Earnings call transcript: Sandoz Q1 2025 shows steady growth in biosimilars

Published 30/04/2025, 19:44
 Earnings call transcript: Sandoz Q1 2025 shows steady growth in biosimilars

Sandoz Group AG reported a 3% increase in net sales for the first quarter of 2025, driven by a strong performance in its biosimilars segment, which now constitutes 27% of total net sales. The stock currently trades at $43.49, showing remarkable resilience with a 10.25% gain over the past week. According to InvestingPro data, Sandoz maintains its position as a prominent player in the Pharmaceuticals industry, with a market capitalization of $19.2 billion. The company remains optimistic about its strategic initiatives and future growth.

Key Takeaways

  • Net sales increased by 3% in constant currencies.
  • Biosimilars grew to 27% of total net sales, up from 25% in Q1 2023.
  • Sandoz plans key product launches in 2025, including Doneotumab and Aflibercept.
  • The company issued new bonds and secured a $2 billion credit facility.
  • European sales accounted for 55% of total sales.

Company Performance

Sandoz demonstrated resilience in Q1 2025 with a 3% rise in net sales, primarily fueled by a 6% volume growth. However, price erosion offset some gains, resulting in a net positive performance. The biosimilars segment continues to be a significant growth driver, with its contribution to total sales increasing from the previous year. The company’s strategic focus on biosimilars aligns with global market trends, where demand for cost-effective alternatives to branded drugs is rising.

Financial Highlights

  • Revenue: Increased by 3% in constant currencies.
  • Biosimilars: Accounted for 27% of total net sales, up from 25% in Q1 2023.
  • European Sales: Comprised 55% of total sales.
  • Top 10 Medicines: Combined growth of 4%.

Outlook & Guidance

Sandoz maintains a positive outlook for the remainder of 2025, expecting mid-single-digit net sales growth in constant currencies. The company anticipates a core EBITDA margin increase to around 21%, with a stronger performance expected in the latter half of the year. Analyst consensus from InvestingPro supports this optimistic view, with price targets ranging from $41.52 to $67.16, suggesting potential upside. The company’s Financial Health Score of "GOOD" further reinforces its stable market position. Notably, Sandoz is preparing for significant product launches in 2025, including Doneotumab and Aflibercept, which are expected to bolster its market position.

Executive Commentary

CEO Richard Saylor emphasized the strategic importance of 2025, stating, "Twenty twenty-five is a pivotal year for our strategic road map." He highlighted Sandoz’s leadership in the European oncology market and expressed confidence in the company’s growing pipeline, saying, "We would be happy when we have 40, 50, 60 plus assets in our pipeline."

Risks and Challenges

  • Regulatory Changes: Potential changes in biosimilar development regulations could impact timelines and costs.
  • Price Erosion: Continued pressure on pricing could affect profit margins.
  • Currency Fluctuations: A potential 3% impact on net sales due to currency movements.
  • Market Competition: Increasing competition in the biosimilars market could challenge Sandoz’s market share.

Sandoz’s strategic initiatives and focus on biosimilars position it well for future growth, despite current market challenges. The company’s robust pipeline and financial strategies are expected to support its long-term objectives, backed by strong fundamentals including a healthy current ratio of 1.24 and an Altman Z-Score of 7.41, indicating solid financial stability. For comprehensive analysis and detailed metrics, investors can access the full Pro Research Report available exclusively on InvestingPro.

Full transcript - Sandoz Group AG (SDZ) Q1 2025:

Conference Operator: Good morning, ladies and gentlemen, and welcome to the Sandoz call today. I will now pass on to Craig Marks, Head of Investor Relations for his opening remarks.

Craig Marks, Head of Investor Relations, Sandoz: Thank you. Welcome to the Sandoz Q1 sales update. Earlier today, we published a press release and an accompanying presentation on our website, which will follow on today’s call. You can find these documents at sandos.com/investors. Joining me on today’s call are Richard Saylor, Chief Executive Officer and Remco Steenbergen, Chief Financial Officer.

Please turn to slide two. Our sales announcement presentation and discussion include forward looking statements. Please see our disclaimer here. Please turn to Slide three. Richard will begin today’s presentation with a summary of the highlights in the quarter, followed by an update on the business.

Remco will cover the sales performance as well as full year guidance. Following the wrap up of the presentation, we’ll be happy to take your questions. With that, I will now hand over to Richard. Please turn to slide four.

Richard Saylor, Chief Executive Officer, Sandoz: Thank you, Craig, and hello, everybody. It’s a pleasure to welcome you all to today’s call, and I’m looking forward to talking you through our continued progress. Please turn to slide five. There are four key messages I’d like you to take away from this morning. Firstly, the quarter one sales performance was in line with our expectations, meaning we’ve now delivered fourteen consecutive quarters of top line growth.

This reconfirms our growing track record of execution and performance. Secondly, we again delivered double digit growth in biosimilars in the quarter, ahead of more launches later this year, putting us in an excellent position to produce good results in 2025. The new confirmed U. S. Tariffs have been absorbed within our full year guidance.

And lastly, we’re confident in our plan for this year and beyond and are extremely well positioned to deliver on our reiterated full year guidance. Now let’s move to the details of the business performance, starting with Slide six. Before I go into the performance of our biosimilars, I wanted to take you through the initial steps of what could be a very significant beneficial movement towards regulatory streamlining, potentially ending the requirement to conduct Phase III biosimilar trial. In light of the evolving global regulatory landscape and growing indications that major regulatory authorities will move to a streamlined biosimilar clinical program, we are already minimizing our ongoing pembrolizumab Phase III trial. We believe that this trial will no longer be considered scientifically necessary to confirm that it produces the same clinical outcome as its reference medicine.

