Press Release: Novartis continues strong momentum of sales growth with margin expansion, reaches key innovation milestones in 2024

Ad hoc announcement pursuant to Art. 53 LR

Full year

-- Net sales grew +12% (cc1, +11% USD) with core operating income1 up +22%

(cc, +19% USD)

-- Sales growth driven by continued strong performance from Entresto

(+31% cc), Cosentyx (+25% cc), Kesimpta (+49% cc), Kisqali (+49%

cc), Pluvicto (+42% cc) and Leqvio (+114% cc)

-- Core operating income margin1 38.7%, +330 basis points (cc),

mainly driven by higher net sales

-- Operating income grew +55% (cc, +49% USD); net income up +45% (cc, +39%

USD)

-- Core EPS1 grew +24% (cc, +21% USD) to USD 7.81

-- Free cash flow1 of USD 16.3 billion (+24% USD) driven by higher net cash

flows from operating activities

Fourth quarter

-- Net sales grew +16% (cc, +15% USD) with core operating income up +29% (cc,

+27% USD)

-- Sales growth driven by continued strong performance from Entresto

(+34% cc), Kesimpta (+49% cc), Kisqali (+52% cc), Cosentyx (+24%

cc), and Leqvio (+83% cc)

-- Selected innovation milestones:

-- Scemblix FDA accelerated approval for 1L Ph+ CML-CP

-- Kisqali EC approval for HR+/HER2- stage II and III eBC

-- Fabhalta (iptacopan) FDA submission for C3G; priority review

granted

-- OAV101 IT Phase III STEER study positive readout in SMA

Dividend, 2025 guidance

-- Dividend of CHF 3.50 per share, an increase of 6.1%, proposed for 2024

-- 2025 guidance2 -- Net sales expected to grow mid- to high-single digit

and core operating income expected to grow high single to low

double-digit

Basel, January 31, 2025 -- commenting on Q4 2024 results, Vas Narasimhan, CEO of Novartis, said:

"In our first full year as a pure-play innovative medicines company, Novartis delivered one of the strongest financial performances in our history, growing sales 12% cc and core operating income 22% cc. We also achieved important innovation milestones, including new approvals and readouts for many of the assets that will fuel our growth over the mid- to long-term. With the momentum we are seeing in the business, we expect to continue our strong sales growth with margin expansion in 2025 and we remain on track to deliver on our mid-term guidance. Looking ahead, we are focused on executing against our pipeline, including 15 submission-enabling readouts over the coming years and more than 30 assets with the potential to drive differentiated growth over the long term. We remain balanced in our capital allocation approach and committed to creating sustainable value for shareholders."

Key figures Continuing operations(3)

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Q4 2024 Q4 2023 % change FY 2024 FY 2023 % change

USD m USD m USD cc USD m USD m USD cc

------- ------- ----- --- ------- ------- ----- ---

Net sales 13 153 11 423 15 16 50 317 45 440 11 12

------- ------- ----- --- ------- ------- ----- ---

Operating income 3 530 2 582 37 39 14 544 9 769 49 55

------- ------- ----- --- ------- ------- ----- ---

Net income 2 820 2 638 7 6 11 939 8 572 39 45

------- ------- ----- --- ------- ------- ----- ---

EPS (USD) 1.42 1.29 10 10 5.92 4.13 43 49

------- ------- ----- --- ------- ------- ----- ---

Free cash flow 3 635 2 141 70 16 253 13 160 24

------- ------- ----- ------- ------- -----

Core operating

income 4 859 3 821 27 29 19 494 16 372 19 22

------- ------- ----- --- ------- ------- ----- ---

Core net income 3 933 3 126 26 29 15 755 13 446 17 21

------- ------- ----- --- ------- ------- ----- ---

Core EPS (USD) 1.98 1.53 29 33 7.81 6.47 21 24

------- ------- ----- --- ------- ------- ----- ---

1. Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 47 of the Condensed Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year. 2. Please see detailed guidance assumptions on page 7.

3. As defined on page 35 of the Condensed Financial Report, Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities, and Discontinued operations include operational results from the Sandoz business.

