Annual Report
2023
Annual Report
2023
Chair’s letter
In 2023, Novartis made another substantial step in trans-
forming from a diversified healthcare player into a focused
innovative medicines company. With the successful spin-
off and listing of our generics and biosimilars division
Sandoz on the SIX Swiss Exchange in October, we con-
cluded a major part of the portfolio transformation, which
started 10 years ago and entailed the divestiture of sev-
eral non-core businesses as well as the establishment of
new therapy and technology platforms.
The portfolio changes are integral to our strategy, which
aims to position Novartis in highly innovative and
fast-growing areas of healthcare, while focusing our
organizational and operational structure. The shift from
taking a broad market approach to going deep into select
medical areas to achieve category leadership is set to
guide our strategy in the future and is designed to spur
sales and profit growth and create sustainable share-
holder value.
We are confident that our strategic direction and our oper-
ational setup allow us to navigate the current market envi-
ronment, which is characterized by a challenging macro-
economic and geopolitical situation that is putting pressure
on healthcare systems and is leading to major policy
shifts. Our ability to adapt demonstrates the resilience
of our business and our capacity to seize emerging
opportunities.
Having introduced more than 40 new molecular entities
into the market over the last two decades, we are among
the world’s most innovative pharmaceutical companies.
By strengthening our expertise in specialized sectors,
such as radioligand and RNA-based therapies, we can
stay at the forefront of the rapid technological advances
in our industry and differentiate ourselves from our com-
petitors.
To maintain this momentum, we will continue to invest
substantial funds into research and development to cre-
ate breakthrough therapies. Our executive leadership
team has set in place a robust structure to fast-track our
activities across our therapeutic areas and enable smooth
project transitions between units.
We also continue to make progress on our environmen-
tal, social and governance (ESG) priorities. We made sub-
stantial investments to reduce our environmental foot-
print and renewed our commitment toward the creation
of more equitable healthcare systems. We also made sig-
nificant investments to advance our portfolio of potential
treatments for neglected tropical diseases.
I
At the same time, we continued efforts to reinforce integ-
rity across our organization and foster a business culture
in which ethics and compliance take center stage. The
Board of Directors will continue to focus on this area as
we recognize that trust, in addition to leadership in inno-
vation and further performance improvement, is vital for
building stronger partnerships with healthcare stake-
holders around the world and helping to create more
resilient and equitable healthcare systems.
I thank you for the confidence you have placed in our
company and am pleased to be able to propose a divi-
dend increase of 3% to CHF 3.30 at the next Annual Gen-
eral Meeting.
Sincerely,
Joerg Reinhardt
Chair of the Board of Directors
CEO’s letter
2023 was a historic year for Novartis. With the Sandoz
spin-off largely completing the multiyear transformation
of our company, we are now completely dedicated to
bringing innovative medicines to the world.
As we enter this new era, our very strong financial and
research and development (R&D) performance in 2023
underscores the benefits of our focused strategy and the
progress we are making in creating value for sharehold-
ers and society.
We continued to show leadership in oncology, with strong
growth for Kisqali and Pluvicto and important data read-
outs that show the potential to bring these medicines to
broader patient populations in early breast cancer and in
earlier lines of treatment for advanced prostate cancer,
respectively.
Other standout performers include Entresto, our treat-
ment for heart failure and hypertension that has now
reached more than 2 million patients in the US, and Kes-
impta, our treatment for multiple sclerosis that almost dou-
bled in sales from the previous year and has now reached
more than 85 000 patients across 87 countries.
Alongside these achievements, we continued to deliver on
our environmental, social and governance (ESG) commit-
ments to broaden access to our innovative medicines,
tackle major global health challenges, advance gender
equity, and reduce our impact on the environment.
At the same time, we are investing to meet rising demand
for our medicines and ensure we can deliver our treat-
ments to people who need them. During the year, we
opened a new radioligand therapy (RLT) facility in the US
that helped us more than double weekly production
capacity of Pluvicto in the market. We also opened an RLT
facility in Spain and announced plans for new facilities in
China and Japan.
We also achieved major innovation milestones that show
the strength of our R&D pipeline and potential for future
growth. One major highlight was the approval of iptaco-
pan to treat a rare blood disorder—the first of what we
hope to be many approved indications for this molecule,
which was discovered and developed by Novartis.
Our pipeline was further strengthened by the acquisition
of Chinook Therapeutics, which added two promising
Phase III assets for IgA nephropathy. Together with ipta-
copan, these assets give us the potential to offer a trio of
differentiated therapies for this rare, complement-medi-
ated kidney disease.
Going forward, we’re continuing to focus on improving our
R&D performance and prioritization by fostering more
streamlined collaboration between our research, devel-
opment and commercial teams. We’re also investing in
artificial intelligence to accelerate R&D while putting in
place guardrails for the ethical use of this rapidly devel-
oping technology.
Culture continues to be foundational to our work, and I’m
grateful for the ongoing commitment of our employees
whose passion and dedication are driving our perfor-
mance. This year, we largely completed the organizational
transformation announced in 2022, helping to set a sim-
pler structure for Novartis with streamlined processes and
more agile decision-making.
Our strong financial performance gives us confidence that
our renewed strategy and simplified structure are enabling
results, with 10% growth in sales (cc) and 18% growth in
core operating income (cc).
I’m filled with optimism for what’s to come. The past year
has shown the strength of our company and set a robust
foundation for growth. Looking ahead, we aim to build on
this momentum and bring the same dedication to innova-
tion and excellence to create value for patients, for soci-
ety, and for our shareholders.
Sincerely,
Vas Narasimhan
Chief Executive Officer
II
Table of contents
Table of contents
*
Item 4.
Introduction and use of certain terms .................................................................................................................................................................4
Forward-looking statements ...................................................................................................................................................................................5
PART I
7
Item 1.
Identity of Directors, Senior Management and Advisers ...................................................................................................7
Item 2. Offer Statistics and Expected Timetable ...................................................................................................................................8
Key Information ........................................................................................................................................................................................9
Item 3.
3.A [Reserved] ..................................................................................................................................................................................................9
3.B Capitalization and indebtedness .....................................................................................................................................................9
3.C Reasons for the offer and use of proceeds ..............................................................................................................................9
3.D Risk factors ................................................................................................................................................................................................9
Information on the Company ..........................................................................................................................................................21
4.A History and development of Novartis ........................................................................................................................................21
4.B Business overview ...............................................................................................................................................................................21
4.C Organizational structure ...................................................................................................................................................................38
4.D Property, plants and equipment ...................................................................................................................................................38
Item 4A. Unresolved Staff Comments ......................................................................................................................................................... 40
*
Item 5. Operating and Financial Review and Prospects ..................................................................................................................41
5.A Operating results..................................................................................................................................................................................41
5.B Liquidity and capital resources .....................................................................................................................................................75
5.C Research and development, patents and licenses .............................................................................................................87
5.D Trend information .................................................................................................................................................................................87
5.E Critical accounting estimates ........................................................................................................................................................87
Item 6. Directors, Senior Management and Employees ..................................................................................................................88
6.A Directors and senior management .............................................................................................................................................88
6.B Compensation .......................................................................................................................................................................................89
6.C Board practices.................................................................................................................................................................................. 118
6.D Employees ............................................................................................................................................................................................155
6.E Share ownership................................................................................................................................................................................156
6.F Erroneously awarded compensation ......................................................................................................................................156
Item 7. Major Shareholders and Related Party Transactions ....................................................................................................157
7.A Major shareholders ..........................................................................................................................................................................157
7.B Related party transactions ...........................................................................................................................................................158
Interests of experts and counsel ..............................................................................................................................................158
7.C
Financial Information .......................................................................................................................................................................159
8.A Consolidated statements and other financial information ...........................................................................................159
8.B Significant changes .........................................................................................................................................................................159
The Offer and Listing ......................................................................................................................................................................160
9.A Offer and listing details ..................................................................................................................................................................160
9.B Plan of distribution ............................................................................................................................................................................160
9.C Markets ...................................................................................................................................................................................................160
9.D Selling shareholders ........................................................................................................................................................................160
9.E Dilution ....................................................................................................................................................................................................160
9.F Expenses of the issue ....................................................................................................................................................................160
Item 10. Additional Information .....................................................................................................................................................................161
10.A Share capital ........................................................................................................................................................................................161
10.B Memorandum and articles of association ............................................................................................................................161
10.C Material contracts .............................................................................................................................................................................164
10.D Exchange controls............................................................................................................................................................................165
10.E Taxation ..................................................................................................................................................................................................165
10.F Dividends and paying agents ...................................................................................................................................................... 170
10.G Statement by experts ..................................................................................................................................................................... 170
10.H Documents on display .................................................................................................................................................................... 170
10.I Subsidiary information .................................................................................................................................................................... 170
Item 8.
Item 9.
* “Item 5. Operating and Financial Review and Prospects,” together with the sections on our compounds in development and selected development projects (see “Item 4.
Information on the Company—Item 4.B Business overview”), constitute the Operating and Financial Review (“Lagebericht”), as defined by the Swiss Code of Obligations.
2
Table of contents
Item 11. Quantitative and Qualitative Disclosures About Market Risk .................................................................................... 171
Item 12. Description of Securities Other than Equity Securities ................................................................................................ 172
12.A Debt securities ................................................................................................................................................................................... 172
12.B Warrants and rights.......................................................................................................................................................................... 172
12.C Other securities ................................................................................................................................................................................. 172
12.D American Depositary Shares ...................................................................................................................................................... 172
PART II
174
Item 13. Defaults, Dividend Arrearages and Delinquencies .......................................................................................................... 174
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds ............................................. 175
Item 15. Controls and Procedures .............................................................................................................................................................. 176
Item 16A. Audit Committee Financial Expert ...........................................................................................................................................177
Item 16B. Code of Ethics .................................................................................................................................................................................... 178
Item 16C. Principal Accountant Fees and Services .............................................................................................................................. 179
Item 16D. Exemptions from the Listing Standards for Audit Committees ................................................................................180
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers ............................................................. 181
Item 16F. Change in Registrant’s Certifying Accountant ..................................................................................................................182
Item 16G. Corporate Governance ..................................................................................................................................................................183
Item 16H. Mine Safety Disclosure ..................................................................................................................................................................184
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections .................................................................185
Item 16J. Insider Trading Policies ..................................................................................................................................................................186
Item 16K. Cybersecurity .....................................................................................................................................................................................187
188
PART III
Item 17. Financial Statements.......................................................................................................................................................................188
Item 18. Financial Statements.......................................................................................................................................................................189
Item 19. Exhibits ...................................................................................................................................................................................................190
3
Introduction and use of certain terms
Introduction and use of certain terms
Novartis AG and its consolidated affiliates publish consolidated financial statements expressed in US dollars. Our
consolidated financial statements responsive to Item 18 of this Annual Report on Form 20-F (Annual Report) are
prepared in accordance with International Financial Reporting Standards Accounting Standards as issued by the
International Accounting Standards Board. “Item 5. Operating and Financial Review and Prospects,” together with
the sections on products in development and key development projects of our businesses (see “Item 4. Informa-
tion on the Company—Item 4.B. Business overview”), constitute the Operating and Financial Review (“Lagebericht”),
as defined by the Swiss Code of Obligations.
Unless the context requires otherwise, the words “we,” “our,” “us,” “Novartis,” “Group,” “Company,” and similar
words or phrases in this Annual Report refer to Novartis AG and its consolidated affiliates. However, each Novartis
affiliate is legally separate from all other Novartis affiliate companies and manages its business independently
through its respective board of directors or similar supervisory body or other top local management body, if appli-
cable. Each executive identified in this Annual Report reports directly to other executives of the Novartis affiliate
company that employs such executive, or to such company’s board of directors.
In this Annual Report, references to “US dollars,” “USD” or “$” are to the lawful currency of the United States of
America; references to “CHF” are to Swiss francs; references to “euro” or “EUR” are to the lawful currency of the
member states of the European Union in which it is the official currency; references to the “United States” or to
“US” are to the United States of America; references to the “European Union” or to “EU” are to the European Union
and its 27 member states; references to “Latin America” are to Central and South America, including the Carib-
bean; references to “Australasia” are to Australia, New Zealand, Melanesia, Micronesia and Polynesia, unless the
context otherwise requires; references to the “EC” are to the European Commission; references to “associates”
are to employees of our affiliates; references to the “SEC” are to the US Securities and Exchange Commission; ref-
erences to the “FDA” are to the US Food and Drug Administration; references to the “EMA” are to the European
Medicines Agency, an agency of the EU; references to the “CHMP” are to the Committee for Medicinal Products
for Human Use of the EMA; references to “ADR” or “ADRs” are to Novartis American Depositary Receipts; refer-
ences to “ADS” or “ADSs” are to Novartis American Depositary Shares; references to the “NYSE” are to the New
York Stock Exchange, and references to “SIX” are to the SIX Swiss Exchange; references to “ECN” are to the Exec-
utive Committee of Novartis; references to “Bausch + Lomb” are to Bausch & Lomb Incorporated; references to
“GSK” are to GlaxoSmithKline plc; references to “Roche” are to Roche Holding AG; references to “Gyroscope Ther-
apeutics” are to Gyroscope Therapeutics Holdings plc; references to “ADACAP” are to Advanced Accelerator Appli-
cations S.A.; references to “Novartis Gene Therapies” are to Novartis Gene Therapies, Inc.; references to “Endo-
cyte” are to Endocyte, Inc.; references to “Chinook” are to Chinook Therapeutics, Inc. and references to “DTx
Pharma” are to DTx Pharma, Inc.
All product names appearing in italics are trademarks owned by or licensed to Novartis. Product names identi-
fied by a “™” are trademarks that are not owned by or licensed to Novartis and are the property of their respective
owners.
Certain documents and information referenced in this Annual Report are available on our website. However, the
information contained on our website, or any information that may be accessed by links on our website, is not
included as part of, or incorporated by reference into, this Annual Report.
4
Forward-looking statements
Forward-looking statements
This Annual Report contains certain forward-looking statements within the meaning of Section 27A of the Securi-
ties Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and the United States Private Securities Litigation Reform Act of 1995, as amended. Other written materials
filed with or furnished to the SEC by Novartis, as well as other written and oral statements made to the public, may
also contain forward-looking statements. Forward-looking statements can be identified by words such as “poten-
tial,” “expect,” “will,” “plan,” “pipeline,” “outlook,” “may,” “could,” “would,” “anticipate,” “seek,” “likely,” “ongoing,” “esti-
mate,” “believe,” “target,” “intend,” or similar terms, or by express or implied discussions regarding potential new
products, potential new indications for existing products, or regarding potential future revenues from any such
products or indications; or regarding the potential outcome, or financial or other impact on Novartis, of any of the
transactions described; or regarding the potential impact of share buybacks; or regarding potential future sales or
earnings of Novartis or potential shareholder returns; or regarding potential future credit ratings of Novartis; or by
discussions of strategy, plans, expectations or intentions. Such forward-looking statements are based on the cur-
rent 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 under-
lying assumptions prove incorrect, actual results may vary materially from those set forth in forward-looking state-
ments. You should not place undue reliance on these statements.
In particular, our expectations could be affected by, among other things:
• Uncertainties regarding the success of key products, commercial priorities and strategy
• Uncertainties in the research and development of new healthcare products, including clinical trial results and
additional analysis of existing clinical data, and the use of new and disruptive technologies, including artificial
intelligence (AI)
• Global trends toward healthcare cost-containment, including new laws and regulations, ongoing government,
payer and general public pricing and reimbursement pressures and requirements for increased pricing transpar-
ency
• Our ability to realize the strategic benefits, operational efficiencies or opportunities expected from our external
business opportunities
• Our ability to realize the intended benefits of our separation of Sandoz into a new publicly traded standalone com-
pany
• 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 that commenced in prior years
and is expected to continue this year
• Our performance on environmental, social and governance matters
• Uncertainties in the development or adoption of potentially transformational digital technologies and business
models
• Uncertainties regarding potential significant breaches of information security or disruptions of our information
technology systems
• Uncertainties surrounding the implementation of our new IT projects and systems
• Our reliance on outsourcing key business functions to third parties
• Uncertainties regarding actual or potential legal proceedings, including, among others, litigation and other legal
disputes with respect to our recent transactions, product liability litigation, litigation and investigations regarding
sales and marketing practices, intellectual property disputes and government investigations generally
• Safety, quality, data integrity or manufacturing issues
• Our ability to identify, attract, integrate, develop and retain key personnel and qualified individuals for critical roles
5
Forward-looking statements
• 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 Annual Report
• Our ability to comply with evolving regulatory requirements and meet societal expectations concerning environ-
mental, social and governance matters
• Our ability to comply with cybersecurity and data privacy laws and regulations, and uncertainties regarding poten-
tial significant breaches of data privacy
• Our ability to adapt to major geopolitical and macroeconomic developments, including the effects of and efforts
to mitigate pandemic diseases such as COVID-19, and the impact of the war in certain parts of the world
• Uncertainties involved in predicting shareholder returns
• Uncertainties regarding the effects of recent and anticipated future changes in tax laws and their application to
us
• Uncertainties regarding future global exchange rates
• Uncertainties regarding our supply chain and future demand for our products
These risks and others are discussed in more detail in this Annual Report, including under “Item 3. Key Informa-
tion—Item 3.D. Risk factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review
and Prospects.” Should one or more of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those described in this Annual Report as anticipated,
believed, estimated or expected. It is not possible to predict or identify all risk to our business. Consequently, you
should not consider the foregoing to be a complete discussion of all potential risks or uncertainties. We provide
the information in this Annual Report as of the date of its filing. We do not intend, and do not assume any obliga-
tion, to update any information or forward-looking statements set out in this Annual Report as a result of new infor-
mation, future events or otherwise.
6
Item 1. Identity of Directors, Senior Management and Advisers
PART I
Item 1. Identity of Directors,
Senior Management and Advisers
Not applicable.
7
Item 2. Offer Statistics and Expected Timetable
Item 2. Offer Statistics and Expected
Timetable
Not applicable.
8
Item 3. Key Information
Item 3. Key Information
3.A [Reserved]
3.B Capitalization and indebtedness
Not applicable.
3.C Reasons for the offer and use of proceeds
Not applicable.
3.D Risk factors
Our business faces significant risks and uncertainties.
You should carefully consider all of the information set
forth in this Annual Report and in other documents we
file with or furnish to the SEC, including the following risk
factors, before deciding to invest in or to maintain an
investment in any Novartis securities. Our business, as
well as our reputation, financial condition, results of oper-
ations, and share price, could be materially adversely
affected by any of these risks, as well as other risks and
uncertainties not currently known to us or not currently
considered material.
Strategic risks
Key products and commercial priorities
Risk description
Failure to deliver key commercial priorities and success-
fully launch new products
Context and potential impact
Our ability to maintain and grow our business and to
replace revenue and income lost to generic, biosimilar
and other competition depends heavily on the commer-
cial success of our new or existing key products. The
commercial success of these products could be impacted
at any time by a number of factors, including pressure
from new or existing competitive products, changes in
the prescribing habits of healthcare professionals,
slower than expected post-launch adoption, unexpected
side effects or safety signals, supply chain issues or
other product shortages, pricing pressure, regulatory
proceedings, changes in labeling, loss of intellectual
property protection, and global pandemics. In addition,
our revenue and margins could be significantly impacted
by the timing and rate of commercial acceptance of new
products.
Healthcare professionals, patients and payers may
choose competitor products instead of ours for various
reasons, including if they perceive them to be better in
terms of efficacy, safety, cost, convenience or other rea-
sons. The commercial success of our key products and
launches in the face of increasing competition requires
significant attention, management focus and resource
allocation. Such competition could significantly affect the
revenue from our products and our results of operations.
This impact could also be compounded to the extent that
such competition results in us making significant addi-
tional investments in research and development, market-
ing or sales.
Furthermore, from time to time, we reassess how our
business is organized to ensure we have the optimal
structure with which to execute our strategy. An inability
to successfully implement new organizational structures
and operating models could have a material adverse
effect on our results of operations and financial condi-
tion.
Research and development
Risk description
Failure to successfully prioritize, integrate and execute
our research and development programs for new prod-
ucts or new indications for existing products
Context and potential impact
We engage in extensive and costly research and devel-
opment activities, both through our own internal
resources and through collaborations with third parties,
in an effort to identify and develop new products and
new indications for existing products that address unmet,
ever-changing medical needs, while ensuring commer-
cial viability and success. Our ability to grow our busi-
ness and our product pipeline; to replace sales lost due
to branded competition, entry of generics, or other rea-
sons; and to bring products to market that take
9
Item 3. Key Information
advantage of new and potentially disruptive technolo-
gies, including cell, gene and radioligand therapies,
depends in significant part on the success of these
efforts.
Failure to successfully develop our pipeline products
is typically the result of the inherent uncertainty of sci-
ence, suboptimal internal execution, or both. Key ele-
ments of internal execution include our ability to priori-
tize our investments on our highest potential value assets,
optimize the transition of assets from research to devel-
opment, integrate externally acquired assets in an effi-
cient way, and execute the steps in our drug develop-
ment process that enable our assets to be approved and
reimbursed in a timely manner to positively impact clin-
ical practice. We invest in new businesses, products, ser-
vices and technologies, including artificial intelligence
(AI), to achieve our goals, operate our business and
reduce the time, effort and expense associated with
identifying, developing and commercializing new prod-
ucts. Our investments in new and disruptive technolo-
gies may not ultimately achieve the intended benefits,
may not result in an adequate return of capital and, in
pursuing new strategies, we may incur unanticipated lia-
bilities. For more information, see also “Item 4. Informa-
tion on the Company—Item 4.B Business overview—
Research and development.”
Our new products must undergo intensive preclinical
and clinical testing and are approved by means of a highly
complex, lengthy, and expensive approval process that
varies substantially from country to country and may
have very specific requirements for the recruitment of
patients for clinical trials. We face increasing and evolv-
ing regulatory approval and reimbursement require-
ments. Additionally, if we fail to successfully progress
late-stage assets and the core elements of drug devel-
opment for key programs, this could have a negative
impact on the development of our product pipeline, and
ultimately on the success of our business and our finan-
cial results.
Another issue we face is the increasing challenge to
adequately recruit a sufficient number of patients in the
US for clinical trials due to the cost and effort associated
with expanding our operations for the recruitment of
patients into such trials. As a result, we may be unable
to develop the necessary clinical evidence to support
the desired indications and product profile for a partic-
ular disease that is needed to drive clinical adoption of
our new products, and thereby achieve the full potential
of our assets (also known as the “target product profile”).
Similarly, the post-approval regulatory burden has also
increased. These requirements make the maintenance
of regulatory approvals for our products increasingly
expensive, and further heighten the risk of recalls, prod-
uct withdrawals, changes to product specifications, loss
of market share, and loss of revenue and profitability.
The clinical testing, regulatory processes and
post-approval activities described above become more
difficult during pandemics, such as the COVID-19 pan-
demic, as well as during periods of geopolitical and eco-
nomic uncertainty. This is due to challenges related to
recruiting, enrolling and treating patients in clinical trials,
as well as ensuring the supply of trial materials. For a fur-
ther description of the research and development of, and
approval processes for, our products, see “Research and
development” and “Regulation” under “Item 4. Informa-
tion on the Company—Item 4.B Business overview.”
Furthermore, our research and development activi-
ties must be conducted in an ethical and compliant man-
ner. Among other things, we are concerned with patient
safety (both pre- and post-product approval), data pri-
vacy, current Good Clinical Practices (cGCP) require-
ments, data integrity, the fair treatment of patients, diver-
sity and inclusion in the recruitment of patients to clinical
trials, and animal welfare. If we fail to properly manage
such issues, we risk injury to third parties, damage to our
reputation, negative financial consequences as a result
of potential claims for damages, sanctions and fines, and
the potential that investments in research and develop-
ment activities may not bring the expected benefits to
us.
Pricing, reimbursement and access
Risk description
Pricing and reimbursement pressure, including pricing
transparency and access to healthcare
Context and potential impact
Our business has continuously experienced significant
pressures on the pricing of our products and on our abil-
ity to obtain and maintain satisfactory rates of reimburse-
ment for our products by governments, insurers and
other payers. These pressures have many sources,
including growth of healthcare costs as a percentage of
gross domestic product; funding restrictions and policy
changes; and public controversies, political debate,
investigations and legal proceedings regarding pharma-
ceutical pricing. Pressures on pricing may negatively
impact both our product pricing and the availability of
our products.
In addition, we face numerous cost-containment
measures imposed by governments and other payers.
These include government-imposed industrywide price
reductions, mandatory pricing systems, reference pric-
ing systems, payers limiting access to treatments based
on cost-benefit analyses, the importation of drugs from
lower-cost countries to higher-cost countries, the shift-
ing of the payment burden to patients through higher
co-payments and co-pay accumulator programs, the lim-
iting of physicians’ ability to choose among competing
medicines, the mandatory substitution of generic drugs
for the patented equivalent, pressure on physicians to
reduce the prescribing of patented prescription
medicines, increasing pressure on intellectual property
protections, and growing requirements for increased
transparency on pricing. For more information on price
controls, see “Item 4. Information on the Company—Item
4.B Business overview—Price controls.”
Recent trends in our external environment may have
an impact on the likelihood of these pricing and reim-
bursement pressures occurring. Slow economic recov-
ery following the COVID-19 pandemic and the onset of
war in certain parts of the world (which is contributing
to challenges such as high energy costs and inflation)
have led to an increased strain on fiscal budgets in many
major economies. In addition, legislative developments
such as those in the US (e.g., the Inflation Reduction Act)
and in Europe (e.g., the EU Joint Health Technology
10
Item 3. Key Information
Assessment and 2023 EU Pharmaceutical Legislation
Update) pose potential further pressures on pricing and
timelines for reimbursement in these countries. For
example, in August 2023, our cardiovascular drug
Entresto was selected for the Medicare Drug Price Nego-
tiation Program in the US and additional Novartis prod-
ucts may be selected for price negotiation programs in
the future. These external factors may materially affect
our ability to achieve value-based prices; to achieve and
maintain an acceptable return on our investments in the
research and development of our products; and may
impact our ability to research and develop new products.
Alliances, acquisitions and divestments
Risk description
Failure to identify, execute or realize the expected ben-
efits from our external business opportunities
Context and potential impact
As part of our strategy, we evaluate external opportuni-
ties that could strengthen our portfolio by acquiring and
divesting products, entering businesses or entering into
strategic alliances and collaborations. For example, in
2023, we closed the acquisitions of Chinook Therapeu-
tics and DTx Pharma. This strategy is partly dependent
on our ability to identify strategic external business
opportunities, including assessing the value of the early
phase companies, and to close transactions with third
parties on acceptable terms and timelines.
Once the terms of a strategic transaction have been
agreed with a third party, we may not be able to com-
plete the transaction in a timely manner or at all. In addi-
tion, we cannot be sure that pre-transaction due dili-
gence will identify all possible issues that might arise
during and after the transaction. Our efforts on such
transactions can also divert management’s attention
from our existing businesses.
After a transaction is closed, efforts to develop and
commercialize acquired or licensed products, to inte-
grate the acquired business or to achieve expected syn-
ergies may fail or may not fully meet expectations. This
may occur due to difficulties in retaining key personnel,
customers and suppliers; failure to obtain marketing
approval or reimbursement within expected timeframes
or at all; differences in corporate culture, standards, con-
trols, processes and policies; or other factors. Transac-
tions can also result in liabilities being incurred that were
not known at the time of acquisition, or the creation of
tax or accounting issues. Acquired businesses are not
always in full compliance with legal, regulatory or Novartis
standards, including, for example, Current Good Manu-
facturing Practices (cGMP) or cGCP standards, which
can be costly and time-consuming to remediate. Further-
more, our strategic alliances and collaborations with third
parties may not achieve their intended goals and objec-
tives within expected time frames, or at all. For more
information about recent business acquisitions, see
“Item 18. Financial Statements—Note 2. Significant trans-
actions.”
Similarly, we cannot ensure that we will be able to
successfully divest or spin off businesses or other assets
that we have identified for this purpose, or that any com-
pleted divestment or spin-off will achieve the expected
strategic benefits, operational efficiencies or opportuni-
ties, or that the divestment or spin-off will ultimately max-
imize shareholder value.
Intellectual property
Risk description
Expiry, assertion or loss of intellectual property protec-
tion
Context and potential impact
Many of our products are protected by intellectual prop-
erty rights, which may provide us with exclusive rights to
market those products for a limited time, and to enable
our purpose of reimagining medicine by sustainably
financing our research and development. However, the
strength and duration of those rights can vary signifi-
cantly from product to product and from country to coun-
try, and they may be successfully challenged by third
parties or governmental authorities.
Loss of intellectual property protection and the intro-
duction of generic or biosimilar competition for a pat-
ented branded medicine in a country typically result in a
significant reduction in net sales and operating income
for the branded product. Such competition can occur
after successful challenges to intellectual property rights
or the regular expiration of the patent term or other intel-
lectual property rights. Such competition can also result
from the entry of generic or biosimilar versions of another
medicine in the same therapeutic class as one of our
drugs or in a competing therapeutic class, from a Dec-
laration of Public Interest or the compulsory licensing of
our intellectual property by governmental authorities, or
as a result of a general weakening of intellectual prop-
erty and governing laws in certain countries around the
world. In addition, generic or biosimilar manufacturers
may sometimes conduct so-called “launches at risk” of
products that are still under legal challenge for infringe-
ment, or whose patents are still under legal challenge for
validity, before final resolution of legal proceedings.
We also rely in all aspects of our businesses on unpat-
ented proprietary technology, know-how, trade secrets
and other confidential information, which we seek to pro-
tect through various measures, including confidentiality
agreements with licensees, employees, third-party col-
laborators and consultants who may have had access to
such information. If these agreements are breached or
our other protective measures should fail, then our con-
tractual or other remedies may not be adequate to cover
our losses.
We may also be subject to assertions of intellectual
property rights against our medicines by third parties. If
successful, these actions may involve payment of future
royalties or damages, for example for patent infringe-
ment, and may also involve injunctive relief requiring the
removal of one or more dosage strengths of a product
from the market (or removal of a therapeutic indication
from the product’s approved labeling) for a period of time
or throughout the life of the asserted intellectual prop-
erty right. Such damages or such an injunction may have
a material impact on our operating income and net sales.
In any given year, we may experience a potentially
significant impact on our net sales from products that
have already lost intellectual property protections, as
11
Item 3. Key Information
well as products that may lose protection during the year.
Because we may have substantially reduced marketing
and research and development expenses related to
products that are in their final years of exclusivity, the
initial loss of protection for a product during a given year
could also have an impact on our operating income for
that year in an amount corresponding to a significant
portion of the product’s lost sales. The magnitude of the
impact of generic or biosimilar competition on our income
could depend on a number of factors. These include,
with respect to income in a given year, the time of year
at which the generic or biosimilar competitor is launched;
the ease or difficulty of manufacturing a competitor prod-
uct and obtaining regulatory approval to market it; the
number of generic or biosimilar competitor products
approved, including whether, in the US, a single compet-
itor is granted an exclusive marketing period; whether an
authorized generic is launched; the geographies in which
generic or biosimilar competitor products are approved,
including the strength of the market for generic or bio-
similar pharmaceutical products in such geographies,
and the comparative profitability of branded pharmaceu-
tical products in such geographies; and our ability to suc-
cessfully develop and launch new products for patients
that may also offset the income lost to generic or bio-
similar competition. For more information on the patent
and generic competition status of our products, see
“Item 4. Information on the Company—Item 4.B Business
overview—Intellectual property.”
Sandoz spin-off
Risk description
We may not successfully achieve our goals related to our
separation from Sandoz and our failure to do so may have
an adverse impact on our business
Context and potential impact
We recently completed the separation of Sandoz, our
generics and biosimilars division, into a new Swiss pub-
licly traded independent company, by way of a 100%
spin-off. In connection with the Sandoz separation, we
entered into a separation and distribution agreement and
various other agreements. These agreements govern the
separation and distribution and the relationship between
Novartis and Sandoz going forward, including with
respect to the allocation of assets and liabilities between
Novartis and Sandoz. The agreements also provide for
the performance of services by each company for the
benefit of the other company for a period of time. The
terms, scope and/or duration of these agreements could
negatively impact our ability to pursue other strategic
business interests as we will have to devote resources
and capacity to fulfilling our obligations that we may pre-
fer to direct elsewhere. If we or Sandoz are unable to
satisfy our respective obligations under these agree-
ments, we could incur losses or experience operational
challenges or difficulties. These agreements could also
lead to disputes over the performance of obligations
under these agreements or the allocation of our respec-
tive resources. For example, during the term of these
agreements, we may have less flexibility to optimize our
biologic manufacturing for our own products (or those
of other third parties). In addition, pursuant to these
agreements, we will perform technical development ser-
vices for Sandoz, which may involve certain proprietary
know-how. While we intend to retain the personnel
involved in our technical research and development and
to protect our trade secrets, provision of such services
might create the incremental potential for the disclosure
or misuse of such proprietary know-how, particularly in
connection with technology transfer at the end of such
arrangements.
Additionally, we may not realize the anticipated stra-
tegic, financial, operational, or other benefits from our
separation of Sandoz. We cannot predict with certainty
when the benefits expected from the Sandoz spin-off
will occur or the extent to which they will be achieved. In
addition, we incurred one-time costs and may encoun-
ter operational inefficiencies in connection with the
Sandoz spin-off that may negate some of the benefits
we expect to achieve. If we do not realize these assumed
benefits, we could suffer a material adverse effect on our
financial condition.
Further, if the spin-off does not generally qualify as
a tax-neutral transaction for Swiss and U.S. federal
income tax purposes, we, our shareholders, or both,
could be subject to significant tax liabilities. The spin-off
is intended to qualify for tax-neutral treatment for us and
our shareholders for Swiss and U.S. federal income tax
purposes. If, however, the spin-off fails to qualify as
tax-neutral for Swiss and U.S. federal income tax pur-
poses, we, our shareholders, or both, could recognize
taxable gain with respect to the spin-off, resulting in
Swiss and U.S. income, withholding and capital gains tax
consequences. In particular, if the spin-off does not qual-
ify as tax neutral for Swiss and U.S. federal income tax
purposes, our shareholders who received shares of
Sandoz in the spin-off as part of the separation would
be subject to tax as if they had received a taxable distri-
bution equal to the fair market value of such shares. For
additional information about the potential tax conse-
quences of the spin-off, see “Item 10.E Taxation—Tax
consequences of the Sandoz spin-off.”
Environmental, social and governance matters
Risk description
Failure to meet rapidly evolving environmental, social and
governance expectations
Context and potential impact
Increasingly, in addition to financial results, companies
are being judged by their performance on a variety of
environmental, social and governance (ESG) matters,
which can contribute to the long-term sustainability of a
company’s performance. An inability to successfully per-
form on ESG matters and to meet societal expectations
could result in negative impacts on our reputation,
recruitment, retention, operations, financial results, and
share price.
Topics related to large societal changes such as
social inequity, access to medicines and climate change
are increasingly important to a wide range of our stake-
holders. For example, a variety of organizations measure
the performance of companies on ESG topics, and the
results of these assessments are widely publicized. In
addition, investments in funds that specialize in
12
Item 3. Key Information
companies that perform well in such assessments are
increasingly popular, and major institutional investors
have publicly emphasized the importance of such ESG
measures in making their investment decisions. Our
actions related to ESG topics may in the long-term impact
our operations and ability to achieve our strategic goals,
and ultimately could have a potential negative impact on
the value of Novartis.
We actively manage a broad range of ESG matters,
taking into consideration their expected impact on the
sustainability of our business over time, and the poten-
tial impact of our business on society and the environ-
ment. We have created a Sustainability & ESG Office,
which, in coordination with the ESG Committee of the
Executive Committee of Novartis, is tasked with devel-
oping our ESG strategy and tracking our performance
against our ESG targets. However, considering the fast
pace of change of external expectations, and a range of
upcoming regulations, there can be no certainty that we
will manage such issues successfully, that the ESG stan-
dards we currently use to measure our performance
against will remain the same, or that we will successfully
meet society or investors’ expectations. Failure to meet
rapidly evolving regulatory requirements and investor
and societal expectations could also result in litigation
or regulatory actions, which could have a material
adverse impact on our reputation, recruitment, retention,
operations, financial results, and share price. Addition-
ally, external partners in our value chain that we do not
control may not comply with ESG commitments and
goals we set for ourselves, which may have a negative
impact on our business.
Operational risks
Cybersecurity and data protection
Risk description
Cybersecurity breaches, data loss and catastrophic loss
of IT systems
Context and potential impact
We are heavily dependent on critical, complex and inter-
dependent information technology (IT) systems, includ-
ing internet-based systems to support our business pro-
cesses. We also outsource significant parts of our IT
infrastructure to third-party providers, and currently use
these providers to perform business-critical IT services
for us. We are therefore vulnerable to cybersecurity
attacks and incidents on such networks and systems,
whether our own or those of the third-party providers
that we contract, and we have experienced, and may in
the future experience, such cybersecurity threats and
attacks. Cybersecurity threats and attacks take many
forms, and the size, age and complexity of our IT sys-
tems make them potentially vulnerable to external and
internal security threats; outages; malicious intrusions
and attacks; cybercrimes, including state-sponsored
cybercrimes; malware; misplaced data, lost data or data
errors; programming or human errors; or other similar
events. The risk of such threats and attacks has increased,
as virtual and remote working have become more com-
mon, and sensitive data is accessed by employees
working in less secure, home-based environments. In
addition, due to our reliance on third-party providers, we
have experienced, and may in the future experience,
interruptions, delays or outages in IT service availability
due to a variety of factors outside of our control, includ-
ing technical failures, natural disasters, fraud, or secu-
rity attacks experienced by or caused by third-party pro-
viders. Interruptions in the service provided by these third
parties could affect our ability to perform critical tasks.
A significant information security or other event, such
as a disruption or loss of availability of one or more of
our IT systems, whether managed by us or a third-party
service provider, has previously and could in the future
negatively impact important business processes, such
as the conduct of scientific research and clinical trials,
the submission of data and information to health author-
ities, our manufacturing and supply chain processes, our
shipments to customers, our compliance with legal obli-
gations, and communication between employees and
with third parties. IT issues have previously led to, and
could in the future lead to, the compromise of trade
secrets or other intellectual property that could be sold
and used by competitors to accelerate the development
or manufacturing of competing products; the compro-
mise of personal financial and health information; and
the compromise of IT security data such as usernames,
passwords and encryption keys, as well as security strat-
egies and information about network infrastructure,
which could allow unauthorized parties to gain access
to additional systems or data. In addition, malfunctions
in software or medical devices that make significant use
of IT could lead to a risk of direct harm to patients.
Although we have experienced some of the events
described above, to date they have not had a material
impact on our operations. Nonetheless, the occurrence
of any of the events described above in the future could
disrupt our business operations and result in enforce-
ment actions or liability, including potential government
fines and penalties, claims for damages, and shareholder
litigation or allegations that the public health, or the
health of individuals, has been harmed.
Any significant events of this type could require us to
expend significant resources beyond those we already
invest to remediate any damage, to further modify or
enhance our protective measures, and to enable the con-
tinuity of our business.
Strategic technology programs implementation
Risk description
Failure to successfully implement our IT strategy may
disrupt our core business processes
Context and potential impact
We rely on various IT systems to operate our complex
global business and several of our current IT systems
are reaching the end of their useful life, which could
cause disruptions to our operational stability. As a result,
we are implementing several companywide IT programs
to replace and consolidate outdated IT systems and to
simplify and standardize our processes, systems and
tools, and create a unified data marketplace. Implemen-
tation and operation of these new systems involves cer-
tain risks, including the potential for a failure of the new
13
Item 3. Key Information
systems to operate as expected; a failure to properly
integrate new systems with other systems we use; delays
in adopting and scaling of new systems; potential loss of
data or information; a failure of, or potential issues with,
systems related to our payment and procurement pro-
cesses; compliance issues; and cost overruns and
delays. Our inability to timely and successfully implement
our IT strategy may prevent us from materializing the
expected business benefits and could lead to business
disruptions, cost inefficiencies and potential exposure
to legal, regulatory and reputational risks as our internal
controls could be negatively affected. Any disruptions or
malfunctions of new systems could cause critical infor-
mation to be delayed, lost, defective, corrupted, or ren-
dered inadequate or inaccessible, which could negatively
impact our operations, the effectiveness of our internal
controls and financial condition.
Talent management
Risk description
Inability to identify, attract, develop and retain qualified
talent for critical roles
Context and potential impact
We rely on identifying, attracting, developing and retain-
ing a diverse, highly skilled workforce across our busi-
ness and functions to achieve our objectives. If we are
unable to sustain our supply of key personnel—including
senior members of our scientific and management
teams, high-quality researchers and development spe-
cialists and skilled employees with key capabilities in key
markets—our ability to achieve our major business objec-
tives may be adversely affected. In addition, our brand
and reputation could be negatively impacted, and the
diversity of our workforce may decline.
The market for skilled talent has become increasingly
competitive, and we anticipate this trend will persist in
the long term. We face a challenge to attract and retain
top talent in several areas, including biology, immunol-
ogy, chemistry, clinical development, drug manufactur-
ing, data, digital and IT, oncology, and advanced therapy
platforms (i.e., gene and cell therapy, radioligand therapy
and “xRNA”). In addition, many pharmaceutical and bio-
technology companies, universities and research cen-
ters, and government entities with significant capital are
not only competing with us to attract the same skilled
talent but are also aggressively pursuing our experi-
enced talent. Furthermore, if we are unable to retain and
engage key talent of companies that we acquire and inte-
grate, we may not be able to realize the full value of these
acquisitions.
In recent years, we have adopted new ways of work-
ing that include location flexibility and increasingly
recruiting from a global pool of talent. However, the suc-
cess of our business continues to depend on having
employees who possess local knowledge of, and expe-
rience in, our key markets. The external talent supply is
especially limited in many of the geographies that are
expected to be sources of growth for us. In the United
States, China and several other markets, the geographic
mobility of talent is decreasing, as they find ample career
opportunities available closer to home.
The risks associated with the challenging talent mar-
ket will be exacerbated if we are unable to retain and
effectively develop employees, and to maintain an inter-
nal pipeline with critical skills, experiences, and leader-
ship to deliver our business priorities. As a result, devel-
opment, engagement, motivation, succession planning
and performance rewards for our critical talent are
essential to achieve our business priorities.
External partner risk management and human
rights
Risk description
Failure to maintain adequate governance and oversight
over external partner relationships, and failure of exter-
nal partners to meet their contractual, regulatory or other
obligations
Context and potential impact
We rely on external partners for the performance of cer-
tain key business functions and services, including,
among others, research and development, manufactur-
ing operations and warehousing and distribution, certain
finance functions, sales and marketing activities and data
management. Some external partners, particularly those
in developing countries, do not have internal compliance
systems or resources comparable to ours. As a result,
our investment and efforts in relation to external partner
management include focusing on risk management and
the oversight of such external partners.
Our reliance on external partners poses certain risks,
including the misappropriation of our intellectual prop-
erty, the failure of the external partner to comply with
regulatory and quality assurance requirements, the fail-
ure of the external partner to comply with environmen-
tal, anti-bribery and human rights standards and regula-
tions, unexpected supply disruptions, breach of our
agreement by the external partner, and the unexpected
termination or nonrenewal of our agreement by the exter-
nal partner.
In addition, governments require us, and the public
expects us, to take responsibility for and report on com-
pliance with various human rights, responsible sourcing
and environmental practices, as well as other actions of
our external partner contractors around the world.
Ultimately, if external partners fail to meet their obli-
gations to us, we may lose our investment in the relation-
ship with the external partners or fail to receive the
expected benefits of our agreements with such external
partners. While we aim to identify and assess any risk of
harm to society caused by our external partners’ oper-
ations, should any of these external partners fail to com-
ply with the law or our standards, or should they other-
wise act inappropriately while performing services for
us, we could be held responsible for their acts, our rep-
utation may suffer, and penalties could be imposed on
us.
Legal, regulatory, ethics and compliance
Risk description
Challenges posed by evolving legal and regulatory
requirements, innovative and disruptive technologies,
and societal expectations regarding ethical behavior
14
Item 3. Key Information
Context and potential impact
We are subject to an extensive and complex framework
of laws and regulations across the jurisdictions in which
we operate.
The laws and regulations relevant to the healthcare
industry and applicable to us are broad in scope, are sub-
ject to change, and have evolving interpretations, which
could require us to incur substantial costs associated
with compliance or to alter one or more of our business
practices. For example, we have been, are currently, and
may in the future be, subject to various significant legal
proceedings, such as private party litigation, government
investigations and law enforcement actions worldwide.
These types of matters may take various forms based
on evolving government enforcement and private party
litigation priorities, and could include, for example, mat-
ters pertaining to: pricing; bribery and corruption; trade
regulation and embargo legislation; product liability;
commercial disputes; employment and wrongful dis-
charge; antitrust and competition; securities; govern-
ment benefit programs; reimbursement; rebates; health-
care fraud; sales and marketing practices; insider trading;
occupational health and safety; environmental regula-
tions; tax; cyber and data security; use of technologies,
including AI; data privacy; regulatory interactions; disclo-
sure compliance; and intellectual property. Such matters
can involve civil or criminal proceedings and can retro-
actively challenge practices previously considered to be
legal.
There is also a risk that governance of our medical
and patient support activities, and of our interactions
with governments, public officials/institutions, health-
care professionals, healthcare organizations and patient
organizations may be inadequate or fail, or that we may
undertake activities based on improper or inadequate
scientific justification.
Legal proceedings and investigations are inherently
unpredictable, and significant judgments sometimes
occur. Consequently, we may in the future incur judg-
ments that could involve large payments, including the
potential repayment of amounts allegedly obtained
improperly, and other penalties, including treble dam-
ages. In addition, such legal proceedings and investiga-
tions, even if meritless, may affect our reputation, may
create a risk of potential exclusion from government
reimbursement programs in the US and other countries,
and may lead to civil litigation or criminal exposure. As a
result, having considered all relevant factors, we have in
the past and may again in the future enter into major set-
tlements of such claims without bringing them to final
legal adjudication by courts or other such bodies, despite
having potentially significant defenses against them, to
limit the risks they pose to our business and reputation.
Such settlements may require us to pay significant sums
of money and to enter into corporate integrity or similar
agreements, which are intended to regulate company
behavior for extended periods. From time to time, we
may also initiate challenges to laws or regulations that
we believe are illegal or unconstitutional. For example,
in September 2023, we filed a lawsuit against the US
Department of Health and Human Services and the Cen-
ters for Medicare and Medicaid Services because we
believe the drug price-setting provisions in the Inflation
Reduction Act (IRA) are unconstitutional and will have
long-lasting negative consequences for patients by lim-
iting access to medicines now and in the future. The
result of this and similar litigation we may pursue in the
future is inherently uncertain and may negatively impact
our business and reputation.
For information on significant legal matters pending
against us, see “Item 18. Financial Statements—Note 21.
Provisions and other non-current liabilities” and “Item 18.
Financial Statements—Note 29. Commitments and con-
tingent liabilities.”
New requirements may also be imposed on us due
to changing government and societal expectations
regarding the healthcare industry, and acceptable cor-
porate behavior generally. For example, we are faced
with laws and regulations requiring changes in how we
do business, including with respect to disclosures con-
cerning our interactions with healthcare professionals,
healthcare organizations and patient organizations.
These laws and regulations include requirements that
we disclose payments or other transfers of value made
to healthcare professionals and organizations, as well as
information relating to the costs and prices for our prod-
ucts, which represent evolving standards of acceptable
corporate behavior. These requirements may cause us
to incur significant costs, including substantial time and
additional resources, that are necessary to bring our
interactions with healthcare professionals and organiza-
tions into compliance with these evolving standards.
To support our efforts to comply with the many
requirements that impact us, we have a significant global
ethics, risk and compliance program in place, and we
devote substantial time and resources to efforts to
ensure that we conduct business in a lawful manner, and
in line with society’s expectations. Despite our efforts,
an actual or alleged failure to comply with the law or with
heightened public expectations could lead to substan-
tial liabilities that may not be covered by insurance, or to
other significant losses.
Manufacturing and product quality
Risk description
Inability to ensure proper controls in product develop-
ment and product manufacturing, and failure to comply
with applicable regulations and standards
Context and potential impact
The development and manufacture of our products is
complex and heavily regulated by governmental health
authorities around the world. Regardless of whether our
products and the related raw materials are developed
and manufactured at our own manufacturing sites or by
third parties, we must ensure that all development and
manufacturing processes comply with regulatory
requirements, as well as our own quality standards in
order to deliver novel therapies while ensuring patient
safety. Failure to comply with regulatory requirements
may result in warning letters, suspension of manufactur-
ing, seizure of products, injunctions, product recalls, fail-
ure to secure product approvals, debarment or harm to
patients or our reputation.
In recent years, global health authorities have sub-
stantially intensified their scrutiny of manufacturers’
compliance with regulatory requirements. Any significant
15
Item 3. Key Information
failure by us or our third-party suppliers to comply with
regulatory requirements, or with health authorities’
expectations, may create the need to suspend clinical
trials, shut down production facilities or production lines,
and recall commercial products. A failure to fully comply
with regulatory requirements could also lead to a delay
in the approval of new products, an inability to ship or
import our products, and significant penalties and repu-
tational harm.
In addition, the technically complex manufacturing
processes required to manufacture many of our prod-
ucts increase the risk of both production failures and
product recalls, and can increase the cost of producing
our goods. Some of our products require a supply of
highly specialized raw materials, such as cell lines, tis-
sue samples, bacteria, viral strains and radioisotopes. In
addition, we manufacture and sell a number of sterile
products, biologic products and products that involve
advanced therapy platforms, such as gene and cell ther-
apy, radioligand therapy, and “xRNA,” all of which are
particularly complex and involve highly specialized man-
ufacturing technologies. For more information, see “Item
4. Information on the Company—Item 4.B. Business over-
view—Production.” As a result, even slight deviations at
any point in their production processes or in the materi-
als used have led to, and may in the future lead to, pro-
duction failures or recalls.
Supply chain
Risk description
Inability to maintain continuity of product supply
Context and potential impact
Many of our products are produced using technically
complex manufacturing processes and require a supply
of highly specialized raw materials. For some of our prod-
ucts and raw materials, we may rely on a single source
of supply. In addition, we manufacture and sell a number
of sterile products, biologic products, and products that
involve advanced therapy platforms, such as gene and
cell therapy, radioligand therapy, and “xRNA,” all of which
are particularly complex and involve highly specialized
manufacturing technologies. Due to this complexity,
there is a risk of production and supply of critical raw
materials failures, which may result in supply interrup-
tions or product recalls due to manufactured products
not meeting required specifications.
In addition, due to the inherent complexities of our
manufacturing processes and the supply chains for
advanced therapy platforms, we are required to plan our
production activities and purchase of materials well in
advance. If we suffer from third-party raw material short-
ages, underestimate market demand for a product, or
fail to accurately predict when a new product will be
approved for sale, then we may not be able to produce
sufficient product to meet demand. These issues could
be made worse during a pandemic, or geopolitical events,
such as wars in certain parts of the world, and could lead
to (i) a sudden increase in demand for selected medici-
nal products, resulting in the short-term unavailability of
critical materials; (ii) logistical and supply challenges that
may lead to our inability to ship products from one loca-
tion to another due to restrictions imposed as a result of
a pandemic or geopolitical events and any related sanc-
tions, which can also impact transportation and ware-
housing costs; or (iii) our inability to properly operate a
manufacturing site due to restrictions imposed as the
result of a pandemic or any issues arising from geopo-
litical events.
Our or our suppliers’ inability to manage such issues
could lead to shutdowns, product shortages, or to us
being entirely unable to supply products to patients for
an extended period of time. Furthermore, as our prod-
ucts are intended to promote the health of patients, such
shortages or shutdowns could endanger our reputation
and have led to, and could continue to lead to, significant
losses of sales revenue, potential litigation or allegations
that the public health, or the health of individuals, has
been harmed.
Data privacy
Risk description
Noncompliance with personal data protection laws and
regulations
Context and potential impact
We operate in an environment that relies on the collec-
tion, processing, analysis and interpretation of large sets
of patients and other individuals’ personal information,
including via social media and mobile technologies. In
addition, the operation of our business requires data to
flow across the borders of numerous countries in which
there are different, potentially conflicting, and frequently
changing, data privacy laws in effect. Examples of such
laws include: the EU General Data Protection Regulation
(GDPR); the California Consumer Privacy Act; Brazil’s
General Personal Data Protection Law; and the Personal
Information Protection Law in China. Such laws impose
stringent requirements on how we and third parties with
whom we contract collect, share, export or otherwise
process personal information, and provide for significant
penalties for noncompliance. Breaches of our systems
or those of our third-party contractors, or other failures
to protect the data we collect from misuse or breach by
third parties, could expose such personal information to
unauthorized persons.
Events involving the substantial loss of personal infor-
mation, use of personal information without a legal basis,
or other privacy violations could give rise to significant
liability, reputational harm, damaged relationships with
business partners, and potentially substantial monetary
penalties and other sanctions under laws enacted or
being enacted around the world. Such events could also
lead to restrictions on our ability to use personal infor-
mation and/or transfer personal information across
country borders, which could interfere with critical busi-
ness operations. In addition, there is a trend of increas-
ing divergence of data privacy legal frameworks, not only
across these frameworks but also within individual legal
frameworks themselves. This divergence may constrain
the implementation of global business processes and
may lead to different approaches on the use of health
data for scientific research, which may have a negative
impact on our business and operations.
16
Item 3. Key Information
Falsified medicines
Risk description
Impact of falsified medicines on patient safety, and rep-
utational and financial harm to Novartis and our products
Context and potential impact
We continue to be challenged by the vulnerability of dis-
tribution channels to falsified medicines, which include
counterfeit, stolen, tampered and illegally diverted
medicines, as defined by the World Health Organization.
Falsified medicines pose patient safety risks and can
be seriously harmful or life-threatening. Reports of
adverse events related to falsified medicines and
increased levels of falsified medicines in the healthcare
system affect patient confidence in genuine medicines
and in healthcare systems in general. These events could
also cause us substantial reputational and financial harm,
and potentially lead to litigation if the adverse event from
the falsified medicine is mistakenly attributed to the gen-
uine one. Stolen or illegally diverted medicines that are
not properly stored and later sold through unauthorized
channels could adversely impact patient safety, our rep-
utation and our business. Furthermore, there is a direct
financial loss when falsified medicines replace sales of
genuine medicines, or genuine medicines are recalled
following the discovery of falsified products.
Emerging risks
Geopolitical developments
Risk description
Impact of geo- and socio-political threats
Context and potential impact
Geopolitical tensions in various parts of the world wors-
ened in 2023 and could continue to worsen in 2024 and
beyond. Direct conflicts, including the ongoing wars in
Ukraine and the Middle East, an increasingly challeng-
ing economic landscape and social unrest, each have
both a direct and indirect impact on the pharmaceutical
industry and lead to a degree of uncertainty about the
future.
As a result of ongoing geopolitical tensions, certain
countries have adopted, and may in the future adopt
additional, protectionist measures including the imposi-
tion of tariffs. Tariffs that are intended to shield domes-
tic markets from foreign competition and the possibility
of additional trade restrictions, such as export controls,
could have a material impact on our business. If tariffs
or export controls on pharmaceutical products or active
pharmaceutical ingredients (APIs) were increased in cer-
tain parts of the world, our supply chain and flow of our
products could be immediately disrupted. There is also
an additional risk that aggressive monetary and fiscal
policies by governments and central banks to curb infla-
tion may prompt market-specific recessions and raise
the cost-of-living, further putting pressure on pricing and
cost containment for the pharmaceutical industry.
Collectively, unstable geo- and socio-political condi-
tions could, among other things, disturb the international
flow of goods and increase the costs and difficulties of
international transactions. This could potentially impact
our ability to develop and supply our products to patients
in an undisrupted fashion, and further erode reimburse-
ment mechanisms for our medicines.
Macroeconomic developments
Risk description
Impact of macroeconomic developments
Context and potential impact
Our business may be impacted by deteriorating macro-
economic and financial conditions directly affecting us,
our suppliers, payers and consumers. Given that patients,
in many countries, directly pay a sizable and increasing
portion of their own healthcare costs, there is a risk that
consumers may cut back on prescription drugs due to
financial constraints.
Negative macroeconomic developments may also
adversely affect the ability of payers, as well as our dis-
tributors, customers, suppliers, and service providers, to
pay for our products, or to buy necessary inventory or
raw materials, and to perform their obligations under
agreements with us. Weakening growth and rising inter-
est rates may also increase the credit risk of our coun-
terparties. Although we make efforts to monitor the finan-
cial condition and liquidity of these third parties, our
ability to do so is limited, and some of them may become
unable to pay their bills in a timely manner or may even
become insolvent. These risks may be elevated with
respect to our interactions with fiscally challenged gov-
ernment payers, or with third parties with substantial
exposure to such payers.
At the same time, significant changes, and potential
future volatility in financial markets, the consumer and
business environment, the competitive landscape, and
the global political and security landscape make it
increasingly difficult for us to predict our revenues and
earnings. As a result, any revenue or earnings guidance
or outlook that we have given or might give may be over-
taken by events or may otherwise prove to be inaccu-
rate. Although we endeavor to give reasonable estimates
of future revenues and earnings at the time at which we
give such guidance, based on then-current knowledge
and conditions, there is a risk that such guidance or out-
look will prove to be incorrect.
Asset price corrections in financial markets may also
result in lower returns on our financial investments. In
addition, pricing pressures in developed markets result-
ing from efforts to reduce the cost of healthcare (e.g.,
the Inflation Reduction Act in the US, which targets drug
prices) may have a negative impact on our revenue and
our net sales. In addition, inflation may have an impact
on our operating costs in the form of higher prices for
supplies, energy, raw materials, wages, and capital, which
could reduce our net income.
Uncertainties around future central bank and other
economic policies in the US and EU, including rising inter-
est rates, as well as high debt levels in some countries
could also impact world trade. Sudden increases in eco-
nomic, currency or financial market volatility in different
countries, such as appreciation of the US dollar, have
also impacted, and may continue to have an unpredict-
able impact on our business, or results of operations,
17
Item 3. Key Information
including the conversion of our operating results into our
reporting currency, the US dollar, as well as the value of
our investments in our pension plans.
For more information about the effect of price con-
trols on our business, see “Item 4. Information on the
Company—Item 4.B—Business overview—Price con-
trols.” See also “Item 5. Operating and Financial Review
and Prospects—Item 5.B Liquidity and capital resources—
Effects of currency fluctuations,” “Item 5. Operating and
Financial Review and Prospects—Item 5.B Liquidity and
capital resources—Condensed consolidated balance
sheets,” “Item 18. Financial Statements—Note 16. Trade
receivables” and “Item 18. Financial Statements—Note
30. Financial instruments – additional disclosures.”
Climate change
Risk description
Failure to manage physical and transition risks from cli-
mate change
Context and potential impact
We are exposed to a broad range of climate risks such
as transition risks (e.g., regulatory frameworks, carbon
pricing, and the cost of and access to capital) and phys-
ical risks (e.g., heat, water scarcity, rising sea levels, and
flooding from severe weather events), which could vary
in magnitude and impact across different countries.
Climate change has triggered, and may continue to
trigger, the adoption of new regulatory requirements
across the globe, as well as rapidly evolving societal
expectations. To comply with such legislation and meet
such expectations, we may be required to increase our
investment in technology to reduce our energy use, water
use and greenhouse gas emissions. In addition, legisla-
tive and regulatory action, both current and in the future,
includes or could include, carbon pricing, climate risk-re-
lated disclosures, and changes in zoning or building
codes to increase climate resilience. As a result, the com-
bined impact of these transition risks could increase our
direct operating costs or be passed on to us through the
impact on our supply chain. As a result of these transi-
tion risks, we are committed to becoming carbon neutral
in our own operations by 2025, and carbon neutral
across our value chain by 2030. In addition, we are com-
mitted to achieving net zero across our value chain by
2040. Any failure to achieve these commitments in the
expected time frame, or at all, could result in negative
impacts on our reputation, our operations, and the price
of our shares.
Climate change has created, and will continue to cre-
ate, physical risks to our business. Some of our produc-
tion facilities that depend on the availability of significant
water supplies are located in areas where fresh water is
increasingly scarce. Other facilities are located in areas
that, due to increasingly violent weather events, rising
sea levels, or both, are increasingly at risk of substantial
damage. In regions where such a risk is present, this has
an impact not only on our own operations but also our
distributed supply chain. Such events may result in the
loss of life, increased costs, business interruptions,
destruction of facilities, and disruption to healthcare sys-
tems that patients use to access our medicines.
Tax laws and developments
Risk description
Changes in tax laws or their application
Context and potential impact
Our multinational operations are taxed under the laws
of the countries and other jurisdictions in which we oper-
ate. Changes in tax laws or in their application could lead
to an increased risk of international tax disputes and an
increase in our effective tax rate, which could adversely
affect our financial results. The integrated nature of our
worldwide operations can produce conflicting claims
from revenue authorities in different countries as to the
profits to be taxed in the individual countries, including
potential disputes relating to the prices our subsidiaries
charge one another for intercompany transactions,
known as transfer pricing. Most of the jurisdictions in
which we operate have double tax treaties with other
foreign jurisdictions, which provide a framework for mit-
igating the impact of double taxation on our revenues
and capital gains. However, mechanisms developed to
resolve such conflicting claims are largely untried and
can be expected to be very lengthy. Accruals for tax con-
tingencies are made based on experience, interpreta-
tions of tax law, and judgments about potential actions
by tax authorities. However, due to the complexity of tax
contingencies, the ultimate resolution of any tax matter
may result in payments materially different from the
amounts accrued.
In 2019, the Organization for Economic Co-operation
and Development (OECD) launched a new initiative on
behalf of the G20 to minimize profit shifting by working
toward a global tax framework that ensures that corpo-
rate income taxes are paid where consumption takes
place, in addition to introducing a global standard on min-
imum taxation combined with new tax dispute resolution
processes. This project achieved OECD political con-
sensus in October 2021, and the detailed principles are
still under discussion by the OECD and political leaders.
The OECD expects that the implementation of these new
principles will begin globally in 2024. However, some
countries already announced postponement to 2025
while others have not taken any implementation steps
so far. Once changes to the tax laws in any jurisdiction
in which we operate are enacted or substantially enacted,
we will be subject to the OECD top-up tax, the aim of
which is to bring the total amount of taxes paid on our
profit in a given jurisdiction up to a minimum rate of 15%.
In June 2023, the Swiss public voted to approve an
amendment to the Swiss Constitution that provides the
legal basis for the implementation of an OECD compli-
ant minimum tax in Switzerland. In December 2023, the
Swiss federal council partially implemented the OECD
15% minimum tax for the financial year 2024 in the form
of a qualified domestic top-up tax (QDMTT), which will
be assessed on certain qualifying profits earned by com-
panies domiciled in Switzerland. This QDMTT will not be
applied to qualifying profits earned by a company’s affil-
iates domiciled in tax jurisdictions outside of Switzerland.
The timing and specific provisions of any further tax reg-
ulations remain subject to assessments in political and
technical forums at both a federal and cantonal level.
18
Item 3. Key Information
Due to the ongoing discussion in many countries on
the implementation and additional guidance from the
OECD, the full impact of the OECD minimum tax project
on our financial position, income statement and cash
flows cannot currently be estimated. On September 12,
2023, the EU Commission published two draft directives
relating to international tax. The draft Business in Europe:
Framework for Income Taxation (BEFIT) directive pro-
vides common rules for determining the corporate tax
base for EU-based entities that are part of a group with
global consolidated revenues above EUR 750 million. The
BEFIT proposal includes provisions for a formula-driven
allocation of profits between relevant EU member states
which would then be subject to the corporate income
tax rate of the respective member state. The draft trans-
fer pricing directive aims to harmonize transfer pricing
rules within the EU consistent with the OECD Transfer
Pricing Guidelines. It also clarifies processes for reliev-
ing double taxation within the EU. Both draft directives
require unanimous agreement among EU member states
before they can be further implemented. In the US, the
IRA was signed into law on August 16, 2022. The IRA
creates a 15% corporate alternative minimum tax on the
profits of corporations whose average annual adjusted
financial statement income exceeds USD 1.0 billion. The
IRA also includes a one percent excise tax on certain
corporate stock repurchases. Additionally, the IRA also
contains provisions that affect tax-exempt entities,
including tax credit opportunities to encourage invest-
ment in clean energy and expanded incentives for ener-
gy-efficient construction by tax-exempt entities.
While we have taken steps to comply with the evolv-
ing tax initiatives of the OECD, the US and the EU, and
we will continue to do so, significant uncertainties remain
as to the outcome of our efforts.
For more information, see “Item 18. Financial State-
ments—Note 7. Income taxes” and “Item 18. Financial
Statements—Note 13. Deferred tax assets and liabilities.”
General risks
Indebtedness
Risk description
Our indebtedness could adversely affect our operations
Context and potential impact
As of December 31, 2023, we had USD 18.4 billion of
non-current financial debt, and USD 6.2 billion of current
financial debt. Our current and long-term debt requires
us to dedicate a portion of our cash flow to service inter-
est and principal payments and, if interest rates rise, this
amount may increase. As a result, our existing debt may
limit our ability to use our cash flow to fund capital expen-
ditures, to engage in transactions, or to meet other cap-
ital needs, or otherwise may place us at a competitive
disadvantage relative to competitors that have less debt.
Our debt could also limit our flexibility to plan for and
react to changes in our business or industry, and increase
our vulnerability to general adverse economic and indus-
try conditions, including changes in interest rates or a
downturn in our business or the economy. We may also
have difficulty refinancing our existing debt or incurring
new debt on terms that we would consider to be com-
mercially reasonable, if at all.
Goodwill and intangible assets
Risk description
Goodwill and intangible assets resulting in significant
impairment charges
Context and potential impact
We carry a significant amount of goodwill and other
intangible assets on our consolidated balance sheet,
including, in particular, substantial goodwill and other
intangible assets obtained through acquisitions, includ-
ing most recently through our acquisitions of The
Medicines Company, Endocyte, Novartis Gene Thera-
pies, ADACAP, and Chinook Therapeutics. As a result,
we may incur significant impairment charges in the future
if the fair value of the intangible assets and the group-
ings of cash-generating units containing goodwill would
be less than their carrying value on our consolidated bal-
ance sheet at any point in time.
We regularly review our intangible and tangible assets
for impairment, including identifiable intangible assets
and goodwill. Any significant impairment charges could
have a material adverse effect on our results of opera-
tions and financial condition. In 2023, for example, we
recorded intangible asset impairment charges of USD
3.0 billion.
For a detailed discussion about how we determine
whether an impairment has occurred, what factors could
result in an impairment, and the impact of impairment
charges on our results of operations, see Item 18. Finan-
cial Statements—Note 1. Accounting policies” and “Item
18. Financial Statements—Note 12. Goodwill and intan-
gible assets.”
Foreign currency exchange rates
Risk description
Negative effect on financial results due to foreign cur-
rency exchange rate fluctuations
Context and potential impact
Changes in exchange rates between the US dollar, which
is our reporting currency, and other currencies can result
in significant increases or decreases in our reported
sales, costs and earnings as expressed in US dollars,
and in the reported value of our assets, liabilities and
cash flows.
In addition to ordinary market risk, there is a risk that
countries could take affirmative steps that could signifi-
cantly impact the value of their currencies. Such steps
could include “quantitative easing” measures and poten-
tial withdrawals by countries from common currencies.
In addition, countries facing local financial difficulties,
including countries experiencing high inflation rates, and
highly indebted countries facing large capital outflows,
may impose controls on the exchange of foreign cur-
rency. Currency exchange controls and sanctions could
limit our ability to distribute retained earnings from our
local affiliates, or to pay intercompany payables due from
those countries.
19
Item 3. Key Information
Despite measures undertaken to reduce or hedge
against foreign currency exchange risks, as a significant
portion of our earnings and expenditures are in curren-
cies other than the US dollar, including expenditures in
Swiss francs that are significantly higher than our reve-
nue in Swiss francs, any such exchange rate volatility
may negatively and materially impact our results of oper-
ations and financial condition, and may impact the
reported value of our net sales, earnings, assets and lia-
bilities. In addition, the timing and extent of such volatil-
ity can be difficult to predict. Furthermore, depending on
the movements of particular foreign exchange rates, we
may be materially adversely affected at a time when the
same currency movements are benefiting some of our
competitors.
For more information on the effects of currency fluc-
tuations on our consolidated financial statements and
on how we manage currency risk, see “Item 5. Operat-
ing and Financial Review and Prospects—Item 5.B Liquid-
ity and capital resources—Effects of currency fluctua-
tions” and “Item 18. Financial Statements—Note 30.
Financial instruments – additional disclosures.”
provisions for known worldwide environmental liabilities
that are probable and estimable, there is no guarantee
that additional costs will not be incurred beyond the
amounts for which we have provided in our consolidated
financial statements. If environmental contamination
resulting from our facility operations, business activities
or products adversely impacts third parties or if we fail
to properly manage the safety of our facilities, including
the safety of our employees and contractors, and the
environmental risks, we may face substantial one-time
and recurring costs and other penalties, and be required
to increase our provisions for environmental liabilities.
Furthermore, our headquarters and a number of our
major production and research facilities are located near
earthquake fault lines in Basel, Switzerland. Other major
facilities are located near major earthquake fault lines in
various locations around the world. A major earthquake
could result in loss of life, business interruptions and the
destruction of our facilities. See also “Item 4. Information
on the Company—Item 4.D Property, plants and equip-
ment” and “Item 18. Financial Statements—Note 21. Pro-
visions and other non-current liabilities.”
Key customers
Pension plans
Risk description
Concentration among our key customers
Context and potential impact
A significant portion of our global sales is made to a rel-
atively small number of drug wholesalers, retail chains
and other purchasing organizations. For example, our
three most important customers globally accounted for
approximately 15%, 13% and 8%, respectively, of net
sales from continuing operations in 2023. The largest
trade receivables outstanding were for these three cus-
tomers, amounting to 17%, 13% and 8%, respectively, of
the trade receivables at December 31, 2023. Historically,
there has been a trend of consolidation among our cus-
tomer base, which may continue in the future. As a result,
we are exposed to a concentration of credit risk among
our key customers. If one or more of our major custom-
ers experienced financial difficulties, the effect on us
would be considerable, and could include a substantial
loss of sales and an inability to collect amounts owed to
us.
Environmental matters
Risk description
Impact of environmental liabilities
Context and potential impact
The environmental laws of various jurisdictions impose
actual and potential obligations on us to investigate and
remediate contaminated sites, including in connection
with activities in the past by businesses that are no lon-
ger part of Novartis. In some cases, these remediation
efforts may take many years. While we have set aside
Risk description
Inaccuracies in the assumptions and estimates used to
calculate our pension plan and other post-employment
obligations
Context and potential impact
We sponsor pension and other post-employment bene-
fit plans in various forms that cover a significant portion
of our current and former employees. For post-employ-
ment plans with defined benefit obligations, we are
required to make significant assumptions and estimates
about future events in calculating the expense and the
present value of the liability related to these plans. These
include assumptions about the discount rates we apply
to estimate future defined benefit obligations and net
periodic pension expense, as well as rates of future pen-
sion increases. In addition, our actuarial consultants pro-
vide our management with historical statistical informa-
tion, such as withdrawal and mortality rates in connection
with these estimates.
Assumptions and estimates that we use may differ
materially from the actual results we experience due to
changing market and economic conditions, higher or
lower withdrawal rates, and longer or shorter life spans
of participants, among other factors. Depending on
events, such differences could have a material effect on
our total equity, and may require us to make additional
contributions to our pension funds.
For more information on obligations under retirement
and other post-employment benefit plans and underly-
ing actuarial assumptions, see “Item 18. Financial State-
ments—Note 26. Post-employment benefits for employ-
ees.”
20
Item 4. Information on the Company
Item 4. Information on the Company
4.A History and development of Novartis
Novartis AG
Novartis AG was incorporated on February 29, 1996,
under the laws of Switzerland as a stock corporation
(“Aktiengesellschaft”) with an indefinite duration. On
December 20, 1996, our predecessor companies,
Ciba-Geigy AG and Sandoz AG, merged into this new
entity, creating Novartis. We are domiciled in and gov-
erned by the laws of Switzerland. Our registered office
is located at the following address:
Novartis AG
Lichtstrasse 35
CH-4056 Basel, Switzerland
Telephone: +41-61-324-1111
Website: www.novartis.com
Novartis AG, our Swiss holding company, owns, directly
or indirectly, all of our significant operating companies.
For a list of our significant operating subsidiaries, see
“Item 18. Financial Statements—Note 33. Novartis prin-
cipal subsidiaries and associated companies.”
For a description of important corporate developments
since January 1, 2021, see “Item 18. Financial State-
ments—Note 2. Significant transactions.” For information
regarding the Company’s material commitments for cap-
ital expenditures, see “Item 5. Operating and Financial
Review and Prospects—Material contractual obligations
and commitments.”
The SEC maintains an internet site at http://www.sec.
gov that contains reports, proxy and information state-
ments, and other information regarding issuers that file
electronically with the SEC.
4.B Business overview
Overview
Novartis is an innovative medicines company. Our pur-
pose is to reimagine medicine to improve and extend
people’s lives. Our strategy is to focus on high-value,
innovative medicines that alleviate society’s greatest dis-
ease burdens through technology leadership in R&D and
novel access approaches. To support our strategy, we
have clear focus areas where we commit most of our
time, energy and resources. These core therapeutic
areas are cardiovascular, renal and metabolic; immunol-
ogy; neuroscience; and oncology. For more information
about our strategy, see “Item 5. Operating and Financial
Review and Prospects—Overview—Our strategy.”
In 2023, Novartis achieved net sales from continuing
operations of USD 45.4 billion, and net income from con-
tinuing operations amounted to USD 8.6 billion. Head-
quartered in Basel, Switzerland, we employed 76 057
full-time equivalent employees as of December 31, 2023.
Our products are sold in approximately 130 countries
around the world.
Beginning in September 2023, we reorganized our
operations into the following five organizational units:
• Biomedical Research is our innovation engine, focused
on creating new ways of fighting disease and turning
scientific breakthroughs into new medicines with the
potential to change lives.
• Development oversees the development of potential
new medicines through clinical trials to confirm their
safety and efficacy, and steers the way to regulatory
approval for use by patients.
• Operations manufactures and delivers our medicines
to customers, while also overseeing the global func-
tions of IT, procurement and real estate services.
• The two commercial units, US and International, focus
on their respective geographic areas. They work with
customers to provide innovative medicines and ser-
vices that improve treatment options and raise the qual-
ity of care for patients.
These organizational units are supported by our global
functions in areas such as corporate affairs, ethics, risk
and compliance, finance, legal, internal audit, people and
organization and strategy and growth. For more infor-
mation about our Development unit, see “—Research and
development—Development program” below. For more
information about our Operations unit see “—Item 4.D
Property, plants and equipment” and “Item 18. Financial
Statements—Note 3. Operating segment and Note 4.
Revenues and geographical information.”
In 2023, Novartis completed its transformation into
a pure-play innovative medicines business, with the suc-
cessful spin-off of Sandoz. Effective October 4, 2023,
Sandoz was listed on the SIX Swiss Exchange, with a
Level 1 ADR program in the United States. To comply with
International Financial Reporting Standards (IFRS®)
Accounting Standards as a result of the spin-off, Novartis
has separated the Company’s reported financial data for
the current and prior years into “continuing” and “discon-
tinued” operations. Continuing operations comprises the
retained business activities that includes our innovative
21
Item 4. Information on the Company
medicines business and continued corporate activities.
Discontinued operations include the Sandoz generic
pharmaceuticals and biosimilars division and certain cor-
porate activities attributable to Sandoz prior to the spin-
off up to the distribution date of October 3, 2023, and
certain other expenses related to the spin-off. Included
in 2023 is also the IFRS Accounting Standards non-cash,
non-taxable net gain on distribution of Sandoz Group AG
to Novartis AG shareholders. Sandoz operated in the
off-patent medicines segment and specialized in the
development, manufacturing and marketing of generic
pharmaceuticals and biosimilars. The Sandoz business
was organized globally into two franchises: Generics and
Biosimilars. Except where noted, this Annual Report
focuses on continuing operations.
Key marketed products
The following summaries describe certain Novartis key
marketed products in certain indications. These prod-
ucts are listed according to year-end net sales within
each therapeutic area or reporting category. Some of
them have lost patent protection or are otherwise sub-
ject to generic competition, while others are subject to
patent challenges by potential generic competitors.
Please see “—Intellectual property” for general informa-
tion on intellectual property and regulatory data protec-
tion, and for more information on the status of patents
and exclusivity for certain key marketed products.
While we typically seek to sell our marketed products
throughout the world, not all products and indications
are available in every country. The indications described
in these summaries may therefore vary by country. In
addition, a product may be available under different
brand names depending on country and indication.
Cardiovascular, renal and metabolic
• Entresto (sacubitril/valsartan) is an oral, first-in-class
angiotensin receptor neprilysin inhibitor. Entresto
enhances the protective effects of a hormone system
called the natriuretic peptide system, and simultane-
ously suppresses the harmful effects of a hormone sys-
tem called the renin-angiotensin-aldosterone system.
It is approved:
• In the US, the EU and other countries to treat adults
who have symptomatic heart failure with reduced
ejection fraction (HFrEF). HFrEF is a disease in which
the heart cannot pump blood efficiently
• In the US and other countries to treat most chronic
heart failure patients with preserved ejection frac-
tion (HFpEF). HFpEF is a disease in which the heart’s
main pumping chamber (left ventricle) becomes stiff
and unable to fill properly with blood
• In the US and other countries to treat children aged
1 year and older who have symptomatic heart failure
with systemic left ventricular systolic dysfunction
• In China and Japan to treat patients with essential
hypertension (abnormally high blood pressure that
is not the result of a medical condition)
• Leqvio (inclisiran) is the first and only approved small-in-
terfering RNA therapy to reduce LDL cholesterol, a risk
factor for atherosclerotic cardiovascular disease
(ASCVD), which is caused by plaque buildup in the
arteries. Leqvio is administered by a healthcare pro-
fessional twice a year as an injection, following an ini-
tial dose and another dose after three months. It is
approved:
• In the EU and other countries to treat adults with pri-
mary hypercholesterolemia (heterozygous familial
and non-familial) or mixed dyslipidemia as an adjunct
to diet. Leqvio is used in combination with the maxi-
mum tolerated dose of a statin or a statin with other
lipid-lowering therapies in patients unable to reach
LDL cholesterol goals, or alone or in combination
with other lipid-lowering therapies in patients who
are statin-intolerant or for whom a statin is contrain-
dicated. Primary hypercholesterolemia and mixed
dyslipidemia are disorders characterized by high lev-
els of fats in the blood
• In the US to treat adults with primary hyperlipidemia,
including heterozygous familial hypercholesterol-
emia (HeFH), as an adjunct to diet and statin therapy
to reduce LDL cholesterol. This includes patients
who have ASCVD or HeFH, or are at an increased
risk of ASCVD, meaning they have not had a cardio-
vascular event but have other factors that increase
their risk. Primary hyperlipidemia, also known as high
cholesterol, is characterized by high levels of fats in
the blood
Novartis obtained global rights to develop, manufac-
ture and commercialize Leqvio under a license and col-
laboration agreement with Alnylam Pharmaceuticals,
Inc.
Immunology
• Cosentyx (secukinumab) is an injectable, fully-human
monoclonal antibody that selectively inhibits interleu-
kin-17A (IL-17A), a cytokine involved in several immuno-
logical diseases. It is approved in the US, the EU and
other countries to treat:
• Adults and children aged 6 years and older with mod-
erate-to-severe plaque psoriasis (this indication is
also approved in China). Psoriasis is a debilitating
systemic inflammatory disease that is characterized
by the appearance of raised, red patches on the skin
• Adults with active ankylosing spondylitis (AS). AS is
a progressive inflammatory disease that is charac-
terized by chronic back pain, is generally visible on
X-rays, and can cause structural damage to the
bones and joints
• Adults with active non-radiographic axial spondy-
loarthritis (nr-axSpA). nr-axSpA is a long-term inflam-
matory disease that is characterized by chronic back
pain and is not visible on X-rays
• Adults and children (aged 2 years and older in the
US and 6 years and older in the EU) with active pso-
riatic arthritis (PsA). PsA is a type of progressive
inflammatory arthritis that results in swollen and pain-
ful joints and tendons, which can cause structural
damage to the bones and joints
• Children (aged 4 years and older in the US and 6
years and older in the EU) with enthesitis-related
arthritis (ERA) and children (aged 2 years and older
in the US and 6 years and older in the EU) with juve-
nile psoriatic arthritis (JPsA). ERA and JPsA are
22
Item 4. Information on the Company
subtypes of juvenile idiopathic arthritis. If left
untreated, they can lead to high levels of pain and
disability
• Adults with moderate to severe hidradenitis suppu-
rativa (HS). HS is a chronic skin disease that causes
recurring boil-like lumps that may burst into open
wounds and cause irreversible scarring, often in the
most intimate parts of the body.
An intravenous formulation of Cosentyx is approved in
the US for the treatment of adults with PsA, AS and
nr-axSpA.
autoinjector pen following three weekly starter doses.
It is approved:
• In the US to treat adults with relapsing forms of mul-
tiple sclerosis, including clinically isolated syndrome,
relapsing-remitting multiple sclerosis and active sec-
ondary progressive multiple sclerosis. Multiple scle-
rosis is a disease in which the immune system attacks
the protective covering of nerves (known as myelin)
• In the EU to treat adults with relapsing forms of mul-
tiple sclerosis with active disease defined by clinical
or imaging features (i.e., relapse, disability, or lesions
detected by MRI scans)
• Xolair (omalizumab) is an injectable prescription med-
icine and the only approved antibody designed to tar-
get and block immunoglobulin E (IgE). It is approved in
the US, the EU and other countries to treat:
• Adults and children aged 6 years and older with mod-
erate-to-severe, or severe, persistent allergic asthma
• Adults and children aged 12 years and older with
chronic spontaneous urticaria/chronic idiopathic
urticaria (hives)
• Adults with nasal polyps or severe chronic rhinosi-
nusitis with nasal polyps (CRSwNP). CRSwNP is a
chronic inflammation of the nose and the sinuses
with the presence of benign lesions (nasal polyps)
on the lining of the nasal sinuses or nasal cavity
Approved indications vary by country. Xolair is provided
as lyophilized powder for reconstitution, and as liquid
formulation in a pre-filled syringe. Novartis co-pro-
motes Xolair with Genentech in the US and shares a
portion of operating income, but Novartis does not
record any US sales. Novartis records all sales of Xolair
outside the US. For more information, see “Item 18.
Financial Statements—Note 28. Transactions with
related parties—Roche Holding AG.”
• Ilaris (canakinumab) is an injectable, selective, high-af-
finity, fully-human monoclonal antibody that inhibits
interleukin-1 beta (IL-1 beta), a key cytokine in the
inflammatory pathway. It is approved in the US, the EU
and other countries to treat patients with certain debil-
itating autoinflammatory disorders, including:
• Adults and children with periodic fever syndromes.
Periodic fever syndromes are a set of rare disorders
characterized by recurrent episodes of illness, with
fever as the main symptom
• Patients with Still’s disease, including systemic juve-
nile idiopathic arthritis and adult-onset Still’s disease.
Still’s disease is a disorder that causes fevers, rash
and joint pain
• Adults with acute gouty arthritis. Gouty arthritis is a
type of arthritis characterized by pain, redness, ten-
derness and swelling in one or more joints
Approved indications vary by country.
Neuroscience
• Kesimpta (ofatumumab) is an anti-CD20 monoclonal
antibody that enables the targeted depletion of B-cells,
specifically in lymph nodes. Kesimpta is the only B-cell
treatment for relapsing multiple sclerosis that is self-ad-
the Sensoready
ministered once-monthly via
Approved indications vary across other countries. Ofa-
tumumab was originally developed by Genmab and
licensed to GlaxoSmithKline (GSK). Novartis obtained
the rights to ofatumumab from GSK across all indica-
tions.
• Zolgensma (onasemnogene abeparvovec) is a one-
time intravenous gene therapy designed to address the
genetic root cause of spinal muscular atrophy (SMA)
by replacing the function of the missing or nonworking
SMN1 gene. Zolgensma delivers a new working copy
of the SMN gene into a patient’s cells. It is approved in
the US, the EU and other countries to treat:
• Babies and young children who have SMA with bial-
lelic mutations in the SMN1 gene. SMA is a rare,
genetic neuromuscular disease resulting in the pro-
gressive and irreversible loss of motor neurons,
which causes muscle weakness and atrophy
Approved indications vary by country.
Oncology
• Promacta/Revolade (eltrombopag) is a once-daily oral
thrombopoietin receptor agonist that works by stimu-
lating bone marrow cells to produce platelets. It is
approved in the US, the EU and other countries to treat:
• Immune thrombocytopenia (ITP) in patients who have
had an insufficient response to or have failed previ-
ous therapies. ITP is a bleeding disorder caused by
an unusually low number of platelets
• Thrombocytopenia in patients with chronic hepatitis
C to allow them to initiate and maintain interfer-
on-based therapy
• Patients with severe aplastic anemia (SAA). SAA is
a condition in which the body does not produce
enough blood cells
Promacta/Revolade is marketed under a research,
development and license agreement between Novartis
and RPI Finance Trust (dba Royalty Pharma), as
assignee of Ligand Pharmaceuticals.
• Kisqali (ribociclib) is a selective oral cyclin-dependent
inhibitor of kinases 4 and 6 (CDK4/6) – two enzymes
involved in the control of cell cycle progression. Kisqali
is approved in the US, the EU and other countries to
treat:
• Pre-, peri- and postmenopausal women, and men (US
and other countries), with locally advanced or meta-
static hormone receptor-positive (HR+)/human epi-
dermal growth factor receptor 2-negative (HER2-)
23
Item 4. Information on the Company
breast cancer, in combination with an aromatase
inhibitor as initial endocrine-based therapy. HR+/
HER2- breast cancer is the most common subtype
of breast cancer
• Pre-, peri- (EU) and postmenopausal women, and
men (US), with locally advanced or metastatic HR+/
HER2- breast cancer, in combination with fulvestrant,
as first- or second-line therapy
Kisqali was developed by our Biomedical Research
organizational unit (formerly the Novartis Institutes for
BioMedical Research) under a research collaboration
with Astex Pharmaceuticals.
• Tafinlar + Mekinist (dabrafenib + trametinib) is an oral
combination therapy. Tafinlar and Mekinist are kinase
inhibitors of the BRAF and MEK1/2 proteins, respec-
tively, approved in combination to treat patients who
have certain types of cancer with a change in the BRAF
gene (called a BRAF V600 mutation), including:
• Adults in the US, the EU and other countries with
unresectable or metastatic melanoma with a BRAF
V600 mutation. Melanoma is a form of skin cancer;
unresectable melanoma cannot be removed with sur-
gery and metastatic melanoma has spread to other
parts of the body. Tafinlar and Mekinist are also
approved as single agents for this indication
• Adults in the US, the EU and other countries with
stage III melanoma with a BRAF V600 mutation as
an adjuvant treatment (following surgery)
• Adults in the US, the EU and other countries with
advanced non-small cell lung cancer (NSCLC) with
a BRAF V600 mutation. NSCLC is the most common
type of lung cancer
• Adults and children aged 1 year and older in the US
and 6 years and older in other countries with unre-
sectable or metastatic solid tumors with a BRAF
V600E mutation whose cancer has progressed fol-
lowing prior treatment and who have no satisfactory
alternative treatment options
Approved indications vary by country. Novartis has
worldwide exclusive rights to develop, manufacture and
commercialize trametinib granted by Japan Tobacco
Inc.
• Tasigna (nilotinib) is a twice-daily oral tyrosine kinase
inhibitor that acts by blocking the BCR-ABL protein. It
is approved in the US, the EU and other countries to
treat:
• Patients with Philadelphia chromosome-positive
chronic myeloid leukemia (Ph+ CML) in the chronic
and/or accelerated phase who are resistant or intol-
erant to existing treatment. Ph+ CML is a cancer that
starts in the blood-forming cells of bone marrow
• Newly diagnosed adults and children with Ph+ CML
in the chronic phase
• Jakavi (ruxolitinib) is an oral inhibitor of the JAK1 and
JAK2 tyrosine kinases. It is the first therapy approved
in the EU and other countries to treat:
• Adults with myelofibrosis (MF), including primary
myelofibrosis, post-polycythemia vera myelofibrosis
and post-essential thrombocythemia myelofibrosis.
MF is a rare blood cancer characterized by abnor-
mal blood cell production and scarring in the bone
marrow, which can lead to an enlarged spleen
• Adults with polycythemia vera (PV) who are resistant
or intolerant to a medication called hydroxyurea. PV
is a rare blood cancer in which the bone marrow pro-
duces too many red blood cells, resulting in serious
problems like clots
• Patients aged 12 years and older with acute or chronic
graft-versus-host disease (GvHD) and who have had
an inadequate response to corticosteroids or other
systemic therapies. GvHD occurs in stem-cell trans-
plant patients when donor cells see the recipient’s
healthy cells as foreign and attack them
Novartis licensed ruxolitinib from Incyte Corporation
for development and commercialization in the indica-
tions of oncology, hematology and GvHD outside the
US. Incyte Corporation markets ruxolitinib as Jakafi® in
the US.
• Pluvicto (lutetium (177Lu) vipivotide tetraxetan) is an
intravenous radioligand therapy combining a targeting
compound (a ligand) with a therapeutic radionuclide (a
radioactive particle, in this case lutetium-177). Pluvicto
delivers radiation selectively to PSMA-positive cells
and the surrounding cells. It is approved in the US, the
EU and other countries to treat:
• Adults with prostate-specific membrane anti-
gen-positive metastatic castration-resistant prostate
cancer (PSMA-positive mCRPC), a type of advanced
cancer that has spread to other parts of the body
(metastatic). These patients have already been
treated with other anticancer treatments (androgen
receptor pathway inhibition and taxane-based che-
motherapy)
• Lutathera (lutetium Lu 177 dotatate/lutetium (177Lu) oxo-
dotreotide) is an intravenous targeted radioligand ther-
apy approved in the US, the EU and other countries to
treat:
• Adults with somatostatin receptor-positive gastroen-
teropancreatic neuroendocrine tumors (GEP-NETs).
GEP-NETs are rare tumors found in the digestive
tract
Approved indications vary by country.
• Scemblix (asciminib) is an oral kinase inhibitor that
works by binding to a part of the BCR-ABL protein
called the ABL myristoyl pocket. It is approved:
• In the US, the EU and other countries to treat adults
with Philadelphia chromosome-positive chronic
myeloid leukemia (Ph+ CML) in the chronic phase
who have previously been treated with two or more
tyrosine kinase inhibitors (TKIs). Ph+ CML is a can-
cer that starts in the blood-forming cells of bone mar-
row
• In the US and other countries to treat adults with Ph+
CML in the chronic phase with the T315I mutation.
The T315I mutation causes resistance to most avail-
able TKI therapies and, as a result, patients with this
mutation would otherwise have limited treatment
options
24
Item 4. Information on the Company
• Fabhalta (iptacopan) is an oral Factor B inhibitor of the
alternative complement pathway, a part of the immune
system involved in triggering inflammation and fighting
infection. It is approved in the US to treat:
• Adults with paroxysmal nocturnal hemoglobinuria
(PNH). PNH is a rare chronic blood disorder in which
red blood cells are susceptible to premature destruc-
tion by the complement system
Established brands
• Lucentis (ranibizumab) is a humanized, high-affinity
antibody fragment that binds to vascular endothelial
growth factor A (VEGF-A), a protein that can cause the
growth of blood vessels in the eye, potentially leading
to vision loss. Lucentis is an anti-VEGF therapy that is
injected into the eye. It is approved in the EU and other
countries to treat patients with certain eye conditions,
including:
• Adults with neovascular (wet) age-related macular
degeneration (AMD). Wet AMD develops when
abnormal blood vessels grow under the macula and
leak blood and other fluids in the back of the eye,
which damages the macula
• Adults with proliferative diabetic retinopathy, moder-
ately severe to severe non-proliferative diabetic ret-
inopathy, and/or visual impairment due to diabetic
macular edema. These conditions are complications
of diabetes
• Adults with visual impairment due to macular edema
secondary to retinal vein occlusion (branch RVO or
central RVO). Retinal vein occlusion is a blockage of
the branch or central retinal veins, which carry blood
away from the retina
Approved indications vary by country. Lucentis is
licensed from Genentech, and Novartis holds the rights
to commercialize the product outside the US. Genen-
tech holds the rights to commercialize Lucentis in the
US. For more information, see “Item 18. Financial State-
ments—Note 28. Transactions with related parties—
Roche Holding AG.”
• Sandostatin SC (octreotide acetate for injection) and
Sandostatin LAR (octreotide acetate for injectable sus-
pension) are somatostatin analogs approved in the US,
the EU and other countries to treat:
• Adults with acromegaly that is inadequately con-
trolled by surgery or radiotherapy. Acromegaly is a
chronic disease caused by the oversecretion of
growth hormone
• Patients with certain symptoms associated with car-
cinoid tumors and other types of functional gastro-
intestinal and pancreatic neuroendocrine tumors
Sandostatin LAR is also approved in the EU and other
countries to treat patients with advanced neuroendo-
crine tumors of the midgut or of unknown primary
tumor origin.
Compounds in development
The following table provides an overview of key projects
currently in the Confirmatory Development stage and
may also describe certain projects in the Early Develop-
ment stage. Projects typically enter Confirmatory Devel-
opment and become the responsibility of our Develop-
ment organizational unit during Phase II testing. (For
more information about our drug development program,
see “—Research and development—Development pro-
gram.”) Projects are listed in alphabetical order by com-
pound code, or by product name where applicable. Proj-
ects include those seeking to develop potential uses of
new molecular entities as well as potential additional indi-
cations or new formulations for already marketed prod-
ucts. The table below, entitled “Projects removed from
the development table since 2022,” highlights changes
to the table entitled “Selected development projects”
from the previous year.
The year that each project entered the current phase
of development refers to the year of the first patient’s
first visit in the first clinical trial of that phase. For proj-
ects in Phase II, the year generally refers to the first
patient’s first visit in the first trial in Confirmatory Devel-
opment. In some cases, the first patient’s first visit in a
Phase II trial can occur before the Confirmatory Devel-
opment stage. Prior to 2020, we reported the current
phase based on the year in which the decision to enter
the phase was made. To maintain continuity, we have
included certain previously disclosed projects, noted
below, that have not yet achieved “first patient, first visit”
in any Phase I-III study for the reported indication and
route of administration. We have disclosed these proj-
ects using our previous reporting criteria.
A reference to a project being in registration means
that an application has been submitted to a health author-
ity for marketing approval. Compounds and new indica-
tions in development are subject to required regulatory
approvals and, in certain instances, contractual limita-
tions. These compounds and indications are in various
stages of development throughout the world. It may not
be possible to obtain regulatory approval for any or all
of the new compounds and new indications referred to
in this Form 20-F in any country or in every country. See
“—Regulation” for more information on the approval pro-
cess.
25
Item 4. Information on the Company
SELECTED DEVELOPMENT PROJECTS
Compound/ Common
product
name
Mechanism
of action
Potential indication
Category
Formulation/
route of
administration
Year project
entered
current
Planned filing
development dates/current
phase
phase
AVXS-101 onasemno- Survival motor neuron Spinal muscular atrophy
(OAV101)
(IT formulation)
gene abepar- (SMN) gene therapy
vovec
Neuroscience
Intrathecal injection
2021
2025/III
Beovu
brolucizumab VEGF inhibitor
Diabetic retinopathy
Ophthalmology
Intravitreal injection
2020
2025/III
CFZ533
iscalimab
CD40 inhibitor
Sjögren’s syndrome
Immunology
Subcutaneous injection 2019
≥2027/II
Coartem
artemether + PGH-1 (artemisinin
lumefantrine combination therapy)
Malaria,
uncomplicated
(<5 kg patients)
Global Health
Oral
2020
2024/III
Cosentyx
secukinumab IL-17A inhibitor
Giant cell arteritis
Immunology
Subcutaneous injection 2021
Polymyalgia rheumatica 1
Immunology
Subcutaneous injection 2023
2025/III
2026/III
Rotator cuff tendinopathy 1
Immunology
Subcutaneous injection 2023
≥2027/III
EXV811 1
atrasentan
ETA receptor
antagonist
IgA nephropathy
Fabhalta
iptacopan
CFB inhibitor
IgA nephropathy
C3 glomerulopathy
IC-MPGN 1
Cardiovascular, Oral
Renal and
Metabolic
Cardiovascular, Oral
Renal and
Metabolic
Cardiovascular, Oral
Renal and
Metabolic
Cardiovascular, Oral
Renal and
Metabolic
2023
2024/III
2021
2024/III
2021
2024/III
2023
≥2027/III
FUB523 1
zigakibart
Anti-APRIL
monoclonal
antibody
JDQ443
opnurasib
KRAS inhibitor
Atypical hemolytic uremic syndrome
Oncology
Oral
2021
≥2027/III
IgA nephropathy
Cardiovascular, Subcutaneous injection 2023
Renal and
Metabolic
≥2027/III
Non-small cell lung cancer 2
(monotherapy and/or combination therapy)
Oncology
Oral
2022
≥2027/III
KAE609
cipargamin PfATP4 inhibitor
Malaria, uncomplicated
Global Health
Oral
Malaria, severe
Hormone receptor-positive
(HR+)/human epidermal growth
factor receptor 2-negative (HER2-)
early breast cancer (adjuvant)
Global Health
Oral
Oncology
Oral
2017
2022
2023
≥2027/II
≥2027/II
US, EU
registration
Malaria, uncomplicated
Global Health
Oral
2023
2026/II
Kisqali
ribociclib
CDK4 inhibitor
KLU156 3
ganaplacide Non-artemisinin
+
lumefantrine falciparum inhibitor
plasmodium
Leqvio
inclisiran
siRNA
(regulation of LDL-C)
Secondary prevention of cardiovascular Cardiovascular, Subcutaneous injection 2018
events in patients with elevated levels
of LDL-C
Renal and
Metabolic
Primary prevention cardiovascular 1
risk reduction
Cardiovascular, Subcutaneous injection 2023
Renal and
Metabolic
LNA043
TBD
ANGPTL3 agonist
Osteoarthritis 4
Immunology
Intra-articular
≥2027/III
≥2027/III
≥2027/II
2024/III
≥2027/III
≥2027/III
Immunology
Immunology
Oral
Oral
Neuroscience
Oral
2021
2021
2023
2021
Oncology
Intravenous infusion
2020
2024/III
LOU064
remibrutinib BTK inhibitor
Chronic spontaneous urticaria
Lutathera
Radioligand therapy
targeting SSTR
lutetium
Lu 177
dotatate/
lutetium
(177Lu)
oxodotreotide
Chronic inducible urticaria
Multiple sclerosis
Gastroenteropancreatic
neuroendocrine tumors,
1st line in G2/3 tumors
LXE408
TBD
Proteasome inhibitor
Visceral leishmaniasis
Global Health
Oral
2022
≥2027/II
Radioligand therapy
targeting PSMA
Metastatic castration-resistant
prostate cancer, pre-taxane
Oncology
Intravenous infusion
2021
2024/III
Pluvicto
lutetium
Lu 177
vipivotide
tetraxetan/
lutetium
(177Lu)
vipivotide
tetraxetan
Metastatic hormone-sensitive
prostate cancer
Oncology
Intravenous infusion
2021
2025/III
1 Project added to selected development projects table in 2023 – entered Confirmatory Development
2 Previously disclosed as non-small cell lung cancer, 2/3L
3 Project added to selected development projects table in 2023 (replacing KAF156) – entered Confirmatory Development, FPFV in Phase III expected in early 2024
4 Previously disclosed as knee osteoarthritis
26
Item 4. Information on the Company
Compound/ Common
product
name
Mechanism
of action
Potential indication
Category
Formulation/
route of
administration
Year project
entered
current
Planned filing
development dates/current
phase
phase
QGE031
ligelizumab
IgE inhibitor
Food allergy
Immunology
Subcutaneous injection 2021
≥2027/III
Scemblix
asciminib
BCR-ABL inhibitor
Chronic myeloid
leukemia, 1st line
Oncology
Oral
2021
2024/III
TQJ230
pelacarsen ASO targeting
lipoprotein(a)
Secondary prevention of cardiovascular Cardiovascular, Subcutaneous injection 2019
events in patients with elevated levels
of lipoprotein(a)
Renal and
Metabolic
2025/III
VAY736
ianalumab
BAFF-R inhibitor
Autoimmune hepatitis
Immunology
Subcutaneous injection 2018
≥2027/II
Lupus nephritis
Immunology
Subcutaneous injection 2022
≥2027/III
Sjögren’s syndrome
Immunology
Subcutaneous injection 2022
2026/III
Systemic lupus erythematosus 1
Immunology
Subcutaneous injection 2023
≥2027/III
Warm autoimmune hemolytic anemia
(wAIHA)
Oncology
Intravenous infusion
2022
2026/III
Immune thrombocytopenia, 1st line 1
Oncology
Intravenous infusion
2023
Immune thrombocytopenia, 2nd line 1
Oncology
Intravenous infusion
2023
2026/III
2026/III
Vijoice
alpelisib
PI3K-alpha inhibitor
Lymphatic malformations
Oncology
Oral
2023
≥2027/III
Xolair
omalizumab
IgE inhibitor
Food allergy
Immunology
Subcutaneous injection 2019
US registration
XXB750
TBD
NPR1 agonist
Hypertension
YTB323 1
rapcabtagene CD19 CAR-T
autoleucel
Severe refractory lupus nephritis/
systemic lupus erythematosus
Cardiovascular, Subcutaneous injection 2022
Renal and
Metabolic
≥2027/II
Immunology
Intravenous infusion
2023
≥2027/II
High-risk large B-cell lymphoma, 1st line
Oncology
Intravenous infusion
2023
≥2027/II
1 Project added to selected development projects table in 2023 – entered Confirmatory Development
PROJECTS REMOVED FROM THE DEVELOPMENT TABLE SINCE 2022
Compound/product
Potential indication
Change
Cosentyx
Hidradenitis suppurativa
Fabhalta
KAF156
LOU064
MBG453
MIJ821
NIS793
Piqray
PPY988
SAF312
SKO136
VDT482
Lupus nephritis
Psoriatic arthritis (IV formulation)
Ankylosing spondylitis (IV formulation)
Paroxysmal nocturnal hemoglobinuria
Malaria, uncomplicated
Sjögren’s syndrome
Myelodysplastic syndrome
Unfit acute myeloid leukemia
Major depressive disorder
Pancreatic cancer, 1st line
Ovarian cancer
Geographic atrophy
Chronic ocular surface pain
Coronavirus infection
Esophageal cancer, 2nd line
Non-small cell lung cancer
Nasopharyngeal carcinoma, 1st line
Gastric cancer, 1st line
Esophageal cancer, 1st line
Localized esophageal cancer
Hepatocellular carcinoma, 1st line
Small cell lung cancer, 1st line
Urothelial cell carcinoma, 1st line
VPM087
Colorectal cancer, 1st line
1 Now in development as KLU156
2 Mutual termination of the agreement with BeiGene, Ltd.
Commercialized
Removed
Commercialized
Commercialized
Commercialized
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
Removed
27
Reason
Development discontinued
Development discontinued 1
Development discontinued
Development discontinued
Development discontinued
Development discontinued
Development discontinued
Development discontinued
Development discontinued
Development discontinued
Development discontinued
Development discontinued 2
Development discontinued 2
Development discontinued 2
Development discontinued 2
Development discontinued 2
Development discontinued 2
Development discontinued 2
Development discontinued 2
Development discontinued 2
Development discontinued
Item 4. Information on the Company
Principal markets
Novartis sells products in approximately 130 countries worldwide. Net sales are primarily concentrated in the US
and Europe. The following table sets forth aggregate 2023 net sales by region:
United States
Europe
Asia, Africa, Australasia
Canada and Latin America
Total
Of which in established markets 1
Of which in emerging growth markets 1
2023 net sales
to third parties
USD millions
17 959
14 997
9 308
3 176
45 440
33 725
11 715
%
40
33
20
7
100
74
26
1 Emerging growth markets comprise all markets other than the established markets of the US, Canada, Western Europe, Japan, Australia and New Zealand. Novartis definition of
Western Europe includes Austria, Belgium, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, The Netherlands, Norway, Portugal, Spain, Sweden,
Switzerland, and the United Kingdom.
Many of our products are used for chronic conditions
that require patients to continue dosing of the product
over long periods of time, ranging from months to years.
However, certain of our marketed products and devel-
opment projects, such as cell and gene therapies, are
administered only once. Net sales of the vast majority of
our products are not subject to material changes in sea-
sonal demand.
Production
Our primary goal is to ensure the uninterrupted and
timely supply of medicines that meet all product speci-
fications and quality standards, and that are produced
in the most cost-effective and sustainable manner. The
manufacturing of our products is highly regulated by gov-
ernmental health authorities around the world, including
the US Food and Drug Administration (FDA) and Euro-
pean Medicines Agency (EMA). In addition to regulatory
requirements, many of our products involve technically
complex manufacturing processes or require highly spe-
cialized raw materials.
We are continuing to integrate ADACAP manufactur-
ing sites into our existing manufacturing and supply
structure for radioligand therapies. We manufacture our
products across the following technologies at facilities
worldwide: large molecules, small molecules, cell and
gene therapy, xRNA therapy and radioligand therapy
(see also “—Item 4.D Property, plants and equipment”).
In addition, we generate contract manufacturing sales
from biotechnology services that we provide to third par-
ties, which we include under “established brands” in our
consolidated financial statements (see “Item 18. Finan-
cial Statements—Note 4. Revenues and geographic
information”).
In our manufacturing network, we maintain
state-of-the-art processes, with quality as a priority, and
require our suppliers to adhere to the same high stan-
dards we expect from our own people and processes.
These processes include chemical and biological syn-
theses; radioisotope handling; sterile processing, includ-
ing CAR-T cell processing; gene modification and
delivery; and formulation and packaging. We are con-
stantly working to improve our existing manufacturing
processes, develop new and innovative technologies,
and review and adapt our manufacturing network to meet
our needs and those of our patients and customers.
We produce raw materials for manufacturing in-house
or purchase them from third-party suppliers. Where pos-
sible, we maintain multiple supply sources so that the
business is not dependent on a single or limited number
of suppliers. However, our ability to do so may at times
be limited by regulatory or other requirements. We mon-
itor market developments that could have an adverse
effect on the supply of essential materials. Our suppliers
of raw materials are required to comply with applicable
regulations and Novartis quality standards.
Because the manufacturing of our products is com-
plex and highly regulated by governmental health author-
ities, uninterrupted supply cannot be guaranteed. If we
or our third-party suppliers fail to comply with applica-
ble regulations, then there could be a product recall or
other disruption to our production activities. We have
experienced supply interruptions for our products in the
past, and there can be no assurance that supply will not
be interrupted again in the future. For more information
on the risks related to the manufacturing of our products,
see “Item 3. Key Information—Item 3.D Risk factors—
Manufacturing and product quality—Inability to ensure
proper controls in product development and product
manufacturing, and failure to comply with applicable reg-
ulations and standards.” We have implemented a global
manufacturing strategy to maximize business continuity
in case of such events.
Marketing and sales
Although specific distribution patterns vary by country,
Novartis generally sells its prescription drugs primarily
to wholesale and retail drug distributors, hospitals, clin-
ics, government agencies and managed healthcare pro-
viders. We reach healthcare professionals and patients
in many markets and across our core therapeutic areas
through integrated channels including field force
28
Item 4. Information on the Company
operations, patient support programs and Novar-
tis-owned digital platforms.
We have 19 607 full-time equivalent field force
employees, as of December 31, 2023, including super-
visors and administrative personnel. These trained rep-
resentatives present the therapeutic benefits and risks
of our products to physicians, pharmacists, hospitals,
insurance groups, managed care organizations and
other healthcare professionals. In the US, Novartis adver-
tises certain products via digital and traditional media
channels, including the internet, television, newspapers
and magazines. Novartis also pursues co-promotion or
co-marketing opportunities as well as licensing and dis-
tribution agreements with other companies in various
markets.
