Novartis AG (NVS) 2016 Q1 法說會逐字稿

Good morning and good afternoon, and welcome to the Novartis Q1 2016 results release conference call and live audio webcast.

Please note that during the presentation, all participants will be in listen-only mode, and the conference is being recorded.

(Operator Instructions)

A recording of the conference call, including the Q & A session, will be available on our website shortly after the call ends.

(Operator Instructions)

With that, I would like to hand over to Mr. Joe Jimenez, CEO of Novartis.

Please go ahead, sir.

Thank you.

I'd like to welcome everybody here today.

Now joining me on the Novartis end are Harry Kirsch, our CFO; we have David Epstein, Head of Pharma; Mike Ball, Head of Alcon; Richard Francis, Head of Sandoz; and Vas Narasimhan, who is our new Global Head of Drug Development.

Now before we start, I'd like Samir to read the Safe Harbor statement.

Samir?

Good morning, everybody.

The information presented in this conference call 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.

Please refer to the Company's Form 20F on file with the US Securities and Exchange Commission for a description of some of these factors.

Thank, Samir.

Okay starting on slide number 4, we had a solid quarter.

We absorbed the Glivec patent expiration, as well as investing in new launches.

Our net sales were up about a point in constant currency.

Core operating income was down 5%, and this reflects the Glivec patent expiration, as well as the launch investments.

We're making some good progress on the launches, which we'll talk about in a minute.

On slide 5, you can see the five priorities that I laid out at the beginning of the year.

I want to touch on each of these, starting with financial results on slide 6. As you know, 2016 we do have some pretty strong head winds with the Glivec patent expiration, with the launch of Entresto and Cosentyx in terms of additional spending, as well as spending on Alcon -- but we had a good quarter.

Pharma was up 1%.

Ex-Glivec, it was up 4%.

Sandoz had a good quarter, sales up 4% in constant currencies.

This was really driven by growth of the biopharmaceuticals business.

Then Alcon was down as expected, as we begin to execute the growth acceleration plan.

The second priority is on the next slide, and it's to strengthen innovation across all of our divisions.

On Entresto and Cosentyx, the launches are progressing.

Cosentyx is doing extremely well.

As you could see, we're growing share both in the US and Europe as we launch in psoriasis, as well as the two new indications.

David's going to talk more about that.

Then in Entresto, we said the first quarter was going to be all about breaking down some of the access barriers, which we've accomplished.

There still is prior authorization that's slowing some up-take, as well as physician reluctance to switch stable patients, but we're working very hard on this.

We're still very confident in the long-term peak sales of Entresto, just given the data on that drug.

Now on the next slide, I just wanted to lay out some of the other potential catalysts.

All the focus has been on Entresto and Cosentyx, but I want to remind everybody that we have a broad and a deep pipeline.

Just touching on a few in oncology, LEE in advanced breast cancer, Fovista in Wet AMD.

In neuroscience, this Amgen collaboration in migraine is going to be very promising.

In cardiovascular, Saralaxin for acute heart failure.

All these are potential blockbusters in growing areas of health care.

At Sandoz on slide 7, we're working hard to expand patient access to biologics with our biosimilars pipeline.

We have five major filings planned for this year and next.

We expect to have a big impact on health systems around the world that are struggling with cost.

This is a needed and going to be a welcome line from Novartis.

Finally on innovation on slide number 10, I'm very excited that now we have our two innovation leaders in place -- Jay Bradner in research and Vas Narasimhan in development.

They're off to a very good start, strong relationship, and this is going to benefit our Company for many years.

The third priority is to improve Alcon performance.

Under Mike Ball's leadership, the Alcon growth plan is under way.

We're accelerating innovation with the launch of UltraSert in panoptics.

We're strengthening our customer relationships around the world and we're improving basic operations, such as customer service, ensuring that we've got the right product at the right place at the right time.

Now the fourth priority is to capture cross-divisional synergies.

As I said in January, we're going to focus our divisions, integrate drug development, and centralize manufacturing.

In terms of focusing the divisions, we've already transferred opthapharma from Alcon to Pharma, so that took place April 1. We have also transferred just under $1 billion of mature products from Pharma to Sandoz.

That also took place April 1.

We're integrating some elements of drug development.

Vas has got his team in place, and we are looking for a July 1 cut-over.

As well as on centralizing manufacturing, we've appointed a new Global Head.

That is Juan Andros, he's Head of Pharmaceutical Manufacturing today, and he's building out his team and the plans for centralization of manufacturing.

That will go live on July 1.

We think these changes will generate significant savings.

We've put a number of $1 billion out by 2020.

That's going to help us with continued margin expansion for the Company, as well as ensuring that the launches have what they need to maximize themselves.

On slide number 14, I just want to give a little bit of an update on NBS.

We've made good progress, just picking out a couple of things that we did in the quarter.

We consolidated facility services, so we had 100 suppliers across -- around the world servicing Novartis sites.

We've reduced that to three.

When you think about that, the leverage that we have in terms of offering these companies significantly greater business, we're able to take costs down considerably.

We've started building out our five global service centers, which will help us lower costs in the long term.

We're expanding NBS to include in-country commercial efficiency across divisions country by country.

Finally, the fifth priority is to continue to build a high-performing organization, with that focus on quality assurance.

In the first quarter, we had a large number of inspections.

All of them were deemed good or acceptable.

Now before we move on to finances for the quarter, I want to invite Mike Ball, who's our new Head of Alcon, to share his initial perspectives on Alcon and the turnaround plan.

Mike?

Thanks Joe, and good morning, everyone.

Well, just to start with, I'm very impressed with Alcon.

Despite the rough patch we hit in 2015, I see a strong foundation and numerous competitive advantages here.

Candidly, for me it's just fun to be back in eye care.

I think I can distill Alcon's issues down to a few key themes.

Alcon needs more innovation driven by a better understanding of customer needs.

I think we may need more investments behind key drivers of growth; a real mindset here of customer delight, rather than simply customer satisfaction; and a nimble device culture that moves fast and is focused.

I think the split with Pharma will really help us in that regard.

We have initiated a focused set of actions to get our business turned around.

In terms of innovation, we are putting more investments behind our most promising R&D programs in both surgical and vision care.

We are actively consulting to get top physician input to ensure best user experience.

Also, we are -- I'll call it open for business, if you will, on the business development front.

We completed three deals in the past 60 days I believe you've read about.

To improve the Alcon customer experience, we established a team that did a deep dive into our surgical business to come up with recommendations to move us into the customer delight area.

We have had a report out on that, and we are now ready to implement.

To drive near-term growth, we are increasing investments in business areas that are immediately responsive to promotion in both surgical and vision care.

In the mid-term, I'm also excited about a number of market expansion opportunities that exist, because virtually no one in this space has invested significant dollars against obvious direct-to-consumer opportunities.

My background in market creation and market expansion tells me there is great potential out there.

I am enjoying it.

I feel confident in the turnaround.

