Novartis - Earnings Call - Q2 2025
July 17, 2025
Transcript
Operator (participant)
Morning and good afternoon, and welcome to the Novartis Q2 2025 Results Release Conference Call and Live Webcast. Please note that during the presentation, all participants will be in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions by pressing star one and one at any time during the conference. Please limit yourself to one question and return to the queue for any follow-ups. 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 Ms. Sloan Simpson, Head of Investor Relations. Please go ahead, Madam.
Sloan Simpson (Head of Investor Relations)
Thank you, Sharon. Good morning and good afternoon, everyone, and welcome to our Q2 2025 earnings call. 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 Form 20-F and its most recent quarterly results on Form 6-K that respectively were filed with and furnished to the U.S. Securities and Exchange Commission. Before we get started, I just want to reiterate what Sharon said. Please limit yourselves to one question at a time, and we'll cycle through the queue as many times as we need to. With that, I'll hand across to Vas.
Vasant Narasimhan (CEO)
Great. Thanks, Sloan, and thanks, everybody, for joining today's conference call. If we move to slide four, as you saw earlier today, Novartis delivered another strong quarter. We had double-digit sales growth, core margin expansion, and this supported an upgrade to our full year 2025 bottom line guidance. Sales were up 11% in constant currency. Core operating income was up 21% in constant currency. We also had important innovation highlights in the quarter, many of which I'll cover in the subsequent slides. Two I wanted to highlight here: OAV101 IT. We had submissions in the U.S. and Europe. We also had important milestones reached on Votoplam in Huntington's disease, as well as a few others, which I'll cover. Our core operating income guidance was upgraded, and Harry will cover that in a bit more detail.
Moving to slide five, our priority brands continued to drive robust growth, demonstrating the replacement power in our portfolio. These brands were up 30% in constant currencies. Excluding Entresto, the portfolio is up 33%. I think some of the highlights for us included KISQALI, Kesimpta, SCEMBLIX, LEQVIO also with a strong quarter, PLUVICTO, as well as Fabhalta. Moving to slide six, KISQALI grew 64% in the quarter, and we achieved TRx leadership in metastatic breast cancer and, very importantly, built strong momentum in the early stages now of our early breast cancer launch. You can see robust growth glob ally, but very strong growth in the U.S. with that eBC launch. In terms of total brand and NBRx, you can see here in the middle panel, we are now the market leader across all of the stages of the disease.
Going by geography, in the U.S., we were up 100% in quarter two. We have metastatic breast cancer leadership in both NBRx and TRx now, which I think is really encouraging. On the early breast cancer side of things, our NBRx share now has reached 61%, with leadership in both the overlapping as well as the exclusive populations to KISQALI. Outside of the U.S., we were up 25%. We've achieved metastatic breast cancer leadership in NBRx and TRx. The early breast cancer indication is now approved in Europe, China, and 18 other countries. Our first launch markets, I think, have shown us some really positive signals. They're following the U.S. trajectory. Our Germany early breast cancer NBRx share is at 71%. That also has supported strong performance in our metastatic breast cancer share as well in Germany.
Now, as you know, we have strong guideline support, category one preferred NCCN Guidelines, the only CDK4/6 with the highest ESMO scores. I think all together, this really puts together a nice story for KISQALI to continue to be one of the key growth drivers for Novartis through the next decade. Now, moving to the next slide, Kesimpta grew 33% in the quarter. This was fueled by the continued strong demand growth we see for a self-administered B-cell therapy for MS. In the U.S., we were up 28%. We had TRx growth of 23%. We're seeing access improvements translating to fewer bridge and more direct-to-paid starts, which I think is really encouraging. Our opportunity still remains the 50% of patients that are still on low efficacy therapies.
Really, in the U.S., our goal is to expand the use of B-cell therapies and then within the B-cell class continue to gain additional NBRx and TRx share. Now, outside of the U.S., strong growth as well. We're leading in NBRx share in eight out of 10 of our major markets. Many of these markets prefer self-administered B-cell therapies. Here as well, we see a significant opportunity for further growth. We estimate that 70% of patients in Europe on disease-modifying treatments are not treated with B-cell therapies. This clearly shows there's an opportunity to really expand the use of B-cell therapies and particularly Kesimpta. Moving to slide eight. One important milestone for us in the quarter was PLUVICTO returned to really, I think, robust growth, which I think bodes well for PLUVICTO as well as more broadly our RLT franchise.
It was up 30% on the quarter, driven by the pre-taxing indication approval in the U.S. That launch is off to a strong start. We saw significant quarter-on-quarter growth, 40% in new patient starts. Sales were up 25%. We had a record high number of patient starts in June, and that was expected given that we have about a four- to seven-week treatment lag time from approval and patients being introduced to the therapy and then actually coming on to the therapy based on all the testing required. Now, the success factors for us in the U.S., both in the near term and long term, are increasingly getting put in place. We're seeing strong uptake in the community setting, a 60% NBRx quarter-on-quarter growth in the community, 58% TRx in quarter two.
We estimate that nine out of ten patients are now within 30 miles of a treatment site with over 670 sites active. We have seen 40% growth in the number of sites over the last year. We believe we have the right footprint now, maybe with some limited additions. Really now we are focusing on driving additional depth in these sites, particularly within the urology setting where we see strong uptake, as well as, I think, targeted expansion in certain regions. We also saw over 50% of PSMAfore patients with HCPs who had previously used PLUVICTO in the vision setting. I think it shows as well that as we gain experience with vision, with PSMAfore, that will surely support the PSMA addition launch and then future RLTs in the future years. Lastly, our Ex-US growth continues in the vision setting.
Our growth is driven by Europe, where we're expanding the level of reimbursement in our key markets. Another word on PLUVICTO on slide nine, we had earlier in the quarter the positive phase III PSMA addition study, which we believe will pave the way now for further expansion in metastatic hormone-sensitive prostate cancer. In the study, from a top-line standpoint, our primary endpoint was met, statistically significant and clinically meaningful benefit in radiographic PFS. We saw a strong positive trend in overall survival, and that will continue to mature over time. That data will be presented at an upcoming medical congress. For context, we estimate that incidence of HSPC is very much comparable to CRPC, though there is additional competition in the HSPC space.
As I mentioned on the previous slide, what will be absolutely critical is our breadth now that we've achieved in community oncology and urology, which will support both PSMAfore and PSMA addition. Based on the FDA feedback that we've received, our submission is planned in the second half. We would plan to provide FDA the final rPFS analysis during the review, as well as an updated OS at that time point. I think we feel like we're on a very solid track to get an approval now in 2026 for PLUVICTO in this setting. Moving to slide 10. Now, LEQVIO grew 61% in the quarter and we're on track now to exceed $1 billion in sales. In the U.S., our growth was 47%, and we outpaced the lipid-lowering market. Our monthly TRx was at 56% versus a market of 35%.
We're seeing more and more depth in our key priority health systems. These health systems are health systems we've been working on for many years to really expand the use of LEQVIO as a way to manage cholesterol in their patient base. We also are seeing strong performance in the post-event patient population. We have new data from the V-INCEPTION study, and we've also seen some updated guidelines which support use in after-acute coronary syndromes. We see this patient population and this group of physicians really interested in optimizing lipid-lowering and particularly the use of LEQVIO. Now, interestingly, you can see here as well that we've had very strong performance outside of the U.S., 74% growth in constant currencies. It's driven broadly across the markets where we are approved, but particularly in China, where we see the continued out-of-pocket market expansion.
