Core Viewpoint - Novartis has submitted a market application for Ianalumab in China, a fully human monoclonal antibody targeting BAFF-R, which has dual mechanisms of depleting B cells and inhibiting BAFF-R, aimed at treating various autoimmune diseases [1]. Group 1 - Ianalumab is the first anti-BAFF-R antibody to complete Phase III studies [1]. - The drug is indicated for conditions such as Sjögren's syndrome, immune thrombocytopenia (ITP), and systemic lupus erythematosus (SLE) [1]. - The application was officially submitted on February 6, 2026, under the registration number JXSS2600007 [2]. Group 2 - The drug is classified as a therapeutic biological product and is imported [2]. - The application involves multiple entities, including Novartis Pharma Schweiz AG, Novartis Pharma Stein AG, and Beijing Novartis Pharma Co., Ltd [2].

Core Viewpoint - The establishment of a radioactive drug production project by Novartis in Haiyan marks a significant step towards the large-scale production of radioligand drugs, particularly Lu-177, with an expected production start by the end of 2026 [1][2]. Group 1: Project Developments - Novartis has obtained a Class A radiation safety license for its radioactive drug production project, which has completed its main construction and is set to begin production by the end of 2026 [1]. - The first production line for Lu-177 at Novartis is currently being installed and is expected to be operational within the year, with an anticipated annual output value exceeding 2 billion yuan [2]. - The project has a total investment of 1.06 billion USD and covers an area of 18.8 acres, with construction completed six months ahead of schedule [2]. Group 2: Industry Growth and Investment - Haiyan has established a 1900-acre isotope industrial park, attracting 31 projects with a total investment exceeding 10 billion yuan, aiming to create the largest isotope industry demonstration base in China [1]. - Other companies, such as Faber New Heaven and Zhejiang Aisotuo Technology, are also setting up operations in Haiyan, focusing on various aspects of nuclear medicine and isotope production [2][3]. Group 3: Domestic Production and Export - The Qinshan Nuclear Power Plant has successfully developed the technology for the commercial production of carbon-14 isotopes, achieving the first batch export to Europe in September 2025 [4]. - The plant has scaled up production of key medical isotopes, including Co-60, C-14, Lu-177, Y-90, and Sr-89, and aims to achieve domestic production of Mo-99 and I-131 by 2028 [4]. Group 4: Future Prospects - Haiyan is planning to advance the development of high-energy accelerator isotope production projects, which are expected to significantly increase the availability of rare isotopes like Ac-225 [7]. - The anticipated annual production of 20 curies of Ac-225 could position the isotope industry in Haiyan as a future trillion-yuan industry [7].

Core Viewpoint - There is a potential opportunity for value investing within the pharmaceutical industry, specifically with Novartis (NVS) stock [1] Company Analysis - Novartis is highlighted as a stock that may be undervalued amidst the current focus on tech and AI companies [1] - The analysis emphasizes the importance of earnings, technological disruption, policy shifts, and capital flows in identifying mispriced opportunities in the market [1] Investment Strategy - The approach combines top-down macroeconomic analysis with bottom-up stock selection and real-time positioning [1] - The analyst shares insights on high-conviction ideas and contrarian views, focusing on both growth and value names [1]

Core Insights - Novartis reported high single-digit sales growth for 2025, achieving a 40.1% core margin two years ahead of schedule, with full-year sales rising 8% and core operating income increasing 14% to CHF 21.9 billion [3][4][6] Financial Performance - In Q4, sales declined by 1%, while core operating income rose by 1%. Excluding R&D-related adjustments, underlying Q4 sales growth would have been approximately 3% [2][6] - For the full year, core EPS increased by 17% to $8.98, and free cash flow grew by 8% to CHF 17.6 billion, marking an all-time high for the company [3][6] Product and Pipeline Momentum - Priority brands such as Kisqali, Kesimpta, Pluvicto, Leqvio, Scemblix, and Cosentyx showed strong growth, with Kisqali sales rising 57% to CHF 4.8 billion and Kesimpta sales increasing 36% to $4.4 billion [5][7][15] - Pluvicto achieved $2 billion in global sales with a 42% constant-currency growth, while Leqvio reached blockbuster status with 57% full-year growth [7][15] Pipeline Updates - Novartis highlighted several pipeline developments, including a submission for remibrutinib and updates on the renal portfolio, with a revised timeline for the zigakibart phase III protocol expected in the first half of 2027 [8][9] - Data from the Phase III MANIFEST program for pelabresib provided a path forward for registration, with plans for a new Phase III study targeting patients with high baseline symptom burden [10] 2026 Outlook - The company anticipates low single-digit sales growth for 2026, with a core margin decline of one to two percentage points due to the Avidity deal, describing the year as "a year of two halves" [12][14] - The first half of 2026 is expected to see low single-digit sales decline and low double-digit core operating income decline, while the second half is projected to grow mid-single-digit in sales and mid- to high single-digit in core operating income [14] Capital Allocation - In 2025, Novartis invested over $10 billion in R&D, completed a CHF 15 billion buyback program, and proposed a dividend of CHF 3.70 per share, marking the 29th consecutive dividend increase [16]

