Novartis AG (NOVN) Earnings Call Transcript & Summary

Hi, everyone, and welcome to our Q3 earnings call. Let me briefly read the safe harbor statement before we can begin. 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'll hand over to Vas.

Thank you, Isabella, and thanks, everybody, for joining today's call. If we could move to Slide 4. So in the quarter -- although one second, we're just getting our slides moving here. In the quarter, Novartis delivered sales growth and core margin expansion, and that supported an upgrade to our full year 2026 bottom line guidance. You can see sales were up 4% in constant currency. Core op inc was up 10%. Mukul will go into the numbers in more detail, but we also had a good margin performance in the quarter. A number of important pipeline milestones, notably, of course, as you all know, the remibrutinib data, but also Rhapsido received FDA approval, Pluvicto also with important approvals in the U.S. and China for HSPC. Pelabresib was also filed in Europe and del-zota received FDA priority review for DMD 44. Overall, this allowed us to increase our guidance, and we'll go through that in a bit more detail on the call. So moving to the next slide. Priority brands continue to perform well in the quarter. They were up 29%, very strong performance across Kisqali, Kesimpta, Scemblix and Leqvio, a solid quarter from Cosentyx. Pluvicto, we're still in the midst of launching in HSPC. So we haven't seen that pick up yet, and we'll talk more about that in a bit. And Rhapsido also with a very strong performance as well in the quarter. So moving to Slide 6. Kisqali grew 37%, and it continued to outperform the CDK4/6 market. You can see that our eBC shares, both in U.S. and Germany are very stable and at a very healthy level. Turning to the U.S. first, 38% growth in the quarter, $3 billion year-to-date. We are the leader in eBC, and our NBRx share was up 3 points versus prior quarter. 53% of the patients now on Kisqali are from the exclusive population. In metastatic, we're continuing to grow our NBRx share in first line, which is now at 55%. And we continue to grow our prescriber base as well. It was up 12% versus prior year and up 44% in early breast cancer. Outside of the U.S., we had 35% constant currency growth, continued leadership in metastatic breast cancer. Our growth is accelerating now in many of our key markets with the early breast cancer launch now approved in 84 countries and reimbursed in 43 countries. And I think some of the benchmarks that demonstrate the performance, Germany, 80% eBC share, U.K., 77%; and China, relatively recently after the launch already reaching 55%. We also released a few weeks -- last weekend, the NATALEE 6-year data, which showed a clinically meaningful overall survival with a hazard ratio of 0.809. And we expect that data to continue to support our growth in the adjuvant setting. I think notably, having that OS data and showing that CDK4/6 combined with endocrine therapy in those node 0 and node 1 patients gives us a strong case to have physicians provide patients with CDK4/6 inhibitors like Kisqali. Kesimpta grew 22%, fueled by strong demand. U.S. growth was up 21% in the quarter. Our TRx growth is outpacing the market. We were up 3 points overall in the MS market to 16% share. We were up 4.5 points in the B-cell class getting to 27% share. We see a continued trend to prescribing the medicine earlier and earlier lines of therapy. 77% of our NBRx is now are first line or first switch. Outside of the U.S., also very solid performance. We have 80% of EU4 patients are from a first-line first switch, and we see strong growth across Europe as well. We continue to generate evidence to demonstrate Kesimpta's activity in various lines of patients as well in longer-term follow-up. So I think that just allows us to continue to support this medicine and its very strong performance. Moving to Slide 8. Pluvicto grew 20% in constant currencies. It was driven more by the ex U.S. momentum as well as by U.S. pre-taxane growth. The U.S. was up 9% in the quarter. That's primarily driven by the mCRPC pre-taxane setting with use predominantly after the first ARPI. The first-line NBRx share is up at 15% now, and we expect further share gains over time, and that remains our top priority to continue to drive that early utilization in the mCRPC setting. We are in the very early days of the PSMAddition launch, and I'll cover that in a little bit further detail on the next slide. Outside of the U.S., we see great performance, 68% growth. We see accelerating adoption in Europe in many of our key markets, Canada and Japan as well as early momentum in China. Japan became the fastest market to reach 1,000 patients, supported by ongoing site expansion and also we are building a facility there. China, we