SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 6-K
 
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 or 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 
Report on Form 6-K dated October 24, 2023
(Commission File No. 1-15024)
 

 
Novartis AG
(Name of Registrant)
 
 
Lichtstrasse 35
4056 Basel
Switzerland
(Address of Principal Executive Offices)
 


 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
 
Form 20-F: x
   
Form 40-F: o
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes: o
   
No: x
 

 




SIGNATURES
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Novartis AG
   
     
Date: October 24, 2023
By:
/s/ PAUL PENEPENT
     
 
Name:
Paul Penepent
 
Title:
Head Financial Reporting and Accounting
       
 

 
 
Ad hoc announcement pursuant to Art. 53 LR

FINANCIAL RESULTS | RÉSULTATS FINANCIERS | FINANZERGEBNISSE
 


Novartis International AG
Novartis Global Communications
CH-4002 Basel
Switzerland
https://www.novartis.com
 

Novartis delivers 12% sales and 21% core operating income growth from continuing operations (in cc1). Executes Sandoz spin-off, achieves important innovation milestones, and raises FY 2023 guidance

Transformation into a “pure-play” innovative medicines business is complete, with the spin-off of Sandoz; commentary below is on continuing operations2
Q3 sales grew +12% (cc, +12% USD) with core operating income growing +21% (cc, +17% USD)
o
Growth driven by continued strong performance from Kesimpta (+124% cc), Entresto (+31% cc), Kisqali (+76% cc), Pluvicto (+217% cc) and Scemblix (+157% cc)
Q3 operating income grew +13% (cc, -4% USD) driven by higher sales and lower restructuring charges, partly offset by higher impairments through discontinuation of early stage development projects
Q3 net income grew +37% (cc, +14% USD) mainly due to higher operating income
Q3 free cash flow3 was USD 5.0 billion (+24% USD) driven by higher net cash flows from operating activities
Q3 core EPS grew +29% (cc, +24% USD) to USD 1.74
Strong nine months performance with sales growing +10% (cc, +8% USD) and core operating income growing +19% (cc, +13% USD)
Q3 key innovation milestones, including positive Ph3 data for multiple pipeline assets with blockbuster potential:
o
Cosentyx FDA approval for intravenous formulation in three indications (PsA, AS, nr-axSpA)
o
Demonstrated clinically meaningful and statistically significant Ph3 data for: 1) Pluvicto (mCRPC pre-taxane), 2) iptacopan (IgAN), 3) remibrutinib (CSU), 4) Lutathera (GEP-NETs)
o
Kisqali – Ph3 NATALEE iDFS 500 event analysis complete; file submitted in EU, US submission planned for Q4 2023
Initiated previously announced, up-to USD 15 billion share buyback to be completed by year-end 2025
Full-year 2023 guidance raised for core operating income based on strong momentum4
o
Net sales expected to grow high single digit
o
Core operating income expected to grow mid to high teens (from low double digit to mid teens)

Basel, October 24, 2023 – commenting on the quarter, Vas Narasimhan MD, CEO of Novartis, said: “Novartis delivered a very strong quarter, with double-digit sales and core operating income growth leading to a further upgrade to 2023 guidance. We have successfully executed the spin-off of Sandoz, allowing us to fully focus on high-value innovative medicines. Our growth drivers, including Kesimpta, Entresto, Kisqali and Pluvicto, continue to perform well in the market. Our robust pipeline also continues to deliver, and we have achieved important innovation milestones for Pluvicto, iptacopan, remibrutinib and Lutathera. We are confident in our mid-term growth outlook and remain committed to creating value for our shareholders.”

Key figures1
 
Continuing operations2
 
Q3 2023
Q3 2022
% change
9M 2023
9M 2022
% change
 
USD m
USD m
USD
cc
 
USD m
USD m
USD
cc
Net sales
11 782
10 492
12
12
 
34 017
31 630
8
10
Operating income
1 762
1 826
-4
13
 
7 187
6 191
16
31
Net income
1 513
1 330
14
37
 
5 934
4 734
25
41
EPS (USD)
0.73
0.61
20
45
 
2.84
2.16
31
49
Free cash flow
5 043
4 054
24
 
 
11 019
8 661
27
 
Core operating income
4 405
3 772
17
21
 
12 551
11 149
13
19
Core net income
3 585
3 035
18
23
 
10 320
8 983
15
22
Core EPS (USD)
1.74
1.40
24
29
 
4.95
4.09
21
28
1 Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 48 of the Condensed Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year. 2 As defined on page 37 of the Condensed Interim Financial Report, Continuing operations include the retained business activities of Novartis, comprising the Innovative Medicines Division and the continuing Corporate activities and Discontinued operations include operational results from the Sandoz business. 3 Effective January 1, 2023, Novartis revised its definition of free cash flow, to define free cash flow as net cash flows from operating activities less purchases of property, plant and equipment. To aid in comparability, the prior year free cash flow amounts have been revised to conform with the new free cash flow definition. See page 48 of the Condensed Interim Financial Report. 4 Please see detailed guidance assumptions on page 8.



Strategy update
Our focus
Novartis has completed its transformation into a “pure-play” innovative medicines business, with the successful spin-off of Sandoz. Our focus is now centered on four core therapeutic areas (cardiovascular, renal and metabolic; immunology; neuroscience, and oncology). In each of these areas, we have multiple significant in-market and pipeline assets, all of which address diseases with a high 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.

Financials
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.”
Continuing operations include the retained business activities of Novartis, comprising the Innovative Medicines Division 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.
With the spin-off of the Sandoz business, Novartis operates as a single global operating segment, being a focused innovative medicines company.
The commentary below focuses on continuing operations. We also provide information on discontinued operations, which mainly includes Sandoz and allocated corporate activities.
Continuing operations
Third quarter
Net sales were USD 11.8 billion (+12%, +12% cc) driven by volume growth of 17 percentage points. Pricing had a negative impact of 1 percentage point and generic competition had a negative impact of 4 percentage points.
Operating income was USD 1.8 billion (-4%, +13% cc), mainly driven by higher sales and lower restructuring charges, partly offset by higher impairments through discontinuation of early stage development projects.
Net income was USD 1.5 billion (+14%, +37% cc), mainly due to higher operating income and lower tax rate driven by non-recurring items. EPS was USD 0.73 (+20%, +45% cc), growing faster than net income, benefiting from lower weighted average number of shares outstanding.
Core operating income was USD 4.4 billion (+17%, +21% cc), mainly driven by higher sales. Core operating income margin was 37.4% of net sales, increasing by 1.4 percentage points (+2.7 percentage points cc).
Core net income was USD 3.6 billion (+18%, +23% cc), mainly due to higher core operating income. Core EPS was USD 1.74 (+24%, +29% cc), growing faster than core net income, benefiting from lower weighted average number of shares outstanding.

Free cash flow amounted to USD 5.0 billion (+24% USD), compared with USD 4.1 billion in the prior year quarter driven by higher net cash flows from operating activities.

Nine months
Net sales were USD 34.0 billion (+8%, +10% cc) driven by volume growth of 16 percentage points. Pricing had a negative impact of 2 percentage points and generic competition had a negative impact of 4 percentage points.

2



Operating income was USD 7.2 billion (+16%, +31% cc), mainly driven by higher sales, other income from legal matters, lower restructuring charges, partly offset by higher impairments through discontinuation of early stage development projects.
Net income was USD 5.9 billion (+25%, +41% cc), mainly due to higher operating income. EPS was USD 2.84 (+31%, +49% cc), growing faster than net income, benefiting from lower weighted average number of shares outstanding.
Core operating income was USD 12.6 billion (+13%, +19% cc), mainly driven by higher sales. Core operating income margin was 36.9% of net sales, increasing by 1.7 percentage points (+2.9 percentage points cc).
Core net income was USD 10.3 billion (+15%, +22% cc), mainly due to higher core operating income. Core EPS was USD 4.95 (+21%, +28% cc), growing faster than core net income, benefiting from lower weighted average number of shares outstanding.

Free cash flow amounted to USD 11.0 billion (+27% USD), compared with USD 8.7 billion in the prior year period driven by higher net cash flows from operating activities.
Discontinued operations
Results for discontinued operations in the third quarter and nine-months 2023 include the results of the Sandoz Division and selected portions of corporate activities attributable to Sandoz business, as well as certain expenses related to the spin-off.

In connection with the Sandoz spin-off on October 4, 2023, the Company will report as part of its Q4 discontinued operations results a one-time non-cash non-taxable IFRS gain of approximately USD 5.9 billion. This IFRS gain represents mainly the excess amount of the IFRS distribution liability, which is the estimated fair value of the Sandoz business distributed to Novartis AG shareholders, over the then carrying value of Sandoz business net assets.

Third quarter
Discontinued operations net sales were USD 2.5 billion (+8%, +6% cc), mainly driven by ex-US growth.

Operating loss amounted to USD 86 million, compared to an operating income of USD 342 million in the previous year. The operating loss in third quarter was driven by the discontinued corporate transaction cost related to spin-off of the Sandoz business, which were core adjustments.

Core operating income was USD 250 million (-51%, -38% cc), mainly driven by lower gross margin and higher SG&A expenses.

Net income from discontinued operations amounted to USD 250 million, compared to USD 245 million in the previous year.

Nine months
Discontinued operations net sales were USD 7.4 billion (+6%, +8% cc), mainly driven by ex-US growth.

Operating income amounted to USD 265 million, compared to USD 1.1 billion in the previous year. The current year period includes the discontinued corporate transaction cost related to spin-off of the Sandoz business, which were core adjustments.

Core operating income was USD 1.2 billion (-20%, -11% cc), mainly driven by higher SG&A expenses and R&D investments.

Net income from discontinued operations amounted to USD 440 million, compared to USD 755 million in the previous year.

3



Total company
Third quarter
Total company net income was USD 1.8 billion, mainly due to higher operating income and lower tax rate driven by non-recurring items compared to USD 1.6 billion in the prior year. EPS increased to USD 0.85 from USD 0.73 in prior year.

Cash flows from operating activities amounted to USD 5.4 billion compared to USD 4.7 billion in the prior year. Free cash flow amounted to USD 5.0 billion compared to USD 4.4 billion in the prior year.

Nine months
Total company net income was USD 6.4 billion, mainly due to higher operating income compared to USD 5.5 billion in the prior year. EPS increased to USD 3.05 from USD 2.50 in prior year.

