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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.
2
| Novartis Q4 and FY 2014 Results | January 27, 2015 | 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 Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
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
2
4
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
CosentyxTM EU and US approval received in January 2015
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Summary of 2014 financial results
FY
(in USD m)
2014
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
10 762
12
Free Cash Flow
1
5
Change vs. PY1
% USD
% cc
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
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
2014 focus
Strengthened innovation
Operational
excellence
Delivered strong financial results
Continued focus on quality
Transforming the portfolio1
Transforming
the company
Capturing cross-divisional synergies
Reshaping the culture of the company
1
6
All uncompleted transactions are subject to closing conditions
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
We have seen a series of important innovations
and regulatory approvals in the last year
1
2
7
Operational excellence
Strengthened innovation
Approval
US
LCZ696 Ph III in chronic
heart failure, file
submitted EU and US
Cosentyx™ approved
in EU, US and Japan
for psoriasis1
QVA149 and NVA237
met primary Ph III
endpoints, file
submitted US
CTL019 FDA
Breakthrough Therapy
designation
FDA granted
accelerated approval
for Meningitis B2
Recommended for
approval by FDA
Advisory Committee,
all indications3
Positive CHMP
recommendation for
polycythemia vera4
CosentyxTM EU and US approval received in January 2015
Bexsero® FDA accelerated approval received in January 2015
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
3
4
Filgrastim recommended for approval by FDA Advisory Committee in January 2015
Jakavi® recommended for approval by CHMP in January 2015
Operational excellence
Strengthened innovation
Alcon has made important acquisitions and collaborations
Acquisition
Collaboration
ORA System®
Acquired
Complements Alcon’s industryleading cataract refractive suite
8
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Innovative contact lens and
intraocular lens technology
Operational excellence
Delivered financial results
Growth in sales and core operating income across all divisions
Net sales 2014
% Change vs. PY
(in USD m)
(in cc)
Pharmaceuticals
31 791
Alcon
10 827
Sandoz
Consumer
Health
Vaccines1
1
2
9
9 562
4 279
1 537
Net sales
Core Operating Income
+1%
+4%
+6%
+8%
+7%
+7%
+8%
+72%2
+10%
+5%2
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
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
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Operational excellence
Delivered financial results
Two factors continue to drive our growth
Growth Products
+18%
Emerging Growth Markets
1
+11%
growth to 32%
of Group sales
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
10
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Operational excellence
Delivered financial results
Pharmaceuticals grew +1% vs. PY in cc in 2014,
driven by Growth Products and Emerging Growth Markets
Pharmaceuticals net sales
(in USD bn, growth in % cc)1
32.2
+1% cc
-1% USD
31.8
 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
FY 2013
1
FY 2014
All growth shown vs. PY in constant currencies (cc)
11
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Operational excellence
Alcon grew +6% vs. PY in cc in 2014, driven
by strong surgical performance
Delivered financial results
Alcon net sales
(in USD bn, growth rates in % cc)1
 Surgical (+7%): Strong equipment sales driven by
+6%
10.8
Centurion® and cataract and vitreoretinal disposables
 Ophthalmic Pharmaceuticals (+5%): Double-digit
10.5
growth of Systane® and glaucoma fixed combination
products
 Vision Care (+4%): Strong Dailies Total1® and
AirOptix® growth
FY 2013
1
FY 2014
All growth shown vs. PY in constant currencies (cc)
12
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Operational excellence
Sandoz grew +7% vs. PY in cc in 2014, driven by
US, Western Europe and Emerging Growth markets
Delivered financial results
Sandoz net sales
(in USD bn, growth rates in % cc)1
Strong Sandoz performance driven by:
+7%
9.6
9.2
 US, Western Europe2 and Emerging Growth
Markets
 Strong sales of valsartan monotherapy
 Biosimilars and oncology injectables
FY 2013
1
2
