US SecUritieS & exchange commiSSion form 20-f 2009
`
`US SecUritieS & exchange commiSSion form 20-f 2009
`
`WWW.noVartiS.com
`
`0001
`
`MYLAN - EXHIBIT 1045
`Mylan et al. v. AstraZeneca
`IPR2015-01340
`
`

`
`As filed with the Securities and Exchange Commission on January 26, 2010
`
`UNITED STATES
`SECURITIES AND EXCHANGE COMMISSION
`Washington D.C. 20549
`FORM 20-F
`អ 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, 2009
`
`OR
`អ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
`OR
`អ 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:
`
`2,274,353,351 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 ፤
`
`0002
`
`

`
`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
`21
`23
`57
`64
`71
`76
`76
`83
`83
`83
`149
`153
`153
`154
`154
`156
`156
`164
`185
`201
`202
`203
`203
`204
`204
`205
`205
`205
`205
`205
`206
`207
`207
`207
`207
`
`0003
`
`

`
`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.
`12.A Debt Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`12.B Warrants and Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`12.C Other Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`12.D American Depositary Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`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 16F Change in Registrant’s Certifying Accountant . . . . . . . . . . . . . . . . . . . . . . .
`Item 16G. Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 17.
`Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 18.
`Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 19.
`Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`207
`207
`207
`212
`212
`212
`217
`217
`217
`218
`
`219
`224
`224
`224
`224
`225
`227
`227
`227
`228
`228
`228
`229
`230
`231
`231
`231
`232
`232
`232
`233
`
`0004
`
`

`
`INTRODUCTION
`Novartis AG and its 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, 2009 and are prepared in
`accordance with International Financial Reporting Standards (IFRS) as issued by the International
`Accounting Standards Board (IASB).
`
`USE OF CERTAIN TERMS
`In this Form 20-F, references to ‘‘US dollars,’’ ‘‘$’’ or ‘‘USD’’ are to the lawful currency of the United
`States of America, and references to ‘‘CHF’’ are to Swiss francs; 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, and references to ‘‘EMEA’’ are to
`the European Medicines Agency, an agency of the EU. All product names appearing in italics are
`trademarks owned by or licensed to Group companies. Product names identified by a ‘‘↧’’ or a ‘‘↩’’ are
`trademarks that are not owned by or licensed to Group companies. 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 Group company is legally separate from all other Group
`companies 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 Group company which employs the executive, or to that Group
`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 terminology such as ‘‘planned,’’ ‘‘expected,’’ ‘‘will,’’ ‘‘potential,’’
`‘‘pipeline,’’ ‘‘outlook,’’ 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 regarding the potential acquisition and merger with Alcon; 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 Group 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. Neither can there be any guarantee that the proposed
`acquisition and merger with Alcon will be completed in the expected form or within the expected time
`frame or at all. Nor can there be any guarantee that Novartis will be able to realize any of the potential
`synergies, strategic benefits or opportunities as a result of the proposed acquisition. In particular,
`management’s expectations could be affected by, among other things, unexpected clinical trial results,
`
`1
`
`0005
`
`

`
`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; uncertainties regarding actual or potential
`legal proceedings, including, among others, product liability litigation, litigation regarding sales and
`marketing practices, government investigations and intellectual property disputes; competition in general;
`government, industry, and general public pricing and other political pressures; uncertainties regarding the
`after-effects of the recent global financial and economic crisis; uncertainties regarding future global
`exchange rates and uncertainties regarding future demand for our products; uncertainties involved in the
`development of new pharmaceutical products; the impact that the foregoing factors could have on the
`values attributed to the Group’s assets and liabilities as recorded in the Group’s consolidated balance
`sheet. Some of these factors are discussed 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 as a result of new information, future events or
`otherwise.
`
`2
`
`0006
`
`

`
`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, 2009, 2008 and 2007 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
`
`0007
`
`

`
`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 . . . . . . . . . . . . . . . . .
`Non-controlling 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(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Cash dividends per share in CHF(2) . . . . . . . . . . . . . .
`
`Operating income from continuing operations
`earnings per share ($):
`—Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`—Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`Year Ended December 31,
`2005
`2008
`2007
`2006
`2009
`($ millions, except per share information)
`
`44,267
`9,982
`293
`198
`(551)
`9,922
`1,468
`8,454
`
`8,454
`
`8,400
`54
`
`3.70
`
`3.70
`
`3.69
`
`3.69
`3,941
`2.10
`
`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
`
`8,195
`38
`
`11,946
`22
`
`7,175
`27
`
`6,130
`11
`
`70
`
`6,152
`
`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
`
`532
`
`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
`
`4.40
`4.38
`
`3.96
`3.92
`
`2.93
`2.91
`
`3.26
`3.24
`
`2.79
`2.78
`
`(1)
`
`(2)
`
`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 2009 will be
`proposed to the Annual General Meeting on February 26, 2010 for approval.
`
`4
`
`0008
`
`