There is unlikely to be a blanket wide decision by the regulators on streamlining. It may be a more case by case basis, but we’re encouraged by these first developments that could lead to significant changes for the industry and for patients. Turning to our approved biosimilars, I’ll provide more color on Omnitra, HYMEROS, TYRUCO and PISTEVA in the following slides. But let me just say a word on why OZJUBOTI and Envisa. Last year, we launched YOS DUBONTY or biosimilar to nosumab in Canada, and we’re looking forward to the launch in The U.

S. In the coming weeks. We plan to launch YOS DUBONTY and Atlakir, aflibercept as biosimilar in Europe later this year. The U. S.

Launch timing of Enviso remains dependent on several factors, including the progress and outcome of potential litigation or potential settlements. Please turn to slide seven. Now let me deep dive on some of our other biosimilars. After almost twenty years, was after it was launched, we’re again delivering double digit growth for Omnitrope, which continues to speak to the sustainability of biosimilars. The performance again undermined our continued market leadership, driven by a particularly strong result in the international region, which is expected to continue.

Please turn to slide eight. Turning to HYMEROS. Again, we delivered good growth in Europe. In The U. S, the launch is continuing to go very well in addition to our private label arrangement with Cordavis, where our formulary was the major pharmacy benefit managers with our own branded Haimerose and unbranded adalunumab.

This puts us in a leading position in terms of market access and payer coverage amongst adalunumab biosimilars. In the quarter, we saw significant price erosion in the private label setting, a dynamic you’d expect to see at this stage. Sandoz remains the market leader amongst biosimilars, and we anticipate seeing changes in formularies to benefit biosimilar penetration during 2025. In summary, we’re extremely well positioned to capture market share in what is a growing market. Please turn to slide nine.

We started rolling TYRUCO out across Europe around eighteen months again. Since then, this important medicine has been growing consistently, reaching 21% market share as per the most recent IQVIA data. Both tender authorities and health care professionals appreciate a more affordable option in the multiple sclerosis space. In The U. S, we are continuing to work with our partner and the FDA on the potential approval of our JCV assay and remain confident of launching Tyreco before the end of this year.

Finally, Bustakinumab continues to make strong progress in the quarter following the European launch of PISGIVA in 2024. We are amongst the first companies to launch with all key reference strength by the end of the year And the medicine has been launched in 22 markets. Uptake continues to be very strong and we’ve achieved a leading position in Europe. Physician reception is positive reinforced by the availability of an initiation dose, which is key to enabling patient switches. Bustakinumab biosimilar penetration has now reached thirty percent, a higher level than that of agalutamab penetration at this stage of the launch.

We’re also delighted to launch PEACEGEVA in February in The U. S. You may have seen that the originators request for a preliminary injunction on the launch of private label ustekinumab was denied this week, and we look forward to the launch in due course. With that, I will hand over to Remco.

Remco Steenbergen, Chief Financial Officer, Sandoz: Thank you, Richard, and hello, everyone. Please turn to slide 12. As Richard mentioned, we started the year as expected, with net sales growing by 3% in constant currencies or by 5% when adjusting for the acquisition of similarly last year as well as the 2024 divestments of our China business. Volumes contributed six percentage points to the growth, while price erosion returned to a more familiar three percentage point. Finally, there was an adverse three percentage points impact from currency movements in the quarter.

Let’s now focus on the breakdown of our sales performance on slide 13. While generics continue to provide a strong foundation for our business, the overall performance reflected the increasing contribution from biosimilars and strong execution across our organization. With another double digit performance, biosimilars increased as a proportion of total net sales to 27% compared to 25% in Q1 last year. I’m particularly proud that the 10 largest selling medicines representing a third of net sales grew by a combined 4% in the quarter. Our regional sales mix remained unchanged with our very strong European business now delivering 55% of our sales.

Let’s now move to sales by business and by region on slide 14. Biosimilars produced strong growth of 11% in the quarter, driven by continued strong demand for Omnitrol, especially in our international region, ongoing strong demand for Hyramaz and the contribution from the launch of PISCHIVA in Europe. Europe sales grew by 7% in the quarter. Strong growth in biosimilars continued, led by demand for recent launches, including PISCHIVA. International sales grew by 2% when excluding the impact of the divestments of the China business.

North America sales grew by 1% and before the impact of withdrawal of Simile by 3%. Paclitaxel also continued to perform well in North America following its launch last year. After reviewing our sales performance, now I’d like to turn to another positive development we executed last month. Please turn to slide 15. We have successfully strengthened our balance sheet by issuing new bonds to repay the spin off term loans.

Moreover, we signed a new $2,000,000,000 revolving credit facility. These transactions were very well received with a six time oversubscription of the client order book on the euro tranche. This was the largest oversubscription rate achieved by Sandoz for a single tranche. These successful transactions give a significant financial leeway going forward. Since independence, we have built a robust debt mature profile and substantially reduced our financing cost.

With these latest transactions, annual interest rate and gross debt is expected to be reduced to below 4%. After repayment of the existing term loans and the new bonds in place, the maturity profile has been extended to 02/1935 with an average maturity of around 5.5 years. Please turn to slide 16. Moving now to US tariffs. The key message is that Sandoz is significantly insulated from both current and potential new tariffs, given our business model and footprint.

We advocate against the introduction of tariffs for pharmaceuticals, especially generics and biosimilars. These tariffs are expected to increase prices over time, disrupt supply and access. We believe that this isn’t beneficial to The U. S. Healthcare system and most importantly to patients.

