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

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

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

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

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

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

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

• Our ability to realize the intended benefits of our intention to separate ourseparation of Sandoz Division into a new publicly traded standalone company by way of a 100% spin-off, or the implementation of our new organizational structure and operating model, may not be realized or may take longer to realize than expected;

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

• Our performance on environmental, social and governance matters;matters

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

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

• Uncertainties surrounding the implementation of our new Enterprise Resource Planning systemIT projects and other IT projects;systems

• Our reliance on outsourcing key business functions to third parties;parties

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

• Safety, quality, data integrity or manufacturing issues;issues

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

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

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

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

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

• Uncertainties involved in predicting shareholder returns;returns

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

• Uncertainties regarding future global exchange rates; andrates

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

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

Not applicable.

Not applicable.

Not applicable.

Not applicable.

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

Strategic risks

Key products and commercial priorities

Risk description

Failure to deliver key commercial priorities and successfully launch new products

Context and potential impact

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

Research and development

Risk description

Failure to successfully prioritize, integrate and execute our research and development programs for new products or new indications for existing products given our focus on innovative medicines

Context and potential impact

Failure to successfully develop our pipeline products is typically the result of the inherent uncertainty of science, suboptimal internal execution, or both. Key elements of internal execution include our ability to prioritize our investments on our highest potential value assets, optimize the transition of assets from research to

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

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

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

Pricing, reimbursement and access

Risk description

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

Context and potential impact

In addition, we face numerous cost‑containment measures imposed by governments and other payers. These include government‑imposed industrywide price reductions, mandatory pricing systems, reference pricing systems, payers limiting access to treatments based on cost‑benefit analyses, the importation of drugs from lower‑cost countries to higher‑cost countries, the shifting of the payment burden to patients through higher co‑payments and co-pay accumulator programs, the limiting of physicians’ ability to choose among competing medicines, the mandatory substitution of generic drugs for the patented equivalent, pressure on physicians to reduce the prescribing of patented prescription medicines, increasing pressure on intellectual property

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

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

Risk description

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

Context and potential impact

Once the terms of a strategic transaction have been agreed with a third party, we may not be able to complete the transaction in a timely manner or at all, nor canall. In addition, we cannot be sure that pre-transaction due diligence will identify all possible issues that might arise during and after the transaction. Our efforts on such transactions can also divert management’s attention from our existing businesses.

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

Intellectual property

Risk description

Expiry, assertion or loss of intellectual property protection

Context and potential impact

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

We also rely in all aspects of our businesses on unpatented proprietary technology, know-how, trade secrets

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

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

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

Risk description

FailureWe may not successfully achieve our goals related to meet organizational transformation programs objectives and/or unintendedour separation from Sandoz and our failure to do so may have an adverse impactsimpact on our business

Context and potential impact

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

Environmental, social and governance matters

Risk description

Failure to meet rapidly evolving environmental, social and governance expectations

Context and potential impact

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

Operational risks

Cybersecurity and IT systemsdata protection

Risk description

Cybersecurity breaches, data loss and catastrophic loss of IT systems

Context and potential impact

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

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

Fragmented IT landscape and strategicStrategic technology programs implementation

Risk description

Failure to address fragmented business processes, unclear data ownership, andsuccessfully implement our IT applications and infrastructure nearing their end-of-life,strategy may disrupt our core business processes

Context and potential impact

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

Talent management

Risk description

Inability to identify, attract, develop and retain and motivate qualified individuals in keytalent for critical roles and markets

Context and potential impact

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

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

Third-partyExternal partner risk management and human rights

Risk description

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

Context and potential impact

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

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

Risk description

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

Context and potential impact

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

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

For information on significant legal matters pending against us, see “Item 18. Financial Statements—Note 20.21. Provisions and other non‑current liabilities” and “Item 18. Financial Statements—Note 28.29. Commitments and contingent liabilities.”

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

Manufacturing and product quality

Risk description

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

Context and potential impact

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

Supply chain

Risk description

Inability to maintain continuity of product supply

Context and potential impact

In addition, due to the inherent complexities of our manufacturing processes and the supply chains for advanced therapy platforms, we are required to plan our production activities and purchase of materials well in advance. If we suffer from third-party raw material shortages, underestimate market demand for a product, or fail to accurately predict when a new product will be approved for sale, then we may not be able to produce sufficient product to meet demand. These issues could be made worse during a pandemic, such as the COVID-19 pandemic, or geopolitical events, such as wars in certain parts of the war in Ukraine,world, and could lead to (i) a sudden increase in demand for selected medicinal products, resulting in the short-term unavailability of critical materials; (ii) logistical and supply challenges that may lead to our inability to ship products from one placelocation to another due to restrictions imposed as a result of a pandemic or geopolitical events and any related sanctions, which can also impact transportation and warehousing costs; or (iii) our inability to properly operate a manufacturing site due to restrictions imposed as the result of a pandemic or any issues arising from geopolitical events.