Our goal will be to continue to build the evidence base. Our pediatric submission is underway. Our global V-MONO trial is to be presented at EAS, and we continue to look to expand LEQVIO's use in the monotherapy frontline setting. We also will present the V-INCEPTION data as well. It was recently presented at a recent medical congress. Moving to slide 11. Now, turning to SCEMBLIX, where we are now in the first phases of our launch in the frontline setting, we saw 79% constant currency growth. We are on track to exceed $1 billion in sales as well in SCEMBLIX this year. We see really strong momentum in early lines, which I'll go through, and continue to have global leadership in the third line setting.
When you look at the middle panel here, you can see that from an NBRx share standpoint across all lines of therapy, now SCEMBLIX is the most widely used TKI in CML, which I think is really a testament to the strength of the data and the profile of this medicine. On the first line setting at the bottom half of the panel, you can see we've already reached 15% NBRx share. We're working hard to drive that up now rapidly over the coming quarters. Overall, we've achieved NBRx leadership, as I mentioned, across all lines of therapy in the U.S., outside of the U.S. third line leadership and increasing early line approvals. We have 48% total share in our key markets now, Ex-US. We see early line indications now coming online. We're approved in 20 countries, including China and Japan.
We also continue to expand the evidence base so that hematologists know they have the data to cover all relevant CML patients. Recent data for ASC4START and ASC2ESCALATE either have been presented or will be presented, and I think build out the overall portfolio of data for this medicine. Now, moving to slide 12. Cosentyx growth moderated to 6% in quarter two, though we continue to expect mid-single digit growth for the full year. When you look at it from a U.S. perspective, we saw solid demand for our launches in the U.S., both HS and IV. HS continued to grow with 70% of the business from naive patients. We continue to have leading NBRx share with 52% share in naive patients and 48% overall. In the IV setting, we have seen continued steady growth as well with 17% volume growth quarter-on-quarter.
What we are seeing as well is that we remain competitive in our core indication, psoriasis and AS and PsA. In the U.S., we're the number one IL 17 prescribed across indications, and that's supported by a long history of strong access. Outside of the U.S., we're the leading originator biologic in both Europe and China. That said, we are facing some geographic-specific short-term headwinds. In the U.S., we did see higher RDs in 340B and as part of the Medicare Part D redesign in the first half of the year. We do have a new competitor entry in HS, which is impacting us, particularly for switches off of Cosentyx. It is worth noting that we did have strong launch performance in the prior year, as well as a positive RD effect as well.
All of that is contributing to the slowdown we see right now in the U.S. growth. Outside of the U.S., we see pricing impacts from the new indication. As we bring the HS indication online, as is normal, we do have a price reset in certain markets, and then we grow off of that new price. We have also seen a market-wide slowdown in China. All of that said, we fully expect to be able to maintain mid-single digit plus growth over the coming years and remain fully confident in our $8 billion+ peak sales guidance for Cosentyx in 2029. Now, moving to slide 13. Turning to Entresto, we continue to see solid growth for this medicine, which I think has just been consistent now for many, many years. I did want to provide an update on the U.S. situation.
We fully met our expectation of a U.S. mid-2025 LOE from a financial planning assumption standpoint. Our IP and regulatory litigation is continuing against a single generic company who we have not settled with yet and who is currently enjoined from any launch. That is in place. Any later launch prior to the final outcome of these litigations would be at risk because we continue to prosecute our various cases that are ongoing. We will continue to monitor the situation. If we have any material updates, we will certainly provide them. We will certainly see now how the courts rule in our various cases over the coming weeks and coming months. Outside of the U.S., we have continued strong guideline position, and we have balanced geographic sales.
It's important to note that in this brand, half of our sales are coming from Europe, China, and Japan, and that in Europe, we're protected through November 2026 and continue to look at ways to extend IP beyond that. In Japan, out to 2030, also looking for additional protection there as well. Entresto will continue to be, outside of the U.S., an important contributor to Novartis growth through the end of the decade. Now, moving to slide 14. Turning to our renal portfolio now, where we have three medicines either launched or in the pipeline. We're excited to see the progress we have on our ongoing launches, as well as some new long-term data on Zigakibart, our anti-APRIL antibodies. First up with Fabhalta, we saw steady growth in the U.S., high persistency and compliance with this oral therapy.
We see a good recognition that this is a medicine that's aligned for patients with persistent proteinuria and glomerular inflammation. C3G, as well as seeing positive early launch signals, reflects a high unmet need. We are now approved in over 30 countries, including in Japan. Now, Vanrafia, our endothelium receptor antagonist. Important to note here, we're seeing very strong HCP feedback, positive feedback, given that we have no REMS, and we are seen as a seamless oral add-on to the current standard of care. We're also seeing that we're exceeding our early targets for patient enrollment, and we've had solid early access wins in the first few months now since launching. Lastly, with Zigakibart, we announced 100-week data from our ongoing phase II trial with 40 patients, which represents the longest duration of treatment for any anti-APRIL antibody to date.
In this trial, we showed clinically meaningful proteinuria reduction of 60%, sustained eGFR stabilization, and no AEs leading to treatment discontinuation. The BEYOND phase III study is on track and nearly completed recruitment now, and we have a readout expected in the first half of 2026, which would give us our third medicine potentially for patients with IgAN and related conditions. Moving to slide 15. We are also announcing today that Remibrutinib demonstrated a clinically meaningful and significant benefit in our phase II study in patients with food allergy. Here, the primary endpoint was met with patients tolerating a greater than 600 mg peanut protein challenge at week four. We also saw safety results, which were consistent with the overall safety profile of Remibrutinib. Just to take a step back, we see food allergy as a significant opportunity and one in need for an effective oral option.
You know, food allergy has a global prevalence of 3%-8%. It is over a $10 billion global market today. Allergen avoidance is seen as burdensome and unreliable. Generally speaking, I would say current treatment options are limited. To have Remibrutinib as potentially the first oral allergen agnostic treatment with a rapid onset of action could be really attractive for patients and physicians. On the right-hand side, you can see the design of the study. We will present the full results at an upcoming medical congress. Our phase III planning is well underway to advance this therapy as quickly as possible and build on Remibrutinib in CSU, phase III now in CINDU, ongoing phase IIIs, as you know, in multiple sclerosis and myasthenia gravis, and now food allergy as well. Really an opportunity here to build out this medicine in a significant way.
Now, moving to slide 16. In the quarter, we also did present our interim phase I/II data on YTB, our rapid CAR-T for immune reset in a range of immunological diseases, but here in this study in severe refractory SLE. You can see on the left-hand side the composite endpoint of the SLEDAI-2K total score. You can see that we had a very strong result that was persistent and consistent out to one year. That improvement in overall disease activity, I think, is very compelling. The safety overall was in line with what we see overall with our CAR-T experience. It's important to note we're quite rigorous in monitoring these patients and logging how we use IVIg and IL-6. I think in our estimation, this is very consistent with what we see in our experience with managing CAR-T patients.
I think very compelling, you can see on the right-hand side at screening, these patients had multiple systemic manifestations of the disease. You can see when you get out to the 12-month time point, you can see again that we have resolved most of these patients see broad resolutions other than in proteinuria, which is likely due, given how severe these patients are and how refractory they are, to ongoing kidney damage that cannot be recovered. Remarkable results. Because of the strength of these results, we feel confident now in our broad program, which you'll see on the next slide, slide 17, where we're advancing YTB in a range of autoimmune diseases. You can see here seven plus ongoing programs. You can see both a phase II and a phase I/II and a phase II study in lupus and lupus nephritis.
