Q3 2014 results presentation (1.2 MB)

Q3 2014 Results
Investor presentation
October 28, 2014
Disclaimer
This presentation contains 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 rating; or regarding the potential completion of the announced transactions with GSK and Lilly, the potential completion of the
announced transaction regarding the Novartis influenza vaccines franchise, or regarding potential future sales or earnings of any of the businesses involved in the
announced transactions, or of the Novartis Group, and regarding any potential strategic benefits, synergies or opportunities as a result of the announced transactions; 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 forwardlooking 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 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.
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. 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 transactions 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; uncertainties regarding the effects of the persistently weak global economic and financial environment;
uncertainties regarding future global exchange rates; uncertainties regarding future demand for our products; uncertainties involved in the development of new
healthcare products; 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 this presentation 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.
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Agenda
3
Group overview
Joseph Jimenez
Chief Executive Officer
Financial review
Harry Kirsch
Chief Financial Officer
Pharmaceuticals
David Epstein
Division Head, Novartis Pharmaceuticals
Closing
Joseph Jimenez
Chief Executive Officer
Q&A session
Executive team
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
We delivered solid sales performance, strong margin expansion
and significant innovation in Q3
 Reinforcing strong innovation momentum in Q3, including:
• LCZ696 positive phase III data in chronic heart failure
• AIN457 positive FDA Advisory Committee recommendation in psoriasis
 Sales growth at +5% in cc vs. PY1
 Core Operating margin improvement of 1.5% pts in Q31 (in cc)
1
4
Group growth rates are based on 2013 data excluding the divestment blood transfusion diagnostics unit. See page 81 of the Condensed Interim Financial Report
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Strong financials results in Q3
Q3
(in USD m)
2014
Net Sales
Change vs. PY
2
1
% USD
% cc
14 704
4
5
Core Operating Income
3 840
8
11
Operating Income
2 980
14
18
Net Income
3 240
45
49
Core EPS (USD)
1.37
10
13
EPS (USD)
1.33
48
51
3 165
-9
Free Cash Flow
1
2
3
5
3
3
Group growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. See page 81 of the Condensed Interim Financial Report. 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 52 of the Condensed Interim Financial Report
2014 results exclude depreciation and amortization related to discontinuing operations from the portfolio transformation announcement date. See page 21 of the Condensed Interim Financial Report for more information
Includes the USD 0.8 billion pre-tax gain from the sale of shares of Idenix Pharmaceuticals
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
We progressed our strategic priorities
Innovation
 LCZ696 phase III positive
data in chronic heart failure
 AIN457 positive FDA
Advisory Committee
recommendation in
psoriasis
Growth
 Growth products 33% of
Productivity
 Core operating margin
Group sales in Q3
 Emerging Growth
Markets grow +13% in Q3
vs. PY in cc1
 Clinical collaboration to
evaluate BMS’ novel
immunotherapy in
combination treatments for
NSCLC
1
6
Group growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. See page 81 of the Condensed Interim Financial Report
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
improved 1.5% pts in Q3
(in cc1), mainly due to R&D
and M&S
Innovation
