Meet Novartis Management

Transcription

1 Meet Novartis Management Joseph Jimenez, CEO and Harry Kirsch, CFO June 7-8, 0

2 Disclaimer This presentation contains forward-looking statements that can be identified by words such as momentum, progress, building, focused, pipeline, focusing, focus, expect, target, on track, strategy, accelerating, well positioned, ongoing, planned, aim, being investigated, continuing, potential, preparing, launch, underway, working, committed, potentially, developing, initiated, continued, development, plans, evolving, will, expects, continue, expected, progressing, priorities, 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 transaction with CSL, or regarding the potential financial or other impact on Novartis of the transactions with GSK, Lilly or CSL, or regarding any potential strategic benefits, synergies or opportunities as a result of these transactions; or regarding potential future sales or earnings of the Novartis Group or its divisions and associated companies; 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 transaction with 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 the Novartis Group or any of its divisions or associated companies 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 announced transaction with CSL, or unexpected delays in obtaining such approvals; the potential that the strategic benefits, synergies or opportunities expected from the transactions with GSK, Lilly or CSL 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; 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; 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 0-F on file with the US Securities and Exchange Commission. Novartis is providing the information in this press release 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. Meet Novartis Management June 7-8, 0 Investor Presentation

3 Novartis: More focused, stronger Continuing Operations 0 net sales: USD. bn Innovation power Growth engines Sandoz 8% Global scale Well-positioned for future Alcon % 6% Pharmaceuticals Meet Novartis Management June 7-8, 0 Investor Presentation

4 This year is about execution of our priorities Deliver strong Financial Results Strengthen Innovation Complete the Portfolio Transformation Capture Cross-Divisional Synergies Build a High-Performing Organization Meet Novartis Management June 7-8, 0 Investor Presentation

5 Novartis is off to a strong start in Q 0 Deliver strong Financial Results Q 0 vs. PY Net sales (% cc ) Core operating income (% cc) Core ROS (%) Core margin change in cc (% pts) Pharmaceuticals 8.9. Alcon 0.9. Sandoz Continuing Operations Constant currencies (cc) and core results are non-ifrs measures. See page of the Q Condensed Interim Financial Report. Continuing Operations (which include the newly acquired oncology assets and the OTC JV in 0, and do not include divested businesses) are defined on page of the Q Condensed Interim Financial Report. Meet Novartis Management June 7-8, 0 Investor Presentation

6 Outlook confirmed at Q Deliver strong Financial Results Barring unforeseen events Continuing Operations net sales expected to grow mid-single digit (cc): Pharmaceuticals: mid-single digit growth (cc) Alcon: mid to high-single digit growth (cc) Sandoz: mid-single digit growth (cc) Continuing Operations core operating income expected to grow ahead of sales at a high-single digit rate (cc) For Continuing Operations in 0 versus Continuing Operations in 0. Outlook based on a modeling assumption that the transaction with CSL will close on December, 0 See explanation on slide and full definition on page of the Q Condensed Financial Report 6 Meet Novartis Management June 7-8, 0 Investor Presentation

7 Expected key mid-term margin drivers Deliver strong Financial Results Growth products including Cosentyx Expected new launches Entresto, biosimilars Lower M&S (as % of sales) from higher focus on specialty (incl. Oncology) R&D productivity, incl. out-licensing and sale of nonfocus programs Novartis Business Services (offshoring, cross-divisional back-office synergies, procurement) Glivec generic (06-7) Pricing pressures Potentially decreasing growth rates in emerging markets Entresto TM is a trade name conditionally approved by the FDA for LCZ696 7 Meet Novartis Management June 7-8, 0 Investor Presentation

8 Capital structure of Novartis balances various considerations Deliver strong Financial Results Support long-term strategy Maximize firm value Ensure ability to ride through turbulent times Satisfy the needs of various capital providers Target rating of double-a 8 Meet Novartis Management June 7-8, 0 Investor Presentation

9 Novartis priorities Novartis allocates capital with a clear focus on sustainable value creation for shareholders Deliver strong Financial Results. Investments in existing business. Growing annual dividend. Value-creating bolt-on M&A Create sustainable shareholder value. Share buybacks 9 Meet Novartis Management June 7-8, 0 Investor Presentation

10 Future CapEx expected to be ~% of sales, after high investments on R&D and production sites in prior years Deliver strong Financial Results Continuing Operations CapEx % of sales Illustrative Outlook Meet Novartis Management June 7-8, 0 Investor Presentation