FY 2014
All growth shown vs. PY in constant currencies (cc)
Excluding Germany
13
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Our productivity initiatives contribute to growth
of our core operating margin1
Procurement
Core Marketing and sales
Savings
M&S spend
(in USD bn)
(% of sales in USD)
1.5
Operational excellence
Delivered financial results
Manufacturing footprint
1.6
25.2%
24.4%
24 manufacturing sites
restructured or divested since
20102
2013
1
2
2014
20131
2014
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
Represents the total number of production sites that have been, or are in the process of being, restructured or divested since 2010
14
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Operational excellence
The continued focus on Quality system upgrades
across our network continues to show results
247
Health authority
inspections
in 20141
1
 Closed FDA Warning Letter for
three Sandoz sites in North
America
 Unterach, Austria FDA
inspection in December 2014
concluded with zero
observations
Sites deemed unsatisfactory were Sandoz Kalwe (MCC) and Pharmaceuticals Japan (MHLW). Inspections still pending are Sandoz Kalwe (FDA) and Sandoz Turbhe (FDA)
15
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Continued focus on quality
Transforming the company
Portfolio transformation
Novartis portfolio transformation is progressing on track
Milestones1
9 Jan 2014
22 Apr
1 Jul
Closed divestiture
of blood
transfusions
diagnostics
business
Announced agreements to:
 Acquire GSK oncology
Established
Novartis
Business
Services
products
 Create Consumer Health
JV with GSK
 Divest Novartis Vaccines
(excl. flu)
 Divest Novartis Animal
Health to Eli Lilly
1
All uncompleted transactions are subject to closing conditions
16
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
26 Oct
1 Jan 2015
Announced
Closed
agreement to
divestiture of
divest flu
animal health
business to CSL
business
Transforming the company
We created Novartis Business Services to deliver
high-quality services to the divisions at lower costs
Cross-divisional opportunities
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
17
| Novartis Q4 and FY 2014 Results | January 27, 2015 | 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
18
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Performance delivered as per upgraded guidance
2014 Full Year Guidance1
(all in cc)
FY 2014
(growth vs. PY2 in % cc)
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%

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%



Net Sales Growth:
1
2
Issued in Q2 2014, reconfirmed in Q3 2014
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
19
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Strong leverage in Q4 and Full Year
Q4
2
Change vs. PY
FY
2
1
(in USD m)
20142
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
4 419
41
10 762
12
Free Cash Flow
1
Change vs. PY1
% USD
% cc
2014
% USD
% cc
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
2014 results exclude depreciation and amortization related to discontinuing operations from the portfolio transformation announcement date
20
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Strong volume growth more than offsets generic impact in FY
Group FY 2014
(growth vs. PY1 in %)
Net sales
Underlying volume
7
22
Price
0
-1
Underlying growth2
-4
Currency
2
3
-13
3
CC growth
USD growth
21
7
Generics impact3
1
Core operating income
8
-2
1
-5
3
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
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 2.4 billion for the full year
21
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
All divisions contributed to FY Group core margin improvement
of 1.2% points
FY 2014 vs. PY
Net
sales
(in % cc)
Core operating
income
(in % cc)
Pharmaceuticals
1
4
29.9
1.1
Alcon
6
8
35.2
0.6
Sandoz
7
7
16.4
0.1
Consumer Health
8
72
10.6
4.33
10
5
nm
nm3
3
8
25.2
1.23
Vaccines1,2
Group1
1
2
3
Core ROS
(%)
Core margin
change in cc
(% pts)
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
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 +0.9% pts for Consumer Health, +6.1% pts for Vaccines, and +0.2% pts for total Group
22
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
FY Group core margin improvement mainly from Functional Costs
Group core R&D1
Group core M&S1
Group core G&A1
as % sales (USD)
as % sales (USD)
as % sales (USD)
-0.6% pts (cc)
-0.3% pts (USD)
-0.8% pts (cc)
-0.8% pts (USD)
16.8%
-0.2% pts (cc)
-0.2% pts (USD)
25.2%