For Sandoz, it’s worth noting that The U. S. Continues to represent less than a fifth of our sales, while manufacturing footprint is predominantly based in Europe. We do not export from The US, where we have one side. With the tariffs that are already in place, focused on China, we anticipate only a limited indirect impact from CMOs.

And so we can absorb the impact of the confirmed tariffs within our full year guidance. While we are closely monitoring ongoing developments, we remain confident in our ability to navigate further tariff actions. Before we wrap up the presentation, I want to cover our 2025 guidance on slide 17. I’m pleased to say that we continue to expect net sales to grow by mid single digit percentage in constant currencies this year and to core EBITDA margin to increase to around 21%. We also continue to expect a return to more normalized levels of price erosion of a low to mid single digit percentage.

It’s worth noting that similar to last year, we expect a lower core EBITDA margin in the first half versus the second half of twenty twenty five. This will reflect increased investments to support the pipeline and numerous launches with the improvement in the second half driven by a more favorable sales mix as the launches begin to contribute materially. Outside of guidance, we anticipate an adverse three percentage points impact on net sales from currency movements based on the average rates in January through March. Given the geography of our cost base, however, we expect these movements to have an immaterial impact on the core EBITDA margin. If the latest spot rates were to prevail for the rest of the year, however, we would see a one percentage point tailwind to net sales over the full year.

The core EBITDA margin would face a limited adverse impact of less than zero five percentage points, which will be in line with what we had in 2024. With this, I will hand back to Richard. Please turn to slide 18.

Richard Saylor, Chief Executive Officer, Sandoz: Thank you so much, Remco. Now let’s take a look for the outlook for the rest of this year. Please turn to slide 19. I’m looking forward to additional growth in the second half of the year and further progress as we launch more biosimilar medicines. We anticipate good contribution from several exciting biosimilar launches such as doneotumab in both Europe and The U.

S, Aflibercept in Europe and natalizumab in The U. S, the latter being subject to FDA approval of the JCV assay. These new medicines will add to an already growing end market portfolio and contribute to margin expansion. In addition, we will continue to build on our industry leading pipeline across both generics and biosimilars. And of course, we have many other generic launches across a number of markets that will continue driving the growth of this large business during 2025.

Now please turn to slide 20. As I mentioned, the quarter one sales performance was in line with our expectations and represented another period of double digit growth in biosimilars. Our performance to date as well as the launches later this year mean that we’re extremely well positioned to deliver on our full year guidance. As we look ahead, our focus is clear. We are committed to delivering both operationally and financially with a sharp eye on execution and long term value creation for society, shareholders and other stakeholders.

First and foremost, we will continue to deliver for patients, especially to our upcoming launches and the pipeline. We will also maintain our unrelenting focus on commercial execution. That means making sure every lesson, every market and every team is aligned to deliver on performance. At the same time, we are committed to driving further growth across sales, margin expansion and cash generation. This is essential to support reinvestment in our business, expand patient access and create more value for shareholders.

Twenty twenty five is a pivotal year for our strategic road map, and I’m delighted by the progress we’ve made so far. With this, I will ask the operator to open the line for Q and A. Please turn to Slide 21.

Conference Operator: Ladies and gentlemen, we will now begin our question and answer session. If you have a question, we ask that you please use the raise hand function at the bottom of your Zoom screen. Or if you have dialed in, please press 9 to enter the queue. Once your name has been announced, you can ask your question. Our first question comes from Victor Block at BNP Paribas.

Please unmute your line and ask your question.

Victor Block, Analyst, BNP Paribas: Hey, thanks. Thanks a lot and good morning. Thanks for taking my questions. A couple of questions on my side. So first of all, could you walk us through the rationale behind the deal announced yesterday night and potentially comment on whether we should expect further deals of that kind moving forward?

And then my second question is on STELARA. So we’ve heard that J and J has been denied preliminary injections just carrying the weight for Sisiva private label launch. Any chance you could update us on your expectation for Sisiva for the remainder of the year? Is IRIMOS still a good proxy? Or would that be fair to assume a quicker ramp up?

Richard Saylor, Chief Executive Officer, Sandoz: Dan, good morning, Victor. Thank you. I think your first question was ipilimumab in recent announcement. So again, we this is a partner we’ve worked with in the past. We believe this is an opportunity to bring a mark an interesting product that complements our oncology portfolio at the point of market formation, both in The U.

S. And in Europe. We’re sort of going to be towards I guess the latter part of this decade. But think we’ll sure beyond that. The J and J question, yes, clearly we’re delighted the court.

It’s all the same thing we did. Yes, we would now go ahead and look to launch with our partner. I would caution obviously, we structured this deal slightly differently than our own Haimurosk. So here we would only book the income. We would not book sales.

So you won’t see this in the sales line. So the take up, I guess, we will see. We would look to see how that evolves. Again, I would caution when we launched adalunumab, it took nearly nine months before we started to see an inflection point. I think this will be a little bit quicker, but I don’t think it will be sort of straight out of the gates over the next couple of weeks.

I think it’s going sort of evolve over the year in a similar way. Similarly, with who ends up on formulary, we’re confident that we would have a wide coverage. But again, it’s too early to really give specific indications on that. So I would describe it as quietly optimistic. Okay.

Conference Operator: Our next question comes from Harry Sefton at UBS. Please unmute your line and ask your question.

Harry Sefton, Analyst, UBS: Brilliant. Thank you very much for taking my questions. So the first one is just on the biosimilar performance in the first quarter. So you’d quite well flagged that we were going to see some headwind from the Simerli withdrawal. But if you look at the performance, it’s about £100,000,000 sequential decline on the fourth quarter of last year.

