Press Release: Novartis continues strong momentum in Q3 with 10% sales growth, 20% core operating income growth, and important innovation milestones; raises ...

Ad hoc announcement pursuant to Art. 53 LR

-- Q3 net sales grew +10% (cc1, +9% USD) with core operating income up +20%

(cc, +17% USD)

-- Sales growth driven by continued strong performance from Entresto

(+26% cc), Cosentyx (+28% cc), Kisqali (+43% cc), Kesimpta (+28%

cc), Pluvicto (+50% cc) and Leqvio (+119% cc)

-- Core operating income margin 40.1%, +340 basis points (cc), mainly

driven by higher net sales

-- Q3 operating income grew +123% (cc, +106% USD); net income up +121% (cc,

+111% USD)

-- Q3 core EPS grew +20% (cc, +18% USD) to USD 2.06

-- Q3 free cash flow1 of USD 6.0 billion (+18% USD) driven by higher net

cash flows from operating activities

-- Strong nine months performance with sales up +11% (cc, +9% USD) and core

operating income up +20% (cc, +17% USD)

-- Q3 selected innovation milestones:

-- Kisqali FDA approval and positive CHMP opinion for HR+/HER2- stage

II and III eBC

-- Fabhalta FDA accelerated approval for IgAN

-- Pluvicto FDA filing for pre-taxane mCRPC

-- Full-year 2024 guidance raised2

-- Net sales expected to grow low double-digit (from high single to

low double-digit)

-- Core operating income expected to grow high teens (from mid to

high teens)

Basel, October 29, 2024 -- commenting on Q3 2024 results, Vas Narasimhan, CEO of Novartis, said:

"Novartis delivered another quarter of strong operational performance in Q3, with sales up 10% and core operating income up 20%. All key growth drivers contributed to the momentum. We achieved important indications expansions for Kisqali in early breast cancer and Fabhalta in IgA nephropathy, and we completed our PSMAfore filing for Pluvicto in the US. With the momentum in our business and pipeline, we were able to once again upgrade our full-year guidance and remain highly confident in our mid-term outlook."

Key figures Continuing operations(3)

----------------------------------------------------------

Q3 2024 Q3 2023 % change 9M 2024 9M 2023 % change

USD m USD m USD cc USD m USD m USD cc

------- ------- ---- ---- ------- ------- ----- ---

Net sales 12 823 11 782 9 10 37 164 34 017 9 11

---------------- ------- ------- ---- ---- ------- ------- ----- ---

Operating income 3 627 1 762 106 123 11 014 7 187 53 61

---------------- ------- ------- ---- ---- ------- ------- ----- ---

Net income 3 185 1 513 111 121 9 119 5 934 54 62

---------------- ------- ------- ---- ---- ------- ------- ----- ---

EPS (USD) 1.58 0.73 116 127 4.50 2.84 58 67

---------------- ------- ------- ---- ---- ------- ------- ----- ---

Free cash flow 5 965 5 043 18 12 618 11 019 15

---------------- ------- ------- ---- ---- ------- ------- ----- ---

Core operating

income 5 145 4 405 17 20 14 635 12 551 17 20

---------------- ------- ------- ---- ---- ------- ------- ----- ---

Core net income 4 133 3 585 15 17 11 822 10 320 15 18

---------------- ------- ------- ---- ---- ------- ------- ----- ---

Core EPS (USD) 2.06 1.74 18 20 5.83 4.95 18 21

---------------- ------- ------- ---- ---- ------- ------- ----- ---

1. Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 46 of the Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year. 2. Please see detailed guidance assumptions on page 7. 3. As defined on page 35 of the Interim Financial Report, Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities and Discontinued operations include operational results from the Sandoz business.

Strategy

Our focus

In 2023, Novartis completed its transformation into a "pure-play" innovative medicines business. We have a clear focus on four core therapeutic areas (cardiovascular-renal-metabolic, immunology, neuroscience and oncology), with multiple significant in-market and pipeline assets in each of these areas, that address high disease burden and have substantial growth potential. In addition to two established technology platforms (chemistry and biotherapeutics), three emerging platforms (gene & cell therapy, radioligand therapy and xRNA) are being prioritized for continued investment into new R&D capabilities and manufacturing scale. Geographically, we are focused on growing in our priority geographies -- the US, China, Germany and Japan.