Data privacy

Risk description

Noncompliance with personal data protection laws and regulations

Context and potential impact

Falsified medicines

Risk description

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

Context and potential impact

Emerging risks

Geopolitical developments

Risk description

Impact of geo- and socio-political threats

Context and potential impact

TheAs a result of ongoing geopolitical tensions, certain countries have adopted, and may in the future adopt additional, protectionist measures including the imposition of tariffs, including those imposed by the US and China,tariffs. Tariffs that are intended to shield domestic markets from foreign competition and the possibility of additional tariffs or other trade restrictions, relating to tradesuch as export controls, could have a material negative impact on our business. Given that the outcome of ongoing trade negotiations remains uncertain, we cannot yet determine the natureIf tariffs or extent of the potential impact on our business. For example, if tariffsexport controls on pharmaceutical products or active pharmaceutical ingredients (APIs) were increased this could impact the profitability of our products and disrupt our supply chain. Increasing opposition to free trade may increase the risks we face in our efforts to improve and harmonize standards in regulation and intellectual property.

Macroeconomic developments

Risk description

Impact of macroeconomic developments

Context and potential impact

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

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

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

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

Climate change

Risk description

Impact ofFailure to manage physical and transition risks from climate change and increased risk of major natural disasters

Context and potential impact

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

Tax laws and developments

Risk description

Changes in tax laws or their application

Context and potential impact

In 2019, the Organization for Economic Co-operation and Development (OECD) launched a new initiative on behalf of the G20 to minimize profit shifting by working toward a global tax framework that ensures that corporate income taxes are paid where consumption takes place, in addition to introducing a global standard on minimum taxation combined with new tax dispute resolution processes. This project achieved OECD political consensus in October 2021, and the detailed principles are still under discussion by the OECD and political leaders. The OECD expects that the implementation of these new principles will begin globally in 2024. However, some countries already announced postponement to 2025 while others have not taken any implementation steps so far. Once changes to the tax laws in any jurisdiction in which the Group

Due to the financialongoing discussion in many countries on the implementation and additional guidance from the OECD, the full impact of the COVID-19 pandemic. In addition,OECD minimum tax project on our financial position, income statement and cash flows cannot currently be estimated. On September 12, 2023, the EuropeanEU Commission continuespublished two draft directives relating to extendinternational tax. The draft Business in Europe: Framework for Income Taxation (BEFIT) directive provides common rules for determining the applicationcorporate tax base for EU-based entities that are part of its policies seeking to limit fiscal aid bya group with global consolidated revenues above EUR 750 million. The BEFIT proposal includes provisions for a formula-driven allocation of profits between relevant EU member states which would then be subject to particular companies, togetherthe corporate income tax rate of the respective member state. The draft transfer pricing directive aims to harmonize transfer pricing rules within the EU consistent with the related investigationOECD Transfer Pricing Guidelines. It also clarifies processes for relieving double taxation within the EU. Both draft directives require unanimous agreement among EU member states before they can be further implemented. In the US, the IRA was signed into member states’ practices regardinglaw on August 16, 2022. The IRA creates a 15% corporate alternative minimum tax on the issuanceprofits of rulingscorporations whose average annual adjusted financial statement income exceeds USD 1.0 billion. The IRA also includes a one percent excise tax on certain corporate stock repurchases. Additionally, the IRA also contains provisions that affect tax-exempt entities, including tax matters relatingcredit opportunities to individual companies. Althoughencourage investment in clean energy and expanded incentives for energy-efficient construction by tax-exempt entities.

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

General risks

Indebtedness

Risk description

Our indebtedness could adversely affect our operations

Context and potential impact

As of December 31, 2022,2023, we had USD 20.218.4 billion of non‑current financial debt, and USD 5.96.2 billion of current financial debt. Our current and long‑term debt requires us to dedicate a portion of our cash flow to service interest and principal payments and, if interest rates rise, this amount may increase. As a result, our existing debt may limit our ability to use our cash flow to fund capital expenditures, to engage in transactions, or to meet other capital needs, or otherwise may place us at a competitive disadvantage relative to competitors that have less debt. Our debt could also limit our flexibility to plan for and react to changes in our business or industry, and increase our vulnerability to general adverse economic and industry conditions, including changes in interest rates or a downturn in our business or the economy. We may also have difficulty refinancing our existing debt or incurring new debt on terms that we would consider to be commercially reasonable, if at all.

