Novartis AG (NOVN) Earnings Call Transcript & Summary

Good afternoon, and welcome to the Novartis Q2 2026 Results Release Conference Call and Live Webcast. [Operator Instructions] note the conference is being recorded. [Operator Instructions] A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Mr. [ Nigel Rothman ], Head Business Planning and Analysis and Digital Finance. Please go ahead, sir.

Thank you, Sharon. Good morning and good afternoon, and welcome, everyone, to our Q2 2026 conference call. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties and other factors. These may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. For a description of some of these factors, please refer to the company's Form 20-F and its most recent quarterly results on Form 6-K that respectively were filed with and furnished to the U.S. Securities and Exchange Commission. . [Operator Instructions] And with that, I'll hand over to Vas.

Thank you, Nigel, and thanks, everyone, for joining today's conference call. Moving to Slide 4. As you saw in the results we released earlier today, Novartis delivered strong performance across our priority brands and launches, while advancing the pipeline, allowing us to return to growth in the second quarter. The business grew 1% in constant currencies in USD, and we had flat core operating income at $5.9 billion. Mukul will go through the numbers in more detail later on in the call, but we're reaffirming our full year guidance for 2026. We also had some important pipeline highlights, which I'll talk about more during the course of the conference call, including updated Kisqali OS data, the Del-brax, biomarker data in FSHD as well as some other regulatory milestones we were able to deliver over the course of the quarter. Now moving to Slide 5. Our growth drivers continued a strong trajectory in quarter 2. They were up 26% in constant currencies. Some of the highlights include strong performance from Kisqali, Kesimpta, Scemblix, solid performance from Pluvicto and strong performance as well from Leqvio. So all taken together, these growth drivers are performing strongly. We believe that gives us momentum going into the second quarter -- second half of the year as we now move beyond the [indiscernible] patent and set us up well to deliver on our midterm growth guidance. Now moving to Slide 6. Kisqali was up 43% in constant currencies on the quarter. We outpaced the CDK4/6 market. We had strong performance in the U.S. and outside the U.S. In the U.S., we were up 39%, reaching over $1 billion in sales for the first time. We continued our metastatic express cancer leadership, with an increasing share in first line. And we also sustained our early breast cancer NBRx leadership with 58% of new patients now from our exclusive N0 and N1 nodal population. We also continue to grow our total prescriber base, up 16%, and we see future growth continuing to be driven by these exclusive Kisqali early breast cancer segment. Outside of the U.S., we were up 49% with continued metastatic leadership. Our growth was accelerating in our eBC launches. We're now approved in 76 countries and reimbursed in 42. And as you can see in the chart, in case study in Germany, we reached 79% eBC NBRx share. We're having similar performance in other key markets. Overall, we're pleased with the trajectory for Kisqali and remain confident in our $10 billion sales goal. Now moving to Slide 7. We're announcing today also updated 6-year follow-up data demonstrating that Kisqali showed clinically meaningful OS in that broadest at-risk eBC population. That data will be presented at an upcoming congress. This is the 6th-year prespecified landmark data for iDFS as well as for OS. The iDFS benefit continues over time and continues to strengthen the case for use in the broadest at-risk eBC population. Safety remained consistent with known profile of Kisqali. We believe this data underscores the value of dual emission with Kisqali and endocrine therapies across all subgroups. So we'll look forward to providing the full details of this data, as I mentioned, in our upcoming medical congress. Then moving to Slide 8. Kesimpta had another strong quarter, up 32%, continuing to increase its share across our key markets. In the U.S., we were up 32% in quarter 2, increasing our TRx share in both B cell and MS markets. Importantly, we're going our NBRx share ahead of our competitors in the first-line and first switch segments, which are our targets segments for this medicine. Outside of the U.S., also very good performance. We're seeing strong growth in Europe as well as sustain NBRx growth in our top international markets. We see a continued opportunity in these international markets, given that 2/3 of patients remain treated with older therapies, not on B cell therapies. This is a clear opportunity for expansion over time. We also continue to progress our next-generation evidence and continued life cycle management for Kesimpta. Our ongoing Phase III with a once every 2-month dose Kesimpta per maintenance dosing is on track for a 2027 readout. So moving to Slide 9. Pluvicto grew 43%, and this is driven primarily by our PSMA population in the pre-taxane in mCRPC. We also see now acceleration outside of the U.S. In the U.S., our pre-taxane is now driving over 70% of new patients. We continue to focus