CEO’s letter

Dear shareholder,

We are endeavoring every day to reimagine medicine to truly impact the lives of people all around the world. As I wrap up my first year as CEO, I’m pleased to report that Novartis continued to deliver on its purpose while we transformed the company into a more focused, agile enterprise that is well placed to deliver cutting-edge innovation, drive sustained, profitable growth, and earn the long-term trust of the stakeholders we serve.

Over the course of 2018, we took significant steps to focus Novartis as a leading medicines company. We sold our stake in our global consumer health joint venture and announced plans to spin off our eye care division, Alcon. We built up three new technology platforms that we believe offer powerful new treatment options to doctors and patients, including cell and gene therapies and radioligand therapies. And we signed more than 100 collaboration and licensing agreements to build greater depth in our core areas.

Meanwhile, our teams delivered strong performance. Growth accelerated, driven by strong sales of key products. Net sales of USD 51.9 billion grew 5%, measured in constant currencies (cc). Our core operating income grew 8% to USD 13.8 billion (cc).

We also defined five strategic priorities that we believe will drive the successful future of Novartis – and we made important progress in each of these areas. Here are some highlights.

We began a cultural transformation aimed at empowering our people to apply their full creativity to tackling big scientific and healthcare challenges

We began a cultural transformation aimed at empowering our people to apply their full creativity to tackling big scientific and healthcare challenges. This is the start of a multi-year journey that we believe will help us continue to create long-term value for shareholders and society. To help drive change, we revitalized the top leadership of the company, appointing seven new members to the Executive Committee. I also visited our teams in more than 25 countries to learn about the organizational hurdles our people face and to gather ideas for addressing them. I thank them for their energy and commitment, which are both encouraging and infectious.

Our research and development teams secured 20 major approvals during 2018, including a second indication for our breakthrough cell therapy, Kymriah, to treat large B-cell lymphoma. They also made 20 major filings, including for BAF312 to treat multiple sclerosis, and for AVXS-101, a potentially transformative treatment for spinal muscular atrophy. We believe we have more than 20 potential blockbusters in development, and we plan to make 60 major submissions to regulators from 2019 to 2021.

We are taking steps to build greater effectiveness and efficiency into how we work. In manufacturing, we’re adjusting production capacity to match our evolving product mix, and in business services, we’re further concentrating operations in five global service centers. Our commercial teams are focused on improving how we plan and execute new product launches.

We want to help lead a digital revolution in our industry. We built a team of 1 500 experts across the enterprise and are pursuing 12 major projects to embed digital technologies and advanced data analytics in our labs, factories and commercial operations. For instance, a new system called Nerve Live uses insights from hundreds of past drug development clinical trials to help design and run more effective trials today.

We need society’s trust to continue doing the incredible work we do, and we strive to earn that trust through our actions. We have made clear to everyone at Novartis that we must never compromise our ethical standards to meet business objectives. We reinforced our compliance function and added the role of Chief Ethics, Risk and Compliance Officer to the Executive Committee. To further expand access to our medicines, we renewed commitments to fighting malaria and leprosy, and adopted principles aimed at embedding access into our everyday business. Our systematic approach helped us rise to No. 2 in the 2018 Access to Medicine Index.

More work remains, but I hope you share my enthusiasm for the strides we’re making in all of these areas.

Vas Narasimhan
Chief Executive Officer