Novartis in Society ESG Report 2020 2 | Novartis in Society Contents Novartis in Society | 3

Contents

2020 highlights 4 Our response to COVID-19 5 Who we are 6 How we create value 8 Message from the Chairman 10 Message from the CEO 11 Our journey to build trust with society 12 Valuing our impact 16 Strategic areas 18 Holding ourselves to high ethical standards 18 Being part of the solution on pricing and access 30 Addressing global health challenges 46 Being a responsible citizen 54 About this report 68 Performance indicators 2020 69 Selected training programs for associates 74 Task Force on Climate-related Financial Disclosures (TCFD) 75 Novartis GRI Content Index 78 Sustainability Accounting Standards Board (SASB) Index 82 Appendix: corporate responsibility material topic boundaries 84 Appendix: corporate responsibility materiality assessment issue cluster and topic definitions 86 Appendix: external initiatives and membership of associations 88 Appendix: measuring and valuing our impact 89 Independent Assurance Report on the 2020 Novartis in Society ESG reporting 90

Inside cover photo Novartis employees at a production facility in Torre Annunziata, Italy.

Cover photo Dr. Ngo Viet Quynh Tram (right) watches as a student practices the correct way to use a mask at the Hue University of Medicine and Pharmacy in central Vietnam. Dr. Tram participated in a nationwide effort to train all final-year medical students how to screen, diagnose and treat COVID-19 patients. The program was supported by the Novartis COVID-19 Response Fund. 4 | Novartis in Society

2020 highlights

ETHICAL STANDARDS 22 98% 8 400+ ETHICAL COMMITMENTS ASSOCIATES SUPPLIERS included in our new Code of Ethics, completed global e-training on the new risk-assessed through our Third-Party co-created with more than 3 000 Code of Ethics (rollout to be completed Risk Management program, with 120 Novartis associates by February 2021) engagements stopped due to assess- ment outcomes

ACCESS TO HEALTHCARE 66m 369 000 8m PATIENTS PATIENTS PEOPLE reached with products through our reached with our emerging market reached with health education at access activities brands in 2020 awareness events

GLOBAL HEALTH 980m 3 400+ 7.3m TREATMENT COURSES PATIENTS PATIENTS of Coartem delivered in the past two treated for sickle cell disease with reached with free multidrug decades in malaria-endemic countries hydroxyurea in 11 treatment centers in therapy for leprosy since 2000 Ghana

CORPORATE CITIZENSHIP 19% 45% 60 000 REDUCTION WOMEN HOURS in greenhouse gas emissions vs. 2016 in management of learning on topics such as innovation, baseline digital skills, and access to medicines during Curiosity Month in September O16ur | resNovartisponse Annual to COVID-19 Review 2020 Novartis in Society | 5

Our response response to to COVID-19 COVID-19

In the face of a global crisis, Novartis quickly mobilized research and development capabilities, medicines, clinical trial expertise and philanthropic aid to address the COVID-19 pandemic.

Supporting our associates

We took steps to support our associates and their families as they adapted to new conditions and commitments such as working remotely, educating children at home, and caring for loved ones. We provided additional paid leave and enhanced childcare support for associates in critical roles who needed to be on site. We announced a new global policy to give office-based associates more flexibility to choose how, where and when they work.

Clinical investigations

We played our part in the scientific effort to find treatments for COVID-19. We quickly designed and launched three Phase III, placebo-controlled trials to determine if our products could help patients with certain COVID-19-related symptoms. We provided these and other medicines to investiga- tor-initiated trials and managed access programs upon request. We are also collaborating with Molecular Partners to develop two potential antiviral treatments for COVID-19 based on a new class of protein therapeutics known as DARPin®.

Access and pricing commitments

Novartis is making 15 drugs that treat key symptoms of COVID-19 available to low-income and lower-middle-income countries at zero profit until a vaccine or curative treatment is available. Our Sandoz Division is maintaining prices on a basket of essential medicines that may help in the treatment of COVID-19.

Collaborating with partners

We are making efforts to leverage our capabilities in discovery, development and scale-up manufac- turing. We are partnering with multi-stakeholder consortia, including the COVID-19 Therapeutics Accelerator, coordinated by the Bill & Melinda Gates Foundation, the Wellcome Trust and Master- card, as well as a partnership supported by the Innovative Medicines Initiative. We are participating with the University of California, Berkeley, and other pharmaceutical companies to develop an antiviral molecule to potentially treat all coronaviruses, including the virus that causes COVID-19.

Community funds

Novartis committed to donating up to USD 40 million to support communities around the world impacted by the pandemic. This includes the Novartis COVID-19 Response Fund and a US COVID- 19 Community Response Fund, established by Novartis and the Novartis US Foundation, that will provide cash and in-kind donations for immediate response and recovery efforts related to the pandemic in the US. 46 | Novartis inAnnual Society Review 2020

Who we we are 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

INNOVATIVE MEDICINES NOVARTIS TECHNICAL OPERATIONS (NTO) The Innovative Medicines Division has two business units: is responsible for making our innovative medicines, devices Novartis Oncology and Sandoz products, and Novartis Oncology focuses on delivering them to our patented treatments for a variety customers across the world. of cancers and rare diseases. dicines/Pharm Me ace ive ut NOVARTIS BUSINESS Novartis Pharmaceuticals at ica ov ls SERVICES (NBS) Novartis Pharmaceuticals nn Bu I si consolidates support focuses on patented treat ments s ne n s io s services across our organi- in multiple disease areas to t c s enhance health outcomes for n e zation, helping drive effi- u r f v i ciency, simplification, stan- patients and offer solutions to c e t e dardization and quality. healthcare providers. a s r

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SANDOZ S C ) support the enterprise in The Sandoz Division offers specific areas of expertise, patients and healthcare including finance, human y profes sionals high-quality, gy g resources, legal, communica- lo affordable generics and o S ol tions, and ethics, risk and a co biosimilars. n nc d On compliance. o / M /sO z a ) es n O ine ufa T cin cturing (N dici eed e M M atitviev InInnoovav

RESEARCH AND DEVELOPMENT (R&D)

The Novartis Institutes The Global Drug for BioMedical Research Development (GDD) (NIBR) is the innovation organization oversees engine of Novartis. NIBR the development of new focuses on discovering medicines discovered new drugs that can change by our researchers and the practice of medicine. partners. 4 | Novartis Annual Review 2020 WhoWhO weWE aareRE Novartis AnnualNovartis Review in Society 2020 | 75

Who we are

Our purpose Our values and behaviors

We reimagine medicine to improve and extend people’s lives. We use innovative INSPIRED CURIOUS UNBOSSED INTEGRITY science and technology to address some of society’s most challenging healthcare ENGAGE OUR PEOPLE LEARN CREATE CLARITY BE HONEST STRIVE FOR PATIENTS BE OPEN SERVE OTHERS HAVE COURAGE issues. We discover and develop breakthrough treatments and find new ways to LIVE OUR PURPOSE BE SELF-AWARE OWN YOUR ACTIONS DO WHAT’S RIGHT 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 Our people The greatest strength of Novartis is our people, whose diversity, energy and INNOVATIVE MEDICINES NOVARTIS TECHNICAL OPERATIONS (NTO) creativity are crucial to our success. The Innovative Medicines Division has two business units: is responsible for making our innovative medicines, devices

Novartis Oncology and Sandoz products, and

Novartis Oncology focuses on delivering them to our patented treatments for a variety customers across the world. of cancers and rare diseases. dicines/Pharm Me ace ive ut NOVARTIS BUSINESS Novartis Pharmaceuticals at ica ov ls SERVICES (NBS) Novartis Pharmaceuticals nn Bu I si consolidates support focuses on patented treat ments s ne n s io s services across our organi- in multiple disease areas to t c s ANNUAL TRAINING WOMEN enhance health outcomes for n e zation, helping drive effi- u r HEADCOUNT NATIONALITIES HOURS PER EMPLOYEE IN MANAGEMENT f v i ciency, simplification, stan- patients and offer solutions to c e t e dardization and quality. healthcare providers. a s r o (

N p 110 738 142 45.7 45 % r B CORPORATE FUNCTIONS

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SANDOZ S C ) support the enterprise in The Sandoz Division offers specific areas of expertise, patients and healthcare including finance, human profes sionals high-quality, y gy resources, legal, communica- og Our products l affordable generics and o S ol tions, and ethics, risk and a co biosimilars. n nc Our products address most major disease areas and are sold in approximately 155 countries around the world. d On compliance. o / Our manufacturing facilities produced 72 billion treatments in 2020. M /sO z a ) es n O ine ufa T cin cturing (N dici eed We develop and produce innovative medicines to We also offer about 1 000 generic and bio- M M itvieve address patient needs in disease areas where our similar medicines covering a broad range of oovavat InInn experience and knowledge have the potential to therapeutic areas. They can bring substantial produce transformative treatments. savings to patients and healthcare systems, RESEARCH AND DEVELOPMENT (R&D) and help improve access to healthcare.

The Novartis Institutes The Global Drug for BioMedical Research Development (GDD) ONCOlOGY REsPIRatORY NEUROsCIENCE PIlls INJECtIONs INhalERs (NIBR) is the innovation organization oversees engine of Novartis. NIBR the development of new CaRDIOVasCUlaR, IMMUNOlOGY, INFECtIOUs focuses on discovering medicines discovered RENal aND hEPatOlOGY aND DIsEasEs new drugs that can change by our researchers and MEtaBOlIsM DERMatOlOGY the practice of medicine. partners. OPhthal MO lOGY

68 | Novartis inAnnual Society Review 2020

How we we create create value value In a rapidly changing business environment, our strategy and business model help us deliver on our purpose and create value for our company and society.

Our business Our strategic priorities environment

aCCElERatING UNlEash thE POWER INNOVatION OF OUR PEOPlE 46 We are transforming our culture to The average yearly ensure people can fully apply their number of new drugs talent and energy. We’re creating approved by the US FDA’s an organization where people are Center for Drug Evalu- inspired, curious and unbossed. ation and Research from 2016-2020, an increase of 25% compared with 2011-2015 DElIVER tRaNsFORMatIVE INNOVatION In our pursuit of trans formative sURGING UsE OF DIGItal treatments, we challenge medical tEChNOlOGY IN hEalthCaRE paradigms and explore possibil- ities to cure disease, intervene 235 bn earlier in chronic illnesses, and The projected value of the global find ways to dramatically improve digital health market by 2023 quality of life. (USD), a 60% increase from 2019, according to the Frost & Sullivan Global Digital Health Outlook 2020 Our strategy is to EMBRaCE OPERatIONal build a leading, EXCEllENCE aGING POPUlatIONs FUElING focused medicines We are rethinking how we work, a RIsE IN ChRONIC DIsEasEs embracing agile teams and building company powered better productivity into our company 77.1 years to free resources that we can The projected average global life by advanced invest in innovation and help boost expectancy in 2050, compared therapy platforms returns. with 72.6 years in 2019, according to the United Nations World and data science. Population Prospects GO BIG ON Data aND DIGItal RIsING hEalthCaRE sPENDING We aim to spark a digital revolution at Novartis, embracing digital 5 % tech no logies, advanced analytics The expected annual average and artificial intelli gence to help growth in healthcare spending drive innovation and improve between 2020 and 2023, efficiency. according to the Economist Intelligence Unit BUIlD tRUst WIth sOCIEtY aCCEss tO hEalthCaRE We strive to build trust with REMaINs a GlOBal IssUE society through finding new ways 2 bn to expand patients’ access to our treatments and operating with The number of people who lack integrity. access to essential medicines, according to the World Health Holding ourselves to Organization high ethical standards Being part of the solution on pricing and access Addressing global health challenges Being a responsible citizen 6 | Novartis Annual Review 2020 hOWHow WEwe CREcreateE VvalaluUEe Novartis AnnualNovartis Review in Society 2020 | 97

How we create value In a rapidly changing business environment, our strategy and business model help us deliver on our purpose and create value for our company and society.

Our business Our strategic priorities Our business model environment R&D R&D RESOURCES WE USE n VALUE WE CREATE n io o t ti u u ib b r hUMaN CaPItal i t PatIENts r s t i We depend on the skills ands creativity of our employees i D aCCElERatING to discover, develop and produceD new medicines, and UNlEash thE POWER INNOVatION deliver them to patients. OF OUR PEOPlE 769 m 46 110 738 Headcount Patients reached with Novartis We are transforming our culture to C g The average yearly C medicines ensure people can fully apply their 45.7 Annual training hourso per employee n o i number of new drugs m r talent and energy. We’re creating m u m t approved by the US FDA’s g m an organization where people are e c Center for Drug Evalu- in e a inspired, curious and unbossed. rc r r f FINaNCIal CaPItal i u c u ation and Research from a t ia 26n li c a 2016-2020, an increase We use cash, equity and debt to meetza our financial fa liz M tio nu ati Approvals granted to Novartis in 2020 of 25% compared with commitments, make investments and pay dividends.n Ma on in the US, the EU, Japan and China for 2011-2015 DElIVER tRaNsFORMatIVE 214.3 bn Year-end market capitalization (USD) new treatments as well as new indica- INNOVatION tions for existing treatments In our pursuit of trans formative 1.85 bn The value of our sustainability- linked sURGING UsE OF DIGItal treatments, we challenge medical bond issued in 2020 (EUR) tEChNOlOGY IN hEalthCaRE paradigms and explore possibil- EMPlOYMENt ities to cure disease, intervene 235 bn earlier in chronic illnesses, and INtEllECtUal CaPItal The projected value of the global find ways to dramatically improve R We use expertise and data to developR&D and market &D digital health market by 2023 quality of life. on 974 000 our products. We hold patents and trademarks ti R (USD), a 60% increase from 2019, u & Estimatedn jobs created by Novartis that protect then long-term investments required ib D o according to the Frost & Sullivan io tr i t s (2019),t including own employees, for our business.u i u Global Digital Health Outlook 2020 Our strategy is to indirectb and induced ib D i EMBRaCE OPERatIONal r r 9.0 bn Investmentt in research and t s build a leading, EXCEllENCE s i developmenti in 2020 (USD) D We are rethinking how we work, D aGING POPUlatIONs FUElING focused medicines 160+ Pipeline projects with ongoing a RIsE IN ChRONIC DIsEasEs embracing agile teams and building 80 company powered better productivity into our company clinical trials in Phases I to III WHAT WE DO C Engagement score (out of 100) in 77.1 years to free resources that we can o Q4 survey of Novartis associates, an g by advanced g C invest in innovation and help boost C m The projected average global life n n all-timeo high and 7 points ahead of the i returns. o i m r expectancy in 2050, compared NatURal CaPItal r m therapy platforms m u g industry benchmark u t e t with 72.6 years in 2019, according m r in m We responsibly consume energy, water and c c r c to the United Nations World e a i u e fa and data science. other resourcesr to manu facture our productsf a t rc u Population Prospects c u li c i n and operate ouria business. n za fa a a GO BIG ON Data li a t u shaREhOlizlDERs M za M io an at aND DIGItal 11.15 Energy use, ontio siten and purchased n M ion RIsING hEalthCaRE sPENDING We aim to spark a digital revolution (million gigajoules) at Novartis, embracing digital 8.5 Water consumption (million m3) 8.1 bn tech no logies, advanced analytics 5 % Net income in 2020 (USD) The expected annual average and artificial intelli gence to help growth in healthcare spending drive innovation and improve between 2020 and 2023, efficiency. MaNUFaCtURED CaPItal according to the Economist We own or lease research laboratories, manufacturing 7.0 bn Intelligence Unit sites and offices around the world. We use artificial intelligence, gene editing and other technologies. Total dividends paid (USD) BUIlD tRUst WIth sOCIEtY 60 Novartis manufacturing facilities aCCEss tO hEalthCaRE We strive to build trust with REMaINs a GlOBal IssUE 72 bn Treatments produced by our manufacturing ENVIRONMENt society through finding new ways facilities in 2020 2 bn to expand patients’ access to our treatments and operating with The number of people who lack integrity. 19% access to essential medicines, RElatIONshIP CaPItal according to the World Health Reduction in greenhouse gas Organization We build trusted relationships with stakeholders to emissions vs. 2016 baseline (Scope 1 bring treatments to patients, advance drug discovery and Scope 2) and expand patient access. 24 432 Field force representatives in our Innovative Medicines Division 35% 98% Employees who completed e-training on new Reduction in water consumption Code of Ethics (to be completed by February 2021) vs. 2016 baseline (million m3)

This infographic is informed by the framework of the International Integrated Reporting Council (IIRC). 10 | Novartis in Society

Message from the Chairman

Dear reader,

The outbreak of the COVID-19 pande­ and middle-income countries by 2025. We are proud that our ESG efforts are mic, which has caused millions of deaths Further­more, we strengthened our recognized by leading nongovernmen- worldwide, highlighted the need for environmental ambitions with a new tar- tal organizations and sustainability rat- rapid and concerted global action to get to be carbon neutral across our ing agencies, such as the Access to overcome an unprecedented crisis, and entire value chain by 2030. Medicine Foundation and Sustainalyt- served as a litmus test for the ability of ics, and we are committed to making the international community to tackle These measures demonstrate the further progress. We will also continue emerging crises. growing importance of ESG for the our efforts to support nonprofit research, Novartis Board of Directors and senior for example with the Friedrich Miescher Novartis took fast and coordinated management. Ambitious targets are Institute in Basel, Switzerland, and the action in response to the pandemic. We necessary to reduce pollution and recently founded Institute of Molecular quickly took steps to protect the safety ­support healthcare equity on an inter- and Clinical Ophthalmology Basel. and well-being of associates. We com- national scale. The measures are also mitted to donating up to USD 40 million designed to help the international The COVID-19 pandemic continues to to support communities around the community strengthen crisis prepar- disrupt everyday lives, jeopardizing world impacted by the pandemic. We edness and support the United Nations businesses and putting healthcare also introduced a portfolio of 15 generic in its efforts to meet its Sustainable systems under increased stress. and over-the-counter medicines to Deve­lop­ment Goals, which we strongly Novartis will remain a committed part- treat patients in low-income and lower- endorse. ner to support private and public ven- middle-income countries suffering from tures designed to help patients, protect COVID-19 symptoms. And we collabo- Increasing safety and sustainability the environment, promote business rated with academic researchers and also drove the transformation of our integrity, and support international industry peers in the effort to find effec- Third-Party Risk Management pro- efforts to address future challenges. tive treatments for COVID-19. gram, under which we are introducing stricter control of our supplier network Sincerely, In parallel, we continued to advance our to help protect the interests of patients, environmental, social and governance stakeholders and shareholders. We (ESG) agenda. In September, we issued also launched our Code of Ethics in a bond linked to targets for global health 2020 to strengthen integrity in deci- and access to medicine, including a tar- sion-making and help Novartis achieve get to increase access to our strategic its ambition to be among the most Joerg Reinhardt innovative therapies by 200% in low- trusted partners in healthcare. Chairman of the Board of Directors

Novartis will remain a committed partner to support private and public ventures designed to help patients, protect the environment, promote business integrity, and support international efforts to address future challenges

Joerg Reinhardt Message from the CEO Novartis in Society | 11

We aspire to create a culture in which our ESG activities are deeply embedded in our daily work, reflecting both the responsibility we have to our patients around the world today as well as those who will come after us

Vas Narasimhan

Message from the CEO

Dear reader,

As a leading global medicines company rate sustainability principles. The sum Our ambitions will remain high. Along that reaches more than 750 million of these efforts has prepared us to take with the urgency of finding solutions to patients every year, we know our work further action and pave the way to reach overcome the global pandemic, climate to build trust with society extends far our goal to be a trusted ESG leader by change is one of the most pressing beyond researching and developing integrating our global efforts, enhanc- challenges of our time given its deep innovative therapies. It entails the total- ing executive accountability and meas- interconnection with human health. This ity of human health and the promotion uring our performance against trans- increasingly urgent problem requires of health equity, including environmental parent targets. fast and vigorous science-based action protection, the delivery of medicines to and the collective strengthening of a as many people as possible, and ­living An important step in our integrated sustainability mindset to ensure a up to high ethical business standards. In approach was the initiation of our Trust healthier planet for rising generations. 2020, we continued taking important & Reputation Committee, which I have steps to integrate our environmental, chaired since its inception in 2019. In its As we look ahead at the years to come, social and governance (ESG) agenda first full year of existence, the commit- I remain optimistic about our ability to into the core of our business.­ tee, among others, reviewed potential meet our company’s ambitions to be an gaps in our ESG performance and iden- ESG leader and the most trusted health- With our perspective on our company’s tified new commitments. As part of care company in the world. We aspire role in society in mind, I am proud of the these efforts, I signed the CEO Water to create a culture in which our ESG ways Novartis has helped lead as part Mandate and the CEO Guide to Human activities are deeply embedded in our of the global pandemic response. In Rights. daily work, reflecting both the respon- addition to collaborating with govern- sibility we have to our patients around ments, academia and other life sciences­ In 2020, Novartis made measurable the world today as well as those who companies, we focused our research pro­gress in our existing ESG agenda will come after us. and development (R&D) engine on find- while setting new targets. We were able ing scientific solutions, set up emer- to resolve our long-standing legal gency health programs, and were the issues and launched a new Code of Eth- Sincerely, first company to commit to keeping rel- ics. We also worked to expand access evant and essential generic medicines to innovative and generic therapies in cost-stable. low- and middle-income countries, and we set ambitious targets in this realm More broadly, as a founding signatory going forward. In addition, we strength- of the United Nations Global Compact, ened our environmental sustainability Novartis has worked to build a strong targets and now aim to be fully carbon, Vas Narasimhan legacy over the past two decades as plastic and water neutral over the next Chief Executive Officer we’ve developed and refined our corpo­ decade. 12 | Novartis in Society

Our journey to build trust with society

As a global company, we have a great responsibility and an even greater opportunity to lead the world in creating positive social change. We can help catalyze a global response to complex challenges, such as the current pandemic or climate change, by embracing societal impact as a core business objective. At Novartis, we work to build trust with society and deliver long-term value to our stakeholders by embedding environmental, social and governance (ESG) topics into the core of our business strategy and operations.

Building trust with our stakeholders is communicate about them clearly and formance, new ESG commitments, the critical to our ability to deliver on our transparently. We are also determined environmental sustainability strategy, purpose, as well as our long-term finan- to learn from and share our experience. and diversity and inclusion. cial performance. Our purpose is inher- ently a social one: We reimagine medi- Maintaining strong governance In 2020, we created the position of cine to improve and extend people’s Chief Sustainability Officer, who reports lives. We discover and develop break- In 2020, the Governance, Nomination to a member of the ECN, to lead the through therapies and aim to deliver and Corporate Responsibilities Com- strategy and execution of environmen- them to as many people as possible. mittee (GNCRC) of the Board of Direc- tal sustainability across Novartis. tors met four times and continued to We have a clear strategic path that we oversee the company’s strategy and We also created the ESG Management believe will further accelerate our jour- governance on global health, corporate Office in our Corporate Strategy group ney to build trust with key stakeholders responsibility and other ESG topics at to further institutionalize ESG efforts and society, centered around four key the Board level. Our new ESG targets across the organization. The new office focus areas: and the issuance of a sustainability- will work with experts in divisions, func- linked bond were among the topics dis- tions and countries to develop a trust • Holding ourselves to high ethical cussed by the GNCRC in 2020. and ESG strategy framework and lead standards key ESG initiatives. • Being part of the solution on pricing The Novartis Trust & Reputation Com- and access to medicines mittee met six times in 2020. Chaired In addition, we are establishing an • Addressing global health challenges by our CEO, this sub-committee of the external advisory board to provide guid- • Being a responsible citizen Executive Committee of Novartis (ECN) ance to the Global Health & Corporate oversees progress and aims to accel- Responsibility (GH&CR) organization We are committed to taking real, meas- erate decision-making in key ESG on strategy and related plans, policies urable and reportable action in these areas. Topics discussed in 2020 and indicators. key areas, and making sure that we included potential gaps in our ESG per-

Our journey toward more sustainable social impact

2000 2001 2007 2014 2015 2017 2019 2020

Sole donor to Antimalarial Healthy Family1 Local Novartis Novartis New strategy Sustainability the WHO of Coartem innovative Access 3 access for sub- bond linked to multidrug (not-for-profit brands in principles Saharan Africa new access therapy for strategy) LMICs2 targets leprosy

1 Health education and access to medicines for rural populations at the bottom of the income pyramid 2 Low- and middle- income countries 3 Portfolio of 15 on- and off-patent medicines for noncommunicable diseases Our journey to build trust with society Novartis in Society | 13

Materiality and reporting manner, helps us prioritize impacts on important: access to healthcare, patient which to focus, and informs our strate- health and safety, ethical business We strive to create long-term value gic thinking. practices and innovation. Novartis along our entire value chain. Our mate- applied statistical analysis to the results riality assessment helps us understand We conduct global materiality assess- to further prioritize the issues and focus the issues that matter most to our inter- ments every four years, and are cur- areas, identifying 14 priority topics. nal and external stakeholders; how our rently preparing for our fourth assess- These topics are reflected in the four economic, social and environmental ment in 2021. In our third global key focus areas of building trust with impacts are perceived along our value materiality assessment conducted in society and are covered in the follow- chain; and how they translate today and 2017, internal and external stakeholders ing sections of this report. A list of the in the future into associated risks and ranked issue clusters based upon their topics is on page 86. We have intro- opportunities for our company. Our impact on the performance and busi- duced new management targets across materiality assessment enables us to ness of Novartis overall. Four issue the four focus areas, as outlined below. capture our impacts in a nonfinancial clusters were identified as being most

ESG management targets

HOLDING OURSELVES TO HIGH ETHICAL STANDARDS

Conduct risk Complete risk Fully integrate human Enhance external Post all clinical trial results assessments for all new assessments of existing rights into third-party risk reporting on anti-bribery on clinicaltrials.gov or eligible suppliers suppliers by 2022 assessments in scope by 2022 novartisclinicaltrials.com within one year of completion BEING PART OF THE SOLUTION ON PRICING AND ACCESS TO MEDICINES

Implement an access Increase by 200% patients Achieve a twofold increase Implement tiered pricing for strategy for all new reached with strategic in the number of patients launches in Pharmaceuticals and products launched innovative therapies in reached in sub-Saharan Oncology based on national low- and middle-income Africa by 2022, and a income levels and value-based countries by 2025 fivefold increase by 2025 pricing

ADDRESSING GLOBAL HEALTH CHALLENGES

Increase by 50% Advance clinical Expand Africa sickle cell Advance clinical patients reached by the development program disease program to development program in global health flagship for our next-generation 10 countries by 2022 patients with Chagas- programs by 2025 antimalarials related heart failure

BEING A RESPONSIBLE CITIZEN

Be carbon neutral in own Reduce water Be water neutral in all Reduce the amount of Achieve gender balance operations (Scope 1 and consumption in our areas of our operations waste sent for disposal in management by 2023 2) by 2025 and across operations by half by by 2030 while by half by 2025 (vs. 2016) Close the gender pay the value chain (Scope 1, 2025 (vs. 2016), with no enhancing water quality Be plastic neutral by gap by 2023 2 and 3) by 2030 water quality impacts wherever we operate 2030, with all new from the manufacturing Invest USD 100 million Include environmental Eliminate polyvinyl products meeting of our products in learning over five criteria in all supplier chloride in packaging by sustainable design years from 2019 contracts by 2025 2025 principles 14 | Novartis in Society Photo Dr. Juliet Akoth (left) walks with a patient in Kitui, Kenya. Dr. Akoth enrolled in Echo for Life, a Novartis-sponsored program in partnership with the University of Nairobi to train healthcare professionals in the diagnosis and treatment of cardiovascular disease.

Engaging with stakeholders Massachusetts Institute of Technology and the Harvard Global Health Institute A cornerstone of our approach is con- hosted a series of 14 webinars to sistent engagement with a wide range explore the role of artificial intelligence of stakeholders, including patients and (AI) in responding to the pandemic in caregivers, associates, healthcare pro- low-resource settings. The webinars viders, governmental organizations, non­ gathered over 3 000 participants. In governmental organizations (NGOs), 2021, the foundation plans to launch the shareholders and other financial mar- HealthTech Dialogue Hub, an initiative ket participants, local communities, and to connect policymakers, tech innova- partners from the pharmaceutical and tors, NGOs and other key stakeholders other industries. and drive the implementation of AI for health in low- and middle-income coun- Our CEO was invited to co-chair the Bill tries. & Melinda Gates Foundation CEO Round­ table, a group comprising 15 CEOs of The Novartis Foundation and Women in the top pharmaceutical companies Global Health also co-hosted the globally. The roundtable focused on #BuildBackBetter Digital Innovation collective action related to the COVID- and AI Challenge to support gender 19 pandemic and established several equity in digital health while advancing workstreams. Additionally, Novartis and health security. Over 100 startups from the roundtable are working with various all continents participated in the chal- governments and stakeholders on lenge. The winning startup, Clafiya, future pandemic preparedness, and received USD 10 000 for its innovative Novartis will continue to co-chair the digital platform that connects patients CEO Roundtable in 2021. in semi-urban and rural parts of Nigeria to community health workers to provide Novartis is also active in multi-stake- home-based primary care services. As holder initiatives on business ethics and the runner-up, Wheels for Life received environmental issues. In October, Novartis USD 5 000 for its innovation in provid- became a signatory to the Partnering ing prompt triage consultation and Against Corruption Initiative, the princi- transferring pregnant mothers from pal CEO-led platform in the global anti- homes to hospitals to prevent delays in corruption arena, building on the pillars accessing maternal healthcare and of public-private cooperation, responsible reduce maternal morbidity in Kenya. leadership and technological ad­­vances. In September, we joined PREMIER, a new Engaging the investor community six-year project with the Innovative on ESG topics Medicines Initiative (IMI), focused on Novartis has more than doubled the evaluating and mitigating the risk of number of investor engagements on medicines in the environment. ESG matters in recent years, and in 2020, our CEO led our ESG Investor We believe we can help build a system- Day for the second time (marking our atic and consistent approach to patient seventh dedicated ESG event for inves- engagement across the healthcare sys- tors since 2014). In 2020, with ECN tem. To this end, we continue to partic- members and the Group Head of Global ipate in 41 IMI projects supporting the Health & Corporate Responsibility, we progression of healthcare and science, held an ESG roadshow series in the as well as other patient-focused initia- Netherlands, France, the US and Swit- tives and collaborations. zerland. Further, as part of our compre- hensive ESG engagement program, we We regularly engage with our associ- increased the frequency of our commu- ates globally through physical and vir- nication, issuing a quarterly ESG news- tual events, which encourage open dia- letter to investors. Please see page 130 logue and communication. We run a of the Annual Report 2020 for key top- global quarterly survey in which asso- ics discussed during our shareholder ciate engagement is one of the main engagements. parameters we measure. We conducted five webinars in 2020 to We also consistently engage with global share how Novartis is implementing the health stakeholders on key topics. For outcomes of our previous materiality example, the Novartis Foundation, the assessments. Webinar topics included Our journey to build trust with society Novartis in Society | 15

access to healthcare, wealth and health, which create opportunities to raise goal 13 (climate action). We harness the and measuring the social outcomes of industry standards and exchange best power of partnerships (goal 17) to dis- access initiatives (see the appendix on practices. A list of our memberships can cover and develop breakthrough treat- page 87). Each webinar featured inter- be found in the appendix on page 88. ments and deliver them to as many peo- nal and external speakers and attracted ple as possible. We contribute to goal approximately 80 participants from Novartis makes financial contributions 5 (gender equality), and our environ- industry, NGOs, access-related and to support political dialogue on issues mental sustainability targets align with sustainability groups, and investors. of relevance to the company or to cer- goal 6 (clean water and sanitation), tain government projects (e.g., for goal 7 (affordable and clean energy), We also organized and participated in capacity building). Such contributions and goal 12 (responsible consumption). several events to promote the value of need to be fully compliant with applica- measuring business impact beyond tra- ble regulations, and we only make polit- As a founding signatory of the UN ditional financial metrics, an important ical contributions in countries where Global Compact (UNGC), we are com- element in driving the ESG agenda with such contributions by corporations are mitted to sharing our progress in imple- a broader stakeholder audience. For both legal and generally considered menting the 10 principles of the com- instance, as part of our impact valuation appropriate. We publish the amounts of pact. We published a Communication work, we participated in discussions at these contributions on our website on Progress in the first quarter of 2020 a Global Solutions Initiative summit and, for the US and Switzerland, in the and will do so again in 2021. about the true value contribution of Novartis in Society US and Novartis in business. We continue to drive impact Society Switzerland reports, respec- A mapping of our activities against the valuation standardization through the tively. SDGs and the UNGC principles can be Value Balancing Alliance, of which found in the GRI Content Index on Novartis is a founding member. We are Contributing to the Sustainable page 78 of this report. also a member of the Impact Valuation Development Goals Roundtable, an informal group of more than a dozen international companies We have a long-term commitment to seeking to develop and operationalize support the UN in achieving its Sustain- the field of impact valuation. able Development Goals (SDGs). As a leading medicines company, ensuring Engaging with policymakers good health and well-being (goal 3) is Novartis also engages in dialogue with at the core of our business and is policymakers and other external stake- aligned with our purpose of reimagining holders. Providing policymakers with medicine to improve and extend peo- data and insights enables informed ple’s lives. Through our business oper- decision-making conducive to improv- ations and ongoing activities, we make ing patient outcomes. Additionally, we essential contributions to goal 8 (decent work closely with trade associations work and economic growth), goal 9 and participate in industry initiatives, (innovation and infrastructure), and 16 | Novartis in Society

Valuing our impact While the understanding of long-term value creation is still evolving, there is increasing interest in the topic among key stakeholders. Part of our work entails engagement and dialogue to foster a better understanding of the concept and contextualize impact valuation within broader health economic considerations.

In December, we hosted our annual Co- cators meant to measure and disclose Overall, in 2019, our activities contrib- Creating Impact Summit with external and the environmental, human, social and uted USD 90.4 billion to global gross internal speakers. To make the experi- economic value companies provide to domestic product (GDP), as well as an ence engaging and interactive, we also society. Overall, we found the indicators estimated 974 000 jobs, including held a virtual exhibition to enable partici- consistent with our approach except for those held by our own employees. In pants to explore the building blocks of our the environmental impact of land use addition, our human capital impact – impact valuation roadmap and discover and of waste in the supply chain, which including employee development, occu- and discuss inspiring best practices. we did not cover previously but have now pational safety and living wages – was added. The social dimension of the indi- valued at USD 1.9 billion, with USD 2.2 bil- We continue to work with partners to cators in the VBA model could be lion coming from the social impact of liv- publish studies that, for example, help strengthened by including the social ing wages in our own operations and the measure the social impact of a disease impact of our medicines and particularly entire supply chain, USD 1.5 billion com- burden or preventive interventions in of living wages. ing from employee development, and a averting negative health impacts and negative USD 1.8 billion coming from environmental damage (see the appen- We continue to refine our approach, occupational safety. At the same time, we dix on page 89). Our current research now called Novartis social, environmen- are taking steps to minimize our negative covers an array of topics, including tal and economic (SEE) impact valua- environmental impact, as measured by social risk in the supply chain, the social tion, to prioritize the social impact of our the carbon, other air emissions, water and impact of pediatric formulations, and medicines. In 2020, more than 20 waste impacts of our own operations and environmental footprints of products. Novartis country organizations – includ- supply chain, which were valued at USD ing, for the first time, the UK and Spain 6.5 billion. The overall social impact of our For impact valuation to be transforma- – drew on local impact valuation results portfolio, including Innovative Medicines tional, standard setters and policies to derive insights and engage with and Sandoz products in 132 countries, need to embrace it. To this end, we con- stakeholders. In total, data is now avail- amounted to USD 219 billion in 2019. tinue to drive impact valuation stand- able for 189 countries, including our More information on our impacts in Swit- ardization through the Value Balancing own operations and supply chain. We zerland is available in the Novartis in Soci- Alliance (VBA), of which Novartis is a also conducted pilots using forecasted ety Switzerland report, which will be pub- founding member. In 2020, we piloted impact valuation results for both Novartis lished in February 2021 on novartis.ch. the alliance’s first impact valuation indi- operations and our supply chain.

