SOURCE: Novartis International AG

July 17, 2007 01:00 ET

Novartis Delivers Strong Performance in First Half of 2007 (H1 - Report)

BASEL, SWITZERLAND--(Marketwire - July 17, 2007) -

* Group first-half net sales advance 14% (+11% in local currencies) to USD 19.9 billion on solid contributions from all divisions * Net income up 14% to USD 4.2 billion and EPS rises 14% to USD 1.78 per share * Operating income from continuing operations up 13% and net income from continuing operations advances 17% * New pharmaceutical brands - particularly Tekturna, Lucentis, Exjade and Exforge - performing dynamically; seven major regulatory approvals achieved to date in 2007 * Proceeds from non-core divestments to fund targeted acquisitions and repurchase of up to approximately USD 4 billion of Novartis shares by February 2008 * Outlook maintained for record 2007 operating and net income for continuing operations; Group net sales growth revised to mid-single-digits in local currencies

* Pharmaceuticals net sales growth expected to slow in second half of 2007, mainly from US generic competition for Lotrel and Lamisil and the Zelnorm suspension

Key Group figures

First half

|                      |    H1 2007     |    H1 2006     | % Change |
|                      |        |  % of |        |  % of |     |    |
|                      |        |   net |        |   net |     |    |
|                      |  USD m | sales |  USD m | sales | USD | lc |
| Net sales            | 19 941 |       | 17 483 |       |  14 | 11 |
| Operating income     |  4 669 |  23.4 |  4 262 |  24.4 |  10 |    |
| Net income           |  4 187 |  21.0 |  3 669 |  21.0 |  14 |    |
| Basic earnings per   |    USD |       |    USD |       |     |    |
| share/ADS            |   1.78 |       |   1.56 |       |  14 |    |

Second quarter

|                       |    Q2 2007     |    Q2 2006    | % Change |
|                       |        |  % of |       |  % of |     |    |
|                       |        |   net |       |   net |     |    |
|                       |  USD m | sales | USD m | sales | USD | lc |
| Net sales             | 10 122 |       | 9 182 |       |  10 |  7 |
| Operating income      |  2 216 |  21.9 | 2 060 |  22.4 |   8 |    |
| Net income            |  2 016 |  19.9 | 1 713 |  18.7 |  18 |    |
| Basic earnings per    |    USD |       |   USD |       |     |    |
| share/ADS             |   0.86 |       |  0.73 |       |  18 |    |

Basel, July 17, 2007 - Commenting on the results, Dr. Daniel Vasella, Chairman and CEO of Novartis said: "All areas of our strategic healthcare portfolio performed well in the first half of 2007 despite some setbacks in the Pharmaceuticals Division. Continuing our focus on innovation, we have already achieved seven major regulatory approvals this year and more are expected in the second half. Many of these new products are meeting high expectations, while our leading brands Diovan and Gleevec/Glivec keep growing dynamically. Sandoz and Vaccines and Diagnostics again delivered strong growth. Our complementary healthcare businesses are positioning us well to fulfill a broad spectrum of patient needs and meet the challenges of an increasingly volatile sector."

First half 2007

Net sales

|                               | H1 2007 | H1 2006 |      % Change |
|                               |   USD m |   USD m |    USD |   lc |
| Pharmaceuticals               |  11 988 |  10 751 |     12 |    9 |
| Vaccines and Diagnostics      |     482 |     127 |        |      |
| Sandoz                        |   3 415 |   2 881 |     19 |   13 |
| Consumer Health continuing    |   2 643 |   2 415 |      9 |    6 |
| operations                    |         |         |        |      |
| Net sales from continuing     |  18 528 |  16 174 |     15 |   11 |
| operations                    |         |         |        |      |
| Consumer Health discontinuing |   1 413 |   1 309 |      8 |    7 |
| operations(1)                 |         |         |        |      |
| Total                         |  19 941 |  17 483 |     14 |   11 |

(1) Discontinuing operations include Medical Nutrition and Gerber in 2007 and Medical Nutrition, Gerber and Nutrition & Santé in 2006. The divestiture of Medical Nutrition was completed on July 1, 2007.

Group net sales rise 14% (+11% lc) to USD 19.9 billion Dynamic performances from Sandoz and Vaccines and Diagnostics as well as solid growth in Pharmaceuticals and Consumer Health supported the double-digit expansion. Higher sales volumes represented seven percentage points of growth and acquisitions three percentage points, while currency translation had a positive impact of three points and net price changes added one point.

