Novartis AG (NVS) Q3 2026 Earnings Report, Transcript and Summary

Good morning, and good afternoon, and welcome to the Novartis Q3 26 Results Release Conference Call and Live Webcast. After the presentation, there will be an opportunity to ask A recording of the conference call, including the Q&A session, will be available on our [Inaudible] shortly after the call ends. With that, I would like to hand over to Ms. Isabella Singh, Investor Relations Executive Director. Please go ahead, madam.

Thank you, Sharon. Hi, everyone, and welcome to our Q3 earnings call. Let me briefly read the safe harbor statement before we can begin. The information presented today contains forward looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results performance, or achievements expressed on slide by that statements. For a description of some of these factors, please refer to the company's Form 20 F, in its most recent quarterly results on Form 6-K, that respectively were filed with and furnished to the U.S. Securities and Exchange Commission. And with that, I will hand over to Robert.

Thank you, Isabella, and thanks, everybody, for joining today's call. If we could move to slide 4. So in the quarter. Hold on 1 second. We are just getting our slides moving here. In the quarter, Novartis delivered sales growth and core margin expansion. And that supported an upgrade to our full year 2026 bottom line guidance. You can see sales were up 4% in constant currency. Core op inc was up 10%. Mukul will go into the numbers. In more detail, but we also had a good margin performance in the quarter. A number of important pipeline milestones, notably of course, as you all know, the remibrutinib data, but also Repsido received FDA approval Pluvicto also with important approvals in the US and China for HST Blabrasib was also filed in Europe. And Delzota received FDA priority review for DMD44 Overall, this allowed us to increase our guidance, and we will go through that in a bit more detail on the call. So moving to the next slide. Priority brands continue to perform well. In the quarter, they were up 29%. Very strong performance across Kisqali, Kesimpta, Semblix, and Leqvio. A solid quarter from Cosentyx. Pluvicto, we are still in the midst of launching in HSPC, so we have not seen that pick up yet, and we will talk more about that in a bit. And Rhapsido also with a very strong performance as well in the quarter. So moving to Slide 6. Kisqali grew 37%, and it continued to take market. You can see that our EBC shares both in US and Germany are very stable and at a very healthy level. Now turning to the US first, 38% growth in the quarter, $3 billion year to date. We are the leader in EBC, and our NBRx share was up 3 points versus prior quarter. 53% of the patients now on Kisqali are from the exclusive population. In metastatic, we are continuing to grow our NBRx share in first line, which is now at 55%. And we continue to grow our prescriber base as well. It was up 12% versus prior year and up 44% in early breast cancer. Outside of the US, we had 35% constant currency growth, continued leadership in metastatic breast cancer, Our growth is accelerating now in many of our key markets with the early breast cancer launch, now approved in 84 countries. And reimbursed in 43 countries. And I think some of the benchmarks that demonstrate the performance Germany, 80% EBC share, UK, 77%. And China relatively recently after the launch already reaching 55%. We also released a few weeks. Or last weekend, the Natalie 6 year data which showed a clinically meaningful overall survival with a hazard ratio of 0.809. And we expect that data to continue to support our growth in the setting. I think, notably, having that OS data and showing that CDK4/6 combined with endocrine therapy in those node zero and node 1 patients gives us a strong case to have physicians provide patients with CDK4/6 inhibitors like Kisqali. Kesimpta grew 22% fueled by strong demand, US growth, was up 22%, 21% in the quarter Our TRx growth is outpacing the market. We were up 3 points overall in the MS market to 16% share. We are up 4.5 points in the B cell class getting to 27% share. We see a continued trend to prescribing the medicine earlier in the earlier lines of therapy. 77% of our NBRxs now are first line or first switch. Outside of the US, also very solid performance. We have 80% of EU4 patients are from a first line first switch. And we see strong growth across Europe as well. We continue to generate evidence to demonstrate Kesimpta's activity in various lines of patients as well. In longer term follow ups. I think that just allows us to continue to support this medicine and its very strong performance. Moving to slide 8. Pluvicto grew 20% in constant currencies. It was driven more by the ex-US momentum as well as by US pre-taxane growth. The US was up 9% in the quarter. that is primarily driven by, in the mCRPC pre-taxane setting. With use predominantly after the first ARPI. The first line NBRx share is at 15%. is at 15% now, and we expect further share gains over time, and that remains our top priority. To continue to drive that early utilization in the MCRPC setting. We are in the very early days of the PSMA edition launch, and I will cover that in a little further detail on the next slide. Outside of the US, we see great performance, 68% growth. We see accelerating adoption in Europe, in many of our key markets, Canada, and Japan, as well as early momentum in China. Japan became the fastest market to reach 1 thousand patients supported by ongoing site expansion, and, also, we are building a facility there. China, we had the approval of the PSMA addition indication in August, and that we expect that to support growth as well. Now moving to slide 9, turning to the PSMA edition launch. I think first, it is important to highlight we have strong foundations in place for the brand. 2-thirds of hormone sensitive prostate cancer patients are managed by physicians who are already using Pluvicto or are connected to establish referral pathways. We see broad treatment at capacity, 9 out of 10 patients within 30 miles of a site. And we also see con. We are also continuing to address the non-clinical barriers. You can see here the images of both the availability of an infusion and the scaled availability of the prefilled syringe. it is important to note we expect about 5 to 10 weeks of lead time for new patients to be treated, a combination of doing the testing required as well as scheduling. We do expect the fastest uptake in high tumor burden patients and as well as the de novo patient segments. Where there is unmet need versus the current standard of care. We also expect continued expansion in the community. Particularly in urology. Overall, I would say we are encouraged by the early uptake indicators. But we do think through Q4, we will see some uptake and also important note, we will hit the holidays, Thanksgiving and so we really think next year is when we will see further acceleration with the HSBC launch. Leqvio continuing to perform extremely well, up 63% in the quarter, and this is demand around the world. In the US, we are up 60%, 60% outgrowing the advanced lipid lowering market. Our monthly TRx growth growing well ahead of the market and our main competitor, and I think that is in part driven by Leqvio's persistency and the high compliance rates we are seeing. We see very strong performance in Medicare, which is a good indicator of our performance in buy and bill. We are up to now 22% share. We also see increasing depth in our key health care systems. And we really focus on