Meet Novartis AG Management Investor Event - Breakout Sessions (Day 2)
May 23, 2019 PM UTC
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NOVN.VX - Novartis AG
Meet Novartis AG Management Investor Event - Breakout Sessions (Day 2)
May 23, 2019 / 01:00PM GMT
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Corporate Participants
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* Vasant Narasimhan
Novartis AG - CEO
* Samir Shah
Novartis AG - Global Head of IR
* Ameet Mallik
Novartis Oncology - Former Head of Global Marketing, Value and Access
* Carol Lynch
Sandoz International GmbH - Global Head of Biopharmaceuticals
* Danny Bar-Zohar
Novartis AG - Global Head of Neuroscience Development
* David Lennon
AveXis, Inc. - President
* David Soergel
Novartis AG - Head of the Cardiovascular, Renal and Metabolic Development Group
* Evan Beckman
Novartis Institute for Biomedical Research - Global Head of Translational Medicine
* Fabrice Chouraqui
Novartis Pharmaceuticals (US) - President
* Francesco Balestrieri
Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa
* Franck Leveiller
Alcon, Inc. - Global Head R&D
* Glenn Dranoff
Novartis Institute for Biomedical Research - Head of Immuno-oncology
* Harry Kirsch
Novartis AG - CFO
* James E. Bradner
Novartis AG - President of Novartis Institutes for Biomedical Research
* Jeffrey A. Engelman
Novartis Oncology - VP & Global Head of Oncology Research
* John Tsai
Novartis AG - Head of Global Drug Development & Chief Medical Officer
* Lilli Petruzzelli
Novartis AG - Vice President Oncology Translational Medicine
* Linda Armstrong
Novartis AG - Global Head Respiratory Development Unit
* Marcia Kayath
Novartis Pharmaceuticals - Chief Medical Officer and Global Head of Medical Affairs
* Olga Santiago
AveXis, Inc. - Chief Medical Officer
* Paul Hudson
Novartis AG - CEO of Novartis Pharmaceuticals
* Philippe Deecke
Sandoz - CFO
* Robert Kowalski
Novartis AG - Head of Global Regulatory Affairs
* Robert Karsunky
Novartis AG - CFO, Pharmaceuticals
* Stefan Hendriks
Sandoz - Global Head Biopharmaceuticals
* Steffen Kurzawa
Sandoz International GmbH - Global Head of Communications
* Susanne Schaffert
Novartis AG - CEO of Novartis Oncology
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Conference Call Participants
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* Brian Kemp Dolliver
Cherrystone Hill Capital Management LLC - CIO
* Chris Shibutani
Cowen and Company, LLC, Research Division - MD & Senior Research Analyst
* Ed Pittman
New Jersey Investment Division - Analyst
* Florent Cespedes
Societe Generale Cross Asset Research - Senior Equity Analyst
* Holger Blum
BZ Bank Aktiengesellschaft, Research Division - Research Analyst
* Jason A. Kritzer
Eaton Vance Management - VP, Portfolio Manager & Equity Analyst
* Kris Harland Jenner
Rock Springs Capital - Co-Founder, MD & Principal
* Naresh Chouhan
New Street Research LLP - Former Partner & Research Analyst
* Richard J. Parkes
Deutsche Bank AG, Research Division - Director
* Vincent Chen
Sanford C. Bernstein & Co., LLC., Research Division - VP
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Questions and Answers
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Unidentified Analyst [1]
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Just a question on R&D and risk. You've had a number of -- you had very high Phase II success rates in recent years, and increasing the new modalities across broad therapeutic areas. We've seen this at other companies across the industry where after a period of very strong success rates, particularly after a period of weakness, you see increase in level of risks being taken and then the failure rates going up, so how do you manage these risks, particularly given the present -- the best cost (inaudible) modalities.
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Vasant Narasimhan, Novartis AG - CEO [2]
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So there are a couple of things we do to ensure that we are consistent in our approach to R&D. I think first and foremost, what we've done both at the research level, so you can ask Jay Bradner about that later. We are also at the development is where we're trying to be very quantitative in how we look at projects, both from a financial return, scientific risk and do they really change the standard of care. But actually be very quantitative in scoring these projects in a way of they forces us to the objective. And we have independent teams. I have learned that you need independent portfolio analysts in the company who are not tied to any projects, producing these analyses that then can be put in front of management that -- and then we can take these decisions.
The second element is, I think, you need leadership to be involved in driving the innovation. So I cheer the Innovation Management Board. Harry is always on my right, like he is right now, at the Innovation Management Board as well. And we are looking hard at all these projects to ensure we remain disciplined. I think, part of the reason we are having good success right now is we've been very disciplined since 2014. And I think, it's, like you said, it's easy to lose that discipline. We just had a discussion at our Innovation Board about how do we maintain the discipline that led us to where we are, so that we don't again make questionable decisions.
I think it's very easy to believe you can skip Phase IIb and outsmart science. But in general, if you look at all the FDA's analyses, companies that skip Phase IIb get the dose wrong, because they think they get where you can outsmart the human body, generally don't succeed. So those are discussions we're having. So we're cognizant of it. I'm not saying we're perfect. I mean sometimes we probably, if anything, err on the side -- we can err on the side of trying to continue projects just because they're already there. That's something we have to keep fighting against. But, if you go back to 2014, we had about 130 projects in our development portfolio. Today, we have 67. So I think that shows you the kind of discipline now we've put into the system to say we want significant medicines to change the standard of care, otherwise we're not going to do the project.
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [3]
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Florent Cespedes from Societe Generale.
I have couple of questions. Let start with the situation in the U.S. -- the U.S. pricing environment because you said during your presentation that you are a strong European company, you know how to manage the kind of tough pricing environment in Europe, but what about the U.S. How do you see the potential changes in the system? How fast could the changes could be implemented? I know it's very difficult to figure out what would be the next step, but we would like to have your view on this.
And then I've a second question, more on the organization of your company. You are now focused with less on SAMA, but with a diversified portfolio and different core therapeutical areas. What's your view on the organization of your group? Do you still have good synergies between different sub-entities, I would say? Could you extract some complexity from this? Or are you, let's say, happy with the current organization?
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Vasant Narasimhan, Novartis AG - CEO [4]
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On the U.S. pricing environment, so I spent quite a bit of time in Washington already this year, also last year. And what I see is, unlikely that we will have major reforms just given the political environment at the moment. I think there's a lot of interest, a lot of hearings, both from the health committee and the finance committee both in the Senate and in the House. So a lot of interest, a lot of bills being passed around. But I think there are probably 3 levels of reforms that are being contemplated. The 1 level where I think there's strong bipartisan support is on the areas of stopping any sort of patent gaming or pay-for-delay, or anything that looked, call it, unfairly delays the ability of generic center. I think there is bipartisan support and we also support reforming those areas.
The secondary bipartisan support is around transparency. And if you look at price transparency -- pricing transparency at the moment, right now we have states all around the country enacting different types of price transparencies. We actually are for the government -- federal government to just put forward a common legislative framework. We have to report in California. The only thing we don't agree with in California is the notice period, but other than that we anyway have to report. So having that be a national standard would simplify things. We're supported there.
The third area of bipartisan support is more rapidly enabling biosimilars, and I think this also would benefit -- overall benefit us. I think that is a place where you have a lot of bipartisan support.
The 2 areas where there's, of course, a lot of debate are on the Part D rebate reform. So we as an industry, Novartis believe, you need to reduce the cost per patients at the pharmacy counter. And the proposed reforms, which would no longer allow removal of the safe harbor, which would probably push rebates to the patients, I think, would be positive. Now that ruling continues to be under review. We don't know, and we actually don't even know what is the substance of the rule yet. So that remains an open question. And the other area is Part B. Now we are very low exposed to Part B as a company relative to our peers. But there is a lot of interest, both in terms of increasing competition and Part B. There has been float at the international pricing index. My view on Part B is, we will ultimately come to a reasonable solution between the pharmaceutical industry and HHS. And we're working hard on it. We're working hard to put different proposals in place with our peers to try to manage the overall Part B situation. So lets call that the Tier 2 level of activity.
The ones that I think are -- where we view as, we call them bright red lines and I think there is good support amongst Republicans, Democrats, not to allow some of these reforms happen. One would be importation, where we are 100% against it. We are troubled by the recent Florida move, but it's, of course, something we have to continue to watch. We don't believe any sort of price indexing makes sense, particularly versus the OECD. When you look at the wealthiest countries in Europe and you compare it to the U.S., price differentials for most drugs aren't that large. If you take a broad bucket like the OECD, it's not really a relevant benchmark, even as a first principle, but in general, we don't think price indexing is the right approach.
And I think the third one that is floating around, we don't think we'd ever get past is, reforms to the IP protections that we receive as a pharmaceutical company to deliver innovation. Those are 3 areas we don't believe would come, but we're also actively advocating against.
The only level of those 3 levels, I believe, could happen in the next 18 months is the level 1, where the industry believes in it, bipartisan support. The challenges in many of those things get linked on to bills that nobody else wants to support, and so these 4 very rational things don't happen, that's the kind of nature of the biz.
Now the second part of your question was?
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Unidentified Company Representative [5]
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Synergies.
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [6]
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The organization.
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Vasant Narasimhan, Novartis AG - CEO [7]
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The organization. So right now we are happy with the organizational setup. I mean the key focus right now is to make Sandoz an anonymous unit because we believe it to be a successful generics company. Sandoz needs a complete flexibly of its manufacturing supply chain. Business services in Robert's area is less of a focus at the moment, though eventually that could make sense. So make Sandoz have the efficiency to -- and simplicity to get after the generics market, and the rest of the company is an integrated innovative medicines company.
Now the one question that comes is why do you hold a pharmaceuticals group and an oncology group in terms of commercial infrastructure. That'd be the one place you could debate. Our view is that with so many launches coming up, having teams that are focused on launches and enable them to drive oncology, where such a huge opportunity and significant business for the company and similar innovative medicines, this is the right setup. But it's not that we don't discuss these things. As a leadership team, we're always revisiting, does that makes sense? And our view is it is the right thing to do.
Kris in the back.
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Kris Harland Jenner, Rock Springs Capital - Co-Founder, MD & Principal [8]
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Kris Jenner, Rock Springs Capital. Vas, could you just go back to your opening comments, you made several points, but specifically, you drew reference to oncology and I just wondered if you were making a distinction between external focus and internal comments about potential assets of interest and you drew a distinction about whether borrowers hire internally for certain therapeutic categories? Could you just elaborate on the point you're making there?
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Vasant Narasimhan, Novartis AG - CEO [9]
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Yes. I think on oncology, because of the scale and size of the business that we have, we need a steady flow of pipeline assets. And I think it's clear that in recent years, we haven't had the output that we have needed from our internal pipeline. It's not from a lack of investments. It's not from the lack of diligence, but we haven't had the output we needed to truly deliver the growth. And we started a number of Phase III projects. Those Phase III projects readout in the 2021, '24 time period Right now, if we could find asset -- late-stage assets to add to our oncology portfolio, we would certainly look at them. It's difficult to find assets that are both high quality and that are appropriately valued. We, of course, looked at the PARP Inhibitors. We've looked at some of the other, let's call it, Phase III assets or recently launched assets and we don't see great value. And so at the moment, we'll keep looking, but we haven't seen anything that would be attractive. And that's all I was pointing out is when we see a pipeline gap like that, we are prepared to do acquisitions, but it's got to make sense. And we're not willing to stretch the valuations so that they are not value creating. Harry, do you have anything to add?
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Harry Kirsch, Novartis AG - CFO [10]
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Yes, I think a good example of that, focused on the AAA acquisition of Endocyte, which added to Phase III (inaudible) opportunity. So we do look, of course, and screen, but there's a good financial discipline is there as well besides the strategic fit.
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Kris Harland Jenner, Rock Springs Capital - Co-Founder, MD & Principal [11]
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Going back to the Zolgensma question, your slides point to type 1 in 2019, and type 2, 3 coming later on, piggybacking off, like should we expect just type 1 in the label for this year as our base case?
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Vasant Narasimhan, Novartis AG - CEO [12]
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So again, as I said in the open session earlier, we can't really comment on the final label. I mean what we've advocated for and continue to believe is that doing the studies in the most difficult population, so patients with type 1 disease and showing a dramatic effect should enable us to go into the less severe population than the presymptomatic populations. But that's the discussion with FDA that until we have a final label, it's difficult to say. And then the other discussion is what is the upper end wave or age for how do we define an infant. So we'll know soon, within the next phase what the final label is.
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Unidentified Analyst [13]
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Kemp Doliver. This is a manufacturing question. In the context of your expected growth in Asia, particularly China, but throughout the region, how you're thinking about in-sourcing versus outsourcing, particularly in biologics?
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Vasant Narasimhan, Novartis AG - CEO [14]
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Steffen?
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Steffen Kurzawa, Sandoz International GmbH - Global Head of Communications [15]
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Yes. I think that's a topic we are looking at regularly, what our best setup is in Asia as well. We have a strong presence for small molecule and for chemicals. And so far we have been relying on importing biologics, but that's a topic, which is still under discussions.
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Vasant Narasimhan, Novartis AG - CEO [16]
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Do you want to say a word about our Singapore footprint as well?
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Steffen Kurzawa, Sandoz International GmbH - Global Head of Communications [17]
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Yes. In Singapore, of course, we are just starting up a large-scale biologics manufacturing facility, maybe also have adjacent, a well-established solids manufacturing facility.
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Vasant Narasimhan, Novartis AG - CEO [18]
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And one of the other things we've done on the biosimilar side, is look for partnerships in Asia to enable us to lower our cost of development in manufacturing, get access to Western U.S. and European markets, and allow the partner to have access to the Chinese, Indian markets. So we did a deal with Biocon for our 4 assets and biosimilars. We did a deal with Gan & Lee in insulins to see again insulin biosimilars. So that's another approach we are taking to excess -- access biologicals capacity and expertise. We're focused more on biosimilars.
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Unidentified Analyst [19]
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I just wanted to get a better sense on the journey and the transformation of Novartis, where we stand maybe today, if you aspire. Guess you never get 100% perfect and satisfied, but if you strive for 90% and then from where you started, how far you now advanced, maybe trying to get some quantification like the manufacturing sites, where you've already produced quite a bit, but also in other areas? How far have you progressed and to what extent maybe has your daily routine changed as well, maybe more from firefighting more into fostering roles in the long-term?
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Vasant Narasimhan, Novartis AG - CEO [20]
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Sure. Well, I would tell our teams are only 50% of the way there. And we're always only 50% of the way there. So that's the right mindset, I think, we need to have as an organization. But I think in each of the areas, we're probably in a different place. I think on the portfolio of the company, we feel good with where we are. I think completely Alcon consumer and Aurobindo, we feel like this is the right setup. So I wouldn't expect us to do anything else from an overall portfolio as a company. From the culture standpoint, I'd say it's early days. And we've made a lot of progress, as I mentioned in the opening session, but culture change is a 5-year journey and you see different parts of the organization in different places. A lot of it is getting the full leadership group on board as well as changing some of the long-standing behaviors in the company, but I think, we're making good progress on the culture change.
I think, on the pivot to breakthrough innovation, second priority, I feel like we've made a lot of progress. I think we've hold a lot much higher bar in our innovation to Naresh's earlier question. We brought on these new technology areas. We're much more disciplined in our R&D, both early and late. So I feel like we're almost there. I mean in the case of how we drive innovation, it's been consistent over time. I don't think there's anything new we need to do.
In our third priority of operational excellence every day, I think it's -- we're making good progress. Maybe Robert, do you want to say a word on where we are on the NBS transformation from your standpoint?
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Robert Kowalski, Novartis AG - Head of Global Regulatory Affairs [21]
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Yes. I think it's pretty few different metrics to look at there. In terms of the financial delivery, are we hitting the savings targets we set out to do? We're well on the way. We're doing, certainly, as I said, a good 50% there. There's always another 50% good after. In terms of the mindset change, that's the sort of the broader productivity, the sort of cost efficiency mindset change in the company, it's still early, but I'm seeing some really encouraging signs, where I see behavior starting to change, where people are starting to spend money as if they earn a little bit more as the norm and a little bit less entitlement. I'm seeing some great signals there actually, not just in my team, but across the organization I see this happening. And then, of course, there's the more systemic drive towards standardization, towards using the latest technologies, et cetera. And there, we're really just about 25% there. We're really in the early part of this transformation yet. A lot more to come back. A lot more benefits to be hatched from there and that's where we're really going to see the benefits of the scale of a corporation like Novartis in driving that level of standardization across the globe. So more to come there.
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Vasant Narasimhan, Novartis AG - CEO [22]
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And on the manufacturing transformation, Steffen?
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Steffen Kurzawa, Sandoz International GmbH - Global Head of Communications [23]
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Very similar. I think we are well underway and halfway school, I would say, the areas where we are more advanced when we talk about new technologies as well as new capabilities. At the same time, the consolidation of part of our portfolio where less demand is happening, where we're adjusting. Typically, it also takes a couple of years' time once you announce a network decision until this is materializing because of product transfers from one side to the other. And then, I think the most sustainable part is also then coming through the change in the culture as well as through the standardization and automation, which we're also working on, which we implement in factories and then basically scale out into other factories. So the ground work is done and then I think, it's more the implementation, which will come over the next couple of years.
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Harry Kirsch, Novartis AG - CFO [24]
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Maybe just to add a few financial metrics. So I think, margin-wise, coming from kind of the 30s innovative medicines with the aspiration to mid-30s, we are right now between 32 and 33. So right in the middle, right with good prospects on further progress towards into mid-30s. So midway there. I think then on capital intensity, CapEx. We have brought down with a clear focus on manufacturing sides and also what campus we own versus lease and more activity-based working designs and more office and laboratory space efficiencies. We are now at roughly 3.5% of sales on CapEx. And we brought that down from almost 6% several years back. So there, I would say, we are in this range of 3% to 4% and we are probably one of the most capital-efficient companies. Within that bit of variability, but probably there we are, maybe, 80% there. And then the one area and Vas touched on that before at the beginning, is our working capital with focus on inventory. We are quite good on receivables, extremely good credit management and focusing our commercial organizations not only on sales, but also cash collection. Very good with some upside on procurement and days payables. But in inventory, we have a significant opportunity, which will come hand-in-hand with the manufacturing consolidation.
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Vasant Narasimhan, Novartis AG - CEO [25]
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So taken together, I mean, really I would expect by the end of 2020, we would be almost complete with the NBS, NTO transformations. I thought -- I expect our culture and some of the financial elements that Harry has mentioned to also be in a much more stable place and we'll be more focused much more just on driving the pipeline and driving the launches. But still in this next 18-month period, we have a lot of change going on absolutely in the company. We've done big restructurings around the world. We're exiting sites. Yesterday, in Switzerland, we announced the exit of half of our site in Basel as another example. So roughly half, I guess. And so I think, those are all big shifts. So I think, we saw the 18 months of getting through all of that and getting the organization to a place where we feel like it's stable and we are purely focused on driving launches.
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Richard J. Parkes, Deutsche Bank AG, Research Division - Director [26]
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Richard Parkes from Deutsche Bank. Just got a couple of questions. First, you talked about the focus on making Sandoz the autonomous unit. I just wonder is that purely a note because you think it's going to help to improve execution within the divisional, is there a longer-term plan around separating out Sandoz? And how long do think it will take to get the business in the place and whether that would be possible? So that's first question.
And the second one is more broadly on U.S. pricing. You talked about being least exposed to some of the planned reforms, but there are pockets where there is a big differential in terms of pricing between U.S. and Europe, things like multiple sclerosis and I think, Cosentyx is still calculated that's kind of twice the price in the U.S. than in Europe. That sometimes generate some concerns among investors how sustainable that is. I'm just wondering how you think about that? And should we be thinking that prices in Europe are actually just so too low and not supporting innovation? Or how do you think about that?
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Vasant Narasimhan, Novartis AG - CEO [27]
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So the -- on the first question on Sandoz, the goal right now is to enable Sandoz to be as competitive as possible within the generics sector. And we believe that giving Sandoz the autonomy within the supply chain and over it's overall operations to drive a low-cost, high-efficient successful core generics and hard to make generics company with biosimilars is the right thing to do. No other readthrough into what happens next. Really, we believe this operationally is the right setup to enable Sandoz to be highly, highly successful. There will be points where we will maintain overall interfaces and we believe we can drive synergies differences in biologics. Biosimilars manufacturing will remain with our overall biologics network under Steffan because we think that's a better setup and in fact, enables us to ensure those facilities are fully utilized. Also in certain areas of business services, we'll maintain the connections to drive synergies. But it's really an operational decision to ensure Sandoz is highly successful.
Now in terms of the pricing reforms, I think, first, it's hard to look at these numbers when you're looking at list WAC prices in the U.S. and list prices in Europe. First you have to always look at net pricing, which is hard to calculate for many of our drugs, because it's not always transparent. It's my belief that net prices in the U.S. and if you look at high-income countries in Europe, the differences aren't as large as what the media would speculate. And that's part of the reason why I think a lot of the focus within the government has been on Part B drugs, on looking at differentials between Europe and the U.S. It is a quite big differential within the Part B space, which is why HHS has been focused on that in terms of their IPI reforms. So we don't see, at least at the moment, exposure outside of Part B in terms of reference pricing. And as I said earlier, our goal with our colleagues in pharma is to ensure we put forward proposals that manage the Part B reforms in a sensible way.
Who's next? Maybe here in the front and then, I'll go back to Naresh and then Kris.
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Naresh Chouhan, New Street Research LLP - Former Partner & Research Analyst [28]
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Vas, maybe to your earlier comment on the 35% margin target, so roughly 1% a year since kind of when that was first given. I guess obviously 1Q was a strong start, but what are the variables? Are there specific pipeline readouts or launches that could enable potentially achieving that earlier, because from an external perspective, it does seem like you are kind of trending, perhaps ahead of expectations, perhaps at that time?
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Vasant Narasimhan, Novartis AG - CEO [29]
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Harry?
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Harry Kirsch, Novartis AG - CFO [30]
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Yes. you already mentioned a couple of the aspects. One is of course the launch success. For example, short-term, I would say, Zolgensma can play a very nice role in that. For instance, what label do we get? What is the launch uptake that is happening short to midterm on Zolgensma? Then, of course, all the other launches and not to forget Cosentyx and Entresto. And on Cosentyx, we have this year two, I would say, very important data points. One is how are we dealing with kind of the last IL-23 competition coming in. And the other one is the fourth indication data, looking good, as we would expect. But when it's the pharma, we have to see the data and that would give also, together with the Entresto (inaudible) readout, a certain range of launch uptake, which, of course, is very important. And Vas mentioned how much we are focusing on launch excellence given we have 10 plus launches, and each of them has to go well. And that would be then in the upper rage of the outcome. The next element of that is what are the generic exposures. As I mentioned on quarter 1 call, quarter 1 for this year looked quite good. We expect on Exjade and Afinitor, a bit of generic erosion happening rest of the year, not dramatic, and always do expect very good sales growth, but a bit of a headwind.
And the other big question is then Gilenya, how long is Gilenya holding? And there we have our dosing patent until 2027, and we took it basically as a guidance for forecast this year out that any generic would launch, but we cannot control if there would be anybody launching at risk, although we think it's very irrational if somebody would do that. So that's why we have these 5, 6 different elements, which would defined certain ranges, but we believe that our sales growth and margin expansion is quite derisked, but it could be also an upside case, in case if a few things go our way.
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Vasant Narasimhan, Novartis AG - CEO [31]
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Here in the front.
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Unidentified Analyst [32]
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China is an enormous opportunity obviously, but there's been very little M&A in the region. I'm curious if you could walk us through what maybe the blockage there? If it's a regulatory issue? Or maybe lack of opportunities or something else?
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Vasant Narasimhan, Novartis AG - CEO [33]
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We recently did review of the China innovation landscape. So I think, right now, regulatory -- from a regulatory and reimbursement standpoint, there is important structural reforms. I think we're going to open up this market. One is the switch from supporting established brands and now moving them to really a tendered market, where I think, about $30 billion will get freed up by taking these old established brands, allowing high-quality generics to enter and then tendering down those prices point. At the same time, China has made a couple of important reforms that are opening up the market for innovation. One, the ability to do pivotal clinical trials in China directly in your Phase III studies. Two, China has enabled now for a list of, I think, over 60 drugs, the ability to use data outside of China to register the medicines. So that was for 4 of our medicines as well including Cosentyx, which allowed us the registration much, much more quickly and much streamlined regulatory review process. And then the third element is the reimbursement. We've seen really an increase in reimbursement. I mentioned we have 14 drugs now that are listed and we see the reimbursement environment just picking up. So it's very -- all very positive.
