Q4 and Full Year 2014 Results - assets.fiercemarkets.netassets.fiercemarkets.net/public/lifesciences/NOVARTIS PRESENTATI… · Solid sales growth, margin expansion and major innovation

Q4 and Full Year 2014 Results

Investor presentation

January 27, 2015

Disclaimer

These materials contain forward-looking statements that can be identified by words such as “potential,” “expected,” “will,” “planned,” or similar terms, or by express or implied discussions

regarding potential new products, potential new indications for existing products, or regarding potential future revenues from any such products; potential shareholder returns or credit

ratings; or regarding the potential completion of the announced transactions with GSK and CSL, or regarding potential future sales or earnings of any of the businesses involved in the

announced transactions with GSK, Lilly or CSL, and regarding any potential strategic benefits, synergies or opportunities as a result of the announced transactions; or regarding potential

future sales or earnings of the Novartis Group or any of its divisions; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these

statements. Such forward-looking statements are based on the current beliefs and expectations of management regarding future events, and are subject to significant known and unknown

risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set

forth in the forward-looking statements. There can be no guarantee that any new products will be approved for sale in any market, or that any new indications will be approved for any

existing products in any market, or that any approvals which are obtained will be obtained at any particular time, or that any such products will achieve any particular revenue levels. Nor

can there be any guarantee that the announced transactions with GSK and CSL will be completed in the expected form or within the expected time frame or at all. Neither can there be

any guarantee that Novartis will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of the transactions with GSK, Lilly or CSL. Neither can there

be any guarantee that Novartis or any of the businesses involved in the transactions will achieve any particular financial results in the future. Nor can there be any guarantee that

shareholders will achieve any particular level of shareholder returns. Neither can there be any guarantee that the Novartis Group, or any of its divisions, will be commercially successful in

the future, or achieve any particular credit rating. In particular, management's expectations could be affected by, among other things, unexpected regulatory actions or delays or

government regulation generally, including an unexpected failure to obtain necessary government approvals for the transactions, or unexpected delays in obtaining such approvals; the

potential that the strategic benefits, synergies or opportunities expected from the announced transactions, including the divestment of our former Animal Health Division to Lilly, may not

be realized or may take longer to realize than expected; the inherent uncertainties involved in predicting shareholder returns or credit ratings; the uncertainties inherent in research and

development, including unexpected clinical trial results and additional analysis of existing clinical data; the Company’s ability to obtain or maintain proprietary intellectual property

protection, including the ultimate extent of the impact on the Company of the loss of patent protection and exclusivity on key products which commenced in prior years and will continue

this year; unexpected manufacturing or quality issues; global trends toward health care cost containment, including ongoing pricing pressures; uncertainties regarding actual or potential

legal proceedings, including, among others, actual or potential product liability litigation, litigation and investigations regarding sales and marketing practices, government investigations

and intellectual property disputes; general economic and industry conditions, including uncertainties regarding the effects of the persistently weak economic and financial environment in

many countries; uncertainties regarding future global exchange rates, including as a result of recent changes in monetary policy by the Swiss National Bank and the European Central

Bank; uncertainties regarding future demand for our products; uncertainties involved in the development of new healthcare products; uncertainties regarding potential significant breaches

of data security or disruptions of the Company’s information technology systems; and other risks and factors referred to in Novartis AG's current Form 20-F on file with the US Securities

and Exchange Commission. Novartis is providing the information in these materials as of this date and does not undertake any obligation to update any forward-looking statements as a

result of new information, future events or otherwise.

| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation 2

Agenda

Group overview Joseph Jimenez

Chief Executive Officer

Financial review Harry Kirsch

Chief Financial Officer

Pharmaceuticals David Epstein

Division Head, Novartis Pharmaceuticals

Closing Joseph Jimenez


Q&A session Executive team


Solid sales growth, margin expansion and major innovation in 2014

Sales up +3% in cc vs. PY, core margin +1.2ppts in cc vs. PY and FCF up +12% in USD1

Dividend of CHF 2.60 per share proposed (up 6% in CHF)

Strong progress on innovation

• LCZ696 file submitted in EU and US

• Zykadia™ approved in US for non small cell lung cancer

• Cosentyx™ approved in EU, US and Japan for psoriasis2

Portfolio transformation on track; Novartis Animal Health divestment closed on Jan 1st

1 2014 Group growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. This measure, as well as constant currencies (cc), core results, and free cash flow are non-IFRS measures.

An explanation of these non-IFRS measures and reconciliation tables can be found beginning on page 54 of the Condensed Financial Report 2 CosentyxTM EU and US approval received in January 2015


Summary of 2014 financial results

FY

(in USD m) 2014 % USD % cc

Net Sales 57 996 1 3

Core Operating Income 14 616 3 8

Operating Income 10 736 1 7

Net Income 10 280 12 19

Core EPS (USD) 5.23 4 10

EPS (USD) 4.21 14 20

Free Cash Flow 10 762 12

Change vs. PY1


An explanation of these non-IFRS measures and reconciliation tables can be found beginning on page 54 of the Condensed Financial Report