Obviously the next question is when is the turnaround.

It's early days, but I feel that our growth acceleration plan will put us on track for sustainable growth by the end of this year.

Joe?

Thanks, Mike.

Mike's going to be around for Q&A, so we can get into it more deeply.

Now I'd like Harry to talk through the financials for the quarter.

Harry?

Yes, thank you, Joe.

Good morning, good afternoon, everyone.

As Joe mentioned, we completed the transfer of operational control for opthapharma from Alcon to Pharma, and for the mature products from Pharma to Sandoz.

We updated our 2015 segment financials to reflect these changes, so all comparisons are on a like-for-like basis.

Also, unless otherwise noted, my comments refer to continuing operations and growth rates in constant currencies.

Slide 17 show the usual summary of our performance.

Overall for quarter one, sales were up 1% and cooperating income was down 5%, as was core EPS.

I mentioned at the start of the year that certain factors would weigh on first-half performance, with generic Glivec entering in the US market from February 1; high investments for Entresto and Cosentyx, as well as the Alcon growth plan.

Operating income for the first quarter was down 5%, in line with core operating income.

Free cash flow was $1.4 billion, broadly in line with the prior year at $1.5 billion.

On slide 18, you'll see that our sales growth was driven by strong underlying volume growth of 7%.

This reflects the strength of our growth products, which were up 24% to $3.9 billion, or 34% of group net sales.

Of course, this includes the GSK acquisition effect, as the transaction closed on March 2 last year.

We had one month of sales from those products in quarter one 2015, compared to three months in quarter one 2016.

This helped us offset four points from generic erosion on the quarter, as well as two points from price.

Currency took us from a positive constant currency growth of plus 1% to a negative dollar growth of minus 3%.

On core operating income, strong underlying growth of 15% was more than offset by negative 8 points from price and negative 12 points from generic erosion.

Currency took us from minus $5 to minus $11.

I provide a bit more detail on the currency evolution of the next slide.

The currency impact in quarter one of minus 4% on the top line and minus 6% on bottom line was slightly better than we anticipated in January, mainly due to the weakening of the US dollar in March.

If March average rates prevail for the remainder of the year, we expect the impact on Q2 would be minus 3% on top line, and minus 4% on bottom line.

For the full year, it would be minus 2% on the top line and minus 3% on the bottom line, slightly favorable to our January guidance.

Now let's turn to margins on slide 20.

Overall, the group core margin declined 1.8 points in constant currency, mainly due to generic erosion and growth investments.

Let me talk you through the divisions.

Pharma grew sales by 1% in quarter one, as growth products compensated for generic erosion.

However, core operating income was down 3% in the quarter, mainly due to generic erosion and launch investments behind Entresto and Cosentyx, partly offset by the two additional months of GSK assets and productivity gains.

This resulted in the core margin decline of 1.5 percent points to 33.7% of sales.

Sandoz grew sales by 4%, and core operating income by 6% in the quarter, resulting in a core margin expansion of 0.5 point to 19.8% of net sales.

This expansion was driven by favorable mix, mainly from the US biosimilars launches of Glatopa in June last year and [Salazio] in September last year.

Alcon sales were down 3%, and core operating income was down 26%, resulting in a core margin decline of 5.9 percent points to 17% of net sales.

This decline was mainly due to investments behind the growth plan announced in January, combined with lower sales.

As I mentioned in January, we expect sales growth at Alcon to follow in the second half of the year.

We expect margins to improve over time to be in line with industry peers.

On slide 21, you can see the dividend payment of $6.5 billion in quarter one drove an increase of our net debt to $23 billion at the end of March.

Our free cash flow, which was broadly in line with prior year at $1.4 billion, was used primarily for payments related to the acquisition of small bolt-on businesses and share repurchases.

Now let's turn to the balance of 2016 shown on slide 22.

In half one, we expect core operating income to be impacted by the higher investments we are making in Pharma launches and the Alcon growth plan.

Quarter two is expected to be the lowest for sales growth, as we lapped the GSK oncology product acquisition, and have the full-quarter impact of Glivec generic erosion, which continues in half two.

With these factors, quarter two core operating income could be a high-single-digit decline in constant currencies versus prior year.

In half two, we expect the sales up-take from growth products including Cosentyx and Entresto, together with cost benefits from productivity programs and resource allocation, to deliver core operating income growth of mid-to-high single digits.

Lastly, on slide 23 I want to confirm our full-year guidance.

We expect net sales and core operating income to be broadly in line with the prior year in constant currencies.

On the divisional level, we are expect pharma to be broadly in line to a slight decline, Sandoz to grow low to mid-single digits, and Alcon to grow low single digits.

With that, I hand over to David.

Good.

Thank you, Harry.

Happy to report that for Q1, despite the negative head winds from Glivec generic entry -- and let's not forget the remaining generic pressures on Exelon patch, Diovan, and Exforge -- the division was able to deliver 1% growth.

Before and after the transfers to Alcon and to Sandoz, we would have been two points better.

As mentioned earlier, our sales growth ex-Glivec was a solid 4%.

Core operating income declined three points from the investments we're making in those new launches.

The next page has now been updated to show you the key growth drivers with exclusivity through 2020 and beyond.

On this chart you see that Gilenya, Xolair, Ultibro, and Jakavi grew double digit.

In addition, products like Cosentyx, Taflenar, Mekenist, and Revolade also grew strongly, although we don't have an easy comparison to show you in the percentage comp.

Overall, the portfolio continues to do nicely, and we have a substantial portion of our revenue coming from these growth drivers.

I want to spend just two slides on our oncology portfolio.

Our oncology base business ex-Glivec grew 7% versus prior year.

Total oncology sales grew 9% versus prior year.

The assets that we recently acquired are delivering right in line with our expectations.

Of note, in the US Glivec volume share remains greater than 50%, which puts us well above the volume retention of very high end benchmarks.

Perhaps just as importantly, if you'll look at the last couple weeks, there seems to be some stabilization in that share decline, which should set us up well for the next couple of quarters.

Of course, the main growth drivers for oncology remain Tasigna, Jakavi, as well as Jadenu, the improved formulation of Exjade.

During the quarter, we also took action on page 28 to further strengthen our oncology portfolio by expanding our relationship with Insight, and working and partnering with them on the development of a new indication targeting Graft-versus-host disease.

This a really horrific condition.

Right now there's not many drugs that work well.

Steroids are used, cyclosporin and others; but here we saw very good promising efficacy results with high overall response rates in both acute and chronic serious Graft-versus-host disease.

As a result of this new deal, a pivotal trial is planned to start in the first quarter of 2017.

This should further help this product expand its already very compelling potential.

Quickly on Gilenya.

This product in multiple sclerosis continues to do very well.

Sales grew 12% versus prior year in the quarter.

We're growing strongly all around the world; in a number of countries we're actually the market share leader.

Over 148,000 patients have been treated to date, and the product is well-positioned and increasingly recognized for early efficacy switch in relapsed remitting multiple sclerosis.