Cash flows from operating activities amounted to USD 11.9 billion compared to USD 10.1 billion in the prior year. Free cash flow amounted to USD 11.0 billion compared to USD 9.3 billion in the prior year.
Q3 key growth drivers
Underpinning our financial results in the quarter is a continued focus on key growth drivers including:
Kesimpta
(USD 657 million, +124% cc) sales growth was driven by increased demand, strong access and benefitting from a one-time revenue deduction adjustment in Europe
Entresto
(USD 1 485 million, +31% cc) sustained robust demand-led growth, benefitting from the adoption of guideline-directed medical therapy across regions
Kisqali
(USD 562 million, +76% cc) sales grew strongly across all regions, based on increasing recognition of consistent overall survival and quality of life benefits
Pluvicto
(USD 256 million, +217% cc) continued sales growth in the US. Supply now unconstrained, focusing on initiating new patients
Ilaris
(USD 335 million, +24% cc) sales grew across all regions
Scemblix
(USD 106 million, +157% cc) sales grew across all regions, demonstrating the high unmet need in CML
Leqvio
(USD 90 million, +165% cc) launch in the US and other markets ongoing, with focus on patient on-boarding, removing access hurdles and enhancing medical education
Cosentyx
(USD 1 329 million, +4% cc) continued demand growth across key regions, partly offset by US revenue deduction fluctuations across periods. Ex-US sales grew +15% (cc)
Promacta/Revolade
(USD 576 million, +10% cc) grew across all regions, driven by increased use in chronic ITP and severe aplastic anemia
Xolair
(USD 369 million, +13% cc) sales grew across most regions
Jakavi
(USD 427 million, +9% cc) sales grew in Emerging Growth Markets, Europe and Japan, driven by strong demand in both myelofibrosis and polycythemia vera
Tafinlar + Mekinist
(USD 482 million, +8% cc) sales grew in the US and Emerging Growth Markets, driven by demand in BRAF+ adjuvant melanoma and NSCLC indications
Lutathera
(USD 159 million, +19% cc) sales grew mainly in the US, Japan and Europe due to increased demand
Emerging Growth Markets*
Overall, grew +17% (cc). Growth in China (+14% cc, USD 848 million)
*All markets except the US, Canada, Western Europe, Japan, Australia, and New Zealand

4



Net sales of the top 20 products in 2023
 
Q3 2023
% change
9M 2023
% change
 
USD m
USD
cc
USD m
USD
cc
Entresto
1 485
31
31
4 400
31
33
Cosentyx
1 329
4
4
3 677
-1
1
Promacta/Revolade
 576
10
10
1 706
10
12
Kesimpta
- excl. revenue deduction adjust.*
 657
127
87
      124
       86
1 530
      112
       95
      112
       96
Kisqali
 562
72
76
1 470
68
74
Tafinlar + Mekinist
 482
7
8
1 436
10
13
Tasigna
 464
-5
-5
1 402
-3
-1
Jakavi
 427
11
9
1 276
9
11
Lucentis
 363
-20
-22
1 174
-20
-19
Xolair
 369
15
13
1 085
4
6
Sandostatin
 338
15
15
 998
7
8
Ilaris
 335
23
24
 979
18
20
Zolgensma
 308
-3
-2
 928
-13
-11
Gilenya
 270
-47
-48
 771
-54
-53
Pluvicto
 256
220
217
 707
nm
nm
Exforge Group
 187
1
3
 557
-5
-1
Galvus Group
 181
-15
-4
 539
-17
-10
Diovan Group
 153
-4
-1
 466
-9
-4
Lutathera
 159
20
19
 458
34
34
Gleevec/Glivec
 144
-19
-17
 433
-24
-21
Top 20 brands total
9 045
13
13
25 992
9
11
nm= not meaningful
* Sales growth benefiting from a one-time revenue deduction adjustment in Europe

5



R&D update - key developments from the third quarter
New approvals

Leqvio
Approved in China and Japan as the first and only small interfering RNA (siRNA) therapy for LDL-C reduction
Cosentyx
In October, FDA approved the intravenous formulation in three indications: Psoriatic Arthritis, Ankylosing Spondylitis, and non-radiographic axial SpA

Regulatory updates

Kisqali
EU file submission in adjuvant early breast cancer setting; US submission planned for Q4 2023
Adakveo
EC adopts decision endorsing CHMP recommendation to revoke conditional marketing authorization

Results from ongoing trials and other highlights

iptacopan
In October, Ph3 APPLAUSE-IgAN study interim analysis demonstrated clinically meaningful and highly statistically significant proteinuria reduction in patients with IgA nephropathy. The trial met its pre-specified interim analysis (9 months) primary endpoint, demonstrating superiority vs. placebo in proteinuria reduction, with safety consistent with previously reported data.
Novartis plans to review interim data with regulatory authorities for accelerated approval; study continues with final readout at 24 months
remibrutinib
Ph3 REMIX-1 and REMIX-2 studies met all primary and secondary endpoints, showing fast, clinically meaningful improvements across urticaria disease activity scores. Remibrutinib demonstrated a favorable safety profile with rates of adverse events comparable to placebo and balanced liver function tests across both studies.
Final (52 weeks) readout and submissions to health authorities are expected in 2024. Full data will be presented at upcoming medical meetings
Pluvicto
Ph3 PSMAfore study demonstrated clinically meaningful and statistically significant rPFS benefit in patients with PSMA+ mCRPC in the pre-taxane setting. Per updated analysis presented at ESMO, median rPFS more than doubled compared to ARPI switch. Patients on Pluvicto showed improved quality of life compared to daily oral ARPI, along with improvements in other clinically meaningful efficacy endpoints including PSA response, ORR, DOR and time to symptomatic skeletal event, with favorable safety. Pre-specified crossover-adjusted OS analysis demonstrated a HR of 0.80 (0.48, 1.33); the unadjusted ITT OS analysis was confounded by a high rate of crossover.
Novartis is continuing to collect OS data, regulatory filings are anticipated in 2024
Lutathera
Ph3 NETTER-2 study demonstrated clinically meaningful and statistically significant improvement in PFS (primary endpoint) in patients with newly diagnosed somatostatin receptor (SSTR)-positive, Grade 2 and 3, advanced gastroenteropancreatic neuroendocrine tumors (GEP-NETs) vs. high-dose long-acting octreotide alone. The trial also met its key secondary endpoint of ORR. No new or unexpected safety findings were observed and data are consistent with the already well-established safety profile of Lutathera.
Data to be presented at an upcoming medical meeting and discussed with regulatory authorities, with submissions to follow
Kisqali
Ph3 NATALEE iDFS 500 event analysis complete. Updated data is consistent with the interim analysis results announced in March 2023 and will be communicated at an upcoming medical meeting.



6



Health-related quality of life (HRQoL) analyses from Ph3 NATALEE trial demonstrated that patients with early breast cancer receiving adjuvant Kisqali plus ET for up to 3 years maintained physical and social functioning; psychological well-being; and overall health scores, compared to baseline. Data was presented at the ESMO Virtual Plenary 2023
Leqvio
Long-term data from Ph3 ORION-8 demonstrated that Leqvio, in addition to statin therapy, provides consistent low-density lipoprotein cholesterol (LDL-C) reduction beyond six years of treatment in patients with atherosclerotic cardiovascular disease (ASCVD), increased risk of ASCVD or heterozygous familial hypercholesterolemia. Efficacy and safety were consistent with previously reported Ph3 results. Data was presented at ESC 2023
GT005
(PPY988)
Development in Geographic Atrophy secondary to dry-Age-related Macular Degeneration discontinued based on benefit-risk assessment. No new safety signals identified. Patients treated will be provided with long term safety follow up
Tislelizumab
Novartis and BeiGene mutually agreed to terminate the collaboration and license agreement for tislelizumab for certain markets. With the termination, BeiGene will re-assume all development and commercialization rights for tislelizumab, and Novartis will manufacture tislelizumab for certain markets. BeiGene will also provide Novartis with ongoing clinical supply of tislelizumab to support its clinical trials
‘Front of Eye’ Assets
Divestment completed of ‘front of eye’ ophthalmology assets to Bausch + Lomb

Capital structure and net debt
Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns remains a priority.
During the first nine months of 2023, Novartis repurchased a total of 74.9 million shares for USD 7.2 billion on the SIX Swiss Exchange second trading line. These repurchases included 52.8 million shares (USD 4.9 billion) under the USD 15 billion share buyback (announced in December 2021 and completed in June 2023) and 10.4 million shares (USD 1.1 billion) under the new up-to USD 15 billion share buyback announced in July 2023. In addition, 11.7 million shares (USD 1.2 billion) were repurchased to mitigate dilution related to participation plans of associates. Furthermore, 1.4 million shares (for an equity value of USD 0.1 billion) were repurchased from associates. In the same period, 12.2 million shares (for an equity value of USD 0.8 billion) were delivered as a result of options exercised and share deliveries related to participation plans of associates. Consequently, the total number of shares outstanding decreased by 64.1 million versus December 31, 2022. These treasury share transactions resulted in an equity decrease of USD 6.5 billion and a net cash outflow of USD 7.3 billion.
As of September 30, 2023, net debt excluding net debt related to discontinued operations increased to USD 10.8 billion compared to USD 7.2 billion total net debt at December 31, 2022. The increase was mainly due to the USD 7.3 billion annual dividend payment, net cash outflow for treasury share transactions of USD 7.3 billion and net M&A / intangible assets transactions of USD 2.9 billion. This increase in net debt was partially offset by USD 11.0 billion free cash flow.
As part of the spin-off, Sandoz incurred total bank debt of approximately USD 3.7 billion and paid approximately USD 3.0 billion in cash, including payment in satisfaction of certain intercompany indebtedness owed by Sandoz and its subsidiaries to Novartis and its affiliates as of September 30, 2023. This reduced the net debt position of Novartis by USD 3.0 billion.
As of Q3 2023, the long-term credit rating for the company is A1 with Moody’s Investors Service and AA- with S&P Global Ratings.


7




2023 outlook raised due to strong momentum                 

Barring unforeseen events; growth vs prior year in cc    Previous Guidance  
Net sales
Expected to grow high single digit
Unchanged
 
  
Core operating income
Expected to grow mid to high teens
(from low double digit to mid teens)
 
 

Key assumptions:
No US Entresto Gx at risk launch in 2023
No Sandostatin LAR generics enter in the US in 2023

Entresto patent update
Novartis has appealed to reverse the negative US District Court decision and to uphold the validity of its combination patent covering Entresto and other combinations of sacubitril and valsartan, which expires in 2025 (with pediatric exclusivity). No generics have tentative or 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.

Foreign exchange impact
If late-October exchange rates prevail for the remainder of 2023, the foreign exchange impact for the year would be negative 2 percentage point on net sales and negative 6 percentage points on core operating income. The estimated impact of exchange rates on our results is provided monthly on our website.


8



Key figures1

Continuing operations2
 
Q3 2023
Q3 2022
% change
   
9M 2023
9M 2022
% change
 
USD m
USD m
USD
cc
 
 
USD m
USD m
USD
cc
Net sales
11 782
10 492
12
12
 
Net sales
34 017
31 630
8
10
Operating income
1 762
1 826
-4
13
 
Operating income
7 187
6 191
16
31
As a % of sales
15.0
17.4
 
 
 
As a % of sales
21.1
19.6
 
 
Net income
1 513
1 330
14
37
 
Net income
5 934
4 734
25
41
EPS (USD)
0.73
0.61
20
45
 
EPS (USD)
2.84
2.16
31
49
Cash flows from
operating activities
5 304
4 275
24
 
 
Cash flows from
operating activities
11 673
9 271
26
 
Non-IFRS measures
         
Non-IFRS measures
       
Free cash flow
5 043
4 054
24
 
 
Free cash flow
11 019
8 661
27
 
Core operating income
4 405
3 772
17
21
 
Core operating income
12 551
11 149
13
19
As a % of sales
37.4
36.0
 
 
 
As a % of sales
36.9
35.2
 
 
Core net income
3 585
3 035
18
23
 
Core net income
10 320
8 983
15
22
Core EPS (USD)
1.74
1.40
24
29
 
Core EPS (USD)
4.95
4.09
21
28
                     
                     
                     
Discontinued operations2
 
Q3 2023
Q3 2022
% change
   
9M 2023
9M 2022
% change
 
USD m
USD m
USD
cc
 
 
USD m
USD m
USD
cc
Net sales
2 476
2 286
8
6
 
Net sales
7 428
6 998
6
8
Operating (loss)/income
-86
342
nm
nm
 
Operating income
265
1 057
-75
-60
As a % of sales
nm
15.0
 
 
 
As a % of sales
3.6
15.1
 
 
Net income
250
245
2
79
 
Net income
440
755
-42
-18
Non-IFRS measures
         
Non-IFRS measures
       
Core operating income
250
510
-51
-38
 
Core operating income
1 185
1 486
-20
-11
As a % of sales
10.1
22.3
 
 
 
As a % of sales
16.0
21.2
 
 
                     
                     
                     
Total company
 
Q3 2023
Q3 2022
% change
   
9M 2023
9M 2022
% change
 
USD m
USD m
USD
cc
 
 
USD m
USD m
USD
cc
Net income
1 763
1 575
12
44
 
Net income
6 374
5 489
16
33
EPS (USD)
0.85
0.73
16
51
 
EPS (USD)
3.05
2.50
22
40
Cash flows from
operating activities
5 378
4 721
14
 
 
Cash flows from
operating activities
11 911
10 125
18
 
Non-IFRS measures
         
Non-IFRS measures
       
Free cash flow
5 043
4 435
14
 
 
Free cash flow
11 038
9 325
18
 
Core net income
3 784
3 419
11
16
 
Core net income
11 209
10 101
11
18
Core EPS (USD)
1.83
1.58
16
22
 
Core EPS (USD)
5.37
4.60
17
24
nm= not meaningful


1 Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 48 of the Condensed Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year.
2 As defined on page 37 of the Condensed Interim Financial Report, Continuing operations include the retained business activities of Novartis, comprising the Innovative Medicines Division and the continuing Corporate activities and Discontinued operations include operational results from the Sandoz business.