2014 focus

1 All uncompleted transactions are subject to closing conditions

Operational

excellence

Transforming

the company

Strengthened innovation

Delivered strong financial results

Continued focus on quality

Transforming the portfolio1

Capturing cross-divisional synergies

Reshaping the culture of the company


We have seen a series of important innovations

and regulatory approvals in the last year

Approval

US

FDA granted

accelerated approval

for Meningitis B2

Recommended for

approval by FDA

Advisory Committee,

all indications3

Cosentyx™ approved

in EU, US and Japan

for psoriasis1

LCZ696 Ph III in chronic

heart failure, file

submitted EU and US

QVA149 and NVA237

met primary Ph III

endpoints, file

submitted US

Operational excellence


CTL019 FDA

Breakthrough Therapy

designation

1 CosentyxTM EU and US approval received in January 2015 2 Bexsero® FDA accelerated approval received in January 2015


Positive CHMP

recommendation for

polycythemia vera4

3 Filgrastim recommended for approval by FDA Advisory Committee in January 2015 4 Jakavi® recommended for approval by CHMP in January 2015

Alcon has made important acquisitions and collaborations

Innovative contact lens and

intraocular lens technology

Acquired ORA System®

Complements Alcon’s industry-

leading cataract refractive suite

Collaboration Acquisition




http://www.conceptcupboard.com/blog/2013/09/all-the-cool-tech-companies-are-rebranding-lets-do-it-too/google-logo-2010/

Growth in sales and core operating income across all divisions


Vaccines1 1 537

Consumer

Health

4 279

Sandoz 9 562

Alcon 10 827

Pharmaceuticals 31 791

Net sales Core Operating Income

% Change vs. PY (in cc)

+1%

+6%

+7%

+10%

+8%

+4%

+8%

+7%

+5%2

+72%2

Net sales 2014 (in USD m)

1 Vaccines growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. Vaccines results exclude certain intellectual property rights and related other revenues which will be retained by

Novartis and are now reported under Corporate activities, with 2013 reported results being restated for this impact. See page 54 of the Condensed Interim Financial Report 2 Includes cessation of depreciation since portfolio transformation announcement date of +13% pts for Consumer Health and +31% pts for Vaccines. Lower loss in Vaccines for 2014


Delivered financial results

Emerging Growth Markets

Two factors continue to drive our growth

1 Emerging Growth Markets 2014 vs. PY (% cc). Group growth rates based on 2013 data excluding the divested blood transfusion diagnostics unit. See page 83 of the Condensed Interim Financial Report

+18% growth to 32%

of Group sales

+11%

Growth Products

1




Pharmaceuticals net sales

(in USD bn, growth in % cc)1

31.8

FY 2013 FY 2014

32.2

+1% cc -1% USD

Growth Products (+17%): now contributing 43% of

total Pharmaceuticals sales vs. 37% in 2013

Emerging Growth Markets (+11%): driven by strong

double digit growth in China, Brazil and Turkey

Absorbed generic impact of -7 percentage points

Pharmaceuticals grew +1% vs. PY in cc in 2014,

driven by Growth Products and Emerging Growth Markets


1 All growth shown vs. PY in constant currencies (cc)



Alcon net sales

(in USD bn, growth rates in % cc)1



+6%

FY 2014

10.8

FY 2013

10.5

Surgical (+7%): Strong equipment sales driven by

Centurion® and cataract and vitreoretinal disposables

Ophthalmic Pharmaceuticals (+5%): Double-digit

growth of Systane® and glaucoma fixed combination

products

Vision Care (+4%): Strong Dailies Total1® and

AirOptix® growth

Alcon grew +6% vs. PY in cc in 2014, driven

by strong surgical performance

1 All growth shown vs. PY in constant currencies (cc)


Sandoz grew +7% vs. PY in cc in 2014, driven by

US, Western Europe and Emerging Growth markets

Sandoz net sales

(in USD bn, growth rates in % cc)1

+7%

FY 2014

9.6

FY 2013

9.2

Strong Sandoz performance driven by:

US, Western Europe2 and Emerging Growth

Markets

Strong sales of valsartan monotherapy

Biosimilars and oncology injectables

1 All growth shown vs. PY in constant currencies (cc) 2 Excluding Germany




Our productivity initiatives contribute to growth

of our core operating margin1

Procurement Core Marketing and sales

Savings (in USD bn)

Manufacturing footprint

24 manufacturing sites

restructured or divested since

20102

M&S spend (% of sales in USD)

1.61.5

2014 2013 2014

24.4%

2013

25.2%

1 2014 group growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. This measure, as well as constant currencies (cc), core results, and free cash flow are non-IFRS measures.

An explanation of these non-IFRS measures and reconciliation tables can be found beginning on page 54 of the Condensed Financial Report

2 Represents the total number of production sites that have been, or are in the process of being, restructured or divested since 2010

1




The continued focus on Quality system upgrades

across our network continues to show results

247 Health authority

inspections

in 20141

Closed FDA Warning Letter for

three Sandoz sites in North

America

Unterach, Austria FDA

inspection in December 2014

concluded with zero

observations


1 Sites deemed unsatisfactory were Sandoz Kalwe (MCC) and Pharmaceuticals Japan (MHLW). Inspections still pending are Sandoz Kalwe (FDA) and Sandoz Turbhe (FDA)


Continued focus on quality

Novartis portfolio transformation is progressing on track

Milestones1

9 Jan 2014

Closed divestiture

of blood

transfusions

diagnostics

business

22 Apr

Announced agreements to:

Acquire GSK oncology

products

Create Consumer Health

JV with GSK

Divest Novartis Vaccines

(excl. flu)

