Financial analysis Novartis

Accounting, Finance & Control PROJECT WORK Prof. M. Arnaboldi Bartesaghi Stefano

878503

Bianchi Francesca

876707

Bonfiglio Roberto

871999

Capozzo Mattia

875420

Casali Carolina

876303

Tutor F. Peraboni

CONTENT TABLE 1.

2.

Introduction ................................................................................................................................................................................................ 3 1.1

Pharmaceutical market .................................................................................................................................................................. 3

1.2

Novartis AG Company.................................................................................................................................................................. 4

Strategic analysis ...................................................................................................................................................................................... 5 2.1 Vision and mission ................................................................................................................................................................................ 5 2.2 Values ........................................................................................................................................................................................................ 6 2.3 Strategy...................................................................................................................................................................................................... 7 2.4SWOT Analysis ....................................................................................................................................................................................... 7

3. Financial statement analysis ...................................................................................................................................................................... 8 4. Value drivers analysis ............................................................................................................................................................................... 14 4.1 Value drivers’ indicators ................................................................................................................................................................... 15 4.1.1 Financial indicators .................................................................................................................................................................... 15 4.1.2 Internal indicators ....................................................................................................................................................................... 15 4.1.3 Learning And Growth ............................................................................................................................................................... 18 4.1.4 Customers' Perspective ............................................................................................................................................................. 19 4.1.5 Sustainability Perspective ........................................................................................................................................................ 21 6. Methodology ................................................................................................................................................................................................ 23 7. Critical analysis ........................................................................................................................................................................................... 24 Bibliography ..................................................................................................................................................................................................... 25 Exhibit attached

LIST OF FIGURES Figure 1: Pharma industry revenues and profit ................................................................................................................. 3 Figure 2: Novartis revenues distribution ........................................................................................................................... 5 Figure 3: Novartis' values ................................................................................................................................................. 6 Figure 4: revenues and EBIT ............................................................................................................................................ 8 Figure 5: Return On Equity............................................................................................................................................... 8 Figure 6: EBIT margin ...................................................................................................................................................... 9 Figure 7: Net Invested Capital .......................................................................................................................................... 9 Figure 8: Return On Investment...................................................................................................................................... 10 Figure 9: sales turnover ................................................................................................................................................... 10 Figure 10: Debt to Equity................................................................................................................................................ 10 Figure 11: Interest Coverage Ratio ................................................................................................................................. 11 Figure 12: Current Ratio ................................................................................................................................................. 11 Figure 13: Cash flow to debt ........................................................................................................................................... 13 Figure 14: Capex coverage ............................................................................................................................................. 14

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1. Introduction The pharmaceutical industry discovers, develops, produces, and markets drugs or pharmaceuticals as medications. Pharmaceutical companies may deal in generic or grand medications and medical devices.

They are subject to a variety of laws and regulations that govern the patenting, testing, safety, efficacy and marketing of drugs.

Fragmentation

1.1 Pharmaceutical market Pharma industry is low fragmented, highly international with high capital intensity and profitability, compared to

Internationalization Capital Intensity Profitability

others industries.

In the statistics below it is possible to see the regional revenues on the world pharmaceutical market in 2015 (billion â‚Ź) and the annual profit in 2015 (million $). In 2015 the North American pharmaceutical market was the world's largest regional market (416,6 billion euros). From 2001 to 2015 the worldwide revenue of the pharmaceutical market has increased dramatically. In 2001, worldwide revenue was around 390.2 billion U.S. dollars. Nearly 15 years later it is worth at almost one trillion U.S. dollars. Currently the biggest pharmaceutical companies worldwide are Novartis, Johnson & Johnson, Roche, Pfizer, Sanofi , Bayer and Merck.

Annual Profit 2015 (million $)

Revenues for region 2015 (billion â‚Ź) 500 400 300 200 100 0

17.794 15.409

416,6 278,8

9.212

217,8 66

North America

Asia, European Africa, Union Australasia

6.960

4.756 4.559 4.442

Latin Amerca

Figure 1: Pharma industry revenues and profit

Internal competition Global population is getting older, life-expectancy is increasing and global healthcare is spending more than in the past. Competition among different main players in pharma is increasing too. Price is becoming more relevant and pressure from governments, media and consumers is growing rapidly. Health regulators are more demanding in terms of benefit-risk: they require more clinical-trial data and risk management plans.

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As a consequence the regulatory approval has become longer and more challenging while investigations and litigations are increasing.

New entrants and Substitutes The industry is characterised by really high and relevant entry barriers associated to high costs of Research & Development for new drugs and for the importance of strict government regulations and long regulatory approval processes. However data management, IT and technology’s role is growing rapidly and many techcompanies (like Google, IBM, Qualcomm) are becoming more and more interested in healthcare and their presence can shift the competitive landscape. Many general drugs are more and more produced and sold without a brand as a generic drug at a lower price. Generic drugs are quite established products and they do not require high R&D investments.

Suppliers Suppliers’ relations can be really different for the requirements of different products, for innovative products they may require contacts with few suppliers for specific elements, in that case Novartis has little bargaining power. On the other hand on established products they have well established relations and the bargaining power is higher.

Buyers Novartis has two main different types of buyers: - OUT-Hospitals: who buy over-the counter and other products in pharmacies, sometimes based on their family doctor’s advice, other times based on their personal experience.

- IN-Hospitals: Healthcare providers (hospitals, clinics…) demanding for high quality products at competitive prices. They have a higher bargaining power compared to single purchasers because of their larger orders.

1.2 Novartis AG Company Novartis International AG is a global Swiss healthcare company based in Basel (CH). It was no. 1 in profit (17.8 million US$) and no. 4 in revenues ($ 51.0 million) among the world-wide pharmaceutical industry in 2015. In 2015 it was ranked no. 175 in the Fortune Globe 500 List and n0. 47 in the Global 2000 Forbes List. Currently it employs more than 118.000 employees.

Novartis was created in 1996 as the result of merging of Ciba-Geigy, a chemical and dyes trading company, and Sandoz, a chemical company founded in Basel.

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In 2003 the Sandoz brand became the Novartis’s single subsidiary of generic drugs. Since 2010 Novartis is also Alcon’s majority owner; Alcon is an American global medical company specialized in eye care products. Since 2014 Novartis has conducted an internal restructuring in order to reduce its divisions to three and to focus only in divisions with innovation power and global scale. alcon 20%

Nowadays Novartis International AG consists of three divisions:   

sandoz 18%

Novartis pharmaceutical: innovative patented medicines Sandoz: generic medicines and biosimilars Alcon: eye care products

pharmaceuticals 62%

2015 sales (USD millions) 62% Pharmaceuticals 30,445 9,157 18% Sandoz 9,812 20% Alcon Figure 2: Novartis revenues distribution

Acquisitions:

Portfolio Transformation 2014-2015 GSK oncology products WaveTec Spinifex Pharmaceuticals (neuropathic) Admune Therapeutics LLC (cancer immunotherapies) CoStim Pharmaceuticals (bio-tech, cancer)

Mergers:

Joint-venture with GSK for health consumers business

Sells:

Animal health business to Eli Lilly and Company Vaccines business to GSK Blood transfusion diagnostics unit to Grifols S.A. Idenix 22% shareholding to Merck LTS 43% shareholding Vaccines influenza to CSL

USD 16 billion 350million 312 million 258 million 248 million

5.4 billion 7.1 billion 1.7 billion 0,8 billion 0.4 billion 275 million

2. Strategic analysis 2.1 Vision and mission "Our vision is to be a trusted leader in changing the practice of medicine."

Novartis' mission is focused on discovering new solutions and alternatives in order to improve and lengthen people's lives. Their effort to control and eliminate disease is underlined in their decisions to launch a digital health strategy by 2017 and to invest in 2016 the total amount of 5 USD million in developing countries aimed at improving scientific and clinical capacity facilities.

Attention is mostly paid to the toughest healthcare challenges by implementing scientific innovations which are essentials to develop breakthrough treatments.

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Moreover, Novartis' concern includes also the availability of their products and the company is really engaged in projects aimed at delivering these cures to as many people as possible. As a matter of fact they are pioneering new business approaches and delivery models. For instance, they want to launch Novartis Access in 30 countries by 2020 to reach 20 million patients. Another important project is the provision by 2016 of health education to 12 million people thanks to hundreds of thousands of community education meetings across Kenya, India, Vietnam and Indonesia. In addition to these measures, in order to address the problem of making treatments available also to low and middle income countries, Novartis opened in 2016 the Novartis Oncology Access. Novartis is also working in unknown fields to find new treatments by always investing in their R&D department. Indeed, in 2016, Novartis spent around 25 USD million in the research area to discover and develop medicines for neglected diseases.

Another point the company is pursuing is the engagement of stakeholders, especially of Shareholders, who are provided returns.

2.2 Values The Executive Committee of Novartis drafted and selected the right values which could form corporate culture and these values represent the guidelines for the realization of their strategy.

They are essential to reach targeted goals and carrying out projects since they give structure and limits to the

Innovation in experimenting and delivering solutions

Quality by excelling in each activity

Collaboration by championing high performing teams with diversity and inclusion

processes. Every employee is expected to follow them and to be assessed and rewarded with

Performance by prioritizing

Courage

Integrity

by pursuing honesty; giving and receiving feedback

by always advocating and applying high ethical standards

respect

to

his

commitment to these same values.

Novartis

underlines

the

importance of employing an

Figure 3: Novartis' values

ethical conduct by drawing up the Code of Conduct, where five core principles are stressed. First of all, the focus is on the patient benefit and safety. Then, associates are treated fairly and respectfully with guaranteed fair working conditions, embodying diversity and inclusion. As with respect to Shareholders, Novartis pursues financial integrity, business continuity, information security, safeguarding of corporate assets and prevention of conflict of interests. Then, the firm assures fair competition against healthcare partners, a policy of anti-bribery and corruption and, last but not least, to strive to be trusted partner aiming at customer satisfaction. As for the last principle regarding Novartis' position in society, the company aspires to be a good corporate citizen by actively contributing to societal problems, to be transparent and to respect and preserve human rights.

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2.3 Strategy Novartis' strategy is based on the use of science-based innovation to deliver better patient outcomes.

Science-based innovation

• The main belief is that innovation is the fundamental resource that produces breakthrough medicines and products will be even more important. As a matter of fact, the company invests a lot in research and development (R&D), especially the ones aimed at areas of unmet medical need. The product pipeline is characterized by a distinctive research and clinical approach that studies scientific advances before market potential.

Therefore, the underlying strategy in the R&D department is to keep reinforcing already strong areas, such as oncology, cardiovascular, neuroscience, and to enlarge the scope of study into new disease areas, like immuno-oncology or aging and regenerative medicine.

Better patient outcomes

• Novartis is working with other healthcare providers or IT companies in order to develop services and new technologies that will increase their core products' value and benefits. The main goal is to achieve effective outcomes for patients and providers, such as an improved cost-effectiveness of high quality products and ensuring a longer life expectancy.

Lead in growing areas of healthcare

• Another significant mission for Novartis is to reach unmet medical needs and to make their services and treatments available to most of people.

Therefore, the company aims at discovering innovative products which can make a real difference in emerging countries like Asia, Africa and Latin America, where the demand for high quality medicines has increased.

Moreover, Novartis modified its portfolio in such direction focusing on patented pharmaceutical, generic medicines and eye care.

2.4 SWOT Analysis STRENGTHS

WEAKNESSES

- International presence in more thn 140 countries - More than 120.000 employees - Wide product range--> excellent product portfolio - Good reputation - Introduction of several new medicines to cure different diseases - Among the largest companies in biotech field (at 4th place worldwide after being overtaken by Pfizer) - Huge investment in R&D, especially oncology - Effective M&A ( with GSK oncology products)

- Problems in advertising products - Patent law issues in India - Damaged reputation after problems with vaccines and due to charges for sexual and gender discrimination in 2010 and 2015 - Failure in positioning in the diabetes market due to problem of Galvus drug

SWOT OPPORTUNITIES

THREATS - Take leverage of its core resources and expertise to create new solutions and expand worldwide - Opportunity of revenue growth in the vaccine and genrics market (thanks to Sandoz) - Expansion of research since R&D is very effective and it gains increased investments

- Technology obsolence - Severe competition with more than 200 players in the pharmaceutical market

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80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0

Revenues USD milion

USD milion

3. Financial statement analysis EBIT

18.000 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0

2011 2012 2013 2014 2015 Novartis 59.375 57.561 58.831 53.634 50.387

2011 2012 2013 2014 Novartis 10.998 11.511 10.910 11.089

8.977

Bayer

48.834 49.147 51.286 52.728 49.439

Bayer

5.547

6.881

6.670

Pfizer

67.425 58.986 51.584 49.605 48.851

Pfizer

12.762 12.080 15.716 12.240

8.965

4.895

6.301

2015

Figure 4: revenues and EBIT

In pharmaceutical and drug industry Novartis plays a key role. Its revenues are around 50 USD billion, similar to its competitors Bayer and Pfizer.

