PRESS RELEASE: Novartis delivers record earnings in first nine months of 2007

Novartis delivers record earnings in first nine months of 2007 thanks to strong operational performance and divestment gains

Strong operational performance for Group continuing operations:

  • Nine-month net sales up 13% to USD 28.1 billion (+9% local currencies) driven by all divisions, particularly Vaccines and Diagnostics and Sandoz
  • Operating income rises 9% to USD 6.5 billion, excluding a one-time incremental environmental provision of USD 590 million to cover worldwide remediation plans
  • 14 positive US and EU regulatory decisions so far in 2007; launches underway for Tekturna/Rasilez, Exforge, Lucentis, Galvus, Exelon Patch, Aclasta/Reclast and Tasigna
  • To expand management experience and provide fresh impetus, Joe Jimenez becomes CEO of Pharmaceuticals and Thomas Ebeling named as CEO of Consumer Health
  • Group net income for first nine months doubles to USD 11.1 billion thanks to after-tax gains of USD 5.2 billion from Medical Nutrition and Gerber divestments
  • Novartis now focused solely on healthcare
  • Group on track for record operating and net income from continuing operations in 2007 (excluding environmental provision)
  • Elimination of 1,260 positions in US Pharma marketing and sales organization to adapt to new product portfolio, generating annual savings of USD 230 million

Basel, October 18, 2007 - Commenting on the results, Dr. Daniel Vasella, Chairman and CEO of Novartis said: "Following the successful divestments of the Medical Nutrition and Gerber businesses we are now strategically focused on healthcare products. Despite the anticipated weak quarter in Pharmaceuticals, we showed a strong operational performance driven by our other businesses. I am especially pleased that Vaccines and Diagnostics and Sandoz grew dynamically and improved profitability. This demonstrates that our focused diversification at least partially balances the risks recently seen in the pharmaceutical industry with heightened FDA demands and a more aggressive and risk-taking generics industry in the US. After losing several products to generics, Pharmaceuticals succeeded in launching many new medicines, including Lucentis, Exforge, Tekturna/Rasilez, Exelon Patch, Tasigna, Galvus and Aclasta/Reclast, creating the foundation for a new growth phase that will be visible starting in the second half of 2008. Our overall objective to bring new medicines to patients is reflected in the 14 positive US and European regulatory decisions already received in 2007. The announced changes at the divisional leadership level will not just broaden management experience but also bring fresh impetus and efficiency after a long and strong growth period."

All divisions - particularly Vaccines and Diagnostics and Sandoz - supported the expansion in Group net sales from continuing operations. Higher net sales volumes represented seven percentage points of growth, while acquisitions provided two percentage points and currency translation four percentage points. Price changes had no impact.
Europe, Latin America and key emerging markets all delivered strong growth, with the Oncology and Neuroscience franchises growing at double-digit rates and many of the top 10 brands maintaining No.1 leadership positions in their therapeutic areas. Diovan (USD 3.7 billion, +17% lc) and Gleevec/Glivec (USD 2.2 billion, +14% lc) both generated good growth, while the new brands Tekturna/Rasilez, Exforge, Exjade, Lucentis, and Xolair expanded rapidly. US net sales fell 3% as growth from many brands were offset by the Zelnorm suspension in March as well as generic competition for Lotrel, Lamisil and Famvir.
Vaccines and Diagnostics
Strong deliveries of vaccines for seasonal influenza to the US as well as vaccines for tick-borne encephalitis and pediatric vaccine components drove growth. On a comparable basis, net sales rose 49% (including net sales from Chiron before April 2006 acquisition).
Dynamic performance thanks mainly to the US and supported by recent launches of difficult-to-make generics, strong growth of the base portfolio and the Lotrel authorized generic. Several other countries contributed to growth, benefiting from initiatives in emerging growth markets and Western Europe.
Consumer Health continuing operations
OTC and Animal Health each delivered double-digit gains thanks to a focus on strategic brands, new product launches and expansion in emerging markets and Japan. CIBA Vision net sales rose as contact lens deliveries were resumed in 2007 following recent product shortages.

