Strategy Update Reimagining Medicine - Vas Narasimhan, CEO J.P. Morgan Healthcare Conference January 11, 2021 - Novartis
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Novartis AG
Reimagining Medicine
Strategy Update
Vas Narasimhan, CEO
J.P. Morgan Healthcare Conference
January 11, 2021
Disclaimer
This presentation contains 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, potential product launches, or regarding potential future revenues from any such products; or regarding the development or adoption of
potentially transformational technologies, treatment modalities and business models; or regarding potential future, pending, announced or completed transactions; or regarding the
potential benefits from and impact of current and future productivity programs on our financial performance and results; or regarding potential future sales or earnings of the 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. In particular, our expectations could be affected by, among other things: global trends toward health care cost containment, including ongoing 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 this presentation; the impact of the COVID-19 pandemic on enrollment in,
initiation and completion of our clinical trials in the future, and research and development timelines, including regulatory approvals; the potential that the anticipated benefits from and
impact of current and future productivity programs on our business, including our financial performance and results, may not be realized or may be more difficult or take longer to
realize than expected; the potential that the strategic benefits, synergies or opportunities expected from the transactions described may not be realized or may be more difficult or
take longer to realize than expected; dependence on third parties to fulfill manufacturing and supply obligations; the uncertainties involved in predicting shareholder returns; the
uncertainties involved 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; safety, quality, data integrity or manufacturing issues; uncertainties regarding actual or potential legal proceedings, investigations
or disputes; uncertainties involved in the development or adoption of potentially transformational technologies, treatment modalities and business models; our performance on
environmental, social and governance measures; political, economic and trade conditions; uncertainties regarding future global exchange rates; general political, economic and
business conditions, including the effects of and efforts to mitigate pandemic diseases such as COVID-19; uncertainties regarding future demand for our products; 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 this presentation 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.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
2
We are transforming Novartis...
Strategy set out in 2018... ...is transforming Novartis
Our focus Our five priorities
100% focused as a medicines company
Focus our Unleash the Deliver
company power of our transformative
and capital people innovation
Record-high engagement score
Accelerate Embrace Go big Leading pipeline, with 4 advanced therapy platforms
certain operational on data
geographies excellence and digital
Achieved USD 2bn cost savings over 2017-2020
Strengthen Build trust
our core with society Establishing a leading digital and data science platform
Improving ESG scores, sector-leader across 3 key indices
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
3
...while delivering strong operational performance...
2017 % 2018 2018 % 2019 2019 % 9M 2020 9M 2020
Continuing operations1 growth (cc) growth (cc) growth (cc)
Net sales 42.3 +5% 44.8 +9% 47.4 +4% 35.9
USD bn, growth cc2
Core2 OpInc 11.7 +7% 12.6 +17% 14.1 +16% 11.9
USD bn, growth cc2
Innovative
Medicines 31.0% +1.0% pts 32.0% +1.8% pts 33.5% +2.7% pts 36.3%3
Core2 margin
%, growth cc2
1. Continuing operations excludes Alcon, includes the businesses of Innovative Medicines and Sandoz as well as the continuing corporate functions. 2. Constant currencies (cc) and core results are non-IFRS measures.
3. Historically Q4 margin lower due to seasonality.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
4...and a robust response to the COVID-19 pandemic
Associates Patients & HCPs Society
Taking care of the health and ...whilst serving our key ...and playing a pivotal role in
safety of our employees... stakeholders... supporting the global response
• Job safety • Patient-oriented digital solutions • Donations and access support
• ‘Choice with responsibility’ • HCPs multi-channel engagements • Research and development
• Support productivity and wellbeing • Business continuity in our operations • External collaborations
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
5We have focused the company...
Company 3 Company 6 Rx Other
Bubble area = 2019 total company revenue
≥ 200
Company 4 TODAY
Size Company 2 Company 11
END 2017
Market
cap, $bn Company 1 Company 7 Company 8
Company 5
Company 10
Company 9
< 200
Company 12
Company 14
Company 13
Rx
Conglomerate < 75% % of revenues Pure-play ≥ 75%
Note: Companies grouped by strategic archetype, not strictly to scale. Source: Evaluate Pharma, S&P Capital IQ, Annual Reports. Revenues FY 2019, Market Caps as of Jan 1, 2020 except Company 2 (May 8, 2020).
