Document Details

# Novartis AG Novartis AG - Q4 2024 Earnings Call

Friday, January 31, 2025 8:00 AM

## Event Participants

#### Executives 3

Sloan Simpson, Vasant Narasimhan, Harry Kirsch

#### Analysts 12

Florent Cespedes, Simon Baker, Richard Parkes, Emily Field, Matthew Weston, Richard Vosser, Graham Parry, Etzer Darout, James Quigley, Seamus Fernandez, Naresh Chouhan, Eric Le Berrigaud

## Operator Operator

Good morning and good afternoon, and welcome to the Novartis Q4 2024 Results Release Conference Call and Live Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] 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 Executive

Thank you, Sharon. Good morning and good afternoon, everyone, and welcome to our Q4 and full year 2024 earnings call. The informat...

# Novartis AG Novartis AG - Q4 2024 Earnings Call

Friday, January 31, 2025 8:00 AM

## Event Participants

#### Executives 3

Sloan Simpson, Vasant Narasimhan, Harry Kirsch

#### Analysts 12

Florent Cespedes, Simon Baker, Richard Parkes, Emily Field, Matthew Weston, Richard Vosser, Graham Parry, Etzer Darout, James Quigley, Seamus Fernandez, Naresh Chouhan, Eric Le Berrigaud

## Operator Operator

Good morning and good afternoon, and welcome to the Novartis Q4 2024 Results Release Conference Call and Live Webcast. [Operator Instructions] The conference is being recorded. [Operator Instructions] 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 Executive

Thank you, Sharon. Good morning and good afternoon, everyone, and welcome to our Q4 and full year 2024 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 di!erent from any future results, performance or achievements expressed or implied by such statements. For a description of some of these factors, please refer to the company's Form 20-F and its most recent quarterly results on Form 6-K that respectively were "led with and furnished to the U.S.

Securities and Exchange Commission. Before we get started, I just want to echo Sharon's comment for all of our analysts, please limit yourselves to one question at a time, and we'll cycle through the queue as many times as we can. And with that, I will hand across to Vas.

## Vasant Narasimhan Executive

Terri"c. Thanks, Sloan, and thanks, everybody, for joining today's call to review our quarter 4, 2024, and full year results. So moving to Slide 4. As you saw this morning, Novartis delivered one of the strongest performances that we've had in our history in 2024. When you look at

quarter 4, our sales grew 16% and core operating income grew 29% in constant currency and on the full year, we had 12% sales growth and 22% core operating income growth with our margin reaching 38.7%, well on our way to our goal of 40% plus margin.

We also had important pipeline highlights in the quarter, including for Scemblix and Kisqali, which we'll go through in more detail later on in the call. Overall, we met and exceeded our full year guidance in 2024, and we're continued -- con"dent in continued growth in sales and Core OpInc in 2025, as Harry will outline later in the call.

So moving to Slide 5. Our priority brands continued to drive robust growth in the quarter. And I think importantly, that demonstrates we have the replacement power to consistently grow through the end of the decade. Overall, this portfolio of brands grew 38% in constant currencies and excluding Entresto, grew 41%. So we feel very good about the momentum we have.

And this is what gives us con"dence in the 5% plus sales guidance out to 2029 and the midsingle-digit growth we believe we can deliver in the long term.

Now moving to Slide 6. Entresto achieved sales of \$7.8 billion on the full year. That's up 31%. And when you look at the left side, you can see we had very good growth, both in the United States and in our international markets. The total prescriptions for Entresto in the weekly TRx in the U.S.

continued to climb. We had plus 41% growth in the United States with 9,000 NBRx's per week, ex U.S. continued to perform well. And I think importantly, we see very good performance in heart failure as well as hypertension in China and Japan.

Now when we look at the outlook for Entresto, we've updated the market that for forecasting purposes, we assume Entresto LOE in mid-2025. As you likely have seen, our combination patent is upheld and we currently believe we will be able to secure pediatric exclusivity, though we'll continue to monitor the situation closely, and that enables us to guide to a mid-2025 LOE. Outside of the U.S., our RDP protection lasts till November 2026 with a protection in Japan until 2030, and we continue to pursue additional options for further protection in these markets.

I think when you think about forecasting Entresto for the rest of the decade, it's important to note that the U.S. sales are about 50% of the global sales. But importantly, Europe contributes 20% and China and Japan in total of 15% of this brand.

So moving to Slide 7. Cosentyx topped \$6 billion of sales in the full year, growing 25%. This was fueled by our new launches in HS as well as the IV launch. When you look at the fourth quarter, we had U.S. sales up 36%, as mentioned by the key launches.

Outside of the United States, we had 7% constant currency growth driven mainly by volume in our core indications. Now when you look at how things are unfolding for the brand, we remain #1 -- the #1 IL-17 in the U.S. dynamic market, and we remain the leading originator biologic in both the EU and China.

Now looking ahead, we plan to accelerate growth through the HS launch with the NBRx

leadership, we've already established with 60% NBRx share and continuing to secure reimbursement in our key markets. Now IV has started to see accelerated adoption in the U.S. We have about 1,625 accounts ordering. We saw 22% quarter-on-quarter growth, but it's still early days, and we're working through now really accelerating the IV adoption. And over the course of the year, we expect 2 Phase III readouts in giant cell arteritis and polymyalgia rheumatica which, if positive, would provide further engines for growth for Cosentyx through the remainder of the decade.

Now moving to Slide 8. Kesimpta grew 49%, reaching \$3.2 billion on the full year. It was outpacing both the B cell and the MS market. We're really pleased by the performance in the U.S. and also very solid performance outside of the United States, growing 42% in the U.S.

with TRx growth at 29%. We're outpacing the B-cell segment. We see our NBRx share in the high 20s in the B-cell segment. Outside of the United States, we had 67% constant currency growth, which we're really pleased with. Overall, 70% of the new patients in the United States are "rst line or "rst switch.

80% of the U.S. commercial lives have been -- have now "rst-line coverage. So we're in a very good position from that standpoint. And we are right now the #1 NBRx naive medicine in 7 out of the 10 ex U.S. market.

So I think the setup overall for Kesimpta looks really good, very strong performance. U.S. and ex U.S., and that gives us con"dence in reaching the peak sales guidance that we've set out for this brand.

