6-K - NVS - Equibles

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 or 15d-16 OF

THE SECURITIES EXCHANGE ACT OF 1934

Report on Form 6-K dated April 25, 2023

(Commission File No. 1-15024)

Novartis AG

(Name of Registrant)

Lichtstrasse 35

4056 Basel

Switzerland

(Address of Principal Executive Offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F: x	Form 40-F: o

Exhibits:

99.1 Financial Report Q1 2023

99.2 Interim Financial Report

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Novartis AG
Date:<br>April 25, 2023	By:	/s/ PAUL PENEPENT
	Name:		Paul Penepent
	Title:		Head Group Financial Reporting and Accounting

99.1 Financial Report Q1 2023

Ad hoc announcement pursuant to Art. 53 LR<br><br> <br><br> <br><br><br> <br>FINANCIAL RESULTS	RÉSULTATS FINANCIERS	FINANZERGEBNISSE	Novartis International AG<br><br> Novartis Global Communications<br><br> CH-4002 Basel<br><br> Switzerland<br><br> https://www.novartis.com

Novartis delivers strong sales growth, robust margin expansion and major innovation milestones. Raises FY guidance

•	Q1 sales grew +8% (cc^1^, +3% USD) and core operating income grew +15% (cc, +8% USD)
o	Innovative Medicines (IM) sales grew +7% (cc, +3% USD) and core operating income +18% (cc, +11% USD)
---	---
o	IM core margin 38.7%, +360 bps cc, driven by higher sales and productivity programs
---	---
o	Growth driven by strong performance of Entresto, Pluvicto, Kesimpta, Kisqali and Scemblix
---	---
o	Sandoz sales grew +8% (cc, +4% USD) and core operating income +3% (cc, -2% USD)
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•	Operating income grew +9% (cc, 0% USD) mainly driven by higher<br> sales
---	---
•	Net income grew +14% (cc, +3% USD) mainly due to<br> higher operating income and higher interest income
---	---
•	Core EPS grew +25% (cc, +17% USD) to USD 1.71, mainly due to higher operating income and lower shares outstanding
---	---
•	Free cash flow^2^ was USD 2.7 billion (+95% USD) mainly due to higher operating income adjusted for non-cash items and favorable working capital
---	---
•	Q1 key innovation milestones:
---	---
o	Kisqali – Ph3 NATALEE trial met primary endpoint (iDFS) at interim analysis in adjuvant breast cancer
---	---
o	Cosentyx – 52 weeks positive readout from the pivotal trials in moderate-to-severe HS
---	---
o	Entresto – positive CHMP opinion for pediatric heart failure; if approved, RDP extends to<br> November 2026
---	---
o	Pluvicto – In April FDA approved Millburn facility for commercial production of Pluvicto
---	---
•	Full-year 2023 group guidance raised based on strong Q1 momentum^3^
---	---
o	Group Sales expected to grow mid-single digits (from low-to-mid single digits)
---	---
o	Group Core Opinc expected to grow high single digits (from mid-single digits)
---	---

Basel, April 25, 2023 - commenting on the quarter, Vas Narasimhan MD, CEO of Novartis, said: “Novartis delivered strong growth to start 2023, driven by our in-market growth brands, in particular Entresto, Kisqali and Kesimpta. The Pluvicto and Scemblix launches continue on their strong trajectory, and the Leqvio launch is progressing steadily. In addition, we are driving R&D productivity by prioritizing high-value medicines across our five core therapeutic areas. Our pipeline momentum gives us confidence in our growth outlook, highlighted by the NATALEE Phase 3 positive readout for Kisqali in early breast cancer, and we look forward to upcoming readouts for iptacopan in multiple indications and Pluvicto in earlier lines of therapy. Our strong start to the year and confidence in our growth drivers allow us to raise guidance for the full year 2023.”

Key figures^1^

	Q1 2023	Q1 2022	% change
	USD m	USD m	USD	cc
Net sales	12 953	12 531	3	8
Operating income	2 856	2 852	0	9
Net income	2 294	2 219	3	14
EPS (USD)	1.09	1.00	9	20
Free cash flow^2^	2 720	1 392	95
Core operating income	4 413	4 083	8	15
Core net income	3 614	3 251	11	18
Core EPS (USD)	1.71	1.46	17	25

^1^ Constant currencies (cc), core results and free cash flow are non-IFRS measures. An explanation of non-IFRS measures can be found on page 35 of the Condensed Interim Financial Report. Unless otherwise noted, all growth rates in this Release refer to same period in prior year.^^^2^^^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 page 35 of the Condensed Interim Financial Report. ^3^ Please see detailed guidance assumptions on page 6.

Strategy Update

Our focus

With our new focused strategy unveiled in 2022, Novartis is transforming into a “pure-play” Innovative Medicines business. We have a clear focus on five core therapeutic areas (cardiovascular, immunology, neuroscience, solid tumors and hematology), with multiple significant in-market and pipeline assets in each of these areas, that address high disease burden and have substantial growth potential. In addition to two established technology platforms (chemistry and biotherapeutics), three emerging platforms (gene & cell therapy, radioligand therapy, and xRNA) are being prioritized for continued investment into new R&D capabilities and manufacturing scale. Geographically, we are focused on growing in our priority geographies - the US, China, Germany and Japan.

Our priorities

1.	Accelerate growth: Renewed attention to deliver high-value medicines (NMEs) and focus on launch excellence, with a rich pipeline<br> across our core therapeutic areas.
2.	Deliver returns: Continuing to embed operational excellence and deliver improved financials. Novartis remains disciplined and<br> shareholder-focused in our approach to capital allocation, with substantial cash generation and a strong capital structure supporting continued flexibility.
---	---
3.	Strengthening foundations: Unleashing the power of our people, scaling data science and technology and continuing to build trust with society.
---	---

Sandoz planned spin-off

The planned spin-off remains on track for the second half of 2023. Completion of the transaction is subject to certain conditions, including consultation with works councils and employee representatives (as required), general market conditions, tax rulings and opinions, final Board of Directors endorsement and shareholder approval in line with Swiss corporate law. The transaction is expected to be tax neutral to Novartis.

Financials

First quarter

Net sales were USD 13.0 billion (+3%, +8% cc) in the first quarter driven by volume growth of 16 percentage points, price erosion of 4 percentage points and the negative impact from generic competition of 4 percentage points.

Operating income was USD 2.9 billion (0%, +9% cc), mainly driven by higher sales. Other income from legal matters was more than offset by higher restructuring and impairment charges.

Net income was USD 2.3 billion (+3%, +14% cc), mainly due to higher operating income and higher interest income.

EPS was USD 1.09 (+9%, +20% cc), growing faster than net income, benefiting from lower weighted average number of shares outstanding.

Core operating income was USD 4.4 billion (+8%, +15% cc). Core operating income margin was 34.1% of net sales, increasing by 1.5 percentage points (+2.2 percentage points cc).

Core net income was USD 3.6 billion (+11%, +18% cc), mainly due to higher core operating income and higher interest income.

Core EPS was USD 1.71 (+17%, +25% cc), growing faster than core net income, benefiting from lower weighted average number of shares outstanding.

Free cash flow amounted to USD 2.7 billion (+95% USD), compared to USD 1.4 billion in the prior year quarter, mainly due to higher operating income adjusted for non-cash items and favorable changes in working capital.

Innovative Medicines net sales were USD 10.6 billion (+3%, +7% cc), with volume contributing 16 percentage points to growth. Sales growth was mainly driven by Entresto, Pluvicto, Kesimpta and Kisqali partly offset by generic competition mainly for Gilenya. Generic competition had a negative impact of 5 percentage points. Pricing had a negative impact of 4 percentage points. Sales in the US were USD 4.1 billion (+11%) and in the rest of the world were USD 6.5 billion (-1%, +5% cc).

Sandoz net sales were USD 2.4 billion (+4%, +8% cc), with volume contributing 15 percentage points to growth. Sales growth was mainly driven by Europe, which benefited from strong volume growth driven by continued momentum from prior year launches and a strong cough and cold season. Pricing had a negative impact of 7 percentage points. Ex-US sales grew by +12% in cc. Global sales of Biopharmaceuticals grew to USD 518 million (+11%, +17% cc), driven by ex-US growth.

Q1 key growth drivers

Underpinning our financial results in the quarter is a continued focus on key growth drivers including:

Entresto	(USD 1,399 million, +32% cc) sustained robust demand-led growth, with increased patient share across all geographies
Pluvicto	(USD 211 million) with strong US launch performance, with demand continuing to exceed supply
Kesimpta	(USD 384 million, +100% cc) sales growth across all geographies driven by increased demand and strong access
Kisqali	(USD 415 million, +81% cc) grew strongly across all geographies, based on increasing recognition of its overall survival and quality of life benefits in HR+/HER2- advanced<br> breast cancer
Promacta/Revolade	(USD 547 million, +15% cc) grew across most regions, driven by increased use in chronic ITP and as first-line and/or second-line treatment for severe aplastic anemia
Tafinlar + Mekinist	(USD 458 million, +18% cc) sales grew across all geographies, driven by demand in BRAF+ adjuvant melanoma and NSCLC indications
Ilaris	(USD 328 million, +19% cc) showed continued growth across all geographies
Scemblix	(USD 76 million, +202% cc) continued its strong launch uptake demonstrating the high unmet need in CML
Leqvio	(USD 64 million) launch progressing steadily including expansion into new geographies
Jakavi	(USD 414 million, +13% cc) sales grew in Emerging Growth Markets, Europe and Japan, driven by strong demand in both myelofibrosis and polycythemia vera
Piqray	(USD 116 million, +61% cc) sales grew mainly in the US, benefiting from indication expansion into PIK3CA-related overgrowth spectrum (PROS)
Lutathera	(USD 149 million, +22% cc) sales grew mainly in the US and Japan due to increased demand
Cosentyx	(USD 1,076 million, -4% cc) continued demand growth across key geographies, offset by revenue deduction adjustments in the US. Ex-US sales grew +17% (cc)
Sandoz Biopharmaceuticals	(USD 518 million, +17% cc) driven by ex-US growth
Emerging Growth Markets*	Overall, grew +14% (cc). China returned to growth post COVID lockdowns. (+1% cc, USD 829 million), with Innovative Medicines growing +5%<br><br> <br>*All markets except the US, Canada, Western Europe, Japan, Australia, and New Zealand

Net sales of the top 20 Innovative Medicines products in Q1 2023

	Q1 2023	% change
	USD m	USD	cc
Entresto	1 399	28	32
Cosentyx	1 076	-7	-4
Promacta/Revolade	547	11	15
Tasigna	462	0	4
Tafinlar + Mekinist	458	14	18
Lucentis	416	-20	-15
Kisqali	415	74	81
Jakavi	414	6	13
Kesimpta	384	97	100
Xolair	354	-4	2
Sandostatin	329	3	5
Ilaris	328	15	19
Zolgensma	309	-15	-14
Gilenya	232	-62	-60
Pluvicto	211	nm	nm
Exforge Group	186	-7	-1
Galvus Group	183	-15	-9
Diovan Group	158	-17	-11
Lutathera	149	19	22
Gleevec/Glivec	147	-26	-21
Top 20 products total	8 157	4	8

nm= not meaningful

R&D update - key developments from the first quarter

New approvals

Pluvicto	In April FDA approved Millburn facility for commercial production of Pluvicto. Expected to contribute meaningfully to supply in Q3 after<br> the anticipated approval of additional lines
Tafinlar + Mekinist	Approved in the US for the treatment of pediatric patients ≥1 year of age with low-grade glioma with a BRAF V600E mutation who require systemic therapy
Hyrimoz (adalimumab)	FDA approved biosimilar Hyrimoz (adalimumab-adaz) high-concentration formulation to treat seven indications covered by the reference<br> medicine, Humira®<br><br> <br><br><br> <br>EC approved (April 3, 2023) citrate-free high concentration formulation of adalimumab biosimilar to treat all indications covered by the reference medicine, Humira®

Regulatory updates

Entresto	Positive CHMP opinion for pediatric heart failure indication. If approved, this would support extension of regulatory data<br> protection in Europe to November 2026
Denosumab biosimilar	FDA accepted BLA for proposed biosimilar denosumab. The application includes all indications covered by the reference medicines Prolia® and Xgeva®

Results from ongoing trials and other highlights

Kisqali	Ph3 NATALEE trial met its primary endpoint (iDFS) at an interim analysis. Kisqali plus ET significantly reduced the risk of disease<br> recurrence, compared to ET alone, demonstrating consistent benefit in a broad population of patients with stage II and III HR+/HER2- early breast cancer, including those with no nodal involvement. Data will be presented at an<br> upcoming meeting and submitted to regulatory authorities
Cosentyx	Long-term data from the pivotal SUNSHINE and SUNRISE trials evaluating Cosentyx in moderate-to-severe HS, demonstrated continued<br> improvement in treatment response rates with over 55% of patients achieving a HiSCR at Week 52 and over 50% of patients demonstrating a meaningful reduction in pain. Data published in Lancet and presented at the 2023 AAD annual<br> meeting
Zolgensma	Data from two long-term follow-up studies, LT-001 and LT-002, show continued efficacy and durability of Zolgensma up to 7.5 years<br> post-dosing, across a range of patient populations, with an overall benefit-risk profile that remains favorable. All pre-symptomatic children treated maintained or achieved all assessed motor milestones. Data presented at the 2023<br> MDA conference
R&D Portfolio Prioritization	Novartis continues to focus its R&D portfolio prioritizing high value medicines with transformative potential for patients. During the quarter, a comprehensive review of<br> R&D projects resulted in decisions to discontinue or out-license projects for reasons including strategic fit and commercial potential, representing approximately 10% of the Novartis pipeline.
FAP-2286	Acquired FAP-2286 (Ph1/2), a potential first-in-class radioligand therapy with the respective radioligand imaging agent, from Clovis Oncology
Bicycle Peptides	Novartis entered into research collaboration on bicyclic peptides with Bicycle Therapeutics

Capital structure and net debt

Retaining a good balance between investment in the business, a strong capital structure and attractive shareholder returns remains a priority.

In Q1 2023, Novartis repurchased a total of 31.5 million shares for USD 2.8 billion on the SIX Swiss Exchange second trading line under the up-to USD 15 billion share buyback announced in December 2021. In addition, 1.2 million shares (for an equity value of USD 0.1 billion) were repurchased from associates. In the same period, 10.5 million shares (for an equity value of USD 0.3 billion) were delivered as a result of options exercised and share deliveries related to participation plans of associates. Novartis aims to offset the dilutive impact from equity based participation plans of associates over the remainder of the year. Consequently, the total number of shares outstanding decreased by 22.2 million versus December 31, 2022. These treasury share transactions resulted in an equity decrease of USD 2.5 billion and a net cash outflow of USD 2.7 billion.