The marketplace for healthcare is constantly evolv-
ing. Customer groups beyond prescribers have increas-
ing influence on treatment decisions and guidelines,
while patients continue to become more informed stake-
holders in their healthcare decisions and look for solu-
tions to meet their changing needs. Novartis is respond-
ing by adapting our business practices to engage
appropriately with patients, customer groups and other
stakeholders, including by delivering innovative solutions
to drive education, access and improved patient care.
The COVID-19 pandemic accelerated additional
changes related to marketing and sales techniques in
the healthcare industry. For example, many healthcare
professionals increased their use of virtual platforms
when interacting with pharmaceutical companies, and
now prefer to receive information in a more convenient
and personalized way. In response, Novartis is combin-
ing traditional face-to-face visits with digital and other
methods of engaging healthcare professionals to improve
the efficiency and effectiveness of every interaction. We
are similarly changing our approach to engaging health-
care systems, payers and other healthcare providers.
The growing number of so-called “specialty” drugs
in our portfolio, such as Cosentyx and Kesimpta, has
resulted in increased engagement with specialty phar-
macies. Because many of these drugs require special
handling and administration, we are rolling out an inter-
national patient support program across our priority mar-
kets that serves as a central resource for onboarding,
education and support to help patients navigate their
healthcare.
With our radioligand therapy Pluvicto, extra steps
must be taken to educate customers, in part because it
can only be administered by those who are trained to
handle radiopharmaceuticals. We are working to improve
the customer experience by connecting patients with
healthcare professionals throughout the disease man-
agement process, including awareness and engage-
ment, treatment site onboarding, referrals and imaging,
preparation and infusion, and treatment follow-up. We
have established a dedicated support team, a customer
relationship management platform and an order man-
agement platform as part of this effort.
In the US, the US Centers for Medicare & Medicaid
Services (CMS) is the largest single payer for healthcare
services as a result of continuing changes in healthcare
economics and an aging population. In addition, both
commercial and government-sponsored managed care
organizations continue to be among the largest groups
of payers for healthcare services in the US. In other coun-
tries, national health services are often the only signifi-
cant payer for healthcare services. In an effort to control
prescription drug costs, almost all managed care orga-
nizations and national health services use formularies
that list specific drugs that may be reimbursed and/or
the level of reimbursement for each drug. Managed care
organizations and national health services also use
cost-benefit analyses to determine whether or not newly
approved drugs will be added to a formulary and/or the
level of reimbursement for that drug, and to determine
whether or not to continue to reimburse existing drugs.
We have dedicated teams that actively seek to optimize
patient access, including formulary positions, for our
products.
The trend toward consolidation among distributors
and retailers of our products continues in the US and
internationally, both within and across countries. This has
increased our customers’ purchasing leverage and
resulted in increased pricing pressure on our products.
Moreover, we are exposed to increased concentration
of credit risk as a result of the consolidation among our
customers.
Drug pricing is an increasingly prominent issue in
many countries as healthcare spending continues to rise.
This issue has received significant attention in the US,
especially with the passage of the Inflation Reduction
Act (please see “—Price controls” for more information).
At Novartis, we are increasing our efforts to enable
patient access through innovative pricing and access ini-
tiatives in the US, Europe and other markets. These
include contract structures such as pay-over-time and
outcome-based agreements.
In 2020, Novartis Gene Therapies established a novel
early access program for Zolgensma. It supports early
patient access through customizable options including
retroactive rebates, deferred payments, installment
options, outcome-based rebates, and collaborations
with healthcare systems to optimize disease manage-
ment. We now have more than 40 early access agree-
ments and pay-for-performance agreements (i.e., out-
come-based arrangements) in place in various markets
around the world. Zolgensma is approved in 51 countries.
Additionally, in 2021 Novartis reached an agreement
with the National Health Service (NHS) in England to
implement a first-of-its-kind population health manage-
ment approach designed to provide faster and broader
access to Leqvio for certain high-risk patients with ath-
erosclerotic cardiovascular disease. Novartis has
engaged in similar collaborations with other countries.
Competition
The global pharmaceutical market is highly competitive.
We compete against other major international corpora-
tions that have substantial financial and other resources,
as well as against smaller companies that operate region-
ally or nationally. Competition within the industry is
intense and extends across a wide range of activities,
including pricing, product characteristics, customer ser-
vice, sales and marketing, and research and develop-
ment.
29
Item 4. Information on the Company
Like
other
selling
companies
patented
pharmaceuticals, Novartis faces challenges from com-
panies selling competing patented products. Generic
forms of our products may follow the expiration of intel-
lectual property protection or regulatory exclusivities,
and generic companies may also gain entry to the mar-
ket through successfully challenging our intellectual
property rights and exclusivities. We use appropriate,
legally permissible measures to defend those rights and
exclusivities (see also “—Intellectual property” below).
We also may face competition from over-the-counter
(OTC) products that do not require a prescription from
a physician.
There is ongoing consolidation in the pharmaceuti-
cal industry. At the same time, new entrants are looking
to use their expertise to establish or expand their pres-
ence in healthcare. Technology companies, for instance,
are seeking to benefit from the increasing importance
of data and data management in our industry, including
the use of artificial intelligence.
Research and development
The discovery and development of a new drug usually
requires approximately 10 to 15 years from the initial
research to bringing a drug to market. This includes
approximately six to eight years from Phase I clinical tri-
als to market entry. At each of these steps, there is a
substantial risk that a therapeutic candidate will not meet
the requirements to progress further. In such an event,
we may be required to abandon the development of a
potential therapy in which we have made a substantial
investment.
We manage our research and development expendi-
tures across our entire portfolio in accordance with our
strategic priorities. We make decisions about whether
or not to proceed with development projects on a proj-
ect-by-project basis. These decisions are based on the
project’s potential to meet a significant unmet medical
need or to improve patient outcomes, the strength of the
science underlying the project, and the potential of the
project (subject to the risks inherent in pharmaceutical
development) to generate significant positive financial
results for the Company. Once a management decision
has been made to proceed with the development of a
therapeutic candidate, the level of research and devel-
opment investment required will be driven by many fac-
tors. These include the medical indications for which it
is being developed, the number of indications being pur-
sued, whether the therapeutic candidate is of a chemi-
cal or biological nature, the stage of development, and
the level of evidence necessary to demonstrate clinical
efficacy and safety.
Research program
Our research and early development program is con-
ducted by our Biomedical Research organizational unit,
which is the innovation engine of Novartis. This unit is
responsible for the discovery of new medicines that bring
value for patients and the Company. This requires hiring
and retaining highly talented employees, focusing on fun-
damental disease mechanisms that are relevant across
improving
different disease areas, continuously
30
technologies for drug discovery and potential therapies,
working with patients to understand their diseases and
the potential benefits of therapies, forming close alli-
ances with clinical and commercial colleagues, and
establishing strategic external alliances.
We have 5 511 full-time-equivalent scientists, physi-
cians and business professionals at Biomedical Research
sites in Basel, Switzerland; Cambridge, Massachusetts;
East Hanover, New Jersey; San Diego, California; and
Emeryville, California. They contribute to research into
disease areas such as cardiovascular, renal and meta-
bolic diseases; neuroscience; oncology; immunology;
and ophthalmology. Research at the Friedrich Miescher
Institute focuses on basic genetic and genomic research,
and our Global Health Disease Area (formerly the
Novartis Institute for Tropical Diseases) focuses on dis-
covering new medicines to fight tropical diseases, includ-
ing malaria and cryptosporidiosis. In 2023, we made the
decision to discontinue our respiratory research efforts
to further focus our resources on priority areas.
All drug candidates go through clinical trials to
enable an early assessment of the safety and efficacy
of the drug while collecting basic information on how the
drug moves through the body and is tolerated, and adher-
ing to the guidance for early clinical testing set forth by
health authorities. When assessments are favorable, our
Development organizational unit conducts confirmatory
trials on the drug candidates to generate data that can
be submitted to regulatory authorities to secure approval
for patient use.
Development program
Our Development unit oversees and executes drug
development activities, working collaboratively with Bio-
medical Research, our commercial units and other parts
of the Company on our overall pipeline strategy. It
includes centralized global functions such as Regulatory
Affairs and Global Clinical Operations, and global Devel-
opment Units, and has 12 723 full-time equivalent employ-
ees worldwide.
The traditional model of clinical development consists
of three phases:
Phase I: The first clinical trials of a new compound – gen-
erally performed in a small number of healthy human vol-
unteers/patients (e.g., in oncology) – to assess the drug’s
safety profile, including the safe dosage range. These
trials also determine how a drug is absorbed, distributed,
metabolized and excreted, and the duration of its action.
Phase II: Studies performed with patients who have the
target disease, with the aim of continuing the Phase I
safety assessment in a larger group, assessing the effi-
cacy of the drug in the patient population, and determin-
ing the appropriate doses for further evaluation.
Phase III: Large-scale studies with up to several thou-
sand patients, which aim to establish the safety and effi-
cacy of the drug in specific indications for regulatory
approval. Phase III trials may also be used to compare a
new drug against a current standard of care to evaluate
the overall benefit-risk relationship of the new medicine.
In each of these phases, physicians monitor consenting
volunteers or patients closely to assess the safety and
efficacy of a potential new drug or indication.
Item 4. Information on the Company
Although we use this traditional model, we have tai-
lored the development process to be simpler, more flex-
ible and more efficient. This design ensures close col-
laboration across R&D, enabling Development teams to
initiate later-stage planning in parallel with early evalua-
tions and research teams to better support later-stage
activities.
Our development process consists of two stages:
Early Development to build confidence in the overall
properties of the compound, followed by Confirmatory
Development to confirm the concept in large numbers
of patients. Early development consists of both Phase I
studies in healthy volunteers as well as Phase Ib and
Phase II studies in patients. This work includes a careful
review of safety and tolerability, understanding of
whether the drug is modulating the target of interest, and
understanding of dose response and early evidence of
disease efficacy. Biomedical Research conducts these
trials and if this evaluation is positive, the drug moves to
the Confirmatory Development stage and becomes the
responsibility of Development.
Confirmatory Development has elements of tradi-
tional Phase II/III testing and includes trials aimed at con-
firming the safety and efficacy of the drug in the given
indication, leading up to submission of a dossier to health
authorities for approval. This stage can also include tri-
als that compare the drug to the current standard of care
for the disease in order to evaluate the drug’s overall ben-
efit-risk profile. Further, with new treatment approaches
such as gene therapy for rare diseases, elements of Early
and Confirmatory Development may be combined and
suffice for registration under certain conditions such as
high unmet medical need and clinical data showing highly
favorable benefit-risk profiles. In these cases, additional
post-approval studies may be required by the regulatory
authorities to continue to gather important data to fur-
ther support approval.
The vast amount of data that must be collected and
evaluated makes clinical testing the most time-consum-
ing and expensive part of new drug development. The
next stage in the drug development process is to seek
registration for the new drug. For more information, see
“—Regulation.”
The Innovation Management Board (IMB), chaired by
our Chief Executive Officer, drives our R&D portfolio
strategy. The IMB endorses new early- and late-stage
development projects, strategic plans and portfolio-re-
lated priorities. It oversees our drug development bud-
get; approves major project phase transitions; and makes
key decisions, such as when to submit regulatory appli-
cations to health authorities or when to discontinue proj-
ects. IMB members include representatives from the
Executive Committee of Novartis (ECN) and senior man-
agement with expertise in different fields.
To support our R&D strategy, we are investing in arti-
ficial intelligence (AI) and other technologies that have
the potential to enhance and accelerate the delivery of
innovative medicines to patients. We are working with
partners on scalable projects in early-stage research
and in clinical development to help improve our deci-
sion-making and generate actionable insights across our
core therapeutic areas—from designing new compounds
to predicting drug safety and conducting clinical trials.
Alliances and acquisitions
Novartis enters into business development agreements
with other pharmaceutical and biotechnology companies
and with academic and other institutions to develop new
products and access new markets. We license products
that complement our current product line and are appro-
priate to our business strategy. We focus on strategic
alliances and acquisition activities for key disease areas
and indications that we expect to be growth drivers in
the future. We review products and compounds we are
considering licensing, using the same criteria that we use
for our own internally discovered drugs.
In July 2023, Novartis acquired DTx Pharma Inc., a
US-based, preclinical-stage biotechnology company
focused on leveraging its proprietary FALCON platform
to develop siRNA therapies for neuroscience indications.
Its lead program, DTx-1252, targets the root cause of
CMT1A – the overexpression of PMP22, a protein that
causes the myelin sheath that supports and insulates
nerves in the peripheral nervous system to function
abnormally. The transaction also includes two additional
preclinical programs for other neuroscience indications.
In August 2023, Novartis acquired Chinook Thera-
peutics, Inc., a US-based, clinical-stage biopharmaceu-
tical company with two late-stage medicines in develop-
ment for rare, severe chronic kidney diseases.
For more information about recent business acquisitions,
see “Item 18. Financial Statements—Note 2. Significant
transactions.”
Regulation
The international pharmaceutical industry is highly reg-
ulated. Regulatory authorities around the world admin-
ister numerous laws and regulations regarding the test-
ing, approval, manufacturing, importing, labeling and
marketing of drugs, and review the safety and efficacy
of pharmaceutical products. Extensive controls exist on
the non-clinical and clinical development of pharmaceu-
tical products. These regulatory requirements, and the
implementation of them by local health authorities around
the globe, are a major factor in determining whether a
substance can be developed into a marketable product,
and the amount of time and expense associated with
that development.
Health authorities, including those in the US and the
EU, have high standards of technical evaluation. The
introduction of new pharmaceutical products generally
entails a lengthy approval process. Products must be
authorized or registered prior to marketing, and such
authorization or registration must subsequently be main-
tained. In recent years, the registration process has
required increased testing and documentation for the
approval of new drugs, with a corresponding increase in
the expense of product introduction.
To register a pharmaceutical product, a registration
dossier containing evidence establishing the safety, effi-
cacy and quality of the product must be submitted to
regulatory authorities. Generally, a therapeutic product
must be registered in each country in which it will be sold.
In every country, the submission of an application to a
31
Item 4. Information on the Company
regulatory authority does not guarantee that approval to
market the product will be granted. Although the criteria
for the registration of therapeutic drugs are similar in
most countries, the formal structure of the necessary
registration documents and the specific requirements,
including risk tolerance, of the local health authorities
can vary significantly from country to country. Even if a
drug is registered and marketed in one country, the reg-
istration authority in another country may request addi-
tional information from the pharmaceutical company
prior to registration or even reject the product. A drug
may be approved for different indications in different
countries.
The registration process generally takes between six
months and several years, depending on the country, the
quality of the data submitted, the efficiency of the regis-
tration authority’s procedures, and the nature of the
product. Many countries provide for accelerated pro-
cessing of registration applications for innovative prod-
ucts of particular therapeutic interest. In recent years,
the US and the EU have made efforts to harmonize reg-
istration requirements in order to achieve shorter devel-
opment and registration times for medical products.
However, the requirement in many countries to negoti-
ate selling prices or reimbursement levels with govern-
ment regulators and other payers can substantially
extend the time until a product may finally be available
to patients.
The following provides a summary of the regulatory
processes in the principal markets served by our affili-
ates:
United States
In the US, applications for drug registration are submit-
ted to and reviewed by the FDA. The FDA regulates the
testing, manufacturing, labeling and approval for market-
ing of pharmaceutical products intended for commer-
cialization in the US. The FDA continues to monitor the
safety of pharmaceutical products after they have been
approved for sale in the US market. The pharmaceutical
development and registration process is typically inten-
sive, lengthy and rigorous. When a pharmaceutical com-
pany has gathered data that it believes sufficiently
demonstrates a drug’s safety, efficacy and quality, the
company may file a New Drug Application (NDA) or Bio-
logics License Application (BLA), as applicable, for the
compound. The NDA or BLA must contain all the scien-
tific information that has been gathered about the com-
pound. This typically includes information regarding the
clinical experiences of patients tested in the drug’s clin-
ical trials. A Supplemental New Drug Application (sNDA)
or Supplemental Biologics License Application (sBLA)
must be filed for new indications and dosage forms for
a previously approved drug.
Once an application is submitted, the FDA assigns
reviewers from its staff, including experts in biopharma-
ceutics, chemistry, clinical microbiology, pharmacology/
toxicology, and statistics. After a complete review, these
content experts provide written evaluations of the NDA
or BLA. These recommendations are consolidated and
are used by senior FDA staff in its final evaluation of the
NDA or BLA. Based on that final evaluation, the FDA then
either approves the NDA or BLA, or provides a “complete
response” letter if the NDA or BLA application is not
approved. If not approved, the letter will state the spe-
cific deficiencies in the NDA or BLA that need to be
addressed. The company making the application must
then submit an adequate response to the deficiencies in
order to restart the review procedure.
Once the FDA has approved an NDA, BLA, sNDA or
sBLA, the company can make the new drug available for
physicians and other healthcare providers to prescribe.
The drug owner must submit periodic reports to the FDA,
including any cases of adverse reactions. For some med-
ications, the FDA requires additional post-approval stud-
ies (Phase IV) to evaluate long-term effects or to gather
information on the use of the product under specified
conditions.
Throughout the life cycle of a product, the FDA
requires compliance with standards relating to good lab-
oratory, clinical and manufacturing practices. The FDA
also requires compliance with rules pertaining to the
manner in which we may promote our products.
European Union
In the EU, there are three main procedures for applica-
tion for authorization to market pharmaceutical products
in more than one EU member state at the same time: the
centralized procedure, the mutual recognition procedure
and the decentralized procedure. It is also possible to
obtain a national authorization for products intended for
commercialization in a single EU member state only. The
procedure used for first authorization must continue to
be followed for subsequent changes, e.g., to add an indi-
cation for a licensed product.
Under the centralized procedure, applications are
made to the EMA for an authorization that is valid for the
European Union (all member states). The centralized pro-
cedure is mandatory for all biotechnology products; new
chemical entities in cancer, neurodegenerative disor-
ders, diabetes, AIDS, autoimmune diseases and other
immune dysfunctions; advanced therapy medicines,
such as gene therapy, somatic cell therapy and tis-
sue-engineered medicines; and orphan medicines
(medicines for rare diseases). It is optional for other new
chemical entities, innovative medicinal products, and
medicines for which authorization would be in the inter-
est of public health. When a pharmaceutical company
has gathered data that it believes sufficiently demon-
strates a drug’s safety, efficacy and quality, the company
may submit an application to the EMA. The EMA then
receives and validates the application, and the special-
ized committee for human medicines, the CHMP, appoints
a rapporteur and co-rapporteur to review it. They use
experts from their countries to carry out the assessment
but can also draw on expertise from other member states
(“multinational teams”). The entire review cycle must be
completed within 210 days, although there are “clock
stops” to allow the company to respond to questions set
forth in the rapporteur and co-rapporteur’s assessment
report and agreed with the CHMP. The first clock stop
is at Day 120 and the clock restarts on Day 121, when the
company’s complete response is received by the EMA.
If there are further aspects of the dossier requiring clar-
ification, the CHMP will issue further questions at Day
180, and may also request an oral explanation, in which
case the sponsor must not only respond to the further
questions but also appear before the committee to
32
Item 4. Information on the Company
justify its responses. On Day 210, the CHMP will take a
vote to recommend the approval or non-approval of the
application, and their opinion is transferred to the Euro-
pean Commission (EC). The final EC decision under this
centralized procedure is a single decision that is appli-
cable to all member states. This decision occurs 60 days,
on average, after a positive CHMP recommendation.
Under both the mutual recognition procedure (MRP)
and the decentralized procedure (DCP), the assessment
is led by one member state, called the reference mem-
ber state (RMS), which then liaises with other member
states, known as the concerned member states. In the
MRP, the company first obtains a marketing authoriza-
tion in the RMS, which is then recognized by the con-
cerned member states in 90 days. In the DCP, the appli-
cation is done simultaneously in the RMS and all
concerned member states. During the DCP, the RMS
drafts an assessment report within 120 days. Within an
additional 90 days, the concerned member states review
the application and can issue objections or requests for
additional information. On Day 90, each concerned mem-
ber state must be assured that the product is safe and
effective, and that it will cause no undue risks to the pub-
lic health. Once an agreement has been reached, each
member state grants national marketing authorizations
for the product.
After receiving the marketing authorizations, the
company must submit periodic safety reports to the rel-
evant health authority (EMA for the centralized proce-
dure, national health authorities for DCP or MRP). In addi-
tion, pharmacovigilance measures must be implemented
and monitored, including the collection, evaluation and
expedited reporting of adverse events, and updates to
risk management plans. For some medications, post-ap-
proval studies (Phase IV) may be imposed to comple-
ment available data with additional data to evaluate long-
term effects (called a Post-Approval Safety Study, or
PASS) or to gather additional efficacy data (called a
Post-Approval Efficacy Study, or PAES).
European marketing authorizations have an initial
duration of five years. The holder of the marketing autho-
rization must actively apply for its renewal after this first
five-year period. As part of the renewal procedure, the
competent authority performs a full benefit-risk review
of the product. Should the authority conclude that the
benefit-risk balance is no longer positive, the marketing
authorization can be suspended or revoked. Once
renewed, the marketing authorization is valid for an unlim-
ited period, unless it is determined that the product must
be further monitored for safety reasons. In this case, the
authority may require another renewal at 10 years. If the
holder does not apply for renewal, the marketing autho-
rization automatically lapses. Any marketing authoriza-
tion that is not followed within three years of its granting
by the actual placing on the market of the correspond-
ing medicinal product ceases to be valid.
Price controls
In most of the markets where we operate, the prices of
pharmaceutical products are subject to both direct and
indirect price controls and to drug reimbursement pro-
grams with varying price control mechanisms. Due to
increasing political pressure and governmental budget
constraints, we expect these mechanisms to remain
robust – and potentially even be strengthened – and to
have a continued negative influence on the prices we are
able to charge for our products.
Direct governmental efforts to control prices
United States: The Inflation Reduction Act of 2022 (IRA),
signed into law in August 2022, mandates the negotia-
tion of eligible Medicare Part B and Part D drugs; rede-
signed the Medicare Part D benefit, including a
USD 2 000 out-of-pocket cap for Medicare beneficia-
ries; and imposed penalties for Medicare drugs that
increase in price faster than the rate of inflation. Under
the IRA, the US government will set Medicare prices for
selected products it has defined as single-sourced
small-molecule drugs that have been on the market for
seven years following FDA approval as well as sin-
gle-sourced biologics that have been on the market for
11 years after FDA approval.
Medicare drugs with the highest total cost to the US
government are being selected for the program as they
become eligible. Exemptions include orphan drugs with
an indication for one rare disease or condition, drugs
with a total cost to the US government of less than
USD 200 million, and plasma-derived drugs.
The price set by the government will be publicly avail-
able and will become effective for selected drugs nine
years after FDA approval for eligible small molecules and
13 years after FDA approval for eligible biologics. It will
be implemented as follows:
• Ten eligible Medicare Part D drugs in 2026
• An additional 15 eligible Medicare Part D drugs in 2027
• An additional 15 eligible combined Medicare Part B and
Part D drugs in 2028
• An additional 20 eligible combined Medicare Part B
and Part D drugs in 2029
• An additional 20 eligible combined Medicare Part B
and Part D drugs each year after 2029
On August 29, 2023, the US government released the
list of the first 10 drugs to be subject to the program, and
Entresto was one of the selected products. Novartis has
initiated the process of participating in negotiations
because manufacturers that refuse to participate are
subject to an excise tax of up to 95% of sales. Novartis
has filed a lawsuit against the US Department of Health
and Human Services (HHS) and the US Centers for Medi-
care & Medicaid Services because we believe the IRA’s
drug price-setting provisions are unconstitutional and
will have long-lasting negative consequences for patients
by limiting access to medicines now and in the future (for
more information, see “Item 18. Financial Statements—
Note 21. Provisions and other non-current liabilities”).
Novartis may also be affected by other provisions of the
IRA, such as price increase penalties for Medicare Part
D drugs starting in 2022 and for Medicare Part B drugs
in 2023, and rebates on eligible Medicare Part D sales
starting in 2025.
In addition, by December 31, 2023, 23 US states had
passed legislation intended to impact pricing or requir-
ing manufacturers to report price increases to states,
with eight of these states also allowing for drug afford-
ability (i.e., price control) review boards. The disclosure
33
Item 4. Information on the Company
requirements vary by state. Many states require multiple
types of reporting, including for new drug applications,
new drug launches, prior notice of price increases, and
quarterly or annual reporting. It is expected that state
legislatures will continue to focus on drug pricing in 2024
and that similar bills will be passed in more states.
Europe: In Europe, our operations are subject to signifi-
cant price and marketing regulations. Many governments
are introducing healthcare reforms in a further attempt
to curb increasing healthcare costs. In some member
states, these include reforms to permit the reimbursed
use of off-label medicines, despite the presence of
licensed alternatives on the market. In the EU, govern-
ments influence the price of pharmaceutical products
through their control of national healthcare systems that
fund a large part of the cost of such products to patients.
The downward pressure on healthcare costs in general
in the EU, particularly with regard to prescription drugs,
is intense. Increasingly strict analyses are applied when
evaluating the entry of new products, and as a result,
access to innovative medicines is limited based on strict
cost-benefit assessments. In addition, prices for mar-
keted products are referenced within member states and
across international borders, further impacting individ-
ual EU member state pricing. Member states also col-
laborate to enhance pricing transparency and have
started conducting joint health technology assessments,
joint pricing negotiations and/or joint purchasing. As an
additional control for healthcare budgets, some EU coun-
tries have passed legislation to impose further manda-
tory rebates for pharmaceutical products and/or finan-
cial claw-backs on the pharmaceutical industry. The
calculation of these rebates and claw-backs may lack
transparency in some cases and can be difficult to pre-
dict.
Regulations favoring generics and biosimilars
In response to rising healthcare costs, most govern-
ments and private medical care providers have estab-
lished reimbursement schemes that favor the substitu-
tion of more expensive brand-name pharmaceuticals by
generic pharmaceuticals. All US states have generic sub-
stitution statutes. These statutes permit or require the
dispensing pharmacist to substitute a less expensive
generic drug instead of an original drug. Other countries,
including many European countries, have similar laws.
We expect that the pressure for generic substitution will
continue to increase. In addition, the US, the EU and other
jurisdictions are increasingly introducing laws and regu-
lations encouraging the development of biosimilar ver-
sions of biologic drugs, which can also be expected to
have an impact on pricing.
Cross-border sales
Price controls in one country can have an impact in other
countries as a result of cross-border sales. In the EU,
products that we have sold to customers in countries
with stringent price controls can be legally resold to cus-
tomers in other EU countries at a lower price than the
price at which the product is otherwise available in the
importing country (known as parallel trade). In North
America, products that we have sold to customers in
Canada – which has relatively stringent price controls
– are sometimes resold into the US, again at a lower price
than the price at which the product is otherwise sold in
the US. Such imports from Canada and other countries
into the US are currently illegal in most states. However,
six US states (Colorado, Florida, Minnesota, New Hamp-
shire, New Mexico and Vermont) have enacted laws
allowing the import of pharmaceutical drugs from select
foreign countries. The Secretary of the HHS must cer-
tify that each state’s importation plan is safe and cost-ef-
fective before it can be implemented.
We expect that pressures on pricing will continue
worldwide and will likely increase. Because of these
pressures, there can be no certainty that in every instance
we will be able to charge prices for a product that, in a
particular country or in the aggregate, would enable us
to earn an adequate return on our investment in that
product.
Intellectual property
Intellectual property (IP) rights are essential to our busi-
ness as an innovative medicines company since they pro-
tect our innovation and investments in research and
development, manufacturing and marketing of our prod-
ucts. IP rights include patents, trademarks, copyrights,
know-how, trade secrets and regulatory-based protec-
tion.
Patents
Among other things, patents may cover products them-
selves, including the product’s active ingredient or ingre-
dients and its formulation. Patents may cover processes
for manufacturing a product, including processes for
manufacturing intermediate substances used in the man-
ufacture of the product. Patents may also cover partic-
ular uses of a product, such as its use to treat a partic-
ular disease, or its dosage regimen. In addition, patents
may cover tests for certain diseases or biomarkers –
which can improve patient outcomes when administered
with certain drugs – as well as assays, research tools
and other techniques used to identify new drugs.
In the US, the EU and other countries, the law recog-
nizes that product development and review by health
authorities can take an extended period, and provides
an extension of patent term for a period related to the
time taken for the conduct of clinical trials and for the
health authority’s review. These extensions are termed
patent term extensions (PTEs) for the US and supple-
mentary protection certificates (SPCs) for the EU.
United States
• In the US, a patent issued from an application filed
today will generally receive a term of 20 years from the
earliest application filing date as well as potential pat-
ent term adjustments for delays in patent issuance
based upon certain delays in prosecution by the United
States Patent and Trademark Office (USPTO). A US
pharmaceutical patent may also be eligible for a PTE.
The PTE may only extend the patent term for a maxi-
mum of five years, and may not extend the patent term
beyond 14 years from regulatory approval. Only one
patent may be extended for a product based on FDA
review.
34
Item 4. Information on the Company
European Union
• Patent applications in Europe may be filed in the Euro-
pean Patent Office (EPO) or in a particular country or
countries. The term of a patent granted by the EPO or
an EU country office is 20 years from the earliest appli-
cation filing date. Pharmaceutical patents can be
granted a further period of exclusivity under an SPC
system. The SPCs may only extend the patent term for
a maximum of five years, and may not extend the pat-
ent term beyond 15 years from the date of the first EU
marketing authorization.
RDP and market exclusivity
In addition to patent protection, various countries pro-
vide regulatory-based protection, including regulatory
data protection (RDP) and/or other market exclusivities,
for a prescribed period of time. RDP is a distinct type of
IP right providing exclusivity that precludes a potential
competitor from filing a regulatory application that relies
on the sponsor’s clinical trial data, or that precludes the
regulatory authority from approving the application for
a set period of time.
United States
• A new small-molecule active pharmaceutical ingredi-
ent receives five years of RDP, during which time a com-
petitor generally may not obtain final approval of an
application to the FDA based on a sponsor’s clinical
data.
• A new biologic active pharmaceutical ingredient
receives 12 years of regulatory-based market exclusiv-
ity, during which time a competitor generally may not
market the same or similar drug.
• The FDA may also request that a sponsor conduct
pediatric studies and, in exchange, it will grant an addi-
tional six-month period of pediatric market exclusivity
if the sponsor makes a timely submission of the reports
of the pediatric studies in response to the FDA’s Writ-
ten Request. The sponsor must also have a pat-
ent-based and/or regulatory-based exclusivity period
for the product to which the pediatric market exclusiv-
ity is appended.
• Orphan drug exclusivity (ODE) provides seven years
of market exclusivity for drugs designated by the FDA
as orphan drugs, meaning drugs that treat rare dis-
eases. During this period, a potential competitor gen-
erally may not market the same or similar drug for the
same indication even if the competitor’s application
does not rely on data from the sponsor.
European Union
• A new pharmaceutical ingredient receives eight years
of data protection, during which a competitor cannot
rely on the relevant data; a further period of two years
of market exclusivity, during which the data can be used
to support applications for marketing authorization but
a competitive product cannot be launched; and a pos-
sible one-year extension of the market exclusivity
period if, during the initial eight-year data exclusivity
period, the sponsor registered a new therapeutic indi-
cation with “significant clinical benefit.”
• Orphan drug exclusivity provides for 10 years of mar-
ket exclusivity, during which time an application for the
same or similar medicine for the same indication will
not generally be accepted or granted. Under certain
circumstances, this exclusivity can be extended with
a two-year pediatric extension.
Third-party patents and challenges to intellectual
property
Third parties can challenge our IP, including patents, pat-
ent term extensions, RDP and marketing exclusivities
(such as pediatric extensions and orphan drug exclusiv-
ity), through various proceedings. For example, patents
in the US can be challenged in the USPTO through var-
ious proceedings, including Inter Partes Review (IPR) and
Post-Grant Review (PGR) proceedings. They may also
be challenged through patent infringement litigation
under the Abbreviated New Drug Application (ANDA)
provisions of the Hatch-Waxman Act or under the Bio-
logics Price Competition and Innovation Act (BPCIA). In
the EU, patents may be challenged through oppositions
in the EPO, or national patents may be challenged in
national courts or national patent offices. The outcomes
of such challenges can be difficult to predict.
In addition to directly challenging our IP rights, in
some circumstances a competitor may be able to mar-
ket a generic version of one of our products by, for exam-
ple, designing around our patents or marketing the
generic product for non-patent-protected indications, or
filing a separate New Drug Application (NDA) under the
Hatch-Waxman Act (typically referred to as a 505(b)(2)
application). Despite RDP, a competitor could opt to incur
the costs of conducting its own clinical trials and prepar-
ing its own regulatory application, and avoid our RDP
altogether. There is a risk that some countries may seek
to impose limitations on or seek not to recognize the
availability of IP rights for pharmaceutical products, or
limit the extent to which such rights may be enforced.
Additionally, even though we may own, co-own or in-li-
cense patents protecting our products, and conduct
freedom-to-operate analyses, a third party may never-
theless assert that one of our products infringes a third-
party patent for which we do not have a license, seeking
remedies such as monetary damages or an injunction
against our continued marketing of the product.
As a result, there can be no assurance that our IP
rights will protect our products or that we will be able to
avoid adverse effects from the loss of IP protection or
from third-party patents in the future. For more informa-
tion on the risks related to our IP protection, see “Item 3.
Key Information—Item 3.D Risk factors—Intellectual
property—Expiry, assertion or loss of intellectual prop-
erty protection.”
Intellectual property protection for certain key
marketed products and compounds in
development
We present additional details below regarding certain IP
protection in the US and the EU for certain key marketed
products. For each, we identify issued, unexpired pat-
ents by their general subject matter and, in parentheses,
years of expiry, if relevant, in the US and the EU. The
identified patents are owned, co-owned or exclusively
in-licensed by Novartis and relate to at least one dosage
strength of the product or to the method of treatment or
its use as it is currently approved and marketed or, in the
case of a compound in development, as it is currently
35
Item 4. Information on the Company
submitted to the FDA and/or the EMA for approval. Iden-
tification of an EU patent refers to national patents in EU
countries and/or to the national patents that have been
derived from a patent granted by the EPO. Novartis may
own, co-own, control or have rights to additional patents,
for example, relating to compound forms, methods of
treatment or use, formulations, devices, processes, prod-
uct-by-process, synthesis, purification and assays. Infor-
mation on such patents, where available, may be found
in publicly accessible databases such as the FDA patent
databases, online databases such as Espacenet™ and
Pat-INFORMED, and patent office registers.
We identify unexpired RDP periods and, in parenthe-
ses, years of expiry if the relevant marketing authoriza-
tions have been authorized or granted. We identify cer-
tain unexpired patent term extensions and marketing
exclusivities and, in parentheses, years of expiry if they
are granted; their subject matter scope may be limited
and is not specified. Marketing exclusivities and patent
term extensions include ODE, pediatric exclusivity (PE),
PTE and SPC.
Identification of a patent in the EU refers to national
patents in EU countries and/or to the national patents
that have been derived from a patent granted by the EPO.
In the case of the EU, identification of a patent, supple-
mentary protection certificate, marketing exclusivity or
regulatory data protection means grant, authorization
and maintenance in at least one EU country. However, it
could be pending, not granted, expired or found invalid
in others.
We designate certain IP protection as “pending” if
such IP protection has been applied for but not granted
and includes years of expiration if estimable. Such pend-
ing applications ultimately may or may not be granted.
Where relevant, we indicate whether there is current
generic or biosimilar competition for one or more prod-
uct versions in one or more approved indications in either
the US or one or more EU countries. We identify certain
enforcement actions, or ongoing challenges to the dis-
closed IP, including IPRs or PGRs if instituted by the
USPTO, that have not been finally resolved (including
appeals) unless noted. Resolution of challenges to the
disclosed IP, which in the EU may involve IP in one or
more EU countries, may include settlement agreements
under which Novartis permits or does not permit future
launch of generic versions of our products before expi-
ration of that IP. We identify certain material terms of
such settlement agreements where they could have a
material adverse effect on our business. In other cases,
such settlement agreements may contain confidential-
ity obligations restricting what may be disclosed.
In the event that a product listed below does not have
identified patents as described above, we provide infor-
mation only on generic competition.
For additional information regarding commercial
arrangements with respect to these products, see “—
Key marketed products.”
Cardiovascular renal and metabolic
• Entresto. US: Two patents on combination (2023,
2023), PTE (2025), two PEs (2024, 2025); two patents
on complex (2026, 2027), two PEs (2027, 2027); three
patents on methods of treatment (2033 (3)); patent on
dosage regimen (2036); RDP for labeling changes
related to new clinical investigation (2024). EU: Patent
on combination (2023), SPC (2028); patent on com-
plex (2026), SPC (2030); patent on formulation (2028);
patent on method of use (2034); patent on dosage reg-
imen (2036); RDP (2026). There is no generic compe-
tition in the US or the EU. In the US, certain patents,
including the combination and complex patents, are
being challenged in ANDA proceedings against generic
manufacturers. In July 2023, the US District Court for
the District of Delaware issued a negative decision
regarding the validity of one of the combination pat-
ents. Novartis has appealed to reverse the decision. In
the EU, certain patents, including the complex patent,
are being opposed in the EPO. In some EU countries,
the combination patent or its associated SPC is being
challenged by generic manufacturers.
• Leqvio. US: Two patents on composition of matter
(2027, 2034), PTE pending (2035); two patents on
method of treatment and dosing regimen (2027, 2036);
RDP (2026). EU: One patent on composition of matter
(2033), SPC (2035); RDP (2030). There is no generic
competition in the US or the EU.
Immunology
• Cosentyx. US: Five patents on composition of matter
(2025 (4), 2026), PTE (2029); patent on psoriatic arthri-
tis use (2031); patent on psoriasis use (2032); two pat-
ents on ankylosing spondylitis use (2032, 2033); RDP
(2027). EU: Four patents on composition of matter
(2025 (4)), SPC (2030), PE (2030); patent on psoriasis
use (2031); RDP (2026). There is no generic competi-
tion in the US or the EU.
• Xolair. US: Two patents on syringe formulation (2024,
2025). EU: Three patents on syringe formulation (2024,
2024, 2025). There is no generic competition in the US
or the EU.
• Ilaris. US: Patent on composition of matter (2024); pat-
ent on cryopyrin-associated periodic syndromes
(CAPS) use (2026); patent on familial Mediterranean
fever (FMF) use (2026); patent on systemic onset juve-
nile idiopathic arthritis (SJIA) use (2028); patent on
gout use (2028); patent on hyperimmunoglobulin D
syndrome, adult-onset Still’s disease (AOSD), and
tumor necrosis factor receptor-associated periodic
syndrome use (2029); patent on formulation (2029);
ODE on AOSD (2027). EU: Patent on composition of
matter (2021), SPC (2024), PE (2025); patent on SJIA
use (2026); patent on FMF use (2026); patent on CAPS
use (2026); two patents on formulation (2029, 2029).
There is no generic competition in the US or the EU.
Neuroscience
• Kesimpta. US: Patent on compound (2031); patent on
dosing regimen (2037). EU: Patent on use (2023), SPC
(2028); patent on formulation (2028), SPC (2033); pat-
ent on formulation and use (2028); two patents on dos-
ing regimen (2037, 2037). There is no generic compe-
tition in the US or the EU.
• Zolgensma. US: Four patents on composition of mat-
ter (2024, 2024, 2026, 2033), PTE pending (2029);
36
Item 4. Information on the Company
four patents on methods of treatment (2028 (3), 2029);
ODE for spinal muscular atrophy (SMA) in patients less
than 2 years old with biallelic mutations in the SMN1
gene (2026); RDP (2031). EU: Three patents on com-
position of matter (2024, 2024, 2028), SPC (2029); two
patents on methods of use (2028, 2028), two SPCs
(2033, 2033); ODE for SMA in patients with a biallelic
mutation in the SMN1 gene and a clinical diagnosis of
SMA type 1, or patients with a biallelic mutation in the
SMN1 gene and up to three copies of the SMN2 gene
(2030); RDP (2030). There is no generic competition
in the US or the EU.
Oncology
• Promacta/Revolade. US: Patent on salt form and throm-
bocytopenia use (2025), PE (2026); five patents on tab-
let formulations of different dose strengths (2027 (5)),
five PEs (2028 (5)); ODE on severe aplastic anemia
patients in combination with standard immunosuppres-
sive therapy (2025). EU: Patent on compound (2021),
SPC (2025), PE (2025); patent on severe aplastic ane-
mia use (2028). There is no generic competition in the
US or the EU. In the US, generic manufacturers have
filed ANDAs challenging certain patents other than the
compound patent. In the EU, a patent, other than the
compound patent, is being opposed in the EPO.
• Kisqali. US: Three patents on compound (2028, 2030,
2031), PTE (2031); three patents on methods of treat-
ment (2029, 2029, 2031); patent on salt form (2031);
patent for tablet formulation (2036). EU: Patent on com-
pound (2027); patent on compound (2029), SPC
(2032); patent on salt form (2031); patent on methods
of use with letrozole (2034); patent on formulation
(2036); RDP (2027). There is no generic competition
in the US or the EU. In the US, certain patents, includ-
ing the compound patent, are being challenged in
ANDA proceedings against a generic manufacturer. In
the EU, a patent, other than the compound patent, is
being opposed in the EPO.
• Tafinlar and Mekinist.
Tafinlar. US: Two patents on compound (2030, 2030),
two PEs (2030, 2030); patent on method of treatment
(2029), PE (2029); patent on pediatric formulation
(2038). EU: Patent on compound (2029); RDP (2024).
There is no generic competition in the US or the EU. In
the EU, patents, other than the compound patent, are
being opposed in the EPO.
Mekinist. US: Patent on compound (2025), PTE (2027),
PE (2027); patent on method of treatment (2025), PE
(2025); four patents on formulation (2032 (4)), four PEs
(2032 (4)). EU: Patent on compound (2025), SPC
(2029); patent on formulation (2031); RDP (2025).
There is no generic competition in the US or the EU. In
the US, certain patents, including the compound pat-
ent, are being challenged in ANDA proceedings against
a generic manufacturer. In the EU, patents other than
the compound patent are being opposed in the EPO.
Use of Mekinist with Tafinlar or Tafinlar with Mekinist.
US: Patent on combination (2030), PE (2031); four
patents on method of use of combination (2025, 2030,
2030, 2033), four PEs (2025, 2031, 2031, 2034); ODE
on non-small cell lung cancer (2024), PE (2024); ODE
on adjuvant treatment of melanoma (2025), PE (2025);
ODE on anaplastic thyroid cancer (2025), PE (2025);
ODE on metastatic solid tumors (2025), PE (2025);
ODE on pediatric glioma (2030). EU: Patent on combi-
nation (2030); patent on combination for use in lung
cancer (2030); patent on adjuvant melanoma use
(2033); ODE on pediatric glioma (2035). There is no
generic competition in the US or the EU.
• Tasigna. US: Two patents on salt forms (2026, 2028),
two PEs (2027, 2029); patent on polymorph compound
form (2026), PE (2027); two patents on capsule form
(2026, 2027), two PEs (2027, 2028); patent on method
of treatment (2032), PE (2032). EU: Patent on salt form
(2026); patent on polymorph compound form (2026);
three patents on capsule form (2027 (3)); patent on
method of treatment (2030). There is no generic com-
petition in the US or the EU. In the US, generic manu-
facturers have filed ANDAs challenging certain patents
other than the compound patent.
• Jakavi. EU: Patent on compound (2026), SPC (2027);
two patents on salt form (2028, 2028); patent on com-
pound for polycythemia vera use (2026); patent on use
in treatment of graft-versus-host disease (2026); pat-
ent on salt form for graft-versus-host disease use
(2028). There is no generic competition in the EU.
• Pluvicto. US: Three patents on composition of matter
(2028, 2028, 2034); RDP (2027). PTE pending. EU:
RDP (2032). There is no generic competition in the US
or the EU.
• Lutathera. US: Two patents on formulation (2038,
2038); ODE (2025). EU: RDP (2027); ODE (2027).
There is no generic competition in the US or the EU. In
the US, certain patents are being challenged in ANDA
proceedings against a generic manufacturer.
• Scemblix. US: Patent on compound (2033), PTE pend-
ing (2035); patent on polymorph compound form
(2040); RDP (2026); ODE (2028). EU: Patent on com-
pound (2033), SPC (2037); RDP (2032); ODE (2032).
There is no generic competition in the US or the EU.
• Fabhalta. US: Patent on compound (2034), PTE pend-
ing (2037); patent on salt form (2041); RDP (2028); ODE
(2030). EU: Patent on compound (2034). There is no
generic competition in the US or the EU.
Established brands
• Lucentis. EU: There is generic competition in the EU.
• Sandostatin SC and Sandostatin LAR.
Sandostatin SC: There is generic competition in the US
and the EU.
Sandostatin LAR: There is generic competition in most
EU countries but no generic competition in the US.
37
Item 4. Information on the Company
Compounds in development
We provide certain patent information for non-marketed
compounds in development that have been submitted to
the FDA and/or the EMA for registration but have not yet
been approved by either agency. For these products,
Novartis will seek all appropriate RDP, will continue to
seek additional intellectual property protection for sig-
nificant product developments, and will apply for PTEs
and SPCs in keeping with the great importance we attach
to intellectual property.
4.C Organizational structure
Organizational structure
See “Item 4. Information on the Company—Item 4.A History and development of Novartis” and “Item 4. Information
on the Company—Item 4.B Business overview—Overview.”
Significant subsidiaries
See “Item 18. Financial Statements—Note 33. Novartis principal subsidiaries and associated companies.”
4.D Property, plants and equipment
Our principal executive offices are located in Basel, Swit-
zerland. We operate through a number of affiliates that
have offices, research and development facilities, and
production sites throughout the world.
We generally own our facilities or have entered into
long-term lease arrangements for them. Some of our
principal facilities are subject to mortgages and other
security interests granted to secure certain debts.
Our Operations organizational unit manages the pro-
duction, supply chains and quality of our products
through a network of 33 manufacturing sites, as well as
through external suppliers, and warehouse and distribu-
tion centers. In addition, our Operations organizational
unit also manages non-production real estate owned or
leased by Novartis around the world.
The following table sets forth our major headquar-
ters and most significant production, research and devel-
opment, and administrative facilities. See also “—Item
4.B Business overview—Production” for a discussion of
our manufacturing processes.
Major facilities
Location
(in square meters) Major activity
Size of site
Basel, Switzerland – St. Johann
481 448 Global Company headquarters; International organizational unit headquarters; research and
development; production of drug substances and drug intermediates
Kundl and Schaftenau, Austria
480 000
Production of biotechnological products, active drug substances and nucleic acids, drug
products and finished products; product development
East Hanover, New Jersey, US
277 015 US organizational unit headquarters; research and development
Cambridge, Massachusetts, US
179 939 Research and development
Menges, Slovenia
Shanghai, China
Stein, Switzerland
133 763
Production of drug substances and drug intermediates; Research and development
for Biologics
105 614 China country headquarters; research and development
64 700
Production of sterile vials, pre-filled syringes and ampoules; capsules and tablets;
active pharmaceutical ingredients; and cell and gene therapies
Huningue, France
35 000
Production of drug substances for clinical and commercial supply
Durham, North Carolina, US
15 794 Manufacture, package and release commercial Zolgensma product and certain clinical
development activities
Schweizerhalle, Switzerland
8 880 Manufacture of small-interfering RNA (siRNA) drug substance for Leqvio
Indianapolis, Indiana, US
6 500 Manufacture, package and release clinical and commercial Pluvicto product
for US and Canada
Ivrea, Italy
2 100 Manufacture, package and release clinical and commercial Pluvicto and Lutathera products
As our product portfolio evolves, the Company’s Oper-
ations organizational unit is adapting our manufacturing
capacity and capabilities to meet our changing needs,
shifting from high-volume products toward lower-volume,
customized and personalized medicines. As of Decem-
ber 31, 2023, we have closed, exited or sold 13 Novartis
manufacturing sites since 2020. We have continued to
invest in manufacturing technologies implemented at our
38
Item 4. Information on the Company
sites, such as our new targeted radioligand therapy pro-
duction facility in Indianapolis, Indiana. We are leverag-
ing innovation to increase the reliability and productivity
of our manufacturing network, including using data and
digital technologies. We continue to seek opportunities
to manage our production facilities as efficiently as pos-
sible, optimize external spend, and simplify and standard-
ize across our manufacturing network to help us increase
our cost competitiveness and optimize the value of our
products. At the same time, we are working to improve
our environmental sustainability, for example by reduc-
ing energy, waste disposal and water consumption at our
sites by making our manufacturing processes more
efficient, introducing new technologies, and switching to
clean and renewable energy solutions.
For a description of the impact of environmental mat-
ters, see “Item 3. Key Information—Item 3.D Risk fac-
tors—Environmental, social and governance matters—
Failure to meet rapidly evolving environmental, social and
governance expectations,” “Item 3. Key Information—
Item 3.D Risk factors—Environmental matters—Impact
of environmental liabilities,” and “Item 3. Key Informa-
tion—Item 3.D Risk factors—Climate change—Failure to
manage physical and transition risks from climate
change.” See also “Item 18. Financial Statements—
Note 21. Provisions and other non-current liabilities.”
39
Item 4A. Unresolved Staff Comments
Item 4A. Unresolved Staff Comments
Not applicable.
40
Item 5. Operating and Financial Review and Prospects
Item 5. Operating and Financial Review
and Prospects
5.A Operating results
This operating and financial review should be read
together with our consolidated financial statements in
this Annual Report, which have been prepared in accor-
dance with International Financial Reporting Standards
(IFRS) Accounting Standards as issued by the Interna-
tional Accounting Standards Board (see “Item 18. Finan-
cial Statements”). “Item 5. Operating and Financial
Review and Prospects” with the sections on our com-
pounds in development and selected development proj-
ects (see “Item 4. Information on the Company—Item 4.B
Business overview”) constitute the Operating and Finan-
cial Review (Lagebericht), as defined by the Swiss Code
of Obligations.
Overview
Novartis is an innovative medicines company. Our pur-
pose is to reimagine medicine to improve and extend
people’s lives. In September 2023, we reorganized our
operations into five organizational units. These are Bio-
medical Research, Development, Operations, and two
commercial units: US and International. Global functions
support these organizational units in the execution of
their work. We are engaged in the research, develop-
ment, manufacturing, distribution, and commercialization
and sale of innovative medicines, with a focus on the core
therapeutic areas: cardiovascular, renal and metabolic;
immunology; neuroscience; and oncology; as well as
established brands. For information about this new orga-
nizational structure, see “Item 4. Information on the Com-
pany—Item 4.B Overview.”
In 2023, Novartis completed its transformation into a
pure-play innovative medicines business, with the spin-
off of Sandoz. Effective October 4, 2023, Sandoz was
listed on the SIX Swiss Exchange, with a Level 1 ADR pro-
gram in the United States.
To comply with IFRS Accounting Standards, as a
result of the spin-off, Novartis has separated the Com-
pany’s consolidated financial statements for the current
and prior years into “continuing” and “discontinued”
operations. For more information, see “Item 18. Financial
Statements—Note 1. Accounting policies.”
The disclosures and commentary in this “Item 5.
Operating and Financial Review and Prospects” focuses
on continuing operations. We also provide information
on discontinued operations.
Continuing operations include the retained business
activities of Novartis, comprising the innovative medicines
business and continued corporate activities.
Discontinued operations include the Sandoz generic
pharmaceuticals and biosimilars division and certain cor-
porate activities attributable to Sandoz prior to the spin-
off up to the distribution date of October 3, 2023, and
certain other expenses related to the spin-off. Included
41
in 2023 is also the IFRS Accounting Standards non-cash,
non-taxable net gain on distribution of Sandoz Group AG
to Novartis AG shareholders. Sandoz operated in the
off-patent medicines segment and specialized in the
development, manufacturing, and marketing of generic
pharmaceuticals and biosimilars. The Sandoz business
was organized globally into two franchises: Generics and
Biosimilars.
Significant transactions are discussed in “Item 18.
Financial Statements—Note 2. Significant transactions,”
and “Item 18. Financial Statements—Note 29. Commit-
ments and contingent liabilities.”
With the spin-off of the Sandoz business, Novartis
operates as a single global operating segment, as an
innovative medicines company.
Our business environment
Progress in science and technology raises the possibil-
ity of new types of medicines and more efficient drug
discovery. At the same time, healthcare inequities remain
entrenched around the world, while aging populations
are putting pressure on healthcare systems in many
countries. The major trends currently shaping our busi-
ness environment include:
• Scientific progress is opening new paths to treat dis-
ease. Rapid progress in medical science is creating
opportunities for new types of treatments. These
advances highlight the importance of investment in
R&D, including in next-generation technologies such
as radioligand therapies and gene and cell therapies.
• Demand for high-quality healthcare continues to rise.
Demand for medicines in areas such as cancer, car-
diovascular disease and immunology continues to grow
in key markets. The US and EU markets are expanding.
China is growing rapidly, while spending in Japan is
forecast to remain stable. To meet demand and main-
tain growth, companies are investing in developing new,
innovative treatments.
• Healthcare systems are under strain. In many countries,
healthcare systems are under pressure. Healthcare
professionals often feel overwhelmed and under-re-
sourced. Staff shortages have occurred in both the US
and Europe. This trend began with the COVID-19 pan-
demic, but there are longer-term factors as well—aging
and changes to lifestyle have led to a significant rise in
noncommunicable illnesses such as cancer, diabetes
and heart disease.
• The policy landscape is changing. New legislation or
regulations in the US, EU and China may change how
governments pay for medicines. In the US, for exam-
ple, the IRA will limit price increases in Medicare to
inflation and impose price controls on select drugs in
the Medicare program beginning in 2026. The EU is
revising the legislative framework for medicines, trying
Item 5. Operating and Financial Review and Prospects
to balance access and affordability, while China has
rolled out a volume-based procurement program to
reduce prices for eligible medicines. See “Item 3. Key
Information—Item 3.D Risk factors—Pricing, reim-
bursement and access—Pricing and reimbursement
pressure, including pricing transparency and access
to healthcare,” and “Item 3. Key Information—Item 3.D
Risk factors—Macroeconomic developments—Impact
of macroeconomic developments.”
• Patients want more say over their treatment. Increas-
ingly, patients want their voice to be heard in the pro-
cess of developing new medicines, so that the treat-
ments address the outcomes that matter most to them.
Patients also want more say over policies that affect
their access to medicines and are becoming more
important as data owners. As a result, companies are
building patient engagement into their approaches—
from research and clinical trials to commercialization
and access programs.
• Health inequities remain entrenched. Billions of people
around the world struggle to get the medicines and
healthcare services they need. Many of the issues are
in low- and middle-income countries (LMICs), where
people face the dual burden of infectious and non-com-
municable diseases, as well as fragile and under-re-
sourced health systems. Health inequities also affect
people in higher-income countries, however, where
causes are often linked to structural health system
issues as well as demographic, social and economic
challenges.
• AI is poised to reshape the industry. Across the bio-
pharmaceutical industry, we are beginning to realize
the benefits of new technologies such as AI in auto-
mating processes and generating insights that could
help us design new compounds, predict drug safety or
speed up drug discovery. The extent to which compa-
nies can harness this potential will depend on their abil-
ity to aggregate and analyze large volumes of ano-
nymized health data. See “Item 3. Key Information—Item
3.D Risk factors—Research and development—Failure
to successfully prioritize, integrate and execute our
research and development programs for new products
or new indications for existing products.”
• Climate change threatens to widen health inequity. Cli-
mate change and nature loss continue to have an
adverse effect on human health, with people in LMICs
disproportionately impacted. The World Health Orga-
nization forecasts approximately 250 000 additional
deaths per year between 2030 and 2050 due to cli-
mate change, mainly from malnutrition, malaria, diar-
rhea and heat stress. Respiratory illnesses are also on
the rise due to air pollution. At the same time, health
systems are aiming to build climate resilience—with 29
countries committing to net-zero carbon emissions in
their health systems by 2050, according to the WHO.
Information—Item 3.D Risk
See “Item 3. Key
factors—Climate change—Failure to manage physical
and transition risks from climate change.”
Our strategy
Our strategy is to deliver high-value medicines that alle-
viate society’s greatest disease burdens through tech-
nology leadership in R&D and novel access approaches.
The aim of our strategy is to create long-term value—to
contribute to continued advances in human health, to
deliver returns to shareholders and to benefit society.
We focus on four core therapeutic areas with strong
growth potential and high unmet patient needs: cardio-
vascular, renal and metabolic; immunology; neurosci-
ence; and oncology. A focused approach enables us to
build depth in these areas to find new ways to treat and
cure disease, intervene earlier in chronic illnesses and
improve quality of life for patients.
We focus on technology platforms where we have
the depth and scale to discover, develop and commer-
cialize therapies. These are two established platforms
(chemistry and biotherapeutics) plus three newer plat-
forms (xRNA, radioligand therapy and gene and cell ther-
apy) that represent key sources of future growth.
We focus on our priority markets—US, Germany,
China and Japan—which together account for most of
the expected growth in global healthcare spending over
the next five years. In the US, our ambition is to become
a top-five player. In Germany we aim to retain our cur-
rent position as market leader, while in China and Japan
we aim to be in third position in each market. Although
these are our priority geographies, we maintain a strong
presence in other markets worldwide.
To support our focus areas, we have three strategic
priorities:
• Deliver high-value medicines. We aim to increase
growth, driven by continued strong momentum in our
existing portfolio of medicines—including Entresto;
Kisqali, Kesimpta, Cosentyx, Scemblix, Pluvicto and
Leqvio—and key upcoming launches. Over the longer
term, we expect growth will come through delivering
high-value medicines that sustain and replace our
existing growth drivers.
• Embed operational excellence. In an increasingly com-
petitive environment, we are simplifying processes and
reducing costs to become more efficient and effective
in our decision-making and to free up resources for
investment in new medicines. Our goal is to continue
making attractive returns to shareholders while creat-
ing value for patients, healthcare systems and society.
• Strengthen the foundations of our business. We con-
tinue to invest to strengthen the foundations of our
long-term success. We have made progress in strength-
ening our culture to attract and retain talent, while
developing artificial intelligence capabilities in R&D and
building stronger trust with stakeholders and society.
42
Item 5. Operating and Financial Review and Prospects
Results of operations
Financial year 2023 compared with 2022
Key figures1
(USD millions unless indicated otherwise)
Net sales from continuing operations
Other revenues
Cost of goods sold
Gross profit from continuing operations
Selling, general and administration
Research and development
Other income
Other expense
Operating income from continuing operations
Return on net sales (%)
Loss from associated companies
Interest expense
Other financial income and expense
Income before taxes from continuing operations
Income taxes
Net income from continuing operations
Net income from discontinued operations
before gain on distribution of Sandoz Group AG
to Novartis AG shareholders
Gain on distribution of Sandoz Group AG
to Novartis AG shareholders
Net income from discontinued operations
Net income
Basic earnings per share from continuing operations (USD)
Basic earnings per share from discontinued operations (USD)
Total basic earnings per share (USD)
Year ended
Year ended
Dec 31, 2023 Dec 31, 2022
Change
in USD
%
Change in
constant
currencies
% 2
45 440
42 206
1 220
1 255
– 12 472
– 11 582
34 188
31 879
– 12 517
– 12 193
– 11 371
– 9 172
1 772
696
– 2 303
– 3 264
9 769
7 946
21.5
– 13
18.8
– 11
– 855
– 800
222
42
9 123
7 177
– 551
– 1 128
8 572
6 049
422
906
5 860
6 282
906
14 854
6 955
4.13
3.02
7.15
2.77
0.42
3.19
8
– 3
– 8
7
– 3
– 24
155
29
23
– 18
– 7
nm
27
51
42
nm
nm
nm
nm
49
nm
nm
9
10
– 3
– 6
11
– 3
– 22
147
31
39
1
– 11
nm
45
44
62
nm
nm
nm
nm
70
nm
nm
Net cash flows from operating activities from continuing operations
14 220
13 039
Non-IFRS measures 2
Free cash flow from continuing operations 2, 3
13 160
12 123
9
1 For information on continuing operations and discontinued operations, refer to the Overview section above in this Item 5 and “Item 18. Financial Statements—Note 1. Accounting
policies “, “Item 18. Financial Statements—Note 2. Significant transactions—Significant transactions in 2023,” and “Item 18. Financial Statements—Note 31. Discontinued
operations.”
2 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
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 “—Non-IFRS measures as
defined by Novartis”
nm = not meaningful
43
Item 5. Operating and Financial Review and Prospects
Company overview
Net sales from continuing operations were USD 45.4 bil-
lion, up 8% in USD reported terms and 10% measured in
constant currencies (cc) to remove the impact of
exchange rate movements. Sales growth was driven by
volume growth of 16 percentage points. Generic compe-
tition had a negative impact of 4 percentage points and
pricing had a negative impact of 2 percentage points.
Sales in the US were USD 18.0 billion (+13%) and in the
rest of the world USD 27.5 billion (+5%, +8% cc). Net
sales growth was mainly driven by continued strong per-
formance from Entresto (USD 6.0 billion, +30%, +31%
cc), Kesimpta (USD 2.2 billion, +99%, +99% cc), Kisqali
(USD 2.1 billion, +69%, +75% cc), Pluvicto (USD 980 mil-
lion, +262%, +261% cc), partly offset by generic compe-
tition mainly for Gilenya.
In the US (USD 18.0 billion, +13%), sales growth was
mainly driven by Entresto, Pluvicto, Kesimpta, Kisqali,
Scemblix and Leqvio, partly offset by the impact of
generic competition for Gilenya. In Europe (USD 15.0 bil-
lion, +4%, +4% cc), sales growth was driven by Kesimpta,
Entresto, Kisqali, Cosentyx and Leqvio, partly offset by
increased generic competition for Lucentis and Gilenya.
Emerging growth markets, which comprise all markets
excluding the US, Canada, Western Europe1, Japan, Aus-
tralia and New Zealand, grew +8% (+17% cc), includes
China net sales of USD 3.3 billion (+11%, +17% cc).
Operating income from continuing operations was
USD 9.8 billion (+23%, +39% cc), mainly driven by higher
net sales, lower restructuring charges, and income from
legal matters, partly offset by higher impairments and
higher selling, general and administration (SG&A), and
research and development (R&D) investments. Operat-
ing income margin from continuing operations was 21.5%
of net sales, increasing 2.7 percentage points (+5.0 per-
centage points in cc).
Net income from continuing operations was USD 8.6
billion (+42%, +62% cc), mainly driven by higher operat-
ing income and non-recurring favorable tax impacts.
Basic earnings per share from continuing operations was
USD 4.13 (+49%, +70% cc), growing faster than net
income, benefiting from lower weighted average number
of shares outstanding.
Net cash flows from operating activities from con-
tinuing operations amounted to USD 14.2 billion, com-
pared with USD 13.0 billion in 2022. This increase was
mainly driven by higher net income from continuing oper-
ations adjusted for non-cash items and other adjust-
ments, including divestment gains, which were partly
offset by higher income taxes paid, mainly due to the tim-
ing of payments.
Free cash flow from continuing operations amounted
to USD 13.2 billion (+9% USD), compared with USD 12.1
billion in 2022, driven by higher net cash flows from oper-
ating activities from continuing operations.
We also present our core results2, which exclude the
impact of amortization of intangible assets, impairments,
business acquisitions, divestments, and other significant
items, including restructuring and related items, to help
investors understand our underlying performance.
Core operating income from continuing operations
was USD 16.4 billion (+11%, +18% cc), mainly driven by
higher net sales, partly offset by higher SG&A and R&D
investments. Core operating income margin from con-
tinuing operations was 36.0% of net sales, increasing
0.9 percentage points (+2.4 percentage points cc).
Core net income from continuing operations was
USD 13.4 billion (+13%, +19% cc), mainly due to higher
core operating income. Core basic earnings per share
from continuing operations was USD 6.47 (+18%, +25%
cc), growing faster than core net income from continu-
ing operations, benefiting from lower weighted average
number of shares outstanding.
Discontinued operations net sales in 2023 were USD
7.4 billion, compared with USD 9.4 billion in 2022, and
operating income amounted to USD 265 million, com-
pared with USD 1.3 billion in 2022. Net income from dis-
continued operations in 2023 amounted to USD 6.3 bil-
lion, compared with USD 906 million in 2022, driven by
the IFRS Accounting Standards non-cash, non-taxable,
net gain on distribution of Sandoz Group AG to Novartis
AG shareholders, which amounted to USD 5.9 billion.
Total Company net income amounted to USD 14.9
billion in 2023, compared with USD 7.0 billion in 2022,
and basic earnings per share was USD 7.15, compared
with USD 3.19 in the prior year, driven by the IFRS
Accounting Standards non-cash, non-taxable, net gain
on distribution of Sandoz Group AG to Novartis AG
shareholders of USD 5.9 billion. Net cash flows from
operating activities for the total Company amounted to
USD 14.5 billion, and free cash flow amounted to USD
13.2 billion.
1 Novartis definition of Western Europe includes Austria, Belgium, Finland, France,
Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, The Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
2 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS
measures as defined by Novartis.”
44
Item 5. Operating and Financial Review and Prospects
Net sales from continuing operations
The following table provides an overview of net sales from continuing operations by core therapeutic area and
established brands:
(USD millions)
Cardiovascular, renal and metabolic
Immunology
Neuroscience
Oncology
Total promoted brands
Established brands 3
Total net sales from continuing operations 3
Year ended
Year ended
Dec 31, 2023 Dec 31, 2022 1
6 391
7 798
4 043
4 756
7 287
3 038
13 590
11 176
31 822
26 257
13 618
15 949
45 440
42 206
Change
in USD
%
Change in
constant
currencies
% 2
34
7
33
22
21
– 15
8
36
8
34
23
23
– 12
10
1 Reclassified to conform with the 2023 organizational structure.
2 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
3 Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were
transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022, in
compliance with IFRS Accounting Standards. See “Item 18. Financial Statements – Note 3. Operating segment.”
45
Item 5. Operating and Financial Review and Prospects
The following table provides the top 20 product net sales from continuing operations in 2023, as well as the change
compared with 2022:
US
Rest of world
Total
Brands
Entresto
Brand classification by
therapeutic area or
established brands
Key indications
Cardiovascular,
renal and metabolic
Chronic heart failure,
hypertension
Cosentyx
Immunology
Promacta/Revolade Oncology
Kesimpta
Neuroscience
Kisqali
Oncology
Tafinlar + Mekinist
Oncology
Tasigna
Oncology
Jakavi
Oncology
Psoriasis (PsO),
ankylosing spondylitis
(AS), psoriatic arthritis
(PsA), non-radiographic
axial spondyloarthritis
(nr-axSPA), hidradenitis
suppurativa (HS)
Immune
thrombocytopenia (ITP),
severe aplastic anemia (SAA)
Relapsing-remitting
multiple sclerosis (RRMS)
HR+/HER2-
metastatic breast cancer
BRAF V600+ metastatic
adjuvant melanoma,
advanced non-small cell
lung cancer (NSCLC),
tumor agnostic with
BRAF mutation indication
Chronic myeloid leukemia
(CML)
Myelofibrosis (MF),
polycytomia vera (PV),
graft-versus-host disease
(GvHD)
%
change
USD m USD/cc 1
%
%
change change
cc 1
USD
USD m
%
%
change change
cc 1
USD
USD m
3 067
30
2 968
30
32
6 035
30
31
2 636
– 5
2 344
16
19
4 980
4
5
1 205
11
1 064
6
8
2 269
9
10
1 528
66
643 276 272
2 171
99
99
1 032 119
1 048
38
47
2 080
69
75
791
17
1 131
4
8
1 922
9
11
884
1
964
– 8
– 5
1 848
– 4
– 3
1 720
10
12
1 720
10
12
Lucentis 2
Established brands
Xolair 3
Immunology
Ilaris
Immunology
Sandostatin
Established brands
Zolgensma
Neuroscience
Age-related
macular degeneration (AMD),
diabetic macular edema (DME),
retinal vein occlusion (RVO)
Severe allergic asthma (SAA),
chronic spontaneous urticaria
(CSU), nasal polyps
Auto-inflammatory (CAPS,
TRAPS, HIDS/MKD, FMF,
SJIA, AOSD, gout)
Carcinoid tumors,
acromegaly
Spinal muscular atrophy
(SMA)
1 475 – 21 – 20
1 475 – 21 – 20
1 463
7
9
1 463
7
9
686
20
669
19
24
1 355
20
22
829
4
485
11
15
1 314
6
8
372 – 14
842 – 10
– 7
1 214 – 11
– 9
Pluvicto
Oncology
PSMA-positive mCRPC patients 921 265
post-ARPI, post-Taxane
59 211 195
980 262 261
Gilenya 2
Established brands
Relapsing multiple sclerosis
(RMS)
359 – 69
566 – 34 – 33
925 – 54 – 54
Exforge Group
Established brands
Hypertension
13
– 7
700
– 4
– 1
713
– 4
– 1
Galvus Group
Established brands
Type 2 diabetes
692 – 19 – 11
692 – 19 – 11
Diovan Group
Established brands
Hypertension
52
– 5
561
– 6
– 1
613
– 6
427
29
178
27
26
605
28
– 1
28
Lutathera
Oncology
Gleevec/Glivec
Established brands
GEP-NETs
gastroenteropancreatic
neuroendocrine tumors
Chronic myeloid
leukemia (CML),
gastrointestinal stromal
tumors (GIST)
Top 20 brands total
Rest of portfolio 4
Total net sales
from continuing
operations 4
150 – 27
411 – 24 – 20
561 – 25 – 22
14 952
15 19 983
3 007
1
7 498
6
1
9 34 935
10
5 10 505
1
12
4
17 959
13 27 481
5
8 45 440
8
10
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
2 In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
3 Net sales reflect Xolair sales for all indications.
4 Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were
transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022, in
compliance with IFRS Accounting Standards. See “Item 18. Financial Statements – Note 3. Operating segment.”
nm = not meaningful
46
Item 5. Operating and Financial Review and Prospects
For the table providing the top 20 products net sales
from continuing operations in 2022 see Results of Oper-
ations 2022 compared with 2021, below in this Item 5.
For the table providing the net sales from continuing
operations by core therapeutic area and established
brands for 2023 and 2022, see “Item 18. Financial state-
ments—Note 4. Revenues and geographic information.”
For information about the approved indications for
certain products described, see “Item 4. Information on
the Company—Item 4.B Business overview— Products.”
CARDIOVASCULAR, RENAL AND METABOLIC
Net sales in the cardiovascular, renal and metabolic ther-
apeutic area were USD 6.4 billion (+34%, +36% cc), sales
growth mainly driven by Entresto.
Entresto (USD 6.0 billion, +30%, +31% cc) sustained
robust demand-led growth. In the US and Europe,
Entresto penetration grew through the continued adop-
tion of guideline-directed medical therapy in heart fail-
ure. In China and Japan, Entresto volume growth is fueled
by heart failure as well as increased penetration in hyper-
tension. Highlights of the year also included the approval
of the pediatric indication and formulation in Europe with
a 1-year extension of RDP to November 2026, and the
inclusion of Entresto in the 2023 China Hypertension
Treatment Guideline as a new drug category and 1st line
treatment option. In the US, Novartis is in ANDA litigation
with generic manufacturers. Novartis has appealed to
reverse the negative US district court decision to uphold
the validity of its combination patent covering Entresto
and combinations of sacubitril and valsartan, which
expires in 2025 (with pediatric exclusivity). No generics
have tentative or final approval in the US. Any US com-
mercial 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 0.4 billion, +217%, +217% cc) launch in
the US and other markets is ongoing, with focus on
patient on-boarding, removing access hurdles and
enhancing medical education. In July 2023, FDA
expanded the label to include primary hyperlipidemia
(patients at increased risk of ASCVD) and removed four
adverse reactions from the safety section and Limita-
tions of Use. In Q3 2023, Leqvio was approved in China
and in Japan and is now approved in 94 countries.
Novartis obtained global rights to develop, manufacture
and commercialize Leqvio under a license and collabo-
ration agreement with Alnylam Pharmaceuticals.
IMMUNOLOGY
Net sales in the immunology therapeutic area reached
USD 7.8 billion (+7%, +8% cc), sales growth was mainly
driven by Ilaris and Cosentyx.
Cosentyx (USD 5.0 billion, +4%, +5% cc) continued
demand growth across key regions, partly offset by rev-
enue deduction increases in the US. Ex-US sales grew
+19% (cc). Since initial approval in 2015, Cosentyx has
shown sustained efficacy and a robust safety profile,
treating more than 1 million patients across six systemic
inflammatory conditions. Cosentyx demonstrated dura-
ble efficacy and symptom improvement at 16 weeks with
observed results at 52 weeks in patients with moder-
ate-to-severe hidradenitis suppurativa. In May and
October 2023, respectively, the European Commission
and FDA approved Cosentyx as the first and only IL-17A
inhibitor for hidradenitis suppurativa in adults and the
first new biologic therapy for hidradenitis suppurativa in
nearly a decade. Cosentyx hidradenitis suppurativa in
adults is now approved in more than 60 countries world-
wide. In October 2023, FDA has approved Cosentyx
intravenous formulation for the treatment of adults with
psoriatic arthritis, ankylosing spondylitis, and non-radio-
graphic axial spondyloarthritis.
Xolair (USD 1.5 billion, ex-US +7%, +9% cc) sales grew
across all regions. Following EMA positive opinion in Feb-
ruary 2023, the Xolair SmPC was updated with long term
(48 week) efficacy and safety data on chronic sponta-
neous urticaria (CSU) allowing continued treatment
beyond 24 weeks. In November 2023, Novartis received
EU approval for six new Xolair product configurations,
including auto injectors and a new 300 mg strength.
Novartis co-promotes Xolair with Genentech in the US
and shares a portion of revenue as operating income but
does not record any US sales.
Ilaris (USD 1.4 billion, +20%, +22% cc) sales grew
across all regions. Contributors to growth include strong
performance in the Periodic Fever Syndrome (PFS) and
Still’s disease indications (SJIA/AOSD) in the US, Europe
and Japan, as well as in key markets worldwide.
NEUROSCIENCE
Net sales in the neuroscience therapeutic area were USD
4.0 billion (+33%, +34% cc), sales growth was mainly
driven by Kesimpta.
Kesimpta (USD 2.2 billion, +99%, +99% cc) sales
grew across all regions mainly driven by increased
demand and strong access. Kesimpta is a high efficacy
B-cell therapy, with a favorable safety and tolerability
profile and an at home self-administration for a broad
population of RMS patients. Kesimpta is now approved
in 87 countries with more than 85,000 patients treated.
Zolgensma (USD 1.2 billion, –11%, –9% cc). Estab-
lished markets are treating mainly incident patients.
Sales declined in the US and Europe. Zolgensma is now
approved in 51 countries with more than 3,700 patients
treated globally through clinical trials, early access pro-
grams and in the commercial setting.
Mayzent (USD 0.4 billion, +10%, +10% 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 0.3 billion, ex-US, ex-Japan +22%,
+21% cc) sales grew mainly in Europe, driven by increased
demand in migraine prevention. Novartis commercializes
Aimovig ex-US, ex-Japan, while Amgen retains all rights
in the US and in Japan.
ONCOLOGY
Net sales in the oncology therapeutic area were USD
13.6 billion (+22%, +23% cc), sales growth was mainly
driven by Kisqali, Pluvicto, Scemblix and Promacta/
Revolade.
Promacta/Revolade (USD 2.3 billion, +9%, +10% cc)
sales grew across all regions, driven by increased use in
second-line persistent and chronic immune thrombocy-
topenia and as first-line and/or second-line treatment
47
Item 5. Operating and Financial Review and Prospects
for severe aplastic anemia, according to the respective
label in the countries.
Kisqali (USD 2.1 billion, +69%, +75% cc) sales grew
strongly across all regions, based on increasing recog-
nition of its consistently reported overall survival in HR+/
HER2- advanced breast cancer. Updates to the NCCN
Clinical Practice Guidelines in Oncology (NCCN Guide-
lines®) for breast cancer, released in January 2023, rec-
ommend ribociclib (Kisqali) as the only Category 1 Pre-
ferred CDK4/6 inhibitor for first-line treatment of patients
with HR+/HER2- advanced breast cancer in combina-
tion with an aromatase inhibitor (AI). Positive, statistically
significant interim and final efficacy results of the iDFS
analysis of the early breast cancer pivotal Phase III trial
NATALEE were presented at ASCO and SABCS 2023.
Additional QOL information presented at ESMO demon-
strated that the addition of Ribociclib to endocrine ther-
apy did not compromise the QOL of patients. Submis-
sion for approval in early breast cancer was completed
in August to EMA and in December to the FDA. Submis-
sions to other regulatory authorities are ongoing.
Tafinlar + Mekinist (USD 1.9 billion, +9%, +11% cc)
sales grew mainly in the US and emerging growth mar-
kets, driven by demand in BRAF+ adjuvant melanoma
and NSCLC indications, while maintaining demand in the
highly competitive BRAF+ metastatic melanoma market.
In addition, the tumor agnostic indication contributed to
growth in the US.
Tasigna (USD 1.8 billion, –4%, –3% cc) sales declined
mainly in Europe.
Jakavi (USD 1.7 billion, ex-US +10%, +12% cc) sales
grew in emerging growth markets, Europe and Japan,
driven by strong demand in both myelofibrosis and poly-
cythemia vera indications. Incyte retains all rights to
ruxolitinib (Jakafi®) in the US.
Pluvicto (USD 1.0 billion, +262%, +261% cc) saw con-
tinued 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-pos-
itive metastatic castration-resistant prostate cancer,
who have already been treated with other anticancer
treatments (ARPI and taxane-based chemotherapy).
Data from the Phase III PSMAfore trial was presented at
ESMO. Pluvicto met its primary endpoint with a clinically
meaningful and statistically significant benefit in radio-
graphic progression-free survival (rPFS) in patients with
prostate-specific membrane antigen (PSMA)-positive
metastatic castration-resistant prostate cancer
(mCRPC) after treatment with androgen receptor path-
way inhibitor (ARPI) therapy, compared with a change in
ARPI. In Q2 2023, approval was received for commer-
cial production of Pluvicto for US patients at our radioli-
gand manufacturing facility in Millburn, NJ and the expan-
sion of manufacturing operations for EU commercial
supply at our site in Zaragoza, Spain. In January 2024,
Novartis received approval from the FDA for the com-
mercial manufacturing of Pluvicto at state-of-the-art radi-
oligand therapy (RLT) manufacturing facility in Indianap-
olis.
Lutathera (USD 0.6 billion, +28%, +28% cc) sales
grew across all regions due to increased demand. Growth
in the US was also driven by strong field execution. In
Japan, growth was driven by increased demand follow-
ing the transfer of the marketing authorization (MA) back
to Novartis from Fujifilm Toyama Chemical. In Q3 2023,
the Phase III NETTER-2 trial with Lutathera met its pri-
mary endpoint, showing Lutathera is the first radioligand
therapy (RLT) to demonstrate clinically meaningful ben-
efit in a first line setting.
Kymriah (USD 0.5 billion, –5%, –5% cc) sales declined
in Europe and the US, partly offset by growth in Japan
and follicular lymphoma indication launch across mar-
kets.
Piqray / Vijoice (USD 0.5 billion, +35%, +37% cc) sales
grew mainly in the US, Europe and emerging growth mar-
kets. In addition to PIK3CA-related overgrowth spectrum
(PROS), Piqray is the first therapy specifically developed
for the approximately 40% of HR+/HER2- advanced
breast cancer patients who have a PIK3CA mutation,
associated with a worse prognosis.
Scemblix (USD 0.4 billion, +177%, +179% 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 tyro-
sine kinase inhibitors. Scemblix has now been approved
in more than 60 countries for patients with Philadelphia
chromosome-positive CML in chronic phase who have
been treated with 2 or more TKIs. In January 2024,
Novartis announced that the ASC4FIRST trial met both
primary endpoints, with clinically meaningful and statis-
tically significant results vs. standard-of-care TKIs in
newly diagnosed Ph+CML-CP patients while demon-
strating a favorable safety and tolerability profile. Data
will be presented at an upcoming medical conference
and submitted to regulatory authorities in 2024.
Votrient (USD 0.4 billion, –18%, –17% cc) declined due
to increased competition, especially from immuno-on-
cology agents in metastatic renal cell carcinoma.
Adakveo (USD 0.2 billion, +1%, 0% cc) sales grew (cc)
mainly in the US, offset by decline in emerging growth
markets and Europe. In August 2023, European Com-
mission 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 contin-
ues to discuss the STAND study results with FDA and
other health authorities globally.
Tabrecta (USD 0.2 billion, +16%, +16% cc) sales grew
mainly in the US. 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. Novartis obtained global rights
to develop, manufacture and commercialize Tabrecta
under a license and collaboration agreement with Incyte
Corporation.
ESTABLISHED BRANDS
The established brands had net sales of USD 13.6 billion
(–15%, –12% cc).
Lucentis (USD 1.5 billion, ex-US –21%, –20% cc) sales
declined in Europe, emerging growth markets and Japan
due to competition.
Sandostatin (USD 1.3 million, +6%, +8% cc) sales
grew mainly in emerging growth markets, Europe and in
the US.
48
Item 5. Operating and Financial Review and Prospects
Gilenya (USD 0.9 billion, –54%, –54% cc) sales
declined due to generic competition mainly in the US and
Europe. Novartis is in litigation against a generic manu-
facturer on the method of treatment patent in the US,
and against generic manufacturers on the dosing regi-
men patent in Europe.
Exforge Group (USD 0.7 million, –4%, –1% cc) sales
declined mainly in Europe, partly offset by growth in
emerging growth markets.
Galvus Group (USD 0.7 million, –19%, –11% cc) sales
declined mainly in Europe, partly offset by growth in
emerging growth markets.
Diovan Group (USD 0.6 million, –6%, –1% cc) sales
declined mainly in Europe, Japan and in the US, partly
offset by growth in emerging growth markets.
Gleevec/Glivec (USD 0.6 million, –25%, –22% cc)
sales declined due to increased generic competition.
Afinitor/Votubia (USD 0.4 million, –20%, –18% cc)
sales declined mainly in the US and Europe, driven by
generic competition.
Operating income from continuing operations
(USD millions unless indicated otherwise)
Gross profit from continuing operations
Selling, general and administration
Research and development
Other income
Other expense
Operating income from continuing operations
Return on net sales (%)
Year ended
Year ended
Dec 31, 2023 Dec 31, 2022
34 188
31 879
– 12 517
– 12 193
– 11 371
– 9 172
1 772
696
– 2 303
– 3 264
9 769
7 946
21.5
18.8
Change
in USD
%
Change in
constant
currencies
% 1
7
– 3
– 24
155
29
23
11
– 3
– 22
147
31
39
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
Operating income from continuing operations was USD
9.8 billion (+23%, +39% cc), mainly driven by higher net
sales, lower restructuring charges, and income from
legal matters, partly offset by higher impairments and
higher SG&A and R&D investments. Operating income
margin from continuing operations was 21.5% of net
sales, increasing 2.7 percentage points (+5.0 percent-
age points in cc). Other revenues as a percentage of net
sales from continuing operations decreased by 0.3 per-
centage points (-0.4 percentage points cc). Cost of
goods sold as a percentage of net sales from continuing
operations was in line with the prior year (+1.0 percent-
age points cc). R&D expenses as a percentage of net
sales from continuing operations increased by 3.3 per-
centage points (-2.4 percentage points cc). Selling, gen-
eral and administration (SG&A) expenses as a percent-
age of net sales from continuing operations decreased
by 1.4 percentage points (+1.7 percentage points cc).
Other income and other expense, net as a percentage
of net sales from continuing operations, increased the
margin by 4.9 percentage points (+5.1 percentage points
cc).
Non-IFRS measure Core operating income from continuing operations 1
(USD millions unless indicated otherwise)
Core gross profit from continuing operations
Core selling, general and administration
Core research and development
Core other income
Core other expense
Core operating income from continuing operations
Core return on net sales (%)
Year ended
Year ended
Dec 31, 2023 Dec 31, 2022
37 959
35 591
– 12 489
– 12 143
– 8 600
– 8 267
392
291
– 890
– 678
16 372
14 794
36.0
35.1
Change
in USD
%
Change in
constant
currencies
%
7
– 3
– 4
35
– 31
11
9
– 3
– 3
29
– 33
18
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
The adjustments made to operating income from con-
tinuing operations to arrive at core operating income
from continuing operations amounted to USD 6.6 billion
(compared with USD 6.8 billion in the prior year). For
more information, see “—Non-IFRS measures as defined
by Novartis—2023, 2022 and 2021 reconciliation from
IFRS Accounting Standards results to non-IFRS core
results.”
49
Item 5. Operating and Financial Review and Prospects
Core operating income from continuing operations
was USD 16.4 billion (+11%, +18% cc), mainly driven by
higher net sales, partly offset by higher SG&A and R&D
investments. Core operating income margin from con-
tinuing operations was 36.0% of net sales, increasing
0.9 percentage points (+2.4 percentage points cc). Core
other revenues as a percentage of sales decreased by
0.2 percentage points (cc). Core cost of goods sold as
a percentage of sales increased by 0.1 percentage points
(cc). Core R&D expenses as a percentage of net sales
decreased by 1.3 percentage points (cc). Core SG&A
expenses as a percentage of net sales decreased by 1.6
percentage points (cc). Core other income and expense
as a percentage of net sales decreased the margin by
0.2 percentage points (cc).
Research and development
The following table provides an overview of the continuing operations reported research and development expense
and the non-IFRS measure core research and development expense1:
(USD millions unless indicated otherwise)
Research and exploratory development
Confirmatory development
Total research and development expense
Research and development as % of net sales from continuing operations
Non-IFRS measures
Core research and exploratory development1
Core confirmatory development1
Total core research and development expense
Core research and development as % of net sales from continuing operations
Year ended
Year ended
Dec 31, 2023 Dec 31, 2022
– 3 640
– 2 938
– 7 731
– 6 234
– 11 371
– 9 172
25.0
21.7
– 2 988
– 2 784
– 5 612
– 5 483
– 8 600
– 8 267
18.9
19.6
Change
in USD
%
– 24
– 24
– 24
– 7
– 2
– 4
Change in
constant
currencies
% 1
– 22
– 22
– 22
– 5
– 1
– 3
1 Core research and development expense exclude impairments, amortization and certain other items. For an explanation of non-IFRS measures and reconciliation tables, see
“—Non-IFRS measures as defined by Novartis.”
Research and exploratory development expenses
increased by 24% (–22% cc) to USD 3.6 billion. Confir-
matory development expenses amounted to USD 7.7 bil-
lion, increasing by 24% (–22% cc) versus the prior year
mainly due to higher impairments from discontinuation
of early stage development projects. Research and
development as a percentage of net sales from continu-
ing operations increased by 3.3 percentage points to
25.0% of net sales from continuing operations.
Total core research and development expenses
amounted to USD 8.6 billion, increasing by 4% (–3% cc)
versus the prior year mainly due to higher investments
in recently acquired assets. Core research and develop-
ment as a percentage of net sales from continuing oper-
ations decreased by 0.7 percentage points (-1.3 percent-
age points cc) to 18.9% of net sales from continuing
operations.
50
Item 5. Operating and Financial Review and Prospects
Non-operating income and expense
The term “non-operating income and expense” includes all income and expense items outside operating income
from continuing operations. The following table provides an overview of non-operating income and expense from
continuing operations:
(USD millions unless indicated otherwise)
Operating income from continuing operations
Loss from associated companies
Interest expense
Other financial income and expense
Income before taxes
Income taxes
Net income from continuing operations
Net income from discontinued operations
before gain on distribution of Sandoz Group AG
to Novartis AG shareholders
Gain on distribution of Sandoz Group AG
to Novartis AG shareholders
Net income from discontinued operations
Net income
Basic earnings per share from continuing operations (USD)
Basic earnings per share from discontinued operations (USD)
Total basic earnings per share (USD)
Year ended
Year ended
Dec 31, 2023 Dec 31, 2022
9 769
7 946
– 13
– 855
222
– 11
– 800
42
9 123
7 177
– 551
– 1 128
8 572
6 049
422
906
5 860
6 282
906
14 854
6 955
4.13
3.02
7.15
2.77
0.42
3.19
Change
in USD
%
23
– 18
– 7
nm
27
51
42
nm
nm
nm
nm
49
nm
nm
Change in
constant
currencies
% 1
39
1
– 11
nm
45
44
62
nm
nm
nm
nm
70
nm
nm
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
nm = not meaningful
Interest expense and other financial income and
expense
Interest expense amounted to USD 855 million, broadly
in line with the prior year.
Other financial income and expense amounted to an
income of USD 222 million compared with USD 42 mil-
lion in the prior year, mainly due to higher interest income
partly offset by higher net losses from the impact of IAS
29 “Financial reporting in Hyperinflation Economies.”
Income taxes
The tax rate was 6.0%, compared with 15.7% in the prior
year period. The current year tax rate was favorably
impacted by the effect of tax benefits from the write-
down of investments in subsidiaries, non-taxable net
gains on unrealized foreign currency results, recognition
of deferred tax assets on prior years tax loss carryfor-
wards, non-taxable income related to legal matters, and
other items including impact of tax rate changes. Exclud-
ing these impacts, the current year tax rate would have
been 15.3% compared with 15.7% in the prior year period.
The decrease from the prior year was mainly the result
of a change in profit mix.
Net income from continuing operations
Net income from continuing operations was USD 8.6 bil-
lion (+42%, +62% cc), mainly due to higher operating
income from continuing operations and non-recurring
favorable tax impacts.
Earnings per share from continuing operations
Basic earnings per share from continuing operations was
USD 4.13 (+49%, +70% cc), growing faster than net
income from continuing operations, benefiting from
lower weighted average number of shares outstanding.
51
Item 5. Operating and Financial Review and Prospects
Non-IFRS measure Core non-operating income and expense1
The following table provides an overview of the non-IFRS measure core non-operating income and expense from
continuing operations:
(USD millions unless indicated otherwise)
Core operating income from continuing operations
Core loss from associated companies
Core interest expense
Core other financial income and expense
Core income before taxes from continuing operations
Core income taxes
Core net income from continuing operations
Core basic EPS from continuing operations (USD)
Year ended
Year ended
Dec 31, 2023 Dec 31, 2022
16 372
14 794
– 13
– 855
430
– 11
– 800
140
15 934
14 123
Change
in USD
%
11
– 18
– 7
nm
13
– 2 488
– 2 177
– 14
13 446
11 946
6.47
5.48
13
18
Change in
constant
currencies
%
18
1
– 11
nm
19
– 21
19
25
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
nm = not meaningful
Core interest expense and other financial income
and expense
Core interest expense amounted to USD 855 million,
broadly in line with the prior year.
Core net income from continuing operations
Core net income from continuing operations was USD
13.4 billion (+13%, +19% cc), mainly due to higher core
operating income from continuing operations.
Core other financial income and expense amounted to
an income of USD 430 million compared with USD 140 mil-
lion in the prior year, mainly due to higher interest income.
Core income taxes
The core tax rate (core taxes as a percentage of core
income before tax) was 15.6% compared with 15.4% in
the prior year period. The increase from the prior year
was mainly the result of a change in profit mix.
Core earnings per share from continuing
operations
Core basic earnings per share from continuing opera-
tions was USD 6.47 (+18%, +25% cc), growing faster than
core net income from continuing operations, benefiting
from lower weighted average number of shares out-
standing.
Discontinued operations
Discontinued operations include the Sandoz, generic
pharmaceuticals and biosimilars division and certain cor-
porate activities attributable to Sandoz prior to the spin-off
up to the distribution date of October 3, 2023 and certain
other expenses related to the spin-off. Included in 2023 is
also the IFRS Accounting Standards non-cash, non-tax-
able net gain on the distribution of Sandoz Group AG to
Novartis AG shareholders of USD 5.9 billion, representing
mainly the excess amount of the IFRS Accounting Stan-
dards distribution liability, which is the estimated fair value
of the Sandoz business distributed to Novartis AG share-
holders, over the then carrying value of Sandoz business
net assets. There were no operating results for the fourth
quarter 2023 following the distribution date. The prior year
includes the results for the full year.
Discontinued operations net sales in 2023 were
USD 7.4 billion, compared with USD 9.4 billion in 2022
and operating income amounted to USD 265 million com-
pared with USD 1.3 billion in 2022.
Net income from discontinued operations in 2023
amounted to USD 6.3 billion, compared with USD 906 mil-
lion in 2022, driven by the IFRS Accounting Standards
non-cash, non-taxable, net gain on distribution of Sandoz
Group AG to Novartis AG shareholders, which amounted
to USD 5.9 billion.
For further information, see “Item 18. Financial State-
ments—Note 1. Accounting policies; Note 2. Significant
transactions—Completion of the spin-off of the Sandoz
business through a dividend in kind distribution to Novartis
AG shareholders and —Note 31. Discontinued operations.”
Total Company
Total Company net income amounted to USD 14.9 billion
in 2023, compared with USD 7.0 billion in 2022, and basic
earnings per share was USD 7.15, compared with USD 3.19
in the prior year, driven by the IFRS Accounting Standards
non-cash, non-taxable, net gain on distribution of Sandoz
Group AG to Novartis AG shareholders of USD 5.9 billion.
Net cash flows from operating activities for the total Com-
pany amounted to USD 14.5 billion, and free cash flow
amounted to USD 13.2 billion.
52
Item 5. Operating and Financial Review and Prospects
Financial year 2022 compared with 2021
Key figures1
(USD millions unless indicated otherwise)
Net sales from continuing operations
Other revenues
Cost of goods sold
Gross profit from continuing operations
Selling, general and administration
Research and development
Other income
Other expense
Operating income from continuing operations
Return on net sales (%)
(Loss)/income from associated companies
Interest expense
Other financial income and expense
Income before taxes from continuing operations
Income taxes
Net income from continuing operations
Net income from discontinued operations
Net income
Basic earnings per share from continuing operations (USD)
Basic earnings per share from discontinued operations (USD)
Total basic earnings per share (USD)
Year ended
Year ended
Dec 31, 2022 Dec 31, 2021
Change
in USD
%
Change in
constant
currencies
% 2
42 206
42 781
1 255
1 193
– 11 582
– 11 735
31 879
32 239
– 12 193
– 12 827
– 9 172
– 8 641
696
1 620
– 3 264
– 2 335
7 946
10 056
18.8
– 11
– 800
42
23.5
15 337
– 787
– 76
7 177
24 530
– 1 128
– 1 625
6 049
22 905
906
1 113
6 955
24 018
2.77
0.42
3.19
10.22
0.49
10.71
– 1
5
1
– 1
5
– 6
– 57
– 40
– 21
nm
– 2
nm
– 71
31
– 74
– 19
– 71
– 73
– 15
– 70
– 2
5
7
– 5
5
0
– 10
– 55
– 49
– 12
nm
– 3
nm
– 67
21
– 70
– 11
– 67
– 69
– 9
– 66
Net cash flows from operating activities from continuing operations
13 039
13 365
Non-IFRS measures 2
Free cash flow from continuing operations 2, 3
12 123
12 299
– 1
1 For information on continuing operations and discontinued operations, refer to the Overview section above in this Item 5 and “Item 18. Financial Statements—Note 1. Accounting
policies “, “Item 18. Financial Statements—Note 2. Significant transactions—Significant transactions in 2023,” and “Item 18. Financial Statements—Note 31. Discontinued
operations.”
2 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
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 “—Non-IFRS measures as
defined by Novartis.”
nm = not meaningful
53
Item 5. Operating and Financial Review and Prospects
Company overview
Net sales from continuing operations were USD 42.2 bil-
lion in 2022, down 1% in USD reported terms and up 5%
measured in constant currencies (cc) to remove the
impact of exchange rate movements. Sales growth was
driven by volume growth of 13 percentage points, mainly
driven by continued strong growth from Entresto, Kesi-
mpta, Kisqali, Pluvicto and Cosentyx. Generic competi-
tion had a negative impact of 4 percentage points, mainly
due to Gilenya, Afinitor/Votubia, and Gleevec/Glivec. Pric-
ing had a negative impact of 4 percentage points. Net
sales from continuing operations in the US were USD
15.9 billion (+7%) and in the rest of the world USD 26.3
billion (–6%, +4% cc).
In emerging growth markets, which comprise all mar-
kets excluding the US, Canada, Western Europe1, Japan,
Australia and New Zealand, net sales from continuing
operations were USD 10.8 billion (+2%, +9% cc), driven
by China (USD 2.9 billion) growing +3% (+7% cc).
Operating income from continuing operations was
USD 7.9 billion (–21%, –12% cc), mainly due to higher
restructuring primarily related to the implementation of
the previously announced streamlined organizational
model, higher impairments and lower divestment gains.
Operating income margin from continuing operations
was 18.8% of net sales from continuing operations,
decreasing by 4.7 percentage points (-3.8 percentage
points cc).
Net income from continuing operations was USD 6.0
billion compared with USD 22.9 billion in the prior year,
impacted by Roche income in the prior year. Excluding
the impact of Roche income, net income from continu-
ing operations declined 9% (cc). Basic earnings per
share from continuing operations were USD 2.77 com-
pared with USD 10.22 in the prior year. Excluding the
impact of Roche income, basic earnings per share from
continuing operations declined 7% (cc).
Net cash flows from operating activities from con-
tinuing operations amounted to USD 13.0 billion, com-
pared with USD 13.4 billion in 2021. This decrease was
mainly due to unfavorable changes in working capital and
lower dividends from associated companies (2021
included the USD 0.5 billion dividends received from our
investment in Roche, which was divested in the fourth
quarter of 2021), partly offset by lower income taxes paid,
higher interest received and favorable hedging results.
Free cash flow from continuing operations amounted
to USD 12.1 billion, broadly in line with USD 12.3 billion in
2021.
We also present our core results2, which exclude the
impact of amortization, impairments, disposals, acquisi-
tions, restructurings and other significant items, to help
investors understand our underlying performance.
Core operating income from continuing operations
was USD 14.8 billion (+2%, +10% cc), benefiting from
higher gross margin, partly offset by higher research and
development (R&D) investments. Core operating income
margin from continuing operations was 35.1% of net sales
from continuing operations, increasing by 1.2 percent-
age points (+1.8 percentage points cc).
Core net income from continuing operations was
USD 11.9 billion (–5%, +4% cc) as growth in core operat-
ing income was partly offset by the loss of Roche core
income. Excluding the impact of Roche core income,
core net income grew from continuing operations +13%
(cc).
Discontinued operations include the Sandoz generic
pharmaceuticals and biosimilars division and certain cor-
porate activities attributable to Sandoz prior to the spin-
off up to the distribution date of October 3, 2023, and
certain other expenses related to the spin-off. Net sales
of discontinued operations were USD 9.4 billion, com-
pared with USD 9.8 billion in 2021, and operating income
amounted to USD 1.3 billion, compared with USD 1.6 bil-
lion in the prior year. Net income from discontinued oper-
ations was USD 0.9 billion compared with USD 1.1 billion
in the prior year.
Total Company net income amounted to USD 7.0 bil-
lion, and basic earnings per share were USD 3.19, com-
pared with USD 10.71 in the prior year. Net cash flows
from operating activities amounted to USD 14.2 billion,
and free cash flow amounted to USD 13.0 billion.
1 Novartis definition of Western Europe includes Austria, Belgium, Finland, France,
Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, The Netherlands, Norway,
Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
2 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS
measures as defined by Novartis.”
54
Item 5. Operating and Financial Review and Prospects
Net sales from continuing operations
The following table provides an overview of net sales from continuing operations by core therapeutic area and
established brands:
(USD millions)
Cardiovascular, renal and metabolic
Immunology
Neuroscience
Oncology
Total promoted brands
Established brands 3
Total net sales from continuing operations 3
Year ended
Year ended
Dec 31, 2022 Dec 31, 2021 1
4 756
7 287
3 038
3 561
7 206
2 220
11 176
10 532
26 257
23 519
15 949
19 262
42 206
42 781
Change
in USD
%
Change in
constant
currencies
% 2
34
1
37
6
12
– 17
– 1
40
7
42
12
18
– 11
5
1 Reclassified to conform with the 2023 organizational structure.
2 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
3 Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were
transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022
and 2021, in compliance with IFRS Accounting Standards. See “Item 18. Financial Statements – Note 3. Operating segment.”
55
Item 5. Operating and Financial Review and Prospects
The following table provides the top 20 product net sales from continuing operations in 2022 as well as the change
compared with 2021:
US
Rest of world
Total
Brands
Cosentyx
Brand classification by
therapeutic area or
established brands
Immunology
Key indications
Psoriasis (PsO),
ankylosing spondylitis
(AS), psoriatic arthritis
(PsA), non-radiographic
axial spondyloarthritis
(nr-axSPA)
%
change
USD m USD/cc 1
%
%
change change
cc 1
USD
USD m
%
%
change change
cc 1
USD
USD m
2 770
– 4
2 018
10
20
4 788
1
5
Entresto
Cardiovascular,
renal and metabolic
Chronic heart failure,
hypertension
2 354
38
2 290
25
37
4 644
31
37
Promacta/Revolade Oncology
Gilenya 2
Established brands
Tasigna
Oncology
Lucentis 2
Established brands
Tafinlar + Mekinist
Oncology
Jakavi
Oncology
Zolgensma
Neuroscience
Xolair 3
Immunology
Sandostatin
Established brands
Kisqali
Ilaris
Oncology
Immunology
Kesimpta
Neuroscience
Immune
thrombocytopenia (ITP),
severe aplastic anemia (SAA)
Relapsing multiple sclerosis
(RMS)
Chronic myeloid leukemia
(CML)
1 083
14
1 005
– 6
5
2 088
4
9
1 153 – 19
860 – 37 – 29
2 013 – 28 – 24
877
– 1
1 046 – 11
– 2
1 923
– 7
– 1
Age-related
macular degeneration (AMD),
diabetic macular edema (DME),
retinal vein occlusion (RVO)
BRAF V600+ metastatic
adjuvant melanoma,
advanced non-small cell
lung cancer (NSCLC),
tumor agnostic with
BRAF mutation indication
Myelofibrosis (MF),
polycytomia vera (PV),
graft-versus-host disease
(GvHD)
Spinal muscular atrophy
(SMA)
Severe allergic asthma (SAA),
chronic spontaneous urticaria
(CSU), nasal polyps
Carcinoid tumors,
acromegaly
HR+/HER2-
metastatic breast cancer
Auto-inflammatory (CAPS,
TRAPS, HIDS/MKD, FMF,
SJIA, AOSD, gout)
Relapsing-remitting
multiple sclerosis (RRMS)
1 874 – 13
– 4
1 874 – 13
– 4
678
12
1 092
0
10
1 770
5
11
1 561
– 2
9
1 561
– 2
9
434
– 7
936
6
12
1 370
1
1 365
– 4
6
1 365
– 4
5
6
800
– 5
438 – 23 – 16
1 238 – 12 – 10
472
39
759
27
38
1 231
31
38
570
14
563
1
16
1 133
7
15
921 165
171
nm
nm
1 092 194 200
Galvus Group
Established brands
Type 2 diabetes
859 – 21 – 12
859 – 21 – 12
Gleevec/Glivec
Established brands
Chronic myeloid
leukemia (CML),
gastrointestinal stromal
tumors (GIST)
205 – 22
540 – 29 – 23
745 – 27 – 22
Exforge Group
Established brands
Hypertension
Diovan Group
Established brands
Hypertension
14
55
0
8
729 – 18 – 12
743 – 18 – 12
597 – 17 – 10
652 – 16
196 – 15
340
– 5
7
536
– 9
– 9
– 2
Kymriah
Oncology
Afinitor/Votubia
Established brands
r/r pediatric and young
adults acute lymphoblastic
leukemia (ALL), diffuse large
B-cell lymphoma (DLBCL),
follicular lymphoma (FL)
Breast cancer/
tuberous sclerosis complex
(TSC)
Top 20 brands total
Rest of portfolio 4
Total net sales
from continuing
operations 4
171 – 67
341 – 18
– 8
512 – 45 – 41
12 753
6 19 384
– 5
5 32 137
– 1
3 182
10
6 887
– 7
1 10 069
– 3
15 935
7 26 271
– 6
4 42 206
– 1
5
4
5
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
2 In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
3 Net sales from continuing operations reflect Xolair sales for all indications.
4 Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were
transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022
and 2021, in compliance with IFRS Accounting Standards. See “Item 18. Financial Statements – Note 3. Operating segment.”
nm = not meaningful
56
Item 5. Operating and Financial Review and Prospects
For the table providing the top 20 product net sales from
continuing operations in 2021 and for the table provid-
ing the net sales from continuing operations by core ther-
apeutic area and established brands for 2022 and 2021,
see “Item 18. Financial statements—Note 4. Revenues
and geographic information.”
CARDIOVASCULAR, RENAL AND METABOLIC
Net sales in the cardiovascular, renal and metabolic ther-
apeutic area were USD 4.8 billion (+34%, +40% cc), sales
growth mainly driven by Entresto.
Entresto (USD 4.6 billion, +31%, +37% cc) sustained
robust demand-led growth, with increased patient share
across all geographies. Guidelines position Entresto as
the first choice RASi versus ACEi/ARB in patients with
HFrEF. Entresto benefits from the adoption of guideline
directed medical therapy for these patients in all geog-
raphies. In the US, Entresto benefits from being added
to guidelines for patients with HFpEF (with LVEF below
normal). In China, Entresto has been listed in the National
Reimbursement Drug List (NRDL) for both HFrEF and
hypertension, effective January 2022. In China and
Japan, Entresto volume growth is fueled by increased
penetration in hypertension in addition to growth in heart
failure. It is estimated that around 10 million patients are
on treatment with Entresto.
Leqvio (USD 0.1 billion) launch in the US and other
markets is ongoing, with focus on patient on-boarding,
removing access hurdles and enhancing medical edu-
cation. Leqvio is the first and only small interfering RNA
(siRNA) therapy to lower low-density lipoprotein choles-
terol approved in the US and was launched in January
2022. In the US, Leqvio is covered at or near label for
76% of patients eleven months after launch. Leqvio in
the US has been assigned a unique Healthcare Common
Procedure Coding System code (J-code) and average
sales price. Leqvio is now approved in 70 countries.
Novartis obtained global rights to develop, manufacture
and commercialize Leqvio under a license and collabo-
ration agreement with Alnylam Pharmaceuticals.
IMMUNOLOGY
Net sales in the immunology therapeutic area reached
USD 7.3 billion (+1%, +7% cc), sales growth was mainly
driven by Cosentyx and Ilaris.
Cosentyx (USD 4.8 billion, +1%, +5% cc) sales grew
in emerging growth markets, Europe and Japan, partly
offset by decline in the US due to higher revenue deduc-
tions. In China, Cosentyx growth was fueled by increased
biologic uptake and inclusion in approximately 1,900 hos-
pital listings. Since initial approval in 2015, Cosentyx has
proven its sustained efficacy and consistent safety pro-
file across five systemic inflammatory conditions and has
treated more than 960,000 patients worldwide.
Xolair (USD 1.4 billion, –4%, +6% cc) sales grew (cc)
in emerging growth markets, Europe and Japan. Novartis
co-promotes Xolair with Genentech in the US and shares
a portion of revenue as operating income but does not
record any US sales.
Ilaris (USD 1.1 billion, +7%, +15% cc) showed contin-
ued growth across all geographies. Contributors to
growth include the adult-onset Still’s disease indication,
together with the other adult rheumatology indications
in the US and Europe, as well as strong performance for
the Periodic Fevers Syndrome indications in Japan.
NEUROSCIENCE
Net sales in the neuroscience therapeutic area were USD
3.0 billion (+37%, +42% cc), sales growth (cc) mainly
driven by Kesimpta.
Zolgensma (USD 1.4 billion, +1%, +5% cc) has been
approved in 47 countries to date. As this represents most
major markets, sales growth is now mainly driven by the
Incident patient population where we’ve seen double
digit growth in 2022. Access pathways are now in place
in 35 countries with negotiations ongoing in additional
markets.
Kesimpta (USD 1.1 billion, +194%, +200% cc) showed
strong sales growth driven by launch momentum across
all geographies. 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 80 countries with more than 36,000 patients treated.
Mayzent (USD 0.4 billion, +27%, +32% cc) sales grew
across all geographies in MS patients showing signs of
progression despite being on other treatments. Mayzent
is the first and only oral disease-modifying therapy stud-
ied and proven to delay disease progression in a broad
SPMS patient population.
Aimovig (USD 0.2 billion, +1%, +11% cc) sales grew in
Europe and emerging growth markets. Aimovig is reim-
bursed in 32 markets and has been prescribed to over
759,000 patients worldwide. Earlier this year, Aimovig
was submitted for approval in China. In October 2022,
Novartis reached an agreement in Germany by which
Aimovig is reimbursed as a 1st line prophylactic migraine
treatment based on the HER-MES trial.
