FY net sales (0% cc[2]) in line with prior year due to strong Growth Products performance
•Cosentyx (USD 1.1 billion) reached blockbuster status
•Entresto (USD 170 million) continued to grow steadily, following positive treatment guidelines in US and Europe and ongoing US field force expansion
•Gilenya (USD 3.1 billion, +14% cc) delivered double-digit growth
•Oncology grew 12% (cc) excluding Gleevec/Glivec, driven by new assets and Jakavi
•Sandoz Biopharmaceuticals[1] grew 31% (cc) to reach USD 1.0 billion

•FY core[2] operating income down 2% (cc) due to generic erosion and growth investments
•Core operating income margin declined 0.7 percentage points (cc)
•Core EPS was USD 4.75 (-2% cc)
•Free cash flow[2] was USD 9.5 billion (+2% USD)

•FY net income up 1% (cc), benefitting from higher income from associated companies
•Continued innovation momentum in Q4, including bolt-on deals to further strengthen pipeline
•LEE011 granted FDA Priority Review
•AMG 334 met primary endpoint in second Phase III episodic migraine study
•Exercised right to acquire Selexys following positive SUSTAIN study in sickle cell disease
•Acquired Ziarco (atopic dermatitis) and Encore (presbyopia); signed option agreements with Conatus (NASH) and Ionis and Akcea (cardiovascular risk)

•Alcon Division continued to make progress toward turnaround; options to maximize shareholder value of the division under consideration
•Q4 division sales were flat (cc); contact lenses delivered third consecutive quarter of growth
•Supply levels and customer service improved in Surgical, laying foundation for return to growth
•Options being considered range from retaining the business to separation via a capital markets transaction; review to take place during the course of 2017

•Dividend of CHF 2.75 per share, an increase of 2%, proposed for 2016
•Initiating share buyback of up to USD 5.0 billion in 2017 under existing shareholder authority, reinforcing confidence in growth prospects
•2017 Outlook
•Net sales expected to be broadly in line with the prior year (cc), after absorbing the impact of generic competition
•Core operating income expected to be broadly in line with prior year to low single digit decline (cc)


Key figures[2] Continuing operations[3]
Q4 2016 Q4 2015 % change FY 2016 FY 2015 % change
USD m USD m USD cc USD m USD m USD cc
Net sales 12 322 12 520 -2 0 48 518 49 414 -2 0
Operating income 1 455 1 677 -13 -9 8 268 8 977 -8 -3
Net income 936 1 054 -11 0 6 698 7 028 -5 1
EPS (USD) 0.40 0.44 -9 2 2.82 2.92 -3 2
Free cash flow 2 976 2 942 1 9 455 9 259 2
Core
Operating income 3 013 3 057 -1 1 12 987 13 790 -6 -2
Net income 2 658 2 707 -2 1 11 314 12 041 -6 -3
EPS (USD) 1.12 1.14 -2 1 4.75 5.01 -5 -2


[1] Growth Products are defined on page 2. Biopharmaceuticals are defined on page 3.
[2] Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 50 of the Condensed Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year.
[3] Refers to continuing operations, defined on page 41 of the Condensed Financial Report.

Basel, January 25, 2017 - Commenting on the results, Joseph Jimenez, CEO of Novartis, said:
"Novartis delivered a solid performance in 2016, absorbing Gleevec US loss of exclusivity while investing in key launches and the Alcon Division turnaround. Cosentyx reached blockbuster status in 2016, and the conditions are now in place for Entresto sales to accelerate in 2017. We made major strides in advancing our pipeline, executing our bolt-on M&A strategy and implementing our new focused organization. Today we are proposing an increase in our dividend and initiating a share buyback of up to USD 5 billion. Additionally, we are reviewing options for the Alcon Division to maximize shareholder value."

GROUP REVIEW

Novartis laid out five priorities for 2016: deliver strong financial results; strengthen innovation; improve Alcon Division performance; capture cross-divisional synergies; and build a higher-performing organization. We are also considering options to maximize shareholder value of the Alcon Division (some additional details on page 8 below).

Financial results

On January 27, 2016, Novartis announced plans to further focus its divisions, integrating businesses that share therapeutic areas to better leverage our development and marketing capabilities. These plans included a new divisional structure. In compliance with International Financial Reporting Standards (IFRS), Novartis updated its segment financials to reflect the new structure, both for the current and prior year, to aid comparability of year-on-year results. As a result, all comparisons of divisional results from 2016 to 2015 reflect the new structure.