As of March 31, 2023, net debt increased to USD 15.1 billion compared to USD 7.2 billion at December 31, 2022. The increase was mainly due to the USD 7.3 billion annual dividend payment and net cash outflow for treasury share transactions of USD 2.7 billion, partially offset by USD 2.7 billion free cash flow in Q1 2023.

As of Q1 2023, the long-term credit rating for the company is A1 with Moody’s Investors Service and AA- with S&P Global Ratings.

2023 outlook raised due to strong growth momentum

Barring unforeseen events; growth vs prior year in cc

Innovative Medicines	Sales expected to grow mid-single digit (from low-to-mid single digit)<br><br> <br>Core OpInc expected to grow high single to low double digit (from mid-to-high<br> single digit)
Novartis ex. Sandoz<br><br> <br>(IM + Corporate)	Sales expected to grow mid-single digit (from low-to-mid single digit)<br><br> <br>Core OpInc expected to grow high single digit to low double digit (from mid-to-high<br><br><br> single digit)
Novartis incl. Sandoz<br><br> <br>(IM + Sandoz + Corporate)*	Sales expected to grow mid-single digit (from low-to-mid single digit)<br><br> <br>Core OpInc expected to grow high single digit (from mid-single digit)

* Novartis Group guidance, assuming Sandoz would remain within the Group for the entire FY 2023

Barring unforeseen events; growth vs prior year in cc

Sandoz	Sales expected to grow mid-single digit (from low-to-mid single digit)<br><br> <br>Core OpInc expected to decline low double digit, reflecting required stand-up investments to transition Sandoz to a separate company and continued<br> inflationary pressures

Our guidance assumes that no Sandostatin LAR generics enter in the US in 2023. We continue to expect that the planned Sandoz spin-off is completed in H2 2023.

Foreign exchange impact

If late-April exchange rates prevail for the remainder of 2023, the foreign exchange impact for the year would be negligible on net sales and negative 3 to negative 4 percentage points on core operating income. The estimated impact of exchange rates on our results is provided monthly on our website.

Key figures^1^

Group	Q1 2023	Q1 2022	% change
	USD m	USD m	USD	cc
Net sales	12 953	12 531	3	8
Operating income	2 856	2 852	0	9
As a % of sales	22.0	22.8
Core operating income	4 413	4 083	8	15
As a % of sales	34.1	32.6
Net income	2 294	2 219	3	14
EPS (USD)	1.09	1.00	9	20
Core net income	3 614	3 251	11	18
Core EPS (USD)	1.71	1.46	17	25
Cash flows from<br><br> operating activities	2 957	1 649	79
Free cash flow^2^	2 720	1 392	95
Innovative Medicines	Q1 2023	Q1 2022	% change
	USD m	restated^3^<br><br> <br>USD m	USD	cc
Net sales	10 570	10 230	3	7
Operating income	2 675	2 627	2	11
As a % of sales	25.3	25.7
Core operating income	4 088	3 672	11	18
As a % of sales	38.7	35.9
Sandoz	Q1 2023	Q1 2022	% change
	USD m	restated^3^<br><br> <br>USD m	USD	cc
Net sales	2 383	2 301	4	8
Operating income	319	394	-19	-14
As a % of sales	13.4	17.1
Core operating income	504	513	-2	3
As a % of sales	21.1	22.3
Corporate	Q1 2023	Q1 2022	% change
	USD m	restated^3^<br><br> <br>USD m	USD	cc
Operating loss	-138	-169	18	16
Core operating loss	-179	-102	-75	-78

^2^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.

^3^Restated to reflect the transfers of the Sandoz division’s biotechnology manufacturing services to other companies’ activities and the Coartem brand to the Innovative Medicines division that was effective as of January 1, 2023 (see Note 9 of the Condensed Interim Financial Report).

Detailed financial results accompanying this press release are included in the Condensed Interim Financial Report at the link below:

https://ml-eu.globenewswire.com/resource/download/c0540159-3aae-4e2d-9a9b-97f92af073e3/

Disclaimer

This press release contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, that can generally be identified by words such as “continue,” “progresses,” “remain,” “growth,” “on track,” “confidence,” “upcoming,” “prioritizing,” “expect,” “continued,” “ongoing,” “optimistic,” “outlook,” “focus,” “pipeline,” “growth,” “potential,” “expected,” “will,” “guidance,” “continuing,” “estimated,” “launch,” “continue,” “to deliver,” “transformation,” “address,” “growing,” “accelerate,” “remains,” “scaling,” “expected,” “driven,” “long-term,” “innovation,” “transformative,” “priority,” “can,” “to develop,” “to experience,” “look forward,” “momentum,” or similar expressions, or by express or implied discussions regarding potential new products, potential new indications for existing products, potential product launches, or regarding potential future revenues from any such products; or regarding potential future, pending or announced transactions; or regarding the research collaboration with Bicycle Therapeutics; or regarding potential future sales or earnings of the Group or any of its divisions; or regarding discussions of strategy, priorities, plans, expectations or intentions, including our transforming into a “pure-play” Innovative Medicines business; or regarding the Group’s liquidity or cash flow positions and its ability to meet its ongoing financial obligations and operational needs; or regarding our planned spin-off of Sandoz. 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 the forward-looking statements. You should not place undue reliance on these statements. In particular, our expectations could be affected by, among other things: liquidity or cash flow disruptions affecting our ability to meet our ongoing financial obligations and to support our ongoing business activities; the impact of a partial or complete failure of the return to normal global healthcare systems including prescription dynamics; global trends toward healthcare cost containment, including ongoing government, payer and general public pricing and reimbursement pressures and requirements for increased pricing transparency; uncertainties regarding potential significant breaches of data security or data privacy, or disruptions of our information technology systems; 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 press release; the potential that the benefits and opportunities expected from our planned spin-off of Sandoz may not be realized or may be more difficult or take longer to realize than expected; the uncertainties in the research and development of new healthcare products, including clinical trial results and additional analysis of existing clinical data; 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; safety, quality, data integrity, or manufacturing issues; uncertainties involved in the development or adoption of potentially transformational technologies and business models; uncertainties regarding actual or potential legal proceedings, investigations or disputes; our performance on environmental, social and governance measures; general political, economic and business conditions, including the effects of and efforts to mitigate pandemic diseases such as COVID-19; uncertainties regarding future global exchange rates; uncertainties regarding future demand for our products; and other risks and factors referred to in Novartis AG’s current Form 20-F on file with the US Securities and Exchange Commission. Novartis is providing the information in this press release as of this date and does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise.

All product names appearing in italics are trademarks owned by or licensed to Novartis Group companies.

Humira® is a registered trademark of Abbvie Biotechnology Ltd. Prolia® and Xgeva® are registered trademarks of Amgen Inc. Jakafi® is a registered trademark of Incyte Corporation.

About Novartis

Novartis is reimagining medicine to improve and extend people’s lives. We deliver high-value medicines that alleviate society’s greatest disease burdens through technology leadership in R&D and novel access approaches. In our quest to find new medicines, we consistently rank among the world’s top companies investing in research and development. About 103,000 people of more than 140 nationalities work together to bring Novartis products to nearly 800 million people around the world. Find out more at https://www.novartis.com.

Novartis will conduct a conference call with investors to discuss this news release today at 14:00 Central European time and 8:00 Eastern Time. A simultaneous webcast of the call for investors and other interested parties may be accessed by visiting the Novartis website. A replay will be available after the live webcast by visiting https://www.novartis.com/investors/event-calendar.

Detailed financial results accompanying this press release are included in the condensed interim financial report at the link below. Additional information is provided on Novartis divisions and pipeline of selected compounds in late stage development and a copy of today's earnings call presentation can be found at https://www.novartis.com/investors/event-calendar.

Important dates

June 04, 2023	ASCO Investor Event
June 08, 2023	Sandoz Capital Markets Day – New York
June 12, 2023	Sandoz Capital Markets Day – London
July 18, 2023	Second quarter & Half year 2023 results
October 24, 2023	Third quarter & Nine months 2023 results
November 28, 2023	R&D Day

99.2 Interim Financial Report

![](coverifr.jpg)

Novartis First Quarter 2023 Condensed Interim Financial Report – Supplementary Data

INDEX

Page

GROUP AND DIVISIONAL OPERATING PERFORMANCE

Group

Innovative Medicines

Sandoz

CASH FLOW AND GROUP BALANCE SHEET

INNOVATION REVIEW

CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Consolidated income statements

Consolidated statements of comprehensive income

Consolidated balance sheets

Consolidated statements of changes in equity

Consolidated statements of cash flows

Notes to condensed interim consolidated financial statements, including update on legal proceedings

SUPPLEMENTARY INFORMATION

CORE RESULTS

Reconciliation from IFRS results to core results

Group

Innovative Medicines

Sandoz

Corporate

FREE CASH FLOW

ADDITIONAL INFORMATION

Net debt

Share information

Effects of currency fluctuations

DISCLAIMER

Group

Key Figures

First quarter

	Q1 2023<br> USD m	Q1 2022<br> USD m	% change<br> USD	% change<br> cc^1^
Net sales to third parties	12 953	12 531	3	8
Divisional operating income^2^	2 994	3 021	-1	8
Corporate income and expense, net^2^	-138	-169	18	16
Operating income	2 856	2 852	0	9
As % of net sales	22.0	22.8
Loss from associated companies	-1	-2	nm	nm
Interest expense	-211	-201	-5	-7
Other financial income and expense	96	20	nm	nm
Income taxes	-446	-450	1	-9
Net income	2 294	2 219	3	14
Basic earnings per share (USD)	1.09	1.00	9	20
Net cash flows from operating activities	2 957	1 649	79
Free cash flow^1, 3^	2 720	1 392	95
Core^1^
Core operating income	4 413	4 083	8	15
As % of net sales	34.1	32.6
Core net income	3 614	3 251	11	18
Core basic earnings per share (USD)	1.71	1.46	17	25
^1^ Constant currencies (cc), core results and free cash flow are non-IFRS measures. An<br> explanation of non-IFRS measures can be found on page 35. Unless otherwise noted,<br> all growth rates in this release refer to same period in prior year.
^2^ Restated to reflect the transfers of the Sandoz Division's biotechnology manufacturing<br> services to other companies' activities and the Coartem brand to the Innovative<br> Medicines Division that was effective as of January 1, 2023 (see Note 9 in this Condensed<br> Interim Financial Report).
^3^ Effective January 1, 2023, Novartis revised its deﬁnition of free cash ﬂow, to deﬁne<br> free cash ﬂow as net cash ﬂows from operating activities less purchases of property,<br> plant and equipment. To aid in comparability, the prior year free cash flow amounts<br> have been revised to conform with the new free cash flow definition. See page 35 of<br> the Condensed Interim Financial Report.
nm = not meaningful

Strategy Update

Our focus

With our new focused strategy unveiled in 2022, Novartis is transforming into a “pure-play” Innovative Medicines business. We have a clear focus on five core therapeutic areas (cardiovascular, immunology, neuroscience, solid tumors and hematology), with multiple significant in-market and pipeline assets in each of these areas, that address high disease burden and have substantial growth potential. In addition to two established technology platforms (chemistry and biotherapeutics), three emerging platforms (gene & cell therapy, radioligand therapy, and xRNA) are being prioritized for continued investment into new R&D capabilities and manufacturing scale. Geographically, we are focused on growing in our priority geographies - the US, China, Germany and Japan.

Our priorities

Accelerate growth: Renewed attention to deliver high-value medicines (NMEs) and focus on launch excellence, with a rich pipeline across our core therapeutic areas.
Deliver returns: Continuing to embed operational excellence and deliver improved financials. Novartis remains disciplined and shareholder-focused in our approach to capital allocation, with substantial cash generation and a strong capital structure supporting continued flexibility.
Strengthening foundations: Unleashing the power of our people, scaling data science and technology and continuing to build trust with society.

Sandoz planned spin-off

Financials

First quarter

Net sales

Corporate income and expense, net

Corporate income and expense, which includes the cost of Group management and central services, amounted to an expense of USD 138 million in the first quarter compared to an expense of USD 169 million in the prior year, mainly driven by income from a fair value adjustment on contingent receivables related to intellectual property rights, partly offset by higher restructuring costs and project costs related to the execution of the Sandoz planned spin-off.

Operating income

Operating income was USD 2.9 billion (0%, +9% cc), mainly driven by higher sales. Other income from legal matters was more than offset by higher restructuring and impairment charges. Operating income margin was 22.0% of net sales, decreasing by 0.8 percentage points (+0.4 percentage points cc).

Core operating income was USD 4.4 billion (+8%, +15% cc) driven by mainly higher gross margin partly offset by higher other expense and R&D costs. Core operating income margin was 34.1% of net sales, increasing by 1.5 percentage points (+2.2 percentage points cc).

Interest expense and other financial income/expense

Interest expense amounted to USD 211 million and was broadly in line with the prior year. Other ﬁnancial income and expense amounted to an income of USD 96 million compared to USD 20 million in the prior year and core other

ﬁnancial income and expense amounted to an income of USD 117 million compared to USD 32 million in the prior year quarter, as higher interest income was only partly offset by currency losses.

Income taxes

The tax rate in the ﬁrst quarter was 16.3% compared to 16.9% in the prior year. The current year tax rate was favorably impacted by the effect of non-taxable income recognized related to a legal matter. Excluding this impact, the current year tax rate would have been 16.7%. The decrease from the prior year was mainly the result of a change in proﬁt mix.

The core tax rate (core taxes as a percentage of core income before tax) was 16.3% compared to 16.9% in the prior year. The decrease from the prior year was mainly the result of a change in proﬁt mix.

Net income, EPS and free cash flow

Net income was USD 2.3 billion (+3%, +14% cc), mainly due to higher operating income and higher interest income. EPS was USD 1.09 (+9%, +20% cc), growing faster than net income, benefiting from lower weighted average number of shares outstanding.

Core net income was USD 3.6 billion (+11%, +18% cc), mainly due to higher core operating income and higher interest income. Core EPS was USD 1.71 (+17%, +25% cc), growing faster than core net income, benefiting from lower weighted average number of shares outstanding.

