Novartis achieves record results in 2009 as momentum from recently launched products drives growth a
(Thomson Reuters ONE) - NOVARTIS AG CHF0.50(REGD) / Novartis achieves record results in 2009 as momentum from recently launched products drives growth across its entire healthcare portfolio processed and transmitted by Hugin AS. The issuer is solely responsible for the content of this announcement. Novartis completes CEO succession process with appointment of Joe Jimenez as newCEO and simplified leadership organization· Group delivers sustained business expansion and profit improvement with alldivisions contributing to strong performance in 2009o Net sales rise 11% in local currencies (lc) to USD 44.3 billion (+7% inUSD), as innovative products drive Pharmaceuticals to industry-leading growthand Vaccines and Diagnostics sells over 100 million influenza A (H1N1) pandemicvaccine doseso Core operating income grows 11% to USD 11.4 billion, as margin improves to25.8% of net sales on business expansion and productivity gainso Core net income rises 8% to USD 10.3 billion, at a lower pace than coreoperating income mainly due to Alcon-related financing costso Core EPS up 8% to USD 4.50o Free cash flow before dividends advances 24% to USD 9.4 billion· More than 30 drug approvals and full pipeline with 145 projects inpharmaceutical clinical development, of which 60 involve new molecular entities· · Forward productivity program exceeds savings goal by nearly 50%and a year ahead of schedule· Access-to-medicine programs including medication for malaria and leprosyreach 80 million patients in 2009 with contributions valued at USD 1.5 billion,or 3% of sales· New management in place for the next phase of growtho Dr. Vasella to focus on strategic priorities as Chairman, Board names JoeJimenez CEO and simplifies organizational structure completing the CEOsuccession process begun in 2008o Novartis to become the first large, listed Swiss company to include aconsultative vote on Compensation System in its Articles of Incorporation,further strengthening governance in wake of global financial crisis· · 13th consecutive dividend increase: CHF 2.10 per share proposedfor 2009· · 2010 to be a year of significant progress in implementingstrategic priorities with continued focus on innovation, growth and productivityKey figures Full year Fourth quarter 2009 2008 % change 2009 2008 % change USD m USD m USD lc USD m USD m USD lc------------------------------------------------------------------------------ Net sales 44 267 41 459 7 11 12 926 10 077 28 20 Operating income 9 982 8 964 11 2 637 1 680 57 Net income 8 454 8 163 4 2 323 1 507 54 Basic EPS (USD) 3.70 3.59 3 1.01 0.66 53 Core(1) Operating income 11 437 10 319 11 3 204 2 090 53 Net income 10 267 9 501 8 2 892 1 967 47 Basic EPS (USD) 4.50 4.18 8 1.26 0.86 47------------------------------------------------------------------------------[1] Core results for operating income, net income and earnings per share (EPS)eliminate the impact of acquisition-related factors and other significantexceptional items. See page 35 for further information.Basel, January 26, 2010 - Commenting on the results, Dr. Daniel Vasella,Chairman and CEO of Novartis, said: "Novartis delivered an excellent performancein 2009 driven by strong underlying growth across our entire healthcareportfolio. Over the past 12 months, we sustained our lead in approvals for newproducts, achieving more than 30 major new product approvals in the US, Europeand Japan. Our productivity efforts improved profitability and allowed forcontinued investments in drug discovery. The planned acquisition of Alcon willpropel Novartis to the global leadership position in eye-care and create a newgrowth platform. After 14 years as CEO it is the right time to complete thecarefully planned CEO succession process, which started over a year ago. TheBoard appointed Joe Jimenez, currently division head of our pharmaceuticalbusiness as new CEO and also agreed to delayer and simplify the top leadershipstructure. The international experience in pharmaceuticals and consumerbusinesses together with an excellent track record destine Joe Jimenez to leadNovartis into a next phase of expansion and growth. I am convinced 2010 will bea year of significant progress."OVERVIEWFull yearThe underlying double-digit expansion in Pharmaceuticals, ranked as one of theindustry's fastest-growing businesses based on market share, led the Group'shealthcare portfolio in 2009 to another year of record results. Vaccines andDiagnostics achieved exceptionally high sales by rapidly developing anddelivering influenza A (H1N1) pandemic vaccines to address the public healththreat.Net sales rose 7% (+11% in local currencies, lc) to USD 44.3 billion on theunderlying expansion in all divisions: Pharmaceuticals (+12% lc), Vaccines andDiagnostics (+39% lc), Sandoz (+5% lc) and Consumer Health (+5% lc).Top-performing regions included Europe (USD 18.4 billion, +10% lc) and theUnited States (USD 14.3 billion, +11% lc) as well as the top six emergingmarkets (USD 4.0 billion, +17% lc) of Brazil, China, India, Russia, South Koreaand Turkey. Higher volumes contributed 10 percentage points of growth, whileacquisitions and price changes together added one percentage point of salesgrowth. The stronger US dollar compared to 2008 reduced full-year growth by fourpercentage points.Operating income grew 11% to USD 10.0 billion in 2009, which resulted in theoperating income margin rising to 22.5% of net sales from 21.6% in 2008. Thestronger US dollar compared to 2008 reduced operating income growth by ninepercentage points. Core operating income, which excludes exceptional items andamortization of intangible assets in both periods, grew 11% to USD 11.4 billionon improvements in Pharmaceuticals and Vaccines and Diagnostics as well asproductivity gains in all divisions. The core operating income margin rose to25.8% of net sales from 25.0% in 2008.Net income rose 4% to USD 8.5 billion, while basic EPS was up 3% to USD 3.70.Core net income of USD 10.3 billion (+8%) rose at a slower pace than operatingincome as increased contributions from associated companies were partiallyreduced by Alcon-related financing costs. Core earnings per share were USD 4.50in 2009, up from USD 4.18 in 2008.Fourth quarterNovartis ended 2009 strongly, delivering double-digit net sales and earningsgrowth that reflected operational progress in all divisions and more favorablecurrency conditions over the 2008 period.Net sales grew 28% (+20% lc) to USD 12.9 billion. Pharmaceuticals (+13% lc)maintained its industry-leading performance based on growth of recently launchedproducts. Results in Vaccines and Diagnostics (+166% lc) included USD 1.0billion of A (H1N1) pandemic vaccine and adjuvant sales. Sandoz (+10% lc)benefited from the EBEWE Pharma specialty generics business acquisition inSeptember, which added five percentage points to sales growth. Consumer Health(+13% lc) had better results in all businesses, particularly in OTC on thefirst-to-market OTC launch of Prevacid24HR in the US.Operating income rose 57% to USD 2.6 billion, with favorable currency movementshaving a positive impact of five percentage points. The operating income marginimproved to 20.4% in the 2009 quarter from 16.7% in 2008. Core operating incomerose 53% to USD 3.2 billion in the 2009 quarter on double-digit contributionsfrom all businesses, with the core operating income margin expanding to 24.8% ofnet