NOVARTIS AG CHF0.50(REGD) Novartis Delivered Strong Sales Growth, Margin Expansion And Breakthrough Innovation Launching Five...

 
TIDMNOVN 
 
 
   -- Full year net sales for continuing operations1 up 9% (cc2, +6% USD): 
 
          -- Pharmaceuticals BU growing 12% (cc) driven by Cosentyx USD 3.6 
             billion (+28% cc), Entresto USD 1.7 billion (+71% cc) and 
             Zolgensma USD 361 million 
 
          -- Oncology BU growing 10% (cc) driven by Promacta/Revolade USD 1.4 
             billion (+23% cc), Kisqali USD 0.5 billion (+111% cc) and 
             Lutathera USD 0.4 billion (+160% cc) 
 
          -- Sandoz sales grew 2% (cc, -1% USD) driven by Biopharmaceuticals 
 
   -- Core2 operating income grew 17% (cc, +12% USD) and Innovative Medicines 
      core margin improved to 33.5% of sales, driven by sales momentum and 
      productivity, while funding growth investments 
 
   -- Free cash flow2 grew 15% to USD 12.9 billion mainly driven by higher 
      operating income 
 
   -- Net income from continuing operations declined 44% due to the one-time 
      net gain from the sale of the OTC JV in prior year, excluding this item 
      net income was broadly in line with prior year 
 
   -- Total Group net income was USD 11.7 billion, including the one-time 
      effect from the Alcon spin-off 
 
   -- Continued focusing Novartis as a leading medicines company: 
 
          -- Alcon successfully spun-off, creating significant shareholder 
             value. Following the spin-off, a one-time non-cash IFRS gain of 
             USD 4.7 billion was recorded in discontinued operations 
 
          -- The Medicines Company acquired, adding inclisiran a potentially 
             transformative cholesterol-lowering therapy 
 
          -- Xiidra acquired, strengthening ophthalmic pharmaceuticals 
             portfolio 
 
   -- Advanced transformation of Manufacturing and Business Services to 
      optimize footprint and efficiencies 
 
   -- 2019 breakthrough innovation milestones: 
 
          -- Five NME approvals of potential blockbusters: Zolgensma, Piqray, 
             Mayzent, Beovu and Adakveo 
 
          -- Major submissions including: ofatumumab, inclisiran, capmatinib 
             and Cosentyx in nr-axSPA 
 
          -- Over 30 readouts supporting submission or enabling transition to 
             Phase III 
 
   -- Significant progress across ESG priorities including steps towards Carbon 
      Neutrality by 2025 in our own operations; set ambitious 2020 ESG targets 
      linked to compensation 
 
   -- Dividend of CHF 2.95 per share, an increase of 4%, proposed for 2019 
 
   -- 2020 guidance - Focused medicines company3 - Net sales expected to grow 
      mid to high-single digit (cc); core operating income expected to grow 
      high-single to low double digit (cc) 
 
   Basel, January 29, 2020 -- Commenting on the results, Vas Narasimhan, 
CEO of Novartis, said: 
 
   "Novartis delivered an exceptional 2019. Strong sales growth drove 
double digit increases in core operating income and free cash flow. 
Significant margin expansion puts us on track to reach mid to high 30s 
core margin for Innovative Medicines in the mid-term. We launched an 
unprecedented 5 new molecular entities in 2019 and advanced a breadth of 
early programs in our pipeline that address significant unmet needs. 
Looking ahead, we expect to sustain our long-term growth and margin 
expansion driven by our in market growth drivers and the 15 ongoing or 
upcoming major launches, while advancing our rich pipeline." 
 
 
 
 
Key figures(2)                           Continuing operations(1) 
                                    ---------------------------------- 
                  Q4 2019  Q4 2018   % change   FY 2019  FY 2018  % change 
                   USD m    USD m    USD   cc    USD m    USD m   USD    cc 
                  -------  -------  -----  ---  -------  -------  ----  ---- 
Net sales          12 403   11 481      8    9   47 445   44 751     6     9 
Operating income    1 823    1 362     34   37    9 086    8 403     8    14 
Net income          1 129    1 220     -7   -6    7 147   12 800   -44   -41 
EPS (USD)            0.50     0.53     -6   -4     3.12     5.52   -43   -40 
Free cash flow      3 488    2 913     20        12 937   11 256    15 
Core Operating 
 income             3 462    3 112     11   13   14 112   12 557    12    17 
Core Net income     2 985    2 681     11   13   12 104   10 920    11    15 
Core EPS (USD)       1.32     1.16     14   15     5.28     4.71    12    17 
                  -------  -------  -----  ---  -------  -------  ----  ---- 
 
 
   Strategy Update 
 
   During 2019, we continued focusing Novartis as a leading medicines 
company powered by advanced therapy platforms and data science. We are 
now uniquely positioned with scale and diversification across 
therapeutic areas and we continue to execute our five strategic 
priorities: embrace operational excellence, deliver transformative 
innovation, go big on data and digital, build trust with society, and 
build a new culture by unleashing the power of our people. 
 
   We successfully spun-off Alcon as a separate public company, creating 
significant value for our shareholders. We acquired Xiidra, expanding 
our ophthalmic pharmaceuticals franchise, and in January 2020 we 
acquired The Medicines Company, adding inclisiran, a potentially 
transformational cholesterol-lowering therapy to address cardiovascular 
disease. Sandoz is in the process of becoming a more autonomous and 
leaner division within Novartis, and returned to sales growth (cc) and 
margin expansion in 2019 despite continued pricing pressure in the US. 
 