Pharmaceuticals net sales advance 12% (+9% lc) to USD 12.0 billion Ongoing strong growth in the top-selling brands Diovan (USD 2.4 billion, +19% lc) and Gleevec/Glivec (USD 1.4 billion, +14% lc) - both No. 1 in their segments - underpinned the performance. Recently launched brands such as Exforge, Exjade, Lucentis, Prexige and Tekturna/Rasilez continued growing rapidly. US net sales rose 5%, as growth in several brands helped offset the impact of the Zelnorm suspension in March and generic competition for Lotrel starting in May.

Vaccines and Diagnostics net sales of USD 482 million Key drivers were growth in deliveries of components for use in combination pediatric vaccines as well as vaccines for tick-borne encephalitis. Diagnostics products, mainly used for blood testing, delivered further double-digit growth. The year-ago period included net sales for only two months following the April 2006 acquisition. Net sales on a comparable basis were up 45% over the 2006 period recorded by Chiron.

Sandoz net sales expand 19% (+13% lc) to USD 3.4 billion Recent US product launches, in particular for difficult-to-make products, underpinned the dynamic performance as this region accounted for 28% of total net sales. Improving positions in markets such as Eastern Europe, Scandinavia, Canada and Latin America further supported double-digit growth.

Consumer Health continuing operations net sales up 9% (+6% lc) to USD 2.6 billion OTC provided strong growth ahead of the market thanks to strategic brands and expansion in emerging markets, while Animal Health benefited from further expansion in key markets.

Operating income

|                          |    H1 2007    |    H1 2006    | Change |
|                          |       |  % of |       |  % of |        |
|                          |       |   net |       |   net |        |
|                          | USD m | sales | USD m | sales |   In % |
| Pharmaceuticals          | 3 620 |  30.2 | 3 303 |  30.7 |     10 |
| Vaccines and Diagnostics |     7 |   1.5 |   -38 |       |        |
| Sandoz                   |   561 |  16.4 |   445 |  15.4 |     26 |
| Consumer Health          |       |       |   446 |       |        |
| continuing operations    |   483 |  18.3 |       |  18.5 |      8 |
| Corporate income &       |       |       |  -218 |       |        |
| expense, net             |  -239 |       |       |       |     10 |
| Operating income from    |       |       |       |       |        |
| continuing operations    | 4 432 |  23.9 | 3 938 |  24.3 |     13 |
| Consumer Health          |       |       |       |       |        |
| discontinuing            |       |       |       |       |        |
| operations(1)            |   237 |  16.8 |   324 |  24.8 |    -27 |
| Total                    | 4 669 |  23.4 | 4 262 |  24.4 |     10 |

(1) Discontinuing operations include Medical Nutrition and Gerber in 2007 and Medical Nutrition, Gerber and Nutrition & Santé in 2006. The 2006 results include a pre-tax divestment gain of USD 129 million from the sale of Nutrition & Santé. The divestiture of Medical Nutrition was completed on July 1, 2007.

Group operating income rises 10% to USD 4.7 billion Operating income rose slower than net sales as the year-ago period included a one-time gain from the sale of Nutrition & Santé. Operating income from continuing operations was up 13% due to strong underlying contributions from all divisions, particularly Sandoz and Pharmaceuticals.

Pharmaceuticals operating income up 10% to USD 3.6 billion The decline in operating margin to 30.2% reflected primarily the ongoing strong investments in new product launches as well as in trials for key late-stage development projects. R&D investments rose 26% and were 20.3% of net sales - an increase of 2.4 percentage points from the year-ago period mainly for major projects entering Phase III and IV trials (FTY720, QAB149, Tekturna/Rasilez, Galvus, RAD001, SOM230, AGO178 and ABF656). Marketing & Sales expenses rose to 31.4% of net sales, an increase of 0.7 percentage points from the year-ago period, to support new product launches including Tekturna/Rasilez, Exforge, Prexige, Exjade and Lucentis. Productivity gains partially offset the higher investments in development and new product launches. Other Expenses, net of Other Income were sharply reduced in the 2007 first half, primarily reflecting the reversal of a one-time USD 107 million pre-launch inventory provision for Tekturna/Rasilez following US approval in March 2007 and acquisition-related charges in 2006. Excluding exceptional items in both periods, operating income rose 7% and the operating margin was 29.9%. Vaccines and Diagnostics provides operating income of USD 7 million Underlying operating income of USD 160 million (before restructuring and acquisition-related amortization charges of USD 153 million) reflected the ongoing business expansion for non-influenza vaccines and steady growth in diagnostics. Reported operating income also included one-time contributions in the 2007 first half of USD 83 million from legal and other settlements.

