Group 1 - The article promotes a weekly newsletter focused on stocks in the biotech, pharma, and healthcare industries, aimed at both novice and experienced investors [1] - The newsletter provides insights on key trends, catalysts, product sales forecasts, and integrated financial statements for major pharmaceutical companies [1] - The author, Edmund Ingham, has over five years of experience in the biotech sector and has compiled detailed reports on more than 1,000 companies [1]

Core Insights - Novartis AG reported better-than-expected Q2 2025 results, with core earnings of $2.42 per share, surpassing the Zacks Consensus Estimate of $2.38 and up from $1.97 a year ago, driven by strong sales growth [1][6] - Revenues reached $14.05 billion, a 12% increase from the previous year, exceeding the Zacks Consensus Estimate of $14.04 billion [1][6] Sales Performance - On a constant currency basis, sales increased by 11%, supported by strong performances from key drugs including Kisqali, Entresto, Kesimpta, Scemblix, Leqvio, and Pluvicto [2][6] - Entresto's sales rose 22% to $2.36 billion, driven by heart failure indications in the U.S. and Europe, and hypertension indications in China and Japan, beating estimates [5][6] - Kisqali's sales surged 64% to $1.2 billion, with strong growth in the U.S. due to recent launches [8] - Kesimpta sales totaled $1.1 billion, up 33%, driven by increased demand [9] - Cosentyx sales increased 6% to $1.6 billion but missed estimates, impacting investor sentiment [7][6] - Pluvicto sales reached $454 million, up 30%, following FDA approval for earlier use, significantly expanding the eligible patient population [12] - Leqvio sales soared 61% to $298 million, driven by steady demand growth [13] Financial Guidance and Strategic Moves - Novartis raised its 2025 core operating income growth outlook to low teens, reflecting strong product and pipeline performance [6][16] - The company initiated a $10 billion share buyback plan, expected to be completed by 2027 [17] - Novartis acquired Regulus Therapeutics Inc. for $0.8 billion, with potential additional payments based on regulatory milestones [21] Management Changes - CFO Harry Kirsch announced his retirement, with Mukul Mehta appointed as the new CFO, effective March 15, 2026 [18]

Core Insights - Novartis reported $14.05 billion in revenue for Q2 2025, a year-over-year increase of 9.2%, with an EPS of $2.42 compared to $1.97 a year ago, exceeding both revenue and EPS consensus estimates [1][3] Revenue Performance - Oncology revenue from Tasigna in the US was $162 million, significantly below the average estimate of $221.75 million, reflecting a year-over-year decline of 29.6% [4] - Net sales of Scemblix in the Rest of the World reached $107 million, surpassing the average estimate of $95.88 million [4] - Oncology revenue from Promacta/Revolade in the US was $227 million, below the average estimate of $285.63 million, marking a year-over-year decline of 19.8% [4] - Immunology revenue from Cosentyx in the US was $921 million, slightly below the average estimate of $993.18 million, but showing a year-over-year increase of 6.1% [4] - Total revenue from Tafinlar + Mekinist in Oncology was $573 million, slightly above the average estimate of $570.15 million, with a year-over-year increase of 9.6% [4] - Kisqali in Oncology generated $1.18 billion, exceeding the average estimate of $1.09 billion, with a substantial year-over-year increase of 64.2% [4] - Total revenue from Cosentyx in Immunology was $1.63 billion, below the average estimate of $1.73 billion, but reflecting a year-over-year increase of 6.8% [4] - Cardiovascular revenue from Entresto totaled $2.36 billion, slightly above the average estimate of $2.34 billion, with a year-over-year increase of 24.2% [4] - Established Brands revenue from Galvus Group was $123 million, below the average estimate of $131 million, reflecting a year-over-year decline of 18% [4] - Established Brands revenue from Exforge Group was $191 million, exceeding the average estimate of $172.31 million, with a year-over-year increase of 7.3% [4] - Kymriah in Established Brands generated $99 million, closely matching the average estimate of $99.32 million, with a year-over-year decline of 12.4% [4] Stock Performance - Novartis shares returned +2.1% over the past month, underperforming the Zacks S&P 500 composite's +4.2% change, with a Zacks Rank 2 (Buy) indicating potential for near-term outperformance [3]

Core Insights - Novartis anticipates Kisqali to become a blockbuster drug, shifting focus from Entresto [1] - Kisqali sales increased by 64% globally in Q2, with 100% growth in the U.S. [1] - The company reported a 56% increase in Kisqali sales in Q1 [2] Industry Trends - Global breast cancer diagnoses and deaths are expected to rise significantly by 2050, with 1 in 20 women projected to be diagnosed [2] - This could lead to 3.2 million new cases and 1.1 million deaths annually by 2050, compared to 2.3 million new cases and 670,000 deaths in 2022 [3] Company Pipeline - Novartis has a strong pipeline with other potential blockbusters like Pluvicto for prostate cancer and Scemblix for chronic myeloid leukemia [3] - The company is focused on driving performance for Kisqali, Pluvicto, and Scemblix, indicating a strategy to replace reliance on older therapies [3]

Financial Data and Key Metrics Changes - Novartis reported an 11% increase in sales in constant currency for Q2 2025, with core operating income rising by 21% [5][43] - Core margin improved to 42.2%, reflecting a 340 basis point increase, and core EPS was $2.42, up 24% [43] - Free cash flow reached $6.3 billion, a 37% increase, while for the first half of the year, sales grew by 13% and core operating income by 24% [43][44] Business Line Data and Key Metrics Changes - Priority brands saw robust growth, with sales up 30% in constant currencies, and excluding Entresto, the portfolio grew by 33% [7] - Kisqali grew by 64% in Q2, achieving TRx leadership in metastatic breast cancer, with a 100% increase in the US [8][9] - Semblix experienced 79% growth, and Lexio grew by 61%, both on track to exceed $1 billion in sales [19][23] Market Data and Key Metrics Changes - In the US, Kisqali's NBRx share reached 61% in early breast cancer, while outside the US, it grew by 25% [9][10] - Cosentyx growth moderated to 6% in Q2, impacted by higher rebates and competitive pressures, particularly in China [25][27] - The company anticipates continued growth in China, albeit at a lower rate than the previous year, due to tightened healthcare spending [69] Company Strategy and Development Direction - Novartis is focused on maintaining strong growth momentum through key launches and pipeline advancements, with an emphasis on innovative therapies [57] - The company announced a new $10 billion share buyback program, reflecting confidence in its long-term growth outlook [45][58] - Ongoing investments in R&D and strategic acquisitions, such as Regulus Therapeutics, are aimed at strengthening the renal pipeline [46] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in mid- to long-term growth despite current market challenges, including