Novartis delivers strong new product momentum and operational performance in first nine months of 2009

Novartis delivers strong new product momentum and operational performance in first nine months of 2009

Strong underlying growth in first nine months of 2009 from healthcare portfolio:

  • Net sales of USD 31.3 billion rise 8% in local currencies (lc), led by double-digit expansion in Pharmaceuticals
  • Operating income of USD 7.3 billion up 1%, but advances 11% in constant currencies and excluding exceptional items
  • Net income of USD 6.1 billion down 8% due to negative currency impact, Alcon-related financing costs and USD 189 million of associated companies charges; but net income in constant currencies rises 2%
  • Basic EPS: USD 2.69 in first nine months of 2009 vs. USD 2.93 in 2008
  • Free cash flow before dividends advances 20% to USD 6.1 billion
  • Progress in innovation: 2009 approvals for Afinitor (US/EU), Ilaris (US) and H1N1 pandemic flu vaccines; positive Phase III data for QAB149 (COPD) and FTY720 (MS)
  • Novartis on track for record sales and earnings in constant currencies in 2009

Key figures - Continuing operations
Nine months to September 30
 YTD 2009 YTD 2008 % change
 USD m % of
net sales USD m % of
net sales USD lc 
Net sales  31 341  31 382  0 8
Operating income 7 345 23.4 7 284 23.2 1 
Net income 6 131 19.6 6 656 21.2 -8 
Basic earnings per share  USD 2.69  USD 2.93  -8 

Third quarter
 Q3 2009 Q3 2008 % change
 USD m % of
net sales USD m % of
net sales USD lc
Net sales  11 086  10 747  3 7
Operating income 2 634 23.8 2 335 21.7 13 
Net income 2 112 19.1 2 082 19.4 1 
Basic earnings per share  USD 0.93  USD 0.92  1 

Basel, October 22, 2009 - Commenting on the results, Dr. Daniel Vasella, Chairman and CEO of Novartis, said: "I am pleased with our strong underlying performance, led by the momentum of our Pharmaceuticals business, outpacing the competition and benefiting from innovative product growth rejuvenating the portfolio. Our investments in R&D show excellent results, with many key approvals in 2009, most notably the anti-cancer therapy Afinitor and the biotechnology medicine Ilaris. Deliveries of H1N1 pandemic flu vaccines are underway as Novartis works at full capacity to meet public health demands. The Sandoz generics business also made good progress, coupled with a turnaround in the US. We expect record full-year underlying results based on the significant progress to date in 2009."


Nine months to September 30

The sustained underlying business expansion in Pharmaceuticals, with net sales rising 11% in local currencies (+4% in US dollars), strengthened the Group's healthcare portfolio in the first nine months of 2009.
Group net sales rose 8% in local currencies, but were steady at USD 31.3 billion in US dollars. Sandoz (+4% lc) and Consumer Health (+3% lc) also provided contributions. Top-performing regions included Europe (USD 12.9 billion, +7% lc) and the United States (USD 10.1 billion, +5% lc) as well as the top six emerging markets (USD 2.8 billion, +16% lc). Higher volumes provided seven percentage points of growth, while net price changes added one percentage point. However, the stronger US dollar compared to the 2008 period offset the underlying business expansion by eight percentage points.

Operating income rose 1% to USD 7.3 billion, and at a faster 11% pace when adjusted for the impact of currency movements, exceptional items and amortization of intangible assets in both periods. Pharmaceuticals, where operating income rose 8%, and productivity gains in all divisions provided resources for business expansion and led to the Group operating income margin improving 0.2 percentage points to 23.4% of net sales.

Net income, however, fell 8% to USD 6.1 billion from the impact of Alcon-related financing costs as well as significantly reduced income from investments in Roche and Alcon in the third quarter of 2009 and a higher tax rate. Basic earnings per share (EPS) fell to USD 2.69 in the first nine months of 2009 from USD 2.93 in the 2008 period.

Third quarter

Novartis maintained the strong underlying momentum of 2009 as third-quarter net sales grew 7% in local currencies, while reported net sales rose 3% to USD 11.1 billion as four percentage points of growth were lost to adverse currency movements. Pharmaceuticals (+11% lc) led the performance, while Consumer Health (+5% lc) and Sandoz (+4% lc) achieved local-currency gains in challenging markets. Vaccines and Diagnostics (-16% lc) fell on sharply lower sales of H5N1 (avian flu) pandemic vaccines in 2009.

Operating income advanced 13% to USD 2.6 billion, while the Group's operating income margin rose 2.1 percentage points to 23.8% of net sales on margin improvements in Pharmaceuticals, Sandoz and Consumer Health. Operating income was up 9% when adjusted for currency movements, exceptional items and amortization of intangible assets.

Net income rose 1% to USD 2.1 billion as the 13% increase in Group operating income was largely offset by a loss from associated companies due to USD 189 million of charges for Roche's restructuring of Genentech and an Alcon-related R&D project impairment, increased financing costs and a higher tax rate. As a result, basic earnings per share (EPS) only climbed to USD 0.93 from USD 0.92 in the 2008 quarter.