We achieved important product milestones for critical disease
areas
Key regulatory news in Q3 2014
Filgrastim
biosimilar
AIN457
Positive CHMP
opinion
in EU
7
Positive FDA
Advisory Committee
in psoriasis
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Approval
in EU
Submitted to FDA
Innovation
We advanced our pipeline significantly, reinforcing key franchise
leadership
Key Q3 clinical results
LCZ696
AIN457
LDE225
Positive Phase III
data in chronic
heart failure1
Positive phase IIIs in
psoriatic arthritis and
in ankylosing
spondylitis
Regulatory application
submitted to FDA in
advanced basal cell
carcinoma
1
8
With reduced ejection fraction
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Innovation
We have acquired WaveTec to further strengthen Alcon’s
innovation leadership in cataract refractive surgery
Acquired
 Intra-operative surgical
guidance helps improve patient
outcomes
 First commercialized intraoperative aberrometry system
in the US
ORA
9
System®
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
 Acquisition complements
Alcon’s industry-leading
cataract refractive suite
Growth
Growth across all divisions, with profit leverage in all divisions
% Change vs. PY1
Net sales Q3 2014
(in USD m)
7 925
Pharmaceuticals
2 665
Alcon
2 401
Sandoz
Consumer
Health
Vaccines
1
(in cc)
1 125
588
Net sales
Core Operating Income
+1%
+5%
+6%
+12%
+7%
+14%
+9%
+74%
+31%
nm
Vaccines growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. Vaccines result 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 81 of the Condensed Interim Financial Report
10
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Growth
Our growth products and Emerging Growth Markets remain
engines of our performance across divisions
Growth products transforming our
portfolio
33%
of sales
1
Driving growth in emerging markets
1
+13%
Emerging Growth Markets Q3 vs. PY (% cc). Group growth rates based on 2013 data excluding the divested blood transfusion diagnostics unit. See page 81 of the Condensed Interim Financial Report
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Growth - Pharmaceuticals
Our Pharmaceuticals growth products maintained strong
momentum in Q3 2014
Net sales1
(in USD m)
+27%
653
Q3 2013
Q3 2014
+7%
614
+22%
408
+25%
391
-5%2
293
+39%
+90%
207
123
3
1
2
3
All growth rates vs. PY are in constant currencies
Impacted by Galvus in Germany, where distribution was stopped July 1, 2014. Excluding Germany, Q3 growth vs. PY is +8%
Onbrez® Breezhaler® approved as Arcapta® Neohaler® in the US
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
+43%
69
Growth – Alcon
Alcon grew +6% in Q3, driven by Surgical
Alcon Net Sales1
(in USD m)
Highlights
+6%
2 665
 Surgical (+10%): Strong Centurion® and
LenSx® performance, with IOL returning
to growth
2 539
 Ophthalmic Pharmaceuticals (+4%):
Double-digit Systane®, Ilevro®, and
Azarga® growth
Q3 2013
1
Q3 2014
All growth rates are vs. PY, in constant currencies
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
 Vision Care (+4%): Strong continued
Dailies Total1® launch
Growth – Sandoz
Strong Sandoz performance, with +7% sales growth vs. PY in cc
and core margin expansion
Sandoz Net Sales1
(in USD m)
+7%
2 401
Strong Sandoz Q3 performance, mainly
driven by:
 US including launch of AGx Diovan®
2 273
monotherapy
 Biosimilars and oncology injectables
 Key Emerging Markets
Q3 2013
1
Q3 2014
All growth rates are vs. PY, in constant currencies
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Productivity
Our productivity initiatives contribute to growth of core operating
leverage
Group core operating margin1
(vs. PY in ppts cc)
+1.5% pts
+1.2% pts
Q3 2014
1
9M 2014
Group growth rates are based on 2013 data excluding the divested blood transfusion diagnostics unit. See page 81 of the Condensed Interim Financial Report
15
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