Operating income - Nine months to Septermber 30

Excluding the Corporate expense of USD 590 million to increase environmental provisions, operating income from continuing operations rose 9%.
Major investments in new product launches and late-stage clinical trials as well as lost US operating income from Lotrel, Zelnorm and Lamisil were among the factors leading to an only modest increase in operating income and a decline in the operating margin to 28.9 % of net sales. R&D investments were up 20% and represented 20.4% of net sales, up 1.9 percentage points from the 2006 period. Marketing & Sales expenses as a percentage of net sales rose 0.9 percentage points to support the new brands Exjade, Lucentis, Exforge, Tekturna/Rasilez and Aclasta/Reclast. Cost of Goods Sold was negatively impacted by an intangible asset impairment charge of USD 320 million following the start of US generic competition for Famvir. However, Other Income & Expense improved from one-time gains mainly related to the sale of equity investments and a launch provision reversal for Tekturna/Rasilez. Excluding exceptional items and the amortization of intangible assets in both periods, adjusted operating income rose 5% and the operating margin was 31.6%.
Vaccines and Diagnostics
The strong expansion, particularly in seasonal influenza vaccines, led to operating income of USD 179 million. Adjusting for legal settlement gains of USD 83 million as well as for restructuring charges and acquisition-related amortization of intangible assets resulted in adjusted operating income of USD 323 million.
Advancing sharply faster than net sales growth, operating income benefited from ongoing improvements in sales volumes thanks to new product launches and efficiency improvements throughout the division, with the operating margin rising to 15.2%. Excluding exceptional items and the amortization of intangible assets in both periods, adjusted operating income rose 19% and the adjusted operating margin was 20.8%.
Consumer Health continuing operations
On the back of a solid performance, significant investments were made throughout the division in R&D and marketing to support new product launches and geographic expansion.

Third quarter
Net sales

Sandoz, Vaccines and Diagnostics and Consumer Health all delivered strong growth, helping to offset the decline in Pharmaceuticals in the US market. The expansion in Group net sales from continuing operations came from five percentage points of higher sales volumes, while acquisitions added one percentage point and currency translation had a positive impact of four percentage points. Net price changes led to a decline of one percentage point.
Strong growth in key regions - particularly in Europe, Latin America and emerging growth markets - was offset by the loss of Zelnorm, Lotrel, Lamisil and Famvir in the US, where net sales declined 17%. The leading brands Diovan (USD 1.3 billion, +14% lc), Gleevec/Glivec (USD 783 million, +14% lc), Sandostatin and Femara were supported by increasing contributions from new products including Tekturna/Rasilez, Exforge, Exjade, Lucentis, and Xolair, had combined net sales of about USD 300 million in the quarter.
Vaccines and Diagnostics
Seasonal influenza vaccine deliveries occurred earlier for the 2007/2008 flu season and were sharply higher for the current season than in the year-ago period. Diagnostics delivered growth from market share expansion in Europe and the West Nile Virus test.
Dynamic expansion driven by recently launched products in the US increasing at a fast pace. Key US contributors were authorized versions of Lotrel and ondansetron (Zofran®)[1] as well as generics of the difficult-to-make products metoprolol succinate ER (Toprol-XL®)[1] and cefdinir (Omnicef®)[1]. Other top regions were Eastern Europe, Asia and Latin America.
Consumer Health continuing operations
OTC and Animal Health both delivered robust growth, leading to the overall double-digit expansion. The start of the "cough and cold" season in the US underpinned OTC, while new product launches in Europe and recent entry in Japan further supported the performance. Animal Health benefited from the integration of Sankyo Lifetech.