Rx = Innovative medicines. Other = vaccines, animal health, generics / biosimilars, consumer health, medical devices / diagnostics, revenues not attributable to a specific segment / TA and other revenues.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
6...through a broad range of transactions and partnerships
Selected deals and total number1 2018-2020
⭐ ⭐ ⭐ ⭐ ⭐
NIBR 45
Innovative ⭐ ⭐ ⭐ ⭐ ⭐ ⭐ ⭐
Medicines Entresto JP
25
Sandoz 45
Digital 22
Divestments
Out-licensing Consumer health
88
⭐ Advanced Therapy Platform (Cell Therapy, Gene Therapy, RLT, RNA)
1. For Sandoz Small Molecules, only deals >1m USD considered
As of December, 2020
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
7Today, we present investors a differentiated profile
Diversified across geographies and TAs, while providing exposure to cutting-edge platforms
Top-selling drug Blockbusters Advanced therapy platforms2 Geographical diversification
Company # of TAs1 % total net sales # Cell Gene RLT RNA % of total Rx sales
10 8% 15 ✔ ✔ ✔ ✔
Company 1 10 8% 6 ✔ ✔
Company 2 10 41% 8
Company 3 9 15% 11 ✔ ✔
Company 4 9 27% 4
Company 5 9 13% 7 ✔ ✔
Company 6 8 15% 13 ✔ ✔
Company 7 6 24% 7 ✔ ✔
Company 8 6 14% 9 ✔ ✔
Company 9 6 21% 7 ✔
Company 10 4 9% 5 ✔ ✔
Company 11 4 27% 9 ✔
Company 12 3 18% 9 ✔
Company 13 3 22% 6 ✔
Company 14 2 39% 4 ✔ ✔
US Asia, Africa, Australasia ex-US
1. Only TAs (Therapeutic Areas) with annual 3rd party sales >USD 500m in 2019; TA definition as per Evaluate Pharma; manual adjustments to keep classification consistent
EU Canada & Latin America
vs. previous years. 2. Defined as net sales from one of the mentioned therapy platforms by 2025 according to Evaluate Pharma and publicly available pipeline information.
Source: Evaluate Pharma 2020
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
8Unleash the power of our people
Significant progress to solidify our culture journey towards an
inspired, curious and unbossed organization
Inspired Curious Unbossed
Engagement1 Growth & learning1 Manager effectiveness2
84
82
80
75 75
Global benchmark: 77
68
Pharma benchmark: 70 Pharma benchmark: 70
05/19 08/19 11/19 03/20 05/20 08/20 11/20 05/19 08/19 11/19 03/20 05/20 08/20 11/20 Q1 ’19 Q1 ’20 Q4 ’20
• Rolled out new Values & Behaviors and • Coursera: ~450k courses completed by • ‘Unbossed Leadership Experience’ re-
EVOLVE performance management ~50k users in 2020, platform access designed (virtual) and delivered to ~5k
system, incl. removing ratings extended to over 10k family and friends leaders in the organization
• Launched TEDxNovartis • Scaling to all 22k people managers
Culture Sense under finalization to track progress and establish the link between culture and performance
1. Source: Quarterly Glint Engagement Survey Scores (out of 100). 2. Source: Team Perspectives, December 2020, 67k participants.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
9Deliver transformative innovation
We have a leading pipeline by key measures
Scale Innovation Value
# of projects1 Estimated 2026 sales from
products launched 2020-20263
Advanced platform
116 Phase 1/2 20 therapies in clinical
development #2 Replacement power
Company A
Pipeline2 potentially
Phase 3/
49 Registration ~90% first-in-class /
first-in-indication
Company B
Company C
Company D
Company E
Company F
>65 NMEs
~80% Target areas of high
unmet need2 Company G
Company H
Company I
1. Including Global Health, excluding Sandoz. As of December, 2020. 2. Projects in confirmatory development. 3. Innovative Medicines product sales excl. Vaccines and LCM products (e.g. new formulations, combos with off-patent
molecules); compound-based analysis (Ph2 and 3) with additional indications allocated to 1st launch. Source: Novartis peer group analysis based on data from Evaluate Pharma (download from September 24, 2020).
