Novartis AG Q1 FY2025 earnings call

• The quarter saw double-digit sales growth, 27% growth in core operating income, and a 400 basis points increase in core margin, with full-year guidance upgraded. - Innovation highlights: Pluvicto, Vanrafia, and Fabhalta obtained approvals in relevant indications; remibrutinib and OAV-101 gene therapy had positive progress. - Key brands showed strong performance: Kisqali grew strongly in the global breast cancer field with good performance at home and abroad; Kesimpta had steady growth in domestic and overseas markets; Leqvio is expected to be a blockbuster; Scemblix is expanding to earlier lines; Cosentyx and Entresto performed well in their respective fields; the renal portfolio performed well. - Continued investment in R&D and capital allocation, such as investment in the US manufacturing and R&D footprint, acquisition of Anthos Therapeutics, and shareholder return strategies.

Novartis delivered double-digit sales growth in Q1 2025. Core operating income was up 27%, and core margin reached 42.1% with a 400 basis points improvement. Key products showed strong performance: Kisqali grew 56% in constant currency, reflecting its leading position in breast cancer; Kesimpta grew 43% in constant currency, with robust growth in domestic and overseas markets; Pluvicto grew 21%, laying the foundation for the pre-tax population launch; Leqvio grew 72% and is on track to become a blockbuster; Scemblix established itself as a leader in the third line plus setting and is expanding to earlier lines; Cosentyx grew 18% with strong performance in core indications; Entresto grew 22% with robust overseas performance; the renal portfolio including Fabhalta and Vanrafia performed well; in innovation, Pluvicto, Vanrafia, and Fabhalta obtained approvals, remibrutinib and OAV-101 gene therapy had positive progress.

• Full-year sales expectations were upgraded, core operating income grew, core margin remained strong, and free cash flow performed well. - Maintained a shareholder-friendly capital allocation strategy, continuing to invest in R&D and capital expenditure, promoting M&A, and returning capital to shareholders, such as paying dividends and stock buybacks. - Expected high single-digit growth in annual sales, low double-digit growth in core operating income, and good core margin, considering exchange rate impacts and other factors.

• Tariff risks, needing to pay attention to its impact on the business, and the company is taking measures to manage the supply chain. - European drug pricing and innovation environment risks, with European drug prices declining and challenges in the innovation environment, the company put forward relevant suggestions to hope for improvement in the European Commission. - Litigation risks, such as patent litigation of Entresto may affect the listing time and sales expectations of the product. - Generic drug regulation and supply risks of radiopharmaceutical therapy, lacking clear regulatory standards, affecting the launch and market competition of generic drugs.

Q: Thoughts on tariffs and feedback on the EU innovation imbalance?

A: The company has considered tariff impacts in the guidance and is taking measures to manage the supply chain; regarding the EU innovation imbalance, relevant suggestions are put forward to hope that the European Commission can improve.

Q: Peak sales expectation for Pluvicto?

A: It is still over $5 billion, and the promotion of the PSMAfore population in the second half will drive performance, needing to expand the number of centers and improve utilization, etc.