Novartis: Reimagining Medicine · PDF fileNovartis: Reimagining Medicine . Disclaimer This presentation contains forward-looking statements that can be ... quantitative analysis of

Joe Jimenez | CEO Novartis

J.P. Morgan Healthcare Conference | San Francisco | January 11, 2016

Novartis: Reimagining Medicine

Disclaimer

This presentation contains 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; regarding potential shareholder returns or credit ratings; regarding the potential financial or other impact on Novartis of the transactions with

GSK, Lilly or CSL, or regarding any potential strategic benefits, synergies or opportunities as a result of these transactions; or regarding potential future sales or

earnings of the Novartis Group or its divisions and associated companies; or by discussions of strategy, plans, expectations or intentions. You should not place

undue reliance on these statements. Such forward-looking statements are based on the current beliefs and expectations of management regarding future

events, and are subject to significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should

underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. There can be no guarantee

that any new products will be approved for sale in any market, or that any new indications will be approved for any existing products in any market, or that any

approvals which are obtained will be obtained at any particular time, or that any such products will achieve any particular revenue levels. Nor can there be any

guarantee that Novartis will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of the transactions with GSK, Lilly or

CSL. Neither can there be any guarantee that the Novartis Group, or any of its divisions or associated companies, will be commercially successful in the future,

will achieve any particular financial results, or achieve any particular credit rating or level of shareholder returns. Nor can there be any guarantee that the growth

acceleration plan under development at Alcon will be successfully developed or implemented, or will achieve its goals. In particular, management’s expectations

could be affected by, among other things, unexpected regulatory actions or delays or government regulation generally; the potential that the strategic benefits,

synergies or opportunities expected from the transactions with GSK, Lilly or CSL may not be realized or may take longer to realize than expected; the inherent

uncertainties involved in predicting shareholder returns or credit ratings; the uncertainties inherent in research and development, including unexpected clinical

trial results and additional analysis of existing clinical data; the Company’s ability to obtain or maintain proprietary inte llectual property protection, including the

ultimate extent of the impact on the Company of the loss of patent protection and exclusivity on key products which will continue this year; unexpected

manufacturing or quality issues; unexpected safety issues; global trends toward health care cost containment, including ongoing pricing pressures and ongoing

reimbursement challenges with payors; uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential product liabili ty

litigation, litigation and investigations regarding sales and marketing practices, government investigations and intellectual property disputes; general economic

and industry conditions, including uncertainties regarding the effects of the persistently weak economic and financial environment in many countries;

uncertainties regarding future global exchange rates; uncertainties regarding future demand for our products; uncertainties involved in the development of new

healthcare products; uncertainties regarding potential significant breaches of data security or disruptions of the Company’s information technology systems; and

other risks and factors referred to in Novartis AG’s current Form 20-F on file with the US Securities and Exchange Commission. Novartis is providing the

information in this presentation 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.

| JPM | J. Jimenez | 11 January 2016 | Novartis: Reimagining Medicine 2

Review of 2015

Forward look 2016

Our strategy in a changing environment


Agenda

Agenda

Review of 2015

Forward look 2016



Powerful trends are changing the healthcare landscape

~1 billion

Population to increase by

>500 million

Additional 50+ year olds

2 0 1 5 - 2 0 2 5

>70% of all illnesses

Chronic diseases

Source: Projections from UN; WHO


Healthcare spending to double1

Healthcare spending forecast to double as a result

1 Projected Global Healthcare Spend at current growth rates, expressed in nominal terms

Source: Economist intelligence Unit, World Bank, Global Insights, BMI, OECD, McKinsey Strategy & Trend Analytic Center

2x 2 0 1 5 - 2 0 2 5


Real world evidence

Health systems are demanding proof that our products

deliver what we promise...

