Novartis Ag · SIX:NOVN
Novartis — Merger or Acquisition (April 2014)
32 slides from Novartis's merger presentation, Apr 22, 2014
Slide 1: Transforming Novartis
Transforming Novartis Investor Conference Call Basel, April 22, 2014
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that can be identified by words such as “going forward,” “projected,” “expected,” “would,” “will,” “can,” “looking ahead,” “future,” “strategy,” “planned,” “committed,” “inter-conditional,” “subject to,” “pipeline,” “underway,” “antici
Slide 3: Novartis announces portfolio transformation to focus company on leading businesses
Novartis announces portfolio transformation to focus company on leading businesses • Will focus Novartis on leading businesses with innovation power and global scale – Pharma, Eye Care and Generics • Transaction with GSK1: acquiring GSK oncology products, divesting Vaccines (excluding flu), and crea
Slide 4: Agenda
Agenda Novartis Strategy and today’s Joseph Jimenez announcements Chief Executive Officer Financial overview Harry Kirsch Chief Financial Officer Closing Joseph Jimenez Chief Executive Officer Q&A session Executive team 4 | Investor Presentation | April 22, 2014 | Transforming Novartis
Slide 5: Our strategy is to lead through science-based innovation
Our strategy is to lead through science-based innovation 5 | Investor Presentation | April 22, 2014 | Transforming Novartis
Slide 6: We deliver on this strategy by focusing on high growth segments of healthcare
We deliver on this strategy by focusing on high growth segments of healthcare Three leading Divisions Three smaller Divisions Pharma- Animal Alcon Sandoz OTC Vaccines ceuticals Health • Leaders in science-based • Solid science-based innovation innovation in their segments • Good businesses • Growth
Slide 7: To accelerate the execution of this strategy, we initiated a portfolio review in mid-2013
To accelerate the execution of this strategy, we initiated a portfolio review in mid-2013 Analyze individual businesses Focus on smaller Market attractiveness divisions to maximize value and make them global leaders Competitive position by Growing, Partnering, or Synergistic fit with rest of Divesti
Slide 8: Today, we announced transactions which will transform our portfolio
Today, we announced transactions which will transform our portfolio Components Compelling strategic and financial rationale Acquire oncology • Strengthen Pharmaceuticals Division & Oncology business products from GSK1 • Leverage our development and commercial capabilities Create Consumer • Create a
Slide 9: These transactions are expected to create value for Novartis and our shareholders
These transactions are expected to create value for Novartis and our shareholders Rationale 1 Consistent with strategy and strengthens future growth prospects 2 Creates good outcomes for OTC, Vaccines and Animal Health 3 Strong financial proposition for Novartis 9 | Investor Presentation | April 22,
Slide 10: These transactions strengthen our strategy
1 Strengthening our strategy and future growth prospects These transactions strengthen our strategy Leading through science-based innovation Three leading Divisions JV Divested Divisions Pharma- Animal Alcon Sandoz OTC Vaccines ceuticals Health • Reinforce leading Novartis • Maintain • Create world
Slide 11: GSK oncology products will immediately strengthen and complement our innovative portfolio
1 Strengthening our strategy and future growth prospects GSK oncology products will immediately strengthen and complement our innovative portfolio... GSK innovative oncology products Key numbers Key products Product Votrient® Mechanism • VEGFR, Current Indication(s) • Renal cell carcinoma, 2013 sale
Slide 12: ... and will provide therapies with additional growth potential and access to pipeline
1 Strengthening our strategy and future growth prospects ... and will provide therapies with additional growth potential and access to current and future pipeline What Novartis Oncology would look like Additional US / EU approved on-market novel therapies, including • Votrient® in renal cell carcino
Slide 13: We're jointly creating a global Consumer Healthcare leader
2 Creating good outcomes for OTC, Vaccines, Animal Health We’re jointly creating a global Consumer Healthcare leader Strong financials Global leading brands Net sales 20131 USD billions 10.0 Novartis GSK Core OpInc1 15% Almost half of sales from brands with 1 Pro forma, GBP to USD exchange rate of 1
Slide 14: Through divestments to GSK and Eli Lilly, we're creating leaders in vaccines and animal health
2 Creating good outcomes for OTC, Vaccines, Animal Health Through divestments to GSK and Eli Lilly, we’re creating leaders in vaccines and animal health GSK Vaccines Eli Lilly Animal Health Divest Novartis Vaccines Divest Novartis Animal to GSK, excluding flu1 Health to Eli Lilly Novartis to a
Slide 15: The transactions would create value for Novartis from year 1 after closing
3 Strong financial proposition for Novartis The transactions would create value for Novartis from year 1 after closing Expected to Improve growth Of sales and core operating income rates Improve core Significantly in year one after closing margin Create With each component of deal creating value val
Slide 16: Agenda
Agenda Novartis Strategy and today’s Joseph Jimenez announcements Chief Executive Officer Financial overview Harry Kirsch Chief Financial Officer Closing Joseph Jimenez Chief Executive Officer Q&A session Executive team 16 | Investor Presentation | April 22, 2014 | Transforming Novartis