Now moving to Slide 9. Kisqali grew 49% in the full year, reaching \$3 billion in sales, and this is a re#ection of both of the strong performance we're seeing in the metastatic setting and in the early breast cancer setting. So as you can see in the middle panel here, we've outlined the total brand NBRx across the market, and you can see the signi"cant increase we've seen in total brand NBRx post the approval in early breast cancer and the positive NCCN guidelines. The brand grew 65% in the U.S. in quarter 4.

We have metastatic share at 50% now and TRx share at 33% and climbing.

In the eBC setting, the early breast cancer setting, we've already reached 52% NBRx share within 3 months of launch. And so we're getting very positive feedback from physicians and seeing solid uptake both in node-negative and node 1 patients without risk factors as well as the overlapping node 1 and node 2+ patient population. I mentioned the category 1 NCCN guidelines, which is really positive for the brand. And importantly, as well, we announced this morning that we've settled the compound patent litigation with a generic manufacturer and that supports Kisqali U.S. patent protection until at least Q1 2031.

Outside of the United States, we grew 34% in constant currency with a leading share. NBRx share at 42%. The early breast cancer launch is ongoing now in Europe and other geographies, and that should provide a further driver of growth for Kisqali over the course of the year -- of this year. So we guided to \$8 billion plus, and I think the early signals are clearly indicating that we're going to be able to get there and hopefully do better.

Now moving to Slide 10. Pluvicto delivered full year sales of \$1.4 billion, 42% in constant

currencies in the post-taxane setting. And most importantly, we spent a lot of our energy in quarter 4, laying the foundation for the pre-taxane PSMAfore launch, which we expect in the "rst half. Now when you look at the quarter, we grew, you can see 28%. Overall, our performance was absolutely in line with what we guided to in our quarter 3 conference call.

U.S. was up 12%. We achieved 40% NBRx share within the VISION population. Pluvicto is now available in over 20 countries outside of the United States. And we're con"dent that we can now accelerate growth with the PSMAfore launch in 2025.

The "nal OS was read out over the course of January with HR -- unadjusted hazard ratio of 0.91. And you can see the con"dence intervals here. The "le has been submitted to the FDA last year, and the review is ongoing. And as we -- so far, there's no adcom plan for this brand. So I think that's really a positive signal, and we'll see now how quickly we can get to launch.

We have over 590 sites open for the brand, 350 sites are actively ordering. And every month, every week, we're adding more sites. We're getting more sites to actively order. We're getting further into community oncology which will set us up not only for Pluvicto, but our broader RLT pipeline over time.

And we expect the initial uptake for PSMAfore to come primarily from the depth we'll get in these existing sites and then grow over time, certainly as we try to reach deeper into the oncology community practices. We're also progressing on our e!orts to expand Pluvicto further and as well as our broader RLT expansion. The PSMAAddition readout is on track for the second half of this year. We have Pluvicto "lings ongoing in China and Japan. And in both of those geographies as well, we've announced manufacturing facilities to support the launch of Pluvicto and of course Lutathera and we've also now initiated planning for our actinium-PSMA-617 Phase III study, the "rst of 2 actinium studies we're now planning to move into Phase III on to have continued life cycle management in prostate cancer with radioligand therapies.

Now moving to Slide 11. Leqvio showed a steady trajectory, delivered 114% constant currency full year growth in the quarter, 83% growth versus prior year. We're really pleased that now in the U.S. our growth is outpacing the overall advanced lipid lowering market. We have over 3,000 health systems ordering now Leqvio that represents 68% of the overall market volume.

We have depth that's increasing, and I think we're getting better and better traction with the overall buy-and-bill comfort levels within cardiology practices. We see demand growth in all relevant channels.

Outside of the United States, we've seen robust growth as well. Leqvio is now registered in over 100 countries. We see solid uptake in markets such as Germany. And in China, our outof-pocket growth really makes it one of the top ranked markets we have outside of the United States. We have an ongoing launch as well now in Japan.

So looking ahead, we have a number of clinical stage readouts coming over the course of 2025, which will help, I think, round out the pro"le of Leqvio as we await the outcomes trials readouts in secondary prevention in 2026 and 2027.

Now moving to Slide 12. Scemblix grew 68% for the full year with continued momentum in the third line setting and early progress that we're already seeing in the frontline setting. We're a market leader now in the third-line CML setting with NBRx share of 49%. We're 3x higher than the nearest competitor, which I think shows how well established now Scemblix is amongst hematologists. Outside of the United States, our leadership is at 66% for NBRx and total patient share in our key markets.

And when you look at the earlier line launch, what was critical is that we have already received NCCN Category 1 preferred recommendation in November. And then we also already see now Scemblix is the fastest-growing TKI by NBRx share across all lines of therapy and we're the market leader now in second-line NBRx with a share already at 29%. And that's just in the "rst few months of launch.

So assuming we can really drive that continued trajectory, we should see a very strong uptake overall for Scemblix in the coming quarters. So we're con"dent in the global "rst-line opportunity. We read out the 96-week data recently as well, which reinforces superior e\$cacy, and I'll say more about that in a moment. And then we also showed some very good data that showed treatment discontinuation as well that Scemblix provides a clear pro"le win over nilotinib.

Now going to Slide 13. That ASC4FIRST 96-week data reinforces superior e\$cacy and safety. When you look at the data set here at 96 weeks on the left-hand side of the chart, you can see against all TKIs, we continued to show a signi"cant improvement, a statistically signi"cant improvement in major molecular response similarly versus imatinib a signi"cant improvement in major molecular response. And while we weren't powered our point estimate di!erence against second gen TKIs continues to improve as well over time.

Now when you look at the safety pro"le, we maintained a very excellent safety pro"le that we had at the earlier time point, whether it was grade 3 AEs, AEs leading to discontinuation or AEs leading to dose interruption, an excellent pro"le for the brand. So overall, we o!er here a medicine that has high e\$cacy, compelling safety. And we believe over time, as there's more and more experience, we'll become the preferred agent in "rst, second and third line for CML patients.

