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TABLE OF CONTENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
NOVARTIS GROUP INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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As filed with the Securities and Exchange Commission on January 29, 201427, 2015

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549

FORM 20-F

Commission file number 1-15024

NOVARTIS AG
(Exact name of Registrant as specified in its charter)

NOVARTIS Inc.
(Translation of Registrant's name into English)

Switzerland
(Jurisdiction of incorporation or organization)

Lichtstrasse 35
4056 Basel, Switzerland

(Address of principal executive offices)

Felix R. Ehrat
Group General Counsel
Novartis AG
CH-4056 Basel
Switzerland
Tel.: 011-41-61-324-1111
Fax: 011-41-61-324-7826
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

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

None

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

None

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

2,426,084,3082,398,626,257 shares

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

Yes ý    No o

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

Yes o    No ý

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

Yes ý    No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer ý                        Accelerated filer o                        Non-accelerated filer o

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

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

Item 17 o        Item 18 o

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

Yes o    No ý

*

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

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INTRODUCTION AND USE OF CERTAIN TERMS

        Novartis AG and its consolidated affiliates publish consolidated financial statements expressed in US dollars. Our consolidated financial statements found in Item 18 of this annual report on Form 20-F (Form 20-F) are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).

        Unless the context requires otherwise, the words "we," "our," "us," "Novartis," "Group," "Company," and similar words or phrases in this Form 20-F refer to Novartis AG and its consolidated affiliates. However, each Group company is legally separate from all other Group companies and manages its business independently through its respective board of directors or other top local management body. No Group company operates the business of another Group company. Each executive identified in this Form 20-F reports directly to other executives of the Group company which employs the executive, or to that Group company's board of directors.

        In this Form 20-F, references to "US dollars" or "$" are to the lawful currency of the United States of America, and references to "CHF" are to Swiss francs; references to the "United States" or to "US" are to the United States of America, references to the "European Union" or to "EU" are to the European Union and its 28 member states, references to "Latin America" are to Central and South America, including the Caribbean, and references to "Americas""Australasia" are to North, Central (including the Caribbean)Australia, New Zealand, Melanesia, Micronesia and South America,Polynesia, unless the context otherwise requires; references to "associates" are to employees of our affiliates; references to the "FDA" are to the US Food and Drug Administration, references to "EMA" are to the European Medicines Agency, an agency of the EU, and references to the "CHMP" are to the EMA's Committee for Medicinal Products for Human Use;Use of the EMA; references to "ADR" or "ADRs" are to Novartis American Depositary Receipts, and references to "ADS" or "ADSs" are to Novartis American Depositary Shares; references to the "NYSE" are to the New York Stock Exchange, and references to the "SIX" are to the SIX Swiss Exchange.Exchange; references to "GSK" are to GlaxoSmithKline plc, references to "Lilly" are to Eli Lilly and Company, and references to "CSL" are to CSL Limited.

        All product names appearing initalics are trademarks owned by or licensed to Group companies. Product names identified by a "®" or a "™" are trademarks that are not owned by or licensed to Group companies.

FORWARD-LOOKING STATEMENTS

        This Form 20-F contains certain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Other written materials filed with or furnished to the US Securities and Exchange Commission (SEC) by Novartis, as well as other written and oral statements made to the public, may also contain forward-looking statements. Forward-looking statements can be identified by words such as "potential," "expected," "will," "planned," "pipeline," "outlook," or similar terms, or by express or implied discussions regarding potential new products, potential new indications for existing products, or regarding potential future revenues from any such products; potential shareholder returns or credit ratings,ratings; or regarding the potential outcomecompletion of the share buyback being initiated;announced transactions with GSK and CSL, or regarding potential future sales or earnings of any of the businesses involved in the transactions with GSK, Lilly or CSL, or regarding any potential strategic benefits, synergies or opportunities as a result of these transactions; or regarding potential future sales or earnings of the Novartis Group or any of its divisions; or by discussions of strategy, plans, expectations or intentions. You should not place undue reliance on these statements.

        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,

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actual results may vary materially from those set forth in the forward-looking statements. There can be no guarantee that any new products will be approved for sale in any market, or that any new indications will be approved for any existing products in any market, or that any approvals which are obtained will be obtained at any particular time, or that any such products will achieve any particular revenue levels. Nor can there be any guarantee that the announced transactions with GSK and CSL will be completed in the expected form or within the expected time frame or at all. Neither can there be any guarantee that Novartis will be able to realize any of the potential strategic benefits, synergies or opportunities as a result of the transactions with GSK, Lilly or CSL. Neither can there be any guarantee that Novartis or any of the businesses involved in the transactions will achieve any particular financial results in the future. Nor can there be any guarantee that shareholders will achieve any particular level of shareholder returns or

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regarding the potential outcome of the share buyback being initiated.returns. Neither can there be any guarantee that the Group, or any of its divisions, will be commercially successful in the future, or achieve any particular credit rating.

        In particular, management's expectations could be affected by, among other things:

•

unexpected regulatory actions or delays or government regulation generally;generally, including an unexpected failure to obtain necessary government approvals for the transactions, or unexpected delays in obtaining such approvals;



•

the potential that the strategic benefits, synergies or opportunities expected from the announced transactions, including the divestment of our former blood transfusion diagnostics unitAnimal Health Division to Lilly, may not be realized or may take longer to realize than expected;



•

the inherent uncertainties involved in predicting shareholder returns or credit ratings;



•

the uncertainties inherent in research and development, including unexpected clinical trial results and additional analysis of existing clinical data;



•

Novartis'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 which commenced in prior years and will continue this year;



•

unexpected manufacturing andor quality issues, including the final resolution of the Warning Letters previously issued to us with respect to Sandoz and Consumer Health manufacturing facilities;issues;



•

global trends toward health care cost containment, including ongoing pricing pressures;



•

uncertainties regarding actual or potential legal proceedings, including, among others, actual or potential product liability litigation, litigation and investigations regarding sales and marketing practices, government investigations and intellectual property disputes;



•

general economic and industry conditions;



•

conditions, including uncertainties regarding the effects of the persistently weak global economic and financial environment in many countries;



•

uncertainties regarding future global exchange rates, including as a result of recent changes in monetary policy by the financial troublesSwiss National Bank;



•

uncertainties regarding future demand for our products;



•

uncertainties involved in certain Eurozone countries;the development of new healthcare products; and



•

uncertainties regarding future global exchange rates; uncertainties regarding future demand forpotential significant breaches of data security or disruptions of our products.information technology systems.