We have just announced the agreement to divest our influenza
business
 Binding agreement to divest influenza
vaccines business to Australia-based
CSL™
 USD 275 m in cash
 Expected to close in H2 2015
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
The transformation of Novartis is progressing on track
2014 milestones
8 January
Closed
divestiture of
blood
diagnostics
business
17
22 April
Announced agreement to:
 Acquire GSK oncology
products
 Create Consumer Health
JV with GSK
 Divest Novartis Vaccines
(excl. influenza)
 Divest Novartis Animal
Health
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
1 July
26 October
Established Novartis
Business Services
Announced
agreement to
divest influenza
business
Novartis Business Services is now providing services across
divisions
Information
Technology
1
Procurement
Human
Resources
Services
Includes Commercial and Medical Affairs Services
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Real Estate &
Facility
Services
Financial
Reporting &
Accounting
Operations
Global
Business
Services1
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
Chief Executive Officer
Q&A session
Executive team
19
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Strong margin expansion in Q3 and nine months
Change vs. PY
Q3
(in USD m)
2014
Net Sales
% USD
% cc
14 704
4
5
Core Operating Income
3 840
8
Operating Income
2 980
Net Income
2
3
4
Change vs. PY
9M
2
% cc
43 363
2
3
11
11 294
4
8
14
18
9 564
14
20
3 240
45
49
8 793
23
28
Core EPS (USD)
1.37
10
13
4.02
5
9
EPS (USD)
1.33
48
51
3.58
24
29
3 165
-9
6 343
-2
4
4
2014
1
% USD
Free Cash Flow
1
2
1
3
3, 4
3, 4
All comparisons to prior year are based on 2013 data excluding the blood transfusion diagnostics unit. See page 81 of the Condensed Interim Financial Report
2014 results exclude depreciation and amortization related to discontinuing operations from the portfolio transformation announcement date. See page 21 of the Condensed Interim Financial Report for more information
Includes the USD 0.9 billion pre-tax gain from the divestment of the blood transfusion diagnostics unit
Includes the USD 0.8 billion pre-tax gain from the sale of shares of Idenix Pharmaceuticals
20
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Strong volume growth more than offsets generic impact in Q3
Group Q3 2014
(in % growth vs. PY1)
Net sales
Core operating income
Underlying volume
Price
Underlying growth2
Generics impact3
2
3
0
0
10
25
-14
11
5
Currency
1
25
-5
CC growth
USD growth
10
-1
4
-3
8
All comparisons to prior year are based on 2013 data excluding the blood transfusion diagnostics unit. See page 81 of the Condensed Interim Financial Report
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
Generics impact on sales amounted to USD 0.6 billion in the quarter
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Growth products continued to increase their contribution
to overall portfolio
Q3 ’14 vs. Q3 ’13
% of sales
Group
Pharmaceuticals
(in USD bn)
(in USD bn)
28%
33%
38%
44%
4.9
4.0
3.0
Q3 2013
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Q3 2014
Q3 2013
3.5
Q3 2014
All divisions contributed to Q3 Group core margin improvement of
1.5% points
Q3 2014 vs. PY1
Net
sales
(in % cc)
Core operating
income
(in % cc)
Pharmaceuticals
1
5
30.3
1.1
Alcon
6
12
36.0
1.9
Sandoz
7
14
17.4
1.1
Consumer Health
9
74
16.0
6.33
31
nm
12.1
8.23
5
11
26.1
1.53
Vaccines2
Group
1
2
3
Core ROS
(%)
Core margin
change in cc
(% pts)
All comparisons to prior year are based on 2013 data excluding the blood transfusion diagnostics unit. See page 81 of the Condensed Interim Financial Report
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
Includes cessation of depreciation since portfolio transformation announcement date of +1.3% pts for Consumer Health, +6.3% pts for Vaccines, and +0.3% pts for total Group