Divest Novartis Animal

Health to Eli Lilly

1 Jul

Established

Novartis

Business

Services

26 Oct

Announced

agreement to

divest flu

business to CSL

1 Jan 2015

Closed

divestiture of

animal health

business

1 All uncompleted transactions are subject to closing conditions

Transforming the company

Portfolio transformation


We created Novartis Business Services to deliver

high-quality services to the divisions at lower costs

Key 2014 activities

New cross-divisional organization structure in place

Costs under NBS responsibility were flat in 2014, at 2013 levels

Additional synergies e.g., through Customers First

Transforming the company

Cross-divisional opportunities


Agenda











Group sales are expected to grow at a low to mid-single digit rate +3%

Group core operating income is expected to grow ahead of

sales (cc) in 2014, at a mid to high-single digit rate (cc) +8%

Net Sales Growth:

Pharmaceuticals sales growth in line with 2013 +1%

Alcon sales growth mid to high-single digit +6%

Sandoz sales growth mid to high-single digit +7%

Performance delivered as per upgraded guidance

FY 2014 (growth vs. PY2 in % cc)

2014 Full Year Guidance1

(all in cc)

1 Issued in Q2 2014, reconfirmed in Q3 2014 2 2014 Group growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. This measure, as well as constant currencies (cc), core results, and free cash flow are non-IFRS measures. An

explanation of these non-IFRS measures and reconciliation tables can be found beginning of page 54 of the Condensed Financial Report


Q4 FY

(in USD m) 2014 % USD % cc 2014 % USD % cc

Net Sales 14 633 -2 4 57 996 1 3

Core Operating Income 3 322 1 9 14 616 3 8

Operating Income 1 172 -49 -39 10 736 1 7

Net Income 1 487 -26 -16 10 280 12 19

Core EPS (USD) 1.21 3 12 5.23 4 10

EPS (USD) 0.62 -23 -13 4.21 14 20

Free Cash Flow 4 419 41 10 762 12

Change vs. PY Change vs. PY

Strong leverage in Q4 and Full Year

1 2014 Group growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. This measure, as well as constant currencies (cc), core results, and free cash flow are non-IFRS measures. An

explanation of these non-IFRS measures and reconciliation tables can be found beginning of page 54 of the Condensed Financial Report 2 2014 results exclude depreciation and amortization related to discontinuing operations from the portfolio transformation announcement date

1

2

1

2


1

3

7

7

USD growth

Currency

CC growth

Generics impact3 -4

Underlying growth2

-2

Price 0

Underlying volume 22

3

8

21

-5

-13

-1

Strong volume growth more than offsets generic impact in FY

Group FY 2014 (growth vs. PY1 in %)

Core operating income Net sales

1 2014 Group growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. This measure, as well as constant currencies (cc), core results, and free cash flow are non-IFRS measures. An

explanation of these non-IFRS measures and reconciliation tables can be found beginning of page 54 of the Condensed Financial Report 2 Underlying growth is the growth rate excluding the impact of generic competition and is calculated by adding back sales and core operating income resulting from generic impact to the reported figures 3 Generics impact on sales amounted to USD 2.4 billion for the full year


All divisions contributed to FY Group core margin improvement

of 1.2% points

FY 2014 vs. PY

Core operating

income

(in % cc)

4

8

7

Pharmaceuticals

Alcon

Sandoz

Group1

Net

sales

(in % cc)

1

6

7

3 8

Core margin

change in cc

(% pts)

1.1

0.6

0.1

1.23

Core ROS

(%)

29.9

35.2

16.4

5 Vaccines1,2 10 nm

4.33 72 Consumer Health 8 10.6

25.2

1 2014 Group and Vaccines growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. This measure, as well as constant currencies (cc), core results, and free cash flow are non-IFRS

measures. An explanation of these non-IFRS measures and reconciliation tables can be found beginning of page 54 of the Condensed Financial Report 2 Vaccines results exclude certain intellectual property rights & related other revenues which will be retained by Novartis and now reported under Corporate activities, with 2013 reported results being restated for this impact 3 Includes cessation of depreciation since portfolio transformation announcement date of +0.9% pts for Consumer Health, +6.1% pts for Vaccines, and +0.2% pts for total Group

nm3


FY Group core margin improvement mainly from Functional Costs

Group core R&D1 as % sales (USD)

FY 2014

24.4%

FY 2013

25.2%

FY 2014

16.5%

FY 2013

16.8%

Group core M&S1 as % sales (USD)

-0.6% pts (cc)

-0.3% pts (USD)

-0.8% pts (cc)

-0.8% pts (USD)


An explanation of these non-IFRS measures and reconciliation tables can be found beginning of page 54 of the Condensed Financial Report

5.1%

FY 2014 FY 2013

5.3%

-0.2% pts (cc)

-0.2% pts (USD)

Group core G&A1 as % sales (USD)


New portfolio would have improved core operating margin

by 2.5%pts on a full-year basis in 2014

Continuing

Operations3 52.2

Cessation 0.0

Discontinuing

Operations 5.8

58.0 Current Portfolio

0.1

14.5

0.2

14.6

Net sales Core operating income (in USD m)