        Some of these factors are discussed in more detail in this Form 20-F, including under "Item 3. Key Information—3.D. Risk factors," "Item 4. Information on the Company," and "Item 5. Operating and Financial Review and Prospects." Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this Form 20-F as anticipated, believed, estimated or expected. We provide the information in this Form 20-F as of the date of its filing. We do not intend, and do not assume any obligation, to update any information or forward-looking statements set out in this Form 20-F as a result of new information, future events or otherwise.

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PART I

Item 1.    Identity of Directors, Senior Management and Advisers

        Not applicable.

Item 2.    Offer Statistics and Expected Timetable

        Not applicable.

Item 3.    Key Information

3.A Selected Financial Data

        The selected financial information set out below has been extracted from our consolidated financial statements prepared in accordance with IFRS as issued by the IASB. Our consolidated financial statements for the years ended December 31, 2014, 2013 2012 and 20112012 are included in "Item 18. Financial Statements" in this Form 20-F.

        All financial data should be read in conjunction with "Item 5. Operating and Financial Review and Prospects". All financial data presented in this Form 20-F are qualified in their entirety by reference to the consolidated financial statements and their Notes.notes.

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Cash Dividends per Share

        Cash dividends are translated into US dollars at the Bloomberg Market System Rate on the payment date. Because we pay dividends in Swiss francs, exchange rate fluctuations will affect the US dollar amounts received by holders of ADRs.

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Exchange Rates

        The following table shows, for the years and dates indicated, certain information concerning the rate of exchange of US dollar per Swiss franc based on exchange rate information found on Bloomberg Market System. The exchange rate in effect on January 22, 2014,21, 2015, as found on Bloomberg Market System, was CHF 1.00 = $1.10.$1.14.

3.B    Capitalization and Indebtedness

        Not applicable.

3.C    Reasons for the offer and use of proceeds

        Not applicable.

3.D    Risk Factors

        Our businesses face significant risks and uncertainties. You should carefully consider all of the information set forth in this annual report on Form 20-F and in other documents we file with or furnish to the SEC, including the following risk factors, before deciding to invest in any Novartis securities. Our business, as well as our financial condition or results of operations could be materially adversely affected by any of these risks, as well as other risks and uncertainties not currently known to us or not currently deemed to beconsidered material.

Risks Facing Our Business

Our products face important patent expirations and significant competition.

        The products of our Pharmaceuticals and Alcon Divisions, as well as key products from our other divisions, are generally protected by patent rights, which are intended to provide us with exclusive rights to market the patented products. However, those patent rights are of varying strengths and durations. Loss of market exclusivity for one or more important products have had, and can be expected to continue to have a material adverse effect on our results of operations.

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        The introduction of generic competition for a patented medicine typically results in a significant and rapid reduction in net sales and net income for the patented product because generic manufacturers typically offer their unpatented versions at sharply lower prices. Such competition can result from the regular expiration of the term of the patent. Such competition can also result from the entry of generic versions of another medicine in the same therapeutic class as one of our drugs, or in another competing therapeutic class, or from the compulsory licensing of our drugs by governments, or from a general weakening of intellectual property laws in certain countries around the world. In addition, generic manufacturers frequently take an aggressive approach to challenging patents, conducting so-called "launches at risk" of products that are still under legal challenge for patent infringement, before final resolution of legal proceedings.

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

        Some of our best-selling products have begun or are about to face significant competition due to the end of market exclusivity resulting from the expiry of patent protection.

•

The patent on imatinib, the active ingredient in our best-selling productGleevec/Glivec (cancer), will expire in July 2015 in the US, in 2016 in the major European countries and expired in 2014 for the main indications in Japan. Additional patents claiming innovative features ofGleevec/Glivec have been challenged in the US. A settlement with one of these generic manufacturers will allow that generic manufacturer to enter the US market on February 1, 2016. Generic versions ofGleevec/Glivec have already launched in a number of countries around the world.



•

The patent on valsartan, the active ingredient ofinDiovan/Co-Diovan/Diovan HCT (high blood pressure), which washad long been our best-selling product, has expired in the major countries of theUS, EU in November 2011,and Japan, and generic competitors have launched there. In addition, patentPatent protection expired in the US in September 2012, and generic versions ofDiovan HCT have launched in the US. Generic versions ofDiovan monotherapy have not yet launched in the US but could potentially launch at any time. In addition, patent protection forDiovan expired in Japan in 2013, and will expire in 2016 forCo-Diovan (including patent term extensions).will expire in Japan in 2016. The active ingredient valsartan is also used in the single-pill combination therapiesExforge andExforge/Exforge HCT (high blood pressure). While marketseparate patents exist in the EU to protect this combination product, they have been challenged. Market exclusivities forExforge/Exforge HCT will remain in the EU and Japan due to regulatory exclusivities and to a valsartan patent extension forExforge in Japan until 2015,exclusivities. However, there is a risk that generic manufacturers may circumvent regulatory exclusivity and gain approval of a combination valsartan-amlodipine product in Europe.product. In the US, under a license agreement with a generics manufacturer,Exforge is expected to facealready faces generic competition beginning in October 2014.



•

The patent on zoledronic acid,despite the active ingredient inZometa (cancer), as well as inReclast/Aclasta (osteoporosis), expired in 2013 inexistence of separate patents covering the US and in other major markets, and generic versions of these products have launched.product.



