On July 18, 2024 commenting on Q2 2024 results, Vas Narasimhan, CEO of Novartis, said (Press release, Novartis, JUL 18, 2024, View Source [SID1234644938]):

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"Novartis delivered a strong Q2, with net sales up 11% and core operating income margin approaching 40%. Our performance reflects continued strong momentum of our key growth drivers, both in the US and ex-US, which has allowed us to upgrade our FY2024 guidance. We also advanced our pipeline in Q2, completing submissions to the FDA for Scemblix in first-line CML and atrasentan in IgAN, generating updated data in the NATALEE study to support the strong profile of Kisqali in eBC, and executing multiple deals to expand our pipeline in RLT and prostate cancer. We remain on track to achieve our mid-term sales growth (+5% cc CAGR 2023-2028) and margin (40%+ by 2027) guidance."

Key figures Continuing operations3
Q2 2024 Q2 2023 % change H1 2024 H1 2023 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 12 512 11 437 9 11 24 341 22 235 9 11
Operating income 4 014 2 807 43 47 7 387 5 425 36 43
Net income 3 246 2 271 43 49 5 934 4 421 34 43
EPS (USD) 1.60 1.09 47 52 2.91 2.12 37 47
Free cash flow 4 615 3 292 40 6 653 5 976 11
Core operating income 4 953 4 240 17 19 9 490 8 146 16 21
Core net income 4 008 3 502 14 18 7 689 6 735 14 19
Core EPS (USD) 1.97 1.69 17 21 3.77 3.23 17 22
1. Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 43 of the Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year. 2. Please see detailed guidance assumptions on page 7. 3. As defined on page 33 of the Interim Financial Report, Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities and Discontinued operations include operational results from the Sandoz business.

Strategy
Our focus
In 2023, Novartis completed its transformation into a "pure-play" innovative medicines business. We have a clear focus on four core therapeutic areas (cardiovascular-renal-metabolic, immunology, neuroscience and oncology), with multiple significant in-market and pipeline assets in each of these areas, that address high disease burden and have substantial growth potential. In addition to two established technology platforms (chemistry and biotherapeutics), three emerging platforms (gene & cell therapy, radioligand therapy and xRNA) are being prioritized for continued investment into new R&D capabilities and manufacturing scale. Geographically, we are focused on growing in our priority geographies – the US, China, Germany and Japan.

Our priorities
Accelerate growth: Renewed attention to deliver high-value medicines (NMEs) and focus on launch excellence, with a rich pipeline across our core therapeutic areas.
Deliver returns: Continuing to embed operational excellence and deliver improved financials. Novartis remains disciplined and shareholder-focused in our approach to capital allocation, with substantial cash generation and a strong capital structure supporting continued flexibility.
Strengthening foundations: Unleashing the power of our people, scaling data science and technology and continuing to build trust with society.

Financials
Following the September 15, 2023, shareholder approval of the spin-off of Sandoz, Novartis reported its consolidated financial statements as "continuing operations" and "discontinued operations."

Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities. Discontinued operations include the Sandoz Division and selected portions of corporate activities attributable to Sandoz’s business, as well as certain expenses related to the spin-off.

While the commentary below focuses on continuing operations, we also provide information on discontinued operations.

Continuing operations
Second quarter

Net sales were USD 12.5 billion (+9%, +11% cc), with volume contributing 15 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing had a negative impact of 2 percentage points.

Operating income was USD 4.0 billion (+43%, +47% cc), mainly driven by higher net sales and lower impairments, partly offset by higher R&D investments.

Net income was USD 3.2 billion (+43%, +49% cc), mainly driven by higher operating income. EPS was USD 1.60 (+47%, +52% cc), benefiting from the lower weighted average number of shares outstanding.

Core operating income was USD 5.0 billion (+17%, +19% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 39.6% of net sales, increasing 2.5 percentage points (+2.7 percentage points cc).

Core net income was USD 4.0 billion (+14%, +18% cc), mainly due to higher core operating income. Core EPS was USD 1.97 (+17%, +21% cc), benefiting from the lower weighted average number of shares outstanding.

Free cash flow from continuing operations amounted to USD 4.6 billion (+40% USD), compared with USD 3.3 billion in the prior-year quarter, driven by higher net cash flows from operating activities from continuing operations.

