Risks in focus
The table below provides an overview of our seven strategic risks. For more information on our full risk portfolio, please see Item 3.D (“Risk factors”) in the Novartis Annual Report.
Risk |
Context |
Actions |
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Deliver transformative innovation |
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Research and development |
We engage in costly, lengthy and uncertain R&D activities, both independently and in collaboration with third parties, to identify and develop new products and new indications for existing products. Failure can occur at any point, including after substantial investment. New products must undergo intensive preclinical and clinical testing. Further, regulatory authorities continue to establish new and increasingly rigorous requirements for approval and reimbursement. The post-approval regulatory burden has also increased. |
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Embrace operational excellence |
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Key products and commercial priorities |
Our ability to grow our business depends on the commercial success of key products. Their success could be impacted by a number of factors, including pressure from new or existing competitive products; changes in the prescribing habits of healthcare professionals; unexpected side effects or safety signals; supply chain issues or other product shortages; pricing pressures; regulatory proceedings; changes in labeling; loss of intellectual property protection; and global pandemics. |
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Alliances, acquisitions and divestments |
As part of our strategy, we acquire and divest products or entire businesses, and enter into strategic alliances and collaborations. This strategy depends in part on our ability to identify and move forward with strategic opportunities. Efforts to develop and market acquired products, to integrate acquired businesses or to achieve expected synergies may fail or may not fully meet expectations. Also, our strategic alliances and collaborations with third parties may not achieve their intended goals and objectives. |
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Sandoz business transformation |
Our Sandoz Division faces competition and pricing pressures as it seeks to increase its market share and achieve sustainable and profitable growth mid-term. Our strategy for Sandoz focuses on accelerating biosimilars growth in the long term; rebuilding the Sandoz US business; and achieving inorganic growth by identifying and successfully executing on merger and acquisition and strategic in-licensing partnership opportunities. Failure to achieve these goals may have a material adverse effect on the success of the Sandoz Division and the Group as a whole, as well as potentially on our results of operations and financial condition. |
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Go big on data and digital |
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Emerging business models |
Rapid adoption of digital technology is transforming our industry. There is a risk of Novartis missing the opportunity while other companies with specialized expertise or business models may enter the healthcare field, potentially disrupting our relationships with patients, healthcare professionals, customers, distributors and suppliers. |
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Build trust with society |
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Pricing, reimbursement and access |
We experience significant pressures on the pricing of our products and on our ability to obtain and maintain satisfactory rates of reimbursement from governments, insurers and other payers. These pressures have many sources, including rising healthcare costs (exacerbated by the COVID-19 pandemic); funding restrictions and policy changes; and public controversies, debate, investigations and legal proceedings around pharmaceutical pricing. Such pressures may impact product pricing and market access. We also face price controls and other measures imposed by governments and other payers. In addition, our Sandoz Division faces continued price erosion in the generics and biosimilars segment. |
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Environmental, social and governance matters |
Increasingly, in addition to their financial performance, companies are being judged on their performance on a variety of environmental, social and governance (ESG) matters. A variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized. In addition, investment in funds that specialize in 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. An inability to successfully perform on ESG matters and meet societal expectations can result in negative impacts to our reputation, recruitment, retention, operations, financial results and share price. |
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