ONCOLOGY
Net sales in the oncology therapeutic area were USD
11.2 billion (+6%, +12% cc), sales growth was mainly
driven by Kisqali, Pluvicto, Promacta/Revolade, Tafinlar +
Mekinist.
Promacta/Revolade (USD 2.1 billion, +4%, +9% cc)
growth was driven by the US, Europe and emerging
growth markets, partly offset by decline in Japan. Sales
growth was driven by increased use in second-line per-
sistent and chronic immune thrombocytopenia and as
first-line and/or second-line treatment for severe aplas-
tic anemia.
Tasigna (USD 1.9 billion, –7%, –1% cc) sales declined
in Europe, Japan and the US, partly offset by growth in
emerging growth markets.
Tafinlar + Mekinist (USD 1.8 billion, +5%, +11% cc)
sales grew across all geographies, driven by demand in
BRAF+ adjuvant melanoma and NSCLC indications,
while maintaining demand in the highly competitive
BRAF+ metastatic melanoma market. Tafinlar + Mekinist
remains the worldwide targeted therapy leader in BRAF+
melanoma. Following FDA approval in late June 2022,
Tafinlar + Mekinist is the first and only therapy with a
tumor-agnostic indication for adult and pediatric patients
with solid tumors that have a BRAF V600E mutation,
which drives tumor growth in more than 20 different
tumor types.
57
Item 5. Operating and Financial Review and Prospects
Jakavi (USD 1.6 billion, –2%, +9% cc) sales grew (cc)
in Europe, emerging growth markets, Japan, driven by
strong demand in both the myelofibrosis and polycythe-
mia vera indications. In May 2022, EC approved Jakavi
for the treatment of patients aged 12 years and older with
acute or chronic GvHD who have inadequate response
to corticosteroids or other systemic therapies.
Kisqali (USD 1.2 billion, +31%, +38% cc) sales grew
strongly across all geographies, based on increasing rec-
ognition of its overall survival benefits in HR+/HER2-
advanced breast cancer. It is a CDK4/6 inhibitor with
proven overall survival benefit across all three Phase III
trials of the MONALEESA program regardless of meno-
pausal status, line of therapy, site and number of metas-
tases, endocrine resistance, or endocrine partner.
Kymriah (USD 0.5 billion, –9%, –2% cc) sales declined
in the US and Europe due to lower DLBCL demand in
both geographies and was partly offset by growth in
emerging growth markets and Japan. In May 2022, EC
and FDA approved Kymriah for the treatment of adult
patients with relapsed or refractory (r/r) follicular lym-
phoma (FL) after two or more lines of systemic therapy.
Votrient (USD 0.5 billion, –18%, –13% cc) declined due
to increased competition, especially from immuno-on-
cology agents in metastatic renal cell carcinoma.
Lutathera (USD 0.5 billion, –1%, +3% cc) sales grew
(cc) in Europe and Japan, partly offset by decline in the
US. There are approximately 500 centers actively treat-
ing patients globally. In the second quarter of 2022, there
was a temporary suspension in manufacturing during the
quarter; production and deliveries of patient doses
resumed in early June 2022.
Piqray/Vijoice (USD 0.4 billion, +13%, +14% cc) sales
grew mainly in the US, benefiting from indication expan-
sion into 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,
which is associated with a worse prognosis.
Pluvicto (USD 0.3 billion) launch is progressing well,
with more than 160 active centers ordering. Pluvicto is
the first and only radioligand therapy approved by the
FDA for the treatment of progressive, PSMA-positive
metastatic castration-resistant prostate cancer, who
have already been treated with other anticancer treat-
ments (ARPI and taxane-based chemotherapy).
Adakveo (USD 0.2 billion, +18%, +19% cc) continued
to grow worldwide, reaching more than 11,800 patients
with vaso-occlusive crises caused by sickle cell disease
to date.
Scemblix (USD 0.1 billion) continued its strong launch
uptake in the US, with launches underway in EU and
Japan, demonstrating the high unmet need in CML, par-
ticularly patients previously treated with 2 or more tyro-
sine kinase inhibitors, or with the T315I mutation. In Octo-
ber 2022, US FDA converted the accelerated approval
of Scemblix to a full approval, confirming the clinical ben-
efit after longer exposure.
Tabrecta (USD 0.1 billion, +48%, +48% cc) sales grew
across all geographies, as the first therapy approved by
the FDA to specifically target metastatic NSCLC with a
mutation that leads to MET exon 14 skipping (METex14).
ESTABLISHED BRANDS
The established brands had net sales of USD 15.9 billion
(–17%, –11% cc).
Gilenya (USD 2.0 billion, –28%, –24% cc) sales
declined mainly in Europe and in the US due to generic
pressure.
Lucentis (USD 1.9 billion, –13%, –4% cc) sales declined
in Japan and Europe mainly due to competition, which
was partly offset by growth in emerging growth markets.
Sandostatin (USD 1.2 billion, –12%, –10% cc) declined
across all geographies due to ongoing competitive pres-
sure, including generic competition ex-US.
Galvus Group (USD 0.9 billion, –21%, –12% cc)
declined in Japan, Europe and Emerging Growth Mar-
kets.
Gleevec/Glivec (USD 0.7 billion, –27%, –22% cc)
declined due to increased generic competition.
Exforge Group (USD 0.7 billion, –18%, –12% cc)
declined across all geographies.
Diovan Group (USD 0.7 billion, –16%, –9% cc) declined
in emerging growth markets, Japan and Europe.
Afinitor/Votubia (USD 0.5 billion, –45%, –41% cc)
declined in the US and Europe, driven by generic com-
petition.
58
Item 5. Operating and Financial Review and Prospects
Operating income from continuing operations
(USD millions unless indicated otherwise)
Gross profit from continuing operations
Selling, general and administration
Research and development
Other income
Other expense
Operating income from continuing operations
Return on net sales (%)
Year ended
Year ended
Dec 31, 2022 Dec 31, 2021
31 879
32 239
– 12 193
– 12 827
– 9 172
– 8 641
696
1 620
– 3 264
– 2 335
7 946
10 056
18.8
23.5
Change
in USD
%
Change in
constant
currencies
% 1
– 1
5
– 6
– 57
– 40
– 21
5
0
– 10
– 55
– 49
– 12
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
Operating income from continuing operations was USD
7.9 billion (–21%, –12% cc), mainly due to higher restruc-
turing primarily related to the implementation of the pre-
viously announced streamlined organizational model,
higher impairments and lower divestment gains. Oper-
ating income margin from continuing operations was
18.8% of net sales from continuing operations, decreas-
ing by 4.7 percentage points (-3.8 percentage points cc).
Other revenues as a percentage of net sales from con-
tinuing operations increased by 0.2 percentage points
(0.0 percentage points cc). Cost of goods sold as a
percentage of net sales from continuing operations (0.1
percentage points cc) was in line with the prior year. R&D
expenses as a percentage of net sales from continuing
operations increased by 1.5 percentage points (1.0 per-
centage points cc). Selling, general and administration
(SG&A) expenses as a percentage of net sales from con-
tinuing operations decreased by 1.1 percentage points
(1.5 percentage points cc). Other income and other
expense, net as a percentage of net sales from continu-
ing operations decreased the margin by 4.5 percentage
points (4.4 percentage points cc).
Non-IFRS measure Core operating income from continuing operations 1
(USD millions unless indicated otherwise)
Core gross profit from continuing operations
Core selling, general and administration
Core research and development
Core other income
Core other expense
Core operating income from continuing operations
Core return on net sales (%)
Year ended
Year ended
Dec 31, 2022 Dec 31, 2021
35 591
36 002
– 12 143
– 12 756
– 8 267
– 8 150
291
296
– 678
– 901
14 794
14 491
35.1
33.9
Change
in USD
%
Change in
constant
currencies
%
– 1
5
– 1
– 2
25
2
5
0
– 5
8
20
10
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
The adjustments made to operating income from con-
tinuing operations to arrive at core operating income
from continuing operations amounted to USD 6.8 billion
mainly due to amortization, impairments and restructur-
ing, compared with USD 4.4 billion in the prior year. Core
adjustments increased compared with the prior year,
mainly due to higher impairments and restructuring. For
more information, see “—Non-IFRS measures as defined
by Novartis—2023, 2022 and 2021 reconciliation from
IFRS Accounting Standards results to non-IFRS core
results.”
Core operating income from continuing operations
was USD 14.8 billion (+2%, +10% cc), mainly driven by
higher gross margin, partly offset by higher R&D invest-
ments. Core operating income margin from continuing
operations was 35.1% of net sales from continuing oper-
ations, increasing 1.2 percentage points (+1.8 percent-
age points cc). Other revenues as a percentage of net
sales from continuing operations decreased by 0.2 per-
centage points (cc). Core cost of goods sold as a per-
centage of net sales from continuing operations was in
line with the prior year. Core R&D expenses as a per-
centage of net sales from continuing operations
increased by 0.1 percentage points (cc). Core SG&A
expenses as a percentage of net sales from continuing
operations decreased by 1.6 percentage points (cc).
Core other income and expense as a percentage of net
sales from continuing operations increased the margin
by 0.5 percentage points (cc).
59
Item 5. Operating and Financial Review and Prospects
Research and development
The following table provides an overview of the continuing operations reported research and development expense
and the non-IFRS measure core research and development expense1:
(USD millions unless indicated otherwise)
Research and exploratory development
Confirmatory development
Total research and development expense
Research and development as % of net sales from continuing operations
Non-IFRS measures
Core research and exploratory development1
Core confirmatory development1
Total core research and development expense
Core research and development as % of net sales from continuing operations
Year ended
Year ended
Dec 31, 2022 Dec 31, 2021
– 2 938
– 3 209
– 6 234
– 5 432
– 9 172
– 8 641
21.7
20.2
– 2 784
– 2 809
– 5 483
– 5 341
– 8 267
– 8 150
19.6
19.1
Change
in USD
%
8
– 15
– 6
1
– 3
– 1
Change in
constant
currencies
% 1
6
– 20
– 10
– 1
– 7
– 5
1 Core research and development expense exclude impairments, amortization and certain other items. For an explanation of non-IFRS measures and reconciliation tables, see
“—Non-IFRS measures as defined by Novartis.”
Research and exploratory development expense
decreased by 8% (+6% cc) to USD 2.9 billion. Confirma-
tory development expense amounted to USD 6.2 billion,
increasing by 15% (–20% cc) versus the prior year mainly
due to higher impairment charges and higher invest-
ments in development to support acquired assets.
Research and development as a percentage of net sales
from continuing operations increased by 1.5 percentage
points to 21.7% of net sales from continuing operations.
Total core research and development expense as a
percentage of net sales from continuing operations
increased by 0.5 percentage points (+0.1 percentage
points cc) to 19.6% of net sales from continuing opera-
tions, mainly driven by higher investments in acquired
assets.
Non-operating income and expense
The term “non-operating income and expense” includes all income and expense items outside operating income.
The following table provides an overview of non-operating income and expense from continuing operations:
(USD millions unless indicated otherwise)
Operating income from continuing operations
(Loss)/income from associated companies
Interest expense
Other financial income and expense
Income before taxes
Income taxes
Net income from continuing operations
Net income from discontinued operations
Net income
Basic earnings per share from continuing operations (USD)
Basic earnings per share from discontinued operations (USD)
Total basic earnings per share (USD)
Year ended
Year ended
Dec 31, 2022 Dec 31, 2021
Change
in USD
%
Change in
constant
currencies
% 1
7 946
10 056
– 21
– 12
– 11
15 337
– 800
42
– 787
– 76
7 177
24 530
– 1 128
– 1 625
6 049
22 905
906
1 113
6 955
24 018
2.77
0.42
3.19
10.22
0.49
10.71
nm
– 2
nm
– 71
31
– 74
– 19
– 71
– 73
– 15
– 70
nm
– 3
nm
– 67
21
– 70
– 11
– 67
– 69
– 9
– 66
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
nm = not meaningful
Income from associated companies
Income from associated companies was a loss of USD
11 million compared with an income of USD 15.3 billion in
the prior year. This decrease was due to the divestment
of our investment in Roche that closed in the fourth
quarter of 2021 where a gain of USD 14.6 billion was rec-
ognized.
60
Item 5. Operating and Financial Review and Prospects
Interest expense and other financial income and
expense
Interest expense amounted to USD 800 million, broadly
in line with the prior year.
Other financial income and expense amounted to an
income of USD 42 million compared with an expense of
USD 76 million in the prior year, as higher interest income
was only partly offset by financial expenses and currency
losses.
Income taxes
The tax rate was 15.7% compared with 6.6% in the prior
year period. In the prior year, the tax rate was impacted
by the Roche income from associated companies (includ-
ing the divestment gain recognized on the sale of our
investment in Roche in December 2021), the impact of
increases in uncertain tax positions and prior-year items.
For comparability, excluding these impacts, the prior year
tax rate would have been 15.4% compared with 15.7% in
the current year period. The increase was mainly the
result of a change in profit mix.
Net income from continuing operations
Net income from continuing operations was USD 6.0 bil-
lion (–74%, –70% cc), impacted by Roche income in the
prior year. Excluding the impact of Roche income, net
income from continuing operations declined 9% (cc).
Earnings per share from continuing operations
Basic earnings per share from continuing operations
were USD 2.77 compared with USD 10.22 in the prior
year, mainly due to prior year Roche income. Excluding
the impact of Roche income, basic earnings per share
from continuing operations declined 7% (cc).
Non-IFRS measure Core non-operating income and expense 1
The following table provides an overview of the non-IFRS measure core non-operating income and expense from
continuing operations:
(USD millions unless indicated otherwise)
Core operating income from continuing operations
Core (loss)/income from associated companies
Core interest expense
Core other financial income and expense
Core income before taxes from continuing operations
Core income taxes
Core net income from continuing operations
Core basic EPS from continuing operations (USD)
Year ended
Year ended
Dec 31, 2022 Dec 31, 2021
14 794
14 491
– 11
– 800
140
991
– 787
– 38
14 123
14 657
– 2 177
– 2 129
11 946
12 528
5.48
5.59
Change
in USD
%
Change in
constant
currencies
%
2
nm
– 2
nm
– 4
– 2
– 5
– 2
10
nm
– 3
nm
5
– 11
4
6
1 For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”
nm = not meaningful
Core net income from continuing operations
Core net income from continuing operations was USD
11.9 billion (–5%, +4% cc) as growth in core operating
income from continuing operations was partly offset by
the loss of Roche core income. Excluding the impact of
Roche core income, core net income from continuing
operations grew 13% (cc).
Core earnings per share from continuing
operations
Core basic earnings per share from continuing opera-
tions was USD 5.48 (–2%, +6% cc), benefiting from lower
weighted average number of shares outstanding. Exclud-
ing the impact of Roche core income, core basic earn-
ings per share from continuing operations grew 16% (cc).
Core income from associated companies
Core income from associated companies was a loss of
USD 11 million compared with an income of USD 991 mil-
lion in the prior year. This decrease was due to the divest-
ment of our investment in Roche that closed in the fourth
quarter of 2021.
Core interest expense and other financial income
and expense
Core interest expense amounted to USD 800 million,
broadly in line with the prior year.
Core other financial income and expense amounted
to an income of USD 140 million compared with an
expense of USD 38 million in the prior year as higher
interest income was only partly offset by currency losses.
Core income taxes
The core tax rate (core taxes as a percentage of core
income before tax) was 15.4%, compared with 14.5% in
the prior year. For comparability, excluding Roche Income
from associated companies (divested in December
2021), the prior year core tax rate would have been 15.4%,
in line with 15.4% in the current year.
61
Item 5. Operating and Financial Review and Prospects
Discontinued operations
Discontinued operations net sales were USD 9.4 billion
compared with USD 9.8 billion in the prior year. Operat-
ing income amounted to USD 1.3 billion, compared with
USD 1.6 billion in the prior year.
Net income from discontinued operations amounted
to USD 0.9 billion, compared to USD 1.1 billion in the prior
year.
Total Company
Total Company net income amounted to USD 7.0 billion
in 2022, compared with USD 24.0 billion in the prior year,
impacted by Roche income in the prior year (see “Item
18. Financial Statements – Note 2. Significant transac-
tions and Note 5. Associated companies”). Basic
earnings per share decreased to USD 3.19 from USD
10.71. Net cash flows from operating activities for the
total Company amounted to USD 14.2 billion, and free
cash flow amounted to USD 13.0 billion.
62
Item 5. Operating and Financial Review and Prospects
Factors affecting comparability of year-on-year results
of operations
Significant transactions in 2023,
2022 and 2021
long-term strategy to focus Novartis as a leading
medicines company, we announced and/or completed
several acquisitions and divestments during 2023, 2022
and 2021.
The comparability of the year-on-year results of our
operations for the total Company can be significantly
affected by acquisitions and divestments. As part of our
A detailed description of significant transactions in
2023, 2022 and 2021, can be found in “Item 18. Finan-
cial Statements—Note 2. Significant transactions.”
Internal control over financial reporting
The Company’s management has assessed the effec-
tiveness of internal control over financial reporting. The
Company’s independent registered public accounting
firm also issued an opinion on the effectiveness of inter-
nal control over financial reporting. Both the Company’s
management and its independent registered public
accounting firm concluded that the Company main-
tained, in all material respects, effective internal control
over financial reporting as of December 31, 2023. For
more information, see “Item 15. Controls and Proce-
dures.”
Approach to risk management
See “Item 6. Directors, Senior Management and Employ-
ees—Item 6.C Board practices—Corporate gover-
nance—Information and control systems—Risk
management” and “Item 18. Financial Statements—Note
30. Financial instruments – additional disclosures.”
Non-IFRS measures as defined by Novartis
Novartis uses certain non-IFRS Accounting Standards
metrics when measuring performance, especially when
measuring current-year results against prior periods,
including core results, constant currencies and free cash
flow. These are referred to by Novartis as non-IFRS mea-
sures.
Despite the use of these measures by management
in setting goals and measuring the Company’s perfor-
mance, these are non-IFRS measures that have no stan-
dardized meaning prescribed by IFRS Accounting Stan-
dards. As a result, such measures have limits in their
usefulness to investors.
Because of their non-standardized definitions, the
non-IFRS measures (unlike IFRS Accounting Standards
measures) may not be comparable to the calculation of
similar measures of other companies. These non-IFRS
measures are presented solely to permit investors to
more fully understand how the Company’s management
assesses underlying performance. These non-IFRS
measures are not, and should not be viewed as, a sub-
stitute for IFRS Accounting Standards measures, and
should be viewed in conjunction with the consolidated
financial statements prepared in accordance with IFRS
Accounting Standards.
As an internal measure of Company performance,
these non-IFRS measures have limitations, and the Com-
pany’s performance management process is not solely
restricted to these metrics.
63
Item 5. Operating and Financial Review and Prospects
Core results
The Company’s core results – including core operating
income, core net income and core earnings per share –
exclude fully the amortization and impairment charges
of intangible assets, excluding software, net gains and
losses on fund investments and equity securities valued
at fair value through profit and loss, impact of IAS 29
“Financial reporting in Hyperinflation Economies” to
other financial income and expense, and certain acqui-
sition- and divestment-related items. The following items
that exceed a threshold of USD 25 million are also
excluded: integration- and divestment-related income
and expenses; divestment gains and losses; restructur-
ing charges/releases and related items; legal-related
items; impairments of property, plant and equipment,
software, and financial assets, and income and expense
items that management deems exceptional and that are
or are expected to accumulate within the year to be over
a USD 25 million threshold.
Novartis believes that investor understanding of the
Company’s performance is enhanced by disclosing core
measures of performance, since core measures exclude
items that can vary significantly from year to year, they
enable better comparison of business performance
across years. For this same reason, Novartis uses these
core measures in addition to IFRS Accounting Standards
measures and other measures as important factors in
assessing the Company’s performance.
The following are examples of how these core measures
are used:
• In addition to monthly reports containing financial infor-
mation prepared under IFRS Accounting Standards,
senior management receives a monthly analysis incor-
porating these non-IFRS core measures.
• Annual budgets are prepared for both IFRS Account-
ing Standard measures and non-IFRS core measures.
As an internal measure of Company performance, the
core results measures have limitations, and the Compa-
ny’s performance management process is not solely
restricted to these metrics. A limitation of the core results
measures is that they provide a view of the Company’s
operations without including all events during a period,
such as the effects of an acquisition, divestment, or
amortization/impairments of purchased intangible
assets, impairments to property, plant and equipment
and restructurings and related items.
Constant currencies
Changes in the relative values of non-US currencies to
the US dollar can affect the Company’s financial results
and financial position. To provide additional information
that may be useful to investors, including changes in
sales volume, we present information about our net sales
and various values relating to operating and net income
that are adjusted for such foreign currency effects.
Constant currency calculations have the goal of elim-
inating two exchange rate effects so that an estimate
can be made of underlying changes in the consolidated
income statement excluding the impact of fluctuations
in exchanges rates:
• The impact of translating the income statements of
consolidated entities from their non-USD functional
currencies to USD
• The impact of exchange rate movements on the major
transactions of consolidated entities performed in cur-
rencies other than their functional currency.
We calculate constant currency measures by translating
the current year’s foreign currency values for sales and
other income statement items into USD (excluding the
IAS 29 “Financial Reporting in Hyperinflationary Econo-
mies” adjustments to the local currency income state-
ments of subsidiaries operating in hyperinflationary
economies), using the average exchange rates from the
prior year and comparing them to the prior year values
in USD.
We use these constant currency measures in evalu-
ating the Company’s performance, since they may assist
us in evaluating our ongoing performance from year to
year. However, in performing our evaluation, we also con-
sider equivalent measures of performance that are not
affected by changes in the relative value of currencies.
Growth rate calculation
For ease of understanding, Novartis uses a sign conven-
tion for its growth rates such that a reduction in operat-
ing expenses or losses compared with the prior year is
shown as a positive growth.
Free cash flow
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 prop-
erty, plant and equipment. This new definition provides
a simpler performance measure focusing on core oper-
ating activities, and also excludes items that can vary
significantly from year to year, thereby enabling better
comparison of business performance across years. The
prior year free cash flow amounts have been revised to
conform with the new free cash flow definition to aid in
comparability.
Free cash flow is a non-IFRS measure and is not
intended to be a substitute measure for net cash flows
from operating activities as determined under IFRS
Accounting Standards. Free cash flow is presented as
additional information because management believes it
is a useful supplemental indicator of the Company’s abil-
ity to operate without reliance on additional borrowing
or use of existing cash. Free cash flow is a measure of
the net cash generated that is available for investment
in strategic opportunities, returning to shareholders and
for debt repayment. Free cash flow is a non-IFRS mea-
sure, which means it should not be interpreted as a mea-
sure determined under IFRS Accounting Standards.
64
Item 5. Operating and Financial Review and Prospects
Additional information
(USD millions)
2023
2022
2021
NET DEBT
Novartis calculates net debt as current financial debts
and derivative financial instruments plus non-current
financial debt less cash and cash equivalents and mar-
ketable securities, commodities, time deposits and deriv-
ative financial instruments.
Net debt is presented as additional information
because it sets forth how management monitors net debt
or liquidity and management believes it is a useful sup-
plemental indicator of the Company’s ability to pay divi-
dends, to meet financial commitments, and to invest in
new strategic opportunities, including strengthening its
balance sheet.
For the table that shows the Company’s net debt, see
“— Item 5.B Liquidity and capital resources — Company
liquidity, financial debts and net debt.”
EBITDA
Novartis defines earnings before interest, tax, depreci-
ation and amortization (EBITDA) as operating income,
excluding depreciation of property, plant and equipment,
depreciation of right-of-use assets, amortization of intan-
gible assets, and net impairments of property, plant and
equipment, right-of-use assets and of intangible assets.
Operating income from
continuing operations
Depreciation of property,
plant and equipment
Depreciation of
right-of-use assets
Amortization of intangible
assets
9 769
7 946
10 056
916
967
1 005
259
267
279
3 960
3 760
3 665
Impairments of property,
plant and equipment, right-of-use
assets and intangible assets, net 1 3 142
1 711
648
EBITDA from continuing
operations
Operating income from
discontinued operations
Depreciation of property,
plant and equipment
Depreciation of the
right-of-use-assets
Amortization of intangible
assets
Impairments of property,
plant and equipment, right-of-use
assets and intangible assets, net 2
EBITDA from discontinued
operations 3
18 046
14 651
15 653
265
1 251
1 633
144
196
203
32
33
39
171
222
238
56
25
36
668
1 727
2 149
EBITDA
18 714
16 378
17 802
1 There were no impairments of right-of-use assets in 2021.
2 There were no impairments of right-of-use assets.
3 The EBITDA from discontinued operations for 2023 is for the period from January 1,
2023, to the October 3, 2023, Distribution date.
ENTERPRISE VALUE
Enterprise value represents the total amount that share-
holders and debt holders have invested in Novartis, less
the Company’s liquidity.
(USD millions)
Dec 31, 2023 Dec 31, 2022 Dec 31, 2021
Market capitalization
206 264
191 530
196 107
Non-controlling interests
83
81
167
Non-current financial debts
18 436
20 244
22 902
Current financial debts and
derivative financial instruments
Marketable securities,
commodities, time deposits
and derivative financial
instruments
6 175
5 931
6 295
– 1 035
– 11 413
– 15 922
Cash and cash equivalents
– 13 393
– 7 517
– 12 407
Enterprise value
216 530
198 856
197 142
65
Item 5. Operating and Financial Review and Prospects
Reconciliation from IFRS Accounting Standards results to non-IFRS measure core results
The following tables provide an overview of the reconciliation from IFRS Accounting Standards results to non-IFRS
measure core results:
2023, 2022 and 2021 reconciliation from IFRS Accounting Standards results to non-IFRS measure core
results – Total Company
(USD millions unless indicated otherwise)
IFRS Accounting Standards operating income from continuing operations
Amortization of intangible assets
Impairments
Intangible assets
Property, plant and equipment related to the company-wide
rationalization of manufacturing sites
Other property, plant and equipment
Total impairment charges
Acquisition or divestment of businesses and related items
- Income
- Expense
Total acquisition or divestment of businesses and related items, net
Other items
Divestment gains
Financial assets – fair value adjustments
Restructuring and related items
- Income
- Expense
Legal-related items
- Income
- Expense
Additional income
Additional expense
Total other items
Total adjustments
Core operating income from continuing operations
as % of net sales
(Loss)/income from associated companies
Core adjustments to income from associated companies, net of tax
Interest expense
Other financial income and expense
Core adjustments to other financial income and expense
Income taxes, adjusted for above items (core income taxes)
Core net income from continuing operations
Core net income from discontinued operations 2
Core net income
Core net income attributable to shareholders of Novartis AG
Core basic EPS from continuing operations (USD) 1
Core basic EPS from discontinued operations (USD) 1, 2
Core basic EPS (USD) 1
2023
9 769
3 730
2022
2021
7 946
10 056
3 585
3 528
3 044
1 293
5
39
286
85
3 088
1 664
– 174
149
– 25
– 4
8
4
360
219
40
619
– 66
107
41
– 225
– 166
105
260
– 724
– 38
– 229
1 180
– 34
1 856
– 38
865
– 608
66
– 51
364
– 602
– 698
123
– 190
6 603
64
1 595
6 848
170
– 277
289
247
4 435
16 372
14 794
14 491
36.0%
35.1%
33.9%
– 13
– 11
15 337
– 14 346
– 855
– 800
– 787
222
208
42
98
– 76
38
– 2 488
– 2 177
– 2 129
13 446
11 946
12 528
889
1 406
1 566
14 335
13 352
14 094
14 331
13 352
14 097
6.47
0.43
6.90
5.48
0.64
6.12
5.59
0.70
6.29
1 Core earnings per share (EPS) is calculated by dividing core net income attributable to shareholders of Novartis AG by the weighted average number of shares used in the basic
EPS calculation outstanding in a reporting period.
2 For details on discontinued operations reconciliation from IFRS Accounting Standards net income to core net income, refer to page 70.
66
Item 5. Operating and Financial Review and Prospects
2023, 2022 and 2021 reconciliation from IFRS Accounting Standards results to non-IFRS measure core
results – Total Company
2023 (USD millions unless indicated otherwise)
Gross profit from continuing operations
Operating income from continuing operations
Income before taxes from continuing operations
Income taxes 5
Net income from continuing operations
Net income from discontinued operations 6
Net income
Basic EPS from continuing operations (USD) 7
Basic EPS from discontinued operations (USD) 7
Basic EPS (USD) 7
IFRS
Accounting Amortization
of intangible
Standards
assets 1
results
Acquisition or
divestment of
businesses and
related items 3
Impairments 2
3 319
3 730
3 730
310
3 088
3 088
– 25
– 25
34 188
9 769
9 123
– 551
8 572
6 282
14 854
4.13
3.02
7.15
Other
items 4 Core results
142
37 959
– 190
16 372
18
15 934
– 2 488
13 446
889
14 335
6.47
0.43
6.90
The following are adjustments to arrive at core gross profit from continuing operations
Cost of goods sold
– 12 472
3 319
310
142
– 8 701
The following are adjustments to arrive at core operating income from continuing operations
Selling, general and administration
Research and development
Other income
Other expense
– 12 517
– 11 371
1 772
– 2 303
28
– 12 489
411
2 737
32
– 409
– 8 600
– 10
51
– 174
– 1 196
117
1 245
392
– 890
The following are adjustments to arrive at core income before taxes from continuing operations
Other financial income and expense
222
208
430
1 Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets;
research and development includes the amortization of acquired rights to technologies
2 Impairments: cost of goods sold, research and development, other income and other expense include net impairment charges related to intangible assets; other income and other
expense includes also net impairment charges related to property, plant and equipment
3 Acquisition or divestment of businesses and related items, including restructuring and integration charges: research and development include restructuring and integration cost
charges; other income includes a favorable stamp duties tax settlement related to a prior periods acquisition; other income and other expense include also transitional service-fee
income and expenses related to the Sandoz distribution, restructuring and integration costs charges and reversals
4 Other items: cost of goods sold, selling, general and administration, research and development, other income and other expense include restructuring income and charges related
to the initiative to implement a new streamlined organizational model, the company-wide rationalization of manufacturing sites and other net restructuring charges and related
items; cost of goods sold and research and development also include contingent consideration adjustments; cost of goods sold and selling, general and administration includes
also adjustments to provisions; research and development also include a write-off of prepaid expenses for a terminated development project; other income and other expense
include fair value adjustments, divestment gains, losses and gains on financial assets, legal related items, adjustments to environmental provisions; other income includes also
gains from the divestment of products and curtailment gains; other expenses also includes a fair value adjustment on a contingent receivable and other costs and items; other
financial income and expense includes the impact of IAS 29 “Financial reporting in Hyperinflation Economies” for subsidiaries operating in hyperinflation economies and foreign
exchange losses
5 Taxes on the adjustments between IFRS Accounting Standards and core results, for each item included in the adjustment, take into account the tax rate that will finally be
applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and
acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising
from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the
differing effective tax rates in the various jurisdictions, the tax on the total adjustments of USD 6.8 billion to arrive at the core results before tax amounts to USD 1.9 billion and the
average tax rate on the adjustments was 28.4%.
6 For details on discontinued operations reconciliation from IFRS Accounting Standards net ncome to core net income refer to page 70.
7 Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.
67
Item 5. Operating and Financial Review and Prospects
2022 (USD millions unless indicated otherwise)
Gross profit from continuing operations
Operating income from continuing operations
Income before taxes from continuing operations
Income taxes from continuing operations 5
Net income from continuing operations
Net income from discontinued operations 6
Net income
Basic EPS from continuing operations (USD) 7
Basic EPS from discontinued operations (USD) 7
Basic EPS (USD) 7
IFRS
Accounting Amortization
Standards of intangible
assets 1
results
Acquisition or
divestment of
businesses and
related items 3
Impairments 2
3 427
3 585
3 585
314
1 664
1 664
31 879
7 946
7 177
– 1 128
6 049
906
6 955
2.77
0.42
3.19
Other
items 4 Core results
– 29
35 591
4
4
1 595
14 794
1 693
14 123
– 2 177
11 946
1 406
13 352
5.48
0.64
6.12
The following are adjustments to arrive at core gross profit from continuing operations
Other revenues
Cost of goods sold
1 255
– 11 582
3 427
314
– 86
1 169
57
– 7 784
The following are adjustments to arrive at core operating income
Selling, general and administration
– 12 193
Research and development
– 9 172
158
Other income
Other expense
696
– 3 264
953
– 1
398
50
– 12 143
– 206
– 8 267
– 4
8
– 400
2 180
291
– 678
The following are adjustments to arrive at core income before taxes from continuing operations
Other financial income and expense
42
98
140
1 Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets;
research and development includes the amortization of acquired rights for technologies
2 Impairments: cost of goods sold, research and development and other expense include impairment charges related to intangible assets; other income and other expense include
net impairment charges related to property, plant and equipment
3 Acquisition or divestment of businesses and related items, including restructuring and integration charges: other income and other expense include transitional service fee income
and charges related to divestments; other income also includes adjustments to provisions; other expense includes stamp duties related to an acquisition
4 Other items: other revenues includes a net income from an outlicensing agreement; cost of goods sold, selling, general and administration, research and development, other
income and other expense include restructuring income and charges related to the restructuring initiative to implement a new streamlined organizational model, the company-wide
rationalization of manufacturing sites and other net restructuring charges and related items; cost of goods sold, selling, general and administration, research and development and
other expense include adjustments to provisions and related items; cost of goods sold and research and development also include contingent consideration adjustments; other
income and other expense include fair value adjustments and divestment gains and losses on financial assets and legal-related items; other income also includes gains from the
divestment of products and property, curtailment gains and an adjustment to an environmental provision; other expense includes a reversal of an accrual and other costs and items;
other financial income and expense includes the impact of IAS 29 “Financial reporting in Hyperinflation Economies” for subsidiaries operating in hyperinflation economies and a
revaluation impact of a financial liability incurred through the Alcon distribution
5 Taxes on the adjustments between IFRS Accounting Standards and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be
applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and
acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising
from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the
differing effective tax rates in the various jurisdictions, the tax on the total adjustments of USD 6.9 billion to arrive at the core results before tax amounts to USD 1.0 billion and the
average tax rate on the adjustments was 15.1%.
6 For details on discontinued operations reconciliation from IFRS Accounting Standards net income to core net income please refer to page 71.
7 Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.
68
Item 5. Operating and Financial Review and Prospects
2021 (USD millions unless indicated otherwise)
Gross profit from continuing operations
Operating income from continuing operations
Income before taxes from continuing operations
Income taxes from continuing operations 5
Net income from continuing operations
Net income from discontinued operations 6
Net income
Basic EPS from continuing operations (USD) 7
Basic EPS from discontinued operations (USD) 7
Basic EPS (USD) 7
IFRS
Accounting Amortization
Standards of intangible
assets 1
results
Acquisition or
divestment of
businesses and
related items 3
Impairments 2
Other
items 4 Core results
32 239
10 056
24 530
– 1 625
22 905
1 113
24 018
10.22
0.49
10.71
3 419
3 528
3 738
619
41
619
– 14 531
344
247
301
36 002
14 491
14 657
– 2 129
12 528
1 566
14 094
5.59
0.70
6.29
The following are adjustments to arrive at core gross profit from continuing operations
Cost of goods sold
– 11 735
3 419
344
– 7 972
The following are adjustments to arrive at core operating income from continuing operations
Selling, general and administration
Research and development
Other income
Other expense
– 12 827
– 8 641
1 620
– 2 335
109
360
– 45
304
71
22
– 12 756
– 8 150
– 66
107
– 1 213
1 023
296
– 901
The following are adjustments to arrive at core income before taxes from continuing operations
Income from associated companies
Other financial income and expense
15 337
210
– 14 556
– 76
– 16
54
991
– 38
1 Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets;
research and development includes the amortization of acquired rights for technologies; income from associated companies includes USD 210 million for the Novartis share of the
estimated Roche core items
2 Impairments: cost of goods sold, and research and development include impairment charges related to intangible assets; other income and other expense include reversals of
impairment charges and impairment charges related to property, plant and equipment
3 Acquisition or divestment of businesses and related items, including restructuring and integration charges: other income includes adjustments to portfolio transformation and Alcon
spin-off accruals; other income and other expense include transitional service-fee income and expenses related to the Alcon distribution; other expense also includes adjustments
to provisions; income from associated companies includes the gain related to the divestment of our investment in Roche; other financial income and expense includes other
financial gains related to the divestment of our investment in Roche
4 Other items: cost of goods sold, research and development, other income and other expense include net restructuring and other charges related to the company-wide
rationalization of manufacturing sites; cost of goods sold, selling, general and administration, other income and other expense include other restructuring income and charges and
related items; cost of goods sold, research and development, other income and other expense also include adjustments to contingent considerations; selling, general and
administration, research and development, other income and other expense include adjustments to provisions; other income and other expense also include gains and losses from
the divestment of products and financial assets and fair value adjustments on financial assets, adjustments to environmental provisions and legal-related items; other financial
income and expense includes the impact of IAS 29 “Financial reporting in Hyperinflation Economies” for subsidiaries operating in hyperinflation economies and a revaluation
impact of a financial liability incurred through the Alcon distribution
5 Taxes on the adjustments between IFRS Accounting Standards and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be
applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and
acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising
from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the
differing effective tax rates in the various jurisdictions, the tax on the total adjustments of USD 9.9 billion to arrive at the core results before tax amounts to USD 504 million.
Excluding the gain on the divestment of our investment in Roche, the tax on the total adjustments of USD 4.5 billion to arrive at the core results before tax amounts to USD 504
million and the average tax rate on the adjustments was 11.3%.
6 For details on discontinued operations reconciliation from IFRS Accounting Standards net income to core net income please refer to page 72.
7 Earnings per share (EPS) is calculated on the amount of net income, attributable to shareholders of Novartis AG.
69
Item 5. Operating and Financial Review and Prospects
2023, 2022 and 2021 reconciliation from IFRS Accounting Standards results to non-IFRS measure core
results – Discontinued operations
2023 (USD millions unless indicated otherwise)
Gross profit from discontinued operations
Operating income from discontinued operations
Income before taxes from discontinued operations
Income taxes 4
Net income from discontinued operations before
gain on distribution of Sandoz Group AG to
Novartis AG shareholders
Gain on distribution of Sandoz Group AG to
Novartis AG shareholders
Net income from discontinued operations
Basic EPS from discontinued operations (USD) 5
IFRS
Accounting Amortization
of intangible
Standards
assets 1
results
Acquisition or
divestment of
businesses and
related items
Impairments 2
Other
items 3 Core results
3 403
265
214
208
422
5 860
6 282
3.02
165
165
165
34
43
43
57
712
718
– 5 860
3 659
1 185
1 140
– 251
889
889
0.43
The following are adjustments to arrive at core gross profit from discontinued operations
Cost of goods sold
– 4 044
165
34
57
– 3 788
The following are adjustments to arrive at core operating income from discontinued operations
Selling, general and administration
Research and development
Other income
Other expense
– 1 728
– 671
56
– 795
10
– 1
25
– 1 703
– 24
654
– 661
31
– 141
The following are adjustments to arrive at core income before taxes from discontinued operations
Other financial income and expense
– 20
6
– 14
1 Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets
2 Impairments: cost of goods sold and research and development include impairment charges related to intangible assets; other income includes a reversal of impairment charges
related to property, plant and equipment
3 Other items: cost of goods sold, selling, general and administration, other income and other expense include charges related to the Sandoz distribution, the company-wide
rationalization of manufacturing sites and other net restructuring charges and related items; cost of goods sold and selling, general and administration also include adjustments to
provisions; other expense includes legal-related items; other financial income and expense includes the impact of IAS 29 “Financial reporting in Hyperinflation Economies” for
subsidiaries operating in hyperinflation economies
4 Taxes on the adjustments between IFRS Accounting Standards and core results, for each item included in the adjustment, take into account the tax rate that will finally be
applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and
acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising
from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the
differing effective tax rates in the various jurisdictions, the tax on the total adjustments of USD 926 million to arrive at the core results before tax amounts to USD 459 million and
the average tax rate on the adjustments was 49.5%.
5 Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.
70
Item 5. Operating and Financial Review and Prospects
2022 (USD millions unless indicated otherwise)
Gross profit from discontinued operations
Operating income from discontinued operations
Income before taxes from discontinued operations
Income taxes from discontinued operations 4
Net income from discontinued operations
Basic EPS from discontinued operations (USD) 5
IFRS
Accounting Amortization
Standards of intangible
assets 1
results
Acquisition or
divestment of
businesses and
related items
Impairments 2
Other
items 3 Core results
221
221
221
24
23
23
4 463
1 251
1 194
– 288
906
0.42
93
376
399
4 801
1 871
1 837
– 431
1 406
0.64
The following are adjustments to arrive at core gross profit from discontinued operations
Cost of goods sold
– 4 937
221
24
93
– 4 599
The following are adjustments to arrive at core operating loss from discontinued operations
Selling, general and administration
Research and development
Other income
Other expense
– 2 060
– 824
109
– 437
1
– 2
13
2
– 14
282
– 2 047
– 821
93
– 155
The following are adjustments to arrive at core income before taxes from discontinued operations
Other financial income and expense
– 22
23
1
1 Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets
2 Impairments: cost of goods sold and research and development include impairment charges related to intangible assets; other income includes a reversal of an impairment charge
related to property, plant and equipment
3 Other items: cost of goods sold, selling, general and administration, research and development, other income and other expense include charges related to the Sandoz strategic
review, the company-wide rationalization of manufacturing sites and other net restructuring charges and related items; other expense also includes legal-related items; cost of
goods sold and selling, general and administration include adjustments to provisions and related items
4 Taxes on the adjustments between IFRS Accounting Standards and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be
applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and
acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising
from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the
differing effective tax rates in the various jurisdictions, the tax on the total adjustments of USD 643 million to arrive at the core results before tax amounts to USD 143 million and
the average tax rate on the adjustments was 22.2%.
5 Earnings per share (EPS) is calculated on the amount of net income, attributable to shareholders of Novartis AG.
71
Item 5. Operating and Financial Review and Prospects
2021 (USD millions unless indicated otherwise)
Gross profit from discontinued operations
Operating income from discontinued operations
Income before taxes from discontinued operations
Income taxes from discontinued operations 4
Net income from discontinued operations
Basic EPS from discontinued operations (USD) 5
IFRS
Accounting Amortization
Standards of intangible
assets 1
results
Acquisition or
divestment of
businesses and
related items
Impairments 2
Other
items 3 Core results
236
236
236
18
34
34
4 771
1 633
1 607
– 494
1 113
0.49
70
194
195
5 095
2 097
2 072
– 506
1 566
0.70
The following are adjustments to arrive at core gross profit from discontinued operations
Cost of goods sold
– 5 121
236
18
70
– 4 797
The following are adjustments to arrive at core operating loss from discontinued operations
Research and development
Other income
Other expense
– 899
232
– 412
9
– 55
62
– 1
– 52
177
– 891
125
– 173
The following are adjustments to arrive at core income before taxes from discontinued operations
Other financial income and expense
– 4
1
– 3
1 Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production related intangible assets
2 Impairments: cost of goods sold and research and development include impairment charges related to intangible assets; other income and other expense include reversals of
impairment charges and impairment charges related to property, plant and equipment
3 Other items: cost of goods sold, other income and other expense include net restructuring charges related to the company-wide rationalization of manufacturing sites and other
restructuring income and charges and related items; research and development includes adjustments to provisions; other income includes net gains from the divestment of a
product; other income and other expense include legal related items
4 Taxes on the adjustments between IFRS Accounting Standards and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be
applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and
acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising
from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the
differing effective tax rates in the various jurisdictions, the tax on the total adjustments of USD 465 million to arrive at the core results before tax amounts to USD 12 million and the
average tax rate on the adjustments was 2.6%.
5 Earnings per share (EPS) is calculated on the amount of net income, attributable to shareholders of Novartis AG.
72
Item 5. Operating and Financial Review and Prospects
Reconciliation of 2021 IFRS Accounting Standards results and non-IFRS measures core results and free
cash flow to exclude the impacts of the 2021 divestment of our Roche investment
To enhance investor understanding of the Company’s performance in comparison with the prior year, we presented
the 2021 IFRS Accounting Standards results and non-IFRS measures core results and free cash flow excluding the
impacts related to our Roche investment, due to its divestment in the fourth quarter of 2021.
The following tables provide a reconciliation of our 2021 published IFRS Accounting Standards results and the non-
IFRS measures core results and free cash flow to the 2021 results, excluding the impacts related to our Roche
investment, due to its divestment. The table also provides a comparison of our 2022 IFRS Accounting Standards
results and non-IFRS measures core results and free cash flow from continuing operations as published with the
non-IFRS measure 2021 results excluding impacts from the divestment of our Roche investment.
2021
2022
(USD millions unless indicated otherwise)
Operating income from continuing operations
Income from associated companies
Interest expense
Other financial income and expense
Income taxes
10 056
15 337
– 787
– 76
– 1 625
Our Roche
investment
impacts
excluding
Results as the divestment
gain
published 1
Gain on
divestment
of our
Results
excluding
impacts
from the
divestment
investment of our Roche
investment
in Roche
Results as
published
Change
in USD
%
Change in
constant
currencies
%
10 056
7 946
– 21
– 12
– 785
– 14 556
– 16
– 4
– 787
– 92
– 11
– 800
42
– 1 625
– 1 128
nm
– 2
nm
31
Net income from continuing operations
22 905
– 785
– 14 572
7 548
6 049
– 20
Basic earnings per share (USD)
from continuing operations
10.22
– 0.35
– 6.50
3.37
2.77
– 18
Effective tax rate 2
6.6%
17.7%
15.7%
Non-IFRS measures
Core operating income from continuing operations 14 491
Core income from associated companies
991
– 995
Core interest expense
Core other financial income and expense
Core income taxes
– 787
– 38
– 2 129
Core net income from continuing operations
12 528
– 995
Core basic earnings per share (USD)
from continuing operations
5.59
– 0.45
Core effective tax rate 3
14.5%
14 491
14 794
– 4
– 787
– 38
– 11
– 800
140
– 2 129
– 2 177
11 533
11 946
5.14
5.48
15.6%
15.4%
2
nm
– 2
nm
– 2
4
7
nm
– 3
nm
– 9
– 7
10
nm
– 3
nm
– 11
13
16
Free cash flow from continuing operations 4,5
12 299
– 522
11 777
12 123
3
1 For information on continuing operations and discontinued operations, refer to the Overview section above in this Item 5 and “Item 18. Financial Statements – Note 1. Accounting
policies “, “Item 18. Financial Statements – Note 2. Significant transactions – Significant transactions in 2023,” and “Item 18. Financial Statements – Note 31. Discontinued
operations.”
2 Effective tax rate is calculated as Income taxes divided by Income before tax.
3 Core effective tax rate is calculated as Core income taxes divided by Core income before tax.
4 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 “-Non-IFRS measures as defined
by Novartis.”
5 The free cash flow impact represents the dividend received in Q1 2021 from Roche in relation to the distribution of its 2020 net income.
73
Item 5. Operating and Financial Review and Prospects
2021
(USD millions)
Operating income from continuing operations
Adjustments for non-cash items
Operating income adjusted for non-cash items from continuing operations
Dividends
received from
Roche in
Free cash
relation to flow excluding
dividends
received
from Roche
the distribution
of its 2020
net income 2
Free cash flow
as published 1
10 056
6 419
16 475
10 056
6 419
16 475
Dividends received from associated companies and others
523
– 522
1
Interest and other financial payments, net
Income taxes paid
Other operating cash flow items, net
Net cash flows from operating activities from continuing operations
Purchases of property, plant and equipment
Free cash flow from continuing operations
– 929
– 1 856
– 848
– 929
– 1 856
– 848
13 365
– 522
12 843
– 1 066
– 1 066
12 299
– 522
11 777
1 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 “-Non-IFRS measures as defined
by Novartis.”
2 In 2021, the dividend received from Roche in relation to the distribution of its 2020 net income was received in Q1 2021.
The following table provides a summary of the percentage point impact from excluding the effect of the divestment
of our investment in Roche (in the fourth quarter of 2021) on the USD and constant currencies % change on key
Company figures:
In USD
In constant currencies
Percentage
point
impact
2022
– 61
– 62
– 9
– 10
% change
excluding
impacts
from the
divestment
% change of our Roche
investment
2022
as published
2022
% change
excluding
impacts
from the
divestment
% change of our Roche
investment
2022
Percentage
point
impact as published
2022
2022
Net income from continuing operations
Basic earnings per share (USD) from continuing operations
Free cash flow from continuing operations
Core net income from continuing operations
Core basic earnings per share (USD) from continuing operations
– 74
– 73
– 1
– 5
– 2
– 20
– 18
3
4
7
– 54
– 55
– 4
– 9
– 9
– 70
– 69
4
6
– 9
– 7
13
16
74
Item 5. Operating and Financial Review and Prospects
5.B Liquidity and capital resources
The following tables summarize the Company’s cash flows and net debt:
(USD millions)
Net cash flows from operating activities from continuing operations
Net cash flows from operating activities from discontinued operations
Net cash flows from investing activities from continuing operations
Net cash flows used in investing activities from discontinued operations
Net cash flows used in financing activities from continuing operations
Net cash flows from financing activities from discontinued operations
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
2023
2022
2021
14 220
13 039
13 365
238
6 719
– 1 123
1 197
1 904
– 436
1 706
4 897
– 689
– 17 564
– 20 681
– 16 290
3 286
100
119
– 32
5 876
– 4 890
26
– 266
2 749
Change in marketable securities, commodities, time deposits and derivative financial instruments
– 10 378
– 4 509
14 017
Change in current and non-current financial debts and derivative financial instruments
1 564
3 022
6 847
Change in net debt
Net debt at January 1
Net debt at December 31
Cash flow
– 2 938
– 6 377
23 613
– 7 245
– 868
– 24 481
– 10 183
– 7 245
– 868
Financial year 2023 compared with 2022
Net cash flows from operating activities from continuing
operations amounted to USD 14.2 billion, compared with
USD 13.0 billion in 2022. This increase was mainly driven
by higher net income from continuing operations adjusted
for non-cash items and other adjustments, including
divestment gains, which were partly offset by higher
income taxes paid, mainly due to the timing of payments.
Net cash flows from operating activities from discon-
tinued operations amounted to USD 0.2 billion, com-
pared with USD 1.2 billion in 2022. This decrease was
mainly driven by lower net income from discontinued
operations adjusted for non-cash items and other adjust-
ments, including divestment gains and the Distribution
(spin-off) of the Sandoz business on October 3, 2023.
Net cash inflows from investing activities from con-
tinuing operations amounted to USD 6.7 billion, com-
pared with USD 1.9 billion in 2022.
The current year net cash inflows from investing
activities from continuing operations were driven by net
proceeds of USD 10.6 billion from the sale of marketable
securities, commodities and time deposits; USD 2.0 bil-
lion 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); USD
0.3 billion from the sale of financial assets; and USD 0.2
billion from the sale of property, plant and equipment
(including proceeds from the sale and leaseback of real
estate). These cash inflows were partly offset by cash
outflows of USD 3.6 billion for acquisitions and divest-
ments 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 1.7 billion for purchases of intangible
assets; USD 1.1 billion for purchases of property, plant
and equipment; and USD 0.1 billion for purchases of
financial assets.
In 2022, net cash inflows from investing activities
from continuing operations of USD 1.9 billion were mainly
driven by net proceeds of USD 4.7 billion from the sale
of marketable securities, commodities and time depos-
its; and USD 0.5 billion from the sale of intangible assets,
financial assets and property, plant and equipment.
These cash inflows were partly offset by cash outflows
of USD 1.3 billion for purchases of intangible assets; USD
0.9 billion for purchases of property, plant and equip-
ment; USD 0.1 billion for purchases of financial assets;
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 1.1 billion,
compared with USD 0.4 billion in 2022. The current year
mainly includes the cash outflow of USD 0.7 billion due
to the derecognition of cash and cash equivalents of the
Sandoz business following the Distribution (spin-off) on
October 3, 2023.
Net cash outflows used in financing activities from
continuing operations amounted to USD 17.6 billion, com-
pared with USD 20.7 billion in 2022.
The current year net cash outflows used in financing
activities from continuing operations were mainly driven
by USD 8.6 billion for net treasury share transactions;
USD 7.3 billion for the dividend payment; USD 2.2 billion
for the repayment of two EUR denominated bonds
(notional amounts of EUR 1.25 billion and of EUR 0.75
billion) at maturity. Payments of lease liabilities amounted
to USD 0.3 billion. These cash outflows were partly off-
set by cash inflows of USD 0.5 billion from the net
increase in current financial debts.
In 2022, net cash outflows used in financing activi-
ties from continuing operations of USD 20.7 billion were
75
Item 5. Operating and Financial Review and Prospects
mainly driven by USD 10.6 billion for net treasury share
transactions; USD 7.5 billion for the dividend payment;
USD 2.5 billion in aggregate for the repayment of two US
dollar bonds; and USD 0.3 billion payments of lease lia-
bilities. These cash outflows were partly offset by cash
inflows of USD 0.3 billion from the net increase in cur-
rent financial debts.
The current year net cash inflows from financing
activities from discontinued operations of USD 3.3 bil-
lion were mainly driven by USD 3.6 billion cash inflows
from bank borrowings (including the USD 3.3 billion
Sandoz business borrowings from a group of banks on
September 28, 2023) in connection with the Distribution
(spin-off) of the Sandoz business to Novartis AG share-
holders, partly offset by transaction cost payments of
USD 0.2 billion. Net cash inflows from financing activi-
ties from discontinued operations in 2022 were USD 119
million.
Financial year 2022 compared with 2021
Net cash flows from operating activities from continuing
operations amounted to USD 13.0 billion, compared with
USD 13.4 billion in 2021. This decrease was mainly due
to unfavorable changes in working capital and lower div-
idends from associated companies (2021 included the
USD 0.5 billion dividends received from our investment
in Roche, which was divested in the fourth quarter of
2021), partly offset by lower income taxes paid, higher
interest received and favorable hedging results.
Net cash flows from operating activities from discon-
tinued operations amounted to USD 1.2 billion, compared
with USD 1.7 billion in 2021. This decrease was mainly
driven by lower net income from discontinued operations
adjusted for non-cash items and other adjustments,
including divestment gains and unfavorable changes in
working capital, which were partly offset by lower income
taxes paid and lower payments out of provisions.
Net cash inflows from investing activities from con-
tinuing operations amounted to USD 1.9 billion, compared
with USD 4.9 billion in 2021.
In 2022, net cash inflows from investing activities
from continuing operations were mainly driven by net
proceeds of USD 4.7 billion from the sale of marketable
securities, commodities and time deposits; and USD 0.5
billion from the sale of intangible assets, financial assets
and property, plant and equipment. These cash inflows
were partly offset by cash outflows of USD 1.3 billion for
purchases of intangible assets; USD 0.9 billion for pur-
chases of property, plant and equipment; USD 0.1 billion
for purchases of financial assets; and USD 0.8 billion for
acquisitions and divestments of businesses, net (primar-
ily the acquisition of Gyroscope Therapeutics Holdings
plc for USD 0.8 billion).
In 2021, net cash inflows from investing activities from
continuing operations of USD 4.9 billion were mainly
driven by proceeds of USD 20.7 billion from the divest-
ment of our investment in Roche; USD 2.3 billion from
the sale of marketable securities, commodities and time
deposits; and USD 1.3 billion from the sale of intangible
assets, financial assets and property, plant and equip-
ment. These cash inflows were partly offset by USD 16.4
billion cash outflows for purchases of marketable secu-
rities and time deposits, mainly due to the investment of
a portion of the proceeds from the divestment of our
investment in Roche; USD 1.5 billion for purchases of
intangible assets (including the upfront payment to in-li-
cense tislelizumab from an affiliate of BeiGene, Ltd); USD
1.1 billion for purchases of property, plant and equipment;
USD 0.2 billion for acquisitions and divestments of busi-
nesses, net; and USD 0.2 billion for purchases of finan-
cial assets.
Net cash outflows used in investing activities from
discontinued operations amounted to USD 0.4 billion,
compared with USD 0.7 billion in 2021. The 2021 amount
includes the acquisition of GSK’s cephalosporin antibi-
otics business for USD 351 million.
Net cash outflows used in financing activities from
continuing operations amounted to USD 20.7 billion,
compared with USD 16.3 billion in 2021.
In 2022, net cash outflows used in financing activi-
ties from continuing operations were mainly driven by
USD 10.6 billion for net treasury share transactions; USD
7.5 billion for the dividend payment; USD 2.5 billion in
aggregate for the repayment of two US dollar bonds; and
USD 0.3 billion payments of lease liabilities. These cash
outflows were partly offset by cash inflows of USD 0.3
billion from the net increase in current financial debts.
In 2021, net cash outflows used in financing activities
from continuing operations of USD 16.3 billion were
driven by USD 7.4 billion for the dividend payment; USD
3.0 billion for net treasury share transactions; USD 3.5
billion net decrease in current financial debts; and USD
2.2 billion for the repayment of two EUR denominated
bonds (notional amount of EUR 1.25 billion and of EUR
0.6 billion) at maturity. Payments of lease liabilities and
other financing cash flows resulted in a net cash outflow
of USD 0.2 billion.
Net cash inflows from financing activities from dis-
continued operations amounted to USD 119 million, com-
pared with USD 26 million in 2021.
76
Item 5. Operating and Financial Review and Prospects
Free cash flow
Free cash flow is a non-IFRS measure, see “—Item 5.A Operating results—Non-IFRS measures as defined by
Novartis—Free cash flow” for further information.
The following table is a reconciliation of the three major categories of the IFRS Accounting Standards consolidated
statements of cash flows to the non-IFRS measure free cash flow:
2023
2022
2021
IFRS
Accounting
Standards
cash flow Adjustments
IFRS
Accounting
Standards
cash flow Adjustments 1
Free
cash flow
IFRS
Revised Accounting
Standards
cash flow Adjustments 1
Free
cash flow 1
Revised
Free
cash flow 1
14 220
14 220
13 039
13 039
13 365
13 365
238
238
1 197
1 197
1 706
1 706
14 458
14 458
14 236
14 236
15 071
15 071
6 719
– 7 779
– 1 060
1 904
– 2 820
– 916
4 897
– 5 963
– 1 066
– 1 123
904
– 219
– 436
154
– 282
– 689
377
– 312
5 596
– 6 875
– 1 279
1 468
– 2 666
– 1 198
4 208
– 5 586
– 1 378
(USD millions)
Net cash flows from operating
activities from
continuing operations
Net cash flows from operating
activities from
discontinued operations
Total net cash flows from
operating activities
Net cash flows from/(used in)
investing activities from
continuing operations
Net cash flows used in investing
activities from
discontinued operations
Total net cash flows from/(used in)
investing activities 2
Net cash flows used in financing
activities from
continuing operations
– 17 564
17 564
0 – 20 681
20 681
0 – 16 290
16 290
Net cash flows from financing activities
from discontinued operations
3 286
– 3 286
0
119
– 119
0
26
– 26
Total net cash flows used in
financing activities 3
Non-IFRS measure free cash
flow from continuing operations 1
Non-IFRS measure free cash flow
from discontinued operations 1
Total non-IFRS measure
free cash flow 1
– 14 278
14 278
0 – 20 562
20 562
0 – 16 264
16 264
13 160
19
13 179
12 123
915
13 038
0
0
0
12 299
1 394
13 693
1 To aid in comparability, the prior year adjustments and free cash flow amounts have been revised to conform with the new free cash flow definition that was effective as of January
1, 2023.
2 With the exception of purchases of property, plant and equipment, all net cash flows from/(used in) investing activities from continuing operations and from discontinued operations
are excluded from the free cash flow.
3 Net cash flows (used in)/from financing activities from continuing operations and from discontinued operations are excluded from the free cash flow.
77
Item 5. Operating and Financial Review and Prospects
The following table is a summary of the non-IFRS measure free cash flow:
(USD millions)
Operating income from continuing operations
Reversal of non-cash items and other adjustments
Depreciation, amortization and impairments
Change in provisions and other non-current liabilities
Other
Operating income from continuing operations adjusted for non-cash items
Dividends received from associated companies and others
Interest received and other financial receipts
Interest paid and other financial payments
Income taxes paid
Payments out of provisions and other net cash movements in non-current liabilities
Change in inventories and trade receivables less trade payables
Change in other net current assets and other operating cash flow items
Net cash flows from operating activities
from continuing operations
Purchases of property, plant and equipment
Non-IFRS measure free cash flow from continuing operations 1
Non-IFRS measure free cash flow from discontinued operations 1, 2
Total non-IFRS measure free cash flow 1
2023
2022
2021
9 769
7 946
10 056
8 383
61
728
6 965
1 318
451
5 559
806
54
18 941
16 680
16 475
2
735
1
323
523
11
– 768
– 693
– 940
– 2 787
– 1 702
– 1 856
– 1 534
– 774
– 1 571
– 1 138
1 202
342
– 775
– 565
492
14 220
13 039
13 365
– 1 060
– 916
– 1 066
13 160
12 123
12 299
19
915
1 394
13 179
13 038
13 693
1 To aid in comparability, the prior year free cash flow amounts have been revised to conform with the new free cash flow definition that was effective as of January 1, 2023.
2 In 2023, the free cash flow from discontinued operations was a cash inflow of USD 19 million (2022: USD 915 million, 2021: USD 1 394 million) consisting of USD 238 million (2022:
USD 1 197 million, 2021: USD 1 706 million) net cash inflows from operating activities from discontinued operations, less purchases of property, plant and equipment by discontinued
operations of USD 219 million (2022: USD 282 million, 2021: USD 312 million).
Financial year 2023 compared with 2022
Free cash flow from continuing operations amounted to
USD 13.2 billion (+9% USD), compared with USD 12.1 bil-
lion in 2022, driven by higher net cash flows from oper-
ating activities from continuing operations.
For the total Company, free cash flow amounted to
USD 13.2 billion, compared with USD 13.0 billion in 2022.
Financial year 2022 compared with 2021
Free cash flow from continuing operations amounted to
USD 12.1 billion, broadly in line with USD 12.3 billion in
2021.
For the total Company, free cash flow amounted to
USD 13.0 billion, compared with USD 13.7 billion in 2021.
78
Item 5. Operating and Financial Review and Prospects
Condensed consolidated balance sheets
(USD millions)
Assets
Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets other than goodwill
Investments in associated companies
Deferred tax assets
Financial assets and other non-current assets
Total non-current assets
Inventories
Trade receivables
Other current assets and income tax receivables
Marketable securities, commodities, time deposits and derivative financial instruments
Cash and cash equivalents
Total current assets
Total assets
Equity and liabilities
Total equity
Liabilities
Financial debts
Lease liabilities
Deferred tax liabilities
Provisions and other non-current liabilities
Total non-current liabilities
Trade payables
Financial debts and derivative financial instruments
Lease liabilities
Provisions and other current liabilities and current income tax liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
Dec 31, 2023 Dec 31, 2022
9 514
10 764
1 410
1 431
23 341
29 301
26 879
31 644
205
4 309
3 806
143
3 739
3 521
69 464
80 543
5 913
7 107
3 033
7 175
8 066
2 739
1 035
11 413
13 393
7 517
30 481
36 910
99 945
117 453
46 750
59 423
18 436
20 244
1 598
2 248
4 523
1 538
2 686
4 906
26 805
29 374
4 926
6 175
230
5 146
5 931
251
15 059
17 328
26 390
28 656
53 195
58 030
99 945
117 453
There has been a significant change to the December
31, 2023 consolidated balance sheet resulting from the
presentation of the Sandoz business as discontinued
operations. This follows the September 15, 2023 share-
holders’ approval to spin off the Sandoz business through
a dividend in kind distribution to the Novartis AG share-
holders (for further information see Item 18. Financial
Statements – Note 1. Accounting policies; and – Note 2.
Significant transactions).
The December 31, 2022 consolidated balance sheet
includes the assets and liabilities of the Sandoz business.
The December 31, 2023 consolidated balance sheet
excludes the assets and liabilities of the Sandoz busi-
ness in the individual lines, due to the derecognition of
the Sandoz business at the date of the October 3, 2023
distribution (spin-off).
The consolidated balance sheet discussion and anal-
ysis that follows excludes the impacts of the derecogni-
tion of the Sandoz business assets and liabilities at the
date of the distribution (spin-off). For information on the
assets and liabilities of the Sandoz business derecog-
nized at October 3, 2023, the distribution (spin-off) date,
see Item 18. Financial Statements – Note 31 – Discontin-
ued operations – Net assets derecognized.”
Assets
Total non-current assets of USD 69.5 billion increased
by USD 0.5 billion compared with December 31, 2022,
excluding the impact of the derecognition of the Sandoz
business non-current assets related to discontinued
operations.
Intangible assets other than goodwill decreased by
USD 3.3 billion mainly due to amortization and impair-
ments and the divestment of the ‘front of eye’ ophthal-
mology assets, partially offset by the impact of acquisi-
tions, including Chinook Therapeutics, Inc. and of DTx
Pharma Inc., additions, and favorable currency transla-
tion adjustments.
Goodwill increased by USD 1.5 billion mainly due to
the acquisition of Chinook Therapeutics, Inc and DTx
Pharma Inc.
Deferred tax assets increased by USD 1.3 billion
mainly due to higher deferred tax assets on intangible
assets, inventory and tax loss carryforwards. Property,
plant and equipment increased by USD 0.6 billion mainly
79
Item 5. Operating and Financial Review and Prospects
as additions and favorable currency translation adjust-
ments exceeded depreciation charge and disposals.
Right-of-use assets, investments in associated compa-
nies, financial assets, and other non-current assets were
broadly in line with December 31, 2022.
Total current assets of USD 30.5 billion decreased
by USD 1.7 billion, compared with December 31, 2022,
excluding the impact of the derecognition 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 4.4 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 0.9 billion. Trade receiv-
ables increased by USD 1.3 billion, mainly due to the
increase in net sales. Other current assets and income
tax receivables were broadly in line with December 31,
2022.
We consider our provisions for doubtful trade receiv-
ables to be adequate. We particularly monitor the level
of trade receivables in countries deemed to have an ele-
vated credit risk. We consider macroeconomic environ-
ment, historical experience, country and political risk, in
addition to other relevant information when assessing
risk. These risk factors are monitored regularly to deter-
mine any adjustments in risk classification. The majority
of the past due trade receivables from elevated credit
risk countries are due from local governments or from
government-funded entities. Deteriorating credit and
economic conditions as well as other factors in these
elevated credit risk countries have resulted in, and may
continue to result in, an increase in the average length
of time that it takes to collect these trade receivables
and may require the Company to re-evaluate the
expected credit loss amount of these trade receivables
in future periods. As at December 31, 2023, amounts
past due for more than one year were not significant in
elevated credit risk countries.
For a table showing an overview of the aging analy-
sis of total trade receivables and the total amount of the
provision for doubtful trade receivables as at December
31, 2023, and 2022, see “Item 18. Financial Statements—
Note 16. Trade receivables.”
There is also a risk that certain countries could
devalue their currency. Currency exposures are
described in more detail in “—Effects of currency fluctu-
ations.”
Liabilities
Total non-current liabilities of USD 26.8 billion decreased
by USD 1.7 billion, compared with December 31, 2022,
excluding the impact of the derecognition of the Sandoz
business non-current liabilities related to discontinued
operations.
Non-current financial debts decreased by USD 1.8
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 bil-
lion 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 26.4 billion increased
by USD 1.5 billion, compared with December 31, 2022,
excluding the impact of the derecognition of the Sandoz
business non-current liabilities related to discontinued
operations.
Current financial debts and derivative financial instru-
ments were broadly in line with December 31, 2022, as
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 of EUR 1.25 billion was largely off-
set by the reclassification of USD 2.1 billion from non-cur-
rent 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 0.6 billion, mainly driven by an increase of the pro-
visions for deductions from revenue. Trade payables
increased by USD 0.9 billion. Current income tax liabili-
ties and current lease liabilities were broadly in line with
December 31, 2022.
In our key countries, Switzerland and the United
States, assessments have been agreed by the tax author-
ities up to 2019 in Switzerland and up to 2016 in the
United States, with the exception of one open United
States position related to the 2007 tax filing. Uncertain-
ties also exist on the application of a taxing right based
on a German non-resident tax regulation for specific rev-
enues derived from German registered intellectual prop-
erty rights.
Novartis believes that its total provisions are ade-
quate based upon currently available information. How-
ever, given the inherent difficulties in estimating liabilities
in this area, Novartis may incur additional costs beyond
the amounts provided. Management believes that such
additional amounts, if any, would not be material to the
Company’s financial condition but could be material to
the results of operations or cash flows in a given period.
Equity
The Company’s equity decreased by USD 12.7 billion to
USD 46.8 billion, compared with December 31, 2022.
This decrease was mainly due to the dividend in kind
to effect the distribution (spin-off) of Sandoz Group AG
to the Novartis AG shareholders’ of USD 14.0 billion (for
further information see “Item 18. Financial Statements –
Note 2. Significant transactions, and Note 31 – Discon-
tinued operations”), the cash-dividend payment of USD
7.3 billion and the purchase of treasury shares of USD
8.5 billion. This was partially offset by the net income of
USD 14.9 billion, and equity-based compensation of USD
0.9 billion.
80
Item 5. Operating and Financial Review and Prospects
Summary of equity movements attributable to Novartis AG shareholders
Balance at beginning of year
Shares acquired to be canceled
Other share purchases
Exercise of options and employee transactions
Equity-based compensation
Shares delivered to Alcon employees as a result of the Alcon spin-off
Shares delivered to Sandoz employees as a result of the Sandoz spin-off
Taxes on treasury share transactions
Decrease of treasury share repurchase
obligation under a share buyback trading plan
Transaction costs, net of taxes
Dividends
Dividend in kind to effect the spin-off of Sandoz
Net income of the year attributable to shareholders of Novartis AG
Other comprehensive income attributable to shareholders of Novartis AG
Other movements
Balance at end of year
Number of outstanding shares
(in millions)
Equity attributable to
Novartis AG shareholders
2023
2022
2023
2022 USD millions USD millions
2 119.6
2 234.9
59 342
67 655
– 87.5
– 126.2
– 8 369
– 10 787
– 1.6
2.8
10.4
0.3
– 1.4
1.9
10.4
0.0
– 148
– 123
146
904
30
14
88
854
5
14
2 809
– 214
– 7 255
– 7 506
– 13 962
14 850
1 200
129
6 955
– 839
217
2 044.0
2 119.6
46 667
59 342
In 2023, Novartis repurchased a total of 87.5 million
shares for USD 8.4 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 com-
pleted in June 2023) and 23.0 million shares (USD 2.3
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,
1.6 million shares (for an equity value of USD 0.1 billion)
were repurchased from associates. In the same period,
13.5 million shares (for an equity value of USD 1.1 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 75.6 million versus December 31, 2022.
These treasury share transactions resulted in an equity
decrease of USD 7.4 billion and a net cash outflow of
USD 8.6 billion.
In 2022, Novartis repurchased a total of 126.2 million
shares for USD 10.8 billion on the SIX Swiss Exchange
second trading line, including 115.3 million shares (USD
9.9 billion) under the up-to USD 15 billion share buyback
announced in December 2021 and 10.9 million shares
(USD 0.9 billion) to mitigate dilution related to participa-
tion plans of associates. In addition, 1.4 million shares
(USD 0.1 billion) were repurchased from associates. In
the same period, 12.3 million shares (for an equity value
of USD 0.9 billion) were delivered as a result of option
exercises and share deliveries related to participation
plans of associates. Consequently, the total number of
shares outstanding decreased by 115.3 million versus
December 31, 2021. These treasury share transactions
resulted in a decrease in equity of USD 10.0 billion and
a net cash outflow of USD 10.6 billion.
Treasury shares
As at December 31, 2023, our holding of treasury shares
amounted to 233.5 million shares, or approximately 10%
of the total number of issued shares. Approximately 93.8
million treasury shares were held in entities that restrict
their availability for use.
As at December 31, 2022, our holding of treasury
shares amounted to 284.1 million shares, or approxi-
mately 12% of the total number of issued shares. Approx-
imately 99.0 million treasury shares were held in entities
that restrict their availability for use.
81
Item 5. Operating and Financial Review and Prospects
Effects of currency fluctuations
We transact our business in many currencies other than the US dollar, our reporting currency.
The following table provides an overview of net sales from continuing operations and operating expenses based
on IFRS Accounting Standards values for 2023, 2022 and 2021, for currencies most important to the Company:
Currency
US dollar (USD)
Euro (EUR)
Swiss franc (CHF)
Chinese yuan (CNY)
Japanese yen (JPY)
Canadian dollar (CAD)
British pound (GBP)
Russian ruble (RUB)
Brazilian real (BRL)
Australian dollar (AUD)
Other currencies
2023
2022
2021
Net sales
from
continuing
operations
%
Operating
expenses
from
continuing
operations
% 1
Net sales
from
continuing
operations
%
Operating
expenses
from
continuing
operations
% 1
Net sales
from
continuing
operations
%
Operating
expenses
from
continuing
operations
% 1
42
24
1
7
4
2
2
1
2
1
14
37
20
22
4
2
1
5
0
1
0
8
40
25
2
7
4
2
2
2
2
1
13
38
21
22
4
2
1
2
1
1
1
7
38
27
2
7
5
2
3
1
1
1
13
37
23
20
4
3
1
2
1
1
1
7
1 Operating expenses include cost of goods sold; selling, general and administration; research and development; other income and other expense.
We prepare our consolidated financial statements in US
dollars. As a result, fluctuations in the exchange rates
between the US dollar and other currencies can have a
significant effect on both the Company’s results of oper-
ations as well as the reported value of our assets, liabil-
ities and cash flows. This in turn may significantly affect
reported earnings (both positively and negatively) and
the comparability of period-to-period results of opera-
tions.
For purposes of our consolidated balance sheets, we
translate assets and liabilities denominated in other cur-
rencies into US dollars at the prevailing market exchange
rates as of the relevant balance sheet date. For purposes
of the Company’s consolidated income and cash flow
statements, revenue, expense and cash flow items in
local currencies are translated into US dollars at aver-
age exchange rates prevailing during the relevant period.
As a result, even if the amounts or values of these items
remain unchanged in the respective local currency,
changes in exchange rates have an impact on the
amounts or values of these items in our consolidated
financial statements.
Because our expenditure in Swiss francs is signifi-
cantly higher than our revenue in Swiss francs, volatility
in the value of the Swiss franc can have a significant
impact on the reported value of our earnings, assets and
liabilities, and the timing and extent of such volatility can
be difficult to predict.
The Company manages its global currency exposure
by engaging in hedging transactions where management
deems appropriate, after taking into account the natural
hedging afforded by our global business activity. In 2023
and 2022, we entered into various contracts that change
in value with movements in foreign exchange rates, to
preserve the value of assets, commitments and expected
transactions. We use forward contracts and foreign cur-
rency options to hedge. For more information on how
these transactions affect our consolidated financial
statements and on how foreign exchange rate exposure
is managed, see “Item 18. Financial Statements—Note 1.
Accounting policies,” “Item 18. Financial Statements—
Note 6. Interest expense and other financial income and
expense,” “Item 18. Financial Statements—Note 16. Trade
receivables,” “Item 18. Financial Statements—Note 29.
Commitments and contingent liabilities” and “Item 18.
Financial Statements—Note 30. Financial instruments –
additional disclosures.”
82
Item 5. Operating and Financial Review and Prospects
The following table sets forth the foreign exchange rates of the US dollar against key currencies used for foreign
currency translation when preparing the Company’s consolidated financial statements:
USD per unit
Australian dollar (AUD)
Brazilian real (BRL)
Canadian dollar (CAD)
Swiss franc (CHF)
Chinese yuan (CNY)
Euro (EUR)
British pound (GBP)
Japanese yen (JPY (100))
Russian ruble (RUB (100))
Average for year
Year-end
2023
0.665
0.200
0.741
1.113
0.141
1.082
1.243
0.713
1.185
2022 Change in %
0.695
0.194
0.769
1.048
0.149
1.054
1.237
0.766
1.481
– 4
3
– 4
6
– 5
3
0
– 7
– 20
2023
0.683
0.206
0.755
1.189
0.141
1.107
1.275
0.707
1.111
2022 Change in %
0.678
0.189
0.738
1.081
0.144
1.065
1.207
0.757
1.380
1
9
2
10
– 2
4
6
– 7
– 19
The following table provides a summary of the currency impact on key Company figures due to their conversion
into US dollars, the Company’s reporting currency. For additional information on the constant currency calculation
(“cc”), see “—Item 5.A Operating results—Non-IFRS measures as defined by Novartis—Constant currencies.”
Currency impact on key figures
Change in
USD %
2023
Change in
Percentage
constant point currency
impact
2023
currencies %
2023
Change in
Change in
Percentage
constant point currency
impact
2022
USD % currencies %
2022
2022
Net sales from continuing operations
Operating income from continuing operations
Net income from continuing operations
Basic earnings per share (USD) from continuing operations
Core operating income from continuing operations
Core net income from continuing operations
Core basic earnings per share (USD) from continuing operations
8
23
42
49
11
13
18
10
39
62
70
18
19
25
– 2
– 16
– 20
– 21
– 7
– 6
– 7
– 1
– 21
– 74
– 73
2
– 5
– 2
5
– 12
– 70
– 69
10
4
6
– 6
– 9
– 4
– 4
– 8
– 9
– 8
nm = not meaningful
For additional information on the effects of currency fluctuations, see “Item 18. Financial Statements—Note 30.
Financial instruments – additional disclosures.”
83
Item 5. Operating and Financial Review and Prospects
Company liquidity, financial debts and net debt
The following table shows Company liquidity, financial debts and net debt:
(USD millions)
Non-current financial debts
Current financial debts and derivative financial instruments
Total financial debts
Less liquidity
Cash and cash equivalents
Marketable securities, commodities, time deposits and
derivative financial instruments
Total liquidity
Net debt at December 31 1
2023
2022
2021
– 18 436
– 20 244
– 22 902
– 6 175
– 5 931
– 6 295
– 24 611
– 26 175
– 29 197
13 393
7 517
12 407
1 035
11 413
15 922
14 428
18 930
28 329
– 10 183
– 7 245
– 868
1 For further information about the net debt measure, which is a non-IFRS measure, see “—Item 5.A Operating results—Non-IFRS measures as defined by Novartis—Net debt.”
Financial year 2023
The Company’s net debt as at December 31, 2023,
increased to USD 10.2 billion, compared with USD 7.2
billion as at December 31, 2022.
Financial year 2022
The Company’s net debt as at December 31, 2022,
increased to USD 7.2 billion, compared with USD 0.9 bil-
lion as at December 31, 2021.
Total financial debts amounted to USD 24.6 billion as
at December 31, 2023, compared with USD 26.2 billion
as at December 31, 2022. Non-current financial debts
decreased by USD 1.8 billion mainly due to the reclassi-
fication 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.
Current financial debts and derivative financial instru-
ments were broadly in line with December 31, 2022, as
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 of EUR 1.25 billion was largely off-
set by the reclassification of USD 2.1 billion from non-cur-
rent to current financial debts of a USD denominated
bond with notional amount of USD 2.2 billion maturing in
2024.
Novartis has two US commercial paper programs
under which it can issue up to USD 9.0 billion in the
aggregate of unsecured commercial paper notes.
Novartis also has a Japanese commercial paper program
under which it can issue up to JPY 150 billion (approxi-
mately USD 1.1 billion) of unsecured commercial paper
notes. Commercial paper notes totaling USD 3.3 billion
under these three programs were outstanding as per
December 31, 2023 (2022: USD 2.8 billion).
Novartis also has a committed credit facility of
USD 6.0 billion. This credit facility is provided by a syn-
dicate of banks and is intended to be used as a backstop
for the US commercial paper programs. The facility
matures in September 2025 and was undrawn as per
December 31, 2023, and December 31, 2022.
Total liquidity decreased to USD 14.4 billion com-
pared with USD 18.9 billion as at December 31, 2022.
As of year-end 2023, Moody’s Investors Service rated
the Company A1 for long-term maturities and P-1 for
short-term maturities and S&P Global Ratings rated the
company AA- for long-term maturities and A-1+ for short-
term maturities.
Total financial debts amounted to USD 26.2 billion as
at December 31, 2022, compared with USD 29.2 billion
as at December 31, 2021. Non-current financial debts
decreased by USD 2.7 billion, mainly due to the reclas-
sification of USD 2.3 billion from non-current to current
financial debts of two EUR denominated bonds with
notional amounts of EUR 750 million and EUR 1.25 bil-
lion maturing in 2023 and favorable foreign currency
translation adjustments of USD 0.4 billion.
Current financial debts and derivative financial instru-
ments decreased by USD 0.4 billion, mainly due to the
repayment of two US dollar bonds of USD 1.0 billion and
USD 1.5 billion, the closure during the third quarter of
2022 of the interest-bearing accounts of employees pay-
able on demand, which amounted to USD 1.8 billion as
at December 31, 2021, and favorable currency transla-
tion adjustments, partly offset by the reclassification
from non-current to current financial debts of USD 2.3
billion and an increase of USD 1.9 billion in commercial
paper.
Novartis has two US commercial paper programs
under which it can issue up to USD 9.0 billion in the
aggregate of unsecured commercial paper notes.
Novartis also has a Japanese commercial paper program
under which it can issue up to JPY 150 billion (approxi-
mately USD 1.1 billion) of unsecured commercial paper
notes. Commercial paper notes totaling USD 2.8 billion
under these three programs were outstanding as per
December 31, 2022 (2021: USD 0.9 billion).
Novartis also has a committed credit facility of
USD 6.0 billion, which was extended in 2022. This credit
facility is provided by a syndicate of banks and is intended
to be used as a backstop for the US commercial paper
programs. The extended facility matures in September
2025 and was undrawn as per December 31, 2022, and
December 31, 2021.
Total liquidity decreased to USD 18.9 billion com-
pared with USD 28.3 billion as at December 31, 2021.
As of year-end 2022, Moody’s Investors Service rated
the Company A1 for long-term maturities and P-1 for
short-term maturities and S&P Global Ratings rated the
84
Item 5. Operating and Financial Review and Prospects
company AA- for long-term maturities and A-1+ for short-
term maturities.
For the tables showing the maturity schedule of our
current financial assets, current and non-current finan-
cial debts and net debt as at December 31, 2023 and
December 31, 2022, see “Item 18. Financial Statements—
Note 30. Financial instruments – Additional disclosures—
Nature and extent of risks arising from financial instru-
ments—Liquidity risk.”
For a description of risks and restrictions on the abil-
ity of subsidiaries to transfer funds to the Company via
cash dividends, loan or advances, see “—Liquidity/short-
term funding” and “Item 18. Financial Statements—Note
30. Financial instruments – Additional disclosures—
Nature and extent of risks arising from financial instru-
ments.”
Information regarding the Company’s material con-
tractual obligations and commitments as of the end of
2023 are provided in “—Material contractual obligations
and commitments.”
Liquidity and financial debt by currency
The following table provides a breakdown of liquidity and financial debt by currency as at December 31:
USD
CHF
EUR
JPY
Other
Liquidity
in % 2023 1
Liquidity
in % 2022 1
Liquidity
in % 2021 1
Financial
debt in %
2023 2
Financial
debt in %
2022 2
Financial
debt in %
2021 2
67
7
22
4
100
85
4
7
4
100
92
4
2
2
100
67
7
23
1
2
62
6
29
1
2
57
12
27
1
3
100
100
100
1 Liquidity includes cash and cash equivalents and marketable securities, including debt securities, commodities and time deposits.
2 Financial debt includes non-current and current financial debt.
Bonds
In August 2023, a 5-year EUR denominated bond of EUR
750 million with a coupon of 0.50% was repaid at matu-
rity.
In September 2023, a 7-year EUR denominated bond
of EUR 1.25 billion with a coupon of 0.125% was repaid
at maturity.
In April 2022, a 5-year USD denominated bond of
USD 1.0 billion with a coupon of 2.40% was repaid, in
advance of its maturity date at no additional cost.
In September 2022, a 10-year USD denominated
bond of USD 1.5 billion with a coupon of 2.40% was
repaid at maturity.
In March 2021, a 4-year EUR denominated bond of
EUR 1.25 billion with a coupon of 0.00% was repaid at
maturity.
In November 2021, a 7-year EUR denominated bond
of EUR 0.6 billion with a coupon of 0.75% was repaid at
maturity.
Liquidity/short-term funding
The Company’s liquidity amounted to USD 14.4 billion as
at December 31, 2023, compared with USD 18.9 billion
as at December 31, 2022. Total non-current and current
financial debts, including derivatives, amounted to USD
24.6 billion as at December 31, 2023, compared with
USD 26.2 billion as at December 31, 2022.
The debt/equity ratio increased to 0.53:1 as at
December 31, 2023, compared with 0.44:1 as at Decem-
ber 31, 2022. The net debt increased to USD 10.2 billion
as at December 31, 2023, compared with USD 7.2 billion
as at December 31, 2022.
We continuously track our liquidity position and
asset/liability profile. This involves modeling cash flow
maturity profiles based on both historical experiences
and contractual expectations to project our liquidity
requirements. We seek to preserve prudent liquidity and
funding capabilities. We are confident that we have suf-
ficient liquidity to support our normal business activities
for the foreseeable future.
Certain countries have legal or economic restrictions
on the ability of subsidiaries to transfer funds to the Com-
pany in the form of cash dividends, loans or advances,
but these restrictions do not have an impact on the abil-
ity of the Company to meet its cash obligations.
We are not aware of any significant demands to
change the level of liquidity needed to support our nor-
mal business activities. We make use of various borrow-
ing facilities provided by several financial institutions. We
also successfully issued various bonds in previous years
and raised funds through our commercial paper pro-
grams.
The maturity schedule of our net debt can be found
in “Item 18. Financial Statements—Note 30. Financial
instruments – Additional disclosures—Nature and extent
of risks arising from financial instruments—Liquidity risk.”
85
Item 5. Operating and Financial Review and Prospects
Material contractual obligations and commitments
The Company’s material contractual obligations and
commitments, entered into from time to time, consist of
the following:
• Non-current financial debt, including current portion
(see “Item 18. Financial Statements—Note 20. Non-cur-
rent financial debt”). For the table showing the matu-
rity schedule of our current and non-current financial
debt, see “Item 18. Financial Statements—Note 30.
Financial instruments—additional disclosures—Nature
and extent of risks arising from financial instruments—
Liquidity risk”;
• Leases on assets used in operations entered into in
the ordinary course of business (see “Item 18. Finan-
cial Statements— Note 11. Right-of-use assets and
lease liabilities”);
• Long-term research and development agreements with
various institutions and pharmaceutical companies
related to intangible assets. These agreements provide
for potential milestone payments by Novartis, which
are dependent on successful clinical development, or
meeting specified sales targets, or other conditions
that are specified in the agreements (see “Item 18.
Financial Statements—Note 29. Commitments and
contingent liabilities—Research and development
commitments”);
• Commitments related to the acquisition of businesses
and interests in intellectual property focused on key
disease areas and indications that the Company
expects to be growth drivers in the future (see “Item
18. Financial Statements—Note 29. Commitments and
contingent Liabilities—Other commitments”). In addi-
tion, certain business acquisition arrangements include
contingent payments, which the shareholders of the
acquired company are eligible to receive upon the
achievement of specified milestones. For the table
showing the maturity schedule of contingent consid-
eration liabilities, see “Item 18. Financial Statements—
Note 30. Financial instruments—additional disclo-
sures—Nature and extent of risks arising from financial
instruments—Liquidity risk”;
• Independent pension and other post-employment ben-
efit plans (see “Item 18. Financial Statements – Note
26. Post-employment benefits for employees”); and
• Property, plant and equipment purchase commitments
in the ordinary course of business (see “Item 18. Finan-
cial Statements—Note 10. Property, plant and equip-
ment”).
86
Item 5. Operating and Financial Review and Prospects
5.C Research and development, patents and licenses
Our research and development spending from continu-
ing operations totaled USD 11.4 billion, USD 9.2 billion
and USD 8.6 billion (non-IFRS measure core research
and development from continuing operations USD 8.6
billion, USD 8.3 billion and USD 8.2 billion) for the years
2023, 2022 and 2021, respectively.
Novartis has numerous products in various stages of
development. For further information on these policies
and these products in development, see “Item 4. Infor-
mation on the Company—Item 4.B Business overview.”
As described in the risk factors section and else-
where in this Annual Report, our drug development
efforts are subject to the risks and uncertainties inher-
ent in any new drug development program. Due to the
risks and uncertainties involved in progressing through
preclinical development and clinical trials, and the time
and cost involved in obtaining regulatory approvals,
among other factors, we cannot reasonably estimate the
timing, completion dates and costs, or range of costs, of
our drug development programs, or of the development
of any particular development compound (see “Item 3.
Key Information—Item 3.D Risk factors”). In addition, for
a description of the research and development process
for the development of new drugs and our other prod-
ucts, and the regulatory process for their approval, see
“Item 4. Information on the Company—Item 4.B Business
overview.”
5.D Trend information
See “—Item 5.A Operating results”, “—Item 5.B Liquidity
and capital resources” and “Item 4. Information on the
Company—Item 4.B Business overview” for trend infor-
mation.
5.E Critical accounting estimates
See “Item 18. Financial Statements—Note 1. Accounting
policies” for Critical accounting estimates.
87
Item 6. Directors, Senior Management and Employees
Item 6. Directors, Senior Management and
Employees
6.A Directors and senior management
The information set forth under “Item 6. Directors, Senior
Management and Employees—Item 6.C Board prac-
tices—Corporate governance—Board of Directors” and
“Item 6. Directors, Senior Management and Employees—
Item 6.C Board practices—Corporate governance—
Executive Committee” is incorporated by reference.
88
Item 6. Directors, Senior Management and Employees
6.B Compensation
Dear shareholder,
On behalf of the Compensation Committee, I am pleased
to present our 2023 Novartis Compensation Report.
2023 company performance
Novartis delivered a very strong performance in 2023,
with a robust strategic (Sandoz spin-off), financial (top-
and bottom-line growth) and innovation (large number
of positive Phase III readouts) performance. The perfor-
mance of our product portfolio (including Entresto, Kes-
impta, Kisqali and Scemblix) together with the optimiza-
tion of our commercial and supporting functions
contributed to sales growth of 10% (constant currencies
‘cc’) and core operating income growth of 18% (cc), com-
pared with the previous year. Innovation highlights
included positive results from several Phase III clinical
trials for investigational medicines with significant sales
potential, including Pluvicto, remibrutinib and iptacopan,
as well as additional approval indications for Entresto
(for pediatric heart failure) in the EU and Cosentyx (for
hidradenitis suppurativa) in the EU and US. Regulatory
submissions were completed for Kisqali (for early breast
cancer) in the EU and US. Transactions provided further
substance to the pipeline, notably with the acquisition of
Chinook Therapeutics to strengthen our renal portfolio.
The one-year 2023 TSR performance of 26% was in the
top 3 of our global healthcare peers.
On October 4, 2023, we successfully spun off our
Sandoz generics and biosimilars business, through a div-
idend-in-kind distribution to holders of Novartis shares
and American Depositary Receipts (ADRs). Each holder
received one Sandoz share for every five Novartis shares
or one Sandoz ADR for every five Novartis ADRs. While
shareholders received the aforementioned dividend in
kind, Performance Share Unit (PSU) and Restricted
Share Unit (RSU) holders, including active and former
members of the Executive Committee of Novartis
(ECN), received instead ‘keep whole awards’ with the
same vesting and performance conditions as the under-
lying award. This ensured award holders were treated
on an economically consistent basis to Novartis share-
holders. For more information, see “—Sandoz equity res-
toration plan.”
2023 realized compensation
The company’s performance in 2023 resulted in an
Annual Incentive payout of 185% for the CEO, and in a
Long-Term Performance Plan (LTPP) 2021-2023 payout
of 122%. These factors, together with an increase of 16%
in the vesting price of the 2021-2023 LTPP (when
adjusted for the Sandoz spin-off) resulted in the total
realized CEO compensation of CHF 16 248 178 in 2023.
These three outcomes contributed to the vast majority
of the year-on-year increase in realized pay for the CEO.
They also impacted the compensation outcome for the
other members of the ECN, whose total aggregated com-
pensation was CHF 47 205 005. For details on the real-
ized compensation, see “—CEO and Executive Commit-
tee 2023 realized compensation.”
Changes to the executive compensation system in
2024
As part of our annual review, we identified that our exist-
ing CEO compensation practices placed us in the low-
est quartile versus global healthcare peers. We engaged
extensively with our largest shareholders and proxy advi-
sors to collect feedback about our executive compen-
sation framework, in particular the challenges that Euro-
pean companies face in the competition for talent.
Following this engagement and the overall positive
nature of the feedback received, the Compensation
Committee and the Board of Directors agreed that it is
necessary to take a global perspective to attract and
retain the best talent at the top of the organization, and
that the company could be more competitive in this
regard. As a result, and while still mindful of the expec-
tations of European-based investors and proxy advisors,
we made the following changes to our compensation
system, effective January 1, 2024:
• CEO target compensation: We aspire to continue grow-
ing our global business, with a particular focus on the
US market. Aligned with this aspiration and our com-
pensation philosophy, the Board of Directors decided
to adjust the CEO target pay in a way that preserves
alignment with shareholders. Specifically, we increased
the LTPP target, which is fully performance driven
based on three-year forward-looking targets, from
325% to 400% as a percentage of annual base salary.
The additional two-year holding period for the CEO
remains unchanged, thereby restricting the equities
from sale for five years. The Compensation Commit-
tee will continue to set stretch targets, with a robust
assessment at the end of the cycle. No changes were
made to the CEO base salary (beyond ordinary salary
increases received by other Swiss employees) or the
Annual Incentive target. This is the first significant
increase in CEO target pay since 2019 and places his
target compensation just above the lowest quartile of
global healthcare peers, based on the last disclosed
proxy information.
• Annual Incentive metrics: The Compensation Commit-
tee agreed to replace operating income with core oper-
ating income in our ECN Annual Incentive. The Com-
pensation Committee agreed that core operating
income, which excludes certain one-time or non-recur-
ring items, represents a better measure of the Compa-
ny’s underlying performance. Additionally, core-ad-
justed metrics are more commonly used by our global
healthcare peers, which would enable easier peer per-
formance comparisons.
• Share ownership and Annual Incentive deferral: The
Compensation Committee strongly affirms a commit-
ment to the principle of aligning the interests of exec-
utives with shareholders. To that end, we will continue
to enforce an obligation that all ECN members become
meaningful shareholders with a requirement to hold a
multiple of their salary in Novartis shares. Currently,
the Annual Incentive has a 50% mandatory deferral
into equity, which is blocked for three years. The Com-
pensation Committee decided that this aspect of the
Annual Incentive should be more in line with relevant
89
Item 6. Directors, Senior Management and Employees
market practice. For this reason, once an ECN mem-
ber has met their shareholding requirement, the por-
tion of the Annual Incentive that is mandatorily deferred
will be reduced to 30%. To reinforce strong share-
holder alignment, the CEO’s shareholding requirement
will simultaneously be increased from 5x to 6x annual
base salary.
For more information about these changes, see “—2024
Executive Committee compensation system changes
and increases.”
2023 compensation report structure and disclosure
The Compensation Committee decided to make the fol-
lowing changes to the 2023 Novartis Compensation
Report:
• The Compensation Report has been reorganized to
enhance its readability. For this reason, a detailed pre-
sentation of executive compensation outcomes can be
found in the first part, and an explanation of our under-
lying compensation philosophy, system and gover-
nance in the second part. The Board compensation
and governance information is in the final section. We
trust that you will find this new structure more acces-
sible.
• In response to shareholder feedback, we provide more
disclosure and transparency
in the CEO bal-
anced scorecard, with an increased focus on the link
between pay and performance.
• Aligned with our evolution from an organization with
separate divisions each with a separate leader into a
focused medicines company, we disclose target pay
for the CEO (as the highest paid), the CFO and the
Presidents of our International and US organizations
individually, while all other ECN target pay is aggre-
gated, see “—Compensation at grant value for the CEO
and Executive Committee”. The Compensation
Committee believes that this approach is more com-
mercially appropriate while also maintaining our dis-
closure at the upper end of Swiss practice. Notwith-
standing this change, we continue to disclose the CEO
and ECN realized pay, as well as any significant indi-
vidual pay increases, buyouts and exit packages.
2024 Annual General Meeting (AGM)
On behalf of the Compensation Committee, I would like
to thank shareholders for their input and engagement
during the consultation process. This has helped us
shape the improvements to our compensation system
presented here, as well as the changes in the format of
the Compensation Report.
At the 2024 AGM, as with prior years, shareholders
will be asked to vote on:
• The maximum aggregate amount of compensation for
the Board of Directors from the 2024 AGM to the 2025
AGM
• The maximum aggregate amount of compensation for
the ECN for the financial year 2025
• This 2023 Compensation Report
We trust that this Report and our 2024 Say-on-Pay bro-
chure provides you with the information required for you
to vote in favor of the above. We continue to welcome
your feedback, which is invaluable in driving improve-
ments in our compensation system and practices.
Simon Moroney, D.Phil.
Chair of the Compensation Committee
90
Item 6. Directors, Senior Management and Employees
Executive Committee and Board 2023
compensation at a glance
CEO pay for performance
2023 Annual Incentive
% of target
200%
Maximum
Payout: 185% of target
2021-2023 Long-Term Performance Plan (LTPP) cycle
% of target
200%
Maximum
150%
150%
100%
Target
100%
Target
Payout: 122% of target
50%
0%
1 CAGR = compound annual growth rate
50%
0%
{
• 3rd party sales CAGR1
(102% of target)
• Core operating
income CAGR
(158% of target)
• Innovation
(108% of target)
• Relative TSR
(120% of target)
CEO and Executive Committee total realized compensation
The 2023 total realized compensation for the CEO and Executive Committee members was CHF 63 453 183. For
more information, see “—2023 CEO Annual Incentive balanced scorecard”, “ —2021-2023 LTPP cycle performance out-
comes” and “ —CEO and Executive Committee 2023 realized compensation.”
2023 annual base
salary
2023 pension
benefits
2023
Annual Incentive
2021 – 2023
LTPP cycle
Other 2023
compensation
Currency
Cash (amount)
Amount
Cash & Equity
Equity (value
at vesting date)
Amount
Total realized
compensation
(incl. share
price movement)
CHF
1 822 334
170 125
5 075 255
8 921 546
258 918 16 248 178
8 551 936
CHF
CHF 10 374 269
1 627 708 15 449 571 15 100 093
1 797 833 20 524 826 24 021 639
6 475 697 47 205 005
6 734 615 63 453 183
Vasant Narasimhan (CEO)
Aggregate realized compensation of the
other 11 Executive Committee members,
including the member who stepped down
during the financial year 2023
Total
Board compensation
The total actual compensation earned by Board members in the 2023 financial year is shown in the table below.
For more information, see “—Board member total compensation earned for the financial year 2023.”
CHF
Board Chair
Other members of the Board
Total
2023
total compensation
3 803 784
4 787 933
8 591 717
91
Item 6. Directors, Senior Management and Employees
CEO compensation and performance
2023 fixed pay and benefits
Annual base salary
The CEO 2023 annual base salary was: CHF 1 828 900 (2.2% salary increase effective as of March 1, 2023, in
line with ordinary salary increases received by other Swiss employees).
Pension and other benefits
The CEO is a member of the Novartis Swiss pension funds, which provide company contributions on the base sal-
ary and Annual Incentive up to the legal cap on the insured salary of CHF 882 000. No supplementary pension
plans or savings plans are provided. The CEO’s employer pension contributions represent 9.3% of the base sal-
ary.
2023 CEO Annual Incentive balanced scorecard
This section presents the balanced scorecard for the CEO. Financial performance is measured in constant curren-
cies (cc) to reflect operational performance that can be influenced. Performance outcomes for compensation pur-
poses may differ from reported numbers in accordance with our compensation adjustments policy e.g. to reflect
any currency impacts.
Measure
Weight (%) Target
Performance
Financial performance1
Group 3rd Party Sales
(cc, USD million)
Group Operating Income
(cc, USD million)
Group Free Cash Flow
as a % of 3rd party sales (cc)
60
24
18
18
49 897
9 833
24.6%
52 282
10 673
26.8%
Target
achievement
Significantly Above
Significantly above
Significantly above
Significantly above
1 Group 3rd Party Sales, Group Operating Income and Group Free Cash Flow as a % of 3rd party sales include the continuing operations’ financial performance for the
year ended December 31, 2023 and the Sandoz discontinued operations’ financial performance for the nine months ended September 30, 2023.
Financial targets were re-calibrated following the Sandoz spin-off by excluding Q4 2023 Sandoz targets. This was
to ensure targets were as stretched as the original targets after excluding the impact of Sandoz; and that they
remain consistent with our financial reporting.
92
Item 6. Directors, Senior Management and Employees
2023 CEO Annual Incentive balanced scorecard (continued)
In addition to the financial targets, the CEO also has five equally weighted strategic objectives across key priority
areas, including targets related to environmental, social and governance (ESG) matters. We provide a summary of
those targets that most influenced performance and their relevant achievements below. More details can be found
in the Novartis in Society Integrated Report 2023.
Measure
Weight (%) / Performance
Strategic objectives
40
Advance our new focused
strategy
• Sandoz spin-off successfully completed as planned on October 4, 2023 with positive
value creation
• More than 15 business development and M&A deals signed, strengthening the pipeline
across key therapeutic areas and technology platforms
Target
achievement
Above
Above
Maintain growth
momentum and ensure
successful launches
Deliver pipeline and drive
R&D productivity
• Strong sales performance for growth drivers: Entresto, Cosentyx, Kesimpta, Kisqali and
Significantly above
Zolgensma were 105% of 2023 target in cc
• Recent launches: Leqvio and Pluvicto, delivered 105% of 2023 target in cc
• Fabhalta (iptacopan) launch preparations on track, after US approval was secured for
paroxysmal nocturnal hemoglobinuria (PNH) in December
• 22 regulatory approvals achieved in US, EU, China and Japan, including: Cosentyx for
Above
hidradenitis suppurativa (HS) in US and EU; intravenous (IV) formulation of Cosentyx in
US; Leqvio for hypercholesterolemia in Japan and China
• 18 submissions filed in the US, EU, China and Japan, including for Fabhalta (iptacopan) for
PNH in EU and Japan and Kisqali (for early breast cancer) in EU and US
• Nine positive phase III readouts/presentations including for Kisqali, Pluvicto, iptacopan,
Lutathera, remibrutinib and atrasentan
• Strong progress was made in the early-stage pipeline, with seven new molecular entity
first patient first visits (NME FPFVs) and six pivotal trial-enabling first patient first visits
(PTE-FPFVs), including two NMEs
• 23 entries were made into the pre-clinical portfolio
Execute on operational
excellence & productivity
• Core Margin exceeded target 37.9% in cc (vs. 2023 target 36.2%), when including policy
Significantly above
adjustments and considering 3rd party sales
• Organizational transformation initiated in 2022 was largely completed and is on track to
Strengthen foundations
(ESG/ Human Capital)
deliver over USD 1.5bn in savings
• Technology transformation programs for our new ERP (Enterprise Resource Planning)
system and master data management are on track
• Increased weekly production of Pluvicto following US and EU production approval in
Milburn and Zaragoza sites. Expanded capacity of sites in Slovenia and Italy to support
Kisqali demand
• 99.1% regulatory inspections of clinical and manufacturing operations acceptable
• Targets for our sustainability-linked bond were exceeded: 1.6m patients reached in LMICs
Above
with strategic innovative therapies (vs. 2023 target 1.1m); 28.7m patients reached with
flagship programs (vs. 2023 target 22.6m)
• Invested USD 98.4m in R&D for neglected tropical diseases and malaria
• 100% new launches with a global access strategy (vs. 2023 target 100%)
• Reduction of greenhouse gas emissions by 63%, water consumption by 50%, and waste
sent for disposal by 66% (all in our own operations; vs 2016 baseline)
• Employee engagement score was 75 (vs. industry benchmark of 74), an increase of 2
percentage points over prior year
• Employee share purchase plan on track: launched in North America, 27 countries in
Europe, and 11 countries in Asia and the Middle East. A rollout to employees in other
countries is scheduled in the near future
• EPIC commitments achieved: 48% female representation in management (vs. 2023
aspiration of 48%–52%); 98% of total headcount with pay transparency to external and/
or internal benchmarks, where available (100% when considering exclusions mainly due
to contractual or legal constraints and the ongoing integration of acquired businesses);
pay gap at -0.9%, compared with external median +19%; 100% of recruitment no longer
using historical salary data
• 100% of eligible suppliers risk-assessed using our External Partner Risk Management
framework
Total
100
Overall assessment and payout for CEO
Significantly Above
Novartis delivered a very strong performance in 2023, surpassing its targets on almost all measures, a signifi-
cant improvement versus 2022. Financial results exceeded target due to a strong performance on sales and
significant savings from our organizational restructuring. Our TSR performance for the year 2023 was in the top
quartile of the industry. Strategic objectives were also well executed: the spin-off of Sandoz was completed in
Q4 2023 and our organic pipeline made good progress with several positive clinical trial results and important
regulatory filings. We maintained strong positions in our priority ESG ratings, underscoring our progress in deliv-
ering on our ESG commitments. In view of these achievements, the Board of Directors decided on an Annual
Incentive payout of 185% (within the range of 0–200%), leading to a total amount of CHF 5 075 255.
93
Item 6. Directors, Senior Management and Employees
2021-2023 LTPP cycle performance outcomes
The charts below illustrate the performance of the 2021-2023 LTPP cycle against target. These targets were intro-
duced in early 2021 during the Covid pandemic and were set at ambitious levels relative to prevailing market and
internal expectations at that time. The Board reviewed these targets again at the end of the cycle and decided they
are still appropriate.
As with the Annual Incentive, the financial LTPP targets were recalibrated to take the Sandoz spin-off into
account. Given that these metrics measure the compound annual growth rate, Sandoz targets were removed for
the financial year 2023. For the relative TSR measure, the dividend in kind distribution was treated as a one-time
dividend that is not reinvested. A similar approach was taken for the targets in other ongoing cycles.
3RD PARTY SALES CAGR
CORE OPERATING INCOME (COI) CAGR
(25% weighting)
(25% weighting)
Vesting range 0–200% of target
Vesting range 0–200% of target
8%
6%
4%
2%
0%
Maximum: 8.8% (CAGR)
Actual: 5.9% (CAGR)
Target: 5.8% (CAGR)
3rd party sales
CAGR payout
102% of target
14%
10.5%
7%
3.5%
0%
Maximum: 14.4% (CAGR)
Actual: 12.3% (CAGR)
Target: 8.4% (CAGR)
COI CAGR payout
158% of target
Notes:
A minimum achievement of 3.2% CAGR was required to receive a payout under
this performance measure
Notes:
A minimum achievement of 2.8% CAGR was required to receive a payout under
this performance measure
Novartis achieved 3rd party sales CAGR of 5.9% (in constant currencies
– cc) against the 5.8% target set at the beginning of the performance
cycle, in large part due to Entresto, Kesimpta and Promacta, partly off-
set by Beovu, Kymriah and Cosentyx.
Novartis achieved a COI CAGR of 12.3% (cc) against the 8.4% target
set at the beginning of the performance cycle as a result of significant
productivity savings generated from the creation of our new organiza-
tional structure.
Following the application of the payout curve, the 3rd party sales
CAGR (cc) achievement generates a payout factor of 102% for this met-
ric.
Following the application of the payout curve, the COI CAGR (cc)
achievement generates a payout factor of 158% for this metric.
