Novartis AG · SIX:NOVN

Novartis — Q3 2013 Earnings Presentation

48 slides from Novartis's earnings presentation, Oct 22, 2013

  1. Slide 1: Third Quarter 2013 Results

    Third Quarter 2013 Results Investor presentation October 22, 2013

  2. Slide 2: Disclaimer

    Disclaimer This presentation contains forward-looking statements that can be identified by terminology such as “potential,” “expected,” “will,” “planned,” or similar expressions, or by express or implied discussions regarding potential new products, potential new indications for existing products, o

  3. Slide 3: Agenda

    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 3 | Novartis Q3 2013 Results | October 22

  4. Slide 4: Novartis delivered strong performance in Q3 driven by growth products' momentum

    Novartis delivered strong performance in Q3 driven by growth products’ momentum In Q3 2013:  Net sales increased +6% vs. PY (in cc1), to USD 14.3 billion • All Divisions contributed to growth  Core operating income +1% vs. PY (in cc)  Core EPS USD 1.26, +1% vs. PY (in cc)  Continued leadership i

  5. Slide 5: Summary of third quarter 2013 financial results

    Summary of third quarter 2013 financial results Change vs. Q3 2012 (in USD m) Q3 2013 % USD % cc Net sales 14 338 +4 +6 Operating income Core 3 621 -5 +1 Reported 2 671 -9 -2 Net income 2 264 -6 +1 EPS (USD) Core 1.26 -4 +1 Reported 0.91 -8 0 Free cash flow 3 543 +1 5 | Novartis Q3 2013 Results | Oc

  6. Slide 6: We continue to deliver on our three strategic priorities

    We continue to deliver on our three strategic priorities 1 Innovation 2 Growth 3 Productivity  4 key approvals in Q3  Growth in all  In Q3 2013, ~ USD 20131 Divisions in Q3 2013 730 m of productivity in cc savings, incl.  FDA Breakthrough Therapy designation  Growth products3 • ~ USD 375 m in f

  7. Slide 7: Strong progress on innovation in Q3 2013

    Innovation Strong progress on innovation in Q3 2013 Selected product Indication Milestones Europe EMA, Japan PMDA  COPD approvals Systemic juvenile  EMA approval Pharma- idiopathic arthritis ceuticals Chronic Spontaneous Phase III ASTERIA I  omalizumab1 Urticaria registration study  AIN457 Psori

  8. Slide 8: We received our 3rd FDA Breakthrough Therapy Designation

    Innovation - Pharmaceuticals We received our 3rd FDA Breakthrough Therapy Designation Number of FDA Breakthrough Therapy Novartis FDA Breakthrough Therapy designations for new molecular entities1 designations Sporadic Novartis 3 Inclusion Body J&J 2 GSK BYM338 Myositis 2 2 Received in Q3 Vertex Roch

  9. Slide 9: Alcon full refractive cataract suite

    Innovation - Alcon In our Alcon surgical franchise, we have built a full refractive cataract suite, to help improve patient outcomes Refractive Cataract Surgery Suite Alcon® LenSx® LuxOR® CENTURION® Image Guidance (with SoftFit® and Microscope Vision System System (GPS) GPS) (with GPS) (with GPS) VE

  10. Slide 10: Sandoz biosimilars innovation - SurePal device

    Innovation - Sandoz We also continue to innovate with our in-market biosimilars products - example SurePal™ device  Simple & secure  Dosages Omnitrope® 5, 10 and 15 mg  Biosimilars can be differentiated beyond price 10 | Novartis Q3 2013 Results | October 22, 2013 | Novartis Investor Presentation

  11. Slide 11: In Q3 2013, sales grew across all of our divisions in cc

    Growth In Q3 2013, sales grew across all of our divisions in cc Net sales Growth Q3 2013 vs. PY (in USD m) (in cc) Net sales Core Op. inc. Pharmaceuticals 7 893 +4% -4% Alcon 2 539 +6% +1% Sandoz 2 273 +11% +8% Consumer 1 039 +12% +49% Health Vaccines & 594 +1% +145% Diagnostics 11 | Novartis Q3 201

  12. Slide 12: Our growth products continued to transform our portfolio

    Growth Our growth products1 continued to transform our portfolio Net sales from growth products as a percent of total Novartis Group net sales (in %, cc) 32% 31% 30% Q1 2013 Q2 2013 Q3 2013 Growth vs. PY +14% +13% +17 % % in USD 1 Growth products are defined as products launched in 2008 or later, or