Our priorities

1. Accelerate growth: Renewed attention to deliver high-value medicines

(NMEs) and focus on launch excellence, with a rich pipeline across our

core therapeutic areas.

2. Deliver returns: Continuing to embed operational excellence and deliver

improved financials. Novartis remains disciplined and shareholder-focused

in our approach to capital allocation, with substantial cash generation

and a strong capital structure supporting continued flexibility.

3. Strengthening foundations: Unleashing the power of our people, scaling

data science and technology and continuing to build trust with society.

Financials

Following the September 15, 2023, shareholder approval of the spin-off of Sandoz, Novartis reported its consolidated financial statements as "continuing operations" and "discontinued operations."

Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and the continuing corporate activities. Discontinued operations include the Sandoz Division and selected portions of corporate activities attributable to Sandoz's business, as well as certain expenses related to the spin-off.

While the commentary below focuses on continuing operations, we also provide information on discontinued operations.

Continuing operations

Third quarter

Net sales were USD 12.8 billion (+9%, +10% cc), with volume contributing 12 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing was flat.

Operating income was USD 3.6 billion (+106%, +123% cc), mainly driven by lower impairments and higher net sales, partly offset by higher R&D investments.

Net income was USD 3.2 billion (+111%, +121% cc), mainly driven by higher operating income. EPS was USD 1.58 (+116%, +127% cc), benefiting from the lower weighted average number of shares outstanding.

Core operating income was USD 5.1 billion (+17%, +20% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 40.1% of net sales, increasing 2.7 percentage points (+3.4 percentage points cc).

Core net income was USD 4.1 billion (+15%, +17% cc), mainly due to higher core operating income. Core EPS was USD 2.06 (+18%, +20% cc), benefiting from the lower weighted average number of shares outstanding.

Free cash flow from continuing operations amounted to USD 6.0 billion (+18% USD), compared with USD 5.0 billion in the prior-year quarter, driven by higher net cash flows from operating activities from continuing operations.

Nine months

Net sales were USD 37.2 billion (+9%, +11% cc) with volume contributing 14 percentage points to growth. Generic competition had a negative impact of 2 percentage points and pricing had a negative impact of 1 percentage point.

Operating income was USD 11.0 billion (+53%, +61% cc), mainly driven by higher net sales, lower impairments and restructuring charges, partly offset by prior-year one-time income from legal matters and higher R&D investments.

Net income was USD 9.1 billion (+54%, +62% cc), mainly driven by higher operating income. EPS was USD 4.50 (+58%, +67% cc), benefiting from the lower weighted average number of shares outstanding.

Core operating income was USD 14.6 billion (+17%, +20% cc), mainly driven by higher net sales, partly offset by higher R&D investments. Core operating income margin was 39.4% of net sales, increasing 2.5 percentage points (+3.2 percentage points cc).

Core net income was USD 11.8 billion (+15%, +18% cc), mainly due to higher core operating income. Core EPS was USD 5.83 (+18%, +21% cc), benefiting from the lower weighted average number of shares outstanding.

Free cash flow from continuing operations amounted to USD 12.6 billion (+15% USD), compared with USD 11.0 billion in the prior-year period, driven by higher net cash flows from operating activities from continuing operations.

Discontinued operations

Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars division, certain corporate activities attributable to Sandoz and certain other expenses related to the spin-off of the Sandoz business.

Third quarter

As the Sandoz spin-off was completed on October 3, 2023, there were no operating results in the third quarter of 2024 related to discontinued operations. In the third quarter of 2023, discontinued operations net sales were USD 2.5 billion, operating loss amounted to USD 86 million and net income from discontinued operations was USD 250 million. For further details see Note 3 "Significant acquisition of businesses and spin-off of Sandoz business" and Note 11 "Discontinued operations" to the condensed interim consolidated financial statements.

Nine months

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