Sandoz Group AG ($SDZ)

Good morning, ladies and gentlemen, and welcome to the Sandoz call today. I will now pass on to Craig Marks, Head of Investor Relations for his opening remarks.

Thank you, and welcome to the Sandoz Q1 2026 sales update. Earlier today, we published a media release and an accompanying presentation on our website, which we'll follow on today's call. You can find these documents at sandoz.com/investors. Joining me on today's call are Richard Saynor, Chief Executive Officer; and Remco Steenbergen, Chief Financial Officer. Please turn to Slide 2. Our sales announcement presentation and discussion include forward-looking statements. Please see our disclaimer here. Please turn to Slide 3. Richard will begin today's presentation with the highlights of Q1, followed by an update on the business. Remco will give more detail on the net sales performance as well as guidance for 2026. Following the wrap-up of the presentation, we'll be happy to take your questions. And with that, I will now hand over to Richard. Please turn to Slide 4.

Thank you, Craig, and hello, everybody. It's a pleasure to welcome you all on the call today. 2026 is a landmark year for Sandoz as we celebrate 3 milestones that tell the story of affordable medicines. This month, we marked the first of these. 20 years ago, Omnitrope was approved in Europe as the world's first ever biosimilar. With this approval, Sandoz didn't just develop a medicine, we pioneered a new industry and laid the foundation for expanding patient access to vital biologics worldwide. And we continue to build on that strong legacy, drawing on decades of experience that firstly made us the global leader in generics, including life-saving antibiotics, then in biosimilars, whilst remaining focused on sustainable and profitable growth through portfolio expansion and disciplined execution. Please turn to Slide 5. Turning to our quarter 1 performance. We delivered sales growth in line with our expectations. And importantly, the fundamentals of our 2026 road map are strong. We achieved 3% growth at constant currencies. And when excluding the impact of adverse dynamics in the anti-infective B2B business, sales growth amounted to 5%. Our biosimilar portfolio continued to perform strongly with net biosimilar sales up 18%, including an exceptional biosimilar growth in international and North America as well as further double-digit biosimilar growth in Europe. Total North America sales were very strong with growth of 12%. From a business perspective, we continue to build momentum. We made strong progress on key launches, including Wyost & Jubbonti in the U.S. and Europe as well as Afqlir in Europe. Alongside the excellent progress we are making in building our biosimilar hub in Slovenia, we appointed Armin Metzger to focus our biosimilar development, manufacturing and supply activities under one roof. This will drive faster decision-making, greater vertical integration and improved launch readiness across the expanding biosimilar pipeline. We also advanced our strategic partnership with Samsung as we strengthened our biosimilar pipeline. And finally, there were a number of positive regulatory decisions in the period, including for aflibercept in the U.S. Based on the strong underlying start to the year and the visibility we have across the business, we are confirming our full year guidance today. We continue to expect mid- to high single-digit net sales growth at constant currencies in 2026, alongside core EBITDA margin expansion of around 100 basis points. Now let's look at the sales performance in more detail, starting with Slide 6. Quarter 1 represented yet another quarter of attractive growth with biosimilars representing 31% of our total net sales. The underlying performance was strong with the shift towards biosimilars continuing to increase the quality of our top line. Generic sales declined by 3% due to a number of factors. Firstly, we actively rationalized our portfolio, particularly in the international region, whilst we also continue to reduce the list of our partners that we use. Secondly, there was adverse phasing of sales, again, mainly in international. Thirdly, our European business was impacted by the effect of a mild season on the sales of antibiotics and over-the-counter cough and cold medicines. And finally, there were the adverse dynamics in our anti-infective B2B business, and Remco will take you through these details in a moment. Please turn to Slide 7. While biosimilars are the key growth engine for our business, generics remain a strong and essential foundation for sustainable growth, providing stability, scale and reliable cash generation to support our long-term strategy. Our attractive generics pipeline covers around 2/3 of loss of exclusivity and is centered on oral solids and injectables. We continue to execute on consistent value-accretive launches and medicines such as Rivaroxaban and Estradiol illustrate how we can convert pipeline assets into tangible market opportunities. I want to reiterate that Europe remains dependent on a handful of global antibiotic suppliers, and we continue to call for a fundamental shift in how Europe thinks about antibiotics, the backbone of modern medicine, especially given that they're a key part of the continent security infrastructure. Now let's turn to the biosimilar performance in the quarter on Slide 8. Firstly, we delivered strong performance from both Hyrimoz and Pyzchiva. Hyrimoz continues to demonstrate strong growth, especially in Europe with our global market share increasing, and we continue to see strong expansion in biosimilar participation. We're well positioned to benefit from this trend. Looking at Pyzchiva, we continue to see rapid and sustained market adoption in Europe. Sandoz' market share has grown quickly, making us the #1 ustekinumab biosimilar across the continent. Importantly, ustekinumab biosimilar penetration has significantly outpaced historic adalimumab. Pyzchiva sales are predominantly in Europe with the contribution from North America remaining subdued to date due to the level of competition. Please turn to Slide 9. Let me now turn to Tyruko and Omnitrope. Starting with Tyruko, we are very pleased with the continued rate of adoption in Europe, and we expect further sales growth. Since launch, our market share has been stable, reflecting the strong clinical and economic value proposition of Tyruko as the only biosimilar approved in Europe for relapsing remitting multiple sclerosis. The recent launch in the U.S. has been encouraging with a focus on naive rather than switch patients. We expect additional launches across more markets this year. Omnitrope continues to demonstrate exceptional stability and resilience in a highly competitive category, and we've maintained our leading global market share for this 20-year-old biosimilar. Overall, both medicines showcase the strength and diversity of our portfolio. Tyruko as the only alternative to the originator brand and Omnitrope as a reliable long-standing leader in its class. Please turn to Slide 10. Let me now highlight the strong progress that we're already making with Wyost & Jubbonti and Afqlir. Starting with Wyost & Jubbonti, we've established a robust commercial footprint in the U.S., building a 62% biosimilar share for Jubbonti and a 50% share for Wyost. We secured broad U.S. provider access early on alongside important wins with key players, enabling rapid uptake. In Europe, the launch has gone very well, rolling out into 27 countries on the first day, and I'm pleased with the early launch progress in Brazil and Australia. Turning to Afqlir. The European rollout is well underway with launches completed in 19 markets, supporting improved patient access whilst contributing to a more sustainable health care system. Strategically, Afqlir plays a critical role in expanding our presence in the $15 billion global ophthalmology market for medicines that inhibit VEGF. In the U.S., we're looking forward to the launch in quarter 4. Overall, being first to market with these medicines has given us a powerful head start and the early uptake confirms that our strategy is working. We are well positioned to continue to build momentum as access, adoption and payer coverage expand across the regions. Please turn to Slide 11. This slide highlights the depth and quality of Sandoz's industry-leading biosimilar pipeline, which is a cornerstone of our long-term growth strategy. In the near term, we have several assets in regulatory review. And looking further ahead, our clinical development portfolio includes major immunology and oncology assets such as Keytruda, Opdivo and Ocrevus biosimilars to some of the most widely used biologics today. Finally, we have a significant number of additional assets in early development, and it's important to recognize how powerful the extended partnership with Samsung is. Overall, this pipeline underscores our position as the global biosimilar leader with the scale, capabilities and focus required to consistently bring high-quality biosimilars to market and to capture a meaningful share of the approximately $320 billion opportunity over the next decade. Please now turn to Slide 12. I'm very proud of the agreement that we recently signed with Samsung, reaffirming Sandoz as a leading partner of choice. The agreement will help us further strengthen our biosimilar pipeline ahead of our golden decade and accelerate patient access. Sandoz will commercialize the biosimilar to Entyvio, addressing a $6 billion opportunity. Samsung will lead development and manufacturing, while Sandoz will be responsible for regulatory, commercialization and market access. The agreement also paves the way for collaboration on up to 4 other biosimilar assets. Strategically, this partnership reinforces our commitment to building a significant share of the global biosimilar LoE opportunity, particularly in high-value therapeutic areas. This partnership demonstrates how we leverage targeted collaborations to expand the pipeline efficiently, accelerate access for patients and enhance long-term value creation whilst maintaining disciplined capital allocation and execution focus. And with that, I hand over to Remco on Slide 13.