pricing pressures and competition [57][76] - The company is actively engaging with the US administration regarding drug pricing policies, aiming to balance innovation rewards with patient access [76] - Novartis expects to maintain mid-single-digit growth for Cosentyx, factoring in potential impacts from the Inflation Reduction Act [92] Other Important Information - The company is preparing for the potential entry of generics for Entresto in mid-2025, which is included in financial forecasts [48][49] - Management highlighted the importance of educating policymakers about the US drug pricing system and its effectiveness in promoting innovation [76] Q&A Session Summary Question: Update on Sjogren's Phase III data confidence - Management acknowledged the challenges in demonstrating statistically significant benefits in Sjogren's but remains optimistic based on strong Phase II data [63] Question: Impact of healthcare spending tightening in China - Management noted a slowdown in growth in China but expects to stabilize and maintain high single-digit to low teens growth moving forward [69] Question: Competitive environment for Cosentyx - Management indicated that while there is an initial impact from new competitors, the market typically stabilizes, and they remain confident in Cosentyx's long-term potential [85] Question: Direct negotiation impacts from the IRA - Management confirmed that the IRA has been factored into guidance, estimating that about 30% of Cosentyx sales are exposed to Medicare pricing [91]

Financial Data and Key Metrics Changes - Novartis reported an 11% increase in sales in constant currency for Q2 2025, with core operating income rising by 21% [5][44] - Core margin improved to 42.2%, reflecting a 340 basis point increase, and core EPS was $2.42, up 24% [44] - Free cash flow reached $6.3 billion, a 37% increase, while for the first half of the year, sales grew by 13% and core operating income by 24% [44][45] Business Line Data and Key Metrics Changes - Priority brands saw a 30% increase in sales in constant currencies, with notable growth from Kisqali (up 64%), Kisimta (up 33%), and Pluvicto (up 30%) [7][8][14] - Kisqali achieved TRx leadership in metastatic breast cancer, with a 100% increase in the US for Q2 [8][9] - Lexio grew by 61% in the quarter, with a 47% increase in the US, and Semblix saw a 79% growth [18][22] Market Data and Key Metrics Changes - In the US, Kisqali's NBRx share reached 61% in early breast cancer, while outside the US, it grew by 25% [9] - Cosentyx growth moderated to 6% in Q2, impacted by higher rebates and competitive pressures, particularly in China [24][26] - The company expects continued growth in China, albeit at a lower rate than the previous year, due to tightened healthcare spending [68] Company Strategy and Development Direction - Novartis is focused on maintaining strong growth momentum through key launches and pipeline advancements, including the acquisition of Regulus Therapeutics to enhance its renal portfolio [46][57] - The company has initiated a new $10 billion share buyback program, reflecting confidence in its long-term growth outlook [46][57] - Novartis aims to expand the use of B cell therapies and strengthen its position in the market, particularly for Kisqali and Kisimta [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the mid to long-term growth outlook, despite facing challenges such as potential generic competition for Entresto [57][49] - The company anticipates a strong performance in Q3 based on continued momentum in priority brands, while Q4 may see a step down in growth due to the full impact of potential generics [52][53] - Management acknowledged the ongoing discussions with the administration regarding drug pricing and emphasized the importance of maintaining US leadership in biopharmaceutical innovation [76] Other Important Information - Novartis is advancing its pipeline with significant readouts expected, including for Plavicto and remibrutinib [57] - The company is committed to a balanced capital allocation strategy, including dividends and share buybacks, while continuing to invest in R&D [46][57] Q&A Session Summary Question: Update on Sjogren's Phase III data confidence - Management acknowledged the excitement around Sjogren's but noted the risks involved, emphasizing the importance of robust data from both studies for the filing process [62] Question: Impact of healthcare spending tightening in China on Cosentyx - Management confirmed a notable slowdown in China, with expectations of high single-digit to low teens growth moving forward, while acknowledging the impact on the broader portfolio [68] Question: Competitive environment for Cosentyx - Management indicated that while there is an initial impact from new competitors, the market typically stabilizes, and they remain confident in Cosentyx's long-term growth potential [84] Question: Direct negotiation impacts from IRA on Cosentyx - Management confirmed that the IRA has been factored into guidance, estimating that about 30% of Cosentyx sales are exposed to Medicare pricing, which is manageable [90] Question: Performance expectations for ramibutinib in food allergy - Management expressed confidence in the compelling data for ramibutinib compared to existing treatments and highlighted the potential for a significant commercial launch [104]

Q2 2025 Financial Performance - Novartis delivered double-digit sales growth and core margin expansion in Q2 2025 [134] - Q2 sales reached USD 141 billion, an increase of 11% in constant currencies (cc) compared to Q2 2024 [14] - Core operating income for Q2 2025 was USD 59 billion, a 21% increase in constant currencies (cc) compared to Q2 2024 [14] - Core margin improved to 422%, a 340 basis points increase [14] - Free cash flow for H1 2025 increased by 46% to USD 97 billion [104] FY 2025 Guidance and Capital Allocation - FY 2025 core operating income guidance upgraded to low-teens growth from low double-digit [15] - A new share buyback program of up to USD 10 billion was initiated, to be completed by the end of 2027 [108] - The company assumes Entresto US generic entry in mid-2025 for forecasting purposes [112] Key Products Performance - Kisqali grew by 64% cc in Q2, achieving TRx leadership in mBC [23] - Kesimpta grew by 33% cc in Q2, driven by strong demand growth [31] - Pluvicto grew by 30% cc in Q2, with promising uptake since pre-taxane indication approval in the US [36] - Leqvio grew by 61% cc in Q2, on track for blockbuster status in 2025 [45] - Scemblix grew by 79% cc in Q2, with strong momentum in early lines and global leadership in 3L+ CML [52]

④【AMD将重启对华出口AI芯片】7月17日，据央视新闻援引多家外媒报道，美芯片公司AMD称，将 很快恢复向中国市场交付其人工智能芯片MI308。此前，美国对英伟达一款芯片作出了类似决定。报道 称，AMD发言人7月15日表示，美国商务部告知该公司，MI308产品的许可申请将进入审查程序。美国 芯片行业近期集体呼吁美国政府放宽出口管制，并警告称对华限制将导致收入受损。今年4月，AMD 称，针对MI308芯片的出口限制将使该公司损失约8亿美元。截至发稿，AMD涨0.5%，英伟达涨0.7%。 ⑤【阿斯麦盘前跌近3%，Q2业绩超预期但下调业绩指引】阿斯麦盘前跌近3%。消息面上，阿斯麦2025 年第二季度交出了一份全面超预期的答卷。当季净订单达55亿欧元，环比大增41%，同比持平，显著高 于市场共识。但该公司同时下调了第三季度业绩指引，预计第三季度营业收入为74亿至79亿欧元，市场 预期值为82.6亿欧元。此外，阿斯麦还下调了2025财年业绩指引，预计2025财年的营业收入为325亿欧 元，市场预期为373.9亿欧元。 ①【三大期指涨跌互现】截至发稿，道指期货跌0.12%、标普500指数期货涨0.06%、纳指期货涨 0 ...