Novartis can constantly guarantee high profits with an EBIT around 10 billion USD in the past 5 years, although in 2015 it suffered a -19% dropping to 8,9 billion USD. Pfizer and Bayer are profitable too: Pfizer shows an inconstant trend but always comparable to Novartis while Bayer is constantly improving its ability to generate profit and is reducing the gap between itself and the others.

The average ROE in pharmaceutical and drug

35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00%

industry is around 15%.

Novartis has maintained a stable ROE in 2011-2014 around 13-14% but in the last year (2015) it

ROE

suddenly rose to 23% due to a divestment gain of

2011 2012 2013 2014 2015 Novartis 14,02% 13,90% 12,48% 14,51% 23,07%

13,3 USD billion from discontinued operations. Not

Bayer

12,83% 13,44% 15,33% 17,03% 16,11%

Pfizer

12,11% 17,84% 28,72% 12,75% 10,71%

considering discounted operations, Novartis in 2015

Figure 5: Return On Equity

would have a ROE of 9,11% instead of 23%.

Bayer, on the other hand, has kept a semi-steady ROE in a slow growth around 15%, having a lower net profit but also a lower equity about 50% of Novartis and Pfizer. Pfizer, the big US competitor has a similar ROE between 10% and 15%, aside in the 2013 where it peaked a ROE of 28% due to divestments gains.

The Net Profit Margin has a similar trend to ROE, and it is too affected by the frequent disposals in the pharma industry. Since all the companies considered have comparable revenues, the Net Profit Trend has nearly the same trend of the net income. Novartis in the previous years (2011-2014) had an average NPM of 16% and in the last one (2015) it climbed suddenly to 35% for disposals’ pre-tax gains.

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Bayer always had a lower level of margins, around 7%, but it is continuously growing it margins bringing them from 6,6% in 2011 to 8,85% in 2015% mainly reducing its costs of goods sold. Pfizer has a highly unsteady record of net profit margin, with a peak of 42% in 2013 (due to its pre-tax gain from disposals).

Now it is coming back to an average value around 15%.

35,00%

Considering the relevance of divestments and transactions

30,00%

in this industry in recent years, EBIT margin seems a

25,00%

good indicator for considering and comparing companies because of its operational nature.

EBIT Margin

20,00% 15,00% 10,00%

Novartis and Pfizer have had in last years an advantage of ~10% EBIT margin over Bayer. In 2013 Pfizer had a peak of EBIT margin to 30% mainly due to a combination of litigation settlement and gains from disposals recorded in

5,00% 0,00%

2011

2012

2013

2014

2015

Novartis 18,52% 20,00% 18,54% 20,68% 17,82% Bayer

11,36% 9,96% 12,29% 13,05% 13,49%

Pfizer

18,93% 20,48% 30,47% 24,67% 18,35% Figure 6: EBIT margin

Other Deductions-Net.

In recent years Bayer is constantly improving its operational ability and has reduced its gap to 5%.

NIC Equity Financial liabilities

Novartis Bayer

Pfizer

▲▲ ▲▲ ↔

▼▼ ▼▼ ↔

▲ ▲ ▲▲

The net invested capital, calculated as the sum of equity and financial liabilities, is very different among the companies considered. The graph presents that these

companies are in different phases: Novartis is changing, Bayer is growing, Pfizer is declining.

Novartis has increased its equity in order to sustain its new focused strategy. Bayer is investing increasing equity and especially debt to become bigger and more efficient. On the other hand, Pfizer has decreased its equity and is in a declining phase.

Equity Financial liabilities NIC

Equity Financial liabilities NIC

Equity Financial liabilities NIC

NOVARTIS 2013 2014

Novartis shows an increasing trend, which raised the

2011

2012

2015

65.940

69.219

74.472

70.844

77.122

NIC up to 99.053 USD million in 2015 (+15% from

20.229

19.726

18.018

20.411

21.931

2011) through a growing in equity reserves, while the

86.169

88.945

92.490

91.255

99.053

liabilities oscillate around 20.000 USD million.

2011

2012

BAYER 2013

2014

2015

25.763 15.614

22.953 11.783

26.570 11.534

25.788 27.863

27.156 21.274

Pfizer’s one, which shows an opposite trend, starting in

41.377

34.736

38.104

53.651

48.430

companies’ ones, to go down of some 14,5% in 2015.

This variation brought the NIC value close to the

2011 from a value sharply higher than the other

2011

2012

PFIZER 2013

2014

2015

82.621 38.949

81.678 37.460

76.620 36.489

71.622 36.682

64.998 38.978

Novartis, also in this case the value of liabilities is

121.570

119.138

113.109

108.304

103.976

variation in equity, in particular in treasury stocks.

Although Pfizer has more financial debt than

Figure 7: Net Invested Capital

quite stable, and the variation in NIC is due to

Bayer has a lower and fluctuating NIC (40% of

Novartis and Pfizer), because of significant variations in debt, which in 2014 was doubled for the 9

acquisitions of new businesses and related patents. Bayer has the highest ROI because of its low NIC. Novartis is not in a bad position, but its ROI has a negative trend, particularly in 2015, when not only the NIC has augmented, but also EBIT fell down of 19% from the previous year, mainly because of the amortization of the new oncology assets acquired from GSK and the decrease in sales. The reduction in sales

18,00% 16,00% 14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00%

seems to be a bad trend for Novartis (but also for Pfizer), even if it could be due also to currency fluctuation. This trend doesn’t seem to be a big issue for Bayer instead, which has a slightly increasing value, dropping just a little in the last year. As a consequence of low Bayer’s NIC has an exceptional sales turnover: it can repay more than 100% of the NIC with its revenues.

ROI

201 1

201 2

201 3

201 4

201 5

Novartis 12,76% 12,94% 11,79% 11,84% 9,06%

A remarkable performance that is not achieved by Novartis, and even less by Pfizer.

Bayer

13,41% 14,09% 16,54% 12,82% 13,77%

Pfizer

10,50% 10,14% 13,89% 11,30% 8,62% Figure 8: Return On Investments

SALES TURNOVER Novartis Bayer Pfizer

2011

2012

2013

2014

2015

68,90% 118,02% 55,46%

64,71% 141,49% 49,51%

63,61% 134,59% 45,60%

58,77% 98,28% 45,80%

50,87% 102,08% 46,98%

Figure 9: sales turnover

D/E

1,20

After the analysis of profitability, we can focus our attention on the debt situation of Novartis and its

1,00

competitors. Novartis, compared with Bayer and

0,80

Pfizer, is the only company that has a total equity

0,60

higher than total liabilities, this means that, from

0,40

debt-holders prospective, Novartis is one of the least

0,20 0,00

dangerous companies in this sector. In the debt to 2011

2012

2013

2014

2015

Novartis

0,31

0,28

0,24

0,29

0,28

Bayer

0,61

0,51

0,43

1,08

0,78

Pfizer

0,47

0,46

0,48

0,51

0,60

equity ratio (considering only financial debt) as graph shows, from 2011 to 2015 Novartis has slight variations and it is settled around the value of 0,3.

Figure 10: Debt to Equity

Pfizer’s debt to equity ratio is always above Novartis’s one and it is slightly increasing from 0,47 in 2013 to 0,6 in 2015. It is mainly due to a decrease of total equity (-17,88%) during those three years. Bayer debt to equity ratio is the highest one but is also highly inconstant due to its fluctuating debt in recent years and low equity. In 2014 Bayer’s non-current debt tripled to 23 billion USD. After this analysis, it is not really hard to say that Novartis is in a very good position by the debt-holders point of view. Also other indicators show that Novartis’s debt state is great, such as interest coverage ratio and cost of debt.

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Novartis’ ICR level was always around 17, except in the

ICR

last years when it decreased to 13,90 in 2015 due to EBIT

25,00

decrement. This value is really high and it means that

20,00

Novartis can repay 14 times the financial expense of the

15,00

year with the EBIT of that year.

10,00

On the other hand, Bayer is in a more critical situation: its

5,00

ICR is around 3 or 4 in a slightly positive trend, still major

0,00

2011 2012 2013 2014 2015 Novartis 17,18 19,38 17,91 16,60 13,90

than 1,5 and 2,5 but much lower than Novartis’ one.

Bayer

3,13

3,39

4,49

4,12

4,57

Pfizer’s situation is in the middle: the value was around 5

Pfizer

5,20

6,25

8,07

6,71

5,82

or 6 for all the period, except in 2013 when there was a

Figure 11: Interest Coverage Ratio

peak at 8,07; it is a good result, but still far away from

Novartis. Finally, also the cost of debt of Novartis is the best in the sector: around 3%. Pfizer started from an higher value (4,5%), but at the end of the period reached Novartis with a cost of debt of 3,08%, while Bayer’s one was more or less 12% in the first 3 years and only 6% in the last 2 years, but still higher than Novartis’ one.

Another interesting factor is the tax situation of the companies in the pharm-sector and the Effective Tax rate. Novartis’s percentage of taxes paid is a lot inferior compared with others actors: it is headquartered in Switzerland, where the taxation imposed by the government is one of the most advantageous in the world.

Its rate is around 14%, nearly 10% lower than Bayer and Pfizer.

Current ratio

Now we move to the liquidity analysis using 3,00

liquidity ratios that measure the company's ability to

2,50

pay debt obligations and its margin of safety.

2,00

Looking at the current ratio, we can see that

1,50

Novartis’s performance is the worst one, in fact its

1,00 0,50

current ratio is mostly under Bayer’s and Pfizer’s

0,00

lines. In 2015 it passed below 1 because of a relevant cash reduction of 64% of nearly 8.4 USD billion and the disposal of current assets from

2011

2012

2013

2014

2015

Novartis

1,04

1,16

1,16

1,39

0,96

Bayer

1,50

1,45

1,36

1,43

1,40

Pfizer

2,06

2,15

2,41

2,67

1,49

Figure 12: Current Ratio

discontinued operations of 6 USD billions.

While Pfizer’s current ratio has always been over 2 with peak in 2014 (2,67), in 2015 it dropped to 1,49 due a doubling in short-term borrowings (+ 5 USD billion) and a reduction of 40% in short-term investments (12 USD billion).Bayer has stable values of current assets and liabilities and its current ratio is constantly around 1,4. The quick ratio graph trend is very similar to the current ratio’s one. We can only notice that Pfizer is still higher than 1, while both Bayer and Novartis are around 0,6-0,8.

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Looking at these three companies’ annual report, it is possible to understand why the Novartis’s performance, comparing to the other ones, is the worst one: Bayer’s current ratio is higher than Novartis’s one because, even if these two companies have similar current assets, Bayer’s current liabilities are half Novartis’s ones. On the other hand, Novartis and Pfizer have the similar current liabilities, but the Pfizer’s current assets are about twice the Novartis’s ones.

It is now time to focus on the cash situations encountered in these three big corporations.

Starting from cash from operating activities, we

Cash from operating activities 2011 2012 2013 2014

2015 Novartis 14.309 14.194 13.174 13.897 11.897 6.765 5.602 6.604 7.411 7.353 Bayer 20.240 17.054 17.765 16.883 14.512 Pfizer

may notice that Novartis has very stable results with just slights fluctuations, in particular in 2015 because of the lower income. On the other hand, Bayer has the

lowest performances in operating cash inflows, but, despite being lower they are pretty stable. As for Pfizer, the company has the best results in terms of operating cash, starting with the highest operating cash inflow of 20.240 USD million and closing the five-year period with 14.512 USD million, which is also very high with respect to the competitors, but still it Cash from investing activities 2011 2012 2013 2014 Novartis Bayer Pfizer

-792 -5.201 2.200

-5.675 -1.011 6.154

-3.352 -3.296 -10.625

2015

881 -19.820 -5.654

-10.784 -2.948 -2.980

denotes a decrease in net income.

An interesting thing is that Pfizer, although is the one with the highest operating cash inflow, does

not invest so much capital. It invests around 1-1,5 USD billion in Production Plant and equipment and intangible assets while Bayer and Novartis spend around 2-3,5 USD billion.