Detailed financial results accompanying this press release are included in the Condensed Interim Financial Report at the link below:
https://ml-eu.globenewswire.com/resource/download/1a97fd38-edbc-49ea-9350-8042dc006c1c/


9



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 “guidance,” “expected,” “momentum,” “continue,” “drivers,” “confident,” “outlook,” “remain,” “committed,” “prioritized,” “prioritizing,” “continued,” “growing,” “growth,” “plans,” “on-track,” “continuing,” “anticipated,” “to follow,” “will,” “outlook,” “may,” “upcoming,” “ongoing,” “focus,” “pipeline,” “potential,” “estimated,” “launch,” “to deliver,” “transformation,” “transformative,” “address,” “planned,” “focusing,” “accelerated,” “long-term,” “innovation,” “priority,” “can,” “awaiting,” 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 potential future, pending or announced transactions; or regarding potential future sales or earnings of Novartis; or regarding discussions of strategy, priorities, plans, expectations or intentions, including our transformation into a “pure-play” innovative medicines business; or regarding our liquidity or cash flow positions and our ability to meet our ongoing financial obligations and operational needs; or regarding our USD 15 billion share buyback; or regarding our appeal of the negative decision of the US District Court for the District of Delaware on the validity of our patent covering Entresto and combinations of sacubitril and valsartan. 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: liquidity or cash flow disruptions affecting our ability to meet our ongoing financial obligations and to support our ongoing business activities; the impact of a partial or complete failure of the return to normal global healthcare systems including prescription dynamics; 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 potential significant breaches of data security or data privacy, or disruptions of our information technology systems; regulatory actions or delays or government regulation generally, including potential regulatory actions or delays with respect to the development of the products described in this press release; the potential that the benefits and opportunities expected from our planned spin-off of Sandoz may not be realized or may be more difficult or take longer to realize than expected; the uncertainties in the research and development of new healthcare products, including clinical trial results and additional analysis of existing clinical data; 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; safety, quality, data integrity, or manufacturing issues; uncertainties involved in the development or adoption of potentially transformational technologies and business models; uncertainties regarding actual or potential legal proceedings, investigations or disputes; our performance on environmental, social and governance measures; general political, economic and business conditions, including the effects of and efforts to mitigate pandemic diseases such as COVID-19; uncertainties regarding future global exchange rates; uncertainties regarding future demand for our products; and other risks and factors referred to in Novartis AG’s current Form 20-F on file with 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 AG and its subsidiaries. BAUSCH + LOMB is a registered trademark of Bausch & Lomb Incorporated.

10


About Novartis
Novartis is a focused 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 Novartis divisions and pipeline of selected compounds in late stage development and a copy of today's earnings call presentation can be found at https://www.novartis.com/investors/event-calendar.

Important dates
November 13, 2023 Impact and Health Equity Annual Event
November 28, 2023 R&D Day



11







Novartis Third Quarter and Nine Months 2023 Condensed Interim Financial Report – Supplementary Data

INDEX
Page
COMPANY OPERATING PERFORMANCE REVIEW
Continuing operations
3
Discontinued operations
11
Total Company
11
COMPANY CASH FLOW AND BALANCE SHEET
12
INNOVATION REVIEW
16
CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated income statements
19
Consolidated statements of comprehensive income
21
Consolidated balance sheets
22
Consolidated statements of changes in equity
23
Consolidated statements of cash flows
25
Notes to condensed interim consolidated financial statements, including update on legal proceedings
27
SUPPLEMENTARY INFORMATION
48
CORE RESULTS
Reconciliation from IFRS results to core results
50
Total Company
51
Discontinued operations
53
FREE CASH FLOW
54
ADDITIONAL INFORMATION
Net debt
57
Share information
57
Effects of currency fluctuations
58
DISCLAIMER
59


2



Company
Key Figures
Third quarter and nine months

(USD millions unless indicated otherwise)
Q3 2023
USD m
Q3 2022
USD m
% change
USD
% change
cc 1
9M 2023
USD m
9M 2022
USD m
% change
USD
% change
cc 1
Net sales from continuing operations
11 782
10 492
12
12
34 017
31 630
8
10
Other revenues
310
291
7
6
867
865
0
0
Cost of goods sold
-3 117
-2 874
-8
-4
-9 450
-8 541
-11
-9
Gross profit
from continuing operations

8 975

7 909

13

15

25 434

23 954

6

10
Selling, general and administration
-3 091
-2 936
-5
-4
-9 073
-9 010
-1
-1
Research and development
-3 925
-2 542
-54
-48
-8 804
-6 956
-27
-25
Other income
224
87
157
143
1 322
541
144
141
Other expense
-421
-692
39
42
-1 692
-2 338
28
29
Operating income
from continuing operations

1 762

1 826

-4

13

7 187

6 191

16

31
% of net sales
15.0
17.4
21.1
19.6
Loss from associated companies
-3
-5
40
46
-7
-8
13
26
Interest expense
-222
-206
-8
-11
-638
-593
-8
-11
Other financial income and expense
15
-28
nm
nm
204
18
nm
nm
Income before taxes
from continuing operations

1 552

1 587

-2

18

6 746

5 608

20

36
Income taxes
-39
-257
85
82
-812
-874
7
-5
Net income from continuing operations
1 513
1 330
14
37
5 934
4 734
25
41
Net income from discontinued operations
250
245
2
79
440
755
-42
-18
Net income
1 763
1 575
12
44
6 374
5 489
16
33
Basic earnings per share from continuing operations (USD)
0.73
0.61
20
45
2.84
2.16
31
49
Basic earnings per share from discontinued operations (USD)
0.12
0.12
0
88
0.21
0.34
-38
-13
Total basic earnings per share (USD)
0.85
0.73
16
51
3.05
2.50
22
40
Net cash flows from operating activities from continuing operations
5 304
4 275
24
11 673
9 271
26
Non-IFRS measures 1
Free cash-flow from continuing operations  2
5 043
4 054
24
11 019
8 661
27
Core operating income from continuing operations
4 405
3 772
17
21
12 551
11 149
13
19
% of net sales
37.4
36.0
36.9
35.2
Core net income from continuing operations
3 585
3 035
18
23
10 320
8 983
15
22
Core basic earnings per share (USD) from continuing operations
1.74
1.40
24
29
4.95
4.09
21
28
 1  Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 48. Unless otherwise noted, all growth rates in this release refer to same period in prior year.
 2  Effective January 1, 2023, Novartis revised its definition of free cash flow, to define free cash flow as net cash flows from operating activities less purchases of property, plant and equipment. To aid in comparability, the prior year free cash flow amounts have been revised to conform with the new free cash flow definition. See page 48 of the Condensed Interim Financial Report.
nm = not meaningful
3

Strategy update
Our focus
Novartis has completed its transformation into a “pure-play” innovative medicines business, with the successful spin-off of Sandoz. Our focus is now centered on four core therapeutic areas (cardiovascular, renal and metabolic; immunology; neuroscience and oncology). In each of these areas, we have multiple significant in-market and pipeline assets, all of which address diseases with a high 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.
Financials
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.”
Continuing operations include the retained business activities of Novartis, comprising the Innovative Medicines Division 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.
With the spin-off of the Sandoz business, Novartis operates as a single global operating segment, being a focused innovative medicines company.
The commentary below focuses on continuing operations. We also provide information on discontinued operations, which mainly includes Sandoz and allocated corporate activities.
Third quarter
Net sales
Net sales were USD 11.8 billion (+12%, +12% cc) driven by volume growth of 17 percentage points. Pricing had a negative impact of 1 percentage point and generic competition had a negative impact of 4 percentage points. Sales in the US were USD 4.7 billion (+13%) and in the rest of the world USD 7.1 billion (+12%, +11% cc).
Sales growth was mainly driven by continued strong performance from Kesimpta (USD 657 million, +127%, +124% cc), Entresto (USD 1.5 billion, +31%, +31% cc), Kisqali (USD 562 million, +72%, +76% cc), Pluvicto (USD 256 million, +220%, +217% cc) and Scemblix (USD 106 million, +159%, +157% cc), partly offset by generic competition mainly for Gilenya.
In the US (USD 4.7 billion, +13%), sales growth was mainly driven by Kesimpta, Pluvicto, Kisqali and Entresto, partly offset by the impact of generic competition on Gilenya. In Europe (USD 3.9 billion, +17%, +11% cc), sales growth was driven by Kesimpta, Entresto and Kisqali, partly offset by increased generic competition for Lucentis and Gilenya. Emerging Growth Markets grew +11% (+17% cc), which includes China sales of USD 0.8 billion (+8%, +14% cc).
Operating income
Operating income was USD 1.8 billion (-4%, +13% cc), mainly driven by higher sales and lower restructuring charges, partly offset by higher impairments through discontinuation of early stage development projects. Operating income margin was 15.0% of net sales, decreasing 2.4 percentage points (+0.1 percentage points in cc).
Core adjustments were USD 2.6 billion, mainly due to impairments and amortization compared to USD 1.9 billion in prior year. Core adjustments increased compared to prior year, mainly due to higher impairments, partly offset by lower restructuring charges.
Core operating income was USD 4.4 billion (+17%, +21% cc), mainly driven by higher sales. Core operating income margin was 37.4% of net sales, increasing 1.4 percentage points (+2.7 percentage points cc). Other revenue as a percentage of sales decreased by 0.2 percentage points (cc). Core cost of goods sold as a percentage of sales increased by 0.8 percentage points (cc). Core R&D expenses as a percentage of net sales decreased by 1.7
4

percentage points (cc). Core SG&A expenses as a percentage of net sales decreased by 1.9 percentage points (cc). Core other income and expense as a percentage of net sales increased the margin by 0.1 percentage points (cc).
Interest expense and other financial income/expense
Interest expense amounted to USD 222 million broadly in line with prior year at USD 206 million.
Other financial income and expense amounted to an income of USD 15 million compared to an expense USD 28 million in the prior year, as higher interest income was only partly offset by higher currency losses.
Core other financial income and expense amounted to an income of USD 46 million compared to an expense USD 6 million in the prior year, as higher interest income was only partly offset by higher currency losses.
Income taxes
The tax rate for continuing operations in the third quarter was 2.5% compared to 16.2% in the prior year. The current year rate was favorably impacted by tax benefits from the write-down of investments in subsidiaries, net decreases in uncertain tax positions and the effect of adjusting to the estimated full year tax rate, which was lower than previously estimated. The prior year third quarter tax rate was impacted by the effect of adjusting to the estimated full year tax rate, which was higher than previously estimated. Excluding these impacts the current and prior year quarter rate would have been 14.9% and 15.5% respectively. The decrease from the prior year was mainly the result of a change in profit mix.
The core tax rate for continuing operations (core taxes as a percentage of core income before tax) in the third quarter was 15.2% compared to 14.6% in the prior year. The current and prior year third quarter core tax rate was impacted by the effect of adjusting to the estimated full year core tax rate, which was lower than previously estimated. Excluding these impacts the current and prior year quarter tax rate would have been 15.4%.
Net income, EPS and free cash flow
Net income was USD 1.5 billion (+14%, +37% cc), mainly due to higher operating income and lower tax rate driven by non-recurring items. EPS was USD 0.73 (+20%, +45% cc), growing faster than net income, benefiting from lower weighted average number of shares outstanding.
Core net income was USD 3.6 billion (+18%, +23% cc), mainly due to higher core operating income. Core EPS was USD 1.74 (+24%, +29% cc), growing faster than core net income, benefiting from lower weighted average number of shares outstanding.
Free cash flow amounted to USD 5.0 billion (+24% USD), compared with USD 4.1 billion in the prior year quarter driven by higher net cash flows from operating activities.
Nine months
Net sales
Net sales were USD 34.0 billion (+8%, +10% cc) driven by volume growth of 16 percentage points. Pricing had a negative impact of 2 percentage points and generic competition had a negative impact of 4 percentage points. Sales in the US were USD 13.2 billion (+13%) and in the rest of the world USD 20.8 billion (+5%, +8% cc).
Sales growth was mainly driven by continued strong performance from Entresto (USD 4.4 billion, +31%, +33% cc), Kesimpta (USD 1.5 billion, +112%, +112% cc), Kisqali (USD 1.5 billion, +68%, +74% cc), Pluvicto (USD 707 million) and Scemblix (USD 288 million, +197%, +198% cc), partly offset by generic competition mainly for Gilenya.
In the US (USD 13.2 billion, +13%), sales growth was mainly driven by Pluvicto, Entresto, Kesimpta, Kisqali and Scemblix, partly offset by the impact of generic competition on Gilenya. In Europe (USD 11.3 billion, +5%, +5% cc), sales growth was driven by Kesimpta, Entresto, Kisqali, and Leqvio, partly offset by increased generic competition for Gilenya and Lucentis. Emerging Growth Markets grew +9% (+17% cc), which includes China sales of USD 2.5 billion (+5%, +12% cc).
Operating income
Operating income was USD 7.2 billion (+16%, +31% cc), mainly driven by higher sales, other income from legal matters, lower restructuring charges, partly offset by higher impairments through discontinuation of early stage
5