Thank you, Richard, and hello, everyone. Please turn to Slide 14. Turning to our top line performance. The key drivers behind our Q1 net sales performance were strong biosimilar momentum and strong execution in North America. Net sales increased to USD 2.8 billion, representing 11% headline growth and 3% growth in constant currencies, impacted by the movements in the price of penicillin API, meaning an underlying net sales growth of 5%. Volume growth was a clear positive, contributing 7%, reflecting strong biosimilar demand. This was partly offset by a price impact of 4%. Foreign exchange provided an additional 8% tailwind. Overall, this performance reflects exceptional biosimilar execution and strong underlying fundamentals, which provides a good growth profile for the rest of the year. Please turn to Slide 15. Looking at the business mix, biosimilar sales increased to USD 0.9 billion, reflecting strong volume growth and continued uptake of newly launched medicines, resulting in biosimilar growth of 18%. Generic net sales were broadly stable overall with an underlying decline of around 1% at constant currencies, excluding the impact of adverse dynamics of our anti-infective B2B sales. As you may remember, Asian suppliers engaged in price dumping for key penicillin APIs, including some that we sell to other businesses. This had a significant impact on the value of these sales, though we anticipate a materially smaller impact in the rest of the year. Looking at the regions, underlying Europe sales were up by 4% when excluding anti-infective P2B sales. Biosimilar sales grew double digit and the generic performance reflected the mild seasons conditions and factors such as health care policy changes in France. International sales were mixed with an outstanding biosimilar performance, offset by generic sales that were impacted by the phasing of sales and the pruning of our portfolio. North America sales really stood out based on an exceptional biosimilar performance. Now let's have a look at the balance sheet on Slide 16. Last month, we further strengthened our balance sheet by issuing CHF 550 million in dual tranche bonds with 6- and 10-year maturities, while also extending our USD 2 billion revolving credit facility to March 2021. These actions significantly enhanced our liquidity profile, extended our debt maturity profile to 2036 and supported the refinancing of upcoming maturities. Importantly, financing costs remain very attractive with annual interest rate on gross debt expected to stay below 4%, and we continue to strengthen our investment-grade rating. I was very pleased to see that Standard & Poor's recently revised their outlook on Sandoz to positive. Overall, the strong capital structure gives us increased financial flexibility to support growth and execute our strategy. Please turn to Slide 17. Finally, let's move to guidance for the full year. We continue to expect net sales to grow by a mid- to high single-digit percentage in constant currency, supported by the positive impact of our recent launches. The core EBITDA margin is targeted to increase by around 100 basis points weighted towards the second half of the year. We continue to anticipate price erosion in the low to mid-single-digit percentage range. Outside of guidance, we now expect a 4 percentage point tailwind to net sales from currency movements based on recent spot rates and average rates in the quarter. Our prior assumption was a 2 percentage point tailwind. We still do not expect a material impact from currency movements on the core EBITDA margin this year. And with that, I hand back to Richard. Please turn to Slide 18.