Now what I'd like to do starting on page 30 is go a little bit deeper on Entresto, given the high interest and the very high potential for this product for our Company.

Those of you who were on the call over prior to the launch, remember I spoke primarily about two things.

One was the fact that the patient population is largely divided in half: Patients that are symptomatic and are getting worse, and patients that are viewed as stable although their underlying disease is also getting worse.

At that point, I said the difference between a big drug and a very successful drug would be our ability to move the patients that are viewed as stable over to this product.

I'm going to come back to that point in a moment.

We also cautioned that up-take, particularly in the US, would be very slow at the beginning because access would be with blocked.

Take a look at this chart.

In fact, up until about January of this year, there was virtually no access for this brand.

What that meant was the early adopters, the physicians who would write a prescription, that prescription largely would not get filled because the managed care plans put in place so many hurdles to filling that prescription.

In all honesty and all candor, some physicians said I'm going to wait a while now, and I'm going to wait until access opens before I re-engage in what I see as a laborious process.

The good news is that our managed care team in the US has done a truly excellent job.

If you look at the data for April, you see that we have at this point 100% access under commercial insurance, with about 56% of those patients on the -- what we call the lower co-pay tier, which is usually around $30.

In Medicare we have over 90% access, with the vast majority of those patients on the lower co-pay.

I'd like to say at this point there's no more access issues, but I'd rather say the access issues are greatly addressed but not completely, and that insurance companies and other payers have gotten much smarter about putting additional hurdles in place.

In particular, they're very good at using prior authorizations.

Each insurance company has a different prior authorization form for their product.

In fact, they have different prior-authorization forms for Entresto, but also the PCSK9s and Corlanor.

Physician offices need to adjust to building these PAs into their normal practice, in order to make sure that patients do get access to these products.

Turning now to next page, you should be asking -- I suspect you are asking -- so what does this really mean in terms of results to date?

What are the lessons learned, and where do we go from here with this product?

On the left-hand side of the chart you see weekly new RX and TRX trends for Entresto.

The good news is those prescription trends are indeed trending up since access has opened, since our field force was re-trained in January, and was given materials to use for the first time with our physicians.

Clearly there's no inflection there yet, and you'll recall we promised an inflection in the second half of the year.

But you could look closely and lead yourself to believe it's certainly getting better and not getting worse.

On the other hand, on the right hand side of the chart we show something that's in my mind very encouraging.

This chart compares relative up-take on a per capita adjusted basis for the sales of Entresto in Europe -- basically Switzerland, Germany, and France -- relative to the US.

What you see is a marked difference between Europe and the US, much better, several folds better in Europe than the US, and particularly well in Switzerland.

You might ask the question why is it so different?

Well, first of all the access issue in Europe is very different from the US issue.

Once a product enters the market, generally there are little to no co-pays, there are not step edits, and patients really have broad access to the product.

Second, we made a decision based upon our learnings in the US to launch in Europe focusing a bit more on those symptomatic patients, because it became clear to us that physicians were much more willing to change a symptomatic patient when they've precede a stable.

Third, we decided to go -- because we knew there were not going to be access issues -- we decided to go more broadly with our field organization.

What we're learning from our European launch is that frequency does drive prescribing for this product.

Very good news in Europe, and lots of work to be done in the US.

I will come back to that, as well.

But before I do, on page 32 I want to try to give us all -- get us all grounded again, both in the long-term potential and what we see in the near term for the product.

First of all, as you know this is a product that's going to be built on multiple heart failure indications.

The Paradigm trial, which was the first approval and where almost all of the sales are coming now, it's the subject of the first label.

The Paragon trial in preserved ejection heart failure, which is enrolling well and we hope to file in 2019, will expand the market considerably for the product.

Recently, after talking with leaders in the field, we decided to start another pivotal trial in post acute myocardial infarction.

These are patients that are at risk of heart failure.

We plan to file in 2020 or perhaps a little bit later.

This will be a third opportunity to expand the potential for Entresto.

As a result of these programs and because of the remarkable data in terms of reductions in mortality and hospitalization, and also what we're starting to see now, which is some of the symptomatic benefits, we remain confident that the sales of this product would be in the range of $5 billion in reduced ejection heart failure, and we can build from there.

For 2016, as we cautioned last time, we would like people to be more modest in their expectations.

We're estimating sales in the ballpark of $200 million.

I suspect some people will say to me is that conservative, is optimistic.

A lot depends upon exactly when that trend line breaks in the second half.

We certainly hope to beat the number, but nonetheless we think using $200 million as a target is not unreasonable for this year.

On the next page, I want to take you through a little bit more detail of what we're doing, primarily in the US market, but also some of these tactics are being used ex-US, as well.

Basically, we're focusing on three areas to make sure the appropriate patients get this drug.

We're expanding promotion and share voice.

We are adding sales representatives.

Those sales reps are in the field today.

They started in April.

It's roughly a 50% increase in capacity against our cardiologists.

We are valuating a primary care field force expansion as well, likely to happen either very late this year or early next year.

Another interesting learning is that in Germany, where we are calling on PCPs, a significant number of them are writing the prescription, which is something we had not fully anticipated when we launched the product.

In addition, we just launched our Tomorrow direct-to-consumer campaign.

That's meant to educate and activate patients so they understand there's something better out there for them that can give them a better life.

More work to be done around informing patients and also supporting practices, doctors' practices, around reimbursement.

Last but not least, we are now well into and expanding and executing a clinical trial program which we've now branded under an umbrella of something called Fortify.

I won't read all the details for you, but you can see this is a fairly active clinical program meant to support this product.

That's where we tie up on Entresto today, so I'll leave you again with a feeling of confidence.

This is a very good drug.

It's working in physicians' hands.

Physicians just need to use it, get comfortable with it, and also get comfortable that the reimbursement process is something that can be managed.

Turning now to an even better news story is Cosentyx on page 34.

This product is above expectations, both your expectations and our expectations.

We're out-pacing competition with strong share gains in this psoriasis market.

You can see on the left-hand side of the chart the strong share growth versus Stelarra.

The weekly TRXs are tracking nicely.

You could even argue that the line is beginning to accelerate, rather than decelerate.

Perhaps even more importantly, if you look at a chart on the right-hand side -- and this is Germany.

You'll remember that we launched in Germany quite some months after the US.

In Germany, we've already bypassed Stelarra in terms of market share.

We are on track that before the end of this year it is quite likely that we could bypass the market share for Humira, which would make Cosentyx the number one biologic brand in the German market.

If we turn to the next page, let me share again why we believe Europe is -- has even more potential for biologics, and particularly Cosentyx, than is typically understood.

In the US, reimbursement requirements through step-edits usually require that patients fail other biologics -- one, two, or occasionally even three.

In Europe, those step-edits do not exist, which means a patient can move immediately from oral therapy to Cosentyx as the first biologic therapy.