•

Patent protection for octreotide acetate, the active ingredient ofinSandostatin, has expired. Generic versions ofSandostatin SC SC are available in the US and elsewhere. Patents protecting theA series of US patents protectSandostatin LAR formulation,, the long-acting version ofSandostatin which represents a majority of ourSandostatin sales,US sales. Some of these US patents have already expired, and the last of these US patents is expected to expire in 20102017. Patents protecting theSandostatin LAR formulation in key markets outside the US and will expire in 2014 and beyond in the US.have expired.



•

Patent protection on rivastigmine, the active ingredient inExelon, has expired in 2011 and 2012 andExelon capsules are subject to generic competition in major markets, including in the US and all of Europe. We hold certain formulationadditional patents with respect toExelon Patch, which makes up a substantial portion of ourExelon sales. These patentssales, but these have been challenged. Generic patches were launched in Germany and certain other EU countries in 2013.



•

The patent on the active ingredient inGleevec/Glivec (cancer) will expire in 2015 in the US, in 2016 in the major EU countries and in September 2014 for the main indications in Japan. However, the product is protected by additional patents claiming innovative features ofGleevec/Glivec. Generic versions ofGleevec/GlivecExelon have already been launchedPatch are on the market in Turkey, Brazil, Canada, China, India, Russia and for a minor indication in Japan.several European countries.

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        For more information on the patent status of our Pharmaceuticals Division's products see "Item 4. Information on the Company—Item 4.B Business Overview—Pharmaceuticals—Intellectual Property" and "Item 18. Financial Statements—Note 20".

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        In 2014,2015, the impact of generic competition on our net sales is expected to be as much as $3.0approximately $2.5 billion. Because we typically have substantially reduced marketing and research and development expenses related to a product in its final year of exclusivity, it is expected that the loss of patent protection will have an impact on our operating income which can be expected to correspond to a significant portion of the product's lost sales. The magnitude of such an impact could depend on a number of factors, including:including the time of year at which such exclusivity would be lost; the ease or difficulty of manufacturing a competitor product and obtaining regulatory approval to market it; the number of generic competitor products approved, andincluding whether, in the US, a single competitor is granted an exclusive marketing period;period, and whether an authorized generic is launched; and the geographies in which generic competitor products are approved, including the strength of the market for generic pharmaceutical products in such geographies and the comparative profitability of branded pharmaceutical products in such geographies.

        Clearly, with respect to major products for which the patent terms are expiring, the loss of exclusivity of these products can be expected to have a material adverse effect on our business, financial condition and results of operations. In addition, should we unexpectedly lose exclusivity on additional products as a result of patent litigation or other reasons, this could also have a material adverse effect on our business, financial condition and results of operations, both due to the loss of revenue and earnings, and the difficulties in planning for such losses.

        Similarly, all of our businesses are faced with intense competition from new products and technological advances from competitors.competitors, including new competitors from other industries that are entering the healthcare field. Physicians, patients and third-party payers may choose our competitors' products instead of ours if they perceive them to be safer, more effective, easier to administer, less expensive, more convenient, or more cost-effective.

        Products that compete with ours, including products competing against some of our best-selling products, are launched from time to time. We cannot predict with accuracy the timing of the introduction of such competitive products or their possible effect on our sales. However, products significantly competitive to our major productsLucentis andGilenya have recently been launched. Such products, and other competitive products, could adversely affect the revenues from our products and our results of operations.

Our research and development efforts may not succeed in bringing new products to market, or may fail to do so cost-efficiently enough, or in a manner sufficient to grow our business and replace lost revenues and income.

        Our ability to continue to grow our business and to replace sales lost due to competition or to other sources depends in significant part upon the success of our research and development activities in identifying, and successfully and cost-effectively developing new products that address unmet medical needs, are accepted by patients and physicians, and are reimbursed by payors. To accomplish this, we commit substantial effort, funds and other resources across all our divisions to research and development, both through our own dedicated resources and through collaborations with third parties. Developing new healthcare products and bringing them to market, however, is a highly costly, lengthy and uncertain process. In spite of our significant investments, there can be no guarantee that our research and development activities will produce commercially viable new products that will enable us to grow our business and replace lost revenues and income.

        Using the products of our Pharmaceuticals Division as an example, the research and development process for a new product can take up to 15 years, or even longer, from discovery to commercial product launch—and with a limited available patent life, the longer it takes to develop a product, the less time there will be for us to recoup our development costs. New products need not only undergo intensive preclinical and clinical testing, but also must be approved by means of highly complex, lengthy and

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expensive approval processes which can vary from country to country. During each stage, there is a substantial risk that we will encounter serious obstacles which will further delay us and add substantial expense, that we will only develop a product with limited potential for commercial success, or that we will be forced to abandon a product in which we have invested substantial amounts of time and money. These

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risks may include: failure of the product candidate in preclinical studies; difficulty enrolling patients in clinical trials or delays or clinical trial holds at clinical trial sites; delays in completing formulation and other testing and work necessary to support an application for regulatory approval; adverse reactions to the product candidate or indications or other safety concerns; insufficient clinical trial data to support the safety or efficacy of the product candidate; an inability to manufacture sufficient quantities of the product candidate for development or commercialization activities in a timely and cost-effective manner; and failure to obtain, or delays in obtaining, the required regulatory approvals for the product candidate or the facilities in which it is manufactured.

        In addition, FDAfollowing a series of widely publicized issues, health regulators have increased their focus on product safety. Governmental authorities and payors around the world have also paid increased attention to whether new products offer a significant benefit over other governmental health authoritiesproducts in the same therapeutic class. These developments have recently intensified their scrutinyled to requests for more clinical trial data, for the inclusion of pharmaceutical companies' clinical development activities, both with respect to compliance with regulations related to the conducta significantly higher number of patients in clinical trials, and with respect to their interpretationsfor more detailed analyses of the trials. As a result, the already lengthy and expensive process of obtaining regulatory approvals and reimbursement for pharmaceutical products has become even more challenging.

