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[00:00:01] Good morning and good afternoon and welcome to the Novartis Q3 Twenty twenty results release, conference call and live audio webcast. Please note that during the presentation, all participants will be in a listen only mode and the conference is being recorded after the presentation. There will be an opportunity to ask questions by pressing the star and one at any time during the conference. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. Should anyone need assistance during the conference call, they may signal the operator of depression, Storin Zero, with thoughts. I'd like to hand the call over to Mr. Samir Shah, global head of investor relations. Please go ahead, sir.

[00:00:46] Thank you very much and thank you to everybody for participating in today's call and we appreciate very busy day for you all. And lots of companies are reporting out. Before we start, I just want to read you the Safe Harbor statement. The information presented today contains forward looking statements that involve known and unknown risks, uncertainties and other factors. These may cause 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. Twenty f its most recent quarterly results on form 6k that respectively were filed with and furnished to the U.S. Securities and Exchange Commission and with that one hand across to us.

[00:01:42] Thank you, Samir, and thanks, everyone, from my side as well for joining today's conference call with me today, I'm Harry Curtis, our chief financial officer. Many friends, Chewton, our president of Novartis Pharmaceuticals, Susanna Shapard, our president, Novartis Oncology. John Sire, head of Global Drug Development. Richard Stainer, our CEO Sandos and Shannon Clinger, our chief legal officer. So if we move to slide five, I'd like to start out by providing some perspectives on the third quarter. As you saw, we delivered very solid results. And I think it's important to put those results in the context of covid-19 and the impact it's had on health care systems. Despite that impact and despite the impact of those health care system disruptions on some of our legacy brands, because of our key growth drivers, because of our execution on launches, we were able to deliver solid sales performance in line with Q3 of last year, four percent sales growth year to date and strong operating income performance, core operating income performance with 11 percent in the quarter and 16 percent year to date. As important was our ability to continue to deliver on our innovation agenda. In the quarter, you saw important approvals in the U.S. for relapsing forms of multiple sclerosis, multiple approvals for contenting Pecorella and some indication expansions as well. For Zoellner, we had multiple positive readouts in Bellevue, in DME Abels 001 and CML and importantly, a range of readouts as well for Ellen 023 of Tuckerton, our factor B inhibitor, which we believe could be the next one of the next major medicines for Novartis. And we also achieved positive CHB Affinion for Leitchville and Hyperlipidemia and a cure for sickle cell disease. So a solid and strong quarter really for delivering on…

[00:16:36] Hey, thank you. Good morning and good afternoon, everybody. So I'm now going to walk you through some of the financials for the third for and to my mom, as well as provide you with an update on our full year guidance. Now, as always, my comments refer to your site of continuing operations and growth rates and constant currencies unless otherwise noted. So Slide 16 shows the summary of our performance for quarter three and the past nine months. First, I would like to focus on the year to date results. On the right hand side, the nine months performed well strong, with states falling four percent, Travancore operating income and core EPS growth of 16 percent. National sales were mainly driven by Intercostals or Gentner centric Suddaby month, as well as the rest of our portfolio. And the core operating income growth at this significant level was driven by the higher sales, improve gross margins from various productivity and cost initiatives. Of course, Holditch, related to our marketing and sales department, also contributed to core operating income growth free cash flow with eight point three billion. That's down 12 percent. [00:18:01] And the US dollar was mainly driven by legal settlement, cash outs and lower divestment proceeds compared to the prior year. With respect to quarter three, that sales were in line with prior year due to the increased generic competition, particularly the furniture and extras, as well as the impact of 219 mainly on our technology portfolio, which we will discuss will return later. Despite this, we were able to deliver another quarter of double digit increase our core operating income, which grew 11 percent driven by lower spending and improved gross margin. Overall, a strong performance, especially given the challenging business environment that we are…

[00:26:27] Thank you, Harry. Good morning. Good afternoon to all of you. So let's turn to the overall performance for pharmaceutical. The first nine months of sales growth, six percent with continued momentum from our two key growth drivers to three store sales growth of two percent, despite the continued covid-19 impact. Our focus continues to be on driving consensus on interest, though, also leveraging the launch of new indications and geographical expansion. And, of course, executing on the launches of Buki Center and Leitchville. If we turn to slide twenty three, twenty four four 2006 to three brought us our first billion dollar quarter and seven percent year over year growth, despite covid-19 impact, intensifying competition, biosimilars and pricing pressure, this is a great testament to the complete profile of. The market growth has slowed versus previous year due to covid-19, and today we still see only an estimated 70 to 90 percent of patients returning versus the pre covid levels. We continue to see delays in diagnosis and slower news starts across the US and the EU, particularly in dermatology. Despite increasing competition, Hendricks maintains a strong position in Durham and is outperforming the market in room. [00:27:54] If we look at the U.S., we saw double digit growth year over year, strong momentum in the second half of this quarter. Our focus is on maintaining value in Durham while driving the growth in room. If we look a little bit more closely at dermatology, we maintained our market share and our IAL 17 leadership. And in rheumatology we're going three times the market year over year and leading and share around 30 percent. If we turn to you percentage to stabilize market share in Durham and maintains rheumatology despite the increasing mandatory use of biosimilars in our…