We move to Slide 14. Now turning to Fabhalta. As you're well, Fabhalta is now launched in 2 indications in PNH and IgAN. And while it's early days, I think we see really solid, steady performance for this brand, a 23% volume growth in PNH. Most of the source of business at the moment is switch patients from the established therapies.

We see over 90% of patients staying on therapy after the -- continuing after their "rst re"ll, very good commercial coverage levels. We're approved now in 40 countries. And so step by step as well, we're progressing the launch in other geographies.

The early signs for the IgAN launch as well are very encouraging. We've seen strong access with 67% commercial coverage already to label. We're seeing a number of nephrologists, a sizeable number of nephrologists, completing REMS certi"cation. And we also see a high interest in our conversations with opinion leaders on the Fabhalta MOA. One other update we have as well for Fabhalta is that the C3G "ling was completed in quarter 4.

We received priority review. The FDA has con"rmed no Adcom for C3G. So we're now preparing for a launch in the "rst half of 2025.

So moving to Slide 15. So when you look across the full year, I think we delivered very good innovation momentum across regulatory decisions, submissions, readouts and Phase III starts. Obviously, the critical approvals were delivered upon, particularly the Kisqali early breast cancer, the Fabhalta approvals, the "lings of Pluvicto and the approval for Scemblix, so I think we really are looking forward to maintaining and continuing that momentum in the years to come.

One important readout that we did have in quarter 4. Turning to Slide 16, was for the STEER study for OAV101 IT. This is the intrathecal version of Zolgensma that is administered intrathecally at roughly 1/10 the dose of what we see in the IV administration. This was tested in children and young adults over 2 years of age. We're really pleased to see that we've met the primary endpoint for an increase versus baseline for the Hammersmith score, HFMSE which is the gold standard.

Not all of the therapies in the space have been tested against the Hammersmith score. So we chose the gold standard and we demonstrated that we met the primary endpoint of a statistically signi"cant improvement versus a sham or placebo as requested by FDA. A very favorable safety pro"le consistent with what we've seen in other settings.

We're looking forward to present the data at an upcoming Medical Congress. You can see the study design over on the right. And our goal here will be to try to secure a broad indication across the various ACE levels and looking forward then to advance this global regulatory submissions across the various geographies. A sizable number of patients have not had the opportunity to bene"t from Zolgensma in the "rst 6 months of life. And now we're really excited now to give those patients a very compelling onetime treatment option that can hopefully stabilize and potentially improve their disease.

Now moving to Slide 17. We also completed an exciting deal in our neuroscience pipeline. This is for votoplam, PTC518. It's a potential "rst-in-class oral disease-modifying therapy for Huntington's disease. We have a lot of expertise in oral splicing agents.

We had a molecule called LMI070, which ultimately did not progress because of peripheral neuropathy signals that we had during the development program. So this is a space we know well, and we really believe PTC518 has a very strong pro"le as evidenced in the interim readout of their Phase II study.

As you know, in Huntington's disease, a very fatal neurodegenerative disease with really no disease-modifying therapies at the moment. Prevalence is 37,000 in the U.S. and 28,000 in EU. So we have an opportunity, hopefully, to make a big di!erence. We would expect the Phase II readout for the study in the "rst half of 2025 and then moving to pivotal Phase III studies thereafter.

Then moving to Slide 18. So our goal will be to continue our innovation momentum in 2025. We outlined to meet the management. We have a deep and broad pipeline across our 4 therapeutic areas across our key platform and our goal now is to advance the next wave of therapies, both in terms of approvals and submissions. You can see the list here, but also read out some study initiations, which will really "ll up that mid-stage pipeline and then allow us to maintain our growth momentum well into the 2030s and beyond.

So moving to Slide 19 and to close, I just wanted to remind you of our con"dence in our midterm guidance of 5% plus sales growth out to 2029 and a 40% core margin by 2027. We're very comfortable that we can -- with our replacement power outpaced the Gx impacts that we have to 2029, we have an exciting set of in-market growth drivers, many of which have protection well into the 2030s.

We have the pipeline probabilized and are hopefully with positive clinical data and approval, that pipeline will become further unprobablized in medicines like Remibrutinib, OAV, Ianalumab, pelacarsen and Atrasentan, can further drive the growth pro"le of the company. So an exciting year. We're really excited by our performance in 2024 and excited about continuing delivering the strong results and strong innovation delivery into 2025.

So with that, I'll hand it over to Harry.

# Harry Kirsch Executive

Yes. Thank you, Vas. Good morning, and good afternoon, everyone. I'll now talk you through our "nancials for the fourth quarter and full year '24, which as Vas mentioned, has shown some of the strongest performance in our history. As always, my comments refer to continuing operations and growth rates in constant currencies, unless otherwise noted.

So starting on Slide 21, giving a bit of context, our results in 2024, which is here on the far right of each of the 3 charts was really our "rst full year as a pure-play Innovative Medicines Company and we continue to show a strong track record of sales growth with margin expansion. If you look back over the last 5 years, we have grown sales at a 7% CAGR and core operating income at a 15% CAGR through consistent, strong commercial execution and overall signi"cant progress on operational productivity.

This has resulted in core margin expansion of 1,100 basis points in constant currencies, putting us on a clear path to achieve our midterm margin guidance of 40% plus by 2027. I think when you look at this track record, it becomes very clear that we have lifted the company to a whole new level of sales, margin and as we will discuss later, free cash #ow.

Moving to Slide 22. We guided to a low double-digit sales growth for full year 2024, and we achieved 12%. So meeting our guidance. And for core operating income, we delivered 22% growth exceeding by 1 notch our guidance, re#ecting the strong momentum we have seen in our priority brands, good also and launches as well as cost discipline throughout the end of the year, including some productivity gains.

On Slide 23, you see a summary of our "nancial performance. In the quarter, sales were up 16%, and core operating income increased 29%. Core EPS was \$1.98, up 33%. To note, in quarter 4, we bene"ted from some growth to net favorability, mainly in the U.S. This added about 3% points of growth in quarter 4 from gross to net true-ups based on invoices for prior quarters in 2024.

So the underlying growth in quarter 4 has been a very strong 13%, slightly better than the

12% sales growth for the full year in 2024.