        For the same reason, the post-approval regulatory burden has also increased. Approved drugs are subject to various requirements such as risk evaluation and mitigation strategies (REMS), risk management plans, comparative effectiveness studies, health technology assessments and requirements to conduct post-approval Phase IV clinical trialtrials to gather additional safety and other data on products. These requirements necessary to support ahave the effect of making the maintenance of regulatory approvals and of achieving reimbursement for our products increasingly expensive, and further heightening the risk of recalls, product submission. This has added to the obstacles and costs we face in bringing new products to market.withdrawals, loss of revenues or loss of market share.

        Our other divisions face similar challenges in developing new products and bringing them to market. Alcon's Ophthalmic Pharmaceuticals products Vaccines and Diagnostics' Vaccine products, and the products of our Animal HealthVaccines Division all must be developed and approved in accordance with essentially the same processes as faced by our Pharmaceuticals Division. Nearly all of our otherAlcon's Surgical and Vision Care products face similarly difficult development and approval processes. At Alcon management has announcedmakes significant investments in research and development to develop new eye care products to replace sales that may be lost to generic or other competition and to grow its business.businesses. Vaccines and Diagnostics has, and continues to expend considerable time and resources to fully develop and bring to market new vaccines, includingBexsero, vaccines to combat serogroup B meningococcal disease. Our Animal Health Division seeks to bring new products to market from time to time. If these efforts do not bear significant fruit, they could have a material adverse effect on the medium to long-term success of these divisions, and of the Group as a whole.

        In addition, our Sandoz Division has made, and expects to continue to make, significant investments in the development of differentiated, "difficult-to-make" generic products, including biotechnology-based, "biologic" medicines intended for sale as bioequivalent or "biosimilar" generic versions of currently-marketed biotechnology products. While the development of such products can betypically is significantly less costly and complex than the development of the equivalent originator medicines, it can often beis nonetheless significantly more costly and complex than for non-differentiated generic products. In addition, to date, many countries do not yet have a fully-developed legislative or regulatory pathway which would permit biosimilars to be brought to market or sold in a manner in which the biosimilar product would be readily substitutable for the originator product. Significant difficulties in the development of differentiated products, further delays in the development of such regulatory pathways, or any significant impediments that may ultimately be built into such pathways, could put at risk the significant investments that Sandoz has made, and will continue to make, in the development of differentiated products in general, and in its biotechnology operations in particular, and could have a material adverse effect on the long-term success of the Sandoz Division and the Group as a whole.

        If we are unable to cost-effectively maintain an adequate flow of successful new products and new indications for existing products sufficient to cover our substantial research and development costs and the decline in sales of older products that either become subject to generic competition, or are displaced by

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competing products or therapies, this could have a material adverse effect on our business, financial condition or results of operations. For a description of the approval processes which must be followed to market our products, see the sections headed "Regulation" included in the descriptions of our fourfive operating divisions under "Item 4. Information on the Company—Item 4.B Business Overview."

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Increasing regulatory scrutiny of drug safety and efficacy has and is likely to continue to adversely affect us.

        Following a series of widely publicized issues in recent years, health regulators are increasingly focusing on product safety. In addition, governmental authorities around the world have paid increased attention to the risk/benefit profile of pharmaceutical products with an increasing emphasis on product safety and on examining whether new products offer a significant benefit over older products in the same therapeutic class. These developments have led to requests for more clinical trial data, for the inclusion of a significantly higher number of patients in clinical trials, and for more detailed analyses of the trials. As a result, the already lengthy and expensive process of obtaining regulatory approvals for pharmaceutical products has become even more challenging.

        In addition, for the same reason, the post-approval regulatory burden has been increasing. Approved drugs have increasingly been subject to requirements such as risk evaluation and mitigation strategies (REMS), risk management plans, comparative effectiveness studies, health technology assessments and requirements to conduct post-approval Phase IV clinical trials to gather far more detailed safety and other data on products. These requirements have the effect of making the maintenance of regulatory approvals and achieving reimbursement for our products increasingly expensive, and further heightening the risk of recalls, product withdrawals, or loss of market share.

        Like our industry peers, we have been required by health authorities to conduct additional clinical trials, and to submit additional analyses of our data in order to obtain product approvals or reimbursement by government or private payors. We have had REMS and other such requirements imposed as a condition of approval of our new drugs. Because these regulatory developments can increase the costs of, and cause delays in obtaining approvals, and create an increased risk that products either will not be approved, or will be removed from the market after previously having been approved, these regulatory developments could have a material adverse effect on our business, financial condition and results of operations.

Our business is increasingly affected by pressures on pricing for our products.

        The growth of overall healthcare costs as a percentage of gross domestic product in many countries means that governments and payors are under intense pressure to control healthcare spending even more tightly. These pressures are particularly strong given the persistently weak global economic and financial environment.environment in many countries and the increasing demand for healthcare resulting from the aging of the global population and the prevalence of behaviors that increase the risk of obesity and other chronic diseases. In addition, in certain countries, patients, healthcare providers and the media are increasingly raising questions about healthcare pricing issues. As a result, our businesses and the healthcare industry in general are operating in an ever more challenging environment with very significant pricing pressures. These ongoing pressures affect all of our businessesdivisions that rely on reimbursement—including Pharmaceuticals, Alcon, Sandoz and Vaccines and Diagnostics.Vaccines. They involve a number of cost-containment measures, such as government-imposed industry-wide price reductions, mandatory pricing systems, reference pricing systems, payors limiting access to innovative medicinestreatments based on cost-benefit analyses, an increase in imports of drugs from lower-cost countries to higher-cost countries, shifting of the payment burden to patients through higher co-payments, limiting physicians' ability to choose among competing medicines, mandatory substitution of generic drugs for the patented equivalent, and growing pressure on physicians to reduce the prescribing of patented prescription medicines. Such initiatives include the 2010 enactment of the Affordable Care Act in the US, its implementation, and ongoing efforts by the US Government to find additional savings from government healthcare programs.