Core operating margin

25.2%1

27.7%

+2.5%pts2

1 Includes cessation of depreciation since portfolio transformation announcement date of +0.2% pts 2 Without the benefit of the cessation of depreciation, Core Operating Income difference would have been +2.7% pts 3 Continuing Operations do not yet include the results from oncology assets to be acquired from GSK on closing of the transaction or the results from the 36.5% interest in the GSK/Novartis consumer healthcare OTC joint

venture interest which will be created at the same time


0 -2

-7 -6

-1 -2

Increasing negative currency impact in Q4 due to weakening of Euro,

Yen, Ruble and key Emerging Market currencies

Net sales Core operating income

Currency impact vs. PY (in % points)

2013 2014

Q4 Q1 Q2 Q3 Q4

FY impact: -2%

FY

20151 2013 2014

Q4 Q1 Q2 Q3 Q4

FY impact: -5%

FY

1 Continuing Operations impact only, assuming the stated FX rates prevail for the remainder of 2015

20151

-8

-8

-3-3

-6-8 -4

-12

Jan 16, 2015 rate prevailing

Jan 8, 2015 rate prevailing


Net salesOperating

Expenses Net Sales

Operating

Income

EUR 26% 25% -12% -3% -3%

CHF

(Jan 8, 2015 rate)

CHF

(Jan 16, 2015 rate)

JPY 7% 5% -9% -1% -1%

RUB 2% 1% -41% -1% -2%

USD 36% 39% n/a n/a n/a

Selected major

currencies

Jan 16, 2015

FX rates vs

2014 average2

-10%2%

5%2% 0%13% -2%

2014 currency overview 1 Fx Impact on:

4%0%13%

FX


Impact of recent changes in exchange rates – if applied to 2014

results

Major currencies overview and the respective impact

if January 16, 2015 FX rates are applied to 2014

1 Continuing operations currency overview as per 2014 annual report page 138 and SEC form 20-F page 192. Impact of selected major currencies only; others may impact results as well 2 FX rates based on Bloomberg

FY Free Cash Flow of USD 10.8 bn, USD 1.2 bn higher than 2013

FY Free Cash Flow

(in USD bn)

3.14.4

FY 2014 FY 2013

10.8 9.6

+1.2 Key reasons for variance vs. PY:

Higher operating income2 (net of negative FX)

Hedging gains

Higher investments in intangible assets


An explanation of these non-IFRS measures and reconciliation tables can be found beginning of page 54 of the Condensed Financial Report 2 Operating income after adjusting for non-cash items

1

9M

Q4


Net debt decreased by USD 2.3 billion to USD 6.5 billion

(in USD bn)

1 Mainly due to divestment of the Vaccines blood transfusion diagnostics unit net of tax (USD 1.1 bn) and Idenix (USD 0.8 bn) 2 Related to employee participation programs 3 Including mainly repurchases on the first (USD 4.1 bn) and second trading lines (USD 2.4 bn)

-5

-9

-8

-7

-6

-4

2

1

0

-1

-2

-3

Share

repurchases3

Dec 31, 2013

10.8

Dec 31, 2014

Free Cash Flow

2.3

-6.8

Dividends Net divestment

proceeds1

-6.5

-8.8

2.1

Others

2.4

Proceeds

from options

exercised 2

-6.9

0.7


2.4

5

2.6

0

2.7

6

2.9

63

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

18th consecutive dividend growth proposed1

(payout ratio of 71%2 in 2014)


1 Proposal to shareholders at the 2015 Annual General Meeting, taking place on February 27, 2015 2 Payout ratio is calculated by converting into USD the proposed total gross dividend amount in CHF at the CHF-USD exchange rate of January 21, 2015 based on an estimated number of shares outstanding on dividend

payment date and dividing it by the USD consolidated net income attributable to shareholders of Novartis AG in the 2014 Novartis Group consolidated financial statements effective December 31, 2014 3 Dividend per share in USD is calculated by converting into USD the proposed dividend per share in CHF at the CHF-USD exchange rate of January 21, 2015 (1 CHF=USD 1.14)

CHF

USD

Proposed1 dividend growth

2014 vs. 2013:

6% in CHF, 7% in USD

Outlook for continuing operations in 2015 versus continuing

operations in 2014

Barring unforeseen events

Continuing operations1 net sales expected to grow mid-single digit (cc)2:

• Pharmaceuticals: mid-single digit growth (cc)

• Alcon: mid to high-single digit growth (cc)

• Sandoz: mid-single digit growth (cc)

Continuing operations1 core operating income expected to grow ahead of sales at a high-single digit rate (cc)2

Outlook based on a modelling assumption that the transaction with GSK will close on March 31, 2015, and that the transaction with CSL will close on December 31, 20153

1 Continuing operations includes Pharmaceuticals, Alcon, Sandoz, Corporate, the to be acquired Oncology assets from GSK and contribution from the OTC Joint Venture (contribution in income from associated

companies). The results from the oncology assets from GSK and the OTC Joint Venture are only included as of the date of closing 2 Pro-forma growth, assuming continuing operations in 2014 and 2015 3 Assumption for modelling purposes only. Novartis continues to expect the GSK transactions to be completed in the first-half of 2015 and the transaction with CSL to be completed in the second-half of 2015


Key core margin drivers 2015 for continuing operations1



(mostly in H2)

Pharmaceuticals growth

products

NBS holding costs flat

Full-year impact of 2014

restructurings

Ongoing productivity programs

in Divisions

Impact from generic

competition (more in H1)