For the full year, core margin expanded 330 basis points versus prior year in constant currencies to reach 38.7%. Core EPS was \$7.81, up 24%. And free cash #ow grew 24% to EUR 16.3 billion, a record high for Novartis. Now speaking of free cash #ow, let's turn to the next slide. You can see free cash #ow generation has really accelerated since we completed our transformation into a pure-play pharma company end of 2023 and also "nalized our transformation program -- Transformation for Growth program, which we announced April 22.

This has been a focus for us to, of course, ensure that not only core operating income increases, but appropriately also free cash #ow, so high quality of core earnings and strong free cash #ow generation.

And in fact, we have generated more cash than we did as combined businesses, be it with Sandoz or a few years back, even with Alcon. This gives us also ample capacity, of course, to reinvest in the business, pursue bolt-on deals, and return attractive -- attractively to our shareholders while growing dividends and buybacks.

This brings me to my next slide. So we continue to execute in line with our shareholderfriendly capital allocation strategy, which balances the priorities I mentioned. Invest over \$9 billion in R&D in 2024, and completed more than 30 bolt-on deals over the last 2 years to strengthen our pipeline, particularly in the area of neuroscience RLT and Renal. With respect to returning capital to shareholders, we remain committed to consistently growing our dividend in Swiss francs per share and completing our ongoing share buyback, which has about \$5.4 billion still to be executed in 2025.

Now on to the next slide, please, to the dividend. So we are really pleased to propose the 28th consecutive dividend increase to CHF 3.50 per share. an increase of 6% in Swiss francs and [indiscernible] after the prior few years of [indiscernible] per year. As you know, we did not rebase our dividend for the spin-o! of Sandoz, no Alcon. So this represents really an attractive, consistent growth over time, in line with our commitment to our shareholders.

Moving to Slide 27. For full year 2025, we expect continued strong sales growth with margin expansion, with sales growing mid- to high single digit and core operating income growing high single to low double digits. Embedded in our guidance with the "nancial planning assumption that Tasigna, Promacta and Entresto U.S. generics entry occurs in the middle of 2025 and I'll give some more detail on expected half 1 versus half 2 dynamics on the next slide.

To complete our full year guidance, please note that we expect core net "nancial expenses to be around \$1 billion, and our core tax rate to be around 16% to 16.5%.

On Slide 28, we have shown illustratively how we expect half 1 and half 2 dynamics should generics for Entresto, Tasigna and Promacta enter in US in mid of 2025 as per our "nancial planning assumption. Overall, we expect continued strong volume growth from priority brands in 2025. In half one, we expect sales to grow low double digit while we expect, of course, a softer half due to the impact of the 3 potential generic entries with low to midsingle-digit sales growth. Likewise, we expect half 1 Corp Inc to grow the high teens versus low to mid-single-digit growth in half 2. And "nally, let's have a quick look at the currencies as they always move around.

And if late January rates were to prevail for the remainder of 2025, we would expect the full year currency impact to be a negative 2% on sales and a negative 3 percentage points on core operating income. As a reminder, we always provide an estimated impact of exchange rates of our results on a monthly basis on our website. And with that, I hand back to Vas.

### Vasant Narasimhan Executive

Terri"c. Thank you, Harry. So coming to the "nal slide, and really, just in summary, continued strong business momentum in quarter 4, one of the best "nancial performances in the company's history. Met and exceeded our full year guidance. We're advancing our pipeline, including new approvals, but importantly, readouts for assets that will fuel our mid- to longterm growth and really ensuring we advance the mid-stage pipeline and expect to continue strong sales growth with margin expansion in 2025, as Harry outlined.

And we remain on track to deliver our midterm guidance of 5% plus sales growth through 2029.

So with that, Sharon, we can open the line for questions.

### Operator Operator

[Operator Instructions] And your "rst question comes from the line of Florent Cespedes from Bernstein.

#### Florent Cespedes Analyst

A quick one on the guidance as the guidance is a little bit better than expected on the top line, but also on the margin. And as Entresto is a very pro"table product and you will lose patent and you have generics from the mid of this year. I was just wondering if you could elaborate, Harry, what are the -- where we should see some pressure and where you will have some growth that will o!set the generic impact on the P&L and on the top line?

#### Vasant Narasimhan Executive

Thanks, Florent. Harry?

### Harry Kirsch Executive

Yes. Thank you, Florent. I mean, in the end, all starts with the top line, as we all know, in the Pharma businesses. So having our mid- to high single-digit sales growth, given the strength of our growth brands and launches, that's a good starting base. And also our other products are quite pro"table.

Now of course, pro"tability does vary by the di!erent brands. But overall, with a mid- to high single-digit sales growth and our ongoing resource allocation and productivity programs, we are very con"dent that with that, we will have also some moderate margin increase, right? So from that standpoint, and I laid out half 1, we will be more, obviously. And if these generics would enter half 2 would be basically pretty much low to mid-single digit both on top and bottom line. That's "ne.

But overall, very con"dent in that sales growth with these assumptions as well as this -- the underlying volume growth when you look at it, right, 14%, 15% volume, and then it depends a bit pricing was quite neutral last year. And then it depends simply on generic assumptions there. But also with a 5% very con"dent the 5% CAGR on the 5 years.

And then, of course, from 38.7% to 40% plus, it's not that far, right, in 2027. But we have good ongoing productivity. And therefore, especially on SG&A with good resource allocation and the launches are mostly in areas where we have already strong presence, we would expect SG&A to grow below sales growth, right, as you have also seen in the prior 2 years.

### Operator Operator

Your next question comes from the line of Simon Baker from Redburn Atlantic.

### Simon Baker Analyst

It's kind of a continuation from Florent's question. Just mindful of the loss of exclusivity potentially for Entresto later in the year. Historically, you've been very, very good at managing gross margin through patent expiries. I just wonder, Harry, I know you don't guide on gross margin. If you could just give us any commentary around the resilience of the gross margin in 2025 in light of that event.

### Vasant Narasimhan Executive

Harry?

### Harry Kirsch Executive

Yes. Thanks, Simon. So as I mentioned on prior calls and in IR roadshows, the further margin improvement, I expect to basically fully come from SG&A as we, with good resource allocation, basically slightly grow SG&A, but signi"cantly below sales growth, right? The gross margin comes a little bit under pressure as we lose small molecules where we don't pay royalties with either small molecules where we pay some royalties or larger molecules.