had the approval of the PSMAddition indication in August, and we expect that to support growth as well. Now moving to Slide 9. Turning to the PSMAddition launch. I think first, it's important to highlight we have strong foundations in place for the brand, 2/3 of hormone-sensitive prostate cancer patients are managed by physicians who are already using Pluvicto or are connected to established referral pathways. We see broad treatment capacity with 9 out of 10 patients within 30 miles of a site. And we also see -- we are also continuing to address the nonclinical barriers. You can see in the images of both the availability of an infusion and the scaled availability of the prefilled syringe. It's important to note, we expect about 5 to 10 weeks of lead time for new patients to be treated, a combination of doing the testing required as well as the scheduling. We do expect the fastest uptake in high tumor burden patients and as well as the de novo patient segments where there is unmet need versus the current standard of care. We also expect continued expansion in the community, particularly in urology. Overall, I'd say we're encouraged by the early uptake indicators. But we do think through quarter 4, we will see some uptake. And also important to note, we will hit the holiday, Thanksgiving and Christmas. So we really think next year is when we'll see further acceleration with the HSPC launch. Leqvio continued to perform extremely well, up 63% in the quarter, and this is demand around the world. In the U.S., we're up 60%, outgrowing the advanced lipid lowering market. Our monthly TRx growth growing well ahead of the market and our main competitor. And I think that's in part driven by Leqvio's persistency and the high compliance rates we're seeing. We see very strong performance in Medicare, which is a good indicator of our performance in buy-and-bill where we're up to now 22% share. We also see increasing depth in our key health care systems, and we really focus on patients post event where there's a high propensity to want to get patients to their LDL goal. And then we also had our U.S. label updated with a cardiovascular outcome statement, and we're on track for the ORION-4 and V2P readouts that are expected in quarter 4 and in 2027, respectively. Outside of the U.S., 65% growth. China growth continues post NRDL, and we've noted previously very strong growth in China as well as sustained growth in Europe. And then we're continuing to expand the Leqvio evidence base. V-CHALLENGE was presented, which showed LDL-C lowering better is superior to bempedoic acid. Moving to Slide 11. Scemblix was up 67%, driven by strong U.S. momentum. And in the U.S., we continue to see very strong performance in first line. We have reached 33% share. And so you can see we're edging towards market leadership. We're really at market leadership now. And we're maintaining leadership as well in later lines where we expect continued shift in the treatment mix from second, third line towards first line. So very pleased with the U.S. performance. Outside of the U.S. as well, we're building off a very strong third-line leadership where we have 77% share across key markets. The early line indication is now approved in 69 countries outside of the U.S. Japan has sustained first-line NBRx leadership at 56% share and Germany already at 33% share. So very excited about the trajectory of Scemblix as we move forward. Now Cosentyx had a solid quarter, up 9% in constant currencies. I think when you net out some of the gross to net, we're in the mid-single-digit growth range. So I think that's very solid performance with growth in both HS and the SpA indications. In the U.S., you can see our HS share is very stable in the high 40s. The SpA business is remaining resilient. So you can see as well on the bottom panel here, our share is steady at 14%. Outside of the U.S., continued growth in Europe and most emerging markets, stable in China. And we expect continued indication expansion as we move towards the end of the life cycle for Cosentyx. PMR, polymyalgia rheumatica that was approved by the European Commission. We expect the FDA decision in quarter 4. And the HS IV was added to the label as well in October. Now Rhapsido has had really strong launch momentum. You see that in quarter 3. And we also had the additional approval of symptomatic dermographism, which covers about 2/3 of patients with chronic inducible urticaria. And let's start with CSU. We continue to see the launch trajectory in the U.S. on a steady, strong pace, over 6,000 subscribers split between allergists and dermatologists, over 15,000 patients treated. Our NBRx share is about 26%, and that's up about 3 points versus prior quarter. We've been very disciplined with the contracting. So that performance is in the context