Prepared remarks
Good afternoon, and welcome to the Novartis Q2 2026 results release conference call and live webcast. Please note that during the presentation, all participants will be in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions by pressing star one and one at any time during the conference. Please limit yourself to one question and return to the queue for any follow-ups. 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 Mr. Nigel Trotman, Head of Business Planning, Analysis and Digital Finance. Please go ahead, sir.
Thank you, Sharon. Good morning and good afternoon, welcome everyone to our Q2 2026 conference 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 different 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 filed with and furnished to the U.S. Securities and Exchange Commission. Before we get started, as a reminder, please kindly limit yourselves to one question at a time and we will cycle through the queue as needed. With that, I will hand over to Vas.
Thank you, Nigel. Thanks everyone for joining today's conference call. Moving to slide four. As you saw in the results we released earlier today, Novartis delivered strong performance across our priority brands and launches while advancing the pipeline, allowing us to return to growth in the second quarter. The business grew 1% in constant currencies in USD, we had flat core operating income at $5.9 billion. Mukul will go through the numbers in more detail later on in the call, we are reaffirming our full year guidance for 2026. We also had some important pipeline highlights, which I will talk about more during the course of the conference call, including updated KISQALI OS data, the del-brax biomarker data in FSHD, as well as some other regulatory milestones we were able to deliver over the course of the quarter. Moving to slide five. Our growth drivers continued a strong trajectory in quarter two. They were up 36% in constant currencies. Some of the highlights include strong performance from KISQALI, Cosentyx, Scemblix, solid performance from PLUVICTO, and strong performance as well from LEQVIO. Overall taken together, these growth drivers are performing strongly. We believe that gives us momentum going into the second half of the year as we now move beyond the Entresto patent expiry and set us up well to deliver on our midterm growth guidance. Moving to slide six. KISQALI was up 43% in constant currencies on the quarter. We outpaced the CDK4/6 market. We had strong performance in the U.S. and outside the U.S. In the U.S., we were up 39%, reaching over $1 billion in sales for the first time. We continued our metastatic breast cancer leadership with an increasing share in first line. We also sustained our early breast cancer, NBRX and TRX leadership with 58% of new patients now from our exclusive N0 and N1 nodal populations. We also continue to grow our total prescriber base up 16%, and we see future growth continuing to be driven by these exclusive KISQALI early breast cancer segments. Outside of the U.S., we were up 49% with continued metastatic leadership. Our growth was accelerating in our EBC launches. We are now approved in 76 countries and reimbursed in 42. As you can see in the chart in the case study in Germany, we have reached 79% EBC NBRX share. We are having similar performance in other key markets. Overall, we are pleased with the trajectory for KISQALI and remain confident in our $10 billion peak sales goal. Moving to slide seven. We are announcing today also updated six-year follow-up data, demonstrating that KISQALI showed clinically meaningful overall survival in that broadest at-risk early breast cancer population. That data will be presented at an upcoming congress. This is the six-year pre-specified landmark data for IDFS as well as for OS. The IDFS benefit continues over time and continues to strengthen the case for use in the broadest at-risk early breast cancer population. Safety remained consistent with the known profile of KISQALI. We believe this data underscores the value of dual inhibition with KISQALI and endocrine therapies across all subgroups. We will look forward to providing the full details of this data, as I mentioned, at an upcoming medical congress. Moving to slide eight. Kesimpta had another strong quarter up 32%, continuing to increase its share across our key markets. In the U.S., we were up 32% in quarter two, increasing our TRX share in both B-cell and MS markets. Importantly, we are growing our NBRX share ahead of our competitors in the first line and first switch segments, which are our target segments for this medicine. Outside of the U.S., also very good performance. We are seeing strong growth in Europe, as well as sustained NBRX growth in our top international markets. We see a continued opportunity in these international markets given that two-thirds of patients remain treated with older therapies, not on B-cell therapies. This is a clear opportunity for expansion over time. We also continue to progress our next generation evidence and continue the life cycle management for Kesimpta. Our ongoing phase III with a once every two month dose Kesimpta for maintenance dosing is on track for a 2027 readout. Moving to slide nine, PLUVICTO grew 43%, and this is driven primarily by our PSMA-positive population and the pre-taxane mCRPC. We also see now acceleration outside of the U.S. In the U.S., pre-taxane is now driving over 70% of new patients. We continue to focus on use after the first ARPI. This is our largest segment, and we believe we now will have the opportunity to drive further growth given that the NCCN guidelines have been updated to remove routine use of a second ARPI in this setting. We continue to expand our sites, over 880 sites now providing PLUVICTO, and a lot of our focus now is getting additional depth in those sites, especially as we prepare now for the HSPC launch. Outside of the U.S., strong growth, 83% growth in new patients with accelerating adoption in Europe and launch momentum in Japan and China. The number of sites now that are providing RLT outside of the U.S. is over 650. This sets us up well as well for our future RLT pipeline, where we're excited to continue to progress beyond PLUVICTO and Lunafara, hopefully into additional cancer types in the coming years. The next wave of growth for PLUVICTO will be the expected approval in quarter three in HSPC. This will increase the eligible patient pool by 75%, give us a strong foundation for further growth. Two-thirds of the patients in the PSMA-addition population are with healthcare providers that currently use PLUVICTO