Sandoz operating income advances 26% to USD 561 million Volume growth from several new product launches, particularly in the US, underpinned the growth in operating income ahead of net sales. Productivity gains and better economies of scale in key markets more than offset ongoing investments in new product development and the negative impact of regulatory changes in some markets. Focus on high-margin sales as well as strong productivity gains in the anti-infectives business also positively impacted profitability. The operating income margin improved by one percentage point to 16.4%.

Consumer Health continuing operations operating income up 8% to USD 483 million Operating income progressed well as significant investments were made in R&D and marketing initiatives for new product launches as well as ongoing geographic expansion in emerging markets and Japan.

Second quarter 2007

Net sales

|                               | Q2 2007 | Q2 2006 |      % Change |
|                               |   USD m |   USD m |    USD |   lc |
| Pharmaceuticals               |   6 065 |   5 699 |      6 |    4 |
| Vaccines and Diagnostics      |     251 |     127 |        |      |
| Sandoz                        |   1 719 |   1 450 |     19 |   13 |
| Consumer Health continuing    |   1 365 |   1 232 |     11 |    7 |
| operations                    |         |         |        |      |
| Net sales from continuing     |   9 400 |   8 508 |     10 |    7 |
| operations                    |         |         |        |      |
| Consumer Health discontinuing |     722 |     674 |      7 |    5 |
| operations(1)                 |         |         |        |      |
| Total                         |  10 122 |   9 182 |     10 |    7 |

(1) Discontinuing operations include Medical Nutrition and Gerber in 2007 and Medical Nutrition, Gerber and Nutrition & Santé in 2006. The divestiture of Medical Nutrition was completed on July 1, 2007. Group net sales up 10% (+7% lc) to USD 10.1 billion Outstanding performances from Sandoz, Vaccines and Diagnostics and Consumer Health helped offset lower sales in Pharmaceuticals in the US. Four percentage points of Group net sales growth came from higher sales volumes, while acquisitions added two points and net price changes one point. Currency translation had a positive impact of three points.

Pharmaceuticals net sales rise 6% (+4% lc) to USD 6.1 billion Europe, Latin America and emerging markets supported the overall performance, which was impacted by a 6% decline in the US after the suspension of Zelnorm and generic competition for Lotrel. Strong growth came from the top brands Diovan (USD 1.2 billion, +17% lc), Gleevec/Glivec (USD 747 million, +12% lc) and Femara (USD 231 million, +28% lc) as well as from new products such as Exforge, Tekturna/Rasilez, Prexige, Exjade and Lucentis.

Vaccines and Diagnostics net sales advance to USD 251 million The dynamic performance came mainly from higher deliveries of components for multivalent pediatric vaccines as well as for various non-influenza vaccines, including tick-borne encephalitis. Diagnostics benefited from geographic expansion outside the US. The 2006 period includes two months of net sales after the April 2006 acquisition. On a comparable basis, net sales were up 44% over the 2006 period recorded by Chiron.

Sandoz net sales grow 19% (+13% lc) to USD 1.7 billion Ongoing growth in the US, where net sales rose 27%, drove the division's double-digit expansion. New product launches in the US performed very well, including anti-infectives such as cefdinir (Omnicef®)[1] and an authorized generic version of Lotrel. Other markets - particularly Eastern Europe, India, Canada, Brazil, Australia and Turkey - showed strong growth based on new product launches and in some cases rising generic utilization rates.

Consumer Health continuing operations net sales up 11% (+7% lc) to USD 1.4 billion OTC generated solid growth from strategic brands, expansion in emerging markets, new product launches in Europe and the recent entry into Japan, the world's No. 2 OTC market. Animal Health also grew at a double-digit rate, while CIBA Vision net sales were higher mainly on improved availability of lens care products.

Operating income

|                            |    Q2 2007    |   Q2 2006   | Change |
|                            |       |  % of |     |  % of |        |
|                            |       |   net | USD |   net |        |
|                            | USD m | sales |   m | sales |   In % |
| Pharmaceuticals            |       |       |   1 |       |        |
|                            | 1 767 |  29.1 | 677 |  29.4 |      5 |
| Vaccines and Diagnostics   |   -20 |       | -38 |       |        |
| Sandoz                     |   243 |  14.1 | 207 |  14.3 |     17 |
| Consumer Health continuing |       |       | 216 |       |        |
| operations                 |   243 |  17.8 |     |  17.5 |     13 |
| Corporate income &         |       |       | -98 |       |        |
| expense, net               |  -136 |       |     |       |        |
| Operating income from      |       |       |   1 |       |        |
| continuing operations      | 2 097 |  22.3 | 964 |  23.1 |      7 |
| Consumer Health            |       |       |     |       |        |
| discontinuing              |       |       |     |       |        |
| operations(1)              |   119 |  16.5 |  96 |  14.2 |     24 |
| Total                      |       |       |   2 |       |        |
|                            | 2 216 |  21.9 | 060 |  22.4 |      8 |

(1) Discontinuing operations include Medical Nutrition and Gerber in 2007 and Medical Nutrition, Gerber and Nutrition & Santé in 2006. The divestiture of Medical Nutrition was completed on July 1, 2007.

