Novartis Ag · SIX:NOVN

Novartis — Q2 2013 Earnings Presentation

48 slides from Novartis's earnings presentation, Jul 17, 2013

  1. Slide 1: Second Quarter 2013 Results

    Second Quarter 2013 Results Investor presentation July 17, 2013 2013年第2四半期業績 投資家向け説明資料 2013年7月17日 1

  2. Slide 2: Disclaimer

    Disclaimer The following presentation contains forward-looking statements that can be identified by terminology such as “guidance,” “prospects,” “Breakthrough Therapy,” “outlook,” “strategy,” “pipeline,” “potential,” “expected,” “promise,” “momentum,” “ongoing,” “outlook,” “expectation,” “likely,” “

  3. Slide 3: Agenda

    Agenda Group overview Joseph Jimenez Chief Executive Officer Financial review Harry Kirsch Chief Financial Officer Pharmaceuticals David Epstein Division Head, Novartis Pharmaceuticals Closing Joseph Jimenez Chief Executive Officer Q&A session Executive team 5 | Novartis Q2 2013 Results | July 17, 2

  4. Slide 4: Novartis delivered growth across all Divisions in Q2; raises guidance for FY 2013

    Novartis delivered growth across all Divisions in Q2; raises guidance for FY 2013 In Q2 2013:  Net sales increased +3% (in cc1), to USD 14.5 billion  Core operating income +2% (in cc)  Continued leadership in product innovation, including FDA Breakthrough Therapy designation for RLX030  Raising

  5. Slide 5: Summary of second quarter 2013 financial results

    Summary of second quarter 2013 financial results Change vs. Q2 2012 (in USD m) Q2 2013 % USD % cc Net sales 14 488 +1 +3 Operating income Core 3 755 -2 +2 Reported 2 970 -4 +1 Net income 2 548 -5 0 EPS (USD) Core 1.30 -4 +1 Reported 1.03 -6 -1 Free cash flow 1 785 -23 9 | Novartis Q2 2013 Results |

  6. 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  4 key approvals in Q2  Sales growth in all  In Q2 2013, ~ USD 20131,2 Divisions in Q2 2013 650 m of productivity in cc savings, incl.  FDA filing and Breakthrough Therapy  Growth products3 • ~ USD 340

  7. Slide 7: Strong progress on innovation in Q2 2013

    Innovation Strong progress on innovation in Q2 2013 Selected product Indication Milestone Systemic juvenile  FDA approval idiopathic arthritis Pharma-  Alzheimer’s disease FDA approval1 ceuticals Myopic choroidal  EU approval2 neovascularization Alcon  Glaucoma FDA approval 1 Approval refers to

  8. Slide 8: Our biosimilars pipeline continues to make strong progress

    Innovation – Sandoz Our biosimilars pipeline continues to make strong progress Sandoz Phase 3 biosimilar clinical trials Molecule Sandoz trial Number of ongoing Market size1 2012 Indication Phase 3 trials (USD bn) Etanercept • Psoriasis 8.5 Rituximab • Follicular Lymphoma 7.4 Pegfilgrastim • Breast

  9. Slide 9: In Q2 2013, sales grew across all of our divisions in cc

    Growth In Q2 2013, sales grew across all of our divisions in cc Net sales Growth Q2 2013 vs. PY (in USD m) (in cc) Net sales Core Opinc Pharmaceuticals 8 121 +1% - 6% Alcon 2 736 +6% +10% Sandoz 2 216 +3% +4% Vaccines & +18% +78%1 411 Diagnostics Consumer +12% +186% 1 004 Health 1 Lower core operati

  10. Slide 10: Our Pharmaceuticals growth products maintained strong momentum in Q2 2013

    Growth - Pharmaceuticals Our Pharmaceuticals growth products1 maintained strong momentum in Q2 2013 Net sales2 (in USD m) Q2 2012 Q2 2013 -3% +66% 576 468 +77% +38% +37% 308 315 289 +20% +80% nm4 148 59 33 3 1 Growth products are defined as products launched in 2008 or later, or with exclusivity unt

