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Novartis Annual Review 2018 | 1 Annual Review 2018 Novartis Annual Review 2018 | 1 Contents Chairman’s letter 2 CEO’s letter 3 Who we are 4 What we do 6 Key performance indicators consolidated highlights 8 Highlights 14 Performance Group performance 15 Division performance 17 Our priorities Unleash the power of our people 22 Deliver transformative innovation 26 – Key products in development 30 Embrace operational excellence 32 Go big on data and digital 38 Build trust with society 40 Our corporate governance approach 48 Our Board of Directors 50 Our Executive Committee 51 Compensation Report summary 54 Cover photo Dr. Helen Yifter, an Ethiopian endocrinologist, and one of her patients, Amina Shafi, a charcoal seller who is being treated for diabetes. About 3 million people in Ethiopia are diabetic, and the number is rising. Christian Schnell, an animal testing specialist, has for nearly 30 years used technology to improve the quality of research results and reduce stress for laboratory animals. His efforts contributed to a 50% decline in the number of animals used in lab testing at Novartis since 1990. 2 | Novartis Annual Review 2018 Chairman’s letter Dear shareholder, In 2018, Novartis strengthened its oper- development activities, we expect in- rity and ethical behavior across our ations, expanded its therapeutic plat- novative medical approaches in areas company, we have further strengthened forms, and accelerated its push into the such as gene therapy and immunology our risk and compliance structure and data and digital healthcare space. to hold the potential for the development improved our respective processes, Together, these steps are set to increase of curative therapies. In domains such including our approach toward the man- our ability to develop breakthrough as chimeric antigen receptor T-cell agement of cyber risk. therapies, improve patient outcomes, (CAR-T) therapy, we have made good and support our sales and profit growth progress over the past few years. We I thank you for the confidence you have to create sustainable value for our also deepened our digital footprint by placed in our company and am pleased shareholders and society as a whole. initiating a range of collaborations to to be able to propose a dividend strengthen scientific and commercial increase of 2% to CHF 2.85 at the next Last year, we announced the intention operations. Annual General Meeting. to spin off our eye care division, Alcon; divested a part of the US-based gener- In view of the rising healthcare chal- ics business of Sandoz; and sold our lenges both in industrialized and in Sincerely, remaining consumer healthcare stake developing and emerging countries, we to joint venture partner GlaxoSmith- remain acutely aware of the need to Kline. These moves were designed deliver our medicines to more patients. to position Alcon as an independent We have a proven track record of sup- leader in ophthalmology, strengthen the porting individual patient assistance existing operations of Sandoz, and and global drug access programs, such solidify the position of Novartis as a as the Novartis Malaria Initiative and our Joerg Reinhardt focused pharmaceutical company. Novartis Access program, and we remain Chairman of the Board of Directors dedicated to these global activities. We We also made substantial investments believe they help stabilize healthcare in breakthrough technologies such as systems and increase trust in Novartis gene therapy, nuclear medicine and data as a reliable healthcare partner. science. These include the acquisitions of gene therapy firm AveXis and radio- As much as we are dedicated to the pharmaceutical companies Advanced highest scientific standards when de vel- Accelerator Applications and Endocyte, oping new medicines, Novartis is also which are set to strengthen our position committed to the highest ethical norms in neuroscience and oncology. As a regarding the execution and gover- science-based healthcare company nance of our business. As part of our with cutting-edge global research and continual efforts to maintain high in teg- As a science-based healthcare company with cutting-edge global research and development activities, we expect innovative medical approaches in areas such as gene therapy and immunology to hold the potential for the development of curative therapies Joerg Reinhardt CEO’S LETTer Novartis Annual Review 2018 | 3 We began a cultural transformation aimed at empowering our people to apply their full creativity to tackling big scientific and healthcare challenges Vas Narasimhan CEO’s letter Dear shareholder, We are endeavoring every day to We began a cultural transformation We want to help lead a digital revolution reimagine medicine to truly impact the aimed at empowering our people to in our industry. We built a team of 1 500 lives of people all around the world. As apply their full creativity to tackling big experts across the enterprise and are I wrap up my first year as CEO, I’m