Group operating income up 8% to USD 2.2 billion All divisions contributed to the improved operating income, particularly the double-digit expansion in Sandoz and Consumer Health that helped to compensate for lower growth in Pharmaceuticals.

Pharmaceuticals operating income rises 5% to USD 1.8 billion Continued significant investments in Research & Development and Marketing & Sales led to a decline in the operating margin to 29.1% of net sales. R&D expenses rose to 20.0% of net sales, driven by major projects entering late-stage trials compared to the 2006 second quarter. Marketing & Sales expenses were up 11% and represented 32.3% of net sales, mainly due to investments in new products such as Tekturna/Rasilez, Exforge, Prexige, Exjade and Lucentis. Productivity gains helped to partially offset these investments. In addition, lower acquisition-related charges had a positive impact on Other Income & Expense. Excluding exceptional items in both periods, operating income fell 1%, while operating margin declined to 29.5% from 31.8% in the prior-year period. Vaccines and Diagnostics operating loss of USD 20 million Operating income was USD 55 million before restructuring and acquisition-related amortization charges of USD 75 million, which led to the reported operating loss. The relatively low underlying operating income contribution during the second quarter reflects the seasonal nature of this business.

Sandoz operating income advances 17% to USD 243 million The double-digit growth reflected volume expansion from the recent wave of new product launches, particularly in the US and other key markets. Productivity gains, including lower production costs, more than offset new product investments and expansion plans in emerging markets.

Consumer Health continuing operations operating income up 13% to USD 243 million Strong volume growth in net sales underpinned the improvement and supported investments in sales forces and marketing for new product launches and geographic expansion into new markets, mainly in Animal Health and OTC.


Income from associated companies Income from associated companies was USD 95 million in the second quarter compared to USD 1 million in the year-ago period, reflecting one-time charges in 2006 for the Chiron acquisition. The investment in Roche provided a contribution of USD 87 million, up from USD 72 million in the 2006 second quarter. In the first half, associated companies provided income of USD 192 million compared to USD 105 million in the year-ago period.

Financial income, net Net financial income rose to USD 33 million in the second quarter, up from USD 4 million in the year-ago period and mainly reflecting the realization of gains from the sale of marketable securities and excellent currency management. For the first half, net financial income was USD 67 million, a 24% increase from the year-ago period.

Group net income Group net income in the second quarter rose 18%, faster than operating income based on the beneficial impact of income from associated companies and a lower anticipated tax rate of 14.0% in the quarter compared to 17.0% in the year-ago period. For the first six months of 2007, Group net income rose 14%, also faster than operating income thanks to higher contributions from associated companies and the lower anticipated tax rate of 15.0%. The reduced tax rates for these periods mainly reflect the impact of deferred tax accounting effects on completing legal restructurings following the Chiron acquisition.

Balance sheet The Group's equity rose to USD 43.7 billion at June 30, 2007, compared to USD 41.3 billion at December 31, 2006. First-half net income of USD 4.2 billion as well as actuarial gains from employee benefit plans of USD 1.2 billion and a contribution of USD 0.3 billion from share-based compensation and USD 0.3 billion in currency translation gains more than offset the dividend payment of USD 2.6 billion and share repurchases of USD 1.1 billion.

Total liquidity declined slightly to USD 7.5 billion from USD 8.0 billion at the end of 2006, while the debt/equity ratio improved to 0.17:1 compared to 0.18:1 at the end of 2006.

Novartis is one of the few non-financial services companies worldwide to have attained the highest credit ratings from Standard & Poor's, Moody's and Fitch, the three benchmark rating agencies. S&P has rated Novartis as AAA for long-term maturities and as A1+ for short-term maturities. Moody's has rated the Group as Aaa and P1, respectively, while Fitch has rated Novartis as AAA for long-term maturities and as F1+ for short-term maturities.

Cash flow Cash flow from operating activities from continuing operations in the 2007 first half was USD 3.9 billion, up USD 0.3 billion from the year-ago period. Net cash used in financing activities was USD 3.3 billion, of which USD 2.6 billion was for the 2006 dividend payment, USD 1.0 billion for the purchase of treasury shares offset by USD 0.3 billion in other net financing cash inflow. For continuing operations, free cash flow after dividends was USD 111 million in the first half, down from USD 604 million in the year-ago period due mainly to the increased dividend payment for 2006.

