• Pharmaceuticals an industry growth leader: Net sales up 12% (local currencies) in
first half of 2009 on contributions from new products and expansion in all regions
• R&D maintains momentum: Anti-cancer therapy Afinitor introduced in the US,
awaiting EU approval; new biologic Ilaris and OTC brand Prevacid 24HR gain US
approvals; clinical trials set to start in July for A(H1N1) pandemic flu vaccine
• H1 2009 operating results advance well, but impacted negatively by currencies:
o Net sales of USD 20.3 billion grow 8% in local currencies (lc), decline 2% in
US dollars
o Operating income of USD 4.7 billion up 11% in constant currencies and
excluding exceptional items in both periods, down 5% in US dollars
o Free cash flow before dividends advances 33% to USD 3.4 billion
• Net income of USD 4.0 billion falls 12%, includes negative currency impact and Alcon financing costs
o Basic EPS: USD 1.76 in first half of 2009 vs. USD 2.01 in 2008 period
• Novartis reaffirms expectations for strong operational performance in 2009 and record earnings in constant currencies

Key figures – Continuing operations
First half H1 2009 H1 2008 % change USD m % of
net sales USD m % of net sales USD lc
Net sales 20 255 20 635 –2 8
Operating income 4 711 23.3 4 949 24.0 –5
Net income 4 019 19.8 4 574 22.2 –12
Basic earnings per share USD 1.76 USD 2.01 –12

Second quarter
Q2 2009 Q2 2008 % change USD m % of
net sales USD m % of net sales USD lc
Net sales 10 546 10 726 –2 8
Operating income 2 364 22.4 2 461 22.9 –4
Net income 2 044 19.4 2 266 21.1 –10
Basic earnings per share USD 0.90 USD 0.99 –9

Basel, July 16, 2009 — Commenting on the results, Dr. Daniel Vasella, Chairman and CEO of Novartis, said: “I am pleased that our pharmaceuticals business continues to deliver double-digit underlying growth, driven by the strong momentum of our recently launched products. Our pipeline continues to deliver a steady stream of innovative medicines. In the first six months of 2009 we have introduced our new anti-cancer therapy Afinitor in the US and gained first approval for llaris as a new biologic therapy for
auto-inflammatory diseases. We are advancing well in our efforts to rapidly produce and commercialize a vaccine against the H1N1 virus, with clinical trials set to begin in July.
We continue to expect record underlying results in constant currencies based on
innovation and productivity initiatives.”

OVERVIEW
First half
Pharmaceuticals delivered strong and sustained growth to lead the Group’s healthcare portfolio. The division’s net sales rose 12% in local currencies (+3% in US dollars) thanks to rapid expansion of recently launched products such as Lucentis, Exforge, Exjade, Exelon Patch, Reclast/Aclasta, Tasigna, Tekturna/Rasilez and Galvus and growth in all therapeutic franchises and regions. R&D highlights included the US launch of the anti-cancer medicine
Afinitor, which is awaiting EU approval. US approvals were also granted for the biologic therapy Ilaris for some auto-inflammatory conditions and the OTC product Prevacid 24HR.
Challenging global economic conditions dampened growth in Consumer Health (+1% lc), while Sandoz (+4% lc) achieved greatly improved performances in many key markets outside the US.
Group net sales rose 8% in local currencies, but declined 2% in US dollars to USD 20.3 billion. Solid operational gains were offset by 10 percentage points from the negative impact of the stronger US dollar. Higher sales volumes contributed seven percentage points over the 2008 period, while net price changes provided one percentage point.
Operating income fell 5% to USD 4.7 billion, but rose 11% when adjusted for the impact of currency movements, exceptional items and the amortization of intangible assets in both periods. Significant productivity gains in production, marketing and selling, and administrative areas helped to finance R&D projects involving many novel and potentially first-in-class
compounds as well as rapid expansion in high-growth markets.
Net income fell 12% to USD 4.0 billion, also impacted by financing costs for the 25% Alcon stake acquired in mid-2008. Basic earnings per share (EPS) declined to USD 1.76 in the first half of 2009 from USD 2.01 in the year-ago period.