sales in the 2009 period from 20.8% in the year-ago quarter.Net income rose 54% to USD 2.3 billion, while basic EPS rose at the same pace toUSD 1.01 in the 2009 period from USD 0.66 in 2008. Core net income was up 47% toUSD 2.9 billion, which reflected higher financing charges and reduced incomefrom associated companies. Core basic earnings per share (EPS) rose 47% to USD1.26 in the 2009 quarter from USD 0.86 in the 2008.More than 30 major approvals in 2009Novartis is transforming its portfolio through long-term investments ininnovation. More than 30 major regulatory approvals in 2009 included the newmedicines Afinitor (cancer), Onbrez Breezhaler (chronic obstructive pulmonarydisease) and Ilaris (CAPS); A (H1N1) pandemic flu vaccines; the first-everbiosimilars in Japan and Canada; and the Prevacid24HR OTC brand in the US. Amongregulatory submissions completed in 2009 included Gilenia (FTY720, multiplesclerosis) in the US and Europe. Other key submissions involved new indicationsfor Tasigna (first-line CML), Zometa (adjuvant breast cancer) and Lucentis(diabetic macular edema). Novartis gained approvals in Japan for six newmedicines, while three more approvals were received in January 2010 for Equa(Galvus), Exforge (hypertension) and Afinitor. Many submissions are planned for2010, with up to five in oncology: Afinitor (neuroendocrine tumors) and thedevelopment projects SOM230 (Cushing's disease), LBH589 (Hodgkin's lymphoma) andEPO906 (ovarian cancer).Improving organizational productivityNovartis is integrating the drive for greater productivity and increasedefficiency into its operations, improving speed while freeing up resources tofocus on customers and growth initiatives. This is expected to lead to furtherimprovement in the Group's operating income margin in 2010. Forward, theGroup-wide initiative launched in late 2007 to simplify structures and redesignthe way Novartis operates, has been completed a year ahead of schedule afterprogressing rapidly and achieving more than USD 2.3 billion of cumulative costsavings since 2007 and exceeding its 2010 goal of USD 1.6 billion.Commitment to patientsBusiness success enables Novartis to continue its commitment to patients aroundthe world, an integral part of the Group's strategy. Medicines and vaccines fromNovartis were used in 2009 to treat and protect more than 930 million peoplearound the world, according to internal estimates. Novartis is helping patientsin the developing world through key initiatives focused on neglected diseases,especially malaria, leprosy, dengue fever and treatment-resistant tuberculosis.Treatments worth USD 1.5 billion were contributed through Novartisaccess-to-medicine programs in 2009, reaching 79.5 million patients in need.2010: Delivering on strategic prioritiesNovartis expects 2010 to be a year of significant progress in implementing itsstrategy to meet the growing needs of patients and aging societies worldwidethrough its healthcare portfolio.Industry-leading growthNovartis expects to maintain momentum in 2010 and increase Group net sales at amid-single-digit percentage rate in local currencies[1] based on the rapidlygrowing contributions of recently launched products and targeted investments inemerging growth markets.Pharmaceuticals expects to continue the strong volume growth achieved in 2009 onthe rapid expansion of recently launched products, implementing new commercialmodels to adapt to local market needs while expanding in high-growth markets.However, pricing conditions are uncertain given industry challenges that includehealthcare reforms (particularly in the US and Turkey) and biennial price cutsin Japan, while therapeutic-class generic competition is also set to start forDiovan in 2010 ahead of the end of exclusivity in Europe (2011) and the US(September 2012). Reflecting these factors, Pharmaceuticals net sales in 2010are expected to grow at a mid- to high-single digit rate in local currencies.Vaccines and Diagnostics is preparing the launch of Menveo, a developmentalvaccine against four serogroups of meningococcal meningitis. European approvalis expected in early 2010 after a positive opinion in December 2009, while a USregulatory decision is also expected in the first half of the year. Novartisplans to continue delivering A (H1N1) pandemic influenza vaccines and adjuvantsin 2010; however, sales estimates for the year are well below 2009 levels.Sandoz expects to increase its pace of growth in 2010. The addition of EBEWEPharma's specialty injectables business in September 2009 has created a newglobal growth platform by improving access to price competitive quality oncologymedicines.Consumer Health aims to keep growing ahead of its markets in 2010. The late2009 US launch of Prevacid24HR, the first OTC version of this drug for frequentheartburn pain, has created an important new brand. Novartis will launch an OTCversion of pantoprazole, another proton pump inhibitor, in 14 European countriesin the second quarter of 2010 after gaining rights from Nycomed.The addition of Alcon, the global leader in eye care, will strengthen theNovartis healthcare portfolio and provide a greater presence in the fast-growingglobal eye care sector. Novartis announced on January 4 its intention to gainfull ownership of Alcon by first completing the April 2008 agreement with Nestl?.A. to acquire a 77% majority stake and subsequently entering into an all-sharedirect merger with Alcon for the remaining 23% minority stake. This merger,which will be implemented under the Swiss Merger Act, is in the interest of allstakeholders and will provide the needed clarity on Alcon's future. Followingthe merger, Alcon will become a new Novartis division that incorporates CIBAVision and certain Novartis ophthalmic medicines.Board selects new CEO and simplifies the top leadership organizationThe Board has accepted Dr. Daniel Vasella's proposal to complete the CEOsuccession process after serving 14 years as CEO and 11 years as Chairman andCEO, by appointing Joe Jimenez, currently Head of the Pharmaceuticals Divisionas Novartis' new CEO. Dr. Vasella will continue in his role as Chairman of theBoard concentrating on strategic priorities. This completes the succession planwhich began in 2008 with the creation of a transitional COO position and theappointment of new divisional management. The business portfolio has beensuccessfully transformed to focus on healthcare, the research organization ishighly respected and the pipeline is full and highly valued. Novartis'reputation is among the best in its industry and beyond, led by a world-classleadership team. So, it is timely to transition to a new CEO.The Board has selected Joe Jimenez with complete trust in his global leadershipcapabilities, based on his outstanding performance track record, broadinternational business experience and his ability to provide direction, alignand engage people. These skills will be crucial for implementing Novartis'strategy. Jimenez will take over the CEO responsibilities as of February1, 2010.David Epstein, currently Head of the Novartis Oncology business, the fastestgrowing unit in Pharmaceuticals, will become Head of the PharmaceuticalsDivision. Jon Symonds will take over as CFO on February 1, 2010, from RaymundBreu, who will retire on March 31, having reached the mandatory retirement age.Simplifying its leadership structure Novartis reduces the size of the ExecutiveCommittee from 12 to 9. They will be Joe Jimenez, CEO; Mark