Novartis social, environmental and economic impact 2019

Indicator Results 1, 2 Remarks Social Living wages USD 2.2 bn Own operations USD 1 bn, indirect USD 1.2 bn Employee development USD 1.5 bn Own operations USD 80 m, indirect USD 697 m, induced USD 775 m Occupational safety -USD 1.8 bn Own operations USD 461 m, indirect USD 767 m, induced USD 561 m Other human capital impacts Employee well-being, voluntary turnover, human rights beyond living wages not valued in 2019 Products USD 219 bn Based on 54 Innovative Medicines brands and 40 Sandoz products in 132 countries Environmental Climate, energy and air pollution -USD 3.80 bn Own operations USD 164 m, indirect USD 1.4 bn, induced USD 2.2 bn Water and waste -USD 1.03 bn Own operations USD 15 m, indirect USD 322 m, induced USD 542 m, downstream USD 152 m Land use -USD 1.71 bn Own operations USD 43 000, indirect USD 266 m, induced USD 1.441 m Other environmental impacts Biodiversity not valued in 2019 Economic GDP contribution USD 90.4 bn Own operations USD 52.1 bn, indirect impacts USD 17.7 bn, induced impacts USD 20.6 bn Employment 974 000 FTEs Own operations 104 000 FTEs, indirect 351 000 FTEs, induced 519 000 FTEs Economic inefficiencies Not valued in 2019 – no methodology available Total taxes Not valued globally in 2019

1 Our methodology is based on leading approaches including WifOR (social impact of medicines, direct GDP contribution, indirect and induced environmental and economic impacts), Valuing Nature (social impact of wages and salaries), VBA (employee development, occupational safety, waste, land use) and Impact Valuation Roundtable (general approach). 2 Data represent continuing operations. Valuing our impact Novartis in Society | 17

Photo Leo Vieira exercises in São Paulo, Brazil, after recovering from COVID-19. Mr. Vieira was treated at the Hospital das Clinicas of the University of São Paulo, where doctors used an artificial intelligence platform – developed with the support of the Novartis Foundation as well as government and civil society partners – to assess damage to his lungs. 18 | Novartis in Society

Photo Novartis employees at a production facility in Torre Annunziata, Italy.

STRATEGIC AREAS Holding ourselves to high ethical standards

Why is it important?

Building trust with customers, patients, associates and society is the foundation of our long-term success. Our stakeholders not only expect us to do what is legally required, but also to act with high ethical standards wherever we operate and to be accountable for the way our business impacts people and the environment. We recognize these expectations of our company and strive to do what’s right both for Novartis and for society at large.

In this section Read about our journey to strengthen ethics, risk, compliance and assurance at Novartis:

Code of Ethics Risk management Third-party risk Human rights Launched a new Code of Ethics, Defined the Novartis risk management Signed the CEO Guide to encouraging associates to be portfolio, which comprises 21 Revised our Novartis Third Party Human Rights, calling on bold, open-minded, honest and risks categorized as strategic, Code, outlining requirements for businesses to contribute to the accountable when making operational or emerging, as third parties on environmental realization of universal human decisions well as awareness topics sustainability, human rights, and rights diversity and inclusion ! p. 19 ! p. 20 ! p. 26 ! p. 25 Holding ourselves to high ethical standards Novartis in Society | 19

Our targets

Conduct risk assessments for all new eligible suppliers

Complete risk assessments of existing suppliers by 2022

Fully integrate human rights into third-party risk assessments in scope

Enhance external reporting on anti-bribery by 2022

Post all clinical trial results on clinicaltrials.gov or novartisclinicaltrials.com within one year of completion

“The experiences of the past 12 Our approach and performance associates understand what it means to behave and act ethically. months have shown just how We work to build trust – with associates important it is to coordinate risk and partners, doctors and patients, and Our new Code of Ethics, launched in with society more broadly – by embed- September, is a natural step on this jour- management locally, regio­nally ding environmental, social and govern- ney. It is rooted in behavioral science, and internationally – based ance (ESG) topics into the core of our which is about what we do, why we do business. We are governed by strong it, and how it is influenced. If we want to on our ethical commitment and consistent values and continue to change behaviors, we need to change to do what’s right” implement policies and practices to the context and environment in which hold our company, our associates, our we work and live. Klaus Moosmayer, suppliers, and stakeholders we work Chief Ethics, Risk & Compliance Officer and interact with to high ethical stand- Our new Code of Ethics elevates prin- ards. We endeavor to identify potential ciple-based decision-making and rein- problems, prevent issues from occur- forces our commitment to ethics across ring, promote personal accountability, all business interactions, encouraging and generate lessons that we can apply associates to be bold, open-minded, OUR ETHICAL PRINCIPLES across the company. honest and accountable when making decisions. Co-created with more than Be open-minded This continues to be a journey, and we 3 000 Novartis associates sharing are making progress. We are embed- feedback, ideas and insights into the Am I actively listening to ideas or concerns? ding principle-based decision-making areas that matter most, our Code of Am I questioning the impact of my decisions? in our business interactions to help Ethics is a collection of 22 ethical com- Am I valuing the perspective of others? ensure our leaders and associates act mitments we make as an organization, appropriately when faced with ethical reflecting the diverse voices of our dilemmas. We are expanding our efforts associates. The code is accompanied Be honest to protect human rights within our oper- by an online decision-making frame- ations and throughout our supply chain. work based on behavioral science that Am I acting with clear intent? This extends from creating a more helps associates challenge their intui- Am I avoiding harm? inclusive company culture to protecting tion and encourages reflection on the Am I speaking up? people and communities with uncom- potential impacts of their decisions. In promising standards for ethical sourc- 2020, more than 45 750 associates ing and practices. As a diverse com- used the interactive tool and resources. Be bold pany operating globally, we know this is a challenging endeavor and there will To mark the launch of the code, we held Am I standing up for what I believe? always be more we can do. a companywide Ethics Week, which Am I putting patients first? included a series of global events Am I making a positive difference? Creating a Code of Ethics hosted by internal and external experts, Over the past two years, we have been with almost 20 000 associates tuning Be accountable on a journey to strengthen principle- into the live virtual sessions. Addition- based decision-making by introducing ally, 160 local events were held across Am I taking responsibility for my decisions? P3, our Professional Practices Policy. 78 countries, and more than 1 200 We have learned about the importance associates participated in virtual train- Am I treating others as I would like to be treated? of providing room for open dialogue and ings on understanding why, and how, Am I putting the team before myself? discussion, especially in grey areas, so we make decisions. Global e-training on 20 | Novartis in Society

the new Code of Ethics is being rolled shops with business and organizational While our purpose – reimagining medi- out from September 2020 to February units. Additionally, we looked at reports cine to improve and extend people’s 2021, with a preliminary completion rate by Novartis functions such as Internal lives – drives our values and defines our of 98% by December 31, 2020. Audit, as well as external data on indus- culture, our ethical principles guide us try and macro-economic trends, to help in everyday decision-making and en­­ Safeguarding our company from risks identify high-risk areas. sure we act with integrity. Our new In a rapidly changing business environ- Code of Ethics sets the ethical frame- ment, effective risk management is crit- The Chief Ethics, Risk & Compliance work for risk management at Novartis. ical to our ability to build resilience and Officer is responsible for the overall risk In addition, within the Novartis Risk & provide sustained, long-term value to management process at Novartis. The Resilience organization, Business Con- patients, shareholders and other stake- Ethics, Risk & Compliance (ERC) func- tinuity Management (BCM) and holders. We strive to minimize or pre- tion oversees the company’s risk man- Novartis Emergency Management vent negative issues from occurring agement and compliance functions, (NEM) are important elements of our while helping ensure we capture busi- including risk-based companywide pol- risk management strategy. During the ness opportunities as they arise. icy and internal control management, as COVID-19 pandemic, more than 100 well as crisis and business continuity NEM teams worldwide supported the The Enterprise Risk Management (ERM) management. business to help ensure the safety and process at Novartis is a series of coor- well-being of associates as well as the dinated activities designed to identify The Executive Committee of Novartis uninterrupted supply of medicines to risks, promote accountability and sup- (ECN), led by the CEO, reviews and patients. port balanced decision-making for sus- endorses the risk portfolio. The Board tainable long-term growth. The process of Directors provides the highest layer THE NOVARTIS RISK COMPASS begins with leadership discussions of oversight. It focuses on the most We use the outcomes of the ERM pro- about risk at the global level and in significant risks, while the Board-level cess to update the Novartis Risk Com- country organizations as part of annual Risk Committee reviews the entire risk pass, which provides a single holistic strategic planning. In 2020, we held portfolio and actions implemented by view of risk across the company. We mostly virtual cross-divisional work- management. For further details on the group risks into four categories and shops in our top 11 markets and a num- Risk Committee and its activities, assign a risk rating based on likelihood, ber of additional countries in Africa, please see page 146 of the Novartis potential impact and other factors Asia, Europe and South America. At Annual Report 2020. within a time horizon of up to five years. the global level, we also held risk work- This approach helps senior manage-

Enterprise Risk Management process (ERM)

• Previous risk assessment results Scope, context, criteria • Risk leadership roundtable discussion

Risk workshops: • At selected country level Risk assessment • By business unit/division/organizational unit • By selected corporate function • Consolidation at annual risk workshop. Finalization of the Novartis Risk Compass • Accept • Avoid Risk treatment • Pursue • Reduce • Share

• Monitor risk mitigation progress Monitoring & review • Review of risk status by ERM team

• Recording of risks and mitigation activities via the Novartis ERM tool Recording & reporting • Risk reporting to the Executive Committee of Novartis

• Promote risk awareness Communication & consultation • Support decision-making Holding ourselves to high ethical standards Novartis in Society | 21

Novartis Risk Compass

STRATEGIC RISKS EMERGING RISKS are the most consequential to our ability require close monitoring and have to execute our strategy or achieve our the potential to become strategic or business objectives. operational risks.

OPERATIONAL RISKS AWARENESS TOPICS relate to internal processes or systems, are longer-term trending topics that have employee errors or external events. the potential to become new risks

ment and the Board of Directors align For ERM purposes, we assessed Novartis has for some time actively the company strategy and our risk expo- whether the COVID-19 pandemic ampli- ma­naged a range of ESG matters. These sure. Once a risk is identified, we decide fied or accelerated known risks in our are now included within the risk portfo- how to treat it based on our risk appe- portfolio, rather than labeling it as a lio as a strategic risk, taking into account tite. We regularly monitor and reassess standalone risk. For example, we esca- their expected impact on the sustaina- risks in case there are changes in the lated “geo-political and socio-eco- bility of our business over time, and the risk situation. nomic threats” from an awareness topic potential impact of our activities on to an emerging risk in 2020, due in part society and the environment. RISKS IN 2020 to the widespread societal and eco- The Novartis risk portfolio comprises nomic impact of the COVID-19 pan- The below categories show the degree 21 risks, of which seven are categorized demic. We also identified “new ways of of risk exposure for Novartis, based on as strategic, 10 are categorized as working” as an emerging risk, partly due a combination of the risk’s likelihood operational, and four are categorized to the potential impact of a widespread and potential impact on our business. as em­er­ging. In addition, we identified shift to remote working amid the pan- three awareness topics. demic. T Very high M High T Medium T Low

STRATEGIC RISKS OPERATIONAL RISKS EMERGING RISKS T Key products and commercial priorities T Cybersecurity and IT systems M Geo-political and socio-economic threats T Pricing, reimbursement and access M Third-party management T New ways of working M Research and development M Manufacturing and product quality T Global enterprise resource planning Alliances, acquisitions and divestments Fragmented core processes and IT M M (ERP) implementation landscape M Environmental, social and governance T Social media and digital engagement matters M Talent management T Organizational, structural and cultural M Facility and workplace safety transformations AWARENESS TOPICS M Legal and compliance T Digitalization and emerging business Climate change Inadequate oversight of medical models M programs Antimicrobial resistance and changes in disease patterns, including pandemics T Data privacy Deterioration of human rights protection T Supply chain 22 | Novartis in Society

Risks in focus

The following provides further details on key risks for Novartis, including the top risks in each category as well as those that have been significantly upgraded in 2020.

Risk Context Actions

STRATEGIC RISKS

Key products and Our ability to grow our business depends on the commercial • We are pursuing a “launch excellence” strategy in commercial priorities success of key products. Their success could be impacted by a commercial execution, including investing in earlier Failure to deliver key number of factors, including pressure from new or existing prelaunch preparations and using data science to commercial priorities and competitive products; changes in the prescribing habits of test and learn from new commercial models. successfully launch new healthcare professionals; unexpected side effects or safety products • We are accelerating the planned implementation of signals; supply chain issues or other product shortages; pricing a new customer engagement model, which pressures; regulatory proceedings; changes in labeling; loss of combines traditional face-to-face visits with digital intellectual property protection; and global pandemics. methods of engaging healthcare professionals. We are similarly changing our approach to engaging healthcare systems, payers and other healthcare providers. • We enter into business development agreements with other companies and with academic and other institutions to develop new products and access new markets.

Pricing, We experience significant pressures on the pricing of our • We have dedicated teams that actively seek to reimbursement and products and on our ability to obtain and maintain satisfactory optimize patient access, including formulary access rates of reimbursement from governments, insurers and other positions, for our products. Pricing and reimbursement payers. These pressures have many sources, including rising • We are increasing our efforts to enable patient pressure, including access healthcare costs (exacerbated in 2020 by the COVID-19 to healthcare access through innovative pricing and access pandemic); funding restrictions and policy changes; and public initiatives in the US, Europe and other markets. controversies, debate, investigations and legal proceedings These include contract structures such as pay- around pharmaceutical pricing. Such pressures may impact over-time and outcome-based agreements. product pricing and market access. We also face price controls and other measures imposed by governments and other payers. • We announced new access-to-medicine and In addition, our Sandoz Division has faced and may in the future global health targets in 2020. We also launched a face continued price erosion in the generics and biosimilars sustainability-linked bond, embedding the targets segment. into the core of Novartis business operations.

Research and We engage in costly, lengthy and uncertain R&D activities, both • We enter into agreements with other pharmaceutical development (R&D) independently and in collaboration with third parties, to identify and biotechnology companies and with academic Failure or delay in the and develop new products and new indications for existing and other institutions to develop new products. research and development­­ products. Failure can occur at any point, including after • We are accelerating the use of data science and of new products or new substantial investment. New products must undergo intensive digital technology to make the drug discovery and indications for existing preclinical and clinical testing. Further, regulatory authorities products development process more efficient and effective. continue to establish new and increasingly rigorous requirements for approval and reimbursement. The post‑approval regulatory burden has also increased. Holding ourselves to high ethical standards Novartis in Society | 23

Risk Context Actions

STRATEGIC RISKS (CONTINUED)

Environmental, social Increasingly, in addition to their financial performance, companies • We announced new access-to-medicine and and governance are being judged on their performance on a variety of ESG global health targets in 2020. We also launched a matters matters. Novartis actively manages a broad range of ESG topics sustainability-linked bond, embedding the targets Unsuccessful that impact our business, including environmental sustainability, into the core of Novartis business operations. management of falsified medicines, patient access and human capital • We strengthened our environmental targets in 2020, environmental, social and management. An inability to demonstrate performance on ESG governance matters including aiming for full carbon neutrality across our matters can result in negative impacts to our reputation, operations, entire supply chain (Scope 1, 2 and 3) by 2030. recruitment and retention of employees, financial results and/or our share price. Reflecting the growing importance of ESG for Novartis, • We established an ESG Management Office under this risk was upgraded to the strategic category in 2020, from an Corporate Strategy to track performance and drive awareness topic in the previous year. strategic initiatives.

OPERATIONAL RISKS

Cybersecurity and IT We rely on critical, complex and interdependent information • We established Security Operations Center and systems technology (IT) systems to support our business processes. We Cyber Security Center teams to proactively assess Cybersecurity breaches are therefore vulnerable to cybersecurity attacks and incidents, threats to Novartis, perform security monitoring, and and catastrophic loss of both on our own networks and those of third parties to whom we respond to security incidents. Our Vulnerability IT systems outsource parts of our IT infrastructure. In the context of the COVID- Management team also monitors the environment 19 pandemic, the risk of such threats and attacks has increased as for vulnerabilities and coordinates mitigation virtual and remote working becomes more widely used and as activities. employees access sensitive data in less secure, home-based • We continually validate and identify critical assets environments. The disruption of our IT systems could negatively for enhanced protection. impact important business processes, including R&D, regulatory submissions to health authorities, and our manufacturing and distribution operations, among others.

Third-party We outsource certain key business functions to third parties. • We require third parties to comply with the Novartis management These include R&D collaborations, manufacturing and Third Party Code. We also expect third parties to Failure to maintain distribution, certain finance functions, sales and marketing adopt standards that cover the same principles adequate governance and activities, and data management, among others. We may fail to and content in the code with their own suppliers. oversight over third-party receive the expected benefits of these agreements if third parties • We merged our human rights and Third-Party Risk relationships, and failure of fail to meet their obligations. In addition, we may be held third parties to meet their Management program into one function to help contractual, regulatory or responsible if third parties fail to comply with laws or our ensure more effective human rights due diligence. other obligations standards, or otherwise act inappropriately.

Manufacturing and The development and manufacture of our products is complex • We aligned the Novartis Quality organization to the product quality and highly regulated by health authorities around the world. We business, while embedding Quality Management Inability to ensure proper must ensure that all relevant processes comply with regulatory System requirements closer to the points of controls in product requirements as well as our own quality standards. Failure to do execution. development and product so may result in warning letters, suspension of manufacturing, • In 2020, we took steps to ensure the Novartis Quality manufacturing, and failure seizure of products, injunctions, product recalls, failure to secure to comply with applicable audit program continued to cover internal and regulations and standards product approvals, or debarment. Any of these could have a external sites across the product lifecycle despite material adverse effect on our business, financial condition, and COVID-19 challenges. results of operations. • We took action to fulfill new regulatory requirements within specified timeframes with respect to acceptable impurity levels in our products. 24 | Novartis in Society

Risk Context Actions

EMERGING RISKS

Geo-political and A range of geo-political and socio-economic issues may affect • We consider assessments of the geo-political, socio-economic our business. These include trade restrictions, such as tariffs, and macro-economic and socio-economic environment threats government policies on drug pricing and other issues. In addition, in our Enterprise Risk Management process to Negative impact of unpredictable economic conditions may adversely affect the identify high-risk areas. geo- and socio-political financial position of payers, distributors, customers, suppliers and • We work with trade associations, key stakeholders threats and economic service providers. Financial market issues may also result in a instability and multilateral organizations to anticipate policy/ lower return on our financial investments, and a lower value on trade developments and related consequences some of our assets. This risk was upgraded to an emerging risk in for our business. 2020, from an awareness topic in the previous year, as the COVID-19 pandemic, trade frictions and other trends continue to create an unpredictable environment for global business.

New ways of working The COVID-19 pandemic has fundamentally changed the way • We accelerated the launch of a new global working we work. It has accelerated existing trends and triggered new model for office-based functions, called Choice with Impact on productivity and well-being of associates of ones. These include reduced business travel, increased Responsibility, which addresses associates’ need constant remote working dependence on virtual communications platforms, potential for flexibility in working arrangements while seeking due to the current mental health concerns due to prolonged isolation, and blurred to maintain business performance. pandemic crisis and in lines between working and non-working life. These trends pose planned future setup • We expanded mental health resources and tools several risks for our business, including decreased productivity, available to associates. challenges around keeping associates engaged with our corporate culture, employee burnout, and data privacy/protection issues.

Global enterprise We are in the design and planning phase for the implementation • We expect the planning, design and build phase to resource planning of a new global ERP system that seeks to simplify, standardize continue through 2021, with the first implementations (ERP) implemen­tation and digitize processes across several business functions. The of our new ERP system expected to begin in the Inability to implement and aim is to help ensure efficient and compliant business operations second half of 2022. properly operate our new as well as to ensure the availability of high-quality data necessary global ERP system to aid our decision-making. Any disruption or malfunction of our new ERP system could negatively affect our operations.

AWARENESS TOPIC

Climate change Climate change and the potential failure of adaptation are key risks • We formally signed on to the Task Force on Climate- highlighted across most risk and trend reports. The transition to a related Financial Disclosures. Climate change and increased risk of major low-carbon economy and the adjustment of energy production and • We provided long-term sensitivity and stress-testing natural disasters consumption will continue to be critical for investors and society as a analysis for climate and water to relevant business whole. Novartis is potentially exposed to physical risks from varying functions. natural disaster or extreme weather events. In addition, we face increasing transition risks due to market and regulatory dynamics, • We started a process to assess climate-related risks including carbon taxes and carbon pricing. Novartis is committed to for our development pipeline and existing medicines. using resources efficiently and reducing greenhouse gas emissions. For more information on our climate-related actions We aim to achieve carbon neutrality across our supply chain (Scope and disclosures, please see page 64 and page 75. 1, 2 and 3) by 2030. However, in a rapidly changing world, there can be no certainty that we will manage such issues successfully to meet our targets.

Holding ourselves to high ethical standards Novartis in Society | 25

Strengthening internal assurance pulse checks providing additional in­­sight new global standard for assessing and advisory into the Novartis culture journey. these groups, covering anti-bribery, Novartis Business Assurance & Advi- credit risk and trade sanctions. We will sory (NBAA) plays an important role in We performed 81% of planned activities first conduct assessments in 12 pilot supporting the risk and compliance (equating to 62 engagements) in 2020, countries in Asia, Africa, Europe, and process. It is an independent corporate most conducted remotely, despite the North and South America before rolling function comprising Internal Audit, the obstacles created by COVID-19. These out this centralized risk management SpeakUp Office (our whistleblower pro- engagements comprised 39 audits, 17 process globally. gram) and Global Security that provides advisories and six internal reviews cov- protection, insight, advice and assur- ering the entire value chain of Novartis In November, we launched our revised ance to the business and the Audit & and key risks. Novartis Third Party Code to strengthen Compliance Committee of the Board the environmental sustainability lan- of Directors. In 2020, we invested in We evolved our approach from a main guage and outline requirements for ups­killing 115 NBAA associates to focus on findings to truly understand third parties around setting environ- become better at identifying emerging the root causes, and started to share mental targets and managing their envi- risks, and we accelerated data and knowledge and learnings that our asso- ronmental performance and that of digital awareness. ciates can apply. As an example, insights their supply chain. Further, it specifies were shared from engagements explor- requirements for our suppliers with With our joint ambition for integrated ing the unique challenges associated respect to human rights (e.g., minimum assurance and data and digital, we are with Kymriah, our chimeric antigen wages, working hours and child labor), leveraging new digital capabilities to receptor T-cell (CAR-T) therapy. Learn- and reinforces our ongoing commit- seamlessly connect and analyze data ings regarding the need to strongly con- ment to diversity and inclusion, prohib- from NBAA, ERC and across Novartis nect the supply chain and commercial iting supplier discrimination based on divisions into a single dashboard to functions, or how to implement innova- national or ethnic minority status, and de­tect emerging risks, trends and devel- tive agreements with payers, helped us gender identity or expression. opments more quickly and accurately. identify and mitigate risks linked to the new business model for this immuno- ADDRESSING ENVIRONMENTAL RISK IN These enhancements were crucial in therapy. OUR SUPPLY CHAIN helping us adapt to the COVID-19 pan- In 2020, we established a dedicated in- demic. As lockdowns took effect, we Expanding the third-party risk house team of global HSE risk experts quickly shifted to remote audits, advi- management process within our HSE Supplier Assurance and sories and investigations, and recali- Our Third-Party Risk Management Risk function to perform supplier audits brated our focus on evolving threats (TPRM) team is responsible for identi- and assessments, covering all regions. such as cybersecurity in coordination fying, assessing and managing risk, We assess third parties in terms of their with Novartis Information Security and promoting ethical behavior and foster- compliance with the Novartis Third Risk Management. These efforts helped ing sustainability in our supply chain. In Party Code, the effectiveness of their ensure NBAA provided senior manage- 2020, we continued to integrate human management system, and if they meet ment and the Board of Directors with rights into TPRM, most notably through legal and Novartis HSE standards. The timely advice on how to optimize busi- labor rights; health, safety and environ- HSE risk assessment team works ness continuity in critical units such as ment (HSE); anti-bribery; and corruption. closely with the Third-Party Labor Novartis Technical Operations, which Further, we expanded our risk assess- Rights, Human Rights and Quality oversees global manufacturing opera- ment methodologies to include addi- teams to help ensure a focus on human tions, the supply chain and quality tional human rights risks and strength- rights and community impact. assurance. Support included early inter- ened our due diligence processes. vention advice to review business conti- We continued to monitor the environ- nuity and emergency management plans TPRM covers the following core risk mental performance of our suppliers so sites could continue to operate seam- areas: anti-bribery; animal welfare; against Novartis targets for carbon, lessly until Novartis had established a HSE; labor rights; information security; energy, water and waste reduction. global response plan. data privacy; and good manufacturing Every year, we measure and monitor the practices. In 2020, we added financial performance of key suppliers through We further strengthened our Internal due diligence and assessment of suppli- a dedicated sustainability survey. In Audit function by introducing data auto- ers’ business continuity plans. The latter 2020, we distributed the survey to more mation and laying the foundation for has been especially relevant during than 80 suppliers, with an 86% response continuous risk assessment through COVID-19, with some suppliers requir- rate. Moving forward, we will also imple- data analytics. We also introduced auto- ing support in dealing with financial dis- ment an environmental maturity ladder mated analytics for commercial audi- tress. We also included trade sanction approach, outlining the milestones sup- tors, with an estimated 150 hours saved checks in TPRM, further integrating our pliers should reach within a certain across commercial audits per year. We risk management processes. timeframe to continuously enhance enhanced our understanding of key their environmental performance. This company risks as well as our coverage We expanded our risk management is important for progressing toward our by using new approaches such as practices to include wholesalers and 2030 sustainability targets, and in par- reviews covering smaller markets or distributors, who are important Novartis ticular for achieving carbon neutrality in emerging topics, and piloted culture customers. In October, we launched a the supply chain (see page 64 of this 26 | Novartis in Society

Supply chain performance indicators

2020 2019 2018 Suppliers risk-assessed by TPRM 1, 2 8 448 2 839 3 NA 4 Suppliers with remediation action agreed 2, 5 521 122 89 Suppliers audited 2 35 135 48 Suppliers assessed for anti-bribery risks 2 014 479 3 NA 6 Suppliers assessed for animal welfare 10 3 3 NA 6 Suppliers assessed for business continuity plans 70 NA 6 NA 6 Suppliers assessed for financial due diligence 193 NA 6 NA 6 Suppliers assessed for health, safety and environment 315 226 3 NA 6 Suppliers assessed for information security and data privacy 3 174 1 142 3 NA 6 Suppliers assessed for labor rights risks 4 635 1 423 3 NA 6 Suppliers assessed for Quality GmP 561 162 3 NA 6 Supplier engagements stopped due to risk assessment outcomes 120 15 3 NA 6

1 TPRM: Third-Party Risk Management 4 Data not available; the TPRM program was not launched. 2 Includes new suppliers and new products, services or sites from existing suppliers. Figures 5 Follow-up includes more information requested, audits or on-site assessments. do not include GxP audits (see page 57 for more details). 6 Not available; the specific risk domain was not yet included in TPRM 3 Data reflect April to December 2019, based on the TPRM program geographical rollout.

report). In addition, we now also embed ment in the Pharmaceutical Supply We continued to conduct due diligence environmental sustainability objectives Chain Initiative (PSCI). In particular, we to embed the UN Guiding Principles on in our supplier contracts. worked with the PSCI to develop HSE Business and Human Rights throughout guidance documents based on indus- our operations. Although the pandemic Despite COVID-19, we performed a total try best practices that were rolled out limited our ability to perform due dili- of 382 comprehensive HSE assessments during webinars and published on the gence on the ground, we conducted in 2020. These included 33 audits and PSCI’s supplier platform. desk-based research in preparation for led to 383 findings. Findings across future field-based human rights assess- Europe, the Americas, China and India Upholding our commitment to ments in Bangladesh, Indonesia, Mexico highlighted process safety as an area human rights and Russia, and we completed virtual for improvement. Specifically in China In 2020, our CEO was the first from a labor rights and HSE audits in India, Bra- and India, industrial hygiene was also a pharmaceutical company to sign the zil and Mexico. We have initiated a pro- concern. Together with our suppliers, we World Business Council for Sustainable cess of human rights risk mapping and have developed mitigation plans with set Development’s CEO Guide to Human assessments regarding raw material timelines to address these findings. Rights, calling on businesses to contrib- inputs into our products, and clinical trial ute to the realization of universal human policies and processes, which we will In 2020, Novartis identified eight sup- rights. He was also one of more than report on once findings are available. pliers with unacceptable gaps in HSE 1 000 CEOs to endorse the Statement compliance leading to either an exit or from Business Leaders for Renewed In April, based on the World Health termination of the evaluation process. Global Cooperation, reaffirming sup- Organization’s technical information on We also engaged in capability-building port for the United Nations (UN) and COVID-19, we provided guidance to our activities with suppliers, especially in renewed global cooperation, with firm suppliers to help ensure they met our India and China as part of our involve- commitments to uphold human rights. expectations for the treatment of work-

Novartis human rights strategy

ONGOING HUMAN RIGHTS CAPACITY STRATEGIC STAKEHOLDER DUE DILIGENCE ASSESSMENTS BUILDING RIGHTS ENGAGEMENT PROMOTION Augmenting existing Investigating markets, Building capacity in Reporting and Supporting protection due diligence pro­­ products, and services Novartis about human engaging with key of human rights in cesses by embedding for potential human rights and due diligence internal functions and areas that align with human rights rights risks and impacts processes external stakeholders our business Holding ourselves to high ethical standards Novartis in Society | 27

ers. Together with Human Rights, HSE, supplier awareness and capability to local channels such as the ERC, P&O TPRM and other functions, the Labor avoid discharging untreated wastewa- and Legal functions; or to senior man- Rights team in India also established a ter effluents. In Brazil, we coordinated agement. Our process helps ensure Novartis supplier extension program to a PSCI working group to investigate that complaints are swiftly received, share COVID-19-related good prac- human and labor rights practices risk-assessed, prioritized, investigated, tices with suppliers virtually. among carnauba wax suppliers and and resolved at the appropriate level. encourage them to join sector-wide ini- We are committed to analyzing and Our Novartis Third Party Code includes tiatives for addressing these issues, in understanding the root causes of mis- a specific requirement for suppliers to particular the risk of forced labor. Fur- conduct to help prevent similar issues respect human rights and align to our ther, we mobilized a group of pharma- from occurring in the future. requirements for minimum wages, paid ceutical companies to look into the overtime, maximum working hours, time human rights risks associated with raw In total, 1 941 complaints of alleged mis- off and breaks, and definitions of child material inputs in pharmaceutical prod- conduct, with a total of 2 186 allega- labor and young workers, to comply ucts. Novartis also led the development tions, were made. 22% were self-iden- with international standards. The code and delivery of human rights and mod- tified (monitoring), and 78% came from reinforces our commitment to diversity ern slavery trainings for PSCI members, SpeakUp. 35% were made anonymously. and inclusion in our supply chain by pro- and for the annual pharmaceutical sup- There was a 17% decrease in overall hibiting supplier discrimination based plier conferences in China and India. complaints in comparison to last year on national or ethnic minority status, (similar to peers) due to COVID-19 and and gender identity or expression. In We continued to promote human rights the stricter risk assessment. addition, we rolled out training for rele- through more inclusive policies at vant internal functions to raise their Novartis. Our Human Rights, Diversity & Complaints fell under 15 categories awareness and provide them with due Inclusion, and People & Organization (see the prior table). In 2020, we fac- diligence guidance to help prevent (P&O) teams partnered to support human tored human rights-related violations modern slavery. To further build inter- rights leadership opportunities, including into our existing misconduct catego- nal capacity, we plan to launch pilots in the promotion of lesbian, gay, bisexual, ries; within these categories, nine cases 2021 to enable our supply chain man- transgender and intersex (LGBTI) asso- contained allegations of human rights agers to better identify and manage ciates’ rights and the development of the violations. human rights concerns among higher- company’s first global policy and strategy risk third parties. for ensuring respect for the right to equal Overall, the investigated central matter opportunities of disabled associates. allegations (higher-risk cases) resulted We publish a statement explaining how in 102 dismissals or resignations, and in we address modern slavery risks or Encouraging associates to speak up 68 written warnings. Other remedial impacts each year on our website. The SpeakUp Office continues to pro- actions such as training, coaching and vide a safe place for associates to raise implementing new controls were also In 2020, to drive collective action at scale concerns about potential misconduct widely used when deemed appropriate. beyond our own company’s operations, while being protected against retalia- we spearheaded projects through the tion. Complaints can be made directly We continued to strengthen the SpeakUp PSCI’s Human Rights and Labor Sub- to the SpeakUp Office through an exter- Office with general awareness sessions committee, which we co-chair. For nal web-based platform, which offers about the program, and together with example, in India, we mobilized a coali- the possibility to report anonymously, the Global Security team responsible tion of PSCI members to support the or through our mobile app. Complaints for investigating most central matter state of Telangana’s initiative to restore can also be raised via a generic email allegations, we offered training on spe- the Musi River in Hyderabad by raising address to the SpeakUp Office; through cific investigations to upskill local case

Our SpeakUp process

REPORT REVIEW INVESTIGATE DECISION UPDATE ACTION CLOSE

Report concern Concern Local or global Business Employee will If required, SpeakUp using one of the reviewed to function decides on be updated actions case closed SpeakUp decide investigates appropriate on the case will be put into platforms* next steps action practice

* Externally hosted web-based platform (web form or hotline) or via local channels, such as the ERC, People & Organization, and Legal functions or senior management 28 | Novartis in Society Photo Novartis employees at a production facility in Torre Annunziata, Italy.