Second quarter
Net sales rose 8% in local currencies, but fell 2% to USD 10.5 billion from the loss of 10 percentage points of growth to currency movements. The dynamic business expansion in Pharmaceuticals (+11% lc) led the performance ahead of Sandoz (+4% lc) and Consumer Health (+2% lc). Vaccines and Diagnostics (–15% lc) was hampered by comparison to the prior year that included deliveries of H5N1 pandemic flu vaccines.
Operating income fell 4% to USD 2.4 billion, but rose 13% when adjusted for the impact of adverse currency movements, exceptional items and the amortization of intangible assets in both periods.
Net income fell 10% to USD 2.0 billion, affected by currency changes and higher financing costs, which included a EUR 1.5 billion bond issued in the second quarter of 2009. Basic earnings per share (EPS) declined to USD 0.90 from USD 0.99 in the year-ago period.
Delivering sustainable growth by meeting broad healthcare needs
Results in the first half of 2009 confirm the Group’s strong operational performance as Novartis continues to focus on delivering long-term sustainable growth from a portfolio that addresses broad healthcare needs. The Group is selectively strengthening its businesses, stepping up investments in innovation and expanding in high-growth markets while improving organizational efficiency.

In Pharmaceuticals, ongoing dynamic growth of recently launched products (+91% lc) provided USD 2.0 billion of net sales in the first half of 2009, which represented 15% of net sales compared to 9% in the first half of 2008. These contributions have made Novartis one of the fastest-growing pharmaceutical companies in 2009 in terms of local currency net sales. New products emerging from the R&D pipeline, led by the anticancer medicine Afinitor, are expected to further support the expansion underway in all therapeutic areas. Top emerging markets also continue to deliver robust growth.
Vaccines and Diagnostics is making good progress in creating a vaccine against the new strain of influenza A(H1N1). Novartis has started large-scale antigen production at all sites in Europe, using both traditional egg-based manufacturing as well as its faster cell-based vaccine production capacity to maximize the potential vaccine supply. Using cell-culture technology, first batches have been successfully produced for both the wild virus strain and
the “reassortant seed” modified virus recommended by the WHO and health authorities.
Clinical trials will start in July for this vaccine. Novartis has secured several orders for H1N1 vaccines amid discussions with more than 35 governments. The US government has now awarded Novartis two contracts totaling USD 979 million for future purchase of H1N1 bulk vaccine and the Group’s proprietary MF59 adjuvant, while contracts have also been received from other countries.

Sandoz, a world leader in generics, is growing rapidly in selected key markets and taking actions to broaden its product portfolio. Sandoz agreed in May to acquire the generic oncology injectables business of EBEWE Pharma for EUR 925 million (USD 1.3 billion), which will create a new global growth platform and improve access to oncology medicines.
Sandoz is also addressing FDA concerns about the Wilson manufacturing site in the US.
An FDA inspection is anticipated for the 2009 third quarter.
Consumer Health continues to focus on maximizing the value of its trusted brands and expanding geographically, led by sustained growth in CIBA Vision from the rollout of new
contact lens products. In the second quarter of 2009, Prevacid 24HR earned US
regulatory approval as the first OTC (over-the-counter) version of this proton pump inhibitor for frequent heartburn; launch in the US is set for later in 2009.
Expansion in targeted high-growth markets continues. Net sales in the top six emerging markets rose 20% lc to USD 1.8 billion in the first half of 2009, with only limited signs to date of an adverse impact from global economic conditions.
Forward, an initiative for greater productivity, increased efficiency and speed, is progressing rapidly ahead of schedule with USD 631 million of incremental savings in the first half of 2009, which are being partially reinvested to bolster growth. Forward has now achieved cumulative cost savings of USD 1.7 billion and exceeded the 2010 goal of USD 1.6 billion (compared to 2007) 18 months ahead of plan.

Group outlook
(Barring any unforeseen events)
Novartis reaffirms expectations for strong underlying momentum in 2009, with Group net sales growing at a mid-single-digit rate in local currencies. Pharmaceuticals net sales are now expected to expand at a minimum high-single-digit rate in 2009, also in local currencies. Underlying growth in operating and net income to record levels in 2009, however, could be more than offset in reported results by currency-related losses.