Novartis Ag · SIX:NOVN
Novartis — Q3 2011 Earnings Presentation
47 slides from Novartis's earnings presentation, Oct 25, 2011
Slide 1: Third Quarter 2011 Results
Third Quarter 2011 Results Investor presentation October 25, 2011
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that can be identified by terminology such as “planned,” “expected,” “will,” “potential,” “pipeline,” or similar expressions, or by express or implied discussions regarding potential new products, potential new indications for existing
Slide 3: Agenda
Agenda Q3 2011 Group results Joseph Jimenez Chief Executive Officer Q3 2011 Financials Jon Symonds Chief Financial Officer Pharmaceuticals – update on key products David Epstein Division Head Pharmaceuticals Closing Joseph Jimenez Chief Executive Officer Q&A session 3 | Novartis Third Quarter 2011 R
Slide 4: Strong sales and operating income growth in Q3 2011
Strong sales and operating income growth in Q3 2011 Strong double digit sales growth: +12% CC1 Continued operating leverage with Core operating income2 +15% CC Strong Free Cash Flow of USD 3.7 billion Continued leadership in product innovation with key approvals in Q3 • Gilenya® (Japan, MS3)
Slide 5: Summary of Q3 2011 financial results
Summary of Q3 2011 financial results (in USD m) Q3 2011 % USD % CC Net sales 14 843 +18 +12 Operating income Core 4 112 +11 +15 Reported 2 951 +14 +22 Net income 2 488 +7 +15 Free cash flow 3 675 +27 EPS (USD) Core 1.45 +7 Reported 1.02 +3 5 | Novartis Third Quarter 2011 Results | October 25, 2011 |
Slide 6: Diversified portfolio paying off, with sales growth driven by Alcon, Pharma and Consumer Health
Diversified portfolio paying off, with sales growth driven by Alcon, Pharma and Consumer Health Q3 2011 Sales by division Growth vs PY (in USD m) (in % CC) Pharmaceuticals 8 159 +3% Alcon1 2 492 +7% Sandoz 2 340 +1% Consumer 1 197 +3% Health2 Vaccines & -2% 655 Diagnostics 1 On a pro forma basis 2 C
Slide 7: Focusing on our strategic priorities drives growth
Focusing on our strategic priorities drives growth Strategic Priorities: Delivering innovation, growth and productivity 1 2 3 Extend lead in Drive productivity to Accelerate growth innovation improve margins Strengthen industry- Drive recently Improve profitability leading pipeline launched pr
Slide 8: Key approvals in Q3 2011
Innovation Key approvals in Q3 2011 Selected program Indication Q3 2011 achievement Advanced pNET1 EU approval TSC-SEGA2 EU approval Pharma- ceuticals Multiple sclerosis Japan approval CAPS3 Japan approval CHMP Rasitrio® High blood pressure recommendation4 Alcon Optical correction of visio
Slide 9: Successful transformation of portfolio continues
Growth Successful transformation of portfolio continues Recently launched products1 Afinitor® with annual sales (Sales in USD bn) potential of USD 1 bn+ if indication approved % of Group net sales2 21% 25% Indication expansion - strong Phase III clinical data presented for Breast Cancer +31% Reg
Slide 10: Strong emerging markets growth across divisions
Growth Strong emerging markets growth across divisions Top 6 emerging markets Q3 2011 Top 6 emerging markets growth (in CC) +35% OTC +27% Animal Health Turkey Brazil +24% Alcon1 Example China – Group sales growth India South Korea +35% CC Russia China Q3 2010 Q3 2011 1 On pro forma basis 10 |
Slide 11: Alcon's solid performance fueled by Surgical and Pharmaceuticals
Growth Alcon’s solid performance fueled by Surgical and Pharmaceuticals Q3 2011 Alcon net sales of USD 2.5 bn (Growth +7% in CC1) Strong Surgical growth Ophthalmic Vision Care Pharmaceuticals Cataract procedures up in US Advanced technology IOL2 sales grew 23% -1% CC1 +9% CC1 Ophthalmic Pharmace
Slide 12: For the nine months, Sandoz outperformed key markets
Growth For the nine months, Sandoz outperformed key markets Market2 September YTD 2011 net sales1 growth vs. PY (% in CC) Sandoz Central & Canada Western Europe Eastern Europe 17% 15% 10% 6% 5% -10% US Germany 34% 8% -16% -16% Asia-Pacific3 10% 13% Middle East, Latin America Turkey, & Africa 11% 12%
