US SecUritieS & exchange commiSSion form 20-f 2008
`
`US SecUritieS & exchange commiSSion form 20-f 2008
`
`WWW.noVartiS.com
`
`0001
`
`MYLAN - EXHIBIT 1044
`Mylan et al. v. AstraZeneca
`IPR2015-01340
`
`

`
`0002
`
`0002
`
`

`
`As filed with the Securities and Exchange Commission on January 28, 2009
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington D.C. 20549
`FORM 20-F
`
`REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
`OR
`ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal
`year ended December 31, 2008
`
`អ
`
`፤
`
`អ
`
`អ
`
`OR
`TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`OR
`SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`Commission file number 1-15024
`NOVARTIS AG
`(Exact name of Registrant as specified in its charter)
`NOVARTIS Inc.
`(Translation of Registrant’s name into English)
`Switzerland
`(Jurisdiction of incorporation or organization)
`Lichtstrasse 35
`4056 Basel, Switzerland
`(Address of principal executive offices)
`Thomas Werlen
`Group General Counsel
`Novartis AG
`CH-4056 Basel
`Switzerland
`011-41-61-324-2745
`thomas.werlen@novartis.com
`(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
`Securities registered pursuant to Section 12(b) of the Act:
`Title of class
`Name of each exchange on which registered
`American Depositary Shares
`New York Stock Exchange, Inc.
`each representing 1 share,
`nominal value CHF 0.50 per share,
`and shares
`Securities registered or to be registered pursuant to Section 12(g) of the Act:
`None
`Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
`None
`Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by
`the annual report:
`2,264,852,842 shares
`Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
`Yes ፤ No អ
`If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
`15(d) of the Securities Exchange Act of 1934.
`
`Yes អ No ፤
`Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
`Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has
`been subject to such filing requirements for the past 90 days.
`
`Yes ፤ No អ
`Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
`‘‘accelerated filer and large accelerated filer’’ in Rule 12b-2 of the Exchange Act (Check one):
`Large accelerated filer ፤
`Accelerated filer អ
`Non-accelerated filer អ
`Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
`អ U.S. GAAP ፤ International Financial Reporting Standards as issued by the International Accounting Standards Board អ Other
`If ‘‘Other’’ has been checked in response to the previous question indicate by check mark which financial statement item the registrant has
`elected to follow.
`
`Item 17 អ Item 18 អ
`If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
`Yes អ No ፤
`
`0003
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`

`
`(This page has been left blank intentionally.)
`
`0004
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`

`
`TABLE OF CONTENTS
`
`INTRODUCTION AND USE OF CERTAIN TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 1.
`Identity of Directors, Senior Management and Advisers . . . . . . . . . . . . . . . .
`Item 2.
`Offer Statistics and Expected Timetable . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 3.
`Key Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`3.A Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`3.B
`Capitalization and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`3.C Reasons for the offer and use of proceeds . . . . . . . . . . . . . . . . . . . . . . . . .
`3.D Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 4.
`Information on the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`4.A History and Development of Novartis . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`4.B
`Business Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Pharmaceuticals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Vaccines and Diagnostics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Sandoz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Consumer Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`4.C Organizational Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`4.D Property, Plants and Equipment
`. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 4A. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 5.
`Operating and Financial Review and Prospects . . . . . . . . . . . . . . . . . . . . . .
`5.A Operating Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`5.B
`Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`5.C Research & Development, Patents and Licenses . . . . . . . . . . . . . . . . . . . . .
`5.D Trend Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`5.E Off-Balance Sheet Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`5.F
`Aggregate Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 6.
`Directors, Senior Management and Employees . . . . . . . . . . . . . . . . . . . . . .
`6.A Directors and Senior Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`6.B
`Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`6.C
`Board Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`6.D Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`6.E
`Share Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 7.
`Major Shareholders and Related Party Transactions . . . . . . . . . . . . . . . . . . .
`7.A Major Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`7.B Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`7.C
`Interests of Experts and Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 8.
`Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`8.A Consolidated Statements and Other Financial Information . . . . . . . . . . . . . .
`8.B
`Significant Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 9.
`The Offer and Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`9.A Listing Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`9.B
`Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`9.C Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`9.D Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`9.E Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`9.F
`Expenses of the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`1
`1
`3
`3
`3
`3
`3
`6
`6
`6
`18
`18
`20
`22
`51
`59
`66
`70
`71
`78
`78
`78
`136
`140
`140
`140
`141
`142
`142
`150
`168
`182
`183
`184
`184
`185
`186
`186
`186
`186
`187
`187
`188
`189
`189
`189
`189
`
`0005
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`