As a matter of fact, its net cash used in investing activities is not relevant: especially in 2011 and 2012, Pfizer invested so little that the ending balance is positive. In 2013 it spent a great amount of cash in investments, probably to compensate the previous years. Bayer is the one investing more continuously, except for a peak in 2014 of 19.820 USD millions, which is basically five times the usual amount. Also, Novartis has a quite stable investment approach and it invested as well a greater amount reaching 10.784 USD million in 2015.

Cash from financing activities 2011 2012 2013 2014 Novartis Bayer Pfizer

-15.024 -2.959 -20.607

-6.675 -4.675 -16.486

-8.769 -3.238 -14.975

-8.147 12.418 -9.986

After analyzing the cash used for investing 2015 -9.176 -4.241 -10.233

activities, we look for the cash of financing activities and we can first understand one reason for the lack of investments in the first

two year of Pfizer. The company, in fact, gave out huge amounts of cash for financing activities, so it did not have the possibility to spend on two fronts. Novartis in also very generous with its investors, paying out

Novartis Bayer Pfizer

Cash and cash equivalents 2011 2012 2013 2014

2015

3.709 2.366 3.539

4.674 1.984 3.641

5.552 2.095 10.389

6.687 2.123 2.183

13.023 2.364 3.343

always almost the same amount of dividends and

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therefore presenting a very stable final balance for cash used in financing activities. On the other hand, Bayer pays the lowest dividends and with

issuance of debt, it ends up with the lower loss of cash used for financing.

Summing up, the cash situation is almost linear for all three companies, but mostly for Bayer, which has also the lowest results. Novartis and Pfizer, instead, present higher final results, especially in 2012 for Pfizer and in 2014 for Novartis.

Having taken into considerations the cash tendencies of the three firms, we shall discuss deeper their ability to reach certain performances. Therefore, it is important to analyze cash ratios, which do not depend on managerial choices and decisions and therefore they are more reliable as measures. Moreover, they do not include depreciations or amortizations which are not associated to cash outflows.

First of all, we start to consider the ability of the company to cover debt in long term with the Cash Flow to

Cash flow to Debt 0,80 0,70 0,60 0,50 0,40 0,30 0,20 0,10 0,00

Debt Ratio. It analyzes whether a firm has enough operating Cash Flow to cover debt liabilities, both current and non current.

For this ratio we seek to obtain a high result, which underlines that the company

2011

2012

2013

2014

2015

is able to support its existing debts. It is

Novartis

0,71

0,72

0,73

0,68

0,54

Bayer

0,43

0,48

0,57

0,27

0,35

the main measure to understand a firm's

Pfizer

0,52

0,46

0,49

0,46

0,37

creditworthiness, but it may not be that accurate for the future since it is

Figure 13: Cash flow to debt

obviously based on past performances and repayment also depends on debts' maturity, which is not taken into account in this indicator. For instance, we may consider Short Term Debt Coverage, which indicates the firm's ability to cover debt in short terms and it is even clearer that Novartis and Bayer are really stable, with low ratios and therefore can meet repayments, while Pfizer is very fluctuating from peaks in 2011 and 2014, followed by a sharp decline.

We may notice that Novartis is the best company with respect to debt repayment: its path is mainly stable and always the highest, around 70%, except for a decrease starting in 2014 due to lower cash flow from operating activities. As for Pfizer, its cash flow-to-debt indicator proves that the firm has kept a very stable ability in repaying debt, although decreasing in 2015 due to a reduction in operating cash flow as well.

Bayer is, instead, the most fluctuating in terms of cash flow to debt. As a matter of fact, it has a peak in 2013 of 57%, thanks to lower total debts.

Nevertheless, already in the following year 2014, the company reaches its lowest percentage of 27% due to an enormous increase in noncurrent financial liabilities. Therefore, we may say that Pfizer is not as reliable in covering its long-term debts as Novartis and Bayer, both of which continue with stable values. Another important indicator is the one measuring the tendency of a company to acquire long term assets, both tangible and intangible: Capital Expenditure Coverage Ratio.

13

So, it analyzes whether the firm has enough operating cash to cover expenses in investments. Usually, we associate a high result in this Capital Expenditure

CAPEX coverage

7,00 6,00 5,00 4,00 3,00 2,00 1,00 0,00

Coverage Ratio with a better performance since it implies that the company is investing in order to grow.

Novartis has the highest values of Capital

2011

2012

2013

2014

2015

Novartis

5,99

4,63

3,69

4,08

3,39

Bayer

3,13

2,35

2,40

2,45

2,74

Pfizer

1,01

0,67

0,40

0,32

0,48

Figure 14: Capex coverage

Expenditure Coverage, although it decreased from 5.99 in 2011 to 3.39 in 2015 due to a decline in cash flow from operating activities and an increase in capital expenditure, especially in the

purchases of intangible assets. Bayer and Pfizer, on the other hand, prove to have a more constant structure, without any peaks or declines. Apart from being stable, though, the values are a bit low, especially Pfizer, whose range goes from 1.01 in 2011 to 0.48 in 2015, which proves an incredible difference from the leading Novartis. This is peculiar since Pfizer's operating cash flow is really high, but the company employs a greater amount of capital especially in short term investments, which by far overtakes operating cash inflow.

Therefore, we may say that Novartis is more able to sustain its capital expenditure and it is more careful in not exaggerating in expenses. Instead, Pfizer is more interested in investing greater amounts even though it may be more than what earned.

4. Value drivers analysis A value driver analysis should start from company’s strategy and objectives in order to have a complete and useful vision of the company.

As we have seen before, Novartis’s strategy is based on three pillars:  Science-based

innovation: research for finding new drugs for unmet medical needs;

 Better patient

outcomes: provide positive real-world outcomes for patients and healthcare providers;

 Lead

in growing areas of healthcare: developing both innovative products in growing areas of

healthcare and expanding their presence in emerging markets.

Therefore, we can identify the following critical success factors:  Global

scale and volumes – necessary to be competitive in emerging markets and reach a great number

of patients and healthcare providers while sustaining high R&D investments;  Innovation

capability – essential for being the first in proposing drugs for unmet medical needs and

improving and differentiating existing ones;  Brand

recognition – relevant for being a trusted supplier of healthcare providers and for final patients

with over-the-counter products.

14

For each critical success factor we can identify several useful capabilities and skills as following: Global scale and volumes Presence in emerging countries

Innovation capability R&D Product Development Coordination Market penetration

Brand recognition Sales and marketing Responsible business CRM

4.1 Value drivers’ indicators They are useful for having early signals of company’s health and value and therefore for decision making processes. Previously we have described company’s strategy and objectives and some possible related indicators, we can now go beyond looking at the overall company while keeping an eye on its objectives.

Then we have decided to organize our indicators with a traditional balanced scorecard framework with the following areas: financial, internal, customers, learning & growth and sustainability.

4.1.1 Financial indicators – “We aspire to be the world’s most respected and successful healthcare company” Financial indicators are useful to have an overview of how the company is seen by shareholders’ and investors, but do not directly provide early signals to top management as support their decisions. Some relevant indicators can be: -EBIT margin -Return On Investment -Cash from operating activities -Market share in established and emerging countries EBIT margin and ROI are reliable data about Novartis’s profitability and its ability to generate profits from the invested capital. Cash is also important in controlling if Novartis is able to really cash.

Others relevant financial data are Novartis’ market share in established and emerging countries that provide an overview of its position in the industry.

4.1.2 Internal indicators – “We strive to ensure the rights, safety and well-being of all participants” Now we move on the Internal Perspective that is focused on all the activities and key processes required in order for the company to excel at providing the value expected by the customers. These processes can manage the intervention affecting financial outcomes.

Internal processes can be grouped into: 

Employees Management: emphasizing safe behaviour support an integrated approach to personal health and safety;



Operations Management: improving asset utilization, supply chain management, etc.



Research and Development Management: focusing on the importance to invest in researchers, scientists and PhDs.

15

Employees Management: Novartis strongly believes that employees’ accidents at work rate and employee’s lost time injury and illness rate are related to the quality of working conditions and workers’ knowledge and competences. Therefore, the company is investing in a safety culture with the goal to reduce accidents and incidents at work. Novartis struggles to create a safety culture including: continuous improvement, adaptability, problem solving and involvement and accountability. It is trying to reduce the total rate of injury, illness and death cases (with and without lost work time) in order to improve employees’ satisfaction and market image: each of these events has negative impact not only on workers’ lives but on the company as well that could have negative economical and image consequences.

Measurement: 

Ranking Top Employer ďƒ REVENUE DRIVER: This indicator is defined by organizations outside the company, but it has important consequences on the company itself. It considers many company’s parameters has employees’ turnover, employees’ satisfaction and company yearly results. If the company is in a high-ranking position, it can usually easier attract motivated and talented employees.

They are an added value for the company since motivated employees achieve more and suitable results than the other ones. In this way, they can impact company’s revenue and so “Ranking top employer� is a revenue driver indicator.



đ?‘łđ?’?đ?’”đ?’• đ?’•đ?’Šđ?’Žđ?’† đ?’Šđ?’?đ?’‹đ?’–đ?’“đ?’š đ?’‚đ?’?đ?’… đ?’Šđ?’?đ?’?đ?’?đ?’†đ?’”đ?’” đ?’“đ?’‚đ?’•đ?’† (đ?‘łđ?‘ťđ?‘°đ?‘š) = % đ?’•đ?’Šđ?’Žđ?’† đ?’?đ?’?đ?’”đ?’• đ?’‡đ?’?đ?’“ đ?’Šđ?’?đ?’‹đ?’–đ?’“đ?’Šđ?’†đ?’” đ?’‚đ?’?đ?’… đ?’Šđ?’?đ?’?đ?’?đ?’†đ?’”đ?’” ďƒ COST DRIVER: It is calculated as the rate of absenteeism cases due to occupational injury and illness. LTIR was further reduced to 0.11, from 0.12 in 2014; this represents an 8.3% reduction with a total of 142 lost time cases (including Novartis associates and 3rd party personnel). Their goal is to continue in decreasing the total rate of injury and illness case without a precise value to be reached: they want to reduce it as much as possible. This is a cost driver indicator because in this way they will reduce direct and indirect costs related to absenteeism and accidents at work.

Operations Management: In the past few years, Novartis has rid itself of more than two dozens manufacturing sites. Nowadays, it is organizing what is left into one overreaching operation in order to save money by 2020. Novartis is trying to streamline both R&D and manufacturing in hopes of cutting out $1 billion in extra costs in the next three years. One of Novartis’s objectives is to move manufacturing operations to centralization using a single technical operations unit. This aims at optimizing capacity planning and reducing cost through simplification, standardization and external spend optimization. So, the company expects to improve the ability to develop next generation technologies, implement continuous manufacturing and share best practices across divisions. In order to quantify this characteristic we can consider the two following cost drivers indicators.

Measurement: 

Saturation machineďƒ COST DRIVERS: It calculates the actual time of use of the machine comparing to the time in which it is available.

16

Novartis should try to increase as much as possible the saturation of its own machines in order to reduce cost in buying new machines and employees’ costs. It will improve its own performances. đ?‘ đ?‘˘đ?‘šđ?‘?đ?‘’đ?‘&#x; đ?‘œđ?‘“ đ?‘Ąđ?‘Žđ?‘?đ?‘™đ?‘’đ?‘ đ?‘’đ?‘“đ?‘“đ?‘’đ?‘?đ?‘Ąđ?‘–đ?‘Łđ?‘’đ?‘™đ?‘Ś đ?‘?đ?‘&#x;đ?‘œđ?‘‘đ?‘˘đ?‘?đ?‘’đ?‘‘

Saturation of machine = đ?‘€đ?‘Žđ?‘Ľđ?‘–đ?‘šđ?‘˘đ?‘š đ?‘›đ?‘˘đ?‘šđ?‘?đ?‘’đ?‘&#x; đ?‘œđ?‘“ đ?‘Ąđ?‘Žđ?‘?đ?‘™đ?‘’đ?‘Ąđ?‘ đ?‘Ąâ„Žđ?‘’đ?‘œđ?‘&#x;đ?‘’đ?‘Ąđ?‘–đ?‘?đ?‘Žđ?‘™đ?‘™đ?‘Ś đ?‘?đ?‘&#x;đ?‘œđ?‘‘đ?‘˘đ?‘?đ?‘’đ?‘‘ 

Cycle timeďƒ COST DRIVERS: It is the time required to do one repetition of any particular task typically measured from the starting point of one tablet’s processing in a specified machine (or operation) until the start of another similar tablet’s processing in the same machine (or process). By reducing cycle time of each product, Novartis can produce more products using the same machine. It would require fewer machines to produce the same tablets quantities and so it would reduce cost.