of about 50% access to label. We do expect further access expansion over quarter 4 and into 2027. And of course, as that access expands, we expect continued acceleration on the sales. Outside of the U.S., we're now launched in 7 markets, and we're steadily getting reimbursement step-by-step market by market. We do see strong early uptake in Germany and China. When you turn to inducible urticaria, as a reminder, symptomatic dermographism, this is the first ever approved treatment for this condition. There's about 100,000 U.S. CIndU patients who are uncontrolled on antihistamines out of about 500,000 patients total and 2/3 of those with SD. We have 100% overlap with the CSU prescribers, so that should enable us to get to a very efficient launch. And we're already rapidly working towards filing the medicine across all 3 subtypes around the globe. So we're upgrading our peak sales guidance for Rhapsido in CSU and CIndU combined to over $4 billion. And moving to the next slide. We had some important readouts in the quarter, which you're well aware of. Remibrutinib, hopefully, many of you heard the call on Friday, so you know well. So I won't belabor, but we'll go a little bit and further review on the next slide, but we were really pleased with the results. We show that we achieved disease control with outstanding consistent safety and the FDA submission is on track for quarter 4 with a priority review voucher. Del-desiran, we had the -- didn't meet the endpoint in HARBOR, but we did have the evidence of clinical activity in the secondary exploratory analyses. We'll present that data at an upcoming medical congress. We're doing a lot of work now to prepare the next steps and engage with health authorities to chart out the next -- right steps for the development of the medicine. We did take a partial impairment charge of $1.9 billion, primarily driven by the time line shifting out by the additional clinical work that needs to be completed. And then lastly, pelacarsen, the Phase III HORIZON study did not meet its primary endpoint. We will have that full data set presented at AHA and published in a major medical journal. And I think that will provide further insights into that data. Further development of DII-235, our once annual siRNA for Lp(a) is still under consideration. All of that taken together, we reaffirmed our 5% to 6% constant currency sales guidance for '25 to '30 and our mid-single-digit constant currency long-term growth outlook. We've done all the modeling. We feel very comfortable with those numbers. Now turning to REMODEL, remibrutinib, we were really pleased with this data, delivered comprehensive disease control. You can see here on the left, all the data that was reviewed, including the 6-month PIRA, so independent of relapse progression impact is reduced by 30%. Very favorable safety profile, robust, consistent, no liver signals, no infection imbalances, 50 -- nearly 50% fewer discontinuations due to AEs, immunomodulation without B-cell depletion. And as we all know, in multiple sclerosis with so many options, it starts with safety. And if you can't demonstrate a clear, clean safety profile, understandably neurologists will look for other options. So we think having that safety profile and then showing disease control is why we're so excited about the medicine. So the filings are ongoing, as I already mentioned. And if you go to Slide 16, as a quick review for anyone who's not on the call, we see an opportunity in the naive population. So that's about 30% of that naive population, we think, would be open to take a medicine like remibrutinib. In the oral switch population, 40% to 100% of patients over time could prefer remibrutinib given its excellent safety profile and comprehensive disease control. We expect over time, as patients are fully controlled under anti-CD20s, patients who might want to be switched to an oral medicine, about 45% of those patients in the U.S. And then the other segment, which is some of the older injectable medicines, over time, we hope to be able to address 100% of that patient population. Outside of the U.S., we estimate about -- around 38% is addressable. All of that taken together gives us confidence in a $4 billion-plus medicine with a further upside with the non-relapsing SPMS population. And as well, we will read out data in 2 years on the Ocrevus switch data, which could provide further momentum to these forecasts. Now going to Slide 17. I won't go through the slide in detail, but just to highlight, we have multiple readouts coming out in 2026 and a strong catalyst path for 2027. We can cover it on the call with your questions, but all of the milestones that we have for the remainder of this year as well as next year are on track. So moving to Slide 18. And with that, I'll hand it over to Mukul.