Thank you so much, Remco. I'd like to now wrap up the presentation on Slide 19 before we go to questions. To conclude, our quarter 1 performance was in line with our expectations with underlying results driven by biosimilars momentum and strong execution in North America. This confirms that our strategic focus is translating into tangible results. The fundamentals of our 2026 road map remains strong. Our launches are going well, and we're accelerating access through our extended partnership with Samsung, which significantly enhances the breadth of our biosimilar pipeline and access for patients. Thank you for listening. Please turn to Slide 20, and I'll ask the operator to open the lines for Q&A.

[Operator Instructions] Our first question comes from Sophia Graeff Buhl Nielsen with JPMorgan.

One on the guidance. Just could you outline further what gives you confidence in an acceleration in the top line growth through the remainder of the year despite the tougher base and also the annualization of the launch for denosumab in the U.S. And then just on denosumab in the U.S., you've highlighted the high market share you have with Wyost and Jubbonti. How do you see the growth of these assets developing in the U.S. in the coming quarters given additional competition in the market?

Thank you, Sophia. Good to hear from you. Perhaps if I do the second question first, and then I'll pass to Remco, you can turn and talk about the acceleration that we expect in the second half of the year. Deno, I mean, the market share is that's the 66% of the available biosimilar. There's still a significant proportion to take of the originator assets. So I think we're well positioned I think we had a nice runway. We took a leadership position by being first to market. We had the HCPCS code early on, and we've leveraged that relationship. So I anticipate further gains in market share as we go out through the rest of this year. And I'm really delighted with the performance of the U.S. team have delivered. Remco, do you want to talk about?

Remco here. Yes, you have seen in Q1, we had a formidable biosimilar growth of 18%, and we expect this biosimilar growth to continue also in Q2, 3 and 4 in a very positive way based on the launches we have and still other things we have in the pipeline. As you have seen that the Q1 sales in generics were impacted by some incidentals. We have been pruning the portfolio a bit in international. We had the impact of the B2B price dumping by the Chinese. As you know, that started in the summer last year. So by the second half of this year, this should have faded through the system. So the impact we have in Q1 on the generics, we expect as of Q2 that will mostly disappear. And therefore, for the full year, we stick to our outlook for mid- to high single guidance. This was always what we expected. I think we gave the guidance in this regard. So we're very happy with the Q1 results that stand, and we stand fully behind our full year results.

Our next question comes from Victor Floch with BNP Paribas.

So maybe one on the different like generics headwinds that you faced over the quarter. So maybe any chance you can discuss the portfolio rationalization you've mentioned in international. So what's baked into this rationalization? And what should we expect for the midterm? Can you also maybe quantify the phasing in international? And how should we expect the growth in international over the coming quarters? And finally, any comments would be helpful on the market dynamic in Germany and the policy changes you've mentioned in France.

