Novartis AG (NVS) Q2 2022 Earnings Call Transcript

Novartis AG  (NYSE: NVS) Q2 2022 earnings call dated Jul. 19, 2022

Corporate Participants:

Samir Shah — Global Head of Investor Relations

Vasant (Vas) Narasimhan — Chief Executive Officer

Harry Kirsch — Chief Financial Officer

Analysts:

Matthew Weston — Credit Suisse — Analyst

Tim Anderson — Wolfe Research — Analyst

Richard Vosser — JPMorgan — Analyst

Emmanuel Papadakis — Deutsche Bank — Analyst

Graham Parry — Bank of America Merrill Lynch — Analyst

Steve Scala — Cowen and Company — Analyst

Florent Cespedes — Societe Generale — Analyst

Emily Field — Barclays — Analyst

Simon Baker — Redburn — Analyst

Kerry Holford — Berenberg — Analyst

Seamus Fernandez — Guggenheim Securities — Analyst

Andrew Baum — Citi — Analyst

Laura Sutcliffe — UBS — Analyst

Keyur Parekh — Goldman Sachs — Analyst

Naresh Chouhan — Intron Health — Analyst

Sarita Kapila — Morgan Stanley — Analyst

Peter Welford — Jefferies — Analyst

Wimal Kapadia — Bernstein — Analyst

Richard Parkes — BNP Paribas — Analyst

Presentation:

Operator

Good morning, and good afternoon, and welcome to the Novartis Q2 2022 Results Release Conference Call and Live Webcast. [Operator Instructions] A recording of the conference call including the Q&A session will be available on our website shortly after the call ends.

With that, I would like to hand over to Mr. Samir Shah, Global Head of Investor Relations. Please go ahead, sir.

Samir Shah — Global Head of Investor Relations

Thank you very much, and thank you to all of you who joined us today on this beautiful summer day for Novartis’ Quarter Two Results. Before we start, I’ll just read you the Safe Harbor statement.

The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements. For a description of some of these factors, please refer to the company’s Form 20-F and its most recently quarterly results on Form 6-K that respectively were filed with and furnished to the US Securities and Exchange Commission.

And with that, I’ll hand the call to Vas. Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Thank you Samir, and thanks everyone for joining today’s conference call. We’re pleased to go over the results. I have with me today, Harry Kirsch, our CFO; and Karen Hale, our Chief Legal Officer.

Moving to Slide 4. As you saw in the release earlier today, we delivered a solid quarter two across each of our key value drivers. 5% growth across the entire company, as well as in Innovative Medicines and Sandoz, continuing our productivity agenda with solid core operating income, growth across the business, as well as continued margin expansion in constant currencies, as well as an upgrade to our expected savings from our transformation programs are now $1.5 billion.

Some innovation milestones, notably, we continued to garner approvals for Scemblix, our new medicine for CML, including a positive CHMP opinion. And then lastly, three milestones within our ESG efforts. First, a $250 million R&D commitment as part of the Kigali declaration for neglected tropical diseases. We’ve increased our commitment to clinical trial diversity over the next 10 years through our Beacon of Hope project. We also had an upgrade from MSCI to now a double-A rating top quartile within the industry, and we continue to work to further improve our overall ESG profile.

Moving to the next slide. When you look at Innovative Medicines sales, we grew consistently across the U.S. and in our ex-U.S. markets, primarily driven by our key growth drivers. We had 6% sales in the U.S., 5% sales ex-U.S. and you now see on the right hand side of the chart, 59% of our sales come from our key growth drivers and those key growth drivers are now growing at 21%.

And moving to the next slide and zooming in a little closer on the quarter. You saw pretty consistent performance across our key medicines and we’ll go through this in a bit more detail. Two things — two products I wanted to particularly call out, Kesimpta had a very strong quarter, I think demonstrating its overall profile as a multiple sclerosis therapy of choice. And Kisqali as well is now gaining momentum in breast cancer — in metastatic breast cancer patients. And we’ll talk a little bit more about that throughout the call.

And moving to the next slide, we’ve really focused attention as a company on six key growth drivers, we believe, which will enable us to deliver the growth profile. We’ve outlined, both in the next five years and also beyond, notably, Cosentyx and Entresto continued their outstanding performance towards their respective peak sales goal, we’ll talk more about Zolgensma, which continues its global expansion.

Kisqali and Kesimpta I’ve already mentioned. In Leqvio we are building a strong base with which we believe will enable this medicine to reach a significant sales potential over time. Taken together, these six brands now constitutes 32% of Innovative Medicines sales and they’re growing at 31%, I think giving confidence in the growth outlook that we’ve outlined.

Now moving to Slide 8 and going through each of these key brands. Starting with Cosentyx, Cosentyx delivered 12% sales, 12% sales growth on the quarter. When you look at that the outlook for Cosentyx, we continue to guide to a double-digit growth, driven by steady volume growth in the key geographies, U.S., Europe and China. We’re very confident in the overall clinical profile now that we’ve treated over 700,000 patients across five of the indications — indicated for Cosentyx. And we continue to get important guideline recommendations, including the GRAPPA psoriatic arthritis guidelines, which highlight Cosentyx unique benefit versus alternative therapies, including the IL-12/23 and its ability to tackle axial manifestations of this disease.

Overall, we’re confident in the $7 billion plus peak sales potential. This will be driven by global expansion of the product, as well as lifecycle management where we had some good progress in the quarter, including approvals in pediatrics in Europe, we’ve submitted Hidradenitis Suppurativa in the EU, and we expect to submit in the U.S. in the second half. We have positive data on an IV study looking at Cosentyx use in axial spondyloarthritis. And lastly, we do anticipate an IV submission in the U.S. as well in psoriatic arthritis, for a proof points of our ongoing efforts on lifecycle management for Cosentyx.

Then moving to slide — the next slide, Slide 9. When you look at Entresto, Entresto is continuing it’s really dynamic growth globally and in the U.S. You can see, we delivered 33% growth with Entresto. Our weekly NBRx continues its strong progression with continued strong growth. We’ve now treated over 7 million patients globally and over 1 million patients in the U.S., growing in hospitals, cardiology and primary care. So, really strong growth across geographies.

And we’re confident in the future growth and delivering the $5 billion plus peak sales potential for this brand, there is only one-third of the addressable population that’s been treated, and we see a strong profile consistently regardless of the setting of the medicine is used in. And lastly, with the approval of Entresto in hypertension in Japan and China, where there is a high unmet need, it gives another opportunity for future growth.

Then moving to Slide 10, with Zolgensma. Zolgensma is continuing to demonstrate the power of a onetime gene therapy to treat really dramatic — in a dramatic way to treat a terrible disease like SMA. 26% growth driven by global expansion, 2,300 patients now treated. We had recent reimbursement decisions, positive reimbursement decisions in Australia, Switzerland and Greece. And we recently received approval for our North Carolina new manufacturing facility, which further expands the capacity of our gene therapy network and really brings online a state-of-the-art facility, continuing our leadership in the gene to AAV gene therapy space.

Now future growth drivers for the Zolgensma are going to be that continued global expansion, 43 countries to date and growing. We also want to enable stronger newborn screening programs outside of the United States. 97% of newborns are screened in the U.S., but only 30% in Europe, and those numbers are similar and — or lower in many other geographies.

As we can get more newborns screened, then we believe Zolgensma is the treatment of choice for these babies, allows for normalization of their overall development and we saw that in the Nature publication that recently summarized the data from one of our earlier studies with 14 out of 18 patients walking alone and 11 of them in the normal development window when treated early with Zolgensma. I also want to note that both our STEER studies and STRENGTH studies are progressing well and we continue to outlook a submission in intrathecal for Zolgensma for two to 18 year old in 2025.

Then moving to the next slide with Kisqali. We continue to deliver double-digit growth. You see 43% growth and we see this as a brand that given its recent data releases is really coming into a strong profile and strong growth profile. We’re seeing increased traction based on the clinical data, I’ll talk more about that a little bit later in the presentation and we saw that at ASCO once again we were able to highlight some of the datasets, particularly around OS in the first-line setting, which demonstrates the strong profile as Kisqali. The NATALEE adjuvant study primary analysis is expected in 2023 and continues to progress on track, I’ll talk more about that in the pipeline section.

