Company Overview
Novartis provides healthcare solutions that address the evolving needs of patients and societies worldwide. Our broad portfolio includes innovative pharmaceuticals and oncology medicines, generic and biosimilar medicines and eye care devices. 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 in growing areas of healthcare.
Following the completion of a series of transactions in 2014 and 2015, the Group’s continuing operations comprise three global operating divisions: Innovative Medicines, Sandoz and Alcon. We also separately report the results of Corporate activities. From March 2, 2015, the date of the completion of a series of transactions with GSK, continuing operations also includes the results from the oncology assets acquired from GSK. We sold on March 2, 2015, our Vaccines Division, excluding our influenza vaccines business, to GSK. Our influenza vaccines business was sold on July 31, 2015, to CSL and our Animal Health Division was sold on January 1, 2015, to Lilly. On June 1, 2018, we completed the divestment to GSK of our 36.5 percent stake in our consumer healthcare joint venture with GSK for a total consideration of USD 13.0 billion. The divestment was completed in accordance with the terms of the transaction announced on March 27, 2018, and brings to an end our participation in the joint venture, which was formed in 2015 as part of our portfolio transformation.
Continuing Operations:
• Innovative Medicines: Innovative patent-protected prescription medicines
• Sandoz: Generic pharmaceuticals and biosimilars
• Alcon: Surgical and vision care products
• Corporate activities
Discontinued Operations:
• Vaccines and Diagnostics: Preventive human vaccines and blood-testing diagnostics
• Consumer Health: OTC (over-the-counter medicines) and Animal Health
• Corporate: certain transactional and other expenses related to the portfolio transformation
Novartis has leading positions globally in the areas of each of our three divisions. To maintain our competitive positioning across these segments of the healthcare industry, we place a strong focus on innovating to meet the evolving needs of patients around the world, working to grow our presence in new and emerging markets, and to enhance our productivity to invest for the future and increase returns to shareholders. The financial results of our continuing Corporate activities include the costs of the Group headquarters and those of corporate coordination functions in major countries. In addition, Corporate includes other items of income and expense that are not attributable to specific segments such as certain revenues from intellectual property rights and certain expenses related to post-employment benefits, environmental remediation liabilities, charitable activities, donations and sponsorships.
In June 2018, we announced our intention to spinoff Alcon, our eye care division, into a separately traded standalone company. The planned spinoff would enable Novartis and Alcon to focus fully on their respective growth strategies. Completion of this transaction is subject to general market conditions, tax rulings and opinions, final Board of Directors endorsement and shareholder approval at the 2019 AGM in line with Swiss corporate law. We also announced that we will initiate a share buyback of up to USD 5 billion to be executed by the end of 2019.
In May 2018, we announced that Felix R. Ehrat, Group General Counsel of Novartis, decided to retire from the company. Shannon Thyme Klinger, previously the Chief Ethics, Risk and Compliance Officer, was appointed Group General Counsel, effective June 1, 2018, and is a member of the Executive Committee of Novartis (ECN).
In addition, in May 2018, we announced that we have completed the acquisition of AveXis, Inc. through the consummation of a merger of our indirect wholly owned subsidiary, Novartis AM Merger Corporation, with and into AveXis without a vote of the AveXis stockholders in accordance with Section 251(h) of the Delaware General Corporation Law (“DGCL”). In the merger, each share of AveXis common stock outstanding immediately prior to the effective time of the merger (other than shares owned by Novartis, Merger Sub, AveXis or any subsidiary of Novartis or AveXis or by any AveXis stockholders who properly perfected their appraisal rights under the DGCL) has been converted into the right to receive USD 218.00 per share, net to the seller in cash, without interest and subject to any tax withholding.
In April 2018, we announced the appointment of John Tsai, M.D., as Head of Global Drug Development (GDD) and Chief Medical Officer. Dr. Tsai joined Novartis on May 1, 2018, and is a member of the ECN. He succeeds Dr. Vasant (Vas) Narasimhan who became CEO of Novartis on February 1, 2018.
In March 2018, we announced changes to our senior leadership team to support the implementation of our strategic priorities. Bertrand Bodson, Chief Digital Officer, Steffen Lang, Global Head Novartis Technical Operations, and Shannon Klinger, Chief Ethics, Risk and Compliance Officer, were appointed to the ECN, effective as of April 1, 2018. André Wyss, President Novartis Operations, decided to step down from the ECN on April 1, 2018, to pursue his career outside of Novartis.