Core Insights - Novartis AG reported fourth-quarter 2025 net sales of $13.34 billion, a 1% year-over-year increase, but below Wall Street's estimate of $13.78 billion [1] - On a constant-currency basis, sales decreased by 1% [1] - The company faced a significant negative impact from generic competition, which reduced sales by 15 percentage points, including a 3 percentage point impact from revenue deduction adjustments in the U.S. related to Entresto and Promacta [1] Financial Performance - Pricing pressures negatively impacted sales by 4 percentage points, while currency fluctuations had a positive impact of 2 percentage points [2] - Core operating income increased by 1% to $4.93 billion, with a core operating income margin of 37.0%, reflecting a slight increase of 0.1 percentage points [2] - The growth in core operating income was supported by higher government grant income and lower selling, general, and administrative (SG&A) expenses, although this was partially offset by increased research and development (R&D) expenses [2] Product Performance - Strong demand for key therapies contributed to growth, with Kisqali sales rising 44% to $1.32 billion, Kesimpta increasing 27% to $1.23 billion, and Cosentyx revenue up 11% to $1.81 billion [3] - Scemblix saw an 87% increase to $391 million, while Pluvicto advanced 70% to $605 million [3] Future Outlook - For fiscal 2026, Novartis anticipates low single-digit growth in net sales, while core operating income is expected to decrease in the low single digits [5] - The incoming CFO indicated that adjusted operating income is projected to grow significantly in the second half of 2026, which is expected to positively impact 2027 and beyond [5] - Novartis shares rose 1.79% to $152.54, reaching a new 52-week high [5]

Market Overview - Pre-market futures have shown a recovery from early lows, influenced by Q4 earnings reports and private-sector job numbers, with the Dow up by 142 points and the S&P 500 up by 10 points, while the Nasdaq is down by 66 points [1] Employment Data - Private-sector payrolls for January reported by ADP came in at +22K, significantly below expectations, and down from a revised +37K the previous month, marking the first back-to-back monthly job gains since April and May of the previous year [2] - Services employment accounted for most of the private-sector hires, with +21K in services compared to only +1K in goods-producing sectors; Healthcare Services led with +74K hires, followed by Financial Services with +14K and Construction with +9K, while Professional & Business Services lost -57K jobs [3] - ADP Chief Economist noted that hiring trends are following consumer demand rather than technology advancements, indicating a disconnect between stock market performance and private-sector job growth [4] Sector Insights - The job gains in the Construction sector may hint at increased labor demand due to data-center buildouts, although it is considered premature to draw definitive conclusions [5] - A new ADP methodology revealed a downward adjustment of -212K fewer hires for the private sector in 2025, reducing total expected hires from +771K in 2024 to +398K in 2025, which may provide a clearer picture of the labor market [6] Earnings Reports - Eli Lilly & Co. reported a +7.9% earnings surprise with earnings of $7.54 per share and revenues of $19.29 billion, driven by strong performance in diabetes and weight loss drugs [8] - AbbVie reported earnings of $2.71 per share, exceeding estimates of $2.66, while Novartis reported $2.03 per share, beating consensus by 4 cents; however, AbbVie shares fell by -3% despite the positive earnings [9] - Phillips 66 reported earnings of $2.47 per share, surpassing expectations of $2.11 and significantly improving from a loss of -$0.15 per share in the same quarter last year, with shares up by +1.3% in pre-market trading [10]