[00:35:57] Thank you very much, Marie-France. And let's turn to slide 30. The oncology business remains resilient, delivering four percent of growth for the nine months, with sales reaching ten point nine billion in the quarter. We have seen a very strong uptake of our recent launches. His colleague, Kim Ryan pick up Duckbill and the recently launched Rechter and also our growth drivers PROMACTA, Regulate Tukwila Mechanist and Chakravarti contains very strong double digit growth. The strong momentum across these brands was offset this quarter by increasing generic erosion of Affinitas exchange new in the US and send us that in L.A. in Europe, as well as continued covid impact in some areas of the oncology business due to the pandemic. Our Radio Lagann Therapy Luthra continue to experience increased number of cancellations and delays in new patient starts, still achieving sales of 109 million. But overall, oncology business remains very resilient and we are confident about the dynamic into the fourth quarter maintained by the strong performance of its market brands and recent launches moving to Slide 31 because it continues its very strong growth trajectory this Q3 sales of one hundred eighty three million and 50 percent growth from previous year, benefiting from the ongoing impact of positive overall survival data from two pivotal phase retries. We have seen very strong uptake in market share again ex US, especially in European markets, where both post and premenopausal indications were approved for reimbursement in Germany, Italy, France and Spain, and also in the U.S., where his colleagues continue to grow and gain market share in Q3. [00:38:05] And this despite patient screening being suppressed and approximately 20 percent decline in breaks of CDK four six. And at the moment, Escala is the fastest growing CDK four six in the US. We are also pleased to see that differentiation within the CDK four six years is increasingly recognized. And just to remind you that KISS colleague has a unique profile versus other CDK four six inhibitors, this preferential inhibition to CDK for over CDK six and a high concentration to inhibit the target. We are very proud to share with you that because has received the highest rating as the only CDK four six on the small magnitude of clinical benefits scale, confirming once again the substantial benefit for patients based on significant overall survival benefit. On the development side, we are expecting a readout with overall survival results from our Monalisa to study in age twenty one. Our Natoli trial. As was mentioned in High and Bubon, breast cancer is enrolling. Well, we have extended the enrollment in the trial in order to enrich the data generated with the increase sample size and allow a more robust assessment of the treatment affect. The Natoli trial is on track for final readout in Twenty Bubo. So overall, we are very pleased with the performance of his colleagues. And they said I went back to Vas.

[00:39:46] Thank you, Susanna. So just in conclusion, as you can see, we had a very solid quarter with double digit core operating income growth, despite the impact of covid on health care systems, our growth drivers, our launch brands, the key drivers for our mid to long term growth are well intact and performing well. We raise our full year core operating income guidance. As Harry outlined, our mid and late stage pipeline is advancing. And I hope all of you will continue to appreciate the depth and breadth of our Mid-State pipeline in the coming months and years. And lastly, we continue to progress on our journey to become an EU leader with concrete advances over the quarter. We look forward to taking your questions. So, operator, we can open the line.

[00:40:29] Thank you very much indeed, gentlemen, if you wish to ask a question on one on your telephone keypad. Your first question today comes from the line of Mark Purcell from Morgan Stanley.

[00:40:42] Yes, thank you very much for taking my question mark personalties, Tony, just a couple of them in terms of Sondos, I noted on the media management of this, there's going to be a focus on this business. So perhaps could you sort of talk to us about some of the pipeline opportunities you Sondes see here and over Tahari in terms of, you know, there's a significant opportunity in the global manufacturing footprint within this business, what sort of operating margin targets you believe you could get? And for the pipeline, I mean, things like Ginelli and Biocon and to know some of which you haven't spent much time talking about yet. And then a second one for Hari on the on the group margin, 260 basis points improvement. Could you help us understand the underlying improvement and the sort of covid related improvement and how sticky that related part might be going forward? And the last question is, on a scale of upside, it'll be like LMP. It's a I guess, a pipeline and a product here. Could you help us understand if there's going to be any more sort of interim analysis from the proof of concept data as that matures in the transplantation setting and sort of frame the opportunity and soldiers syndrome, I think is the second most prevalent autoimmune disease. So how significant could that opportunity be ahead of proof of concept in the second half of this year? Thank you.

[00:41:56] Thank you, Mark. So first Richar on Sandos Pipeline and Global Manufacturing.

[00:42:00] Thank you, Mark. Let's start with a pipeline. We don't generally disclose specific elements of our pipeline, but we have a very strong pipeline across small molecules, but increasingly biologics and more complex products to bring to market with a goal, ideally been at first entry and market at Alawy formation across pretty much all our territories. You raise a point about supply, actually. First of all, you know, supply this year has been remarkably strong given the challenges that we've had. And also we've gone ahead and form Sandos Tech Ops over this year. That means that we have far more control over site utilization, investment and strategy that is helping to bring better production and a greater degree of alignment between the retail and commercial businesses and the supply chain, which, as you know, in generics is a key success factor. So thank you.

[00:42:54] Let me just add one point, we have seen a range of deals over the recent years to continue to bolster the Sandos portfolio, including the Aspen Pharmaceuticals business in Japan, which helps us build out our injectables portfolio and pipeline in Japan again. And Lee, as you mentioned, diabetes, the Biocon collaboration. So our aspirations both through the internal portfolio and biosimilars, but also to the range of partnerships to not only tackle the kind of largest opportunities in biosimilars, but also the so-called mid tier opportunities in biosimilars and build a broad and deep portfolio. I think, Mark, you also asked around margins and we have an aspiration to get to the mid to high 20s margins. And Sandos over time, this won't be necessarily overnight. But we believe that we have the potential to be in line with the top tier peers in the generics sector. And that's absolutely our goal. Harry, ungrouped margins.

