Novartis Ag · SIX:NOVN
Novartis — Merger or Acquisition (February 2005)
39 slides from Novartis's merger presentation, Feb 24, 2005
Slide 1: Focus on Medicines: Creating A Global Leader in Generics
Focus on Medicines: Creating A Global Leader in Generics Analyst Conference Call February 21, 2005 th) NOVARTIS
Slide 2: Forward-looking Statements
The following information contains certain "Forward-looking Statements" relating to the transaction and resulting business combination described herein, which can be identified by the use of forward-looking terminology such as "will" or "expect", or by discussions of strategy, plans, intentions or p
Slide 3: Agenda
Agenda ¢ Transaction rationale D. Vasella « Creating a global leader A. Rummelt ¢ Financials R. Breu 9 A Global Leader in Genes / Conference Cal/21 February 2005 th Novartis
Slide 4: Novartis Purpose — Focusing on Patient Needs
Novartis Purpose — Focusing on Patient Needs A commitment to — Better therapeutic benefit through a continuous flow of innovative, branded pharmaceuticals — Rapid market entry of high quality and best cost generics — Convenient, easily available quality OTC products 4A Global Leader in Genes / Confe
Slide 5: Novartis Strategy — Consistently Focusing the Portfolio on Medicines
Novartis Strategy — Consistently Focusing the Portfolio on Medicines Novartis net sales in % by Novartis net sales in % by division for the full year division for the full year 2004 2004E' Sales contribution Hexal & Eon Labs @ Medicines Other businesses 1 based on unaudited, preliminary financial co
Slide 6: Generics Market Place — High Demand and Double-Digit Growth
Generics Market Place — High Demand and Double-Digit Growth Generics retail market segment estimates in USD bnt ~15% of total healthcare CAGR in % market 2004—-2009E ~14% of ti 93 Worldwide 10.0 neue Japan 48 * Global CAGR Rest of Americas 97 2004-2009E: Western Europe 10.5 10% us 12.6 * US and West
Slide 7: Generics Market Offers Significant Opportunities
Generics Market Offers Significant Opportunities Total value of US drugs going off-patent per year’ 2003 sales in USD m 20 000 15 000 10 000 5000 2004 2005 2006 2007 2008 2009 2010 ‘Value of patent expiries by 2010 based on 2003 sales in USD m Source: Global Generic Drug Stocks, Citigroup — Smith Ba
Slide 8: Generics Penetration is Expected to Increase in Key Markets
Generics Penetration is Expected to Increase in Key Markets Generics penetration by value 2004-2009 Change Q3 2004'-2009 Q3 2004! 2009E Market (% pts) {in %) (in%) Germany 19.5 24.9 France 5.6 10.3 Italy 1.9 5.3 Spain 47 71 Canada? 13.72 16.0 us? 6.7? 77 Ee ‘Moving annual total per Q3 2004 2 MAT Q2
Slide 9: Building a Global Generics Leader
Building a Global Generics Leader e Strong competitive position in relevant markets e First entry and broad product offering e Continuous productivity gains and cost leadership intent ¢ Technological differentiation (difficult to make biopharmaceuticals) Skilled and engaged team 9 A Global Leader in
Slide 10: A Transformational Transaction for Sandoz
A Transformational Transaction for Sandoz Novartis Sandoz Novartis Pharmaceuticals Generics Consumer Health Hexal = t.. Eon Labs 410A Olobal Leader in Genesee Conerence Call/24 Febivany2006 th Novartis
Slide 11: Moving into the Top Rank
Moving into the Top Rank Nine-Month 2004 sales (in USD m) Excluding branded product sales for Teva, Watson and Mylan Sandoz (proforma) Teva Sandoz Merck Gx lax Ratiopharm Hexal Watson. Alpharma Barr Mylan 321 Eon Labs 1+ oo PULA: RURHEED omMpane: Eeposts Retlonnagm based on IMS and internal assumpti
Slide 12: A Compelling Business Portfolio
A Compelling Business Portfolio Injectables Patcheslimplants Inhalersicreams: ‘Sustained-release formulations 42 Olobal Leader in Geneios/ Conference Call /21 Februany2005 th wovartis
Slide 13: Complementary Geographic Contributions