   Operationally, strong sales growth drove double digit growth in core 
operating income and free cash flow. Innovative Medicines core margin 
increased by 1.8 percentage points (cc) to 33.5% of sales, and we expect 
this margin to improve to the mid to high 30's in the mid-term. Sales in 
China grew double digit and we expect to double our China business by 
2024. 
 
   2019 was a breakthrough innovation year for Novartis, with five NME 
approvals with blockbuster potential including the first drug treatment 
for breast cancer with a PIKC3A mutation, the first oral drug to treat 
aSPMS, the first gene therapy to treat SMA and next generation 
treatments for sickle cell disease and wet AMD. Additionally we 
submitted regulatory filings for several major drugs, including 
inclisiran, and we had over 30 readouts supporting submissions or 
enabling transition to Phase 3. Our pipeline remains rich including many 
2020 catalysts and we expect to maintain innovation momentum. 
 
   We are continuing our cultural journey and are seeing progress towards 
becoming more inspired, curious and unbossed. We advanced an 
enterprise-wide digital transformation spanning the entire value chain, 
from development to commercial operations. We continue our journey to 
rebuild trust with society based on four pillars; ethical standards, 
pricing and access, global health and corporate citizenship. We have 
introduced ESG targets for 2020 across these pillars which are 
transparent, systemically reviewed and linked to compensation. 
 
   Financials 
 
   In order to comply with International Financial Reporting Standards 
(IFRS), Novartis has separated the Group's reported financial data for 
the current and prior years into "continuing" and "discontinued" 
operations. The results of the Alcon business are reported as 
discontinued operations. See page 45 and Notes 2, 3 and 11 in the 
Condensed Financial Report for a full explanation. 
 
 
 
   The commentary below focuses on continuing operations including the 
businesses of Innovative Medicines and Sandoz (including the US generic 
oral solids and dermatology portfolio), as well as the continuing 
Corporate functions. We also provide information on discontinued 
operations. 
 
   Continuing operations fourth quarter 
 
   Net sales were USD 12.4 billion (+8%, +9% cc) in the fourth quarter 
driven by volume growth of 13 percentage points, mainly from Entresto, 
Zolgensma, Cosentyx and Kisqali. Strong volume growth was partly offset 
by the negative impacts of pricing (3 percentage points) and generic 
competition (1 percentage point). 
 
   Operating income was USD 1.8 billion (+34%, +37% cc) mainly driven by 
higher sales and divestments, partly offset by growth investments, 
higher legal provisions and higher amortization. 
 
   Net income was USD 1.1 billion (-7%, -6% cc) due to higher taxes, 
including a one-time, non-cash deferred tax expense, partly offset by 
higher operating income. EPS was USD 0.50 (-6%, -4% cc), benefiting from 
lower weighted average number of shares outstanding. 
 
   Core operating income was USD 3.5 billion (+11%, +13% cc) mainly driven 
by higher sales, partly offset by growth investments. Core operating 
income margin was 27.9% of net sales, increasing by 0.8 percentage 
points (+0.8 percentage points cc). 
 
   Core net income was USD 3.0 billion (+11%, +13% cc) driven by growth in 
core operating income. Core EPS was USD 1.32 (+14%, +15% cc) growing 
faster than core net income driven by lower weighted average number of 
shares outstanding. 
 
   Free cash flow from continuing operations amounted to USD 3.5 billion 
(+20%) compared to USD 2.9 billion in the prior year quarter. The 
increase was mainly driven by higher cash flows from operating 
activities and higher proceeds from the divestment of intangible assets. 
 
   Innovative Medicines net sales were USD 9.9 billion (+10%, +11% cc) in 
the fourth quarter. Pharmaceuticals BU sales grew 14% (cc), driven by 
continued momentum on Entresto and Cosentyx and the launch uptake of 
Zolgensma. Oncology BU grew 8% (cc) driven by continued momentum on 
Kisqali and Kymriah and the launch uptake of Piqray. Volume contributed 
15 percentage points to sales growth. Generic competition had a negative 
impact of 2 percentage points. Net pricing had a negative impact of 2 
percentage points. 
 
   Sandoz net sales were USD 2.5 billion (+1%, +2% cc), driven by strong 
volume growth of 5 percentage points partially offset by 3 percentage 

points of price erosion. Excluding the US, net sales grew strongly (+8% 
cc). Global sales of Biopharmaceuticals grew to USD 425 million (+11% 
cc), mainly driven by continued strong double-digit growth in Europe. 
 
   Novartis continues to expect the previously-announced divestment of the 
Sandoz US oral solids and dermatology portfolio to be completed in Q1 
2020, pending regulatory approval. Novartis remains fully committed to 
this business until it is divested to Aurobindo. The results of this 
business are included in continuing operations. 
 
   Continuing operations full year 
 
   Net sales were USD 47.4 billion (+6%, +9% cc) in 2019 driven by volume 
growth of 12 percentage points, mainly from Cosentyx, Entresto and 
Zolgensma for the Pharmaceuticals BU and Promacta/Revolade, Kisqali and 
Lutathera for the Oncology BU. Strong volume growth was partly offset by 
the negative impacts of pricing (2 percentage points) and generic 
competition (1 percentage point). 
 