Achieving success with long-term R&D investments

Novartis has been reaping the benefits of long-term, disciplined investments in innovation, achieving more than 30 major regulatory approvals and significant progress in the Group's R&D pipeline so far in 2009.

Important approvals include the anti-cancer medicine Afinitor, the high blood pressure combination therapy Valturna, the biotechnology drug Ilaris and the H1N1 pandemic flu vaccines. The late-stage pipeline is also progressing quickly: European regulatory approval expected soon for QAB149 (COPD), while further positive Phase III data presented in September 2009 reaffirmed the potential of FTY720 (MS).
R&D investments complement other strategic initiatives as Novartis seeks to deliver long-term sustainable growth from a focused portfolio addressing broad healthcare needs. In addition to investments in innovation, Novartis is selectively strengthening its businesses, expanding in high-growth markets and improving organizational efficiency.

High-growth markets are increasingly contributing to the business expansion. Net sales in the top six emerging markets rose 16% lc to USD 2.8 billion in the first nine months of 2009, with only limited signs to date of adverse impact from global economic conditions. These six markets

- Brazil, China, India, Russia, South Korea and Turkey - represented 9% of the Group's net sales for the 2009 period.
New products are transforming Pharmaceuticals and positioning Novartis as one of the industry's fastest-growing companies. Recently launched products provided dynamic growth (+88% lc) and USD 3.3 billion of net sales in the first nine months of 2009, boosting their share of net sales to 16% from 9% in the 2008 period. New product approvals in 2009, such as Afinitor and Ilaris, are set to support business expansion. In Japan, approvals of five new medicines to date in 2009 - Tasigna, Xolair, Co-Dio, Lucentis and Rasilez - are expected to underpin momentum in this important market.

Vaccines and Diagnostics began delivering vaccines in the last week of September for the new H1N1 influenza strain as US and European regulatory approvals were received. Large-scale antigen production continues at all sites in Europe. Approximately 90 million to 120 million doses are expected to be produced by the end of 2009, with expected fourth-quarter net sales contributions of approximately USD 400 million to USD 700 million. In early October, Novartis also completed its shipment of 27 million seasonal influenza vaccines for the US market, ahead of original plans, to allow for earlier vaccination.

Sandoz completed in September the acquisition of EBEWE Pharma's specialty generics injectables business for EUR 0.8 billion (USD 1.2 billion), creating a new global growth platform and improving access to oncology medicines. This acquisition is set to further drive expansion in the fast-growing injectables market and represents an important extension of the Sandoz portfolio. In addition, the manufacturing site in Wilson, North Carolina, has a renewed focus on new product launches following the successful completion of an FDA inspection in the third quarter of 2009.

Consumer Health is preparing the upcoming US launch of Prevacid 24HR, the first OTC version of this prescription drug for frequent heartburn pain and an important addition to the division's current portfolio of 15 global brands with annual sales of more than USD 100 million. Novartis aims to make Prevacid 24HR a top-five OTC brand in the US, where this proton pump inhibitor has three years of market exclusivity.

Group outlook
(Barring any unforeseen events)
Novartis expects to deliver a strong operational performance in 2009. Group net sales are now set to grow at a high-single-digit rate in local currencies, even excluding anticipated H1N1 pandemic flu vaccines sales in the fourth quarter of 2009. Pharmaceuticals net sales in local currencies are now expected to expand at a double-digit rate in 2009. Operating and net income are expected to reach record levels in constant currencies for the full year, even excluding the contribution from H1N1 pandemic flu vaccine sales. However, currency-related losses could significantly reduce growth in reported results.

Nine months to September 30
Net sales
 YTD 2009 YTD 2008 % change
 USD m USD m USD lc
Pharmaceuticals 20 765 19 901 4 11
Vaccines and Diagnostics 1 037 1 268 -18 -13
Sandoz 5 350 5 753 -7 4
Consumer Health continuing operations 4 189 4 460 -6 3
Net sales from continuing operations 31 341 31 382 0 8

Pharmaceuticals: USD 20.8 billion (+4%, +11% lc)
Sustained dynamic performance achieved in local currencies thanks to rapid expansion of recently launched products and double-digit growth in all regions. The global rollouts of new products, including Lucentis, Exforge, Exjade, Exelon Patch, Reclast/Aclasta and Tekturna/Rasilez, are transforming the portfolio and provided USD 3.3 billion of net sales in the 2009 period. These products accounted for 16% of net sales, up from 9% in 2008, and eight percentage points of the division's 11% local currency net sales growth.

All therapeutic franchises advanced at double-digit rates in local currencies. Oncology (USD 6.5 billion, +13% lc), the largest franchise, grew thanks to Gleevec/Glivec (USD 2.9 billion, +12% lc), Femara (USD 925 million, +16% lc) and Exjade (USD 469 million, +30% lc). The strategic Cardiovascular and Metabolism franchise (USD 5.4 billion, +12% lc) was led by the new medicines Exforge (USD 475 million) and Tekturna/Rasilez (USD 202 million) as well as the flagship product Diovan (USD 4.4 billion, +5% lc). The diabetes medicine Galvus (USD 115 million) outpaced competition in some key markets in Europe, Latin America and Asia. Neuroscience and Ophthalmics (USD 3.3 billion, +13% lc) gains were led by Lucentis (USD 858 million, +48% lc) and Exelon (USD 687 million, +24% lc).

