, of course, are contending with our loss of exclusivity, that is particularly Entresto, but also Tasigna and Promacta, what I hope we can get the focus to be on is on our strong underlying growth of our key growth drivers. Here you can see growing 35%. Really excellent performance from Kisqali, Cosentyx, Pluvicto, Scemblix, solid performance from Leqvio and Fabhalta. I think we’re on a solid track to drive growth through the coming years. Now moving to slide seven, now taking each brand in turn, Kisqali grew 68% in quarter three, outpacing the market and our CDK4/6 competition. If I could draw your attention to the center panel, our total to brand NBRx now, as you can see, is in a market-leading position, particularly driven by the early breast cancer launch. Our U.S. growth was up 91% in quarter three.

We are the metastatic breast cancer leader in NBRx and TRx, and in early breast cancer, our share is 63%. We’re leading both in the overlapping populations with our competitor and the exclusive population. In particular, I’d say we see significant growth potential in that exclusive population, where we estimate more than 60% of patients are currently not on a CDK4/6 inhibitor. Outside of the U.S., we saw 37% growth in constant currency. We are the metastatic breast cancer leader in NBRx and TRx share across our key markets. Our early breast cancer indication now is approved in 56 countries. We’ll start to see the effect of the early breast cancer launch in the next few quarters ex-U.S. I think as a good indicator of what we see as possible outside the United States, our Germany NBRx share is already at 77%.

I think that helps demonstrate the kind of power that we have to drive Kisqali’s utilization and enable women to prevent breast cancer recurrence across the globe. I’ll close by just reminding you we have a category one NCCN guideline support as the only preferred CDK4/6 inhibitor with the highest score in early breast cancer and metastatic breast cancer. Now moving to slide eight, I just wanted to say a word about Kisqali’s five-year data, which we showed at ESMO. There was a 28.4% reduction in the risk of recurrence in the broadest population of early breast cancer patients that have been studied. You can see here the data is very consistent across tumor stage two or stage three in node-negative patients and node-positive patients. I’d also note that our OS data, while still maturing, has reached a hazard ratio of 0.8.

We see a narrowing confidence interval, as you can see here in the third bullet, just a little bit above one on the upper bound of the confidence interval. This is a clear trend favoring Kisqali. The safety is consistent. We also had some notable important trends in the data continue to demonstrate a reduction in distant recurrence. It is a distant metastases, which is excellent to see. We will continue to follow these patients and continue to provide updates on this data as it matures. Now moving to slide nine, Kisqali grew 44% in quarter three. This was primarily demand-driven growth, particularly in the United States. In the U.S., we had 45% growth in Q3. Robust TRX growth outpacing both the MS and B-cell markets. We have broad first-line access now. Almost 80% of the patients receiving Kisqali are first-line or first switch.

Outside of the U.S., we had 43% growth, and we’re the leader in NBRX share in eight out of the 10 major markets that we participate in. We see a significant opportunity now looking ahead for Kisqali outside of the U.S., where approximately 70% of disease-modifying treated patients are not currently being treated with a B-cell therapy. As we continue to get that B-cell class up, with Kisqali having leading share in many markets, we see the opportunity to drive dynamic growth ex-U.S. We did present some additional data at ECTRMS that show the benefit of Kisqali. I’d highlight that 90% of naive patients receiving Kisqali showed no evidence of disease activity at seven years, really demonstrating the durability of the response to this medicine. Now moving to slide 10, Pluvicto grew 45% in constant currency in quarter three.

That’s really momentum driven off of the pre-taxane castrate-resistant prostate cancer approval, which we recently achieved. The U.S. growth is driven. The Q3 sales in the U.S. were up 53%, driven by new patient starts increasing to 60% versus prior year. 60% of our new patients in the pre-taxane setting are with market share already surpassing chemotherapy. Really driven now by that pre-taxane launch. The key enablers to sustain our growth now in the U.S. is really to drive community adoption. We have 60% of our TRX in the community. We have nine out of ten patients within 30 miles of a treating site, so over 730 sites. We believe that we need to get to around 900 sites to also support the HSPC indications. We’re well on our way. Our rollout of the prefilled syringe is really positive, around 70% of sites using the prefilled syringe already.

Outside of the U.S., our rollout continues. We see good growth in the post-taxane setting in Europe, Canada, and Brazil. We also received a Japan approval and expect a China approval in quarter four. All on track for Pluvicto to reach its peak sales potential. Now moving to slide 11, we presented last week the PSMA addition data, where we demonstrated that Pluvicto plus standard of care reduced the risk of progression or death for standard of care alone by 28%. The primary endpoint was met, clinically meaningful, 28% reduction in these patients with a compelling p-value. A clear positive trend in OS with a hazard ratio of 0.84. That’s even with crossover. I think that really demonstrates we’re having the intended effect. The time to progression to castrate-resistant prostate cancer was delayed, which demonstrates we are achieving disease control.

Overall, the Pluvicto tolerability profile was consistent with the phase 3 trials and PSMA4 envisioned. We would see global regulatory submissions in quarter four of this year. Moving to slide 12, Leqvio was up 54% in the quarter, on track for over $1 billion in sales in the year. In the U.S., we’re up 45%, outpacing the advanced lipid-lowering market. We had solid TRX gains of 44% versus prior year. Our key focus is particularly in Part B accounts and accounts that have a high interest, of course, in using the buy and bill Leqvio model to drive more depth in those accounts, particularly as we’ve now evolved our field model to better support those accounts. Outside of the U.S., we see continued strong performance, 63% growth, driven by a number of markets, particularly China out of pocket.

We also see strong uptake in Japan, strong uptake in the Middle East and the Gulf countries. All of that taken together, I think really portends well for Leqvio in the medium to long term. We did achieve some important regulatory and clinical trial highlights. Our U.S. monotherapy label expansion, removing the statin prerequisite in the primary prevention population, was added to the label. The V difference data was presented at ESC, which showed Leqvio helps patients get to goal faster. I’d also note that our pediatric submissions are on track, which of course supports our longer-term loss of exclusivity profile. Now moving to slide 13, Scemblix grew 95% in constant currency in quarter three. It’s on track to be the most prescribed TKI by NBRx in the U.S.

