Good morning and good afternoon, and welcome to the Novartis Investor 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'll be an opportunity to ask questions by pressing star one and one at any time during the conference. A recording of the conference call, including the Q&A session, will be available on our website shortly after the call ends. With that, I would like to hand over to Mr. Samir Shah, Global Head of Investor Relations. Please go ahead, sir. Thank you very much, and welcome to everybody who's joining the webcast and this call. First of all, a big thank you for taking the time to participate. Before we start, I just wanted to go through our safe harbor statement. The information presented today contains forward-looking statements that involve known and unknown risks, uncertainties, and other factors. These may cause actual results to be materially different from any future results, performance, or achievements expressed or implied by such statements. For a description of some of these factors, please refer to the company's Form 20-F, its most recent quarterly results on Form 6-K that respectively were filed with and furnished to the U.S. Securities and Exchange Commission. Now I want to hand across to Vas Narasimhan, the CEO for Novartis. Thank you. Thank you, Samir, and thanks everyone for joining today's conference call. With me today, if we move to slide three, is Harry Kirsch, our CFO, Richard Saynor, the Chief Executive Officer of Sandoz, and you've already heard from Samir. Moving to slide four. Today, as you heard earlier or saw earlier today, Novartis has concluded that a separation of Sandoz by a 100% spin-off is what we believe is in the best interest of shareholders, and we expect completion of the proposed spin-off in the second half of 2023. What we'd like to do is walk you through, at a high level, some of the overview considerations that we made in taking this decision, the profile of the two companies, and some of the details of the specifics on the transaction. Now moving to slide five. We've concluded that the separation of these two businesses would create two standalone companies which can fully focus on their respective strategies, business segments, and ultimately maximize their impact as well as maximize value for shareholders. For Novartis, the new Novartis, we have a clear investment thesis as a focused innovative medicines business. Our capital and investments will focus on bringing new technology platforms in our core TAs, new medicines to life in those core TAs. It'll enable us to really focus on the execution of the pipeline and commercialization of our assets, as well as an improved financial profile and return on capital. We also believe this will enable us to simplify our organization and operations and fully focus our capital on our critical business needs. For Sandoz, this creates a clear investment thesis as a generics and biosimilars business. Sandoz will become the number one European generics company and a global leader in biosimilars. We believe this will enable Sandoz to follow strategies to win in the long term in the generics market, allow us to have more freedom to operate, freedom to allocate its capital as best needed to achieve its business goals, and to build an organization that is fit for purpose culturally and with the right talent for the generics industry. All of our assessments over the recent period have concluded that there are limited synergies between the innovative medicines and generics businesses at their opposite ends of the biopharma value chain. Importantly, we do conclude that biosimilars and generics have strong synergies. Hence, we bring these two businesses together in Sandoz. Now moving to slide 6. We've concluded as well that 100% spin-off is the preferred separation path, and there are a few reasons for this. First, from a value standpoint, we believe that Novartis shareholders can benefit from the future upside of both businesses and make their own portfolio decisions as to which businesses they would like to own for the long term. It provides also business clarity and focus for the two independent operations, enabling each business to take on and complete its own business transformation. We also know from our own precedents with Alcon, the largest public market spin in recent memory in Europe, which was a highly successful spin. We can do this in an attractive way. Other benefits include a high certainty of completion of a transaction, an expectation to be generally tax neutral for Novartis, and lastly, an immediate full separation and deconsolidation of Sandoz at the time of spin-off. Some of these considerations will be covered in more detail by Harry on subsequent slides. Now moving to slide seven. We wanna also highlight that for the new Novartis, the Sandoz separation would improve the financial profile of our innovative medicines business and enable us to fully execute our innovative medicine strategy with those improved financials. You see here on this slide that we would expect our sales growth from 2021 to 2027 to be in the 4% range. We expect our core operating income margin over time in the 2027+ time horizon to reach 40% or more in terms of core operating income. Lastly, free cash flow and return on invested capital would also improve as a standalone innovative medicines business. We're pleased with this opportunity to really improve the profile of a new Novartis, 100% focused on innovative medicines. Now turning to Sandoz. Sandoz, we've become a unique pure play market leader across generics and biosimilars, and we believe highly well-positioned to take advantage of what is a really highly attractive off-patent market opportunity. Moving to slide nine. Sandoz is a global leader. Here you see IQVIA MIDAS data from March 2021 to March 2022. The combined generics and biosimilars business on a gross sales basis of $12.7 billion makes Sandoz the largest player in this segment in the world, clearly having scale and capabilities across the key segments in the key markets in the sector. Moving to slide ten. Importantly, we believe Sandoz is uniquely positioned among its relevant peer sets with its mix of generics and biosimilars. When you look at the chart on the left, we've charted global sales from biosimilars against global standard GX sales. You can see that Sandoz is a uniquely positioned company benefiting from 65% of its sales from standard generics and 35% of its sales from