In addition, as a result of the portfolio transformation transactions completed in 2015, Novartis reported the Group's financial results in 2015 as "continuing operations" and "discontinued operations." All comparisons from 2016 to 2015 are versus continuing operations, unless otherwise noted. See page 41 of the Condensed Financial Report for a full explanation.

Fourth quarter

Continuing operations

Net sales were USD 12.3 billion (-2%, 0% cc) in the fourth quarter, as volume growth of 6 percentage points was offset by the negative impact of generic competition (-4 percentage points) and pricing (-2 percentage points). Growth Products[1] contributed USD 4.6 billion or 37% of net sales, up 19% (USD) over the prior-year quarter.

Operating income was USD 1.5 billion (-13%, -9% cc). Core adjustments amounted to USD 1.5 billion (2015: USD 1.4 billion), broadly in line with the prior-year quarter.

Core operating income was USD 3.0 billion (-1%, +1% cc). Core operating income margin in constant currencies increased 0.2 percentage points, as investments behind new launches and the Alcon Division growth plan were more than offset by resource allocation. Currency had a negative impact of 0.1 percentage points, resulting in a net increase of 0.1 percentage points in US dollar terms to 24.5% of net sales.

Net income was USD 0.9 billion (-11%, 0% cc), flat despite the decline in operating income due to higher income from associated companies.

EPS was USD 0.40 (-9%, +2% cc), up more than net income due to a reduction in the average number of shares outstanding.

Core net income was USD 2.7 billion (-2%, +1% cc), broadly in line with core operating income.

Core EPS was USD 1.12 (-2%, +1% cc), in line with core net income.

Free cash flow in the fourth quarter was USD 3.0 billion (+1% USD), broadly in line with the prior-year quarter as lower cash flows from operating activities were offset by lower net investments in property, plant and equipment and intangible assets.

[1] "Growth Products" are an indicator of the rejuvenation of the portfolio, and comprise products launched in a key market (EU, US, Japan) in 2011 or later, or products with exclusivity in key markets until at least 2020 (except Sandoz, which includes only products launched in the last 24 months). They include the acquisition effect of the GSK oncology assets.

Innovative Medicines (formerly named the Pharmaceuticals Division) net sales were USD 8.3 billion (-3%, -1% cc) in the fourth quarter. Volume contributed 6 percentage points to sales growth. Generic competition had a negative impact of 6 percentage points and pricing had a negative impact of 1 percentage point, both largely due to Gleevec/Glivec genericization in the US. Growth Products grew 20% (cc) to USD 4.0 billion, or 48% of division net sales.

Operating income was USD 1.4 billion (-9%, -4% cc), down mainly due to higher impairment charges, which offset underlying operating income growth. Core operating income was USD 2.4 billion (0%, +4% cc). Core operating income margin in constant currencies increased by 1.2 percentage points; currency had a negative impact of 0.5 percentage points, resulting in a net increase of 0.7 percentage points to 29.1% of net sales.

Sandoz net sales were USD 2.6 billion (+2%, +3% cc) in the fourth quarter, as volume growth of 9 percentage points was offset by 6 percentage points of price erosion. Global sales of Biopharmaceuticals[1] grew 28% (cc) to USD 277 million.

Operating income was USD 365 million (+25%, +22% cc), driven by strong operating performance in the quarter and legal provisions in the prior-year quarter. Core operating income was USD 521 million (+5%, +4% cc). Core operating income margin in constant currencies increased by 0.1 percentage points; currency had a positive impact of 0.4 percentage points, resulting in a net increase of 0.5 percentage points to 20.0% of net sales.

Alcon Division net sales were USD 1.4 billion (-2%, 0% cc) in the fourth quarter. Surgical sales (-4% cc) were down, mainly due to lower sales of Cataract and Refractive equipment, as well as competitive pressures in IOLs. Vision Care sales (+5% cc) returned to growth, driven by strong performance of the daily contact lens portfolio, including continued double-digit growth of Dailies Total1 globally.

Operating loss was USD 120 million, compared to an income of USD 29 million in the prior-year quarter. Core operating income was USD 163 million (-38%, -36% cc), impacted by increased investments in M&S and R&D behind the growth plan. Core operating income margin in constant currencies decreased by 6.3 percentage points; currency had a negative impact of 0.4 percentage points, resulting in a net decrease of 6.7 percentage points to 11.3% of net sales.