So can you just give us some help on what were the contributing factors to such a weak quarter on the biosimilar sales? And then maybe on the you called out the adalimumab pricing as a headwind in The U. S. We haven’t really seen biosimilar pricing being a material issue to date. So it would be helpful if you could clarify what was driving that?

Was that competition with other manufacturers looking to compete on your contract with CVS and you were defending against that? Or were there any other factors? Thank you.

Richard Saylor, Chief Executive Officer, Sandoz: Thank you, Harry. I guess, it sounds like both the questions are linked. I mean, I wouldn’t describe the performance as a weak quarter. I think you’re looking at a really couple of factors. I think your second point partly answers your own question.

Obviously, we have to renegotiate. We have a strong relationship with CVS, but it’s a competitive market. We’ve always said that we would maintain the volume, but the pricing would have to be renegotiated. And now this contract is moving into a more mature phase. That’s a normal part of that life cycle.

Then I think you have a couple of factors clearly. We had a very strong final quarter last year and really combination of pricing that we talked about in terms of adalimumab and the phasing of orders, particularly in The U. S. So really you have one or two big customers that take orders. Really, you’ve got to look at sort of the timing of that.

So I don’t really see this as a trend. It’s just more when you have a particularly big order, clearly, wants to close last year strong and this quarter then will flow through and some of the pricing impact. And then on top of that, as you mentioned, the similar impact as effectively we’ve sort of paused this product in the marketplace. So there’s really no sales at all in Q1 versus clearly a strong sales performance in Q1 last year. So I think a combination of those things.

Conference Operator: Thank you. Our next question comes from Tibalt Bootharam from Morgan Stanley. Please unmute your line and ask your question.

Richard Saylor, Chief Executive Officer, Sandoz: American technical problems, operator.

Conference Operator: Yes. Please unmute your line and ask your question.

Tibalt Bootharam, Analyst, Morgan Stanley: Hello. Can you hear me? Yes. Can you hear me? Yes.

Yeah. Okay. Thank you. Sorry about that. So my first question is just on the on the CELAR market and the biosimilar penetration here.

When you look at IQVIA data, we we see so far very, very limited penetration, including for Amgen, which has a private label bill as well. So first of all, do the data reflect what you’re seeing on the market? And second, sort of if you could help us understand how you think this is going to evolve for the rest of the year? And second question just on the KEITHRA trial and sort of minimizing this trial based on the feedback you’re getting from agencies and other elements. Just if you could give us in the long term sort of the puts and takes you’re expecting for the industry because on one side, this is helpful for lowering R and D costs for development, but at the same time, it actually lowering the bias to entry very similar.

So if you could sort of give us what you think the net net is for Sandoz and for the, I guess, existing player? Thank you.

Richard Saylor, Chief Executive Officer, Sandoz: No. Okay. Thank you, Jeebo. I guess, at Stellara, think that partly goes back to the question that Harry asked. I mean, a, bear in mind, sorry, the early question from Victor.

The point is that our partnership with Stellara or isakinumab is a third party. We don’t book the sale. So you won’t necessarily see this in IQVIA data. So again, I will say IQVIA data was a bit of a pinch of salt. And it’s still too early days.

Again, I would caution when we looked at adalunumab, it was up six to nine months before we saw any inflection. I do think it will take a while before contracts are renegotiated and start moving over. I think we’ll see a we sort of forecasted internally a modest buildup during the year and no big bang. So we just looked at a step performance key. We’re a leader in the adalunumab space.

We have a relationship with physician. We have a great product. I would sort of take you back in Europe with a 30% share. We’ve done extremely well. I think we’re outselling our competition almost two to one.

So we know how to market product and how to position it. And the partnership with Samsung is working extremely well. I think the question you have raised on Patreon is a fascinating one. Yes. Yeah.

Now I think this is going to be case by case on the depending on the quality of the data submissions. So we’re encouraged that both the EMA and the FDA now are becoming more aligned in terms of a rational approach in terms of data submission. Now I don’t have blanket, and I think clearly, but it’s a step in the right direction, which I’m really encouraged by. Then the question I normally guess was, does this mean that the biologics market will commoditize? Let’s be real here.

I mean, I think we’re dropping from a cost of about 150,000,000 to $180,000,000 down to maybe $100,000,000 That is still a significant barrier to entry plus all the CapEx and the requirement to manufacture that. But then I’d also then caution, I always sort of look at Europe in many ways. I’ve been in generics thirty plus years and the Indian generics companies have been coming all that time and yet they still have not arrived in Europe because there’s a significant barrier to entry. And in this space, there’s two barriers to entry, from clinical to commercial. That’s actually very technically difficult.

It’s something you need real skill and capability. And a lot of our partners, which is why they come to us really struggle. And then the piece that we always forget is commercial. And you saw that execution in The U. S.

With alonimat, and you see our phenomenal performance in Europe due to that execution. It also means that potentially, we can bring more assets, obviously, with the deal that we’ve just announced on IPI that takes us down to 29 assets in our pipeline. Five years ago, we had five assets. I would clearly love to continue to reinvest in our business. I’ll be happy when we have 40 plus assets.

So I think it’s a rational move. As a leader in this space, it allows us to really cement that position and accelerate. So I think maybe this is probably the most exciting thing I’ve seen in this sector for a very long time.

Conference Operator: Thank you. Our next question comes from Florent Cespedes from Bernstein. Please unmute your line and ask your question.

Florent Cespedes, Analyst, Bernstein: Good morning, everyone. Thank you very much for taking my questions. Two or maybe three quick ones. First on Tyrorico, could we have a quick update on your discussion regarding your GCV assay as you said

Richard Saylor, Chief Executive Officer, Sandoz: Sorry. I think we’ve lost the connection with that. Is as operator wrong? Is that wrong?