Slide 13: Consumer Health up +3% CC with continued focus on key brands
Growth Consumer Health up +3% CC with continued focus on key brands in major markets 9M 2011 Sales (Growth in CC) Solid sales growth of key brands Otrivin® +23% CC OTC Voltaren® +13% CC Theraflu® +7% CC +35% CC growth in key emerging markets1 Animal Health Strong global growth of key brands
Slide 14: Menveo US market share ramping up
Growth Menveo® US market share ramping up Menveo® - US market segment share (in %) 13 11 10 10 Steady growth 8 > USD 100 m global sales YTD US infant/toddler indication filed with FDA in Q2 2011 2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2010 2011 14 | Novartis Third Quarter 2011 Results | October 25, 2011 | Nova
Slide 15: Reducing our cost base
Productivity Reducing our cost base Action planned Ongoing savings Transfer of some activities out of Research Switzerland to US Development Global restructuring of activities Expected ongoing annual Close 2 production sites in savings of Manufacturing > USD 200 m Switzerland and transfer acti
Slide 16: Agenda
Agenda Q3 2011 Group results Joseph Jimenez Chief Executive Officer Q3 2011 Financials Jon Symonds Chief Financial Officer Pharmaceuticals – update on key products David Epstein Division Head Pharmaceuticals Closing Joseph Jimenez Chief Executive Officer Q&A session 16 | Novartis Third Quarter 2011
Slide 17: Group Financial summary – Q3 2011
Group Financial summary – Q3 2011 Q3 Group Growth (in USD m) USD Reported CC Core CC Net sales 3rd party 14 843 18% 12% Core operating income 4 112 11% 15% Operating income 2 951 14% 22% Core net income 3 539 12% 16% Net income 2 488 7% 15% Core EPS (USD) 1.45 7% 10% EPS (USD) 1.02 3% 9% Free Cash F
Slide 18: Weakness of USD benefits sales, but negative profit impact from CHF
Weakness of USD benefits sales, but negative profit impact from CHF Full year currency estimate based on September 30, 2011 spot rates 8 8 6 6 5 4 4 2 2 0 -2 -1 -2 -2 -4 -3 -3 -4 -4 -4 -6 -6 -8 -8 Q1 Act Q2 Act Q3 Act 9M Act FY estimate Sales Operating income Core Operating income 18 | Novartis Thir
Slide 19: Many moving parts, but performance underpinned by growth in volume
Growth Many moving parts, but performance underpinned by growth in volume Q3 2011 Components of Group sales growth (% growth) 18 6 12 7 10 3 2 2 Volume Generic Price CC excl. Acquisitions/ CC Currency USD volume Acquisitions/ Divestments2 impact1 Divestments 1 Primarily Femara ® (US and some Europea
Slide 20: Recently launched products growing 41% for the nine months
Growth Recently launched products growing 41% for the nine months to reach 24% of Group sales (in USD bn) Recently launched products1 % of Group net sales 25% 24% 10.7 +41%2 7.6 6.7 3.6 2.8 +31%2 1.7 2.4 Pharmaceuticals Sandoz 0.4 2.3 0.8 Other Divisions Q3 2010 Q3 2011 9M 2010 9M 2011 1 Major produ
Slide 21: Core operating margin improves +0.6ppts in constant currencies
Operating leverage Core operating margin improves + 0.6ppts in constant currencies (in ppt) Q3 2010 Core operating 29.4 income margin Productivity savings improve Performance 0.6 margin by +3.9 percentage points before reinvestments Currency 2.3 Q3 2011 Core operating 27.7 income margin 21 | Novarti
Slide 22: Diversified portfolio results in strong leverage
Operating leverage Diversified portfolio results in strong leverage Q3 2011 Sales Core operating Operating Change in Growth income growth leverage CC margin1 (% CC) (% CC) (bps) Pharmaceuticals 3% 6% 70 Alcon2 7% 13% 210 Sandoz 1% -10% -260 Vaccines & Diagnostics -2% 26% 560 Consumer Health3 3% -16%
Slide 23: Exceptional charges in Q3 2011 mainly driven by impairments and restructuring
Operating leverage Exceptional charges in Q3 2011 mainly driven by impairments and restructuring Key exceptional charges in Q3 2011 (in USD m) Q3 2011 Q3 2010 Impairments, of which 153 592 Pharmaceuticals 101 592 Vaccines & Diagnostics 52 Restructuring/Integration, of which 233 Pharmaceuticals 27 Al
Slide 24: EPS diluted by higher number of shares and lower income from associated companies