If you look at this chart, you see that indeed 40% or more of patients are naive to biologics in the European market that are taking Cosentyx.

This means this market will expand, and we will capture much of that expansion, which means the European opportunity is quite big for the brand overall in psoriasis.

Now if psoriasis was all we had for this product, it would be a good news story; but actually psoriasis is just the beginning.

If you turn to slide 36, you see that we're building a mega blockbuster across three indications for this brand.

We are now the only anti-IL17 with indications for moderate to severe psoriasis, psoriatic arthritis, and ankylosing spondylitis in our label.

Sales during Q1 were $176 million, and we are just getting started in the rheumatology indications.

There are over 25,000 patients on this brand worldwide, and the market is big -- $15 billion at the end of 2015, growing at over 20% per year.

You can imagine this market growing at that rate for the next couple years, even if we were only to capture 20% to 25% of that market, we should be able to easily hit our peak sales forecast for this brand.

We have more to do in the area of rheumatology.

Field forces are being expanded.

We're working through reimbursement in a number of countries for these additional indications.

We plan to start a head-to-head superiority study in psoriatic arthritis and ankylosing spondylitis with Cosentyx versus Humira, because we believe the profile of this product is very strong.

With that, I'd like to end on the expected highlights for the pharmaceuticals and our regulatory news flow for the year.

As you can see, the year is progressing nicely.

I believe we will indeed see the regulatory filings also for PKC412 in the first half, so we'll see another green check mark.

The BYM result in this rare orphan indication are disappointing.

We just saw the early data sets, and we're now doing the evaluation to see what the implications might be on the other potential indications.

With that, I'd like to turn the presentation back to Joe.

Thanks, David.

Okay, so to just conclude, we had a solid Q1, and we are on track to deliver our full-year guidance for the year.

Now what I'd like to do is open it up for Q&A.

Thank you.

(Operator Instructions)

The first question comes from the line of Jeff Holford from Jefferies.

Hi, thanks very much for taking my questions.

In the first quarter, you did core operating profit of a 5% decline at constant exchange rates.

You had said when you updated it for full year it could have been as bad as a double-digit decline.

The first question is does this mean you've got some potential gas in the tank for a beat this year?

Was there something that changed the phasing of operating profit loss in the first half to make it come out better than you expected?

Secondly, just because we're all still getting to grips with the margins in the new Alcon and the new pharma business, can you give us a bit more help on the shape of Alcon margins through this year?

For example, which quarter do you think should be the lowest margin for the Alcon business?

Is that something we could expect in Q2, or are we already past that?

Then just last, just on LEE11, can you just remind us of when the different interim readouts on this product are expected, just to help us understand there is time points that are out there, and how events are occurring in those studies?

Thank you.

Okay.

Harry first, on the quarter?

Yes, thank you, Jeff.

Concerning the 5% -- I said it in January, quarter one could be double digit.

We had some better productivity, we had some cost phasing and Cosentyx performed better than expected.

Overall, as I've shown on chart 22, I expect the first half to have a core decline of mid-to-high single digits, so quarter two, given phasing, could be high-single digits.

But overall, we simply stick to our full-year guidance of broadly in line, as further productivity and up-take from the growth products I expect to then drive some further upside in the second half.

Mike, on Alcon margin?

Still early days for me, and I'm still learning.

Job one is obviously to turn the top line around.

To do that, we need to invest in marketing and sales and R&D.

As we do those investments, we could take short-term margin hit.

But as I see this business turning around, we are going to return to industry norm.

Still a bit of a mystery to us right now.

David on LEE?

Vas, do you want to?

Absolutely.

For LEE, our Mona Lisa 2 study, the enrollment's complete.

We expect to have the interim analysis complete in Q2.

We're on track for a full study readout by the end of this year.

Thanks very much.

Next question, please?

The next question comes from the line of Richard Vosser from JPMorgan.

Hi, thanks for taking my questions.

Just a follow-up question on LEE.

Perhaps you might be able to touch, given you're fully enrolled, on the blinded safety tolerability profile that you're seeing in the trial.

Are you seeing anything that stands out in terms of signals relative to I-brands?

Second question on Entresto, and your comments on the experience in Germany with the PCPs.

Perhaps you could explain why you're waiting until the end of the year to expand the sales force to PCPs in the US.

I certainly would have thought the sooner the better maybe, there.

Secondly, after the expansion of the US cardiology sales force, perhaps you might give us an idea of the relative size of the sales force and relative to their number of target docs in each geography.

One final one on Entresto.

Just thinking ahead in terms of pricing in Europe and price discussions, in Germany of course we have the GBA thinking about price one year after launch.

Do you anticipate any issues there that we should think about?

Maybe I'll push one more on Cosentyx.

The thought Lilly's [taut] has just been approved.

What are you seeing there in terms of their launch behavior?

Is there sampling?

What are you thinking in terms of the future and the impact on Cosentyx?

Thanks very much.

Okay, Vas, LEE?

On LEE, we are of course looking at the blinded safety review.

We're seeing safety that's in line with what we've seen in previous trials, but I think it's too soon to make any definitive declarations about the profile.

David, Entresto?

Regarding Entresto, the learnings about Germany and primary care adoption of the product are actually very recent.

It just really started to happen now, and it was surprising.

That has actually given us additional fuel to look at accelerating that primary care launch.

That's why I was saying it could be as early as the end of this year, versus waiting for next year.

I want to be clear, we have not made an exact decision yet.

We need a couple -- I think we need another month or two of data, and then we'll really know what the right decision is.

The next question was around--

Expansion of US cardiology.

Yes, we're at around 600 people in the field.

Typical rep has between 30 and 50 what you would call more or less super-targets that they focus on, but they do also call on a bit more physicians.

What we're starting to learn is we're getting -- the good news is we're seeing a fairly good breadth of prescriber.

We're getting about 200 more physicians subscribing per week.

But we haven't generally gotten to depth, which means repeated use -- except in the places where we've really heavied-up on the frequency.

We're actually in the process of narrowing down the number of doctors the reps are calling on, but seeing them more frequently.

We think that's going to be part of the reason you're going to see the inflection during the second half of the year.

Regarding Entresto in Europe, you're right.

Entresto is priced more modestly in Europe.

It depends upon the country, but the price is around EUR5.50 in the European market.

Interestingly, in Germany we just went through the first evaluation process for the product, and the product was deemed to provide significant incremental advantage, which sets us up pretty well from a pricing perspective.

Price will come down, but probably not come down a lot, because the German government has deemed this product to be a significant event.

Regarding Lilly's approval and launch, we welcome them into the market.

Our experience has been that whenever a new class of drugs enters, having more than one player almost certainly expands the class -- in this case the anti-IL17, so we expect that to happen here.

The profiles for the drugs are a little bit different.

I think actually in terms of clinical efficacy, they are spot on.

Their label, however, from an efficacy perspective is better than ours, because they were able to get something called POSI100 in their labels.