`
`Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 10.
`10.A Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`10.B Memorandum and Articles of Association . . . . . . . . . . . . . . . . . . . . . . . . . .
`10.C Material contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`10.D Exchange controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`10.E Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`10.F Dividends and paying agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`10.G Statement by experts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`10.H Documents on display . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`10.I
`Subsidiary Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 11.
`Quantitative and Qualitative Disclosures about Non-Product-Related Market
`Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Description of Securities other than Equity Securities . . . . . . . . . . . . . . . . .
`Item 12.
`PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 13.
`Defaults, Dividend Arrearages and Delinquencies . . . . . . . . . . . . . . . . . . . .
`Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds .
`Item 15.
`Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 16A. Audit Committee Financial Expert . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 16B. Code of Ethics
`. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 16C. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 16D. Exemptions from the Listing Standards for Audit Committees . . . . . . . . . . . .
`Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers . . . . . .
`Item 16G. Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 17.
`Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 18.
`Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 19.
`Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`189
`189
`189
`193
`194
`194
`198
`199
`199
`199
`
`199
`205
`206
`206
`206
`206
`206
`207
`207
`208
`209
`209
`210
`210
`210
`211
`
`0006
`
`

`
`INTRODUCTION AND USE OF CERTAIN TERMS
`Novartis AG and our consolidated affiliates (Novartis or the Group) publish consolidated financial
`statements expressed in US dollars. Our consolidated financial statements found in Item 18 of this annual
`report on Form 20-F (Form 20-F) are those for the year ended December 31, 2008 and are prepared in
`accordance with International Financial Reporting Standards (IFRS) as issued by the International
`Accounting Standards Board (IASB). In this Form 20-F, references to ‘‘US dollars’’, ‘‘USD’’ or ‘‘$’’ are to
`the lawful currency of the United States of America; and references to ‘‘CHF’’ are to Swiss francs.
`
`In this Form 20-F, references to the ‘‘United States’’ or to ‘‘US’’ are to the United States of America,
`references to the European Union (EU) are to the European Union and its 27 member states and
`references to ‘‘Americas’’ are to North, Central (including the Caribbean) and South America, unless the
`context otherwise requires; references to ‘‘ADS’’ or ‘‘ADSs’’ are to Novartis American Depositary Shares;
`references to ‘‘associates’’ are to employees of our affiliates; references to the ‘‘FDA’’ are to the US Food
`and Drug Administration. All product names appearing in italics are trademarks licensed to or owned by
`Group companies. Product names identified by a ‘‘↧’’ or a ‘‘↩’’ are trademarks that are not licensed to or
`owned by the Group. You will find the words ‘‘we,’’ ‘‘our,’’ ‘‘us’’ and similar words or phrases in this
`Form 20-F. We use those words to comply with the requirement of the US Securities and Exchange
`Commission to use ‘‘plain English’’ in public documents like this Form 20-F. For the sake of clarification,
`each operating company in the Group is legally separate from all other companies in the Group and
`manages its business independently through its respective board of directors or other top local
`management body. No Group company operates the business of another Group company nor is any
`Group company the agent of any other Group company. Each executive identified in this Form 20-F
`reports directly to other executives of the company by whom the executive is employed, or to that
`company’s board of directors.
`
`FORWARD LOOKING STATEMENTS
`This Form 20-F contains certain ‘‘forward looking statements’’ within the meaning of Section 27A of
`the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
`amended, which can be identified by the use of forward-looking terminology such as ‘‘will’’ or ‘‘expected’’,
`or similar expressions, 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
`potential future sales or earnings of the Novartis Group or any of its divisions or business units; or by
`discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these
`statements. Such forward-looking statements reflect the current views of the Company regarding future
`events, and involve known and unknown risks, uncertainties 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 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 such
`products will achieve any particular revenue levels. Nor can there be any guarantee that the Novartis
`Group, or any of its divisions or business units, will achieve any particular financial results. 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
`the impact that the foregoing factors could have on the values attributed to the Novartis Group’s assets
`and liabilities as recorded in the Group’s consolidated balance sheet. Some of these factors are discussed
`
`1
`
`0007
`
`

`
`in more detail herein, including under ‘‘Item 3. Key Information—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 Form 20-F as anticipated, believed,
`estimated or expected. We provide the information in this 20-F as of the date of its filing. We do not
`intend, and do not assume any obligation, to update any information or forward looking statements set
`out in this Form 20-F.
`
`2
`
`0008
`
`

`
`Identity of Directors, Senior Management and Advisers
`Item 1.
`Not applicable.
`
`PART I
`
`Item 2. Offer Statistics and Expected Timetable
`Not applicable.
`
`Item 3. Key Information
`
`3.A Selected Financial Data
`The selected financial information set out below has been extracted from our consolidated financial
`statements prepared in accordance with IFRS as issued by the IASB. Our consolidated financial
`statements for the years ended December 31, 2008, 2007 and 2006 are included in ‘‘Item 18. Financial
`Statements’’ in this Form 20-F.
`The results of our Medical Nutrition and Gerber Business Units are shown as discontinued
`operations for all periods presented, following their divestment in 2007. See ‘‘Item 5. Operating and
`Financial Review and Prospects—5.A Operating Results—Factors Affecting Comparability of
`Year-on-Year Results of Operations’’ and ‘‘Item 18. Financial Statements—note 2’’ for more detailed
`discussion.
`All financial data should be read in conjunction with ‘‘Item 5. Operating and Financial Review and
`Prospects’’. All financial data presented in this Form 20-F are qualified in their entirety by reference to the
`consolidated financial statements and their notes.
`
`3
`
`0009
`
`

`
`INCOME STATEMENT DATA
`Net sales from continuing operations . . . . . . . . . . . .
`Operating income from continuing operations . . . . . .
`Income from associated companies . . . . . . . . . . . . . .
`Financial income . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Income before taxes from continuing operations . . . . .
`Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Net income from continuing operations . . . . . . . . . . .
`Net income from discontinued operations . . . . . . . . .
`Group net income . . . . . . . . . . . . . . . . . . . . . . . . . .
`Attributable to:
`Shareholders of Novartis AG . . . . . . . . . . . . . . . . .
`Minority interests . . . . . . . . . . . . . . . . . . . . . . . . .
`Operating income from discontinued operations
`(including divestment gains) . . . . . . . . . . . . . . . . .
`
`Basic earnings per share ($):
`—Continuing operations . . . . . . . . . . . . . . . . . . . . .
`—Discontinued operations . . . . . . . . . . . . . . . . . . . .
`—Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`Diluted earnings per share ($):
`—Continuing operations . . . . . . . . . . . . . . . . . . . . .
`—Discontinued operations . . . . . . . . . . . . . . . . . . . .
`—Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Cash dividends(2) . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Cash dividends per share in CHF(3) . . . . . . . . . . . . . .
`
`Operating income from continuing operations
`earnings per share ($):
`—Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`—Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`Year Ended December 31,
`2004(1)
`2007
`2006
`2005
`2008
`($ millions, except per share information)
`
`41,459
`8,964
`441
`384
`(290)
`9,499
`(1,336)
`8,163
`70
`8,233
`
`38,072
`6,781
`412
`531
`(237)
`7,487
`(947)
`6,540
`5,428
`11,968
`
`34,393
`7,642
`264
`354
`(266)
`7,994
`(1,169)
`6,825
`377
`7,202
`
`29,446
`6,507
`193
`461
`(294)
`6,867
`(986)
`5,881
`260
`6,141
`
`25,685
`5,835
`68
`486
`(261)
`6,128
`(962)
`5,166
`214
`5,380
`
`8,195
`38
`
`11,946
`22
`
`7,175
`27
`
`6,130
`11
`
`5,365
`15
`
`70
`
`6,152
`
`532
`
`3.59
`0.03
`3.62
`
`3.56
`0.03
`3.59
`3,345
`2.00
`
`2.81
`2.34
`5.15
`
`2.80
`2.33
`5.13
`2,598
`1.60
`
`2.90
`0.16
`3.06
`
`2.88
`0.16
`3.04
`2,049
`1.35
`
`398
`
`2.52
`0.11
`2.63
`
`2.51
`0.11
`2.62
`2,107
`1.15
`
`317
`
`2.19
`0.09
`2.28
`
`2.18
`0.09
`2.27
`1,896
`1.05
`
`3.96
`3.92
`
`2.93
`2.91
`
`3.26
`3.24
`
`2.79
`2.78
`
`2.48
`2.46
`
`(1) We adopted a number of new International Financial Reporting Standards from January 1, 2005, not all of which required
`retrospective application. Data for 2004 is therefore not comparable with 2008, 2007, 2006 and 2005.
`
`(2)
`
`(3)
`
`Cash dividends represent cash payments in the applicable year that generally relate to earnings of the previous year.
`
`Cash dividends per share represent dividends proposed that relate to earnings of the current year. Dividends for 2008 will be
`proposed to the Annual General Meeting on February 24, 2009 for approval.
`
`4
`
`0010
`
`

`
`BALANCE SHEET DATA
`Cash, cash equivalents and marketable securities &
`derivative financial instruments . . . . . . . . . . . . . . . . .
`Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . .
`Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Assets held for sale related to discontinued operations . .
`Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . .
`Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . .
`Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . .
`Liabilities related to discontinued operations . . . . . . . . .
`Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Issued share capital and reserves attributable to
`shareholders of Novartis AG . . . . . . . . . . . . . . . . . .
`Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . .
`Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Outstanding share capital
`. . . . . . . . . . . . . . . . . . . . . .
`Total outstanding shares (millions) . . . . . . . . . . . . . . . .
`
`Year Ended December 31,
`2007
`2006
`2005
`($ millions)
`
`2004
`
`13,892
`3,558
`6,470
`28,568
`
`52,488
`2,020
`9,829
`9,324
`
`10,933
`3,725
`6,785
`36,289
`
`57,732
`1,961
`13,367
`9,240
`
`24,568
`
`21,173
`
`32,990
`174
`33,164
`57,732
`33,164
`848
`2,336
`
`31,177
`138
`31,315
`52,488
`31,315
`849
`2,338
`
`2008
`
`6,117
`5,792
`8,972
`57,418
`
`78,299
`3,395
`13,109
`11,358
`
`13,201
`5,455
`8,774
`48,022
`
`75,452
`3,018
`13,623
`9,415
`
`27,862
`
`26,056
`
`50,288
`149
`50,437
`78,299
`50,437
`820
`2,265
`
`49,223
`173
`49,396
`75,452
`49,396
`815
`2,264
`
`7,955
`4,498
`8,215
`46,604
`736
`68,008
`2,487
`13,540
`10,480
`207
`26,714
`
`41,111
`183
`41,294
`68,008
`41,294
`850
`2,348
`
`Cash Dividends per Share
`Cash dividends are translated into US dollars at the Reuters Market System Rate on the payment
`date. Because we pay dividends in Swiss francs, exchange rate fluctuations will affect the US dollar
`amounts received by holders of ADSs.
`
`Year Earned
`
`Month and
`Year Paid
`
`2004 . . . . . . . . . . . . . . . . . . . .
`2005 . . . . . . . . . . . . . . . . . . . .
`2006 . . . . . . . . . . . . . . . . . . . .
`2007 . . . . . . . . . . . . . . . . . . . .
`2008(1)
`. . . . . . . . . . . . . . . . . .
`
`March 2005
`February 2006
`March 2007
`February 2008
`February 2009
`
`Total Dividend
`per share
`(CHF)
`1.05
`1.15
`1.35
`1.60
`2.00
`
`Total Dividend
`per ADS
`($)
`0.93
`0.87
`1.11
`1.41
`1.88(2)
`
`(1)
`
`(2)
`
`Dividend to be proposed at the Annual General Meeting on February 24, 2009 and to be distributed February 27,
`2009.
`
`Translated into US dollars at the 2008 period end rate of $0.94 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.
`
`5
`
`0011
`
`