And when we look at the external ecosystem, there are a few observations I think we have. One is that there is a lot of investment dollars available for sure to invest in local Chinese companies. In general, we see them focused on being patented fast forward today if you look PD1. But also if you look at the other classes, particularly in oncology, you'll see a large number of companies entering, ensuring that they can get around the relevant IP, which is not monoclonal antibodies you can obviously do, doing the rapid development also in cell therapies or CAR-T as well. But it's all very fast-forward oriented. So what I see is that for large-capped global biopharmaceutical companies, looking at these companies as partners to plug gaps in your portfolios, I think you've seen others do deals for PD1 recently, and basically take those technologies and globalize them while the local companies hold them locally. We've yet to identify significant fundamental scientific innovation. Obviously, CART space is one where we are watching very closely. But I think there the regulatory standards need to go up and the data quality needs to go up to actually be -- have comparable data. It's not always clear how many lines of prior therapy a patient had. Is it really even a patient with the given disease? So these are all challenges. So I think that's why you are not seeing as much as activities. You don't see real fundamental new target discovery leading to novel drugs. And two, when you do see something that's an opportunity perhaps a fast follower and add-on or an adaptation, the data is hard to be sure is really credible. I think as those things get resolved in the 5- to 10-year period, you will see an uptick, but those are the barriers we see.
Who's next. Naresh, and then I'll come back to Kris in the top?
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Harry Kirsch, Novartis AG - CFO [34]
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At the front?
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Vasant Narasimhan, Novartis AG - CEO [35]
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No, no. Here in the front as well.
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Naresh Chouhan, New Street Research LLP - Former Partner & Research Analyst [36]
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Last night at dinner, Vas, you mentioned that the AI was forecasting next year's revenues, and you also talked about the sales, the sales platform that's going to changing the way your reps will do this. Potentially, within a few years, you'll see tens of thousands of people in the organization doing their jobs radically differently from where they were before. How do you manage that? And how much -- how do you prevent kind of too much change too fast and causing disruption?
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Vasant Narasimhan, Novartis AG - CEO [37]
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Yes. I'll talk about it in general terms and maybe Harry can go through the case study on what's happening now in finance. What we talk to about with our people is that we've seen consistently that AI doesn't beat the people, but AI plus the person is better than the AI alone or the person alone. We think people have to fundamentally rethink the way they work to your point. It takes time. I mean it takes a lot of commitment. The place we refer this along is drug development, where we've been able to do a show people using that Sense Bridge platform I showed in my side earlier, that this can actually help them make better decisions if they decide to use quantitative approaches to actually drive the decision-making. What does that mean in practice? That means if you are country -- trial leader in a given country, you don't call up your friend, the investigator, you go to the system and you say what is the system predict and say does that make sense and if it does make sense, you go with what the system predicts instead of calling the investigator friend you've always used. That's the behavior change at the end of the day that we need. Similarly, for the sales rep, you need the sales rep to trust the system to tell them where to go and spend their day versus going to the doctor they always went to on Tuesday. What we find is as long as it leads to improvements in performance, people make the switch. So when the pilots we've done in sales force in the United States, it was actually with Entresto. We've seen better performance in the reps that actually use the system. That spreads -- the word of mouth spreads very rapidly in the sales force. And then if everyone believe this will help them improve their output and their numbers, then they will nearly migrate. So I think the key is getting people to trial, showing people that it actually impacts result and then tell the story and then the story spreads.
Harry, do you want to talk a bit about AI?
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Harry Kirsch, Novartis AG - CFO [38]
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Yes. So maybe starting with where we leveraged since a few years digital. We have basically an app that puts the financial data at everybody's fingertips according to their information needs, very controlled, but quite transparent. And it helps people also in decision-making and transparency and not sending unnecessary requests, but you will fetch data at your finger tips on daily sales, on all the P&L items, on brands, on external market data, and script data.
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Vasant Narasimhan, Novartis AG - CEO [39]
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It updates at 3:00. So we have the daily sales from yesterday already for the whole world, every brand, every country in the world.
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Harry Kirsch, Novartis AG - CFO [40]
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So that's -- it's kind of, I would say, basic digital enabled, which makes people simply more efficient in their information penetration analytics and decision-making. And another area where we feel that as an organization we are quite effective, but not efficient, is kind of in the financial planning, be it in year, quarterly or 3 to 5 years. There as an organization we are effective, but we spent too much time on it. It's not only finance, it's the whole of the business teams. And so we have been testing our data legs, artificial intelligence in order to say, okay can we do better artificial intelligence-based forecasting. Started with cash flow, was a tremendous success, and now on sales. And now we go through whole P&L. So we are revamping the way we do financial planning, but of course, we safeguard. It's quite an important process. And -- but there we see good opportunities, because that will allow, for example, the business finance people focus much more externally together with their business partners or business opportunities in serving customers and patients, rather than trying bottom up, top down, left and right forecast processes to take way too long. So it one example. I think, overall, there is probably an area where Bertrand and team have done a fantastic push overall in different lighthouses, but also we are starting to leverage across the value chain and also on the support functions, the power of digital opportunities.
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Steffen Kurzawa, Sandoz International GmbH - Global Head of Communications [41]
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If I can maybe, the answer is -- the question you asked is, is the change too much for the associates, right? I think the approach we take is quite good from there's the large sort of lighthouses that are sort of top down to big flagship, the big motivational pieces, but at the same time we are motivating many -- most of our associates to sort of in an on-bus session, take digitally in their own hands and we are making technologies available for our associates to experiment and to work. And so next to the big ones, we have hundreds of other industries out there in the organization. People experiment, people are learning, and that sort of take the scare factor away, because people get used to this. It is not like it's coming in one big bang. It's people are growing into it and it works.
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Harry Kirsch, Novartis AG - CFO [42]
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I think it's part of also one element of the culture change. Nobody wants to do work that in the end a machine can do, in the end. So getting over that hump of maybe a bit of fear of change into kind of embracing change and being curious. I think that really is helping the organization to drive proactively into more efficient, more productive situations.
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Vasant Narasimhan, Novartis AG - CEO [43]
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Maybe one last point, we were talking about cultural -- sorry. We launched a digital hub to let associates in the company start to learn about these technologies. The idea would be that we want any associates at Novartis, the 100,000 associates, to at least be digitally literate or data science literate. So I think in the first 6 months, we've had tens of thousands of people on the platform taking the courses. So then we realized the massive online open courses was a way to go. So just this month we launched the entire Corthera LinkedIn learning platform free for all of our associates. And again, we've already seen tens of thousands of associates go on. And the place where they go on the most is to learn about the digital and data science. That's actually the courses where we see people, highest levels. So there's a hunger in the organization to understand what all of this is and make sure that they can integrate it in their work. Kris?
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Kris Harland Jenner, Rock Springs Capital - Co-Founder, MD & Principal [44]
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Vas, it strikes me that we're about to enter an incredibly fascinating period where Novartis is probably the world's expert on pricing of gene therapy. Obviously, you've done a tremendous amount of work on that subject, leading up to the acquisition of AveXis, you subsequently had a lot of payer discussions. I realize this is could-you-look-into-your-crystal-ball-type question, but if this will be the most expensive medicine that's ever been launched and I think that will be the case, what is your prediction for subsequent pricing of gene therapy assets? So for example, if I came to you in 5 years from now and I need to make the business case that my gene therapy will be at some comparable pricing to what you're achieving now, do you think that, that type of pricing will hold up, deteriorate or accelerate over time?
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Vasant Narasimhan, Novartis AG - CEO [45]
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I'll take the broader question first and I'll come specifically on Zolgensma. So I think first and foremost, for one-time gene therapies, you need to have a very significant clinical impact, and it's got to be reasonably durable. And if you don't have that it's going to be difficult to justify the pricing from cost effectiveness standpoint or other value-based frameworks and probably difficult to justify the return profile from an investment standpoint. So we hold a high bar for these gene therapies. We expect them to be really transformational. Otherwise, I think, for incremental gains, it's going to be difficult. Both Kymriah and Zolgensma are truly transformational. These are curing children of cancer and potentially curing them of SMA. So I think that's the high bar you have to have, so that in the quantitative models, whichever models you decide to use, you can justify rationally the price. Now with respect to Zolgensma, we took a very analytical value-based approach. We looked at what would be a cost-effective price at different thresholds in terms of costs per life-year gained. We can debate the assumptions, but we know if you take the ultra-rare disease cutoff of $500,000 per life-year gain, Zolgensma is cost effective at $4.6 million to $5.4 million for the infusion. And if you take the low end of the range at $150,000 per quality-adjusted life year, it could be $1.5 million to $2 million. I would note this morning in the Boston Globe, ICER said that if Zolgensma's label is appropriately brought, they would expect it to be cost effective at $2 million. So that's something that ICER said morning in the Boston Globe. So you have, I think, a powerful voice in this whole system, saying that again the medicine delivers tremendous, tremendous value. So that's one benchmark.
Second is what is the current cost of care today. So the current cost of care for an SMA patient for 10 years is about $4 million for the therapeutic, $6 million total. That's what the system spends today. So again, another benchmark and how are we lower than that benchmark.
The third benchmark we looked at was what are the cost of other ultra-rare orphan therapies. All of you know enzyme replacement therapies and similar therapies like the therapies for hemophilia that are marketed by other other large-cap companies. And all of those medicines as well, over a 10-year period, you are at $6 million to $10 million for 10 years. So again, your benchmarks that are showing. If you look at transplants, you can look all of these things. These are different variables you look at and then you say what is a cost-effective reasonable price and what can we do to enable price payments over time in outcomes-based models. So I feel good with where we'll end up with Zolgensma, especially talking to all the stakeholders. I think the key is going to be for the future. The gene therapies need to be keep delivering transformational potential. I think if it's marginal, I think, it will be just difficult to justify the price.
Three minutes, so let's go to Michael. Vincent, sorry. I thought Michael. Sorry, Vincent. I'm thinking out. Sorry, I'm thinking of somebody else?
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Vincent Chen, Sanford C. Bernstein & Co., LLC., Research Division - VP [46]
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Vincent Chen from Bernstein. I'd like a follow-up just quickly on Kris' question actually. So you're certainly a leader in innovative cell and gene therapies. And you certainly spearheading a lot of discussions around new reimbursement models. So I guess what traction are you seeing so far in discussions with payers and stakeholders around the world for new pricing models and may better enable access to, I guess, and reimbursement for one-time cure? And how should we think about likely pricing models?
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Vasant Narasimhan, Novartis AG - CEO [47]
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So our experience to date has been quite positive on Kymriah. We're reimbursed on 18 countries, and in all 18 of those countries, Kymriah was ultimately determined to be cost-effective for the health care system. We have had, I would say, a mixed uptake on payment-over-time model. So Germany has adopted a payment-over-time model, certain systems in the U.S. as well, but I think that's been mixed primarily because of the administrative complexities of payment-over-time, limited also outcomes-based contracting is whether we offer that as well. I think the future when we have a large number of gene therapies is going to be we have to have payment models that allow payment over time and then allow outcomes-based space contracting. Now how exactly that's transacted is going to vary based on the health care system. In the U.S. it's probably the most complex. On the private insurer side, we've seen, I mean, really very positive discussions. So we don't expect in the private markets for there to be any challenges. Discussions in Medicaid as well are quite positive. But from a combination of state budget rules, Medicaid best price calculations and other administrative rules, we saw work to do to enable payment over time and outcomes-based contracting in the United States. We are advocating for that -- the pay WAC. It is an act that is circulating among Congress to fix some of these topics or other legislation from various other senators. So this is a topic everyone is aware of. Within HHS, in Congress they have to tackle. I don't believe it will impact the Zolgensma's launch. But, I think, Zolgensma is an opportunity to hopefully sort of all this out, because with the cell therapies both Kymriah and Yescarta, are it was very slow to get both the DRGs to adjust to enable the outcomes-based contracting. So we need to set this up so that the next wave of gene therapies just slot in and don't have to go through all of the hurdles that we're going through. I think in the end the system will adjust and it will take a few years, but we'll get there.
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Vasant Narasimhan, Novartis AG - CEO [48]
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Last question. Who wants to see the last question? Yes. Sorry, you wanted to ask a question. Please go ahead. Sorry.
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Unidentified Analyst [49]
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On the topic of M&A in oncology, so clearly you've been focused on more innovative modalities, AAAs, radioligands and others. Do you think there's still value out there for small molecules and antibodies kind of the classical ways of addressing oncology?
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Vasant Narasimhan, Novartis AG - CEO [50]
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So we are primarily focused in the research labs here at NIBR on targeted therapies. I think what may not come across because we talked so much about immunooncology, cell therapies, radioligand therapies is the vast majority of the expertise of Novartis is in targeted therapy. That's why we ended up with PIQRAY or BYL. That's why we have ABL001 for CML. That's why we have a hold, and then Jay and Jeff Engelman can tell you more about the next wave of products as well that we're developing in targeted therapies. We think that still remains a massive, massive opportunity. I think on immunooncology, it's been tough for anyone to find medicines with significant single-agent activity in relevant therapeutic areas. We're still looking, we're still working through the large asset lists we have of around 20 assets to see if there's something with single-agent activity. We might find something and see. But I wouldn't want to give the signal that we're not focused on targeted therapies, that's still the vast majority of the effort that happens at NIBR.
Thanks, everyone, I appreciate it. I hope you enjoy the day.
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Operator [51]
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Thank you. And for those people who are on the audio cast, there's a 15-minute break and the Pharma session next.
(Break)
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Unidentified Company Representative [52]
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Booth gave the thumbs-up so go ahead.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [53]
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Okay. Great. Good. So thank you for the time, of course. I'm joined by Marcia, who is the Global Head of Medical and Chief Medical Officer for Pharma. Been in the role for 3 weeks, 4 weeks. But you can feel free to pret her. She has got a great knowledge. Robert Karsunky, CFO, Pharma. Been in the role longer. Fabrice Chouraqui, running the U.S., and has been behind the much of success we've had over the last 3 years there. And Dave Lennon we've put on the end because he leads AveXis and our gene therapy business and we know -- we hope we may get into a conversation on Zolgensma. By way of some introductory comments, we find ourselves coming into and through Q2 in great shape. You've seen the Q1 numbers. Cosentyx was right where it needed to be, perhaps slightly ahead. Entresto, we continue the momentum. So we're on track for this $3 billion to $4 billion medicine even without PFS, so that's exciting for us. Cosentyx has progressed very well and we've had the TREMFYA launch, we've had Taltz launch, and now we'll come through Skyrizi. We maybe want to get into that conversation, but we think we're incredibly well positioned for that.
We've launched Mayzent. And for Fabrice can tell you about how the launch is going. We're very pleased with how we've started there. We've got BYLieve, RTH launching towards the end of the year, and we're very excited about competing with Regeneron in the U.S. market, and what that could mean as we enter the retina specialists office. And of course, we are waiting with baited breath, we hope for an approval for Zolgensma in SMA and we can get to a little bit of that. And then further out, we got ofatumumab, we got fevipiprant, both will get data readouts this year, and they're potentially game-changing in the classes that they operate in and they're worthy of some conversation if we have time. So really well set up and very pleased with the way Pharma is developing. TA-focused, margin accretive launch machine is how I'm now describing it. So if you want to get started, if you have any questions.
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Questions and Answers
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [1]
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Florent Cespedes from Societe Generale. Two quick questions. Could you -- back on the Xiidra acquisition and share with us how do you see the opportunity for this product so we have to understand that it is mainly a U.S. product and (inaudible) want to ex-U.S. opportunity for this product? And my second question is on (inaudible) brand. Why this product should not be pretty a big drug for your company because, let's say, give a -- what you're looking for efficacy and as long as the safety profile is attractive, could you share with us the opportunity for this product?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [2]
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Great questions. So maybe I'll ask Fabrice in a moment to come on, on the market opportunity in the U.S and for Xiidra. We'll have to correct my boss later, Xiidra. The -- let's remind ourselves of the fundamentals. You've just seen ocular therapeutics fail with an implant. It's very, very hard to do front-of-eye solutions, very hard. So we've really liked Xiidra from the very beginning. We would never have had a chance of getting a hold of it except for the Takeda Shire tie up. So it became available because, of course, it's not an area of focus for Takeda. Close to $400 million of sales, and that's for a medicine in 2018 that was between companies and try to do an exit on between companies. And we pay a $3.4 billion upfront, but we have a derisked-approved asset that will quickly become a blockbuster and we don't pay another milestone to $1.2 billion. With IP through 2033, front-of-eye with nobody following us, incredibly other than ourselves at ECF. And then we have 2 other friends of our SAF in ocular pain and UNR in presbyopia. So when a
(technical difficulty)
fit a portfolio, bring some innovation for patients and allow us to manage really efficiently, growth and derisked at that. You know it's accretive incredibly quickly. So just made a huge amount of sense financially because those milestones go all the way out to 2033. So we're going to be a huge asset if we're paying them on the arrears. I think Vas mentioned, which means that both Takeda is doing well, but we've done really well. Fabrice on market opportunity, U.S.?
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Fabrice Chouraqui, Novartis Pharmaceuticals (US) - President [3]
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Yes. I think Xiidra combines not only a unique market opportunity also but our ability to leverage our footprint. So from a market opportunity in the U.S., there are 17, 1-7, 17 million patients who are suffering from moderate to severe dry eye. Only 10% are being treated. You can see, actually the market opportunity. And you may say yes, but there is -- Restasis already -- yes, but the average patient only stays on Restasis for 4 months. After 4 months, often he or she would drop out.
Now when it comes to our ability, I mean, we have a very (inaudible) footprint. We are calling on 24,000 optometrists and ophthalmologists. There is very significant overlap, obviously, with Xiidra. So we have the footprint. We also have the knowledge when it comes to the marketing mix, when it comes to salesforce versus DTC. This is something that we've developed over time, that we have also developed and show actually how we can manage in other areas. And last, but not least, I mean, one of the key levers would also -- would be to expand access in Medicare, again, I think we have proven that we have developed superior, industry-leading cavities in access in drugs like Cosentyx. And so we believe that we'll be able to maximize that opportunities in the coming years. Obviously, the coming months, once the deal closed, we'll have to manage the condition correctly. I think it's important to understand that, as Paul said, this is a drug which has been in between 2 companies, there's been some decreasing investments, there's been potentially loss of engagement in -- among the employees and in salesforce, we believe we can correct that very quickly.
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Robert Karsunky, Novartis AG - CFO, Pharmaceuticals [4]
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Thank you. If I can add a little bit Paul, if I may, and Fabrice. Also you have to keep in mind, what sometimes people forget is, when Alcon was spun off, we actually kept around $2 billion of front-of-the-eye sales and medicines. So we have actually a very strong foothold worldwide. So this is actually one of our strong areas. And as Vas was saying, we're leveraging an existing franchise, we're leveraging an existing infrastructure, and we're very strong. We're probably the strongest player in front-of-the-eye worldwide. And so this really fits very neatly into that.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [5]
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Yes. Outside the U.S., we've submitted in Europe -- Takeda, Shire did. We don't know where that will play, but we've committed to exploring all of the global marketing opportunities and approvals that we can. They were not part of the deal case, so they have been incremental for us, so we're comfortable with being bold in our conversations with the regulators and beyond there. No issue.
As for the fevi, I think you summed it up perfectly actually, it's -- we're aiming for a biologic-like efficacy in severe asthmatics, and if we get a very good tolerability profile and gives us some flexibility to decide how early in the continuum should fevi be added on. We know historically, medicines like singulair, and to look to try an antagonist, we know that they have huge volume, a $5 billion asset, I think, in the U.S. alone, with very little efficacy ultimately, and still around genericize. So we know add-on plays a huge part in the asthma population, the patients are highly symptomatic, but we know that we are really spending most of our time in the prebiologic space of about 3 million patients who are struggling, who may not qualify for biologics, but would qualify for fevi if the data is what we hope it is and that reads out later this year. So -- and you saw the chart from Vas on airway smooth muscle mass reduction, the only medicine that's ever proven -- and in my career, I've been involved in 5 orals in asthma and COPD, and this is the first time without super selective medicine that we have a chance of doing something. So of course, we'll wait for the data readout, but if it's clean, patients will really have a different option they've ever had before and that's pretty fundamental. Yes?
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Richard J. Parkes, Deutsche Bank AG, Research Division - Director [6]
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Richard Parkes from Deutsche Bank. Firstly, a question on Cosentyx. I just wondered if you could talk about the reception in the ankylosing spondylitis indication? Obviously, that's a key future growth opportunity. And can you talk about how much -- how important the head-to-head data is in order to fully access that opportunity and maybe move Cosentyx ahead of TNF? So that's one question. The other question was on Zolgensma. It's obviously been a discussion about the breadth of the label that we could expect, but could you help us to understand the work that you did around selecting the dose based on sort of weight? And you, obviously, chose to use the intrathecal formulation for older patients. So what could be sort of -- I'm trying to figure out what the best case -- worst case is in terms of the breadth of that label. It must be limited by the work you did on dosing. So if you could talk about that, that'll be great.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [7]
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Okay. So I'll come to Dave in a moment on that, and Marcia if you have a comment on, I think, SURPASS then we can talk about that. Just for context, remind everybody that the rheumatology indications of AS and PSA in terms of patient opportunity is the same as dermatology. We also know that 2/3 of the derm psoriasis population have joint involvement. So we know that where the 17 competes, Cosentyx competes in more than half the derm opportunity as a standout winner and then competes on skin-only in only 1/3. AS and PSA are massive opportunities, they're underpenetrated. PSA better because of its proximity to skin and RA, but for AS, it's underdiagnosed and underpenetrated, single-digit, really in terms of use, and predominately TNF, as you know. The head-to-head will be important, but you've seen the data, I'm sure on the weeklies that in -- on MBRX, we are now the market leader on PSA, and we are on track to be the market leader overall in new patient starts in AS and PSA combined versus Emerald and Kymriah. So physicians already know because of the activity of IL-17 that we are absolutely the go-to. Not only that, actually and frankly, Taltz has done nothing in room, nothing. So we're well positioned to take that whole class. Maybe going on and maybe a comment on non-radiographic axials part on the head-to-head.
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Marcia Kayath, Novartis Pharmaceuticals - Chief Medical Officer and Global Head of Medical Affairs [8]
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Yes. So what we're excited about, we have 3 trials going on that are very important. So we have PREVENT, which is for non-radiographic SpA. We should be seeing the reading by the end of the year. In this situation, the population is as big as AS patients that are already diagnosed, so it's a great opportunity there. What we've seen -- realized with AS and PSA is high effectiveness, which gave us really confidence. We're having 2 head-to-head trials which are superiority trials versus adalimumab. First one the PSA, which is also known as the -- it's called the EXCEED trial, that is going to be reading out as well very shortly, and the other one is SURPASS, which is in AS, and we've got -- we are also going for superiority versus adalimumab. So this is all based on what the HCPs have been showing us in terms of effectiveness in the enrolled.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [9]
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We know TREMFYA and Skyrizi will not have the efficacy data in AS, PSA and non-radiographic. We know that we are the winner in room. So it's about education, patient identification and going on, but it's -- there's nobody to follow, to catch us. So that's more than half the patient opportunity, which is why we're so confident and that we still compete in derm, which is ahead of what most people, I think, what have thought at this point, but Cosentyx is so good. Dave, on all of the questions on Zolgensma?
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David Lennon, AveXis, Inc. - President [10]
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So let me just -- I'll go for the IV versus IT formulation decision. I think one underappreciated effect about the formulation choices that AveXis has made with IV and the intrathecal doses. How strategic it actually is and how scientifically ground it is. The first thing to recognize is, just scientifically, our belief is that you need more SMN protein very early in life, and you need that in more tissues than you do later in life. And so pursuing a systemic therapy for kids early in life, infants really, is the first driver of having the IV formulation for those kids. We believe later in life that we can actually be much more targeted and focused on the central nervous system, which is why we went with the IT formulation for kids above the infant age. And so that strategy was rooted in that really scientific decision about what we thought was the appropriate route of administration and what we needed there. It had some additional benefits. So one is that, on IV, if you're scaling systemically to get into the CNS system, you have to continually increase dose space on weight, which leads to larger and larger doses that you need for those patients, which previously they're thought to be some potentially some safety risk that would increase with that increasing dose. We actually have found that, that's probably not the case, but for whatever reason -- for very specific reason around safety, we want to make sure we're overexposing patients to huge viral loads that would be utilized in larger patients.
