Novartis is a global healthcare company based in Basel, Switzerland, with roots dating back more than 150 years. We provide healthcare solutions that address the evolving needs of patients and societies worldwide. Novartis products are available in more than 180 countries and they reached nearly 1 billion people globally in 2015. About 123 000 people of 144 nationalities work at Novartis around the world.
The world’s rapidly growing and aging population is changing healthcare, presenting both new opportunities and new challenges for Novartis. The global population will increase by more than 1 billion people by 2030, projects the United Nations, with most of that growth occurring in developing countries. People over age 60 are the fastest-growing population segment – a segment that is expected to add 500 million people by 2030, reaching 1.4 billion.
These factors are behind increasing demand for healthcare worldwide. If current growth rates continue, healthcare spending will likely more than double by 2025, exceeding USD 15 trillion. Governments and health insurers are increasingly searching for ways to keep spending in check. They are focusing on the value they receive, based on tangible benefits for patients and healthcare systems.
These developments validate our focus on innovation and global scale, and underscore the need for collaboration to reinforce our know-how in areas of emerging science and technology.
We believe Novartis is well prepared for a world with a growing, aging population and evolving healthcare needs. Our mission, vision and strategy support the creation of long-term value for our company, our shareholders and society.
Our mission is to discover new ways to improve and extend people’s lives. Our vision is to be a trusted leader in changing the practice of medicine. Our strategy is to use science- based innovation to deliver better outcomes for patients and to lead in growing areas of healthcare.
We maintain strong investment in research and development focused on areas of unmet medical need.
Strong values define our culture and help us execute the Novartis strategy in line with our mission and vision. We updated values across our organization in 2015. They describe the professional behavior we expect from employees: innovation, quality, collaboration, performance, courage and integrity.
Transactions completed in 2015 focus Novartis on three leading divisions with innovation power and global scale: pharmaceuticals, eye care and generics. Novartis acquired GlaxoSmithKline’s (GSK) oncology products, solidifying our position as a global leader in cancer treatments. We also merged our over-the-counter business into a joint venture with GSK, and sold our Vaccines and Animal Health businesses.
Supporting our Divisions
Novartis Institutes for BioMedical Research The Novartis Institutes for BioMedical Research (NIBR) is the innovation engine of Novartis, focused on discovering new drugs that can change the practice of medicine.
Novartis Business Services Novartis Business Services (NBS) consolidates support services across Novartis divisions, helping drive efficiency, standardization and simplification. Its role in generating productivity gains supports our continued investment in research and development, and underpins strong financial results.
Novartis delivered solid performance in continuing operations in 2015, supported by our growth products,3 productivity gains, and strength in our Pharmaceuticals and Sandoz Divisions. These factors helped counter a stronger US dollar, economic slowdowns in key emerging markets, and weakness in our Alcon eye care division.
Net sales were USD 49.4 billion, a 5% decline from 2014 in reported terms, but up 5% measured in constant currencies (cc). Operating income was USD 9.0 billion (–19%, –2% cc), down mainly due to the amortization of the new oncology assets in the Pharmaceuticals Division. Operating income margin was 18.2% of net sales. Net income from continuing operations was USD 7.0 billion, down 34% (–18% cc), mainly due to an exceptional USD 0.4 billion charge in the current year and exceptional gains of USD 1.2 billion in the prior year. Earnings per share (EPS) from continuing operations were USD 2.92, down 33% (–17% cc).
Total net income rose 73% to USD 17.8 billion, mainly due to gains from our portfolio transformation.
Total free cash flow in 2015 of USD 9.0 billion declined 16%, primarily due to the negative impact of currency exchange rates.
We also present our core results, which exclude the impact of significant disposals, acquisitions and other exceptional items. Our core operating income from continuing operations in 2015 was USD 13.8 billion (–5%, +10% cc). Core operating income margin grew 1.3 percentage points in constant currencies due to higher sales and enhanced productivity. However, that gain was offset by 1.1 percentage points of negative impact from currency exchange rates, resulting in a margin of 27.9% of net sales.
Core net income from continuing operations was USD 12.0 billion (–5%, +9% cc), and core EPS was USD 5.01 (–3%, +10% cc).
Research and development efforts in 2015 yielded 20 major approvals and 14 major submissions. A key approval during the year in the US and EU was Entresto (formerly LCZ696) to treat heart failure. We received approval in the US and EU for Cosentyx for psoriasis, as well as approval in Europe to treat psoriatic arthritis and ankylosing spondylitis. Tafinlar + Mekinist, the first combination therapy approved for metastatic melanoma, also received approval in the US and EU.
Additionally, Sandoz extended its leadership in biosimilars with US approval for Zarxio (filgrastim), the first biosimilar under a new regulatory framework. In eye care, we launched three new intraocular lens products under the AcrySof brand for patients undergoing cataract surgery.
In 2015, we launched Novartis Access, focused on the affordability and availability of 15 on- and off-patent medicines to treat chronic illnesses in developing countries. The portfolio is offered to governments and other public-sector healthcare providers for USD 1 per treatment per month. It launched in Kenya and Ethiopia, with plans to expand to about 30 countries.
Also in 2015, the Novartis Malaria Initiative concluded a partnership with charity Malaria No More, which enabled public donations of malaria treatments for children in Africa.
Sandoz launched a new program in Ethiopia to improve maternal and child health and to reduce mortality associated with childbirth. Alcon supported 552 medical missions, reaching more than 390 000 patients with eye conditions.
Novartis also adopted new environmental sustainability targets for 2020, including commitments to further cut greenhouse gas emissions. Moreover, we voluntarily adopted an internal price of USD 100 per ton of carbon dioxide we emit, providing an added incentive to investments that will reduce emissions.
To reinforce our culture of ethics, Novartis began pursuing new ways of engaging healthcare professionals, while adjusting promotional practices.
Novartis made additional progress on corporate governance. The Board of Directors’ Research & Development Committee met four times to evaluate the effectiveness and competitiveness of our R&D organization, reinforcing the Board’s focus on innovation.
We increased diversity on our Board. Nancy C. Andrews, a medical researcher, dean of the Duke University School of Medicine and vice chancellor for academic affairs at Duke University in the US, joined last February. Two more Board candidates were nominated for election at the Annual General Meeting of Shareholders in 2016.
We further reinforced our corporate governance framework, implementing all remaining rules related to the Minder Initiative, including binding shareholder votes on aggregate compensation for the Board and Executive Committee of Novartis, and a non-binding vote on the Compensation Report. We introduced annual elections of the Chairman of the Board, all Board members and Compensation Committee members.
2015 was a year of stability and refinement for our compensation system. Our approach is designed to align pay with business strategy and shareholder interest through a rigorous performance management process.
As of December 31, 2015; excluding treasury shares
In constant currencies and for continuing operations
Growth products are products launched in 2010 or later, or products with exclusivity until at least 2019 in key markets (EU, US, Japan), except Sandoz, which includes only products launched in the last 24 months.