Ethical business practices performance indicators

2020 2019 2018 Novartis associates trained and certified on the Code of Ethics (%) 1 98 98 98 Misconduct cases (central matters) reported to the SpeakUp Office 2, 3, 4 142 209 441 Total SpeakUp Office allegations (central matters) 2, 4, 5 243 427 768 SpeakUp Office allegations (central matters) per category (%) 2, 7 Fraud/asset misappropriation 7.8 6.8 21.6 Expense fraud 2.9 5.4 23.4 8 Books and records, accounting irregularities 0.8 1.2 0.4 Improper professional practices 11.9 16.9 22.3 Bribery, kickbacks 0.8 1.6 2.1 Discrimination and sexual harassment 12.8 8.2 4.0 Retaliation 3.0 6.3 2.1 Other employee relations issues 19.0 18.0 7.9 Conflict of interest 10.7 10.8 5.2 IT security breach 3.7 4.0 1.9 Quality assurance/data integrity 8.6 6.3 3.1 Data privacy 1.6 2.6 0.5 Antitrust, fair competition 0.8 0.2 0.3 Company confidential/trade secret information 3.7 0 0 Other 11.9 11.7 5.1 SpeakUp Office allegations (central matters) substantiated 2, 4, 6, 9 114 254 558 Dismissals and resignations related to misconduct (central matters) 2, 4, 6, 9, 10 102 186 350

1 Active Novartis associates with email addresses, trained via e-learning or via One Deck for 6 May include allegations from previous years Novartis Technical Operations. Training rolled out from September 2020 to February 2021, 7 Percentages are based on total SpeakUp Office allegations number. Results for 2019 and with a preliminary completion rate as of December 31, 2020. 2018 have been revised to reflect the change in methodology from using the number of 2 A central matter applies to a senior leader or manager, potentially disruptive reputational misconduct cases to the number of allegations. impact, sexual harassment, discrimination, retaliation and significant financial impact. 8 Until the end of 2018, these expense fraud allegations are assessed to be of higher risk in 3 The number of misconduct cases reported may change year-on-year as matters may be China. The risk assessment of these issues changed as of 2019. reassessed in the course of the case lifecycle. 9 Data based on when investigation report was received. Results for 2019 and 2018 have 4 The decrease in the number of misconduct cases reported is due to a new risk assessment been revised to reflect this change in methodology. as of 2019. 10 Data based on year when case is closed. Results for 2019 and 2018 have been revised to 5 The number of allegations is higher than the actual number of cases as a case can have reflect this change in methodology. more than one allegation.

managers in ERC and P&O teams. A cians, which is consistent with what Commitment to transparency and total of 755 associates were engaged, Novartis found in its own internal inves- disclosure and more than 150 completed virtual tigation. We also resolved a civil suit Transparent reporting and disclosure play training sessions. pending in the US District Court for the a key role in building trust with society. We Southern District of New York challeng- aim to be open and clearly disclose what Addressing legacy legal issues ing speaker programs and other promo- we do, how we work, where we are suc- Novartis resolved several legacy litiga- tional events conducted from 2002 cessful and where we face challenges. tion matters in 2020. We reached set- through 2011 by Novartis Pharmaceuti- This applies across all aspects of our tlements with the US Department of cals Corporation in the US. As part of this business around the world, including clin- Justice and the US Securities and settlement, Novartis will continue to ical trials, interactions with healthcare pro- Exchange Commission, resolving all evolve its approach to peer-to-peer med- fessionals, and patient group funding. For Foreign Corrupt Practices Act investi- ical education in the US by transitioning more disclosures, visit our website. gations into historical conduct by the predominantly to digital formats. Going company and its subsidiaries. Specifi- forward, we aim to set the standard by cally, with respect to allegations per- embracing new, digitally enabled educa- taining to our subsidiary in Greece, the tion programs that will help physicians resolutions contained no allegations keep pace with medical innovation and relating to any bribery of Greek politi- support better outcomes for patients. Holding ourselves to high ethical standards Novartis in Society | 29 30 | Novartis in Society

Photo Dr. Juliet Akoth (right) speaks with a patient and her family during a home visit in Kitui, Kenya. Dr. Akoth enrolled in Echo for Life, a training program sponsored by Novartis in partnership with the University of Nairobi.

STRATEGIC AREAS Being part of the solution on pricing and access

Why is it important?

Improving access to medicines remains one of the greatest healthcare needs worldwide. According to the World Health Organization (WHO), one-quarter of the world’s population – 2 billion people – have no access to basic medicines. Roughly 1 billion people faced catastrophic payments for healthcare in 2020, driven in large part by out-of-pocket spending on medicines. With COVID-19 putting nearly half of the global workforce at risk of losing their livelihoods, there has never been more urgency to make medicines affordable and secure equitable access to healthcare. Collectively, the global health community has a responsibility to help ensure that no one is left behind and that anyone who requires treatment receives it.

In this section Read about our approach to pricing and access, and our progress in implementing the Novartis access principles:

New targets Innovative brands Sub-Saharan Africa Healthcare workers Launched new access targets Introduced outcome-based Announced a collaboration with Provided access to peer-reviewed and issued a sustainability bond agreements for Luxturna, and the Africa Medical Supplies information for diagnosis and linked to those targets more than 20 new local brands for Platform to help provide more management of a range of our innovative therapies efficient and rapid access to diseases to more than 20 000 ! p. 31 medicines in the Novartis healthcare professionals in 150 ! p. 33 COVID-19 Pandemic Response countries, through the Better Portfolio for the member states Evidence program at Ariadne Labs ! p. 37 ! p. 42 Being part of the solution on pricing and access Novartis in Society | 31

Our targets

Implement an access strategy for all new products launched

Increase patients reached with strategic innovative therapies in low- and middle-income countries (LMICs) by at least 200% by 2025

Implement tiered pricing for launches in Pharmaceuticals and Oncology based on national income levels and value-based pricing

Achieve a twofold increase in the number of patients reached in sub-Saharan Africa by 2022, and a fivefold increase by 2025

Our approach and performance teams accountable for acting on access opportunities. Through our core business – the dis- covery, development and marketing of The highest ranks of our organization are innovative treatments – we have helped accountable for expanding access to our prevent and treat diseases, ease suffer- treatments. Members of the Executive ing, and improve quality of life. But as the Committee of Novartis (ECN) and other size and complexity of the world’s health- senior leaders have access indicators in care challenges grow, we must widen their annual objectives. This keeps our our scope, extending our impact even entire company focused on increasing further to help effectively address the our positive impact on society. needs of underserved populations in a way that is sustainable for our business. In September, as part of the company’s ambition to expand access to innova- We established the Novartis access tive medicines in LMICs, Novartis com- principles in 2017 to systematically inte- mitted to increase patient reach with NOVARTIS ACCESS PRINCIPLES grate access strategies into how we our strategic innovative therapies by at research, develop and deliver our new least 200% by 2025. In addition, we R&D medicines globally. This is a key meas- announced we would increase patient We systematically assess our product ure of success for our leaders and asso- reach of our global health flagship pro- portfolio against the unmet needs of ciates. Our emerging markets center of grams in leprosy, malaria, sickle cell dis- underserved populations and integrate excellence in our Pharmaceuticals busi- ease and Chagas disease by at least these needs, as appropriate, into our drug ness unit supports the implementation 50% over the same period. Achieve- discovery and development strategy of the principles by ingraining access ment of these targets, which we will into all new launches in LMICs. Strate- report on annually, should result in a Affordability gies can include establishing innovative potential reach of more than 24 million We work to make our medicines available pricing and access models, driving early patients across therapy areas. by considering both effective affordability launches in these countries, and sup- strategies and innovative solutions to porting approaches to strengthen To reinforce our commitment to the disease management healthcare systems. The Access to patient access targets, we issued a Medicine Foundation has repeatedly EUR 1.85 billion sustainability-linked System strengthening recognized our efforts in this area, rank- bond (SLB). The bond is the first of its ing us second in the 2018 Access to kind in the healthcare industry and the We seek opportunities to lower local barriers Medicine Index among 20 of the world’s first SLB incorporating social targets, to healthcare delivery, working in colla­boration largest healthcare companies. with bondholders entitled to receive a with governments and other partners to higher amount of interest if Novartis support quality patient care in areas where Our drug development processes fails to meet its access targets. Novartis we can have the greatest impact re­quire our teams to explore how we obtained two separate second-party can increase our impact in LMICs in opinions that validate the robustness terms of affordability, health system and relevance of the key performance strengthening, and adaptive research indicators and targets, one from the and development (R&D). The Novartis Access to Medicine Foundation and Research & Development Committee one from Sustainalytics, a consultancy reviews all drug development submis- with recognized environmental, social sions and holds our clinical research and governance (ESG) expertise. Sus- 32 | Novartis in Society

tainalytics also confirmed alignment of • Conducting research that enables (rare inflammatory diseases), among the bond with the Sustainability-Linked us to better pursue adaptive others. In addition, Novartis medicines Bond Principles published by the Inter- development of new medicines (e.g., are being studied in more than 30 ongo- national Capital Markets Association. genetic diversity) ing investigator-initiated trials around We will report annually on our perfor- the world. mance against these patient access We focus our adaptive development targets, with limited assurance by an efforts to support our global health flag- Developing effective affordability external verifier. ship programs in sickle cell disease, strategies Chagas disease, malaria and leprosy We live in an era of medical innovation, Adapting medicines to address (see “Addressing global health chal- driven by a better understanding of the unmet needs lenges” on page 46). We also conduct genetic and biological roots of disease, In line with the Novartis access princi- adaptive development projects in a and a burgeoning use of data analytics ples, we carry out research and devel- range of other therapeutic areas to and digital technology in science and opment with an aim to help address the address emerging needs. Selected pro- healthcare. At the same time, the world’s unmet needs of underserved patients, jects are shown in the table below. population continues to grow and people known as adaptive development. This are living longer, fueling a rise in chronic means we continually assess our prod- Early in the COVID-19 outbreak, we diseases. Together, these factors are uct portfolio to see where we can assessed whether our investigational or increasing demand for healthcare world- deliver new solutions for vulnerable approved medicines could be repur- wide and pressuring healthcare sys- populations by: posed beyond their present indications tems to contain spending growth. The • Developing new formulations to treat the symptoms or complications COVID-19 pandemic has exacerbated • Expanding the clinical use of of COVID-19. This included conducting this pressure on healthcare budgets. existing medicines into new multiple large clinical trials for Jakavi indications and new populations (blood malignancies), in collaboration In 2020, the WHO published an updated (e.g., infants and children) with Incyte Corporation, and for Ilaris policy guideline on country pharmaceu-

Adaptive development projects

Category Product Objectives Progress to date

Expansion of clinical Entresto Phase IV clinical trial to assess the Study approved by the health authorities and use of existing efficacy and safety ofEntresto in started recruitment in Argentina, Brazil, medicines into new people with heart failure due to Colombia and Mexico indications­ and chronic Chagas cardiomyopathy populations Hydroxyurea Develop pediatric formulation for Dossier submitted for registration treatment of sickle cell disease in Ghana in October; submissions in Uganda, Tanzania and Kenya are planned for 2021

Myfortic Expansion of lupus nephritis Following registration in 2019 of Myfortic for the indication treatment of lupus nephritis in Pakistan, we are continuing to register this indication in countries with high prevalence and unmet medical need, including Argentina, Bangladesh and Myanmar, to provide better treatment options.

Development of new Coartem Develop pediatric formulation for The trial is expected to start in 2021 in formulations for infants < 5 kg body weight collaboration with the PAMAfrica consortium, greater incremental funded by the European & Developing benefit to vulnerable Countries Clinical Trials Partnership. patients

Conducting research Tamoxifen Study to understand how Africa- In 2019, we submitted a study protocol to the that enables us to specific CYP2D6 polymorphism – government of Zimbabwe. All study approval better pursue a key enzyme to metabolize a large requests were granted in 2020. However, adaptive de­velop­ number of clinically important drugs patient enrollment in the study was placed on ment of new medi­ – potentially affects how the drug hold due to the COVID-19 pandemic. cines metabolizes in the body Being part of the solution on pricing and access Novartis in Society | 33

tical pricing policies, making recom- border treatments whereby patients more than 355 000 patients and launched mendations on 10 pricing policies com- from smaller countries lacking the nec- 15 EMBs in Pharmaceuticals, and we monly considered in countries to essary infrastructure are treated in cent- reached more than 13 900 patients and manage medicine prices, as well as ers in larger countries. In addition, we are launched seven EMBs in Oncology. pragmatic considerations for what is working with local partners to increase required to implement these policies the low level of symptom awareness and The Access to Medicine Foundation according to the objectives and context genetic diagnoses in developed and estimates that innovative drugs reach of individual health systems. emerging markets, establishing patient less than 1% of patients in emerging support programs and referral networks markets five years after launch. One of Novartis welcomes the WHO’s condi- to address these hurdles. our priorities has been to reduce the tional recommendation on value-based time it takes us to bring new therapies pricing and is committed to pricing our To help improve the affordability of our to patients in LMICs compared to the medicines according to the value they medicines in countries around the original brand in higher-income coun- deliver. Yet most healthcare systems world, we take local economic realities tries. In 2019, we reduced this time lag base their payment models on volume into account in considering a range of to five months for the first EMB of of procedures – such as the number of approaches to expand access across the Kisqali, six months for Aimovig, and visits to the doctor, days spent at the income pyramid, including tiered pricing, seven months for Beovu by more effec- hospital, or the number of medicines innovative business models, emerging tively integrating access considerations delivered – which often results in a sub- market brand strategies, patient access into the launch process. In 2020, we optimal allocation of resources. programs and off-patent solutions. launched the EMB of Piqray in India one month ahead of the first European We believe medicine prices should be EMERGING MARKET BRANDS country launch thanks to early planning based on four value pillars: clinical value, The WHO estimates that up to 90% of and more formalized processes. patient value, value to the healthcare sys- the population in LMICs purchases tem, and value to society as a whole. As medicines through out-of-pocket pay- EXPANDING ACCESS TO HIGH-QUALITY an example, cost offsets from prevented ments. In 2014, Novartis introduced an GENERICS hospitalizations have been considered in emerging market brand (EMB) strategy Our Sandoz Division drives access pricing our treatments for heart failure. to expand access to innovative medi- through the provision of affordable, cines to people in LMICs, in a way that quality generic medicines and biosimi- A value-based approach to healthcare is sustainable for the business and sup- lars. It focuses increasingly on seg- incentivizes the healthcare sector to ports governments in responding to ments where it can make a difference, focus on the interventions that deliver unmet medical needs. One of the key either by making available a competitive the most effective, efficient and sustain- objectives of the EMB strategy (previ- generic alternative or by offering a novel able outcomes. Novartis was among the ously known as our local brand strat- and more affordable alternative to exist- first pharmaceutical companies to egy) is to provide access to innovative ing therapies (such as leading biologic enter into value-based contracting for drugs as early as possible at a price medicines through its global biosimilar medicines, linking pricing and reim- patients can afford. We continue to business). In 2019 alone, the US gener- bursement rates to specific outcomes. expand this strategy in LMICs to reduce ics industry contributed more than USD the out-of-pocket burden for patients, 313 billion in savings, with Sandoz med- For example, outcome-based agree- improve access, and help shorten the icines accounting for USD 12.1 billion. ments are in place for our breakthrough time lag between the availability of our therapy Luxturna, which can be sight- innovative medicines in higher-income In February, Sandoz was the first com- saving by treating a gene mutation countries and in LMICs. pany to commit to maintaining stable causing an inherited retinal dystrophy. prices for 23 essential medicines for To address payers’ concern about the In 2020, we launched EMBs for thera- the treatment of COVID-19-related durability of the effect of this one-time pies in our Innovative Medicines port- symptoms and disease complications, treatment, payment is dependent on the folio, including Piqray (advanced breast including antivirals to reduce the impact accepted clinical threshold reached by cancer), Kisqali (metastatic breast can- of COVID-19, and antibiotics to combat patients at agreed time points based on cer), Tafinlar + Mekinist (lung cancer pneumonia. a commonly used light sensitivity test. and metastatic melanoma), Rydapt In addition, to help improve affordability (acute myeloid leukemia), Entresto Further, the Novartis COVID-19 portfo- and increase access, we have devel- (heart failure), Aimovig (migraine) and lio launched in July includes 15 Sandoz oped an overarching tiered pricing Beovu (wet age-related macular degen- drugs that treat key symptoms of approach taking local economic con- eration). Novartis is systematically eval- COVID-19, such as fever, coughing, res- siderations into account. We are also uating the feasibility of implementing piratory problems and pneumonia. The exploring other innovative payment EMBs for key launches. This has proven medicines – including dexamethasone, models, such as installment payments to be an effective tool to reach more which has been shown to reduce deaths and deferred payments. In markets patients. For instance, the EMB of Entresto in severe COVID-19 pneumonia – are where Luxturna is not yet approved, we is benefiting more than 230 000 heart made available to governments, non- implemented early access schemes, failure patients, a 50% increase in patient governmental organizations (NGOs) such as providing individual named reach in LMICs compared to the same and other institutional customers in up patient funding and facilitating cross- period last year. In 2020, we reached to 79 eligible LMICs at zero profit. 34 | Novartis in Society

NOVARTIS ACCESS Income segments Novartis access approaches FRAMEWORK High income Original brands, generics Value-based pricing, patient Our access framework can be Upper-middle income assistance programs, tenders adapted to the needs of people across income segments Middle income

Equitable commercial models Emerging market brands Generics Social business models Patient assistance programs Zero-profit models Strategic philanthropy Low income Tenders

Donations, strategic Poor philanthropy, tenders

“How do we make broader INTEGRATED ACCESS PROGRAMS & MARKETS needs in complex environments through Novartis has been pioneering social a cross-divisional approach and with access possible? In business models for more than 10 the right partners. addition to having more years. Our experience in implementing social business activities and commu- Once more, our experience on the affordable prices, it is also nity health education has provided ground showed that delivering quality about working with health important lessons for expanding access care along the patient journey – from to affordable medicines and delivering diagnosis to treatment and disease systems and partnering quality care in lower-income settings. management – requires strong health- with governments, payers care systems. To support this, we will In particular, our experience with place even more emphasis on health and relevant organizations Novartis Access, our portfolio of medi- system strengthening activities in the to accelerate access to cines addressing key noncommunica- future. transformative therapies” ble diseases (NCDs) and childhood pneumonia, revealed that we had to In 2020, we created the Integrated Marie-France Tschudin, President of expand our offering to additional thera- Access Programs & Markets (IAPM) Novartis Pharmaceuticals peutic areas in order to best meet unit to help apply these learnings more healthcare needs. Further, although our consistently and support our shift to

pricing was attractive (USD 1 per treat- further integrate social business activi- ment per month for the portfolio), our ties into our core business and opera- model should be more flexible. (See tions. The new unit builds on the core “Evaluating Novartis Access.”) capabilities of our former Novartis Social Business group and aims to bet- We are also investigating ways to ter leverage synergies across our expand on our direct market approach Global Health & Corporate Responsibil- in the three countries where we assume ity organization, our Innovative Medi- responsibility for the full Novartis port- cines and Sandoz Divisions, functions folio (Laos, Cambodia and Nepal) to and regions. IAPM includes Novartis build a roadmap that will enable us to Access, Healthy Family, direct markets deliver better solutions for underserved (countries where IAPM has full respon- patient populations. In these and other sibility for the entire Novartis product countries in Latin America, we are portfolio), and a new center of excel- exploring how to best address unmet

Emerging market brands performance indicators

Patients reached (thousands)

2020 2019 2018 Emerging market brands Novartis Pharmaceuticals 355.1 302.6 213.3 Novartis Oncology 13.9 11.3 8.2 Being part of the solution on pricing and access Novartis in Society | 35

lence to facilitate the implementation of Our social business initiatives around the world the Novartis access principles across the company, with a focus on health EL SALVADOR COLOMBIA NIGERIA MOLDOVA PAKISTAN system strengthening. VENEZUELA GEORGIA While the structure has changed, our commitments remain the same. We continue to develop global health pro- grams and social business models, with the ambition of advancing them into sustainable solutions that can be scaled CAMEROON in the market.

Novartis Access TANZANIA

Novartis Access provides on- and off- patent medicines addressing childhood UGANDA pneumonia and key NCDs (cardiovascu- ETHIOPIA lar diseases, type 2 diabetes, respiratory Healthy Family RWANDA KENYA INDIA VIETNAM illnesses and breast cancer). Medicines Novartis Access are offered together with capacity-build- ing activities to strengthen health sys- tems in lower-income countries. Novartis Access currently operates in 14 coun- nam. In Pakistan, we launched a new acknowledged that the conclusion of the tries across Africa, Asia and Latin digital medicine dispensing service in study came too soon, and ideally the America, and has reached 4.5 million partnership with the Health Promotion evaluation should have continued for an patients since launch. Foundation in Karachi. Data gathered additional one or two years. through the platform enables the foun- In 2020, as part of the transition of our dation to see if Novartis Access medi- Yet, overall, academic researchers social business activities into IAPM, we cines are dispensed in accordance with commended Novartis for investing in a undertook an in-depth assessment of guidelines, identify disease hotspots, gold standard, transparent evaluation, unmet medical needs in LMICs based gain insights into comorbidities, and which is the first randomized, controlled on data from the Institute for Health monitor adherence. By having access trial of its kind. Further, learnings will Metrics and Evaluation, the WHO and to aggregated data, Novartis is able to benefit companies in designing access medical reviews. When an unmet need track usage patterns and prevent prod- interventions that are more likely to be was identified, we analyzed the feasibil- uct stockouts. Approximately 800 successful, undertaking rigorous meas- ity of producing and registering medi- patients were registered in 2020, and urement and evaluation from the outset. cines to effectively address this need in we have signed an agreement with a Several papers linked to the study were target countries. Based on this analy- second NGO to launch a similar solu- published, for instance on equity in sis, we are considering additional ther- tion in 2021. access to NCD medicines in Kenya. apeutic areas for our future Novartis Access offering. Evaluating Novartis Access We have started evolving Novartis We have invested in rigorous evaluation Access based on the interim findings. With nearly 30% of the population liv- to measure the impact of Novartis We will further strengthen our efforts ing below the poverty line, Latin Amer- Access. In 2019, we reported on interim around NCD screening and local pro- ica is home to some of the poorest pop- results of an independent evaluation of curement processes, especially where ulations in the world. People living in Novartis Access in Kenya, conducted by molecule-based tendering is the norm, disadvantaged communities are dispro- Boston University in the US. and work with local authorities to help portionally affected by NCDs and are ensure patients can benefit to the great- particularly vulnerable to the health and Final results were released in 2020. They est extent possible from Novartis Access socio-economic impacts of the COVID- demonstrated that Novartis Access did medicines. The final results will further 19 pandemic. This situation adds to the not have a major impact on NCD medi- guide our journey toward strengthening unprecedented migration crisis facing cine access at the household level for the program and our overall approach the region. Despite operational chal- various reasons, including the lengthy to expanding access to medicines. Mov- lenges due to COVID-19, we achieved process in registering the portfolio, ing forward, we aim to further empower an estimated patient reach of 69 000 which made it difficult to get medicines Novartis country teams in the imple- patients in Venezuela, El Salvador and into supply streams. Further, involving mentation of our access objectives, and Colombia in 2020. We aim to expand end users at the county and household focus more strongly on health system Novartis Access to more Latin Ameri- levels (instead of stakeholders at the strengthening. can countries over the next years. central level alone) prior to launching Novartis Access in Kenya would have In Asia, we are continuing to operate informed refinements that may have Novartis Access in Pakistan and Viet- increased impact. It was also widely 36 | Novartis in Society

Novartis Global Health performance indicators

2020 1 2019 2018

Countries with products on the ground 115 33 26 FTEs 2, 3 1 334 786 651 Patients reached with products (thousands) 4 65 828 15 069 5 28 509 5 Health educators trained 671 1 536 1 028 Healthcare providers trained 6 12 648 1 516 697 Policymakers trained 90 145 131 Points of service provision 7 5 902 13 635 15 190 People reached at points of service provision 486 642 986 701 765 055 Awareness events held 8 424 878 250 432 185 756 People reached at awareness events 8 048 360 10 211 704 982 078

1 Data reflect the full scope of access approaches managed by the Global Health 5 Data restated to reflect the patients reached as defined by the sustainability-linked bond, organization, including the activities formerly managed by Novartis Social Business, as well which includes private sector sales in LMICs as the newly formed sub-Saharan Africa (SSA) organization and the Integrated Access 6 Shift to virtual events Programs & Markets unit. More details are on pages 33-38. 7 Points of service provision include facilities and health camps where healthcare services 2 Full-time equivalent positions and contractors are provided. 3 Significant number of headcounts integrated from different units as a result of the 8 In India, we adjusted our approach from hosting large health education meetings with establishment of the new SSA organization community groups to a door-to-door model, and also partnered with schools to deliver 4 The patient number was calculated based on treatments delivered and the following health education to classrooms virtually. This led to an increase in the number of events, but elements: daily treatment doses, treatment duration, treatment adherence and potential with a restricted reach. treatment overlap (NCD patients often take several drugs). The treatment adherence and treatment overlap factors are based on assumptions from developed markets.

Novartis Healthy Family Since 2007, the combined outreach for groups, we switched to a door-to-door The Novartis Healthy Family programs all projects across the four countries model and partnered with schools to are innovative social business models has delivered health education to more deliver health education to classrooms that build local, sustainable healthcare than 66 million people. Beyond deliver- virtually. We also partnered with state capabilities for populations at the base ing education and healthcare, the pro- governments in educating communities of the income pyramid. They address grams also provide people with jobs, about COVID-19. Additionally, in Bihar social issues that impact access to income, and skills enhancement – state, we engaged communities in healthcare, such as education, infra- opportunities that may not otherwise 2 400 villages, educating families about structure and distribution. The programs exist in rural communities. the national health insurance scheme are operational in India (Arogya Parivar), known as Ayushman Bharat. As a result Kenya (Familia Nawiri), Uganda (Familia In 2020, despite challenges posed by of providing this education, the number Nawiri) and Vietnam (Kung Kong Khoe). the COVID-19 pandemic, we continued of individuals enrolled in health insur- Each program is unique and adapted to to make progress in all four countries, ance nearly doubled. the country’s healthcare priorities and adjusting to the situation as needed. local customs. To be included in the In the first quarter of 2020, in Kenya and respective portfolios, products must be For example, in India, we were able to Uganda, we organized 204 health simple to use and tailored to meet the maintain activities in 285 out of 300 camps offering NCD screening, which needs of underserved rural populations project cells thanks to a change in were attended by more than 30 000 with a low disposable income. approach. Instead of hosting health people. In total, we reached nearly education meetings with community 130 000 community members with

Patient assistance programs performance indicators

Patients reached (thousands)

2020 2019 2018 Patient assistance programs Novartis Patient Assistance Foundation Inc. (US) 102.7 87.2 68.1 Novartis Oncology Access 33.9 60.7 71.1 Being part of the solution on pricing and access Novartis in Society | 37

health education in both countries. Due need in both countries. Further, in In September, we announced a collab- to restrictions on mass gatherings, in Bolivia, where Chagas disease has the oration with the African Union (AU) April we halted all community-based highest prevalence in Latin America, we through the Africa Medical Supplies education and outreach activities. Sim- are exploring a cross-divisional Platform (AMSP). The AMSP portal is ilarly, in Vietnam, restrictions led to a approach to treat Chagas-related car- an online marketplace that enables the 50% reduction in program coverage diomyopathy and associated cardio- supply of COVID-19-related critical compared to 2019. vascular diseases. medicines and medical equipment in Africa. Our collaboration focused on Overall, in 2020, Healthy Family pro- LEAVING NO PATIENT BEHIND IN SUB- helping ensure more efficient and rapid grams brought direct health benefits to SAHARAN AFRICA access to medicines in the Novartis over 180 000 patients through diagno- In 2019, we established a dedicated COVID-19 Pandemic Response Portfo- sis and treatment. Moving forward, we organization to reach more patients in lio for the 55 AU member states and 15 are working to expand our Healthy Fam- sub-Saharan Africa (SSA), which is eligible countries from the Caribbean ily programs to reach more underserved home to the largest underserved popu- Community (CARICOM). communities in Asia and other regions. lation in the world. The SSA unit is sup- porting a One Novartis approach to In addition, Novartis provided USD 2 mil­ Direct markets doing business in Africa and is deploy- lion to relief organizations such as the In Asia, our plans to expand direct mar- ing innovative approaches to increase International Federation of Red Cross ket activities into Laos, Nepal and Cam- patient reach, taking a high-volume, and Red Crescent Societies to mobilize bodia were impacted by COVID-19. In lower-price approach. community-based efforts to prevent the Cambodia, we are also adapting our spread of COVID-19 in more than a strategy following an EU ruling classify- In line with our mandate, we have set dozen African countries. This included ing the country as one of 12 high-risk ambitious targets to increase patient purchases of soap, sanitizer and bleach, countries for money laundering. Moving reach twofold by 2022 and fivefold by and essential caregiver equipment like forward, we plan to support the health- 2025. To achieve these targets, we will personal protective equipment. We also care system through scientific knowl- focus on three strategic pillars: provided educational materials on how edge exchange rather than the market- • A customized therapeutic area to support vulnerable and impacted ing of Novartis products. For example, strategy tailored to the regional patients. Further, the funds included working with medical scientific liaisons, burden of disease assistance for the International Rescue we are disseminating guidance to phy- • A strategic shift from the private Committee’s pandemic response for ref- sicians on the effective prevention and sector to the public sector to gain ugee camps in Kenya, Uganda and treatment of ophthalmologic and cardi- market share and drive Somalia, providing humanitarian and psy- ovascular diseases. In Laos, we contin- maximization of patient reach chosocial support for displaced people. ued to distribute products from our oph- potential thalmology portfolio. We were unable • Geographical prioritization to Beyond the pandemic response, the to expand into Nepal due to COVID-19 countries where we can deliver SSA unit made significant progress in restrictions. higher impact at lower cost improving patient access. In June, we joined a collaboration with the Ameri- In addition, in Latin America, we con- The COVID-19 pandemic put our SSA can Cancer Society, the Clinton Health ducted an assessment of public health unit to the test, with most African coun- Access Initiative and other pharmaceu- needs in our first two direct markets: tries going into lockdown in March. We tical companies to expand access to 20 Paraguay and Bolivia. Breast cancer quickly adapted to maintain access to lifesaving cancer therapies in 26 coun- and cardio-metabolic diseases stood our medicines during the crisis. tries across SSA and Asia. It is ­estimated out as areas where there is significant that there were approximately 811 000

Increasing patient reach in sub-Saharan Africa (SSA)

2x patient reach by 5x patient reach by 2022 2025 OUR STRATEGIC MANDATE

Our strategic pillars CUSTOMIZED THERAPEUTIC A STRATEGIC SHIFT FROM GEOGRAPHICAL PRIORITI­ AREA STRATEGY tailored to the THE PRIVATE TO THE PUBLIC ZATION TO COUNTRIES where regional burden of disease SECTOR to gain market share we can deliver higher impact at and drive maximization of patient lower cost reach potential 38 | Novartis in Society

new cancer cases and 534 000 cancer receiving chemotherapy and are at risk seven countries benefited from the deaths in SSA in 2018. Novartis is con- of infection. Novartis Oncology portfolio in multiple tributing with a portfolio of chemo- and disease areas. hormonal therapies for breast, cervical At the start of 2020, NPAF focused on and prostate cancers, with plans to add improving the patient experience. For MANAGED ACCESS PROGRAMS more therapies in the future. example, NPAF reduced the time it took Physicians sometimes seek access to to process enrollment applications, pro- medical products that are not yet We are also expanding access to our viding patients more timely access to approved or available in their country to portfolio of inhaled medicines for medicines. NPAF then had to adapt to the treat patients with serious or life-threat- chronic obstructive pulmonary disease impact of COVID-19 on employment, ening conditions. Novartis Managed (COPD), including Ultibro Breezhaler, travel restrictions and medication access. Access Programs (MAPs) address this Onbrez and Seebri. Our teams in East Due to quarantine and travel restrictions, need by making certain investigational Africa are developing access and patients faced challenges in submitting or unapproved treatments available to launch plans for Ultibro Breezhaler in documentation for NPAF eligibility. Addi- eligible patients. Novartis has been four countries where the treatment has tionally, healthcare professionals (HCPs), widely acknowledged as a leading com- been approved. COPD has a high prev- who collect patient NPAF enrollment pany when it comes to providing alence in East Africa, affecting 44 mil- documents, had restricted access to patients with access to medicines lion individuals in the region due to patients. Many patients lost their jobs as though MAPs. widespread high-risk factors such as well as insurance coverage for drug pre- biomass fuel and smoking. scriptions, and many expressed con- Since 2017, Novartis has collaborated cerns about their ability to continue with an external Independent Bioethics Africa also has a high prevalence of accessing Novartis medicines. Advisory Committee (IBAC), which pro- glaucoma and front-of-the-eye dis- vides analysis and recommendations eases. If left untreated, glaucoma can In response, NPAF took measures to on our guidelines and policies for the lead to blindness. We are therefore reduce the additional burden on ethical conduct of clinical research, and working to expand access to our mature patients and HCPs, working to ensure on selected ethical challenges that may ophthalmology medicines to 20 coun- continuity of treatment. We quickly arise in clinical trials, development pro- tries across Africa. This expansion is modified our processes for gathering grams, managed access programs and part of an ongoing effort to improve and reviewing documentation in order other areas across Novartis. The IBAC patient access to medicines that treat to account for circumstances created includes bioethicists, clinicians, health- ocular diseases such as glaucoma, by COVID-19. We expanded timeframes care practitioners, patient advocates allergy, inflammation and infection. for refills, shipped patients a greater and other domain knowledge experts supply of medicines, and provided addi- as required. We are one of a few com- PATIENT ASSISTANCE PROGRAMS tional flexibility in the renewal process. panies that consults with an independ- Assistance programs are critical for ent bioethics committee. helping patients access healthcare We also expanded NPAF’s Institutional when it is unaffordable. This includes Patient Assistance Program (IPAP) to Novartis monitors patient support via uninsured or underinsured patients in include ophthalmology and cardiovas- MAPs through the Novartis Managed high-income countries. Even when cular products. Moreover, we widened Access Center of Excellence. In 2020, patients have insurance coverage for the IPAP network of collaborating we received and reviewed 10 670 MAP drug prescriptions, they may be unable safety net clinics, which provide health- requests from physicians and we to afford to pay for certain medicines. care services to indigent populations. approved 94% of those requests from IPAP clinics receive Novartis medica- 82 countries and across 64 compounds. To help support such patients, the tions directly, enroll patients in the pro- An additional estimate of 4 500 patients Novartis Patient Assistance Foundation gram, and assist them with administra- were supported via requests from Inc. (NPAF) provides medicines at no tive processing. This support allows healthcare institutions and govern- cost for individuals who are experienc- patients to walk in and receive medicines­ ments. More than 14 000 patients are ing financial hardship and have limited almost immediately, filling a critical gap currently on treatment via MAPs. or no prescription drug coverage in the in the healthcare system. We worked to US. In 2020, NPAF served more than ensure these clinics maintained conti- COVID-19 was the leading indication for 107 000 patients, making available nuity of care during the pandemic. which Novartis received managed more than 72 medicines from our port- access requests in 2020, followed by folio. Over the past five years, NPAF has In LMICs, Novartis Oncology Access metastatic breast cancer. Novartis pro- provided ­medicines at no charge to more (NOA) makes medicines in its portfolio vided medicines for treating COVID- than 363­ 500 patients. available through equitable pricing 19-related conditions to more than models. NOA pursues a partnership- 7 000 patients, responding to unsolic- In 2020, NPAF began providing access based approach, sharing the cost of its ited requests from physicians, health- to new Novartis medicines launched the medicines with government healthcare care institutions and governments. The same year, including Tabrecta for met- systems, charities and other payers, or initial demand came from Italy, with astatic non-small cell lung cancer, directly with patients without health- approximately 900 requests for medi- Kesimpta for multiple sclerosis, incli- care coverage who are unable to pay cines received within the first few weeks siran for managing cholesterol, and for the full cost of their medication. In of the outbreak in that country. In Ziextenzo for use in patients who are 2020, more than 33 000 patients in response to the demand and urgency Being part of the solution on pricing and access Novartis in Society | 39

of the situation, we instituted an expe- diseases or life-threatening conditions, dited review process that shortened and to provide medicines in areas 20 m MAP approval times from five working impacted by the COVID-19 pandemic, COVID-19 Response Fund to days to three or four hours, with med- natural disasters and extreme poverty. support communities around the icines shipped within 24 hours. Novartis world impacted by the pandemic approved nearly 100% of requests for In March, Novartis announced a USD (USD) medicines to treat COVID-19 patients. 20 million COVID-19 Response Fund to support communities around the world In 2019, the US Food and Drug Admin- impacted by the pandemic. In total, 172 istration approved Piqray (alpelisib), a local projects across 81 countries have targeted treatment for advanced breast received funding. cancer. As part of our access strategy, through a global MAP we made the For over 30 years, Novartis and the medicine available to patients with no Novartis Foundation have been work- alternative or comparable treatment ing with partners around the world to options in countries where the product eliminate leprosy. Since 2000, Novartis was yet to be approved or unavailable. has donated more than 68 million blis- In 2020, we received over 1 550 ter packs of multidrug therapy (MDT) requests from 40 countries, and we valued at approximately USD 108 mil- approved 89%. To date, we have pro- lion through the WHO, helping to treat vided the medicine to more than 2 040 more than 7.3 million leprosy patients patients through managed access. worldwide. In 2020, we renewed our pledge with the WHO to extend our Despite supply constraints, in 2020 we MDT donation to 2025. fulfilled our commitment to make Zolgensma (onasemnogene abeparvo- Novartis has also been donating Egaten vec), our one-time gene therapy to the WHO for the treatment of fasci- approved to treat pediatric patients with oliasis, or liver fluke, since 2005, help- spinal muscular atrophy, available to up ing to treat approximately 2 million to 100 patients via a global MAP. In patients in more than 30 countries. Fas- 2020, 100 patients received Zolgensma cioliasis infects more than 2.4 million in more than 20 countries where the people globally. Egaten is currently the therapy is not yet approved by regula- only medicine for fascioliasis recom- tory authorities. mended by the WHO and is on the WHO Model List of Essential Medicines. Further, through a MAP we continued to make Lamprene (clofazimine) avail- Our generics division, Sandoz, contin- able to more than 1 900 patients in ued its collaboration with World Child 2020, mainly for nontuberculous myco- Cancer, a global charity that aims to bacterial infection. improve diagnosis and access to treat- ment for children with cancer in LMICs. DONATIONS Since our partnership began in 2016, Through our medicine donation pro- 6 185 children have been diagnosed in gram, Novartis supports LMICs in their Ghana, Mexico, Myanmar and the Phil- efforts to treat patients for neglected ippines, and 7 116 healthcare profes-