Patient management services

Partnerships with payors

This is expected to increase pricing pressure and a shift toward ‘outcomes’


At the same time, competition is intensifying

More breakthrough

drugs and devices

Tech companies entering

healthcare


To succeed, industry leaders will need:

Science-based R&D and innovation power

Global scale

Broad partnerships to deliver outcomes


Our strategy to lead in this environment

To deliver

better

patient

outcomes

Science-

based

innovation

In

growing

areas of

healthcare


Science-based innovation

200 More than

R&D projects

underway

USD 9 billion

Over

Invested in R&D

in 2015

18 Major approvals

in US, EU, Japan

in 2015


To deliver better patient outcomes


Pharmaceuticals Alcon Sandoz

In growing areas of healthcare

#2 generic medicines

company worldwide

#2 pharmaceuticals

company worldwide1

#1 eye care

company worldwide

1 Rx sales excluding Gx & Major vaccines for top pharmacos

Source: Evaluate Pharma


Agenda

Review of 2015

Forward look 2016



18 major approvals

EntrestoTM & Cosentyx® launched

First BPCIA US Biosimilar

Core margin up 3.1 ppts1

Closed all deals

Smooth integration and separation

NBS up and running

NBS managed costs flat

Scaling up 5 global service centers

Quality - 98% 2015 inspections good or acceptable

The high points....

Increased profitability

1

Progressed Pipeline

2

Completed portfolio

transactions

3

Delivered Cross-divisional

synergies

4

Strengthened organization

5

1 9M 2015, including portfolio changes


2015 - a year of highs and lows for Novartis

Where we fell short

1 All growth shown vs. PY in constant currencies (cc)


Growth trajectory slowed in Q2:

• IOL competition

• Surgical equipment sales

• US generic competition

9M 20151

• Sales +1%

• Core Operating income -5%

The low points....

Our underlying performance was strong, although Fx

headwinds had a big impact,

Sales Core operating

income

+5% +10%

At Q3 results, we confirmed full year outlook for

continuing operations, barring unforeseen events

9M 2015 continuing operations1

1 All growth shown vs. PY in constant currencies (cc), an explanation of continuing operations can be found on page 42 of the Q3 2015 Condensed Interim Financial Report.


1 Increased

profitability

1.3

2.8

0

26

30

31

29

27

28

+3.1

29.1

Fx

-1.0

Sales and

Productivity

Portfolio

Transformation

9M 2014 Total

Group core ROS

26.0

Core Operating Income Margin USD at period rates

(in % pts)

Allowing us to deliver our margin improvement

commitment


1 Increased

profitability

9M 2015

Continuing

Operations core

ROS

We delivered on Entresto™ and Cosentyx® approvals

ahead of schedule and launches are underway

US, EU, JP approval for Psoriasis

EU approval for AS & PsA

>15,000 patients worldwide; 7% patient share in the US1

US and EU approval

Positive feedback from physicians on clinical experience

US: Sales modest to date, patient access expected to improve in 2016

1 Estimated share in psoriasis, patients on biologics only (IMS National Prescription Audit data)


2 Progressed

Pipeline

Our Immuno-Oncology portfolio now extends well

beyond checkpoint inhibitors

Immune boosting

STING

TIM-3

T-cell

modulation

GITR

PD-1

PD-L1

Het-IL15

Tumor

microenvironment

PD-1

PD-L1

LAG-3

Adenosine

receptor

TIM-3

GITR

CSF-1

TGFβ


CAR-T cells

CTL019

Note: Checkpoint inhibitors include PD-1, PD-L1, LAG-3 and TIM-3

2 Progressed

Pipeline

We now have 10 molecules in our pipeline, with a

focus on second generation immunotherapy

1 Target FIH1

Checkpoint

inhibitors

PD-1 ✓

LAG-3 ✓

TIM-3 ✓

2nd Generation

CSF-1 ✓

CART-19 ✓

Het-IL 15 ✓

Adenosine receptor ✓

TGFbeta 2016

STING 2016

GITR 2016

Combinations

PD-1 + LAG-3 ✓

PD-1 + TIM-3 2016

PD-1 + CSF-1 2016

1 Expected commencement of First-In-Human trial (CSF-1 dosed after previously being developed in another indication)


2 Progressed

Pipeline

We have also added therapeutic depth in neuroscience

EMA401; Neuropathic Pain

Ofatumumab; Multiple Sclerosis

Partnership in migraine (AMG 334) and

Alzheimer’s Disease (CNP520)


