Good morning and good afternoon, and welcome to the Novartis Q1 2024 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. 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 Ms. Sloan Simpson, Head of Investor Relations. Please go ahead, madam.

Thank you so much, operator. Good morning and good afternoon, everyone. Thank you for joining our first quarter 2024 earnings 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. And with that, I will hand across to Vas.

Thank you, Sloan. I'd like to open today's call by first thanking Samir Shah for his incredible tenure as our Head of Investor Relations for over a decade. We're grateful for all of his contributions. We look forward to his continued contributions in a new role at Novartis. And I want to welcome Sloan Simpson. I think Sloan will do an absolutely outstanding job serving all of you as our Head of Investor Relations. I've worked with her for many, many years. I think we're really pleased and grateful to have her on board. So, let's turn to the quarter. Novartis delivered a really strong start to the year with double-digit sales growth, core margin expansion, which enabled us to upgrade our guidance, and Harry will go through the guidance in more detail. Sales were up 11% in constant currencies, core operating income was up 22%, our core margin reached 38.4% as we steadily march to our goal of 40%-plus by 2027. In addition, we had a number of important innovation milestones in the quarter, which I'll go through over the course of the call. But a few I'd want to particularly highlight the Fabhalta positive opinion enabled us to launch Fabhalta in Europe. Scemblix first line readout, we think will be very important for a major medicine for the company. And we also had the updated PSMAfore OS results, which will enable us now to move forward with the filing of Pluvicto in the United States. Now, moving to Slide 5. Now, our growth in the quarter was broad based, and we had strong contributions from many of our key growth drivers, including Entresto, Kesimpta, Cosentyx, which had a very strong quarter, as well as Kisqali. I would also say geographically, our performance was broad based, with strong growth across U.S., Europe, China with very strong growth, and Japan. As you can see on the chart, the strong growth was indicated by 41% constant currency growth, and we expect this growth to continue over the course of the year, which is what gives us confidence to do the upgraded guidance that we've outlined this morning. Now, moving to Slide 6, and we'll walk through the brands one by one as we always do. First, with Entresto, we experienced significant growth, increasing by 36% in the first quarter. This growth was broad-based, both in the U.S. and internationally. In the U.S., our weekly prescriptions continue to hit new highs, while we saw 38% constant currency growth outside the U.S. The brand is maintaining its momentum, and we are well-positioned in guidelines in both the U.S. and Europe. We see further opportunities for penetration in global heart failure markets, particularly in hypertension in China and Japan. In Japan, we have patent protection extending into the early 2030s for this medication. For forecasting purposes, there is no change in our outlook for Entresto's loss of exclusivity, which we continue to project for mid-2025, as we actively defend our patents. In the EU, we continue to guide towards a regulatory decision point in November 2026, thanks to our pediatric extension. Now moving to Cosentyx, it grew by 25% in the quarter, returning to the strong growth levels we anticipate from this medication. This growth was driven by both our core indications and some robust launches. In the U.S., we saw a 25% increase in constant currency, while outside the U.S. it was up 24%. We were very competitive in our core areas, leading to improvements in market share for psoriasis and rheumatology indications in both the U.S. and Europe. We are now the leading originator biologic in the IL-17 class in Europe and China. Now, in terms of our new launches, we saw very strong performance in HS, hidradenitis suppurativa, where we have over 50% now NBRx share versus adalimumab in U.S. and Germany. When we compare our launch on a comparable basis to the adalimumab launch in this indication, we currently see ourselves at nearly three times the performance of that previous launch. I think really highlighting how strong the uptake for Cosentyx has been in this new indication. We also had very strong performance in the intravenous indication ahead of the J-code, which we expect in July. I think again that indicates there is strong interest in having an IV option for patients with Cosentyx in the rheumatology indications. So, we'll look forward to further acceleration in the back half of the year once we have that J-code in place. Now, moving to Slide 8, Kesimpta delivered 66% growth on the quarter, and this was again global U.S. and ex U.S. driven. We have over 100,000 patients treated worldwide on the medicine and the majority of these patients are either naive or first switch, which reflects the strategy we have for this brand. In the U.S., we saw a very strong demand-driven growth with NBRx volume at plus-26% versus prior quarter. And one of our key priorities now in the U.S. is to increase our B-cell market share over the coming quarters. Outside of the U.S., we have leadership now in seven out of 10 major markets and we look forward to continuing to drive the convenience and high efficacy story that Kesimpta presents in these markets. In the quarter as well, we announced the ALITHIOS six-year long-term data, which demonstrated sustained efficacy and the consistent safety profile for Kesimpta. In this study, nine out of 10 patients were free on the NEDA-3 score of disease activity. And we also saw treatment-naive patients derive substantial benefits across multiple markers of disease activity. So, even in the face of some competitor launches, we feel very confident about the one-minute-a-month self-administered dosing, high efficacy, strong safety profile of Kesimpta. Now, moving to Slide 9, Kisqali grew 54% in metastatic breast cancer with now continued leading share in new patient starts. U.S. was up 72%. And I think there's increasing recognition of the unique profile that Kisqali offers given its broad data set of OS across three different studies in metastatic breast cancer. We have leading NBRx share at 45%, and we see a steady growth in writers, we're also working to increase depth, as well as improve our market access position across key accounts ahead of the early breast cancer launch. Now, outside of the United States, 39% growth. We're the fastest growing CDK4/6 in Europe and a market leader in the pre-menopausal indication. We also successfully entered the NRDL list in China in quarter one. It is still early in China, but due to the strength of our operations there, we are optimistic about driving significant growth for Kisqali over time. The regulatory review for early breast cancer is ongoing. We have submitted our application in the U.S. and EU and expect the review to proceed as planned. Our manufacturing adjustments, which we mentioned a few weeks ago, are on track to meet the latest regulatory standards for early breast cancer by the end of Q2, and we still anticipate launching this medicine in the second half of this year. Now, regarding Pluvicto, it experienced strong growth of 47% in the quarter, fueled by new patient starts and initial growth outside of the U.S. We currently have 400 treatment sites operational in the U.S., steadily progressing towards our goal of over 500 fully certified sites for the use of Pluvicto. Additionally, our supply performance is consistently high, with over 99.5% of injections administered on the scheduled day. With ample supply, our Indianapolis facility up and running, and ongoing expansion of our manufacturing network, we feel well-positioned to supply the market globally for this medicine. In 2024, we will concentrate on expanding our presence at existing sites and particularly on enhancing our referral network of medical oncologists