5.3%
16.5%
5.1%
24.4%
FY 2013
1
FY 2014
FY 2013
FY 2014
FY 2013
FY 2014
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
23
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
New portfolio would have improved core operating margin
by 2.5%pts on a full-year basis in 2014
(in USD m)
Core operating income
Net sales
Current Portfolio
Discontinuing
Operations
58.0
5.8
14.6
Core operating margin
25.2%1
0.2
+2.5%pts2
Cessation
Continuing
Operations3
1
2
3
0.0
52.2
0.1
14.5
27.7%
Includes cessation of depreciation since portfolio transformation announcement date of +0.2% pts
Without the benefit of the cessation of depreciation, Core Operating Income difference would have been +2.7% pts
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
24
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Increasing negative currency impact in Q4 due to weakening of Euro,
Yen, Ruble and key Emerging Market currencies
Currency impact vs. PY
(in % points)
Net sales
Core operating income
0
-2
-1
-2
-3
-6
-7
-8
-8
-3
-6
-8
-4
-12
Q4
2013
Q1
Q2
Q3
2014
Q4
FY
Q4
20151
2013
FY impact: -2%
Q1
Q2
Q3
2014
Q4
FY
20151
FY impact: -5%
Jan 8, 2015 rate prevailing
1
Continuing Operations impact only, assuming the stated FX rates prevail for the remainder of 2015
25
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Jan 16, 2015 rate prevailing
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
2014 currency overview
Selected major
currencies
Operating
Expenses
2014 average
26%
25%
-12%
-3%
-3%
2%
13%
-10%
0%
4%
2%
13%
5%
0%
-2%
JPY
7%
5%
-9%
-1%
-1%
RUB
2%
1%
-41%
-1%
-2%
USD
36%
39%
n/a
n/a
n/a
CHF
(Jan 8, 2015 rate)
CHF
(Jan 16, 2015 rate)
2
FX
Fx Impact on:
Jan 16, 2015
FX rates vs
Net sales
EUR
1
1
2
Net Sales
Operating
Income
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
FX rates based on Bloomberg
26
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
FY Free Cash Flow of USD 10.8 bn, USD 1.2 bn higher than 2013
FY Free Cash Flow
(in USD bn)
+1.2
1
10.8
9.6
3.1
FY 2013
1
2
4.4
Q4
9M
Key reasons for variance vs. PY:

Higher operating income2 (net of negative FX)

Hedging gains

Higher investments in intangible assets
FY 2014
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
Operating income after adjusting for non-cash items
27
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Net debt decreased by USD 2.3 billion to USD 6.5 billion
(in USD bn)
2.3
2
1
0
-1
-6.8
-2
-3
2.4
10.8
2.1
-4
-6.9
-5
-6
-7
0.7
-6.5
Others
Dec 31, 2014
-8
-9
-8.8
Dec 31, 2013
1
2
3
Free Cash Flow
Dividends
Net divestment
proceeds1
Proceeds
from options
exercised 2
Mainly due to divestment of the Vaccines blood transfusion diagnostics unit net of tax (USD 1.1 bn) and Idenix (USD 0.8 bn)
Related to employee participation programs
Including mainly repurchases on the first (USD 4.1 bn) and second trading lines (USD 2.4 bn)
28
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Share
repurchases3
18th consecutive dividend growth proposed1
(payout ratio of 71%2 in 2014)
3.50
2.00
CHF
USD
2.60
2.963
2.50
2.45
2.76
3.00
1.50
1.00
Proposed1 dividend growth
2014 vs. 2013:
6% in CHF, 7% in USD
0.50
0.00
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
1
2
3
Proposal to shareholders at the 2015 Annual General Meeting, taking place on February 27, 2015
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
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)
29
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
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
2
3
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
Pro-forma growth, assuming continuing operations in 2014 and 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
30
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Key core margin drivers 2015 for continuing operations1
 Impact from generic
competition (more in H1)
 Portfolio transformation
(mostly in H2)
 Pharmaceuticals growth
products
 Launch and pipeline
investments
 FX impact (Swiss franc,
yen, euro, ruble)
 NBS holding costs flat
 Full-year impact of 2014
restructurings
 Ongoing productivity programs
in Divisions
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
31
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Novartis Business Services fully operational and contributing to
margin improvement in 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
32
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Improvement in core margin expected despite FX headwind in 2015
Illustrative
2015 core ROS1
