Q3 2019 Results Investor Presentation October 22, 2019 Disclaimer
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Novartis AG Investor Relations Q3 2019 Results Investor presentation October 22, 2019 Disclaimer This presentation contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, that can generally be identified by words such as “potential,” “expected,” “will,” “planned,” “pipeline,” “outlook,” or similar expressions, or by express or implied discussions regarding potential new products, potential new indications for existing products, potential product launches, or regarding potential future revenues from any such products; or regarding the potential outcome, or financial or other impact on Novartis, of the proposed divestiture of certain portions of our Sandoz Division business in the US; or regarding the potential impact of the completion of the up to USD 5 billion share buyback; or regarding potential future sales or earnings of the Group or any of its divisions or potential shareholder returns; or by discussions of strategy, plans, expectations or intentions. 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. You should not place undue reliance on these statements. In particular, our expectations could be affected by, among other things: global trends toward healthcare cost containment, including ongoing government, payor and general public pricing and reimbursement pressures and requirements for increased pricing transparency; regulatory actions or delays or government regulation generally, including potential regulatory actions or delays with respect to the proposed transactions or the development of the products described in this presentation; the potential that the proposed divestiture of certain portions of our Sandoz Division business in the US may not be completed in the expected time frame, or at all; the potential that the strategic benefits, synergies or opportunities expected from the proposed divestiture of certain portions of our Sandoz Division business in the US, and other transactions described, may not be realized or may be more difficult or take longer to realize than expected; the inherent uncertainties involved in predicting shareholder returns; the uncertainties inherent in the research and development of new healthcare products, including clinical trial results and additional analysis of existing clinical data; our ability to obtain or maintain proprietary intellectual property protection, including the ultimate extent of the impact on Novartis of the loss of patent protection and exclusivity on key products that commenced in prior years and will continue this year; safety, quality or manufacturing issues; uncertainties involved in the development or adoption of potentially transformational technologies and business models; uncertainties regarding actual or potential legal proceedings, including, among others, product liability litigation, disputes and litigation with business partners or business collaborators, government investigations generally, litigation and investigations regarding sales and marketing practices, and intellectual property disputes; our performance on environmental, social and governance measures; general political, economic and trade conditions, including uncertainties regarding the effects of ongoing instability in various parts of the world; uncertainties regarding future global exchange rates; uncertainties regarding future demand for our products; uncertainties regarding potential significant breaches of data security or data privacy, or disruptions of our 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. Eylea® is a registered trademark of Regeneron Pharmaceuticals, Inc. 2 | Novartis Q3 2019 Results | October 22, 2019 | Investor Presentation Vas Narasimhan Chief Executive Officer Strong Q3 with double digit top and bottom line growth, margin expansion and major innovation milestones Q3 operational performance Innovation performance Continuing operations1 growth vs. PY in % cc 2 Launched in US Ofatumumab Compelling efficacy in RMS Met primary endpoints in nr-axSpA +18% +1.4% +13% pts Achieved OS in 2nd Ph3 study Sales Core OpInc Core margin Clinically important benefit in HFpEF sub-groups3 Sales & Core OpInc guidance increased QVM149 / QMF149 Positive Ph3 results in asthma OS – overall survival RMS – relapsing forms of multiple sclerosis 1. Continuing operations as defined on page 44 of the Condensed Interim Financial Report, excludes Alcon, includes the businesses of Innovative Medicines and Sandoz (including the US generic oral solids and dermatology portfolio), as well as the continuing corporate functions 2. Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 56 of the Condensed Interim Financial Report 3. Study narrowly missed primary endpoint, but showed benefit in pre-specified large subgroups including women and patients with lower ejection fraction 4 | Novartis Q3 2019 Results | October 22, 2019 | Investor Presentation Key growth drivers represent 28% of 9M Innovative Medicines sales and contributed +8%pts to Novartis sales growth Key growth drivers sales in USD m Growth contribution to continuing operations sales (% of Innovative Medicines sales) (% points) 28% 9% 21% 2% 1% 16% 10% 8% 9M 2016 9M 2017 9M 2018 9M 2019 Growth drivers Gx erosion Others CC growth volume 9M 2019 Cosentyx® Tafinlar®+Mekinist® Kisqali® Xiidra® Entresto® Xolair® Kymriah® Piqray® Promacta® Lutathera® Zolgensma® 5 | Novartis Q3 2019 Results | October 22, 2019 | Investor Presentation Strong sales performance of key growth drivers Key growth drivers Q3 2019 9M 2019 Sales Growth vs. PY Growth vs. PY Sales Growth vs. PY USD Million USD Million cc USD Million cc 937 187 27% 2,586 30% 160 160 nm 175 nm 430 159 61% 1,208 75% 102 102 nm 102 nm 380 85 31% 1,036 26% Lutathera® 119 63 116% 334 nm 79 59 nm 182 nm 345 54 22% 982 22% 123 51 76% 325 92% 299 44 22% 870 20% 43 43 nm 49 nm NM – not meaningful 6 | Novartis Q3 2019 Results | October 22, 2019 | Investor Presentation Cosentyx® sales driven by strong demand across indications and geographies Cosentyx® revenues Strong momentum in growing US dermatology USD m, % cc market1 . Dermatology market TRx +17% YoY, driven by novel agents +27% . Cosentyx® TRx +32% YoY, despite intensifying competition 937 750 Leading expansion in growing US SpA market2 336 Ex-US 291 . SpA market TRx +15% YoY . Cosentyx® major contributor to market growth, TRx +36% YoY 601 US 459 . Positive CHMP opinion for up-titration to 300mg in AS . PREVENT met primary endpoints at 16 and 52 weeks Q3 2018 Q3 2019 1. IQVIA National Prescription Audit for Dermatology, WE 09/27/2019 2. IQVIA National Prescription Audit for Rheumatology, WE 09/27/2019. Rx for SpA indications. Market includes Cimzia®, Enbrel®, Humira®, Simponi®, Stelara®, Taltz® and Cosentyx® 7 | Novartis Q3 2019 Results | October 22, 2019 | Investor Presentation Nr-axSpA indication builds Cosentyx® leading position in SpA, potentially doubling patient population in axSpA1 Significant potential for growth Well-positioned for further growth across SpA populations (US & EU5)2 PREVENT Could add nr-axSpA to label; submissions 3.2m ongoing 1.7m 1.7m Undiagnosed MAXIMISE Proved for the first-time benefits in axial Diagnosed manifestations of PsA Biologics EXCEED Assessing benefits in joints vs. Humira® – treated expected H1 2020 PsA AS nr-axSpA Other clinical Including HS, pediatric PsO, pediatric JIA Biologics 19-27% 12-21% 4-8% trials and Ph2 GCA study, on track penetration3 Please see appendix for references All trademarks are the property of their respective owners HS – Hidradenitis Suppurativa PsO – Psoriasis JIA – Juvenile Idiopathic Arthritis GCA – Giant Cell Arthritis 8 | Novartis Q3 2019 Results | October 22, 2019 | Investor Presentation Entresto® solidifying position as standard of care in HFrEF with >USD 1.2bn sales YTD Entresto® revenues Entresto® weekly US TRx USD m, % cc 2017-19, thousands +61% 45 430 40 +51% 35 271 210 Ex-US 30 120 25 220 US 20 Q3 Q3 151 2018 2019 0 Q3 2018 Q3 2019 11/17 01/18 03/18 05/18 07/18 09/18 11/18 01/19 03/19 05/19 07/19 09/19 11/19 . Solid QoQ demand growth US and ex-US . PROVE-HF and EVALUATE-HF provide mechanistic support for Entresto® efficacy1 . FDA approved pediatric indication in Q4 HFrEF – heart failure with reduced ejection fraction 1. While several structural and functional echocardiographic measures versus enalapril showed improvement, EVALUATE didn’t meet the primary endpoint of change from baseline in aortic characteristic impedance at 12 weeks 9 | Novartis Q3 2019 Results | October 22, 2019 | Investor Presentation PARAGON-HF: clinically important effect against active comparator supports expansion of addressable population Total HF hospitalizations and CV death N= 4796 . Largest HFpEF outcomes trial on back of approved HFrEF indication . Despite narrow miss on primary