`
`Exchange Rates
`The following table shows, for the years and dates indicated, certain information concerning the rate
`of exchange of US dollar per Swiss franc based on exchange rate information found on Reuters Market
`System. The exchange rate in effect on January 21, 2009, as found on Reuters Market System, was
`CHF 1.00 = $0.87.
`
`Year ended December 31,
`($ per CHF)
`2004 . . . . . . . . . . . . . . . . . . . . . . . . . .
`2005 . . . . . . . . . . . . . . . . . . . . . . . . . .
`2006 . . . . . . . . . . . . . . . . . . . . . . . . . .
`2007 . . . . . . . . . . . . . . . . . . . . . . . . . .
`2008 . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`Month end,
`August 2008 . . . . . . . . . . . . . . . . . . . .
`September 2008 . . . . . . . . . . . . . . . . . .
`October 2008 . . . . . . . . . . . . . . . . . . .
`November 2008 . . . . . . . . . . . . . . . . . .
`December 2008 . . . . . . . . . . . . . . . . . .
`January 2009(2)
`. . . . . . . . . . . . . . . . . .
`
`Period End
`0.88
`0.76
`0.82
`0.88
`0.94
`
`Average(1)
`0.81
`0.80
`0.80
`0.83
`0.93
`
`Low
`0.76
`0.75
`0.76
`0.80
`0.82
`
`0.90
`0.88
`0.86
`0.82
`0.82
`0.87
`
`High
`0.88
`0.88
`0.84
`0.91
`1.02
`
`0.95
`0.92
`0.89
`0.87
`0.96
`0.94
`
`(1)
`
`(2)
`
`Represents the average of the exchange rates on the last day of each full month during the year.
`
`Through January 21, 2009.
`
`3.B Capitalization and Indebtedness
`Not applicable.
`
`3.C Reasons for the offer and use of proceeds
`Not applicable.
`
`3.D Risk Factors
`Our businesses face significant risks and uncertainties. You should carefully consider all of the
`information set forth in this annual report on Form 20-F and in other documents we file with or furnish to
`the SEC, including the following risk factors, before deciding to invest in any Novartis securities. Our
`business as well as our financial condition or results of operations 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
`deemed to be material.
`
`Risks Facing Our Business
`
`Our Pharmaceuticals Division faces and will continue to face important patent expirations and aggressive generic
`competition.
`Our Pharmaceuticals Division’s products are generally protected by patent rights, which are intended
`to provide us with exclusive rights to market the patented products. However, those patent rights are of
`varying strengths and durations. Loss of market exclusivity for one or more important products—whether
`due to patent expiration, generic challenges or other reasons—could have a material adverse effect on our
`
`6
`
`0012
`
`