today or with established referral patterns, so we think we have a strong base for rapid adoption. We continue to progress the pipeline. We presented promising launch results for our Actinium PSMA in mCRPC. This medicine is now being studied in the post-PLUVICTO setting, in the post-chemo setting, and as well in the first-line mCRPC setting in combination with ARPI. An opportunity here to life-cycle manage PLUVICTO for the longer term. Moving to slide 10, LEQVIO had a strong quarter, growing 59%, driven by strong demand we saw across the globe. In the U.S., we were up 55% in quarter two. We outpaced the advanced lipid-lowering market. This was driven by monthly TRX growth of 49%, demonstrating LEQVIO's differentiated profile, strong persistency. The demand is being driven with increasing depth in the priority health systems that we're targeting. The most important segment for us remains the Medicare Part B segment, where we see 23.3% share. That's up 3.6% year to date, we see an opportunity for continued expansion. I think even with oral PCSK9s launching, our opportunity remains for driving strong growth in the segment that wants infrequently administered, physician-administered medicines for lipid lowering in the United States, we see this as an attractive and growing segment that supports our peak sales potential in the U.S. and beyond. Outside of the U.S., NRDL inclusion is unlocking significant demand. You saw that in quarter one and continues in quarter two. Our market share has doubled now versus the pre-NRDL share we were previously seeing. We also see sustained growth in Europe and Japan. Overall, pleased with our performance. We keep generating additional data for LEQVIO. Three real-world studies demonstrated that inclisiran, LEQVIO, improves adherence and persistence compared to other advanced lipid-lowering therapies. We also have the V-CHALLENGE head-to-head study of inclisiran versus bempedoic acid to prevent MACE. Lastly, we're on track as well for our two outcome studies to read out in 2027 for LEQVIO. Moving to slide 11, Scemblix had a very strong quarter, 89% constant currency growth driven by both U.S. and ex-U.S. performance. In the U.S., we had 93% growth in the quarter. This is driven by sustained leadership across all lines. Importantly, we now expect to reach first-line NBRX leadership share in the second half of the year. You can see steady improvements in that first-line NBRX share. Outside of the U.S., we're primarily still driven by the third line and beyond performance with 75% NBRX share across our key markets. Importantly for future growth, we're seeing early line adoption now starting to pick up. We are now approved in 65 countries outside of the U.S. In Japan, we've already reached first-line NBRX leadership, as you can see in the lower chart. In Germany, our early NBRX first-line share is already up to 15%. We're very excited for the trajectory of Scemblix and to continue to be a growth driver long into the future. With Cosentyx, we had a solid quarter, 10% constant currency growth, in part driven by some one-timers with still strong underlying growth. When you look at in the U.S., we were up 16%. You can see that in the NHS, we're steady in our NBRX share in the high 40s, and we expect that to continue. We see steady demand growth in HS and IV. Underlying growth in the U.S. is around the mid-single digits as we've guided to in the past. Outside of the U.S., continued solid growth in Europe. We do see additional challenges in China with more competition, but we're able to manage that to maintain the overall global performance of the brand. We're excited by the phase III REPLENISH-PMR polymyalgia rheumatica data, which we recently published and presented at EULAR. It showed very strong data with sustained remission at 52 weeks that was twice as high in patients treated with Cosentyx versus placebo. We're anticipating FDA approval for that indication in the second half and remain on track for the $8 billion peak sales guidance that we've previously provided. Moving to slide 13, Rhapsido continues its strong launch trajectory with phase III CIndU data now available to support our broader potential in urticaria. First starting with the CSU launch, we see continued solid U.S. uptake, over 4,000 prescribers, over 10,000 patients treated. Sixty percent of those patients are treated in the first-line setting. We see steady expansion in our patient access. We have two of the three major PBMs now covering remibrutinib, Rhapsido, with prior authorization to label. In the second half, we expect steady expansion in that access with an effective bridge and sample program in place. We don't expect an inflection per se. We think this will be steady expansion. We want to ensure that we're disciplined in how we approach getting reimbursement given the multiple indications we hope to secure for remibrutinib over time. Outside of the U.S., we see good traction in China. Launches are ongoing across Europe and the Middle East, and we'll see further expansion in the second half post the EMEA, Japan, and Swiss approvals. Importantly, in chronic inducible urticaria, we presented our REMIND data supporting remibrutinib as the first targeted therapy for chronic inducible urticaria. We had early and broad efficacy with onset as early as week 2 in the two additional largest subtypes, consistent 12-week responses versus placebo. We're on track for the FDA approval in SD, which is the most common CIndU subtype, two-thirds of CIndU patients. We'll have global filings across all three subtypes later this year. As a reminder, we estimate in the U.S. there's about 100,000 CIndU patients that are uncontrolled with antihistamines with no other treatment options. This is a significant expansion in the population that can be helped by Rhapsido. Turning to slide 14, we also presented some updated data on ianalumab showing the favorable ESSDAI benefits of the medicine in longer-term follow-up, and we remain on track for a U.S. launch in Sjögren's disease in the second half. You can see on the left-hand side of this chart in our pooled NEPTUNUS data, you can see the consistent benefits in ESSDAI, statistically significant versus the placebo arm across both studies when pooled, demonstrating the benefits we see with the medicine. We presented a 108-week long-term extension data, which showed that we can maintain the benefits of ianalumab over time, and it also was supported by clinically meaningful improvements for the placebo crossover group when crossing over onto the active arm. Throughout all of these long-term follow-ups, we