Novartis AG (NVS) 2016 Q2 法說會逐字稿

Welcome to the Novartis Q2 2016 results release conference call and live audio webcast.

(Operator Instructions)

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.

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

Please go ahead, sir.

Thank you.

Welcome, everybody to our second-quarter earnings call.

Joining me on the Novartis end are: Harry Kirsch, our CFO; Vas Narasimhan, our Head of Global Drug Development; Paul Hudson, the new Head of the Pharma business; Bruno Strigini, Head of Oncology; Mike Ball, Head of Alcon; and Richard Francis, Head of Sandoz.

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

Samir?

Thank you, Joe.

The information presented in this conference call contains forward-looking statements that involve known and unknown risks, uncertainties and other factors.

These may cause the 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 20-F on file with the US Securities and Exchange Commission for a description of some of these factors.

Thanks, Samir.

Okay.

Starting on Slide 4.

We had a solid quarter, so despite the Gleevec impact, our sales were flat in constant currency, which means that our growth products fully offset the Gleevec loss of exclusivity.

Core operating income was down 4% reflecting that Gleevec impact, as well as the launch investments that we're making behind Entresto and Cosentyx.

The launches are progressing well.

We'll talk about them in a minute.

We also had good innovation in the quarter.

On Slide 5, we had five priorities for 2016.

We've made progress on all of them.

So let me start with the first on Slide 6.

When you look division by division, Innovative Medicines sales were down just one point.

Excluding Gleevec, they were up 3%.

Sandoz had a solid quarter, up 3%.

This was particularly good because all regions in Sandoz were up nicely.

Alcon was down 1% in the quarter.

As we've said previously, we expected the first half to be still down.

We will -- we are on track to return to top line growth by the end of the year.

Now, our second priority is to strengthen innovation.

We had some very good news on Entresto in the second quarter.

You all saw how we received positive news on the treatment guidelines, which came about six months earlier than what we had previously expected.

The Class I recommendation means that physicians should prescribe Entresto for all appropriate patients given the strong clinical data.

We also had a very positive publication in JAMA Cardiology that Entresto could prevent or postpone more than 28,000 deaths per year in the US alone.

So based on the earlier and better than expected guidelines, we made the decision to increase spending in the second half of the year significantly versus our original budget.

This will be to support the US field force, primary care build-out, as well as additional medical support.

Additionally, as we've stated earlier, we have initiated a clinical trial program under the name FortiHFy.

This is going to allow us to study heart failure in Entresto and generate additional data on symptom reduction, on quality of life benefits, among some other things.

But if you look at Slide 8, in terms of uptake, we shipped $32 million in the quarter.

But you can see that the US is at least beginning to create a break in the trend line.

So this gives us additional confidence that now is the time to pull that spending forward based on the good news and based on the beginning of some traction on Entresto.

Outside the US, we're getting some positive HTA responses.

So NICE in the UK and IQWiG in Germany both have enforced Entresto as cost effective.

So we believe we're on track for the full-year [$200,000] forecast that we had given previously.

Cosentyx continues to be very strong with the three indications launched in many major markets.

So we've completed the US field force expansion.

We're going to continue driving this, as it continues to exceed our expectations.

You can see on Slide 10, we have had a very strong, very early launch in ankylosing spondylitis and psoriatic arthritis.

We're taking share from Humira and from Enbrel.

We've got head-to-head superiority trials planned versus Humira.

So this is turning out to be, I think, one of the most successful launches in Novartis history.

We also had good pipeline news in the quarter, as shown on Slide 11.

LEE, the Phase III trial was stopped early.

We intend to file shortly and Afinitor was approved in the US and Europe for GI and lung neuroendocrine tumors.

In pharma, the FLAME study showed that Ultibro significantly reduces the rate of COPD exacerbations and prolongs the time to first exacerbation compared to Seretide.

So this is an important study for the future of Ultibro.

Then on Slide 12, you can see that innovation doesn't just happen in the Innovative Medicines division.

Sandoz also had good biosimilars news.

Etanercept, we had the very positive FDA advisory committee unanimous vote to recommend approval in all five indications of Enbrel.

Also, Rituximab was accepted by the EMA.

This is the sixth major biosimilar file acceptance over the last 12 months.

We've got two more filings planned in 2016.

Now, the third priority is shown on 13.

This is to turn Alcon.

We're showing some progress here.

So we're accelerating innovation in sales.

We've increased marketing in sale expense behind the Surgical and the Vision Care business.

We're starting to see some reaction on contact lenses, which grew in the quarter.

Also, cataract consumables grew in the quarter.

So Mike and his team continued to build strong customer relationships while they're improving the basic operations.

The fourth priority is to advance our productivity agenda.

You can see that Novartis Business Services cost under management, which was just under $5 billion, were held flat versus year ago.

So that includes investment in some areas and cost reduction in others.

We have begun the restructuring to be even more productive by starting to offshore some activity into the five Global Service Centers.

Also on July 1, we went live with our integrated Global Manufacturing Group as well as our global Drug Development Group.

We moved [28,000] employees into the manufacturing unit and 6,000 into global drug development.

We expect cost synergies from the manufacturing changes, as well as global drug development, to be around $1 billion per year by 2020.

We'll have one-time restructuring costs of about $1.4 billion spread over five years.

On Slide 16, finally on building a high performing organization.

In addition to the manufacturing and development organizations going live on July 1, we also created the independent Novartis Oncology business unit operating right alongside Novartis Pharmaceuticals.

So as a result: our divisions are more focused; our functions have greater scale to drive efficiency; and importantly, I believe this improves our control of the Company, as we're moving from independent divisions into what is now an integrated Company.

So, now Harry is going to talk through the financials.

Harry?

Thank you, Joe.

Good morning and good afternoon everyone.

Before I dive into the financial result, I just want to remind you that we updated our 2015 segment financials to reflect the new divisional structure announced in January.

So all comparison are on a like-for-like basis.

In addition, as usual, my comments refer to continuing operations and growth rates and constant currencies unless otherwise noted.

Slide 18 shows the usual summary of our performance.

Noting that this was the first full quarter of Gleevec loss of exclusivity in the US, we delivered a solid performance on the top line with net sales of $12.5 billion in line with prior year.

That performance was driven by continued strong uptake of our growth products across neuroscience, oncology and other disease areas.

Core operating income was $3.3 billion down 4% in Q2, mainly due to investments in Entresto, Cosentyx and Alcon, which I will come back to later in my presentation.

