20-F

As filed with the Securities and Exchange Commission on January 31, 2024

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Form 20-F

☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report……………

For the transition period from _____ to _____

Commission file number 1-15024

Novartis AG

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Switzerland

(Jurisdiction of incorporation or organization)

Lichtstrasse 35

4056 Basel, Switzerland

(Address of principal executive offices)

Karen L. Hale

Chief Legal Officer

Novartis AG

CH 4056 Basel

Switzerland

Tel.: +41-61-324-1111

Fax: +41-61-324-7826

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

American Depositary Shares each representing 1 share

NVS

New York Stock Exchange

Ordinary shares, nominal value CHF 0.49 per share*

NOVN

New York Stock Exchange*

* Not for trading but only in connection with the registration of American Depositary Shares representing such ordinary shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:

2 044 033 986 ordinary shares

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

**** Yes    ☒   No    ☐

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes    ☐    No    ☒

Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

**** Yes    ☒   No    ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

**** Yes    ☒   No    ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒                      Accelerated filer ☐                      Non-accelerated filer ☐                      Emerging growth company ☐

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐                     International Financial Reporting Standards as issued by the International Accounting Standards Board ☒                    Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17    ☐    Item 18    ☐

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes   ☐   No    ☒

Table of contents

Introduction and use of certain terms

Forward-looking statements

Part I

Item 1. Identity of Directors, Senior Management and Advisers

Item 2. Offer Statistics and Expected Timetable

Item 3. Key Information

3.A [Reserved]

3.B Capitalization and indebtedness

3.C Reasons for the offer and use of proceeds

3.D Risk factors

Item 4. Information on the Company

4.A History and development of Novartis

4.B Business overview

4.C Organizational structure

4.D Property, plants and equipment

Item 4A. Unresolved Staff Comments

Item 5. Operating and Financial Review and Prospects

5.A Operating results

5.B Liquidity and capital resources

5.C Research and development, patents and licenses

5.D Trend information

5.E Critical accounting estimates

Item 6. Directors, Senior Management and Employees

6.A Directors and senior management

6.B Compensation

6.C Board practices

6.D Employees

6.E Share ownership

6.F Erroneously awarded compensation

Item 7. Major Shareholders and Related Party Transactions

7.A Major shareholders

7.B Related party transactions

7.C Interests of experts and counsel

Item 8. Financial Information

8.A Consolidated statements and other financial information

8.B Significant changes

Item 9. The Offer and Listing

9.A Offer and listing details

9.B Plan of distribution

9.C Markets

9.D Selling shareholders

9.E Dilution

9.F Expenses of the issue

Item 10. Additional Information

10.A Share capital

10.B Memorandum and articles of association

10.C Material contracts

10.D Exchange controls

10.E Taxation

10.F Dividends and paying agents

10.G Statement by experts

10.H Documents on display

10.I Subsidiary information

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Item 11. Quantitative and Qualitative Disclosures About Market Risk

Item 12. Description of Securities Other than Equity Securities

12.A Debt securities

12.B Warrants and rights

12.C Other securities

12.D American Depositary Shares

PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

Item 15. Controls and Procedures

Item 16A. Audit Committee Financial Expert

Item 16B. Code of Ethics

Item 16C. Principal Accountant Fees and Services

Item 16D. Exemptions from the Listing Standards for Audit Committees

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Item 16F. Change in Registrant’s Certifying Accountant

Item 16G. Corporate Governance

Item 16H. Mine Safety Disclosure

Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 16J. Insider Trading Policies

Item 16K. Cybersecurity

PART III

Item 17. Financial Statements

Item 18. Financial Statements

Item 19. Exhibits

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Introduction and use of certain terms

Novartis AG and its consolidated affiliates publish consolidated financial statements expressed in US dollars. Our consolidated financial statements responsive to Item 18 of this Annual Report on Form 20-F (Annual Report) are prepared in accordance with International Financial Reporting Standards Accounting Standards as issued by the International Accounting Standards Board. “Item 5. Operating and Financial Review and Prospects,” together with the sections on products in development and key development projects of our businesses (see “Item 4. Information on the Company—Item 4.B. Business overview”), constitute the Operating and Financial Review (“Lagebericht”), as defined by the Swiss Code of Obligations.

Unless the context requires otherwise, the words “we,” “our,” “us,” “Novartis,” “Group,” “Company,” and similar words or phrases in this Annual Report refer to Novartis AG and its consolidated affiliates. However, each Novartis affiliate is legally separate from all other Novartis affiliate companies and manages its business independently through its respective board of directors or similar supervisory body or other top local management body, if applicable. Each executive identified in this Annual Report reports directly to other executives of the Novartis affiliate company that employs such executive, or to such company’s board of directors.

In this Annual Report, references to “US dollars,” “USD” or “$” are to the lawful currency of the United States of America; references to “CHF” are to Swiss francs; references to “euro” or “EUR” are to the lawful currency of the member states of the European Union in which it is the official currency; references to the “United States” or to “US” are to the United States of America; references to the “European Union” or to “EU” are to the European Union and its 27 member states; references to “Latin America” are to Central and South America, including the Caribbean; references to “Australasia” are to Australia, New Zealand, Melanesia, Micronesia and Polynesia, unless the context otherwise requires; references to the “EC” are to the European Commission; references to “associates” are to employees of our affiliates; references to the “SEC” are to the US Securities and Exchange Commission; references to the “FDA” are to the US Food and Drug Administration; references to the “EMA” are to the European Medicines Agency, an agency of the EU; references to the “CHMP” are to the Committee for Medicinal Products for Human Use of the EMA; references to “ADR” or “ADRs” are to Novartis American Depositary Receipts; references to “ADS” or “ADSs” are to Novartis American Depositary Shares; references to the “NYSE” are to the New York Stock Exchange, and references to “SIX” are to the SIX Swiss Exchange; references to “ECN” are to the Executive Committee of Novartis; references to “Bausch + Lomb” are to Bausch & Lomb Incorporated; references to “GSK” are to GlaxoSmithKline plc; references to “Roche” are to Roche Holding AG; references to “Gyroscope Therapeutics” are to Gyroscope Therapeutics Holdings plc; references to “ADACAP” are to Advanced Accelerator Applications S.A.; references to “Novartis Gene Therapies” are to Novartis Gene Therapies, Inc.; references to “Endocyte” are to Endocyte, Inc.; references to “Chinook” are to Chinook Therapeutics, Inc. and references to “DTx Pharma” are to DTx Pharma, Inc.

All product names appearing in italics are trademarks owned by or licensed to Novartis. Product names identified by a “™” are trademarks that are not owned by or licensed to Novartis and are the property of their respective owners.

Certain documents and information referenced in this Annual Report are available on our website. However, the information contained on our website, or any information that may be accessed by links on our website, is not included as part of, or incorporated by reference into, this Annual Report.

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Forward-looking statements

This Annual Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the United States Private Securities Litigation Reform Act of 1995, as amended. Other written materials filed with or furnished to the SEC by Novartis, as well as other written and oral statements made to the public, may also contain forward-looking statements. Forward-looking statements can be identified by words such as “potential,” “expect,” “will,” “plan,” “pipeline,” “outlook,” “may,” “could,” “would,” “anticipate,” “seek,” “likely,” “ongoing,” “estimate,” “believe,” “target,” “intend,” or similar terms, or by express or implied discussions regarding potential new products, potential new indications for existing products, or regarding potential future revenues from any such products or indications; or regarding the potential outcome, or financial or other impact on Novartis, of any of the transactions described; or regarding the potential impact of share buybacks; or regarding potential future sales or earnings of Novartis or potential shareholder returns; or regarding potential future credit ratings of Novartis; or by discussions of strategy, plans, expectations or intentions. Such forward-looking statements are based on the current beliefs and expectations of management regarding future events, and are subject to significant known and unknown risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those set forth in forward-looking statements. You should not place undue reliance on these statements.

In particular, our expectations could be affected by, among other things:

• Uncertainties regarding the success of key products, commercial priorities and strategy

• Uncertainties in the research and development of new healthcare products, including clinical trial results and additional analysis of existing clinical data, and the use of new and disruptive technologies, including artificial intelligence (AI)

• Global trends toward healthcare cost-containment, including new laws and regulations, ongoing government, payer and general public pricing and reimbursement pressures and requirements for increased pricing transparency

• Our ability to realize the strategic benefits, operational efficiencies or opportunities expected from our external business opportunities

• Our ability to realize the intended benefits of our separation of Sandoz into a new publicly traded standalone company

• Our ability to obtain or maintain proprietary intellectual property protection, including the ultimate extent of the impact on Novartis of the loss of patent protection and exclusivity on key products that commenced in prior years and is expected to continue this year

• Our performance on environmental, social and governance matters

• Uncertainties in the development or adoption of potentially transformational digital technologies and business models

• Uncertainties regarding potential significant breaches of information security or disruptions of our information technology systems

• Uncertainties surrounding the implementation of our new IT projects and systems

• Our reliance on outsourcing key business functions to third parties

• Uncertainties regarding actual or potential legal proceedings, including, among others, litigation and other legal disputes with respect to our recent transactions, product liability litigation, litigation and investigations regarding sales and marketing practices, intellectual property disputes and government investigations generally

• Safety, quality, data integrity or manufacturing issues

• Our ability to identify, attract, integrate, develop and retain key personnel and qualified individuals for critical roles

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• Regulatory actions or delays or government regulation generally, including potential regulatory actions or delays with respect to the development of the products described in this Annual Report

• Our ability to comply with evolving regulatory requirements and meet societal expectations concerning environmental, social and governance matters

• Our ability to comply with cybersecurity and data privacy laws and regulations, and uncertainties regarding potential significant breaches of data privacy

• Our ability to adapt to major geopolitical and macroeconomic developments, including the effects of and efforts to mitigate pandemic diseases such as COVID-19, and the impact of the war in certain parts of the world

• Uncertainties involved in predicting shareholder returns

• Uncertainties regarding the effects of recent and anticipated future changes in tax laws and their application to us

• Uncertainties regarding future global exchange rates

• Uncertainties regarding our supply chain and future demand for our products

These risks and others are discussed in more detail in this Annual Report, including under “Item 3. Key Information—Item 3.D. Risk factors,” “Item 4. Information on the Company,” and “Item 5. Operating and Financial Review and Prospects.” Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Annual Report as anticipated, believed, estimated or expected. It is not possible to predict or identify all risk to our business. Consequently, you should not consider the foregoing to be a complete discussion of all potential risks or uncertainties. We provide the information in this Annual Report as of the date of its filing. We do not intend, and do not assume any obligation, to update any information or forward-looking statements set out in this Annual Report as a result of new information, future events or otherwise.

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Part I

Item 1. Identity of Directors, Senior Management and Advisers

Not applicable.

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Item 2. Offer Statistics and Expected Timetable

Not applicable.

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Item 3. Key Information

3.A [Reserved]

3.B Capitalization and indebtedness

Not applicable.

3.C Reasons for the offer and use of proceeds

Not applicable.

3.D Risk factors

Our business faces significant risks and uncertainties. You should carefully consider all of the information set forth in this Annual Report and in other documents we file with or furnish to the SEC, including the following risk factors, before deciding to invest in or to maintain an investment in any Novartis securities. Our business, as well as our reputation, financial condition, results of operations, and share price, could be materially adversely affected by any of these risks, as well as other risks and uncertainties not currently known to us or not currently considered material.

Strategic risks

Key products and commercial priorities

Risk description

Failure to deliver key commercial priorities and successfully launch new products

Context and potential impact

Our ability to maintain and grow our business and to replace revenue and income lost to generic, biosimilar and other competition depends heavily on the commercial success of our new or existing key products. The commercial success of these products could be impacted at any time by a number of factors, including pressure from new or existing competitive products, changes in the prescribing habits of healthcare professionals, slower than expected post-launch adoption, unexpected side effects or safety signals, supply chain issues or other product shortages, pricing pressure, regulatory proceedings, changes in labeling, loss of intellectual property protection, and global pandemics. In addition, our revenue and margins could be significantly impacted by the timing and rate of commercial acceptance of new products.

Healthcare professionals, patients and payers may choose competitor products instead of ours for various reasons, including if they perceive them to be better in terms of efficacy, safety, cost, convenience or other reasons. The commercial success of our key products and launches in the face of increasing competition requires significant attention, management focus and resource allocation. Such competition could significantly affect the revenue from our products and our results of operations. This impact could also be compounded to the extent that such competition results in us making significant additional investments in research and development, marketing or sales.

Furthermore, from time to time, we reassess how our business is organized to ensure we have the optimal structure with which to execute our strategy. An inability to successfully implement new organizational structures and operating models could have a material adverse effect on our results of operations and financial condition.

Research and development

Risk description

Failure to successfully prioritize, integrate and execute our research and development programs for new products or new indications for existing products

Context and potential impact

We engage in extensive and costly research and development activities, both through our own internal resources and through collaborations with third parties, in an effort to identify and develop new products and new indications for existing products that address unmet, ever-changing medical needs, while ensuring commercial viability and success. Our ability to grow our business and our product pipeline; to replace sales lost due to branded competition, entry of generics, or other reasons; and to bring products to market that take

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advantage of new and potentially disruptive technologies, including cell, gene and radioligand therapies, depends in significant part on the success of these efforts.

Failure to successfully develop our pipeline products is typically the result of the inherent uncertainty of science, suboptimal internal execution, or both. Key elements of internal execution include our ability to prioritize our investments on our highest potential value assets, optimize the transition of assets from research to development, integrate externally acquired assets in an efficient way, and execute the steps in our drug development process that enable our assets to be approved and reimbursed in a timely manner to positively impact clinical practice. We invest in new businesses, products, services and technologies, including artificial intelligence (AI), to achieve our goals, operate our business and reduce the time, effort and expense associated with identifying, developing and commercializing new products. Our investments in new and disruptive technologies may not ultimately achieve the intended benefits, may not result in an adequate return of capital and, in pursuing new strategies, we may incur unanticipated liabilities. For more information, see also “Item 4. Information on the Company—Item 4.B Business overview—Research and development.”

Our new products must undergo intensive preclinical and clinical testing and are approved by means of a highly complex, lengthy, and expensive approval process that varies substantially from country to country and may have very specific requirements for the recruitment of patients for clinical trials. We face increasing and evolving regulatory approval and reimbursement requirements. Additionally, if we fail to successfully progress late-stage assets and the core elements of drug development for key programs, this could have a negative impact on the development of our product pipeline, and ultimately on the success of our business and our financial results.

Another issue we face is the increasing challenge to adequately recruit a sufficient number of patients in the US for clinical trials due to the cost and effort associated with expanding our operations for the recruitment of patients into such trials. As a result, we may be unable to develop the necessary clinical evidence to support the desired indications and product profile for a particular disease that is needed to drive clinical adoption of our new products, and thereby achieve the full potential of our assets (also known as the “target product profile”). Similarly, the post‑approval regulatory burden has also increased. These requirements make the maintenance of regulatory approvals for our products increasingly expensive, and further heighten the risk of recalls, product withdrawals, changes to product specifications, loss of market share, and loss of revenue and profitability.

The clinical testing, regulatory processes and post-approval activities described above become more difficult during pandemics, such as the COVID-19 pandemic, as well as during periods of geopolitical and economic uncertainty. This is due to challenges related to recruiting, enrolling and treating patients in clinical trials, as well as ensuring the supply of trial materials. For a further description of the research and development of, and approval processes for, our products, see “Research and development” and “Regulation” under “Item 4. Information on the Company—Item 4.B Business overview.”

Furthermore, our research and development activities must be conducted in an ethical and compliant manner. Among other things, we are concerned with patient safety (both pre- and post-product approval), data privacy, current Good Clinical Practices (cGCP) requirements, data integrity, the fair treatment of patients, diversity and inclusion in the recruitment of patients to clinical trials, and animal welfare. If we fail to properly manage such issues, we risk injury to third parties, damage to our reputation, negative financial consequences as a result of potential claims for damages, sanctions and fines, and the potential that investments in research and development activities may not bring the expected benefits to us.

Pricing, reimbursement and access

Risk description

Pricing and reimbursement pressure, including pricing transparency and access to healthcare

Context and potential impact

Our business has continuously experienced significant pressures on the pricing of our products and on our ability to obtain and maintain satisfactory rates of reimbursement for our products by governments, insurers and other payers. These pressures have many sources, including growth of healthcare costs as a percentage of gross domestic product; funding restrictions and policy changes; and public controversies, political debate, investigations and legal proceedings regarding pharmaceutical pricing. Pressures on pricing may negatively impact both our product pricing and the availability of our products.

In addition, we face numerous cost‑containment measures imposed by governments and other payers. These include government‑imposed industrywide price reductions, mandatory pricing systems, reference pricing systems, payers limiting access to treatments based on cost‑benefit analyses, the importation of drugs from lower‑cost countries to higher‑cost countries, the shifting of the payment burden to patients through higher co‑payments and co-pay accumulator programs, the limiting of physicians’ ability to choose among competing medicines, the mandatory substitution of generic drugs for the patented equivalent, pressure on physicians to reduce the prescribing of patented prescription medicines, increasing pressure on intellectual property protections, and growing requirements for increased transparency on pricing. For more information on price controls, see “Item 4. Information on the Company—Item 4.B Business overview—Price controls.”

Recent trends in our external environment may have an impact on the likelihood of these pricing and reimbursement pressures occurring. Slow economic recovery following the COVID-19 pandemic and the onset of war in certain parts of the world (which is contributing to challenges such as high energy costs and inflation) have led to an increased strain on fiscal budgets in many major economies. In addition, legislative developments such as those in the US (e.g., the Inflation Reduction Act) and in Europe (e.g., the EU Joint Health Technology

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Assessment and 2023 EU Pharmaceutical Legislation Update) pose potential further pressures on pricing and timelines for reimbursement in these countries. For example, in August 2023, our cardiovascular drug Entresto was selected for the Medicare Drug Price Negotiation Program in the US and additional Novartis products may be selected for price negotiation programs in the future. These external factors may materially affect our ability to achieve value-based prices; to achieve and maintain an acceptable return on our investments in the research and development of our products; and may impact our ability to research and develop new products.

Alliances, acquisitions and divestments

Risk description

Failure to identify, execute or realize the expected benefits from our external business opportunities

Context and potential impact

As part of our strategy, we evaluate external opportunities that could strengthen our portfolio by acquiring and divesting products, entering businesses or entering into strategic alliances and collaborations. For example, in 2023, we closed the acquisitions of Chinook Therapeutics and DTx Pharma. This strategy is partly dependent on our ability to identify strategic external business opportunities, including assessing the value of the early phase companies, and to close transactions with third parties on acceptable terms and timelines.

Once the terms of a strategic transaction have been agreed with a third party, we may not be able to complete the transaction in a timely manner or at all. In addition, we cannot be sure that pre-transaction due diligence will identify all possible issues that might arise during and after the transaction. Our efforts on such transactions can also divert management’s attention from our existing businesses.

After a transaction is closed, efforts to develop and commercialize acquired or licensed products, to integrate the acquired business or to achieve expected synergies may fail or may not fully meet expectations. This may occur due to difficulties in retaining key personnel, customers and suppliers; failure to obtain marketing approval or reimbursement within expected timeframes or at all; differences in corporate culture, standards, controls, processes and policies; or other factors. Transactions can also result in liabilities being incurred that were not known at the time of acquisition, or the creation of tax or accounting issues. Acquired businesses are not always in full compliance with legal, regulatory or Novartis standards, including, for example, Current Good Manufacturing Practices (cGMP) or cGCP standards, which can be costly and time-consuming to remediate. Furthermore, our strategic alliances and collaborations with third parties may not achieve their intended goals and objectives within expected time frames, or at all. For more information about recent business acquisitions, see “Item 18. Financial Statements—Note 2. Significant transactions.”

Similarly, we cannot ensure that we will be able to successfully divest or spin off businesses or other assets that we have identified for this purpose, or that any completed divestment or spin-off will achieve the expected strategic benefits, operational efficiencies or opportunities, or that the divestment or spin-off will ultimately maximize shareholder value.

Intellectual property

Risk description

Expiry, assertion or loss of intellectual property protection

Context and potential impact

Many of our products are protected by intellectual property rights, which may provide us with exclusive rights to market those products for a limited time, and to enable our purpose of reimagining medicine by sustainably financing our research and development. However, the strength and duration of those rights can vary significantly from product to product and from country to country, and they may be successfully challenged by third parties or governmental authorities.

Loss of intellectual property protection and the introduction of generic or biosimilar competition for a patented branded medicine in a country typically result in a significant reduction in net sales and operating income for the branded product. Such competition can occur after successful challenges to intellectual property rights or the regular expiration of the patent term or other intellectual property rights. Such competition can also result from the entry of generic or biosimilar versions of another medicine in the same therapeutic class as one of our drugs or in a competing therapeutic class, from a Declaration of Public Interest or the compulsory licensing of our intellectual property by governmental authorities, or as a result of a general weakening of intellectual property and governing laws in certain countries around the world. In addition, generic or biosimilar manufacturers may sometimes conduct so-called “launches at risk” of products that are still under legal challenge for infringement, or whose patents are still under legal challenge for validity, before final resolution of legal proceedings.

We also rely in all aspects of our businesses on unpatented proprietary technology, know-how, trade secrets and other confidential information, which we seek to protect through various measures, including confidentiality agreements with licensees, employees, third-party collaborators and consultants who may have had access to such information. If these agreements are breached or our other protective measures should fail, then our contractual or other remedies may not be adequate to cover our losses.

We may also be subject to assertions of intellectual property rights against our medicines by third parties. If successful, these actions may involve payment of future royalties or damages, for example for patent infringement, and may also involve injunctive relief requiring the removal of one or more dosage strengths of a product from the market (or removal of a therapeutic indication from the product’s approved labeling) for a period of time or throughout the life of the asserted intellectual property right. Such damages or such an injunction may have a material impact on our operating income and net sales.

In any given year, we may experience a potentially significant impact on our net sales from products that have already lost intellectual property protections, as

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well as products that may lose protection during the year. Because we may have substantially reduced marketing and research and development expenses related to products that are in their final years of exclusivity, the initial loss of protection for a product during a given year could also have an impact on our operating income for that year in an amount corresponding to a significant portion of the product’s lost sales. The magnitude of the impact of generic or biosimilar competition on our income could depend on a number of factors. These include, with respect to income in a given year, the time of year at which the generic or biosimilar competitor is launched; the ease or difficulty of manufacturing a competitor product and obtaining regulatory approval to market it; the number of generic or biosimilar competitor products approved, including whether, in the US, a single competitor is granted an exclusive marketing period; whether an authorized generic is launched; the geographies in which generic or biosimilar competitor products are approved, including the strength of the market for generic or biosimilar pharmaceutical products in such geographies, and the comparative profitability of branded pharmaceutical products in such geographies; and our ability to successfully develop and launch new products for patients that may also offset the income lost to generic or biosimilar competition. For more information on the patent and generic competition status of our products, see “Item 4. Information on the Company—Item 4.B Business overview—Intellectual property.”

Sandoz spin-off

Risk description

We may not successfully achieve our goals related to our separation from Sandoz and our failure to do so may have an adverse impact on our business

Context and potential impact

We recently completed the separation of Sandoz, our generics and biosimilars division, into a new Swiss publicly traded independent company, by way of a 100% spin-off. In connection with the Sandoz separation, we entered into a separation and distribution agreement and various other agreements. These agreements govern the separation and distribution and the relationship between Novartis and Sandoz going forward, including with respect to the allocation of assets and liabilities between Novartis and Sandoz. The agreements also provide for the performance of services by each company for the benefit of the other company for a period of time. The terms, scope and/or duration of these agreements could negatively impact our ability to pursue other strategic business interests as we will have to devote resources and capacity to fulfilling our obligations that we may prefer to direct elsewhere. If we or Sandoz are unable to satisfy our respective obligations under these agreements, we could incur losses or experience operational challenges or difficulties. These agreements could also lead to disputes over the performance of obligations under these agreements or the allocation of our respective resources. For example, during the term of these agreements, we may have less flexibility to optimize our biologic manufacturing for our own products (or those of other third parties). In addition, pursuant to these agreements, we will perform technical development services for Sandoz, which may involve certain proprietary know-how. While we intend to retain the personnel involved in our technical research and development and to protect our trade secrets, provision of such services might create the incremental potential for the disclosure or misuse of such proprietary know-how, particularly in connection with technology transfer at the end of such arrangements.

Additionally, we may not realize the anticipated strategic, financial, operational, or other benefits from our separation of Sandoz. We cannot predict with certainty when the benefits expected from the Sandoz spin-off will occur or the extent to which they will be achieved. In addition, we incurred one-time costs and may encounter operational inefficiencies in connection with the Sandoz spin-off that may negate some of the benefits we expect to achieve. If we do not realize these assumed benefits, we could suffer a material adverse effect on our financial condition.

Further, if the spin-off does not generally qualify as a tax-neutral transaction for Swiss and U.S. federal income tax purposes, we, our shareholders, or both, could be subject to significant tax liabilities. The spin-off is intended to qualify for tax-neutral treatment for us and our shareholders for Swiss and U.S. federal income tax purposes. If, however, the spin-off fails to qualify as tax-neutral for Swiss and U.S. federal income tax purposes, we, our shareholders, or both, could recognize taxable gain with respect to the spin-off, resulting in Swiss and U.S. income, withholding and capital gains tax consequences. In particular, if the spin-off does not qualify as tax neutral for Swiss and U.S. federal income tax purposes, our shareholders who received shares of Sandoz in the spin-off as part of the separation would be subject to tax as if they had received a taxable distribution equal to the fair market value of such shares. For additional information about the potential tax consequences of the spin-off, see “Item 10.E Taxation—Tax consequences of the Sandoz spin-off.”

Environmental, social and governance matters

Risk description

Failure to meet rapidly evolving environmental, social and governance expectations

Context and potential impact

Increasingly, in addition to financial results, companies are being judged by their performance on a variety of environmental, social and governance (ESG) matters, which can contribute to the long-term sustainability of a company’s performance. An inability to successfully perform on ESG matters and to meet societal expectations could result in negative impacts on our reputation, recruitment, retention, operations, financial results, and share price.

Topics related to large societal changes such as social inequity, access to medicines and climate change are increasingly important to a wide range of our stakeholders. For example, a variety of organizations measure the performance of companies on ESG topics, and the results of these assessments are widely publicized. In addition, investments in funds that specialize in

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companies that perform well in such assessments are increasingly popular, and major institutional investors have publicly emphasized the importance of such ESG measures in making their investment decisions. Our actions related to ESG topics may in the long-term impact our operations and ability to achieve our strategic goals, and ultimately could have a potential negative impact on the value of Novartis.

We actively manage a broad range of ESG matters, taking into consideration their expected impact on the sustainability of our business over time, and the potential impact of our business on society and the environment. We have created a Sustainability & ESG Office, which, in coordination with the ESG Committee of the Executive Committee of Novartis, is tasked with developing our ESG strategy and tracking our performance against our ESG targets. However, considering the fast pace of change of external expectations, and a range of upcoming regulations, there can be no certainty that we will manage such issues successfully, that the ESG standards we currently use to measure our performance against will remain the same, or that we will successfully meet society or investors’ expectations. Failure to meet rapidly evolving regulatory requirements and investor and societal expectations could also result in litigation or regulatory actions, which could have a material adverse impact on our reputation, recruitment, retention, operations, financial results, and share price. Additionally, external partners in our value chain that we do not control may not comply with ESG commitments and goals we set for ourselves, which may have a negative impact on our business.

Operational risks

Cybersecurity and data protection

Risk description

Cybersecurity breaches, data loss and catastrophic loss of IT systems

Context and potential impact

We are heavily dependent on critical, complex and interdependent information technology (IT) systems, including internet‑based systems to support our business processes. We also outsource significant parts of our IT infrastructure to third-party providers, and currently use these providers to perform business-critical IT services for us. We are therefore vulnerable to cybersecurity attacks and incidents on such networks and systems, whether our own or those of the third-party providers that we contract, and we have experienced, and may in the future experience, such cybersecurity threats and attacks. Cybersecurity threats and attacks take many forms, and the size, age and complexity of our IT systems make them potentially vulnerable to external and internal security threats; outages; malicious intrusions and attacks; cybercrimes, including state-sponsored cybercrimes; malware; misplaced data, lost data or data errors; programming or human errors; or other similar events. The risk of such threats and attacks has increased, as virtual and remote working have become more common, and sensitive data is accessed by employees working in less secure, home-based environments. In addition, due to our reliance on third-party providers, we have experienced, and may in the future experience, interruptions, delays or outages in IT service availability due to a variety of factors outside of our control, including technical failures, natural disasters, fraud, or security attacks experienced by or caused by third-party providers. Interruptions in the service provided by these third parties could affect our ability to perform critical tasks.

A significant information security or other event, such as a disruption or loss of availability of one or more of our IT systems, whether managed by us or a third-party service provider, has previously and could in the future negatively impact important business processes, such as the conduct of scientific research and clinical trials, the submission of data and information to health authorities, our manufacturing and supply chain processes, our shipments to customers, our compliance with legal obligations, and communication between employees and with third parties. IT issues have previously led to, and could in the future lead to, the compromise of trade secrets or other intellectual property that could be sold and used by competitors to accelerate the development or manufacturing of competing products; the compromise of personal financial and health information; and the compromise of IT security data such as usernames, passwords and encryption keys, as well as security strategies and information about network infrastructure, which could allow unauthorized parties to gain access to additional systems or data. In addition, malfunctions in software or medical devices that make significant use of IT could lead to a risk of direct harm to patients.

Although we have experienced some of the events described above, to date they have not had a material impact on our operations. Nonetheless, the occurrence of any of the events described above in the future could disrupt our business operations and result in enforcement actions or liability, including potential government fines and penalties, claims for damages, and shareholder litigation or allegations that the public health, or the health of individuals, has been harmed.

Any significant events of this type could require us to expend significant resources beyond those we already invest to remediate any damage, to further modify or enhance our protective measures, and to enable the continuity of our business.

Strategic technology programs implementation

Risk description

Failure to successfully implement our IT strategy may disrupt our core business processes

Context and potential impact

We rely on various IT systems to operate our complex global business and several of our current IT systems are reaching the end of their useful life, which could cause disruptions to our operational stability. As a result, we are implementing several companywide IT programs to replace and consolidate outdated IT systems and to simplify and standardize our processes, systems and tools, and create a unified data marketplace. Implementation and operation of these new systems involves certain risks, including the potential for a failure of the new

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systems to operate as expected; a failure to properly integrate new systems with other systems we use; delays in adopting and scaling of new systems; potential loss of data or information; a failure of, or potential issues with, systems related to our payment and procurement processes; compliance issues; and cost overruns and delays. Our inability to timely and successfully implement our IT strategy may prevent us from materializing the expected business benefits and could lead to business disruptions, cost inefficiencies and potential exposure to legal, regulatory and reputational risks as our internal controls could be negatively affected. Any disruptions or malfunctions of new systems could cause critical information to be delayed, lost, defective, corrupted, or rendered inadequate or inaccessible, which could negatively impact our operations, the effectiveness of our internal controls and financial condition.

Talent management

Risk description

Inability to identify, attract, develop and retain qualified talent for critical roles

Context and potential impact

We rely on identifying, attracting, developing and retaining a diverse, highly skilled workforce across our business and functions to achieve our objectives. If we are unable to sustain our supply of key personnel—including senior members of our scientific and management teams, high‑quality researchers and development specialists and skilled employees with key capabilities in key markets—our ability to achieve our major business objectives may be adversely affected. In addition, our brand and reputation could be negatively impacted, and the diversity of our workforce may decline.

The market for skilled talent has become increasingly competitive, and we anticipate this trend will persist in the long term. We face a challenge to attract and retain top talent in several areas, including biology, immunology, chemistry, clinical development, drug manufacturing, data, digital and IT, oncology, and advanced therapy platforms (i.e., gene and cell therapy, radioligand therapy and “xRNA”). In addition, many pharmaceutical and biotechnology companies, universities and research centers, and government entities with significant capital are not only competing with us to attract the same skilled talent but are also aggressively pursuing our experienced talent. Furthermore, if we are unable to retain and engage key talent of companies that we acquire and integrate, we may not be able to realize the full value of these acquisitions.

In recent years, we have adopted new ways of working that include location flexibility and increasingly recruiting from a global pool of talent. However, the success of our business continues to depend on having employees who possess local knowledge of, and experience in, our key markets. The external talent supply is especially limited in many of the geographies that are expected to be sources of growth for us. In the United States, China and several other markets, the geographic mobility of talent is decreasing, as they find ample career opportunities available closer to home.

The risks associated with the challenging talent market will be exacerbated if we are unable to retain and effectively develop employees, and to maintain an internal pipeline with critical skills, experiences, and leadership to deliver our business priorities. As a result, development, engagement, motivation, succession planning and performance rewards for our critical talent are essential to achieve our business priorities.

External partner risk management and human rights

Risk description

Failure to maintain adequate governance and oversight over external partner relationships, and failure of external partners to meet their contractual, regulatory or other obligations

Context and potential impact

We rely on external partners for the performance of certain key business functions and services, including, among others, research and development, manufacturing operations and warehousing and distribution, certain finance functions, sales and marketing activities and data management. Some external partners, particularly those in developing countries, do not have internal compliance systems or resources comparable to ours. As a result, our investment and efforts in relation to external partner management include focusing on risk management and the oversight of such external partners.

Our reliance on external partners poses certain risks, including the misappropriation of our intellectual property, the failure of the external partner to comply with regulatory and quality assurance requirements, the failure of the external partner to comply with environmental, anti-bribery and human rights standards and regulations, unexpected supply disruptions, breach of our agreement by the external partner, and the unexpected termination or nonrenewal of our agreement by the external partner.

In addition, governments require us, and the public expects us, to take responsibility for and report on compliance with various human rights, responsible sourcing and environmental practices, as well as other actions of our external partner contractors around the world.

Ultimately, if external partners fail to meet their obligations to us, we may lose our investment in the relationship with the external partners or fail to receive the expected benefits of our agreements with such external partners. While we aim to identify and assess any risk of harm to society caused by our external partners’ operations, should any of these external partners fail to comply with the law or our standards, or should they otherwise act inappropriately while performing services for us, we could be held responsible for their acts, our reputation may suffer, and penalties could be imposed on us.

Legal, regulatory, ethics and compliance

Risk description

Challenges posed by evolving legal and regulatory requirements, innovative and disruptive technologies, and societal expectations regarding ethical behavior

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Context and potential impact

We are subject to an extensive and complex framework of laws and regulations across the jurisdictions in which we operate.

The laws and regulations relevant to the healthcare industry and applicable to us are broad in scope, are subject to change, and have evolving interpretations, which could require us to incur substantial costs associated with compliance or to alter one or more of our business practices. For example, we have been, are currently, and may in the future be, subject to various significant legal proceedings, such as private party litigation, government investigations and law enforcement actions worldwide. These types of matters may take various forms based on evolving government enforcement and private party litigation priorities, and could include, for example, matters pertaining to: pricing; bribery and corruption; trade regulation and embargo legislation; product liability; commercial disputes; employment and wrongful discharge; antitrust and competition; securities; government benefit programs; reimbursement; rebates; healthcare fraud; sales and marketing practices; insider trading; occupational health and safety; environmental regulations; tax; cyber and data security; use of technologies, including AI; data privacy; regulatory interactions; disclosure compliance; and intellectual property. Such matters can involve civil or criminal proceedings and can retroactively challenge practices previously considered to be legal.

There is also a risk that governance of our medical and patient support activities, and of our interactions with governments, public officials/institutions, healthcare professionals, healthcare organizations and patient organizations may be inadequate or fail, or that we may undertake activities based on improper or inadequate scientific justification.

Legal proceedings and investigations are inherently unpredictable, and significant judgments sometimes occur. Consequently, we may in the future incur judgments that could involve large payments, including the potential repayment of amounts allegedly obtained improperly, and other penalties, including treble damages. In addition, such legal proceedings and investigations, even if meritless, may affect our reputation, may create a risk of potential exclusion from government reimbursement programs in the US and other countries, and may lead to civil litigation or criminal exposure. As a result, having considered all relevant factors, we have in the past and may again in the future enter into major settlements of such claims without bringing them to final legal adjudication by courts or other such bodies, despite having potentially significant defenses against them, to limit the risks they pose to our business and reputation. Such settlements may require us to pay significant sums of money and to enter into corporate integrity or similar agreements, which are intended to regulate company behavior for extended periods. From time to time, we may also initiate challenges to laws or regulations that we believe are illegal or unconstitutional. For example, in September 2023, we filed a lawsuit against the US Department of Health and Human Services and the Centers for Medicare and Medicaid Services because we believe the drug price-setting provisions in the Inflation Reduction Act (IRA) are unconstitutional and will have long-lasting negative consequences for patients by limiting access to medicines now and in the future. The result of this and similar litigation we may pursue in the future is inherently uncertain and may negatively impact our business and reputation.

For information on significant legal matters pending against us, see “Item 18. Financial Statements—Note 21. Provisions and other non‑current liabilities” and “Item 18. Financial Statements—Note 29. Commitments and contingent liabilities.”

New requirements may also be imposed on us due to changing government and societal expectations regarding the healthcare industry, and acceptable corporate behavior generally. For example, we are faced with laws and regulations requiring changes in how we do business, including with respect to disclosures concerning our interactions with healthcare professionals, healthcare organizations and patient organizations. These laws and regulations include requirements that we disclose payments or other transfers of value made to healthcare professionals and organizations, as well as information relating to the costs and prices for our products, which represent evolving standards of acceptable corporate behavior. These requirements may cause us to incur significant costs, including substantial time and additional resources, that are necessary to bring our interactions with healthcare professionals and organizations into compliance with these evolving standards.

To support our efforts to comply with the many requirements that impact us, we have a significant global ethics, risk and compliance program in place, and we devote substantial time and resources to efforts to ensure that we conduct business in a lawful manner, and in line with society’s expectations. Despite our efforts, an actual or alleged failure to comply with the law or with heightened public expectations could lead to substantial liabilities that may not be covered by insurance, or to other significant losses.

Manufacturing and product quality

Risk description

Inability to ensure proper controls in product development and product manufacturing, and failure to comply with applicable regulations and standards

Context and potential impact

The development and manufacture of our products is complex and heavily regulated by governmental health authorities around the world. Regardless of whether our products and the related raw materials are developed and manufactured at our own manufacturing sites or by third parties, we must ensure that all development and manufacturing processes comply with regulatory requirements, as well as our own quality standards in order to deliver novel therapies while ensuring patient safety. Failure to comply with regulatory requirements may result in warning letters, suspension of manufacturing, seizure of products, injunctions, product recalls, failure to secure product approvals, debarment or harm to patients or our reputation.

In recent years, global health authorities have substantially intensified their scrutiny of manufacturers’ compliance with regulatory requirements. Any significant

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failure by us or our third-party suppliers to comply with regulatory requirements, or with health authorities’ expectations, may create the need to suspend clinical trials, shut down production facilities or production lines, and recall commercial products. A failure to fully comply with regulatory requirements could also lead to a delay in the approval of new products, an inability to ship or import our products, and significant penalties and reputational harm.

In addition, the technically complex manufacturing processes required to manufacture many of our products increase the risk of both production failures and product recalls, and can increase the cost of producing our goods. Some of our products require a supply of highly specialized raw materials, such as cell lines, tissue samples, bacteria, viral strains and radioisotopes. In addition, we manufacture and sell a number of sterile products, biologic products and products that involve advanced therapy platforms, such as gene and cell therapy, radioligand therapy, and “xRNA,” all of which are particularly complex and involve highly specialized manufacturing technologies. For more information, see “Item 4. Information on the Company—Item 4.B. Business overview—Production.” As a result, even slight deviations at any point in their production processes or in the materials used have led to, and may in the future lead to, production failures or recalls.

Supply chain

Risk description

Inability to maintain continuity of product supply

Context and potential impact

Many of our products are produced using technically complex manufacturing processes and require a supply of highly specialized raw materials. For some of our products and raw materials, we may rely on a single source of supply. In addition, we manufacture and sell a number of sterile products, biologic products, and products that involve advanced therapy platforms, such as gene and cell therapy, radioligand therapy, and “xRNA,” all of which are particularly complex and involve highly specialized manufacturing technologies. Due to this complexity, there is a risk of production and supply of critical raw materials failures, which may result in supply interruptions or product recalls due to manufactured products not meeting required specifications.

In addition, due to the inherent complexities of our manufacturing processes and the supply chains for advanced therapy platforms, we are required to plan our production activities and purchase of materials well in advance. If we suffer from third-party raw material shortages, underestimate market demand for a product, or fail to accurately predict when a new product will be approved for sale, then we may not be able to produce sufficient product to meet demand. These issues could be made worse during a pandemic, or geopolitical events, such as wars in certain parts of the world, and could lead to (i) a sudden increase in demand for selected medicinal products, resulting in the short-term unavailability of critical materials; (ii) logistical and supply challenges that may lead to our inability to ship products from one location to another due to restrictions imposed as a result of a pandemic or geopolitical events and any related sanctions, which can also impact transportation and warehousing costs; or (iii) our inability to properly operate a manufacturing site due to restrictions imposed as the result of a pandemic or any issues arising from geopolitical events.

Our or our suppliers’ inability to manage such issues could lead to shutdowns, product shortages, or to us being entirely unable to supply products to patients for an extended period of time. Furthermore, as our products are intended to promote the health of patients, such shortages or shutdowns could endanger our reputation and have led to, and could continue to lead to, significant losses of sales revenue, potential litigation or allegations that the public health, or the health of individuals, has been harmed.

Data privacy

Risk description

Noncompliance with personal data protection laws and regulations

Context and potential impact

We operate in an environment that relies on the collection, processing, analysis and interpretation of large sets of patients and other individuals’ personal information, including via social media and mobile technologies. In addition, the operation of our business requires data to flow across the borders of numerous countries in which there are different, potentially conflicting, and frequently changing, data privacy laws in effect. Examples of such laws include: the EU General Data Protection Regulation (GDPR); the California Consumer Privacy Act; Brazil’s General Personal Data Protection Law; and the Personal Information Protection Law in China. Such laws impose stringent requirements on how we and third parties with whom we contract collect, share, export or otherwise process personal information, and provide for significant penalties for noncompliance. Breaches of our systems or those of our third-party contractors, or other failures to protect the data we collect from misuse or breach by third parties, could expose such personal information to unauthorized persons.

Events involving the substantial loss of personal information, use of personal information without a legal basis, or other privacy violations could give rise to significant liability, reputational harm, damaged relationships with business partners, and potentially substantial monetary penalties and other sanctions under laws enacted or being enacted around the world. Such events could also lead to restrictions on our ability to use personal information and/or transfer personal information across country borders, which could interfere with critical business operations. In addition, there is a trend of increasing divergence of data privacy legal frameworks, not only across these frameworks but also within individual legal frameworks themselves. This divergence may constrain the implementation of global business processes and may lead to different approaches on the use of health data for scientific research, which may have a negative impact on our business and operations.

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Falsified medicines

Risk description

Impact of falsified medicines on patient safety, and reputational and financial harm to Novartis and our products

Context and potential impact

We continue to be challenged by the vulnerability of distribution channels to falsified medicines, which include counterfeit, stolen, tampered and illegally diverted medicines, as defined by the World Health Organization.

Falsified medicines pose patient safety risks and can be seriously harmful or life-threatening. Reports of adverse events related to falsified medicines and increased levels of falsified medicines in the healthcare system affect patient confidence in genuine medicines and in healthcare systems in general. These events could also cause us substantial reputational and financial harm, and potentially lead to litigation if the adverse event from the falsified medicine is mistakenly attributed to the genuine one. Stolen or illegally diverted medicines that are not properly stored and later sold through unauthorized channels could adversely impact patient safety, our reputation and our business. Furthermore, there is a direct financial loss when falsified medicines replace sales of genuine medicines, or genuine medicines are recalled following the discovery of falsified products.

Emerging risks

Geopolitical developments

Risk description

Impact of geo- and socio-political threats

Context and potential impact

Geopolitical tensions in various parts of the world worsened in 2023 and could continue to worsen in 2024 and beyond. Direct conflicts, including the ongoing wars in Ukraine and the Middle East, an increasingly challenging economic landscape and social unrest, each have both a direct and indirect impact on the pharmaceutical industry and lead to a degree of uncertainty about the future.

As a result of ongoing geopolitical tensions, certain countries have adopted, and may in the future adopt additional, protectionist measures including the imposition of tariffs. Tariffs that are intended to shield domestic markets from foreign competition and the possibility of additional trade restrictions, such as export controls, could have a material impact on our business. If tariffs or export controls on pharmaceutical products or active pharmaceutical ingredients (APIs) were increased in certain parts of the world, our supply chain and flow of our products could be immediately disrupted. There is also an additional risk that aggressive monetary and fiscal policies by governments and central banks to curb inflation may prompt market-specific recessions and raise the cost-of-living, further putting pressure on pricing and cost containment for the pharmaceutical industry.

Collectively, unstable geo- and socio-political conditions could, among other things, disturb the international flow of goods and increase the costs and difficulties of international transactions. This could potentially impact our ability to develop and supply our products to patients in an undisrupted fashion, and further erode reimbursement mechanisms for our medicines.

Macroeconomic developments

Risk description

Impact of macroeconomic developments

Context and potential impact

Our business may be impacted by deteriorating macroeconomic and financial conditions directly affecting us, our suppliers, payers and consumers. Given that patients, in many countries, directly pay a sizable and increasing portion of their own healthcare costs, there is a risk that consumers may cut back on prescription drugs due to financial constraints.

Negative macroeconomic developments may also adversely affect the ability of payers, as well as our distributors, customers, suppliers, and service providers, to pay for our products, or to buy necessary inventory or raw materials, and to perform their obligations under agreements with us. Weakening growth and rising interest rates may also increase the credit risk of our counterparties. Although we make efforts to monitor the financial condition and liquidity of these third parties, our ability to do so is limited, and some of them may become unable to pay their bills in a timely manner or may even become insolvent. These risks may be elevated with respect to our interactions with fiscally challenged government payers, or with third parties with substantial exposure to such payers.

At the same time, significant changes, and potential future volatility in financial markets, the consumer and business environment, the competitive landscape, and the global political and security landscape make it increasingly difficult for us to predict our revenues and earnings. As a result, any revenue or earnings guidance or outlook that we have given or might give may be overtaken by events or may otherwise prove to be inaccurate. Although we endeavor to give reasonable estimates of future revenues and earnings at the time at which we give such guidance, based on then‑current knowledge and conditions, there is a risk that such guidance or outlook will prove to be incorrect.

Asset price corrections in financial markets may also result in lower returns on our financial investments. In addition, pricing pressures in developed markets resulting from efforts to reduce the cost of healthcare (e.g., the Inflation Reduction Act in the US, which targets drug prices) may have a negative impact on our revenue and our net sales. In addition, inflation may have an impact on our operating costs in the form of higher prices for supplies, energy, raw materials, wages, and capital, which could reduce our net income.

Uncertainties around future central bank and other economic policies in the US and EU, including rising interest rates, as well as high debt levels in some countries could also impact world trade. Sudden increases in economic, currency or financial market volatility in different countries, such as appreciation of the US dollar, have also impacted, and may continue to have an unpredictable impact on our business, or results of operations,

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including the conversion of our operating results into our reporting currency, the US dollar, as well as the value of our investments in our pension plans.

For more information about the effect of price controls on our business, see “Item 4. Information on the Company—Item 4.B—Business overview—Price controls.” See also “Item 5. Operating and Financial Review and Prospects—Item 5.B Liquidity and capital resources—Effects of currency fluctuations,” “Item 5. Operating and Financial Review and Prospects—Item 5.B Liquidity and capital resources—Condensed consolidated balance sheets,” “Item 18. Financial Statements—Note 16. Trade receivables” and “Item 18. Financial Statements—Note 30. Financial instruments – additional disclosures.”

Climate change

Risk description

Failure to manage physical and transition risks from climate change

Context and potential impact

We are exposed to a broad range of climate risks such as transition risks (e.g., regulatory frameworks, carbon pricing, and the cost of and access to capital) and physical risks (e.g., heat, water scarcity, rising sea levels, and flooding from severe weather events), which could vary in magnitude and impact across different countries.

Climate change has triggered, and may continue to trigger, the adoption of new regulatory requirements across the globe, as well as rapidly evolving societal expectations. To comply with such legislation and meet such expectations, we may be required to increase our investment in technology to reduce our energy use, water use and greenhouse gas emissions. In addition, legislative and regulatory action, both current and in the future, includes or could include, carbon pricing, climate risk-related disclosures, and changes in zoning or building codes to increase climate resilience. As a result, the combined impact of these transition risks could increase our direct operating costs or be passed on to us through the impact on our supply chain. As a result of these transition risks, we are committed to becoming carbon neutral in our own operations by 2025, and carbon neutral across our value chain by 2030. In addition, we are committed to achieving net zero across our value chain by 2040. Any failure to achieve these commitments in the expected time frame, or at all, could result in negative impacts on our reputation, our operations, and the price of our shares.

Climate change has created, and will continue to create, physical risks to our business. Some of our production facilities that depend on the availability of significant water supplies are located in areas where fresh water is increasingly scarce. Other facilities are located in areas that, due to increasingly violent weather events, rising sea levels, or both, are increasingly at risk of substantial damage. In regions where such a risk is present, this has an impact not only on our own operations but also our distributed supply chain. Such events may result in the loss of life, increased costs, business interruptions, destruction of facilities, and disruption to healthcare systems that patients use to access our medicines.

Tax laws and developments

Risk description

Changes in tax laws or their application

Context and potential impact

Our multinational operations are taxed under the laws of the countries and other jurisdictions in which we operate. Changes in tax laws or in their application could lead to an increased risk of international tax disputes and an increase in our effective tax rate, which could adversely affect our financial results. The integrated nature of our worldwide operations can produce conflicting claims from revenue authorities in different countries as to the profits to be taxed in the individual countries, including potential disputes relating to the prices our subsidiaries charge one another for intercompany transactions, known as transfer pricing. Most of the jurisdictions in which we operate have double tax treaties with other foreign jurisdictions, which provide a framework for mitigating the impact of double taxation on our revenues and capital gains. However, mechanisms developed to resolve such conflicting claims are largely untried and can be expected to be very lengthy. Accruals for tax contingencies are made based on experience, interpretations of tax law, and judgments about potential actions by tax authorities. However, due to the complexity of tax contingencies, the ultimate resolution of any tax matter may result in payments materially different from the amounts accrued.

In 2019, the Organization for Economic Co-operation and Development (OECD) launched a new initiative on behalf of the G20 to minimize profit shifting by working toward a global tax framework that ensures that corporate income taxes are paid where consumption takes place, in addition to introducing a global standard on minimum taxation combined with new tax dispute resolution processes. This project achieved OECD political consensus in October 2021, and the detailed principles are still under discussion by the OECD and political leaders. The OECD expects that the implementation of these new principles will begin globally in 2024. However, some countries already announced postponement to 2025 while others have not taken any implementation steps so far. Once changes to the tax laws in any jurisdiction in which we operate are enacted or substantially enacted, we will be subject to the OECD top-up tax, the aim of which is to bring the total amount of taxes paid on our profit in a given jurisdiction up to a minimum rate of 15%. In June 2023, the Swiss public voted to approve an amendment to the Swiss Constitution that provides the legal basis for the implementation of an OECD compliant minimum tax in Switzerland. In December 2023, the Swiss federal council partially implemented the OECD 15% minimum tax for the financial year 2024 in the form of a qualified domestic top-up tax (QDMTT), which will be assessed on certain qualifying profits earned by companies domiciled in Switzerland. This QDMTT will not be applied to qualifying profits earned by a company’s affiliates domiciled in tax jurisdictions outside of Switzerland. The timing and specific provisions of any further tax regulations remain subject to assessments in political and technical forums at both a federal and cantonal level.

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Due to the ongoing discussion in many countries on the implementation and additional guidance from the OECD, the full impact of the OECD minimum tax project on our financial position, income statement and cash flows cannot currently be estimated. On September 12, 2023, the EU Commission published two draft directives relating to international tax. The draft Business in Europe: Framework for Income Taxation (BEFIT) directive provides common rules for determining the corporate tax base for EU-based entities that are part of a group with global consolidated revenues above EUR 750 million. The BEFIT proposal includes provisions for a formula-driven allocation of profits between relevant EU member states which would then be subject to the corporate income tax rate of the respective member state. The draft transfer pricing directive aims to harmonize transfer pricing rules within the EU consistent with the OECD Transfer Pricing Guidelines. It also clarifies processes for relieving double taxation within the EU. Both draft directives require unanimous agreement among EU member states before they can be further implemented. In the US, the IRA was signed into law on August 16, 2022. The IRA creates a 15% corporate alternative minimum tax on the profits of corporations whose average annual adjusted financial statement income exceeds USD 1.0 billion. The IRA also includes a one percent excise tax on certain corporate stock repurchases. Additionally, the IRA also contains provisions that affect tax-exempt entities, including tax credit opportunities to encourage investment in clean energy and expanded incentives for energy-efficient construction by tax-exempt entities.

While we have taken steps to comply with the evolving tax initiatives of the OECD, the US and the EU, and we will continue to do so, significant uncertainties remain as to the outcome of our efforts.

For more information, see “Item 18. Financial Statements—Note 7. Income taxes” and “Item 18. Financial Statements—Note 13. Deferred tax assets and liabilities.”

General risks

Indebtedness

Risk description

Our indebtedness could adversely affect our operations

Context and potential impact

As of December 31, 2023, we had USD 18.4 billion of non‑current financial debt, and USD 6.2 billion of current financial debt. Our current and long‑term debt requires us to dedicate a portion of our cash flow to service interest and principal payments and, if interest rates rise, this amount may increase. As a result, our existing debt may limit our ability to use our cash flow to fund capital expenditures, to engage in transactions, or to meet other capital needs, or otherwise may place us at a competitive disadvantage relative to competitors that have less debt. Our debt could also limit our flexibility to plan for and react to changes in our business or industry, and increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates or a downturn in our business or the economy. We may also have difficulty refinancing our existing debt or incurring new debt on terms that we would consider to be commercially reasonable, if at all.

Goodwill and intangible assets

Risk description

Goodwill and intangible assets resulting in significant impairment charges

Context and potential impact

We carry a significant amount of goodwill and other intangible assets on our consolidated balance sheet, including, in particular, substantial goodwill and other intangible assets obtained through acquisitions, including most recently through our acquisitions of The Medicines Company, Endocyte, Novartis Gene Therapies, ADACAP, and Chinook Therapeutics. As a result, we may incur significant impairment charges in the future if the fair value of the intangible assets and the groupings of cash-generating units containing goodwill would be less than their carrying value on our consolidated balance sheet at any point in time.

We regularly review our intangible and tangible assets for impairment, including identifiable intangible assets and goodwill. Any significant impairment charges could have a material adverse effect on our results of operations and financial condition. In 2023, for example, we recorded intangible asset impairment charges of USD 3.0 billion.

For a detailed discussion about how we determine whether an impairment has occurred, what factors could result in an impairment, and the impact of impairment charges on our results of operations, see Item 18. Financial Statements—Note 1. Accounting policies” and “Item 18. Financial Statements—Note 12. Goodwill and intangible assets.”

Foreign currency exchange rates

Risk description

Negative effect on financial results due to foreign currency exchange rate fluctuations

Context and potential impact

Changes in exchange rates between the US dollar, which is our reporting currency, and other currencies can result in significant increases or decreases in our reported sales, costs and earnings as expressed in US dollars, and in the reported value of our assets, liabilities and cash flows.

In addition to ordinary market risk, there is a risk that countries could take affirmative steps that could significantly impact the value of their currencies. Such steps could include “quantitative easing” measures and potential withdrawals by countries from common currencies. In addition, countries facing local financial difficulties, including countries experiencing high inflation rates, and highly indebted countries facing large capital outflows, may impose controls on the exchange of foreign currency. Currency exchange controls and sanctions could limit our ability to distribute retained earnings from our local affiliates, or to pay intercompany payables due from those countries.

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Despite measures undertaken to reduce or hedge against foreign currency exchange risks, as a significant portion of our earnings and expenditures are in currencies other than the US dollar, including expenditures in Swiss francs that are significantly higher than our revenue in Swiss francs, any such exchange rate volatility may negatively and materially impact our results of operations and financial condition, and may impact the reported value of our net sales, earnings, assets and liabilities. In addition, the timing and extent of such volatility can be difficult to predict. Furthermore, depending on the movements of particular foreign exchange rates, we may be materially adversely affected at a time when the same currency movements are benefiting some of our competitors.

For more information on the effects of currency fluctuations on our consolidated financial statements and on how we manage currency risk, see “Item 5. Operating and Financial Review and Prospects—Item 5.B Liquidity and capital resources—Effects of currency fluctuations” and “Item 18. Financial Statements—Note 30. Financial instruments – additional disclosures.”

Key customers

Risk description

Concentration among our key customers

Context and potential impact

A significant portion of our global sales is made to a relatively small number of drug wholesalers, retail chains and other purchasing organizations. For example, our three most important customers globally accounted for approximately 15%, 13% and 8%, respectively, of net sales from continuing operations in 2023. The largest trade receivables outstanding were for these three customers, amounting to 17%, 13% and 8%, respectively, of the trade receivables at December 31, 2023. Historically, there has been a trend of consolidation among our customer base, which may continue in the future. As a result, we are exposed to a concentration of credit risk among our key customers. If one or more of our major customers experienced financial difficulties, the effect on us would be considerable, and could include a substantial loss of sales and an inability to collect amounts owed to us.

Environmental matters

Risk description

Impact of environmental liabilities

Context and potential impact

The environmental laws of various jurisdictions impose actual and potential obligations on us to investigate and remediate contaminated sites, including in connection with activities in the past by businesses that are no longer part of Novartis. In some cases, these remediation efforts may take many years. While we have set aside provisions for known worldwide environmental liabilities that are probable and estimable, there is no guarantee that additional costs will not be incurred beyond the amounts for which we have provided in our consolidated financial statements. If environmental contamination resulting from our facility operations, business activities or products adversely impacts third parties or if we fail to properly manage the safety of our facilities, including the safety of our employees and contractors, and the environmental risks, we may face substantial one-time and recurring costs and other penalties, and be required to increase our provisions for environmental liabilities. Furthermore, our headquarters and a number of our major production and research facilities are located near earthquake fault lines in Basel, Switzerland. Other major facilities are located near major earthquake fault lines in various locations around the world. A major earthquake could result in loss of life, business interruptions and the destruction of our facilities. See also “Item 4. Information on the Company—Item 4.D Property, plants and equipment” and “Item 18. Financial Statements—Note 21. Provisions and other non‑current liabilities.”

Pension plans

Risk description

Inaccuracies in the assumptions and estimates used to calculate our pension plan and other post-employment obligations

Context and potential impact

We sponsor pension and other post-employment benefit plans in various forms that cover a significant portion of our current and former employees. For post-employment plans with defined benefit obligations, we are required to make significant assumptions and estimates about future events in calculating the expense and the present value of the liability related to these plans. These include assumptions about the discount rates we apply to estimate future defined benefit obligations and net periodic pension expense, as well as rates of future pension increases. In addition, our actuarial consultants provide our management with historical statistical information, such as withdrawal and mortality rates in connection with these estimates.

Assumptions and estimates that we use may differ materially from the actual results we experience due to changing market and economic conditions, higher or lower withdrawal rates, and longer or shorter life spans of participants, among other factors. Depending on events, such differences could have a material effect on our total equity, and may require us to make additional contributions to our pension funds.

For more information on obligations under retirement and other post-employment benefit plans and underlying actuarial assumptions, see “Item 18. Financial Statements—Note 26. Post-employment benefits for employees.”

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Item 4. Information on the Company

4.A History and development of Novartis

Novartis AG

Novartis AG was incorporated on February 29, 1996, under the laws of Switzerland as a stock corporation (“Aktiengesellschaft”) with an indefinite duration. On December 20, 1996, our predecessor companies, Ciba‑Geigy AG and Sandoz AG, merged into this new entity, creating Novartis. We are domiciled in and governed by the laws of Switzerland. Our registered office is located at the following address:

Novartis AG

Lichtstrasse 35

CH‑4056 Basel, Switzerland

Telephone: +41‑61‑324‑1111

Website: www.novartis.com

Novartis AG, our Swiss holding company, owns, directly or indirectly, all of our significant operating companies. For a list of our significant operating subsidiaries, see “Item 18. Financial Statements—Note 33. Novartis principal subsidiaries and associated companies.”

For a description of important corporate developments since January 1, 2021, see “Item 18. Financial Statements—Note 2. Significant transactions.” For information regarding the Company’s material commitments for capital expenditures, see “Item 5. Operating and Financial Review and Prospects—Material contractual obligations and commitments.”

The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

4.B Business overview

Overview

Novartis is an innovative medicines company. Our purpose is to reimagine medicine to improve and extend people’s lives. Our strategy is to focus on high-value, innovative medicines that alleviate society’s greatest disease burdens through technology leadership in R&D and novel access approaches. To support our strategy, we have clear focus areas where we commit most of our time, energy and resources. These core therapeutic areas are cardiovascular, renal and metabolic; immunology; neuroscience; and oncology. For more information about our strategy, see “Item 5. Operating and Financial Review and Prospects—Overview—Our strategy.”

In 2023, Novartis achieved net sales from continuing operations of USD 45.4 billion, and net income from continuing operations amounted to USD 8.6 billion. Headquartered in Basel, Switzerland, we employed 76 057 full‑time equivalent employees as of December 31, 2023. Our products are sold in approximately 130 countries around the world.

Beginning in September 2023, we reorganized our operations into the following five organizational units:

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

• Development oversees the development of potential new medicines through clinical trials to confirm their safety and efficacy, and steers the way to regulatory approval for use by patients.

• Operations manufactures and delivers our medicines to customers, while also overseeing the global functions of IT, procurement and real estate services.

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

These organizational units are supported by our global functions in areas such as corporate affairs, ethics, risk and compliance, finance, legal, internal audit, people and organization and strategy and growth. For more information about our Development unit, see “—Research and development—Development program” below. For more information about our Operations unit see “—Item 4.D Property, plants and equipment” and “Item 18. Financial Statements—Note 3. Operating segment and Note 4. Revenues and geographical information.”

In 2023, Novartis completed its transformation into a pure-play innovative medicines business, with the successful spin-off of Sandoz. Effective October 4, 2023, Sandoz was listed on the SIX Swiss Exchange, with a Level 1 ADR program in the United States. To comply with International Financial Reporting Standards (IFRS^®^) Accounting Standards as a result of the spin-off, Novartis has separated the Company’s reported financial data for the current and prior years into “continuing” and “discontinued” operations. Continuing operations comprises the retained business activities that includes our innovative

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medicines business and continued corporate activities. Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars division and certain corporate activities attributable to Sandoz prior to the spin-off up to the distribution date of October 3, 2023, and certain other expenses related to the spin-off. Included in 2023 is also the IFRS Accounting Standards non-cash, non-taxable net gain on distribution of Sandoz Group AG to Novartis AG shareholders. Sandoz operated in the off-patent medicines segment and specialized in the development, manufacturing and marketing of generic pharmaceuticals and biosimilars. The Sandoz business was organized globally into two franchises: Generics and Biosimilars. Except where noted, this Annual Report focuses on continuing operations.

Key marketed products

The following summaries describe certain Novartis key marketed products in certain indications. These products are listed according to year-end net sales within each therapeutic area or reporting category. Some of them have lost patent protection or are otherwise subject to generic competition, while others are subject to patent challenges by potential generic competitors. Please see “—Intellectual property” for general information on intellectual property and regulatory data protection, and for more information on the status of patents and exclusivity for certain key marketed products.

While we typically seek to sell our marketed products throughout the world, not all products and indications are available in every country. The indications described in these summaries may therefore vary by country. In addition, a product may be available under different brand names depending on country and indication.

Cardiovascular, renal and metabolic

• Entresto (sacubitril/valsartan) is an oral, first‑in‑class angiotensin receptor neprilysin inhibitor. Entresto enhances the protective effects of a hormone system called the natriuretic peptide system, and simultaneously suppresses the harmful effects of a hormone system called the renin‑angiotensin‑aldosterone system. It is approved:

• In the US, the EU and other countries to treat adults who have symptomatic heart failure with reduced ejection fraction (HFrEF). HFrEF is a disease in which the heart cannot pump blood efficiently

• In the US and other countries to treat most chronic heart failure patients with preserved ejection fraction (HFpEF). HFpEF is a disease in which the heart’s main pumping chamber (left ventricle) becomes stiff and unable to fill properly with blood

• In the US and other countries to treat children aged 1 year and older who have symptomatic heart failure with systemic left ventricular systolic dysfunction

• In China and Japan to treat patients with essential hypertension (abnormally high blood pressure that is not the result of a medical condition)

• Leqvio (inclisiran) is the first and only approved small-interfering RNA therapy to reduce LDL cholesterol, a risk factor for atherosclerotic cardiovascular disease (ASCVD), which is caused by plaque buildup in the arteries. Leqvio is administered by a healthcare professional twice a year as an injection, following an initial dose and another dose after three months. It is approved:

• In the EU and other countries to treat adults with primary hypercholesterolemia (heterozygous familial and non-familial) or mixed dyslipidemia as an adjunct to diet. Leqvio is used in combination with the maximum tolerated dose of a statin or a statin with other lipid-lowering therapies in patients unable to reach LDL cholesterol goals, or alone or in combination with other lipid-lowering therapies in patients who are statin-intolerant or for whom a statin is contraindicated. Primary hypercholesterolemia and mixed dyslipidemia are disorders characterized by high levels of fats in the blood

• In the US to treat adults with primary hyperlipidemia, including heterozygous familial hypercholesterolemia (HeFH), as an adjunct to diet and statin therapy to reduce LDL cholesterol. This includes patients who have ASCVD or HeFH, or are at an increased risk of ASCVD, meaning they have not had a cardiovascular event but have other factors that increase their risk. Primary hyperlipidemia, also known as high cholesterol, is characterized by high levels of fats in the blood

Novartis obtained global rights to develop, manufacture and commercialize Leqvio under a license and collaboration agreement with Alnylam Pharmaceuticals, Inc.

Immunology

• Cosentyx (secukinumab) is an injectable, fully-human monoclonal antibody that selectively inhibits interleukin-17A (IL‑17A), a cytokine involved in several immunological diseases. It is approved in the US, the EU and other countries to treat:

• Adults and children aged 6 years and older with moderate‑to‑severe plaque psoriasis (this indication is also approved in China). Psoriasis is a debilitating systemic inflammatory disease that is characterized by the appearance of raised, red patches on the skin

• Adults with active ankylosing spondylitis (AS). AS is a progressive inflammatory disease that is characterized by chronic back pain, is generally visible on X-rays, and can cause structural damage to the bones and joints

• Adults with active non-radiographic axial spondyloarthritis (nr-axSpA). nr-axSpA is a long-term inflammatory disease that is characterized by chronic back pain and is not visible on X-rays

• Adults and children (aged 2 years and older in the US and 6 years and older in the EU) with active psoriatic arthritis (PsA). PsA is a type of progressive inflammatory arthritis that results in swollen and painful joints and tendons, which can cause structural damage to the bones and joints

• Children (aged 4 years and older in the US and 6 years and older in the EU) with enthesitis-related arthritis (ERA) and children (aged 2 years and older in the US and 6 years and older in the EU) with juvenile psoriatic arthritis (JPsA). ERA and JPsA are

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subtypes of juvenile idiopathic arthritis. If left untreated, they can lead to high levels of pain and disability

•  Adults with moderate to severe hidradenitis suppurativa (HS). HS is a chronic skin disease that causes recurring boil-like lumps that may burst into open wounds and cause irreversible scarring, often in the most intimate parts of the body.

An intravenous formulation of Cosentyx is approved in the US for the treatment of adults with PsA, AS and nr-axSpA.

• Xolair (omalizumab) is an injectable prescription medicine and the only approved antibody designed to target and block immunoglobulin E (IgE). It is approved in the US, the EU and other countries to treat:

• Adults and children aged 6 years and older with moderate‑to‑severe, or severe, persistent allergic asthma

• Adults and children aged 12 years and older with chronic spontaneous urticaria/chronic idiopathic urticaria (hives)

• Adults with nasal polyps or severe chronic rhinosinusitis with nasal polyps (CRSwNP). CRSwNP is a chronic inflammation of the nose and the sinuses with the presence of benign lesions (nasal polyps) on the lining of the nasal sinuses or nasal cavity

Approved indications vary by country. Xolair is provided as lyophilized powder for reconstitution, and as liquid formulation in a pre‑filled syringe. Novartis co-promotes Xolair with Genentech in the US and shares a portion of operating income, but Novartis does not record any US sales. Novartis records all sales of Xolair outside the US. For more information, see “Item 18. Financial Statements—Note 28. Transactions with related parties—Roche Holding AG.”

• Ilaris (canakinumab) is an injectable, selective, high-affinity, fully-human monoclonal antibody that inhibits interleukin-1 beta (IL-1 beta), a key cytokine in the inflammatory pathway. It is approved in the US, the EU and other countries to treat patients with certain debilitating autoinflammatory disorders, including:

• Adults and children with periodic fever syndromes. Periodic fever syndromes are a set of rare disorders characterized by recurrent episodes of illness, with fever as the main symptom

• Patients with Still’s disease, including systemic juvenile idiopathic arthritis and adult-onset Still’s disease. Still’s disease is a disorder that causes fevers, rash and joint pain

• Adults with acute gouty arthritis. Gouty arthritis is a type of arthritis characterized by pain, redness, tenderness and swelling in one or more joints

Approved indications vary by country.

Neuroscience

• Kesimpta (ofatumumab) is an anti-CD20 monoclonal antibody that enables the targeted depletion of B-cells, specifically in lymph nodes. Kesimpta is the only B-cell treatment for relapsing multiple sclerosis that is self-administered once-monthly via the Sensoready autoinjector pen following three weekly starter doses. It is approved:

• In the US to treat adults with relapsing forms of multiple sclerosis, including clinically isolated syndrome, relapsing-remitting multiple sclerosis and active secondary progressive multiple sclerosis. Multiple sclerosis is a disease in which the immune system attacks the protective covering of nerves (known as myelin)

• In the EU to treat adults with relapsing forms of multiple sclerosis with active disease defined by clinical or imaging features (i.e., relapse, disability, or lesions detected by MRI scans)

Approved indications vary across other countries. Ofatumumab was originally developed by Genmab and licensed to GlaxoSmithKline (GSK). Novartis obtained the rights to ofatumumab from GSK across all indications.

• Zolgensma (onasemnogene abeparvovec) is a one-time intravenous gene therapy designed to address the genetic root cause of spinal muscular atrophy (SMA) by replacing the function of the missing or nonworking SMN1 gene. Zolgensma delivers a new working copy of the SMN gene into a patient’s cells. It is approved in the US, the EU and other countries to treat:

• Babies and young children who have SMA with biallelic mutations in the SMN1 gene. SMA is a rare, genetic neuromuscular disease resulting in the progressive and irreversible loss of motor neurons, which causes muscle weakness and atrophy

Approved indications vary by country.

Oncology

• Promacta/Revolade (eltrombopag) is a once‑daily oral thrombopoietin receptor agonist that works by stimulating bone marrow cells to produce platelets. It is approved in the US, the EU and other countries to treat:

• Immune thrombocytopenia (ITP) in patients who have had an insufficient response to or have failed previous therapies. ITP is a bleeding disorder caused by an unusually low number of platelets

• Thrombocytopenia in patients with chronic hepatitis C to allow them to initiate and maintain interferon‑based therapy

• Patients with severe aplastic anemia (SAA). SAA is a condition in which the body does not produce enough blood cells

Promacta/Revolade is marketed under a research, development and license agreement between Novartis and RPI Finance Trust (dba Royalty Pharma), as assignee of Ligand Pharmaceuticals.

• Kisqali (ribociclib) is a selective oral cyclin‑dependent inhibitor of kinases 4 and 6 (CDK4/6) – two enzymes involved in the control of cell cycle progression. Kisqali is approved in the US, the EU and other countries to treat:

• Pre-, peri- and postmenopausal women, and men (US and other countries), with locally advanced or metastatic hormone receptor-positive (HR+)/human epidermal growth factor receptor 2-negative (HER2-)

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breast cancer, in combination with an aromatase inhibitor as initial endocrine‑based therapy. HR+/HER2- breast cancer is the most common subtype of breast cancer

• Pre-, peri- (EU) and postmenopausal women, and men (US), with locally advanced or metastatic HR+/HER2- breast cancer, in combination with fulvestrant, as first- or second-line therapy

Kisqali was developed by our Biomedical Research organizational unit (formerly the Novartis Institutes for BioMedical Research) under a research collaboration with Astex Pharmaceuticals.

• Tafinlar + Mekinist (dabrafenib + trametinib) is an oral combination therapy. Tafinlar and Mekinist are kinase inhibitors of the BRAF and MEK1/2 proteins, respectively, approved in combination to treat patients who have certain types of cancer with a change in the BRAF gene (called a BRAF V600 mutation), including:

• Adults in the US, the EU and other countries with unresectable or metastatic melanoma with a BRAF V600 mutation. Melanoma is a form of skin cancer; unresectable melanoma cannot be removed with surgery and metastatic melanoma has spread to other parts of the body. Tafinlar and Mekinist are also approved as single agents for this indication

• Adults in the US, the EU and other countries with stage III melanoma with a BRAF V600 mutation as an adjuvant treatment (following surgery)

• Adults in the US, the EU and other countries with advanced non-small cell lung cancer (NSCLC) with a BRAF V600 mutation. NSCLC is the most common type of lung cancer

• Adults and children aged 1 year and older in the US and 6 years and older in other countries with unresectable or metastatic solid tumors with a BRAF V600E mutation whose cancer has progressed following prior treatment and who have no satisfactory alternative treatment options

Approved indications vary by country. Novartis has worldwide exclusive rights to develop, manufacture and commercialize trametinib granted by Japan Tobacco Inc.

• Tasigna (nilotinib) is a twice-daily oral tyrosine kinase inhibitor that acts by blocking the BCR-ABL protein. It is approved in the US, the EU and other countries to treat:

• Patients with Philadelphia chromosome-positive chronic myeloid leukemia (Ph+ CML) in the chronic and/or accelerated phase who are resistant or intolerant to existing treatment. Ph+ CML is a cancer that starts in the blood-forming cells of bone marrow

• Newly diagnosed adults and children with Ph+ CML in the chronic phase

• Jakavi (ruxolitinib) is an oral inhibitor of the JAK1 and JAK2 tyrosine kinases. It is the first therapy approved in the EU and other countries to treat:

• Adults with myelofibrosis (MF), including primary myelofibrosis, post-polycythemia vera myelofibrosis and post-essential thrombocythemia myelofibrosis. MF is a rare blood cancer characterized by abnormal blood cell production and scarring in the bone marrow, which can lead to an enlarged spleen

• Adults with polycythemia vera (PV) who are resistant or intolerant to a medication called hydroxyurea. PV is a rare blood cancer in which the bone marrow produces too many red blood cells, resulting in serious problems like clots

• Patients aged 12 years and older with acute or chronic graft-versus-host disease (GvHD) and who have had an inadequate response to corticosteroids or other systemic therapies. GvHD occurs in stem-cell transplant patients when donor cells see the recipient’s healthy cells as foreign and attack them

Novartis licensed ruxolitinib from Incyte Corporation for development and commercialization in the indications of oncology, hematology and GvHD outside the US. Incyte Corporation markets ruxolitinib as Jakafi^®^ in the US.

• Pluvicto (lutetium (^177^Lu) vipivotide tetraxetan) is an intravenous radioligand therapy combining a targeting compound (a ligand) with a therapeutic radionuclide (a radioactive particle, in this case lutetium-177). Pluvicto delivers radiation selectively to PSMA-positive cells and the surrounding cells. It is approved in the US, the EU and other countries to treat:

• Adults with prostate-specific membrane antigen-positive metastatic castration-resistant prostate cancer (PSMA-positive mCRPC), a type of advanced cancer that has spread to other parts of the body (metastatic). These patients have already been treated with other anticancer treatments (androgen receptor pathway inhibition and taxane-based chemotherapy)

• Lutathera (lutetium Lu 177 dotatate/lutetium (^177^Lu) oxodotreotide) is an intravenous targeted radioligand therapy approved in the US, the EU and other countries to treat:

• Adults with somatostatin receptor-positive gastroenteropancreatic neuroendocrine tumors (GEP-NETs). GEP-NETs are rare tumors found in the digestive tract

Approved indications vary by country.

• Scemblix (asciminib) is an oral kinase inhibitor that works by binding to a part of the BCR-ABL protein called the ABL myristoyl pocket. It is approved:

• In the US, the EU and other countries to treat adults with Philadelphia chromosome-positive chronic myeloid leukemia (Ph+ CML) in the chronic phase who have previously been treated with two or more tyrosine kinase inhibitors (TKIs). Ph+ CML is a cancer that starts in the blood-forming cells of bone marrow

• In the US and other countries to treat adults with Ph+ CML in the chronic phase with the T315I mutation. The T315I mutation causes resistance to most available TKI therapies and, as a result, patients with this mutation would otherwise have limited treatment options

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• Fabhalta (iptacopan) is an oral Factor B inhibitor of the alternative complement pathway, a part of the immune system involved in triggering inflammation and fighting infection. It is approved in the US to treat:

• Adults with paroxysmal nocturnal hemoglobinuria (PNH). PNH is a rare chronic blood disorder in which red blood cells are susceptible to premature destruction by the complement system

Established brands

• Lucentis (ranibizumab) is a humanized, high-affinity antibody fragment that binds to vascular endothelial growth factor A (VEGF‑A), a protein that can cause the growth of blood vessels in the eye, potentially leading to vision loss. Lucentis is an anti-VEGF therapy that is injected into the eye. It is approved in the EU and other countries to treat patients with certain eye conditions, including:

• Adults with neovascular (wet) age‑related macular degeneration (AMD). Wet AMD develops when abnormal blood vessels grow under the macula and leak blood and other fluids in the back of the eye, which damages the macula

• Adults with proliferative diabetic retinopathy, moderately severe to severe non-proliferative diabetic retinopathy, and/or visual impairment due to diabetic macular edema. These conditions are complications of diabetes

• Adults with visual impairment due to macular edema secondary to retinal vein occlusion (branch RVO or central RVO). Retinal vein occlusion is a blockage of the branch or central retinal veins, which carry blood away from the retina

Approved indications vary by country. Lucentis is licensed from Genentech, and Novartis holds the rights to commercialize the product outside the US. Genentech holds the rights to commercialize Lucentis in the US. For more information, see “Item 18. Financial Statements—Note 28. Transactions with related parties—Roche Holding AG.”

• Sandostatin SC (octreotide acetate for injection) and Sandostatin LAR (octreotide acetate for injectable suspension) are somatostatin analogs approved in the US, the EU and other countries to treat:

• Adults with acromegaly that is inadequately controlled by surgery or radiotherapy. Acromegaly is a chronic disease caused by the oversecretion of growth hormone

• Patients with certain symptoms associated with carcinoid tumors and other types of functional gastrointestinal and pancreatic neuroendocrine tumors

Sandostatin LAR is also approved in the EU and other countries to treat patients with advanced neuroendocrine tumors of the midgut or of unknown primary tumor origin.

Compounds in development

The following table provides an overview of key projects currently in the Confirmatory Development stage and may also describe certain projects in the Early Development stage. Projects typically enter Confirmatory Development and become the responsibility of our Development organizational unit during Phase II testing. (For more information about our drug development program, see “—Research and development—Development program.”) Projects are listed in alphabetical order by compound code, or by product name where applicable. Projects include those seeking to develop potential uses of new molecular entities as well as potential additional indications or new formulations for already marketed products. The table below, entitled “Projects removed from the development table since 2022,” highlights changes to the table entitled “Selected development projects” from the previous year.

The year that each project entered the current phase of development refers to the year of the first patient’s first visit in the first clinical trial of that phase. For projects in Phase II, the year generally refers to the first patient’s first visit in the first trial in Confirmatory Development. In some cases, the first patient’s first visit in a Phase II trial can occur before the Confirmatory Development stage. Prior to 2020, we reported the current phase based on the year in which the decision to enter the phase was made. To maintain continuity, we have included certain previously disclosed projects, noted below, that have not yet achieved “first patient, first visit” in any Phase I-III study for the reported indication and route of administration. We have disclosed these projects using our previous reporting criteria.

A reference to a project being in registration means that an application has been submitted to a health authority for marketing approval. Compounds and new indications in development are subject to required regulatory approvals and, in certain instances, contractual limitations. These compounds and indications are in various stages of development throughout the world. It may not be possible to obtain regulatory approval for any or all of the new compounds and new indications referred to in this Form 20‑F in any country or in every country. See “—Regulation” for more information on the approval process.

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Selected development projects

Compound/<br>product	Common <br> name	Mechanism <br> of action	Potential indication	Category	Formulation/<br> route of<br> administration	Year project<br> entered<br> current<br> development<br> phase	Planned filing<br> dates/current<br> phase
AVXS-101<br>(OAV101)	onasemno-<br> gene abepar-<br> vovec	Survival motor neuron <br> (SMN) gene therapy	Spinal muscular atrophy <br> (IT formulation)	Neuroscience	Intrathecal injection	2021	2025/III
Beovu	brolucizumab	VEGF inhibitor	Diabetic retinopathy	Ophthalmology	Intravitreal injection	2020	2025/III
CFZ533	iscalimab	CD40 inhibitor	Sjögren's syndrome	Immunology	Subcutaneous injection	2019	≥2027/II
Coartem	artemether + <br> lumefantrine	PGH-1 (artemisinin <br> combination therapy)	Malaria, <br> uncomplicated <br> (<5 kg patients)	Global Health	Oral	2020	2024/III
Cosentyx	secukinumab	IL‑17A inhibitor	Giant cell arteritis	Immunology	Subcutaneous injection	2021	2025/III
			Polymyalgia rheumatica^1^	Immunology	Subcutaneous injection	2023	2026/III
			Rotator cuff tendinopathy^1^	Immunology	Subcutaneous injection	2023	≥2027/III
EXV811^1^	atrasentan	ETA receptor<br> antagonist	IgA nephropathy	Cardiovascular,<br> Renal and<br> Metabolic	Oral	2023	2024/III
Fabhalta	iptacopan	CFB inhibitor	IgA nephropathy	Cardiovascular,<br> Renal and<br> Metabolic	Oral	2021	2024/III
			C3 glomerulopathy	Cardiovascular,<br> Renal and<br> Metabolic	Oral	2021	2024/III
			IC-MPGN ^1^	Cardiovascular,<br> Renal and<br> Metabolic	Oral	2023	≥2027/III
			Atypical hemolytic uremic syndrome	Oncology	Oral	2021	≥2027/III
FUB523^1^	zigakibart	Anti-APRIL <br> monoclonal<br> antibody	IgA nephropathy	Cardiovascular,<br> Renal and<br> Metabolic	Subcutaneous injection	2023	≥2027/III
JDQ443	opnurasib	KRAS inhibitor	Non-small cell lung cancer ^2^<br> (monotherapy and/or combination therapy)	Oncology	Oral	2022	≥2027/III
KAE609	cipargamin	PfATP4 inhibitor	Malaria, uncomplicated	Global Health	Oral	2017	≥2027/II
			Malaria, severe	Global Health	Oral	2022	≥2027/II
Kisqali	ribociclib	CDK4 inhibitor	Hormone receptor-positive <br> (HR+)/human epidermal growth <br> factor receptor 2-negative (HER2-)<br> early breast cancer (adjuvant)	Oncology	Oral	2023	US, EU <br> registration
KLU156^3^	ganaplacide <br> + <br> lumefantrine	Non-artemisinin <br> plasmodium <br> falciparum inhibitor	Malaria, uncomplicated	Global Health	Oral	2023	2026/II
Leqvio	inclisiran	siRNA <br> (regulation of LDL-C)	Secondary prevention of cardiovascular <br> events in patients with elevated levels <br> of LDL-C	Cardiovascular,<br> Renal and<br> Metabolic	Subcutaneous injection	2018	≥2027/III
			Primary prevention cardiovascular ^1^<br> risk reduction	Cardiovascular,<br> Renal and<br> Metabolic	Subcutaneous injection	2023	≥2027/III
LNA043	TBD	ANGPTL3 agonist	Osteoarthritis^4^	Immunology	Intra-articular	2021	≥2027/II
LOU064	remibrutinib	BTK inhibitor	Chronic spontaneous urticaria	Immunology	Oral	2021	2024/III
			Chronic inducible urticaria	Immunology	Oral	2023	≥2027/III
			Multiple sclerosis	Neuroscience	Oral	2021	≥2027/III
Lutathera	lutetium <br> Lu 177 <br> dotatate/<br> lutetium <br> (^177^Lu)<br> oxodotreotide	Radioligand therapy <br> targeting SSTR	Gastroenteropancreatic <br> neuroendocrine tumors, <br> 1st line in G2/3 tumors	Oncology	Intravenous infusion	2020	2024/III
LXE408	TBD	Proteasome inhibitor	Visceral leishmaniasis	Global Health	Oral	2022	≥2027/II
Pluvicto	lutetium<br> Lu 177 <br> vipivotide <br> tetraxetan/<br> lutetium <br> (^177^Lu) <br> vipivotide <br> tetraxetan	Radioligand therapy <br> targeting PSMA	Metastatic castration-resistant <br> prostate cancer, pre-taxane	Oncology	Intravenous infusion	2021	2024/III
			Metastatic hormone-sensitive <br> prostate cancer	Oncology	Intravenous infusion	2021	2025/III
^1^ Project added to selected development projects table in 2023 – entered Confirmatory Development
^2^ Previously disclosed as non-small cell lung cancer, 2/3L
^3^ Project added to selected development projects table in 2023 (replacing KAF156) – entered Confirmatory Development, FPFV in Phase III expected in early 2024
^4^ Previously disclosed as knee osteoarthritis

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Compound/<br>product	Common <br> name	Mechanism <br> of action	Potential indication	Category	Formulation/<br> route of<br> administration	Year project<br> entered<br> current<br> development<br> phase	Planned filing<br> dates/current<br> phase
QGE031	ligelizumab	IgE inhibitor	Food allergy	Immunology	Subcutaneous injection	2021	≥2027/III
Scemblix	asciminib	BCR‑ABL inhibitor	Chronic myeloid <br> leukemia, 1st line	Oncology	Oral	2021	2024/III
TQJ230	pelacarsen	ASO targeting<br> lipoprotein(a)	Secondary prevention of cardiovascular <br> events in patients with elevated levels <br> of lipoprotein(a)	Cardiovascular,<br> Renal and<br> Metabolic	Subcutaneous injection	2019	2025/III
VAY736	ianalumab	BAFF-R inhibitor	Autoimmune hepatitis	Immunology	Subcutaneous injection	2018	≥2027/II
			Lupus nephritis	Immunology	Subcutaneous injection	2022	≥2027/III
			Sjögren’s syndrome	Immunology	Subcutaneous injection	2022	2026/III
			Systemic lupus erythematosus^1^	Immunology	Subcutaneous injection	2023	≥2027/III
			Warm autoimmune hemolytic anemia<br> (wAIHA)	Oncology	Intravenous infusion	2022	2026/III
			Immune thrombocytopenia, 1st line^1^	Oncology	Intravenous infusion	2023	2026/III
			Immune thrombocytopenia, 2nd line^1^	Oncology	Intravenous infusion	2023	2026/III
Vijoice	alpelisib	PI3K-alpha inhibitor	Lymphatic malformations	Oncology	Oral	2023	≥2027/III
Xolair	omalizumab	IgE inhibitor	Food allergy	Immunology	Subcutaneous injection	2019	US registration
XXB750	TBD	NPR1 agonist	Hypertension	Cardiovascular,<br> Renal and<br> Metabolic	Subcutaneous injection	2022	≥2027/II
YTB323^1^	rapcabtagene<br> autoleucel	CD19 CAR-T	Severe refractory lupus nephritis/<br> systemic lupus erythematosus	Immunology	Intravenous infusion	2023	≥2027/II
			High-risk large B-cell lymphoma, 1st line	Oncology	Intravenous infusion	2023	≥2027/II
^1^ Project added to selected development projects table in 2023 – entered Confirmatory Development

Projects removed from the development table since 2022

Compound/product	Potential indication	Change	Reason
Cosentyx	Hidradenitis suppurativa	Commercialized
	Lupus nephritis	Removed	Development discontinued
	Psoriatic arthritis (IV formulation)	Commercialized
	Ankylosing spondylitis (IV formulation)	Commercialized
Fabhalta	Paroxysmal nocturnal hemoglobinuria	Commercialized
KAF156	Malaria, uncomplicated	Removed	Development discontinued^1^
LOU064	Sjögren's syndrome	Removed	Development discontinued
MBG453	Myelodysplastic syndrome	Removed	Development discontinued
	Unfit acute myeloid leukemia	Removed	Development discontinued
MIJ821	Major depressive disorder	Removed	Development discontinued
NIS793	Pancreatic cancer, 1st line	Removed	Development discontinued
Piqray	Ovarian cancer	Removed	Development discontinued
PPY988	Geographic atrophy	Removed	Development discontinued
SAF312	Chronic ocular surface pain	Removed	Development discontinued
SKO136	Coronavirus infection	Removed	Development discontinued
VDT482	Esophageal cancer, 2nd line	Removed	Development discontinued^2^
	Non‑small cell lung cancer	Removed	Development discontinued^2^
	Nasopharyngeal carcinoma, 1st line	Removed	Development discontinued^2^
	Gastric cancer, 1st line	Removed	Development discontinued^2^
	Esophageal cancer, 1st line	Removed	Development discontinued^2^
	Localized esophageal cancer	Removed	Development discontinued^2^
	Hepatocellular carcinoma, 1st line	Removed	Development discontinued^2^
	Small cell lung cancer, 1st line	Removed	Development discontinued^2^
	Urothelial cell carcinoma, 1st line	Removed	Development discontinued^2^
VPM087	Colorectal cancer, 1st line	Removed	Development discontinued
^1^ Now in development as KLU156
^2^ Mutual termination of the agreement with BeiGene, Ltd.

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Principal markets

Novartis sells products in approximately 130 countries worldwide. Net sales are primarily concentrated in the US and Europe. The following table sets forth aggregate 2023 net sales by region:

	2023 net sales to third parties
	USD millions	%
United States	17 959	40
Europe	14 997	33
Asia, Africa, Australasia	9 308	20
Canada and Latin America	3 176	7
Total	45 440	100
Of which in established markets^1^	33 725	74
Of which in emerging growth markets^1^	11 715	26
^1^ Emerging growth markets comprise all markets other than the established markets of the US, Canada, Western Europe, Japan, Australia and New Zealand. Novartis definition of Western Europe includes Austria, Belgium, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

Many of our products are used for chronic conditions that require patients to continue dosing of the product over long periods of time, ranging from months to years. However, certain of our marketed products and development projects, such as cell and gene therapies, are administered only once. Net sales of the vast majority of our products are not subject to material changes in seasonal demand.

Production

Our primary goal is to ensure the uninterrupted and timely supply of medicines that meet all product specifications and quality standards, and that are produced in the most cost-effective and sustainable manner. The manufacturing of our products is highly regulated by governmental health authorities around the world, including the US Food and Drug Administration (FDA) and European Medicines Agency (EMA). In addition to regulatory requirements, many of our products involve technically complex manufacturing processes or require highly specialized raw materials.

We are continuing to integrate ADACAP manufacturing sites into our existing manufacturing and supply structure for radioligand therapies. We manufacture our products across the following technologies at facilities worldwide: large molecules, small molecules, cell and gene therapy, xRNA therapy and radioligand therapy (see also “—Item 4.D Property, plants and equipment”). In addition, we generate contract manufacturing sales from biotechnology services that we provide to third parties, which we include under “established brands” in our consolidated financial statements (see “Item 18. Financial Statements—Note 4. Revenues and geographic information”).

In our manufacturing network, we maintain state‑of‑the‑art processes, with quality as a priority, and require our suppliers to adhere to the same high standards we expect from our own people and processes. These processes include chemical and biological syntheses; radioisotope handling; sterile processing, including CAR-T cell processing; gene modification and delivery; and formulation and packaging. We are constantly working to improve our existing manufacturing processes, develop new and innovative technologies, and review and adapt our manufacturing network to meet our needs and those of our patients and customers.

We produce raw materials for manufacturing in‑house or purchase them from third-party suppliers. Where possible, we maintain multiple supply sources so that the business is not dependent on a single or limited number of suppliers. However, our ability to do so may at times be limited by regulatory or other requirements. We monitor market developments that could have an adverse effect on the supply of essential materials. Our suppliers of raw materials are required to comply with applicable regulations and Novartis quality standards.

Because the manufacturing of our products is complex and highly regulated by governmental health authorities, uninterrupted supply cannot be guaranteed. If we or our third-party suppliers fail to comply with applicable regulations, then there could be a product recall or other disruption to our production activities. We have experienced supply interruptions for our products in the past, and there can be no assurance that supply will not be interrupted again in the future. For more information on the risks related to the manufacturing of our products, see “Item 3. Key Information—Item 3.D Risk factors—Manufacturing and product quality—Inability to ensure proper controls in product development and product manufacturing, and failure to comply with applicable regulations and standards.” We have implemented a global manufacturing strategy to maximize business continuity in case of such events.

Marketing and sales

Although specific distribution patterns vary by country, Novartis generally sells its prescription drugs primarily to wholesale and retail drug distributors, hospitals, clinics, government agencies and managed healthcare providers. We reach healthcare professionals and patients in many markets and across our core therapeutic areas through integrated channels including field force

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operations, patient support programs and Novartis-owned digital platforms.

We have 19 607 full-time equivalent field force employees, as of December 31, 2023, including supervisors and administrative personnel. These trained representatives present the therapeutic benefits and risks of our products to physicians, pharmacists, hospitals, insurance groups, managed care organizations and other healthcare professionals. In the US, Novartis advertises certain products via digital and traditional media channels, including the internet, television, newspapers and magazines. Novartis also pursues co‑promotion or co‑marketing opportunities as well as licensing and distribution agreements with other companies in various markets.

The marketplace for healthcare is constantly evolving. Customer groups beyond prescribers have increasing influence on treatment decisions and guidelines, while patients continue to become more informed stakeholders in their healthcare decisions and look for solutions to meet their changing needs. Novartis is responding by adapting our business practices to engage appropriately with patients, customer groups and other stakeholders, including by delivering innovative solutions to drive education, access and improved patient care.

The COVID-19 pandemic accelerated additional changes related to marketing and sales techniques in the healthcare industry. For example, many healthcare professionals increased their use of virtual platforms when interacting with pharmaceutical companies, and now prefer to receive information in a more convenient and personalized way. In response, Novartis is combining traditional face-to-face visits with digital and other methods of engaging healthcare professionals to improve the efficiency and effectiveness of every interaction. We are similarly changing our approach to engaging healthcare systems, payers and other healthcare providers.

The growing number of so‑called “specialty” drugs in our portfolio, such as Cosentyx and Kesimpta, has resulted in increased engagement with specialty pharmacies. Because many of these drugs require special handling and administration, we are rolling out an international patient support program across our priority markets that serves as a central resource for onboarding, education and support to help patients navigate their healthcare.

With our radioligand therapy Pluvicto, extra steps must be taken to educate customers, in part because it can only be administered by those who are trained to handle radiopharmaceuticals. We are working to improve the customer experience by connecting patients with healthcare professionals throughout the disease management process, including awareness and engagement, treatment site onboarding, referrals and imaging, preparation and infusion, and treatment follow-up. We have established a dedicated support team, a customer relationship management platform and an order management platform as part of this effort.

In the US, the US Centers for Medicare & Medicaid Services (CMS) is the largest single payer for healthcare services as a result of continuing changes in healthcare economics and an aging population. In addition, both commercial and government-sponsored managed care organizations continue to be among the largest groups of payers for healthcare services in the US. In other countries, national health services are often the only significant payer for healthcare services. In an effort to control prescription drug costs, almost all managed care organizations and national health services use formularies that list specific drugs that may be reimbursed and/or the level of reimbursement for each drug. Managed care organizations and national health services also use cost‑benefit analyses to determine whether or not newly approved drugs will be added to a formulary and/or the level of reimbursement for that drug, and to determine whether or not to continue to reimburse existing drugs. We have dedicated teams that actively seek to optimize patient access, including formulary positions, for our products.

The trend toward consolidation among distributors and retailers of our products continues in the US and internationally, both within and across countries. This has increased our customers’ purchasing leverage and resulted in increased pricing pressure on our products. Moreover, we are exposed to increased concentration of credit risk as a result of the consolidation among our customers.

Drug pricing is an increasingly prominent issue in many countries as healthcare spending continues to rise. This issue has received significant attention in the US, especially with the passage of the Inflation Reduction Act (please see “—Price controls” for more information). At Novartis, we are increasing our efforts to enable patient access through innovative pricing and access initiatives in the US, Europe and other markets. These include contract structures such as pay-over-time and outcome-based agreements.

In 2020, Novartis Gene Therapies established a novel early access program for Zolgensma. It supports early patient access through customizable options including retroactive rebates, deferred payments, installment options, outcome-based rebates, and collaborations with healthcare systems to optimize disease management. We now have more than 40 early access agreements and pay-for-performance agreements (i.e., outcome-based arrangements) in place in various markets around the world. Zolgensma is approved in 51 countries.

Additionally, in 2021 Novartis reached an agreement with the National Health Service (NHS) in England to implement a first-of-its-kind population health management approach designed to provide faster and broader access to Leqvio for certain high-risk patients with atherosclerotic cardiovascular disease. Novartis has engaged in similar collaborations with other countries.

Competition

The global pharmaceutical market is highly competitive. We compete against other major international corporations that have substantial financial and other resources, as well as against smaller companies that operate regionally or nationally. Competition within the industry is intense and extends across a wide range of activities, including pricing, product characteristics, customer service, sales and marketing, and research and development.

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Like other companies selling patented pharmaceuticals, Novartis faces challenges from companies selling competing patented products. Generic forms of our products may follow the expiration of intellectual property protection or regulatory exclusivities, and generic companies may also gain entry to the market through successfully challenging our intellectual property rights and exclusivities. We use appropriate, legally permissible measures to defend those rights and exclusivities (see also “—Intellectual property” below). We also may face competition from over-the-counter (OTC) products that do not require a prescription from a physician.

There is ongoing consolidation in the pharmaceutical industry. At the same time, new entrants are looking to use their expertise to establish or expand their presence in healthcare. Technology companies, for instance, are seeking to benefit from the increasing importance of data and data management in our industry, including the use of artificial intelligence.

Research and development

The discovery and development of a new drug usually requires approximately 10 to 15 years from the initial research to bringing a drug to market. This includes approximately six to eight years from Phase I clinical trials to market entry. At each of these steps, there is a substantial risk that a therapeutic candidate will not meet the requirements to progress further. In such an event, we may be required to abandon the development of a potential therapy in which we have made a substantial investment.

We manage our research and development expenditures across our entire portfolio in accordance with our strategic priorities. We make decisions about whether or not to proceed with development projects on a project‑by‑project basis. These decisions are based on the project’s potential to meet a significant unmet medical need or to improve patient outcomes, the strength of the science underlying the project, and the potential of the project (subject to the risks inherent in pharmaceutical development) to generate significant positive financial results for the Company. Once a management decision has been made to proceed with the development of a therapeutic candidate, the level of research and development investment required will be driven by many factors. These include the medical indications for which it is being developed, the number of indications being pursued, whether the therapeutic candidate is of a chemical or biological nature, the stage of development, and the level of evidence necessary to demonstrate clinical efficacy and safety.

Research program

Our research and early development program is conducted by our Biomedical Research organizational unit, which is the innovation engine of Novartis. This unit is responsible for the discovery of new medicines that bring value for patients and the Company. This requires hiring and retaining highly talented employees, focusing on fundamental disease mechanisms that are relevant across different disease areas, continuously improving technologies for drug discovery and potential therapies, working with patients to understand their diseases and the potential benefits of therapies, forming close alliances with clinical and commercial colleagues, and establishing strategic external alliances.

We have 5 511 full‑time-equivalent scientists, physicians and business professionals at Biomedical Research sites in Basel, Switzerland; Cambridge, Massachusetts; East Hanover, New Jersey; San Diego, California; and Emeryville, California. They contribute to research into disease areas such as cardiovascular, renal and metabolic diseases; neuroscience; oncology; immunology; and ophthalmology. Research at the Friedrich Miescher Institute focuses on basic genetic and genomic research, and our Global Health Disease Area (formerly the Novartis Institute for Tropical Diseases) focuses on discovering new medicines to fight tropical diseases, including malaria and cryptosporidiosis. In 2023, we made the decision to discontinue our respiratory research efforts to further focus our resources on priority areas.

All drug candidates go through clinical trials to enable an early assessment of the safety and efficacy of the drug while collecting basic information on how the drug moves through the body and is tolerated, and adhering to the guidance for early clinical testing set forth by health authorities. When assessments are favorable, our Development organizational unit conducts confirmatory trials on the drug candidates to generate data that can be submitted to regulatory authorities to secure approval for patient use.

Development program

Our Development unit oversees and executes drug development activities, working collaboratively with Biomedical Research, our commercial units and other parts of the Company on our overall pipeline strategy. It includes centralized global functions such as Regulatory Affairs and Global Clinical Operations, and global Development Units, and has 12 723 full‑time equivalent employees worldwide.

The traditional model of clinical development consists of three phases:

Phase I: The first clinical trials of a new compound – generally performed in a small number of healthy human volunteers/patients (e.g., in oncology) – to assess the drug’s safety profile, including the safe dosage range. These trials also determine how a drug is absorbed, distributed, metabolized and excreted, and the duration of its action.

Phase II: Studies performed with patients who have the target disease, with the aim of continuing the Phase I safety assessment in a larger group, assessing the efficacy of the drug in the patient population, and determining the appropriate doses for further evaluation.

Phase III: Large‑scale studies with up to several thousand patients, which aim to establish the safety and efficacy of the drug in specific indications for regulatory approval. Phase III trials may also be used to compare a new drug against a current standard of care to evaluate the overall benefit‑risk relationship of the new medicine.

In each of these phases, physicians monitor consenting volunteers or patients closely to assess the safety and efficacy of a potential new drug or indication.

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Although we use this traditional model, we have tailored the development process to be simpler, more flexible and more efficient. This design ensures close collaboration across R&D, enabling Development teams to initiate later-stage planning in parallel with early evaluations and research teams to better support later-stage activities.

Our development process consists of two stages: Early Development to build confidence in the overall properties of the compound, followed by Confirmatory Development to confirm the concept in large numbers of patients. Early development consists of both Phase I studies in healthy volunteers as well as Phase Ib and Phase II studies in patients. This work includes a careful review of safety and tolerability, understanding of whether the drug is modulating the target of interest, and understanding of dose response and early evidence of disease efficacy. Biomedical Research conducts these trials and if this evaluation is positive, the drug moves to the Confirmatory Development stage and becomes the responsibility of Development.

Confirmatory Development has elements of traditional Phase II/III testing and includes trials aimed at confirming the safety and efficacy of the drug in the given indication, leading up to submission of a dossier to health authorities for approval. This stage can also include trials that compare the drug to the current standard of care for the disease in order to evaluate the drug’s overall benefit-risk profile. Further, with new treatment approaches such as gene therapy for rare diseases, elements of Early and Confirmatory Development may be combined and suffice for registration under certain conditions such as high unmet medical need and clinical data showing highly favorable benefit-risk profiles. In these cases, additional post-approval studies may be required by the regulatory authorities to continue to gather important data to further support approval.

The vast amount of data that must be collected and evaluated makes clinical testing the most time‑consuming and expensive part of new drug development. The next stage in the drug development process is to seek registration for the new drug. For more information, see “—Regulation.”

The Innovation Management Board (IMB), chaired by our Chief Executive Officer, drives our R&D portfolio strategy. The IMB endorses new early- and late-stage development projects, strategic plans and portfolio-related priorities. It oversees our drug development budget; approves major project phase transitions; and makes key decisions, such as when to submit regulatory applications to health authorities or when to discontinue projects. IMB members include representatives from the Executive Committee of Novartis (ECN) and senior management with expertise in different fields.

To support our R&D strategy, we are investing in artificial intelligence (AI) and other technologies that have the potential to enhance and accelerate the delivery of innovative medicines to patients. We are working with partners on scalable projects in early-stage research and in clinical development to help improve our decision-making and generate actionable insights across our core therapeutic areas—from designing new compounds to predicting drug safety and conducting clinical trials.

Alliances and acquisitions

Novartis enters into business development agreements with other pharmaceutical and biotechnology companies and with academic and other institutions to develop new products and access new markets. We license products that complement our current product line and are appropriate to our business strategy. We focus on strategic alliances and acquisition activities for key disease areas and indications that we expect to be growth drivers in the future. We review products and compounds we are considering licensing, using the same criteria that we use for our own internally discovered drugs.

In July 2023, Novartis acquired DTx Pharma Inc., a US-based, preclinical-stage biotechnology company focused on leveraging its proprietary FALCON platform to develop siRNA therapies for neuroscience indications. Its lead program, DTx-1252, targets the root cause of CMT1A – the overexpression of PMP22, a protein that causes the myelin sheath that supports and insulates nerves in the peripheral nervous system to function abnormally. The transaction also includes two additional preclinical programs for other neuroscience indications.

In August 2023, Novartis acquired Chinook Therapeutics, Inc., a US-based, clinical-stage biopharmaceutical company with two late-stage medicines in development for rare, severe chronic kidney diseases.

For more information about recent business acquisitions, see “Item 18. Financial Statements—Note 2. Significant transactions.”

Regulation

The international pharmaceutical industry is highly regulated. Regulatory authorities around the world administer numerous laws and regulations regarding the testing, approval, manufacturing, importing, labeling and marketing of drugs, and review the safety and efficacy of pharmaceutical products. Extensive controls exist on the non‑clinical and clinical development of pharmaceutical products. These regulatory requirements, and the implementation of them by local health authorities around the globe, are a major factor in determining whether a substance can be developed into a marketable product, and the amount of time and expense associated with that development.

Health authorities, including those in the US and the EU, have high standards of technical evaluation. The introduction of new pharmaceutical products generally entails a lengthy approval process. Products must be authorized or registered prior to marketing, and such authorization or registration must subsequently be maintained. In recent years, the registration process has required increased testing and documentation for the approval of new drugs, with a corresponding increase in the expense of product introduction.

To register a pharmaceutical product, a registration dossier containing evidence establishing the safety, efficacy and quality of the product must be submitted to regulatory authorities. Generally, a therapeutic product must be registered in each country in which it will be sold. In every country, the submission of an application to a

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regulatory authority does not guarantee that approval to market the product will be granted. Although the criteria for the registration of therapeutic drugs are similar in most countries, the formal structure of the necessary registration documents and the specific requirements, including risk tolerance, of the local health authorities can vary significantly from country to country. Even if a drug is registered and marketed in one country, the registration authority in another country may request additional information from the pharmaceutical company prior to registration or even reject the product. A drug may be approved for different indications in different countries.

The registration process generally takes between six months and several years, depending on the country, the quality of the data submitted, the efficiency of the registration authority’s procedures, and the nature of the product. Many countries provide for accelerated processing of registration applications for innovative products of particular therapeutic interest. In recent years, the US and the EU have made efforts to harmonize registration requirements in order to achieve shorter development and registration times for medical products. However, the requirement in many countries to negotiate selling prices or reimbursement levels with government regulators and other payers can substantially extend the time until a product may finally be available to patients.

The following provides a summary of the regulatory processes in the principal markets served by our affiliates:

United States

In the US, applications for drug registration are submitted to and reviewed by the FDA. The FDA regulates the testing, manufacturing, labeling and approval for marketing of pharmaceutical products intended for commercialization in the US. The FDA continues to monitor the safety of pharmaceutical products after they have been approved for sale in the US market. The pharmaceutical development and registration process is typically intensive, lengthy and rigorous. When a pharmaceutical company has gathered data that it believes sufficiently demonstrates a drug’s safety, efficacy and quality, the company may file a New Drug Application (NDA) or Biologics License Application (BLA), as applicable, for the compound. The NDA or BLA must contain all the scientific information that has been gathered about the compound. This typically includes information regarding the clinical experiences of patients tested in the drug’s clinical trials. A Supplemental New Drug Application (sNDA) or Supplemental Biologics License Application (sBLA) must be filed for new indications and dosage forms for a previously approved drug.

Once an application is submitted, the FDA assigns reviewers from its staff, including experts in biopharmaceutics, chemistry, clinical microbiology, pharmacology/toxicology, and statistics. After a complete review, these content experts provide written evaluations of the NDA or BLA. These recommendations are consolidated and are used by senior FDA staff in its final evaluation of the NDA or BLA. Based on that final evaluation, the FDA then either approves the NDA or BLA, or provides a “complete response” letter if the NDA or BLA application is not approved. If not approved, the letter will state the specific deficiencies in the NDA or BLA that need to be addressed. The company making the application must then submit an adequate response to the deficiencies in order to restart the review procedure.

Once the FDA has approved an NDA, BLA, sNDA or sBLA, the company can make the new drug available for physicians and other healthcare providers to prescribe. The drug owner must submit periodic reports to the FDA, including any cases of adverse reactions. For some medications, the FDA requires additional post‑approval studies (Phase IV) to evaluate long‑term effects or to gather information on the use of the product under specified conditions.

Throughout the life cycle of a product, the FDA requires compliance with standards relating to good laboratory, clinical and manufacturing practices. The FDA also requires compliance with rules pertaining to the manner in which we may promote our products.

European Union

In the EU, there are three main procedures for application for authorization to market pharmaceutical products in more than one EU member state at the same time: the centralized procedure, the mutual recognition procedure and the decentralized procedure. It is also possible to obtain a national authorization for products intended for commercialization in a single EU member state only. The procedure used for first authorization must continue to be followed for subsequent changes, e.g., to add an indication for a licensed product.

Under the centralized procedure, applications are made to the EMA for an authorization that is valid for the European Union (all member states). The centralized procedure is mandatory for all biotechnology products; new chemical entities in cancer, neurodegenerative disorders, diabetes, AIDS, autoimmune diseases and other immune dysfunctions; advanced therapy medicines, such as gene therapy, somatic cell therapy and tissue-engineered medicines; and orphan medicines (medicines for rare diseases). It is optional for other new chemical entities, innovative medicinal products, and medicines for which authorization would be in the interest of public health. When a pharmaceutical company has gathered data that it believes sufficiently demonstrates a drug’s safety, efficacy and quality, the company may submit an application to the EMA. The EMA then receives and validates the application, and the specialized committee for human medicines, the CHMP, appoints a rapporteur and co‑rapporteur to review it. They use experts from their countries to carry out the assessment but can also draw on expertise from other member states (“multinational teams”). The entire review cycle must be completed within 210 days, although there are “clock stops” to allow the company to respond to questions set forth in the rapporteur and co‑rapporteur’s assessment report and agreed with the CHMP. The first clock stop is at Day 120 and the clock restarts on Day 121, when the company’s complete response is received by the EMA. If there are further aspects of the dossier requiring clarification, the CHMP will issue further questions at Day 180, and may also request an oral explanation, in which case the sponsor must not only respond to the further questions but also appear before the committee to

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justify its responses. On Day 210, the CHMP will take a vote to recommend the approval or non‑approval of the application, and their opinion is transferred to the European Commission (EC). The final EC decision under this centralized procedure is a single decision that is applicable to all member states. This decision occurs 60 days, on average, after a positive CHMP recommendation.

Under both the mutual recognition procedure (MRP) and the decentralized procedure (DCP), the assessment is led by one member state, called the reference member state (RMS), which then liaises with other member states, known as the concerned member states. In the MRP, the company first obtains a marketing authorization in the RMS, which is then recognized by the concerned member states in 90 days. In the DCP, the application is done simultaneously in the RMS and all concerned member states. During the DCP, the RMS drafts an assessment report within 120 days. Within an additional 90 days, the concerned member states review the application and can issue objections or requests for additional information. On Day 90, each concerned member state must be assured that the product is safe and effective, and that it will cause no undue risks to the public health. Once an agreement has been reached, each member state grants national marketing authorizations for the product.

After receiving the marketing authorizations, the company must submit periodic safety reports to the relevant health authority (EMA for the centralized procedure, national health authorities for DCP or MRP). In addition, pharmacovigilance measures must be implemented and monitored, including the collection, evaluation and expedited reporting of adverse events, and updates to risk management plans. For some medications, post-approval studies (Phase IV) may be imposed to complement available data with additional data to evaluate long-term effects (called a Post-Approval Safety Study, or PASS) or to gather additional efficacy data (called a Post-Approval Efficacy Study, or PAES).

European marketing authorizations have an initial duration of five years. The holder of the marketing authorization must actively apply for its renewal after this first five-year period. As part of the renewal procedure, the competent authority performs a full benefit‑risk review of the product. Should the authority conclude that the benefit‑risk balance is no longer positive, the marketing authorization can be suspended or revoked. Once renewed, the marketing authorization is valid for an unlimited period, unless it is determined that the product must be further monitored for safety reasons. In this case, the authority may require another renewal at 10 years. If the holder does not apply for renewal, the marketing authorization automatically lapses. Any marketing authorization that is not followed within three years of its granting by the actual placing on the market of the corresponding medicinal product ceases to be valid.

Price controls

In most of the markets where we operate, the prices of pharmaceutical products are subject to both direct and indirect price controls and to drug reimbursement programs with varying price control mechanisms. Due to increasing political pressure and governmental budget constraints, we expect these mechanisms to remain robust – and potentially even be strengthened – and to have a continued negative influence on the prices we are able to charge for our products.

Direct governmental efforts to control prices

United States: The Inflation Reduction Act of 2022 (IRA), signed into law in August 2022, mandates the negotiation of eligible Medicare Part B and Part D drugs; redesigned the Medicare Part D benefit, including a USD 2 000 out-of-pocket cap for Medicare beneficiaries; and imposed penalties for Medicare drugs that increase in price faster than the rate of inflation. Under the IRA, the US government will set Medicare prices for selected products it has defined as single-sourced small-molecule drugs that have been on the market for seven years following FDA approval as well as single-sourced biologics that have been on the market for 11 years after FDA approval.

Medicare drugs with the highest total cost to the US government are being selected for the program as they become eligible. Exemptions include orphan drugs with an indication for one rare disease or condition, drugs with a total cost to the US government of less than USD 200 million, and plasma-derived drugs.

The price set by the government will be publicly available and will become effective for selected drugs nine years after FDA approval for eligible small molecules and 13 years after FDA approval for eligible biologics. It will be implemented as follows:

• Ten eligible Medicare Part D drugs in 2026

• An additional 15 eligible Medicare Part D drugs in 2027

• An additional 15 eligible combined Medicare Part B and Part D drugs in 2028

• An additional 20 eligible combined Medicare Part B and Part D drugs in 2029

• An additional 20 eligible combined Medicare Part B and Part D drugs each year after 2029

On August 29, 2023, the US government released the list of the first 10 drugs to be subject to the program, and Entresto was one of the selected products. Novartis has initiated the process of participating in negotiations because manufacturers that refuse to participate are subject to an excise tax of up to 95% of sales. Novartis has filed a lawsuit against the US Department of Health and Human Services (HHS) and the US Centers for Medicare & Medicaid Services because we believe the IRA’s drug price-setting provisions are unconstitutional and will have long-lasting negative consequences for patients by limiting access to medicines now and in the future (for more information, see “Item 18. Financial Statements—Note 21. Provisions and other non-current liabilities”). Novartis may also be affected by other provisions of the IRA, such as price increase penalties for Medicare Part D drugs starting in 2022 and for Medicare Part B drugs in 2023, and rebates on eligible Medicare Part D sales starting in 2025.

In addition, by December 31, 2023, 23 US states had passed legislation intended to impact pricing or requiring manufacturers to report price increases to states, with eight of these states also allowing for drug affordability (i.e., price control) review boards. The disclosure

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requirements vary by state. Many states require multiple types of reporting, including for new drug applications, new drug launches, prior notice of price increases, and quarterly or annual reporting. It is expected that state legislatures will continue to focus on drug pricing in 2024 and that similar bills will be passed in more states.

Europe: In Europe, our operations are subject to significant price and marketing regulations. Many governments are introducing healthcare reforms in a further attempt to curb increasing healthcare costs. In some member states, these include reforms to permit the reimbursed use of off-label medicines, despite the presence of licensed alternatives on the market. In the EU, governments influence the price of pharmaceutical products through their control of national healthcare systems that fund a large part of the cost of such products to patients. The downward pressure on healthcare costs in general in the EU, particularly with regard to prescription drugs, is intense. Increasingly strict analyses are applied when evaluating the entry of new products, and as a result, access to innovative medicines is limited based on strict cost‑benefit assessments. In addition, prices for marketed products are referenced within member states and across international borders, further impacting individual EU member state pricing. Member states also collaborate to enhance pricing transparency and have started conducting joint health technology assessments, joint pricing negotiations and/or joint purchasing. As an additional control for healthcare budgets, some EU countries have passed legislation to impose further mandatory rebates for pharmaceutical products and/or financial claw‑backs on the pharmaceutical industry. The calculation of these rebates and claw‑backs may lack transparency in some cases and can be difficult to predict.

Regulations favoring generics and biosimilars

In response to rising healthcare costs, most governments and private medical care providers have established reimbursement schemes that favor the substitution of more expensive brand‑name pharmaceuticals by generic pharmaceuticals. All US states have generic substitution statutes. These statutes permit or require the dispensing pharmacist to substitute a less expensive generic drug instead of an original drug. Other countries, including many European countries, have similar laws. We expect that the pressure for generic substitution will continue to increase. In addition, the US, the EU and other jurisdictions are increasingly introducing laws and regulations encouraging the development of biosimilar versions of biologic drugs, which can also be expected to have an impact on pricing.

Cross‑border sales

Price controls in one country can have an impact in other countries as a result of cross‑border sales. In the EU, products that we have sold to customers in countries with stringent price controls can be legally resold to customers in other EU countries at a lower price than the price at which the product is otherwise available in the importing country (known as parallel trade). In North America, products that we have sold to customers in Canada – which has relatively stringent price controls – are sometimes resold into the US, again at a lower price than the price at which the product is otherwise sold in the US. Such imports from Canada and other countries into the US are currently illegal in most states. However, six US states (Colorado, Florida, Minnesota, New Hampshire, New Mexico and Vermont) have enacted laws allowing the import of pharmaceutical drugs from select foreign countries. The Secretary of the HHS must certify that each state’s importation plan is safe and cost-effective before it can be implemented.

We expect that pressures on pricing will continue worldwide and will likely increase. Because of these pressures, there can be no certainty that in every instance we will be able to charge prices for a product that, in a particular country or in the aggregate, would enable us to earn an adequate return on our investment in that product.

Intellectual property

Intellectual property (IP) rights are essential to our business as an innovative medicines company since they protect our innovation and investments in research and development, manufacturing and marketing of our products. IP rights include patents, trademarks, copyrights, know‑how, trade secrets and regulatory-based protection.

Patents

Among other things, patents may cover products themselves, including the product’s active ingredient or ingredients and its formulation. Patents may cover processes for manufacturing a product, including processes for manufacturing intermediate substances used in the manufacture of the product. Patents may also cover particular uses of a product, such as its use to treat a particular disease, or its dosage regimen. In addition, patents may cover tests for certain diseases or biomarkers – which can improve patient outcomes when administered with certain drugs – as well as assays, research tools and other techniques used to identify new drugs.

In the US, the EU and other countries, the law recognizes that product development and review by health authorities can take an extended period, and provides an extension of patent term for a period related to the time taken for the conduct of clinical trials and for the health authority’s review. These extensions are termed patent term extensions (PTEs) for the US and supplementary protection certificates (SPCs) for the EU.

United States

• In the US, a patent issued from an application filed today will generally receive a term of 20 years from the earliest application filing date as well as potential patent term adjustments for delays in patent issuance based upon certain delays in prosecution by the United States Patent and Trademark Office (USPTO). A US pharmaceutical patent may also be eligible for a PTE. The PTE may only extend the patent term for a maximum of five years, and may not extend the patent term beyond 14 years from regulatory approval. Only one patent may be extended for a product based on FDA review.

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European Union

• Patent applications in Europe may be filed in the European Patent Office (EPO) or in a particular country or countries. The term of a patent granted by the EPO or an EU country office is 20 years from the earliest application filing date. Pharmaceutical patents can be granted a further period of exclusivity under an SPC system. The SPCs may only extend the patent term for a maximum of five years, and may not extend the patent term beyond 15 years from the date of the first EU marketing authorization.

RDP and market exclusivity

In addition to patent protection, various countries provide regulatory-based protection, including regulatory data protection (RDP) and/or other market exclusivities, for a prescribed period of time. RDP is a distinct type of IP right providing exclusivity that precludes a potential competitor from filing a regulatory application that relies on the sponsor’s clinical trial data, or that precludes the regulatory authority from approving the application for a set period of time.

United States

• A new small‑molecule active pharmaceutical ingredient receives five years of RDP, during which time a competitor generally may not obtain final approval of an application to the FDA based on a sponsor’s clinical data.

• A new biologic active pharmaceutical ingredient receives 12 years of regulatory-based market exclusivity, during which time a competitor generally may not market the same or similar drug.

• The FDA may also request that a sponsor conduct pediatric studies and, in exchange, it will grant an additional six‑month period of pediatric market exclusivity if the sponsor makes a timely submission of the reports of the pediatric studies in response to the FDA’s Written Request. The sponsor must also have a patent‑based and/or regulatory‑based exclusivity period for the product to which the pediatric market exclusivity is appended.

• Orphan drug exclusivity (ODE) provides seven years of market exclusivity for drugs designated by the FDA as orphan drugs, meaning drugs that treat rare diseases. During this period, a potential competitor generally may not market the same or similar drug for the same indication even if the competitor’s application does not rely on data from the sponsor.

European Union

• A new pharmaceutical ingredient receives eight years of data protection, during which a competitor cannot rely on the relevant data; a further period of two years of market exclusivity, during which the data can be used to support applications for marketing authorization but a competitive product cannot be launched; and a possible one‑year extension of the market exclusivity period if, during the initial eight‑year data exclusivity period, the sponsor registered a new therapeutic indication with “significant clinical benefit.”

• Orphan drug exclusivity provides for 10 years of market exclusivity, during which time an application for the same or similar medicine for the same indication will not generally be accepted or granted. Under certain circumstances, this exclusivity can be extended with a two‑year pediatric extension.

Third-party patents and challenges to intellectual property

Third parties can challenge our IP, including patents, patent term extensions, RDP and marketing exclusivities (such as pediatric extensions and orphan drug exclusivity), through various proceedings. For example, patents in the US can be challenged in the USPTO through various proceedings, including Inter Partes Review (IPR) and Post-Grant Review (PGR) proceedings. They may also be challenged through patent infringement litigation under the Abbreviated New Drug Application (ANDA) provisions of the Hatch‑Waxman Act or under the Biologics Price Competition and Innovation Act (BPCIA). In the EU, patents may be challenged through oppositions in the EPO, or national patents may be challenged in national courts or national patent offices. The outcomes of such challenges can be difficult to predict.

In addition to directly challenging our IP rights, in some circumstances a competitor may be able to market a generic version of one of our products by, for example, designing around our patents or marketing the generic product for non‑patent-protected indications, or filing a separate New Drug Application (NDA) under the Hatch-Waxman Act (typically referred to as a 505(b)(2) application). Despite RDP, a competitor could opt to incur the costs of conducting its own clinical trials and preparing its own regulatory application, and avoid our RDP altogether. There is a risk that some countries may seek to impose limitations on or seek not to recognize the availability of IP rights for pharmaceutical products, or limit the extent to which such rights may be enforced. Additionally, even though we may own, co‑own or in‑license patents protecting our products, and conduct freedom‑to‑operate analyses, a third party may nevertheless assert that one of our products infringes a third-party patent for which we do not have a license, seeking remedies such as monetary damages or an injunction against our continued marketing of the product.

As a result, there can be no assurance that our IP rights will protect our products or that we will be able to avoid adverse effects from the loss of IP protection or from third-party patents in the future. For more information on the risks related to our IP protection, see “Item 3. Key Information—Item 3.D Risk factors—Intellectual property—Expiry, assertion or loss of intellectual property protection.”

Intellectual property protection for certain key marketed products and compounds in development

We present additional details below regarding certain IP protection in the US and the EU for certain key marketed products. For each, we identify issued, unexpired patents by their general subject matter and, in parentheses, years of expiry, if relevant, in the US and the EU. The identified patents are owned, co‑owned or exclusively in‑licensed by Novartis and relate to at least one dosage strength of the product or to the method of treatment or its use as it is currently approved and marketed or, in the case of a compound in development, as it is currently

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submitted to the FDA and/or the EMA for approval. Identification of an EU patent refers to national patents in EU countries and/or to the national patents that have been derived from a patent granted by the EPO. Novartis may own, co-own, control or have rights to additional patents, for example, relating to compound forms, methods of treatment or use, formulations, devices, processes, product-by-process, synthesis, purification and assays. Information on such patents, where available, may be found in publicly accessible databases such as the FDA patent databases, online databases such as Espacenet™ and Pat-INFORMED, and patent office registers.

We identify unexpired RDP periods and, in parentheses, years of expiry if the relevant marketing authorizations have been authorized or granted. We identify certain unexpired patent term extensions and marketing exclusivities and, in parentheses, years of expiry if they are granted; their subject matter scope may be limited and is not specified. Marketing exclusivities and patent term extensions include ODE, pediatric exclusivity (PE), PTE and SPC.

Identification of a patent in the EU refers to national patents in EU countries and/or to the national patents that have been derived from a patent granted by the EPO. In the case of the EU, identification of a patent, supplementary protection certificate, marketing exclusivity or regulatory data protection means grant, authorization and maintenance in at least one EU country. However, it could be pending, not granted, expired or found invalid in others.

We designate certain IP protection as “pending” if such IP protection has been applied for but not granted and includes years of expiration if estimable. Such pending applications ultimately may or may not be granted.

Where relevant, we indicate whether there is current generic or biosimilar competition for one or more product versions in one or more approved indications in either the US or one or more EU countries. We identify certain enforcement actions, or ongoing challenges to the disclosed IP, including IPRs or PGRs if instituted by the USPTO, that have not been finally resolved (including appeals) unless noted. Resolution of challenges to the disclosed IP, which in the EU may involve IP in one or more EU countries, may include settlement agreements under which Novartis permits or does not permit future launch of generic versions of our products before expiration of that IP. We identify certain material terms of such settlement agreements where they could have a material adverse effect on our business. In other cases, such settlement agreements may contain confidentiality obligations restricting what may be disclosed.

In the event that a product listed below does not have identified patents as described above, we provide information only on generic competition.

For additional information regarding commercial arrangements with respect to these products, see “—Key marketed products.”

Cardiovascular renal and metabolic

• Entresto. US: Two patents on combination (2023, 2023), PTE (2025), two PEs (2024, 2025); two patents on complex (2026, 2027), two PEs (2027, 2027); three patents on methods of treatment (2033 (3)); patent on dosage regimen (2036); RDP for labeling changes related to new clinical investigation (2024). EU: Patent on combination (2023), SPC (2028); patent on complex (2026), SPC (2030); patent on formulation (2028); patent on method of use (2034); patent on dosage regimen (2036); RDP (2026). There is no generic competition in the US or the EU. In the US, certain patents, including the combination and complex patents, are being challenged in ANDA proceedings against generic manufacturers. In July 2023, the US District Court for the District of Delaware issued a negative decision regarding the validity of one of the combination patents. Novartis has appealed to reverse the decision. In the EU, certain patents, including the complex patent, are being opposed in the EPO. In some EU countries, the combination patent or its associated SPC is being challenged by generic manufacturers.

• Leqvio. US: Two patents on composition of matter (2027, 2034), PTE pending (2035); two patents on method of treatment and dosing regimen (2027, 2036); RDP (2026). EU: One patent on composition of matter (2033), SPC (2035); RDP (2030). There is no generic competition in the US or the EU.

Immunology

• Cosentyx. US: Five patents on composition of matter (2025 (4), 2026), PTE (2029); patent on psoriatic arthritis use (2031); patent on psoriasis use (2032); two patents on ankylosing spondylitis use (2032, 2033); RDP (2027). EU: Four patents on composition of matter (2025 (4)), SPC (2030), PE (2030); patent on psoriasis use (2031); RDP (2026). There is no generic competition in the US or the EU.

• Xolair. US: Two patents on syringe formulation (2024, 2025). EU: Three patents on syringe formulation (2024, 2024, 2025). There is no generic competition in the US or the EU.

• Ilaris. US: Patent on composition of matter (2024); patent on cryopyrin‑associated periodic syndromes (CAPS) use (2026); patent on familial Mediterranean fever (FMF) use (2026); patent on systemic onset juvenile idiopathic arthritis (SJIA) use (2028); patent on gout use (2028); patent on hyperimmunoglobulin D syndrome, adult-onset Still’s disease (AOSD), and tumor necrosis factor receptor-associated periodic syndrome use (2029); patent on formulation (2029); ODE on AOSD (2027). EU: Patent on composition of matter (2021), SPC (2024), PE (2025); patent on SJIA use (2026); patent on FMF use (2026); patent on CAPS use (2026); two patents on formulation (2029, 2029). There is no generic competition in the US or the EU.

Neuroscience

• Kesimpta. US: Patent on compound (2031); patent on dosing regimen (2037). EU: Patent on use (2023), SPC (2028); patent on formulation (2028), SPC (2033); patent on formulation and use (2028); two patents on dosing regimen (2037, 2037). There is no generic competition in the US or the EU.

• Zolgensma. US: Four patents on composition of matter (2024, 2024, 2026, 2033), PTE pending (2029);

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four patents on methods of treatment (2028 (3), 2029); ODE for spinal muscular atrophy (SMA) in patients less than 2 years old with biallelic mutations in the SMN1 gene (2026); RDP (2031). EU: Three patents on composition of matter (2024, 2024, 2028), SPC (2029); two patents on methods of use (2028, 2028), two SPCs (2033, 2033); ODE for SMA in patients with a biallelic mutation in the SMN1 gene and a clinical diagnosis of SMA type 1, or patients with a biallelic mutation in the SMN1 gene and up to three copies of the SMN2 gene (2030); RDP (2030). There is no generic competition in the US or the EU.

Oncology

• Promacta/Revolade. US: Patent on salt form and thrombocytopenia use (2025), PE (2026); five patents on tablet formulations of different dose strengths (2027 (5)), five PEs (2028 (5)); ODE on severe aplastic anemia patients in combination with standard immunosuppressive therapy (2025). EU: Patent on compound (2021), SPC (2025), PE (2025); patent on severe aplastic anemia use (2028). There is no generic competition in the US or the EU. In the US, generic manufacturers have filed ANDAs challenging certain patents other than the compound patent. In the EU, a patent, other than the compound patent, is being opposed in the EPO.

• Kisqali. US: Three patents on compound (2028, 2030, 2031), PTE (2031); three patents on methods of treatment (2029, 2029, 2031); patent on salt form (2031); patent for tablet formulation (2036). EU: Patent on compound (2027); patent on compound (2029), SPC (2032); patent on salt form (2031); patent on methods of use with letrozole (2034); patent on formulation (2036); RDP (2027). There is no generic competition in the US or the EU. In the US, certain patents, including the compound patent, are being challenged in ANDA proceedings against a generic manufacturer. In the EU, a patent, other than the compound patent, is being opposed in the EPO.

• Tafinlar and Mekinist.

Tafinlar. US: Two patents on compound (2030, 2030), two PEs (2030, 2030); patent on method of treatment (2029), PE (2029); patent on pediatric formulation (2038). EU: Patent on compound (2029); RDP (2024). There is no generic competition in the US or the EU. In the EU, patents, other than the compound patent, are being opposed in the EPO.

Mekinist. US: Patent on compound (2025), PTE (2027), PE (2027); patent on method of treatment (2025), PE (2025); four patents on formulation (2032 (4)), four PEs (2032 (4)). EU: Patent on compound (2025), SPC (2029); patent on formulation (2031); RDP (2025). There is no generic competition in the US or the EU. In the US, certain patents, including the compound patent, are being challenged in ANDA proceedings against a generic manufacturer. In the EU, patents other than the compound patent are being opposed in the EPO.

Use of Mekinist with Tafinlar or Tafinlar with Mekinist. US: Patent on combination (2030), PE (2031); four patents on method of use of combination (2025, 2030, 2030, 2033), four PEs (2025, 2031, 2031, 2034); ODE on non‑small cell lung cancer (2024), PE (2024); ODE on adjuvant treatment of melanoma (2025), PE (2025); ODE on anaplastic thyroid cancer (2025), PE (2025); ODE on metastatic solid tumors (2025), PE (2025); ODE on pediatric glioma (2030). EU: Patent on combination (2030); patent on combination for use in lung cancer (2030); patent on adjuvant melanoma use (2033); ODE on pediatric glioma (2035). There is no generic competition in the US or the EU.

• Tasigna. US: Two patents on salt forms (2026, 2028), two PEs (2027, 2029); patent on polymorph compound form (2026), PE (2027); two patents on capsule form (2026, 2027), two PEs (2027, 2028); patent on method of treatment (2032), PE (2032). EU: Patent on salt form (2026); patent on polymorph compound form (2026); three patents on capsule form (2027 (3)); patent on method of treatment (2030). There is no generic competition in the US or the EU. In the US, generic manufacturers have filed ANDAs challenging certain patents other than the compound patent.

• Jakavi. EU: Patent on compound (2026), SPC (2027); two patents on salt form (2028, 2028); patent on compound for polycythemia vera use (2026); patent on use in treatment of graft-versus-host disease (2026); patent on salt form for graft-versus-host disease use (2028). There is no generic competition in the EU*.*

• Pluvicto. US: Three patents on composition of matter (2028, 2028, 2034); RDP (2027). PTE pending. EU: RDP (2032). There is no generic competition in the US or the EU.

• Lutathera. US: Two patents on formulation (2038, 2038); ODE (2025). EU: RDP (2027); ODE (2027). There is no generic competition in the US or the EU. In the US, certain patents are being challenged in ANDA proceedings against a generic manufacturer.

• Scemblix. US: Patent on compound (2033), PTE pending (2035); patent on polymorph compound form (2040); RDP (2026); ODE (2028). EU: Patent on compound (2033), SPC (2037); RDP (2032); ODE (2032). There is no generic competition in the US or the EU.

• Fabhalta. US: Patent on compound (2034), PTE pending (2037); patent on salt form (2041); RDP (2028); ODE (2030). EU: Patent on compound (2034). There is no generic competition in the US or the EU.

Established brands

• Lucentis. EU: There is generic competition in the EU.

• Sandostatin SC and Sandostatin LAR.

Sandostatin SC: There is generic competition in the US and the EU.

Sandostatin LAR: There is generic competition in most EU countries but no generic competition in the US.

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Compounds in development

We provide certain patent information for non‑marketed compounds in development that have been submitted to the FDA and/or the EMA for registration but have not yet been approved by either agency. For these products, Novartis will seek all appropriate RDP, will continue to seek additional intellectual property protection for significant product developments, and will apply for PTEs and SPCs in keeping with the great importance we attach to intellectual property.

4.C Organizational structure

Organizational structure

See “Item 4. Information on the Company—Item 4.A History and development of Novartis” and “Item 4. Information on the Company—Item 4.B Business overview—Overview.”

Significant subsidiaries

See “Item 18. Financial Statements—Note 33. Novartis principal subsidiaries and associated companies.”

4.D Property, plants and equipment

Our principal executive offices are located in Basel, Switzerland. We operate through a number of affiliates that have offices, research and development facilities, and production sites throughout the world.

We generally own our facilities or have entered into long-term lease arrangements for them. Some of our principal facilities are subject to mortgages and other security interests granted to secure certain debts.

Our Operations organizational unit manages the production, supply chains and quality of our products through a network of 33 manufacturing sites, as well as through external suppliers, and warehouse and distribution centers. In addition, our Operations organizational unit also manages non-production real estate owned or leased by Novartis around the world.

The following table sets forth our major headquarters and most significant production, research and development, and administrative facilities. See also “—Item 4.B Business overview—Production” for a discussion of our manufacturing processes.

Major facilities

Location	Size of site <br> (in square meters)	Major activity
Basel, Switzerland – St. Johann	481 448	Global Company headquarters; International organizational unit headquarters; research and development; production of drug substances and drug intermediates
Kundl and Schaftenau, Austria	480 000	Production of biotechnological products, active drug substances and nucleic acids, drug products and finished products; product development
East Hanover, New Jersey, US	277 015	US organizational unit headquarters; research and development
Cambridge, Massachusetts, US	179 939	Research and development
Menges, Slovenia	133 763	Production of drug substances and drug intermediates; Research and development for Biologics
Shanghai, China	105 614	China country headquarters; research and development
Stein, Switzerland	64 700	Production of sterile vials, pre‑filled syringes and ampoules; capsules and tablets; active pharmaceutical ingredients; and cell and gene therapies
Huningue, France	35 000	Production of drug substances for clinical and commercial supply
Durham, North Carolina, US	15 794	Manufacture, package and release commercial Zolgensma product and certain clinical development activities
Schweizerhalle, Switzerland	8 880	Manufacture of small-interfering RNA (siRNA) drug substance for Leqvio
Indianapolis, Indiana, US	6 500	Manufacture, package and release clinical and commercial Pluvicto product for US and Canada
Ivrea, Italy	2 100	Manufacture, package and release clinical and commercial Pluvicto and Lutathera products

As our product portfolio evolves, the Company's Operations organizational unit is adapting our manufacturing capacity and capabilities to meet our changing needs, shifting from high-volume products toward lower-volume, customized and personalized medicines. As of December 31, 2023, we have closed, exited or sold 13 Novartis manufacturing sites since 2020. We have continued to invest in manufacturing technologies implemented at our

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sites, such as our new targeted radioligand therapy production facility in Indianapolis, Indiana. We are leveraging innovation to increase the reliability and productivity of our manufacturing network, including using data and digital technologies. We continue to seek opportunities to manage our production facilities as efficiently as possible, optimize external spend, and simplify and standardize across our manufacturing network to help us increase our cost competitiveness and optimize the value of our products. At the same time, we are working to improve our environmental sustainability, for example by reducing energy, waste disposal and water consumption at our sites by making our manufacturing processes more efficient, introducing new technologies, and switching to clean and renewable energy solutions.

For a description of the impact of environmental matters, see “Item 3. Key Information—Item 3.D Risk factors—Environmental, social and governance matters—Failure to meet rapidly evolving environmental, social and governance expectations,” “Item 3. Key Information—Item 3.D Risk factors—Environmental matters—Impact of environmental liabilities,” and “Item 3. Key Information—Item 3.D Risk factors—Climate change—Failure to manage physical and transition risks from climate change.” See also “Item 18. Financial Statements—Note 21. Provisions and other non‑current liabilities.”

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Item 4A. Unresolved Staff Comments

Not applicable.

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Item 5. Operating and Financial Review and Prospects

5.A Operating results

This operating and financial review should be read together with our consolidated financial statements in this Annual Report, which have been prepared in accordance with International Financial Reporting Standards (IFRS) Accounting Standards as issued by the International Accounting Standards Board (see “Item 18. Financial Statements”). “Item 5. Operating and Financial Review and Prospects” with the sections on our compounds in development and selected development projects (see “Item 4. Information on the Company—Item 4.B Business overview”) constitute the Operating and Financial Review (Lagebericht), as defined by the Swiss Code of Obligations.

Overview

Novartis is an innovative medicines company. Our purpose is to reimagine medicine to improve and extend people’s lives. In September 2023, we reorganized our operations into five organizational units. These are Biomedical Research, Development, Operations, and two commercial units: US and International. Global functions support these organizational units in the execution of their work. We are engaged in the research, development, manufacturing, distribution, and commercialization and sale of innovative medicines, with a focus on the core therapeutic areas: cardiovascular, renal and metabolic; immunology; neuroscience; and oncology; as well as established brands. For information about this new organizational structure, see “Item 4. Information on the Company—Item 4.B Overview.”

In 2023, Novartis completed its transformation into a pure-play innovative medicines business, with the spin-off of Sandoz. Effective October 4, 2023, Sandoz was listed on the SIX Swiss Exchange, with a Level 1 ADR program in the United States.

To comply with IFRS Accounting Standards, as a result of the spin-off, Novartis has separated the Company’s consolidated financial statements for the current and prior years into “continuing” and “discontinued” operations. For more information, see “Item 18. Financial Statements—Note 1. Accounting policies.”

The disclosures and commentary in this “Item 5. Operating and Financial Review and Prospects” focuses on continuing operations. We also provide information on discontinued operations.

Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and continued corporate activities.

Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars division and certain corporate activities attributable to Sandoz prior to the spin-off up to the distribution date of October 3, 2023, and certain other expenses related to the spin-off. Included in 2023 is also the IFRS Accounting Standards non-cash, non-taxable net gain on distribution of Sandoz Group AG to Novartis AG shareholders. Sandoz operated in the off-patent medicines segment and specialized in the development, manufacturing, and marketing of generic pharmaceuticals and biosimilars. The Sandoz business was organized globally into two franchises: Generics and Biosimilars.

Significant transactions are discussed in “Item 18. Financial Statements—Note 2. Significant transactions,” and “Item 18. Financial Statements—Note 29. Commitments and contingent liabilities.”

With the spin-off of the Sandoz business, Novartis operates as a single global operating segment, as an innovative medicines company.

Our business environment

Progress in science and technology raises the possibility of new types of medicines and more efficient drug discovery. At the same time, healthcare inequities remain entrenched around the world, while aging populations are putting pressure on healthcare systems in many countries. The major trends currently shaping our business environment include:

• Scientific progress is opening new paths to treat disease. Rapid progress in medical science is creating opportunities for new types of treatments. These advances highlight the importance of investment in R&D, including in next-generation technologies such as radioligand therapies and gene and cell therapies.

• Demand for high-quality healthcare continues to rise. Demand for medicines in areas such as cancer, cardiovascular disease and immunology continues to grow in key markets. The US and EU markets are expanding. China is growing rapidly, while spending in Japan is forecast to remain stable. To meet demand and maintain growth, companies are investing in developing new, innovative treatments.

• Healthcare systems are under strain*.* In many countries, healthcare systems are under pressure. Healthcare professionals often feel overwhelmed and under-resourced. Staff shortages have occurred in both the US and Europe. This trend began with the COVID-19 pandemic, but there are longer-term factors as well—aging and changes to lifestyle have led to a significant rise in noncommunicable illnesses such as cancer, diabetes and heart disease.

• The policy landscape is changing. New legislation or regulations in the US, EU and China may change how governments pay for medicines. In the US, for example, the IRA will limit price increases in Medicare to inflation and impose price controls on select drugs in the Medicare program beginning in 2026. The EU is revising the legislative framework for medicines, trying

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to balance access and affordability, while China has rolled out a volume-based procurement program to reduce prices for eligible medicines. See “Item 3. Key Information—Item 3.D Risk factors—Pricing, reimbursement and access—Pricing and reimbursement pressure, including pricing transparency and access to healthcare,” and “Item 3. Key Information—Item 3.D Risk factors—Macroeconomic developments—Impact of macroeconomic developments.”

• Patients want more say over their treatment. Increasingly, patients want their voice to be heard in the process of developing new medicines, so that the treatments address the outcomes that matter most to them. Patients also want more say over policies that affect their access to medicines and are becoming more important as data owners. As a result, companies are building patient engagement into their approaches—from research and clinical trials to commercialization and access programs.

• Health inequities remain entrenched. Billions of people around the world struggle to get the medicines and healthcare services they need. Many of the issues are in low- and middle-income countries (LMICs), where people face the dual burden of infectious and non-communicable diseases, as well as fragile and under-resourced health systems. Health inequities also affect people in higher-income countries, however, where causes are often linked to structural health system issues as well as demographic, social and economic challenges.

• AI is poised to reshape the industry . Across the biopharmaceutical industry, we are beginning to realize the benefits of new technologies such as AI in automating processes and generating insights that could help us design new compounds, predict drug safety or speed up drug discovery. The extent to which companies can harness this potential will depend on their ability to aggregate and analyze large volumes of anonymized health data. See “Item 3. Key Information—Item 3.D Risk factors—Research and development—Failure to successfully prioritize, integrate and execute our research and development programs for new products or new indications for existing products.”

• Climate change threatens to widen health inequity. Climate change and nature loss continue to have an adverse effect on human health, with people in LMICs disproportionately impacted. The World Health Organization forecasts approximately 250 000 additional deaths per year between 2030 and 2050 due to climate change, mainly from malnutrition, malaria, diarrhea and heat stress. Respiratory illnesses are also on the rise due to air pollution. At the same time, health systems are aiming to build climate resilience—with 29 countries committing to net-zero carbon emissions in their health systems by 2050, according to the WHO. See “Item 3. Key Information—Item 3.D Risk factors—Climate change—Failure to manage physical and transition risks from climate change.”

Our strategy

Our strategy is to deliver high-value medicines that alleviate society’s greatest disease burdens through technology leadership in R&D and novel access approaches. The aim of our strategy is to create long-term value—to contribute to continued advances in human health, to deliver returns to shareholders and to benefit society.

We focus on four core therapeutic areas with strong growth potential and high unmet patient needs: cardiovascular, renal and metabolic; immunology; neuroscience; and oncology. A focused approach enables us to build depth in these areas to find new ways to treat and cure disease, intervene earlier in chronic illnesses and improve quality of life for patients.

We focus on technology platforms where we have the depth and scale to discover, develop and commercialize therapies. These are two established platforms (chemistry and biotherapeutics) plus three newer platforms (xRNA, radioligand therapy and gene and cell therapy) that represent key sources of future growth.

We focus on our priority markets—US, Germany, China and Japan—which together account for most of the expected growth in global healthcare spending over the next five years. In the US, our ambition is to become a top-five player. In Germany we aim to retain our current position as market leader, while in China and Japan we aim to be in third position in each market. Although these are our priority geographies, we maintain a strong presence in other markets worldwide.

To support our focus areas, we have three strategic priorities:

• Deliver high-value medicines . We aim to increase growth, driven by continued strong momentum in our existing portfolio of medicines—including Entresto; Kisqali, Kesimpta, Cosentyx, Scemblix, Pluvicto and Leqvio—and key upcoming launches. Over the longer term, we expect growth will come through delivering high-value medicines that sustain and replace our existing growth drivers.

• Embed operational excellence. In an increasingly competitive environment, we are simplifying processes and reducing costs to become more efficient and effective in our decision-making and to free up resources for investment in new medicines. Our goal is to continue making attractive returns to shareholders while creating value for patients, healthcare systems and society.

• Strengthen the foundations of our business . We continue to invest to strengthen the foundations of our long-term success. We have made progress in strengthening our culture to attract and retain talent, while developing artificial intelligence capabilities in R&D and building stronger trust with stakeholders and society.

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Results of operations

Financial year 2023 compared with 2022

Key figures1

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2023	Year ended<br> Dec 31, 2022	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^2^
Net sales from continuing operations	45 440	42 206	8	10
Other revenues	1 220	1 255	-3	-3
Cost of goods sold	-12 472	-11 582	-8	-6
Gross profit from continuing operations	34 188	31 879	7	11
Selling, general and administration	-12 517	-12 193	-3	-3
Research and development	-11 371	-9 172	-24	-22
Other income	1 772	696	155	147
Other expense	-2 303	-3 264	29	31
Operating income from continuing operations	9 769	7 946	23	39
Return on net sales (%)	21.5	18.8
Loss from associated companies	-13	-11	-18	1
Interest expense	-855	-800	-7	-11
Other financial income and expense	222	42	nm	nm
Income before taxes from continuing operations	9 123	7 177	27	45
Income taxes	-551	-1 128	51	44
Net income from continuing operations	8 572	6 049	42	62
Net income from discontinued operations before gain on distribution of Sandoz Group AG to Novartis AG shareholders	422	906	nm	nm
Gain on distribution of Sandoz Group AG to Novartis AG shareholders	5 860		nm	nm
Net income from discontinued operations	6 282	906	nm	nm
Net income	14 854	6 955	nm	nm
Basic earnings per share from continuing operations (USD)	4.13	2.77	49	70
Basic earnings per share from discontinued operations (USD)	3.02	0.42	nm	nm
Total basic earnings per share (USD)	7.15	3.19	nm	nm
Net cash flows from operating activities from continuing operations	14 220	13 039	9
Non-IFRS measures^2^
Free cash flow from continuing operations^2, 3^	13 160	12 123	9
^1^ For information on continuing operations and discontinued operations, refer to the Overview section above in this Item 5 and "Item 18. Financial Statements—Note 1. Accounting policies ", "Item 18. Financial Statements—Note 2. Significant transactions—Significant transactions in 2023," and "Item 18. Financial Statements—Note 31. Discontinued operations."
^2^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
^3^ Effective January 1, 2023, Novartis revised its definition of free cash flow, to define free cash flow as net cash flows from operating activities less purchases of property, plant and equipment. To aid in comparability, the prior year free cash flow amounts have been revised to conform with the new free cash flow definition. See "—Non-IFRS measures as defined by Novartis"
nm = not meaningful

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Company overview

Net sales from continuing operations were USD 45.4 billion, up 8% in USD reported terms and 10% measured in constant currencies (cc) to remove the impact of exchange rate movements. Sales growth was driven by volume growth of 16 percentage points. Generic competition had a negative impact of 4 percentage points and pricing had a negative impact of 2 percentage points. Sales in the US were USD 18.0 billion (+13%) and in the rest of the world USD 27.5 billion (+5%, +8% cc). Net sales growth was mainly driven by continued strong performance from Entresto (USD 6.0 billion, +30%, +31% cc), Kesimpta (USD 2.2 billion, +99%, +99% cc), Kisqali (USD 2.1 billion, +69%, +75% cc), Pluvicto (USD 980 million, +262%, +261% cc), partly offset by generic competition mainly for Gilenya.

In the US (USD 18.0 billion, +13%), sales growth was mainly driven by Entresto, Pluvicto, Kesimpta, Kisqali, Scemblix and Leqvio, partly offset by the impact of generic competition for Gilenya. In Europe (USD 15.0 billion, +4%, +4% cc), sales growth was driven by Kesimpta, Entresto, Kisqali, Cosentyx and Leqvio, partly offset by increased generic competition for Lucentis and Gilenya. Emerging growth markets, which comprise all markets excluding the US, Canada, Western Europe^1^, Japan, Australia and New Zealand, grew +8% (+17% cc), includes China net sales of USD 3.3 billion (+11%, +17% cc).

Operating income from continuing operations was USD 9.8 billion (+23%, +39% cc), mainly driven by higher net sales, lower restructuring charges, and income from legal matters, partly offset by higher impairments and higher selling, general and administration (SG&A), and research and development (R&D) investments. Operating income margin from continuing operations was 21.5% of net sales, increasing 2.7 percentage points (+5.0 percentage points in cc).

Net income from continuing operations was USD 8.6 billion (+42%, +62% cc), mainly driven by higher operating income and non-recurring favorable tax impacts. Basic earnings per share from continuing operations was USD 4.13 (+49%, +70% cc), growing faster than net income, benefiting from lower weighted average number of shares outstanding.

Net cash flows from operating activities from continuing operations amounted to USD 14.2 billion, compared with USD 13.0 billion in 2022. This increase was mainly driven by higher net income from continuing operations adjusted for non-cash items and other adjustments, including divestment gains, which were partly offset by higher income taxes paid, mainly due to the timing of payments.

Free cash flow from continuing operations amounted to USD 13.2 billion (+9% USD), compared with USD 12.1 billion in 2022, driven by higher net cash flows from operating activities from continuing operations.

We also present our core results^2^, which exclude the impact of amortization of intangible assets, impairments, business acquisitions, divestments, and other significant items, including restructuring and related items, to help investors understand our underlying performance.

Core operating income from continuing operations was USD 16.4 billion (+11%, +18% cc), mainly driven by higher net sales, partly offset by higher SG&A and R&D investments. Core operating income margin from continuing operations was 36.0% of net sales, increasing 0.9 percentage points (+2.4 percentage points cc).

Core net income from continuing operations was USD 13.4 billion (+13%, +19% cc), mainly due to higher core operating income. Core basic earnings per share from continuing operations was USD 6.47 (+18%, +25% cc), growing faster than core net income from continuing operations, benefiting from lower weighted average number of shares outstanding.

Discontinued operations net sales in 2023 were USD 7.4 billion, compared with USD 9.4 billion in 2022, and operating income amounted to USD 265 million, compared with USD 1.3 billion in 2022. Net income from discontinued operations in 2023 amounted to USD 6.3 billion, compared with USD 906 million in 2022, driven by the IFRS Accounting Standards non-cash, non-taxable, net gain on distribution of Sandoz Group AG to Novartis AG shareholders, which amounted to USD 5.9 billion.

Total Company net income amounted to USD 14.9 billion in 2023, compared with USD 7.0 billion in 2022, and basic earnings per share was USD 7.15, compared with USD 3.19 in the prior year, driven by the IFRS Accounting Standards non-cash, non-taxable, net gain on distribution of Sandoz Group AG to Novartis AG shareholders of USD 5.9 billion. Net cash flows from operating activities for the total Company amounted to USD 14.5 billion, and free cash flow amounted to USD 13.2 billion.

^1^ Novartis definition of Western Europe includes Austria, Belgium, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

^2^ For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”

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Net sales from continuing operations

The following table provides an overview of net sales from continuing operations by core therapeutic area and established brands:

(USD millions)	Year ended<br> Dec 31, 2023	Year ended<br> Dec 31, 2022^1^	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^2^
Cardiovascular, renal and metabolic	6 391	4 756	34	36
Immunology	7 798	7 287	7	8
Neuroscience	4 043	3 038	33	34
Oncology	13 590	11 176	22	23
Total promoted brands	31 822	26 257	21	23
Established brands^3^	13 618	15 949	-15	- 12
Total net sales from continuing operations^3^	45 440	42 206	8	10
^1^ Reclassified to conform with the 2023 organizational structure.
^2^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
^3^ Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022, in compliance with IFRS Accounting Standards. See “Item 18. Financial Statements – Note 3. Operating segment.”

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The following table provides the top 20 product net sales from continuing operations in 2023, as well as the change compared with 2022:

			US		Rest of world			Total
Brands	Brand classification by therapeutic area or established brands	Key indications	USD m	% change USD/cc^1^	USD m	% change USD	% change cc^1^	USD m	% change USD	% change cc^1^
Entresto	Cardiovascular, renal and metabolic	Chronic heart failure, hypertension	3 067	30	2 968	30	32	6 035	30	31
Cosentyx	Immunology	Psoriasis (PsO), ankylosing spondylitis (AS), psoriatic arthritis (PsA), non-radiographic axial spondyloarthritis (nr-axSPA), hidradenitis suppurativa (HS)	2 636	-5	2 344	16	19	4 980	4	5
Promacta/Revolade	Oncology	Immune thrombocytopenia (ITP), severe aplastic anemia (SAA)	1 205	11	1 064	6	8	2 269	9	10
Kesimpta	Neuroscience	Relapsing-remitting multiple sclerosis (RRMS)	1 528	66	643	276	272	2 171	99	99
Kisqali	Oncology	HR+/HER2- metastatic breast cancer	1 032	119	1 048	38	47	2 080	69	75
Tafinlar + Mekinist	Oncology	BRAF V600+ metastatic adjuvant melanoma, advanced non-small cell lung cancer (NSCLC), tumor agnostic with BRAF mutation indication	791	17	1 131	4	8	1 922	9	11
Tasigna	Oncology	Chronic myeloid leukemia (CML)	884	1	964	-8	-5	1 848	-4	-3
Jakavi	Oncology	Myelofibrosis (MF), polycytomia vera (PV), graft-versus-host disease (GvHD)			1 720	10	12	1 720	10	12
Lucentis^2^	Established brands	Age-related macular degeneration (AMD), diabetic macular edema (DME), retinal vein occlusion (RVO)			1 475	-21	-20	1 475	-21	-20
Xolair^3^	Immunology	Severe allergic asthma (SAA), chronic spontaneous urticaria (CSU), nasal polyps			1 463	7	9	1 463	7	9
Ilaris	Immunology	Auto-inflammatory (CAPS, TRAPS, HIDS/MKD, FMF, SJIA, AOSD, gout)	686	20	669	19	24	1 355	20	22
Sandostatin	Established brands	Carcinoid tumors, acromegaly	829	4	485	11	15	1 314	6	8
Zolgensma	Neuroscience	Spinal muscular atrophy (SMA)	372	-14	842	-10	-7	1 214	-11	-9
Pluvicto	Oncology	PSMA-positive mCRPC patients post-ARPI, post-Taxane	921	265	59	211	195	980	262	261
Gilenya^2^	Established brands	Relapsing multiple sclerosis (RMS)	359	-69	566	-34	-33	925	-54	-54
Exforge Group	Established brands	Hypertension	13	-7	700	-4	-1	713	-4	-1
Galvus Group	Established brands	Type 2 diabetes			692	-19	-11	692	-19	-11
Diovan Group	Established brands	Hypertension	52	-5	561	-6	-1	613	-6	-1
Lutathera	Oncology	GEP-NETs gastroenteropancreatic neuroendocrine tumors	427	29	178	27	26	605	28	28
Gleevec/Glivec	Established brands	Chronic myeloid leukemia (CML), gastrointestinal stromal tumors (GIST)	150	-27	411	-24	-20	561	-25	-22
Top 20 brands total			14 952	15	19 983	6	9	34 935	10	12
Rest of portfolio^4^			3 007	1	7 498	1	5	10 505	1	4
Total net sales from continuing operations^4^			17 959	13	27 481	5	8	45 440	8	10
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
^2^ In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
^3^ Net sales reflect Xolair sales for all indications.
^4^ Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022, in compliance with IFRS Accounting Standards. See “Item 18. Financial Statements – Note 3. Operating segment.”
nm = not meaningful

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For the table providing the top 20 products net sales from continuing operations in 2022 see Results of Operations 2022 compared with 2021, below in this Item 5. For the table providing the net sales from continuing operations by core therapeutic area and established brands for 2023 and 2022, see “Item 18. Financial statements—Note 4. Revenues and geographic information.”