2 Progressed

Pipeline

Sandoz launched first biosimilar approved in the US

under BPCIA pathway, with strong pipeline

Chemotherapy induced febrile

neutropenia

1 Glatopa is not a biosimilar

Note: All trademarks are the property of their respective owners

Rheumatoid Arthritis

Psoriasis

Non-Hodgkin's Lymphoma

Chemotherapy induced febrile

neutropenia

Anaemia

Multiple sclerosis1


2 Progressed

Pipeline

Phase 3 / registration recruitment complete for all programs

8 major filings in next 3 years

Launched in US

Launched in US

Etanercept accepted by FDA/EMA

Peg-Filgrastim accepted by FDA Chemotherapy induced febrile

neutropenia

We completed our complex portfolio transactions

ahead of schedule

Divested

Vaccines

(ex. Flu)

Acquired Oncology

Divested Animal Health

Divested Flu

Vaccines

Joint Venture

OTC


3 Portfolio

Transactions

Making Novartis a stronger, more focused company

Innovation power to lead

Global scale

Well-positioned for future 61% 21%

18%

Continuing Operations1

Net Sales 2014, USD 52.2 bn

Pharmaceuticals

Sandoz

Alcon


1 An explanation of continuing operations can be found on page 42 of the Q3 2015 Condensed Interim Financial Report.

3 Portfolio

Transactions

Novartis Business Services (NBS) is building up 5

Global Service Centers

Five Novartis Global Service Centers are a cornerstone of NBS’ strategy


4 Cross-Divisional Synergies

Delivered strong Quality performance across our

~80 sites

192 Health Authority inspections in 2015

Includes 31 US FDA inspections

98% good or acceptable in 20151,2


1 100% pending acceptance of action plans for three inspections

2 An FDA Warning Letter issued in 2015 to Sandoz with respect to its sites in Kalwe and Turbhe, India, related to inspections conducted in 2014

5 Strengthened Organization

Where we fell short: Completed Alcon Diagnosis

We have conducted an

exhaustive and

quantitative analysis of

Alcon’s underlying issues

Listened to our customers 100+

surgeons, ophthalmologists, optometrists

Deep dive data analysis of market and

competitor benchmark data

Assessed impact of Alcon’s strategic

decisions over last decade


Turnaround actions to:

Increase innovation

Improve capabilities

Accelerate growth


Turnaround plan to be announced at Full Year

results

Agenda

Review of 2015

Forward look 2016



2016 expected to be a transition year for Novartis - but also big

opportunities for future growth


Facing historically high headwinds...

Glivec® patent expiration (~$2bn)

Heavy investment for launches

Investment in Alcon Turnaround

...but with big future growth opportunities

Cosentyx® & EntrestoTM uptake

Actions to return Alcon to growth

Begin to realize Biosimilars potential

In summary: Our 2016 Priorities

Strengthen

Innovation 2 o Improve pipeline across Divisions & ensure launch uptake

Deliver strong

Financial

Results 1

o Deliver performance, while absorbing Glivec® loss of

exclusivity

Capture

Cross-Divisional Synergies

4 o Execute NBS plans, and capture additional synergies

Build a

Higher-Performing Organization

5 o Strengthen quality, compliance and develop the best talent


Turnaround

Alcon

Performance 3 o Take action to return Alcon to growth

Q&A in Borgia Room

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Novartis: Reimagining Medicine · PDF fileNovartis: Reimagining Medicine . Disclaimer This presentation contains forward-looking statements that can be ... quantitative analysis of