Net income of $1.8 billion was in line with the prior year, benefiting from a higher income contribution from our Consumer Healthcare joint venture with GSK.

Core EPS was $1.23 down 1% only, benefiting from a reduction in shares outstanding.

Free cash flow was $2.5 billion, significantly above the prior-year quarter, due to lower investments in capital expenditures and intangible assets and a dividend from the Consumer Healthcare joint venture.

Slide 19 shows the impact of generics that we saw on the top and the bottom line in quarter two.

Sales volume grew 5% in the quarter.

We had a negative impact of minus 1% on price.

Generics took us down from 4% growth to flat in constant currency.

With the currency impact, flat in constant currency became a minus 2% decline in US dollars.

You'll see a similar but more pronounced story on the bottom line.

Volume growth of 14% was more than offset by minus 6% of price and minus 12% on generics.

Now let's turn to margins on Slide 20.

Core operating margin for the Group was down 1.1 percentage points in quarter two as Innovative Medicines and Alcon margins declined, while Sandoz showed a slight improvement.

Innovative Medicines sales were down 1% as volume growth was fully offset by generic impacts, mainly from Gleevec, and price had a minus 1% impact.

Core operating income was down 4% due to generic erosion as well as investments into the Entresto and Cosentyx launches.

This resulted in a core margin decline of 1% point to 31.8% of sales.

Sandoz grew sales by 3%, driven by biopharmaceuticals, despite lapping the launch of Glatopa in the US in the prior-year quarter.

Sandoz core operating income grew faster than sales at 4%, mainly due to productivity improvements and some small legal settlements, while continuing investments in biosimilars and other key projects.

This resulted in a core margin improvement of 0.2 percentage points to 20.8% of sales.

Alcon sales were down 1% while core operating income declined 15%, mainly due to higher investments in marketing and sales and R&D behind the growth plan.

This resulted in a core margin decline of 2.6 percentage points to 15.8% of sales.

If you look back over the past year, you'll see that Alcon's core M&S and R&D spend has significantly increased as a percentage of sales.

These are necessary investments to return the business to growth as part of the Alcon growth plan.

While core operating income margin at Alcon has declined to its prior year, we expect to return margins to the low to mid 20s over time, with the successful execution of the growth plan.

Now, let's look at some of our growth drivers in the Innovative Medicines division on Slide 21.

Joe already talked about Cosentyx and Entresto.

A few others to highlight here include, clearly, Gilenya, which continued to grow double-digit, mainly due to volume growth and Tasigna, which continued to grow even in the US where generic Gleevec is now available.

Other growth products like Tafinlar Mekinist, Jakavi, and Promacta Revolade also showed strong double-digit sales increase.

Please note that for the oncology assets we acquired from GSK, this is the first quarter where we can show growth rates versus prior year, since the acquisition closed in March 2015.

Slide 22 shows the currency impact for quarter two 2016 of minus 2% on the top line and minus 3% on the bottom line, which was slightly better than we expected in April, mainly due to the strengthening of the yen versus the dollar.

Assuming early July rates prevail for the remainder of the year, the full-year impact would be minus 1% on the top line and minus 3% on the bottom line.

For quarter three, we estimate the currency impact to be minus 1% and minus 2% for the top and bottom line.

On Slide 23, you can see that the net debt stood at $20.6 billion at the end of the first half.

The two largest contributing factors for the change in net debt were the annual dividend payment of $6.5 billion offset by our free cash flow of $3.9 billion for the first half.

The other smaller elements are illustrated on the slide.

On Slide 24, I'd like to turn to our full-year outlook.

Group net sales are expected to be broadly in line with the prior year in constant currency, as per the guidance we gave in January.

Based on the positive treatment guidelines for Entresto, which were published about half a year earlier than we expected in the US, we have made the decision to pull forward our investments in the US primary care field force and incremental medical support into the second half of 2016.

We expect this to accelerate the uptake of Entresto and maximize future peak sales.

Without these additional investments, we are on track to meet our guidance for core operating income of broadly in line with the prior year.

The incremental spending of about $0.2 billion could reduce our core operating income to a low single-digit decline versus prior year.

However, the shape of the Gleevec generic erosion curve could be a source of upside on core operating income.

While it is very difficult to predict, depending on the shape of the curve, we could still end the year with core operating income broadly in line with a year ago, even with the additional investments mentioned.

This is why we are now giving a range for our guidance on the bottom line of broadly in line to a low single-digit decline.

Just a final word on the dynamics for core operating income in the second half.

The key tailwinds are the expected continued uptake for Cosentyx, Entresto and our other growth products, as well as our ongoing productivity programs.

In terms of headwinds, we have the incremented spending for Entresto as well as the impact of Gleevec generic erosion, as we expect multiple entrants in August when Sun's 180-day exclusivity period expires.

Based on these factors within the second half, quarter three core operating income could decline low to mid single-digits.

With that, I now hand over to Vas.

Great.

Thank you, Harry.

Good morning and good afternoon, everyone.

If I could have Slide 26.

On the innovation front, Novartis had another strong quarter in new data, an important progress on what we believe is the leading pipeline in the industry.

As Joe mentioned, we have now brought together Novartis drug development across the group into a single organization, focused on delivering world-class innovation and world-class operations.

We group our innovation efforts into Pharmaceuticals, which covers our non-oncology TAs; Oncology, including cell and gene therapy; and biopharmaceutical, our biosimilars unit.

Our goal is to lead in both drug development productivity and efficiency.

We are now working hard to ensure integrated portfolio management, world-class systems, best-in-class talent, and streamlined operations across the group.

Now in Q2, we had a number of important data read-outs and milestones, demonstrating the breadth and depth of our pipeline.

If I could have Slide 27.

Starting with neuroscience, we were pleased, in collaboration with our partner Amgen, to announce the top line results of AMG 334, our calcitonin gene-related peptide antagonist in chronic migraine.

As many of you are aware, we hold the ex-US, ex-Japan and ex-Canada rights to this program, as part of our Alzheimer's migraine collaboration with Amgen.

Now, there are about 70 million migraine suffers in the G7 countries, with nearly 7 million on some form of prevention.

Chronic migraine sufferers in particular have a very poor quality of life, with 15 or more headache days a month.

These patients are really desperate for better therapies.

As you can see in this study, we met the primary endpoint of the statistically significant reduction in mean migraine days from baseline, with a very good safety profile.

Key trial results, including secondary endpoints, will be presented at the European Headache and Migraine Trust International Congress in September.

We are also awaiting the Phase III results of our episodic migraine program with Amgen later this year.