development projects. Operating income margin was 21.1% of net sales, increasing 1.5 percentage points (+3.6 percentage points in cc).
Core adjustments were USD 5.4 billion, mainly due to amortization and impairments, compared to USD 5.0 billion in prior year. Core adjustments increased compared to prior year, mainly due to higher impairments, partly offset by other income from legal matters and lower restructuring charges.
Core operating income was USD 12.6 billion (+13%, +19% cc), mainly driven by higher sales. Core operating income margin was 36.9% of net sales, increasing 1.7 percentage points (+2.9 percentage points cc). Other revenue as a percentage of sales decreased by 0.2 percentage points (cc). Core cost of goods sold as a percentage of sales increased by 0.3 percentage points (cc). Core R&D expenses as a percentage of net sales decreased by 1.4 percentage points (cc). Core SG&A expenses as a percentage of net sales decreased by 2.2 percentage points (cc). Core other income and expense as a percentage of net sales decreased the margin by 0.2 percentage points (cc).
Interest expense and other financial income/expense
Interest expense amounted to USD 638 million broadly in line with prior year at USD 593 million.
Other financial income and expense amounted to an income of USD 204 million compared to USD 18 million in the prior year, as higher interest income was only partly offset by higher currency losses.
Core other financial income and expense amounted to an income of USD 293 million compared to USD 90 million in the prior year, as higher interest income was only partly offset by higher currency losses.
Income taxes
The tax rate in the first nine months was 12.0% compared to 15.6% in the prior year period. The current year rate was favorably impacted by the effect of non-taxable income recognized related to a legal matter, tax benefits from the write-down of investments in subsidiaries and net decreases in uncertain tax positions. Excluding these impacts, the current year tax rate would have been 15.3% compared to 15.6% in the prior year period. The decrease from the prior year was mainly the result of a change in profit mix.
The core tax rate (core taxes as a percentage of core income before tax) was 15.4% in the first nine months compared to 15.6% in the prior year period. The decrease from the prior year was mainly the result of a change in profit mix.
Net income, EPS and free cash flow
Net income was USD 5.9 billion (+25%, +41% cc), mainly due to higher operating income. EPS was USD 2.84 (+31%, +49% cc), growing faster than net income, benefiting from lower weighted average number of shares outstanding.
Core net income was USD 10.3 billion (+15%, +22% cc), mainly due to higher core operating income. Core EPS was USD 4.95 (+21%, +28% cc), growing faster than core net income, benefiting from lower weighted average number of shares outstanding.
Free cash flow amounted to USD 11.0 billion (+27% USD), compared with USD 8.7 billion in the prior year period driven by higher net cash flows from operating activities.
6

Product commentary (relating to Q3 performance)
Cardiovascular, RENAL and METABOLIC
Q3 2023
Q3 2022
% change
% change
9M 2023
9M 2022
% change
% change
USD m
USD m
USD
cc
USD m
USD m
USD
cc
Cardiovascular, Renal and Metabolic
Entresto
1 485
1 135
31
31
4 400
3 353
31
33
Leqvio
90
34
165
165
232
70
231
231
Total Cardiovascular, Renal and Metabolic
1 575
1 169
35
34
4 632
3 423
35
37
Entresto (USD 1 485 million, +31%, +31% cc) sustained robust demand-led growth. In the US and Europe, Entresto penetration grew through the adoption of guideline-directed medical therapy in heart failure. In China and Japan, Entresto volume growth is 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 and to uphold the validity of its combination patent covering Entresto and other combinations of sacubitril and valsartan, which expires in 2025 (with pediatric exclusivity). No generics have tentative or 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 90 million, +165%, +165% cc) launch in the US and other markets is ongoing, with focus on patient on-boarding, removing access hurdles and enhancing medical education. In the US, Leqvio is covered at or near label for 76% of patients. More than 55% of Leqvio source of business in the US is now through “Buy and Bill” acquisition mode. FDA expanded the label to include primary hyperlipidemia (patients at increased risk of ASCVD) and removed four adverse reactions from the safety section as well as Limitations of Use. In Q3 2023, Leqvio was approved in China and in Japan and is now approved in 93 countries. Novartis obtained global rights to develop, manufacture and commercialize Leqvio under a license and collaboration agreement with Alnylam Pharmaceuticals.
Immunology
Q3 2023
Q3 2022
% change
% change
9M 2023
9M 2022
% change
% change
USD m
USD m
USD
cc
USD m
USD m
USD
cc
Immunology
Cosentyx
1 329
1 274
4
4
3 677
3 708
-1
1
Xolair 1
369
322
15
13
1 085
1 042
4
6
Ilaris
335
272
23
24
979
832
18
20
Other
1
nm
nm
Total Immunology
2 033
1 868
9
9
5 741
5 583
3
4
 1  Net sales reflect Xolair sales for all indications.
nm = not meaningful
Cosentyx (USD 1 329 million, +4%, +4% cc) continued demand growth across key regions, partly offset by US revenue deduction fluctuations across periods. Ex-US sales grew +15% (cc). Since initial approval in 2015, Cosentyx has shown sustained efficacy and a consistent safety profile treating patients across six systemic inflammatory conditions. In October 2023, FDA has approved Cosentyx intravenous formulation for the treatment of adults with psoriatic arthritis, ankylosing spondylitis, and non-radiographic axial spondyloarthritis. Cosentyx hidradenitis suppurativa is now approved in more than 45 countries worldwide, with an FDA decision expected in Q4 2023.
Xolair (USD 369 million, ex-US +15%, +13% cc) sales grew across most regions. 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. In September 2023, Novartis received CHMP positive opinion for the six new Xolair product configurations, including auto injectors.
Ilaris (USD 335 million, +23%, +24% cc) sales grew across all regions. Contributors to growth include the Still’s disease indications (SJIA/AOSD) in the US and Europe, as well as strong performance for the Familial Mediterranean Fever (FMF) indication in key markets worldwide.
7

Neuroscience
Q3 2023
Q3 2022
% change
% change
9M 2023
9M 2022
% change
% change
USD m
USD m
USD
cc
USD m
USD m
USD
cc
Neuroscience
Kesimpta
657
289
127
124
1 530
723
112
112
Zolgensma
308
319
-3
-2
928
1 061
-13
-11
Mayzent
103
94
10
9
286
258
11
12
Aimovig
69
50
38
32
197
159
24
24
Other
1
nm
nm
Total Neuroscience
1 137
752
51
50
2 941
2 202
34
35
nm = not meaningful
Kesimpta (USD 657 million, +127%, +124% cc) sales growth was driven by increased demand, strong access, and benefiting from a one-time revenue deduction adjustment in Europe. Kesimpta is a targeted B-cell therapy that can deliver powerful and sustained high efficacy, with a favorable safety and tolerability profile and the flexibility of an at home self-administration for a broad population of RMS patients. Kesimpta is now approved in 87 countries with more than 55,000 patients treated.
Zolgensma (USD 308 million, -3%, -2% cc) sales were broadly in line with previous year. Established markets are treating mainly incident patients. Zolgensma is now approved in 51 countries with more than 3500 patients treated globally through clinical trials, early access programs and in the commercial setting.
Mayzent (USD 103 million, +10%, +9% cc) sales grew mainly in Europe. Sales continued to grow in patients with multiple sclerosis showing signs of progression despite being on other treatments.
Aimovig (USD 69 million, ex-US, ex-Japan +38%, +32% cc) sales grew mainly in Europe. Aimovig is reimbursed in 32 markets and has been prescribed to more than 834,000 patients worldwide. Novartis commercializes Aimovig ex-US, ex-Japan, while Amgen retains all rights in the US and in Japan.
ONCOLOGY
Q3 2023
Q3 2022
% change
% change
9M 2023
9M 2022
% change
% change
USD m
USD m
USD
cc
USD m
USD m
USD
cc
Oncology
Promacta/Revolade
576
523
10
10
1 706
1 548
10
12
Kisqali
562
327
72
76
1 470
874
68
74
Tafinlar + Mekinist 1
482
450
7
8
1 436
1 305
10
13
Tasigna
464
489
-5
-5
1 402
1 448
-3
-1
Jakavi
427
386
11
9
1 276
1 173
9
11
Pluvicto
256
80
220
217
707
92
nm
nm
Lutathera
159
132
20
19
458
343
34
34
Kymriah
124
134
-7
-9
388
397
-2
-1
Piqray/Vijoice
128
103
24
24
374
261
43
44
Votrient
102
118
-14
-14
313
371
-16
-14
Scemblix
106
41
159
157
288
97
197
198
Adakveo
45
50
-10
-11
150
143
5
5
Tabrecta
36
36
0
1
113
97
16
17
Other
1
2
nm
nm
Total Oncology
3 467
2 869
21
21
10 082
8 151
24
26
 1  Majority of sales for Mekinist and Tafinlar are combination, but both can be used as monotherapy.
nm = not meaningful
Promacta/Revolade (USD 576 million, +10%, +10% cc) sales grew across all regions driven by increased use in second-line persistent and chronic immune thrombocytopenia and as first-line and/or second-line treatment for severe aplastic anemia, according to the respective label in the countries.
8