Goodwill and intangible assets

Risk description

Goodwill and intangible assets resulting in significant impairment charges

Context and potential impact

We regularly review our intangible and tangible assets for impairment, including identifiable intangible assets and goodwill. Any significant impairment charges could have a material adverse effect on our results of operations and financial condition. In 2022,2023, for example, we recorded intangible asset impairment charges of USD 1.33.0 billion.

Foreign currency exchange rates

Risk description

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

Context and potential impact

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

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

Key customers

Risk description

Ongoing consolidationConcentration among our distributors and retailers, and the concentration of credit riskkey customers

Context and potential impact

A significant portion of our global sales is made to a relatively small number of drug wholesalers, retail chains and other purchasing organizations. For example, our three most important customers globally accounted for approximately 16%15%, 11%13% and 7%8%, respectively, of net sales from continuing operations in 2022.2023. The largest trade receivables outstanding were for these three customers, amounting to 16%17%, 14%13% and 7%8%, respectively, of the Group’s trade receivables at December 31, 2022. The trend2023. Historically, there has been toward furthera trend of consolidation among some distributors and retailers.our customer base, which may continue in the future. As a result, we may be affected by fluctuations in the buying patterns of such customers. Furthermore, these customers are gaining additional purchasing leverage, increasing the pricing pressures facing our businesses. These pressures can impact our Sandoz Division in particular, the generic products of which can often be obtained from numerous competitors. Moreover, we are exposed to a concentration of credit risk as a result of this concentration among our key customers. If one or more of our major customers experienced financial difficulties, the effect on us would be substantial,considerable, and could include a substantial loss of sales and an inability to collect amounts owed to us.

Environmental matters

Risk description

Impact of environmental liabilities

Context and potential impact

The environmental laws of various jurisdictions impose actual and potential obligations on us to investigate and remediate contaminated sites, including in connection with activities in the past by businesses that are no longer part of Novartis. In some cases, these remediation efforts may take many years. While we have set aside provisions for known worldwide environmental liabilities that are probable and estimable, there is no guarantee that additional costs will not be incurred beyond the amounts for which we have provided in the Groupour consolidated financial statements. If environmental contamination resulting from our facility operations, business activities or products adversely impacts third parties or if we fail to properly manage the safety of our facilities, including the safety of our employees and contractors, and the environmental risks, we may face substantial one-time and recurring costs and other penalties, and be required to increase our provisions for environmental liabilities.

Pension plans

Risk description

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

Context and potential impact

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

Novartis AG

Novartis AG

Novartis is a multinational group of companies specializing in the research, development, manufacturing and marketing of a broad range of innovative pharmaceuticals and cost-saving generic medicines. Novartis AG, our Swiss holding company, owns, directly or indirectly, all of our significant operating companies. For a list of our significant operating subsidiaries, see “Item 18. Financial Statements—Note 31. Principal Group33. Novartis principal subsidiaries and associated companies.”

For a description of important corporate developments since January 1, 2020,2021, see “Item 18. Financial Statements—Note 2. Significant transactions.” For information regarding the Company’s material commitments for capital expenditures, see “Item 5. Operating and Financial Review and Prospects—LiquidityMaterial contractual obligations and Capital Resources—Material short- and long-term cash requirements.commitments.”

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

Overview

In 2022,2023, Novartis achieved net sales from continuing operations of USD 50.545.4 billion, and total net income from continuing operations amounted to USD 7.08.6 billion. Headquartered in Basel, Switzerland, our Group companieswe employed approximately 102 00076 057 full‑time equivalent employees as of December 31, 2022.2023. Our products are sold in approximately 140130 countries around the world.

Under this newThese organizational structure, our divisionsunits are supported by the following organizational units: the Novartis Institutes for BioMedical Research (NIBR), Global Drug Development (GDD),our global functions in areas such as corporate affairs, ethics, risk and Operations. The financial results of these organizational units are included in the results of the divisions for which their work is performed.compliance, finance, legal, internal audit, people and organization and strategy and growth. For more information about NIBR,our Development unit, see “—Innovative Medicines—Research and development—Research program” below. For more information about GDD, see “—Innovative Medicines—Research and development—Development program” below. For more information about our Operations unit see “—Item 4.D Property, plants and equipment” and “Item 18. Financial Statements—Note 3. SegmentationOperating segment and Note 4. Revenues and geographical information.”