Free cash flow amounted to USD 2.7 billion (+95% USD), compared to USD 1.4 billion in the prior year quarter. This increase was mainly driven by higher operating income adjusted for non-cash items, favorable changes in working capital and lower income taxes paid, partly offset by higher payments out of provisions.

Innovative Medicines

	Q1 2023<br> USD m	Q1 2022<br> restated<br> USD m^1^	% change<br> USD	% change<br> cc
Net sales to third parties	10 570	10 230	3	7
Operating income	2 675	2 627	2	11
As % of net sales	25.3	25.7
Core operating income	4 088	3 672	11	18
As % of net sales	38.7	35.9
^1^ Restated to reflect the transfers of the Sandoz Division's biotechnology manufacturing<br> services to other companies' activities and the Coartem brand to the Innovative<br> Medicines Division that was effective as of January 1, 2023 (see Note 9 in this Condensed<br> Interim Financial Report).

First quarter

Net sales

Net sales were USD 10.6 billion (+3%, +7% cc) with volume contributing 16 percentage points to growth. Generic competition had a negative impact of 5 percentage points and pricing had a negative impact of 4 percentage points. Sales in the US were USD 4.1 billion (+11%) and in the rest of the world USD 6.5 billion (-1%, +5% cc).

Sales growth was mainly driven by continued strong performance from Entresto (USD 1.4 billion, +28%, +32% cc), Pluvicto (USD 211 million), Kesimpta (USD 384 million, +97%, +100% cc) and Kisqali (USD 415 million, +74%, +81% cc), partly offset by generic competition mainly for Gilenya.

In the US (USD 4.1 billion, +11%), sales growth was mainly driven by Pluvicto, Entresto, Kesimpta and Kisqali, partly offset by the impact of generic competition on Gilenya. In Europe (USD 3.4 billion, -3%, +1% cc), sales growth was driven by Entresto, Kisqali and Kesimpta, partly offset by increased generic competition for Gilenya and Lucentis. Emerging Growth Markets grew +9% (+16% cc), which includes China sales of USD 0.8 billion (-2%, +5% cc), where growth was mainly driven by Entresto and Cosentyx.

Operating income

Operating income was USD 2.7 billion (+2%, +11% cc), mainly driven by higher gross margin. Other income from legal matters was more than offset by higher impairments and restructuring charges. Operating income margin was 25.3% of net sales, decreasing 0.4 percentage points (+0.9 percentage points in cc).

Core adjustments were USD 1.4 billion, mainly due to amortization, restructuring and impairment charges, compared to USD 1.0 billion in prior year. Core adjustments increased compared to prior year, mainly due to higher impairments and restructuring charges, partly offset by other income from legal matters.

Core operating income was USD 4.1 billion (+11%, +18% cc), mainly driven by higher gross margin. Core operating income margin was 38.7% of net sales, increasing 2.8 percentage points (+3.6 percentage points cc). Other revenue and sales to other segments as a percentage of sales decreased by 0.2 percentage points (cc). Core cost of goods sold as a percentage of sales decreased by 0.5 percentage points (cc). Core R&D expenses as a percentage of net sales decreased by 1.0 percentage points (cc). Core SG&A expenses as a percentage of net sales decreased by 2.6 percentage points (cc). Core other income and expense as a percentage of net sales decreased the margin by 0.3 percentage points (cc).

Product commentary (relating to Q1 performance)

Cardiovascular

	Q1 2023	Q1 2022	% change	% change
	USD m	USD m	USD	cc
Cardiovascular
Entresto	1 399	1 093	28	32
Leqvio	64	14	nm	nm
Total Cardiovascular	1 463	1 107	32	36
nm = not meaningful

Entresto (USD 1,399 million, +28%, +32% cc) sustained robust demand-led growth, with increased patient share across all geographies. Entresto is positioned in HF guidelines as a first choice treatment for patients with HFrEF and benefits from the adoption of guideline-directed medical therapy across geographies. In the US, the 2022 AHA/ACC/HFSA HF Guideline positioned Entresto as the first choice RASi versus ACEi/ARB in patients with NYHA Class II to III HFrEF, and recognized Entresto for patients with HFmrEF and HFpEF. In China and Japan, Entresto volume growth is fueled by heart failure as well as increased penetration in hypertension. As announced in March 2023, Entresto is included in the 2023 China Hypertension Treatment Guideline as a new drug category and 1st line treatment option. Entresto received positive CHMP opinion for pediatric heart failure indication. If approved, this would support extension of regulatory data protection in Europe to November 2026. It is estimated that more than 11 million patients are on treatment with Entresto globally. In the US, Novartis is in ANDA litigation with generic manufacturers.

Leqvio (USD 64 million) launch in the US and other markets is ongoing, with focus on patient on-boarding, removing access hurdles and enhancing medical education. In the US, Leqvio is covered at or near label for 76% of patients. More than 50% of Leqvio source of business in the US is now through “Buy and Bill” acquisition model. Leqvio is now approved in 76 countries. Novartis obtained global rights to develop, manufacture and commercialize Leqvio under a license and collaboration agreement with Alnylam Pharmaceuticals.

Immunology

	Q1 2023	Q1 2022	% change	% change
	USD m	USD m	USD	cc
Immunology
Cosentyx	1 076	1 159	-7	-4
Xolair	354	368	-4	2
Ilaris	328	285	15	19
Other		1	nm	nm
Total Immunology	1 758	1 813	-3	1
Net sales reflect Xolair sales for all indications.
nm = not meaningful

Cosentyx (USD 1,076 million, -7%, -4% cc) continued volume growth across key geographies, offset by revenue deduction adjustments in the US, mainly related to channel mix. Ex-US sales grew +17% (cc). 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 1 million patients worldwide. Recently presented data showed durable efficacy and symptom improvement at 52 weeks in majority of moderate-to-severe hidradenitis suppurativa patients treated with Cosentyx.

Xolair (USD 354 million, -4%, +2% cc) sales grew (cc) in Emerging Growth Markets offset by lower sales in other markets. 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. 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 328 million, +15%, +19% cc) showed continued growth across all geographies. Contributors to growth include the Still’s disease indications (SJIA/AOSD) in the US and Europe, as well as strong performance for the Familial Mediterranean Fever (FMF) indication in key markets worldwide.

Neuroscience

	Q1 2023	Q1 2022	% change	% change
	USD m	USD m	USD	cc
Neuroscience
Kesimpta	384	195	97	100
Zolgensma	309	363	-15	-14
Mayzent	89	79	13	14
Aimovig	61	54	13	17
Other		1	nm	nm
Total Neuroscience	843	692	22	24
nm = not meaningful

Kesimpta (USD 384 million, +97%, +100% cc) sales grew across all geographies driven by increased demand and strong access. 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 83 countries with more than 42,000 patients treated.

Zolgensma (USD 309 million, -15%, -14% cc) sales declined mainly in Europe, mainly due to price mix and other one-time events in Q1 2022 as number of patients was relatively stable. Zolgensma is now approved in 48 countries.

Mayzent (USD 89 million, +13%, +14% cc) sales grew mainly in Europe and Emerging Growth Markets, partly offset by a decline in the US. Sales continued to grow in patients with multiple sclerosis 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 61 million, ex-US, ex-Japan +13%, +17% cc) sales grew in Europe and Emerging Growth Markets. Aimovig is reimbursed in 32 markets and has been prescribed to over 780,000 patients worldwide.

SOLID TUMORS

	Q1 2023	Q1 2022	% change	% change
	USD m	USD m	USD	cc
Solid Tumors
Tafinlar + Mekinist^1^	458	403	14	18
Kisqali	415	239	74	81
Pluvicto	211	2	nm	nm
Lutathera	149	125	19	22
Piqray	116	73	59	61
Votrient	105	129	-19	-16
Tabrecta	36	31	16	18
Other	1		nm	nm
Total Solid Tumors	1 491	1 002	49	53
^1^ Majority of sales for Mekinist and Tafinlar are combination, but both<br> can be used as monotherapy.
nm = not meaningful

Tafinlar + Mekinist (USD 458 million, +14%, +18% 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. The US also posted strong growth in the tumor agnostic indication (approved in June 2022). Tafinlar + Mekinist remains the worldwide targeted therapy leader in BRAF+ melanoma.

Kisqali (USD 415 million, +74%, +81% cc) sales grew strongly across all geographies, based on increasing recognition of its overall survival and quality of life benefits in HR+/HER2- advanced breast cancer. In January 2023, the USA National Comprehensive Cancer Network Clinical Practice Guidelines in Oncology (NCCN Guidelines) released an update recommending Kisqali as the only Category 1 Preferred CKD4/6 inhibitor for first-line treatment of patients with HR+/HER2- advanced breast cancer in combination with an aromatase inhibitor (AI). In March 2023, we announced positive topline results from an interim analysis of NATALEE, a Phase III trial evaluating Kisqali plus

endocrine therapy in a broad population of patients with HR+/HER2- early breast cancer at risk of recurrence. Results will be presented at an upcoming medical meeting and submitted to regulatory authorities worldwide. Novartis is in US ANDA litigation with a generic manufacturer.

Pluvicto (USD 211 million) continues to see strong demand in the US as 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). In Q1 2023, we completed a filing to the FDA for expedited review and approval of commercial production of Pluvicto for US patients at our radioligand manufacturing facility in Millburn, NJ.

Lutathera (USD 149 million, +19%, +22% cc) sales grew mainly in the US and Japan, where growth in the US was driven by the new targeted strategy and RLT field detailing focused on Lutathera and in Japan, growth was driven by increased demand following the transfer of the marketing authorization (MA) back to Novartis from Fujifilm Toyama Chemical.

Piqray (USD 116 million, +59%, +61% cc) sales grew mainly in the US, benefiting from indication expansion into PIK3CA-related overgrowth spectrum (PROS). In addition to 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.

Votrient (USD 105 million, -19%, -16% cc) sales declined due to increased competition, especially from immuno-oncology agents in metastatic renal cell carcinoma.

Tabrecta (USD 36 million, +16%, +18% 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.

HEMATOLOGY

	Q1 2023	Q1 2022	% change	% change
	USD m	USD m	USD	cc
Hematology
Promacta/Revolade	547	491	11	15
Tasigna	462	461	0	4
Jakavi	414	389	6	13
Kymriah	135	127	6	11
Scemblix	76	25	204	202
Adakveo	52	44	18	18
Other		1	nm	nm
Total Hematology	1 686	1 538	10	14
nm = not meaningful

Promacta/Revolade (USD 547 million, +11%, +15% cc) showed growth across all geographies, 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 462 million, 0%, +4% cc) sales grew in Emerging Growth Markets and the US, partly offset by declines in Europe and Japan.

Jakavi (USD 414 million, +6%, +13% cc) sales grew in Emerging Growth Markets, Europe and Japan, driven by strong demand in both myelofibrosis and polycythemia vera indications. As per the Incyte/Novartis License Agreement, Incyte has rights in the US to exclusively develop and commercialize ruxolitinib for all indications under a different brand name Jakafi^®^.

Kymriah (USD 135 million, +6%, +11% cc) sales grew mainly in Emerging Growth Markets, Japan and the US, partly offset by decline in Europe.

Scemblix (USD 76 million, +204%, +202% cc) continued strong growth mainly in the US and Europe, 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, or who have the T315I mutation.

Adakveo (USD 52 million, +18%, +18% cc) sales grew mainly in the US, treating patients with vaso-occlusive crises caused by sickle cell disease.

Other promoted brands

	Q1 2023	Q1 2022	% change	% change
	USD m	USD m	USD	cc
Other Promoted Brands
Ultibro Group	114	132	-14	-8
Xiidra	89	107	-17	-16
Beovu	51	48	6	9
Other respiratory	25	19	32	41
Total Other Promoted Brands	279	306	-9	-5
Total Promoted Brands^1^	7 520	6 458	16	20
^1^ Total Promoted Brands refer to the sum of Total Other Promoted Brands and all Therapeutic<br> Areas brands (Hematology, Solid Tumors, Immunology, Neuroscience and Cardiovascular).

Ultibro Group (USD 114 million, -14%, -8% cc) sales declined mainly in Europe and Japan due to competition, partly offset by growth in China. Ultibro Group consists of Ultibro Breezhaler, Seebri Breezhaler and Onbrez Breezhaler.

Xiidra (USD 89 million, -17%, -16% cc) 97% of the sales are in the US where the variance is driven by rebates. In the US, Novartis is in ANDA litigation with a generic manufacturer.

Beovu (USD 51 million, +6%, +9% cc) sales grew in Europe, Japan and Emerging Growth Markets, benefitting from 6 new DME indication approvals in Q1 2023, partly offset by a decline in the US.

Established BRANDS

	Q1 2023	Q1 2022	% change	% change
	USD m	USD m	USD	cc
Established Brands
Lucentis	416	520	-20	-15
Sandostatin	329	320	3	5
Gilenya	232	605	-62	-60
Exforge Group	186	200	-7	-1
Galvus Group	183	216	-15	-9
Diovan Group	158	191	-17	-11
Gleevec/Glivec	147	198	-26	-21
Afinitor/Votubia	110	138	-20	-16
Contract manufacturing^1^	123	99	24	26
Other^2^	1 166	1 285	-9	-4
Total Established Brands^1, 2^	3 050	3 772	-19	-15
^1^ Q1 2022 restated to reflect the transfer of the Sandoz Division’s biotechnology manufacturing<br> services to other companies’ activities to the Innovative Medicines Division that<br> was effective as of January 1, 2023.
^2^ Q1 2022 restated to reflect the transfer of the Coartem brand from the Sandoz<br> Division to the Innovative Medicines Division that was effective as of January 1,<br> 2023.

Lucentis (USD 416 million, -20%, -15% cc) sales declined in Europe, Emerging Growth Markets and Japan mainly due to competition.

Gilenya (USD 232 million, -62%, -60% cc) sales declined due to generic competition across all geographies. Novartis is in litigation against generic manufacturers on the dosing regimen patent and on the method of treatment patent in the US, and on the dosing regimen patent in Europe***.***

Sandoz

	Q1 2023<br> USD m	Q1 2022<br> restated<br> USD m^1^	% change<br> USD	% change<br> cc
Net sales to third parties	2 383	2 301	4	8
Operating income	319	394	-19	-14
As % of net sales	13.4	17.1
Core operating income	504	513	-2	3
As % of net sales	21.1	22.3
^1^ Restated to reflect the transfers of the Sandoz Division's biotechnology manufacturing<br> services to other companies' activities and the Coartem brand to the Innovative<br> Medicines Division that was effective as of January 1, 2023 (see Note 9 in this Condensed<br> Interim Financial Report).