Kisqali (USD 562 million, +72%, +76% cc) sales grew strongly across all regions, based on increasing recognition of its consistently reported overall survival and quality of life benefits in HR+/HER2- advanced breast cancer. Interim iDFS data from the NATALEE trial in early HR+/HER2- breast cancer, were presented at ASCO and submitted to EMA in August 2023. QOL information from this data was recently presented at a virtual ESMO session demonstrating that the addition of Kisqali did not compromise the quality of life of patients with early breast cancer. Submissions to other regulatory authorities are ongoing with major markets expected to be submitted by the end of this year. Novartis is in US ANDA litigation with a generic manufacturer.
Tafinlar + Mekinist (USD 482 million, +7%, +8% cc) sales grew in the US and Emerging Growth Markets, partly offset by decline in Europe, driven by demand in BRAF+ adjuvant melanoma and NSCLC indications, while maintaining demand in the highly competitive BRAF+ metastatic melanoma market. In addition, growth in the US came from the tumor agnostic indication.
Tasigna (USD 464 million, -5%, -5% cc) sales declined across all regions due to various factors including competition.
Jakavi (USD 427 million, ex-US +11%, +9% cc) sales grew in Emerging Growth Markets, Europe and Japan, driven by strong demand in both myelofibrosis and polycythemia vera indications. Incyte retains all rights to ruxolitinib (Jakafi®) in the US.
Pluvicto (USD 256 million, +220%, +217% cc) saw continued sales growth in the US. Pluvicto is the first and 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 anticancer treatments (ARPI and taxane-based chemotherapy).
Lutathera (USD 159 million, +20%, +19% cc) sales grew mainly in the US, Japan and Europe due to increased demand. Novartis announced the Phase III NETTER-2 trial with Lutathera met its primary endpoint, showing Lutathera is the first radioligand therapy (RLT) to demonstrate clinically meaningful benefit in a first line setting.
Kymriah (USD 124 million, -7%, -9% cc) sales declined in the US, Emerging Growth Markets and Europe, partly offset by growth in Japan.
Piqray/Vijoice (USD 128 million, +24%, +24% cc) sales grew mainly in the US, Emerging Growth Markets and Europe. In addition to PIK3CA-related overgrowth spectrum (PROS), Piqray is the first and only therapy specifically developed for the approximately 40% of HR+/HER2- advanced breast cancer patients who have a PIK3CA mutation, associated with a worse prognosis.
Votrient (USD 102 million, -14%, -14% cc) sales declined due to increased competition, especially from immune-oncology agents in metastatic renal cell carcinoma.
Scemblix (USD 106 million, +159%, +157% cc) sales grew across all regions, demonstrating the high unmet need for effective and tolerable treatment options for CML patients, who have been treated with 2 or more tyrosine kinase inhibitors, or who have the T315I mutation.
Adakveo (USD 45 million, -10%, -11% cc) sales declined mainly in Emerging Growth Markets and Europe. In August 2023, European Commission endorsed the CHMP’s recommendation to revoke the conditional marketing authorization for Adakveo. Adakveo remains approved for use by the FDA for the reduction in frequency of vaso-occlusive crises (pain crises) in adults and pediatric patients aged 16 years or older with sickle cell disease. Novartis continues to discuss the STAND study results with FDA and other health authorities globally.
Tabrecta (USD 36 million, 0%, +1% cc) sales were stable (cc). Tabrecta is the first therapy approved by the FDA to specifically target metastatic NSCLC with a mutation that leads to MET exon 14 skipping (METex14) in line agnostic setting.
9

Other promoted brands
Q3 2023
Q3 2022
% change
% change
9M 2023
9M 2022
% change
% change
USD m
USD m
USD
cc
USD m
USD m
USD
cc
Other Promoted Brands
Ultibro Group
104
108
-4
-7
332
366
-9
-8
Xiidra
64
109
-41
-41
249
342
-27
-27
Beovu
47
52
-10
-9
151
154
-2
1
Other respiratory
21
19
11
21
69
58
19
27
Total Other Promoted Brands
236
288
-18
-19
801
920
-13
-11
Total Promoted Brands 1
8 448
6 946
22
21
24 197
20 279
19
21
 1  Total Promoted Brands refer to the sum of Total Other Promoted Brands and all Therapeutic Areas brands (Cardiovascular, Renal and Metabolic, Immunology, Neuroscience, and Oncology).
Ultibro Group (USD 104 million, -4%, -7% cc) sales declined mainly in Europe, Japan and Emerging Growth Markets due to various factors including competition. Ultibro Group consists of Ultibro Breezhaler, Seebri Breezhaler and Onbrez Breezhaler.
Xiidra (USD 64 million, -41%, -41% cc) sales declined mostly driven by increase in revenue deductions. In September 2023, Novartis completed the divestment of Xiidra to Bausch + Lomb.
Beovu (USD 47 million, -10%, -9% cc) sales declined in the US and Europe, partly offset by growth in Japan and Emerging Growth Markets.
Established BRANDS
Q3 2023
Q3 2022
% change
% change
9M 2023
9M 2022
% change
% change
USD m
USD m
USD
cc
USD m
USD m
USD
cc
Established Brands
Lucentis
363
455
-20
-22
1 174
1 476
-20
-19
Sandostatin
338
295
15
15
998
933
7
8
Gilenya
270
507
-47
-48
771
1 667
-54
-53
Exforge Group
187
185
1
3
557
584
-5
-1
Galvus Group
181
212
-15
-4
539
650
-17
-10
Diovan Group
153
160
-4
-1
466
510
-9
-4
Gleevec/Glivec
144
178
-19
-17
433
570
-24
-21
Afinitor/Votubia
85
125
-32
-30
311
406
-23
-21
Contract manufacturing 1
471
271
74
60
1 174
879
34
30
Other 2
1 142
1 158
-1
-2
3 397
3 676
-8
-3
Total Established Brands 1, 2
3 334
3 546
-6
-7
9 820
11 351
-13
-11
 1  2022 restated to reflect the transfer of the Sandoz Division’s biotechnology manufacturing services to other companies’ activities to the Innovative Medicines Division that was effective as of January 1, 2023.
 2  2022 restated to reflect the transfer of the Coartem brand from the Sandoz Division to the Innovative Medicines Division that was effective as of January 1, 2023.
Lucentis (USD 363 million, ex-US -20%, -22% cc) sales declined in Europe, Emerging Growth Markets and Japan mainly due to biosimilar competition.
Sandostatin (USD 338 million, +15%, +15% cc) sales grew mainly in the US, benefiting from favorable revenue deduction adjustment and inventory movements compared to the prior year.
Gilenya (USD 270 million, -47%, -48% cc) sales declined due to generic competition across all regions. Novartis is in litigation against a generic manufacturer on the method of treatment patent in the US, and against generic manufacturers on the dosing regimen patent in Europe.
10

Discontinued operations
Results for discontinued operations in the third quarter and nine-months 2023 include the results of the Sandoz Division and selected portions of corporate activities attributable to Sandoz business, as well as certain expenses related to the spin-off.
In connection with the Sandoz spin-off on October 4, 2023, the Company will report as part of its Q4 discontinued operations results a one-time non-cash non-taxable IFRS gain of approximately USD 5.9 billion. This IFRS gain represents mainly the excess amount of the IFRS distribution liability, which is the estimated fair value of the Sandoz business distributed to Novartis AG shareholders, over the then carrying value of Sandoz business net assets.
Third quarter
Discontinued operations net sales were USD 2.5 billion (+8%, +6% cc), mainly driven by ex-US growth.
Operating loss amounted to USD 86 million, compared to an operating income of USD 342 million in the previous year. The operating loss in third quarter was driven by the discontinued corporate transaction cost related to spin-off of the Sandoz business, which were core adjustments.
Core operating income was USD 250 million (-51%, -38% cc), mainly driven by lower gross margin and higher SG&A expenses.
Net income from discontinued operations amounted to USD 250 million, compared to USD 245 million in the previous year.
Nine months
Discontinued operations net sales were USD 7.4 billion (+6%, +8% cc), mainly driven by ex-US growth.
Operating income amounted to USD 265 million, compared to USD 1.1 billion in the previous year. The current year period includes the discontinued corporate transaction cost related to spin-off of the Sandoz business, which were core adjustments.
Core operating income was USD 1.2 billion (-20%, -11% cc), mainly driven by higher SG&A expenses and R&D investments.
Net income from discontinued operations amounted to USD 440 million, compared to USD 755 million in the previous year.
Total company
Third quarter
Total company net income was USD 1.8 billion, mainly due to higher operating income and lower tax rate driven by non-recurring items compared to USD 1.6 billion in the prior year. EPS increased to USD 0.85 from USD 0.73 in prior year.
Cash flows from operating activities amounted to USD 5.4 billion compared to USD 4.7 billion in the prior year. Free cash flow amounted to USD 5.0 billion compared to USD 4.4 billion in the prior year.
Nine months
Total company net income was USD 6.4 billion, mainly due to higher operating income compared to USD 5.5 billion in the prior year. EPS increased to USD 3.05 from USD 2.50 in prior year.
Cash flows from operating activities amounted to USD 11.9 billion compared to USD 10.1 billion in the prior year. Free cash flow amounted to USD 11.0 billion compared to USD 9.3 billion in the prior year.
11

Company Cash Flow and Balance Sheet
Cash Flow
Third quarter
Net cash flows from operating activities from continuing operations amounted to USD 5.3 billion, compared with USD 4.3 billion in the prior year quarter. This increase was mainly driven by higher net income adjusted for non-cash items and other adjustments, including divestment gains, favorable changes in working capital, partly offset by higher income taxes paid.
Net cash flows from operating activities from discontinued operations amounted to USD 74 million, compared with USD 0.4 billion in the prior year quarter. This decrease was mainly driven by lower net income from discontinued operations adjusted for non-cash items and other adjustments, including divestment gains.
Net cash outflows used in investing activities from continuing operations amounted to USD 2.0 billion, compared with USD 5.3 billion net cash inflows in the prior year quarter.
The current year quarter net cash outflows from investing activities from continuing operations were mainly driven by cash outflows of USD 3.4 billion for acquisitions and divestments of businesses, net (including the acquisition of Chinook Therapeutics, Inc. for USD 3.1 billion, net of cash acquired USD 0.1 billion, and the acquisition of DTx Pharma Inc. for USD 0.5 billion, net of cash acquired USD 0.1 billion); USD 0.4 billion for purchases of intangible assets; and USD 0.3 billion for purchases of property, plant and equipment. These cash outflows were partly offset by the proceeds from sale of intangible assets of USD 1.8 billion (including USD 1.75 billion proceeds from the divestment of the ‘front of eye’ ophthalmology assets to Bausch + Lomb); and USD 0.1 billion from the sale of financial assets and property, plant and equipment. Net proceeds from the sale of marketable securities, commodities and time deposits amounted to USD 0.2 billion.
In the prior year quarter, net cash inflows from investing activities from continuing operations of USD 5.3 billion were mainly driven by net proceeds of USD 5.7 billion from the sale of marketable securities, commodities and time deposits. These cash inflows were partly offset by USD 0.5 billion cash outflows for purchases of intangible assets and property, plant and equipment.
Net cash outflows used in investing activities from discontinued operations amounted to USD 0.2 billion, broadly in line with USD 0.1 billion in the prior year quarter.
Net cash outflows used in financing activities from continuing operations amounted to USD 4.3 billion, compared with USD 4.7 billion in the prior year quarter.
The current year quarter net cash outflows used in financing activities from continuing operations were mainly driven by USD 2.2 billion for the repayment of two bonds denominated in euro (notional amounts of EUR 1.25 billion and of EUR 0.75 billion) at maturity; USD 1.6 billion payments for net treasury share transactions; and USD 0.4 billion from the net decrease in current financial debts.
In the prior year quarter, net cash outflows used in financing activities from continuing operations of USD 4.7 billion were mainly driven by USD 2.7 billion for net treasury share transactions; USD 1.5 billion for the repayment of a US dollar bond; USD 0.5 billion net decrease in current financial debts; and USD 0.1 billion payments for lease liabilities.
The current year quarter net cash inflows from financing activities from discontinued operations of USD 3.5 billion were mainly driven by USD 3.5 billion cash inflows from bank borrowings (including the USD 3.3 billion Sandoz business borrowings on September 28, 2023, from a group of banks) in connection with the distribution (spin-off) of the Sandoz business to Novartis AG shareholders (refer to Notes 2, 3 and 12 for further details). Net cash inflows from financing activities from discontinued operations in the prior year quarter were USD 11 million.
Free cash flow from continuing operations amounted to USD 5.0 billion (+24% USD), compared with USD 4.1 billion in the prior year quarter, driven by higher net cash flows from operating activities from continuing operations.
Net cash flows from operating activities for the total company amounted to USD 5.4 billion, compared with USD 4.7 billion in the prior year quarter. Total company free cash flow amounted to USD 5.0 billion, compared with USD 4.4 billion in the prior year quarter.
12

