Novartis Ag · SIX:NOVN
Novartis — Q1 2014 Earnings Presentation
54 slides from Novartis's earnings presentation, Apr 24, 2014
Slide 1: Q1 2014 Results Investor Presentation
Q1 2014 Results Investor presentation April 24, 2014
Slide 2: Disclaimer
Disclaimer This presentation contains forward-looking statements that can be identified by words such as “potential,” “expected,” “will,” “planned,” or similar terms, or by express or implied discussions regarding potential new products, potential new indications for existing products, or regarding
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 3 | Novartis Q1 2014 Results | April 24,
Slide 4: Q1 2014 delivered solid results with innovation momentum
In Q1 2014, we delivered solid results with innovation momentum and all divisions contributing to growth Sales of USD 14.0 billion, up +3% versus PY in cc1,2 Core2 operating income +6% in cc Delivered innovation momentum, including • Approvals, e.g., Xolair® in EU / US • Positive pipeline prog
Slide 5: Solid Q1 2014 financial results with core operating leverage in cc
Solid Q1 2014 financial results with core operating leverage in cc Q1 Change vs. PY1 (in USD m) 2014 % USD % cc2 Net Sales 14 022 +1 +3 Core2 Operating Income 3 657 0 +6 Operating Income 3 489 +22 +31 Net Income 2 968 +24 +30 Core EPS (USD) 1.31 +1 +6 EPS (USD) 1.21 +25 +30 Free Cash Flow2 765 -38 1
Slide 6: We delivered against our strategic priorities
We delivered against our strategic priorities Innovation Growth Productivity Approval of Xolair® in Sales growth in all Creation of Novartis US/EU Divisions in cc1 Business Services Positive Phase III and Emerging Growth Group G&A and M&S pivotal trials for LCZ696, Markets grow +9% vs. P
Slide 7: We achieved important product milestones
Innovation We achieved important product milestones Key approvals and portfolio news in Q1 2014 Approval Approval Approval JCVI approval, CSU/CIU Diabetic Macular HR+ Breast Cancer FDA Breakthrough in EU, US Edema & in Japan Therapy Pre-filled syringe in Designation Japan 7 | Novartis Q1 2014 Result
Slide 8: We advanced our pipeline significantly
Innovation We advanced our pipeline significantly Key Q1 pipeline progress LCZ696 Ph III in chronic heart failure Jakavi® Ph III in polycythemia vera LDE225 pivotal trial in advanced basal Biosimilar to Enbrel®1 Ph III cell carcinoma recruitment completed in chronic plaque-type psoriasis AIN457 in 2
Slide 9: Strengthened cancer immunotherapy program with acquisition of CoStim
Innovation We strengthened our cancer immunotherapy program with the acquisition of CoStim Improved competitive position in immune- oncotherapy Novel immune modulating targets and technology Complements CART-19 technology 9 | Novartis Q1 2014 Results | April 24, 2014 | Novartis Investor Presen
Slide 10: Each division contributed to top line growth in Q1
Growth Each of our divisions contributed to top line growth in Q1 Net sales % Change vs. PY1 (in USD m) (in cc) Net sales Core Operating Income Pharmaceuticals 7 807 +1% +4% Alcon 2 642 +6% +3% Sandoz 2 318 +4% -6% Consumer 1 040 +8% +3% Health Vaccines 215 +12% +4% 1 Group and Vaccines growth rates
Slide 11: Growth products and Emerging Growth Markets remain engines of performance
Growth Our growth products and Emerging Growth Markets remain engines of our performance across divisions Growth products transforming our Driving growth in emerging markets portfolio 31% +9% 1 of sales 1 Emerging Growth Markets vs. PY (in % cc). Group and Vaccines growth rates are based on pro form
Slide 12: Pharmaceuticals growth products maintained strong momentum
Growth - Pharmaceuticals Our Pharmaceuticals growth products maintained strong momentum in Q1 2014 Net sales, selected growth products1 (in USD m) Q1 2013 +6% Q1 2014 +31% 620 552 +19% +21% +20% 357 337 308 +24% +99% 173 +60% 97 57 Q Family2 1 All growth rates are in constant currencies 2 Q family i
Slide 13: Strong track record in Emerging Growth Markets
Growth We continued our strong track record in Emerging Growth Markets Emerging Markets growth vs. PY (in % cc) +9%1 +9% Led by +5% China Q1 growth +17% in cc Q1 2011 Q1 2012 Q1 2013 Q1 2014 1 Group and Vaccines growth rates are based on pro forma data excluding our blood transfusion diagnostics uni
Slide 14: We continued to enhance productivity
