Annual Report 2025 Annual Report 2025 Chair and CEO's letter 2025 was another strong year for Novartis. We delivered meaningful impact for patients around the world while remaining focused on our strategy. In an environment shaped by rapid scientific progress and evolving policy — including our recent pricing agree‑ ment with the US government — we continued to lead in our core therapeutic areas and technology platforms, advance our pipeline, and execute with discipline to deliver long‑term value for patien ...

Pricing and Reimbursement Pressures - Novartis faces significant pricing and reimbursement pressures, including government-imposed price reductions and mandatory pricing systems, which could negatively impact product pricing and availability [34]. - The company has committed to launching future medicines with comparable prices across high-income countries as part of a voluntary agreement with the US administration [35]. - Novartis's cardiovascular drug Entresto has been set to a "maximum fair price" under the US Inflation Reduction Act for 2026 to avoid penalties [35]. - Macroeconomic factors, such as inflation and geopolitical tensions, are expected to continue affecting pricing and reimbursement pressures on Novartis [35]. - The company anticipates that pressures on pricing will continue to increase globally, potentially affecting returns on investment for products [217]. - The Inflation Reduction Act of 2022 mandates that eligible Medicare drugs participate in a Drug Price Negotiation Program, affecting pricing for selected products [205]. - The first 10 drugs selected for the Medicare Drug Price Negotiation Program include Entresto, with implementation phases extending through 2029 [207][208]. - The company expects ongoing political pressure and governmental budget constraints to strengthen price control mechanisms, negatively impacting product pricing [204]. - In Europe, governments are implementing healthcare reforms that may limit access to innovative medicines based on strict cost-benefit assessments [213]. - The company is subject to significant price and marketing regulations in Europe, with increasing scrutiny on new product evaluations [213]. - The expansion of the 340B Program and related legislation in 2025 may impact revenue as it becomes a growing proportion of sales [210]. - The company has agreed to actions aimed at lowering medicine costs in the US, including launching future medicines with comparable prices across high-income countries [212]. Competition and Market Dynamics - The company is under pressure from competition, with the success of key products dependent on their ability to maintain market share against generics and biosimilars [36]. - The company lost market exclusivity for Entresto in the US in July 2025, leading to a substantial decline in sales during the second half of 2025 [50]. - Regulatory data protection for Entresto in Europe expires in November 2026, with anticipated significant revenue decline thereafter unless intellectual property rights are successfully asserted [50]. - The company faces risks in identifying and executing external business opportunities due to a highly competitive environment for clinical-stage assets and technology platforms [51]. - The global pharmaceutical market is highly competitive, with intense competition across pricing, product characteristics, customer service, and research and development [167]. Research and Development - Novartis engages in extensive R&D to develop innovative medicines, but faces high rates of failure in product candidates, impacting growth and pipeline development [39]. - The company is investing in AI and other technologies to enhance drug delivery and improve decision-making across core therapeutic areas [184]. - The Innovation Management Board (IMB) drives the R&D portfolio strategy, overseeing the drug development budget and making key decisions on project transitions [183]. - The drug development process typically requires 10 to 15 years, with approximately 6 to 8 years from Phase I clinical trials to market entry [170]. - The registration process for new pharmaceutical products can take between six months to several years, depending on the country and quality of data submitted [193]. - The company has several compounds in development, including AAA817 for metastatic castration-resistant prostate cancer, expected to enter Phase III by 2028 [1][148]. - The company plans to file for new