First half

Net sales were USD 24.3 billion (+9%, +11% cc), with volume contributing 15 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing had negative impact of 2 percentage points.

Operating income was USD 7.4 billion (+36%, +43% cc), mainly driven by higher net sales and lower impairments and restructuring charges, partly offset by a prior-year one-time income from legal matters.

Net income was USD 5.9 billion (+34%, +43% cc), mainly driven by higher operating income. EPS was USD 2.91 (+37%, +47% cc), benefiting from the lower weighted average number of shares outstanding.

Core operating income was USD 9.5 billion (+16%, +21% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 39.0% of net sales, increasing 2.4 percentage points (+3.1 percentage points cc).

Core net income was USD 7.7 billion (+14%, +19% cc), mainly due to higher core operating income. Core EPS was USD 3.77 (+17%, +22% cc), benefiting from the lower weighted average number of shares outstanding.

Free cash flow from continuing operations amounted to USD 6.7 billion (+11% USD), compared with USD 6.0 billion in the prior-year period, driven by higher net cash flows from operating activities from continuing operations.

Discontinued operations
Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars division, certain corporate activities attributable to Sandoz and certain other expenses related to the spin-off of the Sandoz business.

Second quarter

As the Sandoz spin-off was completed on October 3, 2023, there were no operating results in the second quarter of 2024 related to discontinued operations. In the second quarter of 2023, discontinued operations net sales were USD 2.4 billion, operating income amounted to USD 113 million and net income from discontinued operations was USD 46 million. For further details see Note 3 "Significant acquisition of businesses and spin-off of Sandoz business" and Note 11 "Discontinued operations" to the condensed interim consolidated financial statements.

First half

As the Sandoz spin-off was completed on October 3, 2023, there were no operating results in the first half 2024 related to discontinued operations. In the first half 2023, discontinued operations net sales were USD 5.0 billion, operating income amounted to USD 351 million and net income from discontinued operations was USD 190 million. For further details see Note 3 "Significant acquisition of businesses and spin-off of Sandoz business" and Note 11 "Discontinued operations" to the condensed interim consolidated financial statements.

Total Company
Second quarter

Total Company net income was USD 3.2 billion in 2024, compared to USD 2.3 billion in 2023 and basic EPS was USD 1.60 compared to USD 1.11 in prior year quarter. Net cash flows from operating activities for total Company amounted to USD 4.9 billion and free cash flow amounted to USD 4.6 billion.

First half

Total Company net income was USD 5.9 billion in 2024, compared to USD 4.6 billion in 2023 and basic EPS was USD 2.91 compared to USD 2.20 in prior year. Net cash flows from operating activities for total Company amounted to USD 7.1 billion and free cash flow amounted to USD 6.7 billion.

Q2 key growth drivers
Underpinning our financial results in the quarter is a continued focus on key growth drivers (ranked in order of contribution to Q2 growth) including:

Entresto (USD 1 898 million, +28% cc) sustained robust demand-led growth, with increased penetration in the US and Europe following guideline-directed medical therapy in heart failure, as well as in China with increased penetration in hypertension
Kesimpta (USD 799 million, +65% cc) sales grew across all regions reflecting increased demand and strong access for a high efficacy product with convenient self-administered dosing
Cosentyx (USD 1 526 million, +22% cc) sales grew mainly in the US, driven by recent launches (including the HS indication and the IV formulation in the US) in addition to volume growth in core indications
Kisqali (USD 717 million, +50% cc) sales grew strongly across all regions, based on increasing recognition of its overall survival benefit in HR+/HER2- advanced breast cancer and Category 1 NCCN guidelines recommendation
Leqvio (USD 182 million, +134% cc) continued to show steady growth, with a focus on increasing account and patient adoption, growing customer confidence in acquisition and access, and continuing medical education
Pluvicto (USD 345 million, +44% cc) grew in the US and Europe. With supply now unconstrained, the focus is on increasing share in established RLT sites, opening new sites and referral pathways, and initiating new patients
Xolair (USD 427 million, +22% cc) growth was driven mainly by emerging growth markets and Europe
Ilaris (USD 368 million, +20% cc) sales grew across all regions, mainly US and Europe
Scemblix (USD 164 million, +56% cc) sales grew across all regions, demonstrating the high unmet need in later lines of CML
Jakavi (USD 471 million, +13% cc) sales grew across all regions, with strong demand in both myelofibrosis and polycythemia vera indications
Tafinlar + Mekinist (USD 523 million, +9% cc) sales grew in all regions, led by emerging growth markets
Lutathera (USD 175 million, +17% cc) sales grew across all regions due to increased demand, following the presentation of NETTER-2 results in 1L GEP-NET
Fabhalta (USD 22 million) continued to show encouraging early launch indicators in the US, as the first oral monotherapy approved for PNH patients
Emerging Growth Markets* Grew +16% (cc) overall. China grew +27% (cc) to USD 1.1 billion, mainly driven by Entresto and Xolair
*All markets except the US, Canada, Western Europe, Japan, Australia, and New Zealand