who can direct patients to a Pluvicto treatment center. We believe this will be crucial in the post-taxane environment. Additionally, we aim to grow our business outside the United States with significant launches in Europe, as well as preparing for planned launches in Japan and China, where we are establishing new manufacturing facilities to support our Pluvicto and Lutathera operations. Our current indications are progressing well. Earlier this quarter, we announced that we achieved the PSMAfore submission that enables overall survival readout, positioning us to file for Pluvicto in the early part of the second half of the year, targeting a mid-year submission for this medication. And then, PSMAddition also on track as well as the PSMA delayed castration localized oligometastatic program as well. Now, a little more detail on the PSMAfore submission enabling OS readout. We had a primary endpoint that we read out last year where we met the primary endpoints as well as really strong data across all of the secondary and exploratory endpoints, a very impressive relative risk reduction for rPFS, strong profile across the patient reported outcomes, as well as the various response ORR, DCR and DOR. What we announced earlier in the quarter was the updated third interim, which gave us a higher proportion of OS events. The OS hazard ratio was less than 1, which puts us in a position to file mid-year and other secondary endpoints were consistent with the previous results as was the rPFS. And what we feel and see is with the additional eight months of follow-up, we have high confidence in the safety profile of Pluvicto. And so, these results will be presented at an upcoming medical congress, and of course, we're working as quickly as we can to get this filed in. Now, moving to Slide 12, Leqvio also had a really strong quarter. Adoption expanded steadily in the U.S., but also outside of the United States. As you can see here on the left-hand chart, very strong performance both in the U.S. and outside the U.S. Taking the U.S. first, we had growth outpacing the advanced lipid-lowering market. We have now nearly 3,900 facilities that are ordering Leqvio, increased breadth and depth across our key accounts. We continue to see buy and bill as the key driver overall of the business, but we do see also the use of other channels as well. Outside of the U.S., we have a consistent rollout now. We have 29 countries where Leqvio is publicly reimbursed and an additional 39 with private commercial coverage. This puts us in a strong position with our top three European markets contributing 50% of international sales, but really strong growth across the international region. And strong early uptake in China in the self-pay setting with over 200 new patients a day ahead of our planned NRDL listing in the first part of next year. Lastly, we had new data at ACC and a publication as well, which supported the early initiation of Leqvio, demonstrating that starting Leqvio early in patients requiring secondary prevention for cardiovascular event allowed these patients to achieve their LDL-C goals earlier. Now, moving to the next slide, Slide 14, Scemblix grew 83% in the quarter, again, primarily driven by the third line indication with our first line submission on track to be completed in the coming months. We had continued momentum in the core third line indication over 40% NBRx share. Outside of the U.S., we're at a 32% total market share, driven by our key markets, Japan, France and Germany. And here in the third line setting, we primarily focus on early identification of patients who could benefit from a switch to Scemblix post two TKIs. As a reminder, our ASC4FIRST study enabled first in line submission in half one. Primary endpoints were met versus all standard of care TKI and versus Gleevec as well, favorable safety and tolerability profile. And we can confirm that the full data will be presented at ASCO in 2024. Now turning to Fabhalta, we're at the early stages of the PNH launch, and we didn't expect really to see significant sales at this very early stage given the complexity of this launch, but we are very pleased with the early launch indicators. We've had a rapid increase in the number of HCPs who are certified under the REMS program. An increase in new writers and patient starts, which are exceeding our internal expectations. We see uptake across naive and switch patients for this medicine. And we also are really happy to see HCPs willing to work through the medical exception process to get patients on this medicine. So, we also have the positive CHMP opinion for PNH, and we expect that full approval to happen in the coming few months. And we'll consistently work to launch this medicine across the globe as well as drive rapid uptake in the United States. Now, turning to Slide 15, we announced the full results of our Phase 3 APPLAUSE-IgAN study earlier this quarter, where we demonstrated a 38% reduction in proteinuria compared to placebo. In this study, we randomized patients to receive iptacopan or a placebo. The results we presented were from the nine-month interim proteinuria analysis. These patients will continue to be monitored until month 24 for the full eGFR analysis. The right-hand panel shows a remarkable proteinuria reduction of 43.8% compared to a 9% reduction in the placebo group, which is both clinically meaningful and statistically significant. Complement activation is a key contributor to inflammation in IgAN, and the overall safety profile aligns with previous data we've reported. We have submitted this data to the FDA, and to clarify, we did not use a priority review voucher for this medicine; the FDA granted us priority review based on the dataset we provided. This study will continue to provide its eGFR readout in 2025, and we are looking forward to achieving full approval very soon or receiving initial approval in the near future. Moving to Slide 16, Remibrutinib had already shown robust efficacy and safety in an earlier study at 12 weeks, but we needed to wait for the 52-week data before we could file for chronic spontaneous urticaria. This data has now come out positive, allowing us to proceed with this important filing. It’s worth noting that there are about 400,000 chronic spontaneous urticaria patients in the U.S. who are not controlled or are refractory to antihistamines, with fewer than 20% currently using biologics. Therefore, there is a significant opportunity for a high-efficacy oral medicine. The primary endpoint data at week 12 shows that we consistently demonstrated improvements compared to placebo on the UAS7 score. We look forward to presenting the full dataset through 52 weeks in the second quarter for this medicine. Given the consistent favorable safety profile we have shown, with overall rates of adverse events comparable to placebo and balanced liver function tests, along with clear efficacy data, we anticipate global submissions in the second half for Remibrutinib. So, all taken together, we're on track across our innovation goals for the year. I did want to highlight that we have shifted our iptacopan C3G U.S. submission to the second half. There is no great correlate for efficacy in C3G given the ultra-rare nature of this disease. We provided the FDA our six-month data. While certainly we believe that six-month data was very compelling, the FDA wanted to see the additional six months of follow-up for these patients after all patients had rolled over onto active. The first six-month period was randomized, second six-month period, all patients are inactive. So, we will complete that six-month follow-up and then file in the second half, and we remain very excited about the opportunity to bring Fabhalta as well to patients with C3G. So, moving to the next slide, we also are on track for our range of submissions, '24, '25 and '26 to '28. So, we'll continue to keep you abreast of how datasets unfold as well as potential readout timelines, as we understand those readouts timelines better, and really excited about the catalyst-rich profile that we have out through the coming years. So, moving to Slide 19, I'll hand it over to Harry.