Conference Operator: No. I think we may have lost the connection. Florian, can you still hear me?

Richard Saylor, Chief Executive Officer, Sandoz: Perhaps we go to the next question, then congrats on back to him.

Florent Cespedes, Analyst, Bernstein: Yes. Yep.

Conference Operator: Absolutely. The next question comes

Richard Saylor, Chief Executive Officer, Sandoz: from Alan Baker.

Florent Cespedes, Analyst, Bernstein: Second question may be on to come back up.

Craig Marks, Head of Investor Relations, Sandoz: So sorry, Florent, we lost you for a second.

Richard Saylor, Chief Executive Officer, Sandoz: You keep breaking up, Florent. So we got little bits of your question. Yeah. And then we lost. So first question was, I can update you on that.

The second, I’ve got no idea. Sorry. That’s not my answer to the question.

Florent Cespedes, Analyst, Bernstein: Can you hear me now?

Richard Saylor, Chief Executive Officer, Sandoz: Yes, we Yeah.

Florent Cespedes, Analyst, Bernstein: Oh, so okay. Apologize for that. So my second question is on GLP-one strategy. Could you remind us if you would be interested to launch products in diabetes and obesity as early as next year in countries such as Canada or Brazil or if it’s not necessarily an attractive market for you? And last question, big picture questions on tariffs.

Do you believe that the biosimilars may be excluded from tariffs because given the profile of the products, at the end of the day, this would favor the branded products? So like to have your thoughts on this really important question for patients and for the industry. Thank you.

Richard Saylor, Chief Executive Officer, Sandoz: Thank you. I guess, for JCP, yes, we’re working with the regulators. We’re still anticipating a launch in Q4 this year. And so if we get any more material, we’ll update you. But we’re confident in terms of how that’s progressing.

And then they will look to launch that in the latter part of the year. GLP-1s, I guess, I’ve been talking about that now for a couple of years. Yes, we would we have at least two partners for the Canadian market and the others. So we are looking to launch a market formation in Canada. Similarly, for Brazil and a number of emerging markets.

I would caution, we deliberately didn’t put this into our guidance because this is an evolving space. And I’ve never been seen a product in my career that in a sense, the originators could meet the demand. And I think it’s a huge opportunity. But bear in mind that Canada is the second largest hemagglutide market in the world. So I think it presents a significant opportunity.

And we are the second largest player and one of the strongest players in the Canadian market. So I think we’re extremely well positioned to capitalize on that. And similarly, like Brazil, I think, presents a fascinating opportunity during the next few years. And then more in the medium term, Europe doesn’t really come up back until the early 2030s and then U. S.

A little bit later and then to the appetite more into sort of the mid-2030s. So this is really sort of a ten year journey. Clearly, it’s going have many twists and turns. Our focus at the moment, if you’re right to say, is looking to bring it forward to patients as early as possible in Canada next year. And lastly, tariffs.

Look, it’s a fascinating subject. And again, I take a step back. I’m so encouraged by the conversations that Karen, our US President, have been having with the White House. I think there’s a degree of common sense in terms of doing a full strategic review. I do sense that the administration recognize the important role that generics and biosimilars play.

Let’s remind ourselves, ninety percent of all patients and all prescriptions in The U. S. Are supplied by the generics and biosimilar industry at less than 10% to 15% of the cost. So quite frankly, our industry, there is no health care in The U. S.

To tariff that in a meaningful way over a long period of time, I don’t think would do a lot of benefit for patients. I think the conversation we should be having and we are having is about how do we create more tariffs rather than focus on sticks. Think clearly looking at PBM reform, looking at channel reform, looking at creating incentives, I think those are the things that ultimately will benefit by a similar market. And small things, we just talked about the approval of bus for approval of biosimilars, but opening up channels to make this a more attractive market that then may warrant greater investments and opportunities. But I think in tariffs themselves, think ultimately, they’re fortunate for patients to carry a multiple of Brexit.

But at the moment, I’m optimistic that we won’t see any significant tariffs in this space.

Florent Cespedes, Analyst, Bernstein: Thank you very much for your key.

Conference Operator: Our next question comes from Simon Baker at Redburn Atlantic.

Simon Baker, Analyst, Redburn Atlantic: Two, if I may, just a clarification. Just going back to Thibault’s question on pembrolizumab development. As you said, that’s in progress. You’ve got a seven twenty patient Phase III study ongoing. Presumably, you’ll stop enrollment.

I’m just wondering if you could give us some idea of how involved that study is. And then moving on to Haimanos. There have been a lot of moving parts there. You talked about pricing. If we look at the scripts, it looks like there was an acceleration in sequential growth in March.

On Friday, AbbVie cut their U. S. HUMIRA guidance for the year by $500,000,000 So taking all that together, how is higher amounts tracking in 2025 in The U. S. Versus your original expectations?

And then a question for Remco. You alluded to the success of the recent bond auction. You’ve got by far the strongest balance sheet in the sector. So just wondering if you could update us on your appetite and opportunities for M and A. Thanks so much.

Richard Saylor, Chief Executive Officer, Sandoz: Thanks, Simon. Good to hear from you. Pembroke, yes, we’re trying to manage it. Obviously, we have a risk duty of care to the patients already on the study. So we wouldn’t just abrupt stop the study.

It’s really looking at how we are now, I guess, not enrolling further patients and minimizing that. So we would continue with the patients around that. I think there’s a moral obligation to do so, but really trimming any expansions or reducing the power of that study. So there’s savings there that we would look to reinvest in the business. And IMAROS, yes, you’re right.

