Novartis AG Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Simon Baker - Redburn Atlantic - Analyst : A few if I may, please. Firstly, on the issue of tariffs. Most of your peers have led their quarterly presentations this time with tariffs and the impact and the correlation between where drugs are made, where they're sold. You chose not to. So I just wondered if you could give us some thoughts on the tariff exposure as you see it now. And related to that, given it's a few weeks since it was published, I wonder if you could give us some feedback on your letter with Paul Hudson to the FT. And then secondly on -- for Harry, on the gross to net positive impact of 2 percentage points. Could you give us any more color on precisely where that was disproportionately landing? I'm assuming it wasn't equally distributed across the portfolio. So a little bit of color at the drug level would be very helpful there.

Question: Graham Parry - Bank of America - Analyst : So just a follow-up on tariffs as you shared about. Your guidance -- so your midterm guidance focuses on revenue and margin. Obviously, Novartis is one of the companies that has a lower global tax rate because of the booking and profits in Switzerland. It looks like from the reports and accounts just 16.5%. That's obviously quite a long way below US corporate rate. So when you're talking about factoring this into your guidance, is that also factoring in the potential for any actions on transfer pricing or IP, patent boxes, et cetera, which would impact on tax rate as well?

Question: Emmanuel Papadakis - Deutsche Bank - Analyst : Maybe a question on Pluvicto. Just firstly, a clarification. I think you mentioned this earlier, $4 billion ultimate peak sales ambition. But if I recall correctly, last year, you provided us with the $5 billion numbers. I just wanted to confirm if that had changed or that was just a typo. And then just talk to us a little bit about the confidence on H2 PSMAfore inflection. Is that really based on confidence that you're going to transcend this community referrals bottleneck? Is it actually expanding the number of sites will be capable of administering therapy? If you could provide a little bit more color that, that would be extremely helpful.

Question: Florent Cespedes - Bernstein - Analyst : Just a quick follow-up on Pluvicto. In the US, when you said that 50% of the sellers are not Pluvicto at a target rate, is it -- what's the main pushback from the sellers? Is just they need more convenience, so prefilled prefer syringe would help? Or other -- any color on this front would be helpful. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 29, 2025 / 12:00PM, NOVN.S - Q1 2025 Novartis AG Earnings Call

Question: Peter Verdult - Exane BNP Paribas - Analyst : Just one question for you, as on ianalumab in Sj÷gren's. I mean, the feedback from the docs is positive, but we know that there are no systemic treatment options to offer patients. It just seems from the people that we're getting -- that replicating that Phase II data you presented earlier, it will be enough to get the community excited. So I just wanted to check in on your latest thoughts ahead of that readout and how you're seeing the commercial opportunity if we were to compare it to something like Cosentyx and HS. Do you see Sj÷gren's being that sort of similar size or even bigger?

Question: Richard Vosser - JPMorgan - Analyst : A question on Scemblix, please. The growth on prescriptions is very stunning but revenue growth is a bit below that. So just wondering whether you're having to rebate more heavily to generate first-line volume or we could see an uptick later on this year in terms of Scemblix more towards the prescriptions.

Question: James Quigley - Goldman Sachs - Analyst : I have a question on pelacarsen's competitiveness. So last month, really put out Phase II data demonstrating a 94% reduction in the Lp(a) at the highest dose with a 180-day administration interval. The Phase III will clearly come after HORIZON, and we need to see that to really sort of see where the competitive landscape will move. But with data emerging for competitors with longer dosing intervals, how does this impact your view on the competitiveness and/or your launch strategy for pelacarsen, assuming positive HORIZON data? And does this also increase the need to accelerate development of your own six-monthly or longer acting LP(a) option?

Question: Thibault Boutherin - Morgan Stanley - Analyst : I just have a question on the new Phase III study. You started with Kesimpta in you're dosing regimen. Is it extending injection interval? Is it exploring higher dose for more efficacy? Because it's quite late in the life cycle of the drug. So I'm just trying to understand the goal here. And could it be something potentially helping with IP duration, for example.