Thank you very much, Vas, and good morning, good afternoon, everyone. I will now share more details on the financials for the quarter. And as a reminder, my comments, as always, refer to growth rates in constant currencies, unless otherwise noted. Moving to Slide 19. So in the third quarter, net sales grew 4% to $14.5 billion, while core operating income grew 10% to $6 billion, mainly driven by our growth drivers as well as continued productivity in our business. Quarter 3 core operating income margin was at 41.6% of net sales. This is an increase of 2 percentage points versus prior year, and this is mainly driven by gross margin improvements as well as continued productivity initiatives, primarily in our SG&A business -- SG&A part of our business. Core EPS grew 8% to $2.46. On a reported basis, in quarter 3, operating income was negatively impact -- was $1.8 billion, which is a decline of 61%, mainly due to higher R&D expenses. The higher R&D spend includes a $1.9 billion partial impairment of del-desiran. This impairment follows the Phase III HARBOR readout in DM1, and it reflects our updated assessment of the value of the asset as we evaluate the full data set and engage with the health authorities on the future development path for the product. Net income for the period was at $1.2 billion, which was a decline of 71%, mainly due to lower operating income and higher interest income. And free cash flow for the period was at $5.1 billion, which is below prior year, primarily due to lower net cash flow coming out of our operating activities. For the first 9 months of the year, net sales were flat and core operating income declined 2%. Core operating income for the 9-month period was a decline of 0.8 percentage points and free cash flow for the same period was at $14 billion. Moving to Slide 20, please. We remain committed to our shareholder-friendly capital allocation strategy, balancing disciplined growth investments in the business with meaningful capital distribution back to our shareholders. In quarter 3, we completed the acquisitions of Myricx Bio, adding to our early-stage oncology pipeline. We also exercised our option to acquire Sironax' blood-brain barrier delivery platform. And at the same time, we continue to invest in our internal R&D programs. On capital distribution front, in the first 9 months of the year, we have now repurchased $2.8 billion worth of our shares under the current up to $10 billion share buyback program. Please note, we still have $4.9 billion of the program still to be executed. Slide 21. Moving to guidance. So given our very strong bottom line performance in the quarter, we are raising our full year 2026 guidance for core operating income. We now expect for the full year 2026 core operating income to be in line to growing low single digit. For reference, this is an upgrade from the previous guidance of core operating income of low single-digit decline for the full year. At the same time, we are maintaining our full year guidance on net sales, expecting to grow net sales at low single digits for the year. For 2026, we also continue to expect core net financial results to be an expense of $1.7 billion and the core tax rate to be around 16.5%. This is in line with our previous guidance for them. Moving to Slide 22. So beginning of the year, we talked about 2026 as a year of 2 halves. And with this quarter reading out, we're pretty much sticking to that outlook. As a reminder, in H1, net sales declined 2%, core operating income declined 7%. Both were impacted by the U.S. Entresto generic erosion. With a strong Q3 delivery, we now expect a stronger H2 performance. For H2, we expect net sales growing mid- to high single digit and core operating income growing high single to low double digit. After stepping up in Q3, quarterly sales growth is expected to accelerate further in Q4 as we move beyond the impact of the U.S. Entresto generic erosion. On the core margin, we do expect a decline in Q4 versus Q3. This reflects a typical year-end phasing of our spend, also higher royalties as growth drivers scale up would play a part. And finally, we will also see the impact of lower other income as a result of the Xolair biosimilars in the U.S. As a reminder, for 2027, we will provide our full year guidance with the Q4 results in February next year. Moving to Slide 23. If exchange rates remain at late October levels, we expect a positive 1 percentage point impact on the full year net sales and a positive 1 percentage point impact on our full year core operating income. If these rates also prevail in 2027, we would expect a negative 1 percentage point impact on top line and no impact on core operating income. As a reminder, we publish updated FX estimates monthly on our website. And that concludes my remarks, and I will hand it back to Vas.