But all of that will be more than o!set by the SG&A e\$ciencies. And of course, also our colleagues in manufacturing and supply chain continue to work on very good productivity programs and have cost reduction programs on each of our products in a very impressive way, of course, never compromising quality or supply, very high 99.5% plus supply customer service levels. And with that, a little bit pressure on the gross margin because of increasing royalties, but by far compensated from SG&A e\$ciencies.

### Operator Operator

Your next question comes from the line of Matthew Weston from USB.

Due to no response, I'll move to the next question. Your next question comes from the line of Richard Parkes from BNP Paribas.

## Richard Parkes Analyst

I think I'll take one on the Huntington's program. Obviously, a huge unmet medical need,

terrible disease. But there have been some other failures in that area in the past. So I'm just wondering what makes you more con"dent in the approach what you've learned from those past experiences? And to what degree do you think the PIVOT-HD trial will derisk the probability of success given it's a slowly progressing disease and the study is relatively short?

Or will we still be seeing it as a high-risk program? That would be really helpful.

### Vasant Narasimhan Executive

Yes. Thanks, Richard. And I think as you're aware, the goal here is to take down mutant Huntington but at a level where you're not taking it so low that you have some -- you have adverse consequences from reducing Huntington's too much. I mean, generally speaking, the feeling in the "eld is you want to reduce mutant Huntington protein by 30% to 50%. And then alongside that biomarker, you want to see clinical signs of improvement.

So I think at their interim results, PTC has shown the relevant MHTT lowering. They've seen some signals of clinical e\$cacy and a very good safety pro"le without some of the peripheral neuropathies that we saw in our own program. So I think all of that taken together makes the program look like it's headed in the right direction.

I think the big question, of course, is does reducing mutant Huntington at that level lead to a large enough or important enough clinical bene"t that would lead to most importantly helping patients, but also regulatory approval. I think we'll see how the Phase IIb study reads out.

Obviously, if it's a very compelling result, it might enable us to take it forward for a "ling. And if not, we would then need to go to a full pivotal study and then really answer the question, does reducing mutant Huntington at that level lead to the clinical bene"ts that one would hope.

So it's been -- I think PTC has developed the product in all the right ways. We've had good dialogue with the regulators. So we're hopeful that we see a good result on the Phase IIb study, and then we'll take over and run those Phase III studies. And hopefully, we can bring an important "rst disease-modifying therapy to these patients who badly need it.

## Operator Operator

Your next question comes from the line of Emily Field from Barclays.

# Emily Field Analyst

The "rst one was just a clari"cation question from the "rst question that was asked by Florent. If you could just con"rm the contribution of favorable gross to net adjustments to sales in Q4 '24? And then I just wanted to ask a question about Pluvicto. I mean I know the guidance had been not to expect signi"cant sales growth until the additional indication of PSMAfore was added. But was there any particular driver between the sequential decline in the U.S.

quarter-over-quarter? And would you expect any of the DTC and promotional e!orts that you've been putting in place to have an impact on sales ahead of the PSMAfore approval?

### Vasant Narasimhan Executive

Yes. Thanks, Emily. So back on the guidance, Harry.

### Harry Kirsch Executive

Yes. So on the -- I think your question was about the gross to net in quarter 4 impacting the guidance. So let me try and then you can tell me if it was su\$cient. So we had a growth of 16% in quarter 4, as you have seen in constant currency. About 3 points of that was due to true-ups of gross to net for prior quarters of 2024.

So underlying 13%. The full year sales by brand in 2024 is basically undistorted.

The underlying growth for '24 is 12%, right, as you see in the report. So if you want to have a basis, it's best to take the full year 2024 sales and these are undistorted overall. Now of course, that has lifted the overall 2024 sales. And we have, of course, computed that, if you will, into our 2025 gross to net calculations, right?

And a key element of this is really Medicaid utilization is continuously reducing to prepandemic levels. Now we do not assume that it gets lower and lower. We basically assume that in 2025, we see what we have seen as the latest for 2024, right, which is a reasonable assumption. So we never take risky assumptions on gross to net.

It's obviously a big part of money, right, like EUR 16 billion to EUR 20 billion of sales as we have like 50% of our U.S. list prices being gross to net. But from that standpoint, it has lifted this more favorable gross to net situation for 2024, our sales level. And from that, we expect to grow mid- to high single digit. I hope that clari"es your question.

#### Vasant Narasimhan Executive

And Emily on Pluvicto, when you look at it, in Q4, it was really in line with what we had expected. In Q3, we had the bene"t of some onetime adjustments in France and Germany. But then when you overall look at where we had guided for Q4, it's roughly exactly -- almost exactly with where we had expected.

Now I think looking ahead, we are hopeful to see further progress in the VISION population, but I think that will be not a rapid increase. I think we've already gotten to 40% NBRx share, and that we'll need to get to steady gains by expanding further and further the number of treating sites for the VISION population.

But it is possible certainly that the DTC will start to have an impact that we kicked o! in quarter 3 of last year. Usually it takes 6 months for DTC to have an impact. So it would be around February, March of this year, we might see some impact on the VISION population.

But really, our organizational focus is on the PSMAfore launch. I think now that we have a really compelling rPFS data, we have very compelling data on distant mets. We have now the OS unadjusted for crossover at 0.91. I think everything now is a good setup to go into a population that's 3x larger, really ensure the sites that are already using Pluvicto now fully maximize their capacity to get as many patients to bene"t from the therapy as possible and also accelerate our e!orts to get even more sites ready in the community.

We've launched a number of initiatives. We're launching a few more over the course of the quarter to really simplify and hopefully get clinicians very comfortable even in the community oncology setting, providing radiopharmaceuticals or radioligand therapy. And that's where I think we're going to see the next uplift for the brand.

### Operator Operator

Your next question comes from the line of Matthew Weston, UBS.

### Matthew Weston Analyst

I don't know what happened earlier. It's a question for Harry, and it's again about guidance, Harry, but particularly about the impact of Medicare Part D reform on what you've assumed within your growth. So one of the questions we've had a lot this morning from investors is how can you be so con"dent given that you have a very large oral oncology portfolio, which is assumed to be used largely in the Medicare Part D population. So what have you assumed in your outlook are the puts and takes around that portfolio from that new reform?