If we can move to Slide 28.

In respiratory, our portfolio continues to advance.

As Joe noted, in May, we announced the publication of our landmark FLAME study, comparing our LABA/LAMA Ultibro to the leading LABA/LAMA/ICS, Seretide.

Our goal in this study was to look at exacerbations, which is the best predictor of five-year mortality, declining quality of life and disease progression.

In this fully powered Phase III-b trial, we demonstrated with our daily dosing regimen that Ultibro lead to 22% reduction in first-time exacerbations, a 17% reduction in overall exacerbation rate and showed statistically significant improvements in lung function and quality of life.

Ultibro is licensed worldwide, and we expect the GOLD science committee, which evaluates new scientific evidence on COPD care, to consider this data in the coming months for potential future guideline updates.

Moving to Slide 29.

In cardiovascular, we've had a number of important events for Entresto this quarter, highlighting that this is a drug that is unique in that: it's shown a mortality benefit; it's cost effective; and it has the support of key guideline committees around the world.

In May, we announced the launch of our FortiHFy program.

It's the largest ever heart failure clinical program, with over 40 trials and 30,000 investigators.

Our goal is to address any remaining data gaps that exist with Entresto initiation, such as: in-hospital initiation with our TRANSITION study; use in preserved ejection fraction heart failure, with our PARAGON study; initiation in the pre-heart failure setting, with our PARADISE study; as well as to generate real world evidence on the impact of Entresto on quality of life and outcomes.

As Joe mentioned, our lead investigators from the PARADIGM study continue to publish a range of secondary analysis, including recent publications in JAMA, showing Entresto could prevent or postpone 28,000 deaths a year.

And an additional publication that showed that if used in the indicated population, Entresto has a very attractive cost effectiveness for the US healthcare system.

Moving to Slide 30.

As many of you are also aware, we were very pleased with the early release of the guidelines in the US and Europe, giving Entresto a Class I rating in both geographies.

Now, in the US, this strong recommendation means Entresto should be used in all reduced ejection fraction symptomatic patients, which includes by definition, patients in Class II and III heart failure, covering nearly 80% of the reduced ejection fraction heart failure patients.

In Europe, the recommendation applies to reduced ejection fraction patients in Class II, III, or IV.

But importantly was restricted to the inclusion criteria used in the PARADIGM study, particularly that patients need to tolerate a maximal dose of Enalapril.

We continue to work with the EU guidelines committee to provide additional data to ensure that heart failure patients can draw the full benefit of Entresto in line with the labeling that we've achieved with EMA.

Now, on Slide 31, we talk about Cosentyx.

For Cosentyx, we continue to generate additional data that show that IL17A inhibition should be the standard of care for patients with not only psoriasis but also ankylosing spondylitis and psoriatic arthritis.

In ankylosing spondylitis, we released data in June showing that Cosentyx prevents radiographic progress in 80% of patients at two years, setting a new standard for the disease.

Given this data and other supportive indirect analysis we've conducted, we plan to move forward with a head-to-head study versus Humira to definitively show Cosentyx should be the first choice for these patients.

Moving to Slide 32.

Similarly in psoriatic arthritis, we've showed that up to 84% of patients do not progress on x-ray while on Cosentyx through two years.

These patients had sustained improvements in signs and symptoms of the disease.

We also plan to initiate a head-to-head study versus Humira in psoriatic arthritis.

So taken together, you can see with Cosentyx, we continue to generate long-term data that compellingly shows the impact of the IL17A mechanisms on these diseases.

Now, moving to Slide 33.

Also on our immunology and dermatology franchise, we were very pleased to release breakthrough data for Ilaris, our anti-IL-1 monoclonal antibody in hereditary periodic fever syndromes.

Now, this is a fever syndrome that's a debilitating disease for children.

It's a rare disease but an important disease.

In this study, we showed we were able to resolve flares at a much higher rate than placebo, giving these children a hope of much better quality of life.

We've received three breakthrough therapy designations and three priority reviews for these programs and filings in both the US and Europe are complete.

Along with recent approvals, we've achieved an Adult-Onset Still's Disease.

Ilaris is now approved in a broad range of rare diseases and demonstrates our ability to bring innovative therapies to high unmet need populations.

So, moving to Slide 34.

In Oncology, we continue to build-out our data set on our targeted therapy pipeline.

We announced in May that our DMC recommended to stop our LEE Phase III study in first-line hormone receptor positive, HER2 negative, advanced breast cancer, as the stopping criteria was fully met.

Now, we plan to released full data set at ESMO, the European Society For Medical Oncology in October.

We're currently preparing for filings with regulatory agencies worldwide.

Now, our goal with LEE is to build a broad range of clinical data to support its use in breast cancer.

We have now completed enrollment of MONALEESA-3, which is in first and second-line in combination with Fulvestrant, a study we believe is going to be extremely important given the recent FALCON study, which demonstrated Fulvestrant's benefit over aromatase inhibitors.

We've also completed enrollment in our MONALEESA-7 study in pre-menopausal women in first-line.

We expect to file both indications if the data are positive in 2018 and to be the first CDK4/6 with this broad label.

Now moving to Slide 35.

Also in Oncology, we continue to generate data supporting the use of Tafinlar and Mekinist in combination in BRAF mutant metastatic melanoma and advanced non-small cell lung cancer.

We believe, for patients with this mutation, this combination offers the best option.

In metastatic melanoma, our COMBI-d three-year survival data continues to confirm the benefit of the combination, with 44% overall survival, setting a new landmark for this cancer.

Moving to Slide 36.

In non-small cell lung cancer, we released data for the Taf/Mek combination at ASCO, demonstrating a superior response rate and a median progression free survival versus Tafinlar monotherapy, with a safety profile consistent with what we've seen in melanoma for this combination.

Now, we're working hard in progressing towards regulatory submissions in the US, EU and Japan for Q3 in this year.

Now, lastly, in Oncology on Slide 37, we talk about Jakavi, where we've released data showing a continued overall survival benefit versus placebo in Myelofibrosis.

In addition, in Polycythemia Vera, we demonstrated significantly improved hematocrit control in patients without an enlarged spleen.

Now, this is data that's consistent with previous data we've released in patients with an enlarged spleen.

Now, the COMFORT-I and II data and the RESPONSE studies were both already in our label.

We will include the RESPONSE-2 data in a label update later this year.

Now, taken together, on Slide 38, you can see we continue to progress our pipeline with 11 potential blockbuster therapies with read-outs over the next three years, importantly: Fovista, later this year; AMG, as I already mentioned, later this year; and Serelaxin, in the first part of next year.

