Novartis AG · SIX:NOVN
Novartis — Q1 2010 Earnings Presentation
54 slides from Novartis's earnings presentation, Apr 20, 2010
Slide 1: First Quarter 2010 Results
Novartis First Quarter 2010 Results Investor presentation April 20, 2010 2010年第1四半期業績 投資家向け説明会資料 2010年4月20日 1
Slide 2: Disclaimer
Novartis Disclaimer These materials contain certain forward-looking statements relating to the Group's business, which can be identified by terminology such as “planned,” "expected", "will", "potential", "pipeline", “outlook,” or similar expressions, or by express or implied discussions regarding po
Slide 3: Agenda
Novartis Agenda Group overview Joseph Jimenez Chief Executive Officer Financial Review Jon Symonds Chief Financial Officer Pharmaceuticals David Epstein Division Head, Novartis Pharmaceuticals Summary Joseph Jimenez Chief Executive Officer Q&A session Management team 5 | Novartis First Quarter 2010
Slide 4: Group overview
Novartis Group overview Q1 2010 performance Novartis priorities • Innovation • Growth • Productivity Note: Core results for operating income, net income and earnings per share (EPS) eliminate the amortization of intangible assets, the impact of acquisition-related factors and other significant e
Slide 5: Strong performance in Q1 2010
Novartis Strong performance in Q1 2010 Exceptional sales growth in Q1 • Net sales growth of +25% in USD (+18% in constant currencies, CC) • Recently launched products deliver USD 1.9 bn in Q1; 16% of Group net sales1 • Top 6 emerging markets achieve growth of +38% in USD (+22% CC) Productivity g
Slide 6: Significant growth opportunities outweigh challenges facing healthcare industry
Novartis Significant growth opportunities outweigh challenges facing healthcare industry Opportunities: Challenges g Significant unmet medical needs Aging population Healthcare cost containment Growing demand in emerging Conservative regulators markets Advances in science and R&D productivity techno
Slide 7: Novartis priorities
Novartis Novartis priorities Priorities: Delivering innovation, growth and productivity Innovation Growth Productivity Build pipeline to extend Rejuvenate the Pharma Improve profitability lead in innovation portfolio Streamline and simplify Key growth driver for Accelerate growth of the
Slide 8: Leading the industry in NME approvals in the US
Novartis Innovation Leading the industry in NME approvals in the US Number of US FDA new molecular entity approvals for selected companies 2000 – March 2010 Novartis 19 Pfizer/Wyeth 16 Merck/SGP 10 Roche/Genentech 10 J&J 8 GSK 8 BMS 6 Sanofi-Aventis 6 Eli Lilly 5 AstraZeneca 3 Abbott 1 Notes: Novart
Slide 9: Building the pipeline in 2010
Novartis Innovation Building the pipeline in 2010 Key approvals expected or received in 2010 Compound Indication US EU Gil i ® (FTY720) Gilenia M lti l sclerosis Multiple l i Pharma Tasigna® Newly diagnosed CML1 Lucentis® DME2 Vaccines and Diagnostics Menveo® Meningococcal disease ; ; Meta
Slide 10: Recently launched products contribute 25% of net sales
Novartis Growth Recently launched products contribute 25% of net sales Recently launched product sales1 (USD bn) % of Group net sales 12% 16% 25% 3.0 +164% 1.1 1.9 +68% 1.2 Tacrolimus Q1 2009 Q1 2010 Q1 2010 + A(H1N1) A (H1N1) pandemic vaccines Launch products 1 Major products launched since 2007 ex
Slide 11: Emerging markets 24% of Novartis sales growing dynamically
Novartis Growth Emerging markets 24% of Novartis sales growing dynamically Q1 2010 emerging market sales (Percentage of net sales) 29 24 25 24 23 12 19 Other emerging 14 markets3 14 16 Top 6 emerging 13 markets1 10 9 10 8 Group Pharma Vaccines and Sandoz Consumer Diagnostics Health Top 6 emerging ma
Slide 12: Building global scale: Sandoz
Novartis Growth Building global scale: Sandoz +81% Q1 growth vs. previous year1 Biosimilars Continued launches of Zarzio® and Binocrit® oncology l across EU and d RoW R W Oncology EBEWE fully integrated and Oncology Business injectables Unit established, delivering strong results Rapid tacro
Slide 13: Building global scale: Vaccines and Diagnostics
Novartis Growth Building global scale: Vaccines and Diagnostics Met delivery schedules for pandemic customers Flu Positive EMA feedback on A (H5N1) pre-pandemic leadership p flu vaccine; on track for launch in 2010 Menveo® approved in US and EU in Q1 Meningitis MenB vaccine to be submitted i
Slide 14: Building global scale: Consumer Health
Novartis Growth Building global scale: Consumer Health Prevacid24HR® achieved 30% share in the US OTC PPI market OTC Voltaren® in Europe p and Excedrin® in the US key y growth drivers Air Optix® off to strong start; key growth driver for CIBA 2010 Vision Air Optix Multi-focal® gaining strong
Slide 15: Modified Pharma operating models in US and China
Novartis Growth Modified Pharma operating models in US and China: Anticipating and shaping the future Created four new business units • Primary Care • Multiple Sclerosis • Psychiatry/Neuroscience • Respiratory/Transplant/Infectious Disease Regional primary care operating units aligned under Head
Slide 16: Customers First initiative gaining traction
Novartis Growth Customers First initiative gaining traction Objectives Single voice to better meet customer needs Sales growth from better customer focus Focus areas Key Account Management for hospitals, wholesalers and retailers Co-promotion Co promotion of product offerings Rolling out in
Slide 17: Create leading global platform in eye care with Alcon
Novartis Growth Create leading global platform in eye care with Alcon Enhance position as a global leader in ophthalmology Maximize revenue and cost synergies Accelerate change g within Novartis Maintain and build Alcon’s momentum 33 | Novartis First Quarter 2010 Results | April 20, 2010 成長
Slide 18: Productivity initiatives improving profit and funding growth
Novartis Productivity Productivity initiatives improving profit and funding growth Pharma Reduced Marketing & Sales Continued strong sales growth expenditure to 27.9% of of +7% vs PY (CC) Pharma sales, -1.6 ppt vs PY • Geo-tailoring • Centralization of key services Production COGS Core ROS i
Slide 19: Agenda
Novartis Agenda Group overview Joseph Jimenez Chi f Executive Chief E ti Officer Offi Financial review Jon Symonds Chief Financial Officer Pharmaceuticals David Epstein Division Head, Novartis Pharmaceuticals Summary Joseph Jimenez Chief Executive Officer Q&A session Management team 37 | Novartis Fi
Slide 20: Financial review
Novartis Financial review Group and divisional overview Growth • Sales: A (H1N1) vaccines, pipeline products and emerging markets Productivity • Operating margin improvement • Net income and EPS • Free cash flow and liquidity Summary 39 | Novartis First Quarter 2010 Results | April 20, 2010
Slide 21: Strong sales growth drives operating income and cash flow
Novartis Strong sales growth drives operating income and cash flow Growth USD m Q1 2010 Q1 2009 % USD % CC1 Net sales 12 131 9 709 25 18 Core operating income 3 865 2 611 48 41 Operating income 3 511 2 347 50 42 Core EPS (USD) 1.45 1 01 1.01 44 36 EPS (USD) 1.29 0.87 48 40 Free cash flow before divi
Slide 22: Strong volume growth drives sales
Novartis Growth Strong volume growth drives sales Q1 2010 sales growth 25 19% volume growth 7 Price effect -2ppts (Sandoz and Vaccines and Diagnostics, 19 Pharma neutral) 18 2 1 US healthcare reform manageable within guidance Volume Growth Growth Price (CC) (USD) Acquisitions/ Currency Divestm
