Ad hoc announcement pursuant to Art. 53 LR 


   -- Q3 net sales grew +5% (cc(1), +6% USD) 
 
          -- Innovative Medicines grew +7% (cc, +8% USD) 
 
          -- Strong performance of key growth drivers: Entresto (+44% cc), 
             Cosentyx (+22% cc), Kesimpta (USD 109 million), Jakavi (+26% cc), 
             Zolgensma (+28% cc), Promacta/Revolade (+18% cc) and Kisqali (+27% 
             cc) 
 
          -- Sandoz declined -2% (cc, -1% USD), affected by continued pricing 
             pressures. Ex-US sales grew +3% (cc) 
   -- Q3 core(1) operating income grew +9% (cc, +10% USD) 
 
          -- Innovative Medicines grew +13% (cc, +14% USD), due to higher sales 
             and productivity programs 
 
          -- Sandoz declined -15% (cc, -13% USD), impacted by gross margin 
 
   -- Q3 operating income grew +32% (cc, +34% USD) 
 
   -- Q3 net income increased +41% (cc, +43% USD) 
 
   -- Q3 free cash flow1 of USD 4.4 billion (+64% USD), with higher operating 
      income, lower payments out of provisions and favorable changes in working 
      capital 
   -- Nine months sales grew +4% (cc, +7% USD) and core operating income grew 
      +4% (cc, +7% USD) 
 
          -- Innovative Medicines sales grew +6% (cc, +9% USD) and core 
             operating income +8% (cc, +11% USD) 
 
          -- Sandoz sales declined -4% (cc, 0% USD) and core operating income 
             declined -18% (cc, -15% USD) 
 
   -- Increasing peak sales guidance for Cosentyx (at least USD 7.0 billion) 
      and Entresto (at least USD 5.0 billion) 
 
   -- Key innovation milestones 
 
          -- Zolgensma partial clinical trial hold lifted by FDA; Ph3 IT 
             clinical trial for SMA to proceed Q4 2021 
 
          -- Kisqali demonstrated statistically significant OS benefit for 1L 
             HR+/HER2- advanced breast cancer 
 
          -- Cosentyx met primary endpoint in Ph2 Giant Cell Arteritis study; 
             Ph3 started 
 
          -- Remibrutinib met primary endpoint in Ph2b CSU study; Ph3 in CSU 
             and MS planned 
 
          -- 177Lu-PSMA-617 and Asciminib granted priority review by FDA 
   -- Commencing a strategic review of Sandoz to maximize shareholder value, 
      options range from retaining the business to separation 
 
   -- 2021 Group guidance(2) unchanged

Basel, October 26, 2021 - commenting on the quarter, Vas Narasimhan, CEO of Novartis, said:

"Novartis delivered strong Innovative Medicines performance, driven by the continued momentum of Cosentyx and Entresto, allowing us to raise peak sales guidance for these products. Rejuvenation of our portfolio continues, from our key brands which include Kesimpta, Leqvio, Zolgensma and the oncology portfolio. We are also commencing a strategic review of Sandoz to maximize shareholder value. We remain confident in the strength of our pipeline and launch brands to fuel the growth of our company in the mid to longer term." 


 
Key figures(1) 
                   Q3 2021  Q3 2020    % change  9M 2021  9M 2020    % change 
                     USD m    USD m    USD   cc    USD m    USD m    USD   cc 
                   -------  -------  -----  ---  -------  -------  -----  --- 
Net sales           13 030   12 259      6    5   38 397   35 889      7    4 
                   -------  -------  -----  ---  -------  -------  -----  --- 
Operating income     3 233    2 412     34   32    9 127    7 508     22   18 
                   -------  -------  -----  ---  -------  -------  -----  --- 
Net income           2 758    1 932     43   41    7 712    5 972     29   26 
                   -------  -------  -----  ---  -------  -------  -----  --- 
EPS (USD)             1.23     0.85     45   44     3.44     2.62     31   28 
                   -------  -------  -----  ---  -------  -------  -----  --- 
Free cash flow       4 423    2 697     64        10 255    8 349     23 
                   -------  -------  -----       -------  -------  ----- 
Core operating 
 income              4 467    4 069     10    9   12 769   11 915      7    4 
                   -------  -------  -----  ---  -------  -------  -----  --- 
Core net income      3 830    3 467     10    9   10 959   10 124      8    5 
                   -------  -------  -----  ---  -------  -------  -----  --- 
Core EPS (USD)        1.71     1.52     13   11     4.88     4.44     10    7 
                   -------  -------  -----  ---  -------  -------  -----  ---

Strategic review of the Sandoz Division

Novartis has commenced a strategic review of the Sandoz Division. The review will explore all options, ranging from retaining the business to separation, in order to determine how to best maximize value for our shareholders.

Sandoz is a global leader in generic pharmaceuticals and biosimilars. Its global portfolio covers all major therapeutic areas with a global market leadership position in biosimilars, generic antibiotics and oncology medicines.