Europe (USD 7.6 billion, +11% lc) as well as Latin America and Canada (USD 1.8 billion, +14% lc) showed strong performances. Gains were also seen in the US (USD 7.1 billion, +10% lc), while Japan (USD 2.2 billion, +9% lc) benefited from new product launches. The six top emerging markets of Brazil, China, India, Russia, South Korea and Turkey (USD 1.8 billion, +19% lc) kept up a good growth pace.

Vaccines and Diagnostics: USD 1.0 billion (-18%, -13% lc)
A sharp reduction in deliveries of H5N1 avian pandemic flu vaccines compared to the 2008 period as well as lower sales of TBE (tick-borne encephalitis) vaccines in Europe were among reasons for the decline. Seasonal influenza vaccines sales were down in the 2009 period, mainly due to price pressure in the US.
Sandoz: USD 5.4 billion (-7%, +4% lc)

Sandoz achieved three quarters of consistent 4% lc growth in 2009 compared to only 1% lc in 2008. Retail generics in Germany (+5% lc) grew in a declining market, reaching a 29% share as launches offset the switch to tenders by some government health insurance providers. US retail generics and biosimilars (+1%) delivered 18 new launches so far in 2009 (vs. 17 in all of 2008), but price erosion offset some of the volume gains. Other regions were higher, led by Asia-Pacific (+20% lc) on growth in China and Japan.
Consumer Health: USD 4.2 billion (-6%, +3% lc)

BA Vision is the industry's fastest-growing contact lens and lens care company, driven by the expansion of new products that have fueled solid local currency growth. Animal Health grew ahead of its global market and gained share in the US parasiticide market, while OTC delivered an increasingly positive underlying performance during the year.

Operating income
 YTD 2009 YTD 2008 Change
 USD m % of
sales USD m % of
sales %
Pharmaceuticals 6 486 31.2 6 017 30.2 8
Vaccines and Diagnostics -211  52 4.1 
Sandoz 850 15.9 884 15.4 -4
Consumer Health continuing operations 809 19.3 858 19.2 -6
Corporate Income & Expense, net -589  -527  
Operating income
from continuing operations 7 345 23.4 7 284 23.2 1

Pharmaceuticals: USD 6.5 billion (+8%)
Operating income grew 8%, well ahead of sales, and advanced at a faster 16% pace when adjusted in both periods for adverse currency movements (-10 percentage points) and exceptional items (+2 percentage points). The double-digit sales expansion and productivity gains of more than USD 700 million in the 2009 period fueled operating income growth and enabled significant investments in new product launches as well as accelerated investments in Oncology projects, particularly Afinitor, and targeted emerging markets such as China. Marketing & Sales expenses fell to 29.0% of net sales in 2009 from 30.0% in the 2008 period while supporting the global rollouts of a range of new products, including Galvus, Exelon Patch, Tekturna/Rasilez and Afinitor. R&D investments were 20.3% of net sales in 2009 while supporting ten new Phase III trials started in 2009, but declined from 21.3% in the 2008 period that included an exceptional charge of USD 223 million for impairment of the Aurograb development project.

Vaccines and Diagnostics: USD -211 million
Core operating income, which excludes exceptional items and amortization of intangible assets, fell to USD 66 million from USD 254 million in the year-ago period. Investments were made in clinical trials for H1N1 pandemic vaccines and late-stage meningitis vaccine development projects. Results in 2009 included exceptional legal charges of USD 45 million, while the 2008 period benefited from a USD 49 million exceptional gain for a diagnostics license.

Sandoz: USD 850 million (-4%)
Strong performance realized with 8% growth in constant currencies on volume expansion in key markets and major productivity gains, but these were more than offset in reported results by negative currency movements (-12 percentage points). The Project Compete initiative led to reduced total function costs compared to the 2008 period, with the operating income margin rising 0.5 percentage points to 15.9% of net sales.

Consumer Health: USD 809 million (-6%)
Increased productivity provided operating income growth of 9% in constant currencies, well ahead of 3% lc sales growth. These gains, however, were more than offset by adverse currency movements (-15 percentage points).

Corporate Income & Expense, net
The increase in net corporate expenses was due mainly to higher pension expenses.
Third quarter
Net sales
 Q3 2009 Q3 2008 % change
 USD m USD m USD lc
Pharmaceuticals 7 217 6 709 8 11
Vaccines and Diagnostics 543 666 -18 -16
Sandoz 1 850 1 899 -3 4
Consumer Health continuing operations 1 476 1 473 0 5
Net sales from continuing operations 11 086 10 747 3 7

Pharmaceuticals: USD 7.2 billion (+8%, +11% lc)
Ongoing dynamic growth in the 2009 third quarter thanks to the rapid expansion of new products and sustained contributions from key markets. Recently launched products reached USD 1.3 billion of net sales in the 2009 quarter, representing 18% of divisional net sales compared to 11% in the 2008 quarter. These new products also provided nine percentage points of the 11% lc net sales growth in the 2009 period.