And the -- on the other side, the IT formulation because it avoids systemic delivery and liver doesn't potentially have that same safety risk, and also allows us because the CNS space is pretty much fixed after 3 years old, you actually don't grow that much in terms of volume and aronal count. You can generate the proper coverage with a fixed IT formulation for anyone above 3 years of age. So we use flat dosing for anyone above 3 years of age in the IT formulation. What that leads to is a massive difference in terms of the amount of virus we need to produce to treat older population. And so we often say it's 1/10 of the dose at equivalent age, but if you were trying to treat a 20-year-old with IV versus IT or someone at 50 KIGS, you'd be talking about 100x the dose utilizing in an IV setting. So that allows us then also from a manufacturing perspective also to produce less to treat more patients, which is one of the main limitations right now in gene therapy is the ability to produce overall. So strategically it started very much from a scientific basis for what we were going after, backed up with the potential for safety risk that hasn't totally materialized, but we still want to keep an eye out on and then ultimately has a benefit on the manufacturing side. So that's why we've made those choices in terms of IV versus IT, and think it's the right strategy overall.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [11]
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Thanks, Dave. Yes?
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Unidentified Analyst [12]
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Maybe just following up on Cosentyx. I mean it's continuing to perform very well with TREMFYA, Taltz. I guess, now with Skyrizi coming, could you just discuss the pricing trajectory going forward? It's been, I think, Novartis' strategy to kind of focus on first-line access. Does that strategy now evolve perhaps or is it more about kind of just being competitive and kind of maintaining that same level of access?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [13]
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I'll ask Fabrice to come in on first line. Skyrizi is really the last material event in the space. Just tried to point out that it won't even compete in the room. In derm, it's -- the efficacy bar has already been set. So they make it close to that and that's fine. But the access, we can't underestimate given the history of Humira and the scale of what they have to leverage. So we are respectful and vigilant about what they may do. We'll find out over time around what their own immunogenicity profile is, both in injection side reactions and in durability of response. We made the only medicine, it's really showing data out to 5 years in terms of durability because our immunogenicity, we believe is the lowest in the class. So we think we're in an excellent position to continue our success with Cosentyx. As for access and the first line of choices, excellent choices the U.S. made. Fabrice, if you want to comment?
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Fabrice Chouraqui, Novartis Pharmaceuticals (US) - President [14]
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Yes. Sure. The goal is to maintain the momentum. You may have seen that over the last 5 years, there's been a number of new entrants. And those new entrants didn't disrupt any of the players really. So you saw that -- you can see that our TRX is very strong. I mean we are growing year-on-year 37%. So if I were an investor, I think that would really matter for me. It's about -- also about leveraging the momentum in the market, but it's a market which will continue to grow high single digits, double-digit. So we see tremendous opportunities. A large number of patients are still suboptimally treated and we believe that ultimately, those patients should access high-efficacy treatment like Cosentyx.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [15]
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There was a question here, and then we'll go up there. Yes?
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Vincent Chen, Sanford C. Bernstein & Co., LLC., Research Division - VP [16]
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Vincent Chen from Bernstein. A couple of quick follow-ups on Zolgensma. So first is, Vas alluded earlier to discussing the Zolgensma strong data in the regulatory path forward with agency some time later this year. And we note that the current timing for Zolgensma in Type 2 and 3 patients is listed as 2021 in the slides. Recognizing there's a range of potential regulatory paths forward, what does a 2021 timing assume in terms of the potential regulatory path forward for approval in the intrathecal gene therapy? And what is the range of likely scenarios look like that you could see for potentially earlier or later approval? And then a quick question on the ongoing managed access program for Zolgensma. What was the rationale both for the -- what was the rationale for the inclusion criteria in the managed access program both in terms of the weights of patients who are eligible and also in terms of the specification for patients who are either diagnosed symptomatic -- sorry, diagnosed and symptomatic prior to 6 months or patients who are presymptomatic with 1, 2 or 3 copies?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [17]
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Dave?
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David Lennon, AveXis, Inc. - President [18]
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So on the first question in terms of the filing, I think, that filing date is based on completion of the strong trial and filing the strong data in a standard format. So that's where I would say that, that is the base plan that we have there. What we want to do is now, given the results we have, which are the first results we really have in Type 2 and 3 patients have a discussion if data is sufficient or what additional data would the agency want to see for us to submit -- potentially submit that program earlier. That's the basics of it. I don't think I would speculate on what that range could be at this point in time.
I think on the managed access program, what we wanted to do in discussions in the agency, we realized we had set certain limitations about how we utilize the product early on just based on our initial understanding of how we went into the start data and wanting to have a targeted population, very consistent population for evaluation of the therapy in the first 15 patients, once we had submitted that data in discussions with the agency, there is good recognition that we could easily extend the weight range that we were treating patients on and there was a lot of
(technical difficulty)
even within Novartis as to how large of a therapeutic category CGRP is. This is not really meant to kind of get into the kind of back-and-forth that you find yourself with Amgen. But I was interested in your point of view and whether or not you think that the overall efficacy that these new therapies provide are sufficiently large to drive a very large therapeutic effect and commercial success? And then I just had one follow-up, if I may.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [19]
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Okay. So I'll ask Fabrice to come in the second about the scale of the opportunity. Just some points, while there may be some executive differing in perspective, between ourselves and Amgen, there is absolutely no change on the ground.
I think it's worth reminding everybody that we're business as usual. We've just had the cycle meeting with all guns blazing. We've had a recent weekly high in NBrx. I think we've learned a few things. I think one, the pent-up demand, the bolus, the warehouse of patients who are desperately sick, which is a large number, we penetrated perhaps much faster than expected. But of course, suddenly it wasn't one product, there were 3 products. And we find ourselves in a competitive situation where we have to emerge as the winner or close 2 share in the market ultimately over time. We must be there. And I think we have the brand profile to do that because the next lift in the class is going after all of the patients that weren't -- still waiting and desperate with 14, 15 or more days per month migraine. Now we're going after those that are horribly impacted, that haven't been spoken to yet. And this is an order of magnitude from the 200,000 patients to date to the above 10 million patient population. So whilst we got through the excitement, now we have to emerge as a winner and do the education and work to pull in everybody else to just see how big the market can be.
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Unidentified Participant [20]
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And just so you're clear. My question really is, do you think this class of medicines offers the level of efficacy that is going to bring in this -- and in a very meaningful way -- this next wave of patients that you're referencing?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [21]
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Sure. So the study support it. The data supports it. But I can tell you, there isn't a day that doesn't go by without me receiving a letter or an e-mail from a patient whose life has changed, many of whom have gone to a normal life. The efficacy is unquestionable, but it's differing depending on the patient population because there's some heterogeneity to it. But there has been no debate over efficacy. And so the whole point is, do we have enough to go in a bigger population? I think we absolutely do. And maybe, Fabrice, you can comment on that.
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Fabrice Chouraqui, Novartis Pharmaceuticals (US) - President [22]
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I mean, honestly, I can only confirm what you're saying about the tremendous efficacy of this new class of drug. I'm going to share a story with you. I mean, one day, I was in a meeting and I met a woman who told me her story. And I told her, listen, it's a fantastic story what you're sharing with me. You really made my day. And she took my hand, she rubbed my palm and said, perhaps I made your day, but you changed my life. This is the type of story that we are hearing. So for 30% of the patients who are taking this medication, it's a miracle. So 30% is good response. An already good response mean meaningful change in their life. And so 30% they do not respond, but that's okay. And that's why there are several drug in the class, receptor ligand. And we see that actually some patient non-responding to one respond to the other. I really believe it's a game-changing class for migraine patients.
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Unidentified Participant [23]
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And Paul, the follow-up. And this is just drawing upon an explanation that part of the company's rationale for when you acquired Endocyte was the significant success that you were experiencing with the AAA acquisition. And what I'm wondering is, is that a reasonable framework to think about Zolgensma in that if that has the type of success that you're hoping for, is that likely to engender kind of a further emphasis on gene therapy specifically as it relates to sourcing external assets?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [24]
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So the work that Susanne and the onco team have done with AAA and Endocyte has been extraordinary. I showed the dollar impact, but the patient impact has been, quite frankly, staggering. And I think it's kudos to everybody. And we've learned, I think, how to operate small companies with magic and retain the very best of it and then add the opportunity to be surrounded by the resources of Novartis without compromising why we bought them. And I think that is very manifest in what Susanne and the team have done in onco. We tried to take a very similar approach so that we can get follow-on indications and opportunities fast without changing those time lines, perhaps even accelerating. Maybe, Dave, what's going on, on Rett or ALS or the potential to the platform?
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David Lennon, AveXis, Inc. - President [25]
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I think when you think about it, it is a platform. And I do think we're taking a very similar approach. When we think about sourcing of assets, it's slightly different only because we actually have so much work already going on in NIBR here. And so with AveXis came a few additional programs in Rett and ALS that we're working on and moving into the clinic.
The acceleration opportunity was actually an internal one here where the ideas and the brilliance was already here in Boston and it was just looking for a platform to put new therapeutics on. So we've actually partnered on 2 additional programs that we also believe we can put into clinic next year. We'll reveal those at a later date in terms of what those actually are. But suffice to say, I think from a sourcing perspective, we'll have 4 new compounds into the gene therapy clinic next year on the AveXis platform and potentially more. We're working on a number. So we think there's a lot of low-hanging fruit here in this area just with our internal group.
There's also then the opportunity to partner externally. I think there it's a trickier situation because I do think matching platforms is important when you consider those. And if we're going to take on a new platform, say, a non-AAV platform or a non-AAV9 platform, we have to think about where are they in development and how much synergy is there really in doing that. But certainly, it's an area we're looking at actively. And unfortunately, there's also very high valuations externally right now on a lot of these assets, partially of our own doing, of course, but it makes it a very tough environment to think about sourcing externally also.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [26]
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And I think when we complete the manufacturing capacity, this 1 million square feet, I think what we may find is that assets in development much earlier who have chosen the AAV9 route may choose to come to us early rather than decide on building their own infrastructure. And that would be a lot more than a manufacturing collaboration, that would be a partnership. So we hope to see a bit more of that.
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David Lennon, AveXis, Inc. - President [27]
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I would encourage you guys, there's a manufacturing demonstration at the break if you guys want to check that out. We also have a deck with that, that gives a little more detail on our manufacturing footprint.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [28]
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It's more exciting than you think.
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Brian Kemp Dolliver, Cherrystone Hill Capital Management LLC - CIO [29]
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Great. Kemp Dolliver, Cherrystone Hill. A couple of questions about China. Given the magnitude of products you're going to be introducing into the market over the next few years, one question is, how much more commercial build-out do you need to do there?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [30]
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You only have one question?
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Brian Kemp Dolliver, Cherrystone Hill Capital Management LLC - CIO [31]
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No, I have a couple, but I'm going to start with that one.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [32]
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Okay. Sorry. So there's 2 chapters, I think, to the industry in China. There's been sort of legacy. How they've been investing for a decade, 2 decades, the Sanofi, Pfizer A to Z approach. We're more recent than that. How you got all the medicines because it was 9 years between listings on the NRDL. So I think we're seeing that wash out now. We're going to have the quality standards and the entrance of branded generics and some of the Pulmicorts maybe are obvious, but the Lipitors and Plavixes under intense pressure. But now we're seeing this unprecedented level of NRDL annualized and the access to innovation, which means that it's going to become much more like the rest of the world, except with over 1 billion population. So there's going to become a sort of new era of how do you address and at what price do you address the large volume opportunity that exists.
The Chinese government is, I have to say, they're trying to create an environment to make it the second-biggest pharma market in the world and perhaps beyond that. And I think we're well positioned to do that. Now we've been investing for a long time, but in the last 3 years we've been investing much more significantly. And we reached, I would say, close to a steady state for what we need to deliver on the next wave of launches. I think it would be hard for me to mention China without commenting on, we have this commitment to what I call ethical growth in China. So whilst the temptation is to keep adding people and to keep moving, we spend equal amount of time trying to make sure we're using big data and machine learning and that we are really clear on where we think any risk could emerge where a rogue employee trying to do something wrong could be spotted and flagged too and much faster than the traditional methods.
Give you an example. We track how far physicians live from the meeting or their offices are from where the meeting takes place. We know visually what the physician looks like because they sign up so that we know that. We compare that to the invite we've sent on WeChat. We triangulate every data point to make sure that the physician could have possibly made it to the meeting. It was actually the physician and that the right level of medical content and exchange was world-class. And so we're doing this real-time with big data so that we will always in any large organization have outliers in terms of how the behavior is, but we've tried to make it so that we can move at speed and make sure there's no systemic issue as we grow and bring the medicines through. And that's what is ethical growth mindset. It's never perfect and it's learning, but I think we're set up very well for that growth and what that looks like.
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Brian Kemp Dolliver, Cherrystone Hill Capital Management LLC - CIO [33]
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Great. Related question with reimbursement. There's essentially a cash market and then there's the reimbursed market. And given the magnitude of price discounts you may have to give, are there cases where you look at your products and think that, if you don't go on the reimbursement list that you can still be successful because the price you can charge in the cash market will be high enough to offset the volume you give up?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [34]
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So this is going to be the next sort of trade-off. And the thinking starts to become a little bit more like Europe, which by the way we're the best at access out of the industry in Europe. So that sort of tipping point becomes important.
To remind you, Entresto's the most successful primary care launch in the history of the Chinese market without reimbursement. So that proves your point in many ways. There is a out-of-pocket market that is significant and can be very rewarding for the organization and for the patients. But there is a moment. When I look at some of the medicines we mentioned, Plavix, Lipitor, Pulmicort, they're not modern innovations by anybody's standards. And so there is a moment where we may choose to go after a very large volume access with an innovative medicine. And I think many of the big companies are looking at that dilemma now and saying, can you really get the volume if you do it and is it worth doing? And I think we're open-minded to that conversation.
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Brian Kemp Dolliver, Cherrystone Hill Capital Management LLC - CIO [35]
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Okay. And then the final question relates to quality of data because it was referenced in the R&D discussion, but also just the concept of, this is a country that's only about 50%, 60% urbanized. The poor people in that country are really, really poor. And so many number of industries have overestimated the market opportunity. How are you digging around and making sure you understand the patient data given that environment?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [36]
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Look, we know. We've been on that journey some time. And we know what it looks like to be a patient in the more rural areas which is significant, could be half the population at some point. We know the migration to the big cities and to the second tier cities, if you like, which is still bigger than many in Europe, is underway. And we know that if you get reimbursement, access is there. Sometimes the barrier is actually there is no treating physician. And so we're working and partnering with Tencent and other major digital players in China to say, it's unlikely a China-wide primary care physician model will be created by the Chinese government. So we have to recognize that the tech opportunity to allow patients access to medicines, particularly those that have been reimbursed and low patient burden cannot be underrepresented. So whereas before we've been trying to calculate the relative percentages, now we're actually looking at just a different go-to-market model beyond that big hospital, big city. And I think enabled by digital, we have a shot at that. And then how long do we have? We have 5 minutes and really excited for an Entresto question.
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Unidentified Participant [37]
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I leave the Entresto question for the next speaker. Just wanted to follow up a little bit on your portfolio development in general and the know-how that the industry has gained with new technology, understanding pathways much better than before and the role of inflammation or immunology and the role of inflammation in cardiovascular, respiratory disease, for instance. To what extent do you break out of the traditional indication patterns and understanding the pathways better today? And taking it one step further, in case you are successful, let's say, in kidney, liver disease, which are part of the wider list as I understand, how would you implement that or make it a stronger pillar within your existing franchise?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [38]
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So I'll let Marcia comment in a moment on some of the inflammation perspective, if you like, if you have any additional comments. I think there's a couple of things. We got very good at doing the therapeutic areas so we're now going much deeper in the sciences vertical because we know we have infrastructure already deployed. The decision, for example, to go into APO(a) was a very well considered decision because we'd, if you like, stepped back from an opportunity to going with Canikinumab. Because if we're not using data and if we're not tracking patients in a more modern way, then we end up with very large patient populations that are not reimbursable where the effect is less. And I think we have to invest at it. We're now targeting the top 10% of patients. We're really making sure that we don't have to run very large cardiovascular studies, that we can be very selective about those patients and track them in different tech-enabled ways that we weren't doing before and break new ground. Because we have to believe that we can then create markets or get reimbursement further down the line. And our benefit has to be bigger. And we can't carry $400 million Phase III studies particularly if they're not going to be rewarded at the end of it. So we've been trying to make that balance.
For renal and for NASH, we've said all along, it's about the one true place where we go outside of our TA structure to build structure to be bold, and we can be bold. And if our FXR reads out where it needs to and the combinations, that's worth considering a different model again because that's such a huge unmet need for patients that companies like us have to step forward and do something and be a little bit pioneering on that. I don't know whether you had anything to add on the pipeline?
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Marcia Kayath, Novartis Pharmaceuticals - Chief Medical Officer and Global Head of Medical Affairs [39]
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Yes. I think we've gained understanding of pathways much better in focusing on the ones that can be very impactful for patients. So one example would be the DP2 pathway for asthma that we study in fevipiprant where we are seeing that it can be very impactful for moderate-to-severe asthma and by blocking the receptors upstream to any inflammatory activities there. So I think the understanding of the pathway has been much greater. And as we also select the right population for the trials, we are seeing much better the impact in selecting the population that we want to reach as well.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [40]
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Yes. Could we add ofatumumab to that? We know that Ocrevus blazed a trail on B-cell depletion and has done a marvelous job and credit to them. But we also know that as we get deeper into the pathways and understanding the spleen being in the lymph, the B-cell lysis and the specificity, the expectation on better understanding the pathway will lead to better medicines and sooner than people think. And I think that's incumbent upon us. Maybe a last question, sorry. Just here, I think and then we reach the time.
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Jason A. Kritzer, Eaton Vance Management - VP, Portfolio Manager & Equity Analyst [41]
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Jason Kritzer, Eaton Vance. I will ask an Entresto question.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [42]
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I don't know what it is.
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Jason A. Kritzer, Eaton Vance Management - VP, Portfolio Manager & Equity Analyst [43]
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For the PARAGON trial, can you help us think about what would be clinically meaningful with respect to the results that's going to potentially really open up the market for this med?
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [44]
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Okay. So to Marcia in a second, the past population in PARAGON is the equivalent of the rEF population in terms of market opportunity. I think it's understated what that will do to Entresto. And of course, the differences relating to pEF from rEF, there's some education to do for sure because they're not well characterized and there's not really an asset driving that. But at the same time, the education we had to do on the Entresto and the physician experience in rEF is already in our bank. So same physician population by and large and an opportunity to move very quickly through education to do something meaningful and it is equivalent to the rEF population. So we shouldn't lose sight of the opportunity.
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Marcia Kayath, Novartis Pharmaceuticals - Chief Medical Officer and Global Head of Medical Affairs [45]
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What is important to see with the HFpEF study and the PARAGON is, first of all, that we are comparing to valsartan. So it's not -- some of the HFpEF studies that are ongoing there versus placebo, so we have versus valsartan. And what is going to be interesting with the primary endpoint is a co-primary endpoint that we're going to look at total hospitalizations, which is something that is very impactful in health care system. So the payers are looking forward to that and mortality. So we are going to be looking at both endpoints there. And we should know by the end of the year.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [46]
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Okay. Thank you. Thank you very much. Glad we got to share some of what's going on in pharma and I think we have to move on now, right? Thank you.
(Break)
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Presentation
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Susanne Schaffert, Novartis AG - CEO of Novartis Oncology [1]
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Very good. I think we can get started. So welcome everybody to the oncology session. Let me first introduce the team here. My name is Susanne Schaffert. I am the CEO of Oncology appointed since January. And I have a great team with me. On the very far out here is our Head of Research for Oncology based here in NIBR, Jeff Engelman. Then we have our Head of the U.S. Operations, Ameet Mallik, here with us. We have our CFO, Teresa Jose, with us. And we have our Head of the Cell and Gene Therapies namely Kymriah and other promising stuff, Pascal Touchon, here.
So maybe let me give you a short introduction before we go into Q&A. We feel quite good about oncology these days. Maybe you have seen our Q1 results, very strong performance, 9% growth. And that is really based on a quite robust portfolio. We have 7 blockbusters in the portfolio, 3 of these blockbusters growing high double digit. And that are namely Mekinist + Tafinlar, there is Jakavi and there is Promacta/Revolade. We have also 3 products that are very promising and have the potential to be blockbuster in launch phase. Kisqali, our CDK4. We are currently in launch phase for Lutathera, our first radioligand therapy; and Kymriah, our pioneering product in cell therapy.
We take a very rigorous look at our pipeline and constantly strive to strengthen that. We are very excited about some upcoming launches. We are expecting to get approval for a first and only in class PIK3CA inhibitor BYL or our new product name will be Piqray that we are expecting to be approved in the next month. We are very excited about this product because it can be a very significant medicine in PIK3CA-mutated, HR-positive, HER2-negative breast cancer. We are also having a second radioligand program in the pipeline with the lutetium PSMA product that we acquired through Endocyte where we would enter prostate cancer. And we're also preparing for submission and then launching of SEG101 or crizanlizumab in sickle cell disease.
We can then go, of course, further into other products. But as I said, very strong momentum, some very promising assets there. And I think there is a highly dedicated team of researchers also being there and preparing us the next wave of product. And with Jeff, obviously, you have the expert there to go into Q&A. So I would say let's open it up for your questions, happy to answer whatever comes to your mind. Florent, we start with you.
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Questions and Answers
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [1]
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Florent Cespedes from Societe Generale. And few quick questions. Could you share with us your excitement about Piqray BYL719. It seems that maybe could be a bit underestimated by investors. Why do you believe that this product may become pretty big contributor to your franchise? What may be the positioning after CDK 4/6? Or different -- if you could elaborate on that would be great. My second question, an earlier phase product ABL001. Could you share with us why you believe this product may be more potent? I see that it will be adjuvant therapy first line. So could you come back on this even if it's a bit early stage? And my third question is on immuno-oncology. I see a long list of novel immunotherapy treatments, mono and combination. Could you help us to navigate and to understand which are the promising targets and combinations you got on this list?
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Susanne Schaffert, Novartis AG - CEO of Novartis Oncology [2]
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So let us start with Piqray, our PIK3 inhibitor. As you know, we will be the first and only in this class. There was a lot of efforts to bring this class of products to the market because there's a very high medical need. We know there's 40% of patients that are HR+/HER2-. Having this mutation and the prognosis and outcome is unfortunately very, very poor. So maybe you followed our data from SOLAR-1 that we're really impressive, doubling PFS in this population. And that's why there's a lot of excitement around. But maybe then Jeff can later comment also by we think even beyond this indication. That's very promising. Ameet is really preparing the launch, and I think he's the best to comment how he is preparing and how he sees this product evolving.
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Ameet Mallik, Novartis Oncology - Former Head of Global Marketing, Value and Access [3]
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Yes, so we're excited about this launch. I mean to be first and only in such an important space when you have 40% of HR+/HER2- patients having the PIK3CA mutation. It's a big opportunity. Obviously, first and foremost, for us, is establishing this mutation broadly. It's well-known obviously in the academic setting, but in the community setting that's going to be key. We know testing rates are still low right now, less than 10%, and so driving testing is going to be the key. We have a good strategy now, where we're going to be launching with a companion diagnostics from Qiagen, PCR-based test. We also have a partnership that we've announced with NeoGenomics, the biggest lab in U.S. for breast cancer testing. And I think that's going to help us drive uptake in the beginning. We also have an agreement with Foundation Medicine. So by the end of the year, we'll have next-gen sequencing. So we have a very robust testing platform because that's how it's going to be key for driving use. And if you look at the trial, the SOLAR-1 trial, there's an opportunity for patients after an AI. So we think we're going to get some business. If you look at CDK 4/6s, they've penetrated about 60% of the first-line market. There's still quite a bit of AI-only use, and there's AI use also sometimes in the adjuvant setting. So we think we'll get some use there. There's also, in our SOLAR-1 studies, some patients that were post-CDK 4/6. So I think there's an opportunity across the lines for patients with this mutation to really benefit from the therapy.