[00:43:54] Your first time on Sondos 320 is clearly too high to only be achievable and also correct, of course, the manufacturing. Initiatives, transformation initiatives are also significant ways, according to Sondos model. In addition to, of course, will be the biologic success to structurally biologics and demanded a higher margin structure. The other part of the business, so very good potential for business. But of course, overall, for example, innovative medicines are also very positive. If you look at the first nine months, you know, three hundred sixty basis points of improvement and I think we can almost put it to about one third of them by the gross margin. Also here, of course, the manufacturing footprint and some mix effects that have a positive impact, some through 60 percent 360 basis points. And the other models, which would what we call the related lower spending levels and for productivity and say know four percent sales growth pick up. And now we do expect that some of the according to the latest on this board will come back. And by the way, also the current situation, we do invest into our products where it's possible. Of course, we don't waste money and some activities are simply not possible or whatever. But we do also believe that most of the productivity that we for this new situation will also speak for the future. And that, of course, the key element that we work for next year and the three to five year plan. So we expect that if we do increase our core margin on the innovative medicines business and the company each of those years, that we are very well on track to get through to mid to high 30s with these margin improvements year by year as we continue on our productivity programs and also figure out how we make most of the quality related productivity initiatives also. So overall, on the very good trajectory, the.

[00:46:26] Thanks Harry. And John.

[00:46:28] Yeah. As you know, Mark Scoutmaster's is Orianthi 40 that we're advancing and multiple indications, our primary indication that we're pursuing is in renal transplant. And we've shared some of the data previously and we're moving forward with an innovative approach that we call inbox, which is a risk prediction scoring that combines measurements of kidney function. We look forward to bringing that to the market, working with the health authorities in the early 23 timeframe. That's for renal transplant. You were referring to the Shogan syndrome, which which is an additional indication that we're exploring and that is moving forward. Currently in a phase to a study, there is an interim reading out in the showgrounds syndrome population that will not come out until the first half of 2022. So those are the general timelines. But we are looking at multiple indications for a scale that we're hoping for potential multiple approaches to treating patients. Back to you.

[00:47:29] Thank you.

[00:47:31] All right. Next question, operator.

[00:47:34] Thank you. Your next question comes from the line of Graham Parry from Bank of America.

[00:47:43] Hi, thanks for taking my questions. So firstly on the margin, guns that Harry was just touching on that. So year to date, you're almost into your mid to high 30s margin target, which I think you'd previously pitched as being by 2022. So can you just help us understand when there's margin, where does margin growth stop? So where is it taps at above that level? Secondly, on to the actual sales in the quarter. Is it all free drug and how long do you expect the two months free drug program to continue? Is that scheduled for all of Kiwan or first half of 2021, for example? And then thirdly, on the changes on the Natalee trial. So you've highlighted you've increased to 5000 patients, but have you changed recruitment criteria there at all to enrich the population for higher risk patients or amended the statistical analysis plan to allow a primary endpoint readout only in high risk patients, for example? Or do you think that the differences we're seeing between the evidence and zino adjuvant trials were actually product rather than population related? Thank you.

[00:48:53] Thanks, Graham, on the mid to longer term margin, Harry.

[00:48:58] Thank you. And of course, we have to first recognize the first nine months, a margin of error, it's usually a bit above the full year. This quarter for margins tend to be for seasonality reasons, lower. So we are the first thirty six indicated for the quarter year to be roughly 35 for innovative medicines. So we have some room to go, you know, for the mid to high 30s and then we don't put a cap on it. But first we want to get into a range of mid to high 30s. I think most of our large comparable market cap companies R&D mid to high 30s. But it depends also, of course, on the mix of businesses and the launch cycles. So I don't want to put a cap on it at the moment. But first, we want to get to the mid 30s and we always, always want to ensure that we have the right investment at the same time as we try to productivity and resource allocation.

[00:50:02] Thanks, Erica, on to Center Matron's.

[00:50:05] Yes, so our focus in Twenty twenty is really just about driving appropriate demand and initiation of patients. In other words, for us, the broad adoption and ease of access initiation is key. As you know, we have this free drug program and this will be a significant bridge for a number of patients until we get to page script. So, so far, our key metrics is going to be NDR. We're not underestimating the extra lift it takes to launch a product during this pandemic, and that's why we're really focused on driving demand and initiation. We've already seen some early access wins and we're focusing on broad availability for four patients. We've seen that with CVS and that now we've had our first Medicare when we want to ensure that patients have preferred single step access. We believe that content has the potential of being the first choice CMT for patients, physicians and payers, because it's highly efficacious, it's safe and it can be administered at home. So that's what we're doing right now in Twenty twenty is really focusing on demand and initiation of patients.

[00:51:19] Thanks, Mike and John, I'm Natalie.

[00:51:22] Thanks, Grams. Thanks for the question, Natalie. As you know, we increase the sample size from 4000 to 5000 patients to allow for a more robust assessment of the overall treatment effect. But I will say is for competitive reasons, we don't want to disclose too much details, but we do believe in the unique scholarly profile and the overall trial design remains the same. So what we can disclose is that the enrollments continuing and going very well. We also are using a 400 milligram dose here. And what we've seen so far is that this has been well tolerated, which is different from the 600 milligram dose in the advanced breast cancer patients. So overall, it's going well and recruitment is going very well. So thanks perspective.