  13. Slide 13: Pharmaceuticals growth products grew at 28% in Q3 2013

    Growth - Pharmaceuticals Our Pharmaceuticals growth products1 grew at 28% in Q3 2013, now representing 39% of the division’s sales Net sales2 (in USD m) Q3 2012 Q3 2013 -1% +63% 581 518 +65% +46% +25% 337 316 315 +13% +103% nm3 151 64 48 1 Growth products are defined as products launched in 2008 or

  14. Slide 14: Q3 Alcon growth at 6%, driven by Surgical

    Growth - Alcon Q3 Alcon growth at 6%, driven by Surgical 2013 Q3 sales by franchise Growth vs. PY Comment (in USD m) (in cc) +9%  Increase in procedure volume growth, Surgical 919 equipment, disposables Ophthalmic  Gains in DuoTrav® and Azarga® offsetting Pharma- 990 +5% US Gx competition ceutical

  15. Slide 15: Sandoz outperformed the market in all regions

    Growth – Sandoz Sandoz outperformed the market in all regions Q3 2013 total net sales growth vs. PY1 Market Sandoz (% in cc) Western Europe2 Central & 13 Eastern Europe 6 North America 4 7 10 Germany 3 -3 -7 Asia-Pacific 17 Latin America 6 Middle East & 23 Africa 8 11 7 1 Net market growth estimate

  16. Slide 16: Consumer Health delivered double-digit sales growth in Q3

    Growth – Consumer Health Consumer Health delivered double-digit sales growth in Q3 Q3 2013 net sales Main drivers: (in USD m)  Strong growth of priority brands +12% in cc 1 039  US re-launches1 938  Broad-based Emerging Markets2 Russia China growth Ukraine Turkey Q3 2012 Q3 2013 1 Re-launch of Ex

  17. Slide 17: Strong Emerging Markets growth led by China and Russia

    Growth Novartis Group’s strong Emerging Markets1 growth was led by China and Russia Q3 2013 Group net sales (illustrative) Growth vs. PY (USD m) (in % cc) +18% China +15% Russia Total Emerging +9% Markets 1 All markets excluding the US, Canada, Western Europe, Japan, Australia, and New Zealand 17 |

  18. Slide 18: Productivity savings of approximately USD 730 million in Q3 2013

    Productivity Productivity savings of approximately USD 730 million in Q3 2013 Procurement Marketing and sales Savings Group M&S spend (USD m) (% of sales) 375 24.6% 24.3% 350 Q3 2012 Q3 2013 Q3 2012 Q3 2013  Leverage scale  Improvement in M&S spend as % of sales despite ongoing  Implement global

  19. Slide 19: Agenda

    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 2013 Results | October 2

  20. Slide 20: Novartis grew sales and core operating income in cc despite generics impact

    Novartis grew sales and core operating income in constant currencies despite generics impact Growth vs. PY in cc Growth vs. PY in cc Q3 9M (in USD m) 2013 Reported Core 2013 Reported Core Net sales 3rd party 14 338 +6% 42 842 +4% Core operating income 3 621 +1% 11 090 +3% Operating income 2 671 -2%

  21. Slide 21: All divisions contribute to sales growth in Q3

    Growth All divisions contribute to sales growth in Q3 Contribution to Group sales growth (in %) Sales Q3 2013 Growth in cc (in USD m) (vs. PY in %) Pharmaceuticals 7 893 +4% Alcon 2 539 +6% Sandoz 2 273 +11% Vaccines & 594 +1% Diagnostics Consumer Health 1 039 +12% Group cc growth 14 338 +6% Note: G

  22. Slide 22: Double digit underlying growth of sales and core operating income in Q3

    Growth Double digit underlying growth of sales and core operating income in Q3 Group (Q3 2013) (% growth vs. PY) Sales 9 10 1 –4 6 –2 4 Underlying Price Underlying Generics CC growth FX USD growth volume growth impact Core operating income 12 9 3 –11 1 –6 -5 Underlying Price Underlying Generics CC g

  23. Slide 23: Continued strong underlying performance driven by growth products

    Growth Continued strong underlying performance in sales and core operating income driven by growth products1 9M 2013 (Underlying cc growth in %) 16 8  Underlying sales growth excludes the impact of USD 1.8 billion of generics year-to-date Sales Core Operating Income  Full year underlying core oper

  24. Slide 24: Currency impacted sales and core operating income in Q3

    Currency Currency impacted sales and core operating income by -2 and -6 percentage points in Q3 Currency impact vs. PY (in % points) Sales Core operating income -1 -2 -2 -2 -2 -2 -2 -2 -2-3 -3 -4 -5 -5 -5 -6 -5-6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q41 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q41 2012 2013 2012 2013 Increase in negat