First quarter

Net sales

Sandoz net sales were USD 2.4 billion (+4%, +8% cc), with volume contributing 15 percentage points to growth. Pricing had a negative impact of 7 percentage points. Sales growth was mainly driven by Europe, which benefited from strong volume growth driven by continued momentum from prior year launches and a strong cough and cold season. Ex-US sales grew by +12% in cc.

Sales in Europe were USD 1.4 billion (+11%, +16% cc), in the US USD 380 million (-7%), in Asia / Africa / Australasia USD 377 million (-7%, +3% cc) and in Canada and Latin America USD 260 million (+3%, +7% cc).

Retail sales were USD 1.8 billion (+1%, +6% cc). Total Anti-Infectives sales were USD 297 million (+10%, +15% cc).

Global sales of Biopharmaceuticals grew to USD 518 million (+11%, +17% cc), driven by growth ex-US.

Operating income

Operating income was USD 319 million (-19%, -14% cc), with the decline mainly due to higher legal expenses, higher SG&A investments to drive sales growth, and lower divestment income, partly offset by higher sales and improved product mix. The full impact of inflation on production costs will only be realized in subsequent periods, after the sell-through of inventory produced at lower cost in the prior year. Operating income margin was 13.4% of net sales, decreasing 3.7 percentage points (-3.4 percentage points in cc).

Core adjustments were USD 185 million, including USD 54 million of amortization. Prior year core adjustments were USD 119 million including USD 58 million of amortization. The change in core adjustments compared to prior year was mainly due to higher legal settlements.

Core operating income was USD 504 million (-2%, +3% cc), mainly driven by higher sales and improved product mix partly offset by higher SG&A investments and lower divestment income. Core operating income margin was 21.1% of net sales, decreasing by 1.2 percentage points (-1.0 percentage points cc). Core gross margin as a percentage of sales increased by 1.6 percentage points (cc) mainly due to improved product mix, as the full impact of inflation on production costs will only be realized in subsequent periods, after the sell-through of inventory produced at lower cost in the prior year. Core R&D expenses as a percentage of net sales were in line with the prior year (cc). Core SG&A expenses as a percentage of net sales increased by 0.7 percentage points (cc). Core Other income and expense as a percentage of net sales decreased the margin by 1.9 percentage points (cc), mainly due to lower divestment income.

Group Cash Flow and Balance Sheet

Cash Flow

First quarter

Net cash flows from operating activities amounted to USD 3.0 billion, compared with USD 1.6 billion in the prior year quarter. This increase was mainly driven by higher net income adjusted for non-cash items and other adjustments, including divestment gains, favorable changes in working capital and lower income taxes paid, partly offset by higher payments out of provisions.

Net cash inflows from investing activities amounted to USD 10.6 billion, compared with USD 9.4 billion in the prior year quarter.

The current year quarter cash inflows were mainly driven by net proceeds of USD 10.9 billion from the sale of marketable securities, commodities and time deposits; USD 0.2 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 0.2 billion for purchases of intangible assets and USD 0.2 billion for purchases of property, plant and equipment.

In the prior year quarter, net cash inflows from investing activities of USD 9.4 billion were driven by USD 10.9 billion net proceeds from the sale of marketable securities, commodities and time deposits; and USD 0.2 billion from the sale of intangible assets, financial assets and property, plant and equipment. These cash inflows were partly offset by USD 0.8 billion cash outflows for acquisitions and divestments of businesses, net (primarily the acquisition of Gyroscope Therapeutics Holdings plc); and USD 0.9 billion for purchases of intangible assets, property, plant and equipment and of financial assets.

Net cash outflows used in financing activities amounted to USD 9.2 billion, compared with USD 9.5 billion in the prior year quarter.

The current year quarter cash outflows were driven by USD 7.3 billion for the dividend payment; and USD 2.7 billion for net treasury share transactions. Payments of lease liabilities and other financing cash flows resulted in a net cash outflow of USD 0.2 billion. These cash outflows were partly offset by cash inflows of USD 1.0 billion from the net increase in current financial debts.

In the prior year quarter, net cash outflows used in financing activities of USD 9.5 billion were driven by USD 7.5 billion for the dividend payment; USD 2.4 billion for net treasury share transactions and USD 0.1 billion payments for lease liabilities. These cash outflows were partly offset by cash inflows of USD 0.5 billion from the net increase in current financial debts.

Free cash flow amounted to USD 2.7 billion (+95% USD), compared with USD 1.4 billion in the prior year quarter. This increase was mainly driven by higher operating income adjusted for non-cash items, favorable changes in working capital and lower income taxes paid, partly offset by higher payments out of provisions.

Balance sheet

Assets

Total non-current assets of USD 80.1 billion decreased by USD 0.4 billion compared to December 31, 2022.

Intangible assets other than goodwill decreased by USD 1.2 billion mainly due to amortization and impairments, partially offset by additions and favorable currency translation adjustments.

Goodwill increased by USD 0.2 billion due to favorable currency translation adjustments.

Deferred tax assets increased by USD 0.3 billion and property, plant and equipment, 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 32.1 billion at March 31, 2023 decreased by USD 4.8 billion compared to December 31, 2022.

Cash and cash equivalents, marketable securities, commodities, time deposits and derivative financial instruments decreased by USD 6.7 billion mainly due to the dividend payment, and purchases of treasury shares, offset by the cash generated through operating activities.

Inventories increased by USD 0.7 billion and trade receivables increased by USD 0.9 billion. Other current assets increased by USD 0.3 billion and income tax receivables were broadly in line with December 31, 2022.

Liabilities

Total non-current liabilities of USD 29.6 billion increased by USD 0.2 billion compared to December 31, 2022.

Non-current financial debts increased by USD 0.2 billion and 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 30.5 billion increased by USD 1.9 billion compared to December 31, 2022.

Current financial debts and derivative financial instruments increased by USD 1.0 billion, mainly due to the issuance of commercial paper notes under the US and Japanese commercial paper programs.

Trade payables and current income tax liabilities increased by USD 0.3 billion and USD 0.4 billion, respectively. Provisions and other current liabilities and current lease liabilities were broadly in line with December 31, 2022.

Equity

The Group`s equity of USD 52.1 billion decreased by USD 7.3 billion compared to December 31, 2022. This decrease was mainly due to the cash-dividend payment of USD 7.3 billion and purchases of treasury shares of USD 2.9 billion partially offset by the net income of USD 2.3 billion, favorable currency translation differences of USD 0.3 billion, exercise of options and employee transactions of USD 0.2 billion, and equity-based compensation of USD 0.2 billion.

Net debt and debt/equity ratio

The Group’s liquidity amounted to USD 12.3 billion at March 31, 2023, compared to USD 18.9 billion on December 31, 2022. Total non-current and current financial debts, including derivatives, amounted to USD 27.4 billion at March 31, 2023 compared to USD 26.2 billion at December 31, 2022.

The debt/equity ratio were 0.52:1 at March 31, 2023, compared to 0.44:1 at December 31, 2022. As of March 31, 2023 the net debt was USD 15.1 billion, compared to USD 7.2 billion on December 31, 2022.

Innovation Review

Novartis continues to focus its R&D portfolio prioritizing high value medicines with transformative potential for patients. During the quarter, a comprehensive review of R&D projects resulted in decisions to discontinue or out-license projects for reasons including strategic fit and commercial potential, representing approximately 10% of the Novartis pipeline. We now focus on ~136 projects in clinical development.

Selected Innovative Medicines projects awaiting regulatory decisions

		Completed submissions
Product	Indication	US	EU	Japan	News update
Cosentyx	300mg auto-injector <br> and pre-filled syringe	Q4 2022	Approved	Approved
Cosentyx	Intravenous formulation for <br> psoriatic arthritis (PsA), <br> ankylosing spondylitis (AS), <br> and non-radiographic axial <br> SpA (nr-axSpA)	Q4 2022
Cosentyx	Hidradenitis suppurativa	Q3 2022	Q2 2022
Entresto	Heart failure,<br> pediatrics	Approved	Q2 2022		– CHMP positive opinion; if approved, this would <br> support extension of the regulatory data <br> protection to November 2026
Jakavi	Acute graft-versus-host <br> disease (GvHD)		Approved	Q1 2021
	Chronic GvHD		Approved	Q1 2021
SEG101<br>(crizanlizumab)	Sickle cell disease, pediatrics				– Ph3 STAND study did not show<br> superiority compared to placebo
VDT482 <br> (tislelizumab)	2L Esophageal cancer (ESCC)	Q3 2021	Q1 2022		– FDA site inspection planned for Q2 2023
	NSCLC		Q1 2022

Selected Innovative Medicines pipeline projects

Compound/<br>product	Potential indication/<br> Disease area	First planned<br> submissions	Current <br> Phase	News update
Aimovig	Migraine, pediatrics	≥2026	3
AVXS-101 <br>(OAV101)	Spinal muscular atrophy <br> (IT formulation)	2025	3
Beovu	Diabetic retinopathy	2025	3
CFZ533<br>(iscalimab)	Sjögren's syndrome	≥2026	2
Coartem	Malaria, uncomplicated (<5 kg patients)	2024	3	– Submission will use the MAGHP procedure<br> in Switzerland to facilitate rapid approval in <br> developing countries
Cosentyx	Giant cell arteritis	2025	3
	Polymyalgia rheumatica	≥2026	3	– Ph3 REPLENISH initiated
	Rotator cuff tendinopathy	≥2026	3	– Ph3 initiating
	Lupus nephritis	≥2026	3
JDQ443	Non-small cell lung cancer, 2/3L	2024	3
	Non-small cell lung cancer (combos)	≥2026	2
KAE609 <br> (cipargamin)	Malaria, uncomplicated	≥2026	2
	Malaria, severe	≥2026	2
KLU156 <br>(ganaplacide <br>+ lumefantrine)	Malaria, uncomplicated	≥2026	2	– FDA Orphan Drug designation <br> – FDA Fast Track designation <br> for the ganaplacide-containing combination<br> therapy

Compound/<br>product	Potential indication/<br> Disease area	First planned<br> submissions	Current <br> Phase	News update
Kisqali + <br>endocrine therapy	Hormone receptor-positive <br> (HR+)/human epidermal growth <br> factor receptor 2-negative (HER2-)<br> early breast cancer (adjuvant)	2023	3	– Trial met primary endpoint at interim analysis <br> demonstrating clinically meaningful benefit in<br> broad population of patients
Leqvio	Secondary prevention of cardiovascular <br> events in patients with elevated levels of LDL-C	≥2026	3
	Primary prevention CVRR	≥2026	3	– Ph3 VICTORION-1P initiated
LNA043	Osteoarthritis	≥2026	2	– FDA Fast Track designation
LNP023 <br> (iptacopan)	Paroxysmal nocturnal hemoglobinuria	2023	3	– FDA, EU Orphan Drug designation<br> – FDA Breakthrough Therapy designation<br> – China Breakthrough Therapy designation <br> granted<br> – Ph3 APPOINT-PNH data presentation <br> at EBMT
	IgA nephropathy	2024	3	– EU Orphan Drug designation
	C3 glomerulopathy	2024	3	– EU Orphan Drug designation <br> – EU PRIME designation <br> – FDA Rare Pediatric designation <br> – China Breakthrough Therapy designation <br> – Enrollment (of the adult cohort) completed
	IC-MPGN	≥2026	3	– Ph3 start planned in H2 2023
	Atypical haemolytic uraemic syndrome	≥2026	3
LOU064 <br> (remibrutinib)	Chronic spontaneous urticaria	2024	3
	Multiple sclerosis	≥2026	3
	Sjögren's syndrome	≥2026	2
Lutathera	Gastroenteropancreatic <br> neuroendocrine tumors, <br> 1L in G2/3 tumors	2023	3
^177^Lu-NeoB	Multiple solid tumors	≥2026	1
LXE408	Visceral leishmaniasis	≥2026	2
MBG453 <br> (sabatolimab)	Myelodysplastic syndrome	2024	3	– FDA Fast Track designation <br> – EU Orphan Drug designation
	Unfit acute myeloid leukemia	≥2026	2
MIJ821 <br>(onfasprodil)	Depression	≥2026	2
NIS793	1L Pancreatic cancer	2025	3	– FDA Orphan Drug designation
Piqray	Ovarian cancer	2023	3
Pluvicto	Metastatic castration-resistant <br> prostate cancer pre-taxane	2023	3
	Metastatic hormone sensitive prostate cancer	2024	3
PPY988 <br>(GT005)	Geographic atrophy	≥2026	2	– Gyroscope acquisition
QGE031 <br>(ligelizumab)	Food allergy	≥2026	3
SAF312<br>(libvatrep)	Chronic ocular surface pain	≥2026	2
Scemblix	1L Chronic myeloid leukemia	2024	3	– Submission expected in 2024 vs 2025<br> due to fast enrollment
TQJ230 <br>(pelacarsen)	Secondary prevention of cardiovascular <br> events in patients with elevated levels <br> of lipoprotein(a)	2025	3	– FDA Fast Track designation <br> – China Breakthrough Therapy designation

Compound/<br>product	Potential indication/<br> Disease area	First planned<br> submissions	Current <br> Phase	News update
VAY736 <br> (ianalumab)	Auto-immune hepatitis	≥2026	2
	Sjögren’s syndrome	≥2026	3	– FDA Fast Track designation
	Lupus nephritis	≥2026	3
	Systemic lupus erythematosus	≥2026	3	– Ph3 studies SIRIUS-SLE 1 and 2 initiated
	1L Immune thrombocytopenia	≥2026	3	– Ph3 study VAYHIT1 initiated
	2L Immune thrombocytopenia	≥2026	3	– Ph3 study VAYHIT2 initiatied
	warm Autoimmune hemolytic anemia	≥2026	3
VDT482 <br> (tislelizumab)	1L Nasopharyngeal carcinoma	2023	3
	1L Gastric cancer	2023	3
	1L ESCC	2023	3
	Localized ESCC	2024	3
	1L Hepatocellular carcinoma	2023	3
	1L Small cell lung cancer	2024	3
	1L Urothelial cell carcinoma	≥2026	3
	Adj/Neo adj. NSCLC	≥2026	3
VPM087 <br>(gevokizumab)	Colorectal cancer, 1L		1	– Project will be discontinued to prioritize<br> other key programs in portfolio
Xolair	Food allergy	2023	3
YTB323	Lupus nephritis	≥2026	2	– Study initiated
	1L High-risk large B-cell lymphoma	≥2026	2
XXB750	Hypertension	≥2026	2
Business <br> development<br> updates				– Acquired FAP-2286 (Ph1/2), a <br> potential first-in-class radioligand therapy <br> with the respective radioligand imaging <br> agent, from Clovis Oncology
				– Entered into research collaboration<br> on bicyclic peptides with Bicycle <br> Therapeutics