#### Vasant Narasimhan Executive

Yes. Thanks, Matthew. I'll actually take that one. Overall, we expect a modest headwind from the Part D reforms, and we fully factored that into our guidance. The 2 brands where we see the biggest impact of the reforms primarily paying into the -- to cover in the catastrophic phase are for Cosentyx and Kisqali.

But overall, when we look at it, we've factored in the expected modeled headwinds from that. We look at the potential volume uplifts, which we don't really put a lot of stake in yet because we'd really like to see how that ultimately unfolds over the course of this year. And we see a modest headwind, which we think we can manage fully, and that's incorporated into our guidance. I think we'll see.

I mean I think in the midterm, the policy should lead to volume uplifts, more patients staying on therapy, which is why the industry wanted the \$2,000 out-of-pocket cap, and that would ultimately, of course, improve patient compliance, staying on their medicines and ultimately impact -- positively impact our sales in the coming years. In this "rst year, I think it's hard to put much credence on that. But beyond that, we feel very comfortable with the modeling that we did. We think we've taken appropriately conservative assumptions.

#### Operator Operator

Your next question comes from the line of Richard Vosser from JPMorgan.

#### Richard Vosser Analyst

A question on Kisqali. Looking at the NBRx share in metastatic, it stayed at sort of 50% for a number of quarters and maybe a couple of years now. So I'm just wondering what it takes to change that. You have a superior product. Does the sort of halo e!ect from the adjuvant allow you to get more accounts on board?

Just can we see that displacement of Ibrance? Just your thoughts.

# Vasant Narasimhan Executive

Yes. Thanks, Richard. I think the Kisqali shares really started to gain in the "rst part of last year after we had the early breast cancer readout and led to a lot more con"dence overall in the brand as well as the NCCN guidelines further supporting the use of Kisqali.

I think now we are hopeful that with the early breast cancer readout and the opportunity to have a single medicine for all patients within a clinic that we can drive the overall share -- NBRx share higher than 52%. We do have a cap probably somewhere around 75%, 80% just because of some of the payer dynamics and some of the contraindications for Kisqali. But of course, our goal is to get from that 52% as high as we can to that 75% over the coming years.

Of course, we have plenty of time now to do that. And I think we should see steady gains over time on that one. But the biggest focus for us right now is maximizing the opportunity in the node 0 and node 1 patients without risk factors where Kisqali is uniquely labeled and our competitors are not.

In our ability to get those patients diagnosed and then ultimately on therapy, it's such a sizable population and the size of the -- obviously, the public health bene"t we can deliver, that's the core focus for us overall. And then with that, of course, we should see metastatic gains as well.

# Operator Operator

Your next question comes from the line of Graham Parry, Bank of America.

# Graham Parry Analyst

It's just on Entresto. Just wanting to get perhaps a little bit more detail on the dynamics that are factored into the guidance for 2025. So what sales progression are you looking at worldwide and in the U.S. And in the U.S., do you see a bene"t in the "rst half of the year from donut hole discount removal? And to what extent does that o!set some of the generic decline you should get in the second half of the year?

And on generics, how con"dent are you can hold o! Entresto generics until 16th of July. The court "ling seems to suggest that MSN is trying every which way to launch at the moment, and there's only one appeal court stay in place, blocking them from doing that? And are you con"dent they haven't shipped any products at all in that narrow window where there wasn't actually a stay in place a couple of weeks ago?

# Vasant Narasimhan Executive

Yes. Thanks, Graham. On the overall dynamics, Harry?

# Harry Kirsch Executive

Yes, overall, we would expect continued good growth of Entresto until from a forecast assumption standpoint, middle of the year, of course, our colleagues in the legal and IP department will do everything to appropriately defend further patents. But that's for now the "nancial forecast assumption. And so we would see growth on that.

And yes, you are right, there's some favorability from the Medicare Part D design on Entresto as it is not a very high-priced specialty product. So very positive dynamics expected until LOE would happen in the U.S. And then, of course, what -- actually, when we look at the multiyear outlook and forecast, Entresto is one of the products that's really under forecasted versus our model from the consensus, due to the fact that Europe, at least end of '26, Japan, 2030.

And then we have a large tail end product always on large -- even small molecules in emerging markets. So also there, quite a lot of, let's say, remainder of sales because of Japan should be a blockbuster and then emerging markets once even end of '26, Europe would see generic entries.

## Vasant Narasimhan Executive

Thanks, Harry. And of course, we're pursuing all options in Europe and Japan to ensure we maximize the exclusivity for Entresto in those geographies, and there are certainly options that might materialize. Now I think on the U.S. dynamic, to our knowledge and our best understanding, there were no products shipped into the channel in those few hours. The stay is in place.

MSN has requested a reconsideration of the Circuit Court's stay. And of course, we'll monitor that situation. But we believe it's very clear that the spirit of the law very much is that we did our pediatric exclusivity studies and those pediatric -- that pediatric 6-month extension on the combination patent, which has been upheld should be respected. And so that's our very clear position.

We, of course, continue to litigate out the amorphous complex patents as well as the lawsuit that we have that the FDA should not have approved products with a carve-out on the dosing regimen on the label. So those court cases also continue to go on over the course of these months. And we'll see how it unfolds.

Our best estimate at the moment is to give you that forecasting guidance of middle of the year. And if anything changes, either we or I think IPD will let you know, probably IPD sooner than us, but we do the best we can. So thank you very much.

### Operator Operator

Your next question comes from the line of Etzer Darout from BMO Capital Markets.

# Etzer Darout Analyst

I had a couple of inbound this morning. Just wondering if you had any maybe additional commentary you could provide on the pushout of the HORIZON Phase III and maybe what could be driving that -- the event sort of rate dynamic relative to your initial event rate assumptions?

## Vasant Narasimhan Executive

Yes. Thanks, Etzer. So this is an event-driven study. We've been modeling the event rates. I think I've also heard a few questions.

There's been no interim analysis, so no interim analysis drove this. This is just event rate modeling on the blinded event rates that we saw. And we expect now to reach the "nal number of events, which is, I think, always preferable for a cardiovascular study that we need to ensure is adequately powered in the "rst part of next year.

