US SecUritieS & exchange commiSSion form 20-f 2014
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`US SecUritieS & exchange commiSSion form 20-f 2014
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`WWW.noVartiS.com
`
`0001
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`MYLAN - EXHIBIT 1050
`Mylan et al. v. AstraZeneca
`IPR2015-01340
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`

`

`As filed with the Securities and Exchange Commission on January 27, 2015
`
`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, 2014
`
`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)
`Felix R. Ehrat
`Group General Counsel
`Novartis AG
`CH-4056 Basel
`Switzerland
`Tel.: 011-41-61-324-1111
`Fax: 011-41-61-324-7826
`(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
`New York Stock Exchange, Inc.*
`Ordinary shares, nominal value CHF 0.50 per share*
`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
`
`2,398,626,257 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):
`Non-accelerated filer អ
`Large accelerated filer ፤
`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 Other
`អ U.S. GAAP
`፤ International Financial Reporting Standards as issued by the International Accounting Standards Board
`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 18 អ
`Item 17 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 ፤
`
`*
`
`Not for trading but only in connection with the registration of American Depositary Shares representing such ordinary shares.
`
`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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Alcon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Sandoz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Vaccines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`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
`Tabular Disclosure of 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 Offer and Listing Details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`4
`4
`6
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`24
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`27
`31
`73
`82
`91
`98
`102
`102
`107
`107
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`188
`201
`202
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`203
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`292
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`293
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`295
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`297
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`2
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`0003
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`

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`Plan of Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`9.B
`9.C Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`9.D Selling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`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 Market Risk . . . . . . . . . . . . .
`Item 12.
`Description of Securities Other than Equity Securities . . . . . . . . . . . . . . . . .
`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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 16H. Mine Safety Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 17.
`Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 18.
`Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Item 19.
`Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
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`3
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`0004
`
`

`

`INTRODUCTION AND USE OF CERTAIN TERMS
`Novartis AG and its consolidated affiliates 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 prepared in accordance with International Financial Reporting Standards (IFRS) as
`issued by the International Accounting Standards Board (IASB).
`Unless the context requires otherwise, the words ‘‘we,’’ ‘‘our,’’ ‘‘us,’’ ‘‘Novartis,’’ ‘‘Group,’’
`‘‘Company,’’ and similar words or phrases in this Form 20-F refer to Novartis AG and its consolidated
`affiliates. However, 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. 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.
`In this Form 20-F, references to ‘‘US dollars’’ or ‘‘$’’ 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’’ or to ‘‘EU’’ are to the European
`Union and its 28 member states, references to ‘‘Latin America’’ are to Central and South America,
`including the Caribbean, and references to ‘‘Australasia’’ are to Australia, New Zealand, Melanesia,
`Micronesia and Polynesia, 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 Committee for Medicinal Products for Human Use of the EMA; references to
`‘‘ADR’’ or ‘‘ADRs’’ are to Novartis American Depositary Receipts, and references to ‘‘ADS’’ or ‘‘ADSs’’
`are to Novartis American Depositary Shares; references to the ‘‘NYSE’’ are to the New York Stock
`Exchange, and references to the ‘‘SIX’’ are to the SIX Swiss Exchange; references to ‘‘GSK’’ are to
`GlaxoSmithKline plc, references to ‘‘Lilly’’ are to Eli Lilly and Company, and references to ‘‘CSL’’ are to
`CSL Limited.
`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.
`
`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. Other written materials filed with or furnished to the US Securities and Exchange Commission
`(SEC) by Novartis, as well as other written and oral statements made to the public, may also contain
`forward-looking statements. Forward-looking statements can be identified by words such as ‘‘potential,’’
`‘‘expected,’’ ‘‘will,’’ ‘‘planned,’’ ‘‘pipeline,’’ ‘‘outlook,’’ or similar terms, 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; potential shareholder returns or credit ratings; or
`regarding the potential completion of the announced transactions with GSK and CSL, or regarding
`potential future sales or earnings of any of the businesses involved in the transactions with GSK, Lilly or
`CSL, or regarding any potential strategic benefits, synergies or opportunities as a result of these
`transactions; or regarding potential future sales or earnings of the Novartis Group or any of its divisions;
`or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on
`these statements.
`Such forward-looking statements are based on the current beliefs and expectations of management
`regarding future events, and are subject to significant known and unknown risks and uncertainties. Should
`one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect,
`
`4
`
`0005
`
`

