Sandoz Group AG

Thank you. Welcome to the Sandoz Q1 sales update.

Earlier today, we published a press release and an accompanying presentation on our website, which will follow on today's call. You can find these documents at sandoz.com/investors.

Joining me on today's call are Richard Saynor, Chief Executive Officer; and Remco Steenbergen, Chief Financial Officer. Please turn to Slide 2.

Our sales announcement presentation and discussion include forward-looking statements. Please see our disclaimer here.

Please turn to Slide 3. Richard will begin today's presentation with a summary of the highlights in the quarter, followed by an update on the business.

Remco will cover the sales performance as well as full year guidance. Following the wrap-up of the presentation, we'll be happy to take your questions.

With that, I will now hand over to Richard. Please turn to Slide 4.

Thank you, Craig, and hello, everybody. It's a pleasure to welcome you all to today's call, and I'm looking forward to talking you through our continued progress.

Please turn to Slide 5. There are four key messages I'd like you to take away from this morning.

Firstly, the quarter one sales performance was in line with our expectations, meaning we've now delivered 14 consecutive quarters of top line growth. This reconfirms our growing track record of execution and performance.

Secondly, we again delivered double-digit growth in biosimilars in the quarter ahead of more launches later this year, putting us in an excellent position to produce good results in 2025. The new confirmed U.S.

tariffs have been absorbed within our full year guidance. And lastly, we're confident in our plan for this year and beyond, and extremely well positioned to deliver on our reiterated full year guidance.

Now let's move to the details of the business performance, starting with Slide 6. Before I go into the performance of our biosimilars, I wanted to take you through the initial steps of what could be a very significant beneficial movement towards regulatory streamlining, potentially ending the requirement to conduct Phase 3 biosimilar trials.

In light of the evolving global regulatory landscape and growing indications that major regulatory authorities will move to a streamlined biosimilar clinical program, we're already minimizing our ongoing pembrolizumab Phase 3 trial. We believe that this trial will no longer be considered scientifically necessary to confirm that it produces the same clinical outcome as its reference medicine.

There is unlikely to be a blanket-wide decision by the regulators on streamlining. It may be a more case-by-case basis, but we're encouraged by these first developments that could lead to significant changes for the industry and for patients.

Turning to our approved biosimilars. I'll provide more color on Omnitrope, Hyrimoz, Tyruko and Pyzchiva in the following slides.

But let me just say a word on Wyost/Jubbonti and Enzeevu. Last year, we launched Wyost/Jubbonti or biosimilar denosumab in Canada, and we're looking forward to the launch in the U.S.

in the coming weeks. We've planned to launch Wyost/Jubbonti and Afqlir or aflibercept as biosimilar in Europe later this year.

The U.S. launch timing of Enzeevu remains dependent on several factors, including the progress and outcome of potential litigation or potential settlements.

Please turn to Slide 7. Now let me deep dive on some of our other biosimilars.

After almost 20 years after it was launched, we're again delivering double-digit growth for Omnitrope, which continues to speak to the sustainability of biosimilars. The performance again underlined our continued market leadership, driven by particularly strong results in the international region, which is expected to continue.

Please turn to Slide 8. Turning to Hyrimoz.

Again, we delivered good growth in Europe. In the U.S., the launch is continuing to go very well.

In addition to our private label arrangement with Cordavis, we're on formulary with the major pharmacy benefit managers with our own branded Hyrimoz and unbranded adalimumab. This puts us in a leading position in terms of market access and payer coverage amongst adalimumab biosimilars.

In the quarter, we saw significant price erosion in the private label setting, a dynamic you'd expect to see at this stage. Sandoz remains a market leader amongst the biosimilars, and we anticipate seeing changes in formularies to benefit biosimilar penetration during 2025.

In summary, we're extremely well positioned to capture market share in what is a growing market. Please turn to Slide 9.

We started rolling Tyruko out across Europe around 18 months again. Since then, this important medicine has been growing consistently, reaching 21% market share as per the most recent IQVIA data.

Both tender authorities and health care professionals appreciate a more affordable option in the multiple sclerosis space. In the U.S., we are continuing to work with our partner and the FDA on the potential approval of our JCV assay and remain confident of launching Tyruko before the end of this year.

Finally, ustekinumab continues to make strong progress in the quarter following the European launch of Pyzchiva in 2024. We are amongst the first companies to launch with all key reference strengths by the end of the year, and the medicine has been launched in 22 markets.