`
`Year Ended December 31,
`2008
`2007
`2006
`($ millions)
`
`2009
`
`17,449
`5,830
`10,412
`61,814
`
`95,505
`4,012
`15,458
`18,573
`
`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
`
`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 . . . . . . . . . . . . . . . . . .
`Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . .
`Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . .
`Net assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Outstanding share capital
`. . . . . . . . . . . . . . . . . . . . . .
`Total outstanding shares (millions) . . . . . . . . . . . . . . . .
`
`38,043
`
`27,862
`
`26,056
`
`57,387
`75
`57,462
`95,505
`57,462
`825
`2,274
`
`50,288
`149
`50,437
`78,299
`50,437
`820
`2,265
`
`49,223
`173
`49,396
`75,452
`49,396
`815
`2,264
`
`2005
`
`10,933
`3,725
`6,785
`36,289
`
`57,732
`1,961
`13,367
`9,240
`
`24,568
`
`32,990
`174
`33,164
`57,732
`33,164
`848
`2,336
`
`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
`
`2005 . . . . . . . . . . . . . . . . . . . .
`2006 . . . . . . . . . . . . . . . . . . . .
`2007 . . . . . . . . . . . . . . . . . . . .
`2008 . . . . . . . . . . . . . . . . . . . .
`2009(1)
`. . . . . . . . . . . . . . . . . .
`
`February 2006
`March 2007
`February 2008
`February 2009
`February 2010
`
`Total Dividend
`per share
`(CHF)
`1.15
`1.35
`1.60
`2.00
`2.10
`
`Total Dividend
`per share in $
`($)
`0.89
`1.09
`1.53
`1.72
`2.04(2)
`
`(1)
`
`(2)
`
`Dividend to be proposed at the Annual General Meeting on February 26, 2010 and to be distributed March 5, 2010.
`
`Translated into US dollars at the 2009 Reuters Market System period end rate of $0.97 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
`
`0009
`
`

`
`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 19, 2010, as found on Reuters Market System, was
`CHF 1.00 = $0.97.
`
`Year ended December 31,
`($ per CHF)
`2005 . . . . . . . . . . . . . . . . . . . . . . . . . .
`2006 . . . . . . . . . . . . . . . . . . . . . . . . . .
`2007 . . . . . . . . . . . . . . . . . . . . . . . . . .
`2008 . . . . . . . . . . . . . . . . . . . . . . . . . .
`2009 . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`Month end,
`August 2009 . . . . . . . . . . . . . . . . . . . .
`September 2009 . . . . . . . . . . . . . . . . . .
`October 2009 . . . . . . . . . . . . . . . . . . .
`November 2009 . . . . . . . . . . . . . . . . . .
`December 2009 . . . . . . . . . . . . . . . . . .
`January 2010(2)
`. . . . . . . . . . . . . . . . . .
`
`Period End
`0.76
`0.82
`0.88
`0.94
`0.97
`
`Average(1)
`0.80
`0.80
`0.83
`0.93
`0.92
`
`Low
`0.75
`0.76
`0.80
`0.82
`0.84
`
`0.92
`0.94
`0.96
`0.97
`0.95
`0.96
`
`High
`0.88
`0.84
`0.91
`1.02
`1.00
`
`0.95
`0.98
`0.99
`1.00
`1.00
`0.98
`
`(1)
`
`(2)
`
`Represents the average of the exchange rates on the last day of each full month during the year.
`
`Through January 19, 2010.
`
`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
`
`6
`
`0010
`
`

`
`varying strengths and durations. Loss of market exclusivity for one or more important products—which we
`will face in the near future—will have a material adverse effect on our 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. Such competition can result from the regular expiration of the
`term of the patent. Such competition can also result from the entry of generic versions of another
`medicine in the same therapeutic class as one of our drugs, or in another competing therapeutic class. In
`addition, generic manufacturers are taking an increasingly aggressive approach to challenging patents,
`conducting so-called ‘‘launches at risk’’ of products that are still under legal challenge for patent
`infringement, before final resolution of legal proceedings.
`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 not be
`adequate to cover any losses.
`Some of our best-selling products are expected to face significant competition in the coming years
`due to the end of market exclusivity resulting from the expiry of patent protection.
`(cid:127) The patent on valsartan, the active ingredient of our top-selling drug, Diovan/Co-Diovan/Diovan
`HCT (high blood pressure), expires in the major countries of the EU during 2011, in the US in
`September 2012, and in Japan in 2013. Our sales may also be impacted in 2010 when a competitor
`product, Cozaar↧, is expected to become the first branded medicine in the same therapeutic class
`as Diovan to lose market exclusivity. In addition, the active ingredient valsartan is also used in the
`single-pill combination therapies Exforge/Exforge HCT (high blood pressure). While there is an
`expectation that market exclusivities for Exforge/Exforge HCT will remain in the EU and Japan due
`to regulatory exclusivities, there is a risk that the product may face generic competition in the US in
`September 2012.
`(cid:127) The patent on Femara (cancer) will expire in 2011 in the US and in major European markets, while
`generic versions have already been launched in some smaller European markets.
`(cid:127) Patents protecting the Sandostatin LAR (acromegaly) formulation, the long-acting version of this
`drug that represents a majority of our Sandostatin sales, expire in July 2010 in major markets
`outside the US, and in 2014 and beyond in the US.
`Some of our products are also the subject of ongoing patent litigation. In particular, zoledronic acid,
`the active ingredient in Zometa (cancer), as well as in Reclast/Aclasta (osteoporosis), is currently the
`subject of US patent litigation, with the possibility of an ‘‘at risk launch’’ of a generic version of Zometa by
`one or more generic competitors in December 2010, when the 30-month stay period expires, absent any
`court decision preventing such a launch before then.
`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’’
`and ‘‘Item 18. Financial Statements—note 20’’.
`Clearly, with respect to products for which the patent terms are expiring, the loss of exclusivity of
`these products will have a material adverse effect on our business, financial condition and results of
`operations. In addition, should we unexpectedly lose exclusivity on additional products due to patent
`litigation or other reasons, this will have a material adverse effect on our business, financial condition and
`results of operations, both due to the loss of revenue, and the difficulties in planning for such losses.
`
`7
`
`0011
`
`

`
`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.
`These pressures are particularly strong given the lingering effects of the recent global economic and
`financial crisis. As a result, our businesses and the healthcare industry in general are operating in an ever
`more challenging 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
`prescripti