Focusing on the middle panel, you can see that our all-line of therapy NBRx has now reached 39% and is steadily climbing, built off of that first-line approval. In first-line specifically, we’ve reached 22% share. We’re now approaching NBRx leadership in first-line. We already are the NBRx leader in second-line and third-line plus, with 52% and 53% share respectively. Outside of the U.S., our focus currently is on the third-line plus setting, where we have 68% share. We do have the early line now approved in 26 countries, including China and Japan, and a positive CHMP recommendation from October. We would expect now to start to see our ability to reach patients in the first-line setting picking up outside of the United States. As an indicator of that, you can see here our strong launch momentum in Japan, first-line share already up to 18%, second-line at 25%.

We continue to be very optimistic about the outlook for Scemblix. Now moving to slide 14, Cosentyx had a mixed quarter. Our growth was impacted by one-time effects in quarter three, which I’ll go through in a moment. Most importantly, we remain on track for mid-single-digit growth in full year 2025 and are confident in the peak sales potential of the brand. You can see that in constant currencies, our growth was down 1%. In U.S. dollars, we’re more or less flat. When you remove the one-time R&D adjustment of $74 million, our global sales growth was around 4% in constant currencies. In the U.S., when we adjust for that one-time R&D, our growth goes from plus 1% to plus 9%. Cosentyx continues to be the number one prescribed IL-17 across indications. In HS, now we see a stabilization of the performance, 52% share in naive and 50% overall.

When the competitor came in, we did see a dip in that share, but that’s now stabilized. We are better able now to manage patients alongside physicians to achieve step-up dosing rather than switching off of Cosentyx. I think that’ll be important. We can really turn our focus to market expansion in HS with the stable share that we’ve been able to achieve. Outside of the U.S., we were down 3% in constant currencies, but this again was driven by a one-time price effect in the prior year. Importantly, we saw 4% volume growth, and we’re the leading originator biologic in Europe and China. Overall, I think the key message is we’re confident in the $8 billion peak sales potential. We expect continued market growth in our core indications and rollout of the recent launches in HS and IV.

I think also importantly, we did achieve a positive phase 3 readout in polymyalgia rheumatica. It’s the second most common inflammatory disease in adults over 50. An estimated 800,000 patients in the U.S. and 1 million patients in Europe have the condition. This is a market that’s on par with the HS market when you think about the size of the segment. We have global regulatory submissions planned in the first half of 2026, and we’ll be working to accelerate them as well. We really hope to drive rapid uptake in PMR. We believe the data is compelling. We demonstrated, as you saw in the press release, a positive, clinically meaningful primary endpoint. We also hit all of the secondary endpoints. We’re looking forward to presenting that data and taking this launch forward. Now moving to slide 15, our renal portfolio continues to gain traction in the U.S.

We had a positive Foplita eGFR data, really the first oral therapy to generate such compelling eGFR data. Looking forward to presenting that. We see steady growth in the U.S. Our IGAN portfolio grew 98% versus a market growth of 23%. Our NBRX share is now 18% and climbing steadily. We see strong uptake as the first approved therapy in C3G. Outside of the U.S., we’re beginning to get the key approvals, particularly in China, where there’s a large market for IGAN therapies. Turning to the phase 3 applause, IGAN study, we saw a statistically significant clinically meaningful improvement in eGFR slope versus placebo. It’s the longest renal function data for IGAN to date. We’re excited to present that data at a future meeting. This data should support a full approval, traditional approval with FDA.

Now moving to slide 16, remibrutinib was approved by FDA as the only oral targeted BTK inhibitor for CSU. I think many of you know the medicine well. It’s something we’re quite excited about. It’s indicated for the treatment in adult patients who remain symptomatic despite antihistamine treatment. We estimate that patient population to be around 400,000 patients uncontrolled out of 1.5 million treated patients. We achieved a clean safety profile with this medicine. No box warning, no contraindications, no requirements for routine lab or liver monitoring. Oral administration, 25 milligrams twice daily with or without food. It’s a really good profile for these patients. I would want to highlight as well, we’re very excited to have a medicine with rapid onset in a highly symptomatic condition. These patients have to deal with itch, loss of sleep, discomfort.

If you can have a medicine that has a really rapid efficacy benefit, that’s really, I think, something that could drive rapid uptake. Our initial patient physician feedback is excellent. We’re already seeing a steady increase in start forms. Our goal will be to improve the access environment for the drug as fast as possible. We would start to expect to see rapid uptake over the course of next year. Lastly, in both EU and China, we’ve completed our submissions, and our Japan submission is slated for also later this year. Now moving to the next slide, in ianalumab, we announced our positive phase 3 studies earlier in the quarter. Yesterday, we released our top-line data.

The full data set will be presented soon, I think tomorrow, and our analyst day to discuss this data as well as the remibrutinib data, as well as other immunology data, including our CART therapy platform for immunology. Immune reset platform will be on Thursday. I hope you’ll be able to join that. We’ll give you a lot more detail on the secondary endpoints, on post-HACA endpoints, on biopsy data, et cetera. Here, just out of top line, the phase 3 endpoint was met in both studies, statistically significant improvement in SDI. I do want to highlight here there’s a lot of focus, a lot of reports on the aggregate SDI from a patient standpoint and a physician standpoint. What matters is where the individual patients are and how much we’re able to improve their relative disease. Also, what is the starting point for the SDI score.

The fact that we’ve achieved two positive phase 3 trials, I think, will really enable us to roll this out to patients. As patients see the symptom benefit given their profile, they’ll hopefully be able to get the benefits and stay on the medicine. We had consistent numerical endpoints, improvements in the secondary endpoint, a favorable safety profile. As I mentioned, the data will be provided shortly. Regulatory submissions are on track for the first half of 2026. Now moving to slide 18, overall, I think a strong innovation year for the company. You can see all the various milestones that we’ve reached. Also, we’ve been, I think, the leading player in the sector in terms of deals, bringing in medicines at all stages from preclinical to phase 1 to late-stage assets, also continuing to bolster our technology platform.