Novartis has to minimize products’ cycle time.

Cycle time =

đ?‘ đ?‘˘đ?‘šđ?‘?đ?‘’đ?‘&#x; đ?‘œđ?‘“ đ?‘?đ?‘&#x;đ?‘œđ?‘‘đ?‘˘đ?‘?đ?‘Ąđ?‘–đ?‘œđ?‘› â„Žđ?‘œđ?‘˘đ?‘&#x;đ?‘ đ?‘ đ?‘˘đ?‘šđ?‘?đ?‘’đ?‘&#x; đ?‘œđ?‘“ đ?‘Žđ?‘Łđ?‘Žđ?‘–đ?‘™đ?‘Žđ?‘?đ?‘™đ?‘’ â„Žđ?‘œđ?‘˘đ?‘&#x;đ?‘

Research and Development: A company, which wants to stay competitive on the market as Novartis does, has to invest continuously in research and development that are the keys for present and future successes. In order to conduct focused and efficient researches, the company has to invest on experts and qualified people who can provide new and more effective solutions. Furthermore, it is important a continuous reduction of side effects.

Measurement: In this case, the number of researchers, scientists and PhDs are good measurements. 

Number of researchers and scientistsďƒ REVENUE DRIVER: Novartis has more than 6000 scientists and physicians focused on biomedical research and more than 100 researchers for tropical diseases. The research areas are multiple, among which there are oncology, infectious diseases and musculoskeletal diseases. Novartis has to continue to invest in these skilled employees and to increase the number of scientists and researchers in the near future in order to maintain its competitive market position. Researchers and scientists play an important role in achieving this goal and for this reason the number of researchers and scientists is a revenue driver indicator.



Number of PhDs recruitedďƒ REVENUE DRIVER: PhDs bring a breath of newness in research and development of new drugs and can improve the performances of existing products; in fact, they usually know new techniques and new approaches to work because university researches are innovative and strongly open minded oriented. For this reason, even if PhDs have lower experiences than other researchers and scientists, they are an added value for the company: their new products can raise company sales, so the number of PhDs recruited is a revenue driver indicator. Therefore, Novartis should increase hiring of these employees.

17

4.1.3 Learning And Growth – “New actions to strengthen healthcare systems in both developing and advanced economies�

In the pharmaceutical market there is a very high stress on research and development; innovation and learning processes are the heart of the future competitiveness of the company, but that’s not all. In fact these factors alone are not effective; speed is an important key for the success, given the significant role of patents and the long journey undertaken by drugs to be approved and commercialized.

Time To Marketďƒ REVENUE DRIVER: Being the first to meet medical needs selling new drugs is certainly an advantage; how big it is depends on the market context. A study conducted by Myoung Cha and Flora Yu (2014) shows that the first mover in pharma industry has a very significant advantage in terms of market share if it is a large company, like Novartis, but there are chances to have fair market share for fast followers as well. Anyway, if the lead time for development is particularly long and the market is not so crowded, timing is a successful performance, and consequently a lower value of this indicator may be a driver for a future competitive advantage. Time to market can be calculated as the time elapsing between the qualification of the molecular entities and the submission of the drug. It should be compared with the past average time for drugs belonging to the same therapeutic area and with competitors’ values, if possible, to set reasonable and strategic goals.

N. Countries covered

ďƒ REVENUE DRIVER: It is a synthetic measure of the capability of the company of being present in many markets, providing access to healthcare with a global scale overcoming geographical differences. This enlarges the customer base and therefore increases sales. đ?‘šđ?’†đ?’?đ?’†đ?’—đ?’‚đ?’?đ?’„đ?’† đ?‘śđ?’‡ đ?‘Źđ?’Žđ?’†đ?’“đ?’ˆđ?’Šđ?’?đ?’ˆ đ?‘´đ?’‚đ?’“đ?’Œđ?’†đ?’•đ?’” =

đ?‘…đ?‘’đ?‘Łđ?‘’đ?‘›đ?‘˘đ?‘’đ?‘ đ?‘–đ?‘› đ?‘’đ?‘šđ?‘’đ?‘&#x;đ?‘”đ?‘–đ?‘›đ?‘” đ?‘šđ?‘Žđ?‘&#x;đ?‘˜đ?‘’đ?‘Ąđ?‘ đ?‘‡đ?‘œđ?‘Ąđ?‘Žđ?‘™ đ?‘…đ?‘’đ?‘Łđ?‘’đ?‘›đ?‘˘đ?‘’đ?‘

ďƒ REVENUE DRIVER Focusing the business on growing areas of unmet medical needs is only a part of the innovation strategy of Novartis. An important role is played by the geographical markets in which the company put its sales effort. Europe and United States account for 70% of the revenues while the remaining 30% is due to sales in Canada and Latin America, Africa, Asia and Australasia. Novartis believes in particular that a key aspect is to provide medicine access in developing countries, which have a rapidly growing pharmaceutical market, and it has started numerous projects and programs in these regions. So it is important to identify the key emerging markets (e.g. Brazil, India‌) and measure the ratio between the revenues coming from them and the total revenues. đ?‘šđ?’†đ?’•đ?’–đ?’“đ?’? đ?‘śđ?’? đ?‘šđ?’†đ?’”đ?’†đ?’‚đ?’“đ?’„đ?’‰ đ?‘¨đ?’?đ?’… đ?‘Ťđ?’†đ?’—đ?’†đ?’?đ?’?đ?’‘đ?’Žđ?’†đ?’?đ?’• đ?‘Źđ?’™đ?’‘đ?’†đ?’?đ?’”đ?’†đ?’” =

đ?‘ đ?‘œ. đ?‘œđ?‘“ đ?‘Žđ?‘?đ?‘?đ?‘&#x;đ?‘œđ?‘Łđ?‘Žđ?‘™đ?‘ đ?‘…&đ??ˇ đ?‘–đ?‘›đ?‘Łđ?‘’đ?‘ đ?‘Ąđ?‘šđ?‘’đ?‘›đ?‘Ąđ?‘

ďƒ REVENUE DRIVER: the more approvals you get, the more products you sell on the market. Novartis has the scale to be a leader in innovation investing effectively in new and powerful area of business, achieving best results with low overall costs to better respond to the present and future pressure on health systems. Just in 2015 they spent in R&D 8,9 USD billion (18% of net sales), focusing now on oncology, 18

cardiovascular, eye care, biosimilars and neuroscience and to a lesser extent immune-oncology, aging and regenerative medicine, and infectious diseases. However, the true relevant performance is the efficiency of these investments, which should be measured with a proper indicator. R&D expenses are a risky investment, especially when concentrated in areas with high risk of failure, and therefore have to be kept under control.

A meaningful indicator for this purpose is the number of approvals over the total R&D expenses. Another possible indicator could be one that uses as numerator the number of projects underway adjusted with a probability of success based on historical data or forecasts, but it would be much more subjective. đ?‘Žđ?’“đ?’?đ?’˜đ?’•đ?’‰ đ?‘ˇđ?’“đ?’?đ?’…đ?’–đ?’„đ?’• đ?‘Şđ?’?đ?’?đ?’•đ?’“đ?’Šđ?’ƒđ?’–đ?’•đ?’Šđ?’?đ?’? =

đ?‘…đ?‘’đ?‘Łđ?‘’đ?‘›đ?‘˘đ?‘’đ?‘ đ?‘”đ?‘&#x;đ?‘œđ?‘¤đ?‘Ąâ„Ž đ?‘?đ?‘&#x;đ?‘œđ?‘‘đ?‘˘đ?‘?đ?‘Ąđ?‘ đ?‘…đ?‘’đ?‘Łđ?‘’đ?‘›đ?‘˘đ?‘’đ?‘

Growth products are defined as products launched within the preceding five years, or products with exclusivity in key markets (EU, US, Japan) for at least the next four years (except for Sandoz products, which were included only if launched within the preceding two years). We can measure how effective the portfolio modification is, which was clearly announced in the company’s strategy and carried out through recent years, computing the impact of these products as a percentage of net sales.

4.1.4 Customers' Perspective - "We are inspired by patients" Moving to customers' perspective, we may underline how Novartis focuses on Customer Relationship Managementďƒ REVENUE DRIVERS: the better the brand image is, the more customers are attracted.

Customers' Satisfaction And Loyalty: Novartis pays lots of attention to how customers' perceive the company and whether they are satisfied or they could improve in some areas. We believe that the most honest and reliable measure of clients' satisfaction is a survey addressed to physicians and doctors. Answers will then be evaluated and submitted in a simple but effective ratio between the number of positive outcomes over the total interviewees, resulting in the degree of satisfaction of customers and retailer.

We conducted our own survey questioning mainly family doctors and physicians about their level of satisfaction of Novartis and their insights on the company. The sample we analyzed is narrow since taking into account just several areas in the northern part of Italy (Lombardia, Veneto, Emilia Romagna, Piemonte) but the company should extend it to a global scale.

The main opinion that emerged among doctors is that Novartis is an excellent and reliable company, whose brand reputation is very strong but it is considered mostly equivalent to other competitors' brands, like Pfizer and Bayer. As for the marketing and drugs' promotion, the general idea is that usually Novartis sales representatives are more prepared and more valid than other brands' ones. Moreover, we asked whether doctors are more inclined to prescribe Novartis-branded products or their equivalent generics. It came up that most of the interviewed doctors tend to prescribe a branded medicine because they rely more on the assistance and professionalism of big well-known company.

Moreover, they are aware that the patient himself usually feels "safer" with famous drugs. It also emerged, that doctors tend to rely more on Novartis products for cardiological treatments and respiratory diseases.

19

As well as doctors, physicians survey's results recognize Novartis's strength as a brand and as market leader.

An important aspect of drugstores is that Novartis is more involved in the OTC (Over The Counter) market, while probably Pfizer is stronger in prescribed medicines.

Moreover, they underline how the fidelity program is truly working since clients trust the brand and physicians cannot convince them to get the same drug, but generic. Therefore, loyalty to the brand is certainly a well-achieved point.

Moran Brand Equity Index: As we have pointed out in the satisfaction analysis, brand is a fundamental aspect of a company since it influences a lot customers' perception. We decided to apply the Moran Brand index which stresses out how much the brand is worth. It consists of three dimensions: 

Effective Market Share, which is the sum of weighted market shares in each market segment the company operates in. In this case we take into account: đ?‘†đ?‘’đ?‘”đ?‘šđ?‘’đ?‘›đ?‘Ą đ?‘šđ?‘Žđ?‘&#x;đ?‘˜đ?‘’đ?‘Ą đ?‘ â„Žđ?‘Žđ?‘&#x;đ?‘’ =

(đ?‘ đ?‘’đ?‘Ą đ?‘ đ?‘Žđ?‘™đ?‘’đ?‘ đ?‘œđ?‘“ đ?‘ đ?‘’đ?‘”đ?‘šđ?‘’đ?‘›đ?‘Ą đ?‘–đ?‘› 2015) đ?‘‡đ?‘œđ?‘Ąđ?‘Žđ?‘™ đ?‘ đ?‘Žđ?‘™đ?‘’đ?‘ đ?‘–đ?‘› 2015

As we can see from figure n. 2, Pharmaceutical segment is the most significant, while Sandoz Generics covers just 20%. One assumption, also based on the previous survey, may be that in countries like Italy with a quite functioning health system, customers prefer to buy branded products.

We may therefore deduce that Sandoz Generics is mainly succeeding in emerging countries or also in a giant as USA, which has a very poor health system. 

Relative price is the second element taken into account and it is measured as following: đ?‘…đ?‘’đ?‘™đ?‘Žđ?‘Ąđ?‘–đ?‘Łđ?‘’ đ?‘ƒđ?‘&#x;đ?‘–đ?‘?đ?‘’ =

đ??ľđ?‘&#x;đ?‘Žđ?‘›đ?‘‘ đ?‘ƒđ?‘&#x;đ?‘–đ?‘?đ?‘’ đ??´đ?‘Łđ?‘Žđ?‘&#x;đ?‘Žđ?‘”đ?‘’ đ?‘ƒđ?‘&#x;đ?‘–đ?‘?đ?‘’

It is useful to understand the mark up on products due to the brand. In order to analyze this indicator, we take as an example Novartis well-known product, Voltaren at â‚Ź6 (average value) and we compare it to two other drugs with the same principle but from competitors: Lasonil (Bayer) and Fastum Gel (Menarini),

which

both

costs

more

or

less

â‚Ź4.50.

