Novartis Second Quarter and Half Year 2024 Condensed Interim Financial Report – Supplementary Data
INDEX Page
COMPANY OPERATING PERFORMANCE REVIEW
Continuing operations 4
Discontinued operations 10
Total Company 10
COMPANY CASH FLOW AND BALANCE SHEET 11
INNOVATION REVIEW 15
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated income statements 17
Consolidated statements of comprehensive income 19
Consolidated balance sheets 20
Consolidated statements of changes in equity 21
Consolidated statements of cash flows 23
Notes to condensed interim consolidated financial statements 25
SUPPLEMENTARY INFORMATION 43
CORE RESULTS - Reconciliation from IFRS® Accounting Standards results to non-IFRS measure core results 45
Total Company 46
Discontinued operations 48
FREE CASH FLOW 49
ADDITIONAL INFORMATION
Net debt 52
Share information 52
Effects of currency fluctuations 53
DISCLAIMER 54
2
Company
Key figures
Second quarter and half year
(USD millions unless indicated otherwise) | Q2 2024 USD m | Q2 2023 USD m | % change USD | % change cc1 | H1 2024 USD m | H1 2023 USD m | % change USD | % change cc1 | |||||||||
Net sales from continuing operations | 12 512 | 11 437 | 9 | 11 | 24 341 | 22 235 | 9 | 11 | |||||||||
Other revenues | 360 | 308 | 17 | 17 | 651 | 557 | 17 | 17 | |||||||||
Cost of goods sold | -3 173 | -3 342 | 5 | 4 | -6 269 | -6 333 | 1 | 1 | |||||||||
Gross profit from continuing operations | 9 699 | 8 403 | 15 | 18 | 18 723 | 16 459 | 14 | 16 | |||||||||
Selling, general and administration | -3 091 | -3 091 | 0 | -1 | -5 931 | -5 982 | 1 | 0 | |||||||||
Research and development | -2 367 | -2 304 | -3 | -4 | -4 788 | -4 879 | 2 | 2 | |||||||||
Other income | 273 | 135 | 102 | 100 | 522 | 1 098 | -52 | -53 | |||||||||
Other expense | -500 | -336 | -49 | -48 | -1 139 | -1 271 | 10 | 11 | |||||||||
Operating income from continuing operations | 4 014 | 2 807 | 43 | 47 | 7 387 | 5 425 | 36 | 43 | |||||||||
% of net sales | 32.1 | 24.5 | 30.3 | 24.4 | |||||||||||||
Loss from associated companies | -2 | -2 | 0 | 20 | -31 | -4 | nm | nm | |||||||||
Interest expense | -246 | -216 | -14 | -17 | -467 | -416 | -12 | -15 | |||||||||
Other financial income and expense | 75 | 85 | -12 | 41 | 81 | 189 | -57 | 2 | |||||||||
Income before taxes from continuing operations | 3 841 | 2 674 | 44 | 49 | 6 970 | 5 194 | 34 | 43 | |||||||||
Income taxes | -595 | -403 | -48 | -53 | -1 036 | -773 | -34 | -43 | |||||||||
Net income from continuing operations | 3 246 | 2 271 | 43 | 49 | 5 934 | 4 421 | 34 | 43 | |||||||||
Net income from discontinued operations | 46 | nm | nm | 190 | nm | nm | |||||||||||
Net income | 3 246 | 2 317 | nm | nm | 5 934 | 4 611 | nm | nm | |||||||||
Basic earnings per share from continuing operations (USD) | 1.60 | 1.09 | 47 | 52 | 2.91 | 2.12 | 37 | 47 | |||||||||
Basic earnings per share from discontinued operations (USD) | 0.02 | nm | nm | 0.08 | nm | nm | |||||||||||
Total basic earnings per share (USD) | 1.60 | 1.11 | nm | nm | 2.91 | 2.20 | nm | nm | |||||||||
Net cash flows from operating activities from continuing operations | 4 875 | 3 517 | 39 | 7 140 | 6 369 | 12 | |||||||||||
Non-IFRS measures 1 | |||||||||||||||||
Free cash flow from continuing operations | 4 615 | 3 292 | 40 | 6 653 | 5 976 | 11 | |||||||||||
Core operating income from continuing operations | 4 953 | 4 240 | 17 | 19 | 9 490 | 8 146 | 16 | 21 | |||||||||
% of net sales | 39.6 | 37.1 | 39.0 | 36.6 | |||||||||||||
Core net income from continuing operations | 4 008 | 3 502 | 14 | 18 | 7 689 | 6 735 | 14 | 19 | |||||||||
Core basic earnings per share from continuing operations (USD) | 1.97 | 1.69 | 17 | 21 | 3.77 | 3.23 | 17 | 22 | |||||||||
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 43. Unless otherwise noted, all growth rates in this release refer to same period in prior-year. | |||||||||||||||||
nm = not meaningful | |||||||||||||||||
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Strategy
Our focus
In 2023, Novartis completed its transformation into a “pure-play” innovative medicines business. We have a clear focus on four core therapeutic areas (cardiovascular-renal-metabolic, immunology, neuroscience and oncology), with multiple significant in-market and pipeline assets in each of these areas, that address high disease burden and have substantial growth potential. In addition to two established technology platforms (chemistry and biotherapeutics), three emerging platforms (gene & cell therapy, radioligand therapy and xRNA) are being prioritized for continued investment into new R&D capabilities and manufacturing scale. Geographically, we are focused on growing in our priority geographies – the US, China, Germany and Japan.
Our priorities
1. Accelerate growth: Renewed attention to deliver high-value medicines (NMEs) and focus on launch excellence, with a rich pipeline across our core therapeutic areas.
2. Deliver returns: Continuing to embed operational excellence and deliver improved financials. Novartis remains disciplined and shareholder-focused in our approach to capital allocation, with substantial cash generation and a strong capital structure supporting continued flexibility.
3. Strengthening foundations: Unleashing the power of our people, scaling data science and technology and continuing to build trust with society.
Financials
Following the September 15, 2023, shareholder approval of the spin-off of Sandoz, Novartis reported its consolidated financial statements as “continuing operations” and “discontinued operations.”
Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities. Discontinued operations include the Sandoz Division and selected portions of corporate activities attributable to Sandoz’s business, as well as certain expenses related to the spin-off.
While the commentary below focuses on continuing operations, we also provide information on discontinued operations.
Continuing operations
Second quarter
Net sales
Net sales were USD 12.5 billion (+9%, +11% cc) with volume contributing 15 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing had a negative impact of 2 percentage points. Sales in the US were USD 5.1 billion (+14%) and in the rest of the world USD 7.4 billion (+6%, +9% cc).
Sales growth was mainly driven by continued strong performance from Entresto (USD 1.9 billion, +25%, +28% cc), Kesimpta (USD 799 million, +63%, +65% cc), Cosentyx (USD 1.5 billion, +20%, +22% cc), Kisqali (USD 717 million, +45%, +50% cc), Leqvio (USD 182 million, +133%, +134% cc) and Pluvicto (USD 345 million, +44%, +44% cc), partly offset by erosion due to generic competition, mainly for Gilenya and Lucentis, and the Xiidra divestment.
In the US (USD 5.1 billion, +14%), sales growth was mainly driven by Cosentyx, Entresto, Kesimpta, Kisqali and Pluvicto, partly offset by the impact of generic competition on Gilenya, and the Xiidra divestment. In Europe (USD 3.9 billion, +5%, +6% cc), sales growth was mainly driven by Kesimpta, Entresto, Kisqali, Pluvicto and Leqvio, partly offset by increased generic competition for Lucentis and Gilenya. Sales in emerging growth markets were USD 3.3 billion (+12%, +16% cc), including USD 1.1 billion sales from China (+23%, +27% cc).
Operating income
Operating income was USD 4.0 billion (+43%, +47% cc), mainly driven by higher net sales and lower impairments, partly offset by higher R&D investments. Operating income margin was 32.1% of net sales, increasing 7.6
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percentage points (+7.9 percentage points in cc). Other revenue as a percentage of sales increased by 0.2 percentage points (+0.1 percentage points cc). Cost of goods sold as a percentage of sales decreased by 3.8 percentage points (+4.1 percentage points cc). R&D expenses as a percentage of net sales decreased by 1.2 percentage points (+1.4 percentage points cc). SG&A expenses as a percentage of net sales decreased by 2.3 percentage points (+2.4 percentage points cc). Other income and expense as a percentage of net sales decreased the margin by 0.1 percentage points (-0.1 percentage points cc).
Core adjustments were USD 0.9 billion, mainly due to amortization, compared to USD 1.4 billion in the prior year. Core adjustments decreased compared to the prior year, mainly due to lower impairments.
Core operating income was USD 5.0 billion (+17%, +19% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 39.6% of net sales, increasing 2.5 percentage points (+2.7 percentage points cc). Other revenue as a percentage of sales increased by 0.1 percentage points (cc). Core cost of goods sold as a percentage of sales increased by 0.7 percentage points (cc). Core R&D expenses as a percentage of net sales decreased by 0.5 percentage points (cc). Core SG&A expenses as a percentage of net sales decreased by 2.3 percentage points (cc). Core other income and expense as a percentage of net sales increased the margin by 0.5 percentage points (cc).
Interest expense and other financial income/expense
Interest expense amounted to USD 246 million and other financial income and expense amounted to an income of USD 75 million, both broadly in line with prior-year quarter.
Core other financial income and expense amounted to an income of USD 60 million compared to an income of USD 129 million in the prior-year quarter, mainly due to lower interest income.
Income taxes
The tax rate in the second quarter was 15.5% compared to 15.1% in the prior year. The increase from the prior year was mainly the result of the impact of the enactment of Pillar Two tax legislation in Switzerland, which became effective on January 1, 2024, partially offset by a change in profit mix and the effect of adjusting the current-year tax rate to the estimated full-year tax rate, which was lower than previously estimated.
The core tax rate (core taxes as a percentage of core income before tax) was 15.9% compared to 15.6% in the prior year. The increase from the prior year was mainly the result of the impact of the enactment of Pillar Two tax legislation in Switzerland, which became effective on January 1, 2024, partially offset by a change in profit mix and the effect of adjusting the current-year core tax rate to the estimated full-year core tax rate, which was lower than previously estimated.
Net income, EPS and free cash flow
Net income was USD 3.2 billion (+43%, +49% cc), mainly driven by higher operating income. Basic EPS was USD 1.60 (+47%, +52% cc), benefiting from lower weighted average number of shares outstanding.
Core net income was USD 4.0 billion (+14%, +18% cc), mainly due to higher core operating income. Core EPS was USD 1.97 (+17%, +21% cc), benefiting from lower weighted average number of shares outstanding.
Free cash flow from continuing operations amounted to USD 4.6 billion (+40% USD), compared with USD 3.3 billion in the prior-year quarter, driven by higher net cash flows from operating activities from continuing operations.
First half
Net sales
Net sales were USD 24.3 billion (+9%, +11% cc) with volume contributing 15 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing had a negative impact of 2 percentage points. Sales in the US were USD 9.7 billion (+14%) and in the rest of the world USD 14.6 billion (+7%, +10% cc).
Sales growth was mainly driven by continued strong performance from Entresto (USD 3.8 billion, +30%, +32% cc), Kesimpta (USD 1.4 billion, +64%, +66% cc), Cosentyx (USD 2.9 billion, +21%, +23% cc), Kisqali (USD 1.3 billion, +48%, +52% cc), Pluvicto (USD 655 million, +45%, +45% cc) and Leqvio (USD 333 million, +135%, +137% cc), partly offset by erosion due to generic competition, mainly for Lucentis and Gilenya, and the Xiidra divestment.
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In the US (USD 9.7 billion, +14%), sales growth was mainly driven by Entresto, Cosentyx, Kesimpta, Kisqali, Pluvicto and Leqvio, partly offset by the impact of generic competition on Gilenya, and the Xiidra divestment. In Europe (USD 7.6 billion, +4%, +5% cc), sales growth was mainly driven by Kesimpta, Entresto, Kisqali, Jakavi and Pluvicto, partly offset by erosion due to generic competition, mainly for Lucentis and Gilenya. Sales in emerging growth markets were USD 6.7 billion (+14%, +19% cc), including USD 2.1 billion sales from China (+24%, +29% cc).
Operating income
Operating income was USD 7.4 billion (+36%, +43% cc), mainly driven by higher net sales, lower impairments and restructuring charges, partly offset by prior-year one-time income from legal matters. Operating income margin was 30.3% of net sales, increasing 5.9 percentage points (+6.8 percentage points in cc). Other revenue as a percentage of sales increased by 0.2 percentage points (+0.1 percentage points cc). Cost of goods sold as a percentage of sales decreased by 2.7 percentage points (+3.2 percentage points cc). R&D expenses as a percentage of net sales decreased by 2.2 percentage points (+2.6 percentage points cc). SG&A expenses as a percentage of net sales decreased by 2.6 percentage points (+2.7 percentage points cc). Other income and expense as a percentage of net sales decreased the margin by 1.8 percentage points (-1.8 percentage points cc).
Core adjustments were USD 2.1 billion, mainly due to amortization, compared to USD 2.7 billion in the prior year. Core adjustments decreased compared to the prior year, mainly due to lower impairments and restructuring charges, partly offset by prior-year one-time income from legal matters.
Core operating income was USD 9.5 billion (+16%, +21% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 39.0% of net sales, increasing 2.4 percentage points (+3.1 percentage points cc). Other revenue as a percentage of sales increased by 0.1 percentage points (cc). Core cost of goods sold as a percentage of sales increased by 0.5 percentage points (cc). Core R&D expenses as a percentage of net sales decreased by 0.7 percentage points (cc). Core SG&A expenses as a percentage of net sales decreased by 2.5 percentage points (cc). Core other income and expense as a percentage of net sales increased the margin by 0.3 percentage points (cc).
Interest expense and other financial income/expense
Interest expense amounted to USD 467 million and was broadly in line with the prior year. Other financial income and expense amounted to an income of USD 81 million compared with an income of USD 189 million in the prior year, mainly due to higher net losses from the impact of IAS Standards 29 “Financial Reporting in Hyperinflationary Economies” and lower interest income, partly offset by realized gains on sale of financial assets.
Core other financial income and expense amounted to an income of USD 156 million compared to an income of USD 247 million in the prior year, mainly due to lower interest income.
Income taxes
The tax rate in the first half was 14.9% compared to 14.9% in the prior year period. The current year tax rate was favorably impacted by the effect of changes in uncertain tax positions. The prior-year tax rate was favorably impacted by the effect of non-taxable income recognized related to a legal matter. Excluding these impacts, the current and prior-year tax rate would have been 16.3% and 15.3% respectively. The increase from the prior year was mainly the result of a change in profit mix and the impact of the enactment of Pillar Two tax legislation in Switzerland, which became effective on January 1, 2024.
The core tax rate (core taxes as a percentage of core income before tax) was 16.2% in the first half and 15.5% in the prior-year period. The increase from the prior year was mainly the result of a change in profit mix and the impact of the enactment of Pillar Two tax legislation in Switzerland, which became effective on January 1, 2024.
Net income, EPS and free cash flow
Net income was USD 5.9 billion (+34%, +43% cc), mainly driven by higher operating income. EPS was USD 2.91 (+37%, +47% cc), benefiting from the lower weighted average number of shares outstanding.
Core net income was USD 7.7 billion (+14%, +19% cc), mainly due to higher core operating income. Core EPS was USD 3.77 (+17%, +22% cc), benefiting from the lower weighted average number of shares outstanding.
Free cash flow from continuing operations amounted to USD 6.7 billion (+11% USD), compared with USD 6.0 billion in the prior-year period, driven by higher net cash flows from operating activities from continuing operations.
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Product commentary (relating to Q2 performance)
Cardiovascular, RENAL and METABOLIC
Q2 2024 | Q2 2023 | % change | % change | H1 2024 | H1 2023 | % change | % change | ||||||||||
USD m | USD m | USD | cc | USD m | USD m | USD | cc | ||||||||||
Cardiovascular, renal and metabolic | |||||||||||||||||
Entresto | 1 898 | 1 516 | 25 | 28 | 3 777 | 2 915 | 30 | 32 | |||||||||
Leqvio | 182 | 78 | 133 | 134 | 333 | 142 | 135 | 137 | |||||||||
Total cardiovascular, renal and metabolic | 2 080 | 1 594 | 30 | 33 | 4 110 | 3 057 | 34 | 37 | |||||||||
Entresto (USD 1 898 million, +25%, +28% cc) sustained robust demand-led growth. In the US and Europe, Entresto penetration grew through the continued adoption of guideline-directed medical therapy in heart failure. In China and Japan, Entresto volume growth was fueled by heart failure as well as increased penetration in hypertension. In the US, Novartis is in ANDA litigation with generic manufacturers. Novartis has appealed to reverse the negative US district court decision to uphold the validity of its combination patent covering Entresto and combinations of sacubitril and valsartan, which expires in 2025 (with pediatric exclusivity). Several generics have received final approval in the US. Any US commercial launch of a generic Entresto product prior to the final outcome of Novartis combination patent appeal, or ongoing litigations involving other patents, may be at risk of later litigation developments.
Leqvio (USD 182 million, +133%, +134% cc) launch in the US and other markets is ongoing, delivering a medicine with powerful and consistent LDL-C reduction in two doses per year. Focus remains on increased account and patient adoption, growing customer confidence in acquisition and access, and continuing medical education. Leqvio is now approved in 96 countries. Novartis obtained global rights to develop, manufacture and commercialize Leqvio under a license and collaboration agreement with Alnylam Pharmaceuticals.
Immunology
Q2 2024 | Q2 2023 | % change | % change | H1 2024 | H1 2023 | % change | % change | ||||||||||
USD m | USD m | USD | cc | USD m | USD m | USD | cc | ||||||||||
Immunology | |||||||||||||||||
Cosentyx | 1 526 | 1 272 | 20 | 22 | 2 852 | 2 348 | 21 | 23 | |||||||||
Xolair 1 | 427 | 362 | 18 | 22 | 826 | 716 | 15 | 18 | |||||||||
Ilaris | 368 | 316 | 16 | 20 | 724 | 644 | 12 | 17 | |||||||||
Other | 1 | nm | nm | 1 | nm | nm | |||||||||||
Total immunology | 2 322 | 1 950 | 19 | 22 | 4 403 | 3 708 | 19 | 21 | |||||||||
1 Net sales reflect Xolair sales for all indications. | |||||||||||||||||
nm = not meaningful | |||||||||||||||||
Cosentyx (USD 1 526 million, +20%, +22% cc) sales grew mainly in the US, driven by strong demand for new indication (HS) and formulation (IV) launches, in addition to growth in core indications (PsO, PsA, AS and nr-axSpA). Ex-US performance was driven by robust demand-led growth, including the HS indication launch, partly offset by one-off pricing effects. Since initial approval in 2015, Cosentyx has shown sustained efficacy and a robust safety profile, treating more than 1.4 million patients across 8 indications.