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| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Q3 Group core margin improvement mainly from R&D and M&S
Group core R&D
Group core M&S
as % sales (USD)
as % sales (USD)
-1.1% pts (cc)
-1.3% pts (cc)
-0.9% pts (USD)
-1.4% pts (USD)
24.5%
24
16.6%
15.7%
Q3 2013
Q3 2014
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Q3 2013
23.1%
Q3 2014
Increasing currency impact on sales in Q3 from weaker Yen and
emerging market currencies
Currency impact vs. PY
(in % points)
Net sales
Core operating income
0
-2
-2
-2
-2
-1
-2
-2
-3
-4
-6
-3
-3
Q2
Q3
-6
-4 to
-5-5
-8
Q1
Q2
Q3
2013
Q4
Q1
Q2
Q3
FY1
Q1
2014
FY impact: -2%
1
Expected full year currency impact assuming early October average exchange rates prevail for the remainder of the year
25
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Q2
Q3
2013
FY impact: -5%
Q4
Q1
2014
FY1
Free Cash Flow in line with prior year
9M Free Cash Flow
(in USD bn)
Key drivers of free cash flow
1
-0.2
6.5
6.3
 Higher operating income
Offset by:
 Currency impact
 Higher net working capital
 Investments in intangibles
9M 2013
1
9M 2014
All comparisons to prior year are based on 2013 data excluding the blood transfusion diagnostics unit. See page 81 of the Condensed Interim Financial Report
26
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
As of September 30, net debt increased by USD 0.4 billion to
USD 9.2 billion
(in USD bn)
-0.4
6.3
2.4
-6.8
-5.0
2.3
0.4
-8.8
December
2013
1
2
3
Free Cash Flow
Dividends
Net divestment
1
proceeds
Proceeds from
Share repurchases
2
options exercised
3
Others
Mainly due to divestment of the Vaccines blood transfusion diagnostics unit net of tax (USD 1.2 bn) and sale of shares of Idenix Pharmaceuticals (pre-tax gain of USD 0.8 billion)
Related to employee participation programs
Including mainly repurchases on the first (USD 2.9 bn) and second trading lines (USD 1.7 bn)
27
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
-9.2
September
2014
Impact of the binding sale agreement1 to divest influenza vaccines
business to CSL™
 With the signing of the binding sale agreement1 for the influenza vaccines business to CSL™ for
USD 275 million, the vaccines business is now divested to two separate buyers
 As a result, IFRS requires a separate valuation of the influenza vaccines net assets
 This triggers the recognition of an exceptional pre-tax, non-cash impairment charge of
approximately USD 1.1 billion
 Upon closing the deal with GSK for the remaining non-influenza vaccines business, Novartis
expects to record a substantial non-cash gain, which will more than compensate for this
previously recognized non-cash impairment charge1
 Novartis expects to record significant additional gains upon closing of the other inter-conditional
transactions with GSK and the transaction with Lilly announced on April 221
1
The transactions are subject to customary closing conditions including regulatory approvals; GSK transactions are also inter-conditional and subject to approval by its shareholders
28
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Full year outlook1 confirmed
Barring unforeseen events
 Group net sales in 2014 are expected to grow at a
low to mid-single digit rate (cc)
 Group core operating income is expected to grow ahead of sales (cc) in 2014,
at mid to high-single digit (cc)
1
The outlook is based on the total Group business. This includes the cessation of depreciation and amortization following IFRS reporting requirements, although this is not expected to have a material impact on
guidance. All comparisons to prior year are based on 2013 data excluding the divested blood transfusion diagnostics unit for 2013
29
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
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
Chief Executive Officer
Q&A session
Executive team
30
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Pharmaceuticals sales +1% in cc in Q3 2014 with core operating