EPS diluted by higher number of shares and lower income from associated companies (in USD) Q3 Core Q3 Reported 2010 EPS 1.36 0.99 Operating income 0.17 0.16 Income from 0.03 0.09 associated companies Net financial 0.01 0.01 income/expenses +7% +3% Income taxes 0.03 0.02 Non-controlling interest 0.01
Slide 25: Net debt decreases due to strong free cash flow
Cash leverage Net debt decreases due to strong free cash flow Net debt (in USD bn) -14.9 5.4 -18.3 4.1 2.8 -21.9 0.5 0.8 -22.3 2.5 2.9 December Dividends Share FCF/ March 31, Share FCF/ June 30, Share FCF/ September 31, 2010 buy- Others 2011 buy-back Others 2011 buy- Others 30, 2011 back & Alcon bac
Slide 26: Agenda
Agenda Q3 2011 Group results Joseph Jimenez Chief Executive Officer Q3 2011 Financials Jon Symonds Chief Financial Officer Pharmaceuticals – update on key products David Epstein Division Head Pharmaceuticals Closing Joseph Jimenez Chief Executive Officer Q&A session 26 | Novartis Third Quarter 2011
Slide 27: Pharmaceuticals: Solid sales, profit and cash flow growth
Pharmaceuticals: Solid sales, profit and cash flow growth Growth (USD m) Q3 2011 Q3 2010 (% USD) (% CC) Net sales 8 159 7 500 9 3 Core operating income 2 510 2 489 1 6 Operating income 2 219 1 765 26 35 Core operating income margin1 30.8 33.2 Operating income margin 27.2 23.5 Free cash flow 3 257 3
Slide 28: Launch brands driving overall sales growth despite patent expiries and price cuts
Growth Launch brands driving overall sales growth despite patent expiries and price cuts Q3 2011 contribution to growth (in % CC) In-Market 2 Recently launched 8 products1 Overall sales grew 3% in CC, Healthcare reforms & despite Femara® generic 1 price cuts competition Generics2 5 New products
Slide 29: An unparalleled platform for growth – current and potential blockbusters
Growth An unparalleled platform for growth – 1 current and 7 potential blockbusters Indication Q3 Sales Growth vs PY (USD m) (% CC) Wet Age-related macular degeneration, 515 +19% DME1, RVO2 Chronic myeloid leukemia 186 +63% Diabetes mellitus, Type 2 181 +65% Hypertension 159 +34% Multiple
Slide 30: Lucentis growing 19% driven by wAMD
Growth Lucentis® growing 19% driven by wAMD1 with 2 new indications approved Lucentis® (in USD m, growth in CC) +19% 515 +22% +19% sales growth versus Q3 2010 mainly driven by expansion of wAMD1 398 patient pool2 335 Significant future opportunity in • DME3 (620k patients) and • RVO4 (210k patie
Slide 31: Gilenya launch best in class in the US
Growth Gilenya® launch best in class in the US – today more than 250001 patients treated globally US Monthly launch trends German Monthly launch trends (TRx2) (Units) TRx Market Share = 6.0% Unit Market Share = 5.1% 3 Gilenya® TRx 3 500 Gilenya® 10 000 Rebif® TRx Rebif® 3 000 Copaxone® TRx Copaxone®
Slide 32: Tasigna share of CML franchise grew to ~19% in Q3 2011
Growth Tasigna® share of CML franchise grew to ~19% in Q3 2011 WW Tasigna®/Glivec® CML1 sales (in USD m) (Tasigna® % of franchise ) Tasigna® revenues Glivec® revenues Tasigna® share 1'200 20% 18% 1'000 16% 14% 800 12% 600 10% 8% 400 6% 4% 200 2% 0 0% Q1 '09 Q2 '09 Q3 '09 Q4 '09 Q1 '10 Q2 '10 Q3 '10
Slide 33: Positive Phase III data on several development projects
Innovation Positive Phase III data on several development projects Planned / Trial Program News completed submission Angiomyolipoma Met primary endpoint with 42% of patients EXIST-2 2011 in TSC1 responding 35% of patients with 50% or greater tumor EXIST-1 SEGA2 in TSC1 2011 volume reduction ER+ HER2
Slide 34: Afinitor more than doubles progression free survival in ER+ breast cancer
Innovation Afinitor® more than doubles progression free survival in estrogen receptor positive breast cancer Phase III pivotal trial, enrolled over 700 women with ER+ HER2-1 locally advanced or metastatic breast cancer Afinitor® more than doubles Progression Free 2 Survival Worldwide regulatory
Slide 35: Large parallel Phase III program ongoing