Launch and pipeline

investments

FX impact (Swiss franc,

yen, euro, ruble)

1 Based on an assumption that the transaction with GSK will close on March 31, 2015, and that the transaction with CSL will close on December 31, 2015. Assumption for modelling purposes only. Novartis continues to

expect the GSK transactions to be completed in the first-half of 2015 and the transaction with CSL to be completed in the second-half of 2015


• Streamline and consolidate (e.g. optimize size of the organization, rationalize IT

applications)

• Optimize geographical footprint (centralization and offshoring of certain transactional

activities)

• Leverage scale (e.g. accelerate Sourcing productivity, vendor spend and process

optimization)

• Cross-divisional coordination (e.g. Real Estate and Facility Services spend

optimization)

NBS will manage about USD 5 billion spend in 2015

Novartis Business Services fully operational and contributing to

margin improvement in 2015

Improvement in core margin expected despite FX headwind in 2015



2014 reported core ROS1

Total Group

25.2%

2014 reported core ROS1

Continuing operations

27.7%

Improvement between reported Total Group 2014 core margin and 2015 continuing operations core margin, despite FX impact

1 Core return on sales 2 Assuming Jan 16, 2015 rates prevail for the remainder of 2015

Sales: mid-single digit (cc) growth

Core operating income: high-single digit (cc) growth

Illustrative 2015 core ROS1

Continuing operations (cc)

2015 core ROS1

Continuing operations

(USD2)

FX impact on sales2: -7% FX impact on core operating income2: -12%

2

3

1

Outlook

Agenda











Change vs. PY

(in USD m) FY 2014 FY 2013 % USD % cc

Net Sales 31 791 32 214 -1 +1

Core Operating Income 9 514 9 523 0 +4

Operating Income 8 471 9 376 -10 -5

Core Operating Income margin 29.9% 29.6%

Operating Income margin 26.6% 29.1%

Free Cash Flow 7 918 8 332 -5

Pharmaceuticals delivered sales growth with margin expansion


Growth products1 now represent 43% of total division sales

Growth products net sales (in USD bn)

% of total division sales

37% 43%

FY 2014

+17% cc

FY 2013

13.7 12.0

1 Growth products comprise products launched in 2009 or later, or products with exclusivity until at least 2018 in key markets (EU, US, Japan)


Sales Growth

(in % cc)

Gx impact

(in USD bn)

+4% +2% +3% +1%

-1.1bn

-1.9bn -2.2bn -2.4bn

Net sales growth and impact from generics

2011 2012 2013 2014

2014 marks another year of delivering sales growth despite

most substantial Gx impact in years


Emerging Growth Markets1: accelerated growth to double-digit

and now contributing 26% of Pharmaceuticals sales

1 Emerging Growth Markets comprise of all markets other than the Established Markets of the US, Canada, Western Europe, Japan, Australia and New Zealand

Pharmaceuticals Division net sales (in %)

2012 6%

2013 9%

2014 11%

2015 Growth likely to be lower

26%

74%

Emerging Growth Markets rates (in % cc)

Established Markets Emerging

Growth Markets


Unparalleled growth platform1 with exclusivity until 2018 and

beyond

Indication

FY 2014

Net sales

USD m

FY 2014

Growth vs. PY

% cc

Multiple sclerosis 2 477 30%

Wet age-related macular degeneration, Diabetic macular

edema, Retinal vein occlusion, mCNV 2 441 5%

Metastatic renal cell carcinoma, TSC SEGA, pNET,

HR+/HER2-advanced breast cancer 1 575 22%

Chronic myeloid leukemia 1 529 24%

Diabetes mellitus, Type 2 1 224 6%

Severe allergic asthma and chronic spontaneous

urticaria 777 30%

Chronic obstructive pulmonary disease 484 93%

Myelofibrosis 279 72%

1 Key products for growth of Pharmaceuticals Division 2 Impacted by Galvus in Germany, where distribution was stopped July 1, 2014. Excluding Germany, FY growth vs. PY is +15%

3

2

4 4

3 Onbrez® Breezhaler® approved as Arcapta® Neohaler® in the US 4 Net sales and growth of Onbrez®, Seebri® and Ultibro®


http://www.novartisoncology.com/products/jakavi.jsp

Gilenya® net sales and growth (in USD m, growth in % cc)

2014 2013

US Ex-US

911

+45%

1 287

1 023

+16%

1 190

Growth was +30% (FY) and +32% (Q4) vs. PY

Continued Gilenya adoption

Over 114,000 patients treated to date with Gilenya

worldwide1

#1 in value share in Multiple Sclerosis (ex-US)2

Gilenya® growth fueled by consistent increase of

new patients on treatment

1 Worldwide Novartis estimate in clinical trials and in post-marketing setting 2 Leading share in the Multiple Sclerosis segment defined as global sales excluding USA. Source: Evaluate Pharma


Lucentis® growth driven by new launches which

achieved blockbuster status


New indications contributed 41% of sales in 2014

(up from 27% in 2013) reaching USD 1bn

The pre-filled syringe was launched in key

markets, incl. Germany, France, Italy, Spain, UK,

Japan and Australia

63% 59%

2013 2014

wAMD DME RVO mCNV

Lucentis® Ex-US1 net sales2 and growth (in USD m, growth in % cc)