  11. Slide 11: Solid Q2 Alcon growth at 6%, driven by Surgical franchise

    Growth - Alcon Solid Q2 Alcon growth at 6%, driven by Surgical franchise 2013 Q2 sales by franchise Growth vs. PY Comment (in USD m) (in cc)  Increase in procedure 2013 Key growth and disposables Launches Surgical 1 009 +8%  YTD procedure growth below historic levels Q2: SimbrinzaTM, Jetrea®,  St

  12. Slide 12: Sandoz outperformed market in most key regions

    Growth – Sandoz Sandoz outperformed market in most key regions H1 2013 total net sales growth vs. PY Market1 Sandoz (% in cc) Central & Western Eastern Europe Europe2 13 13 6 4 North America Germany Asia-Pacific 0 0 0 2 9 9 Middle East & Africa Latin America 17 15 7 8 1 Net market growth estimate vs

  13. Slide 13: Consumer Health with double-digit growth across both OTC and Animal Health

    Growth – Consumer Health Consumer Health with double-digit growth across both OTC and Animal Health in Q2 2013 Q2 2013 Net sales Main drivers: (in USD m)  Growth of Global Priority brands +12% in cc 1 004 904  Re-launch into US1  Emerging Markets2: 16% growth in cc in Q2 China Russia Poland vs. P

  14. Slide 14: Strong Emerging Markets growth led by China and Russia

    Growth Novartis Group’s strong Emerging Markets1 growth was led by China and Russia Q2 2013 Group net sales (USD m) Growth vs. PY (in % cc2) +25% China +18% Russia Total Emerging +11% Markets 1 All markets except the US, Canada, Western Europe, Australia, New Zealand, and Japan 2 Constant currencies

  15. Slide 15: Emerging Markets growth has accelerated for six consecutive quarters

    Growth Novartis Group’s Emerging Markets1 growth has accelerated for six consecutive quarters Total Group Emerging Markets growth vs. PY (in % cc2) +11% +9% +7% +6% +6% +5% Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 1 All markets except the US, Canada, Western Europe, Australia, New Zealand, an

  16. Slide 16: Continued focus on quality improvements and upgrades across our ~100 sites

    Continued focus on quality improvements and upgrades across our ~100 sites However, Warning Letter was Progress on several dimensions received at Unterach site  97% satisfactory or good Inspection outcomes year-to-date outcomes Unterach, Austria  New manufacturing science Process and technology fu

  17. Slide 17: Productivity savings of approximately USD 650 million in Q2 2013

    Productivity Productivity savings of approximately USD 650 million in Q2 2013 Procurement Marketing and sales Savings Group M&S spend (USD m) (% sales) ~340 25.3% 25.2% ~280 Q2 2012 Q2 2013 Q2 2012 Q2 2013  Leverage scale  Stable M&S spend as % of sales despite ongoing investment in  Implement gl

  18. Slide 18: Agenda

    Agenda Group overview Joseph Jimenez Chief Executive Officer Financial review Harry Kirsch Chief Financial Officer Pharmaceuticals David Epstein Division Head, Novartis Pharmaceuticals Closing Joseph Jimenez Chief Executive Officer Q&A session Executive team 35 | Novartis Q2 2013 Results | July 17,

  19. Slide 19: Q2 contributed to a strong first half for Novartis

    Q2 contributed to a strong first half for Novartis Growth vs. PY in cc Growth vs. PY in cc Q2 H1 (in USD m) 2013 Reported Core 2013 Reported Core Net sales 3rd party 14 488 +3% 28 504 +4% Core operating income 3 755 +2% 7 469 +4% Operating income 2 970 +1% 5 866 +5% Core EPS (USD) 1.30 +1% 2.62 +5%