indications and formulations for existing products, with several projects in the Confirmatory Development stage [1][145]. - Novartis has entered Confirmatory Development for several projects following acquisitions in 2025, indicating a strategic focus on expanding its product pipeline [160]. Regulatory and Compliance Challenges - The company must navigate increasing regulatory burdens and post-approval requirements, which complicate the maintenance of product approvals and market share [42]. - Regulatory authorities in the US and EU have high standards for drug approval, requiring extensive testing and documentation for new drugs [190]. - The company faces substantial legal and regulatory compliance costs due to evolving healthcare laws, which could lead to significant liabilities and operational disruptions [72]. - Noncompliance with data privacy laws could result in significant penalties and operational disruptions, affecting the company's ability to process personal information [85]. - The manufacturing processes are highly regulated, and the company aims to maintain uninterrupted supply while adhering to quality standards [154]. Cybersecurity and IT Infrastructure - Cybersecurity threats and attacks on IT systems have increased, potentially impacting critical business processes and operations [61]. - The company relies on third-party providers for significant parts of its IT infrastructure, increasing vulnerability to cybersecurity incidents [61]. - Significant information security events could disrupt business operations and result in enforcement actions or liability, including government fines and penalties [64]. - The company may incur substantial costs related to cybersecurity breaches, which may not be fully covered by insurance [63]. - The company is implementing several IT programs to replace outdated systems, which may disrupt operational stability and internal controls [66]. Financial Performance and Debt - As of December 31, 2025, the company had USD 27.9 billion in non-current financial debt and USD 5.6 billion in current financial debt, which may limit cash flow for capital expenditures and increase vulnerability to economic downturns [110]. - In 2025, the company recorded impairment charges of USD 557 million on intangible assets other than goodwill, which could adversely affect financial results [113]. - The company is exposed to foreign currency exchange rate fluctuations, which can significantly affect reported sales, costs, and earnings in USD [114]. - Environmental liabilities may impose substantial costs on the company for investigating and remediating contaminated sites, potentially affecting financial stability [118]. - The implementation of OECD minimum tax principles may increase the effective tax rate, impacting financial results [106]. Workforce and Talent Management - Novartis's ability to attract and retain key personnel is critical for executing its strategy and achieving commercial success [26]. - The competitive talent market is impacting the company's ability to attract and retain skilled personnel, particularly in critical areas such as AI and advanced therapies [69]. - The geographic mobility of talent is decreasing, which may hinder the company's growth in key markets like the US and China [70]. - The company is investing in employee development to meet evolving business needs, particularly in AI capabilities [71]. - Novartis has 5,720 full-time-equivalent scientists and professionals primarily focused on core therapeutic areas such as cardiovascular, renal, and metabolic diseases, neuroscience, oncology, and immunology [173]. Sales and Market Presence - Novartis achieved net sales of USD 54.5 billion and net income of USD 14.0 billion from continuing operations in 2025 [124]. - The United States accounted for 43% of total net sales in 2025, with USD 23,331 million, up from 42% in 2024 and 40% in 2023 [152]. - Europe contributed 31% of total net sales in 2025, totaling USD 16,729 million, consistent with the previous two years [152]. - Emerging growth markets represented 26% of total net sales in 2025, amounting to USD 13,977 million, maintaining the same percentage as in 2024 and 2023 [152]. - Novartis focuses on core therapeutic areas including cardiovascular, renal and metabolic; immunology; neuroscience; and oncology [124]. - Key marketed products include Entresto, Cosentyx, Kisqali, and Jakavi, which target various diseases and conditions [127][131][135].