patients post event where there is a high propensity to want to get patients to their LDL goal. And then we also had our US label updated with a cardiovascular statement, and we are on track for the Orion 4 and VT readouts that are expected in quarter 4 and in 2027, respectively. Outside of the US, 65% growth. China growth continues post NRDL, and we have noted previously very strong growth in China. As well as the same growth in Europe And then we are continuing to expand the x v. Electio evidence base. The challenge was presented, which showed LDL C lowering as superior to pempedoic acid. Moving to slide 11. Semblix was up 67% driven by strong US momentum. I mean, in the US, we continue to see very strong performance in first line. We have reached 33% share and so you can see we are edging towards market leadership. We are really at market leadership now. And we are maintaining leadership as well in later lines where we expect continued shift in the treatment mix from second, third line towards first line. So very pleased with the US performance Outside of the US as well, we are building off a very strong third line leadership where we have 77% share across key markets. The early line indication is now approved in 69 countries outside of The US. Japan has sustained first line NBRx leadership at 56% share, and Germany already at 33% share. So very excited about the trajectory of Scemblix as we move forward. Now Cosentyx had a solid quarter, up 9% in constant currencies. I think when you net out some of the gross to net, we are in the mid single digit growth range, so I think that is very solid performance. With growth in both HS and the spa indications. In the US, you can see our HS share is very stable in the high forties. The spa business is remaining resilient, so you can see as well on the bottom panel here our share steady at 14%. Outside of the US, continued growth in Europe and most emerging markets, stable in China, and we expect continued indication expansion as we move towards the towards the end of the life cycle for Cosentyx. PMR, polymyalgia rheumatica, approved by the European Commission. We expect the FDA decision in Q4. And the HSIV was added to the label as well in October. Now Rhapsido has had really strong launch momentum. You see that in quarter 3, and we also had the additional approval of dermographism, which covers about 2-thirds of patients with chronic inducible urticaria. Let's start with CSU, we continue to see the launch trajectory in The US on a steady strong pace. over 6 thousand prescribers split between allergists and dermatologists. Over 15 thousand patients treated. Our NBRx share is about 26%, and that is up about 3 points versus prior quarter. Been very disciplined with the contracting, so that performance is in the context of about 50% access to label. We do expect further access expansion over Q4 and into 2027. And, of course, as that access expands, we expect continued acceleration on the sales. Outside of the US, we are now launched in 7 markets, and we are steadily getting reimbursement step by step, market by market. We do see strong early uptake in Germany and China. When you turn to inducible urticaria, as a reminder, a symptomatic dermographism, This is the first treatment ever approved treatment for this condition. there is about 100 thousand US CIndU patients who are uncontrolled on antihistamine out of about 500 thousand patients total. and 2-thirds of those with SD We have 100% overlap with the CSU prescribers, so that should enable us to get to a very efficient launch. And we are already rapidly working towards filing across all 3 subtypes around the globe. So we are upgrading our peak sales guidance for Rhapsido in CSU and CIndU combined to over $4 billion. And moving to the next slide, we had some important readouts in the quarter, which you are well aware of. Of remibrutinib. Hopefully, many of you heard the call on Friday, so you know well. So I will not belabor, but we will go a little bit further review on the next slide. But we were really pleased with the results. We show that we achieved disease control with outstanding consistent safety. And the FDA submission is on track for Q4 with a priority review voucher. delgociptacine, we had the-- Did not meet the primary endpoint in HARBOR, but we did have the evidence clinical activity in the secondary exploratory analyses. We will present that data in an upcoming medical congress. We are doing a lot of work now to prepare the next steps. And engage with health authorities to chart out the next right steps for the development of the medicine. We did take a partial impairment charge of $1.9 billion. Primarily driven by the timeline shifting out by the additional clinical work that has to be completed. And then lastly, pelicarcen, the phase 3 of Horizon study did not meet its primary endpoint. We will have that full dataset presented at and published in a major medical journal, and I think that will provide further insights into that data Further development of DII 5 or 1 annual sRNA for LP(a) is still under consideration. All of that taken together, we reaffirmed our 5% to 6% constant currency sales guidance for 25 to 30 and our mid single digit constant currency long term growth outlook. We have done all the modeling. We feel very comfortable with those numbers. Now turning to remibrutinib, you know, we were really pleased with this data, delivered comprehensive disease control, You can see here on the left, all the data that was reviewed, including the 6-month PIRA, so independent of relapse progression impact-- reduced by 30%. Very favorable safety profile, robust, consistent, no liver signals, no infection imbalances. nearly 50% fewer discontinuations due to AE immunomodulation without B cell depletion. And as we all know in multiple sclerosis, with so many options, it starts with safety. And if you cannot demonstrate a clear, clean safety profile, understandably, neurologists will look for other options. So we think having that safety profile and then showing disease control is why we are so excited about the medicine. So the filings are ongoing, as I already mentioned. And if you go to slide 16, as a quick review for anyone who is not on the call, we see an opportunity in the naive populations about the. that is about 30% of that naive population we think would be open to take a medicine like remibrutinib. In the oral switch population, 40% to 100% of patients over time, could prefer remibrutinib given its excellent safety profile and comprehensive disease control We expect over time as patients are fully controlled under anti CD twenties, patients who might want to be switched to an oral medicine, about 45% of those patients in the US And then the other segment, which is some of the older injectable medicines, over time, we hope to be able to address 100% of that patient population. Outside of the US, we estimate about, around 38% is addressable. All of that taken together gives us confidence in a $4 billion-plus medicine. With a further upside with the nonrelapsing SPMS population And as well, we will read out data in 2 years on the Acrivus switch data which could provide further momentum to these forecasts. Now going to slide 17, I will not go through the slide in detail, but just the highlight, we have multiple readouts coming out in 2026 and a strong catalyst path for 2027. We can cover it on the call with your questions, but if all of the milestones that we have for the remainder of this year as well as next year are on track. So moving to slide 18, and with that, I will hand it over to Mukul.