We look forward to giving you a full innovation update and technology update at Meet the Management in November. With that, let me hand it over to Harry.

Harry, Chief Financial Officer, Novartis: Thank you very much, Vas. Good morning, good afternoon, everybody. As usual, I will take you through the financial results now for the third quarter, the first nine months, and the full year guidance. As always, unless otherwise noted, all growth rates are presented in constant currencies. If you go to our slide 20, you see a summary of the financial performance. In the third quarter, net sales grew 7% versus prior year. Core operating income was also up 7%. In the U.S., we had some negative growth to net true ups, first time since a year. Prior, we had mostly positive. They were mainly related to Medicare Part D redesign, which was new for the industry this year, based on invoices for prior periods, mainly quarter two.

Excluding these true ups, the underlying growth would have been 9% on the top line and 11% on the bottom line, as the priority brands and launches continue to offset the increasing generic erosions, mainly for Entresto, Tasigna, and Promacta in the U.S. Our core margin was 39.3% in Q3, and core EPS came in at $2.25, reflecting a 10% increase, and free cash flow totaled $6.2 billion. For the first nine months, obviously, as we had less generic erosion, net sales grew 11%, core operating income 18%, and the core margin expanded 250 basis points to reach 41.2%. With core EPS at $6.94, up 21%. Free cash flow reached after nine months already $16 billion, growing 26% in U.S. dollars versus prior year. Moving to the next slide.

Speaking of free cash flow, up 26%, as I mentioned, already close to actually prior year full year $16 billion after nine months. It really shows continued strong conversion from profits to cash flow. Of course, cash flow remains a strategic priority as it increases further our ability to convert strong core operating income growth and robust free cash flow and gives us the capacity to reinvest in our business organically, pursue value-creating bolt-ons like the proposed acquisition of Avidity Biosciences, and return attractive capital levels to our shareholders through growing dividends and share repurchases. Speaking of capital allocation, let’s go to the next page. Right, it’s really unchanged. Again, based on very strong free cash flow, we really can optimize both a significant investment in the business to drive top and pipeline and returning capital to our shareholders at attractive levels.

In the first nine months, aside from Avidity Biosciences, we have executed multiple bolt-on M&As, smaller in size but still very important, which strengthen our key platforms and pipelines for our four therapeutic areas. We also continue to invest in our internal R&D engine. On the capital return side, we successfully completed our up to $15 billion share buyback program in early July and have launched a new up to $10 billion buyback program targeted for completion by the end of 2027. We also have distributed $7.8 billion in dividends during the first half of this year as part of our annual dividend. Turning to the next slide, we reaffirm our full year guidance. We expect high single-digit growth in net sales and low teens growth in core operating income, even after accounting for negative growth in net through-ups in the third quarter.

To complete our outlook, we now anticipate the core net financial expenses are slightly higher at $1.1 billion, before and be at $1.0 billion, a bit higher in hedging costs. Overall, nothing dramatic. The core tax rate continues to be in this range of 16% to 16.5%. So far, the first three quarters at 16.2%. Now let’s move to the next slide. Usually, we don’t provide so much level of quarterly guidance. Quarters are a bit more volatile than the full year usually. Given that we have U.S. generics entry in the middle of the year for three of our brands, the biggest being Entresto, but also Promacta and Tasigna, which were blockbusters, it results in a very different quality dynamic this and next year.

As a reminder, in quarter four of last year, we benefited from significant positive growth in net adjustments, which added back then about three points of growth. It makes for a very high prior year base. Adjusting for these one-timers, we expect quarter four underlying growth to be low single digit on the top line and mid-single digit on the bottom line, reflecting the increasing generic erosion from a full year impact of Entresto U.S. generics, but better obviously than what we expect to report, including the prior year growth to net adjustments. We provide full year guidance for 2026 next quarter with the full year results. You can imagine it will be a year of two halves. The first half of 2026 will be depressed due to the impact of generics, with still a high prior year base.

We expect to emerge much stronger in the second half, much more than that as we report our full year results early February. Now let’s move to our currency. Estimated impact of currencies, should currencies remain where they are basically in late October, we expect the full year in 2025 impact of 0% to 1% on net sales and minus 2% points on core margin. You see also the quarter, and we roll this forward to 2026. In 2026, we would expect with these exchange rates a slight positive 1% point on net sales and basically no material impact on core operating income. As you know, we publish this on a monthly basis as it is quite difficult to forecast this from the outside in. We hope you find it helpful. Lastly, I hope you were able to join our presentation on the proposed acquisition of Avidity yesterday.

If not, I would encourage you to listen to the replay. Adding Avidity, as we mentioned yesterday, raises our 2024 to 2029 sales average growth rate from 5% to 6%. Of course, even more importantly, it further supports our mid-single digit growth over the long term, with main impacts in the 2030s and beyond. It brings these near-term product launches, two with multi-billion blockbuster potential with loss of exclusivity in the 2040s and no IRA impact. We also mentioned yesterday that we do expect some short-term core margin dilution given phase 3 studies are basically now starting to run or up and running shortly in the range of 1% to 2% points for the next three years. We are confident that we return to the 40% margin, which we already achieved this year. We will return back to that in 2029.

Please make sure that you also model this 1% to 2% points core margin dilution as you finalize your 2026 models for us. This deal overall is expected to deliver very strong sales and profits contributions starting in 2029 and then even more, therefore driving significant shareholder value with a small price to pay over the next three years on the margin dilution as part of the investment. That’s all I had for now. Handing back to Vas.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Great. Thank you, Harry. Moving to slide 28. In summary, solid sales and core operating income growth in the quarter despite generic headwinds. I think we’re navigating that well with strong underlying performance of our priority brands, which is reflecting strong execution, a strong pipeline progress. We delivered strong pipeline progress in the quarter. We also reaffirm our 2025 guidance to remain highly confident in our mid to long-term growth, which is further bolstered by our proposed acquisition of Avidity, not just through the end of the decade, but into the next decade and beyond. I want to just quickly remind you as well, we have our immunology pipeline update on October 30 and our Meet Novartis Management on November 19 and 20 in person in London. Thank you again, and we’ll open the line for questions.