Donations performance indicators

Patients reached (thousands)

2020 2019 2018 Donations Leprosy (WHO) 1 245.4 168.6 176.2 Fascioliasis/Egaten 2 132.8 154.7 154.7 CMLPath to Care TM 30.2 14.4 13.4

Value USD (millions) 4 2020 2019 2018 World Child Cancer <0.01 <0.1 0.1 Emergency relief 3 2.5 2.8 4.7

1 In 2020, the leprosy program fully transitioned to the Global Health organization as one of 3 Monetary and product donations the flagship programs and is also included in data reported in the Novartis Global Health 4 Wholesale acquisition cost (WAC) plus logistics costs for some programs table above. 2 Numbers of patients reached have been updated to reflect the new methodology used by the WHO and based on real-world evidence. 40 | Novartis in Society

sionals have received training. In 2020, additional 17 lower-income countries. In Strengthening health systems our efforts focused on the Philippines, 2020, we reached almost 32 000 The COVID-19 pandemic has demon- where we helped 137 children receive a patients through CMLPath to Care™. strated that fragile healthcare systems diagnosis. In addition, 2 795 healthcare Novartis has committed to providing limit healthcare interventions and sub- professionals were trained in cancer USD 29 million in financial assistance sequently our ability to respond to pub- treatment and care for children. By through 2021 and supplying 150 million lic health challenges. This is why we 2025, the charity aims to reach 16 000 Glivec and Tasigna tablets. Since the need to continue to do more to children a year. beginning of our partnership with the strengthen healthcare systems across Max Foundation in 2002, we have the globe. Sandoz also works with Americares, a donated more than 100 million daily leading health-focused relief and devel- doses of CML treatments. To this end, we collaborate with govern- opment organization that aids people ments and other partners to lower bar- affected by poverty and disaster. It pro- This collaboration has helped signifi- riers to healthcare delivery, and we sup- vides long-term assistance in five cantly raise the CML survival rate in port quality patient care in areas where healthcare areas: maternal, newborn LMICs. Published in The Lancet’s EClin- we can have the greatest impact. We and child health; infectious diseases; icalMedicine journal in January 2020, a work to empower patients to take own- health system strengthening; mental study by Boston University researchers ership of their health and to better health; and hypertension and diabetes. showed that despite the challenges of understand and manage disease. We In 2020, Sandoz donated products delivering cancer care in LMICs, 89% also invest in the training and support worth approximately USD 35 million to of patients supported by GIPAP survived­ of healthcare workers to expand their the organization. for at least five years – a rate ­comparable knowledge and improve their ability to to patients in developed countries. help patients. As the COVID-19 pandemic struck, we took rapid action to help ensure our donations reached patients in need. When hydroxychloroquine was consid- Humanitarian aid in Bangladesh ered as a potential treatment for COVID- 19, Sandoz committed to donate 130 Rural communities in Bangladesh are suffering from a massive shortage of million doses of the medicine to public skilled healthcare providers. In 2011, Novartis and Swisscontact, an organi- and private partners worldwide, based zation that promotes economic, social and environmental development, on government requests. To support established ASTHA (Achieving Sustainability Towards Healthcare Access) to the COVID-19 effort, Sandoz also part- help address this gap. The project aims to improve access to healthcare ser- nered with Direct Relief to donate pack- vices for rural communities in Bangladesh by training community paramedics, ages of critical medications and sup- with a focus on maternal and child health, family planning and basic primary plies to intensive care units throughout healthcare services. These paramedics can later return to their villages and the US. deliver care in hard-to-reach areas. The program has a positive health impact in communities and helps lift individuals out of poverty by providing a steady CMLPath to Care™ is a unique global income. initiative that connects people living with chronic myeloid leukemia (CML) Since 2015, 464 young adults, including 244 women, have completed the two- with effective treatments made availa- year training, and 78% work as community paramedics. More than 135 000 ble at no cost, professional medical people in rural communities have received healthcare services from project- capabilities, trained physicians and supported community paramedics. hands-on support. The initiative is implemented in countries most urgently Additionally, since 2018, Novartis has assisted the Swiss Red Cross in build- in need of medicines, as identified by ing four primary healthcare centers in the world’s largest refugee camp, the Access to Medicine Index. The Max located in Cox’s Bazar in Bangladesh. Here, approximately 1 million refugees Foundation directs the initiative, while reside, and around 30 000 babies are born every year. In the Kutupalong Novartis donates medicines and pro- expansion site, the largest cluster of camps, the population density is 40 000 vides financial resources. persons per square kilometer, making it one of the world’s most densely pop- ulated areas. There is only minimal infrastructure and very little clean drink- CMLPath to Care™ evolved out of the ing water. To date, four primary healthcare centers providing basic medical Glivec International Assistance Pro- care to more than 100 000 camp residents have been built. A fifth center is gram (GIPAP), also a collaboration currently under construction. between Novartis and the Max Founda- tion, that began in 2002. The transition of GIPAP to CMLPath to Care™ began in 2017 and encompassed 63 countries; the program is now expanding to an Being part of the solution on pricing and access Novartis in Society | 41

One Novartis health system strengthening framework

Health system barrier If the medicine is free, a barrier that still prevents patients from accessing the treatment they need

In collaboration with healthcare partners, lower health system barriers that prevent patients from accessing the treatment they need, beyond product affordability. Solutions Health system address local needs with sustainable impact strengthening Focus on barriers along the patient journey where we have the greatest expertise and can have the greatest impact. Targeted interventions tied to our portfolio, building on Novartis strengths

Patient Screening & Treatment Treatment progres­ ­ navigation diagnosis initiation sion & adherence

Ensure patient is Increase patient screening Improve timely treatment Ensure progression to motivated to access care and timely diagnosis rates initiation with the most appropriate next- Where we have impact and health system is appropriate treatment generation treatment accessible and supportive and strengthen disease management potential impact for Access to and effective use of data and digital solutions

• Tools connecting • Tools/algorithms to • Updated treatment • Updated treatment patients to HCPs initiate screening or guidelines guidelines diagnosis • Referral and linkage • Care coordination • Disease management tools and algorithms • Partnerships for programs programs and tools How we have impact • Counselors and access to diagnostics • HCP capacity building • Care coordination navigators to patient • Diagnostic centers • Supply manage­ment programs education equipped with bio- support • Outcome registries/ • HCP capacity building marker­­­ capabilities data collection • HCP capacity building management systems

For example, in collaboration with the In India, Novartis began its journey to During the COVID-19 pandemic, the government of Vietnam, Harvard Medi- help strengthen health systems for partners led India’s first virtual stake- cal School Center for Primary Care, and breast cancer care in 2018 with a holder consultation on breast cancer the World Economic Forum, we began national assessment that showed there with physicians, patient groups, implementing a new initiative that aims was little knowledge of breast cancer patients, policymakers and research- to strengthen the delivery of primary detection and diagnosis, and limited ers. We also virtually trained more than care at the community level by strength- access to early screening. Further, 60 healthcare professionals on deliver- ening community-based healthcare capabilities to screen and diagnose ing breast cancer care. Further, we services at 26 blueprint commune breast cancer were centralized at developed screening algorithms for health centers. We initiated activities in national and state teaching facilities community-based healthcare provid- the first two provinces (Hà Tĩnh and and centers of excellence. Together ers, and mapped referral pathways to Khánh Hòa) during 2020, conducting with Jhpiego, a nonprofit health organ- help women in rural and hard-to-reach education and outreach to encourage ization affiliated with Johns Hopkins areas access breast cancer diagnosis patients to seek care for treatable con- University in the US, and the govern- and treatment. ditions at community-based primary ment of India, Novartis launched the care centers to alleviate pressure on PRARAMBH program to increase By 2021, PRARAMBH aims to reach district and central level hospitals. access to breast cancer care. Through 25 000 women between the ages of 30 These activities led to 6 000 people capacity-building activities, the pro- and 65 with early breast cancer screen- receiving screening and health educa- gram is designed to enable early detec- ing and diagnosis. The initiative is also tion in primary care centers. tion in primary care facilities and working to expand access to treatment, strengthen disease management at the and increase the number of facilities secondary care level. that can cover the full breast cancer continuum of care. 42 | Novartis in Society

“For nearly two decades, The Novartis US Foundation strives to center’s cardiac diagnosis and echocar- we have been working with improve health in underserved commu- diogram short-course training. More nities in the US by creating innovative than half of them were fully sponsored partners to improve access and sustainable solutions to expand by Novartis Kenya. to our most innovative access to healthcare and build trust within the healthcare system. In Sep- GHA continued its support to streng­ cancer therapies. We are tember, the foundation announced an then access to evidence-based clinical committed to helping additional commitment of USD 15 mil- re­search tools in SSA, working with the lion to develop partnerships and fund Better Evidence program at Ariadne ensure that our medicines community organizations and pro- Labs – a joint health system innovation are accessible to as many grams that address health inequities, center of Brigham and Women’s Hospi- building on the more than USD 10 mil- tal and the Harvard T.H. Chan School of patients as possible, and lion committed to date. A key area of Public Health in the US. The digital por- that everyone living with focus will be addressing the under-rep- tal provides more than 20 000 health- resentation of minorities, including Black care professionals across 124 countries, cancer gets the treatment Americans, in clinical trials. Diversity in including 36 in SSA, with online and they require” clinical trials is critical to understanding offline access to regularly updated, peer- how medicines will work in all patient reviewed, evidence-based information Susanne Schaffert, populations impacted by a disease. for guiding the diagnosis and manage- President of Novartis Oncology ment of a wide range of diseases, includ- THE NOVARTIS GLOBAL HEALTH ALLIANCE ing COVID-19. The program in SSA has The Novartis Global Health Alliance partnered with 50 training facilities (GHA) helps support Novartis country across 16 medical schools, filling a criti- organizations with targeted health sys- cal gap for clinicians in low-income set- tem strengthening programs. In July, tings who otherwise would face major with GHA funding, the SSA unit suc- challenges in accessing information cessfully implemented the MedShr needed to provide quality care. Heart Failure pilot project. This platform connects healthcare professionals via INVESTING IN SCIENTIFIC EXCHANGE a smartphone app to share knowledge Novartis trains and supports research- and experience on CV diagnosis, treat- ers, scientists and healthcare workers ment and care, and also provides to help expand their knowledge and access to case studies on heart failure. improve their ability to help patients. We In 2020, MedShr’s heart failure educa- offer mentorship opportunities for mul- tion program reached more than tidisciplinary partners to share exper- 95 000 doctors and community health tise and build collaborations that workers across the region. Approxi- advance the research and development mately 85% of participating clinicians of new therapies for major global health are general practitioners and commu- problems in ways that benefit both local 385 000 nity health workers, with cardiologists research institutions and Novartis. and internists comprising the rest. More than 265 scientists and clinicians Healthcare workers in LMICs received from 37 countries have participated in training on prevention, diagnosis and Additionally, GHA helped expand the these programs over the past decade. management of COVID-19 remit of MedShr’s COVID-19 education These partnerships have also helped program, delivering training to over establish a global network of future 385 000 healthcare workers on the leaders across academia, industry and prevention, diagnosis and management government in LMICs. of the disease in LMICs. In 2020, we brought our core scientific Over the past years, Novartis has sup- exchange programs under a common ported an extensive capacity-building framework called Global Health Schol- program to train doctors in Kenya on CV ars. Going forward, this will help ensure care. In 2020, with support from GHA, we harness synergies and lessons 30 handheld Butterfly iQ™ ultrasound learned across initiatives to maximize devices used to diagnose CV diseases impact. were provided to the University of Nai- robi Enterprises and Services, and to Many of these activities were affected by The Heart Center, significantly enhanc- COVID-19 and related travel restrictions. ing their training and community out- However, we still made progress. We reach capabilities. Since February conducted our first virtual internship with 2018, 115 doctors have completed the six international students from Kenya, Being part of the solution on pricing and access Novartis in Society | 43

Malawi, Mexico and India in the vaccinol- training and education material for front- nerships to strengthen health systems ogy and drug development master’s pro- line health workers and communities. and bring digital health solutions to gram at the University of Siena in Italy. To date, more than 1 000 health work- patients. For five weeks, the interns trained in clin- ers across 79 countries have accessed ical trial management and patient safety, these materials. To enable sustainable health system and received insights into key functions strengthening, Novartis co-founded the that support drug development. TACKLING CARDIOVASCULAR HEALTH IN STELLA CoE (Strengthening of Trans- LOW-INCOME SETTINGS lational Ecosystems for Lifesaving Novartis continued to co-fund a Euro- Cardiovascular diseases are the lead- Local Access Center of Excellence) pean & Developing Countries Clinical ing cause of death worldwide, with with the University of Basel Innovation Trials Partnership (EDCTP) career most of the disease burden concen- Office and the Swiss Tropical and Pub- development fellowship call with at trated in LMICs. By 2050, 70% of peo- lic Health Institute. Launched in Novem- least five fellowship opportunities (to a ple will live in cities, increasing their ber, the STELLA CoE is a collaborative maximum value of EUR 750 000) for exposure to unhealthy lifestyles and ecosystem that aims to address health proposals in the areas of maternal and health risk factors. For instance, against system challenges in LMICs by bringing child health, focusing on the interaction this backdrop of rapid urbanization, together the right partners to apply between poverty-related infectious dis- health officials in LMICs are reporting innovative digital solutions while sup- eases and NCDs. The scope of the fel- new cases of heart disease at alarming porting local entrepreneurship and lowships was extended to include sickle rates. The Novartis Foundation is forg- ownership. cell disease in 2020. ing multisector partnerships to lever- age data, digital and artificial intelli- Several projects have already been ini- Through EDCTP, Novartis also hosted gence (AI) solutions to strengthen tiated under the STELLA CoE umbrella, two research fellows from Mali and Nige- population health in LMICs. notably a collaboration with the Depart- ria in 2020. These mentorship opportu- ment of Informatics at the University of nities help strengthen the competencies Partnering with local and national gov- Oslo in Norway. The university devel- of scientists who could later assume ernment agencies and an array of civil oped the District Health Information leading roles in clinical research at their society organizations, in 2017 the Software 2 (DHIS2), the world’s largest host institutions. Further, the Novartis Novartis Foundation launched Better open source, web-based health man- Institutes for BioMedical Research Hearts Better Cities in three cities in agement information system deployed (NIBR) hosted a research fellow from LMICs: São Paulo, Brazil; Dakar, Sene- in LMICs. Colombia through the WHO-TDR Clini- gal; and Ulaanbaatar, Mongolia. While cal Research and Development Fellow- activities were tailored to the unique The STELLA CoE is also addressing ship program to develop early-phase conditions of each city, we applied a supply chain inefficiencies, a major clinical trial management skills. common strategy called CARDIO, based cause of drug stockouts. Through the on six pillars: improve quality of care; SMS for Life program, Novartis pio- TRAINING COMMUNITY HEALTH WORKERS ensure access; reform policies; leverage neered a logistics management infor- Recognizing the important role of com- digital technology; create an intersecto- mation system to tackle stockouts at munity health workers in building ral coalition; and ensure local ownership. the last mile. Novartis will transfer stronger healthcare systems in LMICs, knowledge, experience and lessons Novartis continued its commitment as With this approach, the Novartis Foun- learned from SMS for Life to DHIS2 to a founding partner of Last Mile Health’s dation was able to achieve significant enable a robust, scalable and sustain- Community Health Academy through improvements in cardiovascular health able logistics solution for LMICs. our USD 1 million contribution over three outcomes. In São Paulo, preliminary years. The academy provides univer- data showed that the percentage of Through a partnership between sity-quality courses delivered virtually patients diagnosed with high blood Novartis, Medtronic Labs and Manage- and in person through coaching, men- pressure who had it controlled ment Sciences for Health in Kenya, we torship and discussion. To date, more increased from 17% to 55.9% in just 18 are investing in digital technologies to than 31 000 health workers from over months. Preliminary data from Dakar create value for patients, providers and 200 countries have accessed this con- showed an eightfold increase in blood the healthcare system. We are support- tent for health system leaders. The pro- pressure control from 3.4% to 27% in ing an integrated end-to-end solution gram helps community health workers two years, while in Ulaanbaatar, 90% of for hypertension and diabetes care that deliver quality care within government- the target population with high blood links patients to community health led primary healthcare systems. pressure is now being treated. workers, pharmacists and clinicians.

The Community Health Academy has LEVERAGING DIGITAL HEALTH SOLUTIONS The core of the program is a dedicated also helped ensure that community Embracing digital health technologies, screening app linked to an online plat- health workers are equipped to support advanced analytics and AI is a top pri- form. Once people have been screened the response to COVID-19. Alongside a ority for Novartis. These solutions have and registered on the platform, they are consortium of partners, the academy the power to radically change the way able to access blood pressure checks launched the COVID-19 Digital Class- healthcare is delivered, especially in at community-based locations. Clini- room, which provides medically reviewed LMICs. Novartis is engaged in key part- cians can view patient data, provide 44 | Novartis in Society Photo Dr. Juliet Akoth (left) shows a Butterfly iQ™ portable ultrasound device to the mother of a patient in Kitui, Kenya. Dr. Akoth enrolled in Echo for Life, a program sponsored by Novartis in partnership with the University of Nairobi to train healthcare professionals in the diagnosis and treatment of cardiovascu- lar disease. Although heart disease is a feedback via text message, and write In 2020, together with Microsoft AI for growing problem in Kenya, many people electronic prescriptions that are acces- Health and Apollo Hospitals (one of remain undiagnosed due to a lack of sible through participating pharmacies. India’s largest private healthcare pro- healthcare infrastructure and not enough The program also provides training on viders), the Novartis Foundation initi- doctors with relevant expertise. NCD treatment guidelines to commu- ated AI4BetterHearts, the first global nity health workers and facility health data collaborative on cardiovascular providers so that they can provide qual- population health. The collaboration ity care. Since launch in 2019, the pro- aims to integrate heart patient data gram has reached more than 200 000 from the primary, secondary and ter- community members with education on tiary healthcare levels, as well as from diabetes and hypertension, and has global partners, and use advanced ana- screened more than 20 000 people lytics to change the way cardiovascular (with 6 500 screenings completed prior population health is managed, pre- to launching the digital app). dicted and prevented. This knowledge can help empower policymakers, health AI has tremendous potential to make system managers, health workers and health systems proactive, predictive patients to make more informed deci- and preventive. To help drive the adop- sions. For example, it can help policy- tion of AI for health within countries, the makers understand where they can Novartis Foundation and Microsoft – best allocate resources for addressing co-chairs of the Broadband Commis- cardiovascular disease at the popula- sion Working Group on Digital and AI in tion level. Health – led the development of a major new report in 2020 called “Reimagining Global Health through Artificial Intelli- gence: The Roadmap to AI Maturity.” Based on a landscape review of more Using a mobile clinic to provide healthcare services in Uganda than 300 use cases of AI in health, the report presents a roadmap to help gov- Through its Healthcare Access Challenge (HACk), Sandoz invites entrepre- ernments and their partners implement neurs and innovators in the field of digital technology to submit ideas with the AI to transform their health systems. potential to complement – or even positively disrupt – established approaches to driving access to healthcare. Andrew Ddembe, founder and CEO of mobik- The Novartis Foundation is also work- linik, a mobile clinic using an app and a mobile van to provide door-to-door ing with partners in countries to imple- maternal healthcare services in Uganda, was among the three 2019 winners. ment AI solutions. In Brazil, the Novartis Foundation together with Instituto Tel- In 2020, Mr. Ddembe continued his journey to provide access to basic health lus supported the Hospital das Clinicas services to 42 million Ugandans living in last-mile villages (rural areas and peri- of the University of São Paulo AI nucleus urban areas). His mobile application, which connects city doctors to commu- to establish an AI-driven tool for detect- nity health partners providing health services to patients in rural areas, is now ing COVID-19 using CT scans and chest available in one of the largest districts of Uganda. The service is helping to X-rays. The hospital adopted the solu- expand the reach of medical services, improve medical information, scale tion and has used it to speed up COVID- knowledge transfer, and integrate patient referrals into the healthcare sys- 19 diagnosis. Together with the hospital tem. So far, mobiklinic has supported 80 expectant mothers, 350 patients and Instituto Tellus, the Novartis Foun- with general healthcare needs, and more than 1 000 people who attended dation also built an innovation platform free medical camps. that empowers local partners to apply data science and AI in other disease areas beyond COVID-19. Additionally, the Novartis Foundation and Instituto Tellus supported the São Paulo state government in developing a public pol- icy roadmap to procure new technolo- gies, and helped launch IdeiaGov, an ini- tiative that sources innovative ideas to respond to government challenges such as COVID-19. Being part of the solution on pricing and access Novartis in Society | 45 46 | Novartis in Society

Photo Dr. Fernanda Sardinha with a patient at a Chagas disease cardiac rehabilitation center in Rio de Janeiro, Brazil.

STRATEGIC AREAS Addressing global health challenges

Why is it important?

Lower-income countries – fraught with a double burden of infectious and chronic diseases – now also face COVID-19 and are redeploying already stretched resources to fight the pandemic. Disruption to healthcare systems could reverse decades of hard-fought progress, in particular against neglected diseases. We must take action to control the spread of COVID-19 while maintaining a focus on other global health priorities that take a heavy toll on vulnerable populations.

In this section Read about the progress we have made on addressing global health challenges and our flagship programs:

COVID-19 Sickle cell disease Chagas disease Malaria Announced a collaboration with Expanded the Novartis Africa Initiated recruitment for Discovered another novel malaria Molecular Partners AG to develop, Sickle Cell Disease program to PARACHUTE-HF, our Phase IV therapy with an entirely new manufacture and commercialize Kenya, Tanzania and Uganda clinical trial in people with heart mechanism of action, expected to two potential antiviral treatments failure due to chronic Chagas begin clinical trials in 2021 ! p. 48 cardiomyopathy ! p. 48 ! p. 50 ! p. 49 Addressing global health challenges Novartis in Society | 47

Our targets Achieve a 50% increase in patients reached through global health flagship programs in sickle cell disease, Chagas disease, malaria and leprosy by 2025

Advance our clinical development program for our next-generation antimalarials KAE609 (cipargamin) and KAF156 (ganaplacide)

Expand our Africa sickle cell disease program to 10 countries by 2022

Advance our clinical development program for our heart failure medicine in patients with Chagas- related heart failure

Our approach and performance We continue to maintain a strong com- At Novartis, we apply our expertise, mitment to research for various infec- 67m people and full organizational capabil- tious and neglected diseases through Invested in R&D to discover new and ity to address major, unresolved global the Novartis Institute for Tropical Dis- better treatments for infectious and health challenges with the aim of trans- eases (NITD). In 2020, Novartis invested neglected diseases (USD) forming health in lower-income popula- approximately USD 67 million in R&D to tions. discover new and better treatments, including through NITD. These efforts We continue to align our global health have produced three potential new work with the Novartis access princi- medicines currently in clinical testing – ples, leveraging research and develop- two for malaria and one for visceral ment (R&D) to address unmet needs, leishmaniasis. expanding affordable access through novel pricing and business models, and Joining forces to expand global working with partners to strengthen access to COVID-19 solutions health systems. We aim to adopt an COVID-19 threatens communities eve- integrated end-to-end approach to dis- rywhere, and it can only be addressed ease management for the elimination or through the collective actions of stake- control of four diseases where there holders across private, public and phil- has been market failure and little invest- anthropic sectors in partnership with ment in R&D: sickle cell disease (SCD), civil society. With this in mind, in Sep- Chagas disease, malaria and leprosy. In tember, Novartis was one of 16 life sci- sub-Saharan Africa, we are implement- ences companies, together with the Bill ing a targeted strategy focused on & Melinda Gates Foundation, to commit reaching more patients and expanding to accelerating the discovery of COVID- the availability of our full portfolio of 19 diagnostics, therapeutics and vac- medicines. cines. As a co-chair of the Gates Foun- dation CEO Roundtable, our CEO In 2020, Novartis quickly mobilized R&D helped drive this commitment, which capabilities, medicines, clinical trial represents the most expansive and expertise and philanthropic aid to help ambitious pandemic R&D response address the COVID-19 pandemic. Travel effort in history. restrictions and lockdowns due to the pandemic caused unavoidable delays This is an unprecedented collaboration in our global health flagship programs. to tackle the biggest global health chal- Despite these obstacles, we continued lenge of our lifetime, and this commit- to make measurable progress, expand- ment is critical to helping ensure that ing our work on SCD and Chagas dis- people – no matter where they live or ease, and supporting global efforts to what they can pay – have access to the end malaria and leprosy. diagnostics, therapeutics and vaccines 48 | Novartis in Society

“We take a holistic approach that will help end this pandemic. To help access principles into action to treat ensure equitable global access to these SCD at scale. Within the scope of the to addressing global health innovations, we committed to conduct program, Novartis and its partners are challenges. We work with clinical trials in diverse settings and collaborating to develop a comprehen- populations, and to rapidly scale up sive approach that makes screening, partners and communities to global manufacturing capacity. We aim diagnosis and treatment available, help strengthen healthcare to pursue a range of approaches to accessible and affordable for patients, make the products we are developing and that promotes scientific research, systems and create new or supporting affordable in lower- training and education. We have regis- opportunities for medical income countries, including through tered hydroxyurea, the global standard innovation to benefit lower- donations, not-for-profit supply, and of care for the treatment of SCD, in tiered-pricing agreements based on Uganda, Tanzania and Kenya. Treat- income populations” country needs and capabilities. ment guidelines are in place, and we are currently working with the ministries of Lutz Hegemann, In October, Novartis announced a col- health to conduct trainings for health- Chief Operating Officer, Global Health laboration with Molecular Partners AG care professionals, identify and set up to develop, manufacture and commer- centers of excellence, and further scope cialize two potential antiviral treatments out the details of the respective partner- for COVID-19 based on a new class of ship agreements. In October, we offi- protein therapeutics known as DARPin®. cially launched our partnership with the Ministry of Health in Uganda. Novartis is also collaborating in open science efforts to identify immediate In Ghana, the program has been pro- solutions for patients and to antici- gressing well since launch. More than pate pandemics of the future. For exam- 3 400 patients have been treated with ple, we’re working with researchers from hydroxyurea in 11 treatment centers other pharmaceutical companies and the across the country. In total, Novartis has University of California, Berkeley, to tar- delivered more than 6 million capsules get a protein that is essential for corona- of hydroxyurea, providing SCD patients virus survival. The goal is to find a mole- in Ghana with uninterrupted access to cule that blocks all coronaviruses, treatment during the global COVID-19 including the virus that causes COVID-19. pandemic.

For more details on our COVID-19 Together with our implementation part- response, see page 5 of this report, and ner, the Sickle Cell Foundation of Ghana visit our website. (SCFG), we are working to increase awareness of the disease, encourage Expanding the Novartis Africa newborn screening, and address the Sickle Cell Disease program stigma associated with the disease. In 10 SCD is a neglected health problem in addition, we are employing digital tech- The number of countries we plan to sub-Saharan Africa, which carries 80% nologies to help optimize diagnosis and reach by 2022 through our Africa of the global disease burden. Approxi- disease management. In the past two sickle cell disease program mately 1 000 children in Africa are born years, we supported the SCFG in devel- with SCD every day. More than half die oping and rolling out a newborn screen- before they reach age 5. ing mobile application, which has helped manage data from more than 17 000 In 2020, we expanded our Africa SCD babies in Ghana. Within the scope of program with three new memoranda of our current memorandum of under- understanding with the ministries of standing, and taking into account the health of Uganda, Tanzania and Kenya. learnings from the screening app, we The program, first launched in Ghana in contributed to the development of a November 2019, aims to improve and clinical management app to help ensure extend the lives of people with SCD in hydroxyurea is administered safely and sub-Saharan Africa. We plan to reach a that patients receive the maximum ben- total of 10 countries by 2022. efit from the treatment. In 2020, the app was rolled out to 11 treatment centers, This expansion represents another ma with more than 2 200 patients already jor step forward in putting the Novartis registered. Addressing global health challenges Novartis in Society | 49

In June, Novartis signed a memoran- In addition to our work to help improve PARACHUTE-HF, our Phase IV clinical dum of understanding with the Univer- the standard of care for people with trial to assess the efficacy and safety sity of Ghana to collaborate on promot- SCD, we are committed to expanding of Entresto in people with heart failure ing education, research, advocacy and the reach of cutting-edge innovations due to chronic Chagas cardiomyopathy, capacity building, with the goal of to patients everywhere who need them, was approved by the health authorities advancing Ghana’s national health including in SSA. We are starting a col- and started recruitment in Argentina, agenda to improve the health and well- laboration with the Bill & Melinda Gates Brazil, Colombia and Mexico. Chagas being of people with SCD. This includes Foundation to explore the discovery cardiomyopathy accounts for the monitoring and evaluation activities to of in vivo gene therapies for SCD, majority of deaths and disability among assess the impact of the Africa SCD whereby cells are modified inside the individuals affected by the disease. The program. body, which has the potential to facili- study resumed recruitment after initial tate access to these advanced thera- delays due to the COVID-19 pandemic Moving forward, the priority will be to pies in lower-resource settings. and has managed to enroll 6 % of the initiate field testing of treatment guide- total number of patients in 2020. Our lines across more than 20 healthcare Reimagining the fight against goal is to recruit approximately 900 institutions in Ghana. We expect to start Chagas disease patients with heart failure with reduced field testing in the first half of 2021. Chagas disease affects approximately ejection fraction and confirmed Chagas Together with the Ministry of Health and 6 million people, mainly in Latin Amer- disease. the SCFG, we are also working to iden- ica. Less than 1% of affected individu- tify and establish 12 centers of excellence als receive proper antiparasitic treat- We also included sub-studies in PARA- for SCD in the country in early 2021. ment, and current drugs are inadequate CHUTE-HF to better understand the to fight the entire spectrum of the dis- underlying pathophysiology of Chagas We continued our efforts to develop a ease. Against this background, Novartis cardiomyopathy, coordinating activities child-friendly formulation of hydroxyu- is pursuing an end-to-end approach, across Global Drug Development, NITD, rea, which was submitted for registra- with activity on three fronts: drug dis- and our country organizations in Latin tion in Ghana in October. Submissions covery, clinical research and health sys- America together with our academic in Uganda, Tanzania and Kenya are tem strengthening. partner, the Brazilian Clinical Research planned for 2021. Institute. This additional assessment In April, we joined the global community will collect biological samples for bio- Due to COVID-19, the two clinical trials in marking the first World Chagas Day markers, estimate the arrhythmia bur- planned to start in 2020 in Ghana and to raise awareness of this neglected den, and use magnetic resonance imag- Kenya for crizanlizumab, a novel tar- disease and the resources needed for ing to evaluate cardiac structure, geted biologic therapy that reduces its prevention, control and elimination function and fibrosis. We are confident pain events in people with SCD, have as a global health challenge. Further, we that these findings will help advance the been delayed. We have received health supported the World Heart Federation global community’s knowledge of Cha- authority and ethics committee approval and the Inter-American Society of Car- gas disease and create new opportuni- in both Ghana and Kenya for the STAND diology in developing an end-to-end ties for partnerships to treat and con- trial, a Phase III trial to assess the effi- roadmap for Chagas disease. It outlines trol it. cacy and safety of crizanlizumab in ado- a vision for an ideal pathway of care, lescents and adults with SCD, and site providing actionable recommendations Additionally, NITD and its academic initiation visits have started in Ghana. for policymakers and healthcare pro- partners have been conducting These trials represent the first time that fessionals. Once health authorities can research into novel growth inhibitors for a non-vaccine biologic therapy will expand their focus beyond the immedi- the treatment of Chagas disease and enter multicenter clinical trials in sub- ate needs of the COVID-19 pandemic, other kinetoplastid diseases. These Saharan Africa (excluding South Africa). we plan several roundtables with local efforts have identified a unique drug tar- stakeholders, using the roadmap as a get for trypanosomatid parasitic proto- In February, Novartis joined the World tool to help overcome local barriers to zoa and a new chemical tool for inves- Bank, the World Health Organization comprehensive care for people with tigating the function of cell division. The (WHO) and the US Department of Chagas disease. parasites that cause Chagas disease, Health and Human Services as a found- leishmaniasis and African sleeping ing member of the Global Coalition on We took significant steps to advance sickness share a common cell cycle Sickle Cell Disease. The coalition aims the development of new treatments for protein, which may be a promising new to develop, organize and implement a Chagas disease. In early 2020, we target for treatment. The study was global multisectoral initiative to combat launched a three-year drug discovery published in Nature Microbiology in SCD in Africa, with an initial focus on program for Chagas disease and October. countries that have the ability to provide cryptosporidiosis with support from the the basic primary care required to treat Wellcome Trust to pursue potential people with SCD. first-in-class treatments. 50 | Novartis in Society