That's a pivotal study aligned with FDA. Systemic sclerosis, also a pivotal study. Myositis, also a pivotal study, as well as AAV, also a pivotal study. We also have early stage programs to look at refractory RA and Sjögren's disease as a basket study, as well as programs in relapsing MS, progressive MS, and myasthenia gravis. Our hope is to use this YTB as our first foray and strong foray into immune reset using a cell therapy. Behind this, we have a number of programs that look at bispecific antibodies and other approaches to achieve immune reset. It's very exciting data, and we look forward to keeping you updated. Moving to slide 18. Overall, our key innovation milestones are broadly on track.
We're on track for the quarter three readout of ianalumab in Sjögren's disease, though we don't have either study's data in-house as of yet. And you know we continue to progress our other programs on track as well. So with that, let me hand it over to Harry.
Harry Kirsch (CFO)
Yeah, thank you, Vas. Good morning. Good afternoon, everybody. I'll now talk you through our financials for the second quarter and the first half, which reflects continued strong performance of our growth drivers and overall portfolio. As always, my comments refer to growth rates and constant currencies unless otherwise noted. Starting on slide 20, net sales grew +11% in quarter two versus prior year, and core operating income grew 21%. Our core margin was 42.2%, reflecting a 340 basis point improvement. Core EPS was $2.42, up 24%. Cash flow was even $6.3 billion, up 37% in U.S. dollars.
For the first half, also reflecting a very strong growth momentum with sales up +13% and operating income up 24%. Core margin increased even a bit more given quarter one, 370 basis points reaching 42.1%. Core EPS, as you can see, $4.69, up 27%, and free cash flow almost $10 billion. Speaking of free cash flow, I think on the next slide, it's a simple slide, but I would say not less quite impressive. Right? 46% increase in free cash flow in the first half. As you know, cash flow always remains a key priority for us, as our ability to convert strong operating income growth into excellent free cash flow provides, of course, plenty of capacity to reinvest, pursue board-owned acquisitions, and return capital to our shareholders through growing dividends in Swiss francs as well as share buybacks.
This brings me to the next slide, where I'm pleased to announce that we are initiating a new up to $10 billion share buyback program targeted for completion by the end of 2027. This follows the completion of our previous $15 billion share buyback program earlier this month and is part of our ongoing commitment to a balanced capital allocation. Importantly, this new buyback does not limit in any way our ability to pursue value-creating board-owned deals and remains a key area of focus for us to continue to strengthen our pipeline and our four core therapeutic areas. A good example from the second quarter is the acquisition of Regulus Therapeutics, which adds an asset targeting the most common genetic cause of kidney failure worldwide in our renal pipeline. Alongside board-owned deals, we, of course, continue to invest in our internal R&D engine.
Beyond buybacks, our commitment to a strong and growing dividend in Swiss francs remains strong, with the payout of $7.8 billion in the first half of our annual dividend to our shareholders. Moving now to slide 23 for the full year guidance. We continue to expect high single-digit sales growth. However, strong business momentum and good progress on ongoing productivity programs has led us to raise our bottom line guidance. We now anticipate core operating income to grow in the low teens, up from the previous low double-digit outlook. Some people asked us, what is low teens versus low double-digit? Low double-digit, we see in the range of 10-12%, and then low teens in the 13-14% range. Embedded in our guidance is the assumption that Entresto U.S. generic entry occurs mid of 2024 to mid of 2025.
However, I want to emphasize this is only for financial forecasting purposes. Of course, we will continue to appropriately enforce our valid IP and regulatory rights that hopefully lengthen that assumption. As a reminder, U.S. Entresto sales were $1.2 billion in quarter two, so each month of sales is worth $400 million for us. To complete our full year guidance, please note that we continue to expect core net financial expenses to be around $1 billion and our core tax rate to be around 16%-16.5%. Now let's move to the next slide. Yeah. I want to talk you through the phasing we expect for the remainder of the year.
Usually, as you know, we do not give such detailed quarterly guidance, but in the potential transformation year with Promacta and Tasigna U.S. generics, and depending on Entresto dynamics, I hope this is helpful to describe how our forecast scenario could unfold over the next couple of quarters. Should Entresto generics in the U.S. enter later in July or August? Clearly, if we are successful in the ongoing IP and regulatory litigation, this forecast scenario looks different without Entresto U.S. generics. With this forecast assumption for the second half, we anticipate mid-single-digit sales and bottom line growth to arrive at the guidance we have given for the full year after a very strong first half. However, the dynamics in quarter three and quarter four would be quite different. We continue to expect strong growth in quarter three based on continued momentum in our priority brands.
Of course, if there would be a generic entry, there would be initially in quarter three a bit less of an impact, even though we would expect then multiple entries on Entresto. In quarter four, however, we anticipate a step down in growth on both top and bottom line. This would reflect the full quarter impact of potential U.S. generics in the Entresto U.S. generics based on our financial forecasting assumption, as well as a quite large prior year growth to net adjustment. You may recall when we reported quarter four last year, we reported 16%, but actually the underlying excluding out-of-period growth to net adjustment was 13%. Quite a big on top line. Then, of course, the bottom line of that is like two and a half times in terms of growth rates. Right?
Therefore, if you would exclude this prior year one time, we would have a quarter four and a mid-single-digit sales growth and a mid to high single-digit core operating income growth. I hope that was not too complicated. In case it was, we have, of course, the call to answer questions, or our IR colleagues will take you through it later in the week. Now, let's move to the final slide, where we outline the expected currency impact for 2025. If mid-July rates were to prevail for the remainder of 2025, we would expect the full year currency impact to be a +1% on net sales and a -1% on core operating income.
As a reminder, we always publish these estimates on a monthly basis, assuming the exchange rates always move, would hold for the rest of the year, and it is on our website, which we hope that you find helpful. With that, back to Vas.
Vasant Narasimhan (CEO)
Great. Thank you, Harry. If you can move to slide 27. In summary, Novartis delivered a strong quarter two, double-digit sales growth, core margin expansion, continuing now, I think, our 10th quarter in a row of being able to raise our guidance. Key launches are accelerating with consistent strong execution. We saw that particularly with KISQALI, SCEMBLIX, and PLUVICTO, but broadly across the portfolio. We also continue to advance our pipeline with exciting readouts, including the PLUVICTO HSPC readout, as well as now the Remi food allergy and the YTB readouts. We have upgraded our full year 2025 bottom line guidance.
Importantly, with our current outlook, we remain highly confident in our mid to long-term growth outlook. This gives us the confidence as well to take on another $10 billion share buyback. Now, moving to slide 28, I did want to say a word about the announcement we made earlier today as part of an orderly transition, which we're always committed to. First, I want to thank Harry for his unwavering commitment and over 22, with over 22 years at Novartis. At the end of this year, Harry will have completed 13 years as CFO and I think truly one of the great leaders in the history of our company, being able to reshape Novartis into the pure play medicines company we are today. Very grateful and very indebted to Harry for all of his amazing contributions.
He will retire and step down from the ECN effective March 15th, 2026. A warm welcome to Mukul Mehta, who will join us as our new CFO and join the ECN effective March 16th, 2026. Mukul joined Novartis in 2003. He has done all of the key finance roles across the company. After a rigorous selection process, he was clearly the best leader, we believe, to lead Novartis into this next chapter. A big warm welcome as well to Mukul. With that, I think we can open the line to questions.