Then moving to Kesimpta on the next slide, Slide 12. The launch is continuing to — and really continue on a strong trajectory. We see an acceleration of the brand in the U.S. and we continue to work towards providing the medicine globally in our key markets. We have U.S. demand of 18% growth quarter-over-quarter. We have 3,200 adopters, physician adopters since launch. You can see the NBRx of now 42%. It’s really dynamic growth for this medicine. And we’re working to continue to strengthen the profile and differentiation.

We have new extension data which demonstrated eight out of ten patients treated continuously with Kesimpta had no evidence of disease activity. From a operational standpoint, we continue to work to drive fast the NEDA [Phonetic] initiation, patients are now getting on therapy within six days, 80% of patients achieving that goal and 77% of patients remain on therapy at 12 months, which I think, again, demonstrates the medicine impact, as well as ease of use for patients. So, very excited about the outlook for Kesimpta.

Then moving to the next slide, on Slide 13. With Leqvio, we’re laying the foundation as we’ve outlined in 2022 for the ramp we expect over the coming years. I mean, and we continue to expect in the remainder of 2022 for a steady ramp-up of Leqvio. But I think there is important proof point that we are beginning to lay that groundwork successfully.

First, with respect to access, and as a reminder, Leqvio is under the medical benefit. We have 65% of — 55% of patients now covered with aligned to our label or near our label, and that’s within six months of launch. This is higher than relevant competitor brands, both from PCSK monoclonal antibodies and-or other recently launched anti-cholesterol therapeutics, and those brands have been on the market for many years. So I think this demonstrates, we’ve been able to drive fast access and the J-code now is in place as of July 1. So, I think from an access perspective, we’re progressing well, progressing on or ahead of our plan and I think that sets us up well for the future.

Secondly on affordability. We can now confirm that two-thirds of patients of zero co-pay for Leqvio, including Medicare Part B patients with supplemental insurance. This again, we believe, will enable a strong uptake and strong adherence to this medicine for patients and get the benefit that they need from lower cholesterol.

And lastly, we’re making progress working through logistics and administration for this medicine in cardiologists offices, as well as in relevant hospitals and medical centers. We’ve increased the number of unique locations ordering Leqvio to over 700. We’re expanding the depth now with 55% of our customers already having placed repeat orders, and we’re seeing growing usage now with 2,100 HCPs and now 3,900 patients in the service center. So, all of this taken together, I think points to a strong future for the brand and we’ll continue to work through the second half of this year to build out this base to enable long-term growth.

Then moving to the next slide, Slide 14. With Pluvicto, and moving to our two recently launched medicines in oncology, Pluvicto and Scemblix. The Pluvicto launch is really progressing in a strong manner and it’s either at or above our own expectations. We’ve seen our manufacturing issues remediated and we’ve cleared our backlog, commercial and clinical supply resumed in June. We have a permanent A code that was granted in July and that will be effective in October. Over 50% of insured lives now are covered. We have over 100 RLT sites now operational, 40 sites have completed orders. So a strong trajectory from the start and we’re hoping that — hoping to maintain that over the coming months.

We’re preparing for further expansion with this medicine, given the clinical profile we’ve seen to date. Both the Phase III studies are on track. Growth in the pre-taxane setting and the hormone-sensitive setting with a readout for the pre-taxane study still slated for the — before the end of this year. The manufacturing scale-up is ongoing, we have a new facility in Indianapolis that we plan to bring online in the second half of next year and we have capacity expansions ongoing in our Italy and New Jersey sites. And we’re making significant investments to ensure logistics and support access as the patient population that can be reached by radioligand therapies, continue to expand across to Pluvicto, Lutathera and our pipeline.

So moving to the next slide, Slide 15. Scemblix, as well is off to a very strong U.S. launch. And then we achieved the, as I noted earlier, important regulatory milestones in the EU, $31 million of sales, primarily driven in that third line setting, 44% share in the third line, which I think is a good marker, given how recently we launched the medicine, and 16% NBRx share regardless of CML line of treatment.

In terms of future growth for Scemblix, it’s going to be driven by the first-line study which is enrolling ahead of plan. This, as a reminder, is versus investigator choice of TKI. And has the CHMP positive opinion in the ex-U.S. markets, where we continue to work to get a global rollout of the medicine.

So moving to the next slide and turning to Sandoz. As you saw, Sandoz had a really solid quarter in quarter two and we’ve raised the full-year guidance for Sandoz, and Harry will talk a little bit more about that. When you look at the drivers for Sandoz, sales performance, it’s primarily in Europe where we are a leader with a leading generics company with 4% growth, driven by both launches, as well as recovery of the healthcare systems. We had double-digit growth in the Rest of World markets, Japan and other emerging market and we’ve seen a stabilization in the U.S. business, setting us up with future biosimilars launches and small molecules launches to drive growth in the U.S. over the years to come.

You can see, our retail sales growth in the quarter was 4%, biopharma was up 11%. So we’ve raised the guidance as mentioned, and when you look longer-term, we believe this creates a solid base of growth — for growth, 2023 and beyond. A lot of that will be driven by the biosimilars portfolio, the portfolio of biosimilars in Sandoz targets $80 billion of originator sales, over 15 assets in the portfolio and some recent progress, including the acceptance of the adalimumab high concentration formulation, as well as natalizumab in the EU. We are also continuing to pursue small molecule opportunities to both serve the small molecule portfolio. Overall, the strategic review for Sandoz is continuing to progress on track and we expect an update at the latest by the end of this year.

So moving to the next slide, on Slide 17. Our broad pipeline of novel medicines progressed in quarter two, but we’ve also worked to focus our efforts, as you saw in both our earnings release, as well as with some of our pipeline decisions. Five core therapeutic areas, while being opportunistic in other therapeutic areas and we’re trying to make consequential decisions to really ensure we’re focused and getting scale in those five core therapeutic areas.

On this slide, a few things to highlight. We had important designations in milestones, Scemblix I’ve mentioned, pelacarsen completed enrollment for the Phase III HORIZON study, so on track on its journey to become the first medicine to treat Lp(a) driven cardiovascular outcomes. JDQ443, our G12C inhibitor for solid tumors. The Phase III study in second and third line non-small cell lung cancer was initiated. We continue to also progress combination studies for that medicine.

Cosentyx was filed — had a filing for hidradenitis suppurativa in Europe and we continue to work towards the U.S. filing. And then lastly, we continue to streamline the portfolio, we have a number of projects that we made the decision to either partner our self and notably, we’re exiting our efforts — development efforts in COPD and general asthma with the decision to partner two assets in that portfolio and we’ll continue to look to streamline the medicine portfolio in our pipeline so that we can focus on the medicines that matter most in our core therapeutic areas.

So moving to Slide 18. I did want to say another word on Kisqali. Given the OS benefit now we’ve seen across all three — all three of the Phase III trials in the metastatic setting we’ve conducted to date. On the left hand side, you can see the results that we’ve generated in the first-line metastatic setting, you could be impressed with the risk reduction, importantly median OS that’s been achieved consistently across these three studies, the longest median OS ever published and we’ve seen that same OS benefit regardless of situation. We also maintain that benefit even after prior CDK4/6 use. We think this dataset is part of the reason we’re seeing the real growth acceleration behind Kisqali.

Now, in the middle of frame you see the reason for this clinically, we believe, is that Kisqali is unique in its ability to hit the CDK4 target and we hit it eight times harder than we hit CDK5. And that’s relevant because we believe CDK4 is a key driver of the benefits you’re seeing for this medicine and you can see our relative performance versus — in preclinical studies versus our competition.

Now, when you look at the adjuvant study, it’s fully enrolled as we’ve already noted. We’ve already cleared the first utility analysis, the primary analysis is planned at 500 iDFS events and we expect that by the end of 2023. The two interim analysis are to be conducted at 350 and 425 event. We have not yet reached the first of those interim analysis, we expect that in the coming quarters. We do guide for this study to really complete at the end of next year when we reach the full number of events, but we’ll of course keep the markets updated as we progress through these interim analysis.