For information about the approved indications for certain products described, see “Item 4. Information on the Company—Item 4.B Business overview— Products.”

Cardiovascular, renal and metabolic

Net sales in the cardiovascular, renal and metabolic therapeutic area were USD 6.4 billion (+34%, +36% cc), sales growth mainly driven by Entresto.

Entresto (USD 6.0 billion, +30%, +31% cc) sustained robust demand-led growth. In the US and Europe, Entresto penetration grew through the continued adoption of guideline-directed medical therapy in heart failure. In China and Japan, Entresto volume growth is fueled by heart failure as well as increased penetration in hypertension. Highlights of the year also included the approval of the pediatric indication and formulation in Europe with a 1-year extension of RDP to November 2026, and the inclusion of Entresto in the 2023 China Hypertension Treatment Guideline as a new drug category and 1st line treatment option. In the US, Novartis is in ANDA litigation with generic manufacturers. Novartis has appealed to reverse the negative US district court decision to uphold the validity of its combination patent covering Entresto and combinations of sacubitril and valsartan, which expires in 2025 (with pediatric exclusivity). No generics have tentative or final approval in the US. Any US commercial launch of a generic Entresto product prior to the final outcome of Novartis combination patent appeal, or ongoing litigations involving other patents, may be at risk of later litigation developments.

Leqvio (USD 0.4 billion, +217%, +217% cc) launch in the US and other markets is ongoing, with focus on patient on-boarding, removing access hurdles and enhancing medical education. In July 2023, FDA expanded the label to include primary hyperlipidemia (patients at increased risk of ASCVD) and removed four adverse reactions from the safety section and Limitations of Use. In Q3 2023, Leqvio was approved in China and in Japan and is now approved in 94 countries. Novartis obtained global rights to develop, manufacture and commercialize Leqvio under a license and collaboration agreement with Alnylam Pharmaceuticals.

Immunology

Net sales in the immunology therapeutic area reached USD 7.8 billion (+7%, +8% cc), sales growth was mainly driven by Ilaris and Cosentyx.

Cosentyx (USD 5.0 billion, +4%, +5% cc) continued demand growth across key regions, partly offset by revenue deduction increases in the US. Ex-US sales grew +19% (cc). Since initial approval in 2015, Cosentyx has shown sustained efficacy and a robust safety profile, treating more than 1 million patients across six systemic inflammatory conditions. Cosentyx demonstrated durable efficacy and symptom improvement at 16 weeks with observed results at 52 weeks in patients with moderate-to-severe hidradenitis suppurativa. In May and October 2023, respectively, the European Commission and FDA approved Cosentyx as the first and only IL-17A inhibitor for hidradenitis suppurativa in adults and the first new biologic therapy for hidradenitis suppurativa in nearly a decade. Cosentyx hidradenitis suppurativa in adults is now approved in more than 60 countries worldwide. In October 2023, FDA has approved Cosentyx intravenous formulation for the treatment of adults with psoriatic arthritis, ankylosing spondylitis, and non-radiographic axial spondyloarthritis.

Xolair (USD 1.5 billion, ex-US +7%, +9% cc) sales grew across all regions. Following EMA positive opinion in February 2023, the Xolair SmPC was updated with long term (48 week) efficacy and safety data on chronic spontaneous urticaria (CSU) allowing continued treatment beyond 24 weeks. In November 2023, Novartis received EU approval for six new Xolair product configurations, including auto injectors and a new 300 mg strength. Novartis co-promotes Xolair with Genentech in the US and shares a portion of revenue as operating income but does not record any US sales.

Ilaris (USD 1.4 billion, +20%, +22% cc) sales grew across all regions. Contributors to growth include strong performance in the Periodic Fever Syndrome (PFS) and Still’s disease indications (SJIA/AOSD) in the US, Europe and Japan, as well as in key markets worldwide.

Neuroscience

Net sales in the neuroscience therapeutic area were USD 4.0 billion (+33%, +34% cc), sales growth was mainly driven by Kesimpta.

Kesimpta (USD 2.2 billion, +99%, +99% cc) sales grew across all regions mainly driven by increased demand and strong access. Kesimpta is a high efficacy B-cell therapy, with a favorable safety and tolerability profile and an at home self-administration for a broad population of RMS patients. Kesimpta is now approved in 87 countries with more than 85,000 patients treated.

Zolgensma (USD 1.2 billion, -11%, -9% cc). Established markets are treating mainly incident patients. Sales declined in the US and Europe. Zolgensma is now approved in 51 countries with more than 3,700 patients treated globally through clinical trials, early access programs and in the commercial setting.

Mayzent (USD 0.4 billion, +10%, +10% cc) sales grew mainly in Europe. Sales continued to grow in patients with multiple sclerosis showing signs of progression despite being on other treatments.

Aimovig (USD 0.3 billion, ex-US, ex-Japan +22%, +21% cc) sales grew mainly in Europe, driven by increased demand in migraine prevention. Novartis commercializes Aimovig ex-US, ex-Japan, while Amgen retains all rights in the US and in Japan.

Oncology

Net sales in the oncology therapeutic area were USD 13.6 billion (+22%, +23% cc), sales growth was mainly driven by Kisqali, Pluvicto, Scemblix and Promacta/Revolade.

Promacta/Revolade (USD 2.3 billion, +9%, +10% cc) sales grew across all regions, driven by increased use in second-line persistent and chronic immune thrombocytopenia and as first-line and/or second-line treatment

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for severe aplastic anemia, according to the respective label in the countries.

Kisqali (USD 2.1 billion, +69%, +75% cc) sales grew strongly across all regions, based on increasing recognition of its consistently reported overall survival in HR+/HER2- advanced breast cancer. Updates to the NCCN Clinical Practice Guidelines in Oncology (NCCN Guidelines®) for breast cancer, released in January 2023, recommend ribociclib (Kisqali) as the only Category 1 Preferred CDK4/6 inhibitor for first-line treatment of patients with HR+/HER2- advanced breast cancer in combination with an aromatase inhibitor (AI). Positive, statistically significant interim and final efficacy results of the iDFS analysis of the early breast cancer pivotal Phase III trial NATALEE were presented at ASCO and SABCS 2023. Additional QOL information presented at ESMO demonstrated that the addition of Ribociclib to endocrine therapy did not compromise the QOL of patients. Submission for approval in early breast cancer was completed in August to EMA and in December to the FDA. Submissions to other regulatory authorities are ongoing.

Tafinlar + Mekinist (USD 1.9 billion, +9%, +11% cc) sales grew mainly in the US and emerging growth markets, driven by demand in BRAF+ adjuvant melanoma and NSCLC indications, while maintaining demand in the highly competitive BRAF+ metastatic melanoma market. In addition, the tumor agnostic indication contributed to growth in the US.

Tasigna (USD 1.8 billion, -4%, -3% cc) sales declined mainly in Europe.

Jakavi (USD 1.7 billion, ex-US +10%, +12% cc) sales grew in emerging growth markets, Europe and Japan, driven by strong demand in both myelofibrosis and polycythemia vera indications. Incyte retains all rights to ruxolitinib (Jakafi®) in the US.

Pluvicto (USD 1.0 billion, +262%, +261% cc) saw continued sales growth in the US. Pluvicto is the first and only radioligand therapy approved by the FDA for the treatment of adult patients with progressive, PSMA-positive metastatic castration-resistant prostate cancer, who have already been treated with other anticancer treatments (ARPI and taxane-based chemotherapy). Data from the Phase III PSMAfore trial was presented at ESMO. Pluvicto met its primary endpoint with a clinically meaningful and statistically significant benefit in radiographic progression-free survival (rPFS) in patients with prostate-specific membrane antigen (PSMA)-positive metastatic castration-resistant prostate cancer (mCRPC) after treatment with androgen receptor pathway inhibitor (ARPI) therapy, compared with a change in ARPI. In Q2 2023, approval was received for commercial production of Pluvicto for US patients at our radioligand manufacturing facility in Millburn, NJ and the expansion of manufacturing operations for EU commercial supply at our site in Zaragoza, Spain. In January 2024, Novartis received approval from the FDA for the commercial manufacturing of Pluvicto at state-of-the-art radioligand therapy (RLT) manufacturing facility in Indianapolis.

Lutathera (USD 0.6 billion, +28%, +28% cc) sales grew across all regions due to increased demand. Growth in the US was also driven by strong field execution. In Japan, growth was driven by increased demand following the transfer of the marketing authorization (MA) back to Novartis from Fujifilm Toyama Chemical. In Q3 2023, the Phase III NETTER-2 trial with Lutathera met its primary endpoint, showing Lutathera is the first radioligand therapy (RLT) to demonstrate clinically meaningful benefit in a first line setting.

Kymriah (USD 0.5 billion, -5%, -5% cc) sales declined in Europe and the US, partly offset by growth in Japan and follicular lymphoma indication launch across markets.

Piqray / Vijoice (USD 0.5 billion, +35%, +37% cc) sales grew mainly in the US, Europe and emerging growth markets. In addition to PIK3CA-related overgrowth spectrum (PROS), Piqray is the first therapy specifically developed for the approximately 40% of HR+/HER2- advanced breast cancer patients who have a PIK3CA mutation, associated with a worse prognosis.

Scemblix (USD 0.4 billion, +177%, +179% cc) sales grew across all regions, demonstrating the high unmet need for effective and tolerable treatment options for CML patients who have been treated with 2 or more tyrosine kinase inhibitors. Scemblix has now been approved in more than 60 countries for patients with Philadelphia chromosome-positive CML in chronic phase who have been treated with 2 or more TKIs. In January 2024, Novartis announced that the ASC4FIRST trial met both primary endpoints, with clinically meaningful and statistically significant results vs. standard-of-care TKIs in newly diagnosed Ph+CML-CP patients while demonstrating a favorable safety and tolerability profile. Data will be presented at an upcoming medical conference and submitted to regulatory authorities in 2024.

Votrient (USD 0.4 billion, -18%, -17% cc) declined due to increased competition, especially from immuno-oncology agents in metastatic renal cell carcinoma.

Adakveo (USD 0.2 billion, +1%, 0% cc) sales grew (cc) mainly in the US, offset by decline in emerging growth markets and Europe. In August 2023, European Commission endorsed the CHMP’s recommendation to revoke the conditional marketing authorization for Adakveo. Adakveo remains approved for use by the FDA for the reduction in frequency of vaso-occlusive crises (pain crises) in adults and pediatric patients aged 16 years or older with sickle cell disease. Novartis continues to discuss the STAND study results with FDA and other health authorities globally.

Tabrecta (USD 0.2 billion, +16%, +16% cc) sales grew mainly in the US. Tabrecta is the first therapy approved by the FDA to specifically target metastatic NSCLC with a mutation that leads to MET exon 14 skipping (METex14) in line agnostic setting. Novartis obtained global rights to develop, manufacture and commercialize Tabrecta under a license and collaboration agreement with Incyte Corporation.

Established Brands

The established brands had net sales of USD 13.6 billion (-15%, -12% cc).

Lucentis (USD 1.5 billion, ex-US -21%, -20% cc) sales declined in Europe, emerging growth markets and Japan due to competition.

Sandostatin (USD 1.3 million, +6%, +8% cc) sales grew mainly in emerging growth markets, Europe and in the US.

48

Gilenya (USD 0.9 billion, -54%, -54% cc) sales declined due to generic competition mainly in the US and Europe. Novartis is in litigation against a generic manufacturer on the method of treatment patent in the US, and against generic manufacturers on the dosing regimen patent in Europe.

Exforge Group (USD 0.7 million, -4%, -1% cc) sales declined mainly in Europe, partly offset by growth in emerging growth markets.

Galvus Group (USD 0.7 million, -19%, -11% cc) sales declined mainly in Europe, partly offset by growth in emerging growth markets.

Diovan Group (USD 0.6 million, -6%, -1% cc) sales declined mainly in Europe, Japan and in the US, partly offset by growth in emerging growth markets.

Gleevec/Glivec (USD 0.6 million, -25%, -22% cc) sales declined due to increased generic competition.

Afinitor/Votubia (USD 0.4 million, -20%, -18% cc) sales declined mainly in the US and Europe, driven by generic competition.

Operating income from continuing operations

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2023	Year ended<br> Dec 31, 2022	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^1^
Gross profit from continuing operations	34 188	31 879	7	11
Selling, general and administration	-12 517	-12 193	-3	-3
Research and development	-11 371	-9 172	-24	-22
Other income	1 772	696	155	147
Other expense	-2 303	-3 264	29	31
Operating income from continuing operations	9 769	7 946	23	39
Return on net sales (%)	21.5	18.8
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."

Operating income from continuing operations was USD 9.8 billion (+23%, +39% cc), mainly driven by higher net sales, lower restructuring charges, and income from legal matters, partly offset by higher impairments and higher SG&A and R&D investments. Operating income margin from continuing operations was 21.5% of net sales, increasing 2.7 percentage points (+5.0 percentage points in cc). Other revenues as a percentage of net sales from continuing operations decreased by 0.3 percentage points (-0.4 percentage points cc). Cost of goods sold as a percentage of net sales from continuing operations was in line with the prior year (+1.0 percentage points cc). R&D expenses as a percentage of net sales from continuing operations increased by 3.3 percentage points (-2.4 percentage points cc). Selling, general and administration (SG&A) expenses as a percentage of net sales from continuing operations decreased by 1.4 percentage points (+1.7 percentage points cc). Other income and other expense, net as a percentage of net sales from continuing operations, increased the margin by 4.9 percentage points (+5.1 percentage points cc).

Non-IFRS measure Core operating income from continuing operations 1

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2023	Year ended<br> Dec 31, 2022	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %
Core gross profit from continuing operations	37 959	35 591	7	9
Core selling, general and administration	-12 489	-12 143	-3	-3
Core research and development	-8 600	-8 267	-4	-3
Core other income	392	291	35	29
Core other expense	-890	-678	-31	-33
Core operating income from continuing operations	16 372	14 794	11	18
Core return on net sales (%)	36.0	35.1
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."

The adjustments made to operating income from continuing operations to arrive at core operating income from continuing operations amounted to USD 6.6 billion (compared with USD 6.8 billion in the prior year). For more information, see “—Non-IFRS measures as defined by Novartis—2023, 2022 and 2021 reconciliation from IFRS Accounting Standards results to non-IFRS core results.”

49

Core operating income from continuing operations was USD 16.4 billion (+11%, +18% cc), mainly driven by higher net sales, partly offset by higher SG&A and R&D investments. Core operating income margin from continuing operations was 36.0% of net sales, increasing 0.9 percentage points (+2.4 percentage points cc). Core other revenues as a percentage of sales decreased by 0.2 percentage points (cc). Core cost of goods sold as a percentage of sales increased by 0.1 percentage points (cc). Core R&D expenses as a percentage of net sales decreased by 1.3 percentage points (cc). Core SG&A expenses as a percentage of net sales decreased by 1.6 percentage points (cc). Core other income and expense as a percentage of net sales decreased the margin by 0.2 percentage points (cc).

Research and development

The following table provides an overview of the continuing operations reported research and development expense and the non-IFRS measure core research and development expense^1^:

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2023	Year ended<br> Dec 31, 2022	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^1^
Research and exploratory development	-3 640	-2 938	-24	-22
Confirmatory development	-7 731	-6 234	-24	-22
Total research and development expense	-11 371	-9 172	-24	-22
Research and development as % of net sales from continuing operations	25.0	21.7
Non-IFRS measures
Core research and exploratory development^1^	-2 988	-2 784	-7	-5
Core confirmatory development^1^	-5 612	-5 483	-2	-1
Total core research and development expense	-8 600	-8 267	-4	-3
Core research and development as % of net sales from continuing operations	18.9	19.6
^1^ Core research and development expense exclude impairments, amortization and certain other items. For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."

Research and exploratory development expenses increased by 24% (-22% cc) to USD 3.6 billion. Confirmatory development expenses amounted to USD 7.7 billion, increasing by 24% (-22% cc) versus the prior year mainly due to higher impairments from discontinuation of early stage development projects. Research and development as a percentage of net sales from continuing operations increased by 3.3 percentage points to 25.0% of net sales from continuing operations.

Total core research and development expenses amounted to USD 8.6 billion, increasing by 4% (-3% cc) versus the prior year mainly due to higher investments in recently acquired assets. Core research and development as a percentage of net sales from continuing operations decreased by 0.7 percentage points (-1.3 percentage points cc) to 18.9% of net sales from continuing operations.

50

Non-operating income and expense

The term “non-operating income and expense” includes all income and expense items outside operating income from continuing operations. The following table provides an overview of non-operating income and expense from continuing operations:

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2023	Year ended<br> Dec 31, 2022	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^1^
Operating income from continuing operations	9 769	7 946	23	39
Loss from associated companies	-13	-11	-18	1
Interest expense	-855	-800	-7	-11
Other financial income and expense	222	42	nm	nm
Income before taxes	9 123	7 177	27	45
Income taxes	-551	-1 128	51	44
Net income from continuing operations	8 572	6 049	42	62
Net income from discontinued operations before gain on distribution of Sandoz Group AG to Novartis AG shareholders	422	906	nm	nm
Gain on distribution of Sandoz Group AG to Novartis AG shareholders	5 860		nm	nm
Net income from discontinued operations	6 282	906	nm	nm
Net income	14 854	6 955	nm	nm
Basic earnings per share from continuing operations (USD)	4.13	2.77	49	70
Basic earnings per share from discontinued operations (USD)	3.02	0.42	nm	nm
Total basic earnings per share (USD)	7.15	3.19	nm	nm
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
nm = not meaningful

Interest expense and other financial income and expense

Interest expense amounted to USD 855 million, broadly in line with the prior year.

Other financial income and expense amounted to an income of USD 222 million compared with USD 42 million in the prior year, mainly due to higher interest income partly offset by higher net losses from the impact of IAS 29 “Financial reporting in Hyperinflation Economies.”

Income taxes

The tax rate was 6.0%, compared with 15.7% in the prior year period. The current year tax rate was favorably impacted by the effect of tax benefits from the write-down of investments in subsidiaries, non-taxable net gains on unrealized foreign currency results, recognition of deferred tax assets on prior years tax loss carryforwards, non-taxable income related to legal matters, and other items including impact of tax rate changes. Excluding these impacts, the current year tax rate would have been 15.3% compared with 15.7% in the prior year period. The decrease from the prior year was mainly the result of a change in profit mix.

Net income from continuing operations

Net income from continuing operations was USD 8.6 billion (+42%, +62% cc), mainly due to higher operating income from continuing operations and non-recurring favorable tax impacts.

Earnings per share from continuing operations

Basic earnings per share from continuing operations was USD 4.13 (+49%, +70% cc), growing faster than net income from continuing operations, benefiting from lower weighted average number of shares outstanding.

51

Non-IFRS measure Core non-operating income and expense1

The following table provides an overview of the non-IFRS measure core non-operating income and expense from continuing operations:

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2023	Year ended<br> Dec 31, 2022	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %
Core operating income from continuing operations	16 372	14 794	11	18
Core loss from associated companies	-13	-11	-18	1
Core interest expense	-855	-800	-7	-11
Core other financial income and expense	430	140	nm	nm
Core income before taxes from continuing operations	15 934	14 123	13	19
Core income taxes	-2 488	-2 177	-14	-21
Core net income from continuing operations	13 446	11 946	13	19
Core basic EPS from continuing operations (USD)	6.47	5.48	18	25
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
nm = not meaningful

Core interest expense and other financial income and expense

Core interest expense amounted to USD 855 million, broadly in line with the prior year.

Core other financial income and expense amounted to an income of USD 430 million compared with USD 140 million in the prior year, mainly due to higher interest income.

Core income taxes

The core tax rate (core taxes as a percentage of core income before tax) was 15.6% compared with 15.4% in the prior year period. The increase from the prior year was mainly the result of a change in profit mix.

Core net income from continuing operations

Core net income from continuing operations was USD 13.4 billion (+13%, +19% cc), mainly due to higher core operating income from continuing operations.

Core earnings per share from continuing operations

Core basic earnings per share from continuing operations was USD 6.47 (+18%, +25% cc), growing faster than core net income from continuing operations, benefiting from lower weighted average number of shares outstanding.

Discontinued operations

Discontinued operations include the Sandoz, generic pharmaceuticals and biosimilars division and certain corporate activities attributable to Sandoz prior to the spin-off up to the distribution date of October 3, 2023 and certain other expenses related to the spin-off. Included in 2023 is also the IFRS Accounting Standards non-cash, non-taxable net gain on the distribution of Sandoz Group AG to Novartis AG shareholders of USD 5.9 billion, representing mainly the excess amount of the IFRS Accounting Standards distribution liability, which is the estimated fair value of the Sandoz business distributed to Novartis AG shareholders, over the then carrying value of Sandoz business net assets. There were no operating results for the fourth quarter 2023 following the distribution date. The prior year includes the results for the full year.

Discontinued operations net sales in 2023 were USD 7.4 billion, compared with USD 9.4 billion in 2022 and operating income amounted to USD 265 million compared with USD 1.3 billion in 2022.

Net income from discontinued operations in 2023 amounted to USD 6.3 billion, compared with USD 906 million in 2022, driven by the IFRS Accounting Standards non-cash, non-taxable, net gain on distribution of Sandoz Group AG to Novartis AG shareholders, which amounted to USD 5.9 billion.

For further information, see “Item 18. Financial Statements—Note 1. Accounting policies; Note 2. Significant transactions—Completion of the spin-off of the Sandoz business through a dividend in kind distribution to Novartis AG shareholders and —Note 31. Discontinued operations.”

Total Company

Total Company net income amounted to USD 14.9 billion in 2023, compared with USD 7.0 billion in 2022, and basic earnings per share was USD 7.15, compared with USD 3.19 in the prior year, driven by the IFRS Accounting Standards non-cash, non-taxable, net gain on distribution of Sandoz Group AG to Novartis AG shareholders of USD 5.9 billion. Net cash flows from operating activities for the total Company amounted to USD 14.5 billion, and free cash flow amounted to USD 13.2 billion.

52

Financial year 2022 compared with 2021

Key figures1

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2022	Year ended<br> Dec 31, 2021	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^2^
Net sales from continuing operations	42 206	42 781	-1	5
Other revenues	1 255	1 193	5	7
Cost of goods sold	-11 582	-11 735	1	-5
Gross profit from continuing operations	31 879	32 239	-1	5
Selling, general and administration	-12 193	-12 827	5	0
Research and development	-9 172	-8 641	-6	-10
Other income	696	1 620	-57	-55
Other expense	-3 264	-2 335	-40	-49
Operating income from continuing operations	7 946	10 056	-21	-12
Return on net sales (%)	18.8	23.5
(Loss)/income from associated companies	-11	15 337	nm	nm
Interest expense	-800	-787	-2	-3
Other financial income and expense	42	-76	nm	nm
Income before taxes from continuing operations	7 177	24 530	-71	-67
Income taxes	-1 128	-1 625	31	21
Net income from continuing operations	6 049	22 905	-74	-70
Net income from discontinued operations	906	1 113	-19	-11
Net income	6 955	24 018	-71	-67
Basic earnings per share from continuing operations (USD)	2.77	10.22	-73	-69
Basic earnings per share from discontinued operations (USD)	0.42	0.49	-15	-9
Total basic earnings per share (USD)	3.19	10.71	-70	-66
Net cash flows from operating activities from continuing operations	13 039	13 365	-2
Non-IFRS measures^2^
Free cash flow from continuing operations^2, 3^	12 123	12 299	-1
^1^ For information on continuing operations and discontinued operations, refer to the Overview section above in this Item 5 and "Item 18. Financial Statements—Note 1. Accounting policies ", "Item 18. Financial Statements—Note 2. Significant transactions—Significant transactions in 2023," and "Item 18. Financial Statements—Note 31. Discontinued operations."
^2^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
^3^ Effective January 1, 2023, Novartis revised its definition of free cash flow, to define free cash flow as net cash flows from operating activities less purchases of property, plant and equipment. To aid in comparability, the prior year free cash flow amounts have been revised to conform with the new free cash flow definition. See "—Non-IFRS measures as defined by Novartis."
nm = not meaningful

53

Company overview

Net sales from continuing operations were USD 42.2 billion in 2022, down 1% in USD reported terms and up 5% measured in constant currencies (cc) to remove the impact of exchange rate movements. Sales growth was driven by volume growth of 13 percentage points, mainly driven by continued strong growth from Entresto, Kesimpta, Kisqali, Pluvicto and Cosentyx. Generic competition had a negative impact of 4 percentage points, mainly due to Gilenya, Afinitor/Votubia, and Gleevec/Glivec. Pricing had a negative impact of 4 percentage points. Net sales from continuing operations in the US were USD 15.9 billion (+7%) and in the rest of the world USD 26.3 billion (-6%, +4% cc).

In emerging growth markets, which comprise all markets excluding the US, Canada, Western Europe^1^, Japan, Australia and New Zealand, net sales from continuing operations were USD 10.8 billion (+2%, +9% cc), driven by China (USD 2.9 billion) growing +3% (+7% cc).

Operating income from continuing operations was USD 7.9 billion (–21%, –12% cc), mainly due to higher restructuring primarily related to the implementation of the previously announced streamlined organizational model, higher impairments and lower divestment gains. Operating income margin from continuing operations was 18.8% of net sales from continuing operations, decreasing by 4.7 percentage points (-3.8 percentage points cc).

Net income from continuing operations was USD 6.0 billion compared with USD 22.9 billion in the prior year, impacted by Roche income in the prior year. Excluding the impact of Roche income, net income from continuing operations declined 9% (cc). Basic earnings per share from continuing operations were USD 2.77 compared with USD 10.22 in the prior year. Excluding the impact of Roche income, basic earnings per share from continuing operations declined 7% (cc).

Net cash flows from operating activities from continuing operations amounted to USD 13.0 billion, compared with USD 13.4 billion in 2021. This decrease was mainly due to unfavorable changes in working capital and lower dividends from associated companies (2021 included the USD 0.5 billion dividends received from our investment in Roche, which was divested in the fourth quarter of 2021), partly offset by lower income taxes paid, higher interest received and favorable hedging results.

Free cash flow from continuing operations amounted to USD 12.1 billion, broadly in line with USD 12.3 billion in 2021.

We also present our core results^2^, which exclude the impact of amortization, impairments, disposals, acquisitions, restructurings and other significant items, to help investors understand our underlying performance.

Core operating income from continuing operations was USD 14.8 billion (+2%, +10% cc), benefiting from higher gross margin, partly offset by higher research and development (R&D) investments. Core operating income margin from continuing operations was 35.1% of net sales from continuing operations, increasing by 1.2 percentage points (+1.8 percentage points cc).

Core net income from continuing operations was USD 11.9 billion (–5%, +4% cc) as growth in core operating income was partly offset by the loss of Roche core income. Excluding the impact of Roche core income, core net income grew from continuing operations +13% (cc).

Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars division and certain corporate activities attributable to Sandoz prior to the spin-off up to the distribution date of October 3, 2023, and certain other expenses related to the spin-off. Net sales of discontinued operations were USD 9.4 billion, compared with USD 9.8 billion in 2021, and operating income amounted to USD 1.3 billion, compared with USD 1.6 billion in the prior year. Net income from discontinued operations was USD 0.9 billion compared with USD 1.1 billion in the prior year.

Total Company net income amounted to USD 7.0 billion, and basic earnings per share were USD 3.19, compared with USD 10.71 in the prior year. Net cash flows from operating activities amounted to USD 14.2 billion, and free cash flow amounted to USD 13.0 billion.

^1^ Novartis definition of Western Europe includes Austria, Belgium, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

^2^ For an explanation of non-IFRS measures and reconciliation tables, see “—Non-IFRS measures as defined by Novartis.”

54

Net sales from continuing operations

The following table provides an overview of net sales from continuing operations by core therapeutic area and established brands:

(USD millions)	Year ended<br> Dec 31, 2022	Year ended<br> Dec 31, 2021^1^	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^2^
Cardiovascular, renal and metabolic	4 756	3 561	34	40
Immunology	7 287	7 206	1	7
Neuroscience	3 038	2 220	37	42
Oncology	11 176	10 532	6	12
Total promoted brands	26 257	23 519	12	18
Established brands^3^	15 949	19 262	-17	- 11
Total net sales from continuing operations^3^	42 206	42 781	-1	5
^1^ Reclassified to conform with the 2023 organizational structure.
^2^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
^3^ Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022 and 2021, in compliance with IFRS Accounting Standards. See “Item 18. Financial Statements – Note 3. Operating segment.”

55

The following table provides the top 20 product net sales from continuing operations in 2022 as well as the change compared with 2021:

			US		Rest of world			Total
Brands	Brand classification by therapeutic area or established brands	Key indications	USD m	% change USD/cc^1^	USD m	% change USD	% change cc^1^	USD m	% change USD	% change cc^1^
Cosentyx	Immunology	Psoriasis (PsO), ankylosing spondylitis (AS), psoriatic arthritis (PsA), non-radiographic axial spondyloarthritis (nr-axSPA)	2 770	-4	2 018	10	20	4 788	1	5
Entresto	Cardiovascular, renal and metabolic	Chronic heart failure, hypertension	2 354	38	2 290	25	37	4 644	31	37
Promacta/Revolade	Oncology	Immune thrombocytopenia (ITP), severe aplastic anemia (SAA)	1 083	14	1 005	-6	5	2 088	4	9
Gilenya^2^	Established brands	Relapsing multiple sclerosis (RMS)	1 153	-19	860	-37	-29	2 013	-28	-24
Tasigna	Oncology	Chronic myeloid leukemia (CML)	877	-1	1 046	-11	-2	1 923	-7	-1
Lucentis^2^	Established brands	Age-related macular degeneration (AMD), diabetic macular edema (DME), retinal vein occlusion (RVO)			1 874	-13	-4	1 874	-13	-4
Tafinlar + Mekinist	Oncology	BRAF V600+ metastatic adjuvant melanoma, advanced non-small cell lung cancer (NSCLC), tumor agnostic with BRAF mutation indication	678	12	1 092	0	10	1 770	5	11
Jakavi	Oncology	Myelofibrosis (MF), polycytomia vera (PV), graft-versus-host disease (GvHD)			1 561	-2	9	1 561	-2	9
Zolgensma	Neuroscience	Spinal muscular atrophy (SMA)	434	-7	936	6	12	1 370	1	5
Xolair^3^	Immunology	Severe allergic asthma (SAA), chronic spontaneous urticaria (CSU), nasal polyps			1 365	-4	6	1 365	-4	6
Sandostatin	Established brands	Carcinoid tumors, acromegaly	800	-5	438	-23	-16	1 238	-12	-10
Kisqali	Oncology	HR+/HER2- metastatic breast cancer	472	39	759	27	38	1 231	31	38
Ilaris	Immunology	Auto-inflammatory (CAPS, TRAPS, HIDS/MKD, FMF, SJIA, AOSD, gout)	570	14	563	1	16	1 133	7	15
Kesimpta	Neuroscience	Relapsing-remitting multiple sclerosis (RRMS)	921	165	171	nm	nm	1 092	194	200
Galvus Group	Established brands	Type 2 diabetes			859	-21	-12	859	-21	-12
Gleevec/Glivec	Established brands	Chronic myeloid leukemia (CML), gastrointestinal stromal tumors (GIST)	205	-22	540	-29	-23	745	-27	-22
Exforge Group	Established brands	Hypertension	14	0	729	-18	-12	743	-18	-12
Diovan Group	Established brands	Hypertension	55	8	597	-17	-10	652	-16	-9
Kymriah	Oncology	r/r pediatric and young adults acute lymphoblastic leukemia (ALL), diffuse large B-cell lymphoma (DLBCL), follicular lymphoma (FL)	196	-15	340	-5	7	536	-9	-2
Afinitor/Votubia	Established brands	Breast cancer/ tuberous sclerosis complex (TSC)	171	-67	341	-18	-8	512	-45	-41
Top 20 brands total			12 753	6	19 384	-5	5	32 137	-1	5
Rest of portfolio^4^			3 182	10	6 887	-7	1	10 069	-3	4
Total net sales from continuing operations^4^			15 935	7	26 271	-6	4	42 206	-1	5
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
^2^ In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
^3^ Net sales from continuing operations reflect Xolair sales for all indications.
^4^ Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022 and 2021, in compliance with IFRS Accounting Standards. See “Item 18. Financial Statements – Note 3. Operating segment.”
nm = not meaningful

56

For the table providing the top 20 product net sales from continuing operations in 2021 and for the table providing the net sales from continuing operations by core therapeutic area and established brands for 2022 and 2021, see “Item 18. Financial statements—Note 4. Revenues and geographic information.”

Cardiovascular, renal and metabolic

Net sales in the cardiovascular, renal and metabolic therapeutic area were USD 4.8 billion (+34%, +40% cc), sales growth mainly driven by Entresto.

Entresto (USD 4.6 billion, +31%, +37% cc) sustained robust demand-led growth, with increased patient share across all geographies. Guidelines position Entresto as the first choice RASi versus ACEi/ARB in patients with HFrEF. Entresto benefits from the adoption of guideline directed medical therapy for these patients in all geographies. In the US, Entresto benefits from being added to guidelines for patients with HFpEF (with LVEF below normal). In China, Entresto has been listed in the National Reimbursement Drug List (NRDL) for both HFrEF and hypertension, effective January 2022. In China and Japan, Entresto volume growth is fueled by increased penetration in hypertension in addition to growth in heart failure. It is estimated that around 10 million patients are on treatment with Entresto.

Leqvio (USD 0.1 billion) launch in the US and other markets is ongoing, with focus on patient on-boarding, removing access hurdles and enhancing medical education. Leqvio is the first and only small interfering RNA (siRNA) therapy to lower low-density lipoprotein cholesterol approved in the US and was launched in January 2022. In the US, Leqvio is covered at or near label for 76% of patients eleven months after launch. Leqvio in the US has been assigned a unique Healthcare Common Procedure Coding System code (J-code) and average sales price. Leqvio is now approved in 70 countries. Novartis obtained global rights to develop, manufacture and commercialize Leqvio under a license and collaboration agreement with Alnylam Pharmaceuticals.

Immunology

Net sales in the immunology therapeutic area reached USD 7.3 billion (+1%, +7% cc), sales growth was mainly driven by Cosentyx and Ilaris.

Cosentyx (USD 4.8 billion, +1%, +5% cc) sales grew in emerging growth markets, Europe and Japan, partly offset by decline in the US due to higher revenue deductions. In China, Cosentyx growth was fueled by increased biologic uptake and inclusion in approximately 1,900 hospital listings. Since initial approval in 2015, Cosentyx has proven its sustained efficacy and consistent safety profile across five systemic inflammatory conditions and has treated more than 960,000 patients worldwide.

Xolair (USD 1.4 billion, -4%, +6% cc) sales grew (cc) in emerging growth markets, Europe and Japan. Novartis co-promotes Xolair with Genentech in the US and shares a portion of revenue as operating income but does not record any US sales.

Ilaris (USD 1.1 billion, +7%, +15% cc) showed continued growth across all geographies. Contributors to growth include the adult-onset Still’s disease indication, together with the other adult rheumatology indications in the US and Europe, as well as strong performance for the Periodic Fevers Syndrome indications in Japan.

Neuroscience

Net sales in the neuroscience therapeutic area were USD 3.0 billion (+37%, +42% cc), sales growth (cc) mainly driven by Kesimpta.

Zolgensma (USD 1.4 billion, +1%, +5% cc) has been approved in 47 countries to date. As this represents most major markets, sales growth is now mainly driven by the Incident patient population where we’ve seen double digit growth in 2022. Access pathways are now in place in 35 countries with negotiations ongoing in additional markets.

Kesimpta (USD 1.1 billion, +194%, +200% cc) showed strong sales growth driven by launch momentum across all geographies. Kesimpta is a targeted B-cell therapy that can deliver powerful and sustained high efficacy, with a favorable safety and tolerability profile and the flexibility of an at home self-administration for a broad population of RMS patients. Kesimpta is now approved in 80 countries with more than 36,000 patients treated.

Mayzent (USD 0.4 billion, +27%, +32% cc) sales grew across all geographies in MS patients showing signs of progression despite being on other treatments. Mayzent is the first and only oral disease-modifying therapy studied and proven to delay disease progression in a broad SPMS patient population.

Aimovig (USD 0.2 billion, +1%, +11% cc) sales grew in Europe and emerging growth markets. Aimovig is reimbursed in 32 markets and has been prescribed to over 759,000 patients worldwide. Earlier this year, Aimovig was submitted for approval in China. In October 2022, Novartis reached an agreement in Germany by which Aimovig is reimbursed as a 1st line prophylactic migraine treatment based on the HER-MES trial.

ONCOLOGY

Net sales in the oncology therapeutic area were USD 11.2 billion (+6%, +12% cc), sales growth was mainly driven by Kisqali, Pluvicto, Promacta/Revolade, Tafinlar + Mekinist.

Promacta/Revolade (USD 2.1 billion, +4%, +9% cc) growth was driven by the US, Europe and emerging growth markets, partly offset by decline in Japan. Sales growth was driven by increased use in second-line persistent and chronic immune thrombocytopenia and as first-line and/or second-line treatment for severe aplastic anemia.

Tasigna (USD 1.9 billion, -7%, -1% cc) sales declined in Europe, Japan and the US, partly offset by growth in emerging growth markets.

Tafinlar + Mekinist (USD 1.8 billion, +5%, +11% cc) sales grew across all geographies, driven by demand in BRAF+ adjuvant melanoma and NSCLC indications, while maintaining demand in the highly competitive BRAF+ metastatic melanoma market. Tafinlar + Mekinist remains the worldwide targeted therapy leader in BRAF+ melanoma. Following FDA approval in late June 2022, Tafinlar + Mekinist is the first and only therapy with a tumor-agnostic indication for adult and pediatric patients with solid tumors that have a BRAF V600E mutation, which drives tumor growth in more than 20 different tumor types.

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Jakavi (USD 1.6 billion, -2%, +9% cc) sales grew (cc) in Europe, emerging growth markets, Japan, driven by strong demand in both the myelofibrosis and polycythemia vera indications. In May 2022, EC approved Jakavi for the treatment of patients aged 12 years and older with acute or chronic GvHD who have inadequate response to corticosteroids or other systemic therapies.

Kisqali (USD 1.2 billion, +31%, +38% cc) sales grew strongly across all geographies, based on increasing recognition of its overall survival benefits in HR+/HER2- advanced breast cancer. It is a CDK4/6 inhibitor with proven overall survival benefit across all three Phase III trials of the MONALEESA program regardless of menopausal status, line of therapy, site and number of metastases, endocrine resistance, or endocrine partner.

Kymriah (USD 0.5 billion, -9%, -2% cc) sales declined in the US and Europe due to lower DLBCL demand in both geographies and was partly offset by growth in emerging growth markets and Japan. In May 2022, EC and FDA approved Kymriah for the treatment of adult patients with relapsed or refractory (r/r) follicular lymphoma (FL) after two or more lines of systemic therapy.

Votrient (USD 0.5 billion, -18%, -13% cc) declined due to increased competition, especially from immuno-oncology agents in metastatic renal cell carcinoma.

Lutathera (USD 0.5 billion, -1%, +3% cc) sales grew (cc) in Europe and Japan, partly offset by decline in the US. There are approximately 500 centers actively treating patients globally. In the second quarter of 2022, there was a temporary suspension in manufacturing during the quarter; production and deliveries of patient doses resumed in early June 2022.

Piqray/Vijoice (USD 0.4 billion, +13%, +14% cc) sales grew mainly in the US, benefiting from indication expansion into PIK3CA-related overgrowth spectrum (PROS). Piqray is the first and only therapy specifically developed for the approximately 40% of HR+/HER2- advanced breast cancer patients who have a PIK3CA mutation, which is associated with a worse prognosis.

Pluvicto (USD 0.3 billion) launch is progressing well, with more than 160 active centers ordering. Pluvicto is the first and only radioligand therapy approved by the FDA for the treatment of progressive, PSMA-positive metastatic castration-resistant prostate cancer, who have already been treated with other anticancer treatments (ARPI and taxane-based chemotherapy).

Adakveo (USD 0.2 billion, +18%, +19% cc) continued to grow worldwide, reaching more than 11,800 patients with vaso-occlusive crises caused by sickle cell disease to date.

Scemblix (USD 0.1 billion) continued its strong launch uptake in the US, with launches underway in EU and Japan, demonstrating the high unmet need in CML, particularly patients previously treated with 2 or more tyrosine kinase inhibitors, or with the T315I mutation. In October 2022, US FDA converted the accelerated approval of Scemblix to a full approval, confirming the clinical benefit after longer exposure.

Tabrecta (USD 0.1 billion, +48%, +48% cc) sales grew across all geographies, as the first therapy approved by the FDA to specifically target metastatic NSCLC with a mutation that leads to MET exon 14 skipping (METex14).

Established Brands

The established brands had net sales of USD 15.9 billion (-17%, -11% cc).

Gilenya (USD 2.0 billion, -28%, -24% cc) sales declined mainly in Europe and in the US due to generic pressure.

Lucentis (USD 1.9 billion, -13%, -4% cc) sales declined in Japan and Europe mainly due to competition, which was partly offset by growth in emerging growth markets.

Sandostatin (USD 1.2 billion, –12%, –10% cc) declined across all geographies due to ongoing competitive pressure, including generic competition ex-US.

Galvus Group (USD 0.9 billion, –21%, –12% cc) declined in Japan, Europe and Emerging Growth Markets.

Gleevec/Glivec (USD 0.7 billion, –27%, –22% cc) declined due to increased generic competition.

Exforge Group (USD 0.7 billion, –18%, –12% cc) declined across all geographies.

Diovan Group (USD 0.7 billion, –16%, –9% cc) declined in emerging growth markets, Japan and Europe.

Afinitor/Votubia (USD 0.5 billion, –45%, –41% cc) declined in the US and Europe, driven by generic competition.

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Operating income from continuing operations

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2022	Year ended<br> Dec 31, 2021	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^1^
Gross profit from continuing operations	31 879	32 239	-1	5
Selling, general and administration	-12 193	-12 827	5	0
Research and development	-9 172	-8 641	-6	-10
Other income	696	1 620	-57	-55
Other expense	-3 264	-2 335	-40	-49
Operating income from continuing operations	7 946	10 056	-21	-12
Return on net sales (%)	18.8	23.5
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."

Operating income from continuing operations was USD 7.9 billion (–21%, –12% cc), mainly due to higher restructuring primarily related to the implementation of the previously announced streamlined organizational model, higher impairments and lower divestment gains. Operating income margin from continuing operations was 18.8% of net sales from continuing operations, decreasing by 4.7 percentage points (-3.8 percentage points cc). Other revenues as a percentage of net sales from continuing operations increased by 0.2 percentage points (0.0 percentage points cc). Cost of goods sold as a percentage of net sales from continuing operations (0.1 percentage points cc) was in line with the prior year. R&D expenses as a percentage of net sales from continuing operations increased by 1.5 percentage points (1.0 percentage points cc). Selling, general and administration (SG&A) expenses as a percentage of net sales from continuing operations decreased by 1.1 percentage points (1.5 percentage points cc). Other income and other expense, net as a percentage of net sales from continuing operations decreased the margin by 4.5 percentage points (4.4 percentage points cc).

Non-IFRS measure Core operating income from continuing operations 1

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2022	Year ended<br> Dec 31, 2021	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %
Core gross profit from continuing operations	35 591	36 002	-1	5
Core selling, general and administration	-12 143	-12 756	5	0
Core research and development	-8 267	-8 150	-1	-5
Core other income	291	296	-2	8
Core other expense	-678	-901	25	20
Core operating income from continuing operations	14 794	14 491	2	10
Core return on net sales (%)	35.1	33.9
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."

The adjustments made to operating income from continuing operations to arrive at core operating income from continuing operations amounted to USD 6.8 billion mainly due to amortization, impairments and restructuring, compared with USD 4.4 billion in the prior year. Core adjustments increased compared with the prior year, mainly due to higher impairments and restructuring. For more information, see “—Non-IFRS measures as defined by Novartis—2023, 2022 and 2021 reconciliation from IFRS Accounting Standards results to non-IFRS core results.”

Core operating income from continuing operations was USD 14.8 billion (+2%, +10% cc), mainly driven by higher gross margin, partly offset by higher R&D investments. Core operating income margin from continuing operations was 35.1% of net sales from continuing operations, increasing 1.2 percentage points (+1.8 percentage points cc). Other revenues as a percentage of net sales from continuing operations decreased by 0.2 percentage points (cc). Core cost of goods sold as a percentage of net sales from continuing operations was in line with the prior year. Core R&D expenses as a percentage of net sales from continuing operations increased by 0.1 percentage points (cc). Core SG&A expenses as a percentage of net sales from continuing operations decreased by 1.6 percentage points (cc). Core other income and expense as a percentage of net sales from continuing operations increased the margin by 0.5 percentage points (cc).

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Research and development

The following table provides an overview of the continuing operations reported research and development expense and the non-IFRS measure core research and development expense^1^:

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2022	Year ended<br> Dec 31, 2021	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^1^
Research and exploratory development	-2 938	-3 209	8	6
Confirmatory development	-6 234	-5 432	-15	-20
Total research and development expense	-9 172	-8 641	-6	-10
Research and development as % of net sales from continuing operations	21.7	20.2
Non-IFRS measures
Core research and exploratory development^1^	-2 784	-2 809	1	-1
Core confirmatory development^1^	-5 483	-5 341	-3	-7
Total core research and development expense	-8 267	-8 150	-1	-5
Core research and development as % of net sales from continuing operations	19.6	19.1
^1^ Core research and development expense exclude impairments, amortization and certain other items. For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."

Research and exploratory development expense decreased by 8% (+6% cc) to USD 2.9 billion. Confirmatory development expense amounted to USD 6.2 billion, increasing by 15% (-20% cc) versus the prior year mainly due to higher impairment charges and higher investments in development to support acquired assets. Research and development as a percentage of net sales from continuing operations increased by 1.5 percentage points to 21.7% of net sales from continuing operations.

Total core research and development expense as a percentage of net sales from continuing operations increased by 0.5 percentage points (+0.1 percentage points cc) to 19.6% of net sales from continuing operations, mainly driven by higher investments in acquired assets.

Non-operating income and expense

The term “non-operating income and expense” includes all income and expense items outside operating income. The following table provides an overview of non-operating income and expense from continuing operations:

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2022	Year ended<br> Dec 31, 2021	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %^1^
Operating income from continuing operations	7 946	10 056	-21	-12
(Loss)/income from associated companies	-11	15 337	nm	nm
Interest expense	-800	-787	-2	-3
Other financial income and expense	42	-76	nm	nm
Income before taxes	7 177	24 530	-71	-67
Income taxes	-1 128	-1 625	31	21
Net income from continuing operations	6 049	22 905	-74	-70
Net income from discontinued operations	906	1 113	-19	-11
Net income	6 955	24 018	-71	-67
Basic earnings per share from continuing operations (USD)	2.77	10.22	-73	-69
Basic earnings per share from discontinued operations (USD)	0.42	0.49	-15	-9
Total basic earnings per share (USD)	3.19	10.71	-70	-66
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
nm = not meaningful

Income from associated companies

Income from associated companies was a loss of USD 11 million compared with an income of USD 15.3 billion in the prior year. This decrease was due to the divestment of our investment in Roche that closed in the fourth quarter of 2021 where a gain of USD 14.6 billion was recognized.

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Interest expense and other financial income and expense

Interest expense amounted to USD 800 million, broadly in line with the prior year.

Other financial income and expense amounted to an income of USD 42 million compared with an expense of USD 76 million in the prior year, as higher interest income was only partly offset by financial expenses and currency losses.

Income taxes

The tax rate was 15.7% compared with 6.6% in the prior year period. In the prior year, the tax rate was impacted by the Roche income from associated companies (including the divestment gain recognized on the sale of our investment in Roche in December 2021), the impact of increases in uncertain tax positions and prior-year items.

For comparability, excluding these impacts, the prior year tax rate would have been 15.4% compared with 15.7% in the current year period. The increase was mainly the result of a change in profit mix.

Net income from continuing operations

Net income from continuing operations was USD 6.0 billion (–74%, –70% cc), impacted by Roche income in the prior year. Excluding the impact of Roche income, net income from continuing operations declined 9% (cc).

Earnings per share from continuing operations

Basic earnings per share from continuing operations were USD 2.77 compared with USD 10.22 in the prior year, mainly due to prior year Roche income. Excluding the impact of Roche income, basic earnings per share from continuing operations declined 7% (cc).

Non-IFRS measure Core non-operating income and expense 1

The following table provides an overview of the non-IFRS measure core non-operating income and expense from continuing operations:

(USD millions unless indicated otherwise)	Year ended<br> Dec 31, 2022	Year ended<br> Dec 31, 2021	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %
Core operating income from continuing operations	14 794	14 491	2	10
Core (loss)/income from associated companies	-11	991	nm	nm
Core interest expense	-800	-787	-2	-3
Core other financial income and expense	140	-38	nm	nm
Core income before taxes from continuing operations	14 123	14 657	-4	5
Core income taxes	-2 177	-2 129	-2	-11
Core net income from continuing operations	11 946	12 528	-5	4
Core basic EPS from continuing operations (USD)	5.48	5.59	-2	6
^1^ For an explanation of non-IFRS measures and reconciliation tables, see "—Non-IFRS measures as defined by Novartis."
nm = not meaningful

Core income from associated companies

Core income from associated companies was a loss of USD 11 million compared with an income of USD 991 million in the prior year. This decrease was due to the divestment of our investment in Roche that closed in the fourth quarter of 2021.

Core interest expense and other financial income and expense

Core interest expense amounted to USD 800 million, broadly in line with the prior year.

Core other financial income and expense amounted to an income of USD 140 million compared with an expense of USD 38 million in the prior year as higher interest income was only partly offset by currency losses.

Core income taxes

The core tax rate (core taxes as a percentage of core income before tax) was 15.4%, compared with 14.5% in the prior year. For comparability, excluding Roche Income from associated companies (divested in December 2021), the prior year core tax rate would have been 15.4%, in line with 15.4% in the current year.

Core net income from continuing operations

Core net income from continuing operations was USD 11.9 billion (–5%, +4% cc) as growth in core operating income from continuing operations was partly offset by the loss of Roche core income. Excluding the impact of Roche core income, core net income from continuing operations grew 13% (cc).

Core earnings per share from continuing operations

Core basic earnings per share from continuing operations was USD 5.48 (–2%, +6% cc), benefiting from lower weighted average number of shares outstanding. Excluding the impact of Roche core income, core basic earnings per share from continuing operations grew 16% (cc).

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Discontinued operations

Discontinued operations net sales were USD 9.4 billion compared with USD 9.8 billion in the prior year. Operating income amounted to USD 1.3 billion, compared with USD 1.6 billion in the prior year.

Net income from discontinued operations amounted to USD 0.9 billion, compared to USD 1.1 billion in the prior year.

Total Company

Total Company net income amounted to USD 7.0 billion in 2022, compared with USD 24.0 billion in the prior year, impacted by Roche income in the prior year (see “Item 18. Financial Statements – Note 2. Significant transactions and Note 5. Associated companies”). Basic earnings per share decreased to USD 3.19 from USD 10.71. Net cash flows from operating activities for the total Company amounted to USD 14.2 billion, and free cash flow amounted to USD 13.0 billion.

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Factors affecting comparability of year-on-year results of operations

Significant transactions in 2023, 2022 and 2021

The comparability of the year-on-year results of our operations for the total Company can be significantly affected by acquisitions and divestments. As part of our long-term strategy to focus Novartis as a leading medicines company, we announced and/or completed several acquisitions and divestments during 2023, 2022 and 2021.

A detailed description of significant transactions in 2023, 2022 and 2021, can be found in “Item 18. Financial Statements—Note 2. Significant transactions.”

Internal control over financial reporting

The Company’s management has assessed the effectiveness of internal control over financial reporting. The Company’s independent registered public accounting firm also issued an opinion on the effectiveness of internal control over financial reporting. Both the Company’s management and its independent registered public accounting firm concluded that the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023. For more information, see “Item 15. Controls and Procedures.”

Approach to risk management

See “Item 6. Directors, Senior Management and Employees—Item 6.C Board practices—Corporate governance—Information and control systems—Risk management” and “Item 18. Financial Statements—Note 30. Financial instruments – additional disclosures.”

Non-IFRS measures as defined by Novartis

Novartis uses certain non-IFRS Accounting Standards metrics when measuring performance, especially when measuring current-year results against prior periods, including core results, constant currencies and free cash flow. These are referred to by Novartis as non-IFRS measures.

Despite the use of these measures by management in setting goals and measuring the Company’s performance, these are non-IFRS measures that have no standardized meaning prescribed by IFRS Accounting Standards. As a result, such measures have limits in their usefulness to investors.

Because of their non-standardized definitions, the non-IFRS measures (unlike IFRS Accounting Standards measures) may not be comparable to the calculation of similar measures of other companies. These non-IFRS measures are presented solely to permit investors to more fully understand how the Company’s management assesses underlying performance. These non-IFRS measures are not, and should not be viewed as, a substitute for IFRS Accounting Standards measures, and should be viewed in conjunction with the consolidated financial statements prepared in accordance with IFRS Accounting Standards.

As an internal measure of Company performance, these non-IFRS measures have limitations, and the Company’s performance management process is not solely restricted to these metrics.

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Core results

The Company’s core results – including core operating income, core net income and core earnings per share – exclude fully the amortization and impairment charges of intangible assets, excluding software, net gains and losses on fund investments and equity securities valued at fair value through profit and loss, impact of IAS 29 “Financial reporting in Hyperinflation Economies” to other financial income and expense, and certain acquisition- and divestment-related items. The following items that exceed a threshold of USD 25 million are also excluded: integration- and divestment-related income and expenses; divestment gains and losses; restructuring charges/releases and related items; legal-related items; impairments of property, plant and equipment, software, and financial assets, and income and expense items that management deems exceptional and that are or are expected to accumulate within the year to be over a USD 25 million threshold.

Novartis believes that investor understanding of the Company’s performance is enhanced by disclosing core measures of performance, since core measures exclude items that can vary significantly from year to year, they enable better comparison of business performance across years. For this same reason, Novartis uses these core measures in addition to IFRS Accounting Standards measures and other measures as important factors in assessing the Company’s performance.

The following are examples of how these core measures are used:

• In addition to monthly reports containing financial information prepared under IFRS Accounting Standards, senior management receives a monthly analysis incorporating these non-IFRS core measures.

• Annual budgets are prepared for both IFRS Accounting Standard measures and non-IFRS core measures.

As an internal measure of Company performance, the core results measures have limitations, and the Company’s performance management process is not solely restricted to these metrics. A limitation of the core results measures is that they provide a view of the Company’s operations without including all events during a period, such as the effects of an acquisition, divestment, or amortization/impairments of purchased intangible assets, impairments to property, plant and equipment and restructurings and related items.

Constant currencies

Changes in the relative values of non-US currencies to the US dollar can affect the Company’s financial results and financial position. To provide additional information that may be useful to investors, including changes in sales volume, we present information about our net sales and various values relating to operating and net income that are adjusted for such foreign currency effects.

Constant currency calculations have the goal of eliminating two exchange rate effects so that an estimate can be made of underlying changes in the consolidated income statement excluding the impact of fluctuations in exchanges rates:

• The impact of translating the income statements of consolidated entities from their non-USD functional currencies to USD

• The impact of exchange rate movements on the major transactions of consolidated entities performed in currencies other than their functional currency.

We calculate constant currency measures by translating the current year’s foreign currency values for sales and other income statement items into USD (excluding the IAS 29 “Financial Reporting in Hyperinflationary Economies” adjustments to the local currency income statements of subsidiaries operating in hyperinflationary economies), using the average exchange rates from the prior year and comparing them to the prior year values in USD.

We use these constant currency measures in evaluating the Company’s performance, since they may assist us in evaluating our ongoing performance from year to year. However, in performing our evaluation, we also consider equivalent measures of performance that are not affected by changes in the relative value of currencies.

Growth rate calculation

For ease of understanding, Novartis uses a sign convention for its growth rates such that a reduction in operating expenses or losses compared with the prior year is shown as a positive growth.

Free cash flow

Effective January 1, 2023, Novartis revised its definition of free cash flow, to define free cash flow as net cash flows from operating activities less purchases of property, plant and equipment. This new definition provides a simpler performance measure focusing on core operating activities, and also excludes items that can vary significantly from year to year, thereby enabling better comparison of business performance across years. The prior year free cash flow amounts have been revised to conform with the new free cash flow definition to aid in comparability.

Free cash flow is a non-IFRS measure and is not intended to be a substitute measure for net cash flows from operating activities as determined under IFRS Accounting Standards. Free cash flow is presented as additional information because management believes it is a useful supplemental indicator of the Company’s ability to operate without reliance on additional borrowing or use of existing cash. Free cash flow is a measure of the net cash generated that is available for investment in strategic opportunities, returning to shareholders and for debt repayment. Free cash flow is a non-IFRS measure, which means it should not be interpreted as a measure determined under IFRS Accounting Standards.

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Additional information

NET DEBT

Novartis calculates net debt as current financial debts and derivative financial instruments plus non-current financial debt less cash and cash equivalents and marketable securities, commodities, time deposits and derivative financial instruments.

Net debt is presented as additional information because it sets forth how management monitors net debt or liquidity and management believes it is a useful supplemental indicator of the Company’s ability to pay dividends, to meet financial commitments, and to invest in new strategic opportunities, including strengthening its balance sheet.

For the table that shows the Company’s net debt, see “— Item 5.B Liquidity and capital resources — Company liquidity, financial debts and net debt.”

EBITDA

Novartis defines earnings before interest, tax, depreciation and amortization (EBITDA) as operating income, excluding depreciation of property, plant and equipment, depreciation of right-of-use assets, amortization of intangible assets, and net impairments of property, plant and equipment, right-of-use assets and of intangible assets.

(USD millions)	2023	2022	2021
Operating income from continuing operations	9 769	7 946	10 056
Depreciation of property, plant and equipment	916	967	1 005
Depreciation of right-of-use assets	259	267	279
Amortization of intangible assets	3 960	3 760	3 665
Impairments of property, plant and equipment, right-of-use assets and intangible assets, net^1^	3 142	1 711	648
EBITDA from continuing operations	18 046	14 651	15 653
Operating income from discontinued operations	265	1 251	1 633
Depreciation of property, plant and equipment	144	196	203
Depreciation of the right-of-use-assets	32	33	39
Amortization of intangible assets	171	222	238
Impairments of property, plant and equipment, right-of-use assets and intangible assets, net^2^	56	25	36
EBITDA from discontinued operations^3^	668	1 727	2 149
EBITDA	18 714	16 378	17 802
^1^ There were no impairments of right-of-use assets in 2021.
^2^ There were no impairments of right-of-use assets.
^3^ The EBITDA from discontinued operations for 2023 is for the period from January 1, 2023, to the October 3, 2023, Distribution date.

Enterprise value

Enterprise value represents the total amount that shareholders and debt holders have invested in Novartis, less the Company’s liquidity.

(USD millions)	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021
Market capitalization	206 264	191 530	196 107
Non-controlling interests	83	81	167
Non-current financial debts	18 436	20 244	22 902
Current financial debts and derivative financial instruments	6 175	5 931	6 295
Marketable securities, commodities, time deposits and derivative financial instruments	-1 035	-11 413	-15 922
Cash and cash equivalents	-13 393	-7 517	-12 407
Enterprise value	216 530	198 856	197 142

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Reconciliation from IFRS Accounting Standards results to non-IFRS measure core results

The following tables provide an overview of the reconciliation from IFRS Accounting Standards results to non-IFRS measure core results:

2023, 2022 and 2021 reconciliation from IFRS Accounting Standards results to non-IFRS measure core results – Total Company

(USD millions unless indicated otherwise)	2023	2022	2021
IFRS Accounting Standards operating income from continuing operations	9 769	7 946	10 056
Amortization of intangible assets	3 730	3 585	3 528
Impairments
Intangible assets	3 044	1 293	360
Property, plant and equipment related to the company-wide rationalization of manufacturing sites	5	286	219
Other property, plant and equipment	39	85	40
Total impairment charges	3 088	1 664	619
Acquisition or divestment of businesses and related items
- Income	-174	-4	-66
- Expense	149	8	107
Total acquisition or divestment of businesses and related items, net	-25	4	41
Other items
Divestment gains	-225	-166	-724
Financial assets - fair value adjustments	105	260	-38
Restructuring and related items
- Income	-229	-34	-38
- Expense	1 180	1 856	865
Legal-related items
- Income	-608	-51
- Expense	66	364	170
Additional income	-602	-698	-277
Additional expense	123	64	289
Total other items	-190	1 595	247
Total adjustments	6 603	6 848	4 435
Core operating income from continuing operations	16 372	14 794	14 491
as % of net sales	36.0%	35.1%	33.9%
(Loss)/income from associated companies	-13	-11	15 337
Core adjustments to income from associated companies, net of tax			-14 346
Interest expense	-855	-800	-787
Other financial income and expense	222	42	-76
Core adjustments to other financial income and expense	208	98	38
Income taxes, adjusted for above items (core income taxes)	-2 488	-2 177	-2 129
Core net income from continuing operations	13 446	11 946	12 528
Core net income from discontinued operations^2^	889	1 406	1 566
Core net income	14 335	13 352	14 094
Core net income attributable to shareholders of Novartis AG	14 331	13 352	14 097
Core basic EPS from continuing operations (USD)^1^	6.47	5.48	5.59
Core basic EPS from discontinued operations (USD)^1, 2^	0.43	0.64	0.70
Core basic EPS (USD)^1^	6.90	6.12	6.29
^1^ Core earnings per share (EPS) is calculated by dividing core net income attributable to shareholders of Novartis AG by the weighted average number of shares used in the basic EPS calculation outstanding in a reporting period.
^2^ For details on discontinued operations reconciliation from IFRS Accounting Standards net income to core net income, refer to page 70.

66

2023, 2022 and 2021 reconciliation from IFRS Accounting Standards results to non-IFRS measure core results – Total Company

2023 ( millions unless indicated otherwise)	Amortization <br> of intangible <br> assets^1^	Impairments^2^	Acquisition or <br> divestment of <br> businesses and<br> related items^3^	Other <br> items^4^	Core results
Gross profit from continuing operations	3 319	310		142	37 959
Operating income from continuing operations	3 730	3 088	-25	-190	16 372
Income before taxes from continuing operations	3 730	3 088	-25	18	15 934
Income taxes 5					-2 488
Net income from continuing operations					13 446
Net income from discontinued operations 6					889
Net income					14 335
Basic EPS from continuing operations () 7					6.47
Basic EPS from discontinued operations () 7					0.43
Basic EPS () 7					6.90
The following are adjustments to arrive at core gross profit from continuing operations
Cost of goods sold	3 319	310		142	-8 701
The following are adjustments to arrive at core operating income from continuing operations
Selling, general and administration				28	-12 489
Research and development	411	2 737	32	-409	-8 600
Other income		-10	-174	-1 196	392
Other expense		51	117	1 245	-890
The following are adjustments to arrive at core income before taxes from continuing operations
Other financial income and expense				208	430
1  Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets; research and development includes the amortization of acquired rights to technologies
2  Impairments: cost of goods sold, research and development, other income and other expense include net impairment charges related to intangible assets; other income and other expense includes also net impairment charges related to property, plant and equipment
3  Acquisition or divestment of businesses and related items, including restructuring and integration charges: research and development include restructuring and integration cost charges; other income includes a favorable stamp duties tax settlement related to a prior periods acquisition; other income and other expense include also transitional service-fee income and expenses related to the Sandoz distribution, restructuring and integration costs charges and reversals
4  Other items: cost of goods sold, selling, general and administration, research and development, other income and other expense include restructuring income and charges related to the initiative to implement a new streamlined organizational model, the company-wide rationalization of manufacturing sites and other net restructuring charges and related items; cost of goods sold and research and development also include contingent consideration adjustments; cost of goods sold and selling, general and administration includes also adjustments to provisions; research and development also include a write-off of prepaid expenses for a terminated development project; other income and other expense include fair value adjustments, divestment gains, losses and gains on financial assets, legal related items, adjustments to environmental provisions; other income includes also gains from the divestment of products and curtailment gains; other expenses also includes a fair value adjustment on a contingent receivable and other costs and items; other financial income and expense includes the impact of IAS 29 "Financial reporting in Hyperinflation Economies" for subsidiaries operating in hyperinflation economies and foreign exchange losses
5  Taxes on the adjustments between IFRS Accounting Standards and core results, for each item included in the adjustment, take into account the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of 6.8 billion to arrive at the core results before tax amounts to 1.9 billion and the average tax rate on the adjustments was 28.4%.
6  For details on discontinued operations reconciliation from IFRS Accounting Standards net ncome to core net income refer to page 70.
7  Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

All values are in US Dollars.

67

2022 ( millions unless indicated otherwise)	Amortization<br> of intangible<br> assets^1^	Impairments^2^	Acquisition or <br> divestment of <br> businesses and<br> related items^3^	Other <br> items^4^	Core results
Gross profit from continuing operations	3 427	314		-29	35 591
Operating income from continuing operations	3 585	1 664	4	1 595	14 794
Income before taxes from continuing operations	3 585	1 664	4	1 693	14 123
Income taxes from continuing operations 5					-2 177
Net income from continuing operations					11 946
Net income from discontinued operations 6					1 406
Net income					13 352
Basic EPS from continuing operations () 7					5.48
Basic EPS from discontinued operations () 7					0.64
Basic EPS () 7					6.12
The following are adjustments to arrive at core gross profit from continuing operations
Other revenues				-86	1 169
Cost of goods sold	3 427	314		57	-7 784
The following are adjustments to arrive at core operating income
Selling, general and administration				50	-12 143
Research and development	158	953		-206	-8 267
Other income		-1	-4	-400	291
Other expense		398	8	2 180	-678
The following are adjustments to arrive at core income before taxes from continuing operations
Other financial income and expense				98	140
1  Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets; research and development includes the amortization of acquired rights for technologies
2  Impairments: cost of goods sold, research and development and other expense include impairment charges related to intangible assets; other income and other expense include net impairment charges related to property, plant and equipment
3  Acquisition or divestment of businesses and related items, including restructuring and integration charges: other income and other expense include transitional service fee income and charges related to divestments; other income also includes adjustments to provisions; other expense includes stamp duties related to an acquisition
4  Other items: other revenues includes a net income from an outlicensing agreement; cost of goods sold, selling, general and administration, research and development, other income and other expense include restructuring income and charges related to the restructuring initiative to implement a new streamlined organizational model, the company-wide rationalization of manufacturing sites and other net restructuring charges and related items; cost of goods sold, selling, general and administration, research and development and other expense include adjustments to provisions and related items; cost of goods sold and research and development also include contingent consideration adjustments; other income and other expense include fair value adjustments and divestment gains and losses on financial assets and legal-related items; other income also includes gains from the divestment of products and property, curtailment gains and an adjustment to an environmental provision; other expense includes a reversal of an accrual and other costs and items; other financial income and expense includes the impact of IAS 29 "Financial reporting in Hyperinflation Economies" for subsidiaries operating in hyperinflation economies and a revaluation impact of a financial liability incurred through the Alcon distribution
5  Taxes on the adjustments between IFRS Accounting Standards and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of 6.9 billion to arrive at the core results before tax amounts to 1.0 billion and the average tax rate on the adjustments was 15.1%.
6  For details on discontinued operations reconciliation from IFRS Accounting Standards net income to core net income please refer to page 71.
7  Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

All values are in US Dollars.

68

2021 ( millions unless indicated otherwise)	Amortization<br> of intangible<br> assets^1^	Impairments^2^	Acquisition or <br> divestment of <br> businesses and<br> related items^3^	Other <br> items^4^	Core results
Gross profit from continuing operations	3 419			344	36 002
Operating income from continuing operations	3 528	619	41	247	14 491
Income before taxes from continuing operations	3 738	619	-14 531	301	14 657
Income taxes from continuing operations 5					-2 129
Net income from continuing operations					12 528
Net income from discontinued operations 6					1 566
Net income					14 094
Basic EPS from continuing operations () 7					5.59
Basic EPS from discontinued operations () 7					0.70
Basic EPS () 7					6.29
The following are adjustments to arrive at core gross profit from continuing operations
Cost of goods sold	3 419			344	-7 972
The following are adjustments to arrive at core operating income from continuing operations
Selling, general and administration				71	-12 756
Research and development	109	360		22	-8 150
Other income		-45	-66	-1 213	296
Other expense		304	107	1 023	-901
The following are adjustments to arrive at core income before taxes from continuing operations
Income from associated companies	210		-14 556		991
Other financial income and expense			-16	54	-38
1  Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets; research and development includes the amortization of acquired rights for technologies; income from associated companies includes 210 million for the Novartis share of the estimated Roche core items
2  Impairments: cost of goods sold, and research and development include impairment charges related to intangible assets; other income and other expense include reversals of impairment charges and impairment charges related to property, plant and equipment
3  Acquisition or divestment of businesses and related items, including restructuring and integration charges: other income includes adjustments to portfolio transformation and Alcon spin-off accruals; other income and other expense include transitional service-fee income and expenses related to the Alcon distribution; other expense also includes adjustments to provisions; income from associated companies includes the gain related to the divestment of our investment in Roche; other financial income and expense includes other financial gains related to the divestment of our investment in Roche
4  Other items: cost of goods sold, research and development, other income and other expense include net restructuring and other charges related to the company-wide rationalization of manufacturing sites; cost of goods sold, selling, general and administration, other income and other expense include other restructuring income and charges and related items; cost of goods sold, research and development, other income and other expense also include adjustments to contingent considerations; selling, general and administration, research and development, other income and other expense include adjustments to provisions; other income and other expense also include gains and losses from the divestment of products and financial assets and fair value adjustments on financial assets, adjustments to environmental provisions and legal-related items; other financial income and expense includes the impact of IAS 29 "Financial reporting in Hyperinflation Economies" for subsidiaries operating in hyperinflation economies and a revaluation impact of a financial liability incurred through the Alcon distribution
5  Taxes on the adjustments between IFRS Accounting Standards and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of 9.9 billion to arrive at the core results before tax amounts to 504 million. Excluding the gain on the divestment of our investment in Roche, the tax on the total adjustments of 4.5 billion to arrive at the core results before tax amounts to 504 million and the average tax rate on the adjustments was 11.3%.
6  For details on discontinued operations reconciliation from IFRS Accounting Standards net income to core net income please refer to page 72.
7  Earnings per share (EPS) is calculated on the amount of net income, attributable to shareholders of Novartis AG.

All values are in US Dollars.

69

2023, 2022 and 2021 reconciliation from IFRS Accounting Standards results to non-IFRS measure core results – Discontinued operations

2023 ( millions unless indicated otherwise)	Amortization <br> of intangible<br> assets^1^	Impairments^2^	Acquisition or <br> divestment of <br> businesses and<br> related items	Other <br> items^3^	Core results
Gross profit from discontinued operations	165	34		57	3 659
Operating income from discontinued operations	165	43		712	1 185
Income before taxes from discontinued operations	165	43		718	1 140
Income taxes 4					-251
Net income from discontinued operations before gain on distribution of Sandoz Group AG to Novartis AG shareholders					889
Gain on distribution of Sandoz Group AG to Novartis AG shareholders			-5 860
Net income from discontinued operations					889
Basic EPS from discontinued operations () 5					0.43
The following are adjustments to arrive at core gross profit from discontinued operations
Cost of goods sold	165	34		57	-3 788
The following are adjustments to arrive at core operating income from discontinued operations
Selling, general and administration				25	-1 703
Research and development		10			-661
Other income		-1		-24	31
Other expense				654	-141
The following are adjustments to arrive at core income before taxes from discontinued operations
Other financial income and expense				6	-14
1  Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets
2  Impairments: cost of goods sold and research and development include impairment charges related to intangible assets; other income includes a reversal of impairment charges related to property, plant and equipment
3  Other items: cost of goods sold, selling, general and administration, other income and other expense include charges related to the Sandoz distribution, the company-wide rationalization of manufacturing sites and other net restructuring charges and related items; cost of goods sold and selling, general and administration also include adjustments to provisions; other expense includes legal-related items; other financial income and expense includes the impact of IAS 29 "Financial reporting in Hyperinflation Economies" for subsidiaries operating in hyperinflation economies
4  Taxes on the adjustments between IFRS Accounting Standards and core results, for each item included in the adjustment, take into account the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of 926 million to arrive at the core results before tax amounts to 459 million and the average tax rate on the adjustments was 49.5%.
5  Earnings per share (EPS) is calculated on the amount of net income attributable to shareholders of Novartis AG.

All values are in US Dollars.

70

2022 ( millions unless indicated otherwise)	Amortization <br> of intangible<br> assets^1^	Impairments^2^	Acquisition or <br> divestment of <br> businesses and<br> related items	Other <br> items^3^	Core results
Gross profit from discontinued operations	221	24		93	4 801
Operating income from discontinued operations	221	23		376	1 871
Income before taxes from discontinued operations	221	23		399	1 837
Income taxes from discontinued operations 4					-431
Net income from discontinued operations					1 406
Basic EPS from discontinued operations () 5					0.64
The following are adjustments to arrive at core gross profit from discontinued operations
Cost of goods sold	221	24		93	-4 599
The following are adjustments to arrive at core operating loss from discontinued operations
Selling, general and administration				13	-2 047
Research and development		1		2	-821
Other income		-2		-14	93
Other expense				282	-155
The following are adjustments to arrive at core income before taxes from discontinued operations
Other financial income and expense				23	1
1  Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production-related intangible assets
2  Impairments: cost of goods sold and research and development include impairment charges related to intangible assets; other income includes a reversal of an impairment charge related to property, plant and equipment
3  Other items: cost of goods sold, selling, general and administration, research and development, other income and other expense include charges related to the Sandoz strategic review, the company-wide rationalization of manufacturing sites and other net restructuring charges and related items; other expense also includes legal-related items; cost of goods sold and selling, general and administration include adjustments to provisions and related items
4  Taxes on the adjustments between IFRS Accounting Standards and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of 643 million to arrive at the core results before tax amounts to 143 million and the average tax rate on the adjustments was 22.2%.
5  Earnings per share (EPS) is calculated on the amount of net income, attributable to shareholders of Novartis AG.

All values are in US Dollars.

71

2021 ( millions unless indicated otherwise)	Amortization <br> of intangible<br> assets^1^	Impairments^2^	Acquisition or <br> divestment of <br> businesses and<br> related items	Other <br> items^3^	Core results
Gross profit from discontinued operations	236	18		70	5 095
Operating income from discontinued operations	236	34		194	2 097
Income before taxes from discontinued operations	236	34		195	2 072
Income taxes from discontinued operations 4					-506
Net income from discontinued operations					1 566
Basic EPS from discontinued operations () 5					0.70
The following are adjustments to arrive at core gross profit from discontinued operations
Cost of goods sold	236	18		70	-4 797
The following are adjustments to arrive at core operating loss from discontinued operations
Research and development		9		-1	-891
Other income		-55		-52	125
Other expense		62		177	-173
The following are adjustments to arrive at core income before taxes from discontinued operations
Other financial income and expense				1	-3
1  Amortization of intangible assets: cost of goods sold includes the amortization of acquired rights to currently marketed products and other production related intangible assets
2  Impairments: cost of goods sold and research and development include impairment charges related to intangible assets; other income and other expense include reversals of impairment charges and impairment charges related to property, plant and equipment
3  Other items: cost of goods sold, other income and other expense include net restructuring charges related to the company-wide rationalization of manufacturing sites and other restructuring income and charges and related items; research and development includes adjustments to provisions; other income includes net gains from the divestment of a product; other income and other expense include legal related items
4  Taxes on the adjustments between IFRS Accounting Standards and core results take into account, for each individual item included in the adjustment, the tax rate that will finally be applicable to the item based on the jurisdiction where the adjustment will finally have a tax impact. Generally, this results in amortization and impairment of intangible assets and acquisition-related restructuring and integration items having a full tax impact. There is usually a tax impact on other items, although this is not always the case for items arising from legal settlements in certain jurisdictions. Adjustments related to income from associated companies are recorded net of any related tax effect. Due to these factors and the differing effective tax rates in the various jurisdictions, the tax on the total adjustments of 465 million to arrive at the core results before tax amounts to 12 million and the average tax rate on the adjustments was 2.6%.
5  Earnings per share (EPS) is calculated on the amount of net income, attributable to shareholders of Novartis AG.

All values are in US Dollars.

72

Reconciliation of 2021 IFRS Accounting Standards results and non-IFRS measures core results and free cash flow to exclude the impacts of the 2021 divestment of our Roche investment

To enhance investor understanding of the Company’s performance in comparison with the prior year, we presented the 2021 IFRS Accounting Standards results and non-IFRS measures core results and free cash flow excluding the impacts related to our Roche investment, due to its divestment in the fourth quarter of 2021.

The following tables provide a reconciliation of our 2021 published IFRS Accounting Standards results and the non-IFRS measures core results and free cash flow to the 2021 results, excluding the impacts related to our Roche investment, due to its divestment. The table also provides a comparison of our 2022 IFRS Accounting Standards results and non-IFRS measures core results and free cash flow from continuing operations as published with the non-IFRS measure 2021 results excluding impacts from the divestment of our Roche investment.

	2021				2022
(USD millions unless indicated otherwise)	Results as <br> published^1^	Our Roche <br> investment <br> impacts<br> excluding<br> the divestment<br> gain	Gain on<br> divestment<br> of our<br> investment<br> in Roche	Results <br> excluding <br> impacts <br> from the <br> divestment <br> of our Roche<br> investment	Results as <br> published	Change<br> in USD<br> %	Change in<br> constant<br> currencies<br> %
Operating income from continuing operations	10 056			10 056	7 946	-21	-12
Income from associated companies	15 337	-785	-14 556	-4	-11	nm	nm
Interest expense	-787			-787	-800	-2	-3
Other financial income and expense	-76		-16	-92	42	nm	nm
Income taxes	-1 625			-1 625	-1 128	31
Net income from continuing operations	22 905	-785	-14 572	7 548	6 049	-20	-9
Basic earnings per share (USD) from continuing operations	10.22	-0.35	-6.50	3.37	2.77	-18	-7
Effective tax rate^2^	6.6%			17.7%	15.7%
Non-IFRS measures
Core operating income from continuing operations	14 491			14 491	14 794	2	10
Core income from associated companies	991	-995		-4	-11	nm	nm
Core interest expense	-787			-787	-800	-2	-3
Core other financial income and expense	-38			-38	140	nm	nm
Core income taxes	-2 129			-2 129	-2 177	-2	-11
Core net income from continuing operations	12 528	-995		11 533	11 946	4	13
Core basic earnings per share (USD) from continuing operations	5.59	-0.45		5.14	5.48	7	16
Core effective tax rate^3^	14.5%			15.6%	15.4%
Free cash flow from continuing operations^4,5^	12 299	-522		11 777	12 123	3
^1^ For information on continuing operations and discontinued operations, refer to the Overview section above in this Item 5 and “Item 18. Financial Statements - Note 1. Accounting policies “, “Item 18. Financial Statements - Note 2. Significant transactions - Significant transactions in 2023,” and “Item 18. Financial Statements - Note 31. Discontinued operations.”
^2^ Effective tax rate is calculated as Income taxes divided by Income before tax.
^3^ Core effective tax rate is calculated as Core income taxes divided by Core income before tax.
^4^ Effective January 1, 2023, Novartis revised its definition of free cash flow, to define free cash flow as net cash flows from operating activities less purchases of property, plant and equipment. To aid in comparability, the prior year free cash flow amounts have been revised to conform with the new free cash flow definition. See “-Non-IFRS measures as defined by Novartis."
^5^ The free cash flow impact represents the dividend received in Q1 2021 from Roche in relation to the distribution of its 2020 net income.

73

	2021
(USD millions)	Free cash flow <br> as published^1^	Dividends <br> received from <br> Roche in <br> relation to <br> the distribution<br> of its 2020 <br> net income^2^	Free cash <br> flow excluding<br> dividends <br> received <br> from Roche
Operating income from continuing operations	10 056		10 056
Adjustments for non-cash items	6 419		6 419
Operating income adjusted for non-cash items from continuing operations	16 475		16 475
Dividends received from associated companies and others	523	-522	1
Interest and other financial payments, net	-929		-929
Income taxes paid	-1 856		-1 856
Other operating cash flow items, net	-848		-848
Net cash flows from operating activities from continuing operations	13 365	-522	12 843
Purchases of property, plant and equipment	-1 066		-1 066
Free cash flow from continuing operations	12 299	-522	11 777
^1^ Effective January 1, 2023, Novartis revised its definition of free cash flow, to define free cash flow as net cash flows from operating activities less purchases of property, plant and equipment. To aid in comparability, the prior year free cash flow amounts have been revised to conform with the new free cash flow definition. See “-Non-IFRS measures as defined by Novartis."
^2^ In 2021, the dividend received from Roche in relation to the distribution of its 2020 net income was received in Q1 2021.

The following table provides a summary of the percentage point impact from excluding the effect of the divestment of our investment in Roche (in the fourth quarter of 2021) on the USD and constant currencies % change on key Company figures:

	In		In constant currencies
	% change as published 2022	Percentage<br> point <br> impact<br> 2022	% change<br> as published<br> 2022	% change<br> excluding <br> impacts <br> from the <br> divestment <br> of our Roche<br> investment<br> 2022	Percentage<br> point <br> impact<br> 2022
Net income from continuing operations	-74	-54	-70	-9	-61
Basic earnings per share (USD) from continuing operations	-73	-55	-69	-7	-62
Free cash flow from continuing operations	-1	-4
Core net income from continuing operations	-5	-9	4	13	-9
Core basic earnings per share (USD) from continuing operations	-2	-9	6	16	-10

All values are in US Dollars.

74

5.B Liquidity and capital resources

The following tables summarize the Company’s cash flows and net debt:

(USD millions)	2023	2022	2021
Net cash flows from operating activities from continuing operations	14 220	13 039	13 365
Net cash flows from operating activities from discontinued operations	238	1 197	1 706
Net cash flows from investing activities from continuing operations	6 719	1 904	4 897
Net cash flows used in investing activities from discontinued operations	-1 123	-436	-689
Net cash flows used in financing activities from continuing operations	-17 564	-20 681	-16 290
Net cash flows from financing activities from discontinued operations	3 286	119	26
Effect of exchange rate changes on cash and cash equivalents	100	-32	-266
Net change in cash and cash equivalents	5 876	-4 890	2 749
Change in marketable securities, commodities, time deposits and derivative financial instruments	-10 378	-4 509	14 017
Change in current and non-current financial debts and derivative financial instruments	1 564	3 022	6 847
Change in net debt	-2 938	-6 377	23 613
Net debt at January 1	-7 245	-868	-24 481
Net debt at December 31	-10 183	-7 245	-868

Cash flow

Financial year 2023 compared with 2022

Net cash flows from operating activities from continuing operations amounted to USD 14.2 billion, compared with USD 13.0 billion in 2022. This increase was mainly driven by higher net income from continuing operations adjusted for non-cash items and other adjustments, including divestment gains, which were partly offset by higher income taxes paid, mainly due to the timing of payments.

Net cash flows from operating activities from discontinued operations amounted to USD 0.2 billion, compared with USD 1.2 billion in 2022. This decrease was mainly driven by lower net income from discontinued operations adjusted for non-cash items and other adjustments, including divestment gains and the Distribution (spin-off) of the Sandoz business on October 3, 2023.

Net cash inflows from investing activities from continuing operations amounted to USD 6.7 billion, compared with USD 1.9 billion in 2022.

The current year net cash inflows from investing activities from continuing operations were driven by net proceeds of USD 10.6 billion from the sale of marketable securities, commodities and time deposits; USD 2.0 billion from the sale of intangible assets (including USD 1.75 billion cash proceeds from the divestment of the ‘front of eye’ ophthalmology assets to Bausch + Lomb); USD 0.3 billion from the sale of financial assets; and USD 0.2 billion from the sale of property, plant and equipment (including proceeds from the sale and leaseback of real estate). These cash inflows were partly offset by cash outflows of USD 3.6 billion for acquisitions and divestments of businesses, net (including the acquisition of Chinook Therapeutics, Inc. for USD 3.1 billion, net of cash acquired USD 0.1 billion, and the acquisition of DTx Pharma Inc. for USD 0.5 billion, net of cash acquired USD 0.1 billion); USD 1.7 billion for purchases of intangible assets; USD 1.1 billion for purchases of property, plant and equipment; and USD 0.1 billion for purchases of financial assets.

In 2022, net cash inflows from investing activities from continuing operations of USD 1.9 billion were mainly driven by net proceeds of USD 4.7 billion from the sale of marketable securities, commodities and time deposits; and USD 0.5 billion from the sale of intangible assets, financial assets and property, plant and equipment. These cash inflows were partly offset by cash outflows of USD 1.3 billion for purchases of intangible assets; USD 0.9 billion for purchases of property, plant and equipment; USD 0.1 billion for purchases of financial assets; and USD 0.8 billion for acquisitions and divestments of businesses, net (primarily the acquisition of Gyroscope Therapeutics Holdings plc for USD 0.8 billion).

Net cash outflows used in investing activities from discontinued operations amounted to USD 1.1 billion, compared with USD 0.4 billion in 2022. The current year mainly includes the cash outflow of USD 0.7 billion due to the derecognition of cash and cash equivalents of the Sandoz business following the Distribution (spin-off) on October 3, 2023.

Net cash outflows used in financing activities from continuing operations amounted to USD 17.6 billion, compared with USD 20.7 billion in 2022.

The current year net cash outflows used in financing activities from continuing operations were mainly driven by USD 8.6 billion for net treasury share transactions; USD 7.3 billion for the dividend payment; USD 2.2 billion for the repayment of two EUR denominated bonds (notional amounts of EUR 1.25 billion and of EUR 0.75 billion) at maturity. Payments of lease liabilities amounted to USD 0.3 billion. These cash outflows were partly offset by cash inflows of USD 0.5 billion from the net increase in current financial debts.

In 2022, net cash outflows used in financing activities from continuing operations of USD 20.7 billion were

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mainly driven by USD 10.6 billion for net treasury share transactions; USD 7.5 billion for the dividend payment; USD 2.5 billion in aggregate for the repayment of two US dollar bonds; and USD 0.3 billion payments of lease liabilities. These cash outflows were partly offset by cash inflows of USD 0.3 billion from the net increase in current financial debts.

The current year net cash inflows from financing activities from discontinued operations of USD 3.3 billion were mainly driven by USD 3.6 billion cash inflows from bank borrowings (including the USD 3.3 billion Sandoz business borrowings from a group of banks on September 28, 2023) in connection with the Distribution (spin-off) of the Sandoz business to Novartis AG shareholders, partly offset by transaction cost payments of USD 0.2 billion. Net cash inflows from financing activities from discontinued operations in 2022 were USD 119 million.

Financial year 2022 compared with 2021

Net cash flows from operating activities from continuing operations amounted to USD 13.0 billion, compared with USD 13.4 billion in 2021. This decrease was mainly due to unfavorable changes in working capital and lower dividends from associated companies (2021 included the USD 0.5 billion dividends received from our investment in Roche, which was divested in the fourth quarter of 2021), partly offset by lower income taxes paid, higher interest received and favorable hedging results.

Net cash flows from operating activities from discontinued operations amounted to USD 1.2 billion, compared with USD 1.7 billion in 2021. This decrease was mainly driven by lower net income from discontinued operations adjusted for non-cash items and other adjustments, including divestment gains and unfavorable changes in working capital, which were partly offset by lower income taxes paid and lower payments out of provisions.

Net cash inflows from investing activities from continuing operations amounted to USD 1.9 billion, compared with USD 4.9 billion in 2021.

In 2022, net cash inflows from investing activities from continuing operations were mainly driven by net proceeds of USD 4.7 billion from the sale of marketable securities, commodities and time deposits; and USD 0.5 billion from the sale of intangible assets, financial assets and property, plant and equipment. These cash inflows were partly offset by cash outflows of USD 1.3 billion for purchases of intangible assets; USD 0.9 billion for purchases of property, plant and equipment; USD 0.1 billion for purchases of financial assets; and USD 0.8 billion for acquisitions and divestments of businesses, net (primarily the acquisition of Gyroscope Therapeutics Holdings plc for USD 0.8 billion).

In 2021, net cash inflows from investing activities from continuing operations of USD 4.9 billion were mainly driven by proceeds of USD 20.7 billion from the divestment of our investment in Roche; USD 2.3 billion from the sale of marketable securities, commodities and time deposits; and USD 1.3 billion from the sale of intangible assets, financial assets and property, plant and equipment. These cash inflows were partly offset by USD 16.4 billion cash outflows for purchases of marketable securities and time deposits, mainly due to the investment of a portion of the proceeds from the divestment of our investment in Roche; USD 1.5 billion for purchases of intangible assets (including the upfront payment to in-license tislelizumab from an affiliate of BeiGene, Ltd); USD 1.1 billion for purchases of property, plant and equipment; USD 0.2 billion for acquisitions and divestments of businesses, net; and USD 0.2 billion for purchases of financial assets.

Net cash outflows used in investing activities from discontinued operations amounted to USD 0.4 billion, compared with USD 0.7 billion in 2021. The 2021 amount includes the acquisition of GSK’s cephalosporin antibiotics business for USD 351 million.

Net cash outflows used in financing activities from continuing operations amounted to USD 20.7 billion, compared with USD 16.3 billion in 2021.

In 2022, net cash outflows used in financing activities from continuing operations were mainly driven by USD 10.6 billion for net treasury share transactions; USD 7.5 billion for the dividend payment; USD 2.5 billion in aggregate for the repayment of two US dollar bonds; and USD 0.3 billion payments of lease liabilities. These cash outflows were partly offset by cash inflows of USD 0.3 billion from the net increase in current financial debts.

In 2021, net cash outflows used in financing activities from continuing operations of USD 16.3 billion were driven by USD 7.4 billion for the dividend payment; USD 3.0 billion for net treasury share transactions; USD 3.5 billion net decrease in current financial debts; and USD 2.2 billion for the repayment of two EUR denominated bonds (notional amount of EUR 1.25 billion and of EUR 0.6 billion) at maturity. Payments of lease liabilities and other financing cash flows resulted in a net cash outflow of USD 0.2 billion.

Net cash inflows from financing activities from discontinued operations amounted to USD 119 million, compared with USD 26 million in 2021.

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Free cash flow

Free cash flow is a non-IFRS measure, see “—Item 5.A Operating results—Non-IFRS measures as defined by Novartis—Free cash flow” for further information.

The following table is a reconciliation of the three major categories of the IFRS Accounting Standards consolidated statements of cash flows to the non-IFRS measure free cash flow:

	2023			2022			2021
(USD millions)	IFRS <br> Accounting <br> Standards<br> cash flow	Adjustments	Free <br> cash flow	IFRS <br> Accounting <br> Standards<br> cash flow	Adjustments^1^	Revised<br> Free <br> cash flow^1^	IFRS <br> Accounting <br> Standards<br> cash flow	Adjustments^1^	Revised<br> Free <br> cash flow^1^
Net cash flows from operating activities from continuing operations	14 220		14 220	13 039		13 039	13 365		13 365
Net cash flows from operating activities from discontinued operations	238		238	1 197		1 197	1 706		1 706
Total net cash flows from operating activities	14 458		14 458	14 236		14 236	15 071		15 071
Net cash flows from/(used in) investing activities from continuing operations	6 719	-7 779	-1 060	1 904	-2 820	-916	4 897	-5 963	-1 066
Net cash flows used in investing activities from discontinued operations	-1 123	904	-219	-436	154	-282	-689	377	-312
Total net cash flows from/(used in) investing activities^2^	5 596	-6 875	-1 279	1 468	-2 666	-1 198	4 208	-5 586	-1 378
Net cash flows used in financing activities from continuing operations	-17 564	17 564	0	-20 681	20 681	0	-16 290	16 290	0
Net cash flows from financing activities from discontinued operations	3 286	-3 286	0	119	-119	0	26	-26	0
Total net cash flows used in financing activities^3^	-14 278	14 278	0	-20 562	20 562	0	-16 264	16 264	0
Non-IFRS measure free cash flow from continuing operations^1^			13 160			12 123			12 299
Non-IFRS measure free cash flow from discontinued operations^1^			19			915			1 394
Total non-IFRS measure free cash flow^1^			13 179			13 038			13 693
^1^ To aid in comparability, the prior year adjustments and free cash flow amounts have been revised to conform with the new free cash flow definition that was effective as of January 1, 2023.
^2^ With the exception of purchases of property, plant and equipment, all net cash flows from/(used in) investing activities from continuing operations and from discontinued operations are excluded from the free cash flow.
^3^ Net cash flows (used in)/from financing activities from continuing operations and from discontinued operations are excluded from the free cash flow.

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The following table is a summary of the non-IFRS measure free cash flow:

( millions)	2022	2021
Operating income from continuing operations	7 946	10 056
Reversal of non-cash items and other adjustments
Depreciation, amortization and impairments	6 965	5 559
Change in provisions and other non-current liabilities	1 318	806
Other	451	54
Operating income from continuing operations adjusted for non-cash items	16 680	16 475
Dividends received from associated companies and others	1	523
Interest received and other financial receipts	323	11
Interest paid and other financial payments	-693	-940
Income taxes paid	-1 702	-1 856
Payments out of provisions and other net cash movements in non-current liabilities	-774	-775
Change in inventories and trade receivables less trade payables	-1 138	-565
Change in other net current assets and other operating cash flow items	342	492
Net cash flows from operating activities from continuing operations	13 039	13 365
Purchases of property, plant and equipment	-916	-1 066
Non-IFRS measure free cash flow from continuing operations 1	12 123	12 299
Non-IFRS measure free cash flow from discontinued operations 1, 2	915	1 394
Total non-IFRS measure free cash flow 1	13 038	13 693
1  To aid in comparability, the prior year free cash flow amounts have been revised to conform with the new free cash flow definition that was effective as of January 1, 2023.
2  In 2023, the free cash flow from discontinued operations was a cash inflow of 19 million (2022: 915 million, 2021: 1 394 million) consisting of 238 million (2022: 1 197 million, 2021: 1 706 million) net cash inflows from operating activities from discontinued operations, less purchases of property, plant and equipment by discontinued operations of 219 million (2022: 282 million, 2021: 312 million).

All values are in US Dollars.

Financial year 2023 compared with 2022

Free cash flow from continuing operations amounted to USD 13.2 billion (+9% USD), compared with USD 12.1 billion in 2022, driven by higher net cash flows from operating activities from continuing operations.

For the total Company, free cash flow amounted to USD 13.2 billion, compared with USD 13.0 billion in 2022.

Financial year 2022 compared with 2021

Free cash flow from continuing operations amounted to USD 12.1 billion, broadly in line with USD 12.3 billion in 2021.

For the total Company, free cash flow amounted to USD 13.0 billion, compared with USD 13.7 billion in 2021.

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Condensed consolidated balance sheets

(USD millions)	Dec 31, 2023	Dec 31, 2022
Assets
Property, plant and equipment	9 514	10 764
Right-of-use assets	1 410	1 431
Goodwill	23 341	29 301
Intangible assets other than goodwill	26 879	31 644
Investments in associated companies	205	143
Deferred tax assets	4 309	3 739
Financial assets and other non-current assets	3 806	3 521
Total non-current assets	69 464	80 543
Inventories	5 913	7 175
Trade receivables	7 107	8 066
Other current assets and income tax receivables	3 033	2 739
Marketable securities, commodities, time deposits and derivative financial instruments	1 035	11 413
Cash and cash equivalents	13 393	7 517
Total current assets	30 481	36 910
Total assets	99 945	117 453
Equity and liabilities
Total equity	46 750	59 423
Liabilities
Financial debts	18 436	20 244
Lease liabilities	1 598	1 538
Deferred tax liabilities	2 248	2 686
Provisions and other non-current liabilities	4 523	4 906
Total non-current liabilities	26 805	29 374
Trade payables	4 926	5 146
Financial debts and derivative financial instruments	6 175	5 931
Lease liabilities	230	251
Provisions and other current liabilities and current income tax liabilities	15 059	17 328
Total current liabilities	26 390	28 656
Total liabilities	53 195	58 030
Total equity and liabilities	99 945	117 453

There has been a significant change to the December 31, 2023 consolidated balance sheet resulting from the presentation of the Sandoz business as discontinued operations. This follows the September 15, 2023 shareholders’ approval to spin off the Sandoz business through a dividend in kind distribution to the Novartis AG share- holders (for further information see Item 18. Financial Statements – Note 1. Accounting policies; and – Note 2. Significant transactions).

The December 31, 2022 consolidated balance sheet includes the assets and liabilities of the Sandoz business. The December 31, 2023 consolidated balance sheet excludes the assets and liabilities of the Sandoz business in the individual lines, due to the derecognition of the Sandoz business at the date of the October 3, 2023 distribution (spin-off).

The consolidated balance sheet discussion and analysis that follows excludes the impacts of the derecognition of the Sandoz business assets and liabilities at the date of the distribution (spin-off). For information on the assets and liabilities of the Sandoz business derecognized at October 3, 2023, the distribution (spin-off) date, see Item 18. Financial Statements – Note 31 – Discontinued operations – Net assets derecognized.”

Assets

Total non-current assets of USD 69.5 billion increased by USD 0.5 billion compared with December 31, 2022, excluding the impact of the derecognition of the Sandoz business non-current assets related to discontinued operations.

Intangible assets other than goodwill decreased by USD 3.3 billion mainly due to amortization and impairments and the divestment of the ‘front of eye’ ophthalmology assets, partially offset by the impact of acquisitions, including Chinook Therapeutics, Inc. and of DTx Pharma Inc., additions, and favorable currency translation adjustments.

Goodwill increased by USD 1.5 billion mainly due to the acquisition of Chinook Therapeutics, Inc and DTx Pharma Inc.

Deferred tax assets increased by USD 1.3 billion mainly due to higher deferred tax assets on intangible assets, inventory and tax loss carryforwards. Property, plant and equipment increased by USD 0.6 billion mainly

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as additions and favorable currency translation adjustments exceeded depreciation charge and disposals. Right-of-use assets, investments in associated companies, financial assets, and other non-current assets were broadly in line with December 31, 2022.

Total current assets of USD 30.5 billion decreased by USD 1.7 billion, compared with December 31, 2022, excluding the impact of the derecognition of the Sandoz business non-current assets related to discontinued operations.

Cash and cash equivalents, marketable securities, commodities, time deposits and derivative financial instruments decreased by USD 4.4 billion mainly due to the dividend payment, and net purchases of treasury shares and intangible assets, partially offset by the cash generated through operating activities.

Inventories increased by USD 0.9 billion. Trade receivables increased by USD 1.3 billion, mainly due to the increase in net sales. Other current assets and income tax receivables were broadly in line with December 31, 2022.

We consider our provisions for doubtful trade receivables to be adequate. We particularly monitor the level of trade receivables in countries deemed to have an elevated credit risk. We consider macroeconomic environment, historical experience, country and political risk, in addition to other relevant information when assessing risk. These risk factors are monitored regularly to determine any adjustments in risk classification. The majority of the past due trade receivables from elevated credit risk countries are due from local governments or from government-funded entities. Deteriorating credit and economic conditions as well as other factors in these elevated credit risk countries have resulted in, and may continue to result in, an increase in the average length of time that it takes to collect these trade receivables and may require the Company to re-evaluate the expected credit loss amount of these trade receivables in future periods. As at December 31, 2023, amounts past due for more than one year were not significant in elevated credit risk countries.

For a table showing an overview of the aging analysis of total trade receivables and the total amount of the provision for doubtful trade receivables as at December 31, 2023, and 2022, see “Item 18. Financial Statements—Note 16. Trade receivables.”

There is also a risk that certain countries could devalue their currency. Currency exposures are described in more detail in “—Effects of currency fluctuations.”

Liabilities

Total non-current liabilities of USD 26.8 billion decreased by USD 1.7 billion, compared with December 31, 2022, excluding the impact of the derecognition of the Sandoz business non-current liabilities related to discontinued operations.

Non-current financial debts decreased by USD 1.8 billion mainly due to the reclassification of USD 2.1 billion from non-current to current financial debts of a USD denominated bond with notional amount of USD 2.2 billion maturing in 2024.

Non-current lease liabilities, deferred tax liabilities and provisions and other non-current liabilities were broadly in line with December 31, 2022.

Total current liabilities of USD 26.4 billion increased by USD 1.5 billion, compared with December 31, 2022, excluding the impact of the derecognition of the Sandoz business non-current liabilities related to discontinued operations.

Current financial debts and derivative financial instruments were broadly in line with December 31, 2022, as the repayment of a 0.5% coupon bond with a notional amount of EUR 750 million and a 0.125% coupon bond with a notional amount of EUR 1.25 billion was largely offset by the reclassification of USD 2.1 billion from non-current to current financial debts of a USD denominated bond with notional amount of USD 2.2 billion maturing in 2024.

Provisions and other current liabilities increased by USD 0.6 billion, mainly driven by an increase of the provisions for deductions from revenue. Trade payables increased by USD 0.9 billion. Current income tax liabilities and current lease liabilities were broadly in line with December 31, 2022.

In our key countries, Switzerland and the United States, assessments have been agreed by the tax authorities up to 2019 in Switzerland and up to 2016 in the United States, with the exception of one open United States position related to the 2007 tax filing. Uncertainties also exist on the application of a taxing right based on a German non-resident tax regulation for specific revenues derived from German registered intellectual property rights.

Novartis believes that its total provisions are adequate based upon currently available information. However, given the inherent difficulties in estimating liabilities in this area, Novartis may incur additional costs beyond the amounts provided. Management believes that such additional amounts, if any, would not be material to the Company’s financial condition but could be material to the results of operations or cash flows in a given period.

Equity

The Company’s equity decreased by USD 12.7 billion to USD 46.8 billion, compared with December 31, 2022.

This decrease was mainly due to the dividend in kind to effect the distribution (spin-off) of Sandoz Group AG to the Novartis AG shareholders’ of USD 14.0 billion (for further information see “Item 18. Financial Statements – Note 2. Significant transactions, and Note 31 – Discontinued operations”), the cash-dividend payment of USD 7.3 billion and the purchase of treasury shares of USD 8.5 billion. This was partially offset by the net income of USD 14.9 billion, and equity-based compensation of USD 0.9 billion.

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Summary of equity movements attributable to Novartis AG shareholders

	Number of outstanding shares (in millions)		Equity attributable to Novartis AG shareholders
	2023	2022	2023<br> USD millions	2022<br> USD millions
Balance at beginning of year	2 119.6	2 234.9	59 342	67 655
Shares acquired to be canceled	-87.5	-126.2	-8 369	-10 787
Other share purchases	-1.6	-1.4	-148	-123
Exercise of options and employee transactions	2.8	1.9	146	88
Equity-based compensation	10.4	10.4	904	854
Shares delivered to Alcon employees as a result of the Alcon spin-off		0.0		5
Shares delivered to Sandoz employees as a result of the Sandoz spin-off	0.3		30
Taxes on treasury share transactions			14	14
Decrease of treasury share repurchase obligation under a share buyback trading plan				2 809
Transaction costs, net of taxes			-214
Dividends			-7 255	-7 506
Dividend in kind to effect the spin-off of Sandoz			-13 962
Net income of the year attributable to shareholders of Novartis AG			14 850	6 955
Other comprehensive income attributable to shareholders of Novartis AG			1 200	-839
Other movements			129	217
Balance at end of year	2 044.0	2 119.6	46 667	59 342

In 2023, Novartis repurchased a total of 87.5 million shares for USD 8.4 billion on the SIX Swiss Exchange second trading line. These repurchases included 52.8 million shares (USD 4.9 billion) under the USD 15 billion share buyback (announced in December 2021 and completed in June 2023) and 23.0 million shares (USD 2.3 billion) under the new up-to USD 15 billion share buyback announced in July 2023. In addition, 11.7 million shares (USD 1.2 billion) were repurchased to mitigate dilution related to participation plans of associates. Furthermore, 1.6 million shares (for an equity value of USD 0.1 billion) were repurchased from associates. In the same period, 13.5 million shares (for an equity value of USD 1.1 billion) were delivered as a result of options exercised and share deliveries related to participation plans of associates. Consequently, the total number of shares outstanding decreased by 75.6 million versus December 31, 2022. These treasury share transactions resulted in an equity decrease of USD 7.4 billion and a net cash outflow of USD 8.6 billion.

In 2022, Novartis repurchased a total of 126.2 million shares for USD 10.8 billion on the SIX Swiss Exchange second trading line, including 115.3 million shares (USD 9.9 billion) under the up-to USD 15 billion share buyback announced in December 2021 and 10.9 million shares (USD 0.9 billion) to mitigate dilution related to participation plans of associates. In addition, 1.4 million shares (USD 0.1 billion) were repurchased from associates. In the same period, 12.3 million shares (for an equity value of USD 0.9 billion) were delivered as a result of option exercises and share deliveries related to participation plans of associates. Consequently, the total number of shares outstanding decreased by 115.3 million versus December 31, 2021. These treasury share transactions resulted in a decrease in equity of USD 10.0 billion and a net cash outflow of USD 10.6 billion.

Treasury shares

As at December 31, 2023, our holding of treasury shares amounted to 233.5 million shares, or approximately 10% of the total number of issued shares. Approximately 93.8 million treasury shares were held in entities that restrict their availability for use.

As at December 31, 2022, our holding of treasury shares amounted to 284.1 million shares, or approximately 12% of the total number of issued shares. Approximately 99.0 million treasury shares were held in entities that restrict their availability for use.

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Effects of currency fluctuations

We transact our business in many currencies other than the US dollar, our reporting currency.

The following table provides an overview of net sales from continuing operations and operating expenses based on IFRS Accounting Standards values for 2023, 2022 and 2021, for currencies most important to the Company:

	2023		2022		2021
Currency	Net sales<br> from<br> continuing <br> operations<br> %	Operating<br> expenses<br> from<br> continuing<br> operations<br> %^1^	Net sales<br> from<br> continuing <br> operations<br> %	Operating<br> expenses<br> from<br> continuing<br> operations<br> %^1^	Net sales<br> from<br> continuing <br> operations<br> %	Operating<br> expenses<br> from<br> continuing<br> operations<br> %^1^
US dollar (USD)	42	37	40	38	38	37
Euro (EUR)	24	20	25	21	27	23
Swiss franc (CHF)	1	22	2	22	2	20
Chinese yuan (CNY)	7	4	7	4	7	4
Japanese yen (JPY)	4	2	4	2	5	3
Canadian dollar (CAD)	2	1	2	1	2	1
British pound (GBP)	2	5	2	2	3	2
Russian ruble (RUB)	1	0	2	1	1	1
Brazilian real (BRL)	2	1	2	1	1	1
Australian dollar (AUD)	1	0	1	1	1	1
Other currencies	14	8	13	7	13	7
^1^ Operating expenses include cost of goods sold; selling, general and administration; research and development; other income and other expense.

We prepare our consolidated financial statements in US dollars. As a result, fluctuations in the exchange rates between the US dollar and other currencies can have a significant effect on both the Company’s results of operations as well as the reported value of our assets, liabilities and cash flows. This in turn may significantly affect reported earnings (both positively and negatively) and the comparability of period-to-period results of operations.

For purposes of our consolidated balance sheets, we translate assets and liabilities denominated in other currencies into US dollars at the prevailing market exchange rates as of the relevant balance sheet date. For purposes of the Company’s consolidated income and cash flow statements, revenue, expense and cash flow items in local currencies are translated into US dollars at average exchange rates prevailing during the relevant period. As a result, even if the amounts or values of these items remain unchanged in the respective local currency, changes in exchange rates have an impact on the amounts or values of these items in our consolidated financial statements.

Because our expenditure in Swiss francs is significantly higher than our revenue in Swiss francs, volatility in the value of the Swiss franc can have a significant impact on the reported value of our earnings, assets and liabilities, and the timing and extent of such volatility can be difficult to predict.

The Company manages its global currency exposure by engaging in hedging transactions where management deems appropriate, after taking into account the natural hedging afforded by our global business activity. In 2023 and 2022, we entered into various contracts that change in value with movements in foreign exchange rates, to preserve the value of assets, commitments and expected transactions. We use forward contracts and foreign currency options to hedge. For more information on how these transactions affect our consolidated financial statements and on how foreign exchange rate exposure is managed, see “Item 18. Financial Statements—Note 1. Accounting policies,” “Item 18. Financial Statements—Note 6. Interest expense and other financial income and expense,” “Item 18. Financial Statements—Note 16. Trade receivables,” “Item 18. Financial Statements—Note 29. Commitments and contingent liabilities” and “Item 18. Financial Statements—Note 30. Financial instruments – additional disclosures.”

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The following table sets forth the foreign exchange rates of the US dollar against key currencies used for foreign currency translation when preparing the Company’s consolidated financial statements:

	Average for year			Year-end
USD per unit	2023	2022	Change in %	2023	2022	Change in %
Australian dollar (AUD)	0.665	0.695	-4	0.683	0.678	1
Brazilian real (BRL)	0.200	0.194	3	0.206	0.189	9
Canadian dollar (CAD)	0.741	0.769	-4	0.755	0.738	2
Swiss franc (CHF)	1.113	1.048	6	1.189	1.081	10
Chinese yuan (CNY)	0.141	0.149	-5	0.141	0.144	-2
Euro (EUR)	1.082	1.054	3	1.107	1.065	4
British pound (GBP)	1.243	1.237	0	1.275	1.207	6
Japanese yen (JPY (100))	0.713	0.766	-7	0.707	0.757	-7
Russian ruble (RUB (100))	1.185	1.481	-20	1.111	1.380	-19

The following table provides a summary of the currency impact on key Company figures due to their conversion into US dollars, the Company’s reporting currency. For additional information on the constant currency calculation (“cc”), see “—Item 5.A Operating results—Non-IFRS measures as defined by Novartis—Constant currencies.”

Currency impact on key figures

	Change in<br> USD %<br> 2023	Change in<br> constant<br> currencies %<br> 2023	Percentage<br> point currency<br> impact<br> 2023	Change in<br> USD %<br> 2022	Change in<br> constant<br> currencies %<br> 2022	Percentage<br> point currency<br> impact<br> 2022
Net sales from continuing operations	8	10	-2	-1	5	-6
Operating income from continuing operations	23	39	-16	-21	-12	-9
Net income from continuing operations	42	62	-20	-74	-70	-4
Basic earnings per share (USD) from continuing operations	49	70	-21	-73	-69	-4
Core operating income from continuing operations	11	18	-7	2	10	-8
Core net income from continuing operations	13	19	-6	-5	4	-9
Core basic earnings per share (USD) from continuing operations	18	25	-7	-2	6	-8
nm = not meaningful

For additional information on the effects of currency fluctuations, see “Item 18. Financial Statements—Note 30. Financial instruments – additional disclosures.”

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Company liquidity, financial debts and net debt

The following table shows Company liquidity, financial debts and net debt:

(USD millions)	2023	2022	2021
Non-current financial debts	-18 436	-20 244	-22 902
Current financial debts and derivative financial instruments	-6 175	-5 931	-6 295
Total financial debts	-24 611	-26 175	-29 197
Less liquidity
Cash and cash equivalents	13 393	7 517	12 407
Marketable securities, commodities, time deposits and derivative financial instruments	1 035	11 413	15 922
Total liquidity	14 428	18 930	28 329
Net debt at December 31^1^	-10 183	-7 245	-868
^1^ For further information about the net debt measure, which is a non-IFRS measure, see “—Item 5.A Operating results—Non-IFRS measures as defined by Novartis—Net debt.”

Financial year 2023

The Company’s net debt as at December 31, 2023, increased to USD 10.2 billion, compared with USD 7.2 billion as at December 31, 2022.

Total financial debts amounted to USD 24.6 billion as at December 31, 2023, compared with USD 26.2 billion as at December 31, 2022. Non-current financial debts decreased by USD 1.8 billion mainly due to the reclassification of USD 2.1 billion from non-current to current financial debts of a USD denominated bond with notional amount of USD 2.2 billion maturing in 2024.

Current financial debts and derivative financial instruments were broadly in line with December 31, 2022, as the repayment of a 0.5% coupon bond with a notional amount of EUR 750 million and a 0.125% coupon bond with a notional amount of EUR 1.25 billion was largely offset by the reclassification of USD 2.1 billion from non-current to current financial debts of a USD denominated bond with notional amount of USD 2.2 billion maturing in 2024.

Novartis has two US commercial paper programs under which it can issue up to USD 9.0 billion in the aggregate of unsecured commercial paper notes. Novartis also has a Japanese commercial paper program under which it can issue up to JPY 150 billion (approximately USD 1.1 billion) of unsecured commercial paper notes. Commercial paper notes totaling USD 3.3 billion under these three programs were outstanding as per December 31, 2023 (2022: USD 2.8 billion).

Novartis also has a committed credit facility of USD 6.0 billion. This credit facility is provided by a syndicate of banks and is intended to be used as a backstop for the US commercial paper programs. The facility matures in September 2025 and was undrawn as per December 31, 2023, and December 31, 2022.

Total liquidity decreased to USD 14.4 billion compared with USD 18.9 billion as at December 31, 2022.

As of year-end 2023, Moody’s Investors Service rated the Company A1 for long-term maturities and P-1 for short-term maturities and S&P Global Ratings rated the company AA- for long-term maturities and A-1+ for short-term maturities.

Financial year 2022

The Company’s net debt as at December 31, 2022, increased to USD 7.2 billion, compared with USD 0.9 billion as at December 31, 2021.

Total financial debts amounted to USD 26.2 billion as at December 31, 2022, compared with USD 29.2 billion as at December 31, 2021. Non-current financial debts decreased by USD 2.7 billion, mainly due to the reclassification of USD 2.3 billion from non-current to current financial debts of two EUR denominated bonds with notional amounts of EUR 750 million and EUR 1.25 billion maturing in 2023 and favorable foreign currency translation adjustments of USD 0.4 billion.

Current financial debts and derivative financial instruments decreased by USD 0.4 billion, mainly due to the repayment of two US dollar bonds of USD 1.0 billion and USD 1.5 billion, the closure during the third quarter of 2022 of the interest-bearing accounts of employees payable on demand, which amounted to USD 1.8 billion as at December 31, 2021, and favorable currency translation adjustments, partly offset by the reclassification from non-current to current financial debts of USD 2.3 billion and an increase of USD 1.9 billion in commercial paper.

Novartis has two US commercial paper programs under which it can issue up to USD 9.0 billion in the aggregate of unsecured commercial paper notes. Novartis also has a Japanese commercial paper program under which it can issue up to JPY 150 billion (approximately USD 1.1 billion) of unsecured commercial paper notes. Commercial paper notes totaling USD 2.8 billion under these three programs were outstanding as per December 31, 2022 (2021: USD 0.9 billion).

Novartis also has a committed credit facility of USD 6.0 billion, which was extended in 2022. This credit facility is provided by a syndicate of banks and is intended to be used as a backstop for the US commercial paper programs. The extended facility matures in September 2025 and was undrawn as per December 31, 2022, and December 31, 2021.

Total liquidity decreased to USD 18.9 billion compared with USD 28.3 billion as at December 31, 2021.

As of year-end 2022, Moody’s Investors Service rated the Company A1 for long-term maturities and P-1 for short-term maturities and S&P Global Ratings rated the

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company AA- for long-term maturities and A-1+ for short-term maturities.

For the tables showing the maturity schedule of our current financial assets, current and non-current financial debts and net debt as at December 31, 2023 and December 31, 2022, see “Item 18. Financial Statements—Note 30. Financial instruments - Additional disclosures—Nature and extent of risks arising from financial instruments—Liquidity risk.”

For a description of risks and restrictions on the ability of subsidiaries to transfer funds to the Company via cash dividends, loan or advances, see “—Liquidity/short-term funding” and “Item 18. Financial Statements—Note 30. Financial instruments - Additional disclosures—Nature and extent of risks arising from financial instruments.”

Information regarding the Company’s material contractual obligations and commitments as of the end of 2023 are provided in “—Material contractual obligations and commitments.”

Liquidity and financial debt by currency

The following table provides a breakdown of liquidity and financial debt by currency as at December 31:

	Liquidity<br> in % 2022^1^	Liquidity<br> in % 2021^1^	Financial<br> debt in %<br> 2023^2^	Financial<br> debt in %<br> 2022^2^	Financial<br> debt in %<br> 2021^2^
	85	92	67	62	57
CHF	4	4	7	6	12
	7	2	23	29	27
			1	1	1
Other	4	2	2	2	3
	100	100	100	100	100
1  Liquidity includes cash and cash equivalents and marketable securities, including debt securities, commodities and time deposits.
2  Financial debt includes non-current and current financial debt.

All values are in Japanese Yen.

Bonds

In August 2023, a 5-year EUR denominated bond of EUR 750 million with a coupon of 0.50% was repaid at maturity.

In September 2023, a 7-year EUR denominated bond of EUR 1.25 billion with a coupon of 0.125% was repaid at maturity.

In April 2022, a 5-year USD denominated bond of USD 1.0 billion with a coupon of 2.40% was repaid, in advance of its maturity date at no additional cost.

In September 2022, a 10-year USD denominated bond of USD 1.5 billion with a coupon of 2.40% was repaid at maturity.

In March 2021, a 4-year EUR denominated bond of EUR 1.25 billion with a coupon of 0.00% was repaid at maturity.

In November 2021, a 7-year EUR denominated bond of EUR 0.6 billion with a coupon of 0.75% was repaid at maturity.

Liquidity/short-term funding

The Company’s liquidity amounted to USD 14.4 billion as at December 31, 2023, compared with USD 18.9 billion as at December 31, 2022. Total non-current and current financial debts, including derivatives, amounted to USD 24.6 billion as at December 31, 2023, compared with USD 26.2 billion as at December 31, 2022.

The debt/equity ratio increased to 0.53:1 as at December 31, 2023, compared with 0.44:1 as at December 31, 2022. The net debt increased to USD 10.2 billion as at December 31, 2023, compared with USD 7.2 billion as at December 31, 2022.

We continuously track our liquidity position and asset/liability profile. This involves modeling cash flow maturity profiles based on both historical experiences and contractual expectations to project our liquidity requirements. We seek to preserve prudent liquidity and funding capabilities. We are confident that we have sufficient liquidity to support our normal business activities for the foreseeable future.

Certain countries have legal or economic restrictions on the ability of subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances, but these restrictions do not have an impact on the ability of the Company to meet its cash obligations.

We are not aware of any significant demands to change the level of liquidity needed to support our normal business activities. We make use of various borrowing facilities provided by several financial institutions. We also successfully issued various bonds in previous years and raised funds through our commercial paper programs.

The maturity schedule of our net debt can be found in “Item 18. Financial Statements—Note 30. Financial instruments - Additional disclosures—Nature and extent of risks arising from financial instruments—Liquidity risk.”

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Material contractual obligations and commitments

The Company’s material contractual obligations and commitments, entered into from time to time, consist of the following:

• Non-current financial debt, including current portion (see “Item 18. Financial Statements—Note 20. Non-current financial debt”). For the table showing the maturity schedule of our current and non-current financial debt, see “Item 18. Financial Statements—Note 30. Financial instruments—additional disclosures—Nature and extent of risks arising from financial instruments— Liquidity risk”;

• Leases on assets used in operations entered into in the ordinary course of business (see “Item 18. Financial Statements— Note 11. Right-of-use assets and lease liabilities”);

• Long-term research and development agreements with various institutions and pharmaceutical companies related to intangible assets. These agreements provide for potential milestone payments by Novartis, which are dependent on successful clinical development, or meeting specified sales targets, or other conditions that are specified in the agreements (see “Item 18. Financial Statements—Note 29. Commitments and contingent liabilities—Research and development commitments”);

• Commitments related to the acquisition of businesses and interests in intellectual property focused on key disease areas and indications that the Company expects to be growth drivers in the future (see “Item 18. Financial Statements—Note 29. Commitments and contingent Liabilities—Other commitments”). In addition, certain business acquisition arrangements include contingent payments, which the shareholders of the acquired company are eligible to receive upon the achievement of specified milestones. For the table showing the maturity schedule of contingent consideration liabilities, see “Item 18. Financial Statements—Note 30. Financial instruments—additional disclosures—Nature and extent of risks arising from financial instruments—Liquidity risk”;

• Independent pension and other post-employment benefit plans (see “Item 18. Financial Statements – Note 26. Post-employment benefits for employees”); and

• Property, plant and equipment purchase commitments in the ordinary course of business (see “Item 18. Financial Statements—Note 10. Property, plant and equipment”).

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5.C Research and development, patents and licenses

Our research and development spending from continuing operations totaled USD 11.4 billion, USD 9.2 billion and USD 8.6 billion (non-IFRS measure core research and development from continuing operations USD 8.6 billion, USD 8.3 billion and USD 8.2 billion) for the years 2023, 2022 and 2021, respectively.

Novartis has numerous products in various stages of development. For further information on these policies and these products in development, see “Item 4. Information on the Company—Item 4.B Business overview.”

As described in the risk factors section and elsewhere in this Annual Report, our drug development efforts are subject to the risks and uncertainties inherent in any new drug development program. Due to the risks and uncertainties involved in progressing through preclinical development and clinical trials, and the time and cost involved in obtaining regulatory approvals, among other factors, we cannot reasonably estimate the timing, completion dates and costs, or range of costs, of our drug development programs, or of the development of any particular development compound (see “Item 3. Key Information—Item 3.D Risk factors”). In addition, for a description of the research and development process for the development of new drugs and our other products, and the regulatory process for their approval, see “Item 4. Information on the Company—Item 4.B Business overview.”

5.D Trend information

See “—Item 5.A Operating results”, “—Item 5.B Liquidity and capital resources” and “Item 4. Information on the Company—Item 4.B Business overview” for trend information.

5.E Critical accounting estimates

See “Item 18. Financial Statements—Note 1. Accounting policies” for Critical accounting estimates.

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Item 6. Directors, Senior Management and Employees

6.A Directors and senior management

The information set forth under “Item 6. Directors, Senior Management and Employees—Item 6.C Board practices—Corporate governance—Board of Directors” and “Item 6. Directors, Senior Management and Employees—Item 6.C Board practices—Corporate governance—Executive Committee” is incorporated by reference.

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6.B Compensation

Dear shareholder,

On behalf of the Compensation Committee, I am pleased to present our 2023 Novartis Compensation Report.

2023 company performance

Novartis delivered a very strong performance in 2023, with a robust strategic (Sandoz spin-off), financial (top-and bottom-line growth) and innovation (large number of positive Phase III readouts) performance. The performance of our product portfolio (including Entresto, Kesimpta, Kisqali and Scemblix) together with the optimization of our commercial and supporting functions contributed to sales growth of 10% (constant currencies ‘cc’) and core operating income growth of 18% (cc), compared with the previous year. Innovation highlights included positive results from several Phase III clinical trials for investigational medicines with significant sales potential, including Pluvicto, remibrutinib and iptacopan, as well as additional approval indications for Entresto (for pediatric heart failure) in the EU and Cosentyx (for hidradenitis suppurativa) in the EU and US. Regulatory submissions were completed for Kisqali (for early breast cancer) in the EU and US. Transactions provided further substance to the pipeline, notably with the acquisition of Chinook Therapeutics to strengthen our renal portfolio. The one-year 2023 TSR performance of 26% was in the top 3 of our global healthcare peers.

On October 4, 2023, we successfully spun off our Sandoz generics and biosimilars business, through a dividend-in-kind distribution to holders of Novartis shares and American Depositary Receipts (ADRs). Each holder received one Sandoz share for every five Novartis shares or one Sandoz ADR for every five Novartis ADRs. While shareholders received the aforementioned dividend in kind, Performance Share Unit (PSU) and Restricted Share Unit (RSU) holders, including active and former members of the Executive Committee of Novartis (ECN), received instead ‘keep whole awards’ with the same vesting and performance conditions as the underlying award. This ensured award holders were treated on an economically consistent basis to Novartis shareholders. For more information, see “—Sandoz equity restoration plan.”

2023 realized compensation

The company’s performance in 2023 resulted in an Annual Incentive payout of 185% for the CEO, and in a Long-Term Performance Plan (LTPP) 2021-2023 payout of 122%. These factors, together with an increase of 16% in the vesting price of the 2021-2023 LTPP (when adjusted for the Sandoz spin-off) resulted in the total realized CEO compensation of CHF 16 248 178 in 2023. These three outcomes contributed to the vast majority of the year-on-year increase in realized pay for the CEO. They also impacted the compensation outcome for the other members of the ECN, whose total aggregated compensation was CHF 47 205 005. For details on the realized compensation, see “—CEO and Executive Committee 2023 realized compensation.”

Changes to the executive compensation system in 2024

As part of our annual review, we identified that our existing CEO compensation practices placed us in the lowest quartile versus global healthcare peers. We engaged extensively with our largest shareholders and proxy advisors to collect feedback about our executive compensation framework, in particular the challenges that European companies face in the competition for talent. Following this engagement and the overall positive nature of the feedback received, the Compensation Committee and the Board of Directors agreed that it is necessary to take a global perspective to attract and retain the best talent at the top of the organization, and that the company could be more competitive in this regard. As a result, and while still mindful of the expectations of European-based investors and proxy advisors, we made the following changes to our compensation system, effective January 1, 2024:

• CEO target compensation: We aspire to continue growing our global business, with a particular focus on the US market. Aligned with this aspiration and our compensation philosophy, the Board of Directors decided to adjust the CEO target pay in a way that preserves alignment with shareholders. Specifically, we increased the LTPP target, which is fully performance driven based on three-year forward-looking targets, from 325% to 400% as a percentage of annual base salary. The additional two-year holding period for the CEO remains unchanged, thereby restricting the equities from sale for five years. The Compensation Committee will continue to set stretch targets, with a robust assessment at the end of the cycle. No changes were made to the CEO base salary (beyond ordinary salary increases received by other Swiss employees) or the Annual Incentive target. This is the first significant increase in CEO target pay since 2019 and places his target compensation just above the lowest quartile of global healthcare peers, based on the last disclosed proxy information.

• Annual Incentive metrics: The Compensation Committee agreed to replace operating income with core operating income in our ECN Annual Incentive. The Compensation Committee agreed that core operating income, which excludes certain one-time or non-recurring items, represents a better measure of the Company’s underlying performance. Additionally, core-adjusted metrics are more commonly used by our global healthcare peers, which would enable easier peer performance comparisons.

• Share ownership and Annual Incentive deferral: The Compensation Committee strongly affirms a commitment to the principle of aligning the interests of executives with shareholders. To that end, we will continue to enforce an obligation that all ECN members become meaningful shareholders with a requirement to hold a multiple of their salary in Novartis shares. Currently, the Annual Incentive has a 50% mandatory deferral into equity, which is blocked for three years. The Compensation Committee decided that this aspect of the Annual Incentive should be more in line with relevant

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market practice. For this reason, once an ECN member has met their shareholding requirement, the portion of the Annual Incentive that is mandatorily deferred will be reduced to 30%. To reinforce strong shareholder alignment, the CEO’s shareholding requirement will simultaneously be increased from 5x to 6x annual base salary.

For more information about these changes, see “—2024 Executive Committee compensation system changes and increases.”

2023 compensation report structure and disclosure

The Compensation Committee decided to make the following changes to the 2023 Novartis Compensation Report:

• The Compensation Report has been reorganized to enhance its readability. For this reason, a detailed presentation of executive compensation outcomes can be found in the first part, and an explanation of our underlying compensation philosophy, system and governance in the second part. The Board compensation and governance information is in the final section. We trust that you will find this new structure more accessible.

• In response to shareholder feedback, we provide more disclosure and transparency in the CEO balanced scorecard, with an increased focus on the link between pay and performance.

• Aligned with our evolution from an organization with separate divisions each with a separate leader into a focused medicines company, we disclose target pay for the CEO (as the highest paid), the CFO and the Presidents of our International and US organizations individually, while all other ECN target pay is aggregated, see “—Compensation at grant value for the CEO and Executive Committee”. The Compensation Committee believes that this approach is more commercially appropriate while also maintaining our disclosure at the upper end of Swiss practice. Notwithstanding this change, we continue to disclose the CEO and ECN realized pay, as well as any significant individual pay increases, buyouts and exit packages.

2024 Annual General Meeting (AGM)

On behalf of the Compensation Committee, I would like to thank shareholders for their input and engagement during the consultation process. This has helped us shape the improvements to our compensation system presented here, as well as the changes in the format of the Compensation Report.

At the 2024 AGM, as with prior years, shareholders will be asked to vote on:

• The maximum aggregate amount of compensation for the Board of Directors from the 2024 AGM to the 2025 AGM

• The maximum aggregate amount of compensation for the ECN for the financial year 2025

• This 2023 Compensation Report

We trust that this Report and our 2024 Say-on-Pay brochure provides you with the information required for you to vote in favor of the above. We continue to welcome your feedback, which is invaluable in driving improvements in our compensation system and practices.

Simon Moroney, D.Phil.

Chair of the Compensation Committee

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Executive Committee and Board 2023 compensation at a glance

CEO pay for performance

2023 Annual Incentive% of target200%150%100%50%0%MaximumPayout: 185% of targetTarget2021-2023 Long-Term Performance Plan (LTPP) cycle% of target200%150%100%50%0%MaximumTargetPayout: 122% of target3rd party sales CAGR1(102% of target)Core operating income CAGR (158% of target)Innovation (108% of target)Relative TSR (120% of target)

^1^ CAGR = compound annual growth rate

CEO and Executive Committee total realized compensation

The 2023 total realized compensation for the CEO and Executive Committee members was CHF 63 453 183. For more information, see “—2023 CEO Annual Incentive balanced scorecard”, “ —2021-2023 LTPP cycle performance outcomes” and “ —CEO and Executive Committee 2023 realized compensation.”

		2023 annual base salary	2023 pension benefits	2023 Annual Incentive	2021 - 2023 LTPP cycle	Other 2023 compensation
	Currency	Cash (amount)	Amount	Cash & Equity	Equity (value <br> at vesting date)	Amount	Total realized <br> compensation <br> (incl. share<br> price movement)
Vasant Narasimhan (CEO)	CHF	1 822 334	170 125	5 075 255	8 921 546	258 918	16 248 178
Aggregate realized compensation of the other 11 Executive Committee members, including the member who stepped down during the financial year 2023	CHF	8 551 936	1 627 708	15 449 571	15 100 093	6 475 697	47 205 005
Total	CHF	10 374 269	1 797 833	20 524 826	24 021 639	6 734 615	63 453 183

Board compensation

The total actual compensation earned by Board members in the 2023 financial year is shown in the table below. For more information, see “—Board member total compensation earned for the financial year 2023.”

CHF	2023<br> total compensation
Board Chair	3 803 784
Other members of the Board	4 787 933
Total	8 591 717

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CEO compensation and performance

2023 fixed pay and benefits

Annual base salary

The CEO 2023 annual base salary was: CHF 1 828 900 (2.2% salary increase effective as of March 1, 2023, in line with ordinary salary increases received by other Swiss employees).

Pension and other benefits

The CEO is a member of the Novartis Swiss pension funds, which provide company contributions on the base salary and Annual Incentive up to the legal cap on the insured salary of CHF 882 000. No supplementary pension plans or savings plans are provided. The CEO’s employer pension contributions represent 9.3% of the base salary.

2023 CEO Annual Incentive balanced scorecard

This section presents the balanced scorecard for the CEO. Financial performance is measured in constant currencies (cc) to reflect operational performance that can be influenced. Performance outcomes for compensation purposes may differ from reported numbers in accordance with our compensation adjustments policy e.g. to reflect any currency impacts.

TargetMeasureWeight (%)TargetPerformanceachievementFinancial performance160Significantly AboveGroup 3rd Party Sales (cc, USD million)244989752 282Significantly aboveGroup Operating Income (cc, USD million)18983310 673Significantly aboveGroup Free Cash Flow as a % of 3rd party sales (cc)1824.6%26.8%Significantly above1Group 3rd Party Sales, Group Operating Income and Group Free Cash Flow as a % of 3rd party sales include the continuing operations’ financial performance for the year ended December 31, 2023 and the Sandoz discontinued operations’ financial performance for the nine months ended September 30, 2023.

Financial targets were re-calibrated following the Sandoz spin-off by excluding Q4 2023 Sandoz targets. This was to ensure targets were as stretched as the original targets after excluding the impact of Sandoz; and that they remain consistent with our financial reporting.

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2023 CEO Annual Incentive balanced scorecard (continued)

In addition to the financial targets, the CEO also has five equally weighted strategic objectives across key priority areas, including targets related to environmental, social and governance (ESG) matters. We provide a summary of those targets that most influenced performance and their relevant achievements below. More details can be found in the Novartis in Society Integrated Report 2023.

TargetMeasureWeight (%) / PerformanceachievementStrategic objectives40 AboveAdvance our new focused strategy•Sandoz spin-off successfully completed as planned on October 4, 2023 with positive value creation•More than 15 business development and M&A deals signed, strengthening the pipeline across key therapeutic areas and technology platforms AboveMaintain growth momentum and ensure successful launches•Strong sales performance for growth drivers: Entresto, Cosentyx, Kesimpta, Kisqali and Zolgensma were 105% of 2023 target in cc•Recent launches: Leqvioand Pluvicto, delivered 105% of 2023 target in cc•Fabhalta (iptacopan) launch preparations on track, after US approval was secured for paroxysmal nocturnal hemoglobinuria (PNH) in DecemberSignificantly aboveDeliver pipeline and drive R&D productivity•22 regulatory approvals achieved in US, EU, China and Japan, including: Cosentyx for hidradenitis suppurativa (HS) in US and EU; intravenous (IV) formulation of Cosentyx in US; Leqvio for hypercholesterolemia in Japan and China•18 submissions filed in the US, EU, China and Japan, including for Fabhalta (iptacopan) for PNH in EU and Japan and Kisqali(for early breast cancer) in EU and US•Nine positive phase III readouts/presentations including for Kisqali, Pluvicto, iptacopan, Lutathera, remibrutinib and atrasentan•Strong progress was made in the early-stage pipeline, with seven new molecular entity first patient first visits (NME FPFVs) and six pivotal trial-enabling first patient first visits (PTE-FPFVs), including two NMEs •23 entries were made into the pre-clinical portfolioAboveExecute on operational excellence & productivity•Core Margin exceeded target 37.9% in cc (vs. 2023 target 36.2%), when including policy adjustments and considering 3rd party sales •Organizational transformation initiated in 2022 was largely completed and is on track to deliver over USD 1.5bn in savings• Technology transformation programs for our new ERP (Enterprise Resource Planning) system and master data management are on track•Increased weekly production of Pluvictofollowing US and EU production approval in Milburn and Zaragoza sites. Expanded capacity of sites in Slovenia and Italy to support Kisqalidemand•99.1% regulatory inspections of clinical and manufacturing operations acceptableSignificantly aboveStrengthen foundations (ESG/ Human Capital) •Targets for our sustainability-linked bond were exceeded: 1.6m patients reached in LMICs with strategic innovative therapies (vs. 2023 target 1.1m); 28.7m patients reached with flagship programs (vs. 2023 target 22.6m)•Invested USD 98.4m in R&D for neglected tropical diseases and malaria•100% new launches with a global access strategy (vs. 2023 target 100%)•Reduction of greenhouse gas emissions by 63%, water consumption by 50%, and waste sent for disposal by 66% (all in our own operations; vs 2016 baseline)•Employee engagement score was 75 (vs. industry benchmark of 74), an increase of 2 percentage points over prior year •Employee share purchase plan on track: launched in North America, 27 countries in Europe, and 11 countries in Asia and the Middle East. A rollout to employees in other countries is scheduled in the near future•EPIC commitments achieved: 48% female representation in management (vs. 2023 aspiration of 48%52%); 98% of total headcount with pay transparency to external and/or internal benchmarks, where available (100% when considering exclusions mainly due to contractual or legal constraints and the ongoing integration of acquired businesses); pay gap at -0.9%, compared with external median +19%; 100% of recruitment no longer using historical salary data•100% of eligible suppliers risk-assessed using our External Partner Risk Management frameworkAboveTotal100Overall assessment and payout for CEOSignificantly AboveNovartis delivered a very strong performance in 2023, surpassing its targets on almost all measures, a significant improvement versus 2022. Financial results exceeded target due to a strong performance on sales and significant savings from our organizational restructuring. Our TSR performance for the year 2023 was in the top quartile of the industry. Strategic objectives were also well executed: the spin-off of Sandoz was completed in Q4 2023 and our organic pipeline made good progress with several positive clinical trial results and important regulatory filings. We maintained strong positions in our priority ESG ratings, underscoring our progress in delivering on our ESG commitments. In view of these achievements, the Board of Directors decided on an Annual Incentive payout of 185% (within the range of 0200%), leading to a total amount ofCHF 5 075 255.

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2021-2023 LTPP cycle performance outcomes

The charts below illustrate the performance of the 2021-2023 LTPP cycle against target. These targets were introduced in early 2021 during the Covid pandemic and were set at ambitious levels relative to prevailing market and internal expectations at that time. The Board reviewed these targets again at the end of the cycle and decided they are still appropriate.

As with the Annual Incentive, the financial LTPP targets were recalibrated to take the Sandoz spin-off into account. Given that these metrics measure the compound annual growth rate, Sandoz targets were removed for the financial year 2023. For the relative TSR measure, the dividend in kind distribution was treated as a one-time dividend that is not reinvested. A similar approach was taken for the targets in other ongoing cycles.

3rd pARTY sales CAGR(25% weighting)Vesting range 0–200% of target8%6%4%2%0%Maximum: 8.8% (CAGR)Actual: 5.9% (CAGR)Target: 5.8% (CAGR)3rd party sales CAGR payout102% of targetNotes: A minimum achievement of 3.2% CAGR was required to receive a payout under this performance measureNovartis achieved 3rd party sales CAGR of 5.9% (in constant currencies – cc) against the 5.8% target set at the beginning of the performance cycle, in large part due to Entresto, Kesimpta and Promacta, partly offset by Beovu, Kymriah and Cosentyx.Following the application of the payout curve, the 3rd party sales CAGR (cc) achievement generates a payout factor of 102% for this metric.Core operating income (COI) CAGR(25% weighting)Vesting range 0–200% of target14%10.5%7%3.5%0%Maximum: 14.4% (CAGR)Actual: 12.3% (CAGR)Target: 8.4% (CAGR)COI CAGR payout158% of targetNotes: A minimum achievement of 2.8% CAGR was required to receive a payout under this performance measureNovartis achieved a COI CAGR of 12.3% (cc) against the 8.4% target set at the beginning of the performance cycle as a result of significant productivity savings generated from the creation of our new organizational structure. Following the application of the payout curve, the COI CAGR (cc) achievement generates a payout factor of 158% for this metric.Relative Total Shareholder Return (TSR)(25% weighting)Novartis position Payout rangein the peer group(% of target)Position 1 – 2Position 3 – 5Position 6 – 8Position 9 – 15170% – 200% 130% – 160%80% – 120%0%Actual ranking 6th = 120% of targetTSR for the 2021-2023 cycle was 31.2%. As a result, Novartis ranked No. 6 out of 15 healthcare companies (including Novartis) resulting in a payout of 120% for this metric.Innovation(25% weighting)The following outcomes were considered in our 2021-2023 LTPP cycle innovation performance:•Cosentyx approved in the EU for childhood arthritic conditions; approved in the EU and US for HS; IV formulation approved in US •Entresto approved in the EU for pediatric heart failure; extending regulatory data protection to November 2026•Kymriah approved in the EU and US for adults with relapsed or refractory follicular lymphoma•Pluvicto approved in the US for the treatment of progressive PSMA positive mCRPC•Kisqali submissions in EU and US (for early breast cancer)•Iptacopan submission in EU and approval in US for patients with PNH•Submissions for Pluvicto treating metastatic castration-resistant prostate cancer, ligelizumab in chronic spontaneous urticaria and canakinumabas adjuvant treatment in non-small cell lung cancer were delayed or not submitted•In Biomedical Research, 19 pivotal trial enabling First Patient First Visits were achieved. Two Oncology targeted therapies and two radio-ligand NMEs were progressed to clinical investigationBased on input from the Science & Technology Committee (STC), the Board of Directors approved a payout of 108% for this metric.2021-2023 LTPP CYCLE PayoutOverall, the Board of Directors approved a 2021-2023 LTPP cycle payout at 122% of target, within the range of 0–200%. This resulted in an LTPP payout of CHF 8 921 546 for the CEO, including ­dividend equivalents of CHF 759 557 and Keep Whole Awards of CHF 523 862. The Committee did not exercise any discretion in relation to the vesting or share price changes following the spin-off.3rd party sales CAGR102% x 25%+COI CAGR158% x 25%+Innovation108% x 25%+Relative TSR120% x 25%Final vesting122% of target

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Historic CEO incentive payouts since appointment

The table below presents the CEO Annual Incentive and LTI payouts over the last six years since his appointment, out of a maximum of 200%. The average Annual Incentive and LTI payouts over this period were 132% and 111%, respectively. The high variability of the incentive payouts demonstrates a strong link between pay and performance, and provides evidence of stretch in the targets. For instance, the three lowest LTI payouts correspond to the cycles for which relative TSR performance was below the median of the peer group, and the payout was therefore 0% under this metric.

Year ending	2018^1^	2019^1^	2020^1^	2021	2022	2023
STI payout	145%	160%	100%	100%	100%	185%
LTI payout	99%	157%	126%	107%	57%	122%
^1^ For these cycles, two LTI plans existed: LTPP and LTRPP. Payouts represent the average CEO weighted payout

Interim update regarding ongoing LTPP cycles

How performance is tracking against target for our ongoing LTPP performance cycles is reported below.

2022-2024 LTPP cycle

After the first two years of the three-year LTPP cycle, 3^rd^ party sales CAGR and core operating income CAGR are tracking ahead of target. Innovation is on track. At the end of 2023, the relative TSR for Novartis was above median among our global healthcare peer group.

Performance measures	Tracking
3rd party sales CAGR (25%)
Core operating income CAGR (25%)
Innovation (25%)
Relative TSR (25%)

2023-2025 LTPP cycle

After the first year of the three-year LTPP cycle, 3^rd^ party sales CAGR and core operating income CAGR are ahead of target and innovation is tracking on target. At the end of 2023, the relative TSR for Novartis was in the top three of our global healthcare peer group.

Performance measures	Tracking
3rd party sales CAGR (25%)
Core operating income CAGR (25%)
Innovation (25%)
Relative TSR (25%)

On or ahead of target

95

CEO and Executive Committee

2023 compensation of joining and departing Executive Committee members

Appointment of President, International

Patrick Horber

Patrick Horber joined the Executive Committee on December 1, 2023 as President, International. In line with the buyout policy of Novartis (see “—CEO and Executive Committee: appointments”), to replace entitlements forfeited from his previous employer as a result of joining Novartis, he was granted buyout awards of CHF 1 058 274 in cash to be paid out in March 2024 as well as CHF 3 084 694 in target PSUs and CHF 2 292 624 in RSUs, both of which will vest between 2024 and 2026.

Departure of President, Innovative Medicines International & Chief Commercial Officer

Marie-France Tschudin

Marie-France Tschudin stepped down from the Executive Committee on September 15, 2023 and started her notice period on October 1, 2023. In determining her termination arrangement, the Compensation Committee ensured that contractual entitlements were respected, and all payments are in line with our plan rules and the Swiss Code of Obligations.

Per policy (see “—CEO and Executive Committee: termination arrangements”), during her 12-month notice period, Marie-France is entitled to her base salary, pension, Annual Incentive and other benefits. No severance payments were made. Outstanding equity grants will vest in line with the respective plan rules and are subject to malus and clawback, including requirements defined by the U.S. Securities and Exchange Commission, as well as non-compete restrictions. No new LTPP grants will be made during the notice period.

96

CEO and Executive Committee 2023 realized compensation

To aid shareholders’ understanding of the link between pay and performance, the Compensation Report discloses the realized compensation for the CEO on an individual basis, and for the other ECN members on an aggregated basis. Disclosing realized compensation means that the Annual Incentive and the LTPP are disclosed at the end of their respective performance cycles, reflecting actual payouts based on performance.

The total actual payout may vary year on year depending on multiple factors, including the composition of the Executive Committee and the tenure of its members (as new members may not have equity vestings), compensation increases, payout of variable compensation based on actual performance, share price fluctuations, and dividend equivalents.

The table below shows compensation for all ECN members for the 2023 financial year, including base salary, pension, other benefits, 2023 Annual Incentive, 2021-23 LTPP cycle payout, and any buyouts paid or vesting within the year. Base salary increases were in line with the average of other Novartis employees, with the exception of three individuals as disclosed in Item 6B of the 2022 Annual Report. The portion of the Annual Incentive paid in shares for the year 2023 is disclosed using the underlying value of Novartis shares at the date of grant. The realized values of any other equity awards (including dividend equivalents) are calculated using the share price on the date of vesting. The table also includes the total 2022 realized compensation for all Executive Committee members for comparative purposes.

To determine the appropriateness of 2023 CEO and executive compensation payouts under the Annual Incentive and LTPP, the Board of Directors and the Compensation Committee reviewed management’s performance against targets set at the beginning of the cycles as described in “—2023 CEO Annual Incentive balanced scorecard” and “—2021-2023 LTPP cycle performance outcomes.”

The incentive performance outcomes, combined with base salary and other benefits, pension, keep whole awards and dividend equivalents, resulted in 2023 total realized compensation for the CEO of CHF 16 248 178.

Realized compensation for the CEO and Executive Committee (2023 compared with 2022)

			2022
In CHF (gross) 1	Other ECN^2^	Total	CEO	Other ECN^3^	Total
Annual Base Salary	8 551 936	10 374 269	1 786 500	9 122 792	10 909 292
Annual Incentive (performance achieved)	15 449 571	20 524 826	2 684 321	10 130 159	12 814 480
Thereof cash	6 149 179	8 686 778	1 342 125	4 211 841	5 553 966
Thereof equity	9 300 392	11 838 048^4^	1 342 196	5 918 318	7 260 514^5^
LTPP	15 100 093	24 021 639^6^	3 307 422	10 025 047	13 332 469^7^
Other payments 8	6 475 697	6 734 615^9^	499 445	9 716 294	10 215 739
Pension benefits 10	1 627 708	1 797 833^11^	174 488	1 978 304	2 152 792^12^
Total	47 205 005^13^	63 453 183	8 452 176	40 972 595^14^	49 424 771
1  All compensation amounts are stated gross, before the deduction of social security contributions and income tax paid by the Executive Committee members. Amounts for Executive Committee members paid in were converted at a rate of 1.00 = CHF 0.8986, which is the same average exchange rate used in the Company's 2023 consolidated financial statements (a similar rule applies to payments made in other currencies during the year).
2  Aggregate realized compensation of the other 11 Executive Committee members, including Marie-France Tschudin who stepped down during the financial year 2023.
3  Aggregate realized compensation of the other 15 Executive Committee members, including the members who stepped down during the financial year 2022. For more information, see item 6B of the 2022 Annual Report.
4  The portion of the Annual Incentive delivered in equity is rounded up to the nearest share, based on the closing share price on the grant date (January 24, 2024) of CHF 93.53 per Novartis share and 107.55 per ADR.
5  The portion of the Annual Incentive delivered in equity is rounded up to the nearest share, based on the closing share price on the grant date (January 25, 2023) of CHF 85.30 per Novartis share and 92.81 per ADR.
6  The amount represents the underlying share value of the 264 799 realized LTPP PSUs to the CEO and other Executive Committee members for the 2021-2023 LTPP cycle, including dividend equivalents for the three-year cycle of value CHF 759 557 for the CEO and CHF 1 228 736 for the other Executive Committee members, including the one who stepped down during the financial year 2023. The taxable value is determined using the closing share price, on the day the payout factor is approved by the Board of Directors (i.e., January 24, 2024), of CHF 93.53 per Novartis share and 107.55 per ADR. Includes vested keep-whole shares received in connection to the Sandoz spin-off. Robert Kowalski was promoted to the Executive Committee during the course of the 2021 performance period, and Victor Bulto during the course of the 2022 performance period. As such, the information disclosed reflects their pro-rata 2021-2023 LTPP payouts attributable to the period in which they were members of the Executive Committee. Shreeram Aradhye rejoined Novartis, and Patrick Horber, Aharon Gal and Fiona Marshall joined Novartis after the 2021-2023 LTPP awards were made, and therefore did not receive an LTPP award for the 2021-2023 LTPP cycle.
7  Based on the closing share price of January 25, 2023 of CHF 85.30 per Novartis share and 92.81 per ADR for all members.
8  Includes any other perquisites, benefits in kind, and international assignment benefits as per the global mobility policy (e.g., housing, international health insurance, children's school fees, tax equalization). The compensation and benefits elements related to the period after the step-down dates are also reported under ‘other payments’.
9  Includes 2 042 realized PSUs, which vested on March 31, 2023 and 6 212 realized RSUs, which vested on May 1, 2023 and a cash buyout of CHF 469 071 (for a total value of CHF 1 553 135), to Fiona Marshall in lieu of the Annual Incentive and LTI that she forfeited when leaving her previous employer.
10  Includes social security contributions to the extent that they result in a pension entitlement. Includes also contributions to company provided pension plans.
11  This amount is out of total social security employer contributions of CHF 1 933 476 and pension employer contributions of CHF 1 852 898 paid in 2023 for all Executive Committee members.
12  This amount is out of total social security employer contributions of CHF 3 266 972 and pension employer contributions of CHF 2 608 462 paid in 2022 for all Executive Committee members.
13  Includes CHF 5 975 824 for the member who stepped down during 2023.
14  Includes CHF 20 967 229 for members who stepped down during 2022.

All values are in US Dollars.

97

The 2023 total realized compensation for the CEO increased compared with the prior year, driven by (i) the higher performance payouts of the 2023 Annual Incentive (185% compared with 100% in 2022) and the 2021-2023 LTPP (122% compared with 57% payout for cycle 2020-2022), which will be blocked until January 2026, and (ii) the vesting share price of the 2021-2023 LTPP, which was 16% higher than the prior cycle (when adjusted for the Sandoz spin-off). For more information on the performance outcomes, see “—2023 Annual Incentive CEO balanced scorecard” and “—2021-2023 LTPP cycle performance outcomes.” The performance outcomes of each measure compared with 2022 are provided below:

Annual Incentive	2023	2022
3rd party sales	Significantly above	Met
Operating income	Significantly above	Met
Free cash flow/3rd party sales	Significantly above	Below
Share of peers	-^1^	Met
Strategic objectives	Above	Met
Overall assessment	Significantly above	Met
CEO payout	185%	100%
^1^ Share of peers was removed from the ECN Annual Incentive from performance year 2023, as disclosed in the 2022 Compensation Report				LTPP cycle ending	2023	2022
---	---	---
3rd party sales CAGR	102%	43%
Core operating income CAGR	158%	93%
Innovation	108%	92%
Relative TSR	120%	0%
Payout (weighted)	122%	57%

The strong performance outcomes in 2023 were driven by several factors including:

• Sales of Entresto, Kesimpta, Promacta, Lucentis and Ilaris

• Savings generated from the new, more efficient organizational structure of Novartis

• Strategic milestones achieved, including clinically meaningful Phase III data for multiple assets with blockbuster potential, patient reach in low-and middle-income countries, achievements against our EPIC pledge commitment and the launch of our all-employee share purchase plan

• Significant improvement in the rTSR; 6th position for the 2021-2023 cycle (versus 12th position for the cycle ending in 2022), driven by a strong one-year 2023 TSR performance of 26%

Sandoz equity restoration plan

Novartis shareholders received a dividend in kind in Sandoz shares at the spin-off date. PSUs and RSUs held by Novartis employees are not entitled to dividends. To ensure equal treatment of PSU and RSU holders relative to Novartis shareholders, Novartis granted keep whole awards to its employees, including the CEO and members and former members of the Executive Committee. This was done in accordance with the Sandoz spin-off equity restoration plan as described in the 2022 Compensation Report:

• The keep whole awards had a value similar to that of the dividend in kind that the beneficiary would have received had they been holding Novartis shares

• The keep whole awards were granted in the same equity instrument (i.e., PSUs or RSUs) with the same vesting terms and performance conditions (if applicable) as the underlying award

The total value of keep whole awards granted to the active members of the Executive Committee was CHF 4 704 902. This is equivalent to the estimated reduction in the value of the Novartis share price due to the dividend in kind distribution, and as such is not considered additional compensation. The amounts realized from the vesting of keep whole awards will however be reported in the ECN realized pay for each respective year.

98

CEO and Executive Committee 2023 compensation at grant

In accordance with the Swiss Code of Obligations, Novartis discloses total compensation at grant value for the CEO and Executive Committee.

The CEO 2023 compensation at grant increase was mainly driven by the stronger performance on the 2023 Annual Incentive compared with 2022, as detailed in “—CEO and Executive Committee 2023 realized compensation.” 2023 compensation at grant for all ECN members remained broadly the same compared with 2022 (CHF 68 365 598 versus CHF 70 819 358), as the higher performance payouts were offset by a reduction in the number of members reported. In 2022, five members stepped down, including the Sandoz CEO, who was not replaced, compared with one in 2023.

The table below discloses the following information about compensation for the CEO and Executive Committee:

• 2023 base salary

• Actual cash portion and portion deferred in equity of the 2023 Annual Incentive

• 2023-2025 LTPP cycle awards, which are reported at target grant date value, based on the assumption that the awards will vest at 100% achievement, excluding any share price movement and dividend equivalents that may be accrued over the performance cycle. The future payout will be determined only after the performance cycle concludes in three years (i.e., at the end of 2025), with a payout range of 0% to 200% of the target value

• Other payments for 2023, which include other benefits, either paid in cash or granted in equity during the year

• 2023 pension benefits

• Total 2023 and total 2022 compensation at grant, for comparative purposes

The highest-paid individual in 2023 was Vasant Narasimhan, CEO of Novartis.