   Operating income was USD 9.1 billion (+8%, +14% cc) mainly driven by 
higher sales, higher divestments and productivity programs, partly 
offset by growth investments, legal provisions and higher impairments. 
 
   Net income was USD 7.1 billion (-44%, -41% cc) as prior year benefited 
from a USD 5.7 billion net gain recognized from the sale of our stake in 
the GSK consumer healthcare joint venture. EPS was USD 3.12 (-43%, -40% 
cc) benefiting from lower weighted average number of shares outstanding. 
 
   Core operating income was USD 14.1 billion (+12%, +17% cc) mainly driven 
by higher sales and productivity programs, partly offset by growth 
investments. Core operating income margin was 29.7% of net sales, 
increasing by 1.6 percentage points (+1.9 percentage points cc). 
 
   Core net income was USD 12.1 billion (+11%, +15% cc) driven by growth in 
core operating income partly offset by the discontinuation of core 
income from the GSK consumer healthcare joint venture. Core EPS was USD 
5.28 (+12%, +17% cc) growing faster than core net income driven by lower 
weighted average number of shares outstanding. 
 
   Free cash flow from continuing operations amounted to USD 12.9 billion 
(+15%) compared to USD 11.3 billion in 2018. The increase was mainly 
driven by higher operating income adjusted for non-cash items. 
 
   Innovative Medicines net sales were USD 37.7 billion (+8%, +11% cc) in 
2019. Pharmaceuticals BU grew 12% (cc) driven by Cosentyx reaching USD 
3.6 billion, Entresto USD 1.7 billion and Zolgensma USD 361 million. 
Oncology BU grew 10% (cc) driven by Promacta/Revolade reaching USD 1.4 
billion, Kisqali USD 0.5 billion and Lutathera USD 0.4 billion. Volume 
contributed 13 percentage points to sales growth. Generic competition 
had a negative impact of 1 percentage point. Net pricing had a negative 
impact of 1 percentage point. 
 
   Sandoz net sales were USD 9.7 billion (-1%, +2% cc) driven by strong 
volume growth of 8 percentage points partially offset by 6 percentage 
points (of price erosion, mainly in the US. Excluding the US, net sales 
grew strongly (+7% cc). Global sales of Biopharmaceuticals grew to USD 
1.6 billion (+16% cc), driven by continued strong double-digit growth in 
Europe from Hyrimoz (adalimumab), Rixathon (rituximab) and Erelzi 
(etanercept). 
 
   Discontinued operations 
 
   Discontinued operations include the business of Alcon and certain 
Corporate costs directly attributable to Alcon up to the spin-off date. 
As the Alcon spin-off was completed on April 9, 2019, there were no 
operating results in the fourth quarter of 2019. 
 
   Discontinued operations net sales in 2019 were USD 1.8 billion compared 
to USD 7.1 billion in 2018 and operating income amounted to USD 71 
million compared to an operating loss of USD 234 million in 2018. Net 
income from discontinued operations in 2019 amounted to USD 4.6 billion 
compared to a net loss of USD 186 million in 2018 driven by the 
non-taxable non-cash net gain on distribution of Alcon Inc. to Novartis 
AG shareholders which amounted to USD 4.7 billion. For further details 
see Note 3 "Significant transactions -- Completion of the spin-off of 
the Alcon business through a dividend in kind distribution to Novartis 
AG shareholders". 
 
   Total Group fourth quarter 
 
   For the total Group, net income amounted to USD 1.1 billion compared to 
USD 1.2 billion in prior year, and basic earnings per share was USD 0.50 
compared to USD 0.52 in prior year. Cash flow from operating activities 
for the total Group amounted to USD 3.5 billion and free cash flow to 
USD 3.5 billion. 
 
   Total Group full year 
 
   For the total Group, net income amounted to USD 11.7 billion compared to 
USD 12.6 billion in prior year, and basic earnings per share was USD 
5.12 compared to USD 5.44 in prior year. Cash flow from operating 
activities for the total Group amounted to USD 13.6 billion and free 
cash flow to USD 12.9 billion. 
 
 
 
   Key growth drivers (Q4 performance): 
 
   Underpinning our financial results in the fourth quarter is a continued 
focus on key growth drivers including: 
 
 
   -- Entresto (USD 518 million, +65% cc) continued to deliver strong 
      double-digit performance, benefiting from the PIONEER data on hospital 
      initiation and higher demand in ambulatory settings. 
 
   -- Zolgensma (USD 186 million) US launch continued to progress well. 
      Policies are in place covering 97% of commercial patients and >50% of 
      Medicaid patients. Currently, 16 states representing 32% of newborns are 
      screening for SMA in the US. 
 
   -- Cosentyx (USD 965 million, +21% cc) continued to grow strongly across 
      indications and regions. In the US sales grew 25% with broad first line 
      access in all three indications. 
 
   -- Kisqali (USD 155 million, +166% cc) accelerated in the US driven by use 
      in metastatic breast cancer patients, independent of menopausal status or 
      combination partner, and benefiting from overall survival data, as well 
      as strong uptake and patient share gain in Europe and other regions. 
 
   -- Kymriah (USD 96 million) grew driven by ongoing uptake in the US and 
      Europe. There are over 200 qualified treatment centers and more than 20 
      countries worldwide have coverage for at least one indication. 
 
   -- Piqray (USD 67 million) US launch continued to progress well. Piqray is 
      the first and only treatment for the 40% of HR+/HER2- advanced breast 
      cancer patients who harbor a PIK3CA mutation. 
 