biosimilars. There are many benefits to having this kind of diversification. One is a balanced risk profile. Two, an organization-wide expertise and generics mindset that can be brought to both segments. They can leverage their deep scale and understanding of their key customers. Biosimilars leadership, of course, offers margin upside and the opportunity, given the growth of the biosimilars segment, to grow significantly. We believe substantial synergies exist between generics and biosimilars, given how the biosimilars market has evolved in terms of commercial execution, channels, people and culture. Now moving to slide 11. That positioning will endow Sandoz over the coming decades to take advantage of what is really an attractive off-patent market opportunity, growing today from $251 billion of generics and $25 billion of biosimilars to a total market of $470 billion, driven by very strong growth in the biosimilar segment and solid growth in the standard generic segment. We believe healthcare policies will continue to encourage generics and biosimilar adoption. There remains high value biologics which will be going off patent in the coming decade. There continues to be an important and positive shift in physician attitudes in the U.S. towards biosimilars, building on the already strong adoption of biosimilars in Europe. Moving to slide 12. Taken together, you know, Sandoz is well established, a well-established player in the industry with the capabilities to win in the long term. From a portfolio standpoint, the business has both biosimilars as well as the key segments within small molecule generics, including oral solids, a leading position in anti-infectives, a growing position in injectables and steriles, and also a growing future position in respiratory generics. Its fit for purpose commercial engine and competitiveness in terms of cost and flexible supply will allow us to compete well over the coming years. It has a people and culture that's proven over the many years that Sandoz has been built, bringing together strong generics companies in different regions. From a growth standpoint, Sandoz will have 15+ assets in biosimilars that can drive a strong wave of growth over this next decade, as well as good coverage of the 350 small molecules, the LOE coverage of 350 molecules in development. From a competitiveness standpoint, Sandoz has a critically strong footprint in Europe, Japan and other emerging markets, and a strong and growing regrowing business in the U.S., good growth margins and good control of its operational costs. Now moving to slide 13. The first half of this year, we believe has demonstrated the strong profile of this business. You see in the first half, we had sales growth of 6% driven by Europe, where Sandoz, as I've mentioned, is the leader. Good growth as well in the rest of world and a stabilizing U.S. business. Sandoz in this space is ultimately a European rest of world business with a strong future position in the U.S., which we think creates an attractive investment opportunity. You also see on the right the full year guidance for the business, which was increased, and a solid pipeline, which should enable us to continue to drive growth into the future. Now moving to slide 14, I'll hand it off to Harry to provide some of the transaction details. Yeah, thank you very much, Vas. Hello, everybody. Good morning. Good afternoon. Very pleased to be here and share with you some of the transaction details of this proposed transaction. Now, before I go into the details, just want to step back. A lot of work to be done here. I mean, it follows in general the Alcon playbook now that the board has agreed to this transaction. There's a lot of work to do because of course Sandoz has been more integrated into Novartis than Alcon was. All the plans are in place. Now we have to get to work to get this done. We do envision that the spin-off completion would happen in the second half of next year, and then that basically the Sandoz team would do IR road shows and Capital Markets Day, mainly in half one. After the full year results, which we would present end of January, and where we would provide, for example, guidance for Novartis, including and excluding Sandoz as well as for Sandoz, the future financial targets. Of course, the first opportunity to engage with the Sandoz team will be also at our Meet Novartis Management Day in September. If you now go to the next page 15. Some more of the details here. It will be a 100% spin-off of the new Sandoz share to our existing Novartis shareholders. The SIX Swiss Exchange will be the listing venue. We will have, we'll set up a U.S. ADR program. Generally, we expect this, like the Alcon spin, to be tax neutral, for Novartis and most of our shareholders. Incorporated and headquartered, Sandoz would be in Switzerland. In terms of the financial profile and the balance sheet or the debt situation, there we would target an investment-grade credit rating and, also to be able to deliver on the plans for growth, some investments, as well as attractive dividends. In terms of dividend policy, because we keep getting questioned on that, and try to be super clear here that all of the dividends that would come would be incremental to the Novartis dividend, and we will not rebase our Novartis dividend even after separation of Sandoz. We will continue to grow our dividend based on the dividend we just paid out in March of this year. I hope that clarifies that question, which comes up so often. As mentioned, half II would be the spin completion. In terms of further actions, this will be announced in due time. For example, some of the distribution ratio, you know, what will be conversion from Novartis, what will be the ratio from Novartis to Sandoz shares, the board, the chairman, chairwoman selection, and so on, all of that would come. Of course, this, as you see in the transaction conditions, several conditions as always, but one of them will also be the final Novartis board approval as well as the shareholder approval. We would envision then and likely an extraordinary general assembly, 6-8 weeks roughly before that the final spin date. If we move to the next slide. Just a bit as this may also have some questions, but we see clearly the Swiss Exchange as the natural listing location, given the Sandoz headquarters in Switzerland and of course the legacy of the Sandoz brand. Also, we basically mirror the current structure of the Novartis listing and the Novartis shareholders all being able to remain invested and participate in the expected future growth of both Novartis and Sandoz. Just at the bottom here, the detail. We keep also an ADR program, which offers the flexibility to our U.S. investors and of course also for the U.S.