11 Strong and growing dividend Deliver strong Financial Results.0.00 CHF USD Meet Novartis Management June 7-8, 0 Investor Presentation

12 Strengthening our lead in innovation: Summary Strengthen Innovation Pharmaceuticals Cosentyx approved and launched Entresto accelerated review granted in US CTL09 entered global study in pediatric r/r ALL, first cells processed at commercial scale facility Moving CoStim checkpoint inhibitors into clinic Two positive US Phase III programs in COPD Accelerating ATIOL innovation by increasing the number of pipeline projects Centurion Vision System >% penetration of our global installed base Alcon Sandoz FDA approvals of Zarxio and Glatopa Biosimilars: molecules Phase III trial recruitment completed Entresto TM is a trade name conditionally approved by the FDA for LCZ696 Meet Novartis Management June 7-8, 0 Investor Presentation

13 Strong progress in immuno-oncology Strengthen Innovation Aduro in-licensing adds STING pathway agonist PD- and LAG- checkpoint inhibitors entered clinic; TIM- likely in 0 CAR-T program, CTL09, progressing well Collaborations with Amgen, BMS, MedImmune/AstraZeneca and Merck Glenn Dranoff, pre-eminent Harvard immuno-oncology expert, joins to lead research in immuno-oncology Meet Novartis Management June 7-8, 0 Investor Presentation

14 Oncology pipeline continues to deliver Indication 0 milestones Polycythemia vera EU approval Strengthen Innovation Multiple myeloma US approval and CHMP positive opinion Chronic iron overload US approval and EU submission ALK+ lung cancer EU approval Melanoma Positive OS data from COMBI-d trial Submissions in EU/Japan Overall survival Meet Novartis Management June 7-8, 0 Investor Presentation

15 Cosentyx launched, Entresto still to come and Sandoz extending leadership in complex generics Cosentyx Psoriasis Approved and launched in US, EU and Japan for psoriasis Psoriatic arthritis and ankylosing spondylitis submissions completed in US/EU Strengthen Innovation Entresto Heart Failure (ref) Accelerated review granted in US, Canada and Switzerland Zarxio Neutropenia First biosimilar approved in the US under BPCIA pathway Glatopa Multiple sclerosis First FDA approved substitutable generic version of Copaxone 0mg Entresto TM is a trade name conditionally approved by the FDA for LCZ696 Copaxone is a registered trademark of Teva Pharmaceutical Industries Ltd. Meet Novartis Management June 7-8, 0 Investor Presentation

16 Sandoz: Biosimilars pipeline continues to make strong progress Sandoz biosimilar portfolio Molecule Phase III / Registration Approved Originator sales (Forecast 0 USD bn) Strengthen Innovation Etanercept 8.7 Rituximab 7. Adalimumab. Pegfilgrastim. Epoetin alfa (US) (EU). Filgrastim.0 Somatropin N/A As reported by EvaluatePharma in 0 6 Meet Novartis Management June 7-8, 0 Investor Presentation

17 Execution of portfolio changes moving at pace GSK transaction closed March nd Oncology Successful Day with ~,800 new associates in process of becoming Novartis employees in ~60 countries Complete the Portfolio Transformation Sales force in top 0 markets fully operational Strengthens position in hematology, breast cancer and renal cell carcinoma, opens new opportunities in melanoma OTC, Vaccines Separation activities continue to be managed by team of experts Flu vaccines divestiture on track to complete in the second half of 0 7 Meet Novartis Management June 7-8, 0 Investor Presentation

18 Novartis to continue precision M&A approach pursuing bolt-on acquisitions (up to USD bn) Focus areas for bolt-on acquisitions Pharmaceuticals: Enhance pipeline and strengthen existing therapeutic areas Alcon: Surgical and Ophthalmic Pharmaceuticals pipeline Sandoz: Differentiated generics, selected geographies Strategic and financial criteria for assessing investments Complete the Portfolio Transformation Focus on innovation-driven deals: Increase therapeutic depth in core areas Enhance innovation-driven growth and leverage Establish presence in complementary markets Support long-term growth objectives Pricing, regulatory and commercial resilience Apply strict financial discipline: DCF related, e.g. positive NPV, % synergies shared with seller, appropriate value / risk sharing CFROI accretive within mid-term period IRR hurdle rate Other criteria, e.g. EPS accretive for established businesses, enhancing / supporting revenue / margin growth, payback period DCF = Discounted Cash Flow CFROI = Cash Flow Return on Investment IRR = Internal Rate of Return 8 Meet Novartis Management June 7-8, 0 Investor Presentation