We're very pleased with the progress we are making.

It really shows that we continue to build TA depth and progress our leadership in key areas of unmet need.

Now, moving to Slide 39.

Turning to biosimilars, we had a few key regulatory events and data that we wanted to highlight.

First, with Rituximab, we filed in the EU based on our data in folicular lymphoma.

For this program, we have demonstrated equivalent pharmacokinetics, pharmacodymanics, safety, efficacy and immunogenicity to MabThera.

Now, Pegfilgrastim, we received a complete response letter from FDA at the end of June.

We've worked closely with the agency throughout this program and are continuing to work with the agency to determine how best to answer their questions.

Finally, as many of you saw, with Etanercept, we released data confirming our strong biosimilarity to the originator.

We were really very pleased with the positive vote at last week's FDA advisory committee.

When you look across our biosimilars portfolio, we continue to make strong progress and believe we are on track to deliver one of the broadest biosimilars portfolios in the industry.

With that, I hand it back over to Joe.

Thanks, Vas.

Okay.

So to conclude, we had a solid quarter.

We're increasing our investment behind our growth opportunities.

We're driving our launches and we're delivering against the pipeline.

So now, what I'd like to do is open it up to questions.

(Operator Instructions)

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

So, the first question on the incremental investment for Entresto.

The $200 million seems relatively large given the 600 rep salesforce you were suggesting at Meet Management, taking around six months to recruit.

So could you talk about whether you're adding additional reps beyond that 600?

Whether you can recruit quicker than the six months?

Or is there actually incremental investment here behind other pharma programs and products that are in this investment number?

Second question also on Entresto, last quarter, you gave some idea of curves of uptake in European countries for Entresto.

Just if you could give us an idea of what's going on there?

Also, in the US, how the negotiations around prior authorizations are progressing, in terms of removing those?

Then final question, just on Alcon, broadly, we've seen some weakness in the quarter in Asia from the IOLs.

Is this a pricing impact?

Are you losing share?

Is this an effect we've already seen in other geographies in 2015 or is there still pressure to come?

How does that feed through into the turnaround; is that still on track?

Thanks very much.

Okay.

Thanks, Richard.

We'll start with Paul on the Entresto question, starting with spending.

Okay.

Thank you, Richard, Paul Hudson here.

So let's break it down.

Yes, we have made the additional investments.

We make a combination of investment in field force and investment in MSL.

With them all too, go the necessary investment for the programs to allow them to be effective for what they're doing.

Now, you asked a question about how quickly it ramps up.

There is a mixture as we go into primary care of the CSO component and a Novartis headcount component.

It allows us to ramp up perhaps faster than people are expecting.

That said, just because we can get the team on the ground quickly, we shouldn't underestimate the time needed to educate and get them up to speed in terms of delivery to the level we would expect to reflect the changing and positive environment.

When you put it all together, the majority of the $200 million goes into these investments.

These are required based on the change in landscape, the confidence we feel, the plans we have in place and the recent trends.

Outside of that, you asked about launch uptake in Europe, I think.

The trend that I believe you've been shown previously for Germany continues.

We're very pleased with the uptake.

I think it's worth mentioning -- maybe Joe mentioned it in the preamble, we had a positive IQWiG.

We also had a positive NICE.

We had a positive ICE, of course, in the US.

So it's no surprise we're off to a good start.

Of course, don't forget we have a somewhat of a restricted launch in France.

We wait for that to bottom out and we get into full usage.

I think Italy and Spain are going to be close behind.

On the prior auths, the last question, I have some working knowledge of this type of marketplace and of what I would expect to see an evolution in terms of a reduction, if you like, in the prior auth environment.

The P&T committees and others meet on their own schedule.

We introduce the guidelines to them.

They pick them up.

They work them through.

Then, we will see a gradual softening of the prior auths.

I've had preliminary conversations myself at a senior level with US payers and I see nothing but a gradual progress that will make it along this journey.

So, confident in the $200 million we have in expectations this year.

Looking forward to demonstrating what we can do and what we can exit in fact at the end of 2016.

Thanks, Paul.

Mike, on Alcon IOLs?

Yes.

So, with respect to Asia then -- so we are in fact looking into this weakness.

Preliminarily, what I think it is, is some issues with distributors both in China and India.

We also though clearly are having issues from an ASP standpoint, which is impacting us.

Now, we do have new management teams on the ground there since the end of last year, beginning of this year.

So I expect that as we move through the year, we'll get some resolution in terms of what exactly is going on here and what exactly we can do about it.

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

Three questions, please.

Following on Alcon.

Could you give us an update on your IOL pipeline progress there?

We saw Abbott get FDA approval last week for their next generation multi-focal lens, Tecnis.

That includes a toric version.

I recall toric lenses were a key focus for Alcon, your next generation pipeline.

So perhaps you could give us an update there in light of the competitive progress?

Secondly, on CTL019, it doesn't feature on Slide 38 of your pad with the potential blockbusters.

How should we interpret that absence?

Should we assume that you do not foresee blockbuster potential for that particular asset?

Or that you're some way less enthusiastic about that project going forwards?

Then, on LEE-011, can you talk us through how you intend to position that asset, given that Ibrance is already in the market and has first-line data?

Do you see any rationale to use the second CDK4/6 after you've failed on another?

Thank you.

Okay.

Let's start with Mike on the IOL innovation that's coming?

So if I look at what we've got actually in market right now that has just been launched, so I'll turn your attention over to Europe, where we've just launched the PanOptix trifocal, as well as our UltraSert offerings.

We've also launched the UltraSert here in the United States.

As I look down the road, I look from a materials standpoint.

We've got a new material IOL coming along, which is called the Clarion, which we expect in the midterm.

Then as I look further out, we have another IOL, which is an accommodating IOL for Presbyopia and the PowerVision as you've heard us refer to it.

So we seem to have a reasonably robust pipeline in there.

I should also say that we believe that the market for AT-IOLs, which we have, of course, the multi-focal and the torics is relatively under penetrated.

So one of our investment hypothesis is to put more money behind that and in fact, grow the marketplace there.

So I still think we have lots of opportunities with the IOLs, as I look to the midterm.

So, a pretty robust pipeline.

With respect to the approval of the AMO Symfony, we've been up against that in a few markets around the world and I would say we've done well.

Good.

Thanks, Mike.

Vas, on CART 19?

Thanks for the question, Kerry.

On CTL019, we remain on track.

