0001
`
`MYLAN - EXHIBIT 1046
`Mylan et al. v. AstraZeneca
`IPR2015-01340
`
`

`
`As filed with the Securities and Exchange Commission on January 27, 2011
`
`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, 2010
`
`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:
`
`អ
`
`អ
`
`2,289,445,178 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`1
`1
`3
`3
`3
`3
`3
`6
`6
`6
`20
`20
`23
`25
`58
`67
`74
`79
`79
`86
`87
`87
`166
`172
`172
`172
`172
`174
`174
`182
`210
`230
`232
`233
`233
`234
`235
`235
`235
`235
`236
`236
`237
`237
`237
`
`0003
`
`

`
`9.E Dilution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`9.F
`Expenses of the Issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 10.
`Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`237
`237
`237
`237
`237
`242
`243
`243
`247
`247
`248
`248
`
`249
`254
`254
`254
`254
`255
`257
`257
`257
`258
`258
`258
`259
`260
`261
`261
`261
`262
`262
`262
`263
`
`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, 2010 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 ‘‘Alcon’’ are to Alcon, Inc.; 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 ‘‘associates’’ are to employees of our affiliates; references to the ‘‘FDA’’ are to the
`US Food and Drug Administration, references to ‘‘EMA’’ are to the European Medicines Agency, an
`agency of the EU, and references to the CHMP are to the EMA’s Committee for Medicinal Products for
`Human Use; references to ‘‘ADS’’ or ‘‘ADSs’’ are to Novartis American Depositary Shares, and references
`to ‘‘ADR’’ or ‘‘ADRs’’ are to Novartis American Depositary Receipts; references to the NYSE are to the
`New York Stock Exchange, and references to the SIX are to the SIX Swiss Exchange. 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 regarding potential growth opportunities from the acquisition of a 77% majority
`ownership in Alcon, Inc. or regarding the expected merger with Alcon, or the potential impact on Alcon
`or Novartis of the expected merger; or regarding potential future sales or earnings of the Novartis Group
`or any of its divisions as a result of the expected merger or otherwise, or of Alcon, or any potential
`synergies, strategic benefits or opportunities as a result of the expected merger; 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
`
`1
`
`0005
`
`

`
`particular revenue levels. Nor can there be any guarantee that the expected 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 either Novartis’ acquisition of a 77% majority ownership in Alcon, Inc., or as a
`result of the expected merger with Alcon. Nor can there be any guarantee that the Novartis Group, or any
`of its divisions, or Alcon will achieve any particular financial results, whether as a result of the merger or
`otherwise. In particular, management’s expectations could be affected by, among other things, unexpected
`regulatory actions or delays or government regulation generally; unexpected clinical trial results, including
`additional analyses of existing clinical data or unexpected new clinical data; the Group’s ability to obtain
`or maintain patent or other proprietary intellectual property protection; disruptions from the Alcon 77%
`implementation and the expected merger making it more difficult to maintain business and operational
`relationships, and relationships with key employees; unexpected product manufacturing
`issues;
`uncertainties regarding actual or potential legal proceedings, including, among others, litigation seeking to
`prevent the merger from taking place, 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; and 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, 2010, 2009 and 2008 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.
`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 ($):
`—Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`—Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`Year Ended December 31,
`2006
`2009
`2008
`2007
`2010
`($ millions, except per share information)
`
`50,624
`11,526
`804
`64
`(692)
`11,702
`(1,733)
`9,969
`
`44,267
`9,982
`293
`198
`(551)
`9,922
`(1,468)
`8,454
`
`9,969
`
`8,454
`
`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
`
`9,794
`175
`
`8,400
`54
`
`8,195
`38
`
`11,946
`22
`
`7,175
`27
`
`70
`
`6,152
`
`532
`
`4.28
`
`4.28
`
`3.70
`
`3.70
`
`4.26
`
`3.69
`
`4.26
`4,486
`2.20
`
`3.69
`3,941
`2.10
`
`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
`
`5.04
`5.01
`
`4.40
`4.38
`
`3.96
`3.92
`
`2.93
`2.91
`
`3.26
`3.24
`
`(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 2010 will be
`proposed to the Annual General Meeting on February 22, 2011 for approval.
`
`4
`
`0008
`
`