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
10Deliver transformative innovation
In 2020 we advanced our innovation agenda
Major approvals Major submissions
Selected examples Selected examples
Leqvio® (EU)
Hyperlipidemia (EU) SMA IV (EU, JP)
Kesimpta® (EU, JP)
RMS (US) wAMD (EU, JP) Entresto® HFpEF (US)
NSCLC (US, JP) Sickle cell disease (EU) Major readouts
Selected examples
Asthma (EU, JP) HR+/HER2- aBC (EU)
Beovu® (DME)
nr-axSpA (US, EU, JP) CRSwNP (US, EU) Jakavi® (Chronic GvHD)
Pediatric PsO (EU)
Asciminib (CML)
AS (CN)
Iptacopan (PNH, C3G) (IA)
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
11Deliver transformative innovation
2021 catalysts maintaining momentum
Potential catalysts Selected examples
Major approvals Leqvio® (US) Kesimpta® (EU/JP)
Hyperlipidemia RMS
Entresto® (US) Entresto® (JP/CN)
HFpEF HTN
Major submissions1 Alpelisib (BYL719) Sabatolimab (MBG453) Jakavi®
PROS MDS Acute and chronic GvHD
177Lu-PSMA-617 Kymriah® Asciminib (ABL001)
mCRPC FL, r/r DLBCL 1st relapse CML
Canakinumab3 Entresto® Beovu®
NSCLC 1L + 2L Post-AMI DME
177Lu-PSMA-617 Kymriah® Kisqali®
Major readouts2
(pivotal) mCRPC r/r DLBCL 1st relapse Breast cancer (MONALEESA-2 OS)
Canakinumab Entresto® Cosentyx®
NSCLC 1L + 2L Post-AMI HS
Sabatolimab (MBG453) Ligelizumab (QGE031)
MDS CSU
1. First submission in any market. 2. Readouts enabling submission or label change. 3. Depending on timing of final read-out submission may move to early 2022.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
12Deliver transformative innovation
Moving forward a breadth of assets to drive long-term growth...
Selected opportunities
Lifecycle management Pharmaceuticals Oncology
Asset Indications Asset Indications Asset Indications
HFpEF, Post-AMI, Essential Iptacopan IgAN, PNH, aHUS, C3G, iMN
Canakinumab NSCLC 1L/2L, NSCLC
hypertension (ex US), Pediatric (LNP023) (ACZ885) adjuvant
Derm: HS, L. Planus, Peds PsO
Iscalimab Sjögren's, Kidney Tx, Liver Tx 177 mCRPC 3L, mCRPC pre-
Rheum: jPsA/ER, GCA, Lupus Lu-PSMA-617 taxane
(CFZ533)
Nephritis
Adjuvant BC
Ligelizumab CSU, Pediatric CSU, CINDU, Sabatolimab HR-MDS, AML, Maintenance
(QGE031) food allergy (MBG453) MRD + AML
Solid tumors, Multiple
PROS, TNBC, Ovarian cancer Pelacarsen
BYL719 HER2+ aBC, HNSCC 2/3L
CVRR-Lp(a) TNO155 combinations being explored
(TQJ230)
including 1L KRAS NSCLC
DME, RVO, Diabetic retinopathy
Branaplam BRAF/NRASm Melanoma,
Huntington disease, SMA LXH254
(LMI070) mRAS/RAF NSCLC
‘Wild Cards’ CSJ117 (Asthma), ECF843 (Dry Eye), LNA043 (Osteoarthritis), QBW251 (COPD), NIS793 (Solid Tumors)
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
13Deliver transformative innovation
...while strengthening our advanced therapy platforms
Research & Development Manufacturing Commercialization
Clinical programs Pre-clinical Internal sites More info Countries approved Reimbursed
Gene 4 OAV101 SMA IT
19 3 Libertyville (US) 1m+
Therapy
OAV201 Rett syndrome Longmont (US) Square feet
ADPT03 Sickle cell anemia Durham (US) footprint of the 37 6
internal network
CPK850 RP
Cell CTL019 Multiple1 Morris Plains (US)
Therapy
8 10 3 4
JEZ567 AML Stein (CH) Continents
LXF821 Glioblastoma multiforme Les Ulis (FR) spanned by
Novartis’ 28 232
MCM998 Plasma cell myeloma manufacturing
network
YTB323 Hematological malignancy
RLT 177Lu-NeoB Multiple solid tumors Millburn (US)
4 14 6 1
177Lu-oxodotreotide GEP-NET 1L G3 Ivrea, Saluggia, Forli (IT) Additional
177Lu-PSMA-617 mCRPC Zaragoza (ES) site under Lutathera® 38 16
construction in
177Lu-PSMA-R2 Prostate cancer IDB (NL) Indianapolis (US)
4 additional clinical programs relating to RNA (including KJX839 and TQJ230)
1. DLBCL 1st relapse, r/r FL, r/r DLBCL in combo with pembro, 1st line high risk pediatric and young adult ALL. 2. Both pALL and DLBCL.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
14Embrace operational excellence
Strong performance from our growth drivers, with focus on