Complementary Geographic Contributions Sandoz Hexal' Eon Labs USD 3.0 bn USD 1.6 bn USD 0.4 bn Latam Asia +2004 estimates for retail sales by region ? Global sales in biopharmaceuticals and anti-infectives * Includes Eastern Europe, Miidie East.andh Afsica,, 2005 th Novartis
Slide 14: | Netherlands ~
| Netherlands ~ eg Belgium | sa = France | ence, IMSIMAT Q3104
Slide 15: Strong Business Logic
Strong Business Logic * Global organization, * Best in class registration * One of the most production and R&D and development effective product pear Market leader in Germany developreeny a ans * World leader in and strong in other key aU anti-infectives markets — * Leading market Vertically integra
Slide 16: A Transaction that Meets Strategic Objectives
A Transaction that Meets Strategic Objectives ¢ Highly complementary (geography, portfolio and technologies) * Top positions in key markets, particularly in US and in Germany ¢ Significantly broadened product portfolio ¢ One of the largest pipelines in the industry covering most generic opportunitie
Slide 17: Transaction Synergies
Transaction Synergies ¢ Transformational transaction ¢ Sales synergies through broader geographic coverage of complementary product line ¢ Potential sales synergies between generics and branded, innovative pharmaceuticals with large customers, e.g. governments, pharmacy- chains ¢ Production synergie
Slide 18: Experienced Leadership Team in Place
Experienced Leadership Team in Place’ CEO A. Rummelt Integration Office Internal Communications Hvelssl A. Schardey Finence I Statoxy Human PRE Leva animan fl Resouces K. Plummer L HU. Groh K. Mager Product} Technical Biopharma. | Germany! | Europe! Develop. | Operations | Assurance ceuticals | Amer
Slide 19: Agenda
Agenda * Transaction rationale D. Vasella ¢ Creating a global leader A. Rummelt ¢ Financials R. Breu 419A Olobal Leader Genesee Conerence Call/24 Februany2008 th Novartis
Slide 20: Key Success Factors in the Generics Market
Key Success Factors in the Generics Market + Strong market position in most key markets + First to the market — and last in market + Broad product portfolio including “difficult-to-make” generics + Biopharmaceuticals market opportunities + Cost competitiveness (production, sourcing and vertical inte
Slide 21: Sandoz — A Powerhouse in the Making
Sandoz — A Powerhouse in the Making Strongest brand names in Generics coming together #1 worldwide #1 in Europe #1 in Germany #2in US #1 in antibiotics A pioneer in biopharmaceuticals Strengthened position in injectables t novartis
Slide 22: Strong Presence Across the Globe
Strong Presence Across the Globe ubsidia ep office or trade alliance 23s Be) 5 Strengthened position in Brazil Strong position in India 22a oiafed on nanantet sales. includes alge, countries without focal subsidiaries) th Novartis
Slide 23: Broad Product Portfolio
Broad Product Portfolio Top marketed brands Agate Eon Labs Source Indication 8 Saracr fan Las Acetylcystein| Mucolytic for lung disease Amoxc | Infection Amoxicillin | Infection Buproprion ——— Depression Citalopram EEE, Depression Enalapril UAL Hypertension Lisinopril MLL ACE inhibitor for hypertens
Slide 24: Manufacturing sites
| Boucherville (CAN): Injectables ' Kundl (A): Orals?, biogenerics Ljubljana (SLO): Orals*, biogenerics | Kolshet (India): Orals* of Buenos Aires (ARG): Orals, Steriles? | Anti ncology
Slide 25: Strong Pipeline — Major Launches in 2005 in the US and Germany
Strong Pipeline — Major Launches in 2005 in the US and Germany Number of planned launches 2005 Brand sales’ 2003, in USD Sandoz (US, Ger) 33 8.5 bn Hexal (Ger) 24 0.8 bn Eon Labs (US) 13 6.5 bn 4 Source: IMS for brand sales 2003 258 Olbal Leader es} Conference Cal 21 February 2005 th Novartis
Slide 26: Powerful Position in Biopharmaceuticals
Powerful Position in Biopharmaceuticals ¢ Leading position in biopharmaceuticals ¢ Combined company with more than 10 year track record in developing and producing biopharmaceutical products — Development centers in Kundl, Schaftenau, Ljubljana and Munich — Many advanced development programs ¢ Highl