-based employees to participate via share participation programs. With that, back to Vas Narasimhan. Thank you, Harry. Turning to slide 17, I think it's also important to note that this is an important moment for Novartis as a company, as it completes our journey from a conglomerate with numerous business segments to a fully focused innovative medicines company. Since 2014, we've been on that journey. You can see the various steps we've taken over the years. With the proposed spin-off of Sandoz, we will be a 100% innovative medicines company. Moving to slide 18, we think that new Novartis provides a very attractive value proposition to investors. From a scale and growth standpoint, we'll have a strong position in our five core therapeutic areas and continuing to build positions on top of small molecules and biologics in critical and important technology platforms for the long-term growth of our sector. We have six key end market brands, multiple launches in flight, and then multiple pipeline readouts that will be coming over the coming years with up to 20 potential billion-dollar-plus assets with approval by 2027. This also enables us to focus even more on our goal of delivering high-value assets out of R&D so that we can consistently generate that above peer median growth that we've committed to. Our commercial engine is number one in Europe and in the US, we aim over time to achieve a top five position, enabling us to have a balanced global footprint that enables us to fully commercialize and maximize assets around the globe. We're also focused on driving synergies and leveraging our global scale. You've seen our recent organizational announcement, which will continue to enable us to create a more agile and fast organization, as well as improve our margins and enable us to invest in R&D. We expect this to lead to a stronger financial profile for Novartis with improved core margin, free cash flow, and return on invested capital. We'll continue, as Harry Kirsch outlined, our shareholder-friendly capital allocation policy. Lastly, we have an experienced management team, which is completely focused on future growth supported by the new organizational model that we are implementing. Moving to slide 19. In summary, Sandoz offers a unique value proposition to investors as well as a pure play market leader across the generics and biosimilars market. A global leader in generics and biosimilars in an attractive market segment that will grow to $470 billion over the coming decade. A strong pipeline in small molecules and biosimilars. A strong commercialization engine that's proven itself with a number one position in Europe and a deep understanding of customers. A good financial outlook that we'll provide more details, as Harry outlined, in the first part of next year. A commitment to provide Sandoz with a solid capital structure which will allow it to allocate its capital both to invest in its business and pursue business development opportunities. A commitment from the Sandoz team to develop lean and efficient operations. Lastly, a strong and experienced management team on the Sandoz side that's experienced in the global generics and biosimilars market and knows what it takes to deliver growth in that segment. Moving to slide 20 and in closing, we of course will be holding our Meet Novartis Management on September twenty-first and twenty-second. It will provide an excellent opportunity for investors to meet the leadership teams across the various parts of Novartis and Sandoz, and we'll look forward at that time to also taking further questions, on these various businesses. With that, I'll open the line for questions. Thank you. As a reminder, to ask a question, you will need to press star one on one on your telephone and wait for your name to be announced. Once again, star one and one if you would like to ask a question. We will take our first question. Please stand by. Your first question comes from the line of Matthew Weston from Credit Suisse. Please go ahead. Your line is open. Thank you very much and good afternoon. Two questions, please. They're both financial. Harry, in the past, you've talked about diseconomies of scale if you took the decision to spin out Sandoz. I think I'm right in saying you also said they would likely to be more substantial than those we saw with consumer and outcome, 'cause Sandoz was more embedded in the Novartis business. How much of the group corporate cost today do you think you'll be able to reduce with the Sandoz spin? Or should we think of it as that cost staying with the Innovative Medicines business? A quick housekeeping one on tax. Can you just give us an idea of how the tax rate for Novartis splits today? Is it very similar for Sandoz versus IM or there is a meaningful difference? And if so, what is it? Thank you. Yeah. Thank you, Matthew. To start with the tax, I would expect. Of course, we have to finalize all of that, right? As we finalize the carve-out financials, we finalize the parameter and so on. I would expect it to be relatively similar. In terms of, you know, corporate cost. First of all, the corporate cost, there is nothing really dedicated to Sandoz as we see at the moment, right? There's generally activities across the different businesses. On the other hand, we will find after some additional work the corporate colleagues have to do over the next 2, 3 years as we set up a new standalone company. I'm sure we will find that over the mid-term also some further efficiencies. If you know, as Vas laid out, we have given now a midterm guidance of a mid- to long-term of 40%+ for the new Novartis. That of course includes corporate, and it's basically an upgrade from the prior 40%+ for the innovative medicines. All right. How exactly this will play out, we have to figure out. We will find further opportunities to streamline our operations, and we expect that, by being a focused innovative medicines company. Thank you, Matthew. Perfect. Next question, operator. I'll jump back in the queue. Thank you. Thank you. We'll take our next question. Please stand by. Your next question comes from the line of Simon Baker from Redburn. Please go ahead. Your line is open. Thank you