Novartis AG · SIX:NOVN
Novartis — Q1 2008 Earnings Presentation
56 slides from Novartis's earnings presentation, Apr 21, 2008
Slide 1: Novartis Group Q1 2008 results
Novartis Group Q1 2008 results April 21, 2008 ノバルティス グループ 2008年第1四半期業績 2008年4月21日
Slide 2: Forward-looking statements
These materials contain certain forward-looking statements relating to the Group's business, which can be identified by the use of forward-looking terminology such as "outlook", "expected", "will", "potential", "pipeline", or similar expressions, or by express or implied discussions regarding potent
Slide 3: Agenda
Agenda Overview D. Vasella Financials R. Breu Pharmaceuticals J. Jimenez Sandoz A. Rummelt Outlook D. Vasella 議題 概要 D. バセラ 財務 R. ブロイ 医薬品 J. ジメネス サンド社 A. ルンメルト 見通し D. バセラ
Slide 4: Novartis on track with Q1 2008 performance
Novartis on track with Q1 2008 performance Higher sales1 and earnings from continuing operations • Pharmaceuticals dynamic growth of key brands and all regions offset drop in the US market • Vaccines and Diagnostics with continued expansion; preparing for new meningitis vaccines • Sandoz fast-grow
Slide 5: Q1 2008 continuing operations with higher sales and earnings
Q1 2008 – continuing operations1 with higher sales and earnings Group key figures Q1 2007 Q1 2008 Change Change in USD m in USD m in % USD in % LC2 Net sales 9 128 9 909 +9 0 Operating income 2 335 2 488 +7 Net income 2 092 2 308 +10 EPS (USD) 0.89 1.02 +15 Number of associates 97 025 98 003 +1 1 Co
Slide 6: Dynamic growth in local currencies in all geographies, except the US
Dynamic growth in local currencies in all geographies, except the US Group Q1 2008 net sales in USD bn; growth in local currency Rest of Americas +8% Asia/Australia/Africa 0.8 +12% 1.6 Europe 4.5 +7 % 3.0 US -14% 11 | Novartis Q1 2008 Results | April 21, 2008 米国を除くすべての地域で力強い成長（現地通貨ベー ス） グループ全体の2008年
Slide 7: Top emerging growth markets expand rapidly
Top 7 emerging growth markets1 expand rapidly and reach 10% of Novartis sales in largest divisions Q1 2008 EGM sales as a percentage of total sales 11 10 10 10 Novartis Group 6 Pharma V&D Sandoz NCH EGM sales 13% -14% 26% 38% growth rate (LC) 1 Emerging growth markets: Russia, Turkey, Brazil, Mexico
Slide 8: Dynamic growth in all divisions, except Pharmaceuticals US
Dynamic growth in all divisions, except Pharmaceuticals US2 Sales growth in USD Op. Inc. growth in USD Actual results Q1 2008 (USD, bn) % growth Q1 2008 vs. Q1 2007 Sales1 Op. Inc. 1 in USD in LC Pharma 6.3 2.0 Pharma 6 -3 13 Sandoz 1.9 0.3 Sandoz 12 +2 8 CH 1.4 0.3 CH 14 +5 9 V&D 0.3 -0.1 V&D 21 +1
Slide 9: Vaccines and Diagnostics with double digit growth
Vaccines and Diagnostics with double digit growth and positive pipeline development Vaccines and Diagnostics expansion • Growth driven by TBE1 in vaccines and NAT2 in diagnostics • On track to deliver 40 mn doses of flu vaccine to the US market Phase III vaccines on track • Menveo: recruitment f
Slide 10: Consumer Health with steady performance
Consumer Health with steady performance • Top-line driven by Cough & Cold products OTC • Strong performance from Voltaren and Neo-Citran in Europe • Expanding in emerging markets with double-digit sales growth in Russia and LatAm • Top-line growing faster than the market, led by companion- Animal an
Slide 11: 2008 key initiatives on track at the end of Q1
2008 key initiatives on track at the end of Q1 Opening of Shanghai R&D center, closure Research of Vienna and Tsukuba (Japan) R&D sites centers Ensure success in developing biologics Biologics unit compounds as share of biologics grew from 4% to 25% Increase the speed, quality, productivity St
Slide 12: Alcon deal – A strategic stake of the world leader