Xolair (USD 427 million, ex-US +18%, +22% cc) growth was driven mainly by emerging growth markets and Europe. Novartis co-promotes Xolair with Genentech in the US and shares a portion of revenue as operating income but does not record any US sales.
Ilaris (USD 368 million, +16%, +20% cc) sales grew across all regions, led by US and Europe. Contributors to growth include strong performance in the Periodic Fever Syndromes and Still’s disease indications.
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Neuroscience
Q2 2024 | Q2 2023 | % change | % change | H1 2024 | H1 2023 | % change | % change | ||||||||||
USD m | USD m | USD | cc | USD m | USD m | USD | cc | ||||||||||
Neuroscience | |||||||||||||||||
Kesimpta | 799 | 489 | 63 | 65 | 1 436 | 873 | 64 | 66 | |||||||||
Zolgensma | 349 | 311 | 12 | 14 | 644 | 620 | 4 | 6 | |||||||||
Aimovig | 77 | 67 | 15 | 16 | 153 | 128 | 20 | 19 | |||||||||
Other | 1 | nm | nm | ||||||||||||||
Total neuroscience | 1 225 | 867 | 41 | 43 | 2 234 | 1 621 | 38 | 39 | |||||||||
nm = not meaningful | |||||||||||||||||
Kesimpta (USD 799 million, +63%, +65% cc) sales grew across all regions driven by increased demand and strong access. Kesimpta is a high efficacy B-cell therapy, with a favorable safety and tolerability profile and an at-home self-administration for a broad population of RMS patients. Kesimpta is now approved in 90 countries with more than 100 thousand patients treated.
Zolgensma (USD 349 million, +12%, +14% cc) sales grew particularly in the US and continues to treat mainly incident patients in established markets. Zolgensma is now approved in 55 countries with more than 4 thousand patients treated globally through clinical trials, managed access programs and in the commercial setting.
Aimovig (USD 77 million, ex-US, ex-Japan +15%, +16% cc) sales grew mainly in Europe driven by increased demand for migraine prevention. Novartis commercializes Aimovig ex-US and ex-Japan, while Amgen retains all rights in the US and in Japan.
ONCOLOGY
Q2 2024 | Q2 2023 | % change | % change | H1 2024 | H1 2023 | % change | % change | ||||||||||
USD m | USD m | USD | cc | USD m | USD m | USD | cc | ||||||||||
Oncology | |||||||||||||||||
Kisqali | 717 | 493 | 45 | 50 | 1 344 | 908 | 48 | 52 | |||||||||
Promacta/Revolade | 544 | 583 | -7 | -5 | 1 064 | 1 130 | -6 | -4 | |||||||||
Tafinlar + Mekinist 1 | 523 | 496 | 5 | 9 | 997 | 954 | 5 | 7 | |||||||||
Jakavi | 471 | 435 | 8 | 13 | 949 | 849 | 12 | 15 | |||||||||
Tasigna | 446 | 476 | -6 | -4 | 841 | 938 | -10 | -9 | |||||||||
Pluvicto | 345 | 240 | 44 | 44 | 655 | 451 | 45 | 45 | |||||||||
Lutathera | 175 | 150 | 17 | 17 | 344 | 299 | 15 | 16 | |||||||||
Scemblix | 164 | 106 | 55 | 56 | 300 | 182 | 65 | 67 | |||||||||
Kymriah | 113 | 129 | -12 | -11 | 233 | 264 | -12 | -10 | |||||||||
Piqray/Vijoice | 120 | 130 | -8 | -7 | 229 | 246 | -7 | -6 | |||||||||
Fabhalta | 22 | nm | nm | 28 | nm | nm | |||||||||||
Other | 1 | nm | nm | ||||||||||||||
Total oncology | 3 640 | 3 238 | 12 | 15 | 6 984 | 6 222 | 12 | 14 | |||||||||
1 Majority of sales for Mekinist and Tafinlar are combination, but both can be used as monotherapy. | |||||||||||||||||
nm = not meaningful | |||||||||||||||||
Kisqali (USD 717 million, +45%, +50% cc) sales grew strongly across all regions, based on increasing recognition of its consistently reported overall survival in HR+/HER2- advanced breast cancer, Category 1 NCCN guidelines recommendation and highest ESMO-Magnitude of Clinical Benefit Scale scores in the CDK4/6 inhibitor class. Novartis is in US ANDA litigation with a generic manufacturer.
Promacta/Revolade (USD 544 million, -7%, -5% cc) sales declined mainly in the US due to higher revenue deductions.
Tafinlar + Mekinist (USD 523 million, +5%, +9% cc) sales grew across all regions driven by demand in BRAF+ adjuvant melanoma, NSCLC and tumor agnostic indications, while maintaining demand in the highly competitive BRAF+ metastatic melanoma market.
Jakavi (USD 471 million, ex-US +8%, +13% cc) sales grew across all regions, driven by strong demand in both myelofibrosis and polycythemia vera indications. Incyte retains all rights to ruxolitinib (Jakafi®) in the US.
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Tasigna (USD 446 million, -6%, -4% cc) sales declined across most regions due to lower demand.
Pluvicto (USD 345 million, +44%, +44% cc) sales grew mainly in the US and Europe. Pluvicto is the only radioligand therapy approved by the FDA for the treatment of adult patients with progressive, PSMA-positive metastatic castration-resistant prostate cancer, who have already been treated with other anti-cancer treatments (ARPI and taxane-based chemotherapy). Pluvicto is now on the market in several EU countries.
Lutathera (USD 175 million, +17%, +17% cc) sales grew across all regions due to increased demand. Following the presentation of Phase III NETTER-2 data at ASCO GI in January, promotion has started in the US, where the 1L population is within the current indication for Lutathera. Growth in international markets was mainly driven by Europe and Japan.
Scemblix (USD 164 million, +55%, +56% cc) sales grew across all regions, demonstrating continued high unmet need for effective and tolerable treatment options for CML patients treated with two or more tyrosine kinase inhibitors.
Kymriah (USD 113 million, -12%, -11% cc) sales declined in most markets, partly offset by strong performance in pediatric and young adult patients up to 25 years of age with B-cell acute lymphoblastic leukemia (pALL), and follicular lymphoma indication uptake ex-US.
Piqray/Vijoice (USD 120 million, -8%, -7% cc) sales declined mainly in the US, driven by higher revenue deduction adjustments.
Fabhalta (USD 22 million) continues to show encouraging early launch indicators in the US, as the first oral monotherapy for the treatment of adults with paroxysmal nocturnal hemoglobinuria (PNH).
Established BRANDS
Q2 2024 | Q2 2023 | % change | % change | H1 2024 | H1 2023 | % change | % change | ||||||||||
USD m | USD m | USD | cc | USD m | USD m | USD | cc | ||||||||||
Established brands | |||||||||||||||||
Sandostatin Group | 313 | 331 | -5 | -4 | 668 | 660 | 1 | 3 | |||||||||
Lucentis | 275 | 395 | -30 | -28 | 589 | 811 | -27 | -26 | |||||||||
Exforge Group | 178 | 184 | -3 | 1 | 370 | 370 | 0 | 3 | |||||||||
Gilenya | 138 | 269 | -49 | -47 | 313 | 501 | -38 | -36 | |||||||||
Diovan Group | 160 | 155 | 3 | 9 | 300 | 313 | -4 | 1 | |||||||||
Galvus Group | 150 | 175 | -14 | -5 | 299 | 358 | -16 | -9 | |||||||||
Contract manufacturing | 271 | 339 | -20 | -19 | 550 | 714 | -23 | -23 | |||||||||
Other | 1 760 | 1 940 | -9 | -10 | 3 521 | 3 900 | -10 | -10 | |||||||||
Total established brands | 3 245 | 3 788 | -14 | -13 | 6 610 | 7 627 | -13 | -12 | |||||||||
Sandostatin Group (USD 313 million, -5%, -4% cc) sales declined mainly in the US due to timing in inventory shipments.
Lucentis (USD 275 million, ex-US -30%, -28% cc) sales declined in Europe, emerging growth markets and Japan, mainly due to competition.
Exforge Group (USD 178 million, -3%, +1% cc) sales were largely stable, driven by growth (cc) in emerging growth markets.
Gilenya (USD 138 million, -49%, -47% cc) sales declined due to generic competition, mainly in the US and Europe.
Diovan Group (USD 160 million, +3%, +9% cc) sales grew mainly in emerging growth markets.
Galvus Group (USD 150 million, -14%, -5% cc) sales declined mainly in Europe.
9
Discontinued operations
Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars division, certain corporate activities attributable to Sandoz and certain other expenses related to the spin-off of the Sandoz business.
Second quarter
As the Sandoz spin-off was completed on October 3, 2023, there were no operating results in the second quarter of 2024 related to discontinued operations. In the second quarter of 2023, discontinued operations net sales were USD 2.4 billion, operating income amounted to USD 113 million and net income from discontinued operations was USD 46 million. For further details see Note 3 “Significant acquisition of businesses and spin-off of Sandoz business” and Note 11 “Discontinued operations” to the condensed interim consolidated financial statements.
First half
As the Sandoz spin-off was completed on October 3, 2023, there were no operating results in the first half 2024 related to discontinued operations. In the first half 2023, discontinued operations net sales were USD 5.0 billion, operating income amounted to USD 351 million and net income from discontinued operations was USD 190 million. For further details see Note 3 “Significant acquisition of businesses and spin-off of Sandoz business” and Note 11 “Discontinued operations” to the condensed interim consolidated financial statements.
Total Company
Second quarter
Total Company net income was USD 3.2 billion in 2024, compared to USD 2.3 billion in 2023 and basic EPS was USD 1.60 compared to USD 1.11 in the prior-year quarter. Net cash flows from operating activities for total Company amounted to USD 4.9 billion and free cash flow amounted to USD 4.6 billion.
First half
Total Company net income was USD 5.9 billion in 2024, compared to USD 4.6 billion in 2023 and basic EPS was USD 2.91 compared to USD 2.20 in the prior year. Net cash flows from operating activities for total Company amounted to USD 7.1 billion and free cash flow amounted to USD 6.7 billion.
10
Company Cash Flow and Balance Sheet
Cash flow
Second quarter
Net cash flows from operating activities from continuing operations amounted to USD 4.9 billion, compared with USD 3.5 billion in the prior-year quarter. This increase was mainly driven by higher net income from continuing operations adjusted for non-cash items and other adjustments, including divestment gains, and lower income taxes paid, mainly due to the timing of income tax payments.
In the prior-year quarter, net cash flows from operating activities from discontinued operations amounted to USD 0.1 billion (Q2 2024: nil).
Net cash outflows used in investing activities from continuing operations amounted to USD 3.2 billion, compared with USD 1.0 billion in the prior-year quarter.
The current-year quarter net cash outflows used in investing activities from continuing operations were mainly driven by USD 3.3 billion for acquisitions and divestments of businesses including the acquisition of Mariana Oncology for USD 1.0 billion (USD 1.1 billion, net of cash acquired USD 0.1 billion) and the acquisition of MorphoSys AG for USD 2.3 billion (USD 2.5 billion, net of cash acquired USD 0.2 billion). Cash outflows for purchases of intangible assets amounted to USD 0.5 billion and of property, plant and equipment amounted to USD 0.3 billion. These were partly offset by cash inflows of USD 0.6 billion from the sale of financial assets (including USD 0.6 billion proceeds from the sale of Sandoz Group AG shares by consolidated foundations); and by net proceeds of USD 0.2 billion from the sale of marketable securities, commodities and time deposits.
In the prior-year quarter, net cash outflows used in investing activities from continuing operations of USD 1.0 billion were driven by USD 0.7 billion for the purchases of intangible assets; USD 0.2 billion for purchases of property, plant and equipment; and USD 0.1 billion for acquisitions and divestments of businesses, net.
In the prior-year quarter, net cash outflows used in investing activities from discontinued operations amounted to USD 0.1 billion (Q2 2024: nil).
Net cash outflows used in financing activities from continuing operations amounted to USD 3.2 billion, compared with USD 3.8 billion in the prior-year quarter.
The current-year quarter net cash outflows used in financing activities from continuing operations were mainly driven by the USD 2.4 billion payment (in April 2024 when it was due) of Swiss withholding tax on the dividend payment made in the first quarter 2024. Payments for treasury share transactions resulted in a net cash outflow of USD 1.6 billion and the repayment of a US dollar bond at maturity amounted to USD 2.15 billion. These were partly offset by cash inflows from the issuance of Swiss franc denominated bonds of USD 2.5 billion (notional amount of CHF 2.2 billion) and the net increase in current financial debts of USD 0.6 billion.
In the prior-year quarter, net cash outflows used in financing activities from continuing operations of USD 3.8 billion were driven by USD 3.0 billion for treasury share transactions and USD 0.7 billion from the net decrease in current financial debts.
In the prior-year quarter, net cash inflows from financing activities from discontinued operations amounted to USD 0.1 billion (Q2 2024: nil).
Free cash flow from continuing operations amounted to USD 4.6 billion (+40% USD), compared with USD 3.3 billion in the prior-year quarter, driven by higher net cash flows from operating activities from continuing operations.
For the total Company, net cash flows from operating activities amounted to USD 4.9 billion, compared with USD 3.6 billion in the prior-year quarter and free cash flow amounted to USD 4.6 billion, compared with USD 3.3 billion in the prior-year quarter.
First half
Net cash flows from operating activities from continuing operations amounted to USD 7.1 billion, compared with USD 6.4 billion in the prior-year period. This increase was mainly driven by higher net income from continuing
11
operations adjusted for non-cash items and other adjustments, including divestment gains, partly offset by unfavorable changes in working capital.
In the prior-year period, net cash flows from operating activities from discontinued operations amounted to USD 0.2 billion (H1 2024: nil).
Net cash outflows used in investing activities from continuing operations amounted to USD 4.1 billion, compared with USD 9.7 billion net cash inflows in the prior-year period.
The current year period, net cash outflows used in investing activities from continuing operations were mainly driven by USD 3.6 billion for acquisitions and divestments of businesses including the acquisition of Mariana Oncology for USD 1.0 billion (USD 1.1 billion, net of cash acquired USD 0.1 billion) and the acquisition of MorphoSys AG for USD 2.3 billion (USD 2.5 billion, net of cash acquired USD 0.2 billion). Cash outflows for purchases of intangible assets amounted to USD 1.4 billion; of property, plant and equipment amounted to USD 0.5 billion; and of financial assets amounted to USD 0.1 billion. These were partly offset by cash inflows of USD 0.7 billion from the sale of financial assets (including USD 0.6 billion proceeds from the sale of Sandoz Group AG shares by consolidated foundations); and by net proceeds of USD 0.7 billion from the sale of marketable securities, commodities and time deposits.
In the prior-year period, net cash inflows from investing activities from continuing operations of USD 9.7 billion were driven by the net proceeds of USD 10.9 billion from the sale of marketable securities, commodities and time deposits; USD 0.3 billion from the sale of intangible assets, financial assets and property, plant and equipment. These cash inflows were partly offset by cash outflows of USD 0.9 billion for purchases of intangible assets; USD 0.4 billion for purchases of property, plant and equipment; and USD 0.1 billion for purchases of financial assets. Acquisitions and divestments of businesses resulted in a net cash outflow of USD 0.1 billion.
In the prior-year period, net cash outflows used in investing activities from discontinued operations amounted to USD 0.2 billion (H1 2024: nil).
Net cash outflows used in financing activities from continuing operations amounted to USD 8.4 billion, compared with USD 12.8 billion in the prior-year period.
The current-year period net cash outflows used in financing activities from continuing operations were mainly driven by USD 7.6 billion for the dividend payment; USD 2.7 billion for net treasury share transactions; and the repayment of a US dollar bond at maturity of USD 2.15 billion. These were partly offset by cash inflows from the issuance of Swiss franc denominated bonds of USD 2.5 billion (notional amount of CHF 2.2 billion) and the net increase in current financial debts of USD 1.8 billion.
In the prior-year period, net cash outflows used in financing activities from continuing operations of USD 12.8 billion were mainly driven by USD 7.3 billion for the dividend payment and USD 5.7 billion for net treasury share transactions. These cash outflows were partly offset by cash inflows of USD 0.3 billion from the net increase in current financial debts.
In the prior-year period, net cash outflows used in financing activities from discontinued operations amounted to USD 0.1 billion (H1 2024: nil).
Free cash flow from continuing operations amounted to USD 6.7 billion (+11% USD), compared with USD 6.0 billion in the prior-year period driven by higher net cash flows from operating activities from continuing operations.
For the total Company, net cash flows from operating activities amounted to USD 7.1 billion, compared with USD 6.5 billion in the prior-year period and free cash flow amounted to USD 6.7 billion, compared with USD 6.0 billion in the prior-year period.
Balance sheet
Assets
Total non-current assets of USD 71.8 billion increased by USD 2.3 billion compared to December 31, 2023.
Intangible assets other than goodwill increased by USD 0.9 billion mainly due the impact of the Mariana Oncology and MorphoSys business acquisitions, partially offset by amortization, impairments and unfavorable currency translation adjustments.
12
Goodwill increased by USD 1.9 billion mainly due the impact of the Mariana Oncology and MorphoSys business acquisitions, partially offset by unfavorable currency translation adjustments.
Financial assets decreased by USD 0.6 billion mainly due to the sale of Sandoz AG shares by consolidated foundations. Property, plant and equipment decreased by USD 0.3 billion mainly as depreciation charges and unfavorable currency translation adjustments more than offset additions.
Other non-current assets increased by USD 0.5 billion due to the MorphoSys business acquisition. Deferred tax assets, right-of-use assets and investments in associated companies were broadly in line with December 31, 2023.
Total current assets of USD 25.7 billion decreased by USD 4.8 billion compared to December 31, 2023.
Cash and cash equivalents decreased by USD 5.5 billion mainly as cash generated through operating activities was more than offset by the USD 7.6 billion net dividend payment, USD 3.6 billion for the Mariana Oncology and MorphoSys business acquisitions, USD 1.4 billion for investments in intangible assets, and USD 2.7 billion for purchases of treasury shares, partly offset by USD 2.1 billion net proceeds from changes in financial debts.