scientific and healthcare challenges. pursuing 12 major projects to embed pleased to report that Novartis contin- This is the start of a multi-year journey digital technologies and advanced data ued to deliver on its purpose while we that we believe will help us continue to analytics in our labs, factories and com- transformed the company into a more create long-term value for shareholders mercial operations. For instance, a new focused, agile enterprise that is well and society. To help drive change, we system called Nerve Live uses insights placed to deliver cutting-edge innova- revitalized the top leadership of the from hundreds of past drug develop- tion, drive sustained, profitable growth, company, appointing seven new mem- ment clinical trials to help design and and earn the long-term trust of the bers to the Executive Committee. I also run more effective trials today. stakeholders we serve. visited our teams in more than 25 coun- tries to learn about the organizational We need society’s trust to continue Over the course of 2018, we took sig- hurdles our people face and to gather doing the incredible work we do, and we nificant steps to focus Novartis as a ideas for addressing them. I thank them strive to earn that trust through our leading medicines company. We sold for their energy and commitment, which actions. We have made clear to every- our stake in our global consumer health are both encouraging and infectious. one at Novartis that we must never com- joint venture and announced plans to promise our ethical standards to meet spin off our eye care division, Alcon. We Our research and development teams business objectives. We reinforced our built up three new technology platforms secured 20 major approvals during compliance function and added the role that we believe offer powerful new 2018, including a second indication for of Chief Ethics, R isk and Compliance treatment options to doctors and our breakthrough cell therapy, Kymriah, Officer to the Executive Committee. To patients, including cell and gene thera- to treat large B-cell lymphoma. They further expand access to our medicines, pies and radioligand therapies. And we also made 20 major filings, including we renewed commitments to fighting signed more than 100 collaboration and for BAF312 to treat multiple sclerosis, malaria and leprosy, and adopted princi- licensing agreements to build greater and for AVXS-101, a potentially trans- ples aimed at embedding access into depth in our core areas. formative treatment for spinal muscular our everyday business. Our systematic atrophy. We believe we have more than approach helped us rise to No. 2 in the Meanwhile, our teams delivered strong 20 potential blockbusters in develop- 2018 Access to Medicine Index. performance. Growth accelerated, ment, and we plan to make 60 major driven by strong sales of key products. submissions to regulators from 2019 to More work remains, but I hope you Net sales of USD 51.9 billion grew 5%, 2021. share my enthusiasm for the strides measured in constant currencies (cc). we’re making in all of these areas. Our core operating income grew 8% to We are taking steps to build greater USD 13.8 billion (cc). effectiveness and efficiency into how we work. In manufacturing, we’re adjust- Sincerely, We also defined five strategic priorities ing production capacity to match our that we believe will drive the successful evolving product mix, and in business future of Novartis – and we made services, we’re further concentrating important progress in each of these operations in five global service cen- areas. Here are some highlights. ters. Our commercial teams are focused on improving how we plan and execute Vas Narasimhan new product launches. Chief Executive Officer 4 | Novartis Annual Review 2018 Who we are Our purpose We reimagine medicine to improve and extend people’s lives. We use innovative science and technology to address some of society’s most challenging healthcare issues. We discover and develop breakthrough treatments and find new ways to deliver them to as many people as possible. We also aim to reward those who invest their money, time and ideas in our company. Our company RESEARCH AND DEVELOPMENT (R&D) INNOVATIVE MEDICINES The Novartis Institutes for BioMedical Research The Innovative Medicines (NIBR) is the innovation Division has two business units: engine of Novartis. NIBR focuses on discovering Novartis Oncology Novartis Oncology focuses on new drugs that can change patented treatments for a variety the practice of medicine. of cancers and rare diseases. ls The Global Drug ica ut Development (GDD) Novartis Pharmaceuticals ce a Bu organization oversees Novartis Pharmaceuticals rm si a s ne the development of new focuses on patented treat - h n s P io s medicines discovered by t ments in the areas of c s n e our researchers and ophthalmology; immunology, u r f v partners. i c hepatology and dermatology; e t e neuroscience; respiratory; a s r ( o and cardio-metabolic.
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