Great. Thank you, Mukul. So turning to Slide 25. We delivered strong growth in the quarter, driven by our priority brands and launches, which really shows the replacement power of the business. We've been able to successfully navigate the Entresto, Tasigna, Promacta expiry in the U.S., demonstrating we grew through the year. We will grow through the year, which I think really shows the power of the company. We advanced the pipeline with positive readouts for our RMS and for Rhapsido as well as Pluvicto label expansion. We're upgrading our full year guidance for core operating income, and we remain on track to deliver our midterm guidance of 5% to 6% sales in 2025 to 2030 and our long-term growth outlook. If you go to Slide 26, we're excited to also host hopefully, many of you at Meet Novartis Management where we'll provide an update on our midterm guidance from 2026 to 2031 as well as our long-term growth outlook. We'll update our peak sales potential for key growth drivers. We'll also focus on our mid- and late-stage pipeline assets, which we believe will support our long-term growth. We'll have, as usual, breakout sessions by therapeutic area, and we'll also have a panel session on AI in R&D. So we look forward to seeing you there. And with that, we can open the line for questions.

[Operator Instructions] The first question today comes from the line of Sachin Jain from Bank of America.

Maybe I'll just kick off this one, it's usually helpful to hear pushes and pulls the '27 growth. So a number of launches next year, perhaps some color on what you're most excited about. Limited LOE, it seems into next year. So just to wrap the question, is the implied 4Q sales growth rate, the best proxy for how to think about '27?

Yes. Thanks, Sachin. I think overall, when you look at next year, as you say, we have less generic headwinds. We will be navigating the Entresto Europe headwinds, which will just navigate country by country. And so I think that's important to factor in there. But we do expect continued dynamic growth from our key growth drivers, brands like Kisqali, Kesimpta, Leqvio, Pluvicto, HSPC, of course, remibrutinib and CSU and CIndU showing acceleration. We'll also have Scemblix, and then, of course, we'll also expect the ianalumab launch as well. So a number of things that will provide us the opportunity to have a strong 2027. I mean I think it's important to note in quarter 4, we are lapping a number of gross to net dynamics in the previous year. So I think it would be best for us to provide more detailed guidance as always in January. But I'd say, overall, we do expect to get back to where we were, dynamic growth in 2027.

Your next question comes from the line of James Gordon from Barclays.

James Gordon from Barclays. So I noted the comment on the Ocrevus to remi switching study and the focus on switching on Friday's call. But can you just talk about assuming the approval, what do you think the initial rationale for switching would be? And then what do you hope the trial will show? Because with the caveats of cross-trial comparison, the percentage of naive patients might make a difference. Ocrevus does look a bit more effective in terms of relapses and disability. But is that just due to different patients? So what's a good outcome on the trial? And what would that show?

Yes, absolutely. So I mean, I think it's important to note, obviously, we have to run to complete the study. But our expectation is that once an anti-CD20 manages the inflammation, particularly in controlling from an MRI standpoint, the overall inflammatory burden on the patient, that remibrutinib's ability to manage -- achieve disease control, particularly when you look at the disability progression and the PIRA without complete depletion of B-cell antibodies, which has advantages for patients or patients who no longer want injectable therapies. So the idea would be to show patients once they're under control with the anti-CD20 that we can maintain control with MRI as well as other measures. And I think that would give you the opportunity to kind of treat and then maintain with remi. We're certainly also evaluating to do additional studies, again, with all of the anti-CD20s just to demonstrate that remi can control regardless of the anti-CD20. And I think when you have patients that have been on anti-CD20s for 5 to 8 years, there is a desire for many patients, and we put our estimates in our forecast to get control through a safe oral medicine. But we're also equally excited by new starts in patients who don't want to start one on an anti-CD20, switching oral patients who are not feeling like there -- or physicians who are not comfortable with the level of control or also switching older injectable patients on to remi. So we think we have many opportunities to grow the brand.

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

It's [ Mike ] on for Simon. Thank you very much for the commentary on the SG&A line in 3Q. And I appreciate the seasonality in 4Q, but I'm just wondering what the durability is of that cost reduction and how we should think about that line going forward?

Mukul?

Yes. Thanks for the question. So productivity remains a very, very strong key pillar of how we run the company. If you look at SG&A for the quarter, we've actually seen SG&A 7% lower in Q3 versus previous year, while the company from a top line perspective has shown a growth of 4%. So this will, as we have previously said, this focus on driving the company forward while looking at productivity, SG&A productivity in particular, as means for us to get to those profit margins of 40% plus by 2029 latest would remain a focal point for the company. We've also -- historically, we've said we are spending upwards of $11 billion every year on third-party spend. And this is a year, the last couple of years, I think the extreme focus on those cost categories, which includes things like agency cost, travel cost, consulting or professional services costs and trying to get some of these categories, we know have been significantly impacted by use of technology, use of AI and to get both from a demand as well as cost perspective, our fair share of the benefits that these categories are deriving is leading us to this productivity advantage, which is very durable as we look forward from an outlook perspective for the company.

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

Florent Cespedes from ODDO BHF. A question related to Leqvio. Now the ORION-4 results are expected by the end of this year. Could you come back on why it is earlier, is it event driven? And also, could you remind us what kind of profile for this product? And if the results are positive, is it fair to assume an acceleration of the sales next year for this product?