Fishman, M.D.,Global Head of NIBR (The Novartis Institute for BioMedical Research); DavidEpstein, Division Head Pharmaceuticals; Jeff George, Division Head Generics;George Gunn, Division Head Consumer Health: Andrin Oswald, M.D., Division HeadVaccines and Diagnostics; Jon Symonds, CFO; Thomas Werlen, General Counsel; andJ?n Brokatzky-Geiger, Global Head Human Resources.Furthering the delayering efforts, three executive positions have beeneliminated: COO, Head Corporate Affairs, and Head Group Quality/TechnicalOperations.Two smaller units, Group Quality Assurance, headed by Juan Andres and GroupCountry Management/External Affairs, led by Joe Jimenez ad interim, report tothe CEO. Corporate Audit and Compliance reports to the Chairman.In the context of this new organizational structure Joerg Reinhardt, AndreasRummelt and Thomas Wellauer have decided to pursue their careers outside ofNovartis. We are thankful to each of them for their many contributions over themany years to the success of Novartis. All changes will be effective February1, 2010.AGM proposals for dividend rise and consultative vote on Compensation System tofurther strengthen governance in the wake of the global financial crisis, andagainst the mandatory separation of the responsibilities of Chairman and CEOThe Board proposes a dividend payment of CHF 2.10 per share for 2009, up 5% fromCHF 2.00 per share for 2008 and representing the 13(th) consecutive dividendincrease since the creation of Novartis in December 1996. The average annualdividend increased by 11.7% in CHF, while the annual total shareholder returnsince 1996 increased by 9%. Dividends paid for 2009 on outstanding shares willamount to USD 4.6 billion and the payout ratio is estimated at 55% of netincome. Based on the year-end 2009 share price of CHF 56.50, the dividend yieldis 3.7%. The payment date is March 5, 2010. All issued shares are dividendbearing, except 167.7 million treasury shares.The Board further proposes that Novartis become the first large, listed Swisscompany to include a consultative vote on its Compensation System in itsArticles of Incorporation. Such a vote is to be held before every significantchange in the Compensation System, but at least at every third Annual GeneralMeeting (AGM). The three-year cycle for votes also allows shareholders to take alonger-term view when examining the sustainability of the Compensation System.Sustainable compensation systems are harmonized with multi-year business plans,and only attain their full effect when used unchanged for several years, in partsince it takes time for them to be understood by employees. This proposal, ifapproved by shareholders, would be implemented following the upcoming AGM. Theproposal complements the corporate governance initiatives that Novartis hasinstituted over the past year. In 2009 a new Risk Committee of the Board wasestablished that oversees enterprise risk management processes for the Groupwhile monitoring risk-adjusted decision-making. In addition, a "clawbackprovision" for incentive payments will be progressively included in employeecontracts. This will allow Novartis to retract any unjustified payment to anemployee if later it is found to be based on financial misstatements orunethical business behavior. This will further enhance Novartis' governance inthe wake of the global financial crisis, which revealed among some companies alack of standards and oversight which eventually contributed to the worldwiderecession.The Board recommends to shareholders to vote against the proposal by ashareholder group to introduce a yearly separate consultative vote on theCompensation Report, stating that such a vote is retrospective as it relatesonly to the previous business year. This vote would not allow a trueconsultation since shareholders would only express their views on matters thathad already occurred. Shareholders also do not have the essential basis for aninformed opinion on compensation awarded, as this implies knowledge of thepre-agreed objectives and the degree to which these objectives have been met.For competitive reasons it would be against the interest of the corporation todisclose yearly and long-term objectives and individual performance assessments.Setting the compensation of executives is an essential management instrument ofthe Board that may not be rescinded. Swiss company law mandates that this dutymust be allocated to the Board.The Board also recommends to shareholders to vote against a mandatory separationof the Chairman of the Board and CEO functions, regarding such a rule as toorigid and not in the best interests of shareholders, as it would restrictfreedom and prevent the flexible adaptation of the Group's leadership structureto circumstances and strategic requirements. Novartis has long complied withinternational best practice based on the Board's decision to combine the rolesof Chairman and CEO with the appointments of a Lead Director and onlyIndependent Directors for the most important Board Committees.Finally, the Board proposes the re-election of Dr. Daniel Vasella and MarjorieM.T. Yang, each for a three-year term, and Hans-Joerg Rudloff for a one-yearterm (as he will reach the age limit).Shareholders will vote on these and other proposals at the next Annual GeneralMeeting scheduled for February 26, 2010.BUSINESS REVIEWFull yearNet sales 2009 2008 % change USD m USD m USD lc--------------------------------------------------------- Pharmaceuticals 28 538 26 331 8 12 Vaccines and Diagnostics 2 424 1 759 38 39 Sandoz 7 493 7 557 -1 5 Consumer Health 5 812 5 812 0 5--------------------------------------------------------- Net sales 44 267 41 459 7 11---------------------------------------------------------Pharmaceuticals: USD 28.5 billion (+8%, +12% lc)All geographic regions and therapeutic areas contributed to the double-digitexpansion in local currencies, driven by recently launched products (USD 4.7billion, +81% lc) that increased their share of net sales to 16% in 2009 from10% in 2008. This group of rapidly growing products - including Lucentis,Exforge, Exjade, Exelon Patch, Reclast/Aclasta, Tekturna/Rasilez, Afinitor andIlaris - provided eight percentage points of the division's 12% lc net salesgrowth in 2009.Oncology (USD 9.0 billion, +14% lc) remained the largest franchise and ranks No.2 in the global oncology segment, led by sustained growth of Gleevec/Glivec (USD3.9 billion, +12% lc) and three additional products - Zometa, Femara andSandostatin - that each achieved more than USD 1 billion of sales. Exforge andTekturna/Rasilez (high blood pressure) and Galvus (type 2 diabetes) droveexpansion of Cardiovascular and Metabolism (USD 8.8 billion, +9% lc),complementing Diovan (USD 6.0 billion, +6% lc) as Novartis expanded its positionas the global leader in hypertension. Lucentis (USD 1.2 billion, +47% lc) andExelon (USD 954 million, +22% lc) fueled growth in Neuroscience and Ophthalmics(USD 4.9 billion, +12% lc).All regions benefited from the product portfolio transformation, particularlyEurope (USD 10.5 billion, +12% lc) as the largest region and generating morethan 20% of sales from recently launched products. Also delivering topperformances were Latin America and Canada (USD 2.5 billion, +13% lc), while theUS (USD 9.5 billion, +11% lc) and Japan (USD 3.1 billion, +9% lc) both showedrenewed growth. All six top emerging markets (USD 2.6 billion, +19% lc) -Brazil, China, India, Russia, South Korea and Turkey - advanced at robustdouble-digit rates.Vaccines and Diagnostics: USD 2.4 billion (+38%, +39% lc)A rapid response after the outbreak of the A (H1N1) pandemic in April 2009enabled Vaccines and Diagnostics to deliver more than 100 million vaccine dosesto governments around the world in only a few months, providing USD 1.0 billionof net sales from pandemic vaccines and adjuvants in 2009. Pediatric vaccinesand strong growth in emerging markets helped offset price pressure on seasonalinfluenza vaccines and a decline in tick-borne encephalitis vaccines in Europe.Diagnostics sales were slightly lower.Sandoz: USD 7.5 billion (-1%, +5% lc)Consistent growth in 2009 at a stronger pace than in 2008 reflected the impactof new product launches, a sharper commercial focus in both mature and emergingmarkets, and the US returning to growth. To the benefit of customers, a pricedecline of seven percentage points from price erosion was more than offset byvolume growth of 11 percentage points from new product launches. Retail genericsand biosimilars in Germany (+4% lc) reached a leading 29% share from new productlaunches and volume growth in a challenging market. A total of 25 new productlaunches, eight more than 2008, underpinned US retail generics and biosimilars(+5%). Asia-Pacific (+17% lc) and Russia (+19% lc) were also among topperformers. The EBEWE acquisition in September, which added one percentage pointto sales growth in 2009, provided a strong platform for growth in injectableoncology medicines.Consumer Health: USD 5.8 billion (+0%, +5% lc)All businesses achieved faster underlying growth than their respective marketsdespite the difficult economic conditions. CIBA Vision was the industry'sfastest-growing contact lens and lens care company on the strength of newproduct introductions. OTC delivered an increasingly positive performance,driven by portfolio innovation and the successful US launch of Prevacid24HR inNovember 2009. Animal Health grew ahead of the competition in the US.Core operating income 2009 2008 Change % of % of net net USD m sales USD m sales %--------------------------------------------------------------------- Pharmaceuticals 9 068 31.8 8 249 31.5 10 Vaccines and Diagnostics 719 29.7 309 18.1 133 Sandoz 1 395 18.6 1 421 18.8 -2 Consumer Health 1 118 19.2 1 125 19.4 -1 Corporate income and expenses, net -863 -785--------------------------------------------------------------------- Core operating income 11 437 25.8 10 319 25.0 11---------------------------------------------------------------------PharmaceuticalsOperating income rose 11% to USD 8.4 billion and the operating income margin was29.4% of net sales, up from 28.8% in 2008. Core operating income (USD 9.1billion, +10%, including adverse currency impact of six percentage points) alsogrew well ahead of net sales on the strong volume expansion in local currenciesand productivity gains of nearly USD 1 billion, which resulted in the coreoperating income margin rising 0.3 percentage points to 31.8% of net sales.The improved core operating income performance also absorbed a dilution of 1.1percentage points in lower Other Revenues, mainly due to the end of Betaseron(®)royalties in late 2008. The operational expansion, along with reinvestments ofsome productivity gains, enabled major investments in new product launches andrapid expansion of top emerging markets such as China. Marketing & Salesexpenses fell 1.6 percentage points to 29.3% of net sales in 2009 asproductivity improvements more than offset costs for the ongoing worldwidelaunches of many new products including Galvus, Exelon Patch, Valturna and theTekturna/Rasilez portfolio. R&D investments supported the start of 14 new PhaseIII trials in 2009, with R&D representing 20.0% of net sales in 2009 compared to20.3% in 2008. Among items excluded from core operating income in 2009 thattotaled USD 676 million, which was largely unchanged from USD 670 million in2008, were a USD 318 million increase in legal provisions as part of pendingsettlements to resolve US federal investigations into past marketing practicesof Trileptal. Also in 2009, the ongoing strong sales performance of Famviroutside the US enabled the partial reversal of an impairment charge taken in2007, providing a one-time gain of USD 100 million.Vaccines and DiagnosticsOperating income of USD 372 million rose sharply from USD 78 million in 2008,with the operating income margin rising to 15.3% from 4.4% in 2008. Coreoperating income of USD 719 million in 2009 included substantial contributionsfrom A (H1N1) pandemic flu vaccine sales enabled by significant development andmanufacturing investments earlier in the year. Clinical trials for the pandemicvaccines and investments in the late-stage meningitis development vaccines ledto R&D costs still rising as a percentage of net sales in 2009 compared to2008. Results in 2008 included sales from major deliveries of A (H5N1) pandemicflu vaccines.SandozOperating income declined 1% to USD 1.1 billion, which included an adversecurrency impact of 11 percentage points, with the operating income marginunchanged at 14.3% of net sales. Core operating income fell 2% to USD 1.4billion. Improved business conditions in key markets and productivity gains,particularly in Marketing & Sales and R&D, reduced the total cost base whilesupporting investments in emerging markets and new products. However, theunderlying improvements were more than offset by significant price erosion andthe adverse currency impact, resulting in the core operating income marginfalling 0.2 percentage points to 18.6% of net sales.Consumer HealthOperating income fell 3% to USD 1.0 billion, which included an adverse currencyimpact of 10 percentage points, and the operating income margin in 2009 fell0.5 percentage points to 17.5% of net sales. Core operating income benefitedfrom the strong underlying business expansion and productivity gains. However,it declined 1% to USD 1.1 billion due to the adverse currency impact and majorinvestments to launch the OTC product Prevacid24HR in the US, which resulted inthe core operating income margin declining slightly to 19.2% of net sales in2009 from 19.4% in 2008.Corporate Income & Expense, netCorporate income and expense, net, as well as related core measures, increasedmainly due to higher pension expenses.Fourth quarterNet sales Q4 2009 Q4 2008 % change USD m USD m USD lc------------------------------------------------------------ Pharmaceuticals 7 773 6 430 21 13 Vaccines and Diagnostics 1 387 491 182 166 Sandoz 2 143 1 804 19 10 Consumer Health 1 623 1 352 20 13------------------------------------------------------------ Net sales 12 926 10 077 28 20------------------------------------------------------------Pharmaceuticals: USD 7.8 billion (+21%, +13% lc)Sustained dynamic growth in the 2009 fourth quarter driven by rapid uptake ofnew products and ongoing expansion in all major markets. Recently launchedproducts provided USD 1.4 billion of net sales in the 2009 quarter, rising to18% of the division's net sales from 12% in the 2008 quarter. These productsalso provided eight percentage points of the 13% lc net sales growth in thequarter. Among new product launches initiated in the 2009 quarter were OnbrezBreezhaler (COPD) in Germany following European regulatory approval in November.Recently launched products provided important contributions in Oncology (USD2.5 billion, +14% lc), which benefited from the new anti-cancer medicineAfinitor (USD 32 million) approved in 2009 and new clinical data supportingTasigna (USD 68 million, +101% lc). Cardiovascular and Metabolism (USD 2.4billion, +10% lc) benefited from rapid expansion of the diabetes medicine Galvus(USD 66 million, +211% lc), while Novartis expanded its share of the globalbranded anti-hypertension market on gains recorded for Diovan in all key marketsas well as the rollout of new single-pill combination therapies involvingTekturna/Rasilez and Exforge. The ophthalmics medicine Lucentis (USD 374million, +44% lc) also continued to show strong gains.Europe (USD 2.9 billion, +14% lc) solidified its position as the largest region.Gains were also seen in the US (USD 2.5 billion, +12% lc), while Japan (USD 889million, +9% lc) continued to benefit from new launches in 2009. The six topemerging markets (USD 712 million, +22% lc) advanced at a rapid pace, led bygains in China, Russia and India that more than offset recent governmentalcost-containment measures in Turkey.Vaccines and Diagnostics: USD 1.4 billion (+182%, +166% lc)USD 1.0 billion of net sales in the 2009 period came from deliveries of A (H1N1)pandemic flu vaccines and adjuvants. Seasonal flu vaccines were adverselyimpacted by a price decline, while pediatric vaccines helped offset lower salesof tick-borne encephalitis vaccines.Sandoz: USD 2.1 billion (+19%, +10% lc)Solid growth in key markets was in line with the consistent pace throughout2009, with completion of the EBEWE Pharma acquisition in September adding fivepercentage points of growth in the 2009 quarter. US retail generics andbiosimilars (+24%) achieved a third consecutive quarter of growth in 2009 withmore new product launches than 2008. German retail generics and biosimilars (+1%lc) extended its lead in a deteriorating environment. Key emerging markets keptup their expansion, particularly in Asia-Pacific (+10% lc).Consumer Health: USD 1.6 billion (+20%, +13% lc)Very strong growth across all businesses was led by OTC expansion at adouble-digit rate in local currencies on the strength of the US launch ofPrevacid24HR in November and strong demand for "cough & cold" products.Continued momentum of new contact lens products supported CIBA Vision, whileAnimal Health advanced on market share gains in the US.Core operating income Q4 2009 Q4 2008 Change % of % of net net USD m sales USD m sales %------------------------------------------------------------------------------- Pharmaceuticals 2 215 28.5 1 803 28.0 23 Vaccines and Diagnostics 653 47.1 55 12.5 NM Sandoz 356 16.6 296 16.4 20 Consumer Health 248 15.3 209 15.5 19 Corporate income and expenses, net -268 -273------------------------------------------------------------------------------- Core operating income 3 204 24.8 2 090 20.8 53-------------------------------------------------------------------------------PharmaceuticalsOperating income rose 22% to USD 1.9 billion, and the operating income marginimproved 0.2 percentage points to 24.5% of net sales. Core operating incomeadvanced 23%, well ahead of sales and included four percentage points ofpositive currency impact.The strong business expansion, with net sales rising 13% lc, and benefits ofproductivity initiatives resulted in double-digit core operating income gainsafter investments in product launches, key development projects and geographicexpansion. Marketing & Sales expenses were 30.3% of net sales, declining threepercentage points from the 2008 period. R&D investments also benefited fromproductivity efforts, but remained largely steady at 21.0% of net sales amidinvestments in oncology, biologics and molecular diagnostics. As a result, thecore operating income margin rose 0.5 percentage points to 28.5% of net sales.Cost of Goods Sold were 18.1% of net sales, an increase of 2.7 percentagepoints, reflecting higher Lucentis royalties and the short-term impact of anaccelerated inventory reduction program in the quarter. Among exceptional itemsexcluded in core operating income for 2009 that totaled USD 309 million were aUSD 318 million increase in legal provisions as part of pending settlements toresolve US federal investigations into past marketing practices of Trileptal aswell as a one-time gain of USD 100 million from the partial reversal of animpairment charge in 2007 for Famvir due to ongoing strong sales growth outsidethe US in the meantime. Core adjustments in 2008 excluded total exceptionalitems of USD 241 million.Vaccines and DiagnosticsOperating income rose to USD 583 million from USD 26 million in the 2008 period,while core operating income of USD 653 million in the 2009 quarter reflected therecognition of exceptional contributions from sales of A (H1N1) pandemic fluvaccines during the period that were made possible by significant investments indevelopment and manufacturing earlier in the year.SandozOperating income grew 11% to USD 221 million, which was reduced by sevenpercentage points of adverse currency impact. Core operating income improved onstrong economies of scale and high growth in the US, advancing 20% to USD 356million. As a result, the core operating income margin improved 0.2 percentagepoints to 16.6% of net sales. Core results excluded higher acquisition-relatedcharges and exceptional items totaling USD 135 million in 2009 (including EBEWEacquisition costs and restructuring in Germany) compared to USD 96 million in2008.Consumer HealthOperating income was up 9% to USD 207 million in the 2009 quarter, whichincluded nine percentage points of positive currency impact. However, theoperating income margin declined 1.3 percentage points to 12.8% of net sales.Core operating income, which excluded higher impairment and other exceptionalcharges of USD 22 million in 2009 over the 2008 period, grew 19% to USD 248million as productivity gains and cost controls helped free up resources forincreased Marketing & Sales investments for the launch of Prevacid24HR in the USand R&D projects. As a result, the core operating income margin declined only0.2 percentage points to 15.3% of net sales.Corporate Income & Expense, netNet corporate expenses in the fourth quarter of 2009 were slightly lower than inthe 2008 period, as positive currency exchange movements and a gain on the saleof financial assets more than offset higher pension costs.FINANCIAL REVIEWFull year and fourth quarter 2009 2008 Change Q4 2009 Q4 2008 Change USD m USD m % USD m USD m %------------------------------------------------------------------------------ Core operating income 11 437 10 319 11 3 204 2 090 53 Income from associated companies 1 051 839 25 252 266 -5 Financial income 198 384 -48 104 58 79 Interest expense -551 -290 90 -156 -76 105 Taxes -1 868 -1 751 7 -512 -371 38------------------------------------------------------------------------------ Core net income 10 267 9 501 8 2 892 1 967 47------------------------------------------------------------------------------ Core basic EPS (USD) 4.50 4.18 8 1.26 0.86 47------------------------------------------------------------------------------Income from associated companiesFor the fourth quarter of 2009, income from associated companies rose 10% to USD107 million, but fell 34% to USD 293 million for the full year, mainly due toUSD 189 million of exceptional charges in the third quarter of 2009 related toRoche's restructuring of Genentech and Alcon's decision to stop a developmentproject. Core results in the fourth quarter declined 5% to USD 252 million dueto losses from Idenix after