Novartis AG · SIX:NOVN
Novartis — Q1 2013 Earnings Presentation
35 slides from Novartis's earnings presentation, Apr 24, 2013
Slide 1: First Quarter 2013 Results
First Quarter 2013 Results Investor presentation April 24, 2013
Slide 2: Disclaimer
Disclaimer The following presentation contains forward-looking statements that can be identified by terminology such as such as “potential,” “expected,” “will,” “planned,” or similar expressions, or by express or implied discussions regarding potential new products, potential new indications for exi
Slide 3: Agenda
Agenda Group overview Joseph Jimenez Chief Executive Officer Financial review Jon Symonds Chief Financial Officer Closing Joseph Jimenez Chief Executive Officer Q&A session 3 | Novartis Q1 2013 Results | April 24, 2013 | Novartis Investor Presentation
Slide 4: Solid performance in Q1, with all divisions contributing to growth
Solid performance in Q1, with all divisions contributing to growth Q1 2013 net sales of USD 14.0 billion increased +4% versus year ago (in cc1) Core operating income up +6% (in cc) Core EPS was USD 1.32, up +9% versus year ago (in cc) Continued leadership in product innovation • 8 key approv
Slide 5: Summary of First Quarter 2013 financial results
Summary of First Quarter 2013 financial results Change vs. Q1 2012 (in USD m) Q1 2013 % USD % cc Net sales 14 016 +2 +4 Operating income Core 3 714 +3 +6 Reported 2 896 +6 +10 Net income 2 422 +7 +13 EPS (USD) Core 1.32 +6 +9 Reported 0.98 +5 +12 Free cash flow 1 298 -37 5 | Novartis Q1 2013 Results
Slide 6: We continue to deliver on our three strategic priorities
We continue to deliver on our three strategic priorities 1 Innovation 2 Growth 3 Productivity 8 key approvals in Q1 Growth in all In Q1 2013, ~ USD 20131,2 Divisions in Q1 2013 600 m of productivity savings, incl. Growth products3 up ~ USD 250 m in 2 positive key phase +14% vs. PY III tria
Slide 7: Strong progress on innovation in Q1 2013
Innovation Strong progress on innovation in Q1 2013 Q1 2013 US / EU Selected product Indication milestones Acute gouty arthritis EMA approval (15 sq cm) Alzheimer’s disease EMA approval Pseudomonas infection FDA approval Pharma- ceuticals Iron overload in thalassemia FDA approval Liver tra
Slide 8: In Q1 2013, sales grew across all of our Divisions
Growth In Q1 2013, sales grew across all of our Divisions Net sales Growth Q1 2013 vs. PY (in USD m) (in cc) Net sales Core Opinc Pharma- 7 877 +3% +2% ceuticals Alcon 2 566 +3% +8% Sandoz 2 259 +7% +14% Vaccines & +10% +17%1 327 Diagnostics Consumer +7% +85% 987 Health 1 Lower core operating loss 8
Slide 9: Our Pharmaceuticals growth products maintained strong momentum in Q1 2013
Growth - Pharmaceuticals Our Pharmaceuticals growth products1 maintained strong momentum in Q1 2013 Net sales2 (in USD m) Q1 2012 Q1 2013 +7% 596 +71% 421 +114% +39% +40% 303 284 +29% 267 +48% n/a 141 43 35 1 Growth products are defined as products launched in 2008 or later, or with exclusivity unti
Slide 10: Gilenya grew 71% in Q1 2013
Growth - Pharmaceuticals Gilenya® grew 71% in Q1 2013 Gilenya® worldwide sales (in USD m) +71% (cc) 421 US RoW 349 316 283 RoW now 42% of 247 sales 203 153 56% of growth in past year ex-US 79 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2011 2012 2013 10 | Novartis Q1 2013 Results | April 24, 2013 | Novartis Investo
Slide 11: Alcon Q1 growth driven by Ophthalmic Pharmaceuticals and Vision Care
Growth - Alcon Alcon Q1 growth driven by Ophthalmic Pharmaceuticals and Vision Care 2013 Q1 sales by franchise Growth vs. PY Comment (in USD m) (in cc) Stable cataract share, procedure Surgical 912 +2% slowdown and reduced growth of capital equipment Pharma- +5% Share gains in glaucoma in non-US
Slide 12: Alcon has several launches planned for the remainder of 2013