Thank you very much, Vasant, and good morning, good afternoon, everyone. I will now share more details on the financials for the quarter. And as a reminder, my comments, as always, refer to growth rates in constant currencies, unless otherwise noted. Moving to Slide 19. Yeah. So in the third quarter, net sales grew 4% to $14.5 billion. While core operating income grew 10% to $6 billion mainly driven by our growth driven by our growth drivers as well as continued productivity in our business. Quarter 3 core operating income margin was at 41.6% of net sales. This is an increase of 2 percentage points versus prior year. And this is mainly driven by gross margin improvements as well as continued productivity initiatives, primarily in our SG&A business. SG&A part of our business. Core EPS grew 8% to $2.46. On a reported basis, in quarter 3, operating income was operating income was negatively impacted. It was $1.8 billion, which is a decline of 61% mainly due to higher R&D expenses. The higher R&D spend includes a $1.9 billion partial impairment of delgociptacine This impairment follows the phase 3 HARBOR readout in DMD and it reflects our updated assessment of the value of the asset as we evaluate the full data set and engage with the health authorities on the future development path for the product. Net income for the period was at $1.2 billion, a decline of 71% mainly due to lower operating income and higher interest income. And free cash flow for the period was at $5.1 billion, which is below prior year. Primarily due to lower net cash flow coming out of our operating activities. For the first 9 months of the year, net sales were flat and core operating income declined 2%. Core operating income for the 9 month period was a decline of 0.8 percentage points. And free cash flow for the same period was at $14 billion. Moving to slide 20, please. We remain committed to our shareholder friendly capital allocation strategy. Balancing disciplined growth investments in the business with meaningful capital distribution back to our shareholders. In quarter 3, we completed the acquisitions of Karen Bio, adding to our early stage oncology pipeline, We also exercised our option to acquire Sironax's blood brain barrier delivery platform. And at the same time, we continued to invest in our internal R&D programs. On capital distribution front, in the first 9 months of the year, we have now repurchased $2.8 billion worth of our shares, under the current up to $10 billion share buyback program. Please note, we still have $4.9 billion of the program still to be executed. Slide 21. Moving to guidance. So given our very strong bottom line performance in the quarter, we are raising our full-year 2020 guidance for core operating income. We now expect for the full year 2026, core operating income to be in line to growing low single digit. For reference, this is an upgrade from the previous guidance of core operating income of low single digit decline for the full year. At the same time, we are maintaining our full year guidance of net sales expecting to grow net sales at low single digit for the year. For 2026, we also continue to expect core net financial results to be an expense of $1.7 billion and the core tax rate to be around 16.5%. This is in line with our previous guidance. Moving to slide 22. Yeah. So beginning of the year, we talked about 2026 as a year of 2-halves. And with this quarter with this quarter reading out, we pretty much sticking to that outlook. As a reminder, in H1, net sales declined 2%. Core operating income declined 7%. Both were impacted by the US Entresto generic erosion. With a strong Q3 delivery, we now expect a stronger H2 performance. H2, we expect net sales growing mid to high single digit and core operating income growing high single to low double digit. After stepping up in Q3, sales growth is expected to accelerate further in Q4, as we move beyond the impact of the US. Interest to generic erosion. On the core margin, we do expect a decline in Q4 versus Q3. This reflects the typical year end phasing of our spend. Also, higher royalties as growth drivers scale up would play a part And finally, we will also see the impact of lower other income as a result of the Xolair biosimilars in the US. As a reminder, for 2027, we will provide our full year guidance with the Q4 results in February next year. Moving to slide 23. Yeah. If exchange rates remain at late October levels, we expect positive 1 percentage point impact on the full year net sales and a positive 1 percentage point impact on our full year core operating income. If these rates also prevail in 2027, we would expect a negative 1 percentage point impact on top line and no impact on core operating income. As a reminder, we publish updated FX estimates monthly on our website. And that concludes my remarks, and I will hand it back to Vasant.

Great. Great. Thank you, Mukul. So turning to Slide 25. We delivered strong growth in the quarter driven by our priority brands and launches. The really shows the replacement power of the business. We have been able to successfully navigate the Entresto, Tasigna, Promacta/Revolade in the US, demonstrating we grew through the year We will grow through the year, which I think really shows the power of the company. We advanced the pipeline with positive readouts for remibrutinib in RMS and for Rhapsido as well as the Pluvicto label expansion. We are upgrading our full year guidance for core operating income and we remain on track to deliver our midterm guidance of 5% to 6% sales in 2025 to 2020. And our long term growth outlook. You go to slide 26, we are excited to also host, hopefully, many of you at Meet Novartis Management. We will provide an update on our midterm guidance from 2026 to 2031. As well as our long term growth outlook. We will update our peak sales potential for key growth drivers We will also focus on our mid and late stage pipeline assets, which we believe will support our long term growth. We will have, as usual, breakout sessions by therapeutic area, and we will also have a panel session on AI in R&D. So we will look forward to seeing you there. And with that, we can open the line for questions.

Thank you. To ask a question, you will need to press 1-1 on your telephone and wait for your name to be announced. Please limit yourself to 1 question and return to the queue for any follow-up. To withdraw your question, please press 1-1 again. We will now take the first question. And the first question today comes from the line of Sachin Jain from Bank of America. Please go ahead.

Maybe I will just kick off This time of year, it is usually helpful to hear pushes and pulls. for 2027 growth. So number of launches next year perhaps in Calm, what you are most excited about, limited LOE, it seems into next year. So just to wrap the question, is the implied Q4 sales growth rate the best proxy to think about 2027? Thank you.