Uptake continues to be very strong, and we've achieved a leading position in Europe. Physician reception is very positive, reinforced by the availability of an initiation dose, which is key to enabling patient switches.

Ustekinumab biosimilar penetration has now reached 30%, a higher level than that of adalimumab penetration at this stage of a launch. We're also delighted to launch Pyzchiva in February in the U.S.

You may have seen that the originator's request for a preliminary injunction on the launch of private label ustekinumab was denied this week, and we look forward to the launch in due course. With that, I will hand over to Remco.

Thank you, Richard, and hello, everyone. Please turn to Slide 12.

As Richard mentioned, we started the year as expected, with net sales growing by 3% in constant currencies or by 5% when adjusting for the acquisition of Cimerli last year as well as the 2024 divestments of our China business. Volumes contributed 6 percentage points to the growth, while price erosion returned to a more familiar 3 percentage point.

Finally, there was an adverse 3 percentage points impact from currency movements in the quarter. Let's now focus on the breakdown of our sales performance on Slide 13.

While generics continue to provide a strong foundation for our business, the overall performance reflected the increasing contribution from biosimilars and strong execution across our organization. With another double-digit performance, biosimilars increased as a proportion of total net sales to 27% compared to 25% in Q1 last year.

I'm particularly proud that the 10 largest selling medicines, representing a third of net sales, grew by a combined 4% in the quarter. Our regional sales mix remained unchanged with our very strong European business now delivering 55% of our sales.

Let's now move to sales by business and by region on Slide 14. Biosimilars produced strong growth of 11% in the quarter, driven by continued strong demand for Omnitrope, especially in our international region.

Ongoing strong demand for Hyrimoz and the contribution from the launch of Pyzchiva in Europe, Europe sales grew by 7% in the quarter. Strong growth in biosimilars continued, led by demand for recent launches, including Pyzchiva.

International sales grew by 2% when excluding the impact of the divestments of the China business. North America sales grew by 1% and before the impact of withdrawal of Cimerli by 3%.

Paclitaxel also continued to perform well in North America following its launch last year. After reviewing our sales performance, now I'd like to turn to another positive development we executed last month.

Please turn to Slide 15. We have successfully strengthened our balance sheet by issuing new bonds to repay the spin-off term loan.

Moreover, we signed a new $2 billion revolving credit facility. These transactions were very well received with a 6x oversubscription of the client order book on the euro tranche.

This was the largest oversubscription rate achieved by Sandoz for a single tranche. These successful transactions give us significant financial leeway going forward.

Since independence, we have built a robust debt mature profile and substantially reduced our financing costs. With these latest transactions, annual interest rate on gross debt is expected to be reduced to below 4%.

After repayment of the existing term loans and the new bonds in place, the maturity profile has been extended to 2035 with an average maturity of around 5.5 years. Please turn to Slide 16.

Moving now to U.S. tariffs.

The key message is that Sandoz is significantly insulated from both current and potential new tariffs given our business model and footprint. We advocate against the introduction of tariffs for pharmaceuticals, especially generics and biosimilars.

These tariffs are expected to increase the prices over time, disrupt supply and access. We believe that this isn't beneficial to the U.S.

health care system and most importantly, to patients. For Sandoz, it's worth noting that the U.S.

continues to represent less than fifth of our sales, while manufacturing footprint is predominantly based in Europe. We do not export from the U.S.

where we have one site. With the tariffs that are already in place focused on China, we anticipate only a limited indirect impact from CMOs, and so we can absorb the impact of the confirmed tariffs within our full year guidance.

While we are closely monitoring ongoing developments, we remain confident in our ability to navigate further tariff actions. Before we wrap up the presentation, I want to cover our 2025 guidance on Slide 17.

I'm pleased to say that we continue to expect net sales to grow by a mid-single-digit percentage in constant currencies this year and the core EBITDA margin to increase to around 21%. We also continue to expect a return to more normalized levels of price erosion of a low to mid-single-digit percentage.

It's worth noting that similar to last year, we expect a lower core EBITDA margin in the first half versus the second half of 2025. This will reflect increased investments to support the pipeline and numerous launches with the improvement in the second half driven by a more favorable sales mix as the launches begin to contribute materially.

Outside of the guidance, we anticipate an adverse 3 percentage points impact on net sales from currency movements based on the average rate in January through March. Given the geography of our cost base, however, we expect these movements to have an immaterial impact on the core EBITDA margin.