6

đ?‘…đ?‘ƒ = 4.5 = â‚Ź1.33, which is the mark up just to buy a product branded Novartis. However, Novartis also launched a cheaper product on the market through the Sandoz generics segment, Diclofenac Hexal sold at â‚Ź4.90, which competes in the low price products range. 

Durability of customers, which measures how many customers will rely again on Novartis by acquiring multiple times the product. đ??ˇ=

đ??śđ?‘˘đ?‘ đ?‘Ąđ?‘œđ?‘šđ?‘’đ?‘&#x;đ?‘ đ?‘?đ?‘˘đ?‘Śđ?‘–đ?‘›đ?‘” đ?‘ đ?‘œđ?‘Łđ?‘Žđ?‘&#x;đ?‘Ąđ?‘–đ?‘ đ?‘?đ?‘&#x;đ?‘œđ?‘‘đ?‘˘đ?‘?đ?‘Ąđ?‘ đ?‘ đ?‘’đ?‘Łđ?‘’đ?‘&#x;đ?‘Žđ?‘™ đ?‘Ąđ?‘–đ?‘šđ?‘’đ?‘ đ?‘‡đ?‘œđ?‘Ąđ?‘Žđ?‘™ đ?‘›đ?‘˘đ?‘šđ?‘?đ?‘’đ?‘&#x; đ?‘œđ?‘“ đ?‘?đ?‘˘đ?‘ đ?‘Ąđ?‘œđ?‘šđ?‘’đ?‘&#x;

As for this last indicator, it is difficult to obtain the numerator data, so we suggest that the company starts making partnership with pharmacies in order to receive patients’ data and orders. Anyway, as 20

we have addressed earlier through the survey, we may assume that customers are very loyal to Novartis and they usually stick to the product, unless of course due to side effects.

4.1.5 Sustainability Perspective – “We strive to be a leader in all aspects of health, safety and environmental protection�

A good sustainability policy is important for a pharmaceutical company because it is useful to increase company’s image and value. Customers, governments and healthcare providers pay more attention to companies’ environmental footprint. Novartis focuses on four main areas of sustainability: ď‚&#x; Materials ď‚&#x; Energy ď‚&#x; Water

and waste: establish closed materials loops recycling materials and reducing waste

and climate: reduce gas emissions by increasing energy efficiency and renewable energy usage

and micro-pollutants: minimize their water footprint along the entire materials supply chain, and

avoid potential risks related to pharmaceuticals reaching the natural environment. ď‚&#x; Environmental

sustainability management: minimize the environmental impact of its products over

the entire life cycle. e.g. sustainable packaging solutions guaranteed savings amounted to USD 2.7 million; 572 tons of materials reduced (cardboard, plastic, metals); and more than 130t CO2e of GHG emissions avoided.

Measurement: đ???đ??žđ??Ťđ??œđ??žđ??§đ??­đ??šđ?? đ??ž đ??Žđ??&#x; đ??Œđ??šđ??­đ??žđ??Ťđ??˘đ??šđ??Ľđ??Ź đ??”đ??Źđ??žđ??? đ??“đ??Ąđ??šđ??­ đ??€đ??Ťđ??ž đ??‘đ??žđ??œđ??˛đ??œđ??Ľđ??žđ??? đ??ˆđ??§đ??Šđ??Žđ??­ đ??Œđ??šđ??­đ??žđ??Ťđ??˘đ??šđ??Ľđ??Ź =

Materials recycled Materials used

ďƒ COST / REVENUE DRIVER: you reduce raw materials purchasing costs, while improving company's image by promoting environmental sustainability.

For example at the five chemical operations plants of the Novartis Pharmaceuticals Division, 55.4% of the solvents used are from recycled input materials.

Novartis is installing waste-segregation programs at many sites that enable better use of recycling routes for materials such as paper, cardboard, glass and plastics – for example from packaging, offices and production processes. đ??“đ??¨đ??­đ??šđ??Ľ đ??–đ??žđ??˘đ?? đ??Ąđ??­ đ??Žđ??&#x; đ??‡đ??šđ??łđ??šđ??Ťđ???đ??¨đ??Žđ??Ź đ??–đ??šđ??Źđ??­đ??ž [đ??¤đ??­đ??¨đ??§]

ďƒ COST / REVENUE DRIVER: the lower the hazardous waste, the lower the costs of disposal; whereas it still contributes to enhance firm's eco-friendly image.

67% of Novartis’ waste is dangerous, therefore it puts a high priority on reducing the amount of hazardous waste generated and on increasing recycling rates.

Hazardous waste

21

2015 (compared to 2010) TARGET ACHIEVED -10% -21,6%

Revenues đ??„đ??§đ??žđ??Ťđ?? đ??˛ đ??˘đ??§đ??­đ??žđ??§đ??Źđ??˘đ??­đ??˛ = Energy consumption

Energy intensity

2015 (compared to 2010) TARGET ACHIEVED +15% +23%

ďƒ COST DRIVER. Energy intensity is considered a valid indicator to support site energy managers and primarily local management in evaluating energy efficiency. Novartis measures energy consumption in relation to sales, production quantity, number of associates, and indoor area conditioned for specified type of operation. Since 2003, the Novartis Group has successfully introduced energy efficiency targets in all divisions. đ??“đ??¨đ??­đ??šđ??Ľ đ??†đ??Ťđ??žđ??žđ??§đ??Ąđ??¨đ??Žđ??Źđ??ž đ??†đ??šđ??Ź (đ??†đ??‡đ??†) đ??„đ??Śđ??˘đ??Źđ??Źđ??˘đ??¨đ??§ measured in CO2 equivalents

ďƒ REVENUE DRIVER: since you use more sophisticated CO2 reduction processes, it is likely that expenses are higher, but, as for previous indicators, it positively influences customers' perception of the brand. Novartis has reported its GHG emissions in accordance with the World Resources Institute’s and WBCSD’s Greenhouse Gas Protocol for all sites under its operational control since 2005. GHG emissions are divided in 3 different types: direct (combustion processes, vehicles), indirect (purchased energy), other.

Novartis emission are mainly type 1 (40%), and 2 (60%), while type 3 is really low.

As in previous years, the Novartis Group achieved an absolute reduction in total Scope 1 and Scope 2 GHG emissions in 2015.

In 2010, they set targets on total GHG emissions for 2015 and 2020, and now have set new targets for 2020 and 2030. Reduction results were achieved through their comprehensive energy-saving program, as well as increased use and purchase of renewable energy.

Total GHG emissions

2015 (compared to 2008) TARGET ACHIEVED -17% -20,5%

2020 (compared to 2010) -30%

2030 -50%

đ???đ??žđ??Ťđ??œđ??žđ??§đ??­đ??šđ?? đ??ž đ??¨đ??&#x; đ???đ??Ťđ??Žđ?? đ??Ź đ??Ťđ??žđ??Ľđ??žđ??šđ??Źđ??žđ??? đ??˘đ??§ đ??°đ??šđ??­đ??žđ??Ť

ďƒ COST DRIVER: you keep this value low to avoid potential litigation and consequent high fines.

Novartis has a quite constant water usage. More than 98% of all non-contact water used for cooling is released back into the environment, the rest of the cooling water, together with the contact water used in processes, is sent to water treatment plants, accounting for 16% of our water outputs.

One major water-related concern is preventing pharmaceuticals from entering the aquatic environment.

Novartis regularly monitor the levels of active pharmaceutical ingredients in Novartis’ effluents and in the aquatic environment. These levels are below those approved as safe by medical regulatory agencies in particular the total quantity of drug substance released has been reduced to below 0.2%.

22

5. BALANCED SCORECARD

FINANCIAL PERSPECTIVE -EBIT margin -Return On Investment -Cash from operating activities -Market share INTERNAL PERSPECTIVE - TRCR - LTIR - Saturation machine - Cycle time - Number of researchers and scientists - Number of PhDs recruited

CUSTOMERS PERSPECTIVE - Customers' Satisfaction And Loyalty -Effective Market Share - Relative price - Durability

LEARNING & GROWTH PERSPECTIVE - Time To Market - N. Countries covered - Return On Research And Development Expenses - Growth Product Contribution

SUSTAINABILITY PERSPECTIVE - % of materials used that are recycled input materials - Total weight of hazardous waste - Energy intensity - Total greenhouse gas emissions - % of drugs released in water %

6. METHODOLOGY This text aims at analyzing the Novartis company by analyzing both financial and non-financial indicators.

We started by presenting the general context in which pharmaceutical companies have to compete in nowadays and we pointed out two main competitors for Novartis: Bayer and Pfizer. We chose these two firms since Bayer's revenues are really similar to Novartis's ones and Pfizer is the main player in this industry so it makes a great line for comparison. We decided therefore that having a similar company in terms of revenues and sales and having the giant of America pharmacological industry would already give us a great margin to compare and analyze our own Swiss firm.

Later on, we defined Novartis's vision, mission and strategy in order to identify the company's critical success factors. We then started our financial analysis and we chose to study from 2011 to 2015 since the more time we analyzed the more our conclusions are reliable. Moreover, we wanted to include 2012, since it was a challenging year for Novartis due to the vaccines' anomalies that obliged the firm to retire them from the market.

23

At first, we calculated all indicators in order to see which one presented significant fluctuations or more interesting data. We believe that the chosen financial indicators are the ones giving more insights into the company's performances and situations.

We then moved to establish value indicators and we focused our attention to brief description of the Financial area, Internal Processes, Learning and Growth perspective, Customers' one and Sustainability approaches.

We listed the indicators, in our opinion, which suit the best company's goals and which better help Novartis reach and achieve those targets. They are also fundamental to monitor those areas of interest for the firm.

As for the Dashboard, we dwelled upon which scorecard to use and after some discussion we decided to go for the first generation balance scorecard. As a matter of fact, we think that for a pharmaceutical company, a strategy map is too fixed and static. Novartis' strategy, indeed, evolves with respect to actual problems and evolving of diseases. The strategy map is too focused on a foreseeable future which, in our case, is not so clear and determined.

Therefore, balance scorecard seems to us the best choice and, although it usually concentrates too much on past and present performances, we tried to keep an open view on future problems and on future initiatives.

7. CRITICAL ANALYSIS Considering the analysis conducted, Novartis is a profitable company in a good financial position, with low debts compared to its main competitors. Moreover, it is now evolving and facing an internal restructure due to recent disinvestments in some areas and investments in new branches. Nevertheless, Novartis main weakness is low current ratio since current assets have declined in the past years, even though total assets have increased due to significant growth in non current assets.

Our analysis presents several advantages, which can be useful for the company. First, we decided to conduct this study taking into account a wide range of factors in order to have a more complete and detailed overview. We always based our analysis on company’s strategy and mission in order to maintain a future perspective. Furthermore, we decided to study another area in the dashboard: the environment aspect has indeed become a relevant issue for the company.

Another important point in our analysis is that we provided an excellent benchmarking model by comparing Novartis to pharmaceutical industry’s leader, Pfizer, and to Bayer, with similar revenues and size.

On the other side, we must say that this analysis lacks in a few aspects, also due to the limited space available. For instance, single divisions should have been deeper analysed and also we could have taken into account more competitors, like Johnson & Johnson or the other Swiss company, Roche.

As for the survey we conducted, the limited interviewed sample is certainly not sufficient because it doesn’t include different countries, cultures and economic background.

24

Moreover, for future studies it can be interesting to address the risk management of the company, which gives further insights into firm’s performance.

In conclusion, this analysis can be useful for the company to set new targets considering the whole industry and its positioning. Since Alcon division is doing poorly, Novartis should either focus its resources on its performances' improvement or divest. Moreover, it should keep increasing patients' outcomes providing services and technology, for instance apps, through collaboration with IT companies. This partnership is useful to both consumers and healthcare providers, which can deliver a better service.

Since the population segment which is growing faster is the over-60's one, the company should particularly take care of their needs.