Marketable securities, commodities, time deposits and derivative financial instruments decreased by USD 0.5 billion, mainly due to the net sales of marketable securities, commodities and time deposits and fair value adjustments on derivative financial instruments.
Trade receivables increased by USD 1.1 billion, mainly driven by the increase in net sales. Other current assets increased by USD 0.4 billion. Inventories and income tax receivables were broadly in line with December 31, 2023.
Liabilities
Total non-current liabilities of USD 28.0 billion increased by USD 1.2 billion compared to December 31, 2023.
Non-current financial debts increased by USD 1.2 billion mainly due to the issuance of Swiss franc denominated bonds of USD 2.5 billion (notional amount of CHF 2.2 billion) and financial debts acquired through the MorphoSys business acquisition of USD 0.6 billion, partly offset by the reclassification of USD 1.6 billion from non-current to current financial debts of a USD denominated bond with notional amount of USD 1.0 billion maturing in 2025 and a CHF denominated bond of notional amount of CHF 0.5 billion maturing in 2025 and favorable currency impacts.
Non-current lease liabilities, deferred tax liabilities and provisions and other non-current liabilities were broadly in line with December 31, 2023.
Total current liabilities of USD 27.6 billion increased by USD 1.2 billion compared to December 31, 2023.
Current financial debts and derivative financial instruments increased by USD 1.4 billion compared to December 31, 2023, mainly due to the issuance of commercial paper notes under the US commercial paper programs, the impact of the MorphoSys business acquisition of USD 0.3 billion, and the reclassification of USD 1.6 billion from non-current to current financial debts of a USD denominated bond with notional amount of USD 1.0 billion maturing in 2025 and a CHF denominated bond of notional amount of CHF 0.5 billion maturing in 2025, partly offset by the repayment of a US dollar bond at maturity of USD 2.15 billion.
Trade payables decreased by USD 0.8 billion. Provisions and other current liabilities increased by USD 0.6 billion mainly driven by the increase in provisions for deductions from revenue, partly offset by reductions in accruals for compensation and benefits, including social security, and restructuring provisions. Current income tax liabilities and current lease liabilities were broadly in line with December 31, 2023.
Equity
The Company’s equity decreased by USD 4.8 billion to USD 41.9 billion compared to December 31, 2023. This decrease was mainly driven by the net income of USD 5.9 billion and favorable impact from equity-based compensation of USD 0.6 billion being more than offset by the cash-dividend to Novartis AG shareholders of USD 7.6 billion, the purchase of treasury shares of USD 2.8 billion and unfavorable currency translation differences of USD 1.4 billion.
13
Net debt and debt/equity ratio
The Company’s liquidity amounted to USD 8.4 billion as at June 30, 2024, compared with USD 14.4 billion as at December 31, 2023. Total non-current and current financial debts, including derivatives, amounted to USD 27.2 billion as at June 30, 2024, compared with USD 24.6 billion as at December 31, 2023.
The debt/equity ratio increased to 0.65:1 as at June 30, 2024, compared with 0.53:1 as at December 31, 2023. The net debt increased to USD 18.8 billion as at June 30, 2024, compared with USD 10.2 billion as at December 31, 2023.
14
Innovation Review
Novartis continues to focus its R&D portfolio prioritizing high value medicines with transformative potential for patients. We now focus on ~100 projects in clinical development.
Selected Innovative Medicines approvals
Product | Active ingredient/ Descriptor | Indication | Region | |||||
Fabhalta | iptacopan | Paroxysmal nocturnal hemoglobinuria | EU, Japan and China | |||||
Lutathera | 177Lu-oxodotreotide | Pediatric GEP-NETs | US | |||||
Selected Innovative Medicines projects awaiting regulatory decisions
Completed submissions | |||||||||||
Product | Indication | US | EU | Japan | News update | ||||||
Kisqali | Hormone receptor-positive / human epidermal growth factor receptor 2-negative early breast cancer (adjuvant) | Q4 2023 | Q3 2023 | ||||||||
Scemblix | 1L chronic myeloid leukemia | Q2 2024 | – US submission and Breakthrough Therapy designation granted – Ph3 data presented at ASCO congress | ||||||||
Fabhalta | IgA nephropathy | Q1 2024 | – US submission, priority review granted | ||||||||
Atrasentan | IgA nephropathy | Q2 2024 | – US submission – Ph3 data presented at ERA congress | ||||||||
Lutathera | Gastroenteropancreatic neuroendocrine tumors, 1L in G2/3 tumors | Q2 2024 | |||||||||
Coartem | Malaria (<5kg patients) | – Submission using MAGHP procedure in Switzerland to facilitate rapid approvals in developing countries | |||||||||
Selected Innovative Medicines pipeline projects
Compound/ product | Potential indication/ Disease area | First planned submissions | Current Phase | News update | |||||
Aimovig | Migraine, pediatrics | ≥2027 | 3 | ||||||
AVXS-101 (OAV101) | Spinal muscular atrophy (IT formulation) | 2025 | 3 | ||||||
Beovu | Diabetic retinopathy | 2025 | 3 | ||||||
CFZ533 (iscalimab) | Sjögren's syndrome | ≥2027 | 2 | ||||||
Cosentyx | Giant cell arteritis | 2025 | 3 | ||||||
Polymyalgia rheumatica | 2026 | 3 | |||||||
Rotator cuff tendinopathy | 3 | – Project discontinued to prioritize other key programs in portfolio | |||||||
DAK539 (pelabresib) | Myelofibrosis | 3 | – Morphosys aquisition | ||||||
FUB523 (zigakibart) | IgA nephropathy | ≥2027 | 3 | ||||||
JDQ443 (opnurasib) | Non-small cell lung cancer (mono/combos) | 3 | – Project discontinued to prioritize other key programs in portfolio | ||||||
KAE609 (cipargamin) | Malaria, uncomplicated | ≥2027 | 2 | ||||||
Malaria, severe | ≥2027 | 2 | |||||||
KLU156 (ganaplacide + lumefantrine) | Malaria, uncomplicated | 2026 | 3 | – FDA Orphan Drug designation – FDA Fast Track designation | |||||
Leqvio | Secondary prevention of cardiovascular events in patients with elevated levels of LDL-C | ≥2027 | 3 | ||||||
Primary prevention CVRR | ≥2027 | 3 | |||||||
LNA043 | Osteoarthritis | ≥2027 | 2 | – FDA Fast Track designation | |||||
15
Compound/ product | Potential indication/ Disease area | First planned submissions | Current Phase | News update | |||||
LNP023 (iptacopan) | C3 glomerulopathy | 2024 | 3 | – EU Orphan Drug designation – EU PRIME designation – FDA Rare Pediatric designation – China Breakthrough Therapy designation – FDA Breakthrough Therapy designation – Ph3 data presented at ERA congress | |||||
IC-MPGN | ≥2027 | 3 | |||||||
Atypical haemolytic uraemic syndrome | ≥2027 | 3 | |||||||
Myasthenia gravis | ≥2027 | 3 | – Ph3 started | ||||||
LOU064 (remibrutinib) | Chronic spontaneous urticaria | 2025 | 3 | – Updated CMC package, filing now anticipated in 2025 – Ph3 52-week data presented at EAACI | |||||
Multiple sclerosis | ≥2027 | 3 | |||||||
CINDU | ≥2027 | 3 | |||||||
177Lu-NeoB | Multiple solid tumors | ≥2027 | 1 | ||||||
LXE408 | Visceral leishmaniasis | ≥2027 | 2 | ||||||
Pluvicto | Metastatic castration-resistant prostate cancer, pre-taxane | 2024 | 3 | ||||||
Metastatic hormone sensitive prostate cancer | 2025 | 3 | – Event-driven trial | ||||||
Oligometastatic prostate cancer | ≥2027 | 3 | |||||||
QGE031 (ligelizumab) | Food allergy | ≥2027 | 3 | ||||||
TQJ230 (pelacarsen) | Secondary prevention of cardiovascular events in patients with elevated levels of lipoprotein(a) | 2025 | 3 | – FDA Fast Track designation – China Breakthrough Therapy designation | |||||
VAY736 (ianalumab) | Auto-immune hepatitis | ≥2027 | 2 | – FDA Fast Track designation | |||||
Sjögren’s syndrome | 2026 | 3 | – FDA Fast Track designation | ||||||
Lupus nephritis | ≥2027 | 3 | |||||||
Systemic lupus erythematosus | ≥2027 | 3 | |||||||
1L immune thrombocytopenia | ≥2027 | 3 | – Adjusted submission timeline due to slower recruitment progress | ||||||
2L immune thrombocytopenia | ≥2027 | 3 | – Adjusted submission timeline due to slower recruitment progress | ||||||
Warm autoimmune hemolytic anemia | ≥2027 | 3 | – Adjusted submission timeline due to slower recruitment progress | ||||||
Vijoyce | Lymphatic malformations | ≥2027 | 3 | – US, EU Orphan Drug designation | |||||
XXB750 | Hypertension | ≥2027 | 2 | ||||||
YTB323 | Severe refractory lupus nephritis / Systemic lupus erythematosus | ≥2027 | 2 | ||||||
1L high-risk large B-cell lymphoma | ≥2027 | 2 | |||||||
16
Condensed Interim Consolidated Financial Statements
Consolidated income statements
Second quarter (unaudited)
(USD millions unless indicated otherwise) | Note | Q2 2024 | Q2 2023 | ||||
Net sales from continuing operations | 9 | ||||||
Other revenues | 9 | ||||||
Cost of goods sold | - | - | |||||
Gross profit from continuing operations | |||||||
Selling, general and administration | - | - | |||||
Research and development | - | - | |||||
Other income | |||||||
Other expense | - | - | |||||
Operating income from continuing operations | |||||||
Loss from associated companies | - | - | |||||
Interest expense | - | - | |||||
Other financial income and expense | |||||||
Income before taxes from continuing operations | |||||||
Income taxes | - | - | |||||
Net income from continuing operations | |||||||
Net income from discontinued operations | 11 | ||||||
Net income | |||||||
Attributable to: | |||||||
Shareholders of Novartis AG | |||||||
Non-controlling interests | |||||||
Weighted average number of shares outstanding – Basic (million) | |||||||
Basic earnings per share from continuing operations (USD) 1 | |||||||
Basic earnings per share from discontinued operations (USD) 1 | |||||||
Total basic earnings per share (USD) 1 | |||||||
Weighted average number of shares outstanding – Diluted (million) | |||||||
Diluted earnings per share from continuing operations (USD) 1 | |||||||
Diluted earnings per share from discontinued operations (USD) 1 | |||||||
Total diluted earnings per share (USD) 1 | |||||||
1 Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG. | |||||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||||
17
Consolidated income statements
First half (unaudited)
(USD millions unless indicated otherwise) | Note | H1 2024 | H1 2023 | ||||
Net sales from continuing operations | 9 | ||||||
Other revenues | 9 | ||||||
Cost of goods sold | - | - | |||||
Gross profit from continuing operations | |||||||
Selling, general and administration | - | - | |||||
Research and development | - | - | |||||
Other income | |||||||
Other expense | - | - | |||||
Operating income from continuing operations | |||||||
Loss from associated companies | - | - | |||||
Interest expense | - | - | |||||
Other financial income and expense | |||||||
Income before taxes from continuing operations | |||||||
Income taxes | - | - | |||||
Net income from continuing operations | |||||||
Net income from discontinued operations | 11 | ||||||
Net income | |||||||
Attributable to: | |||||||
Shareholders of Novartis AG | |||||||
Non-controlling interests | |||||||
Weighted average number of shares outstanding – Basic (million) | |||||||
Basic earnings per share from continuing operations (USD) 1 | |||||||
Basic earnings per share from discontinued operations (USD) 1 | |||||||
Total basic earnings per share (USD) 1 | |||||||
Weighted average number of shares outstanding – Diluted (million) | |||||||
Diluted earnings per share from continuing operations (USD) 1 | |||||||
Diluted earnings per share from discontinued operations (USD) 1 | |||||||
Total diluted earnings per share (USD) 1 | |||||||
1 | |||||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||||
18
Consolidated statements of comprehensive income
Second quarter (unaudited)
(USD millions) | Q2 2024 | Q2 2023 | |||
Net income | |||||
Other comprehensive income | |||||
Items that are or may be recycled into the consolidated income statement | |||||
Net investment hedge, net of taxes | |||||
Currency translation effects, net of taxes | |||||
Total of items that are or may be recycled | |||||
Items that will never be recycled into the consolidated income statement | |||||
Actuarial gains/(losses) from defined benefit plans, net of taxes | - | ||||
Fair value adjustments on equity securities, net of taxes | - | ||||
Total of items that will never be recycled | - | ||||
Total other comprehensive income | |||||
Total comprehensive income | |||||
Total comprehensive income for the period attributable to: | |||||
Shareholders of Novartis AG | |||||
Continuing operations | |||||
Discontinued operations | |||||
Non-controlling interests | - | ||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||
First half (unaudited)
(USD millions) | H1 2024 | H1 2023 | |||
Net income | |||||
Other comprehensive income | |||||
Items that are or may be recycled into the consolidated income statement | |||||
Net investment hedge, net of taxes | - | ||||
Currency translation effects, net of taxes | - | ||||
Total of items that are or may be recycled | - | ||||
Items that will never be recycled into the consolidated income statement | |||||
Actuarial gains/(losses) from defined benefit plans, net of taxes | - | ||||
Fair value adjustments on equity securities, net of taxes | - | ||||
Total of items that will never be recycled | - | ||||
Total other comprehensive income | - | ||||
Total comprehensive income | |||||
Total comprehensive income for the period attributable to: | |||||
Shareholders of Novartis AG | |||||
Continuing operations | |||||
Discontinued operations | |||||
Non-controlling interests | - | ||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||
19
Consolidated balance sheets
(USD millions) | Jun 30, 2024 (unaudited) | Dec 31, 2023 (audited) | |||
Assets | |||||
Non-current assets | |||||
Property, plant and equipment | |||||
Right-of-use assets | |||||
Goodwill | |||||
Intangible assets other than goodwill | |||||
Investments in associated companies | |||||
Deferred tax assets | |||||
Financial assets | |||||
Other non-current assets | |||||
Total non-current assets | |||||
Current assets | |||||
Inventories | |||||
Trade receivables | |||||
Income tax receivables | |||||
Marketable securities, commodities, time deposits and derivative financial instruments | |||||
Cash and cash equivalents | |||||
Other current assets | |||||
Total current assets | |||||
Total assets | |||||
Equity and liabilities | |||||
Equity | |||||
Share capital | |||||
Treasury shares | - | - | |||
Reserves | |||||
Equity attributable to Novartis AG shareholders | |||||
Non-controlling interests | |||||
Total equity | |||||
Liabilities | |||||
Non-current liabilities | |||||
Financial debts | |||||
Lease liabilities | |||||
Deferred tax liabilities | |||||
Provisions and other non-current liabilities | |||||
Total non-current liabilities | |||||
Current liabilities | |||||
Trade payables | |||||
Financial debts and derivative financial instruments | |||||
Lease liabilities | |||||
Current income tax liabilities | |||||
Provisions and other current liabilities | |||||
Total current liabilities | |||||
Total liabilities | |||||
Total equity and liabilities | |||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||
20
Consolidated statements of changes in equity
Second quarter (unaudited)
Reserves | |||||||||||||||||
(USD millions) | Note | Share capital | Treasury shares | Retained earnings | Total value adjustments | Issued share capital and reserves attributable to Novartis shareholders | Non- controlling interests | Total equity | |||||||||
Total equity at April 1, 2024 | - | - | |||||||||||||||
Net income | |||||||||||||||||
Other comprehensive income | - | ||||||||||||||||
Total comprehensive income | - | ||||||||||||||||
Purchase of treasury shares | - | - | - | - | |||||||||||||
Exercise of options and employee transactions | - | - | - | ||||||||||||||
Equity-based compensation | |||||||||||||||||
Shares delivered to Sandoz employees as a result of the Sandoz spin-off | |||||||||||||||||
Taxes on treasury share transactions | - | - | - | ||||||||||||||
Fair value adjustments on financial assets sold | - | ||||||||||||||||
Impact of change in ownership of consolidated entities | - | - | |||||||||||||||
Other movements | 4.3 | ||||||||||||||||
Total of other equity movements | - | - | - | - | - | ||||||||||||
Total equity at June 30, 2024 | - | - | |||||||||||||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||||||||||||||
Reserves | |||||||||||||||||
(USD millions) | Note | Share capital | Treasury shares | Retained earnings | Total value adjustments | Issued share capital and reserves attributable to Novartis shareholders | Non- controlling interests | Total equity | |||||||||
Total equity at April 1, 2023 | - | - | |||||||||||||||
Net income | |||||||||||||||||
Other comprehensive income | |||||||||||||||||
Total comprehensive income | |||||||||||||||||
Purchase of treasury shares | - | - | - | - | |||||||||||||
Equity-based compensation | |||||||||||||||||
Fair value adjustments on financial assets sold | - | ||||||||||||||||
Other movements | 4.3 | ||||||||||||||||
Total of other equity movements | - | - | - | - | - | ||||||||||||
Total equity at June 30, 2023 | - | - | |||||||||||||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||||||||||||||
21
Consolidated statements of changes in equity
First half (unaudited)
Reserves | |||||||||||||||||
(USD millions) | Note | Share capital | Treasury shares | Retained earnings | Total value adjustments | Issued share capital and reserves attributable to Novartis shareholders | Non- controlling interests | Total equity | |||||||||
Total equity at January 1, 2024 | - | - | |||||||||||||||
Net income | |||||||||||||||||
Other comprehensive income | - | - | - | - | |||||||||||||
Total comprehensive income | - | - | |||||||||||||||
Dividends | 4.1 | - | - | - | |||||||||||||
Purchase of treasury shares | - | - | - | - | |||||||||||||
Reduction of share capital | 4.2 | - | |||||||||||||||
Exercise of options and employee transactions | - | - | - | ||||||||||||||
Equity-based compensation | |||||||||||||||||
Shares delivered to Sandoz employees as a result of the Sandoz spin-off | |||||||||||||||||
Taxes on treasury share transactions | |||||||||||||||||
Fair value adjustments on financial assets sold | - | ||||||||||||||||
Impact of change in ownership of consolidated entities | - | - | |||||||||||||||
Other movements | 4.3 | ||||||||||||||||
Total of other equity movements | - | - | - | - | - | ||||||||||||
Total equity at June 30, 2024 | - | - | |||||||||||||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||||||||||||||
Reserves | |||||||||||||||||
(USD millions) | Note | Share capital | Treasury shares | Retained earnings | Total value adjustments | Issued share capital and reserves attributable to Novartis shareholders | Non- controlling interests | Total equity | |||||||||
Total equity at January 1, 2023 | - | - | |||||||||||||||
Net income | |||||||||||||||||
Other comprehensive income | |||||||||||||||||
Total comprehensive income | |||||||||||||||||
Dividends | - | - | - | ||||||||||||||
Purchase of treasury shares | - | - | - | - | |||||||||||||
Reduction of share capital | - | - | |||||||||||||||
Exercise of options and employee transactions | |||||||||||||||||
Equity-based compensation | |||||||||||||||||
Taxes on treasury share transactions | |||||||||||||||||
Fair value adjustments on financial assets sold | - | ||||||||||||||||
Other movements | 4.3 | ||||||||||||||||
Total of other equity movements | - | - | - | - | - | ||||||||||||
Total equity at June 30, 2023 | - | - | |||||||||||||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||||||||||||||
22
Consolidated statements of cash flows
Second quarter (unaudited)
(USD millions) | Note | Q2 2024 | Q2 2023 | ||||
Net income from continuing operations | |||||||
Adjustments to reconcile net income from continuing operations to net cash flows from operating activities from continuing operations | |||||||
Reversal of non-cash items and other adjustments | 6.1 | ||||||
Dividends received from associated companies and others | |||||||
Interest received | |||||||