If the latest spot rates were to prevail for the rest of the year, however, we would see a 1 percentage point tailwind to net sales over the full year. The core EBITDA margin would face a limited adverse impact of less than 0.5 percentage point, which will be in line with what we had in 2024.

With this, I will hand back to Richard. Please turn to Slide 18.

Thank you so much, Remco. Now let's take a look for the outlook for the rest of this year.

Please turn to Slide 19. I'm looking forward to additional growth in the second half of the year and further progress as we launch more biosimilar medicines.

We anticipate good contribution from several exciting biosimilar launches, such as denosumab in both Europe and the U.S., aflibercept in Europe and natalizumab in the U.S., the latter being subject to FDA approval of the JCV assay. These new medicines will add to an already growing in-market portfolio and contribute to margin expansion.

In addition, we will continue to build on our industry-leading pipeline across both generics and biosimilars. And of course, we have many other generic launches across a number of markets that will continue driving the growth of this large business during 2025.

Now please turn to Slide 20. As I mentioned, the quarter one sales performance was in line with our expectations and represented another period of double-digit growth in biosimilars.

Our performance to date as well as the launches later this year mean that we're extremely well positioned to deliver on our full year guidance. As we look ahead, our focus is clear.

We are committed to delivering both operationally and financially with a sharp eye on execution and long-term value creation for society, shareholders and other stakeholders. First and foremost, we will continue to deliver for patients, especially through our upcoming launches and the pipeline.

We will also maintain our unrelenting focus on commercial execution. That means making sure every medicine, every market and every team is aligned to deliver on performance.

At the same time, we are committed to driving further growth across sales, margin expansion and cash generation. This is essential to support reinvestment in our business, expand patient access and create more value for shareholders.

2025 is a pivotal year for our strategic road map, and I'm delighted by the progress we've made so far. With this, I will ask the operator to open the line for Q&A.

Please turn to Slide 21.

Hi, good morning. Thanks for taking my questions.

A couple of questions on my side. So first of all, could you walk us through the rationale behind the deal announced yesterday night and potentially comment on whether we should expect further deals of that kind moving forward?

And then my second question is on STELARA. So we've heard that J&J has been denied preliminary injections, just clearing the way for Pyzchiva private label launch.

Any chance you could update us on your expectation for Pyzchiva for the remainder of the year? Is Hyrimoz is a good proxy?

Or would that be fair to assume a quicker ramp-up? Thanks, so much.

Good morning. I think your first question was ipilimumab, the recent announcement.

So again, this is a partner we've worked with in the past. We believe this is an opportunity to bring an interesting product that complements our oncology portfolio at the point of market formation, both in the U.S.

and in Europe, which is sort of going to be towards, I guess, the latter part of this decade. But yes, particularly beyond that.

The J&J question, yes, clearly, we're delighted with the court. So it's all the same thing we did.

Yes, we would now go ahead and look to launch with our partner. I would caution, obviously, we structured this deal slightly differently than our own Hyrimoz.

So here, we would only book the income, we would not book sales. So you won't see this in the sales line.

So the take-up, I guess, we will see. We would love to see how that evolves.

Again, I would caution when we launched adalimumab, it took nine months before we started to see an inflection point. I think this will be a little bit quicker, but I don't think it will be sort of straight out of the gates over the next couple of weeks.

I think it's going to sort of evolve over the year in a similar way. Similarly, with who ends up on formulary, we're confident that we would have a wide coverage.

But again, it's too early to really give specific indications on that. But I would describe it as quietly optimistic.

Okay.

Yeah, thanks so much for taking my questions. So the first one is just on the biosimilar performance in the first quarter.

So you had quite well flagged that we were going to see some headwind from the Cimerli withdrawal. But if you look at the performance, it's about EUR 100 million sequential decline on the fourth quarter of last year.

So can you just give us some help on what were the contributing factors to such a weak quarter on the biosimilar sales? And then maybe on the -- you called out the adalimumab pricing as a headwind in the U.S.

We haven't really seen biosimilar pricing being a material issue to date. So it would be helpful if you could clarify what was driving that.

Was that competition with other manufacturers looking to compete on your contract with CVS and you were defending against that? Or were there any other factors?

Thank you.

Thank you, Harry. I guess is almost, both the questions are linked.

I mean I wouldn't describe the performance as a weak quarter. I think you're looking at really a couple of factors.