Alcon deal – A strategic stake of the world leader in a highly attractive industry for Novartis’ future Eye care segment is highly attractive • Large and profitable segment (USD 25 bn, 20%-30% EBIT) • Strong future growth (aging population, emerging markets, innovation) Alcon is the world leader
Slide 13: Project Forward – Q1 08
Project Forward – Q1 08 Target to save USD 1.6 billion by 2010 confirmed • Potential of all initiatives validated bottom-up • Implementation started across divisions On track to achieve target savings in 2008 • Target to achieve USD 670 m by end of 2008 • YTD costs savings of USD ~160 m Key op
Slide 14: Agenda
Agenda Overview D. Vasella Financials R. Breu Pharmaceuticals J. Jimenez Sandoz A. Rummelt Outlook D. Vasella 議題 概要 D. バセラ 財務 R. ブロイ 医薬品 J. ジメネス サンド社 A. ルンメルト 見通し D. バセラ
Slide 15: Q1 continuing operations with higher sales and earnings
Q1 08 – continuing operations1 with higher sales and earnings USD m 3 M 2008 3 M 2007 % USD % LC2 Net sales 9 909 9 128 9 0 Operating income 2 488 2 335 7 as % of net sales 25.1% 25.6% Net income 2 308 2 092 10 as % of net sales 23.3% 22.9% Free cash flow -1 987 - 352 * EPS (USD) 1.02 0.89 15 Number
Slide 16: Investments in Pharma pipeline contribute to softer operating margin
Investments in Pharma pipeline and positive one- timers in ‘07 contribute to softer operating margin % pt change Q1 08 vs. Q1 07 +0.4 + Other revenues: increase in Pharma (mainly Betaseron) -0.5% +0.6 + COGS: lower royalties paid by Pharmaceuticals and Sandoz with favorable product mix and supply ch
Slide 17: Increased financial income advances Group net margin
Increased financial income and income from associated companies advance Group net margin % pt change Q1 08 vs. Q1 07 -0.5 – Operating margin slightly softer due to investments in Pharma pipeline and positive one-timers in Q1 07 +0.4% +0.3 + Income from associated companies driven by Roche +0.6 + Fin
Slide 18: Operating income adjustments for intangible asset charges
Operating income adjustments for intangible asset charges and significant exceptional items USD m 3 M 2008 3 M 2007 Group Intangible Asset Charges -307 -273 Pharmaceuticals 104 54 Exceptional restructuring -39 Major product divestments 115 Zelnorm suspension -52 Release of pre-launch inventory prov.
Slide 19: Adjusted Group operating income increases 6%
Adjusted1 Group operating income increases +6% driven by Pharma and Consumer Health 3 M 2008 Adjusted % operating income growth % operating income growth Pharmaceuticals 11 13 V&D NM NM Sandoz 8 8 Consumer Health 8 9 Group 6 7 1Adjusted for intangible asset charges and significant exceptional items
Slide 20: Adjusted Group operating margin at 26.8%
Adjusted1 Group operating margin at 26.8% in Q1 08 Adjusted operating margins (%) 3 M 2008 3 M 2007 33.8 32.2 26.8 27.4 22.5 23.3 19.3 20.3 16.5 -7.1 Pharma- V&D Sandoz Consumer Health Group ceuticals 1 無形資産関連費用および主要な例外的項目を加味して調整 39 | Novartis Q1 2008 Results | April 21, 2008 2008年第1四半期における調整後のグループ全
Slide 21: Non-operating items contribute to net income growth
Non-operating items contribute to net income growth USD m 3 M 2008 3 M 2007 Change (% USD) Operating income from continuing operations 2 488 2 335 7 Income from associated companies 137 97 41 Financial income, net 91 34 168 1 in % of average net liquidity 5.7% 16.0% Income before taxes from continui
Slide 22: Dividend payout impacts free cash flow
Dividend payout impacts free cash flow 3M 2008 free cash flow change vs. previous year Free cash flow 3 M 2007 - 352 -362 Decreased cash flow from operating activities Lower PPE investments 119 Lower investment in 34 intangible & financial assets Higher sale of assets 124 Raised dividends -744 Withh
Slide 23: Agenda
Agenda Overview D. Vasella Financials R. Breu Pharmaceuticals J. Jimenez Sandoz A. Rummelt Outlook D. Vasella 議題 概要 D. バセラ 財務 R. ブロイ 医薬品 J. ジメネス サンド社 A. ルンメルト 見通し D. バセラ