Yeah. Thanks, Sachin. I think overall, when you look at next year, as you say, we have less generic headwinds. We will be navigating the Entresto Europe headwinds, which will just navigate country by country. And so I think that is important to factor in there. But we do expect continued dynamic growth from our key growth drivers, brands like Kisqali, Kesimpta, Leqvio, Pluvicto in mHSPC, of course, remibrutinib in CSU and CIndU, showing acceleration. We will also Scemblix and then, of course, we will also expect the enalumab launch as well. So there are a number of things that will provide us the opportunity to have a strong 2027. I mean, I think it is important to note in Q4, we are lapping a number of gross to net dynamics in the previous year. I think it would be best for us to provide, you know, more detailed guidance as always in January. But I would say overall, we do expect, you know, to get back to where we were, you dynamic growth in 2027. Next question, operator.

Thank you. Your next question comes from the line of James Gordon from Barclays. Please go ahead.

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

Yeah. Absolutely. So, I mean, I think it is important to know, obviously, we have to run to complete the study. But our expectation is that once an anti-CD20 manages the inflammation, particularly in controlling from an MRI standpoint, the overall inflammatory burden on the patient. That remibrutinib's ability to manage disease -- achieve disease control, particularly when you look at the disability progression and the PIRA without complete depletion of B cell antibodies, which has advantages for patients or if patients no longer want injectable therapies. So the idea would be to show patients once they are on control with the anti CD 20 that we can maintain control with MRI as well as other measures. And I think that would give you the opportunity to kind of treat and then maintain with remibrutinib. We will certainly also evaluating doing additional studies with. Again, with all of the anti CD twenties just to demonstrate that Remi can control regardless of the anti CD 20. And I think when you have patients that have been on an anti-CD20 for 5 to 8 years, there is a desire for many patients We put our estimates in our forecast to get control through a safe oral medicine. But we are also equally excited by new starts in patients who do not want to start on an anti CD 20. Switching oral patients who are not feeling like they are-- or physicians are not comfortable with the level of control or also switching older injectable patients onto Remi. So we think we have many opportunities to grow the brand. Next question.

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

Hello. it is Michael on for Simon. Thank you very much for the commentary on the SG&A line in 3Q. And I appreciate the seasonality in 4Q, but I am just wondering what the durability is of that cost reduction and how we should think about that line going forward?

So, Mukul?

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

Perfect. Thanks, Mukul. Next question.

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

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

Yeah. Thanks, Laurence. So we have 2 studies. We have the ORION 4, and then we have the VICTORION-2P. Both are looking at outcomes. ORION-4 focused primarily in the UK. The VICTORION-2P is a global study. We expect VICTORION-2P to have a readout next year. I think both studies were designed in such a way to really look at if you look at the fixed time or following up over a fixed time point, but holding for a much longer than the competitor PCSK9s. Could you demonstrate a greater CVRR than the high teens that the other PCSK9s demonstrated. So we will see how that works. it is important that ORION 4 was partially conducted during the pandemic. So I think that is something we are going to have to see how that data plays out. Nonetheless, we would expect both of these studies given the cholesterol lowering for Lepio. So LDL lowering is so clear. To ultimately read out positive. And I think it would support the continued growth of Leqvio. We have guided it to be a $4 billion plus medicine very strong and dynamic growth around the globe. You are seeing that in The US. You are seeing that in China. And we are certainly looking at the peak sales potential of the medicine longer term. So I think certainly the outcome studies would support that. We also have VICTORION-1P, which is a primary prevention outcomes trial, which we would expect to read out in 2029. So a number of things I think that can support. Number of readouts that can support the longer term growth of Leqvio. Question. Thanks, Ron.

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

Great. Thanks for taking the questions. So you now have 2 quarters in a row with margins above 40%. I think the guide has been a suggestion to return to above 40% by 2029. So can you maybe just talk to how we could see that progressing into next year? Could you see 40% earlier than 2029? Maybe even into next year? And then if I could just throw in a quick follow-up on Pluvicto. Do you see any potential impacts of the draft proposed new DGAT 70 guidelines for patient release after radioligand therapy and any impact on the ability of sites to administer radioligand therapies in general? Thank you.

Thanks, Graham.

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

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

Thank you. Your next question comes from the line of Kerry Ann Holford from Berenberg. Please go ahead.

Thank you for taking my question. Victor Saran, I wonder, Matthew, if you could give us a little bit more insight into the plans post-HARBOR. Will you run another phase 3. Are you considering different end points and update from the timelines? Also on the impairment, noting it was only around a quarter. The total carrying value. Perhaps the write-up is not larger. So did mention the delay to launch. Was that the key reason for the write down? And Should we infer. there is been minimal change to probability assumptions, your peak assumptions for that product. Thank you.

Yeah. Thanks, Gary. So with delgociptacine, early days, I think it is hard for us to, I think, give you too much color. What we are doing is a deep analysis of the trial data and really trying to learn as much as we can. We have an ongoing open label extension, which is also providing us further insights and using that to further understand the profile of the medicine. And I think that will inform our approach for the next steps in development. So I think once we have clarity and really realignment with regulators, we will provide updates on what that next study will look like. I mean, we still assume we will need to do another phase 3 study to ultimately bring the medicine to patients. In terms of the math for the write-off, I mean, when you have to do an additional study, a of course, the phase 3 program, you know, the timelines are the timelines. We assume a similar probability of success. We, of course, make a. Assumption. Various assumptions that scenario assumptions with respect to competition. And that is how we arrive at the number. I would note that we also. When we have accelerations, it may not always be the case. We marked up assets as well. So, I mean, I think this is. I would not read too much into these numbers. I think it is more important that we just keep working as fast as we can to get the medicine forward to patients, and that is what we are focused on. Next question.

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

Oh, thank you so much. On the second quarter call, Novartis said that inalumab was on track for a Q3 approval. So we are now a third of the way through Q4 and no news. On the second quarter call, the company also referred to data FDA was requesting. So real time requests, at least as of that point. So curious on the reason for the delay, and what is the outlook? Thank you.