Thank you, Victor. I think the second question about Germany. Was that correct? I'll take it. Yes. So let's talk. So we have a large portfolio, I think something like 29,000 SKUs across our business. So we are always constantly looking at pruning or moving out nonprofitable or margin-dilutive assets. And particularly in international, as we've streamlined the business, I think we've exited a few smaller markets. We've cleaned it up, and it's ongoing. But really, the impact was Q1 a little bit into Q2. It won't have a broader impact beyond that. So I don't really see that continuing much more beyond this quarter. And I think Remco covered the sort of the headwinds and the tailwinds. I think really, a lot of the headwinds wash out in Q1, particularly the Chinese dumping in the B2B and the soft cough and cold season in Europe. And then really, we see the generics business stabilizing and then strong momentum building and continuing in the biologics. In terms of Germany, I think the question here relates to the potential changes in terms of tendering into the sick funds. We've had very good access to the German government. The team has done a phenomenal job. That legislation won't come until -- really until '28, I think in the current guidance. And that in the medium and long term, I see this as a positive. What that means is that access is going to be driven far more aggressively. And as we expand our pipeline over the next few years, I see that as a significant growth driver, additional growth driver to the German market. So very pleased, but I think we're still working but delighted with the relationship that we've been able to build with the local government in terms of that policy. were very strong with growth of 12%.

Our next question comes from Charlie Haywood with BofA.

Charlie Haywood, Bank of America. Just one on phasing for the year. I think, obviously, 2Q, you're still getting some slight B2B headwinds, and you just alluded to the slight rationalization headwinds as well. So is it sort of fair to think 2Q is still slightly down and then you're thinking of a better second half or I think slightly softer and a better second half? And then on that as well, just the phasing of FX in the year, I think plus 4% surprised many people. So how should we think of the phasing of that through 2Q, 3Q, 4Q? Any color there would be appreciated.

Thank you, Charlie. I'm going to hand that one to Remco.

Charlie, thank you for that question, Richard gave a little bit more details on the GX. As we currently see, we see Q2 at a better top line than we had in Q1, correct? So it's not something which fully weighs for H2. But for H2, we would still expect a higher full H2 versus a full H1. So you can -- we should expect as of Q2 and higher top line growth number. The FX, you saw an impact of 8% in Q1, and we guided for 4% for the full year. There should be still also in terms of the phasing, relatively more material impact in Q2 and then becoming less in H2 of this year because also then the whole FX impact is phasing out. But of course, we're happy with that because it impacts as well the absolute amount of EBITDA and EPS and net income. And you've also seen that in terms of the EBITDA margin, we're able to manage the FX, the margin has -- it has no impact on the margin. Perhaps then also to comment because some of you might also ask the phasing of the EBITDA over the year. We expect still a step-up in the EBITDA margin in the guidance of 100 basis points. And of course, when the sales is a little bit more weighted to the second half of the year and also the margin improvement comes from the leverage on our cost base, there should be a little bit higher benefit in H2, but we still expect a very good benefit in H1 to come in. So everything here fully on track.

Our next question comes from Shyam Kotadia with Goldman Sachs.

The first one I have is on generic Suma. So it looks like one of your competitors got the Health Canada approval yesterday for generic Ozempic. So just want to see if there's any update from your end in terms of timing of approval and launch? Or is the expectation is still that the second half '26 launch? And then yes, any updates you have as well on the potential Brazil and Mexico launches would be appreciated. And any color you could provide on the device or the approach it looks like, I guess, Dr. Reddy's going with the chemical synthesis approach. That's the first question. And then the second one is just on the biosimilar launches. So I think the key ones you flagged this year is Eylea in the U.S. in 4Q and then Vcentis in Europe. But are there any others that we should be aware of over that '26, '27 period? Because I can see you've got some insulins and some legacy oncology products like Herceptin and Avastin in your pipeline. So when could we expect them?

Okay. thank you so much for getting the first GLP question. That was a little bit later than I was expecting. So thank you. Look, I'm not going to say anything particularly new to what I've already said before. We're extremely confident of launching in Canada and Brazil in probably the second half and the latter part of this year. That remains unchanged. So we will see. I think it's an exciting opportunity. Mexico, I think, is actually a little bit later because the patent situation in Mexico is different. So it's very much, I guess, Brazil and Canada this year and then a number of markets as you go into next year, so Turkey and a number of other markets around the world. Fascinating opportunity. And again, as we get more color, clearly, we'll give you more information as that evolves. In terms of launches, I think the -- as launch, I'm particularly excited about. I think it's actually a nice opportunity in the U.S. We know we've got approval, so we're well positioned for launching that in Q4. That will actually create some nice momentum as we go into 2027. And as you rightly say, there's a number of more local assets, so things like insulin, et cetera, that we'll launch in specific geographies. We tend not to disclose in local assets because it gets so complicated. So we normally only talk about the bigger assets. But that said, I think I know a theme we get asked a lot is how you see '27, '28 shaping up. I think with the underlying momentum in the business, I think we can expect that growth momentum to continue into '27 and '28. But again, we'll discuss that perhaps a little bit closer to the time.

Our next question comes from Simon Baker with RoTHchild & Co.