INNOVATION
(25% weighting)
The following outcomes were considered in our 2021-2023 LTPP cycle
innovation performance:
• Cosentyx approved in the EU for childhood arthritic conditions;
approved in the EU and US for HS; IV formulation approved in US
• Entresto approved in the EU for pediatric heart failure; extending reg-
ulatory data protection to November 2026
Position 1 – 2
Position 3 – 5
• Kymriah approved in the EU and US for adults with relapsed or refrac-
Position 6 – 8
tory follicular lymphoma
• Pluvicto approved in the US for the treatment of progressive PSMA
Position 9 – 15
RELATIVE TOTAL SHAREHOLDER RETURN (TSR)
(25% weighting)
Novartis position
in the peer group
Payout range
(% of target)
170% – 200%
130% – 160%
80% – 120%
0%
Actual ranking
6th = 120% of target
TSR for the 2021-2023 cycle was 31.2%. As a result, Novartis ranked
No. 6 out of 15 healthcare companies (including Novartis) resulting in a
payout of 120% for this metric.
positive mCRPC
• Kisqali submissions in EU and US (for early breast cancer)
•
Iptacopan submission in EU and approval in US for patients with PNH
• Submissions for Pluvicto treating metastatic castration-resistant
prostate cancer, ligelizumab in chronic spontaneous urticaria and
canakinumab as adjuvant treatment in non-small cell lung cancer
were delayed or not submitted
In Biomedical Research, 19 pivotal trial enabling First Patient First
Visits were achieved. Two Oncology targeted therapies and two
radio-ligand NMEs were progressed to clinical investigation
•
Based on input from the Science & Technology Committee (STC), the Board
of Directors approved a payout of 108% for this metric.
2021-2023 LTPP CYCLE PAYOUT
Overall, the Board of Directors approved a 2021-2023 LTPP cycle payout at 122% of target, within the range of 0–200%. This resulted in an LTPP
payout of CHF 8 921 546 for the CEO, including dividend equivalents of CHF 759 557 and Keep Whole Awards of CHF 523 862. The Committee
did not exercise any discretion in relation to the vesting or share price changes following the spin-off.
3rd party sales CAGR
102% x 25%
+
COI CAGR
158% x 25%
+
Innovation
108% x 25%
+
Relative TSR
120% x 25%
Final vesting
122% of target
94
Item 6. Directors, Senior Management and Employees
Historic CEO incentive payouts since appointment
The table below presents the CEO Annual Incentive and LTI payouts over the last six years since his appointment,
out of a maximum of 200%. The average Annual Incentive and LTI payouts over this period were 132% and 111%,
respectively. The high variability of the incentive payouts demonstrates a strong link between pay and performance,
and provides evidence of stretch in the targets. For instance, the three lowest LTI payouts correspond to the cycles
for which relative TSR performance was below the median of the peer group, and the payout was therefore 0%
under this metric.
Year ending
STI payout
LTI payout
2018 1
145%
99%
2019 1
160%
157%
2020 1
100%
126%
2021
100%
107%
2022
100%
57%
2023
185%
122%
1 For these cycles, two LTI plans existed: LTPP and LTRPP. Payouts represent the average CEO weighted payout
Interim update regarding ongoing LTPP cycles
How performance is tracking against target for our ongoing LTPP performance cycles is reported below.
2022-2024 LTPP cycle
After the first two years of the three-year LTPP cycle, 3rd
party sales CAGR and core operating income CAGR are
tracking ahead of target. Innovation is on track. At the
end of 2023, the relative TSR for Novartis was above
median among our global healthcare peer group.
2023-2025 LTPP cycle
After the first year of the three-year LTPP cycle, 3rd party
sales CAGR and core operating income CAGR are ahead
of target and innovation is tracking on target. At the end
of 2023, the relative TSR for Novartis was in the top three
of our global healthcare peer group.
PERFORMANCE MEASURES
3rd party sales CAGR (25%)
Core operating income CAGR (25%)
Innovation (25%)
Relative TSR (25%)
T On or ahead of target
TRACKING
PERFORMANCE MEASURES
TRACKING
T
T
T
T
3rd party sales CAGR (25%)
Core operating income CAGR (25%)
Innovation (25%)
Relative TSR (25%)
T
T
T
T
95
Item 6. Directors, Senior Management and Employees
CEO and Executive Committee
2023 compensation of joining and departing Executive Committee members
Appointment of President, International
Patrick Horber
Patrick Horber joined the Executive Committee on December 1, 2023 as President, International. In line with the
buyout policy of Novartis (see “—CEO and Executive Committee: appointments”), to replace entitlements forfeited
from his previous employer as a result of joining Novartis, he was granted buyout awards of CHF 1 058 274 in cash
to be paid out in March 2024 as well as CHF 3 084 694 in target PSUs and CHF 2 292 624 in RSUs, both of which
will vest between 2024 and 2026.
Departure of President, Innovative Medicines International & Chief Commercial Officer
Marie-France Tschudin
Marie-France Tschudin stepped down from the Executive Committee on September 15, 2023 and started her notice
period on October 1, 2023. In determining her termination arrangement, the Compensation Committee ensured
that contractual entitlements were respected, and all payments are in line with our plan rules and the Swiss Code
of Obligations.
Per policy (see “—CEO and Executive Committee: termination arrangements”), during her 12-month notice period,
Marie-France is entitled to her base salary, pension, Annual Incentive and other benefits. No severance payments
were made. Outstanding equity grants will vest in line with the respective plan rules and are subject to malus and
clawback, including requirements defined by the U.S. Securities and Exchange Commission, as well as non-com-
pete restrictions. No new LTPP grants will be made during the notice period.
96
Item 6. Directors, Senior Management and Employees
CEO and Executive Committee 2023 realized compensation
To aid shareholders’ understanding of the link between pay and performance, the Compensation Report discloses
the realized compensation for the CEO on an individual basis, and for the other ECN members on an aggregated
basis. Disclosing realized compensation means that the Annual Incentive and the LTPP are disclosed at the end of
their respective performance cycles, reflecting actual payouts based on performance.
The total actual payout may vary year on year depending on multiple factors, including the composition of the
Executive Committee and the tenure of its members (as new members may not have equity vestings), compensa-
tion increases, payout of variable compensation based on actual performance, share price fluctuations, and divi-
dend equivalents.
The table below shows compensation for all ECN members for the 2023 financial year, including base salary,
pension, other benefits, 2023 Annual Incentive, 2021-23 LTPP cycle payout, and any buyouts paid or vesting within
the year. Base salary increases were in line with the average of other Novartis employees, with the exception of
three individuals as disclosed in Item 6B of the 2022 Annual Report. The portion of the Annual Incentive paid in
shares for the year 2023 is disclosed using the underlying value of Novartis shares at the date of grant. The real-
ized values of any other equity awards (including dividend equivalents) are calculated using the share price on the
date of vesting. The table also includes the total 2022 realized compensation for all Executive Committee mem-
bers for comparative purposes.
To determine the appropriateness of 2023 CEO and executive compensation payouts under the Annual Incen-
tive and LTPP, the Board of Directors and the Compensation Committee reviewed management’s performance
against targets set at the beginning of the cycles as described in “—2023 CEO Annual Incentive balanced score-
card” and “—2021-2023 LTPP cycle performance outcomes.”
The incentive performance outcomes, combined with base salary and other benefits, pension, keep whole awards
and dividend equivalents, resulted in 2023 total realized compensation for the CEO of CHF 16 248 178.
Realized compensation for the CEO and Executive Committee (2023 compared with 2022)
2023
2022
In CHF (gross) 1
CEO
Other ECN 2
Total
CEO
Other ECN 3
Total
Annual Base Salary
1 822 334
8 551 936
10 374 269
1 786 500
9 122 792
10 909 292
Annual Incentive
(performance achieved)
Thereof cash
Thereof equity
LTPP
Other payments 8
Pension benefits 10
5 075 255
15 449 571
20 524 826
2 684 321
10 130 159
12 814 480
2 537 599
6 149 179
8 686 778
1 342 125
4 211 841
5 553 966
2 537 656
9 300 392
11 838 048 4
1 342 196
5 918 318
7 260 514 5
8 921 546
15 100 093
24 021 639 6
3 307 422
10 025 047
13 332 469 7
258 918
170 125
6 475 697
6 734 615 9
1 627 708
1 797 833 11
499 445
174 488
9 716 294
10 215 739
1 978 304
2 152 792 12
Total
16 248 178
47 205 005 13
63 453 183
8 452 176
40 972 595 14
49 424 771
1 All compensation amounts are stated gross, before the deduction of social security contributions and income tax paid by the Executive Committee members. Amounts for Executive
Committee members paid in USD were converted at a rate of USD 1.00 = CHF 0.8986, which is the same average exchange rate used in the Company’s 2023 consolidated financial
statements (a similar rule applies to payments made in other currencies during the year).
2 Aggregate realized compensation of the other 11 Executive Committee members, including Marie-France Tschudin who stepped down during the financial year 2023.
3 Aggregate realized compensation of the other 15 Executive Committee members, including the members who stepped down during the financial year 2022. For more information, see
item 6B of the 2022 Annual Report.
4 The portion of the Annual Incentive delivered in equity is rounded up to the nearest share, based on the closing share price on the grant date (January 24, 2024) of CHF 93.53 per
Novartis share and USD 107.55 per ADR.
5 The portion of the Annual Incentive delivered in equity is rounded up to the nearest share, based on the closing share price on the grant date (January 25, 2023) of CHF 85.30 per
Novartis share and USD 92.81 per ADR.
6 The amount represents the underlying share value of the 264 799 realized LTPP PSUs to the CEO and other Executive Committee members for the 2021-2023 LTPP cycle, including
dividend equivalents for the three-year cycle of value CHF 759 557 for the CEO and CHF 1 228 736 for the other Executive Committee members, including the one who stepped down
during the financial year 2023. The taxable value is determined using the closing share price, on the day the payout factor is approved by the Board of Directors (i.e., January 24,
2024), of CHF 93.53 per Novartis share and USD 107.55 per ADR. Includes vested keep-whole shares received in connection to the Sandoz spin-off. Robert Kowalski was promoted
to the Executive Committee during the course of the 2021 performance period, and Victor Bulto during the course of the 2022 performance period. As such, the information disclosed
reflects their pro-rata 2021-2023 LTPP payouts attributable to the period in which they were members of the Executive Committee. Shreeram Aradhye rejoined Novartis, and Patrick
Horber, Aharon Gal and Fiona Marshall joined Novartis after the 2021-2023 LTPP awards were made, and therefore did not receive an LTPP award for the 2021-2023 LTPP cycle.
7 Based on the closing share price of January 25, 2023 of CHF 85.30 per Novartis share and USD 92.81 per ADR for all members.
8 Includes any other perquisites, benefits in kind, and international assignment benefits as per the global mobility policy (e.g., housing, international health insurance, children’s school
fees, tax equalization). The compensation and benefits elements related to the period after the step-down dates are also reported under ‘other payments’.
9 Includes 2 042 realized PSUs, which vested on March 31, 2023 and 6 212 realized RSUs, which vested on May 1, 2023 and a cash buyout of CHF 469 071 (for a total value of
CHF 1 553 135), to Fiona Marshall in lieu of the Annual Incentive and LTI that she forfeited when leaving her previous employer.
10 Includes social security contributions to the extent that they result in a pension entitlement. Includes also contributions to company provided pension plans.
11 This amount is out of total social security employer contributions of CHF 1 933 476 and pension employer contributions of CHF 1 852 898 paid in 2023 for all Executive Committee
members.
12 This amount is out of total social security employer contributions of CHF 3 266 972 and pension employer contributions of CHF 2 608 462 paid in 2022 for all Executive Committee
members.
13 Includes CHF 5 975 824 for the member who stepped down during 2023.
14 Includes CHF 20 967 229 for members who stepped down during 2022.
97
Item 6. Directors, Senior Management and Employees
The 2023 total realized compensation for the CEO increased compared with the prior year, driven by (i) the higher
performance payouts of the 2023 Annual Incentive (185% compared with 100% in 2022) and the 2021-2023 LTPP
(122% compared with 57% payout for cycle 2020-2022), which will be blocked until January 2026, and (ii) the vest-
ing share price of the 2021-2023 LTPP, which was 16% higher than the prior cycle (when adjusted for the Sandoz
spin-off). For more information on the performance outcomes, see “—2023 Annual Incentive CEO balanced score-
card” and “—2021-2023 LTPP cycle performance outcomes.” The performance outcomes of each measure com-
pared with 2022 are provided below:
ANNUAL INCENTIVE
3rd party sales
Operating income
2023
2022
LTPP CYCLE ENDING
Significantly above
Significantly above
Met
Met
3rd party sales CAGR
Core operating income CAGR
Free cash flow/3rd party sales
Significantly above
Below
Innovation
Share of peers
Strategic objectives
Overall assessment
CEO payout
- 1
Above
Significantly above
Met
Met
Met
185%
100%
Relative TSR
Payout (weighted)
1 Share of peers was removed from the ECN Annual Incentive from performance year
2023, as disclosed in the 2022 Compensation Report
2023
102%
158%
108%
120%
122%
2022
43%
93%
92%
0%
57%
The strong performance outcomes in 2023 were driven by several factors including:
• Sales of Entresto, Kesimpta, Promacta, Lucentis and Ilaris
• Savings generated from the new, more efficient organizational structure of Novartis
• Strategic milestones achieved, including clinically meaningful Phase III data for multiple assets with blockbuster
potential, patient reach in low-and middle-income countries, achievements against our EPIC pledge commitment
and the launch of our all-employee share purchase plan
• Significant improvement in the rTSR; 6th position for the 2021-2023 cycle (versus 12th position for the cycle end-
ing in 2022), driven by a strong one-year 2023 TSR performance of 26%
Sandoz equity restoration plan
Novartis shareholders received a dividend in kind in Sandoz shares at the spin-off date. PSUs and RSUs held by
Novartis employees are not entitled to dividends. To ensure equal treatment of PSU and RSU holders relative to
Novartis shareholders, Novartis granted keep whole awards to its employees, including the CEO and members and
former members of the Executive Committee. This was done in accordance with the Sandoz spin-off equity resto-
ration plan as described in the 2022 Compensation Report:
• The keep whole awards had a value similar to that of the dividend in kind that the beneficiary would have received
had they been holding Novartis shares
• The keep whole awards were granted in the same equity instrument (i.e., PSUs or RSUs) with the same vesting
terms and performance conditions (if applicable) as the underlying award
The total value of keep whole awards granted to the active members of the Executive Committee was CHF 4 704 902.
This is equivalent to the estimated reduction in the value of the Novartis share price due to the dividend in kind dis-
tribution, and as such is not considered additional compensation. The amounts realized from the vesting of keep
whole awards will however be reported in the ECN realized pay for each respective year.
98
Item 6. Directors, Senior Management and Employees
CEO and Executive Committee 2023 compensation at grant
In accordance with the Swiss Code of Obligations, Novartis discloses total compensation at grant value for the CEO
and Executive Committee.
The CEO 2023 compensation at grant increase was mainly driven by the stronger performance on the 2023 Annual
Incentive compared with 2022, as detailed in “—CEO and Executive Committee 2023 realized compensation.” 2023
compensation at grant for all ECN members remained broadly the same compared with 2022 (CHF 68 365 598 ver-
sus CHF 70 819 358), as the higher performance payouts were offset by a reduction in the number of members
reported. In 2022, five members stepped down, including the Sandoz CEO, who was not replaced, compared with
one in 2023.
The table below discloses the following information about compensation for the CEO and Executive Committee:
• 2023 base salary
• Actual cash portion and portion deferred in equity of the 2023 Annual Incentive
• 2023-2025 LTPP cycle awards, which are reported at target grant date value, based on the assumption that the
awards will vest at 100% achievement, excluding any share price movement and dividend equivalents that may be
accrued over the performance cycle. The future payout will be determined only after the performance cycle con-
cludes in three years (i.e., at the end of 2025), with a payout range of 0% to 200% of the target value
• Other payments for 2023, which include other benefits, either paid in cash or granted in equity during the year
• 2023 pension benefits
• Total 2023 and total 2022 compensation at grant, for comparative purposes
The highest-paid individual in 2023 was Vasant Narasimhan, CEO of Novartis.
Compensation at grant value for the CEO and Executive Committee (2023 compared with 2022)
In CHF (gross) 1
Annual
Base Salary
2023 Annual
Incentive
(performance
achieved)
2023-2025
LTPP cycle
PSUs
(target amount) 2
Other
payments 3
Pension
benefits 4
Total 2023 5
Total 2022 6
Vasant Narasimhan
1 822 334
5 075 255
5 943 960
258 918
170 125 13 270 592 10 960 639
Victor Bulto
859 085
1 642 520
2 161 211
359 772
137 180
5 159 769
2 948 867
Patrick Horber
(from December 1, 2023) 7
83 333
132 560
–
6 455 092
14 007
6 684 992
–
Harry Kirsch
1 103 917
2 315 616
2 880 581
47 744
180 055
6 527 912
5 426 373
Other ECN members
5 789 756 10 093 882 12 714 201
1 348 250
1 178 184 31 124 272 30 516 250
Subtotal
9 658 425
19 259 833
23 699 952
8 469 775
1 679 551
62 767 536
49 852 130
Members who stepped down
715 845
1 264 993
2 767 559
731 384
118 282
5 598 062 20 967 229 8
Subtotal
Total
715 845
1 264 993
2 767 559
731 384
118 282
5 598 062
20 967 229
10 374 269
20 524 826 9 26 467 511
9 201 159
1 797 833 10 68 365 598
70 819 358
1 All compensation amounts are stated gross, before the deduction of social security contributions and income tax paid by the Executive Committee members. Amounts for Executive
Committee members paid in USD were converted at a rate of USD 1.00 = CHF 0.8986, which is the same average exchange rate used in the Company’s 2023 consolidated financial
statements (a similar rule applies to payments made in other currencies during the year).
2 The amounts represent the underlying share value of the target number of PSUs granted to Executive Committee members for the 3-year performance cycle, based on the closing
share price on the grant date (January 24, 2024) of CHF 93.53 per Novartis share and USD 107.55 per ADR for all members.
3 Includes any other perquisites, benefits in kind, buyouts and international assignment benefits as per the global mobility policy (e.g., housing, international health insurance, children’s
school fees, tax equalization). The compensation and benefits elements related to the period after the step-down dates are also reported under ‘other payments’.
4 Includes social security contributions to the extent that they result in a pension entitlement. Includes also contributions to company provided pension plans.
5 Aggregate compensation at grant for the 12 Executive Committee members, including Marie-France Tschudin who stepped down during the financial year 2023.
6 Aggregate compensation at grant for the 16 Executive Committee members, including the members who stepped down during the financial year 2022. For more information, see item
6B of the 2022 Annual Report.
7 In line with the Company’s buyout policy (see “—CEO and Executive Committee: appointments”), Patrick Horber received buyout awards of CHF 1 058 274 in cash to be paid out in
March 2024 as well as CHF 3 084 694 in PSUs, and CHF 2 292 624 in RSUs, both of which will vest between 2024 and 2026, in lieu of the Annual Incentive and LTI that he forfeited
when leaving his previous employer.
8 Includes five members (James Bradner, Richard Saynor, John Tsai, Susanne Schaffert and Robert Weltevreden) who stepped down during the financial year 2022.
9 The portion of the Annual Incentive delivered in equity is rounded up to the nearest share, based on the closing share price on the grant date (January 24, 2024) of CHF 93.53 per
Novartis share and USD 107.55 per ADR.
10 This amount is out of total social security employer contributions of CHF 1 933 476 and pension employer contributions of CHF 1 852 898 paid in 2023 for all Executive Committee
members.
99
Item 6. Directors, Senior Management and Employees
Number of equity instruments granted to the CEO and Executive Committee (2023 compared with 2022)
Variable compensation1
2023 Annual Incentive
(performance achieved)
Equity
(number) 2
2023-2025 LTPP
PSUs
(target number) 3
Other
Equity/PSUs
(number)
Vasant Narasimhan
Victor Bulto
Patrick Horber (from December 1, 2023) 5
Harry Kirsch
Other ECN members
Subtotal
Members who stepped down 4
Subtotal
Total
27 132
8 498
709
24 758
58 099
119 196
6 763
6 763
125 959
69 683
25 914
–
33 770
149 713
279 080
32 445
32 445
311 525
–
–
62 981
–
–
62 981
–
–
62 981
Total
2023
96 815
34 412
63 690
58 528
207 812
461 257
39 208
39 208
500 465
Total
2022
90 145
14 016
–
43 749
218 563
366 473
178 653
178 653
545 126
1 The values of these awards are reported in the table “—Compensation at grant value for the CEO and Executive Committee.”
2 Vested shares, restricted shares and/or RSUs granted under the Annual Incentive for the 2023 performance period.
3 Target number of PSUs granted under the LTPP for the 2023-2025 performance cycle.
4 Marie-France Tschudin stepped down from the Executive Committee on September 15, 2023, and will end her contractual notice period on September 30, 2024. The LTPP grant for
the 2023-2025 performance cycle, included in the table above, will vest at the end of the performance cycle on a pro-rata basis subject to the plan rules.
5 In line with the Company’s buyout policy (see “—CEO and Executive Committee: appointments”), Patrick Horber received buyout awards of 36 129 PSUs, and 26 852 RSUs, both of
which will vest between 2024 and 2026, in lieu of the Annual Incentive and LTI that he forfeited when leaving his previous employer.
Additional disclosures and other statutory information
Fixed and variable compensation
The following table summarizes the annual base salary
and variable compensation at grant for the financial year
2023 for the CEO and Executive Committee.
base salary, the Annual Incentive, realized LTI and other
benefits). No other payments (or waivers of claims) were
made to former Executive Committee members or to “per-
sons closely linked” to them during 2023.
Vasant Narasimhan
Victor Bulto
Patrick Horber (from December 1, 2023)
Harry Kirsch
Other ECN members 3, 4
Total
Annual
Variable
Base Salary 1 Compensation 2
13.9%
17.1%
1.2%
17.4%
19.3%
15.8%
86.1%
82.9%
98.8%
82.6%
80.7%
84.2%
1 Pro-rated for ECN time.
2 See the table “–Compensation at grant value for the CEO and Executive Committee”
with regard to the disclosure principles of variable compensation.
3 For the other seven active members at December 31, 2023.
4 Excludes the member who stepped down during the financial year 2023.
Other payments to Executive Committee members
During 2023, no other payments or waivers of claims
other than those set out in the tables (including the foot-
notes) contained in this Compensation Report were
made to Executive Committee members or to “persons
closely linked” to them.
Payments to former Executive Committee members
Under the contracts of Executive Committee members
and in line with the Company’s LTI plan rules, payments
were made to 12 former members. Of this, CHF 8 725 507
relates to the vesting of LTI awards. In addition, contrac-
tual amounts totaling CHF 5 028 812 were made (com-
prising the base salary, the Annual Incentive and other ben-
efits), and tax equalization on variable compensation
granted during international assignments/commuter
arrangements amounted to a total of CHF 221 718. The
highest paid former Executive Committee member was
John Tsai, who received CHF 3 537 225 (comprising the
Persons closely linked
“Persons closely linked”, a definition used throughout the
Annual Report, are (i) their spouse or equivalent, (ii) their
children (under 18 years of age), (iii) any legal entities that
they own or otherwise control, and (iv) any legal or natu-
ral person who is acting as their fiduciary.
Malus and clawback
Consistent with our “—CEO and Executive Committee
compensation philosophy and system,” in 2023 there was
no legal or factual basis on which to exercise malus or
clawback for current or former Executive Committee
members.
Award and delivery of equity to Novartis employees
During 2023, 11.8 million unvested restricted shares (or
ADRs), RSUs and target PSUs were granted, and 10.7 mil-
lion Novartis vested shares (or ADRs) were delivered to
Novartis employees under various equity-based participa-
tion plans. Current unvested equity instruments (restricted
shares, RSUs and target PSUs) held by employees repre-
sent 0.92% of issued shares. Novartis delivers treasury
shares to employees to fulfill these obligations and aims
to offset the dilutive impact from its equity-based partici-
pation plans.
Note 28 to the Company’s audited consolidated
financial statements
The total expense for the year for compensation awarded
to Executive Committee, using IFRS Accounting Stan-
dards measurement rules, is presented in Note 28 to the
Company’s audited consolidated financial statements.
100
Item 6. Directors, Senior Management and Employees
Shares, ADRs and other equity rights owned by Executive Committee members as at December 31, 20231
The following table shows, in alphabetical order after the CEO, the total number of shares, ADRs and other equity
rights owned by the CEO and the other Executive Committee members and “persons closely linked” to them as at
December 31, 2023. At this date, no members of the Executive Committee, either individually or together with “per-
sons closely linked” to them, owned 1% or more of the outstanding shares or ADRs of Novartis. As at December
31, 2023, all members who had served at least five years on the Executive Committee had met or exceeded their
personal Novartis share ownership requirements.
Vested shares
Unvested shares
and ADRs 1 and other equity rights 2
as a multiple of Unvested target PSUs
(e.g., LTPP) 4
annual base salary 3
Equity ownership level
Total as at
December 31,
2023
Total as at
December 31,
2022
Vasant Narasimhan
250 240
Shreeram Aradhye
Victor Bulto
Aharon Gal
Karen Hale
Patrick Horber
Harry Kirsch
Robert Kowalski
Steffen Lang
Fiona Marshall
Klaus Moosmayer
Subtotal
0
1 780
47 660
5 481
0
342 730
0
124 349
5 010
21 559
77 324
17 523
32 000
39 241
18 527
27 561
35 944
21 450
28 821
44 643
15 396
15x
169 770
497 334
406 502
1x
3x
9x
2x
2x
29x
2x
14x
4x
4x
19 573
28 310
6 862
48 182
22 083
82 290
26 085
49 080
16 864
31 187
37 096
62 090
93 763
72 190
49 644
460 964
47 535
202 250
66 517
68 142
14 394
36 386
62 960
28 568
0
399 948
32 495
174 237
34 980
47 421
798 809
358 430
500 286
1 657 525
1 237 891
Members who stepped down
36 174
Subtotal
Total
36 174
834 983
33 493
33 493
391 923
81 135
81 135
150 802
150 802
667 092
667 092
581 421
1 808 327
1 904 983
1 Includes holdings of persons closely linked to Executive Committee members (see definition “—Persons closely linked”).
2 Includes unvested shares and ADRs as well as other equity rights applicable for the determination of equity amounts for the share ownership requirements, as per the definition “—
CEO and Executive Committee: share ownership requirements.” Also includes unvested keep-whole awards received in connection to the Sandoz spin-off.
3 The multiple is calculated based on the full-year annual base salary and the closing share price as at the end of the 2023 financial year. The share price and ADR price on the final
trading day of 2023 was CHF 84.87 and USD 100.97, respectively.
4 The target number of PSUs is disclosed pro-rata to December 31, 2023, unless the award qualified for full vesting under the relevant plan rules. Also includes unvested keep-whole
awards received in connection to the Sandoz spin-off.
Executive Committee compensation approved by shareholders
The total compensation dispensed by the Company in 2023 is within the Say-on-Pay budget approved by the share-
holders at the 2022 AGM, including active Executive Committee members and those who stepped down in the course
of 2023.
101
Item 6. Directors, Senior Management and Employees
CEO and Executive Committee
compensation philosophy and system
Compensation philosophy
Our compensation philosophy aims to ensure that we
attract and retain outstanding Executive Committee
members and reward them according to their success
in implementing the Company strategy, as well as their
contribution to the Company performance and long-term
value creation. The main elements of our compensation
philosophy are set out in the table below.
Pay for
performance
Shareholder
alignment
• Variable compensation is tied directly to the
achievement of strategic Company targets
• Our incentives are significantly weighted
toward long-term equity-based plans
• Measures under the Long-Term Incentive
plans are calibrated to promote the creation
of shareholder value
• Executive Committee members are
expected to build and maintain substantial
shareholdings
Balanced
rewards
• Balanced set of measures to create
sustainable value
• Mix of targets based on financial metrics,
strategic objectives, and performance versus
our competitors
Business
ethics
• The Novartis Values and Behaviors are an
integral part of our compensation system
• They underpin the assessment of overall
performance for the Annual Incentive
Competitive
compensation
• Total compensation must be sufficient to
attract and retain key global talent
Approach to market benchmarking
Significant competition continues to exist for top execu-
tive talent with deep expertise and the requisite compe-
tencies and proven performance within the pharmaceu-
tical and biotechnology industries. For this reason,
external peer compensation data is one of a number of
key reference points considered by the Board of Direc-
tors and the Compensation Committee when making
decisions on executive pay, so as to help ensure that the
compensation system and levels at Novartis remain com-
petitive. Novartis is committed to confirming benchmark-
ing practices, including the healthcare peer group, to
shareholders on an annual basis.
The Compensation Committee believes in a rigorous
approach to peer group construction and maintenance.
Furthermore, it believes that using a consistent set of
global peers that is similar in size and scope of the oper-
ations of Novartis enables shareholders to evaluate the
compensation year on year and make pay-for-perfor-
mance comparisons.
Although Novartis is headquartered in Switzerland,
more than a third of its sales come from the US market,
and the US therefore represents a significant talent pool
for the recruitment of executives by the Company. The
Compensation Committee uses a pay comparator group
of global healthcare companies to ensure that Novartis
is able to attract and retain key talent globally. To ensure
European and local practices are fully taken into account,
the Compensation Committee also uses a cross-indus-
try peer group of Europe-headquartered multinational
companies of a similar size and scope.
• Overarching emphasis on pay for
performance
GLOBAL HEALTHCARE PEER COMPANIES
Alignment with Company strategy
Our strategy is to focus on high-value, innovative
medicines that alleviate society’s greatest disease bur-
dens through technology leadership in R&D and novel
access approaches.
We made some strategic updates to our compensa-
tion framework to ensure it remains aligned to our Com-
pany strategy and compensation philosophy, while being
market competitive. Details of these changes are pro-
vided in “—2024 Executive Committee compensation
system changes and increases.”
AbbVie
Biogen
Amgen
AstraZeneca
Bristol-Myers Squibb
Eli Lilly & Co.
GlaxoSmithKline
Gilead Sciences
Johnson & Johnson
Novo Nordisk
Merck & Co.
Pfizer
Roche
Sanofi
EUROPEAN PEER COMPANIES
Anheuser-Busch InBev
L’Oréal
AstraZeneca
Merck KGaA
Bayer
BMW
Nestlé
Novo Nordisk
GlaxoSmithKline
Reckitt Benckiser
Roche
Siemens
Sanofi
Unilever
102
Item 6. Directors, Senior Management and Employees
Components of CEO and Executive Committee compensation
The compensation of the CEO and Executive Committee is comprised of fixed pay, including an annual base salary,
pension and other benefits, in addition to a variable annual incentive and long-term incentive, which are entirely per-
formance based.
Fixed pay and benefits
Annual base salary
Pension and other benefits
2023 Annual Incentive
PLAN OVERVIEW
Target Annual Incentive
• The annual base salary is based on the individual’s role, skills and experience. It is reviewed on an annual basis
based on an external benchmark for the role, the performance of the individual, business performance and
the external environment, salary increases across the Company and market movements.
• Pension and other benefits are provided to the ECN members on the same terms as to all other employees
based on local country practices and regulations. No supplementary pension plans or savings plans are pro-
vided.
• Pension and other benefits do not constitute a significant proportion of total compensation.
• Globally the Company operates both defined benefit and defined contribution pension plans (see also Note
26 to the Company’s consolidated financial statements).
• Novartis may provide other benefits according to local market practice. These include the provision of a com-
pany car, tax and financial planning, and insurance benefits.
Annual base
salary
x
Target
incentive %
=
Target
Annual Incentive
On-target opportunities
• CEO: 150% of annual base salary.
• Other Executive Committee members: 80% to 120% of annual base salary.
Performance measures
• An Annual Incentive balanced scorecard containing:
• Financial performance measures (60% weighting) related to the Company
• Strategic objectives (40% weighting)
• The balanced scorecard targets and achievements of the CEO are detailed in “—2023 CEO Annual
Incentive balanced scorecard.”
• The balanced scorecards for individual Executive Committee members include the same company financial
targets (60% weighting) as well as individual qualitative and quantitative targets (40% weighting).
• Values and Behaviors are a key component of the Annual Incentive and are embedded in our culture. As
such, members of the Executive Committee are expected to demonstrate these to the highest standards.
Target setting
• Financial targets are set at the beginning of each financial year and align with the strategic plan proposed
by management to the Board of Directors for approval.
• The strategic objectives are aligned with the most important priorities in any performance year.
Payout ranges
• The payout schedule for the Annual Incentive incorporates performance against financial and strategic
objectives. The payout range is 0% to 200% of on-target opportunity based on performance, as shown
below:
PERFORMANCE
Outstanding
Exceeds expectations
Meets expectations
Partially meets expectations
Below expectations
PAYOUT (% of on-target)
170% – 200%
130% – 160%
80% – 120%
40% – 70%
0%
Payout formula
Annual base
salary
x
Target
incentive %
x
Payout factor (% of
target: 0%–200%)
=
Realized
Annual Incentive
Payout vehicle
• At the end of the performance period, 50% is paid in cash, and the remaining 50% is delivered in Novartis
restricted shares or RSUs, deferred for three years.
• Executives may choose to receive all or part of the cash portion of their Annual Incentive in Novartis shares
or American Depositary Receipts (ADRs; US only) that will not be subject to forfeiture conditions. In the US,
awards may also be delivered in cash under the US deferred compensation plan.
Dividend rights, voting rights
and settlement
• Novartis restricted shares and ADRs carry voting rights and dividends during the vesting period. RSUs are
of equivalent value but do not carry voting rights and dividends during the vesting period.
• Following the vesting period, settlement of RSUs is made in unrestricted Novartis shares or ADRs.
103
Item 6. Directors, Senior Management and Employees
2021–2023 LTPP cycle
PLAN OVERVIEW
Award vehicle
Performance share units (PSUs) are granted at the beginning of the three-year performance cycle and vest
at the end of the cycle to the extent that performance conditions have been met. At the time of vesting, they
are converted into Novartis shares.
PSUs carry dividend equivalents that are paid in shares at the end of the cycle.
Grant formula
At the start of the performance cycle, PSUs are granted under the LTPP, as follows:
Step 1
Annual base
salary
Step 2
Grant value
x
/
Target
incentive %
Share price
=
=
Grant value
Target number of
PSUs
Target opportunity
• CEO: 325% of annual base salary
• Other Executive Committee members: between 180% and 260% of annual base salary
Performance measures
• 3rd party sales CAGR (25%)
• Core operating income CAGR (25%)
• Innovation (25%)
• Relative TSR (25%)
Target setting
Payout range
Financial targets: Targets for 3rd party sales CAGR and core operating income CAGR are set based on the
strategic plan of the Company.
Innovation: Development targets are based on targeted filings communicated at the start of each
performance cycle, weighted 70%. The Science & Technology Committee (STC) determines the most
important Biomedical Research milestones, weighted 30%.
Financial targets: When assessing performance, achievements for threshold, target and maximum payout are
defined for each metric, and a payout curve is applied to determine the corresponding payout between 0–200%
against target.
Innovation: At the end of the cycle, the Compensation Committee determines the payout factor in the range
of 0–150% based on the performance assessment made by the STC. A payout between 150–200% of target
is only delivered for truly exceptional performance.
Relative TSR: Performance on TSR is assessed relative to our global healthcare peer group, as outlined
below. A three-month averaging method is used for both the start and the end of the performance cycle.
Companies are then ranked in order of highest to lowest TSR in USD. No payout for below median TSR
applies.
Global healthcare peer group
Novartis position
in the peer group
Payout range
(% of target)
AbbVie
Biogen
Amgen
AstraZeneca
Position 1 – 2
Bristol-Myers Squibb
Eli Lilly & Co
Position 3 – 5
GlaxoSmithKline
Gilead Sciences
Johnson & Johnson
Position 6 – 8
Novo Nordisk
Merck & Co.
Pfizer
Position 9 – 15
170% – 200%
130% – 160%
80% – 120%
0%
Roche
Sanofi
The Compensation Committee may use its discretion on each metric, including deciding on the payout
within the ranges where appropriate. In doing so, it takes into consideration factors such as the underlying
assumptions of the targets set at the beginning of the cycle, overall economic conditions, currency
fluctuations and other unforeseeable situations.
Payout formula
Target number of
PSUs
x
Payout factor
+
Dividend
equivalents
=
Realized PSUs
104
Item 6. Directors, Senior Management and Employees
CEO and Executive Committee: share ownership requirements
CEO and Executive Committee members are required to own at least a minimum multiple of their annual base sal-
ary in Novartis equity as set out in the table below. The Compensation Committee reviews compliance with the
share ownership guideline on an annual basis.
Function
Ownership level
Additional holding
requirements
Time for achieving level
Equity included
in determination
CEO
CFO
5 x annual base salary
3 x annual base salary
Equity vesting under the
LTPP for a minimum of
two years after the
vesting date
Other EC members
None
5 years within hire or
promotion.
In the event of a substan-
tial rise or drop in the
share price, the Board of
Directors may, at its
discretion, amend the
time period accordingly.
• Vested and unvested
Novartis shares or
ADRs, and RSUs
acquired under Novartis
compensation plans
(unvested PSUs
excluded)
• Other shares and vested
options of Novartis
shares or ADRs that are
owned directly or
indirectly by “Persons
closely linked” to an
Executive Committee
member
CEO and Executive Committee: appointments
ELEMENT OF COMPENSATION POLICY
Level
The overall package should be market-competitive to enable the recruitment of global executive talent with
deep expertise and competencies.
Annual base salary
The Compensation Committee may appoint individuals who are new to a role on an annual base salary
that is below the market level, with a view to increase this toward market level over a period of three to four
years as an individual develops in the role.
This prudent approach ensures pay levels are merit-based, with increases dependent on strong
performance and proven ability in the role over a sustained period.
If the scope of an existing Executive Committee member’s role changes significantly during the year, the
Compensation Committee may make adjustments to the individual’s base salary (and/or incentives) in
consideration of the benchmark of the new role and the Executive Committee appointments compensation
policy.
Incentives
The compensation package will normally include the key compensation elements and incentive
opportunities in line with those offered to current Executive Committee members.
In exceptional circumstances, higher incentive opportunities than those offered to current Executive
Committee members may be provided at the Compensation Committee’s discretion.
Performance measures may include business-specific measures tailored to the specific role.
Pension and other benefits
Newly appointed Executive Committee members are eligible for the local country pension plan and other
benefits in line with the wider employee group.
Buyouts
The Compensation Committee seeks to balance the need to offer competitive compensation opportunities
to acquire the talent required by the business with the principle of maintaining a strong focus on pay for
performance.
As such, when an individual forfeits variable compensation as a result of an appointment at Novartis,
the Compensation Committee may offer replacement awards to compensate the commercial equivalent
value or fair value of payments and awards forfeited by the individual, in such form as the Compensation
Committee considers appropriate, taking into account relevant factors.
Relevant factors include the expected value of the forfeited award, the replacement vehicle (i.e., cash,
restricted share units, restricted shares or performance share units), whether the award is contingent on
meeting performance conditions or not, the timing of forfeiture (i.e., Novartis mirrors the blocking or vesting
period of the forfeited award) and the leaver conditions, in case the recruited individual leaves Novartis
prior to the end of the blocking or vesting period.
If individuals are required to relocate or be assigned away from their home location to take up their position,
relocation support may be provided in line with our global mobility policies (e.g., relocation support, tax
equalization). This includes ongoing US state income tax liabilities on behalf of US citizens locally employed
outside the US who have US workdays and therefore, US state taxable compensation that generates a US
state tax liability.
International mobility
105
Item 6. Directors, Senior Management and Employees
CEO and Executive Committee: termination arrangements
Retirement, termination by
the Company for reasons
other than performance or
conduct, and change of
control
Pro-rata Annual Incentive is
paid to reflect the portion of
the year the individual was
employed.
Awards are released on the
original blocking end date. Is
subject to forfeiture in the
event that a leaver joins a
competitor company before
the original vesting date.
Awards vest on the regular
vesting date, subject to
performance, on a pro-rata
basis for time spent with the
Company during the
performance cycle. Is subject
to forfeiture in the event that
a leaver joins a competitor
company before the vesting
date.
Accelerated vesting is
applied to equity pro-rated
until last date of employment
Elements
Annual Incentive for period
between start of notice and
termination date
Unvested equity: mandatory
deferral of Annual Incentive
into restricted shares/
restricted share units (RSUs)
Unvested equity: voluntary
deferral of Annual Incentive
into restricted shares/RSUs/
American Depository
Receipts (ADRs) (ADRs
applicable for US employees
only)
Unvested equity: mandatory
Long-Term Incentive
performance share units
(PSUs)
Unvested equity: Buyouts or
previous equity grants in
restricted shares/
restricted share units (RSUs)
Voluntary
resignation
Termination by the
Company for misconduct or
poor performance
Death or
long-term disability
Annual Incentive is fully forfeited.
Pro-rata Annual Incentive is
paid to reflect the portion of
the year the individual was
employed.
Unvested restricted shares and restricted share units
(RSUs) are forfeited.
Accelerated vesting is
applied.
Awards are not subject to forfeiture during the deferral period.
All of the award is forfeited.
Accelerated vesting at target
is applied.
All of the award is forfeited.
Accelerated vesting is
applied
Further details are provided in in our “—Risk Management principles.”
Malus and clawback policy
Any incentive compensation paid to Executive Commit-
tee members is subject to malus and clawback rules.
This means that the Board of Directors for the CEO, and
the Compensation Committee for the other Executive
Committee members, may decide – subject to applica-
ble law – to retain any unpaid or unvested incentive com-
pensation (malus), or to recover incentive compensation
that has been paid or vested in the past (clawback). This
applies in cases where the payout has resulted from a
violation of laws or conflicts with internal management
standards, including Company and accounting policies.
This principle applies to both the short-term Annual
Incentive and all long-term incentive plans.
In October 2023, the Compensation Committee
adopted a no-fault compensation clawback policy “for
the recovery of erroneously awarded compensation” to
all members of the Executive Committee and certain
executive officers, in the event that the Company is
required to prepare an accounting restatement, in full
compliance with the U.S. Securities and Exchange Com-
mission (SEC) Rule.
106
Item 6. Directors, Senior Management and Employees
CEO and Executive Committee performance management
To foster a high-performance culture, the Company applies a performance management process based on quan-
titative and qualitative criteria. The CEO and the other Executive Committee members are subject to a formal three-
step process, which consists of objective setting, performance evaluation and compensation determination. This
process is explained in the chart below.
Performance targets are generally set before the start of the relevant performance cycle. A rigorous framework
is in place for establishing targets to ensure they are suitably robust, challenging and align with the strategic prior-
ities of the Company.
The key factors taken into account when setting targets include:
• Internal and external market expectations
• The strategic priorities of Novartis
• Regulatory factors (e.g., new launches, patent expiries)
• Investment in capital expenditure
• Novartis Values and Behaviors
The targets are challenged at multiple stages before they are ultimately approved by the Board of Directors. In line
with good governance practices, the Compensation Committee works to set targets that are ambitious and chal-
lenging but do not encourage undue risk-taking.
Following the end of the performance cycle, the Board of Directors and the Compensation Committee consider
performance against the targets originally set. The CEO and Executive Committee members are not present while
the Board of Directors and the Compensation Committee discuss their individual performance evaluations and
determine their individual compensation. Prior to determining the final outcome, related factors such as perfor-
mance relative to peers, wider market conditions, general industry trends and best practice are used to inform the
overall performance assessment.
Objective setting
Performance evaluation
Compensation determination
• The CEO proposes his targets to the
• The CEO’s performance against
• A recommendation for the CEO’s
Board Chair; they are then reviewed and
approved by the Board of Directors,
based on input from the Compensation
Committee.
• For other Executive Committee
members, targets for their business
units or functions are initially discussed
with the CEO and subsequently
approved by the Board of Directors and
the Compensation Committee.
the individual balanced scorecard is
assessed by the Board of Directors.
• For Executive Committee members,
the CEO discusses each member’s
performance (assessed against his
or her individual balanced scorecard)
with the Board Chair before making
recommendations to the Board of
Directors for final determination.
• Periodic assessments, including at the
mid-year stage, ensure progress is
suitably tracked.
variable pay is made by the
Compensation Committee to the Board
of Directors for final determination.
• For the LTPP financial measures’
payout schedules, a formulaic approach
applies, and the Compensation
Committee can also exercise judgment
to ensure there is appropriate
alignment between payout levels and
overall performance achieved. The
same principle of discretion applies
to the relative TSR and innovation
performance measures.
• The CEO’s recommendations for
other Executive Committee members
are considered and approved by the
Compensation Committee, after which
the Board of Directors is notified of the
outcomes.
107
Item 6. Directors, Senior Management and Employees
2024 Executive Committee compensation
system changes and increases
Novartis is today a pure-play innovative medicines company with a focused strategy. The Board of Directors and
the Compensation Committee therefore decided to make certain changes to the compensation system, in partic-
ular to reflect the ambition of Novartis to build its US business organically and become a top player in the US.
In this context, the following changes align with our compensation philosophy, and will enable Novartis to com-
pete for talent globally (see “—Compensation philosophy”):
Annual Incentive metrics
CEO target compensation
As of the 2024 performance year, core operating income
(which includes adjustments for certain one-time/
non-recurring items such as restructuring and M&A
write-downs) replaces operating income in the financial
objectives of the Annual Incentive. The weighting remains
at 30% of the financial objectives. The Compensation
Committee decided to make this change as core oper-
ating income:
• Is consistent with how investors and analysts measure
underlying performance
• Encourages executives to make bold investments with
high return potential
• Aligns with our global healthcare peers and the broader
market, enabling more effective performance compar-
isons
Since 2019, the Board of Directors has made no mate-
rial increases to the CEO compensation. As a result, the
CEO’s target pay has fallen below the 25th percentile of
global healthcare peers.
Given the competitive landscape of the industry, the
Board of Directors decided to increase the CEO LTPP
target from 325% to 400% of his annual base salary as
from the cycle 2024-26. This represents a 15.8% increase
in total target compensation and moves him out of the
bottom quartile to just above the 25th percentile of global
healthcare peers, as shown in the figure below. The max-
imum payout for the LTPP remains at 200% of target,
and there will be no change to the metrics. For this review,
we used the same global healthcare companies speci-
fied in “—Approach to market benchmarking.”
A reconciliation between our core operating income and
operating income will continue to be provided in “—Item
5. Operating and Financial Review and Prospects —Non-
IFRS measures as defined by Novartis —Reconciliation
from IFRS Accounting Standards results to non-IFRS
measures core results.”
To maintain strong alignment between performance
and pay outcomes, the Board of Directors will retain its
discretion to consider any adjustment to the Annual
Incentive payout of the CEO and other Executive Com-
mittee members. Any such decisions will be disclosed in
the Compensation Report.
Share ownership and Annual
Incentive deferral
The CEO shareholding requirement increased from 5x
to 6x the CEO’s annual base salary. Increasing the CEO
shareholding requirement better aligns with shareholder
interests and brings Novartis in line with its global health-
care peers.
The Compensation Committee also decided to amend
the portion of the Annual Incentive that is mandatorily
deferred into equity to make the compensation system
more competitive, particularly in markets where bonus
deferrals are uncommon (such as Switzerland and US,
where much of our executive talent is sourced). As of the
2024 performance year, the portion of the Annual Incen-
tive that is mandatorily deferred into equity is reduced
from 50% to 30% for all Executive Committee members,
provided that their shareholding requirement is met. Com-
pliance with their shareholding requirement must then be
maintained.
Last disclosed global healthcare peer
CEO target compensation (CHF millions)
2023 Novartis
CEO target
2024 Novartis
CEO target
5
10
15
20
25
Bottom quartile to median
Median to upper quartile
In making its decision, the Board of Directors was mind-
ful of investor perspectives toward executive compen-
sation of European companies. It therefore chose to
make an increase to the LTPP target only (rather than to
the base salary or Annual Incentive), which is fully per-
formance-based (i.e. no use of restricted shares or stock
options as used by many peers), to align with the Com-
pany’s long term strategy. Targets will continue to be
stretched as demonstrated in “—Historic CEO incentive
payouts since appointment.”
The Board of Directors considered it appropriate to
act now so as to:
• Align with the Company’s ambition to become a top
player in the US. This requires a leader with significant
knowledge and experience of the US market, and exec-
utive compensation in US peer companies is more com-
petitive than in Europe
• Proactively avoid a further decline of the pay position-
ing of our CEO, while providing a fair compensation
system that rewards performance
• Demonstrate its commitment to establishing a com-
petitive system that promotes the retention and attrac-
tion of executive talent capable of delivering value to
shareholders
108
Item 6. Directors, Senior Management and Employees
Executive Committee compensation increases
Each year, we collaborate with our independent external advisors to benchmark the compensation levels of the
Executive Committee members and assess the competitiveness of their total target compensation. 2024 compen-
sation increases have been made in line with demonstrated performance and ability in role as outlined in “—CEO
and Executive Committee: appointments.” Accordingly, the following Executive members will receive the following
increases, effective 2024:
Shreeram Aradhye, President, Development and Chief Medical Officer
Dr. Aradhye, appointed in May 2022, led an operational improvement of our Development function, resulting in sig-
nificant approvals and submissions for new medicines across US, EU, China and Japan, as well as promising results
for many ongoing Phase III programs. Dr. Aradhye will receive a 4.7% increase in annual base salary and a 20%
increase in LTPP target, as a percentage of annual base salary.
Victor Bulto, President, US
Mr. Bulto, appointed in April 2022, delivered a strong performance on almost all brands including Pluvicto, Kisqali,
Kesimpta and Scemblix and ensured proactive launch-readiness for Cosentyx HS and Cosentyx IV. Mr. Bulto will
receive a 4% increase in annual base salary and a 20% increase in Annual Incentive target, as a percentage of
annual base salary.
Aharon (Ronny) Gal, Chief Strategy & Growth Officer
Mr. Gal, appointed in July 2022, made a significant impact in his first full year with the Company, integrating the new
Strategy and Growth team across the key decision-making bodies. Under his leadership, several business devel-
opment deals were completed in the year, including Xiidra, and Chinook. Mr. Gal will receive a 4% increase in annual
base salary and a 20% increase in LTPP target, as a percentage of annual base salary.
Karen Hale, Chief Legal Officer
Ms. Hale, appointed in May 2021, successfully managed several large-scale transactions, such as the Sandoz spin-
off, as well as successfully handling a number of important legal matters, a civil investigative demand involving
Entresto, the Exforge antitrust litigation, a shareholder derivative lawsuit, and critical intellectual property matters.
She also played a critical role in managing the obligations under the US Department of Justice’s deferred prose-
cution agreement and SEC Order and led both to a timely and satisfactory conclusion. Ms. Hale will receive a 2.8%
increase in annual base salary and a 20% increase in LTPP target, as a percentage of annual base salary.
Rob Kowalski, Chief People & Organization Officer
Mr. Kowalski, appointed in September 2021, provided critical support to the transformation of the company, includ-
ing outstanding progress of the restructuring of the organization, successful completion of consultations with works
councils and developing the ECN into a high-performing team. Mr. Kowalski will receive a 3.8% increase in annual
base salary and a 10% increase in LTPP target, as a percentage of annual base salary.
All other Executive Committee members will receive ordinary base salary increases received by other employees
in Switzerland or the US, effective March 1, 2024. Their Annual Incentive and LTPP targets remain unchanged.
Pay practice for other employees
The Board of Directors is equally committed to ensuring fair and competitive compensation practices across the
entire organization in 2024. Recent such examples include an approved global budget of USD 420 million for sal-
ary adjustments during the year 2024, achieving our EPIC commitments, further closing our global pay gap, and
launching the second wave of our all-employee share purchase plan which is now available to 64% of our global
population. More details can be found in the Novartis in Society Integrated Report 2023.
109
Item 6. Directors, Senior Management and Employees
Board compensation
Board member total compensation earned for the financial year 2023 (compared with 2022)
Positions as per
31 December
Share-Based
compensation
Audit and
Compliance Compensation Nomination
Committee
Committee
membership Committee
Board
Governance,
Sustainability
and
Science &
Technology
Committee
Risk
Committee
Cash
(CHF)
(A)
Shares
1
(number)
Shares
(CHF)
(B)
Social
Security
(CHF)
(C)
Total 2023
(CHF) Total 2022
(CHF)
2
(A)+(B)+(C)
Joerg Reinhardt 3
Board Chair
Chair
1 900 000 22 606 1 900 000
3 784 3 803 784 3 803 670
Simon Moroney
Vice-Chair
Chair
Patrice Bula
Nancy C. Andrews
Ton Buechner
Elizabeth Doherty
Bridgette Heller
Daniel Hochstrasser
Frans van Houten
Ana de Pro Gonzalo
Charles L. Sawyers
William T. Winters
Lead Independent
Director
•
Chair
•
Chair
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
John D. Young 4
• 4
Subtotal
Board members who stepped down 5
Subtotal
Total
•
•
•
•
230 000
2 736 230 000
–
460 000 456 228
205 000
2 438 205 000
3 784
413 784 398 670
•
180 000
2 141 180 000
–
360 000 360 000
Chair
210 000
2 497 210 000
4 675
424 675 424 560
•
225 000
2 676 225 000
215 000
2 557 215 000
–
–
450 000 450 000
430 000 423 334
185 833
2 085 185 833
4 675
376 341 237 894
162 500
3 565 227 500
4 675
394 675 390 000
•
195 000
2 319 195 000
180 000
2 141 180 000
–
4 283 360 000
–
–
–
390 000 329 560
360 000 360 000
360 000 360 000
• 4
• 4
150 000
991 150 000
4 675
304 675
–
4 038 333 53 035 4 463 333
26 267 8 527 933 7 993 916
30 000
1 150
30 000
3 784
63 784 512 339
30 000
1 150
30 000
3 784
63 784 512 339
4 068 333 54 185 4 493 333
30 051 8 591 717 8 506 255
1 The amounts shown represent the gross number of shares delivered to each Board member in 2023 for the respective Board member’s service period. The number of shares
reported in this column represent: (i) the second and final equity installment delivered in February 2023 for their service from the 2022 AGM to the 2023 AGM; and (ii) the first of
two equity installments delivered in August 2023 for their service from the 2023 AGM to the 2024 AGM. The second and final equity installment for their service from the 2023 AGM
to the 2024 AGM will take place in February 2024.
2 All amounts are before the deduction of social security contributions and income tax paid by the Board members.
3 No additional committee fees for chairing the Science & Technology Committee were delivered to Joerg Reinhardt.
4 From March 7, 2023.
5 Includes the compensation earned by Andreas von Planta, who stepped down at the 2023 AGM, as well as Ann Fudge and Enrico Vanni, who stepped down at the 2022 AGM.
Compensation approved and dispensed
In CHF
Compensation earned during the financial year 2023
Compensation earned for the period January 1 to February 28, 2023 (2 months)
Compensation to be earned for the period from January 1 to February 29, 2024 (2 months)
Board of
Directors
8 591 717
1 417 153
1 435 008
A
B
C
Total compensation earned for the period from the 2023 AGM to the 2024 AGM
A-B+C
8 609 573
Amount approved by shareholders at the 2023 AGM
Compensation dispensed by the Company within the approved amount
8 750 000
Yes
110
Item 6. Directors, Senior Management and Employees
Shares, ADRs and share options owned by Board members
The total number of vested Novartis shares and ADRs owned by members of the Board of Directors and “persons
closely linked” to them as at December 31, 2023, is shown in the table below. As at this date, no members of the
Board, either individually or together with “persons closely linked” to them, owned 1% or more of the outstanding
shares (or ADRs) of Novartis. As at the same date, no members of the Board of Directors held any share options
to purchase Novartis shares.
Joerg Reinhardt
Simon Moroney
Patrice Bula
Nancy C. Andrews
Ton Buechner
Elizabeth Doherty
Bridgette Heller
Daniel Hochstrasser
Frans van Houten
Ana de Pro Gonzalo
Charles L. Sawyers
William T. Winters
John D. Young
Subtotal
Number of shares
at December 31, 2023 1,2
655 336
5 992
11 240
10 536
22 958
14 843
6 214
2 824
17 115
2 422
17 493
30 777
682
798 432
169 867
169 867
968 299
Board members who stepped down at the 2023 AGM
Andreas von Planta
Subtotal
Total
1 Includes holdings of persons closely linked to Board members (see definition
“—persons closely linked”).
2 Each share provides entitlement to one vote.
Additional disclosures and other statutory information
Other payments to Board members
During 2023, no payments (or waivers of claims) other
than those set out in the Board member compensation
table titled “—Board member total compensation earned
for the financial year 2023” (including in the table foot-
notes) were made to current members of the Board or
to “persons closely linked” to them.
Payments to former Board members
During 2023, no payments (or waivers of claims) were
made to former Board members or to “persons closely
linked” to them.
Note 28 to the Group’s audited consolidated
financial statements
The total expense for the year for compensation awarded
to Board members, using IFRS Accounting Standards
measurement rules, is presented in Note 28 to the
Group’s audited consolidated financial statements.
111
Item 6. Directors, Senior Management and Employees
Board compensation philosophy and fee
structure
Philosophy and benchmarking
Aligned with market practice in Switzerland, the Board
of Directors sets compensation for its members at a level
that allows for the attraction of high-caliber individuals,
including both Swiss and international members, who
have global experience.
Given their focus on corporate strategy, supervision
and governance, Board members do not receive variable
compensation. Each year at the AGM, shareholders are
requested to approve, in a binding vote, the total com-
pensation of the Board of Directors until the following
AGM.
The Board of Directors sets the level of compensa-
tion for its Chair and the other members to be in line with
relevant benchmark companies, including other large
Switzerland-based multinational companies. Following
the acquisition of Credit Suisse by UBS in 2023, the
Board of Directors revised its peer benchmarking group
to a larger set of companies comprising ABB, Holcim,
Nestle, Richemont, Roche, SwissRe, UBS and Zurich
Insurance. This peer group was chosen for Board com-
pensation due to the comparability of Swiss legal require-
ments, including broad personal and individual liabilities
under Swiss law (and criminal liability under Swiss rules
regarding board and executive committee compensa-
tion related to the Swiss Code of Obligations), and under
US law, where applicable (due to the Company’s second-
ary listing on the New York Stock Exchange). Each year,
the Board of Directors reviews the compensation of its
members, including the Board Chair, based on a proposal
by the Compensation Committee and advice from its
independent advisor, including relevant benchmarking
information. To ensure independence of decision-mak-
ing, the peer group used for the Board of Directors is dif-
ferent to that used for the Executive Committee.
The Board Chair’s contract and the Board of Direc-
tors compensation policy do not provide for any termi-
nation-related payments.
Share ownership requirements for
Board members
To ensure their interests are aligned with those of share-
holders the Board Chair is required to own a minimum
of 30 000 Novartis shares, and other members of the
Board of Directors are required to own at least 5 000
Novartis shares within five years of having joined the
Board of Directors.
Board members are prohibited from hedging or
pledging their ownership positions in Novartis shares
that are part of their guideline share ownership require-
ment and are required to hold these shares for 12 months
after having retired from the Board of Directors. As at
December 31, 2023, all current and former members of
the Board of Directors who were required to meet the
minimum share ownership requirements did so.
Board fee structure
The annual fee rates for Board membership and addi-
tional functions are included in the table below. These
were approved by the Board of Directors and remain
unchanged from the prior term. Aggregate Board com-
pensation is aligned with other large Swiss companies.
2023-2024 AGM
annual fee
CHF 000s
Board Chair
Board membership
Vice-Chair
Lead Independent Director
Chair of the Audit and Compliance Committee
Chair of the Compensation Committee
Chair of the following committees:
• Governance, Nomination and
Corporate Responsibilities Committee
• Science & Technology Committee
• Risk Committee
Membership of the Audit
and Compliance Committee
Membership of the following committees:
• Compensation Committee
• Governance, Nomination and
Corporate Responsibilities Committee
• Science & Technology Committee
• Risk Committee
3 800
280
50
20
130
90
70
70
40
In addition, the following policies apply regarding Board
compensation:
• 50% of compensation is delivered in cash, paid on a
quarterly basis in arrears. Board members may choose
to receive more of their compensation in shares instead
of cash
• At least 50% of compensation is delivered in shares in
two installments: one six months after the AGM; and
one 12 months after the AGM
Board members bear the full cost of their employee
social security contributions, if any, and do not receive
share options or pension benefits.
For 2023, the Board Chair voluntarily waived the
increase in compensation to which he is contractually
entitled.
112
Item 6. Directors, Senior Management and Employees
Compensation governance
Legal framework
The Swiss Code of Obligations and the corporate gov-
ernance guidelines of the SIX Swiss Exchange require
listed companies to disclose certain information about
the compensation of board and executive committee
members, their equity participation, and loans made to
them. This Annual Report fulfills that requirement in addi-
tion to being in line with the principles of the Swiss Code
of Best Practice for Corporate Governance of the Swiss
Business Federation (economiesuisse). For more infor-
mation, see “—Corporate Governance” in Section 6C of
this Report.
Compensation decision-making
authorities
Authority for decisions related to compensation is gov-
erned by the Articles of Incorporation, Board Regulations
and the Compensation Committee Charter, which are all
published on the Company website: www.novartis.com/
investors/company-overview/corporate-governance.
The Compensation Committee serves as the supervi-
sory and governing body for compensation policies and
plans within Novartis, and has overall responsibility for
determining, reviewing and proposing compensation pol-
icies and plans for approval by the Board of Directors in
line with the Compensation Committee Charter. The dis-
cussions and conclusions of each committee meeting
are delivered to the full Board of Directors. A summary
of the compensation decision-making authorities is set
out below.
Approval process for key compensation decisions
CEO
Compensation
Committee
Board
Chair
Board of
Directors
AGM
O
T
O
O
O
O
O
O
T
T
O
T
T
Binding Vote
Binding Vote
Consultative Vote
T
T
T
T
T
Executive Compensation
CEO
Performance target setting and assessment
Individual compensation
Other EC members
Performance target setting and assessment
Individual compensation
All Executive Committee
Maximum aggregate amount of fixed and
variable long-term compensation
Board Compensation
Board of Directors
Fee structure for individual roles on the Board of Directors
Maximum aggregate amount of compensation
for the next term of office
Other
Board members, Executive Committee and other employees
Compensation report
Compensation policy and principles
Variable short-term and long-term compensation
payout factors for the Group
O Propose T Endorse T Approve
O
O
113
Item 6. Directors, Senior Management and Employees
Committee member independence
Risk management principles
The Compensation Committee is composed exclusively
of members of the Board of Directors who meet the inde-
pendence criteria set forth in the Board Regulations. From
the 2023 AGM, the Compensation Committee consisted
of the following four members: Simon Moroney (as Chair),
Patrice Bula, Bridgette Heller, and William Winters.
Role of the Compensation
Committee’s independent advisor
The independent external compensation advisor sup-
ports the Compensation Committee in determining the
design and implementation of compensation and bene-
fits.
In 2023, the Compensation Committee retained Mitul
Shah of Deloitte LLP, who was appointed in July 2022,
as its independent compensation advisor. The indepen-
dent advisor from Deloitte LLP and his respective team
that advised and supported the Compensation Commit-
tee are not responsible or rewarded for work on senior
compensation beyond support provided to the Compen-
sation Committee and the People & Organization func-
tion.
Meetings held in 2023 and
self-evaluation
In 2023, the Compensation Committee held six formal
meetings. For the approval of the Board of Directors, in
line with prior years, it collaborated with the Science &
Technology Committee to review and endorse the inno-
vation targets and achievements of the Annual Incentive
and LTPP. The Compensation Committee will conduct a
self-evaluation in 2024.
The Compensation Committee, with support from its
independent advisor, reviews market trends in compen-
sation, and changes in corporate governance rules and
best practices. Together with the Risk Committee, it also
reviews the Novartis compensation systems to ensure
that they do not encourage inappropriate or excessive
risk-taking, and instead encourage behaviors that sup-
port sustainable value creation. A summary of the risk
management principles is outlined below.
RISK MANAGEMENT PRINCIPLES
• Rigorous performance
management process, with
approval of targets and
evaluation of performance
of the CEO by the Board of
Directors
• Balanced mix of short-term and
long-term variable compensa-
tion elements
• Novartis Values and Behav-
iors are a key component of
the Annual Incentive and are
embedded in our culture
• Clawback and malus principles
apply to all elements of the
variable compensation
• Performance-vesting Long-
Term Incentives only, with
three-year cycles
• All variable compensation is
capped at 200% of target
• Contractual notice period of
12 months
• Post-contractual non-compete
period is limited to a maximum
of 12 months from the end
of employment. Resulting
compensation, if applicable, will
not exceed the average annual
compensation (annual base
salary plus Annual Incentive)
of the previous three financial
years
• Good and bad leaver provisions
apply to variable compensation
of leavers
• No severance payments or
change-of-control clauses
• Share ownership requirements;
no hedging or pledging of
Novartis share ownership
• No loans granted to current or
former members of the Execu-
tive Committee and the Board
of Directors or to “Persons
closely linked” to them
114
Item 6. Directors, Senior Management and Employees
Mandates outside the Novartis Group
According to article 34 of the Articles of Incorporation (https://www.novartis.com/investors/company-overview/
corporate-governance), limitations apply to mandates outside the Novartis Group for Board members and Execu-
tive Committee members (see “-Item 6.C Board Practices-Board of Directors-Mandates outside the Novartis Group”
and “-Item 6.C Board Practices-Executive Committee-Mandates outside the Novartis Group”). The following exter-
nal mandates are subject to these limitations and are therefore presented in the Compensation Report.
Board Members
Joerg Reinhardt
Swiss Re AG, Switzerland T
• Member of the Board
Nancy C. Andrews
Charles River Laboratories International, Inc., US T
• Member of the Board
• Chair of the Science and Technology Committee
Maze Therapeutics, Inc., US
• Member of the Board
Ton Buechner
Burckhardt Compression AG, Switzerland T
• Board Chair
• Chair of the Strategy and Sustainability Committee
Swiss Prime Site AG, Switzerland T
• Board Chair
• Chair of the Sustainability Board
Tonality Holding AG, Switzerland (private holding)*
• Director
Bandinnera GmbH, Switzerland (private holding)*
• Manager
Great Apes Aviation GmbH, Switzerland (private holding)*
• Manager
Patrice Bula
Schindler AG, Switzerland T
• Member and Vice Chair of the Board
Froneri Lux Topco Sarl, Luxembourg
• Board Chair
New Tiger LLC, US
• Member of the Board
• Chair of the ESG Committee
Elizabeth (Liz) Doherty
Corbion NV, Netherlands T
• Member of the Board
• Chair of the Audit Committee
Royal Philips NV, Netherlands T
• Member of the Supervisory Board
• Chair of the Audit Committee
Bridgette Heller
Aramark, US T
• Member of the Board
DexCom, Inc., US T
• Member of the Board
Integral Ad Science Inc., US T
• Member of the Board
Newman’s Own Inc., US
• Member of the Board
Executive Committee members
Steffen Lang
Bachem Holding AG, Switzerland T
• Board member
T in listed companies
* under common ownership
Daniel Hochstrasser
Daniel Hochstrasser AG, Switzerland
• Board Chair
• CEO
Frans van Houten
Absci Corporation, US T
• Member of the Board
Castor EDC, NL
• Board Chair
Synthesis Health Inc. US
• Member of the Board
FvH Capital BV, NL (private family holding)
• Director
Simon Moroney
Biotalys NV, Belgium T
• Board Chair
• Chair of the Remuneration and Nomination Committee
Ana de Pro Gonzalo
Mobico Group PLC, UK T
• Member of the Board
STMicroelectronics NV, Switzerland T
• Member of the Supervisory Board
• Chair of the Audit Committee
Charles Sawyers
–
William Winters
Standard Chartered Bank plc., UK T
• Member of the Board
• CEO
John Young
Arvinas Inc, US T
• Member of the Board
Johnson Controls International plc., Ireland T
• Member of the Board
Imbria Pharmaceuticals Inc., US
• Member of the Board
Other Executive Committee members
–
115
Statutory Auditor’s Report
Statutory Auditor’s Report
to the General Meeting of Novartis AG, Basel
Report on the Audit of the Compensation Report
Opinion
We have audited the Compensation Report of Novartis
AG (the Company) for the year ended December 31,
2023. The audit was limited to the information pursuant
to Art. 734a-734f of the Swiss Code of Obligations (CO)
namely the tables “Realized compensation for the CEO
and Executive Committee (2023 compared with 2022)”
on page 97, “Compensation at grant value for the CEO
and Executive Committee (2023 compared with 2022)”
on page 99, “Number of equity instruments granted to
the CEO and Executive Committee (2023 compared with
2022)” on page 100 and sections “Additional disclosures
and other statutory information” (CEO and ECN) on
pages 100-101, as well as the “Board compensation” on
page 110-111 and “Additional disclosures and other stat-
utory information” (BoD) on page 111 of the Compensa-
tion Report of Novartis AG for the year ended Decem-
ber 31, 2023, hereinafter referred to as “disclosures
made on the pages defined as subject to audit”.
In our opinion, the information pursuant to Art.
734a-734f CO in the accompanying Compensation
Report complies with Swiss law and the Company’s arti-
cles of incorporation.
Basis for Opinion
We conducted our audit in accordance with Swiss law
and Swiss Standards on Auditing (SA-CH). Our respon-
sibilities under those provisions and standards are fur-
ther described in the “Auditor’s Responsibilities for the
Audit of the Compensation Report” section of our report.
We are independent of the Company in accordance with
the provisions of Swiss law and the requirements of the
Swiss audit profession, and we have fulfilled our other
ethical responsibilities in accordance with these require-
ments.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Other Information
The Board of Directors is responsible for the other infor-
mation. The other information comprises the information
included in the annual report, but does not include the
tables and disclosures in the Compensation Report men-
tioned in the “Opinion” paragraph of this report, the con-
solidated financial statements, the stand-alone financial
statements and our auditor’s reports thereon.
Our opinion on the Compensation Report does not
cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the Compensation
Report, our responsibility is to read the other informa-
tion and, in doing so, consider whether the other infor-
mation is materially inconsistent with the audited finan-
cial information in the Compensation Report or our
knowledge obtained in the audit or otherwise appears
to be materially misstated.
If, based on the work we have performed, we con-
clude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.
Board of Directors’ Responsibilities
for the Compensation Report
The Board of Directors is responsible for the prepara-
tion of a Compensation Report in accordance with the
provisions of Swiss law and the Company’s articles of
incorporation, and for such internal control as the Board
of Directors determines is necessary to enable the
preparation of a Compensation Report that is free from
material misstatement, whether due to fraud or error. The
Board of Directors is also responsible for designing the
compensation system and defining individual compen-
sation packages.
Auditor’s Responsibilities for the
Audit of the Compensation Report
Our objectives are to obtain reasonable assurance about
whether the information pursuant to Art. 734a-734f CO
is free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assur-
ance, but is not a guarantee that an audit conducted in
accordance with Swiss law and SA-CH will always detect
a material misstatement when it exists. Misstatements
can arise from fraud or error and are considered mate-
rial if, individually or in the aggregate, they could reason-
ably be expected to influence the economic decisions
of users taken on the basis of this Compensation Report.
116
Statutory Auditor’s Report
As part of an audit in accordance with Swiss law and
SA-CH, we exercise professional judgement and main-
tain professional skepticism throughout the audit. We
also:
•
Identify and assess the risks of material misstatement
in the Compensation Report, whether due to fraud or
error, design and perform audit procedures respon-
sive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstate-
ment resulting from fraud is higher than for one result-
ing from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the
override of internal control.
• Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effective-
ness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting esti-
mates and related disclosures made.
We communicate with the Board of Directors or its rel-
evant committee regarding, among other matters, the
planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide the Board of Directors or its relevant
committee with a statement that we have complied with
relevant ethical requirements regarding independence,
and to communicate with them all relationships and other
matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
KPMG AG
Richard Broadbelt
Licensed Audit Expert
Auditor in charge
Basel, January 30, 2024
Norman Dittes
Licensed Audit Expert
117
Item 6. Directors, Senior Management and Employees
6.C Board practices
Corporate governance
Framework
Novartis is committed to effective corporate governance,
and our corporate governance framework is intended to
support sustainable financial performance and long-
term value creation for our shareholders, patients,
employees and other stakeholders based on our Values
and Behaviors.
Novartis AG is subject to and compliant with the laws
and regulations of Switzerland (in particular, Swiss com-
pany and securities law, SIX Swiss Exchange rules and
the Swiss Code of Best Practice for Corporate Gover-
nance) and the securities laws of the United States,
including New York Stock Exchange (NYSE) rules, appli-
cable to foreign private issuers of securities.
The Novartis corporate governance principles are
described in key governance documents, in particular in
our Articles of Incorporation and the Regulations of
the Board, the Board Committees and the Executive
Committee (“Board Regulations”) (www.novartis.com/
investors/company-overview/corporate-governance).
The Governance, Sustainability and Nomination Com-
mittee (GSNC) regularly reviews both the corporate gov-
ernance principles and the key governance documents
against evolving best practice standards and new devel-
opments in line with our commitment to maintaining the
highest standards.
Governance bodies
GENERAL MEETING OF SHAREHOLDERS
Approves operating and financial review, Novartis Group consolidated financial statements, and financial
statements of Novartis AG; decides appropriation of available earnings and dividend; approves compensation
of Board and Executive Committee; elects Board members, Board Chair, Compensation Committee members,
Independent Proxy and external auditor; adopts and modifies Articles of Incorporation
BOARD OF DIRECTORS
Sets strategic direction of Novartis, appoints and oversees key executives, approves major transactions
and investments, adopts and modifies Board Regulations
EXECUTIVE COMMITTEE
Responsible for operational management of Novartis
EXTERNAL AUDITOR
Provides opinion on
compliance of Novartis
Group consolidated
financial statements and
the financial statements
of Novartis AG with
applicable standards and
Swiss law, on compliance
of the Compensation
Report with applicable
law, and on effectiveness
of internal controls over
financial reporting.
118
AUDIT AND COMPLIANCE COMMITTEECOMPENSATION COMMITTEERISK COMMITTEESCIENCE & TECHNOLOGY COMMITTEEGOVERNANCE, SUSTAINABILITY AND NOMINATION COMMITTEE
Who we are
7
Novartis in Society
Integrated Report 2023
Who we are
We are Novartis
Novartis is an innovative medicines company.
Every day, we work to reimagine medicine to
improve and extend people’s lives.
In 2023, our medicines reached 284 million
patients around the world.
Item 6. Directors, Senior Management and Employees
Group structure and shareholders
Group structure
Shareholders
Novartis AG and Group companies
Novartis AG, the Group’s holding company, is a corpo-
ration organized under Swiss law with issued registered
shares and registered office at Lichtstrasse 35, CH-4056
Basel, Switzerland.
The principal subsidiaries and associated companies
of the Novartis Group are shown in “Item 18. Financial
Statements—Note 33. Novartis principal subsidiaries and
associated companies.”
Significant shareholders
According to the Share Register, as of December 31, 2023,
the following registered shareholders, including nominees
and the American Depositary Share (ADS) depositary, held
more than 2% of the total share capital, with the right to vote
all their shares based on exemptions granted by the Board
(see “—Item 6.C Board practices—Shareholder participa-
tion—Voting rights, restrictions and representation—Reg-
istration restrictions”):*
Our operating environment and strategy
Organizational structure
Novartis is an innovative medicines company. Following
the spin-off of Sandoz, it no longer has divisions. Its five
organizational units represent parts of the Company along
the research and development/production/commercial-
ization continuum. These are Biomedical Research, Devel-
opment, Operations and the two commercial units – US
and International – which are, focused on their respec-
tive geographic areas.
Our performance in 2023
Governance, risk management and compensation
Shareholders registered for their own account:
Appendix
Emasan AG, Basel 1
UBS Fund Management (Switzerland) AG, Basel
Credit Suisse Funds AG, Zurich
% holding of
share capital
Dec 31, 2023
3.9
2.7
2.2
I n t e r national
ti o n s
O p e r a
Research and
development
n ctions
Gl o b a l f u
US
1 According to a disclosure notification filed with Novartis AG and the SIX Swiss
Exchange, the beneficial owner of the shares registered for Emasan AG is Sandoz
– Fondation de Famille, Liechtenstein.
Shareholders registered as nominees:
Nortrust Nominees Ltd., London
The Bank of New York Mellon, New York
Through The Bank of New York Mellon, Everett
Through The Bank of New York Mellon, New York
Through The Bank of New York Mellon, SA/NV, Brussels
Chase Nominees Ltd., London 1
% holding of
share capital
Dec 31, 2023
3.6
2.9
1.5
1.0
0.4
Shareholder acting as American Depositary Share (ADS) depositary:
JPMorgan Chase Bank, N.A., New York
8.3
1 Chase Nominees, Ltd. (Chase) has informed us that as of December 2023, it will no
longer register any shareholding positions on its own behalf. Shares held by
customers of Chase will be registered for such customer’s own account.
According to a disclosure notification filed with Novartis AG,
Norges Bank (Central Bank of Norway), Oslo, held 2.4%
of the share capital but was not registered in the Share
Register as of December 31, 2023.
Research and development
Shareholdings
Operations and global functions
At the heart of our company is research
and development (R&D):
• Biomedical Research is our innovation
engine, focused on creating new ways
of fi ghting disease and turning scientifi c
breakthroughs into new medicines with the
potential to change lives.
• Development oversees the development
of potential new medicines, running large
clinical trials to confi rm their safety and
effi cacy, and steering the way to regulatory
approval for use for patients.
Operations manufactures and delivers our
Majority holdings in publicly traded Group companies
medicines to customers, while also overseeing
The Novartis Group owns 70.68% of Novartis India Ltd.,
IT, procurement, real estate and other support
with its registered office in Mumbai, India, and a list-
services that we need to run our business.
Novartis operates 33 production sites worldwide.
ing on the BSE (formerly known as the Bombay Stock
Exchange) (ISIN INE234A01025, symbol: HCBA). The
Global functions provide support in areas
such as fi nance; human resources; legal; ethics,
total market value of the 29.32% free float of Novartis
risk and compliance; corporate aff airs; and
India Ltd. was USD 66.8 million on December 31, 2023,
strategy and growth. Novartis Global Health
using the quoted market share price at year-end. Apply-
and Sustainability focuses on improving health
in low- and middle-income countries (LMICs)
ing this share price to all the shares of the Company, the
and works to embed material sustainability and
market capitalization of the whole company was USD
ESG topics into our business.
227.8 million, and that of the shares owned by Novartis
was USD 161.0 million.
Commercial
According to a disclosure notification filed with
Novartis AG and the SIX Swiss Exchange, BlackRock, Inc.,
New York, held between 5% and 10% but was registered
US and International are our two commercial
with less than 2% of the share capital as of Decem-
units, focused on their respective geographic
ber 31, 2023.
areas. They work with customers to provide
innovative medicines and services that improve
treatment options and raise the quality of
care for patients. Novartis sells products in
approximately 130 countries worldwide.
Disclosure notifications pertaining to shareholdings
filed with Novartis AG and the SIX Swiss Exchange are
published on the latter’s electronic publication platform:
www.ser-ag.com/en/resources/notifications-market-par-
ticipants/significant-shareholders.html.
* Excluding 10.2% of the share capital held as treasury shares by Novartis AG or its
fully owned subsidiaries (including Swiss foundations controlled by Novartis AG)
119
PURPOSE, VISION AND ORGANIZATION
Our purpose is to reimagine medicine to
improve and extend people’s lives.
Purpose
Vision
Our vision is to become the most
valued and trusted medicines company
in the world.
Our company
Novartis organizational units represent
parts of the research, development,
production and commercialization
value chain.
Item 6. Directors, Senior Management and Employees
Duty to make an offer
According to the Swiss Federal Act on Financial Infra-
structures, anyone who – directly, indirectly or acting in
concert with third parties – acquires equity securities
exceeding 33 1/3% of the voting rights of a company
(whether or not such rights are exercisable) is required
to make an offer to acquire all listed equity securities of
that company. A company may raise this threshold up to
49% of the voting rights (“opting up”) or may, under cer-
tain circumstances, waive the threshold (“opting out”).
Novartis AG has not adopted any such measures.
Cross shareholdings
Novartis AG has no cross shareholdings in excess of
5% of capital, or voting rights with any other company.
Overview on shareholder structure
The following tables relate only to registered share-
holders and cannot be assumed to represent the entire
investor base because nominees and JPMorgan Chase
Bank, N.A., as ADS depositary, are registered as share-
holders for a large number of beneficial owners.
Number of registered shareholders/shares
As of December 31, 2023 1
1–100
101–1 000
1 001–10 000
10 001–100 000
100 001–1 000 000
1 000 001–5 000 000
5 000 001 or more 2
Number of
registered
shareholders
34 384
108 966
36 299
3 071
458
61
26
Total registered shareholders/shares
183 265
Unregistered shares
Total
% of
share capital
0.09
1.92
4.38
3.46
6.01
5.46
35.45
56.77
43.23
100.00
1 At the record date of the 2023 Annual General Meeting of Shareholders (AGM),
unregistered shares amounted to 16.3%.
2 Including significant registered shareholders as listed above
Registered shareholders by type
As of December 31, 2023, Novartis AG had approxi-
As of December 31, 2023
Shareholders in %
Shares in %
mately 183 000 registered shareholders.
Individual shareholders
Legal entities 1
Nominees, fiduciaries
and ADS depositary
Total
96.79
3.17
0.04
100.00
19.98
41.74
38.28
100.00
1 Excluding 10.2% of the share capital held as treasury shares by Novartis AG or its fully
owned subsidiaries (including Swiss foundations controlled by Novartis AG)
Registered shareholders by country1
As of December 31, 2023
Shareholders in %
Shares in %
Belgium
Canada
France
Germany
Ireland
Japan
Luxembourg
Switzerland 2
United Kingdom
United States
Other countries
Total
0.11
0.04
1.99
5.82
0.48
0.18
0.06
86.84
0.67
0.24
3.57
1.01
0.68
0.48
2.15
0.55
0.52
0.96
54.61
11.99
24.68
2.37
100.00
100.00
1 Registered shares held by nominees are shown in the country where the company/
affiliate entered in the Share Register as shareholder has its registered seat.
2 Excluding 10.2% of the share capital held as treasury shares by Novartis AG or its fully
owned subsidiaries (including Swiss foundations controlled by Novartis AG)
120
Item 6. Directors, Senior Management and Employees
Capital structure
Share capital
Convertible securities and options
Novartis AG has not issued convertible or exchangeable
bonds, warrants, options or other securities granting
rights to shares, other than certain instruments granted
under or in connection with equity-based participation
plans of employees.
Limitation on transferability
No transferability restrictions are imposed on shares (for
registration restrictions, see “—Item 6.C Board practices—
Shareholder participation—Voting rights, restrictions and
representation—Registration restrictions”). The registra-
tion of shareholders in the Share Register or in the ADR
register kept by JPMorgan Chase Bank, N.A., does not
affect the tradability of shares or ADRs.
As of December 31, 2023, the share capital amounted
to CHF 1 115 964 098.48 fully paid-in and divided into
2 277 477 752 registered shares with a nominal value of
CHF 0.49 each.
Shares are listed on the SIX Swiss Exchange (ISIN
CH0012005267, symbol: NOVN) and on the New York
Stock Exchange (NYSE) in the form of American Depos-
itary Receipts (ADRs) representing American Deposi-
tary Shares (ADSs) (ISIN US66987V1098, symbol: NVS).
No conditional capital exists as of December 31, 2023
nor has a capital band been introduced in the Compa-
ny’s Articles of Incorporation.
Shares, participation certificates,
non-voting equity securities, profit-
sharing certificates
Shares are issued as uncertificated securities (in the
sense of the Swiss Code of Obligations) and as book
entry securities (in terms of the Swiss Act on Intermedi-
ated Securities). All shares have equal voting rights and
carry equal entitlements to dividends. No participation
certificates, non-voting equity securities (Genussscheine)
or profit-sharing certificates have been issued.
Changes to share capital
AGM
Shareholder decision
2021
2022
2023
• Capital reduction by CHF 16.32 million (from CHF 1 233 530 460.00 to CHF 1 217 210 460.00)
• Authorization of the Board to repurchase shares up to a maximum of CHF 10 billion
between the 2021 AGM and the 2024 AGM
• Capital reduction by CHF 15.35 million (from CHF 1 217 210 460.00 to CHF 1 201 860 626.00)
• Authorization of the Board to repurchase shares up to a maximum of CHF 10 billion
between the 2022 AGM and the 2025 AGM2
• Capital reduction by CHF 63.12 million (from CHF 1 201 860 626.00 to CHF 1 138 738 876.00)
• Authorization of the Board to repurchase shares up to a maximum of CHF 10 billion
between the 2023 AGM and the 2026 AGM3
Shares canceled
32 640 000
30 699 668
126 243 500
EGM
Shareholder decision
2023
• Capital reduction by CHF 22.77 million (from CHF 1 138 738 876.00 to CHF 1 115 964 098.48)
by reducing the par value of each share from CHF 0.50 to CHF 0.49
Average repurchase
share price (CHF) 1
80.57
81.82
81.56
AGM
Proposal to the shareholders
Shares to be canceled
2024
• Capital reduction by CHF 42.90 million (from CHF 1 115 964 098.48 to CHF 1 073 065 943.53)
87 547 255
Average repurchase
share price (CHF) 1
86.36
1 All shares were repurchased on the SIX Swiss Exchange second trading line.
2 In addition to the remaining authorization from the 2021 AGM
3 In addition to the remaining authorization from the 2022 AGM
121
Item 6. Directors, Senior Management and Employees
Key Novartis share data
Issued shares
Treasury shares 1
Outstanding shares at December 31
2023
2022
2021
2 277 477 752
2 403 721 252
2 434 420 920
233 443 766
284 112 195
199 480 972
2 044 033 986
2 119 609 057
2 234 939 948
Weighted average number of shares outstanding
2 076 794 140
2 181 180 341
2 242 601 173
1 Approximately 94 million treasury shares (2022: 99 million 2021: 102 million) are held in Novartis entities that restrict their availability for use.
Per-share information1
Basic earnings per share from continuing operations (USD)
Diluted earnings per share from continuing operations (USD)
Net cash flows from operating activities from continuing operations (USD)
Year-end equity for Novartis AG shareholders (USD)
Dividend (CHF) 2
Dividend (USD) 3
2023
4.13
4.10
6.85
2022
2.77
2.76
5.98
22.83
28.00
3.30
3.92
3.20
3.51
2021
10.21
10.14
5.96
30.31
3.10
3.33
1 Calculated on the weighted average number of shares outstanding, except year-end equity
2 2023: proposal to shareholders for approval at the AGM on March 5, 2024.
3 Translated into US dollars at the December 31, 2023, rate of USD 1.189 to the Swiss franc. This translation is an example only, and should not be construed as a representation that
the Swiss franc amount represents, or has been or could be converted into US dollars at that or any other rate. 2022 and 2021, dividends are translated into US dollars at the
Bloomberg Market System Rate on the payment date.
Key ratios – December 31
Share price (CHF)
Price/earnings ratio 1
Dividend yield (%) 1
2023
14.1
3.9
2022
28.3
3.8
2021
8.2
3.9
1 Based on the Novartis share price at December 31 of each year
Year-end share price
High 1
Low 1
2023
84.87
93.87
74.62
2022
83.59
87.82
73.98
2021
80.28
86.75
73.44
Key data on ADRs issued in the US
Year-end ADR price (USD)
High 1
Low 1
Number of
ADRs outstanding 2
2023
100.97
105.13
80.03
2022
90.72
93.75
74.61
2021
87.47
98.47
79.70
189 633 312 225 435 680 269 891 321
1 Based on daily closing prices
2 The depositary, JPMorgan Chase Bank, N.A., holds one Novartis AG share for every
ADR issued.
Year-end market capitalization
(USD billions) 2
Year-end market capitalization
(CHF billions) 2
206.3
191.5
196.1
173.5
177.2
179.4
1 Based on daily closing prices
2 Market capitalization is calculated based on the number of shares outstanding
(excluding treasury shares). Market capitalization in USD is based on the market
capitalization in CHF converted at the year-end CHF/USD exchange rate.
122
Item 6. Directors, Senior Management and Employees
Shareholder participation
Shareholder engagement
Shareholder engagement is fundamental to our commit-
ment to governance and transparency, and the feedback
we receive during these engagements helps us create
long-term and sustainable value.
We concentrate our outreach efforts on our largest
100 shareholders – portfolio managers, buy-side profes-
sionals, stewardship teams and ESG analysts – who rep-
resent 60% of our ownership. While the Board Chair,
CEO and CFO, together with Investor Relations, are
accountable for ensuring effective shareholder engage-
ment, other senior managers from within and outside the
Executive Committee also participate in the meetings. We
conduct regular outreach to investors throughout the
year.
TYPES OF ENGAGEMENTS (SELECT EXAMPLES):
• AGM and quarterly results teleconferences (TCs)
• Bank conferences and management roadshows
• “Meet Novartis Management” and “R&D day” capital markets event
• Governance roadshow and TCs
• Board Chair’s meetings with Swiss, US and UK investors
• Annual ESG investor event, captioned “Impact and Health Equity”
• Sandoz spin-off EGM
TOPICS DISCUSSED WITH SHAREHOLDERS DURING 2023:
GROWTH:
• Replacement power
• Growth drivers (including Cosentyx, Entresto, Kisqali, Kesimpta and
Pluvicto)
• Policy and pricing environment
• Life cycle management
INNOVATION:
• Progress and milestones
• Data of pipeline projects
• Return on R&D investments
PRODUCTIVITY:
• Progress on financial, strategic and operational performance
• Long-term sustainability of financial performance
• Capital allocation strategy
• New organization model
• Sandoz spin-off
BUILDING TRUST WITH SOCIETY AND CULTURE:
• Board accountability on ESG, and integration of ESG and
compensation
• Strong governance, enhanced process and focus on material ESG
factors, leading to improved rating agency scores
• Patient access to innovative medicines
• Learning from Novartis Access programs implemented over the
decades, including integrated sustainable business models and
access principles to help address access and health inequity
• ESG targets: full carbon neutrality, patient access targets for
strategic innovative therapies, and global health flagship programs
• Progress on culture and other human capital metrics
COMPENSATION AND GOVERNANCE:
• Diversity of the Board, the Executive Committee, and the Company
• Board renewal, succession planning and evaluation
• The linking of the compensation system to key strategic priorities
• Risk oversight
• Stakeholder expectations from the Board on ESG matters
Voting rights, restrictions and
representation
REGISTRATION
Shareholders have the right to vote and to execute all
other rights as granted under Swiss law and the Articles
of Incorporation (see, in particular, articles 17 and 18 of
the Articles of Incorporation).
Each share registered with the right to vote by the
third business day before the General Meeting entitles
the holder to one vote at General Meetings. Article 5,
paragraph 2 of the Articles of Incorporation provides that
to be registered with voting rights, shareholders must
declare that they acquired the shares in their own name
and for their own account. According to article 5, para-
graph 3 of the Articles of Incorporation, the Board may reg-
ister nominees with the right to vote. The Share Register is a
non-public register subject to statutory confidentiality and
data privacy.
The Articles of Incorporation are available at www.
novartis.com/investors/company-overview/corpo-
rate-governance.
REGISTRATION RESTRICTIONS
Article 5, paragraph 2 of the Articles of Incorporation pro-
vides that no shareholder shall be registered with the right to
vote for more than 2% of the share capital. Given that share-
holder representation at General Meetings has traditionally
been comparatively low in Switzerland, Novartis AG consid-
ers registration restrictions necessary to prevent a minority
shareholder from dominating a General Meeting. The Board
may, upon request, grant an exemption. Considerations include
if the shareholder supports our goal of creating sustainable
value and has a long-term investment horizon. Exemptions
are in force for the registered shareholders listed in “—Item
6.C Board practices—Group structure and shareholders—
Shareholders—Significant shareholders.” Exemptions also
apply to the Novartis Foundation for Employee Participa-
tion, Basel, which as of December 31, 2023, was registered
in the Share Register with less than 2% of the share capital,
and to Norges Bank (Central Bank of Norway), Oslo, which
as of December 31, 2023, was not registered but held 2.4%
according to a disclosure notification filed with Novartis AG.
No further exemptions were requested in 2023. The same
restrictions indirectly apply to ADR holders.
Article 5, paragraph 3 of the Articles of Incorporation
provides that no nominee shall be registered with the right
to vote for more than 0.5% of the registered share capital.
The Board may, upon request, grant an exemption from this
restriction if the nominee discloses the names, addresses
and number of shares of the persons for whose account it
holds 0.5% or more of the registered share capital. Exemp-
tions are in force for the nominees listed in “—Item 6.C Board
practices—Group structure and shareholders—Sharehold-
ers—Significant shareholders,” and for the nominee Citibank,
London, which in 2015 requested an exemption, but as of
December 31, 2023, was not registered in the Share Regis-
ter. The same restrictions indirectly apply to ADR holders.
According to article 5, paragraph 4 of the Articles of
Incorporation, shareholders, ADR holders, or nominees who
are linked to each other or who act in concert to circumvent
123
Item 6. Directors, Senior Management and Employees
registration restrictions are treated as one person or nom-
inee for the purposes of the restrictions on registration.
The registration restrictions may be changed by res-
olution of the General Meeting, with approval of at least
two-thirds of the votes represented at the meeting.
The Articles of Incorporation are available at www.
novartis.com/investors/company-overview/corpo-
rate-governance.
ATTENDANCE, REPRESENTATION AND WEB PORTAL
Registered shareholders will receive personal invita-
tions to the General Meetings along with a registration/
proxy form as well as a personal access code and a QR
code to log in to our web portal. By returning the regis-
tration/proxy form or using the web portal, shareholders
can order an admission ticket for the General Meeting
or appoint a representative of their choice by means of
a written proxy or the Independent Proxy to vote their
shares on their behalf.
If the Independent Proxy is appointed, shareholders
can also give voting instructions on agenda items or on
alternative or additional motions related to the agenda
items either (i) following the recommendations of the
Board for such alternative or additional motions; or (ii)
opposing such alternative or additional motions. They
can also abstain from voting.
Shareholders choosing not to receive the compre-
hensive invitation materials will be informed of upcoming
General Meetings through a letter containing the login
credentials to access the web portal as well as a refer-
ence to www.novartis.com/investors/shareholder-infor-
mation/general-meetings, where all relevant information
is available.
ADR HOLDERS
ADR holders have the rights enumerated in the deposit
agreement (such as the right to give voting instruc-
tions and to receive dividends). The ADS depositary of
Novartis AG – JPMorgan Chase Bank, N.A., New York –
holds the shares underlying the ADRs and is registered
as a shareholder in the Share Register. An ADR is not a
share, and an ADR holder is not a Novartis AG shareholder.
Each ADR represents one share. ADR holders exercise
their voting rights by instructing the depositary to exer-
cise their voting rights. The ADS depositary exercises
the voting rights for registered shares underlying ADRs
for which no voting instructions have been given by pro-
viding a discretionary proxy to an uninstructed indepen-
dent designee. Such designee has to be a shareholder.
Annual General Meeting (AGM)
CONVENING
The AGM must be held within six months of the end of our
financial year (December 31), and normally takes place in late
February or early March. According to article 12a of the
Articles of Incorporation (www.novartis.com/investors/
company-overview/corporate-governance), the Board
may foresee that shareholders who cannot be present at
the venue of the AGM may exercise their rights through
electronic means. The Board may at any time until June
30, 20281 also order that the AGM be held electronically
without a venue. Extraordinary General Meetings may be
requested by the Board, the external auditor, or share-
holders representing at least 5% of the share capital.
AGENDA
Shareholders representing shares with an aggregate
nominal value of at least CHF 1 million may request that
an item be included in a General Meeting agenda. Such
requests must be made in writing at least 45 days before
the meeting, specifying the requested item and proposal.
If an explanatory statement is to be included in the notice
of meeting, it must be submitted within the same period,
and formulated in a short, clear and concise manner.
POWERS
According to article 17 of the Articles of Incorporation
(www.novartis.com/investors/company-overview/corpo-
rate-governance), the following powers are vested exclu-
sively in the General Meeting:
• Adoption and amendment of the Articles of Incorporation
• Election and removal of the Board Chair, the Board and
Compensation Committee members, the Independent
Proxy and the external auditor
• Approval of the management report, the consolidated
financial statements and the report on non-financial
matters
• Approval of the financial statements of Novartis AG, and
the decision on the appropriation of available earnings
shown on the balance sheet, in particular with regard
to dividends (including any repayment of the statutory
capital reserves and the approval of interim dividends
and the interim financial statements required for such
purpose)
• Approval of the maximum aggregate compensation of
the Board (from an AGM until the next AGM) and of the
Executive Committee (for the financial year following
the AGM). If the maximum aggregate amount of com-
pensation already approved by the AGM is not suffi-
cient to cover the compensation of newly appointed
or promoted Executive Committee members, Novartis
may use up to 40% of the amount last approved for
the newly appointed or promoted Executive Commit-
tee members
• Discharge of Board and Executive Committee mem-
bers
• Delisting of the shares of Novartis AG
• Decision on other matters that are reserved by law or
by the Articles of Incorporation (e.g., advisory vote on
the Compensation Report) to the General Meeting
1 In accordance with the statement by the Board issued on February 10, 2023, Novartis
commits to submitting the corresponding authorization again to a shareholder vote at
the 2025 Annual General Meeting, regardless of the time limitation stipulated in the
Articles of Incorporation.
124
Item 6. Directors, Senior Management and Employees
STATUTORY QUORUMS
The General Meeting passes resolutions and elections with
the absolute majority of the votes represented at the meet-
ing. However, under article 18 of the Articles of Incorpora-
tion (www.novartis.com/investors/company-overview/
corporate-governance), the approval of two-thirds of the
votes represented at the meeting is required for:
• An alteration of the purpose of Novartis AG
• The consolidation of shares, unless the approval of all
affected shareholders is required
• The introduction of a conditional capital or a capital
band
• An implementation of restrictions on the transfer of
registe red shares, and the removal of such restrictions
• The creation of shares with increased voting powers
• The change of the currency of the share capital
• The introduction of the deciding vote for the presiding
officer at the General Meeting of Shareholders
• A provision in the Articles of Incorporation allowing to
hold the General Meeting of Shareholders abroad
• An increase of the share capital out of equity, by con-
tribution in kind, for the purpose of an acquisition of
property or the grant of special rights
• The delisting of the shares of Novartis AG
• A change of the registered office of Novartis AG
• The introduction of an arbitration clause in the Articles
• An increase of the share capital out of equity, by con-
tributions in kind by way of set-off against a receivable
and the grant of special rights
of Incorporation
• The merger, split or transformation of Novartis AG under
the Merger Act (subject to mandatory provisions)
• A restriction or cancellation of rights of options to sub-
• The dissolution of Novartis AG
scribe
125
Item 6. Directors, Senior Management and Employees
Board of Directors
Composition (as per December 31, 2023)
BOARD CHAIR: J. Reinhardt
VICE-CHAIR: S. Moroney
LEAD INDEPENDENT DIRECTOR: P. Bula
N. Andrews
T. Buechner
E. Doherty
B. Heller
D. Hochstrasser
F. van Houten
A. de Pro Gonzalo
C. Sawyers
W. Winters
J. Young
AUDIT AND
COMPLIANCE
COMMITTEE
E. Doherty (Chair)
T. Buechner
B. Heller
D. Hochstrasser
F. van Houten
A. de Pro Gonzalo
COMPENSATION
COMMITTEE
S. Moroney (Chair)
P. Bula
B. Heller
W. Winters
GOVERNANCE,
SUSTAINABILITY
AND NOMINATION
COMMITTEE
P. Bula (Chair)
B. Heller
D. Hochstrasser
C. Sawyers
W. Winters
RISK COMMITTEE
SCIENCE & TECHNOLOGY
COMMITTEE
T. Buechner (Chair)
N. Andrews
E. Doherty
A. de Pro Gonzalo
J. Young
J. Reinhardt (Chair)
N. Andrews
F. van Houten
S. Moroney
C. Sawyers
J. Young
Changes to the Board of Directors
Succession planning
The GSNC prepares and reviews succession plans for the
Board on an annual basis. These plans are discussed by
the Board in private meetings. A search for a new Board
member is launched – normally with the support of a pro-
fessional executive search company – with individual selec-
tion criteria defined based on the evolving needs of the
Company and a continuing focus on diversity, skills and
experience. The set of competencies (further explained in
“—Item 6.C Board practices—Board of Directors—Board
skills”) and a balance between continuity of experience
and fresh perspectives are also important criteria for the
GSNC when evaluating new candidates. Candidates are
interviewed by the Board Chair, members of the GSNC,
other Board members, and members of the Executive
Committee. The GSNC then makes a recommendation
to the full Board, and the Board ultimately decides who
should be proposed for election at the upcoming AGM.
John Young was elected as a new Board member at the
2023 AGM. Andreas von Planta, who had been a Board
member since 2006, did not stand for re-election at the
2023 AGM. The biography of Mr. von Planta can be found
in the 2022 Annual Report (page 136), which is available
at www.novartis.com/news/media-library/novartis-an-
nual-report-2022.
Election and term of office
Board members (including the Board Chair) and Com-
pensation Committee members are elected individually
by shareholders at the General Meeting for a one-year
term of office. The term of office expires at the end of
the next AGM.
According to article 20, paragraph 3 of the Articles
of Incorporation, a member shall not serve on the Board
for more than 12 years. Under special circumstances and
if deemed to be in the best interest of the Company, the
Board may recommend exceptions to the shareholders
(www.novartis.com/investors/company-overview/cor-
porate-governance).
The term limit supports our commitment to renew the
Board on an ongoing basis and follows international best
practice. We believe age is still a relevant factor in Board
composition, and the GSNC will consider this and other
factors – including gender, nationality and ethnicity –
when evaluating candidates and exploring ways to increase
Board diversity.
126
Item 6. Directors, Senior Management and Employees
Independence
Diversity
GENDER
GENDER
INDEPENDENCE
INDEPENDENCE
NATIONALITY
NATIONALITY
All Board members – including the Board Chair – are
non-executive and independent, pursuant to applica-
ble corporate governance rules and Novartis indepen-
dence criteria, which are outlined in Appendix II to the
Board Regulations (www.novartis.com/investors/com-
pany-overview/corporate-governance). In particular, no
Board member is or was a member of the management
of Novartis AG or of any other Novartis Group company
in the last three financial years up to December 31, 2023,
or has or had, a significant business relationship with
Novartis AG or with any other Novartis Group company.
No separate meetings of independent Board members
were held in 2023.
The independence of Board members is assessed
annually. Each Board member completes an indepen-
dence questionnaire that is reviewed by the GSNC. The
GSNC then submits a proposal to the full Board, and the
Board determines the independence status of each Board
member.
Diversity profile
EXECUTIVE/NON-EXECUTIVE
EXECUTIVE/NON-EXECUTIVE
Novartis is dedicated to fostering an inclusive board where
individuals from all genders and ethnic backgrounds can
thrive and contribute their unique insights. We pledge
to continuously advance our efforts to promote gen-
der parity in the composition of our Board of Directors
within a range of +/- 10 %. A diverse Board ensures that
the appropriate balance of skills, expertise, experience
and cultural background is represented to discharge its
responsibilities and to support long-term value creation
for shareholders, patients, employees and other stake-
holders. Diversity remains a critical focus area for the
Board, and the GSNC continuously examines opportuni-
ties to further increase the Board’s diversity when iden-
tifying new Board member candidates. We firmly believe
that by valuing and respecting these differences, we can
drive innovation and make more informed decisions and
better serve our stakeholders.
NATIONALITY
NATIONALITY
Nationality1
BACKGROUND/EXPERIENCE
GENDER
BACKGROUND/EXPERIENCE
Gender
GENDER
AGE
AGE
EXECUTIVE/NON-EXECUTIVE
EXECUTIVE/NON-EXECUTIVE
Age
TENURE
TENURE
Tenure
INDEPENDENCE
INDEPENDENCE
p American
27%
p Swiss
23%
p British
11.5%
p Dutch
11.5%
p German
11.5%
p Spanish
7.5%
p Irish
4%
p New Zealander 4%
p Male
p Female
69%
31%
p 55–60
p 61–65
p >65
23%
54%
23%
p <3 y
p 3–6 y
p 7–9 y
p >9 y
23%
31%
23%
23%
1 Please note that six Board members have dual nationalities. Each of these nationalities is counted as a half in the above chart.
BACKGROUND/EXPERIENCE
BACKGROUND/EXPERIENCE
AGE
AGE
TENURE
TENURE
Board skills
Upon proposal by the GSNC, the Board has determined
a diverse set of competencies for its members that aligns
with our status as a listed company, as well as our busi-
ness portfolio, geographic reach and culture. Within this
set of competencies, the Board members were asked
to identify their most relevant skills based on their edu-
cational background, professional experience and per-
sonal achievements.
The GSNC assesses the set of competencies as well
as the individual skills annually to ensure that an appro-
priate balance of skills, expertise, experience and diver-
sity is represented on the Board.
To learn more about our Board members and their
individual skills, see “—Item 6.C Board practices—Board
of Directors—Members of the Board of Directors.”
Board skill distribution
Medicine/healthcare/R&D
54% 7/13
Environmental, social
and governance (ESG)
61% 8/13
Data/digital
38% 5/13
Leadership/management
85% 11/13
Finance/accounting
61% 8/13
Law/regulatory/risk management 77% 10/13
127
Item 6. Directors, Senior Management and Employees
Members of the Board of Directors
Joerg Reinhardt, Ph.D.
Chair since 2013 | Nationality: German | Year of birth: 1956
Joerg Reinhardt is a healthcare industry veteran whose career spans nearly 40 years. After receiving his
doctorate in pharmaceutical sciences, Mr. Reinhardt joined Sandoz Pharma Ltd., a predecessor to Novartis,
in 1982. He held a number of senior leadership positions at Novartis, including Chief Operating Officer and
Head of the Vaccines and Diagnostics Division. Additionally, he led Bayer HealthCare AG as chair of the board
of management and the executive committee from 2010 to 2013.
Professional experience
• Chair of the board of management and the executive committee, Bayer HealthCare AG, Germany
(2010–2013)
• Chief Operating Officer, Novartis AG, Switzerland (2008–2010)
• Head of the Vaccines and Diagnostics Division, Novartis AG, Switzerland (2006–2008)
• Various managerial positions at Sandoz Pharma Ltd. and Novartis AG, Switzerland (1982–2006)
Mandates
• Senate member, Helmholtz Association of German Research Centers, Germany
• Chair of the board of trustees, Institute of Molecular and Clinical Ophthalmology Basel (IOB), Switzerland
• Chair of the board of trustees, Novartis Foundation, Switzerland
• Board member, Swiss Re AG, Switzerland
Education
• Doctorate in pharmaceutical sciences, Saarland University, Germany
Key skills
x Medicine/healthcare/R&D z Environmental, social and governance (ESG)
g Leadership/management l Law/regulatory/risk management
Simon Moroney, D.Phil.
Board member since 2020 | Vice-Chair since March 4, 2022 | Nationality: German/New Zealander |
Year of birth: 1959
As co-founder and CEO of MorphoSys AG, Simon Moroney played a central role in establishing the company
as a force in the field of therapeutic antibodies, with one of the broadest pipelines of drug candidates in the
industry. Mr. Moroney holds both a doctorate and a Master’s degree in chemistry.
Professional experience
• Co-founder and CEO, MorphoSys AG, Germany (1992–2019)
• Research associate, Department of Pharmacology, University of Cambridge, UK (1991–1992)
• Assistant professor, Department of Chemistry, University of British Columbia, Canada (1989–1990)
Mandates
• Chair of the board of directors and the remuneration and nomination committee, Biotalys NV, Belgium
Education
• Doctorate in chemistry, University of Oxford, UK
• Master’s degree in chemistry, University of Waikato, New Zealand
Key skills
x Medicine/healthcare/R&D z Environmental, social and governance (ESG)
g Leadership/management l Law/regulatory/risk management
128
Item 6. Directors, Senior Management and Employees
Nancy C. Andrews, M.D., Ph.D.
Board member since 2015 | Nationality: American/Swiss | Year of birth: 1958
Nancy C. Andrews has extensive experience as a physician, scientist, professor and senior administrator at
leading academic institutions and hospitals. Her distinguished career spans more than 30 years, with
leadership roles at both Harvard Medical School and the Duke University School of Medicine. Since 2023,
Dr. Andrews is professor in residence of pediatrics at Harvard Medical School and is credited with conducting
research that led to advances in understanding iron biology and iron diseases.