Nine months
Net cash flows from operating activities from continuing operations amounted to USD 11.7 billion, compared with USD 9.3 billion in the prior year period. This increase was mainly driven by higher net income adjusted for non-cash items and other adjustments, including divestment gains, favorable changes in working capital, partly offset by higher payments out of provisions.
Net cash flows from operating activities from discontinued operations amounted to USD 0.2 billion, compared with USD 0.9 billion in the prior year period. This decrease was mainly driven by lower net income from discontinued operations adjusted for non-cash items and other adjustments, including divestment gains.
Net cash inflows from investing activities from continuing operations amounted to USD 7.7 billion, compared with USD 3.2 billion in the prior year period.
The current year period net cash inflows from investing activities from continuing operations were driven by net proceeds of USD 11.1 billion from the sale of marketable securities, commodities and time deposits; USD 2.0 billion from the sale of intangible assets (including USD 1.75 billion cash proceeds from the divestment of the ‘front of eye’ ophthalmology assets to Bausch + Lomb); and USD 0.3 billion from the sale of financial assets and property, plant and equipment. These cash inflows were partly offset by cash outflows of USD 3.6 billion for acquisitions and divestments of businesses, net (including the acquisition of Chinook Therapeutics, Inc. for USD 3.1 billion, net of cash acquired USD 0.1 billion, and the acquisition of DTx Pharma Inc. for USD 0.5 billion, net of cash acquired USD 0.1 billion); USD 1.3 billion for purchases of intangible assets; USD 0.7 billion for purchases of property, plant and equipment; and USD 0.1 billion for purchases of financial assets.
In the prior year period, net cash inflows from investing activities from continuing operations of USD 3.2 billion were mainly driven by net proceeds of USD 5.6 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 USD 1.1 billion for purchases of intangible assets; USD 0.6 billion for purchases of property, plant and equipment; and USD 0.8 billion for acquisitions and divestments of businesses, net (primarily the acquisition of Gyroscope Therapeutics Holdings plc for USD 0.8 billion).
Net cash outflows used in investing activities from discontinued operations amounted to USD 0.3 billion, broadly in line with the prior year period.
Net cash outflows used in financing activities from continuing operations amounted to USD 17.1 billion, compared with USD 16.6 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 7.3 billion for the dividend payment; USD 7.3 billion for net treasury share transactions; USD 2.2 billion for the repayment of two bonds denominated in euro (notional amounts of EUR 1.25 billion and of EUR 0.75 billion) at maturity, and USD 0.1 billion from the net decrease in current financial debts. Payments of lease liabilities amounted to USD 0.2 billion.
In the prior year period, net cash outflows used in financing activities from continuing operations of USD 16.6 billion were mainly driven by USD 7.5 billion for the dividend payment; USD 7.9 billion for net treasury share transactions; USD 2.5 billion in aggregate for the repayment of two US dollar bonds; and USD 0.2 billion payments for lease liabilities. These cash outflows were partly offset by cash inflows of USD 1.4 billion from the net increase in current financial debts and other net financing cash inflows of USD 0.1 billion.
The current year period net cash inflows from financing activities from discontinued operations of USD 3.4 billion were mainly driven by USD 3.6 billion cash inflows from bank borrowings (including the USD 3.3 billion Sandoz business borrowings on September 28, 2023, from a group of banks) in connection with the distribution (spin-off) of the Sandoz business to Novartis AG shareholders (refer to Notes 2, 3 and 12 for further details). Net cash inflows from financing activities from discontinued operations in the prior year period were USD 14 million.
Free cash flow from continuing operations amounted to USD 11.0 billion (+27% USD), compared with USD 8.7 billion in the prior year period driven by higher net cash flows from operating activities from continuing operations.
Net cash flows from operating activities for the total company amounted to USD 11.9 billion, compared with USD 10.1 billion in the prior year period. Total company free cash flow amounted to USD 11.0 billion, compared with USD 9.3 billion in the prior year period.
13

Balance sheet
There has been a significant change on the September 30, 2023 consolidated balance sheet resulting from the presentation of the Sandoz business as a discontinued operations, following the September 15, 2023 shareholders’ approval to spin-off of Sandoz business through a dividend in kind distribution to the Novartis AG shareholders (for further details see Note 1, Note 2 and Note 3).
The December 31, 2022 consolidated balance sheet includes the assets and liabilities of the Sandoz business. The September 30, 2023 consolidated balance sheet excludes the assets and liabilities of the Sandoz business in the individual lines and presents its total assets in a single line in current assets “Assets related to discontinued operations” and its total liabilities in a single line in current liabilities “Liabilities related to discontinued operations.” The consolidated balance sheet discussion and analysis that follows excludes the impacts of the presentation of the assets and liabilities of the Sandoz business in these respective single lines as current assets and current liabilities, respectively. For details on the assets and liabilities of the Sandoz business at September 30, 2023 see Note 12.
Assets
Total non-current assets of USD 67.0 billion decreased by USD 1.9 billion compared to December 31, 2022, excluding the impact of the presentation of the Sandoz business non-current assets related to discontinued operations.
Intangible assets other than goodwill decreased by USD 3.8 billion mainly due to amortization and impairments and the divestment of the ‘front of eye’ ophthalmology assets, partially offset by the acquisition of Chinook Therapeutics, Inc. and of DTx Pharma Inc., additions, and favorable currency translation adjustments.
Goodwill increased by USD 1.6 billion mainly due to the acquisition of DTx Pharma Inc. and of Chinook Therapeutics, Inc.
Deferred tax assets increased by USD 0.6 billion and property, plant and equipment, right-of-use assets, investments in associated companies, financial assets, and other non-current assets were broadly in line with December 31, 2022.
Total current assets of USD 45.7 billion decreased by USD 4.0 billion compared to December 31, 2022, excluding the impact of the presentation of the Sandoz business non-current assets related to discontinued operations.
Cash and cash equivalents, marketable securities, commodities, time deposits and derivative financial instruments decreased by USD 6.2 billion mainly due to the dividend payment, and net purchases of treasury shares and intangible assets, partially offset by the cash generated through operating activities.
Inventories increased by USD 0.6 billion and trade receivables increased by USD 1.0 billion. Other current assets increased by USD 0.6 billion and income tax receivables were broadly in line with December 31, 2022.
Liabilities
Total non-current liabilities of USD 26.1 billion decreased by USD 2.5 billion compared to December 31, 2022, excluding the impact of the presentation of the Sandoz business non-current liabilities related to discontinued operations.
Non-current financial debts decreased by USD 2.1 billion mainly due to the reclassification of USD 2.1 billion from non-current to current financial debts of a USD denominated bond with notional amount of USD 2.2 billion maturing in 2024.
Non-current lease liabilities, deferred tax liabilities and provisions and other non-current liabilities were broadly in line with December 31, 2022.
Total current liabilities of USD 48.4 billion increased by USD 0.7 billion compared to December 31, 2022 excluding the impact of the presentation of the Sandoz business non-current liabilities related to discontinued operations. This increase was mainly due to recognition of the dividend in kind distribution liability to effect the spin-off of the Sandoz business of USD 14.0 billion (see Note 3).
Current financial debts and derivative financial instruments decreased by USD 0.3 billion, mainly due to the repayment of a 0.5% coupon bond with a notional amount of EUR 750 million and a 0.125% coupon bond with a notional amount
14

of EUR 1.25 billion partly offset by the reclassification of USD 2.1 billion from non-current to current financial debts of a USD denominated bond with notional amount of USD 2.2 billion maturing in 2024.
Provisions and other current liabilities increased by USD 1.4 billion. Trade payables, current income tax liabilities and current lease liabilities were broadly in line with December 31, 2022.
Equity
The Company’s equity decreased by USD 21.2 billion to USD 38.2 billion compared to December 31, 2022.
This decrease was mainly due to the dividend in kind distribution liability of USD 14.0 billion (see Note 3), the cash-dividend payment of USD 7.3 billion and the purchase of treasury shares of USD 7.3 billion. This was partially offset by the net income of USD 6.4 billion, exercise of options and employee transactions of USD 0.2 billion, and equity-based compensation of USD 0.7 billion.
Net debt and debt/equity ratio
The Company’s liquidity amounted to USD 12.7 billion at September 30, 2023, compared to USD 18.9 billion on December 31, 2022. Total non-current and current financial debts, including derivatives, amounted to USD 23.5 billion at September 30, 2023 compared to USD 26.2 billion at December 31, 2022.
The debt/equity ratio were 0.62:1 at September 30, 2023, compared to 0.44:1 at December 31, 2022. As of September 30, 2023 the net debt was USD 10.8 billion, compared to USD 7.2 billion on December 31, 2022.
15

Innovation Review
Novartis continues to focus its R&D portfolio prioritizing high value medicines with transformative potential for patients. We now focus on ~115 projects in clinical development.
Selected Innovative Medicines approvals

Product
Active ingredient/
Descriptor

Indication

Region
Leqvio
inclisiran
Hypercholesterolemia
China, Japan
Cosentyx
secukinumab

Intravenous formulation for psoriatic
arthritis, ankylosing spondylitis,
and non-radiographic axial SpA
US

Jakavi
ruxolitinib
Acute graft-versus-host
disease
Japan

Chronic graft-versus-host
disease
Japan
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)



Q3 2023





– EU filing


LNP023
(iptacopan)
Paroxysmal nocturnal
hemoglobinuria
Q2 2023
Q2 2023
Q3 2023
– Japan filing
Cosentyx
Hidradenitis suppurativa
Q3 2022
Approved
VDT482
(tislelizumab)
2L Esophageal cancer



– Mutual termination of the agreement
with BeiGene, Ltd.
Non-small cell lung
cancer




Selected Innovative Medicines pipeline projects
Compound/
product
Potential indication/
Disease area
First planned
submissions
Current
Phase

News update
Aimovig
Migraine, pediatrics
≥2026
3
AVXS-101
(OAV101)
Spinal muscular atrophy
(IT formulation)
2025
3

Beovu
Diabetic retinopathy
2025
3
CFZ533
(iscalimab)
Sjögren's syndrome
≥2026
2

Coartem
Malaria, uncomplicated (<5 kg patients)

2024

3

– Submission will use the MAGHP procedure
in Switzerland to facilitate rapid approval in
developing countries
Cosentyx
Giant cell arteritis
2025
3
Polymyalgia rheumatica
≥2026
3
Rotator cuff tendinopathy
≥2026
3
EXV811
(atrasentan)
IgA nephropathy
2024
3
– Chinook aquisition
FUB523
(zigakibart)
IgA nephropathy
≥2026
3
– Chinook aquisition
JDQ443
(opnurasib)
Non-small cell lung cancer, 2/3L
2024
3

Non-small cell lung cancer (combos)
≥2026
2
KAE609
(cipargamin)
Malaria, uncomplicated
≥2026
2
Malaria, severe
≥2026
2
KLU156
(ganaplacide
+ lumefantrine)
Malaria, uncomplicated

≥2026

2

– FDA Orphan Drug designation
– FDA Fast Track designation
16

Compound/
product
Potential indication/
Disease area
First planned
submissions
Current
Phase

News update
Leqvio
Secondary prevention of cardiovascular
events in patients with elevated levels of LDL-C
≥2026
3

Primary prevention CVRR
≥2026
3
LNA043
Osteoarthritis
≥2026
2
– FDA Fast Track designation
LNP023
(iptacopan)
IgA nephropathy


2024


3


– EU Orphan Drug designation
– Ph3 APPLAUSE-IgAN study met
its pre-specified interim analysis
primary endpoint
C3 glomerulopathy



2024



3



– EU Orphan Drug designation
– EU PRIME designation
– FDA Rare Pediatric designation
– China Breakthrough Therapy designation
– FDA Breakthrough Therapy designation
IC-MPGN
≥2026
3
Atypical haemolytic uraemic syndrome
≥2026
3
LOU064
(remibrutinib)
Chronic spontaneous urticaria
2024
3
– Ph3 REMIX-1 and REMIX-2 studies
met all primary and secondary endpoints
Multiple sclerosis
≥2026
3
CINDU
≥2026
3
Sjögren's syndrome
≥2026
2
Lutathera
Gastroenteropancreatic
neuroendocrine tumors,
1L in G2/3 tumors
2024

