Novartis maintained the strong underlying momentum of 2009 as third-quarter net sales grew 7% in local currencies, while reported net sales rose 3% to USD 11.1 billion as four percentage points of growth were lost to adverse currency movements. Pharmaceuticals (+11% lc) led the performance, while Consumer Health (+5% lc) and Sandoz (+4% lc) achieved local-currency gains in challenging markets. Vaccines and Diagnostics (-16% lc) fell on sharply lower sales of H5N1 (avian flu) pandemic vaccines in 2009.

Operating income advanced 13% to USD 2.6 billion, while the Group's operating income margin rose 2.1 percentage points to 23.8% of net sales on margin improvements in Pharmaceuticals, Sandoz and Consumer Health. Operating income was up 9% when adjusted for currency movements, exceptional items and amortization of intangible assets.

Net income rose 1% to USD 2.1 billion as the 13% increase in Group operating income was largely offset by a loss from associated companies due to USD 189 million of charges for Roche's restructuring of Genentech and an Alcon-related R&D project impairment, increased financing costs and a higher tax rate. As a result, basic earnings per share (EPS) only climbed to USD 0.93 from USD 0.92 in the 2008 quarter.

Achieving success with long-term R&D investments
Novartis has been reaping the benefits of long-term, disciplined investments in innovation, achieving more than 30 major regulatory approvals and significant progress in the Group's R&D pipeline so far in 2009.

Important approvals include the anti-cancer medicine Afinitor, the high blood pressure combination therapy Valturna, the biotechnology drug Ilaris and the H1N1 pandemic flu vaccines. The late-stage pipeline is also progressing quickly: European regulatory approval expected soon for QAB149 (COPD), while further positive Phase III data presented in September 2009 reaffirmed the potential of FTY720 (MS).

R&D investments complement other strategic initiatives as Novartis seeks to deliver long-term sustainable growth from a focused portfolio addressing broad healthcare needs. In addition to investments in innovation, Novartis is selectively strengthening its businesses, expanding in high-growth markets and improving organizational efficiency.

High-growth markets are increasingly contributing to the business expansion. Net sales in the top six emerging markets rose 16% lc to USD 2.8 billion in the first nine months of 2009, with only limited signs to date of adverse impact from global economic conditions. These six markets - Brazil, China, India, Russia, South Korea and Turkey - represented 9% of the Group's net sales for the 2009 period.

New products are transforming Pharmaceuticals and positioning Novartis as one of the industry's fastest-growing companies. Recently launched products provided dynamic growth (+88% lc) and USD 3.3 billion of net sales in the first nine months of 2009, boosting their share of net sales to 16% from 9% in the 2008 period. New product approvals in 2009, such as Afinitor and Ilaris, are set to support business expansion. In Japan, approvals of five new medicines to date in 2009 - Tasigna, Xolair, Co-Dio, Lucentis and Rasilez - are expected to underpin momentum in this important market.

Vaccines and Diagnostics began delivering vaccines in the last week of September for the new H1N1 influenza strain as US and European regulatory approvals were received. Large-scale antigen production continues at all sites in Europe. Approximately 90 million to 120 million doses are expected to be produced by the end of 2009, with expected fourth-quarter net sales contributions of approximately USD 400 million to USD 700 million. In early October, Novartis also completed its shipment of 27 million seasonal influenza vaccines for the US market, ahead of original plans, to allow for earlier vaccination.

Sandoz completed in September the acquisition of EBEWE Pharma's specialty generics injectables business for EUR 0.8 billion (USD 1.2 billion), creating a new global growth platform and improving access to oncology medicines. This acquisition is set to further drive expansion in the fast-growing injectables market and represents an important extension of the Sandoz portfolio. In addition, the manufacturing site in Wilson, North Carolina, has a renewed focus on new product launches following the successful completion of an FDA inspection in the third quarter of 2009.

Consumer Health is preparing the upcoming US launch of Prevacid 24HR, the first OTC version of this prescription drug for frequent heartburn pain and an important addition to the division's current portfolio of 15 global brands with annual sales of more than USD 100 million. Novartis aims to make Prevacid 24HR a top-five OTC brand in the US, where this proton pump inhibitor has three years of market exclusivity.

Commenting on the results, Dr. Daniel Vasella, Chairman and CEO of Novartis, said: "I am pleased with our strong underlying performance, led by the momentum of our Pharmaceuticals business, outpacing the competition and benefiting from innovative product growth rejuvenating the portfolio. Our investments in R&D show excellent results, with many key approvals in 2009, most notably the anti-cancer therapy Afinitor and the biotechnology medicine Ilaris. Deliveries of H1N1 pandemic flu vaccines are underway as Novartis works at full capacity to meet public health demands. The Sandoz generics business also made good progress, coupled with a turnaround in the US. We expect record full-year underlying results based on the significant progress to date in 2009."

Nine months to September 30
The sustained underlying business expansion in Pharmaceuticals, with net sales rising 11% in local currencies (+4% in US dollars), strengthened the Group's healthcare portfolio in the first nine months of 2009.

Group net sales rose 8% in local currencies, but were steady at USD 31.3 billion in US dollars. Sandoz (+4% lc) and Consumer Health (+3% lc) also provided contributions. Top-performing regions included Europe (USD 12.9 billion, +7% lc) and the United States (USD 10.1 billion, +5% lc) as well as the top six emerging markets (USD 2.8 billion, +16% lc). Higher volumes provided seven percentage points of growth, while net price changes added one percentage point. However, the stronger US dollar compared to the 2008 period offset the underlying business expansion by eight percentage points.

Operating income rose 1% to USD 7.3 billion, and at a faster 11% pace when adjusted for the impact of currency movements, exceptional items and amortization of intangible assets in both periods. Pharmaceuticals, where operating income rose 8%, and productivity gains in all divisions provided resources for business expansion and led to the Group operating income margin improving 0.2 percentage points to 23.4% of net sales.

Net income, however, fell 8% to USD 6.1 billion from the impact of Alcon-related financing costs as well as significantly reduced income from investments in Roche and Alcon in the third quarter of 2009 and a higher tax rate. Basic earnings per share (EPS) fell to USD 2.69 in the first nine months of 2009 from USD 2.93 in the 2008 period.

About Novartis
Novartis provides healthcare solutions that address the evolving needs of patients and societies. Focused solely on healthcare, Novartis offers a diversified portfolio to best meet these needs: innovative medicines, cost-saving generic pharmaceuticals, preventive vaccines, diagnostic tools and consumer health products. Novartis is the only company with leading positions in these areas. In 2008, the Group's continuing operations achieved net sales of USD 41.5 billion and net income of USD 8.2 billion. Approximately USD 7.2 billion was invested in R&D activities throughout the Group. Headquartered in Basel, Switzerland, Novartis Group companies employ approximately 99,000 full-time-equivalent associates and operate in more than 140 countries around the world. For more information, please visit http://www.novartis.com.