Bibliography Performance Measurement and Management for Engineers, M. Arnaboldi, G. Azzone, M. Giorgino 

Novartis website: https://www.novartis.com/  Bayer website: http://www.bayer.com/  Pfizer website: http://www.pfizer.com/      

Top-employer: http://www.top-employers.com/it/certified-top-employers/ Fortune Global 500: http://beta.fortune.com/global500/ PWC pharma insight: http://www.pwc.com/gx/en/pharma-life-sciences/pharma2020/assets/pwc-pharmasuccess-strategies.pdf McKinsey pharma insight: http://www.mckinsey.com/industries/pharmaceuticals-and-medicalproducts/our-insights/a-wake-up-call-for-big-pharma Pharma KPIs: https://opsdog.com/industries/pharmaceuticals/pharmaceuticals-kpis-and-benchmarks Financial Times, Novartis: https://markets.ft.com/data/equities/tearsheet/summary?s=NOVN:VTX

Article about Novartis’ manufacturing: http://www.fiercepharma.com/node/290126  Article about Novartis’ strategy: http://connect.dcat.org/blogs/patricia-van-arnum/2015/06/22/novartisexecutives-outline-strategic-and-cost-savings-initiatives#.WFvV5fnhA2w  Damodaran website: http://people.stern.nyu.edu/adamodar/New_Home_Page/ 

25

EXHIBIT

NOVARTIS FINANCIAL STATEMENTS (values in USD millions) Novartis – Consolidated Balance Sheets USD millions

Assets Non-current assets Property, plant & equipment Goodwill Intangible assets other than goodwill Investments in associated companies Deferred tax assets Financial assets Other non-current assets

Current assets Inventories Trade receivables Marketable securities, commodities, time deposits and derivative financial instruments Cash and cash equivalents Other current assets Assets related to discontinued operations

Equity and liabilities Equity Share capital Treasury shares Reserves Non-controlling interests

Liabilities Non-current liabilities Financial debts Deferred tax liabilities Provisions and other non-current liabilities

Current liabilities Trade payables Financial debts and derivative financial instruments Current income tax liabilities Provisions and other current liabilities Liabilities related to discontinued operations

2011

2012

2013

2014

2015

117.496 124.216 126.254 125.387 131.556 93.412

96.212

95.712

87.826

108.711

15627 29.943 31.969 8.622 5.857 976 418

16.939 31.090 30.331 8.840 7.390 1.117 505

18.197 31.026 27.841 9.225 7.375 1.523 525

15.983 29.311 23.832 8.432 7.994 1.720 554

15.982 31.174 34.217 15.314 8.957 2.466 601

24.084

28.004

30.542

37.561

22.845

5.930 10.323

6.744 10.051

7.267 9.902

6.093 8.275

6.226 8.180

1.366 3.709 2.756 0

2.567 5.552 3.090 0

2.535 6.687 3.392 759

839 13.023 2.530 6.801

773 4.674 2.992 0

117.496 124.216 126.254 125.387 131.556 65.940

69.219

74.472

70.844

77.122

1.016 -121 64.949 96

1.001 -92 68.184 126

1.001 -89 73.431 129

1.001 -103 69.868 78

991 -101 76.156 76

51.556

54.997

51.782

54.543

54.434

28.408

30.946

25.414

27.570

30.726

13.855 6.761 7.792

13.781 7.286 9.879

11.242 6.904 7.268

13.799 6.099 7.672

16.327 6.355 8.044

23.148

24.051

26.368

26.973

23.708

4.989

5.593

6.148

5.419

5.668

6.374 1.706 10.079

5.945 2.070 10.443

6.776 2.459 10.935

6.612 2.076 10.448

5.604 1.717 10.719

0

0

50

2.418

0

2

non-current assets

120000

Other non-current assets

100000

Financial assets

80000

Deferred tax assets

60000

Investments in associated companies

40000

Intangible assets other than goodwill Goodwill

20000 0 2011

Property, plant & equipment 2012

2013

2014

2015

current assets

40.000

Assets related to discontinued operations

35.000

Other current assets

30.000 25.000

Cash and cash equivalents

20.000

Marketable securities, commodities, time deposits and derivative financial instruments

15.000 10.000

Trade receivables

5.000 0 2011

Inventories 2012

2013

2014

2015

non-current liabilities

40.000 30.000

Provisions and other non-current liabilities

20.000

Deferred tax liabilities

10.000 0 2011

Financial debts 2012

2013

2014

2015

3

current liabilities

30.000 25.000

Liabilities related to discontinued operations

20.000

Provisions and other current liabilities

15.000

Current income tax liabilities

10.000

Financial debts and derivative financial instruments

5.000 0 2011

Trade payables 2012

2013

2014

2015

ASSETS

EQUITY & LIABILITIES

140.000 120.000 100.000 80.000 60.000 40.000 20.000 0

140.000 120.000 100.000 80.000 60.000 40.000 20.000 0

2011 2012 2013 2014 2015 Current 24.084 28.004 30.542 37.561 22.845 assets

2011

2012

2013

2014

2015

Current liabilities 23.148 24.051 26.368 26.973 23.708

Noncurrent 93.412 96.212 95.712 87.826 108.711 assets

Non-current liabilities

28.408 30.946 25.414 27.570 30.726

Equity

65.940 69.219 74.472 70.844 77.122

Novartis – Consolidated Statement of Income / Profit & Loss USD millions

2011

2012

2013

2014

2015

Revenues

59.375

57.561

58.831

53.634

50.387

58.566 58.566 0 809

56.673 56.673 0 888

57.920 57.920 0 911

52.419 52.180 239 1.215

49.440 49.414 26 947

18.983 40.392

18.756 38.805

19.608 39.223

17.345 36.289

17.404 32.983

-15.079 -9.583 -2.970 1.354 -3.116 10.998

-14.353 -9.332 -2.937 1.187 -1.859 11.511

-14.549 -9.852 -3.060 1.367 -2.219 10.910

-12.377 -9.086 -2.616 1.391 -2.512 11.089

-11.772 -8.935 -2.475 2.049 -2.873 8.977

528 -751 -2

552 -724 -96

600 -683 -92

1.918 -704 -31

266 -655 -454

10.773

11.243

10.735

12.272

8.134

Taxes

-1.528

-1.625

-1.443

-1.545

-1.106

Net income from continuing operations

9.245

9.618

9.292

10.727

7.028

0

0

0

-447

10.766

Net sales from continuing operations Net sales to third parties from continuing operations Sales to discontinued segments Other revenues

Cost of goods sold Gross profit from continuing operations Marketing & Sales Research & Development General & Administration Other income Other expense Operating income from continuing operations Income from associated companies Interest expense Other financial income and expense

Income before taxes from continuing operations

4

Net income/loss from discontinued operations

Net income

9.245

9.618

9.292

10.280

17.794

Sandoz Alcon Pharmaceuticals 0% Cost of goods

20% Pharmaceuticals 24,1%

40%

60%

80% Sandoz 57,4%

Alcon 52,3%

R&D

23,6%

9,4%

8,4%

Marketing and Sales

25,5%

24,3%

17,1%

Others

1,9%

5,9%

6,4%

EBIT

24,8%

8,1%

10,8%

100%

Sales 70000 60000

USD millions

50000 40000 30000 20000 10000 0

alcon

2011

2012

2013

2014

2015

9958

10225

10496

10827

9812

sandoz

9473

8702

9159

9562

9157

pharmaceuticals

32508

32153

32214

31791

30445

consumer health

4631

3735

4064

4279

vaccines

1996

1858

1987

1537

Operating Income (EBIT)

14000

USD millions

12000 10000 8000 6000 4000 2000 0 -2000

2011

2012

2013

2014

alcon

1472

1465

1232

1597

794

sandoz

1422

1091

1028

1088

1005

pharmaceuticals

8296

9598

9376

8471

7597

consumer health

727

48

178

470

vaccines

-249

-250

-238

-552

5

2015

Novartis – Consolidated Cash Flow Statement

2011 2012 2013 2014

USD millions

Net income from continuing operations Reversal of non-cash items Dividends received from associated companies and others Interest received Interest paid Other financial receipts Other financial payments Taxes paid Cash flows before working capital and provision changes from continuing operations Payments out of provisions and other net cash movements in non-current liabilities Change in net current assets and other operating cash flow items Cash flows from operating activities from continuing operations Cash flows used in operating activities from discontinued operations Total cash flows from operating activities Purchase of property, plant & equipment Proceeds from sales of property, plant & equipment Purchase of intangible assets

2015

9.245 9.300 404 66 -640 0 -47 -2.435

9.618 7.838 426 49 -594 214 -22 -2.022

9.292 7.750 446 40 -609 55 -22 -2.024

10.727 6.725 479 35 -668 553 -24 -2.179

7.028 9.070 432 34 -646 714 -23 -2.454

15.893

15.507

14.928

15.648

14.155

-1.471

-1.173

-1.015

-1.125

-1.207

-113

-140

-739

-625

-863

14.309

14.194

13.174

13.898

12.085 -188 11.897 -2.367 237 -1.138

0 14.309 -2.167 61 -220

14.194 -2.698 92 -370

13.174 -3.064 60 -507

-1 13.897 -2.624 60 -780

643

163

154

246

621

-139 59 -48 5

-180 221 -57 18

-165 315 -39 17

-239 431 -60 2

-264 166 -82 1

-12

0

-52

1.370

Acquisitions of businesses Purchase of marketable securities and commodities Proceeds from sales of marketable securities and commodities Cash flows used in investing activities from continuing operations Cash flows from investing activities from discontinued operations Total cash flows used in/from investing activities

-569 -1.750

-1.741 -1.639

-42 -278

-331 -169

-16.507 -595

3.345

516

249

2.086

262

-792

-5.675

-3.352

-8

-19.666

0 -792

0 -5.675

0 -3.352

889 881

8.882 -10.784

Dividends paid to shareholders of Novartis AG Acquisition of treasury shares Proceeds from exercise options and other treasury share transactions Increase in non-current financial debts

-5.368 -3.628

-6.030 -505

-6.100 -2.930

-6.810 -6.915

-6.643 -6.071

159 281

414 1.979

1.693 93

2.400 6.024

1.581 4.596

Proceeds from sales of intangible assets Purchase of financial assets Proceeds from sales of financial assets Purchase of other non-current assets Proceeds from sales of other non-current assets Divestments/acquisitions of interests in associated companies

6

Repayment of non-current financial debts Change in current financial debts Impact of change in ownership of consolidated entities Proceeds from issuance of share capital to third parties Acquisition of Alcon non controlling interests Dividends paid to non-controlling interests and other financing cash flows Cash flows used in financing activities Net effect of currency translation on cash and cash equivalents Net change in cash and cash equivalents Cash and cash equivalents at January 1 Cash and cash equivalents at December 31

7

-28 -3.054

-704 -1.737

-2.022 596 4

-2.599 -107

-3.086 451

4 -3.187

-6

-203 -15.024

-86 -6.675

-103 -8.769

-140 -8.147

-4 -9.176

-103 -1.610

-1 1.843

82 1.135

-295 6.336

-286 -8.349

5.319 3.709

3.709 5.552

5.552 6.687

6.687 13.023

13.023 4.674

BAYER FINANCIAL STATEMENTS (€ millions) USD/euro

2015 2014 2013 2012 2011 2010 0,94 0,78 0,78 0,81 0,75 0,79

Bayer – Consolidated Balance Sheets € millions

2011

2012

2013

2014

2015

Assets

52.765 32.697 9.160 10.295 9.823

51.336 32.350 9.293 9.464 9.863

51.317 32.289 9.862 8.914 10.015

70.234 48.007 15.347 15.653 11.428

73.917 50.096 16.096 15.178 12.375

319 1.364 425 1.311 20.068 6.368 7.061 2.784 1.628 373 1.770

284 1.324 541 1.581 18.986 6.980 7.431 856 1.648 376 1.695

203 1.203 496 1.596 19.028 7.129 7.569 779 1.476 413 1.662

223 1.107 447 3.802 22.227 8.478 9.097 723 1.488 588 1.853

246 1.092 430 4.679 23.821 8.550 9.933 756 2.017 509 1.859

84 52.765 19.271

0 51.336 18.569

0 51.317 20.804

0

70.234 20.218

197 73.917 25.445

19.212 2.117 6.167 10.928 59

18.469 2.117 6.167 10.185 100

20.718 2.117 6.167 12.434 86

20.106 2.117 6.167 11.822 112

24.265 2.117 6.167 15.981 1.180

33.494 20.104

32.767 19.668

30.513 16.490

50.016 34.513

48.472 31.492

7.870 1.649 7.995 0 474 2.116 13.390 4.218 3.684 3.779 76 1.630

9.373 1.986 6.962 0 409 938 13.099 4.844 2.570 4.295 72 1.318

7.368 1.977 5.590 0 362 1.193 14.023 4.727 3.441 4.473 101 1.281

12.236 1.593 18.484 423 1.088 689 15.503 4.530 3.376 5.363 445 1.789

10.873 1.740 16.513 475 1.065 826 16.980 5.045 3.421 5.945 923 1.534

Noncurrent Assets Goodwill Other intangible assets Property, plant and equipment Investments accounted for using the equity method Other financial assets Other receivables Deferred taxes

