Sachin Dean

Sachin Dean asked for clarification on Q3 margins, particularly gross margin, and if Novartis can maintain stable margins next year before Avidity dilution. He also inquired about the excitement and differentiation of the anti-APRIL antibody in the IgAN pipeline.

Answer

CFO Harry Kirsch acknowledged slight negative mix effects on gross margin from genericized high-price small molecules, but noted that growing high-margin products like Kisqali partly offset this. He expects gross margin headwinds to be offset by SG&A productivity, projecting margins around 40% for the year, with a 1-2 percentage point dilution for the next 2-3 years due to Avidity, returning to 40% by 2029. CEO Vasant Narasimhan highlighted that their anti-APRIL antibody is distinct from competitors' anti-APRIL BAFF, with strong proteinuria reductions in phase 2. He emphasized a portfolio approach for IgAN, combining Vanrafia, Fabhalta, and the anti-APRIL antibody, and exploring combination studies to optimize patient care.

Sachin Dean asked for clarification on Q3 margins, particularly gross margin impact from generics, and whether margins could be maintained stable in 2026 before Avidity dilution. He also inquired about the anti-APRIL antibody's excitement and differentiation in a competitive landscape.

Answer

Harry Kirsch, CFO of Novartis, acknowledged slight negative mix effects on gross margin from generic entries but expects offsetting productivity in manufacturing and SG&A. He reiterated the guidance of 1-2 margin points dilution for the next 2-3 years due to Avidity, returning to 40% by 2029. Vasant Narasimhan, CEO of Novartis, noted that the anti-APRIL antibody (ours is anti-APRIL, competitors are anti-APRIL BAFF) will likely be third to market. He emphasized a portfolio approach with combination studies (endothelin antagonist, factor B inhibitor, anti-APRIL antibody) to optimize care and differentiate in the competitive IgAN landscape.