We're very confident in our upcoming filing in pediatric ALL early next year.

Then we continue to progress our program in DLBCL with a filing we plan on in the following year.

We continue to believe in this technology and believe that this will be -- have a really important place in cancer care.

So, no change in our outlook and our confidence in CTL019.

Then with respect to LEE, we view this as a very sizeable market.

We believe CDK4/6 is going to become a very important class of drug.

We think we can position this best by continuing to generate data in additional settings, including in first-line settings with Fulvestrant as well as in pre-menopausal women, as I noted.

We continue to evaluate the potential to take it into the adjuvant and neoadjuvant setting.

I think I'll turn it over to maybe, Bruno, for the commercial positioning.

I think that you're absolutely right, Vas.

By all accounts, this market is predicted to be a $10 billion plus market.

We believe that we will have a competitive asset given the full program that you have described and that we are developing as we speak.

Launch timing in Europe will be actually very close to Ibrance.

Right.

Absolutely.

We anticipate filing before the end of the year, which will mean that launch timing will be very, very close with that of Palbo in Europe.

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

Two questions, please.

First, I was underwhelmed by the single partial response in the spider plot for your PD-1 data that you showcased at ASCO.

Given you've got 1,500 patients or so in clinical trials with this drug, are you comfortable -- this molecule has a competitive profile as a CoStim asset compared with many of the other more advanced compounds.

Then second, broadening the last question.

I appreciate several recent high profile academic hires at Novartis immuno-oncology and the ongoing early Business Development; however, from an organization point of view, doesn't future proofing NIBR and oncology research in general, organically involve slow expensive and potentially painful building of skills sets, such as antibody engineering, where you're not among the industry leaders?

My question is, given the time and cost that I suspect it's going to entail, how do you assess the comparative attractiveness of taking a competitor and acquiring it, which has leading antibody skills set, as well as a much broader advanced IO pipeline, compared with the organic approach?

Thanks.

Vas?

So, thanks, Andrew.

On the PD-1 data, this is very early response data.

We continue to monitor our studies closely, but we feel very confident in the PD-1 asset that we have early in NIBR.

I'd also want to note that we've conducted a number of pipeline deals to bring in-house, really, world-class assets from around the biotech community.

I think we've done over six deals, looking at various immuno-oncology mechanisms of action.

We believe we have one of the broadest portfolios in IO.

So our view is to take a balanced approach, continue to bring expertise in-house that can evaluate external technology but also determine what's the best path with our internal assets, particularly in combination with targeted therapies.

I think on your second question, I'll hand it back to Joe.

Look, Andrew, I think when you look at the talent that we have assembled starting with Glenn Dranoff in immuno-oncology in the Novartis Institute of Biomedical Research and then you look at Jay Bradner and look at our recent hire of Jeff Engleman -- this is a world-class team in terms of not just oncology but immuno-oncology.

So we believe that while we did go outside to acquire and in-license a very broad range of second generation IO candidates, as well as the current checkpoint inhibitors that we're developing -- we're developing them for a very specific reason.

Immuno-oncology -- the winners in immuno-oncology long term are going to win through combination therapies.

You better have a broad line of those combination therapies to capture the economics of what is going to become a capitation model in oncology going forward, with combination therapy.

So we see the checkpoint inhibitors as table stakes to supplement what is a very strong second generation.

So I would disagree that we don't have -- or that we haven't assembled the talent to be able to do this internally.

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

Three questions, if I can.

The first on Entresto and the investment in primary care.

One of the issues you've highlighted in the launch so far is that cardiologists don't have the office staff or the experience to fill in the forms to drive past the prior authorization.

Paul's answer in terms of a gradual erosion of that prior auth or softening of prior auth suggests it will remain an issue for some time.

So how confident are you that US primary care docs have the office staff or the experience to manage all the prior authorization paperwork?

Or have you found a way with your investment in medical liaison where you can help them do that?

Secondly, around Cosentyx, clearly a very strong performance in Q2.

Can you please just set out how you have seen the landscape change with the launch of Taltz?

Are we seeing the market being grown by a second entrant?

What is their competitive message versus yours?

Or is the growth coming not only from psoriasis but your other indications?

Then thirdly, Vas called out the FLAME data and Ultibro.

Clearly, the issue there is that Advair is going generic ex-US, so there's a big price differential.

So can you set out whether or not you expect the COPD guidelines to change over time, ex-US?

If so, when?

Can you also remind us of your US strategy?

I think that's been promised for a number of months and we still haven't seen what you're doing with the asset there?

Thank you.

Okay, Paul?

Okay.

Thank you for the questions.

So let me start with Entresto and primary care.

So I think -- let's be clear when I said that it's -- the prior auths are softening -- it's a journey and it's positive one.

We come better equipped to dealing with it, so do cardiologists.

A great part of the opportunity is still in cardiology.

Let me then say about the primary care piece.

Often primary care does have better or more well developed skills with physicians offices that have been on this journey themselves before in helping overcome these barriers.

They see -- have a large number of patients to equip them to be able to do that and get into a normal operating rhythm.

We supply all the tools and materials within the rules of the game to enable them to do that.

So looking at adding on the primary care physician prescribers, looking at what that means in terms of the number of patients present, we think that the timing is right to be able to overcome those things.

The resulting in the field is appropriate, given how the guidelines and everything are evolving.

Now as for Cosentyx, thank you for complimenting us on the great quarter.

It was really an outstanding performance that came across-the-board, frankly, psoriasis plus ankylosing spondylitis plus psoriatic arthritis.

It's a great performance by the team, great work across-the-board in fact.

The opportunity comes for us with having two anti-IL-17s in the market; you realize how important this class of drugs is.

We know that -- we think they'll be the leading class available for patients across this (inaudible) and dermatology in general.

But we also know that with a new competitor and some difficult to treat patients, they do get some early uptake.

For us, it's a long term game.

For us, we have to clearly look at the fact that we are indeed fully human, that we have low immunogenicity and that leads of course to a strong and durable response.

In fact, we look forward to the four-year data, I think, next year that will confirm that.

Beyond that of course, the low to no immunogenicity presents an opportunity with no or low injection site reaction.

So you've got to remember that the winners in this marketplace will be able to have great clinical utility in the dermatology market.

We feel more than adequately placed.

I had the opportunity having only been on board for two weeks, but to sit down and go through the plans with the US team.

The plans are strong.

We know what we need to do to deliver.

So a good performance and of course, we're optimistic about what's to follow.

FLAME, I'll ask Vas to comment on guidelines.