`
`results of operations. The introduction of a generic version of a branded medicine typically results in a
`significant and rapid reduction in net sales for the branded product because generic manufacturers
`typically offer their unbranded versions at sharply lower prices. The pharmaceuticals industry is
`confronted by a continuing high level of patent expirations, with products representing approximately
`$24 billion in combined annual sales facing patent expiry in 2009, similar to levels seen in 2007 and 2008,
`according to IMS Health. In addition, generic manufacturers are increasingly conducting so-called
`‘‘launches at risk’’ of products that are still under legal challenge for patent infringement, before final
`resolution of legal proceedings.
`In 2008, sales of four Novartis Pharmaceuticals Division products—Lotrel (high blood pressure),
`Lamisil (fungal infections), Trileptal (epilepsy) and Famvir (viral infections)—continued to lose sales
`following the start of generic competition in the US in 2007. As a result of generic competition, combined
`net sales for these products declined from $2.6 billion in 2006 to $1.6 billion in 2007 and $536 million in
`2008. The sharp reduction in net sales of these products had an adverse effect on the results of operations
`of our Pharmaceuticals Division in 2007 and 2008.
`Four of our five best-selling products, Diovan (high blood pressure), Zometa, Femara (both for
`cancers), and Sandostatin (acromegaly) potentially could face generic competition in the near future in
`various markets, either in the US or Europe, or both, whether due to patent challenges or the scheduled
`expiration of patents. In particular, the patent on our top-selling drug, Diovan, expires in the major
`countries of the EU in 2011 and in the US in 2012. In addition, sales of Diovan may begin to erode in 2009
`in certain countries in the EU and in 2010 in the US when a competitor product, Cozaar↧, goes off-patent.
`Similarly, zoledronic acid, the active ingredient in Zometa, as well as in Reclast/Aclasta (osteoporosis), is
`currently the subject of US patent litigation, with the possibility of an ‘‘at risk launch’’ by one or more
`generic competitors as early as the end of 2010. Femara’s patent will expire in 2011 in the US and in major
`European markets. Patent litigation against a generic manufacturer who challenged the Femara patent has
`been settled. Finally, patents protecting the Sandostatin LAR formulation, the long-acting version of
`Sandostatin which represents a majority of our sales, expires in 2010 in major markets outside the US (and
`in 2014 and beyond in the US). Clearly, the loss of exclusivity of any one of these four products could have
`a material adverse effect on our business, financial condition and results of operations.
`In addition to Zometa and Reclast/Aclasta, key products of our Pharmaceuticals Division that are the
`subject of ongoing US patent litigation include Lescol (high cholesterol), Focalin/Ritalin LA (ADHD) and
`Comtan/Stalevo (Parkinson’s disease). The loss of exclusivity of some of these products could have a
`significant adverse effect on the results of operations of our Pharmaceuticals Division. In addition, Neoral
`(transplantation) and Voltaren (pain), which are still among our top ten-selling products with combined
`net sales of $1.8 billion in 2008, have already encountered generic competition in many markets. As a
`result, sales from these products may decline significantly in the future, which could have a material
`adverse effect on our business, financial condition and results of operations.
`For more information on the patent status of our Pharmaceuticals Division’s products see ‘‘Item 4.
`Information on the Company—Item 4.B Business Overview—Pharmaceuticals—Intellectual Property.’’
`We also rely in all aspects of our businesses on unpatented proprietary technology, know-how, trade
`secrets and other confidential information, which we seek to protect through various measures including
`confidentiality agreements with licensees, employees, third party collaborators, or consultants who may
`have access to such information. If these agreements are breached, our contractual remedies may
`inadequately cover any losses.
`
`Our business is increasingly affected by pressures on drug pricing.
`The growth of overall healthcare costs as a percentage of gross domestic product in many countries
`means that governments and payors are under intense pressure to control spending even more tightly. As
`a result, our businesses and the healthcare industry in general are operating in an ever more challenging
`
`7
`
`0013
`
`

`
`environment with very significant pricing pressures. These ongoing pressures include government-imposed
`industry-wide price reductions, mandatory pricing systems, an increase in imports of drugs from lower cost
`countries to higher cost countries, shifting of the payment burden to patients through higher co-payments,
`limiting physicians’ ability to choose among competing medicines, mandatory substitution of generic drugs
`and growing pressure on physicians to reduce the prescribing of patented prescription medicines. We
`expect these efforts to continue as healthcare payors around the globe—in particular government-
`controlled health authorities, insurance companies and managed care organizations—step up initiatives to
`reduce the overall cost of healthcare, restrict access to higher-priced new medicines, increase the use of
`generics and impose overall price cuts.
`These initiatives not only affect the results of our Pharmaceuticals Division, but also have an
`increasing impact on the prices we can charge for the generic drugs marketed by our Sandoz Division.
`This is particularly true in Europe and especially Germany, our second-largest market for generic
`products, where various measures have been introduced to require generic manufacturers to lower their
`prices. In addition, in the US, a combination of aggressive efforts by distributors to increase their profit
`margins on generic products that are considered commodities, intense