Novartis AG · SIX:NOVN
Novartis — Q1 2009 Earnings Presentation
34 slides from Novartis's earnings presentation, Apr 23, 2009
Slide 1: Novartis Group Q1 2009 results
Novartis Group Novartis Group Q1 2009 results 23 April 2009 Disclaimer These materials contain certain forward-looking statements relating to the Group's business, which can be identified by terminology such as "outlook", "expected", "will", "potential", "pipeline", or similar expressions, or by exp
Slide 2: Novartis delivers strong underlying growth
Agenda Q1 2009 performance highlights J Reinhardt Financial review R Breu Pharma highlights J Jimenez Building a strong future, outlook 2009 J Reinhardt Novartis delivers strong underlying growth, Pharma portfolio rejuvenation progressing in Q1 2009 Strong underlying Group performance offset by ne
Slide 3: Performance in Q1 led by Pharmaceuticals
Q1 2009 results reflect strong growth in local currencies but significant negative currency movements Group key figures Q1 2009 Q1 2008 % change % of % of USD m net sales USD m net sales USD lc1 Net sales 9 709 9 909 -2 8 Operating income 2 347 24.2 2 488 25.1 -6 Net income 1 975 20.3 2 308 23.3 -14
Slide 4: Operational performance in Q1 driven by portfolio rejuvenation in Pharma
Operational performance in Q1 driven by portfolio rejuvenation in Pharma Pharma – recently launched products and good country performance drove 12% local currency growth Vaccines and Diagnostics – modest sales decline due to lower sales of Encepur®1 in Europe Sandoz – solid growth outside the
Slide 5: Q1 2009 results reflect currency impact
Agenda Q1 2009 performance highlights J Reinhardt Financial review R Breu Pharma highlights J Jimenez Building a strong future, outlook 2009 J Reinhardt Q1 2009 results reflect currency impact USD m Q1 2009 Q1 2008 % USD % lc2 Net sales 9 709 9 909 -2 8 Operating income 2 347 2 488 -6 as % of net sa
Slide 6: Q1 2009 strong underlying growth offset by currency
Q1 2009 strong underlying growth offset by currency Net sales growth (%) Operating income growth (%) 8 8 5 0 -7 -10 -2 -4 -2 -6 Volume Price/Acq. Total LC FX USD Curr. Transact. LC Transl. USD corrected growth growth growth 11 | Novartis Q1 2009 results | 23 April 2009 Continued high investment in R
Slide 7: Q1 2009 also impacted by exceptional items
Q1 2009 also impacted by exceptional items Operating income growth (%), Selected exceptional items adjusted for exceptional items 7 Pharmaceuticals: USD 100 m higher 2 divestment gains and USD 45 m 5 more release of provisions in Q1 2008 Vaccines & Diagnostics: USD 49 m settlement income in Q1 2
Slide 8: Net financial result declines; strong free cash flow
Net financial result declines on lower liquidity, finance costs and currency impact 91 -45 -50 -130 -134 Q1/08 Fin. result, Lower liquidity Bond interest FX losses Q1/09 Fin. result, net (Alcon) net All figures in USD m 15 | Novartis Q1 2009 results | 23 April 2009 Strong free cash flow in Q1 2009 e
Slide 9: Financial flexibility remains high
Financial flexibility remains high Ratings Recent Novartis debt issues Long-term Bond (size) Coupon Date of issue Maturities USD 2 bn 4.125% 5 Feb 2009 5 yr S&P AA- Moody‘s Aa2 USD 3 bn 5.125% 5 Feb 2009 10 yr Fitch AA Short-term CHF 700 m 3.5% 10 June 2008 4 yr S&P A-1+ CHF 800 m 3.625% 10 June 200
Slide 10: Strong operating performance in Q1 2009
Agenda Q1 2009 performance highlights J Reinhardt Financial review R Breu Pharma highlights J Jimenez Building a strong future, outlook 2009 J Reinhardt Strong operating performance in Q1 2009 Sales USD 6.4 billion, +12% vs 2008 in local currency • Double-digit growth in all regions • All key ther
Slide 11: Q1 2009 shows strong sales growth in Pharma
Q1 2009 shows strong sales growth in Pharma Q1 2009 Growth USD m Q1 2009 vs Q1 2008 Net sales 6 433 +12% in LC1 Operating income 2 062 -2% in USD2 Return on net sales (ROS) 32.1% -1.4 ppts3 1 Local currencies 2 Foreign exchange negative impact -10.0 ppts vs PY, one-time items negative impact -3.0 pp
Slide 12: Unprecedented four approvals on one day in Japan
Unprecedented four approvals on one day in Japan Four approvals on January 21 – a new record in Japan • Co-DIO® for hypertension • Xolair® for severe asthma • Lucentis® for wet age-related macular degeneration (AMD) • Tasigna® for certain forms of chronic myeloid leukemia (CML) Launches have alr
Slide 13: Key therapeutic areas growing double digits
Key therapeutic areas growing double digits Sales by therapeutic area Growth vs PY USD m in lc% Oncology 1 997 13% Cardiovascular and 1 699 14% Metabolism Neuroscience and 996 12% Ophthlalmics Immunology and 447 21% Infectious Diseases Respiratory 250 18% Other Products* 1 044 4% Pharma Total 46000
Slide 14: Rasilez/Tekturna uptake growing
Rasilez®/Tekturna® uptake growing Q1 2009 total sales: USD 52 million Rasilez® launched in 35 countries Rasilez®/Tekturna® share in total antihypertension market segment (%) • Rasilez® HCT expected to launch 0.5 in 30 countries in 2009 Positive data and news flow 0.4 from outcomes trials will 0.
