31/01/2025 - Novartis AG: Earnings Document (novartis integrated report 2024)

02 Novartis in Society Integrated Report 2024

Contents

About this report\	03
Chair's letter\	04
CEO's letter\	05
About Novartis
Our company\	07
Our medicines\	08
Our global operations\	09
Our people, culture and values\	10
Strategy and business model
Operating environment\	12
Strategy\	13
Business model\	15
Material topics\	16
Business review
Financial performance\	19
Innovation performance\	20
Operational performance\	21
Key assets in our R&D pipeline\	22

Sustainability matters

Environmental matters \	25
Climate\	25
Nature\	30
Social matters\	34
People and culture\	34
Human rights\	37
Patient health and safety\	38
Access to medicines: a shared responsibility\	40
Governance and integrity matters\	42
Ethical business conduct\	42
Animal welfare\	45
Political engagement\	45
Supply chain management\	46

Corporate governance, risk management and compensation

Corporate governance\	48
Our Board of Directors\	51
Our Executive Committee\	52
Risk management\	53
Compensation\	56
Appendix
Performance indicators\	60
Disclosures in accordance with
Art. 964b Swiss Code of Obligations\	63
Task Force on Climate-related Financial
Disclosures (TCFD) index\	64
2024 climate scenario analysis in accordance
with the recommendations of the Task Force
on Climate-related Financial Disclosures (TCFD)\	65
Global Reporting Initiative (GRI) content index\	69
Independent practitioner's limited assurance report
on selected Sustainability Information of Novartis AG\	72
Abbreviations\	74

The Novartis in Society Integrated Report is our main disclosure for nonfinancial information. It has been prepared in accordance with Art. 964b of the Swiss Code of Obligations, including the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) as required by the Swiss Ordinance on Climate Disclosures­.

In addition, it has been prepared in alignment with the Integrated Reporting Framework and with reference to the Global Reporting Initiative (GRI) standards.

This report was subject to approval by the Board of Directors prior to publication.

It is published in conjunction with our Annual Report and Form 20-F, which are filed with the SIX Swiss Exchange and US Securities & Exchange Commission (SEC), respectively. Our annual reports are available on our corporate website.

Scope, reporting boundaries and data

This report covers all business and consolidated entities in line with the Novartis Annual Report and Form 20-F. Annual performance data relates to our financial year (from January 1 to December 31, 2024). All information in this report reflects the continuing operations of Novartis, including any changes to the company's portfolio of activities. Further details on the basis for reporting are available in the Reporting Criteria document on our corporate website.

Environmental data for 2024 is based on actual January-September performance data, plus estimates for October- December (exceptions are indicated with a footnote). The 2022 and 2023 environmental comparative data reflects 12-month actual performance data.

Data on financial performance is consistent with the Novartis Annual Report and Form-20F, prepared in accordance with the International Financial Reporting Standards (IFRS®) Accounting Standards, as issued by the International Accounting Standards Board (IASB®). Novartis financial data is presented in US dollars (USD).

Comparative data for certain indicators in data tables (pages 60 and 62) include data for Sandoz, our former generics and biosimilars business, which was spun off in 2023. These indicators have been highlighted with a footnote. The 2016 baseline for environmental targets has been restated to remove Sandoz.

Some figures in this report have been rounded. Percentages may have been calculated using rounded numbers.

An overview of definitions and methodologies for ESG performance indicators in this report is available on our corporate website.

Certain ESG-related disclosures that are deemed outside the scope of Art. 964b of the Swiss Code of Obligations

are published on the ESG Index on our corporate website. This includes information related to performance on our sustainability-linked bond targets.

References, abbreviations and trademarks

Where third-party sources are used, this is indicated in the text. A list of abbreviations can be found on page 74. Please note that all product names printed in italics in this report refer to trademarks owned by, or licensed to, Novartis.

Note on the Swiss Code of Obligations

On page 63, we summarize how this report complies with the requirements of Art. 964b of the Swiss Code of Obligations, including the Swiss Ordinance on Climate Disclosures. We also adhere to the requirements of Art. 964j-l of the Swiss Code of Obligations (Ordinance on Due Diligence and Transparency in relation to Minerals and Metals from Conflict-Affected Areas and Child Labour). We have determined that we are exempt from the obligations of due diligence and reporting on conflict minerals (see page 38). Our disclosure relating to due diligence on child labor can be found in a separate report available on our corporate website.

External assurance

KPMG AG provided limited assurance in accordance with International Standard on Assurance Engagements (ISAE)

3000 (Revised) and ISAE 3410 on the performance indicators in the report. KPMG's independent assurance report is on page 72.

In our first full-year as a pure-play medicines company, Novartis delivered strong results, with double-digit growth in sales and net profit in 2024. The performance validates our strategy and gives us confidence that we are well prepared to grow by focusing

fast-growing and highly innovative medical fields such as xRNA, radioligand therapy and gene and cell therapy.