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Susanne Schaffert, Novartis AG - CEO of Novartis Oncology [4]
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So when we click a word on ABL001, actually the feedback and really response from medical experts is very overwhelming. And as you know, we pioneered treatment in CML, and this disease and the outcome of the disease has really been transformed. But there is still a medical need. And as you know, treatment guidelines, such as that you have to reach a certain level of molecular response. And if you really follow that guideline, then 50% to 70% of patients over 5 years are not reaching this guidance and that is really deciding of the long-term outcome of the disease. So this is why medical experts feel quite excited about. We started to embarking on this in third line because there's the highest medical need and that would also allow us to get fast to market. But I think there's quite a good rationale also to go in first line and then combine it with any TKI that is out there. So that's something we are now embarking on and really to hopefully completely transform this disease. And maybe Jeff on the IO and the long list we have there, if you want to comment maybe.
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Jeffrey A. Engelman, Novartis Oncology - VP & Global Head of Oncology Research [5]
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Yes, before commenting, your question, I think, was which ones are you most excited about? What's that?
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [6]
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The IO.
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Jeffrey A. Engelman, Novartis Oncology - VP & Global Head of Oncology Research [7]
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Something like that, right? So the one thing about the IO field that I think we've learned over the last few years that makes it a little bit -- or makes it significantly more challenging than some other fields is that the laboratory research is not well positioned to determine which medicines are most likely to work in the clinic. Just the laboratory models don't translate in this space like it does -- like they do, excuse me, in some autonomous therapies like targeted therapies. So a lot of the medicines that comes to the clinic isn't because there's such overwhelming preclinical data that is translatable, it's based on very compelling concepts from the field of immunology and putting a lot of things together. So the real testing ground is in the clinic because the preclinical laboratory models are not so translatable. So when you say, which ones are you most excited about, it's really -- so either I have to do one of the two things. I have to disclose data we're not ready to disclose or I have to -- based on data from the laboratory, which is isn't translatable. So I will say that they will all be examined to see if there is efficacy and move forward. I don't think we're ready to release any information about the status of those trials at this point. Personally, I'm very excited about the TGF-beta pathway, which you see on the list. That's a personal interest of mine and its role. Maybe whether it's immuno-oncology or role of regulating how the stroma may interfere with the efficacy of immunotherapy, chemotherapy or targeted therapy. So I think the impact of the stroma in the cancer can be beyond just immuno-oncology, but it is on that list, and we pick that as a personal favorite, but it's not based on what I would say is any compelling data at this point.
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [8]
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Just to follow up, if I may. Could we have an idea of when you will be in a position to disclose a bit your view, is it matter of months, quarters, years, just to...
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Jeffrey A. Engelman, Novartis Oncology - VP & Global Head of Oncology Research [9]
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Yes, so I mean I don't -- looking at the list, just to make sure I'm looking at the correct list. Different ones are reading out at different times, as you can imagine. We've already shared data at AACR and ASCO on the few of the medicines, including LAG-3 and others. But these are reading out over -- these continued to read out over the next 12 to 18 months. So all of the medicines that you see are in Phase I/II studies. And the real trick and the real challenge is to see if the signal we see in combination with PD-1 is more impressive than we would have expected with PD-1 alone if there is not single agent activity. And that, of course, is not our unique challenge, that's a challenge in the whole field. Hopefully, we're going to get better at it as the field matures. But I would say in 12 to 18 months, you'll continue to see the data roll out at major medical meetings.
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Richard J. Parkes, Deutsche Bank AG, Research Division - Director [10]
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Richard Parkes from Deutsche Bank. I just got question on Piqray. You mentioned the efficacy, which is very impressive, but one of the drawbacks is the tolerability. So could you talk about how you're sort of helping physicians understand or perhaps to help manage the tolerability side effects of Piqray, and maybe what quality of life data you're generating? How much of a limitation that's likely to be to uptake?
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Ameet Mallik, Novartis Oncology - Former Head of Global Marketing, Value and Access [11]
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Yes, so one thing we saw in the SOLAR-1 study is learning. As investigators got more experience, actually the duration increased. And if you look at the 2 main side effects, rash is one, which is pretty easily controllable. And I think oncologists have a lot of experience and know how to manage that. There is hyperglycemia, which is going to be more of an unknown. I think here there is a lot of education also to, one, (inaudible), actually hyperglycemia is an indication that the drug is working. It's an on-target effect of the drug. It's manageable and it's reversible. This isn't diabetes. And so with metformin and other treatments, this can be well controlled. So we have a very comprehensive program that we're launching with -- to ensure that the total care of the patient is managed right from the get-go. And like I said, in the SOLAR-1 study, we learned a lot because you can see the experience of the investigators as they got better at managing, the duration of therapy and outcomes also improve. So we think there's a good opportunity, and we're well aware of it. That's going to be key to launch.
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Susanne Schaffert, Novartis AG - CEO of Novartis Oncology [12]
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Maybe Jeff, you want to comment on the other areas why we're excited about the mutation?
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Jeffrey A. Engelman, Novartis Oncology - VP & Global Head of Oncology Research [13]
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Yes, I think just to follow up on Ameet's point, we're confident that with newer agents that have come on the scene to control hyperglycemia that we may be able to develop even better regimens to mitigate that side effect, which would unleash greater activity of the drug because patients wouldn't need any dose reductions or wouldn't need as many. Their adherence would be higher, and we expect the clinical benefit to be even greater. So while the commercialization is going on and we're giving our best advice as to how physicians should treat this, we're also undergoing intense investigation to find the next generation of approaches to mitigate this effect, which, I think, will be important in the long term for this medication. The other aspect of this medication is that, we think, that this is likely the beginning of the use of the medicine. PIK3CA mutations are a very common oncogene in cancer and they're very common in cancers outside of breast cancer. So we think that the PI3 kinase pathway is playing an important role in those cancers. There's mutation that's playing an important role in those cancers. And we plan now with a significant momentum we have behind this medicine to be much more aggressive and exploring the utility of this medication in those other malignancies. And these are plans that the full development team is working on currently as we look to see how we can have this medicine help more patients with cancer.
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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [14]
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Chris Shibutani from Cowen. I wanted to ask about your SHP2. One of the upcoming watched events, I think, for the ASCO is the clinical data that we're going to see this year on the KRAS side, the G12C. I think people contemplate that as a potential combination agent with agent such as SHP2 inhibitor, which, I believe, you guys are most advanced in the clinic. Can you talk about how you would consider potentially doing combination work for your SHP2? And then specifically what kind of early clinical data might you be looking for? And how would you think about that in colorectal and non-small cell lung that we're likely to see at ASCO and over the following months? And finally, what might you be looking for if it involves doing a potential external collaboration in that regard with the SHP2?
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Susanne Schaffert, Novartis AG - CEO of Novartis Oncology [15]
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Jeff, you go ahead.
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Jeffrey A. Engelman, Novartis Oncology - VP & Global Head of Oncology Research [16]
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So thanks for the question. I endorsed the scientific hypothesis that SHP2 is a very interesting combination partner with the KRAS G12C inhibitors. I think there are a few Mekinistic reasons that I'm happy to go into detail about as to why, but I think the data is rather compelling. Without getting into specifics, you can imagine that companies that have G12C inhibitors either under the radar or entering the clinic or in the clinic are interested in our -- and we're having conversations about those types of collaboration to see if our SHP2 inhibitor could be used to really help patients that are treated with those types of drugs. I will say we haven't released any of our data on the SHP2 inhibitor. But as in qualitative way, we've been very pleased with its performance in Phase I studies in terms of both PK and pharmacodynamic readouts and that data will come out at some point. But we're enthusiastic about our medicine. And I think the hypothesis that you see is a sound one, and one that has not been unnoticed by many people, and those conversations are ongoing.
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Unidentified Participant [17]
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My question is on Capmatinib. You guys have breakthrough therapy for that asset, but we don't hear a ton about it. So I was just hoping you could kind of layout the market opportunity there by mutation status and line of therapy. And just talk about what standard of care is for these patients at the moment and what the competitive landscape looks like, your competitor has Capmatinib close behind you, so how do you think your asset is differentiated in that space?
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Susanne Schaffert, Novartis AG - CEO of Novartis Oncology [18]
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So our asset, Capmatinib or INC280, is very active as a single agent. We are showing data at ASCO about our GEOMETRY trial, Phase II trial. And as you rightly pointed out, we got orphan drug status and breakthrough status granted by FDA recently. So we plan to file in the U.S. and Japan and preparing for the launch. INC280 is targeting cMET mutation that is present in around 3% of non-small cell lung cancer patients. We believe it's a quite good commercial fit as Ameet's organization has a footprint, as we're also in lung cancer with our Mekinist, Tafinlar combination. So therefore, I think, we have the footprint there. And maybe, Ameet, do you want to comment how we plan to go?
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Ameet Mallik, Novartis Oncology - Former Head of Global Marketing, Value and Access [19]
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Sure. We're excited about this, and I think the Tafinlar + Mekinist experience in the BRAF-mutated population will really serve us well for this launch. And so if you think about the world and how it's changed in a pre-PD-1 world, the 2 mutations that were established were ALK and EGFR in lung cancer. And I'll see now in a post-immunotherapy world, the first new driver mutation that was established is BRAF. And so with Tafinlar + Mekinist, as we've been able to establish the testing, fundamentally, what we've seen is lung cancer doctors different from other areas like in melanoma really believe in -- once they really believe something is a driver of mutation and going frontline and hitting that driver mutation before going to immunotherapy, we've seen good success in the BRAF population, which is even smaller, only about 2%. And so obviously, key will be to get the testing like we did with BRAF for cMET to make sure it's done upfront before frontline therapy, not subsequent to be able to establish this market, but we think we have a good opportunity, and like I said, good relevant experience from our experience in BRAF to be able to do this.
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Susanne Schaffert, Novartis AG - CEO of Novartis Oncology [20]
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And we also believe that combinations would make sense and maybe Jeff will want to comment about the combination we're embarking on for 280.
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Jeffrey A. Engelman, Novartis Oncology - VP & Global Head of Oncology Research [21]
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So I think it's in one of the pages in the pamphlet. One of the combinations we are looking at is in [QAD] with anti-PD-1 for 2 reasons. One is in the MET exon-14 skipping mutation population that Susanne was talking about or referring to. That population may have some responsiveness to PD-1. And so we're very excited about bringing 2 medicines that kill the cancer through different mechanisms of action together, kind of similar to the concept of BRAF/MEK PD-1 for the BRAF mutant melanoma. And we think that by doing that, we may provide the patients with the very long-term benefit. And so we're excited about bringing that trial forward. There is also a lot of data that HGF--Met -- this HGF--Met signaling access, which is really a wound-healing access, is part of an immunosuppressive microenvironment. If you think about when your wound is healing, you try to suppress inflammation. So you can get effective scar formation. And this HGF--Met axis may play a role in helping PD-1 be more effective. We are now looking at this as well in lung cancer in patients that don't have the MET exon-14 skipping mutation. Obviously, that's a higher-risk project, but will help more patients than only the patients with the MET exon-14 skipping mutations.
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Unidentified Participant [22]
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A couple on PI3 kinase. So one, does the incidence of mutations differ in the previously exposed CDK 4/6 population? And second, can you comment if the compound penetrate the blood-brain barrier, does it impact liver -- brain mets?
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Jeffrey A. Engelman, Novartis Oncology - VP & Global Head of Oncology Research [23]
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I can't -- I don't know if you -- if any of you can comment. I can't comment with precision about whether the incidence of the PIK3CA mutations changes after treatment with CDK 4/6 inhibitors. That data should become available to us and a lot of them on the list of trials. We did collect circulating tumor DNA at the end of treatment. So as that data is maturing, we should be able to see if the incidents changes. We do think that PIK3CA mutations are a tranquil mutation in a large subset of these breast cancers, and so we certainly wouldn't expect it to be lower. But I don't want to -- I don't know the information, so I don't want to state anything beyond that. What was your other question? Brain penetration. I don't believe that the drug has very strong CNS penetration. However, other drugs that do not have strong CNS penetration can also work on CNS mets. We've seen this now in the field before and it may be because some of the blood-brain barrier is compromised in metastases in the brain. But I don't believe BYL719 has strong brain penetration. And I don't know if we specifically looked at the activity in brain met. I will say we know, for example, though drugs like some EGFR inhibitors that don't have strong CNS penetration do have activity on brain met. So the composition of the blood-brain barrier is questionable and so that doesn't always equate to activity on brain mets.
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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [24]
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A question -- Chris Shibutani from Cowen. On the BRAF/MEK franchise commercially focused, 2 questions, 1 on melanoma and the other on colorectal. Within melanoma, Tafinlar + Mekinist have clearly established a very strong position there. Market dynamics have become more complicated with the new entrant. Can you talk about what are the main factors that you believe are guiding for new patient starts in that indication? And then as far as BRAF mutant colorectal cancer, NCCN guidelines have continued to update, making recommendations in that setting. Can you comment about what "off label" you assume maybe seeing given that we don't have formal regulatory approvals as of yet in that setting?
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Susanne Schaffert, Novartis AG - CEO of Novartis Oncology [25]
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Okay. Let me start and then Ameet can also chime in here. So we still see very strong performance as Mekinist, Tafinlar as you see double-digit growth and it's coming from different segments. So still there is growth in metastatic, but that is obviously where competition is entering. We have very strong growth from adjuvant, that is really in launch phase and we see very long -- a strong uptake there. And as Ameet mentioned, there is also quite some growth coming from the lung indication. So this year, we are in a very good position. We always consider our competitors is very respected, and we obviously still watch the space, but we have very good momentum. We also looking forward to the readout of our triplet combination of Mekinist, Tafinlar and our PD-L1 later this year that should further strengthen our position. And maybe, Ameet, do you want to comment also a little bit on the dynamics and maybe colorectal, but we can also -- then I can take you back there also.
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Ameet Mallik, Novartis Oncology - Former Head of Global Marketing, Value and Access [26]
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Yes, so I mean, if you look at the growth, the 2 biggest growth drivers are the adjuvant setting and in lung, where we're the only targeted therapy combination approved. So there is no competition there really from -- within the targeted therapy segment. Within the metastatic setting, there is some more competition, but we're still obviously clearly the very, very strong market leader, and we're still seeing good performance there. If you look at what matters, especially in melanoma and why you see an affinity towards also immunotherapy, even relative to other solid tumor types is because it's all about durability of response. And I think with our long-term data, we think that's differentiating versus some of the new entrants in the metastatic space, where they don't have long-term data. And I think especially in melanoma, that really matters. So our 5-year data that we're going to be also releasing at ASCO, I think, further solidifies the longer-term data that you have in the durability response maybe gives you the key, and key for us to remain a leader and the leader in targeted therapy, which, we believe, will do. In CRC, obviously there is more excitement now with the data. We'd love to see how the guidelines are written. I think the use to date is limited. But obviously I think as data evolves and as the guidelines evolves, it's going to grow. I think there's going to be excitement around it.
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Unidentified Analyst [27]
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[Marceli Batun] from ODDO. Could you comment on the next generation of CAR-T and the pipeline today?
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Unidentified Company Representative [28]
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Yes, so we have -- as you know with Kymriah today, we have already got approval in all geographies where we filed U.S., Canada, Australia, Japan and Europe, and we're now ramping up capacity to address the medical need there, which is very high. In fact, the Q1 results were very good in that sense that we saw acceleration of ourselves because when we increase capacity, the demand is so strong that we can deliver on that demand. Now we want to move further and not only to increase capacity, and that's what we're doing in ramping up manufacturing sites in Europe and in Asia but also investing in new technologies. As Vas say this morning, we have this new manufacturing technology that is going to the clinic within the end of the year, so in the next few months, and that's going to be real improvement on current third generation technologies. We cannot say much about it because it's a very competitive space and we think we have the lead there. We have very exciting stuff. Now this is going to be a way to address some of limitation today on the current generation of CAR-T and Kymriah in particular like others, which is about the need to have a certain time to wait the turnaround time before we can treat the patients as well as the fact it's a very manual process and that's why it takes time to build up capacity there. Now going into a more rapid turnaround as well as into the ability to scale up and add more automation is going to really address that particular constraint. Meanwhile, Kymriah itself is going to increase. I mean today, we are addressing the population of about 18,000 patients in our different indication in markets where we have proved and also where we have access and reimbursement. So 18,000 patients is a sizable trend of patients already in need of Kymriah. Now we are doing 7 new clinical trials with Kymriah that allows us, hopefully, if the results are good as they were in relapsed/refractory PLN and relapsed/refractory DLBCL, to address the populations about twice that size. So we're going to multiply by 3 the next few years the population that could be addressable by Kymriah there. We're also working on new CAR-Ts. And we have a partner at Penn. They are testing now in human combination of CD19 and CD22 CAR-T in leukemia patients as well as their original combination of CD19 CAR-T and BCMA CAR-T in multiple myeloma patients. So this approach to multi targeted CAR-T is going also to play into very innovative way to address medical need. And so that, combined with the new manufacturing technologies, put us in very good position to be a leader there. In fact, we are, we say, already a leader ex U.S. where we have, based on Q1 results, [67%] market share of the CAR-T business. So we want to also become a leader in the U.S. and become a leader globally with these new manufacturing technologies, new indications and this multi targeted approach.
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Unidentified Company Representative [29]
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Question here. Here.
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Vincent Chen, Sanford C. Bernstein & Co., LLC., Research Division - VP [30]
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Vincent Chen from Bernstein. Following up on the prior question, a couple more on CAR-T therapy. The first is actually on reimbursement. So U.S. CAR-T reimbursement for inpatient use is very poor and, frankly, insufficient. What are your strategies with respect to how you overcome this? To what extent will it be possible to grow CART therapy in the U.S. without meaningful change in the CMS inpatient reimbursement rules? And then second one is following up on the pipeline but almost taking a step even earlier. If I look at the cell therapy pipeline, certainly a lot of programs in the hematological malignancies, how about solid tumors? Are there plans to enter the clinic with programs targeting solid tumors potentially leveraging the Endocyte adapter control, the Endocyte adapter control platform? And I guess, maybe broadly speaking, what's your perspective on the potential for cell therapy in solid tumors in the near to medium-term future?
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Unidentified Company Representative [31]
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Thank you for your question. These are important questions. I'll address the first one around reimbursement. I think the reimbursement by the way is really particularly insufficient in the U.S. because ex U.S, it has been growing very, very fast. I mean, we have less than a year after approval in Europe and of course, in Japan and Australia and Canada, and we are reimbursed everywhere already in key markets, on nearly everywhere in key markets there, at least in one indication. So ex U.S, reimbursement has gone very, very fast and very positively. In the U.S., we have this particular challenge of the Medicare patients in patients with the DRG system. As you know, CMS has a policy where they change DRG on every 3 years. So here we are just less than a year -- just a year, in fact, after the launch. So it's going to take some time for me to change the DRG. We have been really advocating an earlier change, and the progress has been made in terms of impact because since October last year, they're reimbursing 50% of the cost of the therapy itself. Now they put in their draft resolution for October of this year, 65%. We think it's not enough. And we think there should be better progress in covering this type of innovation there. On the other hand, in the U.S., what is relatively specific to the market is different type of reimbursement situation for outpatient units. And we know with Kymriah that it could be used in an outpatient setting. This has been the case in the clinical trials, both in pediatric ALL and in DLBCL. But 1/4 of the patients in the study were treated in outpatient setting within the institutions. So we know already that some institutions, in fact, those that have most experience like UPenn or CHOP (inaudible), the pediatric hospital in Philadelphia, are already using Kymriah only outpatient because the safety profile of Kymriah is such that it is perfectly manageable in terms of safety profile to ensure the patient in outpatient setting and, in fact, to hospitalize the patient only if there are very serious side effect that requires verification. So that's the other approach we're taking. So we're advocating for better reimbursement, and we know that we are supported by physicians, hospitals, scientific societies. At the same time, we are making sure that the possibility to use Kymriah in outpatient setting is being well understood and starting progressively to be used by hospitals. So that's for the first question. Is that fine in terms of answer on that first question?
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Vincent Chen, Sanford C. Bernstein & Co., LLC., Research Division - VP [32]
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And maybe one more. On the patient reimbursement, how much more -- how much is the exact that you (inaudible) for outpatient constrained you today relative to what you did get at ERG?
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Unidentified Company Representative [33]
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I don't think it's constraining us at all. In fact, what we start with the centers -- you have 3 types of centers. You have one that have been very early on like UPenn, then new that have been part of clinical trials and there was not been part of clinical trials. So UPenn is already in the early adopter phase of being really outpatient now. Now because outpatient, they get reimbursed at ASP per 6% so that means they are really into a satisfactory level for them. Now those in clinical trials have started to use outpatient but they are in the learning phase of using outpatient and getting organized to do so. And one example I had is Chicago, for example, the hospital there has organized itself. Some hospitals are now getting organized toward the outpatient setting. And the third group of hospitals is those that have not been part of clinical trials, so naturally, they want to start first inpatient to be able to add a feel for how to manage the patient and then they have in mind to move some to outpatient then. So that's the way it's going. Now the second question is an important one, solid tumors. So we are very keen on finding a way to use the leverage of technology, of platform and (inaudible) therapy into solid tumors. We have 2 challenges, and Jeff might build up about what I'm going to say. One is a long target because you need to find targets that are, of course, very specific to the solid tumors. And do not -- are not present in (inaudible) tissues because the CAR-T was being very effective and we also remain in the patients because of these memory cells, which is by the way the unique (inaudible) of CAR-T, for autologous CAR-Ts towards these memory cells, they stay for a long time and there's a very long-term remission there. So we like to find the right targets in terms of safety. The second thing that it's a more complex entailment where you need to have the CAR-T trafficking to the tumor and then being able to expand a (inaudible) once in the tumor. And by definition, these patients are in relatively advanced stage of cancer. That means their tumor has been able to build barriers against the immune system and these barriers are very when the CAR-T goes into the tumors. So you need to make sure that you can relieve these barriers so then the CAR-T can work, expanding the work in the tumors. That's why probably the way forward is around combining the CAR-T with some immunomodulators like checkpoint inhibitors. We are doing a study on that with UPenn with a particular CAR-T addressing EGFR variancy in glioblastoma. We know that, that CAR-T is penetrating into the brain and is able to be there in the tumor. Whether it's not acting and so we hope that in combining that with a PD-1 blocker, we will relieve the break and make the immunosuppressive development less effective, allowing the CAR-T to expand enough. So that's the way we see the solid tumors space. I don't know, Jeff, whether you want to add anything there.
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Jeffrey A. Engelman, Novartis Oncology - VP & Global Head of Oncology Research [34]
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No. I think that was good.
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Unidentified Analyst [35]
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Just a follow-up on that. Do you have any thoughts on gamma delta as a target for solid tumors?
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Unidentified Company Representative [36]
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Yes, we are very interested in different types of effector cells. Gamma delta is one particular type of effector cells could be interesting like NK cells as well. We are not working internally on this program, but we are watching very, very closely all the different programs that are being done in that space. And that could be very exciting if indeed, you are able and because the same thing will happen to make sure that cells will traffic to the tumors and then we'll be able to act there from that point of view. So this subpopulation of effector cells that exist in the normal way of the immune system, reaction to cancers like gamma delta or NK, if we can find a way to boost them and to make them more effective than they are and certainly even than T cells, the classical T cells, alpha beta, we should be able to have some leverage there but still early stage.
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [37]
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Florent, Societe Generale. Hello again. Two quick questions. Could you elaborate a bit on canakinumab on your Phase III programs? How you see the, let's say, these products given the fact that you are targeting a quite highly competitive cancer? And my second question is on your technology platform, the radioligand therapy platform, could you also provide some comments on how we do -- will leverage this technology?
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Unidentified Company Representative [38]
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Jeff, would you want to take the canakinumab? I couldn't vouch half as much more if I wanted doing it.