Yeah, thank you very much, Vas. Good morning, good afternoon, everyone. And I'm going to walk you through some of the financials for the first quarter. And, as always, my comments refer to growth rates in constant currencies, unless otherwise noted. Also throughout the presentation, I refer to continuing operations. And as you see from the numbers, it has been a very strong start to the year. So, on Slide 20, you'll see a summary of our financial performance, with net sales up 11% and core operating income up 22%. Our core margin grew 340 basis points to reach 38.4%, showing that we are very well on track to achieve our mid-term margin guidance of 40%-plus by 2027. Core EPS was $1.80 for the first quarter, growing 23%, a bit ahead of expectations due to the share buyback program. Free cash flow was $2 billion, declining versus quarter one of 2023, but that was due to a prior year one-timer and the timing of some tax payments this year. However, and importantly, for the full year 2024, free cash flow is expected to grow approximately in line with core operating income. So, in summary, very strong start to the year, as our efforts to focus and streamline the business continue to pay off. This brings us already to our full year guidance on Slide 21. So, the strong momentum in our business across our in-market growth brands and launches both in U.S. and international markets give us the confidence to upgrade both top- and bottom-line guidance. We have also a favorable update on generic entry assumption in U.S., but that's actually a smaller element of the analysis driving our 2024 guidance upgrade. We now expect net sales to grow in the range of high-single digit to low-double digit, and core operating income to grow in the range of low-double digit to mid-teens. Underpinning our guidance are two key assumptions that no Entresto and no Promacta generics will launch in 2024 in U.S. And to complete our 2024 full year guidance, please know that we continue to expect core net financial expenses to be in the range of $0.6 billion to $0.7 billion, and our core tax rate to be around 16.5%. Now, moving to Slide 22, I'm very pleased with the quality of our quarter one sales growth, driven by our key in-market brands, which grew, as Vas showed also on the prior slide, 41% in the quarter. And the vast majority of these brands still have many years of patent protection ahead of them. So, their continued momentum strongly supports our mid-term growth outlook of 5% CAGR through 2028. Slide 23 please. Just to highlight that we continued our shareholder-friendly capital allocation strategy in quarter one, of course, investing in the business alongside returning capital to shareholders. Notably, in Q1, we announced two value-creating bolt-ons in our core therapeutic areas, the proposed acquisition of MorphoSys and the licensing deal of Arvinas, both of which align with our strategic focus in oncology. In terms of returning capital to our shareholders, we paid $7.6 billion of our growing dividend in quarter one, and we also continue our up to $15 billion share buyback program, and we still have $11.7 billion remaining to be executed by the end of 2025. All right, to my final Slide 24, we have outlined some of the details regarding the FX impacts. And as you see, in quarter one, FX had a 1% negative impact on sales and 6 points negative on core operating income, the latter driven by the strong Swiss franc. And if late April rates prevail, including the most recent strengthening of the U.S. dollar, we expect the full year impact of currency still to be less than it was in '23, on the top-line, negative 2%, bottom-line, negative 4%. As a reminder, as this is hard to forecast from the outside and moving all the time, we are updating our expected FX impact on our website on a monthly basis. And with that, I hand back to Vas.

Great. Thanks, Harry. So, as you heard, a strong start to the year with double-digit sales growth, strong core margin expansion, and with the strong momentum we see in the business, we're able to raise our guidance for the year. We saw this momentum across all of our key growth brands and across geographies, I think indicating the high quality of the performance that we're seeing in the company. Our pipeline continued to advance with multiple submissions and submission enabling readouts as we outlined, and we continue to have confidence in our mid-term guidance of 5% constant currency sales growth '23 to '28, and 40%-plus core operating income margin by 2027. So, with that, I'll hand it back to Sloan, who will outline some of our upcoming investor events.

