Sandoz Group AG at Morgan Stanley Global Healthcare Conference Transcript

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

Question: Thibault Boutherin - Morgan Stanley - Analyst : Perfect. Thank you for the introductory comments. And let's jump straight into biosimilars. And everyone is, I think, interested and excited about what's happening with biosimilar, Humira in the US in particular? So if you could give us an update on the progress you've made here, maybe starting with the sales from your private label deal with Cordavis, the subsidiary of CVS, it has done incredibly well. So the question is how much more room for growth there is here in terms of volume? Or has this channel already reached some level of maturity already?

Question: Thibault Boutherin - Morgan Stanley - Analyst : Perfect. And zooming in a bit on this private label deal, I think one of the key questions we have is what is the agreement with Cordavis? I think you said it's a multiyear. So if you could come back on the stability we can expect from this channel? And also, if you could maybe tell us if you have a sort of first right to renew option on this contract or some sort of tools to renegotiate down the line and be maybe first in line to kind of continue this contract?

Question: Thibault Boutherin - Morgan Stanley - Analyst : Okay. That's very helpful. And then just talking maybe a little bit about ex-US for biosimilar Humira. How sustainable the growth is here because you've done very, very well? I think you're clearly one of the leaders, if not the leader on biosimilar Humira Express, so how should we think about that? And how much more room from growth that is here as well?

Question: Thibault Boutherin - Morgan Stanley - Analyst : Understood. So consider growth ex-US and going back to the US, a similar question, but I guess the question is on US biosimilars, I think what we've seen in the past for some other biosimilars is a sort of time to peak of maybe calling it two to four years, and then we started to see a decline as the price erosion were kind of more than the volume growth. So for Humira, in particular, you mentioned the room you have to grow in some other channels outside of Cordavis and CVS. So how should we think about the shape of US biosimilar Humira? And could it be consistently growing? Or should we also expect the sort of bell curve in terms of reaching pixels and then expecting an erosion?

Question: Thibault Boutherin - Morgan Stanley - Analyst : Very clear. And just maybe focusing a little bit on the specific opportunity within the US market. Recently, as you mentioned, Express Script announced that they would remove branded Humira from the label starting in January '25. They have their own private label deal, at least kind of Cigna, which is the parent organization as the private label deal with the Alvotech, Boehringer, but biosimilars of Sandoz still on the preferred formulary. So how should we think about this? And how much upside do you see in that formulary exclusion opportunity where Cigna is basically removing branded Humira?

Question: Thibault Boutherin - Morgan Stanley - Analyst : That's clear. And switching to biosimilars Stelara. So you have visibility on the launch date in the US next year. Are you in discussion already for a similar private label deal similar to what you did with Humira? And could there also potentially be a provider for multiple PBMs rather than having sort of kind of exclusion deal with -- exclusives deal with specific PBM on Stelara or even other biosimilars in the future.

Question: Thibault Boutherin - Morgan Stanley - Analyst : Very well, that's clear. Moving a little bit on the US generics. I think the sales declined a little bit in H1. Can you comment on the price dynamics in this market, how your pipeline can help compensate for this in the future? And some color of you mentioned generic launches that you would expect to launch in the US in the second half of the year, so a bit more maybe granularity here if you can.

Question: Thibault Boutherin - Morgan Stanley - Analyst : That is clear. And moving out of the US and focusing on Europe, you launched biosimilar Stelara very recently in Europe. And right now, I think it's just you and Alvotech, Teva launching this product. So it's obviously very early. But if you could tell us a little bit about the reception, are you seeing any particular obstacles to launch or any early successes? And any color you can give us here?

Question: Thibault Boutherin - Morgan Stanley - Analyst : Very well. So maybe we do a little bit of a pause on the product question and talk a little bit about the margins. I think margins have come in to debate at the second quarter earnings, you did 17.5% margin -- EBITDA margin in the first half, and you need to achieve around 22.5% in the second half to kind of reach your margin guidance of around 20% for the year. So if you can remind us of the kind of different elements of this margin position and also an update on the cost-saving plan that is part of achieving this margin. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:27PM, SDZ.S - Sandoz Group AG at Morgan Stanley Global Healthcare Conference

Question: Thibault Boutherin - Morgan Stanley - Analyst : That's clear. And then the cost saving plans, can you just give a little bit more granularity on what are the pockets of savings you're making in terms of different functions where you saw opportunities for cost savings?