Yes. Thanks, Florent. So we have 2 studies. We have the ORION-4 and then we have the VICTORION-2 PREVENT. Both are looking at outcomes. ORION-4 focused primarily in the U.K. The VICTORION-2 PREVENT is a global study. We expect VICTORION-2 PREVENT to read out next year. I think both studies were designed in such a way to really look at if you look at the fixed time, so following up over a fixed time point, but holding for much longer than the competitor PCSK9, could you demonstrate a greater CVRR than the high teens that the other PCSK9 demonstrated. So we'll see how that works. It's important to note ORION-4 was partially conducted during the pandemic. So I think that's something we're going to have to see how that data plays out. Nonetheless, we would expect both of these studies, given the cholesterol lowering for Leqvio, so LDL lowering is so clear to ultimately read out positive. And I think it would support the continued growth of Leqvio. We've guided to be a $4 billion-plus medicine, very strong and dynamic growth around the globe. You're seeing that in the U.S., you're seeing that in China. And we're certainly looking at the peak sales potential of the medicine longer term. So I think certainly, the outcome studies would support that. We also have V1P, which is the primary prevention outcomes trial, which we would expect to read out in 2029. So a number of things, I think, that can support -- a number of readouts that can support the longer-term growth of Leqvio.

Your next question comes from the line of Graham Parry from Citigroup.

So you now have 2 quarters in a row with margins above 40%. I think the guide has been suggesting to return to above 40% by 2029. So can you maybe just talk to how we could see that progressing into next year? Could you see 40% earlier than 2029 and maybe even into next year? And then if I could just throw in a quick follow-up on the Pluvicto, are you seeing any potential impact of the draft proposed new DG-8070 guidelines for patient relief after radioligand therapy and any impact on the ability of sites to administer radioligand therapies in general?

Thanks, Graham. So on the margin, Mukul?

Yes. Thanks for the question, Graham. So we remain confident on our commitment to get to 40% margin by 2029. And the main drivers of getting -- for us to get back to that would be continued momentum on the top line as well as continued productivity movements. And as I've previously answered, I think most of it would come from SG&A as a percentage of sales. Now what we have to understand is, as Vas mentioned previously, I think during this time, we'd also have to deal with Entresto ex U.S. genericization as well as the U.S. Xolair biosimilar competition coming and hence, impacting other revenue, which is essentially pretty much $1 on other revenue all comes down to the bottom line. So I think, give or take, we're talking of between 2% to 2.5% percentage of erosion to deal with from this other revenue perspective. So I think, yes, we've had a fantastic performance year-to-date, I think, year-to-date numbers of 40.1% from a margin perspective, but we do expect Q4 to be lower as it has always been with the spend going up in Q4. And then from there on, I think we would see continued investment in R&D, continued productivity measures, especially on the SG&A line, erosion on the margin as a result of other revenue wiping off or other revenue because of Xolair biosimilar wiping out and then we're getting back to 40% latest by 2029.

And then, Graham, on the Pluvicto, we don't see an impact from this regulation. I mean we did provide input. So we don't see any changes in site behavior from what we can tell. Certainly, we're working with the authorities to continue to educate them on the appropriate standards for radiation exposure and manage that appropriately. But we don't see that. And if anything, we're having ongoing programs to look at Pluvicto readministration in multiple settings. So it could be given an HSPC and an mCRPC to give physicians more confidence that they could use Pluvicto and not have to reserve it for patients who are further progressing. So I will keep you, of course, posted if we see anything different. But at the moment, no impact from those regulations.

Your next question comes from the line of Kerry Holford from Berenberg.

I wonder, Vas, if you could give us a little bit more insight into the plans post-HARBOR, will you run another Phase III? Are you considering different endpoints and update on the time lines there? Also on the impairment, noting it was only around 1/4 of the total carrying value, perhaps the price up was not larger, so you did mention the delay to launch. Was that the key reason for the write-down? And should we assume there's been minimal change to your probability assumptions, your peak assumptions for that product?