Operating income - Third quarter

Operating income from continuing operations rose 3% when excluding the USD 590 million one-time increase in Corporate environmental liability provisions.
Operating income was heavily impacted by the loss of contributions from Zelnorm, Lotrel and Lamisil in the US and the USD 320 million impairment charge for Famvir as well as investments in new launches and late-stage development compounds. Marketing & Sales investments rose 1.1 percentage points as a percentage of net sales over the 2006 quarter to support investments in Tekturna/Rasilez, Exforge and Aclasta/Reclast. R&D expenses were up 1.2 percentage points as a percentage of net sales for late-stage trials, including QAB149, FTY720, Galvus, AGO178 and MFF258. Other Income & Expense contributed 2.9 percentage points, thanks to USD 166 million in gains from the sale of Tanox shares and product divestments. Excluding exceptional items and the amortization of intangible assets in both periods, operating income fell 3% and the operating margin was 31.4%.
Vaccines and Diagnostics
Underlying operating income of USD 246 million reflected the dynamic increase in sales of seasonal influenza vaccines to the US and shipments occurring earlier than in 2006. Reported operating income includes USD 74 million in restructuring and acquisition-related amortization charges.
Excellent underlying improvement thanks to ongoing volume growth and new product launches. Operational improvements in manufacturing and efficiencies in Marketing & Sales further supported growth. Excluding exceptional items and amortization of intangible assets in both periods, operating income rose 28% and the adjusted operating margin was 19.2%.
Consumer Health continuing operations  
Investments for several new product launches and expansion into emerging markets and Japan led to operating income growing at a slower rate than net sales.

First nine months

Income from associated companies
In the third quarter, income from associated companies was USD 116 million, up 32% from USD 88 million in the year-ago period. The Roche investment contributed USD 113 million, representing an anticipated share of USD 144 million from Roche's 2007 third quarter net income, which was offset by USD 31 million for amortization of intangible assets. In the first nine months, income was USD 308 million compared to USD 193 million in the 2006 period, which included one-time charges for the Chiron acquisition.
Financial income, net
Net financial income in the third quarter was USD 43 million compared to a loss of USD 4 million in the 2006 third quarter, reflecting good currency management in challenging conditions and additional returns from increased liquidity due to divestitures. In the first nine months, net financial income was USD 110 million, more than double the income from the 2006 period.
Group continuing operations for the first nine months of 2007 had a tax rate of 11.0%, down from 15.1% in the prior-year period due to factors that included reduced profits in the US, the environmental liability provision, a reduction of the German corporate tax rate from 37.5% to 28.5% and the deferred tax impact of legal restructurings for the Chiron acquisition. Many of these one-time factors occurred in the 2007 third quarter, leading to a tax rate of 2.3% for the period.
Net income from discontinued operations
Net income from discontinued operations was USD 5.4 billion, which reflects the pre-tax divestment gain of USD 5.8 billion (USD 5.2 billion after taxes) from the sale of Medical Nutrition and Gerber as well as net income before their divestment.
Balance sheet
The Group's equity rose to USD 49.5 billion at September 30, 2007, from USD 41.3 billion at December 31, 2006. The increase reflected nine-month net income of USD 11.1 billion, actuarial gains from employee benefit plans of USD 0.9 billion, share-based compensation of USD 0.4 billion and USD 1.4 billion in currency translation gains that more than offset the dividend payment of USD 2.6 billion and net share repurchases of USD 3.3 billion.
Thanks to the divestment proceeds, net liquidity rose to USD 7.3 billion from net debt of USD 0.7 billion at the end of 2006. The debt/equity ratio improved to 0.15:1 compared to 0.18:1 at the end of 2006. Utilizing these proceeds and the Group's strong free cash flow, Novartis plans to complete the repurchase of up to USD 4 billion of shares by the next Annual General Meeting in February 2008. Shares worth USD 3.0 billion were repurchased in the first nine months of 2007, including USD 2.2 billion during the third quarter, via a second trading line on the SWX Swiss Exchange.
Novartis is one of the few non-financial services companies worldwide to have attained the highest credit ratings from Standard & Poor's, Moody's and Fitch, the three benchmark rating agencies. S&P has rated Novartis as AAA for long-term maturities and as A1+ for short-term maturities. Moody's has rated the Group as Aaa and P1, respectively, while Fitch has rated Novartis as AAA for long-term maturities and as F1+ for short-term maturities.
Cash flow
For the first nine months, cash flow from continuing operating activities rose USD 0.3 billion to USD 6.2 billion. Net cash used in financing activities from continuing operating activities was USD 6.2 billion, mainly the result of the USD 2.6 billion dividend payment and USD 3.1 billion for the net purchase of treasury shares. For continuing operations in the first nine months, free cash flow after dividends was USD 1.7  billion, down from USD 2.4 billion in the 2006 period mainly due to the higher dividend and higher working capital requirements to support the business expansion.
Increase of provisions for worldwide environmental liabilities
Novartis has increased its provisions for worldwide environmental liabilities linked mostly to previously owned businesses by USD 590 million following a review completed in the 2007 third quarter. This increase in Corporate provisions includes the creation of a Swiss foundation with capital of CHF 200 million to finance the Novartis-related share of any potential remediation costs including landfills in the Basel region (including Switzerland, France and Germany). Assessments are expected to be completed shortly in coordination with various governments, which are responsible for the supervision and decision-making process for any remediation actions. This new foundation underscores the commitment of Novartis to sustainable and appropriate solutions.