Professional experience
• Professor in residence of pediatrics, Harvard Medical School, US (2023-present)
• Executive vice president and chief scientific officer, Boston Children’s Hospital, US (2021–present)
• Dean emerita, Duke University School of Medicine, and vice chancellor emerita for academic affairs,
Duke University, US (2017–present)
• Dean, Duke University School of Medicine, and vice chancellor for academic affairs,
Duke University, US (2007–2017)
• Professor of pediatrics, pharmacology and cancer biology, Duke University, US (2007–2021)
• Dean for basic sciences and graduate studies, Harvard Medical School, US (2003–2007)
• Director, Harvard/MIT M.D.-Ph.D. Program, US (1999–2003)
• Biomedical research investigator, Howard Hughes Medical Institute, US (1993–2006)
Mandates
• Board member, Maze Therapeutics Inc., US
• Board member and chair of the science and technology committee, Charles River Laboratories
International Inc., US
• Home secretary (since July 2023) and council member, National Academy of Sciences, US
• Former council member (2013–2019) and member, National Academy of Medicine, US
• Fellow (since April 2007) and former chair (2017 – 2023), American Academy of Arts and Sciences, US
• Member of the executive committee of the corporation, Massachusetts Institute of Technology, US
(2019-2022)
• Member of the scientific management review board, National Institutes of Health, US (2014–2019)
• Board member and former chair, Burroughs Wellcome Fund, US (2011–2019)
Education
• Doctor of medicine, Harvard Medical School, US
• Doctorate in biology, Massachusetts Institute of Technology, US
• Master’s and bachelor’s degrees in molecular biophysics and biochemistry, Yale University, US
Key skills
x Medicine/healthcare/R&D g Leadership/management
Ton Buechner
Board member since 2016 | Nationality: Dutch/Swiss | Year of birth: 1965
Ton Buechner is an engineer by training who started his career in the oil and gas construction industry. Before
becoming the CEO of Sulzer AG, he held several divisional leadership roles at the company and worked in
markets including Asia. Mr. Buechner most recently served as CEO and chair of the executive board of
AkzoNobel NV, where he introduced industry-leading ESG policies.
Professional experience
• CEO and chair of the executive board, AkzoNobel NV, Netherlands (2012–2017)
• CEO, Sulzer AG, Switzerland (2007–2011)
• President, Sulzer Pumps, Switzerland (2003–2006)
• President, Sulzer Turbomachinery Services, Switzerland (2000–2002)
• Various managerial positions at Sulzer AG, China and Switzerland (1994–2000)
Mandates
• Chair of the board of directors and the sustainability committee, Swiss Prime Site AG, Switzerland
• Chair of the board of directors and the strategy and sustainability committee, Burckhardt Compression
AG, Switzerland
• Member of advisory committee to the Ministry of Economic Affairs and Climate Policy (“Adviescommissie
Maatwerkafspraken Verduurzaming Industrie”), Netherlands
• Member of the presidential and shareholder committees, Voith GmbH & Co. KGaA, Germany
(2014–2020)
• Member of the supervisory board, Voith GmbH & Co. KGaA, Germany (2014–2018)
Education
• Master of business administration, IMD business school, Switzerland
• Master’s degree in civil engineering, Delft University of Technology, Netherlands
Key skills
z Environmental, social and governance (ESG) g Leadership/management
m Finance/accounting l Law/regulatory/risk management
129
Item 6. Directors, Senior Management and Employees
Patrice Bula
Board member since 2019 | Lead Independent Director since March 4, 2022 | Nationality: Swiss | Year of birth: 1956
Patrice Bula has 40 years of global management experience and is a leader in the consumer goods industry
across established and emerging markets. He has served in various senior roles at Nestlé SA, including as
general manager of its businesses in China, Germany and South Africa. Most recently, he successfully led
the Nestlé Group’s brand strategies, digital marketing transformation and Nespresso business.
Professional experience
• Executive vice president and head of strategic business units, marketing, sales and Nespresso, Nestlé
SA, Switzerland (2011–2021)
• Market head of the Greater China region, Nestlé SA, Switzerland (2007–2011)
• Market head of Germany, Nestlé SA, Switzerland (2003–2007)
• Head of the confectionery and biscuits strategic business unit, Nestlé SA, Switzerland (2000–2003)
• Various managerial positions at Nestlé SA, Switzerland (1980–2000)
Mandates
• Chair, Froneri Lux Topco Sarl, Luxembourg
• Board member and vice chair, Schindler AG, Switzerland
• Board member and chair of the ESG committee, New Tiger LLC, US
• Co-chair (2020–2021) and board member (2015–2021), Cereal Partners Worldwide SA, Switzerland
(Nestlé representative)
• Board member, Froneri Lux Topco Sarl, Luxembourg (Nestlé representative) (2016–2020)
• Board member, Bobst Group SA, Switzerland (2017–2019)
• Chair, Blue Bottle Coffee Inc., US (Nestlé representative) (2017–2019)
• Chair, Nestlé Nespresso SA, Switzerland (Nestlé representative) (2011–2019)
• Board member, Hsu Fu Chi Food Companies, China (Nestlé representative) (2011–2019)
Education
• Program for executive development, IMD business school, Switzerland
• Master’s degree in economic sciences, HEC Lausanne, Switzerland
Key skills
z Environmental, social and governance (ESG) y Data/digital g Leadership/management
m Finance/accounting
Elizabeth (Liz) Doherty
Board member since 2016 | Nationality: British/Irish | Year of birth: 1957 | Audit Committee Financial Expert
Elizabeth (Liz) Doherty is an expert in finance and accounting who has broad operational experience in inter-
national consumer and retail businesses. She began her career in internal audit at Unilever PLC and has held
senior finance and accounting roles there and at other companies including Tesco PLC and Reckitt Benckiser
Group PLC.
Professional experience
• CFO (interim), Cognita Schools Ltd., UK (2014–2015)
• CFO and board member, Reckitt Benckiser Group PLC, UK (2011–2013)
• CFO (interim), City Inn, UK (2010)
• CFO, Brambles Ltd., Australia (2007–2009)
• Group international finance director, Tesco PLC, UK (2001–2007)
• Various managerial positions at Unilever PLC, UK (1981–2001)
Mandates
• Board member and chair of the audit committee, Corbion NV, Netherlands
• Member of the supervisory board and chair of the audit committee, Royal Philips NV, Netherlands
• Advisor, Affinity Petcare SA and GB Foods SA, Spain (2017–2023)
• Board member, Dunelm Group PLC, UK (2013–2019)
• Board member, HM Courts & Tribunals Service, UK (2015–2019)
• Board member, Ministry of Justice, UK (2015–2019)
• Board member, Delhaize Group, Belgium (2013–2016)
• Board member, Nokia Corp., Finland (2013–2016)
Education
• Fellow, Chartered Institute of Management Accountants, UK
• Bachelor’s degree in liberal studies in science (physics), University of Manchester, UK
Key skills
g Leadership/management m Finance/accounting l Law/regulatory/risk management
130
Item 6. Directors, Senior Management and Employees
Bridgette Heller
Board member since 2020 | Nationality: American | Year of birth: 1961
Bridgette Heller has proven experience in the standalone divisions of companies such as Johnson & Johnson,
Merck & Co. Inc. and Danone SA, and has served on the audit committees of ADT Corp. and Tech Data Corp.
During her career, she has overseen the performance of CFOs and made decisions on strategic R&D prior-
ities. Ms. Heller is an advocate for diversity, equity and inclusion, and traveled globally to reinforce Danone’s
commitment to infant and maternal health, inclusive diversity, an equitable workforce for women, and
sustainable communities. She is co-founder and CEO of the Shirley Proctor Puller Foundation, an education
and youth empowerment nonprofit, and devotes much of her time to strengthening education and sustain-
ability in an underserved community in the US.
Professional experience
• Co-founder and CEO, Shirley Proctor Puller Foundation, US (2019–present)
• EVP and president of specialized nutrition, Danone SA, Netherlands (2017–2019)
• EVP of early life nutrition, Danone SA, Netherlands (2016–2019)
• EVP and president of consumer care, Merck & Co. Inc., US (2010–2015)
• Global president of the baby global business unit, Johnson & Johnson, US (2007–2009)
• President of the US baby, kids and wound care business and of global innovation development,
Johnson & Johnson, US (2005–2007)
• Managing partner, Heller Associates: Ideas for Growth Inc., US (2004–2005)
• CEO, Chung’s Gourmet Foods, US (2003–2004)
• Various managerial positions at Kraft Foods Inc., US (1985–2003)
Mandates
• Board member, Integral Ad Science Inc., US
• Board member, Aramark, US
• Board member, Dexcom Inc., US
• Board member, Newman’s Own Inc., US
• Member of the board of trustees, Northwestern University, US
• Member of the advisory board, Kellogg School of Management at Northwestern University, US
• Board member, Shirley Proctor Puller Foundation, US
• Board member, Newman’s Own Foundation, US
• Board member, Tech Data Corp., US (2016–2020)
• Board member, ADT Corp., US (2012–2016)
• Board member, Girls Inc., US (2002–2014)
Education
• Master’s degree in marketing and management policy, Kellogg School of Management at Northwestern
University, US
• Bachelor’s degree in economics and computer studies, Northwestern University, US
Key skills
x Medicine/healthcare/R&D z Environmental, social and governance (ESG)
y Data/digital g Leadership/management m Finance/accounting l Law/regulatory/risk management
Daniel Hochstrasser
Board member since March 4, 2022 | Nationality: Swiss | Year of birth: 1960
Daniel Hochstrasser is an independent dispute resolution specialist practicing in Zurich, Switzerland. Until
the end of 2022, he has been leading Bär & Karrer’s arbitration practice for 15 years. He frequently repre-
sented parties in complex disputes arising from matters such as M&A transactions, industrial and infrastructure
projects, and license, distribution and development agreements, particularly in the pharmaceutical industry.
In addition, he led the firm as senior partner from 2011 until 2021. He has published extensively on arbitration
and litigation, and lectures at the University of Zurich and the University of St. Gallen in Switzerland.
Professional experience
• Attorney-at-law, Daniel Hochstrasser AG, Switzerland (since January 2023)
• Attorney-at-law and partner, Bär & Karrer AG, Switzerland (1993–December 2022)
• Senior partner and chair of the board of directors, Bär & Karrer AG, Switzerland (2011-2021)
• Lawyer, District Court of Affoltern, Court of Appeals/Court of Cassation of Zurich, Switzerland
(1987–1992)
• In-house lawyer, Staubli SA, France (1986–1987)
Mandates
• Chair of the board of directors, Daniel Hochstrasser AG, Switzerland
• Member (2015–2021) and vice president (since 2021), ICC Court of Arbitration, France
• Member of the Ethics Court, Zurich Bar Association, Switzerland (since 2004)
• Board member, Finland Arbitration Institute, Finland (since 2020)
• Chair of the board of directors, Bär & Karrer AG, Switzerland (2011-2021)
• Member of the Court, Swiss Arbitration Chambers, Switzerland (2004–2014)
Education
• Master of laws (LL.M.), Cornell Law School, US
• Bar examination, Switzerland
• Licentiatus iuris, University of Zurich, Switzerland
Key skills
l Law/regulatory/risk management
131
Item 6. Directors, Senior Management and Employees
Frans van Houten
Board member since 2017 | Nationality: Dutch | Year of birth: 1960
Frans van Houten is passionate about purpose-driven innovation, entrepreneurship and business transfor-
mation to drive customer value and competitiveness. Under his leadership as CEO of Royal Philips, the
company transformed into a leading health technology solutions company, leveraging data and informatics
to improve healthcare provider results, and became a forerunner across ESG dimensions, having become
carbon neutral in its operations since 2020 and recycling over 90% of its waste. Mr. van Houten was an
initiator of the World Economic Forum Compact for Responsive and Responsible Leadership as well as
founder and co-chair of the Platform to Accelerate the Circular Economy.
Professional experience
• Advisor, Royal Philips NV, Netherlands (October 2022–April 2023)
• CEO and chair of the executive committee and the board of management, Royal Philips NV, Netherlands
(2011–October 2022)
• Interim management, ING Group NV, Netherlands (2009–2010)
• CEO and chair of the management board, NXP Semiconductors NV (formerly Philips Semiconductors
NV), Netherlands (2004–2009)
• Various managerial positions at Royal Philips Electronics NV, Netherlands (1986–2004)
Mandates
• Board member, Absci Corporation, US
• Board member, Synthesis Health Inc. US
• Chair, Castor EDC, Netherlands
• Member of the steering committee, European Round Table for Industry (ERT), Belgium (2014-November
2022)
• Vice chair and member of the supervisory board, Philips Lighting, Netherlands (2016–2017)
Education
• Master’s degree in economics and business management, Erasmus University Rotterdam, Netherlands
• Bachelor’s degree in economics, Erasmus University Rotterdam, Netherlands
Key skills
x Medicine/healthcare/R&D z Environmental, social and governance (ESG) y Data/digital
g Leadership/management m Finance/accounting l Law/regulatory/risk management
Ana de Pro Gonzalo
Board member since March 4, 2022 | Nationality: Spanish | Year of birth: 1967 | Audit Committee Financial Expert
Since starting her career at Arthur Andersen, Ana de Pro Gonzalo has worked across a variety of industries,
ranging from construction and real estate to engineering and telecommunications. With deep expertise in
finance, capital markets and technology, she has held executive positions at several multinational companies.
Most recently, she spent 10 years as chief financial officer of Amadeus IT Group, a leading software provider
for the global travel and tourism industry.
Professional experience
• Chief financial officer, Amadeus IT Group SA, Spain (2010–2020)
• Corporate general manager, Sacyr Vallehermoso SA, Spain (2002–2010)
• Deputy general manager and finance director, Metrovacesa SA, Spain (1994–2002)
• Senior auditor, Arthur Andersen SA, Spain (1990–1994)
Mandates
• Member of the supervisory board and chair of the Audit Committee, STMicroelectronics NV, Netherlands
• Board member, Mobico Group PLC, UK
• Board member, Indra Sistemas SA, Spain (2020-2022)
• Board member, Merlin Properties Socimi SA, Spain (2015–2017)
Education
• General management program (PDG), IESE Business School, Spain
• Bachelor’s degree in business studies, Complutense University of Madrid, Spain
Key skills
z Environmental, social and governance (ESG) y Data/digital g Leadership/management
m Finance/accounting l Law/regulatory/risk management
132
Item 6. Directors, Senior Management and Employees
Charles L. Sawyers, M.D.
Board member since 2013 | Nationality: American | Year of birth: 1959
Charles L. Sawyers is a highly accomplished expert and leader in cancer research. As a physician and
prominent scientist, he has a deep understanding of the benefits of drugs for patients and society at large,
and the importance of access to medicines. Dr. Sawyers co-developed the Novartis cancer drug Gleevec/
Glivec and has received numerous honors and awards, including the Lasker-DeBakey Clinical Medical
Research Award.
Professional experience
• Chair of the human oncology and pathogenesis program, Memorial Sloan Kettering Cancer Center, US
(2006–present)
• Professor of medicine (2008–present), and professor of cell and developmental biology (2011–present),
Weill Cornell Graduate School of Medical Sciences, US
• Investigator, Howard Hughes Medical Institute, US (2002–2006 and 2008–present)
• Associate chief, division of hematology-oncology, University of California, Los Angeles, US (1996–2006)
Mandates
• Member, National Academy of Medicine, US
• Member, National Academy of Sciences, US
• Investigator, Howard Hughes Medical Institute, US
• Member, National Cancer Advisory Board, US (2012–2020)
• President, American Association for Cancer Research, US (2013–2014)
Education
• Doctor of medicine, Johns Hopkins University School of Medicine, US
• Bachelor’s degree, Princeton University, US
Key skills
x Medicine/healthcare/R&D
William T. Winters
Board member since 2013 | Nationality: British/American | Year of birth: 1961
William T. Winters has extensive leadership experience in the financial sector. He began his career at JPMorgan
Chase & Co. in 1983 and has held management roles across several market areas and in corporate finance.
Mr. Winters founded Renshaw Bay LLP, an alternative asset management firm, and now serves as CEO of
Standard Chartered PLC, where he is leading a digital transformation of the global bank.
Professional experience
• CEO, Standard Chartered PLC, UK (2015–present)
• Chair and CEO, Renshaw Bay LLP, UK (2011–2015)
• Co-CEO of the investment bank, JPMorgan Chase & Co., UK (2004–2010)
• Various managerial positions at JPMorgan Chase & Co., UK and US (1983–2004)
Mandates
• Board member, Standard Chartered Bank PLC, UK
• Commissioner, Independent Commission on Banking, UK (2010–2011)
Education
• Master of business administration, Wharton School of the University of Pennsylvania, US
• Bachelor’s degree in international relations, Colgate University, US
Key skills
z Environmental, social and governance (ESG) y Data/digital g Leadership/management
m Finance/accounting l Law/regulatory/risk management
133
Item 6. Directors, Senior Management and Employees
John D. Young
Board member since March 7, 2023 | Nationality: British/American | Year of birth: 1964
A scientist by training, John D. Young has over 35 years of experience in the healthcare industry and will
bring a wealth of experience in leadership, strategy, business development and commercialization of innovative
medicines to the Novartis Board of Directors. He joined Pfizer in 1987 as a sales representative and held
positions of increasing seniority across the company, including as a member of Pfizer’s executive leadership
team from 2012. As Pfizer’s group president and chief business officer from 2019 until 2022, John also played
an integral role in the development and delivery of the Pfizer-BioNTech COVID-19 vaccine.
Professional experience
• Senior advisor to the CEO, Pfizer, US (January-June 2022)
• Group president and chief business officer, Pfizer, US (2019-2022)
• Group president, innovative health business, Pfizer, US (2018)
• Group president, essential health business, Pfizer, US (2014-2017)
• President and general manager, global primary care business unit, Pfizer, US (2012-2013)
• Regional president, primary care business unit for Europe and Canada, Pfizer, UK (2009-2012)
• Various managerial positions, Pfizer, UK and Australia (1987–2008)
Mandates
• Board member, Johnson Controls International, Ireland
• Board member, Arvinas Inc, US
• Board member, Imbria Pharmaceuticals, US
• Board member, Haleon, UK (2022-February 2023)
• Board member, GSK Consumer Health Joint Venture, UK (2019-2022)
• Board member, Biotechnology Innovation Organization (BIO), US (2018-2021)
• US bio-pharmaceutical representative, UK Government Life Sciences Council, UK (2007-2021)
• Board member, National Committee for US China Relations, US (2014-2017)
• Board member, European Federation of Pharmaceutical Industries and Associations (EFPIA), Belgium
(2012-2017)
Education
• Master of business administration, University of Strathclyde, UK
• Bachelor’s degree in biological sciences, University of Glasgow, UK
Key skills
x Medicine/healthcare/R&D g Leadership/management m Finance/accounting
l Law/regulatory/risk management
Corporate Secretary
Charlotte Pamer-Wieser, Ph.D.
134
Item 6. Directors, Senior Management and Employees
Self-assessment
The Board and its committees conduct a self-assessment
once a year, covering topics including Board composition,
purpose, scope and responsibilities; succession planning;
Board processes and governance; interaction between the
Board and the Executive Committee; Board meetings and
pre-reading material; team effectiveness; and Board Chair
and peer evaluation. Every third year, this process is con-
ducted by an independent external consultant. The 2023
review is currently being undertaken by the consulting
firm Egon Zehnder. Its results will be discussed during
the second quarter of 2024.
Questionnaire and Interviews
Review
Outcome
• Each Board member fills out a
• The preliminary results of the
• The results of the in-depth 2023
assessment will be discussed during a
Board Meeting in the first half of 2024.
• Conclusions and results will be shared
in the Annual Report 2024.
questionnaire prepared by Egon
Zehnder.
• Individual interviews are scheduled,
during which Board members have the
opportunity to share their perspectives
on their strengths and areas for
development, best practices, and
interaction between Board members,
and between the Board and the
Executive Committee.
• The Executive Committee members are
also interviewed individually to capture
their perspectives on the Board’s
functioning and its interactions with
the Executive Committee, including
focusing on ways to improve efficiency.
questionnaires and interviews are
then presented to the Board Chair.
This qualitative review covers topics
including Board composition; purpose,
scope and responsibilities; processes
and governance of the Board and its
committees; meetings and pre-reading
material; team effectiveness; and
leadership and culture.
• Thereafter, Egon Zehnder also
undertakes a qualitative review with the
full Board, sharing its key observations
and recommendations, and holds
additional individual feedback sessions
with each Board member.
Trainings
Role of the Board and its committees
The Board receives regular briefings and trainings on
ethics, risks and compliance, ESG and other relevant
topics. In 2023, each Board member completed train-
ings on the following:
• ESG, tailored for Board members
• Doing business ethically
• ‘Fit to Commit’, which focused on anti-bribery, insider
trading and procurement
• Information Management
Our Chief Legal Officer also provides regular updates to
the Board members on developments related to insider
trading laws and regulations and briefs the members of
the Board and the Executive Committee on an annual
basis on their respective duties. In addition, the Com-
pany offers a broad range of external trainings to its
Board members.
The Board is responsible for the overall direction
and oversight of management, and holds the ultimate
decision-making authority, with the exception of deci-
sions reserved for shareholders. Board members are
expected to commit the time and effort required to fulfil
all their Board and committee responsibilities.
The Board has delegated certain duties and responsi-
bilities to its five committees led by a Board-elected com-
mittee chair, as set out in the Board Regulations (www.
novartis.com/investors/company-overview/corporate-gov-
ernance). In some cases, these responsibilities are of an
advisory or preparatory nature. In other cases, the com-
mittee has decision-making power that is subject to final
Board approval, or the responsibilities have been fully del-
egated to the committee. All committees have the author-
ity to retain external consultants.
Any Board member may request a Board or committee
meeting and the inclusion of an agenda item. Before meet-
ings, Board members receive materials to help them pre-
pare for the discussions and to inform decision-making.
135
Item 6. Directors, Senior Management and Employees
Attendance at Board and Board Committee Meetings in 2023
Name
Position
Board
J. Reinhardt
Board Chair
S. Moroney
Vice-Chair
P. Bula
Lead Independent Director
N. Andrews
T. Buechner
E. Doherty
B. Heller
F. van Houten
Member
Member
Member
Member
Member
D. Hochstrasser
Member
A. de Pro Gonzalo Member
C. Sawyers
W. Winters
J. Young 1
Member
Member
Member
1 Mr. Young was elected at the 2023 AGM.
Further details can be found on pages 137 – 142.
9/9
9/9
9/9
9/9
9/9
9/9
9/9
9/9
9/9
9/9
9/9
9/9
7/7
Audit and
Compliance
Committee
Compensation
Committee
Governance,
Sustainability
and Nomination
Committee
Risk
Committee
Science &
Technology
Committee
8/8
8/8
8/8
8/8
8/8
8/8
6/6
6/6
6/6
6/6
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
4/4
3/3
3/3
3/3
3/3
3/3
3/3
136
Item 6. Directors, Senior Management and Employees
Board of Directors
Primary responsibilities
• Strategy: decides on the ultimate direction of the Company’s business (including portfolio, markets, acquisitions and
divestments), considering also key ESG aspects
• Structure and organization: determines major changes in the Group’s structure and organization
• Culture: oversees the strategy and implementation of the corporate culture
• Ethics and compliance: oversees the Group’s ethics and compliance framework, including the approval of fundamental
corporate policies such as the Novartis Code of Ethics
• Risk management: oversees the Group’s risk management system, the most significant risks, and how these risks are
managed
• Finance: determines the Group’s accounting system, financial controls and financial planning; and
reviews and approves the Annual Report (including the Compensation Report)
• Non-financial reporting: reviews and approves the Group’s annual reporting on non-financial matters
• People and organization: nominates or appoints, removes, and determines responsibilities of key executives,
and succession planning
Key activities in 2023
• Oversaw the Company’s strategy to become an innovative medicines company with leading technology in key therapeutic
and geographic areas
• Reviewed the set-up and functioning of the Executive Committee in the context of the Company’s organizational structure
• Reviewed in depth the US market and our priorities to accelerate growth and become a top player in the market, including a
briefing on our markets
• Discussed updates from all organizational units
• Reviewed and discussed strategic considerations around mergers and acquisitions (including the acquisition of Chinook
Therapeutics), and the Company’s larger strategic moves to drive sustainable growth
• Assessed and decided on the structure of Sandoz following the spin-off, including the designated Sandoz board (and its
Committees) and the designated leadership team
• Conducted the Sandoz separation through a 100% spin-off, including securing shareholder approval at the extraordinary
General Meeting held on September 15, 2023
• Discussed the Company’s ESG strategy, plans and developments, and attended an ESG session jointly organized by the
Audit and Compliance Committee and the Governance, Sustainability and Nomination Committee.
• Discussed the upcoming non-financial disclosure regulations and Novartis non-financial reporting governance
• Discussed longer-term Board succession planning and required profiles
• Discussed and reviewed the annual Board self-evaluation
Meetings
Number of meetings held
Number of members
Approximate average duration (hours)
Meeting attendance
9
13
6:12
100%
The Board met nine times in 2023. This included regular meet-
ings in January, April, June, August, October and December,
J. Reinhardt (Board Chair)
S. Moroney (Vice-Chair)
P. Bula (Lead Independent Director)
N. Andrews
T. Buechner
E. Doherty
B. Heller
and additional special meetings to deal with ad hoc matters.
Board committees typically meet the day before the meetings
D. Hochstrasser
F. van Houten
of the full Board. The Board held virtual, hybrid and physical
A. de Pro Gonzalo
meetings, with participants joining in person whenever possible.
C. Sawyers
W. Winters
J. Young1
Documents
• Articles of Incorporation of Novartis AG
• Board Regulations
www.novartis.com/investors/company-overview/corporate-governance
1 Mr. Young was elected at the 2023 AGM and has attended all Board meetings in 2023 following his election.
9
9
9
9
9
9
9
9
9
9
9
9
7
137
Item 6. Directors, Senior Management and Employees
Audit and Compliance Committee
Primary responsibilities
• Supervises the external auditor, and selects and nominates the external auditor for election by the shareholders (FD)**
• Oversees Internal Audit (FD)**
• Oversees accounting policies, financial controls, and compliance with accounting and internal control standards (FD)**
• Approves financial statements for the first three quarters of each calendar year and the corresponding financial results
releases (FD)**, and reviews the annual financial statements and the corresponding financial results releases (FBA)***
• Reviews the non-financial data contained in the Group’s annual reporting (FBA)***
• Oversees compliance with laws, regulations and internal policies related to its subject matter expertise (FD)**
• Reviews updates with regards to Quality Assurance and patient safety twice a year and Health Safety & Environment once
a year (FD)**
• Reviews updates from the SpeakUp Office twice a year (FD)**
• Reviews the Group’s tax policy every two years (FD)**
• Reviews updates in closed sessions with the Chief Financial Officer, Chief Audit Officer, and external auditor (FD)**
Key activities in 2023
• Reviewed the timelines, milestones and accounting treatment of the Sandoz spin-off
• Reviewed the non-financial reporting
• Reviewed the accounting and financial reporting, focusing on those areas involving significant risk or judgment
• Reviewed and discussed the Company’s approach to non-financial reporting and assurance, including audit scope,
processes and the required involvement of the Audit and Compliance Committee (ACC) and the full Board
• In a joint session with the GSNC received an overview of the current and emerging ESG reporting standards and
regulations, in addition to the ESG reporting roadmap of Novartis
• Monitored progress on the delivery of the transformation for growth targets
• Received an update on the Novartis fraud risk management framework, including the assessment against the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) principles
• Liaised with the Risk Committee to ensure adequate oversight of the Company’s key transformation projects (Enterprise
Data Governance and Management and Lean Digital Core (LDC) program)
• Reviewed how Novartis is approaching integrated assurance
• Reviewed the Novartis tax policy
• Evaluated the performance of the external auditor of Novartis, KPMG, during 2023
• Received reports and updates from Internal Audit; Quality; Ethics, Risk & Compliance; the SpeakUp Office; Health, Safety &
Environment; and Legal, and discussed progress on identifying and remedying the root causes of any associated issues or
problems
Meetings
Number of meetings held
Number of members
Approximate average duration (hours)
Meeting attendance
8
6
2:30
100%
E. Doherty (Chair, Audit Committee Financial Expert)
T. Buechner
B. Heller
D. Hochstrasser
8
8
8
8
8
F. van Houten
A. de Pro Gonzalo (Audit Committee Financial Expert) 8
Documents
• Board Committees Charter, Appendix I to the Board Regulations
www.novartis.com/investors/company-overview/corporate-governance
* A/P = advisory or preparatory task
** FD = fully delegated task
*** FBA = task subject to final Board approval
138
Item 6. Directors, Senior Management and Employees
Compensation Committee
Primary responsibilities
• Designs, reviews and recommends to the Board the compensation policies and programs (FBA)***
• Advises the Board on the compensation of Board members and the CEO (A/P)*
• Decides on the compensation of Executive Committee members (FD)**
• Prepares the Compensation Report and the Say-on-Pay brochure, and submits them to the Board for approval (FBA)***
Key activities in 2023
• Made decisions relating to Executive Committee and wider employee compensation during the year
• Reviewed the Sandoz Swiss listing prospectus, Say-on-Pay and incentive plan rules including restoration principles for
shareholders and equity holders
• Determined the critical performance measures (including financial, strategic, operational, innovation and ESG) to be
considered in the Executive incentive plan targets
• Assessed the achievement of incentive plan targets for the Executive Committee members
• Reviewed shareholder and proxy advisor feedback related to Novartis compensation practices and disclosures, in addition
to those of peer companies
• Reviewed format of disclosures in the Novartis Compensation Report
• Proposed appropriate peer companies for comparisons of board and executive committee compensation, and assessed
the Company’s level of compensation against the peer group
• Reviewed incentive plan rules to secure pay-for-performance alignment while preserving market competitiveness
• Reflected on the effectiveness of the Company’s compensation programs in view of becoming a pure-play innovative
medicines company
Meetings
Number of meetings held
Number of members
Approximate average duration (hours)
Meeting attendance
Documents
6
4
1:55
100%
S. Moroney (Chair)
P. Bula
B. Heller
W. Winters
6
6
6
6
• Board Committees Charter, Appendix I to the Board Regulations
www.novartis.com/investors/company-overview/corporate-governance
* A/P = advisory or preparatory task
** FD = fully delegated task
*** FBA = task subject to final Board approval
139
Item 6. Directors, Senior Management and Employees
Governance, Sustainability and Nomination Committee
Primary responsibilities
• Oversees the Company’s strategy, governance and progress on sustainability, including access to medicine and healthcare,
global health, environmental sustainability, human capital management and other material ESG aspects (FBA)***
• Recommends corporate governance best practices to the Board (FBA)***
• Reviews the Articles of Incorporation and Board Regulations on a periodic basis (FD)**
• Reviews the composition and size of the Board and its committees as well as the skills matrix on a regular basis (FBA)***
• Identifies new Board member candidates and recommends to the Board whether existing Board members
should stand for re-election (FBA)***
• Prepares and reviews succession plans for the Board Chair, the Vice-Chair, the Lead Independent Director,
Board members, committee members and chairs, and the CEO (FBA)***
• Reviews the independence of each Board member on an annual basis (FBA)***
• Reviews directorships and agreements of Board members for conflicts of interest, and deals with conflicts of interest (FBA)***
Key activities in 2023
• Discussed the composition of, and the succession for, the Novartis Board and its committees on a regular basis
• Discussed benchmarking data concerning the board size, composition, diversity, and committee structure of peer
companies
• Discussed the candidates for the Sandoz board and the Sandoz board committee structure
• Discussed the new Swiss legal requirements on non-financial reporting and the corresponding shareholder vote on the
2023 report on non-financial matters at the 2024 AGM
• Reviewed an update on ESG Strategy with a focus on trends regarding ESG disclosure regulations, access to medicines
and environmental sustainability
• Regularly reviewed updates on the ESG Scorecard to track progress against the sustainability targets for Innovation &
Access, Human Capital Management, Environmental Sustainability and Ethical Standards; reviewed the 2024 ESG targets
• Received an update on access to medicines, including the implementation of the Novartis access principles
• Received an update on human capital management focused on leadership development, our company culture, the care
agenda for associates, and hybrid working
• Received an update on environmental sustainability, which covered performance against the targets of Novartis for climate,
water, and waste, the impact of the Sandoz separation, the approach to reducing scope 3 emissions (including supplier
engagement), and the Novartis carbon reduction glidepath to Net Zero in 2024.
• Reviewed the company’s performance to date and upcoming regulations and future Novartis targets on gender balance,
equal pay, and pay transparency
• In a joint education session with the ACC received an overview of the current and emerging ESG reporting standards and
regulations, in addition to the ESG reporting roadmap of Novartis
• Evaluated the results of the 2023 AGM as well as investor and analyst feedback from ESG and Governance roadshows
held during 2023
• Reviewed and updated the Board Skills Matrix
Meetings
Number of meetings held
Number of members
Approximate average duration (hours)
Meeting attendance
Documents
4
5
2:03
100%
P. Bula (Chair)
B. Heller
D. Hochstrasser
C. Sawyers
W. Winters
4
4
4
4
4
• Board Committees Charter, Appendix I to the Board Regulations
www.novartis.com/investors/company-overview/corporate-governance
* A/P = advisory or preparatory task
** FD = fully delegated task
*** FBA = task subject to final Board approval
140
Item 6. Directors, Senior Management and Employees
Risk Committee
Primary responsibilities
• Oversees the risk management system and processes (FBA)***
• Reviews, together with management, the prioritization and handling of risks, the risk portfolio,
and actions implemented by management (FBA)***
• Performs deep dives into key risk areas and fosters a culture of smart risk-taking (FBA)***
• Reviews updates on cyber security on an annual basis (FD)**
• Reviews regular updates from designated risk owners as well as the Chief Ethics, Risk & Compliance Officer and/or the
Head of Risk & Resilience (FD)**
Key activities in 2023
• Received updates on Enterprise Risk Management mitigation measures and results
• Received an update on European Union regulatory measures and its associated risks and opportunities
• Reviewed and discussed the current risks associated with key product launches in China and the US
• Evaluated the risks associated with current geopolitical developments
• Discussed the key risks associated with data science and artificial intelligence
• Received an update on the Company’s supply network
• Received an update on the main risks in our Research and Development organizational units
• Reviewed the Source-to-Pay risks and mitigations
• Received a deep-dive update on cyber security, including on data loss protection
• Discussed enterprise data management and Lean Digital Core/ERP design and implementation
Meetings
Number of meetings held
Number of members
Approximate average duration (hours)
Meeting attendance
Documents
4
5
1:52
100%
T. Buechner (Chair)
N. Andrews
E. Doherty
A. de Pro Gonzalo
J. Young1
4
4
4
4
4
• Board Committees Charter, Appendix I to the Board Regulations
www.novartis.com/investors/company-overview/corporate-governance
* A/P = advisory or preparatory task
** FD = fully delegated task
*** FBA = task subject to final Board approval
1 Mr. Young became a member of the Risk Committee after the 2023 AGM and has attended all Risk Committee meetings in 2023 following his election.
141
Item 6. Directors, Senior Management and Employees
Science & Technology Committee
Primary responsibilities
• Monitors emerging scientific, data-related, technological and research trends and issues,
and brings recommendations to the Board (FBA)***
• Informs the Board on a periodic basis about critical developments for the success of the portfolio and for scientific,
technological and research activities as well as benchmarking (A/P)*
• Assists the Board with setting the Company’s strategy for science, data, technology and research (A/P)*
• Assists the Board with oversight and evaluation of the performance of the Company’s scientific, technological
and R&D activities (FBA)***
• Reviews performance and proposed targets in the area of science, technology and research (FD)**
• Reviews other matters in relation to science, data, technology and research that the committee may,
at its own discretion, deem desirable in connection with its responsibilities (A/P)*
Key activities in 2023
• Reviewed the strategy of our Biomedical Research organizational unit with its new leadership
• Reviewed the strategy of the Novartis Venture Fund, and provided input on its future direction
• Provided input on the Novartis plan for future equity investing
• Reviewed R&D performance metrics, including benchmarking, and the Biomedical Research and Development
organizational units’ plans to enhance performance
• Provided guidance to Merger & Acquisition (M&A) and Business Development & Licensing (BD&L) teams on scientific
aspects of key deals
• Discussed the strategy of our Development organizational unit with its new leadership
Meetings
Number of meetings held
Number of members
Approximate average duration (hours)
Meeting attendance
3
6
3:35
100%
J. Reinhardt (Chair)
N. Andrews
F. van Houten
S. Moroney
C. Sawyers
J. Young1
3
3
3
3
3
3
Documents
• Board Committees Charter, Appendix I to the Board Regulations
www.novartis.com/investors/company-overview/corporate-governance
* A/P = advisory or preparatory task
** FD = fully delegated task
*** FBA = task subject to final Board approval
1 Mr. Young became a member of the Science and Technology Committee after the 2023 AGM and has attended all Science and Technology Committee meetings in 2023 following his
election.
142
Item 6. Directors, Senior Management and Employees
Board Chair
Honorary Chairman
The Board Chair leads the Board to represent the interests
of all stakeholders and ensures an appropriate balance of
power between the Board and the Executive Committee.
In this role, the Board Chair:
• Provides leadership to the Board
• Supports and mentors the CEO
• Ensures that the Board and its committees work
effectively
• Sets the agenda, style and tone of Board discus-
sions, promoting constructive dialogue and effective
decision-making
• Ensures onboarding programs for new Board members,
and continuous education for and specialization of all
Board members
• Ensures the Board’s annual performance evaluation
• Promotes effective relationships and communication
between Board and Executive Committee members
• Ensures effective communication with the Company’s
Alex Krauer and Daniel Vasella were appointed Honor-
ary Chairmen in recognition of their significant achieve-
ments on behalf of Novartis. In December 2021, Mr. Krauer
passed away at the age of 90.
Mr. Vasella is not provided with Board documents and
does not attend Board meetings.
Mandates outside the Novartis Group
According to article 34, paragraph 1 of the Articles of
Incorporation
(www.novartis.com/investors/company-
overview/corporate-governance), the following limitations
on mandates apply:
Maximum number
of mandates
10
4
shareholders, other stakeholders and the public
Other listed companies 1
Mandates
1 Holding a chair position of the board of directors in other listed companies counts as
two mandates.
According to article 34, paragraph 3 of the Articles of
Incorporation (www.novartis.com/investors/company-
overview/corporate-governance), the following man-
dates are not subject to the above-mentioned limitations:
Mandates in companies that are controlled by Novartis AG
No limit
Mandates held at the request of Novartis AG
or companies controlled by it
5
Maximum number
of mandates
”Mandates” shall mean any membership in the board of
directors, in the executive board or in the advisory board,
or a comparable function under foreign law, in a com-
pany with an economic purpose. Mandates in different
legal entities that are under joint control are deemed to
be one mandate.
For a full list of all external mandates subject to the
above-mentioned limitations, please refer to the Com-
pensation Report (see “—Item 6.B Compensation—”Man-
dates outside the Novartis Group”).
Vice-Chair and
Lead Independent Director
Vice-Chair
The Vice-Chair has the following responsibilities:
• Leads the Board in the event that, and for as long as,
the Board Chair is incapacitated
• Leads the yearly session of the Board members to eval-
uate the performance of the Board Chair, during which
the Board Chair is not present
The Vice-Chair also provides advice and support to the
Board Chair.
Lead Independent Director
To support adequate control mechanisms, the Board
Regulations outline the role of the Lead Independent
Director. The Lead Independent Director has the follow-
ing responsibilities:
• Chairs the sessions of the independent Board members
• Leads the independent Board members in the event
of a crisis or matter requiring their separate consider-
ation or decision
The roles of the Vice-Chair and the Lead Independent
Director can be held by two Board members or by one
Board member (combined role).
The Board appointed Simon Moroney as Vice-Chair
and Patrice Bula as Lead Independent Director, both
roles effective as of March 4, 2022.
143
Item 6. Directors, Senior Management and Employees
Executive Committee
Composition (as per December 31, 2023)
Vasant (Vas) Narasimhan
Chief Executive Officer
Shreeram Aradhye
President, Development
& Chief Medical Officer
Patrick Horber
President, International
Victor Bulto
President, US
Aharon (Ronny) Gal
Chief Strategy & Growth Officer
Karen L. Hale
Chief Legal Officer
Harry Kirsch
Chief Financial Officer
Robert (Rob) Kowalski
Chief People &
Organization Officer
Steffen Lang
President, Operations
Fiona H. Marshall
President, Biomedical
Research
Klaus Moosmayer
Chief Ethics, Risk
& Compliance Officer
Changes to the Executive Committee
Role of the Executive Committee
Marie-France Tschudin, President of the Innovative
Medicines International unit and Chief Commercial Officer
since 2022, stepped down from her role effective Sep-
tember 15, 2023. The unit was renamed ‘International’
and was led by Mukul Mehta, its chief financial officer, on
an ad interim basis from September 16, 2023 to Novem-
ber 30, 2023. Mukul was not a member of the Execu-
tive Committee during this period. Patrick Horber, M.D.
became President, International, and a member of the
Executive Committee effective December 1, 2023. The
biography of Marie-France Tschudin can be found in the
2022 Annual Report (page 151), available at www.novartis.
com/news/media-library/novartis-annual-report-2022.
The Board has appointed the Executive Committee mem-
bers and delegated the overall responsibility for and
oversight of the operational management of Novartis to
them, including:
• Recruiting, appointing and promoting senior management
• Ensuring the efficient operation of the Group and the
achievement of optimal results
• Promoting an active internal and external communi cations
policy
• Developing policies and strategic plans for Board
approval, and implementing those approved
• Submitting the following to the Board for approval: invest-
ments, divestments, transactions, contracts and litigations
with a value exceeding USD 500 million, and capital market
and other important financing transactions, as well as all
other matters of fundamental significance to the Novartis
Group
• Preparing and submitting quarterly and annual reports
to the Board and its committees
• Informing the Board of all matters of fundamental sig-
nificance to the businesses
• Dealing with any other matters delegated by the Board
There are no contracts between Novartis and third
parties whereby Novartis would delegate any business
management tasks to such third parties.
144
Item 6. Directors, Senior Management and Employees
CEO
• Ensuring Novartis has the capabilities to achieve its
long-term strategic objectives
NATIONALITY
NATIONALITY
With the support of the Executive Committee, the CEO is
responsible for the operational management of Novartis.
This includes effectively implementing the Company strat-
egy, delivering financial results, and shaping a corporate
culture of empowerment and responsibility to help drive
innovation, performance and reputation.
In addition to other Board-assigned duties, the CEO
leads the Executive Committee, and is responsible for
building and maintaining an effective executive team. With
the support of the Executive Committee, the CEO is
responsible for:
Diversity
GENDER
GENDER
• Developing robust management succession and
development plans for presentation to the Board
• Promoting effective communication with shareholders
EXECUTIVE/NON-EXECUTIVE
EXECUTIVE/NON-EXECUTIVE
INDEPENDENCE
INDEPENDENCE
and other stakeholders
• Ensuring Novartis conducts its business in a legal and
ethical manner
• Developing an effective risk control framework for all
business activities
• Ensuring the flow of information to the Board is accurate,
timely and clear
The composition of the Executive Committee of Novartis as of December 31, 2023, in terms of nationality, gender,
age and length of tenure, is shown in the following charts:
Diversity profile
NATIONALITY
NATIONALITY
Nationality1
BACKGROUND/EXPERIENCE
GENDER
BACKGROUND/EXPERIENCE
Gender
GENDER
AGE
AGE
EXECUTIVE/NON-EXECUTIVE
EXECUTIVE/NON-EXECUTIVE
Age
TENURE
TENURE
Tenure
INDEPENDENCE
INDEPENDENCE
p American
p German
p Swiss
p British
p Spanish
p Israeli
41%
18%
18%
9%
9%
5%
p Male
p Female
82%
18%
p <45
p 45–50
p >50
0%
18%
82%
p <2 y
p 2–4 y
p >4 y
45.5%
18%
36.5%
1 Please note that three Executive Committee members have dual nationalities. Each of these nationalities is counted as a half in the above chart.
BACKGROUND/EXPERIENCE
BACKGROUND/EXPERIENCE
AGE
AGE
Mandates outside the Novartis Group
TENURE
TENURE
According to article 34, paragraph 2 of the Articles of
Incorporation (www.novartis.com/investors/company-
overview/corporate-governance), the following limitations
on mandates apply:
Mandates in companies that are controlled by Novartis AG
No limit
Mandates held at the request of Novartis AG
or companies controlled by it
5
Maximum number
of mandates
Mandates
Other listed companies 1
Maximum number
of mandates
6
2
1 Holding a chair position of the board of directors in other listed companies is not
allowed.
According to article 34, paragraph 3 of the Articles of
Incorporation (www.novartis.com/investors/company-
overview/corporate-governance), the following man-
dates are not subject to the above-mentioned limitations:
”Mandates” shall mean any membership in the board of
directors, in the executive board or in the advisory board,
or a comparable function under foreign law, in a com-
pany with an economic purpose. Mandates in different
legal entities which are under joint control are deemed
one mandate.
For a full list of all external mandates subject to the
above-mentioned limitations, please refer to the Com-
pensation Report (see “—Item 6.B Compensation—”Man-
dates outside the Novartis Group”).
145
Item 6. Directors, Senior Management and Employees
Members of the Executive Committee
Vasant (Vas) Narasimhan, M.D.
Chief Executive Officer of Novartis since 2018 | Nationality: American | Year of birth: 1976
Professional experience
• Global Head of Drug Development and Chief Medical Officer, Novartis AG, Switzerland (2016–2018)
• Global Head of Development, Novartis Pharmaceuticals, Switzerland (2014–2016)
• Global Head of Biopharmaceuticals and Oncology Injectables, Sandoz International, Germany (2014)
• Global Head of Development, Novartis Vaccines, US (2012–2014)
• North America Region Head, Novartis Vaccines, and US Country President, Novartis Vaccines and
Diagnostics, US (2008–2012)
• Joined Novartis in 2005
Mandates
• Member, National Academy of Medicine, US
• Committee member, Biopharmaceutical CEOs Roundtable (BCR), International Federation of
Pharmaceutical Manufacturers & Associations (IFPMA), Switzerland
• Board member and treasurer, Pharmaceutical Research and Manufacturers of America (PhRMA), US
Education
• Doctor of medicine, Harvard Medical School, US
• Master’s degree in public policy, John F. Kennedy School of Government, Harvard University, US
• Bachelor’s degree in biological sciences, University of Chicago, US
Shreeram Aradhye, M.D.
President, Development & Chief Medical Officer since May 16, 2022 | Nationality: American | Year of birth: 1962
Professional experience
• Executive vice president & chief medical officer, Dicerna Pharmaceuticals, US (2020–March 2022)
• Executive vice president & chief development officer, Axcella Health, US (2019–2020)
• Global Head, Medical Affairs and Chief Medical Officer, Pharmaceuticals, Novartis, US & Switzerland
(2017–2019)
• Global Head, Development Franchise, Neuroscience, and US Head, Development, Novartis,
US & Switzerland (2013–2017)
• Executive Global Program Head, Multiple Sclerosis, Novartis, Switzerland (2012–2013)
• Head, Global Development India, Novartis, India (2011–2012)
• Head, Global Clinical Development & Medical Affairs, Biosimilars, Sandoz, Germany (2009–2011)
• Joined Novartis in 1999 holding positions of increasing responsibility
Education
• Chief resident and teaching fellow in internal medicine, Newton Wellesley Hospital, US
• Resident in internal medicine, Newton Wellesley Hospital, US
• Fellow in nephrology, St Luke’s Roosevelt Medical Center, US
• Resident in internal medicine (M.D.), All India Institute of Medical Sciences, India
• Bachelor of medicine and bachelor of surgery, All India Institute of Medical Sciences, India
Victor Bulto
President, US since April 4, 2022 | Member of the Executive Committee as of May 1, 2022 | Nationality: Spanish |
Year of birth: 1978
Professional experience
• President, Novartis Pharmaceuticals Corporation, US (2019–April 2022)
• Vice President & Head US Immunology & Dermatology Franchise, US (2017–2019)
• Vice President & Head US Alcon Pharmaceuticals, US (2016–2017)
• Head Neuroscience Franchise, Region Europe, Novartis, Switzerland (2013–2016)
• Business Franchise Head Neuroscience, Novartis, Spain (2012–2013)
• Business Franchise Head Neuroscience/MS, Respiratory, Osteoarticular, Spain, Novartis (2010–2012)
• Marketing Head Respiratory, Osteoarticular, Novartis, Spain (2009–2010)
Mandates
• Board member, Biotechnology Innovation Organization (BIO), US
Education
• Master of business administration, ESADE Business School, Spain
• Master’s degree in health economics and pharmacoeconomics, Pompeu Fabra University Spain
• Master’s degree in chemical engineering, Ramon Llull University, Spain
• Bachelor’s of science degree in chemistry, Ramon Llull University, Spain
146
Item 6. Directors, Senior Management and Employees
Aharon (Ronny) Gal, Ph.D.
Chief Strategy & Growth Officer since July 18, 2022 | Nationality: Israeli/American | Year of birth: 1966
Professional experience
• Senior analyst, US biopharmaceutical, Sanford Bernstein, US (2020–June 2022)
• Senior analyst, US specialty pharmaceuticals and Biotech, Sanford Bernstein, US (2016–2020)
• Senior analyst, US specialty pharmaceuticals and EU mid-cap pharmaceuticals, Sanford Bernstein,
US, UK (2013–2016)
• Senior analyst, US specialty pharmaceuticals, Sanford Bernstein, US (2004–2013)
• Vice president, Canon US Life Sciences, US (2003–2004)
• Consultant, team leader, manager, The Boston Consulting Group, Inc., US, Singapore, China
(1996–2002)
Education
• Doctorate in biochemistry, Massachusetts Institute of Technology, US
• Bachelor’s degree in chemistry, Emory University, US
Karen L. Hale
Chief Legal Officer of Novartis since May 15, 2021 | Nationality: American | Year of birth: 1968
Professional experience
• Vice president, deputy general counsel, AbbVie Inc., US (2019–2021)
• Vice president, chief ethics and compliance officer, AbbVie Inc., US (2013–2019)
• Vice president, litigation and legal specialty operations, AbbVie Inc., US (2013)
• Divisional vice president, commercial litigation, Abbott Laboratories, US (2006–2012)
• Began practicing law in 1994 and joined Abbott in 1997
Education
• Bar memberships: Illinois and Virginia, US
• Juris doctor, William & Mary Law School, US
• Bachelor’s degree in economics, Duke University, US
Patrick Horber
President, International since December 1, 2023 | Nationality: Swiss | Year of birth: 1970
Professional experience
• Senior vice president, AbbVie, president Immunology, AbbVie, US (July 2023–September 2023)
• President, US commercial operations, Immunology, AbbVie, US (2020–June 2023)
• Vice president and head of global marketing and commercial operations, AbbVie, US (2019–2020)
• Vice president and managing director, AbbVie, Germany (2015–2019)
• Managing director, AbbVie, Switzerland (2013–2015)
• Managing director, Abbott, Switzerland (2012–2012)
• Leadership roles at headquarters and country operations, Roche (2005–2012)
Mandates
• Member of the board and chair of the strategy and politics committee, Verband Forschender
Arzneimittelhersteller, Germany (2016–2019)
• Chair of the executive committee and member of the presidents bureau, Interpharma, the association of
Switzerland’s research-based pharmaceutical industry (2015–2015)
• Member of the executive committee and the board, Interpharma (2013–2015)
Education
• Doctor of medicine (M.D.), University of Zurich, Switzerland
Harry Kirsch
Chief Financial Officer of Novartis since 2013 | Nationality: German/Swiss | Year of birth: 1965
Professional experience
• Chief Financial Officer of the Pharmaceuticals Division, Novartis Pharmaceuticals, Switzerland (2010–
2013)
• Chief Financial Officer of Pharma Europe, Novartis Pharmaceuticals, Switzerland (2008–2010)
• Head of Business Planning & Analysis for the Pharmaceuticals Division, Novartis Pharmaceuticals,
Switzerland (2005–2008)
• Joined Novartis in 2003 as Head Finance Global Primary Care, and over the years held positions of
increasing responsibility within Finance
Mandates
• Represented Novartis on the board of GlaxoSmithKline Consumer Healthcare Holdings Ltd. (2015–2018)
Education
• Diploma degree in industrial engineering and economics, University of Karlsruhe, Germany
147
Item 6. Directors, Senior Management and Employees
Robert (Rob) Kowalski
Chief People & Organization Officer of Novartis since September 1, 2021 | Nationality: American | Year of birth: 1968
Professional experience
• Executive Vice President and Global Head of Regulatory Affairs (2018–2021), and US Head of Global
Drug Development (2009–2015 and 2017–2021), Novartis Pharmaceuticals Corporation, US
• Ad interim President, Novartis Corporation, US (2021)
• Ad interim Head of Global Drug Development and Chief Medical Officer, Novartis AG,
Switzerland (2018)
• Senior Vice President and Head of Regulatory Affairs, Novartis Pharmaceuticals Corporation, US
(2009–2015 and 2017–2018)
• Senior Vice President and Head of Regulatory Affairs, Novartis Pharma AG, Switzerland (2015–2017)
• Global Head of Country Medical Development, Novartis Pharmaceuticals Corporation, US (2010–2011)
• Previously held regulatory leadership roles at Schering-Plough Corporation (now Merck) and Pharmacia
Corporation (now Pfizer)
Mandates
• Member of the advisory board, Industry Pharmacists Organization, US
Education
• Doctor of pharmacy, University of Wisconsin-Madison, US
• Bachelor’s degree in pharmaceutical sciences, University of Wisconsin-Madison, US
Steffen Lang, Ph.D.
President, Operations since April 4, 2022 | Nationality: German/Swiss | Year of birth: 1967
Professional experience
• Global Head of Novartis Technical Operations (NTO), Switzerland (2017–April 2022)
• Global Head of Biologics Technical Development and Manufacturing, Novartis Technical Operations,
Switzerland (2015–2017)
• Global Head of Technical Research and Development, Novartis Pharmaceuticals, Switzerland (2009–2015)
• Joined Novartis in 1994 as Head of Laboratory in Research, and over the years held positions of
increasing responsibility within Pharmaceuticals Development
Mandates
• Board member, Bachem Holding AG, Switzerland
Education
• Doctorate in pharmaceutical technology, Swiss Federal Institute of Technology, Switzerland
• Master’s degree in pharmaceutical sciences, University of Heidelberg, Germany
Fiona H. Marshall, Ph.D.
President, Biomedical Research since November 1, 2022 | Nationality: British | Year of birth: 1964
Professional experience
• Senior vice president, head of discovery, preclinical and translational medicine, Merck & Co., US,
(2021–September 2022)
• Vice president, global head of neuroscience, Merck & Co., US (2019–2021)
• Vice president, head of UK discovery research, Merck & Co., UK (2018–2019)
• Executive vice president and chief scientific officer, Sosei Heptares, UK (2015–2018)
• Chief scientific officer and founder, Heptares Therapeutics, UK (2006–2018)
Mandates
• Member of the Scientific Advisory Board, SciLifeLab, Sweden
• Fellow, Royal Society, UK Academy of Medical Sciences, and Royal Society of Biology, all UK
Education
• Doctorate in neuroscience, University of Cambridge, UK
• Bachelor’s degree in biochemistry, University of Bath, UK
Klaus Moosmayer, Ph.D.
Chief Ethics, Risk & Compliance Officer of Novartis since 2018 | Nationality: German | Year of birth: 1968
Professional experience
• Chief compliance officer, Siemens AG, Germany (2014–2018)
• Chief counsel compliance, Siemens AG, Germany (2009–2013)
• Compliance operating officer, Siemens AG, Germany (2007–2009)
Mandates
• Board member, SwissHoldings, the Swiss federation representing Swiss-based multinational companies,
Switzerland
• Member of the executive board, Business at OECD (BIAC), Paris
• Co-founder and honorary board member, European Chief Compliance and Integrity Officers’ Forum
• Co-chair, B20 Integrity & Compliance Task Force under the G20 presidencies of Indonesia (2022), Italy
(2021), Saudi Arabia (2020), Argentina (2018), and Chair of the Task Force under the G20 presidency of
Germany (2017)
• Chair of the Anti-Corruption Committee of the Business and Industry Advisory Committee (BIAC),
Organization for Economic Co-operation and Development (OECD), Paris (2013–2020)
Education
• First and second state examination in law, Germany
• Doctor of jurisprudence, University of Freiburg, Germany
148
Item 6. Directors, Senior Management and Employees
Information and control systems
The Board’s information and control systems vis-à-vis
management include a steady flow of information from
senior management; monthly financial reports; a compre-
hensive and integrated risk management framework; and
the independent evaluation of our risk management and
internal control framework by the Internal Audit function
(see “Item 15. Controls and Procedures”).
Information from senior management
The Board ensures that it receives sufficient information
from the Executive Committee through:
• Monthly CEO reporting (encompassing progress against
company targets, including financial results) and fre-
quent communications from the CEO on current devel-
opments
• Executive Committee meeting minutes
• Regular meetings and teleconferences by the Board
and/or Board committees with the CEO and/or other
members of the Executive Committee (e.g., the CFO,
the Chief Legal Officer, the Chief Ethics, Risk & Com-
pliance Officer), and regular meetings and teleconfer-
ences with senior management (e.g., the Chief Audit
Officer)
• Information from Executive Committee members or
other Novartis employees, and visits to Novartis sites
To obtain an outside view, the Board and/or Board com-
mittees occasionally invite external advisors (e.g., the
independent advisor of the Compensation Committee,
the external auditor) to attend a meeting and/or share
their observations about a specific topic.
Monthly financial reports
Novartis produces comprehensive, consolidated (unau-
dited) financial statements on a monthly basis for the
Company. These are typically available within 10 days
after the end of the month, and include the following:
• Consolidated income statement of the month and year
to date, in accordance with IFRS Accounting Standards,
as well as adjustments to arrive at non-IFRS measures
core results, as defined by Novartis (see “Item 5. Oper-
ating and Financial Review and Prospects—Item 5.A
Operating results—Non-IFRS measures as defined by
Novartis”). The IFRS Accounting Standards and non-
IFRS measures core figures are compared with the pri-
or-year period and targets in both USD and on a con-
stant currency basis.
• Supplementary data on a monthly and year-to-date
basis, such as free cash flow and earnings per share
on a USD basis
Management information related to the consolidated
income statements and free cash flow is made available
to Board members through the monthly CEO Report,
which includes an analysis of key deviations from the
prior year or target.
Prior to the release of each quarter’s results, the Board
receives the actual consolidated financial statement infor-
mation and an outlook of the full-year results in accor-
dance with IFRS Accounting Standards and non-IFRS
measures core results (as defined by Novartis), together
with related commentary.
Annually, during the third quarter, the Board approves
the Company’s strategic plan for the next three years. In
the fourth quarter of the year, the Board approves the
operating targets for the following year as well as the
financial targets for the following three-year period,
including a projected consolidated income statement in
USD prepared in accordance with IFRS Accounting Stan-
dards and non-IFRS measures as defined by Novartis
(core results).
The Board does not have direct access to the Novartis
financial and management reporting systems but can, at
any time, request more detailed information.
149
Item 6. Directors, Senior Management and Employees
Risk management
Overview
At Novartis, our continued success depends on our abil-
ity to manage risk. Our Board has ultimate oversight of
the Enterprise Risk Management (ERM) system and reg-
ularly reviews the most significant risks and how these
risks are managed. As explained further below, the Board
is supported by its committees. Furthermore, our Internal
Audit function provides an independent evaluation of risk
management (see “—Item 6.C Board practices—Informa-
tion and control systems—Internal Audit”).
BOARD COMMITTEES
RISK COMMITTEE
• Oversees the risk management system and processes
• Reviews, together with management, the prioritization and handling
of risks, the risk portfolio, and actions implemented by management
• Performs deep dives into key risk areas and fosters a culture of
smart risk-taking
• Receives updates on cyber security on an annual basis
• Receives regular updates from designated risk owners as well as
the Chief Ethics, Risk & Compliance Officer and/or the Head of Risk
& Resilience
AUDIT AND COMPLIANCE COMMITTEE
• Ensures that Internal Audit plans are aligned with key risks, and that
the function provides independent assurance and insights around
these risks
• Works closely with the Risk Committee to minimize gaps in
risk coverage
• Receives a semiannual presentation from the Chief Ethics, Risk &
Compliance Officer
• Receives a quarterly presentation from the Chief Audit Officer on
progress achieved in implementing the risk-based audit plan, and
key insights about audit and advisory activities
• Pays particular attention to financial risk
• Has closed sessions with the Chief Audit Officer and, upon request,
with the Chief Ethics, Risk & Compliance Officer
COMPENSATION COMMITTEE
• Works closely with the Risk Committee to ensure that the
compensation system does not lead to excessive risk-taking
(see “—Item 6.B Compensation—Compensation governance—
Risk management principles”)
EXECUTIVE COMMITTEE OF NOVARTIS
• Regularly assesses risks and fosters a culture of risk awareness,
in line with the Novartis Values and Behaviors and the Novartis
Code of Ethics
ETHICS, RISK & COMPLIANCE
• Governs the Novartis Code of Ethics
• Provides an integrated ERM framework (which is further described
in the following section)
• Governs the global compliance program within Novartis
• Administers the Enterprise Policy Management and global Internal
Controls framework
SENIOR LEADERS OF ORGANIZATIONAL UNITS AND GLOBAL
FUNCTIONS, AT ALL LEVELS
• Provide appropriate risk management within their area of
responsibility
• Establish adequate risk prevention and mitigation strategies when
risk exposure is identified, including tracking progress and providing
resources for possible actions
• Assess emerging risks, trends and overall exposure as part of the
ERM process
Enterprise Risk Management framework
The Ethics, Risk & Compliance (ERC) function provides
an integrated ERM framework to obtain a holistic view of
Company risks and drive a culture of smart risk-taking.
Under the leadership of the Chief Ethics, Risk & Compli-
ance Officer, the Risk & Resilience team is responsible
for the overall ERM process. This process covers, but is
not limited to, risks associated with:
• The research, development, manufacturing, marketing
and sales of products
• Finance, taxes, intellectual property, compliance with law
and regulations, security, product safety, technology,
human resources, and health, safety and environmental
protection
• Business objectives and strategies, including mergers
and acquisitions
• External factors such as the social, political and eco-
nomic environment
The ERM process continued to evolve in 2023. The Risk
& Resilience team conducted risk workshops and collab-
orated with all risk assurance and monitoring functions
to identify key risks across the Company. Each Novartis
unit organized a focused risk workshop including lead-
ership team members. In parallel, risk workshops were
held in top countries by revenue and in certain focus
markets. Once key risks were identified, mitigation action
plans were created to address them in an effective way.
The findings from these workshops were consolidated
into the Novartis Risk Compass, which enables senior
management, the Executive Committee and the Board
to focus discussions on key risks and more closely align
our corporate strategy with our risk exposure and ways
of working.
In 2023, we further matured our ERM framework
within the Novartis Risk & Resilience organization and
developed additional risk management trainings and our
risk intelligence forum, an event that brought together
internal and external speakers to address emerging
trends and threats. We also integrated a critical scope
of activities (Health, Safety and Environment environ-
mental remediation) into the Risk & Resilience depart-
ment. Furthermore, the Enterprise Policy & Internal Con-
trol team is progressing as planned to create a holistic
framework by linking process governance with policies
and controls and the Central Monitoring Coordination
team is expanding its scope to ensure a harmonized and
coordinated monitoring process across the Company.
SpeakUp Office
Our SpeakUp Office provides a safe place for employ-
ees to report potential misconduct, including the option
to do so anonymously.
Global Security
Global Security proactively collects and shares threat
intelligence to protect Novartis from situations that may
compromise the safety of people, products and assets,
and/or the reputation of our organization. Global Security
protects patients from counterfeit products and, as part
of the SpeakUp process, performs fair and timely inves-
tigations into high-risk cases of alleged internal miscon-
duct. It also provides personal security advice and sup-
port for Novartis executives and other employees with
the utmost discretion.
150
Item 6. Directors, Senior Management and Employees
Internal Audit
2023 INTERNAL AUDIT ACTIVITIES
AUDITS
28
ADVISORIES
18
The purpose of Internal Audit is to assist the Board and
the Executive Committee in discharging their governance
responsibilities by providing independent assurance and
advice on the effectiveness, efficiency and adequacy of
processes and controls that support Novartis in achiev-
ing its objectives, managing its major risks, and ensuring
compliance with applicable policies, laws and regulations.
The Chief Audit Officer reports administratively to
the CEO, and functionally to the chair of the Audit and
Compliance Committee (ACC). The Chief Audit Officer
meets with the ACC at least once a quarter and confirms
the organizational independence of the Internal Audit
function to the ACC on an annual basis.
In 2023, our Internal Audit function executed a risk-
based audit plan and reported the results to the audited
units, the Executive Committee and the ACC. Audit find-
ings and action plans are stored and monitored in a sin-
gle location to enable efficient and effective follow-up.
The following outlines the number of audits and adviso-
ries performed in 2023, and key methodology steps when
managing the Internal Audit cycle.
Internal Audit cycle methodology
includes:
3 Planning: Monitoring and information
gathering via continuous risk assess-
ment based on data analytics, busi-
ness interviews and quarterly calibra-
tion of the audit plan. The audit plan is
approved by the ACC biannually.
3 Execution and Reporting: 46 engage-
ments delivered in 2023, all linked to
group risks, emerging topics and com-
pany-wide initiatives.
3 Follow Up: Management is responsible
for resolving issues, supported by
Internal Audit to ensure timely closure
of high-risk observations.
Internal Audit performed 77% of planned activities (equat-
ing to 46 of 60 engagements) in 2023. Due to method-
ology redesign and tool development, the internal audit
function’s engagement volume was impacted as associ-
ates were actively involved in those projects.
151
Item 6. Directors, Senior Management and Employees
Auditors
Duration of the mandate
and terms of office
On behalf of the Board, the ACC selects and nominates
an independent auditor for election at the AGM. KPMG
commenced its auditing mandate for Novartis in 2022.
Richard Broadbelt, Auditor in charge, and Heidi Broom-
Hirst, Global Audit Partner, began serving in their roles
in 2022 and 2023, respectively. The ACC together with
KPMG will ensure that these partners are rotated at least
every five years.
Auditing fees and additional fees
The ACC monitors and preapproves the fees paid to the
external auditor for all audit and non-audit services. It
has developed and approved a policy with clear guide-
lines on the engagement of the independent auditor firm.
This policy is designed to help ensure that the indepen-
dence of the external auditor is maintained. It limits the
scope of services that the external auditor may provide
to the Company, stipulating certain permissible types of
audit-related and non-audit services, including tax ser-
vices and other services that have been preapproved by
the ACC. The ACC preapproves all other services on a
case-by-case basis.
The external auditor is required to report periodically
to the ACC about the scope of the services it has pro-
vided to the Company and the fees for the services it
has performed to date. KPMG fees for professional ser-
vices related to the 12-month periods ended December
31, 2023, and December 31, 2022, are as follows:
Audit services
Audit-related services
Tax services
Other services
Total
2023
USD million
2022
USD million
26.8
2.5
0.3
0.0
29.6
22.5
0.7
1.2
0.0
24.4
Audit services include work performed to issue opinions
on consolidated financial statements and parent company
financial statements of Novartis AG, to issue opinions
related to the effectiveness of the Company’s internal
control over financial reporting, and to issue reports on
local statutory financial statements. Also included are
audit services that can generally only be provided by the
statutory auditor, such as the audits of the Compensa-
tion Report, special purpose financial statement in con-
nection with divestment transactions, information sys-
tems and the related control environment; and reviews
of quarterly financial results.
Audit-related services include other assurance services
provided by the independent auditor but not restricted to
those that can only be provided by the statutory auditor.
They include services such as: the limited assurance over
the Novartis in Society Integrated Report, audits of pen-
sion and other employee benefit plans; audits in connec-
tion with non-recurring transactions; contract audits of
third-party arrangements; corporate responsibility assur-
ance; and other audit-related services.
Tax services include tax compliance, assistance with
historical tax matters, and other tax-related services.
Other services in 2023 included procedures related
to company specific training on emerging topics, bench-
marking studies, and license fees for use of accounting
and other reporting guidance databases.
Information to the Board and the ACC
The ACC, acting on behalf of the Board, is responsible for
overseeing the activities of the external auditor. In 2023,
this committee held seven meetings. KPMG was invited to
all of these meetings to attend the discussions on audit-
ing matters and any other matters relevant to its audit.
The ACC recommended to the Board to approve the
audited consolidated financial statements and the separate
parent company financial statements of Novartis AG for the
year ended December 31, 2023. The Board proposed
the acceptance of these financial statements for approval
by the shareholders at the next AGM.
The ACC regularly evaluates the performance of the
external auditor and, based on this, once a year deter-
mines whether the external auditor should be proposed
to the shareholders for re-election. To assess the per-
formance of the external auditor, the ACC requests input
from management and holds private meetings with the
CFO and the Chief Audit Officer and, if necessary, obtains
an independent external assessment. Criteria applied
for the performance assessment of the external auditor
include an evaluation of: its technical and operational
competence; its independence and objectivity; the suf-
ficiency of the resources it has employed; its focus on
areas of significant risk to Novartis; its willingness to
probe and challenge; its ability to provide effective, prac-
tical recommendations; and the openness and effective-
ness of its communications and coordination with the
ACC, the Internal Audit function and management.
Once a year, the Auditor in charge and the Global
Audit Partner report to the Board on the external audi-
tor’s activities during the current year, and on the audit
plan for the coming year.
On an annual basis, the external auditor provides the
ACC with written disclosures required by the US Public
Company Accounting Oversight Board, and the commit-
tee and the external auditor discuss the external audi-
tor’s independence from Novartis.
152
Item 6. Directors, Senior Management and Employees
Information policy
Novartis is committed to open and transparent commu-
nication with shareholders, investors, financial analysts,
customers, suppliers and other stakeholders. Novartis
disseminates information about material developments in
its businesses in a broad and timely manner that complies
with the rules of the SIX Swiss Exchange and the NYSE.
Communications
Novartis publishes this Annual Report to provide informa-
tion on the Group’s results and operations. Novartis dis-
closes financial results in accordance with IFRS Accounting
Standards on a quarterly basis, and issues press releases
from time to time regarding business developments.
Novartis publishes press releases related to financial
results and material events to the US Securities and
Exchange Commission (SEC) via Form 6-K. An archive
containing annual reports, US SEC Form 20-F, quarterly
results releases and all related materials – including pre-
sentations and conference call webcasts – is available
at www.novartis.com/investors.
Novartis also publishes the Novartis in Society
Integrated Report, available at www.novartis.com/report-
inghub, which provides an overview of our business, strat-
egy and performance, and describes how we create value
for stakeholders and society. The Novartis in Society
Integrated Report is prepared in accordance with Art.
964b of the Swiss Code of Obligations, and in alignment
with recommendations and standards issued by the Inte-
grated Reporting Framework, the Sustainability Account-
ing Standards Board (SASB), the Global Reporting Ini-
tiative (GRI), and the Task Force on Climate-related
Financial Disclosures (TCFD).
The information on Board and Executive Committee com-
pensation is outlined in the Compensation Report (see “—Item
6.B Compensation” in general, and for certain compensation
information with respect to our Board that is responsive to
Item 6.C.2 of Form 20-F, see “—Item 6.B Compensation—2022
Board compensation—Philosophy and benchmarking”). Please
also refer to articles 29-35 of the Articles of Incorporation
(www.novartis.com/investors/company- overview/corpo-
rate-governance). No change-of-control or ‘golden parachute’
clauses benefit Board members, Executive Committee
members, or other members of senior management. Employ-
ment contracts with Executive Committee members are either
for a fixed term not exceeding one year or for an indefinite
period with a notice period not exceeding 12 months, and do
not contain commissions for the acquisition or transfer of
enterprises or severance payments. No loans or credits are
granted to Board and Executive Committee members.
Information contained in reports and releases issued
by Novartis is only correct and accurate at the time of
release. Novartis does not update past releases to reflect
subsequent events, and advises against relying on them
for current information.
Investor Relations
Investor Relations manages the Company’s interactions
with the international financial community. Several events
are held each year to provide institutional investors and ana-
lysts with various opportunities to learn more about Novartis.
Investor Relations is based at the Company’s head-
quarters in Basel. Part of the team is located in the US
to coor dinate interaction with US investors. More infor-
mation is available at www.novartis.com/investors.
Website information
Topic
Share capital
Shareholder rights
Annual General Meeting of Shareholders
Board Regulations
Novartis code for senior financial officers
Novartis in Society Integrated Report
Novartis Annual Report and Form 20-F
Novartis Financial Data
Press releases
Information
Articles of Incorporation of Novartis AG
https://www.novartis.com/sites/novartiscom/files/statuten-en.pdf
Novartis key share data
www.novartis.com/investors/share-data-analysis
Articles of Incorporation of Novartis AG
www.novartis.com/investors/company-overview/corporate-governance
Annual General Meeting of Shareholders
www.novartis.com/investors/shareholder-information/annual-general-meeting
Board Regulations
www.novartis.com/investors/company-overview/corporate-governance
Novartis Code of Ethical Conduct for CEO, ECN and Senior Financial
Officers of Novartis
www.novartis.com/investors/company-overview/corporate-governance
Novartis in Society Integrated Report
www.novartis.com/reportinghub
Novartis Annual Report and Form 20-F
www.novartis.com/reportinghub
Novartis Financial Data
www.novartis.com/investors/financial-data
Press releases
www.novartis.com/news/news-archive?type=media_release
Email service
www.novartis.com/news/stay-up-to-date
Additional information (including event calendar, registered
office, contact and email addresses, phone numbers, etc.)
Novartis Investor Relations
www.novartis.com/investors
The information on our website is not, and shall not be deemed to be, a part of this Annual Report or incorporated herein.
153
Item 6. Directors, Senior Management and Employees
Quiet periods
According to our Global Insider Policy, employees who
have access to material non-public information on a reg-
ular basis are designated as Continuing Insiders and are
banned from trading in Novartis securities during quiet
periods. Limited exemptions for the expiry of options or
warrants within a quiet period apply. Our quarterly quiet
periods commence on the first trading day of each cal-
endar quarter and end at the beginning of the first trad-
ing day after the subsequent release of the quarterly
and/or annual results.
In 2023, the following quiet periods applied:
• January 1, 2023, until (and including) February 1, 2023
• April 1, 2023, until (and including) April 25, 2023
• July 1, 2023, until (and including) July 18, 2023
• October 1, 2023, until (and including) October 24, 2023
154
Item 6. Directors, Senior Management and Employees
6.D Employees
The table below sets forth the breakdown of the total year-end number of our full-time equivalent employees by
main category of activity and geographic area for the past three years.
For the year ended
December 31, 2023
(full-time equivalents)
USA
Canada and Latin America
Europe
Asia/Africa/Australasia
Total
For the year ended
December 31, 2022
(full-time equivalents)
USA
Canada and Latin America
Europe
Asia/Africa/Australasia
Total
Thereof continuing operations 2
Thereof discontinued operations 2
For the year ended
December 31, 2021
(full-time equivalents)
USA
Canada and Latin America
Europe
Asia/Africa/Australasia
Total
Thereof continuing operations 2
Thereof discontinued operations 2
Total
12 846
3 721
464
182
1 668
34 459
723
25 031
Total
14 525
5 342
599
270
2 483
50 853
932
30 983
Marketing and Research and Production and
sales development
General and
supply Operations 1 administration
5 219
1 732
8 426
5 194
1 310
461
327
8 519
11 811
12 347
4 061
2 718
659
1 019
4 035
5 182
27 724
18 235
16 166
10 895
3 037
76 057
Marketing and Research and Production and
sales development
General and
supply Operations 1 administration
6 003
2 678
5 358
1 740
514
809
14 078
10 483
18 781
15 856
4 841
3 841
825
1 071
5 028
5 513
38 615
21 196
25 171
12 437
4 284
101 703
30 420
18 681
14 826
12 437
3 313
79 677
8 195
2 515
10 345
971
22 026
Marketing and Research and Production and
sales development
General and
supply Operations 1 administration
6 074
3 116
5 324
510
1 938
1 426
15 163
10 307
17 630
16 927
4 812
3 570
879
1 116
5 108
5 696
Total
14 869
6 538
654
370
2 613
50 821
1 090
32 095
41 280
20 953
24 564
12 799
4 727
104 323
32 973
18 425
14 165
12 799
3 765
82 127
8 307
2 528
10 399
962
22 196
1 relates to full time equivalent employees (FTEs) from our Operations unit, excluding the Operations units’ production and supply FTEs
2 Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and continued
corporate activities. Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars division and certain corporate
activities attributable to Sandoz prior to the spin-off up to the distribution date of October 3, 2023.
As of December 31, 2023, the total number of our full-
time equivalent employees decreased by 25 646 com-
pared with December 31, 2022, mainly driven by the
Sandoz spin-off at the October 3, 2023, distribution date,
and the initiative announced in April 2022 to implement
a new, streamlined organizational model.
A significant number of our employees are repre-
sented by unions or works councils. We have not expe-
rienced any material work stoppages in recent years, and
we consider our employee relations to be good.
155
Item 6. Directors, Senior Management and Employees
6.E Share ownership
The information set forth under “Item 6. Directors, Senior
Management and Employees—Item 6.B Compensation—
CEO and Executive Committee—Additional disclosures
and other statutory information—Shares, ADRs and
other equity rights owned by Executive Committee mem-
bers as at December 31, 2023” and under “Item 6. Direc-
tors, Senior Management and Employees—Item 6.B
Compensation—Board compensation—Shares, ADRs
and share options owned by Board members” is incor-
porated by reference. For more information on our equi-
ty-based participation plans, see the information set
forth under “Item 18. Financial Statements—Note 27.
Equity-based participation plans for employees,” which
is incorporated by reference.
6.F Erroneously awarded compensation
Not applicable.
156
Item 7. Major Shareholders and Related Party Transactions
Item 7. Major Shareholders and Related Party
Transactions
7.A Major shareholders
Novartis shares are widely held. As of December 31,
2023, Novartis had approximately 183 000 sharehold-
ers listed in the Share Register of Novartis, representing
approximately 56.8% of issued shares. Based on the
Novartis Share Register and excluding treasury shares,
approximately 54.6% of the shares registered by name
were held in Switzerland, and approximately 24.7% were
held in the US. Approximately 20.0% of the shares reg-
istered in the Share Register were held by individual
investors, while approximately 41.7% were held by legal
entities, excluding 10.2% of our share capital held as trea-
sury shares by Novartis AG or its fully owned subsidiar-
ies (including Swiss foundations controlled by Novartis
AG), and 38.3% were held by nominees, fiduciaries and
the ADS depositary. Due to a change in Swiss corporate
law, as of January 1, 2023, Novartis ordinary shares held
by Swiss foundations controlled by Novartis AG (Foun-
dation Shares) no longer carry the right to vote. As a
result, these Foundation Shares are excluded from the
calculation of the shares registered in the Share Regis-
ter in the same way, as described above, that our trea-
sury shares are excluded.
Based on the Share Register, we believe that we are
not directly or indirectly owned or controlled by another
corporation or government, or by any other natural or
legal persons. There are no arrangements that may result
in a change of control.
The tables below set forth information with respect
to our major shareholders according to the Share Reg-
ister as of December 31, 2023, excluding 10.2% of our
share capital held as treasury shares by Novartis AG or
its fully owned subsidiaries (including Swiss foundations
controlled by Novartis AG). The following registered
shareholders (including nominees and the ADS deposi-
tary) held more than 2% of the total share capital of
Novartis with the right to vote all their Novartis shares
based on an exemption granted by the Board of Direc-
tors:
Shareholders registered for their own account:
Emasan AG, Basel, Switzerland 1
UBS Fund Management (Switzerland) AG, Basel, Switzerland
Credit Suisse Funds AG, Zurich, Switzerland
% of respective share capital beneficially owned
as of:
Ordinary shares
beneficially owned as of
Dec 31, 2023 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021
89 135 960
60 962 889
50 178 623
3.9
2.7
2.2
3.7
2.3
2.1
3.7
2.3
2.1
1 According to a disclosure notification filed with Novartis AG and the SIX Swiss Exchange, the beneficial owner of the shares registered for
Emasan AG is Sandoz – Fondation de Famille, Liechtenstein.
Shareholders registered as nominees:
Nortrust Nominees Ltd., London, England
The Bank of New York Mellon, New York, NY
Through The Bank of New York Mellon, Everett, MA
Through The Bank of New York Mellon, New York, NY
Through The Bank of New York Mellon, SA/NV, Brussels, Belgium
Chase Nominees Ltd., London, England
Shareholder acting as American Depositary Share (ADS) depositary:
% of respective share capital held as of:
Ordinary shares
held as of
Dec 31, 2023 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021
82 324 675
66 451 778
34 094 134
22 963 391
9 394 253
— 1
3.6
2.9
1.5
1.0
0.4
—
3.8
2.9
1.6
0.9
0.4
8.4
4.2
3.0
1.6
1.1
0.3
8.8
JPMorgan Chase Bank, N.A., New York, NY
190 038 312
8.3
9.4
11.1
1 Chase Nominees Ltd. (Chase) has informed us that as of December 2023, it will no longer register any shareholding positions on its own
behalf. Shares held by customers of Chase will be registered for such customer’s own account.
According to a disclosure notification filed with Novartis
AG, Norges Bank (Central Bank of Norway), Oslo, Nor-
way, held 2.4% of the share capital of Novartis AG, or
55 319 441 shares, as of December 31, 2023, but was
not registered in the Share Register as of December 31,
2023. Provided that these shares are registered in the
157
Item 7. Major Shareholders and Related Party Transactions
Share Register on the record date of the Annual General
Meeting, Norges Bank will have full voting rights for all
of these shares.
According to a disclosure notification filed with
Novartis AG and the SIX Swiss Exchange, Black-
Rock, Inc., New York, NY, held between 5% and 10%, but
was registered with less than 2% of the share capital of
Novartis AG in the Share Register as of December 31,
2023.
As of December 31, 2023, no other shareholder was
registered as owner of more than 2% of the registered
share capital.
The Articles of Incorporation provide that no share-
holder shall be registered with the right to vote shares
comprising more than 2% of the registered share capi-
tal. The Board of Directors may, upon request, grant an
exemption from this restriction. Considerations include
whether the shareholder supports the Novartis goal of
creating sustainable value and has a long-term invest-
ment horizon. Exemptions are in force for the registered
major shareholders as described above. Novartis has
not entered into any agreement with any shareholder
regarding the voting or holding of Novartis shares.
7.B Related party transactions
The information set forth under “Item 18. Financial Statements—Note 28. Transactions with related parties” is incor-
porated by reference.
7.C Interests of experts and counsel
Not applicable.
158
Item 8. Financial Information
Item 8. Financial Information
8.A Consolidated statements and other financial
information
See “Item 18. Financial Statements.”
Dividend policy
Subject to the dividend policy described below, our
Board of Directors expects to recommend the payment
of a dividend in respect of each financial year. If approved
by our shareholders at the relevant annual shareholders’
meeting, the dividends will be payable shortly following
such approval. Any shareholder who purchases our
shares before the ex-dividend date and holds the shares
until that date shall be deemed to be entitled to receive
the dividends approved at that meeting. Dividends are
reflected in our financial statements in the year in which
they are approved by our shareholders.
Our dividend policy is to pay a growing annual divi-
dend in Swiss francs per share. This policy is subject to
our financial conditions and outlook at the time, the
results of our operations, and other factors.
The Board will propose a dividend of CHF 3.30 per
share to the shareholders for approval at the Annual Gen-
eral Meeting to be held on March 5, 2024. Because we pay
dividends in Swiss francs, exchange rate fluctuations will
affect the US dollar amounts received by holders of ADRs.
For the amount of dividends we paid in the past three years,
see “Item 18. Financial Statements—Note 19—Equity.”
Disclosure pursuant to Section 219 of
the Iran Threat Reduction and Syria
Human Rights Act (ITRA)
At Novartis, our purpose is to reimagine medicine to
improve and extend people’s lives, regardless of where
they live. This includes the compliant sale of medicines
and other healthcare products worldwide. To help us ful-
fill this mission, we have for many years maintained two
representative offices located in Iran.
As of October 18, 2010, a non-US Novartis affiliate
entered into a non-binding Memorandum of Understand-
ing (MoU) with the Ministry of Health and Medical Educa-
tion of the Islamic Republic of Iran. Pursuant to the MoU,
the Iranian Ministry of Health acknowledges certain ben-
efits that may apply to sales of certain of our medicines
by third-party distributors in Iran. These include fast-track
registration, market exclusivity, end-user subsidies, and
exemptions from customs tariffs. Novartis receives no
payments from the Iranian Ministry of Health under the
MoU, and the MoU creates no obligations on the part of
either Novartis or the Iranian Ministry of Health.
From time to time, including in 2023, certain Novartis
non-US affiliates made payments to government entities
in Iran related to patents, trademarks, exit fees and other
transactions ordinarily incident to travel by doctors and
other medical professionals resident in Iran to attend
conferences or other events outside Iran.
From time to time, including in 2023, certain Novartis
non-US affiliates enter into agreements with hospitals,
research institutes, medical associations and universi-
ties in Iran to provide grants and sponsor congresses,
seminars and symposia, and with doctors and other
healthcare professionals for consulting services, includ-
ing participation in advisory boards and investigator ser-
vices for observational (non-interventional) studies.
Some hospitals and research institutes are owned or
controlled by the government of Iran, and some doctors
and healthcare professionals are employed by hospitals
that may be public or government-owned.
Because we have operations in Iran, including employ-
ees, we obtain services and have other dealings inciden-
tal to our activities in that country, including paying taxes
and salaries either directly or indirectly through a ser-
vice provider, and obtaining office rentals, insurance,
electricity, water and telecommunications services,
office and similar supplies, and customs-related services
from Iranian companies that may be owned or controlled
by the government of Iran. In addition, from time to time,
representatives of our non-US affiliates participate in
meetings with Iranian officials to discuss issues relevant
to our business and the pharmaceutical industry.
Certain Novartis non-US affiliates maintain local
accounts at banks that are, as of November 5, 2018, on
the Specially Designated Nationals and Blocked Persons
List (SDN List). These non-US affiliates make local trans-
actions for employee payroll and local vendor payment
purposes. These transactions are conducted for the pur-
pose of facilitating the provision of medicine to Iran, in line
with the humanitarian exceptions contained in Section 11
of Executive Order 13902 and other applicable sanctions
legal authorities. No transactions are made with an Iranian
financial institution designated on the SDN List in connec-
tion with Iran’s support for international terrorism or pro-
liferation of weapons of mass destruction.
8.B Significant changes
None.
159
Item 9. The Offer and Listing
Item 9. The Offer and Listing
9.A Offer and listing details
Our ordinary shares are listed in Switzerland on the SIX Swiss Exchange under the symbol “NOVN.” Our ADSs,
each representing one ordinary share, are traded on the New York Stock Exchange under the symbol “NVS.”
9.B Plan of distribution
Not applicable.
9.C Markets
See “—Item 9.A Offer and listing details.”
9.D Selling shareholders
Not applicable.
9.E Dilution
Not applicable.
9.F Expenses of the issue
Not applicable.
160
Item 10. Additional Information
Item 10. Additional Information
10.A Share capital
Not applicable.
10.B Memorandum and articles of association
The following is a non-exhaustive summary of certain
provisions of our Articles of Incorporation (“Articles”);
our Regulations of the Board, the Board Committees and
the Executive Committee (“Board Regulations”); and
Swiss law, particularly the Swiss Code of Obligations
(“Swiss CO”), and is qualified in its entirety by reference
to the Articles and the Board Regulations, which are an
exhibit to this Form 20-F, and to Swiss law.
10.B.1 Company purpose
Novartis AG is registered in the commercial register of
the canton of Basel-Stadt, Switzerland, under number
CHE-103.867.266. Our business purpose, as stated in
Article 2 of the Articles, is to hold interests in enterprises
in the area of healthcare or nutrition. We may also hold
interests in enterprises in the areas of biology, chemis-
try, physics, information technology or related areas. We
may acquire, mortgage, liquidate or sell real estate and
intellectual property rights in Switzerland or abroad. In
pursuing our business purpose, we strive to create sus-
tainable value.
10.B.2 Directors
According to our Articles, the Board of Directors
(“Board”) consists of a minimum of eight and a maximum
of 16 members. The members of the Board (including the
Board Chair) are elected individually by the General
Meeting of Shareholders (“General Meeting”) for a one-
year term of office lasting until the completion of the next
Annual General Meeting of Shareholders (“AGM”).
(a) A Board resolution requires the affirmative majority
of the votes cast. According to our Board Regulations,
a member of our Board (“Director”) may not partici-
pate in decisions and resolutions on matters that
affect, or reasonably might affect, the Director’s inter-
ests or the interests of a person close to the Director
(but the Director may participate in the discussion).
(b) Compensation of the Directors is subject to the
approval of the aggregate amounts of such compen-
sation by a shareholders’ resolution under the Ordi-
nance against Excessive Compensation in Public
Companies of the Swiss Federal Council.
(c) The Articles prohibit the granting of loans or credits
to Directors.
(d) The Articles provide that a Director shall not serve on
the Board for more than 12 years. The Board may,
under certain circumstances and if deemed in the
best interests of the Company, recommend excep-
tions to this rule to the General Meeting.
(e) Our Directors are not required to be shareholders at
the time of the election by the General Meeting. How-
ever, according to our share ownership guidelines, to
ensure their interests are aligned with those of our
shareholders, the Board Chair is required to own a
minimum of 30 000 Novartis AG shares, and other
Directors are required to own at least 5 000 Novartis
AG shares within five years of having joined the Board.
10.B.3 Shareholder rights
Because Novartis AG has only one class of registered
shares, the following information applies to all sharehold-
ers.
(a) Under the Swiss CO, we may only pay dividends out
of balance sheet profits or out of distributable
reserves. In any event, under the Swiss CO, while the
Board may propose that a dividend be paid, we may
only pay dividends upon shareholders’ approval at a
General Meeting. Furthermore, the Swiss CO requires
us to accrue general legal reserves under certain cir-
cumstances so long as these reserves amount to less
than 20% of our registered share capital, and Swiss
law and the Articles permit us to accrue additional
reserves beyond the statutory reserves. Our auditors
must confirm that the dividend proposal of our Board
conforms with the Swiss CO and the Articles. Our
Board expects to recommend the payment of a divi-
dend in respect of each financial year. See “Item 6.
Directors, Senior Management and Employees—Item
6.C Board Practices—Capital Structure—Limitation
on transferability—Per-share
information” and
“Item 8. Financial Information—Item 8.A. Consoli-
dated statements and other financial information—
Dividend policy.”
Dividends are usually due and payable shortly after
the shareholders have passed a resolution approving
the payment. Dividends that have not been claimed
within five years after the due date revert to us and are
allocated to our general reserves. For information
about deduction of the withholding tax or other duties
from dividend payments, see “—Item 10.E Taxation.”
161
Item 10. Additional Information
(b) Each share is entitled to one vote at a General Meet-
ing. Voting rights may only be exercised for shares
registered with the right to vote on the record date
for the applicable General Meeting. To do so, the
shareholder must file a share registration form with
us, setting forth the shareholder’s name, address and
citizenship (or, in the case of a legal entity, its regis-
tered office). If the shareholder has not timely regis-
tered its shares, then the shareholder may not vote
at, or participate in, a General Meeting.
To vote its shares, the shareholder must also
explicitly declare that it has acquired the shares in its
own name and for its own account. If the shareholder
refuses to make such a declaration, the shares may
not be voted unless the Board recognizes such share-
holder as a nominee.
The Articles provide that no shareholder shall be
registered with the right to vote shares comprising
more than 2% of the registered share capital. The
Board may, upon request, grant an exemption from
this restriction. Considerations include whether the
shareholder supports our goal of creating sustainable
value and has a long-term investment horizon. Fur-
thermore, the Articles provide that no nominee shall
be registered with the right to vote shares compris-
ing more than 0.5% of the registered share capital.
The Board may, upon request, grant an exemption
from this restriction if the nominee discloses the
names, addresses, and number of shares of the per-
sons for whose account it holds 0.5% or more of the
registered share capital. The same restrictions indi-
rectly apply to ADR holders. We have in the past
granted exemptions from the 2% rule for sharehold-
ers and the 0.5% rule for nominees.
For purposes of the 2% rule for shareholders and
the 0.5% rule for nominees, groups of companies and
groups of shareholders acting in concert are consid-
ered to be one shareholder. These rules also apply to
shares acquired or subscribed by the exercise of sub-
scription, option or conversion rights.
After hearing the registered shareholder or nom-
inee, the Board may cancel, with retroactive effect as
of the date of registration, the registration of the
shareholders if the registration was effected based
on false information.
Registration restrictions in the Articles may only
be removed upon a resolution carrying a two-thirds
majority of the votes represented at a General Meet-
ing.
Except as noted below, shareholders’ resolutions
require the approval of an absolute majority of the
votes present at a General Meeting. As a result,
abstentions have the effect of votes against such res-
olutions. Some examples of shareholders’ resolutions
requiring a vote by such “absolute majority of the
votes” are:
• Adoption and amendment of the Articles
• Election and removal of the Board Chair, the Board
and Compensation Committee members, the Inde-
pendent Proxy and the external auditor
• Approval of the management report, the consoli-
dated financial statements and the report on non-fi-
nancial matters
• Approval of the financial statements of Novartis AG,
and the decision on the appropriation of available
earnings shown on the balance sheet, in particular
with regard to dividends (including any repayment
of the statutory capital reserves and the approval
of interim dividends and the interim financial state-
ments required for such purpose), if any
• Approval of the maximum aggregate compensation
of the Board (from an AGM until the next AGM) and
of the Executive Committee (for the financial year
following the AGM)
• Discharge of Board and Executive Committee
members from liability for matters disclosed to the
General Meeting
• Decision on other matters that are reserved by law
or by the Articles (e.g., advisory vote on the Com-
pensation Report) to the General Meeting
According to the Articles and Swiss law, the fol-
lowing matters require the approval of a “superma-
jority” of at least two-thirds of the votes present at a
General Meeting:
• Alteration of the purpose of Novartis AG
• The consolidation of shares, unless the approval of
all affected shareholders is required
• Increase of the share capital out of equity, by con-
tributions in kind or by way of set-off against receiv-
able, or the grant of special rights
• Restriction or cancellation of subscription rights
• Introduction of a conditional capital or capital band
• Creation of shares with increased voting powers
• Implementation of restrictions on the transfer of
registered shares, and the removal of such restric-
tions
• Change of the currency of the share capital
• Introduction of the deciding vote for the presiding
officer at the General Meeting
• A provision in the Articles allowing the General
Meeting to be held abroad
• Delisting of the shares of the Company
• Change of the registered office of Novartis AG
• Introduction of an arbitration clause in the Articles
162
Item 10. Additional Information
• Merger, split or transformation of Novartis AG under
the Swiss Merger Act (subject to mandatory statu-
tory provisions)
• Dissolution of Novartis AG
Our shareholders are required, on an annual basis,
to elect all Directors (including the Board Chair), the
Compensation Committee members, the external
auditor and the Independent Proxy. The Articles do
not provide for cumulative voting of shares.
At a General Meeting, shareholders can be repre-
sented by a legal representative or, by means of a writ-
ten proxy, by a representative of choice. Furthermore,
a shareholder may be represented by the Indepen-
dent Proxy. Votes are taken either by a show of hands
or by electronic voting, unless the General Meeting
resolves to have a ballot or where a ballot is ordered
by the chair of the meeting. ADSs, each representing
one Novartis AG share and evidenced by ADRs, are
issued by our depositary JPMorgan Chase Bank, N.A.,
New York, and not by us. The ADR is vested with rights
defined and enumerated in the Deposit Agreement
(such as the rights to vote, to receive a dividend and
to receive a share of Novartis AG in exchange for a
certain number of ADRs). The enumeration of rights,
including any limitations on those rights in the Deposit
Agreement, is final. There are no other rights given to
the ADR holders. Only the ADS depositary, holding
our shares underlying the ADRs, is registered as
shareholder in our share register. An ADR is not a
Novartis AG share, and an ADR holder is not a Novartis
AG shareholder.
The Deposit Agreement between our depositary,
the ADR holder and us has granted certain indirect
rights to vote to the ADR holders. ADR holders may
not attend a General Meeting in person. ADR holders
exercise their voting rights by instructing JPMorgan
Chase Bank, N.A., our depositary, to exercise the vot-
ing rights attached to the registered shares underly-
ing the ADRs. Each ADR represents one Novartis AG
share. JPMorgan Chase Bank, N.A., exercises the vot-
ing rights for registered shares underlying ADRs for
which no voting instructions have been given by pro-
viding a discretionary proxy to an uninstructed inde-
pendent designee. Such designee has to be a share-
holder of Novartis AG. The same voting restrictions
apply to ADR holders as to those holding Novartis AG
shares (i.e., the right to vote up to 2% of the Novartis
AG registered share capital – unless otherwise
granted an exemption by the Board – and the disclo-
sure requirement for nominees).
(c) Shareholders have the right to allocate the profit
shown on our balance sheet and to distribute divi-
dends by vote taken at the General Meeting, subject
to the legal requirements described above.
(d) Under the Swiss CO, any surplus arising out of a liq-
uidation of Novartis AG (i.e., after the settlement of all
claims of all creditors) would be distributed to the
shareholders in proportion to the paid-in nominal
value of their shares.
(e) The Swiss CO limits a corporation’s ability to hold or
repurchase its own shares. We and our subsidiaries
may only repurchase shares if we have sufficient
freely disposable equity in the amount of the pur-
chase price of the acquired shares. The aggregate
nominal value of all Novartis AG shares held by us and
our subsidiaries may not exceed 10% of our regis-
tered share capital. However, it is accepted that a
Swiss corporation may repurchase its own shares
beyond the statutory limit of 10% if the repurchased
shares are clearly earmarked for cancellation. In addi-
tion, we are required to recognize a negative position,
or if our subsidiaries acquire our shares, to create a
special reserve on our balance sheet in the amount
of the purchase price of the acquired shares. Repur-
chased shares held by us or our subsidiaries do not
carry any rights to vote at a General Meeting but are
entitled to the economic benefits generally con-
nected with the shares.
Under the Swiss CO, we may not cancel treasury
shares without the approval of a capital reduction by
our shareholders given that shareholders have not
approved the introduction of a capital band.
(f) Not applicable.
(g) Since all of our issued and outstanding shares have
been fully paid in, our shareholders are not obliged to
make further contributions with respect to their
shares.
(h) See “—Item 10.B.3(b) Shareholder rights” and “—
Item 10.B.7 Change in control.”
10.B.4 Changes to shareholder rights
Under the Swiss CO, we may not issue new shares with-
out the prior approval of a capital increase by our share-
holders. If a capital increase is approved, then our share-
holders would generally have certain pre-emptive rights
to obtain newly issued shares in an amount proportional
to the nominal value of the shares they already hold.
These pre-emptive rights could be excluded in certain
limited circumstances with the approval of a resolution
adopted at a General Meeting by a supermajority of
two-thirds of the votes. In addition, we may not create
shares with increased voting powers or place restrictions
on the transfer of registered shares without the approval
of a resolution adopted at a General Meeting by a super-
majority of votes. In addition, see “—Item 10.B.3(b) Share-
holder rights” with regard to the Board’s ability to cancel
the registration of shares under limited circumstances.
10.B.5 Shareholder meetings
Under the Swiss CO and the Articles, we must hold an
AGM within six months after the end of our financial year.
A General Meeting may be convened by the Board or, if
necessary, by the external auditor. The Board is further
required to convene an extraordinary General Meeting
if so resolved by a General Meeting, or if so requested
by shareholders by signed petition representing at least
5% of the share capital, specifying the items for the
agenda and their proposals. Shareholders representing
shares with an aggregate nominal value of at least
CHF 1 000 000 may request that an item be included in
a General Meeting agenda. A General Meeting is con-
vened by publishing a notice in the Swiss Official Gazette
163
Item 10. Additional Information
of Commerce (Schweizerisches Handelsamtsblatt) at
least 20 days prior to such meeting. Shareholders may
also be informed by mail. Neither the Swiss CO nor the
Articles require a quorum for a General Meeting. In addi-
tion, see “—Item 10.B.3(b) Shareholder rights” regarding
conditions for exercising a shareholder’s right to vote at
a General Meeting.
10.B.6 Limitations
There are no limitations under the Swiss CO or our Arti-
cles on the right of non-Swiss residents or nationals to
own or vote shares other than the restrictions applica-
ble to all shareholders and holders of ADRs described
in “—Item 10.B.3(b) Shareholder rights.”
10.B.7 Change in control
The Articles and the Board Regulations contain no pro-
vision that would have an effect of delaying, deferring or
preventing a change in control of Novartis AG and that
would operate only with respect to a merger, acquisition
or corporate restructuring involving us or any of our sub-
sidiaries.
According to the Swiss Merger Act, shareholders
may pass a resolution to merge with another corpora-
tion at any time. Such a resolution would require the con-
sent of at least two-thirds of all votes present at the nec-
essary General Meeting.
Under the Swiss Financial Market Infrastructure Act,
shareholders and groups of shareholders acting in con-
cert who acquire more than 33 1/3% of our shares would
be under an obligation to make an offer to acquire all
remaining Novartis AG shares. Novartis AG has neither
opted out from the mandatory takeover offer obligation
nor opted to increase the threshold for mandatory take-
over offers in its Articles.
10.C Material contracts
10.B.8 Disclosure of shareholdings
Under the Swiss Financial Market Infrastructure Act, per-
sons who directly, indirectly or in concert with other par-
ties acquire or dispose of our shares or purchase or sale
rights relating to our shares are required to notify us and
the SIX of the level of their holdings whenever such hold-
ings reach, exceed or fall below certain thresholds – 3%,
5%, 10%, 15%, 20%, 25%, 33 1/3%, 50% and 66 2/3% –
of the voting rights represented by our share capital
(whether exercisable or not). This also applies to anyone
who has discretionary power to exercise voting rights
associated with our shares. Following receipt of such
notification, we are required to inform the public by pub-
lishing the information via the electronic publication plat-
form operated by the SIX.
An additional disclosure obligation exists under the
Swiss CO that requires us to disclose once a year in the
notes to the financial statements published in our Annual
Report, the identity of all of our shareholders (or related
groups of shareholders) who have been granted exemp-
tion entitling them to vote more than 2% of our registered
share capital, as described in “—Item 10.B.3(b) Share-
holder rights.”
10.B.9 Differences in the law
See the references to Swiss law throughout this “—
Item 10.B Memorandum and articles of association.”
10.B.10 Changes in capital
The requirements of the Articles regarding changes in
capital are not more stringent than the requirements of
Swiss law.
Sandoz Spin-Off
In connection with the spin-off of Sandoz, we entered
into a Separation and Distribution Agreement, a Tax Mat-
ters Agreement and several other agreements with
Sandoz to effect the separation of the Sandoz business
and provide a framework for our relationship with Sandoz
after the spin-off.
The Separation and Distribution Agreement sets
forth the parties’ agreements regarding the principal
actions to be taken in connection with the separation of
the Sandoz business and the spin-off, by way of a distri-
bution of shares of Sandoz Group AG by Novartis AG to
Novartis shareholders, including the conditions of the
spin-off and the rights and obligations of the parties with
respect to the separation and distribution. The Separa-
tion and Distribution Agreement identifies the assets to
be transferred, liabilities to be assumed and contracts
to be assigned to each of Novartis and Sandoz as part
of the internal transactions effected prior to the distribu-
tion and provides for when and how such transfers,
assumptions and assignments should occur. Each party
agreed to indemnify the other and each of the other’s
directors, officers, managers, members, agents and
employees against certain liabilities incurred in connec-
tion with the spin-off and the parties’ respective busi-
nesses (subject to certain exceptions).
The Tax Matters Agreement imposes certain restric-
tions and indemnity obligations on Sandoz designed to
preserve the tax-neutral nature of the spin-off for Swiss
tax and US federal income tax purposes.
The Tax Matters Agreement also provides that
Sandoz will be liable for any taxes accruing in the ordi-
nary course of business of Novartis and its subsidiaries
before the spin-off if such taxes are attributable to enti-
ties which are transferred or allocated to the Sandoz
Group as part of the spin-off, whereas Novartis will
remain liable for any other taxes accruing before the
164
Item 10. Additional Information
spin-off in the ordinary course of business, to the extent
not attributed to Sandoz.
In connection with the spin-off, we also entered into
an employee matters agreement, a claims management
agreement, manufacturing and supply agreements, a
development and collaboration agreement, a transitional
services agreement, an authorized generics agreement,
and certain intellectual property agreements, each of
which is not material to Novartis.
10.D Exchange controls
There are no Swiss governmental laws, decrees or reg-
ulations that affect – in a manner material to Novartis AG
– the export or import of capital, including the availabil-
ity of cash and cash equivalents for use by Novartis or
any foreign exchange controls that affect the remittance
of dividends, interest or other payments to non-residents
or non-citizens of Switzerland who hold Novartis AG
securities.
10.E Taxation
The taxation discussion set forth below is intended only
as a descriptive summary and does not purport to be a
complete analysis or listing of all potential tax effects rel-
evant to the ownership or disposition of our shares or
ADRs. The statements of US and Swiss tax laws set forth
below are based on the laws and regulations in force as
of the date of this 20-F—including the current Conven-
tion Between the US and the Swiss Confederation for
the Avoidance of Double Taxation with Respect to Taxes
on Income, entered into force on December 19, 1997 (the
Treaty); the US Internal Revenue Code of 1986, as
amended (the Code); Treasury regulations; rulings; judi-
cial decisions; and administrative pronouncements—and
may be subject to any changes in US and Swiss law, and
in any double taxation convention or treaty between the
US and Switzerland occurring after that date, which
changes may have retroactive effect.
Swiss taxation
Swiss residents
Withholding Tax on dividends and distributions. Dividends
that we pay and similar cash or in-kind distributions that
we may make to a holder of shares or ADRs (including
distributions of liquidation proceeds in excess of the
nominal value, stock dividends and, under certain cir-
cumstances, proceeds from repurchases of shares by
us in excess of the nominal value) are generally subject
to a Swiss federal withholding tax (the Withholding Tax)
at a current rate of 35%. Under certain circumstances,
distributions out of capital contribution reserves made
by shareholders after December 31, 1996, are exempt
from the Withholding Tax. We are required to withhold
Withholding Tax due from the gross distribution and to
pay the Withholding Tax to the Swiss Federal Tax Admin-
istration. The Withholding Tax is refundable in full to
Swiss tax residents who are the beneficial owners of the
taxable distribution at the time it is resolved and duly
report the gross distribution received on their personal
tax return or in their financial statements for tax pur-
poses, as the case may be.
Income tax on dividends. A Swiss tax resident who
receives dividends and similar distributions (including
stock dividends and liquidation surplus) on shares or
ADRs is required to include such amounts in the share-
holder’s personal income tax return. However, distribu-
tions out of qualified capital contribution reserves are
not subject to income tax. A corporate shareholder may
claim substantial relief from taxation of dividends and
similar distributions received if the shares held represent
a fair market value of at least CHF 1 million.
Capital gains tax upon disposal of shares. Under current
Swiss tax law, the gain realized on shares held by a Swiss
resident who holds shares or ADRs as part of his private
property is generally not subject to any federal, cantonal
or municipal income taxation on gains realized on the
sale or other disposal of shares or ADRs. However, gains
realized upon a repurchase of shares by us may be char-
acterized as taxable dividend income if certain condi-
tions are met. Book gains realized on shares or ADRs
held by a Swiss corporate entity or by a Swiss resident
individual as part of the shareholder’s business property
are, in general, included in the taxable income of such
person. However, the Federal Law on the Direct Federal
Tax of December 14, 1990, and several cantonal laws on
direct cantonal taxes provide for exceptions for Swiss
corporate entities holding more than 10% of our voting
stock for more than one year.
Residents of other countries
Recipients of dividends and similar distributions on our
shares who are neither residents of Switzerland for tax
purposes nor hold shares as part of a business con-
ducted through a permanent establishment situated in
Switzerland (Non-Resident Holders) are not subject to
Swiss income taxes in respect of such distributions.
Moreover, gains realized by such recipients upon the dis-
posal of shares are not subject to Swiss income taxes.
Non-Resident Holders of shares are, however, sub-
ject to the Withholding Tax on dividends and similar dis-
tributions mentioned above and, under certain circum-
stances, to the Stamp Duty described below. Such
Non-Resident Holders may be entitled to a partial refund
165
Item 10. Additional Information
of the Withholding Tax if the country in which they reside
has entered into a bilateral treaty for the avoidance of
double taxation with Switzerland. Non-Resident Holders
should be aware that the procedures for claiming treaty
refunds (and the time frame required for obtaining a
refund) may differ from country to country. Non-Resident
Holders should consult their own tax advisors regarding
receipt, ownership, purchase, sale or other dispositions
of shares or ADRs, and the procedures for claiming a
refund of the Withholding Tax.