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Jeffrey A. Engelman, Novartis Oncology - VP & Global Head of Oncology Research [39]
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Sure. So the effort for canakinumab or Ilaris obviously was born from the observations in the cancer trial. And I think it's in the handout where when we look at the high dose of the Alaris versus the patients who got placebo, there is a 77% reduction among cancer mortality. As far as I know, that's the biggest intervention or the biggest reduction among cancer mortality of any intervention including lung cancer screening with CT scans where it was a 20% reduction in lung cancer mortality. Such a huge signal. And because of that signal, we have to follow that up. That could be a big advance for patients. And we've now -- and you can see from the 3 trials, we followed it up in a few different paradigms in the adjuvant setting and in the metastatic setting to see if it's beneficial in those settings. But beyond even the further development of canakinumab is this recognition that targeting the inflammasome may have a significant effect on either the incidence and/or progression of lung cancer or subsets of lung cancer. And we, as a research and development organization, are very focused on also not just looking at Alaris, but as you can see on the handout, the next generation of therapies that could target the inflammasome for the treatment of cancer and other disorders. So those trials, we've launched those trials. They're actively accruing, and we wait with bated breath to see how they play out. But that signaling CANTOS was -- I think was extraordinary.
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Unidentified Company Representative [40]
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And we're really excited because this could really open a new chapter in immuno-oncology that currently is really reduce to checkpoint inhibitors. So this is why we took a bit there. We're excited about it and really our IL-1 beta and the succeeding compounds should be quite promising there. Maybe quickly to the radioligand question because I see signs here that we have to wrap up in a few minutes. So there, we are really building a very promising platform. You saw Lutathera is doing very, very well in its launch, having already achieved $100 million in Q1. And really when you talk to medical experts, they are very excited about the treatment. It has very, very high efficacy and the safety profile is very, very favorable. So this is why there's very high demand and we're very excited about this opportunity. I think what is kind of what you have to establish to become a leader in the field is you have to establish a very vertical integration between production, supply and then really logistics and shipment to the patient. And as you know, it's all limited by time because you have radioactive isotope that has only a half-life of 72 hours in the case of lutetium. That means that when the hot product, as we call it, is produced, we need to get it shipped to the patient in 24 hours, maximum 48 hours to still be able to expose the patient to the radiation long enough. And that is a footprint that AAA has built and that we can rely on. And that's why we're really excited that we have something that is highly differentiated from other players. We are now embarking on prostate cancer that is an even more attractive in field. And also there, we are in Phase III with the VISION trial actively recruiting. And again, there, we can build on the existing internal footprint. Endocyte has a model that is based on CMOs. And there, really the plan is to integrate this into our footprint, to have everything in house and vertically integrated.
So I think with that, let me wrap up. As you hear us, we're quite excited about our Oncology business. We have a very good momentum. 9% growth. We feel very good about our current launches and we are very excited about the upcoming launches. We have great research coming up. Looking forward to see you maybe at ASCO. We're also having quite exciting data there. Thanks for your interest.
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Unidentified Company Representative [41]
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Thank you.
(Break)
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [42]
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Very good. So last session before lunch time, the (inaudible). And I'll start with a quick introduction of the Sandoz team. My name is Francesco Balestrieri. I am the interim CEO for Sandoz. I've been with Novartis 25 years. And before this all, I was in Europe, head of Europe. Next to me is Philippe Deecke, which is the CFO of Sandoz; Carol Lynch, which is the Head of the U.S.; and next to Carol is Stefan Hendriks, which is the Global Head of Biosimilars. And we're happy to be here.
Just a few words of introduction before we start the Q&A. Key messages from the Sandoz side.
The first one is about the market. We do operate in a very volatile market, which never is short of surprises but nevertheless continues to be attractive. And even in 2018, the growth was 3% and effectively higher than that outside of the U.S. The U.S. pulled back the overall global market growth because of the negative price development in the standard generics. So we keep that outlook for the future. We see market growth ahead and clearly a positive position on the business overall.
We also see our geographical footprint as an advantage because we are only 30% present -- our portfolio, when you look at geographical mix, is 70% outside of the U.S. and that number grows once we complete the Aurobindo deal and -- in the second half of 2019.
So second message is around portfolio. As the market develops, we develop with the market. So we do have clearly a base of standard generics outside of the U.S. that we stay. But at the same time, we have a long-term position on biosimilars supported by 8 products in the market today, 10 products in the pipeline that will continue to basically carry our growth in the short and midterm. And mid to long term, we see an opportunity to further expand our portfolio in so-called differentiated generics. So it can be difficult to make generics, compose generics, so promotable product which offer higher opportunity for growth and combined with that also more attractive margins.
And the last pieces around the transformation agenda that you've heard from us back in January. It's well underway. But it's really important that you look at the 2 parts of it. In one part, we have rebasing the business. Starting in 2018, we -- the exit of -- the decision to exit the standard generic business in the U.S. Continued last week, we rolled out -- we announced basically a workforce reduction of about 7% worldwide to make our cost structure more efficient going forward. The objective is not to deliver it all to the bottom line, the objective is to invest some of that into future growth opportunity. And the second part of the agenda is around the injecting growth back into the business. And that's very important that to do that, that we make choices, both in terms of future portfolio play and in continuing to drive effective cost productivity programs in our manufacturing network.
So that's a little bit of framework we wanted to present to you. And now let's open it up for Q&A., please.
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Unidentified Participant [43]
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Two questions on the biosimilar business. About a year ago, Pfizer brought litigation against J&J for practices related to kind of, I guess, anticompetitive vis-Ã -vis REMICADE. But my question to you is has that litigation, as best you can tell, changed anything as it relates to the ease of uptake for biosimilars in the U.S. market? And then the second question I had is on the last Neulasta biosimilar, what you specifically said about when you're likely to enter the market and any observations you have early on, both Mylan and [Cohera] seem to be having some good initial success, and I just wondered if you could share any observations in their kind of early uptake. Thank you.
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [44]
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I'll hand it over to Carol first and then Stefan can...
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Carol Lynch, Sandoz International GmbH - Global Head of Biopharmaceuticals [45]
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Sure. So with regards to the J&J Pfizer litigation, I think what it says to do is actually highlight some of the challenges about commercializing biosimilar in the U.S. market. And whilst it maybe hasn't directly impacted the adoption of biosimilars, I think what it's done is caused a lot of conversation that happened both with FDA and with CMS and others so that now you see a significant amount of legislation that's being put in place or proposed in order to make it much easier to drive adoption of biosimilars to the U.S. In addition, I think what you've heard from Scott Gottlieb when he was still commissioner of FDA was bringing in FTC when they're looking at the adoption of biosimilars to make sure that, really, fair competition is in place. So I think it had an indirect effect. This really elevated some of the challenges, and that result is a positive thing, I think, for biosimilar adoption. When it comes to Neulasta biosimilar, of course, it's all the 2 recent launches, which I think it's fair to say are growing faster some of the entire earlier launches that we saw. And I think that's really down to -- actually, I'm going to take credit for this is the Zarxio adoption that happened with the first biosimilar that was launched in the U.S. I think it's probably the first successful biosimilar in the U.S. within 3 years as it became a market leader by volume. And I think it broke down so many of the barriers and created a path to follow-on products to have an easier adoption. So we're looking forward to launching our pegfilgrastim biosimilar later this year.
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Stefan Hendriks, Sandoz - Global Head Biopharmaceuticals [46]
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Maybe to add to that. So first of all, Zarxio's adoption is great because market share is still growing so the U.S. team under Carol's leadership clearly demonstrate that if we give them a biosimilar, they know what to do with it, so that's really good. If you look at the U.S. market in general, the way I would frame it is delayed but accelerated. So when you look at regulatory perspective, you now have 20 products approved, of which 11 since beginning of 2018. So you clearly see U.S. catching up and the FDA really starting to become more clear on what it takes to get it approved. That's on one hand. Now on the other hand, as your Pfizer example alluded is that you see more and more stakeholders being big companies, being big insurers, being senators, being all kinds of the FDA, all kinds of stakeholders are clearly seeing now biosimilars as part of the solution for some of the affordability challenges you see and the competitive framework you see in the U.S. market. So we have a positive outlook. For me, it's not a matter of if but it's more a matter of when and how fast it will open up.
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [47]
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There is somebody down here.
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Unidentified Participant [48]
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Two questions. First, on the U.S. So of the interchangeability guidance is now finalized. Where do you stand with switching studies? Have you -- do you have any going on? Are you now in a position you'll start switching studies?
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Carol Lynch, Sandoz International GmbH - Global Head of Biopharmaceuticals [49]
------------------------------
So actually, we did some switching studies already in some of the original programs to get approval. Obviously, the guidance is now finalized and we need to do the analysis to see if our switching studies match those requirements. Are you going to ask about future switching studies as well?
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Unidentified Participant [50]
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Well, I assume you're going to do them.
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Carol Lynch, Sandoz International GmbH - Global Head of Biopharmaceuticals [51]
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So I think what happened is that you need to look at what benefit does interchangeability come for and you need to look at that on a molecule-by-molecule basis. So there may be instances where we say this is valuable, we're going to do it. There'll be others where it's just not appropriate and it's not the best use of resources to be perfectly honest. Because remember, interchangeability is really powerful when it's in the retail setting but not so much when it's the clinical or the institution setting.
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Unidentified Participant [52]
------------------------------
So the second topic is China. You just had an approval of a...
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [53]
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Rosuvastatin.
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Unidentified Participant [54]
------------------------------
Right. And so how are you viewing the evolution of that market? It's highly fragmented, highly competitive. Indian companies are starting to sniff around. And I'm wondering if you're assuming to this, this ultimately will evolve to be an attractive market, that relatively a material percentage of the incumbents have to fail equivalency testing and shutter.
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [55]
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Well, the fact that we have a pipeline in China shows you that we have a positive outlook on the market. Although at the same time, we have -- it's a changing market, right? And so basically, we have to see how things develop. It's not easy because of the competitive -- that the presence of local competitors which are clearly well-placed, although the new quality standards will favor multinational companies. So from here forward, our position is that we are developing a pipeline to play in China. We will then assess case-by-case where we are best positioned to commercialize the pipeline ourselves or in partnership with local players.
Okay. There's somebody down here.
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [56]
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Florent Cespedes from Societe Generale. A few quick questions. First on biosimilars, could you elaborate on which were the growth drivers in Europe and in the U.S. on the biosimilars portfolio? The second question, could you also give us your comments on the recent agreements you signed on the insulin? What are your opportunities there? It seems that's quite a crowded area. And the third question, just a clarification. Post window closing, do we have to understand that the standard generics portfolio will account for 40% of the total sales only and not 65%, 70%, which is the preclosing contribution?
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Unidentified Company Representative [57]
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So I'll take the launches and...
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [58]
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When you say you drivers, you mean which means products are having growth in Europe, right?
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Unidentified Participant [59]
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Right.
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Stefan Hendriks, Sandoz - Global Head Biopharmaceuticals [60]
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So just to start it, full portfolio, we have 8 -- and we are the only company that have 8 molecules approved and marketed in Europe and the rest of the world. And the established products that we -- earlier biosimilars are all market leaders and still doing very well when it comes to capturing market share. But of course, they have to deal with eroding prices. Then we have launched in the last 18 months 5 products, of which 3 in quarter 4 last year. So we're really benefiting from that growth, and we see -- and we're really pleased with the performance. And what you can say over all is that this second wave of biosimilars are penetrating the market much faster than the first wave that you can roughly say across is that what -- it took the first wave 7 to 9 years when it comes to penetration and price evolution, now it happens in 2 to 3 years. But I would say that's a good thing because that means that we are able to take costs out of the system and reach more patients faster. And it also means that the prescribers and the patients have high acceptance of biosimilars. Within those 5, clearly, RITUXAN, Erelzi and adalimumab, here the most -- have the biggest potential for future growth. Is that answering your question?
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [61]
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Yes. In Europe and U.S...
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Stefan Hendriks, Sandoz - Global Head Biopharmaceuticals [62]
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So U.S., we have multiple products in the market doing really well. Zarxio being marketed already mentioned. Also, Omnitrope doing really well. Glatopa 20 did really well and we are even now getting up to speed with Glatopa 40 so that's the established portfolio. And we're getting ready for 2 launches this year. (inaudible) spending outcome of the court hearing. And as you probably know, it's very recently, FDA confirmed our refiling of our pegfilgrastim package. And looking at normal timelines, we would expect still to be able to launch this year. And then the Gan & Lee question, the insulin question. So we're really excited about going into that space. And it starts first and foremost, with unmet need and the health care challenge we have. World Health Organization has also mentioned this as one of the major challenges we face in the coming years. And there's over 400 million patients with diabetes, and 12% of global health care spending goes into managing diabetes. So it's huge and it's only getting bigger because more and more people go into the diabetes space. So we feel that in a market like that where currently a lot of patients -- and the FDA and ADA last part of last year, they made a lot of comments on that, that right now, even in a market like the U.S., patients are not taking their insulins or rationing their insulins because they cannot afford it, which puts them at risk for further complications down the line. So I think that's a market dynamic where clearly, biosimilars play a role, so that's why we're excited. And also, the FDA has announced that by March 2020, the insulins that were developed before there was a biologic pathway, regulatory pathway by the FDA. So by March 2020, they will be defined as biologics, which makes it easier and more predictable to go through regulatory pathway in the U.S. So timing is perfect there. And we've scanned the marketplace for who's best partner, and with Gan & Lee, we found a partner that has years of experience in the insulin space that have built up really good capacity and willing to invest to build the capacity that's needed to address this high-volume demand the insulin market has. So with their ability to manufacture in high volumes with attractive cost of goods and our ability to disrupt the marketplace and commercialize these type of products, I think it's really great partnership to address the need there is in the market.
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Unidentified Analyst [63]
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(inaudible) that you would start with the (inaudible) market first and then (inaudible)?
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Stefan Hendriks, Sandoz - Global Head Biopharmaceuticals [64]
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So it's a global partnership. I think we commercialized across the globe except for 2 Asian markets. And we are focusing on U.S. and Europe and then very quickly a global rollout.
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [65]
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So Philippe will give you a sense of other portfolio as we...
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Philippe Deecke, Sandoz - CFO [66]
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Yes. So I think the oral solids and dermatology business is roughly $1.2 billion in 2018, so we communicated that before. Remember, this is a highly declining business, double-digit decline. This will continue and this is in '19 roughly where we expected it to be. So I think our -- if you refer to Page 4, right, our generics were roughly 60%, 65% of our non bio of our retail business. This will drop to roughly 50% or so. So I think our retail portfolio will be 50% differentiated, 50% standard.
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Unidentified Participant [67]
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Just given the portfolio rationalization, how do you view more complex products? You have advert coming that generic launch hasn't gone well, but then maybe potentially, Sandostatin, which is Novartis innovation drug, like how do you view your portfolio where Sandoz can be the leader?
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [68]
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Well, it's a very broad question. I mean...
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Unidentified Participant [69]
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It's mainly around, like thinking through the pipeline, like where -- which generic markets to target, whether it's Advair that you'll have but the launch hasn't gone well or potentially a Sandostatin.
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [70]
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You say it didn't go well, where? For Advair?
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Unidentified Participant [71]
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Yes. Like we're Advair, like the myelin launch had been.
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [72]
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Oh, you're referring to the myelin launch that we haven't launched.
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Unidentified Participant [73]
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Yes. Like how?
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [74]
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Okay. I mean it's partly is because -- there is some learning, it's about the go-to-market dynamics, some segments. Maybe Carol can comment on the myelin launch. But as I said, I think from a -- if your question is where do we want to play going forward, right, from a portfolio point of view, as I said, clearly, short to midterm, biosimilars super important, key growth driver. We continue to invest. We have a pipeline. We continue to look for additional one, right? We continue to have a strong presence and be well positioned in all future LOEs in the standard generics outside of the U.S. We are global leader in anti-infectives. We are global leader in oncology. We continue to play there. And we will look for other segments of the market where to invest and develop our portfolio but with an eye on segments, which are also opportunities to differentiate ourselves and give us an edge in terms of developing a portfolio that can be promoted and not only substituted in the pharmacy level. And that is work in progress. If you go over the next 12 months, it will become clear where we want to place our bets. It's happening now but we're not ready to disclose it yet.
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Philippe Deecke, Sandoz - CFO [75]
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I think if I can add to this, Francesco, I think one of the reasons for our improvement in gross margin as you've seen in this document, that we have in the document as well has been this shift to more differentiated assets, which are higher margins. So of course, [bio] is the prime example that we have right now but we have a series of more specialized products and differentiated products in geographies, and this is helping us to drive our gross margin up. So this will continue in the future.
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Carol Lynch, Sandoz International GmbH - Global Head of Biopharmaceuticals [76]
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So maybe just a comment here from a U.S. perspective, obviously your question was around Advair. I think obviously, from a Sandoz perspective, we're firmly in the more differentiated space with the biosimilar profile that we have, the specialty or differentiated generics plus midchannel perspective. We've got a great portfolio from an institutional setting, which we performed extremely well. But when you look at that, it's a slightly different market model as well and go-to-market model and how you commercialize those assets. So if you're not in that specialty space and it's not the institution where you can really -- you've got quite a controlled environment but when you go outside of that channel, it's a bit more fragmented. And I think you should expect to see adoption as a little bit more slow than you would see from a pure substitutable generic and we've got a high controlled environment. So I probably don't look as poorly against the launch of myelin as maybe you do because you're expecting because they've got AB rating and it's going to go very fast. But I think we should expect that these more differentiated molecules are going to be a little bit more slow in terms of adoption.
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Holger Blum, BZ Bank Aktiengesellschaft, Research Division - Research Analyst [77]
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Holger Blum, Patinex. I wanted to follow-up on the Chinese market if you can help us understand the changes better in that market. I noticed that recently CRESTOR got approved under the new Quality Evaluation Consistency Scheme. So is it an advantage when it comes to tenders versus others? And then if a pipeline -- although based on these and maybe you dimensionalize the Chinese market today and where it might be 3 to 5 years from now.
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [78]
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Well, so specifically on generics, it is a very large market. We estimate the market to be between $60 billion and $70 billion in value. And still, a large portion of the population is underserved. So we expect the market -- on one end, we expect the market to develop, right, further? So there is growth in the market that we -- when you look at the value projections for the market of between 3% and 5%, behind that 3% to 5%, there is a much higher volume growth because we assume that a higher percentage of the population will have access to medicines, which means your return that you will see more and more price pressure, right, in the market. The new quality standards, we give an edge and advantage in the market to the company's that have it and will become more and more restricted towards who can compete in the market. So that's why we are going in this direction. But if you asked me to give you a firm outlook for the next 5 to 10 years in China, it's difficult to do, right? It's evolving. You can...
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Philippe Deecke, Sandoz - CFO [79]
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I think the Chinese market is very hard to read as what's going to happen. I think you saw the big GPO tender, the so-called 4 plus 7, so the 11 biggest cities in China. So I think it's a market that has been driven by massive amounts of sales force going out and promoting to hospitals. Even generics products where promoted and were sold to it, moving to a tender type setting. And so how quickly this will happen, how much price will go down but then penetration will go up, this is -- at this point in time, very hard to read. I think this is a very, very big market. We -- as Francesco mentioned, we are building a pipeline and developing a pipeline. We've been investing in China in the pipeline for a couple of years already. So we are ready to play that game, probably a more tender-driven China, suits more the type of business we want to pursue there. But of course, this will mean that a lot of other players will come in as well. You mentioned that -- somebody mentioned the Indian companies looking at China as well. So I think this will be a very competitive place, but I think the size makes it interesting and we'll have to see how much we do ourselves versus how much do we do through partnership.
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [80]
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I think we should think the 2 positives, right, that is right in front of us now. One is much faster regulatory pass, right, so registration, timing has dropped significantly versus where it was in the past. Much clear quality standards that actually level the playing field for companies like us and in clarity about the rules. But at the same time, the market's evolving so we have to see how quickly the new rules are embedded across the different parts of the company.
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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [81]
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Chris Shibutani from Cowen. Carol, appreciated your clarifying comments about go-to-market strategies and how the dynamics plays out in the specialty markets. If I could ask you to reflect a little bit more specifically on the pulmonary arterial hypertension market where you have a very well entrenched, committed remodule and base for a product that you just recently launched. Could you help us understand some of the specific and unique aspects of your go-to-market strategy in that particular market? And then given the dynamics where there's potential for after 180 days for additional clinical generic providers to enter the market, how you see the tempo of how that will play again in that particular specialty market, that will be helpful.
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Carol Lynch, Sandoz International GmbH - Global Head of Biopharmaceuticals [82]
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Sure. So the PH market, as you know, is quite specialized market. It's a small community with a very deep connection to that patient base and that patient population for sure. And most of the physicians who work in the space are highly committed to the space and deeply passionate about it. And so there's some natural barriers there that you need to address. So we've actually deployed a customer-facing team and we have partnered with a company that has deep connections in this space as well. So they've got established relationships, which I think goes again towards the different go-to-market model compared to a typical oral solid that you would launch even though we're still AB rated, right? So it's a direct substitutable product. In addition, if you look at the distribution, it actually goes to a specialty pharmacy. So again, fewer customers that you're dealing with, but again, different contracting situation so you have -- really have to work through the contract specifics not just in terms of the pricing and the dynamics around that but also the services that get provided and how you get data back from your service centers as well. So it's a little bit more complex, it's more involved. You have to bring in skill sets that aren't typical for a normal generic company. Fortunately, we have that breadth of experience within our organization. So you bring all of that to bear in order to successfully address the market. And so far, everything's going according to plan so we're in a good place.
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Unidentified Analyst [83]
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[iindiscernible]
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Carol Lynch, Sandoz International GmbH - Global Head of Biopharmaceuticals [84]
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Sorry, yes. So we're hopefully expecting that at 181, there will be additional entrants. But I fully expect that they're going to have to go through the same machinations that we've had to in order to get the right set up in place to drive adoption. So we're assuming that's going to happen. Let's wait and see.
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Unidentified Analyst [85]
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All right. Just some comments on biosimilars in ophthalmology. VEGF is a class that's growing to about $9 billion, $10 billion soon and patents are expiring in the early 2020s. So I hear what is Sandoz's investment there? And what are the potential complications of biosimilars as intraocular injections given the sensitivity for the inflammation events there?
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Stefan Hendriks, Sandoz - Global Head Biopharmaceuticals [86]
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Yes. So right now, we are evaluating those options. So we have not -- so when you look at our pipeline, we're focusing on -- they're focusing on immunology, oncology and endocrinology. But we're also exploring what we call the complex on the surf. And in that space, you have multiple options. But we only have disclosed those molecules that are on Phase III, so I cannot give you more information on how we look at the pipeline moving forward.
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Unidentified Analyst [87]
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Maybe just a question on the Hyrimoz launch and kind of maybe could you discuss how that's tracking versus your expectations? And any learnings as you think about future launches there? And understanding that, that is a very kind of crowded market, I guess, how does that inform how you think more broadly about which markets does it make sense to kind of complete and which are more attractive versus ones that makes more sense to kind of walk away from?
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [88]
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Yes. so thank you for that question. So first of all, we're very pleased with the roll out of the launch and how it goes. I think what you can say is that the penetration goes much faster than with the earlier launches. So if you look at -- and it depends market by market, so it's very hard to give you a European number. But if you look at different type parts of markets, of course, the small Nordic national tender markets penetration goes very fast. But in a market like Germany right now, penetration is already at 30%, which grows much faster than with launches that we saw earlier. And I think that's a consequence of the fact that now, for the first time, 6 molecules were ready to launch at day 1. And I think I would not take adalimumab as a benchmark for what's going to happen in the future because it was such a huge opportunity and many players focused on it. But I do think moving forward, you would see depending on the molecule and the (inaudible), you would see 2, 3, 4 to 5 players that should be able to get ready early on, so you will see faster uptake and also faster price evolution. But it ends up, it stabilizes relatively quickly and it's a very healthy market with good gross margin and we're then also differentiating beyond the molecule and beyond the price is important. So having a broad portfolio in that space. Being a reliable partner when it comes to manufacturing and supply, but also having the right patient services in place. So -- and I don't think, all players can take all those natural hurdles that fit to biosimilar marketplace. And I think the other part of your question was about whether it makes sense to launch. And the answer is everywhere, if we're not -- I mean in a crowded market, the only time where it would not make sense to launch is because we are extremely late. And we've been in a window of opportunity -- window of opportune time, which we'll see in six months, we -- I think there are 5 launches, which is what we have done across Europe. And overall, I think we can say that it's ahead of our expectations. So even if we experience faster price erosion than in the past, what -- it's more about speed than overall price drop. So what you see basically -- what you've seen in the past, the play over a shorter period of time than reaching an equillibrium, the stability.