Operator (participant)
Thank you. To ask a question, you will need to press star one and one on your telephone and wait for your name to be announced. Please limit yourself to one question and return to the queue for any follow-ups. To withdraw your question, please press star one and one again.
We will now take the first question. Your first question comes from the line of Sachin Jain from Bank of America. Please go ahead.
Sachin Jain (VP)
Hi there. Thanks for taking my questions. First one on Sjögren's, actually, if I may. Vas, thanks for confirming no data in-house. When you can just update on your level of confidence into a phase II data 3Q. Can you just clarify whether you need both studies to be positive for a filing process? Thank you.
Vasant Narasimhan (CEO)
Yeah, thanks, Sachin. On Sjögren's, look, I think this is an incredibly exciting opportunity, but I think we should acknowledge that there's been no drug that's ever been demonstrating a benefit, a statistically significant benefit on the SI. I think we go in with a very strong phase II data.
We believe very much in the mechanism, but also acknowledging this is a tough indication. It definitely has risk going into the phase III. Now, in terms of whether or not both studies, I think that really depends on the data. We've had very robust discussions with FDA, both on the primary endpoint and secondary endpoints where we have full agreement. I think based on the data on the two studies, we'll, and of course, given that one study has a third dose level or dosing that's every three months versus every month, I think we'll have the opportunity to look at different statistical approaches and then find the best path forward. We're looking forward to getting to the database locks and then ultimately the readouts.
And then given that these studies are very close together, we would plan on informing the markets based on the results of both studies at the same time.
Sachin Jain (VP)
Thank you.
Vasant Narasimhan (CEO)
Next question, Operator.
Operator (participant)
Thank you. Your next question comes from the line of Shirley Chen from Barclays. Please go ahead.
Shirley Chen (VP of European Pharmaceuticals Equity Research)
Hi. Thank you for taking my question. One on Cosentyx. You called out a slowdown in Cosentyx uptake in China due to broader-based healthcare spending tightening. Can you please share more about how significant this impact is relative to your assumptions and whether it is affecting the broader portfolio? How are you adapting your China strategy to maintain growth in the face of increasingly constrained government pricing? Also, something interesting that you mentioned on lack of growth from out-of-pocket in China.
Do you think it will be the case for your other products for the commercialization in China? Thank you so much.
Vasant Narasimhan (CEO)
Yeah, thank you, Shirley. For China broadly, we have seen over the first six months of this year a notable slowdown. Our China business last year was growing over 20%, and we saw very robust overall market growth as well. This year, we have seen a broad, at least on to the data we're seeing, sector-wide slowdown in pharmaceutical spending. We see our growth coming down as well. We continue to expect to see China grow for Novartis in the high single-digit to low teens range. Still very robust growth.
We do see this, though, as I think a reset in the market because a number of the policies that have been put in place to limit prescription spending, I think, will continue on for the years to come. We continue to see China as a double-digit growth market for Novartis, but maybe not at the 20% plus range where we've been historically. This is impacting the portfolio broadly, primarily medicines that are part of the NRDL listing, as you noted, not medicines that are private market, and particularly medicines that are higher volume medicines. We saw the impact primarily in Cosentyx and Entresto, drugs like Lucentis. These were the medicines where we saw the largest impact through the first six months of the year. We expect this to stabilize in the second half.
Now off of this base, we'll continue to, as I noted, to see our business grow in that high single-digit to low teens plus range. In terms of, and this is fully factored into our midterm guidance, long-term guidance, so no shifts in guidance because of this with respect to China. In terms of LEQVIO out-of-pocket, it has been, I think, a pleasant surprise to see how strong that uptake has been. I think it does give us confidence that in the future, when we launch medicines of a similar profile, we can go out-of-pocket and then make a decision whether it makes sense to move into the NRDL listing at a lower price versus continuing in the out-of-pocket. I think that is an ongoing debate for us right now as to when we will move LEQVIO into the NRDL listing.
I think seeing that out-of-pocket market materialize in China, I think, is also positive overall for the sector.
Next question, Operator.
Operator (participant)
Thank you. Your next question comes from the line of Peter Verdult from BNP Paribas. Please go ahead.
Peter Verdult (Managing Director of Pharmaceuticals Equity Research)
Yeah, thanks. Peter Verdult, BNP Paribas. Vas, I'm probably the millionth person to ask you. I'm sure you're tired having to respond, but the sector is under a cloud. Investor apathy is high. Concerns more on pricing than tariffs. Is there anything you can share with us in terms of latest you've heard from CMS, HHS, your people on the hill about what the administration is thinking about in terms of framework implementation or when we might hear what they plan to do going forward on drug pricing in the U.S.? Thanks.
Vasant Narasimhan (CEO)
Yeah, thanks, Peter.
Not at all, happy to have that discussion because it keeps evolving on an ongoing basis. I would say, broadly speaking, that the conversations with the administration from the Novartis standpoint have been productive, very open dialogue, trying to find solutions. The goal is very much to see how we can have the markets outside of the U.S. in the OECD pay more for innovative medicines, which we fully support, to really reward innovation and help support the R&D efforts of the industry, as well as give patients in the U.S. options for lower-priced medicines, in our view, primarily through going more direct and cutting out much of the 50%-60% that goes to PBMs, 340B, all of the other elements in the system. That is where we are trying to find the solution space. We are moving forward with proposals.
HHS is also evaluating our proposals, and we're looking at the different options. I think it'll still be some time before we get to full resolution. I'd say there's a strong desire within the administration to maintain U.S. leadership in biopharmaceutical innovation and not cede that leadership to China or any other market. I think that's very much high on their minds to ensure they get the balance right. I think that's what we're continuing to work towards.
I think we also have to do a better job educating more broadly about the fact that in the U.S., while there is a disparity in innovative medicine spend overall, given that 94% of volume in the U.S. is estimated to be generic medicines, and the U.S. has the lowest generic prices amongst the major OECD countries in the world, that actually the U.S. total drug bill, when it's appropriately volume adjusted, is actually lower than many of the countries overseas, most of the countries in the OECD. We just have to keep educating about these dynamics that the U.S. system works extremely well. It rewards innovation during the patent period, but then is extremely effective at genericizing medicines as well. I think that's something we need to do a better job of in educating policymakers. Yeah, thank you very much for the question. Next question, Operator.
Operator (participant)
Thank you. Your next question comes from the line of Simon Baker from Rothschild and Company Redburn. Please go ahead.
Simon Baker (Partner and Head of Global Biopharma Research)
Thank you for taking my question. One on Cosentyx, please. Just wondering if you could flesh out a few elements from the slide. Firstly, can you give us any more color on the price volume dynamic so far this year? Also, if you could elaborate a bit more on your comments on the competitive environment and why you see that as a temporary factor rather than an ongoing headwind. Thanks so much.
Vasant Narasimhan (CEO)
Yeah, so I'll give the price volume dynamics to Harry. Harry?
Harry Kirsch (CFO)
Yeah, overall, of course, in Cosentyx, we do have an impact as we laid out due to the Medicare Part D redesign. Rebates go up as we contribute in the catastrophic phase versus the prior design where we did not do that.