Slide 24: Good start to 2008 while transforming
Good start to 2008 while transforming Key messages 2007Pharmaceuticals Delivering 2008: on track during first 3 months • Sales down -3% vs Q1 prior year due to continued effects of 2007 negative events (as expected) • Profit up 13% due to cost management and one-time factors Transformation of No
Slide 25: 2008 Q1 performance
2008 Q1 performance Growth vs. 2007 Q1 USD m in USD in LC Net sales 6 264 +6% -3% Operating income 2 096 +13% Return on net sales (ROS)1 33.5% +2.2 ppt Number of associates 53 670 -3% 1 Adjusted ROS is 33.9% (excl. amortization of intangible assets and extraordinary items) 49 | Novartis Q1 2008 Resu
Slide 26: Strong underlying growth
Strong underlying growth Sales growth vs. PY, in % +10% +9% +6% -13% -3% LC growth of Impact of Overall Growth Currency effect Overall Growth continuing Zelnorm®, Lotrel® Gx, in LC in USD products Lamisil® Gx, portfolio Trileptal® Gx and Famvir® Gx 51 | Novartis Q1 2008 Results | April 21, 2008 力強い基
Slide 27: Return on Sales up 2.2 points versus Q1 2007
Return on Sales up +2.2 points versus Q1 2007 Return on net Sales (ROS), YTD March 2008 (%) 33.5 31.3 Key drivers + Productivity + + Divestment income − Revenue loss in US (Zelnorm, Lotrel, – Trileptal, Lamisil, Famvir1) Q1 2007 Q1 2008 1 2008 Q1 revenues from these products were approximately $100
Slide 28: Strong growth in Europe and Rest of World
Strong growth in Europe and Rest of World Net sales 2008 Q1, in USD bn Change vs PY in LC % Rest of World United States -19% 0.7 Canada +8% Latin America 0.4 2.0 United States Europe +9% Japan 0.6 Japan +5% Latin America +5% 0.1 Canada Rest of World +21% Europe 2.5 Total -3% 55 | Novartis Q1 2008 Re
Slide 29: Strong underlying growth in all key franchises
Strong underlying growth in all key franchises Sales by Therapeutic Area, Q1 2008 (USD m) Change vs PY in LC % Oncology 1 948 +15% CVM 1 570 -3% + 18% excl. Lotrel Gx NSO 1 003 -1% + 14% excl. Trileptal Gx IID* 470 +18% Respiratory 244 +3% Includes Zelnorm, Mature Products 1 030 -30% Lamisil, and Fa
Slide 30: Oncology: overall strong growth in first quarter
Oncology: overall strong growth in first quarter Growth (LC) vs. PY Unparalleled 88% 6-year overall survival in CML1 22%3 Expanding use in GIST2 Most potent aromatase inhibitor 22% Only oral once-daily treatment for iron 55% intoxification Most prescribed treatment for acromegaly 7% and ne
Slide 31: Hypertension portfolio continues to gain worldwide segment share
Hypertension portfolio continues to gain worldwide segment share, more than offsetting loss of Lotrel Novartis Share of Worldwide Antihypertension Market Segment, January 2007 – January 2008 Jan 2008: Jan 2007: 13.6% Share 13.1% Share 14.0% +0.5 ppt Diovan: Persistent strong performance with consi
Slide 32: Tekturna / Rasilez – building the future gold standard
Tekturna / Rasilez – building the future gold standard Commercial Momentum Clinical Differentiation Tekturna HCT launched 24-hour blood pressure in the US in February 2008 protection Positioning Tekturna as Extensive Phase 4 outcome “first choice add-on” trials underway 63 | Novartis Q1 2008
Slide 33: Other launches also performing well
Other launches also performing well SELECTED EXAMPLES Only treatment shown to improve vision Sales (ex-US) out-performing Gleevec at comparable post- launch period Novel approach to treating dementia providing smooth and continuous drug delivery over 24 hours Strong uptake, with significant
Slide 34: Positioning Novartis Pharmaceuticals to win
Positioning Novartis Pharmaceuticals to win Positioning Novartis Pharma. to win Q1 Achievements Tougher 1 Development regulatory • Streamlining processes/accelerate Promising pipeline news environment decision making New leadership • Elevating voice of science in strategic product decisions Mor