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Samir Shah, Novartis AG - Global Head of IR [89]
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Yes. And I also think that...
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Vasant Narasimhan, Novartis AG - CEO [90]
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Compensated by higher penetrations.
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Samir Shah, Novartis AG - Global Head of IR [91]
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And I also would say that specifically this molecule, I think there's a misperception in the market, because there was some media attention on the Nordics where we took a certain pricing strategy that got a lot of media attention. But it's definitely not that strategy across all markets. And if you look at the bigger markets like Germany, France, Italy, Spain, we don't see that type of dynamic playing out. So...
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Vasant Narasimhan, Novartis AG - CEO [92]
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And I think significant cash opportunities from it, financial vulnerability.
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Harry Kirsch, Novartis AG - CFO [93]
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I think financially, we're very pleased with the development in Europe. And I think Europe for us is growing between 4% and 5%, and this is largely driven by the biosimilar launches. So we're very pleased with the progress.
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Unidentified Analyst [94]
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Just sort of a high-level question on the 50% of your business that you are calling the differentiated generics. Can you kind of break that down a little bit further into what is differentiating in that? Is it regulatory hurdles? Is it manufacturing hurdles and how you sort of bifurcate that? And if you can just give any color in those different buckets as to what the margin profiles are?
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Vasant Narasimhan, Novartis AG - CEO [95]
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The question was the other way around, and I'll explain what I mean by that. You said, how much is your standard generic. It's 50%. So to answer your question differently, what the other 50% is, about 50%, 70% is biosimilar, right. And then the rest is what we call differentiated products, which is really a combination of branded generics. So you have to that we have a number of markets, which are still branded. And when you look at branded, it's very important, because your go-to-market promotional model is very different, sales evolution is very different, margins are very different. And so it's attractive space. Most of -- a large part of Middle East, Africa, Central Eastern Europe and Asia is branded generic, right? China today (inaudible) full implementation is a branded generic market, right? Secondly, we have OTC prices. We don't play in OTC across the whole spectrum, but OTC is very much focused on Rx to OTC switches. So it's focused on life cycle management, especially markets where doctor recommendation is still very important actually to drive patients and consumer preference. And last is difficult-to-make. We have some products in the injectable space. We have patch technology for opioids. So it's a combination of different -- of these 3 plus the biosimilar. So that's the other 50% of the portfolio. Does it answer your question?
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Unidentified Analyst [96]
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Yes. And just any kind of answer you can give us then on gross margin, operating (inaudible)?
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Harry Kirsch, Novartis AG - CFO [97]
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We won't be -- we won't go into the specific margin we get for each of these segments or subsegments. But I think it's clear that as Francesco mentioned, certain geographies and certain categories of product are much higher margin than others. And so I think the branded markets are usually higher margin for us. So I think higher gross margin, but also higher overall margin. And especially the hard-to-make injectables, for example, are certainly of so much higher margin than you would have in your solid base and which would also -- included some of the decisions we took for the U.S. I think in the U.S., we are -- if we divest the oral and derm business, we are left with a higher-margin business around injectable, institution and what Carol mentioned before. So this is -- I think at Sandoz, we have a history of resource allocation and resource reallocation, where we constantly prune or divest or reduce the amount of efforts we spend on low-margin business, and we invest this into higher margin business. And so you should see our standard generics ratio declining over time with the differentiated segment increasing over time and not much, because it's declining, but just because it's going to grow in the differentiated area.
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Samir Shah, Novartis AG - Global Head of IR [98]
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We have a question here.
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [99]
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Florent Cespedes from Societe Generale again. 2 quick questions. First, I would like to have your comments about your appetite for diabetes, because following the agreement on insulins, there is another, let's say, product that will be off-patent in the coming years. I don't know if you will give some color on that, but GLP-1 class and Victoza, liraglutide, will be off-patent in 2023. Is there an area where you could consider to develop your own product? So that's first question. And second, could we have a little bit more, let's say, color on the interchangeability in the U.S., how it will work from kind of regulatory standpoint? Could it be possible day 1 to have already products -- interchangeable products in the U.S.? Or do to the -- pharma companies will have to submit a new dossier with a switching study? And if you see big differences between the incidents and the anti-TNF space, any comments would be welcome.
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Vasant Narasimhan, Novartis AG - CEO [100]
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So take the portfolio first? So instead of going into particularly this one specific type of molecules, see, the way we articulate our strategy for portfolio is, as I said, it's focusing on immunology, oncology, endocrinology and we're exploring -- and within that, we want to have an attractive and competitive portfolio. And a portfolio moving forward matters more and more. And then what we're also exploring is what we call complex and underserved. This is within the biologics space, is the highest priced and fastest growing segment where we -- because of some natural hurdles, because you have to add safety programs or -- these molecules are often more complex, we expect lower competitive density. And I think we with our capability are well positioned to play there. So that's our portfolio strategy. And right now, we have 8 products in the market, and we have more than 10 products in development. And we only announced those that are in Phase III. And what we try to find is the optimal mix between in-house development. We have a little bit over half in-house that we develop. And then the rest we do in partnerships, because we feel that with that, we can -- without pressuring our P&L too much, we can build a broader portfolio faster.
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Carol Lynch, Sandoz International GmbH - Global Head of Biopharmaceuticals [101]
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So for interchangeability, I think the short answer is yes. Moving forward, now that we've got the final guidance, I think it will be possible to get approval on the biosimilar and interchangeable product, I think they call it, as that first launch. What we have heard informally from FDA thus far was they would prefer that we would submit for biosimilar approval first, but I think now as an artifact of doing guidance has not been finalized. And so of course, to get an agreement to a program is very difficult when the guidance isn't finalized. So I think moving forward, everybody will have to make their own decisions about whether to pursue a product that is considered interchangeable at time of launch. And again, that will come back to the market situation, right, in the channels through which you choose to commercialize. And so for some products, it will make sense to pursue at time of launch. And for others, it may not make sense at all to pursue it, because it may just artificially inflate the cost of development and the timeline for development when you could have got to just a regular biosimilar proof sooner and cheaper.
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Holger Blum, BZ Bank Aktiengesellschaft, Research Division - Research Analyst [102]
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Holger Blum, Patinex. I have a very direct question now, because a lot of questions were really asking about growth in biosimilars. But what is really going on, on the 50% of the portfolio that is undifferentiated? I mean many years ago, (inaudible) if there's so much price pressure, people set it at below production cost. Market will be cleaned up. There will be a way where the more efficient bigger companies make money. Nowadays it seems that this is more or less written off that thesis and that you can only be successful if you're differentiated. So do you see a solution or a solid business case for the...
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Francesco Balestrieri, Sandoz International GmbH - Head of Central & Eastern Europe, Middle East and Africa [103]
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Yes, you're right in saying that -- you hear a lot of generic companies talking about becoming a semi-specialty business. I -- and as I said, first of all, our agenda going forward will be a combination of both, continuing to play in the standard generic space and explore opportunity for difficult-to-make complex products that give us differentiation. So it's either-and and not either-or kind of situation. When it comes to the standard generic, what you have is effectively a segment of the market which is growing -- actually growing reasonably well. I'll give you Europe as an example maybe to -- which is an effectively our biggest part outside of the U.S. When you look at Europe, similar ratio, you have about 50% of the business, which is standard generic; price erosion, which on average is 4%; and a market growth, depending on the area, which is between 2% and 3%. So effectively, what you have is a very actually mid- to high single-digit underlying volume growth, so you have an expanded market, which is very much driven by new launch and LOEs. And that will continue to be an attractive place to play. But the 2 key elements is to have a robust portfolio, right, going forward that really started the best LOEs in the market and an effective launch machine combined with competitive cost of goods. And that's where I said part of the agenda is going back to basics, we need to continue to make sure that we stay at the top end of the market in these 2 areas, portfolio and cost of goods. We do see that's attractive. It is actually a very important cash generator for the business, and it's part of how we found the biosimilar development in the past 10 years, it's how we fund new business opportunities going forward. Maybe Philippe, you want to add to it.
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Philippe Deecke, Sandoz - CFO [104]
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No, I'll just add (inaudible) I think it's important in Europe to learn how to play in each and every market. So for some markets, you need a very broad portfolio. Usually, these are the substitution markets, where having a broad portfolio in almost all the LOEs that you can get and you develop and you launch them. Other markets, we've learned to play. They're highly competitive. They are low priced, but we play with a very narrow portfolio that -- where we can compete, and we can compete very well. And so this ensures that depending on the markets, you have to apply the right logic, you have to have a deep understanding of the market. I think that's one of the strengths of Sandoz is we understand this market very deeply, and we know which portfolio to play in which market, and this allows us to keep our gross margin where it is and growing this over the years, which I think few of our competitors have managed to do. And so I think this is market knowledge and the right portfolio, as Francesco mentioned.
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Unidentified Analyst [105]
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(inaudible)
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Vasant Narasimhan, Novartis AG - CEO [106]
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(inaudible)
Okay. Looks like it's done. So thank you very much for your questions. And again, I think key message is that we are decisively moving forward with the transformation agenda, and our objective is to bring growth into the business and expanding margin as we move forward. Thank you.
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Harry Kirsch, Novartis AG - CFO [107]
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Thank you.
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Operator [108]
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And lunch is on the first floor where you had breakfast. So down the stairs.
(Break)
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [109]
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Okay. All right. We're going to go ahead and get started here. We are the team from Global Drug Development. My name is John Tsai. I lead the Global Drug Development organization and happy to field questions regarding global drug development or anything in the pipeline. So maybe we'll go around for a round of introductions. Linda, I ask you to start first.
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Linda Armstrong, Novartis AG - Global Head Respiratory Development Unit [110]
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Sure. My name is Linda Armstrong, and I'm the head of the Respiratory Development Unit.
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Olga Santiago, AveXis, Inc. - Chief Medical Officer [111]
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Hello, I'm Olga Santiago. I'm the Chief Medical Officer for AveXis.
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David Soergel, Novartis AG - Head of the Cardiovascular, Renal and Metabolic Development Group [112]
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Hi. I'm David Soergel. I'm the Head of the Cardiovascular, Renal and Metabolic Development Group.
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Danny Bar-Zohar, Novartis AG - Global Head of Neuroscience Development [113]
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Danny Bar-Zohar, Neuroscience Development Head.
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Robert Kowalski, Novartis AG - Head of Global Regulatory Affairs [114]
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And good afternoon. Rob Kowalski, Head of Regulatory Affairs.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [115]
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I'll give a very quick overview of our full development pipeline, and then we'll open it up for any questions that you guys may have.
We started with presentations earlier this morning, and you probably saw that we have 26 potential blockbusters in our pipeline leading from now until 2023 and beyond. We see in our 2019 potential approvals as one we've got Mayzent approved about 6 weeks ago. We have potentially Zolgensma as well as alpelisib and then lastly brolucizumab in neurovascular age-related macular degeneration. That's 4 potential blockbusters that we could actually get approvals for in 2019.
If you also remember that slide, over the next 2 years, we have 6 additional potential blockbusters in our pipeline in the late-stage development and then 3 more in 2021. So very rich pipeline, and those products span different therapeutic platforms, as Vas had talked about in his presentation.
We have gene therapy with Zolgensma, where Olga is leading as the CMO there. We also have radioligand therapy. We have cell therapy. And then one additional platform that's being advanced in terms of our clinical development is RNA interference through antisense oligonucleotides as an additional new platform that we're advancing in. We're not only looking at our pipeline, but also how we do our work and the way that we look at how we do our work is embracing operational excellence and improving the way that we efficiently conduct our clinical trials. And one component of that is through our data and digital technologies and embracing the data and digital technologies as we move forward.
We're pretty excited about our pipeline. We're happy to talk to you and field any questions that you may have. And so let me turn it over to you and see what questions you may have. Florent?
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [116]
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Florent Cespedes from Societe Generale. A few questions. I would start with -- I will start with, one second, yes, NASH. Could you elaborate a bit on your strategy around NASH, because of course, it's not a symptomatic -- asymptomatic disease. There is a question mark of diagnosis and also which biomarker, which endpoint that you have to, let's say, to take into account to follow and to see the magnitude of the efficacy. My other question is about your lipoprotein -- antisense oligonucleotide against lipoprotein. Could you tell us how this strategy, this target differs from the Lp-PLA2 product from Glaxo, (inaudible) a few years ago? And I will come back later with other questions.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [117]
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Great. So first let me talk a little bit about NASH. The journey for NASH started a couple of years ago. And the intent -- and everyone knew that NASH would be the #1 cause for liver transplants, I think, in 2023. And when that journey started, people thought that there would be a single agent that potentially could reverse the fibrosis in NASH. And what we have come to find out as some of these results are reporting out, not only from our own studies, but from competitors, that it's a much more difficult disease than we originally expected. So I think the backbone and the approach that we take is combination therapies. It's not just one single therapy that will actually reverse the fibrosis, and we think it's going to be a multifactorial disease requiring different agents to be used in combination for treatment. The great thing is that we do have a number of different agents to look at from a treatment standpoint. I think the backbone of what people are seeing currently in that landscape is through the FXR agonist, which we have one, it's tropifexor or LJN -- I forgot the exact name, but tropifexor. There are so many names for these compounds. And it's a non-bile acid FXR agonist, we're getting some results. We have early results, but further readouts later on this year. We also have this in combination with some compounds from Allergan as well as Pfizer and our own internal compounds. So I think it's a multi-combination approach as we move forward. What also have found out from the FDA and the guidance is that you absolutely need liver biopsies, and you guys probably know that. So it is challenging in terms of conducting these trials when every patient needs to get a liver biopsy. It's not so straightforward. So I think based on that, it's a high hurdle to cross. I think the clinical trials are a little bit more complex, needing the biopsies instead of just using the FibroScans moving forward. But we think that it may take a little bit longer in order to reverse that fibrosis, which is the ultimate goal of what patients will be looking for. So it's not a very quick and easy solution. It's going to take a multipronged approach. So on Lp(a), David, maybe I'll will turn it over to you to give the background and our approach to it, yes?
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David Soergel, Novartis AG - Head of the Cardiovascular, Renal and Metabolic Development Group [118]
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Yes. Thanks for the question. So just to set the record straight, Lp-PLA2 and apolipoprotein(a) are completely different targets. So there is no relationship between those 2. So lipoprotein(a) is inherited independent risk factor for cardiovascular disease. It's been recognized as an independent risk factor for cardiovascular disease for decades. There's just been nothing that we've had to offer in terms of therapies. So when patients have heart attacks even in their 40s or their 50s or have a family history of heart attacks, in some cases, Lp(a) is measured, and we find that in some cases, they have -- those individuals have elevated Lp(a). But in the -- and today, there has been really nothing that we've been able to offer those patients. So how is it different compared to other cardiovascular risk factors and how we think about them in terms of development of new medicines? Well, I can measure everybody's Lp(a) in this room today. And then you can do whatever you want. You can take statins. You can change your diet. You can exercise. You can do all those things. And you're going to have the same Lp(a) 2 years from now. So it's a stable marker of risk that you can do nothing about. You inherit your Lp(a). So why is this important? So Lp(a) is a LDL-like particle. It contains oxidative phospholipids and is more atherogenic and more thrombogenic than typical LDL cholesterol. So what we think is and what we've been able to show in epidemiologic studies and doing randomization studies and meta-analyses from statin studies is that patients on the upper end of the Lp(a) concentration spectrum have up to 40% increase in the relative risk of cardiovascular morbidity and mortality. So I think you can understand why this is such an important risk factor and why developing a therapy could be so transformational for those individuals with elevated risk. So that brings us to TQJ230, which we in-licensed from Akcea earlier this year. As John said, TQJ is an antisense oligonucleotide. It is targeted to the liver, and it basically eliminates the translation of apolipoprotein(a), mRNA into protein. So you can't actually form the lipoprotein(a) particle anymore. And what we've seen from their Phase II work -- Akcea's Phase II work is that they can reduce Lp(a) levels by about 80% with sustained dosing. So the next step for us to embark on then is to show that, that reduction in that fixed risk factor actually does lead to improved cardiovascular outcomes, which we'll be doing in a cardiovascular outcome study.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [119]
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Yes, I think the important part of what David has mentioned so far is that we knew that Lp(a) is an independent risk factor for cardiovascular disease, but there's been no way to actually find a solution or a drug to treat that. With this new platform, antisense oligonucleotide, you actually are working against the messenger RNA and you can interfere with the production of Lp(a), and that's how we bring it down by 80%. And hopefully, that translates into cardiovascular decrease in terms of events. Other questions?
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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [120]
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Chris Shibutani from Cowen. I noticed amongst the sort of collaborations and development relationships you've had with resTORbio, obviously, is on there as well. Can you talk to how you're feeling about the larger opportunity in sort of the silver wave, aging-related diseases, immunosenescence, where might this fit into your thinking of how much you invest or embrace that from a research standpoint?
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [121]
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Yes, that's probably best to -- and I'll ask some of the team and maybe even -- I don't know if anyone wants to comment. Rob, you can comment too. The way we look at it, obviously, is we look at our portfolio, we look at where the unmet needs are from a disease standpoint. That's where we start. We're agnostic to whether those ideas come from internally within our NIBR organization or externally. In the area of healthy aging, I would call it, we actually look at osteoarthritis. You probably saw that we have some programs in osteoarthritis. Rob, I'll will turn it over to you.
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Robert Kowalski, Novartis AG - Head of Global Regulatory Affairs [122]
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That's what I was going to comment on, John. I think rather than looking at this concept as immunosenescence, which is really hard, even though there's lots of good ideas about it, we're focusing more on the diseases of the aging. So all of us, right? Our cartilage, regenerating cartilage, Alzheimer's disease, all those diseases that could actually get us as we get older from natural age progression. So our focus has been more in that opportunistically, and we wish there was a magic bullet of life, but obviously, that's the Holy Grail.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [123]
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Thanks, next question?
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Unidentified Analyst [124]
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Could you just spend a minute on QAW and just maybe help me better understand what you would consider the kind of the perfect product profile and what -- when the data come in, what specifically are you looking at to say we've really got something important here or we don't?
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [125]
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Yes, QAW is fevipiprant, are oral agent for asthma that you may have seen. And you probably know, within the United States, there are 3 million to 5 million patients who are currently on steroids and still not being treated to improve their symptoms, a sizable population that still is in need of treatment. I'll turn it over to Linda to give you the specifics on fevipiprant.
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Linda Armstrong, Novartis AG - Global Head Respiratory Development Unit [126]
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Sur. And maybe I'll just start briefly by talking about the mechanism of action. So prostaglandin D2 is a lipid mediator that's released from the mast cells, and the DP2 receptor is on a number of different inflammatory cells in both the innate as well as the adaptive immune system. You -- some of you might have heard of it as the CRTH2. And that's because it was first identified on the Th2 cell. But now we know it's on a broad level of immune cells. So we have a large Phase III program, about 3,500 patients and 5 clinical trials. The -- we have 2 1-year exacerbation trials. The primary endpoint is exacerbation rate over the year. We have 2 12-week lung function trials. And then we have 1 safety trial, which is both rollover as well as new patients. And at the end of the Phase III program, we want patients who've been exposed for 3 to 4. A win would be to meet all of our primary endpoints for sure. Now what I also need to mention is that in the Phase III exacerbation studies, we have 2 doses. We are -- we have -- all severe patients were allowed to enroll, both those who had high eosinophils as well as those who did not. However, we are stratifying for eosinophils. So if we see an improvement in exacerbation rate in patients who have high eos, that is also a win. So a win in high eos, a win in all comers, a win in exacerbation. But to be honest, even if we see -- if we see a clinically significant improvement in FEV1, that is also a win. Because as John mentioned, these are patients who are on inhaled corticosteroids, on long-acting beta agonists. In exacerbation studies, they are actually allowed to be on a third controller as well. And still did not have well-controlled disease. So to have a new oral therapy that could add a significant improvement to their lung function would be a win also. We have some safety, of course. So...
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [127]
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Any other questions?
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Richard J. Parkes, Deutsche Bank AG, Research Division - Director [128]
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Richard Parkes from Deutsche Bank. Just wanted to ask a question about ofatumumab. The incumbents (inaudible) presenting some data, trying to argue that you need the maximal B-cell depletion with the IV formulation in order to get the best effects on the disease. So I'm just wondering if you could talk through how confident you are that you can still achieve the same level of efficacy with the monthly dosing.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [129]
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We know ofatumumab very well in terms of PK/PD. Danny, you want to talk?
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Danny Bar-Zohar, Novartis AG - Global Head of Neuroscience Development [130]
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Yes, that's a good question, because we need to take the story back a little bit to how we developed ofatumumab and what ofatumumab is. As compared to all the other infusible B-cell therapies, I'm talking about ocrelizumab and rituximab to some extent and the other one that is currently in development, ofatumumab binds to the CD20 epitope on the B-cells in a very -- on a very unique place. And this unique place allows, and we tested that, it's rather easy to test that, allows a much more potent B-cell depletion. So -- and we showed that in order to get the same B-cell depletion that is achieved by, for example, ocrelizumab, you need by far lower doses of ofatumumab in order to get that. And now when we know that, so we have this sort of hypothesis, and we took that in the Phase IIb study that was actually performed by GSK, the MIRROR study. And in multiple sclerosis, there is a very good -- 2 very good PD markers. One of them is the count of gadolinium-enhancing T1 lesions. And the other one is the actual B-cell count. It's very easy to count. And with low-dose subcutaneous administration of ofatumumab, we achieved -- it's always hard to compare between studies, but we achieved the same 90% to 98% reduction of gadolinium-enhancing lesions and total flattening of the B-cell count. So we have, I would say, very high confidence that the doses that we model through the Phase III studies -- through the Phase III program versus Aubagio will provide at least as good as efficacy. And now we're talking about the other side, which is not less important, which is the safety side. One key important issue is that these are drugs that touch quite heavily the immune system. And this is long-term treatment. These are young people. And I want to put it politely, sometimes they need their immune system back when they have an infection, something like that. So when you stop therapy with ofatumumab, it takes by far less time for B-cell to replete back. And we showed that as well. We also demonstrated, and this is animal data, but we learned about multiple sclerosis along with everyone else that the subcutaneous route of administration means something may be beyond the convenience. Because when you administer an anti-CD20 B-cell therapy intravenously, when you administer it intravenously, it goes very fast to the spleen, extremely fast to the spleen, which -- the spleen is a very relevant organ in terms of antigen presentation to the central nervous system. We don't dismiss that. But still it also has some immune functions that relate to the host defense. Okay? And we do believe -- it's not just our own belief, it's pretty much the majority of the scientific community belief that much more relevant antigen presentation for multiple sclerosis occurs in the lymph nodes, not necessarily in the spleen. And we showed that quite nicely at the last American Academy a few weeks ago that when you administer an anti-CD20 -- any anti-CD20 subcutaneously in the right dose, it gets to lymph nodes preferentially as compared to the spleen. We don't want to go to the spleen too much, because the spleen, as I said, there are very relevant B-cells -- the marginal B-cell -- marginal zone B-cells. And we also showed that, that with subcutaneous ofatumumab, you partially spare these cells, actually allowing the patient to mount an immune response even on therapy. All of this we need to see the data. So we do believe that with low doses of subcutaneous ofatumumab, we'll get at least as good as efficacy and with quite significant benefits in safety as well potentially.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [131]
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Yes, we are looking forward to seeing these results before the end of the year. So we'll see what the results read out. No question here?
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Unidentified Analyst [132]
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So for Zolgensma, question for -- after a -- and I guess, first of all, how do you see physician impressions on the intrathecal data? And secondly, what are your plans for studying patients that are older than 5 or potentially switchers, type 2 or 3 patients from Spinraza.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [133]
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Olga?
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Olga Santiago, AveXis, Inc. - Chief Medical Officer [134]
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I'm going to take that.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [135]
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Yes, sure.