Yes. Thanks, Kerry. So with del-desiran, it's early days. I think it's hard for us to, I think, give you too much color. What we're doing is a deep analysis of the trial data and really trying to learn as much as we can. We have an ongoing open-label extension, which is also providing us further insights and using that to further understand the profile of the medicine. And I think that will inform our approach for the next steps in development. So I think once we have clarity and really alignment with regulators, we'll provide updates on what that next study will look like. We still assume we'll need to do another Phase III study to ultimately bring the medicine to patients. In terms of the math for the write-off, you have to do an additional study, of course, Phase III program, the time lines are the time lines. We assume a similar probability of success. We, of course, make various assumptions, the scenario assumptions with respect to competition and that's how we arrive at the number. I would note that we also -- when we have accelerations, it may not always be the case, we marked up assets as well. So I mean, I think this is -- I wouldn't read too much into these numbers. I think it's more important that we just keep working as fast as we can to get the medicine forward to patients, and that's what we're focused on.

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

On the second quarter call, Novartis said that ianalumab was on track for a Q3 approval. So we're now 1/3 of the way through Q4 and no news. On the second quarter call, the company also referred to data FDA was requesting, so real-time requests at least as of that point. So curious on the reason for the delay and what is the outlook?

Yes. Thanks, Steve. So we're in ongoing label discussions with FDA and providing them the analyses that they're requesting to finalize their review as well as to support them on their approach to labeling. We do expect an action by the end of the year. So I'd say everything is on track, and we're providing that information on a real-time basis, and we'll look forward to giving you an update, but we do expect the action before the end of the year.

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

On Pluvicto, you flagged the speed of uptake for PSMAddition, which is helpful. But for the past 4 quarters or so in the U.S., sales have been flat. So is PSMAfore -- is the PSMAfore indication sort of fully penetrated from a revenue perspective in the U.S.? And how should we think about the impact here with respect to PSMAdditions? Should we expect a similar pattern with a step-up in Q4 or the first half and then to plateau relatively quickly and then ex U.S. will drive most of the growth? So interested on how you think that's going to play out, particularly with respect to Europe following the withdrawal of the application for PSMAddition. And also a very, very quick follow-up on Steve's question on ianalumab. How do you expect the market to develop given the positive data from a competitor? I know we haven't seen the ESSDAI benefit but how are you thinking about the potential scenarios around that?

Yes. Thanks, Steve. So on Pluvicto, I think there's a couple of dynamics. We see most of the demand, as I noted, in the mCRPC setting. And we continue to work to get physicians not to cycle ARPIs and then ultimately to -- ARPIs, excuse me, and to use Pluvicto for the first ARPI where it is indicated. So that's something we're working through. And I think we do very well after multiple rounds of cycling, and we're trying to get earlier and earlier in the treatment paradigm. And we do think there's a lot more opportunity in the mCRPC, but it does take time to change those physician behaviors, particularly in the community. So we do want to see continued growth in mCRPC. And then on top of that, HSPC as well, we do expect there to be steady uptake. I do think that it's important to note that this is going to take time to develop. There are certain patient groups that -- the physicians are particularly interested. So I mentioned high burden patients or patients who are de novo. I think over time, as physicians get more comfortable in the community urology setting, we'll hopefully see broader use for Pluvicto in that setting, and that could then also take us up to further sales momentum. As you also note, I would say, particularly, we're excited about the growth we see in Japan and China, where we see a lot of dynamic growth on the outlook for the brand and could be quite substantial. We also do see very solid performance in certain European markets, markets like France and to some extent, some of our other European markets. The reason, of course, we always think through our indications in Europe is just because of some of the pricing considerations. And sometimes it's not unfortunately the best move to add additional indications depending on what the various reimbursement agencies' perspectives are on the trial. So we have to make those decisions in real time. But all of that taken together, no change in our peak sales outlook for Pluvicto. We think this is just the nature of -- you see a ramp initially and then you have a slower climb as you try to change behavior in the physician offices. Now with respect to Sjogren's, I mean, very hard to comment. I mean, of course, we don't know the competitors' data in detail. And of course, they ran a different program. So I think we need to also understand their data as well in the high symptom burden patients. We're running a separate study in the high symptom burden patients, we ran duplicate studies in the systemic patients, replicate studies. So I think the profiles of the studies are a little bit different. And so I think we'll have to see. Also, the mechanisms are very different, tissue B-cell depletion with ianalumab and CD40 ligand is targeting a different pathway. So I think there also could be nuances as to which patients respond, all to be determined, but hard to know until we see the full data set.