Laying the foundation for future growth
The Pharmaceuticals division is proceeding with a reorganization of its Development organization, aiming to strengthen project focus, integrating decision making at the therapeutic franchise level and simplifying the development governance.
In a second initiative, Novartis Biologics is being established as a focused unit to accelerate and optimize the potential of research and development of innovative biologic medicines. This unit will unify and expand the expertise within Novartis by bringing together the key elements necessary for fast and high-quality R&D activities and to help attract top talent. Biologics comprise 25% of the pre-clinical research pipeline at Novartis and are increasingly a priority in R&D activities.
In the US, immediate actions are underway to strengthen and streamline the pharmaceuticals organization. These include a reduction of about 240 positions in headquarters functions, while the US sales force will be reduced by approximately 510 Novartis and 510 third-party representatives. The majority of these reductions will be accomplished by not filling vacant positions, while all reductions will be handled in a socially responsible manner. This initiative will lead to cost savings of approximately USD 230 million in 2008.
On a Group-wide level, the organization will be delayered and simplified; decision making will be decentralized wherever appropriate and shared functions centralized, such as in procurement and IT infrastructure. Over a period of two years, this will result in significant savings. These actions will enhance the Group's competitiveness and its ability to move rapidly to best meet the needs of patients and customers in a rapidly evolving environment.
Management changes
To expand experience at the top management level and to provide fresh impetus, Thomas Ebeling will now lead the Consumer Health Division and Joe Jimenez will lead the Pharmaceuticals Division. Thomas Ebeling, who has done an excellent job in managing Pharmaceuticals to high levels of performance, will now take over the challenge of developing the Consumer Health business into a world-class leader and a more significant part of the Group's broad healthcare portfolio. Joe Jimenez will, in turn, take over responsibility of transforming Pharmaceuticals as the business adapts to new market conditions. These changes are effective immediately.

Group outlook
(Continuing operations, excludes exceptional divestment gains and environmental provision increase. Barring any unforeseen events)
Novartis has made significant progress during 2007 to focus on its strategic healthcare portfolio as well as gain regulatory approvals and launch new medicines. Strong growth prospects for the Group's portfolio are expected to underpin a new growth phase starting to become visible in the second half of 2008 and positioning Novartis for further years of record results.
The Pharmaceuticals Division's net sales are negatively impacted during 2007 and the first half of 2008 by the suspension of Zelnorm as well as US generic competition for Lotrel, Lamisil, Famvir and Trileptal. Combined annual US net sales in 2006 for these products were approximately USD 3.1 billion. As a result, Novartis expects mid-single-digit growth in 2007 net sales for Group continuing operations and low-single-digit growth in the Pharmaceuticals Division, both in local currencies.
Novartis reaffirms expectations for record operating and net income from continuing operations in 2007 (excluding exceptional divestment gains and Corporate environmental provision increase).
Pharmaceuticals product performance and pipeline update
Novartis has a highly competitive industry position thanks to the ongoing dynamic growth of Diovan and Gleevec/Glivec as well as approvals for several new brands and one of the most respected pipelines with 139 projects in clinical development.
A total of 14 positive regulatory decisions have been achieved to date in 2007 in the US and Europe. These include US/EU approvals for Tekturna/Rasilez and Exforge (hypertension), Exelon Patch (Alzheimer's) and Aclasta/Reclast (osteoporosis). EU approvals were also received for Lucentis (age-related macular degeneration) and Tyzeka/Sebivo (hepatitis B).
During the third quarter, European regulators approved Galvus as a new oral therapy for patients with type 2 diabetes, while European approval is expected by the end of the year for Eucreas as a single-tablet combination of Galvus and metformin.
Following a positive opinion in September from European regulators, European Union approval is expected by the end of the year for Tasigna, a new therapy for chronic myeloid leukemia patients not responding to Gleevec/Glivec. Swiss approval was also granted this year. A decision on the US submission is expected by the end of 2007.
Several late-stage development compounds are on target toward regulatory submissions. These include FTY720 (multiple sclerosis), QAB149 (respiratory diseases), AGO178 (depression), RAD001 (cancer), ABF656 (hepatitis C) and SOM 230 (Cushing's disease).