Net sales of the top 20 brands in Q2 2024
Q2 2024 % change H1 2024 % change
USD m USD cc USD m USD cc
Entresto 1 898 25 28 3 777 30 32
Cosentyx 1 526 20 22 2 852 21 23
Kesimpta 799 63 65 1 436 64 66
Kisqali 717 45 50 1 344 48 52
Promacta/Revolade 544 -7 -5 1 064 -6 -4
Tafinlar + Mekinist 523 5 9 997 5 7
Jakavi 471 8 13 949 12 15
Tasigna 446 -6 -4 841 -10 -9
Xolair 427 18 22 826 15 18
Ilaris 368 16 20 724 12 17
Sandostatin Group 313 -5 -4 668 1 3
Pluvicto 345 44 44 655 45 45
Zolgensma 349 12 14 644 4 6
Lucentis 275 -30 -28 589 -27 -26
Exforge Group 178 -3 1 370 0 3
Lutathera 175 17 17 344 15 16
Leqvio 182 133 134 333 135 137
Gilenya 138 -49 -47 313 -38 -36
Scemblix 164 55 56 300 65 67
Diovan Group 160 3 9 300 -4 1
Top 20 brands total 9 998 15 18 19 326 16 18
R&D update – key developments from the second quarter
New approvals
Fabhalta
(iptacopan) EU, Japan and China approval for the treatment of adults with the rare blood disorder paroxysmal nocturnal hemoglobinuria (PNH).
Lutathera
(lutetium Lu 177 dotatate) FDA approval for the treatment of pediatric patients (≥12 years) with somatostatin receptor-positive gastroenteropancreatic neuroendocrine tumors (GEP-NETs).
Regulatory updates
Scemblix
(asciminib) FDA granted Breakthrough Therapy designation to Scemblix for the treatment of adult patients with newly diagnosed Philadelphia chromosome-positive chronic myeloid leukemia in chronic phase (Ph+ CML-CP).

FDA submission for first-line CML is completed and under Real-Time Oncology Review.
Atrasentan FDA filing accepted for the treatment of adult patients with IgA nephropathy (IgAN).
Lutathera
(lutetium Lu 177 dotatate) EU filing accepted for the treatment of newly diagnosed, unresectable or metastatic, well-differentiated (G2 and G3), somatostatin receptor-positive GEP-NETs in adults.
Results from ongoing trials and other highlights
Scemblix
(asciminib) In the Phase III ASC4FIRST study, Scemblix demonstrated superior major molecular response rates at week 48 vs investigator-selected standard-of-care tyrosine kinase inhibitors (TKIs) (67.7% vs 49.0%) and vs imatinib alone (69.3% vs 40.2%) in adults with newly diagnosed Ph+ CML-CP. Scemblix also demonstrated a favorable safety and tolerability profile. These results have been submitted to the FDA under Real-Time Oncology Review. Data presented at ASCO (Free ASCO Whitepaper) and EHA (Free EHA Whitepaper) 2024 and published in the New England Journal of Medicine.
Kisqali
(ribociclib) New analyses following the end of Kisqali treatment for all patients in the Phase III NATALEE study in HR+/HER2- early breast cancer showed a continued clinically meaningful benefit with a consistent safety profile. Results to be presented at an upcoming medical meeting.