We don't have a good necessarily guess. I mean, in general, I would say cardiovascular outcome studies have been trending to lower event rates under time over time. It's important to note that in these studies, we very rigorously ensure that all patients are at their appropriate treatment levels for LDL lowering to ensure that we can isolate the impact as FDA asked us of the Lp(a) lowering therapy.

So quite -- it could be the background rate. It could be -- the drug is working. That's always our hope, but we can't be sure of that as well. So we'll see over the course of -- we'll see next year at the end, how the study reads out. But we remain very con"dent that the drug is doing what it's supposed to do.

Mechanism of action is clear.

When we look at the pro"le of the patients that we enrolled, this is a high-risk patient population. We wanted to enroll high levels of Lp(a) that then with the lowering that we are seeing -- that we expect to see that, that should lead to the cardiovascular risk reduction that we hope for. So that's the best guidance I can give you at this point in time.

## Operator Operator

Your next question comes from the line of James Quigley from Goldman Sachs.

### James Quigley Analyst

Got one on the guidance, unfortunately. Harry, would you be able to sort of split the guidance out between volumes, generic impact and pricing? I mean presumably pricing is close to 0 or slightly negative, but it would be super helpful if you could give us an idea of how that breaks down.

And then secondly, on the slide where you break out the half 1 versus half 2, obviously, the second half takes a hit because of generics, where would that land if you didn't have the generic impact? And is low to mid-single digits a sort of sensible exit rate for the second half of your guidance out to the end of 2029. I appreciate that you don't guide on the individual years, but just some color would be useful.

## Vasant Narasimhan Executive

Yes. Thanks, James. Harry?

# Harry Kirsch Executive

Yes. Okay. So let's give it a try. So overall, we expect continued, if not slightly increased volume growth due to our launches and continued very good execution from a volume standpoint, right? Pricing probably will be a little bit more pressure.

Usually, we have in a year like 1% to 2% points negative. Last year in '24, we had #at. But

there's a little bit of gross to net pressure due to Medicare Part D redesign, but nothing dramatic there.

And the key impact will be an increased generic according to these forecast assumptions. Now for the U.S., we have taken simply analogs for small molecules in the di!erent categories, cardiovascular as well as onco. And that's what you can model yourself. Now if these 3 would not happen, I would expect the "rst half to look like the second half. Unfortunately, there is not an unreasonable assumption, it will happen, right?

So that's why we carefully have modeled this.

#### Operator Operator

Your next question comes from the line of Seamus Fernandez from Guggenheim Securities.

#### Seamus Fernandez Analyst

So my question is on Ianalumab. You guys have Sjogren's data coming this year in my understanding, as well as some additional Phase II and III data sets. Where are you most excited about the opportunity for Ianalumab? It would strike me that Sjogren's is the highest unmet medical need where even just a positive study would gain substantial utilization. Just trying to get a better understanding of how you're thinking about the market opportunity in Sjogren's and then more broadly for Ianalumab.

#### Vasant Narasimhan Executive

Yes. Thanks, Seamus. We are very excited about Ianalumab's potential, both in hematology and in immunology. So in immunology, clearly, the Sjogren's will be the "rst key foundational readout, we're studying it in the roughly 40% of patients who have systemic manifestations of Sjogren's disease.

In the Phase IIb study, we demonstrated for the "rst time, signi"cant improvements in the Sdye, which is focused on the systemic manifestations, including improvements in areas such as fatigue and other physician-assessed parameters. And so if we can get a positive readout, we'll try to get as broad a label as we can. And we're also assessing should we also study the medicine over time in those patients, the remaining 60% of patients, a subset of them who primarily have symptom manifestations without the systemic manifestations.

So I think there's a signi"cant opportunity in HS. Then, of course, following up on that, we have the systemic lupus and lupus nephritis studies as well running and as well as you note, the Phase IIb in Hidradenitis. Alongside that, I think while there is reasonable standards of care in idiopathic thrombocytopenia purpura ITP, this medicine also has the potential with its mechanism to be an improvement in second line and "rst-line ITP, and that we also have a readout in 2025 as well. And so that would obviously enable us to start the process in hematology.

We have worked through ensuring we have di!erent dose levels as well so we can manage the di!erent indications in immunology and hematology from a price standpoint. So taken together, I mean, you have 6 Phase III studies across the board already running for Ianalumab, multiple Phase IIs. So assuming they go our way, this could be a very signi"cant medicine,

probably underappreciated overall.

#### Operator Operator

Your next question comes from the line of Naresh Chouhan from Intrinsic Health.

## Naresh Chouhan Analyst

Just one on OAV, please. So consensus is currently modeling very little, if anything at all, for OAV101. Can you help us think through the bolus opportunity and the speed of ramp-up? We think it could be a blockbuster by 2027. Is that unreasonable?

And how do you think about the speed of ramp-up?

### Vasant Narasimhan Executive

Yes. I think -- so Naresh, I think it's obviously early days from our standpoint. But certainly, with -- I can use the analog of what we saw with Zolgensma. And certainly, in that case, we did see a very fast ramp and then to the steady state and then we stayed at that steady state. I think it was 2, 3 years until we got to the steady state.

And that's generally what we would expect, I think, in the case of gene therapies. And so I think we'll see with OAV.

The dynamics are obviously a little bit di!erent because many of these patients will need to be switched patients. But I think when you look at the competitive set that we're going up against, you have a competitor that requires quarterly intrathecal administrations into the spinal cord, which is quite challenging for patients over time and also patients often have malformations and the deformities that happen in the spine as a result of the repeated injections.

And then the other competitor medicine was not tested with the standard of care Hammersmith score, which is the gold standard, which is what we used. And I think our hope is by going to the physician and patient population saying, look, you have a onetime gene therapy using the gold standard Hammersmith score, demonstrating statistical signi"cant improvement using that score with a very expected safety pro"le that could be very compelling for a large number of patients.

That's the approach we're going to take in rolling the medicine out. And I'm hopeful that it will surprise people as well because I think there is the opportunity as we guided, this could be overall a \$3 billion-plus medicine over time. And that's very much the goal. And I think also, of course, with gene therapies, we have the opportunity to have medicines that don't at least our current understanding, be di\$cult to face real generic erosion. So these become medicines that kind of stay in the long run in our portfolio.