Core Viewpoint - Novartis has received approval from the National Medical Products Administration for a new indication of secukinumab, which is now approved for treating adult patients with active radiographic axial spondyloarthritis (axSpA) who have inadequate response to non-steroidal anti-inflammatory drugs (NSAIDs) [1] Group 1: Drug Approval and Indications - Secukinumab is now approved for its sixth indication in China, following approvals for severe plaque psoriasis, ankylosing spondylitis, psoriatic arthritis, and hidradenitis suppurativa [1] - The newly approved indication targets axial spondyloarthritis (axSpA), a chronic inflammatory disease, specifically the early stage known as non-radiographic axial spondyloarthritis (nr-axSpA) [1] Group 2: Clinical Significance and Research - Patients with nr-axSpA typically start treatment with NSAIDs and physical therapy, but NSAIDs often only relieve symptoms without altering disease progression, leading to significant clinical and economic burdens due to delayed diagnosis [1] - Early diagnosis and treatment are crucial for improving clinical outcomes and reducing the burden on patients with nr-axSpA [1] - The PREVENT study, a global Phase III trial for secukinumab in nr-axSpA patients, demonstrated a higher ASAS40 response rate at week 16 compared to the placebo group, with improvements sustained until week 52 and good safety profile [1]

Core Viewpoint - Novartis reported its Q4 2025 earnings, showing a revenue of $13.34 billion, a 1.4% year-over-year increase, but $740 million below expectations. The company anticipates a profit decline this year due to generic competition impacting its blockbuster drugs like Entresto [1][2]. Group 1: Financial Performance - Q4 revenue was $13.34 billion, reflecting a 1.4% year-over-year growth, but fell short of expectations by $740 million [1]. - Non-GAAP earnings per share were $2.03, exceeding expectations by $0.03 [1]. - The company expects core operating profit to decline by a low single-digit percentage when adjusted for constant currency [1]. Group 2: Strategic Initiatives - CEO Vas Narasimhan is focusing on innovative drug strategies, which will be tested this year due to competition from generics affecting Entresto and other established drugs [1]. - Novartis is launching a new pill for autoimmune skin diseases and will soon announce key data for experimental therapies targeting heart disease and multiple sclerosis [1]. - To drive growth, Novartis agreed to acquire Tourmaline Bio for a promising therapy to reduce systemic inflammation and made a significant acquisition of Avidity Biosciences for up to $12 billion [2]. Group 3: Market Position and Future Plans - Novartis has addressed some uncertainties regarding its U.S. business by reaching an agreement with the Trump administration to avoid new industry tariffs in exchange for price reductions [2]. - The company has committed to building seven new manufacturing facilities in the U.S. as part of a $23 billion investment to expand its manufacturing capabilities, primarily focusing on radioligand therapy [2].

Core Insights - Novartis (NVS.US) anticipates a decline in profits this year due to increased competition from generics for its core blockbuster drug, Entresto [1] - The company expects core operating income to decrease in the low single digits when adjusted for constant currency, while sales are projected to grow in the low single digits [1] - CEO Vas Narasimhan's focus on innovative drugs will be tested this year as Entresto and other legacy blockbusters face pressure from generic competitors [1] Company Strategy - Novartis is launching a new drug for autoimmune skin diseases and will soon release key data on experimental therapies for heart disease and multiple sclerosis [1] - The company has committed to building seven new facilities in the U.S. as part of a $23 billion investment plan to expand its manufacturing footprint [1] - A significant portion of this investment will focus on radioligand therapy (RLT), a cancer treatment method that delivers radioactive isotopes directly to tumors using targeted drugs [1]

Core Insights - The pharma major reported strong results for the year 2025 but has guided towards a decline in core operating profit for the current year [1] Financial Performance - The company achieved robust financial results in 2025, indicating a strong performance in that fiscal year [1] - Despite the strong results in 2025, the company anticipates a decrease in core operating profit for the current year, suggesting potential challenges ahead [1]

Core Viewpoint - Novartis proposes a dividend payment of CHF 3.70 per share for 2025, representing a 5.7% increase from CHF 3.50 per share in the previous year [1] Dividend Proposal - The proposed dividend of CHF 3.70 per share is set to be voted on by shareholders at the Annual General Meeting scheduled for March 6, 2026 [1]

Group 1 - The core point of the article is that Novartis reported fourth-quarter net sales of $13.34 billion, which fell short of the estimated $13.68 billion [1] Group 2 - The reported sales figure represents a significant financial performance metric for the company, indicating potential challenges in meeting market expectations [1]

格隆汇2月4日丨诺华第四季度销售净额133.4亿美元，预估136.8亿美元；核心运营利润49.3亿美元，预 估49.3亿美元；核心净利润38.9亿美元，预估38.5亿美元；核心每股收益2.03美元，预估2.01美元。 ...

Core Insights - Swiss drugmaker Novartis forecasts a decline in 2026 operating profit in the low single-digit percentage range due to competition from cheaper copies of established products [1] Company Summary - Novartis is facing challenges from generic competition which is expected to impact its operating profit negatively in the coming years [1]