Two, if I may, please. Just going back to one of the earlier questions in terms of the impact of rationalization, I'll just sort of try to get -- if you could give us any sort of quantification of that, the magnitude of that would be very handy. And then secondly, a question on HimMo share, but it's broader than that. It's more of a sort of conceptual question. If we look at the global share for HYMoz, it's been pretty stable over the last few quarters at sort of 20%, plus or minus 1%. But I'm assuming if one looks regionally or the country level, there's a lot more movement there. So just wondould either for HYimMoz or more conceptually generally for biosimilars, how is the -- your market share changing beneath the surface there? Do we see much movement at a lower level that averages out, so you end up with a reasonably stable global share. Any sort of thoughts on how we should think about that specifically to HMO, but going forward would be really handy.

Thank you, Simon. In fact, if I take the second question first, and I'll pass the first question to Remco. It's a good question. And I think I touched on it in my presentation. So if you look at ustekinumab, what's interesting with Uster, the penetration accelerated and the market expanded faster as we launched that. So we saw particularly in Europe, this really the adoption happening. So I think, a, what it's telling you is the payers and physicians are much more ready to accept biosimilars, opening up the market and driving momentum. I think part of the problem with Hirz is that the IQVIA data in the U.S. is pretty useless because the PBMs don't actually want to disclose the data or give the data to IQVIA. So it's actually very difficult to get a stable view. But globally, we've got roughly, what, 20% share of the biosimilar market. And I think that's a strong foundation. We're seeing faster adoption of biologics when we bring. And then certainly, in Europe, we see a very strong expansion of that market post launch for quite a period afterwards. The U.S. does have a slightly different dynamic. If you look at adalimumab, actually, the number of patients on adalimumab has gone down as the originator effectively has used rebating to force patients on to newer assets. Now that will be illegal in Europe, but that somehow is acceptable in the U.S. environment. And that's just the nature of the business. But again, pleased with the position that we've got and strong momentum underlying.

Let me take the other question, Simon. Yes. I don't think it's appropriate to go into too much detail. Let's still try to help you as much as I can. So if you would take international generics growth, it normally should be in the low single digits, correct? And there are a couple of factors influencing this, which is one, the B2B, correct, which we give some indications about. And of course, we have the pruning and the phasing and a bit of the soft cough and cold. That combination explains roughly the delta between the number which has been published and the normal trend, which we would have, right? We should be without that on the normal trend. Europe has an impact a little bit less on the B2B still the cough and cold season also impacted. There is no phasing or pruning in the European portfolio applicable. And in the U.S. is pruning and the one-offs is not applicable. So that without giving you any specifics, still helps you to give some idea of where it's coming from, and you can do your own homework.

Our next question comes from James Gordon with Barclays.

James Gordon from Barclays. Two questions, please. First one was '27, '28 outlook. So I heard some encouraging comments about top line momentum continuing in 2027. So do you think there is a scenario where you might still be able to do on the medium-term trends or mid-single-digit top line in '27, '28 before the golden decade of launches really kicks off in '29? Or are you still -- it would be more likely that there is some deceleration -- and then given that, what will be the appetite to do some in-licensing this year to boost things a bit inorganically in '27 and '28 before things kick off? That would be the first question, please. And then the second one, I got to ask something else on generic Sema. -- got approved, but I think it wasn't all dosed. So is that like some sort of regulatory issue? -- might that impact you as well it wouldn't be your doses? Or do you think you would hopefully get all doses approved? And more generally on generic Sema, we've seen some very low-cost launches in India. I think there's 8 generics and the vial forms about $14, which is a very low price. And I know India is one of the markets you're going for. But is that a negative that suggests that very low-cost generics are going to come in the West and this wouldn't be an attractive market for Sandoz because the prices can plet? Or is it a bit positive because you're actually going to source this very low-cost material and that means you can really do well in the West? How to interpret these really low prices...

Thank you so much, Jen. I mean, look, let's talk about 2728. Look, I mean, we signaled 2728 more about this is a period where there's actually just very relatively few LOEs. -- doesn't necessarily imply that Sandoz won't continue to grow in 2027 and 2028. So those 2 -- first of all, I think we need to separate those 2 things. There's a lot of small molecule launches. Obviously, we've not put semaglutide into our guidance either at this point. Clearly, we're going to launch that. So there's a lot of good tailwinds going from '27 into 2028, launching aflibercept in the U.S. that will obviously contribute nicely in 2027. So I think there's a number of areas. We've not given guidance that I think we originally said, look, when we get to 2028, that would be, in aggregate, mid- to mid- high single digits. I think that -- we always said it won't necessarily be a straight line, but I think the direction of travel is clear. But certainly, we would expect '27 and '28 to continue growing. I think we'll give guidance when it's appropriate to do so. Semaglutide, look, it's early days. I stand by what I said earlier. I think we're confident that we would bring presentations to Canada and to Brazil this year. I think it's an exciting opportunity. That remains unchanged. And look, the Indian generic market, if you look at any product in the Indian generic market, there's a wide range of pricing. And I don't think you can necessary -- I would never draw an analog from Indian pricing of generics into any other market in the world. It's a unique market. It has unique dynamics. I'm confident this is going to be a really interesting product. I still stand by my comments. I think certainly in the first part of the first few years, I think this is going to be more about availability of supply than oversupply and commoditization. I think demand for this product will be substantial. And particularly in markets like Brazil, where these are really predominantly much more out of pocket, more, I guess, consumer-like markets, I think there's a phenomenal opportunity. So stand by that. I think we will discuss it more, no doubt during the year, but let's see how that evolves.