As of January 1, 2024, Switzerland has entered into bilateral treaties for the avoidance of double taxation with
respect to income taxes with the following countries, whereby a part of the above-mentioned Withholding Tax may
be refunded (subject to the limitations set forth in such treaties):
Albania
Algeria
Argentina
Armenia
Australia
Austria
Azerbaijan
Bahrain
Bangladesh
Belarus
Belgium
Brazil
Bulgaria
Canada
Chile
China
Colombia
Croatia
Cyprus
Czechia
Denmark
Ecuador
Egypt
Estonia
Ethiopia
Finland
France
Georgia
Germany
Ghana
Greece
Hong Kong
Hungary
Iceland
India
Indonesia
Iran
Ireland
Israel
Italy
Ivory Coast
Jamaica
Japan
Kazakhstan
Republic of Korea
(South Korea)
Kosovo
Kuwait
Kyrgyzstan
Latvia
Liechtenstein
Lithuania
Luxembourg
Malaysia
Malta
Mexico
Moldova
Mongolia
Montenegro
Morocco
Netherlands
New Zealand
North Macedonia
Norway
Oman
Pakistan
Peru
Philippines
Poland
Portugal
Qatar
Romania
Russia
Saudi Arabia
Serbia
Singapore
Slovak Republic
Slovenia
South Africa
Spain
Sri Lanka
Sweden
Taiwan
Tajikistan
Thailand
Trinidad and Tobago
Tunisia
Türkiye
Turkmenistan
Ukraine
United Arab Emirates
United Kingdom
United States of America
Uruguay
Uzbekistan
Venezuela
Vietnam
Zambia
Tax treaty negotiations are underway, or have been conducted, with Angola, Bosnia and Herzegovina, Cameroon,
Costa Rica, Jordan, Kenya, Libya, Nigeria, Rwanda, Senegal, Syria and Zimbabwe. Tax treaty negotiations between
Switzerland and some of the countries listed in the immediately preceding sentence have been ongoing for an
extended period of time, and we are not certain when or if such negotiations will be completed, and when or if the
corresponding treaties will come into effect.
A Non-Resident Holder of shares or ADRs will not be lia-
ble for any Swiss taxes other than the Withholding Tax
described above and, if the transfer occurs through or with
a Swiss bank or other Swiss securities dealer, the Stamp
Duty described below. If, however, the shares or ADRs of
Non-Resident Holders can be attributed to a permanent
establishment or a fixed place of business maintained by
such person within Switzerland during the relevant tax
year, the shares or ADRs may be subject to Swiss income
taxes in respect of income and gains realized on the shares
or ADRs, and such person may qualify for a full refund of
the Withholding Tax based on Swiss tax law.
Residents of the US. A Non-Resident Holder who is a
resident of the US for purposes of the Treaty is eligible
for a reduced rate of tax on dividends equal to 15% of
the dividend, provided that such holder (i) qualifies for
benefits under the Treaty; (ii) is not a company (or, if it is
a company, such company directly holds less than 10%
of our voting stock); and (iii) does not conduct business
through a permanent establishment or fixed base in Swit-
zerland to which the shares or ADRs are attributable.
Such an eligible holder must apply for a refund of the
amount of the Withholding Tax in excess of the 15%
Treaty rate. A Non-Resident Holder who is a resident of
the US for purposes of the Treaty is eligible for a reduced
rate of tax on dividends equal to 5% of the dividend, pro-
vided that such holder (i) is a company; (ii) qualifies for
benefits under the Treaty; (iii) holds directly at least 10%
of our voting stock, and (iv) does not conduct business
through a permanent establishment or fixed place of
business in Switzerland to which the shares or ADRs are
attributable. Such an eligible holder must apply for a
refund of the amount of the Withholding Tax in excess
of the 5% Treaty rate. Claims for refunds must be filed
on Swiss Tax Form 82 (82C for corporations; 82I for indi-
viduals; 82E for other entities), which may be obtained
from any Swiss Consulate General in the US or from the
Federal Tax Administration of Switzerland at the address
below, together with an instruction form. Four copies of
166
Item 10. Additional Information
the form must be duly completed, signed before a notary
public of the US, and sent to the Federal Tax Adminis-
tration of Switzerland, Eigerstrasse 65, CH-3003 Bern,
Switzerland. The form must be accompanied by suitable
evidence of deduction of Swiss tax withheld at source,
such as certificates of deduction, signed bank vouchers
or credit slips. The form may be filed on or after July 1 or
January 1 following the date the dividend was payable,
but no later than December 31 of the third year following
the calendar year in which the dividend became payable.
For US resident holders of ADRs, JPMorgan Chase Bank,
N.A., as depositary, will comply with these Swiss proce-
dures on behalf of the holders, and will remit the net
amount to the holders.
Stamp Duty upon transfer of securities. The sale of
shares, whether by Swiss residents or Non-Resident
Holders, may be subject to federal securities transfer
Stamp Duty of 0.15%, calculated on the sale proceeds,
if the sale occurs through or with a Swiss bank or other
Swiss securities dealer, as defined in the Swiss Federal
Stamp Duty Act. The Stamp Duty has to be paid by the
securities dealer and may be charged to the parties in a
taxable transaction who are not securities dealers. Stamp
Duty may also be due if a sale of shares occurs with or
through a non-Swiss bank or securities dealer, provided
that (i) such bank or dealer is a member of the SIX, and
(ii) the sale takes place on the SIX. In addition to this Stamp
Duty, the sale of shares by or through a member of the
SIX may be subject to a minor stock exchange levy.
US federal income taxation
The following is a general discussion of the material US
federal income tax consequences of the ownership and
disposition of our shares or ADRs that may be relevant
to you if you are a US Holder (as defined below). Because
this discussion does not consider any specific circum-
stances of any particular holder of our shares or ADRs,
persons who are subject to US taxation are strongly
urged to consult their own tax advisors as to the overall
US federal, state and local tax consequences, as well as
to the overall Swiss and other foreign tax consequences,
of the ownership and disposition of our shares or ADRs.
In particular, additional or different rules may apply to US
expatriates; banks and other financial institutions; regu-
lated investment companies; traders in securities who
elect to apply a mark-to-market method of accounting;
dealers in securities or currencies; tax-exempt entities;
insurance companies; broker-dealers; investors liable for
alternative minimum tax; investors that hold shares or
ADRs as part of a straddle, hedging or conversion trans-
action; holders whose functional currency is not the US
dollar; partnerships or other pass-through entities; per-
sons who acquired our shares pursuant to the exercise
of employee stock options or otherwise as compensa-
tion; and persons who hold, directly, indirectly or by attri-
bution, 10% or more of our outstanding shares. This dis-
cussion generally applies only to US Holders who hold
the shares or ADRs as a capital asset (generally, for
investment purposes), and whose functional currency is
the US dollar. Investors are urged to consult their own
tax advisors concerning whether they are eligible for
benefits under the Treaty.
For purposes of this discussion, a US Holder is a ben-
eficial owner of our shares or ADRs who is (i) an individ-
ual who is a citizen or resident of the US for US federal
income tax purposes; (ii) a corporation (or other entity
taxable as a corporation for US federal income tax pur-
poses) created or organized in or under the laws of the
US or a state thereof or the District of Columbia; (iii) an
estate the income of which is subject to US federal
income taxation regardless of its source; or (iv) a trust
(i) subject to the primary supervision of a US court and
the control of one or more US persons; or (ii) that has a
valid election in place to be treated as a US person. If a
partnership (or other entity treated as a partnership for
US federal income tax purposes) holds shares or ADRs,
the tax treatment of a partner generally will depend upon
the status of the partner and the activities of the part-
nership. Partners in a partnership that holds shares or
ADRs are urged to consult their own tax advisor regard-
ing the specific tax consequences of the owning and
disposing of such shares or ADRs by the partnership.
For US federal income tax purposes, a US Holder of
ADRs generally will be treated as the beneficial owner
of our shares represented by the ADRs. However, see
the discussion below under “—Dividends” regarding cer-
tain statements made by the US Treasury concerning
depositary arrangements.
This discussion assumes that each obligation in the
Deposit Agreement and any related agreement will be
performed in accordance with its terms.
Dividends. US Holders will be required to include in gross
income, as an item of ordinary income, the full amount
(without reduction for any Withholding Tax) of the divi-
dend paid with respect to our shares or ADRs at the time
that such dividend is received by the US Holder, in the
case of shares, or by the depositary, in the case of ADRs.
For this purpose, a “dividend” will include any distribu-
tion paid by us with respect to our shares or ADRs (other
than certain pro rata distributions of our capital stock)
paid out of our current or accumulated earnings and prof-
its, as determined under US federal income tax princi-
ples. To the extent the amount of a distribution by us
exceeds our current and accumulated earnings and prof-
its, such excess will first be treated as a tax-free return
of capital to the extent of a US Holder’s tax basis in the
shares or ADRs (with a corresponding reduction in such
tax basis), and thereafter will be treated as capital gain,
which will be long-term capital gain if the US Holder held
our shares or ADRs for more than one year. Under the
Code, dividend payments by us on the shares or ADRs
are not eligible for the dividends received deduction gen-
erally allowed to corporate shareholders.
Dividend income in respect of our shares or ADRs
will constitute income from sources outside the US for
US foreign tax credit purposes. Subject to the limitations
and conditions provided in the Code, US Holders gener-
ally may claim as a credit against their US federal income
tax liability, any Withholding Tax withheld from a dividend.
The rules governing the foreign tax credit are complex.
Each US Holder is urged to consult its own tax advisor
concerning whether, and to what extent, a foreign tax
credit will be available with respect to dividends received
167
Item 10. Additional Information
from us. Alternatively, a US Holder may claim the With-
holding Tax as a deduction for the taxable year within
which the Withholding Tax is paid or accrued, provided
a deduction is claimed for all of the foreign income taxes
the US Holder pays or accrues in the particular year. A
deduction does not reduce US tax on a dollar-for-dollar
basis like a tax credit. The deduction, however, is not
subject to the limitations applicable to foreign tax cred-
its, but may be subject to other limitations, and each US
Holder is urged to consult its own tax advisor.
The US Treasury has expressed concern that parties
to whom ADRs are released may be taking actions incon-
sistent with the claiming of foreign tax credits for US
Holders of ADRs. Accordingly, the summary above of the
creditability of the Withholding Tax could be affected by
future actions that may be taken by the US Treasury.
In general, a US Holder will be required to determine
the amount of any dividend paid in Swiss francs, including
the amount of any Withholding Tax imposed thereon, by
translating the Swiss francs into US dollars at the spot rate
on the date the dividend is actually or constructively
received by a US Holder, in the case of shares, or by the
depositary, in the case of ADRs, regardless of whether the
Swiss francs are in fact converted into US dollars. If a US
Holder converts the Swiss francs so received into US dol-
lars on the date of receipt, the US Holder generally should
not recognize foreign currency gain or loss on such con-
version. If a US Holder does not convert the Swiss francs
so received into US dollars on the date of receipt, the US
Holder will have a tax basis in the Swiss francs equal to
the US dollar value on such date. Any foreign currency gain
or loss that a US Holder recognizes on a subsequent con-
version or other disposition of the Swiss francs generally
will be treated as US source ordinary income or loss.
For a non-corporate US Holder, the US dollar amount
of any dividends paid that constitute qualified dividend
income generally will be taxable at a maximum rate of
15% (or 20% in the case of taxpayers with annual income
that exceeds certain thresholds), provided that the US
Holder meets certain holding period and other require-
ments. In addition, the dividends could be subject to a
3.8% net investment income tax. This tax is applied
against the lesser of the US Holder’s net investment
income or the amount by which modified adjusted gross
income exceeds a statutory threshold amount based on
filing status. We currently believe that dividends paid with
respect to our shares and ADRs will constitute qualified
dividend income for US federal income tax purposes,
provided that the US Holder meets certain holding period
and other requirements. US Holders of shares or ADRs
are urged to consult their own tax advisors regarding the
availability to them of the reduced dividend rate in light
of their own particular situation and the computations of
their foreign tax credit limitation with respect to any qual-
ified dividends paid to them, as applicable.
Sale or other taxable disposition. Upon a sale or other
taxable disposition of shares or ADRs, US Holders gen-
erally will recognize capital gain or loss in an amount
equal to the difference between the US dollar value of
the amount realized on the disposition and the US Hold-
er’s tax basis (determined in US dollars) in the shares or
ADRs. This capital gain or loss generally will be US
source gain or loss and will be treated as long-term
capital gain or loss if the holding period in the shares or
ADRs exceeds one year. In the case of a non-corporate
US Holder, any long-term capital gain generally will be
subject to US federal income tax at preferential rates,
with a maximum rate of 15% (or 20% in the case of tax-
payers with annual income that exceeds certain thresh-
olds). In addition, the gains could be subject to a 3.8%
investment income tax. This tax is applied against the
lesser of the US Holder’s net investment income or the
amount by which modified adjusted gross income
exceeds a statutory threshold amount based on filing
status. The deductibility of capital losses is subject to
significant limitations under the Code. Deposits or with-
drawals of our shares by US Holders in exchanges for
ADRs will not result in the realization of gain or loss for
US federal income tax purposes.
US information reporting and backup withholding. Divi-
dend payments with respect to shares or ADRs and pro-
ceeds from the sale, exchange or other disposition of
shares or ADRs received in the United States or through
US-related financial intermediaries may be subject to
information reporting to the US Internal Revenue Service
(IRS) and possible US backup withholding. Certain
exempt recipients (such as corporations) are not subject
to these information reporting and backup withholding
requirements. Backup withholding will not apply to a US
Holder who furnishes a correct taxpayer identification
number and makes any other required certification or
who is otherwise exempt from backup withholding. Any
US Holders required to establish their exempt status
generally must provide a properly executed IRS Form W-9
(Request for Taxpayer Identification Number and Certi-
fication). Backup withholding is not an additional tax.
Amounts withheld as backup withholding may be cred-
ited against a US Holder’s US federal income tax liabil-
ity, and a US Holder may obtain a refund of any excess
amounts withheld under the backup withholding rules by
timely filing the appropriate claim for refund with the IRS
and furnishing any required information.
Tax consequences of the Sandoz
spin-off
To implement the Sandoz spin-off, we distributed all of
the Sandoz Group AG shares held by Novartis to Novartis
AG shareholders, pro rata to their respective holdings.
Each Novartis AG shareholder received one Sandoz
Group AG share for every five Novartis AG shares or five
Novartis AG ADRs they held or had acquired prior to the
close of business on October 3, 2023.
The following statements are based on the require-
ment of the continuing effectiveness and validity of the
written confirmations (the Swiss Tax Rulings) from the
Swiss Federal Tax Administration and from the tax
administration of the Canton of Basel-Stadt, a private
letter ruling from the IRS (the IRS Ruling) and a written
opinion of Cravath, Swaine & Moore LLP, counsel to
Novartis (the Tax Opinion), each to the effect that the
Sandoz spin-off qualifies as a tax-neutral transaction.
168
Item 10. Additional Information
Material tax consequences to Novartis
The following is a summary of the material tax conse-
quences to Novartis in connection with the Sandoz spin-
off that may be relevant to holders of Novartis AG shares.
The Sandoz spin-off was preceded by several internal
restructuring steps to separate the Sandoz business from
Novartis. Novartis has received the Swiss Tax Rulings, the
IRS Ruling and the Tax Opinion, providing that the spin-
off should qualify for nonrecognition of gain or loss for US
federal income tax purposes or preserve the tax-neutral
nature for Swiss tax purposes, as applicable. In addition,
the Swiss Tax Rulings provide that no Swiss withholding
tax or stamp duty should apply to the distribution of
Sandoz Group AG shares in the spin-off. The Tax Opinion
and IRS Ruling are subject to the qualifications and lim-
itations set forth below under “—Consequences to US
Holders of Novartis AG Shares.” Additionally, Novartis has
entered into a tax matters agreement with Sandoz, which
restricts Sandoz from taking certain actions that could
affect the qualification of the spin-off as tax-neutral.
Consequences to Swiss Holders of Novartis AG
shares
General
Subject to the qualifications and limitations set forth
herein (including the discussion below relating to the
receipt of cash in lieu of fractional shares), for Swiss tax
purposes no gain or loss should be recognized by, or be
includible in the income of, a Swiss Holder as a result of
the tax-neutral spin-off, provided that Swiss Holders who
hold Novartis AG shares as business assets accurately
maintain the tax and book values of their Novartis AG
and Sandoz Group AG shares. This means that for Swiss
Holders who hold Novartis AG shares as business assets,
the aggregate tax basis of the Novartis AG shares and
Sandoz Group AG shares immediately after the distribu-
tion should be the same as the aggregate tax basis of
the Novartis AG shares held immediately before the dis-
tribution, allocated between the Novartis AG shares and
Sandoz Group AG shares.
If a Swiss Holder that holds Novartis AG shares as
business assets is classified as a “professional securi-
ties dealer” or is a legal entity and receives cash in lieu
of a fractional share, such Swiss Holder will generally
recognize a capital gain or loss measured by the differ-
ence between the cash received for such fractional
Share and the Swiss Holder’s tax basis in that fractional
Share. The same Swiss income tax treatment applies to
Swiss Holders of Novartis physical share certificates
(Heimverwahrer) held as business assets who receive
cash due to non-response by September 19, 2023.
If a Swiss Holder who holds Novartis AG shares as
private assets receives cash in lieu of fractional Shares,
the receipt of such cash will be tax-free to the holder.
The same Swiss income tax treatment applies to Swiss
Holders of Novartis physical share certificates (Heimver-
wahrer) held as private assets who receive cash due to
non-response by September 19, 2023.
Novartis has received the Swiss Tax Rulings which
cover the relevant Swiss tax aspects of the separation
and spin-off. The Swiss Tax Rulings rely upon certain
facts, assumptions, representations and undertakings
from Sandoz and Novartis regarding the past and future
conduct of the businesses of Sandoz and Novartis and
other matters. If any of the facts, assumptions, represen-
tations or undertakings described therein are incorrect
or incomplete or not otherwise satisfied, Novartis may not
be able to rely upon the Swiss Tax Rulings. Accordingly,
notwithstanding the Swiss Tax Rulings, no assurance can
be given that the relevant Swiss tax authorities will not
assert, or that a court would not sustain, a position con-
trary to one or more of the conclusions set forth above.
Consequences to US Holders of Novartis AG shares
The following is a summary of the material US federal
income tax consequences to holders of Novartis AG
shares or ADRs in connection with the Sandoz distribu-
tion. For purposes of the following discussion, any ref-
erence to Novartis AG shares includes Novartis ADRs.
This summary does not address any US state or local or
foreign tax consequences or any estate, gift or other
non-income tax consequences.
General
The IRS Ruling and the Tax Opinion, described below, rely
upon certain facts, assumptions, representations and
undertakings from Novartis and Sandoz regarding the
past and future conduct of Novartis and Sandoz busi-
nesses and other matters. If any of the facts, assumptions,
representations or undertakings described therein are
incorrect or not otherwise satisfied, Novartis may not be
able to rely upon the IRS Ruling or the Tax Opinion.
Accordingly, notwithstanding the Tax Opinion and the IRS
Ruling, there can be no assurance that the IRS will not
assert, or that a court would not sustain, a position con-
trary to one or more of the conclusions set forth below.
Novartis has received the IRS Ruling and the Tax
Opinion providing, in each case, that the distribution
should qualify for nonrecognition of gain or loss under
Section 355 of the Code. As a result:
• no gain or loss should be recognized by, or be includi-
ble in the income of, a US Holder as a result of the dis-
tribution;
• the aggregate tax basis of the Novartis AG shares and
the Sandoz Group AG shares held by each US Holder
immediately after the distribution should be the same
as the aggregate tax basis of the Novartis AG shares
held by the US Holder immediately before the distribu-
tion, allocated between the Novartis AG shares and the
Sandoz Group AG shares in proportion to their relative
fair market values on the date of the distribution; and
• the holding period of the Sandoz Group AG shares
received by each US Holder should include the hold-
ing period of its Novartis AG shares.
Generally, if a Novartis AG shareholder holds different
blocks of Novartis AG shares (generally Novartis AG shares
purchased or acquired on different dates or at different
prices), a US Holder must perform the tax basis allocation
described above with respect to each block and will have
a holding period in the Sandoz Group AG shares deter-
mined with respect to the holding period of such block.
A US Holder that receives cash in lieu of a fractional
Share as part of the distribution will be treated as though
it first received a distribution of the fractional Share in the
distribution and then sold it for the amount of cash
169
Item 10. Additional Information
actually received. The US Holder will generally recognize
a capital gain or loss measured by the difference between
the cash received for such fractional Share and the US
Holder’s tax basis in that fractional Share, as determined
above. Such capital gain or loss will be a long-term capi-
tal gain or loss if the US Holder’s holding period for the
Novartis AG shares is more than one year from the date
of the distribution. Certain US Holders are eligible for
reduced rates of taxation on their long-term capital gains.
A US Holder of Novartis physical share certificates
(Heimverwahrer) who receives cash due to non-re-
sponse by September 19, 2023 will be treated as if the
US Holder received the Sandoz Group AG shares with
respect to its physical share certificates in the distribu-
tion and then sold such Shares for the cash actually
received. The deemed receipt and sale of the Sandoz
Group AG shares for cash will be subject to the same
treatment as the receipt of cash in lieu of a fractional Share
for US federal income tax purposes as described above.
Backup Withholding
Payments of cash in lieu of a fractional Share and cash
payments to a US Holder of Novartis physical share
certificates (Heimverwahrer) who receives cash due to
non-response by September 19, 2023 may, under cer-
tain circumstances, be subject to “backup withholding”,
unless the US Holder provides proof of an applicable
exemption or a correct taxpayer identification number,
and otherwise complies with the requirements of the
backup withholding rules. Corporations will generally be
exempt from backup withholding, but may be required
to provide a certification to establish their entitlement to
the exemption. Backup withholding is not an additional
tax, and it may be refunded or credited against a US
Holder’s US federal income tax liability if the required
information is timely supplied to the IRS.
Information Reporting
Treasury Regulations require each Novartis AG share-
holder that, immediately before the distribution, owned
5% or more (by vote or value) of the total outstanding
stock of Novartis, to attach to such shareholder’s US
federal income tax return for the year in which the dis-
tribution occurs a statement setting forth certain infor-
mation related to the distribution.
10.F Dividends and paying agents
Not applicable.
10.G Statement by experts
Not applicable.
10.H Documents on display
Any statement in this Form 20-F about any of our con-
tracts or other documents is not necessarily complete.
If the contract or document is filed as an exhibit to the
Form 20-F, the contract or document is deemed to mod-
ify the description contained in this Form 20-F. You must
review the exhibits themselves for a complete descrip-
tion of the contract or document.
The SEC maintains an internet site at http://www.sec.
gov that contains reports and other information regard-
ing issuers that file electronically with the SEC. These
SEC filings are also available to the public from commer-
cial document retrieval services.
We are required to file or furnish reports and other
information with the SEC under the Exchange Act and reg-
ulations under that act. As a foreign private issuer, we are
exempt from the rules under the Exchange Act prescrib-
ing the form and content of proxy statements, and our offi-
cers, directors and principal shareholders are exempt from
the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act.
10.I Subsidiary information
Not applicable.
170
Item 11. Quantitative and Qualitative Disclosures About Market Risk
Item 11. Quantitative and Qualitative
Disclosures About Market Risk
The major financial risks facing us are managed centrally
by the Company’s treasury function, which has estab-
lished processes and procedures to identify, aggregate
and manage our financial risk exposure. The Company’s
treasury function is included in management’s internal
control assessment.
For information about the effects of currency fluctu-
ations and how we manage currency risk, see “Item 5.
Operating and Financial Review and Prospects—Item 5.B
Liquidity and capital resources.”
The information set forth under “Item 18. Financial
Statements—Note 30. Financial instruments – additional
disclosures” is incorporated by reference.
171
Item 12. Description of Securities Other than Equity Securities
Item 12. Description of Securities Other than
Equity Securities
12.A Debt securities
Not applicable.
12.B Warrants and rights
Not applicable.
12.C Other securities
Not applicable.
12.D American Depositary Shares
Fees payable by ADR holders
According to the deposit agreement that we entered into with JPMorgan Chase Bank, N.A. (JPMorgan), as depos-
itary (as amended from time to time, the “Deposit Agreement”), holders of our ADRs may have to pay to JPMorgan,
either directly or indirectly, fees or charges up to the amounts set forth below:
Category
Depositary actions
Depositing or substituting Acceptance of shares surrendered, and issuance of ADSs in exchange,
underlying shares
including surrenders and issuances in respect of:
— Share distributions
— Stock split
— Rights
— Merger
— Exchange of shares or any other transaction or event or other distribution
affecting the ADSs or the deposited shares
Withdrawing
underlying shares
Acceptance of ADSs surrendered for withdrawal of deposited shares or
for ADSs that are cancelled or reduced for any other reason
Associated fee
USD 5.00 for each 100 ADSs
(or portion thereof)
USD 5.00 (or less) for each
100 ADSs (or portion
thereof) surrendered
Cash distributions
Distributing cash distributions made or any elective cash/stock dividend offered
USD 0.05 (or less) per ADS
Selling or
exercising rights
Distribution or sale of shares, the fee being in an amount equal to the fee
for the execution and delivery of ADRs that would have been charged
as a result of the deposit of such shares
Depositary services
Services performed by the depositary in administering the ADRs
Expenses of the
depositary
Expenses incurred on behalf of holders in connection with:
— Compliance with foreign exchange control regulations or any law or
regulation relating to foreign investment
— The depositary’s or its custodian’s compliance with applicable law,
rule or regulation
— Stock transfer or other taxes and other governmental charges
— Cable, telex and facsimile transmission and delivery
— Expenses of the depositary in connection with the conversion of foreign
currency into US dollars (which are paid out of such foreign currency)
— Any other charge payable by any of the depositary or its agents
USD 5.00 for each 100 ADSs
(or portion thereof)
USD 0.05 (or less) per ADS
per calendar year
(or portion thereof)
Expenses payable at the sole
discretion of the depositary
by billing holders or by
deducting charges from one
or more cash dividends or
other cash distributions
172
Item 12. Description of Securities Other than Equity Securities
Fees payable by the depositary to the
issuer
Pursuant to a letter agreement effective as of May 11,
2017, as amended from time to time (“the Agreement”),
JPMorgan, as our ADS depositary, has agreed to make
an annual contribution payment to Novartis at the end of
each 12-month period beginning on the effective date of
the Agreement and on each subsequent anniversary of
the effective date of the Agreement (each such 12-month
period is a “Contract Year”). Beginning in the sixth Con-
tract Year, this annual contribution payment will equal:
(a)(1) the applicable fixed contribution amount reflected
in the table below, based on the average daily balance
during such Contract Year of outstanding ADSs backed
by ordinary shares less (a)(2) the custody costs, fees
and expenses (including, without limitation, any central
securities depository fees, charges and expenses)
incurred during the applicable Contract Year (the items
in (a)(2) collectively are the “Custody Costs”) plus (b) 70%
of the gross issuance and cancellation fees collected by
JPMorgan under the Deposit Agreement during such
Contract Year minus (c) that portion (if any) of JPMor-
gan’s legal fees, charges and out-of-pocket expenses in
excess of USD 50 000 for such Contract Year.
Average Daily Balance Range Start
Average Daily Balance Range End
At least 30 000 000
At least 67 000 000
At least 134 000 000
At least 201 000 000
At least 268 000 000
Up to 66 999 999
Up to 133 999 999
Up to 200 999 999
Up to 267 999 999
Fixed contribution
USD 340 000
USD 680 000
USD 1 020 000
USD 1 360 000
USD 1 700 000
The fixed contribution amount payable under (a)(1) in
respect of a given Contract Year shall be zero if the aver-
age daily balance of outstanding ADSs backed by ordi-
nary shares is less than 30 000 000 during such Con-
tract Year. If the Custody Costs for a Contract Year
exceed the fixed contribution amount for such Contract
Year, JPMorgan will reduce the contribution payable to
us by an amount equal to such deficit.
JPMorgan has further agreed to waive the USD 0.05
per ADS issuance fees that would normally be owed by
Novartis in connection with our deposits of shares as
part of our employee stock ownership and employee par-
ticipation plans. Novartis is responsible for reimbursing
JPMorgan for all taxes and governmental charges
required to have been withheld and/or paid, and not so
withheld and/or paid, arising from such waived fees.
173
Item 13. Defaults, Dividend Arrearages and Delinquencies
PART II
Item 13. Defaults, Dividend Arrearages and
Delinquencies
None.
174
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds
Item 14. Material Modifications to the Rights
of Security Holders and Use of Proceeds
None.
175
Item 15. Controls and Procedures
Item 15. Controls and Procedures
Report of Novartis Management on Internal Control Over Financial Reporting
Novartis AG’s Chief Executive Officer and Chief Finan‑
cial Officer, after evaluating the effectiveness of our dis‑
closure controls and procedures (as defined in Exchange
Act Rule 13a‑15(e)) as of the end of the period covered
by this Annual Report, have concluded that, as of such
date, our disclosure controls and procedures were effec‑
tive.
The Board of Directors and management of the Com‑
pany are responsible for establishing and maintaining
adequate internal control over financial reporting. The
Company’s internal control system was designed to pro‑
vide reasonable assurance to the Company’s manage‑
ment and Board of Directors regarding the reliability of
financial reporting and the preparation and fair presen‑
tation of its published consolidated financial statements.
All internal control systems, no matter how well
designed, have inherent limitations. Therefore, even
those systems determined to be effective may not pre‑
vent or detect misstatements and can provide only rea‑
sonable assurance with respect to financial statement
preparation and presentation. Also, projections of any
evaluation of effectiveness to future periods are subject
to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compli‑
ance with the policies or procedures may deteriorate.
The Company’s management assessed the effective‑
ness of the Company’s internal control over financial
reporting as of December 31, 2023. In making this
assessment, it used the criteria established in Internal
Control—Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Tread‑
way Commission (COSO). Based on our assessment,
management concluded that, as of December 31, 2023,
the Company’s internal control over financial reporting
is effective based on those criteria.
KPMG AG, Switzerland, an independent registered
public accounting firm, has issued an unqualified opin‑
ion on the effectiveness of the Company’s internal con‑
trol over financial reporting, which is included in the Form
20‑F under “Item 18. Financial Statements—Report of
independent registered public accounting firm.”
See the report of KPMG, an independent registered
public accounting firm, included in the Form 20‑F under
“Item 18. Financial Statements—Report of independent
registered public accounting firm.”
There were no changes to our internal control over
financial reporting that occurred during the period cov‑
ered by this Annual Report that have materially affected,
or are reasonably likely to materially affect, our internal
control over financial reporting.
Vas Narasimhan
Chief Executive Officer
Harry Kirsch
Chief Financial Officer
Basel, January 30, 2024
176
Item 16A. Audit Committee Financial Expert
Item 16A. Audit Committee Financial Expert
Our Audit and Compliance Committee has determined
that Elizabeth Doherty and Ana de Pro Gonzalo possess
specific accounting and financial management exper-
tise, and that they are “audit committee financial experts”
as defined in Item 16A of Form 20-F. The Board of Direc-
tors has also determined that each member of the Audit
and Compliance Committee is “independent” in accor-
dance with the applicable requirements set forth under
the listing standards of the NYSE and Rule 10A-3 under
the Exchange Act, and has sufficient experience and
ability in finance and compliance matters to enable them
to adequately discharge their responsibilities.
177
Item 16B. Code of Ethics
Item 16B. Code of Ethics
In addition to our Code of Ethics and Doing Business
Ethically Policy, which are applicable to all of our employ-
ees, we have adopted Ethical Conduct Requirements
that impose additional obligations on our principal exec-
utive officer, principal financial officer, principal
accounting officer, and persons performing similar func-
tions. This document is accessible on our internet web-
site at:
https://www.novartis.com/investors/company-over-
view/corporate-governance
178
Item 16C. Principal Accountant Fees and Services
Item 16C. Principal Accountant Fees and
Services
The information set forth under “Item 6. Directors, Senior Management and Employees—Item 6.C Board practices—
Corporate governance—Auditors” is incorporated by reference.
179
Item 16D. Exemptions from the Listing Standards for Audit Committees
Item 16D. Exemptions from the Listing
Standards for Audit Committees
Not applicable.
180
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers
Item 16E. Purchases of Equity Securities by
the Issuer and Affiliated Purchasers
Total number
of shares
purchased
as part of
publicly
announced
plans or
programs
(c) 2
Average price
Total number of paid per share
in USD
(b)
shares purchased
(a) 1
11 383 594
91.91 10 500 000
10 147 593
87.02 10 000 000
11 145 700
85.02 11 000 000
9 092 383
98.58 9 000 000
10 018 880
102.20 10 000 000
10 871 925
100.29 10 847 255
5 026 486
100.98 5 000 000
4 446 306
102.80 4 400 000
4 250 523
101.17 4 200 000
4 494 588
96.85 4 400 000
4 426 601
95.48 4 400 000
3 821 670
98.39 3 800 000
89 126 249
95.55 87 547 255
Maximum
approximate
value of
shares that
may yet be
purchased
under the
plans or
programs
(CHF millions)
(d)
Maximum
approximate
value of
shares that
may yet be
purchased
under the
plans or
programs
(USD millions)
(e) 3
7 433
6 628
15 762
14 966
14 050
13 071
12 625
12 228
11 846
11 461
11 087
10 763
8 030
7 061
17 252
16 736
15 450
14 537
14 493
13 903
12 998
12 705
12 701
12 793
2023
Jan. 1-31
Feb. 1-28
Mar. 1-31
Apr. 1-30
May 1-31
Jun. 1-30
Jul. 1-31
Aug. 1-31
Sep. 1-30
Oct. 1-31
Nov. 1-30
Dec. 1-31
Total
1 Column (a) shows shares repurchased on the SIX Swiss Exchange second trading line plus shares we purchased from employees who had
obtained the shares through a Novartis Employee Ownership Plan. See “Item 18. Financial Statements – Note 27. Equity-based participation
plans for employees.”
2 Column (c) shows shares repurchased on the SIX Swiss Exchange second trading line under the CHF 10 billion share buyback authority
approved at the 2022 AGM for transactions in 2023. See “Item 6. Directors, Senior Management and Employees – Item 6C. Board Practices
– Our capital structure – Changes in capital.”
3 Column (e) shows the Swiss franc amount from column (d) converted into US dollars as of the month-end, using the Swiss franc/US dollar
exchange rate at the applicable month-end.
181
Item 16F. Change in Registrant’s Certifying Accountant
Item 16F. Change in Registrant’s Certifying
Accountant
Not applicable.
182
Item 16G. Corporate Governance
Item 16G. Corporate Governance
Novartis AG is subject to and compliant with the laws
and regulations of Switzerland (in particular, Swiss com-
pany and securities laws, SIX Swiss Exchange rules and
the Swiss Code of Best Practice for Corporate Gover-
nance) and the securities laws of the United States,
including NYSE listing standards, as applicable to for-
eign private issuers of securities. The following summa-
rizes some significant ways in which our corporate gov-
ernance practices differ from those followed by
domestic listed US companies under the listing stan-
dards of the NYSE:
• Novartis AG shareholders do not receive written
reports directly from Board committees.
• While shareholders cannot vote on all equity compen-
sation plans, they are entitled to hold separate, yearly
binding votes on Board and Executive Committee com-
pensation.
• The Board has set up a separate Risk Committee that
oversees the risk management system and processes,
as opposed to delegating this responsibility to the Audit
and Compliance Committee.
• The full Board is responsible for overseeing the
performance evaluation of the Board and Executive
Committee.
• External auditors are appointed by shareholders at the
Annual General Meeting of Shareholders (AGM), as
opposed to being appointed by the Audit and Compli-
ance Committee.
• The full Board is responsible for setting objectives rel-
evant to the CEO’s compensation and for evaluating
his performance.
183
Item 16H. Mine Safety Disclosure
Item 16H. Mine Safety Disclosure
Not applicable.
184
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Item 16I. Disclosure Regarding Foreign
Jurisdictions that Prevent Inspections
Not applicable.
185
Item 16J. Insider Trading Policies
Item 16J. Insider Trading Policies
Not applicable.
186
Item 16K. Cybersecurity
Item 16K. Cybersecurity
Protecting the security and integrity of the IT systems
under our control and safeguarding the privacy of our
customers, patients and employees is a top priority for
us at all levels. Cybersecurity and data privacy risks are
among the core enterprise risks evaluated through our
annual enterprise risk management assessment.
The Chief Security Officer oversees our cybersecu-
rity risk management program in partnership with our
Chief Information Officer and other business leaders.
The program was developed to respond to the threat of
security breaches and cyberattacks, and to protect and
preserve the confidentiality, integrity, and continued
availability of information owned by, or in the care of
Novartis. Our Chief Security Officer reports to our Chief
Information Officer, and is a subject matter expert on
information security, privacy, information technology
strategy and management with over 20 years of relevant
experience across a number of industries, including
pharmaceuticals, consumer goods, financial services
and consulting. Our Chief Information Officer has nearly
25 years of experience as an IT professional, including
14 years with Novartis, and is responsible for our tech-
nology strategy, delivery and operations globally.
To address cybersecurity threats and prevent IT sys-
tem interruptions, the Information Security & Compliance
(ISC) team, which is headed by our Chief Security Offi-
cer, has implemented enterprise-wide policies, pro-
cesses and practices. We follow industry best practices,
such as the NIST Cybersecurity Framework and ISO
27001 to manage information security. Novartis has risk-
based services continuity and systems recovery plans
in place for key business processes, which are tested
periodically. We also conduct ongoing internal vulnera-
bility analyses (including simulated hacking) as well as
external testing via a third-party to ensure the effective-
ness of our cybersecurity controls. We require employ-
ees to report IT security incidents to a Cyber Security
Operations Center (CSOC) that operates 24 hours a day,
7 days a week. CSOC is a function within ISC that is
responsible for investigating all security incidents and
alerts including determining the threat type, incident
scope and incident severity. Where appropriate, major
incidents are escalated to our Chief Executive Officer,
who may then inform our Board of the incident pursuant
to our internal procedures. Novartis has not experienced
any material cybersecurity incidents in the three years
through 2023.
As part of its enterprise risk management oversight,
the Risk Committee of our Board is responsible for
ensuring that the Company has implemented an appro-
priate and effective risk management system and pro-
cess, including annually reviewing updates on cyberse-
curity. The Risk Committee receives updates on
cybersecurity risks, which address a wide range of top-
ics, including recent developments, security incidents,
evolving standards, vulnerability assessments, third-
party and independent reviews, the threat environment,
technological trends and information security consider-
ations arising with respect to the peers and vendors of
Novartis. At least once each year, the Risk Committee
discusses the Company’s approach to cybersecurity risk
management with the Chief Security Officer.
187
Item 17. Financial Statements
PART III
Item 17. Financial Statements
See response to “Item 18. Financial Statements.”
188
Item 18. Financial Statements
Item 18. Financial Statements
The following financial statements are filed as part of this Annual Report.
Consolidated income statements
Consolidated statements of comprehensive income
Consolidated balance sheets
Consolidated statements of changes in equity
Consolidated statements of cash flows
Notes to the Novartis consolidated financial statements
1. Accounting policies
2. Significant transactions
3. Operating segment
4. Revenues and geographic information
5. Associated companies
6. Interest expense and other financial income and expense
7. Income taxes
8. Earnings per share
9. Changes in consolidated statements of comprehensive income
10. Property, plant and equipment
11. Right-of-use assets and lease liabilities
12. Goodwill and intangible assets other than goodwill
13. Deferred tax assets and liabilities
14. Financial and other non-current assets
15. Inventories
16. Trade receivables
17. Marketable securities, commodities, time deposits, derivative financial instruments,
and cash and cash equivalents
18. Other current assets
19. Equity
20. Non-current financial debt
21. Provisions and other non-current liabilities
22. Current financial debt and derivative financial instruments
23. Provisions and other current liabilities
24. Details to the consolidated statements of cash flows
25. Acquisitions of businesses
26. Post-employment benefits for employees
27. Equity-based participation plans for employees
28. Transactions with related parties
29. Commitments and contingent liabilities
30. Financial instruments – additional disclosures
31. Discontinued operations
32. Events subsequent to the December 31, 2023, consolidated balance sheet date
33. Novartis principal subsidiaries and associated companies
Statutory Auditor’s Report on the consolidated financial statements of Novartis AG
Financial statements of Novartis AG
Notes to the financial statements of Novartis AG
Appropriation of available earnings and reserves of Novartis AG
Statutory Auditor’s Report on the financial statements of Novartis AG
Page
F-1
F-2
F-3
F-4
F-5
F-6
F-6
F-14
F-16
F-16
F-22
F-23
F-23
F-24
F-25
F-26
F-28
F-29
F-32
F-33
F-34
F-34
F-35
F-35
F-35
F-38
F-39
F-43
F-43
F-45
F-48
F-48
F-53
F-56
F-57
F-59
F-69
F-72
F-73
F-75
A-1
A-3
A-10
A-11
189
Item 19. Exhibits
Item 19. Exhibits
1.1 Articles of Incorporation of Novartis AG, as amended September 15, 2023 (English translation).
1.2 Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis
AG, effective March 7, 2023.
2.1 Form of Second Amended and Restated Deposit Agreement among Novartis AG, JPMorgan Chase Bank,
N.A., as depositary, and all Holders and Beneficial Owners from time to time of American Depositary
Receipts issued thereunder (incorporated by reference to Exhibit 99.A to the Registration Statement on
Form F-6 as filed with the SEC on December 16, 2022).
2.2 Form of American Depositary Receipt (included in Exhibit 2.1 incorporated by reference to Exhibit 99.A
to the Registration Statement on Form F-6 as filed with the SEC on December 16, 2022).
2.3 Description of Securities registered under Section 12 of the Exchange Act.
4.1 Separation and Distribution Agreement by and between Novartis AG and Sandoz Group AG, dated as of
September 30, 2023.
4.2 Tax Matters Agreement by and between Novartis AG and Sandoz Group AG, dated as of September 30,
2023.
8.1 For a list of all of our principal subsidiaries and associated companies, see “Item 18. Financial State-
ments—Note 33. Novartis principal subsidiaries and associated companies.”
12.1 Certification of Vasant Narasimhan, Chief Executive Officer of Novartis AG, pursuant to Section 302 of
the Sarbanes-Oxley Act of 2002.
12.2 Certification of Harry Kirsch, Chief Financial Officer of Novartis AG, pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
13.1 Certification of Vasant Narasimhan, Chief Executive Officer of Novartis AG, pursuant to Section 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
13.2 Certification of Harry Kirsch, Chief Financial Officer of Novartis AG, pursuant to Section 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
15.1 Consent of KPMG AG.
15.2 Consent of PricewaterhouseCoopers AG.
97.1 Novartis AG Policy Governing the Recovery of Erroneously Awarded Compensation.
101.INS XBRL Instance Document
101.SCH XBRL Taxonomy Extension Schema Document
101.CAL XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).
The total amount of long-term debt securities authorized under any instrument does not exceed 10% of the total
assets of the Company and its subsidiaries on a consolidated basis. We hereby agree to furnish to the SEC, upon
its request, a copy of any instrument defining the rights of holders of long-term debt of the Company or of its
subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.
190
(This page has been left blank intentionally.)
191
Novartis consolidated financial statements
Novartis consolidated financial statements
Consolidated income statements
(For the years ended December 31, 2023, 2022 and 2021)
(USD millions unless indicated otherwise)
Net sales from continuing operations
Other revenues
Cost of goods sold
Gross profit from continuing operations
Selling, general and administration
Research and development
Other income
Other expense
Operating income from continuing operations
(Loss)/income from associated companies
Interest expense
Other financial income and expense
Income before taxes from continuing operations
Income taxes
Net income from continuing operations
Net income from discontinued operations before gain on
distribution of Sandoz Group AG to Novartis AG shareholders
Gain on distribution of Sandoz Group AG to Novartis AG shareholders
Net income from discontinued operations
Net income
Attributable to:
Shareholders of Novartis AG
Non-controlling interests
Basic earnings per share (USD) from continuing operations
Basic earnings per share (USD) from discontinued operations
Total basic earnings per share (USD)
Diluted earnings per share (USD) from continuing operations
Diluted earnings per share (USD) from discontinued operations
Total diluted earnings per share (USD)
The accompanying Notes form an integral part of the consolidated financial statements.
Note
2023
2022
2021
4
4
45 440
42 206
42 781
1 220
1 255
1 193
– 12 472
– 11 582
– 11 735
34 188
31 879
32 239
– 12 517
– 12 193
– 12 827
– 11 371
– 9 172
– 8 641
1 772
696
1 620
– 2 303
– 3 264
– 2 335
9 769
7 946
10 056
5
6
6
– 13
– 855
222
– 11
15 337
– 800
42
– 787
– 76
9 123
7 177
24 530
7
– 551
– 1 128
– 1 625
8 572
6 049
22 905
31
2
31
422
5 860
6 282
906
1 113
906
1 113
14 854
6 955
24 018
14 850
6 955
24 021
4
0
– 3
4.13
3.02
7.15
4.10
3.00
7.10
2.77
0.42
3.19
2.76
0.41
3.17
10.22
0.49
10.71
10.14
0.49
10.63
8
8
F-1
Novartis consolidated financial statements
Consolidated statements of comprehensive income
(For the years ended December 31, 2023, 2022 and 2021)
(USD millions)
Net income
Other comprehensive income
Items that are or may be recycled into the consolidated income statement
Novartis share of other comprehensive income
recognized by associated companies, net of taxes
Net investment hedge, net of taxes
Currency translation effects, net of taxes
Total of items that are or may be recycled
Items that will never be recycled into the consolidated income statement
Actuarial (losses)/gains from defined benefit plans, net of taxes
Fair value adjustments on equity securities, net of taxes
Total of items that will never be recycled
Total comprehensive income
Total comprehensive income for the year attributable to:
Shareholders of Novartis AG
Continuing operations
Discontinued operations
Non-controlling interests
The accompanying Notes form an integral part of the consolidated financial statements.
Note
2023
2022
2021
14 854
6 955
24 018
5
9
9
9
9
– 50
1 375
1 325
– 160
37
– 123
91
46
216
– 450
– 4 762
– 359
– 4 500
– 103
– 382
– 485
1 809
194
2 003
16 056
6 111
21 521
16 050
6 116
21 528
10 115
5 181
20 450
5 935
6
935
– 5
1 078
– 7
F-2
Novartis consolidated financial statements
Consolidated balance sheets
(At December 31, 2023 and 2022)
(USD millions)
Assets
Non-current assets
Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets other than goodwill
Investments in associated companies
Deferred tax assets
Financial assets
Other non-current assets
Total non-current assets
Current assets
Inventories
Trade receivables
Income tax receivables
Marketable securities, commodities, time deposits and derivative financial instruments
Cash and cash equivalents
Other current assets
Total current assets
Total assets
Equity and liabilities
Equity
Share capital
Treasury shares
Reserves
Equity attributable to Novartis AG shareholders
Non-controlling interests
Total equity
Liabilities
Non-current liabilities
Financial debts
Lease liabilities
Deferred tax liabilities
Provisions and other non-current liabilities
Total non-current liabilities
Current liabilities
Trade payables
Financial debts and derivative financial instruments
Lease liabilities
Current income tax liabilities
Provisions and other current liabilities
Total current liabilities
Total liabilities
Total equity and liabilities
The accompanying Notes form an integral part of the consolidated financial statements.
F-3
Note
2023
2022
10
11
12
12
5
13
14
14
15
16
17
17
18
9 514
10 764
1 410
1 431
23 341
29 301
26 879
31 644
205
4 309
2 607
1 199
143
3 739
2 411
1 110
69 464
80 543
5 913
7 107
426
7 175
8 066
268
1 035
11 413
13 393
2 607
7 517
2 471
30 481
36 910
99 945
117 453
19
19
825
– 41
890
– 92
45 883
58 544
46 667
59 342
83
81
46 750
59 423
20
11
13
21
22
11
18 436
20 244
1 598
2 248
4 523
1 538
2 686
4 906
26 805
29 374
4 926
6 175
230
5 146
5 931
251
1 893
2 533
23
13 166
14 795
26 390
28 656
53 195
58 030
99 945
117 453
Novartis consolidated financial statements
Consolidated statements of changes in equity
(For the years ended December 31, 2023, 2022 and 2021)
Note
9
9
19.2
19.1
19.2
19
19.2
19.2
(USD millions)
Total equity at January 1, 2021
Net income
Other comprehensive income
Total comprehensive income
Dividends
Purchase of treasury shares
Reduction of share capital
Exercise of options and employee transactions
Equity-based compensation
Shares delivered to Alcon employees
as a result of the Alcon spin-off
Taxes on treasury share transactions
Increase of treasury share repurchase
19.4
obligation under a share buyback trading plan
19.8
Transaction costs, net of taxes
19.6
Changes in non-controlling interests
9
Fair value adjustments on financial assets sold
9
Value adjustments related to divestments
Impact of change in ownership of consolidated entities 19.5
19.7
Other movements
Total of other equity movements
Total equity at December 31, 2021
Net income
Other comprehensive income
Total comprehensive income
Dividends
Purchase of treasury shares
Reduction of share capital
Exercise of options and employee transactions
Equity-based compensation
Shares delivered to Alcon employees
as a result of the Alcon spin-off
Taxes on treasury share transactions
Decrease of treasury share repurchase
obligation under a share buyback trading plan
Changes in non-controlling interests
Fair value adjustments on financial assets sold
Value adjustments related to divestments
Other movements
Total of other equity movements
Total equity at December 31, 2022
Net income
Other comprehensive income
Total comprehensive income
Dividends
Dividend in kind to effect the
spin-off of Sandoz Group AG
Purchase of treasury shares
Reduction of share capital
Exercise of options and employee transactions
Equity-based compensation
Shares delivered to Sandoz employees
as a result of the Sandoz spin-off
Taxes on treasury share transactions
Transaction costs, net of taxes
Changes in non-controlling interests
Fair value adjustments on financial assets sold
Value adjustments related to divestments
Other movements
Total of other equity movements
Total equity at December 31, 2023
19.1
19.2
19
19.2
19.2
19.4
19.6
9
9
19.7
19.8
19.6
9
9
19.7
2
19.2
19.3
19.2
19.2
19.1
19.2
19.2
9
Non-
controlling
interests
68
– 3
– 4
– 7
Total
equity
56 666
24 018
– 2 497
21 521
– 7 368
– 2 920
39
745
17
1
– 1 040
12
– 1
– 1
107
102
48
106 – 10 365
67 822
167
6 955
0
– 844
– 5
6 111
– 5
– 7 506
– 10 910
88
854
5
14
– 81
2 809
– 81
217
– 81 – 14 510
59 423
14 854
1 202
16 056
– 7 255
81
4
2
6
Share
capital
913
Treasury
shares
– 53
– 12
– 18
18
0
5
0
Reserves
Equity
attributable
Retained Total value
to Novartis
earnings adjustments shareholders
56 598
57 157
– 1 419
24 021
24 021
– 2 493
46
21 528
24 067
– 7 368
– 7 368
– 2 902
– 2 920
– 6
39
740
– 2 539
– 2 539
39
745
17
1
– 1 040
12
17
1
– 1 040
12
164
65
– 5
48
5 – 10 235
70 989
6 955
– 48
6 955
– 7 506
– 66 – 10 844
– 4
87
848
15
1
6
0
5
14
– 164
– 65
0
– 4 187
– 5
48
– 229 – 10 471
67 655
6 955
– 839
6 116
– 7 506
– 10 910
– 839
– 839
88
854
5
14
2 809
2 809
– 4
34
– 4 996
217
30 – 14 429
59 342
14 850
1 200
16 050
– 7 255
1 200
1 200
4
– 34
217
– 44 – 14 404
63 540
– 92
14 850
14 850
– 7 255
– 13 962
– 8 466
– 29
144
898
– 51
94
2
6
0
30
14
– 214
– 1
– 29
129
51 – 28 741
49 649
– 41
– 12
901
– 11
– 11
890
– 65
– 65
825
– 13 962
– 8 517
– 13 962
– 8 517
146
904
30
14
– 214
146
904
30
14
– 214
– 4
– 4
1
29
129
30 – 28 725
46 667
– 3 766
129
– 4 – 28 729
46 750
83
The accompanying Notes form an integral part of the consolidated financial statements.
F-4
Novartis consolidated financial statements
Consolidated statements of cash flows
(For the years ended December 31, 2023, 2022 and 2021)
(USD millions)
Net income from continuing operations
Adjustments to reconcile net income from continuing operations to net cash flows
from operating activities from continuing operations
Note
2023
2022
2021
8 572
6 049
22 905
Reversal of non-cash items and other adjustments
24.1
10 369
10 631
– 6 430
Dividends received from associated companies and others
Interest received
Interest paid
Other financial receipts
Other financial payments
Income taxes paid
Net cash flows from operating activities from continuing operations
before working capital and provision changes
Payments out of provisions and other net cash movements in non-current liabilities
Change in net current assets and other operating cash flow items
Net cash flows from operating activities from continuing operations
Net cash flows from operating activities from discontinued operations
Total net cash flows from operating activities
Purchases of property, plant and equipment
Proceeds from sale of property, plant and equipment
Purchases of intangible assets
Proceeds from sale of intangible assets
Purchases of financial assets
Proceeds from sale of financial assets
Purchases of other non-current assets
Proceeds from sale of other non-current assets
Acquisitions and divestments of interests in associated companies, net
Acquisitions and divestments of businesses, net
Purchases of marketable securities, commodities and time deposits
Proceeds from sale of marketable securities, commodities and time deposits
Net cash flows from investing activities from continuing operations
Net cash flows used in investing activities from discontinued operations
Total net cash flows from investing activities
Dividends paid to shareholders of Novartis AG
Acquisitions of treasury shares
Proceeds from exercised options and other treasury share transactions, net
Repayments of the current portion of non-current financial debts
Change in current financial debts
Payments of lease liabilities
Impact of change in ownership of consolidated entities
Other financing cash flows, net
2
645
1
252
523
11
– 751
– 667
– 643
90
– 17
71
– 26
– 297
24.2
– 2 787
– 1 702
– 1 856
16 123
14 609
14 213
– 1 534
24.3
– 369
– 774
– 796
– 775
– 73
14 220
13 039
13 365
238
1 197
1 706
14 458
14 236
15 071
– 1 060
– 916
– 1 066
237
158
211
– 1 693
– 1 323
– 1 490
1 955
– 106
348
170
– 115
133
– 1
686
– 188
440
– 59
4
24.4
24.5
– 11
– 24
20 669
– 3 558
– 840
– 205
– 641
– 34 695
– 16 403
11 248
39 357
6 719
31
– 1 123
5 596
1 904
– 436
1 468
2 298
4 897
– 689
4 208
– 7 255
– 7 506
– 7 368
– 8 719
– 10 652
– 3 057
153
100
53
– 2 223
– 2 575
– 2 162
546
252
– 3 547
– 258
– 262
– 278
192
– 38
– 3
72
24.6
24.6
24.6
Net cash flows used in financing activities from continuing operations
– 17 564
– 20 681
– 16 290
Net cash flows from financing activities from discontinued operations
31
3 286
119
26
Total net cash flows used in financing activities
– 14 278
– 20 562
– 16 264
Net change in cash and cash equivalents before effect of exchange
rate changes
Effect of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents at January 1
Cash and cash equivalents at December 31
The accompanying Notes form an integral part of the consolidated financial statements.
5 776
– 4 858
100
– 32
5 876
– 4 890
7 517
12 407
3 015
– 266
2 749
9 658
13 393
7 517
12 407
F-5
Notes to the Novartis consolidated financial statements
Notes to the Novartis consolidated financial
statements
1. Accounting policies
Novartis is a multinational group of companies (Novartis
or Company) specializing in the research, development,
manufacturing and marketing of a broad range of
innovative pharmaceutical medicines. The Company is
headquartered in Basel, Switzerland.
The consolidated financial statements of the Com-
pany are prepared in accordance with International
Financial Reporting Standards (IFRS) Accounting Stan-
dards as issued by the International Accounting Stan-
dards Board. They are prepared in accordance with the
historical cost convention, except for items that are
required to be accounted for at fair value.
The Company’s financial year-end is December 31,
which is also the annual closing date of the individual
entities’ financial statements incorporated into the Com-
pany’s consolidated financial statements.
The preparation of financial statements requires
management to make certain estimates and assump-
tions, either at the balance sheet date or during the year,
which affect the reported amounts of revenues, expenses,
assets, liabilities, including the distribution liability and
the non-cash, non-taxable gain recognized in connec-
tion with the distribution of Sandoz Group AG to Novartis
AG shareholders, 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 esti-
mates and assumptions. Revisions to estimates are rec-
ognized in the period in which the estimate is revised.
At the Novartis AG Extraordinary General Meeting,
held on September 15, 2023, our shareholders approved
the spin-off of the Sandoz business. Following the share-
holder approval, IFRS Accounting Standards 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 year ended December 31, 2023 consoli-
dated 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. There
is no requirement for the restatement of the December
31, 2022 consolidated balance sheet related to the
assets and liabilities of the Sandoz business that were
derecognized in 2023 as at the October 3, 2023 Distri-
bution date. For further information and disclosures refer
to the section Distribution of Sandoz Group AG to
Novartis AG shareholders in this Note 1, Note 2 and Note
31.
Listed below are the material accounting policies of sig-
nificance to Novartis or, in cases where IFRS Account-
ing Standards provide alternatives, the option adopted
by Novartis.
Scope of consolidation
The consolidated financial statements include all enti-
ties, including structured entities, over which Novartis
AG, Basel, Switzerland, directly or indirectly has control
(generally as a result of owning more than 50% of the
entity’s voting interest). Consolidated entities are also
referred to as “subsidiaries.”
In cases where Novartis does not fully own a subsid-
iary, it has elected to value any remaining outstanding
non-controlling interest at the time of acquiring control
of the subsidiary at its proportionate share of the fair
value of the net identified assets.
Investments in associated companies (generally
defined as investments in entities in which Novartis holds
between 20% and 50% of voting shares or over which it
otherwise has significant influence) and joint ventures
are accounted for using the equity method, except for
selected venture fund investments for which the Com-
pany has elected to apply the method of fair value through
the consolidated income statement.
Foreign currencies
The consolidated financial statements of Novartis are
presented in US dollars (USD). The functional currency
of a subsidiary is generally the local currency of that
entity. The functional currency used for the reporting of
certain Swiss and foreign finance entities is USD instead
of their respective local currencies. This reflects the fact
that the cash flows and transactions of these entities are
primarily denominated in this currency.
For subsidiaries using a functional currency other
than USD the subsidiary’s results, financial position and
cash flows are translated into USD using the following
exchange rates:
• Income, expense and cash flows for each month using
the average exchange rate, with the US dollar values
for each month being aggregated during the year
• Balance sheet using year-end exchange rates
• Resulting exchange rate differences are recognized in
other comprehensive income
F-6
Notes to the Novartis consolidated financial statements
Distribution of Sandoz Group AG to
Novartis AG shareholders
At the Extraordinary General Meeting (EGM) of Novartis
AG shareholders, held on September 15, 2023, the
Novartis AG shareholders approved a special distribu-
tion 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, as well as certain expenses related to the spin-
off (the “Sandoz business”) to be reported as discontin-
ued operations.
The shareholder approval on September 15, 2023,
for the spin-off the Sandoz business, required the rec-
ognition of a distribution liability at the fair value of the
Sandoz business. Novartis policy is to measure the dis-
tribution 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
was 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 earn-
ings. Any resulting impairment of the business assets to
be distributed would have been recognized in the con-
solidated income statements in “Other expense” of dis-
continued 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, was
recognized 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 the 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 mul-
tiples, 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 “—Goodwill and
intangible assets other than goodwill” in this Note 1 pro-
vides additional information on key assumptions that are
highly sensitive in the estimation of fair values using val-
uation techniques.
Transaction costs that are directly attributable to the
Distribution (spin-off) of the Sandoz business to Novartis
AG shareholders by way of a dividend in kind, and that
would otherwise have been avoided, were accounted for
as a deduction from equity (within retained earnings).
Prior to the recognition of the distribution liability, these
costs were recorded as prepaid expenses in the consol-
idated balance sheet.
For additional disclosures, refer to “Note 2. Signifi-
in
transactions—Significant
transactions
cant
2023—Completion of the spin-off of the Sandoz busi-
ness through a dividend in kind distribution to Novartis
AG shareholders,” and “Note 31. Discontinued opera-
tions.”
Acquisition of assets and businesses
Assets separately acquired are recorded at cost, which
includes the purchase price and any directly attributable
costs for bringing the asset into the condition to operate
as intended. Expected costs for obligations to disman-
tle and remove property, plant and equipment and restore
the site when it is no longer used are included in their
cost.
Acquired businesses are accounted for by applying
the acquisition method, unless the optional concentra-
tion test is applied. The optional concentration test
allows for an election on a transaction-by-transaction
basis to account for the acquired business as an asset
separately acquired when substantially all of the fair
value of the gross assets acquired is concentrated in a
single identifiable asset or group of similar identifiable
assets.
The acquisition method requires that the assets
acquired and liabilities assumed be recorded at their
respective fair values on the date the Company obtains
control. The excess of the fair value of the total purchase
consideration transferred over the fair value of the
acquired assets and assumed liabilities is recognized as
goodwill. The valuations are based on information avail-
able at the acquisition date. Acquisition related costs are
expensed as incurred.
The application of the acquisition method requires
certain estimates and assumptions to be made, espe-
cially concerning the fair values of the acquired intangi-
ble assets, inventories, property, plant and equipment
and the liabilities assumed at the acquisition date, and
the useful lives of the intangible assets and property,
plant and equipment. Estimates of fair value require the
use of valuation techniques. These valuations require the
use of management assumptions and estimates, includ-
ing the value of comparable assets in the market, amount
and timing of future cash flows, outcomes and costs of
research and development activities, probability of
obtaining regulatory approval, long-term sales forecasts,
actions of competitors, discount rates and terminal
growth rates. The section “—Impairment of goodwill and
intangible assets” in this Note 1 provides additional infor-
mation on key assumptions that are highly sensitive in
the estimation of fair values using valuation techniques.
Goodwill and intangible assets other
than goodwill
Goodwill arises on applying the acquisition method on
the acquisition of a business and is the excess of the fair
value of the consideration transferred to acquire the
business over the underlying fair value of the net identi-
fied assets acquired. Goodwill is allocated to groups of
cash-generating units (CGUs) that is expected to bene-
fit from the synergies of the combination, which are usu-
ally represented by the operating segment. Goodwill is
F-7
Notes to the Novartis consolidated financial statements
tested for impairment annually at the level of this group
of CGUs, and any impairment charges are recorded
under “Other expense” in the consolidated income state-
ment.
Purchased intangible assets other than goodwill are
initially recorded at cost. Intangible assets that have been
acquired through a business combination are initially
recorded at fair value using the acquisition method of
accounting.
Intangible assets available for use with a definitive
useful life (which includes the categories Currently mar-
keted products and Other intangible assets) are amor-
tized on a straight-line basis and evaluated for potential
impairment whenever facts and circumstances indicate
that their carrying value may not be recoverable.
Acquired research and development intangible
assets that have not yet obtained marketing approval are
recognized as in-process research and development
(IPR&D). IPR&D is not amortized as it is not yet available
for use. It is evaluated for potential impairment on an
annual basis or when facts and circumstances warrant.
Once a project included in IPR&D has received market-
ing approval from a regulatory authority, it is transferred
to the “Currently marketed products” category of intan-
gible assets.
An asset, a CGU or a grouping of CGUs is considered
impaired when its balance sheet carrying amount
exceeds its estimated recoverable amount, which is
defined as the higher of its fair value less costs of dis-
posal and its value in use. Usually, Novartis applies the
fair value less costs of disposal method for its impair-
ment assessment. In most cases, no directly observable
market inputs are available to measure the fair value less
costs of disposal. An estimate is therefore derived indi-
rectly and is based on net present value techniques uti-
lizing post-tax cash flows and discount rates. In the lim-
ited cases where the value-in-use method would be
applied, net present value techniques would be applied
using pre-tax cash flows and discount rates.
Fair value less costs of disposal reflects estimates of
assumptions that market participants would be expected
to use when pricing the asset or CGU, and for this pur-
pose, management considers the range of economic
conditions that are expected to exist over the remaining
useful life of the asset. These valuations are classified
as “Level 3” in the fair value hierarchy.
The estimates used in calculating the net present val-
ues are highly sensitive and depend on assumptions spe-
cific to the nature of the Company’s activities with regard
to:
• Amount and timing of projected future cash flows
• Sales forecasts
• Actions of competitors (launch of competing products,
marketing initiatives, etc.)
• Sales erosion rates after the end of patent or other
intellectual property rights protection, and timing of the
entry of generic competition
• Outcome of research and development activities (com-
pound efficacy, results of clinical trials, etc.)
• Amount and timing of projected costs to develop IPR&D
into commercially viable products
• Profit margins
• Probability of obtaining regulatory approval
• Future tax rate
• Appropriate terminal growth rate
• Appropriate discount rate
Generally, for intangible assets with a definite useful life,
Novartis uses cash flow projections for the whole useful
life of these assets. For goodwill, Novartis generally uti-
lizes cash flow projections for a three-year period based
on management forecasts, with a terminal value based
on cash flow projections usually in line with inflation rates
for later periods.
Probability-weighted scenarios are typically used.
Discount rates used consider the Company’s esti-
mated weighted average cost of capital, adjusted for spe-
cific asset, country and currency risks associated with
cash flow projections, to approximate the discount rate
that market participants would use to value the asset.
Due to the above factors, actual cash flows and val-
ues could vary significantly from forecasted future cash
flows and related values derived using discounting tech-
niques.
Cash and cash equivalents
Cash and cash equivalents include highly liquid invest-
ments with original maturities of three months or less,
which are readily convertible to known amounts of cash.
Bank overdrafts are presented within current financial
debts on the consolidated balance sheet.
Marketable securities and non-
current financial assets
Marketable securities are financial assets held for short-
term purposes that are principally traded in liquid mar-
kets and are classified within current assets on the con-
solidated balance sheet. The financial impacts related
to these financial assets are recorded in “Other financial
income and expense” in the consolidated income state-
ment. Non-current financial assets held for long-term
strategic purposes are classified within non-current
assets on the consolidated balance sheet. The financial
impacts related to these financial assets are recorded
in “Other income” and “Other expense” in the consoli-
dated income statement.
Marketable securities and non-current financial
assets are initially recorded at fair value on their trade
date, which is different from the settlement date when
the transaction is ultimately effected. Quoted securities
are remeasured at each reporting date to fair value based
on current market prices. If the market for a financial
asset is not active or no market is available, fair values
are established using valuation techniques. The major-
ity of non-quoted investments are initially valued at fair
value through the purchase price established between
a willing buyer and seller. Non-quoted investments are
subsequently adjusted based on values derived from dis-
counted cash flow analysis or other pricing models.
These investment values are classified as “Level 3” in
the fair value hierarchy.
The Company classifies and accounts for its market-
able securities and non-current financial assets in the
following categories:
F-8
Notes to the Novartis consolidated financial statements
• Debt securities are valued at fair value through other
comprehensive income with subsequent recycling into
the consolidated income statement, as they meet both
the “solely payment of principal and interest” and the
business model criteria. Unrealized gains and losses,
except exchange gains and losses, are recorded as a
fair value adjustment in the consolidated statement of
comprehensive income. They are recognized in the
consolidated income statement when the debt instru-
ment is sold, at which time the gain is transferred to
“Other financial income and expense.” Exchange gains
and losses related to debt instruments are immediately
recognized in the consolidated income statement in
“Other financial income and expense.”
• Fund investments and equity securities of the Novartis
Venture Fund are valued at fair value through profit and
loss (FVPL). Unrealized gains and losses, including
exchange gains and losses, are recognized in the con-
solidated income statement in “Other income” for gains
and “Other expense” for losses.
• Equity securities held as strategic investments, typi-
cally held outside of the Novartis Venture Fund, are
generally designated at the date of acquisition as finan-
cial assets valued at fair value through other compre-
hensive income with no subsequent recycling through
profit and loss. Unrealized gains and losses, including
exchange gains and losses, are recorded as a fair value
adjustment in the consolidated statement of compre-
hensive income. They are reclassified to retained earn-
ings when the equity security is sold. If these equity
securities are not designated at the date of acquisition
as financial assets valued at fair value through other
comprehensive income, they are valued at FVPL, as
described above.
• Other non-current financial assets, such as loans and
long-term receivables from customers, advances and
other deposits, are valued at amortized cost, which
reflects the time value of money less any allowances
for expected credit losses.
The Company assesses on a forward-looking basis the
expected credit losses associated with its debt securi-
ties valued at fair value through other comprehensive
income. Impairments on debt securities are recorded in
“Other financial income and expense.”
For other financial assets valued at amortized cost,
impairments, which are based on their expected credit
losses, and exchange rate losses are included in “Other
expense” in the consolidated income statement.
Exchange rate gains and interest income, using the effec-
tive interest rate method, are included in “Other income”
or “Other financial income” in the consolidated income
statement, depending on the nature of the item.
Options are valued based on a modified Black-
Scholes model using volatility and exercise prices as
major observable inputs.
The Company enters into certain derivative financial
instruments for the purpose of hedging to reduce the
volatility in the Company’s performance due to the expo-
sure to various business-related risks. The risk mitiga-
tion is obtained because the derivative’s value or cash
flows are expected, wholly or partly, to offset changes
in the value or cash flows of the recognized assets or
liabilities. The overall strategy is aiming to mitigate the
currency and interest rate risk of positions that are con-
tractually agreed, and to partially mitigate the exposure
risk of selected anticipated transactions.
Certain derivative financial instruments meet the
criteria for hedge accounting treatment. A prerequisite
for obtaining this accounting-hedge relationship is exten-
sive documentation on inception and proving on a regu-
lar basis that the economic hedge is effective for account-
ing purposes. Other derivative financial instruments do
not meet the criteria to qualify for hedge accounting or
are not designated in a hedge relationship. Changes in
the fair value of these derivative instruments are recog-
nized immediately in “Other financial income and
expense” in the consolidated income statement.
In addition, the Company has designated certain
long-term debt components as hedges of the translation
risk arising on certain net investments in foreign opera-
tions. On consolidation, foreign currency differences
arising on long-term debt designated as net investment
hedges of a foreign operation are recognized in other
comprehensive income and accumulated in currency
translation effects, to the extent that the hedge is effec-
tive. The foreign currency differences arising from hedge
ineffectiveness are recognized in the income statement
in “Other financial income and expense.”
When a hedged net investment is disposed of, the
proportionate portion of the cumulative amount recog-
nized in equity in relation to the hedged net investment
is transferred to the consolidated income statement as
an adjustment to the gain or loss on disposal.
Inventories
Inventory is valued at the lower of acquisition or produc-
tion cost determined on a first-in, first-out basis and net
realizable value. This value is used for the “Cost of goods
sold” in the consolidated income statement. Unsaleable
inventory is fully written off in the consolidated income
statement under “Cost of goods sold.”
Trade receivables
Derivative financial instruments
Derivative financial instruments are initially recognized
in the balance sheet at fair value and are remeasured to
their current fair value at the end of each subsequent
reporting period. The valuation of a forward exchange
rate contract is based on the discounted cash flow
model, using interest rate curves and forward rates at
the reporting date as observable inputs.
Trade receivables are initially recognized at their invoiced
amounts, including any related sales taxes less adjust-
ments for estimated revenue deductions such as rebates,
chargebacks and cash discounts.
Provisions for doubtful trade receivables are estab-
lished using a forward-looking expected credit loss
model (ECL). Charges for doubtful trade receivables are
recorded as marketing and selling costs recognized in
F-9
Notes to the Novartis consolidated financial statements
the consolidated income statement within “Selling, gen-
eral and administration” expenses.
Revenue recognition
Legal and environmental liabilities
Novartis and its subsidiaries are subject to contingen-
cies arising in the ordinary course of business, such as
patent litigation, environmental remediation liabilities and
other product-related and commercial litigation, and gov-
ernmental investigations and proceedings. A provision
is recorded when there is a probable outflow of resources
for which a reliable estimate can be made of the outcome
of the legal or other disputes against the subsidiary.
Contingent consideration
In the acquisition or divestment of a business, it is nec-
essary to recognize contingent future amounts due to
previous owners, representing contractually defined
potential amounts as a liability or an asset. Usually for
Novartis, these are linked to milestone or royalty pay-
ments related to certain assets and are recognized as a
financial liability or financial asset at fair value, which is
then remeasured at each subsequent reporting date.
These estimations typically depend on factors such as
technical milestones or market performance, and are
adjusted for the probability of their likelihood of payment,
and are appropriately discounted to reflect the impact
of time.
Changes in the fair value of contingent consideration
liabilities in subsequent periods are recognized in the
consolidated income statement in “Cost of goods sold”
for currently marketed products and in “Research and
development” for IPR&D. Changes in contingent consid-
eration assets are recognized in “Other income” or
“Other expense,” depending on their nature.
The effect of unwinding the discount over time is rec-
ognized for contingent consideration liabilities in “Inter-
est expense” and for contingent consideration assets as
interest income recognized in the consolidated income
statement within “Other financial income and expense.”
Defined benefit pension plans and
other post-employment benefits
The liability in respect of defined benefit pension plans
and other post-employment benefits is the defined ben-
efit obligation calculated annually by independent actu-
aries using the projected unit credit method. The cur-
rent service cost for defined benefit pension plans and
other post-employment benefit plans is included in the
personnel expenses of the various functions in which
employees are employed, and the net interest on the net
defined benefit liability or asset is recognized as “Other
expense” or “Other income.”
Revenue on the sale of Novartis products and services,
which is recorded as “Net sales to third parties” in the
consolidated income statement, is recognized when a
contractual promise to a customer (performance obliga-
tion) has been fulfilled by transferring control over the
promised goods and services to the customer, substan-
tially all of which is at the point in time of shipment to or
receipt of the products by the customer or when the ser-
vices are performed. If contracts contain customer
acceptance provisions, revenue is recognized upon the
satisfaction of the acceptance criteria. If a contract con-
tains more than one performance obligation, the consid-
eration is allocated based on the standalone selling price
of each performance obligation. The amount of revenue
recognized is based on the consideration Novartis
expects to receive in exchange for its goods and ser-
vices, when it is highly probable that a significant rever-
sal will not occur.
The consideration Novartis receives in exchange for
its goods or services may be fixed or variable. Variable
consideration is recognized when it is highly probable
that a significant reversal will not occur. The most com-
mon elements of variable consideration are listed below.
• Rebates and discounts granted to wholesalers, retail-
ers, government agencies (including US Medicaid and
US Federal Medicare programs), government sup-
ported healthcare systems, private health systems,
pharmacy benefit managers, managed healthcare
organizations, purchasing organizations and other
direct and indirect customers, as well as chargebacks
are provisioned and recorded as revenue deductions
at the time the related revenues are recorded, or when
the incentives are offered. The provision represents
estimates of the related obligations, requiring the use
of judgment when estimating the effect of these reve-
nue deductions. These rebates and discounts, applied
using provision rates, are estimated based on the terms
and conditions in the individual government agencies,
states, plans and customer agreements (which may be
subject to challenge or change in interpretative guid-
ance by government authorities and customers), his-
torical experience, product sales and growth rate, pop-
ulation growth, product pricing including inflation
impacts, the mix of contracts and products, the level
of inventory in the distribution channel, regulations,
contracts, channels and payers, as appropriate to the
individual rebate and discount arrangements. These
rebate provisions are adjusted based on established
processes and experiences, for example from filing
data with individual government agencies, states, and
plans. There is often a time lag between recording of
revenue deductions and the final accounting for them.
• Refunds granted to healthcare providers under
innovative pay-for-performance agreements (i.e. out-
come based arrangements) are provisioned and
recorded as a revenue deduction at the time the related
sales are recorded. The provision represents estimates
of the related obligations, requiring the use of judgment
when estimating the effect of these revenue deduc-
tions. They are calculated on the basis of historical
experience and clinical data available for the product,
as well as specific terms of the individual agreements.
F-10
Notes to the Novartis consolidated financial statements
In cases where historical experience and clinical data
are not sufficient for a reliable estimation of the out-
come, revenue recognition is deferred until the uncer-
tainty is resolved, until such history is available or the
period when the refund right has expired. The provi-
sions for revenue deductions under the innovative
pay-for-performance agreements are adjusted period-
ically based on established processes and actual expe-
rience, including the products actual outcomes
achieved compared with the anticipated predefined
targets.
• Cash discounts are offered to customers to encourage
prompt payment and are provisioned and recorded as
revenue deductions at the time the related sales are
recorded.
• Sales returns provisions are recognized and recorded
as revenue deductions when there is historical expe-
rience of Novartis agreeing to customer returns and
Novartis can reasonably estimate expected future
returns. The provision represents estimates of the
related obligations, requiring the use of judgment when
estimating the effect of these revenue deductions. In
doing so, the estimated rate of return is applied, deter-
mined on the basis of historical experience of customer
returns and considering any other relevant factors. This
is applied to the amounts invoiced, also considering
the amount of returned products to be destroyed ver-
sus products that can be placed back in inventory for
resale. Where shipments are made on a resale or return
basis, without sufficient historical experience for esti-
mating sales returns, revenue is only recorded when
there is evidence of consumption or when the right of
return has expired. The provisions for sales returns are
adjusted periodically based on established processes
and actual experience,
Net sales to third parties and provisions for revenue
deductions are adjusted periodically to reflect experi-
ence and to reflect actual amounts as rebates, refunds,
discounts and returns are processed. There is often a
time lag between recording of revenue deductions and
the final accounting for them. The provision represents
estimates of the related obligations, requiring the use of
judgment when estimating the effect of these revenue
deductions.
“Other revenue” includes income from profit-sharing
arrangements with our collaboration partners, and roy-
alty and milestone income from the out-licensing of intel-
lectual property when Novartis retains an interest in the
intellectual property through a license. Royalty income
earned from a license is recognized when the underly-
ing sales have occurred. Milestone income is recognized
at the point in time when it is highly probable that the rel-
evant milestone event criteria are met, and the risk of
reversal of revenue recognition is remote. “Other reve-
nue” also includes revenue from activities such as man-
ufacturing or other services rendered, to the extent such
revenue is not recorded under net sales, and is recog-
nized when control transfers to the third party and our
performance obligations are satisfied.
Research and development
Internal research and development (R&D) costs are fully
charged to “Research and development” in the consol-
idated income statement in the period in which they are
incurred. The Company considers that regulatory and
other uncertainties inherent in the development of new
products preclude the capitalization of internal develop-
ment expenses as an intangible asset until marketing
approval from a regulatory authority is obtained in a
major market such as the United States, the European
Union, Switzerland or Japan.
Payments made to third parties, such as contract
research and development organizations in compensa-
tion for subcontracted R&D, that are deemed not to
transfer intellectual property to Novartis are expensed
as internal R&D expenses in the period in which they are
incurred. Such payments are only capitalized if they meet
the criteria for recognition of an internally generated
intangible asset, usually when marketing approval has
been received from a regulatory authority in a major mar-
ket.
Payments made to third parties to in-license or
acquire intellectual property rights, compounds and
products, including initial upfront and subsequent mile-
stone payments, are capitalized, as are payments for
other assets, such as technologies to be used in R&D
activities. If additional payments are made to the origi-
nator company to continue performing R&D activities, an
evaluation is made as to the nature of the payments. Such
additional payments will be expensed if they are deemed
to be compensation for subcontracted R&D services not
resulting in an additional transfer of intellectual property
rights to Novartis. Such additional payments will be cap-
italized if they are deemed to be compensation for the
transfer to Novartis of additional intellectual property
developed at the risk of the originator company. Subse-
quent internal R&D costs in relation to IPR&D and other
assets are expensed, since the technical feasibility of
the internal R&D activity can only be demonstrated by
the receipt of marketing approval for a related product
from a regulatory authority in a major market.
Costs for post-approval studies performed to sup-
port the continued registration of a marketed product
are recognized as marketing expenses. Costs for activ-
ities that are required by regulatory authorities as a con-
dition for obtaining marketing approval in a major market
are capitalized and recognized as currently marketed
products.
Inventory produced ahead of regulatory approval is
fully provisioned, and the charge is included in “Other
expense” in the consolidated income statement, as its
ultimate use cannot be assured. If this inventory can sub-
sequently be sold, the provision is released to “Other
income” in the consolidated income statement, either on
approval by the appropriate regulatory authority or,
exceptionally in Europe, on recommendation by the
Committee for Medicinal Products for Human Use
(CHMP), if approval is virtually certain.
F-11
Notes to the Novartis consolidated financial statements
Share-based compensation
Vested Novartis shares and American Depositary
Receipts (ADRs) that are granted as compensation are
valued at their market value on the grant date and are
immediately expensed in the consolidated income state-
ment.
The fair values of unvested restricted shares (RSs),
restricted share units (RSUs) and performance share
units (PSUs) in Novartis shares and ADRs granted to
employees as compensation are recognized as an
expense over the related vesting period. The expense
recorded in the consolidated income statement is
included in the personnel expenses of the various func-
tions in which the employees are employed.
Unvested restricted shares, restricted ADRs and
RSUs are only conditional on the provision of services
by the plan participant during the vesting period. They
are valued at fair value on the grant date. As RSUs do
not entitle the holder to dividends, the fair value is based
on the Novartis share price at the grant date adjusted
for the net present value of the dividends expected to
be paid during the holding period. The fair value of these
grants, after making adjustments for assumptions related
to forfeiture during the vesting period, is expensed on a
straight-line basis over the respective vesting period.
PSUs are subject to the achievement of certain per-
formance criteria based on Novartis internal perfor-
mance metrics and variables that can be observed in the
market, which for Novartis plans is the Novartis total
shareholder return (TSR) relative to a specific peer group
of companies over the vesting period and require plan
participants to provide services during this period The
expense is recognized in the consolidated income state-
ment on a straight-line basis over the vesting period, and
is determined based on a bifurcation into the compo-
nents based on the performance criteria related to
Novartis internal performance metrics and TSR. The
number of equity instruments that finally vest is deter-
mined at the vesting date. The following paragraphs pro-
vide an overview of the accounting policies for the deter-
mination of the components of the PSU share-based
compensation plan expense.
The portion of the PSUs expense that is subject to
performance criteria based on Novartis internal perfor-
mance metrics over the vesting period is determined
based on assumptions concerning the expected perfor-
mance against the internal performance metrics through-
out the vesting period. The assumptions are based on
the Company’s targets for those performance metrics,
and the expected forfeitures due to plan participants not
meeting their service conditions. The assumptions are
periodically adjusted over the vesting period. For this
portion of the PSUs expense, any change in estimates
for past services is recorded immediately as an expense
or income in the consolidated income statement, and
amounts for the remaining vesting period are expensed
on a straight-line basis. As a result, at the end of the vest-
ing period, the expense during the entire vesting period
represents the amount that will finally vest.
The portion of the PSUs expense that is subject to
performance criteria based on Novartis TSR relative to
a specific peer group of companies over the vesting
period is determined based on the total fair value of the
grant over the vesting period. IFRS Accounting Stan-
dards require that these variables that can be observed
in the market are taken into account in determining the
fair value of the PSUs at the grant date. Novartis deter-
mined the fair value of these PSUs at the date of grant
using a Monte Carlo simulation model. For this portion
of the PSU expense, adjustments to expense recognized
in the consolidated income statement are only made if a
plan participant does not fulfill the service conditions.
Measuring the fair values of PSUs granted that
include TSR performance criteria requires the use of
estimates. The Monte Carlo simulation used to determine
the fair value of the PSUs TSR performance criteria
requires the probability of factors related to uncertain
future events; the term of the award; the grant price of
underlying shares or ADRs; expected volatilities; the
expected correlation matrix of the underlying equity
instruments with those of the peer group of companies;
and the risk-free interest rate as input parameters.
If a plan participant leaves Novartis for reasons other
than retirement, disability or death, then unvested
restricted shares, restricted ADRs, RSUs and PSUs are
forfeited, unless determined otherwise by the provision
of the plan rules or by the Compensation Committee of
the Novartis Board of Directors, for example, in connec-
tion with a reorganization or divestment.
Income taxes
Income taxes comprise current income taxes and
deferred income taxes and are recognized in the same
periods as the revenues and expenses to which they
relate. Income taxes include interest and penalties
incurred during the period, insofar as they are consid-
ered an income tax. Income taxes related to items rec-
ognized directly to other comprehensive income or to
equity are recognized together with the corresponding
item, to which the income tax is attributable, directly in
other comprehensive income or in equity.
Deferred income taxes are determined using the
comprehensive liability method and are calculated on
the temporary differences that arise between the tax
base of an asset or liability and its carrying value for
financial reporting purposes, except for those temporary
differences related to investments in subsidiaries and
associated companies, where the timing of their rever-
sal can be controlled and it is probable that the differ-
ence will not reverse in the foreseeable future. Since the
retained earnings are reinvested, withholding or other
taxes on eventual distribution of a subsidiary’s retained
earnings are only recognized when a dividend is declared
or has been planned. Furthermore, deferred income
taxes are recognized for the net tax effects of net oper-
ating loss carryforwards and tax credits. The Company
applies the IFRS Accounting Standards exception to not
recognize or disclose information about deferred tax
assets and deferred tax liabilities related to countries
that have enacted tax legislation that comply with the
Organization for Economic Cooperation and Develop-
ment (OECD) Pillar Two income taxes.
The carrying amount of deferred tax assets is
reduced to the extent that it is not probable that suffi-
cient taxable profits will be available to enable all or part
F-12
Notes to the Novartis consolidated financial statements
of the asset to be recovered. In evaluating our ability to
recover our deferred tax assets in the jurisdiction from
which they arise, we consider all available positive and
negative evidence, including scheduled reversals of
deferred tax liabilities, projected future taxable income,
tax-planning strategies, and results of recent operations.
The estimated amounts for current and deferred tax
assets or liabilities, including amounts related to any
uncertain tax positions, are based on applicable tax law
and regulations in the various tax jurisdictions, in which
the Company operates, which are subject to interpreta-
tions based on currently known facts and circumstances.
Tax returns are based on an interpretation of tax laws
and regulations, and reflect estimates based on these
judgments and interpretations. The tax returns are sub-
ject to examination by the competent taxing authorities,
which may result in an assessment being made requir-
ing payments of additional tax, interest or penalties.
The calculation of income tax assets and liabilities
involves dealing with uncertainties in the application of
complex tax laws and regulations in a multitude of juris-
dictions across our global operations. As a result, inher-
ent uncertainties exist in the estimates of the tax posi-
tions. Tax liabilities for uncertain tax provisions are
recognized on the consolidated balance sheets within
current income tax liabilities.
Impact of new IFRS Accounting
Standards, amendments and
interpretations in 2023
No new IFRS Accounting Standards were adopted by
the Company in 2023. In addition, new IFRS Accounting
Standards amendments or interpretations that became
effective in 2023 did not have a material impact on the
Company’s consolidated financial statements.
Based on the Company’s assessment, there are no
IFRS Accounting Standards, amendments or
interpretations not yet effective in 2023 that would be
expected to have a material impact on the Company’s
consolidated financial statements.
Impact of new IFRS Accounting
Standards, amendments and
interpretations in 2022
No new IFRS Accounting Standards were adopted by
the Company in 2022. In addition, new IFRS Accounting
Standards amendments or interpretations that became
effective in 2022 did not have a material impact on the
Company’s consolidated financial statements.
Based on the Company’s assessment, there were no
IFRS Accounting Standards, amendments or interpreta-
tions not yet effective in 2022 that would have been
expected to have a material impact on the Company’s
consolidated financial statements.
Impact of adopting significant new
IFRS Accounting Standards in 2021
The following new IFRS Accounting Standard was
adopted by Novartis from January 1, 2021:
Interest Rate Benchmark Reform – Phase 2,
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and
IFRS 16 (Interest Benchmark Reform Amendments)
Interest Benchmark Reform Amendments became effec-
tive from January 1, 2021. These amendments address
issues that might affect financial reporting when an exist-
ing interest rate benchmark (i.e. Interbank offered rate –
IBOR) is replaced with an alternative benchmark inter-
est rate. The effects of interest rate benchmark reform
on the Company’s financial instruments and risk man-
agement strategies did not have a material impact on the
Company’s consolidated financial statements.
F-13
Notes to the Novartis consolidated financial statements
2. Significant transactions
The Company applied the acquisition method of account-
ing for businesses acquired, and did not elect to apply
the optional concentration test to account for acquired
business as an asset separately acquired.
Significant transactions in 2023
Completion of the spin-off of the Sandoz business
through a dividend in kind distribution to Novartis
AG shareholders
On July 18, 2023, Novartis announced that its Board of
Directors had unanimously endorsed the proposed sep-
aration of the Sandoz business to create an independent
company by way of a spin-off and to seek shareholder
approval for the spin-off of the Sandoz business into a
separately traded standalone company, following the
complete structural separation of the Sandoz business
into a standalone company (the Sandoz business or
Sandoz Group AG) and subject to the satisfaction of cer-
tain conditions and Novartis AG shareholders’ approval.
At the EGM held on September 15, 2023, Novartis AG
shareholders approved a special distribution by way of
a dividend in kind to effect the spin-off of Sandoz Group
AG, subject to the completion of certain conditions prec-
edent to the distribution. Upon shareholder approval, the
Sandoz business was reported as discontinued opera-
tions and the distribution liability was recognized at its
fair value, which exceeded the carrying value of the
Sandoz business net assets.
The conditions precedent to the spin-off were met
and on October 3, 2023 the spin-off of the Sandoz busi-
ness was effected by way of a distribution of a dividend
in kind of Sandoz Group AG shares to Novartis AG share-
holders and American Depositary Receipt (ADR) hold-
ers (the Distribution). Through the Distribution, each
Novartis AG shareholder received 1 Sandoz Group AG
share for every 5 Novartis AG shares and each Novartis
ADR holder received 1 Sandoz ADR for every 5 Novartis
ADR that they held at the close of business on October
3, 2023. As of October 4, 2023, the shares of Sandoz
Group AG have been listed on the SIX Swiss Exchange
(SIX) under the stock symbol “SDZ”.
On September 18, 2023, the Sandoz business entered
into financing arrangements with a group of banks under
which on September 28, 2023, it borrowed a total amount
of USD 3.3 billion. These borrowings consisted of a
bridge loan in EUR (EUR 2.4 billion) and term loans in
EUR (EUR 0.2 billion) and USD (USD 0.5 billion). In addi-
tion, the Sandoz business borrowed approximately USD
0.4 billion under a number of local bilateral facilities in
different countries. This resulted in a total gross debt of
USD 3.7 billion. These outstanding borrowings of the
Sandoz business legal entities were recognized in the
September 30, 2023 consolidated balance sheet within
Liabilities related to discontinued operations and within
financing activities cash flows from discontinued oper-
ations. Prior to the Distribution on October 3, 2023,
Sandoz business legal entities paid approximately USD
3.3 billion in cash to Novartis and its affiliates through a
series of intercompany transactions.
At the Distribution date on October 3, 2023, the div-
idend in kind distribution liability to effect the Distribu-
tion (spin-off) of the Sandoz business amounted to USD
14.0 billion, measured by reference to the October 4,
2023 opening Sandoz Group AG share price and apply-
ing a control premium. The dividend in kind distribution
liability was recorded as a reduction to equity (retained
earnings) and remained in excess of the then carrying
value of the Sandoz business net assets, which amounted
to USD 8.6 billion (see Note 31).
Certain consolidated foundations own Novartis AG
dividend-bearing shares that restricts their availability
for use by Novartis. These Novartis AG shares are
accounted for as treasury shares. Through the Distribu-
tion, these foundations received Sandoz Group AG
shares representing an approximate 4.31% equity inter-
est in Sandoz Group AG. Upon the loss of control of
Sandoz Group AG through the Distribution on October
3, 2023, the financial investment in Sandoz Group AG
was recognized at its initial fair value based on the open-
ing traded share price of Sandoz Group AG on October
4, 2023 (a Level 1 hierarchy valuation). At initial recogni-
tion, on October 4, 2023, the Sandoz Group AG finan-
cial investment had a fair value of USD 0.5 billion, and
was reported in the fourth quarter of 2023 on the con-
solidated balance sheet as a financial asset. Manage-
ment has designated this investment at fair value through
other comprehensive income.
The total non-taxable, non-cash gain recognized at
the Distribution date of the spin-off of the Sandoz busi-
ness amounted to USD 5.9 billion, which consists of:
(USD millions)
Net assets derecognized 1
Derecognition of distribution liability
Oct 3,
2023
– 8 647
13 962
Difference between net assets and distribution liability
5 315
Recognition of Sandoz Group AG shares
obtained through consolidated foundations
Currency translation gains recycled into
the consolidated income statement
Transaction costs and other items recognized in the
consolidated income statement
Gain on distribution of Sandoz Group AG to
Novartis AG shareholders
1 See Note 31 for additional information.
492
357
– 304
5 860
For additional disclosures on discontinued operations,
refer to Note 31.
Acquisition of DTx Pharma Inc.
In the second quarter of 2023, Novartis entered into an
agreement to acquire all outstanding shares of DTx
Pharma Inc. (DTx), a San-Diego, California US based,
pre-clinical stage biotechnology company focused on
leveraging its proprietary FALCON platform to develop
siRNA therapies for neuroscience indications. DTx’s lead
program, DTx-1252 targets the root cause of CMT1A—
the overexpression of PMP22, a protein that causes the
myelin sheath that supports and insulates nerves in the
peripheral nervous system to function abnormally. The
F-14
Notes to the Novartis consolidated financial statements
transaction also includes two additional pre-clinical pro-
grams for other neuroscience indications. The transac-
tion closed on July 14, 2023.
The purchase price consisted of a cash payment of
USD 0.6 billion and potential additional milestones of up
to USD 0.5 billion, which the DTx shareholders are eligi-
ble to receive upon the achievement of specified mile-
stones.
The fair value of the total purchase consideration was
USD 0.6 billion. The amount consisted of a cash payment
of USD 0.6 billion and the fair value of contingent con-
sideration of USD 30 million, which DTx shareholders are
eligible to receive upon the achievement of specified
milestones. The purchase price allocation resulted in net
identifiable assets of USD 0.4 billion, consisting primar-
ily of IPR&D intangible assets of USD 0.4 billion, cash of
USD 0.1 billion and net deferred tax liabilities of USD 0.1
billion. Goodwill amounted to USD 0.2 billion.
The results of operations since the date of acquisi-
tion were not material.
Acquisition of Chinook Therapeutics
On June 12, 2023, Novartis entered into an agreement
to acquire all outstanding shares of Chinook Therapeu-
tics, Inc. (Chinook Therapeutics), a Seattle, Washington
based clinical stage biopharmaceutical company with
two late-stage medicines in development for rare, severe
chronic kidney diseases. The acquisition closed on
August 11, 2023.
The purchase price consisted of a cash payment of
USD 3.2 billion and potential additional payments of up
to USD 0.3 billion, which Chinook Therapeutics share-
holders are eligible to receive upon the achievement of
specified milestones.
The fair value of the total purchase consideration was
USD 3.3 billion. The amount consisted of an upfront cash
payment of USD 3.2 billion and the fair value of contin-
gent consideration of USD 0.1 billion, which Chinook
Therapeutics shareholders are eligible to receive upon
achievement of specified milestones. The purchase price
allocation resulted in net identifiable assets of USD 2.4
billion, consisting primarily of IPR&D intangible assets of
USD 2.5 billion, net deferred tax liabilities of USD 0.4 bil-
lion and other net assets of USD 0.3 billion, including
cash of USD 0.1 billion. Goodwill amounted to USD 0.9
billion.
The results of operations since the date of acquisi-
tion were not material.
Significant transactions in 2022
Acquisition of Gyroscope Therapeutics Holdings
plc
On December 22, 2021, Novartis entered into an agree-
ment to acquire all outstanding shares of Gyroscope
Therapeutics Holdings plc (Gyroscope), a UK-based
ocular gene therapy company. Gyroscope focuses on
the discovery and development of gene therapy treat-
ments for retinal indications. The purchase price con-
sisted of a cash payment of USD 0.8 billion, subject to
certain customary purchase price adjustments, and
potential additional milestone payments of up to USD 0.7
billion, which Gyroscope shareholders are eligible to
receive upon the achievement of specified milestones.
The acquisition closed on February 17, 2022.
The fair value of the total purchase consideration was
USD 1.0 billion. The amount consisted of an upfront cash
payment of USD 0.8 billion (including customary pur-
chase price adjustments) and the fair value of contingent
consideration of USD 0.2 billion, which Gyroscope share-
holders are eligible to receive upon the achievement of
specified milestones. The purchase price allocation
resulted in net identifiable assets of USD 0.9 billion, con-
sisting primarily of IPR&D intangible assets of USD 1.1
billion and net deferred tax liabilities of USD 0.2 billion.
Goodwill amounted to USD 0.1 billion.
The 2022 results of operations since the date of
acquisition were not material.
Significant transactions in 2021
Divestment of the investment in Roche Holding AG
On November 3, 2021, Novartis entered into a Share
Repurchase Agreement with Roche Holding AG under
which Novartis agreed to sell 53.3 million (approximately
33.3%) bearer shares of Roche Holding AG voting shares
in a bilateral transaction to Roche Holding AG for a total
consideration of USD 20.7 billion. As a result, Novartis
discontinued the use of equity method accounting start-
ing from November 3, 2021.
The transaction closed on December 6, 2021.
Novartis realized a gain of USD 14.6 billion, recorded in
income from associated companies.
F-15
Notes to the Novartis consolidated financial statements
3. Operating segment
Prior to the September 15, 2023, shareholders’ approval
of the spin-off of the Sandoz business (refer to Note 1
and Note 2 for additional information), the businesses of
Novartis were divided operationally on a worldwide basis
into two identified reporting segments: Innovative
Medicines Division and the Sandoz Division. In addition,
we separately reported Corporate activities.
Following the September 15, 2023, shareholders’
approval of the spin-off of the Sandoz business (see Note
1 and Note 2), the Company reported its consolidated
financial statements for the current and prior years as
“continuing operations” and “discontinued operations”
(see Note 1).
Continuing operations include the retained business
activities of Novartis, comprising the innovative medicines
business (previously the Innovative Medicines Division)
and the continuing corporate activities.
Discontinued operations include the Sandoz generic
pharmaceuticals and biosimilars business (the Sandoz
Division) and certain corporate activities attributable to
Sandoz’s business, as well as certain expenses related
to the spin-off. Included in 2023 is also the IFRS Account-
ing Standards non-cash, non-taxable net gain on the Dis-
tribution of Sandoz Group AG to Novartis AG sharehold-
ers. For further details and disclosures on discontinued
operations, refer to Note 1, Note 2 and Note 31.
Effective January 1, 2023, the Sandoz business
bio-technology manufacturing services to other compa-
nies’ activities and the Coartem brand were transferred
to the Novartis continuing operations. The financial infor-
mation of the Novartis continuing operations and discon-
tinued operations were accordingly adapted in 2023 and
prior years, in compliance with IFRS Accounting
Standards. This restatement had no impact on the
reported financial results and consolidated balance
sheet of the total Company.
The Company’s continuing operations is engaged in
the research, development, manufacturing, distribution,
and commercialization and sale of innovative medicines,
with a focus on the core therapeutic areas: cardiovas-
cular, renal and metabolic; immunology; neuroscience;
oncology; and established brands.
Following the spin-off of the Sandoz business, on
October 3, 2023, Novartis operates as a single global
operating segment innovative medicines company that
is engaged in the research, development, manufactur-
ing, distribution and commercialization and sale of
innovative medicines. The Company’s research, devel-
opment manufacturing and supply of products and func-
tional activities are managed globally on a vertically inte-
grated basis. Commercial efforts that coordinate
marketing, sales and distribution of these products are
organized by geographic region, therapeutic area and
established brands.
The Executive Committee of Novartis (ECN), chaired
by the CEO, is the governance body responsible for allo-
cating resources and assessing the business perfor-
mance of the operating segment of the Company on a
global basis and is the chief operating decision-maker
(CODM) for the Company.
The determination of a single operating segment is
consistent with the financial information regularly
reviewed by the CODM for purposes of assessing per-
formance and allocating resources.
See Note 4 for revenues and geographic information
disclosures.
4. Revenues and geographic information
Net sales information
Net sales from continuing operations comprise the following:
(USD millions)
Net sales to third parties from continuing operations
Sales to discontinued operations
Net sales from continuing operations
2023
2022
2021
44 635
41 385
41 976
805
821
805
45 440
42 206
42 781
F-16
Notes to the Novartis consolidated financial statements
Geographic information
The following table shows countries that accounted for more than 5% of net sales from continuing operations or
more than 5% of total of selected non-current assets, for the years ended December 31, 2023, 2022 and 2021, and
for selected non-current assets for the years ended December 31, 2023 and 2022:
(USD millions)
Country
Switzerland
United States
Germany
China
Japan
France
Other
Total
Net sales from continuing operations1
Total of selected non-current assets2
2023
%
2022
%
2021
%
2023
%
2022
1 308
17 959
3 367
3 267
1 924
1 749
15 866
45 440
3
1 036
2
926
2
19 396
40
15 935
38
14 923
35
34 059
7
7
4
4
3 101
2 948
1 883
1 754
7
7
4
4
3 595
2 849
2 259
1 955
8
7
5
5
88
547
120
3 085
35
15 549
38
16 274
38
4 269
32
55
1
5
7
23 708
35 353
2 229
599
165
3 188
8 241
100
42 206
100
42 781
100
61 564
100
73 483
100
%
32
48
3
1
4
12
1 Net sales from continuing operations by location of customer
2 Total of property, plant and equipment; right-of-use assets; goodwill; intangible assets; investment in associated companies and other non-current assets excluding post-
employment benefit assets
Net sales from continuing operations by region1
The following table shows net sales from continuing operations by region for the years ended December 31, 2023,
2022 and 2021:
US
Europe
Asia/Africa/Australasia
Canada and Latin America
Total
Of which in established markets
Of which in emerging growth markets
2023
USD m
2022
USD m
Change
(2022
to 2023)
USD %
Change
(2021
to 2022)
USD %
2021
USD m
17 959
15 935
13
14 923
14 997
14 371
9 308
3 176
8 978
2 922
45 440
42 206
33 725
31 386
11 715
10 820
4
4
9
8
7
8
15 721
9 355
2 782
42 781
32 183
10 598
7
– 9
– 4
5
– 1
– 2
2
1 Net sales from continuing operations by location of customer. Emerging growth markets comprise all markets other than the established markets of the US, Canada, Western
Europe, Japan, Australia and New Zealand. Novartis definition of Western Europe includes Austria, Belgium, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg,
Malta, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.
Information about major customers
The Company’s largest, second-largest and third-largest
customers account for approximately 15%, 13% and 8%
of net sales from third parties from continuing operations,
respectively (2022: 16%, 12% and 8%, respectively; 2021:
14%, 13% and 7%, respectively).
The highest amounts of trade receivables outstanding
were for these same three customers and amounted to
approximately 17%, 13% and 8%, respectively, of the trade
receivables at December 31, 2023 (2022: 16%, 14% and
7%, respectively).
F-17
Notes to the Novartis consolidated financial statements
Net sales from continuing operations by core therapeutic area and established brands
Change
(2022 to
2023)
USD m 1 USD %
2022
Change
(2021 to
2021 2022)
USD m 1 USD %
2023
USD m
1 475
1 874
– 21
2 160 – 13
1 314
1 238
6
1 413 – 12
925
2 013
– 54
2 787 – 28
713
692
613
561
408
743
– 4
901 – 18
859
– 19
1 092 – 21
652
– 6
773 – 16
745
– 25
1 024 – 27
512
– 20
938 – 45
Exforge Group
Galvus Group
Diovan Group
Gleevec/Glivec
Afinitor/Votubia
Contract manufacturing 3 1 490
1 200
24
1 083
11
Other 3
5 427
6 113
– 11
7 091 – 14
Total established
brands 3
Total net sales
from continuing
operations
13 618 15 949
– 15 19 262 – 17
45 440 42 206
8 42 781
– 1
1 Reclassified to conform with the 2023 organizational structure.
2 Net sales from continuing operations reflect Xolair sales for all indications.
3 Effective January 1, 2023, the discontinued operations Sandoz business transferred
to Novartis continuing operations its bio-technology manufacturing services to other
companies’ activities (included in Contract manufacturing) and the Coartem brand
(included in Other). The financial information of the Novartis continuing operations
and discontinued operations were adapted accordingly in 2022 and 2021, in
compliance with IFRS Accounting Standards. See Note 3 for additional information.
Change
(2022 to
2023)
USD m 1 USD %
2022
Change
(2021 to
2021 2022)
USD m 1 USD %
2023
USD m
Cardiovascular, renal and metabolic
Established brands
Entresto
Leqvio
Other
6 035
4 644
30
3 548
355
112
217
1
nm
12
1
31
nm
nm
Lucentis
Sandostatin
Gilenya
Total cardiovascular,
renal and metabolic
6 391
4 756
34
3 561
34
Immunology
Cosentyx
Xolair 2
Ilaris
Other
4 980
4 788
1 463
1 365
4
7
4 718
1
1 428
– 4
1 355
1 133
20
1 059
1
nm
1
7
0
1
Total immunology
7 798
7 287
7
7 206
Neuroscience
Kesimpta
Zolgensma
Mayzent
Aimovig
Other
2 171
1 092
99
372 194
1 214
1 370
– 11
1 351
392
266
357
218
1
10
22
nm
281
215
1
1
27
1
0
Total neuroscience
4 043
3 038
33
2 220
37
Oncology
nm = not meaningful
Promacta/Revolade
2 269
2 088
9
2 016
Kisqali
2 080
1 231
69
937
Tafinlar + Mekinist
1 922
1 770
9
1 693
4
31
5
– 7
– 2
nm
– 1
– 9
13
nm
18
48
0
6
Tasigna
Jakavi
Pluvicto
Lutathera
Kymriah
Piqray/Vijoice
Scemblix
Votrient
Adakveo
Tabrecta
Other
1 848
1 923
– 4
2 060
1 720
1 561
10
1 595
980
605
508
505
413
390
195
154
1
271
471
536
373
149
262
28
– 5
35
177
475
587
329
7
474
– 18
577 – 18
194
133
2
1
16
nm
164
90
2
Total oncology
13 590 11 176
22 10 532
Total promoted
brands
31 822 26 257
21 23 519
12
F-18
Notes to the Novartis consolidated financial statements
Net sales from continuing operations of the top 20 brands in 2023
Brands
Entresto
Brand classification by
therapeutic area or
established brands
Cardiovascular,
renal and metabolic
Cosentyx
Immunology
Promacta/Revolade
Oncology
Kesimpta
Neuroscience
Kisqali
Oncology
Tafinlar + Mekinist
Oncology
Tasigna
Jakavi
Oncology
Oncology
Lucentis 1
Established brands
Xolair 2
Immunology
Ilaris
Immunology
Sandostatin
Established brands
Zolgensma
Neuroscience
Pluvicto
Gilenya 1
Exforge Group
Galvus Group
Diovan Group
Lutathera
Oncology
Established brands
Established brands
Established brands
Established brands
Oncology
Gleevec/Glivec
Established brands
Top 20 brands total
Rest of portfolio
Total net sales
from continuing
operations
Key indications
Chronic heart failure,
hypertension
Psoriasis (PsO),
ankylosing spondylitis
(AS), psoriatic arthritis
(PsA), non-radiographic
axial spondyloarthritis
(nr-axSPA), hidradenitis
suppurativa (HS)
Immune
thrombocytopenia (ITP),
severe aplastic anemia (SAA)
Relapsing-remitting
multiple sclerosis (RRMS)
HR+/HER2-
metastatic breast cancer
BRAF V600+ metastatic
adjuvant melanoma,
advanced non-small cell
lung cancer (NSCLC),
tumor agnostic with
BRAF mutation indication
Chronic myeloid leukemia
(CML)
Myelofibrosis (MF),
polycytomia vera (PV),
graft-versus-host disease
(GvHD)
Age-related
macular degeneration (AMD),
diabetic macular edema (DME),
retinal vein occlusion (RVO)
Severe allergic asthma (SAA),
chronic spontaneous urticaria
(CSU), nasal polyps
Auto-inflammatory (CAPS,
TRAPS, HIDS/MKD, FMF,
SJIA, AOSD, gout)
Carcinoid tumors,
acromegaly
Spinal muscular atrophy
(SMA)
PSMA-positive mCRPC patients
post-ARPI, post-Taxane
Relapsing multiple sclerosis
(RMS)
Hypertension
Type 2 diabetes
Hypertension
GEP-NETs
gastroenteropancreatic
neuroendocrine tumors
Chronic myeloid
leukemia (CML),
gastrointestinal stromal
tumors (GIST)
US
USD m
Rest of
world
USD m
Total
USD m
3 067
2 968
6 035
2 636
2 344
4 980
1 205
1 064
2 269
1 528
643
2 171
1 032
1 048
2 080
791
1 131
1 922
884
964
1 848
1 720
1 720
1 475
1 475
1 463
1 463
686
669
1 355
829
485
1 314
372
842
1 214
921
59
980
359
566
925
13
52
427
700
692
561
178
713
692
613
605
150
411
561
14 952
19 983
34 935
3 007
7 498
10 505
17 959
27 481
45 440
1 In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
2 Net sales from continuing operations reflect Xolair sales for all indications.
F-19
Notes to the Novartis consolidated financial statements
Net sales from continuing operations of the top 20 brands in 2022
Brands
Cosentyx
Entresto
Brand classification by
therapeutic area or
established brands 1
Immunology
Key indications
Psoriasis (PsO), ankylosing
spondylitis (AS),
psoriatic arthritis (PsA),
non-radiographic axial
spondyloarthritis (nr-axSPA)
Cardiovascular, renal
and metabolic
Chronic heart failure,
hypertension
Promacta/Revolade
Oncology
Immune thrombocytopenia (ITP),
severe aplastic anemia (SAA)
Established brands
Relapsing multiple sclerosis (RMS)
Gilenya 2
Tasigna
Lucentis 2
Oncology
Established brands
Chronic myeloid leukemia (CML)
Age-related
macular degeneration (AMD),
diabetic macular edema (DME),
retinal vein occlusion (RVO)
BRAF V600+ metastatic
adjuvant melanoma,
advanced non-small cell
lung cancer (NSCLC),
tumor agnostic with
BRAF mutation indication
Myelofibrosis (MF),
polycytomia vera (PV),
graft-versus-host disease
(GvHD)
HR+/HER2-
metastatic breast cancer
Auto-inflammatory (CAPS,
TRAPS, HIDS/MKD, FMF,
SJIA, AOSD, gout)
Relapsing-remitting
multiple sclerosis (RRMS)
Type 2 diabetes
Chronic myeloid leukemia
(CML), gastrointestinal
stromal tumors (GIST)
Hypertension
Hypertension
r/r pediatric and young
adults acute lymphoblastic
leukemia (ALL), diffuse large
B-cell lymphoma (DLBCL)
follicular lymphoma (FL)
Breast cancer/
tuberous sclerosis complex (TSC)
Tafinlar + Mekinist
Oncology
Jakavi
Oncology
Ilaris
Immunology
Kesimpta
Neuroscience
Galvus Group
Gleevec/Glivec
Established brands
Established brands
Exforge Group
Diovan Group
Kymriah
Established brands
Established brands
Oncology
Afinitor/Votubia
Established brands
Top 20 products total
Rest of portfolio 4
Total net sales
from continuing
operations 4
US
USD m
Rest of
world
USD m
Total
USD m
2 770
2 018
4 788
2 354
2 290
4 644
1 083
1 005
2 088
1 153
860
877
1 046
1 874
2 013
1 923
1 874
678
1 092
1 770
1 561
1 561
800
472
438
759
1 238
1 231
570
563
1 133
921
171
1 092
205
14
55
196
859
540
729
597
340
859
745
743
652
536
171
341
512
12 753
19 384
32 137
3 182
6 887
10 069
15 935
26 271
42 206
Zolgensma
Xolair 3
Sandostatin
Kisqali
Neuroscience
Immunology
Spinal muscular atrophy (SMA)
434
936
Severe allergic asthma (SAA),
chronic spontaneous urticaria
(CSU), nasal polyps
1 365
1 370
1 365
Established brands
Carcinoid tumors, acromegaly
Oncology
1 Brand classifications have been changed to conform with the 2023 brand classifications.
2 In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
3 Net sales from continuing operations reflect Xolair sales for all indications.
4 Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were
transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022, in
compliance with IFRS Accounting Standards. See Note 3 for additional information.