All therapeutic franchises delivered strong underlying growth. Initial contributions from the US launch of Afinitor supported Oncology (USD 2.3 billion, +11% lc), while Exforge and Tekturna/Rasilez underpinned the strategic Cardiovascular and Metabolism franchise (USD 1.8 billion, +9% lc). The diabetes therapy Galvus (USD 50 million) also continued its dynamic performance in Europe, Latin America and Asia. Neuroscience and Ophthalmics (USD 1.2 billion, +18% lc) saw rapid gains for Lucentis (USD 335 million, +60% lc ) and Exelon (USD 251 million, +23% lc).
Important growth contributions came from Europe (USD 2.6 billion, +9% lc) as well as Latin America and Canada (USD 645 million, +17% lc) and the US (USD 2.4 billion, +10% lc). Japan (USD 773 million, +8% lc) advanced thanks to contributions from new product launches in 2009. The six top emerging markets (USD 639 million, +12% lc) further advanced and were led by China and Turkey.
Vaccines and Diagnostics: USD 543 million (-18%, -16% lc)

Approximately 27 million doses of seasonal flu vaccines were delivered for the 2009/2010 season in the US and Europe by early October 2009, with net sales per dose down slightly from the 2008 period due mainly to price pressure in the US. Higher shipments of rabies and pediatric vaccines helped partially offset the significant decline in 2009 of H5N1 avian pandemic flu vaccine sales. Net sales of approximately USD 17 million were recorded in the 2009 quarter for H1N1 pandemic flu vaccines delivered in late September.
Sandoz: USD 1.9 billion (-3%, +4% lc)

Key markets achieved solid underlying growth from new product launches and intensified commercialization efforts. For retail generics, top performers included Germany (+8% lc), Western Europe (+6% lc) and Asia-Pacific (+9% lc). US retail generics and biosimilars (+5%) net sales had a second consecutive quarter in 2009 of year-on-year growth thanks to new product launches, including a first-to-market launch of generic tacrolimus (Prograf®). Central and Eastern Europe grew strongly, but results were tempered by challenging economic conditions.
Consumer Health: USD 1.5 billion (0%, +5% lc)

All businesses contributed to the strongest underlying quarterly performance since the first quarter of 2008. CIBA Vision continued to gain market share from new products, while the US and Latin America drove business expansion in Animal Health. OTC gained momentum due to strong demand for cough and cold medicines.

Operating income
 Q3 2009 Q3 2008 Change
 USD m % of
sales USD m % of
sales %
Pharmaceuticals 2 211 30.6 1 743 26.0 27
Vaccines and Diagnostics 23 4.2 180 27.0 -87
Sandoz 312 16.9 293 15.4 6
Consumer Health continuing operations 303 20.5 292 19.8 4
Corporate Income & Expense, net -215  -173  
Operating income
from continuing operations 2 634 23.8 2 335 21.7 13

Pharmaceuticals: USD 2.2 billion (+27%)

Operating income advanced 27%, significantly ahead of sales, and still rose 16% when adjusted in both periods for currency changes (-6 percentage points) and exceptional items (+17 percentage points). The strong underlying business expansion, with net sales rising 11% lc, and productivity savings led to operating income gains and enabled significant investments in new product launches, key development projects and geographic expansion. Marketing & Sales expenses fell 1.4 percentage points to 27.8% of net sales in the 2009 quarter, while R&D investments declined 3.7 percentage points to 19.7% of net sales in 2009 from the same period 2008, which included an exceptional charge of USD 223 million for impairment of the Aurograb development project.

Vaccines and Diagnostics: USD 23 million

Lower contributions from H5N1 and seasonal influenza vaccines in the 2009 quarter as well as investments in H1N1 pandemic vaccines and late-stage trials for the meningitis vaccines were the main factors for reduced operating income. Excluding exceptional items and amortization of intangible assets, core operating income fell to USD 102 million from USD 258 million in the 2008 period.
Sandoz: USD 312 million (+6%)

In constant currencies, operating income rose 18% from productivity improvements in marketing and purchasing while supporting strategic R&D investments, more than offsetting the impact of adverse currency movements (-11 percentage points) in reported results as the operating income margin rose 1.5 percentage points to 16.9% of net sales.
Consumer Health: USD 303 million (+4%)

Supply chain and other productivity gains helped fund R&D initiatives and new product launches across the division. In constant currencies, operating income grew 14%, which was well ahead of local-currency sales growth. The operating income margin rose 0.7 percentage points to 20.5% of net sales.

Corporate Income & Expense, net
Net corporate expenses in the 2009 third quarter rose USD 42 million compared to the year-ago period, mainly due to higher pension and insurance expenses.