`

`actual results may vary materially from those set forth in the forward-looking 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 any existing products in any market, or that any approvals which are obtained will be
`obtained at any particular time, or that any such products will achieve any particular revenue levels. Nor
`can there be any guarantee that the announced transactions with GSK and CSL will be completed in the
`expected form or within the expected time frame or at all. Neither can there be any guarantee that
`Novartis will be able to realize any of the potential strategic benefits, synergies or opportunities as a result
`of the transactions with GSK, Lilly or CSL. Neither can there be any guarantee that Novartis or any of the
`businesses involved in the transactions will achieve any particular financial results in the future. Nor can
`there be any guarantee that shareholders will achieve any particular level of shareholder returns. Neither
`can there be any guarantee that the Group, or any of its divisions, will be commercially successful in the
`future, or achieve any particular credit rating.
`In particular, management’s expectations could be affected by, among other things:
`(cid:127) unexpected regulatory actions or delays or government regulation generally, including an
`unexpected failure to obtain necessary government approvals for the transactions, or unexpected
`delays in obtaining such approvals;
`(cid:127) the potential that the strategic benefits, synergies or opportunities expected from the announced
`transactions, including the divestment of our former Animal Health Division to Lilly, may not be
`realized or may take longer to realize than expected;
`(cid:127) the inherent uncertainties involved in predicting shareholder returns or credit ratings;
`(cid:127) the uncertainties inherent in research and development, including unexpected clinical trial results
`and additional analysis of existing clinical data;
`(cid:127) our ability to obtain or maintain proprietary intellectual property protection, including the ultimate
`extent of the impact on Novartis of the loss of patent protection and exclusivity on key products
`which commenced in prior years and will continue this year;
`(cid:127) unexpected manufacturing or quality issues;
`(cid:127) global trends toward health care cost containment, including ongoing pricing pressures;
`(cid:127) uncertainties regarding actual or potential legal proceedings, including, among others, actual or
`potential product liability litigation, litigation and investigations regarding sales and marketing
`practices, government investigations and intellectual property disputes;
`(cid:127) general economic and industry conditions, including uncertainties regarding the effects of the
`persistently weak economic and financial environment in many countries;
`(cid:127) uncertainties regarding future global exchange rates, including as a result of recent changes in
`monetary policy by the Swiss National Bank;
`(cid:127) uncertainties regarding future demand for our products;
`(cid:127) uncertainties involved in the development of new healthcare products; and
`(cid:127) uncertainties regarding potential significant breaches of data security or disruptions of our
`information technology systems.
`Some of these factors are discussed in more detail in this Form 20-F, 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 Form 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.
`
`5
`
`0006
`
`

`

`PART I
`Identity of Directors, Senior Management and Advisers
`Item 1.
`Not applicable.
`
`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, 2014, 2013 and 2012 are included in ‘‘Item 18. Financial
`Statements’’ in this Form 20-F.
`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.
`
`INCOME STATEMENT DATA
`Group net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Net sales from continuing operations . . . . . . . . . . . . . . . .
`Operating income from continuing operations . . . . . . . . . .
`Income from associated companies . . . . . . . . . . . . . . . . . .
`Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Other financial (expense)/income . . . . . . . . . . . . . . . . . . .
`Income before taxes from continuing operations . . . . . . . . .
`Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Net income from continuing operations . . . . . . . . . . . . . . .
`Net (loss)/income from discontinuing operations . . . . . . . . .
`Group net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Attributable to:
`Shareholders of Novartis AG . . . . . . . . . . . . . . . . . . . .
`Non-controlling interests
`. . . . . . . . . . . . . . . . . . . . . . .
`Basic earnings per share ($)
`Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Discontinuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
`Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Diluted earnings per share ($)
`Continuing operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Discontinuing operations . . . . . . . . . . . . . . . . . . . . . . . . .
`Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Cash dividends(1)
`Cash dividends per share in CHF(2) . . . . . . . . . . . . . . . . . .
`
`Year Ended December 31,
`2010
`2013
`2012
`2011
`2014
`($ millions, except per share information)
`
`57,996
`52,419
`11,089
`1,918
`(704)
`(31)
`12,272
`(1,545)
`10,727
`(447)
`10,280
`
`57,920
`52,090
`10,983
`599
`(683)
`(92)
`10,807
`(1,498)
`9,309
`(17)
`9,292
`
`56,673
`51,330
`11,507
`549
`(724)
`(96)
`11,236
`(1,706)
`9,530
`(147)
`9,383
`
`58,566
`52,195
`10,293
`526
`(751)
`(2)
`10,066
`(1,381)
`8,685
`387
`9,072
`
`50,624
`43,539
`10,153
`798
`(692)
`64
`10,323
`(1,266)
`9,057
`912
`9,969
`
`10,210
`70
`
`9,175
`117
`
`9,270
`113
`
`8,940
`132
`
`9,794
`175
`
`4.39
`(0.18)
`4.21
`
`4.31
`(0.18)
`4.13
`6,810
`2.60
`
`3.76
`0.00
`3.76
`
`3.70
`0.00
`3.70
`6,100
`2.45
`
`3.89
`(0.06)
`3.83
`
`3.85
`(0.06)
`3.79
`6,030
`2.30
`
`3.59
`0.16
`3.75
`
`3.54
`0.16
`3.70
`5,368
`2.25
`
`3.88
`0.40
`4.28
`
`3.86
`0.40
`4.26
`4,486
`2.20
`
`(1)
`
`(2)
`
`Cash dividends represent cash payments in the applicable year that generally relates to earnings of the previous year.
`Cash dividends per share represent dividends proposed that relate to earnings of the current year. Dividends for 2014 will be proposed
`to the Annual General Meeting on February 27, 2015 for approval.
`
`6
`
`0007
`
`