Selected Sandoz approvals and pipeline projects

Project/<br>Compound	Potential indication/ <br> Disease area	News update
GP2411 <br>(denosumab)	Osteoporosis (same as originator)	– US FDA accepted BLA
SOK583<br>(aflibercept)	Ophthalmology (same as originator)	– In Ph3
Insulin glargine, <br>lispro, aspart	Diabetes	– Collaboration with Gan & Lee<br> – Insulin glargine in registration
Natalizumab	Multiple sclerosis and Crohn’s disease	– Collaboration Polpharma Biologics<br> – In registration
Trastuzumab	HER2-positive cancer tumors	– Collaboration EirGenix <br> – In registration
Bevacizumab	Solid tumors	– Collaboration Bio-Thera Solutions<br> – In registration

Condensed Interim Consolidated Financial Statements

Consolidated income statements

First quarter (unaudited)

( millions unless indicated otherwise)	Q1 2023	Q1 2022
Net sales to third parties	12 953	12 531
Other revenues	255	283
Cost of goods sold	-3 931	-3 856
Gross profit	9 277	8 958
Selling, general and administration	-3 443	-3 512
Research and development	-2 794	-2 320
Other income	970	226
Other expense	-1 154	-500
Operating income	2 856	2 852
Loss from associated companies	-1	-2
Interest expense	-211	-201
Other financial income and expense	96	20
Income before taxes	2 740	2 669
Income taxes	-446	-450
Net income	2 294	2 219
Attributable to:
Shareholders of Novartis AG	2 293	2 222
Non-controlling interests	1	-3
Weighted average number of shares outstanding – Basic (million)	2 110	2 225
Basic earnings per share () 1	1.09	1.00
Weighted average number of shares outstanding – Diluted (million)	2 120	2 237
Diluted earnings per share () 1	1.08	0.99
1 Earnings per share (EPS) is calculated on the amount of net income attributable to<br> shareholders of Novartis AG.

All values are in US Dollars.

Consolidated statements of comprehensive income

First quarter (unaudited)

(USD millions)	Q1 2023	Q1 2022
Net income	2 294	2 219
Other comprehensive income
Items that are or may be recycled into the consolidated income statement
Net investment hedge, net of taxes	-35	25
Currency translation effects, net of taxes	306	-270
Total of items that are or may be recycled	271	-245
Items that will never be recycled into the consolidated income statement
Actuarial (losses)/gains from defined benefit plans, net of taxes	-58	1 867
Fair value adjustments on equity securities, net of taxes	-44	-180
Total of items that will never be recycled	-102	1 687
Total comprehensive income	2 463	3 661
Attributable to:
Shareholders of Novartis AG	2 461	3 664
Non-controlling interests	2	-3

Consolidated balance sheets

(USD millions)	Note	Mar 31, <br> 2023<br> (unaudited)	Dec 31, <br> 2022<br> (audited)
Assets
Non-current assets
Property, plant and equipment	9	10 841	10 764
Right-of-use assets		1 507	1 431
Goodwill	9	29 481	29 301
Intangible assets other than goodwill	9	30 451	31 644
Investments in associated companies		130	143
Deferred tax assets		4 081	3 739
Financial assets		2 425	2 411
Other non-current assets		1 211	1 110
Total non-current assets		80 127	80 543
Current assets
Inventories		7 886	7 175
Trade receivables		8 916	8 066
Income tax receivables		267	268
Marketable securities, commodities, time deposits and derivative financial instruments		260	11 413
Cash and cash equivalents		12 000	7 517
Other current assets		2 785	2 471
Total current assets		32 114	36 910
Total assets		112 241	117 453
Equity and liabilities
Equity
Share capital		842	890
Treasury shares		-36	-92
Reserves		51 253	58 544
Equity attributable to Novartis AG shareholders		52 059	59 342
Non-controlling interests		83	81
Total equity		52 142	59 423
Liabilities
Non-current liabilities
Financial debts		20 396	20 244
Lease liabilities		1 589	1 538
Deferred tax liabilities		2 727	2 686
Provisions and other non-current liabilities		4 838	4 906
Total non-current liabilities		29 550	29 374
Current liabilities
Trade payables		5 426	5 146
Financial debts and derivative financial instruments		6 968	5 931
Lease liabilities		251	251
Current income tax liabilities		2 966	2 533
Provisions and other current liabilities		14 938	14 795
Total current liabilities		30 549	28 656
Total liabilities		60 099	58 030
Total equity and liabilities		112 241	117 453

Consolidated statements of changes in equity

First quarter (unaudited)

				Reserves
(USD millions)	Note	Share<br> capital	Treasury<br> shares	Retained<br> earnings	Total value<br> adjustments	Issued share <br> capital and <br> reserves <br> attributable <br> to Novartis <br> shareholders	Non-<br> controlling<br> interests	Total<br> equity
Total equity at January 1, 2023		890	-92	63 540	-4 996	59 342	81	59 423
Net income				2 293		2 293	1	2 294
Other comprehensive income					168	168	1	169
Total comprehensive income				2 293	168	2 461	2	2 463
Dividends				-7 255		-7 255		-7 255
Purchase of treasury shares			-18	-2 859		-2 877		-2 877
Reduction of share capital		-48	68	-20
Exercise of options and employee transactions			2	151		153		153
Equity-based compensation			4	187		191		191
Taxes on treasury share transactions				8		8		8
Fair value adjustments on financial assets sold				8	-8
Other movements	4.3			36		36		36
Total of other equity movements		-48	56	-9 744	-8	-9 744		-9 744
Total equity at March 31, 2023		842	-36	56 089	-4 836	52 059	83	52 142
				Reserves
---	---	---	---	---	---	---	---	---
(USD millions)	Note	Share<br> capital	Treasury<br> shares	Retained<br> earnings	Total value<br> adjustments	Issued share <br> capital and <br> reserves <br> attributable <br> to Novartis <br> shareholders	Non-<br> controlling<br> interests	Total<br> equity
Total equity at January 1, 2022		901	-48	70 989	-4 187	67 655	167	67 822
Net income				2 222		2 222	-3	2 219
Other comprehensive income					1 442	1 442		1 442
Total comprehensive income				2 222	1 442	3 664	-3	3 661
Dividends				-7 506		-7 506		-7 506
Purchase of treasury shares			-17	-2 790		-2 807		-2 807
Exercise of options and employee transactions			1	92		93		93
Equity-based compensation			4	229		233		233
Shares delivered to Alcon employees <br>as a result of the Alcon spin-off			0	5		5		5
Taxes on treasury share transactions				10		10		10
Decrease of treasury share repurchase obligation <br>under a share buyback trading plan	4.2			170		170		170
Fair value adjustments on financial assets sold				7	-7
Other movements	4.3			23		23		23
Total of other equity movements			-12	-9 760	-7	-9 779		-9 779
Total equity at March 31, 2022		901	-60	63 451	-2 752	61 540	164	61 704

Consolidated statements of cash flows

First quarter (unaudited)

(USD millions)	Note	Q1 2023	Q1 2022
Net income		2 294	2 219
Adjustments to reconcile net income to net cash flows from operating activities
Reversal of non-cash items and other adjustments	6.1	3 007	2 353
Dividends received from associated companies and others		5
Interest received		256	17
Interest paid		-123	-110
Other financial receipts		80
Other financial payments		-6	-30
Income taxes paid		-348	-633
Net cash flows from operating activities before working capital <br>and provision changes		5 165	3 816
Payments out of provisions and other net cash movements in non-current liabilities		-704	-156
Change in net current assets and other operating cash flow items	6.2	-1 504	-2 011
Net cash flows from operating activities		2 957	1 649
Purchases of property, plant and equipment		-237	-257
Proceeds from sale of property, plant and equipment		32	33
Purchases of intangible assets		-233	-602
Proceeds from sale of intangible assets		130	66
Purchases of financial assets		-42	-35
Proceeds from sale of financial assets		64	66
Acquisitions and divestments of interests in associated companies, net		-3	-18
Acquisitions and divestments of businesses, net	6.3	-39	-821
Purchases of marketable securities, commodities and time deposits		-65	-4 221
Proceeds from sale of marketable securities, commodities and time deposits		11 014	15 154
Net cash flows from investing activities		10 621	9 365
Dividends paid to shareholders of Novartis AG		-7 255	-7 506
Acquisitions of treasury shares		-2 886	-2 542
Proceeds from exercised options and other treasury share transactions, net		159	94
Increase in non-current financial debts		2	3
Change in current financial debts		1 022	478
Payments of lease liabilities		-75	-77
Other financing cash flows, net		-169	22
Net cash flows used in financing activities		-9 202	-9 528
Net change in cash and cash equivalents before effect of exchange rate changes		4 376	1 486
Effect of exchange rate changes on cash and cash equivalents		107	-41
Net change in cash and cash equivalents		4 483	1 445
Cash and cash equivalents at January 1		7 517	12 407
Cash and cash equivalents at March 31		12 000	13 852

Notes to the Condensed Interim Consolidated Financial Statements for the three-month period ended March 31, 2023 (unaudited)

Basis of preparation

These Condensed Interim Consolidated Financial Statements for the three-month interim period ended March 31, 2023, were prepared in accordance with International Accounting Standard 34 Interim Financial Reporting and accounting policies set out in the 2022 Annual Report published on February 1, 2023.

Selected critical accounting policies

The Group’s principal accounting policies are set out in Note 1 to the Consolidated Financial Statements in the 2022 Annual Report and conform with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board.

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 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.

As disclosed in the 2022 Annual Report, goodwill, and acquired In-Process Research & Development projects are reviewed for impairment at least annually and these, as well as all other investments in intangible assets, are reviewed for impairment whenever an event or decision occurs that raises concern about their balance sheet carrying value. The amount of goodwill and other intangible assets on the Group’s consolidated balance sheet has risen significantly in recent years, primarily from acquisitions. Impairment testing may lead to potentially significant impairment charges in the future that could have a materially adverse impact on the Group’s results of operations and financial condition.

The Group’s activities are not subject to significant seasonal fluctuations.

Significant transactions

The Group 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

There were no significant transactions in the first quarter of 2023.

Significant transactions in 2022

Innovative Medicines – 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 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 achievement of specified milestones. The purchase price allocation resulted in net identifiable assets of USD 0.9 billion, consisting primarily of 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.

Summary of equity attributable to Novartis AG shareholders

		Number of outstanding shares (in millions)		Issued share capital and reserves attributable to Novartis AG shareholders (in millions)
	Note	2023	2022	Q1 2023
Balance at beginning of year		2 119.6	2 234.9	59 342
Shares acquired to be canceled		-31.5	-31.2	-2 769
Other share purchases		-1.2	-1.1	-108
Exercise of options and employee transactions	4.1	2.8	1.9	153
Equity-based compensation		7.7	8.1	191
Shares delivered to Alcon employees as a result of the Alcon spin-off			0.0
Taxes on treasury share transactions				8
Decrease of treasury share repurchase obligation <br>under a share buyback trading plan	4.2
Dividends				-7 255
Net income of the period attributable to shareholders of Novartis AG				2 293
Other comprehensive income attributable to shareholders of Novartis AG				168
Other movements	4.3			36
Balance at March 31		2 097.4	2 212.6	52 059

All values are in US Dollars.

4.1. At December 31, 2022, the market maker held 3 million (December 31, 2021: 3 million) written call options, originally issued as part of the share-based compensation for employees, that had not yet been exercised. The weighted average exercise price of these options at December 31, 2022, was USD 66.07 (December 31, 2021: USD 61.45), and they had contractual lives of 10 years, with remaining lives less than one year (December 31, 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 option outstanding at March 31, 2023.

4.2. 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. Novartis is able to cancel this arrangement at any time but could be subject to a 90-day waiting period. As of March 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 March 31, 2023.

4.3. Other movements include, for subsidiaries in hyperinflationary economies, the impact of the restatement of the equity balances of the current period as well as restatement of the non-monetary assets and liabilities with the general price index at the beginning of the period.

Financial instruments

Fair value by hierarchy

The following table illustrates the three hierarchical levels for valuing financial instruments at fair value as of March 31, 2023, and December 31, 2022. For additional information on the hierarchies and other matters, please refer to the Consolidated Financial Statements in the 2022 Annual Report, published on February 1, 2023.

	Level 1		Level 2		Level 3		Total
(USD millions)	Mar 31, <br> 2023	Dec 31, <br> 2022	Mar 31, <br> 2023	Dec 31, <br> 2022	Mar 31, <br> 2023	Dec 31, <br> 2022	Mar 31, <br> 2023	Dec 31, <br> 2022
Financial assets
Marketable securities
Debt securities			9	9			9	9
Derivative financial instruments			73	204			73	204
Total marketable securities and derivative financial instruments at fair value			82	213			82	213
Current contingent consideration receivables					53	43	53	43
Long-term financial investments
Debt and equity securities	428	473	11	10	672	699	1 111	1 182
Fund investments	19	20			211	261	230	281
Non-current contingent consideration receivables					767	607	767	607
Total long-term financial investments at fair value	447	493	11	10	1 650	1 567	2 108	2 070
Associated companies at fair value through profit or loss					118	129	118	129
Financial liabilities
Current contingent consideration liabilities					-227	-131	-227	-131
Derivative financial instruments			-53	-55			-53	-55
Total current financial liabilities at fair value			-53	-55	-227	-131	-280	-186
Non-current contingent consideration liabilities					-473	-704	-473	-704
Other financial liabilities					-212	-232	-212	-232
Total non-current financial liabilities at fair value					-685	-936	-685	-936

In the first quarter of 2023, there was one transfer of equity securities from Level 3 to Level 1 for USD 17 million due to an Initial Public Offering.

The fair value of straight bonds amounted to USD 20.9 billion at March 31, 2023 (USD 20.3 billion at December 31, 2022) compared with the carrying amount of USD 22.5 billion at March 31, 2023 (USD 22.3 billion at December 31, 2022). For all other financial assets and liabilities, the carrying amount is a reasonable approximation of the fair value.