Your next question comes from the line of Chuong Huynh from RBC.

Just on your slide on the Meet the Management, you've noted this focus on mid-stage and late-stage pipeline assets to support growth. I don't want you to give too much away here, but can you frame which 3 or 4 Phase II assets do you believe to be the next assets for the next decade? And at the event, will you help with guidelines for peak sales time lines, anything to really help us start thinking about these for our forecast?

Yes. I think I don't want to get into -- so I want you guys to actually come. So I won't get into all the details. But I think we have a number of programs, first advancing in Phase III or expanding programs that we've not talked a lot about. I think certainly, abelacimab is high in our mind in trying to describe not only the pivotal study, but also the full spectrum of indications that we'll have pursuing for abelacimab. It's a drug we're very excited about. Programs like Actinium PSMA, pelabresib, we haven't spoken a lot about, but we're advancing Pelabresib. Of course, looking provide further updates on some of the programs we acquired from Avidity. And then there's going to be additional mid-stage programs that we've not previously gone into. I don't want to get into it here on the call, but I think our goal would be in each one of the therapeutic areas to identify, let's call it, 1 to 3 assets that we want to get you guys to start thinking about. We'll provide you at least some perspective on how we think about it. Peak sales, we tend to reserve to indicate drugs where we actually have an approval in at least one indication and -- but we will provide updates on peak sales for our growth drivers as well as recent launches as well.

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

Just on the cardiovascular pipeline, the Lp(a) siRNA follow-on drug DII235, you mentioned is under assessment. What incremental data are you waiting for to make a decision? Are you waiting for competitor data on Lp(a) following the lack of signal that we've seen in Pelacarsen? And similar for pacibekitug IL-6 in ASCVD, we obviously have disappointing data from ziltivekimab in ASCVD and CKD, so what could be the path forward here for the IL-6?

Yes. Thanks a lot for the question. I think on Lp(a), we don't need to wait for necessarily competitor readouts. I think we have a lot of insights based on the study, and you all will see that from Dr. Nissen at AHA. And so I think we have a good understanding. And I think we're just trying to evaluate what -- is there a patient segment where we think that the medicine could make sense and how best to then ultimately run those -- run that study. And I think that assessment is just ongoing. And so I don't want to supersede his presentation and the publication of the data, but I think we still have a lot of things to think through as we learn from that very large robust data set from the HORIZON trial. I think your point on pacibekitug is well taken. I mean we are carefully assessing given the readouts that we've seen from our competitor, what is a reasonable development path, we're still working through that and trying to identify is there a patient group, and we focus on the ACS patients, so patients who are post an acute coronary event. Is there a trial design? Is it something where we believe we have conviction to think that there's a reasonable probability of success. I think given what we've seen, I mean, anything we do would have to be considered a high-risk, high-reward approach, but that we're willing, of course, to take those bets in cardiovascular as appropriate. But that's still something we're working through. I mean we can discuss that further in Meet the Management. We still have to, I think, do some more analysis and thinking to finalize that Phase III program.

Your next question comes from the line of Matthew Weston from UBS.

Vas, you raised the remi peak for CSU and CIndU to $4 billion plus, but you said wait for the CMD for other peak increases. I'm just curious as to why the 2-tier timing. Is it because you wanted to reinforce the overall potential of remi, given maybe the market expected more for MS? I'm just interested.

Yes, Matthew, nothing too -- I think our thinking is not too sophisticated here, $4 billion for CSU and CIndU, $4 billion for the current MS readout, that's not including non-relapsing SPMS, that indeed equals $8 billion plus. And I think once we see the HS readouts, that would help us then I think, inform kind of the overall number that we want to head to. I mean we acknowledge we have food allergy as well. We have chronic pruritus of unknown origin. We have rosacea. As you know, our standard is usually not to include peak sales for drugs that have not actually read out positive in the Phase III study. So any remi peak sales we give has to be based on indications that have read out positive. And so HS would then inform, I think, our thinking on the overall remi peak sales. And then if we ultimately were to be successful in food allergy, we would revisit the peak sales and then CPUO and rosacea. Does that make sense?

Yes, it does.

Your next question comes from the line of Peter Verdult from BNP Paribas.