Earnings Call Transcript - NVS Q3 2023

Operator, Operator

Good morning, and good afternoon, and welcome to the Novartis Q3 2023 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 Mr. Samir Shah, Global Head of Investor Relations. Please go ahead, sir.

Samir Shah, Global Head of Investor Relations

Thank you very much, everybody, for joining once again. Just before we start, I'll just read you the safe harbor statement. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties and other factors. These may cause the 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, its most recent quarterly results on Form 6-K that respectively were filed with and furnished to the US Securities and Exchange Commission. With that, I'll hand the call to Vas.

Vas Narasimhan, CEO

Thank you, Samir, and thanks, everyone, for joining today's conference call. As you saw, we had some really strong results, but I wanted to also take a step back and note that this is an important moment for the company after many years of focusing the organization to become a pure-play medicines company. With the spin of Sandoz, we've completed that multi-year journey. Along the way, we've been able to create multiple important companies for the world in consumer health and eye care devices and now Sandoz in generics, alongside exiting our Roche stake and taking a number of shareholder-friendly actions, which we'll talk more about on the call. But I think this quarter demonstrates that Novartis is well-positioned as a pure-play innovative medicines company to consistently drive top and bottom-line growth for the years to come. So coming to the first slide, as you saw earlier this morning, we delivered strong sales growth, margin expansion, and we were able to raise our guidance for the third time this year along with the successful spin of Sandoz. Sales grew 12% and core operating income was up 21% on the quarter. For the nine months, sales are up 10%, and core operating income growth is 19%, all in constant currencies. This allowed us to raise our guidance, which Harry will discuss in more detail. We also had several important innovation milestones, and I know many of you were on the call earlier regarding Pluvicto's data presentation at ESMO, as well as other results and milestones over the course of the quarter, which I'll cover in the presentation. Now moving to Slide 5, that growth was driven by our key growth drivers, demonstrating broad-based performance across the company, reflecting our focus on four key therapeutic areas, nine key brands, a simplified organization, and a strong execution. This portfolio grew 41% in constant currencies, and we expect that growth to continue. We also saw the normalization of healthcare systems in many of our key markets, which buoyed many of our established brands and older patented brands. Now moving to Slide 6, and going through each brand in turn, starting with Entresto. Entresto delivered 31% growth on the quarter, reaching $1.5 billion, driven by performance in both the US and ex-US markets. In the US, TRx continues to reach new highs. The US growth was driven by 28% constant currency growth, with 1.4 million TRxs in the quarter, while ex-US sales were up 34%. We're seeing strong performance in China and Japan from the hypertension indications, with protection for Entresto in Japan extending into the early 2030s. Importantly, we have a strong position in guidelines in the US and the EU and expect further penetration in heart failure and hypertension. We continue to navigate the patent landscape, guiding to a mid-2025 loss of exclusivity in the US, with no generics approved by the FDA to date. Moving to Slide 7, Cosentyx returned to growth, and we expect a stronger Q4 as we start to lap some of the revenue adjustments from the prior year. The growth was driven by stabilization in the US and strong performance outside the US. US sales were down 3%, but adjusted for revenue items, they were broadly flat, supported by volume growth. Ex-US sales were up 15%, and in Europe, our hidradenitis suppurativa indication has been approved and the launch is on track. We're seeing early signs of uptake from this new indication. We received approval in the US for our IV formulation, allowing us to bring this medicine to patients and providers who prefer advanced treatments in IV settings. We're also on track for the hidradenitis approval in the US in Q4, with ongoing Phase 3 studies in giant cell arteritis, PMR, and rotator cuff tendinopathy. Moving to Slide 8, Kesimpta continued its strong launch trajectory across regions, despite a one-time revenue adjustment in the EU. Importantly, our underlying sales growth remains robust at 86% for this brand, growing faster than the market in the US with TRxs up 75% and NBRxs up 30%. In Europe, we are seeing solid momentum, with 29,000 patients treated, and good performance in Asia as well. We're confident in the growth potential of Kesimpta, as only about a third of MS patients are on B-cell therapies, and we will continue to drive that growth. Now moving to Slide 9, Kisqali sales grew 76% to $562 million this quarter, reflecting the increasing recognition of its differentiated benefit-risk profile. The growth is broad-based across geographies, and we have established a clear leadership position in the metastatic breast cancer setting, based on strong data demonstrating its effectiveness. In the quarter, we completed the Phase 3 NATALEE iDFS analysis with 500 events and are on track for submission in Q4. We also submitted in the EU and are preparing to present data at an upcoming Medical Congress. Moving to Slide 11, Pluvicto grew to $256 million, and supply is now fully unconstrained with our Millburn facility operational. We have seen significant patient growth in Q3, and we expect to reach around $1 billion in sales for this year, with progress in ex-US reimbursement and expansion into Asian markets. Now, as you saw with the presentation earlier and at ESMO, the PSMA study showed robust efficacy and favorable safety, and we plan to submit to the FDA with a comprehensive data set. In terms of Scemblix, while continuing demand exists for CML, we have seen some slowdown in specific mutations attributed to the medicine. Our focus will now be on driving strong growth in the third-line setting while expanding into earlier lines with upcoming study readouts. Moving to Slide 14, Leqvio has shown steady expansion, and while it’s a long build, we are enhancing physician education and tracking adoption across facilities. Our uptake in China is promising, and we aim for significant growth. Regarding pipeline readouts, we've covered many milestones, including Iptacopan, which is on track for FDA and EMA review as well as ongoing studies in various indications. Turning to Remibrutinib, we reported strong data demonstrating significant benefit in CSU, with a filing planned for 2024. The medicine's opportunity lies in addressing the treatment gap for patients not controlled with existing therapies. Iptacopan, an oral selective factor B inhibitor, showed impressive results in studies, and we are discussing accelerated approval with FDA. In summary, we had a positive surprise with the Phase 3 NETTER-2 result for Lutathera, which demonstrated meaningful benefits in earlier disease settings. We plan to present this data early next year and are excited about the opportunities to expand the use of Lutathera further. With that, I'll hand it over to Harry.