for taking my questions. I also have two. Just a quick question, firstly on the financials. You alluded to the seeking of investment-grade credit rating. Some idea of how we should be thinking about the debt that Sandoz will begin life with. Secondly, in the Florida multi-district litigation over Zantac, Sandoz is a defendant, Novartis isn't. Would it be reasonable to assume that should there be any liabilities, that's how it will sit and any liabilities could sit with Sandoz, they will not sit with Novartis? Thanks so much. On the first question on the credit rating, Harry or Vas? Yeah. Thank you, Simon. Yeah. As I mentioned, we target an investment-grade credit rating, which, as you look at this sector would be in the BBB- area. With that, we would expect a low- to mid-single-digit $billion debt pushdown. We would do it very thoughtfully in a way that Sandoz would have reasonable level of debt, but still freedom to operate. Thanks, Harry. From a legal standpoint on the H2 antagonist. First, it's important to note that Sandoz was a very small player, well less than 1% of this market segment over the recent years. We view any exposure as de minimis at this time. It'd be premature, I think, to comment on how exactly we will deal with that specific case. In general, as a principle, we would expect any legal liabilities that are largely related to a business to go with that business at the time of separation. Thank you very much. Next question, operator. Thank you. We'll now take the next question. Your next question comes from the line of Richard Vosser from J.P. Morgan. Please go ahead. Your line is open. Hi. Thanks for taking my questions. Two please. Just one back on costs, please. I think Sandoz has done quite a lot of manufacturing for innovative medicines, potentially. So just are there any manufacturing dis-synergies that we should think about? So incremental costs in COGS that innovative medicines might have to pay to now what would be a separate company. Actually just on Matthew's question again. You know, we're effectively saying, I think from your answer, Harry, that there will be incremental costs on top of the corporate costs for Sandoz that now have to be allocated. I know it's early, but any idea of that amount? Did I understand that right? Second question, just on the gross profile that you highlighted in terms of the off-patent market. Just thinking about the Sandoz portfolio, within both elements of that off-patent market, the generics and the biosimilars, how do you see your portfolio? Can you outgrow the expansion of those markets? Is that how we should think about it? Thanks very much. Yes. Thanks, Richard. So first on manufacturing, just to clarify. Today as an integrated business, we have an integrated manufacturing network. We've identified a certain number of manufacturing plants which would move to Sandoz, which are predominantly or almost wholly producing medicines for Sandoz. There's a set of plants that are predominantly or wholly producing medicines for Novartis. That includes the biologics manufacturing, which will 100% be retained by Novartis. We'd of course have TSAs across the two businesses, but we would not expect there to be an increase in costs for Novartis IM, particularly because we will retain all of our biologics footprint and retain the production facilities that produce the vast majority of our medicines. Now, in terms of the corporate cost question, Harry, if you want to take it again. Yeah, Richard. Let's go through different elements of cost and synergies and also streamlining opportunities over time. Of course, Sandoz will have some stand-up costs as a public company, right? Some corporate functions. The corporate functions have to be set up there. Again, all of this is being finalized. I would expect that to be in the range of around CHF 70 million per year, but that over time, the ability to drive lean further, leaning out of structures that by far gets offset by activities, you know, within streamlining that business. On the Novartis side, again, in the first couple of years, we have additional efforts here, so I don't expect corporate cost reductions. In the mid-term, especially long term, further streamlining opportunities there as well in order to contribute to the 40%+ mid- to long-term margin for the new Novartis company structure. There will be some one-time stand-up costs. Nobody has asked about this yet, but I just want to mention that. You know, for Alcon, that was $1 billion. It was a bit of a smaller business. Here we envision this one-time separation cost to be $1.4 billion ±. Again, we expect then via the streamlining of two focused companies to by far, you know, offset that one-time separation cost over time. Thanks, Harry. Maybe just to put a fine point on it. At the time of our announcement of our transformation program, we highlighted that we would expect our innovative medicines business to have a mid-term margin guidance of 40%+. Now we're saying as a standalone Novartis, inclusive of our corporate costs, we will be at 40%+, which means in the mid-term now, we would mid- to long-term, we would expect to be able to offset the corporate cost element and get the whole company to be at 40%+ ex Sandoz. Does that clarify, Richard? That is perfect. That's very, very clear. Next question, operator. I think there's one. Oh, sorry, we have one more on that, growth segments. Richard. Yeah. I think, Richard, you wanted to understand where we saw the growth coming from and could we consistently beat the market. I mean, if you think there's nearly $500 billion of product coming off patent in the next 10 years, roughly 60/40 split between small molecules and large. If you look at our position in Europe, we generally aim to have 80%+ coverage of all LOEs in small molecules. We've consistently executed around that and delivered growth from Europe. In the biologic space, we've more than doubled the number of assets in partnership and developed, so now we have 15+ assets. Those start beginning to launch really from the end of 2023 onwards. That drives significant incremental growth and expansion in terms of the margin mix. We're confident that the expanding portfolio, the strengthening portfolio both in Europe and in other territories then will deliver good, solid growth. Thank you, Richard. Next question, operator. Thank you. Your next question comes from the line of Tim Anderson from Wolfe Research. Please go ahead. Your line is