Dermatologists don't prescribe to POSI100, but the Lilly reps most certainly will use that data, as anybody would, and that will give an efficacy halo.

On the other hand, there is also data in their label that says patients should never discontinue their product, because when they discontinue, if they are re-challenged due to the immunogenicity of the product, there's a fairly high chance the patients will not respond again.

I think there's a number of 33%, 34% in their label, which may prove problematic.

Last but not least, about 17% of their patients have injection site pain.

For Cosentyx there is virtually no injection site pain.

We look forward to the competition and the market expanding, and this becoming -- IL17 becoming the leading category in the psoriasis market.

Next question, please?

Thanks.

The next question comes from the line of Tim Anderson from Bernstein.

Thank you, I have a few questions.

On Entresto, prior authorizations are still a major access issue.

I'm wondering what's going to get those to lift in the US?

I would imagine the answer would be treatment guidelines.

That's the one thing you didn't seem to touch on very much in your comprehensive update on Entresto.

What's the expectation for how those guidelines will read, and how do you need those to read to get rid of prior authorizations?

Is that really the gating factor on prior authorizations?

Second question is on Alcon.

You talk about returning to growth in 2016.

Is that on an organic basis?

You talked about being open for business in terms of M&A within that division, so I'm wondering if M&A is what you envision carrying that division back to growth?

Then Sandoz, you mentioned in the press release acquiring rights to biosimilar Remicade in Europe.

I'm wondering why Sandoz would have to acquire rights to anything in biosimilars?

I always think of Novartis as being a leader in this area, but when I look at development timelines there are other companies that have been ahead of Sandoz.

I'm wondering why that's happening?

Okay, starting with Entresto.

David?

It seems to us, talking to payers of prior authorizations are a new tool that's not going away any time soon for many products at all.

They originally started, as you know, with very high-priced specialty products, and now prior authorizations are common with most launches, except for very inexpensive brands.

I think payers have figured how to make the prior authorization process fairly inexpensive for them, and a good way for them to save money.

I think the only way prior authorizations come off is when products become so common that the burden of processing the prior authorizations for the insurer outweighs their ability to actually inhibit prescribing, which means it will not be guidelines, but rather it will just be time in market and continued sales growth of the product.

When the product becomes standard of care, those PAs will go away.

When's that going to be?

It's not going to be this year, and it's not going to be next year.

Mike, on the Alcon organic growth?

Yes, my comments were really relative to organic growth.

We were looking to get growth in the fourth quarter organically.

The BD deals are very important to us in 2017 and moving forward.

Really, the return to growth is my view, we have a lot of promotion-responsive brands here.

As we put more investment behind these brands, our prediction is that we will get a lift this year.

All right, and Richard on Sandoz Remicade?

Yes, thanks Tim.

Thanks for the question.

Thank you for the recognition that we have a world-leading pipeline in biosimilars, which we do.

But with that significant pipeline, we obviously have to prioritize and make sure we're actually focusing on the right molecules at the right time in the right markets.

That's what's happened with infliximab.

We saw an opportunity to leverage what was happening with Pfizer, and we took that opportunity to make sure we were well placed for entering the market in a timely fashion.

Right, so it is about timing, as opposed to capability.

Absolutely.

Thanks, Tim.

Next question, please?

The next question comes from the line of Matthew Weston from Credit Suisse.

Thank you very much.

Three questions, if I can.

The first, you called out the opportunity ex-US for Entresto.

Can you give us the split of the Q1 revenue US versus ex-US?

David, can you give us the EU roll-out timetable country by country over the course of the next 12 months, so we understand how that opportunity is going to build?

Secondly, just looking beyond the headline brands, it looks like some of your second-line assets saw weakness, particularly ex-US, in Q1 -- Galvas, Diovan, Exforge were all below expectations.

Is there a risk that you're sacrificing in-market sales by focusing the cardio-metabolic effort on Entresto ex-US?

Thirdly, Mike you called out the opportunity to grow markets with increased promotion, and particularly DTC in Alcon.

That makes a lot of sense, but one of the issues with Alcon as I recall seems to be the difficulties in actually manufacturing sufficient product or getting the product in the right place to actually sell it and get the doctors' support.

How confident are we that for example, Baily's total one is going to have enough capacity for you to grow the market by pushing on new channels?

Thank you.

Thanks, Matthew.

We'll start with the ex-US Entresto question.

David?

Yes.

The sales were quite modest for the quarter.

I think breaking them out, particularly giving stocking -- some places lack of stocks draw-downs and other places -- it's not particularly meaningful where that revenue came from.

Going forward by Q2 or Q3, I think you'll actually have some meaty material.

I'd say over the long term without giving a specific number, a substantial part of that $5-billion estimated peak sales will come from Europe and other parts ex-US, so you can rest assured of that.

The EU roll-out, sales this year are primarily in the three markets that we showed on the chart, so Switzerland, Germany, and France.

A number of countries will provide reimbursement starting in Q3 and in Q4.

It won't be that material for this year, but actually should be a nice growth driver for Entresto as we start 2017.

The question about the second-line assets such as Galvas?

You're right, in order to balance, providing a reasonable margin in a year of generic pressure, finding the money to invest in Entresto and Cosentyx, we did resource reallocation around the world.

It would be easy to jump to the conclusion that maybe that's had some impact on sales for other products.

The reality is when you dive into it, it's driven much more by price reductions that we're seeing across the business in Europe and the emerging world.

There's a number of countries where we're seeing the impact of low commodity prices and lower ordering, so the emerging market growth is quite a bit slower than it used to be.

In Japan, there's quite a lot of pressure, particularly overall, because wholesalers were drawing down inventory prior to their price cuts, and continued erosion of Diovan and Exforge in the Japanese market.

Mike, on Alcon?

Thanks.

On the growth markets then, using direct-to-consumer to actually expand the markets, we're obviously going to marry up our manufacturing abilities with those efforts to expand the markets.

I will tell you, though, that in an expansion into the lenses area with something like DT1, we do have the manufacturing wherewithal to address those opportunities.

I should also point out in other things in our surgical area, you look at how far lasik procedures have fallen in the last 10 years from some 1.6 million in the US down to about 600,000.

There's lots of opportunities I think to grow that market back up, perhaps back to where it was.

There's opportunities for us there, and obviously we have the equipment to handle that.

Then on things like Toric IOLs, I'm always surprised that Toric still is such a low percentage of the market, when really much of the public wants spectacle existence.

I think as I look at our portfolio, we are very well positioned to handle market expansion, both from a commercial standpoint, but also a manufacturing standpoint.

Yes, and as I've seen Mike come in and reallocate resources, obviously where we do have any kind of manufacturing capacity issue just because of growth on certain items, doing a good job of reallocating to where we don't, and that's where we can get the market expansion.

Next question, please?

The next question comes from the line of Andrew Baum from Citi.

Hi, three questions, please -- first on Entresto.

ISA praised the US pricing strategy for the drug, but presumably it's resulted in much lower PBM rebate than you could have got.

