Negative Points

• Overall pricing expected to decline by mid-single-digit percentage in 2026, up from previous low-to-mid single-digit expectation, due to Germany and North America dynamics.

• Generics sales declined in H1 due to temporary headwinds in Q1, including adverse anti-infectives B2B dynamics, though Q2 returned to growth.

• Short-term market dynamics in Germany created headwinds for Pisceva and biosimilar pricing, impacting overall price erosion.

• Currency tailwind reduced to 2 percentage points from prior 4 percentage points, potentially impacting net sales growth.

• One-off costs of $142 million in H1, including litigation and IT expenditures, with full-year expectation of around $0.3 billion.

• Higher interest expense in H1 due to coupon payments on recently issued bonds, impacting cash flow.

• CapEx expected to peak at $1.1 billion this year, reflecting significant investment in future growth, which may pressure near-term cash flow.

Q & A Highlights

Q: Can you provide more color on the commercial dynamics of the GLP-1 opportunity in Brazil, given the competitive landscape and price erosion, and also discuss the other revenues line item, which came in below expectations due to hardly any profit-sharing income? A: CEO Richard Saynor stated it's too early to comment on the GLP-1 market dynamics and declined to disclose strategy, but noted Sandoz is "pretty much the only international generic company coming into that market at this point." CFO Remco Steenbergen clarified there was nothing particular in H1 regarding profit-sharing, with no major changes to report.

Q: Regarding the increased price erosion guidance to mid-single-digit from low-to-mid single-digit, where are you seeing this pricing pressure, and how will you offset it with volume gains? Also, what are your expectations for continued market share gains for denosumab in the US? A: CFO Remco Steenbergen explained the pricing pressure stems from two factors: the rapid growth of biosimilars in North America, where early launches attract higher price erosion percentages, and new pharma substitution rules in Germany. He emphasized volume growth more than offsets the pricing impact. CEO Richard Saynor noted denosumab will continue to be a growth driver in H2 with good share gains, despite lapping prior successes, and expressed confidence in winning against originator competition.

Q: On the German market dynamics, is the biosimilar pricing impact a one-off hit, and could there be longer-term headwinds? Also, regarding the semaglutide approval in Canada, will you have the full dose range, and how should we think about gross margin expansion going forward? A: CFO Remco Steenbergen stated the German pricing impact is specific to 2026, with no expectation of continued erosion in 2027, and highlighted that Germany's need to save money benefits generics and biosimilars adoption. CEO Richard Saynor noted they haven't disclosed presentations for Canada but still expect approval and launch this year, emphasizing a multi-partner strategy. On margins, Steenbergen confirmed continued EBITDA margin improvement through biosimilar mix and fixed cost leverage.

Q: How should we think about the longevity of the biosimilar opportunity, given that markets tend to underestimate how long individual biosimilars can generate value? A: CEO Richard Saynor highlighted that Omnitrope, launched 20 years ago as the world's first biosimilar, remains one of Sandoz's largest products with leading market share. He emphasized that biosimilar markets don't disappear, unlike small molecule generics, and that the competitive intensity is actually decreasing with roughly 100 biologics coming off patent in the next decade, averaging only one or two competitors per biologic. CFO Remco Steenbergen added that unlike originators with end dates, Sandoz's portfolio has no end date, making it a sustainable growth engine.

Q: Regarding the one-off costs, how should we think about the rest of the year for legal and software costs, and will these decrease going forward? Also, will the increasing proportion of in-house pipeline assets positively impact margins? A: CFO Remco Steenbergen confirmed the full-year guidance of around $300 million in one-off costs, with H1 at $150 million, expecting further decreases in 2027. He clarified software costs relate to SAP cloud accounting rules and will continue during the system upgrade, while H1 contained the major legal impact with no material H2 expectations. CEO Richard Saynor confirmed a larger proportion of the pipeline will come from in-house development, which will positively impact margins by avoiding revenue sharing with third parties.

Q: Can you provide more detail on the Afclear launch in Europe, specifically where volume is coming from, and how biosimilar market share penetration for Wyost and Jubbonti in Europe compares to the US? A: CEO Richard Saynor reported very strong uptake for Afclear across European markets, with the patent strategy being rewarded. He noted that while some patients will migrate to high-dose formulations, the opportunity to offer more patients access to this medication is significant, with payers using it to drive access. For Wyost and Jubbonti, Sandoz has established a clear leadership position in Europe as the largest player, though recent IQVIA data is still pending.

Q: Regarding potential US tariffs, should we read your constructive dialogue with the US administration as a commitment to US CapEx, and would you need both generics and biosimilar capabilities locally? A: CEO Richard Saynor confirmed open dialogue with the US administration, having recently met with senior cabinet members in Washington. He stated it's too early to specify what investments might look like but expressed optimism about aligning with the administration's goals of bringing affordable medicines to US patients, declining to comment on specific requirements.

Q: On the semaglutide opportunity, now that you have approval in Brazil and potential visibility on Canada, how are you thinking about the contribution in 2027-2028? Also, for the Eylea US launch, what differentiates Sandoz in this market? A: CEO Richard Saynor stated the Brazil approval won't be material for 2026 but becomes more meaningful in 2027-2028 with launches in Brazil, Turkey, and Canada. For Eylea, he highlighted the ophthalmology capability acquired two years ago, established payer relationships, and a track record of taking strong positions even when not first to market. He acknowledged difficulty in providing a market proxy but expressed excitement about the launch.

Q: Regarding the semaglutide market in Brazil, how does the compounding market affect dynamics, and what are your thoughts on the quality of chemically synthesized peptides? Also, can you provide more color on the longevity of biosimilar opportunities? A: CEO Richard Saynor explained that compounding exists because patients want lower prices, but expects it to erode quickly as generics enter the market with fully manufactured products and appropriate supply chains. He dismissed originator concerns about quality as "the same old shtick" used to disparage the industry, expressing confidence in Sandoz's products. He reiterated the long lifecycle of biosimilars, citing Omnitrope's 20-year success.

Q: On the guidance construct, is an exit rate of 10% growth reasonable given the acceleration into Q2, and what would be needed to exceed the 100 basis point margin expansion guidance? A: CFO Remco Steenbergen confirmed H2 growth will be higher than H1, with Q4 expected to be stronger than Q3, though he declined to provide specific percentages.

For the complete transcript of the earnings call, please refer to the full earnings call transcript .