Ad hoc announcement pursuant to Art. 53 LR

Net sales in Q2 grew +9% (cc¹, +14% USD):
Pharmaceuticals BU grew +12% (cc, +18% USD) with continued strong growth from Entresto (+46% cc), Cosentyx (+21% cc) and Zolgensma (+48% cc). Kesimpta sales reached USD 66 million
Oncology BU grew +7% (cc, +11% USD) driven by Promacta/Revolade (+18% cc), Jakavi (+19% cc), Kisqali (+36% cc) and Tafinlar + Mekinist (+10% cc)
Sandoz grew +5% (cc, +11% USD) as the business is starting to stabilize
Excluding prior year forward purchasing de-stocking, we estimate Q2 net sales grew +5% (cc, +10% USD), Innovative Medicines grew +7% (cc, +11% USD) and Sandoz declined -1% (cc, + 6% USD)²
Q2 core¹ operating income grew +13% (cc, +18% USD) mainly driven by higher sales and favorable gross margin, partly offset by higher spend. Excluding prior year COVID-19 related forward purchasing de-stocking, we estimate core operating income increased +4% (cc, +10% USD)
Q2 operating income grew +41% (cc, +48% USD), mainly from higher sales as well as divestment gains
Q2 net income increased +49% (cc, +55% USD) benefiting from lower financial expenses
Q2 free cash flow1 of USD 4.2 billion (+17% USD), mainly driven by higher operating income, partly offset by unfavorable changes in working capital
H1 sales grew +3% (cc, +7% USD) and core operating income grew +2% (cc, +6% USD):
Innovative Medicines sales grew +5% (cc, +9% USD) and core operating income +6% (cc, +10% USD)
Sandoz sales declined -5% (cc, 0% USD) and core operating income declined -19% (cc, -16% USD)
Key innovation milestones:
Iptacopan Ph2 studies met endpoints in PNH, IgAN and C3G (IA); Ph3 studies enrolling
177Lu-PSMA-617 reduced mortality in patients with mCRPC; received Breakthrough Therapy designation
Zolgensma demonstrated transformational efficacy in presymptomatic children with SMA
Inclisiran resubmission of NDA filed with FDA to address manufacturing related CRL
Asciminib submitted to FDA for treatment of adult patients with Ph+ CML
2021 Group guidance³ unchanged
Basel, July 21, 2021 - commenting on the quarter, Vas Narasimhan, CEO of Novartis, said:

“Novartis delivered a strong second quarter, driven by the momentum of our key growth brands, including Cosentyx, Entresto, Zolgensma, our Oncology portfolio and the launch of Kesimpta which continues to accelerate. Our pipeline of novel medicines continues to progress with key positive readouts in diseases with high unmet need, including iptacopan in a range of immune mediated diseases, 177Lu-PSMA-617 in prostate cancer and Zolgensma in spinal muscular atrophy. We reached a notable milestone in our journey to build trust with society, tackling global health access challenges, by reaching a billion antimalarial courses delivered to patients most in need. Looking ahead, we reconfirm our full-year guidance and our commitment to drive long-term accretive growth”.

Key figures¹
Q2 2021 Q2 2020 % change H1 2021 H1 2020 % change
USD m USD m USD cc USD m USD m USD cc

Net sales 12 956 11 347 14 9 25 367 23 630 7 3
Operating income 3 479 2 352 48 41 5 894 5 096 16 12
Net income 2 895 1 867 55 49 4 954 4 040 23 19
EPS (USD) 1.29 0.82 57 52 2.20 1.77 24 21
Free cash flow 4 235 3 631 17 5 832 5 652 3
Core operating income 4 345 3 669 18 13 8 302 7 846 6 2
Core net income 3 716 3 108 20 14 7 129 6 657 7 3
Core EPS (USD) 1.66 1.36 22 16 3.17 2.92 9 5
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 48 of the Condensed Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year. 2 Growth excluding prior year COVID-19 related forward purchasing de-stocking is a non-IFRS measure, an explanation for this measure can be found on page 61 of the Condensed Interim Financial Report. ³ Please see detailed guidance assumptions on page 7 including the forecast assumption that we see a continuation of the return to normal global healthcare systems including prescription dynamics, particularly oncology, in H2 2021. In addition, we assume that no Gilenya and no Sandostatin LAR generics enter in 2021 in the US.

COVID-19 update

The COVID-19 situation continues to evolve and is taking differing courses across the multitude of geographies in which Novartis operates. While demand is starting to return to pre-COVID-19 levels in most geographies and therapeutic areas, we still see a slight impact on parts of our business for example in oncology, generics and certain geographies. We are assuming further easing of COVID-19 restrictions in the second half of the year with a positive impact on business dynamics.

The Group has not experienced liquidity or cash flow disruptions during Q2 2021 due to the COVID-19 pandemic. We are confident that Novartis is well positioned to meet its ongoing financial obligations and has sufficient liquidity to support its normal business activities.