3

– Ph3 NETTER-2 trial met
its primary endpoint
177Lu-NeoB
Multiple solid tumors
≥2026
1
LXE408
Visceral leishmaniasis
≥2026
2
MBG453
(sabatolimab)
Myelodysplastic syndrome
2024
3
– FDA Fast Track designation
– EU Orphan Drug designation
Unfit acute myeloid leukemia
≥2026
2
MIJ821
(onfasprodil)
Depression



2

– Program discontinued following
strategic review, including a benefit risk
assessment of acute MDD with suicidality
Piqray
Ovarian cancer

3
– Program discontinued based on benefit-risk
assessment
Pluvicto
Metastatic castration-resistant
prostate cancer pre-taxane
2024
3
– Novartis is continuing to collect OS data,
regulatory filings are anticipated in 2024
Metastatic hormone sensitive prostate cancer
2024
3
PPY988
(GT005)
Geographic atrophy





2


– Program discontinued based on benefit-risk
assessment. No new safety signals identified.
Patients treated to be provided with long term
safety follow up
QGE031
(ligelizumab)
Food allergy
≥2026
3

Scemblix
1L Chronic myeloid leukemia
2024
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
17

Compound/
product
Potential indication/
Disease area
First planned
submissions
Current
Phase

News update
VAY736
(ianalumab)
Auto-immune hepatitis
≥2026
2

Sjögren’s syndrome
≥2026
3
– FDA Fast Track designation
Lupus nephritis
≥2026
3
Systemic lupus erythematosus
≥2026
3
1L Immune thrombocytopenia
≥2026
3
2L Immune thrombocytopenia
≥2026
3
warm Autoimmune hemolytic anemia
≥2026
3
VDT482
(tislelizumab)
1L Gastric cancer

3
– Mutual termination of the agreement
with BeiGene, Ltd.
1L ESCC
3
Localized ESCC
3
1L Small cell lung cancer
3
1L Urothelial cell carcinoma
3
Adj/Neo adj. NSCLC
3
Xolair
Food allergy
2023
3
XXB750
Hypertension
≥2026
2
YTB323
sr Lupus nephritis /
Systemic lupus erythematosus
≥2026
2

1L High-risk large B-cell lymphoma
≥2026
2
18

Condensed Interim Consolidated Financial Statements

Consolidated income statements
Third quarter (unaudited)
(USD millions unless indicated otherwise)
Note
Q3 2023
Q3 2022
Net sales from continuing operations
10
11 782
10 492
Other revenues
10
310
291
Cost of goods sold
-3 117
-2 874
Gross profit from continuing operations
8 975
7 909
Selling, general and administration
-3 091
-2 936
Research and development
-3 925
-2 542
Other income
224
87
Other expense
-421
-692
Operating income from continuing operations
1 762
1 826
Loss from associated companies
-3
-5
Interest expense
-222
-206
Other financial income and expense
15
-28
Income before taxes from continuing operations
1 552
1 587
Income taxes
-39
-257
Net income from continuing operations
1 513
1 330
Net income from discontinued operations
12
250
245
Net income
1 763
1 575
Attributable to:
   Shareholders of Novartis AG
1 761
1 573
   Non-controlling interests
2
2
Weighted average number of shares outstanding – Basic (million)
2 062
2 167
Basic earnings per share from continuing operations (USD) 1
0.73
0.61
Basic earnings per share from discontinued operations (USD) 1
0.12
0.12
Total basic earnings per share (USD) 1
0.85
0.73
Weighted average number of shares outstanding – Diluted (million)
2 075
2 180
Diluted earnings per share from continuing operations (USD) 1
0.73
0.61
Diluted earnings per share from discontinued operations (USD) 1
0.12
0.11
Total diluted earnings per share (USD) 1
0.85
0.72
 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
19

Consolidated income statements
Nine months to September 30 (unaudited)
(USD millions unless indicated otherwise)
Note
9M 2023
9M 2022
Net sales from continuing operations
10
34 017
31 630
Other revenues
10
867
865
Cost of goods sold
-9 450
-8 541
Gross profit from continuing operations
25 434
23 954
Selling, general and administration
-9 073
-9 010
Research and development
-8 804
-6 956
Other income
1 322
541
Other expense
-1 692
-2 338
Operating income from continuing operations
7 187
6 191
Loss from associated companies
-7
-8
Interest expense
-638
-593
Other financial income and expense
204
18
Income before taxes from continuing operations
6 746
5 608
Income taxes
-812
-874
Net income from continuing operations
5 934
4 734
Net income from discontinued operations
12
440
755
Net income
6 374
5 489
Attributable to:
   Shareholders of Novartis AG
6 370
5 489
   Non-controlling interests
4
0
Weighted average number of shares outstanding – Basic (million)
2 085
2 196
Basic earnings per share from continuing operations (USD) 1
2.84
2.16
Basic earnings per share from discontinued operations (USD) 1
0.21
0.34
Total basic earnings per share (USD) 1
3.05
2.50
Weighted average number of shares outstanding – Diluted (million)
2 098
2 210
Diluted earnings per share from continuing operations (USD) 1
2.83
2.14
Diluted earnings per share from discontinued operations (USD) 1
0.21
0.34
Total diluted earnings per share (USD) 1
3.04
2.48
 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
20

Consolidated statements of comprehensive income
Third quarter (unaudited)
(USD millions)
Q3 2023
Q3 2022
Net income
1 763
1 575
Other comprehensive income
Items that are or may be recycled into the consolidated income statement from continuing operations
   Net investment hedge, net of taxes
38
36
   Currency translation effects, net of taxes
-389
-631
Total of items that are or may be recycled
-351
-595
Items that will never be recycled into the consolidated income statement from continuing operations
   Actuarial gains/(losses) from defined benefit plans, net of taxes
104
-530
   Fair value adjustments on equity securities, net of taxes
27
40
Total of items that will never be recycled
131
-490
   Other comprehensive income from continuing operations
-220
-1 085
   Other comprehensive income from discontinued operations
-66
-129
Total comprehensive income
1 477
361
Total comprehensive income for the year attributable to:
   Shareholders of Novartis AG
1 476
363
   Non-controlling interests
1
-2
The accompanying Notes form an integral part of the condensed interim consolidated financial statements
Nine months to September 30 (unaudited)
(USD millions)
9M 2023
9M 2022
Net income
6 374
5 489
Other comprehensive income
Items that are or may be recycled into the consolidated income statement from continuing operations
   Net investment hedge, net of taxes
32
84
   Currency translation effects, net of taxes
63
-1 735
Total of items that are or may be recycled
95
-1 651
Items that will never be recycled into the consolidated income statement from continuing operations
   Actuarial gains from defined benefit plans, net of taxes
47
1 741
   Fair value adjustments on equity securities, net of taxes
-19
-281
Total of items that will never be recycled
28
1 460
   Other comprehensive income from continuing operations
123
-191
   Other comprehensive income from discontinued operations
-21
-170
Total comprehensive income
6 476
5 128
Total comprehensive income for the year attributable to:
   Shareholders of Novartis AG
6 472
5 136
   Non-controlling interests
4
-8
    
The accompanying Notes form an integral part of the condensed interim consolidated financial statements
21

Consolidated balance sheets

(USD millions)


Note
Sep 30,
2023
(unaudited)
Dec 31,
2022
(audited)
Assets
Non-current assets
Property, plant and equipment
9 044
10 764
Right-of-use assets
1 300
1 431
Goodwill
23 416
29 301
Intangible assets other than goodwill
26 418
31 644
Investments in associated companies
202
143
Deferred tax assets
3 628
3 739
Financial assets
1 920
2 411
Other non-current assets
1 109
1 110
Total non-current assets
67 037
80 543
Current assets
Inventories
5 610
7 175
Trade receivables
6 819
8 066
Income tax receivables
280
268
Marketable securities, commodities, time deposits and derivative financial instruments
290
11 413
Cash and cash equivalents
12 405
7 517
Other current assets
2 782
2 471
Total current assets related to
continuing operations


28 186

36 910
Assets related to discontinued operations
12
17 474
Total current assets
45 660
36 910
Total assets
112 697
117 453
Equity and liabilities
Equity
Share capital
825
890
Treasury shares
-32
-92
Reserves
37 371
58 544
Equity attributable to Novartis AG shareholders
38 164
59 342
Non-controlling interests
81
81
Total equity
38 245
59 423
Liabilities
Non-current liabilities
Financial debts
18 068
20 244
Lease liabilities
1 453
1 538
Deferred tax liabilities
2 457
2 686
Provisions and other non-current liabilities
4 081
4 906
Total non-current liabilities
26 059
29 374
Current liabilities
Dividend in kind distribution liability
3
13 962
Trade payables
3 870
5 146
Financial debts and derivative financial instruments
5 458
5 931
Lease liabilities
210
251
Current income tax liabilities
2 129
2 533
Provisions and other current liabilities
13 974
14 795
Total current liabilities
related to continuing operations


39 603

28 656
Liabilities related to discontinued operations
12
8 790
Total current liabilities
48 393
28 656
Total liabilities
74 452
58 030
Total equity and liabilities
112 697
117 453
The accompanying Notes form an integral part of the condensed interim consolidated financial statements
22

Consolidated statements of changes in equity
Third 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 July 1, 2023
842
-52
55 682
-4 625
51 847
84
51 931
Net income
1 761
1 761
2
1 763
Other comprehensive income
-285
-285
-1
-286
Total comprehensive income
1 761
-285
1 476
1
1 477
Dividend in kind
3
-13 962
-13 962
-13 962
Purchase of treasury shares
-6
-1 390
-1 396
-1 396
Reduction of share capital
4.1
-17
26
-9
Exercise of options and employee transactions
4.2
-2
-2
-2
Equity-based compensation
0
221
221
221
Taxes on treasury share transactions
3
3
3
Transaction costs, net of taxes
4.4
-74
-74
-74
Changes in non-controlling interests
-4
-4
Fair value adjustments on financial assets sold
52
-52
Other movements
4.5
51
51
51
Total of other equity movements
-17
20
-15 110
-52
-15 159
-4
-15 163
Total equity at September 30, 2023
825
-32
42 333
-4 962
38 164
81
38 245
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 July 1, 2022
890
-60
65 432
-3 337
62 925
81
63 006
Net income
1 573
1 573
2
1 575
Other comprehensive income
-1 210
-1 210
-4
-1 214
Total comprehensive income
1 573
-1 210
363
-2
361
Purchase of treasury shares
-11
-2 702
-2 713
-2 713
Exercise of options and employee transactions
4.2
-2
-2
-2
Equity-based compensation
1
213
214
214
Taxes on treasury share transactions
1
1
1
Changes in non-controlling interests
-1
-1
Fair value adjustments on financial assets sold
-4
4
Other movements
4.5
32
32
32
Total of other equity movements
-10
-2 462
4
-2 468
-1
-2 469
Total equity at September 30, 2022
890
-70
64 543
-4 543
60 820
78
60 898
The accompanying Notes form an integral part of the condensed interim consolidated financial statements
23

Consolidated statements of changes in equity
Nine months to September 30 (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, 2023
890
-92
63 540
-4 996
59 342
81
59 423
Net income
6 370
6 370
4
6 374
Other comprehensive income
102
102
0
102
Total comprehensive income
6 370
102
6 472
4
6 476
Dividends
-7 255
-7 255
-7 255
Dividend in kind
3
-13 962
-13 962
-13 962
Purchase of treasury shares
-41
-7 243
-7 284
-7 284
Reduction of share capital
4.1
-65
94
-29
Exercise of options and employee transactions
4.2
2
149
151
151
Equity-based compensation
5
649
654
654
Taxes on treasury share transactions
11
11
11
Transaction costs, net of taxes
4.4
-74
-74
-74
Changes in non-controlling interests
-4
-4
Value adjustments on financial assets sold
68
-68
Other movements
4.5
109
109
109
Total of other equity movements
-65
60
-27 577
-68
-27 650
-4
-27 654
Total equity at September 30, 2023
825
-32
42 333
-4 962
38 164
81
38 245
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, 2022
901
-48
70 989
-4 187
67 655
167
67 822
Net income
5 489
5 489
0
5 489
Other comprehensive income
-353
-353
-8
-361
Total comprehensive income
5 489
-353
5 136
-8
5 128
Dividends
-7 506
-7 506
-7 506
Purchase of treasury shares
-44
-8 159
-8 203
-8 203
Reduction of share capital
4.1
-11
15
-4
Exercise of options and employee transactions
4.2
1
88
89
89
Equity-based compensation
6
645
651
651
Shares delivered to Alcon employees
as a result of the Alcon spin-off