I think your second point partly answers your own question. Obviously, we have to renegotiate.

We have a strong relationship with CVS, but it's a competitive market. We've always said that we would maintain the volume, but the pricing would have to be renegotiated.

And now this contract is moving into a more mature phase, that's a normal part of that life cycle. And then I think you have a couple of factors.

Clearly, we had a very strong final quarter last year and really a combination of pricing that we talked about in terms of adalimumab and the phasing of orders, particularly in the U.S. So really, you have one or two big customers that take orders.

And really, you've got to look at sort of the timing of that. So I don't really see this as a trend.

It's just more when you have a particularly big order, clearly who wanted to close last year strong, this quarter then will flow through and some of the pricing impact. And then on top of that, as you mentioned, the Cimerli impact as effectively, we sort of paused this product in the marketplace.

So there's really no sales at all in Q1 versus a strong sales performance in Q1 last year. So I think a combination of those things.

So my first question is just on the STELARA market and the biosimilar penetration here. When you look at IQVIA data, we see so far very, very limited penetration, including for Amgen, which has a private label deal as well.

So first of all, do the data reflect what you're seeing on the market? And second, sort of if you could help us understand how you think this data to evolve for the rest of the year?

And second question, just on the KEYTRUDA trial and sort of minimizing this trial based on the feedback you're getting from agencies and other elements. Just if you could give us in the long term sort of puts and takes you're expecting for the industry because on one side, this is helpful for lowering R&D costs for development.

But at the same time, it's lowering the bar to entry in biosimilars. So if you could sort of give us what you think the net-net is for Sandoz and for the, I guess, existing player?

Thank you.

Thank you, Thibault. I guess with STELARA, I think that partly goes back to the question that Harry asked.

I mean, a, bear in mind -- sorry, the earlier question from Victor. The point is that our partnership with STELARA for ustekinumab is a third party, we don't book the sales.

So you won't necessarily see this in the IQVIA data. So again, I always take the IQVIA data with a bit of a pinch of salt.

And it's still too early days. Again, I would caution when we looked at adalimumab, it was 6 to 9 months before we saw any inflection.

I do think it will take a while before contracts are renegotiated and it start moving over. I think we'll see -- we sort of forecasted internally a modest buildup during the year and no big bang.

So we just looked at a step performance key. We're a leader in the adalimumab space.

We have a relationship with the physician. We have a great product.

I would sort of take you back in Europe with a 30% share. We've done extremely well.

I think we're outselling our competition, almost two to one. So we know how to market the product, we know how to position it, and the partnership with Samsung is working extremely well.

I think the question you've raised on KEYTRUDA is a fascinating one. Yes, I think this is going to be case by case depending on the quality of the data submission.

So we're encouraged that both the EMA and the FDA now are becoming more aligned in terms of a rational approach in terms of the data submission. Now I don't know blanket, and I think clearly -- but it's a step in the right direction, which I'm really encouraged by.

Then the question I normally get, well, does this mean that the biologics market will commoditize. Let's be real here.

I mean I think we're dropping from a cost of about $150 million to $180 million down to maybe $100 million. That is still a significant barrier to entry, plus all the CapEx and the requirement to manufacture that.

But then I'd also then caution -- I always sort of look at Europe in many ways. I've been in generics 30-plus years and the Indian generics companies have been coming all that time and yet they somehow not arrived in Europe because there's a significant barrier to entry.

And in this space, there's two barriers to entry going from clinical to commercial. That's actually very technically difficult.

It's something you need real skill and capability and a lot of our partners, which is why they come to us really struggle. And then the piece that we always forget is commercial.

And you saw that execution in the U.S. with adalimumab, and you see our phenomenal performance in Europe due to that execution.

It also means that potentially we can bring more assets. Obviously, with the deal that we've just announced on ipi, that takes us down to 29 assets in our pipeline.

5 years ago, we had five assets. I would clearly love to continue to reinvest in our business.

I'll be happy when we have 40-plus assets. So I think it's a rational move as a leader in this space.

It allows us to really cement that position and accelerate. So I think this is probably the most exciting thing I've seen in this sector for a very long time.

Good morning, everyone. Thank you very much for taking my questions.

Two or maybe three quick ones. First on Tyruko.

Could we have a quick update on your discussion regarding your JCV assay as you said, so my second question is on the GLP-1 strategy. Could you remind us if you interested to launch products in diabetes and obesity as early as next year and can we such as Canada and Brazil or if it’s not necessary an attractive market for you?