   -- Promacta/Revolade (USD 380 million, +16% cc) grew at a double-digit rate 
      in most regions driven by increased use in chronic immune 
      thrombocytopenia (ITP) and further uptake as first-line treatment for 
      severe aplastic anemia (SAA) in the US. 
 
   -- Tafinlar + Mekinist (USD 356 million, +15% cc) grew double-digit due to 
      demand in metastatic and adjuvant melanoma as well as NSCLC, with ongoing 
      uptake of the adjuvant melanoma indication in Europe. 
 
   -- Jakavi (USD 293 million, +17% cc) grew double-digit across all regions 
      driven by demand in the myelofibrosis and polycythemia vera indications. 
 
   -- Beovu (USD 35 million) was launched in the US following FDA approval in 
      October. Initial launch uptake has been strong and broad access has been 
      established including a permanent J-code from CMS effective January 1, 
      2020. 
 
   -- Lutathera (USD 107 million, +31% cc) continued to grow led by the US, 
      with over 170 centers actively treating patients, and ongoing launches in 
      Europe. Sales from all AAA brands (including Lutathera and 
      radiopharmaceutical diagnostic products) were USD 168 million. 
 
   -- Mayzent (USD 17 million) launch is progressing and efforts are ongoing to 
      accelerate patient on-boarding and drive urgency to treat. 
 
   -- Biopharmaceuticals (biosimilars, biopharmaceutical contract manufacturing 
      and Glatopa) grew to USD 425 million (+11% cc), driven by continued 
      strong double-digit growth in Europe. 
 
   -- Emerging Growth Markets, which comprise all markets except the US, Canada, 
      Western Europe, Japan, Australia and New Zealand, sales grew 12% (cc), 
      driven by China (USD 544 million) growing 21% (cc) from strong volume 
      growth, including the launches of Cosentyx and Entresto. 
 
 
 
   Net sales of the top 20 Innovative Medicines products in 2019 
 
 
 
 
                                % change            % change 
                      -------              ------- 
                      Q4 2019              FY 2019 
                       USD m   USD    cc    USD m   USD    cc 
                      -------  ----  ----  -------  ----  ---- 
Cosentyx                  965    20    21    3 551    25    28 
Gilenya                   803    -4    -3    3 223    -4    -1 
Lucentis                  517    -1     1    2 086     2     7 
Tasigna                   491     3     4    1 880     0     3 
Entresto                  518    63    65    1 726    68    71 
Sandostatin               402     1     2    1 585     0     2 
Afinitor/Votubia          365    -9    -8    1 539    -1     1 
Promacta/Revolade         380    15    16    1 416    21    23 
Tafinlar + Mekinist       356    14    15    1 338    16    20 
Galvus Group              342     5     5    1 297     1     5 
Gleevec/Glivec            313   -16   -15    1 263   -19   -17 
Xolair                    303    13    16    1 173    13    19 
Jakavi                    293    14    17    1 114    14    20 
Diovan Group              266     2     5    1 064     4     9 
Exforge Group             245    -2    -1    1 025     2     7 
Exjade/Jadenu             231   -19   -19      975   -11    -9 
Votrient                  177   -11   -10      755    -9    -6 
Ilaris                    178    15    16      671    21    25 
Zortress/Certican         123     3     5      485     5     8 
Kisqali                   155   158   166      480   104   111 
                      -------  ----  ----  -------  ----  ---- 
Top 20 products 

 total                  7 423     7     8   28 646     7    11 
                      -------  ----  ----  -------  ----  ---- 
 
 
 
   R&D Update - Key developments from the fourth quarter 
 
   New approvals and regulatory update 
 
 
   -- Adakveo (crizanlizumab, formerly SEG101) was launched in the US following 
      approval by FDA to reduce frequency of pain crises in individuals living 
      with sickle cell disease. The approval came approximately two months 
      ahead of the FDA's priority review action date. Adakveo reduced the 
      annual rate of sickle cell pain crises by 45% and the median annual rate 
      of days hospitalized by 42% compared to placebo. 
 
   -- Beovu (brolucizumab, formerly RTH258) was launched in the US in October 
      and received a positive CHMP opinion in December. Beovu is the only 
      anti-VEGF in wet AMD approved in the US to maintain eligible patients on 
      up to three-month dosing intervals immediately after the loading phase. 
 
   -- Mayzent (siponimod) was approved in the EU for the treatment of adult 
      patients with active secondary progressive multiple sclerosis (SPMS). 
 
   -- Ziextenzo (Sandoz biosimilar pegfilgrastim) was approved and launched in 
      the US. 
 
 
   Regulatory submissions and filings 
 
 
   -- Inclisiran was submitted in the US for primary hyperlipidemia and in the 
      EU for mixed dyslipidemia, which include FH, ASCVD or ASCVD risk 
      equivalent patients. 
 
   -- Ofatumumab (OMB157) was submitted to FDA and EMA (Jan) for treatment of 
      RMS. 
 
   -- Capmatinib (INC280) was submitted to FDA with breakthrough therapy 
      designation for NSCLC. 
 
   -- Cosentyx was submitted to FDA for treatment of non-radiographic axial 
      spondyloarthritis (nr-axSpA) if approved, nr-axSpA would be the fourth 
      indication for Cosentyx. 
 