income leverage
Change vs. PY
(in USD m)
(% USD)
(% cc)
Q3 2014
Q3 2013
Net Sales
7 925
7 893
0
+1
Core Operating Income
2 405
2 345
+3
+5
Operating Income
2 233
2 267
-1
+1
Core Operating Income margin
30.3%
29.7%
Operating Income margin
28.2%
28.7%
2 376
2 510
Free Cash Flow
31
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
-5
Portfolio rejuvenation progressing well; growth products1 now
represent 44% of total division sales
Growth products sales
(in USD bn)
+16% cc
3.5
3.0
Q3 2013
Q3 2014
% of total sales
38%
1
44%
Growth products comprise products launched in 2009 or later, or products with exclusivity until at least 2018 in key markets (EU, US, Japan)
32
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Emerging markets growth in Q3 was robust driven by
Brazil, China and Turkey
Growth Q3 2014 vs. PY
(in % cc)
Net sales Q3
Growth rates Q3
in selected
emerging markets
24%
Emerging Growth Markets
13%
USD 2 056 m
22%
14%
Established Markets
33
-2%
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
USD 5 869 m
Unparalleled growth platform1 with exclusivity until 2018 and
beyond
Q3 2014
Sales
(USD m)
Indication
 Multiple sclerosis
653
27%
614
7%
408
22%
 Chronic myeloid leukemia
391
25%
 Diabetes mellitus, Type 2
293
-5% 2
 Moderate to severe asthma and chronic spontaneous
207
39%
 Wet age-related macular degeneration, Diabetic macular
edema, Retinal vein occlusion, mCNV
 Metastatic renal cell carcinoma, TSC SEGA, pNET,
HR+/HER2-advanced breast cancer
urticaria
3
 Chronic obstructive pulmonary disease
123
 Myelofibrosis
1
2
Key products for Pharmaceuticals growth
Impacted by Galvus in Germany, where distribution was stopped July 1, 2014. Excluding Germany, Q3 growth vs. PY is +8%
34
Q3 2014
Growth vs. PY
(% cc)
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
69
3
4
4
90%
43%
Onbrez® Breezhaler® approved as Arcapta® Neohaler® in the US
Net sales and growth of Onbrez®, Seebri® and Ultibro®
4
Gilenya® growing strongly despite increasing competition
Gilenya® sales and growth
(in USD m, growth in % cc)
US
Ex-US
 US: Double-digit volume growth vs. PY. Switches
+37%
+18%
332
321
273
245
from other disease modifying therapies to
Gilenya® continue to grow1
 Ex-US: Gilenya® #1 in H1 2014 sales2
 New data presented at A/ECTRIMS confirmed
high efficacy of Gilenya® in achieving “no
evidence of disease activity (NEDA)” based on
four key measures of MS3
 Topline PPMS results expected in Q4 2014
Q3 2013
1
2
3
Q3 2014
Q2 and Q3 2014 IMS NPA Market Dynamics (Tysabri not reported)
Leading share (18.4%) of combined global Multiple Sclerosis segment except that of the USA. Source: Evaluate Pharma
Patients taking Gilenya® had a more than four-times greater likelihood of achieving NEDA across four key measures of Multiple Sclerosis (relapses, MRI lesions, brain shrinkage (brain volume loss) and disability
progression) vs. placebo, odds ratio 4.41; 95% CI 3.03-6.42; p<0.0001
35
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Lucentis® launches in new indications continue to drive growth
Lucentis® ex-US1 sales2 and growth
(in USD m, growth in % cc)
 Lucentis® achieved strong single digit volume
+7%
growth
581
614
27%
 Lucentis® pre-filled syringe successfully
42%
launched in Belgium, Denmark, Spain,
Netherlands and Australia in Q3
 EMA label update approved in EU allowing for
73%
Q3 2013
Wet AMD
1
2
58%
DME
Q3 2014
RVO
mCNV
Genentech has rights to Lucentis® in the US
Sales indication split based on market research and Novartis estimates
36
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
flexible and individualized treatment regimen
including treat and extend
Afinitor® - multiple sources of growth
Afinitor® global sales
(in USD m)
500
337 7%
8%
10%
10%
25%
54%
100
48%
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
2012
2014
2009
2010
2011
2013