Interest paid | - | - | |||||
Change in other financial receipts | - | ||||||
Change in other financial payments | - | - | |||||
Income taxes paid | 6.2 | - | - | ||||
Net cash flows from operating activities from continuing operations before working capital and provision changes | |||||||
Payments out of provisions and other net cash movements in non-current liabilities | - | - | |||||
Change in net current assets and other operating cash flow items | 6.3 | ||||||
Net cash flows from operating activities from continuing operations | |||||||
Net cash flows from operating activities from discontinued operations | |||||||
Total net cash flows from operating activities | |||||||
Purchases of property, plant and equipment | - | - | |||||
Proceeds from sale of property, plant and equipment | |||||||
Purchases of intangible assets | - | - | |||||
Proceeds from sale of intangible assets | |||||||
Purchases of financial assets | - | - | |||||
Proceeds from sale of financial assets | |||||||
Divestments and acquisitions of interests in associated companies, net | - | - | |||||
Acquisitions and divestments of businesses, net | 6.4 | - | - | ||||
Purchases of marketable securities, commodities and time deposits | - | - | |||||
Proceeds from sale of marketable securities, commodities and time deposits | |||||||
Net cash flows used in investing activities from continuing operations | - | - | |||||
Net cash flows used in investing activities from discontinued operations | - | ||||||
Total net cash flows used in investing activities | - | - | |||||
Dividends paid to shareholders of Novartis AG | 4.1 | - | |||||
Purchases of treasury shares | - | - | |||||
Proceeds from exercised options and other treasury share transactions, net | |||||||
Increase in non-current financial debts | |||||||
Repayments of the current portion of non-current financial debts | - | ||||||
Change in current financial debts | - | ||||||
Payments of lease liabilities | - | - | |||||
Payments from changes in ownership interests in consolidated subsidiaries | - | ||||||
Other financing cash flows, net | - | ||||||
Net cash flows used in financing activities from continuing operations | - | - | |||||
Net cash flows from financing activities from discontinued operations | |||||||
Total net cash flows used in financing activities | - | - | |||||
Net change in cash and cash equivalents before effect of exchange rate changes | - | - | |||||
Effect of exchange rate changes on cash and cash equivalents | - | - | |||||
Net change in cash and cash equivalents | - | - | |||||
Cash and cash equivalents at April 1 | |||||||
Cash and cash equivalents at June 30 | |||||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||||
23
Consolidated statements of cash flows
First half (unaudited)
(USD millions) | Note | H1 2024 | H1 2023 | ||||
Net income from continuing operations | |||||||
Adjustments to reconcile net income from continuing operations to net cash flows from operating activities from continuing operations | |||||||
Reversal of non-cash items and other adjustments | 6.1 | ||||||
Dividends received from associated companies and others | |||||||
Interest received | |||||||
Interest paid | - | - | |||||
Other financial receipts | |||||||
Other financial payments | - | - | |||||
Income taxes paid | 6.2 | - | - | ||||
Net cash flows from operating activities from continuing operations before working capital and provision changes | |||||||
Payments out of provisions and other net cash movements in non-current liabilities | - | - | |||||
Change in net current assets and other operating cash flow items | 6.3 | - | - | ||||
Net cash flows from operating activities from continuing operations | |||||||
Net cash flows from operating activities from discontinued operations | |||||||
Total net cash flows from operating activities | |||||||
Purchases of property, plant and equipment | - | - | |||||
Proceeds from sale of property, plant and equipment | |||||||
Purchases of intangible assets | - | - | |||||
Proceeds from sale of intangible assets | |||||||
Purchases of financial assets | - | - | |||||
Proceeds from sale of financial assets | |||||||
Divestments and acquisitions of interests in associated companies, net | - | ||||||
Acquisitions and divestments of businesses, net | 6.4 | - | - | ||||
Purchases of marketable securities, commodities and time deposits | - | - | |||||
Proceeds from sale of marketable securities, commodities and time deposits | |||||||
Net cash flows (used in)/from investing activities from continuing operations | - | ||||||
Net cash flows used in investing activities from discontinued operations | - | ||||||
Total net cash flows (used in)/from investing activities | - | ||||||
Dividends paid to shareholders of Novartis AG | 4.1 | - | - | ||||
Purchases of treasury shares | - | - | |||||
Proceeds from exercised options and other treasury share transactions, net | |||||||
Increase in non-current financial debts | |||||||
Repayments of the current portion of non-current financial debts | - | ||||||
Change in current financial debts | |||||||
Payments of lease liabilities | - | - | |||||
Payments from changes in ownership interests in consolidated subsidiaries | - | ||||||
Other financing cash flows, net | |||||||
Net cash flows used in financing activities from continuing operations | - | - | |||||
Net cash flows used in financing activities from discontinued operations | - | ||||||
Total net cash flows used in financing activities | - | - | |||||
Net change in cash and cash equivalents before effect of exchange rate changes | - | ||||||
Effect of exchange rate changes on cash and cash equivalents | - | ||||||
Net change in cash and cash equivalents | - | ||||||
Cash and cash equivalents at January 1 | |||||||
Cash and cash equivalents at June 30 | |||||||
The accompanying Notes form an integral part of the condensed interim consolidated financial statements | |||||||
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Notes to the Condensed Interim Consolidated Financial Statements for the three month and six month period ended June 30, 2024 (unaudited)
1. Basis of preparation
The consolidated financial statements of the Company are prepared in accordance with International Financial Reporting Standards (IFRS®) Accounting Standards as issued by the International Accounting Standards Board. They are prepared in accordance with the historical cost convention, except for items that are required to be accounted for at fair value. These Condensed Interim Consolidated Financial Statements for the three month and six month period ended June 30, 2024, were prepared in accordance with International Accounting Standards (IAS®) Standards 34 Interim Financial Reporting and accounting policies set out in the 2023 Annual Report published on January 31, 2024.
At the Novartis AG Extraordinary General Meeting, held on September 15, 2023, our shareholders approved the spin-off of the Sandoz business. Following the shareholder approval IFRS Accounting Standards required the Sandoz Division and selected portions of corporate activities attributable to Sandoz’s business, as well as certain expenses related to the spin-off (the “Sandoz business”) to be reported as discontinued operations in the consolidated financial statements. As a result, the Sandoz business has been presented as discontinued operations in the condensed interim consolidated financial statements. This requires the three month and six month period ended June 30, 2023, consolidated income statement, consolidated statement of comprehensive income and consolidated statement of cash flows to present separately continuing operations from discontinued operations.
For further information and disclosures, refer to Note 3 and Note 11.
2. Accounting policies
The Company’s accounting policies are set out in Note 1 to the Consolidated Financial Statements in the 2023 Annual Report and conform with IFRS Accounting Standards as issued by the International Accounting Standards Board.
The preparation of financial statements requires management to make certain estimates and assumptions, either at the balance sheet date or during the period, which affect the reported amounts of revenues, expenses, assets, liabilities and contingent amounts.
Estimates are based on historical experience and other assumptions that are considered reasonable under the given circumstances and are regularly monitored. Actual outcomes and results could differ from those estimates and assumptions. Revisions to estimates are recognized in the period in which the estimate is revised.
As disclosed in the 2023 Annual Report, goodwill, and acquired In-Process Research & Development projects are reviewed for impairment at least annually and these, as well as all other investments in intangible assets, are reviewed for impairment whenever an event or decision occurs that raises concern about their balance sheet carrying value. The amount of goodwill and other intangible assets on the Company’s consolidated balance sheet has risen significantly in recent years, primarily from acquisitions. Impairment testing may lead to potentially significant impairment charges in the future that could have a materially adverse impact on the Company’s results of operations and financial condition.
The Company’s activities are not subject to significant seasonal fluctuations.
Status of adoption of significant new or amended IFRS standards or interpretations
No new IFRS Accounting Standards were adopted by the Company in 2024. In addition, new IFRS Accounting Standards amendments or interpretations that became effective in 2024 did not have a material impact on the Company’s consolidated financial statements.
Based on the Company’s assessment, there are no IFRS Accounting Standards, amendments or interpretations not yet effective in 2024 that would be expected to have a material impact on the Company’s consolidated financial statements.
In the second quarter of 2024, the following new IFRS Accounting Standard, which is not yet effective, was issued by the International Accounting Standards Board:
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IFRS 18 Presentation and Disclosures in Financial Statements
IFRS 18 Presentation and Disclosure in Financial Statements was issued by the International Accounting Standards Board in April 2024. IFRS 18 is effective on January 1, 2027, and is required to be applied retrospectively to comparative periods presented, with early adoption permitted. IFRS 18, upon adoption replaces IAS Standards 1 - Presentation of Financial Statements.
IFRS 18 sets out new requirements focused on improving financial reporting by:
• requiring additional defined structure to the statement of profit or loss (i.e. consolidated statement of income), to reduce diversity in the reporting, by requiring five categories (operating, investing, financing, income taxes and discontinued operations) and defined subtotals and totals (operating income, income before financing, income taxes and net income),
• requiring disclosures in the notes to the financial statements about management-defined performance measures (i.e. non-IFRS measures), and
• adding new principles for aggregation and disaggregation of information in the primary financial statements and notes.
IFRS 18 will not impact the recognition or measurement of items in the financial statements, but it might change what an entity reports as its ‘operating profit or loss’, due to the classification of certain income and expense items between the five categories of the consolidated income statement. It might also change what an entity reports as operating activities, investing activities and financing activities within the statement of cash flows, due to the change in classification of certain cash flow items between these three categories of the cash flows statement. Novartis is currently assessing the impact of adopting IFRS 18.
3. Significant acquisitions of businesses and spin-off of Sandoz business
The Company applied the acquisition method of accounting for businesses acquired, and did not elect to apply the optional concentration test to account for acquired business as an asset separately acquired.
Significant acquisitions of businesses – 2024
Acquisition of Mariana Oncology
On May 2, 2024, Novartis acquired Mariana Oncology, a preclinical-stage US based biotechnology company focused on developing novel radioligand therapies (RLTs) with a portfolio of RLT programs across a range of solid tumor indications.
The purchase price consisted of a cash payment of USD 1.1 billion and potential additional milestones of up to USD 0.8 billion, which the Mariana Oncology shareholders are eligible to receive upon the achievement of specified milestones.
The fair value of the total purchase consideration was USD 1.3 billion, consisting of a cash payment of USD 1.1 billion and the fair value of contingent consideration of USD 0.2 billion. The preliminary purchase price allocation resulted in net identifiable assets of USD 0.7 billion, consisting primarily of IPR&D intangible assets of USD 0.3 billion, other intangible assets (scientific infrastructure) of USD 0.4 billion, cash and cash equivalents of USD 0.1 billion and net deferred tax liabilities of USD 0.1 billion. Goodwill amounted to USD 0.6 billion.
The results of operations since the date of acquisition were not material.
Acquisition of MorphoSys AG
On February 5, 2024, Novartis entered into an agreement to acquire MorphoSys AG (MorphoSys), a Germany-based, global biopharmaceutical company developing innovative medicines in oncology. The acquisition of MorphoSys adds to our oncology pipeline pelabresib, a late-stage BET inhibitor for myelofibrosis and tulmimetostat, an early-stage investigational dual inhibitor of EZH2 and EZH1 for solid tumors or lymphomasis.
On April 11, 2024, Novartis, through a subsidiary, commenced a voluntary public takeover offer (the “Offer”) to acquire all outstanding shares of MorphoSys for EUR 68 per share, representing a total consideration of approximately EUR 2.6 billion in cash on a fully diluted basis. The settlement of the Offer was conditional on a minimum acceptance threshold of 65 percent of MorphoSys outstanding shares.
Novartis purchased during the Offer acceptance period MorphoSys shares on the market for a total amount of EUR 0.3 billion (USD 0.3 billion). The closing conditions of the Offer, including the minimum acceptance threshold of 65 percent were fulfilled by the end of the Offer acceptance period, and the acquisition of MorphoSys closed on May 23, 2024, with the settlement payment amounting to EUR 1.7 billion (USD 1.9 billion) to the MorphoSys shareholders for their tendered shares. Subsequent to May 23, 2024, Novartis acquired additional MorphoSys outstanding shares through the Germany statutory two-week extension period of the Offer (ending on May 30, 2024) for EUR 0.3 billion (USD 0.3 billion). As a result, as at May 30, 2024, Novartis held 89.7 percent of the
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total outstanding share capital of MorphoSys. Total cash paid for the MorphoSys shares purchased by Novartis through to the end of the statutory two-week extension period of the Offer amounted to EUR 2.3 billion (USD 2.5 billion). Non-controlling interests represented 10.3 percent of MorphoSys outstanding shares amounting to USD 0.1 billion and were recognized in equity.
In June 2024, Novartis purchased outside the Offer an additional 1.7 percent of MorphoSys shares for EUR 44 million (USD 47 million). As a result, at June 30, 2024, non-controlling interests in equity were reduced by USD 17 million and Novartis held approximately 91.4 percent of outstanding MorphoSys shares and non-controlling interests represented approximately 8.6 percent of the outstanding MorphoSys shares.
On July 4, 2024, Novartis filed a public delisting purchase offer to delist the MorphoSys shares admitted to trading on regulated markets and acquire all MorphoSys AG shares and ADS not held directly by Novartis.
The purchase price allocation is preliminary pending primarily the outcome of Novartis analysis of certain clinical trial data readouts that became available prior to the closing date. The fair value of the total purchase consideration for the 89.7 percent stake was USD 2.5 billion (including cash acquired). The preliminary purchase price allocation resulted in net identifiable assets of USD 1.0 billion, consisting primarily of IPR&D intangible assets of USD 1.1 billion, financial investments and other receivables of USD 0.6 billion, marketable securities of USD 0.4 billion, cash and cash equivalents of USD 0.2 billion, financial debt to third parties of USD 0.9 billion, net deferred tax liabilities of USD 0.1 billion, and other net liabilities of USD 0.2 billion. Non-controlling interests amounted USD 0.1 billion, which were recognized at the non-controlling interest’s proportionate share of MorphoSys identifiable net assets. Goodwill amounted to USD 1.6 billion. The finalization of the preliminary purchase price allocation may lead to a change to the allocation between the identifiable assets, mainly intangible assets - IPR&D and net deferred taxes, and goodwill.
The results of operations since the date of acquisition were not material.
Significant acquisitions of businesses – 2023
Acquisition of DTx Pharma Inc.
In the second quarter of 2023, Novartis entered into an agreement to acquire all outstanding shares of DTx Pharma Inc. (DTx), a US based, pre-clinical stage biotechnology company focused on leveraging its proprietary FALCON platform to develop siRNA therapies for neuroscience indications. DTx’s lead program, DTx-1252 targets the root cause of CMT1A—the overexpression of PMP22, a protein that causes the myelin sheath that supports and insulates nerves in the peripheral nervous system to function abnormally. The transaction also includes two additional pre-clinical programs for other neuroscience indications. The transaction closed on July 14, 2023.
The purchase price consisted of a cash payment of USD 0.6 billion and potential additional milestones of up to USD 0.5 billion, which the DTx shareholders are eligible to receive upon the achievement of specified milestones.
The fair value of the total purchase consideration was USD 0.6 billion. The amount consisted of a cash payment of USD 0.6 billion and the fair value of contingent consideration of USD 30 million, which DTx shareholders are eligible to receive upon the achievement of specified milestones. The purchase price allocation resulted in net identifiable assets of USD 0.4 billion, consisting primarily of IPR&D intangible assets of USD 0.4 billion, cash of USD 0.1 billion and net deferred tax liabilities of USD 0.1 billion. Goodwill amounted to USD 0.2 billion.
The 2023 results of operations since the date of acquisition were not material.
Acquisition of Chinook Therapeutics, Inc.
On June 12, 2023, Novartis entered into an agreement to acquire all outstanding shares of Chinook Therapeutics, Inc. (Chinook Therapeutics), a US based clinical stage biopharmaceutical company with two late-stage medicines in development for rare, severe chronic kidney diseases. The acquisition closed on August 11, 2023.
The purchase price consisted of a cash payment of USD 3.2 billion and potential additional payments of up to USD 0.3 billion, which Chinook Therapeutics shareholders are eligible to receive upon the achievement of specified milestones.
The fair value of the total purchase consideration was USD 3.3 billion. The amount consisted of an upfront cash payment of USD 3.2 billion and the fair value of contingent consideration of USD 0.1 billion, which Chinook Therapeutics shareholders are eligible to receive upon achievement of specified milestones. The purchase price allocation resulted in net identifiable assets of USD 2.4 billion, consisting primarily of IPR&D intangible assets of USD 2.5 billion, net deferred tax liabilities of USD 0.4 billion and other net assets of USD 0.3 billion, including cash of USD 0.1 billion. Goodwill amounted to USD 0.9 billion.
The 2023 results of operations since the date of acquisition were not material.