Our recent breakthroughs in breast cancer and kidney and blood diseases demonstrate that our operational focus

"\Our recent breakthroughs in breast cancer and kidney and blood diseases demonstrate our ability to deliver high-value medicines that alleviate society's greatest disease burdens."

on our key therapeutic areas and technology platforms.

The strategic shift from a diversified life sciences company to a focused medicines organization over the last decade has proven to be the right path forward. With the divestment of our non-core activities in animal health, vaccines and generics, among others, we were able to free up resources and strengthen our position in

strengthens our ability to deliver high-value medicines that alleviate society's greatest disease burdens. As we continue to accelerate our research and development efforts and strengthen our commercial capabilities, we expect to continue to grow profitably in the long-term and create sustainable shareholder value.

Our efforts to more efficiently align our Research, Development and Commercial

organizations advanced further. Besides strategic acquisitions to increase our technological capacity and broaden our pipeline, we integrated artificial intelligence more deeply into our day-to-day operations to more efficiently assess new molecules and accelerate drug development timelines.

In view of continuing geopolitical and economic volatility, we are further strengthening our global production and distribution network to withstand potential supply chain disruptions and improve overall resilience. We will stay disciplined in managing our technical and data infrastructure as well as our partner networks and build an agile footprint to quickly adapt to the changing environment.

Environmental, social and governance (ESG) matters remained high on our agenda. We deepened our commitment to vital topics: improving access to medicines, taking further measures in our fight against climate change and strengthening our ethics framework, among other things. Our efforts have been recognized by leading independent agencies and are reflected in consistently high rankings.

During my 12-year tenure as Chair, my priorities were, among others, to focus the company on its core pharmaceutical expertise, improve its governance, appoint strong executive leadership and help create a highly versatile Board of Directors to navigate the increasingly complex healthcare landscape. With Dr. Giovanni Caforio, who after shareholder approval is scheduled to join the Board as Non-Executive Chair in April 2025, Novartis has secured an outstanding leader to guide the company through its next phase.

I thank you for the confidence you have placed in our company and am pleased to be able to propose a dividend increase of 6% to CHF 3.50 at the next Annual General Meeting.

Sincerely,

Joerg Reinhardt

Chair of the Board of Directors

2024 was a year of impact at Novartis.

We reached nearly 300 million patients with our innovative therapies - more than ever before - as we built on the momentum from our successful transformation. We consistently delivered strong financial

and operational performance, significant R&D achievements, and sustainable growth, and are well positioned to increase value for shareholders and society moving forward.

Core to our approach is a relentless focus on innovation. It allowed us to develop and expand access to new treatments in our key therapeutic areas and technology platforms.

In oncology, we built on the legacy of our work in areas like breast cancer and chronic myeloid leukemia with Kisqali and Scemblix, medicines developed by researchers in Novartis labs - a testament to the strength of our R&D engine. We secured our spot as a global leader in radioligand therapy (RLT), a platform we believe has the potential to transform cancer care. Pluvicto, our RLT therapy for advanced prostate cancer,

intelligence and data science throughout our R&D activities. These tools are helping uncover potential ways to accelerate drug design and clinical trial processes.

Through a combination of in-house R&D and targeted acquisitions and licensing agreements, we now have more than

30 potential new high-value medicines in our pipeline and expect more than

15 submission-enabling readouts over the next two years.

We remain committed to environmental, social and governance (ESG) matters. We rank highly among industry peers in a range of key ESG ratings, and were honored to rank number one in the 2024 Access to Medicine Index.

Fostering a culture of innovation depends on people. We aim to recruit, retain, and cultivate the best talent in the world. It's why we've rebuilt our organization to meet tomorrow's global healthcare challenges through a simpler organization, targeted hiring efforts and investments in new facilities to serve patients around the world.

"\We reached nearly 300 million patients with our innovative ­therapies - more than ever before."

Looking ahead, I'm confident we'll see	future. The result is a strong portfolio of
sales growth average at least 5% annually	innovative therapies that sets us up for
over the five years to 2029, and reach 40%	sustained growth and finds new ways to
core operating income margin by 2027.1	improve and extend patients' lives.

showed strength in the US and Europe. We are exploring new referral pathways and investing in RLT manufacturing to broaden its global availability.

Our investments in cutting edge technology­ fueled innovation across therapeutic areas. We continue to prioritize platforms like RLT and RNA therapeutics, and increasingly integrate artificial

Our approach delivered solid financial results. This past year saw double-digit growth in net sales and core operating income and improved core margins. Importantly, we delivered strong total shareholder returns for our shareholders over recent years.