launch excellence for our recent and upcoming launches
Key growth driver sales 9M 2020 Major recent / upcoming launches
Sales Growth vs. PY Growth vs. PY
USD Million USD Million cc
1,781 573 48%
666 491 nm
2,886 300 12%
1,267 231 24%
236 187 nm
503 178 59%
268 166 164% nr-axSpA HFpEF, HTN
153 153 nm
1,134 152 17% Canakinumab Sabatolimab
333 151 82%
963 142 19%
Asciminib 177Lu-PSMA-617
633 140 30%
nm – not meaningful
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
15Embrace operational excellence
Progressing at steady pace in NTO / NBS transformations...
Novartis Technical Operations Novartis Business Services
Asset 15 Sites exited since 2016 Continuing on the journey to become a 4th gen,
industry-leading enterprise transformation engine
intensity 126 Warehouses reduced since 2016
reduction Select achievements
26 Sites infrastructures carved out
65% NBS associates across 5 Global Service Centers
2 New Operations Centers
>15k Novartis associates in Activity-Based Working
Standardization >50 Global processes being re-designed
50% DM suppliers reduced since 2016
>90k Novartis associates using OneNovartis Services
>45k Novartis associates enabled to work remotely
3 New sites1 online for cell therapies
>35k Digital assets hosted on one single platform (FUSE)
Innovation 2.8x Increase in Bio capacity since 2016
State-of-the-art advanced analytics, sourcing, contract management,
USD m invested for new process
>175 technology to produce antibiotics API2
travel & expenses, HR standardization and automation
USD 2bn savings delivered 2017-2020
1. Stein (CH), Les Ulis (FR), FBRI (JP). 2. Investment in Kundl, in collaboration with the Austrian government.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
16Embrace operational excellence
...and delivering on our margin commitment
Innovative Medicines
Core margin (%)
Main drivers moving forward
Mid High + Sales momentum of key growth drivers and
to high 30s operational excellence on upcoming launches
36.3 30s + USD 2bn expected in the mid-term from NTO
productivity program started in 2021
33.5
31.0 32.0 + Evolution in ways of working
‒ Generic erosion
‒ Launch investments
2017 2018 2019 9M 20201 Near-term Mid-term
1. Historically Q4 margin lower due to seasonality.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
17Go big on data and digital
Establishing a leading digital and data science platform
Key developments in Data & Digital over the past 12 months
Scale Make #1 partner Pursue
digital lighthouses Novartis digital in tech ecosystem bolder moves
Scaling major platforms across DS&AI community of 800+ data Rolled out our partnership Progressing on our strategic
the value chain, e.g.: scientists accelerator—Biome—with alliances, e.g.:
openings in UK, India, Canada,
• Data42 (3k+ trials ingested) Upskilled the organization • Microsoft: AI Innovation Lab
China
• Control Towers (SpotOn live through leadership programs • AWS: TechOps optimization
in 5 manufacturing sites) and learning offering Signed new scalable
partnerships, e.g. Doximity • Tencent: AI Nurse HF patient
Kept investing to strengthen our
• Next Gen Engagement solution in China (17k+ patients
data foundations
(ACTalya live with 6k+ reps) enrolled, ~400 hospitals)
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
18Build trust with society
Made significant strides in building trust with society and in
integrating ESG across every aspect of our company
Key ESG developments over the past 12 months and selected aspirations
Ethical Pricing Global Health Corporate Governance &
Standards & Access Challenges Citizenship Transparency
Resolved material legacy Introduced 100+ Expanded our Africa sickle Strong COVID-19 response Launched ESG index
compliance issues Emerging Market Brands cell disease program
Integrating D&I efforts New ESG Management
Launched Code of Ethics Issued sustainability- Advancing pipeline of across our operations Office and Head of