Slide 23: Strong volume growth drives results – currency positive on sales and profit
Novartis Growth Strong volume growth drives results – currency positive on sales and profit Q1 2010 operating income growth 50 2 Exceptional items add 2ppts 48 to reported growth Main exceptional items in 2010 7 • Pharma (Protez impairment/ Teva settlement) 41 • Sandoz (AWP settlement) Currency
Slide 24: All divisions contribute to strong Q1 sales growth
Novartis Growth All divisions contribute to strong Q1 sales growth Sales Growth USD 12.1 bn USD m % USD % CC 14 1.4 Vaccines USD 9.7 bn and 1 361 451% 436% 1.5 Diagnostics 0.2 1.3 2.0 Consumer 1 478 13% 7% 1.7 Health Sandoz 2 001 16% 9% 7.3 6.4 Pharma 7 291 13% 7% Q1 2009 Q1 2010 Group 12 131 25% 18
Slide 25: Strong sales of A (H1N1) vaccines result in significant contributions
Novartis Growth Strong sales of A (H1N1) vaccines result in significant contributions Sales revenue in Q1 reaches USD 1.1 billion (USD 1 1.0 0 billion billi ini Q4 2009) Sales revenue derives from • Completion of 2009 contracts • Additional orders • Shipments to Southern Hemisphere markets Sal
Slide 26: Portfolio rejuvenation and emerging markets drive sales growth
Novartis Growth Portfolio rejuvenation and emerging markets drive sales growth Recently launched product sales1 Emerging market sales (USD bn) (USD bn) % of Group net sales 12% 16% 25% 3.0 12.1 1.2 +22% CC 9.7 1.1 0.8 3.2 +21% CC 1.9 2.5 1.2 7.7 +17% CC 6.4 Q1 2009 Q1 2010 Q1 2010 Q1 2009 Q1 2010 +A
Slide 27: Core operating margins improved by 5 ppts
Novartis Productivity Core operating margins improved by 5 ppts Core operating margin Core operating income % CC Core +5.0 ppts (USD m) growth margin 26.9 % 31.9 % Consumer 288 288 5% 19.5% Health 450 923 Sandoz 450 21% 22.5% 254 347 9 Vaccines and 923 NM 67.8% Diagnostics 2 171 2 431 Pharma 2 431 6
Slide 28: A (H1N1) and continued productivity drive core operating income margin improvement
Novartis Productivity A (H1N1) and continued productivity drive core operating income margin improvement Impact on core operating margin (% pts) Core operating income margin 26.9 Q1 2009 Other revenues -0.3 Cost of Goods Sold +0.1 SG&A +5.0 +3.7 Research & Development +1.9 Other Income and Expense,
Slide 29: Core EPS grows 44% (36% CC)
Novartis Productivity Core EPS grows 44% (36% CC) Impact on core EPS USD Growth (% pts) Core operating income 48 Income from associated companies -2 Financial income +5 Interest expense Ӎ T Taxes -7 Core net income 44 Core EPS 44 57 | Novartis First Quarter 2010 Results | April 20, 2010 生産性向上 コアEPSは
Slide 30: Free cash flow grows 93% to USD 2.9 billion
Novartis Productivity Free cash flow grows 93% to USD 2.9 billion +1 506 Free cash flow Q1 2009 Cash flow from +1 354 operating activities +1 397 Investments in property, +64 (+93%) plant and equipment Other -21 +2 903 Free cash flow Q1 2010 59 | Novartis First Quarter 2010 Results | April 20, 2010
Slide 31: Net liquidity building for Alcon completion
Novartis Productivity Net liquidity building for Alcon completion Net liquidity (USD m) USD 5.6 bn Net liquidity improves by +1 969 USD 5.6 billion since March 2009 -3 3 613 +3 461 Gross liquidity and debt reflect March 2010 USD 5 billion bond issue 19 898 17 449 On track for second half 2010
Slide 32: Summary – Financial review
Novartis Summary – Financial review Barring unforeseen events Strong Q1 2010 • Net sales up 25% to USD 12.1 bn • EPS up 48% to USD 1.29 • Free cash flow up 93% to USD 2.9 bn Reaffirming outlook for 2010 • Incremental USD 400 million of sales from A (H1N1) vaccines Currency assumptions: • If ex
Slide 33: Agenda
