Novartis AG (NVS) Q3 2025 Earnings Call Transcript

Rhapsido: FDA approval in CSU for BTK inhibitor, rapid onset, clean safety profile, and submissions completed in EU and China.

Kisqali: 68% growth in Q3, leading in metastatic and early breast cancer markets, approved in 56 countries, and strong 5-year data. Strong growth in U.S. and international markets, with early breast cancer indication approved in 56 countries.

Kesimpta: 44% growth in Q3, leading in B-cell therapy markets, and 90% of naive patients showed no disease activity at 7 years. Significant opportunity outside the U.S., with 70% of patients not on B-cell therapy.

Pluvicto: 45% growth in Q3, strong U.S. and international performance, and regulatory submissions planned for Q4. Strong international rollout, including approvals in Japan and expected approval in China.

Leqvio: 54% growth in Q3, on track for $1 billion in sales, and U.S. monotherapy label expansion achieved. Strong international performance, particularly in China, Japan, and the Middle East.

Scemblix: 95% growth in Q3, strong uptake in first-line therapy, and approvals in 26 countries. Early line approved in 26 countries, with strong launch momentum in Japan.

Cosentyx: Mixed quarter with 1% decline, but positive Phase III readout in polymyalgia rheumatica.

Fabhalta: 98% growth in IgAN portfolio, strong U.S. uptake, and key approvals in China. Key approvals in China for IgAN therapies.

Ianalumab: Positive Phase III studies, regulatory submissions on track for 2026.

Sales and Core Operating Income: 7% growth in Q3, with a core margin of 39.3%.

Free Cash Flow: $6.2 billion in Q3, up 26% year-to-date.

Capital Allocation: New $10 billion buyback program launched, and $7.8 billion in dividends distributed.

Avidity Acquisition: Expected to raise sales growth rate from 5% to 6% and support long-term growth.

Pipeline Progress: Strong innovation year with multiple milestones achieved.

Generic Erosion: The company is facing increasing generic erosion, particularly for key drugs like Entresto, Tasigna, and Promacta in the U.S., which is impacting sales and financial performance.

Gross-to-Net Adjustments: Negative gross-to-net true-ups, particularly related to Medicare Part D redesign, have affected financial results, creating volatility in quarterly performance.

Regulatory and Market Access Challenges: The company faces challenges in improving the access environment for new drugs like Rhapsido and ensuring rapid uptake in various markets.

Supply Chain and Site Expansion: Pluvicto's growth is dependent on expanding treating sites from 730 to 900 to support new indications, which could pose logistical and operational challenges.

Currency Fluctuations: Currency exchange rates are expected to have a slight negative impact on core operating income in 2025, adding financial uncertainty.

Short-Term Margin Dilution: The proposed acquisition of Avidity is expected to dilute core margins by 1-2 percentage points over the next three years, impacting profitability.

Competitive Pressures: The company is contending with competition in various drug categories, such as IL-17 inhibitors for Cosentyx and CDK4/6 inhibitors for Kisqali, which could impact market share and growth.

Economic and Pricing Pressures: Onetime price effects and adjustments in prior years have created challenges in maintaining consistent growth, particularly outside the U.S.

Revenue Growth: Novartis expects high single-digit growth in net sales for the full year 2025, despite generic erosion challenges.

Core Operating Income: The company anticipates low teens growth in core operating income for 2025, with a core margin of 39.3% in Q3 and a return to 40% margin by 2029 after temporary dilution from the Avidity acquisition.

Kisqali: Kisqali is projected to continue its strong growth trajectory, driven by its early breast cancer launch and global expansion. The drug is expected to see significant growth in exclusive populations and outside the U.S., with early breast cancer indications approved in 56 countries.

Kesimpta: Kesimpta is expected to drive dynamic growth outside the U.S., where 70% of disease-modifying treated patients are not currently on B-cell therapy. The drug has shown robust growth in the U.S. and is expanding its market share globally.

Pluvicto: Pluvicto is on track to reach its peak sales potential, supported by its pre-taxane approval and global rollout. Regulatory submissions for additional indications are planned for Q4 2025.

Leqvio: Leqvio is expected to exceed $1 billion in sales for 2025, with strong growth in the U.S. and international markets. Regulatory submissions for pediatric indications are on track, supporting long-term growth.

Scemblix: Scemblix is projected to become the most prescribed TKI in the U.S. and is expanding its market share globally, with early-line approvals in 26 countries.

Cosentyx: Cosentyx is expected to achieve mid-single-digit growth for 2025 and reach $8 billion in peak sales, supported by new indications like polymyalgia rheumatica and market expansion in core indications.

Fabhalta: Fabhalta is gaining traction in the U.S. and internationally, with strong growth in the IgAN market and positive Phase III data supporting regulatory submissions.

Rhapsido: Rhapsido is expected to see rapid uptake in 2026, following its FDA approval as the only oral targeted BTK inhibitor for CSU. Submissions in the EU, China, and Japan are underway.

Ianalumab: Regulatory submissions for Ianalumab are planned for the first half of 2026, following positive Phase III results.

Avidity Acquisition: The acquisition of Avidity is expected to raise Novartis' 2024-2029 sales growth rate from 5% to 6%, with significant contributions starting in 2029.

Dividends distributed: $7.8 billion in dividends were distributed during the first half of the year as part of the annual dividend.

Share buyback program: Successfully completed an up to $15 billion share buyback program early July and launched a new up to $10 billion buyback program targeted for completion by the end of 2027.