[Operating Performance Review](index=4&type=section&id=OPERATING%20PERFORMANCE%20REVIEW) Novartis's Q2 and H1 2025 performance review highlights strong financial growth, strategic focus, and product commentary [Key Figures (Q2 & H1 2025)](index=4&type=section&id=Key%20figures) Novartis reported strong Q2 and H1 2025 financial performance, with significant growth in sales, income, EPS, and free cash flow Key Financial Figures (Q2 2025 vs Q2 2024) | Metric (USD millions) | Q2 2025 | Q2 2024 | % change (USD) | % change (cc) | | :-------------------- | :------ | :------ | :------------- | :------------ | | Net sales | 14,054 | 12,512 | 12 | 11 | | Other revenues | 782 | 360 | 117 | 116 | | Gross profit | 11,514 | 9,699 | 19 | 18 | | Operating income | 4,864 | 4,014 | 21 | 25 | | Net income | 4,024 | 3,246 | 24 | 26 | | Basic EPS (USD) | 2.07 | 1.60 | 29 | 32 | | Free cash flow | 6,333 | 4,615 | 37 | - | Key Financial Figures (H1 2025 vs H1 2024) | Metric (USD millions) | H1 2025 | H1 2024 | % change (USD) | % change (cc) | | :-------------------- | :------ | :------ | :------------- | :------------ | | Net sales | 27,287 | 24,341 | 12 | 13 | | Other revenues | 1,169 | 651 | 80 | 79 | | Gross profit | 21,907 | 18,723 | 17 | 18 | | Operating income | 9,527 | 7,387 | 29 | 33 | | Net income | 7,633 | 5,934 | 29 | 31 | | Basic EPS (USD) | 3.91 | 2.91 | 34 | 37 | | Free cash flow | 9,724 | 6,653 | 46 | - | [Strategy](index=5&type=section&id=Strategy) Novartis focuses as a 'pure-play' innovative medicines company, prioritizing core therapeutic areas, technology platforms, and key geographies - Novartis is a "pure-play" innovative medicines company, focusing on **four core therapeutic areas**: cardiovascular-renal-metabolic, immunology, neuroscience, and oncology[6](index=6&type=chunk) - Investment is prioritized in **two established technology platforms** (chemistry and biotherapeutics) and **three emerging platforms** (gene & cell therapy, radioligand therapy, and xRNA)[6](index=6&type=chunk) - Geographic focus for growth includes the **US, China, Germany, and Japan**[6](index=6&type=chunk) - Strategic priorities include accelerating growth through high-value medicines and launch excellence, delivering returns via operational excellence and disciplined capital allocation, and strengthening foundations by empowering people, scaling data science/technology, and building trust[11](index=11&type=chunk) [Financials - Second Quarter](index=5&type=section&id=Financials%20-%20Second%20Quarter) Novartis's Q2 financials showed robust growth, with net sales, operating income, net income, and free cash flow all significantly increasing Q2 2025 Net Sales Performance | Metric | Q2 2025 (USD bn) | % Change (USD) | % Change (cc) | | :----- | :--------------- | :------------- | :------------ | | Net Sales | 14.1 | 12 | 11 | | US Sales | 6.2 | 21 | - | | RoW Sales | 7.8 | 6 | 4 | - Sales growth was mainly driven by strong performance from Kisqali (**+64%**), Entresto (**+24%**), Kesimpta (**+35%**), Scemblix (**+82%**), and Leqvio (**+64%**), partly offset by generic competition for Tasigna and Lucentis[8](index=8&type=chunk) Q2 2025 Operating Income and Margin | Metric | Q2 2025 (USD bn) | % Change (USD) | % Change (cc) | Margin (%) | | :----- | :--------------- | :------------- | :------------ | :--------- | | Operating Income | 4.9 | 21 | 25 | 34.6 | | Core Operating Income | 5.9 | 20 | 21 | 42.2 | - Operating income growth was primarily due to higher net sales, partially offset by increased investments in priority brands and launches, and net expense from legal matters[10](index=10&type=chunk) Q2 2025 Net Income, EPS, and Free Cash Flow | Metric | Q2 2025 (USD bn/USD) | % Change (USD) | % Change (cc) | | :----- | :------------------- | :------------- | :------------ | | Net Income | 4.0 | 24 | 26 | | Basic EPS | 2.07 | 29 | 32 | | Free Cash Flow | 6.3 | 37 | - | - The tax rate favorably impacted net income, decreasing to **11.2%** from **15.5%** in the prior year, mainly due to changes in uncertain tax positions and profit mix[15](index=15&type=chunk) [Financials - First Half](index=6&type=section&id=Financials%20-%20First%20Half) Novartis sustained strong H1 2025 financial performance, with net sales, operating income, net income, and free cash flow all showing significant increases H1 2025 Net Sales Performance | Metric | H1 2025 (USD bn) | % Change (USD) | % Change (cc) | | :----- | :--------------- | :------------- | :------------ | | Net Sales | 27.3 | 12 | 13 | | US Sales | 12.0 | 23 | - | | RoW Sales | 15.3 | 5 | 6 | - Sales growth was mainly driven by strong performance from Entresto (**+22%**), Kisqali (**+59%**), Kesimpta (**+38%**), Cosentyx (**+11%**), and Scemblix (**+79%**), partly offset by generic competition for Lucentis, Gilenya, and Tasigna[21](index=21&type=chunk) H1 2025 Operating Income and Margin | Metric | H1 2025 (USD bn) | % Change (USD) | % Change (cc) | Margin (%) | | :----- | :--------------- | :------------- | :------------ | :--------- | | Operating Income | 9.5 | 29 | 33 | 34.9 | | Core Operating Income | 11.5 | 21 | 24 | 42.1 | - Operating income growth was primarily due to higher net sales and contingent consideration adjustments, partially offset by increased investments in priority brands and launches[23](index=23&type=chunk) H1 2025 Net Income, EPS, and Free Cash Flow | Metric | H1 2025 (USD bn/USD) | % Change (USD) | % Change (cc) | | :----- | :------------------- | :------------- | :------------ | | Net Income | 7.6 | 29 | 31 | | Basic EPS | 3.91 | 34 | 37 | | Free Cash Flow | 9.7 | 46 | - | - The tax rate for the first half was **14.6%**, slightly lower than the prior year, favorably impacted by changes in uncertain tax positions[28](index=28&type=chunk) [Product Commentary (Q2 Performance)](index=8&type=section&id=PRODUCT%20COMMENTARY%20(RELATING%20TO%20Q2%20PERFORMANCE)) Novartis's Q2 2025 product performance showed strong growth in key innovative medicines across core therapeutic areas, offset by declines in Established Brands Q2 2025 Sales by Therapeutic Area | Therapeutic Area | Q2 2025 (USD m) | % Change (USD) | % Change (cc) | | :----------------- | :-------------- | :------------- | :------------ | | Cardiovascular, Renal and Metabolic | 2,655 | 28 | 26 | | Immunology | 2,549 | 10 | 9 | | Neuroscience | 1,457 | 19 | 17 | | Oncology | 4,293 | 22 | 20 | | Established Brands | 3,100 | -8 | -8 | - Entresto sales grew by **24%** (**22% cc**) driven by heart failure and hypertension indications across regions, despite ongoing litigation with a generic manufacturer in the US[34](index=34&type=chunk) - Kisqali sales increased by **64%** (**64% cc**), including **100%** growth in the US, reflecting strong share gains in HR+/HER2- metastatic and early breast cancer[42](index=42&type=chunk) - Scemblix sales surged by **82%** (**79% cc**) across all regions, addressing high unmet needs for CML patients and benefiting from early-line approvals[47](index=47&type=chunk) - Promacta/Revolade sales declined by **8%** (**9% cc**) due to discontinued promotion and generic entry in the US in May 2025[43](index=43&type=chunk) - Lucentis sales declined by **37%** (**39% cc**) in ex-US markets due to increased competition[51](index=51&type=chunk) [Cash Flow and Balance Sheet](index=11&type=section&id=CASH%20FLOW%20AND%20BALANCE%20SHEET) This section reviews Novartis's Q2 and H1 2025 cash flow and balance sheet, detailing changes in assets, liabilities, equity, and net debt [Cash Flow - Second Quarter](index=11&type=section&id=Cash%20flow%20-%20Second%20Quarter) Novartis reported a significant increase in Q2 2025 net cash flows from operating activities, with lower investing outflows and increased financing outflows Q2 2025 Cash Flow