see a favorable safety profile, no increase in adverse events. This supports ianalumab's multi-blockbuster potential. We're on track for the ITP first-line readout in the second half of 2026, the SLE and lupus nephritis phase III readouts in 2027, and the systemic sclerosis phase II readout as well in 2027. Turning to slide 15, I wanted to provide an update on two of the acquired programs from Avidity. First was del-zota. We achieved our first FDA submission for the therapeutic use of an antibody-oligonucleotide conjugate. That FDA submission is for accelerated approval in the DMD exon 44 skipping, using dystrophin as a surrogate biomarker. We previously received FDA breakthrough therapy designation for this. The submission package is based on the outstanding data that we had in the EXPLORE44 study as well as long-term follow-up. We expect the first launch here in the first half of 2027 with the ongoing phase III studies ongoing. We have multiple follow-on programs now targeting additional exons that we'll be bringing forward as well. We're quite excited to leverage this technology to take on DMD across multiple subtypes. With respect to the del-brax data, we read out in the quarter as well that the phase I/II study at the target dose that we are taking into phase III studies met its primary and key secondary biomarker endpoints. As a reminder, this is a study that looked at KHDC1L and creatine kinase reductions in the plasma. KHDC1L is a protein that's downstream and believed to be regulated by DUX4 being the gene that's impacted in FSHD. Having these plasma biomarkers indicates that we have strong target engagement and muscle damage reduction as indicated by the statistically significant creatine kinase reductions that we saw. Our base case remains a submission in 2028, but based on the data that we've seen in the biomarkers and ongoing work we're currently conducting to hopefully correlate the biomarkers to DUX4 as well as clinical improvements in these patients, we plan to engage FDA and other regulatory authorities in the coming months. We'll ultimately provide an update if those regulatory authorities support our ability to file this medicine based on this data. Moving to slide 16. We're on track for a busy second half. We already had four readouts in the first half. In the second half, we expect with pelacarsen, remibrutinib, and del-desiran readouts in the coming months, before the end of the year readouts for ianalumab, Rhapsido, and HS, as well as additional readouts for phase II programs, QCZ484, as well as VHB937 in ALS. Exciting, I think second half coming up. Solid first half of the year and looking forward to continued progress in the months ahead. With that, I'll hand it over to Mukul.
Thank you very much, Vas, and good morning, good afternoon, everyone on the call. I will now share more details on the financials for the second quarter. As a reminder, my comments as always refer to growth rates in constant currencies, unless otherwise noted. Turning to slide 18. In the second quarter, net sales grew 1% to $14.4 billion, while core operating income was flat at $5.9 billion. This is as our sales growth drivers and continued productivity offset the impact of the significant generic erosion that we saw in the first half of this year. The strong performance of priority brands supported a return to net sales growth in quarter two faster than we initially expected. The second quarter core operating income margin was at 41.2% of net sales. This was a decline of 70 basis points versus previous year, mainly due to the incremental Avidity cost, with a lower gross margin being offset by productivity gains. It's worth noting that Q2 is generally a stronger margin quarter when we look at the phasing across the whole year. Free cash flow for the second quarter was at $5.6 billion, which is in line with expectations. Worth to note that Q2 results were also positively impacted by some one-time phasing items, which will reverse in the second half. Together, these items positively impacted net sales by approximately one percentage point and core operating income by about five percentage points. For the first half of the year, net sales declined 2%, core operating income declined 7%, and the core operating margin declined 2.3 percentage points to 39.4%. Free cash flow for the first half of the year stood at $8.9 billion. Turning to slide 19. We remain committed to our shareholder-friendly capital allocation strategy that has served us well as a company, balancing disciplined growth investments in the business with meaningful capital distribution. In Q2, we continued to execute multiple bolt-on M&A and BD transactions, including the completion of the Pikavation and Excellergy acquisitions. At the same time, we continued to invest in our internal R&D pipeline. On capital distribution during the first half of this year, we paid out $9.1 billion in dividends and repurchased $2.1 billion of shares under the current up to $10 billion share buyback program. There is still $5.6 billion to be executed in this program, and we target to complete the program by end of 2027, as previously indicated. Slide 20, please. With this, we are reaffirming our full-year 2026 guidance. We continue to expect net sales to grow low single digits and core operating income to decline low single digits for the full year. For the full year 2026, we also continue to expect core net financial results to be around $1.7 billion and core tax rate to be around 16.5%, both in line with our guidance from beginning of the year. Moving to slide 21. As I shared previously, H1 net sales declined 2%, with the strong momentum of growth drivers delivering performance at the upper end of sales guidance from the start of the year. Turning to H2, we continue to expect net sales to grow mid-single digits as we move beyond the impact of U.S. generic erosion. However, it's worth pointing out that there will be a notable difference in the sales growth rates between the two quarters, Q3 and Q4. This is because we still have about $800 million of U.S. Entresto in the sales in previous year quarter three base. We expect H2 core operating income to grow mid to high single digits with continued investment in our growth drivers as well as our R&D pipeline. Slide 22. Finally, if exchange rates remain at mid-July levels, we expect a positive one percentage point impact on full-year net sales and a positive one percentage point impact on core operating income. As a reminder, we publish updated FX estimates monthly on our website. That concludes my remarks. I will hand it back to Vas.