on use after the first ARPi. This is our largest segment. And we believe we now will have the opportunity to drive further growth given that the NCCN guidelines have been updated to remove routine use of a second ARPi in this setting. We continue to expand our sites, over 880 sites now providing Pluvicto. And a lot of our focus now is getting additional depth in those sites, especially as we prepare now for the [ mHSPC ] launch. Outside of the U.S., strong growth, 83% growth in new patients, with accelerating adoption in Europe and launch momentum in Japan and China. The number of sites now that are providing RLT outside of the U.S. to over 650. This sets us up well as well for our future RLT pipeline, where we're excited to continue to progress beyond Pluvicto, Lutathera, hopefully in additional cancer types in the coming years. The next wave of growth for Pluvicto will be the approval -- expected approval in quarter 3 in mHSPC. This will increase the eligible patient pool by 75%, give us a strong foundation for further growth. 2/3 of the patients in the PSMA addition population are with healthcare providers that currently use Pluvicto today. So we think we have -- or with established referral patterns, so we think we have a strong base for rapid adoption. And then we continue to progress the pipeline. We presented posting results for our actinium PSMA in mCRPC. This medicine is now being studied in the post-Pluvicto setting, in the post-chemo setting and then as well in the first-line mCRPC setting in combination with ARPi. So an opportunity here to life cycle manage Pluvicto for the longer term. So moving to Slide 10. Leqvio had a strong quarter, growing 59%, driven by strong demand we saw across the globe. In the U.S., we were up 55% in quarter 2. We outpaced the advanced lipid-lowering market. This was driven by monthly TRx growth of 49%, demonstrating Leqvio, the differentiated profile, strong persistency. The demand is being driven with increasing depth in the prior health systems that we're targeting. The most important segment for us remains the Medicare Part B segment, where we see 23.3% share, that's up 3.6% year-to-date. And we see an opportunity for continued advantage. I think even with orals launching, our opportunity remains for driving strong growth in the segment that wants infrequently administered physician-administered medicines for light lipid lowering in the United States, and we see us as attractive and growing segment that supports our peak sales potential in the U.S. and beyond. Outside of the U.S., NRDL inclusion is a lock in significant demand. You saw that in quarter 1. It continues in quarter 2. Our market share has doubled now versus the NRDL -- we currently -- we were previously seen. We also see sustained growth in Europe and Japan. So overall, pleased with our performance. We keep generating additional data Leqvio, 3 world studies demonstrated that inclisiran Leqvio improves adherence and persistence compared to other advanced lipid lowering therapy. And then we also have the V-CHALLENGE head-to-head study of inclisiran versus bempedoic acid, which we will present in ESC. And lastly, we're on track as well for our 2 outcome studies to read out in 2027 for Leqvio. Moving to Slide 11. Scemblix had a very strong quarter, 89% constant currency growth driven by both U.S. and ex-U.S. performance. In the U.S., we had 93% growth in the quarter. This is driven by sustained leadership across all lines. But importantly, we now expect to reach a first-line NBRx leadership share in the second half of the year. You can see steady improvements in that NBRx share -- first-line NBRx share. Outside of the U.S., we're primarily still driven by the third line and beyond performance, with 75% NBRx share across our key markets. But importantly, for future growth, we're seeing early line adoption now starting to pick up. We are now approved in 65 countries outside of the U.S. In Japan, we've already reached first-line NBRx leadership, as you can see in the lower chart. In Germany, our early NBRx first-line share is already up to 15%. So we're very excited for the trajectory of Scemblix and to continue to be a growth driver long into the future. Now with Cosentyx, we had a solid quarter, 10% constant currency growth, in part driven by some one-timers with still strong underlying growth. When you look at in the U.S., we were up 16%. You can see that in HS, we are steady in our NBRx share, in the high 40s, and we expect that to continue. We see steady demand growth in HS and IV. Underlying growth in the U.S. is around mid-single-digits, as we've guided to in the past. And outside of the U.S., continued solid growth in Europe. We do see additional challenges in China with more competition, but we're able to manage that to maintain the overall global performance of the brand. And then we're excited by the Phase III REPLENISH-PMR, [indiscernible], which we recently published and presented at EULAR. It showed very strong data with sustained remission at 52 weeks. That was twice as high in patients treated with Cosentyx versus placebo. So we're anticipating FDA approval for that indication in the second half and remain on track for the $8 billion peak sales guidance that we've previously provided. Now moving to Slide 13. Rhapsido continues its strong launch trajectory