it became an associated company when the Group'sshareholding fell below 50% in late 2009. Full-year core income from associatedcompanies rose 25% to USD 1.1 billion on increased underlying contributions fromRoche as well as full-year equity accounting of the 25% Alcon stake after themid-2008 purchase.Financial income and interest expenseFinancial income rose 79% to USD 104 million in the fourth quarter of 2009,primarily from realized gains and lower impairment charges for marketablesecurities as well as average liquidity of USD 15.7 billion compared to USD 7.2billion in the 2008 quarter. Interest expense more than doubled in the 2009quarter to USD 156 million following the issuance of US dollar and euro bonds inthe first half of the year. Reflecting these same factors for the full year,financial income declined 48% to USD 198 million, while interest expenses rose90% to USD 551 million.TaxesThe tax rate (taxes as a percentage of pre-tax income) in the fourth quarter of2009 was 13.7% compared to 14.3% in the prior-year quarter, while the full-yeartax rate rose to 14.8% from 14.1%. For core results, the tax rate in the fourthquarter of 2009 declined to 15.0% from 15.9% in the 2008 period. The core taxrate in 2009 was 15.4%, down from 15.6% in 2008.Net incomeIn the fourth quarter of 2009, net income rose 54% to USD 2.3 billion, while netincome for the full year rose 4% to USD 8.5 billion. Core net income advanced47% to USD 2.9 billion in the fourth quarter of 2009. For the full year, corenet income rose 8% to USD 10.3 billion.Earnings per shareBasic earnings per share (EPS) in the fourth quarter were up 53% to USD 1.01from USD 0.66 in the 2008 quarter, while full-year basic EPS rose 3% to USD3.70 compared to USD 3.59 in 2008, at a slightly slower pace than net income in2009 due to higher net income attributable to minority interests. For quarterlycore results, basic EPS rose in line with core net income in the 2009 quarter,up 47% to USD 1.26 from USD 0.86 in the 2008 period, while full-year basic EPSgrew 8% to USD 4.50 from USD 4.18 in 2008.Balance sheetThe acquisition of EBEWE Pharma's specialty generics business and USD 7.1billion of investments in marketable securities with proceeds from bond issuesin 2009 led to an increase in total assets, which rose to USD 95.6 billion in2009 from USD 78.3 billion in 2008.The Group's equity rose to USD 57.5 billion at December 31, 2009, from USD 50.4billion at the start of the year. The increase resulted mostly from USD 8.5billion in net income in 2009, actuarial gains of USD 0.9 billion and currencytranslation gains of USD 0.8 billion. Other equity movements provided a netincrease of USD 0.8 billion, mainly from share-based compensation of USD 0.6billion. These contributions more than offset the dividend payment of USD 3.9billion in the 2009 first quarter.The Group's debt/equity ratio rose to 0.24:1 at the end of 2009 compared to0.15:1 at the end of 2008, reflecting issuance of a USD 5 billion bond (twotranches) in the US in the first quarter and a EUR 1.5 billion bond (USD 2.1billion) in the second quarter. At the end of 2009, the Group's financial debtof USD 14.0 billion consisted of USD 5.3 billion in current and USD 8.7 billionin non-current liabilities.Overall liquidity rose to USD 17.4 billion at December 31, 2009, more thandouble the year-end 2008 level of USD 6.1 billion, underpinned by increasingcash flow from operations and proceeds from the bond issues. Novartis returnedto a net liquidity position at the end of 2009, which stood at USD 3.5 billioncompared to net debt (financial debt net of liquidity) of USD 1.2 billion at theend of 2008.Credit agencies maintained their ratings of Novartis debt during 2009. Moody'srated the Group as Aa2 for long-term maturities and P-1 for short-termmaturities, and Standard & Poor's had ratings of AA- for long-term and A-1+ forshort-term maturities. Fitch had a long-term rating of AA and a short-termrating of F1+.Cash flowCash flow from operating activities improved 25% in 2009 to USD 12.2 billionbased on higher profitability and initiatives to reduce working capitalrequirements, which fell USD 1.3 billion from 2008 levels.Cash outflows from investing activities amounted to USD 14.2 billion in 2009compared to USD 10.4 billion in 2008, as lower capital expenditures of USD 1.9billion (which declined to 4.3% of net sales in 2009 compared to 5.1% in 2008)was more than offset by investments in marketable securities and increasedinvestments totaling USD 12.3 billion in intangible, non-current and financialassets, including the EBEWE Pharma generics acquisition.Cash inflows from financing activities were a net USD 2.8 billion in 2009, asproceeds of USD 7.1 billion from the bond issues were partially offset by thedividend payment of USD 3.9 billion for 2008 and other items totaling USD 0.4billion.Free cash flow before dividends rose 24% to USD 9.4 billion in 2009, reflectingthe strong focus on business performance and control of fixed and workingcapital.PHARMACEUTICALS PRODUCT REVIEWNote: Net sales growth data refer to full-year 2009 performance in localcurrencies.Cardiovascular and MetabolismDiovan (USD 6.0 billion, +6% lc) achieved solid worldwide growth based on itsstatus as the only medicine in the angiotensin receptor blocker (ARB) classapproved for all three indications to treat high blood pressure, high-risk heartattack survivors and heart failure. Japan now accounts for 20% of annual sales,while growth was seen in Europe, where the expected entry of generic versions oflosartan, another medicine in the ARB segment, was delayed until the first halfof 2010. In the US (+4%), Diovan increased its leadership of the ARB segmentdespite the overall shrinking of the branded anti-hypertension market due toincreasing use of generic medicines in other anti-hypertensive classes.Exforge (USD 671 million, +72% lc), a single-pill combination of the angiotensinreceptor blocker Diovan (valsartan) and the calcium channel blocker amlodipine,has delivered above-market growth and set new standards for high blood pressurecombination therapies since its launch in 2007. Exforge HCT, which adds adiuretic, was launched in the US in April 2009 as a single-pill therapy withthree medicines. Exforge received approval in Japan in January 2010.Tekturna/Rasilez (USD 290 million, +104% lc), the first in a new class ofmedicines known as direct renin inhibitors to treat high blood pressure, hasbeen growing consistently since its launch in 2007 based on positive clinicaldata demonstrating its prolonged efficacy in lowering blood pressure for morethan 24 hours and superiority in clinical trials over ramipril, a leading ACEinhibitor. Valturna - a single-pill combination with Diovan (valsartan) - waslaunched in the US in late 2009, joining the group of single-pill combinationsthat involve aliskiren, the active ingredient in Tekturna/Rasilez. A single-pillcombination of aliskiren and amlodipine was submitted for US and Europeanapprovals in 2009, and a triple-combination with amlodipine and a diuretic isexpected to be submitted in 2010.Galvus/Eucreas (USD 181 million, +327% lc), oral treatments for type 2 diabetes,have achieved rapid success in many European, Latin American and Asia-Pacificmarkets since first launched in 2007. Galvus and Eucreas, a single-pillcombination of Galvus with metformin that accounts for the majority of sales,have outperformed a competitor medicine in the DPP-4 segment in some