Continuing operations (cc)
2
3
2014 reported core ROS1
Continuing operations
27.7%
1
Portfolio
transformation
Outlook
Sales: mid-single digit
(cc) growth
Core operating
income: high-single
digit (cc) growth
2014 reported core ROS1
Total Group
25.2%
1
2
Core return on sales
Assuming Jan 16, 2015 rates prevail for the remainder of 2015
33
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
FX impact on sales2: -7%
FX impact on core operating income2: -12%
2015 core ROS1
Continuing operations
(USD2)
Improvement between reported Total Group 2014
core margin and 2015 continuing operations core
margin, despite FX impact
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
34
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Pharmaceuticals delivered sales growth with margin expansion
Change vs. PY
(in USD m)
FY 2014
FY 2013
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
35
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
% USD
-5
% cc
Growth products1 now represent 43% of total division sales
Growth products net sales
(in USD bn)
+17% cc
13.7
12.0
FY 2013
FY 2014
% of total division sales
37%
1
43%
Growth products comprise products launched in 2009 or later, or products with exclusivity until at least 2018 in key markets (EU, US, Japan)
36
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
2014 marks another year of delivering sales growth despite
most substantial Gx impact in years
Net sales growth and impact from generics
Sales Growth
(in % cc)
+4%

2011
+2%

2012
+3%

+1%

2013
2014
-2.2bn
-2.4bn
Gx impact
(in USD bn)
-1.1bn
-1.9bn
37
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Emerging Growth Markets1: accelerated growth to double-digit
and now contributing 26% of Pharmaceuticals sales
Pharmaceuticals Division net sales
(in %)
Emerging Growth Markets rates
(in % cc)
26%
74%
Emerging
Growth Markets
1
Established Markets
2012
6%
2013
9%
2014
11%
2015
Growth likely to be lower
Emerging Growth Markets comprise of all markets other than the Established Markets of the US, Canada, Western Europe, Japan, Australia and New Zealand
38
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Unparalleled growth platform1 with exclusivity until 2018 and
beyond
FY 2014
Net sales
USD m
Indication
 Multiple sclerosis
2 477
30%
2 441
5%
1 575
22%
 Chronic myeloid leukemia
1 529
24%
 Diabetes mellitus, Type 2
1 224
 Wet age-related macular degeneration, Diabetic macular
edema, Retinal vein occlusion, mCNV
 Metastatic renal cell carcinoma, TSC SEGA, pNET,
HR+/HER2-advanced breast cancer
 Severe allergic asthma and chronic spontaneous
1
2
 Chronic obstructive pulmonary disease
484
 Myelofibrosis
279
Key products for growth of Pharmaceuticals Division
Impacted by Galvus in Germany, where distribution was stopped July 1, 2014. Excluding Germany, FY growth vs. PY is +15%
39
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
6% 2
777
urticaria
3
FY 2014
Growth vs. PY
% cc
3
4
30%
4
93%
72%
Onbrez® Breezhaler® approved as Arcapta® Neohaler® in the US
Net sales and growth of Onbrez®, Seebri® and Ultibro®
4
Gilenya® growth fueled by consistent increase of
new patients on treatment
Gilenya® net sales and growth
(in USD m, growth in % cc)
US
Ex-US
+16%
+45%
1 023
 Continued Gilenya adoption
1 287
1 190
 Growth was +30% (FY) and +32% (Q4) vs. PY
911
 Over 114,000 patients treated to date with Gilenya
worldwide1
 #1 in value share in Multiple Sclerosis (ex-US)2
2013
1
2
2014
Worldwide Novartis estimate in clinical trials and in post-marketing setting
Leading share in the Multiple Sclerosis segment defined as global sales excluding USA. Source: Evaluate Pharma
40
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Lucentis® growth driven by new launches which
achieved blockbuster status
Lucentis® Ex-US1 net sales2 and growth
(in USD m, growth in % cc)
 Growth was +5% (FY) and +1% (Q4) vs. PY
+5%
 New indications contributed 41% of sales in 2014
2 441
2 383
(up from 27% in 2013) reaching USD 1bn
27%
63%
59%
2013
2014
wAMD
1
2
3
41%3
DME
RVO
mCNV
Genentech has rights to Lucentis® in the US
Sales indication split based on market research and Novartis estimates
Share of new indications in Q4 was 43%
41
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
 The pre-filled syringe was launched in key
markets, incl. Germany, France, Italy, Spain, UK,
Japan and Australia
Tasigna® accounted for 33% of the CML franchise sales1
and grew solidly
Tasigna® sales and growth
(in USD m, growth in % cc)
Ex-US Sales