Nine months to September 30 and third quarter
2009 YTD
2008 Change Q3
2009 Q3
2008 Change
 USD m USD m % USD m USD m %
Operating income
from continuing operations 7 345 7 284 1 2 634 2 335 13
Income from associated companies 186 344 -46 -21 88 -124
Financial income 94 326 -71 51 93 -45
Interest expense -395 -214 85 -173 -96 80
Taxes -1 099 -1 084 1 -379 -338 12
Net income
from continuing operations 6 131 6 656 -8 2 112 2 082 1
Net income
from discontinued operations  28   19 
Total net income 6 131 6 684 -8 2 112 2 101 1

Income from associated companies
Exceptional charges totaling USD 189 million for actions taken by Roche and Alcon resulted in a loss of USD 21 million from associated companies in the third quarter of 2009 compared to an income of USD 88 million in the 2008 period. An exceptional charge of USD 97 million was taken as part of Roche's restructuring charge for the Genentech acquisition, while a USD 92 million impairment charge was taken after Alcon stopped a pharmaceuticals development project. These factors also led to sharply reduced income from associated companies in the first nine months of 2009, which fell 46% to USD 186 million from the year-ago period.

Financial expense, net
Interest expense rose 80% in the 2009 third quarter to USD 173 million following the issuance of US dollar and euro bonds in the first half of 2009. Financial income for the 2009 third quarter fell 45% to USD 51 million due to lower financial yields and currency losses. For the first nine months of 2009, interest expense rose 85% to USD 395 million, reflecting the issuance of bonds after the acquisition of a 25% stake in Alcon in mid-2008, and financial income fell 71% to USD 94 million.

The tax rate (taxes as a percentage of pre-tax income) for the first nine months and third quarter of 2009 was 15.2%, in line with full-year expectations, and higher than the 14.0% tax rate in both of the same periods in 2008.

Net income from continuing operations
For the first nine months of 2009, operating income growth was more than offset by increased financial charges, reduced contributions from associated companies and a higher tax rate, which resulted in net income falling 8% to USD 6.1 billion. However, net income in constant currencies rose 2% over the year-ago period. In the third quarter of 2009, net income was up 1% to USD 2.1 billion as the double-digit business expansion was negatively impacted by these non-operating factors.

Basic earnings per share
Basic earnings per share (EPS) were USD 2.69 in the first nine months of 2009, down from USD 2.93 in the year-ago period. For the third quarter, basic EPS increased to USD 0.93 in 2009 from USD 0.92 per share in the 2008 quarter.

Balance sheet
Total assets increased to USD 90.7 billion at the end of the 2009 third quarter compared to USD 78.3 billion at the end of 2008 mainly as a result of proceeds from recent bond issues, which are held as cash and marketable securities, and intangible assets acquired through the September 2009 purchase of EBEWE Pharma's specialty generics business.

The Group's equity rose to USD 53.3 billion at the end of the 2009 third quarter from USD 50.4 billion at the end of 2008 as net income of USD 6.1 billion and translation gains of USD 0.9 billion in the 2009 period more than offset the dividend payment in the 2009 first quarter amounting to USD 3.9 billion and actuarial losses of USD 0.8 billion for defined benefit plans.

The Group's debt/equity ratio rose to 0.27:1 at the end of the 2009 third quarter from 0.15:1 at the end of 2008, reflecting the issuance of the USD 5 billion bond (two tranches) in the US in the first quarter and the issuance of a EUR 1.5 billion bond in the second quarter. At September 30, 2009, the Group's financial debt of USD 14.4 billion consisted of USD 5.7 billion in current and USD 8.7 billion in non-current liabilities.
Overall liquidity rose to USD 14.2 billion at September 30, 2009, more than double the end-2008 level of USD 6.1 billion, due to improving free cash flow from continuing operations (before dividends), which rose 20% to USD 6.1 billion in the first nine months of 2009, and proceeds from the bond issues. Net debt (financial debt net of liquidity) was reduced to USD 0.2 billion from USD 1.2 billion at December 31, 2008.

Credit agencies have maintained their ratings of Novartis debt during 2009. Moody's rated the Group as Aa2 for long-term maturities and P-1 for short-term maturities and Standard & Poor's had a rating of AA- and A-1+, for long-term and short-term maturities, respectively. Fitch had a long-term rating of AA and a short-term rating of F1+. These agencies maintained a "stable" outlook.

Cash flow

Cash flow from operating activities was USD 7.7 billion in the first nine months of 2009, an 18% increase over the year-ago period that was driven by improvements of USD 0.5 billion in net working capital and a reduction of USD 0.4 billion in tax payments compared to the 2008 period.

Cash outflows from investing activities reached USD 10.0 billion in the first nine months of 2009 and included USD 7.5 billion in marketable securities investments with proceeds from bond offerings as well as USD 0.9 billion related to the EBEWE Pharma generics business acquisition and USD 1.3 billion for capital expenditures.

Cash inflows from financing activities were a net USD 3.0 billion in the 2009 period, as the USD 7.1 billion of proceeds from bond issues were partially offset by the dividend payment for 2008 of USD 3.9 billion and other items totaling USD 0.2 billion.