`
`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) . . . . . . . . . . . . . . .
`
`2010
`
`Year Ended December 31,
`2009
`2008
`2007
`($ millions)
`
`8,134
`6,093
`12,458
`96,633
`
`123,318
`4,788
`19,870
`28,891
`
`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
`
`53,549
`
`38,043
`
`27,862
`
`26,056
`
`63,196
`6,573
`69,769
`123,318
`69,769
`832
`2,289
`
`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
`
`2006
`
`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
`
`2006 . . . . . . . . . .
`2007 . . . . . . . . . .
`2008 . . . . . . . . . .
`2009 . . . . . . . . . .
`2010(1)
`. . . . . . . .
`
`Month and
`Year Paid
`
`March 2007
`February 2008
`February 2009
`March 2010
`March 2011
`
`Total Dividend
`per share
`(CHF)
`1.35
`1.60
`2.00
`2.10
`2.20
`
`Total Dividend
`per share in $
`($)
`1.09
`1.53
`1.72
`1.95
`2.34(2)
`
`(1)
`
`(2)
`
`Dividend to be proposed at the Annual General Meeting on February 22, 2011 and to be distributed March 1, 2011.
`
`Translated into US dollars at the 2010 Reuters Market System period end rate of $1.06 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 25, 2011, as found on Reuters Market System, was
`CHF 1.00 = $1.06.
`
`Year ended December 31,
`($ per CHF)
`2006 . . . . . . . . . . . . . . . . . . . . . . . . . . .
`2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .
`2008 . . . . . . . . . . . . . . . . . . . . . . . . . . .
`2009 . . . . . . . . . . . . . . . . . . . . . . . . . . .
`2010 . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`Month end,
`August 2010 . . . . . . . . . . . . . . . . . . . . .
`September 2010 . . . . . . . . . . . . . . . . . . .
`October 2010 . . . . . . . . . . . . . . . . . . . .
`November 2010 . . . . . . . . . . . . . . . . . . .
`December 2010 . . . . . . . . . . . . . . . . . . .
`January 2011(2)
`. . . . . . . . . . . . . . . . . . .
`
`Period End
`0.82
`0.88
`0.94
`0.97
`1.06
`
`Average(1)
`0.80
`0.83
`0.93
`0.92
`0.96
`
`Low High
`0.76
`0.84
`0.80
`0.91
`0.82
`1.02
`0.84
`1.00
`0.86
`1.07
`
`0.95
`0.98
`1.01
`1.00
`1.00
`1.03
`
`0.98
`1.03
`1.05
`1.04
`1.07
`1.07
`
`(1)
`
`(2)
`
`Represents the average of the exchange rates on the last day of each full month during the year.
`
`Through January 25, 2011.
`
`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.
`
`6
`
`0010
`
`

`
`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—including
`the loss of exclusivity on Diovan, our best-selling product, which we face in the EU this year, and in the US
`in 2012 and in Japan in 2013—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 frequently take an 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 beginning as early as
`this year due to the end of market exclusivity resulting from the expiry of patent protection.
`(cid:127) The patent on valsartan, the active ingredient of 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. 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
`beginning in September 2012.
`(cid:127) The patent on zoledronic acid, the active ingredient in Zometa (cancer), as well as in Reclast/
`Aclasta (osteoporosis), will expire in 2013 in the US and in 2012 and 2013 in other major markets.
`(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.
`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 major 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 research and development efforts may not succeed in bringing high-potential products to market, or to do so
`cost-efficiently enough, or in sufficient numbers.
`Our ability to continue to grow our business and to replace sales lost due to the end of market
`exclusivity depends upon the success of our research and development activities in identifying, and
`successfully and cost-effectively developing high-potential breakthrough products that address unmet
`needs, are accepted by patients and physicians, and are reimbursed by payors. To accomplish this, we
`commit substantial effort, funds and other resources across all our divisions to research and development,
`both through our own dedicated resources and through various collaborations with third parties.
`Developing new healthcare products and bringing them to market, however, is a highly costly, lengthy and
`uncertain process. In spite of our significant investments, there can be no guarantee