Sharon, Conference Call Operator: Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. Please limit yourself to one question and return to the queue for any follow-ups. To withdraw your question, please press star one and one again. We will now take the first question. The question comes from Matthew Weston, UBS. Please go ahead.

Thank you. I hope you can hear me. It’s a question about policy, Vas. We’ve seen now two companies do deals with the White House around Medicaid and tariffs. I wondered from your perspective how much you felt we could see the industry do a cookie-cutter of those deals or whether there are meaningfully greater challenges for some companies and when we should expect something from Novartis. If, Harry, I can steal, I guess, an extension of the same question. Can you walk us through CapEx over the next five years, given the investments that you’ve announced in the U.S., and how we should think about modeling that as part of cash flow?

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Thank you, Matthew. I think from an industry-wide perspective, the pharma industry’s view is that the proposed negotiations or proposed actions are not going to address the underlying issues here, which, of course, we believe are PBMs, 340B, and importantly, perhaps most importantly, G7 countries and related countries outside the U.S. properly rewarding innovation and properly assessing the appropriate price for innovation. That said, as you point out there, I think now three companies have reached agreement with the administration. I’d say Novartis has, I can’t speak to what other companies are doing. We’ve been in conversations with the administration since the beginning of the year as we’ve had the various turns in these discussions. I’d say we’re meeting with the administration weekly to look at what are the best solutions we can come up with.

It is important to note that the president was very clear on the four parameters. I think those are the four parameters that are in discussion. We’ll have to see in the coming weeks and towards the end of the year if we can come to a proposed approach that makes sense for all involved. In terms of CapEx, Harry?

Harry, Chief Financial Officer, Novartis: Hi, Matthew, yes. I think, as we mentioned, when we also introduced the $23 billion over five years commitment, we made it clear that the majority is actually not CapEx. The majority is R&D OpEx, where we have the choice to invest in the U.S. or anywhere else in the world. We choose, of course, to have a strong commitment also for R&D in the U.S. There is a portion, yes, it’s CapEx, but it’s actually part of our overall worldwide financing plan. Also, we choose basically incremental to invest in the U.S. to build up our manufacturing base to supply the U.S. from the U.S. instead of further expanding, for example, European sites. From that standpoint, overall, I don’t expect a significant or meaningful CapEx increase.

We are always in this range of 2.5% to 3% of sales, actually quite a low end of the industry given our very focused and efficient manufacturing setup. You know it’s always there can be annual fluctuations, but nothing meaningful. We have further opportunities in cash flow and inventory. They’re usually on the high side. We keep that as a bit of a buffer in certain times. Overall, in short, we would not expect a significant CapEx increase. I would expect free cash flow to grow roughly in line with core operating income growth.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Thanks, Harry. Thank you, Matthew. Next question.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of Peter Faddalt from BNP Paribas. Please go ahead.

Yeah, thanks, Peter Faddalt, BNP. Only one, so I’ll keep it topical for Vas. Just on the market reaction to that ATR abstract, I think you’ve alluded to it being disappointment and you perhaps sharing a different view. Just pushing you on, you know, do you think the market’s appreciation of the data set will improve once we see the full details tomorrow? Could you remind us, I’m sorry to get technical, of the 12 domains that make up the SDI index, you know, which ones are seen as the most important to patients and physicians? Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, thanks, thanks, Peter. I think for us, the most important thing is that we make a compelling proposition to patients and physicians. If we deliver a strong launch, then I think obviously the markets will do what the markets will do, but presumably will follow. I think we will present detailed data on Thursday. I think that will help at least understand where our conviction comes from. Very important for us is the individual patient benefit. Practicing physicians and patients do not measure an SDI. They are actually looking for symptomatic benefits in things like fatigue, in salivary flow, in activities of daily living.

Looking at that, the global assessment of physicians and how they see patients benefiting is going to be really important for this launch. It is a highly variable disease, so a lot of this will depend on finding those groups of patients that have a significant benefit. Important for these patients as well is to feel like they do not need the same level of steroids that they typically are using, which can be hugely disruptive for their lives. Sleep is another topic as well. We will present that information, but I think we feel confident that there is a high willingness, even from the physicians who we are talking to now in Chicago, a high interest and a high willingness to make this option available for patients.

Assuming we can make patients materially feel better versus the current standard of care, which is frankly just high-dose steroids, we expect to be able to drive significant growth from this medicine. Thank you. Next question, operator.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of Steven Scala from TD Cowen. Please go ahead.

Sloan Simpson, Head of Investor Relations, Novartis: Thank you so much. It seems like there may be a subtle change in the messaging on Cosentyx in HS. While Novartis grew overall market share quarter over quarter on slide 12 of the Q2 deck, Novartis noted continued HS market growth. In the Q3 slide deck, that was not stated explicitly. It’s clear Novartis has been playing defense on share, but with that now stabilized, is the point that you need to grow the market and it’s not growing at the pace that you expected? Is that the contour of the market? This would seem to be a factor in whether Novartis grows earnings in 2026. When Harry was talking about 2026, he didn’t say that specifically. Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, thanks, Steve. What I can say is that we feel confident that our share has stabilized after the competitor entry. I think we have not seen the market growth that we had originally hoped for. There’s clearly a lot of patients who can benefit from biologic therapy with HS. We continue to see this as a $3 to $5 billion plus market, but it’s clearly going to take longer for that market to develop. I think we probably did not do the careful analysis that you did on our slides. I’ll look to our IR team to do that more carefully in the future. I think your point is absolutely on that we need to see, you know, we need to grow this market. That’s what really both companies should really be focused on and get more patients on these therapies.

Now, with respect to earnings, we don’t comment on 2026. We’re focused on clearing out 2025. Once we get there in January, we can provide you our outlook. I would say that I think, you know, I would focus much more on the dynamic growth you saw in the quarter on Kisqali, Pluvicto, Scemblix, Cosentyx, all of which, to my eyes, were ahead of consensus. I think that’s where I think the focus should be now looking ahead for the company. Next question, operator.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of Shirley Tan from Barclays. Please go ahead.

Hi, thank you so much for taking my question. Can I ask about Pluvicto? Congrats on a great quarter. Could you please help frame where you are in the launch curve for Pluvicto and new label? How do you expect the inflection in 4Q and also next year? Can you remind us your peak sales ambition of this drug and when you expect Pluvicto to reach the full potential within the PSMA-4 population and also potentially PSMA addition population? I think you previously mentioned a few challenges for commercialization, such as reimbursement, education of staffing, and referral networks. How do you find where you are tackling these challenges? Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, thanks, Shirley. For Pluvicto overall, I think we’re on the steep part of the curve right now. We see, as you saw, very strong growth in quarter three. We would expect very solid growth in quarter four. It’s important to note in quarter four, we always have a slowdown in the Thanksgiving and Christmas holidays. We, in effect, lose two to three weeks because of those holidays, simply because patients don’t want to, quote-unquote, "have a nuclear medicine, radioactive medicine that prevents them from being around children or family members for a period of time." It’s important to note that. That said, we do expect continued strong performance in quarter four. Going into next year, we would expect solid growth.

I think, you know, as always with these launches, good growth and maybe not the same levels of growth you’re seeing in quarter three and quarter four, kind of an S-shaped curve. Our plan would be to bring on the HSPC indication, which will then propel us, we believe, to the $5 billion peak sales that we’ve guided to. We fully are confident on that. We see high levels of now receptivity. That, I think, brings me to your point on the structural challenges, which I think we’ve successfully tackled now. With the PSMA Vision launch, we struggled to get into the community in a way that was scaled. Now, through years of effort by our US commercial team, we’ve successfully, as I noted, have over 700 prescribing clinics across the country. Nine out of ten patients are very close to a center that can provide Pluvicto.

We’re adding centers just to be on the safe side. We’ve done careful mapping to know the referral pathways. Physicians are much more comfortable now using the PFS, a prefilled syringe, and dealing with some of the other logistics associated with radioligand therapy. We’re in a very good spot in that sense. That’s what gives us confidence that the pre-taxane launch can propel us into the $3 billion plus range. The HSPC launch will propel us into the $5 billion plus range. We’ll be where we expect. We continue in the, as well, in the oligometastatic setting as well to go earlier. We also have a number of phase 4 studies, including in the MCRPC setting in combination with ARPIs to give physicians even more options. We’re doing all of the work as well to fully build out the data package to maximize this medicine.

I think while I’m on Pluvicto, I think all of that builds the base for our radioligand therapy platform more broadly. We have that full range of around 10 different indication medicines that are advancing in the clinic. As we bring those forward, we have that infrastructure built in the U.S. and now increasingly Japan, China, and other markets to make those other launches successful. I think all on the right track. It was a very important element for us to strategically solve. In my view, we have solved the challenge of rolling out radioligand therapy in the United States. Next question, operator.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of Florence Cespedes from Bernstein. Please go ahead.

Good afternoon. Thank you very much for taking my question. A question on remibrutinib. Could you maybe share with us how you see the ramp-up of the product as you have a clean safety profile, convenient administration, and you have any feedback from the street, even though it’s still early days? Any thoughts for the situation in Europe, the adoption, knowing that the product will be compared with much cheaper drugs? Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Thank you, Florence. We’re in the early stages of the launch. Right now, our focus is on sampling through patient start forms, getting through patient start forms, and negotiating with payers to ensure broad access in the early part of next year. Once we get to the early part of next year, we get that base up through sampling in this initial phase. We would then start to expect a more rapid uptake through Q2 forward next year, where I think there will be the opportunity to really drive uptake. We would expect initial uptake to be in patients who are not responding to biologic. Our goal very much is to be positioned pre-biologic. That’s really where the opportunity is for this medicine. That’s going to be our long-term focus in the U.S. and really around the world. In Europe, you raise an important point.

A lot of this will come down to our payer negotiation. In light of the current situation in the U.S., it will be absolutely our goal to hold the line and ensure that remibrutinib is appropriately reimbursed for the innovation it’s bringing and not have it be compared to old generic drugs, but really compared to what it is, a pure list oral twice-a-day option for patients that really need a rapid onset of action. We’re hopeful that European payers will realize that and then appropriately reward it. We’ll be willing to be patient to achieve that. Once we get access to all of our indications, there’s a lot of enthusiasm in both the allergist and the derm community for a safe oral option. We should see rapid uptake there as well. Overall, very excited about the medicine. As you know, we’re progressing as well in CSU.

We would expect that readout next year. We’re progressing in food allergy. We’re progressing in HS. We have a number of opportunities now ahead of us as well for this medicine. Next question.

Thank you very much.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of James Quigley from Goldman Sachs. Please go ahead.

Harry, Chief Financial Officer, Novartis: Hello. Thanks for taking my question. I’ve got a follow-up on ianalumab, please. One question we’ve had is that obviously the slides suggest in Neptune statistical significance was only achieved in the last two blocks of data. Was that just because of when the tests were run? Is that sort of what you’re expecting as well in terms of when you’re planning the study? A second quick one on ianalumab as well, hopefully not to preempt tomorrow or Thursday. You talk about the secondary endpoints and fatigue and salivary flow being more important, but the secondary endpoints were not statistically significant. Was this a case of hierarchical testing or anything else? How can you show that when the drug hopefully gets approved and you talk to physicians about the data? Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, absolutely. I mean, I think the endpoint here is at 52 weeks. I think we were trying to indicate all of the time points to reach nominal significance. Given that endpoint, you know the goal here is 52 weeks. Both studies achieved the pre-specified primary endpoint at 52 weeks in the independent analyses and in the pooled analyses. No issues there. We feel from a regulatory standpoint, 48 weeks, excuse me, at 48 weeks the standard. I think you can see here on slide 17, 48 weeks was hit in both trials. Separate from that, there is hierarchical testing here as often is the case. If one of the secondaries are hit, even if they hit from a nominal standpoint lower in the hierarchy, it’s no longer valid from a pure statistical hierarchy standpoint.

It could be nominally statistically significant, but it wouldn’t reach the threshold from a regulatory standpoint. That said, I think as I’ve tried to articulate, there’s the regulatory standpoint here. In a disease that’s never had an approved drug, there’s really what our patients and physicians are looking for. We’ve really tried to understand once we hopefully can get the regulatory approval, then what do we need to educate physicians and patients on? You’ll hear more about that on Thursday. Our team has done a range of analyses to look at secondary outcomes, look at post-hoc outcomes, look at also biopsies, and really try to demonstrate that you’re seeing the benefits that patients want. I myself have spent time talking to patients with Sjogren’s. I think what really matters to them is quality of life metrics and very specific quality of life metrics that varies patient to patient.

I don’t think that for them the SDI score is going to make the difference. It’s going to be whether or not their symptoms are getting better and they can live their daily life day in and day out better. Thanks very much, James. Next question.

Sharon, Conference Call Operator: Thank you. Before we take the next question, a quick reminder, please limit yourself to one question and return to the queue for follow-ups. Your next question comes from the line of Richard Foster from JP Morgan. Please go ahead.

Hi, thanks for taking my question. One on Cosentyx, please. Just whether you’re seeing any impact in the U.S. from the Ocrevus subcutaneous launch. Doesn’t seem like it, but just wondering what you’re seeing here. Linked to that, there’s some discussion from you about your new formulation. Just wondering on details of treatment interval, whether this could be a new BLA and how this could protect from potential biosimilars down the line. Thanks very much.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, thanks, Richard. On the Ocrevus sub-Q, we don’t see an impact to date, as you can see in our overall performance. We’re holding share in a growing market. I think the overall market growth for multiple sclerosis drugs has been solid. Within that, the B-cell class continues to steadily increase with a bigger opportunity outside of the U.S. We still see the opportunity. I think 25% of patients in the U.S., give or take, are still not on B-cell therapies that could be. We’re really benefiting from the market growth. We are doing a lot of work now to get better at targeting physicians that we think would be more amenable to a patient self-administered administration rather than the various other options available. I think that overall, this is a growing market where the medicine is holding its share and performing really well. It’s all volume-driven growth.

From a lifecycle management standpoint, we are advancing our Q2 month formulation. We’ll keep you updated as we progress. That’s something that’s a trial that’s currently enrolling. We’re exploring other options. No details I can get into at this point to get into longer intervals as well, potentially with novel technologies. I think as those progress and if there is the opportunity to get those launched before biosimilar entry, that’s something that we’re highly, highly focused on, absolutely. I think it’s premature to comment on that at this point. Next question, operator? Sure.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of Thibaut Bothering from Morgan Stanley. Please go ahead.

Yeah, thank you. Just a question on abelacimab, the injectable factor XI acquired with Anthos Therapeutics. I think we’re getting the first phase 3 data in Afib next year. This is for patients at high risk of bleeding and for whom oral anticoagulant is not adequate. Can you just sort of frame the opportunity in terms of size? Are you looking to potentially go into a broader patient population with this asset?

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, thanks, Thibaut. This is the, as you note, the antibody that we acquired back from Anthos Therapeutics. It is originally a Novartis-originated antibody, so we know it quite well. As you note, the study next year will be in patients who are ineligible for DOACs, NOACs. The opportunity here is for these patients, which is a reasonably sizable patient population, to provide them a significant option with monthly dosing. I think the opportunity here, the size of the opportunity, we believe, is multibillion. The scale of that multibillion dollar opportunity will really depend on how the oral phase 3 program from one of our competitors performs. Clearly, if that oral medicine, which is an all-comers in a very large study, is unsuccessful, then we would have a very significant potential with our medicine.

I think with an oral antibody, we will be much more focused on these more refractory patients, and the opportunity will not be quite as large. I think in either case, it will be a multibillion dollar asset we can bring into our cardiovascular portfolio. We’re quite excited about it. Very good. Thank you, Thibaut. Next question, operator.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of Michael Lyson from Jefferies. Please go ahead.

Thank you very much. If I could please go back to Cosentyx, could you tell us please what your pricing assumptions, the net pricing assumptions are for the U.S. into the fourth quarter? Do you expect any drag? I’m just trying to understand the increase in step-up dosing comment on your slides around HS, the 25% utilization. Could you put that into context? What was that maybe at the half of the year and how has that developed? Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, thanks, Michael. On Cosentyx pricing, we don’t expect any shifts going into quarter four. Overall, we expect stable growth to nets as well going into next year. It’s a relatively mature brand, but also with multiple new indications and a solid payer position. I think we should be stable on that front. We are also monitoring the impact of the Part D redesign. Most of the impacts we’ve seen on Part D redesign have actually been on Entresto earlier in the year. I think that will fade away now as generics enter.

On HS, this really referred to the fact that early on with the competitor launch, what we were seeing is with patients who were on the monthly dosing, if they weren’t seeing the effect that their physicians weren’t seeing the effect that they hoped for or the effect was wearing off, they were switching rather than updosing to Cosentyx every two weeks. Now we see about 25% of patients on Cosentyx moving up to that every other week dosing. That’s something we’d like to get even higher over time because I think that really demonstrates patients are persisting on Cosentyx. That’s going to be important for us to retain our greater than 50% NVRX share and then the correlating TRX share as well. That’s very much in focus for us. I’d come back again that we also just need to work on growing the market.

If this ends up being two competitors just trading the same group of patients, that would be a disservice to this patient community. I think we have to get better now at reaching patients who have either fallen out of the system or for whatever reason are being identified as biologic-appropriate patients and get them on therapy. Next question, operator.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of Simon Baker, Rothschild & Co. Redburn. Please go ahead.

I hope you can hear me okay. This is Peter speaking on behalf of Simon Baker. I have one quick question. Thanks for taking my question, by the way. One quick question on the rebate adjustment. Is there anything you can call out other than Cosentyx? Also, did any drug benefit from the rebate adjustment in Q3? Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, thank you for the question. I’ll hand that to Harry.