Harry Kirsch, CFO

Thank you very much, Vas. Good morning, good afternoon, everyone. I'm going to review the financials for the third quarter and the first nine months. My comments will refer to growth rates in constant currencies, unless stated otherwise. Throughout the presentation, I will focus on continuing operations, which include the retained business activities of Novartis such as the Innovative Medicines Division and the ongoing corporate activities, which make up most of our operations. Discontinued operations comprise Sandoz and certain smaller corporate activities linked to Sandoz's business, along with some expenses related to the spin-off. Let's move to the next slide. Before discussing our strong performance in the third quarter and year-to-date, I want to display this slide with restated numbers following the Sandoz spin-off for a more accurate comparison. We published these numbers on our website a few weeks ago to assist with your modeling. We also plan to provide continuing operations figures for years prior to 2022. This slide highlights strong performance in our continuing operations for 2023. As shown, we achieved solid consistent growth in net sales and core operating income, which has positively impacted our margin improvement. In addition to sales growth, cost savings from our productivity programs that started last year have also significantly contributed to our core margin expansion. Moving to the next slide, Slide 24 provides details on our strong double-digit top and bottom-line performance during the third quarter and the first nine months. The top line grew 12% in the quarter and 10% year-to-date, with solid performance across our key therapeutic areas and regions. Core operating income rose by 21% in the third quarter and 19% for the first nine months, mainly due to increased sales and efficiency gains from our ongoing productivity efforts, despite some inflation, which aligns with our earlier forecasts this year. Core EPS increased by 29% to $1.74 in the third quarter and by 28% to $4.95 year-to-date. You can see that core EPS grew at a slightly faster rate than core operating income, aided by our share buyback program. We also generated robust free cash flow of $5 billion in the third quarter, marking our strongest quarter in over five years, and $11 billion in the first nine months. It's worth mentioning that the 12% net sales growth in the third quarter included about 2 percentage points from one-time items that are unlikely to happen again, such as Kesimpta revenue adjustments in Europe, which Vas highlighted when discussing the Kesimpta slide. Additionally, with Sandoz now operating as a separate entity, we've included our contract manufacturing for Sandoz in our financial report under contract manufacturing sales, with sales to Sandoz in the quarter reaching around $100 million to $150 million due to an inventory buildup around the spin-off. We can discuss this further later. However, operationally, the underlying growth was more aligned with 10% in the quarter compared to the reported 12%. In summary, we see a very strong performance in the first nine months of the year, reflecting our ongoing focus on streamlining the business. On the next slide, Page 25, this chart is now less cluttered. Those of you who have been with us for a long time will notice we started with six or seven rows; now there’s just one left. We show the first nine months of discontinued operations, but our primary focus is on our new structure as a focused innovative medicines company based on continuing operations. Again, you can see the net sales growth and other details I discussed earlier, with Kesimpta, Entresto, Kisqali, and Pluvicto again standing out as significant growth drivers for the quarter. This led to an increase in our core operating income and margin to 37.4% for the quarter, similar to our year-to-date core margin of 36.9%. Importantly, we are on track to meet our mid-term target of 40% for margins. Please note, our margin is now computed on net sales, which incorporate sales to discontinued operations and future Sandoz contract manufacturing. Slide 26, please. Yes, the guidance is also becoming simpler. Here’s our guidance: We still expect sales to grow in the high single-digit range. However, we have upgraded our core operating income forecast by two notches to anticipate growth in the mid-to-high teens, an increase from our previous low double-digit to mid-teens outlook. We expect continued strong sales growth in the fourth quarter and anticipate being at the high end of our sales guidance. It’s even possible we could reach 10% revenue growth for the full year, given we achieved 10% in the first nine months. Our key assumption remains that there will be no Entresto or Sandostatin LAR generics entering the U.S. market in 2023. Please move to the next slide. We are committed to delivering value to our shareholders. I have tried to summarize this on one page, outlining some corporate actions we've taken over the years to enhance our future growth and strengthening our competitive positioning. We generate substantial cash from our operations, enabling us to invest effectively in our organic business as well as pursuing bolt-on M&A and business development deals, while also returning capital to our shareholders. A significant portion of our reinvested capital funds R&D, with over $45 billion spent on R&D in the past five years. We supplement this with business development through strategic acquisitions in our primary therapeutic areas. On the return side, we maintain a strong and growing dividend in Swiss francs, consistent since the company’s inception, which will continue even through the spin-offs of Alcon and Sandoz. Additionally, we’ve executed over $30 billion worth of share buybacks in the last five years, and we recently initiated a new share buyback program of up to $15 billion in July this year. We also highlighted our creation of value through significant strategic maneuvers, such as the tax-efficient establishment of new businesses with Alcon and the recent Sandoz spin-off to lead in eye care and the generics sector. Furthermore, we've exited from our Roche stake at a favorable valuation and divested our stake in the consumer joint venture in 2018. With that, I will turn it back over to Vas.