Then moving to the next slide on Slide 19. We’re on track largely against our key 2022 events. Just three things to note, three submission enabling readouts coming up in the second half of this year. Candidly, A, iptacopan and PNH, and as already mentioned, Pluvicto in the pre-taxane setting. So, we’ll look forward to those study readouts and updating all of you as we get that data in-house.

So with that, I will hand it over to Harry.

Harry Kirsch — Chief Financial Officer

Yeah, thank you very much, Vas. Good morning and good afternoon everybody. I’m now going to walk you through some of the financials for the second quarter and the first half. And as always, my comments refer to growth rates in constant currencies, unless otherwise noted.

So, on the next slide, yes, we show our quarter two and half one financial results summary. As you can see, quarter two sales and core operating income, both grew 5% in constant currencies, with sales benefiting from the continued strong performance of our key growth brands and core operating income growth, driven mainly by the higher sales. However, operating income and net income declined significantly in the quarter. This was mainly due to prior year divestment gains from tail end products, and higher impairments and higher restructuring costs this quarter, mainly for the transformation for growth program.

Core EPS grew 1%. However, if you exclude the impact of the prior year Roche income, core EPS would have grown 10%. Overall, we delivered solid sales and core operating income growth for the quarter, resulting also in a strong operational half one performance, with sales growing 5% and core operating income 7%. Core EPS in half one grew 11%, excluding the Roche stake impact.

On the next slide, I would like to drill down a bit into the performance by division. So for quarter two, you can see that Innovative Medicines top-line grew 5% and the bottom-line 6%, resulting in an improvement in the core margin of 15 basis points to 37.2%. Sandoz net sales also grew 5%, although core operating income decreased 4%, mainly due to increased M&S investments and higher other expenses. This was reflected in the core margin, which decreased to 20.4%. Overall, for the first half, we saw a strong performance for Innovative Medicines and Sandoz, Innovative Medicines sales growing 5% and core operating income 6% in half one.

Sandoz grew 6% on the top-line and 10% on the bottom-line in half one, driven by a very strong quarter one. And as a reminder, as we discussed in April, Sandoz benefited from a return towards normal business dynamics compared to a lower prior year base. Our half one core margin improved by 30 basis points for Innovative Medicines, 70 basis points for Sandoz, and 60 basis points for the total Group.

Turning now to our guidance on Slide 23. So within the divisions, we expect Innovative Medicine sales growing mid-single digits and core operating income growing mid-to-high single-digit ahead of sales. The expected core margin increase will be driven by expected continued good top-line momentum and continuation of our productivity programs. Of course, including the new organizational structure giving us some benefits in the second half already.

For Sandoz, the performance year-to-date allows us to upgrade sales guidance to grow low single digit, which is a one-notch upgrade and core operating income guidance is upgraded by two notches, to now be broadly in line with the prior year. For the Group, we confirm our overall full-year guidance, we continue to expect both top and bottom-line to grow mid-single digit in 2022. The key assumption for this guidance is that we see a continuing return to normal global healthcare systems, including prescription dynamics and that no Gilenya, and no Sandostatin LAR generics would enter in U.S. in 2022.

As many of you know, in June of this year, the U.S. appeals courts held the Gilenya U.S. dosing regimen patent invalid. We plan to petition the appeals court for further review to uphold validity of this payment. And as a reminder, there is no generic competition in U.S. at this point in time for Gilenya and in quarter two U.S. sales were $332 million for Gilenya. It is worth noting that U.S. Gilenya sales have been steadily declining due to competitive pressures and of course our key focus and [Indecipherable] being on Kesimpta.

Next slide please. I would like to provide some further details on the expectations for the second half dynamics on top and bottom-line. We expect sales to continue to grow mid-single digits, bringing us to our guidance for the full year. For half two core operating income, we expect to grow slightly slower compared to half one at low-to-mid single digit. This is mainly due to the higher prior year base for Sandoz in half two. As you know, half one core operating income growth benefited partly from a very low prior year base at Sandoz. We will of course continue to monitor the impacts of inflation and utility costs, particularly on the Sandoz product portfolio, as well as the situation around COVID related lockdowns in China. Given that, we are seeing improving signs as of June, which we will continue to monitor in half two.

On the next slide, I would like to provide an update on our new simplified organization model and the financial impacts of the restructuring. As Vas discussed earlier, we have increased our estimates of SG&A savings to approximately $1.5 billion. We anticipate the savings to be fully embedded by 2024. This year, we also expect some savings, but the overall impact will be minimal as we will be offsetting higher energy cost and inflationary pressures. Part of the $1.5 billion savings, we expect to be reinvested into our pipeline and a significant part that contributions to achieve our mid-to-long term, low 40s Innovative Medicines core margin guidance. With regards to the one-time restructuring cost, we could narrow this range a bit and we estimate this now to be 1 time to 1.2 times of the annual structural savings of $1.5 billion.

On Slide 26, I want to provide an update on expected currency impacts, if currency stay at the current levels. Obviously, currency impacts are significant this year given the strengthening U.S. dollar against many currencies. So, if currencies stay as they are now, for the full year, we estimate the impact on top-line to be negative 6% to 7% points and on the bottom-line negative 7% to 8% points. And given it’s volatile, we wanted to give you also a bit of the outlook for 2023. So, for the full year 2023, we would expect sales to be impacted by negative 2% and core operating income, negative 2% to 3% in 2023 versus 2022. As a reminder, we update these currency impacts on our websites monthly and I think, especially in these times, quite important to watch that.

Finally, on Page 27. Thank you. Finally a reminder about our capital allocation priorities, where we remain disciplined and shareholder focused of course. We aim to balance investing in the business with returning capital to shareholders via our dividend and share buybacks. In the first half, our investment in the organic business was $4.5 billion in R&D, and $0.5 billion in capex. We also had bolt-on M&A, which was around $0.9 billion, mainly for the Gyroscope acquisition. Alongside this, as you can see, in terms of returning capital to shareholders, we paid our annual dividend of $7.5 billion earlier this year and have $9.4 billion still to be executed of our ongoing $15 billion share buyback program of which we have completed $5.6 billion by the end of June.

And with that, I hand it back to Vas.

Vasant (Vas) Narasimhan — Chief Executive Officer

Thank you, Harry. So if we move to the last slide, Slide 29. We continue to progress against our top 2022 priorities as we’ve outlined. Successful launches, particularly ensuring the foundation is laid for Leqvio, but driving the dynamic performance of Kesimpta, Pluvicto, Scemblix, which as you’ve seen, are continuing apace. Maintaining the growth momentum across our six key in line growth drivers, progressing the pipeline where we have 20 plus assets where we expect significant sales potential with approval potential by 2026 and the pipeline is on track.

We are tracking well on our Sandoz review and — but a solid quarter from Sandoz in quarter two and we’ll keep you updated as we move towards a update before the end of 2022 at the latest. And we remain disciplined in our business development, looking for important opportunities to build out our pipeline, but remaining disciplined on how we allocate our capital. Continuing to deliver our returns, and you’ve seen that with our productivity initiatives are increased to $1.5 billion of SG&A savings with our new organizational model. And we continue to reinforce the foundations we believe that in the long run will drive Novartis with performance around culture, data science, and as I noted earlier, ESG.

So with that, we look forward to taking your questions. If the questioners could see please limit themselves to one question and we will be able to get through hopefully the list and allow people to ask multiple rounds over the course of the call. So, operator, we can open the line for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We will now take our first question from Matthew Weston from Credit Suisse. Please go ahead, your line is open.

Matthew Weston — Credit Suisse — Analyst

Thank you very much. A question on Kisqali please, Vas, and you have very clearly set out the interim analysis timelines and the final analysis timeline. One question that we’ve received a lot in recent weeks is, how you would communicate when you go past an interim. Would you consider that a material event which you have to press release to the market? Obviously, if it’s positive, it would be positive and we’d see your release. But if you simply passing interim and move forward, would do you see that is requiring a press release or would we simply learn that the next quarter where you would update the timelines? Many thanks indeed.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, thanks, Matthew. So I think as you outlined, clearly if at any time in the study that we either get a definitive positive result as determined by the DSMB or a negative result we would update the market. Otherwise, our plan would be at the quarterly calls to provide updates on where we stand on the study, we don’t believe passing an interim analysis warrants any sort of further update.