41%3 27%

2 441 2 383

+5%

1 Genentech has rights to Lucentis® in the US 2 Sales indication split based on market research and Novartis estimates 3 Share of new indications in Q4 was 43%


Tasigna® accounted for 33% of the CML franchise sales1

and grew solidly


Ex-US Sales US Sales Growth was +24% (FY) and +30% (Q4) vs. PY

• US growth mostly driven by increased usage of Tasigna in 1st line CML patients

• Tasigna sales represent 24% of the total Tasigna and Gleevec®/Glivec® sales2

ENESTnd Landmark 6-year follow-up showed

• Higher rates of early, deep and sustained molecular response, including MMR3 and MR4.54 (vs. imatinib)

• More patients do not progress (vs. imatinib)

Tasigna® sales and growth (in USD m, growth in % cc)

1 Share in the combined sales of Tasigna plus Gleevec/Glivec in so far as it concerns CML 2 Gleevec/Glivec sales across all indications, including Ph+ CML and KIT+ GIST and others 3 Major Molecular Response - defined as 0.1% or less of BCR-ABL as measured by IS RT-Q-PCR 4 Molecular Response of ≥ 4.5-log reduction in BCR-ABL transcripts – defined as an extremely low level of detectable BCR-ABL protein (measured in the blood at 0.0032% or less on a standardized International Scale)

2014 2013

540428

+26% 838

+23%

989

COPD portfolio sales growth was +93% (FY) and

+94% (Q4) vs. PY2

Ultibro is 1st to market dual bronchodilator in the

EU and Japan

Submissions to FDA completed (Dec 2014)

Ultibro® Breezhaler® launched in ex-US markets with strong

penetration; US submission completed

0%

2%

4%

6%

8%

1 2 3 4 5 6 7 8 9 10 11 12 13

Germany Spain Greece

1 IMS Midas Monthly, Nov’14; Share of sales in the combined segment of: R3A3 + R3F1 + Tiotropium, Glycopyrronium, Aclidinium + LABA/LAMAs + Roflumilast. Months since launch in each market 2 Ultibro Breezhaler sales were USD 118 m (FY) and USD 51 m (Q4)

Ultibro® Breezhaler® value share1

(in % on a monthly basis)


Jakavi®1 showed strong growth in 2014 with second

indication expected in 2015

Jakavi® net sales (ex-US)1

(in USD m)


Growth in 1st indication of MF2 driven by

• Continued in-market growth in >70 countries

• Recent launches in Japan, Italy and Spain

>50 published abstracts across MF and PV3 at

ASH4 reinforcing safety / efficacy profile

Launch of 2nd indication (PV) in Q2 2015 in EU5

Target patient populations in MF and PV are of

similar size6

30

163

279

2012 2013 2014

1 Jakavi is licensed from Incyte for development and commercialization outside the US 2 Myelofibrosis 3 Polycythemia vera 4 American Society of Hematology (December 2014) 5 CHMP positive opinion in January 2015 6 Based on approximately 25% of PV patients who fail Hydroxyurea and could qualify for Jakavi treatment. Source: Alvarez-Larrán, et al Blood 2012


http://www.novartisoncology.com/products/jakavi.jsp

Signifor® approved in US and EU for treatment of

patients with acromegaly

Acromegaly is associated with higher mortality rates and serious health complications

• Prevalence ~60 patients per million

• Sandostatin LAR®: USD 1.6bn (FY) +6% vs. PY1

Despite current SSAs2 treatments, 45% of patients3 with acromegaly are inadequately controlled and fail to achieve recommended levels of GH4 or normalized levels of IGF-15

Signifor®6 was approved in a new long acting release formulation in US and EU

1 Sandostatin LAR is indicated for acromegaly and functional gastroenteropancreatic neuroendocrine tumours (GEP NET) 2 Somatostatin Analogues (SSAs) 3 Carmichael JD, JCEM 2014;99(5):1825-1833 4 Growth hormone (GH) 5 Insulin-like growth factor-1 (IGF-1) 6 In the US, the long-acting release formulation of pasireotide for the treatment of acromegaly has been approved under the trade name Signifor® LAR

Novartis Acromegaly Franchise

Medically

naive

patients

Patients

inadequately

controlled on

current SSAs

US EU

6 6

6


Cosentyx™ (secukinumab) showed superiority to Stelara®

in head-to-head CLEAR study (Psoriasis)

CosentyxTM (formerly AIN457) showed superiority to Stelara® in the CLEAR study (PASI 90 at week 16)2

1st approved anti-IL17A (approved as 1st line systemic therapy in EU)

• Japan - first approval in Dec

• EU and US - approval in Jan

Cosentyx is highly differentiated in the market place

• Superior efficacy vs. Stelara® and Enbrel®3

• Sustainability of response

• Favorable safety profile

• Monthly maintenance regimen

Psoriasis sales and growth1

(in USD m)

2 209

2 862

3 459

4 149

4 960

5 896

0

1 000

2 000

3 000

4 000

5 000

6 000

2009 2010 2011 2012 2013 MATOct'14

Enbrel

Humira

Remicade

Stelara

Ciclosporin

Methotrexate

Acitretin

Etretinate

Note: Stelara® and Remicade® are registered trademarks of Janssen Biotech, Inc., Enbrel® is a registered trademark of Amgen Inc., Humira® is a registered trademark of AbbVie Ltd.