Productivity We continued to enhance productivity Group core G&A and M&S spend (% of sales in cc) -0.4% pts 30.2% 29.8% Core G&A Core M&S Q1 20131 Q1 2014 1 Based on pro forma data excluding our blood diagnostics unit. Please see page 2 of the Press Release or page 52 of the Condensed Interim Financ
Slide 15: Creation of Novartis Business Services
Productivity Today we announced the creation of Novartis Business Services New organization to deliver standardized, quality services at lower cost to the divisions NBS to address functions common across all divisions, e.g., IT, Procurement, FRA1 operations, etc. Novartis organization to remai
Slide 16: Novartis Business Services to increase competitiveness
Productivity We expect Novartis Business Services to increase overall competitiveness Goals Enable divisions to be more competitive by allowing them to focus on 1 customer-facing activities Drive standardization and simplification, to improve compliance and 2 reduce complexity and bureaucracy 3 Deli
Slide 17: Continued focus on quality system upgrades
High Performance with Integrity Continued focus on quality system upgrades is resulting in significant improvements 65 All good or Health authority manufacturing inspections in Q1 acceptable 17 | Novartis Q1 2014 Results | April 24, 2014 | Novartis Investor Presentation
Slide 18: Portfolio transformation focusing on leading businesses
We also announced our portfolio transformation, focusing Novartis on leading businesses with innovation power and global scale Components1 The opportunity for Novartis Acquire GSK oncology Strengthen Pharmaceuticals Division & Oncology business products Leverage our development and commercial ca
Slide 19: Transactions to strengthen Novartis going forwards
Transactions to strengthen Novartis going forwards Detail 1 Focus on the three big growth engines of our business 2 Improve the financial profile of the company 3 Position Novartis for future healthcare industry challenges 19 | Novartis Q1 2014 Results | April 24, 2014 | Novartis Investor Presentati
Slide 20: Key ECN leadership changes
Key ECN leadership changes Kevin Buehler Richard Francis Retiring as Alcon Division head Appointed Sandoz Division head Jeff George André Wyss Appointed Alcon Division head Appointed head of Novartis Business Services 20 | Novartis Q1 2014 Results | April 24, 2014 | Novartis Investor Presentation
Slide 21: Thank you Kevin
Thank you Kevin 21 | Novartis Q1 2014 Results | April 24, 2014 | Novartis Investor Presentation
Slide 22: 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 22 | Novartis Q1 2014 Results | April 24,
Slide 23: Sales and core operating income grew in constant currencies
Novartis grew sales and core operating income in constant currencies and achieved leverage in Q1 Q1 Change vs. PY1 (in USD m) 2014 % USD % cc Net Sales 14 022 +1 +3 Core Operating Income 3 657 0 +6 Operating Income 3 489 +22 +31 Net Income 2 968 +24 +30 Core EPS (USD) 1.31 +1 +6 EPS (USD) 1.21 +25 +
Slide 24: Solid underlying volume growth
Solid underlying volume growth Group Q1 2014 (in % growth vs. PY1) Net sales Core operating income Underlying volume 8 18 Price -1 -2 Underlying growth2 7 16 Generics impact -4 USD 0.5 bn -10 CC growth 3 6 Fx -2 -6 USD growth 1 0 1 Group and Vaccines growth rates are based on pro forma data excludin
Slide 25: Group core margin increased 0.9 percentage points in cc
Group core margin increased 0.9 percentage points in constant currencies Q1 2014 vs. PY1 Net sales Core operating Core margin growth income growth Core ROS change in cc (in % cc) (in % cc) (%) (% pts) Pharmaceuticals 1 4 32.5 1.0 Alcon 6 3 35.0 -0.9 Sandoz 4 -6 16.7 -1.7 Consumer Health 8 3 5.8 -0.4
Slide 26: Continued negative currency impact
Continued negative currency impact on net sales and core operating income Currency impact vs. PY (in % points) Net sales Core operating income -1 -2 -2 -2 -2 -2 -3 -4 -4 -6 -6 -8 Q1 Q2 Q3 Q4 Q1 FY1 Q1 Q2 Q3 Q4 Q1 FY1 2013 2014 2013 2014 FY impact: -2% FY impact: -5% 1 Assuming March average exchange
Slide 27: Free cash flow declined versus prior year
Free cash flow declined versus prior year Q1 free cash flow (in USD bn) 1.2 Key components vs. prior year 0.8 Timing of tax payment Timing of revenue deduction payment Negative currency effects 20131 2014 1 Based on pro forma data excluding our blood transfusion diagnostics unit. Please see pa