Note: Net sales growth data refer to year-to-date 2009 performance in local currencies.
Strategic Cardiovascular and Metabolism franchise
Rapidly growing contributions from new products provided 74% of the incremental growth in the strategic Cardiovascular and Metabolism franchise (USD 5.4 billion, +12% lc) in the first nine months of 2009. Seven medicines within the Exforge, Tekturna/Rasilez and Diovan brands are available in many markets, reaffirming the position of Novartis as the world's largest provider of branded anti-hypertension therapies based on annual sales.
Diovan (USD 4.4 billion, +5% lc) achieved solid worldwide growth, driven by expansion in Japan, which accounts for approximately 20% of net sales and where the Co-Dio diuretic combination therapy was launched in 2009. Results from the Japanese KYOTO HEART study, presented in September at the European Society of Cardiology Congress, demonstrated that the addition of Diovan to a non-ARB-based treatment regimen for high blood pressure provided a significant 45% relative risk reduction in cardiovascular events, including stroke, over a conventional non-ARB treatment regimen. Diovan also maintained strong growth in Europe, where the expected entry of generic versions of losartan, another medicine in the angiotensin receptor blockers (ARB) segment, has been delayed until the first half of 2010. In the US, Diovan (+3%) expanded during the 2009 nine-month period despite greater use of generic versions of high blood pressure medicines in other classes.
Exforge (USD 475 million +81% lc), a single pill with the angiotensin receptor blocker Diovan (valsartan) and the calcium channel blocker amlodipine, delivered above-market growth and expanded faster than the broader high blood pressure segment. Exforge HCT, which adds a diuretic to this combination, was launched in the US after regulatory approval in April 2009 as a high blood pressure therapy with three medicines in one pill. Exforge was submitted for Japanese regulatory approval in late 2008.
Tekturna/Rasilez (USD 202 million, +114% lc), the first new class of high blood pressure medicine in more than a decade, is growing consistently. Key drivers are clinical data demonstrating its prolonged efficacy in lowering blood pressure for more than 24 hours, and superiority in clinical trials over ramipril, a leading ACE inhibitor (an older class of high blood pressure medicines). Rasilez was launched in Japan in October 2009. Valturna - a single-pill combination of Tekturna/Rasilez and Diovan (valsartan) - gained US regulatory approval in September based on clinical data showing this medicine offers significantly higher blood pressure reduction than either valsartan or aliskiren alone.
Galvus/Eucreas (USD 115 million, +416% lc), oral treatments for type 2 diabetes, have been expanding rapidly in many European, Latin American and Asia-Pacific markets, and outperforming a competitor medicine in the DPP-IV segment in some countries. First launched in 2008, Galvus is now approved in 69 countries, while Eucreas (a single-pill combination with the oral anti-diabetes medicine metformin) is approved in 50 countries.


Gleevec/Glivec (USD 2.9 billion, +12% lc), a targeted therapy for some forms of chronic myeloid leukemia (CML) and gastrointestinal stromal tumors (GIST), has achieved sustained double-digit growth based on its leadership position in treating these cancers backed by new clinical data and regulatory approvals. The latest approval was for use in adjuvant (post-surgery) GIST patients, which is now approved in more than 25 countries in North America, Europe and Asia-Pacific.

Tasigna (USD 144 million, +171% lc) is approved in 65 countries as a second-line therapy for patients with a form of chronic myeloid leukemia (CML) resistant or intolerant to prior therapy, including Gleevec/Glivec. New clinical data has demonstrated the potential of Tasigna to become a leading therapy for newly diagnosed CML patients. Independent Phase II data published in the journal "Blood" showed molecular traces of this form of leukemia were reduced to nearly undetectable levels in 85% of patients after 12 months. In October 2009, results from the global ENESTnd trial, the largest head-to-head comparison of a targeted therapy against Glivec ever conducted, showed that Tasigna produced faster and deeper responses than Glivec in newly diagnosed CML patients. A Phase III trial of Tasigna as a third-line therapy for GIST did not meet its primary endpoint, but results showed a two-month improvement in median overall survival (not statistically significant) for patients treated with Tasigna. As a result, Novartis will not seek regulatory approval for this indication. A first-line study in GIST began enrollment in March.

Zometa (USD 1.1 billion, +9% lc), an intravenous bisphosphonate therapy for patients with cancer that has spread to bones, is growing due to improved compliance and use in existing indications. Studies are underway to review potential anti-cancer benefits in other tumor types. US and European regulatory submissions are planned in the 2009 fourth quarter for the use of Zometa in adjuvant breast cancer in premenopausal women based on published anti-cancer data for this indication.

Femara (USD 925 million, +16% lc), an oral therapy for women with hormone-sensitive breast cancer, has seen strong sales during 2009 due to growth in the initial adjuvant (post-surgery) setting. In August, "The New England Journal of Medicine" published results from the landmark BIG 1-98 study affirming the five-year upfront use of Femara after surgery was an optimal treatment approach versus tamoxifen for postmenopausal women with early-stage, hormone-receptor positive breast cancer. These data were submitted to US and EU authorities for inclusion in product information.