Innovation Large parallel Phase III program ongoing Recruitment Expect to File/ 1 Registration Studies Status Regulatory Status 1. Kidney Cancer Complete Approved US, EU Pancreatic 2. Complete Approved US, EU Neuroendocrine Tumors Kidney 3. TSC2 SEGA3 Complete Approved US, EU4 NET Breast 4. TSC AML5
Slide 36: Expected Pharmaceuticals newsflow highlights
Innovation Expected Pharmaceuticals newsflow highlights Q4 2011 QTI571 (imatinib): Submissions for pulmonary arterial hypertension (PAH) Rasitrio ®: Triple combination EU approval Afinitor®: Regulatory filings for ER+HER2- metastatic breast cancer Votubia®1: Regulatory filings for TSC – angiomyolipo
Slide 37: Agenda
Agenda Q3 2011 Group results Joseph Jimenez Chief Executive Officer Q3 2011 Financials Jon Symonds Chief Financial Officer Pharmaceuticals – update on key products David Epstein Division Head Pharmaceuticals Closing Joseph Jimenez Chief Executive Officer Q&A session 37 | Novartis Third Quarter 2011
Slide 38: Solid progress on 2011 strategic priorities
Solid progress on 2011 strategic priorities Progress 9M 2011 1 Extend lead in innovation 9 major approvals in Pharmaceuticals and Vaccines 2 Accelerate Recently launched products contributed 24% of Group sales growth Emerging markets1 with strong growth across divisions 3 Drive productivit
Slide 39: Reaffirm outlook for 2011
Reaffirm outlook for 2011 Barring unforeseen events Group sales growth (CC): Expected to be low-double digits • Pharmaceuticals: Low- to mid-single digit • Sandoz: High-single digit • Alcon1: Mid- to high-single digit Group Core operating income margin (CC): Expected to improve 1 On a pro forma
Slide 40: Agenda
Agenda Q3 2011 Group results Joseph Jimenez Chief Executive Officer Q3 2011 Financials Jon Symonds Chief Financial Officer Pharmaceuticals – update on key products David Epstein Division Head Pharmaceuticals Closing Joseph Jimenez Chief Executive Officer Q&A session 40 | Novartis Third Quarter 2011
Slide 41: Appendix
Appendix Uh) NOVARTIS
Slide 42: Planned filings 2011 to 2015
Planned filings 2011 to 2015 2011 2012 2013 2014 2015 INC424 AFQ056 AIN457 AEB071 BAF312 ATI355 Myelofibrosis Fragile X syndrome Psoriasis Kidney transplantation Multiple sclerosis Spinal cord injury Afinitor® LDE225 DEB025 BEZ235 CAD106 LGT209 TSC AML1 Gorlin’s syndrome HCV infection Solid tumo
Slide 43: Group Financial summary – 9 months 2011
Group Financial summary – 9 months 2011 9M 2011 Group Growth in USD m USD Reported CC Core CC Net sales 3rd party 43 785 20% 15% Core operating income 12 359 14% 16% Operating income 9 681 7% 11% Core net income 10 479 14% 16% Net income 8 035 4% 9% Core EPS (USD) 4.34 9% 11% EPS (USD) 3.34 0% 5% Fr
Slide 44: Volume growth and Alcon drive sales growth in 9M 2011
Innovation premium Volume growth and Alcon drive sales growth in 9M 2011 Components of Group sales growth (% growth) 20 5 15 14 5 2 2 1 Volume Generic Price CC excl. Acquisitions/ CC Currency USD volume Acquisitions/ Divestments2 impact1 Divestments 1 Primarily Femara ® (US and some European countri
Slide 45: Leverage in all divisions, V&D impacted by A(H1N1) in 2010
Operating leverage Leverage in all divisions, V&D impacted by A(H1N1) in 2010 9M 2011 Sales Core operating Operating Change in Growth income growth leverage CC margin1 (% CC) (% CC) (bps) Pharmaceuticals 3% 7% 130 Alcon2 7% 9% 90 Sandoz 12% 17% 100 Vaccines & Diagnostics -51% nm nm Consumer Health3
Slide 46: EPS diluted by higher number of shares and lower income from associated companies
EPS diluted by higher number of shares and lower income from associated companies (in USD) 9M 2011Core 9M 2011 Reported 2010 EPS 4.00 3.34 Operating income 0.64 0.27 Income from 0.12 0.10 associated companies Net financial 0.07 0.07 income/expenses +9% 0% Income taxes 0.08 0.04 Non-controlling 0.04
Slide 47: Exceptional items in 9M 2011 mainly driven by amortization, impairments and restructuring
Operating leverage Exceptional items in 9M 2011 mainly driven by amortization, impairments and restructuring Key exceptional items (in USD m) 9M 2011 9M 2010 Exceptional income Divestments, of which 470 33 Pharmaceuticals 324 33 Consumer Health 44 Alcon related 102 Other Exceptionals - Corporate 265