        As a result of such measures, we faced downward pricing pressures on our patented and generic drugs in many countries in 2013.2014. For example, during 2013, the UK's National Institute for Health and Clinical Excellence (NICE) recommended against the UK National Health Service funding the use of our productsJakavi (myelofibrosis) andAfinitor (advanced breast cancer indication). NICE did recommend the funding of the use of our productsXolair (allergic asthma),Lucentis (diabetic macular edema indication), andJetrea (vitreomacular traction), but only after we offered significant price discounts. Similarly, a German agency, theGemeinsamer Bundesausschuss (G-BA), is conductinginitiated an analysis of the

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benefits of drugs previously approved and asprior to 2011. As part of that analysis refused to recommend the use ofG-BA concluded that our producttype 2 diabetes medicinesGalvus andEucreas did not provide an added benefit over certain other medicines indicated for the treatment of that disease. As a result, we were unable to treat type 2 diabetes. In China,reach agreement with the government has imposed significant price cuts on certain of our products. In the US, under the Affordable Care Act, there is a newly created entity, the Independent Payment Advisory Board, which has been granted unprecedented authority to implement broad actions to reduce future costshead organization of the Medicare program. This could include required prescription drug discounts or rebates. In addition, as a result of the ongoing implementation of the Affordable Care Act, some patients may be required to switch from existing commercialGerman statutory health insurance policies to policies offeredfunds, GKV-Spitzenverband, on the new healthcare exchanges. Should a significant numberan acceptable price forGalvus andEucreas, and, in 2014, we stopped distribution of patients switch to policies offered on the exchanges that offer lesser benefits than their prior policies, there could be an impact on the sales or pricing of our products.these products in Germany.

        We expect these efforts to control costspressures to continue in 20142015 as healthcare payors around the globe, including government-controlled health authorities, insurance companies and managed care organizations, step up initiatives to reduce the overall cost of healthcare, restrict access to higher-priced new medicines, increase the use of generics and impose overall price cuts. For more information on price controls and on our challenging business environment see "Item 4. Information on the Company—Item 4.B Business Overview—Pharmaceuticals—Price Controls."

Failure to comply with law, and resulting investigations and legal proceedings may have a significant negative effect on our results of operations.

        We are obligated to comply with the laws of all of the countries around the world in which we operate and sell products with respect to an extremely wide and growing range of activities, as well as with new requirements imposed on us from time to time as government and public expectations regarding acceptable corporate behavior change. For example, there are new laws in the US and in other countries around the world that will require us to be more transparent with respect to our interactions with healthcare professionals. To help us in our efforts to comply with the many requirements that impact us, we have a significant global ethics and compliance with law program in place, and we devote substantial time and resources to efforts to ensure that our business is conducted in a lawful and publicly acceptable manner. Nonetheless, despite our efforts, any failure to comply with law or with heightened public expectations could lead to

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substantial liabilities that may not be covered by insurance, or to other significant losses, and could affect our business and reputation.

        In particular, in recent years, there has been a trend of increasing government investigations and litigations against companies operating in the industries of which we are a part,our industry, both in the US and in an increasing number of countries around the world. A number of our subsidiaries are, and will likely continue to be, subject to various legal proceedings that arise from time to time, includingsuch as proceedings regarding product liability, sales and marketing practices, product liability, commercial disputes, employment and wrongful discharge, antitrust, securities, health and safety, environmental, tax, privacy, and intellectual property matters. Such proceedings are inherently unpredictable, and large judgments sometimes occur. As a consequence, we may in the future incur judgments or enter into settlements of claims that could have a material adverse effect on our results of operations or cash flows.

        In addition, governments and regulatory authorities around the world have been stepping up their compliance and law enforcement activities in recent years in key areas, including sales and marketing practices, corruption, trade restrictions, embargo legislation, insider trading, antitrust, and data privacy, and are increasingly challenging practices previously considered to be legal. Responding to such investigations is costly, and requires an increasing amount of management's time and attention. In addition, such investigations may affect our reputation, create a risk of potential exclusion from government reimbursement programs in the US and other countries, and may lead to litigation.litigation and monetary penalties. These factors have contributed to decisions by us and other companies in our industry, when deemed in their interest, to enter into settlement agreements with governmental authorities around the world prior to any formal decision by the authorities. These settlements have involved and may continue to involve large cash

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payments, including the potential repayment of amounts allegedly obtained improperly, and other penalties, including treble damages. In addition, settlements of healthcare fraud cases oftenin the US and other countries sometimes require companies to enter into corporate integrity or similar agreements, which are intended to regulate company behavior for a period of years. Our affiliate Novartis Pharmaceuticals Corporation is a party to such an agreement, which will notis scheduled to expire untilin 2015. Also, matters underlying governmental investigations and settlements may be the subject of separate private litigation.

        Our businesses are currently subject to a number of these governmental investigations and information requests by regulatory authorities. See "Item 18. Financial Statements—Note 20."

        In addition, our Sandoz Division may, from time to time, seek approval to market a generic version of a product before the expiration of patents claimed by the marketer of the patented product. We do this in cases where we believe that the relevant patents are invalid, unenforceable, or would not be infringed by our generic product. As a result, affiliates of our Sandoz Division frequently face patent litigation, and in certain circumstances, we may elect to market a generic product even though patent infringement actions are still pending. Should we elect to proceed in this manner and conduct a "launch at risk," we could face substantial damages if the final court decision is adverse to us.

        Our businesses are currently subject to a number of these cases and governmental investigations, as well as information requests by regulatory authorities. For more detail regarding specific legal matters currently pending against us and provisions for such matters, see "Item 18. Financial Statements��Note 20." See also "—Our reliance on outsourcing and third parties for the performance of key business functions heightens the risks faced by our businesses" below. Adverse judgments or settlements in any of the significant investigations or cases against us could have a material adverse effect on our business, financial condition and results of operations.

        For more detail regarding specific legal matters currently pending against us and provisions for such matters, see "Item 18. Financial Statements—Note 20." See also "—Our reliance on outsourcing and third parties for the performance of key business functions heightens the risks faced by our businesses" below.

The manufacture of our products is highly regulated and complex, and may result in a variety of issues that could lead to extended supply disruptions and significant liability.