 
   Results from ongoing trials and other highlights 
 
 
   -- Inclisiran, an investigational cholesterol-lowering therapy to address 
      cardiovascular diseases, was added to the pipeline from our acquisition 
      of The Medicines Company. If approved, inclisiran will be the first and 
      only LDL-lowering siRNA medicine that can be given twice yearly by 
      subcutaneous injection and integrate seamlessly into routine healthcare 
      visits, potentially improving adherence and patient outcomes. 
 
   -- MBG453 anti-TIM-3 antibody phase Ib data in combination with decitabine 
      in patients with high-risk myelodysplastic syndrome (MDS) and acute 
      myeloid leukemia was presented at ASH, showing that MBG453 was safe and 
      well tolerated and exhibited evidence of anti-leukemic activity with 
      encouraging preliminary response rates. These findings validate TIM-3 as 
      a promising therapeutic target in MDS and AML. 
 
   -- Tropifexor (LJN452) FLIGHT-FXR phase IIb positive interim results showed 
      robust and dose-dependent reductions in several key biomarkers of NASH 
      including hepatic fat content, body weight and both alanine 
      aminotransferase and gamma glutamyl transferase levels compared to 
      placebo at 12 weeks. Full 48-week biopsy data from the study are expected 
      in Q2 2020. 
 
   -- Cosentyx PREVENT trial in patients with nr-axSpA showed 41.5% of patients 
      treated with Cosentyx had improved ASAS40 scores through Week 16 and 
      improvements continued through Week 52. Cosentyx narrowly missed 
      statistical significance for superiority in ACR 20, the primary endpoint 
      of the EXCEED head-to-head trial in psoriatic arthritis, while showing 
      numerically higher results versus Humira(R). 
 
   -- Kisqali MONALEESA-3 data were published in the NEJM showing superior 
      overall survival compared to fulvestrant and consistent efficacy across 
      advanced breast cancer patient subgroups, reducing the risk of death by 
      almost 30% compared to fulvestrant alone. 
 
   -- Kymriah data presented ASH demonstrated consistent efficacy and safety 
      outcomes in US patients when used in real-world setting. Understanding 
      the Kymriah safety profile, and increased experience with administration 
      in real-world practice supports use in the outpatient setting. 
 
   -- Sickle cell disease global survey results were presented at ASH showing 
      profound and often under-reported effects, for example more than 90% of 
      patients surveyed experienced at least one vaso-occlusive crisis (VOC) in 
      the past 12 months. 
 
   -- QMF149 positive phase III results showed statistically significant 
      improvement in lung function compared to monotherapy. QMF149 showed 
      improvement in peak expiratory flow, exacerbation rates, rescue 
      medication use versus mometasone furoate among other secondary endpoints. 
 
   -- Fevipiprant analysis of phase III LUSTER 1 and 2 phase trials did not 
      support further development in asthma as a primary indication. 
 
   -- Sandoz US Generic Advair(R) development program in the US was 
      discontinued. 
 
   Capital structure and net debt 
 
   Retaining a good balance between investment in the business, a strong 
capital structure and attractive shareholder returns remains a priority. 
 
   In 2019, Novartis repurchased a total of 60.3 million shares for USD 5.4 
billion on the SIX Swiss Exchange second trading line, including 46.5 
million shares (USD 4.2 billion) bought back under the up to USD 5 
billion share buyback and 13.8 million shares (USD 1.1 billion) to 
mitigate dilution related to participation plans of associates. In 
addition, 1.7 million shares (USD 0.2 billion) were repurchased from 
associates. In the same period, 15.8 million shares (for an equity value 
of USD 1.1 billion) were delivered as a result of options exercised and 
share deliveries related to participation plans of associates. 
Consequently, the total number of shares outstanding decreased by 46.2 
million versus December 31, 2018. These treasury share transactions 
resulted in a decrease in equity of USD 4.5 billion and a net cash 
outflow of USD 5.3 billion. 
 
   As of December 31, 2019, net debt decreased by USD 0.3 billion to USD 
15.9 billion versus December 31, 2018. The decrease was mainly driven by 
USD 12.9 billion free cash flow from continuing operations during 2019 
and USD 2.9 billion net inflows related to the Alcon spin-off, partly 
offset by the USD 6.6 billion annual dividend payment, net cash outflow 
for treasury share transactions of USD 5.3 billion and M&A transactions 
of USD 3.8 billion (mainly the Xiidra acquisition). 
 
   In January 2020, Novartis acquired The Medicines Company for USD 9.7 
billion and in connection borrowed USD 7 billion under a short term 
credit facility. 
 
   As of Q4 2019, the long-term credit rating for the company is A1 with 
Moody's Investors Service and AA- with S&P Global Ratings. 
 
   2020 Outlook 
 
   Barring unforeseen events 
 
   Focused medicines company guidance 
 
   Excluding Alcon and the Sandoz US oral solids and dermatology business 
from both 2019 and 2020 
 
 
   -- Net sales: expected to grow mid to high-single digit (cc) 
 
   -- From a divisional perspective, we expect net sales performance (cc) in 
      2020 to be as follows: 
 
          -- Innovative Medicines: expected to grow mid to high-single digit 
 
          -- Sandoz: expected to grow low-single digit 
 
   -- Core operating income: expected to grow high-single to low double digit 
      (cc) 
 
 
   The guidance above includes the forecast assumption that no Gilenya and 
no Sandostatin LAR generics enter in 2020 in the US. 
 