And last question, big picture questions on tariffs. Do you believe that the biosimilars may be excluded from tariffs, because given the profile of the products, at the end of the day, this would favor the branded products?

So I'd like to have your thoughts on this really important question for patients and for the industry. Thank you.

Thank you. I guess, about JCV, yes, we're working with the regulators.

We're still anticipating a launch in Q4 this year. And clearly, if we get any more material, we'll update you.

But we're confident in terms of how that's progressing and then we will look to launch that in the latter part of the year. GLP-1s, I guess I've been talking about that now for a couple of years.

Yes, we would -- we have at least two partners for the Canadian market, potentially others. So we are looking to launch a market formation in Canada.

Similarly, for Brazil and a number of emerging markets. I would caution, we deliberately didn't put this into our guidance because this is an evolving space.

And I've never been seen a product in my career that in a sense, the originators couldn't meet the demand. And I think it's a huge opportunity.

Plus bear in mind that Canada is the second largest semaglutide market in the world. So I think it presents a significant opportunity.

And we are the second largest player and one of the strongest players in the Canadian market. So I think we'll be extremely well positioned to capitalize on that.

And similarly, markets like Brazil, I think, presents a fascinating opportunity during the next few years. And then more in sort of the medium term, Europe doesn't really come off that until the early 2030s and then U.S.

a little bit later and then tirzepatide more into sort of the mid-2030s. So this is really sort of a 10-year journey.

And clearly, it's going to have many twists and turns. Our focus at the moment, as you rightly say, is looking to bring a product to patients as early as possible in Canada next year.

And lastly, tariffs. Look, it's a fascinating subject.

And again, I take a step back, I'm certainly encouraged by the conversations that Karen, our U.S. President have been having with the White House.

I think there's a degree of common sense in terms of doing a full strategic review. I do sense that the administration recognize the important role that generics and biosimilars play.

Let's remind ourselves, 90% of all patients and all prescriptions in the U.S. are supplied by the generics and biosimilar industry at less than 10% to 15% of the cost.

So quite frankly, without our industry, there is no health care in the U.S. To tariff that in a meaningful way over a long period of time, I don't think we'll do a lot of benefit for patients.

I think the conversation we should be having and we are having is about how do we create more tariffs rather than focus on the stakes. I think clearly looking at PBM reform, looking at channel reform, looking at creating incentives.

And I think those are the things that ultimately will benefit the biosimilar market. The small things, as we just talked about the approval, the faster approval of biosimilars, but opening up the channel to make this a more attractive market that then may warrant greater investments and opportunities.

But I think in tariffs themselves, I think ultimately it will be unfortunate for patients to carry [Indiscernible]. But at the moment, I'm optimistic that we won't see any significant tariffs in this space.

Thank you very much.

Thank you. Two, if I may, just a clarification.

Just going back to Thibault's question on pembrolizumab development. As you said, that's in progress.

You've got a 720-patient Phase III study ongoing. Presumably, you'll stop enrollment.

I'm just wondering if you could give us some idea of how enrolled that study is. And then moving on to Hyrimoz.

There have been a lot of moving parts there. You talked about pricing.

If we look at the scripts, it looks like there was an acceleration in sequential growth in March. On Friday, AbbVie cut their U.S.

HUMIRA guidance for the year by $500 million. So taking all that together, how is Hyrimoz tracking in 2025 in the U.S.

versus your original expectations? And then a question for Remco.

You alluded to the success of the recent bond auction. You've got by far the strongest balance sheet in the sector.

So I just wonder if you could update us on your appetite and opportunities for M&A.

Thanks, Simon. Good to hear from you.

Pembro, yes, we're trying to now manage it. Obviously, we have a duty of care to the patients already on the study.

So we wouldn't just abruptly stop a study. It's really looking at how we are now, I guess, not enrolling further patients and minimizing that.

So we would continue with the patients that are on that. I think there is moral obligations to do so, but really trimming any expansion, so reducing the power of that study.

So there's clearly some savings there that we would look to reinvest in the business. Hyrimoz, yes, you're right.

I think in terms of volume, it's in line with our expectations. They always sort of struggle a little bit with the IQVIA data.

And I always said I think last year that this is probably one of the biggest opportunities that we still have in the U.S. I know we sort of talk about some of the other launches, which is really exciting.