In addition, a subgroup analysis from the NATALEE study at the time of final iDFS data cut-off showed the addition of Kisqali to endocrine therapy in patients with high-risk node-negative (N0) disease resulted in a 28% risk reduction in iDFS. The efficacy, safety and tolerability profile observed in the high-risk N0 subgroup​ is consistent with the overall NATALEE study population. Data presented at ASCO (Free ASCO Whitepaper) 2024.
Fabhalta
(iptacopan) Phase III APPEAR-C3G data showed a 35.1% proteinuria reduction vs placebo at 6 months for C3G patients treated with Fabhalta in addition to supportive care. Secondary endpoint data for estimated glomerular filtration rate showed numerical improvement over 6 months vs placebo. The study also showed Fabhalta has a favorable safety profile with no new safety signals. Submissions to the FDA and EMA for the adult C3 glomerulopathy indication are planned for H2 2024. Data presented at ERA 2024.

Phase III APPLAUSE-IgAN data showed a 38.3% proteinuria reduction at nine months vs placebo for patients with IgAN. Fabhalta was well tolerated with a favorable safety profile consistent with previously reported data. Data presented at WCN 2024.
Atrasentan Results from a pre-specified interim analysis of Phase III ALIGN data showed patients treated with atrasentan, in addition to supportive care with a renin-angiotensin system inhibitor, achieved a statistically significant 36.1% reduction in proteinuria vs placebo on top of supportive care at 36 weeks. Results presented at ERA 2024.
Remibrutinib Phase III REMIX-1 and REMIX-2 data showed sustained efficacy and long-term safety of oral remibrutinib in chronic spontaneous urticaria (CSU) patients, with improvements in weekly urticaria activity scores observed as early as week 1 and sustained to week 52. Across both studies, remibrutinib demonstrated a favorable and consistent safety profile up to one year, including balanced liver function tests vs placebo. Novartis plans to submit remibrutinib for regulatory approval in 2025. Data presented at EAACI 2024.
Coartem (artemether- lumefantrine) Phase II/III CALINA study data demonstrated that an optimized dose of Coartem developed for babies weighing <5kg with malaria has the required pharmacokinetic profile and good efficacy and safety. Data presented at the Multilateral Initiative on Malaria Pan-African Malaria Conference 2024.
Deals In line with our strategic focus on oncology, Novartis acquired >90% of the total share capital of MorphoSys AG, adding to our pipeline pelabresib, a late-stage investigational BET inhibitor for myelofibrosis, and tulmimetostat, an early-stage investigational dual inhibitor of EZH2 and EZH1 for solid tumors or lymphomas.

Novartis acquired Mariana Oncology, a biotech company focused on developing novel radioligand therapies (RLTs) across a range of solid tumors. The acquisition brings a robust portfolio of RLT programs, including MC-339, an actinium-based RLT being investigated in small cell lung cancer.

Novartis expanded its peptide discovery collaboration with PeptiDream. Under the multi-program agreement, PeptiDream will identify and optimize novel macrocyclic peptides against targets selected by Novartis, for potential application in RLT.

Novartis signed an exclusive strategic license agreement with Arvinas for the worldwide development and commercialization of ARV-766, a second generation PROTAC androgen receptor (AR) degrader, complementing our RLT platform in prostate cancer.
Capital structure and net debt
Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns remains a priority.

During the first half of 2024, Novartis repurchased a total of 26.7 million shares for USD 2.7 billion on the SIX Swiss Exchange second trading line. These purchases included 25.9 million shares (USD 2.6 billion) under the up-to USD 15 billion share buyback announced in July 2023 (with up to USD 10.1 billion still to be executed). In addition, 0.8 million shares (USD 0.1 billion) were repurchased to mitigate dilution related to participation plans of associates, with the remainder of repurchases for this purpose to be executed in H2 2024. Further, 1.1 million shares (for an equity value of USD 0.1 billion) were repurchased from associates. In the same period, 8.4 million shares (for an equity value of USD 0.5 billion) were delivered as a result of share deliveries related to participation plans of associates. Consequently, the total number of shares outstanding decreased by 19.4 million versus December 31, 2023. These treasury share transactions resulted in an equity decrease of USD 2.3 billion and a net cash outflow of USD 2.7 billion.