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

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

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

Yeah. Thanks, James. So on Pluvicto, I think there are a couple of things We see most of the demand, as I noted, in the MCRPC setting. And we continue to work to get physicians not to cycle ARPIs and then use 2 ARPIs, excuse me, and to use Pluvicto after the first ARPI where it is indicated. So that is something we are working through, and I think we do very well. I multiple rounds of cycling, and we are trying to get earlier and earlier in the treatment paradigm. And we do think there is a lot more opportunity in the MCRPC, but it does take time. To change those physician behaviors, particularly in the community. So we do wanna see continued growth in mCRPC, and then on top of that, HSPC as well, we do expect there to be steady uptake. I do think that it is important to note that this is going to take time to develop. there is certain patient groups that the physicians are particularly interested in. So I mentioned high burden patients or patients who are de novo. I think over time, as physicians get more comfortable in the community urology setting, we will hopefully see broader use for Pluvicto in that setting. And that could then also take us up, you know, to further sales momentum. As you also note, I would say, particularly, we are excited about the growth we see in Japan and China, where we see a lot of dynamic growth on the outlook for the brand and could be quite substantial. We also do see very solid performance in certain European markets. Markets like France and, to some extent, some of our other European markets. The reason, of course, we always think through our indications in Europe is just because of some of the pricing considerations. And sometimes it is not, unfortunately, the best move to add additional indications depending on what the various reimbursement agencies' perspectives are on the trial. So we have to make those decisions in real time. But all of that taken together, no change in our peak sales outlook for Plavicto. We think this is just the nature of you see a ramp initially and then you have a slower climb as you try to change behavior in the physician. Physician offices. Now with respect to Sjogren's, I mean, very hard to comment. I mean, of course, we do not know the competitor's data in detail. And, of course, they ran a different program, so I think we need to also understand their data as well in the symptom burden patients. We are running a separate study in the high symptom burden patients who we ran duplicate. Studies in the systemic patients. Replicate studies. So I think the profiles of the study is a little bit different. And so I think we will have to see. Also, the mechanisms are very different. Tissue B cell depletion with, ianalumab, and B-cell Activating Factor ligand is targeting a different pathway. So I think there also could be nuances as to which patients respond, all to be determined, but hard to know until we see the full dataset. Great. Thank you. Next question.

Your next question comes from the line of Chong Huynh from RBC. Please go ahead.

Hi, guys. Thanks for taking my question. Just on your slide on the Meet the Management you have noted this focus on mid stage and late stage pipeline assets to support growth. I do not want you to give too much away here, but can you frame which 3 or 4 Phase 2 assets do you believe to be the next assets for the next decade? And at the event, will you help with guidelines, for peak sales, timelines, anything to really help us start thinking about these for our forecasts? Thank you.

Yeah. I think I do not want to get into it. So why do not you guys actually come. So I will not get into the. All the details But, you know, I think we have a number of programs. first, advancing in Phase 3 or expanding programs that we have not talked a lot about. Certainly, abalosumab is high on our mind and trying to describe not only the pivotal study, but also the full spectrum of indications that we will have pursuing for abaloparatide. it is a drug we are very excited about. Programs like Actinium, you know, PSMA, Pluvicto. We have not spoken a lot about, but we are advancing pelabresib. Of course, we can provide further updates on some of the programs we acquired from Vividity. And then there is going to be additional mid stage programs that we have not previously gone into. I do not want to get into it here on the call, but I think our goal would be in each 1 of the therapeutic areas to identify you know, let's call it 1 to 3 assets that we would want to get you guys to start thinking about. We will provide you at least some perspective on how we think about it. Peak sales, we tend to reserve for drugs where we actually have an approval and at least 1 indication, and. But we will provide updates on peak sales for our growth drivers as well as recent launches as well. Next question.

Thank you. Our next question comes from the line of Thibault Badrin from Morgan Stanley. Please go ahead.

Thank you very much. Just on the cardiovascular pipeline, the LP delay, FcRnA follow on drug, DII-35, you mentioned is under assessment. What data are you waiting for to make a decision? Are you waiting for competitor data on Lp(a)? Following the lack of signal that we have seen with pelacarthen? And similar for passebek and ianalumab in IC-GVHD and C-GVHD, we obviously had the AGAVE-201 data from axatilimab in cGVHD. So what could be the best follow-up here for the ianalumab? Thank you.

Thanks a lot for the for the question. I think on Lp(a), we do not need to wait for necessarily competitor readouts. I think we have a lot of insights based on the study, and you all will see that from doctor Nissen at AHA. And so I think we have a good understanding, and I think we are just trying to evaluate whether is there a patient segment where we think that the medicine could make sense? How best to then ultimately you know, run those. Run that study. And I think that assessment is just ongoing. And so I do not wanna supersede his presentation and the publication of the data, but I think we still have things to think through as we learn from that very large robust dataset. From the Horizon trial. I think your point on passebek is well taken. I mean, we are carefully assessing given the readouts that we have seen from our competitor what is a reasonable development path. We are still working through that try and identify. Is there a patient group, and we focus on the ACS patients. So patients who are post an acute coronary event. Is there a trial design? Is there something where we believe we have conviction to think that there is a reasonable probability of success. I think given what we have seen, I mean, anything we do would have to be considered a high risk, high reward approach, but that. We are willing, of course, to take those bets in cardiovascular as appropriate. But that is still something we are working through. I mean, we can discuss that further and meet the management. But I. You know, we still have to I think, do some more analysis and thinking to finalize that phase 3 program. Next question.

Thank you. Your next question comes from the line of Matthew Weston from UBS. Please go ahead.

Thanks very much. Vasant, you raised the Remi peak for CSU and CIndU to $4 billion-plus, but you said wait for the CMD for other peak increases. I am just curious as to why the 2 tier timing. Is it because you wanted to reinforce the overall potential of Remy? Given maybe the market expected more for MS? I am just interested.

Yeah, Matthew. Nothing too. I think our thinking is that clear. $4 billion for CSU and CIndU, $4 billion for the current MS readout, so not including non-relapsing SPMS, that indeed equals $8 billion-plus. And I think once we see the HS readouts, that would help us then, I think, inform kind of the overall number that we wanna head to. I mean, we acknowledge we have food allergy as well. We have chronic pruritus of unknown origin. We have rosacea. As you know, our standard is usually not to include peak sales for drugs that have not actually read out positive in the phase 3 studies. So any Remi peak sales we give has to be based on indications that have read out positive. And so HS would then inform, I think, our thinking on the overall remibrutinib peak sales, And then if we ultimately were to be successful in food allergy, we would revisit the peak sales and then CSU and rosacea. Does that make sense? Yeah. It does. Thank you. Thank you. Next question.