We continue to work with local and hensive emergency plan implemented international stakeholders to strengthen at our manufacturing site in Kurtköy, health systems. For example, we are Turkey, which manufactures the major- collaborating with the Global Chagas ity of our malaria therapies. Disease Coalition to develop an online medical platform for Chagas disease, In March, we announced a new collab- which aims to build capability among oration with the PAMAfrica consortium, healthcare professionals to adopt an funded by the European & Developing integrated disease management Countries Clinical Trials Partnership approach. In Bolivia, we signed an (EDCTP) to evaluate the first malaria agreement with the Barcelona Institute treatment for neonates and infants for Global Health (IS Global) to enhance weighing less than 5 kilograms in the awareness of Chagas disease and CALINA trial. This is one of the most vul- improve the well-being of Chagas dis- nerable groups affected by malaria, for ease patients. In Argentina, we contin- whom there is currently no approved ued to work with the Institute for Clini- treatment. The trial is expected to start cal Effectiveness and Health Policy to in 2021. The collaboration also includes generate local evidence for healthcare the evaluation of our very fast-acting system improvements at the first level compound KAE609 for the treatment of care. In Brazil and Mexico, we are of severe malaria. exploring partnerships on community- based disease awareness and educa- Drug discovery efforts at NITD have tion activities to strengthen diagnosis delivered an industry-leading pipeline and treatment. of drug candidates to address the emerging threat of resistance and to Advancing a strong pipeline to help support progress toward malaria elimi- eliminate malaria nation. While COVID-19 delayed some 980m While an increasing number of coun- of our on-site research activities, we Treatment courses of our antimalarial tries are progressing toward malaria continued to conduct clinical trials for Coartem have been delivered in the elimination, the threat of resistance to two antimalarials, KAF156 and KAE609. past two decades existing treatments demands urgent These candidates offer new mecha- action to develop novel agents with nisms of action against the disease and activity against all malaria parasites. have the potential for simplified thera- The disease continues to take a heavy peutic regimens that would offer an toll on pregnant women and children advantage over current treatments. under 5, primarily in sub-Saharan Africa, and there remains considerable work With scientific and financial support to be done. from MMV in collaboration with the Bill & Melinda Gates Foundation, we are Novartis has long been involved in the conducting a Phase IIb efficacy study fight against malaria. In the past two of KAF156 in combination with a new decades, we have delivered more than once-daily formulation of lumefantrine 430m 980 million treatment courses of our across a range of doses and regimens. Pediatric courses of our antimalarial antimalarial medicine Coartem, the first Another Phase IIb trial of KAF156 and have been distributed in more than 50 fixed-dose, artemisinin-based combi- lumefantrine, KALUMI, is being initiated countries since 2009 nation therapy (ACT). Together with in collaboration with MMV and the Medicines for Malaria Venture (MMV), WANECAM 2 consortium funded by we also developed the first dispersible EDCTP. The KALUMI trial will explore pediatric ACT to treat malaria in chil- efficacy and safety in children as young dren and infants. Since its launch in as 6 months old with uncomplicated 2009, we have distributed 430 million malaria. pediatric courses in more than 50 coun- tries, contributing to a significant reduc- Novartis completed a Phase II safety tion in malaria deaths. In 2020, despite and efficacy study of KAE609 with the pandemic, we were able to help financial and technical support from the ensure a continuous supply of our anti- Wellcome Trust. This confirmed the malarial treatments through a compre- safety of KAE609 administered orally, Addressing global health challenges Novartis in Society | 51

and its ability to rapidly clear parasites to strengthen access to diagnosis and ling showed that large-scale implemen- in patients with uncomplicated malaria. treatment at patent and proprietary tation of this strategy could massively An intravenous formulation of KAE609 medicine vendor (PPMV) shops for chil- reduce the global burden of leprosy. is also being developed with support dren under age 5 with pneumonia, The results of the five-year LPEP pro- from the Wellcome Trust. malaria and diarrhea. This includes gram were published in The Lancet capacity building for 400 PPMVs in two Global Health in October. In 2020, NITD discovered another novel states, with a focus on diagnosis and malaria therapy, INE963, which has an treatment of uncomplicated malaria. We continue to leverage artificial intel- entirely new mechanism of action and We expect to expand to additional ligence (AI), data and digital technolo- is expected to begin clinical trials in countries in sub-Saharan Africa in the gies to accelerate leprosy elimination 2021. INE963 is a fast-acting, long-last- coming years. efforts. In January 2020, Microsoft ing antimalarial that could potentially be selected the Novartis Foundation as delivered as a single-dose cure. It was In India, under the umbrella of the one of its four initial partners for its new discovered with support from MMV and Novartis Healthy Family program (Aro- AI for Health initiative, a five-year pro- received the organization’s “Project of gya Parivar), we have started a massive gram to scale up global health initiatives the Year” award in July. malaria screening campaign in six dis- using the power of AI. This will provide tricts in the Odisha state, a highly the Novartis Foundation with access to NITD also continued to explore early- endemic area that bears almost a quar- the latest technology, resources and stage discovery research for malaria, ter of the country’s malaria burden. In technical expertise to help further including a novel PI4K inhibitor and a total, the plan is to screen 60 000 rural embed AI in our leprosy work. program focused on a radical cure tar- villagers by early 2021. If patients are geting the dormant liver stage of diagnosed with malaria, they receive a Microsoft and the Novartis Foundation ­Plasmodium vivax malaria, which is the prescription and are advised to visit the are also collaborating with local inves- predominant form outside of Africa. We nearest government health clinic for tigators from the Oswaldo Cruz Foun- also pursued our Open Innovation pro- treatment and follow-up. We also pro- dation (Fiocruz) in Brazil. The group gram with the Bill & Melinda Gates Foun- vided education at health camps on the developed a protocol to collect, exam- dation, in which academic researchers higher risk of malaria transmission dur- ine and process anonymized leprosy work alongside Novartis scientists on ing monsoon periods. skin lesion images paired with informa- global health problems. Open Innovation tion about the patients’ leprosy symp- scholars contribute ideas to tackle sci- Accelerating leprosy elimination toms. This data was used to train an AI entific questions or technology gaps, Novartis and the Novartis Foundation model – called AI4Leprosy – to accel- while Novartis provides access to state- have been working with international erate the diagnosis of leprosy through of-the-art research infrastructure and partners for over three decades to help early screening. The protocol and the our network of scientists across disci- eliminate leprosy. Since 2000, we have results of the first model will be pub- plines. The current scholar is working in donated more than 65 million blister lished in 2021. the field of Plasmodium vivax malaria packs of multidrug therapy (MDT) research. through the WHO, helping to treat more While the algorithm is currently being than 7.3 million patients worldwide. improved with additional skin images IMPROVING ACCESS TO ANTIMALARIAL and data from India, a global protocol TREATMENT Beyond treatment, we have pioneered has been developed together with the As a committed partner in the fight innovative approaches to fight leprosy. University of Basel in Switzerland, and against malaria, we aim to extend our One of these is the Leprosy Post-Expo- endorsed by international leprosy contribution to areas beyond treatment. sure Prophylaxis (LPEP) program, experts to help further improve the Nearly 40% of children with fever do not which aims to decrease leprosy trans- AI model. This should enable data col- have access to care, according to the mission by providing preventive treat- lection to be extended to new geogra- WHO. Integrated community case man- ment to close contacts of newly diag- phies, minimizing bias and improving agement is a proven strategy for reach- nosed patients. The evidence generated the accuracy of the prediction. AI4­­ ing underserved communities with life- by LPEP in the seven countries where Leprosy has the potential to be easily saving treatments. The COVID-19 the program was operational from integrated at no cost in various tools pandemic has only increased the need 2014-2018 led to the inclusion of this supporting healthcare practitioners in for properly equipped community strategy in the WHO Guidelines for the the field or in clinics. health workers to lead outreach to the Diagnosis, Treatment and Prevention of most vulnerable. Leprosy. Since 2014, thanks to this approach, more than 170 000 contacts Novartis invested in two pilot projects of patients have been traced, and more to support these efforts in 2020. In than 150 000 have received preventive Nigeria, we are working with partners treatment. Our epidemiological mode- 52 | Novartis in Society

SANDOZ STATEMENT OF Developing treatments for jointly develop LXE408, a first-in-class INTENT FOR ADDRESSING infectious and neglected tropical inhibitor of the kinetoplastid proteas- AMR: AREAS OF FOCUS diseases ome, for the treatment of visceral leish- Through NITD, we continue to research maniasis. Within the scope of the agree- Prevention: initiatives to drive and develop a promising portfolio of ment, Novartis is responsible for com­ responsible manufacturing novel drug candidates for the treatment pleting Phase I clinical trials. Upon standards that help reduce the of neglected tropical diseases that approval, we have committed to distrib- environmental impact of the affect around 1.6 billion people world- uting the drug on an affordable basis production of antibiotics wide. worldwide to maximize access in endemic countries. DNDi will lead Access: global and local We made progress on a potential first- Phase II and III clinical development, collaborations with a range of in-class compound to treat dengue with the first Phase II study scheduled partners to help improve access to fever. Although this is the most common to start in early 2021 in India. Additional anti-infectives vector-borne viral disease in the world, trials are planned in East Africa, which there is currently no specific medicine has the highest burden of visceral leish- to treat it. The WHO had listed dengue maniasis. Stewardship: global and local as a potential threat among 10 diseases, initiatives to ensure prescription of and recent outbreaks – with nearly Taking a holistic approach to the right drug at the right dose for twice as many dengue infections as in antimicrobial resistance the right duration the past 20 years – confirm this. The Antimicrobial resistance (AMR) is a compound identified by NITD has dem- growing threat to public health and Innovation: non-traditional onstrated activity against all four den- could increase through the heavy use research and development to gue serotypes. We completed initial of antibiotics in the treatment of COVID- explore innovative solutions to preclinical safety studies and expect to 19 patients. While antibiotics have saved prolong the life of existing begin clinical trials in 2021. countless lives and treat numerous con- antibiotics and improve patient ditions, and are essential to many eve- adherence to therapy Cryptosporidium infection is the lead- ryday procedures including surgery and ing cause of parasitic diarrhea, a major chemotherapy, global health experts cause of death among young children are increasingly concerned about a in developing countries. We reported in new “post-antibiotic” era in which com- 2019 the discovery of the apicomplexan mon infections could once again kill. A lipid kinase PI4K as a potential molecu- UK government report estimates that lar target, and NITD has advanced a without coordinated international promising drug candidate, EDI408, action, AMR could lead to 10 million through preclinical studies. EDI048 is more deaths annually by 2050. active in the intestinal enterocytes, where the parasite resides, and is quickly Novartis supports the global scientific metabolized by the body – a desirable consensus that overuse, underuse and feature in addition to the compound’s misuse of antimicrobial medicines all safety profile. Although diarrhea is one contribute to the spread of AMR, and of the top three killers of children glob- that a balanced approach encompass- ally, there are only a few novel medi- ing prevention, stewardship, access cines currently being developed to treat and innovation is needed. Improve- it. In 2020, NITD was awarded a three- ments in water sanitation and hygiene year grant from the Wellcome Trust for as well as wastewater management will drug discovery science in cryptosporid- help prevent infections and reduce the iosis and Chagas disease. spread of AMR. The global healthcare community should make every effort to With an estimated 50 000 to 90 000 safeguard and maximize the efficacy of new cases per year, visceral leishmani- the medicines we have today through asis is the most serious form of leish- appropriate use. Lack of timely access maniasis, causing fever, weight loss, to appropriate antimicrobial treatments spleen and liver enlargement, and death (particularly antibiotics) and the inabil- if left untreated. In February, we an­­noun­ ity to perform accurate point-of-care ced a collaboration with the Drugs for diagnostics also contribute to the Neglected Diseases Initiative (DNDi) to spread of AMR. Addressing global health challenges Novartis in Society | 53

Sandoz, our generics and biosimilars and availability of generic antibiotics to division, is the world’s largest provider help reduce child deaths from drug- of high-quality, affordable generic anti- resistant infections. In 2020, we filed a 175m biotics. We strive to ensure that our heat-stable pediatric antibiotic for reg- Sandoz plans to invest over the next medicines are used in a responsible and istration in eight African countries. This five years in its integrated antibiotic sustainable way by engaging in global antibiotic treats a number of infections, manufacturing operations in Kundl, and local partnerships to support the including community-acquired pneu- Austria (USD) use of antibiotics in line with WHO guid- monia (pneumonia contracted in a com- ance. We work with health authorities munity setting), acute otitis media (ear and healthcare professionals through- infection) and cellulitis (bacterial skin out the world to foster stewardship and infection), especially in the case of pen- education, and with nongovernmental icillin resistance. organizations and not-for-profit organ- izations to expand access to antibiotics As a leading member of the AMR Indus- regardless of patient affordability. try Alliance since 2016, Novartis worked with other member companies to estab- In July, we announced plans for a new lish an industrywide framework for anti- public-private partnership with the Aus- biotic manufacturing. While the contri- trian federal government to strengthen bution of pharmaceutical manufacturing the long-term future of antibiotic manu- to pharmaceuticals in the environment facturing in Europe. Sandoz plans to is relatively low, there is the potential for invest more than USD 175 million over localized impacts when manufacturing the next five years in its integrated anti- effluents are inadequately managed. In biotic manufacturing operations in addition, we recently joined the Respon- Kundl, Austria, to implement innovative sible Antibiotics Manufacturing Plat- manufacturing technology for both active form, an alliance to combat AMR by pro- pharmaceutical ingredients (APIs) and ducing antibiotics in a manner that is finished dosage forms. environmentally, socially and economi- cally sustainable. This is an important step toward stron­ ger management of the production and ­supply of antibiotics in Europe. Sandoz produces enough penicillin products in Kundl to potentially meet all current Europe-wide demand. Under the agree- ment, we have committed to continue penicillin API production in Europe for the next 10 years. Further, as Kundl is the focal point of the Sandoz­ European antibiotic manufacturing network, mak- ing investments in this facility is vital to help ensure reliable, high-quality supply for European markets.

Novartis was one of 24 pharmaceutical companies that invested a total of USD 1 billion to launch a new AMR Action Fund in July. Developed with the Euro- pean Investment Bank, the Wellcome Trust and the WHO, this groundbreak- ing initiative aims to bring two to four new antibiotics to patients by 2030.

Through the Global Antibiotic Research and Development Partnership, we are working to accelerate the development 54 | Novartis in Society

Photo Dr. Ngo Viet Quynh Tram explains how to use personal protective equipment during a training session at the Hue University of Medicine and Pharmacy in central Vietnam.

STRATEGIC AREAS Being a responsible citizen

Why is it important?

Society increasingly expects companies to take a stand on global challenges such as poverty, social justice, climate change and other complex issues, which the COVID-19 pandemic has brought into even sharper focus. Our purpose as a global medicines company is inherently social, and we have a responsibility, together with governments and civil society, to contribute solutions to big societal problems. We can help drive positive change by harnessing the assets that make us successful in the first place: people, ideas and capital.

In this section Read about our efforts to protect the safety of those using our medicines, care for our people, and minimize our impact on the environment:

Patient safety Our people Our people Environmental Investigated 247 incidents of Announced a new global policy Introduced a new approach to sustainability suspected falsified medicines, giving most office-based performance management that Created the position of Chief which led to 60 successful associates the right to choose involves team-created rolling Sustainability Officer and enforcement actions and the how, when and where they work objectives, the replacement of announced a new target to seizure of 1.7 million medicines within their country of employment performance ratings, and regular achieve full carbon neutrality (unit dosage forms) feedback and coaching to improve across our value chain by 2030 ! p. 60 performance ! p. 55 ! p. 64 ! p. 62 Being a responsible citizen Novartis in Society | 55

Our targets Environment targets • Become carbon neutral in our own operations (Scope 1 and 2) and include environmental criteria in all supplier contracts by 2025. • Achieve full carbon neutrality across the value chain (Scope 1, 2, and 3) by 2030 • Reduce water consumption in our operations by half by 2025 (vs. 2016), with no water quality impacts from the manufacturing of our products • Be water neutral in all areas of our operations by 2030 while enhancing water quality wherever we operate • Eliminate polyvinyl chloride in packaging (secondary and tertiary packaging; primary packaging when feasible) by 2025 • Reduce the amount of waste sent for disposal by half by 2025 (vs. 2016) • Be plastic neutral by 2030, with all new products meeting sustainable design principles

Diversity and inclusion • Achieve gender balance in management by 2023 • Close the gender pay gap by 2023

Training and development • Invest USD 100 million in learning over five years from 2019

Our approach and performance ously monitor and systematically review Novartis is committed to playing a pos- the data collected for products in our itive and constructive role in society. We portfolio, both on the market and in are focused on building a company that development. It is also our responsibil- our patients, customers, associates, ity to balance the risks and benefits of shareholders and partners can all be our treatments, clearly reflecting these proud of. Above all, we aim to discover in the product labeling, so that patients QUALITY FOCUS and develop breakthrough treatments and physicians can make informed Of 126 inspections of our facilities that improve and extend people’s lives, treatment decisions. worldwide, 99.2% were without and to deliver them to as many people major findings as possible. Our primary concern is to MAINTAINING PATIENT SAFETY AND protect the safety and well-being of PRODUCT QUALITY everyone who uses our medicines. We Patient safety and product quality are engage with patients and caregivers our top priorities. We maintain a robust worldwide to help ensure their needs quality system with harmonized pro- and concerns are reflected in our clini- cesses and procedures, in compliance cal research and business operations. with external regulatory requirements The health and safety of our associates and standards. We continually monitor are also key. As COVID-19 spread glob- and adhere to new regulations from ally in 2020, we regularly assessed the health authorities and other regulators situation and adapted accordingly to for both marketed products and inves- help ensure the well-being of those tigational molecules. We conduct thor- working remotely and those who nee­ ough investigations when deviations, ded to be on our premises. We want to out-of-specification and/or failure of be a responsible citizen wherever we our manufacturing processes to meet do business, and we aim to minimize our our quality standards, current Good environmental impact around the world. Manufacturing Practices (cGMP) and other applicable regulations occur. Helping ensure patient health and safety For 100% of manufacturing, supply and Our patient health and safety activities distribution of our pharmaceutical prod- are focused on three key areas: patient ucts, we hold the relevant manufactur- safety and product quality, combating ing licenses and GMP/GxP certificates falsified medicines, and health educa- issued by the appropriate external tion and prevention. We maintain an health authorities – for example, the US array of systems and processes, backed Food and Drug Administration (FDA), by cutting-edge technology, to continu- the European Medicines Agency (EMA), 56 | Novartis in Society

the World Health Organization (WHO) by health authorities around the world, and Swissmedic – that confirm after all but one were found to be acceptable inspection that our duties, including our (99.2%). The one inspection that may quality management systems, comply require further improvement was due to with their strict regulatory require- increased inspection focus on our clin- ments. For the manufacture of medical ical activities. The final classification of devices, we hold the relevant certifica- this inspection is still to be determined. tions from the International Organiza- tion for Standardization (ISO) and other Novartis has a companywide process notified bodies. Please see the Novartis to assess quality defects and safety Quality Management System section of issues, and determine whether an our website. action such as a recall is required. Any such incident is investigated and To help ensure compliance with exter- assessed by subject matter experts, nal regulatory quality and safety stand- quality management, medical safety ards, and support the continuous experts and regulatory teams. Conclu- improvement of our quality manage- sions are provided to the appropriate ment system, Novartis has a robust and health authorities with all relevant doc- independent audit program that covers umentation, including a safety assess- the product lifecycle.1 ment, and market actions such as recalls are executed as agreed with Travel restrictions introduced by the these authorities. Novartis initiated 27 COVID-19 pandemic resulted in busi- recalls in 2020. There were no global ness disruptions across Novartis and recalls. our external partners globally. Auditor travel was temporarily paused, which We work with health authorities around impacted our ability to complete all the the world to continuously review all audits listed in our 2020 Unified Qual- chemical and biological human medi- ity Audit Program (UQAP) plan. cines for the possible presence of nitros- amines. The EMA, the FDA and other The global audit team worked with all health authorities have provided guid- business partners to reprioritize good ance to the pharmaceutical industry to practice (GxP) audits planned in the prevent unacceptable levels of nitrosa- UQAP to help ensure that as many high- mines in medicines. The EMA review is risk audits as possible could be com- due to conclude in March 2021 for chem- pleted before the end of 2020. In par- ical human medicines and in July 2021 allel, the global audit team took several for biological human medicines. measures to conduct risk-based assessments either fully off site or We have a very robust quality and safety through a combination of off-site training process (initial and continuous assessment and short on-site audit training) for our associates and third when travel was possible. We will apply parties, and we are regularly audited on these measures until travel restrictions our training procedures. All third parties are lifted in all geographies in scope of providing services or products manu- the Novartis audit universe, and also in factured to GxP standards are required cases where remote audits are a more by regulation to have their own quality viable option. For those audits that were assurance department and a formal postponed, appropriate risk mitigation training process. Novartis routinely actions have been implemented. assesses the capability and effective- ness of third-party training programs Health authority inspection programs during audits to confirm suitability for were also impacted, with inspections the provided service or product. Despite being postponed or conducted the challenges created by COVID-19, remotely. Novartis was subject to 19 we have maintained our quality and remote inspections, all of which had safety training process. acceptable outcomes. Postponed inspections will be performed as soon EXPANDING PHARMACOVIGILANCE as possible, based upon a risk-benefit EFFORTS evaluation by the competent health We continue our efforts to boost phar- authority. While pursuing our transfor- macovigilance capabilities and support mation, we maintained a focus on qual- patient safety worldwide. This entails ity. Of 126 inspections of our facilities activities to educate patients, providers

1 Third-party audits pertaining to standards for ethics, business integrity and environmental sustainability are conducted by TPRM (see the section regarding managing risk in our supply chain) Being a responsible citizen Novartis in Society | 57

Patient health and safety performance indicators Pharmacovigilance, safety profile and quality of drugs performance indicators

2020 2019 2018 Novartis Group health authority regulatory reporting (ICSRs)1 (%) 2 95.0 98.6 99.1 All audits Total audits executed 3 903 1 607 2 147 Internal 111 162 250 External 792 1 445 1 897 All regulatory authorities Inspections 126 187 202 Inspections considered acceptable (%) 99.2 4 96.8 98.5 FDA inspections 6 19 18 FDA warning letters 0 0 0 FDA Form 483 1 11 8 FDA sponsor inspections Inspections related to clinical trial management and pharmacovigilance 1 2 3 Number of VAI (Voluntary Action Indicated) 0 1 1 Number of OAI (Official Action Indicated) 0 0 0 Recalls 27 29 42 FDA recalls 5 0 2 2 Class I recalls 6 1 3 5 Class II recalls 6 21 21 18

1 ICSRs: individual case safety reports 4 One inspection may require further improvement; the final classification by the health 2 % represents on-time regulatory submissions. Data reflect January to November 2020. authorities is still to be determined. 3 The reduction in the number of audits is primarily due to the divestment of Novartis 5 As recorded on the FDA’s “Recalls, Market Withdrawals, & Safety Alerts” webpage divisions, manufacturing network and supplier consolidation, and for 2020, the impact of 6 Definition of Class I/II recalls is given on the FDA webpage “Recalls Background and COVID-19. Definitions”

and pharmacists; increase the use of event reporting, and to guide the devel- Novartis Patient Safety teams world- digital technology; and strengthen opment of risk management plans. wide are supporting the company’s reporting for adverse events. While clin- COVID-19 response, with two task ical trials provide important information In Egypt, we supported efforts to bring forces. The first task force evaluates all on a medicine’s safety, it is only after its attention to the importance of correct Novartis products from a benefit-risk use in greater numbers of patients in dispensing practices among pharma- perspective and helps ensure patients the real-world setting that some adverse cists. continue to receive essential medica- events come to light. A robust, accurate tions. The second monitors COVID-19 and real-time adverse event reporting In Germany, we contributed to drug impacts on Novartis pharmacovigilance system is crucial for us to maintain the monitoring activities and logistical sup- and medical device vigilance systems, safety and well-being of our patients port for multiple sclerosis patients to helping ensure a rapid response when worldwide. We are further strengthen- assist with everyday challenges related needed. ing reporting through the development to their therapy. We also helped breast of advanced algorithms to screen and cancer patients use virtual workshops With a growing number of medical analyze multiple data sources for and live chat to connect with specialist devices in the Novarti[s portfolio, we adverse events, including projects that physicians in order to discuss how they have additionally built a robust vigilance employ robotic process automation, respond to medication. system to monitor adverse events asso- machine learning and natural language ciated with medical devices worldwide. processing as a complement to tradi- In Portugal, Novartis Patient Safety Novartis became the first company cer- tional pharmacovigilance methods. launched a series of web-based videos tified for compliance with the new Euro- with content promoting the need for pean Medical Devices regulations, In addition to optimizing our global patients to read safety information in which will come into force in May 2021. adverse event reporting system, coun- product leaflets and report adverse tries conducted several patient safety events. In 2020, Novartis Patient Safety also initiatives in 2020. obtained an ISO 9001 certification for In Sweden, we collaborated with univer- its pharmacovigilance governance, In Austria, the Czech Republic and sities to incorporate pharmacovigilance confirming that Novartis has the appro- Ukraine, we organized workshops with education into the curriculum of aspir- priate processes in place to oversee healthcare professionals to raise aware- ing physicians. patient safety. ness on pharmacovigilance and adverse 58 | Novartis in Society

COMBATING FALSIFIED MEDICINES Prevention 1.7m Combating falsified medicines (as We take a holistic approach to prevent- Falsified medicines (unit defined by the World Health Organiza- ing harm caused by falsified medicines dosage forms) seized by law tion) is part of our commitment to using data analytics and the latest avail- enforcement and health expand access to quality medicines able technologies in spectrometry, anti- authorities as a result of 247 worldwide. Pandemic-related lock- counterfeiting packaging features and suspected incidents downs introduced challenges that mobile applications. investigated pushed us to deploy new efforts to help keep patients safe. In 2020, we focused In cases where we identify falsified on strengthening the capacity of our medicines, we are committed to com- team, developing and using new anti- plying with the WHO’s recommendation counterfeiting technological capabili- to voluntarily report all confirmed inci- ties, and deepening our collaboration dents within 10 working days. To this with law enforcement authorities. Since end, we updated our internal standard 2017, our efforts have helped prevent operating procedures regarding inci- falsified medicines from reaching and dent reporting, and we trained associ- harming more than 1.4 million patients. ates in the countries.

Governance In light of COVID-19, we took additional We strengthened our governance struc- steps to secure our products and sup- ture with the executive-level Trust & ply chains. For hydroxychloroquine, a Reputation Committee now overseeing malaria treatment that was investigated our work to combat falsified medicines. as a potential treatment for COVID-19, we enhanced warehouse security, The Combating Falsified Medicines organized secure transit, GPS-tracked team contributed to a new online dash- all shipments, sought best-in-class 50 board, developed by the Ethics, Risk & advice on supply chain security, and Devices to detect falsified Compliance (ERC) and Novartis Busi- deployed 24/7 supply chain monitoring. medicines have been ness Assurance & Advisory (NBAA) We also provided our teams in high-risk deployed in 15 countries functions. This dashboard went live in countries with updated spectrometric through Authentifield by October and links the various company data used for product authentication in Novartis risks across the world, including crimi- the field. To secure the authenticity of nal activities related to medicines the products, we extended security fea- (enforcement cases and products tures on secondary packaging for prod- seized, for example). We added six full- uct verification and anti-tampering. time employees to the team covering governance, forensics and regional In January 2020, Novartis began co- operations, thereby doubling the com- leading with Universidad Politécnica de pany’s workforce devoted to fighting Madrid an industrywide public-private falsified medicines. partnership under the Innovative Medi- 67% cines Initiative (IMI) umbrella to use Of our general medicines Intelligence blockchain technology to enhance programs obtained patient We routinely monitor marketplaces, pharmaceutical supply chain security. insights before starting online pharmacies and social media Known as PharmaLedger, the project human trials platforms for evidence of falsified med- aims to develop a scalable blockchain- icines. Our monitoring led to 68 online based platform for securing supply investigations and the removal of over chains, clinical trials and health data. 13 900 illegal product listings. Early in Twenty-nine public and private partners the pandemic, we doubled capacity in are participating in this two-year pro- online monitoring and enforcement to ject, including 13 global pharmaceutical mitigate the increased counterfeiting companies. risks against medicines used to poten- tially treat COVID-19. We regularly We continue to support local health briefed Interpol and Europol on new authorities through Authentifield by risks and supported their anti-counter- Novartis, a pilot program launched in feiting efforts. 2019 to supply LMICs with affordable spectrometric sensor technology to Further, we are leveraging data analytics detect falsified medicines. To date, 50 and pharmacovigilance data of adverse devices have been deployed in 15 coun- events reported to Novartis to flag sus- tries, mainly across Africa but also in picious products for investigation. South Asia and Latin America. Being a responsible citizen Novartis in Society | 59

In October, we also launched a pilot efforts to strengthen falsified medicines addition, Novartis promptly responded called MOVE, which enables our in- policy. to unsolicited requests from physicians, country sales and regulatory teams to healthcare institutions and govern- use a mobile application to verify We also intensified public awareness ments, providing access to medicines Novartis secondary packaging efforts through participation in global for treating COVID-19-related condi- equipped with security features. We campaigns such as Fight the Fakes. tions (see “Managed Access Programs” plan a global rollout in 2021 and are also Additionally, we supported the Unreal on pages 38-39 of this report). exploring ways to empower healthcare Campaign in developing training mate- professionals and patients with this rials about pharmaceutical crime. We In 2019, Novartis supported more than technology. increased associate awareness of the 1 481 POs in 69 countries. In 2020, we topic through various webinars and sto- engaged with 119 organizations across Enforcement ries published on internal Novartis 35 disease areas to inform our deci- While pandemic lockdowns strained channels. sion-making. Further, we supported 22 enforcement capabilities in 2020, we capacity- and capability-building pro- maintained operational excellence Supporting patients and caregivers grams. We also continued to support through close collaboration with inter- during COVID-19 the European Patients’ Academy on national agencies, including Europol, The Novartis Commitment to Patients Therapeutic Innovation, which empow- Interpol, the World Customs Organiza- and Caregivers continues to guide our ers patients to contribute meaningfully tion and the Pharmaceutical Security associates and leaders to help ensure to R&D processes, as well as capacity- Institute. We investigated 247 incidents that patient insights inform our deci- building projects of the National Health of suspected falsified medicines, which sions. This is critical to fulfilling our Council, the International Alliance of led to 60 successful enforcement commitment to address unmet needs Patients’ Organizations European actions and the seizure of 1.7 million of patients in our research and devel- Patients’ Forum, and EURORDIS (the medicines (unit dosage forms) by law opment (R&D) portfolio. The Executive voice of rare disease patients in Europe). enforcement and health authorities. Committee of Novartis (ECN) endorsed a new patient engagement strategy in We continue to include patient insights In Colombia, our work with law enforce- 2020 that focuses on a disease area in early research, with 67% of our gen- ment authorities led to the dismantle- approach across the full medicine life- eral medicines programs obtaining ment of a criminal network and the sei- cycle – from early research to post- patient insights before beginning human zure of 7.8 million units of falsified launch. This aims to increase our patient trials. Further, 44 clinical development medicines impacting several compa- engagement activity across the com- programs comprising 69 clinical studies nies – the largest seizure in the history pany. For details on our access-to-med- had a patient engagement component of Colombia. In China, an enforcement icine programs and commitments, see in the study design or conduct. Patients action from 2018 led to the conviction the pricing and access (pages 30-44) provided valuable input on how study and sentencing of several criminals in and global health (pages 46-53) sec- designs can be optimized to facilitate 2020 for their involvement in the man- tions of this report. access to clinical trial sites and allow ufacturing of falsified medicines. remote participation. We shared our During the pandemic, the need for learnings on patient engagement with Stakeholder engagement patient support grew exponentially the broader research community, pub- We made significant progress on policy while at the same time the revenue of lishing 11 manuscripts and 26 posters advocacy projects, notably with the patient organizations (POs) dropped and abstracts on patient engagement United Nations (UN) Conference on dramatically primarily due to the can- practices and insights. Trade and Development addressing the cellation of educational events and fun- impact of illicit trade on the UN Sustain- draising activities. We provided funding We expanded the geographical reach able Development Goals. We contrib- to strengthen digital communications of our flagship program, the European uted to an Organization for Economic tools and channels to help bridge these Patient Innovation Summit (EPIS), to the Co-operation and Development report gaps. Our support helped ensure that Middle East and Africa, connecting up called “Trade in Counterfeit Pharma- patient needs were heard and that to 700 patient advocates from 40 coun- ceutical Products,” joining the expert patients were able to access important tries to develop a common understand- panel and sharing an industry perspec- information on topics such as the ing of digital health and its importance tive during the virtual launch event. impact of COVID-19 on existing treat- for patients, and to agree on ways for ment and how to access medical help patients to impact digital health. The Through the International Pharmaceu- for diagnosis, screening and alternative response from the patient community tical Federation, we conducted virtual treatment options. We did this by sup- has been so positive that we are now events for more than 2 500 pharma- porting technology that enabled remote deploying the platform in Asia-Pacific cists that provided education about fal- access to healthcare professionals; and the US. Together with EPIS partic- sified medicines in the context of strengthening call centers on routine ipants, we launched a position paper, COVID-19. This led to a new collabora- and COVID-19-related services; and calling on all stakeholders to prioritize tion with the Commonwealth Pharma- providing education on the pandemic to patient involvement when developing cist Association focusing on online patients, caregivers and communities. In digital health solutions. modules and webinars, and supported 60 | Novartis in Society

In 2020, the FDA issued new guidance PANDEMIC RESPONSE 80 on patient-focused drug development Our priority in responding to COVID-19 to help ensure patient experiences and was to ensure the safety of patients and The engagement score in our perspectives are incorporated into drug employees. In March, Novartis quarterly employee survey in development and evaluation. We aim to announced a range of measures to pro- Q4 2020, an all-time high implement this guidance in 2021. We tect and support our employees world- have also begun adapting our pro- wide, and associates were instructed to cesses and activities to reflect the out- work from home when possible. We puts of the IMI PARADIGM (Patients provided childcare support for employ- Active in Research and Dialogues for ees in critical on-site roles in laborato- an Improved Generation of Medicines) ries or at manufacturing sites, as well initiative, for instance relating to the as 12 days’ extra paid leave in addition implementation of meaningful key per- to existing vacation and personal time formance indicators to measure the off. In countries where schools and impact of patient engagement. childcare were closed, we offered sup- port either in the form of access to “Lasting success is built on We believe we can help build a system- ­special childcare facilities or reim- our people and the culture atic and consistent approach to patient bursement for employees’ personal engagement across the healthcare sys- arrange­ments. Where feasible, similar that binds them together. Our tem. To this end, we continue to partic- benefits were provided for external strong purpose and commit­ ipate in 39 IMI projects supporting the contractors working for Novartis, sub- progression of healthcare and science. ject to local laws and regulations.1 ment to environmental and Additional collaborations include mem- social sustainability – and to berships in the EFPIA (European Fed- We stepped up our Energized for Life eration of Pharmaceutical Industries initiative, which provides a range of diversity, inclusion and social and Associations) Patient Think Tank, health and wellness resources to equity – underpins our inspired, the Clinical Trials Transformation Initia- employees and their families, as they tive, TransCelerate, the Council for adapted to new working practices and curious and unbossed culture International Organizations of Medical commitments. These include the and is a key factor in attracting, Sciences, and Patient Focused Medi- TIGNUM X smartphone app, which gives cines Development. digital coaching in areas like nutrition, growing and retaining our movement, mindset and recovery. We unique talent” Unleashing the power of our people also expanded our resources to support We are transforming our culture to help the mental health of employees. To pro- Steven Baert, fulfill our purpose of reimagining medi- vide reassurance in uncertain times, we Chief People & Organization Officer cine to improve and extend people’s committed to no COVID-19-related job lives, and to create an organization losses during the year and did not fur- where people can fully apply their tal- lough our people. ent and energy at work. The aim of this transformation, which began two years The pandemic accelerated our ambi- ago, is to ensure that every employee tion to explore new working models. In feels inspired by our purpose, is curious July, we announced a new global policy about new ideas, and benefits from an called Choice with Responsibility, giv- unbossed environment in which leaders ing most office-based associates the set clear objectives, remove obstacles, right to choose how, when and where and empower people to attain their they work within their country of goals. The progress we have made employment.2 Employees received a NOVARTIS COMMITMENT TO helped us become more resilient and one-time payment to help purchase PATIENTS AND CAREGIVERS better able to overcome the challenges home office furniture and equipment. Respecting and understanding the of COVID-19 in 2020. The pandemic The program, supported by a total patient community perspective also accelerated our culture transfor- investment of USD 28 million, aims to mation by connecting employees even keep employees safe during the pan- Expanding access to our medicines more strongly to our purpose, creating demic and helps them maintain work- Conducting responsible clinical trials new demands for learning, and demon- life balance while optimizing both per- Recognizing the importance of strating the benefits of empowered sonal and business performance. transparency and reporting working.