US Sales
+23%
989
Tasigna in 1st line CML patients
+26%
• Tasigna sales represent 24% of the total
838
540
428
 Growth was +24% (FY) and +30% (Q4) vs. PY
• US growth mostly driven by increased usage of
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)
2013
1
2
3
4
2014
• More patients do not progress (vs. imatinib)
Share in the combined sales of Tasigna plus Gleevec/Glivec in so far as it concerns CML
Gleevec/Glivec sales across all indications, including Ph+ CML and KIT+ GIST and others
Major Molecular Response - defined as 0.1% or less of BCR-ABL as measured by IS RT-Q-PCR
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)
42
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Ultibro® Breezhaler® launched in ex-US markets with strong
penetration; US submission completed
Ultibro® Breezhaler® value share1
(in % on a monthly basis)
 COPD portfolio sales growth was +93% (FY) and
8%
+94% (Q4) vs. PY2
 Ultibro is 1st to market dual bronchodilator in the
6%
EU and Japan
4%
 Submissions to FDA completed (Dec 2014)
2%
Germany
Spain
Greece
0%
1
1
2
2
3
4
5
6
7
8
9
10
11
12
13
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
Ultibro Breezhaler sales were USD 118 m (FY) and USD 51 m (Q4)
43
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Jakavi®1 showed strong growth in 2014 with second
indication expected in 2015
Jakavi® net sales (ex-US)1
(in USD m)
279
 Growth was +72% (FY) and +91% (Q4) vs. PY
 Growth in 1st indication of MF2 driven by
• Continued in-market growth in >70 countries
163
• Recent launches in Japan, Italy and Spain
 >50 published abstracts across MF and PV3 at
ASH4 reinforcing safety / efficacy profile
30
2012
1
2
3
4
5
6
 Launch of 2nd indication (PV) in Q2 2015 in EU5
2013
2014
Jakavi
 Target patient populations in MF and PV are of
similar size6
is licensed from Incyte for development and commercialization outside the US
Myelofibrosis
Polycythemia vera
American Society of Hematology (December 2014)
CHMP positive opinion in January 2015
Based on approximately 25% of PV patients who fail Hydroxyurea and could qualify for Jakavi treatment. Source: Alvarez-Larrán, et al Blood 2012
44
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Signifor® approved in US and EU for treatment of
patients with acromegaly
Novartis Acromegaly Franchise
US
 Acromegaly is associated with higher mortality rates
EU
and serious health complications
Medically
naive
patients
• Prevalence ~60 patients per million
• Sandostatin LAR®: USD 1.6bn (FY) +6% vs. PY1
6
 Despite current SSAs2 treatments, 45% of patients3
Patients
inadequately
controlled on
current SSAs
6
6
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
2
3
4
5
6
Sandostatin LAR is indicated for acromegaly and functional gastroenteropancreatic neuroendocrine tumours (GEP NET)
Somatostatin Analogues (SSAs)
Carmichael JD, JCEM 2014;99(5):1825-1833
Growth hormone (GH)
Insulin-like growth factor-1 (IGF-1)
In the US, the long-acting release formulation of pasireotide for the treatment of acromegaly has been approved under the trade name Signifor® LAR
45
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Cosentyx™ (secukinumab) showed superiority to Stelara®
in head-to-head CLEAR study (Psoriasis)
Psoriasis sales and growth1
 CosentyxTM (formerly AIN457) showed superiority to
(in USD m)
5 896
6 000
+22%
Enbrel ®
4 960
CAGR (09-14)
5 000
Humira ®
4 149
4 000
Remicade ®
3 459
2 862
3 000
Stelara ®
2 209
Ciclosporin
2 000
Methotrexate
1 000
Acitretin
0
2009
2010
2011
2012
2013
MAT
Oct'14
Etretinate
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
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
46
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Cosentyx™: Novartis is working to be the 1st company
to launch an anti-IL17A with three indications in label
FUTURE 2 (PsA) - Rapid and Significantly Improved ACR20 Responses
60
54.0%
51.0%
% Responders
(ACR 20)
50
40
30
• Efficacy in both anti-TNF-naive and anti-TNF-IR groups
29.3%
20
• PsA: >50% ACR 20 responders at week 24
15.3%
10
0
0 1 2 3 4
8
12
16
20
Secu 300 mg
Secu 75 mg
• AS: unprecedented sustained efficacy; at week 52,
>75% of patients achieved ASAS 20, >60% achieved
ASAS 40 (secondary endpoint)
24
Weeks
Secu 150 mg
Placebo
MEASURE 1 (AS) - Sustained ASAS 20 Response Through Week 52
 Cosentyx™ will compete in three high growth segments2
100
Primary
Endpoint
% Responders
(ASAS 20)
80
76.7%
71.3%
60.8%
60
40
0
0
4
8
12
16
20
24
28
32
36
40
44
Secu 10 mg/kg i.v.  150 mg s.c.