I think in terms of volume, it’s in line with our expectations. I always sort of struggle a little bit with the IQVIA data. And I always said, I think, last year that this is probably one of the biggest opportunities that we still have in The U. S. I know we sort of talk about some of the other launches, which are really exciting.

But this is still the largest gallery in the history of the industry. And we’re the only company on formulary with all three PBMs. We have the largest share of the market. So we see nice substantial gains and pretty much in line with our own internal targets. Beyond that, we tend not to break out individual products.

But I think it really helps explain the story anymore than it does. Thank you. And then I’ll hand over to my colleague, Remco.

Remco Steenbergen, Chief Financial Officer, Sandoz: Simon, good morning to you. Good morning to all of you. Yes, I’m very happy with the balance sheet. You can imagine we’re currently standing. I think it’s also very helpful in the current turbulence times we’re all in.

We’ll have a good balance sheet. And I think also from a currency perspective, we are well positioned overall. With regard to M and A, we have said that small couple hundred million M and A we would consider for the moment every year depending if opportunities are, but that’s for the moment. We have a lot of work to be doing still to get this entangled from Novartis, which requires some efforts we want to get behind. And in a few years, we can look again if something makes sense.

Still to remember that most of it, we believe internally, we have a lot of opportunities for investments in our DNR portfolio as well on BGNL. And of course, those have more likely a larger return. But there are certain things we always look at, but no big M and A on the on the orders on our plan. Right. Thanks so much.

Conference Operator: Our next question comes from James Gordon at JPMorgan. Please unmute your line.

James Gordon, Analyst, JPMorgan: Hello. James Gordon, JPMorgan. Thanks for taking the questions. Firstly, just an update on tariffs, please. So if it was the case that tariffs came in such that it was on all your products or your API from outside The U.

S, just what would that now do? And maybe how would it change over time? So where are we in terms of bringing lots of inventory into The US, which presumably you’ve been you’ve been doing? And and maybe would you even move some sourcing or manufacturing? How might you mitigate?

Also, any thoughts on how quickly you might be able to move prices up if if there were new tariffs announced? I know some companies have suggested that their existing contracts are hard to move prices up, but they could opt out of existing contracts and then try and renegotiate. So if you could talk about that, please. And then the second one was just on HUMIRA, the comments were helpful for the But overall, do you think HUMIRA is still going to be a significant growth driver for you for this year in The U. S.

With the worst pricing but with volumes still sounding good?

Richard Saylor, Chief Executive Officer, Sandoz: Yeah. Good morning, James. HUMIRA I’ll take HUMIRA and then I’ll let Ron comment on tariffs. Yes, again, we took a page I think it’s worth about 20% of the market is converted. And we’ve got a significantly 80% of that 20% by the time I look.

So clearly, there’s the lion’s share to go for. And I think you heard your comments about the originators comment about reducing into expectations for this product. I think, yes, in dollar terms, it’s probably the still the single biggest growth driver in The U. S. And I think we’re still seeing this product growing strongly in other geographies, whether it’s international and or in Europe.

So this still has momentum years after LOE. So yes, think it will. Yes, there was always going to be a bit of a washout as you renegotiate volume contracts with CES. The volume actually broadly will stay the same between the pricing comes down to the historical numbers. And then you’re looking at timing of shipments and you say we’re trying to ship the kind of products we can particularly to CVS this quarter as well.

So, you know, directionally, still, as you say, a very exciting growth driver for us. Remco, do you want to

Remco Steenbergen, Chief Financial Officer, Sandoz: talk about any of this? Yeah. Thank you, James. Of course, it’s also on our minds, Greg. Let’s say, overall, in terms of sourcing and then effect creating a strategy over the longer term, we might move a little things.

But for the moment, particularly on the biosimilars, this all comes from Europe. There’s nothing to be changed. We also don’t see any need and any logic to change anything here. Secondly, if we we look at which tariffs are currently applicable, it’s the Chinese or 20%. Also, have some products coming through Canada, which have Chinese content, which then also are subject to the 20%.

That’s not a big amount, million to 15,000,000 that we can easily handle within our guidance. Now huge unfortunate case, which we don’t think will happen and won’t make sense as Rich is that before on the biosimilars from Europe becomes subject to tariffs. At this point in time, it will be a percentage of 20%, the risk possible tariff, which has been mentioned in the past, but we don’t know and we hope it’s not the case. But let’s say that’s the case. We still believe we can handle that within the the guidance with all the additional actions we take.

Plus, because we these products come directly from the factory going out, also from a technical perspective, the first sale will be applicable. Which is significantly reduces the tariff burden for us. So all in all, we believe that if it will become applicable for a small percentage, can be all noted with all the actions and the way we are positioned that we can handle that even within the guidance. I think

Richard Saylor, Chief Executive Officer, Sandoz: on your comment on pricing, I think it’s fair. It really depends product by product. Maybe that you can’t pass price on day one Monday to the next. But as contracts get renegotiated over a period of time, clearly, there will be upward pressure on pricing. If there wasn’t, then you’d see suppliers exiting the market, which will put upward pressure on pricing.

So I think you may have a short, relatively short to modest impact, but I think over time. And again, let’s just also remind ourselves, Sandoz less than 20% of our revenues come from The U. S, but predominantly a European company. And you saw the very strong growth Europe and a stronger bio growth. So I think we’re extremely well positioned versus our competition to weather this, to absorb it and to deliver, you know, on our performance.

So I’m so concerned. I know we have a lot of conversations about it, but I do think I do think it gets a little bit over in there. Thank you.