The carrying amount of financial assets included in the line total long-term financial investments of USD 2.1 billion at March 31, 2023 (USD 2.1 billion at December 31, 2022) is included in the line “Financial assets” of the consolidated balance sheets. The carrying amount of non-current contingent consideration liabilities and other financial liabilities included in the line total non-current financial liabilities at fair value of USD 0.7 billion at March 31, 2023 (USD 1.0 billion at December 31, 2022) is included in the line “Provisions and other non-current liabilities” of the consolidated balance sheet.

The Group’s exposure to financial risks has not changed significantly during the period and there have been no major changes to the risk management department or in any risk management policies.

Details to the consolidated statements of cash flows

6.1. Non-cash items and other adjustments

The following table shows the reversal of non-cash items and other adjustments in the consolidated statements of cash flows.

(USD millions)	Q1 2023	Q1 2022
Depreciation, amortization and impairments on:
Property, plant and equipment	303	314
Right-of-use assets	74	78
Intangible assets	1 619	1 013
Financial assets^1^	47	102
Change in provisions and other non-current liabilities	512	88
Gains on disposal and other adjustments on property, plant and equipment; intangible<br> assets; <br>financial assets; and other non-current assets, net	-302	-78
Equity-settled compensation expense	199	203
Loss from associated companies	1	2
Income taxes	446	450
Net financial expense	115	181
Other	-7
Total	3 007	2 353
^1^ Includes fair value changes

In the first quarter of 2023, there were no additions to intangible assets with deferred payments. In the first quarter of 2022, USD 0.3 billion additions to intangible assets other than goodwill were acquired with deferred payments.

In the first quarter of 2023, there were USD 151 million (Q1 2022: USD 43 million) additions to right-of-use assets recognized.

6.2. Cash flows from changes in working capital and other operating items included in the net cash flows from operating activities

(USD millions)	Q1 2023	Q1 2022
Increase in inventories	-620	-425
Increase in trade receivables	-850	-496
Increase/(decrease) in trade payables	87	-143
Change in other current and non-current assets	-177	-363
Change in other current liabilities	56	-584
Total	-1 504	-2 011

6.3. 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 3.

( millions)	Q1 2022
Net assets recognized as a result of acquisitions of businesses	-979
Contingent consideration payable, net	181
Payments, deferred consideration and other adjustments, net	-25
Cash flows used for acquisitions of businesses	-823
Cash flows (used for)/from divestments of businesses, net 1	2
Cash flows used for acquisitions and divestments of businesses, net	-821
1 In the first quarter of 2023, 13 million represented the net cash outflows for<br> divestments in prior years.
In the first quarter of 2022, 2 million included net cash flows from business<br> divestments in the first quarter of 2022 and from divestments in previous years. In the first quarter of 2022, the net identifiable assets of divested businesses amounted<br> to 34 million, comprised of non-current assets of 5 million; net current assets<br> of 29 million, including 9 million cash and cash equivalents. The deferred<br> sale price receivable and other adjustments amounted to 25 million.

All values are in US Dollars.

Notes 3 and 7 provide further information regarding acquisitions and divestments of businesses. All acquisitions were for cash.

Acquisitions of businesses

Fair value of assets and liabilities arising from acquisitions of businesses:

(USD millions)	Q1 2023	Q1 2022
Property, plant and equipment		13
Right-of-use assets		12
Acquired research and development		1 105
Deferred tax assets		51
Other current assets		5
Cash and cash equivalents		70
Deferred tax liabilities		-276
Current and non-current lease liabilities		-12
Trade payables and other liabilities		-67
Net identifiable assets acquired	0	901
Acquired cash and cash equivalents		-70
Goodwill		148
Net assets recognized as a result of acquisitions of businesses	0	979

Note 3 details significant acquisitions of businesses. There were no acquisitions of businesses in the first quarter of 2023. In the first quarter of 2022, there was the acquisition of Gyroscope. The goodwill arising out of the Gyroscope acquisition was mainly attributable to the accounting for deferred tax liabilities on acquired assets and the assembled workforce. None of the goodwill arisen in the first quarter of 2022 was tax deductible.

Legal proceedings update

A number of Novartis companies are, and will likely continue to be, subject to various legal proceedings, including litigations, arbitrations and governmental investigations, that arise from time to time. Legal proceedings are inherently unpredictable. As a result, the Group may become subject to substantial liabilities that may not be covered by insurance and may in the future incur judgments or enter into settlements of claims that could have a material adverse effect on its results of operations or cash flow. Note 20 to the Consolidated Financial Statements in our 2022 Annual Report and 2022 Form 20-F contains a summary as of the date of these reports of significant legal proceedings to which Novartis or its subsidiaries were a party. The following is a summary as of April 24, 2023, of significant developments in those proceedings, as well as any new significant proceedings commenced since the date of the 2022 Annual Report and 2022 Form 20-F.

Investigations and related litigations

Government generic pricing antitrust investigations, antitrust class actions

Since 2016, Sandoz Inc. has been part of an investigation into alleged price fixing and market allocation of generic drugs in the United States. In 2020, Sandoz Inc. reached a resolution with the DOJ Antitrust Division, pursuant to which Sandoz Inc. paid USD 195 million and entered into a deferred prosecution agreement (DPA). The Sandoz Inc. resolution related to instances of misconduct at the Company between 2013 and 2015 with regard to certain generic drugs sold in the United States. The term of the DPA concluded in March 2023 and the underlying matter has been dismissed. Sandoz Inc. also finalized a resolution with the DOJ Civil Division and in 2021 paid USD 185 million to settle related claims arising under the False Claims Acts (FCA), and entered into a corporate integrity agreement with the Office of

Inspector General (OIG) of the US Department of Health and Human Services (HHS). This resolved all federal government matters related to price fixing allegations.

Since the third quarter of 2016, Sandoz Inc. and Fougera Pharmaceuticals Inc. have been sued alongside other generic pharmaceutical companies in numerous related individual and putative class action complaints by direct and indirect private purchasers and by over 50 US states and territories, represented by their respective Attorneys General. Plaintiffs claim that defendants, including Sandoz Inc., engaged in price fixing and market allocation of generic drugs in the United States, and seek damages and injunctive relief. The litigation includes complaints alleging product-specific conspiracies, as well as complaints alleging the existence of an overarching industry conspiracy, and assert claims for damages and penalties under federal and state antitrust and consumer protection acts. The cases have been consolidated for pretrial purposes in the United States District Court (USDC) for the Eastern District of Pennsylvania, and 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 filed an appeal of the Court’s decision. Novartis entities are the subject of similar investigations and proceedings involving competition authorities, which are disclosed in the 2022 Annual Report and 2022 Form 20-F.

Antitrust class actions

Exforge

Since 2018, Novartis Group companies as well as other pharmaceutical companies have been sued by various direct and indirect purchasers of Exforge in multiple US individual and putative class action complaints. They claim 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 seeking damages as well as injunctive relief. The cases have been consolidated in the S.D.N.Y. In 2022, Novartis agreed to a settlement in principle to pay USD 245 million to resolve these cases. In Q1 2023 Novartis paid USD 245 million to fund the required trust accounts. These settlements are subject to finalization of documentation and, in some cases, court approval.

In addition to the matters described above, there have been other non-material developments in the other legal matters described in Note 20 to the Consolidated Financial Statements contained in our 2022 Annual Report and 2022 Form 20-F.

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.

Segmentation of key figures

The businesses of Novartis are divided operationally on a worldwide basis into two identified reporting segments: Innovative Medicines and Sandoz. In addition, we separately report Corporate activities.

Reporting segments are presented in a manner consistent with the internal reporting to the chief operating decision-maker, which is the Executive Committee of Novartis. The reporting segments are managed separately because they each research, develop, manufacture, distribute and sell distinct products that require differing marketing strategies.

The Executive Committee of Novartis is responsible for allocating resources and assessing the performance of the reporting segments.

The reporting segments are as follows:

Innovative Medicines researches, develops, manufactures, distributes and sells patented pharmaceuticals. Effective as of April 4, 2022, the Innovative Medicines Division is organized in two commercial organizational units: Innovative Medicines International and Innovative Medicines US, and is focused on the core therapeutic areas: cardiovascular; immunology; neuroscience; solid tumors and hematology; as well as other promoted brands (in the therapeutic areas of ophthalmology and respiratory) and established brands. Prior to the announcement on April 4, 2022, the Innovative Medicines Division was organized into two global business units: Novartis Oncology and Novartis Pharmaceuticals.

Sandoz develops, manufactures and markets finished dosage form medicines as well as intermediary products including active pharmaceutical ingredients. Sandoz is organized globally into three franchises: Retail Generics, Anti-Infectives and Biopharmaceuticals. In Retail Generics, Sandoz develops, manufactures and markets finished dosage forms of small molecule pharmaceuticals for sale to third parties across a broad range of therapeutic areas, including finished dosage form of anti-infectives sold to third parties. In Anti-Infectives, Sandoz manufactures and supplies active pharmaceutical ingredients and intermediates, mainly antibiotics, for internal use by Retail Generics and for sale to third-party companies. In Biopharmaceuticals, Sandoz develops, manufactures and markets protein- or other biotechnology-based products, including biosimilars, and provides biotechnology manufacturing services to other companies.

Corporate includes the costs of the Group headquarters and those of corporate coordination functions in major countries, and items that are not specific to one segment.

Our divisions are supported by Novartis Institutes for BioMedical Research, Global Drug Development, and the Operations unit, which combined the Novartis Technical Operations (NTO) and Customer & Technology Solutions (CTS) organizational units, following the internal reorganization announced on April 4, 2022.

Effective January 1, 2023, the Sandoz Division’s biotechnology manufacturing services to other companies’ activities and the Coartem brand were transferred to the Innovative Medicines Division. The reporting of the financial results and the net assets of the reporting segments Innovative Medicines, Sandoz and Corporate have been accordingly adapted. To comply with IFRS, Novartis has restated its segmentation disclosure of the consolidated income statement and additional consolidated balance sheet disclosure to reﬂect these transfers. This restatement had no impact on the reported ﬁnancial results and consolidated balance sheet of the total Group.

Further details are provided in Note 3 to the Consolidated Financial Statements of the 2022 Annual Report.

Segmentation – Consolidated income statements

First quarter

	Innovative Medicines		Sandoz		Corporate (including eliminations)^1^		Group
(USD millions)	Q1 2023	Q1 2022<br> restated^2^	Q1 2023	Q1 2022<br> restated^2^	Q1 2023	Q1 2022<br> restated^2^	Q1 2023	Q1 2022
Net sales to third parties	10 570	10 230	2 383	2 301			12 953	12 531
Sales to other segments	232	210	92	47	-324	-257
Net sales	10 802	10 440	2 475	2 348	-324	-257	12 953	12 531
Other revenues	246	274	6	6	3	3	255	283
Cost of goods sold	-2 990	-2 922	-1 267	-1 222	326	288	-3 931	-3 856
Gross profit	8 058	7 792	1 214	1 132	5	34	9 277	8 958
Selling, general and administration	-2 760	-2 886	-542	-513	-141	-113	-3 443	-3 512
Research and development	-2 575	-2 112	-219	-208			-2 794	-2 320
Other income	751	145	10	48	209	33	970	226
Other expense	-799	-312	-144	-65	-211	-123	-1 154	-500
Operating income	2 675	2 627	319	394	-138	-169	2 856	2 852
as % of net sales	25.3%	25.7%	13.4%	17.1%			22.0%	22.8%
Loss from associated companies	1		1		-3	-2	-1	-2
Interest expense							-211	-201
Other financial income and expense							96	20
Income before taxes							2 740	2 669
Income taxes							-446	-450
Net income							2 294	2 219
^1^ Eliminations mainly relate to the elimination of sales to other segments and the corresponding<br> cost of goods sold.
^2^ Restated to reflect the transfers of the Sandoz Division’s biotechnology manufacturing<br> services to other companies’ activities and the Coartem brand to the Innovative<br> Medicines Division that was effective as of January 1, 2023.

Segmentation – Additional consolidated balance sheets and income statements disclosure

	Innovative Medicines		Sandoz		Corporate (including eliminations)^1^		Group
(USD millions)	Mar 31, <br> 2023	Dec 31, <br> 2022<br> restated	Mar 31, <br> 2023	Dec 31, <br> 2022<br> restated	Mar 31, <br> 2023	Dec 31, <br> 2022	Mar 31, <br> 2023	Dec 31, <br> 2022
Total assets^2^	75 923	75 836	16 427	15 752	19 891	25 865	112 241	117 453
Total liabilities	-16 746	-16 966	-3 999	-3 710	-39 354	-37 354	-60 099	-58 030
Total equity							52 142	59 423
Net debt^3^					15 104	7 245	15 104	7 245
Net operating assets^2^	59 177	58 870	12 428	12 042	-4 359	-4 244	67 246	66 668
Included in net operating assets are:
Property, plant and equipment	8 518	8 488	1 923	1 861	400	415	10 841	10 764
Goodwill^2^	21 947	21 857	7 534	7 444			29 481	29 301
Intangible assets other than goodwill	28 630	29 826	1 432	1 460	389	358	30 451	31 644
^1^ Eliminations mainly relate to the elimination of intercompany receivables and payables<br> to other segments and inventories.
^2^ December 31, 2022, restated to reflect the transfers of the Sandoz Division’s biotechnology<br> manufacturing services to other companies’ activities and the Coartem brand<br> to the Innovative Medicines Division that was effective January 1, 2023. These restatements<br> had no impact on Corporate or the total Group.
^3^ See page 42 for additional disclosures related to net debt.

The following table shows the property, plant and equipment impairment charges and reversals, the right-of-use assets impairment charges, the intangible assets impairment charges and additions to restructuring provisions:

First quarter

		Sandoz		Corporate		Group
( millions)	Q1 2022	Q1 2023	Q1 2022	Q1 2023	Q1 2022	Q1 2023	Q1 2022
Property, plant and equipment impairment charges	-22	-1	-1			-28	-23
Property, plant and equipment impairment reversals	2		1			9	3
Right-of-use assets impaiment charges			-1				-1
Intangible assets impairment charges 1	-37	-12				-485	-37
Additions to restructuring provisions	-44	-5	-10	-32	-10	-415	-64
1 The first quarter of 2023 includes an impairment of 0.3 billion related to the write-down of IPR&D related to cessation of clinical development<br> program NIZ2985.

All values are in US Dollars.

In the first quarter of 2023, there were no reversals of prior-year impairment charges on intangible assets (Q1 2022: nil) and right-of-use assets (Q1 2022: nil).