Sales indication split based on market research and Novartis estimates
Indeterminate usage
37
-47%
3%
+73%
+18%
+8%
29%
200
2
408
7%
6%
300
1
+22%
Launch in
Breast Cancer
400
0
Afinitor® - Q3 sales split per indication1
(in USD m, growth in % cc)
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Q3 2013
Q3 2014
+36%
Other 2
TSC / SEGA
pNET
RCC
BC
Tasigna® continues to deliver double digit growth
7 years post launch
Tasigna® sales and growth
(in USD m, growth in % cc)
US
Ex-US
+25%
250
204
+27%
 US sales driven by share gains in Ph+ newly
diagnosed CML patients and from patients
resistant / intolerant to imatinib
 Ex-US growth driven by continued uptake in
141
Emerging Growth Markets
111
 Received CHMP positive opinion on the ENESTnd
5year long-term follow-up label update in Q3 2014
Q3 2013
38
Q3 2014
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Myelofibrosis driving strong performance for Jakavi®
Jakavi® sales and growth
(in USD m, growth in % cc)
+65%
195
 Recent approval and reimbursement received in
Japan for Myelofibrosis indication
 EMA label updated in July to include long-term
survival follow up
116
 Submissions ongoing following positive pivotal
study results in Polycythemia Vera
• Submitted in US in Q2, in Japan and EU in Q3
9M 2013
39
9M 2014
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Ultibro® Breezhaler® expanding the evidence into
exacerbation benefit vs. Seretide®
The LANTERN Trial1
Moderate to severe exacerbations
(annualized rate)
Analysis of the rate of exacerbations2
2
3
 Ultibro® Breezhaler® significantly reduced the rate
of moderate to severe exacerbations by 31%
beyond Seretide®2,3
0.4
0.3
 Both primary and key secondary objectives were
0.2
 Positive results were part of the regulatory
0.1
0
1
Rate ratio 0.69
0.5
met in pivotal Phase III LANTERN study
submission in China
0.45
0.31
Seretide®
50/500 μg BID
Ultibro®
27.5/12.5 μg BID
 USD 31 m sales in Q3
Zhong N. et al. Efficacy and safety of once-daily QVA149 compared with twice-daily salmeterol/fluticasone combination (SFC) in patients with COPD: the LANTERN study. [ERS abstract 700090; Session 281, Poster P2815¨]
The primary objective of the study was to demonstrate the non-inferiority of Ultibro® Breezhaler® 110/50 mcg to SFC 50/500 mcg in terms of lung function (trough FEV1) after 26 weeks of treatment in stable patients with
moderate-to-severe COPD, with a history of one exacerbation or none in the previous year. Ultibro® Breezhaler® demonstrated non-inferiority and additionally showed superior efficacy versus SFC for the primary objective. In
this study, exacerbations were a pre-specified exploratory endpoint
Seretide® (salmeterol/fluticasone) 50/500 mcg was used via the Accuhaler® dry powder inhaler. Seretide® is also known as Advair® and Accuhaler® is also known as Diskus®. Seretide®, Advair®, Diskus® and Accuhaler® are
registered trademarks of the GlaxoSmithKline group of companies
40
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Zykadia™ durable responses, better than expected
Data presented at ESMO: PFS1 for ALK+ patients
treated with ceritinib in ASCEND-12
 Zykadia™ demonstrated a high rate of durable
100
Probability (%)
80
60
40
20
0
0
1
2
3
4
3
6
Progression Free Survival
Felip E. et al. Poster. ESMO 2014
Duration of Response
Shaw AT et al. Poster. ESMO 2014
41
9
responses in ALK+ non-small cell lung cancer
naive patients:
• Median PFS1: 18.4 months2
• Median DOR3: 17.02 months2
 Documented systemic benefit and intracranial
activity in patients with brain metastases4
 Strong US launch trajectory, Q3 revenue
(USD 12 m) grew 74% vs. Q2. Regulatory
reviews underway in the EU and other
12 15 18 21 24 27 30 33 36
countries worldwide
Time (Months)
 We announced a collaboration to evaluate
BMS’ novel immunotherapy in combination
treatments for NSCLC
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
LCZ696 - building momentum; positive preliminary regulatory