### Operator Operator

Your next question comes from the line of Eric Le Berrigaud from Stifel.

Eric Le Berrigaud Analyst

Yes. Do you hear me?

### Vasant Narasimhan Executive

Yes. Go ahead, Eric.

## Eric Le Berrigaud Analyst

Yes. Again, on guidance, but this time on the midterm guidance and trying to put the '25 guidance in the context of midterm guidance. Since you implemented this midterm guidance, you systematically beat and raised, '23 was much higher, '24 was much higher. And then we thought that maybe the transition with the signi"cant LOEs in '25, '26 would be the reason for the midterm guidance to be lower than what you achieved.

But now in '25, you're guiding for mid- to high single digit, which is again higher than the midterm guidance. And so if we think that '26 will very much look like '25 because it's a 50-50 mid '25, mid-'26 impact and then '27, '28 should see some rebound with no signi"cant LOE, it becomes hard to understand why the midterm guidance is not more -- or, let's say, higher or, let's say, to articulate things. So maybe something is missing, but could you put that in some context? Or it's just the global policy of underpromise and overdeliver?

### Vasant Narasimhan Executive

No, certainly not a global policy. We do our best to give you the midpoint estimate of where we think things will go. And then, of course, if we do better, and over the last 2 years, I think our performance -- operating performance has been outstanding, actually 2-plus years now. And I think that's part of the reason you've seen the consistent beats and raises.

I think certainly, over the coming years, we'll see. I mean, of course, we'll update over time. I mean the 2026, we have the full year impact, of course, of these generic entries. And then we'll clear them and then accelerate growth from there. So I don't think we're in a position at this moment to change our midterm guidance.

But obviously, if we consistently perform at a higher level than the 5% midterm guidance, we'd have to reconsider it.

But I think right now, our focus is delivering 2025 per plan, getting these launches up on the trajectory, closing the current gap that consensus has to our view, which I think is roughly 2 points, '24 to '29. So I think, Eric, you're there, but some of your colleagues are not. And so I think that getting that gap closed by showing con"dence in Kisqali, in Leqvio, in Pluvicto, in Scemblix, in Fabhalta with the Remibrutinib launch with some of the pipeline delivery, continuing delivering on Cosentyx. And then, of course, we'll reconsider the midterm outlook as appropriate.

#### Operator Operator

[Operator Instructions]

Your next question comes from the line of Richard Parkes from BNP Paribas.

## Richard Parkes Analyst

Thanks for taking the followup. It's just on Cosentyx, the competitive environment. We've now had Bimzelx on the market for a year or so. And I believe that has some recent formulary wins and obviously launching in the HS indication. So just wondering how that competitive environment is playing out and what you anticipate in your guidance?

And maybe if you could quantify the opportunity for Cosentyx in the new indications that you outlined, GCA and PMR, and then "nally, I'd like to thank you for the Lp(a) test at your Meet Management Day because given it was mine was border line, I've now started on a statin. So I appreciate the opportunity.

### Vasant Narasimhan Executive

That's great to hear, Richard. I'm glad we could help. On Cosentyx, we had 25% growth this year. So I think that shows the robust growth pro"le of the brand. In terms of the competitor entries, when you look at our formulary position, it's as we expect.

We've had to give the appropriate level of adjustments on our rebates, but we've maintained very good formulary position.

We see very good performance in Asian markets such as China as well as continued good performance in Europe. In HS speci"cally, we think our pro"le of having very good #are resolution where we showed very compelling data on #are, on pain I think, on itch. So on some of these, I think this really gives us a very compelling data set. And given the long history of safety with Cosentyx, we think a very competitive pro"le to hopefully maintain that 60% plus NBRx share that we have.

We believe in HS, Cosentyx could be over \$1 billion medicine globally. Now for GCA and PMR, our current estimates are \$500 million plus for each one of these. I think the question, of course, we'll have to see. I think originally for HS, we thought this would be \$500 million to \$750 million, and we delivered that almost in the "rst year.

So I think we're learning as we go as we get into these new indications. And as we have a better sense from launching of, of course, positive data and then launching, we can, of course, update over time. And then I think are there more questions, operator?

### Operator Operator

We have one more, sir. And your next question comes from Florent Cespedes from Bernstein.

# Florent Cespedes Analyst

Thank you for taking my followup question. This time, not on guidance, but on the pipeline for the U.S., as pelacarsen is now expected in 2026, and it was supposed to be the big Phase III readout. Now on the list of the products that will read out this year, the pivotal Phase III, please could you share with us which is or which are the most meaningful one, please?

## Vasant Narasimhan Executive

Yes, absolutely, Florent. So I think there's a couple of things I'd say. First, Ianalumab is a key

readout. And I think we've already highlighted that, both Sjogren's and second-line ITP, both of these will be, I think, really important for the pro"le and opportunity in Ianalumab and also hopefully give a read-through of what we might be able to do in lupus, in lupus nephritis in frontline ITP, amongst others.

In addition, we're going to have the readout of Pluvicto in hormone-sensitive prostate cancer, which will further create a patient population that's as large as the VISION -- sorry, the PSMAfore population. And I think that would be another leg to build Pluvicto out to that guidance that we've given of \$6 billion plus over time.

In addition, you're going to have, I think, importantly, the Remibrutinib food allergy Phase IIb readout, which will then enable us to move rapidly for the next third indication, we hope for Remibrutinib on top of CSU and CINDU. I would say for Remibrutinib, we expect to "le soon. And then we do currently intend to use a priority review voucher. And we do believe that Remibrutinib in CSU is going to be bigger than the markets expect.

And I think the opportunity here in the U.S. and around the world to have an oral medicine that can address such a symptomatic disease within 2 weeks of therapy is something we're quite excited about. So we're very much focused on that launch as well.

And then, of course, on Slide 33, you see a long list of other things. But I think those would be the big ones that I would highlight that would really move the needle for this year.

And I think that's it. So thank you all very much for joining. We look forward to seeing you in various settings over the course of the coming quarter and then again at the Q1 earnings call. Have a great day.

## Operator Operator

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.