Pharmaceuticals products
Note: All net sales growth figures refer to year-to-date worldwide performance in local currencies
Diovan (USD 3.7 billion, +17% lc) maintained its strong growth profile as the world's No. 1 branded high blood pressure medicine thanks to double-digit net sales growth in the US, Japan and Latin America. Diovan has achieved a 40% share of its market segment in the US among angiotensin receptor blockers (ARBs) and has been growing faster than the US anti-hypertensive market. Co-Diovan/Diovan HCT, a single-tablet combination with a diuretic, is now the No. 1 branded antihypertension combination therapy in the US and has benefited worldwide from increasing use of multiple therapies to help patients reach treatment goals.
Gleevec/Glivec (USD 2.2 billion, +14% lc), a targeted therapy for certain forms of chronic myeloid leukemia (CML) and gastrointestinal stromal tumors (GIST), expanded net sales based on improved survival rates for patients, expansion of the GIST market and use in rare diseases. Competition has also expanded the CML market, but it had little impact on underlying demand. During the third quarter, the FDA approved updated labeling that includes five years of data demonstrating an estimated overall survival rate of 89.4% in CML patients, confirming the generally well-tolerated safety profile in these patients.
Zometa (USD 954 million, -2% lc), an intravenous bisphosphonate therapy for patients with cancer that has  spread to the bones, has been affected by overall slowing growth for this class of medicines due to patients receiving less frequent treatments and for a shorter course of therapy. However, use in patients with lung and prostate cancers continues to rise.
Sandostatin (USD 749 million, +8% lc), for patients with acromegaly and various tumors, has delivered consistent growth amid increasing use of the long-acting-release Sandostatin LAR version, which accounts for about 85% of the brand's worldwide net sales. New competition in acromegaly is expected to start in the US in the 2007 fourth quarter.
Neoral/Sandimmun (USD 700 million, -1% lc), for organ transplantation, has maintained stable worldwide net sales despite ongoing generic competition in the US thanks to its pharmacokinetic profile and reliability.
Femara (USD 679 million, +27% lc), an oral treatment for women with hormone-sensitive breast cancer, delivered ongoing dynamic growth primarily thanks to expanded use in the early adjuvant indication in the US and Europe as well as from the 2006 launch in Japan. Femara has been outpacing competitors and gaining market share in the aromatase inhibitor segment due to its unique clinical benefits. More than 50 countries have approved Femara for the early adjuvant treatment of women immediately following breast cancer surgery.
Lotrel (USD 660 million, -34% lc, only in US) has been negatively affected since May 2007 following the "at risk" launch of a generic copy by Teva Pharmaceuticals despite a valid US patent until 2017. Sandoz has launched an authorized generic version of this high blood pressure medicine. A trial date has not been set for the ongoing lawsuit against Teva, which risks potentially significant damages if Novartis prevails.
Trileptal (USD 594 million, +10% lc), a treatment for epilepsy seizures, has continued to generate growth but is now facing US generic competition.
Lamisil (USD 529 million, -31% lc), a treatment for fungal nail infections, was negatively impacted by the start of US generics in July. Generic competition also affected sales in  Europe and Japan.
Exelon (USD 461 million, +14%), for mild to moderate forms of Alzheimer's disease and dementia associated with Parkinson's disease, maintained excellent growth. Exelon Patch was launched in the US and approved in Europe in the third quarter. The constant delivery of Exelon through the patch showed equivalent efficacy at the target dose to the highest doses of capsules but with three times fewer reports of nausea or vomiting.
Exjade (USD 255million, +167% lc) has delivered dynamic growth - particularly in Europe and the Middle East - since its first launch in 2005 based on its status as the first once-daily oral iron chelator for the treatment of chronic iron overload due to blood transfusion. Over 85 countries have approved Exjade, which is used to treat iron overload in patients with various blood disorders that require blood transfusion support. In June, it was submitted in Japan for approval a year ahead of schedule.
Lucentis (USD 223 million), for the eye disease "wet" age-related macular degeneration (AMD), was launched in the first European markets after approval in January and has experienced rapid growth, especially in Germany, France and Switzerland. Lucentis is the only treatment proven in clinical trials to maintain and improve vision in these patients, the leading cause of blindness in people over age 50. Genentech holds the US rights.
Xolair (USD 100 million), for moderate to severe allergic asthma, did particularly well in France, Spain and Greece. Novartis co-promotes Xolair with Genentech in the US and shares a portion of operating income. Xolair had nine-month US net sales of USD 352 million.
Zelnorm/Zelmac (USD 83 million, -80% lc), for irritable bowel syndrome and chronic constipation, continued to be negatively affected by the suspension of marketing and sales in March 2007 in the US while complying with the FDA's request to review cardiovascular safety data. It has also been suspended or withdrawn in several other countries. A treatment access program was started in the US to provide Zelnorm to appropriate patients.  Novartis continues to believe that Zelnorm/Zelmac offers important benefits to appropriate patients, and discussions continue with health authorities.