[00:52:13] And maybe just to build on John's point, I mean, we we believe that this guy is unique in its focus that, as I mentioned the early comments on CDK four, we also believe with a robust trial in which we limit patients discontinuation discontinuations in the study, which we think hampered some of the other studies, we have the opportunity to have the broadest indication in the entire in the entire competitive side, which would be, of course, a unique selling proposition for Castalia around the world. So we're quite excited about taking this forward. Thanks for having next question, operator.

[00:52:49] Thank you. Your next question comes from the line of Andrew.

[00:52:54] Thank you. Three questions for Marie-France, please, on Inkless Lauren. Firstly, in terms of the launch and marketing, should I assume that the interest of field force is going to do the bulk of the heavy lifting? Second, when would you expect a codes to be issued? I understand they're issued quarterly now, so I'm assuming either first or second quarter. And then finally, just thinking about the degree of cost advantages you have in terms of pricing to payers versus the fixed kind of antibody, could you just compare and contrast the cogs on this run versus a monoclonal. Thank you.

[00:53:35] Thanks, Mary. If you want to take the first two, I can tackle the COSO on the field force in the Jacob.

[00:53:43] Yeah, so, I mean, clearly, there are there are a lot of synergies between the field force that we've built with and trust, though, and what we would like to do with with and there and I think the approach that we're taking within Quadron will require us to also build our capabilities in managing different stakeholders such as government and insurance companies and payers and working with system. So we will have to build additional capabilities. But overall, I think it's clear that when you look at in trust, so when you look at an acquisition and when you look into the future of our CNN KVM portfolio, that there are there are a lot of synergies that we can leverage across the board when it comes to the GE code. Yes, you're right. There are giving out Jaycox Quarterly. I just remind you that a lot of cardiologists in this space are not necessarily set up for the Bienville process, but systems of care are. And many of these cardiologists are affiliated with systems of care. So we believe that through the systems, we will be able to overcome this initial hurdle. That being said, we will be building the capabilities for Binzel, possibilities for for cardiologists and beyond.

[00:55:09] Stationary front and then on on our longer term strategy and how it links to the cost of the we, of course have the aspiration to take the product brought into the CVB secondary prevention market. We have the ongoing secondary outcome study. And then we also have the aspiration to test the medicine in primary prevention and agreement with the NHS to take that forward and potentially additional supportive studies to get us to a primary prevention which would open up the patient population quite dramatically in order to enable that. We, of course, would then have to over time be able to provide this in larger volumes and that competitive cost. We believe that as an RNA based therapy with small molecule, a small amount of production profile, we have the opportunity to drive these cogs quite low and to not as low, perhaps as the traditional small molecule. But in that range, the way we're going to do that is we are over time planning to build up our own internal capabilities to produce this produce this medicine. We're working with a collaborative group also in the UK to look at next gen technologies. But the aspiration would be certainly to have the costs be a fraction of the cost of a typical monoclonal antibody that would enable, I think, that large volume possibilities.

[00:56:25] Thank you. Next question, operator.

[00:56:27] Thank you. Your next question comes from the line of Nora Sutcliffe from UBS.

[00:56:34] Hello, thank you. Firstly, until you've been clear about your plans to drive some demand in the short term, but could you outline for us what you think the ramp towards profitability looks like for this drug? Is it quicker than usual because you've made up the team up historically, albeit in a different formulation? Then secondly, for John on the fact to be in C three G, the view from the regulator on what the appropriate end point is for a Phase three trial, is proteinuria enough or will you need EGFR? And then maybe finally on Xeljanz missiles outside the US? I think he said Germany is playing a very substantial part. But could you tell us what other countries are contributing meaningfully to revenue at this point? Is it just Japan? Thank you.

[00:57:22] Thank you, Laura. So we'll start with the Kissam to run rate from.

[00:57:28] Yes, I think I think we have to think about what what Cosenza is right, so because of the high efficacy therapy, it's well tolerated. It can be administered at home. And for this reason, we firmly believe that our position goes beyond the current Vissel market. If you think about the fact that 70 percent of patients are currently on either subcu or oral Dantes and 63 percent of patients are remain on low efficacy therapies. When you look at what's happening in the marketplace today, it's very encouraging to see the shift to higher efficacy therapies. We know that there are a number of physicians that are not necessarily don't necessarily have access to infusion capabilities or patients, certainly in this covid period, who are going to be looking for options that don't require them to spend time in an IV infusion center. So we believe that the way we should be positioning himself is in a first line or a first switch. And that's why the focus for Twenty twenty is really on the appropriate demand, the initiation of patients to look at some of the estimates on what the cell market could look like over the next 10 years. There are some estimates that point us to thirty five to 40 percent of the market. We certainly want to be participating in that very strongly. So. What the focus is now is broad adoption, ease of access, initiation. We've learned a lot from our previous launches in this space and we know that it's absolutely crucial for us to have strong access and for patients to be able to initiate this drug very easily. We've got, as we said, the free drug program in our key metrics over the next couple of months is going to be Andrex.

[00:59:18] Thanks for the. And then John on the Ellen series and the history, yeah.

[00:59:25] For LMP or I guess we'll call it Tuxpan if you guys know the new name for it. In fact, as we look at sea 3G, as you know that there's no therapeutic agent designed to really target the underlying disease, which is complement dysfunction here. So we're really encouraged. And you saw the results that was shared in the presentation slide. So we're really encouraged by those results. Now, as you pointed out, in terms of proteinuria reduction, this is not a validated, validated surrogate marker with the FDA. So we're currently working with the FDA and looking at both the urine protein creatinine ratio, as well as looking at the estimated glomerular filtration rate, EGFR. And what we did see in the Phase two studies was that there was benefit in both. So as we move forward, we're capturing both in our studies and looking for the best path forward with the regulatory authorities.

[01:00:29] And then lastly on Xeljanz, my ex, us, there's I would say maybe four groups of countries that are relevant, the U.S., of course, Japan, as we continue to launch in Europe, you have some early adopter countries. So primarily, primarily Germany and a few other smaller countries. But then we're now working very hard on expanding access in the U.K., France, Spain and Italy. And then the fourth group will be the emerging market countries, which are substantial markets, countries like Turkey, Saudi Arabia and the Gulf Coast countries, Brazil, Australia, not emerging markets, but Australia, Australia and Canada. So as the next 12 months unfolds, various markets will come online at different points in time, depending on how fast the body, the various axis bodies move in providing reimbursement. We do continue to see a reasonable number of patients in self-paced situations as well, and also compassionate use, of course, or compassionate use program. I'd say overall, the demand is very robust across these markets, both below two years of age. But as I noted, also a significant number of patients, proportion of patients, about two years of age as well. Thank you, Laura. Next question.

[01:01:50] Thank you. The next question comes from the line of Carey Holford from Berlin, but thank you, Carrie Holford.

[01:01:58] Three questions, please. Certainly. And multiple sclerosis. Looking to Jillani, how much of the sales decline in Q3 is due to pandemic disruption versus the increased competition? You mentioned that. Which competitor is losing share to? I wonder if this is also a reflection of you promoting Masand according to the Chilena, and that will continue going forward at Z. Can I ask, is there another interim analysis scheduled for the kind of one study before the final readout and if so, when that might be and then only to Sarah? I guess I'd like to understand what the risk is here that the disruption we're seeing currently due to the pandemic results in a permanent loss of access or interest to physicians and to new patients. How can you retain that interest in that relationship? Thank you.

[01:02:56] Thank you, Carrie. So first on July, Micron's in the.

[01:03:01] Yeah, so are two three, Jolina decline is is as expected, and it's been driven by some inventory decreases, which should bounce back. We have seen as you know, a significant slowdown in the NBER, especially in the one class and Gilenya due to its pretesting. And first, this observation has has seen a slowdown in the NBER market. We've also seen a slower recovery in the S&P market versus the others during this covid pandemic. We have had a lot lower demand due to increased competition. There are new Oral Dumpty's and also we have seen some some switches happening with other competitors, higher orders. And the fact that the full organizational focus is on driving new patient starts working something nassan. So Gilenya continues to be a third most prescribed DMP worldwide. We know it's a high efficacy oral. It's the only VMT prescribed in pediatric patients 10 years or older in the US will continue to promote it in this population or patients who prefer orals. But our our focus has clearly shifted.

[01:04:15] They spent months on chemical omentum.

[01:04:19] Yeah, for kind of can you imagine the first line non small cell lung cancer study carry with Boston mentioned earlier in the presentations that the DMC did meet earlier this month and recommend that we continue the study without modifications. And this was an interim, as noted previously. We continue to have high thresholds for the interim analysis, for both Canopy One and canopy to the the analysis that are planned for canopy one is in the second half of next year. And for canopy to the end, analysis is planned for the first half of next year. So those are the overall timelines moving forward.

[01:05:04] And we do have carry additional interim analyses, but we're not in a position right now to predict exactly when those are going to happen based on the on the statistics. Of course, keep everyone up to date, but we have a better, better visibility on Luda Sara Sidner.

[01:05:22] Yeah, thank you, Carrie, for the question. So Sarah was more or less in line with previous here reaching 190 million, and it is, as you rightly say, impacted by covid. When you look at the different dynamics for the U.S., we had a slight decline of four percent. But on the other side in Europe, the situation opened up again. We saw growth of 10 percent versus previous year. We remain very confident in Luthra given the very strong profile of the product. As you remember, Sarah has demonstrated overall survival benefit over somatostatin treatment and we see still very high interest for the product. We saw some postponements and cancellation of new patient starts, but we still activating our plan to further growth. We are reaching out to the community level where over 65 percent of the patients are treated. And we have very encouraging discussions there. So overall, we remain very confident and the current softness is mostly impacted by covid. And as soon as the situation is released, we expect to have new patients taking up again.

[01:06:47] Very good. We have a number of questions on the line to Alaska, the next set of questions to please limit yourself to one question, so compare to subparts so we could have the next question. Operator.

[01:06:59] Thank you. Your next question comes from the line of Peter Wellford from Jefferies.

[01:07:04] Hi, thanks for taking my question, Gilenya. Just go back to that, what you can provide us any visibility now on the timing of potential U.S. generics after I think all the sort of legal cases have now been finalized. And so I can go back to John just for clarification on catechisms. You said that there were other interim analyses, I think you said, but is the is the second half of twenty one headline data that you're talking about? Is that your best estimate for the final readout of Canopy one, or is that your assessment of when we could next here, which actually could be one of the next interim analyses. Thank you.

[01:07:41] Yes, I'll take I can take both of these on until Enea, we, of course, are very pleased with the response of the district court to uphold our patent. We do understand the filer has filed an appeal. So over the next 12 to 18 months, that appeal will now unfold. We continue to stand by our patents, including some of the more recent past patents that have been issued. So we would expect, again, a court case that potentially happen over the next 12 to 18 months. And in the meantime, we continue to operate as as as planned and continue to aggressively defend our IP. With respect to Canik, in the final analysis for the second line studies in the first half of next year and the final analysis for the first line study is in the second half of next year, there is an interim another interim analysis for both studies, both the second line and the first line learning from some of the disruptions that have happened with Kobe. We would feel more comfortable not providing specific timings until we have a better sense of when exactly those those interim sort. Is that clear? Peter, that's great. Thank you. All right. Perfect. Thank you. Next question, operator.

[01:08:57] The next question comes from the line of Keyur Parekh, Goldman Sachs.

[01:09:02] Hi, good afternoon. Hopefully you can hear me OK. Would you mind just setting setting the tone for the upcoming advisory committee for and and have faith based on your conversations with the regulatory agencies? What should we expect to be the focus of the advisory committee? That's one. And then very quickly, secondly, for highly, highly continuous reminders for your priorities for capital allocation as we get into kind of next year and especially how are you thinking about stock buybacks vs. business development? Thank you.

[01:09:39] Karen, thank you for the questions on the on the advisory committee. We'll see ultimately what the FDA focuses on. I think our expectation is two major areas of focus, one on the primary endpoint. As you know, the essentially adjudicated result was narrowly missed. The investigator adjudicated results was, in fact, positive. It met statistical significance. A re analysis by an independent group also indicated a positive, positive result. Surpassing those various results I think will be one major topic. And then looking at the various subgroup analysis. There was a clear trend for benefit in patients with up to a certain cutoff, roughly 57 percent as well as in women, and how the FDA might navigate navigate all of the above from a labeling perspective. We expect those to be the major topics from a safety perspective. Don't expect major discussions, Harry, on the capital allocation. I can tell you are. So thank you.

[01:10:47] As you probably imagine, there is no change in our capital allocation strategy. First priority, always the investment business to in prior to being a software growing dividend and the Swiss franc, which we again expect to pay out and well, usually March of next year, AGM, as always, to thirds go to value creating both on the day and for buybacks. So it depends very much on what opportunities do we. We all know that these are usually on M&A, bolt on quite healthy premiums have to be paid and so are super selective on them. So let's see if we find them up to five percent of our market account. And should you not find them? Of course, share buybacks, I expect always to be part of our capital allocation. But the fourth quarter. Having said that, we always do some share buybacks to avoid any dilution from our elderly patient programs that we don't announce ongoing commitment to not only our shareholders.

[01:12:10] Thanks, Terry. Thank you. Next question, please, operator.

[01:12:14] Thank you. Next question comes from the line of Simon Baker from Redburn.

[01:12:19] Thanks very much for a question on some rich, could you give us an idea of how important label carve outs of genetics are for you in light of the recent ruling that potentially renders them illegal in the September case earlier this month? And then secondly, I noticed on the slides the mention of Sternau in a few footnotes, no other comment. If you could just give us an update on where you stand with Luxton. Thanks so much.

[01:12:50] Thank you, Simon, on Sanders level, promotes research.

[01:12:53] Yeah, I know it's a really important and interesting topic. I mean, clearly we're watching the progression now with TiVo, I think going to appeal on the sand on the GSK Korea case. Clearly, the use of skinny labels has been a routine route to market, particularly in the US. It really goes against the provision that they put in place. And clearly, as an industry, it's something we need to explore and consider how we we challenge.

[01:13:22] On Luxton, Marie-France.

[01:13:26] Yeah, so as you know, we have we have the rights for, extern, X excuse, and we have certainly made a lot of progress in in making sure that we prepare centers from a training perspective to to manage the product. I will say that during this covered period, we did see a complete stop to those surgeries as they were considered non urgent. What we what we are seeing is we are seeing pickup happening now. So the hope has to be that that we can continue to see these children getting getting getting use of Leapster. And what we've seen an increase in approvals overall. We're working on reimbursement and making sure that centers are are basically up and trained to administer the product. So definitely a slow down, but but hopefully for the rest of the year, we'll get we'll get as many children treated as possible.

[01:14:37] Thanks very front. Next question, operator, thank you.

[01:14:41] Your next question comes from the line of Florent Cespedes from Societe Generale.

[01:14:47] Everyone, thank you for taking my questions. Two quick ones. First for my thoughts on. Could you please elaborate on what is behind the acceleration of the product and if it is sustainable? My second question is what, John, could you share with us how you believe you will differentiate these products versus your educate me before, which is to thank you very much.

[01:15:17] Based on Masand from.

[01:15:20] Yeah, so, I mean, we have we have seen an acceleration of MASN, we're very happy to to show. Forty one percent quarter over quarter growth. You know, this is a unique set of patients. And MASN has unique data in this population showing really great results in in the CPMs population. We've seen growth despite covid. And this is just a tribute to the fact that physicians are identifying these patients and are bringing these patients to to to treatment. You know, we've got Bretz in our patient. Onboarding is happening and it's easier. So we've improved when it comes to that. And also we have a clear a clear positioning. We've also launched in additional markets. So we've we've seen that Germany has above a thousand patients. We've also recently seen the nice nod from the UK and we're preparing to to launch in China and Japan. So I think you can continue to see this growth quarter over quarter and year over year with Mason.