Growth - Alcon Alcon has several launches planned for the remainder of 2013 First in class treatment for vitreomacular Jetrea® traction First beta blocker-free fixed dose Simbrinza® combination for glaucoma in US Continued gains in launched EU markets Dailies Total1® US / Canada launch expec
Slide 13: Sandoz grew 7% in Q1 2013
Growth - Sandoz Sandoz grew 7% in Q1 20131 Q1 total net sales growth vs. PY Market2 Sandoz (% in cc) Central & Western Eastern Europe Europe3 16 12 7 5 North America Germany 5 Asia-Pacific 0 1 1 15 8 Middle East & Africa 24 Latin America 7 8 6 1 In constant currencies 2 Net market growth estimate vs
Slide 14: Consumer Health returned to growth in Q1 2013
Growth – Consumer Health Consumer Health returned to growth in Q1 2013 Net sales Main drivers: (in USD m) Major brands ex-US +7% in cc 987 932 US re-launch of key brands1 2 Q1 2012 Q1 2013 1 Re-launch of Excedrin® Migraine, Excedrin® Extra Strength, Triaminic® and Lamisil® from third party manuf
Slide 15: Our strong Emerging Markets growth was led by China, India and Russia
Growth Our strong Emerging Markets1 growth was led by China, India and Russia Q1 2013 Net sales (USD m) Growth vs. PY (in % cc2) China +21% India +14% Russia +33% 1 All markets except the US, Canada, Western Europe, Australia, New Zealand, and Japan 2 Constant currencies 15 | Novartis Q1 2013 Result
Slide 16: Productivity savings of approximately USD 600 million in Q1 2013
Productivity Productivity savings of approximately USD 600 million in Q1 2013 Procurement Manufacturing footprint Savings 18 site exits / divestments / restructuring (USD m) Completed or in process since program start Casablanca, Morocco Cidra, Puerto Rico Liverpool*, UK ~250 ~250 Huningue, France F
Slide 17: Our progress on Quality excellence continues
Our progress on Quality excellence continues In Q1 2013 58 Health Authority Inspections Majority of inspections good or satisfactory 10 FDA Inspections 1 1 The 10 FDA inspections were among the 58 total health authority inspections 17 | Novartis Q1 2013 Results | April 24, 2013 | Novartis Investor P
Slide 18: Refocusing activities at our plant in Lincoln, Nebraska
We will be refocusing activities at our plant in Lincoln, Nebraska, while retaining 70% of volume1 From To Solids Solids Powders Powders Technology Semi-solids Liquids Patches Formulations 200 10 Lincoln, Nebraska SKUs 500 50 Manufacturing 400 700 (phased over 2 years) Headcount 1 In u
Slide 19: Agenda
Agenda Group overview Joseph Jimenez Chief Executive Officer Financial review Jon Symonds Chief Financial Officer Closing Joseph Jimenez Chief Executive Officer Q&A session 19 | Novartis Q1 2013 Results | April 24, 2013 | Novartis Investor Presentation
Slide 20: Novartis grew sales despite generics impact and delivered operating leverage
Novartis grew sales despite generics impact and delivered operating leverage in the first quarter Q1 2013 Q1 Group Growth (in USD m) USD Reported cc Core cc Net sales 3rd party 14 016 +2% +4% +4% Core operating income 3 714 +3% +6% Operating income 2 896 +6% +10% Core EPS (USD) 1.32 +6% +9% EPS (USD
Slide 21: High-single digit volume growth more than offsetting generic competition
Growth High-single digit volume growth more than offsetting generic competition (% growth vs. PY) Group 7 7 -1 1 -3 4 -2 2 Pharmaceuticals 9 9 0 -6 3 -3 0 Underlying Price Fougera Underlying Generics CC growth FX USD volume growth impact growth 21 | Novartis Q1 2013 Results | April 24, 2013 | Novart
Slide 22: Growth products grew 14% to USD 4.2 bn or 30% Group net sales
Growth Growth products1 grew 14% to USD 4.2 bn or 30% Group net sales (in USD m) Group (% of sales) Pharmaceuticals (% of sales) 30% 36% 4 210 3 681 +14% 2 851 2 851 2 285 2 285 +27% cc 31 26 414 247 171 214 780 872 Q1 2012 Q1 2013 Q1 2012 Q1 2013 Pharmaceuticals Sandoz Alcon Vaccines & Diagnostics
Slide 23: All divisions contributing to first quarter sales growth