Market Overview - Pre-market futures have improved from early lows, influenced by Q4 earnings reports and private-sector job numbers, with the Dow up 142 points and the S&P 500 up 10 points, while the Nasdaq is down 66 points and the Russell 2000 is up 12 points [1] Private Sector Employment - Private-sector payrolls for January reported by ADP show an increase of only 22K, significantly below expectations, and down from a revised 37K the previous month, marking the first back-to-back monthly job gains since April and May of the previous year [2] - The services sector accounted for most of the job gains, adding 21K jobs, while goods-producing sectors only added 1K jobs. Healthcare Services led with 74K hires, followed by Financial Services with 14K and Construction with 9K. Professional & Business Services lost 57K jobs, and Manufacturing has not seen positive job growth since early 2024 [2][3] - A new ADP methodology indicates a downward revision of 212K fewer hires for the entire year of 2025, reducing total private-sector hires from 771K in 2024 to 398K in 2025 [4] Earnings Reports - Eli Lilly & Co. reported a 7.9% earnings surprise with earnings of $7.54 per share and revenues of $19.29 billion, also exceeding estimates by 7.9%, driven by strong performance in diabetes and weight loss drugs [6][7] - AbbVie reported earnings of $2.71 per share, beating estimates of $2.66, while Novartis reported $2.03 per share, surpassing consensus by 4 cents. Novartis shares rose 1.6%, while AbbVie shares fell 3% [7] - Phillips 66 reported earnings of $2.47 per share, exceeding expectations of $2.11 and significantly improving from a loss of $0.15 per share in the same quarter last year, with shares up 1.3% in pre-market trading [8]

Core Insights - Novartis AG reported fourth-quarter core earnings per share of $2.03, exceeding the Zacks Consensus Estimate of $1.99 and up from $1.98 a year ago [1][7] - Core net income decreased by 1% to $3.9 billion, while revenues of $13.3 billion fell short of the Zacks Consensus Estimate of $13.7 billion, despite a 1% year-over-year increase [2][7] - The company faced revenue pressure from generic competition for key drugs Entresto and Promacta, leading to a 1% decline in sales on a constant currency basis [2][26] Financial Performance - Core operating income improved by 1% to $4.9 billion, supported by higher government grant income and lower SG&A expenses, although offset by increased R&D expenses [19] - For 2025, Novartis reported sales growth of 8% to $54.53 billion, surpassing the Zacks Consensus Estimate, with core EPS increasing by 17% to $8.98 [20] - Guidance for 2026 indicates low single-digit growth in net sales on a constant currency basis, with core operating income expected to decline in low single digits [21] Drug Performance - Cosentyx sales rose 11% to $1.8 billion, driven by strong demand across all regions [5] - Kisqali sales surged 44% to $1.32 billion, although it missed estimates, with underlying global growth at 54% [6][8] - Entresto sales plummeted 45% to $1.2 billion due to generic competition, while Promacta sales fell 63% to $226 million [8][13] - Pluvicto sales increased by 70% to $605 million, driven by strong demand following recent approvals [11] - Kesimpta sales grew 27% to $1.2 billion, while Jakavi sales increased by 8% to $555 million [10][12] Strategic Updates - Novartis announced plans to acquire Avidity Biosciences for $12 billion to enhance its late-stage neuroscience pipeline [22][23] - The acquisition aims to strengthen the company's position in addressing genetic neuromuscular diseases [28] - A collaboration agreement with the U.S. government was established to reduce drug prices while supporting ongoing investments in manufacturing and R&D [25] Market Position - Novartis shares have gained 42.1% over the past year, outperforming the industry growth of 19% [2] - The company is navigating significant patent expirations, with a focus on key growth drivers such as Kisqali, Kesimpta, Pluvicto, and Scemblix [26][27]

