Press Release: Novartis delivers strong sales growth, robust margin expansion and major innovation milestones. Raises FY guidance

Ad hoc announcement pursuant to Art. 53 LR

-- Q1 sales grew +8% (cc1, +3% USD) and core operating income grew +15% (cc,

+8% USD)

-- Innovative Medicines (IM) sales grew +7% (cc, +3% USD) and core

operating income +18% (cc, +11% USD)

-- IM core margin 38.7%, +360 bps cc, driven by higher sales and

productivity programs

-- Growth driven by strong performance of Entresto, Pluvicto,

Kesimpta, Kisqali and Scemblix

-- Sandoz sales grew +8% (cc, +4% USD) and core operating income +3%

(cc, -2% USD)

-- Operating income grew +9% (cc, 0% USD) mainly driven by higher sales

-- Net income grew +14% (cc, +3% USD) mainly due to higher operating income

and higher interest income

-- Core EPS grew +25% (cc, +17% USD) to USD 1.71, mainly due to higher

operating income and lower shares outstanding

-- Free cash flow2 was USD 2.7 billion (+95% USD) mainly due to higher

operating income adjusted for non-cash items and favorable working

capital

-- Q1 key innovation milestones:

-- Kisqali -- Ph3 NATALEE trial met primary endpoint (iDFS) at

interim analysis in adjuvant breast cancer

-- Cosentyx -- 52 weeks positive readout from the pivotal trials in

moderate-to-severe HS

-- Entresto -- positive CHMP opinion for pediatric heart failure; if

approved, RDP extends to November 2026

-- Pluvicto -- In April FDA approved Millburn facility for commercial

production of Pluvicto

-- Full-year 2023 group guidance raised based on strong Q1 momentum3

-- Group Sales expected to grow mid-single digits (from low-to-mid

single digits)

-- Group Core Opinc expected to grow high single digits (from

mid-single digits)

Basel, April 25, 2023 - commenting on the quarter, Vas Narasimhan MD, CEO of Novartis, said: "Novartis delivered strong growth to start 2023, driven by our in-market growth brands, in particular Entresto, Kisqali and Kesimpta. The Pluvicto and Scemblix launches continue on their strong trajectory, and the Leqvio launch is progressing steadily. In addition, we are driving R&D productivity by prioritizing high-value medicines across our five core therapeutic areas. Our pipeline momentum gives us confidence in our growth outlook, highlighted by the NATALEE Phase 3 positive readout for Kisqali in early breast cancer, and we look forward to upcoming readouts for iptacopan in multiple indications and Pluvicto in earlier lines of therapy. Our strong start to the year and confidence in our growth drivers allow us to raise guidance for the full year 2023."

Key figures(1)

Q1 2023 Q1 2022 % change

USD m USD m USD cc

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Net sales 12 953 12 531 3 8

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Operating income 2 856 2 852 0 9

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Net income 2 294 2 219 3 14

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EPS (USD) 1.09 1.00 9 20

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Free cash flow(2) 2 720 1 392 95

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Core operating income 4 413 4 083 8 15

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Core net income 3 614 3 251 11 18

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Core EPS (USD) 1.71 1.46 17 25

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Strategy Update

Our focus

With our new focused strategy unveiled in 2022, Novartis is transforming into a "pure-play" Innovative Medicines business. We have a clear focus on five core therapeutic areas (cardiovascular, immunology, neuroscience, solid tumors and hematology), 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.

Sandoz planned spin-off

The planned spin-off remains on track for the second half of 2023. Completion of the transaction is subject to certain conditions, including consultation with works councils and employee representatives (as required), general market conditions, tax rulings and opinions, final Board of Directors endorsement and shareholder approval in line with Swiss corporate law. The transaction is expected to be tax neutral to Novartis.

Financials

First quarter

Net sales were USD 13.0 billion (+3%, +8% cc) in the first quarter driven by volume growth of 16 percentage points, price erosion of 4 percentage points and the negative impact from generic competition of 4 percentage points.

Operating income was USD 2.9 billion (0%, +9% cc), mainly driven by higher sales. Other income from legal matters was more than offset by higher restructuring and impairment charges.

Net income was USD 2.3 billion (+3%, +14% cc), mainly due to higher operating income and higher interest income.

EPS was USD 1.09 (+9%, +20% cc), growing faster than net income, benefiting from lower weighted average number of shares outstanding.

Core operating income was USD 4.4 billion (+8%, +15% cc). Core operating income margin was 34.1% of net sales, increasing by 1.5 percentage points (+2.2 percentage points cc).

Core net income was USD 3.6 billion (+11%, +18% cc), mainly due to higher core operating income and higher interest income.

Core EPS was USD 1.71 (+17%, +25% cc), growing faster than core net income, benefiting from lower weighted average number of shares outstanding.

Free cash flow amounted to USD 2.7 billion (+95% USD), compared to USD 1.4 billion in the prior year quarter, mainly due to higher operating income adjusted for non-cash items and favorable changes in working capital.

Innovative Medicines net sales were USD 10.6 billion (+3%, +7% cc), with volume contributing 16 percentage points to growth. Sales growth was mainly driven by Entresto, Pluvicto, Kesimpta and Kisqali partly offset by generic competition mainly for Gilenya. Generic competition had a negative impact of 5 percentage points. Pricing had a negative impact of 4 percentage points. Sales in the US were USD 4.1 billion (+11%) and in the rest of the world were USD 6.5 billion (-1%, +5% cc).

Sandoz net sales were USD 2.4 billion (+4%, +8% cc), with volume contributing 15 percentage points to growth. Sales growth was mainly driven by Europe, which benefited from strong volume growth driven by continued momentum from prior year launches and a strong cough and cold season. Pricing had a negative impact of 7 percentage points. Ex-US sales grew by +12% in cc. Global sales of Biopharmaceuticals grew to USD 518 million (+11%, +17% cc), driven by ex-US growth.

Q1 key growth drivers

Underpinning our financial results in the quarter is a continued focus on key growth drivers including:

Entresto (USD 1,399 million, +32% cc) sustained robust demand-led

growth, with increased patient share across all geographies

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Pluvicto (USD 211 million) with strong US launch performance,

with demand continuing to exceed supply

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Kesimpta (USD 384 million, +100% cc) sales growth across all

geographies driven by increased demand and strong

access

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Kisqali (USD 415 million, +81% cc) grew strongly across all

geographies, based on increasing recognition of its

overall survival and quality of life benefits in HR+/HER2-

advanced breast cancer

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Promacta/Revolade (USD 547 million, +15% cc) grew across most regions,

driven by increased use in chronic ITP and as first-line

and/or second-line treatment for severe aplastic anemia

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Tafinlar + (USD 458 million, +18% cc) sales grew across all geographies,

Mekinist driven by demand in BRAF+ adjuvant melanoma and NSCLC

indications

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Ilaris (USD 328 million, +19% cc) showed continued growth

across all geographies

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Scemblix (USD 76 million, +202% cc) continued its strong launch

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April 25, 2023 01:00 ET (05:00 GMT)