Total Group

For the total Group, net income amounted to USD 0.9 billion, compared to USD 1.1 billion the prior-year quarter, and basic earnings per share was USD 0.40.

Total Group free cash flow amounted to USD 3.0 billion, in line with the prior-year quarter.

[1] Biopharmaceuticals include biosimilars, biopharmaceutical contract manufacturing and Glatopa.

Full year

Continuing operations

Net sales were USD 48.5 billion (-2%, 0% cc) in the full year, as volume growth of 6 percentage points was offset by the negative impact of generic competition (-4 percentage points) and pricing (-2 percentage points). Growth Products contributed USD 17.1 billion or 35% of net sales, up 20% (USD) over the prior year.

Operating income was USD 8.3 billion (-8%, -3% cc). Core adjustments amounted to USD 4.7 billion (2015: USD 4.8 billion), broadly in line with the prior year.

Core operating income was USD 13.0 billion (-6%, -2% cc). Core operating income margin in constant currencies decreased 0.7 percentage points, mainly due to the loss of exclusivity on Gleevec, as investments behind new launches and the Alcon Division growth plan were partially offset by resource allocation and productivity programs. Currency had a negative impact of 0.4 percentage points, resulting in a net decrease of 1.1 percentage points to 26.8% of net sales.

Net income was USD 6.7 billion (-5%, +1% cc), with the increase relative to the operating income decline due to higher income from associated companies.

EPS was USD 2.82 (-3%, +2% cc), up more than net income due to a reduction in the average number of shares outstanding.

Core net income was USD 11.3 billion (-6%, -3% cc), broadly in line with core operating income.

Core EPS was USD 4.75 (-5%, -2% cc), down less than core net income due to a reduction in the average number of shares outstanding.

Free cash flow was USD 9.5 billion (+2% USD) compared to USD 9.3 billion in 2015. The increase of USD 0.2 billion was mainly driven by lower net investments in property, plant and equipment.

Innovative Medicines net sales were USD 32.6 billion (-2%, 0% cc) for the full year, as volume growth (+7 percentage points) was offset by the impact of generic competition (-6 percentage points) and pricing (-1 percentage point).

Operating income was USD 7.4 billion (-5%, 0% cc). Core operating income was USD 10.4 billion (-5%, -1% cc). Core operating income margin in constant currencies decreased by 0.2 percentage points, mainly due to launch investments for Entresto and Cosentyx, partially offset by resource allocation and productivity improvements; currency had a negative impact of 0.6 percentage points, resulting in a net decrease of 0.8 percentage points to 31.8% of net sales.

Sandoz net sales were USD 10.1 billion (+1%, +2% cc) for the full year, as volume growth of 8 percentage points more than offset 6 percentage points of price erosion. Global sales of Biopharmaceuticals grew 31% (cc) to reach USD 1.0 billion, benefitting from the performance of prior-year launches in the US (Glatopa in June 2015 and Zarxio in September 2015).

Operating income was USD 1.4 billion (+11%, +14% cc). Core operating income was USD 2.1 billion (+1%, +4% cc). Core operating income margin in constant currencies increased by 0.2 percentage points; currency had a negative impact of 0.1 percentage points, resulting in a net increase of 0.1 percentage points to 20.4% of net sales.

Alcon Division net sales were USD 5.8 billion (-3%, -2% cc) for the full year. Surgical sales (-3% cc) reflected lower sales of Cataract and Refractive equipment, as well as competitive pressures in IOLs, partially offset by continued solid growth of cataract consumables. Vision Care sales were flat (0% cc), with growth in contact lenses offsetting a decline in contact lens care.

Operating loss was USD 132 million, compared to an income of USD 281 million in the prior year. Core operating income was USD 850 million (-31%, -27% cc), impacted by increased investments in M&S and R&D behind the growth plan and the decline in sales. Core operating income margin in constant currencies decreased by 5.3 percentage points; currency had a negative impact of 0.7 percentage points, resulting in a net decrease of 6.0 percentage points to 14.6% of net sales.

read more on
https://www.novartis.com/news/media-releases/novartis-delivered-solid-2016-performance-growth-products1-absorbing-gleevec-us