Vas Narasimhan, CEO

Great. Thanks, Harry. In summary, if we look at Slide 29, we had a very strong third quarter with a 12% growth and a 21% increase in core operating income, demonstrating that Novartis has transformed and our focused strategy is yielding results. Our growth drivers are performing well, and we will continue to work diligently to enhance them further. We have many pipeline milestones ahead, and we anticipate additional data will emerge in the coming quarters and years. As Harry mentioned, we completed the spin-off of Sandoz, and we have now raised our guidance for 2023. With that, I’ll turn it over to Samir to discuss our Capital Markets Day.

Samir Shah, Global Head of Investor Relations

Yeah. Just a quick plug for our Capital Markets Day, which will be in person as well as webcast at the end of November from London. Obviously, we're going to focus on our key R&D assets, which would include Kisqali, Pluvicto, Scemblix, Iptacopan and Remibrutinib. In addition, there will be a short update on strategy from Vas. And with that, we'll hand it across for the Q&A.

Vas Narasimhan, CEO

Yeah. And if everyone could please limit themselves to one question and we'll try to get through the queue as many times as we can. Operator?

Operator, Operator

Thank you. We will now go to our first question. And the first question comes from the line of Andrew Baum from Citi. Please go ahead.

Andrew Baum, Analyst

Thank you. Has the probability that you unblind ORION-4, your cardiovascular outcome trial at an interim next year materially increased? The reason for the question is the IRA has obviously increased the urgency to accelerate Leqvio in the US. ORION-4 is a very well-powered trial. If you unblind next year, you know you're going to get significance with a magnitude of MACE way higher than the 15% of the monoclonals, though perhaps less than 30% if you waited until 2026. You've got your VICTORION-2P second outcome trial to show a significant reduction in MACE and likely CV deaths in '27. So it would seem to me that this is a very viable opportunity. Alternatively, do you think you need to have a 30% MACE reduction because of the competition from, in the near-term, New Amsterdam and then Merck with their oral at the end of the decade? Thank you.