The two brands where you see is major mainly in our portfolios, Cosentyx and KISQALI. Obviously, KISQALI launched completely kind of overweighs that. Cosentyx has some impact also. Of course, there is also then the effect that last year, the HS launch really got momentum as of quarter two. The comparable base is quite high.
Vasant Narasimhan (CEO)
Thanks, Harry. In terms of the competitive entry, I think, Simon, the way we see it is often, and we have experienced this many times over the last decade with Cosentyx, is that when a new competitor enters, there is an initial impact, and then the market settles down into a new dynamic. I mean, when you look at it, Cosentyx is very strong frontline access across all of the relevant indications, including HS.
The opportunity we see is that while initially now during the launch of the competitor, patients who were not achieving full control on Cosentyx monthly, let's say after nine months or one year, were switching off to the competitor product. We see the opportunity to educate more that there's the option to move to a bi-monthly increase and effect increased dosing of Cosentyx to achieve disease control. I think as we do that, we'll be able to moderate some of the switches off of Cosentyx. Second, we continue to see the opportunity where we have very strong performance in that first switch off of the anti-TNFs. There as well, I think we're going to continue to work to do better. That will become, I think, a solid source of growth for Cosentyx and HS.
Taken together, we continue to see HS as a $3+ billion market and Cosentyx as a brand that can deliver $1 billion of sales in HS, which gives us confidence overall in our $8 billion peak sales guidance.
Harry Kirsch (CFO)
Great. Thanks so much.
Vasant Narasimhan (CEO)
Next question.
Operator (participant)
Thank you. Your next question comes from the line of Richard Vosser from JP Morgan. Please go ahead.
Richard Vosser (Managing Director)
Hi. Thanks for taking my question. Just one more on Cosentyx. Just as we look out with that, I think, mid-single-digit growth that you implied to 2029, how should we think about direct negotiation towards the end of that period? Do you think Cosentyx will get hit by that in terms of the IRA, or should we not be expecting that? Thanks very much.
Vasant Narasimhan (CEO)
Yeah, thanks, Richard. We've factored IRA into all of our guidance. So that'd be the first point.
I think Cosentyx overall, we estimate to be about 30% of our sales are exposed to Medicare pricing. Certainly, there will be an impact, but overall, we think can be managed appropriately, and that is factored in as well into the guidance we have. I think overall, also with IRA, I think it was a net positive that the Orphan Cures Act was enacted as part of the recent reconciliation package, which enables medicines to have multiple rare diseases as part of without having to give up the medicines exclusion from the IRA negotiation price setting. I think that's a positive overall as well for the sector. All factored in, and at 30%, we think manageable.
Richard Vosser (Managing Director)
Excellent. Thanks.
Vasant Narasimhan (CEO)
Next question, operator.
Operator (participant)
Thank you. Your next question comes from the line of Michael Leuchten from Jefferies. Please go ahead.
Michael Leuchten (Managing Director)
Thank you very much. [audio distortion]
It looks like the.
Operator (participant)
Apologies, Michael. We cannot really hear you. Your audio is really bad.
Michael Leuchten (Managing Director)
Okay. I shall try again. Thank you. Question on Fabhalta. It looks like the IgAN as well to C3G performance is quite well. You've got Zigakibart coming, but the way you frame the product and the opportunity still seems a little bit conservative. I was just wondering, what are you looking for to maybe become a bit more optimistic about the performance of the overall franchise?
Vasant Narasimhan (CEO)
Yeah, I think overall with Fabhalta, we believe each one of these indications can stack up to be a billion, billion, and get us over to our peak sales guidance for this medicine overall.
I think there's clearly the opportunity in IgAN, where we've positioned the medicine with the higher pricing that we've set just to get physicians more and more comfortable with using it in that later line setting. C3G, I think as well, good opportunity. PNH, we're seeing continued uptake as well. I think we're very optimistic overall in the brand. The intention was not to show a lack of optimism. More, I think that this will be a steady climb. I don't think we're going to see a rapid inflection. It's going to take time as we build out IgAN, as we build out C3G, in PNH, as we work through the various vaccination requirements.
I mean, every one of these things will have to be worked through, and then step by step, as we add more and more indications, we think we'll get to that significant peak sales that we've guided to.
Michael Leuchten (Managing Director)
Thank you.
Operator (participant)
Thank you. Your next question comes from the line of Emmanuel Papadakis from Deutsche Bank. Please go ahead.
Emmanuel Papadakis (Managing Director and Pan-Euro Pharmaceuticals Equity Analyst)
Thank you for taking the question. Perhaps I'll take a question on Remibrutinib, if I may. Intriguing to hear about the positive phase II in food allergy. Perhaps you could just give us an indication of how that compares to the Xolair data in the setting and perhaps your willingness to go head-to-head in phase III to round out the profile. Then maybe just a reminder on your expectations, the speed of commercial CSU launch, assuming approval later this year, would also be helpful. Thank you.
Vasant Narasimhan (CEO)
Yeah, thanks, Emmanuel.
On food allergy, obviously, we'll present the data at an upcoming medical congress. We see the results as very compelling relative to Xolair, particularly for an oral option in this setting. Xolair has been effective and successful in food allergy, but I think having an oral therapy, very strong clean safety profile. When we looked at the comparable cross-trial comparisons, we saw, I think, pretty compelling overall profile. We feel pretty good about that. I think the opportunity will clearly depend on how broad an indication we can ultimately get. Over time as well, moving into the adolescent, more pediatric range with Remibrutinib. Yeah, I think overall favorably positioned. In terms of head-to-head studies versus Xolair, all under evaluation. I mean, we got these results just a few weeks ago.
I think we're currently evaluating what is the optimal phase III, but also phase III-B, any additional studies we'll need to do to ensure Remibrutinib is appropriately positioned versus biologics. Now, in terms of CSU, we're quite excited. We think there's a significant opportunity here. When you look at Remibrutinib's profile, having a drug that is able to work after two weeks and then have this consistent ability over 52 weeks to manage the symptoms of urticaria, CSU, I think is very compelling. We expect both in the U.S. and ex-U.S. there to be strong patient and physician demand. We'll see how the first months go, but I think it could be hopefully an attractive uptake in the early months.
I'd also note, I mean, we're doing a head-to-head versus dupilumab to really show that in that early period where patients want resolution, that we can demonstrate a stronger profile than a biologic. That will also, I think, be important data that we'll get out there as well. We're investing heavily to make Remibrutinib as significant as possible. CSU, CINDU, food allergy. We have the HS study ongoing. We have the two MS studies ongoing. We'll try to maximize this medicine over the coming years.
Emmanuel Papadakis (Managing Director and Pan-Euro Pharmaceuticals Equity Analyst)
Thank you.
Vasant Narasimhan (CEO)
Next question.
Operator (participant)
Thank you. Your next question comes from the line of Harry Sephton from UBS. Please go ahead.
Harry Sephton (Director of Pharma Equity Research)
Thank you very much. I just wanted to follow up on MFN. How does the industry go about getting ex-U.S. countries to pay significantly more? Presumably, this wouldn't be on current products, but only new product launches.
In this case, would the consequences of this be fewer new product launches in markets that do not accept your price? Thank you.
Vasant Narasimhan (CEO)
Yeah, I think it is all good questions, and I do not think there is a single easy answer. What I would say is in the medium to long term, there are a few things that the industry is strongly advocating for, particularly with respect to trade negotiations. I think with the trade negotiations, we feel strongly that when you look at the percent of spend on innovative medicines relative to GDP, you see that the U.S. is significantly higher than most of these OECD markets. One, can we get a commitment from these key markets to increase their funding for innovative medicines as part of their overall government budget?