Targeted investments to strengthen healthcare portfolio Novartis is strategically repositioning its activities to focus solely on healthcare, areas where the Group has expertise and synergies to better address the needs of patients, physicians and societies in a dynamically changing healthcare environment. These areas include innovative pharmaceuticals for human and animal health, vaccines and diagnostics, generics and consumer health products such as over-the-counter (OTC) brands.

Targeted acquisitions will be considered that strengthen this healthcare portfolio. Novartis and Intercell AG signed in July one of the industry's most innovative comprehensive alliances that broadens the Novartis vaccines portfolio. Novartis has gained access to over 10 Intercell projects in preclinical and early-stage development, including vaccines for prevention of hospital-acquired infections and other life-threatening diseases, in return for an upfront payment and equity investment totaling USD 364 million (EUR 270 million). Novartis will assume responsibility for Phase III development, manufacturing and commercialization for any Intercell projects chosen after Phase II trials.

Divestments of non-core businesses are on track to be finished in 2007. The sale of Medical Nutrition to Nestlé for USD 2.5 billion was completed on July 1, while the Gerber baby foods business sale to Nestlé for USD 5.5 billion is set to be completed in the second half.

Repurchase of up to approximately USD 4 billion in Novartis shares Utilizing the Group's strong free cash flow and proceeds from divestitures, Novartis intends to complete the previously approved share repurchase programs and to buy back the remaining open amount of up to approximately USD 4 billion in shares by the next Annual General Meeting in February 2008. Shares worth USD 0.8 billion were already repurchased during the 2007 first half via a second trading line on the SWX Swiss Exchange.

Group outlook (For continuing operations, barring any unforeseen events) With one of the industry's most productive late-stage pipelines, Novartis has made significant progress during 2007 in launching new medicines after gaining important regulatory approvals. This intensive launch plan and strong growth prospects for the Group's strategic healthcare portfolio are expected to underpin mid-term growth through 2010 and beyond and position Novartis for further years of record results.

During the rest of 2007, the Pharmaceuticals Division's net sales will be negatively impacted by the suspension of Zelnorm and US generic competition for Lotrel and Lamisil. Annual net sales for these products in 2006 amounted to USD 2.5 billion. As a result, Novartis has revised its full year outlook to mid-single-digit growth in net sales for Group continuing operations and to low-single-digit growth in the Pharmaceuticals Division, both in local currencies.

The Pharmaceuticals Division will continue during 2007 to reallocate resources to support new product launches and accelerate productivity initiatives. Based on these initiatives, and also plans for continued strong performances from other divisions, Novartis reaffirms expectations for record operating and net income from continuing operations in 2007. Pharmaceuticals product performance update Note: All growth figures refer to year-to-date worldwide sales growth in local currencies

Novartis has received seven major new regulatory approvals for pharmaceuticals in the US and Europe since the start of 2007, making significant progress in delivering a wave of new medicines - many with "first-in-class" status addressing significant medical needs.

These include the approval and launch of the high blood pressure medicine Tekturna/Rasilez in the US, with a launch in Europe anticipated soon. Exforge was launched in the US - three months ahead of schedule - and also in Europe. Others approved and launched in the first half were Aclasta/Reclast in the US for Paget's disease, the blindness therapy Lucentis in Europe and Sebivo in Europe and China for hepatitis B. Exelon Patch won US approval in July as the first skin patch therapy for Alzheimer's disease and Parkinson's disease dementia.

A review of the leading marketed pharmaceutical products follows:

Diovan (USD 2.4 billion, +19% lc) has become the world's No. 1 branded high blood pressure medicine thanks to its status as one of the fastest-growing medicines in its market segment. Diovan has the potential to become one of the industry's top five pharmaceuticals based on annual worldwide sales. A primary growth driver has been increasing awareness about the consequences of uncontrolled high blood pressure, including studies showing 70% of patients do not reach their treatment goals. All regions delivered strong performances, supported in particular by recently published results of the JIKEI heart study underscoring efficacy in reducing the risk of cardiovascular events, especially strokes. Co-Diovan, a single-tablet combination with a diuretic, grew dynamically in both the US and Europe.

Gleevec/Glivec (USD 1.4 billion, +14% lc), a targeted therapy used in patients with certain forms of chronic myeloid leukemia (CML) and gastrointestinal stromal tumors (GIST) as well as other rare cancers, maintained strong growth thanks to improved survival rates for patients, expansion of the GIST market and use in newly-approved rare diseases. New competition had little impact on underlying demand. Data presented at the American Society of Clinical Oncology (ASCO) meeting showed one year of treatment with Gleevec/Glivec led to an 82% reduction in the risk of cancer returning in patients who underwent surgery for GIST tumors. These findings may lead to changes in clinical practice recommendations, and regulatory submissions are planned for 2008. Development of Gleevec/Glivec for use in an aggressive brain tumor known as glioblastoma multiforme was halted in the second quarter after study results showed no improvement in progression-free survival.