Fair value of assets and liabilities arising from acquisitions of businesses
The following table presents the fair value of the assets and liabilities acquired through acquisitions of business and the total purchase consideration for the first half of 2024, and for the year ended December 31, 2023:
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(USD millions) | Jun 30, 2024 | Dec 31, 2023 | |||
Property, plant and equipment | |||||
Right-of-use assets | |||||
In-process research and development | |||||
Other intangible assets 1 | |||||
Deferred tax assets | |||||
Non-current financial and other assets | |||||
Trade receivable and financial and other current assets | |||||
Cash and cash equivalents | |||||
Deferred tax liabilities | - | - | |||
Current and non-current financial debts | - | ||||
Current and non-current lease liabilities | - | - | |||
Trade payables and other liabilities | - | - | |||
Net identifiable assets acquired | |||||
Non-controlling interests | - | ||||
Goodwill | |||||
Total purchase consideration for acquisitions of businesses | |||||
1 Other intangible assets represent technologies (scientific infrastructure). | |||||
The significant business acquisitions in the first half of 2024 were of MorphoSys and Mariana Oncology, both in the second quarter of 2024. The goodwill arising out of the first half of 2024 acquisitions is not tax deductible and it is attributable to the synergies, accounting for deferred tax liabilities on acquired assets, and the assembled workforce, and in addition for MorphoSys the relief from royalties.
In 2023, the significant business acquisitions were the acquisition of DTx Pharma and Chinook Therapeutics. There were no significant acquisitions of businesses in the first half of 2023. The goodwill arising out of these acquisitions is attributable to the synergies, the accounting for deferred tax liabilities on the acquired assets and the assembled workforce. In 2023, no goodwill was tax deductible.
Spin-off of Sandoz business – 2023
Completion of the spin-off of the Sandoz business through a dividend in kind distribution to Novartis AG shareholders
On July 18, 2023, Novartis announced that its Board of Directors had unanimously endorsed the proposed separation of the Sandoz business to create an independent company by way of a spin-off and to seek shareholder approval for the spin-off of the Sandoz business into a separately traded standalone company, following the complete structural separation of the Sandoz business into a standalone company (the Sandoz business or Sandoz Group AG) and subject to the satisfaction of certain conditions and Novartis AG shareholder approval.
At the EGM held on September 15, 2023, Novartis AG shareholders approved a special distribution by way of a dividend in kind to effect the spin-off of Sandoz Group AG, subject to the completion of certain conditions precedent to the distribution. Upon shareholder approval, the Sandoz business was reported as discontinued operations and the distribution liability was recognized at its fair value, which exceeded the carrying value of the Sandoz business net assets.
The conditions precedent to the spin-off were met and on October 3, 2023 the spin-off of the Sandoz business was effected by way of a distribution of a dividend in kind of Sandoz Group AG shares to Novartis AG shareholders and American Depositary Receipt (ADR) holders (the Distribution). Through the Distribution, each Novartis AG shareholder received 1 Sandoz Group AG share for every 5 Novartis AG shares and each Novartis ADR holder received 1 Sandoz ADR for every 5 Novartis ADR that they held at the close of business on October 3, 2023. As of October 4, 2023, the shares of Sandoz Group AG have been listed on the SIX Swiss Exchange (SIX) under the stock symbol “SDZ”.
On September 18, 2023, the Sandoz business entered into financing arrangements with a group of banks under which on September 28, 2023, it borrowed a total amount of USD 3.3 billion. These borrowings consisted of a bridge loan in EUR (EUR 2.4 billion) and term loans in EUR (EUR 0.2 billion) and USD (USD 0.5 billion). In addition, the Sandoz business borrowed approximately USD 0.4 billion under a number of local bilateral facilities in different countries. This resulted in a total gross debt of USD 3.7 billion. These outstanding borrowings of the Sandoz business legal entities were recognized in the September 30, 2023 consolidated balance sheet within Liabilities related to discontinued operations and within financing activities cash flows from discontinued operations. Prior to the Distribution on October 3, 2023, Sandoz business legal entities paid approximately USD 3.3 billion in cash to Novartis and its affiliates through a series of intercompany transactions.
At the Distribution date on October 3, 2023, the dividend in kind distribution liability to effect the Distribution (spin-off) of the Sandoz business amounted to USD 14.0 billion, measured by reference to the October 4, 2023 opening Sandoz Group AG share price and applying a control premium. The dividend in kind distribution liability was recorded as a reduction to equity (retained earnings) and remained in excess of the then carrying value of the Sandoz business net assets, which amounted to USD 8.6 billion.
Certain consolidated foundations own Novartis AG dividend-bearing shares that restricts their availability for use by Novartis. These Novartis AG shares are accounted for as treasury shares. Through the Distribution, these foundations received Sandoz Group AG shares representing an approximate 4.31 % equity interest in Sandoz Group AG. Upon the loss of control of Sandoz Group AG through the Distribution on October 3, 2023, the financial investment in Sandoz Group AG was recognized at its initial fair value based on the opening traded share price of Sandoz Group AG on October 4, 2023 (a Level 1 hierarchy valuation). At initial recognition, on October 4, 2023, the Sandoz Group AG financial investment had a fair value of USD 0.5 billion, and was reported in the fourth quarter of 2023 on the consolidated balance sheet as a financial asset. Management has designated this investment at fair value through other comprehensive income.
The total non-taxable, non-cash gain recognized at the Distribution date of the spin-off of the Sandoz
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business amounted to USD 5.9 billion, which consists of:
(USD millions) | Oct 3, 2023 | ||
Net assets derecognized | - | ||
Derecognition of distribution liability | |||
Difference between net assets and distribution liability | |||
Recognition of Sandoz Group AG shares obtained through consolidated foundations | |||
Currency translation gains recycled into the consolidated income statement | |||
Transaction costs and other items recognized in the consolidated income statement | - | ||
Gain on distribution of Sandoz Group AG to Novartis AG shareholders | |||
For additional disclosures on discontinued operations, refer to Note 11.
4. Summary of equity attributable to Novartis AG shareholders
Number of outstanding shares (in millions) | Issued share capital and reserves attributable to Novartis AG shareholders (in USD millions) | ||||||||||
Note | 2024 | 2023 | H1 2024 | H1 2023 | |||||||
Balance at beginning of year | |||||||||||
Shares acquired to be canceled | - | - | - | - | |||||||
Other share purchases | - | - | - | - | |||||||
Exercise of options and employee transactions | - | ||||||||||
Equity-based compensation | |||||||||||
Shares delivered to Sandoz employees as a result of the Sandoz spin-off | |||||||||||
Taxes on treasury share transactions | |||||||||||
Dividends | 4.1 | - | - | ||||||||
Net income of the period attributable to shareholders of Novartis AG | |||||||||||
Other comprehensive income attributable to shareholders of Novartis AG | - | ||||||||||
Impact of change in ownership of consolidated entities | - | ||||||||||
Other movements | 4.3 | ||||||||||
Balance at June 30 | |||||||||||
4.1. The gross dividend to shareholders of Novartis AG amounted to USD 7.6 billion. The net dividend payment to Novartis AG shareholders paid in March 2024 amounted to USD 5.2 billion. The USD 2.4 billion Swiss withholding tax on the gross dividend was paid at its due date in April 2024.
4.2. In December 2021, Novartis entered into an irrevocable, non-discretionary arrangement with a bank to repurchase Novartis shares on the second trading line under its up-to USD 15.0 billion share buyback. The arrangement was updated in July 2022, December 2022, and May 2023, and concluded in June 2023.
In June 2023, Novartis entered into an irrevocable, non-discretionary arrangement with a bank to repurchase 11.7 million Novartis shares on the second trading line, which concluded in July 2023.
In July 2023, Novartis entered into a new irrevocable, non-discretionary arrangement with a bank to repurchase Novartis shares on the second trading line under its new up-to USD 15.0 billion share buyback.
In June 2024, Novartis amended the arrangement to repurchase an additional 8.7 million Novartis shares on the second trading line to mitigate deliveries under employee participation programs. Novartis is able to cancel this arrangement but may be subject to a 90-day waiting period under certain conditions. As of June 30, 2024, and December 31, 2023, these waiting period conditions were not applicable and as a result, there was no requirement to record a liability under this arrangement as of June 30, 2024, and December 31, 2023.
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4.3. Other movements include, for subsidiaries in hyper-inflationary economies, the impact of the application of IAS Standards 29 “Financial Reporting in Hyperinflationary Economies.”
5. Financial instruments
Fair value by hierarchy
The following table illustrates the three hierarchical levels for valuing financial instruments at fair value as of June 30, 2024, and December 31, 2023. For additional information on the hierarchies and other matters, please refer to the Consolidated Financial Statements in the 2023 Annual Report, published on January 31, 2024.
Level 1 | Level 2 | Level 3 | Total | ||||||||||||||
(USD millions) | Jun 30, 2024 | Dec 31, 2023 | Jun 30, 2024 | Dec 31, 2023 | Jun 30, 2024 | Dec 31, 2023 | Jun 30, 2024 | Dec 31, 2023 | |||||||||
Financial assets | |||||||||||||||||
Cash and cash equivalents | |||||||||||||||||
Debt securities | |||||||||||||||||
Total cash and cash equivalents at fair value | |||||||||||||||||
Marketable securities | |||||||||||||||||
Fund investments | |||||||||||||||||
Derivative financial instruments | |||||||||||||||||
Total marketable securities and derivative financial instruments at fair value | |||||||||||||||||
Current contingent consideration receivables | |||||||||||||||||
Current fund investments and equity securities | |||||||||||||||||
Long-term financial investments | |||||||||||||||||
Debt and equity securities | |||||||||||||||||
Fund investments | |||||||||||||||||
Non-current contingent consideration receivables | |||||||||||||||||
Total long-term financial investments at fair value | |||||||||||||||||
Associated companies at fair value through profit or loss | |||||||||||||||||
Financial liabilities | |||||||||||||||||
Current contingent consideration liabilities | - | - | - | - | |||||||||||||
Current other financial liabilities | - | - | |||||||||||||||
Derivative financial instruments | - | - | - | - | |||||||||||||
Total current financial liabilities at fair value | - | - | - | - | - | - | |||||||||||
Non-current contingent consideration liabilities | - | - | - | - | |||||||||||||
In the first half of 2024, there was one transfer of equity securities from Level 3 to Level 1 for USD 3 million due to Initial Public Offering.
The fair value of straight bonds amounted to USD 19.4 billion at June 30, 2024 (USD 19.2 billion at December 31, 2023) compared with the carrying amount of USD 21.1 billion at June 30, 2024 (USD 20.6 billion at December 31, 2023). For all other financial assets and liabilities, the carrying amount is a reasonable approximation of the fair value.
The carrying amount of financial assets included in the line total long-term financial investments at fair value of USD 1.6 billion at June 30, 2024 (USD 2.2 billion at December 31, 2023) is included in the line “Financial assets” of the consolidated balance sheets. The carrying amount of financial assets included in the line current fund investments and equity securities of USD 56 million at June 30, 2024 (USD 125 million at December 31, 2023) is included in the line “Other current assets” of the consolidated balance sheets. The carrying amount of non-current contingent consideration liabilities of USD 0.5 billion at June 30, 2024 (USD 0.4 billion at December 31, 2023) is included in the line “Provisions and other non-current liabilities” of the consolidated balance sheets.
In the second quarter of 2024, consolidated foundations investments in Sandoz AG shares with a fair value of USD 449 million were sold, and the USD 144 million gain on disposal was transferred from other
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comprehensive income to retained earnings. The fair value of the investment in Sandoz Group AG amounted to USD 61 million at June 30, 2024 (December 31, 2023: USD 595 million) and was sold in the first days of July 2024.
The Company’s exposure to financial risks has not changed significantly during the period and there have been no major changes to the risk management department or in any risk management policies.
6. Details to the consolidated statements of cash flows
6.1. Non-cash items and other adjustments from continuing operations
The following table shows the reversal of non-cash items and other adjustments in the consolidated statements of cash flows.
(USD millions) | Q2 2024 | Q2 2023 | |||
Depreciation, amortization and impairments on: | |||||
Property, plant and equipment | |||||
Right-of-use assets | |||||
Intangible assets | |||||
Financial assets 1 | - | ||||
Change in provisions and other non-current liabilities | - | ||||
Losses on disposal on property, plant and equipment; intangible assets; other non-current assets; and other adjustments on financial assets and other non-current assets, net | |||||
Equity-settled compensation expense | |||||
Loss from associated companies | |||||
Income taxes | |||||
Net financial expense | |||||
Other | - | ||||
Total | |||||
1 Includes fair value changes | |||||
(USD millions) | H1 2024 | H1 2023 | |||
Depreciation, amortization and impairments on: | |||||
Property, plant and equipment | |||||
Right-of-use assets | |||||
Intangible assets | |||||
Financial assets 1 | |||||
Change in provisions and other non-current liabilities | |||||
Losses/(gains) on disposal on property, plant and equipment; intangible assets; other non-current assets; and other adjustments on financial assets and other non-current assets, net | - | ||||
Equity-settled compensation expense | |||||
Loss from associated companies | |||||
Income taxes | |||||
Net financial expense | |||||
Other | - | ||||
Total | |||||
1 Includes fair value changes | |||||
31
6.2. Total amount of income taxes paid
In the first half of 2024, the total amount of income taxes paid by continuing operations was USD 1 049 million (Q2 2024: USD 473 million), and nil by discontinued operations (Q2 2024: nil ). In the first half of 2024, the total amount of income taxes paid by the Company was USD 1 049 million (Q2 2024: USD 473 million).
In the first half of 2023, the total amount of income taxes paid by continuing operations was USD 1 268 million (Q2 2023: USD 973 million), and by discontinued operations was USD 110 million (Q2 2023: USD 57 million), which was included within “Net cash flows from operating activities from discontinued operations”. In the first half of 2023, the total amount of income taxes paid by the Company was USD 1 378 million (Q2 2023: USD 1 030 million).
6.3. Cash flows from changes in working capital and other operating items included in the net cash flows from operating activities from continuing operations
(USD millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |||||
Increase in inventories | - | - | - | - | |||||
Increase in trade receivables | - | - | - | - | |||||
(Decrease)/increase in trade payables | - | - | |||||||
Change in other current and non-current assets | - | - | - | ||||||
Change in other current liabilities | |||||||||
Total | - | - | |||||||
6.4. Cash flows arising from acquisitions and divestments of businesses, net from continuing operations
The following table is a summary of the cash flow impact of acquisitions and divestments of businesses.
(USD millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |||||
Total purchase consideration for acquisitions of businesses | - | - | |||||||
Acquired cash and cash equivalents | |||||||||
Contingent consideration payable, net | - | ||||||||
Payments (incl. prepayments), deferred consideration and other adjustments, net | - | - | |||||||
Cash flows used for acquisitions of businesses 1 | - | - | - | - | |||||
Cash flows (used for)/from divestments of businesses, net 2 | - | - | |||||||
Cash flows used for acquisitions and divestments of businesses, net | - | - | - | - | |||||
1 The second quarter and the first half of 2024 include the payments for purchases of MorphoSys shares by Novartis during the Offer period totaling EUR | |||||||||
2 In the first half of 2024, USD | |||||||||
In the first half of 2023, USD | |||||||||
Note 3 provides further information regarding significant acquisitions and divestments of businesses. All acquisitions were for cash.
32
7. Legal proceedings update
A number of Novartis companies are, and will likely continue to be, subject to various legal proceedings, including litigations, arbitrations and governmental investigations, that arise from time to time. Legal proceedings are inherently unpredictable. As a result, the Company may become subject to substantial liabilities that may not be covered by insurance and may in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations or cash flow. Note 21 to the Consolidated Financial Statements in our 2023 Annual Report and 2023 Form 20-F contains a summary as of the date of these reports of significant legal proceedings to which Novartis or its subsidiaries were a party. The following is a summary as of July 17, 2024, of significant developments in those proceedings, as well as any new significant proceedings commenced since the date of the 2023 Annual Report and 2023 Form 20-F.
Investigations and related litigations
340B Drug Pricing Program investigations
In 2021, Novartis Pharmaceuticals Corporation (NPC) received a notification from the US Health Resources and Services Administration (HRSA) which stated that HRSA believes NPC’s contract pharmacy policy violates the 340B statute, and threatened potential enforcement action. NPC subsequently sued HRSA in the U.S. District Court (USDC) for the District of Columbia to challenge HRSA’s determination and to enjoin HRSA from taking action with respect to NPC’s contract pharmacy policy. HRSA then referred the matter regarding NPC’s contract pharmacy policy to the Office of Inspector General of the US Department of Health and Human Services, which could result in the imposition of civil monetary penalties on NPC. The USDC issued a decision rejecting HRSA’s interpretation of the 340B statute, vacating the violation notification and remanding the matter to HRSA. HRSA appealed, and the United States Court of Appeals for the DC Circuit heard argument on the case in 2022. In May 2024, the Court of Appeals for the DC Circuit issued a decision rejecting HRSA’s interpretation of the 340B statute and upholding NPC’s current contract pharmacy policy. HRSA has 90 days from the decision to determine whether to seek review from the US Supreme Court or the decision will be final. In addition, NPC has brought litigation challenging a number of state statutes purporting to add further requirements under the 340B program as to the use of contract pharmacies in those states.
In addition to the matters described above, there have been other non-material developments in the other legal matters described in Note 21 to the Consolidated Financial Statements contained in our 2023 Annual Report and 2023 Form 20-F.
Novartis believes that its total provisions for investigations, product liability, arbitration and other legal matters are adequate based upon currently available information. However, given the inherent difficulties in estimating liabilities, there can be no assurance that additional liabilities and costs will not be incurred beyond the amounts provided.
8. Operating segment
Following the September 15, 2023, shareholders’ approval of the spin-off of the Sandoz business, the Company reported its consolidated financial statements for the current and prior years as “continuing operations” and “discontinued operations” (see Note 1 and Note 3).
Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business (previously the Innovative Medicines Division) and the continuing corporate activities.
Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars business (the Sandoz Division) and certain corporate activities attributable to Sandoz’s business, as well as certain expenses related to the spin-off. Included in fourth quarter of 2023 is also the IFRS Accounting Standards non-cash, non-taxable net gain on the Distribution of Sandoz Group AG to Novartis AG shareholders. For further details and disclosures on discontinued operations, refer to Note 3 and Note 11.
The Company’s continuing operations is engaged in the research, development, manufacturing, distribution, and commercialization and sale of innovative medicines, with a focus on the core therapeutic areas: cardiovascular, renal and metabolic; immunology; neuroscience; oncology; and established brands.