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Olga Santiago, AveXis, Inc. - Chief Medical Officer [136]
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I think there is an incredible amount of excitement that was generated around the AAN. We had whole alley of poster presentations, some of which we've reproduced over here. And (inaudible), it was just a jammed corridor, a corridor that we basically -- the security people had to clear even at the end of the session. I think they were quite enthusiastic about the findings, and in particular, STRONG. This is an ongoing study. So what we have interim follow-up basically up to about 6 months. And as you know, STRONG is intrathecal administration in the less severe phenotype of type 2 SMA. So you expect longer time to see effects, also longer time to see benefits when you institute a treatment. So I think we were quite encouraged to see even within 6 months for those who are in the older group, we can use the Hammersmith Functional Scale. We have to be 20 months of age, actually use that even in adults. And that was actually what was used in nusinersen CHERISH comparator study. We actually saw a mean improvement that was, from an absolute level perspective, in the same range, but was achieved in a very early time point. And then when we looked at the percent of children that had a response -- a clinically meaningful difference is considered a threefold 3 point-or-greater increase. We saw the same proportion, 50% and it was occurring within 1 month. And I think importantly, these are functional measures. When you actually look at the motor milestones that were achieved within the younger group, we actually had children who were calling, as you know, with the type 2 phenotype. They sit, but they do not achieve the ability to be able to stand. We also had 2 children in that younger group who could stand and then 1 who went on to walk. And then when we actually looked at the older group, we had one child that was able to stand with assistance. So I think you can understand why the expert community was quite encouraged to be able to see these effects at such an early point in time. We will continue to follow these children. We will also be exploring a higher dose. And we hope to see further milestone engagement -- improvement. And based on this finding, we do plan to take this data to the FDA and learn from them what would be the next steps to get this administration -- route of administration for older children within the label. The second question about what about greater than 5 years of age or even nusinersen switches, we have a study that's called the REACH study that's planned to be initiated before the end of the year. And this study is intended to catch a prevalent population that we are currently not studying within the ongoing trial population, and that will include type 2 patients who are older. It would also include some nusinersen switches as well.
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Paul Hudson, Novartis AG - CEO of Novartis Pharmaceuticals [137]
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Great. Thanks, Olga. Question?
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Ed Pittman, New Jersey Investment Division - Analyst [138]
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Ed Pittman, New Jersey Investment Division. And just another question on NASH and maybe one other. So maybe you could comment on what your view is of the current FXR agonist that had Phase III data and maybe discuss what possible advantages you see with your own non-bile acid FXR. I was curious what your views were on targeting fibrosis versus liver fat and just maybe talk about that strategy. Any views on endocrines for NASH would also be venturous. And then on separate question on QAW. Talking to some KOLs and just the magnitude of exacerbation reduction that might be seen like a number -- obviously, we have the biologics that have north of 50% reduction in exacerbation. Maybe you could talk just sort of what magnitude would be clinically meaningful for QAW?
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [139]
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Yes. So first on NASH, and then I'll turn it over to Linda. I think what we see in NASH is we want to have the right balance in terms of efficacy with the AE profile. And some of the FXR agonists out there have a significant prurutis is what we've been seeing. And in terms of what we're seeing with the non-bile acid, we are hoping that translates into a more clean adverse event profile, and we await to see our results as we move forward. In terms of the endpoints that we're looking at and whether we're looking at improving fatty -- fat content or is it really around fibrosis. And I think what we've been able to see in some of the results so far is one great improvement in terms of fibrosis. We think we're looking to achieve at least that in terms of our combinations moving forward. I would say for now, it's too early to talk about any of the other mechanisms. And as I said earlier, it's a multipronged approach where we will combine various agents, whether that's the endocrines or whether it's actuated through some of the glucose-lowering agents, it's a known and the best way to move forward and we're going to take a very open approach to advancing in NASH. So Linda, do you...
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Linda Armstrong, Novartis AG - Global Head Respiratory Development Unit [140]
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Yes. So your question was that what do we think is a significant decrease in exacerbation?
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Ed Pittman, New Jersey Investment Division - Analyst [141]
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The number below, say, it's 30% with that, like I've heard that, that would be somewhat disappointing if that's kind of the magnitude benefit, and I was just curious what you thought.
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Linda Armstrong, Novartis AG - Global Head Respiratory Development Unit [142]
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Well, I'll start with our Phase II data. So in Phase II, we had a study where we looked at sputum eosinophils as well as airway eosinophils. It was a placebo-controlled biopsy study. And we think that sputum eosinophils are a good marker of exacerbation reduction. And the biologics as well as corticosteroids have been shown to significantly reduce sputum eosinophils. So we saw in Phase II that fevipiprant decreased sputum eosinophils by 70%. And that was a reduction that is similar to what we see for the anti-IL-5 and the anti-IL-5 receptor antagonist. Our expectation is that we will be in the range of biologics. That's why we're excited are about that. We think it's an oral that has the potential to have biologic efficacy. Our studies are powered around approximately what we see for the lower end of the biologics, so -- for these range.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [143]
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There is a question there, here and then over there. I'll let you decide. You have the mic, so you can decide.
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Unidentified Analyst [144]
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I wanted to ask one about ApoCIII. One, I was wondering if you could just remind what the timing is for go, no-go on that program. And also just in light of what we saw in the REDUCE trial, can you just talk about how you see triglycerides playing into the role of CV risk reduction? And are there any other sort of interesting indications that you're looking at for ApoCIII?
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [145]
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David, I'll turn it over to you for the CV piece.
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David Soergel, Novartis AG - Head of the Cardiovascular, Renal and Metabolic Development Group [146]
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Yes. Sure, yes. So the ApoCIII antisense oligo program is another program where we have an option on that program with Akcea. They are currently conducting a Phase IIb trial, we're awaiting the results of that study. I don't know what they've said publicly with respect to the delivery of those data. But as soon as those data become available, we'll evaluate them and determine whether or not that will be an option we'd be interested in. I think getting to your question around VASCEPA, it's important with respect to how we look at the ApoCIII program. So VASCEPA, for those of you who aren't familiar with it is, is essentially a fish oil. They report that REDUCE-IT last year at ESC and -- or I can't remember which meeting it was. But they showed a very dramatic reduction in cardiovascular outcomes in patients with elevated triglycerides, I think about a 25% reduction in MACE and a reduction of about 30% in cardiovascular death. So very dramatic effect. The interesting thing about the results is that the triglycerides didn't actually decrease that much. So while the mechanism of the drug was thought to be through triglyceride lowering, what we're seeing in terms of the pharmacodynamic effect really didn't explain necessarily all of the benefits that we're seeing in terms of cardiovascular outcomes. That being said, the patient population that they explored in REDUCE-IT would be similar to the patient population that would be from the group that we would approach with other triglyceride-lowering agents like the ApoCIII antisense. So those data from REDUCE-IT will, of course, influence how we look at the ApoCIII antisense program. But the data will bear it out, and we'll come to a decision at that point.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [147]
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Yes, with regards to the cardiovascular portfolio, what I would say is we hold the high bar in terms of making sure that's just not minimal improvement in efficacy. What we've seen with the PCSK9s, as you guys know, 15% efficacy and there's been very minimal traction from patients who've been willing to actually adopt that therapy. So for us, there has to be a really transformational improvement, and we see that with Lp(a) in terms of an independent risk factor. We'll have to assess each of these compounds and assets, particularly in the triglyceride area, as we move forward.
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Unidentified Analyst [148]
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So sorry for all the NASH questions, I guess, post-lunch. But -- so it's in a Phase II study. Have you commented on when, A, you think those results will readout. Second question is, I've heard it described and I'm not confident one way or the other whether FXR agonism and LDL elevation are a on-target sequelae of FXR agonism. And then I had a question on -- in the gene therapy platform maybe with just -- well, and the third question on NASH is, do you subscribe to the notion that you can have a specific anti-fibrotic effect, but if you have an antiinflammatory effect and take away the underlying nidus that inflammation -- chronic inflammation then leads to presumably fibrosis that even an antiinflammatory agent will, presumably at some point through the regeneration of hepatocytes, show an anti-fibrotic effect? I wonder if you could just comment on those. And then I have the AAV question.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [149]
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Okay. We'll come back to the AAV question then. Let's talk a little bit more about NASH and the time lines. What you'll see is, we have a number of different combinations that are reading out. Single-agent FXR agonist, tropifexor, will be reading out at the end of the year as we move forward. The other combinations that we have will actually be staggered throughout. And there's various time points, and I'm not sure that we've disclosed those time points. We're happy to disclose them when we have -- when we're able to share that information with you. Overall, what I would say in terms of the mechanism as you were describing in terms of inflammation and whether if he could actually reverse fibrosis through -- by attacking the inflammation, I think that's an unknown and we don't have a solution to that yet. But we're -- the great thing is we do have various combinations approaching it from an antiinflammatory standpoint as well as decreasing the fatty approach or decreasing glucose sometimes would actually reach that. So we're taking multi approaches to achieving that. Your second question was whether it is an on-target effect in terms of increasing LDL for the FXR agonist. And we believe that we actually don't know exactly why it's increasing LDL. And whether our agent increases LDL, that's something that we'll find out. If it proves that the non-bile acids do not increase LDL, then we'll find out that it's actually not associated with the on-target effect. So we'll find out those results in the near future when we read out. So you've got a question on AAVs?
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Unidentified Analyst [150]
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Yes. In the prior session, right, there was a question just about additional work that would be anticipated, and obviously, the lead program in SMA and what then would be planned. And there was specific emphasis in the answer on AAV9 approaches. And I just wondered if you could speak to the attributes of AAV9 and what one thinks about specifically what that vector as opposed to other AAVs. And how difficult or not it is to conceptualize a platform that has, for example, multiple AAVs and that they would not? So I just wanted to hear a little bit about when you think about AAV9, what are the attributes that come to mind most readily.
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Vasant Narasimhan, Novartis AG - CEO [151]
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Do want to address that, Olga, starting off with AAV9?
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Olga Santiago, AveXis, Inc. - Chief Medical Officer [152]
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Okay, I will. From the AAV9 perspective, we look at it from the possibility that it's not associated with disease, that it has a tropism with respect to the target organ distribution, is it getting where you want to be. And that platform already is in place. So it remains the current focus. So based on that comment, our main focus is going to be in the neuroscience area, neurodegenerative, neuromuscular disease. And you saw in that pipeline presentation that Vas gave earlier in the day, we also were progressing through the AAV9 vector route treatments for Rett Syndrome as well as a SOD1 ALS, which is something that we have in development. It's currently the focus right now, doesn't necessarily mean that we will be excluding other AAVs or vectors. But that will be dependent upon what the disease is and where we need to have the distribution of the transgene.
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Unidentified Analyst [153]
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So it has tropism then for muscle, specifically?
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Olga Santiago, AveXis, Inc. - Chief Medical Officer [154]
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The -- it will be -- but -- yes, yes, but predominantly for neurologic. Yes.
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Danny Bar-Zohar, Novartis AG - Global Head of Neuroscience Development [155]
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Yes, for muscle, just to complement on that, for muscle, I dare to say that there are more potent and more directed AAVs. But for the neuromuscular junction and for the spinal cord, and of course, the upper part of the central nervous system, the AAV9 is the leading one. Apart from being able to administer a gene that -- or in terms of loss of function like in SMA or in terms of overexpression like in other diseases that you want to silence the gene, but you're actually using the AAV9 as the vector to bring it. We are also thinking about using this technology in order to bring drugs to the central nervous system. Because we all know that many monoclonal antibodies that we're using, we want to bring them to the central nervous system, but only 0.1% of them reach this place if you give it intravenously. But with an AAV technology, given this tropism just slips them through a closed blood-brain barrier and just brings them to it, so it's also a drug delivery -- potential drug delivery approach just to complement it.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [156]
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There's a question here and there.
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Unidentified Participant [157]
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Just a follow-up on that. There was DMD trial with an AAV9 vector and the reported complement activation, but they didn't have hypothesis or what may have led to that. Do you all have any thoughts on that mechanism and why it may have occurred?
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [158]
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I'm not aware.
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Olga Santiago, AveXis, Inc. - Chief Medical Officer [159]
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I'm not aware of that. Danny?
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Danny Bar-Zohar, Novartis AG - Global Head of Neuroscience Development [160]
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Look, it's very hard to comment on other sponsors' studies. The immune response -- the activation of the immune response as a consequence of AAV9 administration is something that we're all well aware of. We characterize it quite well. I'm not saying that this is due to the same complement activation. We're quite sure that this is not the case with Zolgensma. But still there's a lot of research that we, particularly in this campus, we're doing in order to characterize the immune response to AAV9, because we know that there's an immune response, but we actually don't know to which epitope or whatever. So apart from just creating another great vector for a huge unmet need, we need to invest quite a lot in understanding this immune response and how to address that in case we need to.
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Vincent Chen, Sanford C. Bernstein & Co., LLC., Research Division - VP [161]
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I am Vicent Chen from Bernstein. A couple of follow-ups on to the earlier questions, one on Zolgensma and one on Lp(a). So first on Zolgensma, I guess, how confident are you that the STRONG study will be sufficient to demonstrate convincing efficacy in the Type 2/3 population? We've heard from a number of our experts that the data is certainly very, very encouraging. But given the heterogeneity in that patient population, there's a risk that may be hard to show a truly convincing effect without a placebo-controlled trial. And then I guess, the second follow-up on a separate topic of Lp(a). I guess how do you think about the future treatment paradigm here, assuming approval of the ASO? Will this be used in all patients with higher than or normal Lp(a) or above a certain range? Or is this going to be a matter of you've got a patient who has high LDL and high risk, they first get statin therapy and then you take a look at of the remaining lipoprotein what portion is Lp(a) and then maybe the PCSK9, maybe it's ASO targeting Lp(a)?
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [162]
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Olga, do you want to start on Zolgensma.
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Olga Santiago, AveXis, Inc. - Chief Medical Officer [163]
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With respect to STRONG, certainly, Type 2 SMA is a more heterogeneous, and if you will, indolent manifestation of the disease. And when you have that, it is more difficult to detect a treatment effect and to be able to dissect that sometimes -- in fact, most of the time, it won't be easier to do that within a controlled trial framework. With the STRONG data, we are using an intrathecal route of administration. We know that we certainly are addressing the underlying cause of the SMA disease, and that is inherent across all of the different phenotypes. So there isn't any reason to expect that it wouldn't be effective. It's for us to demonstrate what would be the appropriate dose using through this route of intrathecal administration. And we are, I think, encouraged, because we're seeing these effects so early. We're just looking at a mean follow-up of 6 months. We're already seeing magnitudes of effect that were similar to nusinersen in the CHERISH in 1 month. And please remember, where they saw their findings were in 15 months. So it took a lot longer. And what they saw in terms of the child that walked was at 15 months, and we're seeing it at 6 months. So clearly, it is early days, but I think it's a pivot point upon which we need to return to the regulatory agencies and ask them with time and with some longer follow-up during the course of the year whether they would consider this sufficient with changing the route of administration for Zolgensma in the older group.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [164]
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Thanks, Olga. David?
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David Soergel, Novartis AG - Head of the Cardiovascular, Renal and Metabolic Development Group [165]
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Yes, so with respect to the Lp(a) as a treatment paradigm, so let's just -- I guess, let's talk about first what we're doing in the trial. So it's a secondary prevention trial. So these will be patients who've had an event already, if they had a heart attack or have established cardiovascular disease. In those patients, optimizing statin therapy as the first approach is going to be the evidence-based approach, right? So you're going to maximize statin therapy in everybody. The interesting thing is when you maximize statin therapy in patients who have elevated Lp(a), you don't change the risk, right? So you haven't changed their Lp(a)-related risk at all. So what we need to do is start encouraging the measurement of Lp(a) and actually having folks understand what their detailed risk is after they have an event. We see a lot of this already happening with the Lp(a) foundation that is advocating measurement of Lp(a) more commonly. And I think the reasons -- there are actually about 3 million measurements of Lp(a) in the U.S. in last year, I think. That's despite not having a therapeutic option for those patients. So I think once we have a therapeutic option, the measurement of that risk factors become much more commonplace, and I think we're already seeing advocacy for that to happen. So I think once you maximize statin therapy, the next step would be -- if you have elevated Lp(a) would be to go to TQJ230. PCSK9 inhibitors don't really change Lp(a) substantially, right? So when you get to the upper levels of Lp(a) concentrations, PCSK9 inhibitors have about a 15% effect, which is not that much in that population.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [166]
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Yes, it's mid-teens to high teens at most so -- with PCSK9. So we may have time for one more question if there's anymore questions in the room?
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Holger Blum, BZ Bank Aktiengesellschaft, Research Division - Research Analyst [167]
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Holger Blum, Patinex. Just a question on one of the slides from this morning from Vas where he had a few transformational Phase II pipeline efforts. I wonder whether you can shed a bit more light on what you're doing currently in chronic kidney disease, renal disease. And also, the cartilage regeneration program, where you are in terms of trial size, design, targets and so on?
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [168]
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Yes, these are a couple of programs that we certainly are excited about as the next generation of assets beyond near-term pipeline. Maybe I'll ask David to comment on kidney disease and kidney failure.
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David Soergel, Novartis AG - Head of the Cardiovascular, Renal and Metabolic Development Group [169]
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Yes, yes. So there's a huge unmet medical need in chronic kidney disease. There's been very little advancement in the treatment of many types of chronic kidney disease over time. We have a great asset in the pipeline, LNP023. It's complement factor B inhibitor. This medicine is being targeted to patients who have C3 glomerulopathy, so a relatively rare, but severe form of kidney disease; IgA nephropathy, which is a more common and membranous nephropathy. All these renal diseases are -- have as one of their drivers the complement pathway, and we think that LNP could be a transformational product for those individuals. We're also exploring use of LNP in paroxysmal nocturnal hemoglobinuria in Phase II right now. So again, an orally activate agent for those patients, I think, would be a welcome thing as well.
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [170]
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Yes, that's one more area that we're really approaching is, because these patients, the ones with renal failure, are the fairly young patients. They are like 20 to 50 years old. So -- and once they actually develop these nephropathies, there's really no treatment for disease modification. So what happens with these patients is they actually progress to end-stage renal disease and require dialysis, which is really unfortunate, given the young age they're at. And hopefully with the solution, this would be disease modifying for that patient population. In terms of cartilage regeneration, the approach that we're taking is still fairly early. What we know is that this is a huge unmet need, osteoarthritis. And osteoarthritis is multifactorial, but one of those areas, and we believe, is based on cartilage damage. And if we could regenerate that cartilage, then we would be able to impact many patients. I would say it's still early days, because we're working with the agency on what endpoint we would choose for that. So I would say it's still early days, because we have some work to do still. But when we go around the hallways either at NIBR or within the Basel campus and we ask the employees how many people will be willing to take one of these drugs, everyone raises their hand, because they've all been out jogging and looking for a solution to decrease their pain. So we're hopeful that this will advance quickly, but will require some work.
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Unidentified Analyst [171]
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And is there Just a quick follow-up to the...
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John Tsai, Novartis AG - Head of Global Drug Development & Chief Medical Officer [172]
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Yes, sure.
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Unidentified Analyst [173]
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David, you just contrast the targets of B as in boy and the biology versus D as an David, factor D inhibition and what your target may potentially provide -- or the targeting of that may provide as opposed to factor D?
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David Lennon, AveXis, Inc. - President [174]
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Yes, I think the biggest -- one of the biggest differentiators of LNP023 versus other things in the pipeline is its oral bioavailability. So this would be an orally active twice-a-day administered product that targets the alternate complement pathway. So one of the advantages of targeting factor B is you also impact the amplification loop of the pathway. So that could then have potential therapeutic impacts compared to what you'd see with factor D, for example.
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Samir Shah, Novartis AG - Global Head of IR [175]
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Well, great. Thanks a lot for questions, and we look forward to engaging with you again next year at Meet Novartis Management. Thank you.
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Vasant Narasimhan, Novartis AG - CEO [176]
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Thank you.
==============================
Presentation
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [1]
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All right. Good afternoon and thank you for spending these days with us here at our global research headquarters in Cambridge, Massachusetts. I'm Jay Bradner, the President of the Novartis Institutes for Biomedical Research or NIBR. This is the home of the innovation of the internal pipeline. We are responsible from concept to the inventive moments, the optimization and ultimately, the first human clinical investigation of the Novartis pipeline through to what we call proof of concept. So concept to proof of concept.
But with background, I'm a cancer doctor and a chemical biologist, joined by 3 of our great leaders from the research organization. If you'd please introduce yourselves.
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Glenn Dranoff, Novartis Institute for Biomedical Research - Head of Immuno-oncology [2]
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I'm Glenn Dranoff, a cancer doctor as well, and I lead the immuno-oncology efforts.
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Lilli Petruzzelli, Novartis AG - Vice President Oncology Translational Medicine [3]
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I'm Lilli Petruzzelli. I'm actually a hematologist by training, and I lead the early clinical development programs in oncology.
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Evan Beckman, Novartis Institute for Biomedical Research - Global Head of Translational Medicine [4]
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Hi, everyone. I'm Evan Beckman, rheumatologist by background. I lead translational medicine, which is our early development group in NIBR and the early clinical trials for non-oncology or gen meds.
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Franck Leveiller, Alcon, Inc. - Global Head R&D [5]
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So we'd love to structure this time responsive to your questions, but I thought that I'd provide some framing comments on where we are right now here at NIBR. We're in year 3 of a 5-year master strategic plan that Vas and I co-wrote when he was leading drug development. And it's fair to say with Vas now as CEO, the plan is well resourced and moving really, really quickly. All kidding aside, on the heels of the [Gunect padnecks free] about 3 years ago, we had an opportunity to make some changes. And some of these were structural, making our organization much more efficient adopting a matrix style of research and then cultural, the commensurate change to a much more engaged and collaborative relationship within NIBR and also between NIBR and global drug development, the colleagues that you just met with moments ago.
In the third year, last year, we went through a ruthless prioritization exercise where we decreased the scope of our research programs quite substantially from 430 drug discovery programs to 340, a 30% drop. We did this for 2 reasons, both of which were highly strategic. The first is that we didn't want to innovate medicines in spaces where Novartis did not intend to commercialize them ultimately. And we took tough choices in particularly around infectious diseases, which has been very challenging for our industry as well as (inaudible) oncology and wound healing. But truthfully, all of our disease areas took reductions in our programs for the second reason. And that was to be more competitive in the places where we play. We're surrounded here in Cambridge right now by 500 biotech companies, and that's what keeps me up at night. We resource as well on our internal drug discovery programs as all of those highly focused in resource, and these days, maybe even over-resourced, biotech companies. I know we're doing the right thing about patients to be under resourcing these programs. So we went through a prioritization exercise where we over indexed on alignment with our global organization, about 80-20. We think 20% of our research should be in white spaces. We wanted to be sure that in those therapeutic platforms or paradigms that Vas shared with you earlier that we were investing in platforms that could give us multiple therapeutics out of each to create a true comparative advantage and expertise in certain areas. And then finally, do we have people on our leadership teams that really were committed to working collaboratively together. It seems like a small thing, but the alignment that we now enjoy with our global drug development organization allows technologies to move much, much faster from proof of concept into Phase III clinical trials. Anyway, we feel that these framing thoughts would take any questions about what we're working on today, what we're excited about or curiosities that ever risen for all of you. Please.
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Unidentified Participant [6]
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I guess the microphone came to me, sorry. Jay, maybe just from a high-level kind of the yin and yang of what area do you really believe you're world-class and are most excited where you think the unmet medical need is very high and there's a very significant opportunity for the company to take advantage of that? And then on the flip side, where would -- do you feel like you're least well positioned where you see the science moving at a very broad clip and the unmet medical need is high? So really, just a mere view of where best positioned and where you would like to be best positioned, where you're least positioned currently.
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [7]
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No. Thanks. I've not been asked the question before. I don't think of our research portfolio in quite that way. I think within each of our domains of innovation, where do we have programs or ideas or capabilities that are truly world-class and where are we under developed. And after portfolio review, we're not really investing in areas where we lack a comparative advantage, but I'll try to answer your question. I believe that we have and have had for 30 years the leading immunology discovery unit in the industry. From work going back to calcineurin modulation, discovery of the target rapamycin, solid organ transplantation all the way through to canakinumab, Ilaris and Cosentyx today. I think our immunology group based in Basel is truly world-class. I think they define the standard in immunologic drug discovery. This is not to say that great medicines for autoimmune and inflammatory diseases aren't made by other companies, but the portfolio, which we just had the pleasure of reviewing in Basel last week, remains as fresh and exciting as -- and as innovative as ever before. We've taken decisions to wind down research in immunosuppression of B- and T-cell function and take on really challenging opportunities like engendering immune tolerance to really go for the root cause of disease rather than a generation of better Band-Aids for inflammatory condition. If you limit me to just one, I'd stop there but I don't want to because I think we're also world-class in oncology-targeted therapy. The pendulum of investment in cancer research swung violently towards immuno-oncology between 2013 and the present moment. And the pendulum, I think, now is swinging back quite towards the middle. Bringing Glenn on has allowed us in immuno-oncology to find targets using more modern discovery approaches that I think will be really differentiating over the next few years. But over the last 10 years, we have had a continued significant investment in identifying synthetic lethalities in cancer cells and developing therapies targeted to them, in understanding cell autonomous processes and developing truly first-in-class and sometimes only-in-class medicines like our SHP2 antagonist to block receptor tyrosine-kinase signaling and perhaps even immuno-oncology therapy. I think these are 2 very strong areas. I mean we are also the best in discovery unit in ophthalmology if you could even measure best in that dimension, but I'll pick those 2.