Harry, Chief Financial Officer, Novartis: Yeah, thank you for the question. Overall, when you see the amount that is prior period, it is roughly $180 million. You see that this has about this one and a half, almost rounding them with 7% to 9%, if you will, effect on the quarter. Cosentyx is a big piece of it. Another big piece of it is Entresto, actually, where patients got quicker into the catastrophic, you know, as part of the Medicare Part D auto-redesign. That part really should go away. Entresto kind of goes away. There have been some smaller elements, including like really going back into 2024 with some inflation penalty parts. The two biggest ones are Cosentyx and Entresto.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Great. Thank you, Harry. Sharon, next question.

Sharon, Conference Call Operator: Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone and wait for your name to be announced. Please limit yourself to one question and return to the queue for any follow-ups. We will now go to the next question. Your next question comes from the line of Rajesh Kumar from HSBC. Please go ahead.

Hi, good afternoon. Just trying to understand the margin cadence over 2026. I know you’re not giving a 2026 cadence at the moment. Very helpfully, you said it will be a year of two halves. Given what you know about Medicare Part D now and you know how generics are coming and what sort of operational gearing you’re getting on your drugs which are growing, if you were not cutting the costs, would the cadence be a lot more steeper? What have your actions done to offset that impact? What is the mixed impact versus self-help, if you could help us quantify, as well as the seasonality of Medicare Part D cadence? This year you have done a prior period adjustment that might not be the next year because you have some accrual history now. You’ll base your quarterly accruals on the evidence you have.

It would really help us model out first half, second half for 2026. Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, thank you, Rajesh. Very thoughtful question, of course. In our business, with our mix, we usually do not have, you know, Medicare kind of related different growth to net levels quarter by quarter, other than when we have a growth to net true up, right? When the channel mix changes, when a product goes quickly onto the catastrophic, and those, if they are, I mean, there are always some deviations, right? We have over $20 billion RDs in the U.S. When these are significant or meaningful, then we let you know, right, how much it is. Like in quarter four of last year, it was three points of growth, which is now impacting as a high base. Quarter one was two points to the positive, and quarter three is now two points to the negative. We show you that stuff, but that’s basically true ups.

The underlying is not changing quarterly dynamics for us. For next year, you will have a very high base Q1, right, with the two points of growth that we got from the, and you will have a relatively low base in Q3 from the two negative points this year. Other than that, it’s all about launch uptake and generic erosion of the three main products. Maybe long-winded, but I hope it was addressing your question.

Sloan Simpson, Head of Investor Relations, Novartis: I think at the full year earnings as well to provide more guidance on how best to think about the full year of 2026. Next question, Sharon.

Appreciate that. Thank you.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of Matthew Weston, UBS. Please go ahead.

Thank you. It’s just a quick follow-up actually to one of the prior questions. Harry, Cosentyx looks like a very strong quarter in Q3 that looks somewhat off-trend. I’m just making sure that as we go into Q4, we aren’t going to learn that it was lumpy one way versus the other. Can you just confirm that was underlying operational growth?

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Absolutely. Harry?

Harry, Chief Financial Officer, Novartis: Yeah, it was mainly underlying operational growth, a little bit of inventory, but not much.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Just a strong global volume, I think, in both US and ex-US for this management.

Harry, Chief Financial Officer, Novartis: Exactly. Yes.

Perfect. Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Next question.

Sharon, Conference Call Operator: Thank you. Your next question comes from Simon Baker, Rothschild & Co. Redburn. Please go ahead.

Hi. Just one quick question on the ianalumab in Sjogren’s disease. We observed the placebo response in the Sjogren’s trial tend to be plateaued at week 48. Why did it reverse in the first trial of those two phase 3 trials, please? The phase 3 trial is called Neptune 1. Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, I think the question is regarding the placebo response. I mean, I think these were both adequately controlled, well-designed studies, global studies. This is just a highly variable disease, and you’re going to see some variability in how the placebo responds. When we look at background therapy as well, it’s very comparable across the studies, also versus normal standard of care. You do see as well that the Q month data looks much better than the Q3 month data. You do see as well the dose response that we would expect. I think that’s all positive. We’ll have our experts on the line on Thursday if you want to get into more detail, and they’ll also be able to go through some of the background on the study design and baseline characteristics. I can’t comment more until the full data is presented. Next question, Sharon.

Sharon, Conference Call Operator: Thank you. Your next question comes from Steven Scala from TD Cowen. Please go ahead.

Sloan Simpson, Head of Investor Relations, Novartis: Thank you for the follow-up. Novartis raised the long-term revenue guidance yesterday, half of which was attributed to the existing business. Of the half attributed to the existing business, how much is due to currently marketed products? How much is due to higher sites for the pipeline agents? Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, Steve, I think we can provide better midterm guidance on that and meet the management. Most of that is inline brands. Obviously, you see the strong performance of Kisqali, Cosentyx, Pluvicto, Scemblix. I think solid performance on Leqvio. There’s probably some in there of what we expect will be a strong launch for remibrutinib, and the label expansion for Pluvicto. I think that’s roughly the breakdown, more or less. Any other pipeline assets we would expect have limited ramp in this period, just given how long it takes to ramp up these launches when you think out to 2029. We will provide guidance as well out to 2030, as I said yesterday, and meet the management, as well as update our peak sales guidance on our various brands where appropriate.

Thank you.

Next question, Sharon.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of James Quigley from Goldman Sachs. Please go ahead.

Harry, Chief Financial Officer, Novartis: Thank you. Just for me, I mean, you may have already answered it, Harry, but again, it’s going back to the Cosentyx, the rebate adjustment. Which prior periods does that relate to? Is that a Q1, Q2 this year, or is that a 2024 thing? I’m just trying to think in terms of modeling for next year as we look at Cosentyx. Is there a slight headwind from where there was a higher price that you realize in Q1 and Q2 that then reversed out in Q3? Also, what does that mean sort of going forward into 2026? Again, appreciate there is going to be other dynamics with PMR and HS, but just wanted to clarify that from a modeling perspective. Thank you. All right. Yeah, thank you, James. It’s mainly quarter two this year, most of it.