Question: Thibault Boutherin - Morgan Stanley - Analyst : That's clear. So switching to one of the key topics of your strategic update, and you mentioned it's obviously a GLP-1 opportunity where people are getting excited. So if you could talk a little bit about how you -- I mean you -- I mean you have strategic update, but if you can give us a view on how you're thinking about addressing this market. Obviously, the demand is massive and there are some, I would say, constraints in terms of the capacity, supply challenges. So if you could kind of give us how you're thinking about the GLP-1 opportunity?

Question: Thibault Boutherin - Morgan Stanley - Analyst : It does. It's helpful. So also a supply question but this time more on the biologics side of the business because the feedback we get from talking to CDMOs is that there is currently some supply constraints on large-scale biologic capacity, which is, to my understanding, the type of capacity would need for biosimilars and I'm talking about the industry in general. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 05, 2024 / 12:27PM, SDZ.S - Sandoz Group AG at Morgan Stanley Global Healthcare Conference So with your biosimilar portfolio growing at a global level, multiple new launches planned, you will definitely need additional capacity in the coming years. So if you could just talk us through your strategy for supply, yes, generally speaking, to supply your portfolio.

Question: Thibault Boutherin - Morgan Stanley - Analyst : That's clear. And in connection with all of this, you mentioned a bit about CapEx. You have your target of $2.3 billion CapEx plus hundreds of millions of potentially depending on the GLP-1 opportunity. But even excluding GLP-1, is there some flexibility on these numbers if you start to see that growth is accelerating maybe beyond your plans or some biosimilars taking off faster than others? Kind of how you're thinking about this initial target that you set and the flexibility around here?

Question: Thibault Boutherin - Morgan Stanley - Analyst : That's clear. And still related to capital allocation. Maybe if you could tell us a little bit about business development and M&A. You've done some small, I would say, in-licensing deals around here. But how would you frame, first capital allocation priority and second, how you're thinking about business development to supplement your growth?

Question: Thibault Boutherin - Morgan Stanley - Analyst : That's very helpful. Coming back maybe on some [polished] questions. Richard, you mentioned the success of Omnitrope and your market share keeps going up, 38% of the last update. So how high can you go here? What is the outlook for this product? And then how much room do you have to grow on this part of the market?

Question: Thibault Boutherin - Morgan Stanley - Analyst : Understood. That's clear. And you mentioned as well, natalizumab, Tyruko. So you gave us an update on the launch in Europe and how encouraging it is. Maybe starting here, do you see any kind of uptake or friction in the market in Europe? And I guess the problem with multiple sclerosis, in particular, you have so much innovation in this space. I think even before you came in, this product was already starting to decline in volume. So could you reintroduce volume growth here? How are you thinking about your biosimilar in the product of innovation in this condition?

Question: Thibault Boutherin - Morgan Stanley - Analyst : That's clear. Let's talk also a little bit about biosimilar Humira and the timing here. So you have -- you had an approval in the US last month for biosimilar Humira -- sorry, Eylea. I think it's right.

Question: Thibault Boutherin - Morgan Stanley - Analyst : So can you just remind us what are the key changes from an IP perspective and the timing to get the resolution on that for biosimilar Eylea in the US?

Question: Thibault Boutherin - Morgan Stanley - Analyst : That's clear.

Question: Thibault Boutherin - Morgan Stanley - Analyst : And obviously, the branded originators are working very hard on trying to switch patients from the low dose 2 milligram of Eylea towards the high dose version of 8 milligram. And so how is that -- how is the dynamic potentially impacting or slowing you down? And do you think you could convert high-dose patients to low dose? Or do you feel it's going to be complicated here?

Question: Thibault Boutherin - Morgan Stanley - Analyst : No, Europe as well, I think...

Question: Thibault Boutherin - Morgan Stanley - Analyst : Very clear. And still on Eylea, at least one biosimilar company has disclosed that they're working already on the high-dose formulation. And so is it something you're interested in? Do you think it's even worse it? What is your kind of thinking about developing potentially a high dose version?

Question: Thibault Boutherin - Morgan Stanley - Analyst : Understood. Okay. And maybe in the time we have left, last question on biosimilar interchangeability in the US. That's something that has been a debate before. And you have clearly proven with Humira that you don't need interchangeability status to be successful, that's been clear. But that being said, when Cigna did their private label deal, they clearly mentioned interchangeability as one of the key reasons why it choose by our partners. So how you're thinking about this going forward? Is it something that you could work on for future biosimilars? Or do you think it's still not that relevant in the US?

Question: Thibault Boutherin - Morgan Stanley - Analyst : That's very, very helpful. And we're coming up to the end of the time. So thank you very much for taking the time today and be with us. We appreciate you.