Strategy

Our focus

In 2023, Novartis completed its transformation into a "pure-play" innovative medicines business. We have a clear focus on four core therapeutic areas (cardiovascular-renal-metabolic, immunology, neuroscience and oncology), with multiple significant in-market and pipeline assets in each of these areas, that address high disease burden and have substantial growth potential. In addition to two established technology platforms (chemistry and biotherapeutics), three emerging platforms (gene & cell therapy, radioligand therapy and xRNA) are being prioritized for continued investment into new R&D capabilities and manufacturing scale. Geographically, we are focused on growing in our priority geographies -- the US, China, Germany and Japan.

Our priorities

1. Accelerate growth: Renewed attention to deliver high-value medicines

(NMEs) and focus on launch excellence, with a rich pipeline across our

core therapeutic areas.

2. Deliver returns: Continuing to embed operational excellence and deliver

improved financials. Novartis remains disciplined and shareholder-focused

in our approach to capital allocation, with substantial cash generation

and a strong capital structure supporting continued flexibility.

3. Strengthening foundations: Unleashing the power of our people, scaling

data science and technology and continuing to build trust with society.

Financials

Following the September 15, 2023, shareholder approval of the spin-off of Sandoz, Novartis reported its consolidated financial statements as "continuing operations" and "discontinued operations."

Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities. Discontinued operations include the Sandoz Division and selected portions of corporate activities attributable to Sandoz's business, as well as certain expenses related to the spin-off.

While the commentary below focuses on continuing operations, we also provide information on discontinued operations.

Continuing operations

Fourth quarter

Net sales were USD 13.2 billion (+15%, +16% cc), with volume contributing 15 percentage points to growth. Generic competition had a negative impact of 1 percentage point and pricing had a positive impact of 2 percentage points, benefiting from revenue deduction adjustments mainly in the US.

Operating income was USD 3.5 billion (+37%, +39% cc), mainly driven by higher net sales, partly offset by higher R&D investments.

Net income was USD 2.8 billion (+7%, +6% cc), mainly driven by higher operating income, partly offset by higher income taxes, mainly resulting from higher income before taxes in the current year and non-recurring tax benefits in the prior year. EPS was USD 1.42 (+10%, +10% cc), benefiting from the lower weighted average number of shares outstanding.

Core operating income was USD 4.9 billion (+27%, +29% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 36.9% of net sales, increasing 3.4 percentage points (+3.7 percentage points cc).

Core net income was USD 3.9 billion (+26%, +29% cc), mainly due to higher core operating income. Core EPS was USD 1.98 (+29%, +33% cc), benefiting from the lower weighted average number of shares outstanding.

Free cash flow from continuing operations amounted to USD 3.6 billion (+70% USD), compared with USD 2.1 billion in the prior-year quarter, driven by higher net cash flows from operating activities from continuing operations.

Full year

Net sales were USD 50.3 billion (+11%, +12% cc), with volume contributing 14 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing was flat.

Operating income was USD 14.5 billion (+49%, +55% cc), mainly driven by higher net sales, lower impairments, amortization and restructuring charges, partly offset by prior-year one-time income from legal matters and higher R&D investments.

Net income was USD 11.9 billion (+39%, +45% cc), mainly driven by higher operating income, partly offset by higher income taxes, mainly resulting from higher income before taxes in the current year and non-recurring tax benefits in the prior year. EPS was USD 5.92 (+43%, +49% cc), benefiting from the lower weighted average number of shares outstanding.

Core operating income was USD 19.5 billion (+19%, +22% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 38.7% of net sales, increasing 2.7 percentage points (+3.3 percentage points cc).

Core net income was USD 15.8 billion (+17%, +21% cc), mainly due to higher core operating income. Core EPS was USD 7.81 (+21%, +24% cc), benefiting from the lower weighted average number of shares outstanding.

Free cash flow from continuing operations amounted to USD 16.3 billion (+24% USD), compared with USD 13.2 billion in 2023, driven by higher net cash flows from operating activities from continuing operations.

Discontinued operations

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January 31, 2025 01:00 ET (06:00 GMT)