Financial Data and Key Metrics Changes - Novartis achieved 8% sales growth and 14% core operating income growth for the full year 2025, with a core margin of 40.1%, reached two years ahead of plan [5][34][36] - For Q4, sales declined by 1%, while core operating income increased by 1%, with underlying growth of 3% when excluding one-time adjustments [6][38] - Core EPS rose 17% to $8.98, and free cash flow reached an all-time high of CHF 17.6 billion, growing 8% [34][39] Business Line Data and Key Metrics Changes - Kisqali sales grew 57% to CHF 4.8 billion for the year, with Q4 growth at 44% [7][8] - Kesimpta grew 36% to $4.4 billion, with a 27% growth in Q4 [10][11] - Pluvicto reached $2 billion in sales, showing 42% constant currency growth [12] - Leqvio achieved blockbuster status with 57% growth for the year [14] - Scemblix also reached blockbuster status with 87% growth in Q4 [15] Market Data and Key Metrics Changes - Novartis reported strong growth in key markets, with Kisqali leading in early breast cancer settings in Germany with over 80% NBRX share [8] - Kesimpta is leading in 9 out of 10 major markets outside the U.S. [11] - Pluvicto has secured approvals in Japan and China, contributing to strong growth outside the U.S. [12] Company Strategy and Development Direction - Novartis aims to grow through the largest patent expiry in its history, focusing on key growth brands and pipeline replacement power [7] - The company is committed to maintaining a strong pipeline with seven pivotal readouts expected in 2026 [31][49] - Novartis plans to continue investing in R&D, with over $10 billion allocated in 2025 [39] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 5%-6% sales CAGR from 2025 to 2030, despite anticipated generic impacts [42][48] - The company expects to return to a core margin of over 40% by 2029 [43] - Management highlighted the importance of pipeline assets in driving future growth [49] Other Important Information - The company completed a CHF 15 billion share buyback program and proposed a dividend increase of 6% [40][27] - The transition of CFO from Harry Kirsch to Mukul Mehta was noted, with Kirsch acknowledging the company's transformation during his tenure [41] Q&A Session Questions and Answers Question: Insights on remibrutinib and FDA conversations - Management confirmed that remibrutinib has an approved label without liver safety discussions, and they plan to advocate for limited liver monitoring based on FDA feedback [54][56] Question: Commercial opportunities for remibrutinib in MS - Management indicated that while B-cell monoclonal antibodies will remain dominant, there is a significant market for oral options, especially for patients preferring non-injectable therapies [61] Question: Risks associated with Pelacarsen's event-based study - Management expressed confidence in the study's design and powering assumptions, despite lower than expected event rates [63]

Financial Data and Key Metrics Changes - Novartis achieved high single-digit sales growth of 8% for the full year 2025, with core operating income increasing by 14% to CHF 21.9 billion, achieving a core margin of 40.1% two years ahead of plan [5][34][36] - In Q4, sales declined by 1% due to gross-to-net impacts and the loss of exclusivity for Entresto, while core operating income increased by 1% [6][34] - Core EPS rose by 17% to $8.98, with free cash flow reaching an all-time high of CHF 17.6 billion, an 8% increase [37][39] Business Line Data and Key Metrics Changes - Kisqali sales grew 57% year-over-year to CHF 4.8 billion, with Q4 growth at 44% [7][8] - Kesimpta achieved 36% growth to $4.4 billion, with a 27% increase in Q4 [10][11] - Pluvicto reached $2 billion in sales, showing 42% constant currency growth, primarily driven by a 75% increase in the US [12][13] - Leqvio reached blockbuster status with 57% growth for the year and 46% in Q4 [14] - Scemblix also achieved blockbuster status with 87% growth in Q4 [15][16] Market Data and Key Metrics Changes - Novartis reported strong performance in key markets, with Kisqali leading in early breast cancer settings in Germany with over 80% NBRX share [8] - Kesimpta is leading in 9 out of 10 major markets outside the US [11] - Pluvicto has secured approvals in Japan and China, with expectations for strong growth in these markets [12] Company Strategy and Development Direction - Novartis aims to grow through the largest patent expiry in its history, focusing on key growth brands and pipeline replacement power [7] - The company is committed to maintaining a strong pipeline with 7 pivotal readouts expected in 2026, which could strengthen midterm growth outlook [31][49] - Novartis plans to continue investing in R&D, with over $10 billion allocated in 2025, and is focused on shareholder returns through dividends and share buybacks [39][40] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving a 5%-6% sales CAGR from 2025 to 2030, despite anticipated generic impacts [42][48] - The company expects to return to a core margin of over 40% by 2029 [43] - Management highlighted the importance of pipeline assets and their potential to drive higher growth [49] Other Important Information - The company is transitioning leadership with Mukul Mehta set to take over as CFO in mid-March [5][41] - Novartis is focused on global health initiatives, including the development of new malaria treatments [30] Q&A Session Questions and Answers Question: Insights on remibrutinib and FDA conversations - Management noted that remibrutinib has an approved label without liver safety discussions, and they plan to advocate for limited liver monitoring based on FDA feedback [54][56] Question: Commercial opportunities for remibrutinib in MS - Management acknowledged that while B-cell monoclonal antibodies will remain dominant, there is a significant market for oral options, especially for patients preferring non-injectable therapies [61] Question: Risks associated with Pelacarsen's study - Management expressed confidence in the study's design and powering assumptions, indicating that lower event rates may not pose significant risks [63]