0

5


5


5
Taxes on treasury share transactions
12
12
12
Decrease of treasury share repurchase obligation
under a share buyback trading plan

4.3



2 809


2 809


2 809
Changes in non-controlling interests
-81
-81
Fair value adjustments on financial assets sold
3
-3
Other movements
4.5
172
172
172
Total of other equity movements
-11
-22
-11 935
-3
-11 971
-81
-12 052
Total equity at September 30, 2022
890
-70
64 543
-4 543
60 820
78
60 898
The accompanying Notes form an integral part of the condensed interim consolidated financial statements
24

Consolidated statements of cash flows
Third quarter (unaudited)
(USD millions)
Note
Q3 2023
Q3 2022
Net income from continuing operations
1 513
1 330
Adjustments to reconcile net income to net cash flows from operating activities from continuing operations
Reversal of non-cash items and other adjustments from continuing operations
6.1
3 329
2 920
Dividends received from associated companies and others
1
Interest received
109
82
Interest paid
-178
-159
Change in other financial receipts
37
89
Change in other financial payments
-4
19
Income taxes paid
6.2
-426
-260
Net cash flows from operating activities from continuing operations
before working capital and provision changes


4 381

4 021
Payments out of provisions and other net cash movements in non-current liabilities
-255
-193
Change in net current assets and other operating cash flow items
6.3
1 178
447
Net cash flows from operating activities from continuing operations
5 304
4 275
Net cash flows from operating activities from discontinued operations
74
446
Total net cash flows from operating activities
5 378
4 721
Purchases of property, plant and equipment
-261
-221
Proceeds from sale of property, plant and equipment
51
20
Purchases of intangible assets
-422
-251
Proceeds from sale of intangible assets
1 823
3
Purchases of financial assets
-11
-15
Proceeds from sale of financial assets
91
26
Purchases of other non-current assets
-1
Acquisitions and divestments of interests in associated companies, net
-3
-2
Acquisitions and divestments of businesses, net
6.4
-3 443
8
Purchases of marketable securities, commodities and time deposits
-28
-6 693
Proceeds from sale of marketable securities, commodities and time deposits
199
12 435
Net cash flows (used in)/from investing activities from continuing operations
-2 004
5 309
Net cash flows used in investing activities from discontinued operations
-208
-111
Total net cash flows (used in)/from investing activities
-2 212
5 198
Purchases of treasury shares
-1 625
-2 718
Proceeds from exercised options and other treasury share transactions, net
-1
Repayments of the current portion of non-current financial debts
-2 223
-1 500
Change in current financial debts
-418
-499
Payments of lease liabilities
-63
-64
Other financing cash flows, net
24
32
Net cash flows used in financing activities from continuing operations
-4 306
-4 749
Net cash flows from financing activities from discontinued operations
12
3 474
11
Total net cash flows used in financing activities
-832
-4 738
Net change in cash and cash equivalents before effect of exchange rate changes
2 334
5 181
Less cash and cash equivalents from discontinued operations at September 30, 2023
12
-648
Effect of exchange rate changes on cash and cash equivalents
-166
-80
Net change in cash and cash equivalents
1 520
5 101
Cash and cash equivalents at July 1
10 885
3 625
Cash and cash equivalents at September 30
12 405
8 726
The accompanying Notes form an integral part of the condensed interim consolidated financial statements
25

Consolidated statements of cash flows
Nine months to September 30 (unaudited)
(USD millions)
Note
9M 2023
9M 2022
Net income from continuing operations
5 934
4 734
Adjustments to reconcile net income to net cash flows from operating activities from continuing operations
Reversal of non-cash items and other adjustments from continuing operations
6.1
8 578
7 875
Dividends received from associated companies and others
2
1
Interest received
482
119
Interest paid
-513
-455
Other financial receipts
64
89
Other financial payments
-14
-21
Income taxes paid
6.2
-1 694
-1 368
Net cash flows from operating activities from continuing operations
before working capital and provision changes


12 839

10 974
Payments out of provisions and other net cash movements in non-current liabilities
-1 181
-451
Change in net current assets and other operating cash flow items
6.3
15
-1 252
Net cash flows from operating activities from continuing operations
11 673
9 271
Net cash flows from operating activities from discontinued operations
238
854
Total net cash flows from operating activities
11 911
10 125
Purchases of property, plant and equipment
-654
-610
Proceeds from sale of property, plant and equipment
73
56
Purchases of intangible assets
-1 316
-1 131
Proceeds from sale of intangible assets
1 953
170
Purchases of financial assets
-77
-86
Proceeds from sale of financial assets
201
121
Purchases of other non-current assets
-1
Acquisitions and divestments of interests in associated companies, net
-8
-22
Acquisitions and divestments of businesses, net
6.4
-3 550
-833
Purchases of marketable securities, commodities and time deposits
-97
-24 147
Proceeds from sale of marketable securities, commodities and time deposits
11 216
29 706
Net cash flows from investing activities from continuing operations
7 741
3 223
Net cash flows used in investing activities from discontinued operations
-385
-288
Total net cash flows from investing activities
7 356
2 935
Dividends paid to shareholders of Novartis AG
-7 255
-7 506
Purchases of treasury shares
-7 468
-7 974
Proceeds from exercised options and other treasury share transactions, net
158
100
Repayments of the current portion of non-current financial debts
-2 223
-2 575
Change in current financial debts
-128
1 448
Payments of lease liabilities
-194
-198
Other financing cash flows, net
42
123
Net cash flows used in financing activities from continuing operations
-17 068
-16 582
Net cash flows from financing activities from discontinued operations
12
3 397
14
Total net cash flows used in financing activities
-13 671
-16 568
Net change in cash and cash equivalents before effect of exchange rate changes
5 596
-3 508
Less cash and cash equivalents from discontinued operations at September 30, 2023
12
-648
Effect of exchange rate changes on cash and cash equivalents
-60
-173
Net change in cash and cash equivalents
4 888
-3 681
Cash and cash equivalents at January 1
7 517
12 407
Cash and cash equivalents at September 30
12 405
8 726
The accompanying Notes form an integral part of the condensed interim consolidated financial statements
26

 

Notes to the Condensed Interim Consolidated Financial Statements for the three month and nine month period ended September 30, 2023 (unaudited)

1. Basis of preparation
These Condensed Interim Consolidated Financial Statements for the three month and nine month interim period ended September 30, 2023, were prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and accounting policies set out in the 2022 Annual Report published on February 1, 2023.
Following the shareholder approval for the spin-off of our Sandoz business at the Novartis AG 2023 Extraordinary General Meeting held on September 15, 2023, International Financial Reporting Standards (IFRS) require 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 consolidated financial statements. This requires the three months and nine months September 30, 2023 consolidated income statement, consolidated statement of comprehensive income and consolidated statement of cash flows to present separately continuing operations from discontinued operations, with comparative amounts in the prior years restated on a consistent basis. On the September 30, 2023, consolidated balance sheet, the Sandoz business discontinued operations assets and liabilities are presented in a single line within current assets (“Assets related to discontinued operations”) and within current liabilities (“Liabilities related to discontinued operations”), respectively, with no restatement of December 31, 2022, consolidated balance sheet required. Refer to Note 2, Note 3, and Note 12 for further information and disclosures.
2. Selected critical accounting policies
The Company’s principal accounting policies are set out in Note 1 to the Consolidated Financial Statements in the 2022 Annual Report and conform with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.
The preparation of interim 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 2022 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 Novartis AG shareholders’ approval of a special distribution by way of a dividend in kind to effect the spin-off of Sandoz Group AG (the Sandoz business), at the 2023 EGM held on September 15, 2023, required the recognition of a distribution liability at the fair value of the Sandoz business to be distributed to Novartis AG shareholders.
This required the use of valuation techniques for purposes of impairment testing of the Sandoz business net assets to be distributed and for the measurement of the fair value of the distribution liability. These valuations required the use of management assumptions and estimates related to estimating the Sandoz business fair value. These fair value measurements are classified as “Level 3” in the fair value hierarchy. The section “—Impairment of goodwill and intangible assets” in Note 1 to the Consolidated Financial Statements in the Annual Report 2022 provide additional information on key assumptions that are highly sensitive in the estimation of fair values using valuation techniques. Due to these factors and inherent uncertainties in the use of estimates, actual outcomes and results could vary significantly. The section below “Distribution of Sandoz Group AG to Novartis AG shareholders” in this Note 2 and Note 3 provides further information and disclosures.
27

The Company’s activities are not subject to significant seasonal fluctuations.
Non-current assets held for sale or held for distribution to owners
Non-current assets are classified as assets held for sale or related to discontinued operations when their carrying amount is to be recovered principally through a sale transaction or distribution to owners and a sale or distribution to owners is considered highly probable. They are stated at the lower of carrying amount and fair value less costs to sell with any resulting impairment recognized. Assets related to discontinued operations and assets of disposal group held for sale are not depreciated or amortized. The prior-year consolidated balance sheet is not restated.
Distribution of Sandoz Group AG to Novartis AG shareholders
At the 2023 Extraordinary General Meeting (EGM) of Novartis AG shareholders, held on September 15, 2023, the Novartis AG shareholders approved a special distribution by way of a dividend in kind to effect the spin-off of Sandoz Group AG.
The September 15, 2023 shareholder approval for the spin-off required the Sandoz Division and selected portions of corporate activities attributable to Sandoz’s business (the “Sandoz business”) to be reported as discontinued operations.
The shareholder approval to spin off the Sandoz business also required the recognition of a distribution liability at the fair value of the Sandoz business. Novartis policy is to measure the distribution liability at the fair value of the Sandoz business net assets taken as a whole. The distribution liability was recognized through a reduction in retained earnings. It is required to be adjusted at each balance sheet date for changes in its estimated fair value, up to the date of the distribution to shareholders through retained earnings. Any resulting impairment of the business assets to be distributed would have been recognized in the consolidated income statements in “Other expense” of discontinued operations, at the date of initial recognition of the distribution liability or at subsequent dates resulting from changes of the distribution liability valuation.
At the October 4, 2023, distribution settlement date, the resulting gain, which is measured as the excess amount of the distribution liability over the then-carrying value of the net assets of the business distributed, will be recognized in the fourth quarter 2023 on the line “Gain on distribution of Sandoz Group AG to Novartis AG shareholders” within the income statement of discontinued operations.
The recognition of the distribution liability required the use of valuation techniques for purposes of impairment testing of the Sandoz business’ assets to be distributed and for the measurement of the fair value of the distribution liability. These valuations required the use of management assumptions and estimates related to the Sandoz business’ future cash flows, market multiples, opening share price of Sandoz Group AG on the first day of trading its shares on the SIX Swiss Exchange, to estimate day one market value, and control premiums to apply in estimating the Sandoz business fair value. These fair value measurements are classified as “Level 3” in the fair value hierarchy. The section “—Impairment of goodwill and intangible assets” in Note 1 to the Consolidated Financial Statements in the Annual Report 2022 provide additional information on key assumptions that are highly sensitive in the estimation of fair values using valuation techniques.
Transaction costs that are directly attributable to the distribution (spin-off) of Sandoz business to the Novartis AG shareholders by way of a dividend in kind, and that would otherwise have been avoided, are accounted for as a deduction from equity (within retained earnings) at the date of distribution (spin-off). Prior to the recognition of the distribution liability, these costs were recorded as prepaid expenses in the consolidated balance sheet.
For additional disclosures, refer to Note 3 and Note 12.
28

3. Significant transactions