Slide 15: Recently launched products contributed nearly USD 900 million
Recently launched products contributed nearly USD 900 million in Q1, accounting for 14% of Pharma sales Launch product sales1 USD m 872 508 Q1 2008 Q1 2009 % of total Pharma sales 8% 14% 1 Products in first 2 years of first launch in a major market 29 | Novartis Q1 2009 results | 23 April 2009 Signi
Slide 16: PRT128 in-licensed from Portola
PRT128 (Phase II): Reversible P2Y12 ADP1 receptor antagonist in-licensed from Portola Elinogrel is a direct fast acting, intravenous and oral, anti-clotting agent New chemical class of P2Y12 inhibitor Competitive and reversible • Manageable half-life, no metabolism required • Fast bleeding res
Slide 17: Productivity savings continue to fund strategic investments
Productivity savings continue to fund strategic investments Pharma Division achieved more than USD 210 million in savings during Q1 2009 • Confident to exceed 2010 Forward savings target • Savings delivered through sourcing, LEAN, offshoring, and field force optimization Savings contributing to
Slide 18: Delivering on priorities for 2009
Agenda Q1 2009 performance highlights J Reinhardt Financial review R Breu Pharma highlights J Jimenez Building a strong future, outlook 2009 J Reinhardt Delivering on priorities for 2009 Dynamic expansion of new Pharma products • Newly launched products reaching 14% of sales vs 8% in Q1 2008 Suc
Slide 19: Pharmaceuticals executing globally
Pharmaceuticals executing globally – double digit growth in all regions % of net sales Growth vs PY in % of net sales Growth vs PY in by region local currencies by country type local currencies 8% 9% LatAm and Top 6 15% Canada emerging 20% 21% 23% markets1 Asia/Africa/ 11% Australasia 35% ROW 10% US
Slide 20: Strong pipeline expected to accelerate portfolio renewal
NME Strong pipeline expected to accelerate LCM portfolio renewal 2009 2010 2011 ≥ 2012 AGO178 EPO906 ASA404 LCI699 AEB071 Depression Ovarian cancer Non small cell lung can. Heart failure Kidney & heart transpl. FTY720 SOM230 PKC412 CAD106 NIC002 Multiple sclerosis Cushing’s disease ASM8 Alzheimer’s
Slide 21: Sandoz delivering solid sales growth
Sandoz delivering solid sales growth in most regions, and improving in the US % of net sales by region Q1 2009 net sales growth 2008 FY net sales growth Local currencies Local currencies 7% LatAm and 17% 16% 10% Canada 26% Asia/Africa/ 17% 9% Australasia US -3% -10% 57% Europe 4% 4% Q1 2009 41 | Nov
Slide 22: Key steps taken to improve performance of Sandoz US
Key steps taken to improve performance of Sandoz US Management team strengthened 5 submissions and 9 approvals in the US during Q1 2009 Returning to sales growth in March 2009 US operation aiming to return to growth for full year 2009 Christine Mundkur CEO of Sandoz US 43 | Novartis Q1 2009
Slide 23: Consumer Health performance driven by CIBA Vision
Consumer Health performance driven by CIBA Vision, with OTC and AH impacted by economy OTC • Consumption slowdown and wholesaler de-stocking • Voltaren® and Fenistil®/Savlon® perform strongly. Driven by launches and strong performance in emerging markets Animal Health • Farm Animal Business perf
Slide 24: Consumer Health and Vaccines & Diagnostics progress
Consumer Health – innovation driving growth in CIBA Vision 2008 launches of new silicone hydrogel lenses AirOptixTM Aqua – improved comfort and quality AirOptixTM brands AirOptixTM for Astigmatism – showed full parameter toric version of strong AirOptix growth AirOptixTM – Japan launch of week
Slide 25: Broad productivity efforts; Group outlook for FY 2009