Financials

Third quarter

Net sales were USD 13.0 billion (+6%, +5% cc) in the third quarter. Volume contributed 9 percentage points to sales growth, driven by Entresto, Cosentyx, Kesimpta and Jakavi. Volume growth was partly offset by price erosion of 2 percentage points and generic competition of 2 percentage points.

Operating income was USD 3.2 billion (+34%, +32% cc) predominately from higher sales and lower impairment charges, partly offset by higher investments in M&S and R&D.

Net income was USD 2.8 billion (+43%, +41% cc). EPS was USD 1.23 (+45%, +44% cc), growing faster than net income benefiting from lower weighted average number of shares outstanding.

Core operating income was USD 4.5 billion (+10%, +9% cc) benefiting from higher sales and productivity programs, partly offset by higher investments in M&S and R&D. Core operating income margin was 34.3% of net sales, increasing by 1.1 percentage points (+1.0 percentage point cc).

Core net income was USD 3.8 billion (+10%, +9% cc). Core EPS was USD 1.71 (+13%, +11% cc), growing faster than core net income benefiting from lower weighted average number of shares outstanding.

Net cash flows from operating activities amounted to USD 4.9 billion.

Free cash flow amounted to USD 4.4 billion (+64%). This increase was driven by higher operating income adjusted for non-cash items, favorable changes in working capital and lower payments out of provisions, mainly due to legal matters in the prior year quarter.

Innovative Medicines net sales were USD 10.6 billion (+8%, +7% cc). Volume contributed 10 percentage points to sales growth. Pharmaceuticals BU sales grew +8% (cc), with continued strong growth from Entresto, Cosentyx, Kesimpta and Zolgensma. Oncology BU grew +5% (cc) driven by strong performance from Jakavi, Promacta/Revolade and Kisqali. Generic competition had a negative impact of 3 percentage points, mainly due to Diovan, Ciprodex and Exjade. Net pricing had a negligible impact on sales growth. Operating income was USD 2.8 billion (+40%, +38% cc). Core operating income was USD 4.0 billion (+14%, +13% cc). Core operating income margin was 37.8% of net sales, increasing 2.0 percentage points (+1.9 percentage points cc).

Sandoz net sales were USD 2.4 billion (-1%, -2% cc). Volume increased by 7 percentage points more than offset by a negative price effect of 9 percentage points. Sales in Europe grew +2% (cc), while sales in the US declined -20%. Global sales of Biopharmaceuticals grew +5% (cc). Operating income was USD 440 million (+11%, +9% cc). Core operating income was USD 571 million (-13%, -15% cc). Core Operating income margin was 23.8%, decreasing 3.4 percentage points (-3.6 percentage points cc).

Nine months

Net sales were USD 38.4 billion (+7%, +4% cc) in the first nine months. Volume contributed 8 percentage points to sales growth, driven by Entresto, Cosentyx and Zolgensma. Price erosion was 2 percentage points and there was an impact from generic competition of 2 percentage points.

Operating income was USD 9.1 billion (+22%, +18% cc) predominately from higher sales, lower legal expenses and lower impairment charges, partly offset by higher amortization and higher M&S and R&D investments.

Net income was USD 7.7 billion (+29%, +26% cc). EPS was USD 3.44 (+31%, +28% cc), growing faster than net income benefiting from lower weighted average number of shares outstanding.

Core operating income was USD 12.8 billion (+7%, +4% cc) benefiting from higher sales, partly offset by higher investments in M&S and R&D. Core operating income margin was 33.3% of net sales, increasing by 0.1 percentage point (+0.1 percentage point cc).

Core net income was USD 11.0 billion (+8%, +5% cc). Core EPS was USD 4.88 (+10%, +7% cc), growing faster than core net income benefiting from lower weighted average number of shares outstanding.

Net cash flows from operating activities amounted to USD 11.2 billion.

Free cash flow amounted to USD 10.3 billion (+23%). This increase was mainly driven by higher operating income adjusted for non-cash items, higher divestment proceeds and lower payments out of provisions, mainly due to legal matters in the prior year period, partly offset by the USD 650 million upfront payment to in-license tislelizumab from BeiGene.

Innovative Medicines net sales were USD 31.3 billion (+9%, +6% cc). Pharmaceuticals BU sales grew +7% (cc), driven by Entresto, Cosentyx, Zolgensma and Kesimpta. Oncology BU grew +4% (cc) driven by Promacta/Revolade, Jakavi and Kisqali. Volume contributed 9 percentage points to sales growth. Generic competition had a negative impact of 3 percentage points. Net pricing had a negligible impact on sales growth. Operating income was USD 8.2 billion (+21%, +18% cc). Core operating income was USD 11.6 billion (+11%, +8% cc). Core operating income margin was 37.1% of net sales, increasing 0.8 percentage point (+0.9 percentage point cc).

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October 26, 2021 01:00 ET (05:00 GMT)