Sandostatin (USD 839 million, +6% lc), for patients with acromegaly and neuro-endocrine tumors of the gastrointestinal tract and pancreas, has grown from increasing use of Sandostatin LAR, the once-monthly version that accounts for nearly 90% of net sales. Phase III data demonstrating a significant delay in tumor progression in patients with metastatic neuroendocrine tumors of the midgut who were treated with Sandostatin LAR were published recently in the "Journal of Clinical Oncology." These data formed the basis of a recent US National Comprehensive Cancer Network (NCCN) update on treatment guidelines for neuroendocrine tumors.

Exjade (USD 469 million, +30% lc), currently approved in more than 90 countries as the only once-daily oral therapy for transfusional iron overload, received US and Canadian regulatory approvals in 2009 to extend the dose range to 40 mg/kg. This new dosing range, which was also approved in Switzerland in 2009 and will apply to various other countries, provides a new option to patients who require higher dose titration for iron chelation. The FDA is reviewing Exjade safety information specifically on the risk of adverse events in patients with myelodysplastic syndrome (MDS) compared to patients without these conditions. Novartis is working with the FDA to further review and clarify the population of MDS patients most appropriate for treatment with Exjade.

Afinitor (USD 38 million), an oral inhibitor of the mTOR pathway, received European approval in August 2009 for use in patients with advanced renal cell carcinoma (RCC, kidney cancer) whose disease progressed on or after treatment with VEGF-targeted therapy. This follows the US launch in March as the first therapy for patients with RCC after failure of treatment with sunitinib or sorafenib. Afinitor is being studied in many cancer types: Phase III studies are underway in patients with neuroendocrine tumors (NET), breast cancer, lymphoma, tuberous sclerosis complex (TSC) and gastric cancer. A late-stage trial is planned to start in patients with hepatocellular carcinoma (HCC) in early 2010. The active ingredient, everolimus, is the same as in the transplant therapy Certican.

Other Pharmaceuticals products

Lucentis (USD 858 million, +48% lc), a biotechnology eye therapy approved in more than 80 countries, delivered sustained growth on top performances in France, the United Kingdom, Australia and Japan. Lucentis is the only treatment proven to maintain and improve vision in patients with "wet" age-related macular degeneration, a leading cause of blindness in people over age 50. Late-stage clinical trials are underway to assess the benefits of Lucentis in patients with certain forms of diabetic macular edema. Genentech holds the US rights to this medicine.

Exelon/Exelon Patch (USD 687 million, +24 % lc), a therapy for mild to moderate forms of Alzheimer's disease dementia as well as dementia linked with Parkinson's disease, now achieves more than half of its sales from Exelon Patch, the novel skin patch launched in late 2007 and now available in more than 50 countries worldwide.

Reclast/Aclasta (USD 325 million, +100% lc), the first once-yearly infusion therapy for osteoporosis, continues to expand on increasing patient access to infusion centers and a broad range of use in patients suffering from various types of this debilitating disease. A growing number of patients are returning for treatment with this medicine, which is known as Reclast in the US and Aclasta in the rest of the world. It is approved for up to six indications involving the treatment of osteoporosis in men and postmenopausal women, including those who have experienced a low-trauma hip fracture.

Xolair (USD 218 million, +53% lc, Novartis sales), a biotechnology drug for moderate to severe persistent asthma in the US and severe persistent allergic asthma in Europe, has maintained solid growth based on approvals in more than 60 countries, including Japan since early 2009. European Union approval was granted in August 2009 for use in children age 6-11 suffering from severe persistent allergic asthma. This approval was based on data showing Xolair reduced asthma attacks in this age group by 34% at 24 weeks and 50% at one year. Novartis co-promotes Xolair with Genentech in the US and shares a portion of operating income. Genentech's US sales were USD 424 million in the first nine months of 2009.

Extavia (USD 26 million), for patients with relapsing forms of multiple sclerosis (MS), was first launched in the European Union in early 2009 and is now available in more than 15 countries, including the US where it was launched recently after regulatory approval was granted in August 2009. This medicine marks the entry of Novartis into the field of MS. Extavia is the same medicinal product as Betaferon®/ Betaseron® from Bayer Schering, with rights gained to a Novartis-branded version in agreements with Bayer Schering.


Novartis ranks as having one of the industry's most competitive pharmaceuticals development pipelines with 147 projects in clinical development, of which 27 involve new molecular entities in late-stage trials or under regulatory review.
More than 30 positive regulatory decisions have been achieved to date in 2009 in the US, European Union and Japan. These include a historic five regulatory approvals to date in Japan for Rasilez, Tasigna, Xolair, Co-Dio and Lucentis, with regulatory decisions pending for Exforge and Galvus in the world's second-largest pharmaceuticals market. Other approvals include Afinitor (cancer) in the US and European Union as well as the US approvals of the new biotechnology drug Ilaris (CAPS) and Extavia (multiple sclerosis) as well as the high blood pressure combination therapies Valturna, Exforge HCT and Tekturna HCT.

Other important regulatory approvals in 2009 were received for the H1N1 pandemic flu vaccines in the US and Europe as well as the first-ever biosimilar in Japan and Prevacid 24HR, the first and only OTC version of this proton pump inhibitor in the US.