Secu 10 mg/kg i.v.  75 mg s.c.
48 52
Weeks
Placebo
Note: Secu= Secukinumab; i.v. = intravenous; s.c. = sub-cutaneous
47
• Psoriasis
USD 6bn (+22%)2
• Psoriatic Arthritis (PsA)
USD 3bn (+22%)2
• Ankylosing Spondylitis (AS) USD 2bn (+23%)2
28.7%
20
 4 landmark PsA/AS PhIII studies presented at ACR 20141
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
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
25
% of patients
20
-16%
p<0.001
-20%
-20%
-21%
p<0.001
p=0.008
p=0.034
Enalapril
15
10
19.8
17.0
0
16.5
7.4 6.0
All causes
CV causes
Sudden
Death
4.4 3.5
Pump
Failure
Novartis Data on File. Presented at AHA by J. McMurray Nov. 17, 2014
Packer et al. Circulation 2014; epub ahead of print: DOI: 10.1161 / CIRCULATION AHA.114.013748
48
 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
13.3
2
 EMA and Swissmedic granted Accelerated Review
LCZ696
5
1
 Submission in EU and US completed
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
reason (12%) or for any reason (12%)
• Require an emergency room visit for heart
failure (34%)
• Require intensive care (13%)
Currently expected Pharmaceuticals newsflow highlights
H1 2015
H2 2015
49



Cosentyx™
EU approval in psoriasis
Cosentyx™
FDA action in psoriasis
Jakavi®
CHMP opinion in polycythemia vera
Exjade®
FDA action in new formulation film coated tablets
CosentyxTM
Regulatory filings in US and EU for ankylosing spondylitis and psoriatic arthritis
Zykadia™
CHMP opinion in ALK+ NSCLC
BKM120
US, EU & Japan submission in mBC ER+: combo with Fulvestrant, mTOR naive
LDE225
FDA action in advanced basal cell carcinoma
LDE225
CHMP opinion in advanced basal cell carcinoma
LCZ696
FDA action in chronic heart failure with reduced ejection fraction
LCZ696
CHMP opinion in chronic heart failure with reduced ejection fraction
QVA149/NVA237
FDA action in chronic obstructive pulmonary disease (COPD)
| Novartis Q4 and FY 2014 Results | January 27, 2015 | 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
50
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
We are delivering against our priorities
 Strong 2014 financial results
 Strong innovation news adding to momentum
 Progress on portfolio transformation and NBS
51
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Our priorities in 2015 are expected to continue to
position us for future success
2015 priorities
52
1
2
3
4
5
Strong financial
results and
discipline
Strengthen
innovation
Complete
the portfolio
transformation
Capture
cross-divisional
synergies
Build a
high-performing
organization
| Novartis Q4 and FY 2014 Results | January 27, 2015 | 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
53
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
Appendix
Planned filings 2015 to  2019
2016
2017
2018
BKM120
BYM338
KAE609
INC280
BAF312
LIK066
sIBM5
Malaria
NSLCL14
Multiple sclerosis
Type II diabetes
LCI699
Afinitor®
BCT197
LJM716
DLBCL12
COPD16
Solid tumors
mBC ER+ AI resistant/mTOR naive
LCQ908
CTL019
Cushing’s disease
FCS1
Acute lymphoblastic leukemia
PKC412
Fovista®
ACZ885
Lucentis®
BGJ398
QAW039
AML2
Wet AMD
Sec. prev. cv events11
ROP15
Solid tumors
Asthma
LEE011
CTL019
LEE011