Slide 28: Net debt increased by USD 4.7 billion to USD 13.5 billion
Net debt increased by USD 4.7 billion to USD 13.5 billion in Q1 2014 due to dividend payout (in USD bn) - 4.7 -8.8 +0.8 +2.4 -2.4 -0.4 -13.5 -6.8 +1.7 December Free cash flow Dividends Divestment Proceeds Share Others March 2013 proceeds from options repurchases1 2014 1 Including repurchases on the
Slide 29: Full year outlook maintained
Full year outlook maintained Barring unforeseen events For modelling purposes, assumed Diovan® monotherapy Gx entry moved to July 1, 2014 Full year Gx impact now expected to be around USD 2.7 bn Full year outlook unchanged. Group net sales expected to grow low- to mid- single digit (cc)1: • Ph
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 30 | Novartis Q1 2014 Results | April 24,
Slide 31: Pharmaceuticals sales +1% in cc in Q1 2014
Pharmaceuticals sales +1% in cc in Q1 2014 Growth (in USD m) Q1 2014 Q1 2013 (% USD) (% cc) Net Sales 7 807 7 877 -1 +1 Core Operating Income 2 539 2 573 -1 +4 Operating Income 2 221 2 539 -13 -7 Core Operating Income margin 32.5% 32.7% Operating Income margin 28.4% 32.2% Free Cash Flow 1 274 1 627
Slide 32: Underlying volume growth +6%
Underlying volume growth +6% Q1 2014 contribution to growth Growth product sales (in % cc) (in USD bn) +17% cc Underlying volume growth 6 3.2 2.8 Healthcare reforms & 1 price changes Generic competition1 6 Overall sales growth 1 Q1 2013 Q1 2014 % of total sales 35% 41% 1 Primarily Zometa® /Aclasta®,
Slide 33: Emerging Growth Markets grew despite Venezuela import limitations
Emerging Growth Markets grew in Q1 despite import limitations in Venezuela Growth Q1 2014 vs. PY (in % cc) Net sales Q1 Emerging Growth Markets 7% USD 1.9 bn Established Markets -1% USD 5.9 bn 33 | Novartis Q1 2014 Results | April 24, 2014 | Novartis Investor Presentation
Slide 34: Unparalleled growth platform with exclusivity until 2018
Unparalleled growth platform1 with exclusivity until 2018 and beyond Q1 2014 Q1 2014 Sales Growth vs. PY Indication (USD m) (% cc) Wet AMD, DME, RVO, mCNV 620 6% Multiple sclerosis 552 31% Metastatic renal cell carcinoma, TSC SEGA, pNET, HR+/HER2- 357 19% advanced breast cancer Chronic myelo
Slide 35: Gilenya exceeded USD 2 bn sales mark
Gilenya® exceeded USD 2 bn sales mark for rolling 12 months Gilenya® sales and growth (in USD m, growth in % cc) US RoW MS demand grew 15% in 2013 to +65% USD 16 bn1 and is expected to be +7% 292 >USD 18 bn by 20182 260 243 Over 91 500 patients treated with Gilenya® WW3 to date 178 EU: Market
Slide 36: Lucentis new indications making significant contribution
Lucentis® new indications making significant contribution – Brand back to growth Lucentis® ex-US1 sales2 and growth (in USD m, growth in % cc) +6% Ex-US medical retina demand expected to be > USD 6 bn by 20183 596 620 Lucentis® pre-filled syringe launched in first 23% 40% European countries, reg
Slide 37: Ultibro Breezhaler positive launch vs. external analogs
Ultibro® Breezhaler® positive launch vs. external analogs Cumulative USD sales since launch Ex-US 30 Launched in 7 countries since November 24 2013: Japan, Germany, Canada, Netherlands, Denmark, Ireland and Norway 18 USD m Launch in 25+ countries expected in 2014 12 Filing in US expected in Q4
Slide 38: Adjusted peak sales estimates of Afinitor in breast cancer
We have adjusted our estimates of potential peak sales of Afinitor® in breast cancer to USD 1.5 - 1.7 bn Afinitor® global sales (in USD m) 400 Launch in Breast Cancer Slower Q1 growth due to shorter than anticipated duration of treatment since 350 Afinitor® is often used in later lines of 300 trea
Slide 39: Xolair approval in Chronic Spontaneous Urticaria
CSU significantly Early impacts approval of Xolair patients’ lives ®1 in Chronic Spontaneous Urticaria2 both in EU and US Only approved therapy for the up to 50% of patients with CSU with inadequate response to licensed doses of H1-antihistamines3 Pruritus Hives Regulatory reviews currently ongo
Slide 40: Head-to-head trial of AIN457 in psoriasis against Stelara
We launched head-to-head trial with AIN457 (secukinumab) in psoriasis against Stelara® CLEAR study: Head-to-head study of Secukinumab vs Stelara®1 Global Phase IIIb study has started patient Week 16 Primary enrollment Endpoint (PASI 90) Wk 0 16 52 Primary endpoint is PASI 90 measured at Week 16