F-20
Key indications
Psoriasis (PsO), ankylosing
spondylitis (AS),
psoriatic arthritis (PsA),
non-radiographic axial
spondyloarthritis (nr-axSPA)
Chronic heart failure
US
USD m
Rest of
world
USD m
Total
USD m
2 883
1 835
4 718
1 712
1 836
3 548
Relapsing multiple sclerosis (RMS)
1 427
1 360
Notes to the Novartis consolidated financial statements
Net sales from continuing operations of the top 20 brands in 2021
Brands
Cosentyx
Entresto
Gilenya 2
Lucentis 2
Tasigna
Promacta/Revolade
Brand classification by
therapeutic area or
established brands 1
Immunology
Cardiovascular, renal
and metabolic
Established brands
Established brands
Oncology
Oncology
Tafinlar + Mekinist
Oncology
Jakavi
Xolair 3
Oncology
Immunology
Sandostatin
Established brands
Zolgensma
Neuroscience
Age-related macular
degeneration (AMD)
Chronic myeloid leukemia (CML)
Immune
thrombocytopenia (ITP),
severe aplastic anemia (SAA)
BRAF V600+ metastatic
adjuvant melanoma,
advanced non-small cell
lung cancer (NSCLC)
Myelofibrosis (MF),
polycythemia vera (PV)
Severe allergic asthma (SAA),
chronic spontaneous urticaria
(CSU), nasal polyps
Carcinoid tumors,
acromegaly
Spinal muscular atrophy
(SMA)
Galvus Group
Established brands
Type 2 diabetes
Ilaris
Immunology
Gleevec/Glivec
Established brands
Afinitor/Votubia
Established brands
Kisqali
Oncology
Exforge Group
Diovan Group
Kymriah
Established brands
Established brands
Oncology
Ultibro Group
Established brands
Top 20 products total
Rest of portfolio 4
Total net sales
from continuing
operations 4
Auto-inflammatory (CAPS,
TRAPS, HIDS/MKD, FMF,
SJIA, AOSD gout)
Chronic myeloid leukemia (CML),
gastrointestinal stromal tumors (GIST)
Breast cancer/
tuberous sclerosis complex (TSC)
HR+/HER2-
metastatic breast cancer
Hypertension
Hypertension
r/r pediatric and young
adults acute lymphoblastic
leukemia (ALL), diffuse large
B-cell lymphoma (DLBCL)
Chronic obstructive
pulmonary disease
(COPD)
2 160
882
947
1 178
1 069
2 787
2 160
2 060
2 016
606
1 087
1 693
1 595
1 595
1 428
1 428
843
570
1 413
469
882
1 351
1 092
501
558
1 092
1 059
263
761
1 024
521
417
938
339
598
937
14
51
230
887
722
357
901
773
587
584
584
11 688
20 976
32 664
3 235
6 882
10 117
14 923
27 858
42 781
1 Brand classifications have been changed to conform with the 2023 brand classifications.
2 In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
3 Net sales from continuing operations reflect Xolair sales for all indications.
4 Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were
transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2021, in
compliance with IFRS Accounting Standards. See Note 3 for additional information.
F-21
Notes to the Novartis consolidated financial statements
Other revenues
(USD millions)
Profit-sharing income
Royalty income
Milestone income
Other 1
Total other revenues
2023
941
87
45
147
2022
921
35
145
154
2021
873
85
127
108
1 220
1 255
1 193
1 Other includes revenue from activities such as manufacturing or other services rendered, to the extent such revenue is not recorded under net sales to third parties.
5. Associated companies
Net income statement effect
Other comprehensive income effect 1
Total comprehensive income effect
(USD millions)
2023
2022
2021
2023
2022
2021
2023
2022
2021
Roche Holding AG, Switzerland
15 341
Others
Associated companies
– 13
– 13
– 11
– 4
– 11
15 337
46
46
15 387
– 13
– 13
– 11
– 4
– 11
15 383
1 In 2021, Novartis share of other comprehensive income recognized by associated companies, net of taxes of USD 3 million was recycled into the consolidated income statement as
a result of the divestment of the investment in Roche Holding AG. No Novartis share of other comprehensive income recognized by associated companies was recycled to the
consolidated income statement in 2023 and 2022.
Novartis has certain non-significant investments and had
a significant investment in Roche Holding AG, Basel
(Roche), which was divested to Roche on December 6,
2021, that are accounted for as associated companies.
Roche Holding AG
On November 3, 2021, Novartis entered into an agree-
ment with Roche Holding AG to divest its 33.3% of Roche
Holding AG (Roche) voting shares, representing approx-
imately 6.2% of Roche’s total outstanding voting and
non-voting equity instruments, to Roche for USD 20.7
billion in cash. As a result, Novartis discontinued the use
of equity method accounting starting from November 3,
2021.
The divestment transaction closed on December 6,
2021, and Novartis realized a gain of USD 14.6 billion,
recorded in income from associated companies. For
more information, see Note 2.
Since full-year financial data for Roche is not avail-
able when Novartis produces its consolidated financial
results, a survey of analyst estimates is used to estimate
the Company’s share of Roche’s net income. Any differ-
ences between these estimates and actual results were
adjusted in the Company’s consolidated financial state-
ments when available. As Novartis discontinued the use
of equity method accounting starting from November 3,
2021, and the divestment closed on December 6, 2021,
no such adjustment has been made to the 2023 and
2022 Company’s consolidated financial statements.
The consolidated income statement effects from
applying Novartis accounting principles for this invest-
ment in 2021 are as follows:
(USD millions)
Novartis share of Roche’s
estimated current-year
consolidated net income
Prior-year adjustment
Amortization of fair value
adjustments relating to
intangible assets, net of taxes
of USD 10 million
Gain on divestment of the
investment in Roche 1
Net income effect
2021
815
40
– 70
14 556
15 341
1 The gain on divestment of the investment in Roche includes the recycling of currency
translation effects (see Note 9.1) and other comprehensive income effects totaling
USD 3.2 billion.
F-22
Notes to the Novartis consolidated financial statements
6. Interest expense
and other financial income and expense
Interest expense
Other financial income and expense
(USD millions)
Interest expense
2023
– 730
Interest expense on lease liabilities
– 62
2022
– 642
– 57
2021
(USD millions)
– 633
Interest income
– 59
Other financial income
Expense arising from
discounting long-term liabilities
and capitalized borrowing costs
Total interest expense
from continuing operations
– 63
– 101
– 95
– 855
– 800
– 787
Monetary loss from hyperinflation
accounting
Financial expense
Currency result, net
Total other financial income
and expense from
continuing operations
2023
627
21
– 194
– 18
– 214
2022
377
19
– 137
– 33
– 184
2021
70
12
– 48
– 41
– 69
222
42
– 76
7. Income taxes
Income before taxes
(USD millions)
Switzerland 1
Foreign 2
2023
9 719
– 596
2022
2021
5 751
21 830
1 426
2 700
Income before taxes from
continuing operations
9 123
7 177
24 530
1 The 2021 income before taxes from continuing operations in Switzerland includes a
USD 14.6 billion non-taxable gain on the divestment of the Company’s investment in
Roche Holding AG (see Note 2 and Note 5).
2 The 2023 foreign income before taxes from continuing operations is impacted by
non-recurring events, including impairment charges on intangible assets other than
goodwill.
Current and deferred income tax expense
The significant components of the provision for income
taxes from continuing operations are as follows:
different statutory tax rates in those tax jurisdictions. As
a result, there is a difference between our applicable tax
rate and effective tax rate.
The applicable tax rate changes from year to year
due to changes in the mix of the Company’s pre-tax
income and changes in statutory tax rates since it is
calculated as the weighted average tax rate based on
the pre-tax income of each subsidiary.
The main elements contributing to the difference
between the Company’s overall applicable tax rate and
the effective tax rate are shown in the following table:
(As a percentage)
Applicable tax rate
2023
2022
2021
15.0 15.3 14.2
Effect of disallowed expenditures
1.4
2.6
1.0
Effect of income taxed at reduced rates
– 0.6 – 0.4 – 0.1
Effect of income not subject to tax 1
– 2.5 – 0.1 – 7.9
Effect of tax credits and allowances
– 3.9 – 4.1 – 1.5
Effect of release of
contingent consideration liability
– 0.3 – 0.5 – 0.1
(USD millions)
Switzerland
Foreign
2023
– 1 136
2022
– 598
– 1 290
– 1 155
2021
– 949
– 973
Current income tax expense
– 2 426
– 1 753
– 1 922
Effect of tax rate change
on current and deferred
tax assets and liabilities
Effect of derecognition and
reversals of derecognition
of deferred tax assets
– 1.6
0.0
0.0
0.9
1.3
0.0
Switzerland
Foreign
Deferred tax income
Income tax expense from
continuing operations
355
– 131
1 520
1 875
756
625
39
258
297
Effect of write-down of investments
in subsidiaries
Effect of prior-year items
– 3.0
0.0
0.0 – 0.3
– 551
– 1 128
– 1 625
Effect of changes in uncertain tax positions
Effect of other items
Effective tax rate from
continuing operations
0.1
0.5
1.7
0.2 – 0.1
6.0 15.7
6.6
0.0
0.1
1.0
Analysis of tax rate
Novartis has a substantial business presence in many
countries and is therefore subject to income taxes in dif-
ferent tax jurisdictions. This leads to differences in
income and expense items that are non-taxable or
non-deductible (permanent differences) or are taxed at
1 2021 includes the effect of income not subject to tax (– 7.7%) arising from the
non-taxable gain on the divestment of our investment in Roche. See Notes 2 and 5 for
further details.
The effective tax rate of Novartis fluctuates primarily as
a result of, among other factors, changes in pre-tax
F-23
Notes to the Novartis consolidated financial statements
income between countries with varying statutory tax
rates and the effects of disallowed expenditures, income
not subject to tax, tax credits and allowances, tax rate
changes on current and deferred tax assets and liabili-
ties, write-down of investments in subsidiaries, and
changes in uncertain tax positions. The table above pro-
vides the details of the significant items that impact the
comparability of the effective tax rate between years.
In December 2021, the OECD issued model rules for
a new global minimum tax framework (Pillar Two).
Novartis is within the scope of the OECD Pillar Two model
rules. A number of governments in countries in which
Novartis operates are in the process of enacting or have
enacted tax legislation to comply with Pillar Two. Of the
major countries in which we operate, only the enactment
of Pillar Two tax legislation in Switzerland is expected to
have an impact to our income tax provision as from 2024.
In December 2023, Switzerland decided to partially
implement Pillar Two, whereby effective from January 1,
2024, a 15% minimum taxation will be assessed on Pillar
Two qualifying profits earned by companies domiciled in
Switzerland (Qualified Domestic Minimum Top-Up
Tax). This Qualified Domestic Minimum Top-Up Tax will
not be applied to the Pillar Two qualifying profits earned
by a company’s affiliates domiciled in tax jurisdictions
outside of Switzerland. The timing of implementation and
the specific provisions of any further Pillar Two tax reg-
ulations in Switzerland remains subject to further assess-
ments at both the Federal and Cantonal levels. The Com-
pany estimates that the impact of these changes to tax
legislation in the respective countries that have (substan-
tively) enacted Pillar Two tax legislation in 2023 would
not be material to our consolidated financial position,
income statement and cash flows.
8. Earnings per share
Net income attributable to shareholders of Novartis AG (USD millions)
- Continuing operations
- Discontinued operations
Net income attributable to shareholders of Novartis AG (USD millions)
Number of shares (in millions)
2023
2022
2021
8 568
6 282
6 049
22 908
906
1 113
14 850
6 955
24 021
Weighted average number of shares outstanding used in basic earnings per share
2 077
2 181
2 243
Adjustment for vesting of restricted shares, restricted share units and dilutive shares from options
15
16
17
Weighted average number of shares in diluted earnings per share
2 092
2 197
2 260
Basic earnings per share (USD)
- Continuing operations
- Discontinued operations
Total basic earnings per share (USD)
Diluted earnings per share (USD)
- Continuing operations
- Discontinued operations
Total diluted earnings per share (USD)
4.13
3.02
7.15
4.10
3.00
7.10
2.77
0.42
3.19
2.76
0.41
3.17
10.22
0.49
10.71
10.14
0.49
10.63
Basic earnings per share (EPS) is calculated by dividing
net income attributable to shareholders of Novartis AG
by the weighted average number of shares outstanding
in a reporting period. This calculation excludes the aver-
age number of issued shares purchased by the Com-
pany and held as treasury shares.
For diluted EPS, the weighted average number of
shares outstanding is adjusted to assume the vesting of
all restricted shares, restricted share units, and in 2022
and 2021 the conversion of all potentially dilutive shares
arising from options on Novartis shares that have been
issued. At December 31, 2023, there were no options on
Novartis shares issued or outstanding.
No options were excluded from the calculation of
diluted EPS in 2022 or 2021, as all options were dilutive
in both years.
F-24
Notes to the Novartis consolidated financial statements
9. Changes in consolidated statements
of comprehensive income
The consolidated statements of comprehensive income
include the Company’s net income for the year as well as
all other valuation adjustments recorded in the Company’s
consolidated balance sheet, which under IFRS Account-
ing Standards are not recorded in the consolidated income
statement. These include fair value adjustments on finan-
cial instruments, actuarial gains or losses on defined ben-
efit pension plans, and currency translation effects, all net
of taxes.
(USD millions)
Fair value
Actuarial
adjustments gains/(losses)
on financial
from defined
instruments benefit plans
Note
Cumulative
Total value
adjustments
currency attributable to
translation Novartis AG
effects shareholders
Non-
controlling
interest
Total value
adjustments
Value adjustments at December 31, 2020
220
– 5 773
4 134
– 1 419
– 29
– 1 448
Fair value adjustments on equity securities,
net of taxes of USD -44 million 1
Net investment hedge, net of taxes
of USD 33 million
Defined benefit plans, net of taxes
of USD -323 million
Currency translation effects,
net of taxes of USD 17 million
Total value adjustments in 2021
Fair value adjustments on equity securities
sold, reclassified to retained earnings
net of taxes of USD 48 million
Value adjustments related to divestments
Value adjustments at December 31, 2021
Fair value adjustments on equity securities,
net of taxes of USD 81 million 1
Net investment hedge, net of taxes
of USD -30 million
Defined benefit plans, net of taxes
of USD -104 million
Currency translation effects,
net of taxes of USD 18 million
Total value adjustments in 2022
Fair value adjustments on equity securities
sold, reclassified to retained earnings
net of taxes of nil
Value adjustments related to divestments,
net of taxes of USD -4 million
194
194
216
216
194
216
1 808
1 808
1
1 809
9.1
– 4 757
– 4 757
194
1 808
– 4 541
– 2 539
– 5
– 4
– 4 762
– 2 543
– 164
– 62
188
– 382
– 3
– 164
– 65
– 164
– 65
– 3 968
– 407
– 4 187
– 33
– 4 220
– 382
91
91
– 382
91
– 104
– 104
1
– 103
9.1
– 382
– 104
– 444
– 353
– 444
– 839
– 6
– 5
– 450
– 844
– 4
34
– 4
34
– 4
34
Value adjustments at December 31, 2022
– 198
– 4 038
– 760
– 4 996
– 38
– 5 034
Fair value adjustments on equity securities
net of taxes of USD -6 million 1
Net investment hedge, net of taxes
of USD 19 million
Defined benefit plans, net of taxes
of USD 16 million
Currency translation effects,
net of taxes of USD -6 million
Total value adjustments in 2023
Fair value adjustments on equity securities
sold, reclassified to retained earnings
net of taxes of USD -7 million
Value adjustments related to divestments,
net of taxes of USD -4 million
37
37
– 50
– 50
– 160
9.1
37
– 160
1 373
1 323
1
2
27
– 160
1 373
1 200
1
29
37
– 50
– 160
1 375
1 202
1
29
2
2
Value adjustments at December 31, 2023
– 158
– 4 171
563
– 3 766
– 36
– 3 802
1 Includes fair value adjustments on equity securities designated as financial assets valued at fair value through other comprehensive income with no subsequent recycling into the
consolidated income statement
F-25
Notes to the Novartis consolidated financial statements
9.1) In 2023, net cumulative currency translation gains of
USD 358 million were recycled through the income state-
ment, consisting of USD 357 million as a result of the
spin-off of the Sandoz business through a dividend in
kind distribution to Novartis AG shareholders (see Note
2), and of USD 1 million as a result of the divestment of
subsidiaries.
In 2022, net cumulative currency translation gains of
USD 13 million were recycled through the income state-
ment as a result of the divestments of subsidiaries.
In 2021, net cumulative currency translation gains of
USD 3.2 billion were recycled through the income state-
ment as a result of the divestment of the investment in
Roche. See Notes 2 and 5.
10. Property, plant and equipment
The following table summarizes the movements of property, plant and equipment during 2023:
(USD millions)
At January 1, 2023
Cost
Land
Buildings
Construction
in progress
Machinery
and other
equipment
Total
451
11 396
1 184
11 842
24 873
Accumulated depreciation and impairment
– 9
– 5 903
– 27
– 8 170
– 14 109
Net book value
At January 1, 2023
Costs and accumulated depreciation/impairments
on assets related to discontinued operations 1
Impact of acquisitions of businesses
Reclassifications
Additions
Disposals and derecognitions
Depreciation charge
Impairment charge
Reversal of impairment charge
Currency translation effects
At December 31, 2023
At December 31, 2023
Cost
442
5 493
1 157
3 672
10 764
442
5 493
1 157
3 672
10 764
– 54
– 422
– 280
– 588
– 1 344
12
197
85
– 261
– 343
– 36
9
162
1
– 420
734
– 20
– 10
44
5
223
245
– 63
– 573
– 57
4
146
18
1 065
– 360
– 916
– 106
16
377
1
– 16
– 3
3
25
398
4 896
1 206
3 014
9 514
403
10 147
1 213
9 630
21 393
Accumulated depreciation and impairment
– 5
– 5 251
– 7
– 6 616
– 11 879
Net book value
398
4 896
1 206
3 014
9 514
Commitments for purchases of property, plant and equipment
Capitalized borrowing costs
744
3
1 Represents the cost of assets and accumulated depreciation/impairments at January 1, 2023, related to the Sandoz business reported as discontinued operations, and the net
transfers between discontinued and continuing operations from January 1, 2023 to October 3, 2023. Note 31 provides disclosure of discontinued operations additions, depreciation
charge, impairment charge and reversals of impairment change.
F-26
Notes to the Novartis consolidated financial statements
The following table summarizes the movements of property, plant and equipment during 2022:
(USD millions)
At January 1, 2022
Cost
Land
Buildings
Construction
in progress
Machinery
and other
equipment
Total
492
11 819
1 508
13 328
27 147
Accumulated depreciation and impairment
– 7
– 5 744
– 65
– 9 786
– 15 602
Net book value
485
6 075
1 443
3 542
11 545
At January 1, 2022
Impact of acquisitions of businesses
Reclassifications
Additions 1
Disposals and derecognitions
Depreciation charge 2
Impairment charge 2
Reversal of impairment charge 2
Currency translation effects
At December 31, 2022
At December 31, 2022
Cost
485
6 075
1 443
3 542
11 545
3
– 28
– 7
1
– 12
442
297
124
– 49
– 437
– 351
– 166
5 493
– 964
780
– 33
– 13
1
– 57
13
667
312
– 45
13
1 219
– 155
– 726
– 1 163
– 43
– 414
5
7
– 53
– 288
1 157
3 672
10 764
451
11 396
1 184
11 842
24 873
Accumulated depreciation and impairment
– 9
– 5 903
– 27
– 8 170
– 14 109
Net book value
442
5 493
1 157
3 672
10 764
Commitments for purchases of property, plant and equipment
Capitalized borrowing costs
549
5
1 Additions in continuing operations were USD 930 million. Note 31 provides disclosure of discontinued operations additions.
2 Note 31 provides disclosure of discontinued operations depreciation charge, impairment charge and reversals of impairment charge.
Government grants obtained for construction activities,
including any related equipment, are deducted from the
gross acquisition cost to arrive at the balance sheet car-
rying value of the related assets.
Property, plant and equipment is assessed for impair-
ment whenever there is an indication that the balance
sheet carrying amount may not be recoverable using
cash flow projections over the useful life.
Property, plant and equipment is depreciated on a
straight-line basis in the consolidated income statement
over the estimated useful life of the individual asset. The
related depreciation expense is included in the costs of
the functions using the asset.
The following table shows the property, plant and
equipment depreciation charge, impairment charge and
reversals of impairment charge for continuing operations
for the years ended December 31, 2023, 2022 and 20211:
The following table shows the estimated useful life
(USD millions)
by major categories for property, plant and equipment:
Buildings
Machinery and other equipment
Machinery and equipment
Furniture and vehicles
Computer hardware
Useful life
20 to 40 years
7 to 20 years
5 to 10 years
3 to 7 years
Depreciation charge
Impairment charge
Impairment reversals
2023
– 916
– 106
16
2022
2021
– 967
– 1 005
– 411
– 316
4
44
1 Note 31 provides disclosure of discontinued operations depreciation charge,
impairment charge and reversals of impairment charge.
F-27
Notes to the Novartis consolidated financial statements
11. Right-of-use assets and lease liabilities
The Company recognizes a right-of-use asset and a cor-
responding lease liability for all arrangements in which
it is a lessee, except for leases with a term of 12 months
or less (short-term leases) and low-value leases. For
these short-term and low-value leases, the Company
recognizes the lease payments as an operating expense
on a straight-line basis over the term of the lease. The
Company allocates the consideration in the lease con-
tract to the lease and non-lease components on the basis
of the relative standalone price of each component.
The portion of the lease payments attributable to the
repayment of lease liabilities is recognized in cash flows
used in financing activities, and the portion attributable
to the payment of interest is included in cash flows from
operating activities.
Right-of-use assets are depreciated on a straight-line
basis from the commencement date of the lease over
the shorter of the useful life of the right-of-use asset or
the end of the lease term.
Right-of-use assets are assessed for impairment
whenever there is an indication that the balance sheet
carrying amount may not be recoverable using cash flow
projections for the useful life.
The following table summarizes the movements of the right-of-use assets:
(USD millions)
Right-of-use assets at January 1
Costs and accumulated depreciation/impairments
on assets related to discontinued operations 1
Impact of acquisitions of businesses
Additions 2
Depreciation charge
Impairment charge 3
Lease contract terminations 4
Currency translation effects
Total right-of-use assets at December 31
2023
1 431
– 117
16
421
2022
1 561
12
247
– 259
– 300
– 4
– 93
15
– 3
– 34
– 52
1 410
1 431
1 Represents the cost of assets and accumulated depreciation/impairments at January 1, 2023, related to the Sandoz business reported as discontinued operations, and the net
transfers between discontinued and continuing operations from January 1, 2023 to October 3, 2023. Note 31 provides disclosure of discontinued operations additions, depreciation
charge, impairment charge and reversals of impairment change.
2 Additions in continuing operations were USD 216 million in 2022.
3 Impairment charge in continuing operations was USD 3 million in 2022 and nil in 2021.
4 Lease contract terminations also includes modifications to existing leases that result in reductions to the right-of-use assets, and reductions due to sub-leasing.
The following table shows the right-of-use assets carrying value at December 31, 2023 and 2022, and the continu-
ing operations depreciation charge for years 2023, 2022 and 2021, by underlying class of asset1:
December 31, December 31, Depreciation Depreciation Depreciation
charge
2021
2022
carrying value carrying value
charge
2022
charge
2023
2023
483
749
112
505
745
117
12
156
80
16
162
82
11
174
89
66
64
11
7
5
1 410
1 431
259
267
279
(USD millions)
Land
Buildings
Vehicles
Machinery and
equipment, and
other assets
Total right-of-use
assets
1 Note 31 provides disclosure of discontinued operations depreciation charge.
F-28
Notes to the Novartis consolidated financial statements
The following table shows the lease liabilities by maturity at December 31, 2023 and 2022:
(USD millions)
Less than one year
Between one and two years
Between two and three years
Between three and four years
Between four and five years
After five years
Total lease liabilities
Less current portion of lease liabilities
Non-current portion of lease liabilities
Commitments for leases not yet commenced
Lease liabilities
Lease liabilities
Lease liabilities undiscounted Lease liabilities undiscounted
2022
2022
2023
2023
230
203
170
149
113
963
1 828
– 230
1 598
284
248
211
184
142
2 173
3 242
– 284
2 958
89
251
190
167
137
122
922
1 789
– 251
1 538
297
232
201
172
154
2 149
3 205
– 297
2 908
83
At December 31, 2023, and December 31, 2022, there
were no material future cash outflows, including exten-
sion options, excluded from the measurement of lease
liabilities. The Company’s most material lease with a
lease term extension, representing a lease liability value
of USD 0.7 billion (2022: USD 0.7 billion), has a deter-
mined lease term end date of 2071 (2022: 2071). Non-en-
forceable extension options of up to 10 years have not
been included within the measurement of this lease lia-
bility, and do not have a material impact to the carrying
value of the lease for both 2023 and 2022. Should the
landlord agree to a lease extension, rent will be refer-
enced to the market rates as at the commencement of
the extension period.
In 2023, the Company completed two sale and lease-
back transactions for certain property, plant and equip-
ment as part of the Company’s strategy. The transac-
tions resulted in net cash inflows of USD 273 million
(2022: USD 49 million) and the recognition of USD 146
million of lease liabilities(2022: USD 23 million), and USD
109 million of right-of-use assets (2022: USD 13 million).
The right-of-use assets value reflects the proportion of
the property, plant and equipment retained. Extension
options have been included where management believe
that such options will be exercised. The liabilities reflect
the net present value of future lease payments. The net
gain on the sale and leaseback transactions amounted
to USD 18 million (2022: USD 17 million). There were no
significant sale and leaseback transactions in 2021.
The following table provides additional disclosures
related to continuing operations right-of-use assets and
lease liabilities for 2023, 2022 and 2021:
(USD millions)
2023
Interest expense on lease liabilities 1
62
Expense on short-term leases
Expense on low-value leases
5
6
2022
57
3
6
2021
59
6
7
Total cash outflows for leases
321
319
339
Thereof:
Cash outflows for short-term leases
and low-value leases 2
Payments of interest 3
11
52
Payments of lease liabilities 4
258
9
48
262
13
48
278
1 The weighted average interest rate is 3.5% (2022: 3.3%, 2021: 3.2%). Interest on lease
liabilities as at December 31, 2023, is estimated to be USD 54 million for 2024 and
USD 1.4 billion thereafter.
2 Cash flows from short-term and low-value leases are included within total net cash
flows from operating activities. The portfolio of short-term leases to which the
Company is committed to at December 31, 2023, 2022 and 2021, is similar to the
portfolio of short-term leases the Company entered into during 2023, 2022 and 2021.
3 Included within total net cash flows from operating activities
4 Reported as cash outflows in financing activities net of lease incentives received, if
any.
The net investment held and income from subleasing
right-of-use assets were not significant for 2023, 2022,
and 2021. Income from leasing Novartis property, plant
and equipment to third parties for 2023, 2022 and 2021
was not significant.
12. Goodwill and intangible assets other than goodwill
Novartis has the following classes of available for use
intangible assets other than goodwill: Currently mar-
keted products and Other intangible assets.
Currently marketed products represent the compos-
ite value of acquired intellectual property (IP), patents,
distribution rights and product trade names.
Other intangible assets include capitalized internally
developed and acquired computer software and tech-
nologies, which represent identified and separable
acquired know- how used in research, development, and
production.
F-29
Notes to the Novartis consolidated financial statements
The following table summarizes the movements of goodwill and intangible assets other than goodwill in 2023:
Goodwill
Intangible assets other than goodwill
(USD millions)
At January 1, 2023
Cost
Accumulated amortization and impairment
Net book value
At January 1, 2023
Costs and accumulated amortization/impairments
on assets related to discontinued operations 1
Impact of acquisitions of businesses
Reclassifications
Additions
Disposals and derecognitions 2
Amortization charge
Impairment charge
Currency translation effects
At December 31, 2023
At December 31, 2023
Cost
Accumulated amortization and impairment
Net book value
In-process
Currently
research and marketed
products
Total development
Other
intangible
assets
Total
29 596
7 092
58 249
4 343
69 684
– 295
– 2 671 – 32 736
– 2 633 – 38 040
29 301
4 421
25 513
1 710
31 644
29 301
4 421
25 513
1 710
31 644
– 7 445
– 235
– 1 026
– 199
– 1 460
1 094
2 931
– 235
770
15
2 946
23
290
212
516
1 576
– 1 842
– 3
– 1 845
– 3 319
– 641
– 3 960
– 2 544
– 310
– 194
– 3 048
391
221
688
117
1 026
23 341
5 329
20 017
1 533
26 879
23 391
7 822
46 909
3 588
58 319
– 50
– 2 493 – 26 892
– 2 055 – 31 440
23 341
5 329
20 017
1 533
26 879
1 Represents the cost of assets and accumulated depreciation/impairments at January 1, 2023, related to the Sandoz business reported as discontinued operations, and the net
transfers between discontinued and continuing operations from January 1, 2023 to October 3, 2023. Note 31 provides disclosure of discontinued operations additions, depreciation
charge, impairment charge and reversals of impairment change.
2 Derecognition of assets that are no longer being used or developed and are not considered to have a significant disposal value or other alternative use. Disposals include the
divested currently marketed product Xiidra.
The following table summarizes the movements of goodwill and intangible assets other than goodwill in 2022:
Goodwill
Intangible assets other than goodwill
(USD millions)
At January 1, 2022
Cost
Accumulated amortization and impairment
Net book value
At January 1, 2022
Impact of acquisitions of businesses
Reclassifications 1
Additions 2
Disposals and derecognitions 3
Amortization charge 4
Impairment charge 4
Currency translation effects
At December 31, 2022
At December 31, 2022
Cost
Accumulated amortization and impairment
Net book value
In-process
Currently
research and marketed
products
Total development
Other
intangible
assets
Total
29 900
8 013
56 213
3 985
68 211
– 305
– 2 514 – 29 107
– 2 408 – 34 029
29 595
5 499
27 106
1 577
34 182
29 595
5 499
27 106
1 577
34 182
161
1 209
– 1 429
1 403
330
– 95
1 175
– 3
26
588
– 2
– 28
1 209
2 093
– 100
– 3 603
– 379
– 3 982
– 427
– 917
– 176
– 322
– 243
– 87
– 1 326
– 13
– 432
29 301
4 421
25 513
1 710
31 644
29 596
7 092
58 249
4 343
69 684
– 295
– 2 671 – 32 736
– 2 633 – 38 040
29 301
4 421
25 513
1 710
31 644
1 Reclassifications between various asset categories as a result of product launches of acquired in-process research and development and completion of software development
2 Additions in continuing operations were USD 1 930 million. Note 31 provides disclosure of discontinued operations additions.
3 Derecognition of assets that are no longer being used or developed and are not considered to have a significant disposal value or other alternative use
4 Note 31 provides disclosure of discontinued operations amortization charge and impairment charge.
F-30
Notes to the Novartis consolidated financial statements
As at December 31, 2023, the most significant intangi-
ble assets within currently marketed products category
are Leqvio (acquisition of The Medicines Company) and
Zolgensma (acquisition of Avexis Inc.). As at December
31, 2023, the carrying value and remaining amortization
period for Leqvio is USD 6.8 billion and 12 years, respec-
tively (2022: USD 7.4 billion and 13 years, respectively),
and for Zolgensma USD 5.2 billion and 7 years, respec-
tively (2022: USD 5.9 billion and 8 years, respectively).
The following table shows the estimated useful life
by category for intangible assets available for use and
the line in the consolidated income statement in which
the amortization and any potential impairment charge is
recognized:
Useful life
Income statement line
for amortization and
impairment charges
Currently marketed products 5 to 20 years
“Cost of goods sold”
Other (including
software and
technologies)
3 to 15 years
In the relevant
functional expense,
and for technologies
in “Cost of goods
sold” or “Research
and Development”
Any impairment charge for IPR&D is recorded in the con-
solidated income statement under “Research and devel-
opment.”
The Company has no indefinite useful life intangible
asset other than goodwill.
The Company’s cash-generating units to which good-
will is allocated is at the level of the operating segment,
which is comprised of a group of smaller cash-generat-
ing units. The valuation method of the recoverable
amount of the operating segment to which goodwill is
allocated is based on the fair value less costs of disposal.
Any impairment charges are recorded under “Other
expense” in the consolidated income statement.
The following assumptions were used in the goodwill
impairment testing calculation:
(As a percentage)
Terminal growth rate
Discount rate (post-tax)
1.3
8.0
The discount rates consider the Company’s weighted
average cost of capital, adjusted to approximate the
weighted average cost of capital of a comparable mar-
ket participant.
The fair value less costs of disposal, for all cash-gen-
erating units containing goodwill, is reviewed for the
impact of reasonably possible changes in key assump-
tions. In particular, we considered an increase in the dis-
count rate, a decrease in the terminal growth rate, and
certain negative impacts on the forecasted cash flows.
These reasonably possible changes in key assumptions
did not indicate an impairment.
“Note 1. Accounting policies—Goodwill and intangible
assets other than goodwill” provides additional disclo-
sures on how the Company performs goodwill and intan-
gible asset impairment testing.
The following table shows the intangible asset amorti-
zation charge and impairment charges for continuing
operations for the years ended December 31, 2023,
2022 and 20211:
(USD millions)
2023
2022
2021
Amortization charge
– 3 960
– 3 760
– 3 665
Impairment charge 2
– 3 048
– 1 301
– 376
1 Note 31 provides disclosure of discontinued operations amortization charge and
impairment charge.
2 2023 impairment charge includes the write-down of IPR&D on the cessation of
clinical development programs, including PPY988 (USD 1.0 billion), which was
acquired with the 2022 acquisition of Gyroscope Therapeutics Holdings plc (see Note
2), VDT482 (USD 0.4 billion), and MBG453 (USD 0.3 billion), and the clinical research
program NIZ985 (USD 0.3 billion); as well as the write-down of a currently marketed
product by USD 0.3 billion to reflect the reduction in its recoverable amount.
2022 intangible asset impairment charges include the write-down of IPR&D on the
cessation of clinical development programs, including UNR844 (USD 0.6 billion).
2021 intangible asset impairment charges includes the write down of IPR&D on the
cessation of clinical development programs, including GTX312 (USD 0.2 billion).
In 2023, 2022 and 2021, there were no reversals of
impairment charges on intangible assets.
F-31
Notes to the Novartis consolidated financial statements
13. Deferred tax assets and liabilities
(USD millions)
Property,
plant and
equipment
Pensions and
other benefit
Intangible obligations
assets of employees
Tax loss Other assets,
provisions
forwards and accruals
carry-
Total
Inventories
Gross deferred tax assets at January 1, 2023
158
1 726
739
2 214
425
2 789
8 051
Gross deferred tax liabilities at January 1, 2023
– 343
– 4 785
– 420
– 138
– 1 312
– 6 998
Net deferred tax balance at January 1, 2023
– 185
– 3 059
319
2 076
425
1 477
1 053
At January 1, 2023
– 185
– 3 059
Net deferred tax balance related to discontinued operations 1
60
120
Credited/(charged) to income
– 13
1 344
Credited/(charged) to other comprehensive income
Impact of acquisitions of businesses
Other movements
– 3
– 2
– 50
– 530
85
13
– 28
2 076
– 311
386
319
– 36
32
16
425
– 13
173
111
17
1 477
1 053
– 233
– 413
– 47
– 34
– 19
– 30
1 875
– 21
– 440
7
Net deferred tax balance at December 31, 2023
– 193
– 2 040
344
2 123
713
1 114
2 061
Gross deferred tax assets at December 31, 2023
117
2 188
764
2 200
713
2 206
8 188
Gross deferred tax liabilities at December 31, 2023
– 310
– 4 228
– 420
– 77
– 1 092
– 6 127
Net deferred tax balance at December 31, 2023
– 193
– 2 040
344
2 123
713
1 114
2 061
After offsetting the following amount of deferred tax
assets and liabilities within the same tax jurisdiction,
the balance amounts to:
Deferred tax assets at December 31, 2023
Deferred tax liabilities at December 31, 2023
Net deferred tax balance at December 31, 2023
3 879
4 309
– 2 248
2 061
Gross deferred tax assets at January 1, 2022
125
1 307
1 026
2 273
374
2 727
7 832
Gross deferred tax liabilities at January 1, 2022
– 381
– 4 704
– 591
– 148
– 1 335
– 7 159
Net deferred tax balance at January 1, 2022
– 256
– 3 397
435
2 125
374
1 392
673
673
655
1
– 43
– 244
11
1
1
63
1
19
At January 1, 2022
Credited/(charged) to income 2
Charged to equity
– 256
– 3 397
435
2 125
374
1 392
69
628
– 5
– 43
5
Credited/(charged) to other comprehensive income 2
– 2
– 104
Impact of acquisitions of businesses
– 300
Other movements 2
4
10
– 7
– 6
55
– 9
Net deferred tax balance at December 31, 2022
– 185
– 3 059
319
2 076
425
1 477
1 053
Gross deferred tax assets at December 31, 2022
158
1 726
739
2 214
425
2 789
8 051
Gross deferred tax liabilities at December 31, 2022
– 343
– 4 785
– 420
– 138
– 1 312
– 6 998
Net deferred tax balance at December 31, 2022
– 185
– 3 059
319
2 076
425
1 477
1 053
After offsetting the following amount of deferred tax
assets and liabilities within the same tax jurisdiction,
the balance amounts to:
Deferred tax assets at December 31, 2022
Deferred tax liabilities at December 31, 2022
Net deferred tax balance at December 31, 2022
4 312
3 739
– 2 686
1 053
1 Represents the net deferred tax balance at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to
discontinued operations.
2 In 2022 the total related to continuing operations for the charge to income was USD 625 million, for the charge to other comprehensive income was USD – 20 million and for the
charge to other movements was USD 8 million.
F-32
Notes to the Novartis consolidated financial statements
Deferred tax liabilities have not been recognized for the
withholding tax and other taxes that would be payable
on the remittance of earnings of foreign subsidiaries,
insofar as the Company has the ability to control any
future reversal and the unremitted earnings are retained
in the foreign subsidiaries for reinvestment. The total
unremitted earnings retained for reinvestment in the
Company’s foreign subsidiaries that would be subject to
withholding tax or other taxes if remitted to the Com-
pany were estimated to be approximately USD 34 billion
in 2023, (2022: USD 32 billion).
The gross value of tax-loss carry-forwards that have or
have not been recognized as deferred tax assets, with
their expiry dates, is as follows:
(USD millions)
One year
Two years
Three years
Four years
Five years
More than five years
Not subject to expiry
Unrecognized
Recognized
2023 total
23
12
67
22
1 569
2 891
687
44
15
79
569
580
2 975
2 258
67
27
146
591
2 149
5 866
2 945
Total
5 271
6 520
11 791
(USD millions)
One year
Two years
Three years
Four years
Five years
Unrecognized Recognized
2022 total
18
37
25
138
79
0
5
5
0
688
18
42
30
138
767
More than five years
3 880
2 380
6 260
Not subject to expiry
433
452
885
Total
4 610
3 530
8 140
(USD millions)
2023
2022
2021
Tax losses carried forward
that expired
8
6
18
Deferred tax assets related to carry-forwards of taxable
losses and tax credits of relevant Company entities are
recognized to the extent that it is considered probable
that future taxable profits will be available in the respec-
tive tax jurisdictions against which such losses and cred-
its can be utilized.
14. Financial and other non-current assets
Financial assets
Other non-current assets
(USD millions)
Equity securities
Debt securities
Fund investments
2023
2022
(USD millions)
1 403
1 145
Deferred compensation plans
29
190
37
Prepaid post-employment benefit plans 1
281
Other non-current assets
2023
439
545
215
2022
419
491
200
Total financial investments
1 622
1 463
Total other non-current assets
1 199
1 110
Long-term receivables from finance subleases
Other long-term receivables
Contingent consideration receivables 1
104
214
553
Long-term loans, advances and security deposits 114
59
197
607
85
Total financial assets
2 607
2 411
1 Note 30 provides additional disclosures related to contingent consideration.
1 Note 26 provides additional disclosures related to post-employment benefits.
F-33
Notes to the Novartis consolidated financial statements
15. Inventories
(USD millions)
Raw material, consumables
Work in progress
Finished products
Total inventories
2023
963
3 502
1 448
5 913
2022
934
3 673
2 568
7 175
The following table shows the amount of inventory rec-
ognized as an expense in “Cost of goods sold” in the
consolidated income statements from continuing oper-
ations:
(USD billions)
Cost of goods sold
2023
– 5.8
2022
– 5.2
2021
– 5.4
The following table shows the recognized amount of
inventory provision and reversals of inventory provision
recorded in the consolidated income statements from
continuing operations:
(USD millions)
Inventory provisions
2023
– 467
Reversals of inventory provisions
111
2022
– 373
121
2021
– 283
97
The reversals mainly result from the release of products
initially requiring additional quality control inspections
and from the reassessment of inventory values manu-
factured prior to regulatory approval but for which
approval was subsequently received.
16. Trade receivables
(USD millions)
Total gross trade receivables
Provisions for doubtful trade receivables
Total trade receivables
2023
7 158
– 51
2022
8 128
– 62
7 107
8 066
The following table shows the trade receivables that are
not overdue as specified in the payment terms and con-
ditions established with Novartis customers, as well as
an analysis of overdue amounts and related provisions
for doubtful trade receivables:
(USD millions)
Not overdue
Past due for not more than one month
Past due for more than one month
but less than three months
Past due for more than three months
but less than six months
Past due for more than six months
but less than one year
Past due for more than one year
2023
6 791
146
66
64
38
53
2022
7 664
190
110
62
23
79
monitored regularly to determine any adjustments in risk
classification. The majority of the past due trade receiv-
ables from elevated credit risk countries are due from
local governments or from government-funded entities.
Deteriorating credit and economic conditions as well as
other factors in these elevated credit risk countries have
resulted in, and may continue to result in, an increase in
the average length of time that it takes to collect these
trade receivables, and may require the Company to
re-evaluate the expected credit loss amount of these
trade receivables in future periods. At December 31,
2023, amounts past due for more than one year are not
significant in elevated credit risk countries.
Total trade receivables include amounts denomi-
nated in the following major currencies:
Provisions for doubtful trade receivables
– 51
– 62
(USD millions)
Total trade receivables
7 107
8 066
US dollar (USD)
Trade receivable balances represent amounts due from
our customers, which are mainly drug wholesalers, retail-
ers, private health systems, government agencies, man-
aged care providers, pharmacy benefit managers and
government-supported healthcare systems. In particu-
lar, we monitor the level of trade receivables in countries
deemed to have an elevated credit risk. We consider
macroeconomic environment, historical experience,
country and political risk, in addition to other relevant
information when assessing risk. These risk factors are
Euro (EUR)
Japanese yen (JPY)
Russian ruble (RUB)
Chinese yuan (CNY)
British pound (GBP)
Brazilian real (BRL)
Australian dollar (AUD)
Swiss franc (CHF)
Canadian dollar (CAD)
Other currencies
Total trade receivables
2023
3 520
1 138
2022
3 709
1 426
288
240
231
146
130
96
84
75
177
430
155
176
145
137
108
151
1 159
7 107
1 452
8 066
F-34
Notes to the Novartis consolidated financial statements
17. Marketable securities, commodities, time deposits,
derivative financial instruments, and cash and cash
equivalents
Marketable securities, commodities, time deposits and derivative financial instruments
(USD millions)
Commodities
Debt securities
Time deposits and short-term investments with original maturity more than 90 days
Derivative financial instruments
Total marketable securities, commodities, time deposits and derivative financial instruments
2023
111
2022
111
9
569
355
11 089
204
1 035
11 413
The vast majority of debt securities, time deposits and short-term investments with an original maturity of more
than 90 days was denominated in USD as at December 31, 2023, and 2022.
Cash and cash equivalents
(USD millions)
Current accounts
Time deposits and short-term investments with original maturity less than 90 days
Total cash and cash equivalents
18. Other current assets
(USD millions)
VAT receivable
Withholding tax recoverable
Prepaid expenses
Contingent consideration receivable 1
Other receivables and current assets
Total other current assets
1 Note 30 provides additional disclosures related to contingent consideration.
2023
3 207
10 186
13 393
2022
2 877
4 640
7 517
2023
462
64
764
65
1 252
2 607
2022
509
50
911
43
958
2 471
19. Equity
The following table shows the movement in the share capital:
(USD millions)
Share capital 1
Treasury shares
Outstanding share capital
Jan 1, 2021
Movement
in year
Dec 31, 2021
Movement
in year
Dec 31, 2022
Movement
in year
Dec 31, 2023
913
– 53
860
– 12
5
– 7
901
– 48
853
– 11
– 44
– 55
890
– 92
798
– 65
51
– 14
825
– 41
784
1 At December 31, 2023, the Novartis AG share capital consists of registered shares with a nominal value of CHF 0.49 each. Prior to the 2023 capital decrease (see Note 19.3),
Novartis AG share capital at December 31, 2022 and 2021 consists of registered shares with a nominal value of CHF 0.50 each. No authorized and conditional capital exists.
F-35
Notes to the Novartis consolidated financial statements
The following table shows the movement in the shares:
2023
2022
2021
Number of outstanding shares
(in millions)
Note
Total
Novartis
shares
Total
Total
treasury outstanding
shares
shares 1
Total
Novartis
shares
Total
Total
treasury outstanding
shares
shares 1
Total
Novartis
shares
Total
Total
treasury outstanding
shares
shares 1
Balance at beginning of year
2 403.7
– 284.1 2 119.6 2 434.4
– 199.5 2 234.9 2 467.0
– 210.2 2 256.8
Shares canceled for capital
reduction 2
Shares acquired to be
canceled 3
Other share purchases 4
Exercise of options
and employee transactions 5 19.9
Equity-based compensation 5
Shares delivered to Alcon
employees
Shares delivered to Sandoz
employees
– 126.2
126.2
– 30.7
30.7
– 32.6
32.6
– 87.5
– 87.5
– 1.6
– 1.6
2.8
10.4
2.8
10.4
0.3
0.3
– 126.2
– 126.2
– 1.4
– 1.4
– 30.7
– 30.7
– 1.5
– 1.5
1.9
10.4
1.9
10.4
0.0
0.0
0.6
9.6
0.1
0.6
9.6
0.1
Total movements
– 126.2
50.6
– 75.6
– 30.7
– 84.6
– 115.3
– 32.6
10.7
– 21.9
Balance at end of year
2 277.5
– 233.5 2 044.0 2 403.7
– 284.1 2 119.6 2 434.4
– 199.5 2 234.9
1 Approximately 93.8 million treasury shares (2022: 99.0 million; 2021: 102.5 million) are held in Novartis entities that restrict their availability for use.
2 Novartis reduced its share capital by canceling shares that were repurchased on the SIX Swiss Exchange second trading line during previous years.
3 Shares repurchased on the SIX Swiss Exchange second trading line under a CHF 10 billion share buyback authority approved at the 2019 Annual General Meeting (AGM) for
transactions after February 28, 2019, until March 2, 2021. Transactions after March 2, 2021, were executed under the CHF 10 billion share buyback authority approved at the 2021
AGM and the additional CHF 10 billion authority approved at the 2022 AGM.
4 Shares acquired from employees, which were previously granted to them under the respective equity-based participation plans
5 Shares delivered as a result of options being exercised and physical share deliveries related to equity-based participation plans
19.1) The amount available for distribution as a dividend
to shareholders is based on the available distributable
retained earnings of Novartis AG determined in accor-
dance with the legal provisions of the Swiss Code of
Obligations.
Dividend per share (in CHF)
Total dividend payment
(in USD billion)
2023
3.20
2022
3.10
2021
3.00
7.3
7.5
7.4
19.2) Treasury shares are initially recorded at fair value
on their trade date, which is different from the settlement
date, when the transaction is ultimately effected. Trea-
sury shares are deducted from consolidated equity at
their nominal per share value. Differences between the
nominal amount and the transaction price on purchases
or sales of treasury shares with third parties, or the value
of services received for the shares allocated to employ-
ees as part of share-based compensation arrangements,
are recorded in “Retained earnings” in the consolidated
statement of changes in equity.
The following table summarizes the treasury shares movements:
Shares acquired to be canceled 1
Other share purchases 2
Purchase of treasury shares
2023
2022
2021
Number of
outstanding
Number of
outstanding
Number of
outstanding
Note
shares Equity impact
USD m
(in millions)
shares Equity impact
USD m
(in millions)
shares Equity impact
USD m
(in millions)
– 87.5
– 8 369
– 126.2
– 10 787
– 30.7
– 2 775
– 1.6
– 148
– 1.4
– 123
– 1.5
– 145
– 89.1
– 8 517
– 127.6
– 10 910
– 32.2
– 2 920
Exercise of options and employee transactions 3
19.9
Equity-based compensation 4
Shares delivered to Alcon employees
Shares delivered to Sandoz employees
Total
2.8
10.4
146
904
0.3
30
1.9
10.4
0.0
88
854
5
0.6
9.6
0.1
39
745
17
– 75.6
– 7 437
– 115.3
– 9 963
– 21.9
– 2 119
1 Shares repurchased on the SIX Swiss Exchange second trading line under a CHF 10 billion share buyback authority approved at the 2019 Annual General Meeting (AGM) for
transactions after February 28, 2019, until March 2, 2021. Transactions after March 2, 2021, were executed under the CHF 10 billion share buyback authority approved at the 2021
AGM and the additional CHF 10 billion authority approved at the 2022 AGM.
2 Shares acquired from employees, which were previously granted to them under the respective equity-based participation plans
3 Shares delivered as a result of options being exercised related to equity-based participation plans and the delivery of treasury shares. The average share price of the shares
delivered was significantly below market price, reflecting the strike price of the options exercised.
4 Equity-settled share-based compensation is expensed in the consolidated income statement in accordance with the vesting period of the share-based compensation plans. The
value for the shares and options granted is credited to consolidated equity over the respective vesting period. In addition, tax benefits arising from tax-deductible amounts
exceeding the expense recognized in the income statement are credited to equity.
F-36
Notes to the Novartis consolidated financial statements
19.3) In 2023, in connection with the Distribution (spin-
off) of Sandoz business, Novartis AG shareholders
approved at the EGM held on September 15, 2023, a
decrease in Novartis AG share capital in the amount of
CHF 22.8 million (USD 17.1 million). The capital decrease
resulted in a reduction of the nominal value of the Novartis
AG shares by CHF 0.01 from CHF 0.50 per share to CHF
0.49 per share.
19.4) In December 2021, Novartis entered into an irrevo-
cable, non-discretionary arrangement with a bank to
repurchase Novartis shares on the second trading line
under its up-to USD 15.0 billion share buyback. The
arrangement was updated in July 2022, December 2022,
and May 2023, and concluded in June 2023. Novartis
was able to cancel this arrangement at any time but could
have been subject to a 90-day waiting period. As of
December 31, 2022, these waiting period conditions
were not applicable and as a result, there was no require-
ment to record a liability under this arrangement as of
December 31, 2022. The liability under this arrangement
amounted to USD 2.8 billion as at December 31, 2021.
In June 2023, Novartis entered into an irrevocable,
non-discretionary arrangement with a bank to repur-
chase 11.7 million Novartis shares on the second trading
line, which concluded in July 2023.
In July 2023, Novartis entered into a new irrevocable,
non-discretionary arrangement with a bank to repur-
chase Novartis shares on the second trading line under
its new up-to USD 15.0 billion share buyback. Novartis is
able to cancel this arrangement but may be subject to a
90-day waiting period under certain conditions. As of
December 31, 2023, these waiting period conditions
were not applicable and as a result, there was no require-
ment to record a liability under this arrangement as of
December 31, 2023.
In June 2021, Novartis entered into an irrevocable,
non-discretionary arrangement with a bank to repur-
chase Novartis shares to mitigate dilution related to par-
ticipation plans of employees. Novartis would have been
able to cancel this arrangement at any time but would
have been subject to a 90-day waiting period. This trad-
ing plan commitment was fully executed and expired in
June 2021, and as a consequence, there was no liability
related to this plan recognized as of December 31, 2021.
In November 2020, Novartis entered into an irrevo-
cable, non-discretionary arrangement with a bank to
repurchase Novartis shares on the second trading line
under its up-to USD 2.5 billion share buyback. Novartis
would have been able to cancel this arrangement at any
time, but would have been subject to a 90-day waiting
period. This trading plan commitment was fully executed
and expired in March 2021, and as a consequence, there
was no liability related to this plan recognized as of
December 31, 2021.
19.5) The impact of change in ownership of consolidated
entities represents the excess of the amount paid to
non-controlling interest over their carrying value and
equity allocation to non-controlling interest due to
change in ownership percentage.
19.6) Changes in non-controlling interests represent the
impact on the non-controlling interest of transactions
with minority shareholders, such as change in ownership
percentage, dividend payments and other equity trans-
actions.
19.7) Other movements include, for subsidiaries in hyper-
inflationary economies, the impact of the application of
IAS 29 “Financial reporting in Hyperinflation Economies”.
See Note 30 for additional disclosures.
19.8) Transaction costs in 2023 of USD 214 million, net
of tax of USD 29 million, that are directly attributable to
the Distribution (spin-off) of Sandoz business to Novartis
AG shareholders and that would otherwise have been
avoided, are recorded as a deduction from equity
(retained earnings). See Note 1.
In 2021, transaction costs that were directly attribut-
able to the distribution (spin-off) of Alcon Inc. to Novartis
AG shareholders and that would otherwise have been
avoided, were recorded to equity.
19.9) At December 31, 2022, the market maker held 3
million (2021: 3 million) written call options, originally
issued as part of the share-based compensation for
employees, that have not yet been exercised. The
weighted average exercise price of these options at
December 31, 2022, was USD 66.07 (2021: USD 61.45),
and they had contractual lives of 10 years, with remain-
ing lives less than one year (2021: two years). In the first
quarter of 2023, the market maker exercised 3 million
written call options and as a result there are no written
call options outstanding at December 31, 2023.
F-37
Notes to the Novartis consolidated financial statements
20. Non-current financial debt
(USD millions)
Straight bonds
Liabilities to banks and other financial institutions 1
Total, including current portion of non-current financial debt
Less current portion of non-current financial debt
Total non-current financial debt
1 Average interest rate during the year 2023 2.6% (2022: 2.3%)
2023
2022
20 585
22 341
42
144
20 627
22 485
– 2 191
– 2 241
18 436
20 244
All bonds are initially recorded at the amount of proceeds
received, net of transaction costs. They are subsequently
carried at amortized cost, with the difference between
the proceeds, net of transaction costs, and the amount
due on redemption being recognized as a charge to the
consolidated income statement over the period of the
relevant bond. Financial debts, including current finan-
cial debts, contain only general default covenants. The
Company is in compliance with these covenants.
The percentage of fixed-rate financial debt to total
financial debt was 84% as at December 31, 2023, and
86% as at December 31, 2022.
The average interest rate on total financial debt in
2023 was 2.9% (2022: 2.4%).
Note 30 contains a maturity table of the Company’s
future contractual interest payments commitments.
The following table provides a breakdown of straight bonds:
Notional
amount
Currency (millions)
Issuance
year
Maturity
year
Issuer
2022
(USD
Issue price millions) millions)
2023
(USD
Coupon
3.700%
3.400%
4.400%
USD
USD
USD
1.625%
EUR
0.250%
0.625%
1.050%
3.000%
4.000%
0.125%
0.625%
CHF
CHF
CHF
USD
USD
EUR
EUR
500
2 150
1 850
600
500
550
325
1 750
1 250
1 250
500
3.100%
USD
1 000
1.125%
0.500%
1.375%
1.700%
1.750%
2.000%
2.200%
2.750%
EUR
EUR
EUR
EUR
USD
USD
USD
USD
600
750
750
750
1 000
1 250
1 500
1 250
0.000% 1 EUR
1 850
Total straight bonds
2012
2014
2014
2014
2015
2015
2015
2015
2015
2016
2016
2017
2017
2018
2018
2018
2020
2020
2020
2020
2020
2042 Novartis Capital Corporation, New York, United States
98.325%
491
490
2024 Novartis Capital Corporation, New York, United States
99.287% 2 150 2 147
2044 Novartis Capital Corporation, New York, United States
99.196% 1 828 1 827
2026 Novartis Finance S.A., Luxembourg, Luxembourg
2025 Novartis AG, Basel, Switzerland
2029 Novartis AG, Basel, Switzerland
2035 Novartis AG, Basel, Switzerland
99.697%
100.640%
100.502%
100.479%
663
595
654
387
638
541
595
352
2025 Novartis Capital Corporation, New York, United States
99.010% 1 745 1 742
2045 Novartis Capital Corporation, New York, United States
98.029% 1 222 1 221
2023 Novartis Finance S.A., Luxembourg, Luxembourg
2028 Novartis Finance S.A., Luxembourg, Luxembourg
99.127%
98.480%
2027 Novartis Capital Corporation, New York, United States
99.109%
2027 Novartis Finance S.A., Luxembourg, Luxembourg
2023 Novartis Finance S.A., Luxembourg, Luxembourg
2030 Novartis Finance S.A., Luxembourg, Luxembourg
2038 Novartis Finance S.A., Luxembourg, Luxembourg
99.874%
99.655%
99.957%
99.217%
2025 Novartis Capital Corporation, New York, United States
99.852%
1 330
549
995
662
828
823
999
528
994
638
798
797
792
998
2027 Novartis Capital Corporation, New York, United States
99.909% 1 247 1 246
2030 Novartis Capital Corporation, New York, United States
99.869% 1 495 1 494
2050 Novartis Capital Corporation, New York, United States
97.712% 1 216 1 215
2028 Novartis Finance S.A., Luxembourg, Luxembourg
99.354% 2 036 1 958
20 585 22 341
1 The EUR 1 850 million bond issued in 2020 features a coupon step-up of 0.25% commencing with the first interest payment date after December 31, 2025, if one or both of the
2025 Patient Access Targets are not met. These 2025 Patient Access Targets are the 2025 Flagship Programs Patient Reach Target and the 2025 Strategic Innovative Therapies
Patient Reach Target, as defined in the bond prospectus. As of December 31, 2023, there is no indication that these 2025 Patient Access Targets will not be met.
F-38
Notes to the Novartis consolidated financial statements
The following tables provide a breakdown of total non-current financial debt, including current portion by maturity
and currency:
The following table shows the comparison of balance
sheet carrying value and fair value of total non-current
financial debt, including current portion:
(USD millions)
2023
Balance
sheet
2023
Fair
values
2022
Balance
sheet
2022
Fair
values
Straight bonds
20 585
19 194
22 341
20 277
Others
Total
42
42
144
144
20 627
19 236
22 485
20 421
The fair values of straight bonds are determined by
quoted market prices. Other financial debts are recorded
at notional amounts, which are a reasonable approxima-
tion of the fair values.
Breakdown by maturity:
(USD millions)
2023
2024
2025
2026
2027
2028
After 2028
Total
Breakdown by currency:
(USD millions)
US dollar (USD)
Euro (EUR)
Japanese yen (JPY)
Swiss franc (CHF)
Others
Total
2023
2 191
3 338
663
2 906
2 585
8 944
2022
2 241
2 147
3 281
638
2 909
2 485
8 784
20 627
22 485
2023
2022
13 388
13 376
5 563
7 478
76
1 635
1 488
41
67
20 627
22 485
21. Provisions and other non-current liabilities
(USD millions)
Accrued liability for employee benefits:
Defined benefit pension plans 1
Other long-term employee benefits and deferred compensation
Other post-employment benefits 1
Environmental remediation provisions
Provisions for product liabilities, governmental investigations and other legal matters
Contingent consideration 2
Other non-current liabilities
2023
2022
1 815
1 723
546
369
518
82
389
804
554
362
535
154
704
874
Total provisions and other non-current liabilities
4 523
4 906
1 Note 26 provides additional disclosures related to post-employment benefits.
2 Note 30 provides additional disclosures related to contingent consideration.
Novartis believes that its total provisions are adequate based upon currently available information. However, given
the inherent difficulties in estimating liabilities in this area, Novartis may incur additional costs beyond the amounts
provided. Management believes that such additional amounts, if any, would not be material to the Company’s finan-
cial condition but could be material to the results of operations or cash flows in a given period.
F-39
Notes to the Novartis consolidated financial statements
Environmental remediation
provisions
The following table shows the movements in the envi-
ronmental liability provisions:
(USD millions)
January 1
Provisions related to
discontinued operations 1
Cash payments 2
Releases of provisions 3
Additions to provisions 4
Currency translation effects
December 31
Less current provision
Non-current environmental
remediation provisions
at December 31
2023
588
– 53
– 4
– 54
14
47
538
– 20
2022
616
2021
809
– 6
– 18
6
– 10
588
– 53
– 169
– 105
105
– 24
616
– 49
518
535
567
1 Represents the environmental remediation provision at January 1, 2023, related to the
Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide
disclosures related to discontinued operations.
2 Cash payments from continuing operations were USD 5 million in 2022, and USD 169
million in 2021.
3 Releases of provisions credited to the consolidated income statement from
continuing operations were USD 18 million in 2022, and USD 105 million in 2021.
4 Additions to provisions charged to the consolidated income statement from
continuing operations were USD 6 million in 2022, and USD 105 million in 2021.
The significant components of the environmental reme-
diation provisions consist of costs to sufficiently clean
and refurbish contaminated sites to the extent neces-
sary, and to continue surveillance at sites where the envi-
ronmental remediation exposure is less significant.
A substantial portion of the environmental remedia-
tion provisions relate to the remediation of Basel regional
landfills in the adjacent border areas in Switzerland, Ger-
many and France. The provisions are reassessed on an
annual basis and adjusted as necessary.
In the United States, Novartis has been named under
federal legislation (the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as
amended) as a potentially responsible party (PRP) in
respect of certain sites. Novartis actively participates in,
or monitors, the cleanup activities at the sites in which it
is a PRP. The provision takes into consideration the num-
ber of other PRPs at each site as well as the identity and
financial position of such parties in light of the joint and
several nature of the liability.
The expected timing of the related cash outflows as
of December 31, 2023, is currently projected as follows:
(USD millions)
Due within two years
Due later than two years, but within five years
Due later than five years, but within 10 years
Due after 10 years
Total environmental remediation provisions
Expected
cash outflows
82
158
217
81
538
Provisions for product liabilities,
governmental investigations and
other legal matters
Novartis has established provisions for certain product
liabilities, governmental investigations and other legal
matters where a potential cash outflow is probable, and
Novartis can make a reliable estimate of the amount of
the outflow. These provisions represent the Company’s
current best estimate of the total financial effect for the
matters described below and for other less significant
matters. Potential cash outflows reflected in a provision
might be fully or partially offset by insurance in certain
circumstances.
Novartis has not established provisions for potential
damage awards for certain additional legal claims against
its subsidiaries if Novartis currently believes that a pay-
ment is either not probable or cannot be reliably esti-
mated. These not-provisioned-for matters include indi-
vidual product liability cases and certain other legal
matters. Plaintiffs have alleged claims in these matters
and the Company does not believe that information about
the amount sought by plaintiffs, if that is known, would
be meaningful with respect to those legal proceedings.
This is due to a number of factors, including, but not lim-
ited to, the stage of proceedings, the entitlement of par-
ties to appeal a decision and clarity as to theories of lia-
bility, damages and governing law. It is therefore, not
practicable to provide information about the potential
financial impact of these matters. In addition, in some of
these matters there are claims for punitive or multiple
(treble) damages, civil penalties and disgorgement of
profits that in the view of Novartis are either wholly or
partially unspecified, or wholly or partially unquantifiable
at present; the Company believes that information about
these amounts claimed by plaintiffs generally is not
meaningful for purposes of determining a reliable esti-
mate of a loss that is probable or more than remote.
A number of other legal matters are in such early
stages or the issues presented are such that the Com-
pany has not made any provisions since it cannot cur-
rently estimate either a potential outcome or the amount
of any potential losses. For these reasons, among oth-
ers, the Company generally is unable to make a reliable
estimate of possible loss with respect to such cases. It
is therefore not practicable to provide information about
the potential financial impact of those cases.
There might also be cases for which the Company
was able to make a reliable estimate of the possible loss
or the range of possible loss, but the Company believes
that publication of such information on a case-by-case
basis would seriously prejudice the Company’s position
in ongoing legal proceedings or in any related settlement
discussions. Accordingly, in such cases, information has
been disclosed with respect to the nature of the contin-
gency, but no disclosure is provided as to an estimate of
the possible loss or range of possible loss.
Note 29 contains additional information on contin-
gent liabilities.
F-40
Notes to the Novartis consolidated financial statements
Summary of significant legal
proceedings
The following is a summary of significant legal proceed-
ings to which Novartis or its subsidiaries are currently a
party, or were a party and that concluded in 2023.
Investigations and related litigations
Southern District of New York (S.D.N.Y.) Gilenya
marketing practices investigation and litigation
In 2013, Novartis Pharmaceuticals Corporation (NPC)
received a civil investigative demand from the United
States Attorney’s Office (USAO) for the S.D.N.Y. request-
ing the production of documents and information relat-
ing to marketing practices for Gilenya, including the
remuneration of healthcare providers in connection
therewith. In 2017, the S.D.N.Y. and New York State
declined to intervene in claims raised by an individual
relator in a qui tam complaint. In 2022, NPC’s motion to
dismiss this complaint was granted, which was appealed.
The claims are being vigorously contested.
Lucentis/Avastin® matters
In 2019, the French Competition Authority (FCA) issued
a Statement of Objections against Novartis entities,
alleging anti-competitive practices on the French mar-
ket for anti-vascular endothelial growth factor treat-
ments for wet age-related macular degeneration from
2008 to 2013. In 2020, the FCA issued a decision find-
ing that the Novartis entities had infringed competition
law by abusing a dominant position and imposing a fine
equivalent to approximately USD 452 million. Novartis
paid the fine, again subject to recoupment, and appealed
the FCA’s decision. In February 2023, the Paris Court of
Appeal (Court) overturned the FCA’s decision which trig-
gered the reimbursement of the originally paid fine
(recorded as “Other income” in the Company’s consoli-
dated income statement), and, in March 2023, the FCA
appealed the Court’s decision.
Novartis is the subject of similar investigations and
proceedings involving the competition authority in
Greece and is currently in an appeal process in Turkey.
Novartis continues to vigorously contest all claims in both
countries. Novartis is also challenging policies and reg-
ulations allowing off-label/unlicensed use and reim-
bursement for economic reasons in Turkey.
Greece investigation
The Greek authorities are investigating legacy allega-
tions of potentially inappropriate economic benefits to
healthcare providers (HCPs), government officials and
others in Greece. These authorities include the Greek
Coordinating Body for Inspection and Control, and the
Greek Body of Prosecution of Financial Crime (SDOE),
from which the Company received a summons in 2018
and 2020. Novartis has cooperated in these investiga-
tions. In 2021, SDOE imposed on Novartis Hellas a fine
equivalent to approximately USD 1.2 million; Novartis Hel-
las appealed the fine and, in September 2023, the Court
overturned the decision and fine. The Greek State filed
an appeal. In 2022, the Greek State served a civil law-
suit on Novartis Hellas, seeking approximately USD 225
million for moral damages allegedly arising from the con-
duct that was the subject of the Company’s 2020
settlement with the US Department of Justice (DOJ)
regarding allegations of inappropriate economic bene-
fits in Greece that was disclosed in the 2020 Annual
Report and the 2020 Form 20-F. The claims are being
vigorously contested.
340B Drug Pricing Program investigations
In 2021, NPC received a notification from the US Health
Resources and Services Administration (HRSA) which
stated that HRSA believes NPC’s contract pharmacy pol-
icy violates the 340B statute, and threatened potential
enforcement action. NPC subsequently sued HRSA in
the U.S. District Court (USDC) for the District of Colum-
bia to challenge HRSA’s determination and to enjoin
HRSA from taking action with respect to NPC’s contract
pharmacy policy. HRSA then referred the matter regard-
ing NPC’s contract pharmacy policy to the Office of
Inspector General of the US Department of Health and
Human Services, which could result in the imposition of
civil monetary penalties on NPC. The USDC issued a
decision rejecting HRSA’s interpretation of the 340B
statute, vacating the violation notification and remand-
ing the matter to HRSA. HRSA appealed, and the United
States Court of Appeals for the DC Circuit heard argu-
ment on the case in 2022. In addition, in 2021 and 2023,
two medical centers filed Administrative Dispute Reso-
lution (ADR) proceedings against NPC, seeking the
return of alleged overcharges resulting from NPC’s con-
tract pharmacy policy. NPC has moved to dismiss these
proceedings pending resolution of the HRSA litigation.
Also in 2021, NPC received a civil investigative subpoena
from the Office of the Attorney General of the State of
Vermont (Vermont AG) requesting the production of doc-
uments and information concerning NPC’s participation
in the 340B Drug Pricing Program in Vermont. NPC
responded by providing documents and information to
the Vermont AG.
Swiss and EU investigation
In September 2022, the Swiss Competition Commission
(COMCO) initiated an investigation of the acquisition of
certain patents by Novartis from Genentech in April 2020
and their subsequent enforcement against Eli Lilly and
other parties, allegedly in an attempt to protect Cosentyx
from competing products. COMCO is investigating
whether enforcement of the patents violates the Swiss
Cartel Act. The European Commission also requested
information from Novartis regarding this matter. Novartis
is cooperating with the authorities and will vigorously
contest any allegations.
Inflation Reduction Act (IRA) litigation
In 2023, following the U.S. government’s selection of
Entresto for the first round of the IRA’s “Medicare Drug
Price Negotiation Program,” NPC filed a complaint in the
USDC for the District of New Jersey on the grounds that
those drug price-setting provisions are unconstitutional
under the First, Fifth and Eighth Amendments to the U.S.
Constitution.
Product liability litigation
Tasigna
NPC is a defendant in more than 400 US product liabil-
ity actions involving Tasigna, alleging that the product
F-41
Notes to the Novartis consolidated financial statements
caused various cardiovascular effects and that NPC
failed to provide adequate warnings about those alleged
side effects. State court actions are pending in a multi-
county litigation in Bergen County, New Jersey, and fed-
eral cases are pending in a multidistrict litigation in the
Middle District of Florida. The claims are being vigorously
contested.
Other matters
Shareholder derivative lawsuit
In 2021, NPC, Sandoz Inc., Novartis Capital Corporation
and certain present and former directors and officers of
Novartis were named as defendants, and Novartis was
named as a nominal defendant, in a purported share-
holder derivative lawsuit filed in New York State Court.
The plaintiffs, derivatively as purported Novartis share-
holders on behalf of Novartis, seek damages and other
remedies based on alleged conduct by the corporate
and individual defendants. In 2022, the court granted
Novartis motion to dismiss the lawsuit, which the plain-
tiffs have appealed.
Concluded legal matters
Exforge – Concluded matter
Since 2018, Novartis companies as well as other phar-
maceutical companies were sued by various direct and
indirect purchasers of Exforge in multiple US individual
and putative class action complaints. They claimed that
Novartis made a reverse payment in the form of an agree-
ment not to launch an authorized generic, alleging viola-
tions of federal antitrust law and state antitrust, con-
sumer protection and common laws, and sought damages
as well as injunctive relief. The cases were consolidated
in the S.D.N.Y. In 2022, Novartis agreed to pay USD 245
million to resolve these cases, and this resolution was
completed in 2023.
Lucentis/Avastin® (Italian and Belgian Competition
Authorities) – Concluded matter
In connection with an investigation into whether Novartis
entities, F. Hoffmann-La Roche AG, Genentech Inc. and
Roche S.p.A. colluded to artificially preserve the market
positions of Avastin® and Lucentis, in 2014 the Italian
Competition Authority (ICA) imposed a fine equivalent
to USD 125 million on the Novartis entities. Novartis paid
the fine, subject to the right to later claim recoupment,
and appealed the decision. In 2023, the final appeal by
Novartis was denied, and the ICA decision is now final.
In 2014 and 2015, following the ICA’s fine, the Italian Min-
istry of Health and the Lombardia region sent letters with
payment requests for a total equivalent of approximately
USD 1.3 billion in damages from Novartis and Roche enti-
ties based on these allegations, and several additional
Italian regions and hospitals subsequently sent letters in
2019 claiming damages for an aggregate amount of
approximately USD 330 million. None of these claims
have been asserted in legal proceedings. A similar mat-
ter involving the competition authority in Belgium is con-
cluded.
South Korea investigation – Concluded matter
In 2016, the Seoul Western District Prosecutor initiated
a criminal investigation into, among other things, allega-
tions that Novartis Korea utilized medical journals to
provide inappropriate economic benefits to HCPs. This
resulted in a non-material fine, which the prosecutor
appealed. In 2021, the appellate court upheld the fine,
and the prosecutor appealed that decision. In 2023, the
Supreme Court dismissed the appeal. This matter is now
concluded.
U.S. Government Foreign Corrupt Practices Act
(FCPA) investigations – Concluded matter
As previously disclosed in Note 20 to the Consolidated
Financial Statements in our 2020 Annual Report, Novartis
reached settlements with the US Department of Justice
(DOJ) and the US Securities and Exchange Commission
(SEC) that resolved all FCPA investigations into histori-
cal conduct by Novartis and its subsidiaries. To resolve
the DOJ investigation, Novartis Hellas S.A.C.I. entered
into a deferred prosecution agreement (DPA) with the
DOJ. To resolve the SEC investigation, Novartis AG
reached an agreement that resulted in an Order issued
by the SEC. The DPA and the Order each contained cer-
tain reporting and compliance obligations for a three-
year term, which ended on June 26, 2023. On Decem-
ber 21, 2023 the court formally dismissed the Information
filed against Novartis Hellas S.A.C.I at the request of the
DOJ. This matter is now concluded.
Summary of product liability, governmental
investigations and other legal matters provision
movements
(USD millions)
January 1
Provisions related to
discontinued operations 1
2023
702
– 97
2022
397
2021
487
Impact of acquisitions of businesses
4
Cash payments 2
Releases of provisions 3
Additions to provisions 4
Currency translation effects
December 31
Less current portion
Non-current product
liabilities, governmental
investigations and other
legal matters provisions
at December 31
– 448
– 219
170
16
124
– 42
– 105
– 292
– 52
466
– 8
702
– 548
– 44
251
– 5
397
– 56
82
154
341
1 Represents the provisions for product liability, governmental investigations and other
legal matters at January 1, 2023, related to the Sandoz business reported as
discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued
operations.
2 Cash payments from continuing operations were USD 67 million in 2022, and USD 64
million in 2021.
3 Releases of provisions credited to the consolidated income statement from
continuing operations were USD 38 million in 2022, and USD 18 million in 2021.
4 Additions to provisions charged to the consolidated income statement from
continuing operations were USD 435 million in 2022, and USD 190 million in 2021.
Novartis believes that its total provisions for investiga-
tions, product liability, arbitration and other legal matters
are adequate based upon currently available information.
However, given the inherent difficulties in estimating lia-
bilities, there can be no assurance that additional liabil-
ities and costs will not be incurred beyond the amounts
provided.
F-42
Notes to the Novartis consolidated financial statements
Discontinued operations
On October 4, 2023, the separation and spin-off of the
Sandoz business was completed (Note 2). Pursuant to
the Separation and Distribution Agreement that Novartis
and Sandoz entered into in connection with that sepa-
ration and spin-off, Sandoz and Novartis agreed, subject
to certain limitations, exclusions and conditions, that
Sandoz would retain or assume (as applicable) liabilities,
including pending and future claims that relate to the
spun-off Sandoz business (whether arising prior to, at or
after the date of execution of the Separation and Distri-
bution Agreement). Additionally, pursuant to the Sepa-
ration and Distribution Agreement, Sandoz agreed to
indemnify Novartis and each of its directors, officers,
managers, members, agents and employees against lia-
bilities incurred in connection with the spun-off Sandoz
business.
22. Current financial debt
and derivative financial instruments
(USD millions)
Bank and other financial debt 1
Commercial paper
Current portion of non-current financial debt
Derivative financial instruments
2023
624
3 269
2 191
91
2022
863
2 772
2 241
55
Total current financial debt and derivative
financial instruments
6 175
5 931
1 Weighted average interest rate during the year 2023 13.2% (2022: 9.7%)
The carrying amounts of current financial debt, other
than the current portion of non- current financial debt,
approximate the estimated fair value due to the short-
term nature of these instruments.
Details on commercial papers and short-term bor-
rowings are provided under “Liquidity risk” in Note 30.
23. Provisions and other current liabilities
(USD millions)
Taxes other than income taxes
Restructuring provisions
Accrued expenses for goods and services received but not invoiced
Accruals for royalties
Accrued interests on financial debt
Provisions for deductions from revenue
Accruals for compensation and benefits, including social security
Environmental remediation provisions
Deferred income
Provisions for product liabilities, governmental investigations and other legal matters 1
Accrued share-based payments
Contingent consideration 2
Other payables
2023
516
703
1 026
844
116
6 315
2 330
20
98
42
322
14
820
2022
836
1 131
1 059
767
116
6 732
2 321
53
123
548
235
131
743
Total provisions and other current liabilities
13 166
14 795
1 Note 21 provides additional disclosures related to legal provisions.
2 Note 30 provides additional disclosures related to contingent consideration.
Provisions are based upon management’s best estimate and adjusted for actual experience. Such adjustments to
historic estimates have not been material.
F-43
Notes to the Novartis consolidated financial statements
Provisions for deductions from revenue
The following table shows the movement of the provisions for deductions from revenue:
(USD millions)
January 1
Provisions related to discontinued operations 1
Effect of currency translation, business combinations
Payments/utilizations 2
Adjustments of prior years charged to income statement 3
Current year income statement charge 4
Change in provisions offset against gross trade receivables 5
December 31
2023
2022
6 732
6 481
2021
6 256
– 1 415
68
– 210
– 218
– 16 703
– 22 261
– 19 838
– 206
– 322
– 245
17 798
23 072
20 413
41
– 28
113
6 315
6 732
6 481
1 Represents the provision for deductions from revenue at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide
disclosures related to discontinued operations.
2 Payments/utilizations from continuing operations were USD 14 691 million in 2022 and USD 12 473 million in 2021.
3 Adjustments of prior years charged to income statement from continuing operations were USD 218 million in 2022, and USD 251 million in 2021.
4 Current year income statement charge from continuing operations were USD 15 231 million in 2022 and USD 13 084 million in 2021.
5 Change in provisions offset against gross trade receivables from continuing operations were USD 2 million in 2022 and USD – 44 million in 2021.
The provisions for deductions from revenue include spe-
cific healthcare plans and program rebates as well as
non-healthcare plans and program-related rebates,
returns and other deductions. The provisions for deduc-
tions from revenue are adjusted to reflect experience
and to reflect actual amounts as rebates, refunds, dis-
counts and returns are processed. The provision rep-
resents estimates of the related obligations, requiring
the use of judgment when estimating the effect of these
deductions from revenue.
Restructuring provisions movements
(USD millions)
January 1
Provisions related to
discontinued operations 1
Additions to provisions 2
Cash payments 3
Releases of provisions 4
Transfers 5
Currency translation effects
December 31
2023
1 131
– 51
658
– 816
– 193
– 57
31
703
2022
345
2021
459
1 368
– 468
– 42
– 53
– 19
1 131
328
– 344
– 54
– 27
– 17
345
1 Represents the restructuring provisions at January 1, 2023, related to the Sandoz
business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures
related to discontinued operations.
2 Additions to provisions charged to the consolidated income statement from
continuing operations were USD 1.3 billion in 2022 and USD 266 million in 2021.
3 Cash-payments from continuing operations were USD 421 million in 2022 and USD
259 million in 2021.
4 Releases of provisions credited to the consolidated income statement from
continuing operations were USD 33 million in 2022 and USD 29 million in 2021.
5 Transfers from continuing operations were USD 53 million in 2022 and USD 24 million
in 2021.
Restructuring provisions are recognized for the direct
expenditure arising from the restructuring, where the
plans are sufficiently detailed and where appropriate
communication to those affected has been made.
Charges to increase restructuring provisions are
included in “Other expense” in the consolidated income
statements.
In 2023, additions to provisions of USD 658 million
were mainly related to the continuation of the initiative
announced in April 2022 to implement a new streamlined
organizational model designed to support innovation,
growth and productivity.
In 2022, additions to provisions of USD 1.4 billion were
mainly related to the following reorganizations:
• Initiative announced in April 2022 to implement a new
streamlined organizational model designed to support
innovation, growth and productivity.
• The continuation of the 2021 restructuring initiatives.
In 2021, additions to provisions of USD 328 million were
mainly related to the following reorganizations:
• The commencement of a plan to restructure the field
force and supporting functions in response to changes
in the Company’s go-to-market structure with increased
utilization of digital technology.
• Company-wide initiatives to streamline manufacturing
platforms and manufacturing functions and implement
new technologies continued. In addition, the Opera-
tions unit (formerly Customer & Technology Solutions)
continued the phased implementation of the new oper-
ating model to transition activities to service centers.
F-44
Notes to the Novartis consolidated financial statements
24. Details to the consolidated statements of cash flows
24.1) Non-cash items and other adjustments from continuing operations
The following table shows the reversal of non-cash items and other adjustments in the consolidated statements of
cash flows.
(USD millions)
Depreciation, amortization and impairments on:
Property, plant and equipment
Right-of-use assets
Intangible assets
Financial assets 1
Change in provisions and other non-current liabilities
Gains on disposal and other adjustments on property, plant and equipment; intangible assets;
financial assets and other non-current assets, net
Equity-settled compensation expense
Loss/(income) from associated companies 2
Income taxes
Net financial expense
Other
Total
1 Includes fair value changes
2 2021 included the gain of USD 14.6 billion recognized from the divestment of the Company’s investment in Roche (see Notes 2 and 5).
2023
2022
2021
1 006
1 374
1 277
263
270
279
7 008
5 061
4 041
106
61
260
1 318
– 180
– 308
– 38
806
– 646
700
865
13
551
633
43
791
11
– 15 337
1 128
1 625
758
– 32
863
10 369
10 631
– 6 430
In 2023, other than through business combinations,
there were no additions to intangible assets with deferred
payments (2022: USD 635 million, 2021: nil).
In 2023, there were USD 421 million (2022: USD 216
million, 2021: USD 295 million) additions to right-of-use
assets recognized.
F-45
Notes to the Novartis consolidated financial statements
24.2) Total amount of income taxes paid
In 2023, the total amount of income taxes paid by con-
tinuing operations was USD 2 787 million and by discon-
tinued operations was USD 162 million, which was
included within “Net cash flows from operating activities
from discontinued operations.” In 2023, the total amount
of income taxes paid by the Company was USD 2 949
million.
In 2022, the total amount of income taxes paid by
continuing operations was USD 1 702 million and by dis-
continued operations was USD 273 million, which was
included within “Net cash flows from operating activities
from discontinued operations.” In 2022, the total amount
of income taxes paid by the Company was USD 1 975
million.
In 2021, the total amount of income taxes paid by
continuing operations was USD 1 856 million and by dis-
continued operations was USD 486 million, which was
included within “Net cash flows from operating activities
from discontinued operations.” In 2021, the total amount
of income taxes paid by the Company was USD 2 342
million.
24.3) Cash flows from changes in working capital and other operating items included in
the net cash flows from operating activities from continuing operations
(USD millions)
Increase in inventories
Increase in trade receivables
Increase/(decrease) in trade payables
Change in other current and non-current assets
Change in other current liabilities
Total
2023
– 546
– 1 504
479
– 125
1 327
– 369
2022
– 560
– 397
– 181
– 84
426
– 796
2021
– 102
– 352
– 111
– 179
671
– 73
24.4) Cash flows arising from acquisitions and divestments of interests in associated
companies, net
In 2021, acquisitions and divestments of interests in associated companies, net included USD 20.7 billion proceeds
from the divestment of the Company’s investment in Roche (see Notes 2 and 5).
24.5) Cash flows arising from acquisitions and divestments of businesses, net
The following table is a summary of the cash flow impact of acquisitions and divestments of businesses. The most
significant trans actions are described in Note 2.
(USD millions)
Net assets recognized as a result of acquisitions of businesses
Fair value of previously held equity interests
Contingent consideration payables, net
Payments, deferred consideration and other adjustments, net
Cash flows used for acquisitions of businesses
Cash flows from/(used for) divestments of businesses, net 1
Cash flows used for acquisitions and divestments of businesses, net
Note
2023
2022
25
– 3 699
– 1 077
26
146
– 34
21
224
0
2021
– 320
42
18
1
– 3 561
– 832
– 259
3
– 8
54
– 3 558
– 840
– 205
1 In 2023, USD 3 million represented net cash inflows from divestments in previous years.
In 2022, USD 8 million net cash outflows from divestments of businesses included USD 20 million reduction to cash and cash equivalents due to the derecognized cash and cash
equivalents following a loss of control of a company upon expiry of an option to purchase the company, partly offset by USD 12 million net cash inflows from business divestments in
2022 and in prior years.
In 2022, the net identifiable assets of divested businesses amounted to USD 139 million, comprised of non-current assets of USD 127 million, current assets of USD 70 million,
including USD 62 million cash and cash equivalents and of non-current and current liabilities of USD 58 million. The deferred sale price receivable and other adjustments amounted
to USD 19 million.
In 2021, USD 54 million included net cash inflows from divestments in previous years.
Notes 2 and 25 provide further information regarding acquisitions and divestments of businesses. All acquisitions
were for cash.
F-46
Notes to the Novartis consolidated financial statements
24.6) Reconciliation of liabilities arising from financing activities
Payments of lease liabilities 5
– 258
– 295
(USD millions)
January 1
Financial debts, derivative financial
instruments and lease liabilities
related to discontinued operations 1
Increase in non-current financial debts 2
Repayments of the current portion
of non-current financial debts 3
– 2 223
Change in current financial debts 4
546
Interest payments for amounts included
in lease liabilities classified as
cash flows from operating activities 6
New, modified and
terminated leases, net
Impact of acquisitions and
divestments of businesses, net
Changes in fair values, lease interest
and other changes, net
Amortization of bonds discount
Currency translation effects
December 31
Non-current 7
Current 7
– 2
17
276
24 520
18 436
6 084
2023
2022
2021
Financial
debts
Derivative
financial
instruments
Lease
liabilities
Financial
Derivative
financial
debts instruments
Lease
liabilities
Financial
Derivative
financial
debts instruments
Lease
liabilities
26 120
55
1 789
29 129
68
1 896
35 850
194
2 005
– 214
– 1
– 98
16
– 2 575
295
16
– 2 162
– 3 524
– 52
349
51
28
37
– 51
222
12
60
1
1
29
– 13
22
19
– 767
– 55
– 1 082
91
1 828
26 120
55
1 789
29 129
1 598
20 244
1 538
22 902
– 316
– 52
253
– 125
62
– 1
68
– 56
1 896
1 621
91
230
5 876
55
251
6 227
68
275
1 Represents the financial debts, derivative financial instruments and lease liabilities at January 1, 2023 related to the Sandoz business reported as discontinued operations. Notes 1,
2 and 31 provide disclosures related to discontinued operations.
2 Increases in non-current financial debts included in the consolidated statements of cash flows from continuing operations were nil in 2022 and 2021.
3 Repayments of the current portion of non-current financial debts were only recorded in the consolidated statements of cash flows from continuing operations.
4 Changes in current financial debts included in the consolidated statements of cash flows from continuing operations were USD 252 million in 2022 (2021: USD 3 547 million) which
included net cash outflows from interest-bearing accounts of employees payable on demand amounting to USD 1.7 billion.
5 Payments of lease liabilities included in the consolidated statements of cash flows from continuing operations were USD 262 million in 2022 (2021: USD 278 million).
6 Interest payments for amounts included in lease liabilities classified as cash flows from operating activities within the consolidated statements of cash flows from continuing
operations were USD 48 million in 2022 (2021: USD 48 million).
7 Note 11 provides additional disclosures related to lease liabilities, Note 20 provides additional disclosures related to non-current financial debt, and Note 22 provides additional
disclosures related to current financial debt and derivative financial instruments.
F-47
Notes to the Novartis consolidated financial statements
25. Acquisitions of businesses
Fair value of assets and liabilities arising from acquisitions of businesses:
(USD millions)
Property, plant and equipment
Right-of-use assets
Currently marketed products
Acquired research and development
Other intangible assets
Deferred tax assets
Non-current financial and other assets
Trade receivables and financial and other current assets
Cash and cash equivalents
Deferred tax liabilities
Current and non-current financial debts
Current and non-current lease liabilities
Trade payables and other liabilities
Net identifiable assets acquired
Acquired cash and cash equivalents
Non-controlling interests
Goodwill
Net assets recognized as a result of acquisitions of businesses 1
2023
2022
2021
18
16
13
12
2 931
1 209
15
34
164
183
226
56
5
89
– 474
– 300
– 51
– 231
2 831
– 226
– 12
– 67
1 005
– 89
1 094
3 699
161
1 077
292
262
98
28
1
10
– 74
– 1
– 4
612
– 10
– 105
238
735
1 In 2023 and 2022 all net assets recognized relate to business combinations of continuing operations. In 2021, net assets recognized as a result of acquisitions of businesses from
continuing operations were USD 320 million.
Note 2 details significant acquisitions of businesses by
continuing operations, specifically the acquisition of DTx
Pharma and Chinook Therapeutics in 2023, and of Gyro-
scope in 2022. Note 31 details significant acquisitions by
discontinued operations, specifically the cephalosporin
antibiotics business from GSK by Sandoz in 2021. The
goodwill arising out of these acquisitions is attributable
to the synergies, the accounting for deferred tax liabili-
ties on the acquired assets and the assembled work-
force. In 2023, no goodwill (2022: nil; 2021: USD 107 mil-
lion) is tax deductible.
26. Post-employment benefits for employees
Defined benefit plans
In addition to the legally required social security schemes,
the Company has numerous independent pension and
other post-employment benefit plans. In most cases,
these plans are externally funded in entities that are
legally separate from the Company. For certain Com-
pany entities, however, no independent plan assets exist
for the pension and other post-employment benefit obli-
gations of employees. In these cases, the related
unfunded liability is included in the balance sheet. The
defined benefit obligations (DBOs) of all major pension
and other post-employment benefit plans are reap-
praised annually by independent actuaries using the pro-
jected unit credit method. Plan assets are recognized at
fair value.
The major plans are based in Switzerland, the United
States, the United Kingdom, Germany and Japan, which
represent 96% of the Company’s total DBO for pension
plans. Details of the plans in the two most significant
countries, Switzerland and the United States, which rep-
resent 84% of the Company’s total DBO for post-em-
ployment benefit plans, are provided below.
Swiss-based pension plans represent the most sig-
nificant portion of the Company’s total DBO and plan
assets. For the active insured members the benefits are
linked to contributions paid into the plan, interest cred-
its granted and conversion rates applied.
All benefits granted under Swiss-based pension
plans are vested, and Swiss legislation prescribes that
the employer has to contribute a fixed percentage of an
employee’s pay to an external pension fund. Additional
employer contributions may be required whenever the
plan’s statutory funding ratio falls below a certain level.
The employee also contributes to the plan. The pension
plans are run by separate legal entities, each governed
by a board of trustees that – for the principal plans – con-
sists of representatives nominated by Novartis and the
F-48
Notes to the Novartis consolidated financial statements
active insured employees. The boards of trustees are
responsible for the plan design and asset investment
strategy.
Furthermore, in certain countries, employees are cov-
ered under other post-employment benefit plans and
post-retirement medical plans.
The United States pension plans represent the sec-
ond-largest component of the Company’s total DBO and
plan assets. The principal plans (Qualified Plans) are
funded, whereas plans providing additional benefits for
executives (Restoration Plans) are unfunded. Employer
contributions are required for Qualified Plans whenever
the statutory funding ratio falls below a certain level.
In the US, other post-employment benefit plans con-
sist primarily of post-employment healthcare benefits,
which have been closed to new members since 2015.
Part of the costs of these plans is reimbursable under
the Medicare Prescription Drug, Improvement, and Mod-
ernization Act of 2003. There is no statutory funding
requirement for these plans. The Company is funding
these plans to the extent that it is tax efficient.
The following tables are a summary of the funded and unfunded defined benefit obligation for pension and other
post-employment benefit plans of employees at December 31, 2023 and 2022:
Pension plans
Other post-employment
benefit plans
(USD millions)
Benefit obligation at January 1
Benefit obligations related to discontinued operations 1
Current service cost
Interest cost
Past service costs and settlements
Administrative expenses
Remeasurement gains arising from changes in financial assumptions 2
Remeasurement (gains)/losses arising from changes in demographic assumptions
Experience-related remeasurement losses/(gains)
Currency translation effects
Benefit payments
Contributions of employees
Effect of acquisitions, divestments or transfers
Benefit obligation at December 31
Fair value of plan assets at January 1
Plan assets related to discontinued operations 1
Interest income
Return on plan assets excluding interest income
Currency translation effects
Novartis contributions
Contributions of employees
Settlements
Benefit payments
Effect of acquisitions, divestments or transfers
Fair value of plan assets at December 31
Funded status
2022
560
12
17
1
– 94
– 28
– 2
– 44
422
73
2
– 12
2023
2022
17 533
23 583
– 529
260
504
28
25
348
249
– 40
23
1 350
– 5 046
– 303
23
– 53
199
1 304
– 650
2023
422
– 26
9
22
13
– 14
44
4
– 1 384
– 1 253
– 34
174
52
174
– 1
19 037
17 533
18 945
22 420
– 386
514
175
220
– 2 500
1 524
– 539
408
174
– 35
424
174
– 1
440
60
2
10
33
41
– 1 384
– 1 253
– 34
– 44
– 1
19 934
18 945
71
60
897
1 412
– 369
– 362
Limitation on recognition of fund surplus at January 1
– 2 644
– 62
Limitation on recognition of fund surplus at January 1,
related to discontinued operations
Change in limitation on recognition of fund surplus
Currency translation effects
Interest income on limitation of fund surplus
Limitation on recognition of fund surplus at December 31 3
6
740
– 2 504
– 209
– 60
– 76
– 2
– 2 167
– 2 644
Net liability in the balance sheet at December 31
– 1 270
– 1 232
– 369
– 362
1 Represents the benefit obligation, respectively the plan assets at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide
disclosures related to discontinued operations.
2 The remeasurement gains arising from changes in financial assumptions is driven mainly by changes in the actuarial discount rates used to determine the benefit obligation.
3 The most significant pension plans where the asset ceiling was required to be applied were in Switzerland and amounted to USD 2 112 million (2022: USD 2 587 million).
F-49
Notes to the Novartis consolidated financial statements
The reconciliation of the net liability from January 1 to December 31 is as follows:
(USD millions)
Net liability at January 1
Less: net liability related to discontinued operations 1
Current service cost
Net interest expense
Administrative expenses
Past service costs and settlements
Remeasurements
Currency translation effects
Novartis contributions
Effect of acquisitions, divestments or transfers
Change in limitation on recognition of fund surplus
Net liability at December 31
Amounts recognized in the consolidated balance sheet
Prepaid benefit cost
Accrued benefit liability
Pension plans
Other post-employment
benefit plans
2023
2022
– 1 232
– 1 225
149
– 260
– 348
– 50
– 25
– 63
– 31
– 23
39
– 895
2 400
11
408
– 53
740
35
424
1
– 2 504
2023
– 362
26
– 9
– 20
– 33
– 4
33
2022
– 487
– 12
– 15
– 1
110
2
41
– 1 270
– 1 232
– 369
– 362
545
491
– 1 815
– 1 723
– 369
– 362
1 Represents the net liability at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued
operations
The following table shows a breakdown of the DBO for pension plans by geography and type of member, and the
breakdown of plan assets into the geographical locations in which they are held:
(USD millions)
Switzerland
United
States
Rest of
the world
Total Switzerland
United
States
Rest of
the world
Total
Benefit obligation at December 31
13 453
2 574
3 010
19 037
11 824
2 746
2 963
17 533
2023
2022
Thereof unfunded
By type of member
Active
Deferred pensioners
Pensioners
538
390
928
556
363
919
5 557
389
770
847
912
6 793
4 799
1 682
431
830
931
861
6 161
1 691
7 896
1 415
1 251
10 562
7 025
1 485
1 171
9 681
Fair value of plan assets at December 31
15 892
1 835
2 207
19 934
14 701
1 978
2 266
18 945
Funded status
2 439
– 739
– 803
897
2 877
– 768
– 697
1 412
The following table shows a breakdown of the DBO for other post-employment benefit plans by geography and
type of member, and the breakdown of plan assets into the geographical locations in which they are held:
(USD millions)
Benefit obligation at December 31
Thereof unfunded
By type of member
Active
Deferred pensioners
Pensioners
Fair value of plan assets at December 31
United
States
356
285
30
1
325
71
2023
Rest of
the world
84
84
10
0
74
0
United
States
346
286
30
8
308
60
2022
Rest of
the world
76
76
18
0
58
0
Total
440
369
40
1
399
71
Total
422
362
48
8
366
60
Funded status
– 285
– 84
– 369
– 286
– 76
– 362
F-50
Notes to the Novartis consolidated financial statements
The following table shows the principal weighted average actuarial assumptions used for calculating defined ben-
efit plans and other post- employment benefits of employees:
Weighted average assumptions used to determine
benefit obligations at December 31
Discount rate
Expected rate of pension increase
Expected rate of salary increase
Interest on savings account
Current average life expectancy
for a 65-year-old male in years
Current average life expectancy
for a 65-year-old female in years
Pension plans
Other post-employment
benefit plans
2023
2022
2021
2023
2022
2021
2.2%
0.3%
3.0%
1.3%
22
24
3.0%
0.4%
2.9%
2.2%
22
24
0.9%
0.5%
2.7%
0.5%
22
24
5.5%
6.3%
3.3%
21
23
21
23
21
23
Changes in the aforementioned actuarial assumptions
can result in significant volatility in the accounting for the
Company’s pension plans in the consolidated financial
statements. This can result in substantial changes in the
Company’s other comprehensive income, long-term lia-
bilities and prepaid pension assets.
The DBO is significantly impacted by assumptions
regarding the rate that is used to discount the actuari-
ally determined post-employment benefit liability. This
rate is based on yields of high-quality corporate bonds
in the country of the plan. Decreasing corporate bond
yields decrease the discount rate, so that the DBO
increases and the funded status decreases.
In Switzerland, an increase in the DBO due to lower
discount rates is slightly offset by lower future benefits
expected to be paid on the employee’s savings account
where the assumption on interest accrued often changes
broadly in line with the discount rate.
The impact of decreasing interest rates on a plan’s
assets is more difficult to predict. A significant part of
the plan assets is invested in bonds. Bond values usually
rise when interest rates decrease and may therefore par-
tially compensate for the decrease in the funded status.
Furthermore, pension assets also include significant
holdings of equity instruments. Share prices usually tend
to rise when interest rates decrease and therefore often
counteract the negative impact of the rising defined ben-
efit obligation on the funded status (although the
correlation of interest rates with equities is not as strong
as with bonds, especially in the short term).
The expected rate for pension increases significantly
affects the DBO of most plans in Switzerland, Germany
and the United Kingdom. Such pension increases also
decrease the funded status, although there is no strong
correlation between the value of the plan assets and
pension/inflation increases.
Assumptions regarding life expectancy significantly
impact the DBO. An increase in longevity increases the
DBO. There is no offsetting impact from the plan assets,
as no longevity bonds or swaps are held by the pension
funds. The Company’s actuaries use mortality tables that
take into account historic patterns and expected
changes, such as further increases in longevity.
In 2023 the mortality assumptions used for the pen-
sion plans in Switzerland were based on BVG 2020
tables with future improvements based on the Continu-
ous Mortality Investigation (‘CMI’) model (2022: based
on the BVG generational model). For the pension and
postretirement medical benefit plans in the US, the Soci-
ety of Actuaries Pri-2012 mortality tables with genera-
tional improvements based on Scale MP-2021 are used.
The following table shows the sensitivity of the
defined benefit pension obligation to the principal actu-
arial assumptions for the major plans in Switzerland, the
United States, the United Kingdom, Germany and Japan
on an aggregated basis:
(USD millions)
25 basis point increase in discount rate
25 basis point decrease in discount rate
One-year increase in life expectancy
25 basis point increase in rate of pension increase
25 basis point decrease in rate of pension increase
25 basis point increase of interest on savings account
25 basis point decrease of interest on savings account
25 basis point increase in rate of salary increase
25 basis point decrease in rate of salary increase
F-51
Change in 2023
year-end defined
benefit pension
obligation
Change in 2022
year-end defined
benefit pension
obligation
– 528
– 466
557
644
366
– 61
43
– 42
41
– 42
491
535
316
– 63
38
– 37
37
– 37
Notes to the Novartis consolidated financial statements
The healthcare cost trend rate assumptions used for
other post- employment benefits are as follows:
The weighted average duration of the defined benefit
pension obligation is 12.3 years (2022: 11.8 years).
Healthcare cost trend rate
assumed for next year
Rate to which the cost trend
rate is assumed to decline
Year that the rate reaches
the ultimate trend rate
2023
2022
2021
6.3% 6.5% 6.0%
4.5% 4.5% 4.5%
2031 2031 2028
The following table shows the weighted average plan
asset allocation of funded defined benefit pension plans
at December 31, 2023 and 2022:
Pension plans
The Company’s ordinary contribution to the various
pension plans is based on the rules of each plan. Addi-
tional contributions are made whenever this is required
by statute or law (i.e., usually when statutory funding lev-
els fall below predetermined thresholds). The only sig-
nificant plan that requires additional funding is in Ger-
many.
The expected future cash flows over the upcoming
10 years in respect of pension and other post-employ-
ment benefit plans at December 31, 2023, were as fol-
lows:
(as a percentage)
Equity securities
Debt securities
Real estate
Alternative investments
Cash and other investments
Total
Long-term Long-term
target
minimum maximum
target
15
20
5
0
0
40
60
30
20
15
(USD millions)
Pension plans
Company contributions
2023
2022
2024 (estimated)
25
34
19
17
5
24
31
21
18
6
100
100
Expected future benefit payments
2024
2025
2026
2027
2028
2029–2033
388
1 434
1 317
1 186
1 159
1 132
5 316
Other post-
employment
benefit plans
39
40
40
40
39
38
175
Cash and most of the equity and debt securities have a
quoted market price in an active market. Real estate and
alternative investments, which include hedge fund, pri-
vate equity, infrastructure and commodity investments,
usually have a quoted market price or a regularly updated
net asset value.
The strategic allocation of assets of the different pen-
sion plans is determined with the objective of achieving
an investment return that, together with the contributions
paid by the Company and its employees, is sufficient to
maintain reasonable control over the various funding
risks of the plans. Based upon local requirement, the
market and economic environments, actual asset allo-
cations may be permitted to deviate from policy targets.
The asset allocation currently includes investments in
shares of Novartis AG as per the below table:
Investment in shares of Novartis AG
Number of shares (in millions)
Market value (in USD billions)
December 31, December 31,
2022
2023
2.3
0.2
2.3
0.2
Defined contribution plans
In many subsidiaries, employees are covered by defined
contribution plans. Contributions charged to the consol-
idated income statement for continuing operations for
the defined contribution plans were:
(USD millions)
2023
2022
2021
Contributions for defined contribution plans
continuing operations
477
483
484
The Company’s total personnel costs for continuing
operations amounted to USD 12.7 billion in 2023 (2022:
USD 13.1 billion).
F-52
Notes to the Novartis consolidated financial statements
27. Equity-based participation plans for employees
The equity-based compensation expense from continu-
ing operations related to all equity-based participation
plans and the liabilities arising from equity-based pay-
ment transactions were as follows:
eligible to participate in the ESPP commencing in 2024,
according to a multi-year phased implementation plan.
The shares are not subject to a vesting period.
(USD millions)
2023
2022
2021
Expense related to equity-based
participation plans
1 142
982
Liabilities arising from equity-based
payment transactions
322
235
910
253
Equity-based participation plans can be separated into
the following plans:
Annual Incentive
The Annual Incentive for the Novartis Company CEO and
other Executive Committee members (ECN) is paid 50%
in cash and 50% in Novartis restricted shares (RSs) or
restricted share units (RSUs). For a select portion of
Novartis management leadership team, the Annual
Incentive is paid 70% in cash and 30% in RSs or RSUs.
Both the ECN and a select portion of Novartis manage-
ment leadership team can opt to invest up to the maxi-
mum cash portion of their Annual Incentive to receive
further RSs or RSUs. Any cash is paid out during March
in the year following the end of the performance period,
and the shares are granted during January in the year
following the end of the performance period.
Employee share savings plan
Novartis operates employee share savings and purchase
plans in certain countries. The most significant is
described below.