Where are we underperforming? The truth is the world is underperforming in neuroscience. The burden of neurodegenerative diseases today is so profound. It's going to be $1 trillion of health care spend all told. We have an aging population here as in China and globally. And we are so ill-equipped to address the perils of the most common neurodegenerative disease. We lack even the hypothesis beyond amyloid and other misfolded proteins. And so we are taking a generational strategy to neurodegenerative diseases building the models to ask the questions, to find the targets, to test the molecules and ultimately, advance medicines in these diseases. It's not for the faint of heart, but you've seen the big bets Novartis has taken like the Banner study to potentially prevent the onset of Alzheimer's disease to a group I lead in targeted protein degradation. Could we make molecules that destroy these proteins, [Gleevec] relation? The deals that we've done recently like IFM Tre in the inflammasome to think about maybe neural inflammation as a better hypothesis than misfolded protein. The world underperforms in neurodegenerative disease biology. And we're working hard to respond, but it is very challenging. So that's the yin -- ying and the yang. Please?
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [8]
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Florent Cespedes from Societe Generale. Quick questions. So you mentioned that you're the leading -- you're a leading company in inflammation. Could you elaborate a bit on your -- the 2 projects IC on atopic dermatitis, ZPL389 and MOR106? If you could give us some color on this? Ligelizumab, as far as I remember, it's kind of a [zueller-like] product, which failed in [CVRS map] if you can refresh my memory. And if it's correct, could you share with us why you believe that hematology in this product would show some efficacy? And I'm just curious, I would be interested to have your view on your projects on COPD. It's the QBW251. What's the mechanism of action and what's the -- let's say, what kind of positioning you believe you could have with this drug?
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [9]
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As Evan leads general medicines, I'll let Evan Beckman answer.
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Evan Beckman, Novartis Institute for Biomedical Research - Global Head of Translational Medicine [10]
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I mean I caught some but not all. So I heard you about ZPL, which is an H4 antagonist. This product we in-licensed. It had some early clinical data in atopic dermatitis, which we think is a really big unmet need that's just getting starting to get addressed today. The data looked very compelling. It's oral. It looks like a very safe drug. So we're hoping that this will continue in our larger studies as we do larger dose finding studies and be either biologic-like efficacy or even a little bit less but perhaps get used before biologics are used in that disease. So we think that's an important area, especially with our presence in immuno dermatology today, right, with Cosentyx in psoriasis where -- with Xolair in urticaria, and atopic dermatitis is a big area there. We're very bullish about that product, and I think it's very interesting.
The last one you mentioned was QBW251 because I did miss 2 in the middle. But I can start with that one because I think that sort of is a great -- that's a great illustration of what we try to do in this kind of translational medicine approach to early development where we take molecules with a particular pathway, think about where they might be used. So the insights there, right, are from cystic fibrosis with the CFDR pathway. And this is a molecule that helps modify that, which leads to tougher secretions and other things. So this really helps the health, right, of the lung dynamics. And Vertex has a great space there. We were trying to compete there, but we've got proof of principle with that drug in cystic fibrosis. But then our group really tried to think where else that biology might be appropriate and really think about the larger areas of lung diseases, bronchiectasis, COPD, where similar issues actually arise in these lung tissues. So we did some translational work and then we did a proof-of-concept study. And we saw some interesting data, and our colleagues in drug development now are doing a larger Phase II study. And we'll see if the insights that we had in the smaller study pay out. But imagine going from a fundamental pathway, genetic validated in a small disease and then applying that to much larger populations in the -- and that's a lot of what we do.
The other two, I apologize. I didn't...
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [11]
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Ligelizumab, the thoughts in (inaudible).
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Evan Beckman, Novartis Institute for Biomedical Research - Global Head of Translational Medicine [12]
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Yes. Eculizumab is the CD40 monoclonal antibodies, CFZ533? Is this the one?
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [13]
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No. The hematologies from (inaudible) urticaria...
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Evan Beckman, Novartis Institute for Biomedical Research - Global Head of Translational Medicine [14]
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Oh, that's QGE maybe. Yes? So that's the higher affinity -- it's a higher affinity IgE. Right. No. That's -- oh, okay. Now I understand your question. So certainly, we have Xolair, which is anti-IgE molecule. And then QGE is a much higher potency, maybe twentyfold higher potency molecule. The thought certainly was that it could maybe lead to more efficacy, certainly be more convenient dosing. You're right. We did do an asthma study that was a natural place. And it did fail. And the -- however, we still believe it's very potent in -- anti-IgE in urticaria. The effect that we saw was all there. We think this will work very well there. Why? We actually think -- we went deep on this. And we actually think the epitopes are a little bit different relating to binding disparities of that high- and low-affinity receptors. And it could signal that perhaps some other biologies such as B-cell biology may be important for Xolair's efficacy, which this may or may not have. But we still believe it will be very effective in urticaria.
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Unidentified Participant [15]
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(inaudible) to your comments about being world class in a couple of areas, and this is not meant to be an antagonistic question, but I...
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [16]
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I love a question that starts with this is not meant to be...
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Unidentified Participant [17]
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(inaudible)
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [18]
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I won't.
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Unidentified Participant [19]
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Why would you comment about that [GTMR] and say, okay, those are really meaningful medicines right now and you don't really have a top place there. Is this -- I'm trying to understand how Xolair is the exact opposite of what is a world-class (inaudible).
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [20]
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Yes. No. It's a fair question. And for those in the webcast who can't hear, the question was on the one hand, I say that we have a leading discovery capability in targeted therapy. And on the other hand, we don't have the leading EGFR or ALK or RET tyrosine-kinase inhibitors commercially. And I guess what I would say is that in a good way for cancer patients, it's very competitive right now to respond to the cues given by cancer genome sequencing. That information is immediately actionable. And actually, on the heels of our successful development of the drug Gleevec, the world now knows. The secret is out that the discovery and optimization of highly selective, highly -- kinase inhibitors is quite facile these days. I don't believe it's possible for a company to dominate a domain of drug discovery. I just think those days are over. And so I believe that we can be and can become further of -- true leader in cancer-targeted therapy and not make all the best cancer-targeted therapies that just seems highly unrealistic. I wasn't here at the time, but I think that the decision taken to do the GSK deal and bring in very effective targeted cancer therapies even when we had some of those targets covered internally was extremely forward-thinking as to do deals to contribute to worldwide market access to Jakavi and to extend the use of that molecule through further insights.
But as we're here to talk about research in early drug development, I look at the medicines that we have bubbling up through NIBR oncology today, and I see new unrecognized insights into synthetic lethality in cancer with development candidates coming in, in the next 1 to 2 years. I seek first directed targeted therapies to unstructured and undruggable transcription factors. These aren't fourth-generation androgen receptor degraders. These are first-in-class, truly exemplary molecules that -- like DKY709, it's listed in your books. It's one of our new targeted cancer drugs that binds and degrades I mean otherwise undruggable target. I think of our storied success in developing medicines that target the MAP Kinase Pathway and associated factors, ERK inhibitors, MEK inhibitors, a first cRAF inhibitor and of course, BRAF inhibition, it is, taken together, a very compelling group of assets. That is not to say it's easy to find the exit vector for all of these medicines because most of them will be most effective in combination and because the landscape is changing really quickly. Some, like RET, we chose not to enter into because the commercial forecast was not commensurate with a company of our scale and size. Some of those decisions were taken then proactively and thoughtfully. And others, we worked hard in the EGFR space but ultimately didn't make a molecule that carried the day. And it's humbling to make cancer medicines. But as a cancer actor, I feel great about so many companies making so many important drugs.
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Chris Shibutani, Cowen and Company, LLC, Research Division - MD & Senior Research Analyst [21]
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Chris Shibutani from Cowen. In the immuno-oncology space, what kind of -- in this post-checkpoint inhibitor PD-1, what comes next? [I'm sure] the industry has committed tremendous resources and efforts and thousands upon trials in combinations. In the past 12 months, perhaps the industry and investors have gone through this phase of hope, hype, deflation and kind of on way and where do we go from next? So my question to you is, where do you believe we will go next? I think we had Engelman before make some broad commentary. Curious to know yours is. And then similarly, from Dr. Dranoff, we had just interesting comments to make over at lunch in terms of where we are and why you may believe about and how we're going to get to that next phase, whether it's preclinical versus clinical work. But what's next for immuno-oncology? Where is the intention?
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [22]
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It's a really good question. Thank you. The field is rightly anxious about what comes after these first 2 checkpoint thereapies. Glenn, I know you have strong opinions on this. What's your top 5?
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Glenn Dranoff, Novartis Institute for Biomedical Research - Head of Immuno-oncology [23]
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Well, I think it's worth pointing out that if you look at the history of cancer immunotherapy, this cycle of enthusiasm followed by skepticism has actually been characteristic. And so I think if you actually filter out that noise, you see a substantive arc of progress. Probably, today will be a fair estimate that half of all patients with advanced cancer being treated with some form of immunotherapy. We've seen during the past year the standard of care for kidney cancer changed for the first time in decades. It's now a combination of an immunotherapy and a targeted therapy. And I think that finding gives us confidence that there's complementarity between immunotherapy and targeted therapies that hasn't been exploited. In that context, we're very optimistic about the COMBI-i trial as potentially being the first registration for our PD-1 checkpoint. There's very strong scientific rationale for coupling inhibition of MAP Kinase signaling with immunotherapy in addition to the key roles of the Map Kinase Pathway in promoting tumor cell survival and growth. It also remodels the tumor micro environment to make it more immunosuppressive. So we think that a marrying of targeted therapy and immunotherapy is quite attractive. We're excited about the potential for cMET inhibition to expand the opportunities for that agent beyond just the tumor cells where there are mutations or amplifications of the gene.
I think one of the other themes that comes out of recent work in immunotherapy is that as these agents are advanced to earlier stages of disease, the impact is quite striking. Neoadjuvant studies now in a number of tumor types reveal that very modest amounts of immunotherapy are showing very substantive clinical benefits. So I would anticipate over the next chunk of time, you're going to see these PD-1-based therapies moving to earlier lines of therapy. And that is consistent with our thinking about how best to position IL-1 beta blockade. The idea of tumor promoting inflammation has been around for a long time, but hasn't yet had a definitive demonstration of its truth. And the CANTOS trial provides very encouraging evidence that inhibition of IL-1 beta led to almost an 80% reduction in lung cancer mortality, which is unprecedented in any cancer therapeutic. So the idea of testing IL-1 beta blockade in the adjuvant setting as is being done in one of the canopy trials is a very exciting possibility and can highlight potentially the value of therapy early on.
Now it's also important to point out that I think the whole cancer problem has changed in the last 3 or 4 years with the widespread adoption of PD-1 therapy. All the patients who respond to PD-1 are those who have already initiated an immune response against their tumor and that they're being blunted at the very end stage.
So all of the patients who you all are reading about that are coming on early stage trials and late-stage cancer patients, those are almost all uniformly patients who don't have any pre-existing immunity. And so a lot of the therapies that were tested were based on trying to amplify an existing immune response, but they actually haven't been tested in the proper setting for that question to be definitively answered. But also highlights that the major challenge now is to identify ways to initiate the immune response. And I think that the investment we have in radionuclide therapy is really an interesting aspect because that therapy causes DNA damage, which is one of the major ways that cells -- the immune system to cell stress and potentially damage. So by bringing together agents that haven't been looked at yet in combination as well as from innovating things that we're not quite ready to present, we think that we're taking a different tack to expand the immune recognition of tumors in ways that the current approach is largely or not.
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Unidentified Participant [24]
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So a quick question on the canakinumab and the lung -- the data from CANTOS. My understanding is that there was a strong signal in lung cancer specifically, and for a cancer death generally there was a trend towards benefit, but it wasn't statistically -- the 95% confidence interval has a ratio overlap with, was above 1, I think, for the top end. Is there something about lung cancer specifically that IL-1 beta mechanism applies to that as it's not necessarily applicable outside of lung? Or what is your thinking there about how specific the mechanism is to lung?
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Glenn Dranoff, Novartis Institute for Biomedical Research - Head of Immuno-oncology [25]
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Well, it's actually -- it's quite interesting. If you exclude all of the lung cancer deaths, there is a dose-dependent reduction in all cancer mortality that has a statistical significance of 0.06. So it is just beyond what the standard statistical cutoff is. But given that the most common tumors that would originate in that patient population who were really enriched for either former or ongoing smokers would be lung cancer. There weren't enough events of other tumor types to establish a more powerful statistical test. However, it's very interesting that that's almost where the trend was. And if you couple that finding to epidemiologic studies, for example, from the Nurses' Health Study where there are very large cohorts of patients who have been followed where there is a striking inverse association between the use of nonsteroidal anti-inflammatory drugs and the incidence of breast cancer, ovarian cancer, colon cancer, head and neck cancer. It raises the idea that this unresolved inflammation may be well beyond just lung cancer. So part of the excitement around the inflammasome and the multiple ways of targeting this pathway are, in part, will allow exploration of more tumor types depending on how the data for lung cancer play out.
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Unidentified Participant [26]
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Jay, you talked about 20% of your efforts at your levels team being on white spaces. Can you comment about your favorite potential whitespace realms.
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [27]
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Glad to, and love to hear from both of you and [Lilly Evan]. So we, as it turns out, as the company has been pretty good at white spaces. You might know that some of our biggest marketed products are now prescribed for reasons wholly different than what they were invented for. Gilenya in MS was supposed to be a solid organ transplant drug. Cosentyx was supposed to be a rheumatoid arthritis drug when it was invented. Actually Gleevec itself was an experiment in kinase chemical biology for protein kinase A. This has been a strength of the company that follows the science to learn about the molecule in early clinical investigation then pivot it towards its endpoint, its definitive use. And so we've tried to really organize around that much earlier in the process that once a molecule is in Phase I and so we have disease areas that are long-standing committed interests in, say, oncology, cardiovascular, ophthalmology, neuroscience, et cetera. We have a disease area called Disease Area X. And this is a group that will maybe not for 10 years but for a blush of time, provide immediate momentum around the concept that emerges from our chemical and biotherapeutic equity. White spaces, over the last few years, have included liver diseases. We have no meaningful commercial footprint in hepatology. But scientists at our San Diego site invented what we think is a truly remarkable FXR agonist. And as we move this molecule through provocative proof-of-concept studies in a couple of indications, it's harder to gather real momentum and actually driven by the enthusiasm of our commercial unit and global drug development, it now moves out of the white space and into the 80%. So liver disease remains an area of committed whitespace for us. A second one is kidney disease. We like to call kidney, the new liver, because molecules that we made in our immunology group for the complement factor -- for the complement pathway, including this molecule that you heard about this morning that targets complement factor B. These molecules were then studied in a variety of different disease models across NIBR and big opportunities were identified in hematology and in nephrology. And so bringing these medicines forward in complement mediated kidney diseases as they've been studied in early proof-of-concept studies more broadly was a whitespace activity. We didn't have kidney models in all of the preclinical tools needed to advance these compounds. And so DAX built those capabilities and now you hear our CEO presented even this morning. So liver and kidney and certain aspects of the non-hematology are 3 white spaces where we plan to work. In order to do that work, we have to make trade-offs and we exited the white spaces. As I mentioned earlier, wound healing and otolaryngology. So DAX is kind of like our sandbox where we can bring in dyed-in-the-wool experts of a given area to do focused research for a span of time. And sometimes, these white spaces themselves turn into disease areas like musculoskeletal diseases where we, for a long time, we're a very important company in osteoporosis through bisphosphonates. But with that unmet need well addressed, we pivoted to study muscle and tendon and cartilage with regenerative medicine and regenerative biology strategy. And that whitespace has blossomed now into a more long-standing disease area called MSD. We by the way have whitespace technology platforms, too. And what we're now able to do in gene therapy through AveXis was a whitespace investment in adeno-associated viral therapy, I am going back about 5 years. So not all these white spaces go forward but we find that the breadth of Novartis' therapeutic areas is a fertile sandbox to find new opportunities. Please.
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Unidentified Participant [28]
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Just wondering if you could comment specifically on digital therapeutics, is one of the platforms you show here? What opportunities you're seeing? What role do you think Novartis can play? Where do you see that market going?
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [29]
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Gladly. As you know, we have a collaboration with Pear Therapeutics. And that collaboration came in through translational medicine, Joris van Dam. Evan, perhaps you could talk to it?
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Evan Beckman, Novartis Institute for Biomedical Research - Global Head of Translational Medicine [30]
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It started actually from a few years ago. Just -- we were -- I believe Tim was actually on an off-site and just challenging us as an industry where was it going, what's the possible disruptions. And this was one of the topics that came up which was, can we challenge ourselves in our very definition of what is a medicine. So it's been a pill, it's always been protein, now it's a gene therapy, but could it be digital application. So we did spend some time. I had a very enthusiastic person who threw himself into it and talked to all of the disease areas and probably surveyed, I don't know, 100 or 200 companies in the area. And of course, there are many of these technologies that are more consumer application with a handful of companies who are thinking about this in a different way, which was more getting a license and approval, both for safety and efficacy. And that had never been done before and Pear Therapeutics, I think, bubbled up to our list. And in neurology, more psychology-type applications were the easiest to think at first. Really following places where cognitive behavioral therapy might apply. And you can think about digitizing that into an app. It's hard to get all the therapists and having that kind of work done on an app might be able to work. So we started to work with them. We were really impressed with just the way they thought about things. While we were talking with them came out with the first registered rate approval for addiction. And we entered into a collaboration with them really trying to marry up areas that we felt we might have drugs in. So we really are -- to be honest, we're a bit tentative. We don't know if this is -- can these be blockbusters, will all these be small plays, how do you market it, how do you commercialize it? It's a little -- we're learning. But the great thing is that we decided to dive in and we started to do it first in areas we thought we would be. We're working with them right now on application for schizophrenia, which we don't actually have a drug for but was the one that they were right ready for and what we're really interested in is some application, the impression behind that, which we also think could work well with CBT and would be complementary to many of our diseases in the neuroscience area we are interested in. Things like multiple sclerosis, so depression associated with multiple sclerosis and with other diseases. So I would say, it's early days. And we're trying to learn as we go along. But I think the great thing is that we're able to challenge ourselves with our very definitions. And it's not a huge step for us but it's something that we'll figure out how it works. And it fits in also with other areas that we're into which is trying to measure things in patients in different ways, right? So measuring with sensors, with applications, trying to be a lot more precise in measurements rather than some 10-point scale somebody draws a line on. We've had experience with trying to do things, 6-minute walk test around the world. And as you walk into different hospitals and doctors offices, their 6-minute walk path happens to be around the corner and maybe there is a step along the way, and it's motivation for the patients. So wouldn't it be more interesting if you could get higher resolution Fitbit's, medical grade and be able to really measure that and maybe life space if you could add -- if you could add a GPS to that. Wouldn't it be interesting to know that not only did you walk more but someone who is confined to their apartment with a therapy can now go down the block and maybe to the grocery store expanding sort of a life space. So we're interested in those for mobility, for neuroscience, and others, so it's all a bit connected.
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Florent Cespedes, Societe Generale Cross Asset Research - Senior Equity Analyst [31]
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Florent Cespedes, Societe Generale again, 2 quick questions on the quite depth area of neuroscience. Could you share with us your view on your Alzheimer product, the CNP 520. And also, more general question on multiple sclerosis, which are, in our view, let's say, the next attractive targets and how are you working on some of these new pathways that could change the way the diseases -- patient admitted with the disease?
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James E. Bradner, Novartis AG - President of Novartis Institutes for Biomedical Research [32]
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Thank you. CNP 520 is inhibitor of enzyme compound called BACE, which is very much and actually genetically linked to the pathogenesis of Alzheimer's disease through the processing of the A beta protein that becomes aggregated and creates neuraoinflammatory responses and interferes with many vital functions of the brain. We and others hypothesized that inhibition of BACE might recapitulate the protective alleles that some patients who have genetic risks for Alzheimer's posses that can compensate and limit the development of Alzheimer's disease. It's been well learned by our industry now that by the time Alzheimer's disease is symptomatically manifested, it may be hard to expect inhibition of this upstream pathway to matter symptomatically or for the lifespan of those affected. The study that we're doing originated many years ago is very ambitious. It's to take patients who are asymptomatic, people who are asymptomatic but who have allelic risk for developing Alzheimer's disease because of APOE genetic alterations. And it's to treat them with a base inhibitor before the onset of any symptoms and see if we can delay the time on to the development of early Alzheimer's disease. A company like ours should do big experiments in prevention whether it's cardiovascular risk reduction or Alzheimer disease prevention, these are experiments that biotech companies just cannot do in scope and scale. And so I'm proud that we're doing this work. But it is complicated and challenging because as many of our peer pharmaceutical companies have read out negative trials, we're left to wonder is our molecule, which has best-in-class properties and a high degree of blood-brain barrier permeability a better molecule? Is our design more effective to treat not prodromal early symptomatic patients but asymptomatic patients more forward thinking or will this inevitably results as others have before us. And so our global drug development group, John Tsai, that you just met with and Danny Bar-Zohar, are leading this program. We now undertake this more collaboratively with the Banner Foundation and also with Amgen. And this study is open and continues to progress. And we're hopeful that interim analysis and ultimate analysis will demonstrate that this hypothesis so challenging with symptomatic disease will prove relevant for the prevention of disease. But I freely admit that the weight of evidence out there and the literature today challenges the fundamental assumptions. And so it's our job then to imagine what's next. The doomsday scenario is that this hypothesis prevalent in the literature cannot help patients through BACE. And we now focus more on small molecular approaches in neuro regeneration that will be blood-brain barrier permeant that will take out the pathogenic protein itself altogether, not upstream processing either through targeted protein degradation or interference by directly contacting RNA. These are high-hanging fruit but active areas of investigation. And secondarily, to imagine while there's nothing we can do about this concrete, this protein in the brain, can we limit the neuro-inflammatory response to that protein. And there, we have innovated, first, we believe blood-brain barrier permeable and NLRP3 antagonist to target microglial cell inflammation. Now to multiple sclerosis. The discovery here in Novartis that the S1P receptors will prove so important to the progression of demyelinating lesions and symptoms of patients now with relapse as well as some secondary progressive multiple sclerosis has had a profound benefit to a subset of patients, the neuro patients. We're very interested to understand the root cause of this disease. What are the fundamental immunologic mechanisms that drive demyelination and can we engender tolerance within the immune system to those events. Our Basel BACE group is hard at work on this and has undertaken a collaborative model that invokes a lot of academic scientists. Secondarily, there is symptoms associated with multiple sclerosis that are quite debilitating like fatigue. And we work on very safe, we hope, approaches to combat the feedback that we're getting from patient communities. Even those benefiting from Gilenya and hopefully, someday soon, Mayzent, to be more responsive to symptoms that these molecules may not address. And then lastly, and most provocatively, we have a couple of molecules that in experimental models lead to remyelination. Some of these molecules, we have a molecular target identified, others of them are phenotypically identified and for many years, in San Diego, Basel and Cambridge we've been a real leader in cell-based or phenotypic screening. And we just had one of our governance boards a week ago approving the advance of one of these molecules that may lead to a remyelination of lesions in the brain of patients with multiple sclerosis. As these are research projects, it's very early days. But we must do more than just immune modulation and B cell depletion. We have to get to the root cause of the disease and compensatory mechanisms for the symptoms of the underlying biology. I'm sorry, we're out of time. We'll all be at the APRO for those of you here in person, and for those on the webcast, thank you for tuning in.
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