Compensation at grant value for the CEO and Executive Committee (2023 compared with 2022)

In CHF (gross)1	2023 Annual<br> Incentive<br> (performance<br> achieved)	2023-2025<br> LTPP cycle<br> PSUs<br> (target amount)^2^	Other<br> payments^3^	Pension<br> benefits^4^	Total 2023^5^	Total 2022^6^
Vasant Narasimhan	5 075 255	5 943 960	258 918	170 125	13 270 592	10 960 639
Victor Bulto	1 642 520	2 161 211	359 772	137 180	5 159 769	2 948 867
Patrick Horber (from December 1, 2023)  7	132 560	-	6 455 092	14 007	6 684 992	-
Harry Kirsch	2 315 616	2 880 581	47 744	180 055	6 527 912	5 426 373
Other ECN members	10 093 882	12 714 201	1 348 250	1 178 184	31 124 272	30 516 250
Subtotal	19 259 833	23 699 952	8 469 775	1 679 551	62 767 536	49 852 130
Members who stepped down	1 264 993	2 767 559	731 384	118 282	5 598 062	20 967 229^8^
Subtotal	1 264 993	2 767 559	731 384	118 282	5 598 062	20 967 229
Total	20 524 826^9^	26 467 511	9 201 159	1 797 833^10^	68 365 598	70 819 358
1  All compensation amounts are stated gross, before the deduction of social security contributions and income tax paid by the Executive Committee members. Amounts for Executive Committee members paid in were converted at a rate of 1.00 = CHF 0.8986, which is the same average exchange rate used in the Company's 2023 consolidated financial statements (a similar rule applies to payments made in other currencies during the year).
2  The amounts represent the underlying share value of the target number of PSUs granted to Executive Committee members for the 3-year performance cycle, based on the closing share price on the grant date (January 24, 2024) of CHF 93.53 per Novartis share and 107.55 per ADR for all members.
3  Includes any other perquisites, benefits in kind, buyouts and international assignment benefits as per the global mobility policy (e.g., housing, international health insurance, children's school fees, tax equalization). The compensation and benefits elements related to the period after the step-down dates are also reported under ‘other payments’.
4  Includes social security contributions to the extent that they result in a pension entitlement. Includes also contributions to company provided pension plans.
5  Aggregate compensation at grant for the 12 Executive Committee members, including Marie-France Tschudin who stepped down during the financial year 2023.
6  Aggregate compensation at grant for the 16 Executive Committee members, including the members who stepped down during the financial year 2022. For more information, see item 6B of the 2022 Annual Report.
7  In line with the Company’s buyout policy (see “—CEO and Executive Committee: appointments”), Patrick Horber received buyout awards of CHF 1 058 274 in cash to be paid out in March 2024 as well as CHF 3 084 694 in PSUs, and CHF 2 292 624 in RSUs, both of which will vest between 2024 and 2026, in lieu of the Annual Incentive and LTI that he forfeited when leaving his previous employer.
8  Includes five members (James Bradner, Richard Saynor, John Tsai, Susanne Schaffert and Robert Weltevreden) who stepped down during the financial year 2022.
9  The portion of the Annual Incentive delivered in equity is rounded up to the nearest share, based on the closing share price on the grant date (January 24, 2024) of CHF 93.53 per Novartis share and 107.55 per ADR.
10  This amount is out of total social security employer contributions of CHF 1 933 476 and pension employer contributions of CHF 1 852 898 paid in 2023 for all Executive Committee members.

All values are in US Dollars.

99

Number of equity instruments granted to the CEO and Executive Committee (2023 compared with 2022)

	Variable compensation^1^
	2023 Annual Incentive<br> (performance achieved)<br> Equity<br> (number)^2^	2023-2025 LTPP<br> PSUs<br> (target number)^3^	Other<br> Equity/PSUs<br> (number)	Total<br> 2023	Total<br> 2022
Vasant Narasimhan	27 132	69 683	-	96 815	90 145
Victor Bulto	8 498	25 914	-	34 412	14 016
Patrick Horber (from December 1, 2023)^5^	709	-	62 981	63 690	-
Harry Kirsch	24 758	33 770	-	58 528	43 749
Other ECN members	58 099	149 713	-	207 812	218 563
Subtotal	119 196	279 080	62 981	461 257	366 473
Members who stepped down^4^	6 763	32 445	-	39 208	178 653
Subtotal	6 763	32 445	-	39 208	178 653
Total	125 959	311 525	62 981	500 465	545 126
^1^ The values of these awards are reported in the table "—Compensation at grant value for the CEO and Executive Committee."
^2^ Vested shares, restricted shares and/or RSUs granted under the Annual Incentive for the 2023 performance period.
^3^ Target number of PSUs granted under the LTPP for the 2023-2025 performance cycle.
^4^ Marie-France Tschudin stepped down from the Executive Committee on September 15, 2023, and will end her contractual notice period on September 30, 2024. The LTPP grant for the 2023-2025 performance cycle, included in the table above, will vest at the end of the performance cycle on a pro-rata basis subject to the plan rules.
^5^ In line with the Company’s buyout policy (see “—CEO and Executive Committee: appointments”), Patrick Horber received buyout awards of 36 129 PSUs, and 26 852 RSUs, both of which will vest between 2024 and 2026, in lieu of the Annual Incentive and LTI that he forfeited when leaving his previous employer.

Additional disclosures and other statutory information

Fixed and variable compensation

The following table summarizes the annual base salary and variable compensation at grant for the financial year 2023 for the CEO and Executive Committee.

	Annual <br> Base Salary^1^	Variable<br> Compensation^2^
Vasant Narasimhan	13.9%	86.1%
Victor Bulto	17.1%	82.9%
Patrick Horber (from December 1, 2023)	1.2%	98.8%
Harry Kirsch	17.4%	82.6%
Other ECN members^3, 4^	19.3%	80.7%
Total	15.8%	84.2%
^1^ Pro-rated for ECN time.
^2^ See the table “–Compensation at grant value for the CEO and Executive Committee” with regard to the disclosure principles of variable compensation.
^3^ For the other seven active members at December 31, 2023.
^4^ Excludes the member who stepped down during the financial year 2023.

Other payments to Executive Committee members

During 2023, no other payments or waivers of claims other than those set out in the tables (including the footnotes) contained in this Compensation Report were made to Executive Committee members or to “persons closely linked” to them.

Payments to former Executive Committee members

Under the contracts of Executive Committee members and in line with the Company’s LTI plan rules, payments were made to 12 former members. Of this, CHF 8 725 507 relates to the vesting of LTI awards. In addition, contractual amounts totaling CHF 5 028 812 were made (comprising the base salary, the Annual Incentive and other benefits), and tax equalization on variable compensation granted during international assignments/commuter arrangements amounted to a total of CHF 221 718. The highest paid former Executive Committee member was John Tsai, who received CHF 3 537 225 (comprising the base salary, the Annual Incentive, realized LTI and other benefits). No other payments (or waivers of claims) were made to former Executive Committee members or to “persons closely linked” to them during 2023.

Persons closely linked

“Persons closely linked”, a definition used throughout the Annual Report, are (i) their spouse or equivalent, (ii) their children (under 18 years of age), (iii) any legal entities that they own or otherwise control, and (iv) any legal or natural person who is acting as their fiduciary.

Malus and clawback

Consistent with our “—CEO and Executive Committee compensation philosophy and system,” in 2023 there was no legal or factual basis on which to exercise malus or clawback for current or former Executive Committee members.

Award and delivery of equity to Novartis employees

During 2023, 11.8 million unvested restricted shares (or ADRs), RSUs and target PSUs were granted, and 10.7 million Novartis vested shares (or ADRs) were delivered to Novartis employees under various equity-based participation plans. Current unvested equity instruments (restricted shares, RSUs and target PSUs) held by employees represent 0.92% of issued shares. Novartis delivers treasury shares to employees to fulfill these obligations and aims to offset the dilutive impact from its equity-based participation plans.

Note 28 to the Company’s audited consolidated financial statements

The total expense for the year for compensation awarded to Executive Committee, using IFRS Accounting Standards measurement rules, is presented in Note 28 to the Company’s audited consolidated financial statements.

100

Shares, ADRs and other equity rights owned by Executive Committee members as at December 31, 20231

The following table shows, in alphabetical order after the CEO, the total number of shares, ADRs and other equity rights owned by the CEO and the other Executive Committee members and “persons closely linked” to them as at December 31, 2023. At this date, no members of the Executive Committee, either individually or together with “persons closely linked” to them, owned 1% or more of the outstanding shares or ADRs of Novartis. As at December 31, 2023, all members who had served at least five years on the Executive Committee had met or exceeded their personal Novartis share ownership requirements.

	Unvested shares <br> and other equity rights^2^	Equity ownership level <br> as a multiple of <br> annual base salary^3^	Unvested target PSUs <br> (e.g., LTPP)^4^	Total as at<br> December 31, <br> 2023	Total as at<br> December 31, <br> 2022
Vasant Narasimhan	77 324	15x	169 770	497 334	406 502
Shreeram Aradhye	17 523	1x	19 573	37 096	14 394
Victor Bulto	32 000	3x	28 310	62 090	36 386
Aharon Gal	39 241	9x	6 862	93 763	62 960
Karen Hale	18 527	2x	48 182	72 190	28 568
Patrick Horber	27 561	2x	22 083	49 644	0
Harry Kirsch	35 944	29x	82 290	460 964	399 948
Robert Kowalski	21 450	2x	26 085	47 535	32 495
Steffen Lang	28 821	14x	49 080	202 250	174 237
Fiona Marshall	44 643	4x	16 864	66 517	34 980
Klaus Moosmayer	15 396	4x	31 187	68 142	47 421
Subtotal	358 430		500 286	1 657 525	1 237 891
Members who stepped down	33 493		81 135	150 802	667 092
Subtotal	33 493		81 135	150 802	667 092
Total	391 923		581 421	1 808 327	1 904 983
1  Includes holdings of persons closely linked to Executive Committee members (see definition "—Persons closely linked").
2  Includes unvested shares and ADRs as well as other equity rights applicable for the determination of equity amounts for the share ownership requirements, as per the definition "—CEO and Executive Committee: share ownership requirements." Also includes unvested keep-whole awards received in connection to the Sandoz spin-off.
3  The multiple is calculated based on the full-year annual base salary and the closing share price as at the end of the 2023 financial year. The share price and ADR price on the final trading day of 2023 was CHF 84.87 and 100.97, respectively.
4  The target number of PSUs is disclosed pro-rata to December 31, 2023, unless the award qualified for full vesting under the relevant plan rules. Also includes unvested keep-whole awards received in connection to the Sandoz spin-off.

All values are in US Dollars.

Executive Committee compensation approved by shareholders

The total compensation dispensed by the Company in 2023 is within the Say-on-Pay budget approved by the shareholders at the 2022 AGM, including active Executive Committee members and those who stepped down in the course of 2023.

101

CEO and Executive Committee compensation philosophy and system

Compensation philosophy

Our compensation philosophy aims to ensure that we attract and retain outstanding Executive Committee members and reward them according to their success in implementing the Company strategy, as well as their contribution to the Company performance and long-term value creation. The main elements of our compensation philosophy are set out in the table below.

Pay for performance•Variable compensation is tied directly to the achievement of strategic Company targetsShareholderalignment•Our incentives are significantly weighted toward long-term equity-based plans•Measures under the Long-Term Incentive plans are calibrated to promote the creation of shareholder value•Executive Committee members are expected to build and maintain substantial shareholdingsBalanced rewards•Balanced set of measures to create sustainable value•Mix of targets based on financial metrics, strategic objectives, and performance versus our competitorsBusiness ethics•The Novartis Values and Behaviors are an integral part of our compensation system•They underpin the assessment of overall performance for the Annual IncentiveCompetitive compensation•Total compensation must be sufficient to attract and retain key global talent•Overarching emphasis on pay for performance

Alignment with Company strategy

Our strategy is to focus on high-value, innovative medicines that alleviate society’s greatest disease burdens through technology leadership in R&D and novel access approaches.

We made some strategic updates to our compensation framework to ensure it remains aligned to our Company strategy and compensation philosophy, while being market competitive. Details of these changes are provided in “—2024 Executive Committee compensation system changes and increases.”

Approach to market benchmarking

Significant competition continues to exist for top executive talent with deep expertise and the requisite competencies and proven performance within the pharmaceutical and biotechnology industries. For this reason, external peer compensation data is one of a number of key reference points considered by the Board of Directors and the Compensation Committee when making decisions on executive pay, so as to help ensure that the compensation system and levels at Novartis remain competitive. Novartis is committed to confirming benchmarking practices, including the healthcare peer group, to shareholders on an annual basis.

The Compensation Committee believes in a rigorous approach to peer group construction and maintenance. Furthermore, it believes that using a consistent set of global peers that is similar in size and scope of the operations of Novartis enables shareholders to evaluate the compensation year on year and make pay-for-performance comparisons.

Although Novartis is headquartered in Switzerland, more than a third of its sales come from the US market, and the US therefore represents a significant talent pool for the recruitment of executives by the Company. The Compensation Committee uses a pay comparator group of global healthcare companies to ensure that Novartis is able to attract and retain key talent globally. To ensure European and local practices are fully taken into account, the Compensation Committee also uses a cross-industry peer group of Europe-headquartered multinational companies of a similar size and scope.

global healthcare peer companies

AbbVie

Biogen

GlaxoSmithKline

Novo Nordisk

Roche

Amgen

Bristol-Myers Squibb

Gilead Sciences

Merck & Co.

Sanofi

AstraZeneca

Eli Lilly & Co.

Johnson & Johnson

Pfizer

European peer companies

Anheuser-Busch InBev

AstraZeneca

Bayer

BMW

GlaxoSmithKline

L’Oréal

Merck KGaA

Nestlé

Novo Nordisk

Reckitt Benckiser

Roche

Siemens

Sanofi

Unilever

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Components of CEO and Executive Committee compensation

The compensation of the CEO and Executive Committee is comprised of fixed pay, including an annual base salary, pension and other benefits, in addition to a variable annual incentive and long-term incentive, which are entirely performance based.

Fixed pay and benefits

Annual base salary

• The annual base salary is based on the individual’s role, skills and experience. It is reviewed on an annual basis based on an external benchmark for the role, the performance of the individual, business performance and the external environment, salary increases across the Company and market movements.

Pension and other benefits

• Pension and other benefits are provided to the ECN members on the same terms as to all other employees based on local country practices and regulations. No supplementary pension plans or savings plans are provided.

• Pension and other benefits do not constitute a significant proportion of total compensation.

• Globally the Company operates both defined benefit and defined contribution pension plans (see also Note 26 to the Company’s consolidated financial statements).

• Novartis may provide other benefits according to local market practice. These include the provision of a company car, tax and financial planning, and insurance benefits.

2023 Annual Incentive

PLAN OVERVIEWTarget Annual Incentive On-target opportunities•CEO: 150% of annual base salary.•Other Executive Committee members: 80% to 120% of annual base salary.Performance measures•An Annual Incentive balanced scorecard containing:•Financial performance measures (60% weighting) related to the Company •Strategic objectives (40% weighting)•The balanced scorecard targets and achievements of the CEO are detailed in “2023 CEO Annual Incentive balanced scorecard.”•The balanced scorecards for individual Executive Committee members include the same company financial targets (60% weighting) as well as individual qualitative and quantitative targets (40% weighting).•Values and Behaviors are a key component of the Annual Incentive and are embedded in our culture. As such, members of the Executive Committee are expected to demonstrate these to the highest standards.Target setting•Financial targets are set at the beginning of each financial year and align with the strategic plan proposed by management to the Board of Directors for approval.•The strategic objectives are aligned with the most important priorities in any performance year.Payout ranges•The payout schedule for the Annual Incentive incorporates performance against financial and strategic objectives. The payout range is 0% to 200% of on-target opportunity based on performance, as shown below:PERFORMANCEPAYOUT (% of on-target)Outstanding170% 200%Exceeds expectations130% 160%Meets expectations80% 120%Partially meets expectations40% 70%Below expectations0%Payout formulaPayout vehicle•At the end of the performance period, 50% is paid in cash, and the remaining 50% is delivered in Novartis restricted shares or RSUs, deferred for three years.•Executives may choose to receive all or part of the cash portion of their Annual Incentive in Novartis shares or American Depositary Receipts (ADRs; US only) that will not be subject to forfeiture conditions. In the US, awards may also be delivered in cash under the US deferred compensation plan.Dividend rights, voting rights and settlement•Novartis restricted shares and ADRs carry voting rights and dividends during the vesting period. RSUs are of equivalent value but do not carry voting rights and dividends during the vesting period.•Following the vesting period, settlement of RSUs is made in unrestricted Novartis shares or ADRs. Annual base salaryxTargetincentive % =Target Annual IncentiveAnnual base salaryxTarget incentive %xPayout factor (% of target: 0%200%)=Realized Annual Incentive

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2021–2023 LTPP cycle

PLAN OVERVIEWAward vehiclePerformance share units (PSUs) are granted at the beginning of the three-year performance cycle and vest at the end of the cycle to the extent that performance conditions have been met. At the time of vesting, they are converted into Novartis shares.PSUs carry dividend equivalents that are paid in shares at the end of the cycle.Grant formula At the start of the performance cycle, PSUs are granted under the LTPP, as follows:Target opportunity •CEO: 325% of annual base salary•Other Executive Committee members: between 180% and 260% of annual base salaryPerformance measures•3rd party sales CAGR (25%)•Core operating income CAGR (25%)•Innovation (25%)•Relative TSR (25%)Target settingFinancial targets: Targets for 3rd party sales CAGR and core operating income CAGR are set based on the strategic plan of the Company. Innovation: Development targets are based on targeted filings communicated at the start of each performance cycle, weighted 70%. The Science & Technology Committee (STC) determines the most important Biomedical Research milestones, weighted 30%. Payout rangeFinancial targets: When assessing performance, achievements for threshold, target and maximum payout are defined for each metric, and a payout curve is applied to determine the corresponding payout between 0-200% against target.Innovation: At the end of the cycle, the Compensation Committee determines the payout factor in the range of 0150% based on the performance assessment made by the STC. A payout between 150-200% of target is only delivered for truly exceptional performance.Relative TSR: Performance on TSR is assessed relative to our global healthcare peer group, as outlined below. A three-month averaging method is used for both the start and the end of the performance cycle. Companies are then ranked in order of highest to lowest TSR in USD. No payout for below median TSR applies.The Compensation Committee may use its discretion on each metric, including deciding on the payout within the ranges where appropriate. In doing so, it takes into consideration factors such as the underlying assumptions of the targets set at the beginning of the cycle, overall economic conditions, currency fluctuations and other unforeseeable situations.Payout formulaStep 1Annual base salaryxTarget incentive %=Grant valueStep 2Grant value/Share price=Target number of PSUsGlobal healthcare peer groupAbbVieBiogenGlaxoSmithKlineNovo NordiskRocheAmgen Bristol-Myers SquibbGilead SciencesMerck & Co.SanofiAstraZenecaEli Lilly & Co Johnson & JohnsonPfizerNovartis position Payout rangein the peer group(% of target)Position 1 2Position 3 5Position 6 8Position 9 15170% 200% 130% 160%80% 120%0%Target number of PSUsxPayout factor+Dividend equivalents=Realized PSUs

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CEO and Executive Committee: share ownership requirements

CEO and Executive Committee members are required to own at least a minimum multiple of their annual base salary in Novartis equity as set out in the table below. The Compensation Committee reviews compliance with the share ownership guideline on an annual basis.

FunctionOwnership levelAdditional holding requirementsTime for achieving levelEquity included in determinationCEOCFOOther EC members5 x annual base salary3 x annual base salaryEquity vesting under the LTPP for a minimum of two years after the vesting dateNone5 years within hire or promotion. In the event of a substantial rise or drop in the share price, the Board of Directors may, at its discretion, amend the time period accordingly.•Vested and unvested Novartis shares or ADRs, and RSUs acquired under Novartis compensation plans (unvested PSUs excluded)•Other shares and vested options of Novartis shares or ADRs that are owned directly or indirectly by “Persons closely linked” to an Executive Committee member

CEO and Executive Committee: appointments

Element of compensationPolicyLevelThe overall package should be market-competitive to enable the recruitment of global executive talent with deep expertise and competencies.Annual base salaryThe Compensation Committee may appoint individuals who are new to a role on an annual base salary that is below the market level, with a view to increase this toward market level over a period of three to four years as an individual develops in the role.This prudent approach ensures pay levels are merit-based, with increases dependent on strong performance and proven ability in the role over a sustained period.If the scope of an existing Executive Committee member’s role changes significantly during the year, the Compensation Committee may make adjustments to the individual’s base salary (and/or incentives) in consideration of the benchmark of the new role and the Executive Committee appointments compensation policy.IncentivesThe compensation package will normally include the key compensation elements and incentive opportunities in line with those offered to current Executive Committee members.In exceptional circumstances, higher incentive opportunities than those offered to current Executive Committee members may be provided at the Compensation Committee’s discretion.Performance measures may include business-specific measures tailored to the specific role.Pension and other benefitsNewly appointed Executive Committee members are eligible for the local country pension plan and other benefits in line with the wider employee group.BuyoutsThe Compensation Committee seeks to balance the need to offer competitive compensation opportunities to acquire the talent required by the business with the principle of maintaining a strong focus on pay for performance.As such, when an individual forfeits variable compensation as a result of an appointment at Novartis, the Compensation Committee may offer replacement awards to compensate the commercial equivalent value or fair value of payments and awards forfeited by the individual, in such form as the Compensation Committee considers appropriate, taking into account relevant factors.Relevant factors include the expected value of the forfeited award, the replacement vehicle (i.e., cash, restricted share units, restricted shares or performance share units), whether the award is contingent on meeting performance conditions or not, the timing of forfeiture (i.e., Novartis mirrors the blocking or vesting period of the forfeited award) and the leaver conditions, in case the recruited individual leaves Novartis prior to the end of the blocking or vesting period.International mobility If individuals are required to relocate or be assigned away from their home location to take up their position, relocation support may be provided in line with our global mobility policies (e.g., relocation support, tax equalization). This includes ongoing US state income tax liabilities on behalf of US citizens locally employed outside the US who have US workdays and therefore, US state taxable compensation that generates a US state tax liability.

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CEO and Executive Committee: termination arrangements

ElementsRetirement, termination by the Company for reasons other than performance or conduct, and change of controlVoluntary resignationTermination by the Company for misconduct or poor performanceDeath or long-term disabilityAnnual Incentive for period between start of notice and termination datePro-rata Annual Incentive is paid to reflect the portion of the year the individual was employed.Annual Incentive is fully forfeited.Pro-rata Annual Incentive is paid to reflect the portion of the year the individual was employed.Unvested equity: mandatory deferral of Annual Incentive into restricted shares/ restricted share units (RSUs)Awards are released on the original blocking end date. Is subject to forfeiture in the event that a leaver joins a competitor company before the original vesting date.Unvested restricted shares and restricted share units (RSUs) are forfeited.Accelerated vesting is applied.Unvested equity: voluntary deferral of Annual Incentive into restricted shares/RSUs/American Depository Receipts (ADRs) (ADRs applicable for US employees only)Awards are not subject to forfeiture during the deferral period. Unvested equity: mandatory Long-Term Incentive performance share units (PSUs)Awards vest on the regular vesting date, subject to performance, on a pro-rata basis for time spent with the Company during the performance cycle. Is subject to forfeiture in the event that a leaver joins a competitor company before the vesting date.All of the award is forfeited.Accelerated vesting at target is applied.Unvested equity: Buyouts or previous equity grants in restricted shares/ restricted share units (RSUs)Accelerated vesting is applied to equity pro-rated until last date of employmentAll of the award is forfeited.Accelerated vesting is applied

Further details are provided in in our “—Risk Management principles.”

Malus and clawback policy

Any incentive compensation paid to Executive Committee members is subject to malus and clawback rules. This means that the Board of Directors for the CEO, and the Compensation Committee for the other Executive Committee members, may decide – subject to applicable law – to retain any unpaid or unvested incentive compensation (malus), or to recover incentive compensation that has been paid or vested in the past (clawback). This applies in cases where the payout has resulted from a violation of laws or conflicts with internal management standards, including Company and accounting policies.

This principle applies to both the short-term Annual Incentive and all long-term incentive plans.

In October 2023, the Compensation Committee adopted a no-fault compensation clawback policy “for the recovery of erroneously awarded compensation” to all members of the Executive Committee and certain executive officers, in the event that the Company is required to prepare an accounting restatement, in full compliance with the U.S. Securities and Exchange Commission (SEC) Rule.

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CEO and Executive Committee performance management

To foster a high-performance culture, the Company applies a performance management process based on quantitative and qualitative criteria. The CEO and the other Executive Committee members are subject to a formal three-step process, which consists of objective setting, performance evaluation and compensation determination. This process is explained in the chart below.

Performance targets are generally set before the start of the relevant performance cycle. A rigorous framework is in place for establishing targets to ensure they are suitably robust, challenging and align with the strategic priorities of the Company.

The key factors taken into account when setting targets include:

• Internal and external market expectations

• The strategic priorities of Novartis

• Regulatory factors (e.g., new launches, patent expiries)

• Investment in capital expenditure

• Novartis Values and Behaviors

The targets are challenged at multiple stages before they are ultimately approved by the Board of Directors. In line with good governance practices, the Compensation Committee works to set targets that are ambitious and challenging but do not encourage undue risk-taking.

Following the end of the performance cycle, the Board of Directors and the Compensation Committee consider performance against the targets originally set. The CEO and Executive Committee members are not present while the Board of Directors and the Compensation Committee discuss their individual performance evaluations and determine their individual compensation. Prior to determining the final outcome, related factors such as performance relative to peers, wider market conditions, general industry trends and best practice are used to inform the overall performance assessment.

Objective setting•The CEO proposes his targets to the Board Chair; they are then reviewed and approved by the Board of Directors, based on input from the Compensation Committee.•For other Executive Committee members, targets for their business units or functions are initially discussed with the CEO and subsequently approved by the Board of Directors and the Compensation Committee.Performance evaluation•The CEO’s performance against the individual balanced scorecard is assessed by the Board of Directors.•For Executive Committee members, the CEO discusses each member’s performance (assessed against his or her individual balanced scorecard) with the Board Chair before making recommendations to the Board of Directors for final determination.•Periodic assessments, including at the mid-year stage, ensure progress is suitably tracked.Compensation determination •A recommendation for the CEO’s variable pay is made by the Compensation Committee to the Board of Directors for final determination.•For the LTPP financial measures’ payout schedules, a formulaic approach applies, and the Compensation Committee can also exercise judgment to ensure there is appropriate alignment between payout levels and overall performance achieved. The same principle of discretion applies to the relative TSR and innovation performance measures.•The CEO’s recommendations for other Executive Committee members are considered and approved by the Compensation Committee, after which the Board of Directors is notified of the outcomes.

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2024 Executive Committee compensation system changes and increases

Novartis is today a pure-play innovative medicines company with a focused strategy. The Board of Directors and the Compensation Committee therefore decided to make certain changes to the compensation system, in particular to reflect the ambition of Novartis to build its US business organically and become a top player in the US.

In this context, the following changes align with our compensation philosophy, and will enable Novartis to compete for talent globally (see “—Compensation philosophy”):

Annual Incentive metrics

As of the 2024 performance year, core operating income (which includes adjustments for certain one-time/non-recurring items such as restructuring and M&A write-downs) replaces operating income in the financial objectives of the Annual Incentive. The weighting remains at 30% of the financial objectives. The Compensation Committee decided to make this change as core operating income:

• Is consistent with how investors and analysts measure underlying performance

• Encourages executives to make bold investments with high return potential

• Aligns with our global healthcare peers and the broader market, enabling more effective performance comparisons

A reconciliation between our core operating income and operating income will continue to be provided in “—Item 5. Operating and Financial Review and Prospects —Non-IFRS measures as defined by Novartis —Reconciliation from IFRS Accounting Standards results to non-IFRS measures core results.”

To maintain strong alignment between performance and pay outcomes, the Board of Directors will retain its discretion to consider any adjustment to the Annual Incentive payout of the CEO and other Executive Committee members. Any such decisions will be disclosed in the Compensation Report.

Share ownership and Annual Incentive deferral

The CEO shareholding requirement increased from 5x to 6x the CEO’s annual base salary. Increasing the CEO shareholding requirement better aligns with shareholder interests and brings Novartis in line with its global healthcare peers.

The Compensation Committee also decided to amend the portion of the Annual Incentive that is mandatorily deferred into equity to make the compensation system more competitive, particularly in markets where bonus deferrals are uncommon (such as Switzerland and US, where much of our executive talent is sourced). As of the 2024 performance year, the portion of the Annual Incentive that is mandatorily deferred into equity is reduced from 50% to 30% for all Executive Committee members, provided that their shareholding requirement is met. Compliance with their shareholding requirement must then be maintained.

CEO target compensation

Since 2019, the Board of Directors has made no material increases to the CEO compensation. As a result, the CEO’s target pay has fallen below the 25th percentile of global healthcare peers.

Given the competitive landscape of the industry, the Board of Directors decided to increase the CEO LTPP target from 325% to 400% of his annual base salary as from the cycle 2024-26. This represents a 15.8% increase in total target compensation and moves him out of the bottom quartile to just above the 25^th^ percentile of global healthcare peers, as shown in the figure below. The maximum payout for the LTPP remains at 200% of target, and there will be no change to the metrics. For this review, we used the same global healthcare companies specified in “—Approach to market benchmarking.”

Last disclosed global healthcare peer CEO target compensation (CHF millions)2023 Novartis CEO target2024 Novartis CEO target 510152025Bottom quartile to medianMedian to upper quartile

In making its decision, the Board of Directors was mindful of investor perspectives toward executive compensation of European companies. It therefore chose to make an increase to the LTPP target only (rather than to the base salary or Annual Incentive), which is fully performance-based (i.e. no use of restricted shares or stock options as used by many peers), to align with the Company’s long term strategy. Targets will continue to be stretched as demonstrated in “—Historic CEO incentive payouts since appointment.”

The Board of Directors considered it appropriate to act now so as to:

• Align with the Company’s ambition to become a top player in the US. This requires a leader with significant knowledge and experience of the US market, and executive compensation in US peer companies is more competitive than in Europe

• Proactively avoid a further decline of the pay positioning of our CEO, while providing a fair compensation system that rewards performance

• Demonstrate its commitment to establishing a competitive system that promotes the retention and attraction of executive talent capable of delivering value to shareholders

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Executive Committee compensation increases

Each year, we collaborate with our independent external advisors to benchmark the compensation levels of the Executive Committee members and assess the competitiveness of their total target compensation. 2024 compensation increases have been made in line with demonstrated performance and ability in role as outlined in “—CEO and Executive Committee: appointments.” Accordingly, the following Executive members will receive the following increases, effective 2024:

Shreeram Aradhye, President, Development and Chief Medical Officer

Dr. Aradhye, appointed in May 2022, led an operational improvement of our Development function, resulting in significant approvals and submissions for new medicines across US, EU, China and Japan, as well as promising results for many ongoing Phase III programs. Dr. Aradhye will receive a 4.7% increase in annual base salary and a 20% increase in LTPP target, as a percentage of annual base salary.

Victor Bulto, President, US

Mr. Bulto, appointed in April 2022, delivered a strong performance on almost all brands including Pluvicto, Kisqali, Kesimpta and Scemblix and ensured proactive launch-readiness for Cosentyx HS and Cosentyx IV. Mr. Bulto will receive a 4% increase in annual base salary and a 20% increase in Annual Incentive target, as a percentage of annual base salary.

Aharon (Ronny) Gal, Chief Strategy & Growth Officer

Mr. Gal, appointed in July 2022, made a significant impact in his first full year with the Company, integrating the new Strategy and Growth team across the key decision-making bodies. Under his leadership, several business development deals were completed in the year, including Xiidra, and Chinook. Mr. Gal will receive a 4% increase in annual base salary and a 20% increase in LTPP target, as a percentage of annual base salary.

Karen Hale, Chief Legal Officer

Ms. Hale, appointed in May 2021, successfully managed several large-scale transactions, such as the Sandoz spin-off, as well as successfully handling a number of important legal matters, a civil investigative demand involving Entresto, the Exforge antitrust litigation, a shareholder derivative lawsuit, and critical intellectual property matters. She also played a critical role in managing the obligations under the US Department of Justice’s deferred prosecution agreement and SEC Order and led both to a timely and satisfactory conclusion. Ms. Hale will receive a 2.8% increase in annual base salary and a 20% increase in LTPP target, as a percentage of annual base salary.

Rob Kowalski, Chief People & Organization Officer

Mr. Kowalski, appointed in September 2021, provided critical support to the transformation of the company, including outstanding progress of the restructuring of the organization, successful completion of consultations with works councils and developing the ECN into a high-performing team. Mr. Kowalski will receive a 3.8% increase in annual base salary and a 10% increase in LTPP target, as a percentage of annual base salary.

All other Executive Committee members will receive ordinary base salary increases received by other employees in Switzerland or the US, effective March 1, 2024. Their Annual Incentive and LTPP targets remain unchanged.

Pay practice for other employees

The Board of Directors is equally committed to ensuring fair and competitive compensation practices across the entire organization in 2024. Recent such examples include an approved global budget of USD 420 million for salary adjustments during the year 2024, achieving our EPIC commitments, further closing our global pay gap, and launching the second wave of our all-employee share purchase plan which is now available to 64% of our global population. More details can be found in the Novartis in Society Integrated Report 2023.

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Board compensation

Board member total compensation earned for the financial year 2023 (compared with 2022)

	Positions as per 31 December							Share-Based compensation
	Board membership	Audit and Compliance Committee	Compensation Committee	Governance, Sustainability and Nomination Committee	Science & Technology Committee	Risk Committee	Cash (CHF) (A)	Shares (number)^1^	Shares (CHF) (B)	Social Security (CHF) (C)	Total 2023 (CHF) (A)+(B)+(C)^2^	Total 2022 (CHF)
Joerg Reinhardt^3^	Board Chair				Chair		1 900 000	22 606	1 900 000	3 784	3 803 784	3 803 670
Simon Moroney	Vice-Chair		Chair		•		230 000	2 736	230 000	-	460 000	456 228
Patrice Bula	Lead Independent Director		•	Chair			205 000	2 438	205 000	3 784	413 784	398 670
Nancy C. Andrews	•				•	•	180 000	2 141	180 000	-	360 000	360 000
Ton Buechner	•	•				Chair	210 000	2 497	210 000	4 675	424 675	424 560
Elizabeth Doherty	•	Chair				•	225 000	2 676	225 000	-	450 000	450 000
Bridgette Heller	•	•	•	•			215 000	2 557	215 000	-	430 000	423 334
Daniel Hochstrasser	•	•		•			185 833	2 085	185 833	4 675	376 341	237 894
Frans van Houten	•	•			•		162 500	3 565	227 500	4 675	394 675	390 000
Ana de Pro Gonzalo	•	•				•	195 000	2 319	195 000	-	390 000	329 560
Charles L. Sawyers	•			•	•		180 000	2 141	180 000	-	360 000	360 000
William T. Winters	•		•	•			-	4 283	360 000	-	360 000	360 000
John D. Young^4^	•^4^				•^4^	•^4^	150 000	991	150 000	4 675	304 675	-
Subtotal							4 038 333	53 035	4 463 333	26 267	8 527 933	7 993 916
Board members who stepped down^5^							30 000	1 150	30 000	3 784	63 784	512 339
Subtotal							30 000	1 150	30 000	3 784	63 784	512 339
Total							4 068 333	54 185	4 493 333	30 051	8 591 717	8 506 255
^1^ The amounts shown represent the gross number of shares delivered to each Board member in 2023 for the respective Board member’s service period. The number of shares reported in this column represent: (i) the second and final equity installment delivered in February 2023 for their service from the 2022 AGM to the 2023 AGM; and (ii) the first of two equity installments delivered in August 2023 for their service from the 2023 AGM to the 2024 AGM. The second and final equity installment for their service from the 2023 AGM to the 2024 AGM will take place in February 2024.
^2^ All amounts are before the deduction of social security contributions and income tax paid by the Board members.
^3^ No additional committee fees for chairing the Science & Technology Committee were delivered to Joerg Reinhardt.
^4^ From March 7, 2023.
^5^ Includes the compensation earned by Andreas von Planta, who stepped down at the 2023 AGM, as well as Ann Fudge and Enrico Vanni, who stepped down at the 2022 AGM.

Compensation approved and dispensed

In CHF		Board of Directors
Compensation earned during the financial year 2023	A	8 591 717
Compensation earned for the period January 1 to February 28, 2023 (2 months)	B	1 417 153
Compensation to be earned for the period from January 1 to February 29, 2024 (2 months)	C	1 435 008
Total compensation earned for the period from the 2023 AGM to the 2024 AGM	A-B+C	8 609 573
Amount approved by shareholders at the 2023 AGM		8 750 000
Compensation dispensed by the Company within the approved amount		Yes

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Shares, ADRs and share options owned by Board members

The total number of vested Novartis shares and ADRs owned by members of the Board of Directors and “persons closely linked” to them as at December 31, 2023, is shown in the table below. As at this date, no members of the Board, either individually or together with “persons closely linked” to them, owned 1% or more of the outstanding shares (or ADRs) of Novartis. As at the same date, no members of the Board of Directors held any share options to purchase Novartis shares.

	Number of shares <br> at December 31, 2023^1,2^
Joerg Reinhardt	655 336
Simon Moroney	5 992
Patrice Bula	11 240
Nancy C. Andrews	10 536
Ton Buechner	22 958
Elizabeth Doherty	14 843
Bridgette Heller	6 214
Daniel Hochstrasser	2 824
Frans van Houten	17 115
Ana de Pro Gonzalo	2 422
Charles L. Sawyers	17 493
William T. Winters	30 777
John D. Young	682
Subtotal	798 432
Board members who stepped down at the 2023 AGM
Andreas von Planta	169 867
Subtotal	169 867
Total	968 299
^1^ Includes holdings of persons closely linked to Board members (see definition "—persons closely linked").
^2^ Each share provides entitlement to one vote.

Additional disclosures and other statutory information

Other payments to Board members

During 2023, no payments (or waivers of claims) other than those set out in the Board member compensation table titled “—Board member total compensation earned for the financial year 2023” (including in the table footnotes) were made to current members of the Board or to “persons closely linked” to them.

Payments to former Board members

During 2023, no payments (or waivers of claims) were made to former Board members or to “persons closely linked” to them.

Note 28 to the Group’s audited consolidated financial statements

The total expense for the year for compensation awarded to Board members, using IFRS Accounting Standards measurement rules, is presented in Note 28 to the Group’s audited consolidated financial statements.

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Board compensation philosophy and fee structure

Philosophy and benchmarking

Aligned with market practice in Switzerland, the Board of Directors sets compensation for its members at a level that allows for the attraction of high-caliber individuals, including both Swiss and international members, who have global experience.

Given their focus on corporate strategy, supervision and governance, Board members do not receive variable compensation. Each year at the AGM, shareholders are requested to approve, in a binding vote, the total compensation of the Board of Directors until the following AGM.

The Board of Directors sets the level of compensation for its Chair and the other members to be in line with relevant benchmark companies, including other large Switzerland-based multinational companies. Following the acquisition of Credit Suisse by UBS in 2023, the Board of Directors revised its peer benchmarking group to a larger set of companies comprising ABB, Holcim, Nestle, Richemont, Roche, SwissRe, UBS and Zurich Insurance. This peer group was chosen for Board compensation due to the comparability of Swiss legal requirements, including broad personal and individual liabilities under Swiss law (and criminal liability under Swiss rules regarding board and executive committee compensation related to the Swiss Code of Obligations), and under US law, where applicable (due to the Company’s secondary listing on the New York Stock Exchange). Each year, the Board of Directors reviews the compensation of its members, including the Board Chair, based on a proposal by the Compensation Committee and advice from its independent advisor, including relevant benchmarking information. To ensure independence of decision-making, the peer group used for the Board of Directors is different to that used for the Executive Committee.

The Board Chair’s contract and the Board of Directors compensation policy do not provide for any termination-related payments.

Share ownership requirements for Board members

To ensure their interests are aligned with those of shareholders the Board Chair is required to own a minimum of 30 000 Novartis shares, and other members of the Board of Directors are required to own at least 5 000 Novartis shares within five years of having joined the Board of Directors.

Board members are prohibited from hedging or pledging their ownership positions in Novartis shares that are part of their guideline share ownership requirement and are required to hold these shares for 12 months after having retired from the Board of Directors. As at December 31, 2023, all current and former members of the Board of Directors who were required to meet the minimum share ownership requirements did so.

Board fee structure

The annual fee rates for Board membership and additional functions are included in the table below. These were approved by the Board of Directors and remain unchanged from the prior term. Aggregate Board compensation is aligned with other large Swiss companies.

CHF 000s	2023-2024 AGM <br> annual fee
Board Chair	3 800
Board membership	280
Vice-Chair	50
Lead Independent Director	20
Chair of the Audit and Compliance Committee	130
Chair of the Compensation Committee	90
Chair of the following committees:<br>• Governance, Nomination and <br> Corporate Responsibilities Committee<br>• Science & Technology Committee<br>• Risk Committee	70
Membership of the Audit <br>and Compliance Committee	70
Membership of the following committees:<br>• Compensation Committee<br>• Governance, Nomination and <br> Corporate Responsibilities Committee<br>• Science & Technology Committee<br>• Risk Committee	40

In addition, the following policies apply regarding Board compensation:

• 50% of compensation is delivered in cash, paid on a quarterly basis in arrears. Board members may choose to receive more of their compensation in shares instead of cash

• At least 50% of compensation is delivered in shares in two installments: one six months after the AGM; and one 12 months after the AGM

Board members bear the full cost of their employee social security contributions, if any, and do not receive share options or pension benefits.

For 2023, the Board Chair voluntarily waived the increase in compensation to which he is contractually entitled.

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Compensation governance

Legal framework

The Swiss Code of Obligations and the corporate governance guidelines of the SIX Swiss Exchange require listed companies to disclose certain information about the compensation of board and executive committee members, their equity participation, and loans made to them. This Annual Report fulfills that requirement in addition to being in line with the principles of the Swiss Code of Best Practice for Corporate Governance of the Swiss Business Federation (economiesuisse). For more information, see “—Corporate Governance” in Section 6C of this Report.

Compensation decision-making authorities

Authority for decisions related to compensation is governed by the Articles of Incorporation, Board Regulations and the Compensation Committee Charter, which are all published on the Company website: www.novartis.com/investors/company-overview/corporate-governance. The Compensation Committee serves as the supervisory and governing body for compensation policies and plans within Novartis, and has overall responsibility for determining, reviewing and proposing compensation policies and plans for approval by the Board of Directors in line with the Compensation Committee Charter. The discussions and conclusions of each committee meeting are delivered to the full Board of Directors. A summary of the compensation decision-making authorities is set out below.

Approval process for key compensation decisions

	CEO	Compensation <br> Committee	Board <br> Chair	Board of <br> Directors	AGM
Executive Compensation
CEO
Performance target setting and assessment
Individual compensation
Other EC members
Performance target setting and assessment
Individual compensation
All Executive Committee
Maximum aggregate amount of fixed and variable long-term compensation					Binding Vote
Board Compensation
Board of Directors
Fee structure for individual roles on the Board of Directors
Maximum aggregate amount of compensation for the next term of office					Binding Vote
Other
Board members, Executive Committee and other employees
Compensation report					Consultative Vote
Compensation policy and principles
Variable short-term and long-term compensation payout factors for the Group

Propose Endorse Approve

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Committee member independence

The Compensation Committee is composed exclusively of members of the Board of Directors who meet the independence criteria set forth in the Board Regulations. From the 2023 AGM, the Compensation Committee consisted of the following four members: Simon Moroney (as Chair), Patrice Bula, Bridgette Heller, and William Winters.

Role of the Compensation Committee’s independent advisor

The independent external compensation advisor supports the Compensation Committee in determining the design and implementation of compensation and benefits.

In 2023, the Compensation Committee retained Mitul Shah of Deloitte LLP, who was appointed in July 2022, as its independent compensation advisor. The independent advisor from Deloitte LLP and his respective team that advised and supported the Compensation Committee are not responsible or rewarded for work on senior compensation beyond support provided to the Compensation Committee and the People & Organization function.

Meetings held in 2023 and self-evaluation

In 2023, the Compensation Committee held six formal meetings. For the approval of the Board of Directors, in line with prior years, it collaborated with the Science & Technology Committee to review and endorse the innovation targets and achievements of the Annual Incentive and LTPP. The Compensation Committee will conduct a self-evaluation in 2024.

Risk management principles

The Compensation Committee, with support from its independent advisor, reviews market trends in compensation, and changes in corporate governance rules and best practices. Together with the Risk Committee, it also reviews the Novartis compensation systems to ensure that they do not encourage inappropriate or excessive risk-taking, and instead encourage behaviors that support sustainable value creation. A summary of the risk management principles is outlined below.

RISK MANAGEMENT PRINCIPLES

• Rigorous performance management process, with approval of targets and evaluation of performance of the CEO by the Board of Directors

• Balanced mix of short-term and long-term variable compensation elements

• Novartis Values and Behaviors are a key component of the Annual Incentive and are embedded in our culture

• Clawback and malus principles apply to all elements of the variable compensation

• Performance-vesting Long-Term Incentives only, with three-year cycles

• All variable compensation is capped at 200% of target

• Contractual notice period of 12 months

• Post-contractual non-compete period is limited to a maximum of 12 months from the end of employment. Resulting compensation, if applicable, will not exceed the average annual compensation (annual base salary plus Annual Incentive) of the previous three financial years

• Good and bad leaver provisions apply to variable compensation of leavers

• No severance payments or change-of-control clauses

• Share ownership requirements; no hedging or pledging of Novartis share ownership

• No loans granted to current or former members of the Executive Committee and the Board of Directors or to “Persons closely linked” to them

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Mandates outside the Novartis Group

According to article 34 of the Articles of Incorporation (https://www.novartis.com/investors/company-overview/corporate-governance), limitations apply to mandates outside the Novartis Group for Board members and Executive Committee members (see “-Item 6.C Board Practices-Board of Directors-Mandates outside the Novartis Group” and “-Item 6.C Board Practices-Executive Committee-Mandates outside the Novartis Group”). The following external mandates are subject to these limitations and are therefore presented in the Compensation Report.

Board Members

Joerg Reinhardt

Swiss Re AG, Switzerland

• Member of the Board

Nancy C. Andrews

Charles River Laboratories International, Inc., US

• Member of the Board

• Chair of the Science and Technology Committee

Maze Therapeutics, Inc., US

• Member of the Board

Ton Buechner

Burckhardt Compression AG, Switzerland

• Board Chair

• Chair of the Strategy and Sustainability Committee

Swiss Prime Site AG, Switzerland

• Board Chair

• Chair of the Sustainability Board

Tonality Holding AG, Switzerland (private holding)*

• Director

Bandinnera GmbH, Switzerland (private holding)*

• Manager

Great Apes Aviation GmbH, Switzerland (private holding)*

• Manager

Patrice Bula

Schindler AG, Switzerland

• Member and Vice Chair of the Board

Froneri Lux Topco Sarl, Luxembourg

• Board Chair

New Tiger LLC, US

• Member of the Board

• Chair of the ESG Committee

Elizabeth (Liz) Doherty

Corbion NV, Netherlands

• Member of the Board

• Chair of the Audit Committee

Royal Philips NV, Netherlands

• Member of the Supervisory Board

• Chair of the Audit Committee

Bridgette Heller

Aramark, US

• Member of the Board

DexCom, Inc., US

• Member of the Board

Integral Ad Science Inc., US

• Member of the Board

Newman’s Own Inc., US

• Member of the Board

Daniel Hochstrasser

Daniel Hochstrasser AG, Switzerland

• Board Chair

• CEO

Frans van Houten

Absci Corporation, US

• Member of the Board

Castor EDC, NL

• Board Chair

Synthesis Health Inc. US

• Member of the Board

FvH Capital BV, NL (private family holding)

• Director

Simon Moroney

Biotalys NV, Belgium

• Board Chair

• Chair of the Remuneration and Nomination Committee

Ana de Pro Gonzalo

Mobico Group PLC, UK

• Member of the Board

STMicroelectronics NV, Switzerland

• Member of the Supervisory Board

• Chair of the Audit Committee

Charles Sawyers

–

William Winters

Standard Chartered Bank plc., UK

• Member of the Board

• CEO

John Young

Arvinas Inc, US

• Member of the Board

Johnson Controls International plc., Ireland

• Member of the Board

Imbria Pharmaceuticals Inc., US

• Member of the Board

Executive Committee members

Steffen Lang

Bachem Holding AG, Switzerland

• Board member

Other Executive Committee members

–

in listed companies

* under common ownership

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6.C Board practices

Corporate governance

Framework

Novartis is committed to effective corporate governance, and our corporate governance framework is intended to support sustainable financial performance and long-term value creation for our shareholders, patients, employees and other stakeholders based on our Values and Behaviors.

Novartis AG is subject to and compliant with the laws and regulations of Switzerland (in particular, Swiss company and securities law, SIX Swiss Exchange rules and the Swiss Code of Best Practice for Corporate Governance) and the securities laws of the United States, including New York Stock Exchange (NYSE) rules, applicable to foreign private issuers of securities.

The Novartis corporate governance principles are described in key governance documents, in particular in our Articles of Incorporation and the Regulations of the Board, the Board Committees and the Executive Committee (“Board Regulations”) (www.novartis.com/investors/company-overview/corporate-governance).

The Governance, Sustainability and Nomination Committee (GSNC) regularly reviews both the corporate governance principles and the key governance documents against evolving best practice standards and new developments in line with our commitment to maintaining the highest standards.

Our leadership structureGovernance bodies General Meeting of ShareholdersApproves operating and financial review, Novartis Group consolidated financial statements, and financial statements of Novartis AG; decides appropriation of available earnings and dividend; approves compensation of Board and Executive Committee; elects Board members, Board Chair, Compensation Committee members, Independent Proxy and external auditor; adopts and modifies Articles of IncorporationExternal auditorProvides opinion on compliance of Novartis Group consolidated financial statements and the financial statements of NovartisAG with applicable standards and Swiss law, on compliance of the Compensation Report with applicable law, and on effectiveness of internal controls over financial reporting.Board of DirectorsAudit and Compliance CommitteeCompensation CommitteeGovernance, Sustainability and Nomination CommitteeRISK CommitteeSCIENCE &TECHNOLOGYCommitteeSets strategic direction of Novartis, appoints and oversees key executives, approves major transactions andinvestments, adopts and modifies Board RegulationsExecutive CommitteeResponsible for operational management of Novartis

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Group structure and shareholders

Group structure

Novartis AG and Group companies

Novartis AG, the Group’s holding company, is a corporation organized under Swiss law with issued registered shares and registered office at Lichtstrasse 35, CH-4056 Basel, Switzerland.

The principal subsidiaries and associated companies of the Novartis Group are shown in “Item 18. Financial Statements—Note 33. Novartis principal subsidiaries and associated companies.”

Organizational structure

Novartis is an innovative medicines company. Following the spin-off of Sandoz, it no longer has divisions. Its five organizational units represent parts of the Company along the research and development/production/commercialization continuum. These are Biomedical Research, Development, Operations and the two commercial units – US and International – which are, focused on their respective geographic areas.

Shareholdings

Majority holdings in publicly traded Group companies

The Novartis Group owns 70.68% of Novartis India Ltd., with its registered office in Mumbai, India, and a listing on the BSE (formerly known as the Bombay Stock Exchange) (ISIN INE234A01025, symbol: HCBA). The total market value of the 29.32% free float of Novartis India Ltd. was USD 66.8 million on December 31, 2023, using the quoted market share price at year-end. Applying this share price to all the shares of the Company, the market capitalization of the whole company was USD 227.8 million, and that of the shares owned by Novartis was USD 161.0 million.

Shareholders

Significant shareholders

According to the Share Register, as of December 31, 2023, the following registered shareholders, including nominees and the American Depositary Share (ADS) depositary, held more than 2% of the total share capital, with the right to vote all their shares based on exemptions granted by the Board (see “—Item 6.C Board practices—Shareholder participation—Voting rights, restrictions and representation—Registration restrictions”):^*^

	% holding of<br> share capital<br> Dec 31, 2023
Shareholders registered for their own account:
Emasan AG, Basel^1^	3.9
UBS Fund Management (Switzerland) AG, Basel	2.7
Credit Suisse Funds AG, Zurich	2.2
^1^ According to a disclosure notification filed with Novartis AG and the SIX Swiss Exchange, the beneficial owner of the shares registered for Emasan AG is Sandoz - Fondation de Famille, Liechtenstein.				% holding of<br> share capital<br> Dec 31, 2023
---	---
Shareholders registered as nominees:
Nortrust Nominees Ltd., London	3.6
The Bank of New York Mellon, New York	2.9
Through The Bank of New York Mellon, Everett	1.5
Through The Bank of New York Mellon, New York	1.0
Through The Bank of New York Mellon, SA/NV, Brussels	0.4
Chase Nominees Ltd., London^1^
Shareholder acting as American Depositary Share (ADS) depositary:
JPMorgan Chase Bank, N.A., New York	8.3
^1^ Chase Nominees, Ltd. (Chase) has informed us that as of December 2023, it will no longer register any shareholding positions on its own behalf. Shares held by customers of Chase will be registered for such customer’s own account.

According to a disclosure notification filed with Novartis AG, Norges Bank (Central Bank of Norway), Oslo, held 2.4% of the share capital but was not registered in the Share Register as of December 31, 2023.

According to a disclosure notification filed with Novartis AG and the SIX Swiss Exchange, BlackRock, Inc., New York, held between 5% and 10% but was registered with less than 2% of the share capital as of December 31, 2023.

Disclosure notifications pertaining to shareholdings filed with Novartis AG and the SIX Swiss Exchange are published on the latter’s electronic publication platform:

www.ser-ag.com/en/resources/notifications-market-participants/significant-shareholders.html.

^*^ Excluding 10.2% of the share capital held as treasury shares by Novartis AG or its fully owned subsidiaries (including Swiss foundations controlled by Novartis AG)

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Duty to make an offer

According to the Swiss Federal Act on Financial Infrastructures, anyone who – directly, indirectly or acting in concert with third parties – acquires equity securities exceeding 33 1/3% of the voting rights of a company (whether or not such rights are exercisable) is required to make an offer to acquire all listed equity securities of that company. A company may raise this threshold up to 49% of the voting rights (“opting up”) or may, under certain circumstances, waive the threshold (“opting out”). Novartis AG has not adopted any such measures.

Cross shareholdings

Novartis AG has no cross shareholdings in excess of 5% of capital, or voting rights with any other company.

Overview on shareholder structure

The following tables relate only to registered shareholders and cannot be assumed to represent the entire investor base because nominees and JPMorgan Chase Bank, N.A., as ADS depositary, are registered as shareholders for a large number of beneficial owners.

As of December 31, 2023, Novartis AG had approximately 183 000 registered shareholders.

Number of registered shareholders/shares

As of December 31, 2023^1^	Number of<br> registered <br> shareholders	% of <br> share capital
1–100	34 384	0.09
101–1 000	108 966	1.92
1 001–10 000	36 299	4.38
10 001–100 000	3 071	3.46
100 001–1 000 000	458	6.01
1 000 001–5 000 000	61	5.46
5 000 001 or more^2^	26	35.45
Total registered shareholders/shares	183 265	56.77
Unregistered shares		43.23
Total		100.00
^1^ At the record date of the 2023 Annual General Meeting of Shareholders (AGM), unregistered shares amounted to 16.3%.
^2^ Including significant registered shareholders as listed above

Registered shareholders by type

As of December 31, 2023	Shareholders in %	Shares in %
Individual shareholders	96.79	19.98
Legal entities^1^	3.17	41.74
Nominees, fiduciaries and ADS depositary	0.04	38.28
Total	100.00	100.00
^1^ Excluding 10.2% of the share capital held as treasury shares by Novartis AG or its fully owned subsidiaries (including Swiss foundations controlled by Novartis AG)

Registered shareholders by country1

As of December 31, 2023	Shareholders in %	Shares in %
Belgium	0.11	1.01
Canada	0.04	0.68
France	1.99	0.48
Germany	5.82	2.15
Ireland	0.48	0.55
Japan	0.18	0.52
Luxembourg	0.06	0.96
Switzerland^2^	86.84	54.61
United Kingdom	0.67	11.99
United States	0.24	24.68
Other countries	3.57	2.37
Total	100.00	100.00
^1^ Registered shares held by nominees are shown in the country where the company/affiliate entered in the Share Register as shareholder has its registered seat.
^2^ Excluding 10.2% of the share capital held as treasury shares by Novartis AG or its fully owned subsidiaries (including Swiss foundations controlled by Novartis AG)

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Capital structure

Share capital

As of December 31, 2023, the share capital amounted to CHF 1 115 964 098.48 fully paid-in and divided into 2 277 477 752 registered shares with a nominal value of CHF 0.49 each.

Shares are listed on the SIX Swiss Exchange (ISIN CH0012005267, symbol: NOVN) and on the New York Stock Exchange (NYSE) in the form of American Depositary Receipts (ADRs) representing American Depositary Shares (ADSs) (ISIN US66987V1098, symbol: NVS).

No conditional capital exists as of December 31, 2023 nor has a capital band been introduced in the Company’s Articles of Incorporation.

Shares, participation certificates, non-voting equity securities, profit-sharing certificates

Shares are issued as uncertificated securities (in the sense of the Swiss Code of Obligations) and as book entry securities (in terms of the Swiss Act on Intermediated Securities). All shares have equal voting rights and carry equal entitlements to dividends. No participation certificates, non-voting equity securities (Genussscheine) or profit-sharing certificates have been issued.

Convertible securities and options

Novartis AG has not issued convertible or exchangeable bonds, warrants, options or other securities granting rights to shares, other than certain instruments granted under or in connection with equity-based participation plans of employees.

Limitation on transferability

No transferability restrictions are imposed on shares (for registration restrictions, see “—Item 6.C Board practices—Shareholder participation—Voting rights, restrictions and representation—Registration restrictions”). The registration of shareholders in the Share Register or in the ADR register kept by JPMorgan Chase Bank, N.A., does not affect the tradability of shares or ADRs.

Changes to share capital

AGM	Shareholder decision	Shares canceled	Average repurchase <br> share price (CHF)^1^
2021	• Capital reduction by CHF 16.32 million (from CHF 1 233 530 460.00 to CHF 1 217 210 460.00) <br>• Authorization of the Board to repurchase shares up to a maximum of CHF 10 billion between the 2021 AGM and the 2024 AGM	32 640 000	80.57
2022	• Capital reduction by CHF 15.35 million (from CHF 1 217 210 460.00 to CHF 1 201 860 626.00) <br>• Authorization of the Board to repurchase shares up to a maximum of CHF 10 billion between the 2022 AGM and the 2025 AGM^2^	30 699 668	81.82
2023	• Capital reduction by CHF 63.12 million (from CHF 1 201 860 626.00 to CHF 1 138 738 876.00) <br>• Authorization of the Board to repurchase shares up to a maximum of CHF 10 billion between the 2023 AGM and the 2026 AGM^3^	126 243 500	81.56
EGM	Shareholder decision
2023	• Capital reduction by CHF 22.77 million (from CHF 1 138 738 876.00 to CHF 1 115 964 098.48) by reducing the par value of each share from CHF 0.50 to CHF 0.49
AGM	Proposal to the shareholders	Shares to be canceled	Average repurchase <br> share price (CHF)^1^
2024	• Capital reduction by CHF 42.90 million (from CHF 1 115 964 098.48 to CHF 1 073 065 943.53)	87 547 255	86.36
^1^ All shares were repurchased on the SIX Swiss Exchange second trading line.
^2^ In addition to the remaining authorization from the 2021 AGM
^3^ In addition to the remaining authorization from the 2022 AGM

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Key Novartis share data

	2023	2022	2021
Issued shares	2 277 477 752	2 403 721 252	2 434 420 920
Treasury shares^1^	233 443 766	284 112 195	199 480 972
Outstanding shares at December 31	2 044 033 986	2 119 609 057	2 234 939 948
Weighted average number of shares outstanding	2 076 794 140	2 181 180 341	2 242 601 173
^1^ Approximately 94 million treasury shares (2022: 99 million 2021: 102 million) are held in Novartis entities that restrict their availability for use.

Per-share information1

	2022	2021
Basic earnings per share from continuing operations ()	2.77	10.21
Diluted earnings per share from continuing operations ()	2.76	10.14
Net cash flows from operating activities from continuing operations ()	5.98	5.96
Year-end equity for Novartis AG shareholders ()	28.00	30.31
Dividend (CHF) 2	3.20	3.10
Dividend () 3	3.51	3.33
1  Calculated on the weighted average number of shares outstanding, except year-end equity
2  2023: proposal to shareholders for approval at the AGM on March 5, 2024.
3  Translated into US dollars at the December 31, 2023, rate of 1.189 to the Swiss franc. This translation is an example only, and should not be construed as a representation that the Swiss franc amount represents, or has been or could be converted into US dollars at that or any other rate. 2022 and 2021, dividends are translated into US dollars at the Bloomberg Market System Rate on the payment date.

All values are in US Dollars.

Key ratios – December 31

	2023	2022	2021
Price/earnings ratio^1^	14.1	28.3	8.2
Dividend yield (%)^1^	3.9	3.8	3.9
^1^ Based on the Novartis share price at December 31 of each year

Key data on ADRs issued in the US

	2023	2022	2021
Year-end ADR price (USD)	100.97	90.72	87.47
High^1^	105.13	93.75	98.47
Low^1^	80.03	74.61	79.70
Number of ADRs outstanding^2^	189 633 312	225 435 680	269 891 321
^1^ Based on daily closing prices
^2^ The depositary, JPMorgan Chase Bank, N.A., holds one Novartis AG share for every ADR issued.

Share price (CHF)

	2022	2021
Year-end share price	83.59	80.28
High 1	87.82	86.75
Low 1	73.98	73.44
Year-end market capitalization ( billions)  2	191.5	196.1
Year-end market capitalization (CHF billions)  2	177.2	179.4
1  Based on daily closing prices
2  Market capitalization is calculated based on the number of shares outstanding (excluding treasury shares). Market capitalization in is based on the market capitalization in CHF converted at the year-end CHF/ exchange rate.

All values are in US Dollars.

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Shareholder participation

Shareholder engagement

Shareholder engagement is fundamental to our commitment to governance and transparency, and the feedback we receive during these engagements helps us create long-term and sustainable value.

We concentrate our outreach efforts on our largest 100 shareholders – portfolio managers, buy-side professionals, stewardship teams and ESG analysts – who represent 60% of our ownership. While the Board Chair, CEO and CFO, together with Investor Relations, are accountable for ensuring effective shareholder engagement, other senior managers from within and outside the Executive Committee also participate in the meetings. We conduct regular outreach to investors throughout the year.

Types of engagements (select examples):

• AGM and quarterly results teleconferences (TCs)

• Bank conferences and management roadshows

• “Meet Novartis Management” and “R&D day” capital markets event

• Governance roadshow and TCs

• Board Chair’s meetings with Swiss, US and UK investors

• Annual ESG investor event, captioned “Impact and Health Equity”

• Sandoz spin-off EGM

Topics discussed with shareholders during 2023:

Growth:

• Replacement power

• Growth drivers (including Cosentyx, Entresto, Kisqali, Kesimpta and Pluvicto)

• Policy and pricing environment

• Life cycle management

INNOVATION:

• Progress and milestones

• Data of pipeline projects

• Return on R&D investments

PRODUCTIVITY:

• Progress on financial, strategic and operational performance

• Long-term sustainability of financial performance

• Capital allocation strategy

• New organization model

• Sandoz spin-off

BUILDING TRUST WITH SOCIETY AND CULTURE:

• Board accountability on ESG, and integration of ESG and compensation

• Strong governance, enhanced process and focus on material ESG factors, leading to improved rating agency scores

• Patient access to innovative medicines

• Learning from Novartis Access programs implemented over the decades, including integrated sustainable business models and access principles to help address access and health inequity

• ESG targets: full carbon neutrality, patient access targets for strategic innovative therapies, and global health flagship programs

• Progress on culture and other human capital metrics

Compensation AND Governance:

• Diversity of the Board, the Executive Committee, and the Company

• Board renewal, succession planning and evaluation

• The linking of the compensation system to key strategic priorities

• Risk oversight

• Stakeholder expectations from the Board on ESG matters

Voting rights, restrictions and representation

Registration

Shareholders have the right to vote and to execute all other rights as granted under Swiss law and the Articles of Incorporation (see, in particular, articles 17 and 18 of the Articles of Incorporation).

Each share registered with the right to vote by the third business day before the General Meeting entitles the holder to one vote at General Meetings. Article 5, paragraph 2 of the Articles of Incorporation provides that to be registered with voting rights, shareholders must declare that they acquired the shares in their own name and for their own account. According to article 5, paragraph 3 of the Articles of Incorporation, the Board may register nominees with the right to vote. The Share Register is a non-public register subject to statutory confidentiality and data privacy.

The Articles of Incorporation are available at www.novartis.com/investors/company-overview/corporate-governance.

Registration restrictions

Article 5, paragraph 2 of the Articles of Incorporation provides that no shareholder shall be registered with the right to vote for more than 2% of the share capital. Given that shareholder representation at General Meetings has traditionally been comparatively low in Switzerland, Novartis AG considers registration restrictions necessary to prevent a minority shareholder from dominating a General Meeting. The Board may, upon request, grant an exemption. Considerations include if the shareholder supports our goal of creating sustainable value and has a long-term investment horizon. Exemptions are in force for the registered shareholders listed in “—Item 6.C Board practices—Group structure and shareholders—Shareholders—Significant shareholders.” Exemptions also apply to the Novartis Foundation for Employee Participation, Basel, which as of December 31, 2023, was registered in the Share Register with less than 2% of the share capital, and to Norges Bank (Central Bank of Norway), Oslo, which as of December 31, 2023, was not registered but held 2.4% according to a disclosure notification filed with Novartis AG. No further exemptions were requested in 2023. The same restrictions indirectly apply to ADR holders.

Article 5, paragraph 3 of the Articles of Incorporation provides that no nominee shall be registered with the right to vote for more than 0.5% of the registered share capital. The Board may, upon request, grant an exemption from this restriction if the nominee discloses the names, addresses and number of shares of the persons for whose account it holds 0.5% or more of the registered share capital. Exemptions are in force for the nominees listed in “—Item 6.C Board practices—Group structure and shareholders—Shareholders—Significant shareholders,” and for the nominee Citibank, London, which in 2015 requested an exemption, but as of December 31, 2023, was not registered in the Share Register. The same restrictions indirectly apply to ADR holders.

According to article 5, paragraph 4 of the Articles of Incorporation, shareholders, ADR holders, or nominees who are linked to each other or who act in concert to circumvent

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registration restrictions are treated as one person or nominee for the purposes of the restrictions on registration.

The registration restrictions may be changed by resolution of the General Meeting, with approval of at least two-thirds of the votes represented at the meeting.

The Articles of Incorporation are available at www.novartis.com/investors/company-overview/corporate-governance.

Attendance, Representation and WEB PORTAL

Registered shareholders will receive personal invitations to the General Meetings along with a registration/proxy form as well as a personal access code and a QR code to log in to our web portal. By returning the registration/proxy form or using the web portal, shareholders can order an admission ticket for the General Meeting or appoint a representative of their choice by means of a written proxy or the Independent Proxy to vote their shares on their behalf.

If the Independent Proxy is appointed, shareholders can also give voting instructions on agenda items or on alternative or additional motions related to the agenda items either (i) following the recommendations of the Board for such alternative or additional motions; or (ii) opposing such alternative or additional motions. They can also abstain from voting.

Shareholders choosing not to receive the comprehensive invitation materials will be informed of upcoming General Meetings through a letter containing the login credentials to access the web portal as well as a reference to www.novartis.com/investors/shareholder-information/general-meetings, where all relevant information is available.

ADR holders

ADR holders have the rights enumerated in the deposit agreement (such as the right to give voting instructions and to receive dividends). The ADS depositary of Novartis AG – JPMorgan Chase Bank, N.A., New York – holds the shares underlying the ADRs and is registered as a shareholder in the Share Register. An ADR is not a share, and an ADR holder is not a Novartis AG shareholder. Each ADR represents one share. ADR holders exercise their voting rights by instructing the depositary to exercise their voting rights. The ADS depositary exercises the voting rights for registered shares underlying ADRs for which no voting instructions have been given by providing a discretionary proxy to an uninstructed independent designee. Such designee has to be a shareholder.

Annual General Meeting (AGM)

Convening

The AGM must be held within six months of the end of our financial year (December 31), and normally takes place in late February or early March. According to article 12a of the Articles of Incorporation (www.novartis.com/investors/company-overview/corporate-governance), the Board may foresee that shareholders who cannot be present at the venue of the AGM may exercise their rights through electronic means. The Board may at any time until June 30, 2028^1^ also order that the AGM be held electronically without a venue. Extraordinary General Meetings may be requested by the Board, the external auditor, or shareholders representing at least 5% of the share capital.

Agenda

Shareholders representing shares with an aggregate nominal value of at least CHF 1 million may request that an item be included in a General Meeting agenda. Such requests must be made in writing at least 45 days before the meeting, specifying the requested item and proposal. If an explanatory statement is to be included in the notice of meeting, it must be submitted within the same period, and formulated in a short, clear and concise manner.

Powers

According to article 17 of the Articles of Incorporation (www.novartis.com/investors/company-overview/corporate-governance), the following powers are vested exclusively in the General Meeting:

• Adoption and amendment of the Articles of Incorporation

• Election and removal of the Board Chair, the Board and Compensation Committee members, the Independent Proxy and the external auditor

• Approval of the management report, the consolidated financial statements and the report on non-financial matters

• Approval of the financial statements of Novartis AG, and the decision on the appropriation of available earnings shown on the balance sheet, in particular with regard to dividends (including any repayment of the statutory capital reserves and the approval of interim dividends and the interim financial statements required for such purpose)

• Approval of the maximum aggregate compensation of the Board (from an AGM until the next AGM) and of the Executive Committee (for the financial year following the AGM). If the maximum aggregate amount of compensation already approved by the AGM is not sufficient to cover the compensation of newly appointed or promoted Executive Committee members, Novartis may use up to 40% of the amount last approved for the newly appointed or promoted Executive Committee members

• Discharge of Board and Executive Committee members

• Delisting of the shares of Novartis AG

• Decision on other matters that are reserved by law or by the Articles of Incorporation (e.g., advisory vote on the Compensation Report) to the General Meeting

1 In accordance with the statement by the Board issued on February 10, 2023, Novartis commits to submitting the corresponding authorization again to a shareholder vote at the 2025 Annual General Meeting, regardless of the time limitation stipulated in the Articles of Incorporation.

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Statutory Quorums

The General Meeting passes resolutions and elections with the absolute majority of the votes represented at the meeting. However, under article 18 of the Articles of Incorporation (www.novartis.com/investors/company-overview/corporate-governance), the approval of two-thirds of the votes represented at the meeting is required for:

• An alteration of the purpose of Novartis AG

• The consolidation of shares, unless the approval of all affected shareholders is required

• An increase of the share capital out of equity, by contribution in kind, for the purpose of an acquisition of property or the grant of special rights

• An increase of the share capital out of equity, by contributions in kind by way of set-off against a receivable and the grant of special rights

• A restriction or cancellation of rights of options to subscribe

• The introduction of a conditional capital or a capital band

• An implementation of restrictions on the transfer of registered shares, and the removal of such restrictions

• The creation of shares with increased voting powers

• The change of the currency of the share capital

• The introduction of the deciding vote for the presiding officer at the General Meeting of Shareholders

• A provision in the Articles of Incorporation allowing to hold the General Meeting of Shareholders abroad

• The delisting of the shares of Novartis AG

• A change of the registered office of Novartis AG

• The introduction of an arbitration clause in the Articles of Incorporation

• The merger, split or transformation of Novartis AG under the Merger Act (subject to mandatory provisions)

• The dissolution of Novartis AG

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Board of Directors

Composition (as per December 31, 2023)BOARD Chair: J. ReinhardtVice-Chair:S. Moroneylead independent Director: P. BulaN. AndrewsT. BuechnerE. DohertyB. HellerD. HochstrasserF. van HoutenA. de Pro GonzaloC. SawyersW. WintersJ. YoungAudit and Compliance CommitteeE. Doherty (Chair)T. BuechnerB. HellerD. Hochstrasser F. van HoutenA. de Pro GonzaloCompensation CommitteeS. Moroney (Chair)P. BulaB. HellerW. WintersGovernance, Sustainability and Nomination CommitteeP. Bula (Chair)B. HellerD. HochstrasserC. SawyersW. WintersRisk CommitteeT. Buechner (Chair)N. AndrewsE. DohertyA. de Pro Gonzalo J. Young Science & Technology CommitteeJ. Reinhardt (Chair)N. AndrewsF. van HoutenS. MoroneyC. SawyersJ. Young

Changes to the Board of Directors

John Young was elected as a new Board member at the 2023 AGM. Andreas von Planta, who had been a Board member since 2006, did not stand for re-election at the 2023 AGM. The biography of Mr. von Planta can be found in the 2022 Annual Report (page 136), which is available at www.novartis.com/news/media-library/novartis-annual-report-2022.

Election and term of office

Board members (including the Board Chair) and Compensation Committee members are elected individually by shareholders at the General Meeting for a one-year term of office. The term of office expires at the end of the next AGM.

According to article 20, paragraph 3 of the Articles of Incorporation, a member shall not serve on the Board for more than 12 years. Under special circumstances and if deemed to be in the best interest of the Company, the Board may recommend exceptions to the shareholders (www.novartis.com/investors/company-overview/corporate-governance).

The term limit supports our commitment to renew the Board on an ongoing basis and follows international best practice. We believe age is still a relevant factor in Board composition, and the GSNC will consider this and other factors – including gender, nationality and ethnicity – when evaluating candidates and exploring ways to increase Board diversity.

Succession planning

The GSNC prepares and reviews succession plans for the Board on an annual basis. These plans are discussed by the Board in private meetings. A search for a new Board member is launched – normally with the support of a professional executive search company – with individual selection criteria defined based on the evolving needs of the Company and a continuing focus on diversity, skills and experience. The set of competencies (further explained in “—Item 6.C Board practices—Board of Directors—Board skills”) and a balance between continuity of experience and fresh perspectives are also important criteria for the GSNC when evaluating new candidates. Candidates are interviewed by the Board Chair, members of the GSNC, other Board members, and members of the Executive Committee. The GSNC then makes a recommendation to the full Board, and the Board ultimately decides who should be proposed for election at the upcoming AGM.

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Independence

All Board members – including the Board Chair – are non-executive and independent, pursuant to applicable corporate governance rules and Novartis independence criteria, which are outlined in Appendix II to the Board Regulations (www.novartis.com/investors/company-overview/corporate-governance). In particular, no Board member is or was a member of the management of Novartis AG or of any other Novartis Group company in the last three financial years up to December 31, 2023, or has or had, a significant business relationship with Novartis AG or with any other Novartis Group company. No separate meetings of independent Board members were held in 2023.

The independence of Board members is assessed annually. Each Board member completes an independence questionnaire that is reviewed by the GSNC. The GSNC then submits a proposal to the full Board, and the Board determines the independence status of each Board member.

Diversity

Novartis is dedicated to fostering an inclusive board where individuals from all genders and ethnic backgrounds can thrive and contribute their unique insights. We pledge to continuously advance our efforts to promote gender parity in the composition of our Board of Directors within a range of +/- 10 %. A diverse Board ensures that the appropriate balance of skills, expertise, experience and cultural background is represented to discharge its responsibilities and to support long-term value creation for shareholders, patients, employees and other stakeholders. Diversity remains a critical focus area for the Board, and the GSNC continuously examines opportunities to further increase the Board’s diversity when identifying new Board member candidates. We firmly believe that by valuing and respecting these differences, we can drive innovation and make more informed decisions and better serve our stakeholders.

Diversity profileNationality1pAmerican27%pSwiss23%pBritish11.5%pDutch11.5%pGerman11.5%pSpanish7.5%pIrish4%pNew Zealander4%GenderpMale69%pFemale31%Agep556023%p616554%p>6523%Tenurep<3y23%p36y31%p79y23%p>9y23%1Please note that six Board members have dual nationalities. Each of these nationalities is counted as a half in the above chart.

Board skills

Upon proposal by the GSNC, the Board has determined a diverse set of competencies for its members that aligns with our status as a listed company, as well as our business portfolio, geographic reach and culture. Within this set of competencies, the Board members were asked to identify their most relevant skills based on their educational background, professional experience and personal achievements.

The GSNC assesses the set of competencies as well as the individual skills annually to ensure that an appropriate balance of skills, expertise, experience and diversity is represented on the Board.

To learn more about our Board members and their individual skills, see “—Item 6.C Board practices—Board of Directors—Members of the Board of Directors.”

Board skill distributionMedicine/healthcare/R&D54%7/13Environmental, social 61%8/13and governance (ESG)Data/digital38%5/13Leadership/management 85%11/13Finance/accounting61%8/13Law/regulatory/risk management77%10/13

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Members of the Board of Directors

Joerg Reinhardt, Ph.D.

Chair since 2013 | Nationality: German | Year of birth: 1956

Joerg Reinhardt is a healthcare industry veteran whose career spans nearly 40 years. After receiving his doctorate in pharmaceutical sciences, Mr. Reinhardt joined Sandoz Pharma Ltd., a predecessor to Novartis, in 1982. He held a number of senior leadership positions at Novartis, including Chief Operating Officer and Head of the Vaccines and Diagnostics Division. Additionally, he led Bayer HealthCare AG as chair of the board of management and the executive committee from 2010 to 2013.

Professional experience

• Chair of the board of management and the executive committee, Bayer HealthCare AG, Germany (2010–2013)

• Chief Operating Officer, Novartis AG, Switzerland (2008–2010)

• Head of the Vaccines and Diagnostics Division, Novartis AG, Switzerland (2006–2008)

• Various managerial positions at Sandoz Pharma Ltd. and Novartis AG, Switzerland (1982–2006)

Mandates

• Senate member, Helmholtz Association of German Research Centers, Germany

• Chair of the board of trustees, Institute of Molecular and Clinical Ophthalmology Basel (IOB), Switzerland

• Chair of the board of trustees, Novartis Foundation, Switzerland

• Board member, Swiss Re AG, Switzerland

Education

• Doctorate in pharmaceutical sciences, Saarland University, Germany

Key skills

 Medicine/healthcare/R&D   Environmental, social and governance (ESG)    Leadership/management   Law/regulatory/risk management

Simon Moroney, D.Phil.

Board member since 2020 | Vice-Chair since March 4, 2022 | Nationality: German/New Zealander |
Year of birth: 1959

As co-founder and CEO of MorphoSys AG, Simon Moroney played a central role in establishing the company as a force in the field of therapeutic antibodies, with one of the broadest pipelines of drug candidates in the industry. Mr. Moroney holds both a doctorate and a Master’s degree in chemistry.

Professional experience

• Co-founder and CEO, MorphoSys AG, Germany (1992–2019)

• Research associate, Department of Pharmacology, University of Cambridge, UK (1991–1992)

• Assistant professor, Department of Chemistry, University of British Columbia, Canada (1989–1990)

Mandates

• Chair of the board of directors and the remuneration and nomination committee, Biotalys NV, Belgium

Education

• Doctorate in chemistry, University of Oxford, UK

• Master’s degree in chemistry, University of Waikato, New Zealand

Key skills

 Medicine/healthcare/R&D   Environmental, social and governance (ESG)    Leadership/management   Law/regulatory/risk management

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Nancy C. Andrews, M.D., Ph.D.

Board member since 2015 | Nationality: American/Swiss | Year of birth: 1958

Nancy C. Andrews has extensive experience as a physician, scientist, professor and senior administrator at leading academic institutions and hospitals. Her distinguished career spans more than 30 years, with leadership roles at both Harvard Medical School and the Duke University School of Medicine. Since 2023, Dr. Andrews is professor in residence of pediatrics at Harvard Medical School and is credited with conducting research that led to advances in understanding iron biology and iron diseases.

Professional experience

• Professor in residence of pediatrics, Harvard Medical School, US (2023-present)

• Executive vice president and chief scientific officer, Boston Children’s Hospital, US (2021–present)

• Dean emerita, Duke University School of Medicine, and vice chancellor emerita for academic affairs, Duke University, US (2017–present)

• Dean, Duke University School of Medicine, and vice chancellor for academic affairs, Duke University, US (2007–2017)

• Professor of pediatrics, pharmacology and cancer biology, Duke University, US (2007–2021)

• Dean for basic sciences and graduate studies, Harvard Medical School, US (2003–2007)

• Director, Harvard/MIT M.D.-Ph.D. Program, US (1999–2003)

• Biomedical research investigator, Howard Hughes Medical Institute, US (1993–2006)

Mandates

• Board member, Maze Therapeutics Inc., US

• Board member and chair of the science and technology committee, Charles River Laboratories International Inc., US

• Home secretary (since July 2023) and council member, National Academy of Sciences, US

• Former council member (2013–2019) and member, National Academy of Medicine, US

• Fellow (since April 2007) and former chair (2017 – 2023), American Academy of Arts and Sciences, US

• Member of the executive committee of the corporation, Massachusetts Institute of Technology, US (2019-2022)

• Member of the scientific management review board, National Institutes of Health, US (2014–2019)

• Board member and former chair, Burroughs Wellcome Fund, US (2011–2019)

Education

• Doctor of medicine, Harvard Medical School, US

• Doctorate in biology, Massachusetts Institute of Technology, US

• Master’s and bachelor’s degrees in molecular biophysics and biochemistry, Yale University, US

Key skills

 Medicine/healthcare/R&D   Leadership/management

Ton Buechner

Board member since 2016 | Nationality: Dutch/Swiss | Year of birth: 1965

Ton Buechner is an engineer by training who started his career in the oil and gas construction industry. Before becoming the CEO of Sulzer AG, he held several divisional leadership roles at the company and worked in markets including Asia. Mr. Buechner most recently served as CEO and chair of the executive board of AkzoNobel NV, where he introduced industry-leading ESG policies.

Professional experience

• CEO and chair of the executive board, AkzoNobel NV, Netherlands (2012–2017)

• CEO, Sulzer AG, Switzerland (2007–2011)

• President, Sulzer Pumps, Switzerland (2003–2006)

• President, Sulzer Turbomachinery Services, Switzerland (2000–2002)

• Various managerial positions at Sulzer AG, China and Switzerland (1994–2000)

Mandates

• Chair of the board of directors and the sustainability committee, Swiss Prime Site AG, Switzerland

• Chair of the board of directors and the strategy and sustainability committee, Burckhardt Compression AG, Switzerland

• Member of advisory committee to the Ministry of Economic Affairs and Climate Policy (“Adviescommissie Maatwerkafspraken Verduurzaming Industrie”), Netherlands

• Member of the presidential and shareholder committees, Voith GmbH & Co. KGaA, Germany (2014–2020)

• Member of the supervisory board, Voith GmbH & Co. KGaA, Germany (2014–2018)

Education

• Master of business administration, IMD business school, Switzerland

• Master’s degree in civil engineering, Delft University of Technology, Netherlands

Key skills

 Environmental, social and governance (ESG)   Leadership/management    Finance/accounting   Law/regulatory/risk management

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Patrice Bula

Board member since 2019 | Lead Independent Director since March 4, 2022 | Nationality: Swiss | Year of birth: 1956

Patrice Bula has 40 years of global management experience and is a leader in the consumer goods industry across established and emerging markets. He has served in various senior roles at Nestlé SA, including as general manager of its businesses in China, Germany and South Africa. Most recently, he successfully led the Nestlé Group’s brand strategies, digital marketing transformation and Nespresso business.

Professional experience

• Executive vice president and head of strategic business units, marketing, sales and Nespresso, Nestlé SA, Switzerland (2011–2021)

• Market head of the Greater China region, Nestlé SA, Switzerland (2007–2011)

• Market head of Germany, Nestlé SA, Switzerland (2003–2007)

• Head of the confectionery and biscuits strategic business unit, Nestlé SA, Switzerland (2000–2003)

• Various managerial positions at Nestlé SA, Switzerland (1980–2000)

Mandates

• Chair, Froneri Lux Topco Sarl, Luxembourg

• Board member and vice chair, Schindler AG, Switzerland

• Board member and chair of the ESG committee, New Tiger LLC, US

• Co-chair (2020–2021) and board member (2015–2021), Cereal Partners Worldwide SA, Switzerland (Nestlé representative)

• Board member, Froneri Lux Topco Sarl, Luxembourg (Nestlé representative) (2016–2020)

• Board member, Bobst Group SA, Switzerland (2017–2019)

• Chair, Blue Bottle Coffee Inc., US (Nestlé representative) (2017–2019)

• Chair, Nestlé Nespresso SA, Switzerland (Nestlé representative) (2011–2019)

• Board member, Hsu Fu Chi Food Companies, China (Nestlé representative) (2011–2019)

Education

• Program for executive development, IMD business school, Switzerland

• Master’s degree in economic sciences, HEC Lausanne, Switzerland

Key skills

Environmental, social and governance (ESG)   Data/digital   Leadership/management    Finance/accounting

Elizabeth (Liz) Doherty

Board member since 2016 | Nationality: British/Irish | Year of birth: 1957 | Audit Committee Financial Expert

Elizabeth (Liz) Doherty is an expert in finance and accounting who has broad operational experience in international consumer and retail businesses. She began her career in internal audit at Unilever PLC and has held senior finance and accounting roles there and at other companies including Tesco PLC and Reckitt Benckiser Group PLC.

Professional experience

• CFO (interim), Cognita Schools Ltd., UK (2014–2015)

• CFO and board member, Reckitt Benckiser Group PLC, UK (2011–2013)

• CFO (interim), City Inn, UK (2010)

• CFO, Brambles Ltd., Australia (2007–2009)

• Group international finance director, Tesco PLC, UK (2001–2007)

• Various managerial positions at Unilever PLC, UK (1981–2001)

Mandates

• Board member and chair of the audit committee, Corbion NV, Netherlands

• Member of the supervisory board and chair of the audit committee, Royal Philips NV, Netherlands

• Advisor, Affinity Petcare SA and GB Foods SA, Spain (2017–2023)

• Board member, Dunelm Group PLC, UK (2013–2019)

• Board member, HM Courts & Tribunals Service, UK (2015–2019)

• Board member, Ministry of Justice, UK (2015–2019)

• Board member, Delhaize Group, Belgium (2013–2016)

• Board member, Nokia Corp., Finland (2013–2016)

Education

• Fellow, Chartered Institute of Management Accountants, UK

• Bachelor’s degree in liberal studies in science (physics), University of Manchester, UK

Key skills

 Leadership/management   Finance/accounting   Law/regulatory/risk management

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Bridgette Heller

Board member since 2020 | Nationality: American | Year of birth: 1961

Bridgette Heller has proven experience in the standalone divisions of companies such as Johnson & Johnson, Merck & Co. Inc. and Danone SA, and has served on the audit committees of ADT Corp. and Tech Data Corp. During her career, she has overseen the performance of CFOs and made decisions on strategic R&D priorities. Ms. Heller is an advocate for diversity, equity and inclusion, and traveled globally to reinforce Danone’s commitment to infant and maternal health, inclusive diversity, an equitable workforce for women, and sustainable communities. She is co-founder and CEO of the Shirley Proctor Puller Foundation, an education and youth empowerment nonprofit, and devotes much of her time to strengthening education and sustainability in an underserved community in the US.

Professional experience

• Co-founder and CEO, Shirley Proctor Puller Foundation, US (2019–present)

• EVP and president of specialized nutrition, Danone SA, Netherlands (2017–2019)

• EVP of early life nutrition, Danone SA, Netherlands (2016–2019)

• EVP and president of consumer care, Merck & Co. Inc., US (2010–2015)

• Global president of the baby global business unit, Johnson & Johnson, US (2007–2009)

• President of the US baby, kids and wound care business and of global innovation development, Johnson & Johnson, US (2005–2007)

• Managing partner, Heller Associates: Ideas for Growth Inc., US (2004–2005)

• CEO, Chung’s Gourmet Foods, US (2003–2004)

• Various managerial positions at Kraft Foods Inc., US (1985–2003)

Mandates

• Board member, Integral Ad Science Inc., US

• Board member, Aramark, US

• Board member, Dexcom Inc., US

• Board member, Newman’s Own Inc., US

• Member of the board of trustees, Northwestern University, US

• Member of the advisory board, Kellogg School of Management at Northwestern University, US

• Board member, Shirley Proctor Puller Foundation, US

• Board member, Newman’s Own Foundation, US

• Board member, Tech Data Corp., US (2016–2020)

• Board member, ADT Corp., US (2012–2016)

• Board member, Girls Inc., US (2002–2014)

Education

• Master’s degree in marketing and management policy, Kellogg School of Management at Northwestern University, US

• Bachelor’s degree in economics and computer studies, Northwestern University, US

Key skills

 Medicine/healthcare/R&D   Environmental, social and governance (ESG)  Data/digital  Leadership/management   Finance/accounting   Law/regulatory/risk management

Daniel Hochstrasser

Board member since March 4, 2022 | Nationality: Swiss | Year of birth: 1960

Daniel Hochstrasser is an independent dispute resolution specialist practicing in Zurich, Switzerland. Until the end of 2022, he has been leading Bär & Karrer’s arbitration practice for 15 years. He frequently represented parties in complex disputes arising from matters such as M&A transactions, industrial and infrastructure projects, and license, distribution and development agreements, particularly in the pharmaceutical industry. In addition, he led the firm as senior partner from 2011 until 2021. He has published extensively on arbitration and litigation, and lectures at the University of Zurich and the University of St. Gallen in Switzerland.

Professional experience

• Attorney-at-law, Daniel Hochstrasser AG, Switzerland (since January 2023)

• Attorney-at-law and partner, Bär & Karrer AG, Switzerland (1993–December 2022)

• Senior partner and chair of the board of directors, Bär & Karrer AG, Switzerland (2011-2021)

• Lawyer, District Court of Affoltern, Court of Appeals/Court of Cassation of Zurich, Switzerland (1987–1992)

• In-house lawyer, Staubli SA, France (1986–1987)

Mandates

• Chair of the board of directors, Daniel Hochstrasser AG, Switzerland

• Member (2015–2021) and vice president (since 2021), ICC Court of Arbitration, France

• Member of the Ethics Court, Zurich Bar Association, Switzerland (since 2004)

• Board member, Finland Arbitration Institute, Finland (since 2020)

• Chair of the board of directors, Bär & Karrer AG, Switzerland (2011-2021)

• Member of the Court, Swiss Arbitration Chambers, Switzerland (2004–2014)

Education

• Master of laws (LL.M.), Cornell Law School, US

• Bar examination, Switzerland

• Licentiatus iuris, University of Zurich, Switzerland

Key skills

 Law/regulatory/risk management

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Frans van Houten

Board member since 2017 | Nationality: Dutch | Year of birth: 1960

Frans van Houten is passionate about purpose-driven innovation, entrepreneurship and business transformation to drive customer value and competitiveness. Under his leadership as CEO of Royal Philips, the company transformed into a leading health technology solutions company, leveraging data and informatics to improve healthcare provider results, and became a forerunner across ESG dimensions, having become carbon neutral in its operations since 2020 and recycling over 90% of its waste. Mr. van Houten was an initiator of the World Economic Forum Compact for Responsive and Responsible Leadership as well as founder and co-chair of the Platform to Accelerate the Circular Economy.

Professional experience

• Advisor, Royal Philips NV, Netherlands (October 2022–April 2023)

• CEO and chair of the executive committee and the board of management, Royal Philips NV, Netherlands (2011–October 2022)

• Interim management, ING Group NV, Netherlands (2009–2010)

• CEO and chair of the management board, NXP Semiconductors NV (formerly Philips Semiconductors NV), Netherlands (2004–2009)

• Various managerial positions at Royal Philips Electronics NV, Netherlands (1986–2004)

Mandates

• Board member, Absci Corporation, US

• Board member, Synthesis Health Inc. US

• Chair, Castor EDC, Netherlands

• Member of the steering committee, European Round Table for Industry (ERT), Belgium (2014-November 2022)

• Vice chair and member of the supervisory board, Philips Lighting, Netherlands (2016–2017)

Education

• Master’s degree in economics and business management, Erasmus University Rotterdam, Netherlands

• Bachelor’s degree in economics, Erasmus University Rotterdam, Netherlands

Key skills

 Medicine/healthcare/R&D   Environmental, social and governance (ESG)   Data/digital    Leadership/management   Finance/accounting   Law/regulatory/risk management

Ana de Pro Gonzalo

Board member since March 4, 2022 | Nationality: Spanish | Year of birth: 1967 | Audit Committee Financial Expert

Since starting her career at Arthur Andersen, Ana de Pro Gonzalo has worked across a variety of industries, ranging from construction and real estate to engineering and telecommunications. With deep expertise in finance, capital markets and technology, she has held executive positions at several multinational companies. Most recently, she spent 10 years as chief financial officer of Amadeus IT Group, a leading software provider for the global travel and tourism industry.

Professional experience

• Chief financial officer, Amadeus IT Group SA, Spain (2010–2020)

• Corporate general manager, Sacyr Vallehermoso SA, Spain (2002–2010)

• Deputy general manager and finance director, Metrovacesa SA, Spain (1994–2002)

• Senior auditor, Arthur Andersen SA, Spain (1990–1994)

Mandates

• Member of the supervisory board and chair of the Audit Committee, STMicroelectronics NV, Netherlands

• Board member, Mobico Group PLC, UK

• Board member, Indra Sistemas SA, Spain (2020-2022)

• Board member, Merlin Properties Socimi SA, Spain (2015–2017)

Education

• General management program (PDG), IESE Business School, Spain

• Bachelor’s degree in business studies, Complutense University of Madrid, Spain

Key skills

 Environmental, social and governance (ESG)   Data/digital   Leadership/management    Finance/accounting   Law/regulatory/risk management

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Charles L. Sawyers, M.D.

Board member since 2013 | Nationality: American | Year of birth: 1959

Charles L. Sawyers is a highly accomplished expert and leader in cancer research. As a physician and prominent scientist, he has a deep understanding of the benefits of drugs for patients and society at large, and the importance of access to medicines. Dr. Sawyers co-developed the Novartis cancer drug Gleevec/Glivec and has received numerous honors and awards, including the Lasker-DeBakey Clinical Medical Research Award.

Professional experience

• Chair of the human oncology and pathogenesis program, Memorial Sloan Kettering Cancer Center, US (2006–present)

• Professor of medicine (2008–present), and professor of cell and developmental biology (2011–present), Weill Cornell Graduate School of Medical Sciences, US

• Investigator, Howard Hughes Medical Institute, US (2002–2006 and 2008–present)

• Associate chief, division of hematology-oncology, University of California, Los Angeles, US (1996–2006)

Mandates

• Member, National Academy of Medicine, US

• Member, National Academy of Sciences, US

• Investigator, Howard Hughes Medical Institute, US

• Member, National Cancer Advisory Board, US (2012–2020)

• President, American Association for Cancer Research, US (2013–2014)

Education

• Doctor of medicine, Johns Hopkins University School of Medicine, US

• Bachelor’s degree, Princeton University, US

Key skills

 Medicine/healthcare/R&D

William T. Winters

Board member since 2013 | Nationality: British/American | Year of birth: 1961

William T. Winters has extensive leadership experience in the financial sector. He began his career at JPMorgan Chase & Co. in 1983 and has held management roles across several market areas and in corporate finance. Mr. Winters founded Renshaw Bay LLP, an alternative asset management firm, and now serves as CEO of Standard Chartered PLC, where he is leading a digital transformation of the global bank.

Professional experience

• CEO, Standard Chartered PLC, UK (2015–present)

• Chair and CEO, Renshaw Bay LLP, UK (2011–2015)

• Co-CEO of the investment bank, JPMorgan Chase & Co., UK (2004–2010)

• Various managerial positions at JPMorgan Chase & Co., UK and US (1983–2004)

Mandates

• Board member, Standard Chartered Bank PLC, UK

• Commissioner, Independent Commission on Banking, UK (2010–2011)

Education

• Master of business administration, Wharton School of the University of Pennsylvania, US

• Bachelor’s degree in international relations, Colgate University, US

Key skills

Environmental, social and governance (ESG)   Data/digital   Leadership/management    Finance/accounting   Law/regulatory/risk management

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John D. Young

Board member since March 7, 2023 | Nationality: British/American | Year of birth: 1964

A scientist by training, John D. Young has over 35 years of experience in the healthcare industry and will bring a wealth of experience in leadership, strategy, business development and commercialization of innovative medicines to the Novartis Board of Directors. He joined Pfizer in 1987 as a sales representative and held positions of increasing seniority across the company, including as a member of Pfizer’s executive leadership team from 2012. As Pfizer’s group president and chief business officer from 2019 until 2022, John also played an integral role in the development and delivery of the Pfizer-BioNTech COVID-19 vaccine.

Professional experience

• Senior advisor to the CEO, Pfizer, US (January-June 2022)

• Group president and chief business officer, Pfizer, US (2019-2022)

• Group president, innovative health business, Pfizer, US (2018)

• Group president, essential health business, Pfizer, US (2014-2017)

• President and general manager, global primary care business unit, Pfizer, US (2012-2013)

• Regional president, primary care business unit for Europe and Canada, Pfizer, UK (2009-2012)

• Various managerial positions, Pfizer, UK and Australia (1987–2008)

Mandates

• Board member, Johnson Controls International, Ireland

• Board member, Arvinas Inc, US

• Board member, Imbria Pharmaceuticals, US

• Board member, Haleon, UK (2022-February 2023)

• Board member, GSK Consumer Health Joint Venture, UK (2019-2022)

• Board member, Biotechnology Innovation Organization (BIO), US (2018-2021)

• US bio-pharmaceutical representative, UK Government Life Sciences Council, UK (2007-2021)

• Board member, National Committee for US China Relations, US (2014-2017)

• Board member, European Federation of Pharmaceutical Industries and Associations (EFPIA), Belgium (2012-2017)

Education

• Master of business administration, University of Strathclyde, UK

• Bachelor’s degree in biological sciences, University of Glasgow, UK

Key skills

 Medicine/healthcare/R&D   Leadership/management   Finance/accounting    Law/regulatory/risk management

Corporate Secretary

Charlotte Pamer-Wieser, Ph.D.

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Self-assessment

The Board and its committees conduct a self-assessment once a year, covering topics including Board composition, purpose, scope and responsibilities; succession planning; Board processes and governance; interaction between the Board and the Executive Committee; Board meetings and pre-reading material; team effectiveness; and Board Chair and peer evaluation. Every third year, this process is conducted by an independent external consultant. The 2023 review is currently being undertaken by the consulting firm Egon Zehnder. Its results will be discussed during the second quarter of 2024.

Questionnaire and Interviews•Each Board member fills out a questionnaire prepared by Egon Zehnder.•Individual interviews are scheduled, during which Board members have the opportunity to share their perspectives on their strengths and areas for development, best practices, and interaction between Board members, and between the Board and the Executive Committee.•The Executive Committee members are also interviewed individually to capture their perspectives on the Board’s functioning and its interactions with the Executive Committee, including focusing on ways to improve efficiency.Review•The preliminary results of the questionnaires and interviews are then presented to the Board Chair. This qualitative review covers topics including Board composition; purpose, scope and responsibilities; processes and governance of the Board and its committees; meetings and pre-reading material; team effectiveness; and leadership and culture.•Thereafter, Egon Zehnder also undertakes a qualitative review with the full Board, sharing its key observations and recommendations, and holds additional individual feedback sessions with each Board member.Outcome•The results of the in-depth 2023 assessment will be discussed during a Board Meeting in the first half of 2024.•Conclusions and results will be shared in the Annual Report 2024.

Trainings

The Board receives regular briefings and trainings on ethics, risks and compliance, ESG and other relevant topics. In 2023, each Board member completed trainings on the following:

• ESG, tailored for Board members

• Doing business ethically

• ‘Fit to Commit’, which focused on anti-bribery, insider trading and procurement

• Information Management

Our Chief Legal Officer also provides regular updates to the Board members on developments related to insider trading laws and regulations and briefs the members of the Board and the Executive Committee on an annual basis on their respective duties. In addition, the Company offers a broad range of external trainings to its Board members.

Role of the Board and its committees

The Board is responsible for the overall direction and oversight of management, and holds the ultimate decision-making authority, with the exception of decisions reserved for shareholders. Board members are expected to commit the time and effort required to fulfil all their Board and committee responsibilities.

The Board has delegated certain duties and responsibilities to its five committees led by a Board-elected committee chair, as set out in the Board Regulations (www.novartis.com/investors/company-overview/corporate-governance). In some cases, these responsibilities are of an advisory or preparatory nature. In other cases, the committee has decision-making power that is subject to final Board approval, or the responsibilities have been fully delegated to the committee. All committees have the authority to retain external consultants.

Any Board member may request a Board or committee meeting and the inclusion of an agenda item. Before meetings, Board members receive materials to help them prepare for the discussions and to inform decision-making.

135

Attendance at Board and Board Committee Meetings in 2023

Name	Position	Board	Audit and <br> Compliance <br> Committee	Compensation <br> Committee	Governance, <br> Sustainability <br> and Nomination <br> Committee	Risk <br> Committee	Science & <br> Technology <br> Committee
J. Reinhardt	Board Chair	9/9					3/3
S. Moroney	Vice-Chair	9/9		6/6			3/3
P. Bula	Lead Independent Director	9/9		6/6	4/4
N. Andrews	Member	9/9				4/4	3/3
T. Buechner	Member	9/9	8/8			4/4
E. Doherty	Member	9/9	8/8			4/4
B. Heller	Member	9/9	8/8	6/6	4/4
F. van Houten	Member	9/9	8/8				3/3
D. Hochstrasser	Member	9/9	8/8		4/4
A. de Pro Gonzalo	Member	9/9	8/8			4/4
C. Sawyers	Member	9/9			4/4		3/3
W. Winters	Member	9/9		6/6	4/4
J. Young^1^	Member	7/7				4/4	3/3
^1^ Mr. Young was elected at the 2023 AGM.
Further details can be found on pages 137 – 142.

136

Board of Directors

Primary responsibilities

• Strategy: decides on the ultimate direction of the Company’s business (including portfolio, markets, acquisitions and divestments), considering also key ESG aspects

• Structure and organization: determines major changes in the Group’s structure and organization

• Culture: oversees the strategy and implementation of the corporate culture

• Ethics and compliance: oversees the Group’s ethics and compliance framework, including the approval of fundamental corporate policies such as the Novartis Code of Ethics

• Risk management: oversees the Group’s risk management system, the most significant risks, and how these risks are managed

• Finance: determines the Group’s accounting system, financial controls and financial planning; and reviews and approves the Annual Report (including the Compensation Report)

• Non-financial reporting: reviews and approves the Group’s annual reporting on non-financial matters

• People and organization: nominates or appoints, removes, and determines responsibilities of key executives, and succession planning

Key activities in 2023

• Oversaw the Company’s strategy to become an innovative medicines company with leading technology in key therapeutic and geographic areas

• Reviewed the set-up and functioning of the Executive Committee in the context of the Company’s organizational structure

• Reviewed in depth the US market and our priorities to accelerate growth and become a top player in the market, including a briefing on our markets

• Discussed updates from all organizational units

• Reviewed and discussed strategic considerations around mergers and acquisitions (including the acquisition of Chinook Therapeutics), and the Company’s larger strategic moves to drive sustainable growth

• Assessed and decided on the structure of Sandoz following the spin-off, including the designated Sandoz board (and its Committees) and the designated leadership team

• Conducted the Sandoz separation through a 100% spin-off, including securing shareholder approval at the extraordinary General Meeting held on September 15, 2023

• Discussed the Company’s ESG strategy, plans and developments, and attended an ESG session jointly organized by the Audit and Compliance Committee and the Governance, Sustainability and Nomination Committee.

• Discussed the upcoming non-financial disclosure regulations and Novartis non-financial reporting governance

• Discussed longer-term Board succession planning and required profiles

• Discussed and reviewed the annual Board self-evaluation

Meetings

Number of meetings held

9

Number of members

13

Approximate average duration (hours)

6:12

Meeting attendance

100%

The Board met nine times in 2023. This included regular meetings in January, April, June, August, October and December, and additional special meetings to deal with ad hoc matters. Board committees typically meet the day before the meetings of the full Board. The Board held virtual, hybrid and physical meetings, with participants joining in person whenever possible.

J. Reinhardt (Board Chair)

9

S. Moroney (Vice-Chair)

9

P. Bula (Lead Independent Director)

9

N. Andrews

9

T. Buechner

9

E. Doherty

9

B. Heller

9

D. Hochstrasser

9

F. van Houten

9

A. de Pro Gonzalo

9

C. Sawyers

9

W. Winters

9

J. Young^1^

7

Documents

• Articles of Incorporation of Novartis AG

• Board Regulations

www.novartis.com/investors/company-overview/corporate-governance

1 Mr. Young was elected at the 2023 AGM and has attended all Board meetings in 2023 following his election.

137

Audit and Compliance Committee

Primary responsibilities

• Supervises the external auditor, and selects and nominates the external auditor for election by the shareholders (FD)**

• Oversees Internal Audit (FD)**

• Oversees accounting policies, financial controls, and compliance with accounting and internal control standards (FD)**

• Approves financial statements for the first three quarters of each calendar year and the corresponding financial results releases (FD)**, and reviews the annual financial statements and the corresponding financial results releases (FBA)***

• Reviews the non-financial data contained in the Group’s annual reporting (FBA)***

• Oversees compliance with laws, regulations and internal policies related to its subject matter expertise (FD)**

• Reviews updates with regards to Quality Assurance and patient safety twice a year and Health Safety & Environment once a year (FD)**

• Reviews updates from the SpeakUp Office twice a year (FD)**

• Reviews the Group’s tax policy every two years (FD)**

• Reviews updates in closed sessions with the Chief Financial Officer, Chief Audit Officer, and external auditor (FD)**

Key activities in 2023

• Reviewed the timelines, milestones and accounting treatment of the Sandoz spin-off

• Reviewed the non-financial reporting

• Reviewed the accounting and financial reporting, focusing on those areas involving significant risk or judgment

• Reviewed and discussed the Company’s approach to non-financial reporting and assurance, including audit scope, processes and the required involvement of the Audit and Compliance Committee (ACC) and the full Board

• In a joint session with the GSNC received an overview of the current and emerging ESG reporting standards and regulations, in addition to the ESG reporting roadmap of Novartis

• Monitored progress on the delivery of the transformation for growth targets

• Received an update on the Novartis fraud risk management framework, including the assessment against the Committee of Sponsoring Organizations of the Treadway Commission (COSO) principles

• Liaised with the Risk Committee to ensure adequate oversight of the Company’s key transformation projects (Enterprise Data Governance and Management and Lean Digital Core (LDC) program)

• Reviewed how Novartis is approaching integrated assurance

• Reviewed the Novartis tax policy

• Evaluated the performance of the external auditor of Novartis, KPMG, during 2023

• Received reports and updates from Internal Audit; Quality; Ethics, Risk & Compliance; the SpeakUp Office; Health, Safety & Environment; and Legal, and discussed progress on identifying and remedying the root causes of any associated issues or problems

Meetings

Number of meetings held

8

Number of members

6

Approximate average duration (hours)

2:30

Meeting attendance

100%

E. Doherty (Chair, Audit Committee Financial Expert)

8

T. Buechner

8

B. Heller

8

D. Hochstrasser

8

F. van Houten

8

A. de Pro Gonzalo (Audit Committee Financial Expert)

8

Documents

• Board Committees Charter, Appendix I to the Board Regulations

www.novartis.com/investors/company-overview/corporate-governance

^*^ A/P = advisory or preparatory task

^**^ FD = fully delegated task

^***^ FBA = task subject to final Board approval

138

Compensation Committee

Primary responsibilities

• Designs, reviews and recommends to the Board the compensation policies and programs (FBA)***

• Advises the Board on the compensation of Board members and the CEO (A/P)*

• Decides on the compensation of Executive Committee members (FD)**

• Prepares the Compensation Report and the Say-on-Pay brochure, and submits them to the Board for approval (FBA)***

Key activities in 2023

• Made decisions relating to Executive Committee and wider employee compensation during the year

• Reviewed the Sandoz Swiss listing prospectus, Say-on-Pay and incentive plan rules including restoration principles for shareholders and equity holders

• Determined the critical performance measures (including financial, strategic, operational, innovation and ESG) to be considered in the Executive incentive plan targets

• Assessed the achievement of incentive plan targets for the Executive Committee members

• Reviewed shareholder and proxy advisor feedback related to Novartis compensation practices and disclosures, in addition to those of peer companies

• Reviewed format of disclosures in the Novartis Compensation Report

• Proposed appropriate peer companies for comparisons of board and executive committee compensation, and assessed the Company’s level of compensation against the peer group

• Reviewed incentive plan rules to secure pay-for-performance alignment while preserving market competitiveness

• Reflected on the effectiveness of the Company’s compensation programs in view of becoming a pure-play innovative medicines company

Meetings

Number of meetings held

6

Number of members

4

Approximate average duration (hours)

1:55

Meeting attendance

100%

S. Moroney (Chair)

6

P. Bula

6

B. Heller

6

W. Winters

6

Documents

• Board Committees Charter, Appendix I to the Board Regulations

www.novartis.com/investors/company-overview/corporate-governance

^*^ A/P = advisory or preparatory task

^**^ FD = fully delegated task

^***^ FBA = task subject to final Board approval

139

Governance, Sustainability and Nomination Committee

Primary responsibilities

• Oversees the Company’s strategy, governance and progress on sustainability, including access to medicine and healthcare, global health, environmental sustainability, human capital management and other material ESG aspects (FBA)***

• Recommends corporate governance best practices to the Board (FBA)***

• Reviews the Articles of Incorporation and Board Regulations on a periodic basis (FD)**

• Reviews the composition and size of the Board and its committees as well as the skills matrix on a regular basis (FBA)***

• Identifies new Board member candidates and recommends to the Board whether existing Board members should stand for re-election (FBA)***

• Prepares and reviews succession plans for the Board Chair, the Vice-Chair, the Lead Independent Director, Board members, committee members and chairs, and the CEO (FBA)***

• Reviews the independence of each Board member on an annual basis (FBA)***

• Reviews directorships and agreements of Board members for conflicts of interest, and deals with conflicts of interest (FBA)***

Key activities in 2023

• Discussed the composition of, and the succession for, the Novartis Board and its committees on a regular basis

• Discussed benchmarking data concerning the board size, composition, diversity, and committee structure of peer companies

• Discussed the candidates for the Sandoz board and the Sandoz board committee structure

• Discussed the new Swiss legal requirements on non-financial reporting and the corresponding shareholder vote on the 2023 report on non-financial matters at the 2024 AGM

• Reviewed an update on ESG Strategy with a focus on trends regarding ESG disclosure regulations, access to medicines and environmental sustainability

• Regularly reviewed updates on the ESG Scorecard to track progress against the sustainability targets for Innovation & Access, Human Capital Management, Environmental Sustainability and Ethical Standards; reviewed the 2024 ESG targets

• Received an update on access to medicines, including the implementation of the Novartis access principles

• Received an update on human capital management focused on leadership development, our company culture, the care agenda for associates, and hybrid working

• Received an update on environmental sustainability, which covered performance against the targets of Novartis for climate, water, and waste, the impact of the Sandoz separation, the approach to reducing scope 3 emissions (including supplier engagement), and the Novartis carbon reduction glidepath to Net Zero in 2024.

• Reviewed the company’s performance to date and upcoming regulations and future Novartis targets on gender balance, equal pay, and pay transparency

• In a joint education session with the ACC received an overview of the current and emerging ESG reporting standards and regulations, in addition to the ESG reporting roadmap of Novartis

• Evaluated the results of the 2023 AGM as well as investor and analyst feedback from ESG and Governance roadshows held during 2023

• Reviewed and updated the Board Skills Matrix

Meetings

Number of meetings held

4

Number of members

5

Approximate average duration (hours)

2:03

Meeting attendance

100%

P. Bula (Chair)

4

B. Heller

4

D. Hochstrasser

4

C. Sawyers

4

W. Winters

4

Documents

• Board Committees Charter, Appendix I to the Board Regulations

www.novartis.com/investors/company-overview/corporate-governance

^*^ A/P = advisory or preparatory task

^**^ FD = fully delegated task

^***^ FBA = task subject to final Board approval

140

Risk Committee

Primary responsibilities

• Oversees the risk management system and processes (FBA)***

• Reviews, together with management, the prioritization and handling of risks, the risk portfolio, and actions implemented by management (FBA)***

• Performs deep dives into key risk areas and fosters a culture of smart risk-taking (FBA)***

• Reviews updates on cyber security on an annual basis (FD)**

• Reviews regular updates from designated risk owners as well as the Chief Ethics, Risk & Compliance Officer and/or the Head of Risk & Resilience (FD)**

Key activities in 2023

• Received updates on Enterprise Risk Management mitigation measures and results

• Received an update on European Union regulatory measures and its associated risks and opportunities

• Reviewed and discussed the current risks associated with key product launches in China and the US

• Evaluated the risks associated with current geopolitical developments

• Discussed the key risks associated with data science and artificial intelligence

• Received an update on the Company’s supply network

• Received an update on the main risks in our Research and Development organizational units

• Reviewed the Source-to-Pay risks and mitigations

• Received a deep-dive update on cyber security, including on data loss protection

• Discussed enterprise data management and Lean Digital Core/ERP design and implementation

Meetings

Number of meetings held

4

Number of members

5

Approximate average duration (hours)

1:52

Meeting attendance

100%

T. Buechner (Chair)

4

N. Andrews

4

E. Doherty

4

A. de Pro Gonzalo

4

J. Young^1^

4

Documents

• Board Committees Charter, Appendix I to the Board Regulations

www.novartis.com/investors/company-overview/corporate-governance

^*^ A/P = advisory or preparatory task

^**^ FD = fully delegated task

^***^ FBA = task subject to final Board approval

1 Mr. Young became a member of the Risk Committee after the 2023 AGM and has attended all Risk Committee meetings in 2023 following his election.

141

Science & Technology Committee

Primary responsibilities

• Monitors emerging scientific, data-related, technological and research trends and issues, and brings recommendations to the Board (FBA)***

• Informs the Board on a periodic basis about critical developments for the success of the portfolio and for scientific, technological and research activities as well as benchmarking (A/P)*

• Assists the Board with setting the Company’s strategy for science, data, technology and research (A/P)*

• Assists the Board with oversight and evaluation of the performance of the Company’s scientific, technological and R&D activities (FBA)***

• Reviews performance and proposed targets in the area of science, technology and research (FD)**

• Reviews other matters in relation to science, data, technology and research that the committee may, at its own discretion, deem desirable in connection with its responsibilities (A/P)*

Key activities in 2023

• Reviewed the strategy of our Biomedical Research organizational unit with its new leadership

• Reviewed the strategy of the Novartis Venture Fund, and provided input on its future direction

• Provided input on the Novartis plan for future equity investing

• Reviewed R&D performance metrics, including benchmarking, and the Biomedical Research and Development organizational units’ plans to enhance performance

• Provided guidance to Merger & Acquisition (M&A) and Business Development & Licensing (BD&L) teams on scientific aspects of key deals

• Discussed the strategy of our Development organizational unit with its new leadership

Meetings

Number of meetings held

3

Number of members

6

Approximate average duration (hours)

3:35

Meeting attendance

100%

J. Reinhardt (Chair)

3

N. Andrews

3

F. van Houten

3

S. Moroney

3

C. Sawyers

3

J. Young^1^

3

Documents

• Board Committees Charter, Appendix I to the Board Regulations

www.novartis.com/investors/company-overview/corporate-governance

^*^ A/P = advisory or preparatory task

^**^ FD = fully delegated task

^***^ FBA = task subject to final Board approval

1 Mr. Young became a member of the Science and Technology Committee after the 2023 AGM and has attended all Science and Technology Committee meetings in 2023 following his election.

142

Board Chair

The Board Chair leads the Board to represent the interests of all stakeholders and ensures an appropriate balance of power between the Board and the Executive Committee. In this role, the Board Chair:

• Provides leadership to the Board

• Supports and mentors the CEO

• Ensures that the Board and its committees work effectively

• Sets the agenda, style and tone of Board discussions, promoting constructive dialogue and effective decision-making

• Ensures onboarding programs for new Board members, and continuous education for and specialization of all Board members

• Ensures the Board’s annual performance evaluation

• Promotes effective relationships and communication between Board and Executive Committee members

• Ensures effective communication with the Company’s shareholders, other stakeholders and the public

Vice-Chair and Lead Independent Director

Vice-Chair

The Vice-Chair has the following responsibilities:

• Leads the Board in the event that, and for as long as, the Board Chair is incapacitated

• Leads the yearly session of the Board members to evaluate the performance of the Board Chair, during which the Board Chair is not present

The Vice-Chair also provides advice and support to the Board Chair.

Lead Independent Director

To support adequate control mechanisms, the Board Regulations outline the role of the Lead Independent Director. The Lead Independent Director has the following responsibilities:

• Chairs the sessions of the independent Board members

• Leads the independent Board members in the event of a crisis or matter requiring their separate consideration or decision

The roles of the Vice-Chair and the Lead Independent Director can be held by two Board members or by one Board member (combined role).

The Board appointed Simon Moroney as Vice-Chair and Patrice Bula as Lead Independent Director, both roles effective as of March 4, 2022.

Honorary Chairman

Alex Krauer and Daniel Vasella were appointed Honorary Chairmen in recognition of their significant achievements on behalf of Novartis. In December 2021, Mr. Krauer passed away at the age of 90.

Mr. Vasella is not provided with Board documents and does not attend Board meetings.

Mandates outside the Novartis Group

According to article 34, paragraph 1 of the Articles of Incorporation (www.novartis.com/investors/company- overview/corporate-governance), the following limitations on mandates apply:

	Maximum number <br> of mandates
Mandates	10
Other listed companies^1^	4
^1^ Holding a chair position of the board of directors in other listed companies counts as two mandates.

According to article 34, paragraph 3 of the Articles of Incorporation (www.novartis.com/investors/company- overview/corporate-governance), the following mandates are not subject to the above-mentioned limitations:

	Maximum number <br> of mandates
Mandates in companies that are controlled by Novartis AG	No limit
Mandates held at the request of Novartis AG or companies controlled by it	5

”Mandates” shall mean any membership in the board of directors, in the executive board or in the advisory board, or a comparable function under foreign law, in a company with an economic purpose. Mandates in different legal entities that are under joint control are deemed to be one mandate.

For a full list of all external mandates subject to the above-mentioned limitations, please refer to the Compensation Report (see “—Item 6.B Compensation—”Mandates outside the Novartis Group”).

143

Executive Committee

Composition (as per December 31, 2023)Vasant (Vas) NarasimhanChief Executive OfficerShreeram AradhyePresident, Development& Chief Medical OfficerVictor BultoPresident, USAharon (Ronny) GalChief Strategy & Growth OfficerKaren L. HaleChief Legal OfficerPatrick HorberPresident,InternationalHarry KirschChief Financial OfficerRobert (Rob) KowalskiChief People & Organization OfficerSteffen LangPresident, OperationsFiona H. MarshallPresident, BiomedicalResearchKlaus MoosmayerChief Ethics, Risk & Compliance Officer

Changes to the Executive Committee

Marie-France Tschudin, President of the Innovative Medicines International unit and Chief Commercial Officer since 2022, stepped down from her role effective September 15, 2023. The unit was renamed ‘International’ and was led by Mukul Mehta, its chief financial officer, on an ad interim basis from September 16, 2023 to November 30, 2023. Mukul was not a member of the Executive Committee during this period. Patrick Horber, M.D. became President, International, and a member of the Executive Committee effective December 1, 2023. The biography of Marie-France Tschudin can be found in the 2022 Annual Report (page 151), available at www.novartis.com/news/media-library/novartis-annual-report-2022.

Role of the Executive Committee

The Board has appointed the Executive Committee members and delegated the overall responsibility for and oversight of the operational management of Novartis to them, including:

• Recruiting, appointing and promoting senior management

• Ensuring the efficient operation of the Group and the achievement of optimal results

• Promoting an active internal and external communications policy

• Developing policies and strategic plans for Board approval, and implementing those approved

• Submitting the following to the Board for approval: investments, divestments, transactions, contracts and litigations with a value exceeding USD 500 million, and capital market and other important financing transactions, as well as all other matters of fundamental significance to the Novartis Group

• Preparing and submitting quarterly and annual reports to the Board and its committees

• Informing the Board of all matters of fundamental significance to the businesses

• Dealing with any other matters delegated by the Board

There are no contracts between Novartis and third parties whereby Novartis would delegate any business management tasks to such third parties.

144

CEO

With the support of the Executive Committee, the CEO is responsible for the operational management of Novartis. This includes effectively implementing the Company strategy, delivering financial results, and shaping a corporate culture of empowerment and responsibility to help drive innovation, performance and reputation.

In addition to other Board-assigned duties, the CEO leads the Executive Committee, and is responsible for building and maintaining an effective executive team. With the support of the Executive Committee, the CEO is responsible for:

• Ensuring Novartis has the capabilities to achieve its long-term strategic objectives

• Developing robust management succession and development plans for presentation to the Board

• Promoting effective communication with shareholders and other stakeholders

• Ensuring Novartis conducts its business in a legal and ethical manner

• Developing an effective risk control framework for all business activities

• Ensuring the flow of information to the Board is accurate, timely and clear

Diversity

The composition of the Executive Committee of Novartis as of December 31, 2023, in terms of nationality, gender, age and length of tenure, is shown in the following charts:

Diversity profileNationality1pAmerican41%pGerman18%pSwiss18%pBritish9%pSpanish9%pIsraeli5%GenderpMale82%pFemale18%Agep<450%p455018%p>5082%Tenurep<2y45.5%p24y18%p>4y36.5%1Please note that three Executive Committee members have dual nationalities. Each of these nationalities is counted as a half in the above chart.

Mandates outside the Novartis Group

According to article 34, paragraph 2 of the Articles of Incorporation (www.novartis.com/investors/company-overview/corporate-governance), the following limitations on mandates apply:

	Maximum number <br> of mandates
Mandates	6
Other listed companies^1^	2
^1^ Holding a chair position of the board of directors in other listed companies is not allowed.

According to article 34, paragraph 3 of the Articles of Incorporation (www.novartis.com/investors/company-overview/corporate-governance), the following mandates are not subject to the above-mentioned limitations:

	Maximum number <br> of mandates
Mandates in companies that are controlled by Novartis AG	No limit
Mandates held at the request of Novartis AG or companies controlled by it	5

”Mandates” shall mean any membership in the board of directors, in the executive board or in the advisory board, or a comparable function under foreign law, in a company with an economic purpose. Mandates in different legal entities which are under joint control are deemed one mandate.

For a full list of all external mandates subject to the above-mentioned limitations, please refer to the Compensation Report (see “—Item 6.B Compensation—”Mandates outside the Novartis Group”).

145

Members of the Executive Committee

Vasant (Vas) Narasimhan, M.D.

Chief Executive Officer of Novartis since 2018 | Nationality: American | Year of birth: 1976

Professional experience

• Global Head of Drug Development and Chief Medical Officer, Novartis AG, Switzerland (2016–2018)

• Global Head of Development, Novartis Pharmaceuticals, Switzerland (2014–2016)

• Global Head of Biopharmaceuticals and Oncology Injectables, Sandoz International, Germany (2014)

• Global Head of Development, Novartis Vaccines, US (2012–2014)

• North America Region Head, Novartis Vaccines, and US Country President, Novartis Vaccines and Diagnostics, US (2008–2012)

• Joined Novartis in 2005

Mandates

• Member, National Academy of Medicine, US

• Committee member, Biopharmaceutical CEOs Roundtable (BCR), International Federation of Pharmaceutical Manufacturers & Associations (IFPMA), Switzerland

• Board member and treasurer, Pharmaceutical Research and Manufacturers of America (PhRMA), US

Education

• Doctor of medicine, Harvard Medical School, US

• Master’s degree in public policy, John F. Kennedy School of Government, Harvard University, US

• Bachelor’s degree in biological sciences, University of Chicago, US

Shreeram Aradhye, M.D.

President, Development & Chief Medical Officer since May 16, 2022 | Nationality: American | Year of birth: 1962

Professional experience

• Executive vice president & chief medical officer, Dicerna Pharmaceuticals, US (2020–March 2022)

• Executive vice president & chief development officer, Axcella Health, US (2019–2020)

• Global Head, Medical Affairs and Chief Medical Officer, Pharmaceuticals, Novartis, US & Switzerland (2017–2019)

• Global Head, Development Franchise, Neuroscience, and US Head, Development, Novartis, US & Switzerland (2013–2017)

• Executive Global Program Head, Multiple Sclerosis, Novartis, Switzerland (2012–2013)

• Head, Global Development India, Novartis, India (2011–2012)

• Head, Global Clinical Development & Medical Affairs, Biosimilars, Sandoz, Germany (2009–2011)

• Joined Novartis in 1999 holding positions of increasing responsibility

Education

• Chief resident and teaching fellow in internal medicine, Newton Wellesley Hospital, US

• Resident in internal medicine, Newton Wellesley Hospital, US

• Fellow in nephrology, St Luke’s Roosevelt Medical Center, US

• Resident in internal medicine (M.D.), All India Institute of Medical Sciences, India

• Bachelor of medicine and bachelor of surgery, All India Institute of Medical Sciences, India

Victor Bulto

President, US since April 4, 2022 | Member of the Executive Committee as of May 1, 2022 | Nationality: Spanish |
Year of birth: 1978

Professional experience

• President, Novartis Pharmaceuticals Corporation, US (2019–April 2022)

• Vice President & Head US Immunology & Dermatology Franchise, US (2017–2019)

• Vice President & Head US Alcon Pharmaceuticals, US (2016–2017)

• Head Neuroscience Franchise, Region Europe, Novartis, Switzerland (2013–2016)

• Business Franchise Head Neuroscience, Novartis, Spain (2012–2013)

• Business Franchise Head Neuroscience/MS, Respiratory, Osteoarticular, Spain, Novartis (2010–2012)

• Marketing Head Respiratory, Osteoarticular, Novartis, Spain (2009–2010)

Mandates

• Board member, Biotechnology Innovation Organization (BIO), US

Education

• Master of business administration, ESADE Business School, Spain

• Master’s degree in health economics and pharmacoeconomics, Pompeu Fabra University Spain

• Master’s degree in chemical engineering, Ramon Llull University, Spain

• Bachelor’s of science degree in chemistry, Ramon Llull University, Spain

146

Aharon (Ronny) Gal, Ph.D.

Chief Strategy & Growth Officer since July 18, 2022 | Nationality: Israeli/American | Year of birth: 1966

Professional experience

• Senior analyst, US biopharmaceutical, Sanford Bernstein, US (2020–June 2022)

• Senior analyst, US specialty pharmaceuticals and Biotech, Sanford Bernstein, US (2016–2020)

• Senior analyst, US specialty pharmaceuticals and EU mid-cap pharmaceuticals, Sanford Bernstein, US, UK (2013–2016)

• Senior analyst, US specialty pharmaceuticals, Sanford Bernstein, US (2004–2013)

• Vice president, Canon US Life Sciences, US (2003–2004)

• Consultant, team leader, manager, The Boston Consulting Group, Inc., US, Singapore, China (1996–2002)

Education

• Doctorate in biochemistry, Massachusetts Institute of Technology, US

• Bachelor’s degree in chemistry, Emory University, US

Karen L. Hale

Chief Legal Officer of Novartis since May 15, 2021 | Nationality: American | Year of birth: 1968

Professional experience

• Vice president, deputy general counsel, AbbVie Inc., US (2019–2021)

• Vice president, chief ethics and compliance officer, AbbVie Inc., US (2013–2019)

• Vice president, litigation and legal specialty operations, AbbVie Inc., US (2013)

• Divisional vice president, commercial litigation, Abbott Laboratories, US (2006–2012)

• Began practicing law in 1994 and joined Abbott in 1997

Education

• Bar memberships: Illinois and Virginia, US

• Juris doctor, William & Mary Law School, US

• Bachelor’s degree in economics, Duke University, US

Patrick Horber

President, International since December 1, 2023 | Nationality: Swiss | Year of birth: 1970

Professional experience

• Senior vice president, AbbVie, president Immunology, AbbVie, US (July 2023–September 2023)

• President, US commercial operations, Immunology, AbbVie, US (2020–June 2023)

• Vice president and head of global marketing and commercial operations, AbbVie, US (2019–2020)

• Vice president and managing director, AbbVie, Germany (2015–2019)

• Managing director, AbbVie, Switzerland (2013–2015)

• Managing director, Abbott, Switzerland (2012–2012)

• Leadership roles at headquarters and country operations, Roche (2005–2012)

Mandates

• Member of the board and chair of the strategy and politics committee, Verband Forschender Arzneimittelhersteller, Germany (2016–2019)

• Chair of the executive committee and member of the presidents bureau, Interpharma, the association of Switzerland’s research-based pharmaceutical industry (2015–2015)

• Member of the executive committee and the board, Interpharma (2013–2015)

Education

• Doctor of medicine (M.D.), University of Zurich, Switzerland

Harry Kirsch

Chief Financial Officer of Novartis since 2013 | Nationality: German/Swiss | Year of birth: 1965

Professional experience

• Chief Financial Officer of the Pharmaceuticals Division, Novartis Pharmaceuticals, Switzerland (2010–2013)

• Chief Financial Officer of Pharma Europe, Novartis Pharmaceuticals, Switzerland (2008–2010)

• Head of Business Planning & Analysis for the Pharmaceuticals Division, Novartis Pharmaceuticals, Switzerland (2005–2008)

• Joined Novartis in 2003 as Head Finance Global Primary Care, and over the years held positions of increasing responsibility within Finance

Mandates

• Represented Novartis on the board of GlaxoSmithKline Consumer Healthcare Holdings Ltd. (2015–2018)

Education

• Diploma degree in industrial engineering and economics, University of Karlsruhe, Germany

147

Robert (Rob) Kowalski

Chief People & Organization Officer of Novartis since September 1, 2021 | Nationality: American | Year of birth: 1968

Professional experience

• Executive Vice President and Global Head of Regulatory Affairs (2018–2021), and US Head of Global Drug Development (2009–2015 and 2017–2021), Novartis Pharmaceuticals Corporation, US

• Ad interim President, Novartis Corporation, US (2021)

• Ad interim Head of Global Drug Development and Chief Medical Officer, Novartis AG, Switzerland (2018)

• Senior Vice President and Head of Regulatory Affairs, Novartis Pharmaceuticals Corporation, US (2009–2015 and 2017–2018)

• Senior Vice President and Head of Regulatory Affairs, Novartis Pharma AG, Switzerland (2015–2017)

• Global Head of Country Medical Development, Novartis Pharmaceuticals Corporation, US (2010–2011)

• Previously held regulatory leadership roles at Schering-Plough Corporation (now Merck) and Pharmacia Corporation (now Pfizer)

Mandates

• Member of the advisory board, Industry Pharmacists Organization, US

Education

• Doctor of pharmacy, University of Wisconsin-Madison, US

• Bachelor’s degree in pharmaceutical sciences, University of Wisconsin-Madison, US

Steffen Lang, Ph.D.

President, Operations since April 4, 2022 | Nationality: German/Swiss | Year of birth: 1967

Professional experience

• Global Head of Novartis Technical Operations (NTO), Switzerland (2017–April 2022)

• Global Head of Biologics Technical Development and Manufacturing, Novartis Technical Operations, Switzerland (2015–2017)

• Global Head of Technical Research and Development, Novartis Pharmaceuticals, Switzerland (2009–2015)

• Joined Novartis in 1994 as Head of Laboratory in Research, and over the years held positions of increasing responsibility within Pharmaceuticals Development

Mandates

• Board member, Bachem Holding AG, Switzerland

Education

• Doctorate in pharmaceutical technology, Swiss Federal Institute of Technology, Switzerland

• Master’s degree in pharmaceutical sciences, University of Heidelberg, Germany

Fiona H. Marshall, Ph.D.

President, Biomedical Research since November 1, 2022 | Nationality: British | Year of birth: 1964

Professional experience

• Senior vice president, head of discovery, preclinical and translational medicine, Merck & Co., US, (2021–September 2022)

• Vice president, global head of neuroscience, Merck & Co., US (2019–2021)

• Vice president, head of UK discovery research, Merck & Co., UK (2018–2019)

• Executive vice president and chief scientific officer, Sosei Heptares, UK (2015–2018)

• Chief scientific officer and founder, Heptares Therapeutics, UK (2006–2018)

Mandates

• Member of the Scientific Advisory Board, SciLifeLab, Sweden

• Fellow, Royal Society, UK Academy of Medical Sciences, and Royal Society of Biology, all UK

Education

• Doctorate in neuroscience, University of Cambridge, UK

• Bachelor’s degree in biochemistry, University of Bath, UK

Klaus Moosmayer, Ph.D.

Chief Ethics, Risk & Compliance Officer of Novartis since 2018 | Nationality: German | Year of birth: 1968

Professional experience

• Chief compliance officer, Siemens AG, Germany (2014–2018)

• Chief counsel compliance, Siemens AG, Germany (2009–2013)

• Compliance operating officer, Siemens AG, Germany (2007–2009)

Mandates

• Board member, SwissHoldings, the Swiss federation representing Swiss-based multinational companies, Switzerland

• Member of the executive board, Business at OECD (BIAC), Paris

• Co-founder and honorary board member, European Chief Compliance and Integrity Officers’ Forum

• Co-chair, B20 Integrity & Compliance Task Force under the G20 presidencies of Indonesia (2022), Italy (2021), Saudi Arabia (2020), Argentina (2018), and Chair of the Task Force under the G20 presidency of Germany (2017)

• Chair of the Anti-Corruption Committee of the Business and Industry Advisory Committee (BIAC), Organization for Economic Co-operation and Development (OECD), Paris (2013–2020)

Education

• First and second state examination in law, Germany

• Doctor of jurisprudence, University of Freiburg, Germany

148

Information and control systems

The Board’s information and control systems vis-à-vis management include a steady flow of information from senior management; monthly financial reports; a comprehensive and integrated risk management framework; and the independent evaluation of our risk management and internal control framework by the Internal Audit function (see “Item 15. Controls and Procedures”).

Information from senior management

The Board ensures that it receives sufficient information from the Executive Committee through:

• Monthly CEO reporting (encompassing progress against company targets, including financial results) and frequent communications from the CEO on current developments

• Executive Committee meeting minutes

• Regular meetings and teleconferences by the Board and/or Board committees with the CEO and/or other members of the Executive Committee (e.g., the CFO, the Chief Legal Officer, the Chief Ethics, Risk & Compliance Officer), and regular meetings and teleconferences with senior management (e.g., the Chief Audit Officer)

• Information from Executive Committee members or other Novartis employees, and visits to Novartis sites

To obtain an outside view, the Board and/or Board committees occasionally invite external advisors (e.g., the independent advisor of the Compensation Committee, the external auditor) to attend a meeting and/or share their observations about a specific topic.

Monthly financial reports

Novartis produces comprehensive, consolidated (unaudited) financial statements on a monthly basis for the Company. These are typically available within 10 days after the end of the month, and include the following:

• Consolidated income statement of the month and year to date, in accordance with IFRS Accounting Standards, as well as adjustments to arrive at non-IFRS measures core results, as defined by Novartis (see “Item 5. Operating and Financial Review and Prospects—Item 5.A Operating results—Non-IFRS measures as defined by Novartis”). The IFRS Accounting Standards and non-IFRS measures core figures are compared with the prior-year period and targets in both USD and on a constant currency basis.

• Supplementary data on a monthly and year-to-date basis, such as free cash flow and earnings per share on a USD basis

Management information related to the consolidated income statements and free cash flow is made available to Board members through the monthly CEO Report, which includes an analysis of key deviations from the prior year or target.

Prior to the release of each quarter’s results, the Board receives the actual consolidated financial statement information and an outlook of the full-year results in accordance with IFRS Accounting Standards and non-IFRS measures core results (as defined by Novartis), together with related commentary.

Annually, during the third quarter, the Board approves the Company’s strategic plan for the next three years. In the fourth quarter of the year, the Board approves the operating targets for the following year as well as the financial targets for the following three-year period, including a projected consolidated income statement in USD prepared in accordance with IFRS Accounting Standards and non-IFRS measures as defined by Novartis (core results).

The Board does not have direct access to the Novartis financial and management reporting systems but can, at any time, request more detailed information.

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Risk management

Overview

At Novartis, our continued success depends on our ability to manage risk. Our Board has ultimate oversight of the Enterprise Risk Management (ERM) system and regularly reviews the most significant risks and how these risks are managed. As explained further below, the Board is supported by its committees. Furthermore, our Internal Audit function provides an independent evaluation of risk management (see “—Item 6.C Board practices—Information and control systems—Internal Audit”).

Board committees

Risk committee

• Oversees the risk management system and processes

• Reviews, together with management, the prioritization and handling of risks, the risk portfolio, and actions implemented by management

• Performs deep dives into key risk areas and fosters a culture of smart risk-taking

• Receives updates on cyber security on an annual basis

• Receives regular updates from designated risk owners as well as the Chief Ethics, Risk & Compliance Officer and/or the Head of Risk & Resilience

Audit and compliance committee

• Ensures that Internal Audit plans are aligned with key risks, and that the function provides independent assurance and insights around these risks

• Works closely with the Risk Committee to minimize gaps in risk coverage

• Receives a semiannual presentation from the Chief Ethics, Risk & Compliance Officer

• Receives a quarterly presentation from the Chief Audit Officer on progress achieved in implementing the risk-based audit plan, and key insights about audit and advisory activities

• Pays particular attention to financial risk

• Has closed sessions with the Chief Audit Officer and, upon request, with the Chief Ethics, Risk & Compliance Officer

Compensation committee

• Works closely with the Risk Committee to ensure that the compensation system does not lead to excessive risk-taking (see “—Item 6.B Compensation—Compensation governance—Risk management principles”)

Executive committee of NOVARTIS

• Regularly assesses risks and fosters a culture of risk awareness, in line with the Novartis Values and Behaviors and the Novartis Code of Ethics

Ethics, risk & compliance

• Governs the Novartis Code of Ethics

• Provides an integrated ERM framework (which is further described in the following section)

• Governs the global compliance program within Novartis

• Administers the Enterprise Policy Management and global Internal Controls framework

SENIOR LEADERS OF ORGANIZATIONAL UNITS AND GLOBAL FUNCTIONS, AT ALL LEVELS

• Provide appropriate risk management within their area of responsibility

• Establish adequate risk prevention and mitigation strategies when risk exposure is identified, including tracking progress and providing resources for possible actions

• Assess emerging risks, trends and overall exposure as part of the ERM process

Enterprise Risk Management framework

The Ethics, Risk & Compliance (ERC) function provides an integrated ERM framework to obtain a holistic view of Company risks and drive a culture of smart risk-taking. Under the leadership of the Chief Ethics, Risk & Compliance Officer, the Risk & Resilience team is responsible for the overall ERM process. This process covers, but is not limited to, risks associated with:

• The research, development, manufacturing, marketing and sales of products

• Finance, taxes, intellectual property, compliance with law and regulations, security, product safety, technology, human resources, and health, safety and environmental protection

• Business objectives and strategies, including mergers and acquisitions

• External factors such as the social, political and economic environment

The ERM process continued to evolve in 2023. The Risk & Resilience team conducted risk workshops and collaborated with all risk assurance and monitoring functions to identify key risks across the Company. Each Novartis unit organized a focused risk workshop including leadership team members. In parallel, risk workshops were held in top countries by revenue and in certain focus markets. Once key risks were identified, mitigation action plans were created to address them in an effective way. The findings from these workshops were consolidated into the Novartis Risk Compass, which enables senior management, the Executive Committee and the Board to focus discussions on key risks and more closely align our corporate strategy with our risk exposure and ways of working.

In 2023, we further matured our ERM framework within the Novartis Risk & Resilience organization and developed additional risk management trainings and our risk intelligence forum, an event that brought together internal and external speakers to address emerging trends and threats. We also integrated a critical scope of activities (Health, Safety and Environment environmental remediation) into the Risk & Resilience department. Furthermore, the Enterprise Policy & Internal Control team is progressing as planned to create a holistic framework by linking process governance with policies and controls and the Central Monitoring Coordination team is expanding its scope to ensure a harmonized and coordinated monitoring process across the Company.

SpeakUp Office

Our SpeakUp Office provides a safe place for employees to report potential misconduct, including the option to do so anonymously.

Global Security

Global Security proactively collects and shares threat intelligence to protect Novartis from situations that may compromise the safety of people, products and assets, and/or the reputation of our organization. Global Security protects patients from counterfeit products and, as part of the SpeakUp process, performs fair and timely investigations into high-risk cases of alleged internal misconduct. It also provides personal security advice and support for Novartis executives and other employees with the utmost discretion.

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Internal Audit

The purpose of Internal Audit is to assist the Board and the Executive Committee in discharging their governance responsibilities by providing independent assurance and advice on the effectiveness, efficiency and adequacy of processes and controls that support Novartis in achieving its objectives, managing its major risks, and ensuring compliance with applicable policies, laws and regulations.

The Chief Audit Officer reports administratively to the CEO, and functionally to the chair of the Audit and Compliance Committee (ACC). The Chief Audit Officer meets with the ACC at least once a quarter and confirms the organizational independence of the Internal Audit function to the ACC on an annual basis.

In 2023, our Internal Audit function executed a risk-based audit plan and reported the results to the audited units, the Executive Committee and the ACC. Audit findings and action plans are stored and monitored in a single location to enable efficient and effective follow-up. The following outlines the number of audits and advisories performed in 2023, and key methodology steps when managing the Internal Audit cycle.

2023 Internal Audit Activitiesaudits 28advisories18Internal Audit cycle methodology includes:Planning: Monitoring and information gathering via continuous risk assessment based on data analytics, business interviews and quarterly calibration of the audit plan. The audit plan is approved by the ACC biannually. Execution and Reporting: 46 engagements delivered in 2023, all linked to group risks, emerging topics and company-wide initiatives.Follow Up: Management is responsible for resolving issues, supported by Internal Audit to ensure timely closure of high-risk observations.

Internal Audit performed 77% of planned activities (equating to 46 of 60 engagements) in 2023. Due to methodology redesign and tool development, the internal audit function’s engagement volume was impacted as associates were actively involved in those projects.

151

Auditors

Duration of the mandate and terms of office

On behalf of the Board, the ACC selects and nominates an independent auditor for election at the AGM. KPMG commenced its auditing mandate for Novartis in 2022. Richard Broadbelt, Auditor in charge, and Heidi Broom-Hirst, Global Audit Partner, began serving in their roles in 2022 and 2023, respectively. The ACC together with KPMG will ensure that these partners are rotated at least every five years.

Auditing fees and additional fees

The ACC monitors and preapproves the fees paid to the external auditor for all audit and non-audit services. It has developed and approved a policy with clear guidelines on the engagement of the independent auditor firm. This policy is designed to help ensure that the independence of the external auditor is maintained. It limits the scope of services that the external auditor may provide to the Company, stipulating certain permissible types of audit-related and non-audit services, including tax services and other services that have been preapproved by the ACC. The ACC preapproves all other services on a case-by-case basis.

The external auditor is required to report periodically to the ACC about the scope of the services it has provided to the Company and the fees for the services it has performed to date. KPMG fees for professional services related to the 12-month periods ended December 31, 2023, and December 31, 2022, are as follows:

	2023<br> USD million	2022<br> USD million
Audit services	26.8	22.5
Audit-related services	2.5	0.7
Tax services	0.3	1.2
Other services	0.0	0.0
Total	29.6	24.4

Audit services include work performed to issue opinions on consolidated financial statements and parent company financial statements of Novartis AG, to issue opinions related to the effectiveness of the Company’s internal control over financial reporting, and to issue reports on local statutory financial statements. Also included are audit services that can generally only be provided by the statutory auditor, such as the audits of the Compensation Report, special purpose financial statement in connection with divestment transactions, information systems and the related control environment; and reviews of quarterly financial results.

Audit-related services include other assurance services provided by the independent auditor but not restricted to those that can only be provided by the statutory auditor. They include services such as: the limited assurance over the Novartis in Society Integrated Report, audits of pension and other employee benefit plans; audits in connection with non-recurring transactions; contract audits of third-party arrangements; corporate responsibility assurance; and other audit-related services.

Tax services include tax compliance, assistance with historical tax matters, and other tax-related services.

Other services in 2023 included procedures related to company specific training on emerging topics, benchmarking studies, and license fees for use of accounting and other reporting guidance databases.

Information to the Board and the ACC

The ACC, acting on behalf of the Board, is responsible for overseeing the activities of the external auditor. In 2023, this committee held seven meetings. KPMG was invited to all of these meetings to attend the discussions on auditing matters and any other matters relevant to its audit.

The ACC recommended to the Board to approve the audited consolidated financial statements and the separate parent company financial statements of Novartis AG for the year ended December 31, 2023. The Board proposed the acceptance of these financial statements for approval by the shareholders at the next AGM.

The ACC regularly evaluates the performance of the external auditor and, based on this, once a year determines whether the external auditor should be proposed to the shareholders for re-election. To assess the performance of the external auditor, the ACC requests input from management and holds private meetings with the CFO and the Chief Audit Officer and, if necessary, obtains an independent external assessment. Criteria applied for the performance assessment of the external auditor include an evaluation of: its technical and operational competence; its independence and objectivity; the sufficiency of the resources it has employed; its focus on areas of significant risk to Novartis; its willingness to probe and challenge; its ability to provide effective, practical recommendations; and the openness and effectiveness of its communications and coordination with the ACC, the Internal Audit function and management.

Once a year, the Auditor in charge and the Global Audit Partner report to the Board on the external auditor’s activities during the current year, and on the audit plan for the coming year.

On an annual basis, the external auditor provides the ACC with written disclosures required by the US Public Company Accounting Oversight Board, and the committee and the external auditor discuss the external auditor’s independence from Novartis.

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Information policy

Novartis is committed to open and transparent communication with shareholders, investors, financial analysts, customers, suppliers and other stakeholders. Novartis disseminates information about material developments in its businesses in a broad and timely manner that complies with the rules of the SIX Swiss Exchange and the NYSE.

Communications

Novartis publishes this Annual Report to provide information on the Group’s results and operations. Novartis discloses financial results in accordance with IFRS Accounting Standards on a quarterly basis, and issues press releases from time to time regarding business developments.

Novartis publishes press releases related to financial results and material events to the US Securities and Exchange Commission (SEC) via Form 6-K. An archive containing annual reports, US SEC Form 20-F, quarterly results releases and all related materials – including presentations and conference call webcasts – is available at www.novartis.com/investors.

Novartis also publishes the Novartis in Society Integrated Report, available at www.novartis.com/reportinghub, which provides an overview of our business, strategy and performance, and describes how we create value for stakeholders and society. The Novartis in Society Integrated Report is prepared in accordance with Art. 964b of the Swiss Code of Obligations, and in alignment with recommendations and standards issued by the Integrated Reporting Framework, the Sustainability Accounting Standards Board (SASB), the Global Reporting Initiative (GRI), and the Task Force on Climate-related Financial Disclosures (TCFD).

The information on Board and Executive Committee compensation is outlined in the Compensation Report (see “—Item 6.B Compensation” in general, and for certain compensation information with respect to our Board that is responsive to Item 6.C.2 of Form 20-F, see “—Item 6.B Compensation—2022 Board compensation—Philosophy and benchmarking”). Please also refer to articles 29-35 of the Articles of Incorporation (www.novartis.com/investors/company-overview/corporate-governance). No change-of-control or ‘golden parachute’ clauses benefit Board members, Executive Committee members, or other members of senior management. Employment contracts with Executive Committee members are either for a fixed term not exceeding one year or for an indefinite period with a notice period not exceeding 12 months, and do not contain commissions for the acquisition or transfer of enterprises or severance payments. No loans or credits are granted to Board and Executive Committee members.

Information contained in reports and releases issued by Novartis is only correct and accurate at the time of release. Novartis does not update past releases to reflect subsequent events, and advises against relying on them for current information.

Investor Relations

Investor Relations manages the Company’s interactions with the international financial community. Several events are held each year to provide institutional investors and analysts with various opportunities to learn more about Novartis.

Investor Relations is based at the Company’s headquarters in Basel. Part of the team is located in the US to coordinate interaction with US investors. More information is available at www.novartis.com/investors.

Website information

Topic	Information
Share capital	Articles of Incorporation of Novartis AG <br> https://www.novartis.com/sites/novartiscom/files/statuten-en.pdf<br> Novartis key share data<br> www.novartis.com/investors/share-data-analysis
Shareholder rights	Articles of Incorporation of Novartis AG <br> www.novartis.com/investors/company-overview/corporate-governance
Annual General Meeting of Shareholders	Annual General Meeting of Shareholders<br> www.novartis.com/investors/shareholder-information/annual-general-meeting
Board Regulations	Board Regulations<br> www.novartis.com/investors/company-overview/corporate-governance
Novartis code for senior financial officers	Novartis Code of Ethical Conduct for CEO, ECN and Senior Financial <br> Officers of Novartis<br> www.novartis.com/investors/company-overview/corporate-governance
Novartis in Society Integrated Report	Novartis in Society Integrated Report<br> www.novartis.com/reportinghub
Novartis Annual Report and Form 20-F	Novartis Annual Report and Form 20-F<br> www.novartis.com/reportinghub
Novartis Financial Data	Novartis Financial Data<br> www.novartis.com/investors/financial-data
Press releases	Press releases<br> www.novartis.com/news/news-archive?type=media_release<br> Email service<br> www.novartis.com/news/stay-up-to-date
Additional information (including event calendar, registered <br>office, contact and email addresses, phone numbers, etc.)	Novartis Investor Relations <br> www.novartis.com/investors
The information on our website is not, and shall not be deemed to be, a part of this Annual Report or incorporated herein.

153

Quiet periods

According to our Global Insider Policy, employees who have access to material non-public information on a regular basis are designated as Continuing Insiders and are banned from trading in Novartis securities during quiet periods. Limited exemptions for the expiry of options or warrants within a quiet period apply. Our quarterly quiet periods commence on the first trading day of each calendar quarter and end at the beginning of the first trading day after the subsequent release of the quarterly and/or annual results.

In 2023, the following quiet periods applied:

• January 1, 2023, until (and including) February 1, 2023

• April 1, 2023, until (and including) April 25, 2023

• July 1, 2023, until (and including) July 18, 2023

• October 1, 2023, until (and including) October 24, 2023

154

6.D Employees

The table below sets forth the breakdown of the total year-end number of our full-time equivalent employees by main category of activity and geographic area for the past three years.

For the year ended<br>December 31, 2023<br>(full-time equivalents)	Marketing and<br> sales	Research and<br> development	Production and<br> supply	Operations^1^	General and <br> administration	Total
USA	5 219	5 194	1 310	659	464	12 846
Canada and Latin America	1 732	461	327	1 019	182	3 721
Europe	8 426	8 519	11 811	4 035	1 668	34 459
Asia/Africa/Australasia	12 347	4 061	2 718	5 182	723	25 031
Total	27 724	18 235	16 166	10 895	3 037	76 057
For the year ended<br>December 31, 2022<br>(full-time equivalents)	Marketing and<br> sales	Research and<br> development	Production and<br> supply	Operations^1^	General and <br> administration	Total
USA	6 003	5 358	1 740	825	599	14 525
Canada and Latin America	2 678	514	809	1 071	270	5 342
Europe	14 078	10 483	18 781	5 028	2 483	50 853
Asia/Africa/Australasia	15 856	4 841	3 841	5 513	932	30 983
Total	38 615	21 196	25 171	12 437	4 284	101 703
Thereof continuing operations^2^	30 420	18 681	14 826	12 437	3 313	79 677
Thereof discontinued operations^2^	8 195	2 515	10 345		971	22 026
For the year ended<br>December 31, 2021<br>(full-time equivalents)	Marketing and<br> sales	Research and<br> development	Production and<br> supply	Operations^1^	General and <br> administration	Total
USA	6 074	5 324	1 938	879	654	14 869
Canada and Latin America	3 116	510	1 426	1 116	370	6 538
Europe	15 163	10 307	17 630	5 108	2 613	50 821
Asia/Africa/Australasia	16 927	4 812	3 570	5 696	1 090	32 095
Total	41 280	20 953	24 564	12 799	4 727	104 323
Thereof continuing operations^2^	32 973	18 425	14 165	12 799	3 765	82 127
Thereof discontinued operations^2^	8 307	2 528	10 399		962	22 196
^1^ relates to full time equivalent employees (FTEs) from our Operations unit, excluding the Operations units’ production and supply FTEs
^2^ Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business and continued corporate activities. Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars division and certain corporate activities attributable to Sandoz prior to the spin-off up to the distribution date of October 3, 2023.

As of December 31, 2023, the total number of our full-time equivalent employees decreased by 25 646 compared with December 31, 2022, mainly driven by the Sandoz spin-off at the October 3, 2023, distribution date, and the initiative announced in April 2022 to implement a new, streamlined organizational model.

A significant number of our employees are represented by unions or works councils. We have not experienced any material work stoppages in recent years, and we consider our employee relations to be good.

155

6.E Share ownership

The information set forth under “Item 6. Directors, Senior Management and Employees—Item 6.B Compensation—CEO and Executive Committee—Additional disclosures and other statutory information—Shares, ADRs and other equity rights owned by Executive Committee members as at December 31, 2023” and under “Item 6. Directors, Senior Management and Employees—Item 6.B Compensation—Board compensation—Shares, ADRs and share options owned by Board members” is incorporated by reference. For more information on our equity-based participation plans, see the information set forth under “Item 18. Financial Statements—Note 27. Equity‑based participation plans for employees,” which is incorporated by reference.

6.F Erroneously awarded compensation

Not applicable.

156

Item 7. Major Shareholders and Related Party Transactions

7.A Major shareholders

Novartis shares are widely held. As of December 31, 2023, Novartis had approximately 183 000 shareholders listed in the Share Register of Novartis, representing approximately 56.8% of issued shares. Based on the Novartis Share Register and excluding treasury shares, approximately 54.6% of the shares registered by name were held in Switzerland, and approximately 24.7% were held in the US. Approximately 20.0% of the shares registered in the Share Register were held by individual investors, while approximately 41.7% were held by legal entities, excluding 10.2% of our share capital held as treasury shares by Novartis AG or its fully owned subsidiaries (including Swiss foundations controlled by Novartis AG), and 38.3% were held by nominees, fiduciaries and the ADS depositary. Due to a change in Swiss corporate law, as of January 1, 2023, Novartis ordinary shares held by Swiss foundations controlled by Novartis AG (Foundation Shares) no longer carry the right to vote. As a result, these Foundation Shares are excluded from the calculation of the shares registered in the Share Register in the same way, as described above, that our treasury shares are excluded.

Based on the Share Register, we believe that we are not directly or indirectly owned or controlled by another corporation or government, or by any other natural or legal persons. There are no arrangements that may result in a change of control.

The tables below set forth information with respect to our major shareholders according to the Share Register as of December 31, 2023, excluding 10.2% of our share capital held as treasury shares by Novartis AG or its fully owned subsidiaries (including Swiss foundations controlled by Novartis AG). The following registered shareholders (including nominees and the ADS depositary) held more than 2% of the total share capital of Novartis with the right to vote all their Novartis shares based on an exemption granted by the Board of Directors:

		% of respective share capital beneficially owned as of:
	Ordinary shares<br> beneficially owned as of <br> Dec 31, 2023	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021
Shareholders registered for their own account:
Emasan AG, Basel, Switzerland^1^	89 135 960	3.9	3.7	3.7
UBS Fund Management (Switzerland) AG, Basel, Switzerland	60 962 889	2.7	2.3	2.3
Credit Suisse Funds AG, Zurich, Switzerland	50 178 623	2.2	2.1	2.1
^1^ According to a disclosure notification filed with Novartis AG and the SIX Swiss Exchange, the beneficial owner of the shares registered for Emasan AG is Sandoz - Fondation de Famille, Liechtenstein.								% of respective share capital held as of:
---	---	---	---	---
	Ordinary shares<br> held as of <br> Dec 31, 2023	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021
Shareholders registered as nominees:
Nortrust Nominees Ltd., London, England	82 324 675	3.6	3.8	4.2
The Bank of New York Mellon, New York, NY	66 451 778	2.9	2.9	3.0
Through The Bank of New York Mellon, Everett, MA	34 094 134	1.5	1.6	1.6
Through The Bank of New York Mellon, New York, NY	22 963 391	1.0	0.9	1.1
Through The Bank of New York Mellon, SA/NV, Brussels, Belgium	9 394 253	0.4	0.4	0.3
Chase Nominees Ltd., London, England	—^1^	—	8.4	8.8
Shareholder acting as American Depositary Share (ADS) depositary:
JPMorgan Chase Bank, N.A., New York, NY	190 038 312	8.3	9.4	11.1
^1^ Chase Nominees Ltd. (Chase) has informed us that as of December 2023, it will no longer register any shareholding positions on its own behalf. Shares held by customers of Chase will be registered for such customer’s own account.