Thank you, Vas. Before we open up for questions, I just wanted to flag a few investor events that we're planning to hold this year. First, we'll have an in-person event at ASCO in Chicago on June 2, highlighting the Scemblix ASC4FIRST data, which Vas mentioned. We'll also have a virtual event on our renal pipeline in the second half of the year. And we'll be having our annual Meet Novartis Management event in London on November 20 to 21. We hope to see many of you at these events. And with that, operator, let's open the line for questions, please.

Thank you.

And one thing, operator, can we just ask each participant to limit themselves to one question, and then they'll go back through the queue?

Thank you for taking my question. It's going to be on Pluvicto. And so, Vas, you set out some of the metrics in terms of improving revenue. I think there's definitely an expectation amongst investors that we might see an inflection as supply comes online and physicians get more comfortable with your ability to supply and add nurses and chairs into their networks. I wanted to understand whether you thought that was a realistic assumption, or whether or not investors should get more comfortable with a kind of continuous grind in the growth of Pluvicto over the coming quarters?

Yeah, thanks, Matthew. So, first on Pluvicto, we have resolved our supply issue, but we are still working through, I think, the remnants of the base of patients that were a bit lower in quarter four, given that we were still working through things then. Now, when you think about the growth of Pluvicto medium to long term, first, we have this post-taxane indication, where you can see we're already annualizing at a pretty healthy blockbuster, about $1 billion-plus sales range. And we expect that to steadily grow. And we guided to that indication to being a multi-billion dollar, so a $2 billion-plus indication. So, we expect it to steadily grow over the coming quarters in that post-taxane setting. And this will be primarily driven by, as I mentioned, expanding the base of medical oncologists who are able to refer into the existing centers. We don't see the opportunity at this point in terms of expanding the number of centers for this indication. So that will steadily grow over the course of 2024 to get us steadily marching up towards that multi-billion dollar guidance, $2 billion-plus guidance that we've given in the VISION indication. We expect the PSMAfore pre-taxane indication to be the next catalyst, and we anticipate significant momentum from that launch. Additionally, outside of the U.S., we will gain further traction as we expand into Germany, France, and other European countries. In the next few years, we also expect substantial growth from China and Japan, where we are establishing dedicated manufacturing facilities to support both pre-taxane and post-taxane indications. The next catalyst will be the pre-taxane approval, which we aim to secure in the first half of next year, followed by the hormone-sensitive indication and then the oligometastatic indication. We also have two programs progressing with Actinium PSMA to strengthen our overall portfolio. Overall, we foresee steady growth in the VISION indication driven by our expansion outside the U.S. and the growth of indications for the brand.

Thank you. Your next question comes from the line of Steve Scala from TD Cowen. Please go ahead.

Oh, thank you so much. Vas, you noted in the prepared remarks that the Kisqali review was on track, but how confident is Novartis that FDA will meet the priority review regulatory deadline for Kisqali with a broad label? There seems to be a number of things that could give FDA pause, including the nitrosamine issue as well as liver tox. So, what is your level of confidence? Thank you.

We are very confident about the broad label. Regarding the timeline, we are currently adhering to our existing schedule as we implement manufacturing changes. These adjustments are minor but do require discussions with the FDA. Once we have more clarity on whether there will be any changes to the timeline, we will inform the markets. We anticipate launching this medicine in the second half of the year and feel good about that guidance. While we mention minor shifts, they are not significant. We still expect the broad label and do not have concerns about liver issues, which are well-known with Kisqali. LSTs are currently being monitored in the metastatic breast cancer setting, and we expect no changes in monitoring requirements. Overall, we are optimistic about launching this medicine in the second half of the year.

Thank you. Your next question comes from the line of Graham Parry, Bank of America. Please go ahead.

Thank you for addressing my question. I have another one regarding Kisqali. Could you clarify the process amendment required for Kisqali in early breast cancer? Is it related to the actual reaction or purification? Also, do you currently know if an FDA inspection is necessary? If so, do you believe it can be completed within the second quarter, ensuring it won't impact the NATALEE PDUFA timeline? Thank you.

Yeah, Graham, so first on the manufacturer adjustments that we talk about here, just as a reminder, Kisqali already meets the requirements in metastatic breast cancer. So, these are just additional requirements given that early breast cancer is an asymptomatic population. The adjustments we talked about here are primarily, how we source material from third parties. We want to go to higher-quality sourcing of third-party material, which is something we believe we can implement in a very straightforward way. And then also just some additional adjustments within our supply chain for the management of Kisqali, prior to actually leaving our supply chain to go to physicians. So, these are, we believe, relatively minor changes, nonetheless changes we do need to review with the regulators. In terms of an inspection, we don't believe there would be any inspection required for this. And so that's what I think overall gives us confidence in the guidance to launch the medicine in the second half.

Thank you. Your next question comes from the line of Emily Field from Barclays. Please go ahead.

Hi. Thanks for taking my question. I just want to ask a question on Cosentyx. I know you mentioned you're expecting the J-code, but are you currently generating much sales from the IV formulation? Just in that context, if you could frame the current pricing environment in the U.S. specifically? Thank you.