Following the spin-off of the Sandoz business, on October 3, 2023, Novartis operates as a single global operating segment innovative medicines company that is engaged in the research, development, manufacturing, distribution and commercialization and sale of innovative medicines. The Company’s research, development, manufacturing and supply of products and functional activities are managed globally on a vertically integrated basis. Commercial efforts that coordinate marketing, sales and distribution of these products are organized by geographic region, therapeutic area and established brands.
33
The Executive Committee of Novartis (ECN), chaired by the CEO, is the governance body responsible for allocating resources and assessing the business performance of the operating segment of the Company on a global basis and is the chief operating decision-maker (CODM) for the Company.
The determination of a single operating segment is consistent with the financial information regularly reviewed by the CODM for purposes of assessing performance and allocating resources.
See Note 9 for revenues and geographic information disclosures.
9. Revenues and geographic information
Net sales
Net sales information
Net sales from continuing operations comprise the following:
(USD millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |||||
Net sales to third parties from continuing operations | |||||||||
Sales to discontinued operations | |||||||||
Net sales from continuing operations | |||||||||
Net sales from continuing operations by region1
Second quarter
Q2 2024 USD m | Q2 2023 USD m | % change USD | % change cc2 | Q2 2024 % of total | Q2 2023 % of total | ||||||||
US | |||||||||||||
Europe | |||||||||||||
Asia/Africa/Australasia | |||||||||||||
Canada and Latin America | |||||||||||||
Total | |||||||||||||
Of which in established markets | |||||||||||||
Of which in emerging growth markets | |||||||||||||
1 Net sales from continuing operations by location of customer. Emerging growth markets comprise all markets other than the established markets of the US, Canada, Western Europe, Japan, Australia and New Zealand. Novartis definition of Western Europe includes Austria, Belgium, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. | |||||||||||||
2 Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures used by Novartis can be found starting on page 43. | |||||||||||||
First half
H1 2024 USD m | H1 2023 USD m | % change USD | % change cc2 | H1 2024 % of total | H1 2023 % of total | ||||||||
US | |||||||||||||
Europe | |||||||||||||
Asia/Africa/Australasia | |||||||||||||
Canada and Latin America | |||||||||||||
Total | |||||||||||||
Of which in established markets | |||||||||||||
Of which in emerging growth markets | |||||||||||||
1 Net sales from continuing operations by location of customer. Emerging growth markets comprise all markets other than the established markets of the US, Canada, Western Europe, Japan, Australia and New Zealand. Novartis definition of Western Europe includes Austria, Belgium, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom. | |||||||||||||
2 Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures used by Novartis can be found starting on page 43. | |||||||||||||
34
Net sales from continuing operations by core therapeutic area and established brands
Second quarter
Q2 2024 | Q2 2023 | % change | % change | ||||||
USD m | USD m1 | USD | cc2 | ||||||
Cardiovascular, renal and metabolic | |||||||||
Entresto | |||||||||
Leqvio | |||||||||
Total cardiovascular, renal and metabolic | |||||||||
Immunology | |||||||||
Cosentyx | |||||||||
Xolair 3 | |||||||||
Ilaris | |||||||||
Other | nm | nm | |||||||
Total immunology | |||||||||
Neuroscience | |||||||||
Kesimpta | |||||||||
Zolgensma | |||||||||
Aimovig | |||||||||
Total neuroscience | |||||||||
Oncology | |||||||||
Kisqali | |||||||||
Promacta/Revolade | - | - | |||||||
Tafinlar + Mekinist | |||||||||
Jakavi | |||||||||
Tasigna | - | - | |||||||
Pluvicto | |||||||||
Lutathera | |||||||||
Scemblix | |||||||||
Kymriah | - | - | |||||||
Piqray/Vijoice | - | - | |||||||
Fabhalta | nm | nm | |||||||
Total oncology | |||||||||
Total promoted brands | |||||||||
Established brands | |||||||||
Sandostatin Group | - | - | |||||||
Lucentis | - | - | |||||||
Exforge Group | - | ||||||||
Gilenya | - | - | |||||||
Diovan Group | |||||||||
Galvus Group | - | - | |||||||
Contract manufacturing | - | - | |||||||
Other | - | - | |||||||
Total established brands | - | - | |||||||
Total net sales from continuing operations | |||||||||
1 Reclassified to conform with 2024 presentation of brands by therapeutic area and established brands. | |||||||||
2 Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures used by Novartis can be found starting on page 43. | |||||||||
3 Net sales from continuing operations reflect Xolair sales for all indications. | |||||||||
nm = not meaningful | |||||||||
35
Net sales from continuing operations by core therapeutic area and established brands
First half
H1 2024 | H1 2023 | % change | % change | ||||||
USD m | USD m1 | USD | cc2 | ||||||
Cardiovascular, renal and metabolic | |||||||||
Entresto | |||||||||
Leqvio | |||||||||
Total cardiovascular, renal and metabolic | |||||||||
Immunology | |||||||||
Cosentyx | |||||||||
Xolair 3 | |||||||||
Ilaris | |||||||||
Other | nm | nm | |||||||
Total immunology | |||||||||
Neuroscience | |||||||||
Kesimpta | |||||||||
Zolgensma | |||||||||
Aimovig | |||||||||
Other | nm | nm | |||||||
Total neuroscience | |||||||||
Oncology | |||||||||
Kisqali | |||||||||
Promacta/Revolade | - | - | |||||||
Tafinlar + Mekinist | |||||||||
Jakavi | |||||||||
Tasigna | - | - | |||||||
Pluvicto | |||||||||
Lutathera | |||||||||
Scemblix | |||||||||
Kymriah | - | - | |||||||
Piqray/Vijoice | - | - | |||||||
Fabhalta | nm | nm | |||||||
Other | nm | nm | |||||||
Total oncology | |||||||||
Total promoted brands | |||||||||
Established brands | |||||||||
Sandostatin Group | |||||||||
Lucentis | - | - | |||||||
Exforge Group | |||||||||
Gilenya | - | - | |||||||
Diovan Group | - | ||||||||
Galvus Group | - | - | |||||||
Contract manufacturing | - | - | |||||||
Other | - | - | |||||||
Total established brands | - | - | |||||||
Total net sales from continuing operations | |||||||||
1 Reclassified to conform with 2024 presentation of brands by therapeutic area and established brands. | |||||||||
2 Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures used by Novartis can be found starting on page 43. | |||||||||
3 Net sales from continuing operations reflect Xolair sales for all indications. | |||||||||
nm = not meaningful | |||||||||
36
Net sales from continuing operations of the top 20 brands in 2024
Second quarter
US | Rest of world | Total | |||||||||||||||||||
Brands | Brand classification by therapeutic area or established brands | Key indications | USD m | % change USD/cc1 | USD m | % change USD | % change cc1 | USD m | % change USD | % change cc1 | |||||||||||
Entresto | Cardiovascular, renal and metabolic | Chronic heart failure, hypertension | |||||||||||||||||||
Cosentyx | Immunology | Psoriasis (PsO), ankylosing spondylitis (AS), psoriatic arthritis (PsA), non-radiographic axial spondyloarthritis (nr-axSPA), hidradenitis suppurativa (HS) | |||||||||||||||||||
Kesimpta | Neuroscience | Relapsing-remitting multiple sclerosis (RRMS) | |||||||||||||||||||
Kisqali | Oncology | HR+/HER2- metastatic breast cancer | |||||||||||||||||||
Promacta/Revolade | Oncology | Immune thrombocytopenia (ITP), severe aplastic anemia (SAA) | - | - | - | - | |||||||||||||||
Tafinlar + Mekinist | Oncology | BRAF V600+ metastatic adjuvant melanoma, advanced non-small cell lung cancer (NSCLC), tumor agnostic with BRAF mutation indication | |||||||||||||||||||
Jakavi | Oncology | Myelofibrosis (MF), polycytomia vera (PV), graft-versus-host disease (GvHD) | |||||||||||||||||||
Tasigna | Oncology | Chronic myeloid leukemia (CML) | - | - | - | - | - | ||||||||||||||
Xolair 2 | Immunology | Severe allergic asthma (SAA), chronic spontaneous urticaria (CSU), nasal polyps | |||||||||||||||||||
Ilaris | Immunology | Auto-inflammatory (CAPS, TRAPS, HIDS/MKD, FMF, SJIA, AOSD, gout) | |||||||||||||||||||
Sandostatin Group | Established brands | Carcinoid tumors, acromegaly | - | - | - | - | |||||||||||||||
Pluvicto | Oncology | PSMA-positive mCRPC patients post-ARPI, post-Taxane | |||||||||||||||||||
Zolgensma | Neuroscience | Spinal muscular atrophy (SMA) | - | - | |||||||||||||||||
Lucentis | Established brands | Age-related macular degeneration (AMD), diabetic macular edema (DME), retinal vein occlusion (RVO) | - | - | - | - | |||||||||||||||
Exforge Group | Established brands | Hypertension | - | - | - | ||||||||||||||||
Lutathera | Oncology | GEP-NETs gastroenteropancreatic neuroendocrine tumors | |||||||||||||||||||
Leqvio | Cardiovascular, renal and metabolic | Atherosclerotic cardiovascular disease (ASCVD) | |||||||||||||||||||
Gilenya | Established brands | Relapsing multiple sclerosis (RMS) | - | - | - | - | - | ||||||||||||||
Scemblix | Oncology | Philadelphia chromosome- positive chronic myeloid leukemia (Ph+ CML) | |||||||||||||||||||
Diovan Group | Established brands | Hypertension | - | ||||||||||||||||||
Top 20 brands total | |||||||||||||||||||||
Rest of portfolio | - | - | - | - | - | ||||||||||||||||
Total net sales from continuing operations | |||||||||||||||||||||
1 Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures used by Novartis can be found starting on page 43. | |||||||||||||||||||||
2 Net sales from continuing operations reflect Xolair sales for all indications. | |||||||||||||||||||||
37
Net sales from continuing operations of the top 20 brands in 2024
First half
US | Rest of world | Total | |||||||||||||||||||
Brands | Brand classification by therapeutic area or established brands | Key indications | USD m | % change USD/cc1 | USD m | % change USD | % change cc1 | USD m | % change USD | % change cc1 | |||||||||||
Entresto | Cardiovascular, renal and metabolic | Chronic heart failure, hypertension | |||||||||||||||||||
Cosentyx | Immunology | Psoriasis (PsO), ankylosing spondylitis (AS), psoriatic arthritis (PsA), non-radiographic axial spondyloarthritis (nr-axSPA), hidradenitis suppurativa (HS) | |||||||||||||||||||
Kesimpta | Neuroscience | Relapsing-remitting multiple sclerosis (RRMS) | |||||||||||||||||||
Kisqali | Oncology | HR+/HER2- metastatic breast cancer | |||||||||||||||||||
Promacta/Revolade | Oncology | Immune thrombocytopenia (ITP), severe aplastic anemia (SAA) | - | - | - | - | - | ||||||||||||||
Tafinlar + Mekinist | Oncology | BRAF V600+ metastatic adjuvant melanoma, advanced non-small cell lung cancer (NSCLC), tumor agnostic with BRAF mutation indication | - | ||||||||||||||||||
Jakavi | Oncology | Myelofibrosis (MF), polycytomia vera (PV), graft-versus-host disease (GvHD) | |||||||||||||||||||
Tasigna | Oncology | Chronic myeloid leukemia (CML) | - | - | - | - | - | ||||||||||||||
Xolair 2 | Immunology | Severe allergic asthma (SAA), chronic spontaneous urticaria (CSU), nasal polyps | |||||||||||||||||||
Ilaris | Immunology | Auto-inflammatory (CAPS, TRAPS, HIDS/MKD, FMF, SJIA, AOSD, gout) | |||||||||||||||||||
Sandostatin Group | Established brands | Carcinoid tumors, acromegaly | - | ||||||||||||||||||
Pluvicto | Oncology | PSMA-positive mCRPC patients post-ARPI, post-Taxane | nm | nm | |||||||||||||||||
Zolgensma | Neuroscience | Spinal muscular atrophy (SMA) | - | - | |||||||||||||||||
Lucentis | Established brands | Age-related macular degeneration (AMD), diabetic macular edema (DME), retinal vein occlusion (RVO) | - | - | - | - | |||||||||||||||
Exforge Group | Established brands | Hypertension | - | ||||||||||||||||||
Lutathera | Oncology | GEP-NETs gastroenteropancreatic neuroendocrine tumors | |||||||||||||||||||
Leqvio | Cardiovascular, renal and metabolic | Atherosclerotic cardiovascular disease (ASCVD) | |||||||||||||||||||
Gilenya | Established brands | Relapsing multiple sclerosis (RMS) | - | - | - | - | - | ||||||||||||||
Scemblix | Oncology | Philadelphia chromosome- positive chronic myeloid leukemia (Ph+ CML) | |||||||||||||||||||
Diovan Group | Established brands | Hypertension | - | - | |||||||||||||||||
Top 20 brands total | |||||||||||||||||||||
Rest of portfolio | - | - | - | - | - | ||||||||||||||||
Total net sales from continuing operations | |||||||||||||||||||||
1 Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures used by Novartis can be found starting on page 43. | |||||||||||||||||||||
2 Net sales from continuing operations reflect Xolair sales for all indications. | |||||||||||||||||||||
nm = not meaningful | |||||||||||||||||||||
38
Other revenues
(USD millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |||||
Profit sharing income | |||||||||
Royalty income | |||||||||
Milestone income | |||||||||
Other 1 | |||||||||
Total other revenues | |||||||||
1 Other includes revenue from activities such as manufacturing or other services rendered, to the extent such revenue is not recorded under net sales. | |||||||||
10. Other interim disclosures
Property, plant and equipment, right-of-use assets and intangible assets
The following table shows additional disclosures related to property, plant and equipment, right-of-use assets and intangible assets for continuing operations:
(USD millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |||||
Property, plant and equipment impairment charges | - | - | - | - | |||||
Property, plant and equipment impairment reversal | |||||||||
Property, plant and equipment depreciation charge | - | - | - | - | |||||
Right-of-use assets depreciation charge | - | - | - | - | |||||
Intangible assets impairment charges 1 | - | - | - | - | |||||
Intangible assets amortization charge | - | - | - | - | |||||
1 The first half of 2023 includes an impairment of USD | |||||||||
In the first half of 2024 and 2023, there were no impairment charges and no reversals of impairment charges on right-of-use assets, as well as no reversals of impairment charges on intangible assets.
The following table shows the additions to property, plant and equipment, right-of-use assets and intangible assets for continuing operations excluding the impact of business acquisitions, which are disclosed in Note 3:
(USD millions) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |||||
Additions to property, plant and equipment | |||||||||
Additions to right-of-use assets | |||||||||
Additions to intangible assets other than goodwill | |||||||||
Financial debt
Novartis issued the following straight bonds during the second quarter of 2024:
Coupon | Currency | Notional amount (millions) | Maturity year | Issuer | Issue price | Carrying value June 30, 2024 (USD millions) | |||||||
39
In the second quarter of 2024, Novartis repaid the 3.4 % coupon bond with a notional amount of USD 2.15 billion issued in 2014 by Novartis Capital Corporation, USA , in accordance with its terms.
In May 2024, Novartis replaced its existing USD 6.0 billion credit facility with a syndicate of banks (which was undrawn at its replacement date and December 31, 2023 and had a maturity date of September 2025) with a new USD 6.0 billion credit facility with a syndicate of banks. This credit facility is intended to be used as a backstop for the US commercial paper program. This facility matures in May 2029, and was undrawn as at June 30, 2024.
Research and development commitments
The Company has entered into long-term research and development agreements with various institutions related to intangible assets. These agreements provide for potential milestone payments by Novartis, which are dependent on successful clinical development, or meeting specified sales targets, or other conditions that are specified in the agreements.
As of June 30, 2024, the amount and estimated timing of the Company’s commitments to make payments under those agreements, which are shown without risk adjustment and on an undiscounted basis, were as follows:
(USD millions) | 2024 | ||
2024 | |||
2025 | |||
2026 | |||
2027 | |||
2028 | |||
2029 | |||
Thereafter | |||
Total | |||
Significant pending transaction
In July 2024, Novartis entered into a long-term research and development agreement which did not close as of July 17, 2024. This agreement provides for potential milestones payments by Novartis that may be capitalized and royalties. Based on their estimated timing, the payments for this transaction are expected to amount to USD 0.1 billion in 2024, USD 0.1 billion in 2026, USD 0.1 billion in 2028, USD 0.1 billion in 2029 and USD 1.0 billion thereafter.
11. Discontinued operations
Discontinued operations included the operational results from the Sandoz generic pharmaceuticals and biosimilars division and certain corporate activities attributable to the Sandoz business, as well as certain other expenses related to the spin-off (refer to Note 3 for further details).
The Sandoz business operated in the off-patent medicines segment and specialized in the development, manufacturing, and marketing of generic pharmaceuticals and biosimilars. The Sandoz business was organized globally into two franchises: Generics and Biosimilars.
As the Sandoz business spin-off was completed on October 3, 2023, there were no operating results in the first half of 2024.
40
Net income from discontinued operations
(USD millions unless indicated otherwise) | Q2 2023 | H1 2023 | |||
Net sales to third parties from discontinued operations | |||||
Sales to continuing operations | |||||
Net sales from discontinued operations | |||||
Other revenues | |||||
Cost from goods sold | - | - | |||
Gross profit from discontinued operations | |||||
Selling, general and administration | - | - | |||
Research and development | - | - | |||
Other income | |||||
Other expense | - | - | |||
Operating income from discontinued operations | |||||
Income from associated companies | |||||
Interest expense | - | - | |||
Other financial income and expense | - | - | |||
Income before taxes from discontinued operations | |||||
Income taxes 1 | - | - | |||
Net income from discontinued operations | |||||
1 The tax rate in the second quarter of 2023 and in the first half of 2023 was impacted by non-recurring items such as net increases in uncertain tax positions of the Sandoz business and non-deductible expenses recognized related to a legal matter. Excluding these impacts, the tax rate would have been | |||||
Supplemental disclosures related to discontinued operations
Net income from discontinued operations
Included in net income from discontinued operations were:
(USD millions unless indicated otherwise) | Q2 2023 | H1 2023 | |||
Interest income | |||||
Depreciation of property, plant and equipment | - | - | |||
Depreciation of right-of-use assets | - | - | |||
Amortization of intangible assets | - | - | |||
Impairment charges on property, plant and equipment | - | - | |||
Impairment charges on intangible assets | - | - | |||
Impairment reversals of property, plant and equipment | |||||
Additions to restructuring provisions | - | - | |||
Equity-based compensation expense related to Novartis equity-based participation plans | - | - | |||
In 2023 there were no impairment charges and no reversals of impairment charges on right-of-use assets and no reversals of impairment charges on intangible assets of discontinued operations.