According to a disclosure notification filed with Novartis AG, Norges Bank (Central Bank of Norway), Oslo, Norway, held 2.4% of the share capital of Novartis AG, or 55 319 441 shares, as of December 31, 2023, but was not registered in the Share Register as of December 31, 2023. Provided that these shares are registered in the

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Share Register on the record date of the Annual General Meeting, Norges Bank will have full voting rights for all of these shares.

According to a disclosure notification filed with Novartis AG and the SIX Swiss Exchange, BlackRock, Inc., New York, NY, held between 5% and 10%, but was registered with less than 2% of the share capital of Novartis AG in the Share Register as of December 31, 2023.

As of December 31, 2023, no other shareholder was registered as owner of more than 2% of the registered share capital.

The Articles of Incorporation provide that no shareholder shall be registered with the right to vote shares comprising more than 2% of the registered share capital. The Board of Directors may, upon request, grant an exemption from this restriction. Considerations include whether the shareholder supports the Novartis goal of creating sustainable value and has a long-term investment horizon. Exemptions are in force for the registered major shareholders as described above. Novartis has not entered into any agreement with any shareholder regarding the voting or holding of Novartis shares.

7.B Related party transactions

The information set forth under “Item 18. Financial Statements—Note 28. Transactions with related parties” is incorporated by reference.

7.C Interests of experts and counsel

Not applicable.

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Item 8. Financial Information

8.A Consolidated statements and other financial information

See “Item 18. Financial Statements.”

Dividend policy

Subject to the dividend policy described below, our Board of Directors expects to recommend the payment of a dividend in respect of each financial year. If approved by our shareholders at the relevant annual shareholders’ meeting, the dividends will be payable shortly following such approval. Any shareholder who purchases our shares before the ex‑dividend date and holds the shares until that date shall be deemed to be entitled to receive the dividends approved at that meeting. Dividends are reflected in our financial statements in the year in which they are approved by our shareholders.

Our dividend policy is to pay a growing annual dividend in Swiss francs per share. This policy is subject to our financial conditions and outlook at the time, the results of our operations, and other factors.

The Board will propose a dividend of CHF 3.30 per share to the shareholders for approval at the Annual General Meeting to be held on March 5, 2024. Because we pay dividends in Swiss francs, exchange rate fluctuations will affect the US dollar amounts received by holders of ADRs. For the amount of dividends we paid in the past three years, see “Item 18. Financial Statements—Note 19—Equity.”

Disclosure pursuant to Section 219 of the Iran Threat Reduction and Syria Human Rights Act (ITRA)

At Novartis, our purpose is to reimagine medicine to improve and extend people’s lives, regardless of where they live. This includes the compliant sale of medicines and other healthcare products worldwide. To help us fulfill this mission, we have for many years maintained two representative offices located in Iran.

As of October 18, 2010, a non‑US Novartis affiliate entered into a non‑binding Memorandum of Understanding (MoU) with the Ministry of Health and Medical Education of the Islamic Republic of Iran. Pursuant to the MoU, the Iranian Ministry of Health acknowledges certain benefits that may apply to sales of certain of our medicines by third‑party distributors in Iran. These include fast‑track registration, market exclusivity, end‑user subsidies, and exemptions from customs tariffs. Novartis receives no payments from the Iranian Ministry of Health under the MoU, and the MoU creates no obligations on the part of either Novartis or the Iranian Ministry of Health.

From time to time, including in 2023, certain Novartis non‑US affiliates made payments to government entities in Iran related to patents, trademarks, exit fees and other transactions ordinarily incident to travel by doctors and other medical professionals resident in Iran to attend conferences or other events outside Iran.

From time to time, including in 2023, certain Novartis non‑US affiliates enter into agreements with hospitals, research institutes, medical associations and universities in Iran to provide grants and sponsor congresses, seminars and symposia, and with doctors and other healthcare professionals for consulting services, including participation in advisory boards and investigator services for observational (non‑interventional) studies. Some hospitals and research institutes are owned or controlled by the government of Iran, and some doctors and healthcare professionals are employed by hospitals that may be public or government‑owned.

Because we have operations in Iran, including employees, we obtain services and have other dealings incidental to our activities in that country, including paying taxes and salaries either directly or indirectly through a service provider, and obtaining office rentals, insurance, electricity, water and telecommunications services, office and similar supplies, and customs‑related services from Iranian companies that may be owned or controlled by the government of Iran. In addition, from time to time, representatives of our non-US affiliates participate in meetings with Iranian officials to discuss issues relevant to our business and the pharmaceutical industry.

Certain Novartis non-US affiliates maintain local accounts at banks that are, as of November 5, 2018, on the Specially Designated Nationals and Blocked Persons List (SDN List). These non-US affiliates make local transactions for employee payroll and local vendor payment purposes. These transactions are conducted for the purpose of facilitating the provision of medicine to Iran, in line with the humanitarian exceptions contained in Section 11 of Executive Order 13902 and other applicable sanctions legal authorities. No transactions are made with an Iranian financial institution designated on the SDN List in connection with Iran’s support for international terrorism or proliferation of weapons of mass destruction.

8.B Significant changes

None.

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Item 9. The Offer and Listing

9.A Offer and listing details

Our ordinary shares are listed in Switzerland on the SIX Swiss Exchange under the symbol “NOVN.” Our ADSs, each representing one ordinary share, are traded on the New York Stock Exchange under the symbol “NVS.”

9.B Plan of distribution

Not applicable.

9.C Markets

See “—Item 9.A Offer and listing details.”

9.D Selling shareholders

Not applicable.

9.E Dilution

Not applicable.

9.F Expenses of the issue

Not applicable.

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Item 10. Additional Information

10.A Share capital

Not applicable.

10.B Memorandum and articles of association

The following is a non-exhaustive summary of certain provisions of our Articles of Incorporation (“Articles”); our Regulations of the Board, the Board Committees and the Executive Committee (“Board Regulations”); and Swiss law, particularly the Swiss Code of Obligations (“Swiss CO”), and is qualified in its entirety by reference to the Articles and the Board Regulations, which are an exhibit to this Form 20‑F, and to Swiss law.

10.B.1 Company purpose

Novartis AG is registered in the commercial register of the canton of Basel‑Stadt, Switzerland, under number CHE‑103.867.266. Our business purpose, as stated in Article 2 of the Articles, is to hold interests in enterprises in the area of healthcare or nutrition. We may also hold interests in enterprises in the areas of biology, chemistry, physics, information technology or related areas. We may acquire, mortgage, liquidate or sell real estate and intellectual property rights in Switzerland or abroad. In pursuing our business purpose, we strive to create sustainable value.

10.B.2 Directors

According to our Articles, the Board of Directors (“Board”) consists of a minimum of eight and a maximum of 16 members. The members of the Board (including the Board Chair) are elected individually by the General Meeting of Shareholders (“General Meeting”) for a one-year term of office lasting until the completion of the next Annual General Meeting of Shareholders (“AGM”).

(a) A Board resolution requires the affirmative majority of the votes cast. According to our Board Regulations, a member of our Board (“Director”) may not participate in decisions and resolutions on matters that affect, or reasonably might affect, the Director’s interests or the interests of a person close to the Director (but the Director may participate in the discussion).

(b) Compensation of the Directors is subject to the approval of the aggregate amounts of such compensation by a shareholders’ resolution under the Ordinance against Excessive Compensation in Public Companies of the Swiss Federal Council.

(c) The Articles prohibit the granting of loans or credits to Directors.

(d) The Articles provide that a Director shall not serve on the Board for more than 12 years. The Board may, under certain circumstances and if deemed in the best interests of the Company, recommend exceptions to this rule to the General Meeting.

(e) Our Directors are not required to be shareholders at the time of the election by the General Meeting. However, according to our share ownership guidelines, to ensure their interests are aligned with those of our shareholders, the Board Chair is required to own a minimum of 30 000 Novartis AG shares, and other Directors are required to own at least 5 000 Novartis AG shares within five years of having joined the Board.

10.B.3 Shareholder rights

Because Novartis AG has only one class of registered shares, the following information applies to all shareholders.

(a) Under the Swiss CO, we may only pay dividends out of balance sheet profits or out of distributable reserves. In any event, under the Swiss CO, while the Board may propose that a dividend be paid, we may only pay dividends upon shareholders’ approval at a General Meeting. Furthermore, the Swiss CO requires us to accrue general legal reserves under certain circumstances so long as these reserves amount to less than 20% of our registered share capital, and Swiss law and the Articles permit us to accrue additional reserves beyond the statutory reserves. Our auditors must confirm that the dividend proposal of our Board conforms with the Swiss CO and the Articles. Our Board expects to recommend the payment of a dividend in respect of each financial year. See “Item 6. Directors, Senior Management and Employees—Item 6.C Board Practices—Capital Structure—Limitation on transferability—Per-share information” and “Item 8. Financial Information—Item 8.A. Consolidated statements and other financial information—Dividend policy.”

Dividends are usually due and payable shortly after the shareholders have passed a resolution approving the payment. Dividends that have not been claimed within five years after the due date revert to us and are allocated to our general reserves. For information about deduction of the withholding tax or other duties from dividend payments, see “—Item 10.E Taxation.”

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(b) Each share is entitled to one vote at a General Meeting. Voting rights may only be exercised for shares registered with the right to vote on the record date for the applicable General Meeting. To do so, the shareholder must file a share registration form with us, setting forth the shareholder’s name, address and citizenship (or, in the case of a legal entity, its registered office). If the shareholder has not timely registered its shares, then the shareholder may not vote at, or participate in, a General Meeting.

To vote its shares, the shareholder must also explicitly declare that it has acquired the shares in its own name and for its own account. If the shareholder refuses to make such a declaration, the shares may not be voted unless the Board recognizes such shareholder as a nominee.

The Articles provide that no shareholder shall be registered with the right to vote shares comprising more than 2% of the registered share capital. The Board may, upon request, grant an exemption from this restriction. Considerations include whether the shareholder supports our goal of creating sustainable value and has a long‑term investment horizon. Furthermore, the Articles provide that no nominee shall be registered with the right to vote shares comprising more than 0.5% of the registered share capital. The Board may, upon request, grant an exemption from this restriction if the nominee discloses the names, addresses, and number of shares of the persons for whose account it holds 0.5% or more of the registered share capital. The same restrictions indirectly apply to ADR holders. We have in the past granted exemptions from the 2% rule for shareholders and the 0.5% rule for nominees.

For purposes of the 2% rule for shareholders and the 0.5% rule for nominees, groups of companies and groups of shareholders acting in concert are considered to be one shareholder. These rules also apply to shares acquired or subscribed by the exercise of subscription, option or conversion rights.

After hearing the registered shareholder or nominee, the Board may cancel, with retroactive effect as of the date of registration, the registration of the shareholders if the registration was effected based on false information.

Registration restrictions in the Articles may only be removed upon a resolution carrying a two‑thirds majority of the votes represented at a General Meeting.

Except as noted below, shareholders’ resolutions require the approval of an absolute majority of the votes present at a General Meeting. As a result, abstentions have the effect of votes against such resolutions. Some examples of shareholders’ resolutions requiring a vote by such “absolute majority of the votes” are:

• Adoption and amendment of the Articles

• Election and removal of the Board Chair, the Board and Compensation Committee members, the Independent Proxy and the external auditor

• Approval of the management report, the consolidated financial statements and the report on non-financial matters

• Approval of the financial statements of Novartis AG, and the decision on the appropriation of available earnings shown on the balance sheet, in particular with regard to dividends (including any repayment of the statutory capital reserves and the approval of interim dividends and the interim financial statements required for such purpose), if any

• Approval of the maximum aggregate compensation of the Board (from an AGM until the next AGM) and of the Executive Committee (for the financial year following the AGM)

• Discharge of Board and Executive Committee members from liability for matters disclosed to the General Meeting

• Decision on other matters that are reserved by law or by the Articles (e.g., advisory vote on the Compensation Report) to the General Meeting

According to the Articles and Swiss law, the following matters require the approval of a “supermajority” of at least two‑thirds of the votes present at a General Meeting:

• Alteration of the purpose of Novartis AG

• The consolidation of shares, unless the approval of all affected shareholders is required

• Increase of the share capital out of equity, by contributions in kind or by way of set-off against receivable, or the grant of special rights

• Restriction or cancellation of subscription rights

• Introduction of a conditional capital or capital band

• Creation of shares with increased voting powers

• Implementation of restrictions on the transfer of registered shares, and the removal of such restrictions

• Change of the currency of the share capital

• Introduction of the deciding vote for the presiding officer at the General Meeting

• A provision in the Articles allowing the General Meeting to be held abroad

• Delisting of the shares of the Company

• Change of the registered office of Novartis AG

• Introduction of an arbitration clause in the Articles

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• Merger, split or transformation of Novartis AG under the Swiss Merger Act (subject to mandatory statutory provisions)

• Dissolution of Novartis AG

Our shareholders are required, on an annual basis, to elect all Directors (including the Board Chair), the Compensation Committee members, the external auditor and the Independent Proxy. The Articles do not provide for cumulative voting of shares.

At a General Meeting, shareholders can be represented by a legal representative or, by means of a written proxy, by a representative of choice. Furthermore, a shareholder may be represented by the Independent Proxy. Votes are taken either by a show of hands or by electronic voting, unless the General Meeting resolves to have a ballot or where a ballot is ordered by the chair of the meeting. ADSs, each representing one Novartis AG share and evidenced by ADRs, are issued by our depositary JPMorgan Chase Bank, N.A., New York, and not by us. The ADR is vested with rights defined and enumerated in the Deposit Agreement (such as the rights to vote, to receive a dividend and to receive a share of Novartis AG in exchange for a certain number of ADRs). The enumeration of rights, including any limitations on those rights in the Deposit Agreement, is final. There are no other rights given to the ADR holders. Only the ADS depositary, holding our shares underlying the ADRs, is registered as shareholder in our share register. An ADR is not a Novartis AG share, and an ADR holder is not a Novartis AG shareholder.

The Deposit Agreement between our depositary, the ADR holder and us has granted certain indirect rights to vote to the ADR holders. ADR holders may not attend a General Meeting in person. ADR holders exercise their voting rights by instructing JPMorgan Chase Bank, N.A., our depositary, to exercise the voting rights attached to the registered shares underlying the ADRs. Each ADR represents one Novartis AG share. JPMorgan Chase Bank, N.A., exercises the voting rights for registered shares underlying ADRs for which no voting instructions have been given by providing a discretionary proxy to an uninstructed independent designee. Such designee has to be a shareholder of Novartis AG. The same voting restrictions apply to ADR holders as to those holding Novartis AG shares (i.e., the right to vote up to 2% of the Novartis AG registered share capital – unless otherwise granted an exemption by the Board – and the disclosure requirement for nominees).

(c) Shareholders have the right to allocate the profit shown on our balance sheet and to distribute dividends by vote taken at the General Meeting, subject to the legal requirements described above.

(d) Under the Swiss CO, any surplus arising out of a liquidation of Novartis AG (i.e., after the settlement of all claims of all creditors) would be distributed to the shareholders in proportion to the paid‑in nominal value of their shares.

(e) The Swiss CO limits a corporation’s ability to hold or repurchase its own shares. We and our subsidiaries may only repurchase shares if we have sufficient freely disposable equity in the amount of the purchase price of the acquired shares. The aggregate nominal value of all Novartis AG shares held by us and our subsidiaries may not exceed 10% of our registered share capital. However, it is accepted that a Swiss corporation may repurchase its own shares beyond the statutory limit of 10% if the repurchased shares are clearly earmarked for cancellation. In addition, we are required to recognize a negative position, or if our subsidiaries acquire our shares, to create a special reserve on our balance sheet in the amount of the purchase price of the acquired shares. Repurchased shares held by us or our subsidiaries do not carry any rights to vote at a General Meeting but are entitled to the economic benefits generally connected with the shares.

Under the Swiss CO, we may not cancel treasury shares without the approval of a capital reduction by our shareholders given that shareholders have not approved the introduction of a capital band.

(f) Not applicable.

(g) Since all of our issued and outstanding shares have been fully paid in, our shareholders are not obliged to make further contributions with respect to their shares.

(h) See “—Item 10.B.3(b) Shareholder rights” and “—Item 10.B.7 Change in control.”

10.B.4 Changes to shareholder rights

Under the Swiss CO, we may not issue new shares without the prior approval of a capital increase by our shareholders. If a capital increase is approved, then our shareholders would generally have certain pre-emptive rights to obtain newly issued shares in an amount proportional to the nominal value of the shares they already hold. These pre-emptive rights could be excluded in certain limited circumstances with the approval of a resolution adopted at a General Meeting by a supermajority of two‑thirds of the votes. In addition, we may not create shares with increased voting powers or place restrictions on the transfer of registered shares without the approval of a resolution adopted at a General Meeting by a supermajority of votes. In addition, see “—Item 10.B.3(b) Shareholder rights” with regard to the Board’s ability to cancel the registration of shares under limited circumstances.

10.B.5 Shareholder meetings

Under the Swiss CO and the Articles, we must hold an AGM within six months after the end of our financial year. A General Meeting may be convened by the Board or, if necessary, by the external auditor. The Board is further required to convene an extraordinary General Meeting if so resolved by a General Meeting, or if so requested by shareholders by signed petition representing at least 5% of the share capital, specifying the items for the agenda and their proposals. Shareholders representing shares with an aggregate nominal value of at least CHF 1 000 000 may request that an item be included in a General Meeting agenda. A General Meeting is convened by publishing a notice in the Swiss Official Gazette

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of Commerce (Schweizerisches Handelsamtsblatt) at least 20 days prior to such meeting. Shareholders may also be informed by mail. Neither the Swiss CO nor the Articles require a quorum for a General Meeting. In addition, see “—Item 10.B.3(b) Shareholder rights” regarding conditions for exercising a shareholder’s right to vote at a General Meeting.

10.B.6 Limitations

There are no limitations under the Swiss CO or our Articles on the right of non‑Swiss residents or nationals to own or vote shares other than the restrictions applicable to all shareholders and holders of ADRs described in “—Item 10.B.3(b) Shareholder rights.”

10.B.7 Change in control

The Articles and the Board Regulations contain no provision that would have an effect of delaying, deferring or preventing a change in control of Novartis AG and that would operate only with respect to a merger, acquisition or corporate restructuring involving us or any of our subsidiaries.

According to the Swiss Merger Act, shareholders may pass a resolution to merge with another corporation at any time. Such a resolution would require the consent of at least two‑thirds of all votes present at the necessary General Meeting.

Under the Swiss Financial Market Infrastructure Act, shareholders and groups of shareholders acting in concert who acquire more than 33 1/3% of our shares would be under an obligation to make an offer to acquire all remaining Novartis AG shares. Novartis AG has neither opted out from the mandatory takeover offer obligation nor opted to increase the threshold for mandatory takeover offers in its Articles.

10.B.8 Disclosure of shareholdings

Under the Swiss Financial Market Infrastructure Act, persons who directly, indirectly or in concert with other parties acquire or dispose of our shares or purchase or sale rights relating to our shares are required to notify us and the SIX of the level of their holdings whenever such holdings reach, exceed or fall below certain thresholds – 3%, 5%, 10%, 15%, 20%, 25%, 33 1/3%, 50% and 66 2/3% – of the voting rights represented by our share capital (whether exercisable or not). This also applies to anyone who has discretionary power to exercise voting rights associated with our shares. Following receipt of such notification, we are required to inform the public by publishing the information via the electronic publication platform operated by the SIX.

An additional disclosure obligation exists under the Swiss CO that requires us to disclose once a year in the notes to the financial statements published in our Annual Report, the identity of all of our shareholders (or related groups of shareholders) who have been granted exemption entitling them to vote more than 2% of our registered share capital, as described in “—Item 10.B.3(b) Shareholder rights.”

10.B.9 Differences in the law

See the references to Swiss law throughout this “—Item 10.B Memorandum and articles of association.”

10.B.10 Changes in capital

The requirements of the Articles regarding changes in capital are not more stringent than the requirements of Swiss law.

10.C Material contracts

Sandoz Spin-Off

In connection with the spin-off of Sandoz, we entered into a Separation and Distribution Agreement, a Tax Matters Agreement and several other agreements with Sandoz to effect the separation of the Sandoz business and provide a framework for our relationship with Sandoz after the spin-off.

The Separation and Distribution Agreement sets forth the parties’ agreements regarding the principal actions to be taken in connection with the separation of the Sandoz business and the spin-off, by way of a distribution of shares of Sandoz Group AG by Novartis AG to Novartis shareholders, including the conditions of the spin-off and the rights and obligations of the parties with respect to the separation and distribution. The Separation and Distribution Agreement identifies the assets to be transferred, liabilities to be assumed and contracts to be assigned to each of Novartis and Sandoz as part of the internal transactions effected prior to the distribution and provides for when and how such transfers, assumptions and assignments should occur. Each party agreed to indemnify the other and each of the other’s directors, officers, managers, members, agents and employees against certain liabilities incurred in connection with the spin-off and the parties’ respective businesses (subject to certain exceptions).

The Tax Matters Agreement imposes certain restrictions and indemnity obligations on Sandoz designed to preserve the tax-neutral nature of the spin-off for Swiss tax and US federal income tax purposes.

The Tax Matters Agreement also provides that Sandoz will be liable for any taxes accruing in the ordinary course of business of Novartis and its subsidiaries before the spin-off if such taxes are attributable to entities which are transferred or allocated to the Sandoz Group as part of the spin-off, whereas Novartis will remain liable for any other taxes accruing before the

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spin-off in the ordinary course of business, to the extent not attributed to Sandoz.

In connection with the spin-off, we also entered into an employee matters agreement, a claims management agreement, manufacturing and supply agreements, a development and collaboration agreement, a transitional services agreement, an authorized generics agreement, and certain intellectual property agreements, each of which is not material to Novartis.

10.D Exchange controls

There are no Swiss governmental laws, decrees or regulations that affect – in a manner material to Novartis AG – the export or import of capital, including the availability of cash and cash equivalents for use by Novartis or any foreign exchange controls that affect the remittance of dividends, interest or other payments to non‑residents or non‑citizens of Switzerland who hold Novartis AG securities.

10.E Taxation

The taxation discussion set forth below is intended only as a descriptive summary and does not purport to be a complete analysis or listing of all potential tax effects relevant to the ownership or disposition of our shares or ADRs. The statements of US and Swiss tax laws set forth below are based on the laws and regulations in force as of the date of this 20‑F—including the current Convention Between the US and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income, entered into force on December 19, 1997 (the Treaty); the US Internal Revenue Code of 1986, as amended (the Code); Treasury regulations; rulings; judicial decisions; and administrative pronouncements—and may be subject to any changes in US and Swiss law, and in any double taxation convention or treaty between the US and Switzerland occurring after that date, which changes may have retroactive effect.

Swiss taxation

Swiss residents

Withholding Tax on dividends and distributions. Dividends that we pay and similar cash or in‑kind distributions that we may make to a holder of shares or ADRs (including distributions of liquidation proceeds in excess of the nominal value, stock dividends and, under certain circumstances, proceeds from repurchases of shares by us in excess of the nominal value) are generally subject to a Swiss federal withholding tax (the Withholding Tax) at a current rate of 35%. Under certain circumstances, distributions out of capital contribution reserves made by shareholders after December 31, 1996, are exempt from the Withholding Tax. We are required to withhold Withholding Tax due from the gross distribution and to pay the Withholding Tax to the Swiss Federal Tax Administration. The Withholding Tax is refundable in full to Swiss tax residents who are the beneficial owners of the taxable distribution at the time it is resolved and duly report the gross distribution received on their personal tax return or in their financial statements for tax purposes, as the case may be.

Income tax on dividends. A Swiss tax resident who receives dividends and similar distributions (including stock dividends and liquidation surplus) on shares or ADRs is required to include such amounts in the shareholder’s personal income tax return. However, distributions out of qualified capital contribution reserves are not subject to income tax. A corporate shareholder may claim substantial relief from taxation of dividends and similar distributions received if the shares held represent a fair market value of at least CHF 1 million.

Capital gains tax upon disposal of shares. Under current Swiss tax law, the gain realized on shares held by a Swiss resident who holds shares or ADRs as part of his private property is generally not subject to any federal, cantonal or municipal income taxation on gains realized on the sale or other disposal of shares or ADRs. However, gains realized upon a repurchase of shares by us may be characterized as taxable dividend income if certain conditions are met. Book gains realized on shares or ADRs held by a Swiss corporate entity or by a Swiss resident individual as part of the shareholder’s business property are, in general, included in the taxable income of such person. However, the Federal Law on the Direct Federal Tax of December 14, 1990, and several cantonal laws on direct cantonal taxes provide for exceptions for Swiss corporate entities holding more than 10% of our voting stock for more than one year.

Residents of other countries

Recipients of dividends and similar distributions on our shares who are neither residents of Switzerland for tax purposes nor hold shares as part of a business conducted through a permanent establishment situated in Switzerland (Non‑Resident Holders) are not subject to Swiss income taxes in respect of such distributions. Moreover, gains realized by such recipients upon the disposal of shares are not subject to Swiss income taxes.

Non‑Resident Holders of shares are, however, subject to the Withholding Tax on dividends and similar distributions mentioned above and, under certain circumstances, to the Stamp Duty described below. Such Non‑Resident Holders may be entitled to a partial refund

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of the Withholding Tax if the country in which they reside has entered into a bilateral treaty for the avoidance of double taxation with Switzerland. Non‑Resident Holders should be aware that the procedures for claiming treaty refunds (and the time frame required for obtaining a refund) may differ from country to country. Non‑Resident Holders should consult their own tax advisors regarding receipt, ownership, purchase, sale or other dispositions of shares or ADRs, and the procedures for claiming a refund of the Withholding Tax.

As of January 1, 2024, Switzerland has entered into bilateral treaties for the avoidance of double taxation with respect to income taxes with the following countries, whereby a part of the above‑mentioned Withholding Tax may be refunded (subject to the limitations set forth in such treaties):

Albania

Algeria

Argentina

Armenia

Australia

Austria

Azerbaijan

Bahrain

Bangladesh

Belarus

Belgium

Brazil

Bulgaria

Canada

Chile

China

Colombia

Croatia

Cyprus

Czechia

Denmark

Ecuador

Egypt

Estonia

Ethiopia

Finland

France

Georgia

Germany

Ghana

Greece

Hong Kong

Hungary

Iceland

India

Indonesia

Iran

Ireland

Israel

Italy

Ivory Coast

Jamaica

Japan

Kazakhstan

Republic of Korea

(South Korea)

Kosovo

Kuwait

Kyrgyzstan

Latvia

Liechtenstein

Lithuania

Luxembourg

Malaysia

Malta

Mexico

Moldova

Mongolia

Montenegro

Morocco

Netherlands

New Zealand

North Macedonia

Norway

Oman

Pakistan

Peru

Philippines

Poland

Portugal

Qatar

Romania

Russia

Saudi Arabia

Serbia

Singapore

Slovak Republic

Slovenia

South Africa

Spain

Sri Lanka

Sweden

Taiwan

Tajikistan

Thailand

Trinidad and Tobago

Tunisia

Türkiye

Turkmenistan

Ukraine

United Arab Emirates

United Kingdom

United States of America

Uruguay

Uzbekistan

Venezuela

Vietnam

Zambia

Tax treaty negotiations are underway, or have been conducted, with Angola, Bosnia and Herzegovina, Cameroon, Costa Rica, Jordan, Kenya, Libya, Nigeria, Rwanda, Senegal, Syria and Zimbabwe. Tax treaty negotiations between Switzerland and some of the countries listed in the immediately preceding sentence have been ongoing for an extended period of time, and we are not certain when or if such negotiations will be completed, and when or if the corresponding treaties will come into effect.

A Non‑Resident Holder of shares or ADRs will not be liable for any Swiss taxes other than the Withholding Tax described above and, if the transfer occurs through or with a Swiss bank or other Swiss securities dealer, the Stamp Duty described below. If, however, the shares or ADRs of Non‑Resident Holders can be attributed to a permanent establishment or a fixed place of business maintained by such person within Switzerland during the relevant tax year, the shares or ADRs may be subject to Swiss income taxes in respect of income and gains realized on the shares or ADRs, and such person may qualify for a full refund of the Withholding Tax based on Swiss tax law.

Residents of the US. A Non‑Resident Holder who is a resident of the US for purposes of the Treaty is eligible for a reduced rate of tax on dividends equal to 15% of the dividend, provided that such holder (i) qualifies for benefits under the Treaty; (ii) is not a company (or, if it is a company, such company directly holds less than 10% of our voting stock); and (iii) does not conduct business through a permanent establishment or fixed base in Switzerland to which the shares or ADRs are attributable. Such an eligible holder must apply for a refund of the amount of the Withholding Tax in excess of the 15% Treaty rate. A Non‑Resident Holder who is a resident of the US for purposes of the Treaty is eligible for a reduced rate of tax on dividends equal to 5% of the dividend, provided that such holder (i) is a company; (ii) qualifies for benefits under the Treaty; (iii) holds directly at least 10% of our voting stock, and (iv) does not conduct business through a permanent establishment or fixed place of business in Switzerland to which the shares or ADRs are attributable. Such an eligible holder must apply for a refund of the amount of the Withholding Tax in excess of the 5% Treaty rate. Claims for refunds must be filed on Swiss Tax Form 82 (82C for corporations; 82I for individuals; 82E for other entities), which may be obtained from any Swiss Consulate General in the US or from the Federal Tax Administration of Switzerland at the address below, together with an instruction form. Four copies of

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the form must be duly completed, signed before a notary public of the US, and sent to the Federal Tax Administration of Switzerland, Eigerstrasse 65, CH‑3003 Bern, Switzerland. The form must be accompanied by suitable evidence of deduction of Swiss tax withheld at source, such as certificates of deduction, signed bank vouchers or credit slips. The form may be filed on or after July 1 or January 1 following the date the dividend was payable, but no later than December 31 of the third year following the calendar year in which the dividend became payable. For US resident holders of ADRs, JPMorgan Chase Bank, N.A., as depositary, will comply with these Swiss procedures on behalf of the holders, and will remit the net amount to the holders.

Stamp Duty upon transfer of securities. The sale of shares, whether by Swiss residents or Non‑Resident Holders, may be subject to federal securities transfer Stamp Duty of 0.15%, calculated on the sale proceeds, if the sale occurs through or with a Swiss bank or other Swiss securities dealer, as defined in the Swiss Federal Stamp Duty Act. The Stamp Duty has to be paid by the securities dealer and may be charged to the parties in a taxable transaction who are not securities dealers. Stamp Duty may also be due if a sale of shares occurs with or through a non‑Swiss bank or securities dealer, provided that (i) such bank or dealer is a member of the SIX, and (ii) the sale takes place on the SIX. In addition to this Stamp Duty, the sale of shares by or through a member of the SIX may be subject to a minor stock exchange levy.

US federal income taxation

The following is a general discussion of the material US federal income tax consequences of the ownership and disposition of our shares or ADRs that may be relevant to you if you are a US Holder (as defined below). Because this discussion does not consider any specific circumstances of any particular holder of our shares or ADRs, persons who are subject to US taxation are strongly urged to consult their own tax advisors as to the overall US federal, state and local tax consequences, as well as to the overall Swiss and other foreign tax consequences, of the ownership and disposition of our shares or ADRs. In particular, additional or different rules may apply to US expatriates; banks and other financial institutions; regulated investment companies; traders in securities who elect to apply a mark‑to‑market method of accounting; dealers in securities or currencies; tax‑exempt entities; insurance companies; broker‑dealers; investors liable for alternative minimum tax; investors that hold shares or ADRs as part of a straddle, hedging or conversion transaction; holders whose functional currency is not the US dollar; partnerships or other pass-through entities; persons who acquired our shares pursuant to the exercise of employee stock options or otherwise as compensation; and persons who hold, directly, indirectly or by attribution, 10% or more of our outstanding shares. This discussion generally applies only to US Holders who hold the shares or ADRs as a capital asset (generally, for investment purposes), and whose functional currency is the US dollar. Investors are urged to consult their own tax advisors concerning whether they are eligible for benefits under the Treaty.

For purposes of this discussion, a US Holder is a beneficial owner of our shares or ADRs who is (i) an individual who is a citizen or resident of the US for US federal income tax purposes; (ii) a corporation (or other entity taxable as a corporation for US federal income tax purposes) created or organized in or under the laws of the US or a state thereof or the District of Columbia; (iii) an estate the income of which is subject to US federal income taxation regardless of its source; or (iv) a trust (i) subject to the primary supervision of a US court and the control of one or more US persons; or (ii) that has a valid election in place to be treated as a US person. If a partnership (or other entity treated as a partnership for US federal income tax purposes) holds shares or ADRs, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. Partners in a partnership that holds shares or ADRs are urged to consult their own tax advisor regarding the specific tax consequences of the owning and disposing of such shares or ADRs by the partnership.

For US federal income tax purposes, a US Holder of ADRs generally will be treated as the beneficial owner of our shares represented by the ADRs. However, see the discussion below under “—Dividends” regarding certain statements made by the US Treasury concerning depositary arrangements.

This discussion assumes that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

Dividends. US Holders will be required to include in gross income, as an item of ordinary income, the full amount (without reduction for any Withholding Tax) of the dividend paid with respect to our shares or ADRs at the time that such dividend is received by the US Holder, in the case of shares, or by the depositary, in the case of ADRs. For this purpose, a “dividend” will include any distribution paid by us with respect to our shares or ADRs (other than certain pro rata distributions of our capital stock) paid out of our current or accumulated earnings and profits, as determined under US federal income tax principles. To the extent the amount of a distribution by us exceeds our current and accumulated earnings and profits, such excess will first be treated as a tax‑free return of capital to the extent of a US Holder’s tax basis in the shares or ADRs (with a corresponding reduction in such tax basis), and thereafter will be treated as capital gain, which will be long‑term capital gain if the US Holder held our shares or ADRs for more than one year. Under the Code, dividend payments by us on the shares or ADRs are not eligible for the dividends received deduction generally allowed to corporate shareholders.

Dividend income in respect of our shares or ADRs will constitute income from sources outside the US for US foreign tax credit purposes. Subject to the limitations and conditions provided in the Code, US Holders generally may claim as a credit against their US federal income tax liability, any Withholding Tax withheld from a dividend. The rules governing the foreign tax credit are complex. Each US Holder is urged to consult its own tax advisor concerning whether, and to what extent, a foreign tax credit will be available with respect to dividends received

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from us. Alternatively, a US Holder may claim the Withholding Tax as a deduction for the taxable year within which the Withholding Tax is paid or accrued, provided a deduction is claimed for all of the foreign income taxes the US Holder pays or accrues in the particular year. A deduction does not reduce US tax on a dollar‑for‑dollar basis like a tax credit. The deduction, however, is not subject to the limitations applicable to foreign tax credits, but may be subject to other limitations, and each US Holder is urged to consult its own tax advisor.

The US Treasury has expressed concern that parties to whom ADRs are released may be taking actions inconsistent with the claiming of foreign tax credits for US Holders of ADRs. Accordingly, the summary above of the creditability of the Withholding Tax could be affected by future actions that may be taken by the US Treasury.

In general, a US Holder will be required to determine the amount of any dividend paid in Swiss francs, including the amount of any Withholding Tax imposed thereon, by translating the Swiss francs into US dollars at the spot rate on the date the dividend is actually or constructively received by a US Holder, in the case of shares, or by the depositary, in the case of ADRs, regardless of whether the Swiss francs are in fact converted into US dollars. If a US Holder converts the Swiss francs so received into US dollars on the date of receipt, the US Holder generally should not recognize foreign currency gain or loss on such conversion. If a US Holder does not convert the Swiss francs so received into US dollars on the date of receipt, the US Holder will have a tax basis in the Swiss francs equal to the US dollar value on such date. Any foreign currency gain or loss that a US Holder recognizes on a subsequent conversion or other disposition of the Swiss francs generally will be treated as US source ordinary income or loss.

For a non‑corporate US Holder, the US dollar amount of any dividends paid that constitute qualified dividend income generally will be taxable at a maximum rate of 15% (or 20% in the case of taxpayers with annual income that exceeds certain thresholds), provided that the US Holder meets certain holding period and other requirements. In addition, the dividends could be subject to a 3.8% net investment income tax. This tax is applied against the lesser of the US Holder’s net investment income or the amount by which modified adjusted gross income exceeds a statutory threshold amount based on filing status. We currently believe that dividends paid with respect to our shares and ADRs will constitute qualified dividend income for US federal income tax purposes, provided that the US Holder meets certain holding period and other requirements. US Holders of shares or ADRs are urged to consult their own tax advisors regarding the availability to them of the reduced dividend rate in light of their own particular situation and the computations of their foreign tax credit limitation with respect to any qualified dividends paid to them, as applicable.

Sale or other taxable disposition. Upon a sale or other taxable disposition of shares or ADRs, US Holders generally will recognize capital gain or loss in an amount equal to the difference between the US dollar value of the amount realized on the disposition and the US Holder’s tax basis (determined in US dollars) in the shares or ADRs. This capital gain or loss generally will be US source gain or loss and will be treated as long‑term capital gain or loss if the holding period in the shares or ADRs exceeds one year. In the case of a non‑corporate US Holder, any long-term capital gain generally will be subject to US federal income tax at preferential rates, with a maximum rate of 15% (or 20% in the case of taxpayers with annual income that exceeds certain thresholds). In addition, the gains could be subject to a 3.8% investment income tax. This tax is applied against the lesser of the US Holder’s net investment income or the amount by which modified adjusted gross income exceeds a statutory threshold amount based on filing status. The deductibility of capital losses is subject to significant limitations under the Code. Deposits or withdrawals of our shares by US Holders in exchanges for ADRs will not result in the realization of gain or loss for US federal income tax purposes.

US information reporting and backup withholding. Dividend payments with respect to shares or ADRs and proceeds from the sale, exchange or other disposition of shares or ADRs received in the United States or through US‑related financial intermediaries may be subject to information reporting to the US Internal Revenue Service (IRS) and possible US backup withholding. Certain exempt recipients (such as corporations) are not subject to these information reporting and backup withholding requirements. Backup withholding will not apply to a US Holder who furnishes a correct taxpayer identification number and makes any other required certification or who is otherwise exempt from backup withholding. Any US Holders required to establish their exempt status generally must provide a properly executed IRS Form W‑9 (Request for Taxpayer Identification Number and Certification). Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a US Holder’s US federal income tax liability, and a US Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the IRS and furnishing any required information.

Tax consequences of the Sandoz spin-off

To implement the Sandoz spin-off, we distributed all of the Sandoz Group AG shares held by Novartis to Novartis AG shareholders, pro rata to their respective holdings. Each Novartis AG shareholder received one Sandoz Group AG share for every five Novartis AG shares or five Novartis AG ADRs they held or had acquired prior to the close of business on October 3, 2023.

The following statements are based on the requirement of the continuing effectiveness and validity of the written confirmations (the Swiss Tax Rulings) from the Swiss Federal Tax Administration and from the tax administration of the Canton of Basel-Stadt, a private letter ruling from the IRS (the IRS Ruling) and a written opinion of Cravath, Swaine & Moore LLP, counsel to Novartis (the Tax Opinion), each to the effect that the Sandoz spin-off qualifies as a tax-neutral transaction.

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Material tax consequences to Novartis

The following is a summary of the material tax consequences to Novartis in connection with the Sandoz spin-off that may be relevant to holders of Novartis AG shares.

The Sandoz spin-off was preceded by several internal restructuring steps to separate the Sandoz business from Novartis. Novartis has received the Swiss Tax Rulings, the IRS Ruling and the Tax Opinion, providing that the spin-off should qualify for nonrecognition of gain or loss for US federal income tax purposes or preserve the tax-neutral nature for Swiss tax purposes, as applicable. In addition, the Swiss Tax Rulings provide that no Swiss withholding tax or stamp duty should apply to the distribution of Sandoz Group AG shares in the spin-off. The Tax Opinion and IRS Ruling are subject to the qualifications and limitations set forth below under “—Consequences to US Holders of Novartis AG Shares.” Additionally, Novartis has entered into a tax matters agreement with Sandoz, which restricts Sandoz from taking certain actions that could affect the qualification of the spin-off as tax-neutral.

Consequences to Swiss Holders of Novartis AG shares

General

Subject to the qualifications and limitations set forth herein (including the discussion below relating to the receipt of cash in lieu of fractional shares), for Swiss tax purposes no gain or loss should be recognized by, or be includible in the income of, a Swiss Holder as a result of the tax-neutral spin-off, provided that Swiss Holders who hold Novartis AG shares as business assets accurately maintain the tax and book values of their Novartis AG and Sandoz Group AG shares. This means that for Swiss Holders who hold Novartis AG shares as business assets, the aggregate tax basis of the Novartis AG shares and Sandoz Group AG shares immediately after the distribution should be the same as the aggregate tax basis of the Novartis AG shares held immediately before the distribution, allocated between the Novartis AG shares and Sandoz Group AG shares.

If a Swiss Holder that holds Novartis AG shares as business assets is classified as a “professional securities dealer” or is a legal entity and receives cash in lieu of a fractional share, such Swiss Holder will generally recognize a capital gain or loss measured by the difference between the cash received for such fractional Share and the Swiss Holder’s tax basis in that fractional Share. The same Swiss income tax treatment applies to Swiss Holders of Novartis physical share certificates (Heimverwahrer) held as business assets who receive cash due to non-response by September 19, 2023.

If a Swiss Holder who holds Novartis AG shares as private assets receives cash in lieu of fractional Shares, the receipt of such cash will be tax-free to the holder. The same Swiss income tax treatment applies to Swiss Holders of Novartis physical share certificates (Heimverwahrer) held as private assets who receive cash due to non-response by September 19, 2023.

Novartis has received the Swiss Tax Rulings which cover the relevant Swiss tax aspects of the separation and spin-off. The Swiss Tax Rulings rely upon certain facts, assumptions, representations and undertakings from Sandoz and Novartis regarding the past and future conduct of the businesses of Sandoz and Novartis and other matters. If any of the facts, assumptions, representations or undertakings described therein are incorrect or incomplete or not otherwise satisfied, Novartis may not be able to rely upon the Swiss Tax Rulings. Accordingly, notwithstanding the Swiss Tax Rulings, no assurance can be given that the relevant Swiss tax authorities will not assert, or that a court would not sustain, a position contrary to one or more of the conclusions set forth above.

Consequences to US Holders of Novartis AG shares

The following is a summary of the material US federal income tax consequences to holders of Novartis AG shares or ADRs in connection with the Sandoz distribution. For purposes of the following discussion, any reference to Novartis AG shares includes Novartis ADRs. This summary does not address any US state or local or foreign tax consequences or any estate, gift or other non-income tax consequences.

General

The IRS Ruling and the Tax Opinion, described below, rely upon certain facts, assumptions, representations and undertakings from Novartis and Sandoz regarding the past and future conduct of Novartis and Sandoz businesses and other matters. If any of the facts, assumptions, representations or undertakings described therein are incorrect or not otherwise satisfied, Novartis may not be able to rely upon the IRS Ruling or the Tax Opinion. Accordingly, notwithstanding the Tax Opinion and the IRS Ruling, there can be no assurance that the IRS will not assert, or that a court would not sustain, a position contrary to one or more of the conclusions set forth below.

Novartis has received the IRS Ruling and the Tax Opinion providing, in each case, that the distribution should qualify for nonrecognition of gain or loss under Section 355 of the Code. As a result:

• no gain or loss should be recognized by, or be includible in the income of, a US Holder as a result of the distribution;

• the aggregate tax basis of the Novartis AG shares and the Sandoz Group AG shares held by each US Holder immediately after the distribution should be the same as the aggregate tax basis of the Novartis AG shares held by the US Holder immediately before the distribution, allocated between the Novartis AG shares and the Sandoz Group AG shares in proportion to their relative fair market values on the date of the distribution; and

• the holding period of the Sandoz Group AG shares received by each US Holder should include the holding period of its Novartis AG shares.

Generally, if a Novartis AG shareholder holds different blocks of Novartis AG shares (generally Novartis AG shares purchased or acquired on different dates or at different prices), a US Holder must perform the tax basis allocation described above with respect to each block and will have a holding period in the Sandoz Group AG shares determined with respect to the holding period of such block.

A US Holder that receives cash in lieu of a fractional Share as part of the distribution will be treated as though it first received a distribution of the fractional Share in the distribution and then sold it for the amount of cash

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actually received. The US Holder will generally recognize a capital gain or loss measured by the difference between the cash received for such fractional Share and the US Holder’s tax basis in that fractional Share, as determined above. Such capital gain or loss will be a long-term capital gain or loss if the US Holder’s holding period for the Novartis AG shares is more than one year from the date of the distribution. Certain US Holders are eligible for reduced rates of taxation on their long-term capital gains.

A US Holder of Novartis physical share certificates (Heimverwahrer) who receives cash due to non-response by September 19, 2023 will be treated as if the US Holder received the Sandoz Group AG shares with respect to its physical share certificates in the distribution and then sold such Shares for the cash actually received. The deemed receipt and sale of the Sandoz Group AG shares for cash will be subject to the same treatment as the receipt of cash in lieu of a fractional Share for US federal income tax purposes as described above.

Backup Withholding

Payments of cash in lieu of a fractional Share and cash payments to a US Holder of Novartis physical share certificates (Heimverwahrer) who receives cash due to non-response by September 19, 2023 may, under certain circumstances, be subject to “backup withholding”, unless the US Holder provides proof of an applicable exemption or a correct taxpayer identification number, and otherwise complies with the requirements of the backup withholding rules. Corporations will generally be exempt from backup withholding, but may be required to provide a certification to establish their entitlement to the exemption. Backup withholding is not an additional tax, and it may be refunded or credited against a US Holder’s US federal income tax liability if the required information is timely supplied to the IRS.

Information Reporting

Treasury Regulations require each Novartis AG shareholder that, immediately before the distribution, owned 5% or more (by vote or value) of the total outstanding stock of Novartis, to attach to such shareholder’s US federal income tax return for the year in which the distribution occurs a statement setting forth certain information related to the distribution.

10.F Dividends and paying agents

Not applicable.

10.G Statement by experts

Not applicable.

10.H Documents on display

Any statement in this Form 20‑F about any of our contracts or other documents is not necessarily complete. If the contract or document is filed as an exhibit to the Form 20‑F, the contract or document is deemed to modify the description contained in this Form 20‑F. You must review the exhibits themselves for a complete description of the contract or document.

The SEC maintains an internet site at http://www.sec.gov that contains reports and other information regarding issuers that file electronically with the SEC. These SEC filings are also available to the public from commercial document retrieval services.

We are required to file or furnish reports and other information with the SEC under the Exchange Act and regulations under that act. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the form and content of proxy statements, and our officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act.

10.I Subsidiary information

Not applicable.

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Item 11. Quantitative and Qualitative Disclosures About Market Risk

The major financial risks facing us are managed centrally by the Company’s treasury function, which has established processes and procedures to identify, aggregate and manage our financial risk exposure. The Company’s treasury function is included in management’s internal control assessment.

For information about the effects of currency fluctuations and how we manage currency risk, see “Item 5. Operating and Financial Review and Prospects—Item 5.B Liquidity and capital resources.”

The information set forth under “Item 18. Financial Statements—Note 30. Financial instruments - additional disclosures” is incorporated by reference.

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Item 12. Description of Securities Other than Equity Securities

12.A Debt securities

Not applicable.

12.B Warrants and rights

Not applicable.

12.C Other securities

Not applicable.

12.D American Depositary Shares

Fees payable by ADR holders

According to the deposit agreement that we entered into with JPMorgan Chase Bank, N.A. (JPMorgan), as depositary (as amended from time to time, the “Deposit Agreement”), holders of our ADRs may have to pay to JPMorgan, either directly or indirectly, fees or charges up to the amounts set forth below:

Category	Depositary actions	Associated fee
Depositing or substituting <br>underlying shares	Acceptance of shares surrendered, and issuance of ADSs in exchange, <br> including surrenders and issuances in respect of:<br> — Share distributions<br> — Stock split<br> — Rights<br> — Merger<br> — Exchange of shares or any other transaction or event or other distribution <br> affecting the ADSs or the deposited shares	USD 5.00 for each 100 ADSs <br> (or portion thereof)
Withdrawing <br>underlying shares	Acceptance of ADSs surrendered for withdrawal of deposited shares or <br> for ADSs that are cancelled or reduced for any other reason	USD 5.00 (or less) for each <br> 100 ADSs (or portion <br> thereof) surrendered
Cash distributions	Distributing cash distributions made or any elective cash/stock dividend offered	USD 0.05 (or less) per ADS
Selling or <br>exercising rights	Distribution or sale of shares, the fee being in an amount equal to the fee <br> for the execution and delivery of ADRs that would have been charged <br> as a result of the deposit of such shares	USD 5.00 for each 100 ADSs <br> (or portion thereof)
Depositary services	Services performed by the depositary in administering the ADRs	USD 0.05 (or less) per ADS <br> per calendar year <br> (or portion thereof)
Expenses of the <br>depositary	Expenses incurred on behalf of holders in connection with:<br> — Compliance with foreign exchange control regulations or any law or <br> regulation relating to foreign investment<br> — The depositary’s or its custodian’s compliance with applicable law, <br> rule or regulation<br> — Stock transfer or other taxes and other governmental charges<br> — Cable, telex and facsimile transmission and delivery<br> — Expenses of the depositary in connection with the conversion of foreign <br> currency into US dollars (which are paid out of such foreign currency)<br> — Any other charge payable by any of the depositary or its agents	Expenses payable at the sole <br> discretion of the depositary <br> by billing holders or by <br> deducting charges from one <br> or more cash dividends or <br> other cash distributions

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Fees payable by the depositary to the issuer

Pursuant to a letter agreement effective as of May 11, 2017, as amended from time to time (“the Agreement”), JPMorgan, as our ADS depositary, has agreed to make an annual contribution payment to Novartis at the end of each 12-month period beginning on the effective date of the Agreement and on each subsequent anniversary of the effective date of the Agreement (each such 12-month period is a “Contract Year”). Beginning in the sixth Contract Year, this annual contribution payment will equal: (a)(1) the applicable fixed contribution amount reflected in the table below, based on the average daily balance during such Contract Year of outstanding ADSs backed by ordinary shares less (a)(2) the custody costs, fees and expenses (including, without limitation, any central securities depository fees, charges and expenses) incurred during the applicable Contract Year (the items in (a)(2) collectively are the “Custody Costs”) plus (b) 70% of the gross issuance and cancellation fees collected by JPMorgan under the Deposit Agreement during such Contract Year minus (c) that portion (if any) of JPMorgan’s legal fees, charges and out-of-pocket expenses in excess of USD 50 000 for such Contract Year.

Average Daily Balance Range Start	Average Daily Balance Range End	Fixed contribution
At least 30 000 000	Up to 66 999 999	USD 340 000
At least 67 000 000	Up to 133 999 999	USD 680 000
At least 134 000 000	Up to 200 999 999	USD 1 020 000
At least 201 000 000	Up to 267 999 999	USD 1 360 000
At least 268 000 000		USD 1 700 000

The fixed contribution amount payable under (a)(1) in respect of a given Contract Year shall be zero if the average daily balance of outstanding ADSs backed by ordinary shares is less than 30 000 000 during such Contract Year. If the Custody Costs for a Contract Year exceed the fixed contribution amount for such Contract Year, JPMorgan will reduce the contribution payable to us by an amount equal to such deficit.

JPMorgan has further agreed to waive the USD 0.05 per ADS issuance fees that would normally be owed by Novartis in connection with our deposits of shares as part of our employee stock ownership and employee participation plans. Novartis is responsible for reimbursing JPMorgan for all taxes and governmental charges required to have been withheld and/or paid, and not so withheld and/or paid, arising from such waived fees.

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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies

None.

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Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds

None.

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Item 15. Controls and Procedures

(a) Novartis AG’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Annual Report, have concluded that, as of such date, our disclosure controls and procedures were effective.

(b) Report of Novartis Management on Internal Control Over Financial Reporting: The Board of Directors and management of the Company are responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting was designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the reliability of financial reporting and the preparation and fair presentation of its published consolidated financial statements.

Internal controls over financial reporting, no matter how well designed, have inherent limitations. Therefore, even those internal controls over financial reporting determined to be effective may not prevent or detect misstatements and can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The Company’s management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2023. In making this assessment, it used the criteria established in Internal Control —Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our assessment, management concluded that, as of December 31, 2023, the Company’s internal control over financial reporting is effective based on those criteria.

KPMG AG, Switzerland, an independent registered public accounting firm, has issued an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting, which is included in this Annual Report under “Item 18. Financial Statements—Report of independent registered public accounting firm.”

(c) See the report of KPMG AG, an independent registered public accounting firm, included under “Item 18. Financial Statements—Report of independent registered public accounting firm.”

(d) There were no changes to our internal control over financial reporting that occurred during the period covered by this Annual Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Item 16A. Audit Committee Financial Expert

Our Audit and Compliance Committee has determined that Elizabeth Doherty and Ana de Pro Gonzalo possess specific accounting and financial management expertise, and that they are “audit committee financial experts” as defined in Item 16A of Form 20-F. The Board of Directors has also determined that each member of the Audit and Compliance Committee is “independent” in accordance with the applicable requirements set forth under the listing standards of the NYSE and Rule 10A‑3 under the Exchange Act, and has sufficient experience and ability in finance and compliance matters to enable them to adequately discharge their responsibilities.

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Item 16B. Code of Ethics

In addition to our Code of Ethics and Doing Business Ethically Policy, which are applicable to all of our employees, we have adopted Ethical Conduct Requirements that impose additional obligations on our principal executive officer, principal financial officer, principal accounting officer, and persons performing similar functions. This document is accessible on our internet website at:

https://www.novartis.com/investors/company-overview/corporate-governance

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Item 16C. Principal Accountant Fees and Services

The information set forth under “Item 6. Directors, Senior Management and Employees—Item 6.C Board practices—Corporate governance—Auditors” is incorporated by reference.

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Item 16D. Exemptions from the Listing Standards for Audit Committees

Not applicable.

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Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers

2023	Total number of <br> shares purchased<br> (a)^1^	Average price <br> paid per share <br> in USD<br> (b)	Total number <br> of shares<br> purchased <br> as part of <br> publicly <br> announced <br> plans or <br> programs<br> (c)^2^	Maximum <br> approximate <br> value of <br> shares that <br> may yet be <br> purchased <br> under the <br> plans or <br> programs <br> (CHF millions)<br> (d)	Maximum <br> approximate <br> value of <br> shares that <br> may yet be <br> purchased <br> under the <br> plans or <br> programs <br> (USD millions)<br> (e)^3^
Jan. 1-31	11 383 594	91.91	10 500 000	7 433	8 030
Feb. 1-28	10 147 593	87.02	10 000 000	6 628	7 061
Mar. 1-31	11 145 700	85.02	11 000 000	15 762	17 252
Apr. 1-30	9 092 383	98.58	9 000 000	14 966	16 736
May 1-31	10 018 880	102.20	10 000 000	14 050	15 450
Jun. 1-30	10 871 925	100.29	10 847 255	13 071	14 537
Jul. 1-31	5 026 486	100.98	5 000 000	12 625	14 493
Aug. 1-31	4 446 306	102.80	4 400 000	12 228	13 903
Sep. 1-30	4 250 523	101.17	4 200 000	11 846	12 998
Oct. 1-31	4 494 588	96.85	4 400 000	11 461	12 705
Nov. 1-30	4 426 601	95.48	4 400 000	11 087	12 701
Dec. 1-31	3 821 670	98.39	3 800 000	10 763	12 793
Total	89 126 249	95.55	87 547 255
^1^ Column (a) shows shares repurchased on the SIX Swiss Exchange second trading line plus shares we purchased from employees who had obtained the shares through a Novartis Employee Ownership Plan. See "Item 18. Financial Statements - Note 27. Equity-based participation plans for employees."
^2^ Column (c) shows shares repurchased on the SIX Swiss Exchange second trading line under the CHF 10 billion share buyback authority approved at the 2022 AGM for transactions in 2023. See "Item 6. Directors, Senior Management and Employees - Item 6C. Board Practices - Our capital structure - Changes in capital."
^3^ Column (e) shows the Swiss franc amount from column (d) converted into US dollars as of the month-end, using the Swiss franc/US dollar exchange rate at the applicable month-end.

181

Item 16F. Change in Registrant’s Certifying Accountant

Not applicable.

182

Item 16G. Corporate Governance

Novartis AG is subject to and compliant with the laws and regulations of Switzerland (in particular, Swiss company and securities laws, SIX Swiss Exchange rules and the Swiss Code of Best Practice for Corporate Governance) and the securities laws of the United States, including NYSE listing standards, as applicable to foreign private issuers of securities. The following summarizes some significant ways in which our corporate governance practices differ from those followed by domestic listed US companies under the listing standards of the NYSE:

• Novartis AG shareholders do not receive written reports directly from Board committees.

• External auditors are appointed by shareholders at the Annual General Meeting of Shareholders (AGM), as opposed to being appointed by the Audit and Compliance Committee.

• While shareholders cannot vote on all equity compensation plans, they are entitled to hold separate, yearly binding votes on Board and Executive Committee compensation.

• The Board has set up a separate Risk Committee that oversees the risk management system and processes, as opposed to delegating this responsibility to the Audit and Compliance Committee.

• The full Board is responsible for overseeing the performance evaluation of the Board and Executive Committee.

• The full Board is responsible for setting objectives relevant to the CEO’s compensation and for evaluating his performance.

183

Item 16H. Mine Safety Disclosure

Not applicable.

184

Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

185

Item 16J. Insider Trading Policies

Not applicable.

186

Item 16K. Cybersecurity

Protecting the security and integrity of the IT systems under our control and safeguarding the privacy of our customers, patients and employees is a top priority for us at all levels. Cybersecurity and data privacy risks are among the core enterprise risks evaluated through our annual enterprise risk management assessment.

The Chief Security Officer oversees our cybersecurity risk management program in partnership with our Chief Information Officer and other business leaders. The program was developed to respond to the threat of security breaches and cyberattacks, and to protect and preserve the confidentiality, integrity, and continued availability of information owned by, or in the care of Novartis. Our Chief Security Officer reports to our Chief Information Officer, and is a subject matter expert on information security, privacy, information technology strategy and management with over 20 years of relevant experience across a number of industries, including pharmaceuticals, consumer goods, financial services and consulting. Our Chief Information Officer has nearly 25 years of experience as an IT professional, including 14 years with Novartis, and is responsible for our technology strategy, delivery and operations globally.

To address cybersecurity threats and prevent IT system interruptions, the Information Security & Compliance (ISC) team, which is headed by our Chief Security Officer, has implemented enterprise-wide policies, processes and practices. We follow industry best practices, such as the NIST Cybersecurity Framework and ISO 27001 to manage information security. Novartis has risk-based services continuity and systems recovery plans in place for key business processes, which are tested periodically. We also conduct ongoing internal vulnerability analyses (including simulated hacking) as well as external testing via a third-party to ensure the effectiveness of our cybersecurity controls. We require employees to report IT security incidents to a Cyber Security Operations Center (CSOC) that operates 24 hours a day, 7 days a week. CSOC is a function within ISC that is responsible for investigating all security incidents and alerts including determining the threat type, incident scope and incident severity. Where appropriate, major incidents are escalated to our Chief Executive Officer, who may then inform our Board of the incident pursuant to our internal procedures. Novartis has not experienced any material cybersecurity incidents in the three years through 2023.

As part of its enterprise risk management oversight, the Risk Committee of our Board is responsible for ensuring that the Company has implemented an appropriate and effective risk management system and process, including annually reviewing updates on cybersecurity. The Risk Committee receives updates on cybersecurity risks, which address a wide range of topics, including recent developments, security incidents, evolving standards, vulnerability assessments, third-party and independent reviews, the threat environment, technological trends and information security considerations arising with respect to the peers and vendors of Novartis. At least once each year, the Risk Committee discusses the Company’s approach to cybersecurity risk management with the Chief Security Officer.

187

PART III

Item 17. Financial Statements

See response to “Item 18. Financial Statements.”

188

Item 18. Financial Statements

The following financial statements are filed as part of this Annual Report.

Consolidated income statements

Consolidated statements of comprehensive income

Consolidated balance sheets

Consolidated statements of changes in equity

Consolidated statements of cash flows

Notes to the Novartis consolidated financial statements

1. Accounting policies

2. Significant transactions

3. Operating segment

4. Revenues and geographic information

5. Associated companies

6. Interest expense and other financial income and expense

7. Income taxes

8. Earnings per share

9. Changes in consolidated statements of comprehensive income

10. Property, plant and equipment

11. Right-of-use assets and lease liabilities

12. Goodwill and intangible assets other than goodwill

13. Deferred tax assets and liabilities

14. Financial and other non-current assets

15. Inventories

16. Trade receivables

17. Marketable securities, commodities, time deposits, derivative financial instruments, and cash and cash equivalents

18. Other current assets

19. Equity

20. Non-current financial debt

21. Provisions and other non-current liabilities

22. Current financial debt and derivative financial instruments

23. Provisions and other current liabilities

24. Details to the consolidated statements of cash flows

25. Acquisitions of businesses

26. Post-employment benefits for employees

27. Equity-based participation plans for employees

28. Transactions with related parties

29. Commitments and contingent liabilities

30. Financial instruments – additional disclosures

31. Discontinued operations

32. Events subsequent to the December 31, 2023, consolidated balance sheet date

33. Novartis principal subsidiaries and associated companies

Report of Independent Registered Public Accounting Firm – KPMG AG(PCAOB ID 3240)

Report of Independent Registered Public Accounting Firm – PricewaterhouseCoopers AG (PCAOB ID 1358)

189

Item 19. Exhibits

1.1 Articles of Incorporation of Novartis AG, as amended September 15, 2023 (English translation).

1.2 Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG, effective March 7, 2023.

2.1 Form of Second Amended and Restated Deposit Agreement among Novartis AG, JPMorgan Chase Bank, N.A., as depositary, and all Holders and Beneficial Owners from time to time of American Depositary Receipts issued thereunder (incorporated by reference to Exhibit 99.A to the Registration Statement on Form F-6 as filed with the SEC on December 16, 2022).

2.2 Form of American Depositary Receipt (included in Exhibit 2.1 incorporated by reference to Exhibit 99.A to the Registration Statement on Form F-6 as filed with the SEC on December 16, 2022).

2.3 Description of Securities registered under Section 12 of the Exchange Act.

4.1 Separation and Distribution Agreement by and between Novartis AG and Sandoz Group AG, dated as of September 30, 2023.

4.2 Tax Matters Agreement by and between Novartis AG and Sandoz Group AG, dated as of September 30, 2023.

8.1 For a list of all of our principal subsidiaries and associated companies, see “Item 18. Financial Statements—Note 33. Novartis principal subsidiaries and associated companies.”

12.1 Certification of Vasant Narasimhan, Chief Executive Officer of Novartis AG, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

12.2 Certification of Harry Kirsch, Chief Financial Officer of Novartis AG, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

13.1 Certification of Vasant Narasimhan, Chief Executive Officer of Novartis AG, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

13.2 Certification of Harry Kirsch, Chief Financial Officer of Novartis AG, pursuant to Section 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

15.1 Consent of KPMG AG.

15.2 Consent of PricewaterhouseCoopers AG.

97.1 Novartis AG Policy Governing the Recovery of Erroneously Awarded Compensation.

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema Document

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101).

The total amount of long-term debt securities authorized under any instrument does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. We hereby agree to furnish to the SEC, upon its request, a copy of any instrument defining the rights of holders of long-term debt of the Company or of its subsidiaries for which consolidated or unconsolidated financial statements are required to be filed.

190

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.

Novartis AG

By: /s/ Harry Kirsch

Name: Harry Kirsch

Title: Chief Financial Officer of Novartis

By: /s/ Karen Hale

Name: Karen Hale

Title: Chief Legal Officer of Novartis

Date: January 31, 2024

191

Novartis consolidated financial statements

Consolidated income statements

(For the years ended December 31, 2023, 2022 and 2021)

( millions unless indicated otherwise)	2023	2022	2021
Net sales from continuing operations	45 440	42 206	42 781
Other revenues	1 220	1 255	1 193
Cost of goods sold	-12 472	-11 582	-11 735
Gross profit from continuing operations	34 188	31 879	32 239
Selling, general and administration	-12 517	-12 193	-12 827
Research and development	-11 371	-9 172	-8 641
Other income	1 772	696	1 620
Other expense	-2 303	-3 264	-2 335
Operating income from continuing operations	9 769	7 946	10 056
(Loss)/income from associated companies	-13	-11	15 337
Interest expense	-855	-800	-787
Other financial income and expense	222	42	-76
Income before taxes from continuing operations	9 123	7 177	24 530
Income taxes	-551	-1 128	-1 625
Net income from continuing operations	8 572	6 049	22 905
Net income from discontinued operations before gain on distribution of Sandoz Group AG to Novartis AG shareholders	422	906	1 113
Gain on distribution of Sandoz Group AG to Novartis AG shareholders	5 860
Net income from discontinued operations	6 282	906	1 113
Net income	14 854	6 955	24 018
Attributable to:
Shareholders of Novartis AG	14 850	6 955	24 021
Non-controlling interests	4	0	-3
Basic earnings per share () from continuing operations	4.13	2.77	10.22
Basic earnings per share () from discontinued operations	3.02	0.42	0.49
Total basic earnings per share ()	7.15	3.19	10.71
Diluted earnings per share () from continuing operations	4.10	2.76	10.14
Diluted earnings per share () from discontinued operations	3.00	0.41	0.49
Total diluted earnings per share ()	7.10	3.17	10.63
The accompanying Notes form an integral part of the consolidated financial statements.

All values are in US Dollars.

F-1

Consolidated statements of comprehensive income

(For the years ended December 31, 2023, 2022 and 2021)

(USD millions)	Note	2023	2022	2021
Net income		14 854	6 955	24 018
Other comprehensive income
Items that are or may be recycled into the consolidated income statement
Novartis share of other comprehensive income recognized by associated companies, net of taxes	5			46
Net investment hedge, net of taxes	9	-50	91	216
Currency translation effects, net of taxes	9	1 375	-450	-4 762
Total of items that are or may be recycled		1 325	-359	-4 500
Items that will never be recycled into the consolidated income statement
Actuarial (losses)/gains from defined benefit plans, net of taxes	9	-160	-103	1 809
Fair value adjustments on equity securities, net of taxes	9	37	-382	194
Total of items that will never be recycled		-123	-485	2 003
Total comprehensive income		16 056	6 111	21 521
Total comprehensive income for the year attributable to:
Shareholders of Novartis AG		16 050	6 116	21 528
Continuing operations		10 115	5 181	20 450
Discontinued operations		5 935	935	1 078
Non-controlling interests		6	-5	-7
The accompanying Notes form an integral part of the consolidated financial statements.

F-2

Consolidated balance sheets

(At December 31, 2023 and 2022)

(USD millions)	Note	2023	2022
Assets
Non-current assets
Property, plant and equipment	10	9 514	10 764
Right-of-use assets	11	1 410	1 431
Goodwill	12	23 341	29 301
Intangible assets other than goodwill	12	26 879	31 644
Investments in associated companies	5	205	143
Deferred tax assets	13	4 309	3 739
Financial assets	14	2 607	2 411
Other non-current assets	14	1 199	1 110
Total non-current assets		69 464	80 543
Current assets
Inventories	15	5 913	7 175
Trade receivables	16	7 107	8 066
Income tax receivables		426	268
Marketable securities, commodities, time deposits and derivative financial instruments	17	1 035	11 413
Cash and cash equivalents	17	13 393	7 517
Other current assets	18	2 607	2 471
Total current assets		30 481	36 910
Total assets		99 945	117 453
Equity and liabilities
Equity
Share capital	19	825	890
Treasury shares	19	-41	-92
Reserves		45 883	58 544
Equity attributable to Novartis AG shareholders		46 667	59 342
Non-controlling interests		83	81
Total equity		46 750	59 423
Liabilities
Non-current liabilities
Financial debts	20	18 436	20 244
Lease liabilities	11	1 598	1 538
Deferred tax liabilities	13	2 248	2 686
Provisions and other non-current liabilities	21	4 523	4 906
Total non-current liabilities		26 805	29 374
Current liabilities
Trade payables		4 926	5 146
Financial debts and derivative financial instruments	22	6 175	5 931
Lease liabilities	11	230	251
Current income tax liabilities		1 893	2 533
Provisions and other current liabilities	23	13 166	14 795
Total current liabilities		26 390	28 656
Total liabilities		53 195	58 030
Total equity and liabilities		99 945	117 453
The accompanying Notes form an integral part of the consolidated financial statements.

F-3

Consolidated statements of changes in equity

(For the years ended December 31, 2023, 2022 and 2021)

				Reserves
(USD millions)	Note	Share<br> capital	Treasury<br> shares	Retained<br> earnings	Total value<br> adjustments	Equity<br> attributable <br> to Novartis <br> shareholders	Non-<br> controlling<br> interests	Total<br> equity
Total equity at January 1, 2021		913	-53	57 157	-1 419	56 598	68	56 666
Net income				24 021		24 021	-3	24 018
Other comprehensive income	9			46	-2 539	-2 493	-4	-2 497
Total comprehensive income				24 067	-2 539	21 528	-7	21 521
Dividends	19.1			-7 368		-7 368		-7 368
Purchase of treasury shares	19.2		-18	-2 902		-2 920		-2 920
Reduction of share capital	19	-12	18	-6
Exercise of options and employee transactions	19.2		0	39		39		39
Equity-based compensation	19.2		5	740		745		745
Shares delivered to Alcon employees as a result of the Alcon spin-off	19.2		0	17		17		17
Taxes on treasury share transactions				1		1		1
Increase of treasury share repurchase obligation under a share buyback trading plan	19.4			-1 040		-1 040		-1 040
Transaction costs, net of taxes	19.8			12		12		12
Changes in non-controlling interests	19.6						-1	-1
Fair value adjustments on financial assets sold	9			164	-164
Value adjustments related to divestments	9			65	-65
Impact of change in ownership of consolidated entities	19.5			-5	0	-5	107	102
Other movements	19.7			48		48		48
Total of other equity movements		-12	5	-10 235	-229	-10 471	106	-10 365
Total equity at December 31, 2021		901	-48	70 989	-4 187	67 655	167	67 822
Net income				6 955		6 955	0	6 955
Other comprehensive income	9				-839	-839	-5	-844
Total comprehensive income				6 955	-839	6 116	-5	6 111
Dividends	19.1			-7 506		-7 506		-7 506
Purchase of treasury shares	19.2		-66	-10 844		-10 910		-10 910
Reduction of share capital	19	-11	15	-4
Exercise of options and employee transactions	19.2		1	87		88		88
Equity-based compensation	19.2		6	848		854		854
Shares delivered to Alcon employees as a result of the Alcon spin-off	19.2		0	5		5		5
Taxes on treasury share transactions				14		14		14
Decrease of treasury share repurchase obligation under a share buyback trading plan	19.4			2 809		2 809		2 809
Changes in non-controlling interests	19.6						-81	-81
Fair value adjustments on financial assets sold	9			4	-4
Value adjustments related to divestments	9			-34	34
Other movements	19.7			217		217		217
Total of other equity movements		-11	-44	-14 404	30	-14 429	-81	-14 510
Total equity at December 31, 2022		890	-92	63 540	-4 996	59 342	81	59 423
Net income				14 850		14 850	4	14 854
Other comprehensive income	9				1 200	1 200	2	1 202
Total comprehensive income				14 850	1 200	16 050	6	16 056
Dividends	19.1			-7 255		-7 255		-7 255
Dividend in kind to effect the spin-off of Sandoz Group AG	2			-13 962		-13 962		-13 962
Purchase of treasury shares	19.2		-51	-8 466		-8 517		-8 517
Reduction of share capital	19.3	-65	94	-29
Exercise of options and employee transactions	19.2		2	144		146		146
Equity-based compensation	19.2		6	898		904		904
Shares delivered to Sandoz employees as a result of the Sandoz spin-off	19.2		0	30		30		30
Taxes on treasury share transactions				14		14		14
Transaction costs, net of taxes	19.8			-214		-214		-214
Changes in non-controlling interests	19.6						-4	-4
Fair value adjustments on financial assets sold	9			-1	1
Value adjustments related to divestments	9			-29	29
Other movements	19.7			129		129		129
Total of other equity movements		-65	51	-28 741	30	-28 725	-4	-28 729
Total equity at December 31, 2023		825	-41	49 649	-3 766	46 667	83	46 750
The accompanying Notes form an integral part of the consolidated financial statements.

F-4

Consolidated statements of cash flows

(For the years ended December 31, 2023, 2022 and 2021)

(USD millions)	Note	2023	2022	2021
Net income from continuing operations		8 572	6 049	22 905
Adjustments to reconcile net income from continuing operations to net cash flows from operating activities from continuing operations
Reversal of non-cash items and other adjustments	24.1	10 369	10 631	-6 430
Dividends received from associated companies and others		2	1	523
Interest received		645	252	11
Interest paid		-751	-667	-643
Other financial receipts		90	71
Other financial payments		-17	-26	-297
Income taxes paid	24.2	-2 787	-1 702	-1 856
Net cash flows from operating activities from continuing operations before working capital and provision changes		16 123	14 609	14 213
Payments out of provisions and other net cash movements in non-current liabilities		-1 534	-774	-775
Change in net current assets and other operating cash flow items	24.3	-369	-796	-73
Net cash flows from operating activities from continuing operations		14 220	13 039	13 365
Net cash flows from operating activities from discontinued operations		238	1 197	1 706
Total net cash flows from operating activities		14 458	14 236	15 071
Purchases of property, plant and equipment		-1 060	-916	-1 066
Proceeds from sale of property, plant and equipment		237	158	211
Purchases of intangible assets		-1 693	-1 323	-1 490
Proceeds from sale of intangible assets		1 955	170	686
Purchases of financial assets		-106	-115	-188
Proceeds from sale of financial assets		348	133	440
Purchases of other non-current assets			-1	-59
Proceeds from sale of other non-current assets				4
Acquisitions and divestments of interests in associated companies, net	24.4	-11	-24	20 669
Acquisitions and divestments of businesses, net	24.5	-3 558	-840	-205
Purchases of marketable securities, commodities and time deposits		-641	-34 695	-16 403
Proceeds from sale of marketable securities, commodities and time deposits		11 248	39 357	2 298
Net cash flows from investing activities from continuing operations		6 719	1 904	4 897
Net cash flows used in investing activities from discontinued operations	31	-1 123	-436	-689
Total net cash flows from investing activities		5 596	1 468	4 208
Dividends paid to shareholders of Novartis AG		-7 255	-7 506	-7 368
Acquisitions of treasury shares		-8 719	-10 652	-3 057
Proceeds from exercised options and other treasury share transactions, net		153	100	53
Repayments of the current portion of non-current financial debts	24.6	-2 223	-2 575	-2 162
Change in current financial debts	24.6	546	252	-3 547
Payments of lease liabilities	24.6	-258	-262	-278
Impact of change in ownership of consolidated entities				-3
Other financing cash flows, net		192	-38	72
Net cash flows used in financing activities from continuing operations		-17 564	-20 681	-16 290
Net cash flows from financing activities from discontinued operations	31	3 286	119	26
Total net cash flows used in financing activities		-14 278	-20 562	-16 264
Net change in cash and cash equivalents before effect of exchange rate changes		5 776	-4 858	3 015
Effect of exchange rate changes on cash and cash equivalents		100	-32	-266
Net change in cash and cash equivalents		5 876	-4 890	2 749
Cash and cash equivalents at January 1		7 517	12 407	9 658
Cash and cash equivalents at December 31		13 393	7 517	12 407
The accompanying Notes form an integral part of the consolidated financial statements.

F-5

Notes to the Novartis consolidated financial statements

1. Accounting policies

Novartis is a multinational group of companies (Novartis or Company) specializing in the research, development, manufacturing and marketing of a broad range of innovative pharmaceutical medicines. The Company is headquartered in Basel, Switzerland.

The consolidated financial statements of the Company are prepared in accordance with International Financial Reporting Standards (IFRS) Accounting Standards as issued by the International Accounting Standards Board. They are prepared in accordance with the historical cost convention, except for items that are required to be accounted for at fair value.

The Company’s financial year-end is December 31, which is also the annual closing date of the individual entities’ financial statements incorporated into the Company’s consolidated financial statements.

The preparation of financial statements requires management to make certain estimates and assumptions, either at the balance sheet date or during the year, which affect the reported amounts of revenues, expenses, assets, liabilities, including the distribution liability and the non-cash, non-taxable gain recognized in connection with the distribution of Sandoz Group AG to Novartis AG shareholders, and contingent amounts.

Estimates are based on historical experience and other assumptions that are considered reasonable under the given circumstances and are regularly monitored. Actual outcomes and results could differ from those estimates and assumptions. Revisions to estimates are recognized in the period in which the estimate is revised.

At the Novartis AG Extraordinary General Meeting, held on September 15, 2023, our shareholders approved the spin-off of the Sandoz business. Following the shareholder approval, IFRS Accounting Standards require the Sandoz Division and selected portions of corporate activities attributable to Sandoz’s business, as well as certain expenses related to the spin-off (the “Sandoz business”) to be reported as discontinued operations in the consolidated financial statements. As a result, the Sandoz business has been presented as discontinued operations in the consolidated financial statements. This requires the year ended December 31, 2023 consolidated income statement, consolidated statement of comprehensive income and consolidated statement of cash flows to present separately continuing operations from discontinued operations, with comparative amounts in the prior years restated on a consistent basis. There is no requirement for the restatement of the December 31, 2022 consolidated balance sheet related to the assets and liabilities of the Sandoz business that were derecognized in 2023 as at the October 3, 2023 Distribution date. For further information and disclosures refer to the section Distribution of Sandoz Group AG to Novartis AG shareholders in this Note 1, Note 2 and Note 31.

Listed below are the material accounting policies of significance to Novartis or, in cases where IFRS Accounting Standards provide alternatives, the option adopted by Novartis.

Scope of consolidation

The consolidated financial statements include all entities, including structured entities, over which Novartis AG, Basel, Switzerland, directly or indirectly has control (generally as a result of owning more than 50% of the entity’s voting interest). Consolidated entities are also referred to as “subsidiaries.”

In cases where Novartis does not fully own a subsidiary, it has elected to value any remaining outstanding non-controlling interest at the time of acquiring control of the subsidiary at its proportionate share of the fair value of the net identified assets.

Investments in associated companies (generally defined as investments in entities in which Novartis holds between 20% and 50% of voting shares or over which it otherwise has significant influence) and joint ventures are accounted for using the equity method, except for selected venture fund investments for which the Company has elected to apply the method of fair value through the consolidated income statement.

Foreign currencies

The consolidated financial statements of Novartis are presented in US dollars (USD). The functional currency of a subsidiary is generally the local currency of that entity. The functional currency used for the reporting of certain Swiss and foreign finance entities is USD instead of their respective local currencies. This reflects the fact that the cash flows and transactions of these entities are primarily denominated in this currency.

For subsidiaries using a functional currency other than USD the subsidiary’s results, financial position and cash flows are translated into USD using the following exchange rates:

• Income, expense and cash flows for each month using the average exchange rate, with the US dollar values for each month being aggregated during the year

• Balance sheet using year-end exchange rates

• Resulting exchange rate differences are recognized in other comprehensive income

F-6

Distribution of Sandoz Group AG to Novartis AG shareholders

At the Extraordinary General Meeting (EGM) of Novartis AG shareholders, held on September 15, 2023, the Novartis AG shareholders approved a special distribution by way of a dividend in kind to effect the spin-off of Sandoz Group AG.

The September 15, 2023, shareholder approval for the spin-off required the Sandoz Division and selected portions of corporate activities attributable to Sandoz’s business, as well as certain expenses related to the spin-off (the “Sandoz business”) to be reported as discontinued operations.

The shareholder approval on September 15, 2023, for the spin-off the Sandoz business, required the recognition of a distribution liability at the fair value of the Sandoz business. Novartis policy is to measure the distribution liability at the fair value of the Sandoz business net assets taken as a whole. The distribution liability was recognized through a reduction in retained earnings. It was required to be adjusted at each balance sheet date for changes in its estimated fair value, up to the date of the distribution to shareholders through retained earnings. Any resulting impairment of the business assets to be distributed would have been recognized in the consolidated income statements in “Other expense” of discontinued operations, at the date of initial recognition of the distribution liability or at subsequent dates resulting from changes of the distribution liability valuation.

At the October 4, 2023, distribution settlement date, the resulting gain, which is measured as the excess amount of the distribution liability over the then-carrying value of the net assets of the business distributed, was recognized on the line “Gain on distribution of Sandoz Group AG to Novartis AG shareholders” within the income statement of discontinued operations.

The recognition of the distribution liability required the use of valuation techniques for the purposes of impairment testing of the Sandoz business’ assets to be distributed and for the measurement of the fair value of the distribution liability. These valuations required the use of management assumptions and estimates related to the Sandoz business’ future cash flows, market multiples, opening share price of Sandoz Group AG on the first day of trading its shares on the SIX Swiss Exchange, to estimate day one market value, and control premiums to apply in estimating the Sandoz business fair value. These fair value measurements are classified as “Level 3” in the fair value hierarchy. The section “—Goodwill and intangible assets other than goodwill” in this Note 1 provides additional information on key assumptions that are highly sensitive in the estimation of fair values using valuation techniques.

Transaction costs that are directly attributable to the Distribution (spin-off) of the Sandoz business to Novartis AG shareholders by way of a dividend in kind, and that would otherwise have been avoided, were accounted for as a deduction from equity (within retained earnings). Prior to the recognition of the distribution liability, these costs were recorded as prepaid expenses in the consolidated balance sheet.

For additional disclosures, refer to “Note 2. Significant transactions—Significant transactions in 2023—Completion of the spin-off of the Sandoz business through a dividend in kind distribution to Novartis AG shareholders,” and “Note 31. Discontinued operations.”

Acquisition of assets and businesses

Assets separately acquired are recorded at cost, which includes the purchase price and any directly attributable costs for bringing the asset into the condition to operate as intended. Expected costs for obligations to dismantle and remove property, plant and equipment and restore the site when it is no longer used are included in their cost.

Acquired businesses are accounted for by applying the acquisition method, unless the optional concentration test is applied. The optional concentration test allows for an election on a transaction-by-transaction basis to account for the acquired business as an asset separately acquired when substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

The acquisition method requires that the assets acquired and liabilities assumed be recorded at their respective fair values on the date the Company obtains control. The excess of the fair value of the total purchase consideration transferred over the fair value of the acquired assets and assumed liabilities is recognized as goodwill. The valuations are based on information available at the acquisition date. Acquisition related costs are expensed as incurred.

The application of the acquisition method requires certain estimates and assumptions to be made, especially concerning the fair values of the acquired intangible assets, inventories, property, plant and equipment and the liabilities assumed at the acquisition date, and the useful lives of the intangible assets and property, plant and equipment. Estimates of fair value require the use of valuation techniques. These valuations require the use of management assumptions and estimates, including the value of comparable assets in the market, amount and timing of future cash flows, outcomes and costs of research and development activities, probability of obtaining regulatory approval, long-term sales forecasts, actions of competitors, discount rates and terminal growth rates. The section “—Impairment of goodwill and intangible assets” in this Note 1 provides additional information on key assumptions that are highly sensitive in the estimation of fair values using valuation techniques.

Goodwill and intangible assets other than goodwill

Goodwill arises on applying the acquisition method on the acquisition of a business and is the excess of the fair value of the consideration transferred to acquire the business over the underlying fair value of the net identified assets acquired. Goodwill is allocated to groups of cash-generating units (CGUs) that is expected to benefit from the synergies of the combination, which are usually represented by the operating segment. Goodwill is

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tested for impairment annually at the level of this group of CGUs, and any impairment charges are recorded under “Other expense” in the consolidated income statement.

Purchased intangible assets other than goodwill are initially recorded at cost. Intangible assets that have been acquired through a business combination are initially recorded at fair value using the acquisition method of accounting.

Intangible assets available for use with a definitive useful life (which includes the categories Currently marketed products and Other intangible assets) are amortized on a straight-line basis and evaluated for potential impairment whenever facts and circumstances indicate that their carrying value may not be recoverable.

Acquired research and development intangible assets that have not yet obtained marketing approval are recognized as in-process research and development (IPR&D). IPR&D is not amortized as it is not yet available for use. It is evaluated for potential impairment on an annual basis or when facts and circumstances warrant. Once a project included in IPR&D has received marketing approval from a regulatory authority, it is transferred to the “Currently marketed products” category of intangible assets.

An asset, a CGU or a grouping of CGUs is considered impaired when its balance sheet carrying amount exceeds its estimated recoverable amount, which is defined as the higher of its fair value less costs of disposal and its value in use. Usually, Novartis applies the fair value less costs of disposal method for its impairment assessment. In most cases, no directly observable market inputs are available to measure the fair value less costs of disposal. An estimate is therefore derived indirectly and is based on net present value techniques utilizing post-tax cash flows and discount rates. In the limited cases where the value-in-use method would be applied, net present value techniques would be applied using pre-tax cash flows and discount rates.

Fair value less costs of disposal reflects estimates of assumptions that market participants would be expected to use when pricing the asset or CGU, and for this purpose, management considers the range of economic conditions that are expected to exist over the remaining useful life of the asset. These valuations are classified as “Level 3” in the fair value hierarchy.

The estimates used in calculating the net present values are highly sensitive and depend on assumptions specific to the nature of the Company’s activities with regard to:

• Amount and timing of projected future cash flows

• Sales forecasts

• Actions of competitors (launch of competing products, marketing initiatives, etc.)

• Sales erosion rates after the end of patent or other intellectual property rights protection, and timing of the entry of generic competition

• Outcome of research and development activities (compound efficacy, results of clinical trials, etc.)

• Amount and timing of projected costs to develop IPR&D into commercially viable products

• Profit margins

• Probability of obtaining regulatory approval

• Future tax rate

• Appropriate terminal growth rate

• Appropriate discount rate

Generally, for intangible assets with a definite useful life, Novartis uses cash flow projections for the whole useful life of these assets. For goodwill, Novartis generally utilizes cash flow projections for a three-year period based on management forecasts, with a terminal value based on cash flow projections usually in line with inflation rates for later periods.

Probability-weighted scenarios are typically used.

Discount rates used consider the Company’s estimated weighted average cost of capital, adjusted for specific asset, country and currency risks associated with cash flow projections, to approximate the discount rate that market participants would use to value the asset.

Due to the above factors, actual cash flows and values could vary significantly from forecasted future cash flows and related values derived using discounting techniques.

Cash and cash equivalents

Cash and cash equivalents include highly liquid investments with original maturities of three months or less, which are readily convertible to known amounts of cash. Bank overdrafts are presented within current financial debts on the consolidated balance sheet.

Marketable securities and non-current financial assets

Marketable securities are financial assets held for short-term purposes that are principally traded in liquid markets and are classified within current assets on the consolidated balance sheet. The financial impacts related to these financial assets are recorded in “Other financial income and expense” in the consolidated income statement. Non-current financial assets held for long-term strategic purposes are classified within non-current assets on the consolidated balance sheet. The financial impacts related to these financial assets are recorded in “Other income” and “Other expense” in the consolidated income statement.

Marketable securities and non-current financial assets are initially recorded at fair value on their trade date, which is different from the settlement date when the transaction is ultimately effected. Quoted securities are remeasured at each reporting date to fair value based on current market prices. If the market for a financial asset is not active or no market is available, fair values are established using valuation techniques. The majority of non-quoted investments are initially valued at fair value through the purchase price established between a willing buyer and seller. Non-quoted investments are subsequently adjusted based on values derived from discounted cash flow analysis or other pricing models. These investment values are classified as “Level 3” in the fair value hierarchy.

The Company classifies and accounts for its marketable securities and non-current financial assets in the following categories:

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• Debt securities are valued at fair value through other comprehensive income with subsequent recycling into the consolidated income statement, as they meet both the “solely payment of principal and interest” and the business model criteria. Unrealized gains and losses, except exchange gains and losses, are recorded as a fair value adjustment in the consolidated statement of comprehensive income. They are recognized in the consolidated income statement when the debt instrument is sold, at which time the gain is transferred to “Other financial income and expense.” Exchange gains and losses related to debt instruments are immediately recognized in the consolidated income statement in “Other financial income and expense.”

• Fund investments and equity securities of the Novartis Venture Fund are valued at fair value through profit and loss (FVPL). Unrealized gains and losses, including exchange gains and losses, are recognized in the consolidated income statement in “Other income” for gains and “Other expense” for losses.

• Equity securities held as strategic investments, typically held outside of the Novartis Venture Fund, are generally designated at the date of acquisition as financial assets valued at fair value through other comprehensive income with no subsequent recycling through profit and loss. Unrealized gains and losses, including exchange gains and losses, are recorded as a fair value adjustment in the consolidated statement of comprehensive income. They are reclassified to retained earnings when the equity security is sold. If these equity securities are not designated at the date of acquisition as financial assets valued at fair value through other comprehensive income, they are valued at FVPL, as described above.

• Other non-current financial assets, such as loans and long-term receivables from customers, advances and other deposits, are valued at amortized cost, which reflects the time value of money less any allowances for expected credit losses.

The Company assesses on a forward-looking basis the expected credit losses associated with its debt securities valued at fair value through other comprehensive income. Impairments on debt securities are recorded in “Other financial income and expense.”

For other financial assets valued at amortized cost, impairments, which are based on their expected credit losses, and exchange rate losses are included in “Other expense” in the consolidated income statement. Exchange rate gains and interest income, using the effective interest rate method, are included in “Other income” or “Other financial income” in the consolidated income statement, depending on the nature of the item.

Derivative financial instruments

Derivative financial instruments are initially recognized in the balance sheet at fair value and are remeasured to their current fair value at the end of each subsequent reporting period. The valuation of a forward exchange rate contract is based on the discounted cash flow model, using interest rate curves and forward rates at the reporting date as observable inputs.

Options are valued based on a modified Black-Scholes model using volatility and exercise prices as major observable inputs.

The Company enters into certain derivative financial instruments for the purpose of hedging to reduce the volatility in the Company’s performance due to the exposure to various business-related risks. The risk mitigation is obtained because the derivative’s value or cash flows are expected, wholly or partly, to offset changes in the value or cash flows of the recognized assets or liabilities. The overall strategy is aiming to mitigate the currency and interest rate risk of positions that are contractually agreed, and to partially mitigate the exposure risk of selected anticipated transactions.

Certain derivative financial instruments meet the criteria for hedge accounting treatment. A prerequisite for obtaining this accounting-hedge relationship is extensive documentation on inception and proving on a regular basis that the economic hedge is effective for accounting purposes. Other derivative financial instruments do not meet the criteria to qualify for hedge accounting or are not designated in a hedge relationship. Changes in the fair value of these derivative instruments are recognized immediately in “Other financial income and expense” in the consolidated income statement.

In addition, the Company has designated certain long-term debt components as hedges of the translation risk arising on certain net investments in foreign operations. On consolidation, foreign currency differences arising on long-term debt designated as net investment hedges of a foreign operation are recognized in other comprehensive income and accumulated in currency translation effects, to the extent that the hedge is effective. The foreign currency differences arising from hedge ineffectiveness are recognized in the income statement in “Other financial income and expense.”

When a hedged net investment is disposed of, the proportionate portion of the cumulative amount recognized in equity in relation to the hedged net investment is transferred to the consolidated income statement as an adjustment to the gain or loss on disposal.

Inventories

Inventory is valued at the lower of acquisition or production cost determined on a first-in, first-out basis and net realizable value. This value is used for the “Cost of goods sold” in the consolidated income statement. Unsaleable inventory is fully written off in the consolidated income statement under “Cost of goods sold.”

Trade receivables

Trade receivables are initially recognized at their invoiced amounts, including any related sales taxes less adjustments for estimated revenue deductions such as rebates, chargebacks and cash discounts.

Provisions for doubtful trade receivables are established using a forward-looking expected credit loss model (ECL). Charges for doubtful trade receivables are recorded as marketing and selling costs recognized in

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the consolidated income statement within “Selling, general and administration” expenses.

Legal and environmental liabilities

Novartis and its subsidiaries are subject to contingencies arising in the ordinary course of business, such as patent litigation, environmental remediation liabilities and other product-related and commercial litigation, and governmental investigations and proceedings. A provision is recorded when there is a probable outflow of resources for which a reliable estimate can be made of the outcome of the legal or other disputes against the subsidiary.

Contingent consideration

In the acquisition or divestment of a business, it is necessary to recognize contingent future amounts due to previous owners, representing contractually defined potential amounts as a liability or an asset. Usually for Novartis, these are linked to milestone or royalty payments related to certain assets and are recognized as a financial liability or financial asset at fair value, which is then remeasured at each subsequent reporting date. These estimations typically depend on factors such as technical milestones or market performance, and are adjusted for the probability of their likelihood of payment, and are appropriately discounted to reflect the impact of time.

Changes in the fair value of contingent consideration liabilities in subsequent periods are recognized in the consolidated income statement in “Cost of goods sold” for currently marketed products and in “Research and development” for IPR&D. Changes in contingent consideration assets are recognized in “Other income” or “Other expense,” depending on their nature.

The effect of unwinding the discount over time is recognized for contingent consideration liabilities in “Interest expense” and for contingent consideration assets as interest income recognized in the consolidated income statement within “Other financial income and expense.”

Defined benefit pension plans and other post-employment benefits

The liability in respect of defined benefit pension plans and other post-employment benefits is the defined benefit obligation calculated annually by independent actuaries using the projected unit credit method. The current service cost for defined benefit pension plans and other post-employment benefit plans is included in the personnel expenses of the various functions in which employees are employed, and the net interest on the net defined benefit liability or asset is recognized as “Other expense” or “Other income.”

Revenue recognition

Revenue on the sale of Novartis products and services, which is recorded as “Net sales to third parties” in the consolidated income statement, is recognized when a contractual promise to a customer (performance obligation) has been fulfilled by transferring control over the promised goods and services to the customer, substantially all of which is at the point in time of shipment to or receipt of the products by the customer or when the services are performed. If contracts contain customer acceptance provisions, revenue is recognized upon the satisfaction of the acceptance criteria. If a contract contains more than one performance obligation, the consideration is allocated based on the standalone selling price of each performance obligation. The amount of revenue recognized is based on the consideration Novartis expects to receive in exchange for its goods and services, when it is highly probable that a significant reversal will not occur.

The consideration Novartis receives in exchange for its goods or services may be fixed or variable. Variable consideration is recognized when it is highly probable that a significant reversal will not occur. The most common elements of variable consideration are listed below.

• Rebates and discounts granted to wholesalers, retailers, government agencies (including US Medicaid and US Federal Medicare programs), government supported healthcare systems, private health systems, pharmacy benefit managers, managed healthcare organizations, purchasing organizations and other direct and indirect customers, as well as chargebacks are provisioned and recorded as revenue deductions at the time the related revenues are recorded, or when the incentives are offered. The provision represents estimates of the related obligations, requiring the use of judgment when estimating the effect of these revenue deductions. These rebates and discounts, applied using provision rates, are estimated based on the terms and conditions in the individual government agencies, states, plans and customer agreements (which may be subject to challenge or change in interpretative guidance by government authorities and customers), historical experience, product sales and growth rate, population growth, product pricing including inflation impacts, the mix of contracts and products, the level of inventory in the distribution channel, regulations, contracts, channels and payers, as appropriate to the individual rebate and discount arrangements. These rebate provisions are adjusted based on established processes and experiences, for example from filing data with individual government agencies, states, and plans. There is often a time lag between recording of revenue deductions and the final accounting for them.

• Refunds granted to healthcare providers under innovative pay-for-performance agreements (i.e. outcome based arrangements) are provisioned and recorded as a revenue deduction at the time the related sales are recorded. The provision represents estimates of the related obligations, requiring the use of judgment when estimating the effect of these revenue deductions. They are calculated on the basis of historical experience and clinical data available for the product, as well as specific terms of the individual agreements.

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In cases where historical experience and clinical data are not sufficient for a reliable estimation of the outcome, revenue recognition is deferred until the uncertainty is resolved, until such history is available or the period when the refund right has expired. The provisions for revenue deductions under the innovative pay-for-performance agreements are adjusted periodically based on established processes and actual experience, including the products actual outcomes achieved compared with the anticipated predefined targets.

• Cash discounts are offered to customers to encourage prompt payment and are provisioned and recorded as revenue deductions at the time the related sales are recorded.

• Sales returns provisions are recognized and recorded as revenue deductions when there is historical experience of Novartis agreeing to customer returns and Novartis can reasonably estimate expected future returns. The provision represents estimates of the related obligations, requiring the use of judgment when estimating the effect of these revenue deductions. In doing so, the estimated rate of return is applied, determined on the basis of historical experience of customer returns and considering any other relevant factors. This is applied to the amounts invoiced, also considering the amount of returned products to be destroyed versus products that can be placed back in inventory for resale. Where shipments are made on a resale or return basis, without sufficient historical experience for estimating sales returns, revenue is only recorded when there is evidence of consumption or when the right of return has expired. The provisions for sales returns are adjusted periodically based on established processes and actual experience,

Net sales to third parties and provisions for revenue deductions are adjusted periodically to reflect experience and to reflect actual amounts as rebates, refunds, discounts and returns are processed. There is often a time lag between recording of revenue deductions and the final accounting for them. The provision represents estimates of the related obligations, requiring the use of judgment when estimating the effect of these revenue deductions.

“Other revenue” includes income from profit-sharing arrangements with our collaboration partners, and royalty and milestone income from the out-licensing of intellectual property when Novartis retains an interest in the intellectual property through a license. Royalty income earned from a license is recognized when the underlying sales have occurred. Milestone income is recognized at the point in time when it is highly probable that the relevant milestone event criteria are met, and the risk of reversal of revenue recognition is remote. “Other revenue” also includes revenue from activities such as manufacturing or other services rendered, to the extent such revenue is not recorded under net sales, and is recognized when control transfers to the third party and our performance obligations are satisfied.

Research and development

Internal research and development (R&D) costs are fully charged to “Research and development” in the consolidated income statement in the period in which they are incurred. The Company considers that regulatory and other uncertainties inherent in the development of new products preclude the capitalization of internal development expenses as an intangible asset until marketing approval from a regulatory authority is obtained in a major market such as the United States, the European Union, Switzerland or Japan.

Payments made to third parties, such as contract research and development organizations in compensation for subcontracted R&D, that are deemed not to transfer intellectual property to Novartis are expensed as internal R&D expenses in the period in which they are incurred. Such payments are only capitalized if they meet the criteria for recognition of an internally generated intangible asset, usually when marketing approval has been received from a regulatory authority in a major market.

Payments made to third parties to in-license or acquire intellectual property rights, compounds and products, including initial upfront and subsequent milestone payments, are capitalized, as are payments for other assets, such as technologies to be used in R&D activities. If additional payments are made to the originator company to continue performing R&D activities, an evaluation is made as to the nature of the payments. Such additional payments will be expensed if they are deemed to be compensation for subcontracted R&D services not resulting in an additional transfer of intellectual property rights to Novartis. Such additional payments will be capitalized if they are deemed to be compensation for the transfer to Novartis of additional intellectual property developed at the risk of the originator company. Subsequent internal R&D costs in relation to IPR&D and other assets are expensed, since the technical feasibility of the internal R&D activity can only be demonstrated by the receipt of marketing approval for a related product from a regulatory authority in a major market.

Costs for post-approval studies performed to support the continued registration of a marketed product are recognized as marketing expenses. Costs for activities that are required by regulatory authorities as a condition for obtaining marketing approval in a major market are capitalized and recognized as currently marketed products.

Inventory produced ahead of regulatory approval is fully provisioned, and the charge is included in “Other expense” in the consolidated income statement, as its ultimate use cannot be assured. If this inventory can subsequently be sold, the provision is released to “Other income” in the consolidated income statement, either on approval by the appropriate regulatory authority or, exceptionally in Europe, on recommendation by the Committee for Medicinal Products for Human Use (CHMP), if approval is virtually certain.

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Share-based compensation

Vested Novartis shares and American Depositary Receipts (ADRs) that are granted as compensation are valued at their market value on the grant date and are immediately expensed in the consolidated income statement.

The fair values of unvested restricted shares (RSs), restricted share units (RSUs) and performance share units (PSUs) in Novartis shares and ADRs granted to employees as compensation are recognized as an expense over the related vesting period. The expense recorded in the consolidated income statement is included in the personnel expenses of the various functions in which the employees are employed.

Unvested restricted shares, restricted ADRs and RSUs are only conditional on the provision of services by the plan participant during the vesting period. They are valued at fair value on the grant date. As RSUs do not entitle the holder to dividends, the fair value is based on the Novartis share price at the grant date adjusted for the net present value of the dividends expected to be paid during the holding period. The fair value of these grants, after making adjustments for assumptions related to forfeiture during the vesting period, is expensed on a straight-line basis over the respective vesting period.

PSUs are subject to the achievement of certain performance criteria based on Novartis internal performance metrics and variables that can be observed in the market, which for Novartis plans is the Novartis total shareholder return (TSR) relative to a specific peer group of companies over the vesting period and require plan participants to provide services during this period The expense is recognized in the consolidated income statement on a straight-line basis over the vesting period, and is determined based on a bifurcation into the components based on the performance criteria related to Novartis internal performance metrics and TSR. The number of equity instruments that finally vest is determined at the vesting date. The following paragraphs provide an overview of the accounting policies for the determination of the components of the PSU share-based compensation plan expense.

The portion of the PSUs expense that is subject to performance criteria based on Novartis internal performance metrics over the vesting period is determined based on assumptions concerning the expected performance against the internal performance metrics throughout the vesting period. The assumptions are based on the Company’s targets for those performance metrics, and the expected forfeitures due to plan participants not meeting their service conditions. The assumptions are periodically adjusted over the vesting period. For this portion of the PSUs expense, any change in estimates for past services is recorded immediately as an expense or income in the consolidated income statement, and amounts for the remaining vesting period are expensed on a straight-line basis. As a result, at the end of the vesting period, the expense during the entire vesting period represents the amount that will finally vest.

The portion of the PSUs expense that is subject to performance criteria based on Novartis TSR relative to a specific peer group of companies over the vesting period is determined based on the total fair value of the grant over the vesting period. IFRS Accounting Standards require that these variables that can be observed in the market are taken into account in determining the fair value of the PSUs at the grant date. Novartis determined the fair value of these PSUs at the date of grant using a Monte Carlo simulation model. For this portion of the PSU expense, adjustments to expense recognized in the consolidated income statement are only made if a plan participant does not fulfill the service conditions.

Measuring the fair values of PSUs granted that include TSR performance criteria requires the use of estimates. The Monte Carlo simulation used to determine the fair value of the PSUs TSR performance criteria requires the probability of factors related to uncertain future events; the term of the award; the grant price of underlying shares or ADRs; expected volatilities; the expected correlation matrix of the underlying equity instruments with those of the peer group of companies; and the risk-free interest rate as input parameters.

If a plan participant leaves Novartis for reasons other than retirement, disability or death, then unvested restricted shares, restricted ADRs, RSUs and PSUs are forfeited, unless determined otherwise by the provision of the plan rules or by the Compensation Committee of the Novartis Board of Directors, for example, in connection with a reorganization or divestment.

Income taxes

Income taxes comprise current income taxes and deferred income taxes and are recognized in the same periods as the revenues and expenses to which they relate. Income taxes include interest and penalties incurred during the period, insofar as they are considered an income tax. Income taxes related to items recognized directly to other comprehensive income or to equity are recognized together with the corresponding item, to which the income tax is attributable, directly in other comprehensive income or in equity.

Deferred income taxes are determined using the comprehensive liability method and are calculated on the temporary differences that arise between the tax base of an asset or liability and its carrying value for financial reporting purposes, except for those temporary differences related to investments in subsidiaries and associated companies, where the timing of their reversal can be controlled and it is probable that the difference will not reverse in the foreseeable future. Since the retained earnings are reinvested, withholding or other taxes on eventual distribution of a subsidiary’s retained earnings are only recognized when a dividend is declared or has been planned. Furthermore, deferred income taxes are recognized for the net tax effects of net operating loss carryforwards and tax credits. The Company applies the IFRS Accounting Standards exception to not recognize or disclose information about deferred tax assets and deferred tax liabilities related to countries that have enacted tax legislation that comply with the Organization for Economic Cooperation and Development (OECD) Pillar Two income taxes.

The carrying amount of deferred tax assets is reduced to the extent that it is not probable that sufficient taxable profits will be available to enable all or part

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of the asset to be recovered. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations.

The estimated amounts for current and deferred tax assets or liabilities, including amounts related to any uncertain tax positions, are based on applicable tax law and regulations in the various tax jurisdictions, in which the Company operates, which are subject to interpretations based on currently known facts and circumstances.

Tax returns are based on an interpretation of tax laws and regulations, and reflect estimates based on these judgments and interpretations. The tax returns are subject to examination by the competent taxing authorities, which may result in an assessment being made requiring payments of additional tax, interest or penalties.

The calculation of income tax assets and liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a multitude of jurisdictions across our global operations. As a result, inherent uncertainties exist in the estimates of the tax positions. Tax liabilities for uncertain tax provisions are recognized on the consolidated balance sheets within current income tax liabilities.

Impact of new IFRS Accounting Standards, amendments and interpretations in 2023

No new IFRS Accounting Standards were adopted by the Company in 2023. In addition, new IFRS Accounting Standards amendments or interpretations that became effective in 2023 did not have a material impact on the Company’s consolidated financial statements.

Based on the Company’s assessment, there are no IFRS Accounting Standards, amendments or interpretations not yet effective in 2023 that would be expected to have a material impact on the Company’s consolidated financial statements.

Impact of new IFRS Accounting Standards, amendments and interpretations in 2022

No new IFRS Accounting Standards were adopted by the Company in 2022. In addition, new IFRS Accounting Standards amendments or interpretations that became effective in 2022 did not have a material impact on the Company’s consolidated financial statements.

Based on the Company’s assessment, there were no IFRS Accounting Standards, amendments or interpretations not yet effective in 2022 that would have been expected to have a material impact on the Company’s consolidated financial statements.

Impact of adopting significant new IFRS Accounting Standards in 2021

The following new IFRS Accounting Standard was adopted by Novartis from January 1, 2021:

Interest Rate Benchmark Reform – Phase 2, Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (Interest Benchmark Reform Amendments)

Interest Benchmark Reform Amendments became effective from January 1, 2021. These amendments address issues that might affect financial reporting when an existing interest rate benchmark (i.e. Interbank offered rate – IBOR) is replaced with an alternative benchmark interest rate. The effects of interest rate benchmark reform on the Company’s financial instruments and risk management strategies did not have a material impact on the Company’s consolidated financial statements.

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2. Significant transactions

The Company applied the acquisition method of accounting for businesses acquired, and did not elect to apply the optional concentration test to account for acquired business as an asset separately acquired.

Significant transactions in 2023

Completion of the spin-off of the Sandoz business through a dividend in kind distribution to Novartis AG shareholders

On July 18, 2023, Novartis announced that its Board of Directors had unanimously endorsed the proposed separation of the Sandoz business to create an independent company by way of a spin-off and to seek shareholder approval for the spin-off of the Sandoz business into a separately traded standalone company, following the complete structural separation of the Sandoz business into a standalone company (the Sandoz business or Sandoz Group AG) and subject to the satisfaction of certain conditions and Novartis AG shareholders’ approval.

At the EGM held on September 15, 2023, Novartis AG shareholders approved a special distribution by way of a dividend in kind to effect the spin-off of Sandoz Group AG, subject to the completion of certain conditions precedent to the distribution. Upon shareholder approval, the Sandoz business was reported as discontinued operations and the distribution liability was recognized at its fair value, which exceeded the carrying value of the Sandoz business net assets.

The conditions precedent to the spin-off were met and on October 3, 2023 the spin-off of the Sandoz business was effected by way of a distribution of a dividend in kind of Sandoz Group AG shares to Novartis AG shareholders and American Depositary Receipt (ADR) holders (the Distribution). Through the Distribution, each Novartis AG shareholder received 1 Sandoz Group AG share for every 5 Novartis AG shares and each Novartis ADR holder received 1 Sandoz ADR for every 5 Novartis ADR that they held at the close of business on October 3, 2023. As of October 4, 2023, the shares of Sandoz Group AG have been listed on the SIX Swiss Exchange (SIX) under the stock symbol “SDZ”.

On September 18, 2023, the Sandoz business entered into financing arrangements with a group of banks under which on September 28, 2023, it borrowed a total amount of USD 3.3 billion. These borrowings consisted of a bridge loan in EUR (EUR 2.4 billion) and term loans in EUR (EUR 0.2 billion) and USD (USD 0.5 billion). In addition, the Sandoz business borrowed approximately USD 0.4 billion under a number of local bilateral facilities in different countries. This resulted in a total gross debt of USD 3.7 billion. These outstanding borrowings of the Sandoz business legal entities were recognized in the September 30, 2023 consolidated balance sheet within Liabilities related to discontinued operations and within financing activities cash flows from discontinued operations. Prior to the Distribution on October 3, 2023, Sandoz business legal entities paid approximately USD 3.3 billion in cash to Novartis and its affiliates through a series of intercompany transactions.

At the Distribution date on October 3, 2023, the dividend in kind distribution liability to effect the Distribution (spin-off) of the Sandoz business amounted to USD 14.0 billion, measured by reference to the October 4, 2023 opening Sandoz Group AG share price and applying a control premium. The dividend in kind distribution liability was recorded as a reduction to equity (retained earnings) and remained in excess of the then carrying value of the Sandoz business net assets, which amounted to USD 8.6 billion (see Note 31).

Certain consolidated foundations own Novartis AG dividend-bearing shares that restricts their availability for use by Novartis. These Novartis AG shares are accounted for as treasury shares. Through the Distribution, these foundations received Sandoz Group AG shares representing an approximate 4.31% equity interest in Sandoz Group AG. Upon the loss of control of Sandoz Group AG through the Distribution on October 3, 2023, the financial investment in Sandoz Group AG was recognized at its initial fair value based on the opening traded share price of Sandoz Group AG on October 4, 2023 (a Level 1 hierarchy valuation). At initial recognition, on October 4, 2023, the Sandoz Group AG financial investment had a fair value of USD 0.5 billion, and was reported in the fourth quarter of 2023 on the consolidated balance sheet as a financial asset. Management has designated this investment at fair value through other comprehensive income.

The total non-taxable, non-cash gain recognized at the Distribution date of the spin-off of the Sandoz business amounted to USD 5.9 billion, which consists of:

(USD millions)	Oct 3,<br> 2023
Net assets derecognized^1^	-8 647
Derecognition of distribution liability	13 962
Difference between net assets and distribution liability	5 315
Recognition of Sandoz Group AG shares obtained through consolidated foundations	492
Currency translation gains recycled into the consolidated income statement	357
Transaction costs and other items recognized in the consolidated income statement	-304
Gain on distribution of Sandoz Group AG to Novartis AG shareholders	5 860
^1^ See Note 31 for additional information.

For additional disclosures on discontinued operations, refer to Note 31.

Acquisition of DTx Pharma Inc.

In the second quarter of 2023, Novartis entered into an agreement to acquire all outstanding shares of DTx Pharma Inc. (DTx), a San-Diego, California US based, pre-clinical stage biotechnology company focused on leveraging its proprietary FALCON platform to develop siRNA therapies for neuroscience indications. DTx’s lead program, DTx-1252 targets the root cause of CMT1A—the overexpression of PMP22, a protein that causes the myelin sheath that supports and insulates nerves in the peripheral nervous system to function abnormally. The

F-14

transaction also includes two additional pre-clinical programs for other neuroscience indications. The transaction closed on July 14, 2023.

The purchase price consisted of a cash payment of USD 0.6 billion and potential additional milestones of up to USD 0.5 billion, which the DTx shareholders are eligible to receive upon the achievement of specified milestones.

The fair value of the total purchase consideration was USD 0.6 billion. The amount consisted of a cash payment of USD 0.6 billion and the fair value of contingent consideration of USD 30 million, which DTx shareholders are eligible to receive upon the achievement of specified milestones. The purchase price allocation resulted in net identifiable assets of USD 0.4 billion, consisting primarily of IPR&D intangible assets of USD 0.4 billion, cash of USD 0.1 billion and net deferred tax liabilities of USD 0.1 billion. Goodwill amounted to USD 0.2 billion.

The results of operations since the date of acquisition were not material.

Acquisition of Chinook Therapeutics

On June 12, 2023, Novartis entered into an agreement to acquire all outstanding shares of Chinook Therapeutics, Inc. (Chinook Therapeutics), a Seattle, Washington based clinical stage biopharmaceutical company with two late-stage medicines in development for rare, severe chronic kidney diseases. The acquisition closed on August 11, 2023.

The purchase price consisted of a cash payment of USD 3.2 billion and potential additional payments of up to USD 0.3 billion, which Chinook Therapeutics shareholders are eligible to receive upon the achievement of specified milestones.

The fair value of the total purchase consideration was USD 3.3 billion. The amount consisted of an upfront cash payment of USD 3.2 billion and the fair value of contingent consideration of USD 0.1 billion, which Chinook Therapeutics shareholders are eligible to receive upon achievement of specified milestones. The purchase price allocation resulted in net identifiable assets of USD 2.4 billion, consisting primarily of IPR&D intangible assets of USD 2.5 billion, net deferred tax liabilities of USD 0.4 billion and other net assets of USD 0.3 billion, including cash of USD 0.1 billion. Goodwill amounted to USD 0.9 billion.

The results of operations since the date of acquisition were not material.

Significant transactions in 2022

Acquisition of Gyroscope Therapeutics Holdings plc

On December 22, 2021, Novartis entered into an agreement to acquire all outstanding shares of Gyroscope Therapeutics Holdings plc (Gyroscope), a UK-based ocular gene therapy company. Gyroscope focuses on the discovery and development of gene therapy treatments for retinal indications. The purchase price consisted of a cash payment of USD 0.8 billion, subject to certain customary purchase price adjustments, and potential additional milestone payments of up to USD 0.7 billion, which Gyroscope shareholders are eligible to receive upon the achievement of specified milestones. The acquisition closed on February 17, 2022.

The fair value of the total purchase consideration was USD 1.0 billion. The amount consisted of an upfront cash payment of USD 0.8 billion (including customary purchase price adjustments) and the fair value of contingent consideration of USD 0.2 billion, which Gyroscope shareholders are eligible to receive upon the achievement of specified milestones. The purchase price allocation resulted in net identifiable assets of USD 0.9 billion, consisting primarily of IPR&D intangible assets of USD 1.1 billion and net deferred tax liabilities of USD 0.2 billion. Goodwill amounted to USD 0.1 billion.

The 2022 results of operations since the date of acquisition were not material.

Significant transactions in 2021

Divestment of the investment in Roche Holding AG

On November 3, 2021, Novartis entered into a Share Repurchase Agreement with Roche Holding AG under which Novartis agreed to sell 53.3 million (approximately 33.3%) bearer shares of Roche Holding AG voting shares in a bilateral transaction to Roche Holding AG for a total consideration of USD 20.7 billion. As a result, Novartis discontinued the use of equity method accounting starting from November 3, 2021.

The transaction closed on December 6, 2021. Novartis realized a gain of USD 14.6 billion, recorded in income from associated companies.

F-15

3. Operating segment

Prior to the September 15, 2023, shareholders’ approval of the spin-off of the Sandoz business (refer to Note 1 and Note 2 for additional information), the businesses of Novartis were divided operationally on a worldwide basis into two identified reporting segments: Innovative Medicines Division and the Sandoz Division. In addition, we separately reported Corporate activities.

Following the September 15, 2023, shareholders’ approval of the spin-off of the Sandoz business (see Note 1 and Note 2), the Company reported its consolidated financial statements for the current and prior years as “continuing operations” and “discontinued operations” (see Note 1).

Continuing operations include the retained business activities of Novartis, comprising the innovative medicines business (previously the Innovative Medicines Division) and the continuing corporate activities.

Discontinued operations include the Sandoz generic pharmaceuticals and biosimilars business (the Sandoz Division) and certain corporate activities attributable to Sandoz’s business, as well as certain expenses related to the spin-off. Included in 2023 is also the IFRS Accounting Standards non-cash, non-taxable net gain on the Distribution of Sandoz Group AG to Novartis AG shareholders. For further details and disclosures on discontinued operations, refer to Note 1, Note 2 and Note 31.

Effective January 1, 2023, the Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were accordingly adapted in 2023 and prior years, in compliance with IFRS Accounting Standards. This restatement had no impact on the reported financial results and consolidated balance sheet of the total Company.

The Company’s continuing operations is engaged in the research, development, manufacturing, distribution, and commercialization and sale of innovative medicines, with a focus on the core therapeutic areas: cardiovascular, renal and metabolic; immunology; neuroscience; oncology; and established brands.

Following the spin-off of the Sandoz business, on October 3, 2023, Novartis operates as a single global operating segment innovative medicines company that is engaged in the research, development, manufacturing, distribution and commercialization and sale of innovative medicines. The Company’s research, development manufacturing and supply of products and functional activities are managed globally on a vertically integrated basis. Commercial efforts that coordinate marketing, sales and distribution of these products are organized by geographic region, therapeutic area and established brands.

The Executive Committee of Novartis (ECN), chaired by the CEO, is the governance body responsible for allocating resources and assessing the business performance of the operating segment of the Company on a global basis and is the chief operating decision-maker (CODM) for the Company.

The determination of a single operating segment is consistent with the financial information regularly reviewed by the CODM for purposes of assessing performance and allocating resources.

See Note 4 for revenues and geographic information disclosures.

4. Revenues and geographic information

Net sales information

Net sales from continuing operations comprise the following:

(USD millions)	2023	2022	2021
Net sales to third parties from continuing operations	44 635	41 385	41 976
Sales to discontinued operations	805	821	805
Net sales from continuing operations	45 440	42 206	42 781

F-16

Geographic information

The following table shows countries that accounted for more than 5% of net sales from continuing operations or more than 5% of total of selected non-current assets, for the years ended December 31, 2023, 2022 and 2021, and for selected non-current assets for the years ended December 31, 2023 and 2022:

	Net sales from continuing operations^1^						Total of selected non-current assets^2^
(USD millions)	2023	%	2022	%	2021	%	2023	%	2022	%
Country
Switzerland	1 308	3	1 036	2	926	2	19 396	32	23 708	32
United States	17 959	40	15 935	38	14 923	35	34 059	55	35 353	48
Germany	3 367	7	3 101	7	3 595	8	88		2 229	3
China	3 267	7	2 948	7	2 849	7	547	1	599	1
Japan	1 924	4	1 883	4	2 259	5	120		165
France	1 749	4	1 754	4	1 955	5	3 085	5	3 188	4
Other	15 866	35	15 549	38	16 274	38	4 269	7	8 241	12
Total	45 440	100	42 206	100	42 781	100	61 564	100	73 483	100
^1^ Net sales from continuing operations by location of customer
^2^ Total of property, plant and equipment; right-of-use assets; goodwill; intangible assets; investment in associated companies and other non-current assets excluding post-employment benefit assets

Net sales from continuing operations by region1

The following table shows net sales from continuing operations by region for the years ended December 31, 2023, 2022 and 2021:

	2023<br> USD m	2022<br> USD m	Change<br> (2022<br> to 2023)<br> USD %	2021<br> USD m	Change<br> (2021<br> to 2022)<br> USD %
US	17 959	15 935	13	14 923	7
Europe	14 997	14 371	4	15 721	-9
Asia/Africa/Australasia	9 308	8 978	4	9 355	-4
Canada and Latin America	3 176	2 922	9	2 782	5
Total	45 440	42 206	8	42 781	-1
Of which in established markets	33 725	31 386	7	32 183	-2
Of which in emerging growth markets	11 715	10 820	8	10 598	2
^1^ Net sales from continuing operations by location of customer. Emerging growth markets comprise all markets other than the established markets of the US, Canada, Western Europe, Japan, Australia and New Zealand. Novartis definition of Western Europe includes Austria, Belgium, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, Malta, The Netherlands, Norway, Portugal, Spain, Sweden, Switzerland, and the United Kingdom.

Information about major customers

The Company’s largest, second-largest and third-largest customers account for approximately 15%, 13% and 8% of net sales from third parties from continuing operations, respectively (2022: 16%, 12% and 8%, respectively; 2021: 14%, 13% and 7%, respectively).

The highest amounts of trade receivables outstanding were for these same three customers and amounted to approximately 17%, 13% and 8%, respectively, of the trade receivables at December 31, 2023 (2022: 16%, 14% and 7%, respectively).

F-17

Net sales from continuing operations by core therapeutic area and established brands

	2023<br> USD m	2022<br> USD m^1^	Change<br> (2022 to<br> 2023)<br> USD %	2021<br> USD m^1^	Change<br> (2021 to<br> 2022)<br> USD %
Cardiovascular, renal and metabolic
Entresto	6 035	4 644	30	3 548	31
Leqvio	355	112	217	12	nm
Other	1		nm	1	nm
Total cardiovascular, renal and metabolic	6 391	4 756	34	3 561	34
Immunology
Cosentyx	4 980	4 788	4	4 718	1
Xolair^2^	1 463	1 365	7	1 428	-4
Ilaris	1 355	1 133	20	1 059	7
Other		1	nm	1	0
Total immunology	7 798	7 287	7	7 206	1
Neuroscience
Kesimpta	2 171	1 092	99	372	194
Zolgensma	1 214	1 370	-11	1 351	1
Mayzent	392	357	10	281	27
Aimovig	266	218	22	215	1
Other		1	nm	1	0
Total neuroscience	4 043	3 038	33	2 220	37
Oncology
Promacta/Revolade	2 269	2 088	9	2 016	4
Kisqali	2 080	1 231	69	937	31
Tafinlar + Mekinist	1 922	1 770	9	1 693	5
Tasigna	1 848	1 923	-4	2 060	-7
Jakavi	1 720	1 561	10	1 595	-2
Pluvicto	980	271	262		nm
Lutathera	605	471	28	475	-1
Kymriah	508	536	-5	587	-9
Piqray/Vijoice	505	373	35	329	13
Scemblix	413	149	177	7	nm
Votrient	390	474	-18	577	-18
Adakveo	195	194	1	164	18
Tabrecta	154	133	16	90	48
Other	1	2	nm	2	0
Total oncology	13 590	11 176	22	10 532	6
Total promoted brands	31 822	26 257	21	23 519	12			2023<br> USD m	2022<br> USD m^1^	Change<br> (2022 to<br> 2023)<br> USD %	2021<br> USD m^1^	Change<br> (2021 to<br> 2022)<br> USD %
---	---	---	---	---	---
Established brands
Lucentis	1 475	1 874	-21	2 160	-13
Sandostatin	1 314	1 238	6	1 413	-12
Gilenya	925	2 013	-54	2 787	-28
Exforge Group	713	743	-4	901	-18
Galvus Group	692	859	-19	1 092	-21
Diovan Group	613	652	-6	773	-16
Gleevec/Glivec	561	745	-25	1 024	-27
Afinitor/Votubia	408	512	-20	938	-45
Contract manufacturing^3^	1 490	1 200	24	1 083	11
Other^3^	5 427	6 113	-11	7 091	-14
Total established brands^3^	13 618	15 949	-15	19 262	-17
Total net sales from continuing operations	45 440	42 206	8	42 781	-1
^1^ Reclassified to conform with the 2023 organizational structure.
^2^ Net sales from continuing operations reflect Xolair sales for all indications.
^3^ Effective January 1, 2023, the discontinued operations Sandoz business transferred to Novartis continuing operations its bio-technology manufacturing services to other companies’ activities (included in Contract manufacturing) and the Coartem brand (included in Other). The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022 and 2021, in compliance with IFRS Accounting Standards. See Note 3 for additional information.
nm = not meaningful

F-18

Net sales from continuing operations of the top 20 brands in 2023

Brands	Brand classification by therapeutic area or established brands	Key indications	US USD m	Rest of world USD m	Total USD m
Entresto	Cardiovascular, renal and metabolic	Chronic heart failure, hypertension	3 067	2 968	6 035
Cosentyx	Immunology	Psoriasis (PsO), ankylosing spondylitis (AS), psoriatic arthritis (PsA), non-radiographic axial spondyloarthritis (nr-axSPA), hidradenitis suppurativa (HS)	2 636	2 344	4 980
Promacta/Revolade	Oncology	Immune thrombocytopenia (ITP), severe aplastic anemia (SAA)	1 205	1 064	2 269
Kesimpta	Neuroscience	Relapsing-remitting multiple sclerosis (RRMS)	1 528	643	2 171
Kisqali	Oncology	HR+/HER2- metastatic breast cancer	1 032	1 048	2 080
Tafinlar + Mekinist	Oncology	BRAF V600+ metastatic adjuvant melanoma, advanced non-small cell lung cancer (NSCLC), tumor agnostic with BRAF mutation indication	791	1 131	1 922
Tasigna	Oncology	Chronic myeloid leukemia (CML)	884	964	1 848
Jakavi	Oncology	Myelofibrosis (MF), polycytomia vera (PV), graft-versus-host disease (GvHD)		1 720	1 720
Lucentis^1^	Established brands	Age-related macular degeneration (AMD), diabetic macular edema (DME), retinal vein occlusion (RVO)		1 475	1 475
Xolair^2^	Immunology	Severe allergic asthma (SAA), chronic spontaneous urticaria (CSU), nasal polyps		1 463	1 463
Ilaris	Immunology	Auto-inflammatory (CAPS, TRAPS, HIDS/MKD, FMF, SJIA, AOSD, gout)	686	669	1 355
Sandostatin	Established brands	Carcinoid tumors, acromegaly	829	485	1 314
Zolgensma	Neuroscience	Spinal muscular atrophy (SMA)	372	842	1 214
Pluvicto	Oncology	PSMA-positive mCRPC patients post-ARPI, post-Taxane	921	59	980
Gilenya^1^	Established brands	Relapsing multiple sclerosis (RMS)	359	566	925
Exforge Group	Established brands	Hypertension	13	700	713
Galvus Group	Established brands	Type 2 diabetes		692	692
Diovan Group	Established brands	Hypertension	52	561	613
Lutathera	Oncology	GEP-NETs gastroenteropancreatic neuroendocrine tumors	427	178	605
Gleevec/Glivec	Established brands	Chronic myeloid leukemia (CML), gastrointestinal stromal tumors (GIST)	150	411	561
Top 20 brands total			14 952	19 983	34 935
Rest of portfolio			3 007	7 498	10 505
Total net sales from continuing operations			17 959	27 481	45 440
^1^ In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
^2^ Net sales from continuing operations reflect Xolair sales for all indications.

F-19

Net sales from continuing operations of the top 20 brands in 2022

Brands	Brand classification by therapeutic area or established brands^1^	Key indications	US USD m	Rest of world USD m	Total USD m
Cosentyx	Immunology	Psoriasis (PsO), ankylosing spondylitis (AS), psoriatic arthritis (PsA), non-radiographic axial spondyloarthritis (nr-axSPA)	2 770	2 018	4 788
Entresto	Cardiovascular, renal and metabolic	Chronic heart failure, hypertension	2 354	2 290	4 644
Promacta/Revolade	Oncology	Immune thrombocytopenia (ITP), severe aplastic anemia (SAA)	1 083	1 005	2 088
Gilenya^2^	Established brands	Relapsing multiple sclerosis (RMS)	1 153	860	2 013
Tasigna	Oncology	Chronic myeloid leukemia (CML)	877	1 046	1 923
Lucentis^2^	Established brands	Age-related macular degeneration (AMD), diabetic macular edema (DME), retinal vein occlusion (RVO)		1 874	1 874
Tafinlar + Mekinist	Oncology	BRAF V600+ metastatic adjuvant melanoma, advanced non-small cell lung cancer (NSCLC), tumor agnostic with BRAF mutation indication	678	1 092	1 770
Jakavi	Oncology	Myelofibrosis (MF), polycytomia vera (PV), graft-versus-host disease (GvHD)		1 561	1 561
Zolgensma	Neuroscience	Spinal muscular atrophy (SMA)	434	936	1 370
Xolair^3^	Immunology	Severe allergic asthma (SAA), chronic spontaneous urticaria (CSU), nasal polyps		1 365	1 365
Sandostatin	Established brands	Carcinoid tumors, acromegaly	800	438	1 238
Kisqali	Oncology	HR+/HER2- metastatic breast cancer	472	759	1 231
Ilaris	Immunology	Auto-inflammatory (CAPS, TRAPS, HIDS/MKD, FMF, SJIA, AOSD, gout)	570	563	1 133
Kesimpta	Neuroscience	Relapsing-remitting multiple sclerosis (RRMS)	921	171	1 092
Galvus Group	Established brands	Type 2 diabetes		859	859
Gleevec/Glivec	Established brands	Chronic myeloid leukemia (CML), gastrointestinal stromal tumors (GIST)	205	540	745
Exforge Group	Established brands	Hypertension	14	729	743
Diovan Group	Established brands	Hypertension	55	597	652
Kymriah	Oncology	r/r pediatric and young adults acute lymphoblastic leukemia (ALL), diffuse large B-cell lymphoma (DLBCL) follicular lymphoma (FL)	196	340	536
Afinitor/Votubia	Established brands	Breast cancer/ tuberous sclerosis complex (TSC)	171	341	512
Top 20 products total			12 753	19 384	32 137
Rest of portfolio^4^			3 182	6 887	10 069
Total net sales from continuing operations^4^			15 935	26 271	42 206
^1^ Brand classifications have been changed to conform with the 2023 brand classifications.
^2^ In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
^3^ Net sales from continuing operations reflect Xolair sales for all indications.
^4^ Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2022, in compliance with IFRS Accounting Standards. See Note 3 for additional information.

F-20

Net sales from continuing operations of the top 20 brands in 2021

Brands	Brand classification by therapeutic area or established brands^1^	Key indications	US USD m	Rest of world USD m	Total USD m
Cosentyx	Immunology	Psoriasis (PsO), ankylosing spondylitis (AS), psoriatic arthritis (PsA), non-radiographic axial spondyloarthritis (nr-axSPA)	2 883	1 835	4 718
Entresto	Cardiovascular, renal and metabolic	Chronic heart failure	1 712	1 836	3 548
Gilenya^2^	Established brands	Relapsing multiple sclerosis (RMS)	1 427	1 360	2 787
Lucentis^2^	Established brands	Age-related macular degeneration (AMD)		2 160	2 160
Tasigna	Oncology	Chronic myeloid leukemia (CML)	882	1 178	2 060
Promacta/Revolade	Oncology	Immune thrombocytopenia (ITP), severe aplastic anemia (SAA)	947	1 069	2 016
Tafinlar + Mekinist	Oncology	BRAF V600+ metastatic adjuvant melanoma, advanced non-small cell lung cancer (NSCLC)	606	1 087	1 693
Jakavi	Oncology	Myelofibrosis (MF), polycythemia vera (PV)		1 595	1 595
Xolair^3^	Immunology	Severe allergic asthma (SAA), chronic spontaneous urticaria (CSU), nasal polyps		1 428	1 428
Sandostatin	Established brands	Carcinoid tumors, acromegaly	843	570	1 413
Zolgensma	Neuroscience	Spinal muscular atrophy (SMA)	469	882	1 351
Galvus Group	Established brands	Type 2 diabetes		1 092	1 092
Ilaris	Immunology	Auto-inflammatory (CAPS, TRAPS, HIDS/MKD, FMF, SJIA, AOSD gout)	501	558	1 059
Gleevec/Glivec	Established brands	Chronic myeloid leukemia (CML), gastrointestinal stromal tumors (GIST)	263	761	1 024
Afinitor/Votubia	Established brands	Breast cancer/ tuberous sclerosis complex (TSC)	521	417	938
Kisqali	Oncology	HR+/HER2- metastatic breast cancer	339	598	937
Exforge Group	Established brands	Hypertension	14	887	901
Diovan Group	Established brands	Hypertension	51	722	773
Kymriah	Oncology	r/r pediatric and young adults acute lymphoblastic leukemia (ALL), diffuse large B-cell lymphoma (DLBCL)	230	357	587
Ultibro Group	Established brands	Chronic obstructive pulmonary disease (COPD)		584	584
Top 20 products total			11 688	20 976	32 664
Rest of portfolio^4^			3 235	6 882	10 117
Total net sales from continuing operations^4^			14 923	27 858	42 781
^1^ Brand classifications have been changed to conform with the 2023 brand classifications.
^2^ In the first quarter of 2023 Lucentis was reclassified from other promoted brands to established brands and Gilenya was reclassified from neuroscience to established brands.
^3^ Net sales from continuing operations reflect Xolair sales for all indications.
^4^ Effective January 1, 2023, the discontinued operations Sandoz business bio-technology manufacturing services to other companies’ activities and the Coartem brand were transferred to the Novartis continuing operations. The financial information of the Novartis continuing operations and discontinued operations were adapted accordingly in 2021, in compliance with IFRS Accounting Standards. See Note 3 for additional information.

F-21

Other revenues

(USD millions)	2023	2022	2021
Profit-sharing income	941	921	873
Royalty income	87	35	85
Milestone income	45	145	127
Other^1^	147	154	108
Total other revenues	1 220	1 255	1 193
^1^ Other includes revenue from activities such as manufacturing or other services rendered, to the extent such revenue is not recorded under net sales to third parties.

5. Associated companies

			Other comprehensive income effect^1^			Total comprehensive income effect
( millions)	2022	2021	2023	2022	2021	2023	2022	2021
Roche Holding AG, Switzerland		15 341			46			15 387
Others	-11	-4				-13	-11	-4
Associated companies	-11	15 337			46	-13	-11	15 383
1  In 2021, Novartis share of other comprehensive income recognized by associated companies, net of taxes of 3 million was recycled into the consolidated income statement as a result of the divestment of the investment in Roche Holding AG. No Novartis share of other comprehensive income recognized by associated companies was recycled to the consolidated income statement in 2023 and 2022.

All values are in US Dollars.

Novartis has certain non-significant investments and had a significant investment in Roche Holding AG, Basel (Roche), which was divested to Roche on December 6, 2021, that are accounted for as associated companies.

Roche Holding AG

On November 3, 2021, Novartis entered into an agreement with Roche Holding AG to divest its 33.3% of Roche Holding AG (Roche) voting shares, representing approximately 6.2% of Roche’s total outstanding voting and non-voting equity instruments, to Roche for USD 20.7 billion in cash. As a result, Novartis discontinued the use of equity method accounting starting from November 3, 2021.

The divestment transaction closed on December 6, 2021, and Novartis realized a gain of USD 14.6 billion, recorded in income from associated companies. For more information, see Note 2.

Since full-year financial data for Roche is not available when Novartis produces its consolidated financial results, a survey of analyst estimates is used to estimate the Company’s share of Roche’s net income. Any differences between these estimates and actual results were adjusted in the Company’s consolidated financial statements when available. As Novartis discontinued the use of equity method accounting starting from November 3, 2021, and the divestment closed on December 6, 2021, no such adjustment has been made to the 2023 and 2022 Company’s consolidated financial statements.

The consolidated income statement effects from applying Novartis accounting principles for this investment in 2021 are as follows:

( millions)
Novartis share of Roche's estimated current-year consolidated net income
Prior-year adjustment
Amortization of fair value adjustments relating to intangible assets, net of taxes of 10 million
Gain on divestment of the investment in Roche  1
Net income effect
1  The gain on divestment of the investment in Roche includes the recycling of currency translation effects (see Note 9.1) and other comprehensive income effects totaling 3.2 billion.

All values are in US Dollars.

F-22

6. Interest expense and other financial income and expense

Interest expense

(USD millions)	2023	2022	2021
Interest expense	-730	-642	-633
Interest expense on lease liabilities	-62	-57	-59
Expense arising from discounting long-term liabilities and capitalized borrowing costs	-63	-101	-95
Total interest expense from continuing operations	-855	-800	-787

Other financial income and expense

(USD millions)	2023	2022	2021
Interest income	627	377	70
Other financial income	21	19	12
Monetary loss from hyperinflation accounting	-194	-137	-48
Financial expense	-18	-33	-41
Currency result, net	-214	-184	-69
Total other financial income and expense from continuing operations	222	42	-76

7. Income taxes

Income before taxes

( millions)	2022	2021
Switzerland 1	5 751	21 830
Foreign 2	1 426	2 700
Income before taxes from continuing operations	7 177	24 530
1  The 2021 income before taxes from continuing operations in Switzerland includes a 14.6 billion non-taxable gain on the divestment of the Company’s investment in Roche Holding AG (see Note 2 and Note 5).
2  The 2023 foreign income before taxes from continuing operations is impacted by non-recurring events, including impairment charges on intangible assets other than goodwill.

All values are in US Dollars.

Current and deferred income tax expense

The significant components of the provision for income taxes from continuing operations are as follows:

(USD millions)	2023	2022	2021
Switzerland	-1 136	-598	-949
Foreign	-1 290	-1 155	-973
Current income tax expense	-2 426	-1 753	-1 922
Switzerland	355	-131	39
Foreign	1 520	756	258
Deferred tax income	1 875	625	297
Income tax expense from continuing operations	-551	-1 128	-1 625

Analysis of tax rate

Novartis has a substantial business presence in many countries and is therefore subject to income taxes in different tax jurisdictions. This leads to differences in income and expense items that are non-taxable or non-deductible (permanent differences) or are taxed at different statutory tax rates in those tax jurisdictions. As a result, there is a difference between our applicable tax rate and effective tax rate.

The applicable tax rate changes from year to year due to changes in the mix of the Company’s pre-tax income and changes in statutory tax rates since it is calculated as the weighted average tax rate based on the pre-tax income of each subsidiary.

The main elements contributing to the difference between the Company’s overall applicable tax rate and the effective tax rate are shown in the following table:

(As a percentage)	2023	2022	2021
Applicable tax rate	15.0	15.3	14.2
Effect of disallowed expenditures	1.4	2.6	1.0
Effect of income taxed at reduced rates	-0.6	-0.4	-0.1
Effect of income not subject to tax^1^	-2.5	-0.1	-7.9
Effect of tax credits and allowances	-3.9	-4.1	-1.5
Effect of release of contingent consideration liability	-0.3	-0.5	-0.1
Effect of tax rate change on current and deferred tax assets and liabilities	-1.6	0.0	0.0
Effect of derecognition and reversals of derecognition of deferred tax assets	0.9	1.3	0.0
Effect of write-down of investments in subsidiaries	-3.0	0.0	0.0
Effect of prior-year items	0.0	-0.3	0.1
Effect of changes in uncertain tax positions	0.1	1.7	1.0
Effect of other items	0.5	0.2	-0.1
Effective tax rate from continuing operations	6.0	15.7	6.6
^1^ 2021 includes the effect of income not subject to tax (-7.7%) arising from the non-taxable gain on the divestment of our investment in Roche. See Notes 2 and 5 for further details.

The effective tax rate of Novartis fluctuates primarily as a result of, among other factors, changes in pre-tax

F-23

income between countries with varying statutory tax rates and the effects of disallowed expenditures, income not subject to tax, tax credits and allowances, tax rate changes on current and deferred tax assets and liabilities, write-down of investments in subsidiaries, and changes in uncertain tax positions. The table above provides the details of the significant items that impact the comparability of the effective tax rate between years.

In December 2021, the OECD issued model rules for a new global minimum tax framework (Pillar Two).  Novartis is within the scope of the OECD Pillar Two model rules. A number of governments in countries in which Novartis operates are in the process of enacting or have enacted tax legislation to comply with Pillar Two. Of the major countries in which we operate, only the enactment of Pillar Two tax legislation in Switzerland is expected to have an impact to our income tax provision as from 2024.  In December 2023, Switzerland decided to partially implement Pillar Two, whereby effective from January 1, 2024, a 15% minimum taxation will be assessed on Pillar Two qualifying profits earned by companies domiciled in Switzerland (Qualified Domestic Minimum Top-Up Tax).  This Qualified Domestic Minimum Top-Up Tax will not be applied to the Pillar Two qualifying profits earned by a company’s affiliates domiciled in tax jurisdictions outside of Switzerland. The timing of implementation and the specific provisions of any further Pillar Two tax regulations in Switzerland remains subject to further assessments at both the Federal and Cantonal levels. The Company estimates that the impact of these changes to tax legislation in the respective countries that have (substantively) enacted Pillar Two tax legislation in 2023 would not be material to our consolidated financial position, income statement and cash flows.

8. Earnings per share

	2022	2021
Net income attributable to shareholders of Novartis AG ( millions)
- Continuing operations	6 049	22 908
- Discontinued operations	906	1 113
Net income attributable to shareholders of Novartis AG ( millions)	6 955	24 021
Number of shares (in millions)
Weighted average number of shares outstanding used in basic earnings per share	2 181	2 243
Adjustment for vesting of restricted shares, restricted share units and dilutive shares from options	16	17
Weighted average number of shares in diluted earnings per share	2 197	2 260
Basic earnings per share ()
- Continuing operations	2.77	10.22
- Discontinued operations	0.42	0.49
Total basic earnings per share ()	3.19	10.71
Diluted earnings per share ()
- Continuing operations	2.76	10.14
- Discontinued operations	0.41	0.49
Total diluted earnings per share ()	3.17	10.63

All values are in US Dollars.

Basic earnings per share (EPS) is calculated by dividing net income attributable to shareholders of Novartis AG by the weighted average number of shares outstanding in a reporting period. This calculation excludes the average number of issued shares purchased by the Company and held as treasury shares.

For diluted EPS, the weighted average number of shares outstanding is adjusted to assume the vesting of all restricted shares, restricted share units, and in 2022 and 2021 the conversion of all potentially dilutive shares arising from options on Novartis shares that have been issued. At December 31, 2023, there were no options on Novartis shares issued or outstanding.

No options were excluded from the calculation of diluted EPS in 2022 or 2021, as all options were dilutive in both years.

F-24

9. Changes in consolidated statements of comprehensive income

The consolidated statements of comprehensive income include the Company’s net income for the year as well as all other valuation adjustments recorded in the Company’s consolidated balance sheet, which under IFRS Accounting Standards are not recorded in the consolidated income statement. These include fair value adjustments on financial instruments, actuarial gains or losses on defined benefit pension plans, and currency translation effects, all net of taxes.

( millions)	Fair value<br> adjustments <br> on financial<br> instruments	Actuarial<br> gains/(losses)<br> from defined<br> benefit plans	Cumulative<br> currency <br> translation<br> effects	Total value<br> adjustments<br> attributable to <br> Novartis AG <br> shareholders	Non-<br> controlling<br> interest	Total value<br> adjustments
Value adjustments at December 31, 2020	220	-5 773	4 134	-1 419	-29	-1 448
Fair value adjustments on equity securities, net of taxes of -44 million  1	194			194		194
Net investment hedge, net of taxes of 33 million			216	216		216
Defined benefit plans, net of taxes of -323 million		1 808		1 808	1	1 809
Currency translation effects, net of taxes of 17 million			-4 757	-4 757	-5	-4 762
Total value adjustments in 2021	194	1 808	-4 541	-2 539	-4	-2 543
Fair value adjustments on equity securities sold, reclassified to retained earnings net of taxes of 48 million	-164			-164		-164
Value adjustments related to divestments	-62	-3		-65		-65
Value adjustments at December 31, 2021	188	-3 968	-407	-4 187	-33	-4 220
Fair value adjustments on equity securities, net of taxes of 81 million  1	-382			-382		-382
Net investment hedge, net of taxes of -30 million			91	91		91
Defined benefit plans, net of taxes of -104 million		-104		-104	1	-103
Currency translation effects, net of taxes of 18 million			-444	-444	-6	-450
Total value adjustments in 2022	-382	-104	-353	-839	-5	-844
Fair value adjustments on equity securities sold, reclassified to retained earnings net of taxes of nil	-4			-4		-4
Value adjustments related to divestments, net of taxes of -4 million		34		34		34
Value adjustments at December 31, 2022	-198	-4 038	-760	-4 996	-38	-5 034
Fair value adjustments on equity securities, net of taxes of -6 million  1	37			37		37
Net investment hedge, net of taxes of 19 million			-50	-50		-50
Defined benefit plans, net of taxes of 16 million		-160		-160		-160
Currency translation effects, net of taxes of -6 million			1 373	1 373	2	1 375
Total value adjustments in 2023	37	-160	1 323	1 200	2	1 202
Fair value adjustments on equity securities sold, reclassified to retained earnings net of taxes of -7 million	1			1		1
Value adjustments related to divestments, net of taxes of -4 million	2	27		29		29
Value adjustments at December 31, 2023	-158	-4 171	563	-3 766	-36	-3 802
1  Includes fair value adjustments on equity securities designated as financial assets valued at fair value through other comprehensive income with no subsequent recycling into the consolidated income statement

All values are in US Dollars.

F-25

9.1) In 2023, net cumulative currency translation gains of USD 358 million were recycled through the income statement, consisting of USD 357 million as a result of the spin-off of the Sandoz business through a dividend in kind distribution to Novartis AG shareholders (see Note 2), and of USD 1 million as a result of the divestment of subsidiaries.

In 2022, net cumulative currency translation gains of USD 13 million were recycled through the income statement as a result of the divestments of subsidiaries.

In 2021, net cumulative currency translation gains of USD 3.2 billion were recycled through the income statement as a result of the divestment of the investment in Roche. See Notes 2 and 5.

10. Property, plant and equipment

The following table summarizes the movements of property, plant and equipment during 2023:

(USD millions)	Land	Buildings	Construction <br> in progress	Machinery <br> and other <br> equipment	Total
At January 1, 2023
Cost	451	11 396	1 184	11 842	24 873
Accumulated depreciation and impairment	-9	-5 903	-27	-8 170	-14 109
Net book value	442	5 493	1 157	3 672	10 764
At January 1, 2023	442	5 493	1 157	3 672	10 764
Costs and accumulated depreciation/impairments on assets related to discontinued operations^1^	-54	-422	-280	-588	-1 344
Impact of acquisitions of businesses		12	1	5	18
Reclassifications		197	-420	223
Additions	1	85	734	245	1 065
Disposals and derecognitions	-16	-261	-20	-63	-360
Depreciation charge		-343		-573	-916
Impairment charge	-3	-36	-10	-57	-106
Reversal of impairment charge	3	9		4	16
Currency translation effects	25	162	44	146	377
At December 31, 2023	398	4 896	1 206	3 014	9 514
At December 31, 2023
Cost	403	10 147	1 213	9 630	21 393
Accumulated depreciation and impairment	-5	-5 251	-7	-6 616	-11 879
Net book value	398	4 896	1 206	3 014	9 514
Commitments for purchases of property, plant and equipment					744
Capitalized borrowing costs					3
^1^ Represents the cost of assets and accumulated depreciation/impairments at January 1, 2023, related to the Sandoz business reported as discontinued operations, and the net transfers between discontinued and continuing operations from January 1, 2023 to October 3, 2023. Note 31 provides disclosure of discontinued operations additions, depreciation charge, impairment charge and reversals of impairment change.

F-26

The following table summarizes the movements of property, plant and equipment during 2022:

( millions)	Buildings	Construction <br> in progress	Machinery <br> and other <br> equipment	Total
At January 1, 2022
Cost	11 819	1 508	13 328	27 147
Accumulated depreciation and impairment	-5 744	-65	-9 786	-15 602
Net book value	6 075	1 443	3 542	11 545
At January 1, 2022	6 075	1 443	3 542	11 545
Impact of acquisitions of businesses			13	13
Reclassifications	297	-964	667
Additions 1	124	780	312	1 219
Disposals and derecognitions	-49	-33	-45	-155
Depreciation charge 2	-437		-726	-1 163
Impairment charge 2	-351	-13	-43	-414
Reversal of impairment charge 2		1	5	7
Currency translation effects	-166	-57	-53	-288
At December 31, 2022	5 493	1 157	3 672	10 764
At December 31, 2022
Cost	11 396	1 184	11 842	24 873
Accumulated depreciation and impairment	-5 903	-27	-8 170	-14 109
Net book value	5 493	1 157	3 672	10 764
Commitments for purchases of property, plant and equipment				549
Capitalized borrowing costs				5
1  Additions in continuing operations were 930 million. Note 31 provides disclosure of discontinued operations additions.
2  Note 31 provides disclosure of discontinued operations depreciation charge, impairment charge and reversals of impairment charge.

All values are in US Dollars.

Government grants obtained for construction activities, including any related equipment, are deducted from the gross acquisition cost to arrive at the balance sheet carrying value of the related assets.

Property, plant and equipment is depreciated on a straight-line basis in the consolidated income statement over the estimated useful life of the individual asset. The related depreciation expense is included in the costs of the functions using the asset.

The following table shows the estimated useful life by major categories for property, plant and equipment:

	Useful life
Buildings	20 to 40 years
Machinery and other equipment
Machinery and equipment	7 to 20 years
Furniture and vehicles	5 to 10 years
Computer hardware	3 to 7 years

Property, plant and equipment is assessed for impairment whenever there is an indication that the balance sheet carrying amount may not be recoverable using cash flow projections over the useful life.

The following table shows the property, plant and equipment depreciation charge, impairment charge and reversals of impairment charge for continuing operations for the years ended December 31, 2023, 2022 and 2021^1^:

(USD millions)	2023	2022	2021
Depreciation charge	-916	-967	-1 005
Impairment charge	-106	-411	-316
Impairment reversals	16	4	44
^1^ Note 31 provides disclosure of discontinued operations depreciation charge, impairment charge and reversals of impairment charge.

F-27

11. Right-of-use assets and lease liabilities

The Company recognizes a right-of-use asset and a corresponding lease liability for all arrangements in which it is a lessee, except for leases with a term of 12 months or less (short-term leases) and low-value leases. For these short-term and low-value leases, the Company recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease. The Company allocates the consideration in the lease contract to the lease and non-lease components on the basis of the relative standalone price of each component.

The portion of the lease payments attributable to the repayment of lease liabilities is recognized in cash flows used in financing activities, and the portion attributable to the payment of interest is included in cash flows from operating activities.

Right-of-use assets are depreciated on a straight-line basis from the commencement date of the lease over the shorter of the useful life of the right-of-use asset or the end of the lease term.

Right-of-use assets are assessed for impairment whenever there is an indication that the balance sheet carrying amount may not be recoverable using cash flow projections for the useful life.

The following table summarizes the movements of the right-of-use assets:

( millions)	2022
Right-of-use assets at January 1	1 561
Costs and accumulated depreciation/impairments on assets related to discontinued operations  1
Impact of acquisitions of businesses	12
Additions 2	247
Depreciation charge	-300
Impairment charge 3	-3
Lease contract terminations 4	-34
Currency translation effects	-52
Total right-of-use assets at December 31	1 431
1  Represents the cost of assets and accumulated depreciation/impairments at January 1, 2023, related to the Sandoz business reported as discontinued operations, and the net transfers between discontinued and continuing operations from January 1, 2023 to October 3, 2023. Note 31 provides disclosure of discontinued operations additions, depreciation charge, impairment charge and reversals of impairment change.
2  Additions in continuing operations were 216 million in 2022.
3  Impairment charge in continuing operations was 3 million in 2022 and nil in 2021.
4  Lease contract terminations also includes modifications to existing leases that result in reductions to the right-of-use assets, and reductions due to sub-leasing.

All values are in US Dollars.

The following table shows the right-of-use assets carrying value at December 31, 2023 and 2022, and the continuing operations depreciation charge for years 2023, 2022 and 2021, by underlying class of asset^1^:

(USD millions)	December 31,<br> 2023<br> carrying value	December 31,<br> 2022<br> carrying value	Depreciation <br> charge<br> 2023	Depreciation <br> charge<br> 2022	Depreciation <br> charge<br> 2021
Land	483	505	12	16	11
Buildings	749	745	156	162	174
Vehicles	112	117	80	82	89
Machinery and equipment, and other assets	66	64	11	7	5
Total right-of-use assets	1 410	1 431	259	267	279
^1^ Note 31 provides disclosure of discontinued operations depreciation charge.

F-28

The following table shows the lease liabilities by maturity at December 31, 2023 and 2022:

(USD millions)	Lease liabilities<br> 2023	Lease liabilities<br> undiscounted<br> 2023	Lease liabilities<br> 2022	Lease liabilities<br> undiscounted<br> 2022
Less than one year	230	284	251	297
Between one and two years	203	248	190	232
Between two and three years	170	211	167	201
Between three and four years	149	184	137	172
Between four and five years	113	142	122	154
After five years	963	2 173	922	2 149
Total lease liabilities	1 828	3 242	1 789	3 205
Less current portion of lease liabilities	-230	-284	-251	-297
Non-current portion of lease liabilities	1 598	2 958	1 538	2 908
Commitments for leases not yet commenced		89		83

At December 31, 2023, and December 31, 2022, there were no material future cash outflows, including extension options, excluded from the measurement of lease liabilities. The Company’s most material lease with a lease term extension, representing a lease liability value of USD 0.7 billion (2022: USD 0.7 billion), has a determined lease term end date of 2071 (2022: 2071). Non-enforceable extension options of up to 10 years have not been included within the measurement of this lease liability, and do not have a material impact to the carrying value of the lease for both 2023 and 2022. Should the landlord agree to a lease extension, rent will be referenced to the market rates as at the commencement of the extension period.

In 2023, the Company completed two sale and leaseback transactions for certain property, plant and equipment as part of the Company’s strategy. The transactions resulted in net cash inflows of USD 273 million (2022: USD 49 million) and the recognition of USD 146 million of lease liabilities(2022: USD 23 million), and USD 109 million of right-of-use assets (2022: USD 13 million). The right-of-use assets value reflects the proportion of the property, plant and equipment retained. Extension options have been included where management believe that such options will be exercised. The liabilities reflect the net present value of future lease payments. The net gain on the sale and leaseback transactions amounted to USD 18 million (2022: USD 17 million). There were no significant sale and leaseback transactions in 2021.

The following table provides additional disclosures related to continuing operations right-of-use assets and lease liabilities for 2023, 2022 and 2021:

( millions)	2022	2021
Interest expense on lease liabilities 1	57	59
Expense on short-term leases	3	6
Expense on low-value leases	6	7
Total cash outflows for leases	319	339
Thereof:
Cash outflows for short-term leases and low-value leases  2	9	13
Payments of interest 3	48	48
Payments of lease liabilities 4	262	278
1  The weighted average interest rate is 3.5% (2022: 3.3%, 2021: 3.2%). Interest on lease liabilities as at December 31, 2023, is estimated to be 54 million for 2024 and 1.4 billion thereafter.
2  Cash flows from short-term and low-value leases are included within total net cash flows from operating activities. The portfolio of short-term leases to which the Company is committed to at December 31, 2023, 2022 and 2021, is similar to the portfolio of short-term leases the Company entered into during 2023, 2022 and 2021.
3  Included within total net cash flows from operating activities
4  Reported as cash outflows in financing activities net of lease incentives received, if any.

All values are in US Dollars.

The net investment held and income from subleasing right-of-use assets were not significant for 2023, 2022, and 2021. Income from leasing Novartis property, plant and equipment to third parties for 2023, 2022 and 2021 was not significant.

12. Goodwill and intangible assets other than goodwill

Novartis has the following classes of available for use intangible assets other than goodwill: Currently marketed products and Other intangible assets.

Currently marketed products represent the composite value of acquired intellectual property (IP), patents, distribution rights and product trade names.

Other intangible assets include capitalized internally developed and acquired computer software and technologies, which represent identified and separable acquired know- how used in research, development, and production.

F-29

The following table summarizes the movements of goodwill and intangible assets other than goodwill in 2023:

	Goodwill	Intangible assets other than goodwill
(USD millions)	Total	In-process<br> research and<br> development	Currently<br> marketed <br> products	Other<br> intangible<br> assets	Total
At January 1, 2023
Cost	29 596	7 092	58 249	4 343	69 684
Accumulated amortization and impairment	-295	-2 671	-32 736	-2 633	-38 040
Net book value	29 301	4 421	25 513	1 710	31 644
At January 1, 2023	29 301	4 421	25 513	1 710	31 644
Costs and accumulated amortization/impairments on assets related to discontinued operations^1^	-7 445	-235	-1 026	-199	-1 460
Impact of acquisitions of businesses	1 094	2 931		15	2 946
Reclassifications		-235	23	212
Additions		770	290	516	1 576
Disposals and derecognitions^2^			-1 842	-3	-1 845
Amortization charge			-3 319	-641	-3 960
Impairment charge		-2 544	-310	-194	-3 048
Currency translation effects	391	221	688	117	1 026
At December 31, 2023	23 341	5 329	20 017	1 533	26 879
At December 31, 2023
Cost	23 391	7 822	46 909	3 588	58 319
Accumulated amortization and impairment	-50	-2 493	-26 892	-2 055	-31 440
Net book value	23 341	5 329	20 017	1 533	26 879
^1^ Represents the cost of assets and accumulated depreciation/impairments at January 1, 2023, related to the Sandoz business reported as discontinued operations, and the net transfers between discontinued and continuing operations from January 1, 2023 to October 3, 2023. Note 31 provides disclosure of discontinued operations additions, depreciation charge, impairment charge and reversals of impairment change.
^2^ Derecognition of assets that are no longer being used or developed and are not considered to have a significant disposal value or other alternative use. Disposals include the divested currently marketed product Xiidra.