Vas Narasimhan, CEO

Thank you, Andrew. That's a great question. Regarding ORION-4, the study is fully enrolled, and we have effectively managed it with the NHS and our UK teams. The study remains on track. We plan to follow these patients over time rather than conducting an event-based study, as the data suggests that with further follow-up, we can achieve around a 30% cardiovascular risk reduction. This strategy will also be applied to VICTORION-2-PREVENT and VICTORION-1-PREVENT, which is currently underway. We will assess our progress as we move forward but do not plan to unblind the study. Our aim is to gather a strong data set indicating significant cardiovascular risk reduction, which will benefit not just Leqvio but also our upcoming portfolio of siRNAs. We are advancing several initiatives, including longer-acting siRNAs and combination siRNAs, all being developed in our research labs. Additionally, we are focused on addressing the IRA to cover small molecule and NDA drugs, along with specific concerns regarding genetically targeted therapies like siRNAs and ASOs, where we face some technical challenges alongside bipartisan legislative efforts.

Operator, Operator

Thank you. We will now go to the next question. And your next question comes from the line of Kerry Holford from Berenberg. Please go ahead.

Kerry Holford, Analyst

Hi. Thank you. I have a question about Pluvicto. Your peak sales target is still over $2 billion, as indicated in the materials we've reviewed. I remember you mentioned that achieving success in the first-line setting could greatly broaden the target patient population. Could you clarify what your peak sales guidance takes into account regarding approved indications? Also, why haven't you increased that target after the PSMAfore readout? Thank you.

Vas Narasimhan, CEO

Yeah. Thanks, Kerry. So we continue to believe, you know, Pluvicto is going to be a multi-billion dollar medicine. We're guiding to the rounded $1 billion on VISION in its first full year of launch and we continue to see a runway in the VISION population on its own to continue to grow at a healthy clip into next year. PSMAfore will obviously significantly expand depending on the final population, 2x to 3x from where we are today with VISION. And it's important to know, we still haven't really launched Pluvicto outside of the United States in a really meaningful way. So there's opportunity for global expansion as well. Then stepwise from there, the PSMA addition study, which moves us into the hormone-sensitive setting with a readout in 2024, also has the potential for a further expansion on the level of what we would get from PSMAfore. So a similar expansion in patient population that's addressable. And we've also launched additional studies in biochemical recurrence in oligometastatic prostate cancer moving into even earlier lines. Certainly, the potential is here for the medicine to be a very significant medicine. And so that will, of course, depend on the data sets and the timings of approval. We don't plan to provide any sort of peak sale guidance at the moment beyond what we've already provided on Cosentyx and Entresto. And we will do that as the product gets more mature, additional data sets come out and we'd be in a better position to guide you as to how large the medicine could be.

Operator, Operator

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

Emmanuel Papadakis, Analyst

Thank you for taking the question. Perhaps I can start with Pluvicto and try to squeeze in a question I didn't get the chance to ask on the call beforehand. The question is really just relating to the trial design. In your estimation, what percent of patients are typically eligible for a switch of ARPI rather than being moved to chemotherapy? And do you think adoption will be restricted to that switch subgroup based on the data? I'm asking because you've emphasized it will triple the eligible patient population with PSMAfore result, but obviously, you do not have any head-to-head chemotherapy data. So do you think physicians are going to extrapolate this beyond just the count financing use in an ARPI switch subgroup, or is it really going to be restricted to that subgroup in its own or anyway, how large is it? Thank you.

Vas Narasimhan, CEO

Thank you, Emmanuel. It's important to recognize that the process isn't as linear as we might prefer; it's more dynamic and closely tied to patient assessments. Several factors will influence the approval of Pluvicto for the PSMAfore population and its application. For instance, many patients are ineligible for chemotherapy for various reasons, and these patients are ideal candidates for alternative therapies like Pluvicto. Additionally, the use of F18 PET scans in the metastatic population is rapidly increasing. A positive F18 PET for PSMA can lead to a choice to use Pluvicto, allowing treatment based on the scan and potentially before or after ARPI, based on the clinician's judgment. Therefore, there will be a fluid situation in the pre-chemo landscape involving both ARPIs and Pluvicto, with some physicians possibly opting to cycle ARPIs. While we have significant opportunities within the VISION population, moving into the pre-taxane setting should generate a noticeable increase in usage. As Jeff mentioned, we also have Phase 2 data that, while not fully powered, suggests that Pluvicto performs favorably compared to chemotherapy. There’s substantial data available for physicians to reference. In my discussions, I've encountered significant excitement, which stems from Pluvicto's efficacy and, equally important, its safety. Patients increasingly demand therapies that provide a sustainable quality of life. We believe that the strong uptake of Pluvicto in the VISION population is due to its tolerability. While Xerostomia and some mild bone marrow issues exist, they are generally well managed and far more tolerable than some alternatives. Jeff's data even shows lower severe adverse event rates compared to a switch ARPI, highlighting its acceptability among patients. Patients will likely prefer to avoid heavier ARPI or chemotherapy regimens if a safe, highly effective therapy is available. While all these factors are positive, some patients may still be cycled through ARPIs. This response may not address your question directly, but I hope it clarifies some of the dynamics we'll be navigating in the coming years.