Ilaris (canakinumab, ACZ885), a human antibody targeting IL-1 beta, was launched in the US and Switzerland in August 2009 as a new therapy to treat children as young as age four and adults with CAPS (Cryopyrin-Associated Periodic Syndrome), a rare life-long and potentially fatal auto-inflammatory disease. In July 2009, Ilaris received a positive opinion for European Union regulatory approval. This biotechnology drug represents an important advance in the development of personalized medicines since it specifically targets IL-1 beta, the major trigger of inflammation in auto-inflammatory diseases. Studies are ongoing in other diseases in which IL-1 beta plays an important role, such as some forms of gout - one of the most painful types of arthritis, COPD (Chronic Obstructive Pulmonary Disease), type 2 diabetes and systemic juvenile idiopathic arthritis.

QAB149 (indacaterol), a new and effective once-daily bronchodilator therapy for people with COPD (Chronic Obstructive Pulmonary Disease), received a positive opinion in September supporting European Union regulatory approval. The extensive Phase III program for this product has demonstrated statistically superior improvements in lung function and COPD symptoms, especially breathlessness, compared to currently available bronchodilators, including the market leader tiotropium. In the US, Novartis is working with the FDA to address issues raised in a Complete Response letter received in October 2009.

FTY720 (fingolimod), a novel oral development therapy for multiple sclerosis, is on track for regulatory submissions in the US and Europe by the end of 2009. Initial results released in September 2009 from the two-year Phase III FREEDOMS study showed FTY720 was significantly superior to placebo in reducing both relapses and disability progression in patients with relapsing-remitting MS (RRMS). These data build on the one-year Phase III TRANSFORMS study presented at the American Academy of Neurology meeting in April 2009 showing that FTY720 significantly reduced relapses more than interferon beta-1a (Avonex®), a standard of care in RRMS. FTY720 has a well-studied safety profile with more than 5,300 patient-years of exposure, including patients now in their sixth year of treatment. MS affects up to 2.5 million people worldwide and is a leading cause of neurological disability in young adults.

Vaccines and Diagnostics
Menveo, a novel vaccine in clinical development to protect against four common types of meningococcal meningitis, is making good progress toward US and European regulatory approvals for initial use in adolescents (from age 11) and adults. Novartis submitted in August 2009 answers to a Complete Response letter received earlier in the year from the FDA requesting additional information on the submission's clinical and CMC (Chemistry Manufacturing and Control) sections. No new clinical trials were required. A European Union regulatory decision is expected in 2010 for use in adolescents (from age 11) and adults. Trials are underway in other age groups, including as young as two months, to protect against serogroups A, C, W-135 and Y found with this serious bacterial infection.

This release contains certain forward-looking statements relating to the Group's business, which can be identified by terminology such as "momentum," "on track," "expect," "pipeline," "potential," "strategic," "long-term," "set," "expected," "growth platform," "upcoming," "aims," "outlook", "expects," "could," "will," "planned," "risk," "pending," "potentially," or similar expressions, 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, or potential future sales or earnings of the Novartis Group or any of its divisions or business units; or regarding the potential acquisition of any business by Novartis; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements. Such forward-looking statements reflect the current views of the Group regarding future events, and involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such 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 existing products in any market, or that such products will achieve any particular revenue levels. Nor can there be any guarantee that the Novartis Group, or any of its divisions or business units, will achieve any particular financial results. Neither can there be any guarantee that the proposed acquisition of any business will be completed in the expected form or within the expected time frame or at all. Nor can there be any guarantee that Novartis will be able to realize any of the potential synergies, strategic benefits or opportunities as a result of the proposed acquisition. In particular, management's expectations could be affected by, among other things, the uncertain outcome and progress of the ongoing global financial and economic crisis, including uncertainties regarding future global exchange rates and uncertainties regarding future demand for our products; uncertainties involved in the development of new pharmaceutical products; unexpected clinical trial results, including additional analysis of existing clinical data or unexpected new clinical data; unexpected regulatory actions or delays or government regulation generally; the Group's ability to obtain or maintain patent or other proprietary intellectual property protection; uncertainties regarding actual or potential legal proceedings, including, among others, product liability litigation, litigation regarding sales and marketing practices, government investigations and intellectual property disputes; competition in general; government, industry, and general public pricing and other political pressures; the impact that the foregoing factors could have on the values attributed to the Group's assets and liabilities as recorded in the Group's consolidated balance sheet; and other risks and factors referred to in Novartis AG's current Form 20-F on file with the US Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. 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.

About Novartis
Novartis provides healthcare solutions that address the evolving needs of patients and societies. Focused solely on healthcare, Novartis offers a diversified portfolio to best meet these needs: innovative medicines, cost-saving generic pharmaceuticals, preventive vaccines, diagnostic tools and consumer health products. Novartis is the only company with leading positions in these areas. In 2008, the Group's continuing operations achieved net sales of USD 41.5 billion and net income of USD 8.2 billion. Approximately USD 7.2 billion was invested in R&D activities throughout the Group. Headquartered in Basel, Switzerland, Novartis Group companies employ approximately 99,000 full-time-equivalent associates and operate in more than 140 countries around the world. For more information, please visit