In February 2018, we completed the subsequent offering period of the tender offer by our subsidiary, Novartis Groupe France S.A., to purchase all of the outstanding ordinary shares, including Ordinary Shares represented by American Depositary Shares, of Advanced Accelerator Applications S.A., for a price of USD 41.00 per Ordinary Share and USD 82.00 per ADS, in each case payable net to the seller in cash, without interest. The subsequent offering period for the Offer, which commenced on January 22, 2018, expired as scheduled at 12:00 midnight, New York City Time, on January 31, 2018.
In January 2018, we announced that Elizabeth (Liz) Barrett has been appointed CEO Novartis Oncology and a member of the ECN, effective February 1, 2018. Mrs. Barrett succeeds Bruno Strigini who decided to retire from Novartis for personal reasons.
In September 2017, we announced that Joseph Jimenez, CEO of Novartis, informed the Board of Directors of his desire to step down as CEO in 2018, after eight years in the position. The Board of Directors has appointed Vas Narasimhan, M.D., Global Head of Drug Development and Chief Medical Officer, as CEO of Novartis, effective February 1, 2018. Dr. Narasimhan is a member of the ECN and joined Novartis in 2005.
In August 2017, we announced that, effective January 1, 2018, Bertrand Bodson had been appointed to the new role of Chief Digital Officer, reporting to the CEO of Novartis. Mr. Bodson is responsible for creating and executing a company-wide digital strategy, led by the ECN. As part of this strategy, we plan to improve the ways we use data in drug discovery and development, engage with patients, doctors and other stakeholders, as well as to automate business processes.
In addition, we transferred our over-the-counter ophthalmic products and certain surgical diagnostic products (2017 sales of USD 0.8 billion) from the Innovative Medicines Division to the Alcon Division effective January 1, 2018. Our prescription Ophthalmic medicines business remains with the Innovative Medicines Division. In compliance with IFRS, beginning with our first quarter 2018 results, Novartis will update its segment financial information to reflect this transfer, both for the current and prior years, to aid comparability of year-on-year results.
The Group is organized into three divisions: Innovative Medicines, Sandoz and Alcon, as well as Corporate activities. Our divisions are supported by the following cross-divisional organizational units: Novartis Institutes for BioMedical Research, Global Drug Development and Novartis Operations, which includes Novartis Technical Operations, Novartis Business Services and Novartis Corporate Affairs.
The Novartis Institutes for BioMedical Research (NIBR) is the innovation engine of Novartis, which conducts drug discovery research and early clinical development trials for our Innovative Medicines Division and also collaborates with our Sandoz Division. Approximately 6,000 full-time equivalent scientists and associates at NIBR are working to discover new medicines for various diseases at sites located in the US, Switzerland and China.
Our Global Drug Development (GDD) organization oversees drug development activities for our Innovative Medicines Division and the biosimilars portfolio of our Sandoz Division. Development of products for the Surgical and Vision Care franchises within our Alcon Division and of small molecule generics for our Sandoz Division are not included in GDD. GDD works collaboratively with NIBR, Innovative Medicines and Sandoz to execute our overall pipeline strategy and takes an enterprise approach to pipeline portfolio management. The GDD organization includes centralized global functions such as Regulatory Affairs and Global Development Operations, as well as Global Development units aligned with our business franchises. GDD was created to increase Group-wide coordination of drug development and to improve resource allocation, technology implementation and process standardization with a goal of further increasing innovation. GDD includes approximately 11,000 full-time equivalent associates worldwide.
Novartis Technical Operations (NTO) centrally manages our manufacturing operations across our Innovative Medicines and Sandoz Divisions, with a goal of further improving efficiency. Manufacturing for Alcon’s Surgical and Vision Care franchises continues to be managed by our Alcon Division. NTO is expected to optimize capacity planning and adherence to quality standards, and to lower costs through simplification, standardization and external spend optimization. Centralization is also expected to improve our ability to develop next generation technologies, implement continuous manufacturing and share best practices across divisions. NTO includes approximately 25,900 full-time equivalent associates and 67 manufacturing sites across our Innovative Medicines and Sandoz Divisions.
Novartis Business Services (NBS), our shared service organization, delivers integrated solutions to all Novartis divisions and units worldwide. NBS seeks to drive productivity and effectiveness across Novartis by simplifying and standardizing services across six service domains: human resources, real estate and facility services, procurement, information technology, commercial and medical support activities, and financial reporting and
accounting operations. NBS has approximately 10,830 full-time equivalent associates in more than 50 countries. NBS works to leverage the full scale of Novartis to create value across the company and to free up resources to invest in innovation and our product pipeline. NBS continues to transfer the delivery of selected services to its five Global Service Centers in Dublin, Ireland; Hyderabad, India; Kuala Lumpur, Malaysia; Mexico City, Mexico; and Prague, Czech Republic.