Thank you very much, Matthew. Next question, operator.

Matthew Weston — Credit Suisse — Analyst

Thanks. I’ll jump back in the queue.

Operator

Thank you. Your next question comes from the line of Tim Anderson from Wolfe Research. Please go ahead, your line is open.

Tim Anderson — Wolfe Research — Analyst

Hi, just a high-level question on healthcare reform and just talk a reconciliation pushing ahead, seems like it’s finally going to happen to us at least your thoughts on the likelihood of this happening and what it could mean to industry financials and to Novartis specifically over time, and if you have certain products that you think would be impacted the most?

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, thanks, Tim. I think as everyone is reading in the press, there is renewed momentum behind a reconciliation package, which would consists of a drug pricing reform and supporting ACA subsidies. Of course, our overall view remains that there are good and bad elements to the pack, it’s clearly Part D reform is needed, capping out of patient — patient out of pockets will be, I think, a positive step, enable patients to fill their prescriptions and also enable in our — from our sector demand to be supported, but of course there are onerous elements as well, which we think go too far and those support long-term innovation will have a detrimental effect to the long-term outlook for the industry, particularly the negotiation elements.

Now for Novartis, specifically, we view these as not significant impacts in the near-to-mid term, we’ve analyzed this quite in a detailed manner. I mean I think as is well known, we are the number one company, pharmaceutical company in Europe and a leader in many emerging markets. Our business in the U.S. is one we plan to grow significantly over time. But our relative exposure to the peers that, in terms of both government programs and over U.S. — overall U.S. sales is at the low end of the peer set.

So we would expect to have a far lower effect than our — impact on us relative to our peers. And so I would say in the near-to-mid term, not a significant impact, overall net of the positives we get from the Part D reform and of course the impact on — from inflation caps, as well as negotiations, that’s how we see it at the moment, but of course we’ll continue to analyze as the final build test is available.

Tim Anderson — Wolfe Research — Analyst

Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Next question, operator.

Operator

Thank you. Your next question comes from the line of Richard Vosser from JPMorgan. Please go ahead, your line is open.

Hello, Richard, your line is open, are you on mute? As there is no response from Richard, I will go to the next —

Richard Vosser — JPMorgan — Analyst

Hello, sorry. Sorry, apologies, completely my fault. And just on Kisqali, if you can hear me now. Just wanted to go back to the growth potential in the first-line opportunity and how much of the Ibrance market you think you can take with the OS benefit. Obviously, we can see Verzenio benefiting as well, but just your thoughts there? Thanks very much.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah. Thanks, Richard. With Kisqali, we’re starting to see a positive trend on NBRx in the first half of the year versus the competition and in the metastatic setting. And that comes primarily from Ibrance and I think that’s reflective of the dataset that we’ve — we have in OS as I’ve outlined. It’s important to note as well in many European and ex-U.S. markets, we are either number one or close to number one depending on the market and we can — we believe drive additional momentum in those ex-U.S. markets as well.

So, I think it’s positive signs, we want to see that trend continue for hopefully a couple of more quarters, particularly given that now the dynamic market within breast cancer is starting to recover. I would know that it’s just recently on our data coming back to where it was pre-COVID which is, again, is an opportunity for us to gain share, as there is an opportunity to get either new patients or switching patients onto Kisqali. So, I think it’s all positive directions and we’ll see how that trend goes in the coming months.

Thank you, Richard. Next question, operator.

Operator

Thank you. Your next question comes from the line of Emmanuel Papadakis from Deutsche Bank. Please go ahead, your line is open.

Emmanuel Papadakis — Deutsche Bank — Analyst

Thank you for taking the question. Perhaps I’ll take one on Sandoz please. As you called out biosimilars is clearly a key to returning to reasonable levels of growth in the mid term, you’ve recently filed the biosimilar Humira Hyrimoz high dose in Europe. Could you just give us an update on where you are with respect to the U.S. for that opportunity, i.e., both with regard to high dose filing and potential interchangeability and how significant opportunity you think that may be for the business, and indeed, whether that would have any influence on your considerations of strategic options? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, thanks Emmanuel. So we’re on track, overall, to be launching Humira, the adalimumab biosimilar at market formation in the U.S. and it’s our intention to have the high concentration formulation available. I think as soon as we have a file accepted by FDA, we would of course put out a release and update the market. So, I would say, overall, we’re on track with respect to that.

I think clearly the number of entrants when the adalimumab market formation happens will mean that it will be a highly competitive markets. But nonetheless, given the size of the opportunity, it will help meaningfully drive growth for the brand.

I would also note that natalizumab where we are one of the early entrants is a significant opportunity for Sandoz and I think natalizumab both in the U.S. and Europe is one we’re excited about as an opportunity to drive growth within the next few years. And the other upcoming opportunity for us is denosumab, where again, I think we would be one of the earlier entrants amongst biosimilars players. But those would be the three key upcoming biosimilar launches for Sandoz and particularly in the U.S.

Next question, operator.

Operator

Thank you. Your next question comes from the line of Graham Parry from Bank of America. Please go ahead, your line is open.

Graham Parry — Bank of America Merrill Lynch — Analyst

Hi, thanks for taking my question. So I’m just [Indecipherable], I think for the Q1, Vas, you said, you were at 300 events. So I wonder if you could give us an update on how many events you’re asking the trial. And is that the sort of event rate has it fits, but you still have a couple of months delay before the DMC reports to you of what the outcome of fee base interims are. And in the event you were to get positive data, to what extent can you put subgroup analysis, etc., in the press release. So whether you’ve hit across all subgroups, high risk, low risk, etc., just what would be in the press release, so just be quite interesting to know. Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, thanks, Graham. On Kisqali, obviously I don’t want to get into what exactly the number of events are. I would say the event rate that we’ve seen and as we noted previously, we had a slower event rate than we had originally projected and that event rate has continued, so there is no change in the overall event rate. I would also note that you are correct that from the point of a lock, it does take a few months to get the readout with the DMC, particularly because we work with one of the large CROs in the U.S. for the study. So, that’s I think important to note from a timeline standpoint.

In terms of what’s in the release, I mean I think we typically would only comment on the primary endpoint and in this case there is a IDFS across both the medium and high-risk patient populations, who would of course get into the subgroups. I would also note that the DMC’s primary basis for stopping the study would be IDFS. We would hopefully see in OS trend, but I think that’s an important note as well. I would expect, as will be the case normally in such an oncology study, OS takes more time to mature and of course we’ll have to see how it all unfolds over the coming quarters.

Next question, operator. Thank you, Graham.

Operator

Thank you. Your next question comes from the line of [Indecipherable] from Cowen. Please go ahead, your line is open.

Steve Scala — Cowen and Company — Analyst

Hi, can you hear me?

Vasant (Vas) Narasimhan — Chief Executive Officer

Yes.

Steve Scala — Cowen and Company — Analyst

Hi, this is Steve Scala. On remibrutinib, is there any sign of liver tox similar to Sanofi’s tolebrutinib, and is there any reason to believe that liver tox is a class effect? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah. Thanks, Steve. We’ve been watching this space very closely. I mean, when you look overall at BTK inhibitors in cancer, historically liver has not been a signal, at least to our knowledge, that’s been a significant concern and also BTK is not differentially expressed within liver. So in our view, this is related to the drug itself, either metabolites or off-target toxicities in the liver. Today with remibrutinib, we haven’t seen any liver signals. We’ve taken it forward into chronic spontaneous urticaria as its first lead indication where there are two pivotal Phase IIIs ongoing.

And then similarly now are progressing in our MS studies and also evaluating taking the medicine into other areas of rheumatology, dermatology, etc. Our hope and expectation is that the profile of remibrutinib continues to be clean relative to the peer set, particularly with respect to liver signals, we believe that in the MS market, but also in the dermatology markets it’s going to be critical to have a medicine that has safe profile with — especially with respect to more complex side effects like liver. So that’s where we stand and we remain optimistic on the unique profile of remibrutinib based on its chemical design and the lack of any off-target toxicities seen to date.

Steve Scala — Cowen and Company — Analyst

Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Next question, operator.

Operator

Thank you. Sorry, sir. Your next question comes from Florent Cespedes from Societe Generale. Please go ahead, your line is open.

Florent Cespedes — Societe Generale — Analyst

Good afternoon. Thank you very much for taking my question. A quick one on Kesimpta, Q2 evaluation [Phonetic] beaten, how would you see the dynamic on the ex-U.S. sales, they are still quite small for time being, but they are ramping up nicely. Could you give us what should boost these sales year? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah. Thank you, Florent. With respect to Kesimpta, already we covered the U.S. land [Phonetic]. I mean we’re starting to now move through, as you know, the longer reimbursement processes that are required in Europe, Canada and other global markets. So we would expect to see in the second half and then moving into next year more significant sales contributions from our ex-U.S. markets, of course the big markets in Europe, but I was also recently in Canada where there’s a lot of excitement as well about the medicine. And then to a lesser extent in Asia, Japan etc., where MS rates are lower, but the market sizes are significant.

I mean I think it’s important to note in those markets, a monthly subcu patient administered drug is very attractive because of those markets. There is not the same incentive structures around infused medicines, as well as the ability to deload the hospital system by having at home administration. So, we feel optimistic about the opportunity now for Kesimpta, as its next wave of growth to really be about a global expansion of the medicine.

Florent Cespedes — Societe Generale — Analyst

Thank you very much.

Vasant (Vas) Narasimhan — Chief Executive Officer

Next question, operator.

Operator

Thank you. Your next question comes from the line of Emily Field from Barclays. Please go ahead, your line is open.

Emily Field — Barclays — Analyst

Hi, thanks for taking my question. I just wanted to ask a question on the development plans for ligelizumab. I believe kind of the slides just mentioned food allergy, but on clinicaltrials.gov the PEARL-PROVOKE study and CIMDU [Phonetic] still look to be recruiting, so just any update on the other indications? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, with ligelizumab, as you know, we made the decision not to take it forward in CSU, but we continue to the development program in food allergy and we’ll complete the program as well in CIMDU and we continue to believe the medicine has potential. In some of these indications where IGE inhibition has demonstrated the ability to impact symptomatic disease, as well as the disease progression. So, we still think the medicine has potential, particularly in food allergy where if we could find the right setting for its use and get a relatively broad label from the regulators, it would have a significant potential. So the development programs continue on track and we would expect the readouts as we note in our documentation.

Next question, operator.

Emily Field — Barclays — Analyst

Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Thank you Emily.

Operator

Thank you. Your next question comes from the line of Simon Baker from Redburn. Please go ahead, your line is open.

Simon Baker — Redburn — Analyst

Thank you for taking my question. I think quick two part product question if I may please. Firstly on Zolgensma, as you talked about the strong ex-U.S. growth, but actually the growth in the U.S. was pretty impressive this quarter. I just wonder if there is any — anything trapped behind that?

And secondly, on Leqvio, if you could update us on the ex-U.S. performance, particularly in the UK. Thanks so much.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah. With respect to Zolgensma, we were pleased as well to see the performance in the U.S., that’s primarily driven by expansion in newborn screening where you’ll remember when we launched the medicine, we were down at 60%, 70% and now we’re moving into the mid-to-high 90%s and as we get that newborn screening rate up, it tends to be the case that patients who identified a newborn screening, ultimately receive Zolgensma. And so I think that will continue as we move up the newborn screening, but then of course we would expect that to be back to a steady state, as with all gene therapies eventually you get to the steady state of the ability to identify the diseases at birth in any, so called, incident population.

When you look at the specifics on Leqvio ex-U.S. I’d say, in the UK as well, we’ve been systematically building up towards, we’ll be hopeful to be a trend break. I think the UK NHS has of course to deal with COVID for much of the first part of this year. In the last few months we’ve now successfully upgraded and enabled NHS, EHRs, identify patients who would be able to use Leqvio. We have now, I think, over 70% of primary health care units with Leqvio available on their formularies. We’ve launched a large scale education campaign in the UK.

So, I would expect to see as well, hopefully a trend break in Leqvio in the UK is in the first part of next year as we continue to build out foundation in the second half. And as the NHS works through the backlog it has from other — from other diseases because of the COVID pandemic. Beyond that we see very strong uptake in Germany with Leqvio on a per population basis, the uptake is very good. We’ve assigned successfully large scale agreements with certain Middle East governments to the rollout Leqvio at scale in those markets.

And then, we also continue to work to bring Leqvio forward in the large markets of Japan and also are finalizing the plan for a filing in China as well, but all of that is going in course, again, as always with cardiovascular launches, it takes time. But on this one, I mean absolutely our goal is to ramp this medicine faster than we were able to in Entresto and obviously with a runway that goes to the late 2030s at the very least, a significant opportunity to make this a really, really significant medicine.

Simon Baker — Redburn — Analyst

Thanks so much.

Vasant (Vas) Narasimhan — Chief Executive Officer

Next question, operator.

Operator

Thank you. Your next question comes from the line of Kerry Holford from Berenberg. Please go ahead, your line is open.

Kerry Holford — Berenberg — Analyst

Thank you for taking my question. Focusing on radioligand therapies and then we manufacturing delays. Can you now concerned that you do have source plant and running an inventory building for both Lutathera and Pluvicto. I would if you could also elaborate your plans, expansion of RLT manufacturing supply going forwards and how you work around what you’ve learned through those recent delays? And in so many ways the recent manufacturing gap could result in a delay to the ongoing Phase III PSMA4 study, which I think is due by year-end. Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yes, thanks, Kerry. So a couple of points on radioligand therapy manufacturing, which is a challenge, but also I think points to why if we can get it right creates a long-term competitive advantage. This is a medicine where you cannot build inventory, we make the medicine and depending on whether it’s Lutathera or Pluvicto we have between three and five days to get it to its relevant site. And so because of that you have to be a world-class with respect to the supply chain and it’s not something easy, I think, for anyone to build from scratch.

And what we’ve learned is increased capacity with redundant lines in different manufacturing sites to enable us to ensure we have a steady supply, if we were to have a disruption at any one of our sites. And within those sites, to segregate the line so that the one line having an issue doesn’t affect any of the other lines, and we’ve been able to do that now at the relevant sites, particularly in our Italian site and in our U.S. site. So with all that being said, we’ve cleared the backlog. We are now shipping to order successfully. We’re also with large centers moving to a model where we provide Pluvicto doses ahead even if they don’t have patients ready yet, but the supply is there. And of course that enables them to book with — book additional patients with confidence.

And then to further expand the supply, we will be bringing on a third large scale manufacturing facility in Indianapolis, that will actually have automated lines, moving away from more manual lines which further increases capacity. So we would expect by mid-to-second half of next year to have three separate U.S. manufacturing facilities to support the U.S. for both Lutathera and Pluvicto, giving us the redundancy of large-scale capacity and of course the ability then to fulfill what we hope if the data supports that a potential multi-billion dollar opportunity for Pluvicto across a lines of prostate cancer. And I’d also take the opportunity to say that the feedback, both from the nuclear radiology community, as well as the urology community, which is an important customer base for this medicine has been very positive to-date.

With respect to the Phase III studies, we’ve been able to fully reopen enrollment and we currently forecast, no change in timelines, either for the pre-taxane study which is slated to readout before the end of this year or the hormone-sensitive study which is slated to readout in 2024. So both of those studies now are on track and if anything, we’re enrolling slightly ahead of schedule.

Next question. Thanks Kerry. Next question, operator.

Operator

Thank you. Your next question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead, your line is open.

Seamus Fernandez — Guggenheim Securities — Analyst

Great, thanks. Just one quick question on iptacopan. Vas, just wanted your thoughts on relative positioning in PNH and aHUS versus the well-established C5 inhibitors. Just wanted to get your sense of the ability to compete in the treatment-naive setting, as well as, sort of patients that are struggling, as we look at this first dataset and then I think the treatment-naive dataset will come in the first half of next year? Thanks.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, thanks Seamus. We’ve done a lot of work with the U.S. team here and really have to understand the physician expectations and the dynamics. And overall, we believe that hematologists would be highly interested in iptacopan, both in the first line setting and for patients who are not receiving — achieving an adequate response to the anti-C5 monoclonal. I think unlike some of the other areas where Part B infused medicine can create a barrier, this is a low enough volume situation where we believe that patient ease of use to avoid having to come in and out of the hospital, also very safe drug that can be used across lines of therapy would be a highly attractive for physicians.

So, you’re correct, the first dataset will be focused both on add-on therapy, as well as switch and then we’ll have a second data set, the PNH APPLY study, which would then be in the frontline setting and those two datasets together will support the overall filing. So we remain optimistic on that PNH and that of course would translate as well into atypical hemolytic uremic syndrome in that setting.

I’d also note that the opportunity for — hopefully everyone in the call is aware that iptacopan is not only in that hematology setting, but we also prepare in the renal setting where this could be the first medicine approved for C3G glomeruli properties, as well as a opportunity to treat patients on the severe end of the spectrum with IgA nephropathy, and then we continue to expand across a range of other factor B driven diseases, and the unique profile there is a twice-a-day oral with a very safe safety profile, which I think for these rare diseases will hopefully make a lot of sense.

Thanks, Seamus. Next question, operator.

Operator

Thank you. Your next question comes from the line of Andrew Baum from Citi. Please go ahead, your line is open.

Andrew Baum — Citi — Analyst

Thank you. Question on your Beijing collaboration, a couple of parts. So, first, I’m curious whether you could provide some color on the FDA’s guidance to not to file a monotherapy. I assume that they had Western data, I think they do. So, I’m just curious as to why, because they feel the market were first licensed action to go some other?

And then second, you have an option on the Beijing ticket. It sounds like Roche is now not going to be presenting the interim data at ASMO. When do you have to exercise that option? And can you give us any guidance on what you will do, given the available data?

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah. Thanks, Andrew. On the first question on monotherapy, I think the FDA is assessment of our overall data was that it didn’t adequately reflect the U.S. population in terms of the number of patients and the standard of care that was used in that Beijing-driven first line study. So, our focus right now is to finish the filing in the second line small cell lung cancer, sorry, esophageal cancer, and then we had very good data in the first-line setting as well.

As we announced that’s been pushed back as we await the ability for FDA to inspect the facilities in China. And then hopefully, we’d be able to have both first and second line in esophageal, we’d have then hopefully second line in non-small cell lung cancer and we would expand from there. I do think that the FDA is making it very clear now that they expect a — any studies to be filed that they are global in nature, they have an appropriate amount of U.S. patients, and that the standard of care used reflects a standard of care in the U.S.

With respect to the anti-TIGIT, we haven’t changed — no change from our option agreement. The option agreement is driven off of the data from Ociperlimab, the Beijing anti-TIGIT molecule and so that option would be based on when their datasets becomes available. And we will continue to wait for that, their data to mature, which we would expect, I think, if I’m not mistaken, but we can verify in the second half of — in the second half of — first or second half of next year.

Now in terms of the Roche dataset. I mean it doesn’t change anything for us. We will continue to wait and watch as the field evolves and then make an appropriate decision. I think it’s important that we — everyone would like to understand where is the appropriate use of this medicine and in which PD1 subgroup, all comers, and if there is a place, which place would it actually be. But for us, there’s no change of plan at this point in time.

Thank you, Andrew. Next question, operator.

Operator

Thank you. Your next question comes from the line of Laura Sutcliffe from UBS. Please go ahead, your line is open.

Laura Sutcliffe — UBS — Analyst

Hello, thank you. Could you help us understand who the typical U.S. prescriber of Leqvio is? Who is already prescribing to multiple patients or who is already a repeat prescriber? Thanks.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, thanks, Laura. I’ve spent — it’s a great question. I’ve spent three days now in the field here in the U.S. meeting clinicians, visiting hospital centers, visiting larger cardiology centers. I’d say right now where we see the strongest uptake are in Group cardiology practices where they already have the abilities to run buy and bill, they make their own decisions on how they want to approach treating for a cholesterol and have, I think, the infrastructure largely set up and also the scale. So I’d say group cardiology, mid-to-large size group cardiology practices have been really, I think, a key area so far for the medicine.

Combined with, I would say, large volume cardiologists and smaller practices who are leveraging alternative injection centers where we continue to see solid uptake and that’s a solid base for us to grow from. Now, the goal is to move into larger centers where you of course have to work through the pharmacy and the various P&T committees to get everything set up there. Now the J-code being in place and the overall clinical experience increasing is helping. And then also moving towards smaller cardiology offices where there is the need to set up buy and bill capabilities, which historically have not been in place for those cardiology offices.

What I would say though is, what I consistently hear regardless, and I think our teams here on the ground has a lot of enthusiasm for a twice a year, physician administered medicine, they can modify the single most important risk factor in cardiologists mind for preventing repeat cardiology events, cardiovascular events. And I think seeing that, and hearing that again and again gives us confidence, gives me confidence that we will work through the logistical hurdles, which seems to be the primary topic and then get this medicine into wide scale use.

I think we often hear back from practices, especially when they put the patient on the medicine and then at the next visit, they see a significant drop in the LDL levels, that’s a very winning proposition after a single dose. And then I think those practices get really excited about getting more patients on therapy. So again, laying all the foundation, but I think all the right steps are being taken to get us where we need to be.

Next question, operator.

Operator

Thank you. Your next question comes from the line of Keyur Parekh from GS. Please go ahead, your line is open.

Keyur Parekh — Goldman Sachs — Analyst

Hi, thank you. Vas, a big picture kind of capital allocation question for you. If you look at Slide 27 kind of first half, obviously, it’s only first half, which shows that you kind of returned somewhere about $13 billion kind of to shareholders versus investing kind of about $6 billion in businesses and kind of organic and bolt-on transactions.

As we look forward to the next kind of 12 to 18 months, do you expect that balance to be somewhat similar to what we have seen in the first half? Do you expect that to be more counterbalanced by greater investments, either from an R&D or an M&A perspective for Novartis?

And then just kind of more specifically, you are telling us that you will provide us an update on Sandoz by the end of the year. What is that update expected to be? Are we going to get a decision on what you would do? Is it going to be, if you plan to separate it, will we get details on structuring of separation, etc.? So just any color you might be able to provide on what that detail or what update might involve? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, thanks Keyur. So I’ll let Harry start, and then I can add on. Harry?

Harry Kirsch — Chief Financial Officer

Yeah. Thank you. Hi, Keyur. So on the capital allocation, of course all things has been huge by our dividend being annual dividend, provided the $7.5 billion. So, if you want to do it mathematically you almost have to halve that and put it on two parts, that is the annual dividend.

Overall, of course, all of these elements, R&D, we expect to continue to grow in line with sales at least and so there will be continued growth on R&D investments, and we don’t expect margin leverage from the R&D line as we go forward, more from the SG&A line, were also our transformational growth program as we target that and where we have some gap to benchmarks as we can — we have filed of structural opportunities, which is great.

And then in terms of how much goes to bolt-on M&A, that obviously depends on the opportunities we find and given our very attractive net debt position and strong cash flows and balance sheet, of course, we have a quite significant bolt-on M&A firepower, if you will, and if we don’t find the right opportunities, of course share buybacks will always continue to be part of the mix.

In terms of Sandoz, I think you said it all. We make very good progress, in line with our plans, on the carve-out financials, I’m looking at all different options. So, I would be of course happy to give a preliminary decision by end of year, but this is of course subject to Board approval. And from that to end the progress, overall on our whole planning, but end of year should be quite, giving you some good hint to in what direction it goes, given that we take appropriate time for all the homework we are doing on the carve-out financial, separation cost, tax situations at all of that. So it would be, by the end of year, latest we should be in a good position to inform you about the next steps here, Vas.

Vasant (Vas) Narasimhan — Chief Executive Officer

No, it’s perfect. I think Harry said it all. Thank you, Keyur. Thanks, Terry. Next question, operator.

Operator

Thank you Your next question comes from the line of Naresh Chouhan from Intron Health. Please go ahead, your line is open.