with Phase III CIndU data now available to support our broader potential in urticaria. First, targeting -- starting with the CSU launch, we see continued solid U.S. uptake, over 4,000 prescribers, over 10,000 patients treated, 60% of those patients are treated in the first-line setting. We see steady expansion in our patient access. We have 2 of the 3 major PBMs now covering remibrutinib, Rhapsido with [indiscernible]. And in second half, we expect steady expansion in that access with an effective bridge and sample program in place. We don't expect an inflection per se. We think this will be steady expansion. We want to ensure that we're disciplined in how we approach getting reimbursement the multiple indications we hope to secure for remibrutinib over time. Outside of the U.S., we see good traction in China, launches and are going across Europe and the Middle East. And we'll see further expansion in the second half post the EMEA, Japan and Swiss approvals. Now importantly, in chronic inducible urticaria, we presented our REMIND data supporting remibrutinib has the potential as the first targeted therapy for chronic inducible urticaria. We had early and broad efficacy with onset as early as we do in the 2 additional largest subtypes, consistent 12-week responses versus placebo. So we're on track for the FDA approval in SD, which is the most common CIndU subtype, 2/3 of CIndU patients. And then we'll have global funds across all 3 subtypes later this year. Just as a reminder, we expect -- we estimate in the U.S., there's about 100,000 CIndU patients that are uncontrolled with antihistamines with no other treatment options. So this is a significant expansion in the population that can be helped by Rhapsido. Now turning to Slide 14. We also presented some updated data on Ianalumab, showing the favorable ESSDAI benefit of the medicine and longer-term follow-up, and we remain on track for a U.S. launch in Sjögren’s disease in the second half. So you can see on the left-hand side of this chart, in our pooled NEPTUNUS data, you can see the consistent benefits in ESSDAI, a statistically significant versus the placebo arm across both studies when both demonstrating the benefits we seek with the medicine. And then as well, we presented 108-week long-term extension data, which showed that we can maintain the benefits of Ianalumab over time. And then also was supported by clinically meaningful improvements for the placebo crossover group when crossing over on to the active arm. Also throughout all of these long-term follow-ups, we see a favorable safety profile, no increase in adverse events. So this supports Ianalumab's multi-blockbuster potential. We're on track for the ITP first-line readout in the second half of 2026. The SLE and [indiscernible] nephritis Phase III readouts in 2027 and the systemic sclerosis Phase II readout as well in 2027. So turning to Slide 15. I wanted to provide an update on 2 of the acquired programs [indiscernible]. First with Del-zota. We achieved our first FDA submission for the therapeutic use of an antibody also conjugate that FDA submission is for accelerated approval in the DMD44, using dystrophin as a surrogate biomarker. We previously received FDA breakthrough therapy designation for this. The submission package is based on the outstanding data that we had in the EXPLORER44 study as well as long-term follow-up. And we expect the first launch here in the first half of 2027 with the ongoing Phase III studies ongoing. We have multiple follow-on programs now targeting additional exons that we'll be bringing forward as well. So we're quite excited to leverage this technology to take on DMD across multiple subtypes. And then with respect to the Del-brax data, we read out in the quarter as well that the Phase I/II study at the target dose that we are taking into Phase III studies met its primary and key secondary biomarker endpoints. So as a reminder, this is a study that looked at KHDC1L, [indiscernible] in the plasma. KHDC1L is a protein that the downstream and believe to be regulated, the [indiscernible] being the gene that's impacted in FSHD. And so having these plasma biomarkers indicates that we have strong target engagement and muscle damage reduction as indicated by the statistically significant, creating reductions that we saw. Our base case remains a submission in 2028. But based on the data that we've seen in the biomarkers and ongoing work we're currently conducting to strong -- hopefully correlate biomarkers to [ DUCs 4 ] as well as clinical improvements in these patients, we plan to engage FDA and other regulatory authorities in the coming months. And then we'll ultimately provide an update if those regulatory authorities support our ability to file this medicine based on this data. Now moving to Slide 16. So we're on track for a busy second half. We already had 4 readouts in the first half. In the second half, we expect with pelacarsen, remibrutinib and del-desiran readouts in the coming months and then before the end of the year, readouts for Ianalumab, Rhapsido and HS as well as additional readouts for Phase II programs, QCZ484 as well as VHB937 in ALS. So exciting, I think, second half coming up, solid first half out of the year and looking forward to continued progress in the months ahead. So with that, I'll hand it over to Mukul.