If we could get that into trade negotiations, that would at least set the bench, the actual pool of money available up. I think separate from that, there's a few specific policy changes that we continue to advocate for as part of the trade negotiation, but also independent of the trade negotiations. One is to end the practice of clawbacks for above-sector growth or above-benchmark growth. Many European countries, when the sector grows faster than an artificially set growth cap, the growth has to get reimbursed back. The practice that when you have new indications, which you've invested for, that benefit more patients, that you face a price cut rather than at least price maintenance, much less a price increase because you've demonstrated more patients can benefit. I think there's clear policy solutions as well.
Now, I think clearly, depending on how the MFN policy, if it does get rolled out or how it gets rolled out, there will be situations where we would have to leave medicines, us, but also every other company in the sector, in the private market and not go into government reimbursement. I would say that's likely where you'll see a shift in thinking. If there are markets that require you to go into the public market, then of course, you'd have to consider not launching in those markets. I think all of this is TBD, and it all depends on the details of how the policies are created and set.
Harry Sephton (Director of Pharma Equity Research)
Brilliant. Thank you.
Vasant Narasimhan (CEO)
Next question.
Operator (participant)
Thank you. Your next question comes from the line of James Quigley from Goldman Sachs. Please go ahead.
James Quigley (Executive Director)
Great. Thank you for taking my questions.
Firstly, congrats, Harry, on the retirement and all the best for the future. I've got a question on PLUVICTO. Obviously, you've highlighted some encouraging metrics following the PSMAfore launch. How are you thinking about using earlier lines? I know you have PSMA addition. Patients tend to typically be a bit younger here. A few carers we've spoken to have suggested that they may think twice about radioligand therapy due to potential impacts on continence and sexual function. Is this consistent with what you may be hearing, or could this be more of a minority view? Are there any differences in sort of geographic launch you're expecting in the earlier lines? Maybe less worries in the U.S. versus Ex-U.S. Related to that, how could the Actinium PSMA fit into, which is just moving to phase III?
How could that fit into the markets as you position towards earlier lines as well? Thank you.
Vasant Narasimhan (CEO)
Yeah, thanks, James. We haven't heard that feedback. I think PLUVICTO's safety profile is quite compelling. I think with respect to sexual function and chemical castration, I mean, that really is a consequence of some of the other hormonal therapies that these patients are on. I think a question could become, could we get to a point where we get early enough where you don't have that impact on patients? PLUVICTO itself, primary topics are, generally speaking, salivary gland and bone marrow, and some of the hematologic side effects. I think we feel pretty confident overall. In fact, what we usually hear is that people are struck by how well-tolerated PLUVICTO is in various patient populations.
I do think as we move earlier lines, there is more competition. There will be, I think, different ways that PLUVICTO might end up being used. We expected with the compelling RPFS data and as the OS data hopefully matures in the right direction, we would have a very compelling case for significant use in HSPC where it is used on top of standard of care. Of course, in the pre-chemo and post-chemo settings and CRPC. Overall, I think we feel pretty confident that PLUVICTO will continue on the peak sales guidance that we have laid out. Now, Ex-U.S., I think the topic in Ex-U.S. is a little bit different. You asked Ex-U.S. Ex-U.S. really comes down to the comparator choice. We have designed these studies very much with the U.S. in mind.
Depending on the geography or country in question, there is sometimes a request for different comparators, and then we have to decide, is it worth doing those additional studies or not? Certainly in the vision population, we've already launched in multiple European markets and preparing to launch in Asia. We think with the PSMA addition trial design, we have a very compelling case to have that launched. Probably the one where there's a little bit more geographic variability is the PSMAfore study. Now, in terms of the Actinium, the current plan is to move that in the post-PLUVICTO setting. For patients who are progressing on PLUVICTO, then switch from a beta-emitter lutetium to an alpha-emitter Actinium to see if we can obtain control or achieve control of the cancer.
There is the question as well, if safety profile is compelling, could we go even earlier with an Actinium-based PSMA? I mean, I think that is still an open question as to with lutetium, given the long history we have now, both with LUTATHERA and PLUVICTO, that we have a very compelling safety profile and safety understanding. I think with Actinium, still a lot to learn, figuring out what is the dose interval, what is the appropriate dose in different patient populations. It is, as an alpha-emitter, can be stronger on certain tissues. Those are all things we're working through. We have multiple PSMA Actiniums in-house, and we're working through what's the right approach. The phase III you see right now is in post-PLUVICTO patients in the CRPC. I could see if we move it earlier in subsequent trials. Next question, operator.
Operator (participant)
Thank you.
Your next question comes from the line of Kerry Holford from Berenberg. Please go ahead.
Kerry Holford (Head of Global Pharmaceutical Equity Research)
Oh, thank you for taking my question. On capital allocation, the new share buyback program, $10 billion, it's clearly smaller than the size of your previous program and to be spent over a similar timeframe. Just interested to understand why you're more conservative here going forward. Does this signal a growing appetite, perhaps, for more business development over that timeframe or any other expected demands that will change on your future cash flow? Thank you.
Vasant Narasimhan (CEO)
Thanks, Kerry. Harry?
Harry Kirsch (CFO)
Yes. Thank you, Kerry. First of all, we are absolutely convinced of our five-year plan, 5% sales CAGR, and with that, continued core operating income and free cash flow growth. Clearly, strong cash flow. Last year, $16 billion. This year, already $10 billion in the first half. Continued very good cash flow growth.
Now, $10 billion, smaller than $15 billion. Recall the last two $15 billion programs, we basically also started after we sold our Roche stake at a very high price and got like $21 billion, $22 billion for it with a $14 billion profit at the time. That, of course, was then also an element of that. I would say we are almost kind of returning back to the prior $10 billion share buyback rhythm we had. We want to have a balance here. We continue to look, of course, after bolt-ons. It is not for lack of trying or any risk aversionist. We would like to find more bolt-on M&A opportunities to continue to further strengthen our pipelines. We strongly feel that at $10 billion over two and a half years is a nice balance versus also BDNL and M&A.
From that standpoint, I feel it's a good element of continued balanced capital allocation.
Vasant Narasimhan (CEO)
Thanks, Harry. Next question.
Operator (participant)
Thank you. Your next question comes from the line of Thibault Boutherin from Morgan Stanley. Please go ahead.
Thibault Boutherin (Executive Director of Equity Research)
Thank you. Just a question on YTB and the immune reset opportunity. Clearly, strong early results. I noted that you are calling the phase II reading out from 2027 as pivotal. If you could replicate similar results in that study, are you confident you can file from 2027? If you could just sort of frame a bit the opportunity, should we think about this as for highly refractory patients, more like a niche market, and would you have to wait for next generation? I think you mentioned bispecific. Or could we already see a big opportunity with the first generation CAR-T?
Vasant Narasimhan (CEO)
Yeah, great question.
Right now, our assumption is in the four pivotal studies that with highly positive data in 2027, we could file. Yes, we could file based on that data. We would still have to do randomized phase III studies likely as well as follow-ups. Our expectation is if we could replicate this level of results, we would be able to file off of that data. It does create the potential, but data-dependent and data-driven for launches in the 2028 time period. In terms of the market size, we're continuing to, starting now, to really do more detailed work to figure out what proportion of patients would be willing to undergo the procedures needed for CAR-T, primarily the bone marrow ablation to create space for the engraftment of the CAR-T cells. I think it's early days.
