Novartis (NOVN) Investor Update Part 2 summary

M&A and Portfolio Strategy

• Focus remains on acquiring high-value assets in four core therapeutic areas: neurology, cardiovascular, immunology, and oncology, prioritizing novelty and best-in-class or first-in-class potential.

• Interest in late preclinical or phase I assets, emphasizing mechanisms that address significant unmet needs or offer clear differentiation.

• Oncology efforts target new cell surface molecules and mechanism-based approaches, particularly in prostate and breast cancer, and areas with low current standards of care.

• Over 30 potential high-value pipeline medicines, with 10+ licensed or acquired in the past two years, and more than 30 strategic deals executed recently to strengthen the pipeline.

• Announced agreement to acquire Avidity Biosciences, expected to close in H1 2026, with the transaction including the spin-off or sale of SpinCo as a closing condition.

Product Outlook and Guidance

• Sales CAGR guidance for 2025-2030 is set at +5-6% constant currency, with upgraded peak sales guidance for Kisqali, Scemblix, and Cosentyx, among eight assets with $3-10 billion peak sales potential.

• Cosentyx continues strong performance, aiming for $8bn+ peak sales, with no significant biosimilar exposure in the U.S. expected before 2032.

• Pluvicto is profitable and contributes to margins, though with a slightly lower margin structure due to royalties and service model.

• 15+ potentially submission-enabling readouts are expected in the next two years, supporting long-term growth.

• Robust pipeline with 15+ potentially submission-enabling readouts in the next two years and over 30 high-value pipeline assets identified for long-term growth.

Financial Performance and Capital Allocation

• Achieved a 7% compound annual sales growth rate (CAGR) in constant currency from 2019 to 2024, with strong cash flow generation supporting both investment and capital returns.

• Core operating income margin reached 41.2% in the first nine months of 2025, two years ahead of plan, and margins are expected to remain above 40% by 2029, even after dilution from the Avidity acquisition.

• Share buybacks are expected to continue at a normal level of around $4 billion per year, with flexibility depending on M&A activity.

• Capital allocation remains balanced between shareholder returns and strategic investments.

• Strong cash flow and balance sheet enable continued share buybacks and bolt-on M&A, even after recent deals.