The quarter three underlying, that’s why we gave you the quarter three underlying, you know, is what the underlying is already taking into account if such channel mix would continue to prevail. From that standpoint, it gives you a good basis for future modeling.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: I think, Harry, if I’m correct, if you net out the prior period upside versus this down, that really the year-to-date is relatively clean.

Harry, Chief Financial Officer, Novartis: Across the whole portfolio.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, across the whole company, the year-to-date is a clear read.

Harry, Chief Financial Officer, Novartis: Because quarter one, we had a 2% upside. Now we have almost 2% downside, right? It’s a bit different brand by brand. That’s why we’re giving you on the brand that has most of it and is, again, Entresto is deteriorating, of course. This one, of course, is a brand that will stay along with us. That’s why we gave you the underlying, which gives you the real underlying at the moment for quarter three. Got it. Thank you.

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Sharon, next question.

Sharon, Conference Call Operator: Thank you. Your next question comes from the line of Sachin Dean from Bank of America. Please go ahead.

Hi, there. Thanks for my questions. Firstly, just a clarification on margins for Harry. Three key margins were a little bit below street, I guess partly on gross margin, which is sort of first impact from generics. I wonder if you could just talk about gross margin, EBIT margin, as we think about a full year of Entresto impacting 2026. My single question is, can you maintain margin stable next year through the full year of generics before we model the underlying Avidity dilution? Given what we’re saying in the KMI, just take an additional one on pipeline for Vas. You flagged good uptake in Eigan. You have the phase 3 for the April back. Next

I wonder if you could just talk to your excitement on that and differentiation in what’s a competitive landscape. Thank you.

Sloan Simpson, Head of Investor Relations, Novartis: Great. Harry?

Vas, Executive (likely CEO or Chief Strategy Officer), Novartis: Yeah, on the margins.

Sloan Simpson, Head of Investor Relations, Novartis: On the margins, of course, when you have a product like or small molecule high-price products like the three going off patent, especially Entresto being so big, there’s a slight negative mix effect. Cascade is also a super high-margin product, right, and growing significantly. That’s partly offsetting. We have also a significant productivity effort, especially in our manufacturing supply chain. As I mentioned before, there will be, as we go forward, some pressures on the gross margin. On the other hand, we do also expect that our SG&A becomes even more efficient as we go forward, offsetting that. For the next couple of years, you know this year we will be around 40%. Quarter four is usually a bit lower. Historically, we have been in the first nine months at 41%. Q4 brings that in the range of around 40%.

For the next two or three years, we said because of the Avidity Biosciences proposed acquisition, one to two margin points down from the 40% and returning to 40% in 2029. With that, you know basically, but it’s driven by development investments. Overall, to close that long answer on a short question, you know basically, the gross margin headwinds I do expect to be offset by SG&A productivity.

Harry, Chief Financial Officer, Novartis: Was your second question around the anti-APRIL antibody? I didn’t catch it.

Sharon, Conference Call Operator: Yeah. Sorry. In the introduction, you talked about the strength of the existing ligand launches, but I wonder if you could touch on the April bath with data next year and how that wraps up your portfolio.

Harry, Chief Financial Officer, Novartis: Yeah, absolutely. First to note, ours is an anti-APRIL antibody. Our competitors are anti-APRIL BAFF. I think one question, of course, will be to see the profile of those two drugs and does BAFF add anything, and also differences in safety profile. I would say overall, we expect to see proteinuria in the range, we hope, of what the others have seen. Certainly, our phase 2 data, final phase 2 data indicated we have very strong proteinuria reductions. We will be third to market in all likelihood. For us, it’s really going to come down to a portfolio opportunity that we bring to patients, physicians, payers, to physicians’ offices and payers because we’ll have the opportunity to have an endothelin antagonist with Vanrafia, we have the factor B inhibitor with iptacopan, and then Fabhalta, and then we have the anti-APRIL antibody, and bringing that entire solution set to the clinic.

Also, the opportunity for us to run combination studies. We’re already now evaluating what would be the right combination studies to run, generate that combination data so that nephrologists know what would be the right combination agents to optimize care for these patients. These are all the opportunities I think we’re looking at. It’s going to be important for us to think through those given that at least in the anti-APRIL space, we’ll likely be third to market. Next question, Sharon. I think it’s the last question, if I’m not mistaken.

Sharon, Conference Call Operator: Thank you. It is your final question for today. It comes from the line of Steven Skiena from TD Cowen. Please go ahead.

Oh, thank you so much. Given the proof of concept established by the Cantos trial eight years ago, what new evidence compelled Novartis to go down the same pathway and acquire Tourmaline at this time? Thank you.

Harry, Chief Financial Officer, Novartis: Good question, Steve. I think we clearly understand that IL-1 beta and hitting the inflammasome has a powerful effect on cardiovascular risk reduction. In that trial where we did an all-comers study of patients who had a prior event without, I think, focusing down, you saw the challenge of having a significant CVRR. IL-6 has the opportunity to be a little bit further downstream of IL-1 beta. The idea here is to get within the first few months to max six months to a year after an event. If patients are at that point in time with an elevated HSCRP, knocking down that CRP can lead to a significant, we believe, the opportunity exists to lead to a significant impact on cardiovascular risk. I think it’s really we’ve learned from the Cantos study. We understand a lot more about the biology based on that.

We think by targeting now prospectively patients right after an event who are at elevated CRP levels as a marker of elevated inflammation, we can then have a much more compelling cardiovascular risk reduction than the kind of 14% to 15% that we saw in the Cantos study. We do have a competitor ahead of us, but a lot of our focus is designing, we think, with our expertise, a study that can really maximize the opportunity for the Tourmaline asset, the anti-IL-6. Thank you all very much for attending two calls in two days. We have another call coming a day after tomorrow. We hope you will attend that as well to learn more about our immunology portfolio. We’ll talk about remibrutinib. We’ll talk about our ianalumab data and, importantly, also talk about our Immune Reset portfolio, which I think is quite exciting.

Thank you again for your interest in the company. We’ll look forward to catching up soon.

Sharon, Conference Call Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.

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