  20. Slide 20: Volume growth more than offset generic competition

    Growth Volume growth more than offset generic competition (% growth vs. PY) Group (Q2 2013) 8 8 -1 1 -5 3 -2 1 Underlying Price Fougera Underlying Generics CC growth FX USD volume growth impact growth Group (H1 2013) 8 8 -1 1 -4 4 -2 2 Underlying Price Fougera Underlying Generics CC growth FX USD vo

  21. Slide 21: Currency impacted sales and core operating income

    Currency Currency impacted sales and core operating income by 2 and 4 percentage points in Q2 Currency impact vs. PY (in % points) Sales Core operating income -1 -2 -2 -2 -2 -2 -2 -3 -4 -5 -5 -5 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 2012 2012 2012 2012 2013 2013 2012 2012 2012 2012 2013 2013 41 | Nova

  22. Slide 22: Continuous progress of growth products

    Growth Continuous progress of growth products1 (in USD m2) Group (% of sales) 27% 28% 28% 28% 30% 31% 4,491 4,150 4,210 3,961 3,890 3,681 13% vs PY Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Pharma (% of sales) 29% 30% 32% 33% 36% 37% 2,851 3,020 2,745 2,285 2,439 2,466 26% vs PY in cc Q1 2012

  23. Slide 23: Core operating income margin decreased by 0.3 percentage points

    Leverage Core operating income margin decreased by 0.3 percentage points, impacted by generic erosion Q2 20131 Core operating income Sales growth growth change margin (in % cc) (in % cc) (in % pts cc) (in %) Pharmaceuticals 1 -6 -2.3 30.4 Alcon 6 10 +1.4 37.5 Sandoz 3 4 +0.1 16.2 Vaccines & Diagnost

  24. Slide 24: Productivity savings contributed 4 percentage points to Group core margin

    Productivity Productivity savings contributed 4 percentage points to Group core margin Productivity savings (in USD bn) % of sales 4.3% 4.3% 1.2 1.2  18 sites divested, exited or in process of restructuring since Manufacturing Other Footprint program start productivity  Procurement savings of ~USD

  25. Slide 25: Free cash flow was USD 3.1 billion in H1 2013

    Cash flow Free cash flow was USD 3.1 billion in H1 2013 Free cash flow Free cash flow pattern (in USD bn) (past three year average) -29% 4.4 Q2 2.3 3.1 1.8 60% Q1 2.1 40% 1.3 H1 2012 H1 2013 H1 H2 Key reasons for variance (H1 2013):  Collection timing Spain / US - 0.5 bn  Other receivables - 0.4 b

  26. Slide 26: Net debt increased USD 2.0 billion to USD 13.6 billion in H1

    Net debt Net debt increased USD 2.0 billion to USD 13.6 billion in H1 (in USD bn) +2.0 0 -1 -8 -9 -10 -11 -12 -13 -14 -15 -11.6 +3.1 -6.1 +1.4 -1.0 -0.2 +0.8 -13.6 2012 Free Cash Dividends Treasury Share Net cash Others 2013 December Flow share repurchases used for June movements debt repayment 51 |

  27. Slide 27: 2013 Generic impact decreased but impact expected to shift to 2014

    Outlook 2013 Generic impact decreased but impact expected to shift to 2014 Expected impact* of Pharmaceuticals generics – illustrative 2012 2013 2014 2015  Upside from Diovan® mono US generic delay increasing 2013 reported sales growth  Expected to impact 2014 growth rates (underlying unchanged) 

  28. Slide 28: Strong first-half underlying performance in sales and core operating income

    Outlook Strong first-half underlying performance in sales and core operating income H1 2013 (Underlying cc Growth in %) 17 8  High-single digit underlying sales growth in H1 Sales Core  Full year underlying core operating Operating Income income growth expected to be lower than H1 Expected FY 2013

  29. Slide 29: Sales and core operating income guidance raised for full year 2013

    Outlook Sales and core operating income guidance raised for full year 2013 Barring unforeseen events Full Year Guidance, January 2013 (cc) New Full Year Guidance (cc) Group net sales to be in line with 2012 Group net sales to grow low-single digit Group core operating income to decline in mid- Group