Then I'll come back and return to your point on Ultibro or Utibron in the US.

Matt, we believe that the GOLD committee is aware of this data.

While we don't know exactly when they will do a formal review, we would expect it to happen some time in the back half of this year, towards the end.

So let me pick up the Utibron question.

I'll take this one on the chin.

I've been in the organization a couple of weeks.

I've understood that you've been -- it's suggested or promised that we'll make a decision on what happens in the US for some time.

Now, I've a bit of a history in respiratory and I'm excited about evaluating that myself alongside the team and everybody here in the business.

One of the complexities is how the challenge of launching a new medicine in this type of marketplace and the decisions that have to be made alongside that.

We have to put alongside that, potential changes in guidelines, perhaps even conversations with the FDA around the FLAME data and whether it's applicable in a US context.

Then ultimately we are in play with the head-to-head with Anoro that will read-out at the end of this year.

So we are feeling -- I'm feeling like I just need to do a bit of due diligence with the team and then get back to you, at least by the end of Q3, and give you a read-out.

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

A couple of questions.

On your CDK4/6, ribociclib, we haven't seen the data, of course, but you have for MONALEESA-2.

I'm wondering if you can just give us any indication on any sort of differentiation with the product, either efficacy or safety on that one trial?

It could be molecular, differentiation or generally, when you look forward is there differentiation on the development plan?

Related to that, do you think the product needs to be clinically differentiated to capture share?

Or could it be a big drug, even if the product profile and development plan is nearly identical to palbociclib, simply because the market's big enough to support more than just a single product?

Going back to Entresto guidelines, as you characterize them, on Slide 30, both in the US and in Europe, patients are recommended to switch from ACE/ARB only if they are still symptomatic.

But that seems to me like they could still give payers the ability to have prior authorizations in place requiring that if the guidelines suggests they only get Entresto if they're tried on an ACE/ARB and are symptomatic.

So essentially a fail-first policy.

Is that an accurate characterization?

Do you view that as still an impediment going forward?

Vas?

Mike?

So, well, I think Bruno's actually going to take the LEE and I'll take the Entresto comment, sorry.

So on the differentiation, first of all, the data will be presented at ESMO, as we said, early October.

But it is clear that in that market, which is going to be a very large market, differentiation will be key.

So will be execution, as it will be very important in order to deliver on this asset in this market.

Vas presented some of the data or mentioned some of the data, rather that we are working on, MONALEESA-3, MONALEESA-7, which are going to be pretty unique and which help us differentiate the asset as we get the indication.

For memory, we will submit for registration in 2018.

So clearly, it's going to be about differentiation in terms of the programs that we're conducting and about execution, which will be extremely important.

So then on the Entresto guidelines, I think that it's a misunderstanding.

When you look at symptomatic heart failure patients, any one in Class II, III and IV by definition is symptomatic.

So we've had extensive discussions with the guidelines committee.

The way they're communicating these guidelines is, if you have a patient who's progressed to Class II, III or IV, they should be switched to Entresto.

That's how the guidelines committees view their recommendation.

So I think we always have to be careful in terms of how we distinguish between worsening patients and symptomatic patients.

So symptomatic patients are to be switched to Entresto.

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

I wonder if you can just give us a little bit more help on the thinking around Gleevec and the run rate for the rest of the year?

Obviously, that surprised a bit this quarter.

Secondly, any updates regarding your thinking around timing of either the Roche stake disposal or potentially getting into some earlier talks with GlaxoSmithKline around your holding in the joint venture there, even that previously you're more likely to exit that and potentially sooner than 2018, if you can.

Then just lastly, just to ask a question more directly, I think Andrew was referring to what many investor do.

Do you need to buy one of the more advanced IO developers?

I think Bristol Myers and AstraZeneca come up most times in terms of conversations with investors.

Are those potential companies that you are at all considering acquiring for the IO portfolios?

Thank you.

Okay.

Bruno on Gleevec?

So on Gleevec, the performance so far has been in line with our expectations.

We held a 50% share of the molecule and a 30% share of the CML market.

Going forward, we expect that this situation may change when, at the end of the 180 days, and the erosion curve will then depend on the number of entrants and how aggressive they are when you consider pricing strategy.

Okay.

Regarding the timing of the Roche stake, there's really no new news on this.

We've said over and over again that this is a financial investment for us.

We don't necessarily need to announce the premium to exit it.

When the time is right, we would do it.

So there's really no update.

On GSK, we're quite happy with the performance of that JV.

If you look at how the business is performing, we said that our OTC business was sub-scale, by combining it with GSK's, we would create a powerhouse that would have global scale and innovation power.

We're already seeing that start to play out.

So I know Andrew and his team are very pleased with it.

We're starting also to see margin improvement, even ahead of what we expected.

So this is going to be quite a good financial outcome for the Company eventually.

But we -- as you mentioned, there's a put at 2018, but as long as there's value that's going to continue to be generated there, we're happy to participate in it.

Regarding the direct question about whether we need to acquire in IO, I believe that we have a very strong self-generated through in-licensing and through acquisition early stage immuno-oncology pipeline.

I wouldn't speculate on what else we're going to do, but I would tell you that we don't have to -- I don't feel like we have to do something in the immuno-oncology space given what's coming.

We're talking about this as a long-term play.

I think we're in the very early stages of immuno-oncology.

That's why we have assembled a great team internally and why we have invested so much in acquiring these early stage assets, so we have both first and second generation that are right now in the clinic with combination trials that we're advancing as quickly as we can.

The next question comes from the line of Florent Cespedes from Societe Generale.

Three quick ones.

First, on Tasigna, which was quite strong this quarter.

Is there any stocking impact this quarter?

How do you see the trend going forward, despite Gleevec generic-cization Given the results of ENESTfreedom, which did not reach the primary endpoint.

Second question, a quick one on multiple sclerosis.

Could you remind us your plan for [talizumab] in terms of regulatory filing during the second half?

Last one on emerging markets, could you elaborate on the performance in Q2 with a plus 2%, which is a bit softer than the Q1 plus 5%.

Is there any specific country which could explain this or a specific product performance?

Thank you.

Okay.

Bruno, Tasigna?

So, Florent, good afternoon.

On Tasigna -- Tasigna in the US continues to grow.

It grew 9% this quarter in the US and held a share of about 20% of the CML market.

It's fairly stable.

This is completely in line with our expectation based on our experience in other markets where Gleevec LOE has already occurred.