Thank you, Emily. Cosentyx IV has seen better uptake than we anticipated prior to the J-code. The strong performance of Cosentyx this quarter is mainly due to the successful launch for hidradenitis suppurativa, which has also positively impacted psoriasis sales globally. The IV launch is still ramping up. We have already reached most of the accounts we expected to order Cosentyx IV, and they are in the process of ordering the medicine ahead of the J-code by using an exceptional code. Regarding account reach, we are in a strong position, and we believe we can achieve significant depth once the J-code is in place. We feel optimistic that this will be a key factor in driving Cosentyx's growth in the second half after the J-code rollout.

Thank you. Your next question comes from the line of Simon Baker, Redburn Atlantic. Please go ahead.

Thanks so much for taking my question. It's a broad question on the commercial performance. Vas, you've highlighted a few specific reasons for strength in the quarter like the Cosentyx HS launch. But to what extent is the broad-based performance we've seen in this quarter a result of the changes to commercial organization that have been underway over the last couple of years? I wonder to what extent that is responsible. If you could give any color on where it's impacting and how much is left to come from that initiative? Thanks so much.

Thanks, Simon. We believe that the primary factor driving our strong performance in recent quarters has been the reorganization and renewed focus of the company. As a reminder for investors, we made several changes: we elevated our focus on the U.S. market and adopted a geographic model for U.S. and international operations. We narrowed down our portfolio to four key therapeutic areas and concentrated our commercial efforts on nine main drugs. Most of our investments have shifted, with over 75% of marketing and sales investments directed towards our growth drivers, particularly in the U.S., China, Japan, and Germany. Collectively, these efforts have contributed to the broad-based performance seen in both U.S. and international markets, and particularly strong results in markets like China. So, I think this is the biggest sustainable driver. Specifically in this quarter, Cosentyx performed remarkably well. Putting aside consensus, if you look at the growth rates of Kisqali and Kesimpta, Leqvio, Scemblix, these were all very, very strong. Even Pluvicto, if we put aside on quarter-on-quarter growth, these were all very strong growth rates. And I think that also, I think, gives us confidence to raise the guidance for the full year.

Thank you. Your next question comes from the line of Emmanuel Papadakis from Deutsche Bank. Please go ahead.

Thanks for taking the question. Since you flagged it will be forthcoming at ASCO, perhaps just a question on the Scemblix ASC4FIRST data details. The primary endpoint was MMR. So, we're going to be very interested to see how that fares. It's obviously physician standards or physician's choice standard of care control arm versus the potential comparators, in particular Tasigna and Gleevec. Can you talk a little bit about what we could expect to see in terms of some of the standard of care comparators on that primary endpoint? And indeed, any secondaries you're willing to provide thoughts on would be helpful as well. Thank you.

Yeah. Let me outline how the Scemblix study was designed and then hopefully give you some perspective. So, this was a first line study and this is, of course, our third medicine in the world of chronic myelogenous leukemia, so long history in the company. The primary endpoint was Scemblix versus investigator-choice TKI with a goal that over roughly 50% of patients would be on imatinib or Gleevec. And the primary endpoint was Scemblix versus the overall pool of the patients' intention to treat, regardless of TKI. So that's first primary endpoint. And the co-primary endpoint was Scemblix versus Gleevec. And we hit both of those primary endpoints, with clinically meaningful, highly statistically significant improvements in MMR. We had a detailed secondary endpoint comparing Scemblix to the two second-generation TKIs. We will present the full data at ASCO, and we are optimistic about the medicine's profile. Regarding safety, which is a crucial aspect of Scemblix's story in the third-line setting, we observed an excellent safety profile. The overall safety profile of Scemblix will also be a key focus during the ASCO presentation. To advance into the frontline setting, physicians will seek both strong efficacy and a solid safety profile. It's important to highlight that as we approach the filing and eventual launch of the medicine in the U.S., we believe there is a segment of the market that will allow for rapid uptake. These are patients who are currently on second-gen TKIs or in physician practices that are very open to switching. We do know that there is an element of CML market that's contracted and tends to use generic imatinib, that will take us longer to overall to move through. But I think one of the exciting things about Scemblix is that this has a long LoE, and based on targeting a rare disease, it's not part of IRA negotiations. So, we have here a medicine that can drive Novartis growth through this decade and well into the next decade, both U.S. and around the globe. And we, of course, are one of the global leaders in CML. So, I think that positions us well overall. So, thanks for the question, Emmanuel. Next question, operator?

Thank you. Your next question comes from the line of Richard Vosser from JPMorgan. Please go ahead.

Hi, thanks for taking my question. Can I return to Cosentyx? You mentioned that the launch in HS could be three times that of Humira. How do you currently assess the size of the HS indication? Do you believe it represents a $2 billion to $3 billion opportunity for Cosentyx? Furthermore, do you anticipate continued double-digit growth for the product over the next few years? Additionally, could you provide any details regarding the HS contribution at this point? I understand there wasn't any pricing or stocking in the first quarter, but I would like to confirm that as well. Thank you very much.

Yeah, thanks, Richard. So, just as context, we estimate as best we can from public information that adalimumab had over $1 billion in sales in HS historically. We do think that the market is significantly underserved. There's a large number of patients who are not on biologics in this indication. So, it could be a substantial market. I don't think we've given yet guidance on specifically the overall size of the market. But certainly, there's a potential of a multibillion-dollar market here. So, we think Cosentyx has the opportunity to drive very significant growth for the brand as we try to reach $7 billion. Probably not in a position yet to give specific indication-based guidance on Cosentyx, but we think with the combination of HS, of IV, giant cell arteritis Phase 2, which is ongoing, the polymyalgia rheumatica indication that we also have, as well as the strong performance we have in China that this gives us even more conviction that we can get to that $7 billion peak sales by the end of the decade.