1 External contractors are individuals who are engaged under an agreement with a third-party employer (i.e., a staff leasing company) and assigned to work under the authority and directive of Novartis. 2 Corporate tax, individual tax, employment law and social security regulations require special attention if the work is performed from outside the country/state in which the employer is located. Consequently, Choice with Responsibility is currently applicable in-country and in-state/local area only.

Being a responsible citizen Novartis in Society | 61

Diversity and inclusion performance indicators

2020 2019 2018 Management representation by gender (% female / % male) 1 Overall 45 / 55 44 / 56 43 / 57 Novartis Top Leaders 2 33 / 67 31 / 69 30 / 70 Senior management 39 / 61 38 / 62 36 / 64 Middle management 46 / 54 45 / 55 44 / 56 Gender representation of Board of Directors (% female / % male) 29 / 71 25 / 75 25 / 75

1 Management defined by Global Job Level Architecture and Novartis Top Leaders 2 Novartis Top Leaders comprise the approximately 300 most senior managers at Novartis, including the Executive Committee of Novartis.

Alongside the challenges posed by additional Coursera licenses, giving BUILDING SKILLS ACROSS THE COVID-19, the pandemic also brought access to more than 5 700 courses in ORGANIZATION the importance and urgency of the multiple languages. Novartis also We are committed to developing talent Novartis purpose into sharper focus, donated USD 1 million to the Khan Acad- at Novartis, and our comprehensive and gave employees a clear sense of emy, a not-for-profit organization pro- development and succession planning the impact of their work in improving viding free online education to millions programs enable us to build capabilities and extending people’s lives. The score of students worldwide. across different levels of the organiza- for engagement in our quarterly tion. Dedicated divisional and functional employee survey reached an all-time In 2020, employees completed more training teams provide job-specific pro- high of 80 (out of 100) in the fourth than 175 000 courses from Coursera grams for all permanent and part-time quarter of 2020, compared to 74 a year and LinkedIn Learning covering strate- employees, and we also offer engage- earlier. This was 7 points higher than the gic skills such as data science, artificial ment-specific training to contractors. industry benchmark, and was also intelligence (AI) and leadership resil- We welcomed more than 14 500 new ahead of the benchmark for the top ience. In many of these areas, we were associates to Novartis during 2020, 20% of global companies. Engagement ahead of industry benchmarks. We also most of whom were onboarded virtu- favorability, which measures the per- launched online master’s degrees in ally. Some of our training programs are centage of “agree” or “strongly agree” data science, provided by Coursera in outlined in the table on page 74. survey responses, rose to 87% in the conjunction with the University of Mich- fourth quarter from 80% a year earlier. igan and the University of Illinois in the Two years ago, Novartis began reimag- US. Novartis was the first company in ining its approach to leadership by pur- FOCUS ON LEARNING the world to offer these courses free to suing an unbossed approach in which We continue our journey to build a cul- employees. self-aware leaders empower their ture that stimulates curiosity, for exam- teams and help unleash the power of ple by providing more learning oppor- Our aspiration is for all associates to our people. We have three development tunities and increasing skills in key devote 100 hours a year to learning. The journeys to enable leadership excel- areas such as data and digital. This was average was 45.7 hours in 2020, up lence at different stages, and two talent the second year of our pledge to “go big from 35.8 hours in 2019. This was sup- development journeys to develop the on learning,” involving an investment of ported by an ongoing campaign called succession pipeline with early and USD 100 million over five years in addi- #wearecurious to encourage learning, emerging talent. tion to the regular annual training with more than 21 000 employees tak- budget of around USD 200 million. In ing part in 215 webinars and other In 2020, more than 5 000 senior lead- 2020, the pandemic caused a signifi- events during Curiosity Month in Sep- ers started a long-term development cant shift in learning requirements, and tember. These totaled 60 000 hours of program called the Unbossed Leader- we responded by expanding our offer- learning on topics such as innovation, dig- ship Experience (ULE) to enhance the ings to meet the changing needs of ital skills, and patient access to medicines. capabilities they need to transform our employees and their families. culture. The ULE challenges leaders’ In the OurVoice survey, employees gave assumptions and encourages them to With so many people working from a score of 75 to opportunities for learn- learn about their impact on others. This home, more than 14 000 employees ing and growth, compared to 69 in 2019. ensures they are equipped to lead in an visited a portal providing support for The latest score was 5 points above the ever-changing and increasingly com- remote working. Usage of LinkedIn industry benchmark. We also con- plex environment. The quarterly Lead- Learning increased from 1 000 hours a ducted a separate study on the impact ership Perspectives survey showed a week in February to 7 000 in May, and of learning on employee retention. The significant increase in self-awareness more than 8 600 people from outside preliminary results indicated a signifi- among leaders who completed the Novartis took part in the first-ever cant correlation between voluntary ULE, resulting in higher levels of open- ­Coursera friends and family program. learning and retention, and we aim to ness and trust, and greater team effec- Every Novartis employee received two further study this topic in the future. tiveness. In 2020, we converted the 62 | Novartis in Society

ULE into a fully virtual program, and the pler set of behaviors against which per- goal is to make it available to 20 000 formance is measured. These focus on leaders by 2023. the individual’s contribution to creating an inspired, curious and unbossed cul- The emphasis on learning is part of a ture, and also recognize personal integ- 2 700+ five-year transformation of our talent rity. Another important change to per- The number of employees strategy. This was launched in 2020 to formance management was the rollout who took advantage of the support a proactive reskilling of the of Spark, an online platform that allows new Novartis parental leave workforce, using data and analytical people to praise outstanding behavior guideline in 2020 tools to predict the capabilities we will by colleagues. This was used by 71% of need in the future. We are also estab- employees in 2020. lishing a talent marketplace that helps employees navigate their own careers In 2020, the Novartis Board of Direc- within Novartis, and provides guidance tors approved a global Employee Share for hiring managers to help identify Purchase Plan covering all permanently potential candidates across the organ- employed Novartis associates. We aim ization. Our succession planning pro- to launch the plan in country waves over cess covers all executive leadership the next five years. It will give associ- and senior management roles, and eval- ates the option to use a percentage of uates possible successors at various their base salary to purchase Novartis levels of readiness, including middle shares at a discount. 21 000+ management. There is a full annual Associates participated in 215 review with the CEO, and summary suc- DIVERSITY AND INCLUSION webinars and other events cession plans and talent metrics are Novartis strives to adhere to high stand- during Curiosity Month reported to the Board of Directors. ards of diversity and inclusion (D&I) in our culture and values, as embodied in BENEFITS FOR ALL EMPLOYEES the company’s new Code of Ethics. We Where possible, Novartis provides ben- believe that creating a diverse, equita- efits to all full- and part-time employees. ble and inclusive environment is a fun- These vary from country to country but damental part of our aspiration to be usually include comprehensive health, inspired, curious and unbossed. Only by well-being and retirement benefits; being themselves every day can people generous vacation policies; and a global fully apply their talent and energy at recognition program. In addition, during work. Diverse perspectives and inclu- the year more than 2 700 employees sive behaviors help us generate new took advantage of the company’s new ideas, drive innovation, and better parental leave guideline. The guideline understand patients and other stake- offers at least 14 weeks’ paid leave to holders. all new parents employed by Novartis, No.1 regardless of gender, to support the well- In 2020, the importance of D&I was Our industry ranking in the being of their families after the birth or demonstrated by heightened aware- Refinitiv D&I Index adoption of a child. It covers all employ- ness of racial disparity across many ees worldwide as of January 2021, and is societies. To promote understanding effective from the first day of employ- and support our ongoing efforts toward ment. meaningful change, we created oppor- tunities for open dialogue on racial In 2021, we will begin full rollout of a new equity and shared guidance and approach to performance manage- resources for additional learning. More ment, following a successful pilot in than 4 800 people took part in an inter- 2020 involving 16 000 employees, 96% active global webcast to mark the Afri- of whom were positive about the can American Juneteenth celebration, change. The new approach involves followed by a Day of Reflection in Sep- team-created rolling objectives, the tember attended by 6 700 associates replacement of performance rating with worldwide. We implemented new hiring impact nominations, receiving regular guidelines to help increase racial/eth- feedback from colleagues as well as nic and gender diversity in leadership managers, and having more coaching and across the organization, with a ded- to improve performance. Supporting icated diversity hiring team in the US. this, in 2021 we are introducing a sim- Being a responsible citizen Novartis in Society | 63

To make sure everyone feels heard, introduced sponsors to champion TRANSFORMING ENGAGEMENT AND respected and valued as a member of LGBTI awareness at senior levels. We VOLUNTEERING our global community, we encourage also launched a learning program to Novartis empowers associates to engage Employee Resource Groups (ERGs) – promote wider understanding and sup- and volunteer on their own terms; they voluntary networks linking employees port for LGBTI colleagues, and insti- can decide when, where and how. Our who have shared backgrounds, inter- tuted an identity guide and health plan Novartis volunteering program does not ests, experiences and perspectives. reviews to protect and care for our set a limit on the number of volunteering There are now 60 such groups active transgender community. or engagement hours. Every associate across the company. is encouraged to engage with responsi- We recognize the need to provide an bility. We made progress toward our UN environment in which individuals with Equal Pay International Coalition (EPIC) disabilities feel a sense of belonging Due to the COVID-19 pandemic, volun- pledge to achieve gender balance in and can perform at their best. Novartis teering activities were conducted virtu- management and further improve pay is a member of the International Labour ally in 2020. In the first few months of equity and transparency processes by Organization (ILO) Global Business and the pandemic, there was a fivefold 2023. The percentage of women in Disability Network, which promotes the increase in the donation of pro bono overall management rose to 45% in inclusion of people with disabilities in skills and time compared to the same 2020, from 44% a year earlier. Addition- workplaces around the world. We also period last year. Associates used the ally, by February 2021 we aim to intro- collaborate with the Center for Disabil- program’s virtual marketplace, which duce pay transparency in 10 new coun- ity Integration at the University of St.Gal- enables them to register new project tries (16 countries in total), including the len in Switzerland to identify and develop ideas and sign up as volunteers. US and Switzerland, so employees can solutions for disability inclusion. compare their salary to external bench- In April, the program launched a cam- marks. To ensure this commitment to D&I is paign to generate ideas among associ- shared throughout our business net- ates for virtual volunteering. More than We also made progress in removing work, we developed a US Diverse Sup- 2 400 associates in 18 countries con- possible gender bias from our recruit- plier Protocol that empowers decision- tributed, resulting in more than 60 new ing system by eliminating historical sal- makers to engage with approved activities. One example is “Today Posi- ary data when making job offers across suppliers owned by women, minorities, tive Thoughts,” an open forum where 75% of global hiring, up from 40% in LGBTI people and veterans. Globally, associates can freely express their 2019. Novartis has a global median pay we issued the first industrywide thoughts and feelings during COVID-19 gap of -3.1% and a global mean pay gap LGBTQI+ Supplier Good Practice Guid- to help overcome social and emotional of +3.6%. While we acknowledge this ance. Novartis is also committed to isolation. percentage is influenced by worldwide avoiding the use of non-regular employ- workforce demographics, this is signif- ment practices and contracts. Since 2015, the program’s virtual plat- icantly ahead of the Bloomberg bench- form has been used by over 21 100 marks of +19% median and +23% mean. Novartis prepares an Inclusion Index to associates from 59 countries. In 2020, Our parental leave and flexible working measure our progress toward creating the team launched a new platform with initiatives are also expected to posi- an inclusive environment that treats all advanced functionalities, powered by tively influence the gender pay gap by employees with dignity and respect. artificial intelligence, to increase the enabling employees to further balance The composite score was 74 in Novem- likelihood of finding the right match. their work and family commitments. ber 2020, up from 69 a year earlier. Our Associates can now search for and rec- Recognizing this progress, Novartis achievements were also recognized ommend projects based on a range of was again included in the Bloomberg externally. In the Refinitiv D&I Index, we criteria like skills, social causes or ben- Gender-Equality Index, a listing of com- were ranked No. 1 in our industry and eficiaries, UN Sustainable Development panies that achieve the highest stand- No. 9 overall out of more than 9 000 Goals, and geography. The new digital ards in measures of inclusion such as companies worldwide, marking our capabilities also enable impact meas- female empowerment and gender pay third consecutive year in the top 10. We urement for volunteering activities and parity. maintained our strong position in the proactively forecasting trends. The Dow Jones Sustainability World Index, platform launch is expected for the sec- Novartis was the first major pharma- which compares the environmental, ond quarter of 2021. ceutical company to support the UN social and governance (ESG) perfor- LGBTI Standards of Conduct, which mance of leading companies, with a While the program continues to encom- seek to end discrimination against les- percentile score of 91 compared with pass a range of hands-on activities, the bian, gay, bisexual, transgender and 87 in 2019. We achieved a maximum primary focus is to drive higher impact intersex (LGBTI) people in the work- score on DJSI’s labor practice indica- through skills-based volunteering. One place. In June, more than 3 000 Novartis tors and human capital development example is the long-term engagement employees from 67 countries took part criteria. In addition, Novartis achieved of Novartis volunteers in Hyderabad, in a virtual Pride Month event celebrat- sector-leading performances on human India, who completed the launch of the ing LGBTI inclusion. In 2020, Novartis capital from MSCI and Sustainalytics. Leprosy Patients Records Database 64 | Novartis in Society

(LEOPARD) in January 2020. The volun- associates how to identify the hallmarks teers helped design and build a health of a scam, and outlines clear steps to management tool for the Sivananda help associates protect themselves and Rehabilitation Home. This tool digitalizes their families. patient data and helps run daily opera- tions, enabling Sivananda to become a In 2020, we reached out to more than paperless hospital. Through the project, 8 000 associates regarding over 60 Novartis volunteers also plan to support high-risk security and health matters, other hospitals in the fight to eliminate including COVID-19 responses, explo- leprosy. sions, natural disasters and shootings. We continued to provide forward-look- In addition, for the first time, the plat- ing risk insights to the business and form gives access to external partners, conducted 31 enhanced due diligence who can directly post opportunities. inquiries relating to Novartis business This new feature is one example of how activities in complex environments. the program is transforming our approach to community partnership. In 2020, we In collaboration with several functions, took steps to shift the focus of volun- we launched the Everbridge global inci- “You have to deliver every day teering beyond a single day of service dent communications tool in Septem- in order to live up to your own toward a long-term, sustainable com- ber, enabling associates to receive mitment with global health partners and alerts about security, environmental standards and to meet the local communities. To this end, we signed and health-related incidents that may expectations of patients. This new agreements with the US President’s affect them when working on site and Malaria Initiative, the International Res- remotely. A security guide for remote is the mindset that we also cue Committee and Save the Children working was also issued to support need to apply to our to provide skills-based volunteering. associates.

environmental sustainability KEEPING ASSOCIATES SAFE Enhancing environmental efforts. We need to make We made every effort to help ensure the sustainability safety of our associates during the Planetary health has a direct impact on these an essential element of COVID-19 pandemic. As travel restric- human health. Our commitment to envi- how we run our business” tions were imposed early in the year, our ronmental stewardship as a global travel security alerts helped Novartis healthcare company is directly aligned Montse Montaner, associates mitigate their risk, either by with our purpose to reimagine medicine Chief Sustainability Officer avoiding travel to high-risk zones or by to improve and extend people’s lives. returning home. Our ambition is to be a leader in envi- ronmental sustainability, driving posi- We quickly adapted to address new tive change through our operations and threats as lockdowns led to a surge of those of our suppliers. criminal activity online. For example, we redirected our threat scanning to In September, we announced a bold address potential risks during virtual new target to achieve carbon neutrality product launches and meetings, con- across our value chain (Scope 1, 2 and gresses and events. In response to an 3) by 2030, replacing our existing tar- upward trend of social engineering get for a 50% reduction in emissions. fraud (designed to harvest private per- Our supply chain makes up 89% of our sonal and company information for overall carbon footprint. To achieve our criminal use), we also rolled out a “vir- new target, we plan to develop accurate tual kidnapping” awareness training to assessments and benchmarks for the educate associates about online frauds carbon footprints of our suppliers. This and scams. These have become more will be a challenging process, and it will sophisticated since the start of the pan- require close collaboration with our demic as criminal tactics have adjusted suppliers to help them decarbonize the to the situation. This training teaches services they provide to Novartis. Being a responsible citizen Novartis in Society | 65

In addition, we are pursuing carbon neu- In 2020, we created the position of To meet our 2025 carbon-neutrality tar- trality in our own operations (Scope 1 Chief Sustainability Officer to lead the get, we continued to work in line with and 2) by 2025. In this respect, we have strategy and execution of environmen- our four key drivers: made significant progress since 2016, tal sustainability across Novartis, and reducing our carbon emissions by 19%. drive an effective stakeholder engage- Switch to renewable energy: All energy­ At the same time, we achieved a 35% ment strategy with our external stake- used in our US facilities is compensated reduction in water consumption and a holders and across our value chain. with renewable energy credits gener- 36% reduction in waste sent for dis- ated through a virtual power purchase posal (both versus a 2016 baseline). Our All these steps signal our commitment agreement (VPPA) with the Santa Rita efforts and progress have been recog- to further integrate environmental sus- East wind farm in Texas. In 2020, this nized; in 2020, Novartis was included in tainability in our organization. project produced 417 000 megawatt the CDP Water A-List and achieved an hours of carbon-free electricity, which A- rating in CDP Climate. DECARBONIZING OUR OPERATIONS AND is the equivalent of powering 481 000 SUPPLY CHAIN average American households for one Environmental sustainability targets are The COVID-19 pandemic created chal- year. We are on track to achieve the included in senior leaders’ personal lenges but also opportunities with same ends in Europe. In 2020, we performance objectives. Additionally, respect to carbon reduction and energy signed five VPPAs with three develop- the environmental sustainability dash- efficiency. Company travel emissions ers for wind and solar energy projects board, which tracks quarterly progress were reduced to near zero, and engi- to address the company’s carbon foot- across the company, is regularly pre- neers were able to upgrade and optimize print across its European operations sented to the Environmental Sustaina- equipment in buildings that were unoc- over a period of 10 years from the start bility Strategy Implementation Steering cupied during lockdowns. However, we of operations. This is equivalent to Committee and the Trust & Reputation recognize that the shift to remote work- removing approximately 113 000 pas- Committee. For the first time in 2020, ing simply displaced the consumption of senger vehicles from the road each progress against our environmental energy from within our buildings to home year. This move makes Novartis the first sustainability targets was presented to offices. Further, changes to building ven- pharmaceutical company set to achieve the Novartis Board of Directors, which tilation systems have increased airflow 100% renewable electricity in its Euro- also endorsed our new 2030 carbon- rates and the use of fresh air, which has pean operations through VPPAs. neutrality target. increased energy consumption.

Environmental performance indicators 1

2020 2019 2018 Energy use (million gigajoules), on site and purchased 11.15 12.74 13.04

Greenhouse gas (GHG) emissions, Scope 1, combustion and process (1 000 tCO2e) 296.2 356.6 334.5

GHG emissions, Scope 1, vehicles (1 000 tCO2e) 100.2 128.4 146.3

GHG emissions, Scope 2, purchased energy (1 000 tCO2e) 392.2 411.6 448.7

GHG emissions, Scope 3, business travel (1 000 tCO2e) 27.0 191.3 211.7 2 Total GHG emissions, Scope 1 and Scope 2 (1 000 tCO2e) 788.6 896.6 929.5

GHG offsets (1 000 tCO2) 35.4 29.8 54.9

GHG emissions (Scope 1 and Scope 2) per sales (tCO2e per million USD) 16.20 18.86 20.8

GHG emissions (Scope 1 and Scope 2) per associate (tCO2e) 7.12 8.22 8.58 Halogenated volatile organic compounds (VOCs) (t) 13.18 26.59 78.98 Non-halogenated VOCs (t) 446.25 406.82 480.10 Non-hazardous waste recycled (%) 86.6 81.7 82.0 Hazardous waste recycled (%) 46.9 58.8 54.9 Non-hazardous waste not recycled (1 000 t) 8.8 12.9 12.5 Hazardous waste not recycled (1 000 t) 34.2 41.2 47.3 Water withdrawal (million m3) 3 54.7 66.8 69.5 Water discharged directly to aquatic environment (cooling water) (million m3) 46.1 55.5 57.9 Water consumption (million m3) 4 8.5 11.2 11.9

1 The 2020 environmental and resource data published in the Annual Report and the Novartis 2 Scope 1: combustion and process, and vehicles; Scope 2: purchased energy in Society Report are actual data for the period from January through September, and best 3 Sum of contact water and non-contact (cooling) water use estimates for the period from October through December. This data will be updated with 4 Water discharged via treatment and water lost actual data in the first quarter of 2021. Significant deviations will be reported on our website and restated in next year’s Annual Report. 66 | Novartis in Society

ENVIRONMENTAL TARGETS Reduce our demand for energy by im­ emissions from raw material production proving energy efficiency: The work- to consumer use and disposal. Carried Carbon neutral across entire shops Novartis held in 2019 to identify out in accordance with the Greenhouse supply chain by 2030 energy reduction opportunities across Gas Protocol Product Standard, the our sites have generated more than studies showed that the products had 300 projects, of which approximately a much lower carbon footprint than 120 are currently being implemented metered dose inhalers on the market. across the organization. For instance, We are evaluating if we can certify them 19% reduction in greenhouse gas a steam condensate recovery project as the first Novartis carbon-neutral emissions in 2020 vs. 2016 baseline at one of our sites in Slovenia saved products, which would likely make them more than 5 000 gigajoules of energy the first pharmaceutical products cer- and reduced the site’s carbon footprint tified as carbon neutral. That analysis Water neutral in all areas by 2030 by more than 300 tonnes per year. is informing the development of a strat- egy for reducing product-associated Update our manufacturing technology: emissions as much as possible, and We are continuing our long-term, stra- then offsetting residual emissions that tegic shift from traditional chemistry cannot be eliminated. We hope it will toward highly innovative, sustainable lead to a companywide approach to 35% reduction in water consumption in approaches that reduce our carbon neutralizing carbon emissions across 2020 vs. 2016 baseline footprint, resource consumption and the Novartis product portfolio, which waste. At our facility in Schaftenau, aligns with our new 2030 carbon neu- Plastic neutral by 2030 Austria, we are in the process of com- trality target. paring the use of plastics with tradi- tional stainless steel technology for In addition, we continued to embed manufacturing plants and equipment. environmental sustainability objectives Initial results suggest that while plastic related to carbon, water, waste and has a lower overall carbon footprint, it plastics in our supplier contracts, and 60% reduction in single-use plastics in generates more waste, and end-of-life we work with suppliers to develop and the workplace in 2020 vs. 2016 baseline management is more challenging. The refine their sustainability agendas. We information we gather from this experi- updated the Novartis Third Party Code ment will inform how we balance our with specific requirements on environ- aim to reduce waste with our carbon mental performance to reinforce these neutrality target. commitments. The revised code states that Novartis suppliers are expected to Invest in greener infrastructure: We act beyond legal compliance to estab- continue to factor in a price of USD 100 lish and track progress toward achiev- per ton of carbon for investments ing their own environmental sustainabil- greater than USD 20 million. Further, ity targets. the Novartis ECN approved a new global fleet policy that mandates the Managing water quality and consumption switch to zero- and low-emission vehi- We continued to make progress toward cles in at least 22 countries before the our 2025 targets to reduce water con- end of 2025. sumption in our operations by 50% ver- sus 2016 levels and to ensure there are We have identified a partner to diversify no water quality impacts from manufac- our portfolio of natural climate solu- turing effluents. This includes setting tions. This entails moving beyond for- risk-based discharge limits for pharma- estry to explore regenerative agricul- ceuticals in effluent water from our own ture, blue carbon projects and mangrove factories and those of our key suppli- restoration, with a focus on carbon ers. removal that also benefits health, biodi- versity and climate resilience. In September, we joined PREMIER, a new six-year project with the IMI We continued to assess the carbon focused on evaluating and mitigating footprints of select products to identify the risk of medicines in the environ- and address hot spots. For example, we ment. The IMI is a public-private part- completed lifecycle assessment stud- nership between pharmaceutical com- ies of two Breezhaler inhaled products panies, the European Commission and (Atectura and Enerzair), factoring in the EFPIA. Following the success of the Being a responsible citizen Novartis in Society | 67

five-year IMI project iPiE (Intelligent marketed biologics in 2021. Addition- Conducting animal research Assessment of Pharmaceuticals in the ally, we are working to replace product responsibly Environment), which concluded in 2019, leaflets with QR codes in medicine Novartis fully supports the use of alter- PREMIER (Prioritization and Risk Eval- packs and have launched a pilot for natives to animal research wherever uation of Medicines in the Environment) Kesimpta (a treatment for relapsing feasible. We have a Global Animal Wel- was launched as a collaboration among forms of multiple sclerosis). fare Policy and a set of animal welfare 10 pharmaceutical companies, 10 standards that define key principles, research institutes and four small- and ADVOCATING FOR CHANGE responsibilities and explicit require- medium-sized enterprises. The project Novartis signed on to multiple environ- ments governing animal research. All aims to deliver an innovative framework mental initiatives in 2020, including the studies sponsored by Novartis, whether for characterizing the environmental UN Global Compact’s CEO Water Man- conducted internally or externally, must risks of active pharmaceutical ingredi- date, which mobilizes business leaders adhere to this policy and standards. ents (APIs), which can ultimately be to make progress on six elements of used to explore and promote greener water sustainability, and Sustainability We adhere to the 3R principles: reduc- drug design and manufacturing. 30 (S30), a group of sustainability exec- ing the number of animals in studies, utives from 30 of the world’s leading refining study methods to improve the REDUCING WASTE companies working to accelerate busi- animal’s experience, and replacing ani- We made significant progress toward ness action on sustainability. mal studies with alternative options. reducing waste and increasing material Each year, we recognize exceptional efficiency in 2020. For example, by opti- At the height of the pandemic, we joined contributions to the 3Rs through global mizing our in-house incinerators, we more than 150 global corporations in and local 3R awards. In 2020, award- reduced the amount of waste sent for the largest ever UN-backed, CEO-led winning projects: disposal by 300 tonnes and generated climate advocacy effort, urging world • Replaced animals and reduced their energy at the same time. We also imple- leaders for net-zero recovery from number to monitor and maintain mented a new process called process COVID-19. Our CEO reaffirmed the high standards of rodent health mass intensification, which requires both Novartis science-based commitment through exhaust air dust analysis Novartis associates and suppliers to and signed the joint statement urging • Reduced the number of rodents in report how much waste is generated dur- governments around the world to align nerve regeneration studies through ing the production of APIs. We will use their COVID-19 economic aid and recov- AI screening of rodent cells this information to identify and imple- ery efforts with the latest climate sci- • Replaced animals used in assessing ment waste reduction opportunities. ence, calling for policies that build resil- tumorigenicity for new cell and gene ience and help drive the climate agenda. therapies by a soft agar-based We survey our sites quarterly to track benchtop assay progress toward eliminating single-use In October, we expressed support for plastics in all workplaces by 2021. We the Task Force on Climate-related In 2020, we established a Ph.D.-trained were 60% toward achieving this goal Financial Disclosures (TCFD), which 3R scientist role to further strengthen before the outbreak of COVID-19. The aims to develop voluntary climate- our culture of ethical science at Novartis pandemic has temporarily interrupted related financial risk disclosures across and to help advance the reduction, progress, as the use of single-use plas- industries. We believe that having a con- replacement and refinement of animal tics has become necessary due to sistent set of disclosures, which can be studies. infection control protocols. Our efforts adopted by companies to inform inves- to eliminate polyvinyl chloride (PVC) in tors and other stakeholders about the We also added a unique new role: a spe- all secondary and tertiary packaging climate risks they face, will help both cialty-trained veterinarian to liaise remain on track, with only four of our companies and financial markets bet- between internal scientists and those factories still using PVC. All plan to elim- ter evaluate and price those risks. conducting sponsored animal studies inate PVC before the end of 2021. Please see further details in our first at external partner sites. This change TCFD qualitative disclosure on pages has facilitated greater implementation Further, we are evaluating more envi- 75-77. of the 3R principles, and enhanced the ronmentally friendly alternatives to level of ethical oversight before, during PVC. All our biologics development pro- Additionally, Novartis engaged with fed- and after animal studies conducted by jects already use BioPET-A, a plant- eral and state officials in the US, sup- third parties. Further, our team of ani- derived polyethylene terephthalate porting legislative efforts related to car- mal welfare experts prospectively and made from 30% renewable raw mate- bon pricing, renewable portfolio continually audits third parties. rial and 70% oil-based raw material. We standards, zero-emission vehicles, cli- also now use a fully carton-based pack- mate resilience and a just climate tran- aging design instead of PVC for the sition – all important components of packaging of Aimovig (a treatment to responsible business. prevent migraine), and we plan to replace the PVC packaging of all our 68 | Novartis in Society

About this report

For the eighth consecutive year, Novartis is publishing an annual Novartis in Society ESG Report (formerly our Corporate Responsibility Report). This report has been prepared in accordance with the GRI Standards: Core option. The report supplements the “Build trust with society” chapter in the 2020 Novartis Annual Review (pages 38-41) and the 2020 Novartis Annual Report. The previous report was published on January 28, 2020.

As an original signatory of the UN Global Compact (UNGC), we are committed to sharing our progress in implementing the 10 principles of the compact. We published a Communication on Progress in the first quarter of 2020, and will do so again in 2021. On page 15, we ­discuss our contribution to the UN Sustainable Development Goals (SDGs). In addition, both the UNGC principles and the SDGs are clearly mapped versus the GRI indicators (pages 78-81).

The report is divided into four chapters based on our corporate responsibility (CR) material clusters and our priorities for building trust with society: holding ourselves to high ethical standards, being part of the solution on pricing and access, addressing global health chal- lenges and being a responsible citizen. In each chapter, readers will find more focused and contextual information about the priority topics arising from our materiality assessment. Our materiality assessment is a key part of our CR strategy and provides much more than a list of priority CR topics to report against. It is part of a regular four-year cycle we have estab- lished to help us better understand the issues that matter most to our internal and external stakeholders, the impact these issues have on our current and future business, and the asso- ciated risks and opportunities for our company. Download the 2017 Corporate Responsibil- ity Materiality Assessment Results Report.

As in previous years, the Governance, Nomination and Corporate Responsibilities Commit- tee of the Board of Directors, which is the highest CR body in Novartis, has reviewed this report.

This report covers all regions and divisions from January 1, 2020, to December 31, 2020. All information reflects the continuing operations of the Novartis Group, including the various changes in the Group’s portfolio of activities in prior years. Environmental data is based on nine-month actual data (January to September 2020) plus three-month estimates. This data will be restated with actual figures on our website during the first half of 2021. Where data has been restated from previous reports, it is noted in an appropriate footnote in this report. GRI Topic Boundaries show where we as a company have impact and create value.

This report aims to meet the needs and expectations of CR professional audiences by offering easy access to our performance on key topics raised by our CR materiality analysis. The GRI Content Index on page 78 and the SASB Index on page 82 provide links to content within this report, the 2020 Annual Review, the 2020 Annual Report and novartis.com. In 2020, we committed to fully support the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD), and our first qualitative TCFD disclosure can be found on pages 75-77. We aim to provide quantitative disclosure on climate-related topics in the future as we incorporate the TCFD recommendations into our business. In addi- tion, to provide ESG analysts with easier access to our information, we have published a Novartis ESG index, which signposts where our key disclosures – content and KPIs – can be found across our publications and channels.

PricewaterhouseCoopers AG has provided independent assurance on specific CR data and on our materiality assessment outlined in this report. For more detail, see the Independent Assurance Report on page 90.

Learn more about our activities. See our publications.

For feedback and suggestions, contact James Wallace, Head, Corporate Reporting and ESG Office: [email protected].