Our next question comes from Nicolas Poiak with Kepler Cheuvreux.

Maybe 2, let's say, macro level questions for me. The first one would be that we -- since the beginning of the Q1 season, we saw a lot of comments from the pharma CEOs about the impact of MFL and trying to say that Europe will have to step step up in terms of pricing if they want to continue to see new innovative drugs. You guys that are sitting on the other hand, how do you think about the MFN impact for Europe and especially on biosimilars? Do you think it's a good opportunity to, I don't know, secure more market share and get a bit of a win on pricing there, too? So that would be the first one. And then just second one is also macro level, but just it has been now, let's say, almost 2 years since we had the first Phase III waivers. How does that translate now when it comes to discussion on licensing deals, for instance, the new deal you did with Samsung Biologics. Do you see some change on the financials? Or is it the same as what you would have signed, let's say, 2 years ago?

Okay. No, thank you for the question. So MFN, honestly, I think, from standard point of view, 0 impact on -- and I think what's interesting, I mean, we're getting very good access to more ministers of health and Prime Ministers and charters over the last few months than I have in the rest of my life. I'm not sure that's very good or bad thing. But governments want to talk to us. I think they recognize that we're very much part of the solution rather than part of the problem. I mean fundamentally, Europe is getting older, sicker and poorer. We're very much part of that solution. We -- as an industry, we supply something like 80% of the drugs at about 25% to 30% of the cost. And then that also then positions us extremely well for this golden decade out as Sandoz really leverages this incredible opportunity with something like $350 billion of biologics coming off patents and about $300 billion of small molecules. That's more than this industry has ever seen in the history of this industry. So I think Sandoz is in such a strong position. And then that partly answers your second question is now is how we accelerate our pipeline. I think when we started this journey 7 years ago, I think we had 6 products in the pipeline. Clearly, we've launched quite a few of those now, but now we have 32 growing. And that's really, really exciting. And clearly, in relation to your question, the cost of developing these drugs is going down. It's still significant. It's still probably $80 billion, $100 million a throw, but we're encouraged with that direction. So I think as we then leverage that scale that we've got, improving efficiency, then effectively, we can bring more assets as we invest in our pipeline and partnering. So very pleased. I think it creates a great opportunity for patients and a fantastic opportunity for...

Our next question comes from Urban Fritsche with ZKB.

This is from ZKB. A couple of more big picture questions as well. So in recent weeks, we heard about Amnilash and the Sun Pharma organ business combinations driven clearly also by biosimilar opportunities. So I would be wondering about your thoughts on this announcement? And do you see this more as a one-off event? Or is this the beginning of a consolidation wave? And what does it mean for Sandoz? This question one. And then question two, big pharma in general, is very efficient for good reasons in developing expansion strategies for their big brands. Have you seen any major shifts of time lines for your potential launches in your biosimilar pipeline portfolio?

Okay. Look, thank you so much for your questions, Ian. If anything, I think the Sunorganon deal validates a lot of the things that we've been saying. This is -- you need scale. Sandoz has a leadership position in the majority of the markets in which we operate, with the largest player in Europe, fastest accelerating biosimilar player in the U.S., aspiring to be the #1 player in the U.S. So I think it's about scale, capability and execution. And I think it reaffirms that. So I think it's an interesting move. It's a little bit going back to sort of 10, 20 years ago where you saw some consolidation. I think the benefit that Sandoz has is already at scale, but I think it reaffirms the position that we've taken and the strategy that we're deploying. In terms of big pharma, this is -- this story is as old as the hills. As long as I've been in this industry, which is quite a while, they've always been looking at other formulation changes, patent whatever. Nothing is new. I think we've not seen any material changing to our pipeline. And again, this isn't about -- we're fortunate. This isn't about 1 or 2 products. Today, we have 32 assets. We're covering about 60% of that $350 billion. Clearly, there's opportunities to improve that over the next few years, which then completely derisks any delays. And this is never normally about one product in one market as we see from our launches, we've just launched dotamab in Europe. We're in 27 markets. aflibercept again and a significant number of markets to launch and then continuing afterwards. So I think we're nicely positioned, many markets, many launches.

Our next question comes from Chris Richardson with Jefferies...