  30. Slide 30: Agenda

    Agenda Group overview Joseph Jimenez Chief Executive Officer Financial review Harry Kirsch Chief Financial Officer Pharmaceuticals David Epstein Division Head, Novartis Pharmaceuticals Closing Joseph Jimenez Chief Executive Officer Q&A session Executive team 59 | Novartis Q2 2013 Results | July 17,

  31. Slide 31: Pharmaceuticals Division drives 10% underlying volume growth...

    Pharmaceuticals Division drives 10% underlying volume growth... Q2 2013 contribution to growth (in % cc) Underlying volume growth 10%  Growth products1 significant driver of volume growth: • now 37% of total sales Healthcare reforms & 0 (USD 3.0 bn) price changes • +26% in cc Generic competition2 9

  32. Slide 32: ...and continues to deliver cc sales growth despite Diovan loss of exclusivity

    ...and continues to deliver cc sales growth despite Diovan® loss of exclusivity Growth (in USD m) Q2 2013 Q2 2012 (% USD) (% cc) Net sales 8 121 8 255 -2 1 Core operating income 2 472 2 746 -10 -6 Operating income 2 557 2 741 -7 -3 Core operating income margin1 30.4 33.3 Operating income margin 31.5

  33. Slide 33: Emerging Markets sales growth was robust

    Emerging Markets sales growth was robust Growth Q2 2013 vs. PY (in % cc) Net sales Q2 2013 Emerging Markets1 8% USD 2.0 bn Established Markets -1% USD 6.2 bn 1 All markets except the Established Markets of the US, Canada, Western Europe, Australia, New Zealand, and Japan 65 | Novartis Q2 2013 Result

  34. Slide 34: China: dynamic share gains vs. multinational pharma companies

    China: dynamic share gains vs. multinational pharma companies (MNC) Quarter value growth vs. PY in % Sales and growth (IMS, LCUSD)1 (in USD m, growth in % cc) +21% cc 40 2012 2013 288 Novartis 30 Pharmaceuticals 230 MNC 20 excluding Novartis Pharmaceuticals 10 0 Q1 Q2 Q3 Q4 Q1 Q2 2012 Q2 2013 1 Anal

  35. Slide 35: Strong growth platform with exclusivity until 2017 and beyond

    Strong growth platform1 with exclusivity until 2017 and beyond Q2 2013 Q2 2013 Sales Growth vs. PY Indication (USD m) (% cc)  Wet age-related macular degeneration, DME2, 576 -3% RVO3, mCNV4  Multiple sclerosis 468 +66%  Chronic myeloid leukemia 315 +38%  Metastatic renal cell carcinoma, TSC SEGA

  36. Slide 36: Lucentis modest single-digit sales decline impacted by pricing and competitive pressure

    Lucentis® modest single-digit sales decline impacted by pricing and competitive pressure Lucentis® ex US sales and growth (in USD m, growth in % cc) -3% 604 576  Double digit volume growth offset by one-time price reductions required to secure reimbursement for new indications  First licensed comp

  37. Slide 37: Gilenya opportunity ex-US remains underappreciated

    Gilenya® opportunity ex-US remains underappreciated Gilenya® sales and growth (in USD m, growth in % cc) US RoW +41% 255 +109% 213  US: Significant expansion of 181 the oral market segment in Q2, Gilenya® MS1 share remains stable 102  EU: Market share growth continues with strong momentum, now lau

  38. Slide 38: Number of patients starting on Tasigna treatment remains on track

    Number of patients starting on Tasigna® treatment remains on track WW Tasigna®/Glivec® CML1 sales (Share of (USD m) CML franchise) 1,200 Tasigna® sales Tasigna® share 30% of CML franchise Glivec® sales 1,000 25% 800 20%  Tasigna® grew by 38% (cc) and reached USD 315 m in Q2 2013 600 15%  Treatment