The following table summarizes the movements of goodwill and intangible assets other than goodwill in 2022:

	Intangible assets other than goodwill
( millions)	In-process<br> research and<br> development	Currently<br> marketed <br> products	Other<br> intangible<br> assets	Total
At January 1, 2022
Cost	8 013	56 213	3 985	68 211
Accumulated amortization and impairment	-2 514	-29 107	-2 408	-34 029
Net book value	5 499	27 106	1 577	34 182
At January 1, 2022	5 499	27 106	1 577	34 182
Impact of acquisitions of businesses	1 209			1 209
Reclassifications 1	-1 429	1 403	26
Additions 2	330	1 175	588	2 093
Disposals and derecognitions 3	-95	-3	-2	-100
Amortization charge 4		-3 603	-379	-3 982
Impairment charge 4	-917	-322	-87	-1 326
Currency translation effects	-176	-243	-13	-432
At December 31, 2022	4 421	25 513	1 710	31 644
At December 31, 2022
Cost	7 092	58 249	4 343	69 684
Accumulated amortization and impairment	-2 671	-32 736	-2 633	-38 040
Net book value	4 421	25 513	1 710	31 644
1  Reclassifications between various asset categories as a result of product launches of acquired in-process research and development and completion of software development
2  Additions in continuing operations were 1 930 million. Note 31 provides disclosure of discontinued operations additions.
3  Derecognition of assets that are no longer being used or developed and are not considered to have a significant disposal value or other alternative use
4  Note 31 provides disclosure of discontinued operations amortization charge and impairment charge.

All values are in US Dollars.

F-30

As at December 31, 2023, the most significant intangible assets within currently marketed products category are Leqvio (acquisition of The Medicines Company) and Zolgensma (acquisition of Avexis Inc.). As at December 31, 2023, the carrying value and remaining amortization period for Leqvio is USD 6.8 billion and 12 years, respectively (2022: USD 7.4 billion and 13 years, respectively), and for Zolgensma USD 5.2 billion and 7 years, respectively (2022: USD 5.9 billion and 8 years, respectively).

The following table shows the estimated useful life by category for intangible assets available for use and the line in the consolidated income statement in which the amortization and any potential impairment charge is recognized:

	Useful life	Income statement line<br> for amortization and<br> impairment charges
Currently marketed products	5 to 20 years	"Cost of goods sold"
Other (including software and technologies)	3 to 15 years	In the relevant functional expense, and for technologies in "Cost of goods sold" or "Research and Development"

Any impairment charge for IPR&D is recorded in the consolidated income statement under “Research and development.”

The Company has no indefinite useful life intangible asset other than goodwill.

The Company’s cash-generating units to which goodwill is allocated is at the level of the operating segment, which is comprised of a group of smaller cash-generating units. The valuation method of the recoverable amount of the operating segment to which goodwill is allocated is based on the fair value less costs of disposal. Any impairment charges are recorded under “Other expense” in the consolidated income statement.

The following assumptions were used in the goodwill impairment testing calculation:

(As a percentage)
Terminal growth rate	1.3
Discount rate (post-tax)	8.0

The discount rates consider the Company’s weighted average cost of capital, adjusted to approximate the weighted average cost of capital of a comparable market participant.

The fair value less costs of disposal, for all cash-generating units containing goodwill, is reviewed for the impact of reasonably possible changes in key assumptions. In particular, we considered an increase in the discount rate, a decrease in the terminal growth rate, and certain negative impacts on the forecasted cash flows. These reasonably possible changes in key assumptions did not indicate an impairment.

“Note 1. Accounting policies—Goodwill and intangible assets other than goodwill” provides additional disclosures on how the Company performs goodwill and intangible asset impairment testing.

The following table shows the intangible asset amortization charge and impairment charges for continuing operations for the years ended December 31, 2023, 2022 and 2021^1^:

( millions)	2022	2021
Amortization charge	-3 760	-3 665
Impairment charge 2	-1 301	-376
1  Note 31 provides disclosure of discontinued operations amortization charge and impairment charge.
2  2023 impairment charge includes the write-down of IPR&D on the cessation of clinical development programs, including PPY988 ( 1.0 billion), which was acquired with the 2022 acquisition of Gyroscope Therapeutics Holdings plc (see Note 2), VDT482 ( 0.4 billion), and MBG453 ( 0.3 billion), and the clinical research program NIZ985 ( 0.3 billion); as well as the write-down of a currently marketed product by 0.3 billion to reflect the reduction in its recoverable amount.
2022 intangible asset impairment charges include the write-down of IPR&D on the cessation of clinical development programs, including UNR844 ( 0.6 billion).
2021 intangible asset impairment charges includes the write down of IPR&D on the cessation of clinical development programs, including GTX312 ( 0.2 billion).

All values are in US Dollars.

In 2023, 2022 and 2021, there were no reversals of impairment charges on intangible assets.

F-31

13. Deferred tax assets and liabilities

( millions)	Intangible<br> assets	Pensions and<br> other benefit <br> obligations <br> of employees	Inventories	Tax loss<br> carry-<br> forwards	Other assets,<br> provisions<br> and accruals	Total
Gross deferred tax assets at January 1, 2023	1 726	739	2 214	425	2 789	8 051
Gross deferred tax liabilities at January 1, 2023	-4 785	-420	-138		-1 312	-6 998
Net deferred tax balance at January 1, 2023	-3 059	319	2 076	425	1 477	1 053
At January 1, 2023	-3 059	319	2 076	425	1 477	1 053
Net deferred tax balance related to discontinued operations 1	120	-36	-311	-13	-233	-413
Credited/(charged) to income	1 344	32	386	173	-47	1 875
Credited/(charged) to other comprehensive income		16			-34	-21
Impact of acquisitions of businesses	-530			111	-19	-440
Other movements	85	13	-28	17	-30	7
Net deferred tax balance at December 31, 2023	-2 040	344	2 123	713	1 114	2 061
Gross deferred tax assets at December 31, 2023	2 188	764	2 200	713	2 206	8 188
Gross deferred tax liabilities at December 31, 2023	-4 228	-420	-77		-1 092	-6 127
Net deferred tax balance at December 31, 2023	-2 040	344	2 123	713	1 114	2 061
After offsetting the following amount of deferred tax assets and liabilities within the same tax jurisdiction, the balance amounts to:						3 879
Deferred tax assets at December 31, 2023						4 309
Deferred tax liabilities at December 31, 2023						-2 248
Net deferred tax balance at December 31, 2023						2 061
Gross deferred tax assets at January 1, 2022	1 307	1 026	2 273	374	2 727	7 832
Gross deferred tax liabilities at January 1, 2022	-4 704	-591	-148		-1 335	-7 159
Net deferred tax balance at January 1, 2022	-3 397	435	2 125	374	1 392	673
At January 1, 2022	-3 397	435	2 125	374	1 392	673
Credited/(charged) to income 2	628	-5	-43	5	1	655
Charged to equity					1	1
Credited/(charged) to other comprehensive income 2		-104			63	-43
Impact of acquisitions of businesses	-300			55	1	-244
Other movements 2	10	-7	-6	-9	19	11
Net deferred tax balance at December 31, 2022	-3 059	319	2 076	425	1 477	1 053
Gross deferred tax assets at December 31, 2022	1 726	739	2 214	425	2 789	8 051
Gross deferred tax liabilities at December 31, 2022	-4 785	-420	-138		-1 312	-6 998
Net deferred tax balance at December 31, 2022	-3 059	319	2 076	425	1 477	1 053
After offsetting the following amount of deferred tax assets and liabilities within the same tax jurisdiction, the balance amounts to:						4 312
Deferred tax assets at December 31, 2022						3 739
Deferred tax liabilities at December 31, 2022						-2 686
Net deferred tax balance at December 31, 2022						1 053
1  Represents the net deferred tax balance at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued operations.
2  In 2022 the total related to continuing operations for the charge to income was 625 million, for the charge to other comprehensive income was -20 million and for the charge to other movements was 8 million.

All values are in US Dollars.

F-32

Deferred tax liabilities have not been recognized for the withholding tax and other taxes that would be payable on the remittance of earnings of foreign subsidiaries, insofar as the Company has the ability to control any future reversal and the unremitted earnings are retained in the foreign subsidiaries for reinvestment. The total unremitted earnings retained for reinvestment in the Company’s foreign subsidiaries that would be subject to withholding tax or other taxes if remitted to the Company were estimated to be approximately USD 34 billion in 2023, (2022: USD 32 billion).

The gross value of tax-loss carry-forwards that have or have not been recognized as deferred tax assets, with their expiry dates, is as follows:

(USD millions)	Unrecognized	Recognized	2023 total
One year	23	44	67
Two years	12	15	27
Three years	67	79	146
Four years	22	569	591
Five years	1 569	580	2 149
More than five years	2 891	2 975	5 866
Not subject to expiry	687	2 258	2 945
Total	5 271	6 520	11 791		(USD millions)	Unrecognized	Recognized	2022 total
---	---	---	---
One year	18	0	18
Two years	37	5	42
Three years	25	5	30
Four years	138	0	138
Five years	79	688	767
More than five years	3 880	2 380	6 260
Not subject to expiry	433	452	885
Total	4 610	3 530	8 140
(USD millions)	2023	2022	2021
---	---	---	---
Tax losses carried forward that expired	8	6	18

Deferred tax assets related to carry-forwards of taxable losses and tax credits of relevant Company entities are recognized to the extent that it is considered probable that future taxable profits will be available in the respective tax jurisdictions against which such losses and credits can be utilized.

14. Financial and other non-current assets

Financial assets

(USD millions)	2023	2022
Equity securities	1 403	1 145
Debt securities	29	37
Fund investments	190	281
Total financial investments	1 622	1 463
Long-term receivables from finance subleases	104	59
Other long-term receivables	214	197
Contingent consideration receivables^1^	553	607
Long-term loans, advances and security deposits	114	85
Total financial assets	2 607	2 411
^1^ Note 30 provides additional disclosures related to contingent consideration.

Other non-current assets

(USD millions)	2023	2022
Deferred compensation plans	439	419
Prepaid post-employment benefit plans^1^	545	491
Other non-current assets	215	200
Total other non-current assets	1 199	1 110
^1^ Note 26 provides additional disclosures related to post-employment benefits.

F-33

15. Inventories

(USD millions)	2023	2022
Raw material, consumables	963	934
Work in progress	3 502	3 673
Finished products	1 448	2 568
Total inventories	5 913	7 175

The following table shows the amount of inventory recognized as an expense in “Cost of goods sold” in the consolidated income statements from continuing operations:

(USD billions)	2023	2022	2021
Cost of goods sold	-5.8	-5.2	-5.4

The following table shows the recognized amount of inventory provision and reversals of inventory provision recorded in the consolidated income statements from continuing operations:

(USD millions)	2023	2022	2021
Inventory provisions	-467	-373	-283
Reversals of inventory provisions	111	121	97

The reversals mainly result from the release of products initially requiring additional quality control inspections and from the reassessment of inventory values manufactured prior to regulatory approval but for which approval was subsequently received.

16. Trade receivables

(USD millions)	2023	2022
Total gross trade receivables	7 158	8 128
Provisions for doubtful trade receivables	-51	-62
Total trade receivables	7 107	8 066

The following table shows the trade receivables that are not overdue as specified in the payment terms and conditions established with Novartis customers, as well as an analysis of overdue amounts and related provisions for doubtful trade receivables:

(USD millions)	2023	2022
Not overdue	6 791	7 664
Past due for not more than one month	146	190
Past due for more than one month but less than three months	66	110
Past due for more than three months but less than six months	64	62
Past due for more than six months but less than one year	38	23
Past due for more than one year	53	79
Provisions for doubtful trade receivables	-51	-62
Total trade receivables	7 107	8 066

Trade receivable balances represent amounts due from our customers, which are mainly drug wholesalers, retailers, private health systems, government agencies, managed care providers, pharmacy benefit managers and government-supported healthcare systems. In particular, we monitor the level of trade receivables in countries deemed to have an elevated credit risk. We consider macroeconomic environment, historical experience, country and political risk, in addition to other relevant information when assessing risk. These risk factors are monitored regularly to determine any adjustments in risk classification. The majority of the past due trade receivables from elevated credit risk countries are due from local governments or from government-funded entities. Deteriorating credit and economic conditions as well as other factors in these elevated credit risk countries have resulted in, and may continue to result in, an increase in the average length of time that it takes to collect these trade receivables, and may require the Company to re-evaluate the expected credit loss amount of these trade receivables in future periods. At December 31, 2023, amounts past due for more than one year are not significant in elevated credit risk countries.

Total trade receivables include amounts denominated in the following major currencies:

(USD millions)	2023	2022
US dollar (USD)	3 520	3 709
Euro (EUR)	1 138	1 426
Japanese yen (JPY)	288	177
Russian ruble (RUB)	240	430
Chinese yuan (CNY)	231	155
British pound (GBP)	146	176
Brazilian real (BRL)	130	145
Australian dollar (AUD)	96	137
Swiss franc (CHF)	84	108
Canadian dollar (CAD)	75	151
Other currencies	1 159	1 452
Total trade receivables	7 107	8 066

F-34

17. Marketable securities, commodities, time deposits, derivative financial instruments, and cash and cash equivalents

Marketable securities, commodities, time deposits and derivative financial instruments

(USD millions)	2023	2022
Commodities	111	111
Debt securities		9
Time deposits and short-term investments with original maturity more than 90 days	569	11 089
Derivative financial instruments	355	204
Total marketable securities, commodities, time deposits and derivative financial instruments	1 035	11 413

The vast majority of debt securities, time deposits and short-term investments with an original maturity of more than 90 days was denominated in USD as at December 31, 2023, and 2022.

Cash and cash equivalents

(USD millions)	2023	2022
Current accounts	3 207	2 877
Time deposits and short-term investments with original maturity less than 90 days	10 186	4 640
Total cash and cash equivalents	13 393	7 517

18. Other current assets

(USD millions)	2023	2022
VAT receivable	462	509
Withholding tax recoverable	64	50
Prepaid expenses	764	911
Contingent consideration receivable^1^	65	43
Other receivables and current assets	1 252	958
Total other current assets	2 607	2 471
^1^ Note 30 provides additional disclosures related to contingent consideration.

19. Equity

The following table shows the movement in the share capital:

(USD millions)	Jan 1, 2021	Movement<br> in year	Dec 31, 2021	Movement<br> in year	Dec 31, 2022	Movement<br> in year	Dec 31, 2023
Share capital^1^	913	-12	901	-11	890	-65	825
Treasury shares	-53	5	-48	-44	-92	51	-41
Outstanding share capital	860	-7	853	-55	798	-14	784
^1^ At December 31, 2023, the Novartis AG share capital consists of registered shares with a nominal value of CHF 0.49 each. Prior to the 2023 capital decrease (see Note 19.3), Novartis AG share capital at December 31, 2022 and 2021 consists of registered shares with a nominal value of CHF 0.50 each. No authorized and conditional capital exists.

F-35

The following table shows the movement in the shares:

		2023			2022			2021
Number of outstanding shares <br>(in millions)	Note	Total <br> Novartis <br> shares	Total <br> treasury <br> shares^1^	Total <br> outstanding <br> shares	Total <br> Novartis <br> shares	Total <br> treasury <br> shares^1^	Total <br> outstanding <br> shares	Total <br> Novartis <br> shares	Total <br> treasury <br> shares^1^	Total <br> outstanding <br> shares
Balance at beginning of year		2 403.7	-284.1	2 119.6	2 434.4	-199.5	2 234.9	2 467.0	-210.2	2 256.8
Shares canceled for capital reduction^2^		-126.2	126.2		-30.7	30.7		-32.6	32.6
Shares acquired to be canceled^3^			-87.5	-87.5		-126.2	-126.2		-30.7	-30.7
Other share purchases^4^			-1.6	-1.6		-1.4	-1.4		-1.5	-1.5
Exercise of options and employee transactions^5^	19.9		2.8	2.8		1.9	1.9		0.6	0.6
Equity-based compensation^5^			10.4	10.4		10.4	10.4		9.6	9.6
Shares delivered to Alcon employees						0.0	0.0		0.1	0.1
Shares delivered to Sandoz employees			0.3	0.3
Total movements		-126.2	50.6	-75.6	-30.7	-84.6	-115.3	-32.6	10.7	-21.9
Balance at end of year		2 277.5	-233.5	2 044.0	2 403.7	-284.1	2 119.6	2 434.4	-199.5	2 234.9
^1^ Approximately 93.8 million treasury shares (2022: 99.0 million; 2021: 102.5 million) are held in Novartis entities that restrict their availability for use.
^2^ Novartis reduced its share capital by canceling shares that were repurchased on the SIX Swiss Exchange second trading line during previous years.
^3^ Shares repurchased on the SIX Swiss Exchange second trading line under a CHF 10 billion share buyback authority approved at the 2019 Annual General Meeting (AGM) for transactions after February 28, 2019, until March 2, 2021. Transactions after March 2, 2021, were executed under the CHF 10 billion share buyback authority approved at the 2021 AGM and the additional CHF 10 billion authority approved at the 2022 AGM.
^4^ Shares acquired from employees, which were previously granted to them under the respective equity-based participation plans
^5^ Shares delivered as a result of options being exercised and physical share deliveries related to equity-based participation plans

19.1) The amount available for distribution as a dividend to shareholders is based on the available distributable retained earnings of Novartis AG determined in accordance with the legal provisions of the Swiss Code of Obligations.

	2023	2022	2021
Dividend per share (in CHF)	3.20	3.10	3.00
Total dividend payment (in USD billion)	7.3	7.5	7.4

19.2) Treasury shares are initially recorded at fair value on their trade date, which is different from the settlement date, when the transaction is ultimately effected. Treasury shares are deducted from consolidated equity at their nominal per share value. Differences between the nominal amount and the transaction price on purchases or sales of treasury shares with third parties, or the value of services received for the shares allocated to employees as part of share-based compensation arrangements, are recorded in “Retained earnings” in the consolidated statement of changes in equity.

The following table summarizes the treasury shares movements:

		2023		2022		2021
	Note	Number of <br> outstanding <br> shares<br> (in millions)	Equity impact<br> USD m	Number of <br> outstanding <br> shares<br> (in millions)	Equity impact<br> USD m	Number of <br> outstanding <br> shares<br> (in millions)	Equity impact<br> USD m
Shares acquired to be canceled^1^		-87.5	-8 369	-126.2	-10 787	-30.7	-2 775
Other share purchases^2^		-1.6	-148	-1.4	-123	-1.5	-145
Purchase of treasury shares		-89.1	-8 517	-127.6	-10 910	-32.2	-2 920
Exercise of options and employee transactions^3^	19.9	2.8	146	1.9	88	0.6	39
Equity-based compensation^4^		10.4	904	10.4	854	9.6	745
Shares delivered to Alcon employees				0.0	5	0.1	17
Shares delivered to Sandoz employees		0.3	30
Total		-75.6	-7 437	-115.3	-9 963	-21.9	-2 119
^1^ Shares repurchased on the SIX Swiss Exchange second trading line under a CHF 10 billion share buyback authority approved at the 2019 Annual General Meeting (AGM) for transactions after February 28, 2019, until March 2, 2021. Transactions after March 2, 2021, were executed under the CHF 10 billion share buyback authority approved at the 2021 AGM and the additional CHF 10 billion authority approved at the 2022 AGM.
^2^ Shares acquired from employees, which were previously granted to them under the respective equity-based participation plans
^3^ Shares delivered as a result of options being exercised related to equity-based participation plans and the delivery of treasury shares. The average share price of the shares delivered was significantly below market price, reflecting the strike price of the options exercised.
^4^ Equity-settled share-based compensation is expensed in the consolidated income statement in accordance with the vesting period of the share-based compensation plans. The value for the shares and options granted is credited to consolidated equity over the respective vesting period. In addition, tax benefits arising from tax-deductible amounts exceeding the expense recognized in the income statement are credited to equity.

F-36

19.3) In 2023, in connection with the Distribution (spin-off) of Sandoz business, Novartis AG shareholders approved at the EGM held on September 15, 2023, a decrease in Novartis AG share capital in the amount of CHF 22.8 million (USD 17.1 million). The capital decrease resulted in a reduction of the nominal value of the Novartis AG shares by CHF 0.01 from CHF 0.50 per share to CHF 0.49 per share.

19.4) In December 2021, Novartis entered into an irrevocable, non-discretionary arrangement with a bank to repurchase Novartis shares on the second trading line under its up-to USD 15.0 billion share buyback. The arrangement was updated in July 2022, December 2022, and May 2023, and concluded in June 2023. Novartis was able to cancel this arrangement at any time but could have been subject to a 90-day waiting period. As of December 31, 2022, these waiting period conditions were not applicable and as a result, there was no requirement to record a liability under this arrangement as of December 31, 2022. The liability under this arrangement amounted to USD 2.8 billion as at December 31, 2021.

In June 2023, Novartis entered into an irrevocable, non-discretionary arrangement with a bank to repurchase 11.7 million Novartis shares on the second trading line, which concluded in July 2023.

In July 2023, Novartis entered into a new irrevocable, non-discretionary arrangement with a bank to repurchase Novartis shares on the second trading line under its new up-to USD 15.0 billion share buyback. Novartis is able to cancel this arrangement but may be subject to a 90-day waiting period under certain conditions. As of December 31, 2023, these waiting period conditions were not applicable and as a result, there was no requirement to record a liability under this arrangement as of December 31, 2023.

In June 2021, Novartis entered into an irrevocable, non-discretionary arrangement with a bank to repurchase Novartis shares to mitigate dilution related to participation plans of employees. Novartis would have been able to cancel this arrangement at any time but would have been subject to a 90-day waiting period. This trading plan commitment was fully executed and expired in June 2021, and as a consequence, there was no liability related to this plan recognized as of December 31, 2021.

In November 2020, Novartis entered into an irrevocable, non-discretionary arrangement with a bank to repurchase Novartis shares on the second trading line under its up-to USD 2.5 billion share buyback. Novartis would have been able to cancel this arrangement at any time, but would have been subject to a 90-day waiting period. This trading plan commitment was fully executed and expired in March 2021, and as a consequence, there was no liability related to this plan recognized as of December 31, 2021.

19.5) The impact of change in ownership of consolidated entities represents the excess of the amount paid to non-controlling interest over their carrying value and equity allocation to non-controlling interest due to change in ownership percentage.

19.6) Changes in non-controlling interests represent the impact on the non-controlling interest of transactions with minority shareholders, such as change in ownership percentage, dividend payments and other equity transactions.

19.7) Other movements include, for subsidiaries in hyperinflationary economies, the impact of the application of IAS 29 “Financial reporting in Hyperinflation Economies”. See Note 30 for additional disclosures.

19.8) Transaction costs in 2023 of USD 214 million, net of tax of USD 29 million, that are directly attributable to the Distribution (spin-off) of Sandoz business to Novartis AG shareholders and that would otherwise have been avoided, are recorded as a deduction from equity (retained earnings). See Note 1.

In 2021, transaction costs that were directly attributable to the distribution (spin-off) of Alcon Inc. to Novartis AG shareholders and that would otherwise have been avoided, were recorded to equity.

19.9) At December 31, 2022, the market maker held 3 million (2021: 3 million) written call options, originally issued as part of the share-based compensation for employees, that have not yet been exercised. The weighted average exercise price of these options at December 31, 2022, was USD 66.07 (2021: USD 61.45), and they had contractual lives of 10 years, with remaining lives less than one year (2021: two years). In the first quarter of 2023, the market maker exercised 3 million written call options and as a result there are no written call options outstanding at December 31, 2023.

F-37

20. Non-current financial debt

(USD millions)	2023	2022
Straight bonds	20 585	22 341
Liabilities to banks and other financial institutions^1^	42	144
Total, including current portion of non-current financial debt	20 627	22 485
Less current portion of non-current financial debt	-2 191	-2 241
Total non-current financial debt	18 436	20 244
^1^ Average interest rate during the year 2023 2.6% (2022: 2.3%)

All bonds are initially recorded at the amount of proceeds received, net of transaction costs. They are subsequently carried at amortized cost, with the difference between the proceeds, net of transaction costs, and the amount due on redemption being recognized as a charge to the consolidated income statement over the period of the relevant bond. Financial debts, including current financial debts, contain only general default covenants. The Company is in compliance with these covenants.

The percentage of fixed-rate financial debt to total financial debt was 84% as at December 31, 2023, and 86% as at December 31, 2022.

The average interest rate on total financial debt in 2023 was 2.9% (2022: 2.4%).

Note 30 contains a maturity table of the Company’s future contractual interest payments commitments.

The following table provides a breakdown of straight bonds:

Coupon	Notional <br> amount<br> (millions)	Issuance <br> year	Maturity <br> year	Issuer	Issue price	2023<br> (USD<br> millions)	2022<br> (USD<br> millions)
3.700%	500	2012	2042	Novartis Capital Corporation, New York, United States	98.325%	491	490
3.400%	2 150	2014	2024	Novartis Capital Corporation, New York, United States	99.287%	2 150	2 147
4.400%	1 850	2014	2044	Novartis Capital Corporation, New York, United States	99.196%	1 828	1 827
1.625%	600	2014	2026	Novartis Finance S.A., Luxembourg, Luxembourg	99.697%	663	638
0.250%	500	2015	2025	Novartis AG, Basel, Switzerland	100.640%	595	541
0.625%	550	2015	2029	Novartis AG, Basel, Switzerland	100.502%	654	595
1.050%	325	2015	2035	Novartis AG, Basel, Switzerland	100.479%	387	352
3.000%	1 750	2015	2025	Novartis Capital Corporation, New York, United States	99.010%	1 745	1 742
4.000%	1 250	2015	2045	Novartis Capital Corporation, New York, United States	98.029%	1 222	1 221
0.125%	1 250	2016	2023	Novartis Finance S.A., Luxembourg, Luxembourg	99.127%		1 330
0.625%	500	2016	2028	Novartis Finance S.A., Luxembourg, Luxembourg	98.480%	549	528
3.100%	1 000	2017	2027	Novartis Capital Corporation, New York, United States	99.109%	995	994
1.125%	600	2017	2027	Novartis Finance S.A., Luxembourg, Luxembourg	99.874%	662	638
0.500%	750	2018	2023	Novartis Finance S.A., Luxembourg, Luxembourg	99.655%		798
1.375%	750	2018	2030	Novartis Finance S.A., Luxembourg, Luxembourg	99.957%	828	797
1.700%	750	2018	2038	Novartis Finance S.A., Luxembourg, Luxembourg	99.217%	823	792
1.750%	1 000	2020	2025	Novartis Capital Corporation, New York, United States	99.852%	999	998
2.000%	1 250	2020	2027	Novartis Capital Corporation, New York, United States	99.909%	1 247	1 246
2.200%	1 500	2020	2030	Novartis Capital Corporation, New York, United States	99.869%	1 495	1 494
2.750%	1 250	2020	2050	Novartis Capital Corporation, New York, United States	97.712%	1 216	1 215
0.000% 1	1 850	2020	2028	Novartis Finance S.A., Luxembourg, Luxembourg	99.354%	2 036	1 958
Total straight bonds						20 585	22 341
1  The 1 850 million bond issued in 2020 features a coupon step-up of 0.25% commencing with the first interest payment date after December 31, 2025, if one or both of the 2025 Patient Access Targets are not met. These 2025 Patient Access Targets are the 2025 Flagship Programs Patient Reach Target and the 2025 Strategic Innovative Therapies Patient Reach Target, as defined in the bond prospectus. As of December 31, 2023, there is no indication that these 2025 Patient Access Targets will not be met.

All values are in Euros.

F-38

The following tables provide a breakdown of total non-current financial debt, including current portion by maturity and currency:

Breakdown by maturity:

(USD millions)	2023	2022
2023		2 241
2024	2 191	2 147
2025	3 338	3 281
2026	663	638
2027	2 906	2 909
2028	2 585	2 485
After 2028	8 944	8 784
Total	20 627	22 485

Breakdown by currency:

( millions)	2022
US dollar ()	13 376
Euro ()	7 478
Japanese yen ()	76
Swiss franc (CHF)	1 488
Others	67
Total	22 485

All values are in Japanese Yen.

The following table shows the comparison of balance sheet carrying value and fair value of total non-current financial debt, including current portion:

(USD millions)	2023<br> Balance<br> sheet	2023<br> Fair<br> values	2022<br> Balance<br> sheet	2022<br> Fair<br> values
Straight bonds	20 585	19 194	22 341	20 277
Others	42	42	144	144
Total	20 627	19 236	22 485	20 421

The fair values of straight bonds are determined by quoted market prices. Other financial debts are recorded at notional amounts, which are a reasonable approximation of the fair values.

21. Provisions and other non-current liabilities

(USD millions)	2023	2022
Accrued liability for employee benefits:
Defined benefit pension plans^1^	1 815	1 723
Other long-term employee benefits and deferred compensation	546	554
Other post-employment benefits^1^	369	362
Environmental remediation provisions	518	535
Provisions for product liabilities, governmental investigations and other legal matters	82	154
Contingent consideration^2^	389	704
Other non-current liabilities	804	874
Total provisions and other non-current liabilities	4 523	4 906
^1^ Note 26 provides additional disclosures related to post-employment benefits.
^2^ Note 30 provides additional disclosures related to contingent consideration.

Novartis believes that its total provisions are adequate based upon currently available information. However, given the inherent difficulties in estimating liabilities in this area, Novartis may incur additional costs beyond the amounts provided. Management believes that such additional amounts, if any, would not be material to the Company’s financial condition but could be material to the results of operations or cash flows in a given period.

F-39

Environmental remediation provisions

The following table shows the movements in the environmental liability provisions:

( millions)	2022	2021
January 1	616	809
Provisions related to discontinued operations  1
Cash payments 2	-6	-169
Releases of provisions 3	- 18	-105
Additions to provisions 4	6	105
Currency translation effects	-10	-24
December 31	588	616
Less current provision	-53	-49
Non-current environmental remediation provisions at December 31	535	567
1  Represents the environmental remediation provision at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued operations.
2  Cash payments from continuing operations were 5 million in 2022, and 169 million in 2021.
3  Releases of provisions credited to the consolidated income statement from continuing operations were 18 million in 2022, and 105 million in 2021.
4  Additions to provisions charged to the consolidated income statement from continuing operations were 6 million in 2022, and 105 million in 2021.

All values are in US Dollars.

The significant components of the environmental remediation provisions consist of costs to sufficiently clean and refurbish contaminated sites to the extent necessary, and to continue surveillance at sites where the environmental remediation exposure is less significant.

A substantial portion of the environmental remediation provisions relate to the remediation of Basel regional landfills in the adjacent border areas in Switzerland, Germany and France. The provisions are reassessed on an annual basis and adjusted as necessary.

In the United States, Novartis has been named under federal legislation (the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended) as a potentially responsible party (PRP) in respect of certain sites. Novartis actively participates in, or monitors, the cleanup activities at the sites in which it is a PRP. The provision takes into consideration the number of other PRPs at each site as well as the identity and financial position of such parties in light of the joint and several nature of the liability.

The expected timing of the related cash outflows as of December 31, 2023, is currently projected as follows:

(USD millions)	Expected <br> cash outflows
Due within two years	82
Due later than two years, but within five years	158
Due later than five years, but within 10 years	217
Due after 10 years	81
Total environmental remediation provisions	538

Provisions for product liabilities, governmental investigations and other legal matters

Novartis has established provisions for certain product liabilities, governmental investigations and other legal matters where a potential cash outflow is probable, and Novartis can make a reliable estimate of the amount of the outflow. These provisions represent the Company’s current best estimate of the total financial effect for the matters described below and for other less significant matters. Potential cash outflows reflected in a provision might be fully or partially offset by insurance in certain circumstances.

Novartis has not established provisions for potential damage awards for certain additional legal claims against its subsidiaries if Novartis currently believes that a payment is either not probable or cannot be reliably estimated. These not-provisioned-for matters include individual product liability cases and certain other legal matters. Plaintiffs have alleged claims in these matters and the Company does not believe that information about the amount sought by plaintiffs, if that is known, would be meaningful with respect to those legal proceedings. This is due to a number of factors, including, but not limited to, the stage of proceedings, the entitlement of parties to appeal a decision and clarity as to theories of liability, damages and governing law. It is therefore, not practicable to provide information about the potential financial impact of these matters. In addition, in some of these matters there are claims for punitive or multiple (treble) damages, civil penalties and disgorgement of profits that in the view of Novartis are either wholly or partially unspecified, or wholly or partially unquantifiable at present; the Company believes that information about these amounts claimed by plaintiffs generally is not meaningful for purposes of determining a reliable estimate of a loss that is probable or more than remote.

A number of other legal matters are in such early stages or the issues presented are such that the Company has not made any provisions since it cannot currently estimate either a potential outcome or the amount of any potential losses. For these reasons, among others, the Company generally is unable to make a reliable estimate of possible loss with respect to such cases. It is therefore not practicable to provide information about the potential financial impact of those cases.

There might also be cases for which the Company was able to make a reliable estimate of the possible loss or the range of possible loss, but the Company believes that publication of such information on a case-by-case basis would seriously prejudice the Company’s position in ongoing legal proceedings or in any related settlement discussions. Accordingly, in such cases, information has been disclosed with respect to the nature of the contingency, but no disclosure is provided as to an estimate of the possible loss or range of possible loss.

Note 29 contains additional information on contingent liabilities.

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Summary of significant legal proceedings

The following is a summary of significant legal proceedings to which Novartis or its subsidiaries are currently a party, or were a party and that concluded in 2023.

Investigations and related litigations

Southern District of New York (S.D.N.Y.) Gilenya marketing practices investigation and litigation

In 2013, Novartis Pharmaceuticals Corporation (NPC) received a civil investigative demand from the United States Attorney’s Office (USAO) for the S.D.N.Y. requesting the production of documents and information relating to marketing practices for Gilenya, including the remuneration of healthcare providers in connection therewith. In 2017, the S.D.N.Y. and New York State declined to intervene in claims raised by an individual relator in a qui tam complaint. In 2022, NPC’s motion to dismiss this complaint was granted, which was appealed. The claims are being vigorously contested.

Lucentis/Avastin® matters

In 2019, the French Competition Authority (FCA) issued a Statement of Objections against Novartis entities, alleging anti-competitive practices on the French market for anti-vascular endothelial growth factor treatments for wet age-related macular degeneration from 2008 to 2013. In 2020, the FCA issued a decision finding that the Novartis entities had infringed competition law by abusing a dominant position and imposing a fine equivalent to approximately USD 452 million. Novartis paid the fine, again subject to recoupment, and appealed the FCA’s decision. In February 2023, the Paris Court of Appeal (Court) overturned the FCA’s decision which triggered the reimbursement of the originally paid fine (recorded as “Other income” in the Company’s consolidated income statement), and, in March 2023, the FCA appealed the Court’s decision.

Novartis is the subject of similar investigations and proceedings involving the competition authority in Greece and is currently in an appeal process in Turkey. Novartis continues to vigorously contest all claims in both countries. Novartis is also challenging policies and regulations allowing off-label/unlicensed use and reimbursement for economic reasons in Turkey.

Greece investigation

The Greek authorities are investigating legacy allegations of potentially inappropriate economic benefits to healthcare providers (HCPs), government officials and others in Greece. These authorities include the Greek Coordinating Body for Inspection and Control, and the Greek Body of Prosecution of Financial Crime (SDOE), from which the Company received a summons in 2018 and 2020. Novartis has cooperated in these investigations. In 2021, SDOE imposed on Novartis Hellas a fine equivalent to approximately USD 1.2 million; Novartis Hellas appealed the fine and, in September 2023, the Court overturned the decision and fine. The Greek State filed an appeal. In 2022, the Greek State served a civil lawsuit on Novartis Hellas, seeking approximately USD 225 million for moral damages allegedly arising from the conduct that was the subject of the Company’s 2020 settlement with the US Department of Justice (DOJ) regarding allegations of inappropriate economic benefits in Greece that was disclosed in the 2020 Annual Report and the 2020 Form 20-F. The claims are being vigorously contested.

340B Drug Pricing Program investigations

In 2021, NPC received a notification from the US Health Resources and Services Administration (HRSA) which stated that HRSA believes NPC’s contract pharmacy policy violates the 340B statute, and threatened potential enforcement action. NPC subsequently sued HRSA in the U.S. District Court (USDC) for the District of Columbia to challenge HRSA’s determination and to enjoin HRSA from taking action with respect to NPC’s contract pharmacy policy. HRSA then referred the matter regarding NPC’s contract pharmacy policy to the Office of Inspector General of the US Department of Health and Human Services, which could result in the imposition of civil monetary penalties on NPC. The USDC issued a decision rejecting HRSA’s interpretation of the 340B statute, vacating the violation notification and remanding the matter to HRSA. HRSA appealed, and the United States Court of Appeals for the DC Circuit heard argument on the case in 2022. In addition, in 2021 and 2023, two medical centers filed Administrative Dispute Resolution (ADR) proceedings against NPC, seeking the return of alleged overcharges resulting from NPC’s contract pharmacy policy. NPC has moved to dismiss these proceedings pending resolution of the HRSA litigation. Also in 2021, NPC received a civil investigative subpoena from the Office of the Attorney General of the State of Vermont (Vermont AG) requesting the production of documents and information concerning NPC’s participation in the 340B Drug Pricing Program in Vermont. NPC responded by providing documents and information to the Vermont AG.

Swiss and EU investigation

In September 2022, the Swiss Competition Commission (COMCO) initiated an investigation of the acquisition of certain patents by Novartis from Genentech in April 2020 and their subsequent enforcement against Eli Lilly and other parties, allegedly in an attempt to protect Cosentyx from competing products. COMCO is investigating whether enforcement of the patents violates the Swiss Cartel Act. The European Commission also requested information from Novartis regarding this matter. Novartis is cooperating with the authorities and will vigorously contest any allegations.

Inflation Reduction Act (IRA) litigation

In 2023, following the U.S. government’s selection of Entresto for the first round of the IRA’s “Medicare Drug Price Negotiation Program,” NPC filed a complaint in the USDC for the District of New Jersey on the grounds that those drug price-setting provisions are unconstitutional under the First, Fifth and Eighth Amendments to the U.S. Constitution.

Product liability litigation

Tasigna

NPC is a defendant in more than 400 US product liability actions involving Tasigna, alleging that the product

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caused various cardiovascular effects and that NPC failed to provide adequate warnings about those alleged side effects. State court actions are pending in a multicounty litigation in Bergen County, New Jersey, and federal cases are pending in a multidistrict litigation in the Middle District of Florida. The claims are being vigorously contested.

Other matters

Shareholder derivative lawsuit

In 2021, NPC, Sandoz Inc., Novartis Capital Corporation and certain present and former directors and officers of Novartis were named as defendants, and Novartis was named as a nominal defendant, in a purported shareholder derivative lawsuit filed in New York State Court. The plaintiffs, derivatively as purported Novartis shareholders on behalf of Novartis, seek damages and other remedies based on alleged conduct by the corporate and individual defendants. In 2022, the court granted Novartis motion to dismiss the lawsuit, which the plaintiffs have appealed.

Concluded legal matters

Exforge – Concluded matter

Since 2018, Novartis companies as well as other pharmaceutical companies were sued by various direct and indirect purchasers of Exforge in multiple US individual and putative class action complaints. They claimed that Novartis made a reverse payment in the form of an agreement not to launch an authorized generic, alleging violations of federal antitrust law and state antitrust, consumer protection and common laws, and sought damages as well as injunctive relief. The cases were consolidated in the S.D.N.Y. In 2022, Novartis agreed to pay USD 245 million to resolve these cases, and this resolution was completed in 2023.

Lucentis/Avastin® (Italian and Belgian Competition Authorities) – Concluded matter

In connection with an investigation into whether Novartis entities, F. Hoffmann-La Roche AG, Genentech Inc. and Roche S.p.A. colluded to artificially preserve the market positions of Avastin^®^ and Lucentis, in 2014 the Italian Competition Authority (ICA) imposed a fine equivalent to USD 125 million on the Novartis entities. Novartis paid the fine, subject to the right to later claim recoupment, and appealed the decision. In 2023, the final appeal by Novartis was denied, and the ICA decision is now final. In 2014 and 2015, following the ICA’s fine, the Italian Ministry of Health and the Lombardia region sent letters with payment requests for a total equivalent of approximately USD 1.3 billion in damages from Novartis and Roche entities based on these allegations, and several additional Italian regions and hospitals subsequently sent letters in 2019 claiming damages for an aggregate amount of approximately USD 330 million. None of these claims have been asserted in legal proceedings. A similar matter involving the competition authority in Belgium is concluded.

South Korea investigation – Concluded matter

In 2016, the Seoul Western District Prosecutor initiated a criminal investigation into, among other things, allegations that Novartis Korea utilized medical journals to provide inappropriate economic benefits to HCPs. This resulted in a non-material fine, which the prosecutor appealed. In 2021, the appellate court upheld the fine, and the prosecutor appealed that decision. In 2023, the Supreme Court dismissed the appeal. This matter is now concluded.

U.S. Government Foreign Corrupt Practices Act (FCPA) investigations – Concluded matter

As previously disclosed in Note 20 to the Consolidated Financial Statements in our 2020 Annual Report, Novartis reached settlements with the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) that resolved all FCPA investigations into historical conduct by Novartis and its subsidiaries. To resolve the DOJ investigation, Novartis Hellas S.A.C.I. entered into a deferred prosecution agreement (DPA) with the DOJ. To resolve the SEC investigation, Novartis AG reached an agreement that resulted in an Order issued by the SEC. The DPA and the Order each contained certain reporting and compliance obligations for a three-year term, which ended on June 26, 2023. On December 21, 2023 the court formally dismissed the Information filed against Novartis Hellas S.A.C.I at the request of the DOJ. This matter is now concluded.

Summary of product liability, governmental investigations and other legal matters provision movements

( millions)	2022	2021
January 1	397	487
Provisions related to discontinued operations  1
Impact of acquisitions of businesses	4
Cash payments 2	-105	-292
Releases of provisions 3	-52	-44
Additions to provisions 4	466	251
Currency translation effects	-8	-5
December 31	702	397
Less current portion	-548	-56
Non-current product liabilities, governmental investigations and other legal matters provisions at December 31	154	341
1  Represents the provisions for product liability, governmental investigations and other legal matters at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued operations.
2  Cash payments from continuing operations were 67 million in 2022, and 64 million in 2021.
3  Releases of provisions credited to the consolidated income statement from continuing operations were 38 million in 2022, and 18 million in 2021.
4  Additions to provisions charged to the consolidated income statement from continuing operations were 435 million in 2022, and 190 million in 2021.

All values are in US Dollars.

Novartis believes that its total provisions for investigations, product liability, arbitration and other legal matters are adequate based upon currently available information. However, given the inherent difficulties in estimating liabilities, there can be no assurance that additional liabilities and costs will not be incurred beyond the amounts provided.

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Discontinued operations

On October 4, 2023, the separation and spin-off of the Sandoz business was completed (Note 2). Pursuant to the Separation and Distribution Agreement that Novartis and Sandoz entered into in connection with that separation and spin-off, Sandoz and Novartis agreed, subject to certain limitations, exclusions and conditions, that Sandoz would retain or assume (as applicable) liabilities, including pending and future claims that relate to the spun-off Sandoz business (whether arising prior to, at or after the date of execution of the Separation and Distribution Agreement). Additionally, pursuant to the Separation and Distribution Agreement, Sandoz agreed to indemnify Novartis and each of its directors, officers, managers, members, agents and employees against liabilities incurred in connection with the spun-off Sandoz business.

22. Current financial debt and derivative financial instruments

(USD millions)	2023	2022
Bank and other financial debt^1^	624	863
Commercial paper	3 269	2 772
Current portion of non-current financial debt	2 191	2 241
Derivative financial instruments	91	55
Total current financial debt and derivative financial instruments	6 175	5 931
^1^ Weighted average interest rate during the year 2023 13.2% (2022: 9.7%)

The carrying amounts of current financial debt, other than the current portion of non-current financial debt, approximate the estimated fair value due to the short-term nature of these instruments.

Details on commercial papers and short-term borrowings are provided under “Liquidity risk” in Note 30.

23. Provisions and other current liabilities

(USD millions)	2023	2022
Taxes other than income taxes	516	836
Restructuring provisions	703	1 131
Accrued expenses for goods and services received but not invoiced	1 026	1 059
Accruals for royalties	844	767
Accrued interests on financial debt	116	116
Provisions for deductions from revenue	6 315	6 732
Accruals for compensation and benefits, including social security	2 330	2 321
Environmental remediation provisions	20	53
Deferred income	98	123
Provisions for product liabilities, governmental investigations and other legal matters^1^	42	548
Accrued share-based payments	322	235
Contingent consideration^2^	14	131
Other payables	820	743
Total provisions and other current liabilities	13 166	14 795
^1^ Note 21 provides additional disclosures related to legal provisions.
^2^ Note 30 provides additional disclosures related to contingent consideration.

Provisions are based upon management’s best estimate and adjusted for actual experience. Such adjustments to historic estimates have not been material.

F-43

Provisions for deductions from revenue

The following table shows the movement of the provisions for deductions from revenue:

( millions)	2022	2021
January 1	6 481	6 256
Provisions related to discontinued operations 1
Effect of currency translation, business combinations	-210	-218
Payments/utilizations 2	-22 261	-19 838
Adjustments of prior years charged to income statement 3	-322	-245
Current year income statement charge 4	23 072	20 413
Change in provisions offset against gross trade receivables 5	-28	113
December 31	6 732	6 481
1  Represents the provision for deductions from revenue at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued operations.
2  Payments/utilizations from continuing operations were 14 691 million in 2022 and 12 473 million in 2021.
3  Adjustments of prior years charged to income statement from continuing operations were 218 million in 2022, and 251 million in 2021.
4  Current year income statement charge from continuing operations were 15 231 million in 2022 and 13 084 million in 2021.
5  Change in provisions offset against gross trade receivables from continuing operations were 2 million in 2022 and -44 million in 2021.

All values are in US Dollars.

The provisions for deductions from revenue include specific healthcare plans and program rebates as well as non-healthcare plans and program-related rebates, returns and other deductions. The provisions for deductions from revenue are adjusted to reflect experience and to reflect actual amounts as rebates, refunds, discounts and returns are processed. The provision represents estimates of the related obligations, requiring the use of judgment when estimating the effect of these deductions from revenue.

Restructuring provisions movements

( millions)	2022	2021
January 1	345	459
Provisions related to discontinued operations  1
Additions to provisions 2	1 368	328
Cash payments 3	-468	-344
Releases of provisions 4	-42	-54
Transfers 5	-53	- 27
Currency translation effects	-19	-17
December 31	1 131	345
1  Represents the restructuring provisions at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued operations.
2  Additions to provisions charged to the consolidated income statement from continuing operations were 1.3 billion in 2022 and 266 million in 2021.
3  Cash-payments from continuing operations were 421 million in 2022 and 259 million in 2021.
4  Releases of provisions credited to the consolidated income statement from continuing operations were 33 million in 2022 and 29 million in 2021.
5  Transfers from continuing operations were 53 million in 2022 and 24 million in 2021.

All values are in US Dollars.

Restructuring provisions are recognized for the direct expenditure arising from the restructuring, where the plans are sufficiently detailed and where appropriate communication to those affected has been made.

Charges to increase restructuring provisions are included in “Other expense” in the consolidated income statements.

In 2023, additions to provisions of USD 658 million were mainly related to the continuation of the initiative announced in April 2022 to implement a new streamlined organizational model designed to support innovation, growth and productivity.

In 2022, additions to provisions of USD 1.4 billion were mainly related to the following reorganizations:

• Initiative announced in April 2022 to implement a new streamlined organizational model designed to support innovation, growth and productivity.

• The continuation of the 2021 restructuring initiatives.

In 2021, additions to provisions of USD 328 million were mainly related to the following reorganizations:

• The commencement of a plan to restructure the field force and supporting functions in response to changes in the Company’s go-to-market structure with increased utilization of digital technology.

• Company-wide initiatives to streamline manufacturing platforms and manufacturing functions and implement new technologies continued. In addition, the Operations unit (formerly Customer & Technology Solutions) continued the phased implementation of the new operating model to transition activities to service centers.

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24. Details to the consolidated statements of cash flows

24.1) Non-cash items and other adjustments from continuing operations

The following table shows the reversal of non-cash items and other adjustments in the consolidated statements of

cash flows.

( millions)	2022	2021
Depreciation, amortization and impairments on:
Property, plant and equipment	1 374	1 277
Right-of-use assets	270	279
Intangible assets	5 061	4 041
Financial assets 1	260	-38
Change in provisions and other non-current liabilities	1 318	806
Gains on disposal and other adjustments on property, plant and equipment; intangible assets; financial assets and other non-current assets, net	-308	-646
Equity-settled compensation expense	791	700
Loss/(income) from associated companies 2	11	-15 337
Income taxes	1 128	1 625
Net financial expense	758	863
Other	-32
Total	10 631	-6 430
1  Includes fair value changes
2  2021 included the gain of 14.6 billion recognized from the divestment of the Company's investment in Roche (see Notes 2 and 5).

All values are in US Dollars.

In 2023, other than through business combinations, there were no additions to intangible assets with deferred payments (2022: USD 635 million, 2021: nil).

In 2023, there were USD 421 million (2022: USD 216 million, 2021: USD 295 million) additions to right-of-use assets recognized.

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24.2) Total amount of income taxes paid

In 2023, the total amount of income taxes paid by continuing operations was USD 2 787 million and by discontinued operations was USD 162 million, which was included within “Net cash flows from operating activities from discontinued operations.” In 2023, the total amount of income taxes paid by the Company was USD 2 949 million.

In 2022, the total amount of income taxes paid by continuing operations was USD 1 702 million and by discontinued operations was USD 273 million, which was included within “Net cash flows from operating activities from discontinued operations.” In 2022, the total amount of income taxes paid by the Company was USD 1 975 million.

In 2021, the total amount of income taxes paid by continuing operations was USD 1 856 million and by discontinued operations was USD 486 million, which was included within “Net cash flows from operating activities from discontinued operations.” In 2021, the total amount of income taxes paid by the Company was USD 2 342 million.

24.3) Cash flows from changes in working capital and other operating items included in the net cash flows from operating activities from continuing operations

(USD millions)	2023	2022	2021
Increase in inventories	-546	-560	-102
Increase in trade receivables	-1 504	-397	-352
Increase/(decrease) in trade payables	479	-181	-111
Change in other current and non-current assets	-125	-84	-179
Change in other current liabilities	1 327	426	671
Total	-369	-796	-73

24.4) Cash flows arising from acquisitions and divestments of interests in associated companies, net

In 2021, acquisitions and divestments of interests in associated companies, net included USD 20.7 billion proceeds from the divestment of the Company’s investment in Roche (see Notes 2 and 5).

24.5) Cash flows arising from acquisitions and divestments of businesses, net

The following table is a summary of the cash flow impact of acquisitions and divestments of businesses. The most significant transactions are described in Note 2.

( millions)	2023	2022	2021
Net assets recognized as a result of acquisitions of businesses	-3 699	-1 077	-320
Fair value of previously held equity interests	26	21	42
Contingent consideration payables, net	146	224	18
Payments, deferred consideration and other adjustments, net	-34	0	1
Cash flows used for acquisitions of businesses	-3 561	-832	-259
Cash flows from/(used for) divestments of businesses, net 1	3	-8	54
Cash flows used for acquisitions and divestments of businesses, net	-3 558	-840	-205
1  In 2023, 3 million represented net cash inflows from divestments in previous years.
In 2022, 8 million net cash outflows from divestments of businesses included 20 million reduction to cash and cash equivalents due to the derecognized cash and cash equivalents following a loss of control of a company upon expiry of an option to purchase the company, partly offset by 12 million net cash inflows from business divestments in 2022 and in prior years.
In 2022, the net identifiable assets of divested businesses amounted to 139 million, comprised of non-current assets of 127 million, current assets of 70 million, including 62 million cash and cash equivalents and of non-current and current liabilities of 58 million. The deferred sale price receivable and other adjustments amounted to 19 million.
In 2021, 54 million included net cash inflows from divestments in previous years.

All values are in US Dollars.

Notes 2 and 25 provide further information regarding acquisitions and divestments of businesses. All acquisitions were for cash.

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24.6) Reconciliation of liabilities arising from financing activities

			2022			2021
( millions)	Derivative <br> financial <br> instruments	Lease<br> liabilities	Financial <br> debts	Derivative <br> financial <br> instruments	Lease<br> liabilities	Financial <br> debts	Derivative <br> financial <br> instruments	Lease<br> liabilities
January 1	55	1 789	29 129	68	1 896	35 850	194	2 005
Financial debts, derivative financial instruments and lease liabilities related to discontinued operations  1	-1	-98
Increase in non-current financial debts 2			16			16
Repayments of the current portion of non-current financial debts  3			-2 575			-2 162
Change in current financial debts 4			295			-3 524
Payments of lease liabilities 5		-258			-295			-316
Interest payments for amounts included in lease liabilities classified as cash flows from operating activities  6		-52			-51			-52
New, modified and terminated leases, net		349			222			253
Impact of acquisitions and divestments of businesses, net		51			12	1
Changes in fair values, lease interest and other changes, net	37	28		-13	60	1	-125	62
Amortization of bonds discount			22			29
Currency translation effects		19	-767		-55	-1 082	-1	-56
December 31	91	1 828	26 120	55	1 789	29 129	68	1 896
Non-current 7		1 598	20 244		1 538	22 902		1 621
Current 7	91	230	5 876	55	251	6 227	68	275
1  Represents the financial debts, derivative financial instruments and lease liabilities at January 1, 2023 related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued operations.
2  Increases in non-current financial debts included in the consolidated statements of cash flows from continuing operations were nil in 2022 and 2021.
3  Repayments of the current portion of non-current financial debts were only recorded in the consolidated statements of cash flows from continuing operations.
4  Changes in current financial debts included in the consolidated statements of cash flows from continuing operations were 252 million in 2022 (2021: 3 547 million) which included net cash outflows from interest-bearing accounts of employees payable on demand amounting to 1.7 billion.
5  Payments of lease liabilities included in the consolidated statements of cash flows from continuing operations were 262 million in 2022 (2021: 278 million).
6  Interest payments for amounts included in lease liabilities classified as cash flows from operating activities within the consolidated statements of cash flows from continuing operations were 48 million in 2022 (2021: 48 million).
7  Note 11 provides additional disclosures related to lease liabilities, Note 20 provides additional disclosures related to non-current financial debt, and Note 22 provides additional disclosures related to current financial debt and derivative financial instruments.

All values are in US Dollars.

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25. Acquisitions of businesses

Fair value of assets and liabilities arising from acquisitions of businesses:

( millions)	2022	2021
Property, plant and equipment	13
Right-of-use assets	12
Currently marketed products		292
Acquired research and development	1 209	262
Other intangible assets		98
Deferred tax assets	56	28
Non-current financial and other assets
Trade receivables and financial and other current assets	5	1
Cash and cash equivalents	89	10
Deferred tax liabilities	-300	-74
Current and non-current financial debts		-1
Current and non-current lease liabilities	-12
Trade payables and other liabilities	-67	-4
Net identifiable assets acquired	1 005	612
Acquired cash and cash equivalents	-89	-10
Non-controlling interests		-105
Goodwill	161	238
Net assets recognized as a result of acquisitions of businesses 1	1 077	735
1  In 2023 and 2022 all net assets recognized relate to business combinations of continuing operations. In 2021, net assets recognized as a result of acquisitions of businesses from continuing operations were 320 million.

All values are in US Dollars.

Note 2 details significant acquisitions of businesses by continuing operations, specifically the acquisition of DTx Pharma and Chinook Therapeutics in 2023, and of Gyroscope in 2022. Note 31 details significant acquisitions by discontinued operations, specifically the cephalosporin antibiotics business from GSK by Sandoz in 2021. The goodwill arising out of these acquisitions is attributable to the synergies, the accounting for deferred tax liabilities on the acquired assets and the assembled workforce. In 2023, no goodwill (2022: nil; 2021: USD 107 million) is tax deductible.

26. Post-employment benefits for employees

Defined benefit plans

In addition to the legally required social security schemes, the Company has numerous independent pension and other post-employment benefit plans. In most cases, these plans are externally funded in entities that are legally separate from the Company. For certain Company entities, however, no independent plan assets exist for the pension and other post-employment benefit obligations of employees. In these cases, the related unfunded liability is included in the balance sheet. The defined benefit obligations (DBOs) of all major pension and other post-employment benefit plans are reappraised annually by independent actuaries using the projected unit credit method. Plan assets are recognized at fair value.

The major plans are based in Switzerland, the United States, the United Kingdom, Germany and Japan, which represent 96% of the Company’s total DBO for pension plans. Details of the plans in the two most significant countries, Switzerland and the United States, which represent 84% of the Company’s total DBO for post-employment benefit plans, are provided below.

Swiss-based pension plans represent the most significant portion of the Company’s total DBO and plan assets. For the active insured members the benefits are linked to contributions paid into the plan, interest credits granted and conversion rates applied.

All benefits granted under Swiss-based pension plans are vested, and Swiss legislation prescribes that the employer has to contribute a fixed percentage of an employee’s pay to an external pension fund. Additional employer contributions may be required whenever the plan’s statutory funding ratio falls below a certain level. The employee also contributes to the plan. The pension plans are run by separate legal entities, each governed by a board of trustees that – for the principal plans – consists of representatives nominated by Novartis and the

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active insured employees. The boards of trustees are responsible for the plan design and asset investment strategy.

The United States pension plans represent the second-largest component of the Company’s total DBO and plan assets. The principal plans (Qualified Plans) are funded, whereas plans providing additional benefits for executives (Restoration Plans) are unfunded. Employer contributions are required for Qualified Plans whenever the statutory funding ratio falls below a certain level.

Furthermore, in certain countries, employees are covered under other post-employment benefit plans and post-retirement medical plans.

In the US, other post-employment benefit plans consist primarily of post-employment healthcare benefits, which have been closed to new members since 2015. Part of the costs of these plans is reimbursable under the Medicare Prescription Drug, Improvement, and Modernization Act of 2003. There is no statutory funding requirement for these plans. The Company is funding these plans to the extent that it is tax efficient.

The following tables are a summary of the funded and unfunded defined benefit obligation for pension and other post-employment benefit plans of employees at December 31, 2023 and 2022:

		Other post-employment benefit plans
( millions)	2022	2023	2022
Benefit obligation at January 1	23 583	422	560
Benefit obligations related to discontinued operations 1		-26
Current service cost	348	9	12
Interest cost	249	22	17
Past service costs and settlements	-40		1
Administrative expenses	23
Remeasurement gains arising from changes in financial assumptions 2	-5 046	13	-94
Remeasurement (gains)/losses arising from changes in demographic assumptions	-53	-14
Experience-related remeasurement losses/(gains)	199	44	-28
Currency translation effects	-650	4	-2
Benefit payments	-1 253	-34	-44
Contributions of employees	174
Effect of acquisitions, divestments or transfers	-1
Benefit obligation at December 31	17 533	440	422
Fair value of plan assets at January 1	22 420	60	73
Plan assets related to discontinued operations 1
Interest income	220	2	2
Return on plan assets excluding interest income	-2 500	10	-12
Currency translation effects	-539
Novartis contributions	424	33	41
Contributions of employees	174
Settlements	-1
Benefit payments	-1 253	-34	-44
Effect of acquisitions, divestments or transfers
Fair value of plan assets at December 31	18 945	71	60
Funded status	1 412	-369	-362
Limitation on recognition of fund surplus at January 1	-62
Limitation on recognition of fund surplus at January 1, related to discontinued operations
Change in limitation on recognition of fund surplus	-2 504
Currency translation effects	-76
Interest income on limitation of fund surplus	-2
Limitation on recognition of fund surplus at December 31 3	-2 644
Net liability in the balance sheet at December 31	-1 232	-369	-362
1  Represents the benefit obligation, respectively the plan assets at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued operations.
2  The remeasurement gains arising from changes in financial assumptions is driven mainly by changes in the actuarial discount rates used to determine the benefit obligation.
3  The most significant pension plans where the asset ceiling was required to be applied were in Switzerland and amounted to 2 112 million (2022: 2 587 million).

All values are in US Dollars.

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The reconciliation of the net liability from January 1 to December 31 is as follows:

	Pension plans		Other post-employment benefit plans
(USD millions)	2023	2022	2023	2022
Net liability at January 1	-1 232	-1 225	-362	-487
Less: net liability related to discontinued operations^1^	149		26
Current service cost	-260	-348	-9	-12
Net interest expense	-50	-31	-20	-15
Administrative expenses	-25	-23
Past service costs and settlements	-63	39		-1
Remeasurements	-895	2 400	-33	110
Currency translation effects	11	35	-4	2
Novartis contributions	408	424	33	41
Effect of acquisitions, divestments or transfers	-53	1
Change in limitation on recognition of fund surplus	740	-2 504
Net liability at December 31	-1 270	-1 232	-369	-362
Amounts recognized in the consolidated balance sheet
Prepaid benefit cost	545	491
Accrued benefit liability	-1 815	-1 723	-369	-362
^1^ Represents the net liability at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued operations

The following table shows a breakdown of the DBO for pension plans by geography and type of member, and the breakdown of plan assets into the geographical locations in which they are held:

	2023				2022
(USD millions)	Switzerland	United<br> States	Rest of<br> the world	Total	Switzerland	United<br> States	Rest of<br> the world	Total
Benefit obligation at December 31	13 453	2 574	3 010	19 037	11 824	2 746	2 963	17 533
Thereof unfunded		538	390	928		556	363	919
By type of member
Active	5 557	389	847	6 793	4 799	431	931	6 161
Deferred pensioners		770	912	1 682		830	861	1 691
Pensioners	7 896	1 415	1 251	10 562	7 025	1 485	1 171	9 681
Fair value of plan assets at December 31	15 892	1 835	2 207	19 934	14 701	1 978	2 266	18 945
Funded status	2 439	-739	-803	897	2 877	-768	-697	1 412

The following table shows a breakdown of the DBO for other post-employment benefit plans by geography and type of member, and the breakdown of plan assets into the geographical locations in which they are held:

	2023			2022
(USD millions)	United<br> States	Rest of<br> the world	Total	United<br> States	Rest of<br> the world	Total
Benefit obligation at December 31	356	84	440	346	76	422
Thereof unfunded	285	84	369	286	76	362
By type of member
Active	30	10	40	30	18	48
Deferred pensioners	1	0	1	8	0	8
Pensioners	325	74	399	308	58	366
Fair value of plan assets at December 31	71	0	71	60	0	60
Funded status	-285	-84	-369	-286	-76	-362

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The following table shows the principal weighted average actuarial assumptions used for calculating defined benefit plans and other post-employment benefits of employees:

	Pension plans			Other post-employment benefit plans
	2023	2022	2021	2023	2022	2021
Weighted average assumptions used to determine benefit obligations at December 31
Discount rate	2.2%	3.0%	0.9%	5.5%	6.3%	3.3%
Expected rate of pension increase	0.3%	0.4%	0.5%
Expected rate of salary increase	3.0%	2.9%	2.7%
Interest on savings account	1.3%	2.2%	0.5%
Current average life expectancy for a 65-year-old male in years	22	22	22	21	21	21
Current average life expectancy for a 65-year-old female in years	24	24	24	23	23	23

Changes in the aforementioned actuarial assumptions can result in significant volatility in the accounting for the Company’s pension plans in the consolidated financial statements. This can result in substantial changes in the Company’s other comprehensive income, long-term liabilities and prepaid pension assets.

The DBO is significantly impacted by assumptions regarding the rate that is used to discount the actuarially determined post-employment benefit liability. This rate is based on yields of high-quality corporate bonds in the country of the plan. Decreasing corporate bond yields decrease the discount rate, so that the DBO increases and the funded status decreases.

In Switzerland, an increase in the DBO due to lower discount rates is slightly offset by lower future benefits expected to be paid on the employee’s savings account where the assumption on interest accrued often changes broadly in line with the discount rate.

The impact of decreasing interest rates on a plan’s assets is more difficult to predict. A significant part of the plan assets is invested in bonds. Bond values usually rise when interest rates decrease and may therefore partially compensate for the decrease in the funded status. Furthermore, pension assets also include significant holdings of equity instruments. Share prices usually tend to rise when interest rates decrease and therefore often counteract the negative impact of the rising defined benefit obligation on the funded status (although the correlation of interest rates with equities is not as strong as with bonds, especially in the short term).

The expected rate for pension increases significantly affects the DBO of most plans in Switzerland, Germany and the United Kingdom. Such pension increases also decrease the funded status, although there is no strong correlation between the value of the plan assets and pension/inflation increases.

Assumptions regarding life expectancy significantly impact the DBO. An increase in longevity increases the DBO. There is no offsetting impact from the plan assets, as no longevity bonds or swaps are held by the pension funds. The Company’s actuaries use mortality tables that take into account historic patterns and expected changes, such as further increases in longevity.

In 2023 the mortality assumptions used for the pension plans in Switzerland were based on BVG 2020 tables with future improvements based on the Continuous Mortality Investigation (‘CMI’) model (2022: based on the BVG generational model). For the pension and postretirement medical benefit plans in the US, the Society of Actuaries Pri-2012 mortality tables with generational improvements based on Scale MP-2021 are used.

The following table shows the sensitivity of the defined benefit pension obligation to the principal actuarial assumptions for the major plans in Switzerland, the United States, the United Kingdom, Germany and Japan on an aggregated basis:

(USD millions)	Change in 2023 <br> year-end defined <br> benefit pension <br> obligation	Change in 2022 <br> year-end defined <br> benefit pension <br> obligation
25 basis point increase in discount rate	-528	-466
25 basis point decrease in discount rate	557	491
One-year increase in life expectancy	644	535
25 basis point increase in rate of pension increase	366	316
25 basis point decrease in rate of pension increase	-61	-63
25 basis point increase of interest on savings account	43	38
25 basis point decrease of interest on savings account	-42	-37
25 basis point increase in rate of salary increase	41	37
25 basis point decrease in rate of salary increase	-42	-37

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The healthcare cost trend rate assumptions used for other post-employment benefits are as follows:

	2023	2022	2021
Healthcare cost trend rate assumed for next year	6.3%	6.5%	6.0%
Rate to which the cost trend rate is assumed to decline	4.5%	4.5%	4.5%
Year that the rate reaches the ultimate trend rate	2031	2031	2028

The following table shows the weighted average plan asset allocation of funded defined benefit pension plans at December 31, 2023 and 2022:

	Pension plans
(as a percentage)	Long-term <br> target <br> minimum	Long-term <br> target <br> maximum	2023	2022
Equity securities	15	40	25	24
Debt securities	20	60	34	31
Real estate	5	30	19	21
Alternative investments	0	20	17	18
Cash and other investments	0	15	5	6
Total			100	100

Cash and most of the equity and debt securities have a quoted market price in an active market. Real estate and alternative investments, which include hedge fund, private equity, infrastructure and commodity investments, usually have a quoted market price or a regularly updated net asset value.

The strategic allocation of assets of the different pension plans is determined with the objective of achieving an investment return that, together with the contributions paid by the Company and its employees, is sufficient to maintain reasonable control over the various funding risks of the plans. Based upon local requirement, the market and economic environments, actual asset allocations may be permitted to deviate from policy targets. The asset allocation currently includes investments in shares of Novartis AG as per the below table:

	December 31, <br> 2023	December 31, <br> 2022
Investment in shares of Novartis AG
Number of shares (in millions)	2.3	2.3
Market value (in USD billions)	0.2	0.2

The weighted average duration of the defined benefit pension obligation is 12.3 years (2022: 11.8 years).

The Company’s ordinary contribution to the various pension plans is based on the rules of each plan. Additional contributions are made whenever this is required by statute or law (i.e., usually when statutory funding levels fall below predetermined thresholds). The only significant plan that requires additional funding is in Germany.

The expected future cash flows over the upcoming 10 years in respect of pension and other post-employment benefit plans at December 31, 2023, were as follows:

(USD millions)	Pension plans	Other post-<br> employment<br> benefit plans
Company contributions
2024 (estimated)	388	39
Expected future benefit payments
2024	1 434	40
2025	1 317	40
2026	1 186	40
2027	1 159	39
2028	1 132	38
2029–2033	5 316	175

Defined contribution plans

In many subsidiaries, employees are covered by defined contribution plans. Contributions charged to the consolidated income statement for continuing operations for the defined contribution plans were:

(USD millions)	2023	2022	2021
Contributions for defined contribution plans continuing operations	477	483	484

The Company’s total personnel costs for continuing operations amounted to USD 12.7 billion in 2023 (2022: USD 13.1 billion).

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27. Equity-based participation plans for employees

The equity-based compensation expense from continuing operations related to all equity-based participation plans and the liabilities arising from equity-based payment transactions were as follows:

(USD millions)	2023	2022	2021
Expense related to equity-based participation plans	1 142	982	910
Liabilities arising from equity-based payment transactions	322	235	253

Equity-based participation plans can be separated into the following plans:

Annual Incentive

The Annual Incentive for the Novartis Company CEO and other Executive Committee members (ECN) is paid 50% in cash and 50% in Novartis restricted shares (RSs) or restricted share units (RSUs). For a select portion of Novartis management leadership team, the Annual Incentive is paid 70% in cash and 30% in RSs or RSUs. Both the ECN and a select portion of Novartis management leadership team can opt to invest up to the maximum cash portion of their Annual Incentive to receive further RSs or RSUs. Any cash is paid out during March in the year following the end of the performance period, and the shares are granted during January in the year following the end of the performance period.

Employee share savings plan

Novartis operates employee share savings and purchase plans in certain countries. The most significant is described below.

The Employee Share Ownership Plan (ESOP) in Switzerland offers participants to choose to receive their Annual Incentive (i) 100% in shares, (ii) 50% in shares and 50% in cash, or (iii) 100% in cash. After the expiration of a three-year holding period for Novartis shares invested under the ESOP, participants receive one matching share for every two invested shares. Employees eligible for the equity plan “Select” are not eligible to receive ESOP matching shares. The Novartis Company CEO, the other Executive Committee members and a select portion of Novartis management leadership team are not eligible to participate in this plan.

Novartis Employee share purchase plan

In 2022 Novartis started to grant shares under the Employee Share Purchase Plan (ESPP). The ESPP enables employees to voluntarily purchase Novartis AG shares through payroll deductions at a discounted price. While the ESPP is global in scope, the first phase covers employees in North America (the US, Puerto Rico and Canada). Other countries employees will become eligible to participate in the ESPP commencing in 2024, according to a multi-year phased implementation plan. The shares are not subject to a vesting period.

Novartis equity plan “Select”

The equity plan “Select” is a global equity incentive plan under which eligible employees may annually be awarded a grant subject to a three-year, and for eligible employees of selected Company units a four-year, staggered vesting period. No awards are granted for performance ratings below a certain threshold. Executive Committee members and a select portion of Novartis management leadership team are not eligible to participate in the equity plan “Select.”

The equity plan “Select” currently allows participants employed and living in Switzerland to choose the form of their equity compensation in RSs or RSUs. In all other jurisdictions, RSs or RSUs are granted unilaterally. Until 2013, participants could also choose to receive part or the entire grant in the form of tradable share options.

All tradable share options expired on their 10^th^ anniversary from the grant date, which was in January 2023. Each tradable share option entitled the holder to purchase after vesting (and before the 10^th^ anniversary from the grant date) one Novartis share at a stated exercise price that equals the closing market price of the underlying share at the grant date. As the exercise price did not reflect the decrease in the Novartis share due to the Alcon spin, one-fifth of an Alcon share was also awarded to the option holder upon exercise.

Options under Novartis equity plan “Select” outside North America

The following table shows the activity associated with the share options during the period. The weighted average prices in the table below are translated from Swiss francs into USD at historical rates.

	2023		2022
	Options<br> (millions)	Weighted<br> average <br> exercise <br> price<br> (USD)	Options<br> (millions)	Weighted<br> average <br> exercise <br> price<br> (USD)
Options outstanding at January 1	0.5	66.0	1.7	63.6
Sold or exercised	-0.5	66.0	-1.2	62.6
Outstanding at December 31	0.0		0.5	66.0
Exercisable at December 31	0.0		0.5	66.0

All share options were granted at an exercise price that was equal to the closing market price of the Company’s shares at the grant date. The weighted average share price at the dates of sale or exercise was USD 92.61.

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Options under Novartis equity plan “Select” for North America

The following table shows the activity associated with the ADR options during the period:

	2023		2022
	ADR<br> options<br> (millions)	Weighted<br> average <br> exercise <br> price<br> (USD)	ADR<br> options<br> (millions)	Weighted<br> average <br> exercise <br> price<br> (USD)
Options outstanding at January 1	1.1	66.1	4.0	64.4
Sold or exercised	-1.1	66.1	-2.9	63.7
Outstanding at December 31	0.0		1.1	66.1
Exercisable at December 31	0.0		1.1	66.1

All ADR options were granted at an exercise price that was equal to the closing market price of the ADRs at the grant date. The weighted average share price at the dates of sale or exercise was USD 91.68.

Long-Term Performance Plan

The Long-Term Performance Plan (LTPP) is an equity plan for the ECN, a select portion of Novartis management leadership team and employees of Company units with specific targets.

Participants are granted a target number of performance share units (PSUs) at the beginning of every performance period, which are converted into unrestricted Novartis shares after the performance period. The actual payout depends on the achievement of the performance measures and ranges between 0% and 200% of the granted amount. PSUs granted under the LTPP do not carry voting rights, but do carry dividend equivalents that are paid in unrestricted Novartis shares at the end of the performance period.

The LTPP awards are subject to a three-year performance and vesting period. The performance criteria for the ECN are based on both Novartis internal performance metrics and variables that can be observed in the market, which is the ranking of the Novartis total shareholder return (TSR) relative to a global healthcare peer group of 14 other companies, over rolling three-year performance periods. Only ECN members, as from performance cycle 2023, are subject to the TSR performance metric under the LTPP.

TSR for Novartis and the peer companies is calculated as the change in the company share price, which is translated to USD at the relevant exchange rate, including the reinvestment return of dividends, over the three-year performance period. The calculation is based on Bloomberg standard published TSR data, which is publicly available. The position of Novartis in the peer group determines the payout range based on a payout matrix.

Other share awards

Selected employees may exceptionally receive Special Share Awards of RSs or RSUs. These Special Share Awards provide an opportunity to reward outstanding achievements or exceptional performance, and aim to retain key contributors. They are based on a formal internal selection process, through which the individual performance of each candidate is thoroughly assessed at several management levels. Special Share Awards had a minimum three-year vesting period before 2021 and mainly three years thereafter. In exceptional circumstances, Special Share Awards may be awarded to attract special expertise and new talents to the organization. Externally recruited ECN members are eligible only for special awards that are “buyouts” in the case that it is to replace equity forfeited with their former employer. The equity is provided on a like-for-like basis as the forfeited equity, at the same value with the same vesting period, and with or without a performance condition.

Worldwide, employees at different levels in the organization were awarded RSs and RSUs in 2023, 2022 and 2021.

In addition, in 2023, 2022 and 2021, Board members received unrestricted shares as part of their regular compensation.

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Summary of share grants

The table below provides a summary of share grants (shares, RSs, RSUs and PSUs) for all plans. At the Sandoz Distribution date, all RSU and PSU holders, who were not entitled to the dividend in kind in the form of Sandoz Group AG shares received keep whole awards in Novartis AG shares to compensate for the loss of the Sandoz value from their Novartis AG shares. These keep whole awards were accounted for as a modification, which did not significantly change the fair value of the original grant. The change in fair value was measured by comparing the fair value of the grant before the spin against the fair value of the grant plus keep whole award right after spin.

	2023		2022
	Number<br> of shares<br> in millions	Weighted <br> average fair<br> value at grant<br> date in USD	Number<br> of shares<br> in millions	Weighted <br> average fair<br> value at grant<br> date in USD
Annual Incentive
– RSU	0.3	74.2	0.2	74.7
– Restricted shares	0.1	92.3	0.1	85.0
Share savings plans
– RSU	0.4	71.3	0.4	75.0
– Shares	1.0	92.3	1.2	85.0
Novartis Employee Share Purchase Plan	0.9	96.2	0.8	82.8
Select North America (RSU)	4.5	73.9	4.9	74.5
Select outside North America
– RSU	1.9	73.3	2.0	75.1
– Restricted shares	0.6	92.3	0.7	85.0
Long-Term Performance Plan (PSU)	1.8	80.6	1.7	82.0
Other share awards
– RSU	0.6	75.9	0.5	76.3
– Restricted shares			0.1	86.9
– Shares			0.1	86.1

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28. Transactions with related parties

Roche Holding AG

Novartis has two agreements with Genentech, Inc., United States (Genentech), and one agreement with Spark Therapeutics, Inc., United States (Spark). Both companies are subsidiaries of Roche Holding AG (Roche), which were indirectly included in the consolidated financial statements using equity accounting until November 3, 2021, when Novartis entered into an agreement with Roche to divest its 33.3% of Roche voting shares. On December 6, 2021, Novartis divested its investment in Roche, on which date Roche ceased to be a related party (see Notes 2 and 5).

Lucentis

Novartis has licensed from Genentech/Roche the exclusive rights to develop and market Lucentis outside the United States for indications related to diseases of the eye. Novartis pays royalties on the net sales to third parties of Lucentis products outside the United States. From January 1, 2021 until December 6, 2021, Lucentis sales of USD 2.0 billion were recognized by Novartis.

Xolair

Novartis and Genentech/Roche are co-promoting Xolair in the United States, where Genentech/Roche records all sales. Novartis records sales outside the United States.

Novartis markets Xolair and records all sales and related costs outside the United States as well as co-promotion costs in the US. Genentech/Roche and Novartis share the resulting profits from sales in the United States, Europe and other countries, according to agreed profit-sharing percentages. From January 1, 2021 until December 6, 2021, Novartis recognized total sales of Xolair of USD 1.3 billion, including sales to Genentech/Roche for the United States market.

Luxturna

In 2018, Novartis entered into an exclusive licensing and commercialization agreement and a supply agreement with Spark for Luxturna outside the United States. The agreements include regulatory and sales milestones as well as royalties payable to Spark on ex-US sales. On December 17, 2019, Roche acquired Spark.

The net income for royalties, cost sharing and profit sharing arising out of the Lucentis, Xolair and Luxturna agreements with Roche totaled USD 188 million from January 1, 2021 until December 6, 2021.

Furthermore, Novartis has several patent license, supply and distribution agreements with Roche.

Novartis Pension Fund

In 2018, a Company subsidiary provided an uncommitted overnight credit facility to the Novartis Pension Fund, Switzerland, for up to USD 500 million with interest at the US Federal Funds Rate. This credit facility was not utilized during the current and past years.

Executive Officers and Non-Executive Directors compensation

As at December 31, 2023, there were 11 Executive Committee members (“Executive Officers”). During 2023, 1 Executive Officer stepped down.

As at December 31, 2022, there were 11 Executive Officers. During 2022, 5 Executive Officers stepped down.

As at December 31, 2021, there were 12 Executive Officers. During 2021, 3 Executive Officers stepped down.

The total compensation for Executive Committee members and the 14 Non-Executive Directors (15 in 2022 and 14 in 2021) using the Company’s accounting policies for equity-based compensation and pension benefits was as follows:

	Executive Officers			Non-Executive Directors			Total
(USD millions)	2023	2022	2021	2023	2022	2021	2023	2022	2021
Cash and other compensation	18.0	25.0	20.3	4.9	4.6	4.7	22.9	29.6	25.0
Post-employment benefits	2.1	2.8	2.5				2.1	2.8	2.5
Equity-based compensation	62.2	42.6	37.3	5.0	4.8	5.2	67.2	47.4	42.5
Total	82.3	70.4	60.1	9.9	9.4	9.9	92.2	79.8	70.0

During 2023, there was an increase in the IFRS Accounting Standards compensation expense for Executive Officers compared to 2022, primarily driven by higher equity-based compensation, mainly due to higher realized and expected payouts on the achievement of the defined performance criteria, partly offset by lower cash

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and other compensation, due to lower accelerated expenses from stepped down Executive Officers compared to 2022.

During 2022, there was an increase in the IFRS Accounting Standards compensation expense for Executive Officers compared to 2021, driven by accelerated expenses (cash and other compensation and equity-based compensation) required under IFRS Accounting Standards for the executive members who stepped down in 2022, in accordance with their employment contracts and the relevant incentive plan terms, compared to the accelerated expenses due to executive officers who stepped down in 2021.

During 2021, the IFRS Accounting Standards compensation expense decreased due to one role less at the ECN, and lower cash and equity compensation attributable to former ECN members, partially offset by the net increase of the IFRS Accounting Standards compensation expense of current ECN members.

The Annual Incentive award, which is fully included in equity-based compensation even when paid out in cash, is granted in January in the year following the reporting period.

The disclosures on Board and executive compensation required by the Swiss Code of Obligations and in accordance with the Swiss Ordinance against Excessive Compensation in Stock Exchange Listed Companies are shown in the Compensation Report of the Company.

Transactions with a former member of the Board of Directors

Dr. Alex Krauer, was an Honorary Chairman of Novartis and was entitled to an amount of CHF 60 000 for annual periods from one AGM to the next. This amount was fixed in 1998 upon his departure from the Board in 1999. The last payment under this arrangement was in 2021.

29. Commitments and contingent liabilities

Research and development commitments

The Company has entered into long-term research and development agreements with various institutions related to intangible assets. These agreements provide for potential milestone payments by Novartis, which are dependent on successful clinical development, or meeting specified sales targets, or other conditions that are specified in the agreements.

As of December 31, 2023, the amount and estimated timing of the Company’s commitments to make payments under those agreements, which are shown without risk adjustment and on an undiscounted basis, were as follows:

(USD millions)	2023
2024	202
2025	269
2026	493
2027	316
2028	597
Thereafter	4 206
Total	6 083

Commitments for capital calls

The Company holds investments in funds in which it has committed to invest further upon future capital calls. As at December 31, 2023, the total uncalled capital commitments for the Company’s investments in funds amounts to USD 80 million. Note 30 contains further information on the Company’s investments in funds.

Other commitments

The Company has entered into various purchase commitments for services and materials as well as for equipment in the ordinary course of business. These commitments are generally entered into at current market prices and reflect normal business operations. For the disclosure of property, plant and equipment purchase commitments, see Note 10. The Company routinely acquires businesses and interests in intellectual property focused on key disease areas and indications that the Company expects to be growth drivers in the future. The Company has commitments through to the date the consolidated financial statements were approved for publication (see Note 32), totaling USD 3.8 billion (of which USD 3.4 billion may become payable in 2024) related to the acquisition of businesses and interests in intellectual property, the majority of which is subject to the satisfaction of conditions precedent in the arrangements.

Guarantees issued

The Company has issued guarantees to third parties in the ordinary course of business, mostly for tax, customs or other governmental agencies.

Contingent liabilities

Novartis companies have to observe the laws, government orders and regulations of the country in which they operate.

A number of Novartis companies are, and will likely continue to be, subject to various legal proceedings and investigations that arise from time to time, including

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proceedings pertaining to: pricing; bribery and corruption; trade regulation and embargo legislation; product liability; commercial disputes; employment and wrongful discharge; antitrust and competition; securities; government benefit programs; reimbursement; rebates; healthcare fraud; sales and marketing practices; insider trading; occupational health and safety; environmental regulations; tax; cyber and data security; use of technologies, including AI; data privacy; regulatory interactions; disclosure compliance; and intellectual property. As a result, the Company may become subject to substantial liabilities that may not be covered by insurance and that could affect our business, financial position and reputation. While Novartis does not believe that any of these legal proceedings will have a material adverse effect on its financial position, litigation is inherently unpredictable and large judgments sometimes occur. Consequently, we may in the future incur judgments that could involve large payments, including the potential repayment of amounts allegedly obtained improperly, and other penalties, including treble damages, any of which could have a material adverse effect on our results of operations or cash flow.

Governments and regulatory authorities around the world have been stepping up their compliance and law enforcement activities in recent years in key areas, including marketing practices, pricing, corruption, trade restrictions, embargo legislation, insider trading, antitrust, cyber security and data privacy. Furthermore, when a government or regulatory authority undertakes an investigation, it is not uncommon for other governments or regulators to undertake investigations regarding the same or similar matters. Responding to such investigations is costly and requires an increasing amount of management’s time and attention. In addition, such investigations may affect our reputation, create a risk of potential exclusion from government reimbursement programs in the United States and other countries, and lead to (or arise from) litigation. These factors have contributed to decisions by Novartis and other companies in the healthcare industry, when deemed in their interest, to enter into settlement agreements with governmental authorities around the world prior to any formal decision by the authorities or a court. These government settlements have involved and may in the future involve large cash payments, sometimes in the hundreds of millions of dollars or more, including the potential repayment of amounts allegedly obtained improperly and other penalties, including treble damages. In addition, settlements of government healthcare fraud cases and antitrust cases often require companies to enter into corporate integrity agreements, which are intended to regulate company behavior for a period of years. Our affiliate Novartis Corporation is party to such an agreement, which will expire in 2025. In addition, matters underlying governmental investigations and settlements may be the subject of separate private litigation.

While provisions have been made for probable outflows of economic resources, which management deems to be reasonable or appropriate, there are uncertainties connected with these estimates.

Note 21 contains additional information on these matters.

A number of Novartis companies are involved in legal proceedings concerning intellectual property rights. The inherent unpredictability of such proceedings means that there can be no assurances as to their ultimate outcome. A negative result in any such proceeding could potentially adversely affect the ability of certain Novartis companies to sell their products, or require the payment of substantial damages or royalties. The timing and the outcome of legal proceedings and their potential financial effect are not predictable.

In the opinion of management, however, the outcome of these actions will not materially affect the Company’s financial position but could be material to the results of operations or cash flow in a given period.

The Company’s potential environmental remediation liability is assessed based on a risk assessment and investigation of the various sites identified by the Company as at risk for environmental remediation exposure. The Company’s future remediation expenses are affected by a number of uncertainties. These uncertainties include, but are not limited to, the method and extent of remediation, the percentage of material attributable to the Company at the remediation sites relative to that attributable to other parties, and the financial capabilities of the other potentially responsible parties.

Note 21 contains additional information on environmental liabilities.

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30. Financial instruments – additional disclosures

The following tables show the carrying values of financial instruments by measurement category as at December 31, 2023 and 2022. Except for straight bonds (see Note 20), the carrying values are equal to, or a reasonable approximation of, the fair values.

		2023
(USD millions)	Note	Financial<br> instruments at<br> amortized<br> costs	Financial<br> instruments at<br> fair value<br> through other<br> comprehensive<br> income	Financial<br> instruments at<br> fair value<br> through the<br> consolidated<br> income<br> statement	Other<br> financial<br> liabilities at<br> amortized<br> costs
Cash and cash equivalents	17	13 343	50
Time deposits and short-term investments with original maturity more than 90 days	17	569
Trade receivables	16	7 107
Other receivables and current assets	18	1 127	124	1
Long-term financial investments - equity securities	14		1 086	317
Long-term financial investments - debt securities	14		29
Long-term financial investments - fund investments	14			190
Long-term loans, advances, security deposits and other long-term receivables	14	432
Associated companies at fair value through profit and loss				101
Derivative financial instruments	17			355
Contingent consideration receivables	14/18			618
Total financial assets		22 578	1 289	1 582
Bank and other short-term financial debt	22	624
Commercial paper	22	3 269
Straight bonds	20	20 585
Long-term liabilities to banks and other financial institutions	20	42
Trade payables		4 926
Contingent consideration liabilities (see Note 21/23) and other financial liabilities				491
Derivative financial instruments	22			91
Lease liabilities	11				1 828
Total financial liabilities		29 446		582	1 828

F-59

		2022
(USD millions)	Note	Financial<br> instruments at<br> amortized<br> costs	Financial<br> instruments at<br> fair value<br> through other<br> comprehensive<br> income	Financial<br> instruments at<br> fair value<br> through the<br> consolidated<br> income<br> statement	Other<br> financial<br> liabilities at<br> amortized<br> costs
Cash and cash equivalents	17	7 517
Time deposits and short-term investments with original maturity more than 90 days	17	11 089
Trade receivables	16	8 066
Other receivables and current assets	18	958
Marketable securities - debt securities	17		9
Long-term financial investments - equity securities	14		828	317
Long-term financial investments - debt securities	14		37
Long-term financial investments - fund investments	14			281
Long-term loans, advances, security deposits and other long-term receivables	14	341
Associated companies at fair value through profit and loss				129
Derivative financial instruments	17			204
Contingent consideration receivables	14			650
Total financial assets		27 971	874	1 581
Bank and other short-term financial debt	22	863
Commercial paper	22	2 772
Straight bonds	20	22 341
Long-term liabilities to banks and other financial institutions	20	144
Trade payables		5 146
Contingent consideration liabilities (see Note 21/23) and other financial liabilities				1 067
Derivative financial instruments	22			55
Lease liabilities	11				1 789
Total financial liabilities		31 266		1 122	1 789

Derivative financial instruments

The following tables show the contract or underlying principal amounts and fair values of derivative financial instruments analyzed by type of contracts as at December 31, 2023 and 2022. Contract or underlying principal amounts indicate the gross volume of business outstanding at the consolidated balance sheet date and do not represent amounts at risk. The fair values are determined by reference to market prices or standard pricing models that use observable market inputs as at December 31, 2023 and 2022.

	Contract or underlying principal amounts		Positive fair values		Negative fair values
(USD millions)	2023	2022	2023	2022	2023	2022
Forward foreign exchange rate contracts	11 944	7 907	335	189	-91	-41
Commodity purchase contracts	76	97	20	15
Options on equity securities		39				-14
Total derivative financial instruments included in marketable securities and in current financial debts	12 020	8 043	355	204	-91	-55

The following table shows a breakdown by currency of the contract or underlying principal amounts of derivative financial instruments as at December 31, 2023 and 2022:

	2023
(USD millions)	EUR	USD	Other	Total
Forward foreign exchange rate contracts	1 629	8 980	1 335	11 944
Commodity purchase contracts	61	15		76
Total derivative financial instruments	1 690	8 995	1 335	12 020

F-60

	2022
(USD millions)	EUR	USD	Other	Total
Forward foreign exchange rate contracts	687	5 659	1 561	7 907
Commodity purchase contracts	80	17		97
Options on equity securities		39		39
Total derivative financial instruments	767	5 715	1 561	8 043

Derivative financial instruments effective for hedge accounting purposes

At the end of 2023 and 2022, there were no open hedging instruments for anticipated transactions.

Fair value by hierarchy

As required by the IFRS Accounting Standards, financial assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. There are three hierarchical levels, based on increasing subjectivity associated with the inputs to derive fair valuation for these assets and liabilities, which are as follows:

The assets carried at Level 1 fair value are equity and debt securities as well as fund investments listed in active markets.

The assets generally included in Level 2 fair value hierarchy are derivatives, and certain debt securities. The liabilities generally included in this fair value hierarchy consist of derivatives. These are valued using corroborated market data.

Level 3 inputs are unobservable for the asset or liability. The assets generally included in Level 3 fair value hierarchy are various investments in funds and unquoted equity security investments. Contingent consideration and other financial liabilities carried at fair value are included in this category.

	2023
(USD millions)	Level 1	Level 2	Level 3	Total
Financial assets
Cash and cash equivalents
Debt securities^1^	50			50
Total cash and cash equivalents at fair value	50			50
Marketable securities
Derivative financial instruments		355		355
Total marketable securities and derivative financial instruments at fair value		355		355
Fund investments and equity securities current	94		31	125
Current contingent consideration receivables			65	65
Long-term financial investments
Debt and equity securities	796	20	616	1 432
Fund investments	7		183	190
Non-current contingent consideration receivables			553	553
Total long-term financial investments at fair value	803	20	1 352	2 175
Associated companies at fair value through profit and loss			101	101
Financial liabilities
Current contingent consideration liabilities			-14	-14
Other financial liabilities current			-88	-88
Derivative financial instruments		-91		-91
Total current financial liabilities at fair values		-91	-102	-193
Non-current contingent consideration liabilities			-389	-389
Total non-current financial liabilities at fair value			-389	-389
^1^ Includes short-term highly rated government-backed debt securities, with an original maturity of three months or less

F-61

	2022
(USD millions)	Level 1	Level 2	Level 3	Total
Financial assets
Marketable securities and derivative financial instruments
Debt securities		9		9
Derivative financial instruments		204		204
Total marketable securities and derivative financial instruments at fair value		213		213
Current contingent consideration receivables			43	43
Long-term financial investments
Debt and equity securities	473	10	699	1 182
Fund investments	20		261	281
Non-current contingent consideration receivables			607	607
Total long-term financial investments at fair value	493	10	1 567	2 070
Associated companies at fair value through profit and loss			129	129
Financial liabilities
Contingent consideration liabilities			-131	-131
Derivative financial instruments		-55		-55
Total current financial liabilities at fair value		-55	-131	-186
Non-current contingent consideration liabilities			-704	-704
Other financial liabilities			-232	-232
Total non-current financial liabilities at fair value			-936	-936

The change in carrying values associated with Level 3 financial instruments, using significant unobservable inputs during the year ended December 31, is set forth below:

	2023
(USD millions)	Associated <br> companies at <br> fair value through<br> profit and loss	Fund<br> investments	Debt and<br> equity<br> securities	Contingent <br> consideration <br> receivables	Contingent <br> consideration <br> liabilities	Other<br> financial<br> liabilities
January 1	129	261	699	650	-835	-232
Impact from discontinued operations^1^					101
Fair value gains and other adjustments, including from divestments recognized in the consolidated income statement	4	1	11	48	552
Fair value losses (including impairments and amortizations) and other adjustments recognized in the consolidated income statement	-28	-48	-63	-31	-65	-9
Fair value adjustments recognized in the consolidated statement of comprehensive income, including currency translation effects	2	3	71		-32
Purchases	9	14	82		-180
Cash receipts and payments				-49	20	153
Disposals	-6	-47	-80		36
Reclassification	-9		-73
December 31	101	184	647	618	-403	-88
Total of fair value gains and losses recognized in the consolidated income statement for assets and liabilities held at December 31, 2023	-24	-47	-52	17	487	-9
^1^ Represents the carrying values associated with Level 3 financial instruments at January 1, 2023, related to the Sandoz business reported as discontinued operations. Notes 1, 2 and 31 provide disclosures related to discontinued operations.

F-62

	2022
(USD millions)	Associated <br> companies at <br> fair value through<br> profit and loss	Fund<br> investments	Debt and<br> equity<br> securities	Contingent <br> consideration <br> receivables	Contingent <br> consideration <br> liabilities	Other<br> financial<br> liabilities
January 1	192	338	617	641	-1 075	-19
Fair value gains and other adjustments, including from divestments recognized in the consolidated income statement		4	35	53	530	15
Fair value losses (including impairments and amortizations) and other adjustments recognized in the consolidated income statement	-63	-78	-84		-114	-18
Fair value adjustments recognized in the consolidated statement of comprehensive income, including currency translation effects			24		11
Purchases	4	11	160		-231	-238
Cash receipts and payments				-44	44	28
Disposals		-12	-13
Reclassification	-4	-2	-40
December 31	129	261	699	650	-835	-232
Total of fair value gains and losses recognized in the consolidated income statement for assets and liabilities held at December 31, 2022	-63	-74	-49	53	416	-3

During 2023, there were three individually immaterial transfers of equity securities from Level 3 to Level 1 for USD 63 million (2022: USD 44 million), due to the Initial Public Offering of the invested company or lift of certain restrictions.

Realized gains and losses associated with Level 3 long-term financial investments measured at fair value through the consolidated income statement are recorded in the consolidated income statement under “Other income” or “Other expense,” respectively. Realized gains and losses associated with Level 3 long-term financial investments measured at fair value through other comprehensive income are not recycled through the consolidated income statement but are instead reclassified to retained earnings.

During the year, the net loss and net gain recorded on associated companies, fund investments and long-term financial investments at fair value through profit and loss were USD 145 million and USD 39 million, respectively.

To determine the fair value of a contingent consideration, various unobservable inputs are used. A change in these inputs might result in a significantly higher or lower fair value measurement. The inputs used are, among others, the probability of success, sales forecast and assumptions regarding the discount rate and timing and different scenarios of triggering events. The inputs are interrelated. The significance and usage of these inputs to each contingent consideration may vary due to differences in the timing and triggering events for payments or in the nature of the asset related to the contingent consideration.

If the most significant parameters for the Level 3 input were to change by 10% positively or negatively, or where the probability of success (POS) is the most significant input parameter 10% were added or deducted from the applied probability of success, for contingent consideration payables and contingent consideration receivables, this would change the amounts recorded in the 2023 consolidated income statement by USD 57 million and USD 53 million, respectively.

Equity securities measured at fair value through other comprehensive income

Equity securities held as strategic investments, typically held outside the Novartis Venture Fund, are generally designated at date of acquisition as financial assets valued at fair value through other comprehensive income with no subsequent recycling through profit and loss. Except for the investment in Sandoz Group AG with a fair value of USD 595 million as at December 31, 2023, these are made up of individually non-significant investments. As at December 31, 2023, the Company holds 61 non-listed equity securities (December 31, 2022: 65) and 28 listed equity securities (December 31, 2022: 46) in this category with the following fair values:

(USD millions)	2023	2022
Listed equity securities	861	438
Non-listed equity securities	349	390
Total equity securities	1 210	828

During 2023 and 2022, dividends received from these equity securities were insignificant. In 2023, equity securities that were no longer considered strategic, with a fair value of USD 279 million (2022: USD 4 million), were sold, and the USD 1 million gain on disposal (2022: USD 4 million loss) was transferred from other comprehensive income to retained earnings (see Note 9).

F-63

Nature and extent of risks arising from financial instruments

Market risk

Market risk in general comprises currency risk, interest rate risk and price risk, such as commodity and equity prices. Novartis is exposed to market risk, primarily related to foreign currency exchange rates, interest rates and the market value of the investments. The Company actively monitors and seeks to reduce, where it deems it appropriate to do so, fluctuations in these exposures. It is the Company’s policy and practice to enter into a variety of derivative financial instruments to manage the volatility of these exposures. It does not enter into any financial transactions containing a risk that cannot be quantified at the time the transaction is concluded. In addition, it does not sell short assets it does not have, or does not know it will have, in the future. The Company only sells existing assets or enters into transactions and future transactions (in the case of anticipatory hedges) that it confidently expects it will have in the future, based on past experience.

Foreign currency exchange rate risk

The Company uses the US dollar as its reporting currency. As a result, the Company is exposed to foreign currency exchange movements, primarily in European, Japanese and emerging market currencies. Fluctuations in the exchange rates between the US dollar and other currencies can have a significant effect on both the Company’s results of operations, including reported sales and earnings, as well as on the reported value of our assets, liabilities and cash flows. This, in turn, may significantly affect the comparability of period-to-period results of operations.

Because our expenditures in Swiss francs are significantly higher than our revenues in Swiss francs, volatility in the value of the Swiss franc can have a significant impact on the reported value of our earnings, assets and liabilities, and the timing and extent of such volatility can be difficult to predict.

There is also a risk that certain countries could experience a devaluation of their currency. If this occurs, it could impact the effective prices we would be able to charge for our products and also have an adverse impact on both our consolidated income statement and balance sheet.

Subsidiaries whose functional currencies have experienced a cumulative inflation rate of more than 100% over the past three years apply the principles of IAS 29 “Financial reporting in Hyperinflationary Economies.” The hyperinflationary economies in which Novartis operates are Argentina, Venezuela and Turkey. Venezuela and Argentina were hyperinflationary for all periods presented, and Turkey became hyperinflationary effective May 1, 2022, requiring retroactive implementation of hyperinflation accounting as of January 1, 2022. The impacts of applying IAS 29 are recorded in “Other financial income and expense” and are presented in Note 6.

The Company manages its global currency exposure by engaging in hedging transactions where management deems appropriate. Novartis may enter into various contracts that reflect the changes in the value of foreign currency exchange rates to preserve the value of assets, commitments and anticipated transactions. Novartis also uses forward contracts and may enter into foreign currency option contracts to hedge.

Net investments in subsidiaries in foreign countries are long-term investments. Their fair value changes through movements of foreign currency exchange rates. The Company has designated a certain portion of its long-term euro-denominated straight bonds, maturing in 2028, as hedges of the translation risk arising on certain of these net investments in foreign operations with euro functional currency. As of December 31, 2023, long-term financial debt with a carrying amount of EUR 1.8 billion (USD 2.0 billion; December 31, 2022: USD 2.0 billion), has been designated as a hedge instrument. During 2023, USD 50 million of net of taxes unrealized losses (2022: USD 91 million income) was recognized in other comprehensive income and accumulated in currency translation effects in relation with this net investment hedge. The hedge remained effective since inception, and no amount was recognized in the consolidated income statement in 2022 and 2021. In 2023, USD 8 million of accumulated net investment hedge reserve was recognized in the consolidated income statement at the time of the Sandoz spin off.

Commodity price risk

The Company has only a very limited exposure to price risk related to anticipated purchases of certain commodities used as raw materials by the Company’s businesses. A change in those prices may alter the gross margin of a specific business, but generally by not more than 10% of the margin and thus below the Company’s risk management tolerance levels. Accordingly, the Company does not enter into significant commodity futures, forward or option contracts to manage fluctuations in prices of anticipated purchases.

Interest rate risk

The Company addresses its net exposure to interest rate risk mainly through the ratio of its fixed-rate financial debt to variable-rate financial debt contained in its total financial debt portfolio. To manage this mix, Novartis may enter into interest rate swap agreements, in which it exchanges periodic payments based on a notional amount and agreed-upon fixed and variable interest rates.

Equity risk

The Company may purchase equities as investments of its liquid funds. As a policy, it limits its holdings in an unrelated company to less than 5% of its liquid funds. Potential investments are thoroughly analyzed. Call options are written on equities that the Company owns, and put options are written on equities that the Company wants to buy and for which cash is available.

Credit risk

Credit risks arise from the possibility that customers may not be able to settle their obligations as agreed. To manage this risk, the Company periodically assesses country and customer credit risk, assigns individual credit limits, and takes actions to mitigate credit risk where appropriate (for example payment guarantees, credit insurance and factoring).

F-64

The provisions for expected credit losses for customers are based on a forward-looking expected credit loss, which includes possible default events on the trade receivables over the entire holding period of the trade receivables.

In measuring the expected credit losses, trade receivables are grouped based on shared credit risk characteristics (such as private versus public receivables) and days past due. In determining the expected credit loss rates, the Company considers current and forward-looking macroeconomic factors that may affect the ability of customers to settle the receivables, and historical loss rates for each category of customers.

The Company’s largest customer accounted for approximately 15% of net sales to third parties, and the second largest and third largest customers accounted for 13% and 8% of net sales to third parties, respectively (2022: 16%, 12% and 8%, respectively; 2021: 14%, 13% and 7%, respectively).

The highest amounts of trade receivables outstanding were for these same three customers and amounted to 17%, 13% and 8%, respectively, of the Company’s trade receivables as at December 31, 2023 (2022: 16%, 14% and 7%, respectively). There is no other significant concentration of customer credit risk.

Counterparty risk

Counterparty risk encompasses issuer risk on marketable securities and money market instruments; credit risk on cash, time deposits and derivatives; as well as settlement risk for different instruments. Issuer risk is reduced by only buying securities that are at least A- rated. Counterparty credit risk and settlement risk are reduced by a policy of entering into transactions with counterparties (banks or financial institutions) that feature a strong credit rating. Exposure to these risks is closely monitored and kept within predetermined parameters. The limits are regularly assessed and determined based upon credit analysis, including financial statement and capital adequacy ratio reviews. In addition, reverse repurchasing agreements are contracted, and Novartis has entered into credit support agreements with various banks for derivative transactions. To further reduce the settlement risk, the Company has implemented a multi-currency payment system, Continuous Linked Settlement (CLS), which provides multilateral netting (payment-versus-payment settlement) of cash flows from foreign exchange transactions.

The Company’s cash and cash equivalents are held with major regulated financial institutions, the three largest of which hold approximately 8.3%, 7.5% and 7.4%, respectively (2022: 13.2%, 9.2% and 6.8%, respectively).

The Company does not expect any losses from non-performance by these counterparties and does not have any significant grouping of exposures to financial sector or country risk.

Liquidity risk

Liquidity risk is defined as the risk that the Company could not be able to settle or meet its obligations associated with financial liabilities that are settled by delivering cash or another financial asset. Treasury is responsible for liquidity, funding and settlement management. In addition, liquidity and funding risks, and related processes and policies, are overseen by management. Novartis manages its liquidity risk on a consolidated basis according to business needs and tax, capital or regulatory considerations, if applicable, through numerous sources of financing in order to maintain flexibility.

Certain countries have legal or economic restrictions on the ability of subsidiaries to transfer funds to the Company in the form of cash dividends, loans or advances, but these restrictions do not have an impact on the ability of the Company to meet its cash obligations.

Management monitors the Company’s net debt or liquidity position through rolling forecasts on the basis of expected cash flows.

Novartis has two US commercial paper programs under which it can issue up to USD 9.0 billion in the aggregate of unsecured commercial paper notes. Novartis also has one Japanese commercial paper program under which it can issue up to JPY 150 billion (approximately USD 1.1 billion) of unsecured commercial paper notes. Commercial paper notes totaling USD 3.3 billion under these three programs were outstanding as per December 31, 2023 (2022: USD 2.8 billion). Novartis further has a committed credit facility of USD 6.0 billion. This credit facility is provided by a syndicate of banks and is intended to be used as a backstop for the US commercial paper programs. The facility matures in September 2025 and was undrawn as at December 31, 2023, and December 31, 2022.

F-65

The following table sets forth how management monitors net debt or liquidity based on details of the remaining contractual maturities of selected financial assets and liabilities as at December 31, 2023, and December 31, 2022:

	2023
(USD millions)	Due within <br> one month	Due later than <br> one month <br> but less than <br> three months	Due later than<br> three months <br> but less than <br> one year	Due later than <br> one year <br> but less than <br> five years	Due after <br> five years	Total
Current assets
Marketable securities, time deposits and short-term investments with original maturity more than 90 days and accrued interest	12	516	41			569
Commodities					111	111
Derivative financial instruments	24	310	1		20	355
Cash and cash equivalents	7 641	5 752				13 393
Total current financial assets	7 677	6 578	42		131	14 428
Non-current liabilities
Financial debt				-9 492	-8 944	-18 436
Financial debt - undiscounted				-9 522	-9 050	-18 572
Total non-current financial debt				-9 492	-8 944	-18 436
Current liabilities
Financial debt	-3 328	-372	-2 384			-6 084
Financial debt - undiscounted	-3 328	-372	-2 384			-6 084
Derivative financial instruments	-43	-39	-9			-91
Total current financial debt	-3 371	-411	-2 393			-6 175
Net debt	4 306	6 167	-2 351	-9 492	-8 813	-10 183			2022
---	---	---	---	---	---	---
(USD millions)	Due within <br> one month	Due later than <br> one month <br> but less than <br> three months	Due later than<br> three months <br> but less than <br> one year	Due later than <br> one year <br> but less than <br> five years	Due after <br> five years	Total
Current assets
Marketable securities, time deposits and short-term investments with original maturity more than 90 days and accrued interest	4 142	6 911	36		9	11 098
Commodities					111	111
Derivative financial instruments	23	147	19		15	204
Cash and cash equivalents	4 011	3 506				7 517
Total current financial assets	8 176	10 564	55		135	18 930
Non-current liabilities
Financial debt				-8 975	-11 269	-20 244
Financial debt - undiscounted				-9 002	-11 394	-20 396
Total non-current financial debt				-8 975	-11 269	-20 244
Current liabilities
Financial debt	-3 215	-146	-2 515			-5 876
Financial debt - undiscounted	-3 215	-146	-2 517			-5 878
Derivative financial instruments	-38	-13	-4			-55
Total current financial debt	-3 253	-159	-2 519			-5 931
Net debt	4 923	10 405	-2 464	-8 975	-11 134	-7 245

The carrying amounts of financial liabilities included in the above analysis are not materially different to the contractual amounts due on maturity. The positive and negative fair values on derivative financial instruments represent the net contractual amounts to be exchanged at maturity.

F-66

The Company’s contractual undiscounted potential cash flows from derivative financial instruments to be settled on a gross basis are as follows:

	2023
(USD millions)	Due within <br> one month	Due later than <br> one month <br> but less than <br> three months	Due later than<br> three months <br> but less than <br> one year	Total
Derivative financial instruments and accrued interest on derivative financial instruments
Potential outflows in various currencies - from financial derivative liabilities	-4 329	-6 604	-556	-11 489
Potential inflows in various currencies - from financial derivative assets	4 311	6 841	623	11 775			2022
---	---	---	---	---
(USD millions)	Due within <br> one month	Due later than <br> one month <br> but less than <br> three months	Due later than<br> three months <br> but less than <br> one year	Total
Derivative financial instruments and accrued interest on derivative financial instruments
Potential outflows in various currencies - from financial derivative liabilities	-2 029	-4 598	-316	-6 943
Potential inflows in various currencies - from financial derivative assets	2 029	4 712	321	7 062

Other contractual liabilities that are not part of management’s monitoring of the net debt or liquidity consist of the following items:

	2023
(USD millions)	Due within <br> three months	Due later than<br> three months <br> but less than <br> one year	Due later than <br> one year <br> but less than <br> five years	Due after <br> five years	Total
Contractual interest on non-current financial debt, including current portion	-64	-372	-1 258	-3 376	-5 070
Lease liabilities^1^	-65	-165	-635	-963	-1 828
Trade payables	-4 793	-133			-4 926
Contingent consideration liabilities		-14	-205	-184	-403
^1^ Note 11 provides additional disclosures related to lease liabilities.								2022
---	---	---	---	---	---
(USD millions)	Due within <br> three months	Due later than<br> three months <br> but less than <br> one year	Due later than <br> one year <br> but less than <br> five years	Due after <br> five years	Total
Contractual interest on non-current financial debt, including current portion	-64	-412	-1 432	-3 624	-5 532
Lease liabilities^1^	-71	-180	-616	-922	-1 789
Trade payables	-5 020	-126			-5 146
Contingent consideration liabilities	-16	-115	-437	-267	-835
^1^ Note 11 provides additional disclosures related to lease liabilities.

Capital risk management

Novartis strives to maintain a strong credit rating. In managing its capital, Novartis focuses on maintaining a strong balance sheet. As at December 31, 2023, Moody’s Investors Service rated the Company A1 for long-term maturities and P-1 for short-term maturities, and S&P Global Ratings rated the Company AA- for long-term maturities and A-1+ for short-term maturities.

Sensitivity analysis

The Company uses sensitivity analysis disclosures to provide quantitative information about market risks to which it is exposed.

The sensitivity analysis disclosures are in line with the Company’s financial risk management policy, and are based on a one-parameter risk model that considers a one-factor linear relationship between risk factors and exposures. They consider aggregated risk exposures arising from the most significant risk factors (currency risk, interest rate risk and equity price risk) and include

F-67

all financial assets and financial liabilities as set forth in the table on page F-59.

The disclosures below illustrate the potential impact on the Company’s consolidated financial statements as a result of hypothetical market movements in foreign currency exchange rates, interest rates and equity prices. The range of variables chosen reflects management’s view of changes that are reasonably possible over a one-year period.

Foreign currency exchange rate sensitivity

The Company uses the US dollar as its reporting currency. As a result, the Company is exposed to foreign currency exchange movements, primarily in European, Japanese and emerging market currencies, as well as in the Swiss franc. A strengthening (weakening) of the US dollar against these currencies as at December 31, 2023 and 2022 would have affected the measurement of financial instruments denominated in these foreign currencies. This analysis assumes that all other variables, in particular interest rates, remain constant. A hypothetical 5% increase or decrease in the foreign currency exchange rates against the US dollar would have impacted the Company’s consolidated income statement as presented below:

(USD millions)	2023	2022
5% increase in foreign currency exchange rates against USD	3	-6
5% decrease in foreign currency exchange rates against USD	-3	7

As of December 31, 2023, the Company designated EUR 1.8 billion (December 31, 2022: EUR 1.8 billion) of its long-term euro-denominated straight bonds as hedges of the translation risk arising on certain net investments in foreign operations with euro functional currency. This analysis assumes that all other variables, in particular interest rates, remain constant. A hypothetical 5% increase, or decrease, in the foreign currency exchange rates against the US dollar, without considering the translation effect of these net investments, would have impacted the Company’s consolidated equity as presented below:

(USD millions)	2023	2022
5% increase in foreign currency exchange rates against USD	97	93
5% decrease in foreign currency exchange rates against USD	-102	-98

Interest rate sensitivity

Our portfolio of fixed-income instruments as at December 31, 2023, was mainly composed of time deposits and debt securities.

Novartis uses duration models to approximate the possible change in the value of fixed-income instruments. Based on these models, management believes that a 100-basis point change in interest is deemed a reasonable possible change over a one-year period.

Based on exposures in 2023 and 2022, a hypothetical 100-basis point increase (decrease) in interest rates would not have resulted in a significant increase (decrease) in the fair values of the fixed-income instruments nor in a significant increase (decrease) of cash flows attributable to such instruments.

The vast majority of our outstanding financial debts are straight bonds with fixed interest rates and are therefore not affected by movements in interest rates.

Equity price sensitivity

Fund investments and equity securities held by the Novartis Venture Fund are valued at fair value through profit and loss. Equity securities held as strategic investments, typically held outside the Novartis Venture Fund, are generally designated at date of acquisition as financial assets valued at fair value through other comprehensive income with no subsequent recycling through profit and loss.

The fair value of these fund investments and equity securities was USD 1.8 billion as at December 31, 2023 (December 31, 2022: USD 1.6 billion). The fair values of these investments are impacted by the volatility of the stock market, valuation parameters applied (for non-listed equities) and changes in general economic factors. This analysis assumes that all other variables, in particular interest rates, remain constant. A hypothetical increase or decrease of 15% in the risk factors would have impacted the Company’s consolidated income statement as presented below:

(USD millions)	2023	2022
15% increase in equity prices	91	109
15% decrease in equity prices	-91	-109

A hypothetical increase or decrease of 15% in the risk factors would have impacted the Company’s consolidated equity as presented below:

(USD millions)	2023	2022
15% increase in equity prices	182	124
15% decrease in equity prices	-182	-124

F-68

31. Discontinued operations

Discontinued operations include the operational results from the Sandoz generic pharmaceuticals and biosimilars division and certain corporate activities attributable to the Sandoz business, as well as certain other expenses related to the spin-off. Included in 2023 is also the IFRS Accounting Standards non-cash, non-taxable net gain on the distribution of Sandoz Group AG to Novartis AG shareholders (refer to Notes 1 and 2 for further details).

The Sandoz business operates in the off-patent medicines segment and specializes in the development, manufacturing, and marketing of generic pharmaceuticals and biosimilars. The Sandoz business is organized globally into two franchises: Generics and Biosimilars.

Net income from discontinued operations

(USD millions)	2023^1^	2022	2021
Net sales to third parties from discontinued operations	7 128	9 160	9 650
Sales to continuing segments	300	212	184
Net sales from discontinued operations	7 428	9 372	9 834
Other revenues	19	28	58
Cost of goods sold	-4 044	-4 937	-5 121
Gross profit from discontinued operations	3 403	4 463	4 771
Selling, general and administration	-1 728	-2 060	-2 059
Research and development	-671	-824	-899
Other income	56	109	232
Other expense	-795	-437	-412
Operating income from discontinued operations	265	1 251	1 633
Income from associated companies	2	2	2
Interest expense	-33	-37	-24
Other financial income and expense	-20	-22	-4
Income before taxes from discontinued operations	214	1 194	1 607
Income taxes^2^	208	-288	-494
Net income from discontinued operations before gain on distribution of Sandoz Group AG to Novartis AG shareholders	422	906	1 113
Gain on distribution of Sandoz Group AG to Novartis AG shareholders^3^	5 860
Net income from discontinued operations	6 282	906	1 113
^1^ The net income from discontinued operations for 2023 is for the period from January 1, 2023, to the October 3, 2023, Distribution date.
^2^ The tax rate in 2023 was impacted by non-recurring items such as tax benefits arising from intercompany transactions to effect the spin-off of the Sandoz business, net decreases in uncertain tax positions of the Sandoz business and the favorable settlement of a tax matter related to the Alcon business, which was spun-off in 2019. Excluding these impacts, the tax rate would have been 31.2% in 2023, compared to 24.1% and 30.7% in 2022 and 2021, respectively. The tax rate in 2023 is higher than 2022 primarily due to a change in profit mix between years.
^3^ See Note 2 for further details on the non-taxable, non-cash gain on distribution of Sandoz Group AG to Novartis AG shareholders.

F-69

Net assets derecognized

The following table presents the Sandoz business net assets derecognized as at October 3, 2023 Distribution (spin-off) date:

(USD millions)	Oct 3,<br> 2023
Property, plant and equipment	1 447
Right-of-use assets	133
Goodwill	7 424
Intangible assets other than goodwill	1 481
Deferred tax assets	624
Financial assets, investments in associated companies and other non-current assets	142
Inventories	2 565
Trade receivables and other current assets	2 935
Cash and cash equivalents	686
Deferred tax liabilities	-270
Current and non-current lease liabilities	-139
Current and non-current financial debts	-3 691
Trade payables, provisions, current income tax liabilities and other liabilities	-4 690
Net assets derecognized	8 647

Supplemental disclosures related to discontinued operations

Revenue

In addition to the elements of variable consideration listed in the revenue accounting policy described in Note 1, the Sandoz business grants shelf stock adjustments to customers to cover the inventory held by them at the time a price decline becomes effective. Revenue deduction provisions for shelf stock adjustments are recorded when the price decline is anticipated, based on the impact of the price decline on the customer’s estimated inventory levels.

Significant transactions in 2021

On February 10, 2021, Sandoz entered into an agreement with certain subsidiaries of GlaxoSmithKline plc (GSK) for the acquisition of the GSK’s cephalosporin antibiotics business.

Under the agreement, Sandoz acquired the global rights to three established brands (Zinnat®, Zinacef® and Fortum®) in more than 100 markets. It excluded the rights in the US, Australia and Germany to certain of those brands, which were previously divested by GSK, and the rights in India, Pakistan, Egypt, Japan (to certain of the brands) and China, which will be retained by GSK. The transaction closed on October 8, 2021.

The purchase price consisted of a USD 350 million upfront payment paid at closing and potential milestone payments up to USD 150 million, which GSK is eligible to receive upon the achievement of certain annual sales milestones for the portfolio.

The fair value of the total purchase consideration was USD 415 million. The amount consisted of a payment of USD 351 million, including purchase price adjustments, and the fair value of contingent consideration of USD 64 million, which GSK is eligible to receive upon the achievement of specified milestones. The purchase price allocation resulted in net identifiable assets of USD 308 million, consisting of USD 292 million intangible assets and USD 16 million deferred tax assets. Goodwill amounted to USD 107 million.

The 2021 results of operations since the date of acquisition were not material.

Net income from discontinued operations

Included in net income from discontinued operations are:

(USD millions unless indicated otherwise)	2023^1^	2022	2021
Interest income	2	2	1
Depreciation of property, plant and equipment	-144	-196	-203
Depreciation of right-of-use assets	-32	-33	-39
Amortization of intangible assets	-171	-222	-238
Impairment charges on property, plant and equipment	-5	-3	-68
Impairment charges on right-of-use assets	-8
Impairment charges on intangible assets	-44	-25	-27
Impairment reversals of property, plant and equipment	1	3	59
Additions to restructuring provisions	-27	-40	-62
Equity-based compensation expense related to Novartis equity-based participation plans	-60	-66	-69
^1^ 2023 amounts are for the period from January 1, 2023, to the October 3, 2023, Distribution date.

In 2023, 2022 and 2021, there were no reversals of impairment charges on right-of-use assets or on intangible assets of discontinued operations.

F-70

Balance sheet

The following table shows for discontinued operations the additions to property, plant and equipment, right-of-use assets and to goodwill and intangible assets:

(USD millions)	2023^1^	2022
Additions to property, plant and equipment	245	289
Additions to right-of-use assets	66	32
Additions to goodwill and intangible assets	221	163
^1^ The additions for 2023 are for the period from January 1, 2023, to the October 3, 2023, Distribution date.

Financial debt

The Sandoz business entered into financing agreements with a group of banks under which it borrowed on September 28, 2023 a total amount of USD 3.3 billion. See Note 2 for further disclosures.

Net cash flows used in investing activities from discontinued operations

Net cash flows used in investing activities from discontinued operations include the investing activities of the Sandoz business. In 2023, other cash flows used in investing activities, net includes cash outflows of USD 22 million (2022: USD 39 million, 2021: USD 362 million, including the acquisition of GSK’s cephalosporin antibiotics business) for the acquisitions and divestments of business, net.

(USD millions)	2023	2022	2021
Payments out of provision for transaction cost attributable to the spin-off of the Sandoz business	-52
Derecognized cash and cash equivalents attributable to the spin-off of the Sandoz business	-686
Other cash flows used in investing activities, net	-385	-436	-689
Net cash flows used in investing activities from discontinued operations	-1 123	-436	-689

Net cash flows from financing activities from discontinued operations

In 2023, the net cash inflows from financing activities from discontinued operations of USD 3.3 billion (2022: USD 119 million, 2021: USD 26 million) were mainly driven by USD 3.6 billion cash inflows from bank borrowings (including the USD 3.3 billion Sandoz business borrowings from a group of banks on September 28, 2023) in connection with the Distribution (spin-off) of the Sandoz business to Novartis AG shareholders, partly offset by transaction cost payments of USD 0.2 billion (2022: nil, 2021: nil) directly attributable to the Distribution (spin-off) of the Sandoz business (see Notes 1 and 2).

For additional information related to the October 3, 2023 Distribution (spin-off) of the Sandoz business to Novartis AG shareholders, effected through a dividend in kind distribution of Sandoz Group AG shares to Novartis AG shareholders and ADR holders, refer to Note 1 and Note 2.

F-71

32. Events subsequent to the December 31, 2023, consolidated balance sheet date

Dividend proposal for 2023 and approval of Novartis 2023 consolidated financial statements

On January 30, 2024, the Novartis AG Board of Directors proposed the acceptance of the 2023 consolidated financial statements of Novartis for approval by the Annual General Meeting on March 5, 2024. Furthermore, also on January 30, 2024, the Board proposed a dividend of CHF 3.30 per share to be approved at the Annual General Meeting on March 5, 2024. If approved, the total dividend payments would amount to approximately USD 8.0 billion (2022: USD 7.3 billion), using the CHF/USD December 31, 2023, exchange rate.

F-72

33. Novartis principal subsidiaries and associated companies

The following table lists the principal subsidiaries controlled by Novartis, associated companies in which Novartis is deemed to have significant influence, and foundations required to be consolidated under IFRS Accounting Standards. It includes all subsidiaries, associated companies and consolidated foundations with total assets or net sales to third parties in excess of USD  25 million. The equity interest percentage shown in the table also represents the share in voting rights in those entities.

As at December 31, 2023			Share<br> capital^1^		Equity <br> interest
Argentina
Novartis Argentina S.A.	Buenos Aires	ARS	906.1	m	100%
Australia
Novartis Australia Pty Ltd	Macquarie Park, NSW	AUD	2		100%
Novartis Pharmaceuticals<br>Australia Pty Ltd	Macquarie Park, NSW	AUD	3.8	m	100%
Austria
Novartis Holding GmbH	Vienna	EUR	35 000		100%
Novartis Pharmaceutical Manufacturing GmbH	Langkampfen	EUR	763 070		100%
Novartis Pharma GmbH	Vienna	EUR	1.1	m	100%
Bangladesh
Novartis (Bangladesh) Limited	Gazipur	BDT	162.5	m	60%
Belgium
Novartis Pharma NV	Vilvoorde	EUR	7.1	m	100%
Alcon - Couvreur NV	Puurs	EUR	110.6	m	100%
Bermuda
Novartis Investment Ltd.	Hamilton^2^	USD	12 000		100%
Novartis Securities Investment Ltd.	Hamilton	CHF	30 000		100%
Novartis Finance Services Ltd.	Hamilton	CHF	20 000		100%
Triangle International Reinsurance Limited	Hamilton	CHF	1.0	m	100%
Trinity River Insurance Co Ltd.	Hamilton	USD	370 000		100%
Brazil
Novartis Biociências S.A.	São Paulo	BRL	507.1	m	100%
Canada
Novartis Pharmaceuticals Canada Inc.	Montreal, Quebec	CAD	420 717		100%
Chile
Novartis Chile S.A.	Santiago de Chile	CLP	2.0	bn	100%
China
Beijing Novartis Pharma Co., Ltd.	Beijing	USD	30.0	m	100%
Novartis Pharmaceuticals (HK) Limited	Hong Kong	HKD	200		100%
China Novartis Institutes for<br>BioMedical Research Co., Ltd.	Shanghai	USD	320.0	m	100%
Suzhou Novartis Technical<br>Development Co., Ltd.	Changshu	USD	12.0	m	100%
Shanghai Novartis Trading Ltd.	Shanghai	USD	3.2	m	100%
Colombia
Novartis de Colombia S.A.	Santafé de Bogotá	COP	7.9	bn	100%
Czech Republic
Novartis s.r.o.	Prague	CZK	51.5	m	100%
Denmark
Novartis Healthcare A/S	Copenhagen	DKK	14.0	m	100%
Dominican Republic
Novartis Caribe, S.A.	Santo Domingo	DOP	20.0	m	100%
Ecuador
Novartis Ecuador S.A.	Quito	USD	4.0	m	100%
Egypt
Novartis Pharma S.A.E.	Cairo	EGP	2.1	bn	99.98%
Finland
Novartis Finland Oy	Espoo	EUR	459 000		100%
France
Novartis Groupe France S.A.S.	Rueil-Malmaison	EUR	903.0	m	100%
Novartis Pharma S.A.S.	Rueil-Malmaison	EUR	43.4	m	100%
Advanced Accelerator Applications S.A.	Rueil-Malmaison	EUR	9.6	m	99.23%
Advanced Accelerator Applications<br>Molecular Imaging France	Saint-Genis-Pouilly	EUR	7.5	m	99.23%
Germany
Novartis Business Services GmbH	Wehr	EUR	25 000		100%
Novartis Pharma GmbH	Nuremberg	EUR	25.6	m	100%
Novartis Pharma Produktions GmbH	Wehr	EUR	2.0	m	100%
Novartis Pharma Vertriebs GmbH	Nuremberg	EUR	25 000		100%
Greece
Novartis (Hellas) S.A.C.I.	Metamorphosis / Athens	EUR	233.9	m	100%		As at December 31, 2023			Share<br> capital^1^		Equity <br> interest
---	---	---	---	---	---
Hungary
Novartis Hungary Healthcare Limited Liability<br>Company	Budapest	HUF	545.6	m	100%
India
Novartis India Limited	Mumbai	INR	123.5	m	70.68%
Novartis Healthcare Private Limited	Mumbai	INR	60.0	m	100%
Indonesia
PT. Novartis Indonesia	Jakarta	IDR	7.7	bn	100%
Ireland
Novartis Ireland Limited	Dublin	EUR	25 000		100%
Novartis Integrated Services Limited	Cork City	EUR	100		100%
Israel
Novartis Israel Ltd.	Tel Aviv	ILS	1 000		100%
Italy
Novartis Farma S.p.A.	Milan	EUR	18.2	m	100%
Advanced Accelerator Applications (Italy) S.r.l.	Pozzilli	EUR	119 000		99.23%
Japan
Novartis Pharma K.K.	Tokyo	JPY	100.0	m	100%
Ciba-Geigy Japan Limited	Tokyo	JPY	100.0	m	100%
Latvia
Novartis Baltics SIA	Riga	EUR	3.0	m	100%
Luxembourg
Novartis Investments S.à r.l.	Luxembourg City^2^	USD	100.0	m	100%
Novartis Finance S.A.	Luxembourg City	USD	100 000		100%
Malaysia
Novartis Corporation (Malaysia) Sdn. Bhd.	Petaling Jaya	MYR	3.3	m	100%
Mexico
Novartis Farmacéutica, S.A. de C.V.	Mexico City	MXN	206.7	m	100%
Morocco
Novartis Pharma Maroc SA	Casablanca	MAD	80.0	m	100%
Netherlands
Novartis Netherlands B.V.	Amsterdam	EUR	1.4	m	100%
Novartis Pharma B.V.	Amsterdam	EUR	4.5	m	100%
Aduro Netherlands Coöperatief U.A.	Rosmalen^4^	--	--		--
Aduro Biotech Holdings Europe B.V.	Rosmalen	EUR	46 216		100%
IDB Holland BV	Baarle-Nassau	EUR	18 000		99.23%
New Zealand
Novartis New Zealand Ltd	Auckland	NZD	820 000		100%
Norway
Novartis Norge AS	Oslo	NOK	1.5	m	100%
Pakistan
Novartis Pharma (Pakistan) Limited	Karachi	PKR	6.7	bn	99.99%
Panama
Novartis Pharma (Logistics), Inc.	Panama City	USD	10 000		100%
Philippines
Novartis Healthcare Philippines, Inc.	Makati City	PHP	298.8	m	100%
Poland
Novartis Poland Sp. z o.o.	Warsaw	PLN	44.2	m	100%
Portugal
Novartis Portugal, S.G.P.S., Lda.	Porto Salvo	EUR	500 000		100%
Novartis Farma - Produtos Farmacêuticos, S.A.	Porto Salvo	EUR	2.4	m	100%
Romania
Novartis Pharma Services Romania S.R.L.	Bucharest	RON	3.0	m	100%
Sandoz S.R.L.	Targu-Mures	RON	119.5	m	100%
Russian Federation
Novartis Pharma LLC	Moscow	RUB	20.0	m	100%
Novartis Neva LLC	St. Petersburg	RUB	500	m	100%
Saudi Arabia
Novartis Saudi Company	Riyadh	SAR	30.0	m	100%

F-73

As at December 31, 2023			Share<br> capital^1^		Equity <br> interest
Singapore
Novartis (Singapore) Pte Ltd.	Singapore	SGD	100 000		100%
Novartis Singapore Pharmaceutical<br>Manufacturing Pte Ltd	Singapore	SGD	45.0	m	100%
Novartis Asia Pacific Pharmaceuticals<br>Pte Ltd	Singapore	SGD	39.0	m	100%
Slovakia
Novartis Slovakia s.r.o.	Bratislava	EUR	2.0	m	100%
Slovenia
Novartis farmacevtska proizvodnja d.o.o.	Ljubljana	EUR	7 500		100%
South Africa
Novartis South Africa (Pty) Ltd	Midrand	ZAR	86.3	m	100%
South Korea
Novartis Korea Ltd.	Seoul	KRW	24.5	bn	100%
Spain
Novartis Farmacéutica, S.A.	Barcelona	EUR	63.0	m	100%
Advanced Accelerator Applications<br>Iberica, S. L. U.	Esplugues de Llobregat	EUR	22.6	m	99.23%
Abadia Retuerta S.A.	Sardón de Duero / Valladolid	EUR	6.0	m	100%
Sweden
Novartis Sverige AB	Stockholm	SEK	5.0	m	100%
Switzerland
Novartis International AG	Basel	CHF	10.0	m	100%
Novartis Holding AG	Basel^2^	CHF	100.2	m	100%
Novartis International Pharmaceutical Investment AG	Basel	CHF	100 000		100%
Novartis Bioventures AG	Basel	CHF	100 000		100%
Novartis Forschungsstiftung	Basel^3^	--	--		--
Novartis Stiftung für Kaderausbildung	Basel^3^	--	--		--
Novartis-Mitarbeiterbeteiligungsstiftung	Basel^3^	--	--		--
Novartis Stiftung für Mensch und Umwelt	Basel^3^	--	--		--
Stiftung der Novartis AG für Erziehung,<br>Ausbildung und Bildung	Basel^3^	--	--		--
Novartis Overseas Investments AG	Basel	CHF	1.0	m	100%
Japat AG	Basel	CHF	100 000		100%
Novartis Pharma AG	Basel^2^	CHF	350.0	m	100%
Novartis Pharma Services AG	Basel	CHF	20.0	m	100%
Novartis Pharma Schweizerhalle AG	Muttenz	CHF	18.9	m	100%
Novartis Pharma Stein AG	Stein	CHF	251 000		100%
Novartis Pharma Schweiz AG	Risch	CHF	5.0	m	100%
Cellerys AG	Schlieren	CHF	129 630		20%
Novartis Innovative Therapies AG	Risch	CHF	100 000		100%
Advanced Accelerator Applications International SA	Geneva	CHF	9.3	m	99.23%
Taiwan
Novartis (Taiwan) Co., Ltd.	Taipei	TWD	170.0	m	100%
Thailand
Novartis (Thailand) Limited	Bangkok	THB	302.0	m	100%
Turkey
Novartis Saglik, Gida ve Tarim Ürünleri Sanayi<br>ve Ticaret A.S.	Istanbul	TRY	448.0	m	100%
As at December 31, 2023		Share<br> capital^1^		Equity <br> interest
---	---	---	---	---
United Arab Emirates
Novartis Middle East FZE	AED	7.0	m	100%
United Kingdom
Novartis UK Limited	GBP	25.5	m	100%
Novartis Pharmaceuticals UK Limited	GBP	5.4	m	100%
Novartis Grimsby Limited	GBP	250.0	m	100%
Advanced Accelerator Applications (UK & Ireland)	GBP	100		99.23%
Neutec Pharma Limited	GBP	7.7	m	100%
Gyroscope Therapeutics Limited	GBP	1 492		100%
United States of America
Novartis Corporation	USD	72.2	m	100%
Novartis Finance Corporation	USD	1 000		100%
Novartis Capital Corporation	USD	1		100%
Novartis Services, Inc.	USD	1		100%
Novartis US Foundation	--	--		--
Novartis Pharmaceuticals Corporation	USD	650		100%
Advanced Accelerator Applications USA, Inc.	USD	1		99.23%
Novartis Gene Therapies, Inc.	USD	1		100%
Novartis Technology LLC	--	--		--
Novartis Institutes for BioMedical<br>Research, Inc.	USD	1		100%
Novartis Manufacturing LLC	--	--		--
Cadent Therapeutics, Inc.	USD	0.1		100%
Endocyte, Inc.	USD	1		100%
Navigate BioPharma Services, Inc.	USD	1		100%
The Medicines Company	USD	1 000		100%
DTX Pharma, Inc.	USD	1		100%
Chinook Therapeutics, Inc.	USD	1		100%
Chinook Therapeutics U.S., Inc.	USD	1		100%
Venezuela
Novartis de Venezuela, S.A.	VES	0		100%
Vietnam
Novartis Vietnam Company Limited	VND	70	bn	100%
In addition, the Company is represented by subsidiaries and associated companies with total assets or net sales to third parties below 25 million in the following countries: Bosnia and Herzegovina, Bulgaria, Cameroon, Croatia, Ghana, Guatemala, Ivory Coast, Kenya, Kuwait, Nigeria, Peru, Senegal, Ukraine and Uruguay.
1  Share capital may not reflect the taxable share capital and does not include any paid-in surplus.
2  Significant subsidiary under SEC Regulation S-X Rule 1-02(w)
3  Fully consolidated Foundation
4  Fully consolidated entity
m = million; bn = billion

All values are in US Dollars.

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Report of Independent Registered Public Accounting Firm

To the shareholders and the Board of Directors of Novartis AG

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Novartis AG and its consolidated subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated income statements, consolidated statements of comprehensive income, consolidated statements of changes in equity, and consolidated statements of cash flows for each of the years in the two-year period ended December 31, 2023 and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with International Financial Reporting Standards (IFRS) Accounting Standards as issued by the International Accounting Standards Board. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Novartis Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with IFRS Accounting Standards. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

F-75

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Assessment of the recoverable amount for the Leqvio intangible asset

As discussed in Note 1 to the consolidated financial statements, the Company determined the recoverable amount of the intangible assets other than goodwill based on the fair value less costs of disposal method for which no directly observable market inputs were available. As discussed in Note 12, the Company has intangible assets other than goodwill totaling USD 26 879 million as of December 31, 2023, of which USD 6.8 billion related to the currently marketed product Leqvio.

We identified the assessment of the recoverable amount, specifically the sales forecasts, of the Leqvio intangible asset, as a critical audit matter. Significant auditor judgment and specialist skills and knowledge were required to assess the sales forecasts assumptions due to the high degree of subjectivity and estimation uncertainty involved. These sales forecasts assumptions were a significant input in the determination of the recoverable amount of the Leqvio intangible asset.

The following are the primary procedures we performed to address this critical audit matter:

• We evaluated the design and tested the operating effectiveness of a certain internal control related to the Company’s intangible asset impairment process for Leqvio, including the development of the sales forecasts;

• We evaluated the reasonableness of management’s sales forecasts for Leqvio by (1) comparing the sales forecasts assumptions to company-specific operational information and management’s communications to the Board of Directors, (2) comparing the most recent sales performance to previous drug launches, and (3) comparing the sales forecasts assumptions to available external market and industry data;

• We involved professionals with specialized skills and knowledge, who assisted in evaluating the reasonableness and appropriateness of certain inputs to the sales forecasts (in particular, the epidemiological inputs); and

• We assessed management’s ability to accurately forecast sales by comparing historical sales forecasts for Leqvio to actual results.

Provisions for deductions from revenue related to US Managed Care, Medicare Part D and Medicaid rebate programs

As discussed in Note 1 to the consolidated financial statements, the Company records provisions for estimated rebates as a deduction from revenue when the related revenue is recognized. Rebates involve the use of assumptions and judgements in the determination of the provision rates at the time revenues are recorded. Provision rates are influenced by the terms and conditions in the individual agreements, historical experience, product sales and growth rate, population growth, product pricing, the mix of contracts and products, the level of inventory in the distribution channel, regulations, contracts, and channels and payers. As discussed in Note 23, provisions for deductions from revenue totaled USD 6 315 million as of December 31, 2023, a significant portion of which related to US Managed Care, Medicare Part D and Medicaid rebate programs (hereafter “US rebates”).

We identified the evaluation of the US rebates provisions a critical audit matter. The evaluation of the rebate provision rates required a high degree of subjective auditor judgment as it involved estimating the portion of the Company’s consolidated revenue which will ultimately be subject to a related rebate.

The following are the primary audit procedures we performed to address this critical audit matter:

• We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s US rebates process related to the development of the rebate provision rates;

• We developed our own independent expectation of the US rebates provisions, by using internal and external information, including historical experience and trend analysis of actual rebate claims paid, and comparing it to management’s actual recorded balances; and

• We assessed management’s ability to accurately estimate the US rebates provisions by comparing historically recorded provisions to the actual amount that was ultimately paid by the Company.

F-76

Valuation of the dividend-in-kind distribution liability to effect the spin-off of Sandoz Group AG

As discussed in Notes 1 and 2 to the consolidated financial statements, the dividend-in-kind to effect the spin-off of Sandoz Group AG (the Sandoz business) required the Company to recognize a distribution liability representing the fair value of the Sandoz business distributed of USD 13 962 million. The Company measured the distribution liability at the fair value of the Sandoz business net assets as a whole. Fair value was measured using the opening share price of Sandoz Group AG on the first day of trading its shares on the SIX Swiss Exchange and an estimated control premium.

We identified the valuation of the dividend-in-kind distribution liability, specifically the determination of a reasonable control premium, as a critical audit matter. Significant auditor judgment and specialist skills and knowledge were required to assess the control premium, which was sensitive to variation, such that minor changes in the assumption can cause significant changes in the valuation of the dividend-in-kind distribution liability and therefore on the resulting gain on distribution.

The following are the primary procedures we performed to address this critical audit matter:

• We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s valuation of the dividend-in-kind distribution liability, including controls relating to selecting the control premium estimate; and

• We involved valuation professionals with specialized skills and knowledge, who assisted in developing an independent control premium range by utilizing the premiums paid in historic transactions to acquire controlling interests in comparable companies.

/s/ KPMG AG

We have served as the Company’s auditor since 2022.

Basel, Switzerland

January 30, 2024

F-77

Report of Independent Registered Public Accounting Firm

To the shareholders and Board of Directors of Novartis AG

Opinion on the Financial Statements

We have audited the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of cash flows, and consolidated statement of changes in equity of Novartis AG and its subsidiaries (the “Company”) for the year ended December 31, 2021, including the related notes appearing under Item 18 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2021 in conformity with International Financial Reporting Standards (“IFRS”) Accounting Standards as issued by the International Accounting Standards Board.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers AG

Basel, Switzerland

February 1, 2022, except for the effects of discontinued operations discussed in Note 1 to the consolidated financial statements, as to which the date is January 30, 2024

We served as the Company’s auditor from at least 1940 to 2022. We have not been able to determine the specific year we began serving as auditor of the Company’s predecessors.

F-78

EXHIBIT 1.1

Articles of Incorporation<br><br> of Novartis AG<br><br> <br>September 15, 2023<br><br> <br>

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The Articles of Incorporation were adopted at the Extraordinary
General Meeting of Novartis AG  held on October 15, 1996.
Alterations adopted by General Meetings of:
April 21, 1999
October 11, 2000 (extraordinary GM)
March 22, 2001
March 21, 2002
March 4, 2003
February 24, 2004
March 1, 2005
February 28, 2006
February 26, 2008
February 24, 2009
February 26, 2010
April 8, 2011 (extraordinary GM)
February 23, 2012
February 27, 2015
February 23, 2016
February 28, 2017
March 2, 2018
February 28, 2019
February 28, 2020
March 2, 2021
March 4, 2022
March 7, 2023
September 15, 2023 (extraordinary GM)
(The original German text remains, in all matters, binding and definitive)
Novartis AG
4002 Basel, Switzerland
© September 2023, Novartis AG

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1	Articles of Incorporation of Novartis AG
Section 1	Corporate Name, Registered Office, Purpose and Duration	3
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Section 2	Share Capital	3
Section 3	Corporate Bodies	5
	A. General Meeting of Shareholders	5
	B. Board of Directors	8
	C. Auditors	11
Section 4	Compensation of the Board of Directors and the Executive Committee	11
Section 5	Annual Financial Statements, Consolidated Financial Statements and Profit Allocation	15
Section 6	Publications and Place of Jurisdiction	15

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2	Articles of Incorporation of Novartis AG

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3	Articles of Incorporation of Novartis AG
Section 1		Corporate Name, Registered Office, Purpose and Duration
---	---	---
		Article 1
Corporate name, Registered office		Under the Corporate name<br><br> <br>Novartis AG<br><br> <br>Novartis SA<br><br> <br>Novartis Inc.<br><br> <br>there exists a company limited by shares with its registered office in Basel.
		Article 2
Purpose	1	Purpose of the Company is to hold interests in enterprises in the area of health care or nutrition. The Company may also hold interests in enterprises in the areas of<br> biology, chemistry, physics, information technology or related areas.
	2	The Company may acquire, mortgage, liquidate or sell real estate and intellectual property rights in Switzerland or abroad.
	3	In pursuing its purpose, the Company strives to create sustainable value.
		Article 3
Duration		The duration of the Company is unlimited.
Section 2		Share Capital
		Article 4
Share capital		The share capital of the Company is CHF 1 115 964 098.48, fully paid-in and divided into 2 277 477 752 registered shares. Each share has a nominal value of CHF 0.49.
		Article 5
Shareholders register and restrictions of registration, Nominees	1	The Company shall maintain a shareholders register showing the last names, first names, domicile, address and nationality (in the case of legal entities the registered<br> office) of the holders or usufructuaries of registered shares.
	2	Upon request acquirers of registered shares are registered in the shareholders register as shareholders with the<br> right to vote, provided that they declare explicitly to have acquired the registered shares in their own name and for their own account. Subject to the restrictions set forth in paragraph 6 of this article, no person or entity shall be<br> registered with the right to vote for more than 2% of the registered share capital as set forth in the commercial register. This restriction of registration also applies to persons who hold some or all of their shares through nominees<br> pursuant to this article. All of the foregoing is subject to Article 685d paragraph 3 of the Swiss Code of Obligations.

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4	Articles of Incorporation of Novartis AG
	3	The Board of Directors may register nominees with the right to vote in the share register to the extent of up to 0.5% of the registered share capital as set forth in the<br> commercial register. Registered shares held by a nominee that exceed this limit may be registered in the shareholders register if the nominee discloses the names, addresses and the number of shares of the persons for whose account it holds<br> 0.5% or more of the registered share capital as set forth in the commercial register. Nominees within the meaning of this provision are persons who do not explicitly declare in the request for registration to hold the shares for their own<br> account and with whom the Board of Directors has entered into a corresponding agreement.
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	4	Corporate bodies and partnerships or other groups of persons or joint owners who are interrelated to one another through capital ownership, voting rights, uniform management or<br> otherwise linked as well as individuals or corporate bodies and partnerships who act in concert to circumvent the regulations concerning the limitation of participation or the nominees (especially as syndicates), shall be treated as one<br> single person or nominee within the meaning of paragraphs 2 and 3 of this article.
	5	After hearing the registered shareholder or nominee, the Board of Directors may cancel registrations in the shareholders register with retroactive effect as of the date of<br> registration if the registration was effected based on false information. The respective shareholder or nominee shall be informed immediately of the cancellation of the registration.
	6	The Board of Directors shall specify the details and give the necessary orders concerning the adherence to the preceding regulations. In particular cases it may allow<br> exemptions from the limitation for registration in the share register or the regulation concerning nominees. It may delegate its duties.
	7	The limitation for registration in the share register provided for in this article shall also apply to shares acquired or subscribed by the exercise of subscription, option or<br> conversion rights.
		Article 6
Form of shares	1	Subject to paragraphs 2 and 4 of this article, the registered shares of the Company are issued as uncertificated securities (in terms of the Swiss Code of Obligations) and as book entry securities (in terms of the Book Entry Securities Act).
	2	The Company may withdraw shares issued as book entry securities from the custodian system (Verwahrungssystem).
	3	Provided that the shareholder is registered in the shareholders register, the shareholder may request from the Company a statement of his or her<br> registered shares at any time.

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5	Articles of Incorporation of Novartis AG
	4	The shareholder has no right to the printing and delivery of certificates. The Company may, however, print and deliver certificates (individual share certificates, certificates<br> or global certificates) for shares at any time. The Company may, with the consent of the shareholder, cancel issued certificates that are returned to the Company.
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		Article 7
Exercise of rights	1	The shares are not divisible. The Company accepts only one representative per share.
	2	The right to vote and the other rights associated with a registered share may only be exercised vis-à-vis the Company by a shareholder, usufructuary or nominee who is registered in the share<br> register.
Section 3		Corporate Bodies<br><br> <br> <br>A. General Meeting of Shareholders
		Article 8
Competence		The General Meeting of Shareholders is the supreme body of the Company.
		Article 9
General Meetings<br><br> <br>a. Annual General Meeting		The Annual General Meeting of Shareholders shall be held each year within six months after the close of the financial year of the Company.
		Article 10
b. Extraordinary General Meetings of Shareholders	1	Extraordinary General Meetings of Shareholders shall take place upon request of the Board of Directors or the Auditors.
	2	Furthermore, Extraordinary General Meetings of Shareholders shall be convened upon resolution of a General Meeting of Shareholders or if it is required by one or more<br> shareholders who are representing in the aggregate not less than 5% of the share capital and submit a petition signed by such shareholder or shareholders specifying the items for the agenda and the proposals.
		Article 11
Convening of General Meetings of Shareholders	1	General Meetings of Shareholders shall be convened by the Board of Directors at the latest twenty days before the date of the meeting. The meeting shall be convened by way of a notice appearing once in the Swiss Official Gazette of<br> Commerce.
	2	The content of a notice of meeting is governed by the law.

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6	Articles of Incorporation of Novartis AG
		Article 12
---	---	---
Agenda	1	One or more shareholders whose combined shareholdings represent an aggregate nominal value of at least CHF 1 million may demand that an item be included in the agenda of a<br> General Meeting of Shareholders. Such a demand must be made in writing at the latest forty-five days before the meeting and shall specify the items and the proposals of such a shareholder. If an explanatory statement is to be included in the<br> notice of meeting, it must be submitted within the same period and formulated in a short, clear and concise manner.
	2	No resolution shall be passed at a General Meeting of Shareholders on matters for which no proper notice was given. This provision shall not apply to proposals to convene an Extraordinary<br> General Meeting of Shareholders or to initiate a special investigation.
		Article 12a
Electronic<br><br> <br>Participation	1	The Board of Directors may foresee that shareholders who cannot be present at the venue of the General Meeting of Shareholders may exercise their<br> rights through electronic means.
	2	The Board of Directors may at any time until June 30, 2028 also order that the General Meeting of Shareholders be held electronically without a venue.
		Article 13
Presiding officer, Minutes, Vote counters	1	The General Meeting of Shareholders shall take place at the registered office of the Company, unless the Board of Directors decides otherwise. The Chair of the Board of<br> Directors or in the Chair's absence a Vice-Chair or any other member of the Board of Directors designated by the Board of Directors shall take the chair
	2	The presiding officer shall appoint a secretary and the vote counters. The minutes shall be signed by the presiding officer and the secretar.
		Article 14
Proxies	1	The Board of Directors may issue regulations regarding the participation and the representation at the General Meeting of Shareholders and may allow<br> electronic proxies without qualified signatures.
	2	A shareholder can be represented by a legal representative or, by means of a written proxy, by a representative of choice. Furthermore, a shareholder may be represented by the Independent<br> Proxy (in German: Unabhängiger Stimmrechtsvertreter).
	3	The General Meeting of Shareholders shall elect the Independent Proxy for a term of office lasting until completion of the next Annual General<br> Meeting of Shareholders. Re-election is possible.
	4	If the Company does not have an Independent Proxy, the Board of Directors shall appoint the Independent Proxy for the next General Meeting of<br> Shareholders.

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7	Articles of Incorporation of Novartis AG
		Article 15
---	---	---
Voting rights		Each share provides entitlement to one vote.
		Article 16
Resolutions, Elections	1	Unless the law requires otherwise, the General Meeting passes resolutions and elections with the absolute majority of the votes validly represented.
	2	Resolutions and elections shall be taken either on a show of hands or by electronic voting, unless the General Meeting decides for, or the presiding officer orders, a secret<br> ballot.
	3	The presiding officer may at any time order to repeat an election or resolution taken on a show of hands with a secret ballot, if the presiding officer doubts the results of<br> the vote. In this case, the preceding election or resolution taken on a show of hands is deemed not to have taken place.
	4	If no election has taken place at the first ballot and if there is more than one candidate, the presiding officer shall order a second ballot in which the relative majority<br> shall be decisive.
		Article 17
Powers of the General Meeting of Shareholders		The following powers shall be vested exclusively in the General Meeting of Shareholders:<br><br> <br>a) To adopt and amend the Articles of Incorporation;<br><br> <br>b) To elect and remove the members of the Board of Directors, the Chair of the Board of Directors, the members of<br> the Compensation Committee, the Independent Proxy and the Auditors<br><br> <br>c) To approve the management report (if required), the consolidated financial statements and the report on<br> non-financial matters;<br><br> <br>d) To approve the financial statements and to decide on the appropriation of available earnings shown on the<br> balance sheet, in particular with regard to dividends (including any repayment of the statutory capital reserves and the approval of interim dividends and the interim financial statements required for such purpose);<br><br> <br>e) To approve the aggregate amounts of compensation of the Board of Directors and the Executive Committee in<br> accordance with Article 29 of these Articles of Incorporation;<br><br> <br>f) To grant discharge to the members of the Board of Directors and to the members of the Executive<br> Committee;<br><br> <br>g) To delist the shares of the Company; and<br><br> <br>h) To decide on matters that are reserved by law or by the Articles of Incorporation to the General Meeting of<br> Shareholders.

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8	Articles of Incorporation of Novartis AG
		Article 18
---	---	---
Special quorum		The approval of at least two-thirds of the votes represented is required for resolutions of the General Meeting of Shareholders on:<br><br> <br> <br>a) An alteration of the purpose of the Company;<br><br> <br> <br>b) The consolidation of shares, unless the approval of all affected shareholders is required;<br><br> <br> <br>c) An increase of the share capital out of equity, by contributions in kind or by way of set off against a receivable and the grant of special rights;<br><br> <br> <br>d) A restriction or suspension of rights of option to subscribe;<br><br> <br> <br>e) The introduction of a conditional capital or a capital band;<br><br> <br> <br>f) An implementation of restrictions on the transfer of registered shares and the removal of such restrictions;<br><br> <br> <br>g) The creation of shares with increased voting powers;<br><br> <br> <br>h) The change of the currency of the share capital;<br><br> <br>i) The introduction of the deciding vote for the presiding officer at the General Meeting of Shareholders;<br><br> <br>j) A provision in the Articles of Incorporation allowing to hold the General Meeting of Shareholders abroad;<br><br> <br>k) The delisting of the shares of the Company;<br><br> <br>l) A change of location of the registered office of the Company;<br><br> <br>m) The introduction of an arbitration clause in the Articles of Incorporation;<br><br> <br>n) The merger, split or transformation of the Company under the Merger Act (subject to mandatory statutory provisions); and<br><br> <br>o) The dissolution of the Company.
		B. Board of Directors
		Article 19
Number of Directors		The Board of Directors shall consist of a minimum of 8 and a maximum of 16 members.
		Article 20
Term of office	1	The members of the Board of Directors and the Chair of the Board of Directors shall be elected individually by the General Meeting of Shareholders for a term of office lasting<br> until completion of the next Annual General Meeting of Shareholders.
	2	Members whose term of office has ended may be immediately reelected, subject to paragraph 3 hereinafter.
	3	A member shall not serve on the Board for more than 12 years. The Board of Directors may, under certain circumstances and if deemed in the best<br> interests of the Company, recommend exceptions to this rule to the General Meeting of Shareholders.