In 2023, Novartis completed its transformation into a pure-play innovative medicines business, with the successful spin-off of key figures 2022, 2021Sandoz. Effective October 4, 2023, Sandoz was listed on the SIX Swiss Exchange, with a Level 1 ADR program in the United States. To comply with International Financial Reporting Standards (IFRS^®) Accounting Standards as a result of the spin-off, Novartis has separated the Company’s reported financial data for the current and 2020.”prior years into “continuing” and “discontinued” operations. Continuing operations comprises the retained business activities that includes our innovative

medicines business and continued corporate activities. The financial results of our Corporate activitiesDiscontinued operations include the costs of the Group headquartersSandoz generic pharmaceuticals and those ofbiosimilars division and certain corporate coordination functions in major countries. In addition, Corporate includes other items of income and expense that are notactivities attributable to specific segments, such asSandoz prior to the spin-off up to the distribution date of October 3, 2023, and certain revenues from intellectual property rights and certainother expenses related to post-employment benefits, environmental remediation liabilities, charitable activities, donationsthe spin-off. Included in 2023 is also the IFRS Accounting Standards non-cash, non-taxable net gain on distribution of Sandoz Group AG to Novartis AG shareholders. Sandoz operated in the off-patent medicines segment and sponsorships.

The Innovative Medicines Division is the larger of our two divisions in terms of consolidated net sales. It reported consolidated net sales of USD 41.3 billion in 2022, which represented 81.7% of the Group’s net sales. The product portfolio of the Innovative Medicines Division includes a significant number of keyKey marketed products, many of which are among the leaders in their respective therapeutic areas.

Compounds in development

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

Selected development projects

Projects removed from the development table since 20212022

Principal markets

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

Production

In 2022, we beganWe are continuing to integrate Advanced Accelerator Applications (AAA), a Novartis company that focuses on radioligand therapies,ADACAP manufacturing sites into our existing manufacturing and supply structure.structure for radioligand therapies. We manufacture our products across the following technologies at facilities worldwide: large molecules, small molecules, cell and gene therapy, RNAxRNA therapy and radioligand therapy (see also “—Item 4.D Property, plants and equipment”). In addition, we generate contract manufacturing sales from biotechnology services that we provide to third parties, which we include under “established brands” in our consolidated financial statements (see “Item 18. Financial Statements—Note 4. Revenues and geographic information”).

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

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

Marketing and sales

We have 19 607 full-time equivalent field force employees, as of December 31, 2022,2023, including supervisors and administrative personnel. These trained representatives present the therapeutic benefits and risks of our products to physicians, pharmacists, hospitals, insurance groups, managed care organizations and other healthcare professionals. In the US, Novartis advertises certain products via digital and traditional media channels, including the internet, television, newspapers and magazines. Novartis also pursues co‑promotion or co‑marketing opportunities as well as licensing and distribution agreements with other companies in various markets.

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

Although specific distribution patterns vary by country, Novartis generally sells its prescription drugs primarily to wholesale and retail drug distributors, hospitals, clinics, government agencies and managed healthcare providers. The growing number of so‑called “specialty” drugs in our portfolio, such as Cosentyx and Kesimpta, has resulted in increased engagement with specialty pharmacies. Because many of these drugs require special handling and administration, we are rolling out an international patient support program across our priority markets that serves as a central resource for onboarding, education and support to help patients navigate their healthcare.

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

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

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

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

Competition

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

Research and development

ApproximatelyWe have 5 500511 full‑time-equivalent scientists, physicians and business professionals work at NIBRBiomedical Research sites in Basel, Switzerland; Cambridge, Massachusetts; East Hanover, New Jersey; San Diego, California; and Emeryville, California. They contribute to research into disease areas such as cardiovascular, renal and metabolic diseases; neuroscience; oncology; hematology; muscle disorders; ophthalmology; autoimmune diseases;immunology; and respiratory and allergic diseases.ophthalmology. Research at the Friedrich Miescher Institute focuses on basic genetic and genomic research, and our Global Health Disease Area (formerly the Novartis Institute for Tropical Diseases (NITD), in Emeryville, California,Diseases) focuses on discovering new medicines to fight tropical diseases, including malaria and cryptosporidiosis. In 2023, we made the decision to discontinue our respiratory research efforts to further focus our resources on priority areas.