Operator, Operator

Thank you. Your next question comes from the line of Florent Cespedes from Societe Generale. Please go ahead.

Florent Cespedes, Analyst

Good afternoon. Thank you very much for taking my question. On emerging markets, you delivered pretty consistent growth quarter-over-quarter. I was just wondering, how confident are you to continue to deliver such growth? Or is there any loss of exclusivity to come in certain countries, notably in China that could impact this growth trajectory? Thank you.

Vas Narasimhan, CEO

Thank you, Florent. We are seeing strong growth in our international markets. In Europe, we are currently addressing several expiries, including Lucentis and other medications that have recently lost exclusivity. This has moderated growth in Europe, but we anticipate a rebound in the coming years as we launch new medicines to replace those expiring therapies. China continues to show robust, double-digit growth, and we expect to manage the impact of Entresto's inclusion in the BBP framework. Other launches, including Cosentyx and Leqvio, should support ongoing strong growth in China. Japan is also experiencing double-digit growth, mainly due to the Entresto launch, and we will soon introduce Leqvio there as well. Overall, we expect to see solid growth in international markets in the coming years, primarily driven by these new launches.

Operator, Operator

Thank you. We will now take the next question and the question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead.

Seamus Fernandez, Analyst

Thanks for the question. So just two. Can you quantify the magnitude of contribution from Kesimpta in the quarter and also just give us a sense of the directional trajectory? And then just a second question we've been getting from investors repeatedly on PSMAfore relative to the FDA. Just wondering relative to the Lumakras questions that were raised around that study and trial design, how confident are you that PSMAfore is on track for approval? And can you just update us on the timing of the filing? Thanks so much.

Vas Narasimhan, CEO

Yeah. Thanks, Seamus. So on Kesimpta, Harry?

Harry Kirsch, CFO

Seamus, I assume the one-time contribution from the revenue deduction, right? So, as you have seen, Kesimpta overall contributed $368 million as growth to the quarter, right, being now close to $660 million total sales. And of that, roughly $110 million is from this revenue deduction true-up. So if you take that out, still significant contribution of roughly $250 million, $260 million, and also still a growth of 86%. Is that answering your question?

Vas Narasimhan, CEO

Certainly. I will address the second question now, Seamus. Regarding PSMAfore, our plan is to file once we obtain a 75% information fraction. We are confident that the data we have generated, including what you may have seen at ESMO and in previous presentations, shows a strong benefit-risk profile. We will need to work with the agency concerning the adjusted and unadjusted overall survival data. This is somewhat uncharted territory for us. The FDA has recently made significant changes regarding the expectations of overall survival at the time of filing in relation to progression-free survival, but this situation is quite unique compared to others you've mentioned. This study has been exceptionally well-designed and executed, featuring very low dropout rates thanks to our crossover allowance. The timeline for data collection has been rigorous, and we've demonstrated a substantial improvement in progression-free survival with a doubling of the benefits, notable gains in overall response rates, and significant enhancements in patient-reported outcomes, alongside a clear safety profile. Taken collectively, this presents a very different case than you might be referencing. Additionally, we have shown overall survival in another study, an important consideration as we evaluate this. We believe that reaching the 75% information fraction will provide enough data to display the overall profile of the medicine. We will proceed with the filing, address any review inquiries, and manage the process accordingly. Based on the feedback we've received from physicians and experts, it's evident that this medicine is crucial and should ultimately be approved for patient access.

Operator, Operator

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

Simon Baker, Analyst

Thank you for taking my question. A slightly bigger picture question. Back in early September, you announced that NIBR was changing its name. I wonder if you could update us on what else is changing beyond the name at NIBR. Thanks so much.