discussions
PARAGON-HF
trial started
enrolling in the
HFpEF population
July
2014
1
2
PARADIGM-HF data presented
at ESC1, LCZ696:
 reduced the risk of death
from cardiovascular causes
by incremental 20%
 reduced first heart failure
hospitalizations by
incremental 21%
August
2014
European Society of Cardiology
American Heart Association
42
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Disease progression data
from PARADIGM-HF to be
presented at AHA2
 Quality of life
 Impact on recurrent
hospitalizations and
resource utilization
 Cause of death
November
2014
Expected
completion of
submission in
US
Year-end
2014
Expected
submission
in EU / RoW
Early
2015
AIN457 (secukinumab) with potential to be the first anti-IL-17 to
enter both the dermatology and rheumatology spaces
Psoriatic Arthritis (PsA)
A debilitating, long-lasting
condition that causes inflammation
of joints and skin and affects up to
30% of people with psoriasis
globally
 FDA Advisory Committee unanimously
recommended approval for AIN457 in psoriasis
 AIN457 met all primary and key secondary
endpoints in Phase III studies for both PsA and AS
 AIN457 PsA and AS Phase III data to be presented
at ACR1 2014
Ankylosing Spondylitis (AS)
A painful, progressively debilitating
condition associated with
inflammation of the spine, causing
irreversible consequences that
significantly reduce patients'
mobility and quality of life
1
2
 Only 20% biologics used amongst eligible PsA and
AS patients2
 Regulatory submissions are planned for both PsA
and AS in H1 2015
American College of Rheumatology
Source: Gelfand, 2005 (PsA prevalence), Reveille JD et al. 2013 (AS prevalence), Decision Resources 2013 (PsA treated pool) and Datamonitor 2008 (AS treated pool) reports. Patients on Biologics calculated
from sales units data; IMS PADDS Quarterly sales & yearly Medical Data
43
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Currently expected Pharmaceuticals newsflow highlights
H1 2014
H2 2014
1
Afinitor®
Japan action in HR+ Breast cancer
Lucentis®
Japan action in Diabetic Macular Edema
Lucentis®
Japan approval of pre-filled syringe
RLX030
FDA issued complete response letter in May
RLX030
CHMP negative opinion in May
Xolair®
CHMP opinion in Chronic Spontaneous Urticaria
Xolair®
FDA action in Chronic Idiopathic Urticaria
Zykadia™
FDA action in NSCLC
AIN457
FDA Advisory Committee for Psoriasis expected in Oct.
2014 (FDA Action expected in Jan. 2015)
AIN457
CHMP opinion in Psoriasis
Jakavi®
Japan action in Myelofibrosis
LCZ696
Phase III data presentation at
Signifor® LAR
FDA action in Acromegaly
Signifor® LAR
CHMP opinion in Acromegaly
European Society of Cardiology
44
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
ESC1
2014












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
Chief Executive Officer
Q&A session
Executive team
45
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
We are delivering against our priorities
 Strong Q3 financial results
 Strong Innovation news adding to momentum
 Progress on portfolio transformation and NBS
46
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
Appendix
Planned filings 2014 to  2018
2014
2015
2016
2017
LBH589 *
BKM120
BYM338
DEB025
Multiple Myeloma
mBC ER+ AI resistant/mTOR naive
LCQ908
PKC412
FCS1
LCZ696
Heart failure (REF)2
LDE225 **
Fovista®
AIN457
Psoriatic arthritis
Afinitor®
AIN457
HER2+ Breast cancer 1st Line
Rheumatoid arthritis
Afinitor®
Gilenya®
Jakavi® ****
PKC412
HER2+ Breast cancer 2nd/3rd Line
PPMS7
Polycythemia vera
Wet AMD
LEE011
LCI699
BCT197
Afinitor®
COPD18
Solid tumors
ACZ885
BGS649
CTL019
DLBCL17
BGJ398
Solid tumors
MEK162
OHH19
BYL719
DLBCL17
Solid tumors
MEK162 + LGX818
BKM120
Solid tumors
BYM338
Hip fracture and Sarcopenia
Alzheimer’s disease
RLX030
FCR001
Acute Heart Failure
Afinitor®
TSC10 Seizure
Stem cell transplantation
HSC835
Lucentis®
BKM120
INC280
MEK162