Thank you very much, Vas, and good morning, good afternoon, everyone, on the call. I will now share more details on the financials for the second quarter. And as a reminder, my comments as always refer to growth rates in constant currencies unless otherwise noted. . Turning to Slide 18. So in the second quarter, net sales grew 1% to $14.4 billion, while core operating income was flat at $5.9 billion. This is our sales growth drivers and engineered productivity offset the impact of the significant generic erosion that we saw in the first half of this year. The strong performance of Priority Brands supported a return to net sales growth in quarter 2 faster than we initially expected. The second quarter core operating income margin was 41.2 percentage of net sales. This was a decline of 70 basis points versus previous year, mainly due to the incremental ability cost with a lower gross margin being offset by productivity gains. It's worth noting that Q2 is generally a stronger margin quarter when we look at the phasing across the whole year. Free cash flow for the second quarter was at $5.6 billion, which is in line with expectations. Worth to note that Q2 results were also positively impacted by some onetime feeding items, which will reverse in the second half. Together, these items positively impacted net sales by approximately 1 percentage point and core operating income, by about 5 percentage points. And then for the first half of the year, net sales declined 2%. Core operating income declined 7%, and the core operating margin declined 2.3 percentage points to 39.4%. Free cash flow for the first half of the year stood at $8.9 billion. Turning to Slide 19. We remain committed to our shareholder-friendly capital allocation strategy that has served us well as a company, balancing disciplined growth investments in the business with meaningful capital distribution. In Q2, we continue to execute multiple bolt-on M&A and BD transactions, including the completion of the Pikavation and Excellergy acquisitions at the same time, continue to invest in our internal R&D pipeline. Our capital distribution during the first -- on capital distribution during the first half of this year, we paid out $9.1 billion in dividend and repurchased $2.1 billion of shares under the [indiscernible] up to $10 billion share buyback program. There is still $5.6 billion to be executed in this program, and we target to complete the program by end of 2027, as previously indicated. Slide 20, please. With this, we are reaffirming our full year 2026 guidance. We continue to expect net sales to grow low single digits and core operating income to decline low single digit for the full year. For the full year 2026, we also continue to expect core net financial result to be around $1.7 billion and core tax rate to be around 16.5%, both in line with our guidance from beginning of the year. Moving to Slide 21. As I shared previously, H1 net sales declined 2% and with a strong momentum of growth drivers delivering performance at the upper end of sales guidance from the start of the year. Turning to H2. We continue to expect net sales to grow mid-single digit as we move beyond the impact of U.S. [indiscernible]. However, it's worth pointing out that there will be a notable difference in the sales growth rates between the 2 quarters, Q3 and Q4. This is because we still have about $800 million of U.S. Entresto in the sales in previous year quarter 3 base. We expect H2 core operating income to grow mid- to high single-digit with continued investment in our growth drivers as well as our R&D pipeline. Slide 22. Finally, if exchange rates remain at mid-July levels, we expect a positive 1 percentage point impact on full year net sales and a positive 1 percentage point impact on core operating income. As a reminder, we published updated FX estimates monthly on our website. That concludes my remarks, and I will hand it back to Vas.