Novartis Agenda Group overview Joseph Jimenez Chi f Executive Chief E ti Officer Offi Financial review Jon Symonds Chief Financial Officer Pharmaceuticals David Epstein Division Head, Novartis Pharmaceuticals Summary Joseph Jimenez Chief Executive Officer Q&A session Management team 65 | Novartis Fi
Slide 34: Strong performance in Pharma for Q1
Novartis Strong performance in Pharma for Q1 Strong net sales growth in Q1 • Net sales growth of 13% in USD (+7% CC) • Recently launched products delivered USD 1.5 bn in Q1; 20% of sales Productivity gains improving efficiency and funding future growth • Core operating income margin 33.3% • Cont
Slide 35: Sales growth 7% in CC, accelerating cash flow
Novartis Sales growth 7% in CC, accelerating cash flow Growth USD m Q1 2010 Q1 2009 % USD % CC1 Net sales 7 291 6 433 13 7 Core operating income 2 431 2 171 12 6 Operating income 2 327 2 062 13 7 Core return on net sales 33.3 33.7 Return on net sales 31.9 32.1 Free cash flow 1 855 27 1 In constant c
Slide 36: Novartis: Strong growth relative to market
Novartis Growth Novartis: Strong growth relative to market YTD Sales YTD Market Share Feb 2010 YTD % Growth vs PY (USD bn) MS % vs PY NOVARTIS PHARMA 10.3% 4.6 4.0% 0.2% LILLY 7.5% 3.3 2.8% 0.1% BRISTOL-MYERS SQB. 5.3% 2.2 1.9% 0.0% ASTRAZENECA 4.8% 5.6 4.8% 0.0% ROCHE 2.6% 4.9 4.2% 0.0% MERCK & CO
Slide 37: All therapeutic franchises contributing to growth
Novartis Growth All therapeutic franchises contributing to growth Sales by therapeutic area Q1 2010 (USD m) Growth vs PY in CC% Oncology 2 405 14% Cardiovascular and Metabolism 1 884 7% Neuroscience and Ophthalmics 901 24% Immunology and Infectious Diseases 540 14% Respiratory 147 5% Other Products
Slide 38: Growth broad based - across all regions
Novartis Growth Growth broad based - across all regions Net sales Q1 2010 USD 7.3 billion Q1 Growth in CC vs PY Europe United States (38%) (32%) US +6% 2.4 Europe 2.8 +10% Latin America and Canada +12% Asia, Africa and Australia +4% 0.6 1.5 Latin America and Canada Total +7% Asia, Africa (9%) and Au
Slide 39: Recently launched brands account for 20% of total sales
Novartis Growth Recently launched brands account for 20% of total sales, continuing to rejuvenate our portfolio Recently launched product sales1 (USD m) +56% CC 1 455 872 Q1 2009 Q1 2010 % of total sales 14% 20% 1 Major products launched since 2007 77 | Novartis First Quarter 2010 Results | April 20
Slide 40: Rich portfolio of recent and expected 2010 launches
Novartis Innovation Rich portfolio of recent and expected 2010 launches is our focus, prior to Diovan® and Zometa® patent losses Patented Mechanism of action Indication in 2015 Bcr-Abl, c-Kit and PDGF-R Tasigna® y tyrosine kinase Inhibitor Chronic Myeloid Leukemia 9 Afinitor® Inhibition of mTO
Slide 41: 2010 is another busy year as we progress our pipeline
Novartis Innovation 2010 is another busy year as we progress our pipeline Selected key pipeline milestones in Development FTY720 (Gilenia®) in multiple sclerosis (US). Granted priority review by FDA in US Tasigna T i ® in i newly l di diagnosed d CML1 (US,EU). (US EU) Granted G t d priority i it
Slide 42: Strong data drive Gilenia momentum
Novartis Innovation Strong data drive Gilenia® momentum Previously treated patients1 Treatment naive patients1 -44% -62% New Gilenia data2 0.6 0.50 0.6 0 45 0.45 show 0.4 potential benefits Annualized 0.4 0.28 of switching from relapse 0.17 0.2 0.2 intramuscular rates Interferon beta-1a 0.0 0.0 pres
Slide 43: Tasigna: Growing share in 2nd line CML
Novartis Innovation Tasigna®: Growing share in 2nd line CML, 1st line approval expected mid 2010 Tasigna® vs. Dasatinib (US) % share of sales Steady uptake since launch; with leadership in some countries % share (left axis) Submitted for 1st Line CML Weekly TRx (right axis) indication in US, EU,