Just a quick one on historical market shares for the disclosed biosimilars. They've all changed. I was just wondering if you could clarify how that recognition or reporting standards changed and if you saw any material change in trends? And just if you could quickly clarify the pricing pressure seen in Germany for Pa and whether we should expect this to spread to other regions or other biosimilars.

I mean I don't think anything specific in Germany and Pva. I think the point I made earlier was that we expect the funds to change some of their purchasing in 2028. So I don't see necessarily an unusual dynamic. And again, Germany, we're in a very nice position because what's unusual about Germany, particularly for products like Presva is the pharmacy chains don't exist in Germany. They're all mom-and-pop pharmacies, and we have a very strong relationship -- so even when we win a formulary, we get strong leakage over into the pharmacy network. So I think that positions us extremely well. And again, when you look at the performance of PSTUVA, we've taken a leadership position pretty much now across the whole of Europe, and we're very pleased with the performance. I'm sorry, your second question was market share data. That's a very -- we're happy to come back to you. I mean I think the challenge, as I alluded to earlier on is the U.S. And clearly, last year, the PBMs stopped reporting the sale of a number of biologic assets to IQVIA, which sort of means you have to sort of build an analog. That's really the only significant change that I've seen over the last couple of years. But I know it's made certainly looking at the U.S. market a little bit more tricky.

Our next question comes from Thibault Bara with Morgan Stanley.

Just a couple of questions. On the Samsung agreement, can you just give us any color that you can on the economic sharing here? Is the STELARA deal a good blueprint for the 5 biosimilars that you signed? Well, I think with STELA you're not -- in the U.S., you're not booking revenues, booking royalties. So any details helping us to understand the margin contribution of these biosimilars would be helpful. And then just second question on Telco market share in Europe has been stable for a number of quarters. So if you could just help us understand the dynamics here and how you expect this to evolve going forward?

Thank you. So Sam, this is a very different deal structure to the ekinumab deal. That was a straight in-licensing deal. This is much more a partnership and development, which is why I did make the point that we were taking responsibility for the regulatory work, the market access work and all the commercialization. So much more, I guess, an equal partnership rather than a straight in-licensing. So clearly more attractive and accretive to our business. So I think it's a very different model. So you can't really draw the same parallels. I think the nature of those 2 deals was very, very different. Tyruko, we've always said in the U.S., our targeting our naive patients, and that's going exactly to plan. And then in Europe, we're pleased with the switches that we've taken and continue to win share. But again, this is always going to be a build rather than a bang. These patients really need a lot of support, physicians need support. So it's a great product. And clearly, we see no likelihood of a competitor anytime soon, and we will continue to deliver and work with customers to grow the product.

Our next question comes from Natalia Webster with RBC. A few follow-ups for me, please.

Firstly, on denosumab, you've reported the 62% and 50% biosimilar shares. But are you able to comment a bit more on how you expect this to evolve with the additional biosimilar entrants and how you're thinking about volume gains versus pricing erosion through the year? Secondly, on aflibercept, are you able to talk more on how you're looking at potential contribution from the upcoming U.S. launch in 2027, factoring in the expanded label, but also Amgen's head start there? And then finally, on margin, you mentioned you're still expecting the H2 weighting given the operating leverage. Are you still expecting that 130 bps of improvement coming from mix for the full year, as you indicated previously? And beyond the operating leverage and mix, are there any other phasing impacts to call out here?

Perhaps if I let Remco go first to take the third question, and I'll do the first 2.

Nal in terms of the structure of the improvement of the margin, nothing has changed. It comes from 2 elements from margin improvement in bio being a larger part of the portfolio, and that continues as you see this year. And the second is the leverage over our -- particularly our marketing sales and G&A expenses. That continues. That is the case in H1, we expect to be the case. We expect that the case to be also in H2. What I just made the comment is that relatively the sales growth is a bit higher in H2 than H1. You have a little bit more impact of the leverage, and therefore, the margin is a little bit more weighted for H2. That's the only difference for the rest of everything... Speaker 5 Back to you, Richard.

Thank you. On Dano, I think partly said, look, there's still an awful lot of market to go at. So even though Cly competitors are coming into the market. We're also -- I'm less concerned about volume share, it's about value share. So here is keeping control of ASP, making sure that we don't lose control of the discounting and the rebating. So we're very thoughtful about the channels and the partners that we work with. We're not trying to solve everybody's problem. So really, I think there's still momentum that we can create in that business and do that in a way that is sustainable and value creating rather than necessarily chasing this to the bottom and winning volume share. So really, this to me is a value game, not a volume game over the next few years. the, I think it's too soon to call, but you're absolutely right. I think it's a super great opportunity. We're delighted with the performance that we've seen in Europe. Really, the team have really knocked it out of the park, I must say. And then I think as we go and look at taking that learning and applying it to the U.S., I think that plus with SIMarLly now coming back into the U.S. market, it puts us in a very nice position to bring that market into really late '26 and then really, I think the impact will flow through into 2027.