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9	Articles of Incorporation of Novartis AG
		Article 21
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Organization	1	The Board of Directors constitutes itself in compliance with legal requirements and taking into consideration the resolutions of the General Meeting of Shareholders. It shall<br> elect one or two Vice-Chairs. It shall appoint a secretary, who need not be a member of the Board of Directors.
	2	If the office of the Chair of the Board of Directors is vacant, the Board of Directors shall appoint a new Chair from amongst its members for the remaining term of office.
		Article 22
Convening of meetings		The Chair shall convene meetings of the Board of Directors if and when the need arises or if a member so requires in writing.
		Article 23
Meetings, Resolutions	1	The organization of the meetings, including the quorum and the passing of resolutions, is regulated by the Board of Directors in the organizational regulations.
	2	The presiding officer shall not have the deciding vote.
		Article 24
Powers of the Board of Directors	1	The Board of Directors has in particular the following non-delegable and inalienable duties:<br><br> <br> <br>a) The ultimate direction of the Company’s business and issuing of the necessary directives;<br><br> <br> <br>b) The determination of the organization of the Company;<br><br> <br> <br>c) The<br> determination of the principles of accounting, financial controlling and financial planning;<br><br> <br> <br>d) The appointment and removal of the persons entrusted with the management and representation of the Company (including the CEO and the other members of the Executive Committee);<br><br> <br> <br>e) The ultimate supervision of the persons entrusted with the management of the Company, specifically in view of their compliance with the law, Articles of Incorporation, regulations and directives;<br><br> <br> <br>f) The preparation of the annual report, the compensation report and the report on non-financial matters in accordance with the provisions of the law and the Articles of Incorporation, as well as<br> further reports which must be approved by the Board of Directors;<br><br> <br> <br>g) The preparations for the General Meeting of Shareholders and carrying out of the resolutions of the General Meeting of Shareholders;<br><br> <br> <br>h) The filing of a request for a moratorium and the notification to the court in the event of over-indebtedness;

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10	Articles of Incorporation of Novartis AG
		i) The adoption of resolutions concerning the implementation of changes in share capital to the extent that such power is<br> vested in the Board of Directors, as well as resolutions concerning the confirmation of changes in share capital and respective amendments to the Articles of Incorporation; and<br><br> <br>j) All further non-delegable and inalienable duties of the Board of Directors provided for by the law
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	2	In addition, the Board of Directors can pass resolutions with respect to all matters which are not reserved to the authority of the General Meeting of Shareholders by law or by these Articles of Incorporation
		Article 25
Delegation of powers		The Board of Directors may, within the limits of the law and the Articles of Incorporation, delegate the management of the Company in whole or in part to one or several of its<br> members (including to ad hoc or permanent committees of the Board of Directors) or to third persons (Executive Committee).
		Article 26
Signature power		The Board of Directors shall designate those of its members as well as those third persons who shall have legal signatory power for the Company, and shall further determine the<br> manner in which such persons may sign on behalf of the Company.
		Article 27
Organization and powers of the Compensation	1	The Compensation Committee shall consist of a minimum of 3 and a maximum of 5 members of the Board of Directors.
Committee	2	The members of the Compensation Committee shall be elected individually by the General Meeting of Shareholders for a term of office lasting until completion of the next Annual<br> General Meeting of Shareholders. Members of the Compensation Committee whose term of office has expired shall be immediately eligible for re-election.
	3	If there are vacancies on the Compensation Committee, the Board of Directors shall appoint substitutes for the remaining term of office.
	4	The Board of Directors shall elect a chair of the Compensation Committee. The Board of Directors shall, within the limits of the law and the Articles<br> of Incorporation, define the organization of the Compensation Committee in regulations.
	5	The Compensation Committee has the following powers:<br><br> <br>a) Develop a compensation strategy in line with the principles described in the Articles of<br> Incorporation and submit it for approval to the Board of Directors;<br><br> <br>b) Propose to the Board of Directors the principles and structure of the compensation plans;

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11	Articles of Incorporation of Novartis AG
	5	c) Support<br><br><br> the Board of Directors in preparing the proposals to the General Meeting of Shareholders regarding the compensation of the members of the Board of Directors and the Executive Committee;<br><br> <br>d) Submit<br><br> the compensation report to the Board of Directors for approval;<br><br> <br>e) Inform<br><br><br> the Board of Directors about policies, programs and key decisions as well as comparisons of compensation levels at key competitors;<br><br> <br>f) Regularly report to the Board of Directors on the decisions and deliberations of the Compensation Committee;<br><br> <br>g) Assume<br><br> other responsibilities assigned to it by law, the Articles of Incorporation or by the Board of Directors.
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	6	The Board of Directors issues regulations to determine for which positions of the Board of Directors and of the Executive Committee the Compensation Committee shall submit proposals regarding<br> compensation, and for which positions it shall determine the compensation in accordance with the Articles of Incorporation.
		C. Auditors
		Article 28
Term, Powers and Duties		The Auditors, who shall be elected by the General Meeting of Shareholders each year, shall have the powers and duties vested in them by law.
Section 4		Compensation of the Board of Directors and the Executive Committee
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		Article 29
Approval of compensation by the <br><br> General Meeting of Shareholders	1	The General Meeting of Shareholders shall approve annually and separately the proposals of the Board of Directors in relation to the maximum aggregate amount of:<br><br> <br>a) Compensation<br><br><br> of the Board of Directors for the period until the next Annual General Meeting of Shareholders; and<br><br> <br>b) Compensation<br><br> of the Executive Committee paid, promised or granted for the following financial year.<br><br> <br>The Board of Directors may submit for approval by the General Meeting of Shareholders additional proposals relating to the same or different periods.

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12	Articles of Incorporation of Novartis AG
	2	If the General Meeting of Shareholders rejects the proposal of the Board of Directors for the total compensation of the Board of Directors and/or the Executive Committee, the<br> decision on how to proceed shall reside with the Board of Directors. The options for the Board of Directors shall be to either convene an Extraordinary General Meeting to submit a new compensation proposal, or to determine the compensation<br> for the corresponding period on an interim basis, subject to approval at the next Annual General Meeting of Shareholders.
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	3	Notwithstanding the preceding paragraphs, the Company or companies controlled by it may pay out compensation prior to approval by the General Meeting of Shareholders subject to<br> subsequent approval by a General Meeting of Shareholders.
	4	The Board of Directors shall submit the compensation report to an advisory vote of the General Meeting of Shareholders.
		Article 30
Additional amount		If the maximum aggregate amount of compensation already approved by the General Meeting of Shareholders is not sufficient to also cover the compensation of one or more members<br> who become members of the Executive Committee during a compensation period for which the General Meeting of Shareholders has already approved the compensation of the Executive Committee, the Company or companies controlled by it shall be<br> authorized to pay or grant to such member(s) an additional amount during the compensation period(s) already approved. The total additional amount for each relevant compensation period for which approval by the General Meeting of Shareholders<br> has already been obtained shall not exceed (in full and not pro rata temporis) 40% of the aggregate amount of compensation of the Executive Committee last approved by the General Meeting of Shareholders per compensation period.
		Article 31
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General compensation principles	1	Compensation of the non-executive members of the Board of Directors comprises fixed compensation elements only. In particular, non-executive members of the Board of Directors<br> shall receive no company contributions to any pension plan, no performance-related elements and no financial instruments (e.g. options).
	2	Compensation of the members of the Executive Committee comprises fixed and variable compensation elements. Fixed compensation comprises the base salary and may comprise other<br> compensation elements and benefits. Variable compensation may comprise short-term and long-term compensation elements.

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13	Articles of Incorporation of Novartis AG
	3	Compensation (to non-executive members of the Board of Directors and to members of the Executive Committee) may be paid or granted in the form of cash, shares, other benefits or in kind.<br> Compensation to members of the Executive Committee may also be paid or granted in the form of financial instruments or similar units. Compensation may be paid by the Company or companies controlled by it. The Board of Directors determines the<br> valuation of each compensation element on the basis of the principles that apply to the establishment of the compensation report.
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		Article 32
Variable compensation	1	The variable compensation paid or granted to the members of the Executive Committee in a certain year shall consist of compensation elements from short- and long-term<br> compensation plans (as defined in this Article 32).
	2	The short-term compensation plans are based on performance metrics that take into account the performance of the Novartis Group and/or parts thereof, and/or individual targets.<br> Achievements are generally measured based on the one-year period to which the short-term compensation relates. The short-term compensation pay-outs shall be subject to caps that may be expressed as predetermined multipliers of the respective<br> target levels.
	3	The long-term compensation plans are based on performance metrics that take into account strategic objectives of the Novartis Group (such as financial, innovation, Shareholder<br> return and/or other metrics). Achievements are generally measured based on a period of not less than three years. The long-term compensation pay-outs shall be subject to caps that may be expressed as predetermined multipliers of the<br> respective target levels.
	4	The Board of Directors or, to the extent delegated to it, the Compensation Committee determines performance metrics, target levels, and their achievement.
5	The Board of Directors or, to the extent delegated to it, the Compensation Committee determines grant, vesting, blocking, exercise and forfeiture conditions of the<br> compensation; they may provide for continuation, acceleration or removal of vesting and exercise conditions, for payment or grant of compensation assuming target achievement or for forfeiture in the event of predefined events such as death,<br> disability, retirement or termination of an employment or mandate agreement.
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14	Articles of Incorporation of Novartis AG
		Article 33
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Agreements with Members <br><br> of the Board of Directors and <br><br> of the Executive Committee	1	The Company or companies controlled by it may enter into agreements with members of the Board of Directors relating to their compensation for a term not exceeding the term of<br> office of the respective members of the Board of Directors. The Company or companies controlled by it may enter into contracts of employment with members of the Executive Committee for a fixed term not exceeding one year or for an indefinite<br> period of time with a notice period not exceeding 12 months.
	2	Contracts of employment with members of the Executive Committee may contain a prohibition of competition for the time after the end of employment if this is commercially justified. The overall<br> consideration for such prohibition shall not exceed the average annual compensation for the three preceding business years.
		Article 34
Mandates outside <br><br> of the Novartis Group	1	No member of the Board of Directors may hold more than 10 additional mandates in other companies, of which no more than 4 additional mandates shall be in other listed<br> companies. Chairs of the board of directors of other listed companies count as two mandates. Each of these mandates shall be subject to approval by the Board of Directors.
	2	No member of the Executive Committee may hold more than 6 additional mandates in other companies, of which no more than 2 additional mandates shall<br> be in other listed companies. Each of these mandates shall be subject to approval by the Board of Directors. Members of the Executive Committee are not allowed to hold chairs of the board of directors of other listed companies.
	3	The following mandates are not subject to these limitations:<br><br> <br>a) Mandates in<br> companies which are controlled by the Company; and<br><br> <br>b) Mandates which a<br> member of the Board of Directors or of the Executive Committee holds at the request of the Company or companies controlled by it. No member of the Board of Directors or of the Executive Committee shall hold more than 5 such mandates.
4	Mandates shall mean any membership in the board of directors, in the executive board or in the advisory board, or a comparable function under foreign law, in a company with an<br> economic purpose. Mandates in different legal entities which are under joint control are deemed one mandate.
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5	The Board of Directors may issue regulations that may determine additional restrictions, taking into account the position of the respective member.

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15	Articles of Incorporation of Novartis AG
		Article 35
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Loans		No loans or credits shall be granted to the members of the Board of Directors or the Executive Committee.
Section 5		Annual Financial Statements, Consolidated Financial Statements and Profit Allocation
		Article 36
Financial year		The Board of Directors shall prepare for each financial year as of 31 December an annual report consisting of financial statements with a management report if required and<br> the consolidated financial statements.
		Article 37
Allocation of profit shown on the balance sheet, Reserves	1	The allocation of the profit shown on the balance sheet shall be determined by the General Meeting of Shareholders subject to the legal provisions. The Board of Directors<br> shall submit to the General Meeting of Shareholders its proposals.
	2	In addition to statutory reserves additional reserves may be accrued.
	3	Dividends which have not been claimed within five years after the due date fall back to the Company and shall be allocated to the general reserves.
Section 6		Publications and Place of Jurisdiction
		Article 38
Publications	1	Notifications to shareholders and external communications of the Company shall be made in the Swiss Official Gazette of Commerce. The Board of Directors may designate<br> additional publication organs.
	2	Notices to shareholders may instead or in addition be sent (i) by regular mail to their addresses entered in the share register, (ii) by email or (iii) in any other form that the Board of Directors deems appropriate.
		Article 39
Place of jurisdiction		The exclusive place of jurisdiction for any disputes arising from or in connection with the shareholdership in the Company shall be at the registered office of the Company.

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EXHIBIT 1.2

Regulations of the Board of Directors,<br><br> <br>the Board Committees and<br><br> <br>the Executive Committee<br><br> <br>of Novartis AG<br><br> <br><br><br> <br>(Organisationsreglement)<br> <br>March 7, 2023<br><br> <br>

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Novartis AG
4002 Basel, Switzerland
© March 2023, Novartis AG

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1	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Table of Contents
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Section 1	Scope of the Regulations, Organization in general	2
Section 2	General Provisions	2
Section 3	Meetings of the Board, the Board Committees and the Executive Committee	3
Section 4	Board of Directors	4
Section 5	Executive Committee	8
Section 6	Internal Audit	9
Section 7	Effectiveness, Amendments	10
Appendix I	Board Committees Charter	11
Appendix II	Independence Criteria for the Board and the Board Committees	23
	Abbreviations and Definitions	26

All references to individuals apply to both male and female persons.

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2	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
Section 1	Scope of the Regulations, Organization in general
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	Article 1
Scope	These Regulations govern the internal organization as well as the duties, powers and responsibilities of the following executive bodies and persons of the Company:<br><br> <br>– Board and its Committees<br><br> <br>– Board Chair<br><br> <br>– Vice-Chair<br><br> <br>– Lead Independent Director<br><br> <br>– CEO<br><br> <br>– Executive Committee (including its sub-committees) and<br><br> <br>– Internal Audit
	Article 2
Company Structure	The Company is a holding company, which directly or indirectly owns a global group of companies that conduct the Business. To ensure proper functioning of the Business in the interests of<br> the Company, its shareholders and other relevant stakeholders, and to comply with various requirements imposed by relevant laws and regulatory authorities, the Board shall supervise and, where necessary and appropriate, provide overall<br> strategic direction for the Business.
Section 2	General Provisions
	Article 3
Duty of Care and Loyalty	Each Director or Executive is under the duty to carry out his/her responsibilities with due care and to safeguard and further the interests of the Group, the Company, its shareholders and<br> other relevant stakeholders, including the creation of long-term value.
	Article 4
Conflict of Interest	Each Director or Executive arranges his/her personal and business affairs so as to avoid an actual or apparent Conflict of Interest.<br><br> <br><br><br> <br>No Director or Executive shall participate in decisions and resolutions on matters, which affect, or reasonably might affect, his/her interests or the interests of a person close to<br> him/her (but he or she may participate in the discussion). If the Director or Executive is in a position of a permanent Conflict of Interest or any other non-solvable situation that hinders him/her in carrying out his/her duties to the<br> full, he/she shall offer his/her resignation.<br><br> <br><br><br> <br>Each Director or Executive must make a notification immediately, if the circumstances change so that it might affect or appear to affect the Director’s or Executive’s independence or in<br> case of a Conflict of Interest. In case of a new mandate, notification must occur prior to accepting such new mandate.

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3	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Required disclosures include (but are not limited to):<br><br> <br>(i)    a material change (or contemplated change) of his/her business or professional affiliations or responsibilities; and/or<br><br> <br> <br>(ii)  any change of circumstances that may affect or appear to affect his/her independence or give rise to a Conflict of Interest.<br><br> <br><br><br> <br>Disclosure must be made by:<br><br> <br>(i)     the Board Chair to the Chair of the GSNC; and by<br><br> <br> <br>(ii)    a Director or the CEO to the Board Chair; and by<br><br> <br> <br>(iii)   an Executive to the CEO.<br><br> <br><br><br> <br>The Board Chair, the CEO and the Chair of the GSNC, respectively, must review the disclosures and inform the Board, respectively the Executive Committee, with a corresponding<br> proposal for appropriate mitigating measures, if any.
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	Article 5
Confidentiality	Each Director and Executive keeps at all times strictly confidential all information – except information already in the public domain – relating to the Company and/or the Group,<br> which the member has learned during the exercise of the duties. This obligation and duty continue even after the expiration of the term of office.<br><br> <br><br><br> <br>Documents of the Company and/or the Group must be returned by the Director or Executive at the latest on expiry of the term of office. If required, e.g. in case of legal<br> proceedings, the Director or Executive can access relevant documents at the office of the Corporate Secretary.
Section 3	Meetings of the Board, the Board Committees and the Executive Committee
	Article 6
No Representation of Members	A Director or Executive who is not able to participate in a Board, Board Committee or an Executive Committee meeting may not be represented by another Director or Executive or any<br> other person.
	Article 7
Quorum, Majority Requirements	Unless stated otherwise in these Regulations, the presence in person, by telephone, by video conference or other technical means of a majority of the members is required for any<br> meeting. No such quorum shall be required for resolutions of the Board concerning an amendment of the Articles (article 647 CO).<br><br> <br><br><br> <br>If the chair does not participate, the meeting will be chaired by the deputy or, in his/her absence, by any member appointed by the other members as ad hoc chair.

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4	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Resolutions require the affirmative majority of the votes cast. If an item is, however, not on the agenda, resolutions are passed by an affirmative vote of at least two-thirds of the<br> Directors or Executives present at a meeting.<br><br> <br><br><br> <br>In the event of a tie on any issue, (i) in a Board Committee, the full Board decides the issue, and (ii) in the Executive Committee, the CEO decides the issue.
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	Article 8
Circular Resolutions	A proposal for a circular resolution must be communicated to all members, giving a deadline for responding, and is only deemed to have passed if:<br><br> <br>(i)    more than two-thirds of all members cast a vote or give written notice that they abstain (written notice can include email notice);<br><br> <br> <br>(ii)   an absolute majority of all members casting a vote approve the proposed resolution; and<br><br> <br> <br>(iii)  no member requests a meeting within the deadline for responding in relation to the subject matter of the proposed resolution.<br><br> <br><br><br> <br>A circular resolution must be recorded under a separate heading in the minutes of the following meeting.
	Article 9
Secretary, Minutes	The Board and the Board Committees each appoint a secretary, who need not be a member of the body.<br><br> <br><br><br> <br>The secretaries of the Board and the Board Committees, and the Chief Legal Officer in case of the Executive Committee, keep the meeting minutes, which contain all resolutions adopted<br> at the meeting and the key decision-making factors.
	Article 10
Application to other Bodies	Articles 3 – 9 apply analogously to all other management committees of the Company and their members.
Section 4	Board of Directors
	Article 11
Independence	The majority of the Directors have to meet the independence criteria set forth in Appendix II.
	Article 12
Duties of the Board	The Board is the ultimate executive body of the Company.

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5	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
It shall resolve all Business matters, which are not reserved to the authority of the General Meeting or to other executive bodies of the Company by law, the Articles, or these<br> Regulations.<br><br> <br>In particular, the Board has the following duties:<br><br> <br>a) The ultimate direction of the Business, including, without limitation, the<br> taking of resolutions and the giving of instructions or overall guidance regarding the following matters (where applicable, the duties of the Board are further defined and specified in internal regulations):<br><br> <br>– The strategy<br> upon recommendation of the Executive Committee (including also key ESG aspects).<br><br> <br>– The entry into<br> new areas of activity and withdrawal from existing areas of the Business; acquisitions and divestments of companies, participations in companies or businesses, or incorporations or liquidations of companies or businesses, if such<br> matters are of fundamental significance to the Business.<br><br> <br>– The opening and<br> closing down of sites of fundamental significance to the Business.<br><br> <br>– The initiation<br> and settlement of legal proceedings of funda- mental significance to the Business.<br><br> <br>– The setting of<br> financial targets.<br><br> <br>– The review and<br> approval of corporate policies that are fundamental to the Group, as determined by the Board Chair and the CEO.<br><br> <br>– The adoption from time to time of further regulations and instructions regarding the organization of the Business and the duties and responsibilities of the executive bodies.
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b)  The determination of the organization of the Company and the Group.<br><br> <br>c)  The manner of governance of the Group.<br><br> <br>d)  The regular review of the Group’s culture.<br><br> <br>e)  The review of the Group’s risk management system and of the most significant risks and how these are<br> managed.<br><br> <br>f)       The<br><br><br><br><br> determination of the Group’s accounting system, financial controls and financial planning.<br><br> <br>g)  The review and approval of the annual report of the Company and of the Group, incl. the Compensation Report<br> and the annual reporting on non-financial matters.<br><br> <br>h) The<br><br><br><br><br><br><br> nomination or appointment, removal, determination of duties and responsibilities, and succession plans of the following persons (subject to the powers of the General Meeting):<br><br> <br>– Board Chair<br><br> <br>– Vice-Chair<br><br> <br>– Lead Independent Director<br><br> <br>– Board Committee members and<br> Chairpersons<br><br> <br>– CEO

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6	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
– Executives<br><br> <br>– Independent Proxy<br><br> <br>– Such other persons as the<br> Board may determine, from time to time, as having significant impact on the Business.<br><br> <br>i) The composition of the Board, including the appropriate skills and<br> experiences to be considered in succession planning.<br><br> <br> <br>j) The<br> designation of those persons who have signatory power for the Company and the manner in which such persons may sign on behalf of the Company.<br><br> <br> <br>k) The<br> ultimate supervision of the persons entrusted with the management of the Business, specifically in view of their compliance with laws, the Articles, these Regulations and other applicable regulations, directives and<br> instructions.<br><br> <br> <br>l) The<br> preparations for the General Meeting and carrying out the resolutions of the General Meeting, including the preparation of the proposals to the General Meeting related to the compensation of the Board and of the Executive<br> Committee and to the Compensation Report, as per the Articles.<br><br> <br> <br>m) The<br> notification of the court if liabilities exceed assets.<br><br> <br> <br>n) The<br> adoption of resolutions concerning an increase of the share capital to the extent that such power is vested in the Board (article 651 paragraph 4 CO), as well as resolutions concerning confirmation of capital increases and<br> related amendments to the Articles. The adoption of such resolutions shall be exempted from the majority requirement outlined in article 7.<br><br> <br> <br>o) The<br> determination of (i) the compensation strategy and of the principles, structure and design of compensation plans for the Executive Committee, (ii) the long-term incentive/equity plans, (iii) the compensation of the Directors<br> and of the CEO to be presented to the shareholders, and of the terms of employment of the CEO, (iv) the Group and divisional financial, strategic and operational targets and the evaluation of target achievement.<br><br> <br> <br>p) The<br> determination of the maximum aggregate amount or maximum partial amounts of compensation, in the event the General Meeting has not approved a proposal of the Board, as per the Articles.<br><br> <br> <br>q) The<br> determination of (i) whether or not a Director is independent, based on a proposal by the GSNC, and (ii) whether or not the ACC Directors meet the financial literacy and expertise standards.<br><br> <br> <br>r) The<br> decision on appropriate measures in case of a disclosure in accordance with article 4 of these Regulations.<br><br> <br> <br>s) The approval of other business, if such business exceeds the authority delegated from time to time by the Board to the Board Committees or to the Executive Committee.
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7	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Article 13
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Delegation of Management	Where not stipulated as a Board responsibility in the law, the Articles or these Regulations, the Board delegates the management of the Business to the Executive Committee,<br> pursuant and subject to these Regulations.
	Article 14
Meetings, Agenda	The Board meets at the invitation of the Board Chair as often as may be required.<br><br> <br><br><br> <br>Invitations for Board meetings contain the meeting agenda and are sent out at least five business days in advance, except for urgent matters. Also, any Director may request<br> a meeting for a specific purpose or the inclusion of a certain item on the agenda.
	Article 15
Right to Request Information	Directors have full and unrestricted access to the management and employees of the Group in the execution of their duties.
	Article 16
Independent Advisors	The Board has the authority to retain independent advisors for any matters within the scope of its responsibilities.
	Article 17
Evaluation of Board Performance	The Board conducts an annual evaluation of the performance of the Board, of the Board Committees and of the Board Chair.
	Article 18
Board Committees	The Board may establish ad hoc Board Committees and has the following permanent Board Committees:<br><br> <br>– GSNC (Governance, Sustainability and Nomination Committee)<br><br> <br>– ACC (Audit and Compliance Committee)<br><br> <br>– CC (Compensation Committee)<br><br> <br>– RC (Risk Committee)<br><br> <br>– STC (Science & Technology Committee)<br><br> <br><br><br> <br>The composition and duties of the permanent Board Committees are set forth in Appendix I.
	Article 19
Board Chair	In addition to other duties described in these Regulations and the Articles, the Board Chair has the following duties:<br><br> <br>a) Provides<br><br><br><br><br><br> leadership to the Board in its governance role, coordinating the tasks within the Board.<br><br> <br>b) Coordinates,<br><br><br><br><br><br> together with the Chairpersons, the work of the Board Committees.<br><br> <br>c) Establishes<br><br><br><br><br><br><br> and keeps a close working relationship with the CEO, providing advice and support while respecting the fact that

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8	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	the day-to-day management responsibility is delegated to the Executive Committee led by the CEO.<br><br> <br>d) Promotes effective relationships and communication between the Board, the CEO and the Executive Committee.<br><br> <br>e) Takes the lead in crisis situations.<br><br> <br>f) Together<br><br><br><br><br><br> with the CEO, ensures effective communication with shareholders, other relevant stakeholders and the general public; and<br><br> <br>g) Works closely with the CEO in evaluating Executives and in establishing succession plans for key management positions.
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	Article 20
Vice-Chair	a) Once a year, the Vice-Chair leads the Board’s annual assessment of the Board Chair.<br><br> <br>b) In case and as long as the Board Chair is incapacitated, the Vice-Chair assumes all of the Board Chair’s responsibilities.
	Article 20bis
Lead Independent Director	To support adequate control mechanisms, the Board can, if deemed appropriate and in the best interests of the Company, designate an experienced independent Director as<br> Lead Independent Director with the following duties:<br><br> <br>a) Chairs the sessions of the independent Directors; and<br><br> <br>b) Leads the independent Directors in case of a crisis or matter requiring their separate consideration or decision.<br><br> <br><br><br> <br>Every independent Director may request separate meetings of the independent Directors if the need arises.<br><br> <br><br><br> <br>The roles of the Vice-Chair and the Lead Independent Director can be held by two Directors or by one Director (combined role).
Section 5	Executive Committee
	Article 21
CEO	In addition to other duties that may be assigned by the Board, the CEO, supported by the Executive Committee, has the following duties:<br><br> <br>a) Overall responsibility for the management and performance of the Business.<br><br> <br>b) Leads the Executive Committee.<br><br> <br>c) Builds and maintains an effective Executive Committee and proposes adequate succession planning to the Board.<br><br> <br>d) Represents Novartis, in coordination with the Board Chair, with major customers, financial analysts, investors and the media.

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9	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Article 22
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Members of Executive Committee	The Executive Committee is headed by the CEO. It consists of such members as appointed or removed by the Board.
	Article 23
Duties of Executive Committee	The Executive Committee is responsible for the management of the Business. In particular, and without limitation, the Executive Committee has the following duties:<br><br> <br>a) Regularly<br><br><br><br><br> assess the achievement of the (financial and non-financial / ESG) targets for the Business.<br><br> <br>b) Submit<br><br><br><br><br><br> proposals to the Board or to one of the Board Committees for approval for items, requiring such approval based on these Regulations or further internal regulations.<br><br> <br>c) Implement the decisions taken by the Board or the Board Committees.<br><br> <br>d) Prepare<br><br><br><br><br><br> and submit quarterly and annual reports for the attention of the Board or the Board Committees, and keep the Board or the Board Committees informed of all matters of fundamental significance to the Business and/or that are<br> relevant to allow the Board or the Board Committees to fully perform their duties.<br><br> <br>e) Implement<br><br><br><br><br><br><br> modifications to the organization of the Business to ensure efficient operation of the Business and achievement of optimized consolidated results.<br><br> <br>f) Ensure<br><br><br><br><br> appropriate external stakeholder management, including an effective internal and external communication strategy.<br><br> <br>g) Ensure<br><br><br><br><br> that management capacity, financial and other resources are provided and used efficiently.<br><br> <br>h) Deal with such other matters as are delegated by the Board or a Board Committee to the Executive Committee.
	Article 24
Sub-committees of the Executive Committee	The Executive Committee may delegate duties as stipulated in article 23 above to other executives and committees and may empower them to further delegate their<br> responsibilities and authorities. Each such delegation must be in writing, and clear responsibilities and accountabilities must be established. The CEO ensures proper reporting to the Executive Committee as needed.
Section 6	Internal Audit
	Article 25
Duties of Internal Audit	The Internal Audit has to:<br><br> <br>a) Carry out operational and system audits, assisting the Divisions and Cross-Divisional Units in the accomplishment of objectives by providing an independent approach to the evaluation,<br> improvement, and effectiveness of their risk management and

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10	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	internal control framework. All Divisions, Cross-Divisional Units and subsidiaries of the Group are subject to audit.<br><br> <br>b) Prepare reports regarding the audits it has performed, and report to the ACC and to the CEO material irregularities, whether actual or suspected, without delay.<br><br> <br>c) Perform such other functions and audits as assigned to it by the Board, the ACC or the CEO.
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Section 7	Effectiveness, Amendments
	Article 26
Effectiveness, Amendments	These Regulations come into effect on March 7, 2023 and replace former regulations of the Board, the Board Committees and the Executive Committee.<br><br> <br><br><br> <br>These Regulations may only be amended or replaced by the Board.
Dr. Joerg Reinhardt<br><br> <br>Board Chair	Dr. Charlotte Pamer-Wieser<br><br> <br>Corporate Secretary
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11	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
Appendix I:	Board Committees Charter
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Section 1	General Provisions	12
Section 2	Roles and Responsibilities of the Board Committees
	- Roles and Responsibilities of the GSNC	13
	- Roles and Responsibilities of the ACC	15
	- Roles and Responsibilities of the CC	18
	- Roles and Responsibilities of the RC	21
	- Roles and Responsibilities of the STC	22

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12	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
Section 1	General Provisions
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	These General Provisions contain additional organizational requirements for Board Committees in addition to the rules set forth in the Regulations.
	Article 1
Composition	The GSNC, the ACC, the RC and the STC each consist of a minimum of 3 members. The CC consists of a minimum of 3 and a maximum of 5 members.<br><br> <br><br><br> <br>The Board elects the Chairpersons of the Board Committees.
	Article 2
Independence, Qualifications	Each Director of the GSNC, ACC, and CC has to meet the independence criteria set forth in Appendix II.<br><br> <br><br><br> <br>Each ACC member must further be financially literate, including at least one member who has accounting and related financial management expertise (“audit committee financial expert”), as<br> such qualifications are interpreted by the Board in its business judgment.<br><br> <br><br><br> <br>The “audit committee financial expert” must have<br><br> <br>(i)    an understanding of generally accepted accounting principles and financial statements;<br><br> <br><br><br> <br>(ii)     the ability to assess the general application of such principles in connection with the accounting for<br> estimates, accruals and reserves;<br><br> <br>(iii)   experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of<br> complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Group’s financial statements, or experience actively supervising one or more persons<br> engaged in such activities;<br><br> <br>(iv)    an understanding of internal control over financial reporting; and<br><br> <br> <br>(v)     an understanding of audit committee functions.
	Article 3
Coordination between ACC and RC	The Chairpersons of the RC and the ACC shall generally be appointed as members of the other Committee. To the extent appropriate, the Chairpersons of the ACC and the RC coordinate the<br> work of the ACC and the RC, in particular to ensure that there are as few as possible overlaps.

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13	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Article 4
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Meeting Participations and Interactions	Each Board Committee may invite to its meetings other Directors, Executives and such other persons, as the respective Board Committee deems appropriate to carry out its responsibilities.<br> The Board Chair may attend the Board Committee meetings in consultation with the relevant Chairperson.<br><br> <br><br><br> <br>Special rules apply to the presence of the following persons at Board Committee meetings:<br><br> <br>(i)     An Executive shall not be present during the decision on his/her own pay at a CC meeting<br><br> <br> <br>(ii)    Anyone with a personal interest in the matters to be discussed will be excluded from the GSNC, ACC, RC, and STC meeting, respectively.
	Article 5
Advisors, Investigations	The Board Committees shall have the authority to obtain advice and assistance from internal or external legal, accounting or other advisors. The ACC shall have the authority to conduct or<br> authorize investigations into any matter within the scope of its responsibilities.
	Article 6
Debriefing to the Board	The Board Committees regularly report to the Board on its deliberations and decisions and on the items set forth in Section 2 of this Appendix I. Other matters will be reported, as the<br> Board Committees deem appropriate.
Section 2	Roles and Responsibilities of the Board Committees
	Roles and Responsibilities of the Governance, Sustainability, and Nomination Committee (GSNC)
	Article 7
GSNC’s Mission Statement	The GSNC assists the Board in fulfilling its responsibilities with respect to the:<br><br> <br>(i)      governance of the Group;<br><br> <br> <br>(ii)     sustainability of the Group;<br><br> <br> <br>(iii)   identification of individuals who are qualified to become (or be re-elected as) Directors or the CEO.
	Article 8
GSNC’s Roles and Responsibilities	The GSNC has the following roles and responsibilities:
	In General
	1. Review<br><br><br><br><br> periodically the Articles and the Regulations and recommend to the Board changes thereto in respect of good corporate governance and fostering shareholders’ rights.

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14	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
2. Regularly<br><br><br><br><br><br><br> consult with the Board Chair in carrying out the duties of the GSNC.<br><br> <br>3. Regularly<br><br><br><br><br><br><br> discuss feedback from investors, proxy advisors and analysts concerning the Group’s performance in ESG matters.<br><br> <br>4. Annually review<br> the voting results of the General Meeting.<br><br> <br>5. Prepare and<br> annually review succession plans for the Board Chair, the Vice-Chair, the Lead Independent Director, Directors, Board Committee members, Chairpersons and the CEO, and make proposals to the Board for the election and the re-election by the<br> Board respectively by the General Meeting for Directors, the Board Chair and CC members.<br><br> <br>6. Make<br><br><br><br><br> proposals to the Board for the election of the Independent Proxy by the General Meeting.<br><br> <br>7. Recommend<br><br><br><br><br><br> such other actions not set out below regarding the governance of the Group that are in the best interests of the Group, the Company’s shareholders and other relevant stakeholders, as the GSNC deems appropriate.
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Board Composition
8. Regularly<br><br><br><br><br><br><br> review and as necessary update the Board skills matrix.<br><br> <br>9. Regularly review<br> the composition and size of the Board to ensure the Board has the proper skills and experience and consists of persons with sufficiently diverse backgrounds and viewpoints.<br><br> <br>10. Determine the criteria for selection of the Board Chair, the Vice-Chair, the Lead Independent Director,<br> Directors, Chairpersons and Board Committee members. The GSNC considers factors such as (i) personality, skills and knowledge, (ii) diversity of gender, age, nationality, ethnicity, viewpoints, professional backgrounds and expertise,<br> (iii) business and other experience relevant to the Business, (iv) the ability and willingness to commit adequate time and effort to Board and Board Committee responsibilities, (v) the extent to which personality, background, expertise,<br> knowledge and experience will interact with other Directors to build a diverse and effective Board, and (vi) any disclosures made under article 4 of the Regulations, in particular whether existing board memberships or other positions<br> held by a candidate could lead to a Conflict of Interest.<br><br> <br>11. With the participation of the Board Chair, actively seek, interview and screen individuals qualified to become a<br> candidate for the position as a Director, for recommendation to the Board.<br><br> <br>12. Assess and recommend to the Board as to whether Directors should stand for re-election. For its assessment, the<br> GSNC considers factors such as those mentioned in item 10 of this article, the contributions to the Board and the Company, and the term limit.

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15	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Board Committees
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	13. With the Board Chair, make recommendations to the Board for the creation of additional Board Committees or a change<br> in mandate or dissolution of Board Committees.<br><br> <br>14. With the Board Chair, periodically review the composition of the Board Committees. When doing so, the GSNC takes<br> into account whether a Board Committee member is suitable for the tasks of the respective Board Committee, including an envisioned quorum of independent Committee members, if applicable.<br><br> <br>15. With the Board Chair, periodically review the chairpersonships of the Board Committees.
	Conflicts, Other Directorships and Board member
	16. Review directorships and consulting agreements of Board members for conflicts of interest.<br><br> <br>17. Annually submit to the Board a proposal concerning the determination of the independence status of the Directors<br> and the corresponding disclosure.
	Sustainability
	18. Oversee the Group’s strategy and governance on sustainability, including access to medicine and healthcare, global<br> health, environmental sustainability, human capital management and other material ESG aspects that are relevant for the Group’s performance or reputation (unless covered by another Committee).<br><br> <br>19. At least annually review and discuss the Group’s performance against relevant ESG reporting frameworks and indices.<br><br> <br>20. Regularly review and discuss emerging trends with regard to sustainability.<br><br> <br>21. Regularly advise the Board and provide counsel to the management on sustainability.
	Roles and Responsibilities of the Audit and Compliance Committee (ACC)
	Article 9
ACC’s Mission Statement	The ACC assists the Board in monitoring the:<br><br> <br>(i)     integrity of the financial statements of the Group;<br><br> <br>(ii)    External Auditor’s qualifications and independence;<br><br> <br>(iii)   performance of the Internal Audit function and of the External Auditor;<br><br> <br>(iv)  compliance by the Group with legal and regulatory requirements; and<br><br> <br>(v)    financial situation of the group to assess the necessity of actions as set out in article 24 (h) of the Articles.

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16	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Article 10
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ACC’s Role and Responsibilities	The ACC has the following roles and responsibilities:
	Regarding the External Auditor
	1. Annually evaluate<br> the qualifications, performance and independence of the External Auditor, including considering whether the External Auditor’s quality controls are adequate and whether the provision of permitted non-audit services is compatible with<br> maintaining the External Auditor’s independence, taking into account the opinions of management and Internal Audit.<br><br> <br>2. Ensure rotation<br> of the audit partners of the External Auditor at least every five years. Consider whether, in order to ensure continuing auditor independence, it is appropriate to adopt a policy of rotating the external auditing firm on a regular basis.<br><br> <br>3. On behalf of<br> the Board, which has fully delegated this task to the ACC, (1) select and nominate the External Auditor for election by the General Meeting, and (2) be directly responsible for the supervision and compensation of the External Auditor<br> (including the resolution of any disagreement between management and the External Auditor regarding financial reporting).<br><br> <br>4. On behalf of<br> the Board, which has fully delegated this task to the ACC, pre-approve all auditing services, internal control-related services and non-audit services permitted under applicable statutory law, regulations and listing requirements to be<br> performed for the Group by its External Auditor.<br><br> <br>5. Obtain and<br> review a report from the External Auditor at least annually regarding (1) the External Auditor’s internal quality- control procedures, (2) any material issues raised by the most recent quality-control review, or peer review, of the<br> firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (3) any steps taken to deal with any such issues,<br> and (4) all relationships between the External Auditor and the Group.<br><br> <br>6. Discuss with<br> the External Auditor the results of their audits, any unusual items or disclosures contained in the audits and the matters required by Public Company Auditing Oversight Board Auditing Standards No. 1301, as revised, and request a formal<br> written statement from the External Auditor documenting such discussion.
	Regarding Internal Audit
	7. On a quarterly<br> basis, review the significant reports to management, prepared by the Internal Audit department and management’s responses and supervise the remediation of open audit issues.

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17	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
8. Review periodically the adequacy of the organizational structure, budget and appointment or replacement of the senior Internal Audit executives.<br><br> <br>9. Discuss with the CEO, as needed, the Internal Audit department’s responsibilities, staffing and any recommended changes in the planned scope of the Internal Audit.
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Regarding Financial Reporting and internal controls
10. Review and discuss with management and the External Auditor the Company’s and Group’s quarterly and annual<br> financial statements (including the sections on Operating and Financial Review and Prospects) to consider significant financial reporting issues and judgments made in connection with the preparation of the Company’s and Group’s<br> financial statements, including any significant changes in the Company’s or Group’s selection or application of accounting principles.<br><br> <br>11. On behalf of the Board, which has fully delegated this task to the ACC, approve the Company’s and Group’s<br> quarterly financial statements for the first three quarters of each calendar year and the corresponding financial results releases. The Board remains responsible for the approval of the annual financial statements of the Company and<br> the Group and of the corresponding results releases.<br><br> <br>12. Annually review and discuss with management and the External Auditor their assessment of the effectiveness<br> of the Group’s internal controls, disclosure controls and procedures for financial reporting and whether any changes are appropriate in light of such assessment.<br><br> <br>13. Review and discuss (1) all significant deficiencies in the design or operation of internal controls which<br> could adversely affect the Group’s ability to record, process, summarize and report financial data, including any material weaknesses in internal controls, (2) any fraud, whether or not material, that involves management or other<br> employees who have a significant role in the Group’s internal controls, and (3) any significant changes in internal controls or in other factors that could significantly affect internal controls, including any corrective actions<br> with regards to significant deficiencies and material weaknesses.Review the non-financial data contained in the Company’s annual reporting.<br><br> <br>14. Review such other matters in relation to the Group’s accounting, auditing, financial reporting and<br> compliance with law and internal policies.
Regarding Significant Legal Matters and Regulatory Risks

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18	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
15. Review major issues regarding the status of the Group’s material legal matters, as well as major legislative<br> and regulatory developments that may have significant impact on the Group, and get updates on such developments from the Chief Legal Officer at least annually.
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Regarding an Effective Compliance Program and Quality Assurance / patient safety
16. Twice a year, review the processes and procedures used by management to execute an effective compliance<br> program, and compliance by Novartis associates with those Group policies falling into the subject matter expertise of the ACC.<br><br> <br>17. Review updates from the Company’s SpeakUp office twice a year regarding whistleblowing activities and trends.<br><br> <br>18. Establish procedures for (a) the receipt, retention and treatment of complaints received by the Group<br> regarding accounting, internal accounting controls or auditing matters, and (b) the confidential, anonymous submission by employees of the Group of concerns regarding questionable accounting or auditing matters to the SpeakUp<br> office.<br><br> <br>19. Review updates with regards to Quality Assurance / patient safety twice a year.<br><br> <br>20. Annually review updates from Health, Safety & Environment.
Other
21. Every other year, review the Group’s tax policy.<br><br> <br>22. At least annually, hold closed sessions with the External Auditor, the Chief Financial Officer and the Head<br> Internal Audit, respectively.<br><br> <br>23. Annually review the financial literacy of each ACC member to determine whether he/she meets the applicable<br> legal standards, confirm the audit committee financial expert, and propose to the Board the appropriate determination and its disclosure.<br><br> <br>24. Annually review and reassess the adequacy of articles 9-10 of this Appendix I and submit proposed changes to<br> the Board for approval.

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19	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Roles and Responsibilities of the Compensation Committee (CC)
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	Article 11
CC’s Mission Statement	The CC assists the Board concerning, but not limited to, the:<br><br> <br>(i)     compensation philosophy and strategy;<br><br> <br>(ii)    design of the compensation plans;<br><br> <br>(iii)    compensation of the Board Chair, the Directors and of the CEO and other members of the Executive Committee.<br> The CC has oversight of the remuneration policy for the wider employee population;<br><br> <br>(iv)   preparation of the Compensation Report and other relevant disclosures.
	Pay for performance is one of the guiding principles of the compensation strategy of the Group. The Group aims to reward those associates who achieve competitive business results and<br> exemplify the Group values and behaviors. The compensation strategy strives to strengthen the performance-oriented culture and to reinforce entrepreneurial behavior resulting in contributions that motivated and dedicated associates make<br> to sustain superior business results whilst holding executives accountable for behavior that displays innovation, quality, performance, collaboration, courage and integrity.
	Article 12
CC’s Role and Responsibilities	The CC has the following responsibilities:<br><br> <br>1. Develop a<br> compensation strategy in line with the principles described in the Articles, and submit to the Board for approval.<br><br> <br>2. Develop the<br> principles and design of compensation plans, long-term incentive/equity plans, pension arrangements and benefits for the Executives and the Directors, and submit to the Board for approval.<br><br> <br> <br>3. Support the Board in preparing the proposals to the General Meeting regarding the compensation of the Directors and the Executives.<br><br> <br>4. Prepare the Compensation Report and submit to the Board for approval.<br><br> <br>5. Propose to the Board the contractual terms (if any) and compensation of the Directors (incl. the Board Chair) and the CEO.<br><br> <br>6. Determine, after consulting with the CEO, the terms of employment, promotion or termination of the other Executives (except for the CEO).<br><br> <br>7. Develop the terms of, and administer, the Group’s long-term incentive/equity compensation plans, including the weightings, payout curves and caps for the chosen performance measures.

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20	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
8. Assess whether the Group’s incentives for associates below Executive Committee level are appropriately aligned to business performance and do not encourage excessive risk taking.<br><br> <br>9. Determine the critical performance measures (financial, strategic and operational) that inform how well the Group and its Divisions are performing in relation to the business strategy for incorporation<br> into the incentive plans, as well as any measures relating to Environmental, Social and Governance (ESG).<br><br> <br>10. Periodically<br><br><br><br> review and propose to the Board for approval a peer group(s) of companies for executive compensation comparisons.<br><br> <br>11. At the start of each performance period, approve the target total direct compensation levels and the mix of compensation (fixed/variable, short/long-term,<br> individual/Group/Division, and cash/equity) for Executive Committee members and direct reports to the Board Chair taking into consideration pay and conditions for the wider population of Group associates.<br><br> <br>12. At<br><br><br><br> the end of each performance period, taking into consideration the Board’s evaluation of Group and divisional performance against targets established at the beginning of the performance cycle, approve performance results<br> under the incentive plans, evaluate individual performance, approve the amount of compensation earned by Executive Committee members and recommend the amount of compensation earned by the CEO to the Board for approval taking<br> into account the overall performance of the Business and, if appropriate, making adjustments to the formulaic outcome of any incentive plans, within the plan Rules.<br><br> <br>13. Consider<br><br><br><br> and decide whether there is a need for malus and/or clawback provisions to be exercised and, if so, the extent and form of the malus and/or clawback.<br><br> <br>14. Incorporate<br><br><br><br> the recommendations of the STC for the establishment of innovation targets under incentive compensation plans at the start of each performance cycle and measurement of achievement thereof at the end.<br><br> <br>15. Periodically<br><br><br><br> assess the effectiveness of the executive short-term and long-term incentive plans in relation to the Group’s strategic objectives, values and pay-for-performance principles.<br><br> <br>16. Work<br><br><br><br> together with other Board Committees, to ensure that executive compensation is correctly aligned to performance and is not structured in a way that could lead to inappropriate risk taking.<br><br> <br>17. Annually<br><br><br><br> assess the level of Board compensation against the peer group and other relevant companies and submit to the Board its recommendations for the compensation of Directors and the compensation and terms of employment of the<br> Board Chair.
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21	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	18. Establish executive and director stock ownership guidelines and stock trading policies, and monitor<br> compliance with such policies.<br><br> <br>19. Inform the Board about policies, programs and key decisions as well as statistical comparisons and<br> benchmarking of compensation levels against key competitors and regularly report to the Board on the decisions and deliberations of the Compensation Committee.<br><br> <br>20. In collaboration with the Board Chair, oversee communication and engagement on executive compensation<br> matters with shareholders and their advisors, including shareholder voting on Board and Executive Committee compensation, and assess the voting results on executive compensation matters of the most recent General Meeting.<br><br> <br>21. Be kept informed of the remuneration of the workforce and related policies and keep abreast of any<br> developments.<br><br> <br>22. Annually assess the engagement and performance of compensation consultants or other outside advisors<br> engaged by the CC and their independence in relation to any potential conflicts of interest and manage the rotation/renewal of such advisors.<br><br> <br>23. Keep abreast of regulatory and corporate governance best practice requirements regarding Board,<br> Executive Committee and other senior executive compensation.<br><br> <br>24. Keep abreast of market trends and consideration of external factors that may influence pay in terms of<br> design, structure, quantum, disclosure etc.<br><br> <br>25. Establish an annual calendar of activities for the upcoming year, including special projects to be<br> undertaken by the CC.<br><br> <br>26. Review and reassess the adequacy of articles 11-12 of this Appendix I and submit proposed changes to<br> the Board for approval.<br><br> <br>27. Assume other responsibilities assigned to it by law, the Articles and by the Board.
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	Roles and Responsibilities of the Risk Committee (RC)
	Article 13
RC’s Mission Statement	The RC will assist the Board in ensuring that risks are properly assessed and professionally managed by:<br><br> <br>(i)   overseeing the Group’s risk management system and processes; and<br><br> <br>(ii)  reviewing the Group’s risk portfolio and related actions implemented by management.

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22	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Article 14
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RC’s Role and Responsibilities	The RC has the following role and responsibilities:
	1. Ensure that the<br> Group has implemented an appropriate and effective risk management system and process.<br><br> <br>2. Ensure that all<br> necessary steps are taken to foster a culture of risk-adjusted decision-making without constraining reasonable risk taking and innovation.<br><br> <br>3. Review with<br> management and Internal Audit the identification, prioritization and management of the risks, the accountabilities and roles of the functions involved with risk management, the risk portfolio and the related actions implemented by<br> management.<br><br> <br>4. Inform the<br> Board on a periodic basis on the risk management system and on the most significant risks and how these are managed.<br><br> <br>5. Review such<br> other matters in relation to the Group’s risk management, as the RC may, in its own discretion, deem desirable in connection with its responsibilities described above.<br><br> <br>6. Annually<br> review updates on cyber security.<br><br> <br>7. Keep itself<br> up to date on risk management best practices. The Chief Ethics, Risk and Compliance Officer, or his/her designee, is expected to update the RC at least once a year on developments in this area.
	Roles and Responsibilities of the Science & Technology Committee (STC)
	Article 15
STC’s Mission Statement	The STC (i) oversees the science and technology strategy, including digital and data related innovation, (ii) evaluates and challenges the effectiveness and competitiveness of<br> innovation-related functions, (iii) reviews and discusses emerging scientific trends and activities critical to the success of science and innovation, and (iv) reviews the R&D portfolio.
	Article 16
STC’s Role and Responsibilities	The STC has the following role and responsibilities:
	1. Monitoring<br> emerging scientific, data-related, technological and research trends and issues, and bringing recommendations to the Board.<br><br> <br>2. Informing the<br> Board on a periodic basis about critical developments for the success of the portfolio and for scientific, technological and research activities as well as benchmarking.

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23	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	3. Assisting the<br> Board with setting the Company’s strategy for science, data, technology and research.<br><br> <br>4. Assisting the<br> Board with oversight and evaluation of the performance of the scientific, technological and research teams within the Company in relation to the strategy.<br><br> <br>5. Review of<br> performance and proposed targets in the area of science, technology and research.<br><br> <br>6. Reviewing such<br> other matters in relation to science, data, technology and research as the STC may, in its own discretion, deem desirable in connection with its responsibilities.
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Appendix II	Independence Criteria for the Board and the Board Committees
	Independence of the Directors
	The GSNC annually submits to the full Board a proposal concerning the determination of the independent status of all Directors. For purposes of such assessment, the GSNC considers all<br> relevant facts and circumstances of which it is aware.<br><br> <br><br><br> <br>In order to be considered independent, a Director shall not have any material relationship with the Group other than his/her service as a Director.
	I. Material Relationships
	1. A Director will not be considered independent if<br><br> <br>– the Director or his/her<br> immediate Family Member owns more than 10% of the stock of the Company;<br><br> <br>– the Director has<br> received direct compensation (other than for former service as an interim Board Chair) of more than USD 120 000 p.a. (other than dividends or Board/Board Committee fees and retirement or deferred pay for prior service, provided such<br> compensation is not contingent in any way on continued service) from the Group within the last three years;<br><br> <br>– a Family Member has<br> received direct compensation of more than USD 120 000 p.a. (other than compensation received for service as an employee other than an executive officer) from the Group within the last three years;<br><br> <br>– the Director is, or has<br> been within the last three years, an employee of the Group;<br><br> <br>– a Family Member is, or<br> has been within the last three years, an executive officer of the Group;<br><br> <br>– the Director is a<br> current partner or employee of the External Auditor of the Group;<br><br> <br>– a Family Member is a<br> partner of the External Auditor or is an employee of the External Auditor and works on the Group’s audit;

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24	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
– the Director or a<br> Family Member is a former partner or employee of the External Auditor who personally worked on the Group’s audit during the last three years;<br><br> <br>– the Director or a<br> Family Member is, or has been within the last three years, employed as an executive officer of an enterprise while any of the present Executives serves or has served on that enterprise’s compensation committee;<br><br> <br>– an enterprise has made payments to or<br> received payments from the Group for goods, property or services in an amount that exceeds, in any of the last three fiscal years, the greater of USD 1 million or 2% of the enterprise’s consolidated gross revenues, and<br><br> <br>– the Director is a board member or<br> employee of that enterprise or holds more than 10% of the shares in that enterprise; or<br><br> <br>– a Family Member is a board member<br> or executive officer or holds more than 10% of the shares in that enterprise.<br><br> <br>2.  In addition to the independence<br> criteria set forth above for all Directors in Section 1, an ACC Director will not be considered independent if<br><br> <br>– the ACC Director<br> or his/her spouse, minor child, minor stepchild, or child or stepchild sharing the ACC Directors’ home, accepts any salary or consulting, advisory or other compensatory fee (other than Board/Board Committee compensation) from the<br> Group;<br><br> <br>– the ACC Director<br> is a partner, a member, an officer such as a managing director, executive officer or occupies a similar position in an enterprise that provides advisory services such as accounting, legal, investment banking or financial advisory<br> services to the Group;<br><br> <br>– an ACC Director simultaneously serves on the audit committees of more than two public companies other than the Company’s, then the GSNC must determine that such simultaneous service<br> would not impair the ability of such Director to effectively serve on the ACC.<br><br> <br>3.  In addition to the independence criteria set forth for all Directors in<br> Section 1, above, when making its assessment as to the independent status of a CC Director, the GSNC considers whether the CC Director receives compensation from any person or entity that would impair his or her ability to make<br> independent judgments about the Executive compensation.
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II. Immaterial Relationships
Unless the GSNC concludes in its assessment to the contrary, a relationship is presumed not to impair the independence of a Director if<br><br> <br>– the Director or a<br> Family Member received from the Group, during the last fiscal year, personal benefits (other than the coverage of

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25	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
travel expenses incurred by a Family Member in connection with meetings of the Board) having an aggregate value of less than USD 5 000;<br><br> <br>– a Family Member is<br> an employee but not an executive officer of the Group, unless the Family Member is an ACC Director’s spouse, minor child, minor stepchild or child or stepchild sharing the ACC Director’s home;<br><br> <br>– the Director or a<br> Family Member is a board member or executive officer of a non-profit organization and the Group’s contributions to such organization did not exceed, in any of the last three fiscal years, the greater of USD 1 million or 2% of the<br> organization’s consolidated gross revenues;<br><br> <br>– an enterprise in<br> which the Director or a Family Member is a director, executive officer or employee has been indebted to the Group in connection with a transaction in the ordinary course of business or in an amount that did not exceed USD 100 000<br> during the last fiscal year;<br><br> <br>– the Director or a<br> Family Member serves on the board of another enterprise at which an Executive or another Director also serves as board member.<br><br> <br><br><br> <br>The enumeration of relationships mentioned in this Section II is merely exemplary. The fact that a particular relationship is not listed does not mean that the relationship<br> affects the independence of a Director.
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26	Regulations of the Board of Directors, the Board Committees and the Executive Committee of Novartis AG
	Abbreviations and Definitions
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ACC	Audit and Compliance Committee of the Board
Appendix I	Appendix I to these Regulations which forms an integral part of these Regulations (Board Committees Charter)
Appendix II	Appendix II to these Regulations which forms an integral part of these Regulations (Independence Criteria for the Board and the Board Committees)
Articles	Articles of Incorporation of the Company
Board	Board of Directors of the Company
Board Chair	Chair of the Board
Board Committee(s)	Any or all committee(s) of the Board
Business	Business operations conducted by the Group
CC	Compensation Committee of the Board
Chairperson(s)	Any or all Director(s) who chair(s) a / the Board Committee(s)
CO	Swiss Code of Obligations
Company	Novartis AG
Compensation Report	Compensation report of the Company
Conflict of Interest	Any personal interest, or the interest of a closely related person or company, that a Director or Executive might have in a particular matter which does or might be<br> regarded to conflict with the interests of the Company or the Group
Cross-Divisional Unit(s)	Any or all cross-divisional organizational unit(s) supporting the Divisions
Director(s)	Any or all member(s) of the Board
Division(s)	Any or all global operating divisions of the Group, including its business units, if any
ESG	Environmental, Social and Governance
Executive Committee	Executive committee of the Company
Executive(s)	Any or all Executive Committee member(s)
External Auditor	The Group’s external auditor
Family Member	An immediate family member of a Director, i.e., including a person’s spouse, parents, children, stepchildren, siblings, mother-, father-, brothers-, sisters-, sons- and<br> daughters-in-law and anyone (other than domestic employees) who share such person’s home
General Meeting	General meeting of shareholders of the Company
Group	Novartis and its subsidiaries
GSNC	Governance, Sustainability and Nomination Committee of the Board
Independence Criteria	Independence criteria set forth in Appendix II
Internal Audit	The Group’s internal audit
Lead Independent Director	Lead Independent Director of the Board
RC	Risk Committee of the Board
Regulations	These Organizational Regulations of the Company, including Appendix I and Appendix II which form an integral part of these Regulations
STC	Science & Technology Committee of the Board
Vice-Chair	Vice-Chair of the Board

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EXHIBIT 2.3

Exhibit 2.3

DESCRIPTION OF SECURITIES REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT

As of December 31, 2023 Novartis AG (“we,” “us,” and “our”) had the following series of securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”):

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Ordinary shares, nominal value CHF 0.49 per share

—*

New York Stock Exchange*

American Depositary Shares, each representing 1 share

NVS

New York Stock Exchange

*Not for trading but only in connection with the registration of American Depositary Shares representing such ordinary shares.

Our shares are listed in Switzerland on the SIX Swiss Exchange (the “SIX”). American Depositary Shares (“ADSs”), each representing one ordinary share, nominal value 0.49 Swiss Francs per share of Novartis AG (the “shares”), have been available in the US through an American Depositary Receipt (“ADR”) program since December 1996. This program was established pursuant to the deposit agreement, as amended and restated from time to time, that we entered into with JPMorgan Chase Bank, N.A., New York (“JPMorgan Chase”), as depositary (the “Deposit Agreement”). Our ADRs have been listed on the New York Stock Exchange (the “NYSE”) since May 2000 and are traded under the symbol NVS. In connection with this listing (but not for trading), the shares are registered under Section 12(b) of the Exchange Act. This exhibit contains a description of the rights of (i) the holders of the shares and (ii) ADR holders. Shares underlying the ADSs are held by JPMorgan Chase, the depositary, and holders of ADSs will not be treated as holders of the shares.

The following summary is subject to and qualified in its entirety by Novartis AG’s Articles of Incorporation (the “Articles”), Regulations (the “Board Regulations”) of the Novartis AG Board (the “Board”), and by Swiss law, particularly the Swiss Code of Obligations (the “Swiss CO”). This is not a summary of all the significant provisions of the Articles, the Board Regulations, or of Swiss law and does not purport to be complete. Capitalized terms used but not defined herein have the meanings given to them in Novartis AG’s annual report on Form 20-F for the fiscal year ended December 31, 2023 (the “Annual Report”) and in the Deposit Agreement, which is an exhibit to the Post-Effective Amendment to our registration statement on Form F-6 filed with the SEC on December 16, 2022.

ORDINARY SHARES

Item 9. General

9.A.3 Pre-emptive rights

If a capital increase is approved, then our shareholders would generally have certain pre-emptive rights to obtain newly issued shares in an amount proportional to the nominal value of the shares they already hold. These pre-emptive rights could be excluded in certain limited circumstances with the approval of a resolution adopted at a General Meeting of Shareholders (“General Meeting”) by a supermajority of two thirds of the votes. Pre-emptive rights, if not excluded, are transferable during the subscription period relating to a particular offering of shares and may be quoted on the SIX. US holders of shares, or US holders of ADRs, may not be able to exercise the pre-emptive rights attached to the shares or to the shares underlying their ADRs unless a registration statement under the US Securities Act of 1933, as amended (the “Securities Act”), is effective with respect to such rights and the related shares, or an exemption from this registration requirement is available. If pre-emptive rights could not be exercised by an ADR holder, the depositary would, if possible, sell the holder’s pre-emptive rights and distribute the

1

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net proceeds of the sale to the holder. If the depositary determines, in its discretion, that the rights could not be sold, the depositary might allow such rights to lapse.

9.A.5 Type and class of securities

Each share has nominal value of 0.49 Swiss Francs per share. The respective number of shares that have been issued as of December 31, 2023 is given in Item 6.C of the Annual Report. Novartis AG shares are issued as uncertificated securities (in the sense of the Swiss Code of Obligations) and as book entry securities (in terms of the Swiss Act on Intermediated Securities). All shares have equal voting rights and carry equal entitlements to dividends. No participation certificates, non-voting equity securities (Genussscheine) or profit-sharing certificates have been issued.

Item 9.A.6. Limitations or qualifications

Not applicable.

Item 9.A.7. Other rights

Not applicable.

Item 10.B Memorandum and articles of association

10.B.3 Shareholder rights

Because Novartis AG has only one class of registered shares, the following information applies to all shareholders.

(a) Under the Swiss CO, we may only pay dividends out of balance sheet profits or out of distributable reserves. In any event, under the Swiss CO, while the Board may propose that a dividend be paid, we may only pay dividends upon shareholders’ approval at a General Meeting. Furthermore, the Swiss CO requires us to accrue general legal reserves under certain circumstances so long as these reserves amount to less than 20% of our registered share capital, and Swiss law and the Articles permit us to accrue additional reserves beyond the statutory reserves. Our auditors must confirm that the dividend proposal of our Board conforms with the Swiss CO and the Articles. Our Board expects to recommend the payment of a dividend in respect of each financial year. See “Item 6. Directors, Senior Management and Employees—Item 6.C Board Practices—Capital Structure—Limitation on transferability—Per-share information” and “Item 8. Financial Information—Item 8.A. Consolidated statements and other financial information—Dividend policy.” of our Annual Report.

Dividends are usually due and payable shortly after the shareholders have passed a resolution approving the payment. Dividends that have not been claimed within five years after the due date revert to us and are allocated to our general reserves. For information about deduction of the withholding tax or other duties from dividend payments, see “Item 10. Additional Information—Item 10.E Taxation” of our Annual Report.

(b) Each share is entitled to one vote at a General Meeting. Voting rights may only be exercised for shares registered with the right to vote on the record date for the applicable General Meeting. In order to do so, the shareholder must file a share registration form with us, setting forth the shareholder’s name, address and citizenship (or, in the case of a legal entity, its registered office). If the shareholder has not timely registered its shares, then the shareholder may not vote at, or participate in, a General Meeting.

To vote its shares, the shareholder must also explicitly declare that it has acquired the shares in its own name and for its own account. If the shareholder refuses to make such a declaration, the shares may not be voted unless the Board recognizes such shareholder as a nominee.

The Articles provide that no shareholder shall be registered with the right to vote shares comprising more than 2% of the registered share capital. The Board may, upon request, grant an

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exemption from this restriction. Considerations include whether the shareholder supports our goal of creating sustainable value and has a long-term investment horizon. Furthermore, the Articles provide that no nominee shall be registered with the right to vote shares comprising more than 0.5% of the registered share capital. The Board may, upon request, grant an exemption from this restriction if the nominee discloses the names, addresses, and number of shares of the persons for whose account it holds 0.5% or more of the registered share capital. The same restrictions indirectly apply to ADR holders. We have in the past granted exemptions from the 2% rule for shareholders and the 0.5% rule for nominees.

For purposes of the 2% rule for shareholders and the 0.5% rule for nominees, groups of companies and groups of shareholders acting in concert are considered to be one shareholder. These rules also apply to shares acquired or subscribed by the exercise of subscription, option or conversion rights.

After hearing the registered shareholder or nominee, the Board may cancel, with retroactive effect as of the date of registration, the registration of the shareholders if the registration was effected based on false information.

Registration restrictions in the Articles may only be removed upon a resolution carrying a two thirds majority of the votes represented at a General Meeting.

Except as noted below, shareholders’ resolutions require the approval of an absolute majority of the votes present at a General Meeting. As a result, abstentions have the effect of votes against such resolutions. Some examples of shareholders’ resolutions requiring a vote by such “absolute majority of the votes” are:

• Adoption and amendment of the Articles

• Election and removal of the Board Chair, the Board and Compensation Committee members, the Independent Proxy and the external auditor

• Approval of the management report, the consolidated financial statements and the report on non-financial matters

• Approval of the financial statements of Novartis AG, and the decision on the appropriation of available earnings shown on the balance sheet, in particular with regard to dividends (including any repayment of the statutory capital reserves and the approval of interim dividends and the interim financial statements required for such purpose), if any

• Approval of the maximum aggregate compensation of the Board (from an Annual General Meeting of Shareholders (“AGM”) until the next AGM) and of the Executive Committee (for the financial year following the AGM)

• Discharge of Board and Executive Committee members from liability for matters disclosed to the General Meeting

• Decision on other matters that are reserved by law or by the Articles (e.g., advisory vote on the Compensation Report) to the General Meeting

According to the Articles and Swiss law, the following matters require the approval of a “supermajority” of at least two thirds of the votes present at a General Meeting:

• Alteration of the purpose of Novartis AG

• The consolidation of shares, unless the approval of all affected shareholders is required

• Increase of the share capital out of equity, by contributions in kind or by way of set-off against receivable, or the grant of special rights

• Restriction or cancellation of subscription rights

• Introduction of a conditional capital or capital band

• Creation of shares with increased voting powers

• Implementation of restrictions on the transfer of registered shares, and the removal of such restrictions

• Change of the currency of the share capital

• Introduction of the deciding vote for the presiding officer at the General Meeting

• A provision in the Articles allowing the General Meeting to be held abroad

• Delisting of the shares of the Company

• Change of the registered office of Novartis AG

• Introduction of an arbitration clause in the Articles

• Merger, split or transformation of Novartis AG under the Swiss Merger Act (subject to mandatory statutory provisions)

• Dissolution of Novartis AG

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Our shareholders are required, on an annual basis, to elect all Directors (including the Board Chair), the Compensation Committee members, the external auditor and the Independent Proxy. The Articles do not provide for cumulative voting of shares.

At a General Meeting, shareholders can be represented by a legal representative or, by means of a written proxy, by a representative of choice. Furthermore, a shareholder may be represented by the Independent Proxy. Votes are taken either by a show of hands or by electronic voting, unless the General Meeting resolves to have a ballot or where a ballot is ordered by the chair of the meeting.

ADSs, each representing one Novartis AG share and evidenced by ADRs, are issued by our depositary JPMorgan Chase Bank, N.A., New York, and not by us. The ADR is vested with rights defined and enumerated in the Deposit Agreement (such as the rights to vote, to receive a dividend and to receive a share of Novartis AG in exchange for a certain number of ADRs). The enumeration of rights, including any limitations on those rights in the Deposit Agreement, is final. There are no other rights given to the ADR holders. Only the ADS depositary, holding our shares underlying the ADRs, is registered as shareholder in our share register. An ADR is not a Novartis AG share and an ADR holder is not a Novartis AG shareholder.

The Deposit Agreement between our depositary, the ADR holder and us has granted certain indirect rights to vote to the ADR holders. ADR holders may not attend a General Meeting in person. ADR holders exercise their voting rights by instructing JPMorgan Chase Bank, N.A., New York, our depositary, to exercise the voting rights attached to the registered shares underlying the ADRs. Each ADR represents one Novartis AG share. JPMorgan Chase, as depositary, exercises the voting rights for registered shares underlying ADRs for which no voting instructions have been given by providing a discretionary proxy to an uninstructed independent designee. Such designee has to be a shareholder of Novartis AG. The same voting restrictions apply to ADR holders as to those holding Novartis AG shares (i.e., the right to vote up to 2% of the Novartis AG registered share capital – unless otherwise granted an exemption by the Board – and the disclosure requirement for nominees).

(c) Shareholders have the right to allocate the profit shown on our balance sheet and to distribute dividends by vote taken at the General Meeting, subject to the legal requirements described in “—Item 10.B.3(a) Shareholder rights” of the Annual Report.

(d) Under the Swiss CO, any surplus arising out of a liquidation of Novartis AG (i.e., after the settlement of all claims of all creditors) would be distributed to the shareholders in proportion to the paid in nominal value of their shares.

(e) The Swiss CO limits a corporation’s ability to hold or repurchase its own shares. We and our subsidiaries may only repurchase shares if we have sufficient freely disposable equity in the amount of the purchase price of the acquired shares. The aggregate nominal value of all Novartis AG shares held by us and our subsidiaries may not exceed 10% of our registered share capital. However, it is accepted that a Swiss corporation may repurchase its own shares beyond the statutory limit of 10% if the repurchased shares are clearly earmarked for cancellation. In addition, we are required to recognize a negative position, or if our subsidiaries acquire our shares, to create a special reserve on our balance sheet in the amount of the purchase price of the acquired shares. Repurchased shares held by us or our subsidiaries do not carry any rights to vote at a General Meeting, but are entitled to the economic benefits generally connected with the shares.

Under the Swiss CO, we may not cancel treasury shares without the approval of a capital reduction by our shareholders given that shareholders have not approved the introduction of a capital band.

(f) Not applicable.

(g) Since all of our issued and outstanding shares have been fully paid in, our shareholders are not obliged to make further contributions with respect to their shares.

(h) See “—Item 10.B.3(b) Shareholder rights” and “—Item 10.B.7 Change in control.”

10.B.4 Changes to shareholder rights

Under the Swiss CO, we may not issue new shares without the prior approval of a capital increase by our shareholders. If a capital increase is approved, then our shareholders would generally have certain

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pre-emptive rights to obtain newly issued shares in an amount proportional to the nominal value of the shares they already hold. These pre-emptive rights could be excluded in certain limited circumstances with the approval of a resolution adopted at a General Meeting by a supermajority of two-thirds of the votes. In addition, we may not create shares with increased voting powers or place restrictions on the transfer of registered shares without the approval of a resolution adopted at a General Meeting by a supermajority of votes. In addition, see “—Item 10.B.3(b) Shareholder rights” of the Annual Report with regard to the Board’s ability to cancel the registration of shares under limited circumstances.

10.B.6 Limitations

There are no limitations under the Swiss CO or our Articles on the right of non-Swiss residents or nationals to own or vote shares other than the restrictions applicable to all shareholders and holders of ADRs described in “—Item 10.B.3(b) Shareholder rights” of the Annual Report regarding conditions for exercising an ADR holder’s right to vote at a shareholder meeting.

10.B.7 Change in control

The Articles and the Board Regulations contain no provision that would have an effect of delaying, deferring or preventing a change in control of Novartis AG and that would operate only with respect to a merger, acquisition or corporate restructuring involving us or any of our subsidiaries.

According to the Swiss Merger Act, shareholders may pass a resolution to merge with another corporation at any time. Such a resolution would require the consent of at least two thirds of all votes present at the necessary General Meeting.

Under the Swiss Financial Market Infrastructure Act, shareholders and groups of shareholders acting in concert who acquire more than 33 1/3% of our shares would be under an obligation to make an offer to acquire all remaining Novartis AG shares. Novartis AG has neither opted out from the mandatory takeover offer obligation nor opted to increase the threshold for mandatory takeover offers in its Articles.

10.B.8 Disclosure of shareholdings

Under the Swiss Financial Market Infrastructure Act, persons who directly, indirectly or in concert with other parties acquire or dispose of our shares or purchase or sale rights relating to our shares are required to notify us and the SIX of the level of their holdings whenever such holdings reach, exceed or fall below certain thresholds – 3%, 5%, 10%, 15%, 20%, 25%, 33 1/3%, 50% and 66 2/3% – of the voting rights represented by our share capital (whether exercisable or not). This also applies to anyone who has discretionary power to exercise voting rights associated with our shares. Following receipt of such notification, we are required to inform the public by publishing the information via the electronic publication platform operated by the SIX.

An additional disclosure obligation exists under the Swiss CO that requires us to disclose, once a year in the notes to the financial statements published in our Annual Report, the identity of all of our shareholders (or related groups of shareholders) who have been granted exemption entitling them to vote more than 2% of our registered share capital, as described in “—Item 10.B.3(b) Shareholder rights” of the Annual Report.

10.B.9 Differences in the law

See the references to Swiss law throughout this Exhibit 2.3.

10.B.10 Changes in capital

The requirements of the Articles regarding changes in capital are not more stringent than the requirements of Swiss law.

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AMERICAN DEPOSITARY SHARES

Item 12. Other securities

Disclosures under Items 12.A, 12.B, and 12.C are not applicable.

12.D.1 Depositary

JPMorgan Chase has been appointed as the depositary pursuant to the Deposit Agreement. JPMorgan Chase’s principal executive office is located at 383 Madison Avenue, Floor 11, New York, NY 10179.

12.D.2 Provisions

ADSs are issued by the depositary, and not by us. The ADR is vested with rights defined and enumerated in the Deposit Agreement (such as the rights to vote, to receive a dividend and to receive a share of Novartis AG in exchange for a certain number of ADRs). The enumeration of rights, including any limitations on those rights in the Deposit Agreement, is final. There are no other rights given to the ADR holders. Only the depositary is registered as shareholder in our share register. An ADR is not a Novartis AG share and an ADR holder is not a Novartis AG shareholder.

The following is a summary of the material provisions of the Deposit Agreement. For more complete information, you should read the Deposit Agreement and form of ADR. The Deposit Agreement has been filed with the SEC as an exhibit to the Post-Effective Amendment to our registration statement on Form F-6 filed with the SEC on December 16, 2022.

Voting rights

The Deposit Agreement has granted certain indirect rights to vote to the ADR holders. ADR holders may not attend Novartis AG general meetings in person. ADR holders exercise their voting rights by instructing the depositary to exercise the voting rights attached to the registered shares underlying the ADRs. The same voting restrictions apply to ADR holders as to those holding Novartis AG shares (i.e., the right to vote up to 2% of the Novartis AG registered share capital – unless otherwise granted an exemption by the Board – and the disclosure requirement for nominees).

As soon as practicable after receipt from Novartis AG of notice of any meeting or solicitation of consents or proxies of holders of shares or other deposited securities, the depositary shall fix the ADR record date in accordance with the Deposit Agreement, provided that if the depositary receives a written request from Novartis AG in a timely manner and at least 30 days prior to the date of such vote or meeting the depositary shall, at Novartis AG’s expense, distribute to holders a notice (the “Voting Notice”) stating (a) such information as is contained in such notice and any solicitation materials (or a summary thereof), (b) that each holder on the record date set by the depositary therefor will be entitled, subject to applicable law and the provisions of or governing deposited securities to instruct the depositary as to the exercise of the voting rights, if any, pertaining to the deposited securities represented by the ADSs evidenced by such holder’s ADRs and (c) the manner in which such instructions may be given, including instructions to give a discretionary proxy to a person designated by Novartis AG.

Upon actual receipt of instructions of a holder on such record date in the manner and on or before the date established by the depositary for such purpose, the depositary will endeavor insofar as practicable and permitted under the provisions of or governing deposited securities to vote or cause to be voted (or to grant a discretionary proxy to a person designated by Novartis AG) the deposited securities represented by the ADSs evidenced by such holder’s ADRs in accordance with such instructions. The depositary will not itself exercise any voting discretion in respect of any deposited securities. To the extent that (a) the depositary has been provided 35 days’ notice of the proposed meeting from Novartis AG, (b) the Voting Notice is sent to holders and beneficial owners no less than 14 days prior to the date of the meeting or the cut-off date for the solicitation of consents and (c) the depositary does not receive

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instructions on a particular agenda item from a holder in a timely manner, such holder shall be deemed and the depositary shall deem such holder to have so instructed the depositary to give a discretionary proxy to a person designated by Novartis AG and the depositary shall endeavor insofar as practicable and permitted under the provisions of or governing deposited securities to give a discretionary proxy to a person designated by Novartis AG to vote the deposited securities represented by the ADSs evidenced by such holder’s ADRs as to which such instructions are so given with respect to such agenda item(s), provided that no such instruction shall be deemed given unless Novartis AG promptly informs the depositary in writing that Novartis AG wishes such proxy be given with respect to such agenda item(s).

Notwithstanding anything contained in the Deposit Agreement or any ADR, the depositary may, to the extent not prohibited by any law, rule or regulation or the rules and/or requirements of the stock exchange on which the ADSs are listed, in lieu of distribution of the materials provided to the depositary in connection with any meeting of or solicitation of consents or proxies from holders of deposited securities, distribute to the holders a notice that provides holders with or otherwise publicizes to holders instructions on how to retrieve such materials or receive such materials upon request (i.e., by reference to a website containing the materials for retrieval or a contact for requesting copies of the materials). Holders are strongly encouraged to forward their voting instructions as soon as possible. Voting instructions will not be deemed received until such time as the ADR department responsible for proxies and voting has received such instructions, notwithstanding that such instructions may have been physically received by JPMorgan, prior to such time.

Share dividends and other distributions

The depositary will distribute to each ADR holder on the record date set by the depositary at such ADR holder’s address shown on the ADR Register, in proportion to the number of deposited securities (on which the following distributions on deposited securities are received by the custodian) represented by ADSs evidenced by such holder’s ADRs:

(a) Cash: Any US dollars available to the depositary resulting from a cash dividend or other cash distribution or the net proceeds of sales of any other distribution or portion thereof authorized in paragraph 10 (“Cash”) of the form of ADR, on an averaged or other practicable basis, subject to (i) appropriate adjustments for taxes withheld, (ii) such distribution being impermissible or impracticable with respect to certain holders, and (iii) deduction of the depositary’s and/or its agent’s fees and expenses in (1) converting any foreign currency to US dollars by sale or in such other manner as the depositary may determine to the extent that it determines that such conversion may be made on a reasonable basis, (2) transferring foreign currency or US dollars to the US by such means as the depositary may determine to the extent that it determines that such transfer may be made on a reasonable basis, (3) obtaining any approval or license of any governmental authority required for such conversion or transfer, which is obtainable at a reasonable cost and within a reasonable time and (4) making any sale by public or private means in any commercially reasonable manner.

(b) Shares. (i) Additional ADRs evidencing whole ADSs representing any shares available to the depositary resulting from a dividend or free distribution on deposited securities consisting of shares (a “Share Distribution”) and (ii) US dollars available to it resulting from the net proceeds of sales of shares received in a Share Distribution, which shares would give rise to fractional ADSs if additional ADRs were issued therefor, as in the case of Cash.

(c) Rights. (i) Warrants or other instruments in the discretion of the depositary representing rights to acquire additional ADRs in respect of any rights to subscribe for additional shares or rights of any nature available to the depositary as a result of a distribution on deposited securities (“Rights”), to the extent that Novartis AG timely furnishes to the depositary evidence satisfactory to the depositary that the depositary may lawfully distribute the same (Novartis AG has no obligation to so furnish such evidence), or (ii) to the extent Novartis AG does not so furnish such evidence and sales of Rights are practicable, any US dollars available to the depositary from the net proceeds of sales of Rights as in the case of Cash, or (iii) to the extent Novartis AG does not so furnish such evidence and such sales cannot practicably be accomplished by reason of the nontransferability of the Rights, limited markets therefor, their short duration or otherwise, nothing (and any Rights may lapse).

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(d) Other Distributions. (i) Securities or property available to the depositary resulting from any distribution on deposited securities other than Cash, Share Distributions and Rights (“Other Distributions”), by any means that the depositary may deem equitable and practicable, or (ii) to the extent the depositary deems distribution of such securities or property not to be equitable and practicable, any US dollars available to the depositary from the net proceeds of sales of Other Distributions as in the case of Cash. The depositary shall endeavor to conduct any sales hereunder in a commercially reasonable manner.

The depositary will distribute US dollars by checks drawn on a bank in the US for whole dollars and cents (any fractional cents being withheld without liability for interest and dealt with by the depositary in accordance with its then current procedures), pursuant to paragraph 10 of the form of ADR.

Deposit, withdrawal and cancellation

Subject to paragraphs 4 and 5 of the form of ADR, upon surrender of (i) a certificated ADR in a form satisfactory to the depositary at the transfer office or (ii) proper instructions and documentation in the case of a Direct Registration ADR, the holder hereof is entitled to delivery at, or to the extent in dematerialized form from, the custodian’s office of the deposited securities at the time represented by the ADSs evidenced by this ADR. At the request, risk and expense of the holder, the depositary may deliver such deposited securities at such other place as may have been requested by the holder. Notwithstanding any other provision of the Deposit Agreement or the ADR, the withdrawal of deposited securities may be restricted only for the reasons set forth in General Instruction I.A.(1) of Form F-6 (as such instructions may be amended from time to time) under the Securities Act.

Reclassification, recapitalizations and mergers

The depositary may, in its discretion, and shall if reasonably requested by Novartis AG, amend the ADR or distribute additional or amended ADRs (with or without calling existing ADRs for exchange) or cash, securities or property on the record date set by the depositary therefor to reflect any change in par value, split-up, consolidation, cancellation or other reclassification of deposited securities, any share distribution or other distribution not distributed to holders or any cash, securities or property available to the depositary in respect of deposited securities from (and the depositary is authorized under the Deposit Agreement to surrender any deposited securities to any person and, irrespective of whether such deposited securities are surrendered or otherwise cancelled by operation of law, rule, regulation or otherwise, to sell by public or private sale any property received in connection with) any recapitalization, reorganization, merger, consolidation, liquidation, receivership, bankruptcy or sale of all or substantially all the assets of Novartis AG.

To the extent the depositary does not so amend the ADR or make a distribution to holders to reflect any of the foregoing, or the net proceeds thereof, whatever cash, securities or property results from any of the foregoing shall constitute deposited securities and each ADS evidenced by the ADRs shall automatically represent its pro rata interest in the deposited securities as then constituted.

Promptly upon the occurrence of any of the aforementioned changes affecting deposited securities, Novartis AG shall notify the depositary in writing of such occurrence and as soon as practicable after receipt of such notice from Novartis AG, may instruct the depositary to give notice thereof, at Novartis AG’s expense, to holders in accordance with the provisions hereof. Upon receipt of such instruction, the depositary shall give notice to the holders in accordance with the terms thereof, as soon as reasonably practicable.

Amendment and termination

The ADRs and the Deposit Agreement may be amended by Novartis AG and the depositary, provided that any amendment that imposes or increases any fees or charges on a per ADS basis (other than stock transfer or other taxes and other governmental charges, transfer or registration fees, a transaction fee per cancellation request (including through SWIFT, telex or facsimile transmission), applicable delivery expenses or other such fees, charges or expenses), or that shall otherwise prejudice any substantial existing right of holders or beneficial owners, shall become effective 30 days after notice of such

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amendment shall have been given to the holders. Every holder and beneficial owner at the time any amendment to the Deposit Agreement so becomes effective shall be deemed, by continuing to hold such ADR, to consent and agree to such amendment and to be bound by the Deposit Agreement as amended thereby. Any amendments or supplements which (i) are reasonably necessary (as agreed by Novartis AG and the depositary) in order for (a) the ADSs to be registered on Form F-6 under the Securities Act or (b) the ADSs or Shares to be traded solely in electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne by holders, shall be deemed not to prejudice any substantial rights of holders or beneficial owners. Notwithstanding the foregoing, if any governmental body or regulatory body should adopt new laws, rules or regulations which would require amendment or supplement of the Deposit Agreement or the form of ADR to ensure compliance therewith, Novartis AG and the depositary may amend or supplement the Deposit Agreement and the ADR at any time in accordance with such changed laws, rules or regulations.

Such amendment or supplement to the Deposit Agreement in such circumstances may become effective before a notice of such amendment or supplement is given to holders or within any other period of time as required for compliance. Notice of any amendment to the Deposit Agreement or form of ADRs shall not need to describe in detail the specific amendments effectuated thereby, and failure to describe the specific amendments in any such notice shall not render such notice invalid, provided, however, that, in each such case, the notice given to the holders identifies a means for holders and beneficial owners to retrieve or receive the text of such amendment (i.e., upon retrieval from the SEC’s, the depositary’s or Novartis AG’s website or upon request from the depositary).

The depositary may, and shall at the written direction of Novartis AG, terminate the Deposit Agreement and this ADR by mailing notice of such termination to the holders at least 30 days prior to the date fixed in such notice for such termination; provided, however, if the depositary shall have (i) resigned as depositary hereunder, notice of such termination by the depositary shall not be provided to holders unless a successor depositary shall not be operating hereunder within 60 days of the date of such resignation, or (ii) been removed as depositary hereunder, notice of such termination by the depositary shall not be provided to holders unless a successor depositary shall not be operating hereunder on the 60th day after Novartis AG’s notice of removal was first provided to the depositary.

Notwithstanding anything to the contrary in the Deposit Agreement, the depositary may terminate the Deposit Agreement without notice to Novartis AG, but subject to giving 30 days’ notice to the holders, under the following circumstances: (i) in the event of Novartis AG’s bankruptcy or insolvency, (ii) if the shares cease to be listed on an internationally recognized stock exchange, (iii) if Novartis AG effects (or will effect) a redemption of all or substantially all of the deposited securities, or a cash or share distribution representing a return of all or substantially all of the value of the deposited securities, or (iv) there occurs a merger, consolidation, sale of assets or other transaction as a result of which securities or other property are delivered in exchange for or in lieu of deposited securities.

After the date so fixed for termination, the depositary and its agents will perform no further acts under the Deposit Agreement and this ADR, except to receive and hold (or sell) distributions on deposited securities and deliver deposited securities being withdrawn. As soon as practicable after the date so fixed for termination, the depositary shall use its reasonable efforts to sell the deposited securities and shall thereafter (as long as it may lawfully do so) hold in an account (which may be a segregated or unsegregated account) the net proceeds of such sales, together with any other cash then held by it under the Deposit Agreement, without liability for interest, in trust for the pro rata benefit of the holders of ADRs not theretofore surrendered. After making such sale, the depositary shall be discharged from all obligations in respect of the Deposit Agreement and this ADR, except to account for such net proceeds and other cash. After the date so fixed for termination, Novartis AG will be discharged from all obligations under the Deposit Agreement except for its obligations to the depositary and its agents.

Limitation on obligations and liability to ADR holders

The depositary, Novartis AG, their respective directors, officers, employees, agents and affiliates and each of them shall: (i) incur no liability to holders or beneficial owners (a) if any present or future law, rule, regulation, fiat, order or decree of the US, Switzerland or any other country or jurisdiction, or of any governmental or regulatory authority or any securities exchange or market or automated quotation system, the provisions of or governing any deposited securities, any present or future provision of Novartis AG’s Articles, any act of God, war, terrorism, nationalization, epidemic, pandemic, expropriation,

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currency restrictions, work stoppage, strike, civil unrest, revolutions, rebellions, explosions, computer failure or circumstance beyond its direct and immediate control shall prevent or delay, or shall cause any of them to be subject to any civil or criminal penalty in connection with, any act which the Deposit Agreement or the ADR provides shall be done or performed by it, or (b) by reason of any non-performance or delay, caused as aforesaid, in the performance of any act or things which by the terms of the Deposit Agreement it is provided shall or may be done or performed or any exercise or failure to exercise any discretion given it in the Deposit Agreement or the ADR (including, without limitation, any failure to determine that any distribution or action may be lawful or reasonably practicable); (ii) not incur or assume any liability to holders or beneficial owners except to perform its obligations to the extent they are specifically set forth in the ADR and the Deposit Agreement without gross negligence or willful misconduct and the depositary shall not be a fiduciary or have any fiduciary duty to holders or beneficial owners; (iii) in the case of the depositary and its agents, be under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities, ADSs or the ADR; (iv) Novartis AG and its agents are under no obligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any deposited securities, the ADSs, or the ADR, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to it in its sole discretion against all expense (including fees and disbursements of counsel) and liability be furnished as often as may be required; and (v) not be liable to holders or beneficial owners for any action or inaction by it in reliance upon the advice of or information from legal counsel, accountants, any person presenting shares for deposit, any holder, any other person believed by it to be competent to give such advice or information, or in the case of the depositary only, Novartis AG.

The depositary shall not be responsible for, and shall incur no liability in connection with or arising from, the insolvency of any custodian that is not a branch or affiliate of JPMorgan. The depositary shall not have any liability for the price received in connection with any sale of securities, the timing thereof or any delay in action or omission to act nor shall it be responsible for any error or delay in action, omission to act, default or negligence on the part of the party so retained in connection with any such sale or proposed sale. Notwithstanding anything to the contrary contained in the Deposit Agreement and any ADRs, the depositary shall not be responsible for, and shall incur no liability in connection with or arising from, any act or omission to act on the part of the custodian except to the extent that any holder has incurred liability directly as a result of the custodian having (i) committed fraud or willful misconduct in the provision of custodial services to the depositary or (ii) failed to use reasonable care in the provision of custodial services to the depositary as determined in accordance with the standards prevailing in the jurisdiction in which the custodian is located. Notwithstanding anything to the contrary contained in the Deposit Agreement or any ADRs, the depositary and the custodian(s) may use third-party delivery services and providers of information regarding matters such as pricing, proxy voting, corporate actions, class action litigation and other services in connection herewith and the Deposit Agreement, and use local agents to provide services such as, but not limited to, attendance at any meetings of security holders. Although the depositary and the custodian will use reasonable care (and cause their agents to use reasonable care) in the selection and retention of such third-party providers and local agents, they will not be responsible for any errors or omissions made by them in providing the relevant information or services.

The depositary has no obligation to inform holders or beneficial owners about the requirements of the laws, rules or regulations or any changes therein or thereto of any country or jurisdiction or of any governmental or regulatory authority or any securities exchange or market or automated quotation system. Additionally, the depositary is under no obligation to provide the holders and beneficial owners, or any of them, with any information about the tax status of Novartis AG. The depositary and Novartis AG shall not incur any liability for any tax or tax consequences that may be incurred by holders or beneficial owners on account of their ownership or disposition of the ADRs or ADSs. None of the depositary, the custodian or Novartis AG shall be liable for the failure by any holder or beneficial owner to obtain the benefits of credits or refunds of non-US tax paid against such holder’s or beneficial owner’s income tax liability.

The depositary, its agents and Novartis AG may rely and shall be protected in acting upon any written notice, request, direction, instruction or document believed by them to be genuine and to have been signed, presented or given by the proper party or parties. The depositary and its agents will not be responsible for any failure to carry out any instructions to vote any of the deposited securities, for the manner in which any such vote is cast or for the effect of any such vote. Additionally, the depositary may rely upon instructions from Novartis AG or its counsel in respect of any approval or license required for

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any currency conversion, transfer or distribution. The depositary shall not incur any liability for the content of any information submitted to it by or on behalf of Novartis AG for distribution to the holders or for any inaccuracy of any translation thereof, for any investment risk associated with acquiring an interest in the deposited securities, for the validity or worth of the deposited securities, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of the deposit agreement or for the failure or timeliness of any notice from Novartis AG. The depositary shall not be liable for any acts or omissions made by a successor depositary whether in connection with a previous act or omission of the depositary or in connection with any matter arising wholly after the removal or resignation of the depositary. Novartis AG has agreed to indemnify the depositary and its agents under certain circumstances and the depositary has agreed to indemnify Novartis AG under certain circumstances.

Neither Novartis AG, the depositary nor any of their respective agents shall be liable to holders or beneficial owners for any indirect, special, punitive or consequential damages (including, without limitation, legal fees and expenses) or lost profits, in each case of any form incurred by any person or entity (including, without limitation, holders and beneficial owners), whether or not foreseeable and regardless of the type of action in which such a claim may be brought.

No provision of the Deposit Agreement or the ADR is intended to constitute a wavier or limitation of any rights which holders or beneficial owners may have under the Securities Act or the Exchange Act, to the extent applicable.

The depositary and its agents may own and deal in any class of securities of Novartis AG and its affiliates and in ADRs.

Books of depositary

The depositary or its agent will maintain, at a designated office, a register for the registration, registration of transfer, combination and split-up of ADRs, and, in the case of Direct Registration ADRs, shall include the Direct Registration System. Holders of ADRs may inspect such records at the depositary’s office at all reasonable times, but solely for the purpose of communicating with other holders in the interest of the business Novartis AG or a matter relating to the deposit agreement. The depositary will maintain facilities for the delivery and receipt of ADRs.

Governing Law

The Deposit Agreement, the ADSs and the ADRs are governed by and construed in accordance with the internal laws of the State of New York. In the Deposit Agreement, Novartis AG irrevocably agrees that any legal suit, action or proceeding against Novartis AG brought by the depositary or any holder, arising out of or based upon this Deposit Agreement, the ADSs or the ADRs or the transactions contemplated hereby or thereby, may be instituted in any state or federal court in New York, NY, and irrevocably waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any such suit, action or proceeding. Novartis AG also irrevocably agrees that any legal suit, action or proceeding against the depositary brought by it, arising out of or based upon this Deposit Agreement or the transactions contemplated hereby, may only be instituted in a state or federal court in New York, NY.

Under the Deposit Agreement, by holding an ADS or an interest therein, holders and beneficial owners each irrevocably agree that any legal suit, action or proceeding against or involving Novartis AG or the depositary, arising out of or based upon the Deposit Agreement, the ADSs, the ADRs or the transactions contemplated thereby, may only be instituted in a state or federal court in New York, NY, and by holding an ADS or an interest therein each irrevocably waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding.

Notwithstanding the foregoing, any action against Novartis AG based on the Deposit Agreement, the ADSs or the ADRs or the transactions contemplated thereby, may be instituted by the depositary in any competent court in Switzerland and/or the US.

11

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Jury Trial Waiver

Each party to the Deposit Agreement (including, for avoidance of doubt, each holder and beneficial owner and/or holder of interests in ADSs and ADRs) irrevocably waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in any suit, action or proceeding against the depositary and/or us directly or indirectly arising out of or relating to the shares or other deposited securities, the ADSs or the ADRs, the deposit agreement or any transaction contemplated therein, or the breach thereof (whether based on contract, tort, common law or any other theory), including any suit, action, claim or proceeding under the US federal securities laws.

12

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EXHIBIT 4.1

Execution version

PRIVATE & CONFIDENTIAL

30 September 2023

NOVARTIS AG<br><br> <br><br><br> <br>SANDOZ GROUP AG
	SEPARATION AND DISTRIBUTION AGREEMENT

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CONTENTS

Clause	Page
1.	Definitions and Interpretation	6
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2.	The Separation	39
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3.	The Sandoz Transferring Assets	42
---	---	---
4.	The Novartis Transferring Assets	46
---	---	---
5.	The Distribution	48
---	---	---
6.	Global Conditions	49
---	---	---
7.	Delayed Territories	50
---	---	---
8.	Environmental Liabilities and Claims	50
---	---	---
9.	Transferring Contracts and Non-Transferring Tenders	51
---	---	---

51

10.	Intercompany arrangements	53
11.	Accounts Payable and Receivable	54
---	---	---
12.	Credit Support	56
---	---	---
13.	Mutual Release and Indemnification	59
---	---	---
14.	Liabilities and Additional Matters	62
---	---	---
15.	Claims	64
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16.	Access to Information; Books and Records	72
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17.	Insurance	77
---	---	---
18.	Separation Committee	78
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19.	Warranty as to Capacity	78
---	---	---
20.	Wrong Pockets	82
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21.	Post-Separation conduct and covenants	85
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22.	Further Assurances	85
---	---	---
23.	Termination	86
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24.	Confidentiality and Non-use	90
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25.	Announcements	90
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26.	No Set-off	91
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27.	Assignment	91
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28.	Costs	91
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29.	Notices	92
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30.	Relationship with other Agreements	95
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31.	Whole Agreement	97
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32.	Waivers, Rights and Remedies	98
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33.	Counterparts	98
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34.	Variations	98
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35.	Invalidity	98
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36.	No Third Party Enforcement Rights	98
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37.	Governing Law	98
---	---	---
38.	Dispute Resolution	98
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Schedule 1 Transferring Contracts and Non-Transferring Tenders	101
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Schedule2 Delayed Territories	112
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Appendix 1	123
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• 2 -

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Schedule3 Environmental Liabilities and Claims	126
Exhibit 1 Sandoz Entities and Novartis Transferring Entities	127
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Exhibit 2 Separation Steps Plan	128
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Exhibit 3 Distribution Steps Plan	129
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Exhibit 4 Continuing Intercompany Arrangements	130
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Exhibit 5 Transaction Advisory Fees	131
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Exhibit 6 Biopharmaceutical Assets	132
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Exhibit 7 Specific Liabilities	133
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Exhibit 8 Non-Compete Products	134
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Exhibit 9 Potential Divestment Cooperation	135
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Exhibit 10 Microbial Strains	136
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AGREED FORM DOCUMENTS REFERRED TO IN THIS AGREEMENT

Books and Records Plan

Carve-Out Methodology

IT Assets List

Net Debt Implementation Plan

Non-Transferring Tenders List

Properties List

Retained Novartis Product List

Sandoz Product List

• 3 -

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SEPARATION AND DISTRIBUTION AGREEMENT

dated 30 September 2023

PARTIES:

1.	Novartis AG, a corporation (Aktiengesellschaft) incorporated in the Canton of Basel-Stadt, Switzerland with enterprise<br> identification number (UID) CHE-103.867.266 and its registered office at Lichtstrasse 35, 4056 Basel, Switzerland (Novartis); and
2.	Sandoz Group AG, a corporation (Aktiengesellschaft) incorporated in the Canton of Zug, Switzerland with enterprise identification<br> number (UID) CHE-433.164.136 and its registered office at Suurstoffi 14, 6343 Rotkreuz, Switzerland (Sandoz),
---	---

(together the Parties, and each a Party).

Words and expressions used in this Agreement shall be interpreted in accordance with Clause 1 (Definitions and Interpretation).

Whereas:

A.	At the date of this Agreement, Sandoz is a direct, wholly owned Subsidiary of Novartis. Novartis, acting through its Subsidiaries, currently conducts, among other businesses, the Sandoz Business.
B.	The Sandoz Business is conducted through the Sandoz Entities and also comprises certain additional assets – the Sandoz Transferring Assets - and associated liabilities that are held by the Sandoz Asset<br> Transferors.
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C.	The majority of the Novartis Business is conducted by the Novartis Transferring Entities and certain other existing Subsidiaries of Novartis that are not the Sandoz Entities. The Novartis Business also<br> comprises certain additional assets - the Novartis Transferring Assets - and associated liabilities that are held by the Novartis Asset Transferors.
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D.	The board of directors of Novartis has determined that it is appropriate and advisable to:
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i.	separate the Sandoz Business from the Novartis Business; and
---	---
ii.	distribute the shares in Sandoz held by Novartis (the Listing Shares) to holders of Novartis Shares and to Sandoz (to be held as treasury shares) on<br> a pro rata basis out as an extraordinary dividend of distributable reserves (the Distribution).
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The Distribution is planned to be effected on 4 October 2023.

E.	The board of directors of Novartis and the board of directors of Sandoz have approved the separation of the Sandoz Business from the Novartis Business into Sandoz pursuant to the following steps:
i.	the transfer of the Sandoz Transferring Assets and the Sandoz Transferring Entities to the Sandoz Asset Transferees and the Sandoz Share Transferees, respectively;
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• 4 -

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ii.	the transfer of the Novartis Transferring Assets and the Novartis Transferring Entities to the Novartis Asset Transferees and the Novartis Share Transferees, respectively;
iii.	the assumption by the Novartis Group of the Novartis Liabilities; and
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iv.	the assumption by the Sandoz Group of the Sandoz Liabilities,
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together, the Separation.

F.	The Separation has been (or will be) effected pursuant to the Separation Steps Plan included in Exhibit 2 (Separation Steps Plan). In accordance with the terms of this<br> Agreement:
i.	the Sandoz Transferring Entities and Novartis Transferring Entities, respectively, have been (or will be) transferred as part of the Separation together with all of their respective assets and liabilities,<br> including, in the case of the Sandoz Transferring Entities, the shares held in the Sandoz Indirect Transferring Entities;
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ii.	the Sandoz Transferring Assets and Novartis Transferring Assets have been (or will be) transferred in each Asset Sale Jurisdiction; and
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iii.	the Novartis Retained Assets and Sandoz Retained Assets have been (or will be) excluded from the transfer in each Asset Sale Jurisdiction.
---	---
G.	Following completion of the Separation:
---	---
i.	Sandoz will (a) own and conduct, directly and indirectly, the Sandoz Business together with the Sandoz Transferring Assets; (b) be the ultimate Parent Company of, among other Persons, each Sandoz Entity (other<br> than Sandoz); and (c) be responsible for all the Sandoz Liabilities; and
---	---
ii.	Novartis will (a) own and conduct, directly and indirectly, the Novartis Business; (b) be the ultimate Parent Company of, among other Persons, the Novartis Transferring Entities; and (c) be responsible for all<br> the Novartis Liabilities.
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H.	The Novartis shareholders approved at an extraordinary general meeting held on 15 September 2023:
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i.	the Distribution; and
---	---
ii.	the reduction of Novartis’s share capital by CHF 22,774,777.52 (from CHF 1,138,738,876.00 to CHF 1,115,964,098.48), corresponding to a nominal amount of CHF 0.01 per Novartis Share.
---	---
I.	Clauses 5 (The Distribution) and 6 (Global Conditions) and the Distribution Steps Plan included in Exhibit 3 (Distribution Steps Plan) of this Agreement set out the terms and conditions applicable to the Distribution.
---	---
J.	The remainder of this Agreement sets out the terms and conditions on which the Separation and the Distribution are to be implemented.
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• 5 -

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IT IS AGREED:

1. Definitions and Interpretation

1.1	Definitions. In this Agreement, the following words and expressions shall have the following meanings:

Access Period has the meaning given in the Information Access Agreement;

Access Plan has the meaning given in the Information Access Agreement;

Accounts Payable means the Sandoz Accounts Payable and/or the Novartis Accounts Payable, as applicable;

Accounts Receivable means the Sandoz Accounts Receivable and/or the Novartis Accounts Receivable, as applicable;

Acquired Business has the meaning given in Clause 21.7(d);

Acquired Competing Business has the meaning given in Clause 21.7(d);

Acquirer has the meaning given in Clause 21.7(e);

Acquirer’s Pre-Existing Business has the meaning given in Clause 21.7(e);

Acquirer’s Pre-Existing Competing Business has the meaning given in Clause 21.7(e);

Actuary has the meaning given in Clause 17.7(a);

ADR Program has the meaning given in Clause 6.1(d);

Affiliates means, in respect of Novartis, each member of the Novartis Group and, in respect of Sandoz, each member of the Sandoz Group;

Agreed Form means, in relation to a document, the form of that document agreed between the Parties prior to the date of this Agreement and initialled on the front page or otherwise agreed for identification purposes by or on behalf of both of the Parties (in each case with such amendments as may be agreed in writing by or on behalf of both of the Parties);

Agreement means this separation and distribution agreement;

Ancillary Agreement Claims means any Indemnity Claim in respect of:

(a)	any Liabilities that are expressly listed, scheduled or otherwise described by an Ancillary Agreement as Liabilities to be assumed by or allocated to any member of the Novartis Group or Sandoz Group; and/or
(b)	any Liabilities relating to, arising out of, or resulting from any breach of an Ancillary Agreement by any member of the Novartis Group or member of the Sandoz Group;
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Ancillary Agreements means:

(a)	the Books and Records Plan;

• 6 -

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(b)	the Development and Collaboration Agreement;
(c)	the Employee Matters Agreement;
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(d)	the Information Access Agreement;
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(e)	the Intellectual Property Agreements;
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(f)	the Joint Defense and Common Interest Agreement;
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(g)	the Long Term Services Agreement;
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(h)	the MA Transfer Agreement;
---	---
(i)	the Manufacturing and Supply Agreement(s);
---	---
(j)	the Omnibus Data Protection Agreement;
---	---
(k)	the Pharmacovigilance Agreement;
---	---
(l)	the Pharmacovigilance Services Agreement;
---	---
(m)	the Quality Agreements;
---	---
(n)	the RxGx Agreement;
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(o)	the Site Agreements;
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(p)	the Tax Matters Agreement;
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(q)	the Third Party Claims and Investigations Management Agreement;
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(r)	the Technical Transfer Agreement(s);
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(s)	the Transitional Distribution Services Agreement;
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(t)	the Transitional Services Agreement;
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(u)	the US Brands Commercial Agreement;
---	---
(v)	any other agreement agreed in writing between Novartis and Sandoz to constitute an Ancillary Agreement,
---	---

and any Agreed Form agreements referred to therein;

Anniversary Date has the meaning given in Clause 17.6(b);

Applicable Law means any of the following to the extent the applicable Person is subject thereto:

(a)	supra-national, federal, national, state, municipal or local statute, law, ordinance, regulation, rule, code, Order or other requirement or rule of law or legal process (including common law);

• 7 -

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(b)	any rule or requirement of any national securities exchange, securities regulator or listing authority; or
(c)	any rule or requirement of governmental regulatory authority or agency responsible for the grant of approval, clearance, qualification, licensing or permitting of any aspect of research, Development,<br> Manufacture, or Commercialization of the Sandoz Products or the Novartis Products;
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Asset Sale Jurisdiction means a jurisdiction in which:

(a)	a Sandoz Asset Transferor transfers Sandoz Transferring Assets to a Sandoz Asset Transferee; or
(b)	a Novartis Asset Transferor transfers Novartis Transferring Assets to a Novartis Asset Transferee;
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B&R Lead(s) has the meaning given in the Books and Records Plan;

Books and Records means books, ledgers, files, databases, documents, reports, plans, records, manuals, company seals, minute books, charter documents, stock or equity record books and other materials (in any form or medium);

Books and Records Plan means the Books and Records Plan in the Agreed Form;

Brand License Agreements means each brand license agreement entered into between Sandoz and Novartis on or about the date of this Agreement;

Business Day means a day, other than a Saturday or Sunday or public holiday in Luxembourg, Switzerland or the United States of America, on which banks are open in Luxembourg, Basel, Zürich and New York for general commercial business, and on which the TARGET2 payment system is open;

Business Information means, in respect of the Novartis Group or the Sandoz Group (as applicable):

(a)	the Information in Books and Records in each of the following categories:
(i)	Commercial Information;
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(ii)	Employee Information;
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(iii)	Financial Information;
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(iv)	Manufacturing Information;
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(v)	Marketing Authorization Information;
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(vi)	Clinical and Development Information; and
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(b)	any other Information in Books and Records:
---	---
(i)	Exclusively Related to the Novartis Business or Exclusively Related to the Sandoz Business; or
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• 8 -

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(ii)	which is Information which is related to the relevant Party’s business but only to the extent required by that Party (or a member of its Group) in order to comply with Applicable Law;

Carve-Out Methodology means the financial carve-out methodology and results compendium compiled in connection with the preparation of the Sandoz Business Financial Statements and the Separation in the Agreed Form;

Claim means any claim arising under or in relation to this Agreement, including any claim in respect of a breach of any covenant or obligation contained in this Agreement;

Claim Notice has the meaning given in Clause 15.2(b);

Claimant Party has the meaning given in Clause 15.2(b);

Clinical and Development Information means Information relating to clinical and Development matters, including:

(a)	Development of Sandoz Products or Novartis Products, as applicable; and
(b)	therapeutic uses for the approved indications, drug-disease information, and other characteristics of a Sandoz Product or a Novartis Product, as applicable;
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Commercial Information means Information that relates to the Commercialization of Sandoz Products or Novartis Products, as applicable;

Commercialize means to promote, market, distribute (including import or export), sell, donate and/or otherwise commercialize a product, and Commercialized, Commercializing and Commercialization shall be construed accordingly;

Commercially Reasonable Efforts to achieve a result means the taking of such steps in the power of the obligated Party which a determined and reasonable person desirous of achieving the result would take, mindful of the chances of achieving the desired result, taking account of all relevant commercial considerations and without any requirement to sacrifice its own commercial interest. Without limitation, the use of Commercially Reasonable Efforts may include making available employees, making payments and/or bringing a legal claim;

Competing Activity has the meaning given in Clause 21.6 (Non-Compete);

Conflicting Agreement has the meaning given in Clause 30.5(b);

Consolidated Novartis Group means the Novartis Group and the Sandoz Entities, in each case, prior to the Separation Date;

Continuing Intercompany Arrangements means the Intercompany Arrangements listed in Exhibit 4 (Continuing Intercompany Arrangements) and any other Intercompany Arrangements which Novartis and Sandoz may agree in writing should constitute Continuing Intercompany Arrangements;

Contract means any binding contract, agreement, instrument, lease, license or commitment, together with amendments, modifications and supplements thereto, excluding any contract with any Employee;

• 9 -

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Contract Transferee’s Parent has the meaning given in Paragraph 1.6 (Third Party Consents Not Obtained Prior to Commence of Separation) of Part A (Transferring Contracts) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Contract Transferor’s Parent has the meaning given in Paragraph 1.6 (Third Party Consents Not Obtained Prior to Commence of Separation) of Part A (Transferring Contracts) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Correction Transfer has the meaning given in Clause 20.5 (Compensation for Wrong Pockets Transfers);

Correction Transfer Local Payment has the meaning given in Clause 20.5 (Compensation for Wrong Pockets Transfers);

Cover or Covers means:

(a)	as to a compound or product and a Patent, that, in the absence of a license granted under, or ownership of, such Patent, the making, using, selling, offering for sale or importation of such compound or product<br> would infringe, or contribute to or induce the infringement of, such Patent or, as to a pending claim included in such Patent, the making, using, selling, offering for sale or importation of such compound or product would infringe, or<br> contribute to or induce the infringement of, such Patent if such pending claim were to issue in an issued patent without modification;
(b)	as to Know-How and a Patent, that, in the absence of a license granted under, or ownership of, such Patent, the use or practice of such Know-How would infringe, or contribute to or induce the infringement of,<br> such Patent or, as to a pending claim included in such Patent, the use or practice of such Know-How would infringe, or contribute to or induce the infringement of, such Patent if such pending claim were to issue in an issued patent without<br> modification; and
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(c)	as to a compound, product or technology and Know-How, that the exploitation of such compound, product or technology incorporates, uses, employs, embodies, or practices such Know-How;
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Covered Claim has the meaning given in the Third Party Claims and Investigations Management Agreement;

Credit Support Instrument means any guarantee, covenant, indemnity, surety bond, letter of credit or similar assurance or credit support;

Defendant Party has the meaning given in Clause 15.2(b);

Development means, with respect to any product (including for the avoidance of doubt any medical device or combination product), any non-clinical or clinical development activities including (without limitation) pre-clinical or non-clinical testing, clinical studies, GxP and non-GxP chemistry manufacturing controls (CMC), process performance qualification, validation, test method development, stability, quality, statistical analysis or report writing, and related development and regulatory activities associated therewith, and Develop and Developed shall be construed accordingly;

Development and Collaboration Agreement means the agreement relating to the development of biosimilar products to be entered into between Sandoz and Novartis on or around the Separation Date;

• 10 -

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Dispute has the meaning given in Clause 38.1 (Dispute Resolution);

Dispute Notice has the meaning given in Clause 38.2 (Dispute Resolution);

Distribution has the meaning given in Recital D;

Distribution Steps Plan means the steps plan prepared in respect of the Distribution and set out in Exhibit 3 (Distribution Steps Plan);

Employee Benefits means any employee benefits payable to or in respect of any Novartis Employees or Sandoz Employees, including any post-employment benefits or other long-term employee benefits;

Employee Information means Information relating to Employees;

Employee Matters Agreement means the employee matters agreement entered into between Novartis and Sandoz on or about the date of this Agreement;

Employees means any Novartis Employees or Sandoz Employees;

Environmental Liabilities has the meaning given to it in paragraph 1 (Definitions) of Schedule 3 (Environmental Liabilities and Claims);

Environmental Remediation has the meaning given to it in paragraph 1 (Definitions) of Schedule 3 (Environmental Liabilities and Claims);

Equipment means all tangible equipment, including fixtures, machinery, furniture, office equipment, infrastructure, wires, supplies, special and general tools, but excluding any Novartis IT Assets and Sandoz IT Assets;

Exchange Act means the United States Securities Exchange Act of 1934, as amended;

Excluded Records has the meaning given in Clause 16.6 (Excluded Records);

Exclusively Related to the Novartis Business means exclusively related to, or used or held for use exclusively in connection with, the Novartis Business;

Exclusively Related to the Sandoz Business means exclusively related to, or used or held for use exclusively in connection with, the Sandoz Business;

Financial Information means:

(a)	any Information (to the extent that such Information is held by the other Party) reasonably required to enable the receiving Party to prepare and audit the monthly reporting forms of its Group in respect of the<br> period prior to the Separation Date and in respect of the calendar month, the fiscal quarter and the financial year in which the Separation occurs;
(b)	the books, accounts, customer lists and all other records held by a Party to the extent that they:
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(i)	relate to the period prior to the Separation Date;
---	---
(ii)	relate to the other Party’s business; and
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(iii)	are reasonably required for any member of the receiving Party’s Group to fulfil its obligations under Applicable Law;

General Insurance Arrangements means any Insurance Arrangements other than the HDI Insurance Arrangements;

General Pre-Separation Insurance Claims has the meaning given in Clause 17.2 (General Pre-Separation Insurance Claims);

Generic Product Conditions means, in respect of any Novartis Originator Non-Compete Product in any country:

(a)	the expiration, disclaimer, public dedication, invalidation, revocation, unpatentable, unenforceable, cancellation or abandonment date of all claims of all relevant Novartis Patents Covering such Novartis<br> Originator Non-Compete Product in such country; and
(b)	the expiration or invalidation of all Regulatory-Based Exclusivities in respect of such Novartis Originator Non-Compete Product in such country;
---	---

Global Conditions means the conditions set out in Clause 6.1 (Global Conditions);

Governmental Entity means:

(a)	any supra‑national, national, state, municipal or local government (including any subdivision, court, administrative agency or commission or other authority thereof) or any quasi‑governmental or private body<br> exercising any regulatory, importing or other governmental or quasi‑governmental authority, including the European Union and any Tax Authority; and
(b)	any governmental regulatory authority or agency responsible for the grant of approval, clearance, qualification, licensing or permitting of any aspect of research, Development, Manufacture, or Commercialization<br> of the Sandoz Products or the Novartis Products, including the United States Food and Drug Administration, the European Medicines Agency, the European Patent Office and the U.S. Patent and Trademark Office (or their successors);
---	---

Governmental Investigation has the meaning given in the Third Party Claims and Investigations Management Agreement;

Group means the Sandoz Group or the Novartis Group, as applicable;

HDI means HDI Global SE, together with its affiliates and its partnering insurance carriers;

HDI Insurance Arrangements means the liability insurance arrangements between members of the Consolidated Novartis Group and HDI, together with the liability reinsurance arrangements between HDI and Triangle, in each case which are in existence prior to the Separation Date;

HDI Pre-Separation Insurance Claims has the meaning given in Clause 17.4 (HDI Pre-Separation Insurance Claims);

ICC Court has the meaning given in Clause 38.5 (Dispute Resolution);

ICC Rules has the meaning given in Clause 38.4 (Dispute Resolution);

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Indemnifying Party means a Party to this Agreement required to make a payment pursuant to any Indemnity Claim;

Indemnitee means a Party to this Agreement to whom a payment is required to be made pursuant to any Indemnity Claim;

Indemnity Claim means any Claim under Clause 13.5 (Sandoz Indemnity) or Clause 13.6 (Novartis Indemnity);

Indemnity Payment means a payment required by this Agreement from an Indemnifying Party to an Indemnitee;

Information means information, whether or not patentable, copyrightable or protectable as a Trade Secret, in written, oral, electronic or other tangible or intangible forms, stored in any medium now known or yet to be created, including studies, reports, records, books, contracts, instruments, surveys, inventions, discoveries, ideas, concepts, know-how, techniques, designs, specifications, instructions, processes, formulae, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, including biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product) and other technical, financial, employee or business information or data, documents, correspondence, materials and files;

Information Access Agreement means the information access agreement entered into between Novartis and Sandoz on or about the date of this Agreement;

Insurance Arrangements has the meaning given in Clause 3.2(q);

Insurance Proceeds means, with respect to any insured Party, those monies, net of any applicable deductibles or premium adjustments (including reserves and retrospectively rated premium adjustments) and net of any costs or expenses incurred in the collection thereof and subject to any applicable policy limits, which are:

(a)	received by an insured from an insurance carrier or its estate;
(b)	paid by an insurance carrier or its estate on behalf of the insured; or
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(c)	received (including by way of setoff) from any Third Party in the nature of insurance, contribution or indemnification in respect of any Liability;
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Insurance Reserves Report has the meaning given in Clause 17.7(a);

Intellectual Property Agreements means:

(a)	the Brand License Agreements;
(b)	the Trademark Co-existence Agreement;
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(c)	the Trademark, Design and Domain Name Assignment Agreements;
---	---
(d)	the Patent and Know-How License Agreements; and
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(e)	the Patent and Know-How Assignment Agreements,

to be entered into between the Parties on or about the date of this Agreement;

Intellectual Property Rights means:

(a)	Patents and rights in inventions and discoveries, including improvements, designs and invention disclosures;
(b)	rights in any Know-How and confidential information, including any Information and Trade Secrets;
---	---
(c)	trademarks, service marks, rights in logos and other indicia of the source or origin of goods or services, trade names, rights in each of get-up and trade dress, rights to sue for passing off (including<br> trademark-related goodwill), rights to sue for unfair competition, and Internet Identifiers;
---	---
(d)	copyright, moral rights, database rights, rights in designs, and semiconductor topography rights;
---	---
(e)	any other intellectual property rights; and
---	---
(f)	all rights or forms of protection, subsisting now or in the future, having equivalent or similar effect to the rights referred to in paragraphs (a) to (e) above,
---	---

in each case: (i) anywhere in the world; and (ii) whether unregistered or registered (including all applications, rights to apply and rights to claim priority);

Intercompany Accounts means the Intercompany Non-Ordinary Course Accounts and the Intercompany Ordinary Course Accounts;

Intercompany Arrangements means any Contracts and any other agreements, arrangements, commitments and understandings, whether oral or written, entered into prior to the Separation Date between or among Sandoz or any member of the Sandoz Group, on the one hand, and Novartis or any member of the Novartis Group, on the other hand;

Intercompany Non-Ordinary Course Accounts means any amounts owed by any member of the Novartis Group to any member of the Sandoz Group, or by any member of the Sandoz Group to any member of the Novartis Group, that are not Intercompany Ordinary Course Accounts, including intercompany loans and cash-pooling payables together with accrued interest, if any, on the terms of the applicable debt;

Intercompany Ordinary Course Accounts means any amounts owed by any member of the Novartis Group to any member of the Sandoz Group, or by any member of the Sandoz Group to any member of the Novartis Group, that are outstanding or accrued in the ordinary course of trading, including amounts due in respect of the supply of raw materials, components and products and services;

Internet Identifiers means any internet domain names, internet domain name registrations or social media accounts (including the user names and passwords associated therewith);

Investigation has the meaning given in the Third Party Claims and Investigations Management Agreement;

• 14 -

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IT Assets List means the list of information technology equipment and assets that are to be owned by the Sandoz Group following the Separation, in the Agreed Form;

Joint Defense and Common Interest Agreement means the joint defense and common interest agreement entered into between Novartis and Sandoz on or about the date of this Agreement;

Know-How means all existing and available technical Information, know-how and data, including inventions (whether patentable or not), discoveries, Trade Secrets, specifications, instructions, processes and formulae, including all biological, chemical, pharmacological, biochemical, toxicological, pharmaceutical, physical, safety, quality control, preclinical and clinical data;

Liability or Liabilities means all liabilities, claims, damages (including lost profits), proceedings, demands, Orders, suits, costs, losses and expenses, including reasonable attorney’s fees and expenses, in each case, of every description, whether deriving from contract, common law, statute or otherwise, whether present or future, actual or contingent, direct or indirect, ascertained or unascertained or disputed and whether owed or incurred severally or jointly or as principal or surety;

Listing Prospectus means:

(a)	the listing prospectus published by Sandoz in the meaning of articles 35 et seqq. of the Swiss Federal Act on Financial Services and article 27 of the SIX Listing Rules; and
(b)	any supplement to the listing prospectus published by Sandoz in accordance with art. 56 of the Swiss Federal Act on Financial Services;
---	---

Listing Shares has the meaning given in Recital D;

Local Beneficiary has the meaning given in Paragraph 1.1 of Part B (Non-Transferring Tenders) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Local Beneficiary’s Parent has the meaning given in paragraph 1.3 of Part B (Non-Transferring Tenders) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Local Separation Agreement has the meaning given in Clause 2.7 (Execution of Local Separation Agreements);

Long Term Services Agreement means the long term services agreement entered into between Sandoz and Novartis on or about the date of this Agreement;

MA Transfer Agreement means the agreement relating to the transfer of certain Marketing Authorizations entered into between Sandoz and Novartis on or around the date of this Agreement;

MA Transfer Plan has the meaning given in the MA Transfer Agreement;

Manufacture means, as applicable, the planning, purchasing of materials for, manufacturing, production of, processing, compounding, storage, filling, packaging, device assembly, labelling, leafleting, warehousing (prior to quality release), quality control testing, waste disposal, quality release, sample retention and stability testing of products, including the active ingredients of such products or devices and device constituent parts used in connection with products, and Manufacturing or Manufactured shall be construed accordingly;

• 15 -

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Manufacturing and Supply Agreement\(s\) means the manufacturing and supply agreement or agreements entered into between Sandoz and Novartis on or about the date of this Agreement;

Manufacturing Information means Information relating to Manufacturing of Sandoz Products or Novartis Products, as applicable;

Marketing Authorization Information means existing and available dossiers containing technical Information, know-how and data used to obtain and maintain any Marketing Authorizations, including Information relating to any Marketing Authorizations for applications (current or planned) to expand the use of any product;

Marketing Authorizations means, with respect to a product in a territory, all approvals, licenses, registrations, or authorizations of any Governmental Entity necessary in order to market a pharmaceutical product and/or medical device in such territory, including all pending applications, supplements and amendments that may be filed with respect to the foregoing;

Medicare Modernization Act means the United States Medicare Prescription Drug, Improvement, and Modernization Act of 2003, as amended;

Microbial Strains has the meaning given in paragraph 1.1 (Definitions) of Exhibit 11 (Microbial Strains);

Net Debt Implementation Plan means the Agreed Form cash and debt plan to implement the net debt set-up of the Sandoz Group;

Non-Compete Products means those Products listed in Exhibit 8;

Non-Transferring Tenders means the Novartis Non-Transferring Tenders and the Sandoz Non-Transferring Tenders;

Non-Transferring Tenders List means the list of tenders which will be subject to the provisions of Part B (Non-Transferring Tenders) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders), in the Agreed Form;

Novartis Accounts Payable means all amounts which remain payable at the Separation Date in respect of trade creditors by the relevant Sandoz Asset Transferor (excluding, in any event, the Sandoz India Accounts Payable and any Intercompany Accounts or payables arising in respect of any Intercompany Arrangements, payments in advance, trade bills recoverable, suppliers’ prepayments and accrued revenue);

Novartis Accounts Receivable means all amounts which remain receivable at the Separation Date in respect of trade debtors by the relevant Sandoz Asset Transferor (excluding, in any event, the Sandoz India Accounts Receivable and any Intercompany Accounts or receivables arising in respect of any Intercompany Arrangements, payments in advance, trade bills recoverable, suppliers’ prepayments and accrued revenue);

Novartis ADRs has the meaning given in Clause 6.1(d) (Global Conditions);

Novartis Asset Transferees means the members of the Novartis Group identified as Novartis Asset Transferees in Exhibit 2 (Separation Steps Plan) and any other Person that Novartis and Sandoz agree in writing shall constitute a Novartis Asset Transferee (including pursuant to Clause 20.1 (Non-transferred Assets));

• 16 -

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Novartis Asset Transferors means the members of the Sandoz Group identified as Novartis Asset Transferors in Exhibit 2 (Separation Steps Plan) and any other Person that Novartis and Sandoz agree in writing shall constitute a Novartis Asset Transferor (including pursuant to Clause 20.1 (Non-transferred Assets));

Novartis Bangladesh Business means the business, operations and activities conducted by Novartis (Bangladesh) Ltd in Bangladesh;

Novartis Bangladesh Manufacturing Site means the manufacturing site of Novartis (Bangladesh) Limited located at Tongi in Gazipur in Bangladesh;

Novartis Biopharmaceuticals Assets means, in relation to each Novartis Asset Transferor, all assets used in connection with the discovery, research, Development and Manufacture of biopharmaceutical products, processes, technologies and platforms, excluding:

(a)	the Sandoz Biopharmaceuticals Assets;
(b)	in accordance with Part A (Transferring Contracts) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders), the<br> Sandoz Business Contracts and the Sandoz Part of all Shared Contracts;
---	---
(c)	the Sandoz Inventory;
---	---
(d)	any Intellectual Property Rights assigned, or agreed to be assigned, to Sandoz or any member of the Sandoz Group in accordance with the relevant Patent and Know-How Assignment Agreement and the relevant<br> Trademark, Design and Domain Name Assignment Agreement;
---	---
(e)	the Sandoz Properties and the Sandoz Equipment;
---	---
(f)	the Sandoz Works of Art;
---	---
(g)	the Sandoz IT Assets;
---	---
(h)	subject to and in accordance with the MA Transfer Agreement, the Sandoz Transferring Marketing Authorizations;
---	---
(i)	the Sandoz Business Permits;
---	---
(j)	subject to and in accordance with Clause 16 (Access to Information; Books and Records), the Sandoz Transferring Records; and
---	---
(k)	subject to and in accordance with the Third Party Claims and Investigations Management Agreement, all rights of any Sandoz Asset Transferor to causes of action, lawsuits, judgements, claims or demands to the<br> extent Exclusively Related to the Sandoz Business, whether real, inchoate, known or unknown, accrued or not, and any right of any Sandoz Asset Transferor to be indemnified by a Third Party in respect of any Sandoz Liabilities to the extent<br> Exclusively Related to any Sandoz Liabilities;
---	---

Novartis Business means all businesses, operations and activities (whether conducted independently or in association with one or more Third Parties through a partnership, joint venture or other mutual enterprise and whether or not such businesses, operations or activities are or have been terminated, divested or discontinued) conducted at any time prior to the Separation Date by either Party or their respective Affiliates, or on or after the Separation Date

• 17 -

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by any member of the Novartis Group, including any business, operations or activities in connection with the Novartis Products and the Novartis Bangladesh Business but excluding the Sandoz Business;

Novartis Business Contracts means, in relation to each Novartis Asset Transferor, all the Contracts that are Exclusively Related to the Novartis Business and entered into by or on behalf of, or the benefit of which is held on trust for or has been assigned to, that Novartis Asset Transferor prior to the Separation Date which in any case are outstanding or in respect of which the Novartis Asset Transferor has any rights, liabilities, claims, benefits or obligations as at the Separation Date, excluding the Sandoz Non-Transferring Tenders;

Novartis Business Permits means all Permits issued to a Novartis Asset Transferor that are Exclusively Related to the Novartis Business, excluding Marketing Authorizations;

Novartis Cash Management Arrangements means all cash management arrangements pursuant to which Novartis or its Subsidiaries automatically or manually sweep cash from, or automatically or manually transfer cash to, accounts of Sandoz or any of its Subsidiaries;

Novartis Demerger-relevant Entities means the Persons listed in Part A (Novartis Multi-Sector Entities) of Exhibit 10 (Balance Sheet Entities);

Novartis Employee has the meaning given in the Employee Matters Agreement;

Novartis Environmental and H&S Liabilities has the meaning given in paragraph 1 of Schedule 3 (Environmental

  Liabilities and Claims\);

Novartis Equipment means all Equipment:

(a)	in respect of the Delayed Businesses, the Equipment reported in the Novartis Reporting Segment of the relevant Delayed Transferor as at the Separation Date; and
(b)	in respect of any other part of the Novartis Business, owned by a member of the Novartis Group as at the Separation Date;
---	---

Novartis Group means:

(a)	Novartis;
(b)	each Person that upon completion of the Distribution will be, or will become, a direct or indirect Subsidiary of Novartis; and
---	---
(c)	each other Person that becomes a direct or indirect Subsidiary of Novartis at any time after the Distribution;
---	---

Novartis Hellas Accounts Receivable means all amounts which remain receivable at the Separation Date in respect of trade creditors by Novartis (Hellas) Commercial and Industrial Societe Anonyme;

Novartis Indemnitees means:

(a)	Novartis and each member of the Novartis Group;

• 18 -

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(b)	each of their respective past, present and future directors, officers, managers, shareholders (excluding shareholders of Novartis or, following the Separation Date, Sandoz), agents and employees; and
(c)	each of the heirs, executors, administrators, successors and assigns of any of the foregoing;
---	---

Novartis Insurance Contact means Cathy Beck, Director, Corporate Insurance, Novartis Services, Inc., or such other contact as Novartis shall notify to Sandoz in writing from time to time;

Novartis Intragroup Credit Support Instruments means any Credit Support Instrument provided by a member of the Sandoz Group for the benefit of any member of the Novartis Group;

Novartis Inventory means, in relation to each Novartis Asset Transferor, all inventories, wherever located, including the raw materials, stocks, work-in-progress, semi-finished and finished Novartis Products, API and packaging and labelling material of the relevant Novartis Asset Transferor, excluding the Sandoz Inventory;

Novartis IT Assets means all information technology equipment and assets, including those:

(a)	physically located on a Novartis Property as at the Separation Date; or
(b)	allocated to a Novartis Employee on or after the Separation Date,
---	---

but excluding the Sandoz IT Assets;

Novartis Liabilities means:

(a)	all Liabilities to the extent relating to, arising out of, or resulting from, the Novartis Business, regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based<br> occurred prior to, at or after the Separation Date, including:
(i)	all Liabilities to the extent relating to, arising out of, or resulting from, the operation or conduct of the Novartis Business as conducted by any member of the Novartis Group or the Sandoz Group at any time<br> prior to, on or after the Separation Date, including any Liability to the extent relating to, arising out of or resulting from any act or failure to act by any Representatives of any applicable member of the Novartis Group or the Sandoz Group<br> (whether or not such act or failure to act is or was within such Person’s authority), to the extent such act or failure to act relates to the Novartis Business;
---	---
(ii)	all Liabilities to the extent relating to, arising out of, or resulting from, the Novartis Transferring Assets and Novartis Retained Assets, including all Liabilities arising under the Novartis Business<br> Contracts and any part of a Shared Contract but excluding:
---	---
(A)	all Liabilities arising under the Sandoz Part; and
---	---
(B)	all Liabilities arising under the Sandoz Non-Transferring Tenders or the Sandoz Tender Part;
---	---

• 19 -

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(iii)	all Liabilities for claims made by Third Parties, or the directors, officers, employees, agents of any member of the Sandoz Group or the Novartis Group, against either Party or any of its Subsidiaries, whether<br> such Liabilities are known or unknown, contingent or accrued prior to, at or after the Separation Date, to the extent relating to, arising out of or resulting from the Novartis Business or the Novartis Transferring Assets;
(iv)	subject to and in accordance with Clause 11 (Accounts Payable and Receivable), the burden of all Novartis Accounts Payable;
---	---
(v)	any product liability claims, Patent infringement claims, challenges to Regulatory-Based Exclusivities or other claims of Third Parties, whether such liabilities are known or unknown, contingent or accrued<br> prior to, at or after the Separation Date, to the extent related to, arising out of or resulting from the Novartis Business, any Novartis Product or any other product Commercialized by the Novartis Group after the Separation Date and<br> irrespective of whether such liabilities have as a cause or contributory cause, the method or manner in which such product was researched, Developed or Manufactured including, without prejudice to the terms of the Ancillary Agreements, all<br> Liabilities to the extent relating to or arising out of or resulting from the Development or Manufacture of any Novartis Product by any member of the Novartis Group or any member of the Sandoz Group;
---	---
(vi)	any Liabilities relating to, arising out of, or resulting from, the Novartis Properties, arising prior to, on, or after the Separation Date, excluding any Sandoz Environmental and H&S Liabilities;
---	---
(vii)	any Novartis Environmental and H&S Liabilities; and
---	---
(viii)	any Liabilities relating to, arising out of, or resulting from, the Commercialization by or on behalf of the Novartis Group of any co-packaged product that is not on the Product Lists and which includes a<br> Sandoz Product or any product of the Sandoz Group following the Separation Date, where:
---	---
(A)	prior to the Separation Date, such Commercialization was included or reflected in the Novartis Reporting Segment; and/or
---	---
(B)	after the Separation Date, such Commercialization is carried out by or on behalf of the Novartis Group;
---	---
(b)	all other Liabilities that are expressly listed, scheduled or otherwise described by this Agreement or any Ancillary Agreement as Liabilities to be assumed by or allocated to any member of the Novartis Group;<br> and
---	---
(c)	any Liabilities relating to, arising out of, or resulting from any breach of, or indemnification under, this Agreement or any Ancillary Agreement (excluding the Tax Matters Agreement) by Novartis or any member<br> of the Novartis Group,
---	---

notwithstanding any other provision of this definition of Novartis Liabilities, the Liabilities that satisfy the requirements of paragraph 1.3 (Novartis US Brands Liabilities) or are specified in paragraph 1.5(a) of Exhibit 7 (Specific Liabilities),

but excluding all Sandoz Liabilities;

• 20 -

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Novartis Multi-Sector Entities means the Persons listed in Part B (Novartis Multi-Sector Entities) of Exhibit 10 (Balance Sheet Entities);

Novartis Non-Transferring Tenders means the Tenders identified as “Novartis Non-Transferring Tenders” in the Non-Transferring Tenders List and any other Tenders agreed in writing by the Parties;

Novartis Originator Non-Compete Product means, in connection with any Non-Compete Product, any originator Novartis Product which contains or comprises one or more of the same active pharmaceutical ingredients or active ingredients as the Non-Compete Product;

Novartis Part means the relevant part of a Shared Contract that is not Exclusively Related to the Sandoz Business;

Novartis Patent means any Patent:

(a)	owned by any member of the Novartis Group; or
(b)	with respect to which any member of the Novartis Group has a license or similar right, including a covenant not to sue,
---	---

in each case, as of the Separation Date that Covers a Novartis Product;

Novartis Products means:

(a)	any Retained Novartis Product irrespective of whether such product was included or reflected in the Sandoz Business Financial Statements or the Sandoz Reporting Segment at any time; and
(b)	any other product of the Consolidated Novartis Group that is not:
---	---
(i)	a Sandoz Product; or
---	---
(ii)	any other product or pipeline product of any member of the Sandoz Group after the Separation Date;
---	---

Novartis Properties means the real estate, freehold and/or leasehold properties:

(a)	owned by any member of the Sandoz Group or the Novartis Group which have not at any time been included or reflected in the Sandoz Reporting Segment;
(b)	owned by the Novartis Group at, or after, the Separation Date;
---	---
(c)	which were included or reflected in the Sandoz Reporting Segment at any time but were divested to a Third Party prior to the Separation Date and, prior to such divestment, were last included or reflected in the<br> Novartis Reporting Segment; or
---	---
(d)	listed as properties to be owned by the Novartis Group following the Separation in the Properties List,
---	---

excluding any Sandoz Properties and the part of any Novartis Property which is leased by a member of the Sandoz Group from Novartis;

• 21 -

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Novartis Puurs Manufacturing Site means the manufacturing site of S.A. Alcon-Couvreur N.V. located at Rijkskweg 14, B-2870 Puurs-Sint-Amands, Belgium;

Novartis Reporting Segment means any reporting segment in the Consolidated Novartis Group’s financial reporting systems, excluding the Sandoz Reporting Segment;

Novartis Retained Assets has the meaning given in Clause 3.2 (The Novartis Retained Assets);

Novartis Retained Records means Retained Records that relate to the Novartis Business and will be held by the Sandoz Group after the Separation Date, in accordance with the Books and Records Plan;

Novartis Sensitive Information means any non-public Information regarding:^^

(a)	the validity, arguments for invalidity or unenforceability of, or arguments or methods to avoid infringement or applicability of any Novartis Patent or Regulatory-Based Exclusivities attaching to any Novartis<br> Product;
(b)	any Know-How or trade secrets relating to any Novartis Product;
---	---
(c)	the research, Development, Manufacture, Commercialization, reimbursement, or Regulatory Approval of or relating to any Novartis Product; or
---	---
(d)	the marketing, sales or pricing of or relating to any Novartis Product,
---	---

provided that for the purposes of:

(i)	Clauses 21.7(a)(ii), 21.7(b), 21.7(d)(ii) and 21.7(e)(ii), the reference to “Novartis Product” in paragraphs (a) to (d) above shall mean “the Novartis Originator Non-Compete Product which corresponds with a<br> Non-Compete Product of the Sandoz Group or an Acquirer”; and
(ii)	Clause 21.8(b)(i), the reference to “Novartis Product” in paragraphs (a) to (d) above shall mean “any Novartis Product which corresponds with the relevant product of the Sandoz Group or an Acquirer”;
---	---

Novartis Share Transferees means the members of the Novartis Group set out in Column 3 of Part C (Novartis Transferring Entities) of Exhibit 1 (Sandoz Entities and Novartis Transferring Entities) and any other Person that Novartis and Sandoz agree in writing shall constitute a Novartis Share Transferee;

Novartis Share Transferors means the members of the Sandoz Group set out in Column 1 of Part C (Novartis Transferring Entities) of Exhibit 1 (Sandoz Entities and Novartis Transferring Entities) and any other Person that Novartis and Sandoz agree in writing shall constitute a Novartis Share Transferor;

Novartis Shares means registered shares of Novartis;

Novartis Tender Part means the relevant part of a Sandoz Shared Non-Transferring Tender that is Exclusively Related to the Novartis Business;

Novartis Third Party Credit Support Instruments means any Credit Support Instrument provided by a member of the Sandoz Group for the benefit of any Third Party to the extent relating to (i) obligations of any member of the Novartis Group; or (ii) any Novartis Liabilities;

• 22 -

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Novartis Transferring Asset has the meaning given in Clause 4.1 (The Novartis Transferring Assets);

Novartis Transferring Entities means the Persons listed in Column 2 of Part C (Novartis Transferring Entities) of Exhibit 1 (Sandoz Entities and Novartis Transferring Entities);

Novartis Transferring Marketing Authorizations means Marketing Authorizations with respect to the Novartis Products held by members of the Sandoz Group, including those listed in the MA Transfer Plan;

Novartis Transferring Records means Books and Records that are related to the Novartis Business and that are owned or in the possession of the Sandoz Group and which will be transferred to Novartis or another member of the Novartis Group prior to, on or after the Separation Date, as identified in the Books and Records Plan;

NTT Party has the meaning given in Paragraph 1.1 of Part B (Non-Transferring Tenders) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Omnibus Data Protection Agreement means the omnibus data protection agreement entered into between the Parties on or around the date of this Agreement;

Order means any order, decree, writ, injunction, award, judgment or other determination of, or agreement with, any court or any Governmental Entity or any other regulatory or arbitral authority in any jurisdiction;

Parent Company means any company which, whether directly or indirectly through one or more companies:

(a)	holds a majority of the voting rights in another company; or
(b)	is a member of another company and has the right to appoint or remove a majority of its board of directors; or
---	---
(c)	is a member of another company and controls a majority of the voting rights in it under an agreement with the other members;
---	---

Party means Novartis or Sandoz and Parties means both of them;

Patent and Know-How Assignment Agreements means each patent and know-how assignment agreement entered into between Sandoz and Novartis on or about the date of this Agreement;

Patent and Know-How License Agreements means each patent and know-how license agreement entered into between Sandoz and Novartis on or about the date of this Agreement;

Patents means:

(a)	utility patents, industrial and utility models, industrial designs, petty patents, design patents, patents of importation, patents of addition, certificates of invention, and other indicia of invention<br> ownership issued or granted by any Governmental Entity;
(b)	applications for any of the foregoing, including provisional, utility, design, priority, divisional, and continuation (in whole or in part) applications, and all other pre-grant forms of any of the foregoing;<br> and
---	---

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(c)	extensions, reissues, re-examinations, renewals, or other post-grant forms of any of the foregoing; and equivalents or counterparts of any of the foregoing;

Permits means all approvals, permits, licenses, certificates, registrations, authorizations or consents issued by a Governmental Entity under any Applicable Law, including any:

(a)	product notifications not requiring pre-clearance by regulatory authorities and other clearance procedures required to lawfully market any product in the relevant jurisdictions; and
(b)	supplements, amendments and revisions thereto,
---	---

other than any Marketing Authorizations;

Person means any individual, corporation, partnership, limited liability company, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Entity or other entity;

Personnel has the meaning given in the Information Access Agreement;

Pharmacovigilance Agreements means the five pharmacovigilance agreements entered into between Sandoz and Novartis on or around the date of this Agreement;

Pharmacovigilance Services Agreement means the agreement relating to the supply of certain services relating to pharmacovigilance matters entered into between Sandoz and Novartis on or around the date of this Agreement;

POSI Insurance has the meaning given in Clause 17.10 (POSI Insurance);

Pre-Separation Insurance Claims has the meaning given in Clause 17.2 (General Pre-Separation Insurance Claims);

Product means a Sandoz Product or a Novartis Product;

Product Liability Series Claim means an occurrence encompassing actual or alleged personal injury to two or more persons which commences over a period of longer than thirty consecutive days which is attributable directly, indirectly, or allegedly to the same actual or alleged event, condition, cause, defect, hazard and/or failure to warn of such;

Product Lists means the Sandoz Product List and the Retained Novartis Product List;

Properties List means each list of real estate, freehold and/or leasehold properties in the Agreed Form;

Quality Agreements means the quality agreements entered into between Sandoz and Novartis on or around the date of this Agreement, as referred to in the Manufacturing and Supply Agreements;

Reflected Items has the meaning given in Clause 10.3(d)(i);

Regulatory Approval means, with respect to a country or other jurisdiction, the approvals, licenses, registrations, or authorizations of any Governmental Entity that are necessary for the import, distribution, marketing, use, offering for sale, and sale of a product for one or more

• 24 -

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therapeutic indications in such country or jurisdiction in accordance with Applicable Law, excluding any applicable pricing and reimbursement approvals;

Regulatory-Based Exclusivity means, in respect of a Novartis Product and on a country-by-country basis, that:

(a)	Novartis or any of its Affiliates has been granted the exclusive right by a Governmental Entity (or is otherwise entitled to the exclusive right by operation of law) in such country to Commercialize the product<br> in such country, including any pediatric or orphan drug exclusivity, for a certain period of time; or
(b)	the data and Information submitted by Novartis or any of its Affiliates to the relevant Governmental Entity in such country for purposes of obtaining a Marketing<br><br> Authorization for such product may, for a certain period of time, not be relied upon in any way by any Person other than Novartis or its Affiliates (including by relying upon the Governmental Entity’s previous findings regarding the safety or<br> effectiveness of the product) to apply for a Regulatory Approval in the same indications as such product in such country;
---	---

Relevant Contract Transferee has the meaning given in Paragraph 1.6 (Third Party Consents Not Obtained Prior to Commencement of Separation) of Part A (Transferring Contracts) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Relevant Contract Transferor has the meaning given in Paragraph 1.6 (Third Party Consents Not Obtained Prior to Commencement of Separation) of Part A (Transferring Contracts) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Relevant Shared Contract Beneficiary has the meaning given in Paragraph 1.7(c) (Shared Contracts) of Part A (Transferring Contracts) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Relevant Shared Contract Party has the meaning given in Paragraph 1.7(c)(i) (Shared Contracts) of Part A (Transferring Contracts) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Relevant Tender Beneficiary has the meaning given in Paragraph 1.7(b) of Part B (Non-Transferring Tenders) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Relevant Tender Party has the meaning given in Paragraph 1.7(b)(i) of Part B (Non-Transferring Tenders) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

Representatives means, in relation to a specified Person, its respective Affiliates and the directors, officers, employees, agents, advisers, accountants and consultants of that Person and/or of its respective Affiliates;

Resolution Period has the meaning given in Clause 38 (Dispute Resolution);

Retained Novartis Product List means the list of certain Novartis Products, in the Agreed Form;

Retained Novartis Products means the products and the pipeline products on the Retained Novartis Product List;

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Retained Records means Books and Records which:

(a)	would have been Transferring Records but cannot transfer or be separated for technical, operational, commercial, legal or regulatory reasons or without liability being incurred by the relevant transferor as a<br> result of such transfer; or
(b)	contain Business Information and are agreed by the Parties to be Retained Records in the Books and Records Plan,
---	---

including any Books and Records which would have been Sandoz Transferring Records but which contain Novartis Sensitive Information, but excluding, in any event, the Excluded Records;

Retention Period means, in respect of each category of Retained Records, the time period required for such Retained Records to be retained under Applicable Law or, if longer, the holding Party’s internal policies and procedures, the duration of which shall be specified in the Books and Records Plan and / or in the Access Plan for each category of Retained Records, as may be extended in accordance with this Agreement;

Run-Off D&O Insurance has the meaning given to it in Clause 17.5 (Run-off D&O Insurance);

RxGx Agreement means the RxGx agreement entered into between Novartis and Sandoz on or about the date of this Agreement;

Sales has the meaning given to it in Clause 24.10(a);

Sandostatin Distribution Agreement means the supply, distribution and promotion agreement, in relation to products sold under the SANDOSTATIN trade mark in the People’s Republic of China (excluding Hong Kong, Macau and Taiwan), entered into between Novartis Pharma Services AG and LEK d.d. on or about the date of this Agreement;

Sandoz Accounts Payable means all amounts which remain payable at the Separation Date in respect of trade creditors by the relevant Novartis Asset Transferor (excluding, in any event, any Intercompany Accounts or payables arising in respect of any Intercompany Arrangements, payments in advance, trade bills recoverable, suppliers’ prepayments and accrued revenue);

Sandoz Accounts Receivable means all amounts which remain receivable at the Separation Date in respect of trade debtors by the relevant Novartis Asset Transferor (excluding, in any event, any Intercompany Accounts or receivables arising in respect of any Intercompany Arrangements, payments in advance, trade bills recoverable, suppliers’ prepayments and accrued revenue);

Sandoz ADR Registration Statement means the registration statement on Form F-6 (SEC File No. 333-274415) filed by JPMorgan Chase Bank, N.A., with the SEC pursuant to the Securities Act for the registration of the Sandoz ADRs, as such registration statement has been or may be amended and supplemented from time to time, including all documents filed as part thereof or incorporated by reference therein;

Sandoz ADRs means the American depositary shares representing the Listing Shares;

Sandoz Asset Transferees means the members of the Sandoz Group identified as Sandoz Asset Transferees in Exhibit 2 (Separation Steps Plan) and any other Person that Novartis and Sandoz agree in writing shall constitute a Sandoz Asset Transferee (including pursuant to Clause 20.1 (Non-transferred Assets));

• 26 -

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Sandoz Asset Transferors means the members of the Novartis Group identified as Sandoz Asset Transferors in Exhibit 2 (Separation

  Steps Plan\) and any other Person that Novartis and Sandoz agree in writing shall constitute a Sandoz Asset Transferor \(including pursuant to Clause 20.1 \(Non-transferred Assets\)\);

Sandoz Biopharmaceuticals Assets means:

(a)	the Sandoz Cell Lines;
(b)	the Sandoz Biopharmaceuticals Development Inventory;
---	---
(c)	the technical, research and development equipment and infrastructure owned by a member of the Sandoz Group as at the Separation Date, including the technical research and development equipment and<br> infrastructure:
---	---
(i)	located at the Sandoz Properties in Oberhaching, Germany and Holzkirchen, Germany; and/or
---	---
(ii)	acquired by a member of the Sandoz Group for the purposes of the Sandoz Group’s Biosimilar Technical Development Center in Ljubljana, Slovenia;
---	---

Sandoz Biopharmaceuticals Assumed Liabilities means, without prejudice to the terms of the Development and Collaboration Agreement or the Manufacturing and Supply Agreement(s), all Liabilities to the extent relating to, arising out of, or resulting from the research, Development, Manufacture or Commercialization of the Sandoz Biopharmaceuticals Products, including (without limitation) any Liabilities arising from Third Party Claims for Patent infringement or challenges to the Regulatory-Based Exclusivity of any such Sandoz Biopharmaceuticals Product, or the method or manner in which such product was researched, Developed or Manufactured, other than any Liabilities for the maintenance, upkeep or replacement of any equipment or assets (including the Novartis Transferring Assets) utilized by the Novartis Group in the research, Development, or Manufacture of such Products pursuant to the Development and Collaboration Agreement;

Sandoz Biopharmaceuticals Development Inventory means:

(a)	the inventory listed as Sandoz Biopharmaceuticals Development Inventory in Exhibit 6; and
(b)	any other inventory agreed in writing by the Parties;
---	---

Sandoz Biopharmaceuticals Products means the Products on the “1.2 Biopharma Products” tab and the “1.7 Pipeline Biosimilars” tab of the Sandoz Product List together with any additional pipeline products for which the Novartis Group may provide Development or Manufacturing services to the Sandoz Group under the Development and Collaboration Agreement or the Manufacturing Services Agreement(s);

Sandoz Business means any business, operations and activities:

(a)

as reflected on the Sandoz Business Financial Statements and any business, operations and activities conducted by any member of the Sandoz Group or the Novartis Group after the date of the Sandoz Business<br> Financial Statements and prior to the Separation Date that are of a nature or type that would have been reflected on a combined balance sheet of Sandoz as carved out from the Consolidated Novartis Group accounts or any notes or subledgers<br> thereto (were such balance sheet, notes or subledgers to be prepared

• 27 -

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on a basis consistent with the Sandoz Business Financial Statements or any notes or subledgers thereto), provided that the Sandoz Business shall:
(i)	include any balance sheet items reflected in the financial statements of the Sandoz Demerger-relevant Entities as at the Separation Date;
---	---
(ii)	exclude any balance sheet items reflected in the financial statements of the Novartis Demerger-relevant Entities as at the Separation Date;
---	---
(iii)	include any balance sheet items reported in the Novartis Reporting Segment of the Sandoz Multi-Sector Entity as at 30 June 2023; and
---	---
(iv)	exclude any balance sheet items reported in the Sandoz Reporting Segment of the Novartis Multi-Sector Entities as at 30 June 2023;
---	---
(b)	in connection with the research, Development, Manufacture or Commercialization of the Sandoz Products; or
---	---
(c)	included or reflected in the Sandoz Reporting Segment at any time, excluding the Novartis Global Biotech Cooperations Business Reporting Unit,
---	---

in each case, conducted at any time prior to the Separation Date by either Party or any of their respective Affiliates, excluding any business, operations or activities which are excluded in the Sandoz Business Financial Statements or would have been excluded in the Sandoz Business Financial Statements at the relevant time had the Sandoz Business Financial Statements been prepared at the relevant time using the same principles and methodology as set out in the Carve-Out Methodology; or

(d)	conducted on or after the Separation Date by any member of the Sandoz Group;

Sandoz Business Contracts means, in relation to each Sandoz Asset Transferor, all the Contracts that are Exclusively Related to the Sandoz Business and entered into by or on behalf of, or the benefit of which is held on trust for or has been assigned to, that Sandoz Asset Transferor prior to the Separation Date which in any case are outstanding or in respect of which the Sandoz Asset Transferor has any rights, liabilities, claims, benefits or obligations as at the Separation Date, excluding the Novartis Non-Transferring Tenders;

Sandoz Business Financial Statements means:

(a)	the audited combined financial statements of the Sandoz Business as of and for the years ended December 31, 2022, 2021 and 2020;
(b)	the unaudited pro forma combined financial statements of the Sandoz Business as of and for the year ended December 31, 2022;
---	---
(c)	the audited statutory financial statements of Sandoz as of and for the year ended December 31, 2022;
---	---
(d)	the unaudited condensed interim combined financial statements of the Sandoz Business as of the half-year ended June 30, 2023 and for the half-years ended June 30, 2023 and 2022 included in the supplement to the<br> Listing Prospectus;
---	---

• 28 -

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(e)	the unaudited supplementary financial information of the Sandoz Business as of the half-year ended June 30, 2023 and for the half-years ended June 30, 2023 and 2022 included in the supplement to the Listing<br> Prospectus; and
(f)	the unaudited pro forma combined financial statements of the Sandoz Business as of and for the half-year ended June 30, 2023 included in the supplement to the Listing Prospectus,
---	---

including any notes or subledgers thereto (including, for the avoidance of doubt, any post-balance sheet event notes);

Sandoz Business Permits means all Permits issued to a Sandoz Asset Transferor that are Exclusively Related to the Sandoz Business, excluding Marketing Authorizations;

Sandoz Cell Lines means the cell lines set forth in Exhibit 6 (Biopharmaceutical Assets);

Sandoz Clean Team means Representatives of the Sandoz Group who:

(a)	have not participated in or attended discussions regarding any Novartis Sensitive Information in respect of:
(i)	for the purposes of Clause 21.7 (Exception to Non-Compete), the corresponding Novartis Originator Non-Compete Product; or
---	---
(ii)	for the purposes of Clause 21.8 (IP Challenges), the corresponding Novartis Product; and/or
---	---
(b)	have not otherwise received, accessed or obtained knowledge of any Novartis Sensitive Information in respect of:
---	---
(i)	for the purposes of Clause 21.7 (Exception to Non-Compete), the corresponding Novartis Originator Non-Compete Product; or
---	---
(ii)	for the purposes of Clause 21.8 (IP Challenges), the corresponding Novartis Product,
---	---

in each case, either prior to, at or after the Separation Date, provided that any Representative who has not participated in or attended discussions regarding, and/or otherwise received, accessed or obtained knowledge of:

(c)	subject to paragraph (d) below, any Novartis Sensitive Information; or
(d)	the marketing, sales or pricing information in paragraph (d) of the definition of Novartis Sensitive Information since the date which is three years prior to the Separation Date,
---	---

shall be permitted to participate in a Sandoz Clean Team;

Sandoz Demerger-relevant Entities means the Persons listed in Part C (Sandoz Demerger-relevant Entities) of Exhibit 10 (Balance Sheet Entities);

Sandoz Employee has the meaning given in the Employee Matters Agreement;

Sandoz Entities means each of Sandoz, the Sandoz Transferring Entities and the Sandoz Indirect Transferring Entities;

• 29 -

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Sandoz Environmental and H&S Liabilities has the meaning given in paragraph 1 of Schedule 3 (Environmental

  Liabilities and Claims\);

Sandoz Equipment means all Equipment:

(a)	in respect of the Delayed Businesses, the Equipment reported in the Sandoz Reporting Segment of the relevant Delayed Transferor as at the Separation Date; and
(b)	in respect of any other part of the Sandoz Business, owned by a member of the Sandoz Group as at the Separation Date;
---	---

Sandoz Former Properties means any real estate, freehold and/or leasehold properties which were included or reflected in the Sandoz Reporting Segment at any time but were divested to a Third Party prior to the Separation Date, excluding any Novartis Properties;

Sandoz Group means:

(a)	Sandoz;
(b)	each Person that upon completion of the Distribution will be, or will become, a direct or indirect Subsidiary of Sandoz; and
---	---
(c)	each other Person that becomes a direct or indirect Subsidiary of Sandoz at any time after the Distribution;
---	---

Sandoz Indemnitees means:

(a)	Sandoz and each member of the Sandoz Group;
(b)	each of their respective past, present and future directors, officers, managers, shareholders (excluding shareholders of Novartis or, following the Separation Date, Sandoz), agents and employees; and
---	---
(c)	each of the heirs, executors, administrators, successors and assigns of any of the foregoing;
---	---

Sandoz India Accounts Payable means all amounts payable at the Separation Date in respect of trade creditors by Novartis Healthcare Private Limited to the extent Exclusively Related to the Sandoz Business (excluding, in any event, any Intercompany Accounts or payables arising in respect of any Intercompany Arrangements, payments in advance, trade bills recoverable, suppliers’ prepayments and accrued revenue);

Sandoz India Accounts Receivable means all amounts receivable at the Separation Date in respect of trade debtors by Novartis Healthcare Private Limited to the extent Exclusively Related to the Sandoz Business (excluding, in any event, any Intercompany Accounts or receivables arising in respect of any Intercompany Arrangements, payments in advance, trade bills recoverable, suppliers’ prepayments and accrued revenue);

Sandoz Indirect Transferring Entities means each Person listed in Column 1 of Part B (Sandoz Indirect Transferring Entities) of Exhibit 1 (Sandoz Entities and Novartis Transferring Entities);

Sandoz Insurance Contact means Daniel Halter, Director, Global Insurance, Sandoz AG, or such other contact as Sandoz shall notify to Novartis in writing from time to time;

• 30 -

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Sandoz Insurance Reserves means an amount equal to the sum of the undiscounted amounts of the incurred but not reported reserve (IBNRs) and the outstanding loss reserve (OSLR) of Triangle relating to active liability claims of the Sandoz Group as at 30 September 2023, as determined by the Actuary in accordance with Clause 17.7 (Insurance Reserves Report);

Sandoz Intragroup Credit Support Instruments means any Credit Support Instrument provided by a member of the Novartis Group for the benefit of any member of the Sandoz Group;

Sandoz Inventory means, in relation to each Sandoz Asset Transferor, all inventories, wherever located, including the raw materials, stocks, work-in-progress, semi-finished and finished Sandoz Products, API, packaging and labelling material of the relevant Sandoz Asset Transferor, in each case, as reflected on the Sandoz Business Financial Statements or that are of a nature or type that would have been reflected on a combined balance sheet of Sandoz as carved out from the Consolidated Novartis Group accounts or any notes or subledgers thereto (were such balance sheet, notes or subledgers to be prepared on a basis consistent with the Sandoz Business Financial Statements or any notes or subledgers thereto), as of the Separation Date, excluding any inventories which are excluded in the Sandoz Business Financial Statements or would have been excluded in the Sandoz Business Financial Statements at the relevant time had the Sandoz Business Financial Statements been prepared at the relevant time using the same principles and methodology as set out in the Carve-Out Methodology, provided that Sandoz Inventory shall:

(a)	include any inventories reflected in the financial statements of the Sandoz Demerger-relevant Entities as at the Separation Date;
(b)	exclude any inventories reflected in the financial statements of the Novartis Demerger-relevant Entities as at the Separation Date;
---	---
(c)	include any inventories reported in the Novartis Reporting Segment of the Sandoz Multi-Sector Entity as at 30 June 2023; and
---	---
(d)	exclude any inventories reported in the Sandoz Reporting Segment of the Novartis Multi-Sector Entities as at 30 June 2023;
---	---

Sandoz IT Assets means the information technology equipment and assets:

(a)	listed as to be owned by the Sandoz Group following the Separation in the Agreed Form IT Assets List;
(b)	physically located on a Sandoz Property as at the Separation Date; or
---	---
(c)	allocated to a Sandoz Employee on or after the Separation Date;
---	---

Sandoz Liabilities means:

(a)	all Liabilities included or reflected on the Sandoz Business Financial Statements or any notes or subledgers thereto, it being understood that:
(i)	the Sandoz Business Financial Statements and the notes and subledgers thereto shall be used to determine the types of, and methodologies used to determine, those Liabilities that are included in the definition<br> of Sandoz Liabilities pursuant to this paragraph (a); and
---	---

• 31 -

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(ii)	the amounts set forth on the Sandoz Business Financial Statements with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in<br> the definition of Sandoz Liabilities pursuant to this paragraph (a);
(b)	all other Liabilities that are incurred or accrued by any member of the Sandoz Group or the Novartis Group from the date of the Sandoz Business Financial Statements to the Separation Date that are of a nature<br> or type that would have resulted in such Liabilities being included as Liabilities on a combined balance sheet of Sandoz as carved out from the Consolidated Novartis Group accounts or any notes or subledgers thereto as of the date of the<br> Sandoz Business Financial Statements (were such balance sheet, notes or subledgers to be prepared on a basis consistent with the determination of the Liabilities included on the Sandoz Business Financial Statements or any notes or subledgers<br> thereto), it being understood that:
---	---
(i)	the Sandoz Business Financial Statements and the notes and subledgers thereto shall be used to determine the types of, and methodologies used to determine, those Liabilities that are included in the definition<br> of Sandoz Liabilities pursuant to this paragraph (b); and
---	---
(ii)	the amounts set forth on the Sandoz Business Financial Statements with respect to any Liabilities shall not be treated as minimum amounts or limitations on the amount of such Liabilities that are included in<br> the definition of Sandoz Liabilities pursuant to this paragraph (b);
---	---

provided that for the purposes of paragraphs (a) and (b), Sandoz Liabilities shall:

(iii)	exclude any business, operations or activities which are excluded in the Sandoz Business Financial Statements or would have been excluded in the Sandoz Business Financial Statements at the relevant time had the<br> Sandoz Business Financial Statements been prepared at the relevant time using the same principles and methodology as set out in the Carve-Out Methodology;
(iv)	include any balance sheet items reflected in the financial statements of the Sandoz Demerger-relevant Entities as at the Separation Date;
---	---
(v)	exclude any balance sheet items reflected in the financial statements of the Novartis Demerger-relevant Entities as at the Separation Date;
---	---
(vi)	include any balance sheet items reported in the Novartis Reporting Segment of the Sandoz Multi-Sector Entity as at 30 June 2023; and
---	---
(vii)	exclude any balance sheet items reported in the Sandoz Reporting Segment of the Novartis Multi-Sector Entities as at 30 June 2023;
---	---
(c)	all other Liabilities to the extent relating to, arising out of, or resulting from, the Sandoz Business regardless of when or where such Liabilities arose or arise, or whether the facts on which they are based<br> occurred prior to, at or after the Separation Date, including:
---	---
(i)	all Liabilities to the extent relating to, arising out of, or resulting from, the operation or conduct of the Sandoz Business as conducted by any member of the Novartis Group or the Sandoz Group at any time<br> prior to, on or after the Separation Date, including (without limitation) any Liability to the extent
---	---

• 32 -

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relating to, arising out of or resulting from any act or failure to act by any Representatives of any applicable member of the Novartis Group or the Sandoz Group (whether or not such act or failure to act is<br> or was within such Person’s authority), to the extent such act or failure to act relates to the Sandoz Business;
(ii)	all Sandoz Biopharmaceuticals Assumed Liabilities;
---	---
(iii)	all Liabilities to the extent relating to, arising out of, or resulting from, the Sandoz Transferring Assets (including all Liabilities arising under the Sandoz Business Contracts, the Sandoz Part of any Shared<br> Contract, the Sandoz Non-Transferring Tenders and the Sandoz Tender Part of any Sandoz Shared Non-Transferring Tender) and Sandoz Retained Assets;
---	---
(iv)	all Liabilities for claims made by Third Parties, or the directors, officers, employees, agents of any member of the Sandoz Group or the Novartis Group, against either Party or any of its Subsidiaries, whether<br> such Liabilities are known or unknown, contingent or accrued prior to, at or after the Separation Date, to the extent relating to, arising out of or resulting from the Sandoz Business or the Sandoz Transferring Assets;
---	---
(v)	subject to and in accordance with Clause 11 (Accounts Payable and Receivable), the burden of all Sandoz Accounts Payable, and Sandoz India Accounts Payable;
---	---
(vi)	any product liability claims, patent infringement claims, challenges to Regulatory-Based Exclusivities or other claims of Third Parties, whether such liabilities are known or unknown, contingent or accrued<br> prior to, at or after the Separation Date, to the extent related to, arising out of or resulting from the Sandoz Business, any Sandoz Product and/or any other products of the Sandoz Group following the Separation Date and irrespective of<br> whether such liabilities have as a cause or contributory cause, the method or manner in which such product was researched, Developed or Manufactured including, without prejudice to the terms of the Ancillary Agreements, all Liabilities to the<br> extent relating to or arising out of or resulting from the Development or Manufacture of any Sandoz Product and/or any other products of the Sandoz Group following the Separation Date by any member of the Sandoz Group or any member of the<br> Novartis Group; and
---	---
(vii)	any Liabilities relating to, arising out of, or resulting from, the Sandoz Properties or Sandoz Former Properties, arising prior to, on, or after the Separation Date, excluding any Novartis Environmental and<br> H&S Liabilities;
---	---
(viii)	any Sandoz Environmental and H&S Liabilities; and
---	---
(ix)	any Liabilities relating to, arising out of, or resulting from, the Commercialization by or on behalf of the Sandoz Group of any co-packaged product that is not on the Product Lists and which includes a<br> Novartis Product or any product of the Novartis Group following the Separation Date, where:
---	---
(A)	prior to the Separation Date, such Commercialization was included or reflected in the Sandoz Reporting Segment; and/or
---	---
(B)	after the Separation Date, such Commercialization is carried out by or on behalf of the Sandoz Group;
---	---

• 33 -

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(d)	all other Liabilities that are expressly listed, scheduled or otherwise described by this Agreement or any Ancillary Agreement as Liabilities to be assumed by or allocated to any member of the Sandoz Group;
(e)	any Liabilities relating to, arising out of, or resulting from any breach of, or indemnification under, this Agreement or any Ancillary Agreement (excluding the Tax Matters Agreement) by Sandoz or any member of<br> the Sandoz Group;
---	---
(f)	all Liabilities to the extent relating to, arising out of, or resulting from, the Listing Prospectus and/or the Sandoz ADR Registration Statement, including the preparation and publication thereof and including<br> any and all Liabilities relating to, arising out of or resulting from any untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact required to be stated therein or necessary to<br> make the statement therein not misleading, with respect to all Information contained in the Listing Prospectus and/or the Sandoz ADR Registration Statement,
---	---

but notwithstanding any other provision of this definition of Sandoz Liabilities, shall include any Liabilities specified in paragraph 1.4(a) of Exhibit 7 (Specific Liabilities) but exclude any Liabilities specified in paragraph 1.4(b) or paragraph 1.5(b) of Exhibit 7 (Specific

  Liabilities\);

Sandoz Multi-Sector Entity means the Person listed in Part D (Sandoz Multi-Sector Entity) of Exhibit 10 (Balance Sheet Entities);

Sandoz Non-Transferring Tenders means the Tenders identified as “Sandoz Non-Transferring Tenders” in the Non-Transferring Tenders List and any other Tenders agreed in writing by the Parties;

Sandoz Part means the relevant part of a Shared Contract that is Exclusively Related to the Sandoz Business;

Sandoz Product List means the list of certain Sandoz Products, in the Agreed Form;

Sandoz Products means:

(a)	the products and the pipeline products on the Sandoz Product List; and
(b)	any other product which was included or reflected in the Sandoz Reporting Segment prior to the Separation Date other than any products:
---	---
(i)	which were divested to a Third Party or discontinued prior to the Separation Date and, immediately prior to such divestment or discontinuation, were also included or reflected in the Novartis Reporting Segment<br> (but only to the extent so included or reflected in the Novartis Reporting Segment); or
---	---
(ii)	which were also included or reflected in the Novartis Reporting Segment in the 12 months prior to the Separation Date (but only to the extent so included or reflected in the Novartis Reporting Segment),
---	---

excluding any Retained Novartis Product or any other product or pipeline product of any member of the Novartis Group after the Separation Date;

Sandoz Properties means the real estate, freehold and/or leasehold properties listed as properties to be owned by the Sandoz Group following the Separation in the Properties List,

• 34 -

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excluding the part of any Sandoz Property which is leased by a member of the Novartis Group from Sandoz;

Sandoz Reimbursement Payment means the amount by which the aggregate Insurance Proceeds received by, or paid on behalf of, Sandoz following the Separation Date in respect of Pre-Separation Insurance Claims exceeds the Sandoz Insurance Reserves;

Sandoz Reporting Segment means the Sector 14 reporting segment in the Consolidated Novartis Group’s financial reporting systems;

Sandoz Retained Assets has the meaning given in Clause 4.2 (The Sandoz Retained Assets);

Sandoz Retained Records means the Retained Records that relate to the Sandoz Business and will be held by the Novartis Group after the Separation Date, in accordance with the Books and Records Plan;

Sandoz Share Transferees means the members of the Sandoz Group set out in Column 3 of Part A (Sandoz Transferring Entities) of Exhibit 1 (Sandoz Entities and Novartis Transferring Entities) and any other Person that Novartis and Sandoz agree in writing shall constitute a Sandoz Share Transferee;

Sandoz Share Transferors means the members of the Novartis Group set out in Column 1 of Part A (Sandoz Transferring Entities) of Exhibit 1 (Sandoz Entities and Novartis Transferring Entities) and any other Person that Novartis and Sandoz agree in writing shall constitute a Sandoz Share Transferor;

Sandoz Shared Non-Transferring Tenders means any Tender which relates both to the Sandoz Business and to the Novartis Business, and to which a member of the Sandoz Group is a party or in respect of which a member of the Sandoz Group has any liability or obligation at the Separation Date;

Sandoz Tender Part means the relevant part of a Sandoz Shared Non-Transferring Tender that is Exclusively Related to the Sandoz Business;

Sandoz Third Party Credit Support Instruments means any Credit Support Instrument provided by a member of the Novartis Group for the benefit of any Third Party to the extent relating to (i) obligations of any member of the Sandoz Group; or (ii) any Sandoz Liabilities;

Sandoz Transferring Assets has the meaning given in Clause 3.1 (The Sandoz Transferring Assets);

Sandoz Transferring Entity means each Person listed in Column 2 of Part A (Sandoz Transferring Entities) of Exhibit 1 (Sandoz Entities and Novartis Transferring Entities);

Sandoz Transferring Marketing Authorizations means Marketing Authorizations with respect to the Sandoz Products held by members of the Novartis Group, including those listed in the MA Transfer Plan;

Sandoz Transferring Records means Books and Records that are related to the Sandoz Business and that are owned or in the possession of the Novartis Group and which will be transferred to Sandoz or another member of the Sandoz Group prior to, on or after the Separation Date, as identified in the Books and Records Plan;

• 35 -

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Sandoz Works of Art means any Works of Art located on Sandoz Properties other than any Works of Art located in the common area of a Novartis Property and a Sandoz Property;

SEC means the United States Securities and Exchange Commission;

Securities Act means the United States Securities Act of 1933, as amended;

Separation has the meaning given in Recital E;

Separation Balance Sheet has the meaning given in Clause 16.12(a) (Separation Date Balance Sheet);

Separation Committee has the meaning given in Clause 18.1 (Separation Committee);

Separation Date has the meaning given in Clause 2.2 (The Separation Date);

Separation PMO Lead has the meaning given in Clause 18.3 (Separation PMO Leads);

Separation Steps Plan means the steps plans prepared in respect of the Separation and set out in Exhibit 2 (Separation Steps Plan);

Shared Contract means any Contract which relates both to the Sandoz Business and to the Novartis Business or any Novartis Retained Asset, and to which a member of the Novartis Group and/or a member of the Sandoz Group is a Party or in respect of which a member of the Novartis Group and/or a member of the Sandoz Group has any liability or obligation at the Separation Date, excluding Third Party Supply Agreements (as defined in the Transitional Services Agreement(s)) and the Sandoz Shared Non-Transferring Tenders;

Shareholder Information Brochure means the shareholder information brochure published by Novartis on 18 August 2023 in connection with the shareholder meeting to approve the Distribution;

Site Agreements means:

(a)	in respect of the industrial site located in Kundl, Austria (Biochemiestrasse 10, 6250 Kundl):
(i)	the site services agreement between Novartis Pharmaceutical Manufacturing GmbH, as the service provider, and Sandoz GmbH, as the service recipient, dated 12 June 2023; and
---	---
(ii)	the site agreement between Novartis Pharmaceutical Manufacturing GmbH, as the site operator, and Sandoz GmbH, as the site user, dated 10 March 2023;
---	---
(b)	in respect of the industrial site located in Schaftenau, Austria (Biochemiestraße 10, 6336 Langkampfen):
---	---
(i)	the site services agreement between Novartis Pharmaceutical Manufacturing GmbH, as the service provider, and Sandoz GmbH, as the service recipient, dated 12 June 2023; and
---	---
(ii)	the site agreement between Novartis Pharmaceutical Manufacturing GmbH, as the site operator, and Sandoz GmbH, as the site user, dated 10 March 2023;
---	---

• 36 -

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(c)	in respect of the industrial site located in Ljubljana, Slovenia:
(i)	the site services agreement between Novartis Pharmaceutical Manufacturing LLC, as the service provider and Lek Pharmaceuticals d.d., as the service recipient dated 30 June 2023; and
---	---
(ii)	the site agreement between Novartis Pharmaceutical Manufacturing LLC, as the site operator, and Lek Pharmaceuticals d.d., as the site user, dated 30 June 2023; and
---	---
(d)	in respect of the industrial site located in Menges, Slovenia:
---	---
(i)	a site services agreement between Novartis Pharmaceutical Manufacturing LLC, as the service provider, and Lek Pharmaceuticals d.d., as the service recipient, dated 30 June 2023; and
---	---
(ii)	a site agreement between Novartis Pharmaceutical Manufacturing LLC, as the site operator, and Lek Pharmaceuticals d.d., as the site user, dated 30 June 2023;
---	---

SIX means SIX Swiss Exchange Ltd;

SIX Listing Rules means the listing rules of SIX Exchange Regulation AG dated 3 November 2022, as amended;

Subsidiary and Subsidiaries means any company in relation to which another company is its Parent Company;

Swiss CO means the Swiss Code of Obligations (SR 220);

Tax has the meaning given in the Tax Matters Agreement;

Tax Authority has the meaning given in the Tax Matters Agreement;

Tax Matters Agreement means the tax matters agreement entered into between Novartis and Sandoz on or about the date of this Agreement;

Technical Transfer Agreement(s) means the technical transfer agreement or agreements entered into between Sandoz and Novartis on or about the date of this Agreement;

Tender means any contract, arrangement or agreement entered into following a call for tender by a Third Party;

Third Party means any Person excluding any member of the Sandoz Group or the Novartis Group;

Third Party Claim has the meaning given in the Third Party Claims and Investigations Management Agreement;

Third Party Claims and Investigations Management Agreement means the agreement relating to the management and conduct of Third Party Claims and Investigations entered into between Novartis and Sandoz on or about the date of this Agreement;

Third Party Consent has the meaning given in Clause 9.2(a)(i);

• 37 -

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Third Party Proceeds has the meaning given in Clause 14.3\(a\)\(ii\) \(Recovery from Third Parties\);

Trade Secret means all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if: (a) the owner thereof has taken reasonable measures to keep such Information secret; and (b) the Information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure;

Trademark, Design and Domain Name Assignment Agreement means each trademark, design and domain name assignment agreement entered into between Sandoz AG and Novartis on or about the date of this Agreement;

Trademark Co-existence Agreement means each trademark co-existence agreement entered into between Sandoz and Novartis on or about the date of this Agreement;

Transaction Advisory Fees has the meaning given in Clause 28.1 (Transaction Advisory Fees);

Transaction Document means this Agreement, the Ancillary Agreements and the Local Separation Agreements, and any other agreement agreed in writing between Sandoz and Novartis to constitute a Transaction Document;

Transferring Business Contracts means, in relation to the transfer of the Sandoz Transferring Assets, the Sandoz Business Contracts and, in relation to the transfer of the Novartis Transferring Assets, the Novartis Business Contracts;

Transferring Records means the Sandoz Transferring Records and the Novartis Transferring Records;

Transitional Distribution Services Agreement means the Transitional Distribution Services Agreement to be entered into between Sandoz and Novartis on or around the Separation Date;

Transitional Services Agreement(s) means the transitional services agreement or agreements to be entered into between Sandoz and Novartis on or around the Separation Date;

Triangle means Triangle International Reinsurance Limited;

Unclassified Records has the meaning given in Clause 16.4 (Unclassified Records);

US Branded Products means the Products on the “1.4 US Brands” tab of the Sandoz Product List in the territories specified in Column D of that tab only and US Branded Product means any one of them;

US Brands Commercial Agreement means the Commercial Agreement between Sandoz, Inc. and Novartis Pharmaceuticals Corporation dated 18 September 2023 in respect of the US Branded Products;

Waived Records has the meaning given to it in Clause 16.2(b) (Retention of original Transferring Records);

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Working Hours means 9.30am to 5.30pm in the relevant location on a Business Day; and

Works of Art means any paintings, sculptures or other pieces of art.