The traditional model of clinical development consists of three phases:

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

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

Our development process intoconsists of two stages: ExploratoryEarly Development to establish proofbuild confidence in the overall properties of concept,the compound, followed by Confirmatory Development to confirm the concept in large numbers of patients. Exploratory DevelopmentEarly development consists of clinical proof-of-concept (PoC)both Phase I studies which are small clinical trials (typically involving between fivein healthy volunteers as well as Phase Ib and 15 patients) that combine elementsPhase II studies in patients. This work includes a careful review of traditional Phase I/II testing. NIBRsafety and tolerability, understanding of whether the drug is modulating the target of interest, and understanding of dose response and early evidence of disease efficacy. Biomedical Research conducts these customized trials which are designed to give early insights into issues such as safety, efficacy and toxicity for a drug in a given indication. Once aif this evaluation is positive, proof of concept has been established, the

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

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

OurThe Innovation Management Board (IMB) is responsible for all, chaired by our Chief Executive Officer, drives our R&D portfolio strategy. The IMB endorses new early- and late-stage development projects, strategic aspects of our development portfolioplans and portfolio-related priorities. It oversees our drug development budget as well asbudget; approves major project phase transitionstransitions; and milestones following a positive proof-of-concept outcome, including transitions to Confirmatory Development and the decisionmakes key decisions, such as when to submit a regulatory applicationapplications to the health authorities. Theauthorities or when to discontinue projects. IMB is also responsible for the endorsement of overall development strategy, the endorsement of development project priorities, and decisions on project discontinuations. Our Chief Executive Officer chairs the IMB, and othermembers include representatives from the Executive Committee of Novartis (ECN) and senior management with expertise spanning multiple fields,in different fields.

Alliances and acquisitions

In February 2022,July 2023, Novartis completedacquired DTx Pharma Inc., a US-based, preclinical-stage biotechnology company focused on leveraging its proprietary FALCON platform to develop siRNA therapies for neuroscience indications. Its lead program, DTx-1252, targets the acquisitionroot cause of GyroscopeCMT1A – the overexpression of PMP22, a protein that causes the myelin sheath that supports and insulates nerves in the peripheral nervous system to function abnormally. The transaction also includes two additional preclinical programs for other neuroscience indications.

In August 2023, Novartis acquired Chinook Therapeutics, Holdings Plc. Through the acquisition, Novartis added PPY988 (GT005)Inc., an investigational one-time gene therapya US-based, clinical-stage biopharmaceutical company with two late-stage medicines in development for geographic atrophy, to its portfolio.rare, severe chronic kidney diseases.

Regulation

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

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

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

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

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

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

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

After receiving the marketing authorizations, the company must submit periodic safety reports to the relevant health authority (EMA for the centralized procedure, national health authorities for DCP or MRP). In addition, pharmacovigilance measures must be implemented

Price controls

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

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

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

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

In addition, by December 31, 2022, 202023, 23 US states had passed legislation intended to impact pricing or requiring manufacturermanufacturers to report price transparency reporting,increases to states, with eight of these states also allowing for drug affordability (i.e., price control) review boards. The disclosure

In response to rising healthcare costs, most governments and private medical care providers have established reimbursement schemes that favor the substitution of genericmore expensive brand‑name pharmaceuticals for more expensive

Intellectual property

We attach great importance to intellectualIntellectual property (IP) rights – includingare essential to our business as an innovative medicines company since they protect our innovation and investments in research and development, manufacturing and marketing of our products. IP rights include patents, trademarks, copyrights, know‑how, trade secrets and regulatory data protection – as essential to our purpose of reimagining medicine to improve and extend people’s lives, and to protect our investment in research and development, manufacturing and marketing. The IP system provides a means to attract the investments needed to conduct and sustainably finance innovative R&D, and to manage the risks inherent in our work. For example, we seek IP protection under applicable laws for significant product developments in major markets. regulatory-based protection.

• In the product andUS, a patent issued from an application filed today will generally receive marketing authorization. As a result, it is rarelyterm of 20 years from the case, for example, that a `product’s active ingredient(s) will have a fullearliest application filing date as well as potential patent term at the time the product is approvedadjustments for delays in patent issuance based upon certain delays in prosecution by the United States Patent and Trademark Office (USPTO). A US pharmaceutical patent may also be eligible for a PTE. The PTE may only extend the patent term for a maximum of five years, and may not extend the patent term beyond 14 years from regulatory approval. Only one patent may be extended for a product based on FDA review.