Other information
The following table shows for discontinued operations the additions to property, plant and equipment, right-of-use assets and intangible assets:
(USD millions) | Q2 2023 | H1 2023 | |||
Additions to property, plant and equipment | |||||
Additions to right-of-use assets | |||||
Additions to goodwill and intangible assets | |||||
For additional information related to the October 3, 2023 distribution (spin-off) of the Sandoz business to Novartis AG shareholders, effected through a dividend in kind distribution of Sandoz Group AG shares to Novartis AG shareholders and ADR holders, refer to Note 3.
41
12. Events subsequent to the June 30, 2024, consolidated balance sheet
Significant pending transaction
On July 4, 2024, Novartis filed a public delisting purchase offer to delist the MorphoSys shares admitted to trading on regulated markets and acquire all MorphoSys AG shares and ADS not held directly by Novartis. For disclosure of the MorphoSys business acquisition, see Note 3.
In July 2024, Novartis entered into a long-term research and development agreement, which did not close as of July 17, 2024. See Note 10 for further information.
42
Supplementary information (unaudited)
Non-IFRS measures as defined by Novartis
Novartis uses certain non-IFRS Accounting Standards metrics when measuring performance, especially when measuring current-year results against prior periods, including core results, constant currencies and free cash flow. These are referred to by Novartis as non-IFRS measures.
Despite the use of these measures by management in setting goals and measuring the Company’s performance, these are non-IFRS measures that have no standardized meaning prescribed by IFRS Accounting Standards. As a result, such measures have limits in their usefulness to investors.
Because of their non-standardized definitions, the non-IFRS measures (unlike IFRS Accounting Standards measures) may not be comparable to the calculation of similar measures of other companies. These non-IFRS measures are presented solely to permit investors to more fully understand how the Company’s management assesses underlying performance. These non-IFRS measures are not, and should not be viewed as, a substitute for IFRS Accounting Standards measures and should be viewed in conjunction with the consolidated financial statements presented in accordance with IFRS Accounting Standards.
As an internal measure of Company performance, these non-IFRS measures have limitations, and the Company’s performance management process is not solely restricted to these metrics.
Core results
The Company’s core results – including core operating income, core net income and core earnings per share – exclude fully the amortization and impairment charges of intangible assets, excluding software, net gains and losses on fund investments and equity securities valued at fair value through profit and loss, impact of IAS Standards 29 “Financial Reporting in Hyperinflationary Economies” to other financial income and expense, and certain acquisition- and divestment-related items. The following items that exceed a threshold of USD 25 million are also excluded: integration- and divestment-related income and expenses; divestment gains and losses; restructuring charges/releases and related items; legal-related items; impairments of property, plant and equipment, software, and financial assets, and income and expense items that management deems exceptional and that are or are expected to accumulate within the year to be over a USD 25 million threshold.
Novartis believes that investor understanding of the Company’s performance is enhanced by disclosing core measures of performance since, core measures exclude items that can vary significantly from year to year, they enable better comparison of business performance across years. For this same reason, Novartis uses these core measures in addition to IFRS Accounting Standards measures and other measures as important factors in assessing the Company’s performance.
The following are examples of how these core measures are used:
• In addition to monthly reports containing financial information prepared under IFRS Accounting Standards, senior management receives a monthly analysis incorporating these non-IFRS core measures.
• Annual budgets are prepared for both IFRS Accounting Standards and non-IFRS core measures.
As an internal measure of Company performance, the core results measures have limitations, and the Company’s performance management process is not solely restricted to these metrics. A limitation of the core results measures is that they provide a view of the Company’s operations without including all events during a period, such as the effects of an acquisition, divestment, or amortization/impairments of purchased intangible assets, impairments to property, plant and equipment and restructurings and related items.
Constant currencies
Changes in the relative values of non-US currencies to the US dollar can affect the Company’s financial results and financial position. To provide additional information that may be useful to investors, including changes in sales volume, we present information about our net sales and various values relating to operating and net income that are adjusted for such foreign currency effects.
Constant currency calculations have the goal of eliminating two exchange rate effects so that an estimate can be made of underlying changes in the consolidated income statement excluding the impact of fluctuations in exchanges rates:
• The impact of translating the income statements of consolidated entities from their non-USD functional currencies to USD
• The impact of exchange rate movements on the major transactions of consolidated entities performed in currencies other than their functional currency.
We calculate constant currency measures by translating the current year’s foreign currency values for sales and other income statement items into USD (excluding the IAS Standards 29 “Financial Reporting in Hyperinflationary Economies” adjustments to the local currency income statements of subsidiaries operating in hyperinflationary economies), using the average exchange rates from the prior year and comparing them to the prior year values in USD.
We use these constant currency measures in evaluating the Company’s performance, since they may assist us in evaluating our ongoing performance from year to year. However, in performing our evaluation,
43
we also consider equivalent measures of performance that are not affected by changes in the relative value of currencies.
Growth rate calculation
For ease of understanding, Novartis uses a sign convention for its growth rates such that a reduction in operating expenses or losses compared with the prior year is shown as a positive growth.
Free cash flow
Novartis defines free cash flow as net cash flows from operating activities less purchases of property, plant and equipment. This definition provides a performance measure focusing on core operating activities and excludes items that can vary significantly from year to year, thereby enabling better comparison of business performance across years.
Free cash flow is a non-IFRS measure and is not intended to be a substitute measure for net cash flows from operating activities as determined under IFRS Accounting Standards. Free cash flow is presented as additional information because management believes it is a useful supplemental indicator of the Company’s ability to operate without reliance on additional borrowing or use of existing cash. Free cash flow is a measure of the net cash generated that is available for investment in strategic opportunities, returning to shareholders and for debt repayment. Free cash flow is a non-IFRS measure, which means it should not be interpreted as a measure determined under IFRS Accounting Standards.
Additional information
Net debt
Novartis calculates net debt as current financial debts and derivative financial instruments plus non-current financial debts less cash and cash equivalents and marketable securities, commodities, time deposits and derivative financial instruments.
Net debt is presented as additional information because it sets forth how management monitors net debt or liquidity and management believes it is a useful supplemental indicator of the Company’s ability to pay dividends, to meet financial commitments, and to invest in new strategic opportunities, including strengthening its balance sheet.
See page 52 for additional disclosures related to net debt.
44
Reconciliation from IFRS Accounting Standards results to non-IFRS measure core results
The following tables provide an overview of the reconciliation from IFRS Accounting Standards results to non-IFRS measure core results:
Reconciliation from IFRS Accounting Standards results to non-IFRS measure core results – Total Company
(USD millions unless indicated otherwise) | Q2 2024 | Q2 2023 | H1 2024 | H1 2023 | |||||
IFRS Accounting Standards operating income from continuing operations | 4 014 | 2 807 | 7 387 | 5 425 | |||||
Amortization of intangible assets | 768 | 914 | 1 575 | 1 941 | |||||
Impairments | |||||||||
Intangible assets | 37 | 453 | 194 | 926 | |||||
Property, plant and equipment related to the company-wide rationalization of manufacturing sites | -36 | -43 | |||||||
Other property, plant and equipment | 6 | 22 | 6 | 22 | |||||
Total impairment charges | 43 | 439 | 200 | 905 | |||||
Acquisition or divestment of businesses and related items | |||||||||
- Income | -103 | -59 | -215 | -63 | |||||
- Expense | 110 | 1 | 230 | 3 | |||||
Total acquisition or divestment of businesses and related items, net | 7 | -58 | 15 | -60 | |||||
Other items | |||||||||
Divestment gains | -7 | -6 | -19 | -132 | |||||
Financial assets - fair value adjustments | -22 | 29 | 6 | 75 | |||||
Restructuring and related items | |||||||||
- Income | -23 | -64 | -81 | -95 | |||||
- Expense | 167 | 145 | 258 | 795 | |||||
Legal-related items | |||||||||
- Income | -484 | ||||||||
- Expense | 2 | 50 | 31 | ||||||
Additional income | -3 | 25 | -15 | -270 | |||||
Additional expense | 9 | 7 | 114 | 15 | |||||
Total other items | 121 | 138 | 313 | -65 | |||||
Total adjustments | 939 | 1 433 | 2 103 | 2 721 | |||||
Core operating income from continuing operations | 4 953 | 4 240 | 9 490 | 8 146 | |||||
as % of net sales | 39.6% | 37.1% | 39.0% | 36.6% | |||||
Loss from associated companies | -2 | -2 | -31 | -4 | |||||
Core adjustments to loss from associated companies, net of tax | 26 | ||||||||
Interest expense | -246 | -216 | -467 | -416 | |||||
Other financial income and expense | 75 | 85 | 81 | 189 | |||||
Core adjustments to other financial income and expense | -15 | 44 | 75 | 58 | |||||
Income taxes, adjusted for above items (core income taxes) | -757 | -649 | -1 485 | -1 238 | |||||
Core net income from continuing operations | 4 008 | 3 502 | 7 689 | 6 735 | |||||
Core net income from discontinued operations 1 | 309 | 690 | |||||||
Core net income | 4 008 | 3 811 | 7 689 | 7 425 | |||||
Core net income attributable to shareholders of Novartis AG | 4 008 | 3 810 | 7 689 | 7 423 | |||||
Core basic EPS from continuing operations (USD) 2 | 1.97 | 1.69 | 3.77 | 3.23 | |||||
Core basic EPS from discontinued operations (USD) 1, 2 | 0.14 | 0.31 | |||||||
Core basic EPS (USD) 2 | 1.97 | 1.83 | 3.77 | 3.54 | |||||
1 For details on discontinued operations core results refer to page 48. | |||||||||
2 Core earnings per share (EPS) is calculated by dividing core net income attributable to shareholders of Novartis AG by the weighted average number of shares used in the basic EPS calculation outstanding in a reporting period. | |||||||||
45
Reconciliation from IFRS Accounting Standards results to non-IFRS measure core results – Total Company
Second quarter
(USD millions unless indicated otherwise) | Q2 2024 IFRS Accounting Standards results | Amortization of intangible assets1 | Impairments2 | Acquisition or divestment of businesses and related items3 | Other items4 | Q2 2024 Core results | Q2 2023 Core results | ||||||||
Gross profit from continuing operations | 9 699 | 724 | 4 | 10 427 | 9 591 | ||||||||||
Operating income from continuing operations | 4 014 | 768 | 43 | 7 | 121 | 4 953 | 4 240 | ||||||||
Income before taxes from continuing operations | 3 841 | 768 | 43 | 7 | 106 | 4 765 | 4 151 | ||||||||
Income taxes 5 | -595 | -145 | -5 | -3 | -9 | -757 | -649 | ||||||||
Net income from continuing operations | 3 246 | 4 008 | 3 502 | ||||||||||||
Net income from discontinued operations 6 | 309 | ||||||||||||||
Net income | 3 246 | 4 008 | 3 811 | ||||||||||||
Basic EPS from continuing operations (USD) 7 | 1.60 | 1.97 | 1.69 | ||||||||||||
Basic EPS from discontinued operations (USD) 6, 7 | 0.14 | ||||||||||||||
Basic EPS (USD) 7 | 1.60 | 1.97 | 1.83 | ||||||||||||
The following are adjustments to arrive at core gross profit from continuing operations | |||||||||||||||
Cost of goods sold | -3 173 | 724 | 4 | -2 445 | -2 154 | ||||||||||
The following are adjustments to arrive at core operating income from continuing operations | |||||||||||||||
Selling, general and administration | -3 091 | 1 | -3 090 | -3 088 | |||||||||||
Research and development | -2 367 | 44 | 37 | 10 | -2 276 | -2 129 | |||||||||
Other income | 273 | -103 | -69 | 101 | 36 | ||||||||||
Other expense | -500 | 6 | 100 | 185 | -209 | -170 | |||||||||
The following are adjustments to arrive at core income before taxes from continuing operations | |||||||||||||||
Other financial income and expense | 75 | -15 | 60 | 129 | |||||||||||
1 Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products; research and development includes the amortization of acquired rights to technologies | |||||||||||||||
2 Impairments: research and development includes net impairment charges related to intangible assets; other expense includes net impairment charges related to property, plant and equipment | |||||||||||||||
3 Acquisition or divestment of businesses and related items, including integration charges: research and development and other expense include integration cost charges; other income and other expense includes transitional service-fee income and expenses related to the Sandoz distribution | |||||||||||||||
4 Other items: cost of goods sold, selling, general and administration, and other income and other expense include restructuring income and charges related to the initiative to implement a new streamlined organizational model, the company-wide rationalization of manufacturing sites and other net restructuring charges and related items; other income and other expense includes fair value adjustments; other income also includes divestment gains; other financial income and expense includes the impact of IAS Standards 29 "Financial Reporting in Hyperinflationary Economies" for subsidiaries operating in hyperinflationary economies, currency devaluation losses and an adjustment related to the gain on sale of financial assets. | |||||||||||||||
5 Taxes on the adjustments between IFRS Accounting Standards and core results, for each item included in the adjustment, take into account the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising from legal settlements in certain jurisdictions. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of USD 0.9 billion to arrive at the core results before tax amounts to USD 162 million. The average tax rate on the total adjustments was 17.5% since the quarterly core tax charge of 15.9% has been applied to the pre-tax income of the period. | |||||||||||||||
6 For details on discontinued operations core results refer to page 48. | |||||||||||||||
7 Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG. | |||||||||||||||
46
Reconciliation from IFRS Accounting Standards results to non-IFRS measure core results – Total Company
First half
(USD millions unless indicated otherwise) | H1 2024 IFRS Accounting Standards results | Amortization of intangible assets1 | Impairments2 | Acquisition or divestment of businesses and related items3 | Other items4 | H1 2024 Core results | H1 2023 Core results | ||||||||
Gross profit from continuing operations | 18 723 | 1 497 | 9 | 20 229 | 18 591 | ||||||||||
Operating income from continuing operations | 7 387 | 1 575 | 200 | 15 | 313 | 9 490 | 8 146 | ||||||||
Income before taxes from continuing operations | 6 970 | 1 575 | 200 | 15 | 414 | 9 174 | 7 973 | ||||||||
Income taxes 5 | -1 036 | -295 | -26 | -5 | -123 | -1 485 | -1 238 | ||||||||
Net income from continuing operations | 5 934 | 7 689 | 6 735 | ||||||||||||
Net income from discontinued operations 6 | 690 | ||||||||||||||
Net income | 5 934 | 7 689 | 7 425 | ||||||||||||
Basic EPS from continuing operations (USD) 7 | 2.91 | 3.77 | 3.23 | ||||||||||||
Basic EPS from discontinued operations (USD) 7 | 0.31 | ||||||||||||||
Basic EPS (USD) 7 | 2.91 | 3.77 | 3.54 | ||||||||||||
The following are adjustments to arrive at core gross profit from continuing operations | |||||||||||||||
Cost of goods sold | -6 269 | 1 497 | 9 | -4 763 | -4 201 | ||||||||||
The following are adjustments to arrive at core operating income from continuing operations | |||||||||||||||
Selling, general and administration | -5 931 | 1 | -5 930 | -5 952 | |||||||||||
Research and development | -4 788 | 78 | 194 | 21 | 16 | -4 479 | -4 182 | ||||||||
Other income | 522 | -215 | -151 | 156 | 140 | ||||||||||
Other expense | -1 139 | 6 | 209 | 438 | -486 | -451 | |||||||||
The following are adjustments to arrive at core income before taxes from continuing operations | |||||||||||||||
Loss from associated companies | -31 | 26 | -5 | -4 | |||||||||||
Other financial income and expense | 81 | 75 | 156 | 247 | |||||||||||
1 Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products; research and development includes the amortization of acquired rights to technologies | |||||||||||||||
2 Impairments: research and development includes net impairment charges related to intangible assets; other expense includes net impairment charges related to property, plant and equipment | |||||||||||||||
3 Acquisition or divestment of businesses and related items, including integration charges: research and development and other expense include integration cost charges; other income and other expense includes transitional service-fee income and expenses related to the Sandoz distribution | |||||||||||||||
4 Other items: cost of goods sold, selling, general and administration, and other income and other expense includes restructuring income and charges related to the initiative to implement a new streamlined organizational model, the company-wide rationalization of manufacturing sites and other net restructuring charges and related items; research and development includes contingent consideration adjustments; other income and other expense includes fair value adjustments; other income also includes divestment gains; other expense includes legal related items and a fair value adjustment on a contingent receivable and other costs and items; loss from associated companies includes a divestment adjustment related to the sale of an investment in associated companies; other financial income and expense includes the impact of IAS Standards 29 "Financial Reporting in Hyperinflationary Economies" for subsidiaries operating in hyperinflationary economies, currency devaluation losses, an adjustment related to the gain on sale of financial assets and release of provisions for interests on tax matters. | |||||||||||||||
5 Taxes on the adjustments between IFRS Accounting Standards and core results, for each item included in the adjustment, take into account the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of USD 2.2 billion to arrive at the core results before tax amounts to USD 449 million. The average tax rate on the total adjustments was 20.4% since the estimated full year core tax charge of 16.2% has been applied to the pre-tax income of the period. | |||||||||||||||
6 For details on discontinued operations core results refer to page 48. | |||||||||||||||
7 Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG. | |||||||||||||||
47
Reconciliation from IFRS Accounting Standards results to non-IFRS measure core results – Discontinued operations
Second quarter
(USD millions unless indicated otherwise) | Q2 2023 Core results | ||
Gross profit from discontinued operations | 1 265 | ||
Operating income from discontinued operations | 428 | ||
Income before taxes from discontinued operations | 404 | ||
Income taxes | -95 | ||
Net income from discontinued operations | 309 | ||
Basic EPS from discontinued operations (USD) 1 | 0.14 | ||
The following are adjustments to arrive at core gross profit from discontinued operations | |||
Cost of goods sold | -1 538 | ||
The following are adjustments to arrive at core operating income from discontinued operations | |||
Selling, general and administration | -585 | ||