Financials

Second quarter

Net sales were USD 13.0 billion (+14%, +9% cc) in the second quarter. Volume contributed 13 percentage points to sales growth, driven by Entresto, Cosentyx, Zolgensma and Lucentis. Volume growth was partly offset by price erosion of 2 percentage points and negative impact from generic competition of 2 percentage points. Excluding prior year COVID-19 related forward purchasing de-stocking, we estimate second quarter net sales grew +5% (cc, +10% USD).

Operating income was USD 3.5 billion (+48%, +41% cc) mainly driven by higher sales as well as divestment gains, partly offset by higher spend. Lower impairments were offset by lower financial assets gains, higher restructuring and higher amortization.

Net income was USD 2.9 billion (+55%, +49% cc) benefiting from higher Roche income and lower financial expenses. EPS was USD 1.29 (+57%, +52% cc), growing faster than net income benefiting from lower weighted average number of shares outstanding.

Core operating income was USD 4.3 billion (+18%, +13% cc) mainly driven by higher sales and favorable gross margin, partly offset by higher spend. Core operating income margin was 33.5% of net sales, increasing by 1.2 percentage points (+1.2 percentage points cc). Excluding prior year COVID-19 related forward purchasing de-stocking, we estimate core operating income increased +4% (cc, +10% USD).

Core net income was USD 3.7 billion (+20%, +14% cc) mainly driven by growth in core operating income. Core EPS was USD 1.66 (+22%, +16% cc), growing faster than core net income benefiting from lower weighted average number of shares outstanding.

Cash flows from operating activities amounted to USD 4.1 billion.

Free cash flow amounted to USD 4.2 billion (+17%), compared to USD 3.6 billion in the prior year quarter. This increase was mainly driven by operating income growth, including higher divestments, partly offset by unfavorable changes in working capital.

Innovative Medicines net sales were USD 10.6 billion (+15%, +10% cc). Volume contributed 13 percentage points to sales growth. Pharmaceuticals BU sales grew +12% (cc), with continued strong growth from Entresto, Cosentyx and Zolgensma. Lucentis benefited from a low prior year comparison due to COVID-19 related disruptions. Oncology BU grew +7% (cc) driven by strong performance from Promacta/Revolade, Jakavi, Kisqali, Tafinlar + Mekinist, Tasigna and Kymriah. Generic competition had a negative impact of 3 percentage points, mainly due to Ciprodex, Diovan, Exjade, Afinitor and Glivec. Net pricing had a negligible impact on sales growth. Excluding the impact of the forward purchasing de-stocking, we estimate second quarter net sales increased by +7% (cc).

Sandoz net sales were USD 2.4 billion (+11%, +5% cc) as the business is starting to stabilize. Volume increased by 13 percentage points, pricing had a negative impact of 8 percentage points. Sales in Europe grew +6% (cc), while sales in the US declined -10% due to the Retail Generics business, especially oral solids including partnership terminations, as well as Biopharmaceuticals impacted by higher off-contract sales in prior year. Global sales of Biopharmaceuticals grew +5% (cc). Excluding the impact of the forward purchasing de-stocking, we estimate second quarter net sales declined by -1% (cc).


First half

Net sales were USD 25.4 billion (+7%, +3% cc) in the first half. Volume contributed 7 percentage points to sales growth, driven by Entresto, Cosentyx and Zolgensma. Volume growth was partly offset by price erosion of 2 percentage points and negative impact from generic competition of 2 percentage points.

Operating income was USD 5.9 billion (+16%, +12% cc) mainly driven by higher sales, lower legal expenses and higher divestments, partly offset by higher spend and restructuring.

Net income was USD 5.0 billion (+23%, +19% cc) benefiting from higher Roche income and lower financial expenses. EPS was USD 2.20 (+24%, +21% cc), growing faster than net income benefiting from lower weighted average number of shares outstanding.

Core operating income was USD 8.3 billion (+6%, +2% cc) mainly driven by higher sales, partly offset by higher spend. Core operating income margin was 32.7% of net sales, decreasing by 0.5 percentage points (-0.4 percentage points cc).

Core net income was USD 7.1 billion (+7%, +3% cc) mainly driven by growth in core operating income. Core EPS was USD 3.17 (+9%, +5% cc), growing faster than core net income benefiting from lower weighted average number of shares outstanding.

Cash flows from operating activities amounted to USD 6.3 billion.

Free cash flow amounted to USD 5.8 billion (+3%), compared to USD 5.7 billion in the prior year period. This increase was mainly driven by higher divestment proceeds, which were mostly offset by the USD 650 million upfront payment to in-license tislelizumab from BeiGene.

Innovative Medicines net sales were USD 20.7 billion (+9%, +5% cc). Pharmaceuticals BU sales grew +6% (cc), driven by Entresto, Cosentyx, Zolgensma, Lucentis and Kesimpta. Oncology BU grew +4% (cc) driven by Promacta/Revolade, Kisqali, Jakavi, Kymriah and Tafinlar + Mekinist. Volume contributed 8 percentage points to sales growth. Generic competition had a negative impact of 3 percentage points. Net pricing had a negligible impact on sales growth.