Growth All divisions contributing to first quarter sales growth Q1 2013 – Sales growth Sales Q1 2013 Growth in cc (in USD m) (vs. PY in %) Pharmaceuticals 7 877 +3% Alcon 2 566 +3% Sandoz 2 259 +7% Vaccines & 327 +10% Diagnostics Consumer Health 987 +7% Group cc growth 14 016 +4% 23 | Novartis Q1 20
Slide 24: Group Core margin in cc increased by 0.6 percentage points
Leverage Group Core margin in cc increased by 0.6 percentage points Q1 2013 Core operating Sales income Core margin growth growth change Core margin (in % cc) (in % cc) (in % pts cc) (in %) Pharmaceuticals 3 2 -0.2 32.7 Alcon 3 8 1.8 36.8 Sandoz 7 14 1.1 19.1 1 Vaccines & Diagnostics 10 17 9.6 -30.0
Slide 25: Productivity savings contribute 4 percentage points to Group Core ROS
Productivity Productivity savings contribute 4 percentage points to Group Core ROS Productivity savings (in USD bn) 18 sites divested, exited or in process % of sales 3.7% 4.2% of restructuring since program start 0.6 Restructuring of Lincoln manufacturing 0.5 plant Other Procurement savings o
Slide 26: Lower Free Cash Flow due to earlier tax payments and working capital
Cash Flow Lower Free Cash Flow primarily due to earlier tax payments and investment in working capital Free Cash Flow Free Cash Flow pattern (in USD bn) (past three year average) -37% 2.1 60% 1.3 40% Q1 2012 Q1 2013 First half Second half Key reasons for the variance Higher working capital -0.7 bn
Slide 27: Net debt increased USD 3.3 bn to USD 14.9 bn in Q1
Net debt Net debt increased USD 3.3 bn to USD 14.9 bn in Q1 (in USD bn) +3.3 0 -1 -10 -11 -12 -13 -14 -15 -16 -17 -11.6 +1.3 -6.1 +1.5 -0.3 +0.3 -14.9 2012 Free Cash Dividends Treasury Share Others 2013 December Flow share buy-back March movements 27 | Novartis Q1 2013 Results | April 24, 2013 | Nov
Slide 28: Solid start to the year - no change to outlook
Solid start to the year - no change to outlook Outlook assumed some benefit from absence of generic competition to Diovan® monotherapy in US This benefit lasting longer than expected Q2-4 expect to see higher impact of generic erosion from Diovan® / Zometa® / Reclast® / Aclasta® 28 | Novartis
Slide 29: Agenda
Agenda Group overview Joseph Jimenez Chief Executive Officer Financial review Jon Symonds Chief Financial Officer Closing Joseph Jimenez Chief Executive Officer Q&A session 29 | Novartis Q1 2013 Results | April 24, 2013 | Novartis Investor Presentation
Slide 30: Solid progress on 2013 strategic priorities
Solid progress on 2013 strategic priorities Progress in Q1 2013 Extend lead Secured 8 key approvals in Continued to invest in the pipeline, e.g., LDK378, innovation biosimilars Secured product filings Maintained launch trajectories of major brands Accelerate growth Accelerated growth in Em
Slide 31: Outlook for 2013 remains unchanged
Outlook for 2013 remains unchanged Barring unforeseen events Group net sales expected to be in line with 2012 (cc): • Pharmaceuticals: low-single digit decline • Alcon, Sandoz, Vaccines & Diagnostics: mid- to high-single digit increase • Consumer Health: high-single digit increase Group Core ope
Slide 32: Appendix
Appendix Uh) NOVARTIS
Slide 33: Planned filings 2013 to ≥ 2017
Planned filings 2013 to ≥ 2017 2013 2014 2015 2016 ≥ 2017 AIN457 AFQ056 BKM120 BYM338 ATI355 KAE609 Psoriasis Fragile X syndrome Breast cancer sIBM14 Spinal cord injury Malaria LBH589 LCQ908 MEK162 CTL019 AUY922 LFF571 Multiple Myeloma FCS4 Solid Tumors Leukemia Solid tumors Cl.difficile infections
Slide 34: Back-up
Back-up 34 | Novartis Q1 2013 Results | April 24, 2013 | Novartis Investor Presentation
Slide 35: Operating Income growing at a faster rate due to US restructuring charges in 2012
Operating Income growing at a faster rate mainly due to US restructuring charges in 2012 2013 2012 CC Growth Q1 Q1 vs. PY Core operating income 3 714 3 607 6% Core Adjustment- Income Divestment income 41 51 Inventory Provision reductions 58 Others 94 30 Total exceptional income 135 139 Core Adjustme