Zometa (USD 636 million, -1% lc), an intravenous bisphosphonate for patients with bone cancer, has been affected by overall slowing growth for this segment following price reductions in Europe and changes in prescribing that has reduced frequency of use in cancer patients. However, use in patients with lung and prostate cancers continues to rise. Zometa is now the leading infusional bisphosphonate in Japan after its launch just 15 months ago.

Lotrel (USD 594 million, -8% lc, only in US) was negatively impacted by the "at risk" launch of a generic copy by Teva Pharmaceuticals in May 2007 despite a valid US patent until 2017. Sandoz subsequently launched a generic version of this medicine, which is a fixed-dose combination therapy for high blood pressure. Novartis will continue to defend its intellectual property rights. A trial date has not been set for the ongoing lawsuit against Teva, which risks potentially significant damages if Novartis prevails.

Sandostatin (USD 491 million, +8% lc), for patients with acromegaly as well as treatment of patients with certain tumors, reported 14% worldwide growth for the long-acting-release Sandostatin LAR version that accounts for approximately 85% of net sales.

Femara (USD 439 million, +30% lc), a leading oral treatment for women with hormone-sensitive breast cancer, experienced further dynamic growth worldwide. Compelling clinical data shows that Femara is the first aromatase inhibitor when used as an initial therapy to demonstrate a significant reduction in the risk of breast cancer spreading to other parts of the body. Market share gains continue in early adjuvant treatment in women immediately following cancer surgery.

Lamisil (USD 432 million, -11% lc), an oral treatment for fungal nail infections, had lower net sales ahead of the entry of generic competition in the US, which began on July 2. Ongoing generic competition further eroded net sales in Europe.

Trileptal (USD 396 million, +11% lc), a treatment for epilepsy seizures, generated strong growth in key markets. Generic competition may emerge in the US during this year.

Exelon (USD 297 million, +17%), a treatment for mild to moderate forms of Alzheimer's disease dementia and dementia associated with Parkinson's disease, maintained its strong expansion in both the US and other key markets. Exelon Patch received US regulatory approval in early July. The constant 24-hour delivery of Exelon's active ingredient through a skin patch showed equivalent efficacy at the target dose to the highest doses of capsules but with three times fewer reports of nausea or vomiting. The patch was preferred by over 70% of family members as it helps in the management of day-to-day patient care.

Exjade (USD 157 million) has delivered dynamic growth - particularly in Europe and the Middle East - since the first launch in 2006 based on its status as the first once-daily oral iron chelator for blood disorders involving chronic iron overload. Over 80 countries have approved Exjade, which is used to treat iron overload associated with various blood disorders. It was submitted in Japan for approval a year ahead of schedule.

Lucentis (USD 101 million), for the eye disease "wet" age-related macular degeneration (AMD), has generated rapid growth following European Union approval in January 2007. Lucentis is now available in 45 countries (including Switzerland, Australia and Canada) as the first and only treatment proven to maintain and improve vision in patients with wet AMD - the leading cause of blindness in people over age 50. Genentech holds the US rights.

Zelnorm/Zelmac (USD 91 million, -66% lc), for irritable bowel syndrome and chronic constipation, has been negatively affected by the suspension of sales in the US and over 20 other countries following an FDA request in March 2007 to review cardiovascular safety data. Novartis believes Zelnorm/Zelmac provides important benefits for appropriate patients and will continue working with health authorities to secure access for these patients.

Xolair (USD 64 million), for moderate to severe allergic asthma, has grown quickly in key markets worldwide where launched, particularly France and Germany. It is now approved in 55 countries and is already available in 34 countries. In the US, Novartis co-promotes Xolair with Genentech and shares a portion of operating income. Xolair had first-half net sales of USD 231 million in the US, resulting in a contribution to Novartis of USD 79 million reported as Other Revenues.

Prexige (USD 52 million), an oral COX-2 inhibitor for patients with certain forms of osteoarthritic pain, gained market share where launched. EU approval was granted in November 2006, and launches are underway in Latin America, where it has performed strongly. A US regulatory decision is expected in September 2007. Aclasta/Reclast was launched in April in the US after regulatory approval as the first new treatment in nearly a decade for patients with Paget's disease of the bone. Aclasta/Reclast is already approved in more than 50 other countries, including key European markets, for this indication. Decisions on US and European approvals are pending for the use of this medicine as a once-yearly infusion of only 15 minutes for women with postmenopausal osteoporosis.