`

`BALANCE SHEET DATA
`Cash, cash equivalents and marketable securities &
`derivative financial instruments . . . . . . . . . . . . .
`Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Other current assets . . . . . . . . . . . . . . . . . . . . . .
`Non-current assets . . . . . . . . . . . . . . . . . . . . . . .
`Assets related to discontinuing operations . . . . . . .
`Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`Trade accounts payable . . . . . . . . . . . . . . . . . . . .
`Other current liabilities . . . . . . . . . . . . . . . . . . . .
`Non-current liabilities . . . . . . . . . . . . . . . . . . . . .
`Liabilities related to discontinuing 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) . . . . . . . . . . . .
`
`Year Ended December 31,
`2013
`2012
`2011
`($ millions)
`
`2010
`
`9,222
`7,267
`13,294
`95,712
`759
`126,254
`6,148
`20,170
`25,414
`50
`51,782
`
`74,343
`129
`74,472
`126,254
`74,472
`912
`2,426
`
`8,119
`6,744
`13,141
`96,187
`
`5,075
`5,930
`13,079
`93,384
`
`8,134
`6,093
`12,458
`96,620
`
`124,191
`5,593
`18,458
`30,877
`
`117,468
`4,989
`18,159
`28,331
`
`123,305
`4,788
`19,870
`28,856
`
`54,928
`
`51,479
`
`53,514
`
`69,137
`126
`69,263
`124,191
`69,263
`909
`2,421
`
`65,893
`96
`65,989
`117,468
`65,989
`895
`2,407
`
`63,218
`6,573
`69,791
`123,305
`69,791
`832
`2,289
`
`2014
`
`13,862
`6,093
`10,805
`87,826
`6,801
`125,387
`5,419
`19,136
`27,570
`2,418
`54,543
`
`70,766
`78
`70,844
`125,387
`70,844
`898
`2,399
`
` Cash Dividends per Share
`Cash dividends are translated into US dollars at the Bloomberg 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 ADRs.
`
`Month and
`Year Paid
`Year Earned
`2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 2011
`2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 2012
`2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 2013
`2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 2014
`2014(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . March 2015
`
`Total Dividend
`per share
`(CHF)
`2.20
`2.25
`2.30
`2.45
`2.60
`
`Total Dividend
`per share
`($)
`2.37
`2.48
`2.44
`2.76
`2.63(2)
`
`(1)
`
`(2)
`
`Dividend to be proposed at the Annual General Meeting on February 27, 2015 and to be distributed March 5, 2015
`
`Translated into US dollars at the 2014 Bloomberg Market System December 31, 2014 rate of $1.010 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.
`
`7
`
`0008
`
`

`

`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 Bloomberg Market
`System. The exchange rate in effect on January 21, 2015, as found on Bloomberg Market System, was
`CHF 1.00 = $1.14.
`
`Year ended December 31,
`($ per CHF)
`2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`
`Month
`August 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`September 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`October 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`November 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`December 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
`January 2015 (through January 21, 2015) . . . . . . . . . . . . . .
`
`Period End
`1.06
`1.06
`1.09
`1.12
`1.01
`
`Average(1)
`0.96
`1.13
`1.07
`1.08
`1.09
`
`Low High
`0.86
`1.07
`1.06
`1.25
`1.02
`1.12
`1.05
`1.12
`1.01
`1.13
`
`1.09
`1.05
`1.03
`1.03
`1.01
`0.98
`
`1.11
`1.09
`1.06
`1.04
`1.04
`1.16
`
`(1)
`
`Represents the average of the exchange rates on the last day of each month during the year.
`
`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
`considered material.
`
`Risks Facing Our Business
`
`Our products face important patent expirations and significant competition.
`The products of our Pharmaceuticals and Alcon Divisions, as well as key products from our other
`divisions, 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 have had, and can be expected to continue to
`have a material adverse effect on our results of operations.
`
`8
`
`0009
`
`

`

`The introduction of generic competition for a patented medicine typically results in a significant and
`rapid reduction in net sales and net income for the patented product because generic manufacturers
`typically offer their unpatented 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, or from the compulsory licensing of our drugs by governments, or from a general
`weakening of intellectual property laws in certain countries around the world. 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, and 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 have begun or are about to face significant competition due to the
`end of market exclusivity resulting from the expiry of patent protection.
`(cid:127) The patent on imatinib, the active ingredient in our best-selling product Gleevec/Glivec (cancer),
`will expire in July 2015 in the US, in 2016 in the major European countries and expired in 2014 for
`the main indications in Japan. Additional patents claiming innovative features of Gleevec/Glivec
`have been challenged in the US. A settlement with one of these generic manufacturers will allow
`that generic manufacturer to enter the US market on February 1, 2016. Generic versions of
`Gleevec/Glivec have already launched in a number of countries around the world.
`(cid:127) The patent on valsartan, the active ingredient in Diovan/Co-Diovan/Diovan HCT (high blood
`pressure), which had long been our best-selling product, has expired in the US, EU and Japan, and
`generic competitors have launched there. Patent protection for Co-Diovan will expire in Japan