Thank you. Your next question comes from the line of Tim Anderson, Wolfe Research. Please go ahead.

Thank you. I have a couple of questions on Entresto and just timing of generic entry. So, in the U.S., can you map out for us what we should be tracking from here in terms of events and news flow that will help in inform whether mid-'25 is a good assumption? And as we've conceivable that sometime in '24 you'll have a different point of view? And then ex U.S. and the timing of generic entry, you guide for later '26. Is there a similar level of uncertainty on that? And then, if you could wrap in China as part of that discussion on generic timing as well?

Yeah, thanks, Tim. So, on Entresto right now, we do have an appeal ongoing to the Circuit Court on the combination patent, which we believe will be heard and ruled on in the second half of this year. It's important to note that there have been no Entresto generics approved as of yet, and we have two citizens' petitions pending at the FDA on the basis for approval and also the labeling for any potential product with respect to Entresto. So, based on that fact that we don't expect any generics to launch this year, though we can never exclude, of course, somebody trying to do something at risk. We have several other patents currently in litigation set for the end of this year and continuing into the future, which leads us to estimate that resolution in the U.S. will occur around mid-2025. As we gain more clarity, we will provide additional updates. Also, Entresto is included on the IRA negotiation list, and we anticipate that by January 2026, IRA pricing will apply, particularly for the Medicare population, with more information expected in September. Outside of the United States, we already include our pediatric exclusivity. So, we think our current guide of end of 2026 is reasonable. Of course, we're always looking for ways to adequately defend all of our patents, but we think that's a very reasonable assumption at this point in time. In China, at the moment, we currently have, I think, a number of different approaches, but the key there will be the number of generics and when they get approved. And so, I think we could reasonably expect potential entry of Chinese generics sometime in the course of 2025. But the question in China was when we will enter the VBP list. We are monitoring the situation closely. Once we have a clearer understanding of the number of generics and their legal status as we enter the VBP list, we will be able to provide more information. Regarding Japan, we are currently looking at a timeline around 2031 or 2032. Our team will confirm the exact date, but it’s certainly within the 2030s at this point. I hope that helps, Tim. Thank you for your question. Operator, please go ahead with the next question.

Thank you. Your next question comes from the line of Richard Parkes, BNP Paribas. Please go ahead.

Hi. Thanks for taking my question. Just wondered if you could help us with cost phasing. I think guidance is implying a lower margin improvement than the very strong margin improvement you saw in Q1. And I know there's slightly missed model last year going into Q4 extrapolating the margin. So, can you just help us understand the phasing in terms of costs over this year? That would be very helpful. Thank you.

Yeah, thanks, Richard. I'll hand that to Harry. Harry?

Yeah, thank you, Richard. So, overall, as you have seen, our quarter one costs were growing in constant currency roughly 2%, which was driven by R&D, right, up roughly 6%, whilst SG&A was basically flat. That's a consequence also of the full implementation of transformation for growth, restructuring programs, leaning out, going to one organization locally between pharma/onco and leading out above country and customer-facing functions, our organization structures and leading our processes. So, we see some continued benefits from that. Of course, we will continue to leverage new technologies, leaner processes to keep driving the multiple launches, but all within our four therapeutic areas where we have significant commercial infrastructures and medical infrastructures. So, I would expect that SG&A continues to be quite flattish, maybe here or there a bit more investment, but certainly significantly below sales growth. And then, the level of especially development spend depends also a bit on the M&A, in-licensing agenda. So clearly, we have some placeholder for that in the second half of the year as well. And then, we will update you after Q2, of course, how things are going when we have clear visibility. But overall, very good focus on cost consciousness, as Vas mentioned, excellent resource allocation to our top nine brands and pre-launches. And with that, as I always outlook, the key contribution to our margin growth is expected to come from SG&A, as we expect very dynamic sales growth this year and on a five-year basis and very limited SG&A growth.

Thank you.

Thanks, Harry. Thanks, Richard. Next question, operator?

Thank you. Your next question comes from the line of Mark Purcell from Morgan Stanley. Please go ahead. Your line is open.

Yeah, thanks very much for taking my question. It's on Scemblix. I wonder, Vas, if you could help us understand the level of uptake you anticipate in the first line setting. The slide show 40% NBRx share in the third line setting, and you talked about the sort of potential ease of identifying specific patients who might most likely benefit from Scemblix versus the current standard TKIs? And I also wondered on Scemblix, have you seen any early impacts of the Part D redesign when it comes to treatment initiations and volumes? Any sort of comment there for Scemblix and across your business would be great. Thank you.

Thank you, Mark. For Scemblix, we anticipate a modest initial uptake as we navigate access in the first few quarters post-launch, since CML is one of the cancer areas with existing contracts. However, we expect that once we present our comprehensive data at ASCO, it should lead to significant uptake. Additionally, as you know, second-generation TKIs have reached around $2 billion in sales, and Gleevec exceeded $4 billion globally. And so, certainly, our goal is to make this, over time, the leading CML treatment in the world. We wouldn't face any competition, at least branded competition. And given that we will have demonstrated MMR superiority over the pooled group of Gleevec and the second-gen TKI, so it should put us in a very good position over time to make this into a significant medicine. I think on Part D redesign, it's really early days for us to have a strong sense of the impact. And so, we're monitoring this very closely, also reading all of your reports on how you're monitoring it to really understand what is the impact of out of pocket caps, and some of the other shifts that are happening in the system on patients taking up their medicines. As we reduce the cap from $3,500 to $2,000, I anticipate that patients' ability to access their medications will generally improve as costs decrease at the pharmacy. However, we need to see the data before we can provide more detailed insights. Thank you. Next question, operator? Thanks, Mark.