Slide 35: New leadership in place to drive change
New leadership in place to drive change Andrin Oswald, Global Head Development Franchises Responsible for all development projects in five Franchises Continue strong progress made through project “Step Up” Work in close partnership with Trevor Mundel to jointly lead Development organization Tr
Slide 36: Q1 development and regulatory milestones
1 Q1 development and regulatory milestones Highlights SELECTED EVENTS Tekturna® Tekturna® HCT approved by FDA RAD001 Pivotal trial in advanced kidney cancer unblinded early due to outstanding results, filing expected 2H 2008 Extavia® Positive CHMP opinion received, launch expected in Q1 2009 Eucreas
Slide 37: Pipeline includes many innovative projects
1 Pipeline includes many innovative projects First-in-class oral mTOR1 inhibitor with potentially superior efficacy in kidney RAD001 cancer and a broad set of tumors Potential to become first once-daily LABA2, new gold standard QAB149 bronchodilator Monoclonal antibody with potentially superior effi
Slide 38: Adaptation of commercial models well underway
2 Adaptation of commercial models well underway Q1 accomplishments US test markets up and running (Massachusetts, Minnesota, Pacific Northwest) US • Increased focus on individual prescribers • Improved deployment / offerings for non-physicians (e.g., payors, employers, provider groups) Early cus
Slide 39: Productivity programs on track to capture USD 1.2 billion in savings
3 Productivity programs on track to capture USD 1.2 billion in savings in 2010 Q1 achievements Delivered nearly 30% of 2008 targeted savings • Approx. USD 175 m in Q1 Streamlined regional and global structures by more than 25% • Delayered and consolidated support functions • Simplified governanc
Slide 40: Strong growth in emerging markets
4 Strong growth in emerging markets SELECTED EXAMPLES Novartis Market Growth Size (Q1 08 vs 07)1 (2007)2 Novartis Pharmaceuticals #3 pharma multinational company (MNC) in Russia Russia >30% $4 bn Strong reimbursement performance driven by Oncology and Transplantation products Growing strongly
Slide 41: Conclusions and Outlook
Conclusions and Outlook First quarter 2008 on track Novartis Pharmaceuticals transformation underway, already improving performance 2008 outlook confirmed: • H1 negative impact from 2007 events, accelerating growth in H2 • Low-single-digit net sales growth for the full year (in local currency)
Slide 42: Net sales growth returning to high-single-digit rate in H2 2008
Net sales growth returning to high-single-digit rate in H2 2008 Sales growth 2008 vs. PY (LC) in % Plus Key drivers high-single- digit Plus Baseline effect of: mid-single- • Zelnorm suspension Q1 07 Plus digit low-single- Minus digit • Lotrel Gx Q2 07 mid-single- + / - flat • Lamisil Gx Q3 07 digi
Slide 43: Agenda
Agenda Overview D. Vasella Financials R. Breu Pharmaceuticals J. Jimenez Sandoz A. Rummelt Outlook D. Vasella 議題 概要 D. バセラ 財務 R. ブロイ 医薬品 J. ジメネス サンド社 A. ルンメルト 見通し D. バセラ
Slide 44: Sandoz – Investing for growth
Sandoz – Investing for growth Successfully rebalancing our geographic presence • Strong growth, especially in emerging markets and CEE1 • CEE1 markets conquer Sandoz top 5 positions • Germany with significant market share upswing Continuing investments into growth • Established and expanding in
Slide 45: Q1 08: solid performance for Sandoz
Q1 08: solid performance, especially in comparison against an exceptional Q107 Third party sales up +12% in USD, +2% in LC • Strong growth, especially in emerging markets • CEE growth of +36% (+17% in LC) fuelled by marketing initiatives • Germany up +8% (-6% in LC), starting 2008 with market shar