As of June 30, 2024, net debt increased to USD 18.8 billion compared to USD 10.2 billion net debt at December 31, 2023. The increase was mainly due to the USD 7.6 billion annual dividend payment, net cash outflow for M&A / intangible assets transactions of USD 5.0 billion and cash outflow for treasury share transactions of USD 2.7 billion, partially offset by USD 6.7 billion free cash flow.

As of Q2 2024, the long-term credit rating for the company is Aa3 with Moody’s Ratings and AA- with S&P Global Ratings.

2024 outlook
Barring unforeseen events; growth vs prior year in cc Previous guidance
Net sales Expected to grow high single to low double-digit (unchanged)
Core operating income Expected to grow mid- to high teens (from low double-digit to mid-teens)
Key assumptions:

Our guidance assumes that no Entresto generics and no Promacta generics launch in the US in 2024
Foreign exchange impact
If mid-July exchange rates prevail for the remainder of 2024, the foreign exchange impact for the year would be negative 2 to negative 1 percentage points on net sales and negative 3 percentage points on core operating income. The estimated impact of exchange rates on our results is provided monthly on our website.

2025 Annual General Meeting
Nomination for election to the Board of Directors
The Novartis Board of Directors announced today that it is nominating Elizabeth M. McNally, MD, PhD, for election to the Board. Dr. McNally is Director of the Center for Genetic Medicine at Northwestern University, Feinberg School of Medicine, and as a practicing cardiologist and renowned research leader specializing in the genetics of cardiovascular and neuromuscular disorders, her clinical and scientific expertise will add greatly to the Novartis Board of Directors. Dr. McNally completed her MD and PhD at the Albert Einstein College of Medicine, and trained in Internal Medicine and Cardiology at the Brigham and Women’s Hospital at Harvard Medical School. She is a member of the National Academy of Medicine, serves on the Board of the Muscular Dystrophy Association, and is also the Founder and CEO of Ikaika Therapeutics.

Board of Directors announcements
The Board also noted Charles L. Sawyers and William T. Winters will not stand for re-election at the AGM 2025 in accordance with the 12-year term limit. The Board of Directors and the Executive Committee of Novartis thank them for their outstanding contributions and many years of distinguished service.

Key figures1
Continuing operations2 Q2 2024 Q2 2023 % change H1 2024 H1 2023 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 12 512 11 437 9 11 24 341 22 235 9 11
Operating income 4 014 2 807 43 47 7 387 5 425 36 43
As a % of sales 32.1 24.5 30.3 24.4
Net income 3 246 2 271 43 49 5 934 4 421 34 43
EPS (USD) 1.60 1.09 47 52 2.91 2.12 37 47
Cash flows from
operating activities 4 875 3 517 39 7 140 6 369 12
Non-IFRS measures
Free cash flow 4 615 3 292 40 6 653 5 976 11
Core operating income 4 953 4 240 17 19 9 490 8 146 16 21
As a % of sales 39.6 37.1 39.0 36.6
Core net income 4 008 3 502 14 18 7 689 6 735 14 19
Core EPS (USD) 1.97 1.69 17 21 3.77 3.23 17 22


Discontinued operations2 Q2 2024 Q2 2023 % change H1 2024 H1 2023 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 2 449 nm nm 4 952 nm nm
Operating income 113 nm nm 351 nm nm
As a % of sales 4.6 7.1
Net income 46 nm nm 190 nm nm
Non-IFRS measures
Core operating income 428 nm nm 935 nm nm
As a % of sales 17.5 18.9


Total Company Q2 2024 Q2 2023 % change H1 2024 H1 2023 % change
USD m USD m USD cc USD m USD m USD cc
Net income 3 246 2 317 nm nm 5 934 4 611 nm nm
EPS (USD) 1.60 1.11 nm nm 2.91 2.20 nm nm
Cash flows from
operating activities 4 875 3 576 nm nm 7 140 6 533 nm nm
Non-IFRS measures
Free cash flow 4 615 3 275 nm nm 6 653 5 995 nm nm
Core net income 4 008 3 811 nm nm 7 689 7 425 nm nm
Core EPS (USD) 1.97 1.83 nm nm 3.77 3.54 nm nm
nm=not meaningful

1. Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 43 of the Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year.
2. As defined on page 33 of the Interim Financial Report, Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities and Discontinued operations include operational results from the Sandoz business.

Detailed financial results accompanying this press release are included in the Interim Financial Report at the link below:
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