BGS649
QAX576
OHH17
Allergic diseases
Afinitor®
Non-functioning GI and Lung NET3
HR+, HER2(-) advanced breast
cancer (postmenopausal women)
DLBCL12
HR+, HER2(-) advanced breast
cancer (premenopausal women)
Cosentyx™
MEK162*
Gilenya®
LEE011
BYL719
QGE031
Ankylosing spondylitis
NRAS mutant melanoma
CIDP13
Solid tumors
Solid tumors
Asthma
Cosentyx™
MEK162* + LGX818
Psoriatic arthritis
BRAF mutant melanoma
Zykadia™
ALK+advanced NSCLC14
(first line, treatment naive)
CAD106
Alzheimer’s disease
BKM120
Solid tumors
PKC412
RLX030
CJM112
BYM338
ASM4
Acute heart failure
Immune disorders
Hip fracture
EGF816
BYM338
Solid tumors
Sarcopenia
Afinitor®
TSC6 seizures
BKM120
1
mBC ER+ post Al and mTOR inhibitor
2
Ilaris®
Hereditary periodic fevers
Lucentis®
CNV and
New molecule
New indication
New formulation
55
 2019
2015
3
4
5
6
7
ME7
MEK162*
8
LGSOC8
9
Tasigna®
CML treatment free remission
Tekturna®
Heart
failure9
Signifor® LAR10
Cushing’s disease
10
11
12
13
14
15
16
17
18
Familial chylomicronemia syndrome
Acute myeloid leukemia
Neuroendocrine tumors
Aggressive systemic mastocytosis
Sporadic inclusion body myositis
Tuberous sclerosis complex
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
Long-acting release
Secondary prevention of cardiovascular events
Diffuse large B-cell lymphoma
Chronic inflammatory demyelinating polyradiculoneuropathy
Non-small cell lung cancer
Retinopathy of prematurity
Chronic obstructive pulmonary disease
Obese hypogonadotropic hypogonadism
Preserved ejection fraction
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
FCR001
LCZ696
Renal transplantation
Heart failure (PEF)18
HSC835
MEK162*
Stem cell transplantation
Solid tumors
KAF156
QAW039
Malaria
Atopic dermatitis
LGX818
Solid tumors
* MEK162 rights to be returned to Array BioPharma Inc. which is conditional
on the closing of the portfolio transformation transaction with GSK
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
In cc: In constant currencies
ALK+ NSCLC: Anaplastic lymphoma kinase positive (ALK+) Non-small cell lung cancer
(NSCLC)
JCEM: Journal of Clinical Endocrinology & Metabolism
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
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
CAGR: Compound Annual Growth Rate
NSCLC: Non Small Cell Lung Cancer
CML: Chronic myelogenous leukemia
PASI90: 90% reduction in Psoriasis Area Severity Index from baseline
COPD: Chronic Obstructive Pulmonary Disease
pNET: Pancreatic neuroendocrine tumors
DME: Diabetic Macular Edema
PsA: Psoriatic Arthritis
Emerging Growth Markets: All markets excluding the US, Canada, Western Europe,
Japan, Australia, and New Zealand
PV: Polychytemia vera
GH: Growth Hormone
SSA: Somatostatin Analogue
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)
TNF: Tumor Necrosis Factor
Gx: Generic
HR+/HER2-: Hormone Receptor positive, Human Epidermal Growth Factor 2 negative
IGF-1: Insulin-like growth factor-1
56
| Novartis Q4 and FY 2014 Results | January 27, 2015 | Novartis Investor Presentation
RVO: Retinal Vein Occlusion
TSC SEGA: Tuberous sclerosis complex subependymal giant cell astrocytoma
wAMD – wet age-related macular degeneration