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

In addition to patent protection, various countries provide regulatory-based protection, including regulatory data protection (RDP) and/or other market exclusivities, for a prescribed period of time. RDP is a distinct type of IP right providing exclusivity that precludes a potential competitor from filing a regulatory application that relies on the sponsor’s clinical trial data, or that precludes the regulatory authority from approving the application for a set period of time. The RDP period can vary depending on the type of data included in the sponsor’s application. When it is available, market exclusivity, unlike RDP, may preclude a competitor from obtaining marketing approval for a product even if a competitor’s application relies on its own data. RDP and market exclusivity periods generally run from the date a product is approved, and so their expiration dates cannot be known with certainty until the product approval date is known and exclusivity has been granted by the relevant authorities.

United States

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

European Union

The EU also has an orphan• Orphan drug exclusivity systemprovides for medicines. If a medicine is designated as an orphan drug, then it benefits from 10 years of market exclusivity, after it is authorized, during which time an application for the same or similar medicine for the same indication will not generally be accepted or granted. Under certain circumstances, this exclusivity can be extended with a two‑year pediatric extension.

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

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

Identification of a patent term extension (PTE) and supplementary protection certificate (SPC). We designate these as “pending” if theyin the EU refers to national patents in EU countries and/or to the national patents that have been applied for but notderived from a patent granted and include years of expiry if estimable. Such pending applications ultimately may or may not be granted.

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

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

Cardiovascular renal and metabolic

• Entresto. US: FourTwo patents on combination (2023, (4))2023), PTE (2025), fourtwo PEs (2023, 2023, 2024,(2024, 2025); two patents on complex (2026, 2027), two PEs (2027, 2027); three patents on methods of treatment (2033 (3)); patent on dosage regimen (2036); RDP for new pediatric patient population (2022), PE (2023); RDP for labeling changes related to new clinical investigation (2024). EU: Patent on combination (2023), SPC (2028); two patentspatent on complex (2026, 2026)(2026), two SPCs (2030, 2030)SPC (2030); patent on formulation (2028); patent on method of use (2034); patent on dosage regimen (2036); RDP (2025)(2026). There is no generic competition in the US or the EU. In the US, twocertain patents, including the combination patents, the twoand complex patents, and the dosage regimen patent are being challenged in ANDA proceedings against generic manufacturers. In July 2023, the US District Court for the District of Delaware issued a negative decision regarding the validity of one of the combination patents. Novartis has appealed to reverse the decision. In the EU, onecertain patents, including the complex patent and the use patent, are being opposed in the EPO. In some EU countries, the combination patent or its associated SPC is being challenged by generic manufacturers.

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

Immunology

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

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

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

Neuroscience

• •KesimptaGilenya.. US: Patent on dosage regimen (2027), PE (2027); patent on 0.25 mg formulation (2032), PE (2032); patent on method of treatment (2027). EU: Patent on formulation (2024), SPC (2026); patent on

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

• KesimptaPromacta/Revolade. US: Patent on compound (2031)salt form and thrombocytopenia use (2025), PE (2026); patentfive patents on dosing regimen (2037)tablet formulations of different dose strengths (2027 (5)), five PEs (2028 (5)); ODE on severe aplastic anemia patients in combination with standard immunosuppressive therapy (2025). EU: Patent on compound (2023)(2021), SPC (2025), PE (2025); patent on use (2023), SPC (2028); patent on formulation (2028), patent on formulation andsevere aplastic anemia use (2028), SPC (2033); patent on dosing regimen (2037). There is no generic competition in the US or the EU.

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

• PiqrayTafinlar and Mekinist.

• Tasigna. US: Patent on compound (2023), PE (2024); twoTwo patents on salt forms (2026, 2028), two PEs (2027, 2029); patent on polymorph compound form (2026), PE (2027); two patents on capsule form (2026, 2027), two PEs (2027, 2028); patent on method of treatment (2032), PE (2032). EU: Patent on compound (2023); patent on salt form (2026); patent on polymorph compound form (2026); patentthree patents on capsule form (2027)(2027 (3)); patent on method of treatment (2030). There is no generic competition in the US or the EU. In the US, generic manufacturers have filed ANDAs challenging certain patents other than the compound patent.

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

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

• Lucentis. EU: There is generic competition in some EU markets.

• Sandostatin SC and Sandostatin LAR:LAR.

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