linked bond novel malaria treatments Environmental Sustainability
Be recognized in the 200% increase in 50% increase in our Full Carbon, Plastic Integrated reporting
healthcare sector for SITs patient reach by Flagship Programs’ and Water Neutrality and optimized ESG
Human Rights 20251 reach by 20251 by 2030 data management
1. As defined in ESG bond prospectus.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
19Confident that we will grow top and bottom line every year to
2025 and meet external expectations
Analyst consensus sales
USD billion
+4% CAGR
60
47
2019 Growth Drivers1 Launches2 Other/Pipeline Sandoz Gx Brands3 2025
External expectations based
Actual on analyst consensus
Consensus
IM margin 33.5% 37.6%
1. Cosentyx®, Entresto®, Zolgensma®, Kisqali®, Mayzent®, Tafinlar+Mekinist®, Jakavi®, Beovu®, Xiidra®, Aimovig®, Xolair®. 2. Lutathera®, Kymriah®, Piqray®, Adakveo®, Kesimpta®, Leqvio®, Tabrecta®, Asciminib. 3. Brands with 2024
consensus sales lower than 2019 actual sales (Glivec®, Tasigna®, Afinitor®, Votrient®, Promacta®, Exjade®, Sandostatin®, Galvus®, Gilenya®, Lucentis®). Source: Novartis Investor Relations in-house consensus as of November 12, 2020.
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
20Conclusions
✓ In 2020 we kept executing on our strategy, while delivering strong operational performance
✓ Novartis is now positioned as a focused medicines company with a differentiated profile
✓ We have made tangible progress across our five strategic priorities—which taken together make
our proposition unique—and have full confidence in our long-term growth potential
Focus our company and capital Strengthen our core Unleash the power of our people Deliver transformative innovation
Accelerate certain geographies Embrace operational excellence Go big on data and digital Build trust with society
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
21Thank you
Glossary
aBC Advanced breast cancer FL Follicular lymphoma NME New molecular entity
aHUS Atypical hemolytic uremic syndrome FY Full year nr-axSpA Non-radiographic axial spondyloarthritis
AI Artificial intelligence GCA Giant cell arteritis NSCLC Non-small cell lung cancer
AML Acute myeloid leukemia GvHD Graft versus host disease NTO Novartis Technical Operations
API Active pharmaceutical ingredient HCP Healthcare provider OS Overall survival
AS Ankylosing spondylitis HF Heart failure pALL Pediatric acute lymphoblastic leukemia
AWS Amazon Web Services HFpEF Heart failure with preserved ejection fraction PNH Paroxysmal nocturnal haemoglobinuria
C3G C3 glomerulopathy HNSCC Head and neck squamous cell carcinoma Post-AMI Post-acute myocardial infarction
CINDU Chronic inducible urticaria HS Hidradenitis suppurativa PsO Psoriasis
CML Chronic myeloid leukemia HTN Hypertension RLT Radio ligand therapy
COPD Chronic obstructive pulmonary disease IA Interim analysis RMS Relapsing multiple sclerosis
CRSwNP Chronic rhinosinusitis with nasal polyposis IgAN IgA nephropathy RNA Ribonucleic acid
CSU Chronic spontaneous urticaria iMN Membranous nephropathy RP Retinitis pigmentosa
CVRR Cardiovascular risk reduction jPsA/ER Juvenile psoriatic arthritis/enthesitis-related arthritis RVO Retinal vein occlusion
D&I Diversity and inclusion LCM Lifecycle management SIT Strategic innovative therapies
DLBCL Diffuse large B-cell lymphoma mCRPC Metastatic castration-resistant prostate cancer SMA IV Spinal muscular atrophy intravenous
DM Direct material MDS Myelodysplastic syndromes TA Therapeutic area
DME Diabetic macular edema MRD Measurable residual disease TNBC Triple negative breast cancer
DS&AI Data science and artificial intelligence NBS Novartis Business Services Tx Transplant
ESG Environmental, social and governance NIBR Novartis Institutes for BioMedical Research wAMD Wet age-related macular degeneration
| J.P. Morgan Healthcare Conference | January 11, 2021 | Novartis Investor Presentation
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