Thank you. Your next question comes from the line of Peter Verdult from BNP Paribas. Please go ahead.

Yeah. Hi, Peter Verdult, BNP Paribas. Apologies for the, any background noise. Dropping back from Esmo, but just the 1 for you guys. When we think about, you know, the key debate in the market, the mid aspiration of growth, beyond 2030. and what could help drive that from the pipeline. 1 asset we have not talked about is Rhapsido. I just wanted to check-in. Is there anything incremental to say on those autoimmune studies that were paused over the summer? Getting restarted? I know when we saw you in September, we were talking about patients and docs clamoring to get these trials restarted, but our regulators moving at the same speed? Is there anything you can say, there? Thank you.

Yeah. Thanks, Peter. I think we are still working through that safety assessment, and we have to obviously now, because we are on hold, prepare a full package and ultimately engage with regulators. So I do not have a specific timeline. I mean, all I can say is we are very committed. I mean, we. We have seen the efficacy, and it is impressive in almost every indication that we have taken the medicine into. And I think now we just need to figure out exactly what is the right approach to mitigate this particular safety issue, you know, that we have identified at the Phase IIb hidradenitis suppurativa study. And so I think that will take us a few more months is probably the best guess I have at this point, and then we hope to get those studies started up again. You know, next year. I think on the market debate, I mean, I think our. To your. For your earlier part of the question, our plan certainly at Meet the management at least to outline for you how we see at least from where we sit today in 2026, how that first part of the 20 thirties will unfold where you have got the LOEs, but what we see from our in line brands that have protection into the 2030s, what we have from the new launches that we have coming online, what we see from the pipeline, and help you guys bridge to why we are where we are at on in the mid-2030s 20 thirties, 2035, 2036. Versus the few calls there are right now for the consensus. Thank you. Next question.

Thank you. Your next question comes from the line of Michael Loyston from Jefferies. Please go ahead.

Thank you. Vasant, if I could please go back to ianalumab in Sjögren's. Just wondering if I could push that a little bit further on. The inconsistency that we had in the data around regulatory [inaudible] and clinical [inaudible] and there was sort of subgroups of the endpoints that worked in better than others. When you talk to label discussions with the FDA, is it about the definition of the endpoint and where the benefit is? Or is it about defining patient populations that should be the target population?

Yeah. I think it is not about the endpoint. The endpoint results are robust. This is about how best to describe the benefits, which patients derive the greatest benefit. I think, is the best way to put it. And we are providing them the necessary data to do that in the way they see best. Within the label. And that is probably as much as we know as well, but we are providing all the data as we continue to try to finalize the label with the agency. Thank you.

Thank you. Your next question comes from the line of Richard Vosser from J.P. Morgan. Hi, thanks for taking my question.

A quick question on going back to remibrutinib in HS. We have obviously seen in the last week or so the izokibep data, which came in a little bit, on the underwhelming side. Just that latest thinking on remibrutinib and HS, types of patients have you got in the trial? I think there was differences in the between the 2 doses in phase 2. So just latest thoughts there. Thanks very much.

Yeah. Thanks, Richard. I think we obviously saw that data And as you know, in immunology studies, particularly in a situation like this with the placebo group can move around quite a bit. We will have to see. I think our hope is that if we can show efficacy in the HiSCR75 and also 50, but really 75 in the range of biologics as a highly safe oral drug. Especially we can show that persists over time. This can be a very attractive medicine. And then, of course, the upside would be we can demonstrate what we showed in the phase 2 data where we had at least cross trial comparison superiority to the biologics. there is a lot of this will come down to how placebo group behaves. And we think we have done all of the right things to manage that. But that is the kind of wild card in this whole situation. So we will have to see, but we have the 2 readouts sequentially, and then we will provide that update Hopefully, I think, you know, we should hopefully get this done before meeting management. Next question.

Thank you. Your next question comes from the line of Rajesh Kumar from HSBC. Please go ahead.

Hi. Thanks for taking my question. Just thinking to 2027, I know you are going to provide guidance in January, but if we think of the mechanics of it,, gross margin wise, should we sort of assume that to be the trough. Yeah? And then we had a very strong performance of SG&A. Seasonally, it should reverse in fourth quarter a bit. But on a run rate basis, you know, does $14 billion order of magnitude for 2027 look like a sensible ballpark number, which consensus currently is modeling.

Yeah. Go ahead, Mukul. Yeah. So, Rajesh, I mean, you were talking about your estimates for next year. I think this is. As we have previously said, I think we would wait for Q4 to give our estimates. But from a from a from a midterm perspective, I think we stand by 2025-2030 5% to 6%. We have historically said that this will not be a linear growth path. There will be years like 2026, which will be more impacted because of genericization, and then there will be years like 2027 where we will have less generic impact. But we would wait for wait for end of the year to provide these. Provide this provide the necessary guidance for next year.

No. I appreciate that. The implicit question was that the SG&A we have seen, the reduction we have seen in third quarter are there any structural elements there that we need to factor in when we are thinking about the future, like AI driven productivity or, you know, a certain cost reductions which means for future, you will not have those costs. Or all of it is at the moment you know, you know, cost containment as you go through the LOE phase.

Yeah. I think, Rajesh. Okay, Rajesh. So I got it now. So on SG&A as a percentage of sales, I think we have historically said that is the place where our margin improvement over the next 4 years is going to come from. So as we spoke about getting to 40% by 2029, we have actually said that margin improvement will come from SG&A. And if I look at Q3, taking 1 quarter and saying that is the estimate now for the next 3 years, I think is extrapolating it for the full year is not the right thing. But from a-- if we needed a data point to say how we get to that 40% margin by 2029 through SG&A, then I think here is a good data point that we have that we are absolutely on the right path. that is it.

Right. Yes, sir. Thank you very much.

Thank you. Thanks,. Thank you. Your next question comes from the line of Urban Fritsche from ZKB. Please go ahead.

Yes. Hi, everybody. Thanks for taking my question. Just a question on capital allocation. You have been setting up share buybacks quite a bit after the failure. So what is your thinking going forward with those share buybacks? Will they stay on that level? Also taking into account that your shares have been nicely rebounded and how should we. How do you think about you know, having those gaps open now, from the recent failures. and filling those gaps versus share buybacks? that is my question. Thanks.

So maybe on the first part of the question on the pace of the buybacks. Mukul?? Yeah. So as you know, I think, share buyback is a clear pillar of our overall capital allocation priority, and this will not change going forward. You also know that we do the share buybacks on the secondary line here in Switzerland, which are clearly we have certain constraints in terms of the amount of volumes that can go. We do this share buyback through an independent partner and independent bank who does it. And we modulate how much we buy depending on market So this is what we have done in the past, and we would continue to do so. Absolutely right that as our share price took an inordinately significant reduction, we actually increased the pace. But we have to. I think going forward, we would continue to modulate it up or down, and we remain committed to doing. Getting to that $10 billion share buyback program by end of 27.

And then I think on the broader capital point versus M&A, there is no change in our thinking. I mean, we grow the dividend in Swiss francs every year as we have now done for almost 30 years. We are committed to investing in the core business. We do primarily bolt-on M&A under 2 billion very selectively doing larger deals when we see something that is very compelling. And then with excess capital, we are committed to also returning capital to shareholders via the share buyback program. So all 4 pillars are things that are priorities for us. We do them in balance and no change based on any of the recent events. Next question.

Thank you. Your next question comes from the line of Seamus Fernandez from Guggenheim. Please go ahead.

So my question is actually on your approach in kidney disease. You know, Vas, I was just hoping you know, you have a number of assets in the space, across IgAN and other immunologic disorders on the kidney disease side of things, but just wanted to get a better sense of how you see Novartis presence in kidney disease evolving from here. Just given the intensifying competitive landscape in particular. Thanks.

Yeah. Thanks, Seamus. So I think, clearly, the anti-APRILs have changed the landscape. I mean, I think the data has been clear and compelling and really demonstrated that they are the standard of care. And so I think now we both continue to believe iptacopan will be a blockbuster medicine. We also continue to believe Fabhalta across all of its various indications. We will get to the $3 billion sales we have outlined for that medicine. I do think we have had to think carefully now on how to position these medicines in the context of the anti-APRILs. So I think the IgAN board, of course, will have the readout next year. That will be an important milestone for us and then to determine how best to kind of position these medicines in the context of potentially having 4 different anti-APRILs in the market. And so, you know, that is kind of how we are looking at IgAN. I would say outside of The US, the story is very different in places like Japan and China where we have very strong positions, we are seeing significant opportunities for our IGAN portfolio also in certain other markets around the globe. So this will literally be geographically tailored for IgAN. We remain committed to adult polycystic kidney disease. We have ianalumab. We are continuing to advance that in the clinic. We also have ongoing efforts for other rare renal diseases and so that. Those generally are early stage, and that continues to be a focus area. as well. So that is kind of how we are thinking about it, but we are in a state of flux at the moment as we kind of think through how best to position Vanrafia and Fabhalta in the context of the anti-APRILs. Next question.

Thank you. We will now start round 2 for the Q&A. Please limit yourself to 1 question and return to the queue for any follow-up. The next question comes from the line of Steve Scala from TD Cowen. Please go ahead.

Oh, thank you so much. Regarding Kisqali, what portion of growth is attributed to the adjuvant setting, and what is the risk that Roche's gerdesterant captures a majority of that growth? Is Novartis' defense solely based on having achieved OS and the duration of experience with Kisqali. I mean, that is that is a good argument, but it did not work for Lily with Verzenio when you were launching Kisqali. Thank you.

Yeah. I think, Steve, you know, we have very solid growth across all lines. I do not know if I can get you the exact number, but I think metastatic continues to be an area where we are strong with our NBRx share, as I mentioned in the first line setting. About. As I mentioned, over half of the patients are coming from the node zero, node 1 where we are alone, and then the other half for any early breast cancer setting from the overlapping population with our competitor. The way we think about it is we have a couple of things going for us. You know, 1, as you know, we have a very long history here in the market. And we do believe that physicians trust endocrine therapy that they have had a established for many years maybe more than is currently being assumed in the market. So I think that is not an insignificant task to. We have learned that in many, many parts of different therapeutic areas displace established therapies that are safe and effective is not always a straightforward task. Second, with Kisqali plus endocrine therapy, you do have a long history and you have OS data now, which we think is something that we can use to significant effect especially when you look at the overall benefits here for patients. This is something that is proven. You have the OS as well. And then lastly, we continue to work to generate data with Kisqali and the appropriate oral SERD to show that you could also use these in combination as well. And, of course, thinking about that for our CDK 2 and CDK 4, CDK 4 portfolio as well to make sure we have those combination data. So we think when you look from here to 2027, 2028, 2029, 2030, will be able to manage this and achieve our $10 billion peak sales. You can see for yourselves where Kisqali already is. And then I would say outside of The US, you should not be forgotten. I mean, we do extremely well. You saw our very high shares outside of The US. Given our strength ex-US. We are not MFN constrained. We are not constrained by any of these other dynamics. China NRDL is obviously helping us quite a bit as well. So taken together, we feel very comfortable with the peak sales guidance on Kisqali. Thank you. Next question.

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

Hi, great. Thanks for taking my follow-up. Just Entresto in European generics. So I think the regulatory data protection expires next month. But I think there were some SPC rulings on your SPCs to 2028 that might provide some protection in additional countries. So maybe you could just help us understand sort of timing the expected launches across different European territories and if they differ at all. Thank you.