Regarding your question on TFR and the results of ENESTop and ENESTfreedom, which were presented at ASCO, both studies showed that more than 50% of the patients were in TFR after 48 weeks.

The data is being discussed with the authorities as we speak.

We'll keep you updated as this progresses.

Vas, on MS?

Thanks for the question, Florent.

On Ocrelizumab, our plan is for a filing in 2019.

I'm sorry, on Ofatumumab, in 2019.

We are on track right now to start our Phase III programs in Q3.

We'll be charting two pivotal studies.

We'll look forward to enrolling those quickly and being on track for a launch in the 2020 time frame.

Harry, on EGM?

Yes.

Florent, you're right.

We have seen a slight slowdown in Q2.

For the Group, we grew 2% in constant curriencies in emerging markets, Innovative Medicines 3%.

Basically, our Innovative Medicines we see some weaker Middle East tender business, given the macroeconomic situation over there.

But otherwise, also quiet, some head growth in Russia, Brazil, China grew 6%.

The difference from Innovative Medicines to the group picture is basically Alcon.

There you've got -- a prior speaker pointed to the Asia weakness that Mike has addressed.

It's mainly in China and India, where there's some disruption on distributor and hospital chains.

So overall, a slowdown of growth as we expected, but in Innovative Medicines, I would say a bit underrepresented due to the Middle East tender business.

Thank you very much.

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

So on Alcon, you've said again, you expect higher Alcon margins longer term.

But this quarter, you missed consensus expectations once again.

So could you define if this is the trough quarter?

When you expect to see higher margins?

Secondly, on AMG334, could you give us a feel for what you think is the market opportunity and importantly, the differentiation versus the three other similar products that are in the clinic from TEVA, Lilly and ALDA?

Then thirdly, on M&A outlook, your Chairman at the Meet Management day suggested that there would be some flex on the AA rating for the right opportunity.

I was hoping you could define, what is the right opportunity?

There's been a few questions about IO, that perhaps we should switch gears and think about the fact you're building back in primary care and cardiology again in the US, where you've been quite weak of late.

Is there any rationale to trying to add primary care and cardiology assets to the portfolio to get some better leverage from the investments you're making there?

Thanks.

Okay.

Mike, on the Alcon question?

Okay.

With respect to Alcon, obviously, our number one objective here is to return the top line to growth.

To do that, as I've mentioned before, we need to make investments both in the marketing and sales and innovation side, which then necessarily impacts the bottom line.

So as Harry mentioned before, over the longer term, our objective is to get back to this low 20s to mid 20s operating income.

But in the interim, you're going to see a reduction in terms of operating income as we work towards getting this top line back on track.

Vas, on migraine?

Yes.

So I think on migraine, we're very excited by the profile that we see.

A couple of important points of differentiation, first the AMG334 molecule targets the receptor and versus our competitors, who are targeting the ligand.

We believe that to give us some advantages in terms of potency.

Second, we have a subcu formulation, which we've already now taken into Phase III trials.

I've seen it with Amgen conducting the studies.

I think this is going to be advantageous.

We'll have to see how others progress in moving to a subcu formulation.

Third, I think in terms of endpoints and how we manage the endpoints, as well as the speed we're progressing in both episodic and chronic migraine; we hope will give us a broader labeling that we hope can then translate into better uptake.

Finally, I think we're focused on being ahead.

We want to be fast to market.

We're focused right now on conducting the necessary work to insure we can file rapidly in the US and Europe.

Graham, in terms of M&A, yes, we do have the willingness and flexibility to move off of AA minus for the right opportunity.

Your question was, what would be the right opportunity?

I think, first, we have said in the past and still believe that our sweet spot from an M&A standpoint are bolt-on acquisitions that would build-out the pipelines for the three -- actually, now four businesses: pharma, oncology, Alcon or generics.

You've seen us act on that.

Nothing big recently but a lot of in-licensing, a lot of smaller acquisitions that have really helped the pipeline.

So anything bigger than that would have to obviously provide very clear rationale as to why we did it.

It would have to be instantly understandable as a good deal for Novartis shareholders.

I got a lot of questions about immuno-oncology, but if you look at other areas, we are operating in immunology.

It's becoming much more important for the Company.

Cardiovascular disease -- there are a lot of areas that if the right opportunity came that would help us build-out those areas or provide some capability, even beyond the strong pipeline, that it might be the right opportunity.

But right now, we're focused on bolt-ons.

That's what we have been focused on.

That's what we will continue to be focused on.

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

I have a few questions, but they are all brief.

The PD-1 is not listed in the planned filings on Page 47, how should we think about that?

Secondly, is Novartis using fludarabine during pre-conditioning in CART trials?

If so, how does the dose compare to that in the JUNO study?

Third, it appears that the BAF312 data has slipped from mid 2016 to the second half of 2016.

Is this the primary defense for the Gilenya patent expiration in a few years?

Then the last question is, we now have PDUFA dates for a couple of Advair generic competitors.

We have no news from Sandoz, should we assume that Sandoz is substantially lagging in Advair generics?

Thank you.

Vas?

So, thanks for the question, Steve.

On PD-1 and our whole IO portfolio, these are still in translational medicine studies.

We typically don't show filing dates until we get into Phase II-b development.

So first half of next year, we'll start to see the read-outs of our monotherapy as well as combination IO/IO combinations.

At that point in time, I think we'll have a better sense of how our IO portfolio will be evolving from a filing standpoint.

Now, on your second question on fludarabine pre-conditioning, we do use fludarabine pre-conditioning.

When we've looked at -- obviously, depending on the study, we've used a range of doses.

But when we look across our experience right now, we don't see the issues.

I think it's important to note that CARTs do vary.

We have a different CART construct than some of the competitors.

We, of course, are in close contact with the agency and continue to work through the issues.

But as of right now, there's no impact on our clinical programs.

Now, in terms of BAF312, we originally had planned to lock the database in Q2.

We will lock the database in Q3.

This is primarily because of our wanting to assure that we had solid data given the length of the study.

We had just some quality issues we wanted to resolve, but there's nothing else to read through about on BAF312.

When we look at the Gilenya expiry, we believe that with Ofatumumab, we will have a very strong launch well ahead of the EU patent expiry.

When we look at, in the US market, yes, we're going to have to manage through for a period.

But I think between BAF and Ofatumumab coming, we believe given the strong profile that we will have with these products that we can manage through.

Richard, on generic Advair?

Yes, thank you for the question.

So we're progressing well with our generic Advair program and have been working closely with the FDA to make sure that when we submit our dossier, it's good dossier.