Terrific. Thanks, Mukul. So in closing, we delivered our first half performance at the upper end of guidance with Q2 returning to sales growth. We remain on track to deliver our full year guidance. We're progressing our indications for Rhapsido, Ianalumab, both potential multi-lockbuster assets. And we're focused on our second half pivotal readouts that remain on track. That would allow us to raise our mid- to long-term growth outlook. . And with that, we'll open it up to questions.

[Operator Instructions] We will now take the first question. And your first question today comes from the line of Peter Verdult from BNP Paribas.

Peter Verdult, BNP Pariba. I realize there's not much incremental you can say the upcoming Phase III readouts, I heard your comments on Del-brax. So with that in mind, can we focus on the accelerated approval potential for branaplam in Huntington's? I know Phase III planning underway, but do you have any visibility or ballpark time lines you can give us for when FDA might make a decision on whether you can file early on the Phase II data generated thus far?

Yes. Thanks, Peter. So we're planning in the process of engaging with the FDA on that Phase II data. I think at this point, our base case remains that we would need to do the Phase III study as designed. So no change on that expectation. I don't have a specific time line. I would expect it to happen in the second half to provide more clarity. And I would also note that we continue to follow these Phase II patients for a longer duration as well, which could provide us additional data. We do note the FDA's recent decisions or recent guidances from some of other therapies that are available for -- that could be available for Huntington's disease, which certainly, I think, shows the FDA's openness if the data ultimately is compelling. So we certainly want to have that engagement, but I wouldn't change our base case at this point that a Phase III study would be required.

Your next question comes from the line of Sachin Jain from Bank of America.

So I am going to ask a question on pipe given there's a lot of focus, and it's a kind of catch-all question. So given the change from your communication in and out Ianalumab showrooms on clinically meaningful, just wondering whether you've decided internally how you define clinically meaningful for the 3 reads investors most focused on, so MSDM1. Maybe I just give you a catch, it fair to think that any static benefit is clinically meaningful in your eyes for different reasons for which asset and any changes in level of confidence on each?

Yes. Thanks, Sachin. So no change from previous comments. We don't know anything else that I can provide on any of the 3. I think in terms of how we will read them out, I mean, I think we always focus on the primary endpoint and statistical significance and reaching the goal and the primary endpoint in the study. I think certainly -- so that -- I mean, that will guide how we communicate and then as appropriate additional secondary endpoints as well, if appropriate to comment on them. I mean, I think for pelacarsen, as we've guided in the past, we continue to -- we powered the study for the kind of 13% to 15% CVRR benefit. And certainly are hopeful to see that level or higher. And if we can see higher, obviously, we'd prefer that, but I think that's how we think about it. In MS, we'll certainly be looking at not only the ARR reduction, but also the impact on disability. And clearly, in DM1, in addition to VHA, also want to see some of the secondary endpoints and how they perform as well. But I think the reality is we have to be thoughtful because we want to be able to preserve the ability to present this data at high-profile congresses in the future. So we'll navigate that best we can, making sure investors have clarity on what we believe the path forward is, but still preserving that ability to present the data as well.

Can I just take one follow-on on that? So you commented in the answer to the powering of these. I don't think you've ever given us any color on how REIMS or DM1 are powered.

Yes, I don't think we have for either of those. I mean I think for MS, you all know well how studies that are head-to-head against have been powered in the past. So I think you have that as background. So I don't think there's more that I could provide there. And I think on DM1, primary endpoint is VHA and then we have the various secondary endpoints that we've been discussing with the agency, but I don't think we could provide any further clarity on that one at the moment.

Your next question comes from the line of Florent Cespedes from ODDO BHF.

Florent Cespedes from ODDO BHF. A quick one for Mukul. Maybe, Mukul, could you give us a little bit more color about the one-off events which impacted the Q2 top line and operating profit margin? Some color on that point would be great.

Yes. Thank you very much, Florent, for the question. So the onetime phasing that I mentioned, so we have a 1 percentage point impact on top line. This is primarily inventory-related changes that we saw across the whole world. This would simply move from Q2 to Q3 from an inventory perspective. And then on the cost side, on the R&D phasing side, we have a couple of clinical trial-related costs that have essentially were planned for Q2 and now will move to Q3. If you put both of them together, then on the top line, it's an impact of 1%. And on the bottom line, the cumulative impact of the top line over delivery added or compounded by the cost phasing leads to a 5% impact on the core operating income.

Your next question comes from the line of Colin White from UBS.

Just to go back to remibrutinib in MS. Please, could you recap specifically what gives you confidence that remibrutinib can improve upon annualized relapse rate of about 0.1 [ Aubagio ] has achieved in recent RMS studies?