The Employee Share Ownership Plan (ESOP) in Swit-
zerland offers participants to choose to receive their
Annual Incentive (i) 100% in shares, (ii) 50% in shares
and 50% in cash, or (iii) 100% in cash. After the expira-
tion of a three-year holding period for Novartis shares
invested under the ESOP, participants receive one
matching share for every two invested shares. Employ-
ees eligible for the equity plan “Select” are not eligible
to receive ESOP matching shares. The Novartis Com-
pany CEO, the other Executive Committee members and
a select portion of Novartis management leadership
team are not eligible to participate in this plan.
Novartis Employee share purchase
plan
In 2022 Novartis started to grant shares under the
Employee Share Purchase Plan (ESPP). The ESPP
enables employees to voluntarily purchase Novartis AG
shares through payroll deductions at a discounted price.
While the ESPP is global in scope, the first phase covers
employees in North America (the US, Puerto Rico and
Canada). Other countries employees will become
Novartis equity plan “Select”
The equity plan “Select” is a global equity incentive plan
under which eligible employees may annually be awarded
a grant subject to a three-year, and for eligible employ-
ees of selected Company units a four-year, staggered
vesting period. No awards are granted for performance
ratings below a certain threshold. Executive Committee
members and a select portion of Novartis management
leadership team are not eligible to participate in the
equity plan “Select.”
The equity plan “Select” currently allows participants
employed and living in Switzerland to choose the form
of their equity compensation in RSs or RSUs. In all other
jurisdictions, RSs or RSUs are granted unilaterally. Until
2013, participants could also choose to receive part or
the entire grant in the form of tradable share options.
All tradable share options expired on their 10th anni-
versary from the grant date, which was in January 2023.
Each tradable share option entitled the holder to pur-
chase after vesting (and before the 10th anniversary from
the grant date) one Novartis share at a stated exercise
price that equals the closing market price of the under-
lying share at the grant date. As the exercise price did
not reflect the decrease in the Novartis share due to the
Alcon spin, one-fifth of an Alcon share was also awarded
to the option holder upon exercise.
Options under Novartis equity plan “Select”
outside North America
The following table shows the activity associated with
the share options during the period. The weighted aver-
age prices in the table below are translated from Swiss
francs into USD at historical rates.
2023
2022
Weighted
average
exercise
Options
(millions)
price Options
(USD) (millions)
Weighted
average
exercise
price
(USD)
Options outstanding
at January 1
0.5
66.0
1.7
63.6
Sold or exercised
– 0.5
66.0
– 1.2
62.6
Outstanding at December 31
Exercisable at December 31
0.0
0.0
0.5
0.5
66.0
66.0
All share options were granted at an exercise price that
was equal to the closing market price of the Company’s
shares at the grant date. The weighted average share
price at the dates of sale or exercise was USD 92.61.
F-53
Notes to the Novartis consolidated financial statements
Options under Novartis equity plan “Select” for
North America
The following table shows the activity associated with
the ADR options during the period:
2023
2022
Weighted
average
ADR exercise
options
(millions)
price options
(USD) (millions)
Weighted
average
ADR exercise
price
(USD)
Options outstanding
at January 1
1.1
66.1
4.0
64.4
Sold or exercised
– 1.1
66.1
– 2.9
63.7
Outstanding at December 31
Exercisable at December 31
0.0
0.0
1.1
1.1
66.1
66.1
All ADR options were granted at an exercise price that
was equal to the closing market price of the ADRs at the
grant date. The weighted average share price at the
dates of sale or exercise was USD 91.68.
Long-Term Performance Plan
The Long-Term Performance Plan (LTPP) is an equity plan
for the ECN, a select portion of Novartis management
leadership team and employees of Company units with
specific targets.
Participants are granted a target number of perfor-
mance share units (PSUs) at the beginning of every per-
formance period, which are converted into unrestricted
Novartis shares after the performance period. The actual
payout depends on the achievement of the performance
measures and ranges between 0% and 200% of the
granted amount. PSUs granted under the LTPP do not
carry voting rights, but do carry dividend equivalents that
are paid in unrestricted Novartis shares at the end of the
performance period.
The LTPP awards are subject to a three-year perfor-
mance and vesting period. The performance criteria for
the ECN are based on both Novartis internal perfor-
mance metrics and variables that can be observed in the
market, which is the ranking of the Novartis total
shareholder return (TSR) relative to a global healthcare
peer group of 14 other companies, over rolling three-year
performance periods. Only ECN members, as from per-
formance cycle 2023, are subject to the TSR perfor-
mance metric under the LTPP.
TSR for Novartis and the peer companies is calcu-
lated as the change in the company share price, which
is translated to USD at the relevant exchange rate, includ-
ing the reinvestment return of dividends, over the three-
year performance period. The calculation is based on
Bloomberg standard published TSR data, which is pub-
licly available. The position of Novartis in the peer group
determines the payout range based on a payout matrix.
Other share awards
Selected employees may exceptionally receive Special
Share Awards of RSs or RSUs. These Special Share
Awards provide an opportunity to reward outstanding
achievements or exceptional performance, and aim to
retain key contributors. They are based on a formal inter-
nal selection process, through which the individual per-
formance of each candidate is thoroughly assessed at
several management levels. Special Share Awards had
a minimum three-year vesting period before 2021 and
mainly three years thereafter. In exceptional circum-
stances, Special Share Awards may be awarded to
attract special expertise and new talents to the
organization. Externally recruited ECN members are eli-
gible only for special awards that are “buyouts” in the
case that it is to replace equity forfeited with their for-
mer employer. The equity is provided on a like-for-like
basis as the forfeited equity, at the same value with the
same vesting period, and with or without a performance
condition.
Worldwide, employees at different levels in the orga-
nization were awarded RSs and RSUs in 2023, 2022 and
2021.
In addition, in 2023, 2022 and 2021, Board members
received unrestricted shares as part of their regular com-
pensation.
F-54
Notes to the Novartis consolidated financial statements
Summary of share grants
The table below provides a summary of share grants (shares, RSs, RSUs and PSUs) for all plans. At the Sandoz
Distribution date, all RSU and PSU holders, who were not entitled to the dividend in kind in the form of Sandoz Group
AG shares received keep whole awards in Novartis AG shares to compensate for the loss of the Sandoz value from
their Novartis AG shares. These keep whole awards were accounted for as a modification, which did not signifi-
cantly change the fair value of the original grant. The change in fair value was measured by comparing the fair value
of the grant before the spin against the fair value of the grant plus keep whole award right after spin.
Annual Incentive
– RSU
– Restricted shares
Share savings plans
– RSU
– Shares
Novartis Employee Share Purchase Plan
Select North America (RSU)
Select outside North America
– RSU
– Restricted shares
Long-Term Performance Plan (PSU)
Other share awards
– RSU
– Restricted shares
– Shares
2023
2022
Number
Weighted
average fair
of shares value at grant
date in USD
in millions
Number
Weighted
average fair
of shares value at grant
date in USD
in millions
0.3
0.1
0.4
1.0
0.9
4.5
1.9
0.6
1.8
74.2
92.3
71.3
92.3
96.2
73.9
73.3
92.3
80.6
0.6
75.9
0.2
0.1
0.4
1.2
0.8
4.9
2.0
0.7
1.7
0.5
0.1
0.1
74.7
85.0
75.0
85.0
82.8
74.5
75.1
85.0
82.0
76.3
86.9
86.1
F-55
Notes to the Novartis consolidated financial statements
28. Transactions with related parties
Roche Holding AG
Novartis has two agreements with Genentech, Inc.,
United States (Genentech), and one agreement with
Spark Therapeutics, Inc., United States (Spark). Both
companies are subsidiaries of Roche Holding AG
(Roche), which were indirectly included in the consoli-
dated financial statements using equity accounting until
November 3, 2021, when Novartis entered into an agree-
ment with Roche to divest its 33.3% of Roche voting
shares. On December 6, 2021, Novartis divested its
investment in Roche, on which date Roche ceased to be
a related party (see Notes 2 and 5).
Lucentis
Novartis has licensed from Genentech/Roche the exclu-
sive rights to develop and market Lucentis outside the
United States for indications related to diseases of the
eye. Novartis pays royalties on the net sales to third par-
ties of Lucentis products outside the United States. From
January 1, 2021 until December 6, 2021, Lucentis sales
of USD 2.0 billion were recognized by Novartis.
Xolair
Novartis and Genentech/Roche are co-promoting Xolair
in the United States, where Genentech/Roche records
all sales. Novartis records sales outside the United
States.
Novartis markets Xolair and records all sales and
related costs outside the United States as well as co-pro-
motion costs in the US. Genentech/Roche and Novartis
share the resulting profits from sales in the United States,
Europe and other countries, according to agreed prof-
it-sharing percentages. From January 1, 2021 until
December 6, 2021, Novartis recognized total sales of
Xolair of USD 1.3 billion, including sales to Genentech/
Roche for the United States market.
Luxturna
In 2018, Novartis entered into an exclusive licensing and
commercialization agreement and a supply agreement
with Spark for Luxturna outside the United States. The
agreements include regulatory and sales milestones as
well as royalties payable to Spark on ex-US sales. On
December 17, 2019, Roche acquired Spark.
The net income for royalties, cost sharing and profit shar-
ing arising out of the Lucentis, Xolair and Luxturna agree-
ments with Roche totaled USD 188 million from January
1, 2021 until December 6, 2021.
Furthermore, Novartis has several patent license,
supply and distribution agreements with Roche.
Novartis Pension Fund
In 2018, a Company subsidiary provided an uncommit-
ted overnight credit facility to the Novartis Pension Fund,
Switzerland, for up to USD 500 million with interest at
the US Federal Funds Rate. This credit facility was not
utilized during the current and past years.
Executive Officers and Non-Executive Directors compensation
As at December 31, 2023, there were 11 Executive Com-
mittee members (“Executive Officers”). During 2023, 1
Executive Officer stepped down.
As at December 31, 2021, there were 12 Executive
Officers. During 2021, 3 Executive Officers stepped
down.
As at December 31, 2022, there were 11 Executive
Officers. During 2022, 5 Executive Officers stepped
down.
The total compensation for Executive Committee members and the 14 Non-Executive Directors (15 in 2022 and 14
in 2021) using the Company’s accounting policies for equity-based compensation and pension benefits was as fol-
lows:
(USD millions)
Cash and other compensation
Post-employment benefits
Equity-based compensation
Total
Executive Officers
Non-Executive Directors
Total
2023
18.0
2.1
62.2
82.3
2022
25.0
2.8
42.6
70.4
2021
20.3
2.5
37.3
60.1
2023
4.9
2022
2021
4.6
4.7
5.0
9.9
4.8
9.4
5.2
9.9
2023
22.9
2.1
67.2
92.2
2022
29.6
2.8
47.4
79.8
2021
25.0
2.5
42.5
70.0
During 2023, there was an increase in the IFRS Account-
ing Standards compensation expense for Executive Offi-
cers compared to 2022, primarily driven by higher
equity-based compensation, mainly due to higher real-
ized and expected payouts on the achievement of the
defined performance criteria, partly offset by lower cash
F-56
Notes to the Novartis consolidated financial statements
and other compensation, due to lower accelerated
expenses from stepped down Executive Officers com-
pared to 2022.
During 2022, there was an increase in the IFRS
Accounting Standards compensation expense for Exec-
utive Officers compared to 2021, driven by accelerated
expenses (cash and other compensation and equi-
ty-based compensation) required under IFRS Account-
ing Standards for the executive members who stepped
down in 2022, in accordance with their employment con-
tracts and the relevant incentive plan terms, compared
to the accelerated expenses due to executive officers
who stepped down in 2021.
During 2021, the IFRS Accounting Standards com-
pensation expense decreased due to one role less at the
ECN, and lower cash and equity compensation attribut-
able to former ECN members, partially offset by the net
increase of the IFRS Accounting Standards compensa-
tion expense of current ECN members.
The Annual Incentive award, which is fully included
in equity-based compensation even when paid out in
cash, is granted in January in the year following the
reporting period.
The disclosures on Board and executive compensa-
tion required by the Swiss Code of Obligations and in
accordance with the Swiss Ordinance against Excessive
Compensation in Stock Exchange Listed Companies are
shown in the Compensation Report of the Company.
Transactions with a former member of the Board of
Directors
Dr. Alex Krauer, was an Honorary Chairman of Novartis
and was entitled to an amount of CHF 60 000 for annual
periods from one AGM to the next. This amount was fixed
in 1998 upon his departure from the Board in 1999. The
last payment under this arrangement was in 2021.
29. Commitments and contingent liabilities
Research and development
commitments
The Company has entered into long-term research and
development agreements with various institutions related
to intangible assets. These agreements provide for
potential milestone payments by Novartis, which are
dependent on successful clinical development, or meet-
ing specified sales targets, or other conditions that are
specified in the agreements.
As of December 31, 2023, the amount and estimated
timing of the Company’s commitments to make payments
under those agreements, which are shown without risk
adjustment and on an undiscounted basis, were as fol-
lows:
(USD millions)
2024
2025
2026
2027
2028
Thereafter
Total
2023
202
269
493
316
597
4 206
6 083
Other commitments
The Company has entered into various purchase com-
mitments for services and materials as well as for equip-
ment in the ordinary course of business. These commit-
ments are generally entered into at current market prices
and reflect normal business operations. For the disclo-
sure of property, plant and equipment purchase commit-
ments, see Note 10. The Company routinely acquires
businesses and interests in intellectual property focused
on key disease areas and indications that the Company
expects to be growth drivers in the future. The Company
has commitments through to the date the consolidated
financial statements were approved for publication (see
Note 32), totaling USD 3.8 billion (of which USD 3.4 bil-
lion may become payable in 2024) related to the acqui-
sition of businesses and interests in intellectual property,
the majority of which is subject to the satisfaction of con-
ditions precedent in the arrangements.
Guarantees issued
The Company has issued guarantees to third parties in
the ordinary course of business, mostly for tax, customs
or other governmental agencies.
Commitments for capital calls
Contingent liabilities
The Company holds investments in funds in which it has
committed to invest further upon future capital calls. As
at December 31, 2023, the total uncalled capital com-
mitments for the Company’s investments in funds
amounts to USD 80 million. Note 30 contains further
information on the Company’s investments in funds.
Novartis companies have to observe the laws, govern-
ment orders and regulations of the country in which they
operate.
A number of Novartis companies are, and will likely
continue to be, subject to various legal proceedings and
investigations that arise from time to time, including
F-57
Notes to the Novartis consolidated financial statements
proceedings pertaining to: pricing; bribery and corrup-
tion; trade regulation and embargo legislation; product
liability; commercial disputes; employment and wrongful
discharge; antitrust and competition; securities; govern-
ment benefit programs; reimbursement; rebates; health-
care fraud; sales and marketing practices; insider trad-
ing; occupational health and safety; environmental
regulations; tax; cyber and data security; use of technol-
ogies, including AI; data privacy; regulatory interactions;
disclosure compliance; and intellectual property. As a
result, the Company may become subject to substantial
liabilities that may not be covered by insurance and that
could affect our business, financial position and reputa-
tion. While Novartis does not believe that any of these
legal proceedings will have a material adverse effect on
its financial position, litigation is inherently unpredictable
and large judgments sometimes occur. Consequently,
we may in the future incur judgments that could involve
large payments, including the potential repayment of
amounts allegedly obtained improperly, and other pen-
alties, including treble damages, any of which could have
a material adverse effect on our results of operations or
cash flow.
Governments and regulatory authorities around the
world have been stepping up their compliance and law
enforcement activities in recent years in key areas,
including marketing practices, pricing, corruption, trade
restrictions, embargo legislation, insider trading, anti-
trust, cyber security and data privacy. Furthermore, when
a government or regulatory authority undertakes an
investigation, it is not uncommon for other governments
or regulators to undertake investigations regarding the
same or similar matters. Responding to such investiga-
tions is costly and requires an increasing amount of man-
agement’s time and attention. In addition, such investi-
gations may affect our reputation, create a risk of
potential exclusion from government reimbursement
programs in the United States and other countries, and
lead to (or arise from) litigation. These factors have con-
tributed to decisions by Novartis and other co mpanies
in the healthcare industry, when deemed in their interest,
to enter into settlement agreements with governmental
authorities around the world prior to any formal decision
by the authorities or a court. These government settle-
ments have involved and may in the future involve large
cash payments, sometimes in the hundreds of millions
of dollars or more, including the potential repayment of
amounts allegedly obtained improperly and other pen-
alties, including treble damages. In addition, settlements
of government healthcare fraud cases and antitrust
cases often require companies to enter into corporate
integrity agreements, which are intended to regulate
company behavior for a period of years. Our affiliate
Novartis Corporation is party to such an agreement,
which will expire in 2025. In addition, matters underlying
governmental investigations and settlements may be the
subject of separate private litigation.
While provisions have been made for probable out-
flows of economic resources, which management deems
to be reasonable or appropriate, there are uncertainties
connected with these estimates.
Note 21 contains additional information on these mat-
ters.
A number of Novartis companies are involved in legal
proceedings concerning intellectual property rights. The
inherent unpredictability of such proceedings means
that there can be no assurances as to their ultimate out-
come. A negative result in any such proceeding could
potentially adversely affect the ability of certain Novartis
companies to sell their products, or require the payment
of substantial damages or royalties. The timing and the
outcome of legal proceedings and their potential finan-
cial effect are not predictable.
In the opinion of management, however, the outcome
of these actions will not materially affect the Company’s
financial position but could be material to the results of
operations or cash flow in a given period.
The Company’s potential environmental remediation
liability is assessed based on a risk assessment and
investigation of the various sites identified by the Com-
pany as at risk for environmental remediation exposure.
The Company’s future remediation expenses are affected
by a number of uncertainties. These uncertainties
include, but are not limited to, the method and extent of
remediation, the percentage of material attributable to
the Company at the remediation sites relative to that
attributable to other parties, and the financial capabili-
ties of the other potentially responsible parties.
Note 21 contains additional information on environ-
mental liabilities.
F-58
Notes to the Novartis consolidated financial statements
30. Financial instruments – additional disclosures
The following tables show the carrying values of finan-
cial instruments by measurement category as at Decem-
ber 31, 2023 and 2022. Except for straight bonds (see
Note 20), the carrying values are equal to, or a reason-
able approximation of, the fair values.
2023
(USD millions)
Cash and cash equivalents
Time deposits and short-term investments with original maturity more than 90 days
Trade receivables
Other receivables and current assets
Long-term financial investments – equity securities
Long-term financial investments – debt securities
Long-term financial investments – fund investments
Long-term loans, advances, security deposits and other long-term receivables
Associated companies at fair value through profit and loss
17
17
16
18
14
14
14
14
13 343
50
569
7 107
1 127
432
124
1 086
29
Financial
Financial instruments at
fair value
through the
instruments at through other consolidated
income
statement
amortized comprehensive
income
instruments at
fair value
Financial
costs
Note
Other
financial
liabilities at
amortized
costs
1
317
190
101
355
618
17
14/18
22 578
1 289
1 582
22
22
20
20
22
11
624
3 269
20 585
42
4 926
29 446
491
91
582
1 828
1 828
Derivative financial instruments
Contingent consideration receivables
Total financial assets
Bank and other short-term financial debt
Commercial paper
Straight bonds
Long-term liabilities to banks and other financial institutions
Trade payables
Contingent consideration liabilities (see Note 21/23) and other financial liabilities
Derivative financial instruments
Lease liabilities
Total financial liabilities
F-59
Notes to the Novartis consolidated financial statements
2022
(USD millions)
Cash and cash equivalents
Time deposits and short-term investments with original maturity more than 90 days
Trade receivables
Other receivables and current assets
Marketable securities – debt securities
Long-term financial investments – equity securities
Long-term financial investments – debt securities
Long-term financial investments – fund investments
Long-term loans, advances, security deposits and other long-term receivables
Associated companies at fair value through profit and loss
Derivative financial instruments
Contingent consideration receivables
Total financial assets
Bank and other short-term financial debt
Commercial paper
Straight bonds
Long-term liabilities to banks and other financial institutions
Trade payables
Contingent consideration liabilities (see Note 21/23) and other financial liabilities
Derivative financial instruments
Lease liabilities
Total financial liabilities
Financial
Financial instruments at
fair value
through the
instruments at through other consolidated
income
statement
amortized comprehensive
income
instruments at
fair value
Financial
costs
Note
Other
financial
liabilities at
amortized
costs
17
17
16
18
17
14
14
14
14
17
14
22
22
20
20
22
11
7 517
11 089
8 066
958
341
9
828
37
317
281
129
204
650
27 971
874
1 581
863
2 772
22 341
144
5 146
31 266
1 067
55
1 122
1 789
1 789
Derivative financial instruments
The following tables show the contract or underlying
principal amounts and fair values of derivative financial
instruments analyzed by type of contracts as at Decem-
ber 31, 2023 and 2022. Contract or underlying principal
amounts indicate the gross volume of business outstand-
ing at the consolidated balance sheet date and do not
represent amounts at risk. The fair values are determined
by reference to market prices or standard pricing mod-
els that use observable market inputs as at December
31, 2023 and 2022.
(USD millions)
Forward foreign exchange rate contracts
Commodity purchase contracts
Options on equity securities
Contract or underlying
principal amounts
2023
2022
11 944
7 907
76
97
39
Positive fair values
Negative fair values
2023
335
20
2022
189
15
2023
– 91
2022
– 41
– 14
Total derivative financial instruments included in
marketable securities and in current financial debts
12 020
8 043
355
204
– 91
– 55
The following table shows a breakdown by currency of the contract or underlying principal amounts of derivative
financial instruments as at December 31, 2023 and 2022:
(USD millions)
Forward foreign exchange rate contracts
Commodity purchase contracts
Total derivative financial instruments
EUR
2023
USD
Other
Total
1 629
8 980
1 335
11 944
61
15
76
1 690
8 995
1 335
12 020
F-60
Notes to the Novartis consolidated financial statements
(USD millions)
Forward foreign exchange rate contracts
Commodity purchase contracts
Options on equity securities
Total derivative financial instruments
EUR
687
80
2022
USD
Other
Total
5 659
1 561
7 907
17
39
97
39
767
5 715
1 561
8 043
Derivative financial instruments effective for hedge
accounting purposes
At the end of 2023 and 2022, there were no open hedg-
ing instruments for anticipated transactions.
Fair value by hierarchy
As required by the IFRS Accounting Standards, financial
assets and liabilities recorded at fair value in the consol-
idated financial statements are categorized based upon
the level of judgment associated with the inputs used to
measure their fair value. There are three hierarchical lev-
els, based on increasing subjectivity associated with the
inputs to derive fair valuation for these assets and liabil-
ities, which are as follows:
The assets carried at Level 1 fair value are equity and
debt securities as well as fund investments listed in active
markets.
The assets generally included in Level 2 fair value
hierarchy are derivatives, and certain debt securities. The
liabilities generally included in this fair value hierarchy
consist of derivatives. These are valued using corrobo-
rated market data.
Level 3 inputs are unobservable for the asset or lia-
bility. The assets generally included in Level 3 fair value
hierarchy are various investments in funds and unquoted
equity security investments. Contingent consideration
and other financial liabilities carried at fair value are
included in this category.
(USD millions)
Financial assets
Cash and cash equivalents
Debt securities 1
Total cash and cash equivalents at fair value
Marketable securities
Derivative financial instruments
Total marketable securities and derivative financial instruments at fair value
Fund investments and equity securities current
Current contingent consideration receivables
Long-term financial investments
Debt and equity securities
Fund investments
Non-current contingent consideration receivables
Total long-term financial investments at fair value
Associated companies at fair value through profit and loss
Financial liabilities
Current contingent consideration liabilities
Other financial liabilities current
Derivative financial instruments
Total current financial liabilities at fair values
Non-current contingent consideration liabilities
Total non-current financial liabilities at fair value
1 Includes short-term highly rated government-backed debt securities, with an original maturity of three months or less
2023
Level 1
Level 2
Level 3
Total
50
50
94
796
7
50
50
355
355
125
65
1 432
190
553
355
355
20
31
65
616
183
553
803
20
1 352
2 175
101
101
– 91
– 91
– 14
– 88
– 102
– 389
– 389
– 14
– 88
– 91
– 193
– 389
– 389
F-61
Notes to the Novartis consolidated financial statements
(USD millions)
Financial assets
Marketable securities and derivative financial instruments
Debt securities
Derivative financial instruments
Total marketable securities and derivative financial instruments at fair value
Current contingent consideration receivables
Long-term financial investments
Debt and equity securities
Fund investments
Non-current contingent consideration receivables
Total long-term financial investments at fair value
Associated companies at fair value through profit and loss
Financial liabilities
Contingent consideration liabilities
Derivative financial instruments
Total current financial liabilities at fair value
Non-current contingent consideration liabilities
Other financial liabilities
Total non-current financial liabilities at fair value
2022
Level 1
Level 2
Level 3
Total
9
204
213
10
9
204
213
43
1 182
281
607
43
699
261
607
473
20
493
10
1 567
2 070
129
129
– 55
– 55
– 131
– 131
– 704
– 232
– 936
– 131
– 55
– 186
– 704
– 232
– 936
The change in carrying values associated with Level 3 financial instruments, using significant unobservable inputs
during the year ended December 31, is set forth below:
(USD millions)
January 1
Impact from discontinued operations 1
Fair value gains and other adjustments, including from divestments
recognized in the consolidated income statement
Fair value losses (including impairments and amortizations) and
other adjustments recognized in the consolidated income statement
Fair value adjustments recognized in the consolidated statement
of comprehensive income, including currency translation effects
Purchases
Cash receipts and payments
Disposals
Reclassification
December 31
2023
Associated
companies at
fair value through
Fund
profit and loss investments
Debt and Contingent Contingent
equity consideration consideration
liabilities
securities receivables
Other
financial
liabilities
129
261
699
650
– 835
– 232
101
4
1
11
48
552
– 28
– 48
– 63
– 31
– 65
– 9
3
14
– 47
2
9
– 6
– 9
101
184
71
82
– 80
– 73
647
– 32
– 180
20
36
– 49
153
618
– 403
– 88
Total of fair value gains and losses recognized
in the consolidated income statement for assets
and liabilities held at December 31, 2023
– 24
– 47
– 52
17
487
– 9
1 Represents the carrying values associated with Level 3 financial instruments at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2
and 31 provide disclosures related to discontinued operations.
F-62
Notes to the Novartis consolidated financial statements
(USD millions)
January 1
Fair value gains and other adjustments, including from divestments
recognized in the consolidated income statement
Fair value losses (including impairments and amortizations) and
other adjustments recognized in the consolidated income statement
Fair value adjustments recognized in the consolidated statement
of comprehensive income, including currency translation effects
Purchases
Cash receipts and payments
Disposals
Reclassification
December 31
2022
Associated
companies at
fair value through
Fund
profit and loss investments
Debt and Contingent Contingent
equity consideration consideration
liabilities
securities receivables
Other
financial
liabilities
192
338
617
641
– 1 075
– 19
4
35
53
530
15
– 63
– 78
– 84
– 114
– 18
4
11
– 4
129
– 12
– 2
261
24
160
– 13
– 40
699
11
– 231
– 238
– 44
44
28
650
– 835
– 232
Total of fair value gains and losses recognized
in the consolidated income statement for assets
and liabilities held at December 31, 2022
– 63
– 74
– 49
53
416
– 3
During 2023, there were three individually immaterial
transfers of equity securities from Level 3 to Level 1 for
USD 63 million (2022: USD 44 million), due to the Initial
Public Offering of the invested company or lift of certain
restrictions.
Realized gains and losses associated with Level 3
long-term financial investments measured at fair value
through the consolidated income statement are recorded
in the consolidated income statement under “Other
income” or “Other expense,” respectively. Realized gains
and losses associated with Level 3 long-term financial
investments measured at fair value through other com-
prehensive income are not recycled through the consol-
idated income statement but are instead reclassified to
retained earnings.
During the year, the net loss and net gain recorded
on associated companies, fund investments and long-
term financial investments at fair value through profit and
loss were USD 145 million and USD 39 million, respec-
tively.
To determine the fair value of a contingent
consideration, various unobservable inputs are used. A
change in these inputs might result in a significantly
higher or lower fair value measurement. The inputs used
are, among others, the probability of success, sales fore-
cast and assumptions regarding the discount rate and
timing and different scenarios of triggering events. The
inputs are interrelated. The significance and usage of
these inputs to each contingent consideration may vary
due to differences in the timing and triggering events for
payments or in the nature of the asset related to the con-
tingent consideration.
If the most significant parameters for the Level 3 input
were to change by 10% positively or negatively, or where
the probability of success (POS) is the most significant
input parameter 10% were added or deducted from the
applied probability of success, for contingent
consideration payables and contingent consideration
receivables, this would change the amounts recorded in
the 2023 consolidated income statement by USD 57 mil-
lion and USD 53 million, respectively.
Equity securities measured at fair
value through other comprehensive
income
Equity securities held as strategic investments, typically
held outside the Novartis Venture Fund, are generally
designated at date of acquisition as financial assets val-
ued at fair value through other comprehensive income
with no subsequent recycling through profit and loss.
Except for the investment in Sandoz Group AG with a
fair value of USD 595 million as at December 31, 2023,
these are made up of individually non-significant invest-
ments. As at December 31, 2023, the Company holds 61
non-listed equity securities (December 31, 2022: 65) and
28 listed equity securities (December 31, 2022: 46) in
this category with the following fair values:
(USD millions)
Listed equity securities
Non-listed equity securities
Total equity securities
2023
861
349
1 210
2022
438
390
828
During 2023 and 2022, dividends received from these
equity securities were insignificant. In 2023, equity secu-
rities that were no longer considered strategic, with a
fair value of USD 279 million (2022: USD 4 million), were
sold, and the USD 1 million gain on disposal (2022: USD 4
million loss) was transferred from other comprehensive
income to retained earnings (see Note 9).
F-63
Notes to the Novartis consolidated financial statements
Nature and extent of risks arising
from financial instruments
Market risk
Market risk in general comprises currency risk, interest
rate risk and price risk, such as commodity and equity
prices. Novartis is exposed to market risk, primarily
related to foreign currency exchange rates, interest rates
and the market value of the investments. The Company
actively monitors and seeks to reduce, where it deems
it appropriate to do so, fluctuations in these exposures.
It is the Company’s policy and practice to enter into a
variety of derivative financial instruments to manage the
volatility of these exposures. It does not enter into any
financial transactions containing a risk that cannot be
quantified at the time the transaction is concluded. In
addition, it does not sell short assets it does not have, or
does not know it will have, in the future. The Company
only sells existing assets or enters into transactions and
future transactions (in the case of anticipatory hedges)
that it confidently expects it will have in the future, based
on past experience.
Foreign currency exchange rate risk
The Company uses the US dollar as its reporting cur-
rency. As a result, the Company is exposed to foreign
currency exchange movements, primarily in European,
Japanese and emerging market currencies. Fluctuations
in the exchange rates between the US dollar and other
currencies can have a significant effect on both the Com-
pany’s results of operations, including reported sales and
earnings, as well as on the reported value of our assets,
liabilities and cash flows. This, in turn, may significantly
affect the comparability of period-to-period results of
operations.
Because our expenditures in Swiss francs are sig-
nificantly higher than our revenues in Swiss francs, vol-
atility in the value of the Swiss franc can have a signifi-
cant impact on the reported value of our earnings, assets
and liabilities, and the timing and extent of such volatility
can be difficult to predict.
There is also a risk that certain countries could expe-
rience a devaluation of their currency. If this occurs, it
could impact the effective prices we would be able to
charge for our products and also have an adverse impact
on both our consolidated income statement and balance
sheet.
Subsidiaries whose functional currencies have expe-
rienced a cumulative inflation rate of more than 100%
over the past three years apply the principles of IAS 29
“Financial reporting in Hyperinflationary Economies.”
The hyperinflationary economies in which Novartis oper-
ates are Argentina, Venezuela and Turkey. Venezuela and
Argentina were hyperinflationary for all periods pre-
sented, and Turkey became hyperinflationary effective
May 1, 2022, requiring retroactive implementation of
hyperinflation accounting as of January 1, 2022. The
impacts of applying IAS 29 are recorded in “Other finan-
cial income and expense” and are presented in Note 6.
The Company manages its global currency exposure
by engaging in hedging transactions where management
deems appropriate. Novartis may enter into various con-
tracts that reflect the changes in the value of foreign cur-
rency exchange rates to preserve the value of assets,
commitments and anticipated transactions. Novartis also
uses forward contracts and may enter into foreign cur-
rency option contracts to hedge.
Net investments in subsidiaries in foreign countries
are long-term investments. Their fair value changes
through movements of foreign currency exchange rates.
The Company has designated a certain portion of its
long-term euro-denominated straight bonds, maturing in
2028, as hedges of the translation risk arising on certain
of these net investments in foreign operations with euro
functional currency. As of December 31, 2023, long-term
financial debt with a carrying amount of EUR 1.8 billion
(USD 2.0 billion; December 31, 2022: USD 2.0 billion),
has been designated as a hedge instrument. During
2023, USD 50 million of net of taxes unrealized losses
(2022: USD 91 million income) was recognized in other
comprehensive income and accumulated in currency
translation effects in relation with this net investment
hedge. The hedge remained effective since inception,
and no amount was recognized in the consolidated
income statement in 2022 and 2021. In 2023, USD 8 mil-
lion of accumulated net investment hedge reserve was
recognized in the consolidated income statement at the
time of the Sandoz spin off.
Commodity price risk
The Company has only a very limited exposure to price
risk related to anticipated purchases of certain commod-
ities used as raw materials by the Company’s businesses.
A change in those prices may alter the gross margin of
a specific business, but generally by not more than 10%
of the margin and thus below the Company’s risk man-
agement tolerance levels. Accordingly, the Company
does not enter into significant commodity futures, for-
ward or option contracts to manage fluctuations in prices
of anticipated purchases.
Interest rate risk
The Company addresses its net exposure to interest rate
risk mainly through the ratio of its fixed-rate financial
debt to variable-rate financial debt contained in its total
financial debt portfolio. To manage this mix, Novartis may
enter into interest rate swap agreements, in which it
exchanges periodic payments based on a notional
amount and agreed-upon fixed and variable interest
rates.
Equity risk
The Company may purchase equities as investments of
its liquid funds. As a policy, it limits its holdings in an unre-
lated company to less than 5% of its liquid funds. Poten-
tial investments are thoroughly analyzed. Call options
are written on equities that the Company owns, and put
options are written on equities that the Company wants
to buy and for which cash is available.
Credit risk
Credit risks arise from the possibility that customers may
not be able to settle their obligations as agreed. To man-
age this risk, the Company periodically assesses coun-
try and customer credit risk, assigns individual credit lim-
its, and takes actions to mitigate credit risk where
appropriate (for example payment guarantees, credit
insurance and factoring).
F-64
Notes to the Novartis consolidated financial statements
The provisions for expected credit losses for cus-
tomers are based on a forward-looking expected credit
loss, which includes possible default events on the trade
receivables over the entire holding period of the trade
receivables.
In measuring the expected credit losses, trade receiv-
ables are grouped based on shared credit risk charac-
teristics (such as private versus public receivables) and
days past due. In determining the expected credit loss
rates, the Company considers current and forward-look-
ing macroeconomic factors that may affect the ability of
customers to settle the receivables, and historical loss
rates for each category of customers.
The Company’s largest customer accounted for
approximately 15% of net sales to third parties, and the
second largest and third largest customers accounted
for 13% and 8% of net sales to third parties, respectively
(2022: 16%, 12% and 8%, respectively; 2021: 14%, 13%
and 7%, respectively).
The highest amounts of trade receivables outstand-
ing were for these same three customers and amounted
to 17%, 13% and 8%, respectively, of the Company’s trade
receivables as at December 31, 2023 (2022: 16%, 14%
and 7%, respectively). There is no other significant con-
centration of customer credit risk.
Counterparty risk
Counterparty risk encompasses issuer risk on marketable
securities and money market instruments; credit risk on
cash, time deposits and derivatives; as well as settlement
risk for different instruments. Issuer risk is reduced by only
buying securities that are at least A- rated. Counterparty
credit risk and settlement risk are reduced by a policy of
entering into transactions with counterparties (banks or
financial institutions) that feature a strong credit rating.
Exposure to these risks is closely monitored and kept
within predetermined parameters. The limits are regularly
assessed and determined based upon credit analysis,
including financial statement and capital adequacy ratio
reviews. In addition, reverse repurchasing agreements are
contracted, and Novartis has entered into credit support
agreements with various banks for derivative transactions.
To further reduce the settlement risk, the Company has
implemented a multi-currency payment system, Continu-
ous Linked Settlement (CLS), which provides multilateral
netting (payment-versus-payment settlement) of cash
flows from foreign exchange transactions.
The Company’s cash and cash equivalents are held
with major regulated financial institutions, the three larg-
est of which hold approximately 8.3%, 7.5% and 7.4%,
respectively (2022: 13.2%, 9.2% and 6.8%, respectively).
The Company does not expect any losses from
non-performance by these counterparties and does not
have any significant grouping of exposures to financial
sector or country risk.
Liquidity risk
Liquidity risk is defined as the risk that the Company
could not be able to settle or meet its obligations asso-
ciated with financial liabilities that are settled by deliver-
ing cash or another financial asset. Treasury is respon-
sible for liquidity, funding and settlement management.
In addition, liquidity and funding risks, and related pro-
cesses and policies, are overseen by management.
Novartis manages its liquidity risk on a consolidated
basis according to business needs and tax, capital or
regulatory considerations, if applicable, through numer-
ous sources of financing in order to maintain flexibility.
Certain countries have legal or economic restrictions
on the ability of subsidiaries to transfer funds to the Com-
pany in the form of cash dividends, loans or advances,
but these restrictions do not have an impact on the abil-
ity of the Company to meet its cash obligations.
Management monitors the Company’s net debt or
liquidity position through rolling forecasts on the basis
of expected cash flows.
Novartis has two US commercial paper programs
under which it can issue up to USD 9.0 billion in the
aggregate of unsecured commercial paper notes.
Novartis also has one Japanese commercial paper pro-
gram under which it can issue up to JPY 150 billion
(approximately USD 1.1 billion) of unsecured commercial
paper notes. Commercial paper notes totaling USD 3.3
billion under these three programs were outstanding as
per December 31, 2023 (2022: USD 2.8 billion). Novartis
further has a committed credit facility of USD 6.0 billion.
This credit facility is provided by a syndicate of banks
and is intended to be used as a backstop for the US com-
mercial paper programs. The facility matures in Septem-
ber 2025 and was undrawn as at December 31, 2023,
and December 31, 2022.
F-65
Notes to the Novartis consolidated financial statements
The following table sets forth how management monitors net debt or liquidity based on details of the remaining
contractual maturities of selected financial assets and liabilities as at December 31, 2023, and December 31, 2022:
2023
(USD millions)
Current assets
Marketable securities, time deposits and short-term
investments with original maturity more than 90 days
and accrued interest
Commodities
Derivative financial instruments
Cash and cash equivalents
Total current financial assets
Non-current liabilities
Financial debt
Financial debt – undiscounted
Total non-current financial debt
Current liabilities
Financial debt
Financial debt – undiscounted
Derivative financial instruments
Total current financial debt
Due later than Due later than Due later than
one year
Due within but less than but less than but less than
five years
one month
three months
three months
one month
one year
12
516
41
24
7 641
7 677
310
5 752
6 578
1
42
Due after
five years
Total
111
20
569
111
355
13 393
131
14 428
– 9 492
– 8 944
– 18 436
– 9 522
– 9 050
– 18 572
– 9 492
– 8 944
– 18 436
– 3 328
– 372
– 2 384
– 3 328
– 372
– 2 384
– 43
– 39
– 9
– 3 371
– 411
– 2 393
– 6 084
– 6 084
– 91
– 6 175
Net debt
4 306
6 167
– 2 351
– 9 492
– 8 813
– 10 183
(USD millions)
Current assets
Marketable securities, time deposits and short-term
investments with original maturity more than 90 days
and accrued interest
Commodities
Derivative financial instruments
Cash and cash equivalents
Total current financial assets
Non-current liabilities
Financial debt
Financial debt – undiscounted
Total non-current financial debt
Current liabilities
Financial debt
Financial debt – undiscounted
Derivative financial instruments
Total current financial debt
2022
Due later than Due later than Due later than
one year
one month three months
Due within but less than but less than but less than
five years
one month three months
one year
Due after
five years
Total
4 142
6 911
36
9
11 098
23
147
19
4 011
3 506
111
15
111
204
7 517
8 176
10 564
55
135
18 930
– 8 975
– 11 269
– 20 244
– 9 002
– 11 394
– 20 396
– 8 975
– 11 269
– 20 244
– 3 215
– 146
– 2 515
– 3 215
– 146
– 2 517
– 38
– 13
– 4
– 3 253
– 159
– 2 519
– 5 876
– 5 878
– 55
– 5 931
Net debt
4 923
10 405
– 2 464
– 8 975
– 11 134
– 7 245
The carrying amounts of financial liabilities included in the above analysis are not materially different to the con-
tractual amounts due on maturity. The positive and negative fair values on derivative financial instruments repre-
sent the net contractual amounts to be exchanged at maturity.
F-66
Notes to the Novartis consolidated financial statements
The Company’s contractual undiscounted potential cash flows from derivative financial instruments to be settled
on a gross basis are as follows:
(USD millions)
Derivative financial instruments and accrued interest on derivative
financial instruments
2023
Due later than Due later than
one month
three months
Due within but less than but less than
one month
one year
three months
Total
Potential outflows in various currencies – from financial derivative liabilities
– 4 329
– 6 604
– 556
– 11 489
Potential inflows in various currencies – from financial derivative assets
4 311
6 841
623
11 775
(USD millions)
Derivative financial instruments and accrued interest on derivative
financial instruments
2022
Due later than Due later than
one month three months
Due within but less than but less than
one month three months
one year
Total
Potential outflows in various currencies – from financial derivative liabilities
– 2 029
– 4 598
– 316
– 6 943
Potential inflows in various currencies – from financial derivative assets
2 029
4 712
321
7 062
Other contractual liabilities that are not part of management’s monitoring of the net debt or liquidity consist of the
following items:
2023
(USD millions)
Contractual interest on non-current financial debt,
including current portion
Lease liabilities 1
Trade payables
Contingent consideration liabilities
1 Note 11 provides additional disclosures related to lease liabilities.
(USD millions)
Contractual interest on non-current financial debt,
including current portion
Lease liabilities 1
Trade payables
Contingent consideration liabilities
1 Note 11 provides additional disclosures related to lease liabilities.
Due later than Due later than
one year
Due within but less than but less than
five years
one year
three months
three months
Due after
five years
Total
– 64
– 65
– 4 793
– 372
– 1 258
– 3 376
– 5 070
– 165
– 133
– 14
– 635
– 963
– 1 828
– 4 926
– 205
– 184
– 403
2022
Due later than Due later than
one year
three months
Due within but less than but less than
five years
one year
three months
Due after
five years
Total
– 64
– 71
– 5 020
– 16
– 412
– 1 432
– 3 624
– 5 532
– 180
– 126
– 115
– 616
– 922
– 1 789
– 5 146
– 437
– 267
– 835
Capital risk management
Sensitivity analysis
Novartis strives to maintain a strong credit rating. In man-
aging its capital, Novartis focuses on maintaining a
strong balance sheet. As at December 31, 2023, Moody’s
Investors Service rated the Company A1 for long-term
maturities and P-1 for short-term maturities, and S&P
Global Ratings rated the Company AA- for long-term
maturities and A-1+ for short-term maturities.
The Company uses sensitivity analysis disclosures to
provide quantitative information about market risks to
which it is exposed.
The sensitivity analysis disclosures are in line with
the Company’s financial risk management policy, and are
based on a one-parameter risk model that considers a
one-factor linear relationship between risk factors and
exposures. They consider aggregated risk exposures
arising from the most significant risk factors (currency
risk, interest rate risk and equity price risk) and include
F-67
Notes to the Novartis consolidated financial statements
all financial assets and financial liabilities as set forth in
the table on page F-59.
The disclosures below illustrate the potential impact
on the Company’s consolidated financial statements as
a result of hypothetical market movements in foreign cur-
rency exchange rates, interest rates and equity prices.
The range of variables chosen reflects management’s
view of changes that are reasonably possible over a one-
year period.
Foreign currency exchange rate sensitivity
The Company uses the US dollar as its reporting cur-
rency. As a result, the Company is exposed to foreign
currency exchange movements, primarily in European,
Japanese and emerging market currencies, as well as in
the Swiss franc. A strengthening (weakening) of the US
dollar against these currencies as at December 31, 2023
and 2022 would have affected the measurement of finan-
cial instruments denominated in these foreign curren-
cies. This analysis assumes that all other variables, in
particular interest rates, remain constant. A hypothetical
5% increase or decrease in the foreign currency
exchange rates against the US dollar would have
impacted the Company’s consolidated income statement
as presented below:
(USD millions)
2023
2022
5% increase in foreign currency exchange rates
against USD
5% decrease in foreign currency exchange rates
against USD
3
– 3
– 6
7
As of December 31, 2023, the Company designated EUR
1.8 billion (December 31, 2022: EUR 1.8 billion) of its long-
term euro-denominated straight bonds as hedges of the
translation risk arising on certain net investments in for-
eign operations with euro functional currency. This anal-
ysis assumes that all other variables, in particular inter-
est rates, remain constant. A hypothetical 5% increase,
or decrease, in the foreign currency exchange rates
against the US dollar, without considering the translation
effect of these net investments, would have impacted
the Company’s consolidated equity as presented below:
(USD millions)
2023
2022
5% increase in foreign currency exchange rates
against USD
97
93
5% decrease in foreign currency exchange rates
against USD
– 102
– 98
Interest rate sensitivity
Our portfolio of fixed-income instruments as at Decem-
ber 31, 2023, was mainly composed of time deposits and
debt securities.
Novartis uses duration models to approximate the
possible change in the value of fixed-income instru-
ments. Based on these models, management believes
that a 100-basis point change in interest is deemed a
reasonable possible change over a one-year period.
Based on exposures in 2023 and 2022, a hypothet-
ical 100-basis point increase (decrease) in interest rates
would not have resulted in a significant increase
(decrease) in the fair values of the fixed-income instru-
ments nor in a significant increase (decrease) of cash
flows attributable to such instruments.
The vast majority of our outstanding financial debts
are straight bonds with fixed interest rates and are there-
fore not affected by movements in interest rates.
Equity price sensitivity
Fund investments and equity securities held by the
Novartis Venture Fund are valued at fair value through
profit and loss. Equity securities held as strategic invest-
ments, typically held outside the Novartis Venture Fund,
are generally designated at date of acquisition as finan-
cial assets valued at fair value through other compre-
hensive income with no subsequent recycling through
profit and loss.
The fair value of these fund investments and equity
securities was USD 1.8 billion as at December 31, 2023
(December 31, 2022: USD 1.6 billion). The fair values of
these investments are impacted by the volatility of the
stock market, valuation parameters applied (for non-
listed equities) and changes in general economic factors.
This analysis assumes that all other variables, in partic-
ular interest rates, remain constant. A hypothetical
increase or decrease of 15% in the risk factors would
have impacted the Company’s consolidated income
statement as presented below:
(USD millions)
15% increase in equity prices
15% decrease in equity prices
2023
91
– 91
2022
109
– 109
A hypothetical increase or decrease of 15% in the risk
factors would have impacted the Company’s consoli-
dated equity as presented below:
(USD millions)
15% increase in equity prices
2023
182
2022
124
15% decrease in equity prices
– 182
– 124
F-68
Notes to the Novartis consolidated financial statements
31. Discontinued operations
Discontinued operations include the operational results
from the Sandoz generic pharmaceuticals and biosimi-
lars division and certain corporate activities attributable
to the Sandoz business, as well as certain other expenses
related to the spin-off. Included in 2023 is also the IFRS
Accounting Standards non-cash, non-taxable net gain
on the distribution of Sandoz Group AG to Novartis AG
shareholders (refer to Notes 1 and 2 for further details).
The Sandoz business operates in the off-patent
medicines segment and specializes in the development,
manufacturing, and marketing of generic pharmaceuticals
and biosimilars. The Sandoz business is organized glob-
ally into two franchises: Generics and Biosimilars.
Net income from discontinued operations
(USD millions)
Net sales to third parties from discontinued operations
Sales to continuing segments
Net sales from discontinued operations
Other revenues
Cost of goods sold
Gross profit from discontinued operations
Selling, general and administration
Research and development
Other income
Other expense
Operating income from discontinued operations
Income from associated companies
Interest expense
Other financial income and expense
Income before taxes from discontinued operations
Income taxes 2
Net income from discontinued operations before gain on
distribution of Sandoz Group AG to Novartis AG shareholders
Gain on distribution of Sandoz Group AG to Novartis AG shareholders 3
Net income from discontinued operations
2023 1
2022
7 128
9 160
300
212
7 428
9 372
19
28
2021
9 650
184
9 834
58
– 4 044
– 4 937
– 5 121
3 403
4 463
4 771
– 1 728
– 2 060
– 2 059
– 671
– 824
56
– 795
265
2
– 33
– 20
214
208
422
5 860
6 282
109
– 437
1 251
2
– 37
– 22
1 194
– 288
– 899
232
– 412
1 633
2
– 24
– 4
1 607
– 494
906
1 113
906
1 113
1 The net income from discontinued operations for 2023 is for the period from January 1, 2023, to the October 3, 2023, Distribution date.
2 The tax rate in 2023 was impacted by non-recurring items such as tax benefits arising from intercompany transactions to effect the spin-off of the Sandoz business, net decreases
in uncertain tax positions of the Sandoz business and the favorable settlement of a tax matter related to the Alcon business, which was spun-off in 2019. Excluding these impacts,
the tax rate would have been 31.2% in 2023, compared to 24.1% and 30.7% in 2022 and 2021, respectively. The tax rate in 2023 is higher than 2022 primarily due to a change in
profit mix between years.
3 See Note 2 for further details on the non-taxable, non-cash gain on distribution of Sandoz Group AG to Novartis AG shareholders.
F-69
Notes to the Novartis consolidated financial statements
time a price decline becomes effective. Revenue deduc-
tion provisions for shelf stock adjustments are recorded
when the price decline is anticipated, based on the
impact of the price decline on the customer’s estimated
inventory levels.
Significant transactions in 2021
On February 10, 2021, Sandoz entered into an agreement
with certain subsidiaries of GlaxoSmithKline plc (GSK)
for the acquisition of the GSK’s cephalosporin antibiot-
ics business.
Under the agreement, Sandoz acquired the global
rights to three established brands (Zinnat®, Zinacef® and
Fortum®) in more than 100 markets. It excluded the rights
in the US, Australia and Germany to certain of those
brands, which were previously divested by GSK, and the
rights in India, Pakistan, Egypt, Japan (to certain of the
brands) and China, which will be retained by GSK. The
transaction closed on October 8, 2021.
The purchase price consisted of a USD 350 million
upfront payment paid at closing and potential milestone
payments up to USD 150 million, which GSK is eligible to
receive upon the achievement of certain annual sales
milestones for the portfolio.
The fair value of the total purchase consideration was
USD 415 million. The amount consisted of a payment of
USD 351 million, including purchase price adjustments,
and the fair value of contingent consideration of USD 64
million, which GSK is eligible to receive upon the achieve-
ment of specified milestones. The purchase price allo-
cation resulted in net identifiable assets of USD 308 mil-
lion, consisting of USD 292 million intangible assets and
USD 16 million deferred tax assets. Goodwill amounted
to USD 107 million.
The 2021 results of operations since the date of
acquisition were not material.
2023 1
2022
2
– 144
– 32
– 171
– 5
– 8
– 44
1
– 27
– 60
2
– 196
– 33
– 222
– 3
– 25
3
– 40
– 66
2021
1
– 203
– 39
– 238
– 68
– 27
59
– 62
– 69
Net assets derecognized
The following table presents the Sandoz business net
assets derecognized as at October 3, 2023 Distribution
(spin-off) date:
(USD millions)
Property, plant and equipment
Right-of-use assets
Goodwill
Intangible assets other than goodwill
Deferred tax assets
Financial assets, investments in associated
companies and other non-current assets
Inventories
Trade receivables and other current assets
Cash and cash equivalents
Deferred tax liabilities
Current and non-current lease liabilities
Current and non-current financial debts
Trade payables, provisions, current income
tax liabilities and other liabilities
Net assets derecognized
Oct 3,
2023
1 447
133
7 424
1 481
624
142
2 565
2 935
686
– 270
– 139
– 3 691
– 4 690
8 647
Supplemental disclosures related to
discontinued operations
Revenue
In addition to the elements of variable consideration
listed in the revenue accounting policy described in Note
1, the Sandoz business grants shelf stock adjustments
to customers to cover the inventory held by them at the
Net income from discontinued operations
Included in net income from discontinued operations are:
(USD millions unless indicated otherwise)
Interest income
Depreciation of property, plant and equipment
Depreciation of right-of-use assets
Amortization of intangible assets
Impairment charges on property, plant and equipment
Impairment charges on right-of-use assets
Impairment charges on intangible assets
Impairment reversals of property, plant and equipment
Additions to restructuring provisions
Equity-based compensation expense related to Novartis equity-based participation plans
1 2023 amounts are for the period from January 1, 2023, to the October 3, 2023, Distribution date.
In 2023, 2022 and 2021, there were no reversals of
impairment charges on right-of-use assets or on intan-
gible assets of discontinued operations.
F-70
Notes to the Novartis consolidated financial statements
Balance sheet
The following table shows for discontinued operations the additions to property, plant and equipment, right-of-use
assets and to goodwill and intangible assets:
(USD millions)
Additions to property, plant and equipment
Additions to right-of-use assets
Additions to goodwill and intangible assets
1 The additions for 2023 are for the period from January 1, 2023, to the October 3, 2023, Distribution date.
2023 1
245
66
221
2022
289
32
163
Net cash flows from financing activities from
discontinued operations
In 2023, the net cash inflows from financing activities
from discontinued operations of USD 3.3 billion (2022:
USD 119 million, 2021: USD 26 million) were mainly driven
by USD 3.6 billion cash inflows from bank borrowings
(including the USD 3.3 billion Sandoz business borrow-
ings from a group of banks on September 28, 2023) in
connection with the Distribution (spin-off) of the Sandoz
business to Novartis AG shareholders, partly offset by
transaction cost payments of USD 0.2 billion (2022: nil,
2021: nil) directly attributable to the Distribution (spin-
off) of the Sandoz business (see Notes 1 and 2).
For additional information related to the October 3, 2023
Distribution (spin-off) of the Sandoz business to Novartis
AG shareholders, effected through a dividend in kind dis-
tribution of Sandoz Group AG shares to Novartis AG
shareholders and ADR holders, refer to Note 1 and Note
2.
Financial debt
The Sandoz business entered into financing agreements
with a group of banks under which it borrowed on Sep-
tember 28, 2023 a total amount of USD 3.3 billion. See
Note 2 for further disclosures.
Net cash flows used in investing activities from
discontinued operations
Net cash flows used in investing activities from discon-
tinued operations include the investing activities of the
Sandoz business. In 2023, other cash flows used in
investing activities, net includes cash outflows of USD
22 million (2022: USD 39 million, 2021: USD 362 million,
including the acquisition of GSK’s cephalosporin antibi-
otics business) for the acquisitions and divestments of
business, net.
(USD millions)
2023
2022
2021
Payments out of provision for
transaction cost attributable to the
spin-off of the Sandoz business
– 52
Derecognized cash and cash
equivalents attributable to the
spin-off of the Sandoz business
– 686
Other cash flows used in
investing activities, net
Net cash flows used in investing
activities from discontinued
operations
– 385
– 436
– 689
– 1 123
– 436
– 689
F-71
Notes to the Novartis consolidated financial statements
32. Events subsequent to the December 31, 2023,
consolidated balance sheet date
Dividend proposal for 2023 and approval
of Novartis 2023 consolidated financial statements
On January 30, 2024, the Novartis AG Board of Direc-
tors proposed the acceptance of the 2023 consolidated
financial statements of Novartis for approval by the
Annual General Meeting on March 5, 2024. Furthermore,
also on January 30, 2024, the Board proposed a divi-
dend of CHF 3.30 per share to be approved at the Annual
General Meeting on March 5, 2024. If approved, the total
dividend payments would amount to approximately USD
8.0 billion (2022: USD 7.3 billion), using the CHF/USD
December 31, 2023, exchange rate.
F-72
Notes to the Novartis consolidated financial statements
33. Novartis principal subsidiaries
and associated companies
The following table lists the principal subsidiaries controlled by Novartis, associated companies in which Novartis
is deemed to have significant influence, and foundations required to be consolidated under IFRS Accounting Stan-
dards. It includes all subsidiaries, associated companies and consolidated foundations with total assets or net sales
to third parties in excess of USD 25 million. The equity interest percentage shown in the table also represents the
share in voting rights in those entities.
Austria
Novartis Holding GmbH, Vienna
35 000
Novartis Pharmaceutical Manufacturing GmbH, Langkampfen EUR 763 070
Novartis Pharma GmbH, Vienna
EUR
EUR
1.1 m
100%
100%
100%
As at December 31, 2023
Argentina
Novartis Argentina S.A., Buenos Aires
Australia
Novartis Australia Pty Ltd, Macquarie Park, NSW
Novartis Pharmaceuticals
Australia Pty Ltd, Macquarie Park, NSW
Bangladesh
Novartis (Bangladesh) Limited, Gazipur
Belgium
Novartis Pharma NV, Vilvoorde
Alcon – Couvreur NV, Puurs
Bermuda
Novartis Investment Ltd., Hamilton 2
Novartis Securities Investment Ltd., Hamilton
Novartis Finance Services Ltd., Hamilton
Triangle International Reinsurance Limited, Hamilton
Trinity River Insurance Co Ltd., Hamilton
Brazil
Novartis Biociências S.A., São Paulo
Share
capital
Equity
1 interest
As at December 31, 2023
Share
capital
Equity
1 interest
ARS
906.1 m
100%
AUD
2
100%
AUD
3.8 m
100%
BDT
162.5 m
60%
EUR
EUR
7.1 m
110.6 m
100%
100%
Hungary
Novartis Hungary Healthcare Limited Liability
Company, Budapest
India
Novartis India Limited, Mumbai
Novartis Healthcare Private Limited, Mumbai
Indonesia
PT. Novartis Indonesia, Jakarta
Ireland
Novartis Ireland Limited, Dublin
Novartis Integrated Services Limited, Cork City
Israel
Novartis Israel Ltd., Tel Aviv
Italy
Novartis Farma S.p.A., Milan
Advanced Accelerator Applications (Italy) S.r.l., Pozzilli
12 000
30 000
20 000
USD
CHF
CHF
CHF
USD 370 000
1.0 m
100%
100%
100%
100%
100%
Japan
Novartis Pharma K.K., Tokyo
Ciba-Geigy Japan Limited, Tokyo
Latvia
Novartis Baltics SIA, Riga
BRL
507.1 m
100%
Luxembourg
Novartis Investments S.à r.l., Luxembourg City 2
Novartis Finance S.A., Luxembourg City
HUF
545.6 m
100%
INR
INR
123.5 m 70.68%
100%
60.0 m
IDR
7.7 bn
100%
EUR
EUR
25 000
100
100%
100%
ILS
1 000
100%
EUR
EUR
18.2 m
119 000
100%
99.23%
JPY
JPY
100.0 m
100.0 m
100%
100%
EUR
3.0 m
100%
USD
USD 100 000
100.0 m
100%
100%
Canada
Novartis Pharmaceuticals Canada Inc., Montreal, Quebec
CAD 420 717
100%
Chile
Novartis Chile S.A., Santiago de Chile
China
Beijing Novartis Pharma Co., Ltd., Beijing
Novartis Pharmaceuticals (HK) Limited, Hong Kong
China Novartis Institutes for
CLP
2.0 bn
100%
USD
HKD
30.0 m
200
100%
100%
BioMedical Research Co., Ltd., Shanghai
USD
320.0 m
100%
Suzhou Novartis Technical
Development Co., Ltd., Changshu
Shanghai Novartis Trading Ltd., Shanghai
Colombia
Novartis de Colombia S.A., Santafé de Bogotá
Czech Republic
Novartis s.r.o., Prague
Denmark
Novartis Healthcare A/S, Copenhagen
Dominican Republic
Novartis Caribe, S.A., Santo Domingo
Ecuador
Novartis Ecuador S.A., Quito
Egypt
Novartis Pharma S.A.E., Cairo
Finland
Novartis Finland Oy, Espoo
France
Novartis Groupe France S.A.S., Rueil-Malmaison
Novartis Pharma S.A.S., Rueil-Malmaison
Advanced Accelerator Applications S.A., Rueil-Malmaison
Advanced Accelerator Applications
USD
USD
12.0 m
3.2 m
100%
100%
COP
7.9 bn
100%
CZK
51.5 m
100%
DKK
14.0 m
100%
DOP
20.0 m
100%
USD
4.0 m
100%
EGP
2.1 bn 99.98%
EUR 459 000
100%
EUR
EUR
EUR
903.0 m
43.4 m
100%
100%
9.6 m 99.23%
Molecular Imaging France, Saint-Genis-Pouilly
EUR
7.5 m 99.23%
Germany
Novartis Business Services GmbH, Wehr
Novartis Pharma GmbH, Nuremberg
Novartis Pharma Produktions GmbH, Wehr
Novartis Pharma Vertriebs GmbH, Nuremberg
Greece
Novartis (Hellas) S.A.C.I., Metamorphosis / Athens
EUR
EUR
EUR
EUR
25 000
25.6 m
2.0 m
25 000
100%
100%
100%
100%
EUR
233.9 m
100%
Malaysia
Novartis Corporation (Malaysia) Sdn. Bhd., Petaling Jaya
MYR
3.3 m
100%
Mexico
Novartis Farmacéutica, S.A. de C.V., Mexico City
Morocco
Novartis Pharma Maroc SA, Casablanca
Netherlands
Novartis Netherlands B.V., Amsterdam
Novartis Pharma B.V., Amsterdam
Aduro Netherlands Coöperatief U.A., Rosmalen 4
Aduro Biotech Holdings Europe B.V., Rosmalen
IDB Holland BV, Baarle-Nassau
New Zealand
Novartis New Zealand Ltd, Auckland
Norway
Novartis Norge AS, Oslo
Pakistan
Novartis Pharma (Pakistan) Limited, Karachi
Panama
Novartis Pharma (Logistics), Inc., Panama City
Philippines
Novartis Healthcare Philippines, Inc., Makati City
Poland
Novartis Poland Sp. z o.o., Warsaw
MXN
206.7 m
100%
MAD
80.0 m
100%
EUR
EUR
--
EUR
EUR
1.4 m
4.5 m
--
46 216
18 000
100%
100%
--
100%
99.23%
NZD 820 000
100%
NOK
1.5 m
100%
PKR
6.7 bn 99.99%
USD
10 000
100%
PHP
298.8 m
100%
PLN
44.2 m
100%
Portugal
Novartis Portugal, S.G.P.S., Lda., Porto Salvo
Novartis Farma – Produtos Farmacêuticos, S.A., Porto Salvo
EUR 500 000
EUR
2.4 m
100%
100%
Romania
Novartis Pharma Services Romania S.R.L., Bucharest
Sandoz S.R.L., Targu-Mures
Russian Federation
Novartis Pharma LLC, Moscow
Novartis Neva LLC, St. Petersburg
Saudi Arabia
Novartis Saudi Company, Riyadh
RON
RON
RUB
RUB
3.0 m
119.5 m
100%
100%
20.0 m
500 m
100%
100%
SAR
30.0 m
100%
F-73
Notes to the Novartis consolidated financial statements
As at December 31, 2023
Singapore
Novartis (Singapore) Pte Ltd., Singapore
Novartis Singapore Pharmaceutical
Manufacturing Pte Ltd, Singapore
Novartis Asia Pacific Pharmaceuticals
Pte Ltd, Singapore
Slovakia
Novartis Slovakia s.r.o., Bratislava
Slovenia
Novartis farmacevtska proizvodnja d.o.o., Ljubljana
South Africa
Novartis South Africa (Pty) Ltd, Midrand
South Korea
Novartis Korea Ltd., Seoul
Spain
Novartis Farmacéutica, S.A., Barcelona
Advanced Accelerator Applications
Iberica, S. L. U., Esplugues de Llobregat
Abadia Retuerta S.A., Sardón de Duero / Valladolid
Sweden
Novartis Sverige AB, Stockholm
Switzerland
Novartis International AG, Basel
Novartis Holding AG, Basel 2
Novartis International Pharmaceutical Investment AG, Basel
Novartis Bioventures AG, Basel
Novartis Forschungsstiftung, Basel 3
Novartis Stiftung für Kaderausbildung, Basel 3
Novartis-Mitarbeiterbeteiligungsstiftung, Basel 3
Novartis Stiftung für Mensch und Umwelt, Basel 3
Stiftung der Novartis AG für Erziehung,
Ausbildung und Bildung, Basel 3
Share
capital
Equity
1 interest
SGD 100 000
100%
SGD
45.0 m
100%
SGD
39.0 m
100%
EUR
2.0 m
100%
EUR
7 500
100%
ZAR
86.3 m
100%
KRW
24.5 bn
100%
EUR
63.0 m
100%
EUR
EUR
22.6 m 99.23%
100%
6.0 m
SEK
5.0 m
100%
10.0 m
100.2 m
CHF
CHF
CHF 100 000
CHF 100 000
--
--
--
--
--
--
--
--
100%
100%
100%
100%
--
--
--
--
Novartis Overseas Investments AG, Basel
Japat AG, Basel
Novartis Pharma AG, Basel 2
Novartis Pharma Services AG, Basel
Novartis Pharma Schweizerhalle AG, Muttenz
Novartis Pharma Stein AG, Stein
Novartis Pharma Schweiz AG, Risch
Cellerys AG, Schlieren
Novartis Innovative Therapies AG, Risch
Advanced Accelerator Applications International SA, Geneva CHF
--
1.0 m
350.0 m
20.0 m
18.9 m
--
CHF
CHF 100 000
CHF
CHF
CHF
CHF 251 000
CHF
129 630
CHF
CHF 100 000
--
100%
100%
100%
100%
100%
100%
100%
20%
100%
9.3 m 99.23%
5.0 m
Taiwan
Novartis (Taiwan) Co., Ltd., Taipei
Thailand
Novartis (Thailand) Limited, Bangkok
Turkey
Novartis Saglik, Gida ve Tarim Ürünleri Sanayi
ve Ticaret A.S., Istanbul
TWD
170.0 m
100%
THB
302.0 m
100%
TRY
448.0 m
100%
As at December 31, 2023
United Arab Emirates
Novartis Middle East FZE, Dubai
United Kingdom
Novartis UK Limited, London
Novartis Pharmaceuticals UK Limited, London
Novartis Grimsby Limited, London
Advanced Accelerator Applications (UK & Ireland), London
Neutec Pharma Limited, London
Gyroscope Therapeutics Limited, London
United States of America
Novartis Corporation, East Hanover, NJ
Novartis Finance Corporation, East Hanover, NJ 2
Novartis Capital Corporation, East Hanover, NJ
Novartis Services, Inc., East Hanover, NJ
Novartis US Foundation, East Hanover, NJ 3
Novartis Pharmaceuticals Corporation, East Hanover, NJ 2
Advanced Accelerator Applications USA, Inc., Millburn, NJ
Novartis Gene Therapies, Inc., Bannockburn, IL
Novartis Technology LLC, East Hanover, NJ 4
Novartis Institutes for BioMedical
Research, Inc., Cambridge, MA
Novartis Manufacturing LLC, East Hanover, NJ 4
Cadent Therapeutics, Inc., Cambridge, MA
Endocyte, Inc., East Hanover, NJ
Navigate BioPharma Services, Inc., Carlsbad, CA
The Medicines Company, East Hanover, NJ
DTX Pharma, Inc., San Diego, CA
Chinook Therapeutics, Inc., Seattle, WA
Chinook Therapeutics U.S., Inc., Seattle, WA
Venezuela
Novartis de Venezuela, S.A., Caracas
Vietnam
Novartis Vietnam Company Limited, Ho Chi Minh City
Share
capital
Equity
1 interest
AED
7.0 m
100%
GBP
GBP
GBP
GBP
GBP
GBP
USD
USD
USD
USD
--
USD
USD
USD
--
USD
--
USD
USD
USD
USD
USD
USD
USD
25.5 m
5.4 m
250.0 m
100
7.7 m
1 492
100%
100%
100%
99.23%
100%
100%
72.2 m
1 000
1
1
--
650
1
1
--
1
--
0.1
1
1
1 000
1
1
1
100%
100%
100%
100%
--
100%
99.23%
100%
--
100%
--
100%
100%
100%
100%
100%
100%
100%
VES
0
100%
VND
70 bn
100%
In addition, the Company is represented by subsidiaries and associated companies
with total assets or net sales to third parties below USD 25 million in the following
countries: Bosnia and Herzegovina, Bulgaria, Cameroon, Croatia, Ghana, Guatemala,
Ivory Coast, Kenya, Kuwait, Nigeria, Peru, Senegal, Ukraine and Uruguay.
1 Share capital may not reflect the taxable share capital and does not include any
paid-in surplus.
2 Significant subsidiary under SEC Regulation S-X Rule 1-02(w)
3 Fully consolidated Foundation
4 Fully consolidated entity
m = million; bn = billion
F-74
Statutory Auditor’s Report
Statutory Auditor’s Report
to the General Meeting of Novartis AG, Basel
Report on the Audit of the Consolidated Financial Statements
Opinion
We have audited the consolidated financial statements of
Novartis AG and its subsidiaries (the Company), which com-
prise the consolidated balance sheet as at December 31,
2023, the consolidated income statement, consolidated
statement of comprehensive income, the consolidated
statement of changes in equity and the consolidated state-
ment of cash flows for the year then ended, and notes to
the consolidated financial statements, including material
accounting policy information.
In our opinion, the consolidated financial statements
(pages F-1 to F-74) give a true and fair view of the consoli-
dated financial position of the Company as at December 31,
2023, and of its consolidated financial performance and its
consolidated cash flows for the year then ended in accor-
dance with International Financial Reporting Standards
(IFRS) Accounting Standards as issued by the International
Accounting Standards Board (IASB) and comply with Swiss
law.
Basis for Opinion
We conducted our audit in accordance with Swiss law, Inter-
national Standards on Auditing (ISA) and Swiss Standards
on Auditing (SA-CH). Our responsibilities under those pro-
visions and standards are further described in the “Auditor’s
Responsibilities for the Audit of the Consolidated Financial
Statements” section of our report. We are independent of
the Company in accordance with the provisions of Swiss
law, together with the requirements of the Swiss audit pro-
fession, as well as those of the International Ethics Stan-
dards Board for Accountants’ International Code of Ethics
for Professional Accountants (including International Inde-
pendence Standards) (IESBA Code), and we have fulfilled
our other ethical responsibilities in accordance with these
requirements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
• Assessment of the recoverable amount for the Leqvio
intangible asset
• Provisions for deductions from revenue related to US Man-
aged Care, Medicare Part D and Medicaid rebate pro-
grams
• Valuation of the dividend in kind distribution liability to
effect the spin-off of Sandoz Group AG
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the con-
solidated financial statements of the current period. These
matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in form-
ing our opinion thereon, and we do not provide a separate
opinion on these matters.
Assessment of the recoverable amount for the
Leqvio intangible asset
Key Audit Matter
As discussed in Note 1 to the consolidated financial state-
ments, the Company determined the recoverable amount
of the intangible assets other than goodwill based on the
fair value less costs of disposal method for which no directly
observable market inputs were available. As discussed in
Note 12, the Company has intangible assets other than
goodwill totaling USD 26 879 million as of December 31,
2023, of which USD 6.8 billion related to the currently mar-
keted product Leqvio.
We identified the assessment of the recoverable amount,
specifically the sales forecasts, of the Leqvio intangible
asset, as a key audit matter. Significant auditor judgment
and specialist skills and knowledge were required to assess
the sales forecasts assumptions due to the high degree of
subjectivity and estimation uncertainty involved. These
sales forecasts assumptions were a significant input in the
determination of the recoverable amount of the Leqvio intan-
gible asset.
Our response
The following are the primary procedures we performed to
address this key audit matter:
• We evaluated the design and tested the operating effec-
tiveness of a certain internal control related to the Compa-
ny’s intangible asset impairment process for Leqvio, includ-
ing the development of the sales forecasts;
• We evaluated the reasonableness of management’s sales
forecasts for Leqvio by (1) comparing the sales forecasts
assumptions to company-specific operational information
and management’s communications to the Board of Direc-
tors, (2) comparing the most recent sales performance to
previous drug launches, and (3) comparing the sales fore-
casts assumptions to available external market and indus-
try data;
• We involved professionals with specialized skills and
knowledge, who assisted in evaluating the reasonable-
ness and appropriateness of certain inputs to the sales
forecasts (in particular, the epidemiological inputs); and
• We assessed management’s ability to accurately forecast
sales by comparing historical sales forecasts for Leqvio
to actual results.
For further information on the assessment of the recover-
able amount for the Leqvio intangible asset refer to the
following:
Page F-6 (Note 1 Accounting policies), Page F-16 (Note 4 Rev-
enues and geographic information) and Page F-29 (Note 12
Goodwill and intangible assets other than goodwill).
F-75
Statutory Auditor’s Report
Provisions for deductions from revenue related to
US Managed Care, Medicare Part D and Medicaid
rebate programs
Key Audit Matter
As discussed in Note 1 to the consolidated financial state-
ments, the Company records provisions for estimated
rebates as a deduction from revenue when the related rev-
enue is recognized. Rebates involve the use of assumptions
and judgements in the determination of the provision rates
at the time revenues are recorded. Provision rates are influ-
enced by the terms and conditions in the individual agree-
ments, historical experience, product sales and growth rate,
population growth, product pricing, the mix of contracts and
products, the level of inventory in the distribution channel,
regulations, contracts, and channels and payers. As dis-
cussed in Note 23, provisions for deductions from revenue
totaled USD 6 315 million as of December 31, 2023, a sig-
nificant portion of which related to US Managed Care, Medi-
care Part D and Medicaid rebate programs (hereafter “US
rebates”). We identified the evaluation of the US rebates
provisions as a key audit matter. The evaluation of the rebate
provision rates required a high degree of subjective auditor
judgment as it involved estimating the portion of the Com-
pany’s consolidated revenue which will ultimately be sub-
ject to a related rebate.
Our response
The following are the primary audit procedures we per-
formed to address this key audit matter:
• We evaluated the design and tested the operating effec-
tiveness of certain internal controls over the Company’s
US rebates process related to the development of the
rebate provision rates;
• We developed our own independent expectation of the
US rebates provisions, by using internal and external infor-
mation, including historical experience and trend analysis
of actual rebate claims paid, and comparing it to manage-
ment’s actual recorded balances; and
• We assessed management’s ability to accurately estimate
the US rebates provisions by comparing historically
recorded provisions to the actual amount that was ulti-
mately paid by the Company.
For further information on provisions for deductions from
revenue related to US Managed Care, Medicare Part D and
Medicaid rebate programs refer to the following:
Page F-6 (Note 1 Accounting policies), Page F-16 (Note 4
Revenue and geographic information), Page F-34 (Note 16
Trade receivables) and Page F-43 (Note 23 Provisions and
other current liabilities).
Valuation of the dividend in kind distribution liability
to effect the spin-off of Sandoz Group AG
Key Audit Matter
As discussed in Notes 1 and 2 to the consolidated financial
statements, the dividend-in-kind to effect the spin-off of
Sandoz Group AG (the Sandoz business) required the Com-
pany to recognize a distribution liability representing the fair
value of the Sandoz business distributed of USD 13 962 mil-
lion. The Company measured the distribution liability at the
fair value of the Sandoz business net assets as a whole. Fair
value was measured using the opening share price of
Sandoz Group AG on the first day of trading its shares on
the SIX Swiss Exchange and an estimated control premium.
We identified the valuation of the dividend-in-kind dis-
tribution liability, specifically the determination of a reason-
able control premium, as a key audit matter. Significant audi-
tor judgment and specialist skills and knowledge were
required to assess the control premium, which was sensi-
tive to variation, such that minor changes in the assumption
can cause significant changes in the valuation of the divi-
dend-in-kind distribution liability and therefore on the result-
ing gain on distribution.
Our response
The following are the primary procedures we performed to
address this key audit matter:
• We evaluated the design and tested the operating effec-
tiveness of certain internal controls related to the Com-
pany’s valuation of the dividend-in-kind distribution liabil-
ity, including controls relating to selecting the control
premium estimate; and
• We involved valuation professionals with specialized skills
and knowledge, who assisted in developing an indepen-
dent control premium range by utilizing the premiums paid
in historic transactions to acquire controlling interests in
comparable companies.
For further information on the assessment of the valuation of
the dividend in kind distribution liability refer to the following:
Page F-6 (Note 1 Accounting policies) and Page F-14 (Note 2
Significant transactions).
Other Information in the
Annual Report
The Board of Directors is responsible for the other informa-
tion in the Annual Report. The other information comprises
the information included in the annual report, but does not
include the consolidated financial statements, the stand-
alone financial statements of the company, the compensa-
tion report and our auditor’s reports thereon.
Our opinion on the consolidated financial statements does
not cover the other information in the Annual Report and we
do not express any form of assurance conclusion thereon.
In connection with our audit of the consolidated finan-
cial statements, our responsibility is to read the other infor-
mation in the Annual Report and, in doing so, consider
whether the other information is materially inconsistent with
the consolidated financial statements or our knowledge
obtained in the audit or otherwise appears to be materially
misstated.
If, based on the work we have performed, we conclude
that there is a material misstatement of this other informa-
tion, we are required to report that fact. We have nothing to
report in this regard.
Board of Directors’ Responsibilities
for the Consolidated Financial
Statements
The Board of Directors is responsible for the preparation of
the consolidated financial statements that give a true and fair
view in accordance with IFRS Accounting Standards and the
provisions of Swiss law, and for such internal control as the
F-76
Statutory Auditor’s Report
Board of Directors determines is necessary to enable the
preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the
Board of Directors is responsible for assessing the Compa-
ny’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the
going concern basis of accounting unless the Board of Direc-
tors either intends to liquidate the Company or to cease oper-
ations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the
Audit of the Consolidated Financial
Statements
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or
error, and to issue an auditor’s report that includes our opin-
ion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance
with Swiss law, ISA and SA-CH will always detect a material
misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influ-
ence the economic decisions of users taken on the basis of
these consolidated financial statements.
As part of an audit in accordance with Swiss law, ISA
and SA-CH, we exercise professional judgment and main-
tain professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of
the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that
is sufficient and appropriate to provide a basis for our opin-
ion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from
error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant to the
audit in order to design audit procedures that are appro-
priate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Com-
pany’s internal control.
• Evaluate the appropriateness of accounting policies used
and the reasonableness of accounting estimates and
related disclosures made.
• Conclude on the appropriateness of the Board of Direc-
tors’ use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may
cast significant doubt on the Company’s ability to con-
tinue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in
our auditor’s report to the related disclosures in the con-
solidated financial statements or, if such disclosures are
inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions
may cause the Company to cease to continue as a going
concern.
• Evaluate the overall presentation, structure and content
of the consolidated financial statements, including the dis-
closures, and whether the consolidated financial state-
ments represent the underlying transactions and events
in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the
financial information of the entities or business activities
within the Company to express an opinion on the consol-
idated financial statements. We are responsible for the
direction, supervision and performance of the Company
audit. We remain solely responsible for our audit opinion.
We communicate with the Board of Directors, primarily
through the Audit and Compliance Committee regarding,
among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant
deficiencies in internal control that we identify during our audit.
We also provide the Board of Directors with a statement
that we have complied with relevant ethical requirements
regarding independence, and communicate with them all
relationships and other matters that may reasonably be
thought to bear on our independence, and where applica-
ble, actions taken to eliminate threats or safeguards applied.
From the matters communicated with the Board of
Directors and the Audit and Compliance Committee, we
determine those matters that were of most significance in
the audit of the consolidated financial statements of the
current period and are therefore the key audit matters. We
describe these matters in our auditor’s report, unless law
or regulation precludes public disclosure about the matter
or when, in extremely rare circumstances, we determine
that a matter should not be communicated in our report
because the adverse consequences of doing so would rea-
sonably be expected to outweigh the public interest bene-
fits of such communication.
Report on Other Legal and
Regulatory Requirements
In accordance with Art. 728a para. 1 item 3 CO and PS-CH
890, we confirm that an internal control system exists, which
has been designed for the preparation of the consolidated
financial statements according to the instructions of the
Board of Directors.
We recommend that the consolidated financial statements
submitted to you be approved.
KPMG AG
Heidi Broom-Hirst
Richard Broadbelt
Licensed Audit Expert
Auditor in charge
Basel, January 30, 2024
F-77
Financial statements of Novartis AG
Financial statements of Novartis AG
Income statements
(For the years ended December 31, 2023 and 2022)
(CHF millions)
Income from investment in subsidiaries
License income
Other income
Total income
Amortization of goodwill
General and administrative expenses
Total expenses
Operating income
Financial income
Financial expenses
Extraordinary expenses
Income before taxes
Direct taxes
Net income of the year
The accompanying Notes form an integral part of these financial statements.
Note
2023
2022
3
4
5
5
6
11 067
25 096
228
2
230
2
11 297
25 328
– 252
– 14
– 266
– 252
– 13
– 265
11 031
25 063
796
– 254
– 31
556
– 160
11 542
25 459
– 116
– 67
11 426
25 392
A-1
Financial statements of Novartis AG
Balance sheets
(At December 31, 2023 and 2022)
(CHF millions)
Assets
Current assets
Cash and cash equivalents
Interest-bearing current receivables with direct and indirect subsidiaries
Other current receivables with direct and indirect subsidiaries
Total current assets
Non-current assets
Financial assets with direct and indirect subsidiaries
Investments in direct and indirect subsidiaries
Goodwill
Total non-current assets
Total assets
Liabilities and equity
Current liabilities
Note
2023
2022
4
3
8
4 323
6 640
140
97
4 467
6 740
8
7
4
12 405
14 458
12 402
14 303
1 663
1 915
26 470
30 676
30 937
37 416
Interest-bearing current liabilities with direct and indirect subsidiaries
8
1 766
25
141
29
1 961
33
370
92
495
9
1 376
1 376
483
1 859
3 820
483
1 859
2 354
10
1 116
1 202
10
23
11
2 117
320
2 460
580
12
450
320
770
667
19 121
17 353
11 426
25 392
30 547
42 745
31 127
43 412
11
– 7 586
– 10 322
27 117
35 062
30 937
37 416
Other current liabilities with direct and indirect subsidiaries
Other current liabilities with third parties
Accrued expenses
Total current liabilities
Non-current liabilities
Interest-bearing non-current liabilities – Bonds
Non-current provisions
Total non-current liabilities
Total liabilities
Equity
Share capital
Statutory capital reserves
Other capital reserve
Statutory earnings reserves
Legal reserve for treasury shares
General earnings reserve
Total statutory reserves
Free reserves
Retained earnings
Net income of the year
Retained earnings available for distribution at the end of the year
Total unappropriated earnings and free reserves
Treasury shares held by Novartis AG
Total equity
Total liabilities and equity
The accompanying Notes form an integral part of these financial statements.
A-2
Notes to the financial statements of Novartis AG
Notes to the financial statements
of Novartis AG
1. Introduction
The financial statements of Novartis AG, with its regis-
tered office in Basel, comply with the requirements of
the Swiss accounting legislation of the Swiss Code of
Obligations (SCO).
Novartis AG is presenting consolidated financial
statements according to IFRS Accounting Standards.
Novartis AG has therefore applied the exemption
included in article 961d, paragraph 1 SCO, and has not
prepared additional disclosures, a separate cash flow
statement and a management report for SCO purposes.
Declaration of full time equivalents (FTE)
employees
Novartis AG does not have employees.
Significant transactions in 2023
The Novartis AG shareholders approved the spin-off of
the Sandoz business at the Extraordinary General Meet-
ing (EGM) held on September 15, 2023, subject to the
completion of certain conditions precedent to the Dis-
tribution.
The conditions precedent to the spin-off were met,
and on October 3, 2023, the spin-off of the Sandoz busi-
ness was effected by way of a distribution of a dividend
in kind of Sandoz Group AG shares to Novartis AG share-
holders and American Depositary Receipt (ADR) hold-
ers (“the Distribution”).
Through the Distribution each Novartis AG share-
holder received 1 Sandoz Group AG share for every 5
Novartis AG shares and each Novartis ADR holder
received 1 Sandoz ADR for every 5 Novartis ADR that
they held on October 3, 2023, close of business.
As of October 4, 2023, the shares of Sandoz Group
AG have been listed on the Swiss Exchange (SIX) under
the stock symbol “SDZ”.
At the date of the Distribution, the book value of
Sandoz Group AG was CHF 4 769 million and consisted
of investments in direct and indirect Sandoz subsidiar-
ies (CHF 2 781 million) and cash (CHF 1 988 million). The
Distribution was made at the book value of Sandoz Group
AG and was recognized as a reduction to retained earn-
ings (CHF 4 769 million).
2. Accounting policies
Financial income and expenses
Current assets and current liabilities denominated in
foreign currencies are converted at year-end exchange
rates. Realized exchange gains and losses, and all
unreali zed exchange losses arising from these as well
as those from business transactions, are recorded net
as financial income or financial expenses.
Derivative financial instruments
Derivative financial instruments are used for hedging pur-
poses. These instruments are valued at fair value. When
different accounting policies apply for the hedged item
and the derivative financial instrument, hedge accounting
is applied through measuring the hedged item together
with the derivative financial instrument.
Financial assets
Financial assets are valued at acquisition cost less
adjustments for foreign currency losses and any other
impairment of value.
Investments
Investments are initially recognized at cost. Investments
in Novartis AG direct and indirect subsidiaries are
assessed annually and, in case of an impairment, adjusted
to their recoverable amount within their category.
Goodwill
Goodwill is capitalized and amortized over a period of
20 years. Goodwill is reviewed for impairment on an
annual basis. If necessary, an impairment loss is recog-
nized.
Bonds
Bonds are valued at nominal value. Any bond premium
is accrued over the duration of the bond so that at matu-
rity, the balance sheet amount will equal the amount that
is due to be paid.
Provisions
Provisions are made to cover general business risks of
Novartis AG and its direct and indirect subsidiaries.
A-3
Notes to the financial statements of Novartis AG
3. Other income
The French Competition Authority (FCA) conducted an investigation into Lucentis against several Novartis subsid-
iaries. In 2020, Novartis AG was jointly held liable for a fine of EUR 308 million. As Lucentis is commercialized by
Novartis subsidiaries, rather than by Novartis AG itself, Novartis AG was fully reimbursed by the operational sub-
sidiary. In 2023, this decision was reformed and the fine of EUR 308 million (CHF 308 million) was reimbursed to
Novartis AG. As a result, Novartis AG reimbursed the full amount to the operational subsidiary. These amounts are
shown net in the income statement.
4. Goodwill
(CHF millions)
Goodwill
Gross cost 1
Accumulated amortization
January 1
Amortization charges
December 31
Net book value at December 31
1 There was no change during 2023 and 2022.
2023
2022
4 939
4 939
– 3 024
– 2 772
– 252
– 252
– 3 276
– 3 024
1 663
1 915
5. Financial income and expenses
(CHF millions)
Interest
Foreign exchange
Others
Total
2023
2022
Income
Expenses
Income
Expenses
796
– 204
– 49
– 1
525
31
– 160
796
– 254
556
– 160
6. Extraordinary expenses
In 2023, extraordinary expenses are mainly related to prior years’ stamp duty costs that have been paid under res-
ervation.
A-4
Notes to the financial statements of Novartis AG
7. Investments in direct and indirect subsidiaries
The principal direct and indirect subsidiaries and other holdings of Novartis AG are shown in Note 33 to Novartis
AG consolidated financial statements prepared according to IFRS Accounting Standards.
In 2023, various participations in Novartis AG direct and indirect subsidiaries, including Sandoz-related partic-
ipations, were distributed by subsidiaries to Novartis AG, which in turn contributed these subsidiaries to Sandoz
Group AG. The participation in Sandoz Group AG was distributed as a dividend in kind to the Novartis AG share-
holders and American Depositary Receipt (ADR) holders on October 3, 2023. As of October 4, 2023, the shares
of Sandoz Group AG have been listed on the SIX Swiss Exchange (SIX) under the stock symbol “SDZ” (see Note 1).
8. Interest-bearing current receivables and liabilities
and financial assets with direct and indirect
subsidiaries
Interest-bearing current receivables and liabilities with Novartis AG direct and indirect subsidiaries contain intra-
group arrangements under which the company grants or receives credits that are available on demand.
Financial assets with Novartis AG direct and indirect subsidiaries include financing arrangements and loans
with these to direct or indirect subsidiaries.
9. Interest-bearing non-current liabilities – Bonds
Straight bonds
Coupon
0.250%
0.625%
1.050%
Nominal
Currency amount
Issuance
year
Maturity
year
Issuer
CHF
CHF
CHF
500
550
325
2015
2015
2015
2025 Novartis AG, Basel, Switzerland
2029 Novartis AG, Basel, Switzerland
2035 Novartis AG, Basel, Switzerland
Total straight bonds
Breakdowns by maturity
(CHF millions)
2025
After 2028
Total
2022
CHF
Issue price millions millions
2023
CHF
100.640%
100.502%
100.479%
500
551
325
500
551
325
1 376 1 376
2023
500
876
2022
500
876
1 376
1 376
Comparison of balance sheet and fair value
(CHF millions)
Straight bonds
Total
2023
Balance sheet
2023
2022
Fair value Balance sheet
2022
Fair value
1 376
1 376
1 340
1 340
1 376
1 376
1 266
1 266
A-5
Notes to the financial statements of Novartis AG
10. Share capital
January 1
2 403 721 252
1 201.9
2 434 420 920
Number of shares canceled/capital reduced during the period
– 126 243 500
– 63.1
– 30 699 668
Nominal share capital reduction due to Sandoz spin-off
– 22.8
2023
Number
of shares
Share capital
CHF millions
2022
Number
of shares
Share capital
CHF millions
1 217.2
– 15.3
December 31
2 277 477 752
1 116.0
2 403 721 252
1 201.9
Novartis AG share capital consisted of registered shares with a nominal value of CHF 0.49 each as at December
31, 2023, and CHF 0.50 each as at December 31, 2022.
In 2023, in connection with the Distribution (spin-off) of the Sandoz business (see Note 1), Novartis AG share-
holders approved a decrease of CHF 22.8 million in the share capital of Novartis AG at the EGM held on Septem-
ber 15, 2023. The capital decrease resulted in a reduction on September 21, 2023, of the nominal value of the
Novartis AG shares of CHF 0.01, from CHF 0.50 per share to CHF 0.49 per share.
The total share capital decreased from CHF 1 201.9 million at December 31, 2022, to CHF 1 116.0 million at
December 31, 2023, due to a share capital reduction as a result of the cancellation of 126.2 million repurchased
shares with a nominal value of CHF 63.1 million and the reduction of the nominal value of Novartis AG shares by
CHF 0.01 which amounted to CHF 22.8 million. The cancellation of the 126.2 million shares was approved at the
Annual General Meeting on March 7, 2023, and became effective on March 7, 2023.
During 2022, the total share capital decreased from CHF 1 217.2 million at December 31, 2021, to CHF 1 201.9
million at December 31, 2022, due to a share capital reduction as a result of the cancellation of 30.7 million repur-
chased shares with a nominal value of CHF 15.3 million. The cancellation was approved at the Annual General Meet-
ing on March 4, 2022, and became effective on May 11, 2022.
11. Treasury shares
Treasury shares held by subsidiaries and foundations
January 1
Number of shares held by foundations as at January 1
Number of shares purchased/sold; reserves transferred
December 31
1 Excluding foundations
2023
2022 1
Legal reserve for
treasury shares
held by subsidiaries
CHF millions
Number
of shares
Legal reserve for
treasury shares
held by subsidiaries
CHF millions
Number
of shares
7 529 059
96 969 226
– 11 648 475
92 849 810
450
14 987 803
907
2 245
– 578
2 117
– 7 458 744
7 529 059
– 457
450
2023
2022
Deduction from equity
for treasury shares
held by Novartis AG
CHF millions
Number
of shares
Deduction from equity
for treasury shares
held by Novartis AG
CHF millions
Number
of shares
Treasury shares held by Novartis AG
January 1
177 550 958
Number of shares purchased/canceled; reserves transferred
– 38 696 245
10 322
– 2 736
82 007 126
95 543 832
December 31
138 854 713
7 586
177 550 958
2 537
7 785
10 322
A-6
Notes to the financial statements of Novartis AG
2023
2022 1
Number of
shares
Total
treasury shares
CHF millions
Number
of shares
Total
treasury shares
CHF millions
Total treasury shares
January 1
Number of shares held by foundations as at January 1
185 080 017
96 969 226
10 772
96 994 929
3 444
2 245
Number of shares purchased/sold or canceled; reserves transferred – 50 344 720
– 3 314
88 085 088
December 31
1 Excluding foundations
231 704 523
9 703
185 080 017
7 328
10 772
Novartis AG has met the legal requirements for legal reserves under articles 659 et. seq. for the treasury shares.
Treasury share purchases during 2023 totaled 89.1 million (2022: 127.7 million), with an average purchase price
of CHF 86 (2022: CHF 82). No treasury shares were sold during 2023 and 2022. Share-based compensation trans-
actions totaled 11.1 million shares (2022: 9.7 million shares).
The number of treasury shares held by Novartis AG and its direct and indirect subsidiaries meet the definitions
and requirements of article 659b SCO. As at December 31, 2023, treasury shares held by Novartis AG and its direct
and indirect fully-owned subsidiaries totaled 231 704 523. It should be noted that within the Novartis AG consoli-
dated financial statements prepared according to IFRS Accounting Standards, some Novartis entities are included
in the consolidation scope. These Novartis entities are mainly foundations, which as at December 31, 2022 did not
qualify as subsidiaries in the sense of article 659b SCO.
With effective date of January 1, 2023, article 659b SCO was amended to change the definition of subsidiaries
to include foundations of Novartis. This change was implemented as at January 1, 2023, and increased the Novartis
AG reported number of treasury shares held by subsidiaries by 96 969 226 shares, to reflect the Novartis AG shares
held by Novartis foundations.
As of the entry into force of the revised Swiss corporate law on January 1, 2023, Novartis ordinary shares held
by Swiss foundations controlled by Novartis no longer carry the right to vote and are therefore included as trea-
sury shares for determining compliance with the legal requirements for legal reserves under articles 659 et. seq.
for the treasury shares.
For more information related to the amendment to SCO article 659b (see Note 12).
12. Free reserves
(CHF millions)
January 1
Reduction due to cancellation of treasury shares (2022: CHF 545 million of repurchased shares
less their nominal value of CHF 15 million) 1
Transfer to legal reserve for treasury shares from foundations
Transfer from legal reserve for treasury shares 2
December 31
1 Reduction due to cancellation of treasury shares in 2023 fully off-set with retained earnings
2 Transfer from legal reserve for treasury shares (including expired dividends and foundations)
2023
667
– 666
579
580
2022
739
– 530
458
667
With effective date of January 1, 2023, article 659b SCO was amended to change the definition of subsidiaries to
include foundations of a company. This change was implemented as at January 1, 2023 and increased the amount
of legal reserves by the cost basis of the treasury shares held by subsidiaries to the amount of CHF 2 245 million,
for the 96 969 226 Novartis AG shares held by Novartis foundations, (from CHF 450 million to CHF 2 695 million),
with a corresponding decrease in free reserves of CHF 666 million and retained earnings of CHF 1 579 million.
A-7
Notes to the financial statements of Novartis AG
13. Contingent liabilities
(CHF millions)
Guarantees in favor of subsidiaries to cover capital and interest of bonds, credit facilities and commercial paper
programs – total maximum amount CHF 33 791 million (2022: CHF 39 416 million)
Other guarantees in favor of subsidiaries, associated companies and others –
total maximum amount CHF 1 000 million (2022: CHF 1 737 million)
Total contingent liabilities
Dec 31, 2023 Dec 31, 2022
18 810
21 997
223
559
19 033
22 556
Novartis AG is part of the Swiss Novartis value-added tax (VAT) group and is therefore jointly liable for existing and
future VAT claims from the Swiss Federal Tax Administration.
In December 2021, Novartis AG entered into an irrevocable, non-discretionary arrangement with a bank to repur-
chase Novartis shares on the second trading line under its up-to USD 15.0 billion share buyback. The arrangement
was updated in July 2022, December 2022 and May 2023, and concluded in June 2023.
In June 2023, Novartis AG entered into an irrevocable, non-discretionary arrangement with a bank to repur-
chase 11.7 million Novartis shares on the second trading line, which concluded in July 2023.
In July 2023, Novartis AG entered into a new irrevocable, non-discretionary arrangement with a bank to repur-
chase Novartis shares on the second trading line under its new up-to USD 15.0 billion share buyback. Novartis AG
is able to cancel this arrangement but may be subject to a 90-day waiting period under certain conditions.
As of December 31, 2023, these waiting period conditions were not applicable and as a result, there was no
requirement to record a contingent liability under this arrangement as of December 31, 2023.
14. Registration, voting restrictions
and major shareholders
Novartis AG Articles of Incorporation state that no per-
son or entity shall be registered with the right to vote for
more than 2% of the share capital, as set forth in the
commercial register. In particular cases, the Board of
Directors may allow exemptions from the limitation for
registration in the Novartis Share Register.
According to the Novartis Share Register, sharehold-
ers who owned 2% or more of the Company’s capital at
December 31, 2023, and were entitled to voting rights
on all of their shares, excluding treasury shares held by
Novartis AG or its fully owned subsidiaries (including
Swiss foundations controlled by Novartis AG), were as
follows:
Furthermore, there were the following other significant
share holders:
% holding of % holding of
share capital share capital
Dec 31, 2023 Dec 31, 2022
Shareholders registered as nominees:
Nortrust Nominees Ltd., London
The Bank of New York Mellon, New York
Through The Bank of New York Mellon, Everett
Through The Bank of New York Mellon, New York
Through The Bank of New York Mellon,
SA/NV, Brussels
Chase Nominees Ltd., London 1
3.6
2.9
1.5
1.0
0.4
3.8
2.9
1.6
0.9
0.4
8.4
% holding of % holding of
share capital share capital
Dec 31, 2023 Dec 31, 2022
Shareholder acting as American Depositary Share (ADS) depositary:
JPMorgan Chase Bank, N.A., New York
8.3
9.4
Shareholders registered for
their own account:
Emasan AG, Basel 1
UBS Fund Management
(Switzerland) AG, Basel
Credit Suisse Funds AG, Zurich
3.9
2.7
2.2
3.7
2.3
2.1
1 According to a disclosure notification filed with Novartis AG and the SIX Swiss
Exchange, the beneficial owner of the shares registered for Emasan AG is Sandoz
– Fondation de Famille, Liechtenstein.
1 Chase Nominees, Ltd. (Chase) has informed us that as of December 2023, it will no
longer register any shareholding positions on its own behalf. Shares held by
customers of Chase will be registered for such customer’s own account.
The following shareholder was disclosed through a noti-
fication filed with Novartis AG, but was not registered as
of December 31, 2023, in the Novartis Share Register:
• Norges Bank (Central Bank of Norway), Oslo, which
held 2.4% (2022: 2.3%)
The following shareholder was disclosed through a noti-
fication filed with Novartis AG and the SIX Swiss
Exchange, but was registered with less than 2% of the
share capital as of December 31, 2023, in the Novartis
Share Register:
• BlackRock, Inc., New York, which held between 5% and
10%.
A-8
Notes to the financial statements of Novartis AG
15. Equity instrument disclosures for the Board of
Directors and Executive Committee members
The following table provides a summary of equity grants (shares, ADRs, restricted share units (RSUs) and perfor-
mance share units (PSUs)) to the Board of Directors and the Executive Committee members for the years ended
December 31, 2023 and 2022.
Board of Directors members
Shares and ADRs granted during the year
Executive Committee members
Shares and ADRs granted during the year 1
RSUs/PSUs granted during the year
1 Shares and ADRs granted under the Annual Incentive
2023
2022
Weighted
average
fair value
Number at grant date
in CHF
granted
Weighted
average
fair value
Number at grant date
in CHF
granted
54 185
82.93
57 251
80.55
24 141
85.30
54 351
481 980
85.12
492 299
78.16
77.97
A-9
Appropriation of available earnings and reserves of Novartis AG
Appropriation of available earnings and
reserves of Novartis AG
1. Appropriation of available earnings of Novartis AG
as per balance sheet and declaration of dividend
(CHF)
Available unappropriated earnings
Balance brought forward before capital reduction
Reduction due to cancellation of treasury shares1
2023
2022
34 123 671 700
19 318 747 323
– 10 233 254 934
– 1 966 414 116
Total available earnings available for special distribution of a dividend in kind
23 890 416 766
17 352 333 207
Special distribution by way of dividend in kind to effect the spin-off of Sandoz Group AG
– 4 769 299 720
Net income of the year
Total available earnings at the end of the year
Transfer to legal reserves for treasury shares2
11 426 299 804
25 392 232 198
30 547 416 850
42 744 565 405
– 1 578 834 054
Total available earnings at the disposal of the Annual General Meeting
30 547 416 850
41 165 731 351
Appropriation proposed by the Board of Directors
Payment of a gross dividend (before taxes and duties) of CHF 3.30 (2022: CHF 3.20)
on 2 134 274 232 (2022: 2 205 489 460) dividend-bearing shares3
with a nominal value of CHF 0.49 each (2022: CHF 0.50)
Total available earnings after appropriation
Dividend waived for additional treasury shares held by the Company
Balance to be carried forward
– 7 043 104 966
– 7 057 566 272
23 504 311 884
34 108 165 079
23 504 311 884
34 123 671 700
15 506 621
1 Based on the Annual General Meeting resolution of March 7, 2023 and March 4, 2022
2 With effective date of January 1, 2023, article 659b SCO was amended to change the definition of subsidiaries to include foundations of a company. This amendment requires an
additional allocation of legal reserve for treasury shares held by Novartis foundations as of January 1, 2023, resulting in a reduction in available earnings at the disposal of the
Annual General Meeting
3 No dividend was declared on treasury shares held by Novartis AG or its direct or indirect fully owned subsidiaries (excluding foundations)
If this proposal is approved, the dividend will be paid as from March 11, 2024. The last trading day with entitlement
to receive the dividend is March 6, 2024. As from March 7, 2024, the shares will be traded ex-dividend.
2. Special distribution by way of a dividend in kind to
effect the spin-off of Sandoz Group AG
(CHF)
Available retained earnings before special distribution
Retained earnings available for special distribution of a dividend in kind
Special distribution by way of a dividend in kind to effect the spin-off of Sandoz Group AG
Appropriation from retained earnings1
Total distributable retained earnings after special distribution by way of dividend in kind
to effect the spin-off of Sandoz Group AG
Remaining retained earnings
1 Not exceeding the amounts approved by Novartis AG shareholders at the EGM held on September 15, 2023
(CHF)
Other capital reserve before the reduction of par value of Novartis AG shares
Other capital reserve
Increase of other capital reserve due to the reduction of par value of Novartis AG shares1
Remaining other capital reserve
1 Based on the EGM resolution of September 15, 2023
A-10
2023
23 890 416 766
– 4 769 299 720
19 121 117 046
2023
22 774 778
22 774 778
Statutory Auditor’s Report
Statutory Auditor’s Report
to the General Meeting of Novartis AG, Basel
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of Novartis AG
(the Company), which comprise the balance sheet as at
December 31, 2023, and the income statement for the
year then ended, and notes to the financial statements,
including a summary of significant accounting policies.
In our opinion, the accompanying financial state-
ments (A-1 to A-10) comply with Swiss law and the Com-
pany’s articles of incorporation.
Basis for Opinion
We conducted our audit in accordance with Swiss law
and Swiss Standards on Auditing (SA-CH). Our respon-
sibilities under those provisions and standards are fur-
ther described in the “Auditor’s Responsibilities for the
Audit of the Financial Statements” section of our report.
We are independent of the Company in accordance with
the provisions of Swiss law, together with the require-
ments of the Swiss audit profession, and we have ful-
filled our other ethical responsibilities in accordance with
these requirements.
We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our
opinion.
Key Audit Matters
Key audit matters are those matters that, in our profes-
sional judgment, were of most significance in our audit
of the financial statements of the current period. We have
determined that there are no key audit matters to com-
municate in our report.
Other Information in the Annual
Report
The Board of Directors is responsible for the other infor-
mation in the Annual Report. The other information com-
prises the information included in the annual report, but
does not include the consolidated financial statements,
the stand-alone financial statements of the Company,
the compensation report and our auditor’s reports
thereon.
Our opinion on the financial statements does not
cover the other information and we do not express any
form of assurance conclusion thereon.
In connection with our audit of the financial state-
ments, our responsibility is to read the other information
and, in doing so, consider whether the other information
is materially inconsistent with the financial statements
or our knowledge obtained in the audit or otherwise
appears to be materially misstated.
If, based on the work we have performed, we con-
clude that there is a material misstatement of this other
information, we are required to report that fact. We have
nothing to report in this regard.
Board of Directors’ Responsibilities for the Financial
Statements
The Board of Directors is responsible for the prepa-
ration of the financial statements that give a true and fair
view in accordance with the accounting rules for banks,
securities firms, financial groups and conglomerates, the
provisions of Swiss law and the Company’s articles of
incorporation, and for such internal control as the Board
of Directors determines is necessary to enable the
preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of
Directors is responsible for assessing the Company’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern, and using
the going concern basis of accounting unless the Board
of Directors either intends to liquidate the Company or
to cease operations, or has no realistic alternative but to
do so.
Auditor’s Responsibilities for the
Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and
to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance
with Swiss law and SA-CH will always detect a material
misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, indi-
vidually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of these financial statements.
A-11
Statutory Auditor’s Report
As part of an audit in accordance with Swiss law and
SA-CH, we exercise professional judgment and maintain
professional skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement
of the financial statements, whether due to fraud or
error, design and perform audit procedures responsive
to those risks, and obtain audit evidence that is suffi-
cient and appropriate to provide a basis for our opin-
ion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting
from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the over-
ride of internal control.
• Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the pur-
pose of expressing an opinion on the effectiveness of
the Company’s internal control.
• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made.
• Conclude on the appropriateness of the Board of
Directors’ use of the going concern basis of account-
ing and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or con-
ditions that may cast significant doubt on the Compa-
ny’s ability to continue as a going concern. If we con-
clude that a material uncertainty exists, we are required
to draw attention in our auditor’s report to the related
disclosures in the financial statements or, if such dis-
closures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future
events or conditions may cause the Company to cease
to continue as a going concern.
• Evaluate the overall presentation, structure and con-
tent of the financial statements, including the disclo-
sures, and whether the financial statements represent
the underlying transactions and events in a manner that
achieves fair presentation.
We communicate with the Board of Directors regarding,
among other matters, the planned scope and timing of
the audit and significant audit findings, including any sig-
nificant deficiencies in internal control that we identify
during our audit.
We also provide the Board of Directors or its relevant
committee with a statement that we have complied with
relevant ethical requirements regarding independence,
and communicate with them all relationships and other
matters that may reasonably be thought to bear on our
independence, and where applicable, actions taken to
eliminate threats or safeguards applied.
From the matters communicated with the Board of
Directors or its relevant committee, we determine those
matters that were of most significance in the audit of the
financial statements of the current period and are there-
fore the key audit matters. We describe these matters in
our auditor’s report, unless law or regulation precludes
public disclosure about the matter or when, in extremely
rare circumstances, we determine that a matter should
not be communicated in our report because the adverse
consequences of doing so would reasonably be expected
to outweigh the public interest benefits of such commu-
nication.
Report on Other Legal and
Regulatory Requirements
In accordance with article 728a para. 1 item 3 CO and
PS-CH 890, we confirm that an internal control system
exists, which has been designed for the preparation of
financial statements according to the instructions of the
Board of Directors.
We further confirm that the proposed appropriation
of available earnings and reserves of Novartis AG com-
plies with Swiss law and the Company’s articles of incor-
poration. We recommend that the financial statements
submitted to you be approved.
KPMG AG
Richard Broadbelt
Licensed Audit expert
Auditor in Charge
Basel, January 30, 2024
Norman Dittes
Licensed Audit Expert
A-12