1.2	Interpretation. In this Agreement, unless the context otherwise requires:
(a)	headings do not affect the interpretation of this Agreement; the singular shall include the plural and vice versa; and references to one gender include all genders;
---	---
(b)	references to US Dollars or $ are references to the lawful currency from time to time of the United States of America;
---	---
(c)	references to Swiss francs or CHF are references to the lawful currency from time to time of Switzerland; and
---	---
(d)	any phrase introduced by the terms including, include, in particular or any similar expression shall be construed as without limitation and illustrative and shall not limit the sense of the words preceding those terms.
---	---
1.3	Enactments. Except as otherwise expressly provided in this Agreement, any express reference to an enactment (which includes any legislation in any jurisdiction) includes references to:
---	---
(a)	that enactment as amended, consolidated or re-enacted by or under any other enactment before or after the date of this Agreement;
---	---
(b)	any enactment which that enactment re‑enacts (with or without modification); and
---	---
(c)	any subordinate legislation (including regulations) made (before or after the date of this Agreement) under that enactment, as amended, consolidated or re‑enacted as described in (a) or (b) above,
---	---

except to the extent that any of the matters referred to in (a) to (c) occurs after the date of this Agreement and increases or alters the liability of Novartis or Sandoz (or any Person on whose behalf it is acting as agent pursuant to this Agreement) under this Agreement.

1.4	Schedules. The Schedules and Exhibits to this Agreement comprise schedules and Exhibits to this Agreement and form part of this Agreement.
1.5	Inconsistencies. Where there is any inconsistency between the definitions set out in this Clause and the definitions set out in any other Clause or Schedule, then, for the purposes of construing<br> such Clause or Schedule, the definitions set out in such Clause or Schedule shall prevail.
---	---

2. The Separation

2.1	The Separation. The Parties acknowledge that the Separation is intended to result in:
(a)	Sandoz directly or indirectly owning the Sandoz Business, together with the Sandoz Entities and the Sandoz Transferring Assets, and being responsible for the Sandoz Liabilities; and
---	---

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(b)	Novartis directly or indirectly owning the Novartis Business, including the Novartis Transferring Entities and the Novartis Transferring Assets, and being responsible for the Novartis<br> Liabilities,

in accordance with the terms of this Agreement.

2.2	The Separation Date. To the extent not already completed in any jurisdiction prior to the date of this Agreement, the Separation shall take place on 4 October 2023 (the Separation Date).
2.3	Transfer of Sandoz Transferring Assets and Sandoz Transferring Entities.
---	---
(a)	Subject to Clause 9 (Transferring Contracts and Non-Transferring Tenders), on the Separation Date and in accordance with the Separation Steps<br> Plan, Novartis and Sandoz shall procure that, to the extent not transferred prior to the date of this Agreement:
---	---
(i)	each Sandoz Share Transferor shall transfer to each Sandoz Share Transferee, and each Sandoz Share Transferee shall accept, all of such Sandoz Share Transferor’s direct or indirect<br> rights, title and interest in and to each Sandoz Transferring Entity for which it is identified as the respective Sandoz Share Transferor or Sandoz Share Transferee (as applicable) in Part A (Sandoz<br> Transferring Entities) of Exhibit 1 (Sandoz Entities and Novartis Transferring Entities) (together with all of its assets); and
---	---
(ii)	each Sandoz Asset Transferor shall transfer to each Sandoz Asset Transferee, and each Sandoz Asset Transferee shall (A) accept all of such Sandoz Asset Transferor’s direct or indirect<br> rights, title and interest in and to each Sandoz Transferring Asset for which it is identified as the respective Sandoz Asset Transferor or Sandoz Asset Transferee (as applicable) in Exhibit 2 (Separation<br> Steps Plan) and (B) assume and be responsible for all Sandoz Liabilities relating to such Sandoz Transferring Assets pursuant to Clause 2.4 (Assumption of Sandoz Liabilities).
---	---
(b)	Novartis and Sandoz shall procure that the shares (and other equity interests) in each Sandoz Transferring Entity to be transferred pursuant to Clause 2.3(a)(i) shall be transferred with<br> all rights attaching to them, including the right to receive all distributions and dividends declared, paid or made in respect of the relevant shares (and other equity interests) after the Separation Date.
---	---
2.4	Assumption of Sandoz Liabilities. Each Party shall procure that on and from the Separation Date, Sandoz and the applicable member of the Sandoz Group shall assume and be<br> responsible for all Sandoz Liabilities, regardless of:
---	---
(a)	whether such Sandoz Liabilities were approved or authorized by Affiliates or Representatives of Novartis prior to the Separation Date;
---	---
(b)	when or where such Sandoz Liabilities arose or arise, or whether the facts on which they are based occurred prior to, at or after the Separation Date;
---	---
(c)	where or against whom such Sandoz Liabilities are asserted or determined (including any such Sandoz Liabilities arising out of claims made by Novartis’s or Sandoz’s respective Affiliates<br> or by Representatives of Novartis or Sandoz or their respective Affiliates against either Party or any of its Affiliates) or whether asserted or determined prior to, at or after the Separation Date; and
---	---

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(d)	whether arising from or alleged to arise from negligence, recklessness, violation of any Applicable Law, fraud, gross negligence, willful misconduct, misrepresentation or otherwise by<br> either Party or any member of its Group or any of their respective Representatives.

For the avoidance of doubt, without prejudice to such Liability as Novartis or its Affiliates are expressly allocated under any relevant Ancillary Agreement, none of Novartis or any of its Affiliates shall have any liability to Sandoz, any of its Affiliates or any Third Party arising from the research, Development, Manufacture or Commercialization of any Sandoz Product and/or any other products of the Sandoz Group following the Separation Date, and any such liability incurred by any of Novartis or its Affiliates is expressly assumed by Sandoz and the applicable Sandoz Asset Transferee pursuant to this Clause 2.4 (Assumption of Sandoz Liabilities), notwithstanding that Novartis or its Affiliates undertook, was or is involved in such activities with respect to the relevant Sandoz Product(s) and/or any other products of the Sandoz Group following the Separation Date and such activities form part of the Novartis Business.

2.5	Transfer of Novartis Transferring Assets and Novartis Transferring Entities.
(a)	Subject to Clause 9 (Transferring Contracts and Non-Transferring Tenders) and in accordance with the Separation Steps Plan, Novartis and Sandoz<br> shall procure that, to the extent not transferred prior to the date of this Agreement:
---	---
(i)	each Novartis Share Transferor shall transfer to each Novartis Share Transferee, and each Novartis Share Transferee shall accept, all of such Novartis Share Transferor’s direct or<br> indirect rights, title and interest in and to each Novartis Transferring Entity for which it is identified as the respective Novartis Share Transferor or Novartis Share Transferee (as applicable) in Part C (Novartis Transferring Entities) of Exhibit 1 (Sandoz Entities and Novartis Transferring Entities) (together with all of its assets); and
---	---
(ii)	each Novartis Asset Transferor shall transfer to each Novartis Asset Transferee, and each Novartis Asset Transferee shall (A) accept all of such Novartis Asset Transferor’s direct or<br> indirect rights, title and interest in and to each Novartis Transferring Asset for which it is identified as the respective Novartis Asset Transferor or Novartis Asset Transferee (as applicable) in Exhibit 2 (Separation Steps Plan) and (B) assume and be responsible for all Novartis Liabilities relating to such Novartis Transferring Assets pursuant to Clause 2.6 (Assumption of Novartis<br> Liabilities).
---	---
(b)	Novartis and Sandoz shall procure that the shares or other equity interests in the Novartis Transferring Entities to be transferred pursuant to Clause 2.5(a) shall be transferred with<br> all rights attaching to them, including the right to receive all distributions and dividends declared, paid or made in respect of the relevant shares (and other equity interests) after the Separation Date.
---	---
2.6	Assumption of Novartis Liabilities. Each Party shall procure that on and from the Separation Date, Novartis and the applicable member of the Novartis Group shall assume and be<br> responsible for all Novartis Liabilities, regardless of:
---	---
(a)	whether such Novartis Liabilities were approved or authorized by Affiliates or Representatives of Novartis prior to the Separation Date;
---	---
(b)	when or where such Novartis Liabilities arose or arise, or whether the facts on which they are based occurred prior to, at or after the Separation Date;
---	---

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(c)	where or against whom such Novartis Liabilities are asserted or determined (including any such Novartis Liabilities arising out of claims made by Novartis’s or Sandoz’s respective<br> Affiliates or by Representatives of Novartis or Sandoz or their respective Affiliates against either Party or any of its Affiliates) or whether asserted or determined prior to, at or after the Separation Date; and
(d)	whether arising from or alleged to arise from negligence, recklessness, violation of any Applicable Law, fraud, gross negligence, willful misconduct, misrepresentation or otherwise by<br> either Party or any member of its Group or any of their respective Representatives.
---	---

For the avoidance of doubt, without prejudice to such Liability as Sandoz or its Affiliates are expressly allocated under any relevant Ancillary Agreement, none of Sandoz or any of its Affiliates shall have any liability to Novartis, any of its Affiliates or any Third Party arising from the research, Development, Manufacture or Commercialization of any Novartis Product and/or any other products of the Novartis Group following the Separation Date, and any such liability incurred by any of Sandoz or its Affiliates is expressly assumed by Novartis and the applicable Novartis Asset Transferee pursuant to this Clause 2.6 (Assumption of Novartis Liabilities), notwithstanding that Sandoz or its Affiliates undertook, was or is involved in such activities with respect to the relevant Novartis Product(s) and such activities form part of the Sandoz Business.

2.7	Execution of Local Separation Agreements. To the extent not executed prior to the date of this Agreement, Novartis and Sandoz shall, and shall procure that each relevant<br> member of their respective Groups shall, execute such agreements, transfers, conveyances and other documents, as required pursuant to Applicable Law in each applicable jurisdiction and otherwise as may be agreed in writing by Novartis and<br> Sandoz (including with respect to the form thereof) to memorialize and effect the Separation in accordance with the Separation Steps Plan (such agreements and any such agreements executed prior to the date of this Agreement, the Local Separation Agreements).
2.8	Microbial Strains. The provisions of Exhibit 11 (Microbial Strains) shall apply in respect of matters relating to Microbial Strains.
---	---

3. The Sandoz Transferring Assets

3.1	The Sandoz Transferring Assets. Subject to and in accordance with the terms of this Agreement and the Ancillary Agreements, including Clauses 3.2 (The Novartis Retained Assets), 9 (Transferring Contracts and Non-Transferring Tenders) and 30.3 (Matters Governed Exclusively by Ancillary<br> Agreements), the Sandoz Transferring Assets to be transferred by each Sandoz Asset Transferor in each Asset Sale Jurisdiction shall comprise the following (if any are<br> held by such Sandoz Asset Transferor):
(a)	the Sandoz Business Contracts, in accordance with Part A (Transferring Contracts) of Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders);
---	---
(b)	the Sandoz Part of all Shared Contracts, in accordance with Part A (Transferring Contracts) of Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders);
---	---
(c)	the Sandoz Inventory;
---	---
(d)	the Sandoz Properties and the Sandoz Equipment;
---	---

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(e)	the Sandoz Works of Art;
(f)	the Sandoz IT Assets;
---	---
(g)	subject to and in accordance with the MA Transfer Agreement, the Sandoz Transferring Marketing Authorizations;
---	---
(h)	to the extent transferable under Applicable Law, the Sandoz Business Permits;
---	---
(i)	subject to and in accordance with Clause 16 (Access to Information; Books and Records), the Sandoz Transferring Records;
---	---
(j)	subject to and in accordance with the Intellectual Property Agreements, any Intellectual Property Rights assigned, or agreed to be assigned, to Sandoz or any member of the Sandoz Group<br> in accordance with the relevant Patent and Know-How Assignment Agreement and the relevant Trademark, Design and Domain Name Assignment Agreement;
---	---
(k)	subject to and in accordance with the Employee Matters Agreement, any rights and assets related to Employees and/or Employee Benefits to the extent transferred to any member of the<br> Sandoz Group in accordance with the Employee Matters Agreement;
---	---
(l)	subject to and in accordance with the Third Party Claims and Investigations Management Agreement, all rights of any Sandoz Asset Transferor to causes of action, lawsuits, judgements,<br> claims or demands to the extent Exclusively Related to the Sandoz Business, whether real, inchoate, known or unknown, accrued or not, and any right of any Sandoz Asset Transferor to be indemnified by a Third Party in respect of any Sandoz<br> Liabilities to the extent Exclusively Related to any Sandoz Liabilities;
---	---
(m)	subject to the terms of any agreements with any Third Party in force on the Separation Date, the Sandoz Biopharmaceuticals Assets;
---	---
(n)	subject to and in accordance with Clause 11 (Accounts Payable and Receivable), the benefit of all Sandoz India Accounts Receivable and the<br> economic benefit of the Novartis Hellas Accounts Receivable in accordance with the applicable Local Separation Agreement; and
---	---
(o)	any other assets:
---	---
(i)	included or reflected on the Sandoz Business Financial Statements or any notes or subledgers thereto, it being understood that:
---	---
(A)	the Sandoz Business Financial Statements and the notes and subledgers thereto shall be used to determine the types of, and methodologies used to determine, those assets that are<br> included pursuant to this Clause 3.1(o); and
---	---
(B)	the amounts set forth on the Sandoz Business Financial Statements with respect to any assets shall not be treated as minimum amounts or limitations on the amount of such assets that<br> are included pursuant to this Clause 3.1(o);
---	---
(ii)	of any member of the Sandoz Group or the Novartis Group as of the Separation Date that are of a nature or type that would have resulted in such assets being
---	---

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included as assets on a combined balance sheet of Sandoz as carved out from the Combined Novartis Group accounts or any notes or subledgers thereto as of the date of the Sandoz<br> Business Financial Statements (were such balance sheet, notes or subledgers to be prepared on a basis consistent with the Sandoz Business Financial Statements or any notes or subledgers thereto), it being understood that:
(A)	the Sandoz Business Financial Statements and the notes and subledgers thereto shall be used to determine the types of, and methodologies used to determine, those assets that are<br> included pursuant to this Clause 3.1(o)(ii); and
---	---
(B)	the amounts set forth on the Sandoz Business Financial Statements with respect to any assets shall not be treated as minimum amounts or limitations on the amount of such assets that<br> are included pursuant to this Clause 3.1(o)(ii),
---	---

provided that for the purposes of Clause 3.1(o), the Sandoz Transferring Assets shall:

(i)	exclude any business, operations or activities which are excluded in the Sandoz Business Financial Statements or would have been excluded in the Sandoz Business Financial Statements at<br> the relevant time had the Sandoz Business Financial Statements been prepared at the relevant time using the same principles and methodology as set out in the Carve-Out Methodology;
(ii)	include any balance sheet items reflected in the financial statements of the Sandoz Demerger-relevant Entities as at the Separation Date;
---	---
(iii)	exclude any balance sheet items reflected in the financial statements of the Novartis Demerger-relevant Entities as at the Separation Date;
---	---
(iv)	include any balance sheet items reported in the Novartis Reporting Segment of the Sandoz Multi-Sector Entity as at 30 June 2023; and
---	---
(v)	exclude any balance sheet items reported in the Sandoz Reporting Segment of the Novartis Multi-Sector Entities as at 30 June 2023.
---	---
3.2	The Novartis Retained Assets. Notwithstanding anything in this Agreement to the contrary, the following assets (the Novartis<br> Retained Assets) shall be excluded from the transfer of the Sandoz Transferring Assets in each relevant Asset Sale Jurisdiction:
---	---
(a)	all assets of the Novartis Business (as more specifically described in Clause 4 (The Novartis Transferring Assets));
---	---
(b)	the Novartis Part of all Shared Contracts, in accordance with Part A (Transferring Contracts) of Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders), and all Third Party Supply Agreements (as defined in the Transitional Services Agreement(s)) which are held by a member of the Novartis Group;
---	---
(c)	subject to Part B (Non-Transferring Tenders) of Schedule 1 (Transferring Contracts and Non-Transferring<br> Tenders), the Sandoz Non-Transferring Tenders;
---	---

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(d)	all land, real estate and freehold or leasehold property together with all interests therein, including the Novartis Properties and the Novartis Equipment and excluding the Sandoz<br> Properties and the Sandoz Equipment;
(e)	all Works of Art, excluding the Sandoz Works of Art;
---	---
(f)	all information technology equipment and assets, including the Novartis IT Assets and excluding the Sandoz IT Assets;
---	---
(g)	subject to and in accordance with the Intellectual Property Agreements, any Intellectual Property Rights, excluding the Intellectual Property Rights assigned, or agreed to be assigned,<br> to Sandoz or any member of the Sandoz Group in accordance with the relevant Patent and Know-How Assignment Agreement and the relevant Trademark, Design and Domain Name Assignment Agreement;
---	---
(h)	subject to and in accordance with the Employee Matters Agreement, any rights and assets related to Employees and/or Employee Benefits, excluding those transferred to the Sandoz Group<br> in accordance with the Employee Matters Agreement;
---	---
(i)	subject to and in accordance with Clause 11 (Accounts Payable and Receivable), the benefit of all Novartis Accounts Receivable;
---	---
(j)	any Permits in respect of any products, or any applications therefore, including the Novartis Transferring Marketing Authorizations and excluding Sandoz Transferring Marketing<br> Authorizations and the Sandoz Business Permits;
---	---
(k)	all cash, marketable securities and negotiable instruments, and all other cash equivalents, including any bank deposits;
---	---
(l)	subject to and in accordance with the Third Party Claims and Investigations Management Agreement, any right of the Novartis Group to be indemnified by a Third Party in respect of any<br> Novartis Liabilities and any other causes of action, lawsuits, judgements, claims or demands arising in relation to any Novartis Liabilities;
---	---
(m)	any company seal, minute books, charter documents, stock or equity record books of any Sandoz Asset Transferor and any Books and Records, excluding the Sandoz Transferring Records;
---	---
(n)	any rights of the Novartis Group under any Intercompany Arrangements, which Intercompany Arrangements are dealt with in accordance with Clause 10 (Intercompany<br> Arrangements);
---	---
(o)	any shares or other equity interest in any Person, excluding any share or other equity interest in a Sandoz Entity;
---	---
(p)	all rights of the Novartis Group under this Agreement (including, for the avoidance of doubt, any right of the Novartis Group to be indemnified in respect of the Sandoz Liabilities)<br> and any other Transaction Document; and
---	---
(q)	other than as set out in Clause 17 (Insurance), all policies of or agreements for insurance or reinsurance and interests in insurance pools and<br> programs (in each case including self-insurance and insurance from members of the Novartis Group) and all rights of any nature with respect to any of the foregoing, including in each case all recoveries thereunder and rights to assert<br> claims seeking any such recoveries and any
---	---

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claim that was declared thereunder prior to the Separation Date (collectively, Insurance Arrangements), including claims<br> under the POSI Insurance against Novartis and/or its directors or officers.

4. The Novartis Transferring Assets

4.1	The Novartis Transferring Assets. Subject to and in accordance with the terms of this Agreement and the Ancillary Agreements, including this Clause 4.1 (The Novartis Transferring Assets), Clause 9 (Transferring Contracts and Non-Transferring Tenders) and Clause 30.3 (Matters Governed Exclusively<br> by Ancillary Agreements), the Novartis Transferring Assets to be transferred by the Novartis Asset Transferor shall comprise the following (if any held by such Novartis<br> Asset Transferor):
(a)	the Novartis Business Contracts, in accordance with Part A (Transferring Contracts) of Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders);
---	---
(b)	the Novartis Part of all Shared Contracts, in accordance with Part A (Transferring Contracts) of Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders);
---	---
(c)	the Novartis Inventory;
---	---
(d)	all land, real estate and freehold or leasehold property together with all interests therein including the Novartis Properties and the Novartis Equipment and excluding the Sandoz<br> Properties and the Sandoz Equipment;
---	---
(e)	all Works of Art, excluding the Sandoz Works of Art;
---	---
(f)	all information technology equipment and assets including the Novartis IT Assets and excluding the Sandoz IT Assets;
---	---
(g)	subject to and in accordance with the MA Transfer Agreement, the Novartis Transferring Marketing Authorizations;
---	---
(h)	to the extent transferable under Applicable Law, the Novartis Business Permits;
---	---
(i)	subject to and in accordance with Clause 16 (Access to Information; Books and Records), the Novartis Transferring Records;
---	---
(j)	subject to and in accordance with the Intellectual Property Agreements, any Intellectual Property Rights assigned, or agreed to be assigned, to Novartis or any member of the Novartis<br> Group in accordance with the relevant Patent and Know-How Assignment Agreement and the relevant Trademark, Design and Domain Name Assignment Agreement;
---	---
(k)	subject to and in accordance with the Employee Matters Agreement, any rights and assets related to Employees and/or Employee Benefits to the extent transferred to any member of the<br> Novartis Group in accordance with the Employee Matters Agreement;
---	---
(l)	subject to and in accordance with the Third Party Claims and Investigations Management Agreement, all rights of any Novartis Asset Transferor to causes of action, lawsuits, judgements,<br> claims or demands to the extent Exclusively Related to the Novartis Business whether real, inchoate, known or unknown, accrued or not, and any right of any Novartis Asset Transferor to be indemnified by a Third Party in respect
---	---

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of any Novartis Liabilities to the extent Exclusively Related to any Novartis Liabilities; and
(m)	the Novartis Biopharmaceuticals Assets.
---	---
4.2	The Sandoz Retained Assets. Notwithstanding anything in this Agreement to the contrary, the following assets (the Sandoz<br> Retained Assets) shall be excluded from the transfer of the Novartis Transferring Assets in each relevant Asset Sale Jurisdiction:
---	---
(a)	all assets of the Sandoz Business (as more specifically described in Clause 3.1 (The Sandoz Transferring Assets));
---	---
(b)	the Sandoz Part of any Shared Contract in accordance with Part A (Transferring Contracts) of Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders);
---	---
(c)	subject to Part B (Non-Transferring Tenders) of Schedule 1 (Transferring Contracts and Non-Transferring<br> Tenders), the Novartis Non-Transferring Tenders and the Sandoz Shared Non-Transferring Tenders;
---	---
(d)	the Sandoz Properties and the Sandoz Equipment;
---	---
(e)	the Sandoz Works of Art;
---	---
(f)	the Sandoz IT Assets;
---	---
(g)	subject to and in accordance with the Intellectual Property Agreements, any Intellectual Property Rights, excluding the Intellectual Property Rights assigned, or agreed to be assigned,<br> to Novartis or any member of the Novartis Group in accordance with the relevant Patent and Know-How Assignment Agreement and the relevant Trademark, Design and Domain Name Assignment Agreement;
---	---
(h)	subject to and in accordance with the Employee Matters Agreement, any rights and assets related to Employees and/or Employee Benefits, excluding those transferred to the Novartis Group<br> in accordance with the Employee Matters Agreement;
---	---
(i)	subject to and in accordance with Clause 11 (Accounts Payable and Receivable), the benefit of all Sandoz Accounts Receivable;
---	---
(j)	the Sandoz Transferring Marketing Authorizations and the Sandoz Business Permits;
---	---
(k)	all cash, marketable securities and negotiable instruments, and all other cash equivalents, including any bank deposits;
---	---
(l)	subject to and in accordance with the Third Party Claims and Investigations Management Agreement, any right of the Sandoz Group to be indemnified by a Third Party in respect of any<br> Sandoz Liabilities and any other causes of action, lawsuits, judgements, claims or demands arising in relation to any Sandoz Liabilities;
---	---
(m)	any company seal, minute books, charter documents, stock or equity record books of any Novartis Asset Transferor and any Books and Records, excluding the Novartis Transferring Records;
---	---

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(n)	any rights of the Sandoz Group under any of its Intercompany Arrangements, which Intercompany Arrangements are dealt with in accordance with Clause 10 (Intercompany Arrangements);
(o)	any shares or other equity interest in any Person excluding any share or other equity interest in a Novartis Transferring Entity;
---	---
(p)	all rights of the Sandoz Group under this Agreement (including, for the avoidance of doubt, any right of the Sandoz Group to be indemnified in respect of the Novartis Liabilities) and<br> any other Transaction Document; and
---	---
(q)	to the extent provided for in Clause 17 (Insurance), any rights of recovery under any Pre-Separation Insurance Claims and claims under the POSI<br> Insurance against Sandoz and/or its directors or officers.
---	---

5. The Distribution

5.1	Novartis Discretion to Implement the Distribution. Subject to Applicable Law, but notwithstanding Clause 34 (Variations), Novartis<br> shall, in its sole and absolute discretion, determine:
(a)	whether and when to proceed with all or part of the Distribution; and
---	---
(b)	all terms of the Distribution, as applicable, including the form, structure and terms of any transaction(s) and/or offering(s) to effect the Distribution and the timing of and any<br> additional conditions (in addition to, or in place of, those referred to in Clause 6 (Global Conditions)) to the consummation of the Distribution.
---	---

If Novartis determines to proceed with the Distribution, Novartis may, subject to Applicable Law, but notwithstanding Clause 34 (Variations), at any time and from time to time until the completion of the Distribution abandon, modify or change any or all of the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution.

5.2	Implementation of the Distribution. Subject to Clause 6 (Global Conditions), if Novartis determines, in accordance with Clause 5.1 (Novartis Discretion to Implement the Distribution), to implement the Distribution, Novartis and Sandoz shall procure that the Distribution shall be implemented by Novartis and Sandoz in accordance with<br> the Distribution Steps Plan (as may be modified by Novartis in its absolute discretion) and the terms and conditions determined by Novartis in accordance with Clause 5.1 (Novartis Discretion to Implement<br> the Distribution).
5.3	Shareholder Register. Immediately prior to the date of the Distribution, Novartis shall provide Sandoz with the latest available full shareholder data contained in the register<br> of shareholders of Novartis and in the register of holders of Novartis ADRs kept by JPMorgan Chase Bank, N.A., in order to facilitate Sandoz effecting the prompt registration of its shareholders and holders of Sandoz ADRs after the<br> Distribution (except for the details of any shareholder of Novartis who has expressly refused the provision of its Information by the means described in the Listing Prospectus). After the date of Distribution and upon request by Sandoz,<br> Novartis shall provide further Information that is reasonably required or desirable to facilitate such registration and reasonably cooperate with Sandoz for that purpose.
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6. Global Conditions

6.1	Global Conditions. Implementation of the Distribution pursuant to Clause 5 (The Distribution) shall, subject to Applicable Law, be<br> conditional on the following Global Conditions having been fulfilled (or waived by Novartis, in whole or in part, in its sole discretion). It is understood that the following Global Conditions are to be interpreted in accordance with the<br> respective conditions stated in the resolution of the general meeting of shareholders of Novartis held on 15 September 2023 approving the Distribution, which shall prevail in case of any inconsistency:
(a)	the board of directors of Novartis shall have endorsed the implementation of the Separation and the Distribution and shall not have withdrawn such endorsement;
---	---
(b)	the Novartis shareholders shall have authorized and approved the Distribution, and shall not have withdrawn such authorization and approval, in accordance with Swiss law;
---	---
(c)	the Listing Shares shall have been admitted to listing on the SIX as from the ex-dividend date (subject to technical deliverables only);
---	---
(d)	Sandoz shall have established a Level 1 ADR program in respect of the Listing Shares to enable distribution to holders of American depositary shares representing Novartis Shares (Novartis ADRs) issued pursuant to the deposit agreement among Novartis, JP Morgan Chase Bank, N.A., dated 23 December 2022 and all owners and holders from time to time of Novartis<br> ADRs (the ADR Program);
---	---
(e)	the SEC shall have declared effective the Sandoz ADR Registration Statement, no stop order suspending the effectiveness of this Sandoz ADR Registration Statement shall be in effect and<br> no proceedings for that purpose shall be pending before or threatened by the SEC;
---	---
(f)	no Order, injunction or decree issued by any Governmental Entity of competent jurisdiction or other legal restraint or prohibition preventing consummation of the Separation and/or the<br> Distribution shall be in effect, and no other event outside the control of Novartis shall have occurred or shall have failed to occur that prevents the consummation of the Separation and/or the Distribution (including, but not limited to,<br> the Novartis Group not being able to complete the internal transactions required to effect the Separation due to elements outside of its reasonable control); and
---	---
(g)	no other events or developments shall have occurred prior to the ex-dividend date for the Distribution that, in the judgment of the Novartis board of directors, would result in the<br> Separation and/or the Distribution having a material adverse effect (including, but not limited to, material adverse Tax consequences or risks) on Novartis or its shareholders,
---	---

together, the Global Conditions.

6.2	Efforts to Satisfy Global Conditions. Each Party shall use Commercially Reasonable Efforts to ensure that each of the Global Conditions is fulfilled as soon as practicable after<br> the date of this Agreement (to the extent not already fulfilled prior to the date of this Agreement).
6.3	Steps to Satisfy Global Conditions. Without prejudice to the generality of Clause 6.2 (Efforts to Satisfy Global Conditions), to the<br> extent not completed prior to the date of this Agreement:
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(a)	Sandoz shall, and shall cause the other members of the Sandoz Group to, cooperate in all respects with Novartis and any member of the Novartis Group to accomplish the Distribution,<br> including in connection with the admission of the Listing Shares to SIX and the establishment of the ADR Program, including the filing and publication of any necessary documents pursuant to the Securities Act or the Exchange Act,<br> including the Sandoz ADR Registration Statement;
(b)	Novartis and Sandoz shall take all such action as may be necessary or appropriate under the securities or blue sky Applicable Laws of the states or other political subdivisions of the<br> United States of America, Switzerland or any other jurisdiction in connection with the Distribution; and
---	---
(c)	Sandoz shall prepare and file, and shall use Commercially Reasonable Efforts to have approved prior to the Separation Date, an application for the listing of the Listing Shares on the<br> SIX and the Listing Prospectus, subject to official notices of issuance and other conditions, as applicable.
---	---
6.4	Information Sharing. Each Party shall provide the other Party with any Information and documents reasonably required for the purpose of preparing and making any submissions,<br> notifications and filings to any such Governmental Entity in respect of any Global Condition.
---	---
6.5	Conditions for the Benefit of Novartis. The foregoing Global Conditions are for the sole benefit of Novartis and shall not give rise to or create any duty on the part of<br> Novartis to waive or not waive any Global Condition or in any way limit:
---	---
(a)	the right of Novartis pursuant to Clause 5.1 (Novartis Discretion to Implement the Distribution) to determine, in its sole and absolute<br> discretion, whether and when to proceed with all or part of the Distribution and all terms of the Distribution; or
---	---
(b)	the right of Novartis to terminate this Agreement as set forth in Clause 23 (Termination) or alter the consequences of any such termination<br> from those specified in Clause 23 (Termination).
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Any determination made by Novartis concerning the satisfaction or waiver of any or all of the Global Conditions shall be conclusive and binding on the Parties.

7. Delayed Territories

The provisions of Schedule 2 (Delayed Territories) shall apply in respect of the implementation of the Separation after the Separation Date in respect of jurisdictions set out therein.

8. Environmental Liabilities and Claims

The provisions of Schedule 3 (Environmental Liabilities and Claims) shall apply to:

(a)	Environmental Liabilities arising out of or relating to any Novartis Property or Sandoz Property; and
(b)	Covered Claims and Investigations in relation to Environmental Remediation.
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9. Transferring Contracts and Non-Transferring Tenders

9.1	Non-Required Consents. The Parties acknowledge that it is their intention that, where the transfer of any applicable Transferring Business Contract or the Sandoz Part or<br> Novartis Part (as applicable) of any Shared Contract as part of the Separation is subject to a Third Party Consent and such Third Party Consent has not been obtained or is not sought prior to the implementation of the Separation in any<br> jurisdiction, the Separation shall proceed in such jurisdiction without the transfer of any such Transferring Business Contract or Sandoz Part or Novartis Part (as applicable) of a Shared Contract and the provisions of this Clause 9 (Transferring Contracts and Non-Transferring Tenders) and Part A (Transferring Contracts) of Schedule 1 (Transferring Contracts<br> and Non-Transferring Tenders) shall apply.
9,2	Transferring Contracts and Non-Transferring Tenders. The provisions of Schedule 1 (Transferring Contracts and Non-Transferring Tenders)<br> shall apply:
---	---
(a)	if and to the extent that the transfer, assignment, sub-license of the benefit and / or burden of (x) any Sandoz Business Contract to the relevant member of the Sandoz Group; or (y)<br> any Novartis Business Contract to the relevant member of the Novartis Group:
---	---
(i)	requires obtaining an agreement of novation or transfer, a consent, approval, waiver or the like from a Third Party (including any Governmental Entity) (such agreement of novation,<br> transfer, approval, waiver or consent, a Third Party Consent) to such assignment, sub-license, transfer or change of control; or
---	---
(ii)	is prohibited by Applicable Law;
---	---
(b)	with respect to any Shared Contract; and
---	---
(c)	with respect to any Non-Transferring Tender and any Sandoz Shared Non-Transferring Tender.
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10. Intercompany arrangements

10.1	Termination of Intercompany Arrangements. Subject to Clause 10.2 (Continuing Intercompany Arrangements) and Clause 10.3 (Settlement of Intercompany Accounts), Novartis and Sandoz shall procure, and shall procure that each member of their respective Groups shall procure, to the extent not terminated prior to the date of<br> this Agreement, that:
(a)	all Intercompany Arrangements between such Persons and in effect or accrued as of the Separation Date shall be terminated effective as of immediately prior to the Separation Date, but<br> without prejudice to any Intercompany Accounts outstanding as at the Separation Date;
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(b)	no such terminated Intercompany Arrangement (including any provision thereof that purports to survive termination) shall be of any further force or effect on and after the Separation<br> Date; and
---	---
(c)	each member of the Sandoz Group shall cease to be a Party to any Novartis Cash Management Arrangements prior to the Separation Date.
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Each Party shall, at the reasonable request of the other Party, take, or cause to be taken, such other actions as may be necessary to effect the foregoing. The Parties hereby waive, and shall

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procure that the members of their respective Groups waive, any advance notice provision or other termination requirements with respect to any Intercompany Arrangement.

10.2	Continuing Intercompany Arrangements. The provisions of Clause 10.1 (Termination of Intercompany Arrangements) shall not apply to any of<br> the following Contracts, agreements, arrangements, commitments or understandings, each of which shall remain in place and continue in full force and effect notwithstanding this Agreement and the Separation:
(a)	this Agreement and the Transaction Documents (and each other Intercompany Arrangement or Intercompany Account expressly contemplated by this Agreement or any Transaction Document to be<br> entered into by either Party or any other member of its Group);
---	---
(b)	any agreements, arrangements, commitments or understandings to which any Third Party or any non-wholly owned Subsidiary of Novartis or Sandoz (as the case may be) is a Party; and
---	---
(c)	the Continuing Intercompany Arrangements.
---	---
10.3	Settlement of Intercompany Accounts. Without limiting the termination of the Intercompany Arrangements described in Clause 10.1 (Termination<br> of Intercompany Arrangements), each of Novartis and Sandoz shall procure that:
---	---
(a)	any Intercompany Ordinary Course Accounts outstanding on the Separation Date are settled in the ordinary course of business. Notwithstanding Clause 26 (No Set-off), it shall be possible for members of the Novartis Group and the Sandoz Group, respectively, to set-off amounts owed to and from each other in respect of such accounts, on an entity-by-entity basis; and
---	---
(b)	any Intercompany Non-Ordinary Course Accounts are settled no later than close of business on the Business Day immediately prior to the Separation Date on a net basis (whether via a<br> dividend, a capital contribution, a combination of the foregoing or as otherwise agreed), and, for the avoidance of doubt, notwithstanding Clause 26 (No Set-off), it shall be possible for members<br> of the Novartis Group and the Sandoz Group, respectively, to set-off amounts owed to and from each other in respect of such accounts, on an entity-by-entity basis.
---	---
(c)	The Parties shall implement the Net Debt Implementation Plan in accordance with its terms. The Parties acknowledge that the Net Debt Implementation Plan sets out the target net<br> financial debt of the Sandoz Group including, amongst other items:
---	---
(i)	compensation to the Sandoz Group in respect of the balance sheet items reported in the Sandoz Reporting Segment of the Novartis Multi-Sector Entities, determined as at 31 August 2023,<br> which will be excluded from the Sandoz Business;
---	---
(ii)	compensation to the Novartis Group in respect of the balance sheet items reported in the Novartis Reporting Segment of the Sandoz Multi-Sector Entity, determined as at 31 August 2023,<br> which will be included in the Sandoz Business;
---	---
(iii)	amounts reflecting the net asset position in respect of the Controlled Delayed Businesses listed in Appendix 1 to Schedule 2 (Delayed Territories),<br> which
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will be transferred to the relevant transferee in accordance with Schedule 2 (Delayed Territories).
(d)	The Parties acknowledge and agree:
---	---
(i)	the Net Debt Implementation Plan takes into account certain assets, liabilities and associated accounting items in the financial statements of members of the Novartis Group and members<br> of the Sandoz Group (such items which are in the Net Debt Implementation Plan being Reflected Items); and
---	---
(ii)	following the Separation Date, no party shall be entitled to make a claim under this Agreement or any Ancillary Agreement in respect of any Reflected Item on the basis that the amount<br> included in the Net Debt Implementation Plan in respect of the relevant Reflected Item is an amount that is greater or less than the final amount of such item that is actually incurred by the relevant member(s) of the Sandoz Group or the<br> Novartis Group (as applicable).
---	---
10.4	Continuing Intercompany Arrangements Claims. Each Party shall not, and shall cause each member of their Group not to, bring any claim against the other Party or any member of<br> its Group in respect of or based upon any Continuing Intercompany Arrangement. All such claims shall be brought and be subject to the provisions, rights and limitations as set out in this Agreement. To the extent that either Party (or a<br> member of its Group) does bring a claim in breach of this Clause 10.4 (Continuing Intercompany Arrangements Claims), such Party shall indemnify the other Party (and each member of its Group)<br> against all Liabilities which the other Party (or the relevant member of its Group) may suffer as a result of or arising from the bringing of such a claim.
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11. Accounts Payable and Receivable

11.1	Payment of Accounts Payable and Receipt of Accounts Receivable. From and after the Separation Date:
(a)	the relevant Sandoz Asset Transferor shall pay any Novartis Accounts Payable and shall use Commercially Reasonable Efforts to procure receipt of any Novartis Accounts Receivable of<br> such Sandoz Asset Transferor in the ordinary course of business, consistent with past practice;
---	---
(b)	the relevant Novartis Asset Transferor shall pay any Sandoz Accounts Payable and shall use Commercially Reasonable Efforts to procure receipt of any Sandoz Accounts Receivable of such<br> relevant Novartis Asset Transferor in the ordinary course of business, consistent with past practice; and
---	---
(c)	the relevant Sandoz Asset Transferee shall pay the Sandoz India Accounts Payable and shall use Commercially Reasonable Efforts to procure receipt of the Sandoz India Accounts<br> Receivable in the ordinary course of business, consistent with past practice.
---	---
11,2	Re-imbursement of paid amounts.
---	---
(a)	If at any time after the Separation Date, any member of the Novartis Group pays any monies in respect of any amounts payable arising after the Separation Date to trade creditors to the<br> extent Exclusively Related to the Sandoz Business (excluding, in any event, any Intercompany Accounts or payables arising in respect of any Intercompany Arrangements, payments in advance, trade bills recoverable, suppliers’ prepayments
---	---

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and accrued revenue), then the relevant member of the Sandoz Group shall pay or procure payment to the relevant member of the Novartis Group, by no later than 10 Business Days after<br> the end of the calendar month in which the Sandoz Group is notified of such amount having been paid, the amount paid, plus any Tax or other costs actually suffered or incurred by the Novartis Group which would not have arisen but for<br> the payment of such monies (less the amount of any Tax or other benefits actually received by the Novartis Group).
(b)	If at any time after the Separation Date, any member of the Sandoz Group pays any monies in respect of any amounts payable arising after the Separation Date to trade creditors to the<br> extent Exclusively Related to the Novartis Business (excluding, in any event, the Sandoz India Accounts Payable and any Intercompany Accounts or payables arising in respect of any Intercompany Arrangements, payments in advance, trade<br> bills recoverable, suppliers’ prepayments and accrued revenue), then the relevant member of the Novartis Group shall pay or procure payment to the relevant member of the Sandoz Group, by no later than 10 Business Days after the end of the<br> calendar month in which the Novartis Group is notified of such amount having been paid, the amount paid, plus any Tax or other costs actually suffered or incurred by the Sandoz Group which would not have arisen but for the payment of such<br> monies (less the amount of any Tax or other benefits actually received by the Sandoz Group).
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11.3	Pass-back of misdirected payments.
---	---
(a)	If at any time after the Separation Date, any member of the Novartis Group actually receives any monies in respect of any amounts receivable arising after the Separation Date from<br> trade debtors that are Exclusively Related to the Sandoz Business (excluding, in any event, any Intercompany Accounts or receivables arising in respect of any Intercompany Arrangements, payments in advance, trade bills recoverable,<br> suppliers’ prepayments and accrued revenue), then the relevant member of the Novartis Group shall pay or procure payment to the relevant member of the Sandoz Group, by no later than 10 Business Days after the end of the calendar month in<br> which such amount is received, the amount received, less any Tax or other costs actually suffered or incurred by the Novartis Group which would not have arisen but for the receipt of such monies (less the amount of any Tax or other<br> benefits actually received by the Novartis Group).
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(b)	If at any time after the Separation Date, any member of the Sandoz Group actually receives any monies in respect of any amounts receivable arising after the Separation Date from trade<br> debtors that are Exclusively Related to the Novartis Business (excluding, in any event, the Sandoz India Accounts Receivable and any Intercompany Accounts or receivables arising in respect of any Intercompany Arrangements, payments in<br> advance, trade bills recoverable, suppliers’ prepayments and accrued revenue), then the relevant member of the Sandoz Group shall pay or procure payment to the relevant member of the Novartis Group, by no later than 10 Business Days after<br> the end of the calendar month in which such amount is received, the amount received, less Tax or other costs actually suffered or incurred by the Sandoz Group which would not have arisen but for the receipt of such monies (less the amount<br> of any Tax or other benefits actually received by the Sandoz Group).
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12. Credit Support

12.1	Intragroup Credit Support Instruments. Each Party shall, and shall procure that each member of its respective Group shall, use Commercially Reasonable Efforts to procure that,

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unless otherwise agreed in writing between the Parties, effective on or prior to the Separation Date:
(a)	each member of the Sandoz Group is released from any Novartis Intragroup Credit Support Instruments and such Novartis Intragroup Credit Support Instruments are replaced with alternate<br> arrangements that do not require any credit support from any member of the Sandoz Group;
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(b)	the beneficiaries of such Novartis Intragroup Credit Support Instruments provide written releases to Sandoz (which in the case of a letter of credit or bank guarantee may be effective<br> upon surrender of the original Novartis Intragroup Credit Support Instrument to the originating bank and such bank’s confirmation to Sandoz of cancelation thereof) indicating that Sandoz or the relevant member of the Sandoz Group shall,<br> effective upon the consummation of the Separation, have no liability with respect to such Novartis Intragroup Credit Support Instruments, in a form reasonably satisfactory to Sandoz;
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(c)	each member of the Novartis Group is released from all Sandoz Intragroup Credit Support Instruments and such Sandoz Intragroup Credit Support Instruments may be, in the sole discretion<br> of Sandoz, replaced with alternate arrangements that do not require any credit support from any member of the Novartis Group; and
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(d)	the beneficiaries of such Sandoz Intragroup Credit Support Instruments provide written releases to Novartis (which in the case of a letter of credit or bank guarantee may be effective<br> upon surrender of the original Sandoz Intragroup Credit Support Instrument to the originating bank and such bank’s confirmation to Novartis of cancelation thereof) indicating that Novartis or the relevant member of the Novartis Group<br> shall, effective upon the consummation of the Separation, have no liability with respect to such Sandoz Intragroup Credit Support Instruments, in a form reasonably satisfactory to Novartis.
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12.2	Third Party Credit Support Instruments. Each Party shall, and shall procure that each member of its respective Group shall, use Commercially Reasonable Efforts to<br> procure that, unless otherwise agreed in writing between the Parties, prior to, or as soon as reasonably practicable after, and in any event by no later than three months after the Separation<br> Date:
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(a)	each member of the Sandoz Group is released from all Novartis Third Party Credit Support Instruments and such Novartis Third Party Credit Support Instruments may be, in the sole<br> discretion of Novartis, replaced with alternate arrangements that do not require any credit support from any member of the Sandoz Group;
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(b)	the beneficiaries of such Novartis Third Party Credit Support Instruments provide written releases to Sandoz (which in the case of a letter of credit or bank guarantee may be effective<br> upon surrender of the original Novartis Third Party Credit Support Instrument to the originating bank and such bank’s confirmation to Sandoz of cancelation thereof) indicating that Sandoz or the relevant member of the Sandoz Group shall,<br> effective upon the consummation of the Separation, have no liability with respect to such Novartis Third Party Credit Support Instruments, in a form reasonably satisfactory to Sandoz;
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(c)	each member of the Novartis Group is released from all Sandoz Third Party Credit Support Instruments and such Sandoz Third Party Credit Support Instruments may be, in the sole<br> discretion of Sandoz, replaced with alternate arrangements that do not require any credit support from any member of the Novartis Group; and
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(d)	the beneficiaries of such Sandoz Third Party Credit Support Instruments provide written releases to Novartis (which in the case of a letter of credit or bank guarantee may be effective<br> upon surrender of the original Sandoz Third Party Credit Support Instrument to the originating bank and such bank’s confirmation to Novartis of cancelation thereof) indicating that Novartis or the relevant member of the Sandoz Group<br> shall, effective upon the consummation of the Separation, have no liability with respect to such Sandoz Third Party Credit Support Instruments, in a form reasonably satisfactory to Novartis.
12.3	Credit Support Indemnities. With effect from the Separation Date:
---	---
(a)	Novartis shall indemnify on demand and hold harmless Sandoz and each member of the Sandoz Group and their respective directors, officers, managers, members, agents and employees<br> against and in respect of all Liabilities actually suffered or incurred by any of them after the Separation Date under or by reason of any Novartis Intragroup Credit Support Instrument and/or Novartis Third Party Credit Support Instrument<br> that is not released on or prior to the Separation Date; and
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(b)	Sandoz shall indemnify on demand and hold harmless Novartis and each member of the Novartis Group and their respective directors, officers, managers, members, agents and employees<br> against and in respect of all Liabilities actually suffered or incurred by any of them after the Separation Date under or by reason of any Sandoz Intragroup Credit Support Instrument and/or Sandoz Third Party Credit Support Instrument<br> that is not released on or prior to the Separation Date, including, without limitation, any payment obligations or other Liabilities arising from Novartis (or the relevant member of its Group) to the relevant bank or credit card provider<br> in respect of credit cards used or held by, or provided to, members of the Sandoz Group or their respective directors, officers, managers, members, agents and employees.
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13. Mutual Release and Indemnification

13.1	Release of Sandoz Group. Subject to the terms of this Clause 13 (Mutual Release and Indemnification) and Clause 10 (Intercompany Arrangements), Novartis shall, and shall procure that all members of the Novartis Group, and their respective successors and assigns, and all Persons who at any time prior to the<br> Separation Date have been directors, officers, agents or employees of any member of the Novartis Group (in each case, in their respective capacities as such), with effect from the Separation Date and to the fullest extent permitted by<br> Applicable Law, remise, release and forever discharge from all Novartis Liabilities:
(a)	Sandoz, each member of the Sandoz Group and their respective successors and assigns; and
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(b)	all Persons who are, or at any time prior to the Separation Date have been, shareholders (excluding shareholders of Novartis or, following the Separation Date, Sandoz), directors,<br> officers, managers, agents or employees of any member of the Sandoz Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns.
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13.2	Release of Novartis Group. Subject to the terms of this Clause 13 (Mutual Release and Indemnification) and Clause 10 (Intercompany Arrangements), Sandoz shall, and shall procure that all members of the Sandoz Group, and their respective successors and assigns, and all Persons who at any time prior to the Separation<br> Date have been directors, officers, agents or employees of any member of the Sandoz Group (in each case, in their respective capacities as
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such), with effect from the Separation Date and to the fullest extent permitted by Applicable Law, remise, release and forever discharge from all Sandoz Liabilities:
(a)	Novartis, each member of the Novartis Group and their respective successors and assigns; and
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(b)	all Persons who are, or at any time prior to the Separation Date have been shareholders (excluding shareholders of Novartis or, following the Separation Date, Sandoz), directors,<br> officers, managers, agents or employees of any member of the Novartis Group (in each case, in their respective capacities as such), and their respective heirs, executors, administrators, successors and assigns.
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13.3	No Claims by Sandoz Group. Sandoz shall not, and shall procure that no member of the Sandoz Group shall, make, any claim or demand, or commence any proceedings asserting<br> any claim or demand, including any claim of contribution or any indemnification, against Novartis or any other member of the Novartis Group, or any other Person released pursuant to Clause 13.2 (Release<br> of Novartis Group), with respect to any Liabilities released pursuant to Clause 13.2 (Release of Novartis Group). At any time at or after the Separation Date, at the request of Novartis,<br> Sandoz shall cause any member of its Group to execute and deliver releases reflecting the provisions of Clause 13.2 (Release of Novartis Group) in a form reasonably acceptable to Novartis.
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13.4	No Claims by Novartis Group. Novartis shall not, and shall procure that no member of the Novartis Group shall, make, any claim or demand, or commence any proceedings<br> asserting any claim or demand, including any claim of contribution or any indemnification, against Sandoz or any other member of the Sandoz Group, or any other Person released pursuant to Clause 13.1 (Release<br> of Sandoz Group), with respect to any Liabilities released pursuant to Clause 13.1 (Release of Sandoz Group). At any time at or after the Separation Date, at the request of Sandoz,<br> Novartis shall cause any member of its Group to execute and deliver releases reflecting the provisions of Clause 13.1 (Release of Sandoz Group) in a form reasonably acceptable to Sandoz
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13.5	Sandoz Indemnity. Subject to this Clause 13 (Mutual Release and Indemnification) and Clause 14 (Liabilities and Additional Matters), Sandoz shall, with effect from the Separation Date and to the fullest extent permitted by Applicable Law, indemnify on demand, defend and<br> hold harmless each of the Novartis Indemnitees against and in respect of all Liabilities actually suffered or incurred by any of them to the extent arising out of or resulting from any Sandoz Liabilities, including the failure of Sandoz<br> or any other member of the Sandoz Group or any other Person to pay, perform or otherwise promptly discharge any Sandoz Liability in accordance with its terms and any such Liabilities arising by way of setoff, counterclaim or defense or<br> enforcement of any security interest
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13.6	Novartis Indemnity. Subject to this Clause 13 (Mutual Release and Indemnification) and Clause 14 (Liabilities and Additional Matters), Novartis shall, with effect from the Separation Date and to the fullest extent permitted by Applicable Law, indemnify on demand, defend<br> and hold harmless each of the Sandoz Indemnitees against and in respect of all Liabilities actually suffered or incurred by any of them to the extent arising out of or resulting from any Novartis Liabilities, including the failure of<br> Novartis or any other member of the Novartis Group or any other Person to pay, perform or otherwise promptly discharge any Novartis Liability in accordance with its terms and any such Liabilities arising by way of setoff, counterclaim<br> or defense or enforcement of any security interest.
---	---
13.7	Exceptions to the Mutual Release and Indemnification. Nothing in this Agreement or any Transaction Document:
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(a)	shall operate to transfer:
(i)	any of the Novartis Retained Assets to any member of the Sandoz Group or make any member of the Sandoz Group liable for any of the Novartis Liabilities; and
---	---
(ii)	any of the Sandoz Retained Assets to any member of the Novartis Group or make any member of the Novartis Group liable for any of the Sandoz Liabilities;
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(b)	shall impair any right of any Person to enforce, or release any Person from Liability under, this Agreement or any Transaction Document, or any Intercompany Arrangement or Intercompany<br> Account referred to in Clause 10.2 (Continuing Intercompany Arrangements), or any other Contract or Liability specified as continuing notwithstanding the Separation in any Ancillary Agreement, in<br> each case in accordance with its terms;
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(c)	shall impair any right of any Person to enforce, or release any Person from Liability under, any Contract or other agreement, arrangement, commitment and/or undertaking entered into<br> between any member of the Novartis Group, on the one hand, and any member of the Sandoz Group, on the other, after the Separation Date; or
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(d)	shall release:
---	---
(i)	Novartis or any member of the Novartis Group from honoring its obligations existing immediately prior to the Separation Date to indemnify any director, officer or employee of Sandoz or<br> any other member of the Sandoz Group who was a director, officer or employee of Novartis or any other member of the Novartis Group on or prior to the Separation Date, to the extent such director, officer or employee was entitled in such<br> capacity to such indemnification pursuant to obligations existing immediately prior to the Separation; provided that:
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(A)	if a director of Sandoz or any other member of the Sandoz Group receives indemnification payments from Novartis or Sandoz, as the case may be, with respect to a particular Liability<br> for which such director is entitled to indemnification, such director shall not be entitled to receive indemnification payments from the other Party with respect to the same Liability to the extent of the indemnification payments<br> previously received by such director from Novartis or Sandoz, as the case may be; and
---	---
(B)	to the extent the events underlying an indemnification claim would give rise to a Sandoz Liability, the liability of the relevant member of the Novartis Group to such director, officer<br> or employee shall be treated as a Sandoz Liability for the purposes of Clause 13.5 (Sandoz Indemnity); or
---	---
(ii)	Sandoz or any member of the Sandoz Group from honoring its obligations existing immediately prior to the Separation Date to indemnify any director, officer or employee of Novartis or<br> any member of the Novartis Group who was a director, officer or employee of Sandoz or any member of the Sandoz Group on prior to the Separation, to the extent such director, officer or employee was
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entitled in such capacity to such indemnification pursuant to obligations existing immediately prior to the Separation; provided that:
(A)	if a director of Novartis or any member of the Novartis Group receives indemnification payments from Novartis or Sandoz, as the case may be, with respect to a particular Liability for<br> which such director is entitled to indemnification, such director shall not be entitled to receive indemnification payments from the other Party with respect to the same Liability to the extent of the indemnification payments previously<br> received by such director from Novartis or Sandoz, as the case may be; and
---	---
(B)	to the extent the events underlying an indemnification claim would give rise to a Novartis Liability, the liability of the relevant member of the Sandoz Group to such director, officer<br> or employee shall be treated as a Novartis Liability for the purposes of Clause 13.5 (Novartis Indemnity).
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14. Liabilities and Additional Matters

14.1	Threshold for Indemnity Claims. Subject to Clause 14.2 (Applicability of Threshold for Indemnity Claim), no Indemnifying Party shall be<br> liable for any Indemnity Claim unless the amount of the Liability recoverable pursuant to that single Indemnity Claim (and, for these purposes, a number of Indemnity Claims arising out of the same subject matter, facts, events or<br> circumstances may be aggregated and form a single Indemnity Claim) exceeds $500,000.00, in which case the Indemnitee shall be entitled to claim for the full amount of the Indemnity Claim, not just the amount which exceeds the threshold.
14.2	Applicability of Threshold for Indemnity Claim.
---	---
(a)	Notwithstanding Clause 14.1 (Threshold for Indemnity Claims), if Novartis (or any member of the Novartis Group) or Sandoz (or any member of the<br> Sandoz Group) agrees or acknowledges in writing prior to the Separation Date that a relevant Third Party Claim or Governmental Investigation constitutes its Liability (in its entirety or in any part) then Novartis or Sandoz, as<br> applicable, shall be liable for the full amount of such Third Party Claim or Governmental Investigation (or the relevant part in respect of which Liability is accepted), even if the amount of the Liability actually arising from such Third<br> Party Claim or Governmental Investigation is equal to or less than $500,000.00.
---	---
(b)	The terms of Clause 14.1 (Threshold for Indemnity Claims) shall not apply to:
---	---
(i)	any payment or transfer required to be made pursuant to:
---	---
(A)	Clause 11 (Accounts Payable and Receivable); or
---	---
(B)	Clause 20 (Wrong Pockets);
---	---
(ii)	any payment under the indemnities contained in:
---	---
(A)	Clause 12.3 (Credit Support Indemnities);
---	---
(B)	Clause 30.2 (Local Separation Agreement Claims);
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(C)	Schedule 1 (Transferring Contracts and Non-Transferring Tenders);
(D)	Clause 10.4 (Continuing Intercompany Arrangements Claims); or
---	---
(iii)	any breach of an obligation in Clause 24 (Confidentiality and Non-use);
---	---
(iv)	any payment of the contractual penalty pursuant to Clause 24.9 (Contractual Penalty);
---	---
(v)	any allocation of costs or payment required under:
---	---
(A)	Clause 16 (Access to Information; Books and Records);
---	---
(B)	Clause 17 (Insurance);
---	---
(C)	Clause 28 (Costs); or
---	---
(D)	Schedule 1 (Transferring Contracts and Non-Transferring Tenders);
---	---
(vi)	to any Ancillary Agreement Claim if the relevant Ancillary Agreement expressly provides that Clause 14.1 (Threshold for Indemnity Claims) shall<br> not apply to such a claim; or
---	---
(vii)	any dispute or claim arising out of, relating to, or in connection with any Conflicting Agreement.
---	---
14.3	Recovery from Third Parties.
---	---
(a)	The Parties intend that any Liability subject to indemnification or reimbursement pursuant to this Agreement shall be reduced by the amount of:
---	---
(i)	Insurance Proceeds that actually reduce the amount of, or are paid to the applicable Indemnitee in respect of, such Liability; and/or
---	---
(ii)	amounts recovered from any Third Party other than Insurance Proceeds, net of any costs or expenses incurred in the collection or litigation thereof and less the amount of any Taxes<br> resulting from the receipt thereof, that actually reduce the amount of, or are paid to the applicable Indemnitee in respect of, such Liability (Third Party Proceeds).
---	---
(b)	Accordingly, the amount that an Indemnifying Party is required to pay to an Indemnitee shall be reduced by any Insurance Proceeds or Third Party Proceeds recovered by or on behalf of<br> the Indemnitee from a Third Party in respect of the related Liability.
---	---
(c)	If an Indemnitee receives an Indemnity Payment and subsequently receives Insurance Proceeds or Third Party Proceeds in respect of such Liability, then the Indemnitee shall pay to the<br> Indemnifying Party an amount equal to the amount of the Indemnity Payment received minus the amount of the Indemnity Payment that would have been due if such Insurance Proceeds or Third Party Proceeds had been received, realized or<br> recovered (and so deducted from the Indemnity Payment) before the Indemnity Payment was made.
---	---
(d)	An insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or have any subrogation rights with respect
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thereto by virtue of the indemnification provisions hereof, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a “wind-fall”<br> (i.e., a benefit it would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions of this Agreement.
(e)	Subject, and without prejudice, to Clause 17 (Insurance), each Indemnitee shall use Commercially Reasonable Efforts to seek to collect or<br> recover any Insurance Proceeds to which such Indemnitee is entitled in connection with any Liability for which such Indemnitee intends to make an Indemnity Claim; provided, however, that:
---	---
(i)	such Indemnitee’s inability to collect or recover any such Insurance Proceeds shall not limit the Indemnifying Party’s obligations hereunder;
---	---
(ii)	an Indemnifying Party may not delay making any indemnification payment required under the terms of this Agreement, or otherwise satisfying any indemnification obligation, pending the<br> outcome of any actions to collect or recover Insurance Proceeds; and
---	---
(iii)	an Indemnitee need not attempt to collect any Insurance Proceeds prior to making an Indemnity Claim or receiving any Indemnity Payment otherwise owed to it under this Agreement or any<br> Ancillary Agreement.
---	---
14.4	Subrogation. In the event of payment by or on behalf of any Indemnifying Party to any Indemnitee of any Third Party Claim, such Indemnifying Party shall be subrogated to and<br> shall stand in the place of such Indemnitee as to any events or circumstances in respect of which such Indemnitee may have any right, defense or claim relating to such Third Party Claim against any claimant or plaintiff asserting such<br> Third Party Claim or against any other Person. Such Indemnitee shall, and shall procure that its Affiliates shall, in accordance with the Third Party Claims and Investigations Management Agreement, cooperate in good faith with, and<br> provide such assistance as may be reasonably required by, such Indemnifying Party, at its cost and expense, in prosecuting any subrogated right, defense or claim. This Clause 14.4 (Subrogation)<br> shall not apply to Insurance Arrangements that are dealt with in Clause 17 (Insurance).
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14.5	Duty to mitigate. Prior to making any Indemnity Claim, Novartis or Sandoz, as applicable, shall, and shall procure that the relevant members of its respective Group shall,<br> subject to the terms of any Ancillary Agreement, including the Third Party Claims and Investigations Management Agreement, use Commercially Reasonable Efforts to avoid or mitigate any Liabilities for which such Person intends to seek<br> indemnification.
---	---
14.6	No Double Recovery and No Double Counting.
---	---
(a)	A Party shall be entitled to make more than one claim under this Agreement arising out of the same subject matter, fact, event or circumstance but shall not be entitled to recover<br> under this Agreement or any relevant Transaction Document or otherwise more than once in respect of the same Liability or Liabilities suffered (or part of such Liabilities), regardless of whether more than one claim arises in respect of<br> it.
---	---
(b)	No amount (including any relief) (or part of any amount) shall be taken into account, set off or credited more than once under this Agreement or any relevant Transaction Document or<br> otherwise, with the intent that there will be no double counting under this Agreement or any Transaction Document or otherwise.
---	---
14.7	Timing of Payments and Continuation of Indemnity.
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(a)	The Indemnifying Party shall pay to the Indemnitee Indemnity Payments in respect of any Liabilities for which an Indemnitee is entitled to indemnification under this Agreement<br> reasonably promptly upon demand.
(b)	The indemnity provisions contained in this Agreement shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee;<br> and (ii) the knowledge by the Indemnitee of Liabilities for which it might be entitled to indemnification hereunder.
---	---
14.8	Covenant Not to Sue. Each Party hereby covenants and agrees that neither it nor any member of its Group or any Person claiming through it shall bring suit or otherwise assert<br> any claim against any Indemnitee, or assert a defense against any claim asserted by any Indemnitee, before any court, arbitrator, neutral mediator or administrative agency in any jurisdiction, alleging that:
---	---
(a)	the acquisition or transfer of any Sandoz Transferring Assets and/or Novartis Transferring Assets, as applicable, on the terms and conditions set forth in this Agreement and the other<br> Transaction Documents is void or unenforceable for any reason;
---	---
(b)	the assumption of any Sandoz Liabilities and/or Novartis Liabilities, as applicable, on the terms and conditions set forth in this Agreement and the other Transaction Documents is void<br> or unenforceable for any reason; or
---	---
(c)	the provisions of Clause 13 (Mutual Release and Indemnification) or this Clause 14 (Liabilities and<br> Additional Matters) are void or unenforceable for any reason.
---	---
14.9	Remedies Cumulative. The remedies provided in Clause 13 (Mutual Release and Indemnification) shall be cumulative and shall not preclude<br> assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against any Indemnifying Party.
---	---
14.10	Survival of Indemnities. The rights and obligations of each of Novartis and Sandoz and their respective Indemnitees under Clause 13 (Mutual<br> Release and Indemnification) shall survive the Distribution and the sale or other transfer by any Party or its Affiliates of any assets or businesses or the assignment by any Party or its Affiliates of any Liabilities, or the<br> change of form or change of control of any Party.
---	---
14.11	Term of Indemnities. The obligation of Novartis to indemnify under Clause 13.6 (Novartis Indemnity) and the obligation of Sandoz to<br> indemnify under Clause 13.5 (Sandoz Indemnity), together with the related obligations of both Parties under this Clause 14 (Liabilities and Additional Matters),<br> shall lapse (verjähren) upon expiry of the 10-year term pursuant to article 127 of the Swiss Code of Obligations, which shall start to run on the date on which the obligation of Novartis to<br> indemnify under Clause 13.5 (Novartis Indemnity) or the obligation of Sandoz to indemnify under Clause 13.6 (Sandoz Indemnity), as applicable, becomes<br> due, such due date being the date on which the relevant indemnified Party actually suffers or incurs a relevant Liability.
---	---

15. Claims

15.1	Restrictions on Claims. Any Claim shall, to the extent applicable, be subject to the applicable provisions of this Clause 15 (Claims)<br> and Clause 14 (Liabilities and Additional Matters) and, where applicable, without prejudice to the terms of any Ancillary Agreement, including the Third Party Claims and Investigations Management<br> Agreement.

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15.2	Notice of Claims.
(a)	For the purposes of this Clause 15 (Claims), “Affiliates” of each of Sandoz and Novartis shall include the Sandoz Indemnitees and Novartis<br> Indemnitees respectively.
---	---
(b)	If a Party (the Claimant Party) wishes to make a Claim against another Party (the Defendant Party), the Claimant Party shall, subject to Clause 15.3 (Third Party Claims and Investigations Management Agreement), as soon as reasonably practicable<br> after becoming aware of the facts or circumstances giving rise to such Claim (including any written demand or claim that is asserted against the Claimant Party by a Third Party), give written notice to the Defendant Party (the Claim Notice) containing reasonably specific details of:
---	---
(i)	the Claim, including such Information as is available to the Claimant Party (or its Affiliates) to enable the Defendant Party to reasonably assess the Claim;
---	---
(ii)	to the extent reasonably practicable, the Claimant Party’s estimate (on a without prejudice basis), on the basis of the Information then available to the Claimant Party, of the amount<br> of the Liabilities which are, or are to be, the subject of the Claim (if known) and the method of computation thereof;
---	---
(iii)	where such Claim is a demand from an Indemnitee for an Indemnity Payment, the amount of such Indemnity Payment and reasonably satisfactory documentation setting forth the basis for<br> such amount, including documentation with respect to calculations made and consideration of any Insurance Proceeds that would reduce the amount of such Liabilities; and
---	---
(iv)	any other remedies sought by the Claimant Party in relation to the Claim.
---	---

To the extent a reasonable estimate and/or method of computation cannot reasonably be provided in the Claim Notice in accordance with Clause 15.2(b)(ii), the Claimant Party shall provide such Information to the Defendant Party as soon as reasonably practicable thereafter.

(c)	Following the delivery of a Claim Notice pursuant to Clause 15.2(b), the Defendant Party shall have a period of 45 days within which to object to any such notice, stating whether it<br> disputes the Claim, and describing in reasonable detail the basis for its objection thereto. If the Defendant Party does not so respond within such 45-day period stating that the Defendant Party disputes its liability for such Claim, the<br> Defendant Party shall be deemed to have accepted such Claim.
(d)	If the Parties are disputing a Claim following the procedure outlined above, the provisions of Clause 38 (Dispute Resolution) shall apply.
---	---
(e)	The regime provided for in this Clause 15.2 (Notice of Claims) shall be in lieu of, and not in addition to, any Claimant Party’s duty to<br> inspect and notify the Defendant Party in accordance with article 201 of the Swiss CO.
---	---
(f)	The failure of a Party to comply fully with its obligations under this Clause 15.2 (Notice of Claims) shall not release the other Party from<br> its obligations and any liability with regard to the relevant Claim.
---	---
15.3	Third Party Claims and Investigations Management Agreement. The terms of the Third Party Claims and Investigations Management Agreement shall apply as set out therein,
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including in respect of any Claim arising from a Third Party Claim or an Investigation. Any acceptance by Novartis or Sandoz, respectively, that a relevant Third Party Claim<br> constitutes in its entirety, or in any part, its Liability, under clause 11 (Notification and Classification of Third Party Claims) of the Third Party Claims and Investigations Management<br> Agreement (whether by electing to take conduct for the purposes of clause 11 (Notification and Classification of Third Party Claims), or otherwise), shall be binding on the Parties for the<br> purposes of this Agreement and the other Transaction Documents.

16. Access to Information; Books and Records

16.1	Transferring Records.
(a)	To the extent not transferred prior to the date of this Agreement:
---	---
(i)	Novartis shall, and shall procure that each relevant member of the Novartis Group shall, transfer, or procure the transfer of, the Sandoz Transferring Records to Sandoz or the relevant<br> member of the Sandoz Group; and
---	---
(ii)	Sandoz shall, and shall procure that each relevant member of the Sandoz Group shall, transfer, or procure the transfer of, the Novartis Transferring Records to Novartis or the relevant<br> member of the Novartis Group,
---	---

in each case, in accordance with the Books and Records Plan and as soon as reasonably possible after the Separation Date.

(b)	Neither Party shall have any obligation to re-write, edit, amend, translate, re-formulate, re-format, take inventory of, or take any other action in connection with Transferring<br> Records that it is transferring to the other Party, other than to transfer them in the form that they are in to the extent reasonably possible or, at the discretion of the transferor, in another data format that is reasonably accessible<br> by the other Party.
(c)	Subject to Clause 16.1(d), where Transferring Records are to be transferred by physical delivery at or after the Separation Date, Novartis or Sandoz (as applicable) shall procure that<br> such Transferring Records are available for collection at the location at which such Transferring Records are being stored at that time (such that there shall be no requirement on either Party to move Transferring Records from one<br> location to another in order to effect the transfer) or as otherwise agreed in writing between the Parties.
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(d)	If Novartis or Sandoz (as applicable) does not collect the Transferring Records in accordance with Clause 16.1(c) within six months of the later of the Separation Date and the date on<br> which such Transferring Records are made available for collection by the other Party, then such Transferring Records will be deemed to be Waived Records in accordance with Clause 16.2(b).
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(e)	From the point at which any Transferring Records have been transferred to the Sandoz Group or the Novartis Group (as applicable), in the manner described in paragraph (c) above, no<br> member of the Novartis Group or Sandoz Group (as applicable) shall have any further obligations to the other Party or its Group in connection with such Transferring Records.
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16.2	Retention of original Transferring Records.
(a)	Subject to Clause 16.2(b), the original Sandoz Transferring Records shall transfer to the Sandoz Group, and the original Novartis Transferring Records shall transfer to the Novartis<br> Group, in accordance with this Clause 16 (Access to Information; Books and Records), provided that:
---	---
(i)	the Novartis Group and Sandoz Group (as applicable) shall have the right to retain copies of any Transferring Records:
---	---
(A)	if required under Applicable Law; or
---	---
(B)	in order to evidence their respective compliance with their obligations under this Agreement or the relevant Transaction Document; or
---	---
(C)	as otherwise agreed in writing by the Parties;
---	---
(ii)	if any member of the Novartis Group or Sandoz Group, as applicable, is required under Applicable Law to retain the original versions of any Transferring Records or may not transfer the<br> original versions of any Transferring Records under Applicable Law, Novartis or Sandoz (as applicable) shall provide one copy of such Transferring Records to the other Party, to the extent permitted by Applicable Law; and
---	---
(iii)	if either of Novartis and Sandoz (or any members of their Groups) are required under Applicable Law to provide originals of any Transferring Records to a Tax Authority or any other<br> Governmental Entity, the Parties shall cooperate in good faith to ensure that each relevant Party is able to comply with its obligations under Applicable Law or any request from a Tax Authority or any other Governmental Entity with<br> respect to such Transferring Records.
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(b)	In the event that:
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(i)	Sandoz elects in writing not to have any Sandoz Transferring Records transferred to it; or
---	---
(ii)	Novartis elects in writing not to have any Novartis Transferring Records transferred to it,
---	---

then, subject to clause 4 (Existing Litigation Holds) of the Third Party Claims and Investigations Management Agreement, such Transferring Records shall be deemed to be Waived Records and the holding Party shall have no further obligation to the other Party with respect to such Waived Records, including any obligations to provide access to such Waived Records under the Information Access Agreement.

16.3	Retained Records.
(a)	The Retained Records shall be retained by the current holder of the Retained Records and held for the Retention Period, unless either Party requests to transfer the relevant Retained<br> Records during the Retention Period (whether before or after the expiry of the relevant Access Period) from the holding Party to the other Party (if permitted under Applicable Law) and the other Party agrees. In such case, notwithstanding<br> Clause 16.1 (Transferring Records), the Parties shall discuss in good faith the most practical means
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of effecting any transfer on this basis, and the relevant Retained Records shall be deemed to be Transferring Records and treated accordingly.
(b)	If either Party wishes the Retained Records to be retained for a longer period than the Retention Period:
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(i)	it shall, at least three months prior to the expiration of the applicable Retention Period, provide notice to the other Party identifying which Retained Records should be retained and<br> the relevant additional Retention Period requested; and
---	---
(ii)	the holding Party may either:
---	---
(A)	retain the Retained Records for the additional period at the requesting Party’s cost, in which case the Retention Period for such Retained Records will be extended for the additional<br> period and the Books and Records Plan will be updated in accordance with the change management process set out in the Books and Records Plan;
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(B)	if the transfer of the Retained Records is permitted under Applicable Law, transfer the Retained Records to the requesting Party at the requesting Party’s cost; or
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(C)	if the transfer of the Retained Records is not permitted under Applicable Law, delete and/or destroy the Retained Records after the expiry of the Retention Period pursuant to Clause<br> 16.3(c).
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(c)	Subject to clause 4 (Existing Litigation Holds) of the Third Party Claims and Investigations Management Agreement, the holder of the Retained<br> Records shall be entitled (but shall not be obliged) to delete and/or destroy any Retained Records after the expiry of the Retention Period, at the holding Party’s cost, provided that:
---	---
(i)	the other Party has not provided written notice in accordance with Clause 16.3(b); or
---	---
(ii)	if the other Party has provided written notice in accordance with Clause 16.3(b), the transfer of the Retained Records is not permitted under Applicable Law,
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in which case the holding Party shall have no further obligation to the other Party with respect to such Retained Records, including any obligations to provide access to such Retained Records under the Information Access Agreement.

(d)	Each Party shall be entitled to request access to the Retained Records held by the other Party (or its Group) in accordance with the terms of the Information Access Agreement and for<br> the period specified in the Information Access Agreement (including, for the avoidance of doubt, clause 15 (Residual Access Rights) of the Information Access Agreement), or otherwise as set out in<br> the relevant Ancillary Agreement.
16.4	Unclassified Records. If, following the date of this Agreement, either Party identifies any Books and Records which may contain Business Information relating to the other<br> Party but the nature of such Books and Records is unknown (or is not known with sufficient certainty) to enable such Books and Records to be classified into the categories set out in the Books and Records Plan (the Unclassified Records), it shall notify the other Party of the existence of such Unclassified Records in accordance with the Books and Records Plan. Following notification:
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(a)	the B&R Leads of each Party shall seek to agree on the categorization of such Unclassified Records; and
(b)	if the B&R Leads are unable to agree the categorization of such Unclassified Records within 10 Business Days, the Parties shall categorize such Unclassified Records by sampling no<br> more than 10 per cent. of such Unclassified Records and the Parties shall treat such Unclassified Records in accordance with such classification (including in respect of the relevant Retention Period) and shall update the Books and<br> Records Plan accordingly.
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16.5	Books and Records required in connection with the operation of Ancillary Agreements. To the extent that any Books and Records are required by the holder of the<br> relevant Books and Records in connection with the performance or operation of any Ancillary Agreement, the relevant Books and Records will be retained by that Party and, upon:
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(a)	in the case of Books and Records required in connection with the provision of services under the Transitional Services Agreement, termination or expiry of the applicable service term<br> under the Transitional Services Agreement;
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(b)	in the case of Books and Records required in connection with the provision of services under the Transitional Distribution Services Agreement, the applicable “Distribution Transfer<br> Date” under the Transitional Distribution Services Agreement; or
---	---
(c)	in all other cases, termination or expiry of the Ancillary Agreement or as otherwise set out in the relevant Ancillary Agreement,
---	---

will either be:

(i)	transferred (as Transferring Records for the purposes of this Agreement); or
(ii)	made available on the terms of the Information Access Agreement (as Retained Records for the purposes of this Agreement and the Information Access Agreement), or the relevant Ancillary<br> Agreement,
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in each case as set out in the relevant Ancillary Agreement and/or the Books and Records Plan.

16.6	Excluded Records. The following Books and Records shall be excluded from being Transferring Records to be transferred by either Party (or any member of their Group):
(a)	Books and Records that do not contain Business Information related to the Novartis Business (in respect of Novartis Transferring Records) or the Sandoz Business (in respect of Sandoz<br> Transferring Records), as applicable;
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(b)	secondary business information, including archival copies and disaster recovery backups;
---	---
(c)	technical system data/backups, unless related to transferring and un-wiped IT assets;
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(d)	transient information, including Outlook calendar invites, text message, personal notes, unless otherwise agreed in the Books and Records Plan;
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(e)	the Waived Records;
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(f)	subject to the terms of the Third Party Claims and Investigations Management Agreement, Information which is the private property of Personnel and unrelated to the business; and
(g)	any other Books and Records which the Parties agree in writing should be treated as Excluded Records,
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(such Books and Records being, Excluded Records).

16.7	Costs Relating to Books and Records. The costs relating to Books and Records shall be borne by the Parties as follows:
(a)	Transferring Records: Subject to any specific provisions on costs in any Ancillary Agreement, including information technology and other separation costs set out in the<br> Transitional Services Agreement, the cost of separation (including the cost of modification, transformation and/or redaction, if necessary) and transfer of any Transferring Records shall be borne by:
---	---
(i)	the holding Party to the extent incurred in connection with the period up until the relevant Transferring Records are received by the other Party; and
---	---
(ii)	the receiving Party to the extent incurred in connection with the period following receipt by that Party of the relevant Transferring Records; and
---	---
(b)	Retained Records. Subject to any specific provisions on costs in any Ancillary Agreement:
---	---
(i)	the cost of retaining and storing:
---	---
(A)	any Sandoz Retained Records held by Novartis shall be borne by Novartis; and
---	---
(B)	any Novartis Retained Records held by Sandoz shall be borne by Sandoz; and
---	---
(ii)	the cost of providing access to:
---	---
(A)	any Sandoz Retained Records held by Novartis shall be borne by Sandoz, in accordance with the Information Access Agreement; and
---	---
(B)	any Novartis Retained Records held by Sandoz shall be borne by Novartis, in accordance with the Information Access Agreement.
---	---
16.8	Compliance with Applicable Law and Confidentiality. The Parties acknowledge and agree that with respect to the processing of personal data under or in connection with complying<br> with their respective obligations, and exercising their respective rights, under this Clause 16 (Access to Information; Books and Records), the terms and conditions of the Omnibus Data Protection<br> Agreement shall apply. Where such processing involves a Third Country Transfer (as defined in the Omnibus Data Protection Agreement), the Parties furthermore acknowledge and agree that the Model Clause Agreement (as defined in the Omnibus<br> Data Protection Agreement) applies.
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16.9	Ownership of Information. Any Information owned by one Group in accordance with the provisions of this Agreement or any Ancillary Agreement that is provided to the requesting
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Party hereunder or in connection with the transactions contemplated hereunder shall be deemed to remain the property of the providing Party. Except as specifically set forth<br> herein, nothing herein shall be construed as granting or conferring rights of license or otherwise in any such Information.
16.10	Liability in Respect of Information. Each of Novartis and Sandoz acknowledges that the data provided by the other will be provided in their current form and may be<br> inaccurate, incomplete or contain errors. Neither Novartis nor Sandoz shall have any Liability to the other Party in the event that any Information exchanged or provided pursuant to this Agreement is found to be inaccurate, incomplete<br> or to contain errors in the absence of willful misconduct or gross negligence by the providing Party.
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16.11	Accounting and Reporting Cooperation. Sandoz and Novartis shall cooperate with each other (and shall procure that their respective Affiliates shall cooperate with each<br> other) in order to enable each member of the Sandoz Group and each member of the Novartis Group to comply with financial reporting, non-financial reporting, environmental, safety and corporate governance (ESG) reporting and other<br> reporting obligations under Applicable Law (including any associated narrative or other disclosure obligations or requirements), including:
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(a)	without prejudice to the Third Party Claims and Investigations Management Agreement and Tax Matters Agreement, if either of Novartis and Sandoz (or any members of their Groups) are<br> required under Applicable Law to provide financial statements and/or related Information to a Tax Authority or any other Governmental Entity, the Parties shall cooperate in good faith to ensure that the relevant Party is able to comply<br> with its obligations under Applicable Law or any request from a Tax Authority or any other Governmental Entity with respect to such financial statements and/or related Information;
---	---
(b)	until the end of the first full fiscal year occurring after the Distribution (and for a reasonable period of time afterwards as required by Applicable Law for Novartis to prepare<br> consolidated and statutory financial statements on a global or entity basis or complete a financial statement audit or any other tax or statutory filings for any period during which the financial results of the Sandoz Group were<br> consolidated with those of Novartis and/or the Sandoz Business and the Novartis Business was conducted by the same legal entity), Sandoz shall use Commercially Reasonable Efforts to enable:
---	---
(i)	Novartis’s management to assess the effectiveness of its disclosure controls and procedures and its internal control over financial reporting as required under Applicable Law;
---	---
(ii)	Novartis’s auditors to complete timely their annual audit and quarterly reviews of financial statements; and
---	---
(iii)	Novartis to meet its timetable for dissemination of its financial statements.
---	---

As part of such efforts, to the extent reasonably necessary for the preparation of financial statements or completing an audit or review of financial statements or an audit of internal control over financial reporting:

(A)	Sandoz shall authorize and direct its auditors to make available to Novartis’s auditors, within a reasonable time prior to the date of Novartis’s auditors’ opinion or review report,<br> both (x) the personnel who performed or will perform the annual audits and quarterly reviews of Sandoz and (y) work papers related to such annual audits and

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quarterly reviews, to enable Novartis’s auditors to perform any procedures they consider reasonably necessary to take responsibility for the work of Sandoz’s auditors as it relates<br> to Novartis’s auditors’ opinion or report; and
(B)	until all governmental and statutory audits are complete, Sandoz shall provide reasonable access during normal business hours for Novartis’s auditors, counsel and other designated<br> representatives to (x) the premises of the Sandoz Group and all Information (and rights to take copies) within the knowledge, possession or control of the Sandoz Group and (y) the officers and employees of the members of the Sandoz Group,<br> so that Novartis may conduct reasonable audits relating to the financial statements provided by the Sandoz Group; provided, however, that such access shall not be unreasonably disruptive to the business and affairs of the Sandoz Group;<br> and
---	---
(c)	until the end of the first full fiscal year occurring after the Distribution (and for a reasonable period of time afterwards as required by Applicable Law for Sandoz to prepare<br> consolidated and statutory financial statements on a global or entity basis or complete a financial statement audit or any other tax or statutory filings for any period during which the financial results of the Novartis Group were<br> consolidated with those of Sandoz and/or the Novartis Business and the Sandoz Business was conducted by the same legal entity), Novartis shall use Commercially Reasonable Efforts to enable:
---	---
(i)	Sandoz’s management to assess the effectiveness of its disclosure controls and procedures and its internal control over financial reporting as required under Applicable Law;
---	---
(ii)	Sandoz’s auditors to complete timely their annual audit and quarterly reviews of financial statements; and
---	---
(iii)	Sandoz to meet its timetable for dissemination of its financial statements.
---	---

As part of such efforts, to the extent reasonably necessary for the preparation of financial statements or completing an audit or review of financial statements or an audit of internal control over financial reporting:

(A)	Novartis shall authorize and direct its auditors to make available to Sandoz’s auditors, within a reasonable time prior to the date of Sandoz’s auditors’ opinion or review report, both<br> (x) the personnel who performed or will perform the annual audits and quarterly reviews of Novartis and (y) work papers related to such annual audits and quarterly reviews, to enable Sandoz’s auditors to perform any procedures they<br> consider reasonably necessary to take responsibility for the work of Novartis’s auditors as it relates to Sandoz’s auditors’ opinion or report, and
(B)	until all governmental audits are complete, Novartis shall provide reasonable access during normal business hours for Sandoz’s auditors, counsel and other designated<br> representatives to (x) the premises of the Novartis Group and all Information (and right to take copies) within the knowledge, possession or control of the Novartis Group and (y) the officers and employees of the members of the<br> Novartis Group, so that Sandoz may conduct reasonable audits relating to the financial
---	---

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statements provided by the Novartis Group; provided, however, that such access shall not be unreasonably disruptive to the business and affairs of the Novartis Group.
16.12	Separation Balance Sheet.
---	---
(a)	Sandoz shall provide such assistance as Novartis (or the auditors Novartis appoints for such purposes) may reasonably request in order to allow Novartis (or the auditors Novartis<br> appoints for such purposes) to prepare combined financial statements of the Sandoz Group as at the last day of the month immediately prior to the month in which the Distribution occurs (the Separation Balance Sheet), including to support any audit and/or review procedures requested by Novartis’s auditors, which shall be prepared in accordance with the methodologies and accounting principles used to prepare<br> the Sandoz Business Financial Statements and shall be delivered to both Sandoz and Novartis as soon as reasonably practicable following the Distribution.
---	---
(b)	In respect of the preparation of the Separation Balance Sheet, any Third Party auditor or expert costs incurred in preparing and/or auditing the Separation Balance Sheet shall be borne<br> by Novartis.
---	---
(c)	Novartis and Sandoz shall each be responsible for any Third Party auditor or expert costs they (or their respective auditors) incur in the preparation and/or audit of any financial<br> statements or statutory balance sheets after the Separation Date.
---	---
16.13	Medicare Modernization Act. If, within 60 days following the Separation Date, any member of the Novartis Group or the Sandoz Group is required to file any agreement to which<br> the Medicare Modernization Act applies, the other Party shall provide in a timely manner any Information reasonably requested, including copies of any agreements required to be filed, in order for the member of the Novartis Group or the<br> Sandoz Group (as applicable) to comply with its obligations under the Medicare Modernization Act.
---	---
16.14	General Information and Knowledge Sharing.
---	---
(a)	Subject to paragraph (b) below, for a period of one year after the Separation Date, Novartis shall use Commercially Reasonable Efforts during normal business hours to provide any<br> Information, guidance and assistance reasonably requested by Sandoz to the extent that such Information, guidance or assistance relates to the operation of the Sandoz Business, in each case at Sandoz’s expense.
---	---
(b)	Novartis shall not be obliged to provide any Information, guidance or assistance pursuant to paragraph (a) above if doing so would be likely to be unreasonably disruptive to the<br> business and affairs of the Novartis Group or would be prohibited by Applicable Law.
---	---
(c)	Subject to paragraph (d) below, for a period of one year after the Separation Date, Sandoz shall use Commercially Reasonable Efforts during normal business hours to provide any<br> Information, guidance and assistance reasonably requested by Novartis to the extent that such Information, guidance or assistance relates to the operation of the Novartis Business, in each case at Novartis’s expense.
---	---
(d)	Sandoz shall not be obliged to provide any Information, guidance or assistance pursuant to paragraph (c) above if doing so would be likely to be unreasonably disruptive to the business<br> and affairs of the Sandoz Group or would be prohibited by Applicable Law.
---	---

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(e)	This Clause 16.14 (General Information and Knowledge Sharing) shall not give either Party (or any member of their Group) any right to access<br> any Books and Records of the other Party (or any member of its Group).
16.15	Privilege and Litigation. Notwithstanding the forgoing or any of the provisions of the Agreement, neither Party shall be required to disclose any documents or communications<br> protected by the attorney-client privilege, the work product doctrine or any other legal privilege if doing so would result in the loss of any applicable privilege or other protection. The rights conferred under the Agreement shall not<br> affect in any manner either Party’s rights to discovery in any litigation or arbitration and shall not create any rights for Third Parties to access the documents, employees or Information of either Party.
---	---

17. Insurance

17.1	No cover under the Insurance Arrangements from the Separation Date. Other than pursuant to this Clause 17 (Insurance), each Party agrees<br> that with effect from the Separation Date:
(a)	no member of the Sandoz Group (including any Sandoz Entity) shall have, or be entitled to, the benefit of any Insurance Arrangements of the Novartis Group in respect of any event, act,<br> omission or claim that takes place, or of which Sandoz becomes aware, after the Separation Date;
---	---
(b)	it shall be the sole responsibility of Sandoz to ensure that adequate insurances are put in place in relation to the Sandoz Business with effect from the Separation Date; and
---	---
(c)	Novartis shall not be required to maintain any Insurance Arrangements for the benefit of any Sandoz Entity or in respect of any Sandoz Transferring Asset.
---	---
17.2	General Pre-Separation Insurance Claims. Each member of the Sandoz Group shall be entitled to the amount of any Insurance Proceeds (except to the extent that such Insurance<br> Proceeds relate to the Novartis Business) received pursuant to any insurance claims notified by that member of the Sandoz Group to the relevant insurer(s) under any General Insurance Arrangements of the Novartis Group prior to the<br> Separation Date, (all such claims being General Pre-Separation Insurance Claims).
---	---
17.3	General Pre-Separation Insurance Claims under the General Insurance Arrangements. With effect from the Separation Date:
---	---
(a)	any General Pre-Separation Insurance Claim shall be subject to the terms, conditions and exclusions of the Novartis Group Insurance Arrangements applicable to the relevant General<br> Pre-Separation Insurance Claim;
---	---
(b)	Sandoz shall be entitled to correspond with the relevant insurer(s) providing coverage in respect of any General Pre-Separation Insurance Claims, and shall copy the Novartis Insurance<br> Contact in all correspondence with the relevant insurer(s);
---	---
(c)	Novartis and Sandoz shall each cooperate with and provide to the insurer(s) all information reasonably needed by the insurer(s) to assess and provide coverage under the General<br> Pre-Separation Insurance Claim; and
---	---
(d)	any General Pre-Separation Insurance Claim shall be treated as an Affirmative Claim under the Third Party Claims and Investigations Management Agreement.
---	---

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17.4	HDI Pre-Separation Insurance Claims. Subject to Clauses 17.5 (HDI Pre-Separation Insurance Claims under the HDI Insurance Arrangements)<br> and 17.6 (Sandoz Reimbursement Payment), each member of the Sandoz Group shall be entitled to the amount of any Insurance Proceeds (except to the extent that such Insurance Proceeds relate to the<br> Novartis Business) received pursuant to:
(a)	any individual general liability, clinical trial liability or individual product liability insurance claim or any Product Liability Series Claim notified by that member of the Sandoz<br> Group to HDI under the HDI Insurance Arrangements prior to the Separation Date; and
---	---
(b)	any individual product liability claim after the Separation Date that is the direct result of the originating cause attributable to a covered Product Liability Series Claim that was<br> notified by that member of the Sandoz Group to the relevant insurer(s) under the HDI Insurance Arrangements prior to the Separation Date,
---	---

(all such claims being HDI Pre-Separation Insurance Claims).

17.5	HDI Pre-Separation Insurance Claims under the HDI Insurance Arrangements. With effect from the Separation Date:
(a)	any HDI Pre-Separation Insurance Claim shall be subject to the terms, conditions and exclusions of the HDI Insurance Arrangements applicable to the relevant HDI Pre-Separation<br> Insurance Claim;
---	---
(b)	Sandoz shall be entitled to correspond with HDI providing coverage in respect of any HDI Pre-Separation Insurance Claims, and shall copy the Novartis Insurance Contact in all<br> correspondence with HDI;
---	---
(c)	Novartis and Sandoz shall each cooperate with and provide to HDI all Information reasonably needed by HDI to assess and provide coverage under the HDI Pre-Separation Insurance Claim;<br> and
---	---
(d)	any HDI Pre-Separation Insurance Claim shall be treated as an Affirmative Claim under the Third Party Claims and Investigations Management Agreement.
---	---
17.6	Sandoz Reimbursement Payment.
---	---
(a)	If the sum of the Insurance Proceeds received by, or paid on behalf of, Sandoz (or any member of the Sandoz Group) following the Separation Date in respect of HDI Pre-Separation<br> Insurance Claims exceeds the Sandoz Insurance Reserves, then Sandoz shall pay Novartis an amount equal to such excess (the Sandoz Reimbursement Payment) in accordance with this<br> Clause 17.6. For the avoidance of doubt:
---	---
(i)	once the aggregate sum of Insurance Proceeds received by, or paid on behalf of, Sandoz (or any member of the Sandoz Group) following the Separation Date in respect of HDI<br> Pre-Separation Insurance Claims exceeds the Sandoz Insurance Reserves, any excess over such amount shall be a Sandoz Reimbursement Payment; and
---	---
(ii)	if the sum of the Insurance Proceeds received by, or paid on behalf of, Sandoz (or any member of the Sandoz Group) following the Separation Date in respect of HDI Pre-Separation<br> Insurance Claims is less than the Sandoz Insurance Reserves, Sandoz shall not be entitled to any additional amount.
---	---

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(b)	Within 15 Business Days of each anniversary of the Separation Date (each, an Anniversary Date), the Parties shall discuss<br> and agree the aggregate sum of Insurance Proceeds received by, or paid on behalf of, Sandoz (or any member of the Sandoz Group) under any HDI Pre-Separation Insurance Claims:
(i)	in the 12 months prior to the relevant Anniversary Date; and
---	---
(ii)	cumulatively from the Separation Date to the relevant Anniversary Date.
---	---
(c)	If a Sandoz Reimbursement Payment is payable following an Anniversary Date, Novartis shall invoice to Sandoz the amount of:
---	---
(i)	the Sandoz Reimbursement Payment (being the cumulative amount by which the Insurance Proceeds received by, or paid on behalf of, Sandoz (or any member of the Sandoz Group) following<br> the Separation Date in respect of HDI Pre-Separation Insurance Claims exceeds the Sandoz Insurance Reserves, irrespective of any payments made by Sandoz pursuant to this Clause 17.6) as at the relevant Anniversary Date; less
---	---
(ii)	any amounts which Sandoz has already paid to Novartis in respect of the Sandoz Reimbursement Payment.
---	---
(d)	Sandoz shall pay the full amount invoiced to it by Novartis in accordance with Clause 17.6(c) within 15 Business Days of the date on which the invoice is received.
---	---
(e)	The failure by Novartis to issue an invoice to Sandoz in respect of any Sandoz Reimbursement Payment in accordance with Clause 17.6(b) shall not release Sandoz from its obligation and<br> liability to pay Novartis the Sandoz Reimbursement Payment.
---	---
17.7	Insurance Reserves Report.
---	---
(a)	Prior to the date of this Agreement, Novartis has engaged Aon Global Risk Consulting (the Actuary) to prepare an actuarial<br> report including the Sandoz Insurance Reserves attributable to the HDI Pre-Separation Insurance Claims as at 30 September 2023 (the Insurance Reserves Report).
---	---
(b)	Novartis shall provide to the Sandoz Insurance Contact a copy of the Insurance Reserves Report to the extent relating to the Sandoz Insurance Reserves once the report is finalized on<br> or about 30 November 2023.
---	---
(c)	The Sandoz Insurance Reserves attributable to the HDI Pre-Separation Insurance Claims included in the Insurance Reserves Report shall be final and binding on the Parties in the absence<br> of manifest error.
---	---
(d)	The costs to prepare the Insurance Reserves Report shall be borne by Novartis.
---	---
(e)	For the avoidance of doubt, Novartis shall not be required to make available to Sandoz any subsequent actuarial reports.
---	---
17.8	Run-off D&O Insurance.
---	---
(a)	Novartis shall arrange, with effect from the Separation Date for a period of six years, run-off directors and officers insurance coverage in respect of acts or omissions of the<br> directors and officers of Sandoz and each Sandoz Entity who were covered by Novartis
---	---

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directors and officers insurance policies immediately prior to the Separation Date, provided that:
(i)	the run-off directors and officers insurance shall only apply to claims against the directors and officers of Sandoz and each Sandoz entity that arise after the Separation Date and are<br> solely the result of any acts or omissions that occurred prior to the Separation Date; and
---	---
(ii)	any run-off directors and officers insurance shall be on substantially the same terms and conditions (including any applicable deductibles and exclusions) as Novartis’s directors and<br> officers insurance policy,
---	---

(the Run-Off D&O Insurance). For the avoidance of doubt, any deductibles applicable to a claim under the Run-Off D&O Insurance shall be borne by either the underlying claimant or, if applicable, the relevant member of the Novartis Group or the Sandoz Group (as applicable) that the claimant reported to at the time of the relevant act or omission giving rise to such claim.

(b)	The cost of the Run-Off D&O Insurance premium, applicable insurance premium taxes, and the broker fee to secure the Run-Off D&O Insurance shall be borne by Novartis.
17.9	Post-Separation Claims Under the Run-off D&O Insurance.
---	---
(a)	Novartis shall, upon the request of Sandoz, notify the relevant insurers of claim(s) that have been identified by Sandoz against a director and/or officer for which coverage may be<br> provided under the Run-off D&O Insurance, to the extent that the terms and conditions (including any applicable deductibles and exclusions) of the Run-off D&O Insurance provides coverage therefor.
---	---
(b)	With effect from the Separation Date:
---	---
(i)	Sandoz shall be entitled to correspond with the relevant insurer(s) providing coverage in respect of any claim(s) under the Run-off D&O Insurance, and shall copy the Novartis<br> Insurance Contact in all correspondence with the relevant insurer(s);
---	---
(ii)	upon Novartis’s notification of a claim on behalf of Sandoz, Sandoz and Novartis shall cooperate fully with and provide to the insurer(s) information reasonably needed by the<br> insurer(s) to assess and provide coverage under the Run-off D&O Insurance;
---	---
(iii)	any claim notified by Novartis on behalf of Sandoz against the relevant insurers under the Run-off D&O Insurance shall be treated as an Affirmative Claim under the Third Party<br> Claims and Investigations Management Agreement; and
---	---
(iv)	if:
---	---
(A)	under Applicable Law and the terms of the Run-off D&O Insurance, a determination is required and/or permitted as to whether a particular claim follows “Side A” or “Side B” of the<br> policy; and
---	---
(B)	any deductible would be borne by a member of the Sandoz Group,
---	---

the determination shall be made by Sandoz.

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17.10	POSI Insurance.
(a)	Sandoz shall arrange, with effect from the Separation Date for a period of six years, public offering of securities insurance coverage for Sandoz and Novartis and their respective<br> directors and officers in respect of the Separation and Distribution, including the contents of the Listing Prospectus, the Sandoz ADR Registration Statement and other communications or materials prepared for or issued to shareholders of<br> Novartis or potential investors in connection with the Separation and Distribution (the POSI Insurance).
---	---
(b)	The cost of the POSI Insurance premium, applicable insurance premium taxes, and the broker fee to secure the POSI Insurance shall be borne by Sandoz.
---	---
17.11	Post-Separation Claims Under the POSI Insurance.
---	---
(a)	Sandoz shall, upon the request of Novartis, notify the relevant insurers of claim(s) that have been identified by Novartis against Novartis and/or its directors or officers for which<br> coverage may be provided under the POSI Insurance, to the extent that the terms and conditions (including any applicable deductibles and exclusions) of the POSI Insurance provides coverage therefor. For the avoidance of doubt, any<br> deductibles applicable to a claim under the POSI Insurance shall be borne by either the underlying claimant or, if applicable, the relevant member of the Novartis Group or the Sandoz Group (as applicable) that the claimant reported to at<br> the time of the relevant act or omission giving rise to such claim.
---	---
(b)	With effect from the Separation Date:
---	---
(i)	Novartis shall be entitled to correspond with the relevant insurer(s) providing coverage in respect of any claim(s) under the POSI Insurance, and shall copy the Sandoz Insurance<br> Contact in all correspondence with the relevant insurer(s);
---	---
(ii)	upon Sandoz’s notification of a claim on behalf of Novartis, Novartis and Sandoz shall cooperate fully with and provide to the insurer(s) information reasonably needed by the<br> insurer(s) to assess and provide coverage under the POSI Insurance;
---	---
(iii)	any claim notified by Sandoz on behalf of Novartis against the relevant insurers under the POSI Insurance shall be treated as an Affirmative Claim under the Third Party Claims and<br> Investigations Management Agreement; and
---	---
(iv)	Novartis shall not, and shall procure that no member of the Novartis Group shall, take any action in connection with a claim under the POSI Insurance (other than a claim itself) that<br> would reasonably be expected to:
---	---
(A)	have an adverse impact on the relationship between any member of the Sandoz Group and the relevant insurer(s) of the claim under the POSI Insurance;
---	---
(B)	result in the relevant insurer(s) terminating or reducing coverage, or increasing the amount of any premium owed by any member of the Sandoz Group under the applicable POSI Insurance;<br> or
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(C)	otherwise compromise, jeopardize or interfere with the right of any member of the Sandoz Group under the applicable POSI Insurance.
17.12	General Insurance Provisions.
---	---
(a)	This Agreement is not intended to assign (or to attempt to assign) any policy of insurance or as a Contract of insurance and shall not be construed to waive any right or remedy of any<br> member of the Novartis Group in respect of any Insurance Arrangement or any other Contract or policy of insurance.
---	---
(b)	Nothing in this Clause 17 (Insurance) shall limit Novartis’s ability to operate any policy of insurance of the Novartis Group (including any<br> Insurance Arrangement) for the benefit of the Novartis Business.
---	---
(c)	Nothing in this Agreement shall affect any standalone policy of insurance of any Sandoz Entity taken out with, and underwritten by, a Third Party solely for the benefit of the Sandoz<br> Business, which is separate to, and has not been taken out in connection with, any master Insurance Arrangement arranged by any member of the Novartis Group.
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18. Separation Committee

18.1	Separation Committee. Prior to the Separation Date, the Parties shall establish a Separation Committee (the Separation<br> Committee) that shall consist of an equal number of members from Novartis and Sandoz. The Separation Committee shall be responsible for the overall monitoring and management of all matters related to any of the transactions<br> contemplated by this Agreement or any Ancillary Agreements. The Separation Committee shall have the authority to:
(a)	establish one or more subcommittees from time to time as it deems appropriate or as may be described in any Ancillary Agreements, with each such sub-committee comprised of one or more<br> members of the Separation Committee or one or more employees of either Party or any of its Subsidiaries, and each such subcommittee having such scope of responsibility as may be determined by the Separation Committee from time to time;
---	---
(b)	delegate to any such subcommittee any of the powers of the Separation Committee; and
---	---
(c)	to combine, modify the scope of responsibility of, and disband any such subcommittees, and to modify or reverse any such delegations.
---	---
18.2	Separation Committee Procedures. The Separation Committee shall establish general procedures for managing the responsibilities delegated to it under this Clause 18 (Separation Committee) and may modify such procedures from time to time. All decisions by the Separation Committee or any subcommittee thereof shall be effective only if mutually agreed in writing by<br> both Parties. The Parties shall utilize the procedures set forth in Clause 38 (Dispute Resolution) to resolve any matters as to which the Separation Committee is not able to reach a decision.
---	---
18.3	Separation PMO Leads. The Parties shall each appoint a principal point of contact between the Parties in relation to issues arising out of this Agreement (in each case, the
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Separation PMO Lead). As at the Separation Date, Novartis’s Separation PMO Lead is Christelle Sanglier and Sandoz’s<br> Separation PMO Lead is Yara Gonzalez.

19. Warranty as to Capacity

Each Party has obtained all corporate authorizations and (other than to the extent any such consent, license or authorization constitutes a Global Condition) all other governmental, statutory, regulatory or other consents, licenses or authorizations required to empower it to enter into and perform its obligations under this Agreement where failure to obtain them would adversely affect to a material extent such Party’s ability to enter into or perform its obligations under this Agreement.

20. Wrong Pockets

20.1	Non-transferred Assets. Subject to Clause 9 (Transferring Contracts and Non-Transferring Tenders), Clause 16 (Access to Information; Books and Records), Clause 30.3 (Matters Governed Exclusively by Ancillary Agreements) and Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders), and except in relation to any Intellectual Property Right (in respect of which, to the extent relevant, the provisions of Clause 20.3 (Intellectual<br> Property Wrong Pockets) shall apply), any monies to which Clause 11 (Accounts Payable and Receivable) applies or as otherwise expressly provided for in this Agreement, any Ancillary<br> Agreement or the US Brands Commercial Agreement, if, following the Separation Date:
(a)	any property, right or asset:
---	---
(i)	forming part of the Sandoz Business (other than any property, right or asset expressly excluded under this Agreement or any Ancillary Agreement) has not and should have been<br> transferred to Sandoz, or to another member of the Sandoz Group, pursuant to this Agreement or any Ancillary Agreement or otherwise; or
---	---
(ii)	that is a Sandoz Transferring Asset or is Exclusively Related to the Sandoz Business (other than any property, right or asset expressly excluded under this Agreement or any Ancillary<br> Agreement and excluding any Novartis Retained Asset) has not been transferred to Sandoz, or to another member of the Sandoz Group, pursuant to this Agreement or any Ancillary Agreement or otherwise, or is held by a member of the Novartis<br> Group after the Separation Date, then:
---	---
(A)	the Parties shall use their respective Commercially Reasonable Efforts to procure that the holder of such property, right or asset shall be deemed to be a Sandoz Asset Transferor for<br> the purposes of this Agreement; and
---	---
(B)	Sandoz shall nominate a member of the Sandoz Group (acceptable to Novartis, acting reasonably) as the Sandoz Asset Transferee for such property, right or asset and such member of the<br> Sandoz Group shall be deemed to be a Sandoz Asset Transferee for the purposes of this Agreement,
---	---

then Novartis shall use Commercially Reasonable Efforts to procure that all right, title and interest in such property, right or asset (and any related liability which is a Sandoz Liability) is assigned and transferred to Sandoz (or another member of the Sandoz Group as Sandoz has nominated (in accordance with Clause 20.1(a)(ii)(B) above) or

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may nominate that is reasonably acceptable to Novartis) as soon as practicable and at no cost to Sandoz (or any member of its Group), and such member of the Sandoz Group shall accept such transfer or assume such assignment in accordance with the terms of this Agreement. Pending such transfer and subject to Applicable Law, Novartis shall cause such property, right or asset to be held on trust and provide to Sandoz or its designated assignee all of the benefits associated with such property, right or asset (in accordance with Schedule 1 (Transferring Contracts and Non-Transferring Tenders), if applicable); or

(b)	any property, right or asset:
(i)	forming part of the Novartis Business (other than any property, right or asset expressly excluded under this Agreement or any Ancillary Agreement) has not and should have been<br> transferred to Novartis, or to another member of the Novartis Group, pursuant to this Agreement or any Ancillary Agreement or otherwise; or
---	---
(ii)	that is a Novartis Retained Asset or is Exclusively Related to the Novartis Business (other than any property, right or asset expressly excluded under this Agreement or any Ancillary<br> Agreement and excluding any Sandoz Transferring Assets) that has not been transferred to Novartis, or to another member of the Novartis Group, pursuant to this Agreement or any Ancillary Agreement or otherwise, or is held by a member of<br> the Sandoz Group after the Separation Date:
---	---
(A)	the Parties shall use their respective Commercially Reasonable Efforts to procure that the holder of such property, right or asset shall be deemed to be a Novartis Asset Transferor for<br> the purposes of this Agreement;
---	---
(B)	Novartis shall nominate a member of the Novartis Group (acceptable to Sandoz, acting reasonably) as the Novartis Asset Transferee for such property, right or asset and such member of<br> the Novartis Group shall be deemed to be a Novartis Asset Transferee for the purposes of this Agreement,
---	---

then Sandoz shall use Commercially Reasonable Efforts to procure that all right, title and interest in such property, right or asset (and any related liability which is a Novartis Liability) is assigned and transferred to Novartis (or another member of the Novartis Group as Novartis has nominated (in accordance with Clause 20.1(b)(ii)(B) above) or may nominate that is reasonably acceptable to Sandoz) as soon as practicable and at no cost to Novartis (or any member of its Group), and such member of the Novartis Group shall accept such transfer or assume such assignment in accordance with the terms of this Agreement. Pending such transfer and subject to Applicable Law, Sandoz shall cause such property, right or asset to be held on trust and provide to Novartis or its designated assignee all of the benefits associated with such property, right or asset (in accordance with Schedule 1 (Transferring Contracts and Non-Transferring Tenders), if applicable).

20.2

Incorrectly Transferred Assets. Subject to Clause 9 (Transferring Contracts and Non-Transferring Tenders), Clause 16 (Access to Information; Books and Records), Clause 30.3 (Matters Governed Exclusively by Ancillary Agreements) and Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders), and except in relation to any Intellectual Property Right (in respect of which, to the extent relevant, the provisions of Clause 20.3 (Intellectual

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Property Wrong Pockets) shall apply), any monies to which Clause 11 (Accounts Payable and Receivable)<br> applies or as otherwise expressly provided for in this Agreement, any Ancillary Agreement or the US Brands Commercial Agreement, if, following the Separation Date:
(a)	any property, right or asset not forming part of the Sandoz Business (other than any Intellectual Property Right or any property, right or asset expressly included under this Agreement<br> or any Ancillary Agreement) is found to have and should not have been transferred to Sandoz or another member of the Sandoz Group pursuant to this Agreement or any Ancillary Agreement, Sandoz shall transfer (or procure the transfer of)<br> such property, right or asset as soon as practicable to the transferor or another member of the Novartis Group nominated by Novartis reasonably acceptable to Sandoz at no cost to the Novartis Group; or
---	---
(b)	any property, right or asset not forming part of the Novartis Business (other than any Intellectual Property Right or any property, right or asset expressly included under this<br> Agreement or any Ancillary Agreement) is found to have and should not have been transferred to Novartis or another member of the Novartis Group pursuant to this Agreement or any Ancillary Agreement, Novartis shall transfer (or procure the<br> transfer of) such property, right or asset as soon as practicable to the transferor or another member of the Sandoz Group nominated by Sandoz reasonably acceptable to Novartis at no cost to the Sandoz Group.
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20.3	Intellectual Property Wrong Pockets.
---	---
(a)	Except to the extent otherwise addressed in this Agreement or any Ancillary Agreement, if following the Separation Date Sandoz identifies any Intellectual Property Rights that, in each<br> case: (1) was owned or controlled by Novartis or a member of the Novartis Group as at the Separation Date; (2) was used, or planned to be used (as can reasonably be evidenced by written records as at the Separation Date), in the Sandoz<br> Business as at the Separation Date for Development, Manufacture or Commercialization of the Sandoz Products; and (3) has not been:
---	---
(i)	assigned to Sandoz (or any member of the Sandoz Group) pursuant to the terms of the relevant Trademark, Design and Domain Name Assignment Agreement or Patent and Know-How Assignment<br> Agreement (as applicable);
---	---
(ii)	retained by Novartis (or any member of the Novartis Group) and licensed to Sandoz (or a member of the Sandoz Group) pursuant to the terms of the relevant Brand License Agreement or<br> Patent and Know-How License Agreement (as applicable);
---	---
(iii)	included in the scope of the Trademark Co-existence Agreement; or
---	---
(iv)	retained by Novartis (or any member of the Novartis Group) for use solely by Novartis (or any member of the Novartis Group) pursuant to the terms of any Intellectual Property<br> Agreement,
---	---

then Sandoz shall notify Novartis, and the Parties shall meet to discuss and determine (in good faith and taking into account the terms of the Intellectual Property Agreements) as soon as practicable the most appropriate treatment for the relevant Intellectual Property Rights (as applicable).

(b)	Except to the extent otherwise addressed in this Agreement or any Ancillary Agreement, if following the Separation Date Novartis identifies any Intellectual

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Property Rights that, in each case: (1) was owned or controlled by Sandoz or a member of the Sandoz Group as at the Separation Date; (2) was used, or planned to be used (as can<br> reasonably be evidenced by written records as at the Separation Date), in the Novartis Business as at the Separation Date for Development, Manufacture or Commercialization of the Novartis Products; and (3) has not been:
(i)	assigned to Novartis (or any member of the Novartis Group) pursuant to the terms of the relevant Trademark, Design and Domain Name Assignment Agreement or Patent and Know-How<br> Assignment Agreement (as applicable);
---	---
(ii)	retained by Sandoz (or any member of the Sandoz Group) and licensed to Novartis pursuant to the terms of the relevant Brand License Agreement or Patent and Know-How License Agreement<br> (as applicable);
---	---
(iii)	included in the scope of the Trademark Co-Existence Agreement; or
---	---
(iv)	retained by Sandoz (or any member of the Sandoz Group) for use solely by Sandoz (or any member of the Sandoz Group) pursuant to the terms of any Intellectual Property Agreement,
---	---

then Novartis shall notify Sandoz, and the Parties shall meet to discuss and determine (in good faith and taking into account the terms of all Intellectual Property Agreements) as soon as practicable the most appropriate treatment for the Intellectual Property Rights (as applicable).

20.4	Timing of Wrong Pockets Transfer. Any transfer pursuant to this Clause 20 (Wrong Pockets) shall be treated by the Parties for all<br> purposes as if it had occurred on the Separation Date, except as otherwise required by Applicable Law.
20.5	Compensation for Wrong Pockets Transfers. If the transfer of any property, right or asset pursuant to this Clause 20 (Wrong Pockets)<br> (a Correction Transfer) requires a Local Separation Agreement and the payment of an amount equal to the fair market value of the relevant property, right or asset between the<br> relevant member of the Novartis Group and the relevant member of the Sandoz Group (a Correction Transfer Local Payment):
---	---
(a)	in respect of any property, right or asset transferred by any member of the Novartis Group:
---	---
(i)	Sandoz shall procure that the relevant transferee shall make such Correction Transfer Local Payment to the relevant transferor on or around entry into the relevant Local Separation<br> Agreement; and
---	---
(ii)	Novartis shall pay an amount equal to the Correction Transfer Local Payment to Sandoz in accordance with Clause 20.6 (a Novartis<br> Correction Transfer Global Payment); and
---	---
(b)	in respect of any property, right or asset transferred by any member of the Sandoz Group:
---	---
(i)	Novartis shall procure that the relevant transferee shall make such Correction Transfer Local Payment to the relevant transferor on or around entry into the relevant Local Separation<br> Agreement; and
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(ii)	Sandoz shall pay an amount equal to the Correction Transfer Local Payment to Novartis in accordance with Clause 20.6 (a Sandoz<br> Correction Transfer Global Payment).
20.6	Notwithstanding Clause 26 (No Set-off), the Parties agree that any Novartis Correction Transfer Global Payments and any Sandoz Correction<br> Transfer Global Payments shall be set-off and the balance (after set-off) paid by the relevant Party within 15 Business Days after the end of the calendar quarter in which a Correction Transfer is required.
---	---
20.7	If the Correction Transfer does not require a Correction Transfer Local Payment, Novartis (in respect of any property, right or asset transferred by any member of the Novartis<br> Group) or Sandoz (in respect of any property, right or asset transferred by any member of the Sandoz Group) may compensate the relevant member of its Group for the fair market value of such property, right or asset.
---	---
20.8	Books and Records. For the avoidance of doubt, the provisions of this Clause 20 (Wrong Pockets) shall not apply to Books and<br> Records, in respect of which the provisions of Clause 16 (Access to Information; Books and Records) shall apply.
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21. Post-Separation conduct and covenants

21.1	Post-Separation Date Conduct. The Parties acknowledge that, after the Separation Date, each Party shall be independent of the other Party, with responsibility for its own<br> actions and inaction and its own Liabilities relating to, arising out of or resulting from the conduct of its business, operations and activities following the Separation Date, except as may otherwise be provided in this Agreement or any<br> Ancillary Agreement, and each Party shall use Commercially Reasonable Efforts to prevent such Liabilities from being borne by the other Party.
21.2	Divestment of sites. If, prior to the date which is three years after the Separation Date, Novartis determines that it will divest any Novartis Properties (excluding the<br> Novartis Bangladesh Manufacturing Site) as at the Separation Date which are manufacturing sites, it shall notify Sandoz of such divestment and Sandoz may indicate its interest in participating in any process initiated by Novartis or its<br> Affiliates in respect of such divestment.
---	---
21.3	Excess vPPA capacity. If, prior to the date which is three years after the Separation Date, Novartis determines that it will divest its interest in (or sell surplus capacity<br> under) any virtual Power Purchase Agreement (vPPA) project in any country in Europe existing at the Separation Date, it shall notify Sandoz of such divestment (or sale of surplus capacity) and Sandoz may indicate its interest in<br> participating in any process initiated by Novartis or its Affiliates in respect of such divestment (or sale of surplus capacity).
---	---
21.4	Divestment Cooperation. The provisions of Exhibit 9 (Post-Divestment Cooperation) shall apply in respect of certain potential<br> divestments of the relevant part of the Novartis Business or Sandoz Business.
---	---
21.5	Certain outstanding obligations. Sandoz undertakes to duly perform (on behalf of Novartis) the outstanding obligations regarding the supply of the products under the<br> Novartis Access Services Agreement (Pakistan) signed on 3 February 2022 by Novartis Pharma (Pakistan) Ltd. and Lahore Institute of Health Sciences.
---	---
21.6	Non-Compete. Subject to Clause 21.7 (Exceptions to Non-Compete), neither Sandoz nor any member of the Sandoz Group shall carry on<br> or be engaged in any activity which involves the research, Development or Commercialization anywhere in the world of any Non-
---	---

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Compete Product (Competing Activity) for a period of three years after the Separation Date (or, if not enforceable<br> for such period in any country under the Applicable Laws of such country, for such shorter period as will be enforceable in such country under the relevant Applicable Law).
21.7	Exceptions to Non-Compete. Without prejudice to Clause 21.8 (IP Challenges), nothing in Clause 21.6 (Non-compete) shall prevent Sandoz or any member of the Sandoz Group from, after the Separation Date:
---	---
(a)	carrying on or engaging in the research or Development of any product that would constitute a Competing Activity, provided that such activity:
---	---
(i)	is carried out by a Sandoz Clean Team or, if outsourced to a Third Party, such Third Party is managed by a Sandoz Clean Team; and
---	---
(ii)	does not utilize, exploit, or otherwise benefit from Novartis Sensitive Information;
---	---
(b)	Commercializing a product which competes with a Novartis Originator Non-Compete Product in a country following the date on which the Generic Product Conditions are satisfied in respect<br> of such Novartis Originator Non-Compete Product in that country (or, without prejudice to Clause 21.8 (IP Challenges), entering into a related licensing arrangement with a Third Party, filing for,<br> sponsoring or obtaining any Marketing Authorization prior to such date, provided the Generic Product Conditions in respect of the relevant Non-Compete Product are satisfied prior to the Commercialization of such product and Sandoz or any<br> member of the Sandoz Group does not disclose any Novartis Sensitive Information to such Third Party);
---	---
(c)	owning securities, shares or similar interests in any company or partnership provided that they do not:
---	---
(i)	exceed 5 per cent. in nominal value of the securities, shares or similar interests in that company or partnership (or of any class of its securities); or
---	---
(ii)	otherwise grant (directly or indirectly) management functions or any material influence in that company or partnership beyond that of other holders of similar securities;
---	---
(d)	acquiring and subsequently carrying on or being engaged in any one or more companies and/or businesses (but not an individual Marketing Authorization or product) (taken together, the Acquired Business) where at the time of the acquisition the activities or products of the Acquired Business include a Competing Activity (the Acquired Competing Business), provided that following such acquisition Sandoz thereafter ensures that the Acquired Competing Business:
---	---
(i)	is managed by a Sandoz Clean Team; and
---	---
(ii)	does not utilize, exploit, or otherwise benefit from Novartis Sensitive Information communicated by any Sandoz employee not on the Sandoz Clean Team in respect of such Acquired<br> Competing Business;
---	---
(e)	being acquired and such acquirer (the Acquirer) subsequently carrying on or being engaged in any one or more companies<br> and/or businesses (taken together, the Acquirer’s Pre-Existing Business) where at the time of the acquisition the activities of
---	---

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the Acquirer’s Pre-Existing Business include a Competing Activity (the Acquirer’s Pre-Existing Competing Business),<br> provided that the Acquirer thereafter ensures that the Acquirer’s Pre-Existing Competing Business:
(i)	is managed by the Acquirer or a Sandoz Clean Team; and
---	---
(ii)	does not utilize, exploit, or otherwise benefit from Novartis Sensitive Information communicated to the Acquirer by any Sandoz employee not from the Acquirer or on the Sandoz Clean<br> Team in respect of such Acquirer’s Pre-Existing Competing Business; or
---	---
(f)	performing its obligations under the Transaction Documents and/or under any other agreement which it may enter into with a member of the Novartis Group.
---	---
21.8	IP Challenges. Sandoz shall not, and shall procure that its Affiliates and, to the extent acting on behalf of the Sandoz Group, sub-licensees or other Third Party contracting<br> partners do not, undertake any activity (including any assistance to a Third Party) relating to:
---	---
(a)	filing or sponsoring a Marketing Authorization application anywhere in the world requesting approval, or launching a biosimilar or generic of a Novartis Product, prior to the<br> expiration of any Novartis Patent or Regulatory-Based Exclusivities attaching to a corresponding Novartis Product; or
---	---
(b)	a potential or actual challenge (whether by Sandoz, its Affiliates or any Third Party acting on behalf of the Sandoz Group) of any Novartis Patent or Regulatory-Based Exclusivities,
---	---

for a period of three years after the Separation Date, unless any such activity:

(i)	is performed by a Sandoz Clean Team or, if outsourced to or performed by a Third Party, such Third Party is managed by a Sandoz Clean Team, and
(ii)	does not utilize, exploit, or otherwise benefit from Novartis Sensitive Information.
---	---

The requirement in sub-clause (i) shall not apply in respect of the activities in Clause 21.8(a) to the extent that such activity is the filing, sponsoring or maintenance of a Marketing Authorization by members of the Regulatory Affairs function of the Sandoz Group for:

(A)	any RxGx Product; or
(B)	a Generic Version of the Originator Product corresponding to any RxGx Product (other than the RxGx Products that correspond to Stalevo),
---	---

but only in those Territories defined in respect of the relevant RxGx Product in Schedule 2 or 3 (as applicable) of the RxGx Agreement.

For the avoidance of doubt, this exception shall not extend to any such activities performed by members of the Sandoz IP function. Defined terms used in this paragraph shall have the meanings given in the RxGx Agreement.

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21.9	Sandoz Clean Team. Sandoz shall, and shall procure that each member of the Sandoz Group shall, for a period of three years after the Separation Date, implement measures to<br> ensure that any member of a Sandoz Clean Team does not seek to obtain from, disclose to or discuss with any Representative of the Sandoz Group not on a Sandoz Clean Team any relevant Novartis Sensitive Information, provided that:
(a)	the Sandoz Group’s General Counsel and Global Head of Intellectual Property may engage in general management and organizational oversight of a Sandoz Clean Team excluding any<br> decisions, discussions, meetings or other activities resulting in the exchange or provision of any inputs regarding any strategy, development, litigation or challenges to Novartis Patents or Regulatory-Based Exclusivities attaching to any<br> Novartis Product or any Novartis Sensitive Information; and
---	---
(b)	nothing in this Clause 21.9 shall prevent the senior management of Sandoz from exercising their duties under Swiss law.
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22. Further Assurances

22.1	Further Acts and Documents. Subject to the express limitations in this Agreement, each of the Parties shall, at such Party’s sole expense, perform (or procure the performance<br> of) all further acts and things and execute and deliver (or procure the execution and delivery of) such further documents, as may be required by Applicable Law or as may be necessary or reasonably required to implement and give effect to<br> this Agreement.
22.2	Obligations of Agreement on Affiliates. Each of Novartis and Sandoz shall procure that each member of its respective Group complies with all obligations under this Agreement<br> which are expressed to apply to any such member.
---	---
22.3	Ratification of Past Actions. On or prior to the Separation Date:
---	---
(a)	Novartis, in its capacity as direct and indirect shareholder of Sandoz and its other Subsidiaries, shall ratify any actions that have been taken by Sandoz or any other Subsidiary of<br> Novartis prior to the date of such ratification and/or which may be reasonably necessary or desirable to be taken by Sandoz or any other Subsidiary of Novartis, as the case may be, after such date, in each case to effectuate the<br> transactions contemplated by this Agreement and the other Transaction Documents; and
---	---
(b)	Sandoz, in its capacity as direct and indirect shareholder of its Subsidiaries, shall ratify any actions that have been taken by any Subsidiary of Sandoz prior to the date of such<br> ratification and/or which may be reasonably necessary or desirable to be taken by any Subsidiary of Sandoz, as the case may be, after such date, in each case to effectuate the transactions contemplated by this Agreement and the other<br> Transaction Documents.
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23. Termination

23.1	Novartis Termination Right. This Agreement may be terminated by Novartis at any time, in its sole discretion, prior to the Distribution. In the event of any termination of this<br> Agreement prior to the Distribution, neither Party (nor and of their respective Representatives) shall have any Liability or further obligation to the other Party under this Agreement or any Transaction Document
23.2	No Additional Termination Rights. Other than pursuant to Clause 23.1 (Novartis Termination Right), no Party shall be entitled to<br> rescind or terminate this Agreement in any
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circumstances whatsoever (whether before or after the Separation and/or Distribution). This shall not exclude any liability for (or remedy in respect of) fraud.

24. Confidentiality and Non-use

24.1	Definitions. For the purposes of this Clause 24 (Confidentiality and Non-use), the term Information concerning the Novartis Business shall include all Novartis Sensitive Information.
24.2	Confidentiality Obligation. Subject to Clauses 24.3 (Exceptions to Confidentiality Obligations) and 24.4 (Disclosures to Representatives and rating organizations), each of Novartis and Sandoz shall, and shall procure that each member of its respective Groups shall, hold, and shall cause its<br> Representatives (including any Representatives who are Representatives at any time on or after the Separation Date) to hold, in strict confidence with at least the same degree of care that it applies to its own confidential and<br> proprietary Information pursuant to policies in effect immediately prior to the Separation (but no less than a reasonable degree of care), and not to release or disclose:
---	---
(a)	in the case of members of the Novartis Group, all Information concerning the Sandoz Business; or
---	---
(b)	in the case of members of the Sandoz Group, all Information concerning the Novartis Business (including any Novartis Sensitive Information),
---	---

in each case that is either in its possession (including Information in its possession prior to the Separation and including the Retained Records and including the Transaction Documents (or any details in respect of any Transaction Document)) or furnished by the other Group or its respective Representatives at any time pursuant to this Agreement or any Ancillary Agreement.

24.3	Exceptions to Confidentiality Obligation. The obligations in Clause 24.2 (Confidentiality Obligation) shall not apply to the extent that<br> the relevant Party can demonstrate by written evidence that such Information is:
(a)	in the public domain at the time of disclosure, or enters the public domain after such disclosure, through no fault of any member of the Novartis Group or the Sandoz Group, as<br> applicable, or any of its respective directors, officers, employees, agents, accountants, counsel and other advisors and representatives;
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(b)	lawfully acquired from other sources by any member of the Novartis Group or the Sandoz Group, as applicable, or any of their respective Representatives, which sources are not<br> themselves bound by a confidentiality obligation to the knowledge of Novartis or Sandoz (having made reasonable enquiries), as applicable;
---	---
(c)	independently generated without reference to any proprietary or confidential Information of the Novartis Group (including any Novartis Sensitive Information) or the Sandoz Group, as<br> applicable; or
---	---
(d)	required to be disclosed by Applicable Law or the lawful requirements of any Governmental Entity or in a stock exchange filing; provided, however, that the Person required to disclose<br> such Information shall give the applicable Person prompt, and in each case to the extent reasonably practicable, prior notice of such disclosure and an opportunity to contest such disclosure and shall use Commercially Reasonable Efforts<br> to cooperate, at the expense of the requesting Person, in seeking any reasonable
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protective arrangements requested by such Person. In the event of a request for disclosure where the disclosing Party has not obtained a protective order or other remedy, the Party<br> in receipt of such Information agrees to furnish only that portion of the Information that it is legally required and to exercise best efforts to obtain assurance that confidential treatment will be accorded the Information.

If a particular portion or aspect of such Information becomes subject to any of the foregoing exceptions, all other portions of such Information shall remain subject to all of the provisions of the Agreement. The obligations in Clause 24.2 (Confidentiality Obligation) shall not apply to the extent that any disclosure by any member of the Novartis Group of any Transaction Document (or any details in respect of any Transaction Document) in or as an exhibit to its Form 20-F annual report is required.

24.4	Disclosures to Representatives and rating organizations. Notwithstanding the foregoing, each of Novartis and Sandoz (and the members of their respective Group) may release or<br> disclose, or permit to be released or disclosed, any Information concerning the Sandoz Business (in respect of the obligations of the members of the Novartis Group) or the Novartis Business (in respect of the obligations of the members of<br> the Sandoz Group):
(a)	to their respective Representatives who need to know such Information (who shall be advised of the obligations hereunder with respect to such Information); and
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(b)	to any nationally recognized statistical rating organization as it reasonably deems necessary, solely for the purpose of obtaining a rating of securities or other debt instruments upon<br> normal terms and conditions; provided, however, that the Party whose Information is being disclosed or released to such rating organization is promptly notified thereof.
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Each of Novartis and Sandoz shall be responsible for any breach of the terms of this Agreement caused by the recipient of such Information hereunder or its employees or any other party to whom such recipient has disclosed such Information.

24.5	Use of Information. Each of Novartis and Sandoz shall not, and shall procure that each member of their respective Groups shall not, and shall cause its Representatives<br> (including any persons who become Representatives at any time on or after the Separation Date) not to, use:
(a)	in the case of members of the Novartis Group, any Information concerning the Sandoz Business; or
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(b)	in the case of members of the Sandoz Group, any Information concerning the Novartis Business,
---	---

for any purpose except as expressly permitted under this Agreement (including to the extent that any of limbs 24.3(a) to 24.3(d) apply) or any Ancillary Agreement. If any such Information of one Party or any member of its Group (including any Novartis Sensitive Information) is disclosed to the other Party or any member of its Group in connection with providing services under this Agreement or any Ancillary Agreement, then such disclosed Information shall be used only as required to perform such services.

24.6

Each Party shall implement appropriate technical and organizational measures, including information barriers protocols or other operational measures, to ensure the confidentiality of<br> any Information relating to the other Party, to ensure that applicable antitrust and regulatory requirements are complied with and to ensure compliance with this Clause 24 (Confidentiality and Non-use).<br> Without prejudice to the remainder of this Clause 24

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(Confidentiality and Non-use) and other than as permitted in connection with the provision of services under this Agreement or any Ancillary<br> Agreements or as required for corporate archival purposes only, if, following the Separation Date, either Party, any member of their respective Groups, or any of their respective Representatives identifies in their possession:
(a)	in the case of the Sandoz Group or its Representatives, any Novartis Sensitive Information; or
---	---
(b)	in the case of the Novartis Group or its Representatives, any of the Information listed in limbs (a) to (d) of the definition of Novartis Sensitive Information in respect of Sandoz<br> Products,
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the relevant Party shall as soon as practicable and, in any event, within 45 days, either return or destroy such Information.

24.7	Notice of Disclosure. In the event of the unauthorized disclosure of Information, the Party in receipt of such Information hereunder agrees<br> to provide the other Party with prompt notice of such unauthorized disclosure, and such Party shall provide the other Party with all reasonable assistance, to enable the Party that furnished such Information to:
(a)	seek an appropriate protective order or other remedy; or
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(b)	minimize the effects of the unauthorized disclosure.
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24.8	The Party receiving Information hereunder agrees that any and all such Information is and shall remain the proprietary and confidential information of the disclosing party and that<br> nothing in this Agreement nor in any disclosure of such Information shall be deemed, either expressly or by limitation, to convey any right or license to the receiving Party to such Information or in any intellectual property embodied<br> therein or extractable therefrom.
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24.9	Contractual Penalty. In the event of a material breach by Sandoz or any member of the Sandoz Group of:
---	---
(a)	Clause 21.6 (Non-Compete), Clause 21.8 (IP Challenges) or Clause 21.9 (Sandoz Clean Team) of this Agreement;
---	---
(b)	Clause 24.2 (Confidentiality Obligation) or Clause 24.5 (Use of Information) of this Agreement; or
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(c)	Clause 6 (Sandoz Covenants) of the Novartis to Sandoz Patent and Know-How License Agreement or Clause 7.2(c) (Prohibition<br> on Reverse Engineering) or 7.3 (Contract Requirements Pertaining to Approved Transferees) of the Development and Collaboration Agreement,
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which adversely impacts the Sales of a Novartis Product (each a Sandoz Material Breach), Novartis may issue a Claim Notice to Sandoz in accordance with Clause 15.2 (Notice of Claims) requiring Sandoz to pay to Novartis a contractual penalty in accordance with Clause 24.10 below.