  25. Slide 25: Q3 margin below prior year and in line with expectations

    Leverage Q3 margin below prior year and in line with expectations Core operating income vs. 2012 Q3 2013 9M 2013 Core Margin Change Growth Core Margin Change Growth (in % USD) (in % pts cc) (in cc) (in % USD) (in % pts cc) (in cc) Pharmaceuticals 29.7 -2.8 -4 30.9 -1.6 -2 Alcon 34.4 -1.8 +1 36.3 0.7

  26. Slide 26: Strong Q3 Free Cash Flow up 1% versus prior year

    Cash flow Strong Q3 Free Cash Flow up 1% versus prior year despite currency effect Q3 Free cash flow (in USD bn) 3.50 3.54 Key components vs. prior year  Negative currency impact, and  Higher capital investments in Manufacturing and Research offset by • Lower inventories • Lower receivables Q3 201

  27. Slide 27: Net debt decreased by USD 0.2 billion in the first nine months 2013

    Net debt Net debt decreased by USD 0.2 billion to USD 11.4 billion in the first nine months 2013 (in USD bn) +0.2 0 -4 -6 -8 -10 -12 -11.6 +6.6 -6.1 +1.4 -1.9 +0.2 -11.4 December Free Cash Dividends Treasury Share Others September 2012 Flow share repurchases 2013 movements 27 | Novartis Q3 2013 Resu

  28. Slide 28: Most of the upside from Diovan Mono flows to the bottom-line

    Leverage Most of the upside from Diovan® Mono flows to the bottom-line Full-year generics sales impact estimates - illustrative only FY 2012 FY 2013  Total 2013 impact from generics estimated to be up to USD 2.3 bn  Most of this upside flows to the bottom- line  Some additional investments in pip

  29. Slide 29: Full-year Group guidance to be raised

    Outlook Nine months performance and expectation for Q4 allow for full-year Group guidance to be raised Barring unforeseen events Full Year Guidance, July 2013 (cc) New Full Year Guidance (cc) Group net sales to grow low- to mid-single Group net sales to grow low-single digit digit Group core operati

  30. Slide 30: Agenda

    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 2013 Results | October 2

  31. Slide 31: Pharmaceuticals Division delivered mid-single digit cc sales growth

    Pharmaceuticals Division delivered mid-single digit cc sales growth ... Growth vs. PY Q3 2013 Q3 2012 (in USD m at period rate) % USD % cc Net sales 7 893 7 783 1 4 Core operating income 2 345 2 597 -10 -4 Operating income 2 267 2 531 -10 -5 Core operating income margin 29.7%1 33.4% Operating income

  32. Slide 32: 10% underlying volume growth more than offsetting generic competition

    ... with 10% underlying volume growth more than offsetting generic competition Q3 2013 contribution to growth (in % cc) Underlying volume 10 growth  Growth products2 significant Healthcare reforms & 1 driver of volume growth: price changes • Now 39% of total sales (USD 3.1 bn) Generic competition1

  33. Slide 33: Significant growth from Emerging Growth Markets in Q3

    Significant growth from Emerging Growth Markets1 in Q3 Growth Q3 2013 vs. PY (in % cc) Net sales Q3 2013 Emerging Growth Markets1 8% USD 1.9 bn Established Markets 3% USD 6.0 bn 1 All countries excluding US, Canada, Western Europe, Japan, Australia, and New Zealand 33 | Novartis Q3 2013 Results | Oc

  34. Slide 34: Unparalleled growth platform with exclusivity until 2017 and beyond

    Unparalleled growth platform1 with exclusivity until 2017 and beyond Q3 2013 Q3 2013 Sales Growth vs. PY Indication (USD m) (% cc)  Wet age-related macular degeneration, 581 -1% DME2, RVO3, mCNV4  Multiple sclerosis 518 63%  Metastatic renal cell carcinoma, TSC SEGA5, 337 65% pNET6, HR+/HER2-7 ad

  35. Slide 35: Gilenya growth continues, annualized sales surpassing USD 2 billion

    Gilenya® growth continues, annualized sales1 surpassing USD 2 billion Gilenya® sales and growth (in USD m, growth in % cc) US RoW +44%  EU market share growth continues, now available in 273 +90% all EU countries 245  US oral market expected to 189 continue to grow, Gilenya® multiple sclerosis sha

  36. Slide 36: Lucentis new indications now making significant contribution

    Lucentis® new indications now making significant contribution Lucentis® ex US sales and growth (in USD m, growth in % cc) -1%  Double digit volume growth offset 593 581 by one-time price reductions 16% required to secure reimbursement 25% for new indications  Modest cc sales decline however mid an