open. Yes, thank you for taking the question. Richard Vosser at Wolfe Research on behalf of Tim Anderson. I have two questions, please. The first, what other generic companies does Sandoz or Novartis believe are good comps for investors to think about from a valuation perspective? Second question please. Years ago, I believe Novartis described there as being synergies between having an innovative and generics division, and you had mentioned already an integrated manufacturing network. Today, we see that there are limited to no synergies. My question first, am I mistaken in thinking that there had been synergies put forward in the past, and if not, what has happened over the years? Thank you very much. Yeah, thanks, Richard. I think it's in terms of the comps. I think you all know well there's a wide range of multiples one sees in the generic and slash specialty pharma segment, largely dependent on the mix of products they have and the geographic focus they have. I don't think we're gonna be providing specific companies that would be comps, but I can provide, again, the profile. Here you have a business that's number one in European generics, one of the leaders in most emerging markets that it plays in, a global leader in biosimilars with a limited presence in the U.S. that could be built off of over time. We really think about it as a European-focused generics company with a strong global base and a global biosimilars business. You're not gonna find a precise company as we tried to outline on the two-by-two chart that we showed in the slide deck that exactly equates to that. I think you can find the range of companies that with that mix to say, you know, what would be a reasonable multiple for a business like this. I think it's important to look at that geographic presence and the business segments in order to make that determination as best as possible. In terms of synergies, in 2016, we did have a program in which we integrated Sandoz further into Novartis. That was based on a thesis, particularly in biosimilars, where we thought that biosimilars could benefit from Novartis's manufacturing capabilities as well as global commercialization scale. In the meantime, the biosimilars market is increasingly, in most markets we compete, behaving like the standard generics market, where you need outstanding cost competitiveness in production, you need the ability to compete with portfolios and tenders, you need to be able to rapidly meet the needs of customers, and the importance of classical medical affairs and large scale promotional activities is a lot less than market access activities. Given that those synergies no longer exist within the segment which was the primary value driver, we've come to the conclusion that actually a biosimilars and generics business on its own would be best fit to be a standalone business and does not have synergies with our core innovative medicines business. That is a change, but I think it is also a change in the market environment that we've observed as biosimilars launch over the last six or seven years, and that led to this shift. I would say Sandoz does benefit from the tremendous capabilities in Novartis biologics to in order to drive down costs of goods and have a competitive cost base. We will have service agreements to provide supplies to Sandoz, but Sandoz will also have the flexibility now to build its own standalone biologics manufacturing, technical development, and development organization in order to compete in the long run in the biosimilar segment. Very good. Thank you, Richard. Next question, operator. Thank you. Please stand by. Your next question comes from the line of Graham Parry from Bank of America. Please go ahead. Your line is open. Great. Thanks for taking my questions. So just firstly, actually going back to legal liabilities, just on the valsartan and NDMA lawsuits as well, just clarify again, Sandoz would indemnify Novartis against future liabilities from personal injury lawsuits there. Can you just confirm again, NDMA was only an issue to Sandoz, not Diovan brand products. And I think only Sandoz cited in lawsuits. Just clarify that and confirm that. Secondly, on the manufacturing, just following what you were saying then, Vas, about building its own manufacturing network. Would the intent also be for Sandoz to use a significant increase in third-party manufacturing? And how long do you think that shift would be away from Novartis manufacturing? Because presumably that's a lower incremental return on asset base return for Novartis to manufacture generics. Third and last question, just on leverage. You touched on the leverage that Sandoz would have, but also allowing it to pursue its own strategy. Do you see the generics and/or biosimilars business as fragmented and Sandoz as a potential consolidator in that market? Thank you. Yeah. Thanks, Graham. First on legal liabilities, I confirm that Novartis is not a party to the nitrosamines with respect to valsartan. Again, our principle is that liabilities that are predominantly or completely associated with a given business, those liabilities will go with the business at the time of spin. Yes, those liabilities would move with respect to Sandoz. With respect to manufacturing, the current expectation is a five-year agreement to provide supply to Sandoz and biosimilars with the option to extend to two years. That's our current assumption. Of course, Sandoz, I think would want to try to see if they could move it out of the Novartis network if they have their own capacity and ability to drive lower cost of goods in the meantime. Nonetheless, we want to ensure business continuity and business stability for Sandoz to enable that, the Sandoz business to be as successful as possible. Providing that five-year assurance we think is reasonable. In terms of Sandoz being a consolidator in the generic space, maybe Richard, you want to comment on BD&L opportunities. I think in our plan assumptions, we will continue to look for M&A and BD targets. But given that we have such broad coverage of LOE, I can't see much consolidation. They'll be very much specific to either assets or to market segments or strength in particular markets. I don't see strong consolidation in this sector. Yeah. More of a targeted approach to BD and M&A for Sandoz. Thank you. Thank you. Next question, operator, or if there are more questions. Thank you. Your next question comes from the line of Mark Purcell from Morgan Stanley. Please go ahead. Your line is open. Yeah. Thank you for taking my questions. I have two. The first one's on pricing environment, and the second one on policy changes. In terms of the pricing environment, I mean, the biosimilars market is becoming increasingly competitive. There's often half a dozen biosimilar companies now chasing the same target. But at the same time, the inflation environment is becoming less helpful when it comes to generic operating margins, especially for players without the global scale you've just described Sandoz already has. So could you help us understand the anticipated pricing environment going forward, and where Sandoz fits against this backdrop? Secondly, the Inflation Reduction Act might change the balance between extended patent litigation battles, of which you've been involved in several, at the expense of being subject to direct negotiations and deeper discounts in the long term within Medicare. Otherwise, the flip side is you could have another model where you see the advent of limited biosimilar competition within the context of a more favorable pricing dynamic environment. What's your view there in terms of legislative changes that we're currently seeing and whether that's supportive for a business like Sandoz competing in biosimilars? Yeah. Thanks, Mark. First on the pricing environment, Richard? It's a good question. I think it's a little bit general. If you think, you know, the two launches that we're looking towards next year, you've got adalimumab in the U.S., probably the single biggest LOE event in the history of this industry, and we probably see 10, 11 competitors. I think there you'll see a very strong price erosion. Equally then, you start seeing slightly smaller size opportunities for drugs like natalizumab, where we see potentially, again, we look to file in the U.S. again, and there we probably don't see any competition in for the next four or five years. It's very, very different by different product. I think certainly on the biologics, clearly the cost and time element and the number of biologics now is increasing. I think there's always gonna be an attractive space in terms of that mix. On the small molecules, it's something that's been consistent in this industry. You know, normally four or five points of price erosion is pretty standard, and it tends to flow through. But clearly, again, looking at moving up the value chain to more specialty injectables, complex injectables, respiratory assets, again, lower levels of competitive intensity and more sustainable over longer periods of time will help manage some of that as well. Thanks, Richard. In terms of the Inflation Reduction Act, I think it's a great question, Mark, and I can't say that we have the perfect answer yet. We're certainly looking at scenarios of how things might play out given the proposal on when biologics are negotiated, how they might be negotiated, and what that might mean for the effectiveness of biosimilars, also some of the other smaller legislative changes that happened with respect to trying to promote biosimilars. I don't think we have a definitive answer to your question. It's likely, as Richard said, in some biosimilar cases, we will have to now reassess if I'm sure Richard and team actually will reassess if the biosimilar is still attractive market opportunity. There will still be ample options and opportunities to launch highly attractive biosimilars. Just to build on Richard's answer, I think there are multiple places where Sandoz is uniquely positioned. Just two examples are natalizumab and denosumab are places where, you know, Sandoz has a unique position to pick the molecule where there is the ability to be one of the few players in the market and then hopefully drive long-term success. Thank you. Thanks, Mark. Next question, operator. Thank you. Your next question comes from the line of Seamus Fernandez from Guggenheim Securities. Please go ahead. Your line is open. Great. Thanks, guys. Just two quick questions. First, just on sort of capital allocation and share repurchase discussions that, you know, sort of kicked off and share repurchases that were along the way this year. How should we be thinking about capital allocation going forward? Obviously, you guys have confirmed the strength of the dividend, but just wanted to get a better sense of how we should be thinking about the share repurchase plans that were announced towards the end of last year and initiated more strongly this year. The second question relates to just sort of the interchangeability question, which I think is a question that's kind of increased or intensified to some degree, with the Coherus ranibizumab approval, so the generic of Lucentis, or biosimilar Lucentis. How do you guys? You know, sort of decide because the FDA continues to talk about a, you know, treating each biosimilar as a one-off. But how do you decide on the types of trials that are necessary to run going forward, as we think about those types of possibilities? Do you see interchangeability as kind of the most realistic path forward to pursue, over time? Thanks. Thanks, Seamus. First on shares, our share buyback, Harry? Yeah, Seamus, thank you very much for the question. You know, it's probably a very short answer with this: nothing changes. The announcement today doesn't have any impact on our capital allocation of Novartis. We continue with our, you know, CHF 15 billion share buyback, as we have started it. We expect that in the second half of next year, this is concluded, right? Then we see what further capital allocation decisions have to be made. The dividend, as you mentioned, is expected to grow and, on the Swiss franc per share base that we had this year over the next years, of course, and that's our dividend policy of a growing and strong dividend in Swiss francs per share. In terms of M&A, bolt-on will continue to be our focus to strengthen our therapeutic areas, which we have clarified to be five, right? From that standpoint, no change of the capital allocation policies. Very good. Richard, on interchangeability? I guess the jury's still out. I mean, clearly it's not something we've deliberately pursued at this point. I think we'll see how the market evolves with the adalimumab launch and where some parties have gone for interchangeability, but the majority haven't. We'll consider how we choose to file going forward. Very good. Thanks, Richard. Next question, operator. Thank you. Your next question