PASI90 = 90% reduction in Psoriasis Area Severity Index from baseline 1 Sales from US, Japan, Top-5 EU. Source: IMS PADDS Monthly, Oct ’14. Compound Annual Growth Rate (CAGR) ‘09-’14

2 Novartis, Data on file 3 Langley RG, Elewski BE, Lebwohl M, et al. NEJM 2014. Jul 9;371(4):326-38

®

®

®

®

+22% CAGR (09-14)


0

20

40

60

80

100

0 4 8 12 16 20 24 28 32 36 40 44 48 52

Weeks Secu 75 mg

Secu 150 mg

Placebo

Secu 300 mg

% R

esp

on

ders

(AC

R 2

0)

% R

esp

on

ders

(AS

AS

20)

Secu 10 mg/kg i.v. 150 mg s.c.

Placebo Secu 10 mg/kg i.v. 75 mg s.c.

Weeks

76.7%

71.3% 60.8%

28.7%

Primary

Endpoint

51.0%

54.0%

29.3%

15.3%

FUTURE 2 (PsA) - Rapid and Significantly Improved ACR20 Responses

MEASURE 1 (AS) - Sustained ASAS 20 Response Through Week 52

Note: Secu= Secukinumab; i.v. = intravenous; s.c. = sub-cutaneous

Cosentyx™: Novartis is working to be the 1st company

to launch an anti-IL17A with three indications in label

4 landmark PsA/AS PhIII studies presented at ACR 20141

• Efficacy in both anti-TNF-naive and anti-TNF-IR groups

• PsA: >50% ACR 20 responders at week 24

• AS: unprecedented sustained efficacy; at week 52, >75% of patients achieved ASAS 20, >60% achieved ASAS 40 (secondary endpoint)

Cosentyx™ will compete in three high growth segments2

• Psoriasis USD 6bn (+22%)2

• Psoriatic Arthritis (PsA) USD 3bn (+22%)2

• Ankylosing Spondylitis (AS) USD 2bn (+23%)2

60

0

50

40

20

0

4 24 8 12 16 20 1 2

30

10

3

PsA = Psoriatic Arthritis. AS = Ankylosing spondylitis. TNF = Tumor Necrosis factor. ACR20 = reduction by 20% in American

College of Rheumatology response criteria, ASAS 20/40 = 20%/40% improvement in the Assessment of Spondyloarthritis

International Society criterion 1 American College of Rheumatology (November 2014) 2 Sales MAT Oct. 2014 from US and Top-5 EU. Psoriasis includes Japan as well. Source: IMS PADDS Monthly, Oct ‘14.

CAGR (‘09-’14)


LCZ696: Additional clinical data; accelerated regulatory reviews

PARADIGM-HF cause of death data1

Submission in EU and US completed

EMA and Swissmedic granted Accelerated Review

New data shows LCZ696 has potential to reduce

the risk of clinical progression of heart failure1,2

Patients in LCZ696 group were less likely to2 :

• Require hospitalization for a cardiovascular reason (12%) or for any reason (12%)

• Require an emergency room visit for heart failure (34%)

• Require intensive care (13%)

p=0.008

p=0.034

p<0.001

Enalapril

LCZ696

All causes CV causes Pump

Failure

Sudden

Death

p<0.001

19.8 16.5

7.4 4.4

17.0 13.3

6.0 3.5

0

5

10

15

20

25

% o

f p

atie

nts

-16% -20% -20% -21%

1 Novartis Data on File. Presented at AHA by J. McMurray Nov. 17, 2014 2 Packer et al. Circulation 2014; epub ahead of print: DOI: 10.1161 / CIRCULATION AHA.114.013748


BKM120

LDE225

LDE225

LCZ696

LCZ696

QVA149/NVA237

US, EU & Japan submission in mBC ER+: combo with Fulvestrant, mTOR naive

FDA action in advanced basal cell carcinoma

CHMP opinion in advanced basal cell carcinoma

FDA action in chronic heart failure with reduced ejection fraction

CHMP opinion in chronic heart failure with reduced ejection fraction

FDA action in chronic obstructive pulmonary disease (COPD)

Currently expected Pharmaceuticals newsflow highlights

H1 2015

Cosentyx™

Cosentyx™

Jakavi®

Exjade®

CosentyxTM

Zykadia™

EU approval in psoriasis

FDA action in psoriasis

CHMP opinion in polycythemia vera

FDA action in new formulation film coated tablets

Regulatory filings in US and EU for ankylosing spondylitis and psoriatic arthritis