How much of the issue is very simply that the rebate available to the PBM is just too low compared to other primary care drugs -- stroke specialist care drugs -- and how much is other factors along the lines that you mentioned?

Second question regarding marketing.

David, could you just remind us why you made the decision to delay marketing?

It was curious at the time.

Then when you talk about the 50% expansion, you obviously have a small relative base right now, so perhaps you could put it in context, and whether the reason for that is OpEx-dependent, given the pressures on the business this year, or are there other reasons?

Finally, on the Attorney General investigations.

Could you remind us what you believe the timelines could be here, and to what extent the potential GSK-like CIA could negatively impact your prior Entresto estimates?

Then finally a quick one.

I'm not an ophthalmology analyst.

Mike, you referred to industry norm ophthalmology margins.

Perhaps you could educate me and tell me what kind of number you're thinking of?

David?

Andrew, thanks for pointing out that ISA, which is a health technology assement, said that we priced this drug almost spot on, given the value of the drug to bring down hospitalization costs, as well as to improve survival.

As you can see, we were able to find the right level of rebate with the PBNs and other payers, because we have basically open formularies now.

I actually feel we did a very good job here.

There is an interesting what I would call conundrum in the US market.

We could have gone out and maybe priced this drug at say $25,000 a year, and you're right in that case the rebates would be even higher.

Maybe there would have been more excitement among the PBMs, but probably even less patients would have gotten the drug.

Over the long term, I think it would have seriously hurt in the drug's up-take success, and really would have damaged our reputation if we had done something like that.

In terms of marketing, we looked closely at what had happened in the cardiovascular field over the last couple of years.

For example, if you look at the factor 10As, a number of those companies went out very heavy upon their launch, and that was before reimbursement was as restrictive as today.

They actually fired their sales forces after year one, and they pulled back.

It was a largely wasted resource.

We said given that we know reimbursement will be even worse, that would be the wrong way to go.

We decided to go with a more targeted approach.

We said as we opened up reimbursement, we would be ready to then expand the commercial presence.

In fact, we have timed the field force expansion, the DTC, the office support programs, to actually roll out just as reimbursement opens, so it's on plan.

The only still really open question -- well, there are two.

One is when -- and the question came earlier -- when should we put the primary care field force up, and we're evaluating that.

Then second is how to optimally execute in the field, particularly around helping physicians focus initially on patients that are symptomatically getting worse, and having the right frequency.

Rather than trying to cover everybody extensively, but really cover those physicians with enough frequency that we crack the code, and they begin to prescribe routinely.

Your next question was about the southern district of New York case, Andrew.

Timing is always very hard to predict in these cases.

From time to time, it will -- let's say flare up in the newspapers, because we might be in courtroom arguing for example, over how broad or how narrow the case should be, what documents need to be provided.

There's really nothing of substance that has changed in this case, but it's in the newspaper from time to time.

Overall predicting how long this takes, it's really beyond my ability to do that.

Mike on industry norm margins?

Yes, if I think you look at a basket here -- let's call it Cooper, AMO, Medtronic, Boston Scientific, and Stryker, what you find is that the return on sales from an op income standpoint is low to mid-20s.

Thanks Andrew.

Next question, please?

The next question comes from the line of Tim Race from Deutsche Bank.

Hi, thanks for taking my questions.

Looking at the sales and marketing cost in the pharmaceuticals division, it seems pretty much in line with what we saw in the prior year.

Obviously Glivec wasn't a heavily promoted product, and the sales force I presume is behind Tasigna.

Given the timing of launches of Cosentyx and Entresto, one would expect your costs to have increased significantly year on year.

How much of the performance on the cost estimate of sales and marketing is due to phasing, either pre-loaded in the fourth quarter, or are we going to see that in the second quarter?

Then could you just clarify, when you talked about 600 reps earlier, the 50% increase that you're making, does that include the 600, or would that make it up to 900?

Then finally, just talking about re-focusing resources.

You mentioned in the statement re-focusing on Onbrez.

Would you be able to talk about which other products you've refocused resources away from, so that we could perhaps focus the top line better going forward?

Thank you.

Yes, there's a number of factors that impact the overall M&S spend lines, and they're happening at the same time.

One is we've been driving now for several years, and we intensified it last year, a series of activities to make ourselves more productive.

We are constantly driving to take out non-productive costs throughout the year.

Sometimes those costs come through, savings come through in a lumpy way.

But wherever we're not getting a good return, we are squeezing out money.

Second is we have redirected spend from some -- for example, some of the emerging markets into the countries where Cosentyx and Entresto are launching.

There were changes during the course of the year.

Last year you'll recall in terms of how cost of goods came out because of revaluation.

If you actually look at our M&S, our M&S is up slightly from last year -- not a lot, it's about 1%.

But it actually is up.

One would expect that as more countries reimburse Cosentyx and Entresto, our M&S then will continue to go up -- not in a dramatic way, but you would think in an incremental way during the course of a year, because that's a whole new opportunity to grow this brand.

I hope that helps a little bit.

Then Onbrez, the focusing?

Yes, there's virtually no promotion of Onbrez.

We do promote Ultibro, with a particular focus on Ultibro in the European market.

I'm glad you mentioned this product, because it wasn't in my presentation.

You recall that we did a head-to-head study called Flame versus Serevent or Advair.

The idea of that study is to prove that a LABA/LAMA combination, particularly Ultibro, will reduce exacerbations versus a steroid-containing product.

In fact, that is what has happened with this product.

You will see that full data set at the ATF.

I think you will also see that pivotal trial, or that key trial, published in a major medical journal, probably during the month of May.

That should give Ultibro another boost in the market place.

Thanks, Tim.

Next question, please?

The next question comes from the line of Kerry Holford from Exane BNP Paribas.

Thank you very much.

Kerry Holford from Exane BNP Paribas.

Three questions, please.

So firstly on Alcon.

You've given us some more detail on the components of that division now.

We can see that the equipment sales declined about 30% in Q1, and I'm wondering if that's a fair reflection of the outlook through the remainder of the year.

So if you could give us some guidance on the outlook there it would be very useful.

Secondly, on oncology previously stated that you intend to grow that portfolio through the Glivec patent expiry, and I'd just like to hear whether you continue to stay by that target.

And then thirdly a more conceptual question on Entresto.

I'm wondering whether the problems you're now facing regarding the slower ramp in the US and this inherent lack of physician education are in part due to the fact that you enrolled relatively few patients from the US into the paradigm study.

I think it was only about 7% of the total trial population.

So first, can you remind us why you elected to enroll so few into paradigm and secondly, whether you think that US ramp could have been faster, had more physicians, patients have access through the clinical trials earlier.

And is that a consideration going forwards certainly when we think about the Paradise study?

Thank you.

Okay, Mike on equipment sales?

So on equipment sales, the good news here is we had an excellent last couple of years in equipment sales, so we really got a lot of equipment in place.