Conference Operator: Thank you. The next question comes from Sudhat Modi from Barclays. Please unmute your line and ask your question.

Craig Marks, Head of Investor Relations, Sandoz0: Hi, there. Sudhat Modi on behalf of Embley Field from Barclays. Just one question on the deal yesterday. Like, I just wanted to ask you when is the earliest that you can launch this product? And if this is baked in into your midterm guidance, we should expect an increase in the midterm guidance based on this?

Simon Baker, Analyst, Redburn Atlantic: Thank you so much.

Richard Saylor, Chief Executive Officer, Sandoz: Thank you so much. It’s not in our guidance. I mean, we only announced the deal yesterday and obviously gave our guidance two years ago. So it’s not. We wouldn’t be any more specific than I think the earlier comment that I made.

Certainly, I guess, this is looking at towards the late 20s, early 30s. Obviously, LOE is always partly subject to the patent arms in The U. S. But we are confident that we will be there in market formation with this product. And again, as we remind ourselves, in Europe, we’re the largest oncology company.

We have a great platform. This is a sector we know extremely well. So I think this is a very attractive complementary product to bring to the market. And clearly, we want to continue to drive and expand our pipeline both through in house deals in house development and through third party BD partnerships. So again, I’m pleased it’s a step in the right direction, but it’s not in our guidance as of yet.

Simon Baker, Analyst, Redburn Atlantic: Thank you so much.

Conference Operator: Our next question comes from Joris Zimmerman at Octavian. Please unmute your line and ask your question.

Craig Marks, Head of Investor Relations, Sandoz1: Yeah. Hi. Joris Zimmerman from Octavian on line. Two quick ones, if you allow. The first one is on Gymboree and you mentioned the impact of the acquisition in Q1 and the temporary halt.

Can you help us understand how we should have this moving forward? So what does it mean in terms of time lines and potential impact that we still see in Q2? And the second question is on the regulatory changes that you highlighted. You’ve already taken action with the Phase three trials. Does that already impact also the costs in development and regulatory this year?

Thank you so much.

Richard Saylor, Chief Executive Officer, Sandoz: Thank you. Thank you, Orest. So similarly, really as I said, we don’t anticipate any similar sales during 2025. I think we paused this product. We would look to reintroduce it as early as we can, but probably realistically in early twenty twenty six.

And then we would expect to see a relatively modest buildup of sales from there. So really this year, it’s going to have to it’s going to wash out and then start growing again as we get into 2026. The regulatory change, I mean, Tim, this is a directional change, not an announced change across all products. So clearly, we’ve not stopped Phase III trials on everything. We made a judgment call on one specific asset.

We’re choosing to reinvest that money in our pipeline. Now clearly, as we review this situation, at the moment, spent a significant amount of money on DNR. We would look to expand use that to expand our pipeline. I think as I commented earlier on, I’ll be happy when we have forty, fifty, 60 plus assets in our pipeline. We have a record 29.

And clearly, as we go through next year, will continue to add some depth and breadth of that pipeline. But anything beyond that, I can’t really comment specifically. Clearly, and I think this is necessarily one of most exciting developments in this space is first approval of the biosimilar eighteen years ago when we first started human growth for Monometro.

Conference Operator: Thank you. Thank you. Our next question comes from Alastair Campbell at RBC. Please unmute your line and ask your question.

Tibalt Bootharam, Analyst, Morgan Stanley: Hi. Just checking you can hear me, please.

Richard Saylor, Chief Executive Officer, Sandoz: I can hear you. Yes.

Tibalt Bootharam, Analyst, Morgan Stanley: Hello? Yeah. That’s brilliant. Thanks. Thanks taking the question.

It’s it’s a top level one. Just thinking about sort of the big three PBMs and seeing how they’re adjusting their formulary, evolving formulas for adalimumab coming in. I mean, it sort of feels like they are increasingly prioritizing private label options. And so it feels like in the future, you’re going to have to align with at least one of the big three to have a good chance of commercial success in pharmacy benefit. Do you think that’s true?

And do you think that’s ultimately good or bad for Sandoz? Thank you.

Richard Saylor, Chief Executive Officer, Sandoz: Yeah. Well, I think there’s few things there, Alastair. I mean, a, even the pharmacy even the pharmacies, their own label products don’t service all patients. So obviously, in the case of CVS, it’s their own commercial life coverage. They’ve made a choice to switch.

But there’s still a significant patients with that PBM that are still not on and there’s an opportunity to convert to a Class IV group. Also not all PBMs are the same. I mean, think, Olin, you rightly said all three of the PBMs signed on label deals. Only really one of them has made any kind of material change. And for a mix of reasons, different PBMs have different capabilities in terms of their degree and execution of switch or their desire to switch.

I do think we’ll see some of our evolution. And also bear in mind, though, this is really only products that are predominant in the pharmacy benefit space. And really, there’s only ever been two biosimilars that have launched in this space. One aduunumab and the other one is just to get that. Beyond that, most of the others are in the medical benefit space where, really, don’t see this as a business model that is sustainable.

So, yes, it’s a case of Aetna. We’ve done extremely well. Yes, Booster. We have at least one PBM signed. So again, we’ve leveraged that model, but I don’t see that happening in denosumab.

I don’t see it happening on a flip a set. I don’t see it happening on TyrUco. So it’s very specific to this asset class. Hopefully, helps. Thanks, Richard.

Yeah. Thank you.

Conference Operator: Our next question comes from Graham Parry at Bank of America. Please unmute your line and ask your question.