countries.Galvus was approved in Japan in January 2010 with the brand name Equa.OncologyGleevec/Glivec (USD 3.9 billion, +12% lc), a targeted therapy for some forms ofchronic myeloid leukemia (CML) and gastrointestinal stromal tumors (GIST),achieved sustained double-digit growth based on its leadership position intreating these cancers backed by new clinical data and regulatory approvals. Thelatest approval in 2009 was for use in adjuvant (post-surgery) GIST patients,which is now approved in more than 55 countries in North America, Europe andAsia-Pacific.Tasigna (USD 212 million, +145% lc), a second-line therapy for patients with aform of chronic myeloid leukemia (CML) resistant or intolerant to prior therapy,including Gleevec/Glivec, has gained rapid acceptance following its approval inmore than 80 countries. In December 2009, Tasigna was submitted for US andEuropean regulatory approvals for first-line use in CML after new data from theglobal ENESTnd trial, the largest head-to-head comparison of a targeted therapyagainst Glivec ever conducted, showed Tasigna produced faster and deeperresponses than Glivec in newly diagnosed CML patients. Trials are underwayexamining the use of Tasigna in CML with suboptimal response to Glivec, as wellas a Phase III trial in patients with GIST.Zometa (USD 1.5 billion, +9% lc), an intravenous bisphosphonate therapy forpatients with certain types of cancer that has spread to bones, is growing dueto improved compliance and use in existing indications. US and Europeanregulatory submissions were completed in late 2009 for the use of Zometa inadjuvant breast cancer in premenopausal women based on published anticancer datafor this indication. Studies are underway to review potential benefits in othertumor types.Femara (USD 1.3 billion, +16% lc), an oral therapy for postmenopausal women withhormone-sensitive breast cancer, saw strong sales growth in 2009 due to growthin the initial adjuvant (post-surgery) setting. In August 2009, "The New EnglandJournal of Medicine" published results from the landmark BIG 1-98 studyaffirming that the five-year upfront use of Femara after surgery was an optimaltreatment approach for postmenopausal women with early-stage, hormone-receptorpositive breast cancer. These data were submitted in the US and Europe forinclusion in product information.Sandostatin (USD 1.2 billion, +7% lc), for patients with acromegaly and symptomsassociated with neuroendocrine tumors of the gastrointestinal tract andpancreas, has grown from increasing use of Sandostatin LAR, the once-monthlyversion that accounts for nearly 90% of net sales. Recent clinical trial datademonstrated a significant delay in tumor progression in patients withmetastatic neuroendocrine tumors of the midgut treated with Sandostatin LAR.These data formed the basis of a recent US National Comprehensive Cancer Network(NCCN) update on treatment guidelines for neuroendocrine tumors.Exjade (USD 652 million, +27% lc), currently approved in more than 90 countriesas the only once-daily oral therapy for transfusional iron overload, receivedregulatory approvals in 2009 in the US, Europe, Switzerland and other countriesto extend the dose range to 40 mg/kg. This new dosing range provides a newoption to patients who require dose intensification due to high iron burdens.Novartis submitted new safety information to health authorities worldwide inmid-2009. The new labeling was approved in Europe in November, providing newguidance on the selection of appropriate myelodysplastic syndrome (MDS) andmalignant disease patients for Exjade therapy. US and Japanese regulatoryauthorities are also reviewing this data.Afinitor (USD 70 million), an oral inhibitor of the mTOR pathway, was launchedin the US, Europe and Switzerland after gaining regulatory approvals in 2009 asa treatment for advanced renal cell carcinoma (RCC, kidney cancer) followingVEGF-targeted therapy. Afinitor is being studied in many cancer types. Phase IIIstudies are underway in patients with neuroendocrine tumors (NET), breastcancer, lymphoma, tuberous sclerosis complex (TSC) and gastric cancer. Twopotential regulatory submissions are planned for 2010 based on the outcome ofclinical trials of this medicine in patients with neuroendocrine tumors (NET) aswell as tuberous sclerosis complex (TSC). A late-stage trial is planned to startin patients with hepatocellular carcinoma (HCC) in early 2010. The activeingredient, everolimus, is the same as in the transplant therapy Certican.Other Pharmaceuticals productsLucentis (USD 1.2 billion, +47% lc), a biotechnology eye therapy now approved inmore than 80 countries, delivered sustained growth on top performances inFrance, the United Kingdom, Australia and Japan. Lucentis is the only treatmentproven to maintain and improve vision in patients with "wet" age-related maculardegeneration, a leading cause of blindness in people over age 50. Lucentis wassubmitted in December 2009 for European regulatory approval for treatment ofvisual impairment due to diabetic macular edema (DME), an eye condition relatedto longstanding diabetes that may lead to blindness. Late-stage clinical trialsare underway in other eye conditions. Genentech holds the US rights to thismedicine.Exelon/Exelon Patch (USD 954 million, +22% lc), a therapy for mild to moderateforms of Alzheimer's disease dementia as well as dementia linked withParkinson's disease, achieved more than half of its sales from Exelon Patch, thenovel skin patch launched in late 2007 that is now available in more than 60countries worldwide.Reclast/Aclasta (USD 472 million, +88% lc), a once-yearly infusion therapy forosteoporosis, continues to expand on increasing patient access to infusioncenters and a broad range of use in patients with various types of thisdebilitating bone disease. Approvals have been received for up to sixindications, including the treatment of osteoporosis in men and postmenopausalwomen.Xolair (USD 338 million, +65% lc, Novartis sales), a biotechnology drug formoderate to severe persistent allergic asthma in the US and severe persistentallergic asthma in Europe, maintained solid growth due to its global presenceand approvals in more than 80 countries, including Japan since early 2009. InAugust 2009, Xolair received European regulatory approval to treat children agesix and older. Novartis co-promotes Xolair with Genentech in the US and shares aportion of operating income. In 2009, Genentech's US sales were USD 571 million.Certican (USD 118 million, +31% lc), a transplantation medicine, generated solidgrowth based on its availability in more than 70 countries. In the US, the FDAissued a Complete Response letter in December 2009 for this medicine (under thebrand name Zortress) for prevention of organ rejection in adult kidneytransplant patients. The FDA discussions focus on product labeling and RiskEvaluation Mitigation Strategy (REMS) as well as a safety update, but no requestfor more clinical studies. This medicine, which has the same active ingredientas Afinitor (everolimus), has been shown to have good immunosuppressive efficacyand a manageable side-effect profile.Extavia (USD 49 million), for relapsing forms of multiple sclerosis (MS), waslaunched in 2009 in the US and more than 20 other countries, marking the entryof Novartis into the field of MS. Extavia is the Novartis-branded version ofBetaferon(®)/Betaseron(®).Ilaris, a fully human monoclonal antibody that blocks action of the inflammatoryprotein