Summary | Metric (USD billions) | Q2 2025 | Q2 2024 | % Change | | :-------------------- | :------ | :------ | :------- | | Net cash from operating activities | 6.7 | 4.9 | 37 | | Net cash used in investing activities | -2.2 | -3.2 | 30 | | Net cash used in financing activities | -5.2 | -3.2 | -63 | | Free cash flow | 6.3 | 4.6 | 37 | - Increase in operating cash flows was mainly driven by higher net income, favorable hedging results, and favorable changes in working capital, partly offset by higher income taxes paid[53](index=53&type=chunk) - Investing outflows were mainly for acquisitions (Anthos Therapeutics, Inc. for **$0.8 billion** and Regulus Therapeutics Inc. for **$0.7 billion**) and purchases of property, plant, and equipment[55](index=55&type=chunk) - Financing outflows were primarily due to **$2.7 billion** for net treasury share transactions and **$2.5 billion** for Swiss withholding tax on the annual dividend[58](index=58&type=chunk) [Cash Flow - First Half](index=11&type=section&id=Cash%20flow%20-%20First%20Half) For H1 2025, net cash flows from operating activities significantly increased, investing outflows decreased, and financing outflows rose substantially due to dividends and share transactions H1 2025 Cash Flow Summary | Metric (USD billions) | H1 2025 | H1 2024 | % Change | | :-------------------- | :------ | :------ | :------- | | Net cash from operating activities | 10.3 | 7.1 | 44 | | Net cash used in investing activities | -1.9 | -4.1 | 54 | | Net cash used in financing activities | -13.8 | -8.4 | -64 | | Free cash flow | 9.7 | 6.7 | 46 | - Operating cash flows increased due to higher net income and favorable changes in working capital[61](index=61&type=chunk) - Investing outflows were driven by purchases of intangible assets (**$1.5 billion**) and acquisitions (**$1.5 billion**), partially offset by proceeds from marketable securities (**$1.8 billion**)[63](index=63&type=chunk) - Financing outflows were mainly due to **$7.8 billion** for annual dividend payment and **$5.4 billion** for net payments for treasury share transactions[67](index=67&type=chunk) [Balance Sheet - Assets](index=13&type=section&id=Balance%20sheet%20-%20Assets) As of June 30, 2025, total non-current assets increased by **USD 5.9 billion**, while total current assets decreased by **USD 3.8 billion**, mainly due to reduced cash and cash equivalents - Total non-current assets increased by **USD 5.9 billion** to **USD 78.5 billion** compared to December 31, 2024[70](index=70&type=chunk) - Intangible assets (excluding goodwill) increased by **USD 2.3 billion**, and goodwill increased by **USD 0.8 billion**, both partly due to favorable currency translation adjustments[70](index=70&type=chunk) - Total current assets decreased by **USD 3.8 billion** to **USD 25.9 billion** compared to December 31, 2024[72](index=72&type=chunk) - Cash and cash equivalents decreased by **USD 4.8 billion**, as cash outflows for dividends, treasury shares, and acquisitions exceeded inflows from operating activities[73](index=73&type=chunk) - Trade receivables increased by **USD 1.6 billion**, mainly due to higher net sales[75](index=75&type=chunk) [Balance Sheet - Liabilities](index=13&type=section&id=Balance%20sheet%20-%20Liabilities) Total non-current liabilities increased by **USD 1.2 billion**, while total current liabilities increased by **USD 3.0 billion**, driven by higher provisions and income tax liabilities - Total non-current liabilities increased by **USD 1.2 billion** to **USD 30.6 billion** compared to December 31, 2024[76](index=76&type=chunk) - Non-current financial debts increased by **USD 1.1 billion** due to unfavorable currency translation adjustments[76](index=76&type=chunk) - Total current liabilities increased by **USD 3.0 billion** to **USD 31.7 billion** compared to December 31, 2024[78](index=78&type=chunk) - Provisions and other current liabilities increased by **USD 1.8 billion**, mainly due to higher provisions for revenue deductions and legal matters[78](index=78&type=chunk) - Current income tax liabilities increased by **USD 1.2 billion**[78](index=78&type=chunk) [Balance Sheet - Equity](index=13&type=section&id=Balance%20sheet%20-%20Equity) Total equity decreased by **USD 2.1 billion** to **USD 42.1 billion** as of June 30, 2025, primarily due to dividend payments and treasury share purchases - Total equity decreased by **USD 2.1 billion** to **USD 42.1 billion** compared with December 31, 2024[79](index=79&type=chunk) - The decrease was mainly driven by annual dividends to shareholders (**USD 7.8 billion**) and purchase of treasury shares (**USD 5.5 billion**)[79](index=79&type=chunk) - Net income of **USD 7.6 billion** and favorable currency translation differences of **USD 2.8 billion** partially offset the decrease in equity[79](index=79&type=chunk) [Net Debt and Debt/Equity Ratio](index=14&type=section&id=Net%20debt%20and%20debt%2Fequity%20ratio) As of June 30, 2025, Novartis's liquidity decreased, while financial debts increased, leading to a rise in both the debt/equity ratio and net debt - Liquidity amounted to **USD 7.0 billion** as at June 30, 2025, down from **USD 13.5 billion** as at December 31, 2024[81](index=81&type=chunk) - Total non-current and current financial debts increased to **USD 30.8 billion** as at June 30, 2025, from **USD 29.6 billion** as at December 31, 2024[81](index=81&type=chunk) - The debt/equity ratio increased to **0.73:1** as at June 30, 2025, from **0.67:1** as at December 31, 2024[81](index=81&type=chunk) - Net debt increased to **USD 23.8 billion** as at June 30, 2025, from **USD 16.1 billion** as at December 31, 2024[81](index=81&type=chunk) [Innovation Review](index=15&type=section&id=INNOVATION%20REVIEW) This section reviews Novartis's R&D portfolio, recent innovative medicine approvals, regulatory decisions, and pipeline updates [R&D Portfolio Focus](index=15&type=section&id=R%26D%20Portfolio%20Focus) Novartis strategically focuses its R&D portfolio on high-value medicines with transformative potential, with approximately **100 projects** in clinical development - Novartis prioritizes high-value medicines with transformative potential for patients in its R&D portfolio[82](index=82&type=chunk) - The company is currently focusing on approximately **100 projects** in clinical development[82](index=82&type=chunk) [Selected Innovative Medicines Approvals in Q2](index=15&type=section&id=Selected%20Innovative%20Medicines%20approvals%20in%20Q2) In Q2 2025, Novartis secured key approvals for innovative medicines like Vanrafia in the US and Kisqali in China, expanding market presence Selected Innovative Medicines Approvals in Q2 2025 | Product | Active ingredient/Descriptor | Indication | Region | | :-------- | :--------------------------- | :------------------------------------------ | :------------ | | Vanrafia | atrasentan | IgA nephropathy | US | | Kisqali | ribociclib | HR+/HER2- early breast cancer (adjuvant) | China | | Scemblix | asciminib | 1L chronic myeloid leukemia | Japan and China | | Fabhalta | iptacopan | C3 glomerulopathy | Japan | | Coartem Baby | artemether and lumefantrine | Malaria (<5kg patients) | Switzerland | [Selected Innovative Medicines Projects Awaiting Regulatory Decisions](index=15&type=section&id=Selected%20Innovative%20Medicines%20projects%20awaiting%20regulatory%20decisions) Novartis has several innovative medicine projects awaiting regulatory decisions, with recent Q1 and Q2 2025 submissions for key indications Selected Innovative Medicines Projects Awaiting Regulatory Decisions | Product | Indication | US Submission | EU Submission | Japan Submission | News Update | | :---------------- | :-------------------------- | :------------ | :------------ | :--------------- | :-------------------------------------------- | | LOU064 (remibrutinib) | Chronic spontaneous urticaria | Q1 2025 | Q1 2025 | - | - | | Scemblix | 1L chronic myeloid leukemia | Approved | Q1 2025 | Approved | Japan and China approvals | | OAV101 | Spinal muscular atrophy (IT formulation) | Q2 2025 | Q2 2025 | - | EU and US submissions | | Lutathera | Gastroenteropancreatic neuroendocrine tumors, 1L in G2/3 tumors | - | Q2 2024 | - | EU submission withdrawn (unrelated to quality, efficacy or safety) | | Beovu | Diabetic retinopathy | - | - | Q4 2024 | - | [Selected Innovative Medicines Pipeline Projects](index=15&type=section&id=Selected%20Innovative%20Medicines%20pipeline%20projects) Novartis's pipeline includes numerous Phase 2 and 3 projects, with updates on Ac-PSMA-617 in prostate cancer and the MorphoSys acquisition for myelofibrosis - Ac-PSMA-617 (Metastatic castration-resistant prostate cancer) has started **Phase III** development[85](index=85&type=chunk) - The MorphoSys acquisition adds DAK539 (pelabresib) for myelofibrosis, with longer follow-up needed for regulatory path determination[85](index=85&type=chunk) - Pluvicto (Metastatic hormone sensitive prostate cancer) met its primary endpoint in the PSMAddition study, showing significant and clinically meaningful benefit in rPFS[86](index=86&type=chunk) - Cosentyx's PhIII GCAptAIN study for Giant cell arteritis did not meet its primary endpoint[85](index=85&type=chunk) - TQJ230 (pelacarsen) for secondary prevention of cardiovascular events received **FDA Fast Track** and **China Breakthrough Therapy** designations[86](index=86&type=chunk) [Condensed Interim Consolidated Financial Statements](index=17&type=section&id=CONDENSED%20INTERIM%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) This section presents condensed interim consolidated financial statements, including income, comprehensive income, balance sheets, equity changes, and cash flows [Consolidated Income Statements](index=17&type=section&id=Consolidated%20income%20statements) The consolidated income statements for Q2 and H1 2025 reflect strong revenue growth and improved profitability across key metrics Consolidated Income Statement (Q2 2025 vs Q2 2024) | (USD millions) | Q2 2025 | Q2 2024 | | :------------- | :------ | :------ | | Net sales | 14,054 | 12,512 | | Gross profit | 11,514 | 9,699 | | Operating income | 4,864 | 4,014 | | Income before taxes | 4,531 | 3,841 | | Net income | 4,024 | 3,246 | | Basic EPS (USD) | 2.07 | 1.60 | Consolidated Income Statement (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | Net sales | 27,287 | 24,341 | | Gross profit | 21,907 | 18,723 | | Operating income | 9,527 | 7,387 | | Income before taxes | 8,938 | 6,970 | | Net income | 7,633 | 5,934 | | Basic EPS (USD) | 3.91 | 2.91 | [Consolidated Statements of Comprehensive Income](index=19&type=section&id=Consolidated%20statements%20of%20comprehensive%20income) The consolidated statements of comprehensive income show a substantial increase for Q2 and H1 2025, driven by higher net income and positive currency translation effects Consolidated Statements of Comprehensive Income (Q2 2025 vs Q2 2024) | (USD millions) | Q2 2025 | Q2 2024 | | :------------- | :------ | :------ | | Net income | 4,024 | 3,246 | | Currency translation effects, net of taxes | 2,114 | 40 | | Total other comprehensive income | 1,988 | 205 | | Total comprehensive income | 6,012 | 3,451 | Consolidated Statements of Comprehensive Income (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | Net income | 7,633 | 5,934 | | Currency translation effects, net of taxes | 2,834 | -1,364 | | Total other comprehensive income | 3,029 | -1,058 | | Total comprehensive income | 10,662 | 4,876 | [Consolidated Balance Sheets](index=20&type=section&id=Consolidated%20balance%20sheets) The consolidated balance sheets as of June 30, 2025, show increased total assets driven by non-current assets, decreased current assets, and changes in liabilities and equity Consolidated Balance Sheet (June 30, 2025 vs Dec 31, 2024) | (USD millions) | Jun 30, 2025 | Dec 31, 2024 | | :------------- | :----------- | :----------- | | Total non-current assets | 78,456 | 72,542 | | Total current assets | 25,939 | 29,704 | | Total assets | 104,395 | 102,246 | | Total equity | 42,054 | 44,126 | | Total non-current liabilities | 30,627 | 29,428 | | Total current liabilities | 31,714 | 28,692 | | Total liabilities | 62,341 | 58,120 | [Consolidated Statements of Changes in Equity](index=21&type=section&id=Consolidated%20statements%20of%20changes%20in%20equity) The consolidated statements of changes in equity for Q2 and H1 2025 illustrate the impact of net income, OCI, dividends, and treasury share transactions, resulting in a net decrease for H1 - Total equity at June 30, 2025, was **USD 42,054 million**, a decrease from **USD 44,126 million** at January 1, 2025[93](index=93&type=chunk) - Key drivers for the change in equity during H1 2025 included net income of **USD 7,647 million**, other comprehensive income of **USD 3,027 million**, dividends of **USD 7,818 million**, and purchase of treasury shares of **USD 5,509 million**[93](index=93&type=chunk) [Consolidated Statements of Cash Flows](index=23&type=section&id=Consolidated%20statements%20of%20cash%20flows) The consolidated statements of cash flows for Q2 and H1 2025 show strong operating cash generation, strategic investing activities, and significant financing outflows Consolidated Statements of Cash Flows (Q2 2025 vs Q2 2024) | (USD millions) | Q2 2025 | Q2 2024 | | :------------- | :------ | :------ | | Net cash flows from operating activities | 6,664 | 4,875 | | Net cash flows used in investing activities | -2,243 | -3,207 | | Net cash flows used in financing activities | -5,213 | -3,200 | | Net change in cash and cash equivalents | -410 | -1,566 | Consolidated Statements of Cash Flows (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | Net cash flows from operating activities | 10,309 | 7,140 | | Net cash flows used in investing activities | -1,913 | -4,106 | | Net cash flows used in financing activities | -13,761 | -8,364 | | Net change in cash and cash equivalents | -4,803 | -5,490 | [Notes to Condensed Interim Consolidated Financial Statements](index=25&type=section&id=Notes%20to%20condensed%20interim%20consolidated%20financial%20statements) This section provides detailed notes to the interim consolidated financial statements, covering accounting policies, acquisitions, equity, financial instruments, cash flow, legal, and revenue [Basis of Preparation](index=25&type=section&id=Basis%20of%20preparation) The condensed interim consolidated financial statements are prepared in accordance with IFRS Accounting Standards and IAS 34 Interim Financial Reporting, adhering to historical cost - Financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) Accounting Standards as issued by the International Accounting Standards Board[97](index=97&type=chunk) - They conform to IAS 34 Interim Financial Reporting and accounting policies outlined in the 2024 Annual Report[98](index=98&type=chunk) [Accounting Policies](index=25&type=section&id=Accounting%20policies) Novartis's accounting policies align with IFRS, involving management estimates and assumptions, with no material impact from new IFRS standards in 2025, but IFRS 18 is being assessed for 2027 - The company's accounting policies are consistent with IFRS Accounting Standards, requiring management to make estimates and assumptions[99](index=99&type=chunk) - Goodwill and intangible assets are evaluated for impairment annually or when circumstances warrant, with potential for significant future impairment charges[101](index=101&type=chunk) - No new IFRS Accounting Standards or amendments