Craig Marks, Head of Investor Relations, Sandoz2: Thanks for taking my question. Just want to follow-up on the comments around the sort of broader tariffs if they were introduced. So if you did have a sort of blanket 25% tariff for all products being imported into The U. S, Remke, you’re indicating that you felt that you could manage that within the guide this year. But how much of that is because of shipping of inventory ahead of implementation of a tariff like that and the likelihood that it would be introduced later in the year given it would be subject to the February investigation.

Perhaps you can help us by giving us what sort of impact you might expect to see on an annualized basis as you did at the beginning of the year if you saw that sort of tariff implemented? And then secondly, just I’d be interested in your thoughts on or updated thoughts on capacity expansion plans and what’s needed for any GLP-one launches for Canada and Mexico next year? Thank you.

Richard Saylor, Chief Executive Officer, Sandoz: Okay. Good morning, Graham. So if do a glitch and then I’ll pass it around and go to Perris. As I said, I mean, the capacity that we’re leveraging for semi Canada and the emerging markets we’re using with third parties, We have more than sufficient capacity to cover the forecast needs that we’ve put. Then we looked, as we said, as we go along, in many ways, as I I didn’t put any guidance.

I’m seeing this as a bit of a giant experiment in a way. I have no idea how this market’s going to evolve once price points move. We may have massively over forecast, massively under forecast, difficult to say. But certainly, we have more than enough capacity with our partners, so there’s no need for us to invest any additional CapEx to provide the capacity certainly in our plans in the short to mid term. Mid to long term, we’re already investing heavily in Slovenia to fill finished capacity, which is part of our plans anyway because we’re basically a biologics company.

And we need that fill finished capacity, and then we’ve got some flexibility there as the market evolve. So we’re trying to sort of take a pragmatic and cautious approach. Frank, you want talk about tariffs?

Remco Steenbergen, Chief Financial Officer, Sandoz: Yes. Of course, it’s Graham, it’s quite a wild wild discussion because it really depends what the tariffs will be, how they will be implemented, etcetera. But the number I can give you also the comparison before when we had full year results discussion is also a technical discussion is the transfer price applicable, the first sale applicable, which makes quite a difference. We can confirm that the first sale isn’t applicable, which reduces the amount significantly. If you will talk on an analyzed basis, but then I talk with the current 20%, which is applicable for China and another 20% from Europe because that was the risk process of discussion, which is mostly in place.

We will talk with an analyze number of around 60,000,000 to €65,000,000 before any corrective actions, right? So that’s before any pricing actions or any other actions, right? Of course, that will be a bit lower for this year. It will be later this year. It’s part of it, the rest will come next year.

If you do that number, if you consider that number and it’s before corrective action, you can imagine that if it will be a 20% that we that we feel at this point in time, we can handle that within our guidance for this year, but also for the midterm that we will not have any problem mentioned handling that. But of course, again, it depends. Growth is 15%, it’s a different ballpark. But with the current discussions, we’re very happy actually that we are in that position and we can handle.

Craig Marks, Head of Investor Relations, Sandoz2: To 65 is the total impact including the China, or is that incremental on top of China that’s already baked in?

Remco Steenbergen, Chief Financial Officer, Sandoz: It’s including. It’s the OA number.

Craig Marks, Head of Investor Relations, Sandoz2: Including. Yep. Got it. And so and and that was based on the sale as opposed to transfer price. So I just want to make sure I understood it properly.

Remco Steenbergen, Chief Financial Officer, Sandoz: It’s based on first sale, and then it’s based on 20%.

Craig Marks, Head of Investor Relations, Sandoz2: Great. Okay. Thank you.

Richard Saylor, Chief Executive Officer, Sandoz: We would think we’ll be highly unlikely.

Craig Marks, Head of Investor Relations, Sandoz2: Got it. Thank you.

Conference Operator: Thank you. Our final question comes from Victoria Lambert at Berenberg. Please unmute your line and ask your question.

Craig Marks, Head of Investor Relations, Sandoz3: Thanks for taking my question. It’s just on denosumab. We’ve had quite a few approvals from some competitors recently. So just would like to get a sense of how you think this market’s gonna develop because it’s through the hospital channel. It seems that’s a bit easier to to take share, and it happens pretty quickly compared to the PBM channel.

So just wanting to get a sense of how you see the phasing of market share and and how competitive you think this market is going to be? Thank you.

Richard Saylor, Chief Executive Officer, Sandoz: Yes. No. Thank you. Good morning, Victoria. Yes.

You’re right. Also, other part is you need a Q code. So when you launch into this space in The US, you have to have a code. We because we had an assessment, we are the only company with acute code at launch and we probably have that for about five months versus our competition. So that gives us a really good opportunity to secure contracts and partner with customers Without acute care quite frankly, it’s a nightmare to get reimbursed at a patient level.

So clearly, intend to capitalize on that opportunity when we launch the product later this month. So I’m very excited about it. It’s an exciting launch. It’s done extremely well in Canada. We’ve about 30% share of the market now.

And also looking to launch it in Europe. So it’s a really nice product. We have all the presentations. And I think we’re well positioned in The U. S.

Given that we’re the only company with the Q COVID launch. So we want to capitalize on that when we bring this product to

Remco Steenbergen, Chief Financial Officer, Sandoz: market.

Richard Saylor, Chief Executive Officer, Sandoz: So thank you so much for your question. That’s the last question. Thank you. That’s the last question operator. I think we’ll close the line.

And thank you all for your questions today. And have a good rest of your day and a good bank holiday weekend.

Conference Operator: Thank you very

Richard Saylor, Chief Executive Officer, Sandoz: much.

Tibalt Bootharam, Analyst, Morgan Stanley: This concludes

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