Well, I mean, I think for us, as you know, we don't have Phase II data. So we're basing this based on other BTK inhibitors performance in similar studies. We continue to monitor blinded rates for safety and relapse rates. And I think taken together, that gives us confidence that the study is performing as expected in terms of the differences between the active and the control arm. But not more we can say at this point until we ultimately read out the trial. I think for us, clearly, with remibrutinib, in addition to looking at annualized relapse rate and MRI performance, how it performs in disability progression will be important to understand is REMI, something that would be used in a setting post the B-cell antibodies? Or could it be used in a setting in line or ahead of the B-cell antibodies. And this will all be data-driven. And obviously, once we see that data, we'll be able to provide better guidance on that use. But that's probably about as much as we can provide at this point.

Your next question comes from the line of Richard Vosser from JPMorgan.

Just another question on pelacarsen. We've seen some other cardiovascular trials recently suffer from high levels of drop-ins of existing therapies. So wondering how you've controlled for that in the HORIZON trial. Just thinking about it in relation to, I suppose, PCSK9s, but also for GLP-1s and SGLT2s given the 25% of patients that are diabetics. So how should we think about that level of use and potentially the impact on any benefits of pelacarsen?

Yes. Thanks, Richard. I mean it is important to note we study pelacarsen on top of optimized background lipid-lowering therapy. I mean our current estimate is that the number of patients who were on incretin-based therapies in the study is less than 10%. I mean we estimate it to be around 6%. So we don't believe that, that -- if there was any effect from those medicines in the setting that we wouldn't expect that to impact the results here. So when we look at it, overall, it's as we -- more or less as we planned in terms of background therapy. And so we don't think that will be a major swing factor, at least based on what we can see so far.

[indiscernible]

Go ahead, Richard.

No, it was just on PCSK9, just one quick follow-up. Was that controlled as well? I know it was 11% at the start, but does that creep up during the trial? Anything you can say?

I think with respect to PCSK9, I believe they've also been in line with what we saw earlier in the study, but we could follow up with the details. I know the GLP-1 data for sure, but I don't recall that the PCSK9s are a source of concern either.

Your next question comes from the line of Michael Leuchten from Jefferies.

Question for Mukul, please. The guidance for mid- to high single-digit CER EBIT growth in the second half seems to imply more cost control, especially taking into consideration the Avidity R&D phasing that you just mentioned. Can you talk about the P&L dynamics? Like where are you containing costs? And is that something that we need to take into consideration as we think about '27? Or is that sort of tucking in expenses that will not recur?

Yes. Thanks, Michael, for the question. I think from a P&L dynamics perspective, 2 things I'd say is H1 to H2, we always have from a profitability perspective, from a spend perspective, H2 being a higher spend half for example, Q2, our profitability finished with 41.2% operating margin. And we know that Q2 is typically the most profitable quarter, so to say. So that part of the dynamic will remain going into this year as well. In terms of where we are working from a productivity perspective, things have been pretty consistent from beginning of the year. Beginning of the year, we said we'll continue our productivity measures when it comes to our manufacturing operations. Operations has done very well. Gross margin would be pressured as the portfolio shift, but productivity should probably -- should help us keep gross margins more or less to where second half last year was on gross margin. On R&D, we will continue to invest what the pipeline needs. And this would mean incremental investments this year on the back of Avidity, but also a couple of other assets that we took on, including Termalin, Regulus and Anthos last year. And then SG&A as a percentage of sales is a place where we believe we, as a company, can do more productive efforts, specifically focused on third-party spend, which is upwards of $10 billion for the company, and that is what we continue to do. As we look at Q2, we actually see while gross margin -- quarter-on-quarter gross margin has been a negative, but SG&A as a percentage of sales has actually been a positive negating that gross margin impact. And that, I would assume, I would think is -- from a prognosis perspective, that is something that we will continue towards the second half of the year.

Your next question comes from the line of James Quigley from Goldman Sachs.

I've got one on deals and M&A. I think Vas, your quote on Bloomberg as you'd consider larger deals again. So this is a bit of a transition in sort of commentary over the years. A few years back, it was no big deals, then it was focused on bolt-ons, then we had Avidity, which is later stage and a bit larger. So what's changed either internally at Novartis or externally that's driven openness to larger deals? And what could a bigger deal look like in terms of strategic fit given your therapeutic areas and technology set?