Prexige (USD 81 million), an oral COX-2 inhibitor for osteoarthritic pain, is available in 30 countries. It was recently withdrawn in Australia and Canada, and suspended in Turkey, based on post-marketing reports of serious liver side effects associated with long-term use of high doses. In September, a 100 mg dose received a "not approvable" letter from the FDA despite it being one of the most studied COX-2 inhibitors with a favorable benefit/risk profile. Novartis believes Prexige continues to be a valuable therapy option for appropriate patients, particularly those at risk of serious gastrointestinal complications, and will continue discussions with the FDA and other health authorities.
Exforge (USD 52 million), a single tablet combining the angiotensin receptor blocker valsartan (Diovan) and the calcium channel blocker amlodipine, has outpaced the US and European launches of other high blood pressure combination medicines due to its unique combination that involves two of the most prescribed high blood pressure medicines.
Tekturna/Rasilez (USD 20 million), the first new type of high blood pressure medicine in more than a decade, has performed well in a competitive US marketplace following its approval and launch in March. European Union approval was received in August, and initial launches are underway. Known as Tekturna in the US and as Rasilez in other markets, key drivers have been broad clinical data showing its efficacy and safety, recognition of the need for new high blood pressure medicines and increasing US formulary reimbursement coverage. This medicine was discovered by Novartis and developed in collaboration with Speedel.
Aclasta/Reclast was launched in September in the US as a 15-minute, once-yearly infusion for women with postmenopausal osteoporosis. Approved in the EU in October, the initial launches were started in Germany and the UK. The New England Journal of Medicine published in September the results of the first-ever clinical study involving more than 2,100 men and women with osteoporosis who had suffered a hip fracture, showing that Aclasta/Reclast reduces the risk of further fractures and death in the studied population.
Research & Development update
Tasigna (nilotinib) received a positive opinion recommending European approval and Swiss approval in the third quarter as a therapy for patients with a certain form of chronic myeloid leukemia (CML) resistant or intolerant to treatment with Gleevec/Glivec (imatinib). A decision on the US submission is expected in 2007, while a submission for Japanese approval was completed this year. Phase III studies are underway in newly diagnosed CML patients and patients responding sub-optimally to other therapies. A registration study is also underway in gastrointestinal stromal tumors (GIST). Tasigna and Gleevec/Glivec inhibit Bcr-Abl, the cause of Philadelphia chromosome-positive chronic myeloid leukemia (Ph+ CML). Tasigna was designed to be a more selective inhibitor of Bcr-Abl and its mutations.
Galvus (vildagliptin), a new oral once-daily treatment for type 2 diabetes, received European Union approval in September, while a single-tablet combination with the oral anti-diabetes medicine metformin with the brand name Eucreas also received a positive regulatory opinion in September recommending European Union approval. In the US, Novartis is continuing discussions with the FDA on steps needed for approval after having received an "approvable letter" in February 2007 that included a request for additional data from clinical trials.
FTY720 (fingolimod) has completed enrollment in the pivotal Phase III trials for relapsing forms of multiple sclerosis (MS). These are the FREEDOMS trial, a two-year placebo-controlled trial measuring reductions in relapse frequency and disability progression in MS patients and the one-year TRANFORMS trial comparing FTY720 with interferon beta-1a (Avonex®). The extension of a Phase II trial has shown sustained clinical benefits, indicating FTY720 could provide an important new option for the estimated 2.5 million people worldwide with this disabling neurological disease. Submission is on track for 2009.
RAD001 (everolimus), a once-daily oral inhibitor of the mTOR pathway that has demonstrated broad clinical activity in multiple tumors, achieved an important milestone in the third quarter by completing enrollment in the metastatic renal cell carcinoma registration trial. Registration trials are also underway in chemotherapy-refractory pancreatic islet cell tumors (pICT) in the first- and second-line setting and for chemo-refractory carcinoid tumors. RAD001 acts by directly inhibiting tumor cell growth and metabolism as well as the formation of new blood vessels (angiogenesis). First submissions could be as early as 2008.
QAB149 (indacaterol), a once-daily long-acting beta-agonist with 24-hour bronchodilation and a fast onset of action, has completed enrollment in a pivotal Phase III monotherapy trial in chronic obstructive pulmonary disease (COPD). QAB149 is being developed with other respiratory medicines and development compounds for COPD and asthma.
ABF656 (Albuferon®) (albumin interferon alpha-2b) has completed enrollment and initial dosing ahead of schedule in ACHIEVE 1, the first of two pivotal Phase III trials for this long-acting interferon for use in combination with ribavirin in treatment-naïve patients with the liver disease chronic hepatitis C. Phase II results suggest it may offer efficacy at least comparable to peginterferon alfa-2a, with improved dosing convenience, comparable safety and possibly less impairment of quality of life. Novartis and Human Genome Sciences will co-promote Albuferon in the US, while Novartis will have exclusive rights in the rest of the world. The first regulatory submission is planned for 2009.