effective in 2025 had a material impact, but IFRS 18 (effective Jan 1, 2027) is currently being assessed[103](index=103&type=chunk)[104](index=104&type=chunk) [Significant Acquisitions of Businesses](index=26&type=section&id=Significant%20acquisitions%20of%20businesses) Novartis completed significant acquisitions in 2024 and 2025, expanding its pipeline in gene, radioligand, and oncology therapies, involving substantial cash and contingent considerations - In H1 2025, Novartis acquired Regulus Therapeutics Inc. for **USD 0.8 billion** cash plus up to **USD 0.9 billion** in CVRs, focusing on microRNA therapeutics for ADPKD[124](index=124&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) - Also in H1 2025, Anthos Therapeutics, Inc. was acquired for **USD 0.9 billion** cash plus up to **USD 2.1 billion** in milestones, adding abelacimab for stroke prevention[128](index=128&type=chunk)[129](index=129&type=chunk)[130](index=130&type=chunk) - In 2024, significant acquisitions included Kate Therapeutics Inc. (**USD 427 million** cash + up to **USD 700 million** milestones) for gene therapies, Mariana Oncology Inc. (**USD 1.04 billion** cash + up to **USD 750 million** milestones) for radioligand therapies, and MorphoSys AG (approx. **EUR 2.6 billion**) for oncology[105](index=105&type=chunk)[106](index=106&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[113](index=113&type=chunk)[114](index=114&type=chunk) - A **USD 0.9 billion** impairment of goodwill attributable to the MorphoSys business was recognized in the second half of 2024[121](index=121&type=chunk)[122](index=122&type=chunk) [Summary of Equity Attributable to Novartis AG Shareholders](index=29&type=section&id=Summary%20of%20equity%20attributable%20to%20Novartis%20AG%20shareholders) The summary of equity attributable to Novartis AG shareholders details movements in equity, highlighting the impact of share repurchases and annual dividend payments Summary of Equity Attributable to Novartis AG Shareholders (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | Balance at beginning of year | 44,046 | 46,667 | | Shares acquired to be canceled | -5,350 | -2,698 | | Dividends | -7,818 | -7,624 | | Net income | 7,647 | 5,934 | | Other comprehensive income | 3,027 | -1,054 | | Balance at June 30 | 41,985 | 41,733 | - The annual gross dividend to shareholders of Novartis AG amounted to **USD 7.8 billion** in 2025 (2024: **USD 7.6 billion**)[133](index=133&type=chunk) - Novartis amended its share buyback arrangement in June 2025 to repurchase an additional **10.7 million shares** to mitigate the impact of share deliveries under equity-based compensation plans[134](index=134&type=chunk) [Financial Instruments](index=30&type=section&id=Financial%20instruments) The financial instruments note provides a hierarchical valuation of financial assets and liabilities, including cash, marketable securities, and contingent considerations, and details net investment hedges Financial Instruments at Fair Value (June 30, 2025) | (USD millions) | Level 1 | Level 2 | Level 3 | Total | | :------------- | :------ | :------ | :------ | :---- | | Financial assets | | | | | | Debt securities | 50 | - | - | 50 | | Derivative financial instruments | - | 268 | - | 268 | | Current contingent consideration receivables | - | - | 125 | 125 | | Long-term financial investments | 169 | 8 | 1,493 | 1,670 | | Financial liabilities | | | | | | Current contingent consideration liabilities | - | - | -197 | -197 | | Derivative financial instruments | - | -278 | - | -278 | | Non-current contingent consideration liabilities | - | - | -478 | -478 | - Novartis designated a portion of its long-term euro-denominated straight bonds as hedges of translation risk for net investments in foreign operations with euro functional currency[140](index=140&type=chunk) - In H1 2025, **USD 233 million** (net of taxes) of unrealized losses were recognized in other comprehensive income related to these net investment hedges[140](index=140&type=chunk) [Details to the Consolidated Statements of Cash Flows](index=31&type=section&id=Details%20to%20the%20consolidated%20statements%20of%20cash%20flows) This section provides detailed breakdowns of non-cash adjustments, changes in working capital, and cash flows related to acquisitions and divestments, offering further insight into cash flow drivers Reversal of Non-Cash Items and Other Adjustments (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | Depreciation, amortization and impairments | 2,447 | 2,482 | | Change in provisions and other non-current liabilities | 847 | 367 | | Equity-settled compensation expense | 529 | 517 | | Income taxes | 1,305 | 1,036 | | Net financial expense | 583 | 386 | | Total | 5,666 | 4,897 | Cash Flows from Changes in Working Capital (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | (Increase)/decrease in inventories | 11 | -146 | | Increase in trade receivables | -1,210 | -1,421 | | Decrease in trade payables | -315 | -551 | | Change in other current liabilities | 440 | 744 | | Total | -1,326 | -1,751 | - Cash flows used for acquisitions by applying the optional concentration test amounted to **USD 1.5 billion** in 2025, net of cash acquired[149](index=149&type=chunk) [Legal Proceedings Update](index=32&type=section&id=Legal%20proceedings%20update) Novartis is involved in various legal proceedings, including competition law matters in France, civil lawsuits in Greece, and litigation concerning the 340B Drug Pricing Program - France's Supreme Court overturned the Paris Court of Appeal's decision in the Lucentis/Avastin® matter, entitling the French Competition Authority to re-impose its original fine of approximately **USD 452 million** (**USD 443 million** expense recorded in June 2025)[152](index=152&type=chunk)[153](index=153&type=chunk) - In Greece, Novartis Hellas is facing civil lawsuits seeking moral damages, including a **USD 225 million** claim from the Greek State (rejected by court, subject to appeal) and a **EUR 229 million** claim from the National Social Security Fund[154](index=154&type=chunk) - Regarding the 340B Drug Pricing Program, HRSA found no overcharge in a 2023 case, and a civil investigative subpoena from the Vermont AG has seen no further action since 2021[155](index=155&type=chunk) [Operating Segment](index=33&type=section&id=Operating%20segment) Novartis operates as a single global segment focused on innovative medicines, with the ECN serving as the chief operating decision-maker for resource allocation and performance - Novartis operates as a single global operating segment, focusing on innovative medicines across core therapeutic areas[158](index=158&type=chunk) - The Executive Committee of Novartis (ECN), chaired by the CEO, acts as the chief operating decision-maker (CODM) for resource allocation and performance assessment[159](index=159&type=chunk) [Revenues and Geographic Information](index=34&type=section&id=Revenues%20and%20Geographic%20Information) This section provides a comprehensive breakdown of Novartis's net sales by geographic region, therapeutic area, and top brands for Q2 and H1 2025, including other revenue streams [Net Sales to Third Parties by Region (Q2 & H1)](index=34&type=section&id=Net%20sales%20to%20third%20parties%20by%20region%20(Q2%20%26%20H1)) Net sales to third parties showed strong growth in the US for both Q2 and H1 2025, with positive contributions from Europe and emerging markets Net Sales by Region (Q2 2025 vs Q2 2024) | Region | Q2 2025 (USD m) | % change (USD) | % change (cc) | | :----- | :-------------- | :------------- | :------------ | | US | 6,249 | 21 | 21 | | Europe | 4,170 | 8 | 3 | | Asia/Africa/Australasia | 2,713 | 5 | 3 | | Canada and Latin America | 922 | 2 | 15 | | Total | 14,054 | 12 | 11 | Net Sales by Region (H1 2025 vs H1 2024) | Region | H1 2025 (USD m) | % change (USD) | % change (cc) | | :----- | :-------------- | :------------- | :------------ | | US | 11,961 | 23 | 23 | | Europe | 8,075 | 6 | 5 | | Asia/Africa/Australasia | 5,485 | 6 | 6 | | Canada and Latin America | 1,766 | -2 | 12 | | Total | 27,287 | 12 | 13 | [Net Sales to Third Parties by Core Therapeutic Area and Established Brands (Q2 & H1)](index=35&type=section&id=Net%20sales%20to%20third%20parties%20by%20core%20therapeutic%20area%20and%20established%20brands%20(Q2%20%26%20H1)) Innovative medicines across core therapeutic areas demonstrated robust sales growth in Q2 and H1 2025, while Established Brands declined due to generic competition Net Sales by Therapeutic Area (Q2 2025 vs Q2 2024) | Therapeutic Area | Q2 2025 (USD m) | % change (USD) | % change (cc) | | :----------------- | :-------------- | :------------- | :------------ | | Cardiovascular, renal and metabolic | 2,655 | 28 | 26 | | Immunology | 2,549 | 10 | 9 | | Neuroscience | 1,457 | 19 | 17 | | Oncology | 4,293 | 22 | 20 | | Established brands | 3,100 | -8 | -8 | Net Sales by Therapeutic Area (H1 2025 vs H1 2024) | Therapeutic Area | H1 2025 (USD m) | % change (USD) | % change (cc) | | :----------------- | :-------------- | :------------- | :------------ | | Cardiovascular, renal and metabolic | 5,173 | 26 | 26 | | Immunology | 4,958 | 13 | 13 | | Neuroscience | 2,759 | 24 | 23 | | Oncology | 8,199 | 21 | 22 | | Established brands | 6,198 | -9 | -8 | [Net Sales to Third Parties of the Top 20 Brands (Q2 & H1)](index=37&type=section&id=Net%20sales%20to%20third%20parties%20of%20the%20top%2020%20brands%20in%202025%20(Q2%20%26%20H1)) The top 20 brands drove significant sales growth in Q2 and H1 2025, with strong performance from Kisqali, Entresto, and Scemblix, especially in the US Top 5 Brands by Q2 2025 Net Sales | Brand | Q2 2025 (USD m) | % change (USD) | % change (cc) | | :---------------- | :-------------- | :------------- | :------------ | | Entresto | 2,357 | 24 | 22 | | Cosentyx | 1,629 | 7 | 6 | | Kisqali | 1,177 | 64 | 64 | | Kesimpta | 1,077 | 35 | 33 | | Tafinlar + Mekinist | 573 | 10 | 7 | Top 5 Brands by H1 2025 Net Sales | Brand | H1 2025 (USD m) | % change (USD) | % change (cc) | | :---------------- | :-------------- | :------------- | :------------ | | Entresto | 4,618 | 22 | 22 | | Cosentyx | 3,163 | 11 | 11 | | Kisqali | 2,133 | 59 | 60 | | Kesimpta | 1,976 | 38 | 38 | | Tafinlar + Mekinist | 1,125 | 13 | 13 | - Kisqali showed exceptional growth in Q2 2025, with **100%** increase in US sales[171](index=171&type=chunk) [Other Revenues (Q2 & H1)](index=41&type=section&id=Other%20revenues%20(Q2%20%26%20H1)) Other revenues significantly increased in Q2 and H1 2025, primarily driven by a substantial royalty settlement income, profit sharing, and milestone income Other Revenues (Q2 2025 vs Q2 2024) | (USD millions) | Q2 2025 | Q2 2024 | | :------------- | :------ | :------ | | Profit sharing income | 356 | 268 | | Royalty income | 318 | 5 | | Milestone income | 35 | 14 | | Total other revenues | 782 | 360 | Other Revenues (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | Profit sharing income | 613 | 482 | | Royalty income | 326 | 24 | | Milestone income | 89 | 20 | | Total other revenues | 1,169 | 651 | - Royalty income in Q2 and H1 2025 includes a royalty settlement of **USD 0.3 billion**[175](index=175&type=chunk) [Other Interim Disclosures](index=41&type=section&id=Other%20interim%20disclosures) This section covers interim disclosures including depreciation, amortization, asset additions, debt repayments, tax rate changes, and significant future R&D and acquisition commitments Depreciation, Amortization, and Impairment Charges (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | Property, plant and equipment depreciation | -456 | -437 | | Intangible assets amortization | -1,721 | -1,711 | | Intangible assets impairment charges | -94 | -194 | Additions to Assets (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | Property, plant and equipment | 563 | 506 | | Intangible assets other than goodwill | 3,041 | 1,175 | - Novartis repaid a **USD 1.0 billion** US dollar denominated bond and a **CHF 500 million** Swiss franc denominated bond at maturity in H1 2025[179](index=179&type=chunk) - The Basel-Stadt cantonal tax rate change (**6.5%** to **8.5%** effective Jan 1, 2026) required revaluation of deferred tax balances, but the impact was not material[180](index=180&type=chunk) - The US OBBBA tax reform enacted July 4, 2025, is not expected to have a material impact on consolidated financial statements[181](index=181&type=chunk)[182](index=182&type=chunk) - Total commitments for R&D and acquisition agreements amounted to **USD 14.2 billion** as of June 30, 2025, with **USD 10.1 billion** due thereafter[184](index=184&type=chunk) [Events Subsequent to June 30, 2025](index=42&type=section&id=Events%20subsequent%20to%20the%20June%2030%2C%202025%2C%20consolidated%20balance%20sheet%20date) Subsequent to June 30, 2025, the US enacted new tax reform legislation, and the company entered into a new lease agreement with a significant commitment - On July 4, 2025, the United States enacted tax reform legislation (One Big Beautiful Bill Act - OBBBA)[186](index=186&type=chunk) - On July 7, 2025, the Company entered into a lease agreement with an undiscounted commitment amount of **USD 0.8 billion**[185](index=185&type=chunk)[186](index=186&type=chunk) [Supplementary Information](index=43&type=section&id=SUPPLEMENTARY%20INFORMATION) This section provides supplementary information on non-IFRS measures, including core results, constant currencies, and free cash flow, with detailed reconciliations [Non-IFRS Measures as Defined by Novartis](index=43&type=section&id=Non-IFRS%20measures%20as%20defined%20by%20Novartis) Novartis utilizes non-IFRS measures like core results, constant currencies, and free cash flow to assess performance and provide a clearer view of underlying business trends - Novartis uses non-IFRS measures (core results, constant currencies, free cash flow) to measure performance, especially for year-on-year comparisons[187](index=187&type=chunk) - Core results exclude amortization/impairment of intangible assets, certain gains/losses, acquisition/divestment items, restructuring, and legal-related items to enhance comparability[191](index=191&type=chunk) - Constant currency calculations eliminate exchange rate effects to show underlying changes in the income statement[194](index=194&type=chunk)[195](index=195&type=chunk) - Free cash flow is defined as net cash flows from operating activities less purchases of property, plant and equipment, focusing on core operating activities and available cash for investment or shareholder returns[200](index=200&type=chunk)[201](index=201&type=chunk) - Net debt is calculated as current and non-current financial debts less cash and cash equivalents and marketable securities, serving as an indicator of liquidity and financial flexibility[202](index=202&type=chunk)[203](index=203&type=chunk) [Core Results - Reconciliation from IFRS Accounting Standards](index=45&type=section&id=CORE%20RESULTS%20-%20Reconciliation%20from%20IFRS%20Accounting%20Standards%20results%20to%20non-IFRS%20measure%20core%20results) This section provides detailed reconciliations from IFRS to non-IFRS core results for operating income, income before taxes, and net income for Q2 and H1 2025, illustrating adjustments for amortization, impairments, and acquisition expenses Reconciliation to Core Operating Income (Q2 2025 vs Q2 2024) | (USD millions) | Q2 2025 IFRS | Amortization | Impairments | Acquisition/Divestment | Other Items | Q2 2025 Core | Q2 2024 Core | | :------------- | :----------- | :----------- | :---------- | :--------------------- | :---------- | :----------- | :----------- | | Operating income | 4,864 | 770 | 93 | 37 | 161 | 5,925 | 4,953 | | % of net sales | 34.6% | - | - | - | - | 42.2% | 39.6% | Reconciliation to Core Net Income (Q2 2025 vs Q2 2024) | (USD millions) | Q2 2025 IFRS | Q2 2025 Core | Q2 2024 Core | | :------------- | :----------- | :----------- | :----------- | | Net income | 4,024 | 4,710 | 4,008 | | Core basic EPS (USD) | 2.07 | 2.42 | 1.97 | Reconciliation to Core Operating Income (H1 2025 vs H1 2024) | (USD millions) | H1 2025 IFRS | Amortization | Impairments | Acquisition/Divestment | Other Items | H1 2025 Core | H1 2024 Core | | :------------- | :----------- | :----------- | :---------- | :--------------------- | :---------- | :----------- | :----------- | | Operating income | 9,527 | 1,559 | 94 | 29 | 291 | 11,500 | 9,490 | | % of net sales | 34.9% | - | - | - | - | 42.1% | 39.0% | Reconciliation to Core Net Income (H1 2025 vs H1 2024) | (USD millions) | H1 2025 IFRS | H1 2025 Core | H1 2024 Core | | :------------- | :----------- | :----------- | :----------- | | Net income | 7,633 | 9,192 | 7,689 | | Core basic EPS (USD) | 3.91 | 4.69 | 3.77 | [Non-IFRS Measure Free Cash Flow](index=48&type=section&id=NON-IFRS%20MEASURE%20FREE%20CASH%20FLOW) This section reconciles IFRS consolidated cash flow statements to the non-IFRS measure of free cash flow for Q2 and H1 2025, detailing adjustments to highlight cash from core operations Reconciliation to Free Cash Flow (Q2 2025 vs Q2 2024) | (USD millions) | Q2 2025 IFRS Cash Flow | Adjustments | Q2 2025 Free Cash Flow | Q2 2024 IFRS Cash Flow | Adjustments | Q2 2024 Free Cash Flow | | :------------- | :--------------------- | :---------- | :--------------------- | :--------------------- | :---------- | :--------------------- | | Net cash flows from operating activities | 6,664 | - | 6,664 | 4,875 | - | 4,875 | | Net cash flows used in investing activities | -2,243 | 1,912 | -331 | -3,207 | 2,947 | -260 | | Net cash flows used in financing activities | -5,213 | 5,213 | 0 | -3,200 | 3,200 | 0 | | Non-IFRS measure free cash flow | - | - | 6,333 | - | - | 4,615 | Reconciliation to Free Cash Flow (H1 2025 vs H1 2024) | (USD millions) | H1 2025 IFRS Cash Flow | Adjustments | H1 2025 Free Cash Flow | H1 2024 IFRS Cash Flow | Adjustments | H1 2024 Free Cash Flow | | :------------- | :--------------------- | :---------- | :--------------------- | :--------------------- | :---------- | :--------------------- | | Net cash flows from operating activities | 10,309 | - | 10,309 | 7,140 | - | 7,140 | | Net cash flows used in investing activities | -1,913 | 1,328 | -585 | -4,106 | 3,619 | -487 | | Net cash flows used in financing activities | -13,761 | 13,761 | 0 | -8,364 | 8,364 | 0 | | Non-IFRS measure free cash flow | - | - | 9,724 | - | - | 6,653 | [Additional Information](index=50&type=section&id=ADDITIONAL%20INFORMATION) This section provides additional information on net debt, share information, and currency fluctuation effects on key financial figures [Net Debt](index=50&type=section&id=Net%20debt) Novartis's net debt increased significantly in Q2 and H1 2025, driven by decreased cash and increased financial debts, reflecting strategic financial activities Condensed Consolidated Changes in Net Debt (H1 2025 vs H1 2024) | (USD millions) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | Net change in cash and cash equivalents | -4,803 | -5,490 | | Change in marketable securities, commodities, time deposits, financial debts and derivatives financial instruments | -2,840 | -3,087 | | Change in net debt | -7,643 | -8,577 | | Net debt at January 1 | -16,141 | -10,183 | | Net debt at June 30 | -23,784 | -18,760 | Components of Net Debt (June 30, 2025 vs Dec 31, 2024) | (USD millions) | Jun 30, 2025 | Dec 31, 2024 | | :------------- | :----------- | :----------- | | Total financial debts | -30,784 | -29,598 | | Total liquidity | 7,000 | 13,457 | | Net debt at end of period | -23,784 | -16,141 | [Share Information](index=50&type=section&id=Share%20information) Key share information for Novartis as of June 30, 2025, indicates decreased shares outstanding and increased ADR price and market capitalization Share Information (June 30, 2025 vs June 30, 2024) | Metric | Jun 30, 2025 | Jun 30, 2024 | | :----- | :----------- | :----------- | | Number of shares outstanding | 1,935,853,188 | 2,024,579,175 | | Registered share price (CHF) | 96.17 | 96.17 | | ADR price (USD) | 121.01 | 106.46 | | Market capitalization (USD billions) | 233.5 | 216.5 | [Effects of Currency Fluctuations](index=51&type=section&id=Effects%20of%20Currency%20Fluctuations) Currency fluctuations notably impacted Novartis's key financial figures for Q2 and H1 2025, with positive effects on net sales but negative effects on operating income, net income, and EPS Principal Currency Translation Rates (Average Rates H1 2025 vs H1 2024) | (USD per unit) | H1 2025 | H1 2024 | | :------------- | :------ | :------ | | 1 CHF | 1.161 | 1.125 | | 1 EUR | 1.093 | 1.081 | | 1 GBP | 1.297 | 1.265 | | 100 JPY | 0.674 | 0.658 | Currency Impact on Key Figures (Q2 2025) | Metric | Change in USD % | Change in constant currencies % | Percentage point currency impact | | :----- | :-------------- | :---------------------------- | :------------------------------- | | Net sales | 12 | 11 | 1 | | Operating income | 21 | 25 | -4 | | Net income | 24 | 26 | -2 | | Basic EPS | 29 | 32 | -3 | Currency Impact on Key Figures (H1 2025) | Metric | Change in USD % | Change in constant currencies % | Percentage point currency impact | | :----- | :-------------- | :---------------------------- | :------------------------------- | | Net sales | 12 | 13 | -1 | | Operating income | 29 | 33 | -4 | | Net income | 29 | 31 | -2 | | Basic EPS | 34 | 37 | -3 | [Disclaimer](index=52&type=section&id=DISCLAIMER) This section contains a standard disclaimer regarding forward-looking statements, highlighting inherent risks and uncertainties, and stating no obligation to update - The press release contains forward-looking statements subject to significant known and unknown risks and uncertainties, which could cause actual results to vary materially[228](index=228&type=chunk) - Risks include uncertainties in global healthcare cost containment, success of key products, R&D, intellectual property protection, strategic benefits from external opportunities, digital technologies, IT systems, legal proceedings, safety/quality issues, ESG compliance, macroeconomic developments, and currency fluctuations[228](index=228&type=chunk) - Novartis provides information as of the current date and does not undertake any obligation to update forward-looking statements[228](index=228&type=chunk) [About Novartis](index=53&type=section&id=About%20Novartis) Novartis is an innovative medicines company dedicated to improving and extending lives globally, reaching over **250 million** people, and provides investor information via its website - Novartis is an innovative medicines company focused on reimagining medicine to improve and extend people's lives[231](index=231&type=chunk) - Its medicines reach more than **250 million** people worldwide[231](index=231&type=chunk) - Novartis conducts conference calls with investors and provides detailed financial results and presentations on its investor relations website[232](index=232&type=chunk)[233](index=233&type=chunk) - Upcoming important dates include Q3 2025 results (Oct 28, 2025), Meet Novartis Management 2025 (Nov 19-20, 2025), Social Impact & Sustainability annual investor event (Dec 1, 2025), and Q4 & Full Year 2025 results (Feb 4, 2026)[234](index=234&type=chunk)

诺华制药首席执行官表示将在美国进行230亿美元的新投资。 ...