Restructuring provisions movements

(USD millions)	Q1 2023	Q1 2022
Balance at beginning of period	1 131	345
Additions	415	64
Cash payments	-317	-69
Releases	-32	-5
Transfers	-1	0
Currency translation effects	13	-4
Balance at closing of period	1 209	331

In 2023, additions to provisions of USD 415 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 64 million were mainly related to the continuation of the Innovative Medicines Division and the Operations unit (formerly the Novartis Technical Operations and the Customer & Technology Solutions) 2021 restructuring initiatives.

Segmentation – Net sales to third parties

Net sales by region^1^

First quarter

	Q1 2023<br> USD m	Q1 2022<br> restated<br> USD m^2^	% change<br> USD	% change<br> cc^3^	Q1 2023<br> % of total	Q1 2022<br> % of total
Innovative Medicines
Europe	3 421	3 529	-3	1	32	34
US	4 072	3 675	11	11	39	36
Asia/Africa/Australasia	2 299	2 328	-1	8	22	23
Canada and Latin America	778	698	11	20	7	7
Total	10 570	10 230	3	7	100	100
Of which in Established Markets	7 678	7 572	1	4	73	74
Of which in Emerging Growth Markets	2 892	2 658	9	16	27	26
Sandoz
Europe	1 366	1 235	11	16	57	54
US	380	408	-7	-7	16	18
Asia/Africa/Australasia	377	405	-7	3	16	18
Canada and Latin America	260	253	3	7	11	10
Total	2 383	2 301	4	8	100	100
Of which in Established Markets	1 645	1 574	5	9	69	68
Of which in Emerging Growth Markets	738	727	2	7	31	32
Group
Europe	4 787	4 764	0	5	37	38
US	4 452	4 083	9	9	34	33
Asia/Africa/Australasia	2 676	2 733	-2	7	21	22
Canada and Latin America	1 038	951	9	16	8	7
Total	12 953	12 531	3	8	100	100
Of which in Established Markets	9 323	9 146	2	5	72	73
Of which in Emerging Growth Markets	3 630	3 385	7	14	28	27
^1^ Net sales to third parties by location of customer. Emerging Growth Markets comprise<br> all markets other than the Established Markets of the US, Canada, Western Europe,<br> Japan, Australia and New Zealand.
^2^ Restated to reflect the transfers of the Sandoz Division’s biotechnology manufacturing<br> services to other companies’ activities and the Coartem brand to the Innovative<br> Medicines Division that was effective as of January 1, 2023. These restatements had<br> no impact on the total Group.
^3^ Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures<br> used by Novartis can be found starting on page 35.

Innovative Medicines Division net sales to third parties by core therapeutic area; other promoted brands; and established brands

First quarter

	Q1 2023	Q1 2022	% change	% change
	USD m	USD m^1^	USD	cc^2^
Cardiovascular
Entresto	1 399	1 093	28	32
Leqvio	64	14	nm	nm
Total Cardiovascular	1 463	1 107	32	36
Immunology
Cosentyx	1 076	1 159	-7	-4
Xolair^3^	354	368	-4	2
Ilaris	328	285	15	19
Other		1	nm	nm
Total Immunology	1 758	1 813	-3	1
Neuroscience
Kesimpta	384	195	97	100
Zolgensma	309	363	-15	-14
Mayzent	89	79	13	14
Aimovig	61	54	13	17
Other		1	nm	nm
Total Neuroscience	843	692	22	24
Solid Tumors
Tafinlar + Mekinist	458	403	14	18
Kisqali	415	239	74	81
Pluvicto	211	2	nm	nm
Lutathera	149	125	19	22
Piqray	116	73	59	61
Votrient	105	129	-19	-16
Tabrecta	36	31	16	18
Other	1		nm	nm
Total Solid Tumors	1 491	1 002	49	53
Hematology
Promacta/Revolade	547	491	11	15
Tasigna	462	461	0	4
Jakavi	414	389	6	13
Kymriah	135	127	6	11
Scemblix	76	25	204	202
Adakveo	52	44	18	18
Other		1	nm	nm
Total Hematology	1 686	1 538	10	14
Other Promoted Brands
Ultibro Group	114	132	-14	-8
Xiidra	89	107	-17	-16
Beovu	51	48	6	9
Other respiratory	25	19	32	41
Total Other Promoted Brands	279	306	-9	-5
Total Promoted Brands	7 520	6 458	16	20
Established Brands
Lucentis	416	520	-20	-15
Sandostatin	329	320	3	5
Gilenya	232	605	-62	-60
Exforge Group	186	200	-7	-1
Galvus Group	183	216	-15	-9
Diovan Group	158	191	-17	-11
Gleevec/Glivec	147	198	-26	-21
Afinitor/Votubia	110	138	-20	-16
Contract manufacturing^4^	123	99	24	26
Other^5^	1 166	1 285	-9	-4
Total Established Brands^4, 5^	3 050	3 772	-19	-15
Total division net sales to third parties^4, 5^	10 570	10 230	3	7
^1^ Reclassified to reflect the new Innovative Medicines divisional structures announced<br> on April 4, 2022, and the product movement between core therapeutic area, other promoted<br> brands and established brands. In Q1 2023 Lucentis was reclassified from Other<br> Promoted Brands to Established Brands and Gilenya was reclassified from Neuroscience<br> to Established Brands. Q1 2022 has been reclassified to reflect these movements.
^2^ Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures<br> used by Novartis can be found starting on page 35.
^3^ Net sales to third parties reflect Xolair sales for all indications.
^4^ Q1 2022 restated to reflect the transfer of the Sandoz Division’s biotechnology manufacturing<br> services to other companies’ activities to the Innovative Medicines Division that<br> was effective as of January 1, 2023.
^5^ Q1 2022 restated to reflect the transfer of the Coartem brand from the Sandoz<br> Division to the Innovative Medicines Division that was effective as of January 1,<br> 2023.
nm = not meaningful

Net sales to third parties of the top 20 Innovative Medicines Division brands in 2023

First quarter

			US		Rest of world			Total
Brands	Brand classification by therapeutic area, other promoted brands 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	Chronic heart failure, hypertension	704	30	695	26	35	1 399	28	32
Cosentyx	Immunology	Psoriasis (PsO), ankylosing spondylitis (AS), psoriatic arthritis (PsA), non-radiographic axial spondyloarthritis (nr-axSPA)	528	-20	548	10	17	1 076	-7	-4
Promacta/Revolade	Hematology	Immune thrombocytopenia (ITP), severe aplastic anemia (SAA)	277	12	270	11	18	547	11	15
Tasigna	Hematology	Chronic myeloid leukemia (CML)	211	4	251	-3	4	462	0	4
Tafinlar + Mekinist	Solid Tumors	BRAF V600+ metastatic adjuvant melanoma, advanced non-small cell lung cancer (NSCLC), tumor agnostic with BRAF mutation indication	194	26	264	6	13	458	14	18
Lucentis	Established Brands ^2^	Age-related macular degeneration (AMD), diabetic macular edema (DME), retinal vein occlusion (RVO)			416	-20	-15	416	-20	-15
Kisqali	Solid Tumors	HR+/HER2- metastatic breast cancer	182	130	233	46	56	415	74	81
Jakavi	Hematology	Myelofibrosis (MF), polycytomia vera (PV), graft-versus-host disease (GvHD)			414	6	13	414	6	13
Kesimpta	Neuroscience	Relapsing-remitting multiple sclerosis (RRMS)	295	72	89	nm	nm	384	97	100
Xolair^3^	Immunology	Severe allergic asthma (SAA), chronic spontaneous urticaria (CSU), nasal polyps			354	-4	2	354	-4	2
Sandostatin	Established Brands	Carcinoid tumors, acromegaly	209	4	120	0	6	329	3	5
Ilaris	Immunology	Auto-inflammatory (CAPS, TRAPS, HIDS/MKD, FMF, SJIA, AOSD, gout)	141	12	187	18	25	328	15	19
Zolgensma	Neuroscience	Spinal muscular atrophy (SMA)	109	-4	200	-20	-19	309	-15	-14
Gilenya	Established Brands ^2^	Relapsing multiple sclerosis (RMS)	80	-74	152	-49	-46	232	-62	-60
Pluvicto	Solid Tumors	PSMA-positive mCRPC patients post-ARPI, post-Taxane	205	nm	6	200	242	211	nm	nm
Exforge Group	Established Brands	Hypertension	4	0	182	-7	-2	186	-7	-1
Galvus Group	Established Brands	Type 2 diabetes			183	-15	-9	183	-15	-9
Diovan Group	Established Brands	Hypertension	15	15	143	-20	-13	158	-17	-11
Lutathera	Solid Tumors	GEP-NETs gastroenteropancreatic neuroendocrine tumors	104	14	45	32	42	149	19	22
Gleevec/Glivec	Established Brands	Chronic myeloid leukemia (CML), gastrointestinal stromal tumors (GIST)	38	-24	109	-26	-20	147	-26	-21
Top 20 brands total			3 296	11	4 861	0	6	8 157	4	8
Rest of portfolio^4^			776	8	1 637	-3	3	2 413	0	5
Total division net sales to third parties^4^			4 072	11	6 498	-1	5	10 570	3	7
^1^ Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures<br> used by Novartis can be found starting on page 35.
^2^ In Q1 2023 Lucentis was reclassified from Other Promoted Brands to Established<br> Brands and Gilenya was reclassified from Neuroscience to Established Brands.
^3^ Net sales to third parties reflect Xolair sales for all indications.
^4^ % change has been restated to reflect the transfers of the Sandoz Division’s biotechnology<br> manufacturing services to other companies’ activities and the Coartem brand<br> to the Innovative Medicines Division that was effective as of January 1, 2023.
nm = not meaningful

Sandoz Division net sales to third parties by business franchise

First quarter

	Q1 2022<br> restated^1^	% change	% change
	USD m	USD	cc^2^
Retail Generics 3	1 764	1	6
Biopharmaceuticals	465	11	17
Anti-Infectives 3	72	17	20
Total division net sales to third parties	2 301	4	8
1 Restated to reflect the transfers of the Sandoz Division’s biotechnology manufacturing<br> services to other companies’ activities (from Biopharmaceuticals) and the Coartem<br> brand (from Retail Generics) to the Innovative Medicines Division that was effective<br> as of January 1, 2023. These restatements had no impact on Anti-Infectives.
2 Constant currencies (cc) is a non-IFRS measure. A definition of non-IFRS measures<br> used by Novartis can be found starting on page 35.
3 Sandoz total anti-infectives net sales to third parties amounted to 297 million (Q1 2022: 269 million), of which 213 million (Q1 2022: 197 million) were sold through the Retail Generics business franchise and 84 million (Q1 2022: 72 million) were sold to other third-party companies through the Anti-Infectives business<br> franchise.

All values are in US Dollars.

The product portfolio of Sandoz is widely spread in 2023 and 2022.

Segmentation – Other revenue

First quarter

	Innovative Medicines		Sandoz		Corporate		Group
(USD millions)	Q1 2023	Q1 2022	Q1 2023	Q1 2022	Q1 2023	Q1 2022	Q1 2023	Q1 2022
Profit sharing income	199	205					199	205
Royalty income	22	3	4	5		3	26	11
Milestone income	3	19					3	19
Other^1^	22	47	2	1	3		27	48
Total other revenues	246	274	6	6	3	3	255	283
^1^ Other includes revenue from activities such as manufacturing or other services rendered,<br> to the extent such revenue is not recorded under net sales.

Supplementary information (unaudited)

Non-IFRS disclosures

Novartis uses certain non-IFRS metrics when measuring performance, especially when measuring current-year results against prior periods, including core results, constant currencies and free cash flow.

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

Because of their non-standardized definitions, the non-IFRS measures (unlike IFRS 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 Group’s management assesses underlying performance. These non-IFRS measures are not, and should not be viewed as, a substitute for IFRS measures.

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

Core results

The Group’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, 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 Group’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 and other measures as important factors in assessing the Group’s performance.

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

• In addition to monthly reports containing financial information prepared under International Financial Reporting Standards (IFRS), senior management receives a monthly analysis incorporating these core measures.

• Annual budgets are prepared for both IFRS and core measures.

As an internal measure of Group performance, the core results measures have limitations, and the Group’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 Group’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 Group’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 Group’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 which enables 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. Free cash flow is presented as additional information because management believes it is a useful supplemental indicator of the Group’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.

Additional information

Net debt

Novartis calculates net debt as current financial debts and derivative financial instruments plus non-current financial debts 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 Group’s ability to pay dividends, to meet financial commitments, and to invest in new strategic opportunities, including strengthening its balance sheet.

See page 42 for additional disclosures related to net debt.

CORE RESULTS – Reconciliation from IFRS results to core results – Group

First quarter

		Sandoz		Corporate		Group
( millions unless indicated otherwise)	Q1 2022<br> restated^2^	Q1 2023	Q1 2022<br> restated^2^	Q1 2023	Q1 2022<br> restated^2^	Q1 2023	Q1 2022
IFRS operating income	2 627	319	394	-138	-169	2 856	2 852
Amortization of intangible assets	878	54	58			1 081	936
Impairments
Intangible assets	37	12				485	37
Property, plant and equipment related to the Group-wide rationalization of manufacturing sites	17					-7	17
Other property, plant and equipment
Total impairment charges	54	12				478	54
Acquisition or divestment of businesses and related items
- Income				-4	-2	-4	-2
- Expense						2
Total acquisition or divestment of businesses and related items, net				-4	-2	-2	-2
Other items
Divestment gains				4	-18	-126	-18
Financial assets - fair value adjustments	32			7	70	46	102
Restructuring and related items
- Income	-4	-2	-6	-6		-33	-10
- Expense	143	35	46	118	17	771	206
Legal-related items
- Income	-51					-484	-51
- Expense		89	6			118	6
Additional income	-15	-3	-2	-160		-297	-17
Additional expense	8		17			5	25
Total other items	113	119	61	-37	69	0	243
Total adjustments	1 045	185	119	-41	67	1 557	1 231
Core operating income	3 672	504	513	-179	-102	4 413	4 083
as % of net sales	35.9%	21.1%	22.3%			34.1%	32.6%
Loss from associated companies		1		-3	-2	-1	-2
Interest expense						-211	-201
Other financial income and expense						96	20
Core adjustments to other financial income and expense						21	12
Income taxes, adjusted for above items (core income taxes)						-704	-661
Core net income						3 614	3 251
Core net income attributable to shareholders of Novartis AG						3 613	3 254
Core basic EPS () 1						1.71	1.46
1 Earnings per share (EPS) is calculated on the amount of net income attributable to<br> shareholders of Novartis AG.
2 Restated to reflect the transfers of the Sandoz Division’s biotechnology manufacturing<br> services to other companies’ activities and the Coartem brand to the Innovative<br> Medicines Division that was effective as of January 1, 2023 (see Note 9 in this Condensed<br> Interim Financial Report).