Yeah. So, I mean, right now, you. you are correct, Graham. The. SPC expires next month. We do not currently expect any impacts in quarter 4. And then I think we are continuing to now work through the various cases in individual countries. I mean, I think each country has a different dynamic And so I think it is really gonna be. it is really a country by country situation where we do have to make the filing for an injunction and then a of course, then go through the various legal. But we are absolutely committed to defending our patents in every 1 of these markets, and we believe we have a case to be made. And so we are absolutely doing our best to extend based on valid patents and trust those protection across Europe. But I do not. I. For a variety of reasons, I do not wanna get into individual countries. You know, at this at this point in time. And then, of course, when we have clarity, we will, of course, we will pull that into any updates that we give in the various quarters. Next question?

Thank you. Thank you. Your next question comes from the line of Thibault Badrin from Morgan Stanley.

Thank you very much. Just a quick question on Kesimpta sales in The U. S. Your main competitor has been facing increasing competition from the IV in The U. S. Market. I know it is like the 2% channel, but can you comment if you notice any shift in competitive intensity in The U. S? Any color here because you seem to paint a different picture for Kesimpta in The US. Yeah.

Yeah. Thanks for the question. I think, you know, for Kesimpta, what we do see is, you know, the market has split into the physicians who are more oriented towards buy and bill, and there is a competitive dynamic there. And as you are you are aware in the self administration market, we have been able to go on our own, which is why our market share in the high 20s for the B cell class and then continues to grow overall. We are working very hard to get the readout for the Q2 month dosing next year, and we are on track for that. And then continue to look at other life cycle management options. And, of course, we have remibrutinib as well now coming as well in MS. But we do not see impacts from the injectable competitor or the various at home infusions and pumps, etcetera, for Kesimpta right now. We are watching closely the potential launch of a subcu from 1 of the competitors, but I think also there, it would be very important to look at safety profile Can you get around the injection-site reactions and any sort of premedication? You know, because Kesimpta is very comfortable for neurologists to use. So we do not. We are not expecting that to disrupt the Kesimpta peak sales outlook. And so I think we are very pleased. And then, again, outside of The US, Kesimpta performed extremely well. In many markets, we have 80% plus share for Kesimpta. So I think that just demonstrates that the brand is performing extremely well. Next question.

Thank you. Next question comes from the line of Sachin Jain from Bank of America. Please go ahead.

Hi. Thanks for the follow on. I just ask for an update on what is the plan in FSHD, timing of the FDA meetings, and how those interactions are going. Thank you.

Yeah. Thanks, Sachin. So we do expect the givinostat engagement in the coming months, and I think I think that appropriate updates will happen based on the 2 year follow-up data. I think particularly focused on the intermediate advanced patients, so the intermediate disease patients. With FSHD, we are expecting the FDA meeting again before the end of the year. And I think, you know, we are we are doing our best to make the case that we have for an accelerated approval filing based on the data package we have, which we think is compelling. But, of course, this is first in class medicine of disease that is never had a therapy before, and we are gonna have to have that discussion you know, with FDA. I will also add in that before the end of the year, we also expect pelabresib potential accelerated approval discussion based on manifest 2. We are running manifest 3 right now. So that would give us confirmation that we. If the FDA agrees, which we still have to see, we will be able to file this medicine as well. So pelabresib. Would be a nice uplift as well and something we are quite excited about. And then lastly, since it is not been asked, we did pass the abaloparatide interim result. It was a very, very high bar. We. Ultimately, the study will continue but without any changes. So we feel really good about that and excited now to get that study to completion. And as I mentioned, we already have a program of. I think I have mentioned in other settings that we are planning a study to start next year. In secondary stroke prevention, and also evaluating additional clinical trials for abaloparatide, which we can discuss further at meet the management. Next question.

Thank you. Your next question comes from the of Robert Graves from JPMorgan.

Hi. Thanks for taking my follow-up. Just wanted to go back to, the Xolair erosion. I think your partner was suggesting that Xolair might not go down next year. So just wanted some clarification or clarity on the profit share agreement and how you are thinking about that, going into 2027? Thanks very much.

Yeah. Thanks, Richard. So, Richard, I think we can only work with what we have right now in the market. We know that there is biosimilar right now in the market. there is potential for further biosimilars to come. And I think as we go into the next couple of years, as there will be more biosimilar activity, Xolair sales will go down, and hence, the profit contribution that we have that comes to us in terms of other revenue will go down, which essentially that other revenue comes into our core operating income that puts this pressure that we will have. Now you are absolutely right that if the amount of biosimilar impact next year is limited, then we would also have that. That impact that we would have on the margin would also be limited for us. But I think we would have to see how this pans out in terms of biosimilar activity. But what is very clear is that we would see pressure on the margin over the next couple of years as a result of Xolair biosimilars in the US. Does that answer the question, Richard?

Yes. It does. Super helpful. Thank you very much. For the background noise.

Thank you. Next question. Thank you. We will now take our last question for today. And the question comes from the line of Rajesh Kumar from HSBC. Please go ahead.

Hi. So just in terms of your comment about share buyback, I know it is a core pillar. Of how you add value. What would you need to see in an acquisition opportunity? For you to rethink that capital allocation. Decision to buy or do business development would be worth more. than share buyback. And what would change your mind?

Yeah. I think it is. For us, given the free cash flow that we generate, and our core operating income outlook, a 5 year plan, do not see this as a trade off at all. I mean, we can do the m and a deals that we find attractive and maintain share buybacks. Since we are not contemplating deals that are so large that we would have to compromise our share buybacks. We do not see this as a as a as a trade off. Actually, we think it is something that can all work. And then we, of course, have to pace things based on a number of factors, financing costs, debt load, etcetera. But I think overall, this is not a trade off. This is a balanced approach that we plan to over time. Very good. So thank you everybody for joining. We always appreciate it. Always excellent questions, and we hope we got to almost all of your questions. We will look forward to seeing everybody at Meet Novartis Management, where you will get to interact as always with our R&D teams, our commercial teams. We think it is a great event. We always look forward to it. And always appreciate all of your participation. So thank you very much, and we will see you in a few weeks.

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