Novartis AG Q2 FY2025 earnings call

Key Messages

• Novartis delivered double-digit sales growth and core margin expansion, upgrading full year 2025 bottom line guidance.
• Important innovation highlights: OAV101 IT submissions in U.S. and Europe, milestones on Votoplam in Huntington's disease.
• Priority brands driving robust growth: Kisqali up 64%, Kesimpta up 33%, Pluvicto up 30%, Leqvio up 61%, Scemblix on track to $1B sales.
• Cosentyx expects mid-single-digit growth for full year, factoring in IRA impacts.
• Renal portfolio progress: Fabhalta steady growth, C3G and Vanrafia showing positive launch signals, Zigakibart 100-week data from Phase II trial.
• Remibrutinib shows benefit in Phase II food allergy study, YTB has strong early results in severe refractory SLE with plans to advance in multiple autoimmune diseases.

Operational Highlights

• Kisqali: 64% growth, TRx leadership in metastatic breast cancer, strong early breast cancer launch momentum.
• Kesimpta: 33% growth, strong demand for self-administered B-cell therapy, access improvements.
• Pluvicto: 30% growth, pre-taxane indication approval in U.S., strong uptake in community setting.
• Leqvio: 61% growth, on track to exceed $1B in sales, global expansion.
• Scemblix: First phases of frontline launch, on track to exceed $1B in sales.
• Renal portfolio: Fabhalta steady growth, C3G and Vanrafia positive launch signals, Zigakibart 100-week data from Phase II trial.
• Remibrutinib: Phase II benefit in food allergy, plans for CSU, CIndU, and other studies.
• YTB: Strong early results in severe refractory SLE, advancing in multiple autoimmune diseases.

Novartis delivered a strong quarter with double-digit sales growth in constant currency. Priority brands continued to drive robust growth, with brands up 30% in constant currencies (excluding Entresto, up 33%). Kisqali grew 64% in the quarter, achieving TRx leadership in metastatic breast cancer and strong momentum in early breast cancer launch. Kesimpta grew 33% fueled by strong demand for self-administered B-cell therapy for MS. Pluvicto returned to robust growth, up 30% in the quarter, driven by pre-taxane indication approval in the U.S. Leqvio grew 61% in the quarter, on track to exceed $1B in sales. Scemblix is in the first phases of launch in the frontline setting, on track to exceed $1B in sales. Cosentyx growth moderated to 6% in Q2 but expects mid-single-digit growth for the full year. Entresto saw solid growth, with U.S. IP and regulatory litigation ongoing. Renal portfolio including Fabhalta, C3G, Vanrafia, and Zigakibart showed progress, with Zigakibart announcing 100-week data from a Phase II trial. Remibrutinib demonstrated benefit in Phase II study for food allergy, and YTB showed strong early results in severe refractory SLE.

• Full year 2025 guidance upgraded: core operating income expected to grow in low teens (up from previous low double-digit outlook), high single-digit sales growth.
• Initiated a new up to $10 billion share buyback program targeted for completion by end of 2027, following completion of previous $15 billion program.
• Core operating income guidance upgraded, assuming Entresto U.S. generic entry mid-2024/2025 for financial forecasting, but will enforce IP and regulatory rights.
• Core net financial expenses expected to be around $1 billion, core tax rate around 16%-16.5%.

• Competitive headwinds: Cosentyx facing geographic-specific short-term headwinds in U.S. and ex-U.S., new competitor entry impacting Cosentyx in U.S.
• Pricing pressures: Concerns over pricing in U.S. and ex-U.S., with discussions ongoing on drug pricing framework and MFN policies.
• Regulatory uncertainties: IP and regulatory litigation ongoing for Entresto in U.S., impacting financial forecasting assumptions.
• Geographic-specific challenges: Cosentyx facing pricing impacts from new indications and market-wide slowdown in China.

Q: On U.S. drug pricing policy solutions and resolution timeline?

A: Focus on reducing patient out-of-pocket costs, with productive discussions ongoing with HHS. Resolution will take time due to need for policy changes and system knock-on effects, with no clear timeline for full resolution.