And as you get equipment placed, then you get a line of consumables coming out of it, so you saw our consumables grow.

We've also found that when people buy the equipment, of course they keep it for 5, 7, 10 years, so then that real estate really then does belong to us.

So that's good news out of this, and we see increases in shares and things like IOLs where we have equipment in place.

Of course with such a great ramp up then in new products, then the amount of new equipment that's placed happens at a reduced rate going forward.

But bear in mind that equipment is only about.

1/10 of the revenue of this particular area so in my mind, this is a great tradeoff.

We need then to build off of the install base that we have in and get the rest of the business growing as a consequence.

David on oncology growth?

Kerry, so you're right, thank you for reminding us.

About three years ago we said we predicted the oncology business would grow through the Glivec patent expiration.

And then about a year ago we changed that, and the reason we changed it was the Glivec patent expiration came later than the base case.

So the product was bigger and came in at a different point in time.

The interesting thing though is despite Glivec being so large, if you look just at our oncology business for this year, they will have a very modest sales decline.

So actually I'm quite proud of the growth they are able to achieve given that their biggest product is going away.

And on the Entresto trial, Vas?

When you look at the benchmark data on cardiovascular trials in the United States, most companies are ranging from 10% to12% of patients in their total studies.

That's really driven by speed and cost.

So certainly the Paradigm study was lower, but was not way off the mark.

But nonetheless, in our upcoming trial programs, both with Paragon, Paradise as well as our ongoing Phase IV programs.

We want to have more, much more US physician participation in clinical -- the clinical research on Entresto, and you'll be seeing that moving forward.

Thanks Kerry, next question please.

The next question comes from the line of Graham Parry from Bank of America Merrill Lynch.

Great, thanks for taking my question.

So I'm afraid to say more on Entresto.

Firstly, just could you run through exactly what the key pushback from cardiologists is being that you didn't expect initially?

And then how your Phase IV program is intended to specifically address those physician hurdles, particularly the studies that you're doing outside of the big outcomes trials?

What's the size of that program, timing of data and the cost of that plan as well?

And then secondly, from at guidelines perspective, do you think you can get a broader recommendation for use in line with your label, or just the specific Paradigm HF patient population, and what percentage of the market do you think that represents?

And then thirdly on Alcon, Mike, you referred to new business expansion areas, I was just wondering if you could expand on that.

What particular areas are you looking at that we perhaps aren't thinking about?

Thank you.

Let me start and Vas will add to it.

Essentially what you see, if you talk to enough cardiologists, is the following.

I'll try to make this qualitative.

They do not have a huge sense of urgency to move to this product, particularly for patients that have multiple co-morbidities and they view as stable, because they don't want to create any potential -- what they view as any potential harm for that patient.

So they will then, depending upon the physician you talk to, come up with different excuses for why they aren't acting.

They will say reimbursements too difficult.

That problem is now, as you know, going away.

They will say my patients do fine and survival is not enough.

They will say you didn't use maximally tolerated Enalapril, although nobody does.

And as you know, we just completed the Atmosphere study which shows that maximum RAAS inhibition has no incremental value in heart failure.

And it's really the NEPI component that is making this product do the great things that it really does.

They will say I want to follow the label exactly, or they will say I want to wait for guidelines.

But these are all excuses because of the [still] underlying discomfort at moving patients because we haven't really, in my opinion, held their hand enough in support of them and because the reimbursers made it so, so difficult for them to initially try the drug.

I think that will start to change.

We do have some physicians that have put on dozens of patients, even some physicians that have put on 100 patients.

Once they start seeing patients come back to their office who they originally saw in a wheelchair or who could barely catch their breath coming back and thanking the doctor because they feel so much better, I can tell you that doctor, all the excuses go away and we just have to create more of those situations.

Vas?

So just a couple things on the trial program.

You saw at ACC, we released data that pretty clearly showed that for many of these patients, the first event is death.

So you need to act now if you really want to impact their life.

And also that the impact of Entresto is the same, regardless of whether you're talking about a stable patient or a sick patient.

So that's already in our data set, and I think we have very strong evidence to begin with, that you should be starting patients and switching patients to Entresto.

Nonetheless, there are three categories of trials I would say we have, one is bridging the Paradigm data set to our label and insuring that patients who have different Enalapril doses, we have a strong evidence base to show that they can be safely switched.

The second is naive starts, and starting patients who have not been exposed on to Enalapril onto Entresto, and the third is hospital initiation and switching patients in the hospital at different levels of severity onto Entresto.

It's a little over 30 trials, we obviously don't disclose the cost of that.

But what I can say is it's an incredibly robust program that's being reviewed by the top cardiologists in the world and the top cardiologists in the United States.

David, about guidelines, the question?

So guidelines is nothing more to add than what we've said before.

We expect European guidelines during the second quarter, US guidelines are most likely the fourth quarter in terms of their content.

We will have to wait and see.

Mike, business expansion?

Yes, so if you think about new business, I think about it in two ways.

One is actually new business and the other one is thinking about old business in new ways.

So let's go with the new business to start with.

So we did this deal with Transcend, and so essentially what it is, is an opportunity in with what's called minimally invasive glaucoma surgery to insert a stent in the eye during a cataract procedure to alleviate the symptoms of glaucoma.

And so at the end of the day, what you have there is a great situation for us where we are already number one in cataracts and we simply have an add-on to the salesforce that allows us to get into the glaucoma market.

And about 15% to 20% of cataract patients actually have glaucoma.

So that's what I'd call a new business, using our existing resources.

Then when I think of, say thinking about old business and new ways, so for example, presbyopia.

So presbyopia has been around a long time, there are some solutions for it, but it really has been pushed.

The penetration into the presbyopic market, that is people who need reading glasses, has been very poor.

And in my mind, there are many opportunities here to look at technology that we have to in fact penetrate that market in a more aggressive way than we have in the past, and I refer to that as new business as well.

I'd also point out new business in the lasik market, so lots of opportunities in my mind.

Thanks, Graham.

Next question please?

The next question comes from Florent Cespedes from Societe Generale.

Good afternoon.

Thank you very much for taking my questions.

Three quick ones, first for Richard on Sandoz.

Could you maybe clarify and explain a bit why some recently acquired products from Glaxo are already transferred (inaudible) into Sandoz division?

Is it because they are no longer promoted, and is the potential of these drugs really much lower than initially anticipated?

Second question would be for Vas on the research portfolio and LEO11 breast cancer.

Could you elaborate a bit on your strategy on this field, knowing that you have a portfolio of products with BYL or Afinitor?

Is a combination strategy potentially the next step on this field?

The last one, an easy one for David and respiratory.

A usual question, could we have an update on your plans in respiratory in the US and it would be about a partnership?

And is the fact that this -- any announcement is delayed due to some resources conference, given the Glivec generics and the Alcon storm, thank you.

Thank you, Florent.

Richard?

Thanks, Florent, for the question.