19 Drive productivity to improve margins Capture Cross-Divisional Synergies Productivity and procurement across divisions Savings of ~USD 0 billion since 0, half from procurement by leveraging our scale, category and demand management Manufacturing footprint, started 00: Pharmaceuticals capacity utilization improved 0% points 7 Continuing Operations site exits / divestments / restructuring Novartis Business Services, fully operational in 0: Manages USD billion spend cross-divisionally Goal to keep managed costs flat and absorb inflation and volume / demand growth 9 Meet Novartis Management June 7-8, 0 Investor Presentation

20 Productivity programs have generated % savings every year since 0 Continuing Operations productivity savings USD bn Procurement Capture Cross-Divisional Synergies Other productivity % of sales % % % % 0 Meet Novartis Management June 7-8, 0 Investor Presentation

21 Novartis Business Services fully operational and contributing to margin improvement in 0 Capture Cross-Divisional Synergies Streamline and consolidate (e.g. optimize size of the organization, rationalize IT applications): Transfer of additional,00 associates from Divisions to NBS, amounting to a total of ~8,700 associates locations chosen for Global Service Centers, now being scaled up Optimize geographical footprint (centralization and offshoring of certain transactional activities) Leverage scale (e.g. accelerate Sourcing productivity, vendor spend and process optimization): Procurement savings of ~USD 0 m in Q 0 (+% vs. Q 0) Cross-divisional coordination (e.g. Real Estate and Facility Services spend optimization) NBS will manage about USD billion of spend in 0 Goal to keep cost under management flat versus prior-year For known and tracked cost segments Meet Novartis Management June 7-8, 0 Investor Presentation

22 Good progress in manufacturing footprint initiatives Continuing Operations Net number of sites Pharma Division capacity utilization % 98 - sites 8 +0% pts Capture Cross-Divisional Synergies 00 0 Reduced operational complexity 00 0 Portfolio shift from high volume equipment for Primary Care products towards smaller scale multipurpose equipment Includes new site additions associated with Cell & Gene Therapy (Morris Plains plant) and Sandoz acquisition of Fougera Pharmaceuticals in 0 ( plants); excludes St. Petersburg not yet operational and Biotech Center Singapore in construction Total Pharmaceuticals Division Average Meet Novartis Management June 7-8, 0 Investor Presentation

23 Since 00, 7 Continuing Operations production sites will have been closed, restructured or divested 7 site exits / divestments / restructuring through 0 Casablanca (PH), Morocco Huningue (PH), France Jena (SZ), Germany Amwiler (AL), United States ChemOps Torre (PH), Italy Mississauga (AL), Canada Aliso Viejo (AL), United States BiopharmOps, (PH), Switzerland Cidra (AL), Puerto Rico Farnham (AL), UK Buenos Aires (SZ), Argentina Mexico City (PH), Mexico Taboão da Serra (SZ/PH), Brazil Horsham (PH), UK Des Plaines (AL), United States Mexico City (AL), Mexico Vacaville (PH), United States Capture Cross-Divisional Synergies Site has been transferred from Pharmaceuticals to Animal Health in October 0 Meet Novartis Management June 7-8, 0 Investor Presentation

24 Our progress on Quality excellence continues 8 Health authority inspections YTD May 0 All good or acceptable Build a High- Performing Organization Results status as of May, 0 for Pharmaceuticals, Alcon and Sandoz Meet Novartis Management June 7-8, 0 Investor Presentation

25 Conclusion The new Novartis is more focused, set for the future with leading positions for all three Divisions, a strong innovation track record and financial discipline to drive leverage. Meet Novartis Management June 7-8, 0 Investor Presentation

26 Appendix 6 Meet Novartis Management June 7-8, 0 Investor Presentation

27 Increasing negative currency impact in Q from strengthening USD Currency impact vs. PY (% pts) Net sales Core operating income () 0 () (6) (0) (0) (6) () () (8) () () Q Q Q Q Q FY Q Q Q Q Q FY FY impact: -% FY impact: -% Continuing Operations impact only; expected full year currency impact assuming early April average exchange rates prevail throughout the year 7 Meet Novartis Management June 7-8, 0 Investor Presentation