24.10

Calculation of Contractual Penalty. The amount of the contractual penalty to be paid by Sandoz pursuant to Clause 24.9 (Contractual Penalty)<br> shall be an amount equal to the aggregate amount of the Sales of each Novartis Product which has its Sales adversely impacted by a Sandoz Material Breach in the 12-month period that immediately precedes the Sandoz Material Breach,<br> calculated from the first day of the calendar month which is 12 months prior

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to the Sandoz Material Breach to the last day of the calendar month falling 12 months later, in each country where Sales of the relevant Novartis Product were adversely impacted. For<br> the purposes of calculating the amount in this Clause 24.10 (Calculation of Contractual Penalty):
(a)	Sales shall mean the sales of the Novartis Product in a country, as reported in the Novartis financial reporting systems and<br> subject to the accounting principles, judgements and methodology of the Novartis Group at the relevant time; and
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(b)	in calculating the amount of the Sales, where an amount is expressed in a currency other than US Dollars, any such amounts will be converted to the US Dollar equivalent using the<br> Novartis exchange rate methodology as applied in its external reporting to convert the foreign currency into US Dollars.
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24.11	Acknowledgement and Agreement. The Parties acknowledge and agree that:
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(a)	the protection of each Party’s confidential information is a critical element of maximizing long-term value for the Parties and their respective shareholders, and any misuse or<br> unauthorized disclosure could result in irreparable damage;
---	---
(b)	prior to the Separation Date, the Parties and their respective Groups have had access to valuable confidential information of the other Party, including Novartis Sensitive Information;
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(c)	the covenants in Clauses 21 (Post-separation conduct and covenants) and this 24 (Confidentiality and Non-Use)<br> are intended to preserve and protect the valuable confidential information of each Party, including Novartis Sensitive Information, and are appropriate and proportionate to meet this objective;
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(d)	the amount payable pursuant to Clause 24.9 (Contractual Penalty) shall constitute a contractual<br> penalty in accordance with Art. 163 Swiss CO and:
---	---
(i)	the amount of loss or damages likely to be incurred in the event of a Sandoz Material Breach is incapable or is difficult to precisely estimate;
---	---
(ii)	the amount specified herein bears a reasonable relationship to, and is not plainly or grossly disproportionate to, the probable loss likely to be incurred in connection with any<br> failure by Sandoz to abide by the provisions listed in Clause 24.9 (Contractual Penalty);
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(iii)	one of the reasons for the Parties reaching an agreement as to such amount was the uncertainty and cost of litigation regarding the question of actual damages; and
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(e)	the Parties are sophisticated business parties and have negotiated this Agreement at arm’s length.
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24.12	Other remedies. Nothing in Clauses 24.9 (Contractual Penalty), Clause 24.10 (Calculation of<br> Contractual Penalty) or Clause 24.11 (Acknowledgement and Agreement) shall in any way limit either Party’s ability to:
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(a)	recover compensatory or other damages for any Liabilities which are not recoverable pursuant to Clause 24.9 (Contractual Penalty) (including<br> any Liabilities in excess of the amount payable pursuant to Clause 24.10 (Calculation of Contractual Penalty) but not any amounts which are actually<br> recovered pursuant to Clause 24.10 (Calculation
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of Contractual Penalty)) in accordance with this Agreement (including, for the avoidance of doubt, Clause 14.6<br> (No Double Recovery and No Double Counting)); or
(b)	to seek a court order for specific performance, or to obtain injunctive, declaratory or other similar relief based on Sandoz’s breach of the provisions set out in Clauses 24.9(a),<br> 24.9(b) and 24.9(c).
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25. Announcements

25.1	No Announcement Without Approval. From and after the date of the Distribution, neither Party (nor any of their respective Affiliates) shall, without the prior written approval<br> of the other Party (such approval not to be unreasonably withheld, conditioned or delayed), make any public announcement, filing or other communication about or in connection with the subject matter of this Agreement (or any other<br> Transaction Document) or the Sandoz Business (in the case of Novartis) or the Novartis Business (in the case of Sandoz) or any Covered Claims and Investigations within the scope of clause 18.1 of the Third Party Claims and Investigations<br> Management Agreement that contains any Information, statement, fact or opinion that is not either:
(a)	in the public domain prior to the date of this Agreement through no fault of any member of the Novartis Group or the Sandoz Group, as applicable, or any of its respective directors,<br> officers, employees, agents, accountants, counsel and other advisors and representatives; or
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(b)	disclosed in the Listing Prospectus, the Sandoz ADR Registration Statement or any document publicly filed in connection therewith.
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25.2	Required Announcements. The restriction in Clause 25.1 (No Announcement Without Approval) shall not apply to the extent that the<br> announcement, filing or other communication is required by Applicable Law, any stock exchange or any regulatory or supervisory body or authority of competent jurisdiction, including any disclosure by any member of the Novartis Group of<br> any Transaction Document (or any details in respect of any Transaction Document) in or as an exhibit to its Form 20-F annual report. If this exception applies, Novartis or Sandoz (as applicable) shall, in advance of the announcement or<br> other communication being made by the relevant Party, use its Commercially Reasonable Efforts to consult in good faith with the other Party in advance as to the form, content and timing of such announcement or other communication and to<br> take into account any reasonable comments of the other Party in respect of such announcement or other communication.
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26. No Set-off

26.1	No Set-Off. Any amounts received, payments due to be made or amounts claimed to be owed, in each case, under this Agreement and/or the other Transaction Documents shall be free<br> and clear of all set-offs, or counterclaims whatsoever, except as may be required by Applicable Law or otherwise expressly agreed in writing by the Parties.
26.2	Deductions or Withholdings. If any deductions or withholdings are required by Applicable Law, the paying party shall be obliged to pay such sum as will, after such deduction<br> or withholdings have been made, leave the receiving party with the same amount as it would have been entitled to receive in the absence of any such requirement to make such deduction or withholding.
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27. Assignment

27.1	No Assignment Without Consent. Unless Novartis and Sandoz agree in writing, no Person shall assign, transfer, charge or otherwise deal with all or any of its rights under this<br> Agreement nor grant, declare, create or dispose of any right or interest in it. Any purported assignment in contravention of this Clause 27 (Assignment) shall be void
27.2	No Increased Liabilities. If an assignment is made in accordance with this Clause 27(Assignment), the liabilities of the members of<br> the Novartis Group to the Sandoz Group, and the Sandoz Group to the Novartis Group, as applicable, under this Agreement shall be no greater than such liabilities would have been if the assignment had not occurred.
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28. Costs

28.1	Transaction Advisory Fees. Novartis shall bear the fees, charges and other expenses payable to any financial, transaction advisory, accounting or tax advisor or legal counsel<br> listed in Exhibit 5, including all fees, charges and other expenses payable to such transaction advisors (Transaction Advisory Fees).
28.2	Costs. Subject to Clause 28.1 (Transaction Advisory Fees) and except as otherwise provided in this Agreement or any Ancillary<br> Agreement or as otherwise agreed in writing between the Parties, Novartis and Sandoz shall each be responsible for its own costs, charges and other expenses (including those of members of their respective Groups) incurred in connection<br> with the Separation and the Distribution.
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28.3	Invoicing. Except as otherwise agreed in writing between the Parties, the Parties acknowledge and agree that there will be no cross-charging or cross-invoicing between the<br> Parties or the members of their respective Groups in respect of:
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(a)	costs, charges and other expenses incurred in connection with the Separation and the Distribution; or
---	---
(b)	the Transaction Advisory Fees.
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29. Notices

29.1	Form of Notice. Any notice to be given in connection with this Agreement shall be in writing in English and signed by or on behalf of the Party giving it (in the case of notice<br> by e-mail, a notice signed electronically or a scanned copy of a signed original notice shall suffice). It shall be delivered by hand, registered post, e-mail or courier using an internationally recognized courier company. Any notice to<br> Novartis shall be deemed notice to all members of Novartis Group, and any notice to Sandoz shall be deemed notice to all members of Sandoz Group.
29.2	Effectiveness of Notice. Subject to Clause 29.3 (Notices), a notice shall be effective upon receipt and shall be deemed to have been<br> received:
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(a)	at the time of delivery, if delivered by hand, registered post or courier; or
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(b)	at the time it is sent if sent by e-mail, in which case:
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(i)	except as provided in (ii), the time at which an email is sent shall be the time in the place specified for notices on the recipient by hand; and
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(ii)	if an email delivery failure notice is received in the sender’s email account immediately after the sender tried to send it, the notice shall be deemed to have been received at the<br> time the sender tried to send it, if the sender also sends the notice to the recipient by hand, registered post or courier within 48 hours of receipt of the email delivery failure notice.
29.3	If a notice is deemed received outside Working Hours, the notice shall be deemed to have been received at the start of Working Hours on the next following Business Day.
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29.4	Notice Details. The addresses and e-mail addresses of the Parties for the purpose of Clause 29.1 (Form of Notice) are:
---	---
Novartis and each member of the Novartis Group	For the attention of:<br><br> <br>[***]
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Sandoz and each member of the Sandoz Group	For the attention of:<br><br> <br>[***]
29.5	Change of Notice Details. Novartis and Sandoz shall each notify the other Party in writing of a change to its details in Clause 29.4 (Notice<br> Details) from time to time.
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30. Relationship with other Agreements

30.1	Conflicts with Local Separation Agreements. To the extent that the provisions of a Local Separation Agreement are inconsistent with or additional to the provisions of<br> this Agreement or any Ancillary Agreement:
(a)	the provisions of this Agreement and any relevant Ancillary Agreement shall prevail, including in respect of the assets transferred pursuant to such Local Separation Agreement and the<br> allocation and assumption of Liabilities; and
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(b)	so far as permissible under Applicable Law, Novartis and Sandoz shall cause the provisions of the relevant Local Separation Agreement to be amended, solely to the extent necessary<br> under Applicable Law to give effect to the provisions of this Agreement and any relevant Ancillary Agreement or, to the extent this is not permissible, Novartis and Sandoz shall cooperate with each other and use Commercially Reasonable<br> Efforts to ensure that each applicable Party (or the relevant member of its Group) shall receive the rights, benefits and interests, and be responsible for such liabilities, as the case may be, that such Party (or the relevant member of<br> its Group) would have received or been responsible for had such Local Separation Agreement been governed solely by the terms of this Agreement and any relevant Ancillary Agreement.
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30.2	Local Separation Agreement Claims. Each Party shall not, and shall cause each member of their Group not to, bring any claim against the other Party or any member of its Group<br> in respect of or based upon the Local Separation Agreements or in respect of the Separation based upon or pursuant to any relevant Applicable Law in the relevant jurisdiction,
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in each case except to the extent necessary to implement the Separation as contemplated by this Agreement or the assumption of the Sandoz Liabilities or Novartis Liabilities as<br> contemplated by this Agreement or otherwise to implement the terms of this Agreement or any relevant Ancillary Agreement. All such claims (except as referred to above) shall be brought and be subject to the provisions, rights and<br> limitations as set out in this Agreement or any relevant Ancillary Agreement and no Person shall be entitled to recover damages or obtain payment, reimbursement, restitution or indemnity under or pursuant to any of the Local Separation<br> Agreements or in respect of the Separation based upon or pursuant to any relevant Applicable Law in the relevant jurisdiction (but without prejudice to the establishment of the existence of the claim hereunder). To the extent that<br> either Party (or a member of its Group) does bring a claim in breach of this Clause 30.2 (Local Separation Agreement Claims), such Party shall indemnify the other Party (and each member of its<br> Group) against all Liabilities which the other Party (or the relevant member of its Group) may suffer as a result of or arising from the bringing of such a claim.
30.3	Matters Governed Exclusively by Ancillary Agreements. Each of Novartis and Sandoz agrees on behalf of itself and the members of its respective Group that, except as<br> expressly provided in this Agreement or any Ancillary Agreement:
---	---
(a)	the Books and Records Plan shall govern the matters governed thereby, including the categorization of the Books and Records that are part of the Separation;
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(b)	the Employee Matters Agreement shall govern the matters governed thereby, including the allocation between the Parties and their respective Groups of all rights, assets and liabilities<br> related to Employees and/or Employee Benefits related matters, including:
---	---
(i)	the allocation of employment and service-related Liabilities (including wages, salaries, employer’s Liabilities in respect of associated Taxes and other periodic outgoings);
---	---
(ii)	the existing equity plans with respect to employees and former employees of members of both the Novartis Group and the Sandoz Group; and
---	---
(iii)	the allocation of pensions liabilities and workers’ compensation liabilities, including the retention of certain pensions liabilities and related assets by the Novartis Group;
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(c)	the Information Access Agreement shall govern the terms on which the Parties (or the relevant members of their respective Groups) shall access Retained Records;
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(d)	the Intellectual Property Agreements shall govern the matters governed thereby, including the assignment, licensing, maintenance and future use of certain Intellectual Property Rights<br> between the Parties (or members of their Groups);
---	---
(e)	the Joint Defense and Common Interest Agreement shall govern the matters governed thereby, including the confidential exchange of Information and documents for relevant<br> claims/investigations in view of the Parties’ common interest and protection against disclosure of privileged Information;
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(f)	the Long Term Services Agreement shall govern the matters governed thereby, including all matters related to the provision of certain identified services by the Parties (or the members<br> of their Groups) to each other;
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(g)	the MA Transfer Agreement shall govern matters relating to the Sandoz Transferring Marketing Authorizations and the Novartis Transferring Marketing Authorizations;
(h)	the Manufacturing and Supply Agreements and related agreements shall govern the matters governed thereby, including all matters related to the provision of certain identified<br> manufacturing services by the Parties (or the members of their Groups) to each other;
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(i)	the Omnibus Data Protection Agreement shall govern the matters governed thereby, including the obligations of the parties to protect data in accordance with relevant privacy and data<br> protection legislation;
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(j)	the Pharmacovigilance Agreement and Pharmacovigilance Services Agreement shall govern the matters governed thereby, including all matters relating to pharmacovigilance and related<br> services to be provided by one Party (or any member of its Group) to the other Party (or any member of its Group);
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(k)	the Quality Agreements shall govern the matters governed thereby, including all matters relating to the quality responsibilities of the Parties;
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(l)	the RxGx Agreement, shall govern the matters governed thereby, including, together with the Manufacturing and Supply Agreements, all matters related to the purchase and<br> commercialization of certain identified generic versions of Novartis Products by Sandoz;
---	---
(m)	the Site Agreements shall govern the matters governed thereby, including the supply of general health, security and environment services and other services and utilities in relation to<br> certain industrial sites;
---	---
(n)	the Tax Matters Agreement shall govern the matters governed thereby, including the allocation of Taxes between the Parties and their respective Groups and certain other Tax matters;
---	---
(o)	the Third Party Claims and Investigations Management Agreement shall govern the matters governed thereby, including the conduct of Third Party Claims and Investigations;
---	---
(p)	the Technical Transfer Agreements shall govern the matters governed thereby, including the provision of certain identified technical transfer services by the Parties (or the members of<br> their Groups) to each other;
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(q)	the Transitional Distribution Services Agreement shall govern the matters governed thereby, including all matters related to the provision of certain identified distribution and<br> promotional services to be provided by one Party (or any member of its Group) to the other Party (or any member of its Group);
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(r)	the Transitional Services Agreement shall govern the matters governed thereby, including all matters related to the provision of certain identified transitional services to be provided<br> by one Party (or any member of its Group) to the other Party (or any member of its Group);
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(s)	the Development and Collaboration Agreement shall govern the matters governed thereby, including the provision of certain pre-clinical development services by the Novartis Group; and
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(t)	the US Brands Commercial Agreement shall govern the matters governed thereby, including the allocation of the responsibility for rebate, returns and reimbursement in relation to the US<br> Branded Products.
30.4	Ancillary Agreement Conflicts.
---	---
(a)	If there is any conflict between the terms of this Agreement and any Ancillary Agreement:
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(i)	the terms of the relevant Ancillary Agreement shall prevail (as between the Parties to this Agreement and as between any members of the Novartis Group and any members of the Sandoz<br> Group) in respect of the matters expressly set out in the relevant Ancillary Agreement; and
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(ii)	except as expressly set out in this Agreement or any Ancillary Agreement, nothing in this Agreement is intended to limit or exclude the rights and/or obligations of any Party under any<br> Ancillary Agreement.
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(b)	If there is any conflict between the terms of any two or more Ancillary Agreements, drafting in any Ancillary Agreement that deals expressly with any issue, matter or circumstance<br> shall prevail over any drafting in any other Ancillary Agreement that deals generally with such issue, matter or circumstance.
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30.5	Conflicts with any other agreement.
---	---
(a)	The Parties acknowledge that members of the Novartis Group and members of the Sandoz Group have entered into the Continuing Intercompany Arrangements to satisfy operational, commercial<br> and/or regulatory requirements locally in order to facilitate business continuity.
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(b)	Subject to Clause 30.4 (Ancillary Agreement Conflicts), if there is any conflict or inconsistency between the terms of this Agreement or any<br> Ancillary Agreement and any Continuing Intercompany Arrangement (each, a Conflicting Agreement):
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(i)	the Parties shall procure that the conflict or inconsistency is escalated to the Separation PMO Leads to make such amendments to the Conflicting Agreement as are required to resolve<br> the conflict or inconsistency; and
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(ii)	each Party shall procure that any dispute or claim arising out of, relating to, or in connection with any Conflicting Agreement is resolved under this Agreement in accordance with<br> Clause 38 (Dispute Resolution).
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31. Whole Agreement

31.1	In this Clause 31 (Whole Agreement), the Transaction Parties shall mean Novartis,<br> Sandoz and each Sandoz Asset Transferor, Sandoz Asset Transferee, Sandoz Share Transferor, Sandoz Share Transferee, Novartis Asset Transferor, Novartis Asset Transferee, Novartis Share Transferor and Novartis Share Transferee, and each of<br> them shall be a Transaction Party.
31.2	This Agreement and the other Transaction Documents together set out the whole agreement between the Transaction Parties in respect of the Separation and the Distribution and<br> supersede any previous draft, agreement, arrangement or understanding, whether in writing or not, relating to the Separation and/or the Distribution.
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31.3	It is agreed that:
(a)	no Transaction Party has relied on or shall have any claim or remedy arising under or in connection with any statement, representation, warranty or undertaking made by or on behalf of<br> any other Transaction Party (or any of its Representatives) in relation to the Separation and/or the Distribution that is not expressly set out in this Agreement or any other Transaction Document;
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(b)	except as expressly set out in this Agreement or any other Transaction Document, no Person (including any Party) is:
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(i)	representing or warranting to any other Person in any way as to:
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(A)	the Sandoz Entities, Sandoz Transferring Assets, Novartis Transferring Entities, Novartis Transferring Assets, Sandoz Liabilities or Novartis Liabilities;
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(B)	any approvals or notifications required in connection therewith or otherwise in connection with this Agreement;
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(C)	the value or freedom from any security interests of, or any matter concerning, any assets of any Transaction Party;
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(D)	the absence or presence of any defenses to or right of setoff against or freedom from counterclaim with respect to any proceeding or other asset, including any accounts receivable, of<br> any Transaction Party; or
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(E)	the legal sufficiency of any Local Separation Agreement or other conveyance and assumption instruments or any other ancillary agreement to convey title to any asset or thing of value<br> upon the execution, delivery and filing of such conveyance and assumption instruments or such other ancillary agreements; or
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(ii)	making any other representations or granting any warranties, express or implied, either in fact or by operation of law, by statute or otherwise,
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and each Transaction Party specifically disclaims any other warranties, whether written or oral, or express or implied, including any warranty of quality, merchantability, or fitness for a particular use or purpose or any warranty as to the validity of any Patents or the non-infringement of any Intellectual Property Rights of Third Parties;

(c)	except as may be expressly set forth in this Agreement or in any other Transaction Document, all assets being transferred or licensed are done so on an “as is”, “where is” basis and<br> the respective transferees or licensees shall bear the economic and legal risks that:
(i)	any Local Separation Agreement or other conveyance and assumption instruments or any other Ancillary Agreement may prove insufficient to vest in the transferee good and marketable<br> title, free and clear of all security interests; and
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(ii)	any necessary consents are not obtained or that any requirements of Applicable Law, agreements, security interests or judgments are not complied with;
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(d)	any terms or conditions implied by Applicable Law in any jurisdiction in relation to the Separation and/or the Distribution are excluded to the fullest extent permitted by Applicable<br> Law or, if incapable of exclusion, any right or remedies in relation to them are irrevocably waived;
(e)	the only right or remedy of any Transaction Party in relation to any provision of this Agreement or any other Transaction Document shall be for breach of this Agreement or the relevant<br> Transaction Document;
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(f)	except for any liability in respect of a breach of this Agreement or any other Transaction Document, no Transaction Party (or, subject to any agreement between any other Transaction<br> Party and a Representative, any of its Representatives) shall owe any duty of care or have any liability in tort or otherwise to any other Transaction Party (or its respective Representatives) in relation to the Separation and/or the<br> Distribution; and
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(g)	each Transaction Party hereby waives (and shall procure that each of its Affiliates shall waive) any requirement for compliance with the requirements and provisions of any “bulk-sale”<br> or “bulk transfer” Applicable Laws of any jurisdiction that may otherwise be applicable with respect to the Separation and/or the Distribution.
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31.4	Each Transaction Party further understands and agrees that if any disclaimer contained in this Clause 31 (Whole Agreement) is held<br> unenforceable or is unavailable for any reason, or if, under the laws of any jurisdiction, Novartis or any member of the Novartis Group, on the one hand, and Sandoz or any member of the Sandoz Group, on the other hand, are liable for<br> any Novartis Liabilities and/or any Sandoz Liabilities in a manner contrary to this Agreement and the Transaction Documents, the Parties intend that the provisions of this Agreement and the Transaction Documents (including the<br> disclaimer of all representations and warranties, allocation of Liabilities, releases, indemnification and contribution) shall prevail for any and all purposes among the Parties and their respective Groups.
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31.5	Each Transaction Party agrees to the terms of this Clause 31 (Whole Agreement) on its own behalf and as agent for each of its Representatives.
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32. Waivers, Rights and Remedies

32.1	Except as expressly provided in this Agreement, no failure or delay by any Party in exercising any right or remedy relating to this Agreement or any of the Transaction Documents<br> shall affect or operate as a waiver or variation of that right or remedy or preclude its exercise at any subsequent time. No single or partial exercise of any such right or remedy shall preclude any further exercise of it or the<br> exercise of any other remedy.
32.2	Except as expressly provided in a Transaction Document, the remedies in the Transaction Documents shall be in lieu of, and not in addition to, the remedies provided for under<br> Applicable Law.
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32.3	Without limitation to the foregoing, each Party hereby explicitly waives the right of contract rescission under articles 23 et seq. and 205 of the Swiss CO.
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32.4	In the event of any actual or threatened default in, or breach of, any of the terms, conditions or provisions of this Agreement, the affected Party shall have the right<br> to specific performance and declaratory, injunctive or other similar relief of its rights under this Agreement to prevent breaches of this Agreement and to enforce specific performance of the terms and provisions of this<br> Agreement, in addition to any other remedy to which the affected Party is
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entitled pursuant to this Agreement. The other Party shall not oppose the granting of such relief on the basis that money damages are an adequate remedy. The Parties agree that the<br> remedies under Applicable Law for any breach or threatened breach hereof, including monetary damages, are inadequate compensation for any loss and that any defense in any action for specific performance that a remedy under Applicable Law<br> would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived.

33. Counterparts

This Agreement may be executed in any number of counterparts (including electronic counterparts, with a qualified Swiss electronic signature), and by each Party on separate counterparts. Each counterpart is an original, but all counterparts shall together constitute one and the same instrument. Delivery of a counterpart of this Agreement by e-mail attachment or other means of electronic transmission shall be an effective mode of delivery.

34. Variations

No amendment of this Agreement (or of any other Transaction Document), including any amendment to this Clause 34, shall be valid unless it is in writing and duly executed by or on behalf of all of the Parties to it.

35. Invalidity

Each of the provisions of this Agreement and the other Transaction Documents is severable. If any such provision is held to be or becomes invalid or unenforceable in any respect under the law of any jurisdiction, it shall have no effect in that respect and the Parties shall use Commercially Reasonable Efforts to replace it in that respect with a valid and enforceable substitute provision the effect of which is as close to its intended effect as possible.

36. No Third Party Enforcement Rights

Except for the indemnification rights under this Agreement of any Novartis Indemnitee or Sandoz Indemnitee in their respective capacities as such, a Person who is not a Party to this Agreement shall have no right under any statutory provision to enforce any of its terms.

37. Governing Law

This Agreement and any non-contractual obligations arising out of or in connection with this Agreement shall be governed by, and interpreted in accordance with, the substantive laws of Switzerland (excluding its rules on conflict of laws and excluding the UN Convention on Contracts for the International Sale of Goods dated 11 April 1980).

38. Dispute Resolution

38.1	This Clause 38 shall apply to any dispute or claim arising out of, relating to, or in connection with this Agreement, including, without limitation, any dispute relating to the<br> existence, validity, breach or termination of this Agreement (each, a Dispute).
38.2	Before entering into any arbitration pursuant to Clause 38.6, a Party shall give written notice of a Dispute to the other Party (a Dispute Notice) in accordance with Clause 29 (Notices). The Dispute Notice shall:
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(a)	state that it is a Dispute Notice being submitted pursuant to Clause 38 of this Agreement;
(b)	identify the Dispute in sufficient detail to allow the Party receiving the Dispute Notice to understand reasonably the nature of the Dispute; and
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(c)	set out any steps taken by that Party or its Affiliates to resolve it.
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38.3	Upon receipt of a Dispute Notice, each Party shall refer the Dispute to its Group General Counsel or Chief Legal Officer as the case may be (or, if they are not reasonably available<br> during the relevant period, their appointed alternate, who shall be of sufficient seniority within the relevant Party and have authority to be able to reach a resolution of the Dispute) and the two Group General Counsel (or their<br> appointed alternates, if applicable) shall attempt in good faith to settle the Dispute by means of an appropriate written agreement setting out the terms on which the Dispute is resolved within 20 Business Days of the date of receipt of<br> the Dispute Notice (the Resolution Period). The time limit specified in this Clause 38.3 may be extended by the written agreement of the Parties.
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38.4	Notwithstanding any other provision in this Agreement, either Party may, at any time, seek interim relief or provisional relief, whether from an emergency arbitrator appointed and<br> acting in accordance with the Rules of Arbitration of the ICC in effect at the date of this Agreement (the ICC Rules), a tribunal constituted under the ICC Rules and/or from<br> a national court of competent jurisdiction, in advance of or in aid of the arbitration proceedings contemplated by Clause 38.6.
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38.5	If the Parties do not conclude a binding written agreement settling the Dispute within the Resolution Period, either Party shall be entitled to refer the Dispute to be finally<br> resolved by arbitration in accordance with the ICC Rules. In this event, the Parties agree that:
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(a)	the tribunal for the arbitration shall comprise three arbitrators, with each Party selecting one arbitrator each and the chairperson selected by the Parties jointly or, in the absence<br> of agreement between them, by the International Court of Arbitration of the ICC (the ICC Court);
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(b)	the seat of arbitration shall be Zürich, Switzerland;
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(c)	the written and spoken language to be used in the arbitral proceedings shall be English; and
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(d)	the award of the tribunal shall be final and binding upon the Parties and judgment may be entered on an award and enforced in any court of competent jurisdiction.
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38.6	Where the Dispute relates to or is in any way connected with any dispute referred to arbitration under this Agreement or another Ancillary Agreement, either Party may apply to the<br> ICC Court at any time before the tribunal is fully constituted in either arbitration requesting that the two arbitrations be consolidated and the Parties hereby agree that in such circumstances the arbitrations are to be consolidated<br> into a single arbitration conducted under the ICC Rules by the ICC Court. In the event of consolidation, the Parties agree that:
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(a)	the tribunal for the consolidated arbitration shall comprise three arbitrators, with each Party selecting one arbitrator each and the chairperson selected by the Parties jointly or, in<br> the absence of agreement between them, by the ICC Court;
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(b)	the seat of arbitration shall be Zürich, Switzerland;
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(c)	the written and spoken language to be used in the arbitral proceedings shall be English; and
(d)	the award of the tribunal shall be final and binding upon the Parties and judgment may be entered on an award and enforced in any court of competent jurisdiction.
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38.7	The Parties agree that any settlement discussions and communications or negotiations in connection with the proposed resolution of a Dispute are without prejudice to the Parties’<br> positions, are to be kept confidential, and shall not be used or submitted in any arbitration or other legal proceeding between the Parties for any purpose. For the avoidance of doubt, this Clause 38.7 shall not affect a Party’s right<br> to submit and rely on any correspondence marked “without prejudice save as to costs” for the purpose of the tribunal’s determination on costs.
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SCHEDULE 1

      TRANSFERRING CONTRACTS AND NON-TRANSFERRING TENDERS

Part A: Transferring Contracts

1.1	Transfers effective prior to the Separation Date. The Parties agree that the provisions of this Part A (Transferring Contracts) of<br> Schedule 1 (Transferring Contracts and Non-Transferring Tenders) shall be interpreted as applying equally to the implementation of the Separation in any jurisdiction prior to the date of this<br> Agreement, with effect from the date on which such implementation is completed, as if references in this Part A (Transferring Contracts) of Schedule 1 (Transferring<br><br> Contracts and Non-Transferring Tenders) to the Separation Date were references to the date on which such implementation is completed, such that to the extent that any Third Party Consent was required in respect of any<br> Transferring Business Contract in such jurisdiction, the provisions of paragraph 1.2 (Efforts to Obtain Third Party Consents) and paragraphs 1.4 (Effect of Third<br> Party Consents) to 1.6 (Third Party Consents Not Obtained Prior to Commencement of Separation) shall be deemed to apply with retrospective effect<br> from the date of the implementation of the Separation in such jurisdiction.
1.2	Efforts to Obtain Third Party Consents. In relation to any Transferring Business Contract that is not transferable without a Third Party Consent, Sandoz and Novartis shall, and<br> shall procure that the respective members of their Groups shall, unless otherwise agreed in writing between Sandoz and Novartis, use Commercially Reasonable Efforts to obtain such Third Party Consent and cooperate with each other to<br> determine how to address any such outstanding Third Party Consents, subject to paragraph 1.3 (Fees, Costs and Expenses Relating to Third Party Consents) and paragraph 1.4 (Effect of Third Party Consents).
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1.3	Fees, Costs and Expenses Relating to Third Party Consents. Any fees, costs and expenses incurred in connection with obtaining a Third Party Consent:
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(a)	prior to the Separation Date shall be borne by Novartis; and
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(b)	on or after the Separation Date shall be borne equally (on a 50/50 basis) by Novartis and Sandoz.
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1.4	Effect of Third Party Consents. The Parties agree that the provisions of any document entered into in connection with a Third Party Consent (including by way of novation) shall<br> be without prejudice to the provisions of this Agreement.
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1.5	Delayed Transfer of Certain Transferring Business Contracts. If any Transferring Business Contract is required for the provision by the Sandoz Group or the Novartis<br> Group, as applicable, of services under the Transitional Distribution Services Agreement, the Transitional Services Agreement, the Development and Collaboration Agreement and/or any Manufacturing and Supply Agreements, the transfer of<br> such Transferring Business Contract may be delayed by mutual agreement of Sandoz and Novartis until the later of the termination or expiry of the Transitional Distribution Services Agreement, the Transitional Services Agreement, the<br> Development and Collaboration Agreement and/or the relevant Manufacturing and Supply Agreements or such other date as may be agreed in writing by Novartis and Sandoz.
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1.6	Third Party Consents Not Obtained Prior to Commencement of Separation. If any Third Party Consent has not been obtained in relation to any Transferring Business Contract prior<br> to the Separation Date or it is agreed in writing by the Parties that such consent will not be sought, then the Parties acknowledge and agree that, unless otherwise agreed in writing between Sandoz and Novartis, from and after the<br> Separation Date and, where Third Party Consent is being (or will be) sought, until such Third Party Consent is obtained and the relevant Transferring Business Contract is transferred to the relevant member of the Sandoz Group or member of<br> the Novartis Group, as applicable (the Relevant Contract Transferee):
(a)	the transfer of such Transferring Business Contract shall not take effect and the relevant member of the Novartis Group (if the Relevant Contract Transferee is a member of the Sandoz<br> Group) or member of the Sandoz Group (if the Relevant Contract Transferee is a member of the Novartis Group) (as applicable) that is Party to the Transferring Business Contract (the Relevant<br> Contract Transferor) shall remain a Party to such Transferring Business Contract on a fiduciary basis (including performing its obligations under such Transferring Business Contract in its own name but for the account of the<br> Relevant Contract Transferee), and such Relevant Contract Transferor shall in accordance with this paragraph 1.6:
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(i)	cooperate with the Relevant Contract Transferee, as applicable, to enter into a mutually agreeable arrangement to provide to the Relevant Contract Transferee any claims, rights and<br> other benefits to the extent that they relate to such Transferring Business Contract;
---	---
(ii)	hold all monies paid to such Relevant Contract Transferor thereunder, or in respect thereof, on or after the Separation Date for the account of the Relevant Contract Transferee (and,<br> for all Tax purposes, any Relevant Contract Transferor receiving such payments shall be treated as receiving such amounts as an agent or nominee for the Relevant Contract Transferee to the extent permitted by Applicable Law); and
---	---
(iii)	remit such monies to the Relevant Contract Transferee 15 Business Days after the end of the calendar quarter of receipt, except in each case to the extent that any of the rights<br> comprise, or represent the proceeds from, a Novartis Retained Asset or a Novartis Liability (in respect of a Transferring Business Contract held by a member of the Sandoz Group) or a Sandoz Retained Asset or a Sandoz Liability (in respect<br> of a Transferring Business Contract held by a member of the Novartis Group);
---	---
(b)	to the fullest extent permitted by Applicable Law, the Relevant Contract Transferee shall assume, perform and comply with (as the sub-contractor or agent of the Relevant Contract<br> Transferor) all the obligations (including any recordkeeping, reporting, audit and payment obligations) of the Relevant Contract Transferor under the relevant Transferring Business Contract, in each case, only to the extent:
---	---
(i)	not arising out of, in connection with or relating to a Novartis Retained Asset or a Novartis Liability (in respect of a Transferring Business Contract held by a member of the Sandoz<br> Group) or a Sandoz Retained Asset or a Sandoz Liability (in respect of a Transferring Business Contract held by a member of the Novartis Group); and
---	---
(ii)	not attributable to the Relevant Contract Transferor’s (or its Affiliates’) breach of, or non-performance under, any such Transferring Business Contract unless
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such breach or non-performance was the result of a failure of the Relevant Contract Transferee to comply with its obligations under this Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders);

and the Relevant Contract Transferee shall indemnify the Relevant Contract Transferor against all Liabilities actually suffered or incurred as a result of any failure by that Relevant Contract Transferee to perform those obligations in accordance with the terms of this Agreement;

(c)	the Relevant Contract Transferor shall give reasonable assistance to the Relevant Contract Transferee (at such Relevant Contract Transferee’s request and expense) to enable it to<br> enforce its rights under such Transferring Business Contract;
(d)	where it is not lawfully able to hold such Transferring Business Contract on a fiduciary basis in accordance with sub-paragraphs (a) to (c) above or where the Parties agree in writing,<br> the Relevant Contract Transferor and the Relevant Contract Transferee shall cooperate to establish an arrangement reasonably satisfactory to both Persons under which:
---	---
(i)	the Relevant Contract Transferee shall, as far as legally possible, obtain all of the claims, rights and benefits under such Transferring Business Contract and such Relevant Contract<br> Transferee shall assume and comply (or, at the Relevant Contract Transferor’s discretion, enable the Relevant Contract Transferor to comply) with all of the corresponding liabilities and obligations (including any recordkeeping,<br> reporting, audit and payment obligations) of the Relevant Contract Transferor under such Transferring Business Contract (including by means of any subcontracting, sublicensing or subleasing arrangement); and
---	---
(ii)	the Relevant Contract Transferor shall continue to perform and enforce any rights relating to such Transferring Business Contract for the benefit of the Relevant Contract Transferee at<br> such Relevant Contract Transferee’s cost and account, and such Relevant Contract Transferor shall pay or deliver to the Relevant Contract Transferee (15 Business Days after the end of the calendar quarter of receipt) any monies, goods and<br> other benefits which it receives after the Separation Date to the extent that they relate to such Transferring Business Contract (and, for all Tax purposes, any Relevant Contract Transferor receiving such monies, goods and other benefits<br> shall be treated as receiving such items as an agent or nominee for the Relevant Contract Transferee to the extent permitted by Applicable Law), except in each case to the extent that they comprise, or represent the proceeds from, a<br> Novartis Retained Asset or a Novartis Liability (in respect of a Transferring Business Contract held by a member of the Sandoz Group) or a Sandoz Retained Asset or a Sandoz Liability (in respect of a Transferring Business Contract held by<br> a member of the Novartis Group),
---	---

in each case, the Relevant Contract Transferee’s assumption of any liabilities and obligations shall be limited to the extent:

(x) not arising out of, in connection with or relating to a Novartis Retained Asset or a Novartis Liability (in respect of a Transferring Business Contract held by a member of the Sandoz Group) or a Sandoz Retained Asset or a Sandoz Liability (in respect of a Transferring Business Contract held by a member of the Novartis Group); and

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(y) the Relevant Contract Transferor or its Affiliate has breached, or not performed its obligations under, or with respect to, any such Transferring Business Contract unless such breach or non-performance was the result of a failure of the Relevant Contract Transferee to comply with its obligations under this Schedule 1 (Transferring Contracts and Non-Transferring Tenders);

(e)	to the extent that the Relevant Contract Transferee is not lawfully able to perform the obligations under or relating to the relevant Transferring Business Contract from the Separation<br> Date, Novartis or Sandoz, as applicable, shall procure that the Relevant Contract Transferor in such Party’s Group (the Contract Transferor’s Parent) shall (subject to being<br> indemnified by the other Party (the Contract Transferee’s Parent) for any Liabilities that the Contract Transferor’s Parent or the Relevant Contract Transferor may suffer or<br> incur in connection therewith) do all such things as the Contract Transferee’s Parent may reasonably direct or reasonably require to enable due performance;
(f)	without prejudice to the provisions of sub-paragraphs (b) or (e) above, the Relevant Contract Transferor shall provide to the Relevant Contract Transferee such Information and<br> assistance as it may reasonably require (including licensing to the Relevant Contract Transferee any relevant Intellectual Property Rights owned by, or licensed to, the Novartis Group or the Sandoz Group, as applicable, or assisting with<br> identifying alternative suppliers) with respect to any Transferring Business Contract which is subject to the provisions of this paragraph 1.6 (Third Party Consents Not Obtained Prior to Commencement of<br> Separation); and
---	---
(g)	the Relevant Contract Transferor holding and maintaining the relevant Transferring Business Contract in accordance with this paragraph 1.6 (Third<br> Party Consents Not Obtained Prior to Commencement of Separation) shall be deemed to be a service provided under the Transitional Services Agreement and the charging and cost calculation mechanism in the Transitional Services<br> Agreement shall apply.
---	---
1.7	Shared Contracts. With effect from the Separation Date until the termination or expiry of the relevant Shared Contract, in respect of the Sandoz Part or Novartis Part (as<br> applicable) of each Shared Contract:
---	---
(a)	subject to sub-paragraphs (b) and (c) below, the provisions of paragraphs 1.1 (Transfers effective prior to the Separation Date) to 1.6 (Third Party Consents Not Obtained Prior to Commencement of Separation) of this Part A (Transferring Contracts) of Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders) shall apply mutatis mutandis as though:
---	---
(i)	a Third Party Consent is required in respect of the transfer of the Sandoz Part or Novartis Part, as applicable, of such Shared Contract; and
---	---
(ii)	such Third Party Consent has not been obtained at the Separation Date;
---	---
(b)	the application of the provisions of this Part A (Transferring Contracts) of Schedule 1 (Transferring<br> Contracts and Non-Transferring Tenders) to the Shared Contracts referred to in schedule 8 of the Manufacturing and Supply Agreement shall be subject to the terms of schedule 8 of the Manufacturing and Supply Agreement; and
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(c)	if the relevant member of the Sandoz Group or member of the Novartis Group (as applicable) wishes to enforce any of its rights under the Sandoz Part or Novartis Part (as applicable)<br> (the Relevant Shared Contract Beneficiary) of any Shared Contract:
(i)	it shall give written notice to the relevant member of the Novartis Group (if the Relevant Shared Contract Beneficiary is a member of the Sandoz Group) or the relevant member of the Sandoz Group (if the Relevant Shared Contract Beneficiary is a member of the Novartis Group) (as applicable) that is Party to such Shared Contract (the Relevant Shared Contract Party) containing reasonably specific details of any claim that it wishes to make to enforce its rights under the Sandoz Part or Novartis Part (as<br> applicable) of any Shared Contract, including such Information as is available to it to allow such Relevant Shared Contract Party (as applicable) to assess the merits of such claim and its amount; and
---	---
(ii)	if such Shared Contract primarily relates to the Sandoz Business, Sandoz (or any member of the Sandoz Group) shall, subject to Novartis and each member of the Novartis Group being<br> indemnified by Sandoz against all Liabilities suffered or incurred by them to the extent arising out of or resulting from the conduct of any claim having been assumed by Sandoz (or any member of the Sandoz Group) under this sub-paragraph<br> 1.7(c)(ii), be entitled (at its election and sole expense) to take such action as it shall deem necessary to negotiate, make, assert, avoid, dispute, deny, defend, resist, appeal, compromise, contest, settle, discharge or otherwise deal<br> with any such claim and to have the conduct of any related proceedings, negotiations or appeals; provided, that Sandoz shall ensure that it and each member of the Sandoz Group shall:
---	---
(A)	not advance any argument against the counterparty under such Shared Contract or take any step that would reasonably be likely to have an adverse impact on Novartis, any of its<br> Affiliates or the Novartis Business;
---	---
(B)	take into account any reasonable requests of Novartis (or any member of the Novartis Group) in respect of such claim; and
---	---
(C)	keep Novartis regularly informed in respect of such claim; or
---	---
(iii)	if such Shared Contract primarily relates to the Novartis Business, Novartis (or any member of the Novartis Group or its Affiliates) shall be entitled, subject to Sandoz and each<br> member of the Sandoz Group being indemnified by Novartis against all Liabilities suffered or incurred by them to the extent arising out of or resulting from the conduct of any claim having been assumed by Novartis (or any member of the<br> Novartis Group) under this sub-paragraph (iii), (at its election and sole expense) to take such action as it shall deem necessary to negotiate, make, assert, avoid, dispute, deny, defend, resist, appeal, compromise, contest, settle,<br> discharge or otherwise deal with any such claim and to have the conduct of any related proceedings, negotiations or appeals; provided, that Novartis shall ensure that it and each member of the Novartis Group shall:
---	---
(A)	not advance any argument against the counterparty under such Shared Contract or take any step that would reasonably be likely to have an adverse impact on the Sandoz Business;
---	---

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(B)	take into account any reasonable requests of Sandoz (or any member of the Sandoz Group) in respect of such claim; and
(C)	keep Sandoz regularly informed in respect of such claim.
---	---
1.8	Termination of Transferring Business Contracts and Shared Contracts. If any Third Party Consent to the transfer of any applicable Transferring Business Contract or the<br> Sandoz Part or Novartis Part (as applicable) of any Shared Contract is not obtained (including where such consent is not sought) or is refused within 24 months after the Separation Date (or such other<br> time period as Novartis and Sandoz agree):
---	---
(a)	the Relevant Contract Transferor shall be entitled to terminate the Transferring Business Contract or Shared Contract (to the extent possible);
---	---
(b)	both Parties’ (and their respective Affiliates’) obligations under this Schedule 1 (Transferring Contracts and Non-Transferring Tenders)  in<br> relation to the Transferring Business Contract or Shared Contract shall cease forthwith; and
---	---
(c)	references in this Agreement to the Transferring Business Contracts or Shared Contracts shall be construed excluding such Transferring Business Contract or Shared Contract.
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Part B: Non-Transferring Tenders

1.1	The Parties agree that Part A (Transferring Contracts) of this Schedule 1 (Transferring Contracts and<br> Non-Transferring Tenders) shall not apply to any Non-Transferring Tender and instead this Part B (Non-Transferring Tenders) shall apply to each Non-Transferring Tender until it has<br> expired or been terminated.
1.2	To the extent permitted under the terms of the relevant Non-Transferring Tender, the member of the Novartis Group or Sandoz Group that is a party (itself or through an agent) to the<br> relevant Non-Transferring Tender (NTT Party) shall, with effect on and from the Separation Date, be deemed to hold the benefit of that Non-Transferring Tender on trust for the<br> relevant member of the Sandoz Group or Novartis Group that is or will be operating the Sandoz Business or Novartis Business (as applicable) in the market which is the subject of the Non-Transferring Tender (the Local Beneficiary) and the benefit of that Non-Transferring Tender shall be provided to Novartis AG (if the relevant Local Beneficiary is a member of the Novartis Group) and to Sandoz AG (if the<br> relevant Local Beneficiary is a member of the Sandoz Group) in accordance with the provisions of the Transitional Distribution Services Agreement, including clause 7.2 (Transfer of Economic Benefit Amount)<br> of the Transitional Distribution Services Agreement.
---	---
1.3	Performance of Non-Transferring Tenders by Local Beneficiary. To the extent it is permitted under that Non-Transferring Tender or Applicable Law, the Local Beneficiary shall<br> perform (or procure that there is performed by another member of its Group) for and on behalf of the relevant NTT Party (but, in respect of a Sandoz Non-Transferring Tender, at the expense of Sandoz, and, in respect of a Novartis<br> Non-Transferring Tender, at the expense of Novartis (in each case Sandoz or Novartis, as applicable, being the Local Beneficiary’s Parent)) the obligations of the relevant NTT<br> Party (or any other member of its Group) under that Non-Transferring Tender. The Local Beneficiary’s Parent shall:
---	---
(a)	take or procure the taking of all steps required to fulfil the obligations of the relevant NTT Party (or any other member of its Group) under each Non-Transferring Tender, including<br> by:
---	---
(i)	to the extent not otherwise licensed under any Transaction Document, licensing the relevant NTT Party any Intellectual Property Rights owned by the relevant Local Beneficiary or<br> relevant member of the Local Beneficiary’s Group;
---	---
(ii)	forecasting, supplying or procuring the supply of, and where relevant storing inventory of, any products required to fulfil the obligations of the relevant NTT Party (or any other<br> member of its Group) under each Non-Transferring Tender; and
---	---
(b)	indemnify on demand, defend and hold harmless each of the Novartis Indemnitees or Sandoz Indemnitees (as applicable) against any and all Liabilities actually suffered or incurred by<br> any of them to the extent arising out of or in connection with any act or omission of the Local Beneficiary (or other relevant member of its Group) to perform or comply with any obligations of the relevant NTT Party (or other member of<br> its Group) under that non-Transferring Tender.
---	---
1.4	Performance of Non-Transferring Tenders by the NTT Party. If the performance and discharge by the relevant Local Beneficiary of any obligations and liabilities under a
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Non-Transferring Tender would constitute a breach by the relevant NTT Party of the terms of such Non-Transferring Tender, Novartis, in respect of a Sandoz Non-Transferring Tender, or<br> Sandoz, in respect of a Novartis Non-Transferring Tender (in each case Novartis or Sandoz, as applicable, being the NTT Party’s Parent) shall procure that, until such time as<br> the relevant Non-Transferring Tender expires or is terminated by the counterparty thereto or by the NTT Party’s Group on the mutual agreement of the Parties, the relevant NTT Party (or other applicable member of its Group) shall, from<br> the period commencing at the Separation Date, continue as far as reasonably practicable to perform and discharge its retained obligations under such Non-Transferring Tender, provided that:
(a)	the NTT Party’s Parent shall procure that the relevant NTT Party shall exercise its rights and perform its retained obligations in respect of such Non-Transferring Tender as the Local<br> Beneficiary’s Parent may direct or approve (acting reasonably) and shall account to the relevant Local Beneficiary for any benefit/loss arising thereunder in accordance with the Transitional Distribution Services Agreement;
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(b)	the relevant Local Beneficiary (at its own expense) shall, and the Local Beneficiary’s Parent shall procure that the Local Beneficiary shall, provide the relevant NTT Party (or procure<br> that the same is provided) with such documents, facilities, assistance and Information and/or enter into such other arrangements (or procure that the same are entered into) as are necessary for the purpose of performing and discharging<br> the Non-Transferring Tender in such manner that the NTT Party is not in breach thereof or in breach of any Applicable Law including:
---	---
(i)	to the extent not otherwise licensed under any Transaction Document, licensing the relevant NTT Party any Intellectual Property Rights owned by the relevant Local Beneficiary or<br> relevant member of the Local Beneficiary’s Group;
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(ii)	forecasting, supplying or procuring the supply of, and where relevant storing inventory of, any products required to fulfil the obligations of the relevant NTT Party (or any other<br> member of its Group) under each Non-Transferring Tender;
---	---
(c)	the Local Beneficiary’s Parent shall on behalf of the relevant Local Beneficiary, without prejudice to any costs or reimbursements under the Transitional Distribution Services<br> Agreement:
---	---
(i)	reimburse the NTT Party any costs and expenses reasonably incurred by the NTT Party (or any other member of its Group); and
---	---
(ii)	on behalf of the NTT Party, discharge any Liabilities in each case arising as part or as a result of such performance and discharge by the NTT Party (or any other member of its Group),
---	---

in each case (i) and (ii) as part of the economic benefit transfer under the Transitional Distribution Services Agreement; and

(d)

the Local Beneficiary’s Parent shall indemnify on demand, defend and hold harmless each of the Novartis Indemnitees or Sandoz Indemnitees (as applicable) against any and all<br> Liabilities actually suffered or incurred by any of them to the extent arising out of or in connection with the non-performance or non-compliance by the Local Beneficiary or any member of its Group with the provisions of this paragraph<br> 1.4 (Performance of Non-Transferring Tenders by the NTT Party) of Part B (Non-

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Transferring Tenders) of this Schedule 1 (Transferring Contracts and Non-Transferring Tenders).
1.5	Termination of Non-Transferring Tenders. The Local Beneficiary’s Parent (for itself and on behalf of the relevant Local Beneficiary) may serve written notice on the NTT Party’s<br> Parent requesting it to terminate (or to procure the termination of) the relevant Non-Transferring Tender. Upon receipt of such a notice, the NTT Party’s Parent shall as soon as reasonably practicable thereafter take such steps as are<br> necessary to terminate the relevant Non-Transferring Tender to the extent that to do so would not reasonably be expected to prejudice its or any member of its Group’s legitimate commercial interests or otherwise prejudice any of their<br> reputations.
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1.6	Where the Local Beneficiary’s Parent serves such a request, unless the NTT Party’s Parent (or a relevant member of its Group) does not terminate the relevant Non-Transferring Tender<br> for the reasons set out in paragraph 1.5 (Termination of Non-Transferring Tenders) of Part B (Non-Transferring Tenders) of this Schedule 1 (Transferring Contracts and Non-Transferring Tenders):
---	---
(a)	any and all Liabilities arising out of or in connection with such termination (including in respect of any early termination or similar fee or payment and all liabilities, costs,<br> expenses and payments suffered or reasonably incurred by the relevant NTT Party (or any other member of its Group) in procuring such termination (as applicable)) shall be for the account of the Local Beneficiary’s Parent, which shall<br> indemnify on demand, defend and hold harmless each of the Novartis Indemnitees or Sandoz Indemnitees (as applicable) against any and all such Liabilities; and
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(b)	the Local Beneficiary’s Parent (or relevant member of its Group) shall be solely responsible for putting in place its own arrangements in respect of the matters the subject of such<br> terminated Non-Transferring Tender and that no member of the NTT Party’s Parent Group shall have any responsibility for putting in place any such arrangements.
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1.7	Sandoz Shared Non-Transferring Tenders. With effect from the Separation Date until the termination or expiry of the relevant Sandoz Shared Non-Transferring Tender, in respect of<br> the Sandoz Tender Part and the Novartis Tender Part of each Sandoz Shared Non-Transferring Tender:
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(a)	subject to sub-paragraph (b) below, the provisions of paragraphs 1.1, 1.3 (Performance of Non-Transferring Tenders by Local Beneficiary) and<br> 1.4 (Performance of Non-Transferring Tenders by the relevant Group) of this Part B (Non-Transferring Tenders) of Schedule 1 (Transferring Contracts and Non-Transferring Tenders) shall apply mutatis mutandis; and
---	---
(b)	if the relevant member of the Novartis Group wishes to enforce any of its rights under the Novartis Tender Part (the Relevant<br> Tender Beneficiary) of any Sandoz Shared Non-Transferring Tender:
---	---
(i)	it shall give written notice to the relevant member of the Sandoz Group that is party to such Sandoz Shared Non-Transferring Tender (the Relevant Tender Party) containing reasonably specific details of any claim that it wishes to make to enforce its rights under the Novartis Tender Part (as applicable) of any Sandoz Shared Non-Transferring Tender,<br> including such Information as is available to it to allow such Relevant Tender Party (as applicable) to assess the merits of such claim and its amount; and
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(ii)	if such Sandoz Shared Non-Transferring Tender primarily relates to the Sandoz Business, Sandoz (or any member of the Sandoz Group) shall, subject to Novartis and each member of the<br> Novartis Group being indemnified by Sandoz against all Liabilities suffered or incurred by them to the extent arising out of or resulting from the conduct of any claim having been assumed by Sandoz (or any member of the Sandoz Group)<br> under this sub-paragraph (b), be entitled (at its election and sole expense) to take such action as it shall deem necessary to negotiate, make, assert, avoid, dispute, deny, defend, resist, appeal, compromise, contest, settle, discharge<br> or otherwise deal with any such claim and to have the conduct of any related proceedings, negotiations or appeals; provided, that Sandoz shall ensure that it and each member of the Sandoz Group shall:
(A)	not advance any argument against the counterparty under such Sandoz Shared Non-Transferring Tender or take any step that would reasonably be likely to have an adverse impact on<br> Novartis, any of its Affiliates or the Novartis Business;
---	---
(B)	take into account any reasonable requests of Novartis (or any member of the Novartis Group) in respect of such claim; and
---	---
(C)	keep Novartis regularly informed in respect of such claim; or
---	---
(iii)	if such Sandoz Shared Non-Transferring Tender primarily relates to the Novartis Business, Novartis (or any member of the Novartis Group) shall be entitled, subject to Sandoz and each<br> member of the Sandoz Group being indemnified by Novartis against all Liabilities suffered or incurred by them to the extent arising out of or resulting from the conduct of any claim having been assumed by Novartis (or any member of the<br> Novartis Group) under this sub-paragraph (iii), (at its election and sole expense) to take such action as it shall deem necessary to negotiate, make, assert, avoid, dispute, deny, defend, resist, appeal, compromise, contest, settle,<br> discharge or otherwise deal with any such claim and to have the conduct of any related proceedings, negotiations or appeals; provided, that Novartis shall ensure that it and each member of the Novartis Group shall:
---	---
(A)	not advance any argument against the counterparty under such Sandoz Shared Non-Transferring Tender or take any step that would reasonably be likely to have an adverse impact on Sandoz,<br> any of its Affiliates or the Sandoz Business;
---	---
(B)	take into account any reasonable requests of Sandoz (or any member of the Sandoz Group) in respect of such claim; and
---	---
(C)	keep Sandoz regularly informed in respect of such claim.
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1.8	Extensions of Tenders. Notwithstanding any other provision of this Agreement, the NTT Party shall not be under any obligation in respect of a Non-Transferring Tender after the<br> term identified in column G of the Non-Transferring Tenders List.
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1.9	New Tenders. Following the Separation Date, the Novartis Group shall not have any obligation to provide any support or assistance in respect of any new Tenders (including in<br> respect of any Delayed Business) which any member of the Sandoz Group wishes to enter into. Novartis shall consider in good faith any request from Sandoz to provide
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reasonable support in respect of any Tenders which Sandoz wishes to enter into in Chile or Ecuador following the Separation Date but prior to the relevant Delayed Closing Date,<br> provided that Novartis shall not be under any obligation to provide any such support.

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SCHEDULE 2

      DELAYED TERRITORIES

1. Definitions

1.1	Definitions. In this Schedule:

Accounting Standards means the most recent edition of the International Financial Reporting Standards as published by the International Accounting Standards Board at the time that any amount is to be calculated by reference to these standards;

Controlled Business Instruction has the meaning given in paragraph 2.4(a)(i) of this Schedule;

Controlled Delayed Business means the Delayed Businesses;

Delay Milestone means the milestone(s) set out next to the relevant Delayed Business in Appendix 1 to this Schedule;

Delay Milestone Satisfaction Month means the month in which the Delay Milestone(s) in respect of the Delayed Business has been satisfied;

Delayed Business Representative has the meaning given in paragraph 2.1 (Delayed Business Representatives) of this Schedule;

Delayed Businesses means the Delayed Novartis Transferring Assets and the Delayed Sandoz Transferring Assets listed in Appendix 1 to this Schedule

Delayed Closing means, in respect of a Delayed Business, completion of the transfer of legal ownership of that Delayed Business to the Delayed Transferee in accordance with this Schedule;

Delayed Closing Date has the meaning given in paragraph 1.7 (Delayed Closing Dates) of this Schedule and, in respect of the Novartis India EMB, shall mean the date of expiration or termination of the Commercial Agreement between Novartis Healthcare Private Limited and Sandoz Private Limited dated on or around the date of this Agreement;

Delayed Novartis Transferring Assets means the Novartis Transferring Assets listed in Part A of Appendix 1 to this Schedule;

Delayed Sandoz Transferring Assets means the Sandoz Transferring Assets listed in Part B and Part C of Appendix 1 to this Schedule;

Delayed Transfer Employees has the meaning given in the Employee Matters Agreement;

Delayed Transferee means each entity listed in column 4 of Appendix 1 to this Schedule;

Delayed Transferor means each entity listed in column 3 of Appendix 1 to this Schedule;

Egypt Share Transfer Agreements means the share sale and purchase agreements between (i) Novartis Pharma AG and Sandoz AG; (ii) Sameh Ahmed Sayed Khodeir and Sandoz Group AG and (iii) Hala Zaki Hashem and Sandoz Pharmaceuticals AG, in each case dated 25 May 2023 and in respect of the shares in Sandoz Egypt;

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Estimated Consideration has the meaning given in paragraph 1.11 (Local Separation Agreements) of this Schedule;

Final Consideration has the meaning given in Paragraph 1.11 (Local Separation Agreements) of this Schedule;

Instructing Personnel has the meaning given in paragraph 2.3 (Instructing Personnel) of this Schedule;

Longstop Date has the meaning given in paragraph 1.8 (Longstop Date) of this Schedule;

Novartis Group Policy has the meaning given in paragraph 2.12 (Policies and Procedures) of this Schedule;

Novartis India EMB means the balance sheet items recorded in the Novartis Reporting Segment of Sandoz Private Limited as at the Separation Date;

Parent Involvement Instruction has the meaning given in paragraph 2.5 (Parent Involvement Instruction) of this Schedule;

Sandoz Egypt means Sandoz Egypt Pharma S.A.E;

Sandoz Policy has the meaning given in paragraph 2.12(a) of this Schedule; and

Target Delayed Closing Date means the target Delayed Closing Dates that are set out for each Delayed Business in column 5 of Appendix 1 to this Schedule.

1.2	Obligations of Delayed Transferee. Any obligations of a Delayed Transferee in this Schedule shall also be obligations of the ultimate parent of the relevant Delayed Transferee.
1.3	No Transfer at Separation Date. The Parties agree that legal ownership of the Delayed Businesses shall not be transferred by the Delayed Transferor to the Delayed Transferee<br> at or prior to the Separation Date. Instead, the Delayed Businesses shall be operated, and the benefit and the burden of such Delayed Business shall be for the Delayed Transferee, with effect from the Separation Date on the terms set<br> out in this Schedule.
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1.4	Efforts to satisfy the Delay Milestones.
---	---
(a)	Each Party shall (and shall procure that its respective Affiliates shall) use all reasonable endeavors to procure the satisfaction of each Delay Milestone as soon as practicable after<br> the Separation Date and taking into account the relevant Target Delayed Closing Date.
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(b)	Each Party shall issue such Controlled Business Instructions as are reasonably required in connection with the satisfaction of the Delay Milestones and shall not issue any Controlled<br> Business Instructions that are inconsistent with the satisfaction of the Delay Milestones.
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1.5	Information Sharing. Each Party shall provide the other Party with any necessary Information reasonably required in connection with the satisfaction of the Delay Milestones,<br> including in connection with the notices, applications, submissions, reports or other instruments, documents, correspondence or filings required to be made to any Governmental Entity.
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1.6	Waiver and fulfilment of Delay Milestones. The Parties may, through mutual agreement in writing, waive any Delay Milestone, to the extent permissible under Applicable Law. Each Party shall notify<br> the other promptly upon becoming aware that any Delay Milestone has been achieved or will be delayed.
1.7	Delayed Closing Dates. Delayed Closing in respect of a Delayed Business shall occur at 12.01 am on the date which is the first Business Day of the month following the Delay<br> Milestone Satisfaction Month, except that:
---	---
(a)	where less than 15 days remain between achievement of the Delay Milestone(s) and the last Business Day of the Delay Milestone Satisfaction Month, Delayed Closing shall take place:
---	---
(i)	at 12.01am on the first Business Day of the second month following the Delay Milestone Satisfaction Month; or
---	---
(ii)	on such other date as may be agreed in writing between Novartis and Sandoz,
---	---

such date (in each case) being the Delayed Closing Date.

1.8	Longstop Date. If the Delay Milestones have not been satisfied, or waived in accordance with paragraph 1.6 (Waiver and fulfilment of Delay<br> Milestones), by the date that falls 24 months after the date of this Agreement or as otherwise specified in Appendix 1 (the Longstop Date), then:
(a)	to the maximum extent permitted under Applicable Law, the Delayed Transferor (or its relevant Affiliate), shall be permitted (and the Delayed Transferee hereby authorizes each of them)<br> to take such steps as the Delayed Transferor, acting reasonably, considers necessary or desirable to procure the satisfaction of the then outstanding Delay Milestones, including instructing the Delayed Transfer Employees to take such<br> steps as the Delayed Transferor, acting reasonably, considers necessary or desirable to procure the satisfaction of the then outstanding Delay Milestones; and
---	---
(b)	the Delayed Transferee shall provide such assistance and shall provide such services as the Delayed Transferor may reasonably request in connection any steps taken pursuant to<br> paragraph 1.8(a) above or otherwise in connection with the satisfaction of the Delay Milestones.
---	---
1.9	Alternative Arrangements. If the Delay Milestones have not been satisfied or waived in accordance with paragraph 1.6 (Waiver and fulfilment<br> of Delay Milestones) within six months after the Longstop Date, the Parties shall negotiate in good faith, and use Commercially Reasonable Efforts to agree (including through escalation to the Separation Committee, if<br> necessary), an alternative mechanism (acceptable to both Parties, acting reasonably) through which the relevant transferring assets and liabilities of the Delayed Businesses (or as many of them as possible) can be transferred to the<br> relevant Delayed Transferee or such other member of that Delayed Transferee’s group as soon as reasonably practicable (including a termination or modification of the Transitional Distribution Services Agreement with respect to the<br> Delayed Business).
---	---
1.10	Obligations on, prior to and following the Delayed Closing Dates.
---	---
(a)	On each Delayed Closing Date, the relevant Novartis Group entity shall deliver to the relevant Sandoz Group entity any Ancillary Agreements and Local Separation Agreements relating to<br> the relevant Delayed Business duly executed by the relevant
---	---

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member of the Novartis Group (if and to the extent that such Ancillary Agreements have not already been executed prior to such Delayed Closing Date).
(b)	On each Delayed Closing Date, the relevant Sandoz Group entity shall deliver to the relevant Novartis Group entity the Ancillary Agreements and Local Separation Agreements relating to<br> the relevant Delayed Business duly executed by the relevant member of the Sandoz Group (if and to the extent that such Ancillary Agreements have not already been executed prior to such Delayed Closing Date).
---	---
(c)	To the extent the relevant Delayed Business requires any support, services or supplies from the Separation Date until the date of the relevant Delayed Closing Date which are not<br> covered by the Transitional Distribution Services Agreement, the terms of the relevant Ancillary Agreements shall apply, provided that if any support, services or supplies are required from the Delayed Transferee or its Affiliates which<br> are not Services under the Transitional Services Agreement, the processes and calculation methodology set out in Clauses 11.1 (Service Charges) and Clause 12 (Tax)<br> of the Transitional Services Agreement (or any Local Services Agreement concluded thereunder) shall apply, and any charges shall be factored into the profit and loss reconciliation under Clause 7.2 (Transfer<br> of Economic Benefit Amount) of the Transitional Distribution Services Agreement; and
---	---
(d)	Following the relevant Delayed Closing Date, the terms of the relevant Ancillary Agreements shall apply, including but not limited to:
---	---
(i)	the provisions of the MA Transfer Agreement shall apply in respect of any Transferring Marketing Authorizations that are not transferred to the relevant Delayed Transferee on the<br> relevant Delayed Closing Date;
---	---
(ii)	the provisions of the Transitional Services Agreement shall apply in respect of any transitional services identified therein to be provided in respect of any Delayed Businesses; and
---	---
(iii)	for a period of six months following the relevant Delayed Closing Date, the Delayed Transferor shall provide such cooperation and assistance as is reasonably requested by the Delayed<br> Transferee to obtain any Permits required after the relevant Delayed Closing Date.
---	---
1.11	Local Separation Agreements.
---	---
(a)	The Parties agree that the Local Separation Agreements are in Agreed Form as at the date of this Agreement and that no amendments shall be permitted except to:
---	---
(i)	update any lists of specific assets and liabilities contained therein; and
---	---
(ii)	include an estimated consideration value (including any apportionment of such estimated consideration value) (the Estimated Consideration) which reflects the updated list of transferring assets and liabilities,
---	---

for each Delayed Business.

(b)	The Parties agree that a final consideration value (including any apportionment of such final consideration value) (the Final<br> Consideration) shall be agreed for each Delayed Business promptly (and in any event within 10 Business Days) following each Delayed Closing Date which reflects the final list of transferring assets and liabilities.

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(c)	The Parties further acknowledge and agree that both the Estimated Consideration and the Final Consideration for each Delayed Business shall be calculated by the Delayed Transferor and<br> agreed with the Delayed Transferee on the basis of:
(i)	the Delayed Transferee’s balance sheet forming part of the monthly management accounts for the relevant Delayed Business as at (or as formally reported shortly following) the relevant<br> Delayed Closing Date, with such accounts (x) being provided to the Delayed Transferor with sufficient detail to evidence the value of the transferring assets and liabilities and (y) to be prepared in accordance with the Accounting<br> Standards, the principles, policies, procedures, categorizations, measurement techniques, estimations and other methods and practices as applied in the audited financial statements of the Novartis Group for the financial year ended 31<br> December 2022 (except to the extent that the same are required to be changed to comply with any change in the Accounting Standards or otherwise) to the extent not covered by, and in a manner not inconsistent with, the Accounting<br> Standards; and
---	---
(ii)	the relevant transferring assets and liabilities of each Delayed Business being transferred at the local statutory book value, except in the case of any relevant Novartis Inventory or<br> Sandoz Inventory, which shall be transferred at the local statutory book value plus, if applicable, sales taxes and a mark-up of zero point five percent (0.5%), unless agreed otherwise between the Parties.
---	---

2. Management and Control of Delayed Businesses

2.1	Delayed Business Representatives. In order to cooperate in managing the implementation of the provisions set out in this Schedule, Novartis and Sandoz shall notify each other of<br> the identity of a senior member of management (the Delayed Business Representative) who shall be the primary point of contact in the event that there is any issue in connection<br> with the operation of the provisions in this Schedule. The Parties shall notify each other in writing of any changes to the contact details for the respective Delayed Business Representatives from time to time.
2.2	Control of Delayed Businesses. To the maximum extent permissible by Applicable Law, the Parties intend that, pursuant to this Schedule:
---	---
(a)	all management and control rights and powers that a Delayed Transferor and/or its Affiliates has in relation to a Controlled Delayed Business (including the right to determine the<br> commercial policy of and/or strategic commercial decisions relating to its operations, the making (or otherwise) of expenditure, investments, employee matters (including the hiring or dismissal of any Delayed Transfer Employee),<br> determining operating or financial policies of the Controlled Delayed Business, and/or developing the Controlled Delayed Business into new areas and undertaking activities not previously undertaken in relation to that Controlled Delayed<br> Business) shall transfer to the Delayed Transferee and/or its Affiliates; and
---	---
(b)	the economic benefit transfer provisions pursuant to paragraph 3.1 (Economic Benefit Transfer) and the Transitional Distribution Services<br> Agreement shall apply,
---	---

in each case, with effect from the Separation Date and, accordingly, that the relevant Controlled Delayed Businesses shall be consolidated into the consolidated financial statements of the Novartis Group (and not the Sandoz Group), if the Delayed Transferee is a member of the

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Novartis Group, or the Sandoz Group (and not the Novartis Group), if the Delayed Transferee is a member of the Sandoz Group, with effect therefrom in accordance with the relevant accounting policies as applied from the Separation Date.

2.3	Instructing Personnel. Each Delayed Transferor shall be entitled to rely on and act in accordance with Controlled Business Instructions (as defined below) from Representatives<br> of the Delayed Transferee (or its Affiliates) and/or the Delayed Transfer Employees (Instructing Personnel) without further verification and, subject to paragraph 2.7 (Fraud and Gross Negligence), each Delayed Transferee shall be responsible for all Liabilities resulting from any Controlled Business Instruction in accordance with paragraph 2.6 (Claims). Each Delayed Transferee shall procure that its Representatives instruct the Delayed Transfer Employees to perform any Services to be provided by the Service Provider that are conducted by such<br> Delayed Transfer Employee as set forth in Schedule 2 of the Transitional Distribution Services Agreement in accordance with the Transitional Distribution Services Agreement.
2.4	Conduct Pending Delayed Closing. From the Separation Date until the relevant Delayed Closing Date, in respect of any Controlled Delayed Business:
---	---
(a)	each relevant Delayed Transferor shall:
---	---
(i)	subject to paragraphs 1.4(a) and 1.8 above and paragraphs 2.11 (Delayed Transfer Employees) and 2.12 (Policies<br> and Procedures) below and to the maximum extent permitted by Applicable Law, act in accordance with any instructions provided to it by any of the Instructing Personnel in relation to any aspect of the management and operation of<br> that Controlled Delayed Business or any part of it (a Controlled Business Instruction), including the actions listed in paragraph 2.2 (Control<br> of Delayed Businesses); and
---	---
(ii)	except to the extent otherwise instructed by Instructing Personnel in accordance with this paragraph 2.4 (Conduct Pending Delayed Closing),<br> ensure that the Controlled Delayed Business is carried on in the ordinary course of business consistent with past practice in relation to that Controlled Delayed Business; and
---	---
(b)	each Delayed Transferee shall ensure that all Controlled Business Instructions are not in violation of Applicable Law or otherwise likely to materially prejudice the reputation of the<br> Delayed Transferor or its Group.
---	---
2.5	Parent Involvement Instruction. To the extent that the implementation of a Controlled Business Instruction requires an action or actions of a person employed by a member of<br> the Delayed Transferor or its Group but who is not a Delayed Transfer Employee engaged in a Controlled Delayed Business (whether because Applicable Law prevents such Controlled Business Instruction from being given directly to a Delayed<br> Transfer Employee or for any other reason) (a Parent Involvement Instruction), the Delayed Transferee and/or its Affiliates shall also provide the Controlled Business<br> Instruction, in writing (which may include email), to the other Party’s Delayed Business Representative, specifying (i) that it is a Parent Involvement Instruction; (ii) the actions that are required to be taken by such person; and<br> (iii) a reasonable time within which such actions are required to be taken. A Parent Involvement Instruction shall not be required in respect of any services to be provided by the Delayed Transferor or its Group under the Transitional<br> Distribution Services Agreement except that, any change in prices pursuant to clauses 3.2(a) to (d) of the Transitional Distribution Services Agreement shall require a Parent Involvement Instruction and shall not be implemented by a<br> Delayed Transfer Employee without such Parent Involvement Instruction.
---	---

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2.6	Claims. The provisions of clauses 15 (Indemnification) and 16 (Liability) of the<br> Transitional Distribution Services Agreement shall apply with respect to any Liabilities (to the extent that such Liabilities result directly or indirectly from any Controlled Delayed Business and/or from any Controlled Business<br> Instruction). A Delayed Transferee and/or any of its Affiliates shall not be entitled to make any claim for damages against a Delayed Transferor and/or any of its Affiliates under the terms of this Agreement or under the Transitional<br> Distribution Services Agreement otherwise than pursuant to the terms of paragraph 2.7 (Fraud and Gross Negligence).
2.7	Fraud and Gross Negligence. Each Delayed Transferor shall procure that neither it nor any of its Affiliates or their respective directors, officers or employees (other<br> than any Delayed Transfer Employee) shall act (or omit to act) fraudulently or with gross negligence or in willful default in connection with the implementation of any Controlled Business Instruction (including any Parent<br> Involvement Instructions), but it shall not be a breach of this paragraph (and shall accordingly not be acting fraudulently or with gross negligence or in willful default for the purposes of this paragraph or for the purposes of the<br> Transitional Distribution Services Agreement) to carry out any act, or fail to act, if to do so is:
---	---
(a)	required to implement any Controlled Business Instruction;
---	---
(b)	required to comply with Applicable Law;
---	---
(c)	required to implement or comply with the terms of this Agreement or any Ancillary Agreement;
---	---
(d)	taken in good faith to mitigate any other loss or damage to a Controlled Delayed Business; and/or
---	---
(e)	taken in good faith to mitigate any other loss or damage to the retained business of the Delayed Transferor.
---	---
2.8	Cooperation and Assistance. Each Delayed Transferee shall (or shall procure that its Affiliates shall) supply such assistance and access (including the supply of products, the<br> supply or services and access to that Party’s Transferring Records and Commercial Information, but excluding any access to Intellectual Property Rights (except as referred to in paragraph 2.9 (IP<br> Licence) below and/or under the terms of clause 13 (Intellectual Property and Data) of the Transitional Distribution Services Agreement)) as shall be reasonably necessary to allow each<br> Delayed Transferor and/or its relevant Affiliates to operate each Controlled Delayed Business in accordance with this Schedule.
---	---
2.9	IP Licence. Each Delayed Transferee shall (or shall procure that its Affiliates shall) grant each Delayed Transferor and/or its relevant Affiliates from the Separation Date<br> a non-exclusive, fully paid up, royalty free and sub-licensable license or sub-license (as applicable) to use, notwithstanding any other provision of this Agreement or any of the Ancillary Agreements, any Intellectual Property Rights<br> owned by or licensed to each Delayed Transferee and/or its relevant Affiliates under any Ancillary Agreement for the sole purpose of operating each Controlled Delayed Business in accordance with the provisions of this Schedule. This<br> license shall continue on a country-by-country basis, in relation to each Delayed Business, until the date on which that Delayed Business has been transferred by the Delayed Transferor to the Delayed Transferee in accordance with this<br> Schedule.
---	---
2.10	Funding of the Controlled Delayed Businesses. During the period between the Separation Date and the Delayed Closing Date, funding for the Controlled Delayed Businesses<br> shall continue to be provided by the Delayed Transferor or its relevant Affiliate, save that in the
---	---

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event that any Controlled Delayed Business requires funds (for the purposes of working capital, acquisitions, capital expenditure or otherwise) during such period outside of<br> the ordinary course of business and the Controlled Delayed Businesses does not have the required funding in place (including through any ordinary course cash pooling arrangements), the Parties shall agree the method for such<br> funding, provided that, if additional funding cannot be agreed by the Parties or there is otherwise a shortfall in funding requirements, such funds shall be promptly provided by the Delayed Transferee or one of its Affiliates.
2.11	Delayed Transfer Employees. The provisions of the Employee Matters Agreement shall apply in respect of the Delayed Transfer Employees.
---	---
2.12	Policies and Procedures. Between the Separation Date and each relevant Delayed Closing Date:
---	---
(a)	Sandoz shall procure that in relation to all matters in respect of which, as at the Separation Date, a Controlled Delayed Business operates under a Sandoz divisional conduct policy (a<br> Sandoz Policy), the Controlled Delayed Businesses shall continue to follow such Sandoz Policy;
---	---
(b)	Sandoz shall (following consultation with Novartis) be free to amend at its cost any Sandoz Policy, including in respect of the Controlled Delayed Businesses, provided that any amended<br> Sandoz Policy that applies to a Controlled Delayed Business shall be no less rigorous, and shall not require or authorize behavior that is more likely to expose the Parties to legal, regulatory and/or compliance risk, than the Sandoz<br> Policy in place at the Separation Date;
---	---
(c)	subject to paragraph 2.12(d) below, Sandoz shall procure that in relation to all matters in respect of which, as at the Separation Date, a Controlled Delayed Business operates under a<br> global Novartis Group policy (a Novartis Group Policy), the Controlled Delayed Businesses shall continue to follow such Novartis Group Policy;
---	---
(d)	Sandoz shall procure that where a Controlled Delayed Business currently operates under a Novartis Group Policy that is independently managed by Sandoz, the Controlled Delayed Business<br> shall continue to follow such Novartis Group Policy (under Sandoz’s management) until (except with respect to the Delayed Novartis Transferring Assets) such time as the Sandoz Group has a substantially similar (and no less rigorous)<br> policy in place, from which time the Controlled Delayed Business shall follow such new substantially similar (and no less rigorous) Sandoz Policy;
---	---
(e)	Sandoz shall monitor, and take steps to procure, the Controlled Delayed Businesses’ compliance with the Sandoz Policies and any Novartis Group Policy referred to in paragraph 2.12(d)<br> above in a manner no less rigorous (and which does not require or authorize behavior that is more likely to expose the Parties to legal, regulatory and/or compliance risk) than Sandoz does so at the Separation Date;
---	---
(f)	Novartis shall monitor, and take steps to procure, the Controlled Delayed Businesses’ compliance with any Novartis Group Policy other than those referred to in paragraph (d) above in a<br> manner no less rigorous (and which does not require or authorize behavior that is more likely to expose the parties to legal, regulatory and/or compliance risk) than Novartis does at the Separation Date; and
---	---
(g)	the provisions of clause 3.6 (Compliance with Applicable Law and Policies) of the Transitional Distribution Services Agreement shall apply in<br> connection with the policies and procedures to be applied in connection with the performance of the various
---	---

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obligations thereunder and, in the event of any conflict with this paragraph 2.12 or paragraph 2.13, shall override in that respect.
2.13	Subject to paragraph 2.12(g) but notwithstanding paragraphs 2.12(a) to 2.12(f), between the Separation Date and each relevant Delayed Closing Date, in respect of the policies<br> listed below, the relevant Sandoz Policy and Sandoz Group processes shall apply to the Controlled Delayed Businesses listed in Part B and Part C of Appendix 1 (and the Sandoz Group shall be responsible for any training, communication,<br> monitoring and oversight required under Applicable Law including in respect of Delayed Transfer Employees):
---	---
(a)	Code of Ethics;
---	---
(b)	Human Rights Commitment Statement;
---	---
(c)	Third Party Code;
---	---
(d)	Professional Practices (P3) Policy for the avoidance of doubt, not “Doing Business Ethically”;
---	---
(e)	Anti-Bribery Policy;
---	---
(f)	Conflict of Interest Policy;
---	---
(g)	SpeakUp Policy;
---	---
(h)	Non-Retaliation Policy;
---	---
(i)	Data Privacy Policy;
---	---
(j)	Transparency Reporting Guideline;
---	---
(k)	Enterprise Risk Management Handbook;
---	---
(l)	Emergency Management Handbook;
---	---
(m)	Business Continuity Handbook; and
---	---
(n)	Health, Safety and Environment Policy
---	---
2.14	Delayed Business accounting treatment. At the Separation Date:
---	---
(a)	the Sandoz Group (or the Novartis Group in respect of the Controlled Delayed Business in Poland and the Novartis India EMB) shall:
---	---
(i)	include in its balance sheet the relevant Controlled Delayed Business (and, in the case of the Novartis Group, the Novartis India EMB); and
---	---
(ii)	record the cash received under the Net Debt Implementation Plan in respect of such Controlled Delayed Business (and, in the case of the Novartis Group, the Novartis India EMB) as a<br> liability until the relevant Delayed Closing Date; and
---	---
(b)	the Novartis Group (or the Sandoz Group in respect of the Controlled Delayed Business in Poland and the Novartis India EMB) shall:
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(i)	exclude from its balance sheet the relevant Controlled Delayed Business (and, in the case of the Novartis Group, the Novartis India EMB); and
(ii)	record the cash paid under the Net Debt Implementation Plan in respect of such Controlled Delayed Business (and, in the case of the Novartis Group, the Novartis India EMB) as a<br> prepayment until the relevant Delayed Closing Date.
---	---

3. Economic Benefit Transfer

3.1	Economic Benefit Transfer. The provisions of the Transitional Distribution Services Agreement shall apply with respect to all economic benefit considerations relevant to the<br> Delayed Businesses.

4. Transfers to Third Party Distributors

4.1	Transfers to Third Party distributors. In respect of the Delayed Businesses listed in Part C of Appendix 1 to this Schedule, the Parties acknowledge that the Sandoz Transferring<br> Assets listed therein are intended to be transferred to a Third Party or as otherwise set out therein (each, a Delayed Third Party Transfer). Subject to paragraph 4.2 (Transfers to Third Party Distributors), the provisions of this Schedule shall apply with respect to such transfer notwithstanding that the relevant Delayed Transferee may be a Third Party. In<br> particular:
(a)	Sandoz shall procure compliance with any obligations of the relevant Delayed Transferee; and
---	---
(b)	the provisions of paragraph 2.2 (Control of Delayed Businesses) shall apply and the relevant Delayed Business shall be consolidated into the<br> consolidated financial statements of the Sandoz Group (and not the Novartis Group) with effect from the Separation Date in accordance with the relevant accounting policies as applied from the Separation Date.
---	---
4.2	Notwithstanding any other provision of this Agreement:
---	---
(a)	no member of the Novartis Group shall bear any additional Liability or obligations in respect of any Delayed Third Party Transfer than it would have if the relevant assets had been<br> transferred to the Sandoz Group under this Agreement;
---	---
(b)	the costs and expenses associated with any Delayed Third Party Transfer shall be borne by the Sandoz Group;
---	---
(c)	the Sandoz Group shall be responsible for all interactions with the Third Party unless Novartis expressly agrees otherwise, and/or a member of the Novartis Group is required to<br> interact with the relevant Third Party in order to effect the relevant transfer of the Sandoz Transferring Asset under Applicable Law. In particular, no member of the Novartis Group shall be required to enter into any agreement with any<br> Third Party in respect of any Delayed Third Party Transfer except to the extent required by Applicable Law; and
---	---
(d)	no member of the Novartis Group shall have any obligations in respect of any Delayed Third Party Transfer after the Longstop Date.
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5. Egypt Share Transfer

5.1	The Parties acknowledge that, as at the date of this Agreement, the transfer of the entire issued share capital in Sandoz Egypt pursuant to the Egypt Share Transfer Agreements (the Egypt Share Transfer) has not completed due to pending approval from (i) the pricing committee of the Egyptian Exchange (the EGX<br> Approval) and (ii) the trading committee of the Egyptian Financial Regulatory Authority (the FRA Approval and, together with the EGX Approval, the Egyptian Approvals).
5.2	The Parties agree to procure completion of the Egypt Share Transfer as soon as practicable following receipt of the Egyptian Approvals in accordance with the terms of the Egypt Share<br> Transfer Agreements.
---	---
5.3	If the Egypt Share Transfer has not been completed on or prior to the Separation Date, the Parties agree that from the Separation Date until completion of the Egypt Share Transfer:
---	---
(a)	paragraph 2.2(a) shall apply in respect of Sandoz Egypt, mutatis mutandis; and
---	---
(b)	the benefit and burden shall be for the Sandoz Group and Novartis shall not (and shall procure that no member of the Novartis Group shall) extract any value from Sandoz Egypt.
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Appendix 1

Part A

Delayed Novartis Transferring Assets

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Part B

Delayed Sandoz Transferring Assets to Sandoz Group

• 124 -

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Part C

Delayed Sandoz Transferring Assets to Third Party distributors

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SCHEDULE 3

      ENVIRONMENTAL LIABILITIES AND CLAIMS

• 126 -

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Exhibit 1

    Sandoz Entities and Novartis Transferring Entities

• 127 -

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Exhibit 2

    Separation Steps Plan

• 128 -

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Exhibit 3

    Distribution Steps Plan

• 129 -

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Exhibit 4

    Continuing Intercompany Arrangements

• 130 -

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Exhibit 5

    Transaction Advisory Fees

• 131 -

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Exhibit 6

    Biopharmaceutical Assets

• 132 -

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Exhibit 7

    Specific Liabilities

• 133 -

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Exhibit 8

    Non-Compete Products

• 134 -

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Exhibit 9

    Potential Divestment Cooperation

• 135 -

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Exhibit 10

    Microbial Strains

• 136 -

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Novartis AG:

/s/ Christian Diehl<br><br> <br>Name: Christian Diehl<br><br> <br>Title: Authorized Representative	/s/ Jonathan Emery<br><br> <br>Name: Jonathan Emery<br><br> <br>Title: Authorized Representative

Signature page of Separation and Distribution Agreement

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Sandoz Group AG:

/s/ Richard Saynor<br><br> <br>Name: Richard Saynor<br><br> <br>Title: Authorized Representative	/s/ Ingrid Sollerer<br><br> <br>Name: Ingrid Sollerer<br><br> <br>Title: Authorized Representative

Signature page of Separation and Distribution Agreement

EXHIBIT 4.2

30 September 2023

Execution version

	Tax Matters Agreement
dated	30 September 2023
between	Novartis AG<br><br> <br>Lichtstrasse 35<br><br> <br>4056 Basel<br><br> <br>Switzerland
	hereinafter: “Novartis”
and	Sandoz Group AG<br><br> <br>Suurstoffi 14<br><br> <br>6343 Rotkreuz<br><br> <br>Switzerland
	hereinafter: “Sandoz”
	each a “Party” and together the “Parties”
concerning	inter alia the allocation of tax liabilities between the Parties prior to, as a result of and subsequent to the Separation of the Sandoz Business.

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Table of Contents

Preamble	4
1	Definitions	4
---	---	---
2	Tax Indemnity	9
---	---	---
2.1	Scope	9
---	---	---
2.2	Indemnity by Sandoz	9
---	---	---
2.3	Indemnity by Novartis	10
---	---	---
2.4	Allocation of Transaction Taxes	10
---	---	---
2.5	Allocation of Transfer Taxes	11
---	---	---
2.6	Allocation of Restructuring Taxes	11
---	---	---
2.7	Allocation of Ordinary Taxes	11
---	---	---
2.8	Limitation on Indemnification of Ordinary Taxes	12
---	---	---
2.9	Refunds and Credits	13
---	---	---
3	Preparation and Filing of Tax Returns; Payment of Taxes	13
---	---	---
3.1	Preparation of Tax Returns	13
---	---	---
3.2	Preparation of Certain Transfer Pricing Documents	14
---	---	---
3.3	Method of Preparing Tax Returns	14
---	---	---
3.4	Information Packages	15
---	---	---
3.5	Payment of Taxes	15
---	---	---
3.6	Amendments	15
---	---	---
3.7	Carrybacks	16
---	---	---
3.8	Tax Attributes	16
---	---	---
4	Tax Matters Relating to the Transaction	16
---	---	---
4.1	Mutual Representations	16
---	---	---
4.2	Mutual Covenants	16
---	---	---
4.3	Restricted Actions	17
---	---	---
4.4	Consent To Take Certain Restricted Actions	17
---	---	---
4.5	Procedures Regarding Opinions and Rulings	18
---	---	---
4.6	Notice Actions	19
---	---	---
4.7	Reporting	19
---	---	---
5	Tax Matters relating to Other Agreements	19
---	---	---
5.1	Termination of Tax Sharing Agreements and Tax Groups	19
---	---	---
5.2	Amount of Indemnity Payments	20
---	---	---
5.3	Tax Treatment of Indemnity Payments	20
---	---	---
5.4	Treatment of Wrong Pocket Assets	20
---	---	---

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6	Procedural Matters	20
6.1	Tax Contests	20
---	---	---
6.2	Cooperation	22
---	---	---
6.3	Indemnification Claims and Payments	23
---	---	---
7	Miscellaneous	24
---	---	---
7.1	Incorporation	24
---	---	---
7.2	Dispute Resolution	24
---	---	---
7.3	Termination	24
---	---	---
7.4	Confidentiality	24
---	---	---
7.5	Assignability	25
---	---	---
7.6	Entire Agreement	25
---	---	---
7.7	Separation Agreement; Schedule A	25
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7.8	Headings	25
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7.9	Survival of Covenants	26
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7.10	Late Payments	26
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7.11	Interpretation	26
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EXHIBIT 1	29
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EXHIBIT 2	32
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EXHIBIT 3	33
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SCHEDULE A-1	35
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SCHEDULE A-2	37
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EXHIBIT A-2-A	41
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ANNEX I	48
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4

Preamble

A	Novartis is a company limited by shares (Aktiengesellschaft) incorporated under the laws of Switzerland and registered in the<br> Commercial Register of the Canton of Basel-Stadt, Switzerland, under the number CHE-103.867.266, and whose registered office is Lichtstrasse 35, 4056 Basel, Switzerland.
B	Sandoz is a company limited by shares (Aktiengesellschaft) incorporated under the laws of Switzerland and registered in the<br> Commercial Register of the Canton of Zug, Switzerland, under the number CHE-433.164.136, and whose registered office is Suurstoffi 14, 6343 Rotkreuz, Switzerland.
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C	Pursuant to the Separation and Distribution Agreement, dated on or around the date of this Agreement, concluded between Novartis and Sandoz (the “Separation Agreement”), the Parties have carried out or agreed to carry out the Separation and the Distribution.
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D	The Parties intend that the applicable steps of the Transaction as detailed in Exhibit 2 (Separation Steps Plan) and Exhibit 3 (Distribution<br> Steps Plan) to the Separation Agreement qualify for the Intended Tax Treatment.
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E	The Parties desire to provide for and agree upon the allocation of Taxes arising prior to, as a result of and subsequent to the Transaction and to provide for and agree upon certain other matters relating to<br> Taxes (the “Agreement”).
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Based on the above Preamble, which forms an integral part of this Agreement, the Parties agree as follows:

1	Definitions<br><br> <br>In this Agreement the following terms have the following meanings. Capitalized terms used but not defined in this Agreement have the meanings given to them in the Separation Agreement.
Agreement	has the meaning ascribed thereto in the Preamble.
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Capital Stock	means (a) all classes or series of stock or other equity interests in a Person and (b) all instruments properly treated as stock in such Person for applicable Tax purposes.
Code	means the U.S. Internal Revenue Code of 1986, as amended.
Default Interest Rate	means the prime lending rate as published in The Wall Street Journal minus two percent (2%).

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5

Delayed Interest	means any asset or entity that is not transferred on or prior to the Effective Time but at a later stage, as indicated in Schedule 2 (Delayed Territories)<br> to the Separation Agreement.
Determination	means (a) any final determination of liability in respect of a Tax that, under Applicable Law, is not subject to further appeal, review or modification through proceedings or otherwise<br> (including the expiration of a statute of limitations or period for the filing of claims for refunds, amended Tax Returns or appeals from adverse determinations or a final settlement, compromise or other agreement with the relevant Tax<br> Authority), including a “determination” as defined in Section 1313(a) of the Code or execution of an IRS Form 870AD or other similar form, or (b) the payment of Tax by a Party (or its Affiliate) that is responsible for payment of that Tax<br> under Applicable Law (the “Responsible Party”), or the execution of an IRS Form 870 or other similar form, with respect to any item disallowed or adjusted by a Tax Authority, as long as the Responsible<br> Party determines that no action should be taken to recoup that payment or file a claim for refund with respect to that item, and the other Party agrees.
Effective Time	means the completion of the Distribution.
Employment Tax	means any tax payable to a Tax Authority in respect of any employee (including any employment or payroll related taxes, taxes deductible from any amounts paid to an employee, taxes imposed<br> on an employer by reference to an employee or benefits provided to an employee, and any social security, social fund or similar charges or contributions, in each case in any jurisdiction) together with any interest, penalties, additional<br> amounts and additions related thereto.
Indemnity Payment	means an indemnity payment contemplated by any Transaction Document.
Intended Tax Treatment	means the U.S. Intended Tax Treatment and the Swiss Intended Tax Treatment.
IRS	means the U.S. Internal Revenue Service.
Notice Action	means any action designated as a “Notice Action” and occurring at any time during the period specified

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6

	for such action, in each case on any of the Schedules that comprise Schedule A.
Novartis	has the meaning ascribed to it in the Preamble.
Novartis Business	has the meaning attributed to it in Section 1 (Definitions and Interpretation) to the Separation Agreement.
Novartis Consolidated<br><br> Return	means any Tax Return for any consolidated, combined, unitary, affiliated, aggregate or similar group that includes (a) any member of the Novartis Group and (b) any member of the Sandoz<br> Group.
Novartis Indemnity Event	means any event designated as a “Novartis Indemnity Event” on any of the Schedules that comprise Schedule A.
Novartis Separate Return	means any Tax Return that (a) includes any member of the Novartis Group and (b) does not include any member of the Sandoz Group.
Novartis Tax Return	designates Novartis Separate Returns together with Novartis Consolidated Returns.
OECD	means the Organization for Economic Cooperation and Development.
Opinion	means the written opinion of Cravath, Swaine & Moore LLP that, subject to the accuracy of and compliance with the relevant Representations, the Distribution should qualify for its U.S.<br> Intended Tax Treatment.
Ordinary Taxes	means Taxes other than (a) Transaction Taxes, (b) Restructuring Taxes and (c) Transfer Taxes.
Parties	has the meaning ascribed thereto in the Preamble.
Post-Separation Period	means, except as otherwise provided in any of the Schedules that comprise Schedule A, any taxable period (or portion thereof) beginning after the Separation Date.
Pre-Separation Period	means, except as otherwise provided in any of the Schedules that comprise Schedule A, any taxable period (or portion thereof) ending on or before the Separation Date.
Proposed Acquisition<br><br> Transaction	has the meaning ascribed thereto on Schedule A-2.

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7

Refund Recipient	has the meaning ascribed thereto in Section 2.9.
Regulations	means the Treasury regulations promulgated under the Code or any successor Treasury regulations.
Representations	means representations made by the Parties and their Affiliates that serve as a basis for the Transaction Rulings and Opinion.
Restricted Action	means any action designated as a “Restricted Action” and occurring at any time during the period specified for such action, in each case on any of<br> the Schedules that comprise Schedule A.
Restructurings	means the transactions described in Exhibit 2 (Separation Steps Plan) to the Separation Agreement.
Restructuring Taxes	means Taxes (other than Transfer Taxes and Transaction Taxes) arising out of the Transaction set forth in Exhibit 2 (Separation Steps Plan) to the<br> Separation Agreement.
Ruling	means any ruling (including any supplemental ruling) issued by a Tax Authority concerning the Transaction, whether granted prior to, on or after the date hereof.
Sandoz	has the meaning ascribed thereto in the Preamble.
Sandoz Business	has the meaning ascribed to it in Section 1 (Definitions and Interpretation) to the Separation Agreement.
Sandoz Indemnity Event	means any event designated as a “Sandoz Indemnity Event” on any of the Schedules that comprise Schedule A.
Sandoz Tax Return	means any Tax Return that (a) includes any member of the Sandoz Group and (b) does not include any member of the Novartis Group.
Satisfactory Guidance	has the meaning ascribed thereto in Section 4.4b).
Separation Agreement	has the meaning ascribed thereto in the Preamble.
Swiss Intended Tax<br><br> Treatment	has the meaning ascribed thereto on Schedule A-1.
Swiss Tax Rulings	has the meaning ascribed thereto on Schedule A-1.

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8

Tax	means any and all taxes, imposts, duties, withholdings, assessments, levies, fees, duties or other charges imposed, collected or withheld by a Governmental Entity, in each case in the<br> nature of a tax (including Employment Taxes), whether direct or indirect and whether the relevant Party’s own or secondary liability, and together with any interest, penalties, additional amounts and additions related thereto, including, for<br> the avoidance of doubt, any penalties or charges resulting from any reporting obligations under EU Council Directive 2011/16 (“DAC6”).
Tax Advisor	means a Tax counsel or accountant of recognized national standing in the relevant jurisdiction.
Tax Authority	means any Governmental Entity charged with the determination, collection or imposition of Taxes.
Tax Benefit	means any Tax refund or other reduction of Taxes paid or currently payable as a result of a credit or offset or the Tax effect of any item of loss, deduction or credit or any other item<br> (including increases in Tax basis).
Tax Contest	means an audit, review, examination, claim, enquiry, investigation or other administrative or judicial proceeding, in each case by any Tax Authority.
Tax Return	means (i) any return, declaration, statement, report, claim, election, schedule, form or information return filed or required or permitted to be filed with any Tax Authority relating to<br> Taxes, including any supplement, schedule or attachment thereto and any amendment thereof, as well as any reporting in relation to a cross-border tax arrangement pursuant to DAC6 and (ii) any Transfer Pricing Document.
Tax Return Preparer	has the meaning ascribed thereto in Section 3.1.
Transaction Filing	means any filing designated as a “Transaction Filing” on any of the Schedules that comprise Schedule A.
Transaction Rulings	means the U.S. Tax Ruling and the Swiss Tax Rulings.
Transaction Tax Contest	means a Tax Contest with the purpose or effect of determining or redetermining Transaction Taxes.
Transaction Taxes	means all Taxes resulting from the failure of any applicable step of the Transaction to qualify for its Intended Tax Treatment and all reasonable out-of-

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9

	pocket legal, accounting and other advisory and court fees incurred in connection with liability for such Taxes, in each case, whether imposed on a Party or any of its Affiliates or on a<br> Third Party.
Transaction	means the Restructurings and the Distribution.
Transfer Pricing Document	means any return, declaration, statement, report, claim, schedule, form or information return related to transfer pricing reporting and documentation (whether or not required or permitted<br> to be filed with any Tax Authority), including country-by-country reporting and documentation of the type described in the Base Erosion and Profit Shifting Action 13 adopted by the OECD.
Transfer Taxes	means any sales, use, value-added, stamp, duty, excise, documentary, filing, recording, registration or other transfer Taxes incurred as a result of the Transaction.
Unqualified Tax Opinion	has the meaning ascribed thereto in Section 4.4c) of the Agreement.
U.S. Intended Tax<br><br> Treatment	has the meaning ascribed thereto on Schedule A-2.
U.S. Tax Ruling	has the meaning ascribed thereto on Schedule A-2.
VAT	means value added tax.
Wrong Pocket Asset	means any property, right or asset that is subject to Section 20 (Wrong Pockets) of the Separation Agreement.
2	Tax Indemnity
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2.1	Scope<br><br> <br>This Section 2 regulates the allocation of Taxes between the Parties as well as the possible indemnities resulting therefrom, with the exception of Employment Taxes. For the avoidance of doubt, the allocation and indemnification<br> obligations of the Parties in respect of Employment Taxes shall be governed exclusively by the Employment Matters Agreement.
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2.2	Indemnity by Sandoz<br><br> <br>From and after the Effective Time, Sandoz shall be liable for, and shall indemnify and hold harmless Novartis and its Affiliates from the following, without duplication:
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10

a)	Transaction Taxes allocated to Sandoz under Section 2.4;
b)	Transfer Taxes allocated to Sandoz under Section 2.5;
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c)	Restructuring Taxes allocated to Sandoz under Section 2.6; and
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d)	Ordinary Taxes allocated to Sandoz under Section 2.7.
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2.3	Indemnity by Novartis<br><br> <br>From and after the Effective Time, Novartis shall be liable for, and shall indemnify and hold harmless Sandoz and its Affiliates from the following, without duplication:
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a)	Transaction Taxes allocated to Novartis under Section 2.4;
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b)	Transfer Taxes allocated to Novartis under Section 2.5;
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c)	Restructuring Taxes allocated to Novartis under Section 2.6; and
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d)	Ordinary Taxes allocated to Novartis under Section 2.7.
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2.4	Allocation of Transaction Taxes
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a)	Transaction Taxes shall be allocated to Sandoz to the extent such Transaction Taxes result from:
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i)	the failure of any Representation or any representation herein made by Sandoz or any of its Affiliates to be true, correct and complete when made;
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ii)	the breach by Sandoz or any of its Affiliates of any covenant or agreement contained in any Transaction Document (including those contained in Section 4.3, irrespective of any consent<br> given by Novartis pursuant to Section 4.4), Transaction Ruling or Opinion;
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iii)	any Sandoz Indemnity Event; or
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iv)	any other action or failure to act by Sandoz or any of its Affiliates after the Effective Time that it knows or reasonably should expect, after consultation with a Tax Advisor, could give<br> rise to Transaction Taxes, except to the extent such action or failure to act is otherwise expressly required or permitted by the Transaction Documents (other than under Section 4.4).
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b)	Transaction Taxes shall be allocated to Novartis to the extent such Transaction Taxes result from:
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i)	the failure of any Representation or any representation herein made by Novartis or any of its Affiliates to be true, correct and complete when made, except any Representation that is<br> substantially the same as any Representation made by Sandoz or any of its Affiliates;
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11

ii)	the breach by Novartis or any of its Affiliates of any covenant or agreement contained in any Transaction Document, Transaction Ruling or Opinion;
iii)	any Novartis Indemnity Event; or
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iv)	any other action or failure to act by Novartis or any of its Affiliates after the Effective Time that it knows or reasonably should expect, after consultation with a Tax Advisor, could<br> give rise to Transaction Taxes, except to the extent such action or failure to act is otherwise expressly required or permitted by the Transaction Documents.
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c)	Notwithstanding Section 2.4a) or b), if a Transaction Tax would otherwise be allocated under both Sections 2.4a) and b), then such Transaction Tax shall be allocated between the Parties in proportion to the relative degrees of fault of<br> the members of the Sandoz Group (and such members’ Affiliates and, if applicable, counterparties) and the members of the Novartis Group (and such members’ Affiliates and, if applicable, counterparties).
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d)	If a Transaction Tax is not otherwise allocated under this Section 2.4, then such Transaction Tax shall be allocated to Novartis.
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e)	Notwithstanding any other provision of this Agreement, if any applicable step of the Transaction fails to qualify for its Intended Tax Treatment resulting in Transaction Taxes being incurred and, as a result of such Transaction<br> Taxes, any member of the Novartis Group or the Sandoz Group actually realizes a Tax Benefit, then the Parties shall make appropriate payments to share the Tax Benefit in the same manner as the Taxes were allocated pursuant to this<br> Agreement (provided that no Tax shall be considered to be allocated to a Party for purposes of computing a payment under this Section 2.4e) to the extent such other Party owes but has not yet paid any amount in respect of such Tax).
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2.5	Allocation of Transfer Taxes<br><br> <br>Transfer Taxes that are value-added Taxes of the Sandoz Group shall be allocated to Sandoz and of the Novartis Group shall be allocated to Novartis. All Transfer Taxes other than value-added Taxes shall be allocated to Novartis.
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2.6	Allocation of Restructuring Taxes<br><br> <br>Restructuring Taxes shall be allocated as follows:
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a)	Restructuring Taxes resulting from capital gains realised at the level of any member of the Sandoz Group shall be allocated to Sandoz; and
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b)	All other Restructuring Taxes shall be allocated to Novartis.
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2.7	Allocation of Ordinary Taxes
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a)	Except as otherwise provided in this Section 2.7, Ordinary Taxes shall be allocated as follows, for any Pre-Separation Period and Post-Separation Period:
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12

i)	Ordinary Taxes attributable to the Sandoz Business, and the share of the Sandoz Group in the Taxes on Novartis Consolidated Returns, as outlined in Exhibit 1, shall be allocated to<br> Sandoz; and
ii)	All other Ordinary Taxes of the Novartis Group that are not otherwise specifically allocated under Section 2.7a)i) shall be allocated to Novartis.
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Notwithstanding (i) and (ii) above, Ordinary Taxes relating to Delayed Interests shall be allocated to Novartis and Sandoz respectively, pursuant to the Transitional Distribution Services Agreement, except where unforeseeable changes in tax laws or circumstances would have a material impact exceeding $100’000 compared to the amount of Taxes applied according to the Transitional Distribution Services Agreement for Novartis or Sandoz in which case the additional Ordinary Taxes resulting from such an unforeseeable event may be allocated to Sandoz, respectively Novartis.

In the event that the allocation of Ordinary Taxes between the Parties cannot be made pursuant to Section 2.7, the Parties shall refer to the methodology set forth in Exhibit 2 hereto to determine whether Ordinary Taxes of the Novartis Group and Sandoz Group are attributable to the Sandoz Group or Sandoz Business. Novartis and Sandoz shall, in any case, use Commercially Reasonable Efforts to cooperate in determining whether Ordinary Taxes of the Novartis Group and Sandoz Group are attributable to the Sandoz Business.

b)	Notwithstanding the foregoing, Ordinary Taxes of the Novartis Group and Sandoz Group for Post-Separation Periods that are attributable to any Wrong Pocket Asset shall be allocated in accordance with Section 2.7a)i) until such time that<br> such Wrong Pocket Asset is transferred to its ultimate owner in accordance with the Separation Agreement, and such Taxes shall be determined on a “with and without” basis.
c)	With respect to each Sandoz Transferring Entity, Novartis shall cause the applicable Sandoz Share Transferor to indemnify the applicable Sandoz Share Transferee for any Ordinary Taxes allocated to Novartis in connection with such<br> Sandoz Transferring Entity under this Section 2.7 that Novartis would be required to indemnify pursuant to Section 2.3 (subject to the limitations in Section 2.8) and vice versa.
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2.8	Limitation on Indemnification of Ordinary Taxes<br><br> <br>Notwithstanding any other provision in this Agreement to the contrary:
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a)	Neither Novartis nor Sandoz shall be required to indemnify or hold harmless Sandoz and its Affiliates or Novartis and its Affiliates for any Ordinary Taxes pursuant to Section 2.2 or Section 2.3, respectively, in each case for any<br> individual item of Ordinary Taxes that does not exceed $100,000. For the avoidance of doubt, an individual item of Tax is a single type of Tax imposed by a single Tax Authority with respect to a single Tax assessment.
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b)	The provisions of Section 2.8a) shall not apply to: (i) Ordinary Taxes attributable to any Wrong Pocket Asset or (ii) Ordinary Taxes which are not yet due and payable (taking into account any extensions) as of the Separation Date.
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2.9	Refunds and Credits<br><br> <br>Subject to and in accordance with Schedule A, if Novartis, Sandoz or any of their respective Affiliates receives a refund of a Tax for which the other Party is liable (in whole or in part) under this Agreement (a “Refund Recipient”), such Refund Recipient shall pay to the other Party or any of its Affiliates designated by the Parties in a commercially reasonable manner as the relevant recipient of such payment<br> , within 30 days of receipt of such refund, an amount equal to the product of (a) such refund, net of any Taxes and reasonable out-of-pocket expenses incurred in connection with the receipt of such refund, multiplied by (b) the<br> percentage of such Tax for which the other Party is liable under this Agreement (reduced to the extent such other Party owes but has not yet paid any amount in respect of such Tax under this Agreement). If a Party would be a Refund<br> Recipient but for the fact that it elected to apply a refund to which it would otherwise have been entitled against a Tax liability arising in a subsequent taxable period, then for purposes of the immediately preceding sentence, such<br> Party shall be treated as a Refund Recipient and the economic benefit of so applying the refund shall be treated as a refund, and such Party shall be treated as receiving such refund on the due date of the Tax Return to which such<br> refund is applied to reduce the subsequent Tax liability. If a Refund Recipient pays an amount to the other Party or any of its Affiliates designated as the recipient of such payment in respect of a refund under this Section 2.9 and<br> such refund is subsequently disallowed or reduced by the relevant Taxing Authority, then such other Party or recipient of such payment shall repay such amount (or the relevant portion thereof, determined in accordance with the<br> principles of this Section 2.9) to the Refund Recipient, net of any Taxes and reasonable out-of-pocket expenses incurred in connection with the receipt and repayment of such amount.
3	Preparation and Filing of Tax Returns; Payment of Taxes
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3.1	Preparation of Tax Returns
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a)	With respect to any taxable period ending on or before December 31, 2022, and where the Tax Return filing has not been completed before the Separation Date, and as regards Tax Returns relating to VAT and Employment Taxes, for periods up<br> to the Separation Date, Sandoz or Novartis shall prepare and timely file, or cause to be prepared and timely filed, any Tax Return, as outlined in Exhibit 1.
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b)	With respect to any taxable period ending on or after January 1, 2023, and as regards Tax Returns relating to VAT, for periods after the Separation Date:
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i)	Novartis shall prepare and file, or cause to be prepared and filed, all Novartis Tax Returns; and
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ii)	Sandoz shall prepare and file, or cause to be prepared and filed, all Sandoz Tax Returns.
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The Party required to prepare (or cause to be prepared) any Tax Return under this Section 3.1 or Section 3.2 of this Agreement shall be referred to as the “Tax Return Preparer” with respect to such Tax Return. The Party that is the Tax Return Preparer with respect to

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a Tax Return shall be responsible for all costs and expenses associated with the preparation and filing of such Tax Return pursuant to this Section 3.1 or Section 3.2, as applicable.

3.2	Preparation of Certain Transfer Pricing Documents
a)	Notwithstanding anything to the contrary in Section 3.1:
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i)	Novartis shall prepare and timely file, or cause to be prepared and timely filed, all Transfer Pricing Documents relating to the taxable period ending on or before December 31, 2022; and
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ii)	Sandoz shall prepare and timely file, or cause to be prepared and timely filed, all Transfer Pricing Documents relating to the Sandoz Group with respect to any taxable period ending on or<br> after January 1, 2023.
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b)	For the avoidance of doubt, any Transfer Pricing Document prepared by Sandoz pursuant to Section 3.2a)ii) shall be a Tax Return subject to Sections 3.3a)-c) of this Agreement for which Sandoz shall be the Tax Return Preparer and<br> Novartis shall be the other Party. Pursuant to Section 3.3a), and for a period of 2 years following the Separation Date, Sandoz shall notify Novartis of changes to the Transfer Pricing Documents prepared in accordance with this Section<br> 3.2, other than changes already discussed and agreed between the Parties prior to the Separation in writing, which are not based on a change of functions and may result in a conflict with any Transfer Pricing Documents prepared by<br> Novartis. For the avoidance of doubt, Sandoz shall not be required to notify changes to its Transfer Pricing Documents which would result from changes in applicable laws.
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c)	Sandoz shall not implement during a 2-year period after the Effective Time any change to its transfer prices that could reasonably be expected to retroactively and adversely impact Novartis or any entity the Taxes of which are<br> allocated to Novartis under this Agreement, without prior notification of Novartis of such change. For the avoidance of doubt, changes to Sandoz’ transfer prices which are agreed in writing before the Separation between the Parties<br> shall not fall under the present Section 3.2c).
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3.3	Method of Preparing Tax Returns<br><br> <br>To the extent that the Tax Return Preparer is required to prepare a Tax Return that is described in Section 3.1a) or that directly relates to (i) Taxes or related amounts for which the other Party is responsible under this Agreement,<br> (ii) any Tax Benefit or Tax attribute to which such other Party is entitled under this Agreement or (iii) matters affecting a Tax Return that such other Party is required to prepare (or cause to be prepared) under Section 3.1 or Section<br> 3.2:
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a)	the Tax Return Preparer shall prepare (or cause to be prepared) such Tax Return or the relevant portions thereof on a basis consistent with past practice (except as required by Applicable Law or to comply with a position taken by a Tax<br> Authority following a Tax Contest, as required to adjust to circumstances arising out of the Transaction or as determined in good faith by the Tax Return Preparer), and the Tax Return Preparer shall notify the other Party of any such<br> portions not prepared on a basis consistent with past practice.
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15

b)	the Tax Return Preparer shall, upon request, provide the other Party access to such Tax Return or relevant portions thereof, all related workpapers and such additional information as the other Party may reasonably request at least<br> thirty (30) days prior to the due date (including any valid extensions) for filing such Tax Return and shall consider in good faith such other Party’s reasonable comments; and
c)	the Parties shall attempt in good faith to resolve any issues arising out of the review of such Tax Return.
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3.4	Information Packages<br><br> <br>Each Party (a) shall provide to the other Party (in the format reasonably determined by the other Party) all information and assistance requested by the other Party, at such Party’s costs, as reasonably necessary, consistent with the<br> practices of the Novartis Group and Sandoz Group in preparing Tax Returns as of the date hereof, to prepare any Tax Return required to be prepared under Section 3.1 or Section 3.2 on a timely basis and (b) in so providing such<br> information and assistance, shall use any systems and third-party service providers as are consistent with such practices.
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3.5	Payment of Taxes<br><br> <br>In addition to its obligations under Section 3.3, the Tax Return Preparer shall, no later than five (5) Business Days prior to the due date (including any valid extensions) for filing any Tax Return that it is required to prepare or<br> cause to be prepared under Section 3.1, notify the other Party of any amount (including any portion of the total) shown as due on such Tax Return for which such other Party must indemnify the Tax Return Preparer under this Agreement,<br> together with back-up calculations (including any applicable back-up calculations described on any of the Schedules that comprise Schedule A). Such other Party shall pay such amount to the Tax Return Preparer no later than the due date<br> (including any valid extensions) for filing such Tax Return. The Tax Return Preparer shall pay (or cause the responsible party to pay) to the relevant Tax Authority any Taxes shown as due on any Tax Returns that it is required to<br> prepare or cause to be prepared under Section 3.1, without regard to whether it has received the payment described in the immediately preceding sentence. The obligation to make payments to the relevant Tax Authority or failure to give<br> notice under this Section 3.5 shall not affect the Tax Return Preparer’s right, if any, to be indemnified or otherwise receive payments with respect to such Taxes under this Agreement, except to the extent that any such failure to give<br> notice has actually prejudiced the other Party.
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3.6	Amendments<br><br> <br>Each Party shall not (and shall cause its Affiliates not to) amend, withdraw, revoke or otherwise alter any Tax Return if doing so would reasonably be expected to (a) increase Taxes or related amounts for which the other Party is<br> responsible under this Agreement or (b) decrease any Tax Benefit to which such other Party is entitled under this Agreement, in each case without the prior written consent of the other Party (not to be unreasonably withheld, conditioned<br> or delayed).
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3.7	Carrybacks<br><br> <br>With respect to any member of the Novartis Group or Sandoz Group that was a member of a consolidated, combined, unitary, affiliated, aggregate or similar group that included any member of the Novartis Group in any Pre-Separation Period,<br> Novartis, respectively Sandoz, shall, and shall cause its Affiliates, to make any available elections to waive the right to carry back any Tax attributes of such member of the Novartis Group or Sandoz Group from any Post-Separation<br> Period to any such Pre-Separation Period of such member and shall not make any affirmative election to claim any such carryback.
3.8	Tax Attributes
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a)	Novartis shall inform Sandoz in writing of the portion, if any, of any Tax attributes relating to any Pre-Separation Period which Novartis determines in good faith shall be allocated to Sandoz after the Separation Date. Novartis or<br> Sandoz, shall, as the relevant Tax Return Preparer, prepare all Tax Returns in accordance with such written notice.
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b)	Each Party shall indemnify the other Party for the use of any Tax attribute by it or any of its respective Affiliates in the course of any Post-Separation Period, which is attributable to or has arisen from the business carried out<br> by such other Party.
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For the avoidance of doubt, the provisions of this Section 3 shall also apply with respect to Employment Taxes, provided and to the extent, that the Employee Matters Agreement declares them applicable.

4	Tax Matters Relating to the Transaction
4.1	Mutual Representations<br><br> <br>As of the date of this Agreement, each Party represents that:
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a)	All Representations made by it or its Affiliates are true, correct and complete; and
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b)	It knows of no fact, and has no plan or intention to take or fail to take any action, which fact, action or failure to act it knows or reasonably should expect, after consultation with a Tax Advisor, (i) is inconsistent with the<br> Representations given and other information provided by it or its Affiliates in connection with any Transaction Ruling or Opinion, (ii) is inconsistent with the qualification of any applicable step of the Transaction for its Intended Tax<br> Treatment or (iii) could adversely affect the issuance, effectiveness or validity of any Transaction Ruling or Opinion.
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4.2	Mutual Covenants
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a)	Each Party shall use its reasonable best efforts to cause the Opinion to be issued, including by executing letters containing reasonable and customary representations that are true, correct and complete on behalf of itself and its<br> Affiliates.
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b)	Except as otherwise expressly required or permitted by the Transaction Documents, after the Effective Time neither Party shall take or fail to take, or cause or permit its respective Affiliates to take or fail to take, any action, if<br> such action or failure to act (i) would be inconsistent with the Representations given and other information provided by it or its Affiliates in connection with any Transaction Ruling or Opinion, (ii) would be inconsistent with the<br> qualification of any applicable step of the Transactions for its Intended Tax Treatment or (iii) could adversely affect the issuance, effectiveness or validity of any Transaction Ruling or Opinion.
4.3	Restricted Actions
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a)	Subject to Section 4.4, Sandoz shall not (and shall not cause or permit any of its Affiliates to), in any transaction or series of transactions, engage in any Restricted Action;
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b)	If Sandoz merges or consolidates with another Person to form a new Person or another Person acquires a majority of the Capital Stock of Sandoz, references in this Agreement to Sandoz shall also include that new Person or that acquiring<br> Person, as applicable, and references to Capital Stock of Sandoz shall also include the Capital Stock of that new Person or that acquiring Person, as applicable, and always to the extent permitted by applicable law.
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4.4	Consent To Take Certain Restricted Actions
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a)	Sandoz may (and may cause or permit its Affiliates to) take an action otherwise prohibited under Section 4.3 if, prior to taking such action, Novartis provides consent. Novartis may not withhold its consent if Sandoz has provided<br> Novartis with Satisfactory Guidance with respect to such action. In all other cases, Novartis’s consent shall be at its sole discretion.
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b)	For purposes of this Agreement, “Satisfactory Guidance” means either a Ruling or an Unqualified Tax Opinion, at the election of Sandoz, in either case satisfactory to Novartis in its sole<br> discretion in both form and substance, including with respect to any underlying assumptions or representations and any legal analysis contained therein, and concluding that the proposed action will not cause any applicable step of the<br> Transactions to fail to qualify for its Intended Tax Treatment.
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c)	For purposes of this Agreement, “Unqualified Tax Opinion” means an unqualified “will” opinion of a Tax Advisor, reasonably acceptable to Novartis, that permits reliance by Novartis. The Tax<br> Advisor, in issuing its opinion, shall be permitted to rely on the validity and correctness, as of the date given, of any previously issued Opinion, Unqualified Tax Opinions and Rulings, unless such reliance would be unreasonable under<br> the circumstances, and shall assume that the applicable steps of the Transactions would have qualified for the Intended Tax Treatment if the action in question did not occur.
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4.5	Procedures Regarding Opinions and Rulings
4.5.1	Satisfactory Guidance<br><br> <br>Subject to Section 4.5.5, if Sandoz notifies Novartis that it desires to take a Restricted Action and seeks Satisfactory Guidance for purposes of Section 4.4, Novartis, at the request of Sandoz, shall use Commercially Reasonable<br> Efforts to expeditiously obtain, or assist Sandoz in obtaining, such Satisfactory Guidance. Notwithstanding the foregoing, Novartis shall not be required to take any action pursuant to this Section 4.5.1 if, upon request, Sandoz fails<br> to certify that all information and representations relating to Sandoz or any of its Affiliates in the relevant documents are true, correct and complete or fails to obtain certification from any counterparty to any Proposed<br> Acquisition Transaction or to any other Restricted Action involving a counterparty that all information and representations relating to such counterparty in the relevant documents are true, correct and complete. Sandoz shall reimburse<br> Novartis for all reasonable out-of-pocket costs and expenses incurred by Novartis or any of its Affiliates in obtaining Satisfactory Guidance within twenty (20) days after receiving an invoice from Novartis therefor.
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4.5.2	Other Rulings and Opinions Relating to the Transaction<br><br> <br>Subject to Section 4.5.1, Novartis shall have the right to obtain a Ruling, any other guidance from any Tax Authority or an opinion of Tax counsel or an accounting firm relating to the Transaction at any time in Novartis’s sole<br> discretion. Sandoz, at the request of Novartis, shall use Commercially Reasonable Efforts to expeditiously obtain, or assist Novartis in obtaining, any such Ruling, other guidance or opinion; provided, however, that Sandoz shall not<br> be required to make any representation or covenant that it does not reasonably believe is (and will continue to be) true, accurate and consistent with historical facts. Novartis shall reimburse Sandoz for all reasonable out-of-pocket<br> costs and expenses incurred by Sandoz or any of its Affiliates in obtaining any such Ruling, other guidance or opinion requested by Novartis within twenty (20) days after receiving an invoice from Sandoz therefor.
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4.5.3	Participation Rights<br><br> <br>If either Party seeks to obtain a Ruling pursuant to Section 4.5.1 or a Ruling (or any other guidance from any Tax Authority relating to the Transaction) that can reasonably be expected to affect the other Party’s liabilities under<br> this Agreement, then such Party shall at its own costs (i) keep the other Party informed of all material actions taken or proposed to be taken in that regard, (ii) reasonably in advance of the submission of any ruling request, provide<br> the other Party with a draft thereof, consider the other Party’s comments on such draft and provide the other Party with a final copy thereof and (iii) provide the other Party with notice reasonably in advance of, and (subject to the<br> approval of the applicable Tax Authority) permit the other Party to attend, any formally scheduled meetings with the applicable Tax Authority that relate to such Ruling or such other guidance.
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4.5.4	Pre-Separation Rulings<br><br> <br>Novartis and Sandoz shall, and shall cause the applicable members of the Novartis Group and Sandoz Group, respectively, to, cooperate on a basis consistent with past practice with respect to any request for a ruling from a Tax<br> Authority or advance agreement or other similar proceeding with a Tax Authority that remains pending at the time of the Distribution
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19

and the resolution of which is reasonably expected to affect Taxes, or otherwise require the cooperation, of both Novartis (or any other member of the Novartis Group), on the one hand, and Sandoz (or any other member of the<br> Sandoz Group), on the other hand.
4.5.5	Limitations on Seeking Rulings<br><br> <br>Notwithstanding anything herein to the contrary, Sandoz shall not seek a ruling from any Tax Authority with respect to a Pre-Separation Period (whether or not relating to the Transaction) without Novartis’ prior consent which shall<br> not be unreasonably withheld, and Novartis shall not be required to obtain or assist in obtaining any such ruling, if Novartis determines that there is a reasonable possibility that such action could have an adverse impact on<br> Novartis or any of its Affiliates. Novartis shall provide a response within five (5) days of being notified Sandoz’ intention to seek a ruling for a Pre-Separation Period.
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4.6	Notice Actions<br><br> <br>If Sandoz proposes to (i) enter into, (ii) permit to occur or (iii) cause or permit any of its Affiliates to enter into or permit to occur any Notice Action, Sandoz shall undertake in good faith to provide Novartis, no later than<br> twenty (20) days following the signing of any written agreement with respect to such Notice Action or obtaining knowledge of the occurrence of any such Notice Action that takes place without written agreement, with a written<br> description of such transaction (including the information required to be provided with respect to such Notice Action as set forth on the relevant Schedule included in Schedule A) and additional information as Novartis may reasonably<br> request; provided, that in no case shall Sandoz be required to provide Novartis with any material non-public information.
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4.7	Reporting<br><br> <br>The Parties each (a) shall timely file (or cause to be timely filed) any appropriate information and statements (including any Transaction Filings) to report the applicable steps of the Transaction as qualifying for the Intended Tax<br> Treatment and (b) except to the extent required by a change of Applicable Law or a Determination, shall not (and shall not cause or permit any of its respective Affiliates to) take any position on any Tax Return, financial statement<br> or other document (or otherwise with a Tax Authority) that is inconsistent with such qualification. If either Party determines it is required to (x) report any applicable step of the Transaction in a manner other than as qualifying<br> for its Intended Tax Treatment or (y) take any position on any Tax Return, financial statement or other document (or otherwise with a Tax Authority) that is inconsistent with such qualification, such Party shall promptly notify the<br> other Party of its determination, and the Parties shall use Commercially Reasonable Efforts to cooperate to determine the reporting of such step of the Transactions in a manner consistent with Applicable Law.
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5	Tax Matters relating to Other Agreements
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5.1	Termination of Tax Sharing Agreements and Tax Groups
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a)	Prior to the Effective Time, the Parties shall terminate all Tax allocation or sharing agreements that are exclusively between one or more members of the Novartis Group, on the one hand, and one or more members of the Sandoz Group, on<br> the other hand
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(other than this Agreement or any other Transaction Document). Upon termination, all rights and obligations under such agreements shall cease.
b)	To the extent one or more members of the Sandoz Group, on the one hand, and one or more members of the Novartis Group, on the other hand, are members of the same combined, consolidated or unitary Tax group for purposes of filing any<br> Tax Return and such group does not automatically terminate as a result of the Transactions, the Parties shall cooperate to terminate such group effective prior to the Effective Time.
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5.2	Amount of Indemnity Payments<br><br> <br>The amount of any Indemnity Payment, including, for the avoidance of doubt, of any Indemnity Payment, paid by either Party to the other Party pursuant to this Agreement, the Separation Agreement as well as any other Ancillary<br> Agreement shall be (a) reduced to take into account any Tax Benefit actually incurred by the indemnitee resulting from the incurrence of the liability in respect of which the Indemnity Payment is made and (b) increased to take into<br> account any Tax cost actually realized by the indemnitee resulting from the receipt of the Indemnity Payment (including any Tax cost arising from such Indemnity Payment having resulted in income or gain to either Party, and any Taxes<br> imposed on additional amounts payable pursuant to this Section 5.2, taking into account Section 5.3).
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5.3	Tax Treatment of Indemnity Payments<br><br> <br>The Parties shall cooperate in a commercially reasonable manner to determine the treatment of Indemnity Payments for all relevant Tax purposes as and when they are made, as well as designating the relevant payor and recipient of such<br> Indemnity Payments.
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5.4	Treatment of Wrong Pocket Assets<br><br> <br>To the extent permitted by Applicable Law and except as otherwise provided on any of the Schedules that comprise Schedule A, the Parties agree to treat, and to cause their respective Affiliates to treat, for all Tax purposes, (a) any<br> Wrong Pocket Asset as having been transferred to its ultimate owner (or, if applicable for any Wrong Pocket Asset, as having remained with its ultimate owner) in accordance with the Separation Agreement as of the Effective Time and (b)<br> any payments, goods and other benefits received by the transferor in respect of such Wrong Pocket Asset prior to its transfer to its ultimate owner in accordance with the Separation Agreement as having been received by such transferor as<br> an agent or nominee for such ultimate owner.
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6	Procedural Matters
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6.1	Tax Contests
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a)	Novartis or Sandoz, as applicable, shall, within thirty (30) days of becoming aware of any Tax Contest (including a Transaction Tax Contest) that could reasonably be expected to cause the other Party to have an indemnification obligation<br> (or to have or to lose a refund entitlement) under this Agreement, notify such other Party of such Tax Contest and thereafter promptly forward or make available to such other Party copies
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of notices and communications relating to the relevant portions of such Tax Contest (the Party so required to notify such other Party, the “Notifying Party”). Notwithstanding the preceding<br> sentence, if the applicable Tax Authority requests a response, or other action is required, with respect to such Tax Contest within thirty (30) days of the Notifying Party becoming aware of such Tax Contest, the Notifying Party shall<br> notify the other Party of such Tax Contest as soon as possible following the Notifying Party becoming aware of such Tax Contest. A failure by a Party to give notice as provided in this Section 6.1a) (or to promptly forward any such<br> notices or communications) shall not relieve the other Party’s indemnification obligations under this Agreement, except to the extent that such other Party shall have been actually prejudiced by such failure.
b)	With respect to any Tax Contest Novartis and Sandoz are aware of as of the date of this Agreement, which Tax Contests are identified on Exhibit 3 hereto, Novartis shall have the right to control the conduct and settlement of such Tax<br> Contest.
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c)	With respect to any other Tax Contest other than a Transaction Tax Contest:
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i)	Novartis shall have the exclusive right to control the conduct and settlement of any Tax Contest of:
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A)	any member of the Novartis Group;
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B)	to the extent such Tax Contest relates to a Novartis Consolidated Return or to Transfer Pricing Documents prepared by (i) Novartis or (ii) Sandoz where such Transfer Pricing Documents are<br> likely to impact a member of the Novartis Group pursuant to Section 3.2, any member of the Sandoz Group.
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C)
---
ii)	Sandoz shall have the exclusive right to control the conduct and settlement of any other Tax Contest of any member of the Sandoz Group.
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Notwithstanding the foregoing, if the conduct or settlement of any portion or aspect of any such Tax Contest could reasonably be expected to cause the other Party to have an indemnification obligation (or to have or to lose a refund entitlement) under this Agreement as well as in cases covered by Section 6.1c)i)B) either with respect to Novartis Consolidated Tax Returns filed in Germany which are prepared by a Sandoz entity according to Section 3.1a) or to the extent a Sandoz entity could be affected by such Tax Contest, then (i) such other Party shall have the right to share joint control over the conduct and settlement of such portion or aspect and (ii) whether or not such other Party exercises that right, Novartis or Sandoz, as applicable, shall not accept or enter into any settlement without the prior written consent of such other Party (not to be unreasonably withheld, conditioned or delayed).

d)	Novartis and Sandoz shall have the right to control jointly the conduct and settlement of any Transaction Tax Contest. Notwithstanding the foregoing, Novartis shall be entitled to control exclusively the conduct and settlement of any<br> Transaction Tax Contest if Novartis notifies Sandoz that (notwithstanding the rights and obligations of the

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Parties under this Agreement) Novartis agrees to pay (and indemnify Sandoz against) any Transaction Taxes resulting from such Transaction Tax Contest.
e)	In any case where the Parties control jointly the conduct and settlement of any Tax Contest (or portion or aspect thereof), and unless waived by the Parties in writing:
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i)	neither Party shall accept or enter into any settlement of such Tax Contest (or the relevant portion or aspect thereof) without the prior written consent of the other Party (not to be<br> unreasonably withheld, conditioned or delayed);
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ii)	both Parties shall have a right to review, comment on and consent to (not to be unreasonably withheld, conditioned or delayed) any correspondence or filings to be submitted to any Tax<br> Authority with respect to such Tax Contest (or the relevant portion or aspect thereof);
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iii)	both Parties shall have the right to attend any formally scheduled meetings with any Tax Authority or hearings or proceedings before any judicial authority, in each case with respect<br> to such Tax Contest (or the relevant portion or aspect thereof);
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iv)	both Parties shall, in dealing with any Tax Authority, in good faith, take into account and have due regard to any financial, reputational or other impact such dealings might have on<br> the other Party and/or any of its Affiliates;
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v)	both Parties shall use Commercially Reasonable Efforts to reach and take a common position in dealing with any Tax Authority; and
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vi)	in the event the Tax Contest relates to a Tax Return for which Novartis is the Tax Return Preparer, Sandoz shall not consult or otherwise retain any Tax counsel, accountant or other<br> advisor in connection with such Tax Contest unless such Person is a Tax Advisor reasonably acceptable to Novartis.
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f)	All reasonable external costs, expenses and fees (including legal, accounting and other advisory and court fees) incurred after the Distribution in the course of conducting any Tax Contest, shall be borne by the Parties in the same<br> manner as the Taxes that are the subject of such Tax Contest are allocated between the Parties pursuant to this Agreement.
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6.2	Cooperation<br><br> <br>Novartis and Sandoz shall, and shall cause their respective Affiliates to, cooperate fully, and in good faith, with all reasonable requests from the other Party in connection with:
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a)	Matters covered by this Agreement, including the preparation and filing of Tax Returns or Transfer Pricing Documents, the calculation of Taxes, the determination of the proper financial accounting treatment of Tax items and the conduct<br> and settlement of Tax Contests, as well as the implementation of the Parties’ respective transfer pricing model and practices, where such practice or model could reasonably be expected to impact the other Party, excluding changes in<br> transfer prices which have been pre-
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agreed by the Parties before the Separation in writing. Such cooperation shall for example include, but not be limited to:
i)	the preparation and execution of any document or VAT compliant invoice that may be necessary or reasonably helpful in connection with the matters covered by this Agreement; and
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ii)	compliance with Section 16 (Access to Information; Books and Records) of the Separation Agreement (provided, however, that Books and Records<br> relating to Taxes shall be retained by the relevant Group until the expiration of the relevant statute of limitations (including extensions));
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iii)	where required and possible with reasonable efforts, providing access to and assistance from any current personnel (including a current director, officer, manager, employee or agent,<br> adviser or consultant) responsible for the preparation, maintenance and interpretation of information and documents relating to the other Party’s Taxes.
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b)	Reporting and compliance duties beyond the Agreement, such as filing obligations applicable under Pillar One and Pillar Two of the OECD Base Erosion and Profit Shifting Project or related to Country-by-Country Reporting. Any<br> information necessary to comply with this Section 6.2b) shall be shared respectively by Novartis and Sandoz on a need-to-know basis only.
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6.3	Indemnification Claims and Payments
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a)	A Party shall be entitled to make a claim for indemnification with respect to Taxes under this Agreement when such Party determines that it or one of its Affiliates is entitled to such payment and is able to calculate with reasonable<br> accuracy the amount of such payment. Except as otherwise provided in Section 3.5, such Party shall provide to the other Party notice of such claim within sixty (60) Business Days after the first date on which it so becomes entitled to<br> make such claim. Such notice shall include a description of such claim and a detailed calculation of the amount claimed. Such notified Party shall make the claimed payment to the notifying Party within sixty (60) days after receiving such<br> notice, unless such notified Party reasonably disputes its liability for, or the amount of, such payment.
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b)	Notwithstanding Section 6.3a), with respect to any claim for payment relating to Taxes that are the subject of a Tax Contest, the Party seeking Indemnification (the “Indemnified Party”) shall<br> not be entitled to make a claim for payment until there has been a Determination with respect to such Taxes, provided, however, that if the Indemnified Party is able to pay a reasonable estimate or agreed amount of such Taxes or other<br> commercially reasonable amount (such amount, the “Deposit Amount”) to the applicable Tax Authority and the payment of such Deposit Amount would suspend or avoid the imposition or accrual of<br> interest or penalties with respect to such Taxes, unless both Parties agree otherwise, the other Party (the “Indemnifying Party”) shall pay the Deposit Amount to the Indemnified Party promptly<br> after the Indemnified Party is able to determine the Deposit Amount with reasonable accuracy, and, upon receipt of payment from the Indemnifying Party, the Indemnified Party shall promptly remit the Deposit Amount to the applicable Tax<br> Authority.
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c)	A failure by a Party to give notice as provided in Section 6.3a) shall not relieve the other Party’s indemnification or other payment obligations under this Agreement, if any, except to the extent that such other Party shall have been<br> actually prejudiced by such failure. Nothing in this Section 6.3 shall prejudice a Party’s right to receive payments pursuant to Section 3.5.
d)	The Parties shall cooperate in good faith to determine the manner in which any payments required to be made under this Agreement shall be made, including by providing for any such payments to be made directly between the Parties’<br> respective subsidiaries.
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For the avoidance of doubt, the provisions of this Section 6 shall also apply with respect to Employment Taxes, provided and to the extent that, the Employee Matters Agreement declares them applicable.

7	Miscellaneous
7.1	Incorporation<br><br> <br>Sections 14.6 (No Double Recovery and No Double Counting), 22 (Further Assurances), 29 (Notices), 32 (Waivers, Rights and Remedies), 33 (Counterparts), 34 (Variations), 35 (Invalidity),<br><br> 36 (No Third-Party Enforcement Rights) and 37 (Governing Law) of the Separation Agreement are hereby incorporated by reference into this Agreement, mutatis mutandis.
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7.2	Dispute Resolution<br><br> <br>The Parties shall use Commercially Reasonable Efforts to cooperate to resolve any dispute, controversy or claim arising out of, relating to or in connection with this Agreement. If the Parties are unable to resolve such dispute,<br> controversy or claim after complying with the preceding sentence, such dispute, controversy or claim shall be a “Dispute” within the meaning of the Separation Agreement and shall be subject to the<br> provisions of Section 38 (Dispute Resolution) of the Separation Agreement for resolution of Disputes.
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7.3	Termination<br><br> <br>This Agreement will be automatically terminated if, at any time before the Distribution, the Separation Agreement is terminated. In the event of the termination of this Agreement pursuant to this Section 7.3, this Agreement, except for<br> the provisions of this Section 7.3, will become void and have no effect, without any liability on the part of any Party or its directors, officers or stockholders.
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7.4	Confidentiality<br><br> <br>Each Party hereby acknowledges that confidential Information of such Party or its Affiliates may be exposed to employees and agents of the other Party or its Affiliates as a result of the activities contemplated by this Agreement. Each<br> Party agrees, on behalf of itself and its Affiliates, that such Party’s obligations with respect to Information of the other Party or its
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Affiliates shall be governed by Section 24 (Confidentiality and Non-Use) of the Separation Agreement.
7.5	Assignability<br><br> <br>Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of Applicable Law or otherwise by either Party without the prior written consent of the other<br> Party. Any purported assignment without such consent shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and<br> assigns. Notwithstanding the foregoing, either Party may assign this Agreement without consent in connection with (a) a merger transaction in which such Party is not the surviving entity and the surviving entity acquires or assumes all or<br> substantially all of such Party’s assets, (b) the sale of all or substantially all of such Party’s assets or (c) the acquisition of all of the Capital Stock of such Party; provided, however, that the assignee expressly assumes in writing<br> all of the obligations of the assigning Party under this Agreement, and the assigning Party provides written notice and evidence of such assignment and assumption to the non-assigning Party.
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7.6	Entire Agreement<br><br> <br>This Agreement and the Schedules hereto contain the entire agreement between the Parties with respect to the subject matter hereof and supersede all previous agreements negotiations, discussions, writings, understandings, commitments and<br> conversations with respect to such subject matter, and there are no agreements or understandings between the Parties with respect to the subject matter hereof other than those set forth or referred to herein or therein.
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7.7	Separation Agreement; Schedule A<br><br> <br>In the event of any inconsistency between this Agreement and the Separation Agreement or any other Transaction Document, the provisions of this Agreement, as well as the provisions of the Employment Matters Agreement as regards the<br> allocation of Employment Taxes, will prevail. In the event of any inconsistency between this Agreement (other than Schedule A) and Schedule A, the provisions of Schedule A will prevail. For the avoidance of doubt, no provision of any<br> Transaction Document (other than this Agreement), including the Third-Party Claims and Investigations Management Agreement, shall apply to the conduct of Tax Contests, which shall be governed exclusively by the provisions of this Agreement.<br> Conversely, the management of any claim, investigation or other matter which does not constitute or relate to a Tax Contest, shall be covered by the Third-Party Claims and Investigations Management Agreement to the extent that it<br> constitutes a Covered Claim or Investigation as defined in the Third-Party Claims and Investigations Management Agreement. The provisions of Section 3 and 6 shall apply with respect to Employment Taxes, provided and to the extent that, the<br> Employee Matters Agreement declares them applicable.
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7.8	Headings<br><br> <br>The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.
7.9	Survival of Covenants<br><br> <br>Except as expressly set forth in this Agreement, the provisions in this Agreement shall survive the consummation of the Transactions and shall remain in full force and effect for the full period of all applicable statutes of limitations<br> (giving effect to any waiver, mitigation or extensions thereof) plus ninety (90) days.
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7.10	Late Payments<br><br> <br>Any amount owed by one Party to another Party under this Agreement that is not paid when due will bear interest at the Default Interest Rate from the due date of the payment to the date paid.
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7.11	Interpretation<br><br> <br>Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires. The terms “hereof”, “herein”,<br> “herewith”, “this Agreement" and words of similar import, unless otherwise stated, shall be construed to refer to this Agreement as a whole (including all of the schedules hereto) and not to any particular provision of this Agreement.<br> Any capitalized terms used in any schedule to this Agreement but not otherwise defined therein shall have the meaning ascribed thereto in this Agreement. Article, Section or Schedule references are to the articles, sections and<br> schedules of or to this Agreement unless otherwise specified. Any definition of or reference to any agreement, instrument or other document herein (including any reference herein to this Agreement) shall be construed as referring to<br> such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified from time to time (subject to any restrictions on such amendments, supplements or modifications set forth herein). The word<br> "including" and words of similar import when used in this Agreement shall mean "including, without limitation," unless the context otherwise requires or unless otherwise specified. The word "or" shall not be exclusive. References to<br> "written" or "in writing" include in electronic form. Any reference to any provisions of the Code or Regulations or to other Applicable Laws shall be deemed to include any amendments or successor provisions thereto as appropriate.<br> References to dollars or $ are references to the lawful currency from time to time of the United States of America. Any reference herein to a "Section" number shall include a reference to the<br> corresponding Section numbers in the Schedules that comprise Schedule A.<br><br> <br><br><br> <br>Notwithstanding the foregoing, the purpose of Section 4 is to ensure that the applicable steps of the transactions qualify for the Intended Tax Treatment and, accordingly, the parties agree that the<br> language thereof shall be interpreted in a manner that serves this purpose to the greatest extent possible.<br><br> <br><br><br> <br>- Signatures on next page -
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Novartis AG:

/s/ Peter Schreiner<br><br> <br>Name: Dr. Peter Schreiner<br><br> <br>Title: Authorized Representative	/s/ Christoph Ziegler<br><br> <br>Name: Christoph Ziegler<br><br> <br>Title: Authorized Representative

Signature page of Tax Matters Agreement

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Sandoz Group AG:

/s/ Richard Saynor<br><br> <br>Name: Richard Saynor<br><br> <br>Title: Authorized Representative	/s/ Ingrid Sollerer<br><br> <br>Name: Ingrid Sollerer<br><br> <br>Title: Authorized Representative

Signature page of Tax Matters Agreement

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EXHIBIT 1

ALLOCATION OF ORDINARY TAXES AND TAX RETURN PREPARERS

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EXHIBIT 2

ALTERNATE METHODOLOGY FOR THE ALLOCATION OF ORDINARY TAXES

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EXHIBIT 3

LIST OF TAX CONTESTS

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SCHEDULE A

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SCHEDULE A-1

SWITZERLAND

1	Definitions<br><br> <br>In this Agreement the following terms have the following meanings. Capitalized terms used but not defined in this Agreement have the meanings given to them in the Separation Agreement or the Tax Matters Agreement.
Basel-Stadt Tax Rulings	mean the tax rulings Novartis has obtained with the tax authority of the canton of Basel-Stadt in connection with the Transaction.
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SFTA	means the Swiss Federal Tax Administration.
SFTA Tax Ruling	means the tax ruling Novartis has obtained with the SFTA in connection with the Transaction.
Swiss Intended Tax<br><br> Treatment	means the qualification of the steps of the Transaction set forth in Section 4 of this Schedule A-1.
Swiss Stamp Duty	means the tax imposed based on the Swiss Federal Act on Stamp Duties of 27 June 1973 (Bundesgesetz über die Stempelabgaben) as amended from time to time together with the related<br> ordinances, regulations and guidelines.
Swiss Tax Rulings	means the Basel-Stadt Tax Rulings, the SFTA Tax Ruling and the Zug Tax Ruling.
Swiss Withholding Tax	means the tax imposed based on the Swiss Federal Act on Withholding Tax of 13 October 1965 (Bundesgesetz über die Verrechnungssteuer) as amended from time to time together with the<br> related ordinances, regulations and guidelines.
Switzerland, Swiss or CH	means the territory of the Swiss Confederation as defined by its laws in accordance with international law.
Zug Tax Ruling	means the tax ruling Novartis has obtained with the tax authority of the canton of Zug in connection with the Transaction.

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2	Restricted Actions<br><br> <br>The following restricted actions apply for Sandoz: Sandoz failing to comply or causing or permitting any of its Affiliates to fail to comply with the facts and conditions stated in the Swiss Tax Rulings relating to Sandoz and any of its<br> Affiliates. In particular after the Separation Date Sandoz failing to continue the holding activity at its legal seat in Switzerland.
3	Swiss Tax Rulings
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a)	Basel-Stadt Tax Rulings mean the tax ruling Novartis has obtained with the tax authority of the canton of Basel-Stadt dated June 13, 2023, and confirmed on June 14, 2023, covering Swiss corporate income and capital taxes in relation to<br> the Transaction and the ruling dated June 29, 2023, and confirmed on 28 July, 2023, covering personal income taxes for shareholders resident in Switzerland in relation to the Transaction.
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b)	SFTA Tax Ruling means the tax ruling Novartis has obtained with the SFTA dated May 17, 2023, and confirmed on June 13, 2023, covering Swiss Withholding Tax and Swiss Stamp Duty in relation to the Transaction.
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c)	Zug Tax Ruling means the tax ruling Novartis has obtained with the tax authority of the canton of Zug dated February 10, 2023, and confirmed on February 22, 2023, covering Swiss corporate income and capital taxes in relation to the<br> Transaction.
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4	Swiss Intended Tax Treatment<br><br> <br><br><br> <br>The Transaction should qualify as a tax neutral reorganization and a grandparent contribution as confirmed by the Swiss Tax Rulings for Swiss tax purposes and should not trigger Swiss corporate income and capital taxes, personal<br> income taxes for shareholders resident in Switzerland holding the Novartis shares as private assets, Swiss Withholding Tax or Swiss Stamp Duties.
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SCHEDULE A-2

UNITED STATES

1	Definitions<br><br> <br>For purposes of this Schedule A-2, the following terms have the following meanings.
10% Acquisition<br><br> Transaction	means any transaction or series of transactions that would be a Proposed Acquisition Transaction if the percentage specified in the definition of Proposed Acquisition Transaction were 10% instead of 20%.
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Active Trade or Business	means the active conduct (determined in accordance with Section 355(b) of the Code) of the trade or business of Sandoz described in the Representations for purposes of satisfying the requirements of<br> Section 355(b) of the Code.
Employee Share Purchase Plan	means the Employee Share Purchase Plan for North American Employees adopted by the Board of Directors of Novartis Corporation on July 18, 2021.
ESPP Shares	has the meaning ascribed thereto in Section 3c) of this Schedule A-2.
Notice Action	has the meaning ascribed thereto in Section 6 of this Schedule A-2.
Proposed Acquisition<br><br> Transaction	has the meaning ascribed thereto in Section 5b) of this Schedule A-2.
United States or U.S.	means the United States of America.
U.S. Intended Tax<br><br> Treatment	means the qualification of the Distribution as a distribution described in Section 355(a) of the Code.
U.S. Ordinary Taxes	means Ordinary Taxes imposed, collected or withheld by or on behalf of the United States or any political subdivision thereof (whether state or local), including through any agency,<br> authority, instrumentality, regulatory body, court or other entity exercising power on behalf thereof or through the implementation of any agreement or treaty entered into with the United States.
US Sandoz Sale Date	Has the meaning ascribed thereto in Exhibit A-2-A.

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U.S. Tax Ruling	means the private letter ruling issued to Novartis on June 2, 2023 by the IRS in connection with the Transaction.
2	Allocation of Transaction Taxes
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a)	Each of the following items shall constitute a "Sandoz Indemnity Event":
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i)	The application of Section 355(a)(1)(B) of the Code to any part of the Transaction as a result of any direct, indirect or deemed acquisition after the Distribution of Capital Stock or<br> assets of Sandoz or any of its Affiliates; and
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ii)	any action by Sandoz or any of its Affiliates described in Section 5 of this Schedule A-2 without regard to Section 4.4 of the Agreement.
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b)	Each of the following items shall constitute a "Novartis Indemnity Event":
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i)	The application of Section 355(a)(1)(B) of the Code to any part of the Transaction as a result of any direct, indirect or deemed acquisition after the Distribution of Capital Stock or<br> assets of Novartis or any of its Affiliates.
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3	Allocation of Ordinary Taxes
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a)	Ordinary Taxes that are U.S. Ordinary Taxes shall be allocated between the Pre-Separation Period and the Post-Separation Period as provided in Section 2.7 of the Agreement, except that, with respect to the share of the Sandoz Group<br> in the Taxes on Novartis Consolidated Returns, Pre-Separation Period and Post-Separation Period shall have meaning ascribed to each, respectively, in Exhibit A-2-A.
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b)	The determination of which U.S. Ordinary Taxes for the Pre-Separation Period are attributable to the Sandoz Business shall be made in accordance with the methodology described in Exhibit A-2-A.
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c)	Notwithstanding anything in this Agreement or in the Employment Matters Agreement to the contrary, solely Novartis (or its Affiliate) shall be entitled to claim any deduction in respect of a "disqualified disposition" (within the<br> meaning of Section 421(b) of the Code) of shares purchased pursuant to the Employee Share Purchase Plan ("ESPP Shares"), regardless of whether such deduction arises in a Pre- Separation Period or a<br> Post-Separation Period. For the avoidance of doubt, any shares of Sandoz received in the Distribution in respect of ESPP Shares shall also be treated as ESPP Shares.
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4	Preparation of Sandoz Tax Returns<br><br> <br>With respect to any taxable period ending on or after January 1, 2023 and on or before the US Sandoz Sale Date, Novartis shall prepare and file, or cause to be prepared and filed, all Sandoz Tax Returns<br> that are U.S. state Tax Returns.
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5	Restricted Actions
a)	During the period beginning on the date of the Distribution and ending on the first day after the two-year anniversary of the Distribution, the following are Restricted Actions:
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i)	liquidating or partially liquidating, whether by merger, consolidation, conversion or otherwise;
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ii)	entering into, causing or permitting any Proposed Acquisition Transaction;
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iii)	redeeming or otherwise repurchasing (directly or indirectly) any Capital Stock of Sandoz, except to the extent such redemptions or repurchases meet the following requirements: (A) there<br> is a bona fide, non-Tax business purpose for the repurchases of such Capital Stock, (B) such Capital Stock is widely held, (C) the repurchases of such Capital Stock will be made on the open market and (D) the aggregate amount of<br> repurchases of such Capital Stock will be less than 20% of the total value of the outstanding Capital Stock of Sandoz (determined on the date of the Distribution);
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iv)	selling, transferring or disposing of 40% or more of the consolidated gross assets that Sandoz and its Subsidiaries held immediately before the Distribution; and
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v)	causing or permitting Sandoz to cease to engage in the Active Trade or Business.
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b)	For purposes of this Schedule A-2, "Proposed Acquisition Transaction" means:
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i)	any transaction or series of transactions (or any agreement, understanding or arrangement to enter into a transaction or series of transactions) as determined in accordance with Section<br> 355(e) of the Code, in connection with which one or more Persons would (directly or indirectly) acquire, or have the right to acquire (including pursuant to an option, warrant or other conversion right), from any other Person or Persons,<br> Capital Stock of Sandoz that, when combined with any other acquisitions of Capital Stock of Sandoz that occur on or after the Distribution (but excluding any transaction described in Section 5b)ii) of this Schedule A-2), comprises 20% or<br> more of the value or the total combined voting power of all interests that are treated as outstanding equity in Sandoz for U.S. federal income Tax purposes immediately after such transaction or, in the case of a series of transactions,<br> immediately after any transaction in such series. For this purpose, any recapitalization, repurchase or redemption of the Capital Stock of, and any amendment to the certificate of incorporation (or other organizational documents) of,<br> Sandoz shall be treated as an indirect acquisition of the Capital Stock of Sandoz by any shareholder to the extent such shareholder’s percentage interest in interests that are treated as outstanding equity in Sandoz for U.S. federal<br> income Tax purposes increases by vote or value.
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ii)	Notwithstanding the foregoing, a Proposed Acquisition Transaction shall not include (A) the adoption by Sandoz of a shareholder rights plan that meets
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the requirements of IRS Revenue Ruling 90-11, 1990-1 C.B. 10, (B) transfers of Capital Stock of Sandoz that satisfy Safe Harbor VII (relating to acquisitions of stock listed on an<br> established market) of Section 1.355-7(d) of the Regulations or (C) issuances of Capital Stock of Sandoz that satisfy Safe Harbor VIII (relating to acquisitions in connection with a Person’s performance of services) or Safe Harbor IX<br> (relating to acquisitions by a retirement plan of an employer) of Section 1.355-7(d) of the Regulations; provided, however, that such transaction or series of transactions shall constitute a Proposed Acquisition Transaction if meaningful<br> factual diligence is necessary to establish that Section 5b)ii)(A), (B) or (C) of this Schedule A-2 applies.
c)	The provisions of this Section 5, including the definition of "Proposed Acquisition Transaction", are intended to monitor compliance with Section 355 of the Code and shall be interpreted<br> accordingly. Any clarification of, or change in, Section 355 of the Code or the Regulations thereunder shall be incorporated into this Section 5 and its interpretation; provided, that no such clarification or change shall have the effect<br> of permitting any action otherwise prohibited under this Section 5.
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6	Notice Actions<br><br> <br>During the period beginning on the date of the Distribution and ending on the first day after the 30-month period following the Distribution, any 10% Acquisition Transaction is a Notice Action, and the information required to be provided<br> with respect to any such 10% Acquisition Transaction includes (a) the type and amount of Capital Stock to be acquired or issued and (b) an explanation as to why such transaction does not result in the application of Section 355(a)(1)(B)<br> of the Code to the Transaction.
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7	Reporting<br><br> <br>The following are Transaction Filings: any appropriate information and statements required by Section 6045B of the Code and Sections 1.355-5 and 1.368-3 of the Regulations.
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EXHIBIT A-2-A

Methodology for allocation of U.S. Ordinary Taxes in Pre-Separation Period with respect to Novartis Consolidated Returns

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ANNEX I

EXHIBIT 12.1

Exhibit 12.1

CERTIFICATION

I, Vasant Narasimhan, certify that:

1. I have reviewed this annual report on Form 20-F of Novartis AG;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: January 31, 2024

By:   /s/  VASANT NARASIMHAN

Name:  Vasant Narasimhan

Title:  Chief Executive Officer

EXHIBIT 12.2

Exhibit 12.2

CERTIFICATION

I, Harry Kirsch, certify that:

1. I have reviewed this annual report on Form 20-F of Novartis AG;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4. The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5. The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date: January 31, 2024

By:  /s/  HARRY KIRSCH

Name:  Harry Kirsch

Title:  Chief Financial Officer

EXHIBIT 13.1

Exhibit 13.1

CERTIFICATION OF VASANT NARASIMHAN, CHIEF EXECUTIVE OFFICER OF NOVARTIS AG PURSUANT TO SECTION 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Novartis AG, a Swiss corporation (the “Company”), hereby certifies, to the best of such officer’s knowledge, that:

1. The Annual Report on Form 20-F for the year ended December 31, 2023 (the “Form 20-F”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 31, 2024

By:  /s/  VASANT NARASIMHAN

Name:  Vasant Narasimhan

Title:  Chief Executive Officer

EXHIBIT 13.2

Exhibit 13.2

CERTIFICATION OF HARRY KIRSCH, CHIEF FINANCIAL OFFICER OF NOVARTIS AG PURSUANT TO SECTION 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Novartis AG, a Swiss corporation (the “Company”), hereby certifies, to the best of such officer’s knowledge, that:

1. The Annual Report on Form 20-F for the year ended December 31, 2023 (the “Form 20-F”) of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Form 20-F fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: January 31, 2024

By:   /s/  HARRY KIRSCH

Name:  Harry Kirsch

Title:  Chief Financial Officer

EXHIBIT 15.1

Exhibit 15.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Nos. 333-171739, 333-198706, 333-250207 and 333-258081) on Form S-8 of our report dated January 30, 2024, with respect to the consolidated financial statements of Novartis AG and the effectiveness of internal control over financial reporting.

/s/ KPMG AG

Basel, Switzerland

January 31, 2024

EXHIBIT 15.2

Exhibit 15.2

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-198706, 333-198706, 333-250207 and 333-258081) of Novartis AG of our report dated February 1, 2022, except for the effects of discontinued operations discussed in Note 1 to the consolidated financial statements, which is as of January 30, 2024, relating to the financial statements, which appears in this Form 20-F.

/s/ PricewaterhouseCoopers AG

Basel, Switzerland

January 30, 2024

EXHIBIT 97.1

Exhibit 97.1

NOVARTIS AG POLICY GOVERNING THE RECOVERY OF ERRONEOUSLY AWARDED COMPENSATION

1. Purpose

This Policy Governing the Recovery of Erroneously Awarded Compensation (“Policy”) has been adopted by the Board of Directors of Novartis AG (“Board”) to comply with the requirements of United States Securities and Exchange Commission Rule 10D-1 (“Rule 10D-1”) and Section 303A.14 of the New York Stock Exchange Listed Company Manual (“Section 303A.14”).

Pursuant to this Policy, the Company will recover, to the fullest extent permitted by law and in a manner determined by the Board and consistent with Rule 10D-1 and Section 303A.14, any Erroneously Awarded Compensation Received by a current or former Executive Officer on or after October 2, 2023 if:

• the grant, vesting or payment of the Incentive-Based Compensation was based wholly or in part upon the attainment of a Financial Reporting Measure that was subsequently the subject of a Restatement of the Company’s financial statements; and

• the amount of the Incentive-Based Compensation that would have been Received by the Executive Officer had the Financial Reporting Measure been properly reported would have been lower than the amount actually Received.

2. Recovery of Erroneously Awarded Compensation

(a) The Company will recover reasonably promptly the amount of Erroneously Awarded Compensation in the event that the Company is required to prepare a Restatement:

(i) This Policy shall apply to all Incentive-Based Compensation Received by a person:

(1) After beginning service as an Executive Officer;

(2) Who served as an Executive Officer at any time during the performance period for that Incentive-Based Compensation;

(3) While the Company has a class of securities listed on a United States national securities exchange or a United States national securities association; and

(4) During the Recovery Period.

(ii) The Company may exercise discretion in how to accomplish recovery acting in a manner that effectuates the purpose of Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010: to prevent current or former Executive Officers from retaining Incentive-Based Compensation they Received and to which they were not entitled under the Restatement. Depending on the particular facts and circumstances, different methods of recovery may be appropriate in different circumstances.

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(iii) The Company shall recover Erroneously Awarded Compensation in compliance with this Policy except to the extent that the conditions of paragraphs (1), (2), or (3) of this subsection 3(a)(iii) are met, and the Compensation Committee of the Board has made a determination that recovery would be impracticable.

(1) The direct expense paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered. Before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on expense of enforcement, the Company shall make a reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable attempt(s) to recover, and provide that documentation to the NYSE.

(2) Recovery would violate Swiss law where that law was adopted prior to November 28, 2022. Before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation based on violation of Swiss law, the Company shall obtain an opinion of Swiss counsel, acceptable to the NYSE, that recovery would result in such a violation, and must provide such opinion to the NYSE.

(3) Recovery would likely cause an otherwise United States tax- qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the anti-alienation requirements of 26 U.S.C. 401(a)(13) or the non-forfeitability requirements of 26 U.S.C. 411(a) and regulations thereunder.

(iv) The Company shall not indemnify any current or former Executive Officers against the loss of Erroneously Awarded Compensation.

(b) The Company shall file all disclosures with respect to this Policy in accordance with the requirements of the United States Federal securities laws, including the disclosure required by the applicable Commission filings.

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3. Definitions

(a) Commission means the United States Securities and Exchange Commission.

(b) Company means Novartis AG.

(c) Executive Officer means the Company’s president, principal financial officer, principal accounting officer (or if no such officer, the controller), any vice-president of the Company in charge of a principal business unit, division, or function (such as sales, administration, or finance), or an officer who performs a policy-making function, or any other person who performs similar policy making functions for the Company, such person shall be so designated as an Executive Officer. At the Company, this includes all members of the ECN, who have been delegated by the Board with the management of the Company, and the Head of Financial Reporting and Accounting.

(d) ECN means the Executive Committee of Novartis.

(e) Erroneously Awarded Compensation means the amount of Incentive-Based Compensation Received that exceeds the amount of Incentive-Based Compensation that otherwise would have been Received had it been determined based on the amounts pursuant to a Restatement, and must be computed without regard to any taxes paid. For Incentive-Based Compensation based on the Company’s stock price or total shareholder return, where the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in a Restatement:

(i) The amount must be based on a reasonable estimate of the effect of the Restatement on the Company’s stock price or total shareholder return upon which the Incentive-Based Compensation was Received; and

(ii) The Company shall maintain documentation of the determination of that reasonable estimate and provide such documentation to the NYSE.

(f) Financial Reporting Measures mean measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements, and any measures that are derived wholly or in part from such measures. Company stock price and total shareholder return are also Financial Reporting Measures. A Financial Reporting Measure need not be presented within the Company’s financial statements or included in a filing with the Commission.

(g) Group means the Company and all its direct and indirect subsidiaries.

(h) Incentive-Based Compensation means any compensation that is granted, earned, or vested based wholly or in part upon the attainment of a Financial Reporting Measure.

(i) NYSE means the New York Stock Exchange.

(j) Incentive-Based Compensation is deemed Received in the Company’s fiscal period during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if the payment or grant of the Incentive-Based Compensation occurs after the end of that period.

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(k) Recovery Period means three completed fiscal years of the Company immediately preceding the date that the Company is required to prepare a Restatement. In addition to these last three completed fiscal years of the Company, this Policy shall apply to any transition period (that results from a change in the Company’s fiscal year) within or immediately following those three completed fiscal years. However, a transition period between the last day of the Company’s previous fiscal year end and the first day of its new fiscal year that comprises a period of nine to twelve months would be deemed a completed fiscal year. The Company’s obligation to recover Erroneously Awarded Compensation is not dependent on if or when the Restatement is filed with the Commission.

For purposes of determining the relevant Recovery Period, the date that the Company is required to prepare a Restatement is the earlier to occur of:

(i) The date the Company’s Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare a Restatement; or

(ii) The date a court, regulator, or other legally authorized body directs the Company to prepare a Restatement.

(l) Restatement means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under United States Federal securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.

4. Miscellaneous

The Compensation Committee of the Board shall have full and final authority to make all determinations under this Policy, including but not limited to, determining the amount of the Erroneously Awarded Compensation to be recovered from the Executive Officer and the manner in which such Erroneously Awarded Compensation shall be recovered. All determinations and decisions made by the Compensation Committee’s independent directors pursuant to the provisions of this Policy shall be final, conclusive and binding on all persons, including the Company, its affiliates, its shareholders and employees.

Each award agreement or other document setting forth the terms and conditions of any Incentive-Based Compensation granted to an Executive Officer (or any person who becomes an Executive Officer) shall be deemed to include and incorporate the provisions of this Policy. The remedies specified in this Policy shall not be exclusive and shall be in addition to every other right or remedy at law or in equity that may be available to the Company.

As adopted by the Board of Directors of the Company on August 29, 2023.

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