Our next question comes from Beat Fair...

I just had a quick one on whether or not you had or expecting any inflationary impact on input costs such as energy or freight? And if so, how do you plan to mitigate this? And then secondly, you've discussed the active portfolio rationalization in the international generics business. Can I just check whether or not this portfolio rationalization process is expected to be extended in kind of any significant way or kind of impact to other regions as well?

Yes. Look, I mean, on the rationalization, I mean, look, as I said earlier, we have like 2,000 SKUs, and we launched 1,000 SKUs a year. So in a sense, it's a discipline and an ongoing thing that happens in the business. Clearly, if you have products in particular lines that are underwater or dilutive, we either challenge in terms of looking at raising pricing or end of day pruning. And that's an ongoing process. I think in international, we want to be much more targeted and specific about certain markets and certain products. As you see then, really, the business focus in international is accelerating in the biologics. And again, I was particularly proud with what the team has delivered in the first quarter. So you saw strong momentum coming in the biologics and then really less focus on very value-destroying small molecules in that. In terms of input costs, I think we're nicely positioned. I mean, clearly, we're sitting on a good inventory. We have good API levels. So in a sense, that cost there, and we've hedged our energy. So we have a good, nice long-term hedge in our manufacturing sites. So in the short to midterm, I don't see any significant inflationary inputs. Beyond that, look, clearly, air fuel has gone up, shipping costs are going up, but that's true to everybody. So that's not clearly not a Sandoz specific position. But I think we're well positioned. I know there's some debate, particularly in the U.K. media about possible supply disruptions. Again, at the moment, we're tracking it very carefully. But certainly, we're comfortable at the moment in our ability to maintain supply to patients, particularly given our strength in Europe. So we'll see. But I guess your guess is as good as mine in terms of how long this thing is going to continue. So we will see.

Our last question comes from Florence with...

Can you hear me?

Yes, we can.

Speaking from ODDO BHF. Just to come back, a follow-up question on the pruning strategy. So do we have to understand that it is something -- it's business as usual. It's something that you may extend and maybe do more rationalization on the international on other territories. And if you have some proceeds and capital gains from this strategy, do you confirm that it will be excluded from the operating profit guidance? That's my first question. Second question on the generics business. Just to come back on the second half of the year. Do you confirm that you should have more new launches in the second half of the year on the generics business? And last question, I know it's a pretty small business, but in the U.S., the generic business, any comments on the performance here? And if you continue to be focused on the more profitable products rather than the products which are, let's say, facing a tough competitive landscape.

Thank you so much, Lant.hap I just talk about the generics and the U.S. Look, I think the generics business in the U.S. did extremely well. We're very pleased with the performance the U.S. team delivered -- and it's still an attractive market. I think there, we've always said, look, it's much more about specific opportunities. And obviously, we gave paclitaxel was a good example, I think last year, and then there's been a number of others that we've launched feramoxetol, et cetera, et cetera. So there's been some very attractive launches that have performed extremely well in the U.S., and we will continue to look to do that and file. But our ambition in the U.S. have no desire for us to be the #1 generics player in the U.S. Clearly, our main growth driver is biologics and executing extremely well in the U.S., and I think we're just doing that. From a broader Gx timetable, I mean, I think our guidance here really is, look, we expect the headwinds of generics will wash out, particularly Q1 into Q2 as we get into Q3, Q4, that will be -- will stabilize and then continue to potentially grow. there's always launches. I mean we launched -- we've got like 400 generic projects ongoing at any one time. So there's so many launches, it's very difficult. So it's not normally one big specific generic launch. So -- but I think really, we try to explain why Q1 into Q2 and why that washes out as we go into the second half of this year. And then with the strong underlying growth we're seeing in biologics, continuing to deliver and support the overall business. So I think that's really how I view it. Franco?

I perhaps add then your question on the pruning. It's a bit of repeat what Richard already said. The biosimilars is really we want to double-digit growth. We have done that. We will continue that. That will also happen in international. Generics is a quite broad portfolio, and we just have any other company and responsibility to look at our portfolio -- and if there are certain parts of the portfolio which will make sense to discontinue, we will discontinue that. And you saw a relatively a bit more impact in Q1, but it's something we have done also in the last years. So there's a relative more impact in Q1 and the rest of the year, we will expect or in H2, expect less of this impact to happen. That's all. There's no one-off related income or costs related to this pruning. This is just an adjustment of the portfolio. That's all.

I think that was the last question. So I just wanted to thank everybody for your time this morning. I think pleased with the first quarter exactly as we expected it to come. delighted with the momentum that we're seeing in biologics. -- particularly strong call out performance in the U.S. and international and excited about the momentum we're building throughout the rest of this year, again, confirming our guidance and look forward to talking to you again shortly.