But this is still the largest LOE in the history of the industry, and we're the only company on formulary with all three PBMs, and we have the largest share of the market. So we see nice substantial gains and pretty much in line with our own internal targets.

Beyond that, we tend not to break out individual products. But I think it really helps explain the story more than it does.

Thank you. And then I'll hand over to my colleague, Remco.

Simon, good morning to you. Good morning to all of you.

Yes, I'm very happy with the balance sheet. You can imagine where we're currently standing.

I think it's also very helpful in the current turbulent times we're all in. We have a good balance sheet.

And I think also from a currency perspective, we are well positioned overall. With regard to M&A, we have said that small couple of hundred million M&A we would consider for the moment every year depending what opportunities are, but that's for the moment.

We have a lot of work to be doing still to get this entangled from Novartis, which requires some efforts we want to get behind. And in a few years, we can look again if some things make sense.

Still to remember that most of it, we believe internally, we have a lot of opportunities for investments in our D&R portfolio as well on BD&L. And of course, those are more likely a larger return.

But there are certain things we always look at. But no big M&A on the horizon are planned.

Thanks so much.

Firstly, just an update on tariffs, please. So if it was the case that tariffs came in such that it was on all your products, all your API from outside the U.S., just what would that now do?

And maybe how would it change over time? So where are we in terms of bringing lots of inventory into the U.S., which presumably you've been doing?

And maybe would you even move some sourcing or manufacturing? How might you mitigate?

Also, any thoughts on how quickly you might be able to move prices up if there were new tariffs announced? I know some companies have suggested that their existing contracts are hard to move prices up, but they could opt out of existing contracts and then try and renegotiate.

So if you could talk about that, please. And then the second one was just on HUMIRA, the comments were helpful for the U.S.

But overall, do you think HUMIRA is still going to be a significant growth driver for you for this year in the U.S. with the worst pricing, but with volumes still standing good?

I'll take HUMIRA and then I'll let Remco comment on tariffs. Yes, look, again, we took -- I think about 20% of the market is converted.

And we've got a significant I think 80% of that 20%. So clearly, there's the lion's share to go for.

And I think the earlier comment about, the originators comment about reducing its expectations for this product. So I think, yes, in dollar terms, it's probably still the single biggest growth driver in the U.S.

And don't forget, we're still seeing this product growing strongly in other geographies, whether it's international and/or in Europe. So this still has momentum years after LOE.

So yes, I think you will -- yes, there was always going to be a bit of a washout as you renegotiate volume contracts with CVS. The volume actually broadly will stay the same, but then the pricing comes down to historical numbers.

And then you're looking at timing of shipments and clearly, we're trying to ship as much product as we can particularly to CVS this quarter as well. So directionally, as you say, a very exciting growth driver for us.

Remco, do you want to talk about tariffs?

Yeah. Thank you, James.

Of course, it's also on our mind, correct. Let's say, overall, in terms of sourcing and manufacturing strategy over the longer term, we might move a little things.

But for the moment, particularly on the biosimilars, this all comes from Europe. There's nothing to be changed.

We also don't see any need and any logic to change anything here. Secondly, if we look at which tariffs are currently applicable, it's the Chinese over 20%.

Also, we have some products coming through Canada, which have Chinese content, which then also are subject to the 20%. That's not a big amount, $10 million to $15 million, and we can easily handle within our guidance.

Now shoot the unfortunate case, which we don't think will happen and won't make sense, as Richard said before, on the biosimilars from Europe become subject to tariffs. At this point in time, if it would be a percentage of 20%, there is possible tariff, which has been mentioned in the past that we don't know and we hope it's not the case.

But let's say that's the case, we still believe we can handle that within the guidance with all the additional actions we take, plus because we -- these products come directly from the factory going out. Also from a technical perspective, the first sale will be applicable, which also significantly reduces the tariff burden for us.

So all-in-all, we believe that if it will become applicable for a small percentage, again, we hope now that with all the actions and the way we are positioned that we can handle that even within the guidance.

And your comment on pricing, I think it really depends product by product. Maybe that you can't pass price on day one -- one day to the next.

But as contracts get renegotiated over a period of time, clearly, there will be upward pressure on pricing. If there wasn't, then you'd see suppliers exiting the market, which will put upward pressure on pricing.

So I think you may have a short -- relatively short to modest impact, but I think over time. And again, let's just also remind ourselves, Sandoz less than 20% of our revenues come from the U.S.