   Foreign exchange impact 
 
   If late-January exchange rates prevail for the remainder of 2020, the 
currency impact for the year would be zero to negative 1 percentage 
point on net sales and negative 1 to negative 2 percentage points on 
core operating income. The estimated impact of exchange rates on our 
results is provided monthly on our website. 
 
   Annual General Meeting 
 
   Dividend proposal 
 
   The Novartis Board of Directors proposes a dividend payment of CHF 2.95 
per share for 2019, up 4% from CHF 2.85 per share in prior year, 
representing the 23rd consecutive dividend increase since the creation 
of Novartis in December 1996. Shareholders will vote on this proposal at 
the 2020 Annual General Meeting. 
 
   Reduction of Share Capital 
 
   The Novartis Board of Directors proposes to cancel 60 313 900 shares (of 
which 59 483 900 shares were repurchased under the eighth and 830 000 
shares were repurchased under the seventh share repurchase program in 
2019) and to reduce the share capital accordingly by CHF 30 156 950, 
from CHF 1 263 687 410 to CHF 1 233 530 460. 
 
   Nominations for election to the Board of Directors 
 
   The Novartis Board of Directors announced today that it is nominating 
Bridgette Heller, for election to the Board at the Annual General 
Meeting on February 28, 2020. Bridgette Heller brings more than 35 years 
of experience at Fortune 100 companies and held several executive 
positions in the consumer goods and healthcare industry among others at 
Danone, Merck & Co as well as Johnson & Johnson. Furthermore, Bridgette 
Heller serves on several Boards. Bridgette Heller is the co-founder and 
CEO of The Shirley Proctor Puller Foundation which is committed to 
generating better educational outcomes for underserved children in St. 
Petersburg, Florida. Her extensive track record in global leadership 
roles coupled with her broad experience in both the consumer products as 
well as healthcare area will be a great addition to the Novartis Board's 
commercial expertise. 
 
   As previously announced on October 22, 2019, the Board of Directors also 
proposes the election of Simon Moroney to the Board. 
 
   Re-elections of the Chairman and the members of the Board of Directors 
 
   The Novartis Board of Directors proposes the re-election of Joerg 
Reinhardt (also as Chairman), Nancy C. Andrews, Ton Buechner, Patrice 
Bula, Srikant Datar, Elizabeth Doherty, Ann Fudge, Frans van Houten, 

Andreas von Planta, Charles L. Sawyers, Enrico Vanni, and William T. 
Winters as members of the Board of Directors. 
 
   Re-elections and elections to the Compensation Committee 
 
   The Novartis Board of Directors proposes the re-election of Patrice Bula, 
Srikant Datar, Enrico Vanni, and William T. Winters and the election of 
Bridgette Heller as a new member of the Compensation Committee. Ann 
Fudge is no longer standing for re-election as a member of this 
committee. The Board of Directors intends to designate Enrico Vanni 
again as Chairman of the Compensation Committee, subject to his 
re-election as a member of the Compensation Committee. 
 
 
 
 
Continuing operations(1)      Q4 2019   Q4 2018    % change    FY 2019  FY 2018  % change 
                               USD m     USD m    USD    cc     USD m    USD m   USD    cc 
                              --------  -------  -----  -----  -------  -------  ----  ---- 
Net sales                       12 403   11 481      8      9   47 445   44 751     6     9 
Operating income                 1 823    1 362     34     37    9 086    8 403     8    14 
    As a % of sales               14.7     11.9                   19.2     18.8 
Core operating income            3 462    3 112     11     13   14 112   12 557    12    17 
    As a % of sales               27.9     27.1                   29.7     28.1 
Net income                       1 129    1 220     -7     -6    7 147   12 800   -44   -41 
EPS (USD)                         0.50     0.53     -6     -4     3.12     5.52   -43   -40 
Core net income                  2 985    2 681     11     13   12 104   10 920    11    15 
Core EPS (USD)                    1.32     1.16     14     15     5.28     4.71    12    17 
Cash flows from operating 
 activities                      3 540    3 436      3          13 547   13 049     4 
Free cash flow                   3 488    2 913     20          12 937   11 256    15 
                              --------  -------  -----         -------  -------  ---- 
 
  Innovative Medicines         Q4 2019  Q4 2018      % change  FY 2019  FY 2018    % change 
                                 USD m    USD m    USD     cc    USD m    USD m   USD    cc 
                              --------  -------  -----  -----  -------  -------  ----  ---- 
Net sales                        9 920    9 022     10     11   37 714   34 892     8    11 
Operating income                 2 210    1 300     70     73    9 287    7 871    18    24 
    As a % of sales               22.3     14.4                   24.6     22.6 
Core operating income            3 122    2 769     13     14   12 650   11 151    13    18 
    As a % of sales               31.5     30.7                   33.5     32.0 
----------------------------  --------  -------                -------  ------- 
 
  Sandoz                       Q4 2019  Q4 2018      % change  FY 2019  FY 2018    % change 
                                 USD m    USD m    USD     cc    USD m    USD m   USD    cc 
                              --------  -------  -----  -----  -------  -------  ----  ---- 
Net sales                        2 483    2 459      1      2    9 731    9 859    -1     2 
Operating income / loss          - 195      237     nm     nm      551    1 332   -59   -53 
    As a % of sales               -7.9      9.6                    5.7     13.5 
Core operating income              517      482      7     10    2 094    2 002     5    10 
    As a % of sales               20.8     19.6                   21.5     20.3 
----------------------------  --------  -------                -------  ------- 
 