Exforge, a single tablet combining the angiotensin receptor blocker valsartan (Diovan) and the calcium channel blocker amlodipine, was launched in the US following the earlier-than-expected final US approval in June instead of September 2007. European launches are underway in ten countries, including Germany, the UK, Greece and Switzerland following approval in January 2007, with more launches set for 2007 and 2008.

Tekturna/Rasilez, the first new type of high blood pressure medicine in more than a decade, has outpaced the launches of recent hypertension medicines, including Benicar®[2], in the US following approval and launch in March. Known as Tekturna in the US and as Rasilez in other markets, key drivers have been data showing its efficacy and safety and recognition of the need for new high blood pressure medicines. Rasilez gained Swiss approval in June. European approval is expected during the third quarter after European regulators issued a positive opinion in June. A single-tablet combination with a diuretic was submitted for US approval during the second quarter. This medicine was developed with Speedel.

Research & Development update


With 138 projects in pharmaceutical development, Novartis has one of the industry's most promising pipelines. Several of the anticipated approvals are for potentially best-in-class medicines that would advance or create new treatment standards. Many compounds are progressing in late-stage trials. These include FTY720 (multiple sclerosis), QAB149 (respiratory diseases), AGO178 (depression), RAD001 (cancer), ABF656 (hepatitis C) and SOM 230 (Cushing's disease). Among the recent pharmaceuticals pipeline developments are:

Tasigna (nilotinib) is awaiting regulatory decisions in the US, Europe and Switzerland as a new targeted cancer therapy for patients with a form of the life-threatening blood cancer chronic myeloid leukemia (CML) who are resistant or intolerant to treatment with Gleevec/Glivec (imatinib). A submission was completed in Japan during the 2007 second quarter. Also planned for 2007 are the start of Phase III studies in newly diagnosed CML patients and patients responding sub-optimally to other therapies. A registration study is already underway in patients with gastrointestinal stromal tumors (GIST). Both Tasigna and Gleevec/Glivec inhibit Bcr-Abl, the definitive cause of Philadelphia chromosome-positive chronic myeloid leukemia (Ph+ CML). Tasigna was designed to be a more selective inhibitor of Bcr-Abl and its mutations. In the US, the FDA requested on July 16 a three-month extension in the regulatory review period.

Galvus (vildagliptin), a new oral once-daily treatment for type 2 diabetes submitted for approval in the US and Europe, has been shown in new clinical data to deliver consistent and robust blood sugar reductions in patients with this progressive disease. The findings, presented at the American Diabetes Association meeting, were consistent with earlier results demonstrating the efficacy and tolerability of Galvus as a monotherapy and in combination with other diabetes medicines. A European Union regulatory decision is anticipated in 2007. In the US, Novartis is in discussions with the FDA on steps needed for approval after having received an "approvable letter" in February 2007, including a request for additional data from clinical trials.

RAD001 (everolimus), a novel oral inhibitor of the mTOR pathway considered a key target in oncology, demonstrated its broad clinical activity in multiple tumor types in data from 17 abstracts presented at the American Society of Clinical Oncology (ASCO) meeting. Positive interim Phase II data in a proof-of-concept trial involved patients with refractory/relapsed lymphoma was presented. Registration trials are underway in chemotherapy-refractory pancreatic islet cell tumors (pICT), metastatic renal cell carcinoma and plans for expansion in 2007 include registration trials for refractory carcinoid tumors as well as first- and second-line pICT. RAD001 acts by directly inhibiting tumor cell growth and inhibiting the formation of new blood vessels (angiogenesis). First submissions could be as early as 2008.

ACZ885, a fully human monoclonal antibody, has entered a Phase III trial in Muckle Wells Syndrome, an inherited inflammatory disease caused by a rare genetic mutation. ACZ885 has led to immediate and long lasting clinical remission in these patients through potent and selective blockage of interleukin-1B. ACZ885 has a potentially important role in treating a range of systemic inflammatory diseases, and Phase II trials are underway in systemic juvenile arthritis and other conditions. Submissions for regulatory approval in Muckle Wells Syndrome is planned for 2009.

NM283 (valopicitabine), in Phase IIb trials for treatment of hepatitis C, was put on clinical hold on July 13 by FDA after discussions on the overall risk/benefit profile. The affiliated company Idenix Pharmaceuticals and Novartis are evaluating options for this compound.

Novartis acquired the rights to two development compounds during the second quarter. NIC002 (formerly CYT002-NicQb) ("NicQb") from Cytos Biotechnology AG combines elements of medicinal and vaccine technology and has been shown in Phase II clinical trials to help smokers overcome addiction to nicotine. ASA404 (formerly AS1404) from Antisoma plc is a small molecule vascular disrupting agent targeting solid cancer tumors and is expected to soon begin Phase III trials in patients with non-small cell lung cancer.