Slide 27: Manufacturing and development locations
Poland: Oral solids Indi Oral solids, APIs Argentina: . Oncology Austria: Slovenia: Oral solids, APIs [fj Oral solids, APIs
Slide 28: Positioned for Dynamic Growth
Positioned for Dynamic Growth Market e presence ° e oe No. 1 player in Germany, No. 2 player in US No. 1 or 2 position in 7 key European markets Stronger foothold in Asia and Latin America Strengthened technology base in development and production Extended capabilites in Biopharmaceuticals Strengthe
Slide 29: Integration Strategy
Integration Strategy e Significant work already done — Decision on top positions taken “Best of all three” people concept — Excellent talent in all three companies — Best skills and abilities to match jobs Integration of a global manufacturing network Centers of expertise in development Local sales
Slide 30: Significant Synergies To be Captured
Significant Synergies To be Captured Short-, Mid- and Long-Term Vp —~ 7 «Long term a «Mid term - Consolidation of ¢ Short term - Reduced need for licensing in - Reduction of overlapping development projects. ~ Capture early entry opportunities as referred partner 0A Global Leader in Ganerice/ Confer
Slide 31: Integration Process
Integration Process Targets / Governance * Define integration Create task forces governance / structure and integration office © Decide key staffing Develop master plan * Set synergy targets Make and finalize recommendations Confirm synergies 1A Global Leader in Ganerice/ Conference Call/21 February
Slide 32: Conclusions
Conclusions « Excellent strategic rationale * Highly complementary assets * Experienced management team * Industry leading development platform * Well-positioned for future growth 32, Global Leader in Generics / Conference Call/21 February2008 th wovartis
Slide 33: Agenda
Agenda * Transaction rationale D. Vasella « Integration A. Rummelt Financials R. Breu 934 Global Leadsrin Ganerise/ Conference Call /21 Februany2005 th Novartis
Slide 34: Transaction Terms
Transaction Terms e Two separate agreements to acquire in cash for EUR 5.65 bn 100% of Hexal and 67.7%' of Eon Labs e This will be entirely financed by available cash reserves and by the ongoing generation of free cash flow e The acquired companies will be fully consolidated at closing ¢ Closing is
Slide 35: Transaction Terms for Eon Labs Minority Shareholders
Transaction Terms for Eon Labs Minority Shareholders ¢ Tender offer to acquire the 31.9 m remaining fully diluted shares at USD 31.00 per share representing a total value of USD 1.0 bn ¢ Apremium of 25 % over the unaffected price and a premium of 9% to the price paid for controlling block e Transact
Slide 36: All Three Companies Have a History of Above Market Growth
All Three Companies Have a History of Above Market Growth CAGR 1997-2004! Eon Labs Hexal Sandoz Global Gx market ' Growth in USD, Source: Sandoz ‘for global market, internal data for companies aoa dsltesurn Gonenes/contiene Sal ot Fob sts th Novartis
Slide 37: Overview of Key Financials
Overview of Key Financials’ 2004 pro forma figures Hexal' EonLabs' Sandoz [ruta in USD m (combined) Sales 1605 431 3045 5081 Gross profit 9452 240 1422 in percent of sales 58.9% 55.8% 46.7% 51.3% Rap 186 22 286 463 in percent of sales 9.7% ‘5.0% 9.4% 9.1% SG&A 545? 46 710 1301 in percent of sales 33
Slide 38: USD m in Annual Cost Synergies to be Realized Within 3-Year Time Period
USD 200 m in Annual Cost Synergies to be Realized Within 3-Year Time Period Realized cost synergies by year in% 35% 100% Year1 Year2 Year3 Total 2A Global Lender n Genetic Conference Cal /21 Februan/2005 th Novartis
Slide 39: Searchable text section of graphics shown above
Searchable text section of graphics shown above Foc us on Medicines: Creating A Global Leader in Generics Analyst Conference Call February 21, 2005 [LOGO] The following information contains certain “Forward-looking Statements” relating to the transaction and resulting business combination described