Terrific. Thanks, Mukul. In closing, we delivered our first half performance at the upper end of guidance, with Q2 returning to sales growth. We remain on track to deliver our full-year guidance. We're progressing our indications for Rhapsido, ianalumab, both potential multi-blockbuster assets. We're focused on our second half pivotal readouts that remain on track that would allow us to raise our mid to long-term growth outlook. With that, we'll open it up to questions.
Questions and answers
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. Please limit yourself to one question and return to the queue for any follow-ups. To withdraw your question, please press star one and one again. We will now take the first question. Your first question today comes from the line of Peter Verdult from BNP Paribas. Please go ahead.
Thanks. Peter Verdult, BNP Paribas. Realize there's not much incremental you can say regarding upcoming phase III readouts, and I heard your comments on del-brax. With that in mind, can we focus on the accelerated approval potential for votoplam in Huntington's? I know phase III planning underway, but do you have any visibility or ballpark timelines you can give us for when FDA might make a decision, and whether you can file early on the phase II data generated thus far? Thank you.
Thanks, Peter. We're planning, in the process of engaging with the FDA on that phase II data. At this point, our base case remains that we would need to do the phase III study as designed. No change on that expectation. I don't have a specific timeline. I would expect it to happen in the second half to provide more clarity. I would also note that we continue to follow these phase II patients for a longer duration as well, which could provide us additional data. We do note the FDA's recent decisions or recent guidances from some other therapies that could be available for Huntington's disease, which certainly shows the FDA's openness if the data ultimately is compelling. We certainly want to have that engagement, but I wouldn't change our base case at this point that a phase III study would be required.
Thank you. Our next question comes from the line of Sachin Jain from Bank of America. Please go ahead.
Hi there. Thanks for taking my question. I'm going to ask a question that probably is hyped, given there's a lot of focus, and it's a kind of catchall question. Given the change from your communication in and out of ianalumab Sjögren's on 'clinically meaningful,' just wondering whether you've decided internally how you define clinically meaningful for three reads investors most focus on, so pelacarsen, remibrutinib in MS, DM1. Maybe just give a catch. Is it fair to think that any statistically significant benefit is clinically meaningful in your eyes for different reasons for each asset, and any changes in level of confidence on each? Thanks a lot, Vas.
Thanks, Sachin. No change from previous comments. We don't have any additional details I can provide on any of the three beyond what we've said. In terms of how we will read them out, we always focus on the primary endpoint and statistical significance, and reaching the goal and the primary endpoint in the study. That will guide how we communicate and then as appropriate, additional secondary endpoints, as well if appropriate to comment on them. For pelacarsen, as we've guided in the past, we've powered the study for the kind of 13%–15% cardiovascular relative risk reduction benefit, and are certainly hopeful to see that level or higher. If we can see higher, obviously we'd prefer that, but I think that's how we think about it. In MS, we'll certainly be looking at not only the ARR reduction, but also the impact on disability. Clearly on DM1, in addition to vHOT, we also want to see some of the secondary endpoints and how they perform as well. I think the reality is we have to be thoughtful because we want to be able to preserve the ability to present this data at high-profile congresses in the future. We'll navigate that best we can, making sure investors have clarity on what we believe the path forward is, but still preserving that ability to present the data as well.
Can I just take one follow-on, Vas? You have commented in that answer to the powering of pelacarsen. I do not think you have ever given us any color on how remibrutinib in MS or DM1 are powered. Could you comment?
I do not think we have for either of those. I think for MS, you all know well how studies that are head-to-head against Aubagio have been powered in the past. I think you have that as background, and I do not think there is more that I could provide there. On DM1, the primary endpoint is vHOT, and then we have the various secondary endpoints that we have been discussing with the agency. I do not think we could provide any further clarity on that one at the moment.
Thank you.
Thank you. Our next question comes from the line of Florent Cespedes from ODDO BHF. Please go ahead.
Good afternoon. Thank you very much for taking my question. Mukul, could you give us a little bit more color about the one-off events which impacted the Q2 top line and operating profit margin? Some color on that point would be great. Thank you.
Thank you very much, Florent, for the question. The one-time phasing I mentioned: we have a one percentage point impact on top line. This is primarily inventory-related changes that we saw across the whole world. This would simply move from Q2 to Q3 from an inventory perspective. On the cost side, on the R&D phasing side, we have a couple of clinical trial-related costs that were planned for Q2 and now will move to Q3. If we put both of them together, on the top line it's an impact of 1%, and on the bottom line, the cumulative impact of the top line over-delivery added or compounded by the cost phasing leads to a 5% impact on the core operating income.