  Corporate                    Q4 2019  Q4 2018      % change  FY 2019  FY 2018    % change 
                                 USD m    USD m    USD     cc    USD m    USD m   USD    cc 
                              --------  -------  -----  -----  -------  -------  ----  ---- 
Operating loss                    -192     -175    -10    -11     -752     -800     6     4 
Core operating loss               -177     -139    -27    -29     -632     -596    -6    -9 
                              --------  -------  -----  -----  -------  -------  ----  ---- 
 
 
  Discontinued operations 
  (2)                          Q4 2019  Q4 2018      % change  FY 2019  FY 2018    % change 
                                 USD m    USD m    USD     cc    USD m    USD m   USD    cc 
                              --------  -------  -----  -----  -------  -------  ----  ---- 
Net sales                                 1 788                  1 777    7 149 
Operating income / loss                    - 63                     71    - 234 
    As a % of sales                        -3.5                    4.0     -3.3 
Core operating income                       275                    350    1 266 
    As a % of sales                        15.4                   19.7     17.7 
Net income / loss                          - 26                  4 590    - 186 
                                        -------                -------  ------- 
 
  Total Group                  Q4 2019  Q4 2018      % change  FY 2019  FY 2018    % change 
                                 USD m    USD m    USD     cc    USD m    USD m   USD    cc 
                              --------  -------  -----  -----  -------  -------  ----  ---- 
Net income                       1 129    1 194     -5     -4   11 737   12 614    -7    -3 
EPS (USD)                         0.50     0.52     -4     -2     5.12     5.44    -6    -2 
Core net income                  2 985    2 881      4      5   12 382   11 938     4     8 
Core EPS (USD)                    1.32     1.25      6      7     5.40     5.15     5     9 
Cash flows from operating 
 activities                      3 540    3 766     -6          13 625   14 272    -5 
Free cash flow                   3 488    2 939     19          12 875   11 717    10 
                              --------  -------  -----         -------  -------  ---- 
nm = not meaningful 
 
  (1) Continuing operations include the businesses of Innovative Medicines 
  and Sandoz Division including the US generic oral solids and dermatology 
  portfolio and Corporate activities. See page 45 of the Condensed 
  Financial Report for full explanation 
(2) Discontinued operations include the business of Alcon. Net income 
 of discontinued operations for 2019 includes a USD 4.7 billion gain 
 on distribution of Alcon Inc. to Novartis AG shareholders. See page 
 45 and Notes 2, 3 and 11 of the Condensed Financial Report for full 
 explanation 
 
   Detailed financial results accompanying this press release are included 
in the Condensed Financial Report at the link below: 
 
   https://ml-eu.globenewswire.com/resource/download/3ddf6567-def7-415a-b1ae-cee41a33897f/ 
 
 
   Disclaimer 
 
   This press release contains forward-looking statements within the 
meaning of the United States Private Securities Litigation Reform Act of 
1995, that can generally be identified by words such as "growth," 
"expansion," "breakthrough innovation," "potentially," "to optimize," 
"transformative," "potential,"  "guidance," "launched," "launching," 
"momentum," "growth investments," "submissions," "submitted," 
"submission," "to sustain," "advancing," "focus," "focused," "focusing," 
"expect," "becoming," "to improve," "expected," "to grow," "continued," 
"continuing," "continue," "growing," "launches," "continues," "expect," 
"to be completed," "pending," "fully committed," "launch," "ongoing," 
"filings," "breakthrough therapy designation," "will," "may," "would," 
"proposed," "pipeline," "priority," "outlook," "unforeseen," "forecast," 
"enter," "priority review," "upcoming," "on track," "integrate," 
"potentially improving," "promising," "to be discontinued," "prevail," 
"impact," "intends," "launch," "strongly," "remain," "likely," "believes, 
" or similar expressions, or by express or implied discussions regarding 
potential new products, potential new indications for existing products, 
potential product launches, or regarding potential future revenues from 
any such products; or regarding the development or adoption of 
potentially transformational technologies, treatment modalities and 
business models; or regarding potential future or pending transactions, 
including the potential outcome, or financial or other impact on 
Novartis, of the proposed divestiture of certain portions of our Sandoz 
Division business in the US; or regarding the potential impact of share 
buybacks; or regarding potential future sales or earnings of the Group 
or any of its divisions or potential shareholder returns; or by 
discussions of strategy, plans, expectations or intentions. Such 
forward-looking statements are based on the current beliefs and 
expectations of management regarding future events, and are subject to 
significant known and unknown risks and uncertainties. Should one or 
more of these risks or uncertainties materialize, or should underlying 
assumptions prove incorrect, actual results may vary materially from 
those set forth in the forward-looking statements. You should not place 
undue reliance on these statements. In particular, our expectations 
could be affected by, among other things: global trends toward 
healthcare cost containment, including ongoing government, payor and 
general public pricing and reimbursement pressures and requirements for 
increased pricing transparency; uncertainties regarding potential 
significant breaches of data security or data privacy, or disruptions of 
our information technology systems; regulatory actions or delays or 
government regulation generally, including potential regulatory actions 
or delays with respect to the proposed transactions or the development 
of the products described in this press release; the potential that the 
proposed divestiture of certain portions of our Sandoz Division business 
in the US or the planned acquisition of the Japanese operations and 
associated assets of Aspen Global Incorporated may not be completed in 
the expected time frame, or at all; the potential that the strategic 