Ratings and recognition A full list of our ratings and rankings is available on our website. Performance indicators 2020 Novartis in Society | 69

Performance indicators 2020

Holding ourselves to high ethical standards

ETHICAL BUSINESS PRACTICES PERFORMANCE INDICATORS

2020 2019 2018 Novartis associates trained and certified on the Code of Ethics (%) 1 98 98 98 Misconduct cases (central matters) reported to the SpeakUp Office 2, 3, 4 142 209 441 Total SpeakUp Office allegations (central matters) 2, 4, 5 243 427 768 SpeakUp Office allegations (central matters) per category (%) 2, 7 Fraud/asset misappropriation 7.8 6.8 21.6 Expense fraud 2.9 5.4 23.4 8 Books and records, accounting irregularities 0.8 1.2 0.4 Improper professional practices 11.9 16.9 22.3 Bribery, kickbacks 0.8 1.6 2.1 Discrimination and sexual harassment 12.8 8.2 4.0 Retaliation 3.0 6.3 2.1 Other employee relations issues 19.0 18.0 7.9 Conflict of interest 10.7 10.8 5.2 IT security breach 3.7 4.0 1.9 Quality assurance/data integrity 8.6 6.3 3.1 Data privacy 1.6 2.6 0.5 Antitrust, fair competition 0.8 0.2 0.3 Company confidential/trade secret information 3.7 0 0 Other 11.9 11.7 5.1 SpeakUp Office allegations (central matters) substantiated 2, 4, 6, 9 114 254 558 Dismissals and resignations related to misconduct (central matters) 2, 4, 6, 9, 10 102 186 350

Animal testing indicators 76.1% 78.2% 70.4% Rodents (312 332) (355 451) (360 417) 23.8% 21.5% 29.2% Zebrafish (97 596) (97 551) (149 474) 0.1% 0.3% 0.4% Other species (431) (1 452) (2 246)

1 Active Novartis associates with email addresses, trained via e-learning or via One Deck for 6 May include allegations from previous years Novartis Technical Operations. Training rolled out from September 2020 to February 2021, 7 Percentages are based on total SpeakUp Office allegations number. Results for 2019 and with a preliminary completion rate as of December 31, 2020. 2018 have been revised to reflect the change in methodology from using the number of 2 A central matter applies to a senior leader or manager, potentially disruptive reputational misconduct cases to the number of allegations. impact, sexual harassment, discrimination, retaliation and significant financial impact. 8 Until the end of 2018, these expense fraud allegations are assessed to be of higher risk in 3 The number of misconduct cases reported may change year-on-year as matters may be China. The risk assessment of these issues changed as of 2019. reassessed in the course of the case lifecycle. 9 Data based on when investigation report was received. Results for 2019 and 2018 have been 4 The decrease in the number of misconduct cases reported is due to a new risk assessment as revised to reflect this change in methodology. of 2019. 10 Data based on year when case is closed. Results for 2019 and 2018 have been revised to 5 The number of allegations is higher than the actual number of cases as a case can have more reflect this change in methodology. than one allegation. 70 | Novartis in Society

Being part of the solution on pricing and access; addressing global health challenges

ACCESS TO HEALTHCARE PERFORMANCE INDICATORS

2020 2019 2018 Total patients reached (millions) 769 799 765 Patients reached through access-to-healthcare activities (millions) 1 66 16 25

2020 2019 2018 Sustainability-linked bond (September 23, 2020 – September 23, 2028) Strategic innovative therapies patient reach 695 669 547 664 382 714 Flagship programs patient reach 43 912 152 15 069 483 28 509 151

2020 2 2019 2018 Novartis Global Health Countries with products on the ground 115 33 26 FTEs 3, 4 1334 786 651 Patients reached with products (thousands) 5 65 828 15 069 6 28 509 6 Health educators trained 671 1 536 1 028 Healthcare providers trained 7 12 648 1 516 697 Policymakers trained 90 145 131 Points of service provision 8 5 902 13 635 15 190 People reached at points of service provision 486 642 986 701 765 055 Awareness events held 9 424 878 250 432 185 756 People reached at awareness events 8 048 360 10 211 704 982 078

Patients reached (thousands)

2020 2019 2018 Emerging market brands Novartis Pharmaceuticals 355.1 302.6 213.3 Novartis Oncology 13.9 11.3 8.2

Patient assistance programs Novartis Patient Assistance Foundation Inc. (US) 102.7 87.2 68.1 Novartis Oncology Access 33.9 60.7 71.1

Donations Leprosy (WHO) 10 245.4 168.6 176.2 Fascioliasis/Egaten 11 132.8 154.7 154.7 CMLPath to Care TM 30.2 14.4 13.4

Value USD (millions) 13

2020 2019 2018 World Child Cancer <0.01 <0.1 0.1 Emergency relief 12 2.5 2.8 4.7

1 Novartis Global Health, local brands, patient assistance programs, donations 9 In India, we adjusted our approach from hosting large health education meeting with 2 Data reflect the full scope of access approaches managed by the Global Health organization, community groups to a door-to-door model and also partnered with schools to deliver health including the activities formerly managed by Novartis Social Business, as well as the newly education to classrooms virtually. This led to an increase in the number of events, but with a formed sub-Saharan Africa (SSA) organization and the Integrated Access Programs & restricted reach. Markets unit. More details are on pages 33-38. 10 In 2020, the leprosy program fully transitioned to the Global Health organization as one of the 3 Full-time equivalent positions and contractors flagship programs and is also included in data reported in the Novartis Global Health table 4 Significant number of headcounts integrated from different units as a result of the above. establishment of the new SSA organization 11 Numbers of patients reached have been updated to reflect the new methodology used by 5 The patient number is calculated based on treatments delivered and the following elements: WHO and based on real-world evidence. daily treatment doses, treatment duration, treatment adherence and potential treatment 12 Monetary and product donations overlap (NCD patients often take several drugs). The treatment adherence and treatment 13 Wholesale acquisition cost (WAC) plus logistics costs for some programs overlap factors are based on assumptions from developed markets. 6 Data restated to reflect the patients reached as defined by the Sustainability Linked Bond, which includes private sector sales in LMICs. 7 Shift to virtual events 8 Points of service provision include facilities and health camps where healthcare services are provided. Performance indicators 2020 Novartis in Society | 71

Being a responsible citizen

PEOPLE PERFORMANCE INDICATORS

2020 2019 2018 105 794 / 103 914 / 104 780 / Full-time equivalent positions / headcount 1 110 738 108 776 108 422 Turnover: % voluntary / % overall 5.2 / 10.1 7.0 / 14.0 7.4 / 12.0 Voluntary turnover of high performers (%) 4.2 5.4 5.8 Internal hires / external hires (%) 58 / 42 55 / 45 54 / 46 External hires by gender (% female / % male) 52 / 48 53 / 47 52 / 48 Management representation by gender (% female / % male) 2 Overall 45 / 55 44 / 56 43 / 57 Novartis Top Leaders 3 33 / 67 31 / 69 30 / 70 Senior management 39 / 61 38 / 62 36 / 64 Middle management 46 / 54 45 / 55 44 / 56 Gender representation of Board of Directors (% female / % male) 29 / 71 25 / 75 25 / 75 Associate nationalities / associate nationalities in management 2 142 / 113 149 / 110 142 / 113 Annual training hours per employee 4 45.7 35.8 22.6 Associates represented by a trade union/internal work council or covered by a collective bargaining agreement (%) 5 46 45 45 Gender split of leavers (% female / % male) 49 / 51 48 / 52 51 / 49 Median tenure in years by gender (female / male) 4.7 / 5.5 5.5 / 6.5 5.7 / 6.5 Internal promotion by gender (% female / % male) 52 / 48 51 / 49 50 / 50 Revenue-producing roles by gender (% female / % male) 50 / 50 49 / 51 48 / 52 Novartis IT and engineering workforce by gender (% female / % male) 32 / 68 31 / 69 30 / 70 Number of employees by employment contract (permanent and temporary), by gender 6 Women employed on a permanent contract 53 729 51 906 51 139 Women employed on a temporary contract 1 935 2 327 2 316 Men employed on a permanent contract 53 096 52 691 53 252 Men employed on a temporary contract 1 629 1 718 1 669 Number of employees by employment contract (permanent and temporary), by region 6 Employees on a permanent contract in Asia-Pacific region 27 711 26 559 26 581 Employees on a temporary contract in Asia-Pacific region 300 666 654 Employees on a permanent contract in Europe/Middle East/Africa region 56 852 56 855 57 178 Employees on a temporary contract in Europe/Middle East/Africa region 3 016 3 063 3 010 Employees on a permanent contract in Latin America region 5 092 5 311 5 395 Employees on a temporary contract in Latin America region 157 194 206 Employees on a permanent contract in North America region 17 170 15 872 15 237 Employees on a temporary contract in North America region 91 122 115 Number of employees by employment type (full time and part time), by gender 6 Women employed on a full-time contract 48 472 46 907 46 502 Women employed on a part-time contract 7 204 7 338 6 953 Men employed on a full-time contract 53 507 53 164 53 932 Men employed on a part-time contract 1 219 1 246 989

1 Headcount reflects the total number of associates in our payroll systems. Full-time equivalent 4 See page 74 for a list of selected training programs. adjusts headcount for associates working less than 100%. All data as of December 31 5 Non-management associates 2 Management defined by Global Job Level Architecture and Novartis Top Leaders 6 Less than 0.5% of associates have unknown classification. 3 Novartis Top Leaders comprise the approximately 300 most senior managers at Novartis, including the Executive Committee of Novartis. 72 | Novartis in Society

PATIENT HEALTH AND SAFETY PERFORMANCE INDICATORS

Pharmacovigilance, safety profile and quality of drugs performance indicators

2020 2019 2018 Novartis Group health authority regulatory reporting (ICSRs)1 (%) 2 95.0 98.6 99.1 All audits Total audits executed 3 903 1 607 2 147 Internal 111 162 250 External 792 1 445 1 897 All regulatory authorities Inspections 126 187 202 Inspections considered acceptable (%) 99.2 4 96.8 98.5 FDA inspections 6 19 18 FDA warning letters 0 0 0 FDA Form 483 1 11 8 FDA sponsor inspections Inspections related to clinical trial management and pharmacovigilance 1 2 3 Number of VAI (Voluntary Action Indicated) 0 1 1 Number of OAI (Official Action Indicated) 0 0 0 Recalls 27 29 42 FDA recalls 5 0 2 2 Class I recalls 6 1 3 5 Class II recalls 6 21 21 18

1 ICSRs: individual case safety reports 5 As recorded on the FDA’s “Recalls, Market Withdrawals, & Safety Alerts” webpage 2 % represents on-time regulatory submissions. Data reflect January to November 2020. 6 Definition of Class I/II recalls is given on the FDA webpage “Recalls Background and 3 The reduction in the number of audits is primarily due to the divestment of Novartis divisions, Definitions” manufacturing network and supplier consolidation, and for 2020, the impact of COVID-19. 4 One inspection may require further improvement; the final classification by the health authorities is still to be determined.

SUPPLY CHAIN PERFORMANCE INDICATORS

2020 2019 2018 Suppliers risk-assessed by TPRM 1, 2 8 448 2 839 3 NA 4 Suppliers with remediation action agreed 2, 5 521 122 89 Suppliers audited 2 35 135 48 Suppliers assessed for anti-bribery risks 2 014 479 3 NA 6 Suppliers assessed for animal welfare 10 3 3 NA 6 Suppliers assessed for business continuity plans 70 NA 6 NA 6 Suppliers assessed for financial due diligence 193 NA 6 NA 6 Suppliers assessed for health, safety and environment 315 226 3 NA 6 Suppliers assessed for information security and data privacy 3 174 1 142 3 NA 6 Suppliers assessed for labor rights risks 4 635 1 423 3 NA 6 Suppliers assessed for Quality GmP 561 162 3 NA 6 Supplier engagements stopped due to risk assessment outcomes 120 15 3 NA 6

1 TPRM: Third-Party Risk Management 4 Data not available; the TPRM program was not launched. 2 Includes new suppliers and new products, services or sites from existing suppliers. Figures do 5 Follow-up includes more information requested, audits or on-site assessments. not include GxP audits (see page 57 for more details). 6 Not available; the specific risk domain was not yet included in TPRM 3 Data reflect April to December 2019, based on the TPRM program geographical rollout. Performance indicators 2020 Novartis in Society | 73

HEALTH, SAFETY AND ENVIRONMENT PERFORMANCE INDICATORS 1

2020 2019 2018 Lost-time injury and illness rate (per 200 000 hours worked) 2 0.13 0.18 0.15 Total recordable case rate (per 200 000 hours worked) 2, 3 0.23 0.35 0.33 Energy use (million gigajoules), on site and purchased 11.15 12.74 13.04

Greenhouse gas (GHG) emissions, Scope 1, combustion and process (1 000 tCO2e) 296.2 356.6 334.5

GHG emissions, Scope 1, vehicles (1 000 tCO2e) 100.2 128.4 146.3

GHG emissions, Scope 2, purchased energy (1 000 tCO2e) 392.2 411.6 448.7

GHG emissions, Scope 3, business travel (1 000 tCO2e) 27.0 191.3 211.7 4 Total GHG emissions, Scope 1 and Scope 2 (1 000 tCO2e) 788.6 896.6 929.5

GHG offsets (1 000 tCO2) 35.4 29.8 54.9

GHG emissions (Scope 1 and Scope 2) per sales (tCO2e per million USD) 16.20 18.86 20.8

GHG emissions (Scope 1 and Scope 2) per associate (tCO2e) 7.12 8.22 8.58 Halogenated volatile organic compounds (VOCs) (t) 13.18 26.59 78.98 Non-halogenated VOCs (t) 446.25 406.82 480.10 Non-hazardous waste recycled (%) 86.6 81.7 82.0 Hazardous waste recycled (%) 46.9 58.8 54.9 Non-hazardous waste not recycled (1 000 t) 8.8 12.9 12.5 Hazardous waste not recycled (1 000 t) 34.2 41.2 47.3 Water withdrawal (million m3) 5 54.7 66.8 69.5 Water discharged directly to aquatic environment (cooling water) (million m3) 46.1 55.5 57.9 Water consumption (million m3) 6 8.5 11.2 11.9

1 The 2020 environmental and resource data published in the Annual Report and the Novartis in 2 Data include Novartis associates and third-party personnel managed by Novartis associates. Society Report are actual data for the period from January through September, and best 3 Data include all work-related injury and illness, whether leading to lost time or not. estimates for the period from October through December. This data will be updated with 4 Scope 1: combustion and process, and vehicles; Scope 2: purchased energy actual data in the first quarter of 2021. Significant deviations will be reported on our website 5 Sum of contact water and non-contact (cooling) water use and restated in next year’s Annual Report. 6 Water discharged via treatment and water lost 74 | Novartis in Society

Selected training programs for associates

All associates Graduate / entry level Leaders / talent development

General / cross- Ethical standards: E-trainings target Internships and apprenticeships: At We have three leadership develop­ functional training all associates with a Novartis email Novartis headquarters and other sites ment journeys to enable leadership programs address. All remaining associates are in Switzerland, we offer paid internships excellence at different stages, and two required to be trained face-to-face or and apprenticeships to graduates from talent development programs to develop through shared kiosks. high school or commercial colleges, as the succession pipeline with early and well as students who are studying for a emerging talent. In 2020, a total of Training and awareness programs for bachelor’s degree. We also offer post- 5 000 leaders took part in one of these health, safety and environment policy graduate internships. programs to prepare for transition to a new career stage and build sustainable Quality and safety training: Topics performance in their role. covered in initial training for all employees include product quality, reporting adverse Unbossed Leadership Experience events and information management. Reverse mentoring programs: Comprehensive virtual learning: LinkedIn • IGNITE: Accelerates leaders’ abil- Learning provides over 16 000 video- ity to apply a global mindset through based programs in seven languages. self-awareness, curiosity and experi- Coursera provides over 4 500 courses mentation in order to drive sustain- from over 200 global universities in 40 able business impact languages. In addition, associates can • QUEST: Enables participants to become access 10 000 Skillsoft courses, vid- self-aware, authentic and purposeful eos and resources. leaders who accelerate positive change. QUEST leaders inspire others from Novartis Learning Institute: Offers their authentic selves, live their purpose, personal effectiveness, digital capability shape our culture and make a lasting and language programs, as well as talent difference to society. acceleration and leadership programs • EMBRACE (Female Leadership Program): Supports leaders to hone an inclusive mindset and behaviors, and help create a more diverse and inclusive workplace

R&D / Regulatory Innovation / discovery postdoctoral Affairs fellowships: Enable aspiring drug hunters to join teams at the Novartis Institutes for BioMedical Research (NIBR) to gain expe- rience in the design and development of breakthrough therapies

“AI for Life” residency program: A one- year program in Switzerland that enables data-science graduates and research- ers to apply their expertise to real-world healthcare challenges

Regulatory Affairs postgraduate pro­ gram: A two-year postgraduate training program in Switzerland

Medical Affairs / Responsible marketing, promotion and Europe-based MBA program: Novartis Sales & Marketing interaction with healthcare profession­ Oncology offers a two-year, multi-location als: In-depth training covering promotional rotational program across key markets in and non-promotional materials, events Europe for recent MBA graduates. and professional meetings, external funding, engagement with healthcare pro- fessionals and healthcare organizations, interactions with patients and patient organizations, and market research

Other corporate All Novartis associates in Manufactur­ Finance postgraduate rotation program: Coach2Grow: A program offered functions / organi- ing and Quality Assurance receive A three-year development program for in Novartis Business Services to zations at Novartis ongoing training in topics including recent postgraduates in finance, account- develop coaching skills and encourage quality management systems and third- ing or business administration unbossed leadership party oversight.

Task Force on Climate-related Financial Disclosures (TCFD) Novartis in Society | 75

Task Force on Climate-related Financial Disclosures (TCFD)

Novartis committed in 2020 to fully support the recommendations of the Task Force on Climate-related Financial Disclo- sures (TCFD). This is our first qualitative TCFD disclosure, building on our responses to the CDP climate questionnaire in previous years. We aim to provide quantitative disclosure on climate-related topics in the future as we incorporate the TCFD recommendations into our business.

Governance

BOARD OVERSIGHT The Governance, Nomination and Corporate Responsibilities Committee of the Novartis Board of Directors receives regu- lar updates on climate risk and opportunities as part of its oversight of environmental, social and governance (ESG) topics. These are scheduled as written updates semi-annually, with verbal updates in alternating quarters.

MANAGEMENT OVERSIGHT Under the leadership of the CEO, the Executive Committee of Novartis (ECN) has responsibility for approving the compa- ny’s environmental sustainability strategy, and climate and water targets and goals. The Chief Ethics, Risk & Compliance Officer, a member of the ECN, is responsible for fully integrating climate-related risks into the Enterprise Risk Management (ERM) process, including oversight of actions to reduce exposure to risks. The Chief Sustainability Officer provides an annually updated climate scenario analysis and information on physical risks and transition risks and opportunities to the ECN. The Trust & Reputation Committee, chaired by the CEO, meets every two months to assess progress as part of a quarterly ESG scorecard submission process. It also updates the ECN and the Board on progress and challenges.

RELEVANT DISCLOSURES:

TCFD recommendations (governance) Novartis disclosures a) Describe the board’s oversight of climate-related risks and opportuni- Refer to CDP question C1.1b. ties. b) Describe management’s role in assessing and managing climate- Refer to CDP questions C1.2 and C1.2a. related risks and opportunities.

Strategy

Climate change will have a major impact on our business, including our operations, strategy, financial planning and value chain, as well as on stakeholders such as patients. For example, climate change is already causing extreme heat and poor air quality in some areas, which threaten to exacerbate pre-existing health conditions such as heart failure, lung cancer and respiratory diseases. In addition, an increase in temperature and humidity may cause a proliferation of insects that carry vec- tor-borne diseases, including dengue fever, malaria, Chagas disease and leishmaniasis. Novartis is working to understand and anticipate these risks to ensure we can continue to discover, develop and deliver life-saving medicines.

Novartis has been active in integrating climate and environmental considerations into our financial planning. For example, we apply a threshold of USD 20 million for capital expenditure projects requiring an environmental sustainability review. We also operate with a USD 100 per ton shadow carbon price to help inform our strategic decision-making and budget plan- ning with respect to carbon impacts. This was underlined in 2020 by climate change meeting the financial materiality thresh- old for inclusion in our core annual report and in our ERM process as part of a broader strategic risk focused on ESG top- ics.

PROCESSES Novartis has conducted a long-term sensitivity and stress-testing analysis for climate and water in collaboration with the Massachusetts Institute of Technology (MIT) Joint Program on the Science and Policy of Global Change. The analysis was based on a scenario that aligns to the RCP 6.0 model for temperature change, which assumes that climate policy remains constant in the wake of the Paris Accord after 2030, and that significant technology advancements in low-carbon emis- sions technologies take time to scale. This represents a conservative approach to risk (assuming greater exposure), and does not assume improvements that would require significant policy or technology changes. The scenario analysis was a multiphase project for detailed climate risk analysis of a key site, and an initial global assessment of 70 critical sites for the production and research portions of the company, examining scenarios in 2030, 2050 and 2070. 76 | Novartis in Society

In 2020, we conducted a further analysis with MIT of water scarcity risks in three critical water basins in China, Europe and South Africa. The analysis is being used to plan for investments in water stewardship to achieve our water neutrality target.

We provided the outcome of the MIT analyses to Novartis associates in production, procurement, facilities, finance, risk and business continuity, with the aim of supporting the existing ERM process as well as business decisions in areas such as utilities procurement.

PROGRESS The following Novartis accomplishments in 2020 are relevant to the TCFD recommendations: • Awarded contracts for a Pan European Virtual Power Purchase Agreement that will deliver 100% renewable electricity and carbon neutrality for procured electricity in Novartis European operations by 2022 through newly built solar and wind projects in Spain • Completed life cycle assessment (LCA) studies of two Breezhaler inhaled products that included the whole product lifecycle, including climate considerations covering the device, active pharmaceutical ingredients and the optional sensor • Completed a long-term sensitivity and stress-testing analysis for climate and water, as well as a further analysis on water scarcity risks, and provided the results to associates in relevant business functions • Held focused environmental sustainability risk and ESG risk workshops with a diverse group of internal stakeholders to further prioritize and incorporate climate risks and other ESG risks into the ERM process • Started a process to assess climate-related risks for our development pipeline and existing medicines. Continued to make progress in research and development across our flagship global health programs, maintaining our focus on diseases that might be impacted by climate change: – Announced a new collaboration with Medicines for Malaria Venture and the PAMAfrica consortium to evaluate a new formulation of Coartem for infants weighing less than 5 kilograms, for whom there is no current treatment option – Launched a clinical study to evaluate the safety and efficacy ofEntresto in 900 patients with Chagas-related heart failure – The Novartis Institute for Tropical Diseases (NITD) launched a Chagas disease drug discovery program pursuing potentially curative therapies – Continued development of a compound with the potential to be the first direct antiviral treatment for adults and children with dengue fever, and the first antiviral for prevention of dengue infection

RELEVANT DISCLOSURES:

TCFD recommendations (strategy) Novartis disclosures a) Describe the climate-related risks and opportunities the organization Refer to CDP questions C2.1a, C2.3, has identified over the short, medium, and long term. C2.3a, C2.4 and C2.4a. b) Describe the impact of climate-related risks and opportunities on the Refer to CDP questions C2.2, C2.3a, organization’s businesses, strategy, and financial planning. C2.4a, C3.1, C3.1d, C3.1e and C3.1f. c) Describe the resilience of the organization’s strategy, taking into Refer to CDP questions C3.1a and C3.1b. consideration different climate-related scenarios, including a 2°C or lower scenario.

Risk management

Novartis integrates risk and strategy issues in a cross-functional ERM process. All risks are consolidated in a framework called the Novartis Risk Compass, which enables senior management, the ECN and the Novartis Board of Directors to focus on key strategic risks and to align the company strategy to our risk exposure. For more information on how we identify, assess and manage our risks, please see the section “Holding ourselves to high ethical standards.”

In 2020, climate change was recognized as a financially material risk to Novartis, and was disclosed in our 2020 filing to the US Securities and Exchange Commission. Novartis is potentially exposed to physical risks from varying extreme weather events such as hurricanes, tornadoes, floods, or any other event that may result from the impact of climate change on the environment. For example, some of our production facilities are located in places that, because of increasingly violent weather events, sea level rise, or both, are increasingly at risk of substantial flooding. Other facilities that depend on the Task Force on Climate-related Financial Disclosures (TCFD) Novartis in Society | 77

availability of significant water supplies are located in areas where water is increasingly scarce. As a result, we could expe- rience increased costs (production or other), business interruptions, and destruction of facilities, all of which would have a material adverse effect on our business, financial condition, or results of operations. Our distributed supply chains are also vulnerable to these effects.

Climate change may also trigger the adoption of new regulatory requirements across the globe. Such legislation could include increased requirements to invest in technology to reduce energy use, water use and greenhouse gas emissions, beyond what we expect to invest in our existing plans. In addition, legislation could include carbon pricing, climate risk dis- closure mandates, and changes in zoning or building codes to increase climate resilience. The combined impact of these transition risks could increase our direct operating costs and result in the same impact across our supply chain.

In addition to the ERM process, our global materiality assessment evaluates our impact on society and the environment through a dialogue with internal and external stakeholders about value, risks and opportunity. Please see page 22 for more information.

RELEVANT DISCLOSURES:

TCFD recommendations (risk management) Novartis disclosures a) Describe the organization’s processes for identifying and assessing Refer to CDP questions C2.1, C2.1a, C2.2 and C2.2a. climate-related risks. b) Describe the organization’s processes for managing climate-related Refer to CDP questions C2.1, C2.1a and C2.2. risks. c) Describe how processes for identifying, assessing, and managing Refer to CDP question C2.2. climate-related risks are integrated into the organization’s overall risk management

Metrics and targets

• Novartis has a goal to be carbon neutral in our own operations by 2025. • Novartis has a goal to be carbon neutral across the entire value chain (Scopes 1, 2 and 3) by 2030, and to be plastic and water neutral by 2030. • Novartis has an approved 1.5°C Science Based Target for 35% absolute emissions reductions across Scopes 1, 2 and 3 by 2030. • In 2020, Novartis reduced greenhouse gas emissions by 19% when compared to our 2016 baseline. • Additional details on our emissions and other data can be found in the Novartis Environmental Sustainability and Occupational Health and Safety Data Supplement. Our most recent CDP climate questionnaire has details of methodologies, climate mitigation and climate adaptation efforts. Both are available on the Novartis website.

RELEVANT DISCLOSURES:

TCFD recommendations (metrics and targets) Novartis disclosures a) Disclose the metrics used by the organization to assess climate- Refer to CDP questions C4.2, C4.2a, C4.2b and C9.1. related risks and opportunities in line with its strategy and risk management process. b) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse Refer to CDP questions C6.1, C6.3 and C6.5. gas (GHG) emissions, and the related risks. c) Describe the targets used by the organization to manage climate- Refer to CDP questions C4.1, C4.1a, C4.1b, C4.2, C4.2a and C4.2b. related risks and opportunities and performance against targets.

78 | Novartis in Society

Novartis GRI Content Index

DISCLOSURE DISCLOSURE UNGC UN NUMBER TITLE PRINCIPLE SDG COMMENTS REFERENCE

101 – FOUNDATION

102 – GENERAL DISCLOSURES 102-1 Name of the organization Annual Review 2020 p.48 102-2 Activities, brands, products and services p.7 102-3 Location of headquarters Annual Review 2020 p.48 102-4 Location of operations Annual Report 2020 F-83 102-5 Ownership and legal form Annual Report 2020 A-9 102-6 Markets served Annual Review 2020 p.14 102-7 Scale of the organization p.4 102-8 Information on employees and other workers 6 8 12 p.71, p.73 102-9 Supply chain 3, 4, 5, 6, 8, 10 p.25-26 102-10 Significant changes to the organization Annual Report 2020 and its supply chain F-15 102-11 Precautionary principle or approach 7 Annual Report 2020 p.11 102-12 External initiatives p.88 102-13 Membership of associations 1, 8 p.88 102-14 Statement from senior decision-maker p.10 102-16 Values, principles, standards, 1, 2, 3, 4, 5, 16 Ethics, Risk and Compliance and norms of behavior 6, 8, 10 102-17 Mechanisms for advice and concerns about ethics 10 16 Establishing Standards of Integrity 102-18 Governance structure Annual Review 2020 p.44 102-19 Delegating authority p.12 102-20 Executive-level responsibility for economic, p.12 environmental and social topics 102-21 Consulting stakeholders on economic, 16 p.14 environmental and social topics 102-22 Composition of the highest governance body 5 16 Annual Report 2020 and its committees p.133 102-23 Chair of the highest governance body 16 Annual Report 2020 p.134 102-24 Nominating and selecting the highest 5 16 Annual Report 2020 governance body p.133 102-25 Conflicts of interest 16 Annual Report 2020 p.145 102-26 Role of highest governance body in setting Annual Report 2020 purpose, values and strategy p.142 102-27 Collective knowledge of highest governance body 4 p.12 102-28 Evaluating the highest governance Annual Report 2020 body’s performance p.141 102-29 Identifying and managing economic, 16 Annual Report 2020 environmental and social impacts p.145 102-30 Effectiveness of risk management processes Annual Report 2020 p.146 102-31 Review of economic, environmental Annual Report 2020 and social topics p.145 102-32 Highest governance body’s role p.12 in sustainability reporting 102-33 Communicating critical concerns p.12 102-34 Nature and total number of critical concerns Number and nature of concerns are not disclosed Novartis GRI Content Index Novartis in Society | 79

DISCLOSURE DISCLOSURE UNGC UN NUMBER TITLE PRINCIPLE SDG COMMENTS REFERENCE 102-35 Remuneration policies Annual Report 2020 p.91 102-36 Process for determining remuneration Annual Report 2020 p.94 102-37 Stakeholders’ involvement in remuneration 16 Annual Report 2020 p.94 102-38 Annual total compensation ratio Information is confidential and not disclosed 102-39 Percentage increase in annual Information total compensation ratio is confidential and not disclosed 102-40 List of stakeholder groups p.14 102-41 Collective bargaining agreements 3 8 p.71 102-42 Identifying and selecting stakeholders p.14 102-43 Approach to stakeholder engagement p.14 102-44 Key topics and concerns raised p.12 102-45 Entities included in the consolidated Annual Report 2020 financial statements F-83 102-46 Defining report content and topic boundaries p.84 102-47 List of material topics p.86 102-48 Restatements of information p.68 102-49 Changes in reporting p.68 102-50 Reporting period p.68 102-51 Date of most recent report p.68 102-52 Reporting cycle p.68 102-53 Contact point for questions regarding the report p.68 102-54 Claims of reporting in accordance p.68 with the GRI Standards 102-55 GRI Content Index p.78 102-56 External assurance p.90

103 – MANAGEMENT APPROACH 103-1 Explanation of the material topic and its boundary Corporate Responsibility Materiality Assessment Results Report 103-2 The management approach and its components Corporate Responsibility Materiality Assessment Results Report 103-3 Evaluation of the management approach Novartis in Society ESG Report 2020

200 – ECONOMIC 201-1 Direct economic value generated and distributed Annual Review 2020 p.8, p.13 201-2 Financial implications and other risks and 7, 8, 9 13 Annual Report 2020 opportunities due to climate change p.22 203-2 Significant indirect economic impacts 1 2 8 10 17 p.16, p.89 204-1 Proportion of spending on local suppliers Novartis ESG Index 205-1 Operations assessed for risks related to corruption 10 16 p.20 206-1 Legal actions for anti-competitive behavior, Annual Report 2020 anti-trust and monopoly practices F-49 207-1 Approach to tax Annual Report 2020 p. 171

Novartis Tax Policy Statement 207-2 Tax governance, control, and risk management Annual Report 2020 p.171 80 | Novartis in Society

DISCLOSURE DISCLOSURE UNGC UN NUMBER TITLE PRINCIPLE SDG COMMENTS REFERENCE

300 – ENVIRONMENT 301-2 Recycled input materials used 8 8 12 Novartis Health, Safety and Environment (HSE) Data 2020 301-3 Reclaimed products and their packaging materials 8 8 12 Waste 302-1 Energy consumption within the organization 7, 8, 9 7 8 12 13 Novartis Health, Safety and Environment (HSE) Data 2020 302-2 Energy consumption outside of the organization 8 7 8 12 13 Novartis Health, Safety and Environment (HSE) Data 2020 302-3 Energy intensity 8 7 8 12 13 Novartis Health, Safety and Environment (HSE) Data 2020 302-4 Reduction of energy consumption 7, 8, 9 7 8 12 13 Novartis Health, Safety and Environment (HSE) Data 2020 302-5 Reductions in energy requirements 8, 9 7 8 12 13 Novartis Health, Safety and of products and services Environment (HSE) Data 2020 303-1 Water withdrawal by source 7, 8 6 12 Novartis Health, Safety and Environment (HSE) Data 2020 303-2 Water sources significantly affected 7, 8, 9 6 12 Novartis Health, Safety and by withdrawal of water Environment (HSE) Data 2020 303-3 Water recycled and reused 7, 8, 19 6 12 Novartis Health, Safety and Environment (HSE) Data 2020 305-1 Direct (Scope 1) GHG emissions 7, 8 3 12 13 14 15 Novartis Health, Safety and Environment (HSE) Data 2020 305-2 Energy indirect (Scope 2) GHG emissions 7, 8 3 12 13 14 15 Novartis Health, Safety and Environment (HSE) Data 2020 305-3 Other indirect (Scope 3) GHG emissions 7, 8 3 12 13 14 15 Novartis Health, Safety and Environment (HSE) Data 2020 305-4 GHG emissions intensity 8 13 14 15 Novartis Health, Safety and Environment (HSE) Data 2020 305-5 Reduction of GHG emissions 7, 8, 9 13 14 15 Novartis Health, Safety and Environment (HSE) Data 2020 305-6 Emissions of ozone-depleting substances (ODS) 7, 8, 9 3 12 Novartis Health, Safety and Environment (HSE) Data 2020 305-7 Nitrogen oxides (NOX), sulfur oxides (SOX), 7, 8, 9 3 12 14 15 Novartis Health, Safety and and other significant air emissions Environment (HSE) Data 2020 306-1 Water discharge by quality and destination 7, 8, 9 3 6 12 14 Novartis Health, Safety and Environment (HSE) Data 2020 306-2 Waste by type and disposal method 7, 8 3 6 12 Novartis Health, Safety and Environment (HSE) Data 2020 308-1 New suppliers that were screened 8 p.25 using environmental criteria 308-2 Negative environmental impacts in the supply p.25 chain and actions taken Novartis GRI Content Index Novartis in Society | 81

DISCLOSURE DISCLOSURE UNGC UN NUMBER TITLE PRINCIPLE SDG COMMENTS REFERENCE

400 – SOCIAL

401-1 New employee hires and employee turnover 6 5 8 p.71 403-2 Types of injury and rates of injury, 3 8 Data not split by gender; p.73 occupational diseases, lost days and absenteeism, data on non-occupational and number of work-related fatalities absenteeism, and on injury rate and occupa- tional disease for contractors not available 403-3 Workers with high incidence or high risk of 3 8 A Safe Workplace diseases related to their occupation 403-4 Health and safety topics covered in formal 8 A Safe Workplace agreements with trade unions 404-1 Average hours of training per year, per employee 6 4 5 8 p.71 404-2 Programs for upgrading employee skills Annual Review 2020 and transition assistance programs p.20 405-1 Diversity of governance bodies and employees 6 5 8 p.71 409-1 Operations and suppliers at significant risk 4 8 p.25, p.72 for incidents of forced or compulsory labor 412-1 Operations that have been subject to human rights 1 16 p.26 reviews or impact assessments 414-1 New suppliers that were screened p.25, p.72 using social criteria 414-2 Negative social impacts in the supply chain Novartis Third Party Code and actions taken p.25 415-1 Political contributions Public Policy & Advocacy 416-2 Incidents of noncompliance concerning the health p.55 and safety indicators impacts of products and services 417-1 Requirements for product and service We operate in a p.56 information and labeling strictly regulated industry; this Annual Report 2020 information is p.35 obligatory for us to have a license to operate 418-1 Substantiated complaints concerning breaches p.69 of customer privacy and losses of customer data 419-1 Noncompliance with laws and regulations Annual Report 2020 in the social and economic area F-49

82 | Novartis in Society

Sustainability Accounting Standards Board (SASB) Index

Health Care Sector Biotechnology and Pharmaceuticals Industry The Novartis Sustainability Accounting Standards Board (SASB) Index aligns with the Biotechnology and Pharmaceutical Industry guidelines. Data and information disclosed are sourced from the Novartis 2020 Corporate Reporting suite (Annual Review; Annual Report/Form 20-F; Novartis in Society ESG Report), and Novartis public policies and positions.