Broad productivity efforts driving performance in all divisions Forward continuing to deliver savings ahead of plan (USD 329 m in Q1 2009), with procurement the strongest contributor Further productivity initiatives launched across the business • “Global Emerging Markets” (GEM), unifying divisio
Slide 26: Novartis: most US FDA NME approvals 2000 – Q1 2009
Appendix Novartis: most US FDA NME approvals 2000 – Q1 2009 Number of US FDA new molecular entity approvals, 2000 – Q1 2009 Novartis 17 Pfizer/Wyeth 16 Merck/SGP 9 Roche/Genentech 8 GSK 6 BMS 5 Sanofi-Aventis 5 Eli Lilly 4 AstraZeneca 3 Abbott 1 Xolair is excluded from the Roche-Genentech data since
Slide 27: Operating income adjustments for intangible asset charges
Operating income adjustments for intangible asset charges and significant exceptional items USD m Q1 2009 Q1 2008 I/S Line Pharmaceuticals 81 24 Mainly due to: Intangible asset charges 105 128 Exceptional divestment gains -15 -115 OIE Exceptional restructuring -13 39 OIE V&D 78 33 Mainly due to: Int
Slide 28: Adjusted Group operating margin at 26.6% in Q1
Adjusted1 Group operating margin at 26.6% in Q1 Adjusted Operating margins (%) Q1 2009 Q1 2008 33.3 33.8 26.6 26.8 22.5 20.1 19.5 19.3 4.5 -7.1 Pharma- V&D Sandoz Consumer Health Group ceuticals 1 Adjusted for intangible asset charges and other significant exceptional items 55 | Novartis Q1 2009 res
Slide 29: Group operating income declines 6%
Group operating income declines 6% % Operating income growth (USD) Operating income by division Pharmaceuticals -2 Consumer Health nm 9% V&D NA Sandoz 11% Sandoz -16 Consumer Health -10 Pharma- ceuticals 80% Group -6 57 | Novartis Q1 2009 results | 23 April 2009 Group operating margin at 24.2% in Q1
Slide 30: Income from associated companies impacted by Roche catch-up
Q1 2009 income from associated companies impacted by Roche catch-up USD m Q1 2009 Q1 2008 Change (% USD) Share of est. Roche net income 142 155 -8 Depreciation and amortization of tangible and -31 -34 -9 intangible assets Catch-up for actual Roche previous year -40 11 Net income effect Roche 71 132
Slide 31: Novartis has right to take majority ownership in Alcon
Novartis has right to take majority ownership in Alcon as early as 2010 First step Optional second step H2 2008 January 2010 - July 2011 2008 2009 2010 2011 Novartis acquired 24.8% Novartis has right to acquire remaining Alcon stake from Nestlé for 52% stake from Nestlé for fixed price of USD 10
Slide 32: Currency distribution of liquidity
Currency distribution of liquidity – Group Level March 20091 March 20081 Others Others 2% 2% CHF CHF 16% 13% EUR EUR 2% 4% 80% 81% USD USD 1 Including hedges 63 | Novartis Q1 2009 results | 23 April 2009 USD is the predominant currency1 Sales Costs 40% 35% 34% 32% 31% 30% 28% 25% 25% 20% 20% (%) 16%
Slide 33: Major currencies weaken vs USD in Q1 2009
Major currencies1 on average weaken vs USD in Q1 2009 Change in % vs. PY EUR -13 JPY 13 CHF -7 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 1 Based on YTD average rates 65 | Novartis Q1 2009 results | 23 April 2009 Q1 2009 net sales growth components by division Volume Price Acq./div. Total LC Currency Total
Slide 34: Impact of currency movements vs. USD on sales and operating income
Impact of currency movements vs. USD on sales and on operating income1 In the event of an impact of a 10% currency devaluation vs. USD on group sales EUR: - 3.2% CHF: - 0.2% JPY: - 0.7% Others: - 2.5% In the event of an impact of a 10% currency devaluation vs. USD on group operating income