Thank you. Your next question comes from the line of Peter Welford from Jefferies. Please go ahead.

Hi, thanks for taking my question. It's on the planned proposed MorphoSys transaction. I wonder if you can just outline when you did that, how much of the acquisition price that you're considering was based on getting broad, both geographical and market approval for pelabresib? And versus on the other hand, how much of the transaction is described to what you're thinking with regards to the EZH2 and also the ianalumab royalties that you would potentially owe? And how we should think about, I guess, with that deal the potential of picking that into the structure business as it is today?

Yeah, thanks, Peter. Probably, I can't say more than what we've already said given that we have an ongoing share tender offer out in the market. So, what we previously outlined is, we believe there's an opportunity globally for pelabresib in both Europe and in the United States. And that's an exciting opportunity given our Jakavi business and the opportunity that we have to leverage our long history in myelofibrosis and position in myelofibrosis outside the United States and our strong hematology footprint inside the United States. So, we would see pelabresib as fitting nicely within that global infrastructure that we have. We also see potential benefits from historical royalties, especially regarding ianalumab, which we believe has significant potential in both immunology and cancer. This presents an exciting chance for us to regain those royalties and ultimately develop important medicines without needing to pay royalties. Additionally, we have an EZH1, 2 inhibitor in prostate cancer that we believe could be very promising for our future. These are the three reasons why we recognize value in the deal.

Thank you. Your next question comes from the line of Andrew Baum from Citi. Please go ahead.

Apologies. Yes, thank you. Just going back to the ASC first trial with Scemblix. Could you just expand your previous comments, Vas, on the dynamics of the CML market, particularly the current market shares in first line generically versus others, the Medicare versus non-Medicare segmentation, just to help us think about the barriers to entry in the different segment in terms of authorization step edits? Thank you.

We view the market as consisting of approximately 35% to 40% imatinib, or Gleevec generics, and 60% TKIs. Regarding the commercial and Medicare segments, we can provide you with more specific data later, but I remember that it's mostly evenly divided between Medicare and private commercial plans. Looking at the overall market opportunity within that 60% of patients on second-generation TKIs, there is a significant chance for growth, especially as this class becomes generic. For commercial plans, we won't be contending with rebates from existing competitors, which gives us a great chance to inform physicians about our strong safety and efficacy profiles and drive switches. We see the initial opportunity for the medicine in the second-generation TKI, especially in its commercial use and eventually with Medicare. Patients currently on imatinib are often treated in community oncology settings by physicians who have a longstanding familiarity with imatinib, which may lead to resistance to change. This could extend the time it takes to transition them, but we believe we have effective strategies to achieve this. Moving through that segment of the market will take longer for us. In the U.S., the situation differs from other regions. Outside the U.S., the dynamics will vary by geography. In Europe, it is essential for us to show differentiation from imatinib from a payer perspective to justify what we consider a fair price for the medicine. We anticipate strong uptake in Japan and China, where we believe reimbursement opportunities are favorable. And certainly in Japan, there's a very well-educated CML physician community. So that's, I think, a relatively large opportunity as well. So that's kind of the high-level dynamics. But I think at the ASCO presentation in June, we can provide more insights into the overall market structure and how we're seeing the opportunity to launch the medicine.

Thank you.

Thank you, Andrew. Next question, operator?

Thank you. Your next question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.

Thanks so much for the question. So really, I just wanted to focus in on IgAN and some of the activity that we're seeing from a competitive perspective there and acquisitions in the space. Vas, I just wanted to get your thoughts on the acquisitions that you've made in IgAN and the opportunity that you see in that space, whether it be for iptacopan or for the acquisitions that you've made? I know you specified a lot of opportunity there. But interested to sort of see if you view this as a validation of the IgAN market opportunity and how you're thinking about the competitive landscape going forward? Thanks.

Thank you, Seamus. Overall, we believe that IgAN represents a significant market opportunity. Historically, patients with this condition have not had access to effective treatments. They tend to progress at a relatively high rate over a ten-year period toward needing transplants or dialysis. In the U.S. alone, there are over 130,000 patients affected, which makes this a considerable opportunity. When we consider the treatment approach, we recognize that it has primarily relied on steroids in the past, but we believe there will be a shift towards managing the hemodynamic aspects of these patients using atrasentan. You want to manage then the inflammatory component for these patients along two dimensions, complement inhibition and APRIL inhibition as well. Now, we're in a position where we will have atrasentan for hemodynamic inhibition. We'll have iptacopan for complement inhibition, and we'll have zigakibart also acquired in our Chinook acquisition for the anti-APRIL component. We acknowledge there will be competitors, particularly on the anti-APRIL side of things where we're going to have a few other competitors enter. We believe we'll be the only company positioned with really the full range of hemodynamic complement anti-APRIL. I should note as well, of course, upstreaming the SGLT2 inhibitors, which are also going generic, will also be part of that early treatment paradigm. But post SGLT2 inhibitors and perhaps generic hypertensives, you're going to want to move down this paradigm of really more potent hemodynamic control and then also trying to get to the inflammatory component. And we think having three medicines will allow us to be well positioned with patients, physicians, contracting the various elements of the U.S. supply chain and also globally. So that's how we're approaching it. I do think the recent acquisitions do point to that anti-APRIL and this whole area is exciting, right? And we have an asset there others now are also coming, but certainly something we're looking at very carefully to also see, can you expand APRIL inhibition with or without BAF inhibition for other indications as well.