Slide 17: Deal terms
Deal terms Details • USD 14.5 bn plus USD 1.5 bn contingent development Acquire GSK oncology milestone2 products1 • Opt-in rights for GSK’s current and future oncology R&D pipeline • USD 5.25 bn upfront plus USD 1.8 bn in milestones for a Divest Novartis Vaccines total of up to USD 7.1 bn (excl. flu
Slide 18: New Novartis portfolio with significantly improved profitability on modestly lower sales
New Novartis portfolio with significantly improved profitability on modestly lower sales Novartis Group 2013 pro forma in USD billion 57.3 1.6 53.5 -1.4 -1.1 -2.9 Sales Core ROS Current Novartis Novartis OTC Oncology New +2.5ppts Portfolio1 Vaccines Animal products portfolio1 (incl. Flu)2 Health acq
Slide 19: Delivering compelling value for shareholders
Delivering compelling value for shareholders GSK Oncology products Vaccines Divestment acquisition Significant growth expected over Attractive value creation through coming years upfront purchase price, future Access to innovative therapies milestones and royalties Leverages Novartis’ develo
Slide 20: Transactions are expected to result in net cash outflow of up to USD 7.6 billion in 2015
Transactions are expected to result in net cash outflow of up to USD 7.6 billion in 2015 Net cash flow impact in USD billion 5.4 5.3 1 -14.5 -1.5 2 -16.0 -2.3 -6.1 -1.52 -7.6 Vaccines Animal Health Oncology Estimated Net cash Division Division acquisition tax payments outflow 1 This excludes flu bus
Slide 21: We plan to finance transactions with blend of sources (1/2)
We plan to finance transactions with blend of sources and reiterate commitment to target double-A credit rating (1/2) We intend to finance the net after-tax amount of up to USD 7.6 billion of the combined transactions with a blend of sources: • Excess liquidity on the balance sheet at closing • Sh
Slide 22: We plan to finance transactions with blend of sources (2/2)
We plan to finance transactions with blend of sources and reiterate commitment to target double-A credit rating (2/2) Our capital structure and balance sheet support these transactions By balancing shareholder returns and debt holder interests, we plan to maintain our current share buyback progr
Slide 23: Accounting treatment as of Q2 2014
Accounting treatment as of Q2 2014 Key items Substantial exceptional divestment gains to be expected on closing the transactions 36.5% of net income from Consumer Healthcare JV to be reported as income from associated companies (core) Additional Oncology amortization charge of ~USD 1.3-1.4 bil
Slide 24: The transactions are in line with our stated capital allocation strategy
The transactions are in line with our stated capital allocation strategy... 1. Investments into organic business Novartis priorities 2. Growing annual dividend Create sustainable shareholder value, targeting 3. Value-creating bolt-on M&A rating of double-A 4. Share buybacks 24 | Investor Presentatio
Slide 25: ...and were managed with sound financial discipline
...and were managed with sound financial discipline Today’s Key financial criteria for assessing investments transactions DCF1 related, e.g. positive NPV, % synergies shared with counterparties, appropriate value/risk sharing CFROI2 accretive within mid-term period IRR3 hurdle rate Oth
Slide 26: Next steps
Next steps Details on discontinuing operations classification in Q2 2014 The Eli Lilly transaction1 expected to close in Q1 2015 The GSK1,2 transactions expected to close during H1 2015 Divestment gains on transactions to be announced separately 1 All transactions are subject to customary cl
Slide 27: Agenda
Agenda Novartis Strategy and today’s Joseph Jimenez announcements Chief Executive Officer Financial overview Harry Kirsch Chief Financial Officer Closing Joseph Jimenez Chief Executive Officer Q&A session Executive team 27 | Investor Presentation | April 22, 2014 | Transforming Novartis
Slide 28: Summary
Summary • Historic turning point for Novartis as we build world’s most respected and successful healthcare company • Leading positions in our three core businesses, with global scale and innovation power • Strengthens Novartis financial position going forward 28 | Investor Presentation | April 22, 2
Slide 29: Agenda
Agenda Novartis Strategy and today’s Joseph Jimenez announcements Chief Executive Officer Financial overview Harry Kirsch Chief Financial Officer Closing Joseph Jimenez Chief Executive Officer Q&A session Executive team 29 | Investor Presentation | April 22, 2014 | Transforming Novartis
Slide 30: Backup
Backup 30 | Investor Presentation | April 22, 2014 | Transforming Novartis
Slide 31: GSK oncology products would allow us to create a leading oncology pipeline
GSK oncology products would allow us to create a leading oncology pipeline Confirmatory Trials Registration Trials Filed Exploratory Trials (Phase I/II) Phase IIII or pivotal (In Registration) AUY922 LEE011c PI3K LDK378 ALK AEB071 PKC HSP90 CDK4/6 BKM120 Tasigna BCR-ABL Solid tumors Solid tumors Sol
Slide 32: With a significant number of planned filings through 2018
With a significant number of planned filings through 2018 2014 2015 2016 2017 2018 LBH589* BKM120 CTL019c LCI699 AUY922 BKM120 Multiple Myeloma Breast cancer Leukemia Cushing’s Solid tumors Solid tumors LDE225 MEK162b LEE011d TKI258 BYL719 LDE225 Advanced Basal Cell Carcinoma NRAS Mutant Melanoma