interleukin-1 beta, has been launched after receiving first approvalsduring 2009 in the US, Europe and some other markets for treatment ofcryopyrin-associated periodic syndrome (CAPS), a group of rare lifelongauto-inflammatory disorders. Trials are ongoing in other diseases in which IL-1beta is believed to play an important role. Other diseases include refractorygout, chronic obstructive pulmonary disease (COPD), type 2 diabetes and systemicjuvenile idiopathic arthritis (SJIA).R&D UPDATENovartis has one of the industry's most competitive pipelines with 145 projectsin pharmaceutical clinical development, of which 60 involve new molecularentities.PharmaceuticalsAIN457, a fully human monoclonal antibody that blocks action of interleukin-17A- a major trigger of inflammation involved in a variety of diseases such asuveitis, psoriasis and rheumatoid arthritis - has begun Phase III studies inNovember 2009 for use in treating a form of uveitis, an inflammation in the eye,with regulatory submissions possible in 2010.Gilenia (FTY720, fingolimod), a once-daily oral compound in development forcertain forms of multiple sclerosis, was submitted in December 2009 for US andEuropean regulatory approvals. The clinical program provides safety experiencein more than 2,300 MS patients, including some patients in their sixth year oftherapy.QAB149 (indacaterol), a once-daily long-acting bronchodilator for adult patientswith chronic obstructive pulmonary disease (COPD), gained European regulatoryapproval in November 2009 as Onbrez Breezhaler and was launched in Germany inDecember. Onbrez Breezhaler has demonstrated greater improvements in lungfunction, breathlessness and quality of life compared to current therapies andis the first new inhaled compound in Europe for treatment of COPD in more thanseven years. In the US, Novartis received a Complete Response letter from theFDA in October requesting additional information on the dosing proposed forQAB149. Novartis is working with the FDA to determine what clinical trials willbe required.Vaccines and DiagnosticsMenveo, a novel vaccine in development to protect against the four common A, C,W-135 and Y serogroups of meningococcal meningitis, is awaiting Europeanregulatory approval in early 2010 after a positive opinion in December 2009 forinitial use in adolescents (from age 11) and adults. A US regulatory decision isalso expected in the first half of 2010. Trials are underway in other agegroups.MenB, in development as a vaccine to protect against the B serogroup ofmeningococcal meningitis, is in Phase III studies in Europe, where patientenrollment has been completed and a regulatory submission remains on track for2010. The B serogroup is estimated to cause about 70% of meningococcal diseasein Europe, with infants and toddlers most at risk. MenB has shown potential tobe the first to protect infants as young as six months based on Phase II trialresults. In the US, discussions with the FDA are planned for 2010 to determinethe scope of Phase III trials.DisclaimerThese materials contain certain forward-looking statements relating to theGroup's business, which can be identified by terminology such as "strategic,""proposes," "to introduce," "will," "planned," "expected," "commitment,""expects," "set," "preparing," "plans," "estimates," "aims," "would,""potential," "awaiting," "estimated," "proposal," or similar expressions, or byexpress or implied discussions regarding potential new products, potential newindications for existing products, or regarding potential future revenues fromany such products, or potential future sales or earnings of the Novartis Groupor any of its divisions or business units; or regarding the potentialacquisition and merger with Alcon; or by discussions of strategy, plans,expectations or intentions. You should not place undue reliance on thesestatements. Such forward-looking statements reflect the current views of theGroup regarding future events, and involve known and unknown risks,uncertainties and other factors that may cause actual results to be materiallydifferent from any future results, performance or achievements expressed orimplied by such statements. There can be no guarantee that any new products willbe approved for sale in any market, or that any new indications will be approvedfor existing products in any market, or that such products will achieve anyparticular revenue levels. Nor can there be any guarantee that the NovartisGroup, or any of its divisions or business units, will achieve any particularfinancial results. Neither can there be any guarantee that the proposedacquisition and merger with Alcon will be completed in the expected form orwithin the expected time frame or at all. Nor can there be any guarantee thatNovartis will be able to realize any of the potential synergies, strategicbenefits or opportunities as a result of the proposed acquisition. Inparticular, management's expectations could be affected by, among other things,unexpected clinical trial results, including additional analysis of existingclinical data or unexpected new clinical data; unexpected regulatory actions ordelays or government regulation generally; the Group's ability to obtain ormaintain patent or other proprietary intellectual property protection;uncertainties regarding actual or potential legal proceedings, including, amongothers, product liability litigation, litigation regarding sales and marketingpractices, government investigations and intellectual property disputes;competition in general; government, industry, and general public pricing andother political pressures; uncertainties regarding the after-effects of therecent global financial and economic crisis; uncertainties regarding futureglobal exchange rates and uncertainties regarding future demand for ourproducts; uncertainties involved in the development of new pharmaceuticalproducts; the impact that the foregoing factors could have on the valuesattributed to the Group's assets and liabilities as recorded in the Group'sconsolidated balance sheet; and other risks and factors referred to in NovartisAG's current Form 20-F on file with the US Securities and Exchange Commission.Should one or more of these risks or uncertainties materialize, or shouldunderlying assumptions prove incorrect, actual results may vary materially fromthose described herein as anticipated, believed, estimated or expected. Novartisis providing the information in these materials as of this date and does notundertake any obligation to update any forward-looking statements as a result ofnew information, future events or otherwise.About NovartisNovartis provides healthcare solutions that address the evolving needs ofpatients and societies. Focused solely on healthcare, Novartis offers adiversified portfolio to best meet these needs: innovative medicines,cost-saving generic pharmaceuticals, preventive vaccines, diagnostic tools andconsumer health products. Novartis is the only company with leading positions inthese areas. In 2009, the Group's continuing operations achieved net sales ofUSD 44.3 billion, while approximately USD 7.5 billion was invested in R&Dactivities throughout the Group. Headquartered in Basel, Switzerland, NovartisGroup companies employ approximately 100,000 full-time-equivalent associates andoperate in more than 140 countries around the world. For more information,please visit http://www.novartis.com
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