In 2017, our Public Affairs and Group Country Management organizations were combined to form Novartis Corporate Affairs to better enable close collaboration among country presidents, unit heads and Public Affairs.
In the first half of 2018, Novartis continuing operations achieved net sales of USD 25.9 billion. Net income was USD 9.8 billion, compared to USD 3.6 billion in prior year, benefiting from a USD 5.7 billion net gain recognized from the sale of our stake in the GSK consumer healthcare joint venture and the contribution from the growth in operating income, partly offset by the discontinuation of income from the GSK consumer healthcare joint venture.
Research & Development expenditure in 2017 amounted to USD 9.0 billion.
Headquartered in Basel, Switzerland, our Group companies employ approximately 125,000 full-time-equivalent associates Our products are sold in approximately 155 countries around the world.
Disclaimer:
These materials contain forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, that can generally be identified by words such as “potential,” “expected,” “will,” “planned,” “pipeline,” “outlook,” or similar expressions, or by express or implied discussions regarding potential new products, potential new indications for existing products, or regarding potential future revenues from any such products; or regarding the proposed 100% spinoff of the Alcon Division, including express or implied discussions regarding the potential financial or other impact on Novartis, and the potential strategic benefits, synergies or opportunities expected as a result of the proposed spinoff; or regarding the potential impact on Novartis of the completed acquisition of AveXis Inc., including express or implied discussions regarding potential future sales or earnings of Novartis, and any potential strategic benefits, synergies or opportunities expected from the acquisition; or regarding the potential financial or other impact of the other significant acquisitions and reorganizations of recent years; or regarding the potential impact of the share buyback; or regarding potential future sales or earnings of the Novartis Group or any of its divisions or potential shareholder returns; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements. Such forward looking statements are based on our current beliefs and expectations regarding future events, and are subject to significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward looking statements. There can be no guarantee that any new products will be approved for sale in any market, or that any new indications will be approved for any existing products in any market, or that any approvals which are obtained will be obtained at any particular time, or that any such products will achieve any particular revenue levels. Neither can there be any guarantee that the proposed 100% spinoff of the Alcon Division will be approved by our shareholders, or that it will be completed, or completed as currently proposed, or at any particular time. Nor can there be any guarantee that Novartis will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of the proposed 100% spinoff of the Alcon Division, or that the proposed spinoff will in fact maximize shareholder value. Neither can there be any guarantee that Novartis will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of the significant acquisitions and reorganizations of recent years. Nor can there be any guarantee that shareholders will achieve any particular level of shareholder returns. Neither can there be any guarantee that the Group, or any of its divisions, will be commercially successful in the future, or achieve any particular credit rating or financial results. In particular, our expectations could be affected by, among other things: global trends toward health care cost containment, including government, payor and general public pricing and reimbursement pressures and requirements for increased pricing transparency; regulatory actions or delays or government regulation generally, including potential regulatory actions or delays with respect to the development of the products described in these materials; the potential that the proposed 100% spinoff of the Alcon Division may not be approved by our shareholders, or that it may not be completed, or completed as currently proposed, or at any particular time; the potential that the strategic benefits, synergies or opportunities expected from the proposed 100% spinoff of the Alcon Division may not be realized or may take longer to realize than expected, or that the proposed spinoff may not in fact maximize shareholder value; the potential that the strategic benefits, synergies or opportunities expected from the significant acquisitions and reorganizations of recent years may not be realized or may take longer to realize than expected; the inherent uncertainties involved in predicting shareholder returns; the uncertainties inherent in the research and development of new healthcare products, including clinical trial results and additional analysis of existing clinical data; our ability to obtain or maintain proprietary intellectual property protection, including the ultimate extent of the impact on Novartis of the loss of patent protection and exclusivity on key products which commenced in prior years and will continue this year; safety, quality or manufacturing issues; uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential product liability litigation, litigation and investigations regarding sales and marketing practices, intellectual property disputes and government investigations generally; uncertainties involved in the development or adoption of potentially transformational technologies and business models; general political and economic conditions, including uncertainties regarding the effects of ongoing instability in various parts of the world; uncertainties regarding future global exchange rates; uncertainties regarding future demand for our products; and uncertainties regarding potential significant breaches of data security or data privacy, or disruptions of our information technology systems; and other risks and factors referred to in Novartis AG’s current Form 20-F on file with the US Securities and Exchange Commission. Novartis is providing the information in these materials as of this date and does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise.