Novartis AG · SIX:NOVN
Novartis — FRESCO 2004 Analysts
10 slides from Novartis's conference presentation, Jan 20, 2005
Slide 1: How to Succeed in a Highly Competitive Generics Market Environment
A Novartis company How to Succeed in a Highly Competitive Generics Market Environment Andreas Rummelt CEO Sandoz Agenda • Generics market dynamics • Sandoz performance 2004 • Sandoz strategic priorities 2 FRESCO 2004 / Andreas Rummelt / 2005-01-20 / Analysts 1
Slide 2: Generics in the Past – High Growth; Generics in 2004 – A Difficult Market Environment
Generics in the Past – High Growth • Solid overall generics industry growth 1997–2003: +11% CAGR • Exceptional growth 2000–2003: +13% CAGR • Market demand exceeding supply • Increasingly favorable regulatory environment • Fragmented markets with local and regional players • Industry consolidation fr
Slide 3: Generics Business Heading into a Cyclical Downturn?
Generics Business Heading into a Cyclical Downturn? Total US prescription growth " % 4 000 10 3 500 3 000 8 Characteristics of cyclical 2 500 2 000 6 downturn: 1 500 4 1 000 500 2 • Demand " 0 1991 1993 1995 1997 1999 2001 2003 0 − Reduced volume growth − Downward price trend FDA generic filings ! −
Slide 4: Generics Fast Growing and Increasingly Competitive
Generics Fast Growing and Increasingly Competitive Further growth • Blockbuster patent expiries with global sales potential value of USD 20 bn for Rx products and with USD 13 bn sales value for key biopharma- ceuticals (2004–2006) • Increasing generics penetration (e.g. Europe) • Reference pricing s
Slide 5: Generics Fast Growing and Increasingly Competitive; Agenda
Generics Fast Growing and Increasingly Competitive Further growth • Blockbuster patent expiries with global sales potential value of USD 20 bn for Rx products and with USD 13 bn sales value for key biopharma- ceuticals (2004–2006) • Increasing generics penetration (e.g. Europe) • Reference pricing s
Slide 6: Difficult Year 2004 for Sandoz
Difficult Year 2004 for Sandoz USD m 2004 2003 Change in % USD LC Net sales 3 045 2 906 5 -11 Operating income 235 473 -50 -502 Operating margin 7.7% 16.3% -8.6 ppts Employees 13 397 12 918 1 Excl. Durascan, Sabex: -3% in LC 2 Excl. Durascan, Sabex: -49% in LC 11 FRESCO 2004 / Andreas Rummelt / 2005
Slide 7: Sandoz Retail Generics Sales Particularly Weak in US and Germany
Sandoz Retail Generics Sales Particularly Weak in US and Germany US • Highly competitive environment and price pressure • Competition by authorized generics (e.g. Augmentin) • Launch delays (e.g. Ribavirin) Germany • Rebate war between market leaders • Decrease of reference prices • One-off impairme
Slide 8: Successes in Other Key Markets
Successes in Other Key Markets • Global top tier position maintained in generics • Strong growth in other key markets1: e.g. France 34%, Russia 33% • Successful completion of Sabex and Durascan acquisitions • First approval for Omnitrope® (human growth hormone) received in Australia Fentanyl SabexTM
Slide 9: Sandoz Strategic Priorities
Sandoz Strategic Priorities • Establish strong market position in selected key markets • Build broader product portfolio including “difficult-to-make” generics, be first to market • Build-up pipeline in bio-generics • Increase productivity in development and production • Improve cost competitiveness
Slide 10: Conclusions
Conclusions • Generics are a competitive and long-term attractive growth market • Turn-around of Retail Generics • Expansion in key markets • Broaden product portfolio • Speed-up time to market • Manage costs and productivity proactively • Build production capacity in low cost country 19 FRESCO 2004