Our hope is that this, though, very much is a multi-billion dollar opportunity, that across these indications, we create a multi-billion dollar brand. That clearly, if we're able to manage the side effect profile and make it more accessible to a broader group of those refractory patients, could be even larger than that. That is certainly the aspiration and why we go so broadly. I think it's important to note these are a group of patients that are no longer able to have any additional options or few additional options. They generally have relatively severe outcomes. You are seeing almost the disease, if not completely reset, turned back decades by this kind of therapy. It is really a remarkable result.
We'll get a better understanding of the demand, but I would say it's a multi-billion dollar opportunity with the potential to be more based on how we see the phase III results or phase II results play out. Next question.
Operator (participant)
Thank you. Your next question comes from the line of Michael Nedelcovych from TD Cowen. Please go ahead.
Michael Nedelcovych (Director of Pharmaceuticals Equity Research)
Hi. Thanks for taking my question. I have a question on the cardiovascular pipeline. At the meet management event late last year, Novartis expressed the ambition to have multiple arrhythmia assets in the clinic by 2025. I'm just curious if you could give us an update on that effort. Thanks.
Vasant Narasimhan (CEO)
Yeah. Great question. We are progressing now. We hopefully will soon have the okay on an IND to move now into the clinic on a novel agent for control of AFib.
That would then enable us, hopefully, for a first patient first visit this year. We would hopefully have one or two additional agents. May not make it this year, maybe early next year. The goal very much is to have a portfolio of agents targeting AFib and then potentially as well ventricular arrhythmias. We've also signed a few licensing agreements for preclinical stage assets, which are also now advancing. There was an HDAC. We are looking at that to accelerate those as well. We see this as an area where we have unique expertise, probably one of the few companies still going after addressing cardiac arrhythmias. Obviously, if successful, market sizes here are quite large. The opportunity to use a medicine versus using the device-based cardioversion is quite compelling for patients. Thank you. Next question, operator.
Operator (participant)
Thank you.
Your next question comes from the line of Florent Cespedes from Bernstein. Please go ahead.
Florent Cespedes (Senior Analyst of European Biopharmaceuticals)
Good afternoon. Thank you very much for taking my question. A quick one on Entresto, please. Could you maybe remind us what is the next step for the U.S. if the generic does not reach the market? When do you expect the appeal court decision? And could you remind us when is the next patent expiry and also your view on IRA? Thank you.
Vasant Narasimhan (CEO)
Yeah, Florence. There are three cases ongoing. We have the current amorphous complex case where we have a temporary preliminary injunction. We are fully briefing the court. We very much are of the view that that preliminary injunction should be upheld. We would have an appeals case where we would continue to defend the amorphous complex patent.
We have ongoing litigation on the FDA's label carve-out and whether that label carve-out is appropriate. That appeal is ongoing as well. We have the trade dress topic as well where we continue to look at our options on the trade dress. This is all with respect to one generic filer, given that all of the other generic filers have settled with us. That is where we stand. Very difficult for me to comment on timelines. I think at this point, we will see. If there is a material update, we will update you accordingly. I think on the IRA topic, we continue to expect Entresto to face, as planned, IRA in 2026. We can say that the IRA pricing is in line with our current net pricing overall.
From a pricing standpoint, if we were able to maintain Entresto into 2026, given all the legal proceedings, our net pricing would continue to be in the range of where we are this year. The upside that Harry outlined would continue for every month that Entresto is on the market, independent of the IRA, broadly speaking, with some nuances, of course. Harry, anything you'd want to add?
Harry Kirsch (CFO)
No, it was perfectly correct. Thank you very much.
Vasant Narasimhan (CEO)
Perfect. Thank you.
Florent Cespedes (Senior Analyst of European Biopharmaceuticals)
Thank you very much.
Operator (participant)
Thank you. Your next question comes from the line of Seamus Fernandez from Guggenheim. Please go ahead.
Seamus Fernandez (Senior Managing Director)
Thanks so much for the question. Notice the update on HS as it relates to the ianalumab opportunity. Can you just help us understand how you're thinking about the overall B-cell opportunity here in other conditions, particularly as it relates to Sjögren's disease as we advance there?
But also, do you feel that there is a unique opportunity from your learnings in that program for B-cell targeted therapies in HS specifically? Thanks so much.
Vasant Narasimhan (CEO)
Yeah, thanks, Seamus. While we continue to pursue Remibrutinib in HS and ianalumab, we did not see the compelling results we had expected. The reason we had thought that there could be an opportunity is we do see upregulation in HS patients and HS lesions. We thought there could be an opportunity there. It is important to note that we did not have phase II data or proof of concept data per se that really supported that. It was more a hypothesis. It does not really shift our conviction on Sjögren's disease, on lupus nephritis, on SLE, or on the multiple ITP indications and autoimmune hemolytic anemia indications that we have ongoing.
We continue to see those as all B-cell-driven diseases and where we think that tissue-resident B-cells, which is particularly where ianalumab targeting an anti-BAFF monoclonal antibody would be effective. Now, to your question more broadly, certainly we're learning a lot between Remibrutinib as an oral BTK, anti-BAFF with ianalumab, our program on immune reset with YTB, our emerging programs on bispecifics, on truly trying to get to the next generation of B-cell management and B-cell control. Clearly, anti-CD20s have set the foundation here. The opportunity here is as we get smarter about all of the B-cell lineages and understanding which lineages we want to affect in different diseases, we have the opportunity, obviously, to have better and better disease control. We definitely do learn a lot. We run many of these programs as basket studies to try to get as much information and data as possible.
As I said, I think we'll learn a lot in the coming years between ianalumab, the Remibrutinib program, and the YTB program. That hopefully will then inform the next generation of medicines once we get those medicines through pivotal studies. Thanks, Seamus. Next question.
Operator (participant)
Thank you. Your next question comes from the line of Rajesh Kumar from HSBC. Please go ahead.
Rajesh Kumar (Head of European Life Sciences & Healthcare Equity Research)
Hi there. Thanks for taking my question. Just in terms of capital allocation, appreciate that you're doing a share buyback at the moment. How much during the same period would you allocate for M&A? Just thinking through the current valuations, clearly, there would be assets which are complementary to your portfolio, which might be available at more attractive valuation right now. Can you run us through the rationale of prioritizing a share buyback increase over capital allocation towards M&A at this junction?
Vasant Narasimhan (CEO)
Thanks for the question, Rajesh. Harry?
Harry Kirsch (CFO)
Yeah, thank you, Rajesh. We are not prioritizing share buybacks over a board on M&A. We are constantly, and our team is, we have an excellent BDNL and M&A team that has done over 30 deals over the last two years. We are also happy to look at bigger board-ons if they're available, they have great assets. Look, we have $16-plus billion free cash flow growing clearly as we go forward. With the dividend level we have, we have only one-time net debt over EBITDA. Our balance sheet has significant flexibility and, if you call it so, firepower. If we find an attractive asset at an attractive price that is creating a likely very good return for our shareholders, we will try to get that asset. It is not for lack of trying.
We are not prioritizing share buybacks over board on M&A at all. It is about how much can we find in terms of excellent assets that would support our 40As.
Vasant Narasimhan (CEO)
Thanks, Harry.
Rajesh Kumar (Head of European Life Sciences & Healthcare Equity Research)
Understood.