SASB indicator Novartis references

SAFETY OF CLINICAL TRIAL PARTICIPANTS HC-BP-210a.1 Discussion, by world region, of management We have mechanisms in place to protect all trial participants when process for ensuring quality and patient safety consenting to the research, during the conduct of the trial, and after during clinical trials completion. We have additional processes in place to protect vulnerable patients. We ensure voluntary informed consent to the research, including the right to withdraw from the trial at any time and the right to withdraw consent for the collection and use of their personal data. Novartis Position on Responsible Clinical Trials Novartis Commitment to Patients and Caregivers Information for patients and caregivers Ethics in Clinical Trials Human Rights Guideline (p.6) – Procedure to obtain participants’ free, prior and informed consent HC-BP-210a.2 Discussion, by world region, of management Novartis received six FDA inspections for which one resulted in a Form process for ensuring quality and patient safety 483. In each case, corrective and preventative actions were taken. during clinical trials Novartis in Society ESG Report 2020 (p.57) HC-BP-210a.3 Total amount of monetary losses as a result All material legal proceedings are disclosed within of legal proceedings associated with clinical the Annual Report and accounts (p.F-49). trials in developing countries ACCESS TO MEDICINES HC-BP-240a.1 Description of actions and initiatives to Novartis in Society ESG Report 2020 (p.30-53) promote access to health care products for Novartis Access priority diseases and in priority countries as defined by the Access to Medicine Index HC-BP-240a.2 List of products on the WHO List of Novartis has tuberculosis and malaria products on the WHO List of Prequalified Medicinal Products as part of its Prequalified Medicinal Products. Prequalification of Medicines Programme (PQP) Novartis products Sandoz products AFFORDABILITY & PRICING HC-BP-240b.1 Number of settlements of Abbreviated New Not reported Drug Application (ANDA) litigation that involved payments and/or provisions to delay bringing an authorized generic product to market for a defined time period HC-BP-240b.2 Percentage change in: (1) average list price We report these changes annually within our Novartis in Society US Report. and (2) average net price across U.S. product portfolio compared to previous year HC-BP-240b.3 Percentage change in: (1) list price and (2) Not reported net price of product with largest increase compared to previous year DRUG SAFETY HC-BP-250a.1 List of products listed in the Food and Drug Available via FDA Adverse Event Reporting website Administration’s (FDA) MedWatch Safety Alerts for Human Medical Products database HC-BP-250a.2 Number of fatalities associated with products Available via FDA Adverse Event Reporting website as reported in the FDA Adverse Event Reporting System HC-BP-250a.3 Number of recalls issued, total units recalled In 2020, Novartis initiated 27 recalls (vs. 29 in 2019 and 42 in 2018). There were no global recalls. Novartis in Society ESG Report 2020 (p.56) Sustainability Accounting Standards Board (SASB) Index Novartis in Society | 83

SASB indicator Novartis references HC-BP-250a.4 Total amount of product accepted for Novartis in Society ESG Report 2020 (p.67) takeback, reuse, or disposal HC-BP-250a.5 Number of FDA enforcement actions taken in Novartis in Society ESG Report 2020 (p.57) response to violations of current Good Manufacturing Practices (cGMP), by type COUNTERFEIT DRUGS HC-BP-260a.1 Description of methods and technologies Novartis in Society ESG Report 2020 (p.58-59) used to maintain traceability of products throughout the supply chain and prevent counterfeiting HC-BP-260a.2 Discussion of process for alerting customers Novartis in Society ESG Report 2020 (p.58-59) and business partners of potential or known risks associated with counterfeit products HC-BP-260a.3 Number of actions that led to raids, seizure, We investigated 247 incidents of suspected falsified medicines, which led arrests, and/or filing of criminal charges to 60 successful enforcement actions and the seizure of 1.7 million medicines related to counterfeit products (unit dosage forms) by law enforcement and health authorities. Novartis in Society ESG Report 2020 (p.59) ETHICAL MARKETING HC-BP-270a.1 Total amount of monetary losses as a result All material legal proceedings are disclosed within of legal proceedings associated with false the Annual Report and accounts (p.F-49). marketing claims HC-BP-270a.2 Description of code of ethics governing Procedures for off-label requests outlined; further information on promotion of off-label use of products ethical marketing contained in Professional Practices Policy (p.5) on Promotional and Non-Promotional Materials EMPLOYEE RECRUITMENT, DEVELOPMENT & RETENTION HC-BP-330a.1 Discussion of talent recruitment and retention Novartis in Society ESG Report 2020 (p.42, p.61) efforts for scientists and research and development personnel HC-BP-330a.2 (1) Voluntary and (2) involuntary turnover rate for: Voluntary/overall turnover rate: 5.2%/10.1%; high performers voluntary (a) executives/senior managers, (b) midlevel managers, turnover rate: 4.2% (c) professionals, and (d) all others Novartis in Society ESG Report 2020 (p.71) SUPPLY CHAIN MANAGEMENT HC-BP-430a.1 Percentage of (1) entity’s facilities and (2) Tier (1) For the manufacture of medical devices, we hold the relevant I suppliers’ facilities participating in the Rx-360 certifications from ISO and other notified bodies. For all manufacturing, International Pharmaceutical Supply Chain Consortium supply and distribution of Novartis pharmaceutical products, we hold audit program or equivalent third-party audit programs the relevant manufacturing licenses and GMP/GxP certificates issued by for integrity of supply chain and ingredients the appropriate health authorities (FDA, EMEA, WHO, SwissMedic), that confirm after inspection that our duties, including our quality management systems, comply with their regulatory requirements.

All Novartis employees in Manufacturing and Quality Assurance are continuously trained to maintain the skills and knowledge needed to manufacture medicine safely, compliantly and effectively. These trainings include Aseptic Operator, Enhanced Third-party Oversight, Investigation Certification Program and Quality Management Systems. Novartis in Society ESG Report 2020 (p.55) Novartis Quality Management System (QMS) Product and patient safety training (2) Not reported BUSINESS ETHICS HC-BP-510a.1 Total amount of monetary losses as a result of legal All material legal proceedings are disclosed within proceedings associated with corruption and bribery the Annual Report and accounts (p.F-49). HC-BP-510a.2 Description of code of ethics governing Professional Practices Policy (p.5) interactions with health care professionals Payments to Healthcare Professionals ACTIVITY METRICS HC-BP-000.A Number of patients treated 769 million Novartis in Society ESG Report 2020 (p.9) HC-BP-000.B Number of drugs (1) in portfolio and (2) in (1) Novartis Global Product Portfolio (Novartis Innovative Medicines) research and development (Phases 1-3) Sandoz Advanced Accelerator Applications (2) 160+ Novartis Annual Review 2020 (p.29) 84 | Novartis in Society

Appendix: corporate responsibility material topic boundaries

CR MATERIAL TOPIC BOUNDARIES We have analyzed topics identified as material by the 2017 corporate responsibility materiality assessment and presented in this report in the context of our value chain. The resulting diagram displays the boundaries of our impacts (indicated in blue), and helps us better leverage opportunities and manage risks.

Novartis simplified value chain R&D, operations, Topic Supply chain distribution Patients

Holding ourselves to high ethical standards

Ethical and compliant behavior yes yes yes

Transparency yes yes yes

Being part of the solution on pricing and access

R&D for unmet needs yes yes yes

Affordability yes yes

Strengthening healthcare systems yes yes

Intellectual property yes yes yes

Addressing global health challenges

Neglected and tropical diseases yes yes

Drug resistance yes yes yes

Being a responsible citizen

Pharmacovigilance, safety profile and quality of drugs yes yes yes

Combating falsified medicines yes yes yes

Health education and prevention yes yes

Our people yes yes yes

Respect for human rights yes yes yes

Responsible supply chain yes yes yes

Environmental sustainability yes yes yes

To align the 2020 Novartis in Society (NiS) Report with the priority topics identified in the 2017 corporate responsibility materiality assessment, we mapped each of these topics within one or more of the relevant sections of the 2020 NiS Report. When a priority topic was adequately covered in the 2020 Novartis Annual Report and the 2020 Novartis Annual Review, we provided cross-references in the 2020 NiS Report.

The mapping exercise is detailed on the following page and shows the priority topic and relevant page number(s) within the NiS Report, the “building trust with society” focus area the topic sits within, and the mapping rationale. Appendix: corporate responsibility material topic boundaries Novartis in Society | 85

Priority topic (pages in 2020 NiS Report “Building trust with society” # or on novartis.com) focus area(s) Rationale

1 Ethical and compliant behavior Holding ourselves to high This is the cornerstone of the pillar of our strategy to build trust with society (pages 18-28) ethical standards (holding ourselves to high ethical standards).

2 Transparency Holding ourselves to high Transparency is part of our commitment to do business responsibly and is strongly linked (page 28) ethical standards to compliance.

3 Pricing Being part of the solution The Novartis access principles (see page 31) are the cornerstone of this pillar, and (pages 30-40) on pricing and access affordability strategies tailored to different parts of the income pyramid is one of these principles.

4 Health system strengthening (HSS) Being part of the solution The Novartis access principles are the cornerstone of this pillar, with HSS being one of (pages 40-45) on pricing and access these principles.

5 Intellectual property (IP) Being part of the solution Important developments in our approach to IP will help facilitate access to Novartis (Novartis ESG index, page 14 – on pricing and access medicines in low- and middle-income countries. intellectual property access)

6 Business model innovation Being part of the solution Novartis has been pioneering social business models for more than 10 years. Our (pages 34-36) on pricing and access experience in implementing social business activities and community health education has provided important lessons for expanding access to affordable medicines and delivering quality care in lower-income countries.

7 Innovative technologies Being part of the solution We are collaborating across a number of digital solutions to help deliver healthcare to (pages 32; 43; 44-45; 48; 51; 55-56; on pricing and access underserved populations. We are using artificial intelligence to help eliminate leprosy, and are 58-59) employing digital technologies to help optimize diagnosis and disease management in Addressing global health Ghana. We also report on the use of technology to help in our fight against falsified challenges medicines, and engage with patient communities where they live, reducing the need to travel.

8 Drug resistance Addressing global health The Sandoz Statement of Intent explains our strategy on addressing drug resistance. (pages 52-53) challenges

9 Financial health Being part of the solution This is embedded across a number of pillars: and performance on pricing and access On page 16 of this report, we explain how we value our impact through our approach called (pages 16; 30-45; 46-53; 54-67) Addressing global health Novartis social, environmental and economic (SEE) impact valuation. challenges The 2020 Annual Report and 2020 Annual Review, referenced on page 92 of this report, Being a responsible citizen also provide information on financial health and performance. We reference companywide economic sustainability on pages 6-7 and 8-9. Further, with transformative innovation as a cornerstone of our strategy and foundation for our future, we consider the “build trust with society” pillar expression of this to be embodied in our R&D for unmet needs and in R&D for neglected and tropical diseases. Additionally, our people are the key to stimulating innovation and securing long-term value creation.

10 Pharmacovigilance, Being a responsible citizen Patient health and safety was identified as a material cluster in the materiality assessment safety and quality as set out in the 2017 CRMA, and we highlight our efforts across the three areas of (pages 55-57; pharmacovigilance, safety, and health education and prevention. performance indicators To this end, we report on pharmacovigilance and chose to highlight our progress in on page 57) combating falsified medicines, a key element in helping ensure patient safety in low- and middle-income countries. Similarly, we report on our work with patients and caregivers in health education and prevention.

11 Recruitment and Being a responsible citizen Our culture is central to our sustainability, and we have outlined the steps taken in 2020 to retention of employees continue to change the Novartis culture, to provide a diverse and inclusive environment, (pages 60-64; people performance and to promote the health and well-being of associates. indicators on page 71)

12 Pharmaceuticals in the environment Being a responsible citizen In the section “Enhancing environmental sustainability,” we address the three priority topics (page 53) “pharmaceuticals in the environment,” “pollution waste and effluents” and “sustainable use of resources.” Our work in the Antimicrobial Resistance (AMR) Industry Alliance is included 13 Pollution waste and effluents in the “Taking a holistic approach to antimicrobial resistance” section (page 52). (pages 64-65) We further include our commitments and targets, approach and performance (our environmental performance indicators) in managing waste, and our efforts in the 14 Sustainable use of resources sustainable use of resources. (pages 64-67)

Respect for human rights, while not identified as a priority topic through statistical analysis, was ranked 13/30 in terms of impact in the materiality assessment as set out in the 2017 CRMA, and has been defined as a key focus area of our strategy to build trust with society. To this end, we have included our work in further integrating human rights in our business within this report under the pillar “holding ourselves to high ethical standards” (pages 26-27). 86 | Novartis in Society

Appendix: corporate responsibility materiality assessment issue cluster and topic definitions

1. Access to healthcare 3. Environmental protection 1.1. Availability of medicines 3.1. Sustainable use of resources Efforts to manage barriers that may prevent, restrict or delay Measures to ensure efficient consumption of energy, water medicine availability for patients in need. Examples may and other resources. This includes efforts to responsibly include the registration process requirements, inefficient dis- source, recycle and/or reuse natural resources; manage the tribution and supply chain management, etc. company’s impact on plant and animal life; and preserve bio- diversity. 1.2. Pricing Responsible pricing for innovative and generic medicines 3.2. Pollution, waste and effluents that takes into consideration affordable access, positive Reduction and management of emissions, pollution, waste cost-benefit ratio, and overall healthcare costs. Examples (including use of hazardous chemicals and ozone-depleting may include pricing models such as tiered pricing, managed substances) and effluents. This includes activities to mitigate entry agreements, outcomes-based pricing and non-exclu- climate change and its impacts on human health. sive voluntary licensing. 3.3. Pharmaceuticals in the environment 1.3. Healthcare system strengthening Efforts to minimize the environmental impact of our activities Efforts to improve healthcare infrastructure and deliver health- and products over their lifecycle and to ensure proper and legal care-related services “beyond the pill.” Examples may include disposal of waste containing active pharmaceutical ingredients. capacity building, training and education, partnerships involv- ing public and private actors to improve healthcare access in underserved areas, and contribution to reducing healthcare 4. Ethical business practices costs for payers, insurance companies and consumers. 4.1. Ethical and compliant behavior Processes and systems to ensure Novartis operates in line 1.4. Intellectual property with high ethical standards, especially in regard to our inter- Responsible patent exclusivity management that balances actions with healthcare professionals. Examples may include intellectual property (IP) protection with the provision of afford- adherence to laws and regulations, anti-bribery, anti-corrup- able drugs. Examples may include participation in IP-sharing tion and anti-trust; responsible advocacy, lobbying and polit- arrangements and avoidance of compulsory licensing. ical contributions; and responsible incentive structures and compensation. 1.5. Patient assistance programs Programs that support financially needy patients to either 4.2. Animal testing purchase their necessary medication at an affordable price Measures to keep animal testing at a minimum and ensure or receive it for free. tests are conducted according to the highest animal welfare standards.

2. Economic sustainability 4.3. Respect for human rights 2.1. Recruitment and retention of employees Positions, policies and management systems to respect Human resources management that aligns recruiting efforts with human rights across the business and direct supply chain. strategy and that provides talent management programs to Examples may include implementation of responsible clinical engage and retain associates with relevant skill sets and ensure trials in developed and developing countries, protection of per- continuity through reduced associate turnover. sonal data, and the right to health/healthcare.

2.2. Fair contribution to society 4.4. Responsible supply chain management Ensuring good relations and appropriate economic contribu- Processes and systems to ensure a responsible supply chain tion in the areas in which the company operates. Examples and that our direct suppliers uphold appropriate standards may include payment of appropriate amount of tax and efforts on financial, social and environmental issues. Examples may to support the economy in countries of operation (e.g., local include outsourcing, third-party manufacturing, the use of employment, local suppliers, active engagement in local ini- clinical research organizations, supplier audits and transpar- tiatives). ent reporting practices.

2.3. Financial health and performance 4.5. Responsible use of new technologies Ensuring the company’s continued viability, financial health and Ensuring appropriate handling of and response to controver- performance. Examples may include mergers and acquisitions sial ethical questions related to technological advancements. (M&A), divesture activities, risk/crisis management and finan- Examples may include cloning, human genetic engineering cial liquidity. (e.g., genome editing through CRISPR), nanotechnology, wear- ables and life extension. Appendix: corporate responsibility materiality assessment issue cluster and topic definitions Novartis in Society | 87

5. Good governance tic tests), and improving health solutions based on data col- 5.1. Corporate governance lected by wearables. Ensuring the company management structure balances the interests of its relevant stakeholders, and the company is trans- 6.5. Drug resistance parent and discloses critical information to stakeholders. Contributing to the global response to drug resistance that Examples may include rules and regulations to ensure Board is caused, for example, by inappropriate use and environ- independence, shareholder rights and engagement, and lev- mental pollution through antimicrobials. els of executive compensation and golden parachutes.

5.2. Transparency 7. Our people Ensuring appropriate scope and quality of information dis- 7.1. Diversity and inclusion closure and reporting, and engaging in dialogue with our Ensuring equal opportunities and fostering a diverse and stakeholders. Examples may include disclosing information inclusive workplace where each associate can contribute that is critical to stakeholders such as the risk/safety pro- and be recognized. This applies in terms of age, ethnicity, files of products, misconduct cases, support of patient gender, nationality, language, sexual orientation, physical groups and political parties, and trial data. ability, and religious and personal beliefs.

5.3. Data privacy and security 7.2. Health and safety Systems to ensure that the personally identifiable information Ensuring the health and safety of associates. This includes of patients, employees, consumers and others is responsibly efforts to reduce fatalities, injuries and sick leave, and to pro- and securely collected, transferred and stored. mote well-being through health programs.

7.3. Fair working conditions 6. Innovation Ensuring fair employment practices, including upholding 6.1. R&D for unmet medical needs labor rights to freedom of association and collective bargain- Maintaining high investments in creating innovative medicines ing, labor relations and union practices, and fair compensa- that address unmet medical needs, with a focus on maximiz- tion and benefits. This may also include work-life balance ing patients’ outcomes before considering market potential. considerations. This includes the research of new compounds but also the modification of existing medicines (i.e., to improve access or efficacy for poor and specifically vulnerable patient groups). 8. Patient health and safety 8.1. Health education and prevention 6.2. R&D for neglected diseases Efforts to promote health literacy, disease prevention aware- R&D for diseases that disproportionately affect people in low- ness, and the effective use of medicines. Examples may income settings, for which little or no treatment options are include treatment adherence, contributing to solutions to the available and where market failure limits research activities. rising burden of NCDs and chronic illnesses, and substance This may include infectious and tropical diseases. abuse prevention.

6.3. Business model innovation 8.2. Counterfeit medicines Efforts to respond to emerging health needs and trends by Using the company’s influence to fight counterfeit drugs changing the existing business model and/or developing new around the world. business models. Examples may include responding to the needs of low-income patients and to the growing healthcare 8.3. Pharmacovigilance, safety profile and quality of burden of noncommunicable diseases (NCDs). drugs Ensuring healthcare products (patented pharmaceuticals and 6.4. Innovative technologies generics) are manufactured at the highest quality level and Making the most of advances in IT and digital connectivity that the efficacy and safety features of a medicine outweigh to advance R&D for products and outcomes, and to revolu- its risks (e.g., side effects), as well as collecting and recording tionize the delivery of healthcare services. Examples may adverse event reports. This includes transparent and timely include using big data analysis or developing personalized communication in the case of product safety or quality issues healthcare solutions (e.g., products with companion diagnos- (e.g., prompt product recalls).

Materiality assessment (MA) 2017 Corporate Responsibility Materiality Assessment Results Report: Identifying What Matters Most

2020 MA webinars Measuring and Evaluating Social Outcomes of Access Initiatives (October; password: novartis2020) Wealth and Health – Reframing Healthcare Costs as Economic Investments (July) Embracing Double Materiality in Responding to the COVID-19 Pandemic (June) Rethinking Healthcare System Strengthening (May) Reimagine Access – Committing to the Access Principles (April)

For more webinars, visit our website. 88 | Novartis in Society

Appendix: external initiatives and membership of associations

GRI 102-12: External initiatives • Signatory to the UN Global Compact’s CEO Water • Joined Access Accelerated, a global initiative to advance Mandate access to treatment and care for chronic diseases in • Joined IMI-PREMIER (Prioritization and Risk Evaluation lower-income countries of Medicines in the Environment) • Joined Global Chagas Disease Coalition • Voluntarily agreed to reduce greenhouse gas (GHG) • Signatory to the London Declaration on Neglected emissions in line with the Paris Agreement and Tropical Diseases subsequent international target commitments, such as • Member of the Swiss Alliance against Neglected those of the European Union (GHG emissions are Tropical Diseases reported according to the GHG Protocol) • Signatory to the Davos Declaration on Combating • Signatory to the UNGC/UNEP/World Business Council Antimicrobial Resistance (AMR) for Sustainable Development (WBCSD) initiative Caring • Committed to the Industry Roadmap for Progress on for Climate: The Business Leadership Platform, also Combating AMR fulfilling the Business Leadership Criteria on Carbon • Joined the AMR Industry Alliance Pricing • Joined the AMR Action Fund, an industry initiative • Classify and dispose of waste according to the Basel • Joined the Responsible Antibiotics Manufacturing Convention on the Control of Transboundary Movements Platform of Hazardous Wastes and Their Disposal • Joined Business Refugee Action Network • Member of the Carbon Disclosure Project, Water • Founding member of the Value Balancing Alliance, which Disclosure Project and Supply Chain Disclosure Project aims to develop a standard model for measuring and • Signatory to WBCSD’s Manifesto for Energy Efficiency in disclosing the environmental, human, social and financial Buildings value a company provides • Signatory to the Guiding Principles on Access to • Member of the Impact Valuation Roundtable Healthcare (GPAH), which frame the pharmaceutical • Joined the United Nations Equal Pay International industry’s approach to expanding access to quality Coalition (EPIC) healthcare globally • Signatory to the Women’s Empowerment Principles • Strategic Partner of the World Economic Forum launched by the UNGC and the UN Development Fund for Women (UNIFEM) • As a signatory to the UNGC, Novartis supports the GRI 102-13: Membership of associations Universal Declaration of Human Rights, the ILO’s Novartis Group companies are members of various cham- Declaration on Fundamental Principles and Rights at bers of commerce, sustainability industry associations and Work, the Rio Declaration on Environment and pharmaceutical industry associations. Development, the UN Convention Against Corruption, the Organization for Economic Cooperation and We work closely with trade associations, which create oppor- Development (OECD) Guidelines for Multinational tunities to raise industry standards and exchange best prac- Enterprises, the OECD Convention on Combating tices. Bribery of Foreign Public Officials, and the UN Guiding Principles on Business and Human Rights Novartis is a member of: • Signatory to the World Business Council for Sustainable • Interpharma, Intergenerika scienceindustries, Development’s CEO Guide to Human Rights economiesuisse, and SwissHoldings in Switzerland • Support for the United Nations’ workplace standards • Pharmaceutical Research and Manufacturers of America protecting the rights of lesbian, gay, bisexual, (PhRMA), the Biotechnology Innovation Organization transgender and intersex people (BIO), Association for Accessible Medicines (AAM), • Signatory to the International Chamber of Commerce’s AdvaMed in the US Business Charter for Sustainable Development • Global and regional associations, including the • Signatory to the ILO Tripartite Declaration of Principles International Federation of Pharmaceutical Concerning Multinational Enterprises and Social Policy Manufacturers & Associations (IFPMA), Alliance for • Signatory to the CEO Letter on the UN Convention Regenerative Medicines (ARM) Against Corruption • European Federation of Pharmaceutical Industries and • Signatory to the Partnering Against Corruption Initiative Associations (EFPIA), EuropaBio, Medicines for Europe, (PACI), a World Economic Forum initiative EUCOPE, MedTech in the EU • Support for the Pharmaceutical Industry Principles for • National associations in most markets where Novartis Responsible Supply Chain Management set by the has a legal subsidiary Pharmaceutical Supply Chain Initiative (PSCI) • Support for the Task Force on Climate-related Financial Disclosures (TCFD) • Joined Sustainability 30 (S30), a group of sustainability executives from 30 of the world’s leading companies working to accelerate business action on sustainability Appendix: measuring and valuing our impact Novartis in Society | 89

Appendix: measuring and valuing our impact

Direct GDP Contribution Method Social Impact of Childhood Pneumonia in Nigeria White Paper on Social Risk in the Supply Chain The Social Impact of the Tubeho Neza Program in Rwanda Social Impact of Innovative Medicines 90 | Novartis in Society

Independent Assurance Report on the 2020 Novartis in Society ESG reporting

To the Board of Directors of Novartis AG, Basel

We have been engaged to perform assurance procedures to provide limited assurance on the following aspects of the 2020 global health & corporate responsibility (GH&CR) reporting of Novartis AG and its consolidated subsidiaries (Novartis Group) included in the Novartis in Society ESG Report 2020.

SCOPE AND SUBJECT MATTER Our limited assurance engagement focused on the following 2020 data and information disclosed in the consolidated Novartis in Society ESG Report 2020 of the Novartis Group for the year ended December 31, 2020: • The “ethical business practices performance indicators” on page 69, the “access to healthcare performance indicators” on page 70, the “people performance indicators” on page 71, the “supply chain performance indicators” on page 72, and the “health, safety and environment performance indicators” on page 73 (GH&CR indicators) • The materiality determination and stakeholder engagement process of Novartis at the Group level according to the ­requirements of the GRI Sustainability Reporting Standards (GRI Standards), published by the Global Reporting Initiative (GRI) and disclosed as “the 2017 Corporate Responsibility Materiality Assessment Results Report” on page 68 and as applied to the Novartis in Society ESG Report 2020 as indicated on pages 84 to 87 • Reporting processes and related controls in relation to data aggregation of GH&CR indicators

The following indicators are not subject to this Assurance Report. Consequently, we do not express any ­conclusion on this data. • The “pharmacovigilance, safety profile and quality of drugs performance indicators” section (page 72) • The indicators as noted within the “ethical business practices performance indicators” section (page 69), as follows: - The “animal testing indicators” • The indicators as noted within the “people performance indicators” section (page 71), as follows: - The “gender split of leavers” - The “median tenure in years by gender” - The “internal promotion by gender” - The “revenue producing roles by gender” - The “Novartis IT and engineering workforce by gender” - The “number of employees by employment contract (permanent and temporary), by gender” - The “number of employees by employment contract (permanent and temporary), by region” - The “number of employees by employment type (full-time and part-time), by gender”

CRITERIA The management reporting processes with respect to the GH&CR reporting and GH&CR indicators were assessed against GRI Standards guidelines and Novartis Group internal policies and procedures, as set forth in the following: • Guideline on Corporate Responsibility Management at Novartis and the Code of Ethics • Procedures by which the data for the GH&CR indicators reporting is gathered, collected and aggregated internally

The management reporting process with respect to the sustainability-linked bond “strategic innovative therapies patient reach” and “flagship programs patient reach” GH&CR indicators were assessed against the terms and conditions as out- lined within the Final Listing Prospectus dated 21 September 2020.

INHERENT LIMITATIONS The accuracy and completeness of GH&CR indicators are subject to inherent limitations given their nature and methods for determining, calculating and estimating such data. Our Assurance Report should therefore be read in connection with Novartis Group guidelines, definitions and procedures on GH&CR reporting.

NOVARTIS RESPONSIBILITIES The Board of Directors of Novartis AG is responsible for both the subject matter and the criteria as well as for the selec- tion, preparation and presentation of the information in accordance with the criteria. This ­responsibility includes the design, ­implementation and maintenance of the internal control system related to this reporting process­ that is free from material ­misstatement, whether due to fraud or error.

OUR RESPONSIBILITIES Our responsibility is to form an independent opinion, based on our limited assurance procedures, on whether anything has come to our attention to indicate that the GH&CR indicators are not stated, in all material respects, in accordance with the reporting criteria. Independent Assurance Report on the 2020 Novartis in Society ESG reporting Novartis in Society | 91

We planned and performed our procedures in accordance with the International Standard on Assurance Engagements (ISAE) 3000 (revised) “Assurance engagements other than audits or reviews of historical financial information.” This stand- ard requires that we plan and perform the assurance engagement to obtain limited assurance on the identified GH&CR indicators prepared,­ in all material aspects, in accordance with the Novartis Group internal policies and procedures.

A limited assurance engagement under ISAE 3000 (revised) is substantially less in scope than a reasonable assurance ­engagement in relation to both the risk assessment procedures, including an understanding of internal control, and the ­procedures performed in response to the assessed risks. Consequently, the nature, timing and extent of procedures for ­gathering sufficient­ appropriate evidence are deliberately limited relative to a reasonable assurance engagement and, ­therefore, less assurance is obtained with a limited ­assurance engagement than for a reasonable assurance engagement.

OUR INDEPENDENCE AND QUALITY CONTROL We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Account- ants issued by the International Ethics Standards Board for Accountants, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behavior.

Our firm applies International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control, including documented policies and procedures regarding compliance with ethical requirements, professional ­standards, and applicable legal and regulatory requirements.

SUMMARY OF WORK PERFORMED Our assurance procedures included, among others, the following: • Evaluation of the application of Group guidelines: reviewing application of the Novartis Group internal GH&CR reporting guidelines • Management inquiry: interviewing personnel responsible for internal reporting and data collection • Assessment of key figures: performing tests on a sample basis of evidence supporting selected GH&CR data concern- ing completeness, accuracy, adequacy and consistency • Inspection of documentation and analysis of relevant policies and principles: inspecting relevant documentation on a ­sample basis, including Group GH&CR policies, management reporting structures and documentation • Assessment of the processes and data consolidation: reviewing the management reporting processes for GH&CR ­reporting and assessing the consolidation process of data at Group level and the related controls • Evaluation of the materiality determination and stakeholder engagement process: inspecting the principles of the Novartis materiality assessment process providing the basis for the adherence to the GRI reporting requirements, addressing the soundness of the methodology, the identification process, the determination of the impacted stakeholders, as well as the prioritization based on the assessed impact of Novartis

We have not carried out any work on data other than outlined in the scope and subject matter section as defined above. We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our assurance conclu- sions.

LIMITED ASSURANCE CONCLUSION Based on our work described in this report, nothing has come to our attention causing us to believe for the period ended December 31, 2020, in all material respects that: • The GH&CR indicators outlined in the scope and subject matter section and disclosed in the 2020 GH&CR reporting of the Novartis Group are not stated in accordance with Novartis Group internal policies and procedures; • The sustainability-linked bond “strategic innovative therapies patient reach” and “flagship programs patient reach” GH&CR indicators are not stated in accordance with the terms and conditions as outlined within the Final Listing Prospectus dated 21 September 2020; • The materiality determination and stakeholder engagement process of Novartis does not adhere to the principles and ­guiding factors defined by the GRI Standards; and • The reporting processes and related controls in relation to data aggregation of GH&CR indicators are not functioning as designed.

PricewaterhouseCoopers AG

KRIS MULLER JENNIFER KODAT

Basel, January 25, 2021 92 | Novartis in Society

Novartis annual reporting suite

Annual Report and US Securities & Novartis in Society ESG Report Exchange Commission Form 20-F

US Securities & These reports, filed with the SIX Swiss Novartis in Society The Novartis in Society ESG Report Exchange Commission ESG Report 2020 Form 20-F 2020 Exchange in Switzerland and the US details progress on environmental, Securities and Exchange Commission in the social and governance topics and US, provide a comprehensive overview of demonstrates the company’s Novartis, including our company structure, ­commitment in global health and corporate governance and compensation corporate­ responsibility. practices. They also disclose our operating and financial results, accompanied by audited annual financial statements. www.novartis.com/reportingsuite www.novartis.com/nisreport2020

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Annual Review The Annual Review explains who we We present digital and interactive 2020 are and what we do, and highlights our versions of the Annual Review and progress against the company’s five Novartis in Society ESG Report. strategic priorities in 2020. www.reporting.novartis.com

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Disclaimer

These materials contain forward-looking statements within the meaning of the structural and cultural transformations may not be realized or may take longer to United States Private Securities Litigation Reform Act of 1995, that can generally be realize than expected; our performance on environmental, social and governance identified by words such as “potential,” “expected,” “will,” “planned,” “pipeline,” measures; uncertainties in the development or adoption of potentially transforma- “outlook,” or similar expressions, or by express or implied discussions regarding tional technologies and business models; uncertainties regarding potential potential new products, potential new indications for existing products, potential significant breaches of information security or disruptions of our information product launches, or regarding potential future revenues from any such products; technology systems; our reliance on outsourcing key business functions to third or regarding the impact of the COVID-19 pandemic on certain therapeutic areas parties; our ability to attract, integrate and retain key personnel and qualified including dermatology, ophthalmology and the Sandoz retail business, and on drug individuals; uncertainties regarding actual or potential legal proceedings, including, development operations; or regarding potential future, pending or announced among others, litigation and other legal disputes with respect to our recent transactions; regarding potential future sales or earnings of the Group or any of its transactions, product liability litigation, litigation and investigations regarding sales divisions; or by discussions of strategy, plans, expectations or intentions. Such and marketing practices, intellectual property disputes and government forward-looking statements are based on the current beliefs and expectations of investigations generally; regulatory actions or delays or government regulation management regarding future events, and are subject to significant known and generally, including potential regulatory actions or delays with respect to the unknown risks and uncertainties. Should one or more of these risks or uncertainties development of the products described in this Novartis in Society ESG Report; our materialize, or should underlying assumptions prove incorrect, actual results may ability to comply with data privacy laws and regulations, and uncertainties regarding vary materially from those set forth in the forward-looking statements. You should potential significant breaches of data privacy; safety, quality, data integrity or not place undue reliance on these statements. In particular, our expectations could manufacturing issues; general political, economic and business conditions, be affected by, among other things: uncertainties regarding the success of key including the effects of and efforts to mitigate pandemic diseases such as products and commercial priorities; global trends toward healthcare cost-contain- COVID-19; the impact of pandemic diseases such as COVID-19 on enrollment in, ment, including ongoing government, payer and general public pricing and initiation and completion of our clinical trials in the future, and research and reimbursement pressures and requirements for increased pricing transparency; development timelines; uncertainties involved in predicting shareholder returns; uncertainties in the research and development of new healthcare products, uncertainties regarding the effects of recent and anticipated future changes in tax including clinical trial results and additional analysis of existing clinical data; our laws and their application to us; uncertainties regarding future global exchange ability to obtain or maintain proprietary intellectual property protection, including rates; uncertainties regarding future demand for our products; and other risks and the ultimate extent of the impact on Novartis of the loss of patent protection and factors referred to in Novartis AG’s current Form 20-F on file with the US Securities exclusivity on key products that commenced in prior years and is expected to and Exchange Commission. Novartis is providing the information in these materials continue this year; the potential that the strategic benefits, operational efficiencies as of this date and does not undertake any obligation to update any forward-looking or opportunities expected from our recent transactions or our organizational, statements as a result of new information, future events or otherwise.

All product and program names printed in italics in this Novartis in Society Report are trademarks owned by or licensed to the Novartis Group. Photo Dr. Juliet Akoth (seated) calls a patient to a consultation room The use of a ™ or the registered trademark symbol ® in combination with a brand at Kitui Hospital, Kenya. Dr. Akoth enrolled in Echo for Life, a Novartis- name in a normal script indicates a third-party brand. sponsored training program in partnership with the University of The business policy of Novartis takes into account the OECD’s Guidelines Nairobi. Kitui Hospital has increased diagnosis of cardiovascular for Multinational Enterprises, with their recommendations on the disclosure diseases and reduced the waiting time for cardiograms from over a of information. month to less than a week.

Publisher: Novartis International AG, Basel, Switzerland Photo back cover Dr. Juliet Akoth poses with a Butterfly IQTM Design: phorbis communications, Basel, Switzerland Production: Management Digital Data AG, Lenzburg, Switzerland ultrasound portable device during a home visit in Kitui, Kenya. Dr. Akoth Photography: Getty Images for Novartis enrolled in Echo for Life, a program sponsored by Novartis in partner- Alexander Kumar ship with the University of Nairobi to train healthcare professionals in

© Novartis AG, 2021 the diagnosis and treatment of cardiovascular disease.