  37. Slide 37: Respiratory Franchise regulatory progress on track

    Respiratory Franchise regulatory progress on track Regulatory approvals and expected filings       1  Filing H1 2014 Filing H2 2014 1 Onbrez® Breezhaler® approved as Arcapta® Neohaler® in the US 37 | Novartis Q3 2013 Results | October 22, 2013 | Novartis Investor Presentation

  38. Slide 38: Seebri Breezhaler seeing dynamic growth

    Seebri® Breezhaler® seeing dynamic growth coming mainly from LABA/ICS and LAMA classes Germany1 Source of Business for Seebri® Breezhaler ® New  Launched in 7 of the top 39% patients 10 WW LAMA markets Other2  Significant market share Add-on ICS 7% 7% ICS/LABA gained in Germany, Italy 31% 10% 37%

  39. Slide 39: Ultibro Breezhaler positioned to establish a new standard of care in COPD

    Ultibro® Breezhaler® positioned to establish a new standard of care in COPD1 Peak FEV12 At Week 263  Significant benefits beyond current standards of care in key COPD mean of FEV1 (L) 1.6 ∆130mL efficacy domains3,4,5 Least Square p<0.001 • Lung function 1.5 • Symptom control 1.4  Significant benef

  40. Slide 40: AIN457: IL-17A inhibition is a more targeted approach to treat Psoriasis

    AIN457: IL-17A inhibition is a more targeted approach to treat Psoriasis1 Secukinumab FIXTURE PhIII study patients’ photos TNF-a Inhibitors Etanercept IL-12/IL-23 Adalimumab Inhibitors Infliximab IL-17A Inhibitors Ustekinumab TNF-a Secukinumab IL-23 (AIN457) IL-17A Before After Th17 T-cells KERATINO

  41. Slide 41: AIN457 PhIII clinical data demonstrates strong efficacy

    AIN457 PhIII clinical data demonstrates strong efficacy – Global submissions expected in Q4 2013 Results of head-to-head study vs. Enbrel® (FIXTURE) 100  Secukinumab (AIN457) showed superiority over Enbrel® in clearing skin: 80 • Cleared patients’ skin faster and for longer than Enbrel® as early as

  42. Slide 42: Pipeline delivered major approvals YTD

    Pipeline delivered 8 major approvals YTD, one more CHMP opinion possible in Q4 Ilaris®: EMA approval in gouty arthritis  Exjade®: FDA approval in NTDT  1 H1 2013 Zortress®: FDA approval in liver transplantation  TOBI Podhaler®: FDA approval in cystic fibrosis  Ilaris®: FDA approval in SJIA  2 I

  43. Slide 43: Conclusion: Solid performance in Q3 2013 improves full year outlook

    Conclusion: Solid performance in Q3 2013 improves full year outlook1 for Pharmaceuticals Division  10% underlying volume growth from Pharmaceuticals more than offsets loss of sales to generics  Strong regulatory performance with 8 major approvals to date with one more possible in 2013 fueling grow

  44. Slide 44: Agenda

    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 44 | Novartis Q3 2013 Results | October 2

  45. Slide 45: Solid progress on 2013 strategic priorities

    Solid progress on 2013 strategic priorities Progress in Q3 2013 Extend lead  Secured 4 key approvals in  Continued to invest in the pipeline innovation  BYM338 FDA Breakthrough Therapy designation granted  Maintained execution excellence for growth products, offsetting effects of patent expiries

  46. Slide 46: Appendix

    Appendix Uh) NOVARTIS

  47. Slide 47: Planned filings 2013 to 2017

    Planned filings 2013 to  2017 2013 2014 2015 2016  2017 AIN457 AFQ056 BKM120 BYM338 ATI355 QAW039 Psoriasis Fragile X syndrome Breast cancer sIBM11 Spinal cord injury Asthma LCZ696 LBH589 MEK162 CTL019 AUY922 QAX576 Hypertension Multiple Myeloma NRAS Mutant Melanoma Leukemia Solid tumors Allergic

  48. Slide 48: Operating Income / Core Operating Income reconciliation

    Operating Income / Core Operating Income reconciliation 2013 2012 cc Growth 2013 2012 cc Growth Q3 Q3 vs. PY 9M 9M vs. PY Core operating income 3 621 3 810 1% 11 090 11 248 3% Core Adjustment- Income Divestment related income 1 57 188 134 Others 46 74 166 332 Total exceptional income 47 131 354 466

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