Vasant Narasimhan (CEO)
Next question.
Operator (participant)
Thank you. As a reminder, if you would like to ask a question, please press star one and one on your telephone and wait for your name to be announced. Please limit yourself to one question and return to the queue for any follow-ups. We will now take the next question. The question comes from Simon Baker, Rothschild & Company. Please go ahead.
Simon Baker (Partner and Head of Global Biopharma Research)
Thanks for taking my second question. Vas, I just wanted to return to a comment you made about pricing outside the U.S. and moves to stop clawback.
There seems to be quite a lot of activity from your peers with respect to that in the U.K. at the moment, either directly or indirectly, to reform VPAG. I just wondered if you could give us an update on what you've been participating in and learning about potential changes in the U.K. Thanks so much.
Vasant Narasimhan (CEO)
Yeah, thanks, Simon. There's been, I think, active engagement. I think I appreciate the U.K. government now actively looking at VPAG, which is the system they have in the U.K. to cap the pharmaceutical market growth and then basically ask the industry to rebate back or refund back certain levels of growth, beyond certain levels of growth. I think there have been productive engagements and discussions.
I think we're still trying to work through an agreement that we think actually achieves the U.K.'s goal of building a vibrant biopharmaceutical sector, which is the stated goal of the government at the moment, as you know. It's a very challenging environment with NICE and the overall reimbursement environment in the U.K., where actually the reimbursement levels are almost at the level of middle-income countries, and uptake is quite slow. Our goal very much as an industry is to get to a much better place. I think that's also the government's goal. The question is, can we find common ground in these discussions? That is an ongoing process that, yes, I think many of us are involved in or trying to shape.
Simon Baker (Partner and Head of Global Biopharma Research)
Great. Thank you.
Operator (participant)
Thank you. Your next question comes from Harry Sephton from UBS. Please go ahead.
Harry Sephton (Director of Pharma Equity Research)
Brilliant.
Thank you very much for taking my second question. Just one on PLUVICTO, please. We saw an acceleration in growth in the second quarter over the first quarter, but presumably PSMAfore did not really pick up meaningfully until the end of the quarter. I just want to get your thoughts on the expectation for further acceleration in the third quarter. Maybe just also on the average doses for PLUVICTO. I think to date, we have seen that being about four. Do you expect any difference in the earlier setting? Thank you.
Vasant Narasimhan (CEO)
Yeah, absolutely. Harry, I think you are right that we saw the primary impact of PSMAfore, I would say, in the last four to six weeks of quarter two, when patients post the approval had gone through the necessary pre-treatment procedures to be able to ultimately get the treatment.
I think we'll hopefully see a continued acceleration now over the second half of the year. I think we'd see steady growth, steady acceleration. I don't expect to see necessarily a "hockey stick," but I think it'll be steady acceleration over the second half of the year, particularly as we get deeper into the community and get more and more of those community centers to move from a few patients then to hopefully multiple patients and then hopefully teams of patients on therapy in their clinics. In terms of the average dosing level, you're correct that in the vision setting, we were historically in the kind of 3.7-3.9 range, somewhere something like that, versus the six doses that are estimated. It's very early days, but we do see a positive trend up on the number of doses per patient.
I think we're going to have to have a couple more quarters. We would expect that in earlier settings where patients tend to live longer, they tend to be healthier, may not progress as quickly, that we hopefully will get closer and closer to the stated labeled dosing of six doses. That is certainly the aspiration. Hopefully in HSPC, we can certainly get there given the health of those patients. I think one of the other notable things as well is that in terms of the efficacy that we're seeing, clearly going earlier, you also see a more robust effect, likely because you see a better, more consistent PSMA expression and perhaps fewer cells that have mutated away from PSMA expression. You see then, I think, the robust efficacy we're seeing in PSMAfore and then the top-line data on PSMA addition.
Harry Sephton (Director of Pharma Equity Research)
Brilliant. Thank you.
Operator (participant)
Thank you. Your next question comes from the line of Kerry Holford from Berenberg. Please go ahead.
Kerry Holford (Head of Global Pharmaceutical Equity Research)
Thank you for taking my second question. A follow-up one, please, on something you mentioned earlier about in the context of U.S. politics. You mentioned a desire to look at more options to go direct to patients. I wonder if you can just be more explicit on what you're referring to here. Could this be something similar to that sort of DTC strategy that we see in place in Novo and Lilly in the obesity market? If that's what you're thinking, which of your drugs would you see as best suited to that channel? Thank you.
Vasant Narasimhan (CEO)
Yeah, thanks, Kerry. I think the yes, that's correct.
I think the idea would be, are there ways we could give patients access to our medicines at what is, in effect, the net price in a way that does not disrupt the overall complexities of the U.S. pricing system? It is definitely something you have to be thoughtful about. Certainly, depending on our products, depending on the product line, you have gross to nets anywhere from 50-70%. Giving those discounts direct to the patient as opposed to through the various intermediaries would be a very attractive option. We are in the early days of evaluating. As you note, it is very product-specific. We also have to evaluate the knock-on effects on best price and some of the impacts on other parts of the system. We are evaluating it.
Clearly, I think overall in the sector, there's certainly, I think, an evaluation as well to see if there's any approaches that we could work with HHS to come up with. That's certainly the idea we're moving towards. That's correct. Next question. Last question? Last question.
Operator (participant)
Thank you. Your final question for today comes from the line of Sachin Jain from Bank of America. Please go ahead.
Sachin Jain (VP)
All right. Thanks for taking my phone as well. Another one on U.S. politics for me, Vas. Within the answer to the prior two questions, nothing that you describe as the Novartis solution involves a price cut, as I understand it, within the U.S. portfolio. Just confirming that's correct and is HHS comfortable with that?
The reason for the question, obviously, is the public commentary of the administration has been very vocal around the industry coming to the table with a price solution. I just wanted to confirm that was correct. The second one was you said it could take time. Obviously, it is an unknown. What is your best guess as to when this could get resolved? Is it in 2025, or could this bleed into 2026? Thank you.
Vasant Narasimhan (CEO)
Yeah. I think on the solutions, I mean, I think, again, because of the nuance here between list price and net price, I think our goal will get to an option for patients, which would perhaps be a "cut" to what the patient is paying. We are very focused on out-of-pocket costs and improving the realized price for patients and figuring out how to reduce that.
Because as you know, moving list prices around in the U.S. system may not mean anything for, likely will not mean anything for patients. I think that, and that is, I think, a lot of the discussions we are having in a very productive way with HHS is how can we reduce the burden for patients out of pocket? That is where all of our activity has been overall. Now, I think in terms of resolution, it is very difficult to say. I really have no idea. I mean, I think there are multiple efforts ongoing using different approaches that I think HHS is thinking through, and we are trying to support as best we can. Impossible to say when exactly because clearly doing any of these things requires significant shifts in rulemaking, in some of the knock-on effects across the system, not at all straightforward to do overnight.
It would require policy changes that HHS would likely have to make as well. Until the plan is clarified, I think even that process cannot get started. I think it is going to take time. We might have the beginnings of what we would want to do in the coming quarters. Actually implementing it and then rolling it out will certainly, I believe, take time.
Sachin Jain (VP)
Thank you.
Vasant Narasimhan (CEO)
Very good. Thanks, everybody, for joining today's call. I look forward to updating you then in quarter three or when we run into each other at various other conferences, meetings, etc. Thank you again.
Operator (participant)
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.