I think what I would say is, in these difficult filings and difficult development programs, it's not necessarily first in, first out.

I think what we're focused on is making sure our dossier is a very good one and an acceptable one for the FDA.

Thank you.

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

The first one is on LEE.

Can you please explain the rationale, if any, which will favor the intermittent dosing versus the continuous dosing?

We know that abemaciclib has a continuous dosing.

Is there anything here that will be differentiating for one of the different drugs?

Second question on the biosimilar, Neulasta and the complete response letter, can you please give us more details?

Also, what will be the length of the delay?

Lastly, on Entresto, thank you for the confirmation of the $200 million this year for the sales, but can you talk about the profitability of the products, thinking about 2017 or 2018?

Is it fair to assume the profitability of the products will not come before 2018?

Or do you think it will be earlier?

Okay.

Vas?

So for LEE, it's important to note that these drugs have different profiles in terms of how they hit the CDK4 and the CDK6 receptors.

So Lilly's compound is much stronger on the CDK4 receptor, that leads to less neutropenia and less hematological side effects, but higher incidents of diarrhea.

We'll have to see how in the Phase III studies that plays out.

That allows them to avoid the intermittent dosing, because they avoid the neutropenia effect, but it does mean there are other side effect issues that we'll have to bear out in this study.

When you look at our drug as well as Ibrance, we hit CDK6 more potently.

So the profile is going to change.

I think with all of these drugs, we're going to need to see the full Phase III data sets to really understand the profiles and pros and cons of different molecules.

Now with respect to the complete response letter on Neulasta, we've been working closely with the FDA for many years on this program.

We received a complete response letter at the end of June.

We're working through the issue with FDA.

I think as all of you know, until we submit a data package, it's difficult to say how they will classify the response and the overall timeline.

But we will keep you informed as we work through this matter with the FDA.

Paul, on Entresto profitability?

So I think you know we don't comment on individual product level profitability.

I think that it's fair to say we are investing for growth.

When you're investing for growth over a long period of time, in what is really a primary care marketplace, it will be substantial.

We're in it for the long term.

The next question comes from the line of Keyur Parekh from Goldman Sachs.

I've got three, please.

First, just following up on the complete response letter for Pegfilgrastim, can you just help us think, is it a manufacturing issue?

Is it a clinical data issue?

Or is it a labeling issue?

Secondly, as it relates to CDL019, Vas, today I heard you say the DLBCL filing would happen in 2018?

Or do you still expect that to happen in 2017?

Then lastly, Paul, from a respiratory perspective, given kind of the evolving landscape, do you think you have enough assets in there?

Or do you think that again is an area where you are likely to look at bolt-on opportunities?

Thank you.

Okay.

Vas?

So this data with a complete response letter -- with these programs, we're continuing to work with the agency.

These are obviously complex filings, where we have different elements we need to work through.

So I don't think we're ready to discuss the details of the response because we still need to work through with the agency how best to resolve their concerns.

But as I stated, we'll keep you updated as we work through the issue.

Now, with respect to CTL019 and DLBCL, I misspoke, we continue to be on track towards our planned filing in 2017.

I think I'll hand it back to Joe for the next.

Paul, on respiratory, the scale question?

So I think we have some exciting things in our hands with the FLAME data, which theoretically could be game changing again for the standards of care in COPD.

We have the triple in asthma, also going to be very exciting and then we have some small molecules further out.

To early for me to say whether I think we have enough, but, Vas, maybe you want to comment?

When we look at severe asthma, we think there's going to be increasingly the opportunity to segment these patients.

As you've seen with the anti-L5 approval and you've seen the eosinophilic cutoff that the FDA gave in the labeling -- or the lack of an eosinophilic cutoff the FDA gave in the labeling.

So we think there is a substantial opportunity.

Our strategy here is, we have Xolair as the preeminent drug for atopic asthma in TH2-high patients.

We have QVM, which is our triple, that's progressing now in clinical trials.

We believe we can be first to market with a triple in asthma.

Then, give these patients another strong option.

Then finally, QAW, our CRTH2 antagonist, which is completing both of its Phase III trials, which give us another oral option, which we hope to position ahead of them, biologics.

So when you take that portfolio together as well as additional molecules, we have earlier stage NIBR, I think we have an attractive gross portfolio.

The next question comes from the line of Seamus Fernandez from Leerink.

So sorry for the feedback -- just a couple of quick questions here.

As you guys look at your opportunity in immuno-oncology, there was some interesting data on PD-1 plus a MEK inhibitor.

You guys have, obviously, a PD-1 that's in early development.

But what do you see in terms of the opportunity to move forward your MEK inhibitor in combination, specifically with a PD-1 is that something that you would seek to accelerate.

Separate question, again, my last question here, is really as we look at the Alcon story on a go-forward basis, should we really be thinking about the investment here, as a significant reduction in operating income in the relative near term to really drive top line growth?

Are we still looking at the same time frame of a second half of this year for top line growth acceleration?

Thanks.

Okay.

Starting with Vas on the IO opportunity?

So with PD-1, we continue to evaluate a range of different options whether it's in IO/IO combination or in combination with our targeted therapies.

We've certainly seen the potential of PD-1 with MEK.

We are evaluating that.

But I think the key is going to be for us to prioritize amongst all of these opportunities to find the ones where we think we can have a sustainable differentiated position.

As I said, that's something we're really focused on doing as we get the read-outs towards the end of this year and early next year.

Okay.

Mike, on Alcon?

Yes.

With respect to the investments to drive the growth, as I mentioned previously, that's obviously impacting the operating income line.

As I look to the end of the year, we are taking the right actions now in terms of investments and innovation, Business Development, et cetera, to insure that this business has a sustained growth profile.

In terms of the timing, that's always tough to predict.

But my best guess right now is Q4, we get back to a growth profile headed into 2017.

Seamus, the way that we're thinking about margins also is, right now, the priority is to get the business turned, so that you're seeing pretty good margin suppression, right?

But if you look at these businesses and you benchmark -- device businesses like this -- Alcon's got the advantage they've got very, very strong shares in many segments.

They deliver mid 20s core operating income margin.

So there's no reason why we shouldn't be at that level at some point.

That's not the priority today.

So today, the priority is to spend, to get the thing turned, to fix some of the customer issues on the business.

Then the margin's going to follow.

So that's the way we think about the margin.

Okay.

I want to thank everybody for tuning in.

We look forward to giving an update at Q3.

Thanks very much.

Thank you for joining today's conference call.

You may now replace the handsets.