It's very clear. Thanks, Mukul.
Thank you. Your next question comes from the line of Colin White from UBS. Please go ahead.
Hi, Colin White from UBS here. Thanks for taking my question. Just to go back to remibrutinib and MS. Could you recap specifically what gives you confidence that remibrutinib can improve upon the annualized relapse rate of about 0.1 Aubagio has achieved in recent RMS studies?
For us, we do not have phase II data in MS, so our expectations are informed by other BTK inhibitors' performance in similar studies. We continue to monitor blinded rates for safety and relapse rates, and the data we've seen so far indicates the study is performing as expected in terms of differences between the active and control arms. Until we read out the trial, we cannot provide more detail. In addition to annualized relapse rate and MRI performance, how remibrutinib affects disability progression will be important to understand whether remibrutinib could be used post B-cell antibodies or in line with them. This will be a data-driven assessment once the study reads out.
Thank you.
Thank you. Your next question comes from the line of Richard Vosser from JPMorgan. Please go ahead.
Hi. Thanks for taking my question. Just another question on pelacarsen. We've seen some other cardiovascular trials recently suffer from high levels of drop-ins of existing therapies. Wondering how you've controlled for that in the HORIZON trial. Thinking about PCSK9s, but also GLP-1s and SGLT2s, given the 25% of patients that are diabetics. How should we think about that level of use and potentially the impact on any benefits of pelacarsen? Thanks so much.
Thanks, Richard. It is important to know we study pelacarsen on top of optimized background lipid-lowering therapy. Our current estimate is that the number of patients who were on incretin-based therapies in the study is less than 10%; we estimate it to be around 6%. We don't believe that if there was any effect from those medicines in the setting, that it would impact the results here materially. When we look at it overall, background therapy use is more or less as we planned in terms of background therapy. We don't think that will be a major swing factor, at least based on what we can see so far.
Okay. It was just on PCSK9s, just one quick follow-up. Was that controlled as well? I know it was 11% at the start, but does that creep up during the trial? Anything you can say?
With respect to PCSK9s, they have been in line with what we saw earlier in the study. I believe they have not been a source of concern based on the data we've observed to date, but we can follow up with more details if needed.
Brilliant. Thank you very much, Vas.
Thank you. Your next question comes from the line of Michael Leuchten from Jefferies. Please go ahead.
Thank you. Question for Mukul, please. The guidance for mid to high single-digit core EBIT growth in the second half seems to imply more cost control, especially taking into consideration the Avidity R&D phasing that you just mentioned. Can you talk about the P&L dynamics? Where are you containing costs, and is that something that we need to take into consideration as we think about 2027, or is that sort of tucking in expenses that will not recur? Thank you.
Thanks, Michael. Two points on P&L dynamics. First, H1 to H2 we always see H2 as a higher spend half; Q2 is typically our strongest margin quarter, so that phasing is normal. Second, from a productivity perspective, we've continued to focus on manufacturing and operations productivity to offset pressure on gross margin due to portfolio shifts. R&D will continue to be funded based on pipeline needs, including incremental investments from Avidity and some other assets we added last year. SG&A as a percentage of sales is another area where we are focused on productivity, in particular on third-party spend, which is upwards of $10 billion for the company. In Q2, while gross margin was pressured, SG&A as a percentage of sales was positive and helped negate the gross margin impact. We will continue to pursue these productivity measures into the second half.
Thank you.
Thank you. Your next question comes from the line of James Quigley from Goldman Sachs. Please go ahead.
Great. Thank you for my questions. I have one on deals and M&A. Vas, you were quoted that you'd consider larger deals again. This is a bit of a transition in commentary over the years. A few years back, it was no big deals, then it was focused on bolt-ons, then we had Avidity, which is later stage and a bit larger. What's changed either internally at Novartis or externally that's driven openness to larger deals? What could a bigger deal look like in terms of strategic fit, given your therapeutic areas and technology set? Thank you.
Thanks, James. There's no change in our M&A strategy. We've been disciplined and consistent: focus on steady deals in the sub-$2 billion range and, selectively, larger deals when there is a compelling asset that fits our platform strategy or therapeutic area strategy, or both. Avidity fit both. We don't need to do anything larger than that; we have confidence in our internal portfolio and R&D engine. We will continue to supplement innovation with the right external deals that fit our strategic criteria. You can expect a continuation of the approach you've seen in recent years.
Great. Thank you.
Thank you. Your next question comes from the line of Simon Baker from Rothschild & Co. Please go ahead.
Thank you for taking my question. One on the pipeline, if I may please. I wonder if you could just update us on your thoughts on the confidence and potential for abelacimab. I see that it is still showing as a 2027 readout milestone in the slide deck. ClinicalTrials.gov is now showing a late December 2027 primary completion. Is that still a 2027 outcome or is there potential for slippage into 2028? Thanks so much.
Thanks, Simon. We remain excited about abelacimab. It is a monthly monoclonal antibody targeting factor XI with strong PK/PD characteristics. Competitor data suggests factor XI can deliver anticoagulation effectively without increased bleeding risk, aligned with genetic evidence. We have upsized the study given the event rates observed, and we are on track for a readout before the end of the year. To be clear, that readout will be at 75% of events, and then the study would continue if it does not meet stopping criteria to finish the full number of events in 2028. We are also evaluating additional studies in secondary stroke prevention and other indications. We remain optimistic about the asset's potential if the trials read out positive.