[01:16:28] And John.

[01:16:30] Thanks for thanks for the question on legalism, that is, you know, liberalism has bizarre A.G. that forms free complexes and binds up to AIG. We did have a publication earlier in the year and New England Journal, which compared Legolas Mavin CSU, where we showed significant benefits, 42 percent vs. 26 percent in Delaware. So based on that, we are moving forward, obviously, and are fully recruited in our trial for liberalism and we expect a readout to be in the second half of next year. You asked about differentiation versus really Brewton of BTK inhibitor. Currently, we're still looking at we're awaiting the full results for Remy Burton and then CSU. So obviously for Renee Burton, this is an oral versus the liberalism of the subcu formulation. So as we get more information on Remy Burton, I think we'll be able to clarify with the differentiation is between the two agents.

[01:17:32] Thank you very much.

[01:17:33] Thanks. Next question, operator.

[01:17:35] Thank you. The next question comes from the line of Richard Roth, J.P. Morgan.

[01:17:40] Hi, thanks for taking my question. One place we talked about in the opening remarks about continued improvement in the U.S. prescriptions we've seen in terms of covid coming back with a vengeance maybe in Europe. So just your thoughts on on how new patient starts and and new therapies that going on in Europe and outside the U.S. to just give it a flavor going into Q4. Thanks very much.

[01:18:12] Thanks, Richard. You know, I think it's a very variable situation. What I do believe is that it's variable by country and jurisdiction. What what I think is clearly the case, those health care systems have, one gotten better at managing covid to cope with cases, understanding one hospitalization to bring patients into the ICU and therefore better manage the load. I think, secondly, there's a broad recognition broadly also published in the academic literature that there is a substantial impact of this pandemic on non-communicable diseases writ large. And there's a, I think, a broadening desire in the public health community not to see that expand to trying to maintain patient visit schedules from in oncology in all of the various non-communicable diseases categories rheumatology, cardiology, pulmonology, dermatology, ophthalmology, etc.. And then third, from just the economic financial sustainability, health care systems are quite motivated, based on my conversations, to also maintain their normal, their normal activities to to the extent possible. I think for all those reasons, we certainly are seeing an impact of the second next wave in Europe, but it hasn't been thus far as severe as what we saw in April and May. And as Harry noted, we're hopeful that that will remain the case and we do see significant disruptions. Of course, we'll have to adjust accordingly and actually think that the similar situation in the US or the US appears right now to be a bit more resilient and making sure the health care systems operate. Also, I think because of the financial strain those systems have been under. Thank you, Richard. Next question, operator.

[01:19:51] Thank you. The next question comes from the line of Tim Anderson of Wolfe Research.

[01:19:58] Hi, thank you for taking my question. This is this is one of the commanders in my question is regarding lag five to five year lag three inhibitor in Q2, it was shown as a TWENTY TWENTY three submission. It dropped off of the submission slide, wondering if you had some underwhelming data with this novel in the way it's changed its prioritization. I know it's not a high probability program, but it's relevant to one of their IO competitors, Bristol-Myers Squibb, who have a more advanced lag three program. Thank you very much.

[01:20:35] Thanks, Richard. John, I don't know if you have the latest on on unlike three. I certainly don't.

[01:20:40] So, yeah, based on portfolio prioritization, we made some decisions in the area that we were looking at was lag and triple negative breast cancer, and we decided not to move forward in that indication. So that's why it's dropped off.

[01:20:58] Thanks, John. Next question, number 11, express operating, believe it may be our last question.

[01:21:04] Question comes from the line of Joe Walton from Credit Suisse.

[01:21:09] Thank you. Two quick ones, do you have any visibility on some of the stuff in L.A., all generics, and you believe it was mentioned that some of the stuff in generics in Europe will affect other other more countries? Is that becoming a more serious issue? And the second one on Syntex, please. I know that you say that there's been a drop in visits to DERM, but we are seeing in the first three quarters of this year substantially higher prescription than sales growth. So there's obviously some increased competition here. And I wonder if you could address the competition angle as much as the lack of patients in the US and I believe in Europe. You said there's no mandatory use of biosimilars. And if you could expand on that comment, too.

[01:22:01] Thanks, Joe. So first and foremost, Susanna.

[01:22:06] Yeah, thank you, Joe. So as you saw us understanding, sales were declining and this was mostly driven by generic erosion in Europe. At state, there is one generic that has received marketing as the recession in Europe and has started commercial activities in limited countries, namely Germany, France, U.K. and a few other smaller countries on the U.S. side. We know that there one generic application going through Lego's process, but at the moment we have no further updates.

[01:22:43] And then on the competitive dynamics, very far.