        The manufacture of our products we market and sellis heavily regulated by governmental health authorities around the world, including the FDA. Whether our products are either manufactured at our own dedicated manufacturing facilities or by third parties. In either case,parties, we must ensure that all manufacturing processes comply with current Good Manufacturing Practices (cGMP) and other applicable regulations, as well as with our own high quality standards. The manufacture

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standards. In recent years, such health authorities have intensified their scrutiny of manufacturers' compliance with such requirements, and are increasingly challenging practices that were previously considered acceptable. If we or our third-party suppliers fail to comply fully with these requirements and the health authorities' expectations, then we could be required to shut down our production facilities or production lines.lines, or could be prevented from importing our products from one country to another. This could lead to product shortages, or to our being entirely unable to supply products to patients for an extended period of time. And such shortages or shut downs have led to and could continue to lead to significant losses of sales revenue and to potential third-party litigation. In addition, health authorities have in some cases imposed significant penalties for such failures to comply with cGMP. A failure to comply fully with cGMP could also lead to a delay in the approval of new products to be manufactured at the impacted site.

        Like our competitors, we have faced and continue to face, significant manufacturing issues. For example,issues in November 2011, we received a Warning Letter from the FDA with respect to three of our Sandoz Division's facilities—in Broomfield, Colorado, Wilson, North Carolina, and Boucherville, Canada. The Warning Letter raised concerns regarding these facilities' compliance with FDA cGMP regulations. It stated that until the FDA confirms that the deficiencies have been corrected, the FDA can recommend that any pending applications or supplements listing Novartis affiliates as a drug manufacturer not be approved. In addition, FDA may refuse requests to issue export certificates to our Sandoz US affiliate, or import certificates to our Sandoz Canada affiliates. The letter further states that other federal agencies may take the Warning Letter into account when considering the award of contracts. In addition, in May 2013 we received a Warning Letter from the FDA concerning the oncology injectables manufacturing

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facility in Unterach, Austria. The letter contained two observations which followed an agency inspection at the site in October 2012, and are related to historical visual inspection practices for products manufactured at the site. In the fourth quarter of 2012, the FDA formally notified Sandoz that the compliance status of its Broomfield, Colorado site has been upgraded. In January 2014, the FDA formally notified Sandoz that the compliance status of its Boucherville, Canada site was upgraded. Work continues on closing out committed actions across the sites.

        Separately, in December 2011, we suspended operations and shipments from the OTC Division facility located at Lincoln, Nebraska, which also produces certain products for our Animal Health Division. This action was taken to accelerate maintenance and other improvement activities at the site. Subsequently, in 2012 and 2013, we recalled certain OTC Division products that were produced at the Lincoln facility. We have made progress in the remediation of quality issues at Lincoln, and the FDA closed out its October 2013 inspection of the site with zero Form��483 observations. However, we have also outsourced the production of certain Lincoln products, and have discontinued others. As of the date of this Form 20-F, it is not possible to determine when the plant will resume full operations.

        In December 2012, our Alcon Division received an FDA Warning Letter following an inspection at theLenSx laser manufacturing site in Aliso Viejo, California. Alcon responded in writing to the FDA, and in February 2013, FDA responded to Alcon acknowledging that the corrective actions described in Alcon's written response appear to address the items identified in the Warning Letter. The FDA will verify these corrective actions during its next scheduled inspection of the site. The items noted in the Warning Letter do not affect the safety or effectiveness of theLenSx laser, or impact Alcon's ability to sell the product.

recent years. As a result of such manufacturing issues, we were unable to supply certain products to the market for significant periods of time, and so have suffered and may continue to suffer significant losses in sales and market share. These supply issues have required us to outsource the production of certain key products that were previously manufactured in our own production facilities, which may limit the potential profitability of such products. In addition, to meet health authority and our own high quality standards, we have expended considerable resources to upgrade and remediate issues at our sites. Should we fail to complete the planned improvements at the sites in a timely manner, including those done in agreement with the FDA, then we may suffer significant additional losses in sales and drainage of resources, and we could be subject to legal action without further notice including, without limitation, seizure and injunction.

        In addition, to meet increasing health authority expectations, we are devoting substantial time and resources to improve quality and assure consistency of product supply at our other manufacturing sites around the world. Ultimately, there can be no guarantee of the outcome of any of these efforts. Nor can there be any guarantee that we will not again face similarsignificant manufacturing issues, in the future, or that we will successfully manage such issues when they arise.

        In addition to regulatory requirements, many of our products involve technically complex manufacturing processes or require a supply of highly specialized raw materials. For some products and raw materials, we may also rely on a single source of supply. In particular, a significant portion of our portfolio, including products from our Pharmaceuticals, Alcon, Vaccines, and Diagnostics, and Sandoz Divisions, are "biologic" products. Unlike traditional "small-molecule" drugs, biologic drugs or other biologic-based products cannot be manufactured synthetically, but typically must be produced from living plant or animal micro-organisms. As a result, the production of biologic-based products which meet all regulatory requirements is especially complex. Even slight deviations at any point in the production process may lead to batchproduction failures or recalls. In addition, because the production process is based on living plant or animal micro-organisms, the process could be affected by contaminants which could impact those micro-organisms. As a result, the inherent fragility of certain of our raw material supplies and production processes may cause the production of one or more of our products to be disrupted, potentially for extended periods of time.

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        Also as part of the Group's portfolio of products, we have a number of sterile products, including oncology products, which are considered to be technically complex to manufacture, and require strictsophisticated environmental controls. Because the production process for such products is so complex and sensitive, the chance of production failures and lengthy supply interruptions is increased.

        Finally, in addition to potential liability for government penalties, because our products are intended to promote the health of patients, for some of our products, any supply disruption or other production issue could endanger our reputation and subject us to lawsuits or to allegations that the public health, or the health of individuals, has been endangered.harmed.