CHMP opinion in ALK+ NSCLC

H2 2015


Agenda











We are delivering against our priorities

Strong 2014 financial results

Strong innovation news adding to momentum

Progress on portfolio transformation and NBS


Our priorities in 2015 are expected to continue to

position us for future success

Build a

high-performing

organization

5

Complete

the portfolio

transformation

3

Strong financial

results and

discipline

1

Strengthen

innovation

2

Capture

cross-divisional

synergies

4

2015 pr ior i t ies


Agenda











Appendix

Cosentyx™ Ankylosing spondylitis

Cosentyx™ Psoriatic arthritis

Afinitor® TSC6 seizures

PKC412 ASM4

PKC412 AML2

BKM120 mBC ER+ AI resistant/mTOR naive

MEK162* NRAS mutant melanoma

Afinitor® Non-functioning GI and Lung NET3

Gilenya® CIDP13

Lucentis®

CNV and ME7

BYM338 sIBM5

Ilaris®

Hereditary periodic fevers

CTL019

Acute lymphoblastic leukemia

Tasigna® CML treatment free remission

MEK162* + LGX818 BRAF mutant melanoma

MEK162* LGSOC8

ACZ885 Sec. prev. cv events11

KAE609 Malaria

LCI699 Cushing’s disease

Afinitor® DLBCL12

BGS649 OHH17

BYM338 Hip fracture

CAD106 Alzheimer’s disease

BAF312 Multiple sclerosis

QGE031 Asthma

QAW039 Asthma

BCT197 COPD16

LIK066 Type II diabetes

LCZ696

Heart failure (PEF)18

QAX576 Allergic diseases

HSC835 Stem cell transplantation

BYL719 Solid tumors

BGJ398 Solid tumors

LJM716 Solid tumors

BKM120 Solid tumors

MEK162* Solid tumors

LEE011 Solid tumors

Lucentis® ROP15

Tekturna®

Heart failure9

Signifor® LAR10 Cushing’s disease

Planned filings 2015 to 2019

2017 2019 2015 2016

1 Familial chylomicronemia syndrome 2 Acute myeloid leukemia 3 Neuroendocrine tumors 4 Aggressive systemic mastocytosis

5 Sporadic inclusion body myositis 6 Tuberous sclerosis complex 7 Choroidal neovascularization (CNV) and macular edema (ME) secondary to conditions other than macular degeneration, diabetic macular edema, retinal vein occlusion and pathologic myopia

8 Low-grade serous ovarian cancer 9 Reduction of CV death/hospitalization in chronic heart failure patients 10 Long-acting release

11 Secondary prevention of cardiovascular events

12 Diffuse large B-cell lymphoma 13 Chronic inflammatory demyelinating polyradiculoneuropathy 14 Non-small cell lung cancer 15 Retinopathy of prematurity 16 Chronic obstructive pulmonary disease 17 Obese hypogonadotropic hypogonadism

18 Preserved ejection fraction

New molecule

New indication

New formulation

RLX030 Acute heart failure

Fovista® Wet AMD

FCR001 Renal transplantation

BKM120 mBC ER+ post Al and mTOR inhibitor

CTL019 DLBCL12

INC280 NSLCL14

2018

EGF816 Solid tumors

LCQ908 FCS1

KAF156 Malaria

BYM338 Sarcopenia

QAW039 Atopic dermatitis

LEE011 HR+, HER2(-) advanced breast

cancer (premenopausal women)

LEE011 HR+, HER2(-) advanced breast

cancer (postmenopausal women)

LGX818 Solid tumors

CJM112 Immune disorders

* MEK162 rights to be returned to Array BioPharma Inc. which is conditional on the closing of the portfolio transformation transaction with GSK

Zykadia™ ALK+advanced NSCLC14

(first line, treatment naive)


http://deis.novartis.intra/deis.asp?ATI355A

Key Definitions

This presentation contains several important words or phrases that we define as below:

ACR20: Reduction by 20% in American College of Rheumatology response criteria

ALK+ NSCLC: Anaplastic lymphoma kinase positive (ALK+) Non-small cell lung cancer

(NSCLC)

Approval: In Pharmaceuticals, Alcon and Vaccines in US and EU; each indication and

regulator combination counts as approval; excludes label updates, CHMP opinions

alone, and minor approvals

AS: Ankylosing spondylitis

ASAS20/40: 20% respectively 40% improvement in the Assessment of

Spondyloarthritis International Society criterion

CAGR: Compound Annual Growth Rate

CML: Chronic myelogenous leukemia

COPD: Chronic Obstructive Pulmonary Disease

DME: Diabetic Macular Edema

Emerging Growth Markets: All markets excluding the US, Canada, Western Europe,

Japan, Australia, and New Zealand

GH: Growth Hormone

Growth products: Growth products comprise products launched in 2009 or later, or

products with exclusivity until at least 2018 in key markets (EU, US, Japan)

Gx: Generic

HR+/HER2-: Hormone Receptor positive, Human Epidermal Growth Factor 2 negative

IGF-1: Insulin-like growth factor-1

In cc: In constant currencies

JCEM: Journal of Clinical Endocrinology & Metabolism

mCNV: Choroidal neovascularization (CNV) secondary to pathologic myopia (myopic

CNV)

MF: Myelofibrosis

MMR: Major Molecular Response

MR4.5: Molecular Response of ≥ 4.5-log reduction in BCR-ABL transcripts

NEJM: New England Journal of Medicines

NSCLC: Non Small Cell Lung Cancer

PASI90: 90% reduction in Psoriasis Area Severity Index from baseline

pNET: Pancreatic neuroendocrine tumors

PsA: Psoriatic Arthritis

PV: Polychytemia vera

RVO: Retinal Vein Occlusion

SSA: Somatostatin Analogue

TNF: Tumor Necrosis Factor

TSC SEGA: Tuberous sclerosis complex subependymal giant cell astrocytoma

wAMD – wet age-related macular degeneration


Documents

Q4 and Full Year 2014 Results - assets.fiercemarkets.netassets.fiercemarkets.net/public/lifesciences/NOVARTIS PRESENTATI… · Solid sales growth, margin expansion and major innovation