Thank you. Your next question comes from the line of Eric Le Berrigaud from Stifel. Please go ahead.

Yes, thank you. We saw the split in sales by geography on Leqvio being significantly different from the past and now ex U.S. being more significant than U.S. Could you maybe elaborate a little bit on the kind of agreements you reached in ex U.S. territories, maybe the main three markets in Europe and China, how the drug is delivered, how are you billing for the drug in those geographies? Thank you.

We're happy to report that Leqvio is now experiencing consistent growth in its overall sales. In China, for instance, we are seeing over 250 patients starting treatment every day, which indicates steady progress in patient uptake. This is ahead of our expectations for achieving full listing on the NRDL early next year. Given our strong cardiovascular business in China with Entresto, we anticipate significant growth for Leqvio in that market over time. We also have reimbursement in Japan, and we're in the very early days of launching in Japan. So, Japan was not a significant contributor in Q1, but we expect consistently now in the coming quarters, Japan to be a more significant contribution. In Europe, we've had very steady uptake in the commercial market in Germany, as well as improving performance in Italy and the UK. And so I mean, the UK has been a disappointment relative to where we hoped it would be, but nonetheless, is steadily moving up as well. And then interestingly, while it's a smaller contributor, given the number of countries around the globe, we have reimbursement, and we do have public health agreements in places like the Gulf Coast countries as well as other markets in our international business that's also contributing. So, step by step, all of this comes together to drive the performance that you saw in quarter one. And we'll see. We hope we can continue that now in the coming quarters and steadily get Leqvio up to that multibillion-dollar outlook that we've given.

Thank you. Your next question comes from the line of Steve Scala from TD Cowen. Please go ahead.

Thank you so much. On Entresto, were there any one-time factors driving Q1 sales such as rebates and/or inventory? If not, then what in your opinion led to it not tracking prescriptions in the quarter? Thank you.

Yeah, Steve, we're not aware of any one-timers on Entresto. We saw strong TRx growth. We saw outstanding growth in China. And I think that was a big driver of the performance you saw in the quarter, also steady uptake in Japan. But no one-timers that we're aware of. Looking at Harry, yeah, so no one-timers that we see. This was just underlying performance, and I think driven both in the U.S. but also China and Japan. Next question, operator?

Thank you. Your next question comes from the line of Graham Parry, Bank of America. Please go ahead.

Great. Thanks for the follow-up. Just wondering in terms of the NATALEE charges we were talking about timing earlier, just what's assumed in your guidance for adjuvant breast cancer for Kisqali for this year? So, is there any significant contribution in there, or is that de minimis at this point? And then, just I'll slip in a second one. Just at the ASCO event, on Scemblix, so I was wondering if you're going to be in a position to give some sort of updated peak sales guidance for that asset. There's obviously a lot of questions on the call about market opportunity. That's what everyone is fishing for. Thank you.

Yeah, thanks, Graham. On NATALEE, not a material contribution or really any contribution in this year. So, I don't think that's something that needs to be factored in, in terms of our guidance. On Scemblix, we'll take it under advisement. I can't commit one way or another, but we'll certainly take the feedback on trying to guide. It's always tough, of course, before we've even got an approval or launched a medicine to really know the outlook. But I think we've got reasonable benchmarks in the CML market with Gleevec and the second-gen TKIs. And as I outlined, we really believe, but we'll see as we present the data that this can be really the best-in-class medicine to treat CML that's been launched in this industry.

Thank you. We will now take our final question. And your final question today comes from the line of Emily Field, Barclays. Please go ahead.

Hi. Thanks for taking my question. I only have a question on ianalumab, given that this morning, we did see Phase 3 success in ITP from a competitor BTK inhibitor. So, I was just wondering given that you also have a BTK inhibitor of your own, why you're pursuing ITP with the BAF inhibition, and you think that, that's the right mechanism of action? And why you are also prioritizing second line over first line? I believe that's what it says to the lead indication in the slides. Thank you.

Yeah. So, first, on BTK inhibition, we really tried to focus our BTK inhibitor outside of the oncology indications. I mean, we look at the indication range we're pursuing, it's immunology, the full range, HS, food allergy, CSU. We have also ideas to pursue remibrutinib in other immunology indications and multiple sclerosis. So, we've tried to steer clear of the oncology setting overall and really focus ianalumab in both oncology but also in more hard-to-treat immunology indications. Based on our best guidance from FDA and the agreements on the Phase 3 study, we think this was a stepwise approach in ITP, especially for a subcu medicine like ianalumab. And then, yeah, we'll see if we can move into the front line setting. So, I think that's probably the best guidance I can give. I'm trying to recall if we looked at remibrutinib in ITP, but we'd have to get back to you, Emily. I just can't recall if we looked at it in our Phase 2a program. So, we can come back to you if we have studied our BTK inhibitor in those indications. So, thanks very much. I think that was the last question. So, I really appreciate everybody's time today. We look forward to keeping you updated, and we will see you all at our event at ASCO. So, thank you, and have a great quarter season and wish you a great spring.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.