Question: Matthew Weston - UBS - Analyst : It's a question for Harry, please. Harry, in the 4Q slide deck earlier this year, there was a very prominent slide on the first half, second half dynamics in the year especially around profitability. It's absent in today's slides. Is that because you're expecting less of a sharp contrast in first half, second half now you've seen the launch of Kisqali and continued growth of Kesimpta? Or is it just that you decided not to include it today?

Question: Kerry Holford - Berenberg - Analyst : On [Votubia], please. Are using on track to release that Phase II data in the first half of this year? And do you see the potential to file and securing approval in Huntington on that data alone? Or should we assume a Phase II study is likely to be required?

Question: Seamus Fernandez - Guggenheim Partners - Analyst : So really just wanted to ask about value-creating bolt-ons and areas of focus for BD, in particular, if you see opportunities for life cycle management via BD around your hypertension and heart failure portfolio particularly given the upcoming loss of Entresto in the US but the robust opportunity for Entresto in overseas markets.

Question: Steve Scala - TD Cowen - Analyst : Novartis has among the fewest manufacturing plants in the US in the industry. but did announce the $23 billion program to expand the US footprint. The question is how much of that $23 billion buildout to the footprint will be complete in -- by 2028? It seems that such a profound pivot could be a less than ideal decision if the views in the US were different in four years. If instead, it was an inevitable pivot regardless of the US President, then why didn't it start sooner? And related to this, you said Novartis can manage plans put forward in the US so far. Does that include most favored nation legislation?

Question: Graham Parry - Bank of America - Analyst : So first one is just on Pluvicto and PSMA addition. Just wondered, when you get the PFS primary endpoint read, roughly what proportion of overall survival events you think you'd have and whether that will be sufficient for finding just given you needed more OS data on PSMAfore? And then actually, I just wanted to follow up on Harry's comment on Entresto. I think -- because Vas, as I think you were quoted on the wires this morning saying expecting generic Entresto in July. Harry still refers to that as a modeling assumption. So could we still see some flex in that? Is there a potential for a 918-patent ruling or a settlement there that could see this bumped into 2026 in the scenarios that you see?

Question: Graham Parry - Bank of America - Analyst : Okay. So just to replay, that's based on litigation outcome as a place to settlement that you're referring to potential for it to move. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 29, 2025 / 12:00PM, NOVN.S - Q1 2025 Novartis AG Earnings Call

Question: James Quigley - Goldman Sachs - Analyst : Just a quick follow-up for me. Given the European prices has been mentioned a couple of times. So how -- what is the politicians' view on this at the moment? Is it seen as a problem? Or do you have some support from some European politicians about addressing the innovation imbalance that you see between Europe and the US? And have any negotiations or discussions started? Or are we still in a standing start and, hence, the reason for your letter?

Question: Thibault Boutherin - Morgan Stanley - Analyst : Your press release mentioned a litigation with drug manufacturer for a generic of Lutathera. Just if you could help us understand what generic would look like with radioligand in terms of type of price discounts. Any challenges a potential generic maker could face in terms of penetration, supply challenges, these kind of things?

Question: Matthew Weston - UBS - Analyst : I'd love to go back to Graham's question on tax, Harry. On the Astra call, Pascal was prepared to say that he believes Astra pays a fair amount of tax in the US relative to the sales booked in the US and the total tax paid by the company. There's been a lot of discussion in the past as to how Novartis pays tax in the US, some of it before your time. So I'd just be interested if you're comfortable saying the same thing from a Novartis perspective.

Question: Graham Parry - Bank of America - Analyst : Last one, I promise. So I just wanted to follow up, actually, guys, on the -- to qualify the comment you said about MFN being devastating for the industry, I think the word you used, if it was implemented. But when you say devastating, are you talking about MFN being imposed across both government and commercial setting? Or do you see that just in position across Medicare, Medicaid would actually have that level of impact. I think it's an important clarification. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. APRIL 29, 2025 / 12:00PM, NOVN.S - Q1 2025 Novartis AG Earnings Call

Question: Florent Cespedes - Bernstein - Analyst : First, a big picture question on IRA. Could we have your thoughts about the difference in exclusivity between small molecule and large molecules in 9 years versus 13 years? Do you see any, let's say, possible happy endings or more favorable trend on this front? Any color will be great.