Great. Thanks so much.
Thank you. Your next question comes from the line of Thibault Boutherin from Morgan Stanley. Please go ahead.
Thank you. Just a question on Itvisma. Now that you have launched the drug and we start to see the sales coming in, do you have any more visibility on what you expect to be the shape of the bulge of sales from this therapy over the next few years? If you have any indication on when you expect the sales to peak, is it next year? Is it 2028? On the magnitude, I think in the past, Novartis was talking about multi-billion dollars for this asset. Just if you could comment on your confidence on the peak sales.
Thanks, Thibault. No change. We recently got the European Commission approval. With gene therapy launches, as we've learned with Zolgensma, it takes time to secure reimbursement. Once reimbursement is in place, we typically see a rapid ramp. We expect the ramp for Itvisma to occur over a three-year period as additional countries come online. As with Zolgensma, we expect ex-U.S. to be larger than the U.S. This first year will be primarily focused on securing reimbursement. From a peak sales potential, our view is that Itvisma could contribute around $2 billion in the longer term, and combined with Zolgensma, an overall package in the $3 billion range.
Thank you.
Thank you. Your next question comes from the line of Steve Scala from TD Cowen. Please go ahead.
Thank you so much. Vas, you called out Cosentyx in non-U.S. markets as a growth opportunity. Kesimpta had leadership in nine out of 10 markets in Q4 and Q1, and eight out of 10 markets in Q2. One difference appears to have been China. I'm curious what happened with Kesimpta in China in Q2. Thank you.
Steve, there's no specific change in China that we're aware of. We did see a drop-off in Italy from nine out of ten to eight out of ten markets. Kesimpta continues to perform well in Asia and is a market leader in Japan. It's worth noting that MS prevalence in Asia is lower than in other regions, so overall sales potential is smaller. We see a significant opportunity outside the U.S. because B-cell therapies are still underpenetrated. I don't have the detailed reasons for the country-level fluctuation in Italy; it's likely market-share dynamics among competitors.
Thank you.
Thank you. Your next question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.
Thanks for the question. Vas, given the substantial valuation increases that we've seen across biotech in the last year, how should we be thinking about the business development opportunities going forward? You talked about BD focus being no change, but valuations have changed. How are you thinking about risk and the kinds of deals you pursue? Also a quick question on pelacarsen: it's a composite endpoint, and my recollection was we saw a teen-percent benefit with SGLT2s but an outsized benefit in heart failure populations on cardiovascular death. How might a similar outcome play out for pelacarsen? Do you see that as a potential outcome for pelacarsen as the data reads out in the second half of this year?
Thanks, Seamus. On valuations: the prices for early-stage assets have increased substantially; we've seen upfronts over $1 billion for assets with limited clinical data. That means we need higher conviction in the science and clear differentiation to justify deals at those valuations. In our recent deals—Pikavation, Excellergy, Myricx—we focused on differentiated science and clear strategic fits. We'll continue to access external innovation but selectively and with discipline. On pelacarsen: there is an element of the MACE endpoint versus CV death. Lipoprotein(a) is associated with higher rates of sudden cardiac death, particularly in younger patients, so theoretically CV death could be an important component of benefit. We will have to review the data carefully once the database is locked and the results are available.
Thank you. Your next question comes from the line of Kerry Holford from Berenberg. Please go ahead.
Thank you very much. Question from me on KISQALI, just on the IP, the extension that you've been granted related to pediatric exclusivity. Can you confirm now that that composition of matter expiry is May 2032? In the context of your earlier settlements with generic players, is that when we should now be assuming generic market entry?
Thanks for the question. Our guidance remains a Q3 2031 loss of exclusivity for KISQALI with pediatric exclusivity included; that guidance is inclusive of the settlements we have with generic manufacturers. Also, just a quick note on Cosentyx in China: we have a 70% market share and are market leader there.
Thank you. Your next question comes from the line of Emmanuel Papadakis from Deutsche Bank. Please go ahead.
Thank you for taking the question. Maybe I'll take one on ianalumab and Sjögren's, given we must be relatively late in the regulatory review process. Could you perhaps give us an update on how that's proceeding? Is everything on track? Then on commercial readiness, some sense of expectations for magnitude of initial access, breadth of willingness to prescribe, etc., could you give a sense of those parameters? Should we be looking at something like a classic immunology launch like Cosentyx? Or are there other analogs we should perhaps bear in mind? Thank you.
Thanks, Emmanuel. As far as we know, there's no advisory committee planned for ianalumab. We've had mid-cycle review meetings and are providing the FDA with the information they're requesting. Everything is on track for a Q3 approval in the U.S. On market uptake, because there's no approved therapy in Sjögren's, we expect relatively broad access, though it will take time for the environment to open up. The drug's clean safety profile should lower the bar for physicians to try it in appropriate patients. Sjögren's is heterogeneous; some patients will be super responders and others less so. For patients who respond, we expect them to stay on therapy; others may cycle off. The clean safety profile lowers the hurdle for prescribing. We continue to believe standalone in Sjögren's ianalumab has multi-billion dollar potential. There are additional indications in hematology and immunology that we're pursuing as well.