[01:22:48] Yes, I'll just start off by saying that it's a very competitive class and it's getting more competitive by the quarter almost. And but despite this, Centex continues to deliver very strong growth. And if I could just take you through it, we had first of all, we had our first billion dollar quarter, which I think is definitely something to celebrate. And we have seen a slowdown in the market. So if we look at the expansion of the market this year versus last year, I mean, there's clearly been a slowdown. There's been more competition. We'll get to the biosimilars question. Second, and what we have seen is we've seen a faster recovery in the rheumatology space versus the dermatology space. If we look a little bit more carefully at the US, we're maintaining track, Sharon and Barak, Sharon Durham, even though you see the slower recovery and the increased competition of aisle twenty threes in the room space, we're actually going three times tracks versus the market year over year. So what our aspiration is, is to maintain our our share in Durham and accelerate in the rheumatology space. If I look at you where biosimilars are or have entered and where there's mandatory use, so it's exclusively in some of the markets in the EU and namely Germany, Spain and the U.K. What we've done is we've actually maintained the share in dermatology after the initial entry of biosimilars and and and the same with the rheumatology space where we've seen the biosimilars being being more used. So what this means, actually, is that we're just seeing a delay in use for Centex in Europe. We still maintain a number one or number two position in most EU major markets. And then with China, we're outperforming income biologics and we expect NREL testing in the first half of this year. So this all leads us to believe that that through the complete treatment approach of 2006, we see very broad indications from the space to the actual spectrum, the fact that we believe that we and others will continue to grow this market. If you can consider the market penetration rates or the biologic penetration rates in both room and Durham, they're still relatively low. And the fact that cost Gentex we're investing in future indications. You can anticipate three additional indications in the room space, three additional indications in the DERM space. This will address approximately an additional three point five million patients. So for these reasons, we believe that Cosenza, despite the slowdown of covid, despite the competition, despite the biosimilars, we have the potential to go beyond five billion in sales.

[01:25:45] Thanks very much. I think we have two more perhaps questions on the line. Operator, please take the next one.

[01:25:50] Thank you. The next question comes from the line of Maresh.

[01:25:56] I think my question just one to one on S.G. and it's obviously been a big topic when discussing markets with investors and made a concerted effort to improve the racing, to what extent have these efforts, the quality and that may actually lead to better financial or operational outcomes? And it's unfair to assume that all the exits come at the expense of the bottom line. Just a bit of color on what you think. Thanks.

[01:26:24] The things that I think I think the Saudi efforts have had multiple benefits for us has been a big focus for us. We're really pleased not only to have gotten important ratings, the number one ratings across many of the agencies and also in various specialty agencies and in climate and diversity also moved off of the red list for MCI, which I think a lot of investors had on their minds. All of that occurred off the table, but I see a few fundamental benefits for four years. First, with our own associates, it's a huge motivator to be a leader in the space. I think for our people, more than 50 percent millennial. This is a huge topic. So we see it as an element of our own story internally. I think, second, with a broader stakeholder group, the issuance, as in the case that the issuance of our bond led to me to get a very positive feedback from a range of stakeholders, ranging from ministers of health, you know, very senior people in government, the Gates Foundation. And so I think it creates the ability to have a broader conversation about your company and the impact of the impact you're trying to have. And then lastly, we do believe that getting much more efficient on how we use energy is much more diverse and how we source and bringing people into the company, getting to be a leader in building markets, in emerging markets and low income and low and middle income countries through our work in Africa. All of these things will benefit Nevada strategically for the long term from a talent markets and all of the fundamentals of the business. So I actually think it's totally sensible. We talked about it as a leadership team and a committee that I chair. We systematically have the targets which we publish transparently. I think we have a leadership team is very passionate about it. And again, in the long run, it will be a workshop in the quarters, but it will show up in the long run trajectory of the company. So thanks for the question. Next last question, I believe.

[01:28:24] Thank you. The final question comes from the line of Richard Park from Exane BNP.

[01:28:31] Hala, thank you very much for taking my question, just what it looks like, you're also initiating a phase three in the office. So I know you might not want to talk about the safety of agents of this public, but maybe you could compare your experience with the Phase two trials and see through tremulously and nephropathy to the previously reported anecdotal experience of the clues and also how you're thinking about the safety of the drug in terms of infection risk and how that's developing here. Conflicting opinions from experts, whether there's likely to be a greater or lesser risk of serious infection with fact to be inhibition. So be interested in your perspective. Thank you.

[01:29:18] Thanks for the question Richard. Jon?

[01:29:20] Yeah, so thanks for the question, Richard. Across the board, as you know, for Tuxpan, we're looking at multiple indications, PNH as well as C three GIGO as well as idiopathic membranous nephropathy four as we're looking across the board for C three G. What we see is obviously the data that we shared recently for IJA, where the full data set is going to be available early part of next year. As we look at the opportunity is A, there's no disease modifying treatments out there currently. And so the profile that we're seeking is one where we do believe there's a benefit. You asked specifically about infection risk so far, based on our phase two studies, we see that it's well tolerated. We haven't seen significant increases in infections across the board, and that's across both IAC, 3G as well as in the PNH. So I think with all of that information, we will have a large pool of safety information move forward in all of these indications. So I'll leave it there. Hopefully that answers your question.

[01:30:32] Thank you.

[01:30:34] Perfect, thanks, everyone, for joining the call. Everyone stays safe and healthy, and the difficult times will continue to drive the growth of Novartis. We're confident in the long term outlook of the company. I hope increasingly all of you will be as well. And we'll look forward to keeping you up to date. Thank you.

[01:30:52] Thank you. Ladies and gentlemen, that concludes your call for today. Thank you all for participating. And you may now disconnect.