All values are in US Dollars.

CORE RESULTS – Reconciliation from IFRS results to core results – Group

First quarter

( 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^	Q1 2023<br> Core results	Q1 2022<br> Core results
Gross profit	928	12		90	10 307	9 960
Operating income	1 081	478	-2		4 413	4 083
Income before taxes	1 081	478	-2	21	4 318	3 912
Income taxes 5					-704	-661
Net income					3 614	3 251
Basic EPS () 6					1.71	1.46
The following are adjustments to arrive at core gross profit
Cost of goods sold	928	12		90	-2 901	-2 854
The following are adjustments to arrive at core operating income
Selling, general and administration				42	-3 401	-3 498
Research and development	153	474		-105	-2 272	-2 256
Other income		-8	-4	-849	109	127
Other expense			2	822	-330	-250
The following are adjustments to arrive at core income before taxes
Other financial income and expense				21	117	32
1 Amortization of intangible assets: cost of goods sold includes the amortization of<br> acquired rights to currently marketed products and other production-related intangible<br> assets; research and development includes the amortization of acquired rights for<br> technologies
2 Impairments: cost of goods sold, research and development and other income include<br> net impairment charges related to intangible assets; other income also includes reversals<br> of impairment charges related to property, plant and equipment
3 Acquisition or divestment of businesses and related items, including restructuring<br> and integration charges: other income includes adjustments to provisions; other expense<br> includes charges related to an acquisition
4 Other items: cost of goods sold, selling, general and administration, research and<br> development, other income and other expense include restructuring income and charges<br> related to the restructuring initiative to implement a new streamlined organizational<br> model, the Sandoz strategic review, the Group-wide rationalization of manufacturing<br> sites and other net restructuring charges and related items; cost of goods sold and<br> selling, general and administration also include adjustments to provisions; research<br> and development includes contingent consideration adjustments; other income and other<br> expense include fair value adjustments and divestment gains and losses on financial<br> assets and legal-related items; other income also includes a fair value adjustment<br> on a contingent receivable, gains from the divestment of products and curtailment<br> gains; other financial income and expense includes the monetary loss on the restatement<br> of non-monetary items for subsidiaries in hyperinflationary economies
5 Taxes on the adjustments between IFRS and core results take into account, for each<br> individual item included in the adjustment, the tax rate that will finally be applicable<br> to the item based on the jurisdiction where the adjustment will finally have a tax<br> impact. Generally, this results in amortization and impairment of intangible assets<br> and acquisition-related restructuring and integration items having a full tax impact.<br> There is usually a tax impact on other items, although this is not always the case<br> for items arising from legal settlements in certain jurisdictions. Adjustments related<br> to income from associated companies are recorded net of any related tax effect. Due<br> to these factors and the differing effective tax rates in the various jurisdictions,<br> the tax on the total adjustments of 1.6 billion to arrive at the core results<br> before tax amounts to 258 million. The average tax rate on the adjustments is<br> 16.3% since the estimated full year core tax charge of 16.3% has been applied to the<br> pre-tax income of the period.
6 Earnings per share (EPS) is calculated on the amount of net income attributable to<br> shareholders of Novartis AG.

All values are in US Dollars.

CORE RESULTS – Reconciliation from IFRS results to core results – Innovative Medicines

First quarter

(USD millions)	Q1 2023<br> IFRS results	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^	Q1 2023<br> Core results	Q1 2022<br> restated<br> Core results^5^
Gross profit	8 058	874			70	9 002	8 708
Operating income	2 675	1 027	466	2	-82	4 088	3 672
The following are adjustments to arrive at core gross profit
Cost of goods sold	-2 990	874			70	-2 046	-2 006
The following are adjustments to arrive at core operating income
Selling, general and administration	-2 760				36	-2 724	-2 883
Research and development	-2 575	153	474		-105	-2 053	-2 048
Other income	751		-8		-660	83	82
Other expense	-799			2	577	-220	-187
^1^ Amortization of intangible assets: cost of goods sold includes the amortization of<br> acquired rights to currently marketed products and other production-related intangible<br> assets; research and development includes the amortization of acquired rights for<br> technologies
^2^ Impairments: research and development and other income include net impairment charges<br> related to intangible assets; other income also includes reversals of impairment charges<br> related to property, plant and equipment
^3^ Acquisition or divestment of businesses and related items, including restructuring<br> and integration charges: other expense includes charges related to an acquisition
^4^ Other items: cost of goods sold, selling, general and administration, research and<br> development, other income and other expense include restructuring income and charges<br> related to the initiative to implement a new streamlined organizational model, the<br> Sandoz strategic review, the Group-wide rationalization of manufacturing sites and<br> other net restructuring charges and related items; selling, general and administration<br> also includes an adjustment to a provision; research and development includes contingent<br> consideration adjustments; other income and other expense include fair value adjustments<br> on financial assets and legal-related items; other income also includes gains from<br> the divestment of products and a curtailment gain
^5^ Restated to reflect the transfers of the Sandoz Division’s biotechnology manufacturing<br> services to other companies’ activities and the Coartem brand to the Innovative<br> Medicines Division that was effective as of January 1, 2023 (see Note 9 in this Condensed<br> Interim Financial Report).

CORE RESULTS – Reconciliation from IFRS results to core results – Sandoz

First quarter

(USD millions)	Q1 2023<br> IFRS results	Amortization<br> of intangible<br> assets^1^	Impairments^2^	Other <br> items^3^	Q1 2023<br> Core results	Q1 2022<br> restated<br> Core results^4^
Gross profit	1 214	54	12	20	1 300	1 218
Operating income	319	54	12	119	504	513
The following are adjustments to arrive at core gross profit
Cost of goods sold	-1 267	54	12	20	-1 181	-1 136
The following are adjustments to arrive at core operating income
Selling, general and administration	-542			5	-537	-503
Other income	10			-2	8	42
Other expense	-144			96	-48	-36
^1^ Amortization of intangible assets: cost of goods sold includes the amortization of<br> acquired rights to currently marketed products and other production-related intangible<br> assets
^2^ Impairments: cost of goods sold includes impairment charges related to an intangible<br> asset
^3^ Other items: cost of goods sold, selling, general and administration, other income<br> and other expense include charges related to the Sandoz strategic review, the Group-wide<br> rationalization of manufacturing sites and other net restructuring charges and related<br> items; cost of goods sold and selling, general and administration also include adjustments<br> to provisions; other expense includes legal-related items
^4^ Restated to reflect the transfers of the Sandoz Division’s biotechnology manufacturing<br> services to other companies’ activities and the Coartem brand to the Innovative<br> Medicines Division that was effective as of January 1, 2023 (see Note 9 in this Condensed<br> Interim Financial Report).

CORE RESULTS – Reconciliation from IFRS results to core results – Corporate

First quarter

(USD millions)	Q1 2023<br> IFRS results	Acquisition or <br> divestment of <br> businesses and<br> related items^1^	Other <br> items^2^	Q1 2023<br> Core results	Q1 2022<br> restated<br> Core results^3^
Gross profit	5			5	34
Operating loss	-138	-4	-37	-179	-102
The following are adjustments to arrive at core operating loss
Selling, general and administration	-141		1	-140	-112
Other income	209	-4	-187	18	3
Other expense	-211		149	-62	-27
^1^ Acquisition or divestment of businesses and related items, including restructuring<br> and integration charges: other income includes adjustments to provisions
^2^ Other items: selling, general and administration, other income and other expense include<br> restructuring charges and income related to the initiative to implement a new streamlined<br> organizational model, the Sandoz strategic review and other net restructuring charges<br> and related items; other income and other expense also include fair value adjustments<br> and divestment gains and losses on financial assets; other income also includes a<br> fair value adjustment on a contingent receivable and a curtailment gain
^3^ Restated to reflect the transfers of the Sandoz Division’s biotechnology manufacturing<br> services to other companies’ activities and the Coartem brand to the Innovative<br> Medicines Division that was effective as of January 1, 2023 (see Note 9 in this Condensed<br> Interim Financial Report).

Free cash flow

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

First quarter

	Q1 2023			Q1 2022
(USD millions)	IFRS <br> cash flow	Adjustments	Free <br> cash flow	IFRS <br> cash flow	Adjustments^1^	Revised <br> Free <br> cash flow^1^
Net cash flows from operating activities	2 957		2 957	1 649		1 649
Net cash flows from/(used in) investing activities^2^	10 621	-10 858	-237	9 365	-9 622	-257
Net cash flows used in financing activities^3^	-9 202	9 202	0	-9 528	9 528	0
Free cash flow^1^			2 720			1 392
^1^ To aid in comparability, the prior year adjustments and free cash flow amounts have<br> been revised to conform with the new free cash flow definition that was effective<br> as of January 1, 2023.
^2^ With the exception of purchases of property, plant and equipment, all net cash flows<br> from investing activities are excluded from the free cash flow.
^3^ Net cash flows used in financing activities are excluded from the free cash flow.

The following table is a summary of the free cash flow:

First quarter

(USD millions)	Q1 2023	Q1 2022
Operating income	2 856	2 852
Adjustments for non-cash items
Depreciation, amortization and impairments	2 043	1 507
Change in provisions and other non-current liabilities	512	88
Other	-110	125
Operating income adjusted for non-cash items	5 301	4 572
Dividends received from associated companies and others	5
Interest and other financial receipts	336	17
Interest and other financial payments	-129	-140
Income taxes paid	-348	-633
Payments out of provisions and other net cash movements in non-current liabilities	-704	-156
Change in inventories and trade receivables less trade payables	-1 383	-1 064
Change in other net current assets and other operating cash flow items	-121	-947
Net cash flows from operating activities	2 957	1 649
Purchases of property, plant and equipment	-237	-257
Free cash flow^1^	2 720	1 392
^1^ To aid in comparability, the prior year free cash flow amounts have been revised to<br> conform with the new free cash flow definition that was effective as of January 1,<br> 2023

Additional information

Net debt

Condensed consolidated changes in net debt

First quarter

(USD millions)	Q1 2023	Q1 2022
Net change in cash and cash equivalents	4 483	1 445
Change in marketable securities, commodities, time deposits, financial debts and derivatives financial instruments	-12 342	-11 255
Change in net debt	-7 859	-9 810
Net debt at January 1	-7 245	-868
Net debt at March 31	-15 104	-10 678

Components of net debt

(USD millions)	Mar 31, <br> 2023	Dec 31, <br> 2022	Mar 31, <br> 2022
Non-current financial debts	-20 396	-20 244	-22 796
Current financial debts and derivative financial instruments	-6 968	-5 931	-6 696
Total financial debts	-27 364	-26 175	-29 492
Less liquidity
Cash and cash equivalents	12 000	7 517	13 852
Marketable securities, commodities, time deposits and derivative financial instruments	260	11 413	4 962
Total liquidity	12 260	18 930	18 814
Net debt at end of period	-15 104	-7 245	-10 678

Share information

	Mar 31, <br> 2022
Number of shares outstanding	2 212 584 901
Registered share price (CHF)	81.25
ADR price ()	87.75
Market capitalization ( billions) 1	194.7
Market capitalization (CHF billions) 1	179.8
1 Market capitalization is calculated based on the number of shares outstanding (excluding<br> treasury shares). Market capitalization in is based on the market capitalization<br> in CHF converted at the quarter end CHF/ exchange rate.

All values are in US Dollars.

Effects of currency fluctuations

Principal currency translation rates

(USD per unit)	Average <br> rates<br> Q1 2023	Average <br> rates<br> Q1 2022	Period-end <br> rates<br> Mar 31, <br> 2023	Period-end <br> rates<br> Mar 31, <br> 2022
1 CHF	1.081	1.083	1.095	1.083
1 CNY	0.146	0.158	0.146	0.158
1 EUR	1.073	1.123	1.090	1.117
1 GBP	1.215	1.342	1.240	1.314
100 JPY	0.756	0.861	0.751	0.823
100 RUB	1.369	1.163	1.295	1.202

Currency impact on key figures

The following table provides a summary of the currency impact on key Group figures due to their conversion into US dollars, the Group’s reporting currency, of the financial data from entities reporting in non-US dollars. Constant currency (cc) calculations apply the exchange rates of the prior year period to the current period financial data for entities reporting in non-US dollars.

First quarter

	Change in<br> USD %<br> Q1 2023	Change in<br> constant<br> currencies %<br> Q1 2023	Percentage<br> point currency<br> impact<br> Q1 2023	Change in<br> USD %<br> Q1 2022	Change in<br> constant<br> currencies %<br> Q1 2022	Percentage<br> point currency<br> impact<br> Q1 2022
Total Group
Net sales to third parties	3	8	-5	1	5	-4
Operating income	0	9	-9	18	26	-8
Net income	3	14	-11	8	15	-7
Basic earnings per share (USD)	9	20	-11	10	17	-7
Core operating income	8	15	-7	3	9	-6
Core net income	11	18	-7	-5	0	-5
Core basic earnings per share (USD)	17	25	-8	-4	2	-6
Innovative Medicines
Net sales to third parties	3	7	-4	1	4	-3
Operating income	2	11	-9	16	24	-8
Core operating income	11	18	-7	0	5	-5
Sandoz
Net sales to third parties	4	8	-4	2	8	-6
Operating income	-19	-14	-5	34	42	-8
Core operating income	-2	3	-5	21	26	-5
Corporate
Operating loss	18	16	2	-25	-30	5
Core operating loss	-75	-78	3	31	27	4

Disclaimer

All product names appearing in italics are trademarks owned by or licensed to Novartis Group companies. Humira® is a registered trademark of Abbvie Biotechnology Ltd. Prolia® and Xgeva® are registered trademarks of Amgen Inc. Jakafi® is a registered trademark of Incyte Corporation.

About Novartis

Important dates

June 04, 2023

ASCO Investor Event

June 08, 2023

Sandoz Capital Markets Day – New York

June 12, 2023

Sandoz Capital Markets Day – London

July 18, 2023

Second quarter & Half year 2023 results

October 24, 2023

Third quarter & Nine months 2023 results

November 28, 2023

R&D Day