Research and development | -220 | ||
Other expense | -32 | ||
The following are adjustments to arrive at core income before taxes from discontinued operations | |||
Other financial income and expense | -16 | ||
1 Earnings per share (EPS) is calculated on the amount of net income from discontinued operations attributable to shareholders of Novartis AG. | |||
Reconciliation from IFRS Accounting Standards results to non-IFRS measure core results – Discontinued operations
First half
(USD millions unless indicated otherwise) | H1 2023 Core results | ||
Gross profit from discontinued operations | 2 572 | ||
Operating income from discontinued operations | 935 | ||
Income before taxes from discontinued operations | 900 | ||
Income taxes | -210 | ||
Net income from discontinued operations | 690 | ||
Basic EPS from discontinued operations (USD) 1 | 0.31 | ||
The following are adjustments to arrive at core gross profit from discontinued operations | |||
Cost of goods sold | -2 392 | ||
The following are adjustments to arrive at core operating income from discontinued operations | |||
Selling, general and administration | -1 122 | ||
Research and development | -439 | ||
Other income | 5 | ||
Other expense | -81 | ||
The following are adjustments to arrive at core income before taxes from discontinued operations | |||
Other financial income and expense | -17 | ||
1 Earnings per share (EPS) is calculated on the amount of net income from discontinued operations attributable to shareholders of Novartis AG. | |||
48
Free cash flow
The following table is a reconciliation of the three major categories of the IFRS Accounting Standards consolidated statements of cash flows to the non-IFRS measure free cash flow:
Second quarter
Q2 2024 | Q2 2023 | ||||||||||||
(USD millions) | IFRS Accounting Standards cash flow | Adjustments | Free cash flow | IFRS Accounting Standards cash flow | Adjustments | Free cash flow | |||||||
Net cash flows from operating activities from continuing operations | 4 875 | 4 875 | 3 517 | 3 517 | |||||||||
Net cash flows from operating activities from discontinued operations | 59 | 59 | |||||||||||
Total net cash flows from operating activities | 4 875 | 4 875 | 3 576 | 3 576 | |||||||||
Net cash flows used in investing activities from continuing operations | -3 207 | 2 947 | -260 | -960 | 735 | -225 | |||||||
Net cash flows used in investing activities from discontinued operations | -93 | 17 | -76 | ||||||||||
Total net cash flows used in investing activities 1 | -3 207 | 2 947 | -260 | -1 053 | 752 | -301 | |||||||
Net cash flows used in financing activities from continuing operations | -3 200 | 3 200 | 0 | -3 766 | 3 766 | 0 | |||||||
Net cash flows from financing activities from discontinued operations | 129 | -129 | 0 | ||||||||||
Total net cash flows used in financing activities 2 | -3 200 | 3 200 | 0 | -3 637 | 3 637 | 0 | |||||||
Non-IFRS measure free cash flow from continuing operations | 4 615 | 3 292 | |||||||||||
Non-IFRS measure free cash flow from discontinued operations | -17 | ||||||||||||
Total non-IFRS measure free cash flow | 4 615 | 3 275 | |||||||||||
1 With the exception of purchases of property, plant and equipment, all net cash flows used in investing activities from continuing operations and from discontinued operations are excluded from the free cash flow. | |||||||||||||
2 Net cash flows (used in)/from financing activities from continuing operations and from discontinued operations are excluded from the free cash flow. | |||||||||||||
49
Free cash flow
First half
H1 2024 | H1 2023 | ||||||||||||
(USD millions) | IFRS Accounting Standards cash flow | Adjustments | Free cash flow | IFRS Accounting Standards cash flow | Adjustments | Free cash flow | |||||||
Net cash flows from operating activities from continuing operations | 7 140 | 7 140 | 6 369 | 6 369 | |||||||||
Net cash flows from operating activities from discontinued operations | 164 | 164 | |||||||||||
Total net cash flows from operating activities | 7 140 | 7 140 | 6 533 | 6 533 | |||||||||
Net cash flows (used in)/from investing activities from continuing operations | -4 106 | 3 619 | -487 | 9 745 | -10 138 | -393 | |||||||
Net cash flows used in investing activities from discontinued operations | -177 | 32 | -145 | ||||||||||
Total net cash flows (used in)/from investing activities 1 | -4 106 | 3 619 | -487 | 9 568 | -10 106 | -538 | |||||||
Net cash flows used in financing activities from continuing operations | -8 364 | 8 364 | 0 | -12 762 | 12 762 | 0 | |||||||
Net cash flows used in financing activities from discontinued operations | -77 | 77 | 0 | ||||||||||
Total net cash flows used in financing activities 2 | -8 364 | 8 364 | 0 | -12 839 | 12 839 | 0 | |||||||
Non-IFRS measure free cash flow from continuing operations | 6 653 | 5 976 | |||||||||||
Non-IFRS measure free cash flow from discontinued operations | 19 | ||||||||||||
Total non-IFRS measure free cash flow | 6 653 | 5 995 | |||||||||||
1 With the exception of purchases of property, plant and equipment, all net cash flows (used in)/from investing activities from continuing operations and from discontinued operations are excluded from the free cash flow. | |||||||||||||
2 Net cash flows used in financing activities from continuing operations and from discontinued operations are excluded from the free cash flow. | |||||||||||||
50
The following table is a summary of the non-IFRS measure free cash flow:
Second quarter
(USD millions) | Q2 2024 | Q2 2023 | |||
Operating income from continuing operations | 4 014 | 2 807 | |||
Adjustments for non-cash items | |||||
Depreciation, amortization and impairments | 1 140 | 1 737 | |||
Change in provisions and other non-current liabilities | 204 | -53 | |||
Other | 288 | 347 | |||
Operating income adjusted for non-cash items from continuing operations | 5 646 | 4 838 | |||
Dividends received from associated companies and others | 1 | ||||
Interest received and change in other financial receipts | 71 | 64 | |||
Interest paid and change in other financial payments | -320 | -224 | |||
Income taxes paid | -473 | -973 | |||
Payments out of provisions and other net cash movements in non-current liabilities | -288 | -243 | |||
Change in inventories and trade receivables less trade payables | -661 | -559 | |||
Change in other net current assets and other operating cash flow items | 899 | 614 | |||
Net cash flows from operating activities from continuing operations | 4 875 | 3 517 | |||
Purchases of property, plant and equipment | -260 | -225 | |||
Non-IFRS measure free cash flow from continuing operations | 4 615 | 3 292 | |||
Non-IFRS measure free cash flow from discontinued operations 1 | -17 | ||||
Total non-IFRS measure free cash flow | 4 615 | 3 275 | |||
1 In the second quarter of 2023 the free cash flow from discontinued operations was a cash outflow of USD 17 million consisting of USD 59 million net cash inflows from operating activities from discontinued operations, less purchases of property, plant and equipment by discontinued operations of USD 76 million. | |||||
First half
(USD millions) | H1 2024 | H1 2023 | |||
Operating income from continuing operations | 7 387 | 5 425 | |||
Adjustments for non-cash items | |||||
Depreciation, amortization and impairments | 2 482 | 3 653 | |||
Change in provisions and other non-current liabilities | 367 | 362 | |||
Other | 595 | 230 | |||
Operating income adjusted for non-cash items from continuing operations | 10 831 | 9 670 | |||
Dividends received from associated companies and others | 1 | 1 | |||
Interest received and other financial receipts | 235 | 400 | |||
Interest paid and other financial payments | -496 | -345 | |||
Income taxes paid | -1 049 | -1 268 | |||
Payments out of provisions and other net cash movements in non-current liabilities | -631 | -926 | |||
Change in inventories and trade receivables less trade payables | -2 118 | -1 594 | |||
Change in other net current assets and other operating cash flow items | 367 | 431 | |||
Net cash flows from operating activities from continuing operations | 7 140 | 6 369 | |||
Purchases of property, plant and equipment | -487 | -393 | |||
Non-IFRS measure free cash flow from continuing operations | 6 653 | 5 976 | |||
Non-IFRS measure free cash flow from discontinued operations 1 | 19 | ||||
Total non-IFRS measure free cash flow | 6 653 | 5 995 | |||
1 In the first half of 2023, the free cash flow from discontinued operations was a cash inflow of USD 19 million consisting of USD 164 million net cash inflows from operating activities from discontinued operations, less purchases of property, plant and equipment by discontinued operations of USD 145 million. | |||||
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Additional information
Net debt
Condensed consolidated changes in net debt
Second quarter
(USD millions) | Q2 2024 | Q2 2023 | |||
Net change in cash and cash equivalents | -1 566 | -1 115 | |||
Change in marketable securities, commodities, time deposits, financial debts and derivatives financial instruments | -1 358 | 845 | |||
Change in net debt | -2 924 | -270 | |||
Net debt at April 1 | -15 836 | -15 104 | |||
Net debt at June 30 | -18 760 | -15 374 | |||
First half
(USD millions) | H1 2024 | H1 2023 | |||
Net change in cash and cash equivalents | -5 490 | 3 368 | |||
Change in marketable securities, commodities, time deposits, financial debts and derivatives financial instruments | -3 087 | -11 497 | |||
Change in net debt | -8 577 | -8 129 | |||
Net debt at January 1 | -10 183 | -7 245 | |||
Net debt at June 30 | -18 760 | -15 374 | |||
Components of net debt
(USD millions) | Jun 30, 2024 | Dec 31, 2023 | Jun 30, 2023 | ||||
Non-current financial debts | -19 663 | -18 436 | -18 259 | ||||
Current financial debts and derivative financial instruments | -7 532 | -6 175 | -8 289 | ||||
Total financial debts | -27 195 | -24 611 | -26 548 | ||||
Less liquidity | |||||||
Cash and cash equivalents | 7 903 | 13 393 | 10 885 | ||||
Marketable securities, commodities, time deposits and derivative financial instruments | 532 | 1 035 | 289 | ||||
Total liquidity | 8 435 | 14 428 | 11 174 | ||||
Net debt at end of period | -18 760 | -10 183 | -15 374 | ||||
Share information
Jun 30, 2024 | Jun 30, 2023 | ||||
Number of shares outstanding | 2 024 579 175 | 2 068 263 550 | |||
Registered share price (CHF) | 96.17 | 90.00 | |||
ADR price (USD) | 106.46 | 100.91 | |||
Market capitalization (USD billions) 1 | 216.5 | 207.0 | |||
Market capitalization (CHF billions) 1 | 194.7 | 186.1 | |||
1 Market capitalization is calculated based on the number of shares outstanding (excluding treasury shares). Market capitalization in USD is based on the market capitalization in CHF converted at the quarter end CHF/USD exchange rate. | |||||
52
Effects of currency fluctuations
Principal currency translation rates
(USD per unit) | Average rates Q2 2024 | Average rates Q2 2023 | Average rates H1 2024 | Average rates H1 2023 | Period-end rates Jun 30, 2024 | Period-end rates Jun 30, 2023 | |||||||
1 CHF | 1.106 | 1.113 | 1.125 | 1.097 | 1.112 | 1.112 | |||||||
1 CNY | 0.138 | 0.143 | 0.138 | 0.144 | 0.137 | 0.138 | |||||||
1 EUR | 1.077 | 1.089 | 1.081 | 1.081 | 1.070 | 1.086 | |||||||
1 GBP | 1.262 | 1.252 | 1.265 | 1.233 | 1.264 | 1.262 | |||||||
100 JPY | 0.642 | 0.729 | 0.658 | 0.742 | 0.621 | 0.692 | |||||||
100 RUB | 1.102 | 1.230 | 1.101 | 1.300 | 1.156 | 1.133 | |||||||
Currency impact on key figures
The following table provides a summary of the currency impact on key Company figures due to their conversion into US dollars, the Company’s reporting currency, of the financial data from entities reporting in non-US dollars. Constant currency (cc) calculations apply the exchange rates of the prior year period to the current period financial data for entities reporting in non-US dollars.
Second quarter
Change in USD % Q2 2024 | Change in constant currencies % Q2 2024 | Percentage point currency impact Q2 2024 | |||||
Net sales from continuing operations | 9 | 11 | -2 | ||||
Operating income from continuing operations | 43 | 47 | -4 | ||||
Net income from continuing operations | 43 | 49 | -6 | ||||
Basic earnings per share (USD) from continuing operations | 47 | 52 | -5 | ||||
Core operating income from continuing operations | 17 | 19 | -2 | ||||
Core net income from continuing operations | 14 | 18 | -4 | ||||
Core basic earnings per share (USD) from continuing operations | 17 | 21 | -4 | ||||
First half
Change in USD % H1 2024 | Change in constant currencies % H1 2024 | Percentage point currency impact H1 2024 | |||||
Net sales from continuing operations | 9 | 11 | -2 | ||||
Operating income from continuing operations | 36 | 43 | -7 | ||||
Net income from continuing operations | 34 | 43 | -9 | ||||
Basic earnings per share (USD) from continuing operations | 37 | 47 | -10 | ||||
Core operating income from continuing operations | 16 | 21 | -5 | ||||
Core net income from continuing operations | 14 | 19 | -5 | ||||
Core basic earnings per share (USD) from continuing operations | 17 | 22 | -5 | ||||
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Disclaimer
This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, that can generally be identified by words such as “may,” “will,” “continue,” “ongoing,” “grow,” “launch,” “expect,” “deliver,” “focus,” “address,” “accelerate,” “deliver,” “remain,” “scaling,” “guidance,” “outlook,” “long-term,” “priority,” “potential,” “can,” “trajectory” or similar expressions, or by express or implied discussions regarding potential new products, potential new indications for existing products, potential product launches, or regarding potential future revenues from any such products; or regarding results of ongoing clinical trials; or regarding potential future, pending or announced transactions, including completion of the acquisition of MorphoSys AG; regarding potential future sales or earnings; or by discussions of strategy, plans, expectations or intentions, including discussions regarding our continued investment into new R&D capabilities and manufacturing; or regarding our capital structure; or regarding the consequences of the spin-off of Sandoz and our transformation into a “pure-play” innovative medicines company. Such forward-looking statements are based on the current beliefs and expectations of management regarding future events and are subject to significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in the forward-looking statements. You should not place undue reliance on these statements. There can be no guarantee that the investigational or approved products described in this press release will be submitted or approved for sale or for any additional indications or labeling in any market, or at any particular time. Nor can there be any guarantee that such products will be commercially successful in the future. Neither can there be any guarantee expected benefits or synergies from the transactions described in this press release will be achieved in the expected timeframe, or at all. In particular, our expectations could be affected by, among other things: uncertainties regarding the success of key products, commercial priorities and strategy; uncertainties in the research and development of new products, including clinical trial results and additional analysis of existing clinical data; uncertainties regarding the use of new and disruptive technologies, including artificial intelligence; global trends toward healthcare cost containment, including ongoing government, payer and general public pricing and reimbursement pressures and requirements for increased pricing transparency; uncertainties regarding our ability to realize the strategic benefits, operational efficiencies or opportunities expected from our external business opportunities; our ability to realize the intended benefits of our separation of Sandoz into a new publicly traded standalone company; our ability to obtain or maintain proprietary intellectual property protection, including the ultimate extent of the impact on Novartis of the loss of patent protection and exclusivity on key products; uncertainties in the development or adoption of potentially transformational digital technologies and business models; uncertainties surrounding the implementation of our new IT projects and systems; uncertainties regarding potential significant breaches of information security or disruptions of our information technology systems; uncertainties regarding actual or potential legal proceedings, including regulatory actions or delays or government regulation related to the products and pipeline products described in this press release; safety, quality, data integrity, or manufacturing issues; our performance on and ability to comply with environmental, social and governance measures and requirements; major political, macroeconomic and business developments, including impact of the war in certain parts of the world; uncertainties regarding future global exchange rates; uncertainties regarding future demand for our products; and other risks and factors referred to in Novartis AG’s most recently filed Form 20-F and in subsequent reports filed with, or furnished to, the US Securities and Exchange Commission. Novartis is providing the information in this press release as of this date and does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise.
All product names appearing in italics are trademarks owned by or licensed to Novartis.
This communication is neither an offer to purchase nor a solicitation of an offer to sell shares of MorphoSys. The final terms and further provisions regarding the delisting purchase offer are available in the offer document published by Novartis BidCo AG (formerly known as Novartis data42 AG) (the “Bidder”). The offer document has been approved by the BaFin and has been filed with the U.S. Securities and Exchange Commission (the “SEC”). The solicitation and offer to buy shares of MorphoSys is only being made pursuant the offer document. In connection with the Offer, the Bidder and Novartis AG have filed Tender Offer Statement on Schedule TO with the SEC (together with the offer document, an Offer to Purchase including the means to tender and other related documents, the “Offer Documents”), the management board and supervisory board of MorphoSys have issued a joint reasoned statement in accordance with sec. 27 of the German Securities Acquisition and Takeover Act and MorphoSys has filed a Solicitation/Recommendation Statement on Schedule 14D-9 with the SEC (together with the joint reasoned statement, the “Recommendation Statements”). THE MORPHOSYS SHAREHOLDERS AND OTHER INVESTORS ARE URGED TO READ THE OFFER DOCUMENTS AND THE RECOMMENDATION STATEMENTS BECAUSE THEY CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. The Offer Documents and the Recommendation Statements have been distributed to all stockholders of MorphoSys in accordance with German and U.S. securities laws. The Tender Offer Statement on Schedule TO and the Solicitation/Recommendation Statement on Schedule 14D-9 are available for free at the SEC’s website at www.sec.gov. Additional copies may be obtained for free by contacting the Bidder or MorphoSys. Free copies of these materials and certain other offering documents are available on the Bidder’s website at www.novartis.com/investors/morphosys-acquisition or by contacting the Bidder’s investor relations department at +41 61 324 7944.
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About Novartis
Novartis is an innovative medicines company. Every day, we work to reimagine medicine to improve and extend people’s lives so that patients, healthcare professionals and societies are empowered in the face of serious disease. Our medicines reach more than 250 million people worldwide.
Reimagine medicine with us: Visit us at https://www.novartis.com and connect with us on LinkedIn, Facebook, X/Twitter and Instagram.
Novartis will conduct a conference call with investors to discuss this news release today at 14:00 Central European time and 8:00 Eastern Time. A simultaneous webcast of the call for investors and other interested parties may be accessed by visiting the Novartis website. A replay will be available after the live webcast by visiting https://www.novartis.com/investors/event-calendar.
Detailed financial results accompanying this press release are included in the condensed interim financial report at the link below. Additional information is provided on our business and pipeline of selected compounds in late-stage development. A copy of today’s earnings call presentation can be found at https://www.novartis.com/investors/event-calendar.
Important dates
October 29, 2024
Third quarter & nine months 2024 results
November 20-21, 2024
Meet Novartis Management 2024 (London, UK)
January 31, 2025
Fourth quarter & full year 2024 results
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