Novartis(NVS) - 2025 Q3 - Earnings Call Transcript

Financial Performance - Novartis reported a 7% increase in net sales and core operating income for Q3 2025, with a core margin of 39.3% [5][27] - Core EPS rose by 10% to $2.25, and free cash flow totaled $6.2 billion for the quarter [28][27] - For the first nine months, net sales grew by 11%, core operating income by 18%, and core EPS increased by 21% to $6.94 [28][29] Business Line Performance - Key brands showed strong growth: Kisqali grew 68%, Pluvicto 45%, Leqvio 54%, and Scemblix 95% in constant currency [6][10][14][16] - Kisqali's U.S. growth was particularly strong at 91%, with a market-leading position in both metastatic and early breast cancer [7][9] - Pluvicto's growth was driven by new patient starts, with U.S. sales up 53% [11][12] - Leqvio is on track for over $1 billion in sales, with significant growth in both the U.S. and international markets [14][15] - Scemblix is expected to become the most prescribed TKI in the U.S. [16] Market Performance - The U.S. experienced negative growth due to net true-ups related to Medicare Part D redesign, but underlying growth would have been 9% without these adjustments [27][28] - Outside the U.S., Kisqali saw 37% growth in constant currency, and Pluvicto is expanding in Europe, Canada, and Brazil [7][12] - The renal portfolio, particularly IGAN, grew 98% in the U.S., significantly outpacing market growth [20][21] Company Strategy and Industry Competition - Novartis is focused on driving growth through its priority brands and pipeline advancements, despite facing generic erosion from products like Entresto [5][28] - The company is pursuing strategic acquisitions, including Avidity Biosciences, to enhance its growth trajectory [35][36] - Novartis aims to maintain a core margin of around 40% despite expected short-term dilution from new product launches [35][36] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in mid to long-term growth, reaffirming guidance for high single-digit growth in net sales and low teens growth in core operating income for the full year [31][38] - The company anticipates challenges in the first half of 2026 due to generic competition but expects a stronger second half [33][34] - Management highlighted the importance of addressing pricing and reimbursement issues with the administration to support innovation [41][42] Other Important Information - Novartis is preparing for regulatory submissions for several products, including remibrutinib and ianalumab, with expectations for rapid uptake in the market [22][24] - The company is focused on enhancing its R&D capabilities and expanding its manufacturing base in the U.S. [43] Q&A Session Summary Question: Impact of Medicaid and tariffs on the industry - Management indicated that while some companies have reached agreements with the administration, Novartis is in ongoing discussions to find suitable solutions [41][42] Question: CapEx and cash flow modeling - Management clarified that the majority of the $23 billion commitment over five years is for R&D OpEx, with CapEx expected to remain stable at 2.5%-3% of sales [42][43] Question: Market reaction to ATR abstract - Management expressed confidence that detailed data presentation would improve market perception and emphasized the importance of patient benefits over statistical measures [46][47] Question: Pluvicto launch curve and peak sales ambition - Management stated that Pluvicto is on a strong growth trajectory, expecting to reach peak sales of $5 billion with ongoing efforts to tackle commercialization challenges [55][56][58] Question: Remibrutinib ramp-up and European adoption - Management highlighted the focus on payer negotiations and the potential for rapid uptake in the U.S. and Europe, emphasizing the innovative profile of remibrutinib [62][64] Question: Ianalumab study results and secondary endpoints - Management explained the statistical significance achieved in primary endpoints and the importance of patient-relevant outcomes for future discussions with physicians [68][71] Question: Cosentyx market share and new formulation - Management noted that there has been no significant impact from competitor launches and emphasized ongoing efforts to maintain market share in a growing market [74]