Thank you.
Thank you. Your next question comes from the line of Graham Parry from Citigroup. Please go ahead.
Great. Thanks for taking my questions. On pelacarsen, a quick follow-up: you clarified the 13%–15% is what the trial is minimally powered to detect. I think the design paper says it's 20% on all-comers. Would you view that 13%–15% as a clinically meaningful result? Also on remibrutinib MS, could you comment on your confidence in achieving disability progression benefit tied to brain penetration and action at microglia, compared to other BTK inhibitors which did not show that with statistical significance in their phase III?
You're correct: mid-teens (13%–15%) would be a positive outcome and is the benchmark we've used. For some dosing cohorts the study was powered for larger effects, but mid-teens would be considered clinically meaningful, particularly in a population with limited other options. On remibrutinib and disability progression, we cannot predict disability outcomes prior to the readout. We are hopeful given our molecule's potency and selectivity at the target, and we believe that could translate into effects on disability, potentially bringing remibrutinib more in line with antibody-based B-cell therapies. However, we cannot objectively assess that until the data are available.
Thank you.
Thank you. Your next question comes from the line of Rajesh Kumar from HSBC. Please go ahead.
One question for Mukul. Thanks for clarifying what sort of cost cut is flowing forward. Just if we are thinking through the P&L on margins, the gross margin level we have now sort of captures most of the interest or negative impact. Should we expect this to be the level from which you can build based on when you get growth from younger products in the portfolio while you get profit growth through SG&A management and R&D phasing? In other words, from a gross margin trough point, should we be thinking about now or later in the year?
Thanks, Rajesh. From a modeling perspective, I would take the year-to-date gross margin as a reasonable indicator for the year. End of last year, Q3 and Q4 averaged to a gross margin point that is a useful benchmark. Gross margin will vary quarter to quarter based on product mix, but for modeling the year, the year-to-date gross margin is a good point of reference.
Thank you very much.
As a reminder, if you wish to ask a question, please press star one and one on your telephone and wait for your name to be announced. Please limit yourself to one question and return to the queue for any follow-ups. We will now go to the next question. The next question comes from the line of Florent Cespedes from ODDO BHF. Please go ahead.
Good afternoon. Thank you very much for taking my follow-up question. A question on the cardio business. Assuming positive results from pelacarsen later this year and positive LEQVIO outcome trials next year, will you have to use a new sales force or will you use the existing sales force for LEQVIO and beyond? Some color also on the budget going forward: will you have to invest massively in marketing to promote the new clinical results?
Thanks, Florent. For pelacarsen, assuming a positive outcome, we expect to leverage our existing global LEQVIO field force, with usual adjustments as needed. Investments required for a pelacarsen launch—including disease awareness to increase Lp(a) testing—are factored into our guidance. It will take time to increase biomarker testing rates, but we believe a compelling efficacy profile will motivate testing and uptake. Other cardiovascular programs, like abelacimab or the anti-IL-6 asset, might require additional field force investments targeted to different physician segments. We'll provide more guidance as we have more clarity from readouts.
Good. Thank you very much, Vas.
Thank you. Your next question comes from the line of Colin White from UBS. Please go ahead.
Hi, Colin White from UBS. Thanks for taking my question. Just on the stocking in the quarter, we understand the 1% of sales beat was from stocking. Cosentyx explained some of this, but not all of it. Are you able to provide any color on what other drugs may have experienced stocking?
Colin, this was not attributable to a particular brand. It was inventory-related changes across multiple geographies rather than a single product-specific stocking event.
To add color, this inventory phasing was related to the implementation of our new SAP system. When we roll that out in multiple geographies, we do sometimes need to adjust stocking levels for the cutover to the new system. That is the driver and why it is not associated with one brand in particular.
Thanks.
Thank you. Your next question comes from the line of Michael Leuchten from Jefferies. Please go ahead.
Thank you for the follow-up. Vas, interested in your Scemblix comment about the second half aiming for NBRX leadership in the U.S. Is that just natural progression of the dynamics that we are seeing, or is there a pivot point that would inflect that further?
Thanks, Michael. It's primarily the momentum we're seeing. Scemblix has a strong access position and an attractive profile; because CML is a rare disease with limited new patients per year, market-share moves can be driven by relatively few patients, so the progression can seem stepwise. The strong safety profile and known efficacy are driving momentum, which gives us confidence we'll reach first-line NBRX leadership in the U.S. Ex-U.S., we are moving from third-line toward earlier-line adoption, and payers appear increasingly receptive to reimbursing a superior frontline medicine despite available generics.
Thank you. Your next question comes from the line of James Quigley from Goldman Sachs. Please go ahead.
Hello. Thank you for taking a follow-up. Earlier this year, Lutathera generics were cleared to launch by the courts in Delaware. How should we think about potential launches for future generic RLTs? We don't have much experience here when thinking about generic impacts for RLTs. How are you thinking the markets could react, or how could this play out if and when we see generic RLTs launching?