mBC ER+ post Al and mTOR inhibitor
Solid tumors
Gilenya®
LIK066
Type II diabetes
CIDP11
Ilaris®
LJM716
Hereditary Periodic Fevers
Solid tumors
Lucentis®
QAW039
Asthma
LGSOC13
Tasigna®
2
3
4
New indication
5
6
7
New formulation
8
9
10
48
Familial chylomicronemia syndrome
Reduced ejection fraction
Non-small cell lung cancer
Film-coated table
Acute myeloid leukemia
Neuroendocrine tumors
Primary progressive multiple sclerosis
Aggressive systemic mastocytosis
Sporadic inclusion body myositis
Tuberous sclerosis complex
CML Treatment free remission
Tekturna®
11
12
Heart failure14
Zykadia™
ALK+advanced
(first line, treatment naive)
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
LGX818
Solid tumors
MEK162
1
LEE011
Solid tumors
Renal transplantation
CNV and ME12
New molecule
LCZ696
Heart failure (PEF)20
CAD106
BRAF Mutant Melanoma
Iron overload
QGE031
Allergic diseases
Sec. Prev. CV events16
ASM8
LBH589 was filed in the US and EU in Q2 2014
LDE225 was filed in EU in Q2 2014, US application submitted in Q3
Zykadia™ (ceritinib) was approved in the US on April 29, 2014
Jakavi ® was filed in the EU in Q2 2014 and submitted in Japan in Q3
Exjade® FCT was submitted in the US in Q2 2014
BAF312
Multiple sclerosis
BRAF Mutant Melanoma
NRAS Mutant Melanoma
Allergic diseases
Malaria
TKI258
LGX818
QAX576
Solid tumors
Cushing’s Disease
Breast cancer
Exjade® FCT4 *****
*
**
***
****
*****
KAE609
Afinitor®
AIN457
Zykadia™ ***
CTL019
Acute Lymphoblastic Leukemia
Ankylosing spondylitis
ALK+ advanced NSCLC3
HCV infection
AML5
Non-functioning GI and Lung NET6
Advanced Basal Cell Carcinoma
sIBM9
 2018
AUY922
NSCLC3
Signifor®
LAR15
Cushing’s Disease
13
14
Chronic inflammatory demyelinating
polyradiculoneuropathy
Choroidal neovascularization (CNV) and macular
edema (ME) secondary to conditions other than
macular degeneration, diabetic macular edema,
retinal vein occlusion and pathologic myopia
Low-grade serous ovarian cancer
Reduction of CV death/hospitalization in chronic
heart failure patients
15
16
17
18
19
20
21
Long-acting release
Secondary prevention of cardiovascular events
Diffuse large B-cell lymphoma
Chronic obstructive pulmonary disease
Obese hypogonadotropic hypogonadism
Preserved ejection fraction
Retinopathy of prematurity
ROP21
Solid tumors
Key Definitions
This presentation contains several important words or phrases that we define as below:
AGx: Authorized Generic
M&S: Marketing and Sales
ALK+ NSCLC: Anaplastic lymphoma kinase positive (ALK+) Non-small cell lung cancer
(NSCLC)
mCNV: Choroidal neovascularization (CNV) secondary to pathologic myopia (myopic
CNV)
ALL: Relapsed/refractory B-cell acute lymphoblastic leukemia
NEJM: New England Journal of Medicines
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
NSCLC: Non Small Cell Lung Cancer
BC: Breast Cancer
CART: Chimeric Antigen Receptor T-cell
CHF: Chronic Heart Failure
CML: Chronic myelogenous leukemia
DME: Diabetic Macular Edema
Emerging Growth Markets: All markets excluding the US, Canada, Western Europe,
Japan, Australia, and New Zealand
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) (except
Sandoz, which includes only products launched in the last 24 months)
HFpEF: Heart Failure with preserved Ejection Fraction
HFrEF: Heart Failure with reduced Ejection Fraction
HR+/HER2-: Hormone Receptor positive, Human Epidermal Growth Factor 2 negative
In cc: In constant currencies
49
| Novartis Q3 2014 Results | October 28, 2014 | Novartis Investor Presentation
PDGF: Platelet Derived Growth Factor
Ph+: Philadelphia chromosome positive;
pNET: Pancreatic neuroendocrine tumors
PPMS: Primary Progressive Multiple Sclerosis
RCC: Renal Cell Carcinoma
R&D: Research and Development
RVO: Retinal Vein Occlusion
TSC SEGA: Tuberous sclerosis complex subependymal giant cell astrocytoma
wAMD: wet age-related macular degeneration

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