benefits, synergies or opportunities expected from the acquisition of 
The Medicines Company, the proposed divestiture of certain portions of 
our Sandoz Division business in the US, or the planned acquisition of 
the Japanese operations and associated assets of Aspen Global 
Incorporated, and other transactions described, may not be realized or 
may be more difficult or take longer to realize than expected; the 
successful integration of The Medicines Company into the Novartis Group 
and the timing of such integration; potential adverse reactions to the 
transaction by customers, suppliers or strategic partners; dependence on 
key personnel of The Medicines Company; dependence on third parties to 
fulfill manufacturing and supply obligations; the uncertainties involved 
in predicting shareholder returns; the uncertainties in the research and 
development of new healthcare products, including clinical trial results 
and additional analysis of existing clinical data; our ability to obtain 
or maintain proprietary intellectual property protection, including the 
ultimate extent of the impact on Novartis of the loss of patent 
protection and exclusivity on key products that commenced in prior years 
and is expected to continue this year; safety, quality, data integrity, 
or manufacturing issues; uncertainties involved in the development or 
adoption of potentially transformational technologies and business 
models; uncertainties regarding actual or potential legal proceedings, 
including, among others, product liability litigation, disputes and 
litigation with business partners or business collaborators, government 
investigations generally, litigation and investigations regarding sales 
and marketing practices, and intellectual property disputes; our 
performance on environmental, social and governance measures; general 
political, economic and trade conditions, including uncertainties 
regarding the effects of ongoing instability in various parts of the 
world; uncertainties regarding future global exchange rates; 
uncertainties regarding future demand for our products; and other risks 
and factors referred to in Novartis AG's current Form 20-F on file with 
the US Securities and Exchange Commission. Novartis is providing the 
information in this press release as of this date and does not undertake 
any obligation to update any forward-looking statements as a result of 
new information, future events or otherwise. 
 
   All product names appearing in italics are trademarks owned by or 
licensed to Novartis Group companies. 
 
   Advair(R) is a registered trademark of GSK. Humira(R) is a registered 
trademark of Abbvie Inc. 
 
   About Novartis 
 
   Novartis is reimagining medicine to improve and extend people's lives. 
As a leading global medicines company, we use innovative science and 
digital technologies to create transformative treatments in areas of 
great medical need. In our quest to find new medicines, we consistently 
rank among the world's top companies investing in research and 
development. Novartis products reach more than 750 million people 
globally and we are finding innovative ways to expand access to our 
latest treatments. About 109,000 people of more than 140 nationalities 
work at Novartis around the world. Find out more at. www.novartis.com 
 
   Novartis will conduct a conference call with investors to discuss this 
news release today at 14:00 Central European time and 8:00 Eastern Time. 
A simultaneous webcast of the call for investors and other interested 
parties may be accessed by visiting the Novartis website. A replay will 
be available after the live webcast by visiting. 
 
   https://www.novartis.com/investors/event-calendar 
 
   Detailed financial results accompanying this press release are included 
in the condensed financial report at the link below. Additional 
information is provided on Novartis divisions and pipeline of selected 
compounds in late stage development and a copy of today's earnings call 
presentation can be found at. 
 
   https://www.novartis.com/investors/event-calendar 
 
   Novartis issued its 2019 Annual Report today, and it is available at 
www.novartis.com. Novartis will also file its 2019 Annual Report on Form 
20-F with the US Securities and Exchange Commission today, and will post 
this document on www.novartis.com. Novartis shareholders may receive a 
hard copy of either of these documents, each of which contains our 
complete audited financial statements, free of charge, upon request. 
Novartis also issued its 2019 Novartis in Society ESG report today, and 
it is available at www.novartis.com. 
 
   Important dates 
 
 
 
 
February 28, 2020    Annual General Meeting 
April 28, 2020       First quarter results 2020 
May 19/20, 2020      Meet Novartis Management -- in Basel 
July 21, 2020        Second quarter results 2020 
October 27, 2020     Third quarter results 2020 
 
   Please find full media release in English attached and on the following 
link: Media release (PDF) 
https://ml-eu.globenewswire.com/resource/download/12ef3b87-73bc-4d2c-83e9-6a698ee0034f/ 
 
 
   Further language versions are available through the following links: 
 
   German version is available through the following link: Medienmitteilung 
(PDF) 
https://ml-eu.globenewswire.com/resource/download/5c64e357-04f6-420d-9615-f639f39c5459/ 
 
 
   French version is available through the following link: Communiqué 
aux médias (PDF) 
https://ml-eu.globenewswire.com/resource/download/54c45005-d561-478f-8408-4f99d55414c3/ 
 
 
 
 
   (1) Refers to continuing operations as defined on page 45 of the 
Condensed Financial Report, excludes Alcon, includes the businesses of 
Innovative Medicines and Sandoz (including the US generic oral solids 
and dermatology portfolio), as well as the continuing corporate 
functions. 
 
 
 
   (2)  Constant currencies (cc), core results and free cash flow are 
non-IFRS measures. An explanation of non-IFRS measures can be found on 
page 58 of the Condensed Financial Report. Unless otherwise noted, all 
growth rates in this Release refer to same period in prior year. 
 
 
 
   (3)  Removes Alcon and the Sandoz US dermatology and oral solids 
portfolio from both 2019 and 2020. Forecast assumption that no Gilenya 
and Sandostatin LAR generics enter in 2020 in the US. 
 
 
 
 

(END) Dow Jones Newswires

January 29, 2020 01:00 ET (06:00 GMT)

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