comes from the line of Peter Welford from Jefferies. Please go ahead. Your line is open. Hi. Yeah, thanks for taking my question. I've got just, I think, three left. Firstly, just with regards to the actual split of the businesses, and apologies if this has been said, but are there any parts of Novartis at all that will go with Sandoz at the spin or are the companies very much as we see at the moment in terms of the revenue split? Thinking particularly if I think it was a contract manufacturing business, for example, within Novartis. But also, and I know this has been addressed in the past, I thought I'd bring it up again. Can you just confirm none of the respiratory business, as is, at all, will go with the spin to Sandoz? Secondly, just with regards to the sale process or at least the stories that there were in the media, are you able now to confirm were there any approaches that were made for you to buy Sandoz? Were they only ever preliminary? And perhaps, you know, how those discussions panned out or whether the decision was made that was not the most prudent and tax-effective way to pursue this split. And then just finally, you mentioned the biosimilars and what's going on there with regards to manufacturing. Are there also any clauses with regards to Sandoz's freedom to potentially develop biosimilars to Novartis' own medicines in the future? Or will there be total freedom to operate as far as Sandoz's strategy in the future? Thank you. Yeah, thanks. Thanks, Peter. First with respect to the segments, Novartis, in terms of Novartis and Sandoz, we shifted the contract manufacturing business into the IM P&L. Now the two businesses are reported as you would actually expect them to be as standalone entities. I don't know, Harry, if there's anything more you'd want to add or? Yeah. I mean, there's certainly not any, you know, significant moves. Biosimilars, the current generics portfolio as reported for Sandoz is there. The contract manufacturing is and stays with Novartis. Respiratory stays with IM as well. Respiratory stays. It's pretty much in the overall scheme of things, pretty much the current segment reporting on the sales. Peter, in terms of the sales process, I can confirm we only had received preliminary inbound interest, but never any formal offers, you know, from private equity. It is our fiduciary responsibility that if we were to receive any further inbound interest, of course, fully evaluate them and ensure that it's in the best interest of our shareholders to continue down the spin path. That is absolutely our current intention and expectation, that the spin is the best way to go for our shareholders and the two businesses. Lastly, in terms of biosimilars, Sandoz on spin would have freedom to operate, to pursue any business opportunity that it would like, including developing biosimilars for Novartis products. Very clear. Thank you. Next question, operator. Thank you. Your next question comes from the line of Steven Scala from Cowen. Please go ahead. Your line is open. Many thanks. The first question is a follow-up of an earlier question, but did the recent healthcare reform bill give management any pause in pursuing this transaction at this time? One could argue diversification could be an asset, so taking a bit more time to think it through might have been a good idea. That's the first question. Second question is, I appreciate that you are seeking to focus on Novartis' innovative medicine strategy, and I understand that Sandoz has some company-specific issues which make it unique. When Novartis got into generics 20-plus years ago, Novartis Pharmaceuticals's goal was also to pursue innovative medicines, and my recollection is that it was pretty good at it. Why did owning a generics business make sense 20 years ago, but not now? Has the pharma market changed? And if so, how? Or do you believe the strategy was just wrong 20 years ago? Thank you. Thanks, Steve, and nice to hear from you as always. In terms of healthcare reform, no, it did not give us pause. I think we had ample time and opportunity to take appropriate strategies in the U.S. Medicare market, where I would note that Novartis is one of the lowest exposed companies in the sector, and we've reconfirmed that through our own reanalysis based on the latest legislation. In terms of our pipeline, we can adapt the pipeline, I think, to optimize value creation, even in the context of potential price negotiations. As I answered to the earlier question from Seamus, or from Mark Purcell, that it's difficult to judge at the moment, but also for biosimilars, we think there's ample opportunity within the biologics segment as well for biosimilars. It would just have to, of course, be adjusted for the various elements of the recent passed legislation. It didn't give us pause, and we moved ahead based on business strategy, value creation for shareholders. Now, in terms of the history, I think there's been two large trends that have happened that I think have enabled us, you know, led to this decision. I can't speak to the decision, you know, decisions 25 years ago. There was an expectancy, I believe, at that point in time for these businesses to converge more and more, for there to be opportunities for being in the generics segment to give you portfolio options to improve the performance of innovative medicines and for innovative medicines to increase the portfolio options for a generics business. Holding both of those would allow you to provide a unique value proposition to governments and customers. Now, the reality is, over the last 20 years, the businesses have further diverged, and that innovative medicines is a very unique commercialization, R&D, et cetera, and generics as an even more specialized and different commercial model, such that there is no identifiable synergies that we can find in any of our key elements of our value chain between these two businesses. I think it's a question of, you know, there was a hypothesis and it didn't fully plan out as the company expected. It's the logical thing to do to now separate and go in two separate directions. I think on the innovative medicine side, the other element of the story is that, of course, the competitiveness and the breadth of technologies and science that's out there means that being a winner in innovative medicines takes tremendous focus on outstanding R&D productivity and world-class commercialization, as well as being on the leading edge of various technology