Naresh Chouhan — Intron Health — Analyst

Hi, thanks for taking my question. Some of the work we’ve done suggests that people costs are around 40% to 50% of the total cost of the industry. So my question is, how we should think about the timing on the — of the inflationary impact on salaries. Is it fair to assume that on the whole 2022 salaries and therefore your guidance has factored in only last year’s inflation and that really we have to wait until next year salary rounds before we start to see this year’s inflation baked into your cost base on the salary side? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Thanks, Naresh. Harry, you want to take that?

Harry Kirsch — Chief Financial Officer

Yes, you are absolutely right. I mean the current inflationary effects, mainly on energy, utilities, freight cost and so on, on those cost categories as we speak. On wages and salaries, not much yet if anything. So, that needs to be closely monitored and I would expect this to come more in annual cycles, if there is something short term, it’s probably depending on certain countries. Of course we always monitor the markets to be very competitive.

And we have of course a quite a big, if you will, workforce in Switzerland where inflation and wage increases are below, I would say, developed market average. So from that standpoint, our home base gives us also here a bit of competitive advantage. But we have to watch it, right. As you say the wage and salaries are a large portion of the P&L of any pharma company, given that it’s innovation-driven and people-intensive business, and we have to watch that and we’ll monitor this, of course. I would say, we believe it is manageable for us, but we have to monitor how the situation develops.

Naresh Chouhan — Intron Health — Analyst

Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Thanks, Harry. Thanks, Naresh. Next question, operator.

Operator

Thank you. Your next question comes from the line of Sarita Kapila from Morgan Stanley. Please go ahead, your line is open.

Sarita Kapila — Morgan Stanley — Analyst

Hi, thank you for taking my question. Please could you discuss where you stand on the development of the diabetes and obesity franchise. So you have the MBL949 in Phase II, I don’t believe the mechanism is being disclosed that it appears to be dosed every two weeks. And you also have an existing cardiovascular and metabolic commercial platform, and there are a number of asset focused on diabesity in Phase I, II, which remain unpartnered. So it looks like from today’s update, respiratory is less of focus, but it’s not necessarily clear where you stand on diabesity and adding assets around Entresto, Leqvio, and TQJ? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, thanks for the question and noted the Morgan Stanley report as well on obesity. Yeah, I mean I think we of course are observing the significant unmet need for better obesity medicines and because we do have a dedicated cardiovascular research unit in-house, led by Sean Kaufman, really I think global leader and thinking on developing world-class cardiometabolic drugs. We do have assets in our portfolio.

We have not disclosed MBL, but we are awaiting our Phase II data on weight loss with MBL. And if that’s positive, that would be an exciting opportunity to hopefully address with a unique mechanism of action, obesity on a large-scale. And I think based on that readout, we would determine if we advance other earlier-stage opportunities and combination partners we would have for MBL, as well as potential external opportunities.

So I think, more to come. Certainly observing the need for better obesity drugs and hopefully alternative mechanisms to those are already out there, it’s something we’re looking at and we’ll keep the market up-to-date as we learn more.

Sarita Kapila — Morgan Stanley — Analyst

Great, thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Next question, operator.

Operator

Thank you Your next question comes from Peter Welford from Jefferies. Please go ahead, your line is open.

Peter Welford — Jefferies — Analyst

Hi, thanks so much for taking my question. A question on Cosentyx play, you’ve talked about that being to this year. What if you could just talk a little bit about next year? And in particular, you’ve also talked a lot about and Humira biosimilars in your plan now in the U.S. Could you just talk a little bit about how you see coverage negotiations for Cosentyx next year? And perhaps you could just talk about the impact of HS which I guess is unlikely to be approved for the negotiating cycle this time around, but IV, on the other hand also available, and how you think that fits into the potential patient access dynamics for Cosentyx going into next year? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah. Thanks, Peter. I mean, I think right now our assessment is that, with the introduction of adalimumab biosimilars that, it’s a manageable situation and we already have significant gross to net on Cosentyx in some accounts, and other accounts we have very strong overall positioning and as a first-line therapy. And of course, we’ll have to see as the upcoming year unfolds and also how some of the upcoming legislation that potentially might be passed by Congress will impact the gross to net environment given that there would be, if the loss passed as currently designed, less ability to offset price increased rebates, the price increases. I think there is a possibility we see and rethink on rebating at least on the industry side on how the whole structure of the market works, all to be determined and to be seen.

I mean I think for us strategically on Cosentyx in the U.S., the goal is within rheumatology and dermatology to grow with the market and you see healthy market growth in both of those categories. And as you point out, expand both in terms of indications. We would hope to get hidradenitis approved over the course of next year, which then means in 2024, it would be an additional labeled indication for us in a unique label indication for Cosentyx, but also to expand into with IV into other payment settings and it had IV approved hopefully across both axial SpA, as well as psoriatic arthritis would enable providers to also provide Cosentyx in those reimbursement setting. And hopefully then also helps us manage the overall payer environment. So the best answer I can give at this point in time, but I think as we learn more in the second half of the year as we enter towards the January — the negotiations in Q4, we’ll keep you posted.

Next question please.

Operator

Thank you Your next question was from the line of Matthew Weston from Credit Suisse. Please go ahead, your line is open.

Matthew Weston — Credit Suisse — Analyst

Thank you very much. Just a couple of follow-on housekeeping items, please. Harry, for quarter we saw a significantly lower finance charges and also significantly lower corporate costs than consensus was anticipating. I know there was a hyperinflationary writeback in the finance charge. Can you give us any help with what we should anticipate for both those lines for the full year?

And then if I can cheat and ask another question, Vas, you obviously deemphasized COPD within development. Does that mean that we can anticipate that you may consider divesting your legacy respiratory assets or that’s something where you’re going to maintain an existing commercial franchise? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Harry?

Harry Kirsch — Chief Financial Officer

Yeah, hi Matthew, welcome to the second round. So on the corporate cost, we guided so far to $600 million to $650 million this year, our new guidance now would be a notch down, $550 million to $600 million. Now the biggest piece of that is actually currency, because as you can imagine, given our headquarters in Switzerland, most of our corporate costs on Swiss francs. And the Swiss francs also is — the Swiss francs also weakened versus the dollar. So the corporate dollars, if you will, will be a little bit less and we will be a bit lower.

If you take in constant currencies, it was probably hard for you to model on corporate costs, right. This year’s quarter two costs were almost only $5 million lower than last year’s quarter two costs. And of course we do also work on corporate cost efficiencies. So I think that are just the corporate part.

In terms of the core cost on net financial results, we of course do have some income, right. We have some hedging gains, we just see other side of the currency impacts, so that should also be a little bit lower. But of course both of these list the corporate cost apart of our core operating income guidance in constant currencies. And then a bit of gains on the net financial results also was for prior year, but not so significant.

Vasant (Vas) Narasimhan — Chief Executive Officer

Thanks Harry. And then, Matthew, on the respiratory side of things, I think as you rightly point out, we do have a business in inhaled respiratory LABA-LAMA ICS outside of the U.S., primarily in Europe and to some extent in emerging markets, as well we have the XOLAIR business outside the U.S. in severe asthma, as well as a co-promote in the U.S., and all those businesses remain intact and of course we all continue to drive them. We always do evaluate what is the right mix in the markets.

And I think with our recent — now with the transformation announcement where we move to a single Innovative Medicines unit in every country that we operate in, we are going through an exercise to ask what is the right portfolio, not necessarily specific to respiratory, but what is the right portfolio of medicines for us to really focus our resources on and where can we optimize or de-prioritized so that we drive the most growth out of the business and really have the most impact that we can from the portfolio. So as we get to better clarity on those decisions, and if anything changes we’ll of course let you know.

Matthew Weston — Credit Suisse — Analyst

Vas, I don’t know if the mic is on, I don’t know whether a follow-up is appropriate, but could we see those spun out with Sandoz given that that fit with that kind of long life cycle ex-U.S. footprint that Sandoz have?