We're proud of our record and excited about the future. I want to offer a special note of thanks to outgoing Board Chair Joerg Reinhardt, who steps down after decades of leadership at Novartis. His impact will carry forward, and I'm grateful for his years of mentorship.

In recent years, we've narrowed our focus, expanded our reach, and invested in the

Thank you for making that possible. We look forward to continuing our momentum in 2025.

Sincerely,

Vas Narasimhan

Chief Executive Officer

Our company

Novartis is an innovative medicines company engaged in the research, development, manufacturing, distribution, marketing and sale of a broad range of innovative pharmaceutical medicines. In 2024, our medicines reached 296 million patients around the world.

PURPOSE AND VISION

ORGANIZATION

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Research and

development

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Purpose

Organization	US

Our purpose is to reimagine medicine to improve and extend people's lives.

Vision

Our vision is to become the most valued and trusted medicines company in the world.

Research and development

•\ Biomedical Research is our innovation engine, focused on creating new ways to fight disease and turning scientific breakthroughs into new medicines with the potential to change lives.

•\ Development oversees the development of potential new medicines, running clinical trials to confirm their safety and efficacy, and steering the way to regulatory approval for the treatment of patients.

Operations and global functions

•\ Operations manufactures and delivers our medicines to customers, while also overseeing IT, procurement, real estate and other support services. Novartis operates 33 manufacturing sites worldwide.

•\ Global functions provide support in areas such as finance; human resources; legal; ethics, risk and compliance; corporate affairs; internal audit; and strategy and growth.

Commercial

•\ US and International are our two commercial units, focused on their respective geographic areas. They work with customers to provide innovative medicines and services that improve treatment options and raise the quality of care for patients.

Our medicines

Our medicines treat serious diseases from cancer and heart disease to neurological conditions and rare genetic illnesses. We sell our medicines in approximately 120 countries worldwide.

Cosentyx

Injectable treatment for inflammatory and immune conditions

6 141

Entresto

Oral medicine for heart failure and hypertension

7 822

Kesimpta

Injectable treatment for

relapsing multiple sclerosis

3 224

Top 10

Kisqali

Oral treatment for a type

of breast cancer

3 033

Promacta/Revolade

Oral treatment for

certain blood disorders

2 216

CORE THERAPEUTIC AREAS

NOVARTIS TOP 10 MEDICINES

medicines

(by 2024 net sales, USD millions)

Cardiovascular, renal and metabolic

Immunology

Neuroscience

Oncology

In addition, we have in-market products in:

Ophthalmology

Respiratory

Ilaris

Injectable medicine

for certain rare

autoinflammatory disorders

1 509

Xolair1

Injectable medicine for certain respiratory and immunological conditions, including severe allergic asthma

1 643

Tasigna

Oral treatment for a type of chronic myeloid leukemia

1 671

Tafinlar + Mekinist

Oral combination targeted therapy for a certain type of cancer

2 058

Jakavi

Oral treatment for certain rare blood disorders

1 936

Global health

1 Net sales from continuing operations reflect Xolair sales for all indications.

09 Novartis in Society Integrated Report 2024

Our global

About Novartis	Strategy and business model	Business review	Sustainability matters	Corporate governance, risk	Appendix
				management and compensation

Europe

operations

Novartis headquarters are in Basel, Switzerland. In addition, we have

197 operating sites worldwide, including manufacturing sites, R&D facilities and corporate offices.

Switzerland

Basel

Global company headquarters; International organizational unit headquarters; research and development; production of drug substances and drug intermediates

Stein

Production of sterile vials,

pre-filled syringes and ampoules; capsules and tablets; active pharmaceutical ingredients; and cell and gene therapies

Schweizerhalle

Manufacture of small-interfering RNA drug substance for Leqvio

MAJOR FACILITIES

North America

France	Slovenia	Austria
Huningue	Menges	Kundl and Schaftenau
Production of drug substances	Production of small molecules	Production of biotechnological
for clinical and commercial supply	and large molecules drug	products, active drug substances
	substances and drug	and nucleic acids, drug
	intermediates; R&D for biologics	products, and finished products;
		product development

Italy

Ivrea

Galenic development and manufacture, package and release of radioligand therapy products in oncology (clinical & commercial) Pluvicto and Lutathera product

Major facilities and locations

(by size of site and/or number of employees)

Asia

US

East Hanover, NJ US organizational unit headquarters; research and development

Indianapolis, IN Manufacture, package and release clinical and commercial Pluvicto and Lutathera product for US and Canada

	China
Cambridge, MA	Shanghai
Research and development	China country headquarters;
Durham, NC	research and development
Manufacture, package and
release commercial Zolgensma
product and certain clinical
development activities

Curious

We explore to improve

12 591

Unbossed

Integrity

We make each other extraordinary	Canada and Latin America

We hold ourselves and others accountable	3 798