Vaccines and Diagnostics

Two important new vaccines against influenza infections received European Union approval during the 2007 second quarter: Focetria for use as quickly as possible after the declaration of an influenza pandemic, and Optaflu as the first influenza vaccine to utilize a proprietary cell culture line to generate viral antigens rather than relying on traditional chicken eggs. Focetria will be manufactured to contain strains declared at the time of a pandemic by the World Health Organization (WHO). It will also include the proprietary Novartis adjuvant MF59, which could extend supplies by allowing for smaller amounts of viral antigens to be used in each dose compared to vaccines without this additive designed to increase efficacy. Optaflu, considered the first major innovation in influenza vaccine manufacturing in over 50 years, has been approved for use in vaccination against seasonal influenza. This cell culture technology can be used for faster and more flexible manufacturing start-up in a pandemic. It will be available in Germany and Austria for the 2007/2008 influenza season and in other EU countries for the 2008/2009 season. Submission for US approval is planned for 2008.


European Union regulators issued a positive opinion in June supporting approval of a biosimilar version of epoetin alfa, as Sandoz achieved another important milestone in efforts to bring follow-on biological medicines to patients. More than 250,000 patients in Europe are treated annually with epoetin alfa, which is marketed under various brand names, and similar medicines to regulate the formation of red blood cells. The European Commission will soon decide on approval. In a precedent-setting decision in April 2006, Sandoz was the first company to obtain European Commission approval for a follow-on biologic, the human growth hormone Omnitrope. US approval was granted in May 2006.


This release contains certain forward-looking statements relating to the Group's business, which can be identified by the use of forward-looking terminology such as "outlook", "expected", "will", "on track", "set", "intends", "prospects", "expectations", "anticipated", "potential", "may", "planned", "potentially", "believes", "pending", "promising", "pipeline", "approvable", "plans", "could", "can", or similar expressions, or by express or implied discussions regarding potential future revenues from any particular products, or potential future sales or earnings of the Novartis Group or any of its divisions; potential new products, or potential new indications for existing products, or regarding potential future revenues from any such products; or by discussions of strategy, plans, expectations or intentions. Such statements reflect the current views of management with respect to future events and are subject to certain known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. There can be no guarantee that any particular products will reach any particular sales levels. Neither can there be any guarantees that the Novartis Group, or any of its divisions, will achieve any particular financial results. Nor can there be any guarantee that any new products will be approved for sale in any market, or that any new indications will be approved for existing products in any market, or that they will achieve any particular revenue levels. In particular, management's expectations could be affected by, among other things, uncertainties involved in the development of new pharmaceutical products; unexpected clinical trial results, including additional analysis of existing clinical data or unexpected new clinical data; unexpected regulatory actions or delays or government regulation generally; the Group's ability to obtain or maintain patent or other proprietary intellectual property protection, including the uncertainties involved in the US litigation process; competition in general; government, industry, and general public pricing and other political pressures; and other risks and factors referred to in the Group's current Form 20-F on file with the US Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated or expected. Novartis is providing the information in this press release as of this date and does not undertake any obligation to update any forward-looking statements contained in this press release as a result of new information, future events or otherwise.

About Novartis

Novartis AG (NYSE: NVS) is a world leader in offering medicines to protect health, cure disease and improve well-being. Our goal is to discover, develop and successfully market innovative products to treat patients, ease suffering and enhance the quality of life. We are strengthening our medicine-based portfolio, which is focused on strategic growth platforms in innovation-driven pharmaceuticals, high-quality and low-cost generics, human vaccines and leading self-medication OTC brands. Novartis is the only company with leadership positions in these areas. In 2006, the Group's businesses achieved net sales of USD 37.0 billion and net income of USD 7.2 billion. Approximately USD 5.4 billion was invested in R&D. Headquartered in Basel, Switzerland, Novartis Group companies employ more than 100,000 associates and operate in over 140 countries around the world. For more information, please visit

Further important dates

September 12, 2007     Novartis Brand and Business Review (East
                       Hanover, NJ)
October 18, 2007       Nine-month and third quarter 2007 results
January 17, 2008       Full-year and fourth quarter 2007 results

[1] Omnicef® is a registered trademark of Abbott Laboratories
[2] Benicar® is a registered trademark of Daiichi Sankyo

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Copyright © Hugin ASA 2007. All rights reserved.

Contact Information

  • Novartis Media Relations

    John Gilardi
    Novartis Global Media Relations
    41 61 324 3018 (direct)
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