We're predominantly a European company. You saw the very strong growth in Europe and even stronger bio growth.

So I think we're extremely well positioned versus our competition to weather this, to absorb it and to deliver on our performance. So I'm not so concerned.

I know we have a lot of conversations about it, but I do think it's a little bit overindexed.

Sidhartha Modi on behalf of Emily Field from Barclays. Just one question on the deal yesterday.

Like I just wanted to ask you, when is the earliest that you can launch this product? If this is baked in into your midterm guidance, so we should expect an increase in the midterm guidance based on this?

Thank you so much. It's not in our guidance.

I mean we only announced the deal yesterday, and obviously, we gave our guidance two years ago. So it's not.

We wouldn't be any more specific than I think the earlier comment that I made. Certainly, I guess this is looking towards the late 20s, early 30s.

Obviously, LOE is always partly subject to the patent balance in the U.S., but we are confident that we will be there in market formation with this product. And again, let's remind ourselves, in Europe, we're the largest oncology company.

We have a great platform. This is a sector we know it extremely well.

So I think this is a very attractive complementary product to bring to the market. And clearly, we want to continue to drive and expand our pipeline, both through in-house deals, in-house development and through third-party BD partnerships.

So again, I'm pleased it's a step in the right direction, but it's not in our guidance yet.

Joris Zimmermann from Octavian on the line. Two quick ones, if you allow.

The first one is on Cimerli, and you mentioned the impact of the acquisition in Q1 and the temporary halt. Can you help us understand how we shoot off this moving forward?

So what does it mean in terms of time lines and potential impact that we still see in Q2? And the second question is on the regulatory changes that you highlighted.

You've already taken action with the Phase 3 trials. Does that already impact also the costs in development and regulatory this year?

Thank you so much.

So Cimerli, really, as I said, we don't anticipate any Cimerli sales during 2025. I think we paused this product, we would look to reintroduce it as early as we can, but probably realistically in early '26.

And then we would expect to see a relatively modest buildup of sales from there. So really this year, it's going to have -- it's going to wash out and then start growing again as we get into 2026.

The regulatory change, I mean, clearly, this is a directional change, not an announced change across all products. So clearly, we've not stopped Phase III trials on everything.

We made a judgment call on one specific asset. We're choosing to reinvest that money in our pipeline.

Now clearly, as we review this situation, at the moment, we spend a significant amount of money on D&R. We would look to expand -- use that to expand our pipeline.

I think as I commented earlier on, I'll be happy when we have 40, 50, 60-plus assets in our pipeline. Now we have a record 29.

And clearly, as we go through next year, we will continue to add to the depth and breadth of that pipeline. But anything beyond that, I can't really comment specifically.

But clearly pleased. And I think this is, as I said, one of probably the most exciting developments in this space since the first approval of a biosimilar 18 years ago when we first launched human growth hormone Omnitrope.

It's a top level one. Just thinking about sort of the big three PBMs and seeing how they're adjusting their formularies -- evolving formularies for adalimumab going into 2025.

It sort of feels like they are increasingly prioritizing private label options. And sort of feels like in the future, you're going to have to align with at least one of these big three to have a good chance of commercial success in pharmacy benefit.

Do you think that's true? And do you think that's ultimately good or bad for Sandoz?

Thank you.

Yeah. Well, I think there's a few things there, Alistair.

I mean, a, even their pharmacies, their own label products don't service all patients. So obviously, in the case of CVS, base their own commercial lives covered, they made a choice to switch.

But there's still a significant patients with that PBM that are still not on and there's an opportunity to convert to a classic [Indiscernible]. Also, not all PBMs are the same.

I mean I think all you rightly said, all three of the PBMs have signed own label deals, only really one of them have made any kind of material change for a mix of reasons, different PBMs have different capabilities in terms of the degree and execution of switch or the desire to switch. I do think you'll see some evolution.

Also bear in mind, though, this is really only products predominantly in the pharmacy benefit space. And really, there's only ever been two biosimilars that have launched in this space.

One, adalimumab and the other one, ustekinumab. Beyond that, most of the others are on the medical benefit space where really I don't see this as a business model that is sustainable.

So yes, it's a case of -- I don't know, we've done extremely well. Yes, booster, we have at least one PBM signed.

So again, we've leveraged that model, but I don't see that happening in denosumab, I don't see it happening on aflibercept, I don't see it happening on Tyruko. So it's very specific to this asset class.