platforms that are emerging and then having the ability to flex across those different technology platforms as more data arises. Keeping the minds of our management team and the energy of our organization focused on that outstanding R&D productivity and outstanding innovative medicines commercialization, we believe is a better long-term value creation opportunity and use of our capital than splitting our capital across these two businesses. Thank you. Next question. Thank you, Steve. Thank you. Your next question comes from the line of Matthew Weston from Credit Suisse. Please go ahead. Your line is open. Thank you. One quick follow-up and a question for Richard. Harry, you mentioned the $1.4 billion single upfront cost for the split. Can you confirm if that's all cash? Then the second question for Richard. Given your very strong footprint, particularly ex-US, there have been a number of moves more recently from companies that I would say are kind of crossovers between specialty pharma and generics to take on tail products from major pharma and try and limit their decline and maximize the cash flow from those products. Is that something you can ever see Sandoz doing in the future that would fit with your existing footprint or that's outside what you see as your core business? Very good. First, Harry on the $1.4 billion. Yeah. The one-time separation cost, mostly cash, distributed probably over three years, some of it or most of it before the separation and some of it after. Yes, that's also how it played out for Alcon. Thanks, Harry. Richard? I guess it's a good question. I don't see it as a key strategic driver. I mean, there are certain parts of the portfolio. Say, in Europe, actually we're the second largest OTC generics company, highly attractive segment. Those kinds of areas are much more interesting. You know, they have growth potential. We can promote and expand them. The trouble with mature brands, unless they're in very specific therapy areas, clearly we bought the GSK cephalosporin business, but that's a business that fundamentally has growth potential and is very specialized. Those assets just generally decline quite rapidly, and it would take an awful lot of investment to get any kind of growth back. They're not so attractive. I'd much rather focus in different areas. Perfect. Thanks, Rich. Thanks, Matthew, for the follow-ups. Next question. I think last question, operator? Thank you. We will now take our last question. Please stand by. Your last question comes from the line of Jo Walton from Credit Suisse. Please go ahead. Your line is open. I'm sorry I was a backup because Matthew had to leave for a short period of time there. While I have the opportunity, can I ask two quick questions? Harry, I believe you told us originally that this would take some time to sort out, and if you were going to get serious offers from trade buyers or others interested, they'd need to see the full financials. You wouldn't have that until the middle of the year. I'm surprised you say you've only had one preliminary approach, because I was under the impression that it was only around now that you would be able to get those approaches. Can I just check and see, is there now a firm view that perhaps the tax situation would be such that you'd have to be offered so much money for the premium that tax just wouldn't make it worthwhile, or could we still see a big offer come in? My second question is, we always ask this, but with Sandoz being a big part, only part of a much bigger company, you've been able not to tell us. Could you give us some idea of your first-to-file status? It's all very well telling us that you have a full pipeline and there are gazillions of drugs going generic. If you are not in the first wave, as you are not with Humira in the U.S., for example, how do we know how much profitability there will be? You other companies give you some sort of proportion or an idea of value where you think you might have six months plus of exclusivity. Thank you. Yeah, thanks, Jo. I guess Credit Suisse is full on this call. Yeah. We appreciate it. Three times. The holiday is for us. In terms of the offer, there is always the possibility that a party wants to come in. We have now the ability to provide all of the relevant data. Of course, if a very attractive offer came in, that would provide us a different value proposition than a spin. We will of course fully evaluate it. Based on our diligence and our assessment of the various options, we think the spin is far and away the most likely and best way to separate these two companies. We certainly, from a fiduciary responsibility, we cannot rule out the fact that a party might come forward, do the appropriate diligence, and provide a very large offer. Of course, we would evaluate it as such, as we would in any case, in any situation of a business. In terms of the first-to-file story, Richard? Yeah, I know. There are two key parts to that. I mean, clearly as we look towards the roadshows next year, we would think about how we give more clarity about the nature and characterization of our pipeline and where we see whether exclusive opportunities or first to file. I would say. I mean, I think that said, I mean, I think the U.S., the days of sort of the U.S. generics business from 5, 10 years ago with a 180-day exclusivity, a lot of that is just gone. I mean, most now, you know, it's not. You're first to file among several. Most originators do have authorized generics, so it's a much more dynamic place. So you have that. What I would say, I mean, certainly from a European point of view, where we do have really good coverage, even when we are sometimes not necessarily first to market, we normally end up being the market leader, given the strength and the intimacy that we have in those marketplaces. I think again, we look forward to having the opportunity to give more details as we go into next year. Certainly I think that the capital markets roadshows that we'll conduct in the first half of this year, we take the point, Jo, that we need to provide more context and detail, and we would certainly plan to do that at that point in time. Thank you all very much for taking the time on short notice. Really appreciate it. Appreciated the questions. Look forward to continuing the dialogue at Meet the Management. We wish you all a good rest of the week. Thank you. Thank you. This concludes today's call. Thank you for participating. You may now disconnect.