Sandoz net sales were USD 4.7 billion (0%, -5% cc) with a negative price effect of 9 percentage points. Volume increased by 4 percentage points from growth in Biopharmaceuticals partly offset by the impact of softer retail demand, with a historically weak cough and cold season. Sales in Europe declined -7% (cc) due to the impact of COVID-19 on the Retail Generics business. Sales in the US declined -16%, mainly due to the Retail Generics business, especially oral solids including partnership terminations, as well as Biopharmaceuticals impacted by higher off-contract sales in the prior year. Global sales of Biopharmaceuticals grew +6% (cc).

Q2 key growth drivers

Underpinning our financial results in the quarter is a continued focus on key growth drivers (ranked in order of contribution to Q2 growth) including:

Entresto (USD 886 million, +46% cc) sustained strong growth with increased patient share across markets, driven by demand as essential first choice therapy for HF patients
Cosentyx (USD 1.2 billion, +21% cc) strong growth driven by sustained underlying demand across indications in the US and Europe, and strong volume growth in China following NRDL listing in Q1 2021
Zolgensma (USD 315 million, +48% cc) strong growth driven by expanding access in Europe and ongoing geographic expansion. Zolgensma is now approved in 41 countries
Promacta/Revolade (USD 513 million, +18% cc) showed double-digit growth across all regions, driven by increased use in chronic immune thrombocytopenia (ITP) and as first-line treatment for severe aplastic anemia (SAA)
Kesimpta (USD 66 million) sales were driven by launch uptake, strong access and increased demand, despite some COVID-19 vaccination associated delays
Jakavi (USD 398 million, +19% cc) growth in all regions was driven by strong demand in the myelofibrosis and polycythemia vera indications
Kisqali (USD 225 million, +36% cc) continued to see growth, benefiting from the positive impact of updated MONALEESA-3 data
Ilaris (USD 247 million, +21% cc) strong sales were driven by continued double-digit volume growth across all regions
Xolair (USD 355 million, +14% cc) continued growth, mainly driven by the chronic spontaneous urticaria (CSU) and severe allergic asthma (SAA) indications
Xiidra (USD 118 million, +48% cc) sales grew double-digit, benefiting from increased brand awareness and a lower prior year base
Tafinlar + Mekinist (USD 425 million, +10% cc) saw continued demand increases in BRAF+ adjuvant melanoma and NSCLC
Mayzent (USD 69 million, +96% cc) continued to grow, driven by fulfilling an important unmet need in patients showing signs of progression despite being on other treatments
Kymriah (USD 147 million, +19% cc) growth driven mainly by Europe and Emerging Growth Markets. Coverage continued to expand, with more than 325 qualified treatment centers in 30 countries having coverage for at least one indication
Adakveo (USD 42 million, +96% cc) US launch continued to progress with a growing number of accounts purchasing Adakveo, which is now approved in 44 countries
Biopharmaceuticals (USD 524 million, +5% cc) grew more slowly reflecting increased competition
Emerging Growth Markets* Overall, sales grew +13% (cc). China grew strongly (+18% cc) and sales reached USD 811 million
* All markets except US, Canada, Western Europe, Japan, Australia and New Zealand
Net sales of the top 20 Innovative Medicines products in 2021

Q2 2021 % change H1 2021 % change
USD m USD cc USD m USD cc
Cosentyx 1 175 24 21 2 228 19 16
Entresto 886 53 46 1 675 46 40
Gilenya 721 -2 -6 1 428 -5 -9
Lucentis 551 37 27 1 096 23 15
Tasigna 523 9 6 1 038 7 4
Promacta/Revolade 513 22 18 976 18 16
Tafinlar + Mekinist 425 15 10 818 11 7
Jakavi 398 28 19 761 21 14
Sandostatin 359 5 2 717 0 -2
Xolair 355 23 14 690 16 9
Zolgensma 315 54 48 634 69 63
Galvus Group 280 0 -2 542 -12 -14
Gleevec/Glivec 263 -9 -13 535 -13 -17
Afinitor/Votubia 264 -1 -2 518 -8 -9
Ilaris 247 24 21 503 22 20
Exforge Group 247 4 -3 501 1 -5
Kisqali 225 42 36 420 31 28
Diovan Group 190 -29 -33 404 -25 -28
Exjade/Jadenu 147 -10 -14 300 -10 -15
Ultibro Group 150 1 -8 299 -3 -10
Top 20 products total 8 234 16 11 16 083 11 7
R&D Update - key developments from the second quarter

New approvals

Cosentyx

Received FDA approval for treatment of moderate to severe plaque psoriasis in pediatric patients six years and older.

see & read more on
https://www.novartis.com/news/media-releases/novartis-delivered-strong-q2-performance-driven-momentum-key-growth-brands-fy-2021-guidance-unchanged