        In sum, a disruption in the supply of certain key products—whether as a result of a failure to comply with applicable regulations or health authority expectations, the fragility of the production process, natural or man-made disasters at one of our facilities or at a critical supplier or vendor, or our failure to accurately predict demand—could have a material adverse effect on our business, financial condition or results of operations. See also "—Earthquakes and other natural disasters could adversely affect our business," below.

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The persistently weak global economic and financial environment in many countries and increasing political and social instability may have a material adverse effect on our results.

        Many of the world's largest economies and financial institutions continue to be impacted by a weak ongoing global economic and financial environment, with some continuing to face financial difficulty, liquidity problems and limited availability of credit. It is uncertain how long these effects will last, or whether economic and financial trends will worsen or improve. In addition, these issues may be further impacted by the unsettled political conditions currently existing in the US, Europe and other places. Such uncertain times may have a material adverse effect on our revenues, results of operations, financial condition and, if circumstances worsen, our ability to raise capital at reasonable rates. For example, persistent financial weakness in certain countries in Europe has increased pressures on those countries, and on payors in those countries, to force healthcare companies to decrease the prices at which we may sell them our products. See also "Item 4. Information on the Company—Item 4.B Business Overview—Pharmaceuticals—Price Controls." Concerns continue that payors in some countries, including Greece, Italy, Portugal and Spain, may not be able to pay us in a timely manner. Certain other countries, such as Venezuela have taken steps to introduce exchange controls and limit companies from distributing retained earnings or paying intercompany payables due from those countries. See also, "Item 5. Operating and Financial Review and Prospects—Item 5.B Liquidity and Capital Resources," "Item 18. Financial Statements—Notes 15 and 29."

        Current economic conditions may adversely affect the ability of our distributors, customers, suppliers and service providers to obtain the liquidity required to pay for our products, or otherwise to buy necessary inventory or raw materials, and to perform their obligations under agreements with us, which could disrupt our operations, and could negatively impact our business and cash flow. Although we make efforts to monitor these third parties' financial condition and their liquidity, our ability to do so is limited, and some of them may become unable to pay their bills in a timely manner, or may even become insolvent, which could negatively impact our business and results of operations. These risks may be elevated with respect to our interactions with third parties with substantial operations in countries where current economic conditions are the most severe, particularly where such third parties are themselves exposed to payment risks from business interactions directly with fiscally-challenged government payers. See also "—Our reliance on outsourcing and third parties for the performance of key business functions heightens the risks faced by our businesses" below.

        In addition, the varying effects of difficult economic times on the economies, currencies and financial markets of different countries has impacted, and may continue to unpredictably impact, the conversion of our operating results into our reporting currency, the US dollar, as well as the value of our investments in our pension plans. See "—Foreign exchange fluctuations may adversely affect our earnings and the value of some of our assets," below, and "—If any of numerous key assumptions and estimates in calculating our pension plan obligations turn out to be different from our actual experience, we may be required to increase substantially our contributions to pension plans as well as our pension-related costs in the

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future," below. In addition, the financial situation may also result in a lower return on our financial investments, and a lower value on some of our assets. Alternately, inflation could accelerate, which could lead to higher interest rates, which would increase our costs of raising capital.

        To the extent that the economic and financial crisis isconditions directly affectingaffect consumers, some of our businesses, including the elective surgical business of our Alcon Division, and our OTC and Animal Health Divisions, may be particularly sensitive to declines in consumer spending. In addition, our Pharmaceuticals, Vaccines, and Diagnostics, and Sandoz Divisions, and the remaining businesses of our Alcon Division, may not be immune to consumer cutbacks, particularly given the increasing requirements in certain countries that patients pay a larger contribution toward their own healthcare costs. As a result, there is a risk that consumers may cut back on prescription drugs and vaccines, as well as consumer health products, to help cope with rising costs and difficult economic times.

        At the same time, significant changes and volatility in the financial markets, in the consumer and business environment, in the competitive landscape and in the global political and security landscape make it increasingly difficult for us to predict our revenues and earnings into the future. As a result, any

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revenue or earnings guidance or outlook which we have given or might give may be overtaken by events, or may otherwise turn out to be inaccurate. Though we endeavor to give reasonable estimates of future revenues and earnings at the time we give such guidance, based on then-current knowledge and conditions, there is a significant risk that such guidance or outlook will turn out to be, or to have been, incorrect.

        In addition, increasing political and social instability around the world, including political instability and military action involving Russia, Ukraine and parts of the Middle East, the impacts of the Ebola crisis in western Africa, increased political and religious radicalism in many places, and increasing social unrest, including anti-immigrant activities in many countries may lead to significant business disruptions or other adverse business conditions. Similarly, increased scrutiny of corporate taxes and executive pay may lead to significant business disruptions or other adverse business conditions, and may interfere with our ability to attract and retain qualified personnel. See "—An inability to attract and retain qualified personnel could adversely affect our business" below.

Foreign exchange fluctuations may adversely affect our earnings and the value of some of our assets.

        In the past year,Changes in exchange rates between the US dollar, our reporting currency, hasand other currencies can result in significant increases or decreases in our reported sales, costs and earnings as expressed in US dollars, and in the reported value of our assets, liabilities and cash flows. This in turn may significantly affect the comparability of period-to-period results of operations. In 2014, the US dollar significantly increased in value against certain other worldmost currencies. In particular, the average value of the Japanese yen and emerging market currencies (especially the ruble) decreased in 2014 against the US dollar. However, in prior years,January 2015, following an announcement by the US dollar suffered significant decreases in value. In addition, in recent years, unresolved fiscal issues inSwiss National Bank that it was discontinuing its minimum exchange rate with the US and in many European economies, and investor concerns abouteuro, the future of the Euro, have led to the flight of investor capital to the perceived safetyvalue of the Swiss franc causing the Swiss franc to rise significantly in value.increased substantially. Because a significant portion of our earnings and expenditures are in currencies other than the US dollar, including expenditures in Swiss francs whichthat are significantly higher than our revenues in Swiss francs, thissuch exchange rate volatility can have a significant and often unpredictable impact on our reported net sales and earnings. As has happened in the recent past, changes in exchange rates between the US dollar and other currencies can result in increases or decreases in our reported sales, costs and earnings as expressed in US dollars. Fluctuations in exchange rates between the US dollar and other currencies may also affect the reported value of our net sales, earnings, assets measured in US dollarsand liabilities, and the componentstiming and extent of shareholders' equity.such volatility can be difficult to predict.