I think if I understand your question correctly, it's about why did we move some of the GSK assets in the mature transaction that we've just done with David, that $900 million that Joe referred to.

It goes back to the criteria that we place across the mature brands, which is, where do we think Sandoz can strategically at (inaudible) marketing.

Way behind those where they previously had had that in pharma and where they help also create a platform for Sandoz products to actually extend their sales and marketing capability going forward.

So it really fit in that criteria and we looked across all of the brands with David and obviously that included some of the GSK brands.

I think I'd just add to that, the main reason for us doing the oncology part of the GSK transaction was Votrient, Mekinist, Tafinlar, Promacta.

Those were the real drivers.

The other brands were part of the valuation, but we were not expecting much from them anyway, and if by chance Richard can get a bit more out of them, so the better.

Clearly the TDK46 is going to be a significant market and we believe that with LEE we can capture a significant portion in a three player market.

Now in addition to the trial we have ongoing in letrozole, we also have the MONALEESA -3 study that we'll read out with fulvestrant in 2018.

And we're currently evaluating how that's to take forward the program as well with our PA3 kinase delta inhibitors, as you mentioned, BYL.

And we should have, I think more concrete plans by the end of the year on how we'll look at combination studies with our LEE program.

And David, on resp?

I think your last question is, when are we going to launch Seebri and Ulti Bro in the US.

We are in negotiations, to be clear.

I think what's happened that's slowed things down a little bit is when we got this really exceptional FLAME data, it made the asset look even more interesting.

And I'm hopeful that we will be able to close the deal in the coming month or so.

Thank you very much.

The next question comes from the line of Steve Scala from Cowen.

Thank you, I have three questions.

First, would you confirm that the second quarter interim for MONALEESA-2 is for both safety and efficacy?

And David, when you spoke about this last June, you were not backing away from the notion that this is a study which could stop early for efficacy.

Are you still confident?

Secondly, I'd like to follow-up on the LEEO11 safety question from earlier in the call.

Vas, you answered the question relative to earlier LEE data, but there's some view that the safety profile of this agent is less optimal than competitors.

So how does it compare to the competition?

And then lastly, and I apologize for being picky and I appreciate the guidance range for Alcon hasn't changed, but the words that describe it appear to have changed.

So in January, the wording was, accelerate growth in 2016 and beyond.

In today's release the wording is, improve sales performance later in the year.

Michael said sustainable growth later in the year and he also said growth in Q4.

Just wondering why the wording changed, why it seems more muted, and is sustainable growth market growth or better?

Thank you.

Okay David?

Let me take the MONALEESA question.

So yes, the interim that's planned for Q2 looks at both safety and efficacy.

Typically we say, don't anticipate study stops interim.

However, in this case to be fully transparent, if this product works like [Pablo] works, like [I-brands] works, it probably would stop, and that's why we gave you the guidance that we gave you.

In terms of safety, the safety profile seems more like I-brands than the Lilly drug; however, all the safety data, at least for our product, is from very small studies, and much of it's preclinical studies.

We are close to having the full clinical readout.

Once we have it, I think we'll really understand if there are safety differences or not and before that, it would just be speculation.

Okay, and then on the -- let me start on the reason why it might look like the Alcon words have changed.

Obviously no guidance has changed on Alcon, but if you'll remember, we built the Alcon turnaround plan before Mike came in.

So what we're doing now is giving Mike free reign on taking a look at that plan, looking at how we wants to reallocate resources within the plan, and also the expectations.

If you remember the volatility of the Alcon business a year ago, it was quite substantial.

And so we believe that once we get through the second quarter, and really have a good look at the half year as to how Alcon is performing, we'll have a very tight view as to whether we solidify what we said at the beginning of the year or say that it's going to be better or say that it's going to be worse.

It's a little bit due to Mike's entry into the business and my wanting to insure that he owns the plan and can change the plan, as well as wanting to get through first half of the year before we commit to a new number.

Mike, do you have anything to add?

Yes, I think one of the reasons to really take this job is I looked at the prospects for Alcon, and what I saw was the prospects were bright.

You've got a great company, you've got great market shares, you've got probably the best products in the industry and what they need is a boost, and I describe the boost.

Now to try and get into the exact timing when I've been here 75 days, I'm just not going to do that.

I've given you my best shot, but what I can tell you is the prospects look very good for this company and I love the opportunities as I look down the road at expanding the markets that it's operating in.

Thanks Mike.

Okay, next question, please?

I think we have time for two questions.

The next question comes from the line of Vincent Meunier from Morgan Stanley.

Thank you for taking my questions.

The first one is on Glivec.

Have you an idea, or a target for the volume retention after the multiple generics launch in the US?

And the second question is on your peak sales for Entresto, can you give us a bit of color on the horizon for that peak sales, do you think it's the beginning of next decade or middle of next decade or different?

And lastly, what's the net price currently in Europe and in the US for Entresto?

Okay so Glivec, so there will be multiple generics entering in, if I recall correctly, Q3 of this year.

It's hard to know exactly how many, but would not be surprising if there were four, five or six of them.

If history is any guide, prices will more or less collapse at that point in time, and you would expect then our volume to become fairly small.

In the case of Entresto, I think this product will be growing up to the year that it goes generic.

You have to recognize there is virtually no competition for this product.

It's going to be virtually impossible for someone, even if they have a similar molecule, to do a head to head comparison study and prove equivalence or superiority.

So that peak for the reduced ejection fraction will probably come around patent expiration.

Net sales in the US, we don't give specific number, but the discounts vary and they came in right around where we projected when we gave you our peak sales forecast.

So I would say the discounts are not too small and they aren't too big and we found a good place with the payers.

Thanks.

Final question please?

Next question comes from the line of [Mike Loyton] from Barclays.

Thank you, it's Mike Loyton from Barclays, two questions for Harry, please.

Just briefly on the other income line on the P&L, that seemed to be fairly low in Q1 relative to prior quarters.

Just wondering if that's a new run rate to take forward after the restatement of the P&L and the new organizational structure.

And then a second question, with that organizational structure effective from April 1, Harry where is your focus, first and foremost now that you have a different organization to use the P&L for?

Thank you very much Mike, so the OIE line is, of course always, even in core, a little bit volatile.

And so as you have seen, OIE in core pretty much in line with last year quarter one.

So we don't give specifics on the OIE lines by quarter or for the full year but overall, it's of course that volatility is included in our total year guidance.

The core operating income is broadly in line with prior year in constant currency.

In terms of the organizational changes, basically the after products moving to pharma, of course pharma continues to be a significant part of the Company.

I think the realignment now made it easier for the Alcon colleagues to focus on the devises business and therefore, focus continues to be mainly on pharma, but of course also on the turnaround of Alcon, as well as, of course, to make sure the resource and the location into the biosimilars at Sandoz are also appropriate given the very good opportunity.

Thanks, Harry.

Okay, I want to thank everybody for attending the call.

We look forward to giving you an update at the half year.

This concludes the call.

Thank you for joining today's conference call.

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