  39. Slide 39: Serelaxin (RLX030) shown to decrease cardiac and renal biomarkers

    Serelaxin (RLX030) shown to decrease cardiac and renal biomarkers further supporting efficacy Geometric mean change Placebo Serelaxin (RLX030) Troponin T 1.0 p=0.01261 Loss of 0.9 cardiomyocytes  RLX030 shown to significantly 0.8 decrease cardiac and renal biomarkers 1.0 • indicating organ protecti

  40. Slide 40: Secukinumab (AIN457) shows superiority over Enbrel, filing on track for H2 2013

    Secukinumab (AIN457) shows superiority over Enbrel®, filing on track for H2 2013 FIXTURE study design >1,300 moderate-to-severe plaque psoriasis patients Induction Maintenance Wk 0 Wk 12 Wk 24 Wk 52  Both doses superior* to Enbrel® Enbrel® 50 mg**  Largest phase III biologic Secukinumab developmen

  41. Slide 41: Substantial opportunity for Xolair in chronic spontaneous urticaria (CSU)

    Substantial opportunity for Xolair in chronic spontaneous urticaria (CSU)1 ASTERIA II study: Mean weekly Itch Severity Score2 14 Placebo  The GLACIAL study met all key 150mg efficacy endpoints3 12 300mg • Approximately 34% of patients had 10 symptom resolution by Week 12, compared to 5% in the plac

  42. Slide 42: Pipeline delivered 6 major approvals / CHMP opinions in H1 2013

    Pipeline delivered 6 major approvals / CHMP opinions H1 2013, with up to 3 more expected in H2 2013 TOBI Podhaler®: FDA approval in cystic fibrosis  Ilaris®: EMA approval in gouty arthritis  H1 2013 Zortress®: FDA approval in liver transplantation  Exjade®: FDA approval in NTDT1  Ilaris®: FDA ap

  43. Slide 43: Solid performance in Q2 2013 improves full year outlook for Pharmaceuticals Division

    Solid performance in Q2 2013 improves full year outlook for Pharmaceuticals Division  10% underlying volume growth from Pharmaceuticals more than offsets loss of sales to generics  Strong regulatory performance with 6 major approvals in H1 2013 – with up to 3 more expected in 2013 fueling growth p

  44. Slide 44: Agenda

    Agenda Group overview Joseph Jimenez Chief Executive Officer Financial review Harry Kirsch Chief Financial Officer Pharmaceuticals David Epstein Division Head, Novartis Pharmaceuticals Closing Joseph Jimenez Chief Executive Officer Q&A session Executive team 87 | Novartis Q2 2013 Results | July 17,

  45. Slide 45: Solid progress on 2013 strategic priorities

    Solid progress on 2013 strategic priorities Progress in Q2 2013  Secured 4 key approvals Extend lead  Continued to invest in the pipeline, e.g. RLX030 FDA in Breakthrough Therapy designation granted in June innovation  Announced 5 positive key trials, e.g. AIN457 in psoriasis  Maintained launch

  46. Slide 46: Appendix

    th NovarTIs th NovarTIs 46

  47. Slide 47: Planned filings 2013 to 2017

    Planned filings 2013 to  2017 2013 2014 2015 2016  2017 AIN457 AFQ056 BKM120 BYM338 ATI355 LFF571 Psoriasis Fragile X syndrome Breast cancer sIBM 12 Spinal cord injury Cl.difficile infections LBH589 LCQ908 MEK162 CTL019 AUY922 LGX818 Multiple Myeloma FCS4 Solid Tumors Leukemia Solid tumors Solid T

  48. Slide 48: Operating Income / Core Operating Income reconciliation

    Operating Income / Core Operating Income reconciliation 2013 2012 CC Growth 2013 2012 CC Growth Q2 Q2 vs. PY H1 H1 vs. PY Core operating income 3 755 3 831 2% 7 469 7 438 4% Core Adjustment- Income Divestment related income 146 26 187 77 Others 28 152 121 259 Total exceptional income 174 178 308 336

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