This release contains certain forward-looking statements relating to the Group's business, which can be identified by the use of forward-looking terminology such as "outlook", "expected", "will", "on track", "set", "intends", "prospects", "expectations", "anticipated", "potential", "may", "planned", "potentially", "believes", "pending", "promising", "pipeline", "approvable", "plans", "could", "can", or similar expressions, or by express or implied discussions regarding potential future revenues from any particular products, or potential future sales or earnings of the Novartis Group or any of its divisions or business units; potential new products, or potential new indications for existing products, or regarding potential future revenues from any such products; or by discussions of strategy, plans, expectations or intentions. Such statements reflect the current views of management with respect to future events and are subject to certain known and unknown risks, uncertainties, assumptions 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 particular products will reach any particular sales levels. Neither can there be any guarantees that the Novartis Group, or any of its divisions or business units, will achieve any particular financial results. Nor can there be any 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 they will achieve any particular revenue levels. In particular, management's expectations could be affected by, among other things, 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, including the uncertainties involved in the US litigation process; competition in general; government, industry, and general public pricing and other political pressures; and other risks and factors referred to in the Novartis Group'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 this press release as of this date and does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.
About Novartis
Novartis AG (NYSE: NVS) is a world leader in offering medicines to protect health, cure disease and improve well-being. Our goal is to discover, develop and successfully market innovative products to treat patients, ease suffering and enhance the quality of life. We are strengthening our medicine-based portfolio, which is focused on strategic growth platforms in innovation-driven pharmaceuticals, high-quality and low-cost generics, human vaccines and leading self-medication OTC brands. Novartis is the only company with leadership positions in these areas. In 2006, the Group's businesses achieved net sales of USD 37.0 billion and net income of USD 7.2 billion. Approximately USD 5.4 billion was invested in R&D. Headquartered in Basel, Switzerland, Novartis Group companies employ approximately 100,000 associates and operate in over 140 countries around the world. For more information, please visit