Current Assets Inventories Trade accounts receivable Other financial assets Other receivables Claims for income tax refunds Cash and cash equivalents Assets held for sale and discontinued operations

Equity and Liabilities Equity Equity attributable to Bayer AG stockholders Capital stock of Bayer AG Capital reserves of Bayer AG Other reserves Equity attributable to noncontrolling interest

Liabilities Noncurrent Liabilities Provisions for pensions and other postemployment benefits Other provisions Financial liabilities Income tax liabilities Other liabilities Deferred taxes

Current Liabilities Other provisions Financial liabilities Trade accounts payable Income tax liabilities Other liabilities

8

Liabilities directly related to assets held for sale and discontinued operations

3

0

112

Other receivables

50.000

Other financial assets

40.000

Investments accounted for using the equity method Property, plant and equipment

30.000 20.000 10.000 0 2011

0

Deferred taxes

non-current assets

60.000

0

Other intangible assets 2012

2013

2014

current assets

30.000

Goodwill

2015

Assets held for sale and discontinued operations Cash and cash equivalents

25.000

Claims for income tax refunds

20.000

Other receivables

15.000

Other financial assets

10.000

Trade accounts receivable

5.000 0 2011

Inventories 2012

2013

2014

2015

non-current liabilities

40.000

Deferred taxes

35.000 30.000

Other liabilities

25.000

Income tax liabilities

20.000

Financial liabilities

15.000

Other provisions

10.000 5.000 0 2011

18.000 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 0 2011

Provisions for pensions and other postemployment benefits 2012

2013

2014

2015

current liabilities Liabilities directly related to assets held for sale and discontinued operations Other liabilities Income tax liabilities Trade accounts payable Financial liabilities Other provisions 2012

2013

2014

2015

9

ASSETS 80.000 70.000

80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0

60.000 50.000 40.000 30.000 20.000 10.000 0 Total current assets

2011

2012

2013

2014

2015

Current Liabilities

20.068 18.986 19.028 22.227 23.821

EQUITY & LIABILITIES

2011

2012

2013

2014

2015

13.390 13.099 14.023 15.503 16.980

Noncurrent 20.104 19.668 16.490 34.513 31.492 Liabilities

Total noncurrent 32.697 32.350 32.289 48.007 50.096 assets

Equity

19.271 18.569 20.804 20.218 25.445

Bayer – Consolidated Statement of Income / Profit & Loss

2011

2012

2013

2014

2015

36.528 -17.975 18.553 -8.958 -2.932 -1.713 859 -1.660 4.149 -45 586 -1.327 -786

39.760 -19.059 20.701 -9.987 -3.013 -1.866 1.083 -2.958 3.960 -46 502 -1.168 -712

40.157 -19.347 20.810 -10.080 -3.190 -1.883 897 -1.620 4.934 -16 389 -1.100 -727

41.339 -19.909 21.430 -10.669 -3.537 -1.703 710 -836 5.395 -13 343 -1.311 -981

46.324 -21.158 25.166 -12.367 -4.281 -2.098 1.110 -1.280 6.250 -9 371 -1.367 -1.005

Income before income taxes 3.363 Income taxes -891 Income from continuing operations after income taxes 2.472 Income from discontinued operations after income taxes Income after income taxes 2.472

3.248 -752

4.207 -1.021

4.414 -1.071

5.245 -1.227

2.496 2.496

3.186 3 3.189

3.343 100 3.443

4.018 80 4.098

2

50

0

17

-12

2.470

2.446

3.189

3.426

4.110

â‚Ź millions Net sales Cost of goods sold Gross profit Selling expenses Research and development expenses General administration expenses Other operating income Other operating expenses EBIT Equity-method loss Financial income Financial expenses Financial result

of which attributable to noncontrolling interest of which attributable to Bayer AG stockholders (net income)

10

Bayer – Consolidated Cash Flow Statement Income after income taxes Income taxes Financial result Income taxes paid or accrued Depreciation, amortization and impairments Change in pension provisions (Gains) losses on retirements of noncurrent assets Gross cash flow Decrease (increase) in inventories Decrease (increase) in trade accounts receivable (Decrease) increase in trade accounts payable Changes in other working capital, other noncash items Net cash provided by (used in) operating activities (net cash flow) from continuing operations Net cash provided by (used in) operating activities (net cash flow) from discontinued operations Net cash provided by (used in) operating activities (net cash flow) Cash outflows for additions to property, plant, equipment and intangible assets Cash inflows from sales of property, plant, equipment and other assets Cash inflows from divestitures Cash inflows from (outflows for) noncurrent financial assets Cash outflows for acquisitions less acquired cash Interest and dividends received Cash inflows from (outflows for) current financial assets Net cash provided by (used in) investing activities Proceeds from shares of Covestro AG Dividend payments Issuances of debt Retirements of debt Interest paid including interest-rate swaps Interest received from interest-rate swaps Cash outflows for the purchase of additional interests in subsidiaries Net cash provided by (used in) financing activities Change in cash and cash equivalents due to business activities Cash and cash equivalents at beginning of year Change in cash and cash equivalents due to changes in scope of consolidation Change in cash and cash equivalents due to exchange rate movements Cash and cash equivalents at end of year 11

2011

2012

2013

2014

2015

2.472 891 786 -1.067 2.769 -504 -175 5.172 -241 -389 245

2.496 752 712 -1.560 2.960 -542 -219 4.599 -674 -452 539

3.186 1.021 727 -1.644 2.896 -249 -105 5.832 -608 -751 389

3.343 1.071 981 -1.304 2.920 -334 30 6.707 -748 -1.072 485

4.018 1.227 1.005 -2.258 3.333 -221 -105 6.999 -187 -1.061 402

273

520

309

325

694

5.060

4.532

5.171

5.697

6.847

0

0

0

113

43

5.060

4.532

5.171

5.810

6.890

-1.615

-1.929

-2.157

-2.371

-2.517

275 173

227 178

153 79

143 304

193 2

-211 -261 75

-261 -466 104

204 -1.082 125

-10 -13.545 107

-26 -176 106

-2.326 -3.890

1.329 -818

97 -2.581

-167 -15.539

-1.242 1.001 -1.398 -902 332

-1.366 1.309 -3.254 -793 325

-1.574 9.078 -9.697 -550 212

-1.739 27.584 -15.746 -541 179

-344 -2.762 1.490 -1.869 16.620 -19.549 -812 160

-4 -2.213

-3 -3.782

-4 -2.535

-1 9.736

-14 -3.974

-1.043 2.840

-68 1.770

55 1.698

7 1.662

154 1.853

0

0

0

0

5

-27 1.770

-7 1.695

-91 1.662

184 1.853

-153 1.859

PFIZER FINANCIAL STATEMENTS (USD million) Pfizer – Consolidated Balance Sheets

2011

2012

2013

2014

2015

188.002

185.798

172.101

169.274

167.460

Cash and Cash Equivalents Short-Term Investments

57.728 3.539 23.219

61.415 10.389 22.319

56.244 2.183 30.225

57.702 3.343 32.779

43.804 3.641 19.649

Trade account receivables, less allowance for double accounts Inventories Short term loans Current tax assets

13.608 7.769 51 9.441

12.378 7.063 0 9.196

9.357 6.166

8.669 5.663

8.176 7.513

0

0

0

4.624

4.498

2.662

0

0

3.613

2.750

2.163

101

70

76

0

0

130.274

USD millions

Assets Current Assets

Other current assets assets of discontinued operations

Non-Current Assets

124.383

115.857

111.572

123.656

Long-Term Investments Property, plant and equipments, less accumulated depreciation

9.457

14.149

16.406

17.518

15.999

16.938

14.461

12.397

11.762

13.766

Identifiable intangible assets, less accumulated amortization Goodwill

53.833 45.067

44.672 46.013

42.519 39.385

35.166 42.069

40.356 48.242

0 4.979

5.088 0

1.554 3.596

1.544 3.513

1.794 3.499

Noncurrent deferred tax assets and other noncurrent tax assets Other noncurrent taxes

Equity and Liabilities Liabilities Current Liabilities Short-term borrowings, including current portion of long-term debt Trade accounts payable Dividends payable Income taxes payable Accrued compensation and related items Other current liabilities liabilities of discontinued operations

Non-Current Liabilities Long-Term Debt Pension benefit obligations, net Postretirement benefit obligations, net Noncurrent deferred tax liabilities Other taxes payable Other noncurrent liabilities

Equity

188.002

185.798 172.101 169.275 167.460

105.381

104.120

95.481

97.653

102.462

28.069

28.619

23.366

21.631

29.399

4.018 3.836 1.796 1.013 2.169

6.424 4.264 1.734 1.010 2.046

6.027 3.234 1.663 678 1.792

5.141 3.440 1.711 531 1.784

10.160 3.620 1.852 418 2.359

15.237 0 77.312 34.931 6.355 3.344 19.597 6.886 6.199 82.621

13.141 0 75.501 31.036 7.830 3.493 21.593 6.610 4.939 81.678

9.951 21 72.115 30.462 4.635 2.668 25.590 3.993 4.767 76.620

9.024 0 76.022 31.541 7.885 2.379 24.981 4.353 4.883 71.622

10.990

12

0

73.063 28.818 6.310 1.809 26.877 3.992 5.257 64.998

Total Pfizer Inc. shareholders’ equity Preferred stock Common stock Additional paid-in capital Employee benefit trusts Treasury stock Retained Earnings Accumulated other comprehensive loss Equity attributable to noncontrolling interests

82.190 45 445 71.423 -3 -31.801 46.210 -4.129

81.260 39 448 72.608 -1 -40.121 54.240 -5.953

76.307 33 453 77.283

71.301 29 455 78.977

64.720 26 459 81.016

-67.923 69.732 -3.271

-73.021 72.176 -7.316

-79.252 71.993 -9.522

431

418

313

321

278

Pfizer – Consolidated Income Statement USD millions

2011

2012

2013

2014

2015

Revenues Costs and expenses

67.425

58.986

51.584

49.605

48.851

-15.085

-11.334

-9.586

-9.577

-9.648

-19.468 -9.112

-16.616 -7.870

-14.355 -6.678

-14.097 -8.393

-14.809 -7.690

Amortization of intangible assets Restructuring charges and certain acquisitionrelated costs

-5.585

-5.175

-4.599

-4.039

-3.728

-2.934

-1.880

-1.182

-250

-1.152

Other (income)/deductions––net Income from continuing operations before provision for taxes on income Provision for taxes on income Income from continuing operations Discontinued operations Income from discontinued operations––net of tax Gain/(loss) on disposal of discontinued operations––net of tax Discontinued operations––net of tax Net income before allocation to noncontrolling interests Less: Net income attributable to noncontrolling interests Net income attributable to Pfizer Inc.