Vas Narasimhan, CEO

We're excited about the outlook for Biomedical Research within the company. We've made several changes in our overall R&D strategy. We're now clearly focusing on four therapeutic areas: cardiorenal, neuroscience, oncology, and immunology. Additionally, we've significantly reduced our portfolio size to what we believe is approaching the peer median. This allows us to increase the number of scientists on each project, which we hope will speed up the progress of these projects, leading to quicker data and readouts, and ultimately more valuable medicines. We've streamlined our portfolio and R&D operations. Moreover, we've established a system that integrates early commercial input into our research, which has not been a part of Novartis since 2002. We call this the RDC continuum, encompassing research, development, and commercialization. Each new project entering our research portfolio is reviewed by the executive leadership team to ensure alignment on its potential. We do encourage experimentation within Biomedical Research, but we want that early commercial perspective to ensure we develop medicines that are meaningful for both the world and Novartis. We are also enhancing integration between research, development, and commercial teams. For instance, in areas like CART and Immunology, we are creating integrated teams to ensure smooth transitions through Phase 1 and Phase 2, which will enable us to progress more quickly. Lastly, we're changing how we measure our success. Our focus is now solely on whether we can generate medicines in research that move into late-stage development. Generating interesting data that doesn't advance or leads to out-licensed drugs is not our goal. We are committed to using our research resources to develop medicines that reach the market. I am very grateful for the Biomedical Research team; they are doing a commendable job with this new strategy, and I look forward to increased productivity from Research in the coming years.

Operator, Operator

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

Richard Vosser, Analyst

Hi. Thanks for taking my questions. I have one regarding Cosentyx. Could you provide an update on your submission for HS? There seems to be some discussion in the market about potential label changes related to suicidal ideation, which I understand one of your competitors has added to their IL-17A/F label. I'd like to hear your thoughts on the submission timelines for HS, how that process is progressing, and your views on the emerging competition in light of the different warning label they have. Thank you very much.

Vas Narasimhan, CEO

Yeah. Thanks, Richard. So for the recent approval of Cosentyx and IV, as well as our ongoing assessments of Cosentyx HS, we've had no indications of any changes to our safety labeling from what has already been established based on the 10 years of experience we have of Cosentyx in the market. Many hundreds of thousands of patients treated, many millions of patient years that we have on the medicine. So we have no indication, and we're in advanced discussions as well on the HS label right now for any labeling shifts. And that's based on the data that we've consistently generated with respect to all safety signals and the clean profile that I think Cosentyx has demonstrated consistently over time. Now, with respect to the competitiveness, given that Cosentyx does not have suicidal ideation. The need for liver enzyme monitoring, and very low rates of candidiasis, we believe that Cosentyx is positively differentiated versus the competitor product. Our strong reimbursement positions in the US as well as outside the US markets puts us in a very strong footing against any entrant, especially an entrant that has to overcome some safety liabilities. So I think we're very well positioned in that regard. I would close by saying it's important to note that IL-17A inhibitors are distinct from IL-17A/F inhibitors. Previously, as you all well know, Brodalumab in 2016, already has demonstrated that with the IL-17F inhibition, you can have some of these adverse consequences for that medicine. So I think mechanistically it's also important to treat these medicines fundamentally different, and that's certainly what our position is as well. So, looking forward for Cosentyx, the focus is continuing to drive and get back to growth in the US behind the IV launch, as well as the upcoming HS approval. In Europe, maintain the strong position in PSA, AS, and psoriasis, but then also now drive the HS approval and then continue to complete the additional indications that we have ongoing to eventually reach the $7 billion peak sales that we've guided to. Next question, operator.

Operator, Operator

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

Graham Parry, Analyst

Thank you for taking my question. I have one for Harry. With the 3 basis points raise this year and the positive NATALEE data, as well as the PSMAfore attack around C3 and IgAN since your last midterm guidance, I’m curious about the timing for updating that midterm guidance and how conservative it looks now. Additionally, does the pending OS data for PSMAfore affect when you might provide the market with an update on the midterm? I’ll also follow up on the macro comparison. There have been concerns in the market regarding the conduct of the VISION trial and the early dropout seen in that study related to the PFS analysis, and we didn’t even have that data on label. Could you compare the conduct of PSMAfore with VISION regarding the PFS endpoint and any concerns the FDA may have? Thank you.

Harry Kirsch, CFO

Graham, thank you. So, I think overall, you nicely mentioned that we have taken up three times the guidance this year, absolutely on top line two times, now bottom line twice. I think in the end, of course, I don't think I have done this in my 10 years, right, before. And it's not on purpose ever, right? Each moment of time, of course, we try to give you a very balanced picture. You would say it's, of course, a little bit prudent, yes, but not to this extent. And I think we have seen, I think Vas mentioned from the beginning, we have been positively surprised how well the whole entire Novartis team, 76,000 colleagues, right, after the Sandoz spin, have responded to our Transformation for Growth program and the focus as a single innovative medicines company, of course, including some harder action, which in some countries, depending on union work and so on, took a bit longer of uncertainty, unfortunately. But now that we are through that, the majority is still here or there, some things to implement. We have seen that this gives us more agility, faster decision-making and better impact in the market. That's one thing. And on the bottom line, we do execute slightly ahead of plan. That helps, right? But of course, the most important in any pharma company is the top line growth that has been done so well. There's a little bit of market expansion by probably 1 or 2 points. Actually, our global market has grown faster in the end versus initial estimates beginning of the year, but it doesn't explain a 2 times top line upgrade. So it's really the vast majority of that I contribute to our new leaner way of operating in the company. So from that standpoint, I'm very confident that we continue to drive good growth. There's, of course, here or there leads, we divest, et cetera, all smaller points, but attractive growth. And then, Vas will give an outlook on the midterm growth potential of the company at the R&D Day.