Hopefully, that helps.

Just want to follow up on the comments around the sort of broader tariffs if they were introduced. So if you did have a sort of blanket 25% tariff for all products being imported into the U.S., Remco, you're indicating that you felt that you could manage that within the guide this year.

But how much of that is because of shipping of inventory ahead of implementation of a tariff like that and the likelihood that it would be introduced later in the year given it would be subject to the 332 investigation. Perhaps you could help us by giving us what sort of impact you might expect to see on an annualized basis as you did at the beginning of the year if you saw that sort of tariff implemented?

And then secondly, just I'd be interested in your thoughts on or updated thoughts on capacity expansion plans and what's needed for any GLP-1 launches for Canada and Mexico next year?

Graham, I'll deal with plans and then I'll ask Remco to comment on tariffs. As I said, I mean, the capacity that we're leveraging both in Canada and the emerging markets we're using with third parties, we have more than sufficient capacity to cover the forecast needs that we put.

Then we'd look, as we said as we go along -- in many ways, as I said, I didn't put it any guidance. I'm seeing this as a bit of a giant experiment in a way.

I have no idea how this market is going to evolve once price points move. We may have massively over forecast, massively under forecast, difficult to say.

But certainly, we have more than enough capacity with our partners. So there's no need for us to invest any additional CapEx to provide the capacity certainly in our plans in the short to midterm.

Mid- to long term, we're already investing heavily in Slovenia for fill-finish capacity, which is part of our plans anyway because we're basically a biologic company. And we need that fill-finish capacity, and then we've got some flexibility there as the markets evolve.

So we're trying to sort of take a pragmatic and cautious approach. Remco, do you want to talk about tariffs?

Yes, of course. Graham, it's quite a wild discussion because it really depends what the tariffs will be, how they will be implemented, et cetera.

But the number I can give you also in the comparison before when we had full year results discussion is -- also a technical discussion is the transfer price applicable, the first sale applicable, which makes quite a difference. I can confirm that the first sale is applicable, which reduces the amount significantly.

If you will talk on an annualized basis, but then I talk the current 20%, which is applicable for China and another 20% in Europe because that was the discussion, which is mostly in place. We will talk with an annualized number of around EUR60 million to EUR65 million before any corrective actions, right?

So that's before any pricing actions or any other actions, right? That will be a bit lower for this year.

If it will be later in this year, it's a part of it and the rest will come next year. Now if you do that number, if you consider that number and it's before corrective action, you can imagine that if it will be a 20% that we feel at this point in time, we can handle that within our guidance for this year, but also for the midterm that we will not have any problem handling that.

But of course, again, it depends, correct. If it's 50%, it's a different.

But with the current discussions, we are very happy actually that we are in that position and we can add on.

Sorry, just to be clear, the 60% to 65% is the total impact, including the China or is that incremental on top of China that's already baked in?

It's including. It's the all-in number.

Including. Yes.

Got it. And that was based on first sale as opposed to transfer price?

So I just want to make sure we understood it properly.

It's based on first sale. I think it's based on 20%.

We would think it will be highly unlikely.

Thanks for taking my question. It's just on denosumab.

We've had quite a few approvals from some competitors recently. So just would like to get a sense of how you think this market is going to develop because it's through the hospital channel.

It seems that's a bit easier to take share and it happens pretty quickly compared to the PBM channel. So just wanted to get a sense of how you see the phasing of market share and how competitive you think this market is going to be.

Thank you.

Yeah, you're right. Also the other part is you need a Q-code.

So when you launch into this space in the U.S., you have to have a code. We -- because we had an settlement, we are the only company with a Q-code at launch, and we probably have that for about 5 months versus our competition.

So that gives us a really good opportunity to secure contracts and partner with customers, because I think Q-code quite frankly, it's a nightmare to get reimbursed at a patient level. So clearly, we intend to capitalize on that opportunity when we launch the product later this month.

So we're excited about it. It's an exciting launch.

It's done extremely well in Canada. I think we've got about a 30% share of the market now and we're also looking to launch it in Europe.

So it's a really nice product. We have all the presentations.

And I think we're well positioned in the U.S. given that we're the only company with the Q-code app launch.

So we want to capitalize on that when we bring this product to the market. So thanks so much for your question.

That's the last question, operator. I think we'll close the line, and thank you all for your questions today, and have a good rest of your day and a good bank holiday weekend.