Yes. Thanks, James. I don't know what exactly Bloomberg growth, but I can say there's no change in our M&A strategy. We've been, I think, disciplined and consistent that we focus on steady deals in the kind of sub-$2 billion range, which with the upfronts in that range, often lower and then selectively do larger deals in the range of things like Avidity when there is a compelling asset that fits with our -- either our platform strategy or our TA strategy or both and Avidity fit both. So no change at all in our M&A strategy. We don't need to do anything larger than that. We have full confidence in our internal portfolio and pipeline and R&D engine. And yet we know we need to constantly supplement that engine with additional external innovation. So you can expect just a continuation of what you've seen over the recent years.

Your next question comes from the line of Simon Baker from Roth & Co.

One on the pipeline, if I may, please. I wonder if you could just update us on your thoughts on the confidence and potential for abalastimab. And also, I see that it's still showing us a 2027 readout milestone in the slide deck. Clinical trials is now showing a late December '27 primary completion. So is that still a '27 event? Or is there potential for slippage into 2028?

Yes. Thanks, Simon. So we remain excited about abalastimab. As a reminder, this is a monthly monoclonal antibody that has shown outstanding, I think, overall pharmacokinetics and pharmacodynamics on well, very well-behaved antibody on Factor XI. We've seen with competitor data that Factor XI appears to deliver on the promise of a very strong anticoagulation without increased bleeding risk, which is what the genetics would indicate for us. And so we have the study ongoing in patients who are ineligible for NOACs. And that study -- we have upsized that study given the event rates that we saw, so you can also see that on clinicaltrials.gov. But we're on track for a readout before the end of the year. That is a readout at 75% of events, just to be clear. And then the study would continue if it's not successful at that point or that doesn't meet the stopping criteria at that point to finish the number of events in 2028. And then we evaluate now or in the process of beginning additional studies in secondary stroke prevention as well as assessing other indications as well. So excited about that opportunity. I think it could be a significant asset if the trials ultimately read out positive.

Your next question comes from the line of Thibault Boutherin from Morgan Stanley.

Just a question on -- that you have launched the drug and we start to see the sales coming in. Do you have any more visibility on what you expect to be the shape of the bolus of sales from this therapy over the next few years? If you have any indication on when you expect the sales to peak? Is it next year? Is it '28? And then on the magnitude, I think in the past, Novartis was talking about multibillion dollar for this asset. So just if you could comment on your confidence on the peak sales here.

Yes. Thanks, Thibault. So no change. I'd say we -- as you know, I just got the European Commission approval. I think in general, with gene therapy, as we learned with Zolgensma, it does take some time to get the reimbursement. But once we get the reimbursement, we see a relatively rapid ramp on the product. So we -- I would say, over the 3-year period is where we would expect to see the ramp on as we get additional countries online. It's also worth noting for -- as with Zolgensma, we expect ex U.S. to be larger than the U.S., the same dynamics we saw that with Zolgensma. So all on track, but it is important to note this first year will be mostly focused on securing reimbursement. From a peak sales potential, also no change with Zolgensma, we expect the continued steady state in this blockbuster $1 billion-plus territory. and we expect Abema to have a kind of $2 billion range so that the overall package of these 2 medicines have a $3 billion potential.

Your next question comes from the line of Steve Scala from TD Cowen.

Vas, you called out Kesimpta in non-U.S. markets as a growth opportunity, but Kesimpta had leadership in 9 of 10 markets in Q4 and Q1 and 8 of 10 markets in Q2 and one difference appears to have been China. So I'm curious what happened with Kesimpta in China in Q2?

Yes, Steve. So no change in China that we're aware of. We did drop off in Italy actually from 9 out of 10 to 8 out of 10. I'd say, in general, Kesimpta does very well in Asia. It's a market leader in Japan, but it is worth noting that multiple sclerosis levels in Asia are significantly lower than what we see in other parts of the world. So the overall sales potential is lower. So -- but I would say, overall, we continue to see significant opportunity outside of the U.S. just simply because the market has not -- the cell therapies have just not adequately penetrated the market outside of the U.S. So for all B-cell therapies, there's just an opportunity to get more patients on the best possible medicine. And I don't have the details on the Italy shift, but I imagine it's just market share dynamics in a country that we have, of course, other competitors.

Your next question comes from the line of Seamus Fernandez from Guggenheim Securities.