Vas Narasimhan, CEO

Absolutely. We continue to maintain the 4% and 40% margin targets from 2022 to 2027, and we will provide more updates during the R&D Day, Graham. Regarding the VISION study compared to PSMAfore, they represent very different circumstances. The VISION study had limitations, such as no crossover, which resulted in a high dropout rate that we had to address with the FDA. However, the compelling data for overall survival and the safety profile enabled us to present the treatment to patients without an Advisory Committee review. In contrast, the PSMAfore study was notably patient-friendly, with strong execution and a low dropout rate. It was a highly credible study. This created a different scenario where we adhered closely to FDA guidance, which promotes crossover in cancer studies for the benefit of patients. While the FDA encourages crossover, they do not permit us to account for this in the overall survival analysis. This has created a challenge for us and other companies in the industry, and we are planning to manage it. VISION is fully included in the label, while PSMAfore is a well-conducted study that we will advance at the 75% information fraction. Next question, operator. Thanks, Graham.

Operator, Operator

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

Mark Purcell, Analyst

Yeah. Thank you very much for taking my question. It's a question on Kisqali and the outlook. My understanding is that from early next year there's going to have to be priorizations behind Ibrance, and Kisqali is in a pole position to take hold of that business with the NCCN guideline recommendations. So your NBRx share on a three-month rolling basis was 46% in the presentation. How high do you believe that could go, given that my understanding is about a third of physicians are still only prescribing Ibrance? And then just a housekeeping question, sticking on Kisqali. You've now hit 500 iDFS events. I was just wondering whether you could communicate if the upper confidence interval and overall survival has fallen below 1.0? It was 1.07 at the 46 iDFS events stage. And if not, your confidence in that reaching statistical significance? Thanks very much.

Vas Narasimhan, CEO

Thank you, Mark. First, regarding Kisqali NBRx, it's challenging to forecast, especially since we know the Monarch program will release overall survival data at some point. However, we are observing very strong trends with Kisqali. Given our superior overall survival data across three lines compared to one competitor and the fact that other competitors are primarily positioned as second-line therapies following a first CDK4/6 failure, we are witnessing significant uptake. We remain confident that we can consistently be the leading NBRx player. Importantly, we aim to translate this into a consistent share of total prescriptions, which will ultimately drive our sales potential in the long term. Currently, we do not see any indications of a slowdown in our growth trajectory, which is reflected in the data you saw on that slide. Additionally, this growth is not limited to the US; Kisqali is now achieving market leadership for NBRx in our key markets in Europe and globally, which highlights our strong positioning for this medicine in the metastatic setting. We believe that just in the metastatic setting, there is multi-billion dollar potential, and the adjuvant early breast cancer settings will add even more. While I cannot discuss the specifics of the iDFS data that will be presented later this year regarding the 500 iDFS events, we are very confident in the dataset we have seen. It is consistent and reinforces our belief that this medicine should be approved in both intermediate and high-risk settings, which is what we plan to pursue. Next question, operator.

Operator, Operator

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

Stephen Scala, Analyst

Thank you very much. There's a lot of momentum in the Novartis business as evidenced in the guidance raises. There's no reason why the momentum would suddenly stall as we begin 2024, yet consensus does show a bit of a slowdown. I assume you think consensus is underestimating the outlook in 2024. So where do you think consensus is misunderstanding the outlook for next year? Thank you.