Slide 44: We have restructured the US for success in Primary Care and Specialty
Novartis Productivity We have restructured the US for success in both Primary Care and Specialty markets - taking out costs in the process Brought all key primary care functions under one leadership • Further building upon customer centric model implemented in 2009 • Accelerating decision making
Slide 45: Significant productivity savings - improving profit and funding future growth
Novartis Productivity Significant productivity savings - improving profit and funding future growth Sales and SG&A Growth1 % Sales growth SG&A growth 12.9% 12.1% 11.4% 10.6% 8.7% 7.4% 7.3% 5.0% 2.4% 2.1% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 1 In constant currencies 89 | Novartis First Quarter 2010 Results
Slide 46: 2010 Pharma outlook
Novartis 2010 Pharma outlook Barring unforeseen events Growth: • Mid to high single digit sales growth • Strong underlying volume growth • “Launch” brands continue to drive sales growth Productivity: • Core operating income growing ahead of sales Innovation: • Continued strong pipeline newsflo
Slide 47: Agenda
Novartis Agenda Group overview Joseph Jimenez Chi f Executive Chief E ti Officer Offi Financial review Jon Symonds Chief Financial Officer Pharmaceuticals David Epstein Division Head, Novartis Pharmaceuticals Summary Joseph Jimenez Chief Executive Officer Q&A session Management team 93 | Novartis Fi
Slide 48: Making progress on 2010 priorities
Novartis Making progress on 2010 priorities Priorities: Delivering innovation, growth and productivity Innovation Growth Productivity Key approvals in Q1 Recently launched Continued progress on products contributed productivity in all • Menveo® (US/EU) 25% of net sales divisions • Metaxalone M
Slide 49: Strong Q1 affirms mid single digit sales growth outlook for 2010
Novartis Strong Q1 affirms mid single digit sales growth outlook for 2010 Barring unforeseen events 2010 expectations maintained: Mid-single-digit net sales growth (CC)1 Improvement in Group operating income margin 1 Excluding Alcon contribution 97 | Novartis First Quarter 2010 Results | April 2
Slide 50: Appendix
Novartis Appendix 99 | Novartis First Quarter 2010 Results | April 20, 2010 付録 100| Novartis First Quarter 2010 Results | April 20, 2010 50
Slide 51: Q1 2010 net sales growth components by division
Novartis Q1 2010 net sales growth components by division Acquisitions/ Total Total Volume Price Divestments CC1 Currency USD Pharmaceuticals 7% 0% 0% 7% 6% 13% Vaccines & 443% -7% 0% 436% 15% 451% Diagnostics Sandoz 11% -8% 6% 9% 7% 16% Consumer Health 6% 1% 0% 7% 6% 13% Group 19% -2% 1% 18% 7% 25%
Slide 52: Q1 2010 income from associated companies
Novartis Q1 2010 income from associated companies USD m Q1 2010 Q1 2009 % USD Share of est. Roche net income 158 142 11 Depreciation and amortization of tangible and intangible assets -34 -31 10 Genentech restructuring impact -43 Catch-up for actual Roche previous year -40 Net income effect Roche 81
Slide 53: Pharmaceuticals pipeline – Filings 2010 > 2014
Novartis Pharmaceuticals pipeline – Filings 2010 > 2014 2010 2011 2012 2013 ≥ 2014 AIN457 INC424 AFQ056 LCQ908 AEB071 ATI355 Behcet’s Uveitis Myelofibrosis PD-LID 8 Type II diabetes Kidney & heart transpl. Spinal cord injury EPO906 LDE225 AGO178 LCZ696 BAF312 QAX028 Ovarian cancer Gorlin’s syndrome
Slide 54: Core results
Novartis Core results The Group’s core results – including core operating income, core net income and core earnings per share – exclude the amortization of intangible assets, impairment charges, expenses relating to the integration of acquisitions as well as other items over a USD 25 million thres