Slide 41: Heart Failure Franchise update
Heart Failure Franchise update RLX030 (serelaxin) LCZ696 In EU Data Monitoring Committee unanimously recommended early closure of PARADIGM- • Request for re-examination submitted HF trial in chronic heart failure with reduced • CHMP opinion expected by end of May ejection fraction (HFrEF) based
Slide 42: LCZ696 potential new standard of care in HFrEF
LCZ696 potential to become the new standard of care foundation therapy in heart failure with reduced ejection fraction (HFrEF) PARADIGM-HF Study Design PARADIGM-HF is the largest heart Randomization Double-blind randomized failure trial ever conducted so far N = 8,436 patients treatment period T
Slide 43: Large and growing HFrEF patient population
Large and growing1 heart failure with reduced ejection fraction (HFrEF) patient population Potential CHF HFrEF patient population in the US and EU52 * US 3.2M 2.7M 2.2M EU5 2.1M 1.8M 1.4M 11M HFrEF patients4 Rx treated3 3.6M potential patients for LCZ696 CHF patients (NYHA5 II-IV)3,4 diagnosed3 *
Slide 44: LDK378 (ceritinib) for ALK+ NSCLC
LDK378 (ceritinib) for ALK+ NSCLC1 – Publication in New England Journal of Medicine in March 2014 Clinical study of LDK378 clinical response in ALK+ advanced NSCLC patients treated at 400 mg and above: Best % change in tumor response from baseline in NSCLC patients treated with ceritinib Response
Slide 45: LBH589 met primary PFS endpoint in multiple myeloma
LBH589 (panobinostat) met primary progression free survival endpoint in multiple myeloma Panorama-11 Study design Treatment Phase I Treatment Phase II Follow-up Submitted in US in March Eight 21-Day cycles (24 weeks) Four 42-Day cycles (24 weeks) 2014. Submission in EU Panobinostat (TIW) + Panobin
Slide 46: GSK oncology products strengthen innovative portfolio
GSK oncology products will strengthen and complement our innovative portfolio1 GSK innovative oncology products Key numbers Key products Product Mechanism Current Indication(s) Votrient® VEGFR, Renal cell carcinoma, 2013 sales2 ~USD 1.6 bn PDGFR soft tissue sarcoma Tafinlar® B-Raf Metastatic / advan
Slide 47: Ongoing clinical trials of GSK's top oncology assets
On-going clinical trials of GSK’s top 3 oncology assets Drug Potential Indication Clinical Phase Metastatic/Advanced Renal Cell Carcinoma Votrient® + PD1 Phase I/II In combination with MK3475 (Anti-PD-1 Antibody) Votrient® Adjuvant Therapy in Renal Cell Carcinoma Phase III Metastatic BRAF-mutant Mel
Slide 48: Currently expected Pharmaceuticals newsflow highlights
Currently expected Pharmaceuticals newsflow highlights Afinitor® Japan action in HR+ Breast cancer LDK378 FDA action in NSCLC Lucentis® Japan action in Diabetic Macular Edema H1 2014 Lucentis® Japan approval of pre-filled syringe RLX030 FDA action in Acute Heart Failure RLX030 CHMP opinion in
Slide 49: 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 49 | Novartis Q1 2014 Results | April 24,
Slide 50: We are delivering against our priorities
We are delivering against our priorities Announced portfolio transformation, focusing on leading Divisions Delivered innovation momentum, including • Approvals, e.g., Xolair® in EU / US • Positive pipeline progress, e.g., LCZ696 • Bexsero® in EU and US Grew with core operating leverage in cc,
Slide 51: Appendix
Appendix Ub) NOVARTIS
Slide 52: Planned filings 2014 to 2018
Planned filings 2014 to 2018 2014 2015 2016 2017 2018 LBH589* BKM120 BYM338 DEB025 AUY922 QAX576 Multiple Myeloma Breast cancer sIBM9 HCV infection Solid tumors Allergic diseases LCQ908 MEK162 CTL019 KAE609 BAF312 QGE031 FCS1 NRAS Mutant Melanoma Leukemia Malaria Multiple sclerosis Allergic dise
Slide 53: Meet the Management Investor Day
“Meet the Management” Investor Day June 17th -18th 2014, Zurich / Basel Hosted by Joerg Reinhardt, Chairman, June 17th Informal dinner and Joe Jimenez, CEO Four interactive Division / Function heads promoting open June 18th breakout sessions dialogue with operational management 53 | Novartis Q1
Slide 54: Key Definitions
Key Definitions This presentation contains several important words or phrases that we define as below: ALK+ NSCLC: Anaplastic lymphoma kinase positive (ALK+) Non-small cell lung cancer (NSCLC) Approval: In Pharmaceuticals, Alcon and Vaccines in US and EU; each indication and regulator combination co