Vas Narasimhan, CEO

Thanks, Steve. At this time, we aren’t providing any guidance for 2024. While I don’t have the specific numbers for the 2024 consensus, I've found it more beneficial to concentrate on advancing our medicines rather than focusing on consensus figures. Entresto continues to show strong momentum, and we anticipate ongoing growth in our key markets. We believe Cosentyx can return to growth globally, particularly with the HS and IV indications. Kisqali is experiencing significant growth, especially in the metastatic setting, and we expect that trend to persist. We plan to use a priority review voucher for Kisqali to expedite the early breast cancer indication, pending FDA approval. Kesimpta is also demonstrating remarkable growth at 86%, and we see no reason for that growth to slow as its share in the B-cell class increases. Pluvicto is set for exciting opportunities, especially as we expand patient access and ramp up centers and demand generation. Additionally, we expect Lutathera to enhance our radioligand therapy portfolio for longer-term growth next year. Leqvio, Scemblix, and Iptacopan have meaningful potential contributions as well. Although Scemblix growth may moderate due to saturation in the third line setting, we aim to introduce it in earlier lines. Leqvio will gradually grow in the cardiovascular space, leveraging our experience with previous medications like Diovan and Entresto. The launch of Iptacopan in PNH will face initial challenges, but we aim for it to become the standard of care over time and hope to secure approvals for C3G and IgAN later in the year. That summarizes our outlook on these nine key brands. Harry, do you have anything to add?

Harry Kirsch, CFO

I just want to make one comment. We need to keep an eye on how currencies are fluctuating. I didn’t mention this in my prepared remarks, but we have detailed this on Page 40 of the investor relations deck, which we update monthly on our website. Looking at the consensus for 2024, our internal expectations show roughly 3% growth on the top line and 7% on the bottom line. Currently, foreign exchange is anticipated to have a negative impact of about 1% to 2% on the top line if currency values remain the same, and a negative 3% on the bottom line due to the recent strengthening of the dollar. This is just one factor to consider as you model these outcomes. Additionally, we are observing some minor increases in generic and LOE impacts and divestment. I don’t want to paint a negative picture for 2024, but we do need to approach these projections carefully. I expect us to maintain strong momentum with our growth drivers.

Vas Narasimhan, CEO

Terrific. Thanks, Steve. Next question, operator. That's it.

Operator, Operator

Thank you.

Vas Narasimhan, CEO

Go ahead. I think it's one more question.

Operator, Operator

Thank you very much, sir. We will now take our last question for today, and the question comes from Peter Welford from Jefferies. Please go ahead.

Peter Welford, Analyst

Hi. Thanks for fitting me in. A quick, more broader one on radioligand therapies given we've seen some big competitors potentially try and get into this area. Curious if you can remind us of the barriers to entry that you see you can build in this space, and also what your thoughts are in terms of presenting data internally from both the actinium and also potentially using antibodies together with your radioligands rather than just some of the peptides that are currently used in the portfolio. Thank you.

Vas Narasimhan, CEO

Thank you, Peter. The first priority is establishing the supply chain. This involves sourcing upstream materials, producing lutetium, and manufacturing radioligand in a sterile setting. It's crucial to efficiently manage this supply chain, with a target of delivering to physicians' offices in three to five days. This presents a significant logistical challenge, which we have been addressing for many years. We have developed a global supply chain that facilitates unrestricted supply between our sites in Europe and the US, with plans to expand to Asia and possibly increase capacity in Europe and the US. Additionally, we have heavily invested in semi-automated and automated production lines, positioning us at the forefront of technology in producing high volumes of radioligand therapy. Addressing the supply chain is one critical aspect. We've experienced challenges, but managing inventory effectively is essential, especially for a biotech or pharma company without the flexibility of holding extended inventory, as patients and physicians expect timely delivery of medications. The second priority is to enhance our expertise to create a diverse RLT pipeline. We currently have several agents in development, which we will outline in the upcoming R&D Day. Our clinical trial network and internal research capabilities are well-established, allowing us to maintain a portfolio of radioligand therapies. We actively manage the lifecycle of Pluvicto and Lutathera, and we have our FAPI and other targets in Phase 2 studies. We are also progressing with folate and exploring peptide, fab fragment, and antibody-based technologies for radioligand use, including targeting established ADCs. If we can align the biology correctly, there is potential for radioligand therapies to offer a better therapeutic index due to their favorable safety profile compared to ADCs, though this remains to be validated. Finally, we are focused on developing the commercial infrastructure necessary to support these efforts, including IT systems and patient management processes. Our ongoing global investment and commitment to these areas give us a significant advantage over competitors. However, we take competition seriously and recognize that many are entering this space, so we must continually improve our execution to maintain our leadership in radioligand therapy. I appreciate everyone's time today and look forward to providing updates at the R&D Day. Thank you for your interest in our company, and we will continue to work hard to create value for our shareholders. Best wishes to all.

Operator, Operator

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