Thanks, James. As far as we know, neither of the two companies has received FDA approval yet—one pathway is a 505(b)(2) and one is an abbreviated pathway. We continue to believe regulators should apply a high threshold to ensure equivalent radiation dose delivery to tumor versus the originator. RLTs will likely behave differently from small molecules or even biologics due to logistical complexity and the expectation of consistent, on-time delivery to clinics. Our extensive supply network and ability to deliver reliably mitigate generic risk. We also continue to invest in follow-on RLTs for additional targets like GRPR and improving treatments for neuroendocrine tumors, which will support future differentiation.
Great. Thank you.
Thank you. Your next question comes from the line of Urban Fritsche from ZKB. Please go ahead.
Yes. Thanks a lot for taking my question. A question on LEQVIO in China. Could you share some details on how the momentum is developing and what would be needed to really have upside to your current guidance of about $1 billion in China?
Thank you, Urban. With LEQVIO in China, we initially saw very strong uptake in the private self-pay segment, indicating high demand in secondary and primary prevention settings. After NRDL listing, we see strong demand in hospital segments and traditional channels as well. Continued steady growth, expansion into more hospitals and regions, and adding additional siRNA cardiovascular products can drive upside. We believe LEQVIO could become one of our largest medicines in China. The broader adoption of infrequently administered therapies with clean safety profiles suggests strong long-term opportunity for cardiovascular siRNAs in China.
Thank you.
Thank you. Your next question comes from the line of Steve Scala from TD Cowen. Please go ahead.
Thank you for the follow-up. Were there any surprises in the label or pricing of the oral PCSK9 inhibitor recently approved that alter Novartis's view of the commercial potential for LEQVIO? Any thoughts on how limiting the fasting requirement may ultimately be?
Thanks, Steve. There were no surprises for us, other than the reference to PCSK9 outcome trials in the label, which we are still trying to understand. We believe there is a significant remaining unmet need for patients not at lipid goals: the advanced lipid-lowering market is large. There will be competition between orals and injectable PCSK9s, but LEQVIO's positioning as an infrequently administered, physician-administered option, and our lack of exposure to a gross-to-net pricing battle between monoclonal antibodies and orals, helps preserve our commercial opportunity. On the fasting requirement for the oral PCSK9, it remains to be seen how limiting that will be in practice; patients and clinicians may manage it, but other competitors without such requirements could have advantages in some settings. Outside the U.S., particularly in Asia, we see strong appetite for siRNAs, which supports our longer-term confidence.
Thank you.
Thank you. Your next question comes from the line of Sachin Jain from Bank of America. Please go ahead.
Hi, thanks for the follow-up. One on FSHD. In your introductory comments, you referenced ongoing analysis looking at correlating biomarkers for outcomes and that you would use that for the conversation with the regulator. Two linked questions: one, will you comment about the data when you have it? Two, what conversations have you had with the regulator around using that analysis to try and accelerate a biomarker-driven filing?
Yes, Sachin. Avidity previously interacted with the FDA on what would be needed in the phase I/II study to enable a filing. The FDA's interest is in understanding the linkage from DUX4 biology to circulating biomarkers such as KHDC1L, how that relates to creatine kinase changes, and ultimately how those biomarkers correlate with clinical measures of muscle function. We are analyzing biopsy and plasma data from the trial and integrating this information to discuss with regulators. The data we have gives us reason to have a constructive discussion with the FDA and other regulatory authorities, but we can't guarantee an outcome. Once we have the regulatory meeting, we will provide further guidance.
Very clear. Thank you.
We will now take our final question for today, the final question comes from the line of Peter Verdult from BNP Paribas. Please go ahead.
Yeah, thanks for the follow-up. Quick one to end for Mukul Mehta, just on Rhapsido. The IQVIA trends look great, and I heard your comments, Vas, earlier about not expecting an inflection, but can you help us at all by giving us a ballpark split between what is bridge versus paid prescriptions right now? Any ballpark numbers would be helpful. Thank you.
Mukul was the intended respondent, but I can take that. We're not providing detailed breakdowns of bridge versus paid prescriptions right now. What I will say is that the bridge activity is in line with what we've historically observed transitioning to paid scripts. We see strong demand in dermatology and growing demand in allergy. Once physicians use the medicine and see rapid symptom improvement, that supports continued use. We're being disciplined on gross-to-net terms because remibrutinib has potential across many indications, and early concessions are hard to recover later. Access should continue to improve sequentially across the year, positioning us for a strong 2027 and longer-term value.
Thank you.
Thank you. I will now hand the call back to you, Vas.
Absolutely. I just wanted to come back to Richard Vosser's question. We can confirm that the PCSK9 use was just modestly increased versus the 11% from the baseline population. Not a significant factor we expect in the studies. Thanks for that question, Richard. Thanks, everyone, for joining today's conference call. We'll look forward to keeping you up to speed as we have the readouts over the coming months. Of course, catching up with you in various settings in the meantime, and we look forward to a strong second half and wish you all a great summer break as well. Thank you.
Thank you. This concludes today's conference call. Thanks for participating. You may now disconnect.