Vasant (Vas) Narasimhan — Chief Executive Officer

So I’m getting in trouble with all of my IR colleagues for taking your follow-on, Matthew. But I will answer since we’ve known each other for so long. Right now our intention is not to move any of our Innovative Medicines business with any consideration with Sandoz. We’ll keep Sandoz as a pure play small molecule generics and biosimilars business.

Matthew Weston — Credit Suisse — Analyst

Thanks and sorry for that.

Vasant (Vas) Narasimhan — Chief Executive Officer

Thanks Matthew. Next question, operator.

Operator

Thank you. Your next question comes from the line of Wimal Kapadia from Bernstein. Please go ahead, your line is open.

Wimal Kapadia — Bernstein — Analyst

Great, thank you very much for taking my question. So just firstly with Kisqali, you previously suggested that adjuvant is a $6 billion opportunity, but I’m just curious how we should think about it, because when you look at the epidemiology, it would suggest a much larger opportunity into intermediate principles. So, I’m just curious what assumptions you’re making in terms of which actually receives the drug in this population, because really, if we see a decent penetration, the market potential should be significantly larger?

And then just to be cheeky, because we’ve done one round. Just on sabatolimab, given the delay in filing due to needing Phase III OS data, and the high hopes that physicians seem to have VENCLEXTA in MDS in the VERONA trial. I’m just curious how you’re thinking about the potential for the product in MDS at this point? Does it now become somewhat of a lower priority or do you still believe that greater than $1 billion opportunity you discussed previously in MDS is still feasible? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yes, thanks Wimal. On Kisqali in the adjuvant setting, we do believe that with the possibility of adding intermediate risks on top of high-risk, that is a significant expansion in the patient population, probably 3 times to 4 times what we see in the high-risk patient population. We previously guided to, I think, $6 billion based on what we saw in kind of consensus outlooks in various market projections.

But I mean I would agree that if we are successful in demonstrating a meaningful benefit across that entire intermediate risk range, there could be a larger opportunity for the medicine. And we’re certainly doing that work now as we move towards the final readout of the study. Though I agree, it is a significant opportunity to be a fundamental inflection point for the company if Kisqali successful and most importantly, for all of those women with breast cancer who need better therapeutics, so that their cancers don’t recur. But I think it’s a good question and we’ll try to come back with better numbers.

On sabatolimab, I think the data that we have suggested we need to wait for the OS data in Phase III. The opportunity for this medicine is both across AML and MDS. We do know that there is a rapidly changing treatment landscape in MDS, nonetheless, we think that if the medicine has a unique mechanism of action with targeting TIM-3 and could be used in combination with other agents, and if the safety profile would reasonably hold up, and we do think it has that $1 billion potential in each of the indications. But I would know we need to wait for now for the full Phase III studies, and it wouldn’t be prudent to put too much more on to it until we see that data readout.

Wimal Kapadia — Bernstein — Analyst

Great, thanks Vas.

Vasant (Vas) Narasimhan — Chief Executive Officer

Next question, operator. And we’ll try to do as many as we can in the last five minutes.

Operator

Thank you. Your next question comes from the line of Richard Parkes from BNP Paribas. Please go ahead. Your line is open.

Richard Parkes — BNP Paribas — Analyst

Hi, thanks very much for taking my questions. It’s a follow-up on Leqvio in the U.S., feedback we received recently from U.S. physicians is that they’re still seeing difficulties accessing injection sensors and that reimbursement is still challenging. So I just wondered whether that’s just an issue of experience and lack of infrastructure or whether there are other barriers that payers are putting into place in order to manage utilization such as requirement for specific injection sensors or anything we haven’t expected. I think — can I just ask a clarification because I think I heard you say that the final NATALEE readout would the end of next year, but I might have misheard that. So just clarify that time line? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, absolutely, so first on Kisqali and on NATALEE would be in the second half of next year, which I think is what we guided to kind of too previously, not end, I didn’t mean to give a new timeline, timeline is exactly as we’ve said previously, so no change in timeline. On Leqvio, I think if there is an element of experience and also understanding the Part B in the payer dynamic, there is 30% to 40% of patients who are in Medicare Part B fee for service that don’t have any relevant blocks and can act as the medicines. There is that the patients were there is a prior authorization and then there is a set of patients that do have a step edit. And I think physicians are just getting experience seeing how different patients actually have to move through the system.

I think as they get smarter about that and understand those dynamics, as offices get better and as we get better supporting offices, we should be able to overcome those. And as I noted, we have a very high percentage of patients covered now to the full Leqvio label. To my knowledge, there is no restrictions on which alternative injection centers and/or other administration centers that can be used that would really be impacting that perception. I think it’s just if you happen to put a certain patient on certain insurance of the first patients through the system, you do have to work through the reimbursement hurdles and get that all set up in the office, normal things for our U.S. healthcare launched in cardiovascular, things that were well adept at managing having successfully launched Entresto and things we’re working very hard to resolve as quickly as possible. Next question, operator.

Richard Parkes — BNP Paribas — Analyst

Perfect, thank you. Thank you.

Operator

Thank you. Your next question comes from the line of Richard Vosser from JPMorgan. Please go ahead, your line is open.

Richard Vosser — JPMorgan — Analyst

Hi, thanks for the follow-up, just one on the LOEs that we should expect in ’23, I think Promacta is slated but there are some formulation and use patents that might actually push that out and maybe similarly just anything out Lucentis that we should be thinking about? Thanks very much.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah. Thanks, Richard. Yeah, on Promacta, we’re continuing to work to really support all the full range of patents we have on the medicine. I think in appropriate time, if we’re successful, we’ll provide an update on Promacta, but it is something we’re very focused on and then on Lucentis, we do expect the biosimilar — a few biosimilar entries in Europe. I think it’s important to note that with the broad scale availability of Avastin, for now, many, many years that we believe the biosimilars market has in fact already happened in Europe. So we would expect a moderate decline on the launch of the biosimilars, but maybe not what you would see with other biologics when biosimilar entry occurs. So that’s how we’re forecasting Lucentis now for the coming years. And one last question, operator.

Operator

Thank you. Your final question comes from the line of Graham Parry from Bank of America. Please go ahead, your line is open.

Graham Parry — Bank of America Merrill Lynch — Analyst

Great, thanks for taking my follow-up. And so just on Gilenya, so obviously you’ve had the — overstating the decision from the appeal court and you said you’re going to petition. So, just help us understand timeframe for the petition, does that prevent a launch happening in the intervening timeframe. So your level of confidence that we won’t see a launch this year or is the guidance just a guidance assumption, but that could change depending on what happens at the court? And then just one last one, Kisqali growth is just well above prescription growth, obviously we are seeing resurgence there, is that reflective of real volume growth or could it be just a sort of prescription retail versus other channels that we’re seeing and actually that the reported growth is much more in line with the real volume growth? Thank you.

Vasant (Vas) Narasimhan — Chief Executive Officer

Yeah, on Gilenya, right now, no generics can enter the market, we are petitioning the court and we would expect to get a response from the court in the coming months. If granted, then it would be another set of months before the hearing, and then the hearing will take another set of months. As a reminder, we guided to generics entering in 2024. So really what we look at here is between now and that timeline, when exactly the entry might happen, so we’ll know more I think as the court gives us feedback once we — we have yet — we are in the process of submitting the petition. The petition would– then it need to be reviewed, either it’d be rejected at that point or the petition would be granted.

And then we would then move forward — move forward from there. So that’s kind of the scenarios right now on Gilenya, but to remind again, the longed update was anyway in ’24. So from a mid-term growth standpoint, this is not having a significant bearing. Also in Europe, where we were granted the patent — granted a patent by the European Patent Office, we expect that patents will be issued later this year and we’ll continue to defend Gilenya across Europe. So a lot of things puts and takes I think on Gilenya at the moment. And I think on your question on Kisqali, I don’t know the answer, we’ll just have to follow up — follow up with you. But we’ll get back to you on that. Make sure you’re clear on the volume price dynamic. But I would say that what we see in our numbers is a strong growth in underlying demand for just Kisqali that we’d like to sustain.

So, thanks everyone for joining the call. Apologies, we didn’t get to every single question, but I really appreciate everyone taking the time and we’ll look forward to catching up soon. Bye-bye.

Operator

[Operator Closing Remarks]