        In addition, there is a risk that certain countries could devaluetake other steps which could significantly impact the value of their currency. Ifcurrencies. Such steps could include "quantitative easing" measures, potential withdrawals by countries from common currencies or the setting of exchange controls, as Venezuela did. Should such steps significantly change the value of a country's currency, then this occurs then it could impact the effective prices we would be able to charge forvalue in US dollars of our productssales and also have an adverse impact on both our consolidated income statement andearnings in such countries, as well as the currency translation adjustments included in our consolidated equity. For more information on the effects of currency fluctuations on our consolidated financial statements and on how we manage currency risk, see "Item 5. Operating and Financial Review and Prospects—Item 5.A Operating Results—Effects of Currency Fluctuations," "Item 5.A Operating Results—Currency Impact on Key Figures," "Item 5.B Liquidity and Capital Resources,"Resources—Effects of Currency Fluctuations" "Item 11. Quantitative and Qualitative Disclosures about Market Risk", and "Item 18. Financial Statements—Note 29."

We may not successfully achieve our goals in strategic acquisitionstransactions or divestmentsreorganizations, including the portfolio transformation transactions and the formation of businesses.Novartis Business Services.

        As part of our growth strategy, from time to time we evaluate and pursue potential strategic business acquisitions and divestitures to expand or complement our existing businesses, or to enable us to focus more sharply on our strategic businesses. We cannot ensure that suitable acquisition candidates will be identified. Acquisition activities can be thwarted by overtures from competitors for the targeted candidates,assets, potentially increasing prices demanded by sellers, governmental regulation (including market concentration limitations) and replacement product developments in our industry. Once an acquisition is agreed upon with a third party, we may not be able to complete the acquisition in the expected form or within the expected time frame, or at all, due to a failure to obtain required regulatory approvals or a failure to achieve contractual or other required closing conditions. Further, after an acquisition, efforts to integrate the business may not meet expectations, or may otherwise not be successful, integrationas a result of

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the venture can be complicated by corporate cultural differences, difficulties in retention of key personnel, customers and suppliers, and coordination with other products and processes.processes, or other reasons. Also, acquisitions and divestments could divert management's attention from our existing business,businesses, and could result in the existing businesses failing to achieve expected results, or in liabilities being incurred that were not known at the time of acquisition, or the creation of tax or accounting issues. Similarly, we cannot ensure that suitable buyers will be identified for businesses or other assets that we wishmight want to divest. Neither can we ensure that we will correctly select businesses or assets as candidates for divestiture, that we will be able to successfully complete any agreed upon divestments, or that any expected strategic benefits, synergies or opportunities will arise as a result of any divestiture.

        On April 22, 2014, we announced that we had reached definitive agreements with GSK and Lilly on a set of transactions intended to transform our portfolio of businesses. In a series of inter-conditional transactions with GSK, Novartis agreed to: (1) acquire GSK oncology products and certain related assets, and was granted a right of first negotiation over the co-development or commercialization of GSK's current and future oncology R&D pipeline, excluding oncology vaccines; (2) create a joint venture with GSK in consumer healthcare, in which Novartis would own 36.5%; and (3) divest its Vaccines Division (excluding the influenza vaccines business) to GSK. In addition, Novartis agreed to divest its Animal Health Division to Lilly. Subsequently, on October 26, 2014, we announced that we had entered into a definitive agreement to divest our influenza vaccines business to CSL.

        The transaction with Lilly closed on January 1, 2015. All of the remaining transactions are subject to closing conditions, including regulatory approvals. In addition, the transactions with GSK are inter-conditional. The transactions with GSK are expected to close in the first half of 2015 and the transaction with CSL is expected to close in the second half of 2015.

        Because of the need for external approvals and certain other contingencies, the proposed transactions may not be completed in the expected form or within the expected time frame, or at all. If the transactions are completed, then certain milestone and royalty payments may be owed if certain conditions are met. But because of the uncertainties involved, we cannot ensure that any such payments will be made either by us or to us. In addition, in agreeing to these transactions, we expected to achieve certain strategic benefits, synergies and opportunities, including certain financial results, but such expected benefits may never be fully realized or may take longer to realize than expected. With respect to the acquisition of the GSK oncology products and related assets, we cannot be certain that the GSK business will be successfully integrated with ours and that key personnel will be retained. Disruption from these transactions may make it more difficult to maintain relationships with customers, employees or suppliers. Lastly, extensive preparations are needed to complete these transactions, as well as the integration and de-integration of the respective businesses, requiring substantial attention from our management. This diversion of management's attention away from our continuing businesses could result in the continuing businesses failing to achieve expected financial or other results, or in liabilities being incurred that were not known at the time of the transactions, or the creation of tax or accounting issues.

        In addition, in April 2014, we announced the creation of a shared services organization, Novartis Business Services (NBS), which became effective on July 1, 2014. NBS consolidated a number of business support services previously spread across divisions, including Information Technology, Financial Reporting and Accounting Operations, Real Estate & Facility Services, Procurement, Payroll and Personnel Administration and the Pharmaceuticals Global Business Services. This reorganization was designed to improve profitability and free up resources that could be reinvested in growth and innovation, and to allow our divisions to focus more on customer-facing activities. But the expected benefits of this reorganization may never be fully realized or may take longer to realize than expected. There can be no certainty that the numerous business functions involved will be successfully integrated into a single organization and that key personnel will be retained. Disruption from the reorganization may make it more difficult to maintain relationships with customers, employees or suppliers.

        Both with respect to the transactions and reorganizations previously announced, and to potential future transactions and reorganizations, if we fail to timely recognize or address these mattersrisks, or to devote

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