-2.479

-4.031

532

-1.009

-2.860

12.762 -4.023 8.739

12.080 -2.562 9.518

15.716 -4.306 11.410

12.240 -3.120 9.119

8.965 -1.990 6.975

8

297

308

-6

17

1.304 1.312

4.783 5.080

10.354 10.662

55 48

-6 11

10.051

14.598

22.072

9.167

6.986

-42 10.009

-28 14.570

-69 22.003

-32 9.135

-26 6.960

Cost of sales Selling, informational and administrative expenses Research and development expenses

13

Pfizer – Consolidated cash flow statements

USD millions

2011

2012

2013

2014

2015

10.051

14.598

22.072

9.168

6.986

9.026 1.198

7.611 1.299

6.410 1.368

5.537

5.157 1.119

Operating activities Net income before allocation to noncontrolling interests Adjustments to reconcile net income before allocation to noncontrolling interests to net cash provided by operating Depreciation and amortization Asset write-offs and impairments Foreign currency loss related to Venezuela Gain/(loss) on disposal of discontinued operations Gain associated with the transfer of certain product rights to an equitymethod investment

806 -1.688

-7.123

15

-10.446

-51

6

-459

Deferred taxes from continuing operations

264

739

1.726

320

-20

Deferred taxes from discontinued operations

190

1.459

-23

-3

2

Share-based compensation expense

419

481

523

586

669

-1.775

135

310

-199

-617

-189

-203

-324

-430

-160

-66

275

940

148

21

Inventories

1.084

-631

-538

175

-199

Other assets Trade accounts payable Other liabilities Other tax accounts, net

582 1.147 0 -18

83 579 -3.438 1.190

-822 382 -3.184 -170

1.156 297 -844 491

249 254 474 -235

20.240

17.054

17.765

16.883

14.512

-1.660

-1.327

-1.206

-1.199

-1.397

-24.018

-42.761

-50.954

-28.581

Benefit plan contributions (in excess of)/less than expense Other adjustments, net Other changes in assets and liabilities, net of acquisitions and divestitures Trade accounts receivable

Net cash provided by operating activities

Investing activities Purchases of property, plant and equipment Purchases of short-term investments

-18.428 14

Proceeds from redemptions/sales of short-term investments

13.615

25.302

41.127

47.374

40.064

Net (purchases of)/proceeds from redemptions/sales of short-term investments with original maturities of three months or less

10.874

1.459

-4.277

3.930

5.768

Purchases of long-term investments

-4.063

-11.145

-11.020

-10.718

-9.542

Proceeds from redemptions/sales of long-term investments

2.147

4.990

7.555

6.145

6.929

-3.282

-1.050

-15

-195

-16.466

Acquisitions of intangible assets

0

0

-259

-384

-99

Proceeds from sale of businesses Other investing activities, net

2.376 279

11.850 93

0 231

0 347

0 344

Net cash used in investing activities

2.200

6.154

-10.625

-5.654

-2.980

12.810

7.995

4.323

13

5.557

-3.826

-3

-4.234

-10

-3.965

-7.540

-8.204

3.475

-1.841

2.717

1 -6.986 -9.000 -6.234

0 -1.513 -8.228 -6.534

6.618 -4.146 -16.290 -6.580

4.491 -2.104 -5.000 -6.609

0 -3.003 -6.160 -6.940

0 168

0 1

1.750 109

1.002 72

1.263 298

Proceeds from redemptions of shortterm loans

561

Issuances of short-term loans

-19

Issuances of long-term loans

-200

Acquisitions of businesses, net of cash acquired

Financing activities Proceeds from short-term borrowings Principal payments on short-term borrowings Net proceeds from/(payments on) short-term borrowings with original maturities of three months or less Proceeds from issuance of long-term debt Principal payments on long-term debt Purchases of common stock Cash dividends paid Proceeds from exercise of stock options Other financing activities, net

Net cash used in financing activities

-20.607

-16.486

-14.975

-9.986

-10.233

Effect of exchange-rate changes on cash and cash equivalents

-29

-2

-63

-83

-1.000

Net increase/(decrease) in cash and cash equivalents

1.804

7.207

-7.898

1.160

298

1.735 3.539

3.182 10.389

10.081 2.183

2.183 3.343

3.343 3.641

Cash and cash equivalents, beginning

Cash and cash equivalents, end

15

FINANCIAL INDICATORS ROE

35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00%

2011

2012

2013

2014

Net Profit Margin

45,00% 40,00% 35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00%

2015

2011

2012

2013

2014

2015

Novartis 14,02% 13,90% 12,48% 14,51% 23,07%

Novartis 15,57%

16,71%

15,79%

19,17%

35,31%

Bayer

12,83% 13,44% 15,33% 17,03% 16,11%

Bayer

6,77%

6,28%

7,94%

8,33%

8,85%

Pfizer

12,11% 17,84% 28,72% 12,75% 10,71%

Pfizer

14,84%

24,70%

42,65%

18,42%

14,25%

EBIT Margin

ROA

35,00% 30,00% 25,00% 20,00% 15,00% 10,00% 5,00% 0,00%

12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00%

2011 2012 2013 2014 2015 Novartis 9,36% 9,27% 8,64% 8,84% 6,82% Bayer

7,86% 7,71% 9,61% 7,68% 8,46%

Pfizer

6,79% 6,50% 9,13% 7,23% 5,35%

18,00% 16,00% 14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00%

2011 2012 2013 2014 2015 Novartis 18,52% 20,00% 18,54% 20,68% 17,82% Bayer

11,36%

Pfizer

18,93% 20,48% 30,47% 24,67% 18,35%

ROI

201 1

201 2

9,96%

12,29% 13,05% 13,49%

ROCE

201 3

201 4

20,00% 18,00% 16,00% 14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00%

201 5

2011

2012

2013

2014

2015

Novartis 12,76% 12,94% 11,79% 11,84% 9,06%

Novartis 13,78% 13,87% 12,73% 13,10% 9,61%

Bayer

13,41% 14,09% 16,54% 12,82% 13,77%

Bayer

15,22% 15,51% 18,69% 13,94% 14,90%

Pfizer

10,50% 10,14% 13,89% 11,30% 8,62%

Pfizer

10,86% 10,72% 14,68% 11,86% 9,56%

25,00 20,00 15,00 10,00 5,00 0,00

ICR

1,20 1,00 0,80 0,60 0,40 0,20 0,00

D/E

2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

Novartis

0,31

0,28

0,24

0,29

0,28

Novartis

17,18

19,38

17,91

16,60

13,90

Bayer

0,61

0,51

0,43

1,08

0,78

Bayer

3,13

3,39

4,49

4,12

4,57

Pfizer

0,47

0,46

0,48

0,51

0,60

Pfizer

5,20

6,25

8,07

6,71

5,82

16

Quality of operating earning CAPEX coverage 1,80 1,60 1,40 1,20 1,00 0,80 0,60 0,40 0,20 0,00

7,00

35,00%

6,00

30,00% 25,00%

5,00

20,00%

4,00

2011

Novartis

1,30

Bayer

1,22

Pfizer

1,59

Effective tax rate

15,00%

3,00

10,00%

2,00

5,00%

1,00 2012 2013 2014 0,00 1,23 1,21 2011 1,25 Novartis1,05 5,99 1,14 1,08 Bayer 3,13 1,41 1,13 1,38 Pfizer

0,00%

2011 2012 2013 2014 2015 Novartis 14,18% 14,45% 13,44% 12,59% 13,60% 2013 2014 2015 Bayer 26,49% 23,15% 24,27% 24,26% 23,39% 3,69 4,08 3,39 Pfizer 31,52% 21,21% 27,40% 25,49% 22,20% 2,40 2,45 2,74

2015 1,332012 1,104,63 1,622,35

1,01

0,67

Pay-Out ratio

0,40

0,32

0,48

Current ratio

3,00

100,00% 90,00% 80,00% 70,00% 60,00% 50,00% 40,00% 30,00% 20,00% 10,00% 0,00%

2,50 2,00 1,50 1,00 0,50 0,00 2011

2012

2013

2014

2015

Novartis 55,88% 66,15% 64,49% 74,80% 64,66% Bayer

94,81% 55,26% 63,06% 54,53% 54,28%

Pfizer

60,83% 42,79% 29,70% 72,03% 94,96%

2011

2012

2013

2014

2015

Novartis

1,04

1,16

1,16

1,39

0,96

Bayer

1,50

1,45

1,36

1,43

1,40

Pfizer

2,06

2,15

2,41

2,67

1,49

Inventory Turnover Ratio

Quick ratio

12,00 10,00 8,00 6,00 4,00 2,00 0,00

2,50 2,00 1,50 1,00 0,50 0,00

2011

2012

2013

2014

2015

Novartis

0,67

0,76

0,73

0,82

0,57

Bayer

0,87

0,76

0,71

0,75

0,74

Pfizer

1,44

1,58

1,79

2,07

1,07

2011 Novartis 10,01

2012

2013

2014

2015

8,54

8,10

8,80

8,09

Bayer

5,74

5,70

5,63

4,88

5,42

Pfizer

8,68

8,35

8,37

8,76

6,50

Cash flow to Debt 0,80 0,70 0,60 0,50 0,40 0,30 0,20 0,10 0,00

CAPEX coverage 7,00 6,00 5,00 4,00 3,00 2,00 1,00 0,00

2011

2012

2013

2014

2015

2011

2012

2013

2014

2015

Novartis

0,71

0,72

0,73

0,68

0,54

Novartis

5,99

4,63

3,69

4,08

3,39

Bayer

0,43

0,48

0,57

0,27

0,35

Bayer

3,13

2,35

2,40

2,45

2,74

Pfizer

0,52

0,46

0,49

0,46

0,37

Pfizer

1,01

0,67

0,40

0,32

0,48

17

Short-Term Debt Coverage

Quality of operating earning 1,80 1,60 1,40 1,20 1,00 0,80 0,60 0,40 0,20 0,00

6,00 5,00 4,00 3,00 2,00 1,00 2011

2012

2013

2014

0,00

2015

2011

2012

2013

2014

2015

2,24

2,39

1,94

2,10

2,12

Novartis

1,30

1,23

1,21

1,25

1,33

Novartis

Bayer

1,22

1,14

1,05

1,08

1,10

Bayer

1,37

1,76

1,50

1,72

2,01

1,62

Pfizer

5,04

2,65

2,95

3,28

1,43

Pfizer

1,59

1,41

1,13

1,38

Cost of Debt 14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00%

2011

2012

2013

2014

2015

Novartis 3,16%

3,01%

3,38%

3,27%

2,95%

Bayer

11,36% 12,25% 12,18% 6,00%

6,86%

Pfizer

4,32%

3,08%

4,06%

3,88%

3,71%

WACC (Weighted Average Cost of Capital)

S&P 500 3 years average DAX 3 years average SMI SWISS 3 years average

%E %D

2011 56,12% 43,88%

2012 55,72% 44,28%

%E %D

2011 36,52% 63,48%

2012 36,17% 63,83%

%E %D

2011 43,95% 56,05%

2012 43,96% 56,04%

NOVARTIS 2013 58,99% 41,01% BAYER 2013 40,54% 59,46% PFIZER 2013 44,52% 55,48%

MARKET RISK RATE 2008 2009 2010 2011 -36,55% 25,94% 14,82% 2,10% 14,29% -40,37% 23,85% 16,06% 14,69% 8,41% -34,77% 18,27% -1,68% -7,77% 2,94% 18

2014 56,50% 43,50%

2015 58,62% 41,38%

2014 28,79% 71,21%

2015 34,42% 65,58%

2014 42,31% 57,69%

2015 38,81% 61,19%

2012 15,89% 10,94% 29,06% 10,14% 14,93% 1,83%

2013 32,15% 16,71% 25,48% 13,28% 20,24% 9,13%

2014 2015 13,52% 1,36% 20,52% 15,68% 2,65% 9,56% 19,06% 12,56% 9,51% -1,84% 14,89% 9,30%

RISK FREE RATE (BONDS) 2011 2012 2013 2,65% 1,57% 1,64% 2,76% 1,79% 2,38% 1,45% 0,61% 0,89%

German US Swiss

2014 1,23% 2,53% 0,67%

2015 0,54% 2,13% -0,07%

Beta industry = 0,9 D Beta company = βindustry ∗ (1 + (1 − tax rate) ∗ ) E Effective tax rate considered LEVERED BETA Novartis Bayer Pfizer

2011 1,50 2,46 2,05

2012 1,51 2,49 2,05

2013 1,44 2,22 2,02

2014 1,51 3,13 2,13

2015 1,45 2,61 2,32

cost of equity = risk free + βL ∗ (market risk − risk free) Cost of Equity Novartis Bayer Pfizer Cost of Debt Novartis Bayer Pfizer

2011 3,69% 16,84% 26,36% 2011 3,16% 11,36% 4,32%

2012 2,45% 22,91% 20,52% 2012 3,01% 12,25% 4,06%

2013 12,78% 27,49% 31,36% 2013 3,38% 12,18% 3,88%

2014 22,08% 57,00% 40,80% 2014 3,27% 6,00% 3,71%

2015 13,51% 31,98% 33,54% 2015 2,95% 6,86 3,08%

WACC = %D ∗ cost of debt + %E ∗ cost of equity ∗ (1 − Tax rate) WACC Novartis Bayer Pfizer

2011 3,26% 7,00% 11,41%

2012 2,50% 8,79% 9,83%

2013 8,74% 11,37% 13,56%

2014 13,72% 15,67% 16,48%

2015 8,97% 11,02% 12,83%

18,00% 16,00% 14,00% 12,00% 10,00% 8,00% 6,00% 4,00% 2,00% 0,00%

2011

2012

2013

2014

NOVARTIS

3,26%

BAYER

7,00%

PFIZER

11,41%

2,50%

8,74%

13,72%

8,97%

8,79%

11,37%

15,67%

11,02%

9,83%

13,56%

16,48%

12,83%

19

2015

Environmental sustainability in Novartis

20

Novartis’ growth products

21