Slide 46: Solid financial performance with productivity gains and investments
Solid financial performance characterized by productivity gains and accelerated investments Q1 2008 Growth vs. Q1 2007 USD m in USD in LC Net sales 1 906 +12% +2% Operating income 345 +9% Adjusted operating income1 429 +8% Return on net sales 18.1% -0.7 ppt Adjusted return on net sales1 22.5% -0.8 p
Slide 47: Strong growth in emerging markets
Strong growth in emerging markets Q1 2008 sales growth vs. Q1 2007 in USD, in % North America Latin America Canada +40 Brazil +59 Andean2 +29 Western Europe Asia/Pacific Italy +72 China +79 Portugal +57 Philippines +65 Eastern Europe M. East & Africa Russia +50 Turkey +65 Poland +44 S. Africa +20 1
Slide 48: Central & Eastern Europe: marketing initiatives drive strong growth
Central & Eastern Europe: Implemented marketing initiatives1 continue to drive strong growth Q1 2008 sales growth vs. Q1 2007 in USD, in % Serbia 94 Kyrgyzstan 65 Romania 65 Uzbekistan 54 Czech Rep. 54 Russia 50 Poland 44 Kazakhstan 42 Slovakia 38 >+40% Croatia 38 +20-40% Estonia 26 < +20% 1 See Nov
Slide 49: Sandoz rebalancing its geographic presence
With rising share of growth countries, Sandoz is successfully rebalancing its geographic presence Country Position1 Q1 2007 Position1 Q1 2008 Change Germany #2 #1 +1 US #1 #2 -1 Poland #3 #3 - Russia #5 #4 +1 Canada #6 #5 +1 … Brazil #13 #7 +6 Turkey #16 #9 +7 Italy #20 #14 +6 Romania #21 #16 +5 Cze
Slide 50: Germany: significant market share upswing
Germany: significant market share upswing Generics market share development, in % of total gross sales 30 Sandoz Group 25 20 Ratiopharm Group 15 Stada Group 10 01 02 03 04 05 06 07 08 09 10 11 12 01 02 2007 2008 Source: IMS CMA 99 | Novartis Q1 2008 Results | April 21, 2008 ドイツ：市場シェアの大幅拡大 後発薬市場シェア（%
Slide 51: Sandoz US slowing as a result of launch timing
Sandoz US slowing as a result of launch timing Q1 2007 benefited from several semi-exclusive products • Fentanyl patch • Ondansetron and Clarithromycin ER1 (launched in late 2006) Q1 2008 Y/Y sales comparison -1% • No significant launches • Product decline / price erosion offset by strong growth
Slide 52: Ongoing strong development and registration performance
Ongoing strong development and registration performance, e.g. registration status Europe Q1 2008 Number of approved filings (formulations) UK Germany 14 176 40 137 10 124 France Poland 39 43 39 56 14 16 Spain Austria 48 104 46 95 4 24 Italy Other EU 22 FY 2006 409 33 FY 2007 633 48 Q1 2008 191 103 |
Slide 53: Enoxaparin: hurdles remain for 2008 launch
Enoxaparin: high-value difficult-to-make opportunity, but hurdles remain for 2008 launch Enoxaparin: generic Lovenox® • World-leading low molecular weight heparin • Majority of sales in US • Very complex API • Sophisticated injectable • Demanding IP environment • Supply chain favorable to Sandoz
Slide 54: Conclusion – Sandoz investing in the future
Conclusion – Sandoz investing in the future Improving geographic presence • Continuing high growth, especially in emerging markets / CEE • Clear number one gaining share in Germany • US decline due to launch timing and price erosion Ongoing investments in current and future growth markets Stro
Slide 55: Agenda
Agenda Overview D. Vasella Financials R. Breu Pharmaceuticals J. Jimenez Sandoz A. Rummelt Outlook D. Vasella 議題 概要 D. バセラ 財務 R. ブロイ 医薬品 J. ジメネス サンド社 A. ルンメルト 見通し D. バセラ
Slide 56: Novartis Group outlook for FY 2008
Novartis Group outlook for FY 2008 Barring unforeseen events Group sales for continuing operations expected to grow at mid-single-digit rate (LC) Group operating and net income for continuing operations at record levels 111 | Novartis Q1 2008 Results | April 21, 2008 ノバルティス グループの2008年度の見通し 予測不能の